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 March 31, 1998
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
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
9,733,044 Common Shares, no par value, were outstanding as of May 15,
1998.
<PAGE>
2
FIRST MONTAUK FINANCIAL CORP.
FORM 10-Q
MARCH 31, 1998
INDEX
Page
----
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Statement of Financial Condition
as of March 31, 1998 and December 31, 1997 .................... 3
Consolidated Statement of Income for the
Three Months Ended March 31, 1998 and 1997 .................... 4
Consolidated Statement of Cash Flows for the
Three Months Ended March 31, 1998 and 1997 .................... 5-6
Notes to Financial Statements .................................. 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations .................... 8-10
PART II. OTHER INFORMATION:
Item 5. Other Information ......................................... 11
Item 6. Exhibits and Reports on Form 8-K ........................ 12
Signatures ....................................................... 13
<PAGE>
3
FIRST MONTAUK FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
March 31, December 31,
ASSETS 1998 1997
Cash $ 1,390,292 $ 789,883
Due from clearing firm 2,688,956 2,707,782
Securities owned, at market 4,140,689 3,150,772
Securities owned, not readily marketable,
at estimated market value 109,529 506,732
Commissions receivable 75,341 246,250
Employee and broker receivables 772,574 927,195
Furniture, equipment and leasehold
improvements-net 1,665,339 1,357,854
Notes receivable 1,514,883 938,054
Due from officers 140,615 146,691
Other assets 1,864,355 1,164,753
Deferred tax asset-net 215,954 35,968
---------- ----------
Total assets $14,578,527 $11,971,934
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Securities sold, but not yet purchased,
at market $ 733,351 $ 809,523
Notes payable-bank 316,788 340,769
Subordinated notes payable 200,000 250,000
Commissions payable 1,791,780 1,624,316
Accounts payable 950,700 501,267
Accrued expenses 844,544 812,590
Other liabilities 1,069,648 394,002
--------- ---------
Total liabilities 5,906,811 4,732,467
--------- ---------
Common stock issued with guaranteed selling
price - no par value, 173,000 shares issued
and outstanding 346,500 346,500
Commitments and contingencies (See Notes)
Stockholders' equity
Preferred Stock, 5,000,000 shares authorized,
$.10 par value, no shares issued and outstanding - -
Common Stock, no par value, 15,000,000 shares
authorized, 9,629,044 and 9,198,444 shares
issued and outstanding 4,491,273 4,334,173
Additional paid-in capital 2,698,054 1,173,437
Retained earnings 1,590,554 1,570,376
Less: Deferred compensation (454,665) (185,019)
----------- -----------
Total stockholders' equity 8,325,216 6,892,967
----------- -----------
Total liabilities and stockholders'
equity $14,578,527 $11,971,934
========== ==========
See notes to financial statements.
<PAGE>
4
FIRST MONTAUK FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
Three months ended March 31,
1998 1997
Revenues:
Commissions $ 7,627,770 $ 6,558,849
Principal transactions 2,343,443 1,396,509
Investment banking 266,204 138,791
Insurance recovery - 650,000
Interest and other income 378,537 248,430
---------- -----------
10,615,954 8,992,579
---------- -----------
Expenses:
Commissions, employee compensation
and benefits 8,235,819 6,361,971
Clearing and floor brokerage 846,483 728,325
Communications and occupancy 596,991 423,459
Legal matters and related costs 300,574 596,429
Other operating expenses 571,314 434,940
Interest 28,570 14,717
---------- ----------
10,579,751 8,559,841
---------- ----------
Income before income taxes 36,203 432,738
Income taxes 16,025 175,424
---------- ----------
Net income $ 20,178 $ 257,314
========== ==========
Per share of Common Stock:
Basic $ 0.00 $ 0.03
========== ==========
Diluted $ 0.00 $ 0.03
========== ==========
Number of common shares used in
basic earnings per share 9,609,080 8,532,818
Incremental shares from assumed
conversion of options 1,058,084 1,326,856
---------- ----------
Number of common shares used in
diluted earnings per share 10,667,164 9,859,674
========== ==========
See notes to financial statements.
