-----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, Np9N8nSmbzgJ/OaXSxD/M/iaK42fsjAd8OJ7Dpl1ucJ+ATARKF53gKdP4dD0hZT8 LcpaaEjxw2TMXaBYP1Nonw== 0000950116-97-000848.txt : 19970506 0000950116-97-000848.hdr.sgml : 19970506 ACCESSION NUMBER: 0000950116-97-000848 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970505 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TREMONT ADVISERS INC CENTRAL INDEX KEY: 0000880320 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MANAGEMENT CONSULTING SERVICES [8742] IRS NUMBER: 061210532 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 033-43331 FILM NUMBER: 97594909 BUSINESS ADDRESS: STREET 1: 555 THEODORE FREMD AVE CITY: RYE STATE: NY ZIP: 10580 BUSINESS PHONE: 9149213400 MAIL ADDRESS: STREET 1: 555 THEODORE FREMD AVE CITY: RYE STATE: NY ZIP: 10580 10QSB 1 FORM 10-QSB U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: March 31, 1997 -------------- 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 Number: 33-89966 TREMONT ADVISERS, INC. ---------------------- (Exact name of small business issuer as specified in its charter) Delaware 06-1210532 -------- ---------- (State or other jurisdiction or (I.R.S. Employer Identification No) incorporation or organization) 555 Theodore Fremd Avenue, Rye, New York 10580 ------------------------------------------------------ (Address of principal executive offices) (Zip Code) (914) 921-3400 -------------- (Issuer's telephone number) (Former name, former address and former fiscal year, if changed since last report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period) that the issuer was required to file such reports, and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDING DURING THE PRECEDING FIVE YEARS Check whether the issuer filed all documents and reports required to be filed by Section 12, 13, or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes [ ] No [ ] APPLICABLE ONLY TO CORPORATE ISSUERS: The number of shares outstanding of the Registrant's Class A Common Stock, $0.01 par value, as of the close of business on May 1, 1997 was 1,284,718, and the number of shares outstanding of the Registrant's Class B Common Stock, $0.01 par value, was 2,599,739 as of the same date. INDEX Tremont Advisers, Inc.
PART I - FINANCIAL INFORMATION Item 1. Financial Statements. (Unaudited) Page ---- Condensed Consolidated Balance Sheet - March 31, 1997 1 Condensed Consolidated Statements of Income - three months ended March 31, 1997 and 1996 2 Condensed Consolidated Statements of Cash Flows - three months ended March 31, 1997 and 1996 3 Notes to Condensed Consolidated Financial Statements 4 Item 2. Management's Discussion and Analysis 7 PART II - OTHER INFORMATION Item 1. Legal Proceedings 9 Item 6. Exhibits and Reports on Form 8-K 9 SIGNATURE 9 Exhibit 27 10
PART I - FINANCIAL INFORMATION Item 1. Financial Statements. (Unaudited) Tremont Advisers, Inc. Condensed Consolidated Balance Sheet (Unaudited)
March 31 1997 ---- Assets Current Assets Cash and cash equivalents $ 318,420 Accounts receivable, net 1,111,236 Prepaid expenses and other 15,195 ---------- Total current assets 1,444,851 Investments in limited partnerships (cost $803,467) 1,044,482 Investments in joint venture (cost $317,400) 142,388 Other investments (cost $170,000) 170,000 Fixed assets, net 238,545 Other assets 33,601 ---------- Total assets $3,073,867 ========== Liabilities and shareholders' equity Current liabilities Accounts payable and accrued expenses $ 692,997 Income taxes payable 6,155 Deferred income taxes payable 171,500 ---------- Total current liabilities 870,652 Deferred income taxes payable 35,350 Redeemable preferred stock Series A Preferred Stock, $1 par value, 650,000 shares authorized, issued and outstanding - none --- Shareholders' equity Preferred Stock $1 par value, 350,000 shares authorized, issued and outstanding - none --- Class A Common Stock, $0.01 par value, 5,000,000 shares authorized, 1,284,718 shares issued and outstanding 12,847 Class B Common Stock, $0.01 par value, 5,000,000 shares authorized, 2,599,739 shares issued and outstanding 25,997 Additional paid in capital 4,004,063 Accumulated deficit (1,875,042) ---------- Total shareholders' equity 2,167,865 ---------- Total liabilities and shareholders' equity $3,073,867 ========== See accompanying notes.
