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 quarterly period ended DECEMBER 31, 1998
Commission file number 33-37809-NY
CASTLE HOLDING CORP.
(Exact name of small business issuer as specified in this charter)
NEVADA
77-0121957
(State of incorporation) (IRS
Employer Identification Number)
45 CHURCH STREET, SUITE 25, FREEPORT, NEW YORK
11520
(Address of principal executive offices)
(Zip Code)
Issuer's telephone number, including area code (516)868-2000
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest
practicable date.
6,640,500 SHARES ($.0025 PAR VALUE) AT SEPTEMBER 30, 1999
CASTLE HOLDING CORP.
FORM 10-QSB FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1998
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Statements of Financial Condition
3
Consolidated Statements of Operations
4
Consolidated Statements of Cash Flows
5
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 11
SIGNATURES 12
EXHIBIT 27 13
CASTLE HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
SEPTEMBER 30, DECEMBER 31,
1998 1998
ASSETS (UNAUDITED)
Cash and cash equivalents $ 253,243
$ 268,249
Securities owned, at market value 26,121
20,551
Equipment, less accumulated depreciation of
$143,838 and $152,776 respectively 56,014
47,076
Equipment under capital leases, less
accumulated depreciation of $65,241
and $69,082, respectively 30,468
29,936
Leasehold improvements, less
accumulated amortization of
$50,668 and $56,165, respectively
85,017 88,045
Other assets 33,077
40,530
Total assets $ 483,940
$ 494,387
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Notes payable $ 127,500
$ 177,500
Accounts payable and accrued expenses 152,911
155,915
Commissions payable
14,368 24,377
Income taxes payable
2,661 721
Securities sold, not yet purchased, at market 2,983
-
Obligations under capital leases
33,376 33,270
Loan subordinated to claims of general creditors 50,000
50,000
Total liabilities 383,799
441,783
Commitments and contingencies -
-
Stockholders' equity:
Common stock, $.0025 par value; authorized
10,000,000 shares, issued and outstanding
5,034,400 and 5,222,400 shares, respectively
12,586 13,056
Additional paid - in capital 398,334
421,364
Accumulated deficit (285,779) (356,816)
Total 125,141
77,604
Less stock subscriptions receivable (25,000)
(25,000)
Total stockholders' equity 100,141
52,604
Total liabilities and stockholders' equity $ 483,940 $
494,387
See accompanying notes to consolidated financial statements.
CASTLE HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS
ENDED DECEMBER 31,
1998
1997
Revenues:
Commissions $ 585,638 $ 423,079
Principal transactions 36,865
47,471
Interest and dividends
736 1,551
Total revenues 623,239 472,101
Expenses:
Commissions 70,544
56,258
Clearing and execution costs 167,172
(96,188)
Communications 68,338
60,366
Administrative compensation
and employee benefits
118,301 148,866
Professional and consulting fees 86,885
64,677
Registration and regulatory fees 13,573
19,291
Occupancy 14,360
9,850
Interest 8,006
4,650
Other 146,757 188,824
Total expenses
693,936 456,594
Income (loss) before provision for
income taxes (70,697)
15,507
Provision for (benefit from) income taxes 340
760
Net income (loss) $ (71,037) $ 14,747
Net income (loss) per share:
Basic and diluted $ (.01) $
.00
Weighted average number of common
shares outstanding 5,133,100
4,925,100
See accompanying notes to consolidated financial
statements.
CASTLE HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED
DECEMBER 31,
1998 1997
Cash flows from operating activities:
Net income (loss) $ (71,037) $ 14,747
Adjustments to reconcile net income (loss) to net cash
provided by (used for) operating activities:
Depreciation 18,276
40,445
Issuance of common stock for services and rent 23,500
10,000
Changes in assets and liabilities:
Securities owned 5,570
2,537
Other assets (7,453)
6,345
Accounts payable and accrued expenses 3,004
(61,581)
Commissions payable 10,009
5,276
Income taxes payable (1,940)
(1,425)
Securities sold, not yet purchased (2,983)
1,395
Net cash provided by (used for) operating activities
(23,054) 17,739
Cash flows from investing activities:
Purchases of equipment and leasehold improvements (8,525)
(31,860)
Net cash used for investing activities (8,525)
(31,860)
Cash flows from financing activities:
Proceeds from issuance of notes payable 50,000
-
Repayment of note payable -
(100,204)
Repayment of obligations under capital leases (3,415)
(4,813)
Net cash provided by (used for) financing activities
46,585 (105,017)
Net increase (decrease) in cash 15,006
(119,138)
Cash and cash equivalents, beginning of period 253,243
475,314
Cash and cash equivalents, end of period $ 268,249
$356,176
See accompanying notes to consolidated financial statements.
