SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2001
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: (732) 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
8,625,284 Common Shares, no par value, were outstanding as of
November 7, 2001.
Page 1 of 14
02
FIRST MONTAUK FINANCIAL CORP
FORM 10-Q
SEPTEMBER 30, 2001
INDEX
Page
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Statements of Financial Condition
as of September 30, 2001 and December 31, 2000 ....... 3
Consolidated Statements of Income for the
Nine Months ended September 30, 2001 and 2000
and Three Months ended September 30, 2001 and 2000 ...... 4
Consolidated Statements of Cash Flows for
the Nine Months ended September 30, 2001 and 2000 ...... 5
Notes to Financial Statements .......................... 6-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations .........8-11
PART II. OTHER INFORMATION:
Item 5. Other Information................................ 12
Item 6. Exhibits and Reports on Form 8-K................. 12
Signatures ............................................... 13
03
FIRST MONTAUK FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
September December 31,
2001 2000
ASSETS
Cash and cash equivalents $ - $ 3,701,010
Due from clearing firms 4,536,804 2,405,666
Commissions receivable 68,506 39,200
Trading and investment account securities 1,097,720 3,975,309
Employee and broker receivables 2,049,348 1,609,666
Global leases receivable 21,020 174,661
Notes receivable - 18,000
Due from officers 199,923 175,068
Property and equipment - net 2,051,553 2,304,533
Deferred income taxes - net 2,232,150 1,721,262
Other assets 1,501,525 788,688
----------- ------------
Total assets $ 13,758,549 $ 16,913,063
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deferred income $ 3,633,333 $ 3,933,333
Securities sold, but not yet purchased, at market 314,900 386,459
Notes payable 328,424 559,179
Commissions payable 2,837,416 1,637,733
Accounts payable 943,197 450,974
Accrued expenses 883,647 840,578
Income taxes payable 7,111 875,786
Other liabilities 668,677 519,630
----------- ------------
Total liabilities 9,616,705 9,203,672
----------- ------------
Temporary equity - stock subject to redemption 6,500 6,500
Commitments and contingencies (See Notes)
Stockholders' equity
Preferred Stock, 4,375,000 shares authorized, $.10 par
value, no shares issued and outstanding - -
Series A Convertible Preferred Stock, 625,000 shares
authorized, $.10 par value, 331,190 and 349,511 shares
issued and outstanding, respectively; liquidation
preference: $1,655,950 at September 30, 2001 33,119 34,951
Common Stock, no par value, 30,000,000 shares
authorized, 8,744,485 and 9,309,309 shares issued,
8,622,284 and 8,822,409 outstanding, respectively 3,489,622 4,063,397
Additional paid-in capital 4,076,666 4,253,765
Retained earnings (accumulated deficit) (3,319,260) 230,921
Less: Deferred compensation (89,824) (393,120)
Less: Treasury stock (54,979) (487,023)
----------- ------------
Total stockholders' equity 4,135,344 7,702,891
----------- ------------
Total liabilities and stockholders' equity $ 13,758,549 $ 16,913,063
=========== ============
See notes to financial statements.
04
FIRST MONTAUK FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
Nine months ended September 30, Three months ended September 30,
2001 2000 2001 2000
Revenues:
Commissions $ 28,089,695 $ 37,765,633 $ 8,206,662 $ 10,122,888
Principal transactions 5,542,395 8,031,153 1,540,318 1,226,532
Investment banking 1,385,937 2,448,489 1,028,428 669,663
Interest and other income 3,495,974 2,258,924 1,417,509 651,950
------------ ------------- ------------- --------------
38,514,001 50,504,199 12,192,917 12,671,033
------------ ------------- ------------- --------------
Expenses:
Commissions, employee compensation and benefits 31,587,339 38,317,291 10,055,199 10,671,549
Clearing and floor brokerage 2,434,950 3,278,104 730,638 878,429
Communications and occupancy 2,343,288 2,092,461 887,274 610,828
Legal matters and related costs 2,166,501 572,016 1,389,558 249,156
Other operating expenses 3,839,977 3,322,906 952,848 817,273
Interest 118,664 146,801 43,755 32,345
------------ ------------- ------------- --------------
42,490,719 47,729,579 14,059,272 13,259,580
------------ ------------- ------------- --------------
Income (loss) before income taxes(income tax benefit) (3,976,718) 2,774,620 (1,866,355) (588,547)
Income taxes (income tax benefit) (499,682) 1,132,626 208,108 (198,374)
------------ ------------- ------------- --------------
Net income (loss) before extraordinary item (3,477,036) 1,641,994 (2,074,463) (390,173)
Extraordinary loss-extinguishment of debt, net of tax - (34,200) - -