<PAGE>
5
FIRST MONTAUK FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Three months ended March 31,
1998 1997
INCREASE (DECREASE) IN CASH
Cash flows from operating activities:
Net income $ 20,178 $ 257,314
--------- ---------
Adjustments to reconcile net income to
net cash used in operating activities:
Common stock issued with guaranteed selling
price - 37,500
Tax benefit related to exercise of stock options 37,213 -
Depreciation and amortization 84,615 89,177
Amortization of deferred compensation 64,521 -
Other 22,000 -
Increase (decrease) in cash attributable to
changes in assets and liabilities
Due from clearing firm 18,826 329,971
Securities owned - at market (989,917) (221,712)
Securities owned-not readily marketable 397,203 -
Commissions receivable 170,909 118,823
Other assets (815,597) (302,337)
Deferred income taxes (179,986) 174,136
Securities sold but not yet purchased (76,172) (60,489)
Commissions payable 167,464 (412,738)
Accounts payable 449,433 15,662
Accrued expenses 9,954 (655,531)
Other liabilities 675,646 (63,295)
--------- ----------
Total adjustments 36,112 (950,833)
--------- ----------
Net cash provided by (used in) operating
activities 56,290 (693,519)
--------- ----------
Cash flows from investing activities:
Due from officers 6,076 36,289
Employee and broker receivables 154,621 (117,351)
Issuance of notes receivable (759,816) 17,360
Repayment of notes receivable 182,987 -
Capital expenditures (392,101) (34,672)
---------- ---------
Net cash used in investing activities (808,233) (98,374)
---------- ---------
Cash flows from financing activities:
Payment of notes payable-bank (23,981) (30,465)
Payment of subordinated notes payable (50,000) -
Proceeds from rights offering 1,382,751 -
Registration costs (113,518) -
Proceeds from exercise of common stock options 157,100 447,812
---------- ---------
Net cash provided by financing activities 1,352,352 417,347
--------- ---------
Net increase (decrease) in cash 600,409 (374,546)
Cash at beginning of year 789,883 1,069,548
--------- ---------
Cash at end of period $1,390,292 $ 695,002
========= =========
See notes to financial statements.
<PAGE>
6
FIRST MONTAUK FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Continued)
Three months ended March 31,
1998 1997
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest $ 28,570 $ 14,717
Income taxes $ - $ -
See notes to financial statements.
<PAGE>
7
FIRST MONTAUK FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 March 31,
1998 and 1997. 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, 1997, as filed with the Securities and Exchange Commission on Form 10-K.
The results reflected for the three-month period ended March 31, 1998, are
not necessarily indicative of the results for the entire fiscal year to end on
December 31, 1998.
NOTE 2 - EARNINGS PER SHARE
The Company has adopted Statement of Financial Accounting Standards No.128
(SFAS 128), "Earnings per Share," which supersedes APB Opinion No. 15 (APB No.
15). Earnings per Share is effective for all periods ending after December 15,
1997. SFAS 128 requires dual presentation of basic and diluted earnings per
share (EPS) for complex capital structures on the face of the Statements of
Operations. 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 or conversion of other securities into
common stock. Earnings per share data for the 1997 period have been restated to
conform with the provisions of SFAS 128. The impact of the change was not
material.
NOTE 3 - NOTES RECEIVABLE
During the 1998 quarter, the Compan's subsidiary, Montauk Advisors, Inc.,
advanced $525,000 to Global Financial Corp. ("Global") to help Global meet its
obligations to lease investors. As of March 31, 1998, MAI had loaned a total of
$1,094,500 to Global. The loans bear interest at the rate of 8% per annum, with
scheduled maturities, as extended, of $369,500 on September 1, 1998 and $725,000
on October 1, 1998. The loans were originally due on April 1, 1998 and May 1,
1998, respectively. Subsequent to March 31, 1998, MAI made additional loans to
Global totaling $190,000.
MAI is also continuing to provide short-term working capital loans to
FemCom Business Systems ("FCS"), Global's affiliated equipment vendor, to
purchase equipment for resale to FCS customers. FCS owed MAI $239,550 including
accrued interest at March 31, 1998.