CASTLE HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED DECEMBER 31,
1998
1997
Supplemental disclosures of cash flow information:
Interest paid $ 18,481 $ 16,125
Income taxes paid $ 2,280 $
2,699
Schedule of non-cash operating activities:
Issuance of common stock for services and rent $ 23,500
$ 10,000
Schedule of non-cash investing activities:
Acquisition of equipment in connection
with capital lease obligations $ 3,309
$ -
Schedule of non-cash financing activities:
Receipt of stock subscriptions receivable in
connection with sale of common stock $ -
$ -
See accompanying notes to consolidated financial statements.
CASTLE HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1998
(UNAUDITED)
1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements as of December 31, 1998 and for the
three months then
ended were prepared by the Registrant without audit pursuant to the rules
and regulations of the Securities and
Exchange Commission ("SEC"). Certain information and footnote
disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted
pursuant to such rules and regulations. In the opinion of management,
all necessary adjustments to the financial
statements have been made to present fairly the financial position,
results of operations, and cash flows. The
results of operations for the respective periods presented are not
necessarily indicative of the results for the
respective complete years. The Registrant has previously filed with the
SEC a Form 10-KSB, which included
audited financial statements for the year ended September 30, 1998. The
financial statements contained in this
filing should be read in conjunction with the statements and notes thereto.
2. BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the
Registrant Castle Holding Corp. ("CHC") and
its subsidiaries. The principal subsidiaries of CHC are Castle
Securities Corp. ("CSC-1") and Citadel Securities
Corp. ("CSC-2"), both securities broker-dealers. All significant
intercompany balances and transactions have been
eliminated in consolidation.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Financial Condition
Total stockholders' equity decreased $47,537 from $100,141 at September
30,1998 to $52,604 at December 31, 1998. This
decrease was due to the net loss of $71,037 for the three months ended
December 31, 1998, offset by issuances of common
shares to vendors for services totaling $23,500 during the three months ended
December 31, 1998.
Cash and cash equivalents increased $15,006 from $253,243 at September 30,1998
to $268,249 at December 31, 1998. This
increase was due to a $50,000 bank loan received in December 1998, offset by
$23,054 cash used for operating activities,
$8,525 used for investing activities, and $3,415 used for other financing
activities.
Results of Operations
General - Substantial positive and negative fluctuations can occur in the
Registrant's business due to a variety of factors,
including variations in the market value of securities, the volatility and
liquidity of trading markets, and the level of market
activity. As a result, net income and revenues in any particular period may
not be representative of full-year results and
may vary significantly from year to year and from quarter to quarter. In
addition, results of operations have been in the past
and may in the future continue to be materially affected by many factors of a
national and international nature, including
economic and market conditions, currency values, inflation, the availability
of capital, the level and volatility of interest rates,
the valuation of securities positions and investments, and legislative and
regulatory developments, as well as the size, number
and timing of transactions. The Registrant's results of operations also may
be materially affected by competitive factors and
its ability to attract and retain highly skilled individuals.
Castle Online - A substantial portion of the Registrant's revenues are
presently being derived from the Castle Online division
of CSC-1. This division offers customers the ability to place securities
orders electronically over the internet. Many of
its customers trade actively and engage in day trading . The SEC and NASD
has proposed a variety of rules regarding day
trading which, if implemented, may adversely affect the Registrant.
Revenues by source - For the three months ended December 31, 1998 and 1997,
revenues were derived as follows:
THREE MONTHS
ENDED DECEMBER 31,
1998 1997
Commissions:
Castle Online $
481,334 $ 199,506
Active Account Program
89,332 191,959
Other 14,972 31,614
Total commissions 585,638
423,079
Principal transactions:
Trading accounts
37,235 64,887
Investment accounts (370) (17,416)
Total principal transactions 36,865
47,471
Interest and dividends 736
1,551
Total revenues $ 623,239 $ 472,101
Three Months ended December 31, 1998 compared to three months ended December
31, 1997 -
Net loss for the three months ended December 31, 1998 was $71,037, or $(.01)
per share, compared to net income of
$14,747, or $.00 per share, for the three months ended December 31,1997.
Total revenues increased $151,138 (32%)
and total expenses increased $237,342 (52%) in 1998 compared to 1997.