------------ ------------- ------------- --------------
Net income (loss) $ (3,477,036) $ 1,607,794 $ (2,074,463) $ (390,173)
============ ============= ============= ==============
Net income (loss) applicable to common stockholders $ (3,550,181) $ 1,532,012 $ (2,099,303) $ (414,876)
============ ============= ============= ==============
Per share of Common Stock:
Basic:
Before extraordinary loss $ (0.41) $ 0.16 $ (0.24) $ (0.04)
Extraordinary loss - - - -
------------ ------------- ------------- --------------
Net income (loss) $ (0.41) 0.16 (0.24) (0.04)
============ ============= ============= ==============
Diluted:
Before extraordinary loss $ (0.41) $ 0.15 $ (0.24) $ (0.04)
Extraordinary loss - - - -
------------ ------------- ------------- --------------
Net income (loss) $ (0.41) $ 0.15 $ (0.24) $ (0.04)
============ ============= ============= ==============
Number of common shares used in
basic income (loss) per share 8,731,099 9,560,256 8,714,904 9,394,457
============ ============= ============= ==============
Number of common shares used in
diluted income (loss) per share 8,731,099 11,018,623 8,714,904 9,394,457
============ ============= ============= ==============
See notes to financial statements.
05
FIRST MONTAUK FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended September 30,
2001 2000
INCREASE (DECREASE) IN CASH
Cash flows from operating activities:
Net income (loss) $ (3,477,036) $ 1,607,794
-------------- -------------
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation 436,302 449,202
Amortization 148,635 240,154
Reserves and allowances 200,000 149,640
Increase (decrease) in cash attributable to
changes in assets and liabilities
Due from clearing firms (2,131,138) 3,931,370
Trading and investment account securities 2,877,589 (71,954)
Commissions receivable (29,306) 298,875
Due from officers (24,855) 11,696
Employee and broker receivables (439,682) (533,888)
Deferred income taxes (510,888) 109,342
Other assets (712,837) 472,875
Deferred income (300,000) -
Securities sold but not yet purchased (71,559) 308,785
Commissions payable 1,199,683 (1,244,220)
Accounts payable 467,385 23,504
Accrued expenses 43,069 12,208
Income taxes payable (868,675) 347,846
Other liabilities (359,454) (137,260)
-------------- ---------------
Total adjustments (75,731) 4,368,175
-------------- ---------------
Net cash provided by (used in) operating activities (3,552,767) 5,975,969
-------------- ---------------
Cash flows from investing activities:
Collection of notes receivable 18,000 74,708
Collection of Global leases receivable 153,641 526,413
Additions to property and equipment (300,432) (711,037)
Dispositions of property and equipment - 12,851
-------------- ---------------
Net cash used in investing activities (128,791) (97,065)
-------------- ---------------
Cash flows from financing activities:
Payment of notes payable (245,625) (773,172)
Payment of subordinated notes payable - (50,000)
Proceeds from capital lease financing 606,195 -
Payments of capital lease (188,153) (90,936)
Exercise of stock options - 55,920
Payments toward purchase of treasury stock (143,564) (973,717)
Payments of preferred stock dividends (48,305) (75,782)
-------------- ---------------
Net cash used in financing activities (19,452) (1,907,687)
-------------- ---------------
Net increase (decrease) in cash and cash equivalents (3,701,010) 3,971,217
Cash and cash equivalents at beginning of period 3,701,010 686,980
-------------- ---------------
Cash and cash equivalents at end of period - 4,658,197
============== ===============
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 118,664 $ 146,801
============== ===============
Income taxes $ 894,331 $ 675,347
============== ===============
Property and equipment financed under capital leases $ 662,290 $ -
============== ===============
See notes to financial statements.
06
FIRST MONTAUK FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2001
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, 2001 and 2000. The preparation of financial statements in conformity with
GAAP requires the Company to make estimates and assumptions that affect the
reported amounts of revenues and expenses during the reporting period. Actual
results could vary from these estimates. These financial statements should be
read in conjunction with the Company's Annual Report at, and for the year ended
December 31, 2000, as filed with the Securities and Exchange Commission on Form
10-K.
The results reflected for the nine-month and three-month periods ended
September 30, 2001 are not necessarily indicative of the results for the entire
fiscal year to end on December 31, 2001.