NOTE 4 - RIGHTS OFFERING
In February 1998, the Company completed an offering of 3,072,779 Units,
each Unit consisting of one Class A Redeemable Common Stock Purchase Warrant,
one Class B Redeemable Common Stock Purchase Warrant, and one Class C Redeemable
Common Stock Purchase Warrant. The Warrants have the following exercise prices
and terms:
Exercise Price Exercise Period
Warrant Per Share from Date of Issuance
Class A $3.00 Three years
Class B 5.00 Five years
Class C 7.00 Seven years
Each shareholder of record as of December 15, 1997 received three rights
for each share of Common Stock held as of the record date, with three rights
required to subscribe for a single Unit at a price of $.45 per Unit. The
offering raised gross proceeds of $1,382,751 before deducting related costs of
approximately $230,000.
<PAGE>
8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Total revenues for the three months ended March 31, 1998 increased 18% to
$10,615,954, as compared to $8,992,579 in the same period in 1997. Net income
for the 1998 first quarter was $20,178, or $.00 per diluted share, compared to
$257,314, or $.03 per diluted share, in the first quarter of 1997. Results for
the 1997 period include a $650,000 insurance recovery related to previously
settled legal matters. Absent this recovery, total revenues for the quarter
ended March 31, 1998 would have increased 27%, as compared to the same period in
1997. The increase in revenue is attributable to strong securities markets and
commission revenues generated by newly added registered representatives.
Commission revenues from the sale of listed and over-the-counter
securities, mutual funds, fees from managed accounts and other agency
transactions increased to $7,627,770 (72% of gross revenues) in the first
quarter of 1998 as compared to $6,558,849 (73% of gross revenues) in the first
quarter of 1997. This increase resulted primarily from agency equity and mutual
fund transactions as retail investment volume maintained its strong levels
during the 1998 quarter.
Revenues from principal transactions increased to $2,343,443 (22% of gross
revenues) for the quarter ended March 31, 1998 as compared to $1,396,509 (15.5%
of gross revenues) for the same period in 1997. The growth is attributable to a
combination of increased municipal and government bond trading revenues, as well
as an increase in equity trading gains.
Investment banking revenues increased from $138,791 in 1997 to $266,204 in
the 1998 quarter. This increase is a result of the Company's participation as a
selling group member in a number of public offerings. The Company expects to
continue participating in syndications, and will pursue additional opportunities
in the investment banking area, including private placements and public
offerings.
During the 1998 quarter the Company paid commissions, employee compensation
and employee benefits of $8,235,819 (78% of gross revenues) as compared to
$6,361,971 ( 71% of gross revenues) in 1997. This category includes salaries,
commission expense, payroll taxes and fringe benefits for salaried employees.
The Company paid salaries of $1,033,215 for management, operations and clerical
personnel, as compared to $ 776,532 in 1997. This increase was due in part to
the addition of various key management personnel during the latter part of
fiscal 1997, as well as a general increase in employee salaries.
Commissions paid to registered representatives for the first quarter 1998
was $6,860,226 (65% of gross revenues) as compared to $5,213,762 (62% of gross
revenues) in 1997. Commission compensation is directly related to the level of
revenues generated from firm principal and agency trading, as well as the
commission payout percentage to individual registered representatives.
Commission expense as a percentage of total revenues will fluctuate within a
narrow range depending upon the product mix of commission-based business and
principal transactions. This percentage will also fluctuate based upon the
contribution to revenues from the Company's in-house brokers and affiliate
offices. In-house brokers usually receive a lower commission payout than
independent affiliates but are not generally required to pay their own overhead.
Clearing costs increased in 1998 to $846,483 (8% of gross revenues) from
$728,325 (8% of gross revenues) in 1997. The increase in clearing costs was
attributable to a larger number of overall transactions by the firm's registered
representatives. The percentage of clearing costs to gross revenues can
fluctuate depending upon the product mix. Some transactions have a higher
execution and clearing cost than others.
Communications and occupancy costs rose by $173,532, or 41%, to $596,991
during the 1998 quarter. The increase is due to the expansion of the Company's
headquarters and higher charges for communication networks and market data
services. Management expects this expense category to increase as a result of a
new master lease agreement effective February 1998 which expands the Company's
facilities. The new seven-year lease, as amended, covers an aggregate of 32,442
gross rentable square feet at a monthly rental payment of $52,000 through
January 2005. The master lease and amendment also contain a six-year renewal
option providing for a base rental payment of approximately $65,000 per month.