1 Tremont Advisers, Inc. Condensed Consolidated Statements of Income (Unaudited)
Three Months Ended March 31 1997 1996 ---------------------------- Revenues Consulting fees $1,108,462 $ 844,918 Performance fees 101,554 76,047 Commissions 38,661 41,760 --------- ------- Total Revenues 1,248,677 962,725 Expenses Compensation 720,384 612,529 General and administrative 258,133 229,025 Consulting 137,793 85,994 Depreciation and amortization 26,681 29,573 --------- ------- Total expenses 1,142,991 957,121 Equity earnings of limited partnerships, net 38,104 27,226 Loss from operations of joint ventures, net (26,861) (9,100) Other income, net 6,619 2,581 --------- ------- Income before income taxes 123,548 26,311 Provision for income taxes 17,750 --- --------- ------- Net income $ 105,798 $ 26,311 ========= ======== Net income per Common Share $ .03 $ .01 ========= ======== Weighted average Common Shares and Common Share Equivalents outstanding 3,884,457 3,844,457 ========= =========
See accompanying notes. 2 Tremont Advisers, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended March 31 1997 1996 -------------------------- Operating Activities Net income $ 105,798 $ 26,311 Adjustments to reconcile net income to cash used by operating activities: Depreciation and amortization 26,681 29,573 Equity earnings of limited partnerships (38,104) (27,226) Loss from operations of joint ventures 26,861 9,100 Changes in operating assets and liabilities: Accounts receivable 308,342 (254,377) Accounts payable and accrued expenses (529,579) 129,399 Income taxes, net 15,905 (1,742) Other 16,422 13,222 ------- ------- Net cash used by operating activities (67,674) (75,740) Investing activities Purchase of fixed assets (30,616) (2,695) Investments in limited partnerships (135,000) (85,928) ---------- -------- Net cash used by investing activities (165,616) (88,623) Net decrease in cash and cash equivalents (233,290) (164,363) Cash and cash equivalents at beginning of period 551,710 455,149 -------- -------- Cash and cash equivalents at end of period $ 318,420 $ 290,786 ========= =========
See accompanying notes. 3 Tremont Advisers, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) NOTE A - BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments ( consisting of normal recurring accruals) necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 1997 are not necessarily indicative of the results that may be expected for the year ending December 31, 1997. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-KSB for the fiscal year ended December 31, 1996. Net Income Per Common Share: Per share amounts are based on the weighted average number of shares of common stock outstanding during the period, plus the effect of common stock equivalents in the periods where there is a dilutive effect. In February 1997, the Financial Accounting Standards Board issued Statement No. 128, Earnings per Share, which is required to be adopted on December 31, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements for calculating primary earnings per share, the dilutive effect of stock options will be excluded. There will be no impact on primary earnings per share for the quarters ended March 31, 1997 and March 31, 1996, respectively. The impact of Statement 128 on the calculation of fully diluted earnings per share for these quarters is not expected to be material. Concentrations of Credit Risk: The Company's accounts receivable are not concentrated in any specific geographic region, but are concentrated in the investment industry. At March 31, 1997, the Company had accounts receivable of $198,796 and $189,917 from Starvest Funds, Ltd. and Ultima Investments Limited, respectively. Although the Company's exposure to credit risk associated with nonpayment by customers is affected by conditions within the investment industry, no other customer exceeded 10% of the Company's net receivables at March 31, 1997. Income Taxes: The provision for income taxes includes federal and state taxes currently payable and those deferred because of temporary differences between the financial statement and the tax basis of assets and liabilities. A valuation allowance is recorded, based on available evidence when it is more likely than not that some portion or all of the deferred tax assets will not be realized. NOTE B - INVESTMENTS IN LIMITED PARTNERSHIPS At March 31, 1997, TPI's investment in The Broad Market Fund, L.P. was $590,450 and represented .5% of the fund's net assets. Summarized unaudited financial information of The Broad Market Fund, L.P. is as follows:
March 31, 1997 ---------------------------- Total Assets $120,900,723 Partners' Capital 112,122,975 Quarter ended March 31 1997 1996 --------------------------- Net investment income $ 295,630 $ 561,382 Net realized and unrealized gain on investments 4,351,753 1,412,766 ---------- ---------- Net income $4,647,383 $1,974,148 ========== ==========
