<PAGE> 1
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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, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to __________
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WESTECH CAPITAL CORP.
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(Exact Name of Registrant as Specified in its Charter)
NEW YORK 33-37534-NY 13-3577716
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
2700 Via Fortuna, Suite 400, Austin, Texas 78746
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (512) 306-8222
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 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. As of April 30, 2000, the
Registrant had the following number of shares of common stock, $0.001 par value
per share, outstanding: 12,537,218.
<PAGE> 2
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WESTECH CAPITAL CORP. AND SUBSIDIARIES
Consolidated Statements of Financial Condition
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
------------- -------------
ASSETS (UNAUDITED)
<S> <C> <C>
Cash and cash equivalents $ 1,123,413 2,732,175
Receivable from clearing broker, partially restricted 6,478,162 4,640,052
Receivables from employees and stockholders 675,960 627,454
Securities owned, at market value 7,563,189 6,207,748
Other investments 788,104 932,253
Furniture and equipment, net 333,392 323,281
Deferred tax asset, net 54,086 54,086
Prepaid expenses and other assets 505,976 597,053
------------- -------------
Total assets $ 17,522,282 16,114,102
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable, accrued expenses and other liabilities $ 3,625,412 2,905,020
Securities sold, not yet purchased 471,407 187,940
Payable to clearing broker 5,759,808 6,196,059
Subordinated debt 1,000,000 1,000,000
------------- -------------
Total liabilities 10,856,627 10,289,019
------------- -------------
Minority interest in subsidiary 1,158,972 976,725
Stockholders' equity:
Common stock, $0.001 par value
50,000,000 shares authorized; 12,537,218
issued at March 31, 2000 and
December 31, 1999 12,537 12,537
Additional paid in capital 1,669,473 1,669,473
Retained earnings 3,824,673 3,166,348
------------- -------------
Total stockholders' equity 5,506,683 4,848,358
------------- -------------
Commitments and contingencies
Total liabilities and stockholders' equity $ 17,522,282 16,114,102
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE> 3
WESTECH CAPITAL CORP. AND SUBSIDIARIES
Consolidated Statements of Operations (Unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
2000 1999
----------- -----------
<S> <C> <C>
Revenues:
Commissions $ 8,516,778 4,981,533
Underwriting and investment banking income 1,071,165 --
Net dealer inventory and investment income, net of
trading interest expense of $544,272 and
$18,585, respectively 70,390 1,795,021
Other income 45,270 8,771
----------- -----------
Total revenues 9,703,603 6,785,325
----------- -----------
Expenses:
Commissions, employee compensation and benefits 6,311,019 2,646,986
Clearing and floor brokerage 377,329 98,967
Communications and occupancy 477,611 269,800
Professional fees 368,405 67,110
Interest 28,671 14,178
Other 767,196 356,503
----------- -----------
Total expenses 8,330,231 3,453,544
----------- -----------
Income before income tax expense
and minority interest 1,373,372 3,331,781
Income tax expense 532,800 1,309,424
----------- -----------
Income before minority interest 840,572 2,022,357
Minority interest 182,247 --
----------- -----------
Net income $ 658,325 2,022,357
=========== ===========
Earnings per share:
Basic $ 0.05 0.18
=========== ===========
Diluted $ 0.04 0.18
=========== ===========
Weighted average shares outstanding:
Basic 12,537,218 11,149,284
=========== ===========
Diluted 19,280,061 11,149,284
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 4
WESTECH CAPITAL CORP. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
2000 1999
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 658,325 2,022,357
Adjustments to reconcile net income to net cash
provided (used )by operating activities:
Depreciation and amortization expense 23,976 14,016
Minority interest 182,247 --
Decrease in payable to clearing broker, net of
receivable from clearing broker (2,274,361) (445,095)
Decrease (increase) in receivable from employees and stockholders (48,506) 29,335
Increase in securities owned (1,355,441) (3,721,607)
Decrease in other investments 144,149 --
