United States
Securities and Exchange Commission
Washington D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal quarter ended: October 31, 2001
Commission file number: 1-15733
SHOCHET HOLDING CORP.
(Exact name of registrant as specified in its charter)
Delaware 59-2651232
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
433 Plaza Real, Suite 245
Boca Raton, Florida 33432
(Address of principal executive offices) (Zip code)
(561) 362-9300
(Registrant's telephone number, including area code)
Indicate by check mark whether registrant (1) 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
Indicate the number of shares outstanding of each of the registrant's classes of
common stock at the latest possible date: As of December 14, 2001, 2,225,000
shares of common stock, $.0001 par value per share.
SHOCHET HOLDING CORP. AND SUBSIDIARIES
FORM 10-QSB
QUARTERLY PERIOD ENDED OCTOBER 31, 2001
INDEX
Page
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Balance Sheet (Unaudited) October 31, 2001................3
Consolidated Statements of Operations (Unaudited)
For the Three and Nine Months Ended October 31, 2001 and 2000.4
Consolidated Statements of Cash Flows (Unaudited)
For the Nine Months Ended October 31, 2001 and 2000...........5
Notes to Consolidated Financial Statements............................6-8
Item 2 - Management's Discussion and Analysis or Plan of Operations...8-11
PART II - OTHER INFORMATION
Item 2 - Changes in Securities and Use of Proceeds ....................11
Item 6 - Exhibits and Reports on Form 8-K..............................12
Signatures.............................................................12
2
SHOCHET HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
October 31, 2001
ASSETS:
Cash and cash equivalents ...................................... $ 1,397,000
Notes receivable from officers and employees, net .............. 31,000
Net assets from discontinued operations ........................ 178,000
Other assets ................................................... 54,000
------------
Total Assets .............................................. $ 1,660,000
============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable and accrued expenses .......................... $ 163,000
Payable to FFGI and subsidiaries ............................... 169,000
------------
Total Current Liabilities ................................. 332,000
------------
STOCKHOLDERS' EQUITY:
Preferred stock ($.0001 par value; 1,000,000 shares authorized)
no shares issued and outstanding ) ...................... -
Common stock ($.0001 par value; 15,000,000 shares authorized;
2,245,000 shares issued at October 31, 2001 and 2,225,000
shares outstanding at October 31, 2001 .................... -
Treasury stock at cost; 20,000 shares at October 31, 2001 .... (90,000)
Loans to officers and employees .............................. (166,000)
Additional paid-in capital .................................... 10,196,000
Accumulated deficit ........................................... (8,612,000)
------------
Total Stockholders' Equity ................................ 1,328,000
------------
Total Liabilities and Stockholders' Equity ................ $ 1,660,000
============
The accompanying notes are an integral part of these consolidated financial statements.
3
SHOCHET HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months For the Nine Months
Ended October 31, Ended October 31,
-------------------------- --------------------------
2001 2000 2001 2000
----------- ----------- ----------- -----------
REVENUES:
Investment banking .................... $ - $ - $ - $ 217,000
Interest .............................. - 61,000 24,000 136,000
----------- ----------- ----------- -----------
Total Revenues ................. - 61,000 24,000 353,000
----------- ----------- ----------- -----------
OPERATING EXPENSES:
Compensation and benefits ............. - - 2,000 -
Professional fees ..................... 211,000 109,000 242,000 167,000
Other expenses ........................ 108,000 11,000 185,000 62,000
----------- ----------- ----------- -----------
Total Operating Expenses ......... 319,000 120,000 429,000 229,000
----------- ----------- ----------- -----------
Income (loss) from continuing operations . (319,000) (59,000) (405,000) 124,000
DISCONTINUED OPERATIONS:
Loss from discontinued operations .... (2,102,000) (671,000) (4,580,000) (1,871,000)
----------- ----------- ----------- -----------
NET LOSS ................................. $(2,421,000) $ (730,000) $(4,985,000) $(1,747,000)
=========== =========== =========== ===========
Basic and diluted loss per common share:
Income (loss) from continuing operations $ (0.14) $ (0.03) $ (0.18) $ 0.06
Loss from discontinued operations ...... (0.94) (0.30) (2.04) (0.90)
----------- ----------- ----------- -----------
Net loss per common share .............. $ (1.09) $ (0.33) $ (2.22) $ (0.84)
=========== =========== =========== ===========
Weighted Shares used in calculations:
Basic and diluted ...................... 2,245,000 2,245,000 2,245,000 2,071,000
=========== =========== =========== ===========
The accompanying notes are an integral part of these consolidated financial statements.
