Paulson Capital Corp. Announces 2008 Second Quarter ResultsPORTLAND, OR -- 08/13/2008 -- Paulson Capital Corp. (NASDAQ: PLCC), parent company to Paulson Investment Company, Inc., today reported its financial results for the three and six months ended June 30, 2008.
"Challenging market conditions -- particularly those affecting small and micro cap companies -- have resulted in a sharp decline in the number of initial public offerings (IPOs) and private equity transactions taking place," stated Chester Paulson, Chairman and CEO of Paulson Capital Corp. "During the first six months of 2007, there were 147 IPOs completed in the U.S. markets, while only 42 have been completed in 2008, thus far. What's more, 56 companies have cancelled planned IPOs since the first of this year. As a consequence, investment banking firms nationwide have suffered, and our Company is no exception."
Continuing, Paulson noted, "Although we believe that there are still some tough times ahead, Paulson Investment Company, Inc. will remain focused on attending to the needs of our brokerage clients while remaining attuned to market indicators and trends pointing to renewed strength in the corporate finance arena."
Financial Highlights for six months ended June 30, 2008 compared to six months ended June 30, 2007:
-- Total revenues were $(1.03 million) compared to $17.68 million.
- Commissions from securities brokerage activities fell to $8.01
million from $8.72 million.
- Corporate finance revenues totaled $395,000, down from
$4.45 million.
- Investment losses were $12.07 million compared to investment
income of $2.56 million.
- Trading income increased 50% to $2.55 million, up from
$1.71 million.
-- Loss before taxes was $11.12 million compared to income before taxes
of $6.16 million.
-- Net loss totaled $6.96 million, or $1.16 loss per share, down from
net income of $3.78 million, or $0.61 earnings per share.
-- Net cash provided by operations improved 3% to $464,000 from $449,000.
As of June 30, 2008, the Company had $9.74 million in cash, notes and receivables and $31.25 million in total shareholders' equity. In addition, due to the decrease in the value of certain underwriter warrants issued to Paulson Investment Company, Inc. related to past corporate finance transactions and unrealized losses on certain investment securities, the Company has booked a deferred tax asset of $2.87 million on its balance sheet as of June 30, 2008, compared to a deferred tax liability of $1.82 million as of December 31, 2007.
Financial Highlights for three months ended June 30, 2008 compared to three months ended June 30, 2007:
- -- Total revenues declined to $(3.21 million) compared to $7.98 million.
- Commissions from securities brokerage activities decreased 23%
to $3.56 million from $4.60 million.
- Due to the fact that the Company did not complete any corporate
finance transactions in the second quarter of this year,
corporate finance revenues were $0, compared to $3.45 million
in the second quarter of 2007.
- Investment losses totaled $5.04 million compared to investment
losses of $629,000.
- Trading losses declined to $1.77 million from trading income of
$371,000.
-- Loss before taxes was $7.74 million compared to income before taxes
of $1.66 million.
-- Net loss totaled $4.83 million, or $0.81 loss per share, down from net
income of $1.00 million, or $0.16 earnings per share.
Paulson Capital Corp. will host a teleconference this afternoon, beginning at 4:15 PM Eastern Time, and invites all interested parties to join management in a discussion regarding the Company's financial results, corporate progression and other meaningful developments. The conference call can be accessed via telephone by dialing toll-free 1-800-218-8862. For those unable to participate at that time, a replay of the teleconference can be accessed domestically by dialing 1-800-405-2236 and entering the passcode 11118408#. The replay will be available for 30 days.
About Paulson Capital Corporation
Paulson Capital Corporation is the parent company to Paulson Investment Company, Inc. Headquartered in Portland, Oregon, Paulson Investment Company, Inc. is the Northwest's largest independent brokerage firm and a national leader in public offerings of small and emerging growth companies with capital needs of $5 million to $45 million. Founded by Chester "Chet" Paulson in 1970, it has managed or underwritten 163 securities offerings and has generated more than $1.2 billion for client companies. The firm's enduring success stems from its ability to recognize emerging industry trends and from supporting growth companies pioneering positive change and advancements in those related markets.
With corporate and independent retail brokerage offices located in 11 states throughout the country, Paulson Investment Company, Inc. aims to earn and build trust with retail and select institutional investors through highly customized financial portfolio management, diversified financial products and service offerings and effective administration and execution of investment strategies that specifically address individual risk tolerance levels. In addition, Paulson Investment Company, Inc.'s brokerage clients look to the firm for compelling new investment ideas in the small and emerging growth markets.