NOTE 2 - EARNINGS PER SHARE
Basic EPS is computed by dividing net income by the weighted-average number
of common shares outstanding for the period. Diluted EPS reflects the potential
dilution from the exercise of stock options and the deemed conversion of
preferred stock and convertible debt.
NOTE 3 - SHARE REPURCHASE
During the nine months ended September 30, 2001, the Company repurchased
236,751 shares of its common stock for $143,564 under a share repurchase program
authorized by the board of directors.
NOTE 4 - PREFERRED STOCK
During the nine months ended September 30, 2001, a total of 18,321 shares
of Series A Preferred Stock were converted into 36,642 shares of common stock.
NOTE 5 - SALE/LEASEBACK
During the nine months ended September 30, 2001, the Company entered into
two capital leases under a sale/leaseback arrangement with a leasing company.
The transactions resulted in a gain of approximately $45,000, which has been
deferred and will amortized over the related lease terms. The leases, totaling
$662,000, are together payable in 36 monthly installments of $21,000 and an
additional 12 installments of $3,900.
NOTE 6 - AMENDED AND RESTATED FISERV FINANCIAL AGREEMENT
In May 2000, the Company's broker-dealer subsidiary ("FMSC") entered into a
ten year clearing agreement with Fiserv Securities, Inc. ("Fiserv"). In
connection with the clearing agreement, FMSC and Fiserv also entered into a
financial agreement under which Fiserv was to provide cash advances to FMSC
under certain terms and conditions. Upon the conversion of FMSC's accounts to
Fiserv in November 2000, it received the initial cash advance of $4,000,000. As
of February 1, 2001, the Company and FMSC amended and restated the financial
agreement with Fiserv. Under the restated terms, the Company, rather than FMSC,
will be the recipient of any additional cash advances payable under the
financial agreement. The Company has further assumed FMSC's obligation with
respect to the initial payment received in November 2000, and will be solely
responsible for any performance and early termination penalties. In
consideration of FMSC's release from its obligations under the financial
agreement and to secure Fiserv's interest, the Company has granted to Fiserv a
first priority lien in all of the outstanding shares of FMSC that it owns.
07
NOTE 7 - LEGAL MATTERS
During the third quarter of 2001, the Company's broker-dealer subsidiary
(FMSC) resolved a previously disclosed customer claim in which the customer
sought damages in excess of $19 million. FMSC is a respondent or co-respondent
in various other legal proceedings incidental to its securities business. FMSC
is contesting the allegations of these claims and believes that there are
meritorious defenses in each case. In view of the inherent difficulty of
predicting the outcome of litigation, management is unable to derive a
meaningful estimate of the amount or range of possible loss that may arise out
of pending legal proceedings in any particular quarterly or annual period, or in
the aggregate. However, it is possible that the ultimate outcome of these
matters could have a material adverse impact on the Company's financial
condition, results of operations, and cash flows.
NOTE 8 - INCOME TAXES
During the nine months ended September 30, 2001, management increased the
Company's deferred tax valuation allowance by $810,000 to offset additional tax
benefits whose realization is uncertain. These tax assets relate to stock option
compensation, state net operating losses, and deferred income.
08
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Three Months Ended September 30, 2001 (the "2001 Period") vs. September 30,
2000 (the "2000 Period")
Three Months Ended September
2001 2000
(000's) % Change (000's)
-------------------------------------------
Revenues:
Commissions $ 8,207 (19) $ 10,123
Principal transactions 1,540 26 1,226
Investment banking 1,028 53 670
Interest and other income 1,418 117 652
---------------------------------------
$ 12,193 (4) $ 12,671
Three Months Ended September
2001 2000
(000's) % Change (000's)
------------------------------------------
Expenses:
Commissions, compensation
and benefits $ 10,055 (6) $ 10,672
Clearing and floor brokerage 731 (17) 878
Communications and occupancy 887 (45) 611
Legal matters and related costs 1,389 458 249
Other operating expenses 953 17 817
Interest 44 38 32
---------------------------------------
$ 14,059 6 $ 13,259
During the nine-month period ending September 30, 2001, the securities
industry sustained declines in revenues, resulting from a sluggish global
economy and investor uncertainty. The Company's results in both 2001 and
particularly the second half of 2000 reflect declining trading volume in the
U.S. financial markets, and generally bearish investor sentiment. For the three
months ended September 30, 2001, the Company's revenues decreased 4% to
$12,193,000 compared with $12,671,000 for the 2000 period. For the nine months
ended September 30, 2001, the Company recorded revenue of $38,514,000, down from
$50,504,000 over the nine-month period of 2000.