4
SHOCHET HOLDING CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months Ended October 31,
-------------------------------------
2001 2000
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) from continuing operations ..................... $ (405,000) $ 124,000
Adjustments to reconcile net (loss) income to net cash flows
provided by (used) in operating activities:
(Increase) decrease operating assets:
Securities purchased under agreement to resell ........ 3,043,000 (3,523,000)
Notes receivable from officers and employees, net ..... (31,000) -
Deferred IPO costs, net ............................... - 301,000
Other assets .......................................... 23,000 141,000
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses ................. 163,000 (58,000)
----------- -----------
Net cash provided by (used in ) continuing operating activities 2,793,000 (3,015,000)
----------- -----------
Loss from discontinued operations ............................ (4,580,000) (1,871,000)
Adjustments to reconcile net loss to net cash flows
used in discontinued operations:
Net increase in net assets from discontinued operartions 1,258,000 (2,254,000)
----------- -----------
Net cash used in discontinued operating activities ............ (3,322,000) (4,125,000)
----------- -----------
Net cash used in operating activities ......................... (529,000) (7,140,000)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of treasury stock ....................................... 32,000 -
Proceeds from sale of common stock ........................... - 7,926,000
----------- -----------
Net cash provided by financing activities ........................ 32,000 7,926,000
----------- -----------
Net increase (decrease) in cash and cash equivalents ............. (497,000) 786,000
Cash and cash equivalents - beginning of year .................... 1,894,000 574,000
----------- -----------
Cash and cash equivalents - end of period ........................ $ 1,397,000 $ 1,360,000
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest ...................................................... $ - $ 51,000
=========== ===========
Income Taxes .................................................. $ - $ -
=========== ===========
The accompanying notes are an integral part of these consolidated financial statements.
5
SHOCHET HOLDING CORP. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
NOTE 1 - BASIS OF PRESENTATION
The consolidated financial statements include the activities of Shochet Holding
Corp. ("Shochet"), Shochet Investment Adviser Corp., Shochet Mortgage Corp. and
SSI Securities Corp. (formerly Shochet Securities Inc. and referred to herein as
"SSI"), Shochet's broker-dealer subsidiary. The foregoing entities are referred
to herein collectively as the "Company". Through SSI, the Company was engaged
primarily in providing full service discount brokerage services through six
branch offices, all of which are in Florida.
As further discussed in Note 6, on August 31, 2001, the Company transferred
("Asset Sale") substantially all of the assets comprising its securities
brokerage business, including retail and institutional accounts (collectively,
the "Brokerage Assets"), to BlueStone Capital Corp. ("BlueStone"). The Asset
Sale was made under the terms of an agreement by and among the Company, SSI,
BlueStone and BlueStone's parent company, BlueStone Holding Corp. (formerly
HealthStar and referred to herein as "BHC"), dated August 1, 2001 and amended on
August 31, 2001 ("August 2001 Agreement"). On November 7, 2001, the Company,
SSI, BlueStone, BHC and Sands Brothers & Co., Ltd. ("Sands") entered into an
agreement ("November 2001 Agreement") which served to amend and supplement the
August 2001 Agreement, including certain terms of consideration payable to the
Company, and allowed for the transfer of the Brokerage Assets from BlueStone to
Sands. Accordingly, the financial position, results of operations and cash flows
of SSI, have been separately presented as discontinued operations, and
eliminated from the continuing operations amounts in the accompanying
consolidated financial statements and notes thereto.
During the nine months ended October 31, 2001 and 2000, the Company incurred net
(loss) income from continuing operations of $(405,000) and $124,000,
respectively and net losses from discontinued operations of $(4,580,000) and
$(1,871,000) for the nine months ended October 31, 2001 and 2000, respectively.
The Asset Sale was a significant transaction and its impact on the Company's
future results is uncertain as of the date of the consolidated financial
statements. The Company plans to seek the acquisition of complimentary and/or
other businesses and assets. However, there can be no assurance that the Company
will be able to attract capital as may be required to fund such acquisitions or
other operations on reasonable terms and/or to identify and acquire attractive
businesses and related assets.