Decrease in prepaid expenses other assets 91,077 202,603
Increase in accounts payable, accrued
expenses and other liabilities 720,392 2,042,820
Increase in securities sold, not yet purchased 283,467 67,500
----------- -----------
Net cash provided (used) by operating activities (1,574,675) 211,929
----------- -----------
Cash flows from investing activities:
Purchase of furniture and equipment (34,087) (12,421)
----------- -----------
Net cash used by investing activities (34,087) (12,421)
----------- -----------
Cash flows from financing activities:
Purchase of treasury stock -- (172,114)
Subscription collected -- 1,023
----------- -----------
Net cash used by financing activities -- (171,091)
----------- -----------
Net increase (decrease) in cash and cash equivalents (1,608,762) 28,417
Cash and cash equivalents at beginning of period 2,732,175 201,312
----------- -----------
Cash and cash equivalents at end of period $ 1,123,413 229,729
=========== ===========
Supplemental disclosures:
Interest paid $ 450,485 32,763
Taxes paid $ 700,000 --
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 5
WESTECH CAPITAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2000
(Unaudited)
(1) General
Westech, a New York corporation, is a holding company whose primary operating
subsidiary is Tejas Securities Group, Inc., a Texas corporation ("Tejas
Securities"). Tejas Securities is engaged in the business of providing brokerage
and related financial services to institutional and retail customers nationwide.
Pursuant to an Agreement and Plan of Merger by and among Westech, Tejas
Securities, Tejas Securities Group Holding Company, a Texas corporation ("Tejas
Holding"), and Westech Merger Sub, Inc., a Delaware corporation ("Merger Sub"),
Merger Sub was merged (the "Merger") with and into Tejas Holding and Tejas
Holding (which owns approximately 81% of Tejas Securities) became a wholly-owned
subsidiary of Westech. Under the terms of the Merger, the shareholders of Tejas
Holding exchanged their shares for shares of Westech at a ratio 2.4825 to one.
The former shareholders of Tejas Holding currently own 95.21% of the issued and
outstanding common stock of Westech, $.001 par value per share.
Tejas Securities is the operating enterprise and the acquiring enterprise for
financial reporting purposes. The historical financial statements of Tejas
Securities (accounting acquirer) are presented as the historical financial
statements of the combined enterprise. The results of operations of Westech (the
acquired enterprise) are included only from the date of acquisition.
The accompanying unaudited consolidated financial statements of Westech, and
subsidiaries (collectively referred to as the "Company") have been prepared in
accordance with the instructions for Form 10Q and, therefore, do not include all
the disclosures necessary for a complete presentation of financial condition,
results of operations, and cash flows in conformity with generally accepted
accounting principles. All adjustments (consisting of only normal recurring
adjustments) that are necessary in the opinion of management for a fair
presentation of the interim financial statements have been included.
The interim financial information should be read in conjunction with Westech's
1999 Form 10-K. The results of operations for the three months ended March 31,
2000 are not necessary indicative of the results of the year ending December 31,
2000.
During the second quarter of 2000, Westech anticipates submitting to its
shareholders a proposal to change its state of incorporation from New York to
Delaware. Westech does not expect the reincorporation to have any material
effects on it or its subsidiaries.
Tejas Securities' business is conducted out of its primary office in Austin,
Texas and a branch office in Atlanta, Georgia. Tejas Securities anticipates
expanding its operations in the year 2000 with an additional branch in Houston,
Texas. Tejas Securities moved its primary office in the first quarter of 2000 to
2700 Via Fortuna, Suite 400, Austin, Texas 78746.
Tejas Securities is a registered broker-dealer and investment advisor offering
brokerage services to retail and institutional customers as well as investment
banking services. Through our brokerage service, we provide market-making
activities in stocks traded on the Nasdaq and other OTC securities, execution
services in exchange listed securities, high quality investment research to
institutional and retail customers and asset management services.