The Company's primary source of revenue is derived from commissions
generated on listed and over-the-counter securities and other agency
transactions. These revenues during the 2001 period were $8,207,000 (67% of
total revenues) compared to $10,123,000 (80% of total revenues) for the 2000
period. Commission revenue from the sale of mutual funds, insurance products,
and fees from managed accounts decreased by $615,000 to $2,974,000 (24% of total
revenues) during the 2001 period from $3,589,000 (28% of total revenues) for the
2000 period. The decrease in mutual fund revenues during the 2001 period was
partially offset by the increase in commissions from the sale of variable
annuities and fees from managed accounts. Revenues from these two areas
increased by $222,000 for the 2001 period when compared to the 2000 period.
Gains from proprietary trading and market-making activities increased by
26%, or $314,000, over the 2000 period. Principal transactions in equity
securities accounted for most of the increase ($297,000) over the 2000 period.
During the 2001 quarter, the Company reduced its market-making and proprietary
trading activities, eliminating personnel costs and market data services. The
Company also reduced its inventory positions in order to limit further its
exposure to market volatility.
Investment banking revenues increased during the 2001 period by $359,000,
or 54%, to $1,028,000, when compared with the 2000 period. Included in this
category is commissions earned from the sale of registered offerings of
collateralized medical receivables, which the Company began selling during the
second half of this year.
09
Interest and other income for the 2001 period increased by $765,000 to
$1,418,000. This was largely due to an insurance reimbursement of $512,000 and
an increase in interest income.
Compensation and benefits decreased during the 2001 period by 6% or
$616,000 to $10,055,000. Commissions paid to registered representatives for 2001
were $8,092,000 (66% of total revenues) as compared to $8,798,000 (69% of total
revenues) in 2000, a decrease of $706,000. The decrease in commission expense
reflects the overall decrease in commission-generated revenues. Although total
revenues stayed fairly constant for the 2001 period, commission generated
revenues actually decreased by $1,070,000. The other expenses in this category
include salaries, payroll taxes, and fringe benefits for salaried employees.
Employee compensation and employee benefits remained relatively constant,
increasing by only $89,000 over the 2000 period. During this period, the Company
implemented certain cost cutting measures, including the reduction in executive
officers' salaries and personnel layoffs in the trading and operations
departments. The Company expects to realize the full extent of these cost
reductions during the fourth quarter of 2001.
Clearing costs decreased during the 2001 period. This cost, which is
directly associated with the level of transaction volume, decreased by $148,000
to $731,000 (6% of total revenues) from $878,000 (7% of revenues) during the
2000 period. These clearing costs, can and do fluctuate, depending upon the
product mix. Some transactions, such as options and bonds, have a higher
execution and clearing cost than mutual funds and insurance.
Communications and occupancy costs were $887,000 (7% of total revenues) for
the 2001 period as compared to $611,000 (5% of total revenues) for the 2000
period. During the third quarter of 2001, the Company entered into two new
leases for branch offices in Boca Raton, Florida and New York City. As a result
of these new offices, as well as rent increases on current office space, rental
expense increased by approximately $148,000. Subsequent to the quarter, the
Company sublet its office space in Paramus, New Jersey, which formerly housed
the operations of Century Discount Investments ("CDI"). The CDI staff was
relocated to the Red Bank headquarters. As a result of this move, the Company
anticipate savings of approximately $6,000 per month.
Other operating expenses increased by $136,000, to $953,000 (8% of total
revenues) as compared to $817,000 (6% of total revenues) during the 2000 period.
The increase is due primarily to higher customer and broker bad debt reserves.
Legal fees and litigation settlements increased to $1,390,000 from
$249,000, an increase of $1,141,000 over the 2000 period. The Company is
currently a respondent in various customer arbitrations and lawsuits arising in
the normal course of its securities business. In view of the inherent difficulty
of predicting the outcome of litigation, management is unable to derive a
meaningful estimate of the amount or range of possible loss that may arise out
of pending legal proceedings in any particular quarterly or annual period, or in
the aggregate. However, it is possible that the ultimate outcome of these
matters could have a material adverse impact on the Company's financial
condition, results of operations, and cash flows.
The Company has not incurred any income tax liabilities in 2001.
