-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ql4lZdpo4mdUbGsbh/Z072iAqcNLwZ1ipwhBB9jHEQlIUo5jS5bicDAk/d6L/Dto UhUIafJmpHYTY4OS4/6fqQ== 0000950123-95-003342.txt : 19951119 0000950123-95-003342.hdr.sgml : 19951119 ACCESSION NUMBER: 0000950123-95-003342 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951114 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST MONTAUK FINANCIAL CORP CENTRAL INDEX KEY: 0000083125 STANDARD INDUSTRIAL CLASSIFICATION: SECURITY BROKERS, DEALERS & FLOTATION COMPANIES [6211] IRS NUMBER: 221737915 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-06729 FILM NUMBER: 95591851 BUSINESS ADDRESS: STREET 1: 328 NEWMAN SPRINGS RD STREET 2: PKWY 109 OFFICE CTR CITY: RED BANK STATE: NJ ZIP: 07701 BUSINESS PHONE: 9088424700 MAIL ADDRESS: STREET 1: PKWY 109 OFFICE CTR STREET 2: 328 NEWMAN SPRINGS RD CITY: RED BANK STATE: NJ ZIP: 07701 FORMER COMPANY: FORMER CONFORMED NAME: MCC PRESIDENTIAL INC DATE OF NAME CHANGE: 19871203 FORMER COMPANY: FORMER CONFORMED NAME: RENAULT WINERY INC DATE OF NAME CHANGE: 19740725 FORMER COMPANY: FORMER CONFORMED NAME: PRESIDENTIAL APARTMENTS INC DATE OF NAME CHANGE: 19740327 10QSB 1 FORM 10-QSB 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1995 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from_______to_______ Commission File No. 0-6729 FIRST MONTAUK FINANCIAL CORP. (Exact name of registrant as specified in its charter) NEW JERSEY 22-1737915 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) PARKWAY 109 OFFICE CENTER, 328 NEWMAN SPRINGS RD., RED BANK, NJ 07701 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (908) 842-4700 ___________________________________________________ Former name, former address and former fiscal year, if changed since last report. Indicate by check mark whether the Registrant (l) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- 7,956,406 Common Shares, no par value were outstanding as of November 14, 1995. Page 1 of 13 2 FIRST MONTAUK FINANCIAL CORP. FORM 10-QSB SEPTEMBER 30, 1995 INDEX
Page ---- PART I. FINANCIAL INFORMATION: Item 1. Financial Statements Consolidated Statement of Financial Condition as of September 30, 1995 and December 31, 1994.............................. 3 Consolidated Statement of Income for the Three Months ended September 30, 1995 and 1994 and Nine months ended September 30, 1995 and 1994 ......................... 4 Consolidated Statement of Cash Flows for the Nine Months ended September 30, 1995 and 1994............................. 5-6 Notes to Financial Statements ................................................ 7-8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ...................................... 9-11 PART II. OTHER INFORMATION: Item 5. Other Information.................................................... 12 Item 6. Exhibits and Reports on Form 8-K..................................... 12 Signatures ................................................................... 13
2 3 FIRST MONTAUK FINANCIAL CORP. AND ITS SUBSIDIARIES CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
ASSETS September 30, December 31, 1995 1994 ------------- ------------ Cash and cash equivalents $ 766,141 $ 673,951 Securities owned, at market 6,248,101 4,917,218 Commissions receivable 292,551 132,967 Employee and broker receivables 476,087 514,267 Fixed assets - net 650,653 553,947 Prepaid expenses and other assets 339,063 79,368 Due from officers 157,331 151,154 Deferred tax asset 31,191 59,395 ---------- ---------- Total assets $8,961,118 $7,082,267 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Due to clearing organization $ 479,176 $2,279,250 Securities sold, but not yet purchased, at market 1,737,261 454,982 Loan payable - bank 54,028 73,478 Commissions payable 1,428,718 752,196 Accounts payable 912,512 325,949 Income taxes payable 352,424 25,279 Other liabilities 268,773 155,411 ---------- ---------- Total liabilities 5,232,892 4,066,545 ---------- ---------- Commitments and contingencies (See Notes) STOCKHOLDERS' EQUITY Preferred Stock, 5,000,000 shares authorized, $.10 par value, no shares issued and outstanding -- -- Common Stock, no par value, 15,000,000 shares authorized, 8,007,190 and 8,112,406 shares issued and outstanding, respectively 3,297,707 3,296,027 Additional paid-in capital 424,206 427,021 Less: Treasury stock - 108,200 shares, at cost (89,238) -- Retained earnings (deficit) 95,551 (707,326) ---------- ---------- Total stockholders' equity 3,728,226 3,015,722 ---------- ---------- Total liabilities and stockholders' equity $8,961,118 $7,082,267 ========== ==========