Paulson Capital Corp. and Subsidiary Consolidated Balance Sheets
June 30, December 31,
2008 2007
------------ ------------
(Unaudited)
Assets
Cash and cash equivalents $ 23,236 $ 43,619
Receivable from clearing organization 9,008,851 11,702,341
Notes and other receivables 709,801 1,563,530
Income taxes receivable 269,623 -
Deferred tax asset 2,864,798 -
Trading securities, at market value 11,644,364 12,037,368
Investment securities, at market or estimated
fair value 5,189,181 8,157,546
Underwriter warrants, at estimated fair value 5,228,000 16,373,000
Prepaid and deferred expenses 353,125 939,371
Furniture and equipment, at cost, net of
accumulated depreciation and amortization
of $831,600 and $862,616 141,665 196,333
------------ ------------
Total Assets $ 35,432,644 $ 51,013,108
============ ============
Liabilities and Shareholders' Equity
Accounts payable and accrued liabilities $ 1,313,888 $ 3,240,877
Payable to clearing organization 1,290,307 2,463,413
Compensation, employee benefits and payroll
taxes 736,399 2,065,972
Securities sold, not yet purchased, at market
value - 36,259
Income taxes payable - current - 1,369,710
Income taxes payable - long-term 307,000 297,000
Deferred revenue 325,000 375,000
Underwriter warrants--employee and
independent contractor, at estimated fair
value 208,000 651,000
Deferred income taxes - 1,821,000
------------ ------------
Total Liabilities 4,180,594 12,320,231
Commitments and Contingencies - -
Shareholders' Equity
Preferred stock, no par value; 500,000
shares authorized; none issued - -
Common stock, no par value; 20,000,000
shares authorized; shares issued and
outstanding: 5,942,150 and 6,037,150 1,950,469 1,972,319
Retained earnings 29,301,581 36,720,558
------------ ------------
Total Shareholders' Equity 31,252,050 38,692,877
------------ ------------
Total Liabilities and Shareholders' Equity $ 35,432,644 $ 51,013,108
============ ============
Paulson Capital Corp. and Subsidiary
Consolidated Statement of Operations (Unaudited)
For the Three Months Ended For the Six Months Ended
June 30, June 30,
-------------------------- ---------------------------
2008 2007 2008 2007
------------ ------------ ------------ -------------
Revenues
Commissions $ 3,556,903 $ 4,603,971 $ 8,012,732 $ 8,720,539
Corporate
finance - 3,450,296 395,389 4,445,807
Investment
income (loss) (5,036,636) (628,508) (12,074,221) 2,555,836
Trading income
(loss) (1,770,393) 370,687 2,552,042 1,710,763
Interest and
dividends 12,850 36,826 27,471 70,999
Other 31,671 146,700 56,896 172,075
------------ ------------ ------------ -------------
(3,205,605) 7,979,972 (1,029,691) 17,676,019
Expenses
Commissions and
salaries 3,188,836 4,818,382 7,528,400 8,783,091
Underwriting
expenses 168,409 149,509 314,006 309,464
Rent, telephone
and quotation
services 301,893 303,945 588,617 617,180
Professional
fees 213,419 141,228 473,558 345,173
Bad debt
expense 2,239 107,160 5,176 154,849
Travel and
entertainment 169,017 41,804 201,227 77,184
Advertising and
promotion
expense 56,390 36,720 114,586 84,726
Settlement
expense 15,500 230,000 32,000 309,717
Depreciation
and
amortization 28,116 27,363 57,184 56,327
Other 394,384 461,811 775,177 775,859
------------ ------------ ------------ -------------
4,538,203 6,317,922 10,089,931 11,513,570
------------ ------------ ------------ -------------
Income (loss)
before income
taxes (7,743,808) 1,662,050 (11,119,622) 6,162,449
Income tax expense
(benefit):
Current (1,156,805) 259,647 524,798 746,602
Deferred (1,760,195) 401,526 (4,685,798) 1,637,773
------------ ------------ ------------ -------------
(2,917,000) 661,173 (4,161,000) 2,384,375
------------ ------------ ------------ -------------
Net income (loss) $ (4,826,808) $ 1,000,877 $ (6,958,622) $ 3,778,074
============ ============ ============ =============
Basic net income
(loss) per share $ (0.81) $ 0.16 $ (1.16) $ 0.61
============ ============ ============ =============
Diluted net income
(loss) per share $ (0.81) $ 0.16 $ (1.16) $ 0.61
============ ============ ============ =============
Shares used in per
share calculations:
Basic 5,966,051 6,144,599 5,992,480 6,151,100
============ ============ ============ =============
Diluted 5,966,051 6,154,496 5,992,480 6,161,051
============ ============ ============ =============
This release may contain "forward-looking statements" based on current expectations but involving known and unknown risks and uncertainties. Actual results of achievements may be materially different from those expressed or implied. The Company's plan and objectives are based on judgments with respect to future conditions in the securities markets as well as general assumptions regarding the economy and competitive environment in the securities industry, which can be volatile and out of our control. In particular, we make assumptions about our ability to complete corporate finance transactions and increase the volume and size of our securities trading operations, which are difficult or impossible to predict accurately and often beyond the control of the Company. Therefore, there can be no assurance that any forward-looking statement will prove to be accurate.
FOR MORE INFORMATION, PLEASE CONTACT:
Dodi Handy
President and CEO
Elite Financial Communications Group
407-585-1080
or via email at plcc@efcg.net