Management, however, has increased the Company's deferred tax valuation
allowance by $810,000 to offset additional tax benefits whose realization is
uncertain. These tax assets relate to stock option compensation, state net
operating losses, and deferred income.
For the 2001 period, the Company reported a net loss of $2,099,000 or
($.24) per basic and diluted share, as compared to a net loss of $415,000 or
($.04) per basic and diluted share for the 2000 period. For the nine months
ended September 30, 2001, the Company reported a net loss of $3,550,000 or
($.41) per basic and diluted share, as compared to net income of $1,532,000 or
$.16 per basic and $.15 per diluted share for the nine months ended September
30, 2000.
10
Liquidity and Capital Resources
The Company maintains a liquid balance sheet with 41% of the Company's
assets consisting of cash and cash equivalents; securities owned, which are
marked to market; and receivables from the Company's clearing firm and other
broker-dealers. The Company's liquidity can fluctuate significantly depending
largely upon general economic and market conditions, volume of activity, and
investment opportunities.
Net cash used by operating activities for the nine months was $3,552,767.
The primary source of this decrease was the net loss for the nine months ended
September 30, 2001, of $3,477,000.
Investing activities required cash of $129,000 over the last nine months.
Additions to capital expenditures consumed $300,000, while collections of notes
and global lease receivables contributed $172,000. The Company projects
additional expenditures for infrastructure and technology to be approximately
$100,000 for the remainder of the year.
Financing activities used cash of $19,000 during the first nine months of
2001. A total of $606,000 of proceeds was received from capital lease financing.
This was offset by notes and capital lease repayments of $434,000 and dividend
payments to preferred shareholders of $48,000. In addition, a total of $144,000
was used to repurchase 236,751 of the Company's outstanding shares pursuant to a
stock repurchase program.
In May 2000, the Company's broker-dealer subsidiary ("FMSC") entered into a
10-year clearing agreement with Fiserv Securities, Inc. ("Fiserv"). In
connection with the clearing agreement, FMSC and Fiserv also entered into a
financial agreement under which Fiserv was to provide cash advances to FMSC
under certain terms and conditions. Upon the conversion of FMSC's accounts to
Fiserv in November 2000, it received the initial cash advance of $4,000,000. As
of February 1, 2001, the Company and FMSC amended and restated the financial
agreement with Fiserv. Under the restated terms, the Company, rather than FMSC,
will be the recipient of any additional cash advances payable under the
financial agreement. The Company expects an additional cash payment of
$1,250,000 in November 2001, having achieved the performance criteria required
for such payment.
Factors Affecting "Forward-Looking Statements"
From time to time, the Company may publish "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities and Exchange Act of 1934, as amended, or make oral
statements that constitute forward-looking statements. These forward-looking
statements may relate to such matters as anticipated financial performance,
future revenues or earnings, business prospects, projected ventures, new
products, anticipated market performance, and similar matters. The Private
Securities Litigation Reform Act of 1995 provides a safe harbor for
forward-looking statements. In order to comply with the terms of the safe
harbor, the Company cautions readers that a variety of factors could cause the
Company's actual results to differ materially from the anticipated results or
other expectations expressed in the Company's forward-looking statements. These
risks and uncertainties, many of which are beyond the Company's control,
include, but are not limited to: (i) transaction volume in the securities
markets, (ii) the volatility of the securities markets, (iii) fluctuations in
interest rates, (iv) changes in regulatory requirements which could affect the
cost of doing business, (v) fluctuations in currency rates, (vi) general
economic conditions, both domestic and international, (vii) changes in the rate
11
of inflation and related impact on securities markets, (viii) competition from
existing financial institutions and other participants in competition from
existing financial institutions and other participants in the securities
markets, (ix) legal developments affecting the litigation experience of the
securities industry, and (x) changes in federal and state tax laws which could
affect the popularity of products sold by the Company. The Company does not
undertake any obligation to publicly update or revise any forward-looking
statements. The reader is referred to the Company's previous filings on Form
10-Q for the periods ended March 31, 2001 and June 30, 2001 and the Form 10-K
for the year ended December 31, 2000.
Recently Issued Pronouncements
In June 2001, the FASB issued SFAS No. 141, Business Combinations, which
addressed the initial recognition and measurement of goodwill and other
intangible assets acquired in a business combination. SFAS No. 141 requires the
purchase method of accounting to be used for business combinations initiated
after June 30, 2001 and eliminates the pooling of interest method. The adoption
of this statement is not expected to have a material impact on the Company's
financial position or results of operations.