See notes to financial statements. 3 4 FIRST MONTAUK FINANCIAL CORP. AND ITS SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME
Nine months ended September 30, Three months ended September 30, 1995 1994 1995 1994 ----------- ----------- ---------- ----------- REVENUES Net firm trading gains $ 6,947,684 $ 6,081,670 $2,826,631 $2,099,496 Commissions 12,198,847 7,199,208 5,055,209 2,416,418 Investment banking 194,855 899,828 63,898 71,675 Interest and other income 647,065 436,605 199,239 158,641 ----------- ----------- ---------- ---------- 19,988,451 14,617,311 8,144,977 4,746,230 ----------- ----------- ---------- ---------- EXPENSES Compensation and benefits 13,746,682 11,058,864 5,533,745 3,531,870 Clearing charges 2,258,753 1,334,314 967,006 443,960 Communication operating expenses 869,677 674,048 336,895 267,998 Other operating expenses 1,618,416 1,040,918 654,228 390,327 Interest 158,615 105,685 39,775 21,747 ----------- ----------- ---------- ---------- 18,652,143 14,213,829 7,531,649 4,655,902 ----------- ----------- ---------- ---------- Income before income taxes 1,336,308 403,482 613,328 90,328 Income taxes 533,431 168,859 247,615 36,772 ----------- ----------- ---------- ---------- Net income $ 802,877 $ 234,623 $ 365,713 $ 53,556 =========== =========== ========== ========== Per share of Common Stock: Net income $ 0.10 $ 0.03 $ 0.05 $ 0.01 =========== =========== ========== ========== Number of shares 8,148,151 8,450,648 8,005,739 8,264,377 =========== =========== ========== ==========
See Notes to financial statements. 4 5 FIRST MONTAUK FINANCIAL CORP. AND ITS SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS
Nine months ended September 30, 1995 1994 ---- ---- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS Cash flows from operating activities: Net income $ 802,877 $ 234,623 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 121,405 58,489 Commissions receivable (159,584) (102,369) Securities owned -- at market (1,330,883) 2,104,038 Prepaid expenses and other assets (259,695) 17,275 Due to clearing organization (1,800,074) (2,573,582) Securities sold but not yet purchased 1,282,279 262,427 Commissions payable 676,522 (406,210) Accounts payable 586,563 (42,176) Income taxes payable 327,145 -- Other liabilities 113,362 (1,229) Deferred income taxes 28,204 33,373 ----------- ----------- Total adjustments (414,756) (649,964) ----------- ----------- Net cash provided by (used in) operating activities 388,121 (415,341) ----------- ----------- Cash flows from investing activities: Due from officers (6,177) (25,152) Employee and broker receivables 38,180 (296,602) Capital expenditures (218,111) (312,436) ----------- ----------- Net cash used in investing activities (186,108) (634,190) ----------- ----------- Cash flows from financing activities: Proceeds from exercise of warrants -- 776,908 Proceeds from exercise of stock options 1,680 Stock registration costs (2,815) -- Repurchase of common stock (89,238) -- Payment of loan payable (19,450) -- Warrant exercise costs -- (10,000) ----------- ----------- Net cash provided by (used in) financing activities (109,823) 766,908 ----------- ----------- Net increase (decrease) in cash and cash equivalents 92,190 (282,623) Cash and cash equivalents at beginning of year 673,951 902,130 ----------- ----------- Cash and cash equivalents at end of year $ 766,141 $ 619,507 =========== ===========
See notes to financial statements. 5 6 FIRST MONTAUK FINANCIAL CORP. AND ITS SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)
Nine months ended September 30, 1995 1994 ---- ---- Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 158,615 $ 105,685 Income taxes $ 64,470 $ 21,095
