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 JUNE 30, 1999
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 JUNE 30, 1999
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
<TABLE>
CASTLE HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
SEPTEMBER 30, JUNE 30
1998 1999
<S>
<C> <C>
ASSETS
(UNAUDITED)
Cash and cash equivalents $ 253,243 $ 583,156
Securities owned, at market value 26,121 36,881
Equipment, less accumulated depreciation of
$143,838 and $170,133 respectively 56,014 35,807
Equipment under capital leases, less
accumulated depreciation of $65,241
and $80,493, respectively 30,468 70,045
Leasehold improvements, less
accumulated amortization of
$50,668 and $69,319, respectively 85,017 98,367
Other assets 33,077 59,126
Total assets $ 483,940 $ 883,382
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Notes payable $ 127,500 $ 87,500
Accounts payable and accrued expenses 152,911 205,534
Commissions payable 14,368 62,855
Income taxes payable 2,661 1,442
Securities sold, not yet purchased,
at market 2,983 1,031
Obligations under capital leases 33,376 73,630
Loan subordinated to claims of
general creditors 50,000 50,000
Total liabilities 383,799 481,992
Commitments and contingencies - -
Stockholders' equity:
Common stock, $.0025 par value; authorized
10,000,000 shares, issued and outstanding
5,034,400 and 6,606,400 shares, respectively 12,586 16,516
Additional paid - in capital 398,334 841,404
Accumulated deficit (285,779) (271,530)
Total 125,141 586,390
Less stock subscriptions receivable (25,000) (185,000)
Total stockholders' equity 100,141 401,390
Total liabilities and stockholders' equity $ 483,940 $ 883,382
See accompanying notes to consolidated financial statements.
</TABLE>
CASTLE HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
THREE MONTHS NINE MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1999 1998 1999 1998
<S>
Revenues: <C> <C> <C> <C>
Commissions $861,180 $429,765 $2,238,310 $1,228,140
Principal transactions 185,882 63,676 285,434 204,665
Interest and dividends 2,089 753 3,744 3,143
Total revenues 1,049,151 494,194 2,527,488 1,435,948
Expenses:
Commissions 212,278 69,368 386,535 187,479
Clearing and execution costs 220,598 124,209 614,652 134,800
Communications 42,227 52,924 159,427 181,794
Administrative compensation
and employee benefits 236,203 141,784 510,515 460,767
Professional and consulting
fees 109,394 51,009 298,958 155,622
Registration and regulatory
fees 3,559 3,965 27,923 30,190
Occupancy 16,420 11,593 47,400 33,293
Interest 7,666 4,495 24,902 13,795
Other 146,183 136,920 441,066 401,836
Total expenses 994,528 596,267 2,511,378 1,599,576
Income (loss) before provision for
income taxes 54,623 (102,073) 16,110 (163,628)
Provision for (benefit from)
income taxes 1,153 951 1,861 1,996
Net income (loss) $ 53,470 $(103,024) $ 14,249 $ (165,624)
Net loss per share:
Basic and diluted $ .01 $ (.02) $ .00 $ (.03)
Weighted average number of
common shares outstanding 6,323,700 4,978,400 5,564,178 4,960,600
See accompanying notes to consolidated financial statements.
</TABLE>
CASTLE HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
Nine Months Ended June 30,
1999 1998
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 14,249 $(165,624)
Adjustments to reconcile net income (loss)
to net cash provided by (used for)
operating activities:
Depreciation 60,198 77,859
Issuance of common stock for services
and rent 59,500 10,000
Changes in assets and liabilities:
Securities owned (10,760) 10,916
Other assets (26,049) 23,073
Accounts payable and accrued expenses 52,623 (48,129)
Commissions payable 48,487 617
Income taxes payable (1,219) (189)
Securities sold, not yet purchased (1,952) 3,852
Net cash provided by (used for)
operating activities 195,077 (87,625)
Cash flows from investing activities:
Purchases of equipment and leasehold
improvements (38,089) (38,414)
Net cash used for investing activities (38,089) (38,414)
Cash flows from financing activities:
Proceeds from issuance of notes payable 60,000 50,000
Net proceeds from sales of common stock 227,500 -
Repayment of notes payable (100,000) (100,204)
Repayment of obligations under capital leases (14,575) (15,572)
Net cash provided by (used for) financing
activities 172,925 (65,776)
Net increase (decrease) in cash 329,913 (191,815)
Cash and cash equivalents, beginning of period 253,243 475,314
Cash and cash equivalents, end of period $583,156 $283,499
</TABLE>
See accompanying notes to consolidated financial statements.
CASTLE HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
Nine Months Ended June 30,
1999 1998
<S> <C> <C>
Supplemental disclosures of cash flow information:
Interest paid $29,728 $13,795
Income taxes paid $ 3,080 $ 2,185
Schedule of non-cash operating activities:
Issuance of common stock for services and rent $59,500 $10,000
Schedule of non-cash investing activities:
Acquisition of equipment in connection
with capital lease obligations $54,829 $43,873
Schedule of non-cash financing activities:
Receipt of stock subscriptions receivable in
connection with sale of common stock $160,000 $ -
</TABLE>
See accompanying notes to consolidated financial statements.
CASTLE HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements as of June 30, 1999 and for the
three and nine 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 increased $301,249 from $100,141 at September
30,1998 to $401,390 at June 30, 1999.
This increase was due primarily to sales of common shares with net proceeds
totaling $227,500 and issuances of
common shares to vendors for services totaling $59,500 during the nine months
ended June 30, 1999.
Cash and cash equivalents increased $329,913 from $253,243 at September
30,1998 to $583,156 at June 30, 1999.