In June 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible
Assets, which addressed the recognition and measurement of goodwill and other
intangible assets subsequent to their acquisition. SFAS No. 142 also addressed
the initial recognition and measurement of intangible assets acquired outside of
a business combination whether acquired individually or with a group of other
assets. SFAS No. 142 provides that intangible assets with finite useful lives be
amortized and that intangible assets with indefinite lives and goodwill will not
be amortized, but will rather be tested at least annually for impairment.
Although SFAS No. 142 is not required to be adopted by the Company until fiscal
2003, its provisions must be applied to goodwill and other intangible assets
acquired after June 30, 2001. As of September 30, 2001, the Company does not
have any goodwill or other intangible assets relating to business combinations
that were accounted for under APB Opinion No. 16. Accordingly, the adoption of
SFAS No. 142 is not expected to have a material impact on the Company's
financial position or results of operations.
In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations, which addressed the retirement of tangible long-lived assets and
the associated asset retirement costs. The Statement requires that the fair
value of a liability for an asset retirement obligation be recognized in the
period in which it is incurred if a reasonable estimate of fair value can be
made. The associated asset retirement costs are capitalized as part of the
carrying amount of the long-lived asset. SFAS No. 143 is effective for financial
statements issued for fiscal years beginning after June 15, 2002, but may be
implemented earlier. The adoption of SFAS No. 143 is not expected to have a
material impact on the Company's financial position or results of operations.
In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets. The Statement requires a single accounting
model to be used for long-lived assets to be disposed of by sale, and broadens
the presentation of discontinued operations to include more disposal
transactions. SFAS No. 144 is effective for financial statements issued for
fiscal years beginning after December 15, 2001, but may be implemented earlier.
The adoption of SFAS No. 144 is not expected to have a material impact on the
Company's financial position or results of operations.
12
PART II
OTHER INFORMATION
Item 5. Other Information.
Stock Repurchase Program
During the quarter ended September 30, 2001, the Company repurchased
122,201 shares of its common stock for $55,250 under a share repurchase program
authorized by the Board of Directors.
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.
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, 2001 /s/ William J. Kurinsky
----------------------------------
William J. Kurinsky
Secretary/Treasurer
Chief Financial Officer and
Principal Accounting Officer
/s/ Herbert Kurinsky
----------------------------------
Herbert Kurinsky
President
14
First Montauk Financial Corp.
Computation of Earnings Per Share
Nine months ended September 30, Three months ended September 30,
2001 2000 2001 2000
Numerator:
Basic:
Income (loss) before extraordinary loss $(3,477,036) $ 1,641,994 $(2,074,463) $ (390,171)
Extraordinary loss - (34,200) - -
----------- ---------- ----------- ----------
Net income (loss) (3,477,036) 1,607,794 (2,074,463) (390,171)
Deductions:
Preferred stock dividends (73,145) (75,784) (24,840) (24,705)
---------- ---------- ----------- ----------
Net income (loss) for basic computation $(3,550,181) $ 1,532,010 $(2,099,303) $ (414,876)
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Diluted:
Net income (loss) for basic computation $(3,550,181) $ 1,532,010 $(2,099,303) $ -
Additions:
Preferred stock dividends - 75,784 - -
Interest on convertible debt, net of taxes - 16,746 - -
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Net income (loss) for diluted computation $(3,550,181) $ 1,624,540 $(2,099,303) $ -
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Denominator:
Basic:
Weighted average common shares outstanding 8,731,099 9,560,256 8,714,904 9,394,457
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Diluted:
Weighted average common shares outstanding-basic 8,731,099 9,560,256 8,714,904 9,394,457
Additions:
Incremental shares from assumed conversion of stock
options and warrants using the treasury stock method - 245,193 - -
Incremental shares from assumed conversion of
convertible debt and preferred stock using the
if-converted method - 1,213,174 - -
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Weighted average common and common equivalent
shares outstanding-diluted 8,731,099 11,018,623 8,714,904 9,394,457
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Per share:
Basic:
Before extraordinary loss $ (.41) $ 0.16 $ (.24) $ (0.04)
Extraordinary loss - - - -
---------- ----------- ----------- ----------
Net income (loss) $ (.41) $ 0.16 $ (.24) $ (0.04)
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Diluted
Before extraordinary loss $ (.41) $ 0.15 $ (.24) $ (0.04)
Extraordinary loss - - - -
---------- ---------- ----------- -----------
Net income (loss) $ (.41) $ 0.15 $ (.24) $ (0.04)
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