Revenues less commissions and clearing and
execution costs were $385,523 in 1998 compared to $512,031 in 1997. In 1997,
clearing and execution costs were
reduced by $233,908 received from CSC-1's clearing agent in settlement of
prior fee disputes.
The increase in total revenues was due to $281,828 higher commissions derived
from Castle Online, offset by $102,627
lower commissions derived from the Active Account Program ("AAP"). Castle
Online customer transactions increased
from 11,909 in the three months ended December 31, 1997 to 27,070 in the three
months ended December 31, 1998.
Castle Online funded customers increased from 105 at December 31, 1997 to 214
at December 31, 1998.
The source of the increase in total expenses was largely commissions ($14,286)
and clearing and execution costs
($263,360). Commissions expense increased as a result of higher revenues;
commissions expense as a percentage of
total revenues was 11% and 12% in 1998 and 1997, respectively. Clearing and
execution costs increased as a result
of increased Castle Online transactions in 1998 and the $233,908 settlement in
1997 (which reduced 1997 clearing and
execution costs); excluding the settlement, clearing and execution costs as a
percentage of total revenues was 27% and
29% in 1999 and 1998, respectively.
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
No additional reportable legal proceedings were initiated since September 30,
1999, the filing date of Form 10-KSB for
the fiscal year ended September 30, 1998. Reference should be made to the
Registrant's Form 10-KSB for the fiscal
year ended September 30, 1998 for the status of legal proceedings previously
initiated.
Item 2. CHANGES IN SECURITIES
(c) Equity securities of the Registrant sold by the Registrant during the
quarterly period ended December 31, 1998 that
were not registered under the Securities Act were:
(1) October 5, 1998 - 108,000 shares of Common Stock, $.0025 par
value were issued to
Ratan and Michele Halder in exchange for certain lease
concessions (valued at $13,500)
to be provided the Company. No underwriting discounts or
commissions were
paid in connection with this issuance. The Registrant
claimed exemption from
registration under Section 4 (2) of the Securities Act of 1933.
(2) November 18, 1998 - 80,000 shares of Common Stock, $.0025 par value
(valued at $10,000) were issued to Francis D. Pope, Sr. and
Francis D. Pope, Jr. in
settlement of an arbitration proceeding brought by these two
CSC-1 customers. No
underwriting discounts or commission were paid in connection
with this issuance.
The Registrant claimed exemption from registration under
Section 4 (2) of the Securities Act of
1933.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - Financial Data Schedule included as Exhibit 27.
(b) No reports on Form 8-K were filed by the Registrant during the quarter
ended December 31, 1998.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly authorized.
CASTLE HOLDING CORP.
October 4, 1999 /s/ George R. Hebert
GEORGE R. HEBERT
PRESIDENT
October 4, 1999 /s/ Michael T. Studer
MICHAEL T. STUDER
SECRETARY - TREASURER,
PRINCIPAL FINANCIAL AND
ACCOUNTING OFFICER
EXHIBIT 27
FINANCIAL DATA SCHEDULE FOR THE FIRST QUARTER ENDED DECEMBER 31, 1998 REQUIRED
PURSUANT TO ITEM 601(C) OF
REGULATION S-B
[NAME] CASTLE HOLDING CORP.
[MULTIPLIER] 1
[CURRENCY] 1
[PERIOD-TYPE] 3-MOS
[FISCAL-YEAR-END]SEP-30-1999
[PERIOD-START]OCT-01-1998
[PERIOD-END]DEC-31-1998
[EXCHANGE-RATE] 1
[CASH] 268,249
[RECEIVABLES] 0
[SECURITIES-RESALE] 0
[SECURITIES-BORROWED] 0
[INSTRUMENTS-OWNED] 20,551
[PP&E] 165,057
[TOTAL-ASSETS] 494,387
[SHORT-TERM] 177,500
[PAYABLES] 181,013
[REPOS-SOLD] 0
[SECURITIES-LOANED] 0
[INSTRUMENTS-SOLD] 0
<LONG TERM> 83,270
[COMMON] 13,056
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[OTHER-SE] 39,548
[TOTAL-LIABILITY-AND-EQUITY] 494,387
[TRADING-REVENUE] 36,865
[INTEREST-DIVIDENDS] 736
[COMMISSIONS] 585,638
[INVESTMENT-BANKING-REVENUES] 0
[FEE-REVENUE] 0
[INTEREST-EXPENSE] 8,006
[COMPENSATION] 188,845
[INCOME-PRETAX] (70,697)
[INCOME-PRE-EXTRAORDINARY] (70,697)
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] (71,037)
[EPS-BASIC] (.01)
[EPS-DILUTED] .00