The expanded office will house additional registered representatives as well as
administrative and clerical personnel. The new facility will also include an
expanded order and trading room, as well as improved distribution and operation
areas.
<PAGE>
9
Legal matters and related costs include payments to settle customer claims,
professional fees and other defense costs, and provisions for pending
litigation. These costs decreased from $596,429 in 1997 to $300,574 in 1998. The
Company is presently reviewing the extent to which settled and pending claims
may be covered under its insurance policies. There can be no assurance that the
Company will be successful in its efforts to recover additional funds from these
insurers.
Other operating expenses increased from $434,940 (5% of gross revenue) in
1997 to $571,314 (5% of gross revenues) in 1998. The increase was due primarily
to the implementation of the Company's new advertising and marketing campaigns
designed to attract new affiliated registered representatives. These programs
include a new Internet web site, print brochures and a recruiting video, as well
as a 30-second television ad.
Operating results will continue to be sensitive to general economic
conditions, particularly the interest rate environment, and the outlook of
retail investors on the financial markets and management's ability to contain
administative costs.
Liquidity and Capital Resources
Operating activities contributed cash of $56,290 during the 1998 quarter.
During the quarter, inventory positions of securities held by the Company
increased by $1,066,089. A substantial portion of the Company's assets are
liquid, consisting of cash and assets readily convertible into cash, such as
securities inventories, and receivables due from the Company's clearing firm.
The balances in the Company's cash, inventory and clearing firm accounts can and
do fluctuate significantly from day to day, depending on market conditions,
daily trading activity, and investment opportunities. The Company monitors these
accounts on a daily basis in order to ensure compliance with regulatory capital
requirements and to preserve liquidity.
The Company realized a tax benefit of $37,213 related to the exercise of
stock options during the first quarter of 1998. This tax benefit is available to
reduce actual corporate tax liabilities. Under applicable accounting rules, such
benefits are reported as an increase in stockholders' equity rather than as an
item of income.
Other assets increased by $699,602 due primarily to the Company's
prepayment of its Errors & Omissions and Directors' and Officers' liability
insurance policies. These policies were renewed for two and three year terms,
respectively, during the first quarter of 1998. Other liabilities increased by
$675,646 due to the Company's financing of the aforementioned policies.
Investing activities used cash of $808,233 in the 1998 period. Capital
expenditures of $392,101 consisted primarily of an investment in a new
securities back office data management system, additional computer equipment,
and furniture and fixtures for the company's home office expansion. On August 1,
1997, the Company entered into a Software License and Development Agreement with
Uptick Technologies, Inc. ("Uptick") to develop, deliver and install a sales
production and operations management system, based upon Uptick proprietary
software programs and the Company's functional specifications. In payment of the
license fee, the Company will issue 58,400 shares of its Common Stock to Uptick
and use its best efforts to register the shares. The license fee and Common
Stock have been valued at $175,000. The agreement also provides to Uptick an
option to put the stock back to the Company at a price of $3.00 per share in the
event that the Company fails to effect a timely registration of the shares. The
Company will also compensate Uptick for development and consulting service fees
at an hourly rate billed monthly and reimburse Uptick for certain costs and
expenses. The Company retained the right to receive from Uptick certain stated
percentages (ranging from 20% to 5%) of all license fees earned and received by
Uptick for license of the sales production and operations management system to
unrelated third parties up to July 7, 2000. The amount of revenue sharing from
license fees will be limited to the total of all contract payments made by the
Company to Uptick.
Amounts owed by brokers and employees decreased by $154,621 to $772,574.
The net decrease is attributable to repayments on certain loans, decrease in
trading receivables and write-offs of forgivable loans.
<PAGE>
10
In 1997 and the first quarter of 1998, the Company, through its subsidiary,
Montauk Advisors, Inc., ("MAI") has made various loans totaling $1,094,500 to
Global Financial Corp. ("Global"), the financing company which sold leasing
contracts through MAI. The loans bear interest at 8% per annum and were
originally due in April and May 1998. MAI at its sole option, may accept payment
of the loans on an installment basis, and may extend any or all of the loans.