4
<PAGE> 6
WESTECH CAPITAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2000
(Unaudited)
(2) Net Capital
Tejas Securities is subject to SEC Rule 15c3-1, Net Capital Requirements For
Brokers or Dealers (the "Rule"), which establishes minimum net capital
requirements for broker-dealers. The Rule is designed to measure financial
integrity and liquidity in order to assure the broker-dealer's financial
stability within the securities market. The net capital required under the Rule
depends in part upon the activities engaged in by the broker-dealer.
Tejas Securities elects to use the alternative method permitted by the Rule,
which requires it to maintain minimum net capital equal to the greater of
$250,000 or 2% of aggregrate indebtedness. As of March 31, 2000, Tejas
Securities' net capital of $2,069,943 was $1,819,943 in excess of the minimum
required.
(3) Earnings Per Share
After the completion of the Merger, Westech had 12,537,218 shares of common
stock issued and outstanding. Prior to the Merger, Westech completed a stock
split in the form of a stock dividend by issuing 2.28767 new shares of Westech
common stock for each one share of Westech common stock outstanding to
stockholders of record on August 13, 1999, resulting in 599,981 shares
outstanding immediately following the stock split. Under the terms of the
Merger, stockholders of Tejas Holding exchanged their shares for shares of
Westech at a ratio of 2.4825 to one. The effect of this exchange was to issue an
additional 11,937,237 shares of Westech's stock in exchange for 100% of the
outstanding stock of Tejas Holding.
Earnings per share for the period prior to the Merger have been restated to
reflect the post merger number of shares outstanding.
Basic earnings per share is based on the weighted average shares outstanding
without any dilutive effects considered. Diluted earnings per share reflects
dilution from all contingently issuable shares, including options issued during
the three month periods ended March 31, 2000 and 1999. Contingently issuable
shares are not included in the weighted average number of shares when the
inclusion would increase net income per share or decrease the loss per share.
5
<PAGE> 7
WESTECH CAPITAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2000
(Unaudited)
Earnings per share is calculated as follows.
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
2000 1999
----------- ------------
<S> <C> <C>
BASIC EARNINGS PER SHARE:
Net income $ 658,325 2,022,357
Weighted average shares outstanding 12,537,218 11,149,284
Basic earnings per share $ 0.05 0.18
DILUTED EARNINGS PER SHARE:
Net income $ 658,325 2,022,357
Income impact of assumed conversion of
subsidiary stock and recognition of minority
interest income 182,247 0
Income available to common stockholders
after assumed conversions 840,572 2,022,357
Weighted average shares outstanding 12,537,218 11,149,284
Effect of dilutive securities:
Warrants 0 0
Options 4,068,313 0
Assumed conversion of subsidiary stock 2,396,439 0
Application of treasury stock method to
subscriptions receivable 278,091 0
Weighted average shares outstanding 19,280,061 11,149,284
Diluted earnings per share $ 0.04 0.18
</TABLE>
Warrants to purchase 279,281 shares of Westech's common stock at March 31, 1999
were not included in the computation of diluted earnings per share because the
warrants' exercise price was antidilutive. The warrants were exchanged for
279,281 options to purchase shares of Westech common stock as of January 1,
2000. These options are included as dilutive securities for the three months
ended March 31, 2000.
(4) Industry Segment Data
Westech has two reportable segments: brokerage services and investment banking.
The primary operating segment, brokerage services, includes sales, trading and
market-making activities of Westech and encompasses both retail and
institutional customer accounts. These segments require the commitment of
significant human capital and financial resources, as well as industry specific
skills. The investment banking segment participates in underwriting of corporate
securities as managing underwriter and as a syndicate member. Income associated
with other investments accounted for under the equity method is included in
other segment activity for the three months ended March 31, 2000.
6
<PAGE> 8
WESTECH CAPITAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2000
(Unaudited)
The following table presents segment revenues, profits and assets for the
three months ended March 31, 2000.