This increase was due primarily to the $227,500 net proceeds from the sales of
common shares noted above, a
$52,623 increase in accounts payable and accrued expenses, and a $48,487
increase in commissions payable.
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 and nine months ended June 30, 1999
and 1998 revenues were
derived as follows:
<TABLE>
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Commissions:
Castle Online $ 728,652 $ 282,035 $1,878,742 $ 684,089
Active Account Program 103,790 125,658 275,962 460,519
Other 28,738 22,072 83,606 83,532
Total commissions 861,180 429,765 2,238,310 1,228,140
Principal transactions:
Trading accounts 186,178 63,207 285,490 225,642
Investment accounts (296) 469 (56) (20,977)
Total principal transactions 185,882 63,676 285,434 204,665
Interest and dividends 2,089 753 3,744 3,143
Total revenues $1,049,151 $494,194 $2,527,488 $1,435,948
</TABLE>
Nine Months ended June 30, 1999 compared to nine months ended June 30, 1998 -
Net income for the nine months ended June 30, 1999 was $14,249, or $.00 per
share, compared to a net loss of
$165,624, or $(.03) per share, for the nine months ended June 30,1998. Total
revenues increased $1,091,540
(89%) and total expenses increased $911,802 (57%) in 1999 compared to 1998.
Revenues less commissions
and clearing and execution costs were $1,526,301 in 1999 compared to
$1,113,669 in 1998. In 1998, clearing
and execution costs were reduced by $266,162 received from CSC-1's clearing
agent in settlement of prior fee disputes.
The increase in total revenues was due to $1,194,653 higher commissions
derived from Castle Online. Castle
Online customer transactions increased from 38,999 in the nine months ended
June 30,1998 to 110,862 in the
nine months ended June 30,1999. Castle Online funded customers increased
from 140 at 6/30/98 to 364 at 6/30/99.
The source of the increase in total expenses was largely commissions
($199,056) and clearing and execution
costs ($479,852). Commissions expense increased as a result of higher
revenues; commissions expense as a
percentage of total revenues was 15% and 13% in 1999 and 1998, respectively.
Clearing and execution costs
increased as a result of increased Castle Online transactions in 1999 and the
$266,162 settlement in 1998
(which reduced 1998 clearing and execution costs); excluding the settlement,
clearing and execution costs as a
percentage of total revenues was 24% and 28% in 1999 and 1998, respectively.
Three months ended June 30, 1999 compared to three months ended June 30,1998 -
Net income for the three
months ended June 30, 1999 was $53,470, or $.01 per share, compared to a net
loss of $103,024, or $(.02) per
share, for the three months ended June 30, 1998. Total revenues increased
$554,957 (112%) and total
expenses increased $398,261 (67%). Revenues less commissions and clearing
and execution costs were
$616,275 in 1999 compared to $300,617 in 1998.
The increase in total revenues was due to $446,617 higher commissions derived
from Castle Online and
$122,206 higher revenues from principal transactions. Castle Online customer
transactions increased from
15,974 in the three months ended June 30, 1998 to 44,873 in the three months
ended June 30, 1999.
The source of the increase in total expenses was primarily commissions
($142,910), clearing and execution
costs ($96,389), and administrative compensation and employee benefits
($94,419). Commissions expense
increased as a result of higher revenues; commissions expense as a percentage
of total revenues was 20% and
14% in 1999 and 1998, respectively; the higher percentage was due to a higher
proportion of revenues derived
from principal transactions (where the commissions payout percentages are
higher) in 1999 compared to 1998.
Clearing and execution costs increased as a result of increased Castle Online
transactions in 1999; clearing and
execution costs as a percentage of total revenues was 21% and 25% 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 June 30, 1999
that were not registered under the Securities Act were:
(1) April 5, 1999 - 800,000 shares of Common Stock, $.0025 par value
were sold at a price
of $.3125 per share ($250,000) to Plymouth Partners, L.P.
Except for a $25,000 finder's fee paid to Five
Flags Incorporated, no underwriting discounts or commissions
were paid in connection with this sale. The
Registrant claimed exemption from registration
under Rule 504 of Regulation D of the Securities Act of 1933.
(2) May 7, 1999 - 24,000 shares of Common Stock, $.0025 par value
were issued to Equities
Magazine LLC in exchange for certain specified advertising
(valued at $36,000) to be provided the Registrant. 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 June 30, 1999.
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 THIRD QUARTER ENDED JUNE 30, 1999 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]APR-01-1999
[PERIOD-END]JUN-30-1999
[EXCHANGE-RATE] 1
[CASH] 583,156
[RECEIVABLES] 0
[SECURITIES-RESALE] 0
[SECURITIES-BORROWED] 0
[INSTRUMENTS-OWNED] 36,881
[PP&E] 204,219
[TOTAL-ASSETS] 883,382
[SHORT-TERM] 87,500
[PAYABLES] 269,831
[REPOS-SOLD] 0
[SECURITIES-LOANED] 0
[INSTRUMENTS-SOLD] 1,031
<LONG TERM> 123,630
[COMMON] 16,516
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[OTHER-SE] 384,874
[TOTAL-LIABILITY-AND-EQUITY] 883,382
[TRADING-REVENUE] 185,882
[INTEREST-DIVIDENDS] 2,089
[COMMISSIONS] 861,180
[INVESTMENT-BANKING-REVENUES] 0
[FEE-REVENUE] 0
[INTEREST-EXPENSE] 7,666
[COMPENSATION] 448,481
[INCOME-PRETAX] 54,623
[INCOME-PRE-EXTRAORDINARY] 54,623
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 53,470
[EPS-BASIC] .01
[EPS-DILUTED] .01