All significant intercompany accounts and transactions are eliminated in
consolidation. In the Company's opinion, the consolidated financial statements
reflect all adjustments, which are all of a normal recurring nature, necessary
for a fair statement of the Company's financial position and results of
operations for the interim periods presented. These consolidated financial
statements should be read in conjunction with the consolidated financial
statements and accompanying notes for the year ended January 31, 2001, appearing
in the Company's most recent annual report on Form 10-KSB. Certain
reclassifications have been made to the prior period amounts to conform to the
current presentation.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates.
Many factors affect the Company's business activities, including general
economic and market conditions, which can result in substantial fluctuations in
revenues and net income. Accordingly, the results of operations for the nine
months ended October 31, 2001 are not necessarily indicative of the results that
may be expected for the entire fiscal year.
6
SHOCHET HOLDING CORP. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)
NOTE 2 - NET CAPITAL REQUIREMENTS
SSI is a broker-dealer registered with the SEC and a member of the National
Association of Securities Dealers, Inc. It is therefore subject to the SEC's net
capital rule, which requires the maintenance of minimum net capital. The Company
has elected to compute net capital under the standard aggregate indebtedness
method permitted by the net capital rule. At October 31, 2001, SSI had net
capital of $733,998 compared to a net capital requirement of $30,520.
NOTE 3 - EARNINGS PER SHARE
As indicated by the Company's Statement of Operations, the basic and diluted EPS
from continuing operations for the nine months ended October 31, 2001 was a loss
of $(0.18) per share compared to income of $.06 per share for the nine months
ended October 31, 2000. Additionally, the basic and diluted EPS from
discontinued operations for the nine months ended October 31, 2001 was a loss of
$(2.04) per share compared to a loss of $(.90) per share for the nine months
ended October 31, 2000
NOTE 4 - COMMITMENTS AND CONTINGENCIES
SSI is involved in various legal proceedings arising from its business
activities. The Company believes that resolution of these proceedings will not
have any material adverse effect on its consolidated financial position or
results of operations.
The Company leases office facilities under noncancelable operating leases.
Certain leases have renewal options and clauses for escalation and operating
cost adjustments. As further discussed in Note 6, the Company agreed to sublease
or assign to Bluestone or Sands all of the Company's rights, title and interest
under specific leases, as defined in the August 2001 Agreement and November 2001
Agreement. Sands and Bluestone has assumed the Company's obligation to pay the
monthly rental payments under each respective lease. At October 31, 2001, future
minimum rental commitments under such leases were approximately $1,200,000 in
the aggregate. Although, the Company is seeking to negotiate out of its existing
lease obligations, there can be no assurance that it will be successful. The
Company has been made aware that neither Bluestone nor Sands has made any rental
payments under these leases as required under the August 2001 Agreement and the
November 2001 Agreement. Accordingly, the Company believes it is likely that
litigation may be commenced by the landlords against the Company. The Company
intends to assert its rights for indemnification for liability under these
leases against BlueStone and Sands and to pursue other available remedies.
NOTE 5 - RECENT ACCOUNTING PRONOUNCEMENTS
In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141, Business Combinations, and No. 142,
Goodwill and Other Intangible Assets, effective for fiscal years beginning after
December 15, 2001. Under the new rules, goodwill and intangible assets deemed to
have indefinite lives will no longer be amortized but will be subject to annual
impairment tests in accordance with the Statements. Other intangible assets will
continue to be amortized over their useful lives. The Company will apply the new
rules on accounting for goodwill and other intangible assets beginning in the
first quarter of 2002. Application of the non-amortization provisions of the
Statement is not expected to have a material effect on the Company's financial
position or operations.
7
SHOCHET HOLDING CORP. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)
NOTE 6 - DISCONTINUED OPERATIONS
On August 31, 2001, the Company consummated the Asset Sale, whereby it
transferred the Brokerage Assets to BlueStone. Additionally, it was agreed that
BlueStone would have the right (but not the obligation) to offer employment to
some or all of the Company's personnel. In connection with the August 2001
Agreement, the Company transferred and assigned to BlueStone all rights, title
and interest to all of the trademarks, tradenames, service marks and copyrights
owned and used by the Company. Additionally, the Company was entitled to
sublease or assign to BlueStone all of the Company's rights, title and interest
to all properties where the Company operates or conducts retail and
institutional brokerage business. In connection with the August 2001 Agreement,
the Company also transferred or assigned to BlueStone substantially all of its
furniture, fixtures and equipment.