<TABLE>
<CAPTION>
Investment
Brokerage Banking Other Total
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues from external
customers $ 9,080,426 1,071,165 45,270 10,196,861
Interest revenue 51,014 -- -- 51,014
Interest expense 572,943 -- -- 572,943
Depreciation and amortization 23,976 -- -- 23,976
Segment profit 348,908 979,194 45,270 1,373,372
Segment assets 16,734,178 -- 788,104 17,522,282
Capital expenditures 34,087 -- -- 34,087
</TABLE>
The following table presents segment revenues, profits and assets for the
three months ended March 31, 1999.
<TABLE>
<CAPTION>
Investment
Brokerage Banking Other Total
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues from external
customers $ 6,319,839 -- 8,771 6,328,610
Interest revenue 475,300 -- -- 475,300
Interest expense 32,763 -- -- 32,763
Depreciation and amortization 14,016 -- -- 14,016
Segment profit 3,323,010 -- 8,771 3,331,781
Segment assets 11,333,271 -- -- 11,333,271
Capital expenditures 12,421 -- -- 12,421
</TABLE>
7
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Forward Looking Statements and Risk Factors
All statements past and future, written or oral, made by Westech or its
officers, directors, stockholders, agents, representatives or employees,
including without limitation, those statements contained in this Report on Form
10-Q, that are not purely historical are forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, including statements regarding Westech's
expectations, hopes, intentions or strategies regarding the future.
Forward-looking statements may appear in this document or other documents,
reports, press releases, and written or oral presentations made by officers of
Westech to stockholders, analysts, news organizations or others. Readers should
not place undue reliance on forward-looking statements. All forward-looking
statements are based on information available to Westech and the declarant at
the time the forward-looking statement is made, and Westech assumes no
obligation to update any such forward-looking statements. It is important to
note that Westech's actual results could differ materially from those described
in such forward-looking statements. In addition to any risks and uncertainties
specifically identified in connection with such forward-looking statements, the
reader should consult Westech's filings under the Securities Exchange Act of
1934, for factors that could cause actual results to differ materially from
those presented.
Forward-looking statements are necessarily based on various assumptions and
estimates and are inherently subject to various risks and uncertainties,
including risks and uncertainties relating to the possible invalidity of the
underlying assumptions and estimates and possible changes or developments in
social, economic, business, industry, market, legal and regulatory circumstances
and conditions and actions taken or omitted to be taken by third parties,
including customers, suppliers, business partners and competitors and
legislative, judicial and other governmental authorities and officials.
Assumptions relating to the foregoing involve judgements with respect to, among
other things, future economic, competitive and market conditions and future
business decisions, all of which are difficult or impossible to predict
accurately and many of which are beyond the control of Westech. Any such
assumptions could be inaccurate and, therefore, there can be no assurance that
any forward-looking statements by Westech or its officers, directors,
stockholders, agents, representatives or employees, including those
forward-looking statements contained in this Report on Form 10-Q, will prove to
be accurate.
Results of Operations
The revenues and operating expenses of Westech's operating subsidiary, Tejas
Securities, are influenced by fluctuations in the equity markets, general
economic and market conditions, as well as Tejas Securities' ability to identify
investment opportunities for its trading accounts and its customer accounts.
Currently, Tejas Securities revenue is derived primarily from principal debt and
equity transactions, which generate both commission revenue and investment
income.
Westech's total revenues increased by $2,918,278 or 43% to $9,703,603 for the
three months ended March 31, 2000 compared to the prior year quarter. The
reasons for the increases are set forth below.
Commission revenues from principal transactions increased $3,535,245 or 71% to
$8,516,778 for the three months ended March 31, 2000. Commission revenues from
agency transactions increased $751,991 or 514% to $898,166 for the three months
ended March 31, 2000. Tejas Securities' realized an increase of 676% in agency
trades for the three months ended March 31, 2000. The increase in agency
commissions and trades relates to the increase in the number of retail brokers
employed by Tejas Securities since the first quarter of 1999, the addition of
market making activities and its continued focus on expanding its products and
services to customers. Commissions from principal trades increased due to a 472%
increase in trades executed during the three months ended March 31, 2000. The
remaining commissions were the result of portfolio advisory fees on managed
accounts.