4 NOTE B - Investments in Limited Partnerships (continued) At March 31, 1997, TPI's investment in The Ultima Fund, L.P., GamTree, L.P and The F.W. Thompson Fund, L.P. was $257,141, $161,992, and $34,899, respectively. The aggregated summarized unaudited financial information of these entities is as follows:
March 31, 1997 ----------------------------- Total Assets $70,236,865 Partners' Capital 69,249,454 Quarter ended March 31 1997 1996 --------------------------- Net investment loss ($ 306,313) ($ 201,062) Net realized and unrealized gain on investments 1,305,848 3,000,524 ---------- ---------- Net income $ 999,535 $ 2,799,462 ========== ===========
NOTE C - INVESTMENTS IN JOINT VENTURES At March 31, 1997, TBL's investment in Tremont International Insurance Ltd., N-Compass Financial Services Limited and Tremont Capital Limited was $60,532, $51,135 and $30,721, respectively. The aggregated summarized unaudited financial information of these entities is as follows:
March 31, 1997 ---------------------------- Total assets $3,050,620 Shareholders' deficit (404,989) Quarter ended March 31 1997 1996 --------------------------- Revenues $ 124,670 $ 4,289 Expenses 175,609 27,633 --------- ------- Net loss ($ 50,939) ($23,344) ========== =========
NOTE D - ACCOUNTS PAYABLE AND ACCRUED EXPENSES Accounts payable and accrued expenses at March 31, 1997 consist of the following: Professional and consulting fees $428,530 Compensation 105,000 Accounts payable 82,955 Publications 39,000 Other 37,512 ------- $692,997 ======== 5 NOTE E - CONTINGENCIES In February 1997 a case was tried in the Supreme Court, New York County before a judge and jury against the Company, TPI and TBL by Mr. Sass Khazzam, Capulet Management Inc. and Kazco Management Inc. alleging that there was an agreement whereby the plaintiffs would recover 20% of the fees generated from the Global Advisors Portfolio, N.V. Effective with the close of business on November 15, 1996, the board of directors of the Global Advisors Portfolio N.V. terminated TBL and as a result, no further fees were generated after that date. With regard to the lawsuit, TBL recorded reserves which it estimated adequately covered the alleged liability. The complaint against Ms. Manzke was dismissed and at commencement of the trial, all claims asserted by plaintiffs Sass Khazzam and Capulet Management, Inc. against the Company, TPI and TBL were discontinued with prejudice. On February 11, 1997, the jury determined that there was no agreement between the parties, and returned a verdict in favor of plaintiff Kazco Mgt., Inc. and against TBL in the amount of $125,000, as the reasonable value of the services rendered by plaintiff. As a result of the verdict, Kazco Mgt., Inc. became entitled to a judgment against TBL for $125,000 together with interest at 9% per annum from January, 1995, and the Court ordered the dismissal of the complaint against the Company and TPI. After entry of the verdict, the Company's counsel was informed by plaintiffs' counsel that there would be no appeal and that no judgment would be entered against TBL, provided that the amount awarded by the jury was paid. On March 31, 1997, TBL paid Kazco Mtg., Inc. the sum of $151,689, which represented the full amount awarded by the jury including interest and court costs. General releases were exchanged and the action was discontinued with prejudice. 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS The Company's revenues are derived from consulting and specialized investment services provided to institutional and other clients, as well as management fees from certain funds under management. Consulting fees are generally a function of the amount of assets under management and the percentage fees charged to clients. Management fees are based on a percentage of the assets of the managed fund and are usually paid on a monthly basis. The Company also receives asset-based fees for investments placed by Tremont (Bermuda) Limited in certain offshore mutual funds. The Company provides other consulting services generally on a fixed fee basis, whether as annual retainer fees or single project fees. The Company's principal operating expenses consist of its costs of personnel and independent consultants. It is management's intention to adjust the Company's focus to launching new products and take advantage of its growing world-wide relationships to expand its operations. Consulting fees for the three months ended March 31, 1997 increased by $263,544 or approximately 31.2% as compared to the three months ended March 31, 1996. At the domestic subsidiary, Tremont