As consideration for the sale of the Brokerage Assets to BlueStone under the
August 2001 Agreement, BlueStone was obligated to pay to the Company a monthly
cash fee (the "Fee") equal to eight percent (8%) of gross revenue, as defined.
Additionally, the Company was issued 100,000 common shares of BHC and BlueStone
assumed the Company's obligation under a $500,000 principal amount subordinated
note that was owed to the Company's majority shareholder. BlueStone also agreed
to assume any obligation that the Company had under a "Clearing Agreement" with
Salomon Brothers Holding Company, Inc. and to indemnify and hold harmless the
Company from any liability under or arising out of that agreement. As of October
31, 2001, the Company valued its investment in the 100,000 common shares of BHC
at fair market value, which amounted to $40,000 or $.40 per share and is
included in other assets.
Subsequent to October 31, 2001, the Company and SSI entered into the November
2001 Agreement with BlueStone, BHC and Sands, which amended and supplemented the
August 2001 Agreement and allowed for the subsequent transfer of the Brokerage
Assets from BlueStone to Sands. Under the November 2001 Agreement, the Company
relinquished its right to receive the Fee in exchange for an aggregate and
immediate cash payment of $314,000. In addition, the parties further agreed that
certain lease obligations of SSI relating to former branch offices of SSI
previously intended to be transferred to BlueStone would be assumed by Sands.
The financial position, results of operations and cash flows of SSI, have been
separately presented as discontinued operations, and eliminated from the
continuing operations amounts in the accompanying consolidated financial
statements.
Net assets and liabilities of the Company's discontinued operations have been
classified as current. A summary of the net assets from the Company's
discontinued operations at October 31, 2001 is as follows:
Receivables from brokers and dealers ..... $ 99,000
Property and equipment, net .............. 146,000
Other assets ............................. 508,000
Notes payable ............................ (117,000)
Other liabilities ........................ (458,000)
---------
Net assets from of discontinued operations $ 178,000
=========
8
SHOCHET HOLDING CORP. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The following analysis of the consolidated results of operations and financial
condition should be read in conjunction with the unaudited Consolidated
Financial Statements included in Item 1 of this report and with the Management's
Discussion and Analysis of Financial Condition and Results of Operations
included in the Company's Annual Report on Form 10-KSB for the year ended
January 31, 2001.
Discontinued Operations
On August 31, 2001, the Company consummated the Asset Sale, whereby it
transferred the Brokerage Assets to BlueStone. Additionally, the Company agreed
that BlueStone would be permitted (but not obligated) to offer employment to
some or all of the Company's personnel. In connection with the August 2001
Agreement, the Company transferred and assigned to BlueStone all rights, title
and interest to all of the trademarks, tradenames, service marks and copyrights
owned and used by the Company. Additionally, the Company was entitled to
sublease or assign to BlueStone all of the Company's rights, title and interest
to all properties where the Company operates or conducts retail and
institutional brokerage business. In connection with the August 2001 Agreement,
the Company also transferred or assigned to BlueStone substantially all of its
furniture, fixtures and equipment.
As consideration for the Asset Sale, under the August 2001 Agreement, BlueStone
was obligated to pay to the Company a monthly cash fee (the "Fee") equal to
eight percent (8%) of gross revenue, as defined. Additionally, the Company was
issued 100,000 common shares of BHC and BlueStone assumed the Company's
obligation under a $500,000 principal amount subordinated note that was owed to
the Company's majority shareholder. BlueStone also agreed to assume any
obligation that the Company had under a "Clearing Agreement" with Salomon
Brothers Holding Company, Inc. and to indemnify and hold harmless the Company
from any liability under or arising out of that agreement. As of October 31,
2001, the Company valued its investment in the 100,000 common shares of BHC at
fair market value, which amounted to $40,000 or $.40 per share and is included
in other assets.