Investment banking revenues were $1,071,165 for the three months ended March 31,
2000 versus $0 for the corresponding period in 1999. The increase is the result
of the re-establishment of underwriting and syndicate activities beginning in
January 2000. Tejas Securities generated $469,021 in private placement
8
<PAGE> 10
fees for the three months ended March 31, 2000. Fees from syndicate activities
increased to $362,144 for the three months ended March 31, 2000. Corporate
advisory fees of $240,000 were also generated.
Net dealer inventory and investment income decreased by $1,724,631 or 96% to
$70,390 for the three months ended March 31, 2000. The decrease in inventory and
investment income resulted from trading activity in proprietary positions.
For the three months ended March 31, 2000, other income increased $36,499 or
416% to $45,270. The increase for the three months ended March 31, 2000 is due
to an increase in customer margin interest revenue.
Total expenses increased by $4,876,687 or 141% to $8,330,231 for the three
months ended March 31, 2000. Net income for the three months decreased by
$1,364,032 or 67% to $658,325. The explanations for the changes are set forth
below.
Commissions, employee compensation and benefits increased $3,664,033 or 138% to
$6,311,019 for the three months ended March 31, 2000. Commission expense
increased $2,350,885 or 119% to $4,326,105 primarily as a result of the increase
in commission revenue. General and administrative salaries and other employee
benefits increased due to overall salary increases and additional hires,
including a Chief Financial Officer and other management level personnel.
Clearing and floor brokerage costs increased $278,362 or 281% to $377,329 for
the three months ended March 31, 2000. The overall increase in clearing and
floor brokerage costs for the three months ended March 31, 2000 results from
greater trading activity in the over-the-counter equity markets and on the
national exchanges. Most of the cost increase is attributed to the market making
activities, and the increased activity in both the retail and institutional
equity departments. Tejas Securities' percentage of revenues derived from equity
securities increased during 2000 in comparison to the volume of fixed income
securities being traded.
Communications and occupancy charges increased $207,811 or 77% to $477,611 for
the three months ended March 31, 2000. The increases in occupancy charges are
the result of the relocation of Westech's Austin headquarters in January 2000.
Communications charges increased as a function of the 100% increase in employees
since the first quarter of 1999, plus the addition of market making support
systems.
Professional fees for the three months ended March 31, 2000 increased $301,295
or 449% to $368,405. Of the total increase for the three-month period,
approximately $200,000 was accrued legal expenses relating to the registration
of Westech's common stock, legal fees for the settlement of private equity
securities transactions with its customers, and fees for general legal counsel.
In addition, Westech incurred additional accounting costs associated with its
annual reporting as well as for the registration of its common stock. The
remaining costs during the three months ended March 31, 2000 related to
consulting fees incurred during the normal course of business.
Interest expense for the three months ended March 31, 2000 increased $14,493 or
102% to $28,671. The increase is due to the addition of $500,000 of subordinated
debt in June 1999.
Other expenses increased $410,693 or 115% to $767,196 for the three months ended
March 31, 2000. The overall increase in other expenses during the three months
ended March 31, 2000 is the result of increases in general and administrative
services needed to support administrative infrastructure as well as increases in
marketing expenditures related to growth initiatives.
Income tax expense decreased $776,624 or 59% to $532,800 for the three months
ended March 31, 2000. The overall decrease in income tax expense for the three
months ended March 31, 2000 is due to the decrease in taxable income during the
respective period. Westech's effective tax rate was 39% for the three months
ended March 31, 2000.
9
<PAGE> 11
Minority interest in net income for the three months ended March 31, 2000 was
$182,247. Minority interest in net income was created as a result of the merger
of Westech and Tejas Securities.
