UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[ X ] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended April 30, 2000
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 1-15733
SHOCHET HOLDING CORP.
(Exact name of registrant as specified in its charter)
Delaware 59-2651232
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2351 East Hallandale Beach Blvd., Hallandale Beach, Florida 33009
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(Address of principal executive offices) (Zip Code)
(954) 454-0304
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(Registrant's telephone number, including area code)
Indicate by check mark whether the 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 issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at June 14, 2000
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Common Stock, $0.0001 par value 2,245,000 shares
<PAGE>
SHOCHET HOLDING CORP.
Index
<TABLE>
<CAPTION>
Part I - Financial Information Page
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<S> <C>
Item 1. Financial Statements
Consolidated Statements of Financial Condition as of
April 30, 2000 (Unaudited) and January 31, 2000 3
Consolidated Statements of Operations for the three months
ended April 30, 2000 and April 30, 1999 4
Consolidated Statements of Changes in Stockholders' Equity
for the three months ended April 30, 2000 (Unaudited) 5
Consolidated Statements of Cash Flows for the three months
ended April 30, 2000 and 1999 (Unaudited) 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Part II - Other Information
Item 2. Changes in Securities 11
</TABLE>
2
<PAGE>
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
SHOCHET HOLDING CORP.
Consolidated Statements of Financial Condition
<TABLE>
<CAPTION>
April 30, January 31,
2000 2000
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(Unaudited)
<S> <C> <C>
Assets
Cash and cash equivalents $ 9,077,000 $ 574,000
Receivable from brokers and dealers 892,000 407,000
Securities owned, at market value 179,000 190,000
Office furniture, equipment and leasehold improvements, net 806,000 685,000
Goodwill, net 1,505,000 1,563,000
Receivable from related party -- 262,000
Income taxes receivable 224,000 222,000
Other assets 39,000 418,000
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Total assets $ 12,722,000 $ 4,321,000
============ ============
Liabilities and Stockholders' Equity
Liabilities:
Securities sold, not yet purchased, at market value $ 2,000 $ 39,000
Commissions payable 595,000 240,000
Payable to related parties -- 474,000
Accrued expenses and other liabilities 1,566,000 345,000
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Liabilities subordinated to the claims of general creditors 1,500,000 1,500,000
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Total liabilities 3,663,000 2,598,000
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Stockholders' equity:
Common stock, $0.0001 par value; 15,000,000 shares
authorized; 2,245,000 shares issued and outstanding 2,245 1,200
Preferred stock, $0.0001 par value; 1,000,000 shares
authorized; 0 shares issued and outstanding
Additional paid-in capital 9,879,755 2,268,800
Retained earnings (823,000) (547,000)
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Total stockholders' equity 9,059,000 1,723,000
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Total liabilities and stockholders' equity $ 12,722,000 $ 4,321,000
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
SHOCHET HOLDING CORP.
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended April 30,
----------------------------
2000 1999
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<S> <C> <C>
Revenues:
Commissions $ 2,413,000 $ 2,189,000
Investment banking 613,000 --
Interest 252,000 190,000
Other 49,000 32,000
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Total revenues $ 3,327,000 $ 2,411,000
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Expenses:
Compensation and benefits 2,078,000 1,272,000
Occupancy and equipment 147,000 148,000
Brokerage, clearing and exchange fees 369,000 325,000
Communications 319,000 120,000
Business Development 421,000 24,000
Professional fees 27,000 19,000
Other 242,000 319,000
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Total expenses 3,603,000 2,227,000
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Net income / loss from continuing operations $ (276,000) 184,000
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Discontinued operations:
Loss from operations of the discontinued
On-site Day Trading segment (194,000)
-----------
Net loss $ (276,000) $ (10,000)
Weighted average common shares
outstanding - basic and diluted 1,548,333 1,200,000
=========== ===========
Basic and diluted EPS from continuing operations $ (0.18) $ 0.15
Basic and diluted EPS from discontinued operations -- (0.16)
----------- -----------
Basic and diluted EPS $ (0.18) (0.01)
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
SHOCHET HOLDING CORP.