Subsequent to October 31, 2001, the Company and SSI entered into the November
2001 Agreement with BlueStone, BHC and Sands, which amended and supplemented the
August 2001 Agreement and allowed for the subsequent transfer of the Brokerage
Assets from BlueStone to Sands. Under the November 2001 Agreement, the Company
relinquished its right to receive the Fee in exchange for an aggregate and
immediate cash payment of $314,000. In addition, the parties further agreed that
certain lease obligations of SSI relating to former branch offices of SSI
previously intended to be transferred to BlueStone would be assumed by Sands.
The results of operations for the nine months ended October 31, 2001 are not
necessarily indicative of the results that may be expected for the entire fiscal
year.
Current Business Plan
Our current business plan is primarily to serve as a vehicle for the acquisition
of a target business that we believe will have significant growth potential. We
intend to use our available cash, capital stock, debt or a combination of these
to effect a business combination with a company that desires to establish a
public trading market for its securities while avoiding what it may deem to be
adverse consequences of undertaking a public offering itself, such as time
delays, significant expense, loss of voting control and other burdens including
significant professional fees. The business combination may be with a
financially stable, mature company or a company that is financially unstable or
in its early stages of development or growth.
9
In seeking to attain our business objective, we may focus on brokerage services
or investment banking related businesses, but will not restrict our search to
any particular industry. Rather, we may investigate businesses of essentially
any kind or nature and participate in any type of business that may, in our
management's opinion, meet our business objectives as described in this report.
We emphasize that the description in this report of our business objectives is
extremely general and is not meant to restrict the discretion of our management
to search for and enter into potential business opportunities. We have not
chosen the particular business in which we will engage and have not conducted
any market studies with respect to any business or industry for you to evaluate
the possible merits or risks of the target business or the particular industry
in which we may ultimately operate. To the extent we enter into a business
combination with a financially unstable company or an entity in its early stage
of development or growth, including entities without established records of
sales or earnings, we will become subject to numerous risks inherent in the
business and operations of financially unstable and early stage or potential
emerging growth companies. In addition, to the extent that we effect a business
combination with an entity in an industry characterized by a high level of risk,
we will become subject to the currently unascertainable risks of that industry.
An extremely high level of risk frequently characterizes certain industries that
experience rapid growth. In addition, although we will endeavor to evaluate the
risks inherent in a particular industry or target business, we cannot assure you
that we will properly ascertain or assess all significant risk factors.
RESULTS OF OPERATIONS
During August 2001, we discontinued substantially all of our business operations
except for the maintenance of our corporate existence and the search for
potential merger/acquisition candidates. Our plan is to either obtain capital
required to resume business operations or to acquire complimentary businesses in
exchange for shares of our common stock. However, no assurances can be provided
that such business plan can be attained.
Nine months ended October 31, 2001 compared to nine months ended October 31,
2000
Revenues
Investment banking revenues for the nine months ended October 31, 2000 were
$217,000 versus none for the nine months ended October 31, 2001. During the nine
months ended October 31, 2000, we participated in the underwriting of our
Company's initial public offering.
Interest income for the nine months ended October 31, 2001 decreased 82% to
$24,000 as compared to interest income of $136,000 for the nine months ended
October 31, 2000. This decrease is due to our decreased cash position in
interest producing bank accounts, and lower market interest rates.
Operating Expenses
Operating expenses were $429,000 for the nine months ended October 31, 2001 as
compared to $229,000 for the nine months ended October 31, 2000. During the
three months ended October 31, 2001, we incurred professional fees and
consulting fees related to the sale of our net assets amounting to approximately
$290,000.
No additional meaningful comparisons can be made for the nine months ended
October 31, 2001 as compared to the nine months ended October 31, 2000.
As a result of the above, we reported a net loss of $4,985,000 for the nine
months ended October 31, 2001 as compared to a net loss of $1,747,000 for the
nine months ended October 31, 2000.
10
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
The average number of common shares and common stock equivalents outstanding
used in the computation of basic and diluted earnings per common share was
2,245,000 for the nine months ended October 31, 2001 as compared to 2,071,000
for the nine months ended October 31, 2000. This increase was attributable to
the sale of 1,045,000 shares of common stock in our IPO in March 2000.
LIQUIDITY AND CAPITAL RESOURCES
Approximately 84% of our assets at October 31, 2001 are highly liquid,
consisting of cash and cash equivalents.