Partners, Inc., consulting fees increased from $458,366 for the three months ended March 31, 1996 to approximately $687,338 for the three months ended March 31, 1997. The increase at this subsidiary is primarily due to increases in revenues from The Broad Market Fund, L.P. ($125,582), Winston Partners II LLC ($29,716), and Security Equity Life Insurance Company ($29,640). Tremont (Bermuda) Limited consulting fees increased from $386,552 for the three months ended March 31, 1996 to approximately $421,124 for the three months ended March 31, 1997. The increase at this subsidiary is primarily due to increases in revenues from Kingate Global Fund Class B Shares ($75,921) and Winston Partners II Offshore ($50,856). These increases, as well as others, were partially offset by declines in revenues from Global Advisors Portfolio, N.V. ($79,274) and Global Advisers Portfolio II, N.V. ($10,472). The increases or decreases in revenue were primarily as a result of increases or decreases in assets within the respective investment vehicles. The Board of Directors of the Global Advisors Portfolio, N.V. and Global Advisors Portfolio II, N.V. terminated Tremont (Bermuda) Limited effective as of the close of business on November 15, 1996, as a result, no further fees will be generated after that date. Performance fees for the three months ended March 31, 1997 increased by $25,507, or 33.5% as compared to the three months ended March 31, 1996 as a result of underlying investment vehicles outperforming pre-established benchmarks. Management expects for the remainder of 1997 that the Company will become less dependent on a small number of large clients, as the Company is developing relationships with a variety of additional entities. The Company is also utilizing these relationships to create diversified ways to package and distribute Tremont proprietary products. In addition, management expects performance fee revenue to increase during periods of positive market conditions, but management cannot predict with any accuracy whether such income from performance fees will continue in the future due to changing market conditions and outside factors. Compensation expense increased for the three months ended March 31, 1997 by $107,855 or 17.6% as compared to the three months ended March 31, 1996, as a result of the Company's continued efforts to attract and retain qualified employees. Such efforts resulted in an increase in the number of employees to 28 at March 31, 1997 from 23 at March 31, 1996. In addition to the increase in the number of employees, compensation expense also increased due to salary increases of certain employees that became effective January 1, 1997 and as a result of increased health care costs due to the increase in the number of employees. 7 General and administrative expenses increased $29,108 or 12.7% for the three month period ended March 31, 1997 as compared to the three month period ended March 31, 1996 and consist primarily of rent, telecommunications, travel and entertainment, outside professional fees and other related expenses. The increase in general and administrative expenses was primarily due to costs related to the Company's continued expansion to service its business growth. Consulting expenses increased in the first quarter of 1997 as compared to the first quarter of 1996 primarily as a result of the increase in revenues from the clients that participate in revenue sharing arrangements. For example, Tremont Securities, Inc. has an arrangement for securities clearance services with a clearing broker dealer whereby a certain percentage of the commissions earned are shared. Also, Tremont Partners, Inc. and Tremont (Bermuda) Limited have revenue sharing arrangements with certain clients. Profitability is dependent on the ability of the Company to maintain existing client relationships, several of which currently account for a significant portion of the Company's revenues, to increase assets under management for its clients, and to market its services to new accounts. Cash used in operations was $67,674 for the three months ended March 31, 1997 as compared to $75,740 in the comparable period of 1996. The $79,487 increase in net income for the period was offset by certain increases in working capital accounts. Accounts receivable balances decreased $308,342 as compared to December 31, 1996. Such decrease was offset by decreases in accounts payable and accrued expenses ($529,579). The Company believes it has adequate capital resources and working capital to bring to market those products currently in the developmental stage, and that the revenue stream from these, as well as from existing products, will be sufficient to support future growth. The Company has no short term or long term debt