The notes have been extended to September 1, and October 1, 1998. Global is the
finance company, which packaged and sold leases to investors through MAI. These
loans were made for the purpose of assisting Global in meeting cash flow
deficiencies arising from the nonpayment of scheduled monthly installments on
certain delinquent and non-performing leases. Most of the arrears are due from
Fem-Com Copy Systems, Inc. ("FCS"), Global's affiliated equipment vendor and
Biblio, Inc. ("Biblio"), an affiliate of FCS. The MAI notes are guaranteed by
Global; FCS; Biblio and the shareholder of FCS and Biblio. The notes are further
collateralized by mortgage liens on real estate owned by the shareholder of FCS
and Biblio, a pledge of all of the outstanding shares in Global, and various
recorded liens on the assets of FCS and Biblio. MAI expects that Global will
continue to seek additional funds to meet its continuing lease payment
obligations.
MAI has provided FCS with working capital financing to purchase equipment
for resale to FCS customers. MAI believes, but cannot assure, that by continuing
to provide this kind of financial assistance, FCS will be better positioned to
repay its indebtedness to Global. MAI charges a 1% commitment fee on the loans
plus interest at the rate of 12% per annum. The loans are evidenced by a note
which is payable with interest on September 30, 1998.
Financing activities provided cash of $1,352,352 during the 1998 period.
Net proceeds from a rights offering to shareholders of $1,269,233 and proceeds
from the exercise of stock options of $157,100 were partially offset by payments
on bank loans during the quarter of $23,981 under term notes bearing interest at
8 1/2% at March 31, 1998, and the first principal payment of $50,000 to National
Guardian Life Insurance Company under the terms of a subordinated loan
agreement.
Management believes that operating income and the proceeds of a rights
offering to stockholders, at least through the current fiscal year, will provide
the Company's liquidity needs. In March 1998, the Company received gross
proceeds of $1,382,751 from the offering of 3,072,779 units; each unit
consisting of one Class A Warrant, one Class B Warrant and one Class C Warrant.
The warrants have exercise prices and expiration dates as follows:
Warrant Exercise Price Expiration Date
Class A $3.00 February 17, 2001
Class B $5.00 February 17, 2003
Class C $7.00 February 17, 2005
Should the market price of the Company's common stock increase to the level
where any or all of the classes or a portion of the classes of warrants become
exercisable, the Company may obtain additional proceeds from the exercise of the
warrants.
In 1997 the Company converted a portion of one of its legal settlement
obligations into a subordinated loan with the debtor. The five year $250,000
loan bears interest at the rate of 8% per annum, with payments of $50,000
principal and interest on the declining balance due on the first of April of
each of the five years of the loan. The first payment of principal and interest
was made on March 31, 1998. The loan is subordinated to the liabilities of
FMSC's general creditors, and has been approved as to its form by the NASD.
<PAGE>
11
PART II
OTHER INFORMATION
Item 5. Other Information.
Rights Offering
During the reporting period the Company completed an offering (the "Rights
Offering") of 3,072,779 units (the "Units"), to holders ("Shareholders") of
record of its common stock, no par value (the "Common Stock") at the close of
business on December 15, 1997 (the "Record Date"), pursuant to non-transferable
rights (the "Rights") to purchase Units at a price of $.45 per Unit (the
"Subscription Price"). All of the Units were sold with the Company's
shareholders purchasing 1,784,491 Units through the exercise of their basic
subscription rights and 1,288,288 Units through the exercise of their over
subscription rights. Holders of Rights ("Rights Holders") were not required to
pay any brokerage fees for the subscription of Units under the Rights Offering.
Rights Holders were able to exercise their Rights until 5:00 p.m. eastern time
on February 16, 1998. The Rights Offering was completed on February 17, 1998
with all of the Units sold. The Company received gross proceeds of $1,382,751.