Consolidated Statements of Changes in Stockholders' Equity
For the Three Months Ended April 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
Additional Total
Common paid - in (Accum Stockholders'
Stock Capital Deficit) Equity
----- ------- -------- ------
<S> <C> <C> <C> <C>
Balance at January 31, 2000 $ 100,000 2,170,000 (547,000) 1,723,000
Net proceeds of stock sale 7,612,000 7,612,000
Net Loss (276,000) (276,000)
--------- ----------- --------- ----------
Balance at April 30, 2000 100,000 9,782,000 (823,000) 9,059,000
========= =========== ========= ==========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
SHOCHET HOLDING CORP.
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended April 30,
--------------------------
2000 1999
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<S> <C> <C>
Operating activities:
Net loss $ (276,000) $ (10,000)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization 39,000 63,000
Other 137,000 10,000
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(100,000) 63,000
(Increase) decrease in operating assets:
Receivable from brokers and dealers (485,000) 53,000
Securities owned, at market value 11,000 (35,000)
Income taxes receivable (2,000) --
Receivable from related party 262,000 --
Other assets 379,000 117,000
Increase (decrease) in operating liabilities:
Securities sold, not yet purchased (37,000) (4,000)
Commissions payable 355,000 19,000
Payable to related parties (474,000) --
Accrued expenses and other liabilities 1,221,000 61,000
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Net cash provided by (used in) operating activities 1,230,000 211,000
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Investing activities:
Purchase of office furniture, equipment
and leasehold improvements (181,000) (78,000)
Goodwill (58,000) (18,000)
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Net cash provided by (used in) investing activities (239,000) (96,000)
Financing activities:
Net proceeds of stock sale 7,612,000 --
----------- -----------
Net cash provided by financing activities 7,612,000 --
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Net change in cash and cash equivalents 8,503,000 178,000
Cash and cash equivalents at beginning of year 574,000 868,000
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Cash and cash equivalents at end of period $ 9,077,000 $ 1,046,000
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
SHOCHET HOLDING CORP.
Notes to Consolidated Financial Statements
1. Basis of Presentation
The consolidated financial statements include the activities of Shochet Holding
Corp. and Shochet Securities, Inc., its wholly owned subsidiary (the "Company").
The Company is primarily engaged in providing full service discount brokerage
services through Shochet Securities, a broker-dealer which operates five
offices, all of which are in Florida. In January 2000, the Company commenced
offering online brokerage services through Shochet Online!, its online brokerage
division, through its website located at www.shochet.com. The Company's focus is
to continue to develop its presence as a premier discount broker and to develop
its Internet presence.
In March 2000, the Company sold 1,045,000 shares of its common stock to the
public in an initial public offering in a registration statement on Form SB-2
filed with the Securities and Exchange Commission. The offering, priced at $9
per share, raised $9.4 in gross proceeds and $7.6 million in net proceeds for
the Company.
All significant intercompany accounts and transactions are eliminated in
consolidation. In the opinion of the Company, 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 Company's consolidated
financial statements and notes thereto for the year ended January 31, 2000, in
its annual report on Form 10-KSB. Certain reclassifications have been made to
the prior year amounts to conform to the current presentation.
The financial statements conform with generally accepted accounting principles
("GAAP"). The preparation of financial statements in conformity with GAAP
requires the Company 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 revenues and expenses during the reporting period. Actual
results could vary from these estimates.
The Company's principal business activities are affected by many factors,
including general economic and market conditions, which can result in
substantial fluctuations in the Company's revenues and net income. Therefore,
the results of operations for the three months ended April 30, 2000, are not
necessarily indicative of the results which may be expected for the entire
fiscal year.
2. Net Capital Requirements
Shochet Securities, Inc. is a broker-dealer registered with the SEC and a is
member firm of the National Association of Securities Dealers, Inc. ("NASD"). As
such, Shochet Securities, Inc. is subject to the SEC's net capital rule, which
requires the maintenance of minimum net capital.