In March 2000, we sold 1,045,000 shares of our common stock to the public
through an initial public offering. The stock was priced at $9 per share. The
company raised gross proceeds of approximately $9,400,000 and net proceeds of
$7,926,000.
During the nine months ended October 31, 2001, cash used in operating activities
was $529,000 as compared to cash used in operating activities of $7,140,000 for
the nine months ended October 31, 2000. The primary reason for the decrease in
cash used in operating activities was the sale of securities purchased under an
agreement to resell during the nine months ended October 31, 2001 as compared to
the purchase of securities purchased under an agreement to resell during the
nine months ended October 31, 2000. Additionally, during the nine months ended
October 31, 2000, we had a $1,000,000 repayment of liabilities subordinated to
the claims of general creditors, which is included in net asset from
discontinued operations.
Cash provided by financing activities during the nine months ended October 31,
2001 was $32,000 as compared to cash provided by financing activities of
$7,926,000 for the nine months ended October 31, 2000. We received $7,926,000
from the sale of common stock during the nine months ended October 31, 2000.
Our brokerage subsidiary, SSI is subject to the SEC net capital rules, and as
such is subject to restrictions on the use of capital and related liquidity.
SSI's net capital position as of October 31, 2001, was $733,998, which was
$703,478 in excess of its net capital requirements.
Currently, we lease office facilities under noncancelable operating leases.
Certain leases have renewal options and clauses for escalation and operating
cost adjustments. As further discussed in Note 6 to the Unaudited Consolidated
Financial Statements, the Company subleased or assigned to Bluestone or Sands
all of the Company's rights, title and interest under specific leases, as
defined in the November 2001 Agreement. Sands and Bluestone assumed the
Company's obligation to pay the monthly rental payments under each respective
lease. At October 31, 2001, future minimum rental commitments under such leases
were approximately $1,200,000 in the aggregate. Although, we are making every
effort to negotiate out of our existing lease obligations, there can be no
assurances to that effect.
The Company has been made aware that neither Bluestone nor Sands has made any
rental payments under these leases as required under the August 2001 Agreement
and the November 2001 Agreement. Accordingly, the Company believes it is likely
that litigation may be commenced by the landlords against the Company. The
Company intends to assert its rights for indemnification for liability under
these leases against BlueStone and Sands and to pursue other available remedies.
Our overall capital and funding needs are continually reviewed to ensure that
our capital base can support the estimated needs of our business units. These
reviews take into account business needs as well as regulatory capital
requirements. Based upon these reviews, we believe that our capital structure is
adequate for current operations and reasonably foreseeable future needs.
11
OTHER MATTERS
Safe Harbor Cautionary Statement
We occasionally make forward-looking statements such as forecasts and
projections of expected future performance or statements of our plans and
objectives. When used in this quarterly report and in future filings with the
SEC, in our press releases and in oral statements made with the approval of an
authorized executive officer, the words or phrases "will likely result," "the
Company expects," "we intend or expect," "will continue," "is anticipated,"
"estimated," "project," or "outlook" or similar expressions, including
confirmations by one of our authorized executive officers of any such
expressions made by a third party regarding us with respect to the company are
intended to identify forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. We caution you not to place
undue reliance on these forward-looking statements, each of which speaks only as
of the date made. These statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from
historical earnings and those presently anticipated or projected.
We have no obligation to publicly release the result of any revisions that may
be made to any forward-looking statements to reflect anticipated or
unanticipated events or circumstances occurring after the date of these
statements.
Part II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
None
Item 6. Exhibit and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
On September 14, 2001 and November 14, 2001, we filed a Form 8-K and an
amendment related to our agreement with BlueStone Capital Corp. and HealthStar
Corp. (collectively "BlueStone"), New York corporations, whereby we transferred
all of our rights, title, and interest in substantially all of the securities
brokerage accounts of our retail and institutional clients.
On October 2, 10 and 18, 2001, we filed Form 8-K, as amended reporting
Item 4, which related to a change in our Certifying Accountant.
12
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.
Date: December 14, 2001. /s/ Roger N. Gladstone
----------------------
Roger N. Gladstone
Chairman of the Board and Chief Executive Officer
/s/ Arnold Roseman
------------------
Arnold Roseman
Chief Financial Officer
13