Each Unit consisted of one Class A Redeemable Common Stock Purchase
Warrant, one Class B Redeemable Common Stock Purchase Warrant and one Class C
Redeemable Common Stock Purchase Warrant. Each Class A Redeemable Common Stock
Purchase Warrant (the "Class A Warrants"), entitles the holder to purchase from
February 17, 1998 to February 17, 2001 one share of Common Stock of the Company
(the "Class A Warrant Shares"), at an exercise price of $3.00 per share, subject
to adjustment in certain circumstances. Each Class B Redeemable Common Stock
Purchase Warrant (the "Class B Warrants"), entitles the holder to purchase from
February 17, 1998 to February 17, 2003 one share of Common Stock of the Company,
at an exercise price of $5.00 per share, subject to adjustment in certain
circumstances. Each Class C Redeemable Common Stock Purchase Warrants (the
"Class C Warrants"), entitles the holder to purchase from February 17, 1998 to
February 17, 2005 one share of Common Stock of the Company (the "Class C Warrant
Shares"), at an exercise price of $7.00 per share, subject to adjustment in
certain circumstances.
Global Loans
Montauk Advisors, Inc. ("MAI") has made various loans totaling $1,284,500
to Global Financial Corp. ("Global"), the financing company which sold leasing
contracts through MAI. These loans were made for the purpose of assisting Global
in meeting cash flow deficiencies arising from the nonpayment of scheduled
monthly installments on certain delinquent and non-performing leases. The loans
bear interest at 8% per annum and were originally due in April and May 1998.
MAI, at its sole option, may accept payment on the loans on an installment
basis, and may extend any or all of the loans. The notes have been extended to
September 1, and October 1, 1998. Most of the arrears are due from Fem-Com
Systems Inc. ("FCS"), Global's affiliated equipment vendor, and Biblio, Inc.
("Biblio"), an affiliate of FCS. The notes are guaranteed by Global, FCS, Biblio
and the shareholder of FCS and Biblio. The notes are further collateralized by
mortgage liens on real estate owned by the principal shareholder of FCS and
Biblio, the shareholder's personal guarantee, a pledge of the shares of Global
and FCS, and various liens on the assets of Global. MAI expects that Global will
seek additional loans from MAI in the short-term, which will be evaluated, on a
case by case basis.
Additionally, MAI has provided certain financing for the purchase of
equipment by FCS. FCS is indebted to Global for payment on certain leases and is
paying Global from time to time based on its available cash flow. The Company
believes that MAI's assistance to FCS in financing current and future equipment
purchases, will enable FCS to generate additional cash flow to pay Global, which
will eventually enable Global to repay the loans made by MAI. However, there can
be no assurance that Global will be able to repay the loans or that the
collateral will be sufficient to cover the outstanding principal of the loans in
the event of a default.
<PAGE>
12
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.
<PAGE>
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: May 15, 1998 /s/ William J. Kurinsky
-------------------------
William J. Kurinsky
Secretary/Treasurer
Chief Financial Officer and
Principal Accounting Officer
/s/ Herbert Kurinsky
-------------------------
Herbert Kurinsky
President
<PAGE>
14
EXHIBIT INDEX
-------------
Exhibit 27 - Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> BD
<LEGEND>
This Schedule contains summary financial information extracted from
Consolidated Statement of Financial Condition at March 31, 1998 and Consolidated
Statement of Income -- Three Months ended March 31, 1998 and is qualified in its
entirety by reference to such financial statements included in Form 10-Q for
March 31, 1998.
</LEGEND>
<MULTIPLIER> 1,000
<CIK> 0000083125
<NAME> First Montauk Financial Corp.
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-1-1998
<PERIOD-END> Mar-31-1998
<CASH> 1,390
<RECEIVABLES> 2,764
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 4,250
<PP&E> 1,665
<TOTAL-ASSETS> 14,579
<SHORT-TERM> 0
<PAYABLES> 4,151
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 733
<LONG-TERM> 1,023
0
0
<COMMON> 4,491
<OTHER-SE> 3,834
<TOTAL-LIABILITY-AND-EQUITY> 14,579
<TRADING-REVENUE> 2,343
<INTEREST-DIVIDENDS> 379
<COMMISSIONS> 7,628
<INVESTMENT-BANKING-REVENUES> 266
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</TABLE>