Shochet Securities has elected to compute net capital under the standard
aggregate indebtedness method permitted by the net capital rule. At April 30,
2000, Shochet Securities had net capital of $3,200,000 and a net capital
requirement of $100,000.
7
<PAGE>
3. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per
share ("EPS):
<TABLE>
<CAPTION>
Three months ended April 30,
---------------------------------
2000 1999
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<S> <C> <C>
Numerator for basic and diluted EPS:
Net income / loss from continuing operations $ (276,000) $ 184,000
Loss from discontinued operations: -- (194,000)
---------------- -------------
Net loss $ (276,000) $ (10,000)
Denominator for basic EPS:
Weighted-average common shares
outstanding - basic and diluted 1,548,333 1,200,000
Basic and diluted EPS from continuing operations $ (0.18) $ 0.15
Basic and diluted EPS from discontinued operations -- (0.16)
---------------- -------------
Basic and diluted EPS $ (0.18) (0.01)
================ =============
</TABLE>
4. Commitments and Contingencies
Shochet Securities is involved in various legal proceedings arising from its
securities activities. The Company believes that resolution of these proceedings
will have no material adverse effect on its consolidated financial position or
results of operations.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following analysis of the consolidated results of operations and financial
condition of the Company should be read in conjunction with the Consolidated
Financial Statements included in Item 1 of this report and with the Management's
Discussion and Analysis of the Financial Condition and Results of Operations
included in the Company's Annual Report on Form 10-KSB for the year ended
January 31, 2000.
Business Environment
Our primary business activity, full service discount brokerage, is subject to
general economic and market conditions and the volatility of trading markets.
The quarter ended April 30, 2000, was characterized by a strong market
environment through the middle of the quarter and then a decline through the
period end. Volume for the period was above average. The loss incurred during
the period largely reflected a planned expansion of our business development
efforts, with a significant increase in expenses related to marketing and
advertising.
8
<PAGE>
The results of operations for the three months ended April 30, 2000 are not
necessarily indicative of the results which may be expected for the entire
fiscal year.
Results of Operations
Three Months Ended April 30, 2000 vs. Three Months Ended April 30, 1999
------------------------------------------------------------------------
Net loss for the three months ended April 30, 2000 was $276,000 as compared with
a net loss of $10,000 for the three months ended April 30, 1999. From continuing
operations in the year-earlier period, a gain of $184,000 was recorded. Net loss
per basic and diluted share of common stock was $0.18 for the first quarter of
fiscal 2001 as compared to $0.01 per share for the fiscal 2000 quarter. From
continuing operations, a gain of $0.15 per common share was recorded in the
fiscal 2000 period.
Revenues
Total revenues increased by 38% to $3,327,000 for the first quarter of fiscal
2000, versus $2,411,000 in the year-earlier period, as a result of increased
commission revenue, as well as significant investment banking fees compared to
no such fees in the same period one year earlier.
Commission revenues increased by 10% to $2,413,000, from $2,189,000 in the first
quarter, attributable to a similar increase in average commission per ticket ;
trading volume was basically unchanged.
Investment banking revenues in the quarter ended April 30, 2000 were $613,000
versus none in the first quarter of 2000. During the first quarter of fiscal
2000, Shochet Securities participated in the underwriting of the Company's
initial public offering.
Interest income increased 33% to $252,000, as a result of increased interest on
customer balances held at our clearing firm, as well interest on proceeds of the
Company's initial public offering.
Expenses
Total expenses for the quarter in fiscal 2000 were $3,603,000, a 62% increase
from the $2,227,000 from continuing operations in the same quarter in fiscal
1999. The increase is primarily attributable to increased compensation and
benefits expense, partially reflecting increased commissions resulting from
sales of the Company's shares in the IPO, as well as a $397,000 increase in
business development spending for marketing, advertising and development of our
website.
Compensation and benefits expense increased 63% to $2,078,000, as compared to
$1,272,000 in the year-earlier period. These expenses are primarily variable as
commissions to brokers are paid as a percentage of commission revenues
generated. In addition, brokers were compensated for placing shares of the
Company during the Company's IPO.