See notes to financial statements. 6 7 FIRST MONTAUK FINANCIAL CORP. AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1995 NOTE 1 - MANAGEMENT REPRESENTATION The accompanying financial statements are unaudited for the interim period, but include all adjustments (consisting only of normal recurring accruals) which management considers necessary for the fair presentation of results at September 30, 1995 and 1994. Moreover, these financial statements do not purport to contain complete disclosure in conformity with generally accepted accounting principles and should be read in conjunction with the Company's audited financial statements at, and for the year ended December 31, 1994. The results reflected for the nine-month period ended September 30, 1995 are not necessarily indicative of the results for the entire fiscal year to end on December 31, 1995. NOTE 2- BASIS OF PRESENTATION These financial statements include the accounts of First Montauk Financial Corp. and its three wholly-owned subsidiaries - First Montauk Securities Corp., Montauk Insurance Services, Inc. and Montauk Advisors, Inc. NOTE 3 - INCOME PER SHARE Income per share is computed by dividing net income by the weighted average number of shares of common stock and common stock equivalents outstanding during the period. Common stock equivalents include shares issuable upon the exercise of options. NOTE 4 - SECURITIES OWNED AND SECURITIES SOLD BUT NOT YET PURCHASED Marketable securities owned and sold but not yet purchased consist of trading securities at quoted market values, as indicated below:
Sold but not Owned yet purchased September 30, December 31, September 30, December 31, 1995 1994 1995 1994 ---------- ---------- ---------- ---------- Obligation of U.S. government and its agencies $2,472,945 $ 659,908 $1,076,978 $ 19,951 State and municipal obligations 591,827 2,936,522 45,457 60,611 Corporate stocks and bonds 3,120,143 1,304,788 606,522 363,447 Options and warrants 63,186 16,000 8,304 10,973 ---------- ---------- ---------- -------- $6,248,101 $4,917,218 $1,737,261 $454,982 ========== ========== ========== ========
7 8 FIRST MONTAUK FINANCIAL CORP. AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1995 NOTE 5 - STOCK REPURCHASE In May 1995, the Company announced its intention to purchase up to $100,000 of its Common Stock over a ninety-day period. As of September 30, 1995, the Company had repurchased 108,200 shares for a total of $89,238. NOTE 6 - LAWSUIT The Company is a defendant in a Civil Suit brought by Escambia County, Florida in the U.S. District Court for the Northern District of Florida. The suit alleges that the Company is responsible to Escambia County for alleged losses as a result of certain mortgage-backed securities sold to Escambia by the Company, and seeks an unspecified amount of damages. The Company believes it has a meritorious defense to these claims and is vigorously defending this action. The Company is also a party to various other customer claims, most of which are subject to arbitration. At the present time, the Company is unable to determine the outcome of these matters or a range of possible loss relating to the claims. NOTE 7 - INVESTMENT IN ECM The Company has purchased 150,000 shares of Environmental Coupon Marketing, Inc. ("ECM") for $.04 per share, or $60,000. ECM is a closely-held marketer of recycling programs to retailers using store coupons and cash incentives to consumers. In consideration, ECM will issue the Company 60,000 warrants to purchase its Common Stock at the price of $3.33 per share upon completion of a private offering of ECM stock. The Company also loaned ECM $100,000 in August 1995. The loan bears interest at the rate of 6% per annum and matures on the earlier of the proposed private placement of ECM securities or the one-year anniversary of the loan. In October 1995, the Company loaned an additional $182,000 to ECM. This loan is non-interest bearing and may be converted into up to 350,000 shares of ECM common stock at the rate of $.52 per share. The loans are unsecured. 