obligations. In February 1997 a case was tried in the Supreme Court, New York County before a judge and jury against the Company, TPI and TBL by Mr. Sass Khazzam, Capulet Management Inc. and Kazco Management Inc. alleging that there was an agreement whereby the plaintiffs would recover 20% of the fees generated from the Global Advisors Portfolio, N.V. Effective with the close of business on November 15, 1996, the board of directors of the Global Advisors Portfolio N.V. terminated TBL and as a result, no further fees were generated after that date. With regard to the lawsuit, TBL recorded reserves which it estimated adequately covered the alleged liability. The complaint against Ms. Manzke was dismissed and at commencement of the trial, all claims asserted by plaintiffs Sass Khazzam and Capulet Management, Inc. against the Company, TPI and TBL were discontinued with prejudice. On February 11, 1997, the jury determined that there was no agreement between the parties, and returned a verdict in favor of plaintiff Kazco Mgt., Inc. and against TBL in the amount of $125,000, as the reasonable value of the services rendered by plaintiff. As a result of the verdict, Kazco Mgt., Inc. became entitled to a judgment against TBL for $125,000 together with interest at 9% per annum from January, 1995, and the Court ordered the dismissal of the complaint against the Company and TPI. After entry of the verdict, the Company's counsel was informed by plaintiffs' counsel that there would be no appeal and that no judgment would be entered against TBL, provided that the amount awarded by the jury was paid. On March 31, 1997, TBL paid Kazco Mtg., Inc. the sum of $151,689, which represented the full amount awarded by the jury including interest and court costs. General releases were exchanged and the action was discontinued with prejudice. 8 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS In February 1997 a case was tried in the Supreme Court, New York County before a judge and jury against the Company, TPI and TBL by Mr. Sass Khazzam, Capulet Management Inc. and Kazco Management Inc. alleging that there was an agreement whereby the plaintiffs would recover 20% of the fees generated from the Global Advisors Portfolio, N.V. Effective with the close of business on November 15, 1996, the board of directors of the Global Advisors Portfolio N.V. terminated TBL and as a result, no further fees were generated after that date. With regard to the lawsuit, TBL recorded reserves which it estimated adequately covered the alleged liability. The complaint against Ms. Manzke was dismissed and at commencement of the trial, all claims asserted by plaintiffs Sass Khazzam and Capulet Management, Inc. against the Company, TPI and TBL were discontinued with prejudice. On February 11, 1997, the jury determined that there was no agreement between the parties, and returned a verdict in favor of plaintiff Kazco Mgt., Inc. and against TBL in the amount of $125,000, as the reasonable value of the services rendered by plaintiff. As a result of the verdict, Kazco Mgt., Inc. became entitled to a judgment against TBL for $125,000 together with interest at 9% per annum from January, 1995, and the Court ordered the dismissal of the complaint against the Company and TPI. After entry of the verdict, the Company's counsel was informed by plaintiffs' counsel that there would be no appeal and that no judgment would be entered against TBL, provided that the amount awarded by the jury was paid. On March 31, 1997, TBL paid Kazco Mtg., Inc. the sum of $151,689, which represented the full amount awarded by the jury including interest and court costs. General releases were exchanged and the action was discontinued with prejudice. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K There were no reports on Form 8-K filed during the quarter ended March 31, 1997. SIGNATURE 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. Tremont Advisers, Inc. Date: May 2, 1997 /s/Stephen T. Clayton ------------------------------- Stephen T. Clayton Chief Financial Officer (Duly authorized Officer and Principal Financial and Accounting Officer) 9 EX-27 2 FINANCIAL DATA SCHEDULE WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 THIS SCHEDULE CONTAINS UNAUDITED SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED FINANCIAL STATEMENTS AS OF MARCH 31, 1997 AND FOR THE QUARTER THEN ENDED. THIS INFORMATION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONDENSED FINANCIAL STATEMENTS. 3-MOS DEC-31-1997 MAR-31-1997 318,420 0 1,136,236 (25,000) 0 1,444,851 491,226 (252,681) 3,073,867 870,652 0 0 0 38,844 2,129,021 3,073,867 0 1,248,677 0 1,142,991 [OTHER-INCOME] 17,862 0 0 0 123,548 17,750 105,798 0 0 0 105,798 .03 0
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