Occupancy and equipment expense were virtually unchanged.
Brokerage, clearing and exchange fees increased by 14% to $369,000. This
increase is consistent with the increase in trade volume, including the
Company's placement of its IPO shares.
Communications expenses increased 165% to $319,000 as compared to $120,000,
reflecting expanded brokerage activity and improved market data services.
9
<PAGE>
Business development expenses increased to $421,000, as compared to $24,000 for
the same period a year earlier, as a result of the Company's increased marketing
and advertising efforts and the development of Shochet Online!.
Income taxes
For the quarter ended April 30, 1999, our company incurred no income tax expense
primarily due to the use of tax benefits from net operating loss carryforwards.
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
1,548,333 for the first quarter of fiscal 2000, compared with 1,200,000 in
fiscal 1999. These changes are primarily attributable to the sale of 1,045,000
shares of common stock in the Company's IPO in March, 2000.
Liquidity and Capital Resources
Approximately 80% of the Company's assets at April 30, 2000 are highly liquid,
consisting primarily of cash and cash equivalents, securities inventories, and
receivables from other broker-dealers, all of which fluctuate depending upon the
levels of customer business and trading activity. Receivables from
broker-dealers, which are primarily from our clearing broker, turn over rapidly.
As a securities dealer, we may carry significant levels of securities
inventories to meet customer needs. Our inventory of securities is readily
marketable; however, holding large blocks of the same security may limit
liquidity and prevent realization of full market value for the securities. The
total assets or the individual components of total assets may vary significantly
from period to period because of changes relating to customer demand, economic
and market conditions.
In March 2000, the Company sold 1,045,000 shares of its common stock to the
public through an initial public offering. The stock was priced at $9 per share.
The company raised gross proceeds of $9,405,000 and net proceeds of $7,612,000.
As a broker-dealer, Shochet Securities, Inc. is subject to the net capital rules
of the NASD and the SEC. Therefore, it and the Company are subject to
restrictions on the use of capital and its related liquidity. In April 1996,
August 1999 and February 2000, Research Partners International, Inc., the parent
of the Company, contributed an aggregate of $3,000,000 of additional regulatory
capital in the form of additional paid in capital and subordinated debt.
$1,500,000 of this amount was repaid to Research Partners in April 2000. Another
$1,000,000, derived from the proceeds of the Company's IPO was repaid in May
2000. As of May 30, 2000, an aggregate of approximately $500,000 was owed to
Research Partners. Shochet Securities' net capital position as of April 30,
2000, was $ 3,200,000 as compared to net capital requirements of $100,000,
$3,100,000 in excess of its net capital requirements.
Our overall capital and funding needs are continually reviewed to ensure that
our capital base can support the estimated needs of its business units. These
reviews take into account business needs as well as regulatory capital
requirements of the subsidiaries. Based upon these reviews, we believe that our
capital structure is adequate for current operations and reasonably foreseeable
future needs.
10
<PAGE>
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 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 want to 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.
For a more complete discussion of these and other factors, see our registration
statement filed on Form SB-2, as amended (No. 333-92307). 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
Sales of Unregistered Securities.
On March 15, 2000 the date of the Company's IPO, the Company granted to certain
of its key executives options to purchase an aggregate of 108,000 shares of its
common stock at an exercise price of $9.00 per share. The options vest in three
equal annual installments commencing on the one year anniversary date of the
IPO. The Company relied on an exemption from registration under the federal
securities laws contained in Section 4(2) of the Securities and Exchange Act of
1933, as amended.
11
<PAGE>
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: June 17, 2000 /s/ Roger N. Gladstone
----------------------
Roger N. Gladstone
Chairman of the Board and
Chief Executive Officer
/s/ David F. Greenberg
----------------------
David F. Greenberg
Principal Accounting Officer
12
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SHOCHET HOLDING CORP. AND SUBSIDIARY
Exhibit Index
Number Description
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27 Financial Data Schedule