8 9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources During the nine months ended September 30, 1995 the Company's cash balances increased by $92,190 to $766,141. A total of $388,121 was provided by operating activities during the 1995 period. Clearing account balances showed a net increase of $1,800,074 due primarily to a combination of earnings growth and increases in firm payables. The balances in the Company's cash, clearing firm and inventory accounts can fluctuate significantly from day to day, depending on market conditions, daily trading activity, and investment opportunities. The Company monitors these accounts on a daily basis in order to ensure compliance with regulatory capital requirements and to preserve liquidity. As a result of higher trading volume during the 1995 period, payables increased by $1,263,085. This increase reflects higher commission expenses and other variable costs associated with firm trading activities, as well as an increase in fixed overhead expenses. Income taxes payable increased by $327,145 due to higher tax profits and a corresponding increase in marginal tax rates. These payments are expected to come due during the first quarter of 1996. Investing activities used cash of $186,108 during the 1995 period. Loans and advances to brokers decreased by $38,180 through payments and amortization, while expenditures for fixed assets increased by $218,111. The Company anticipates an increase in expenditures of approximately $200,000 for communications and other equipment during the remainder of the year. The Company is continuing its investment in technology and systems development in order to enhance services to its affiliate brokers. Financing activities used cash of $109,823 due primarily to loan principal payments and the repurchase of 108,200 shares of the Company's Common Stock for $89,238 under a stock buy-back program initiated in May 1995. Results of Operations The Company reported net income of $802,877, or $.10 per share for the nine months ended September 30, 1995, as compared to $234,623, or $.03 per share for the comparable 1994 period. Total year-to-date revenues increased approximately 37% to $19,988,451 in 1995 as compared to $14,617,311 in 1994. Revenues for the three months ended September 30, 1995 increased approximately 72%, or $3,398,747, over the comparable 1994 period as the Company benefitted from record volume and price levels experienced by many U.S. securities markets during the year. Year-to-date trading profits in 1995 increased by approximately 14% to $6,947,684 over 1994 levels. Record gains from equity market-making operations and an overall increase in proprietary 9 10 trading of bonds and unit investment trusts offset a significant reduction in profits from the sale of mortgage-backed securities ("MBS") by one of the Company's affiliate offices ($3,713,940 in 1994 as compared to $370,148 in 1995). The MBS market has suffered a dramatic drop in volume, precipitated by higher interest rates commencing in the second quarter of 1994. The MBS market remains out of favor with investors due to continuing volatility and interest rate uncertainty. Consequently, the Company has discontinued proprietary trading in these securities and expects volume to remain substantially below 1994 levels for the entire year. However, a positive development during the second quarter of 1995 and continuing into the third quarter, was the Company's ability to offset this loss of revenue with increases from its other trading departments, particularly in equities. Commission income from the sale of listed and over-the-counter securities, mutual funds, leasing, and other agency transactions rose approximately 69% to a record $12,198,847 in 1995 as compared to $7,199,208 in 1994. Most of the increase occurred in the second and third quarters of 1995 as a result of the surge in retail investment activity during these periods. Another factor contributing to higher commission revenues was an increase in the number of registered representatives affiliated with the Company from 270 in June 1994 to 350 in September 1995. Investment banking revenues were $194,855 in 1995 as compared to $899,828 in 1994. The Company completed its first managed underwriting in 1994. No public offerings have been scheduled for the current year. The decrease was also attributable to the Company's involvement in fewer syndications during the 1995 period. The Company intends to continue exploring opportunities in the investment banking area, including securities private placements. The Company has also purchased a minority interest in Environmental Coupon Marketing, Inc. ("ECM"), a privately-owned marketer of recycling programs, and has loaned ECM a total of $282,000 to date in short-term financing. Interest and other income increased by 48% to $647,065 in 1995. The increase was due primarily to a rise in interest income, which resulted from a combination of an increase in the number of customer accounts, and an expansion of firm trading in interest-bearing securities. The Company paid total compensation and benefits of $13,746,682 in 1995 as compared to $11,058,864 in 1994. Commissions paid to registered representatives for 1995 were $11,834,626 (59% of total revenues) as compared to $9,625,408 (66% of total revenues). Commission compensation is directly related to the 10 11 level of revenues generated from firm trading, agency and investment banking activities. The decrease in 1995 as a percentage of revenues was directly related to the lower production of the affiliate office specializing in the MBS market discussed above. The Company's in-house brokers were also responsible for a larger share of commission income in 1995. In-house brokers receive a lower percentage commission payout than independent affiliates but are not generally required to pay their own expenses. In addition, clearing and other fees charged against broker payouts were greater in 1995 due to the increase in agency business, which carries the highest execution costs per revenue dollar. Communications and occupancy costs increased by $195,629, or 29%. The Company completed the expansion of its corporate headquarters during the first quarter of 1994, which accounts for higher occupancy costs in subsequent periods. Telephone charges, market data services, and computer consulting costs also rose due to the addition of trading personnel and additional in-house brokers. Other operating expenses increased from $1,040,918 in 1994 to $1,618,416 in 1995. An addition to reserves for legal costs during the current year, higher depreciation costs relating to fixed assets purchased in connection with the Company's expansion, as well as higher administrative costs relating to revenue growth, primarily accounted for the increase. The Company is a party to various customer arbitrations and civil actions arising in the normal course of its securities business. At the present time, the Company is unable to determine the outcome of these matters or a range of possible loss relating to the claims. Interest expense increased from $105,685 in 1994 to $158,615 in 1995. The increase is due primarily to higher margin debt on firm inventory positions. 11 12 PART II OTHER INFORMATION ITEM 5. OTHER INFORMATION. In October 1995 the Company announced its intention to buy back up to a maximum of 500,000 shares of its outstanding Common Stock over a ninety-day period. Subsequent to the reporting period, the Company has repurchased 58,800 shares for an aggregate purchase price of $53,493.75. During the period the Company issued 3,000 shares of Common Stock pursuant to the exercise of certain Incentive Stock Options granted to one of the Company's employees. Subsequent to the reporting period an additional 8,000 shares were issued to another employee who exercised Incentive Stock Options. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits None. (b) Reports on Form 8-K There were no reports on Form 8-K filed. 12 13 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. FIRST MONTAUK FINANCIAL CORP. (Registrant) Dated: November 14, 1995 /s/ William J. Kurinsky ----------------------------- William J. Kurinsky Secretary/Treasurer Chief Financial Officer and Principal Accounting Officer /s/ Herbert Kurinsky ----------------------------- Herbert Kurinsky President 13 14 EXHIBIT INDEX Exhibit 27 - Financial Data Schedule EX-27 2 FINANCIAL DATA SCHEDULE
BD THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) CONSOLIDATED STATEMENT OF FINANCIAL CONDITION -- SEPTEMBER 30, 1995 AND CONSOLIDATED STATEMENT OF INCOME -- THREE MONTHS ENDED SEPTEMBER 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) FORM 10QSB SEPTEMBER 30, 1995 1,000 3-MOS DEC-31-1995 JUL-1-1995 SEP-30-1995 766 293 0 0 6,248 651 8,961 0 2,694 0 0 1,737 54 3,298 0 0 431 8,961 2,827 199 5,055 64 0 40 5,538 613 366 0 0 366 .05 .05
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