Liquidity and Capital Resources
Tejas Securities utilizes the receivable balance from its clearing broker,
Schroder & Co., to fund operating and investing activities. The receivable
balance represents the residual equity due to Tejas Securities from Schroder &
Co. if Tejas Securities liquidated all of its investment security holdings. The
receivable balance from the clearing broker is also used to secure temporary
financing from Schroder & Co. for the purchase of investments in Tejas
Securities' trading accounts. The receivable balance held at Schroder & Co. may
fluctuate depending on factors such as the market valuation of securities held
in Tejas Securities' trading accounts, realized trading profits, commission
revenue, cash withdrawals and clearing costs charged to Tejas Securities for
conducting its trading activities. The overall growth in the receivable from
clearing broker balance resulted from the increase in commission revenue during
the three months ended March 31, 2000.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Tejas Securities' principal business activities are, by their nature, risky
and volatile and are directly affected by economic and political conditions and
broad trends in business and finance in the national and international markets.
Any one of these factors may cause a substantial decline in the securities
markets, which could materially affect Tejas Securities' business. Managing risk
is critical to Tejas Securities' profitability and to reducing the likelihood of
earnings volatility. The major types of risk that Tejas Securities faces include
credit risk, operating risk and market risk.
Credit risk is the potential for loss due to a customer or counterparty failing
to perform its contractual obligation. Tejas Securities clears its securities
transactions through a clearing broker. Under the terms of the clearing
agreement, the clearing broker has the right to charge Tejas Securities for its
losses that result from its customers' failure to fulfill their contractual
obligations. In order to mitigate risk, Tejas Securities' policy is to monitor
the credit standing of its customers and maintain collateral to support customer
margin balances. Further, significant portions of Tejas Securities' assets are
held at its clearing broker, Schroder & Co. Therefore, Tejas Securities could
incur substantial losses if its clearing broker were to become insolvent or
otherwise unable to meet its financial obligations. Schroder & Co. has in excess
of $250 million in capital and has historically met all of its obligations to
Tejas Securities.
Operating risk arises from the daily conduct of the Tejas Securities' business
and relates to the potential for deficiencies in control processes and systems,
mismanagement of the Company's activities or mismanagement of customer accounts
by its employees. Tejas Securities relies heavily on computer and communication
systems in order to conduct its brokerage activities. Third party vendors, such
as the clearing broker and news and quote providers, provide many of the systems
critical to Tejas Securities' business. Tejas Securities' business could be
adversely impacted if any of these systems were disrupted. Tejas Securities
mitigates the risk associated with systems by hiring experienced personnel, and
providing employees with alternate means of acquiring or processing information.
In order to mitigate the risk associated with mismanagement of Westech's
activities or customer accounts, Tejas Securities utilizes compliance and
operations personnel to review the activities of administrative and sales
personnel. In addition, the activities of management are actively reviewed by
other members of management on a regular basis and by the Board of Directors.
Tejas Securities' primary market risk exposure is to market price changes and
the resulting risk of loss that may occur from the potential change in the value
of a financial instrument as a result of price volatility or changes in
liquidity for which Tejas Securities has no control. Securities owned by Tejas
Securities are either related to daily trading activity or Tejas Securities'
principal investing activities. Market price risk related to trading securities
is managed primarily through the daily monitoring of funds committed to the
various types of securities owned by Tejas Securities and by limiting exposure
to any one investment or type of investment.
10
<PAGE> 12
Tejas Securities' trading securities were $7,563,189 in long positions and
$471,407 in short positions at March 31, 2000. These trading securities may be
exchange listed, Nasdaq or other over-the-counter securities on both long and
short positions. Historically, Tejas Securities has invested a portion of its
assets in high yield securities of distressed companies, which are closely
monitored by Tejas Securities' research analysts. Valuation of high yield
securities may be based upon factors other than those experienced by the overall
equity and debt markets. The potential loss in fair value of Tejas Securities'
trading securities, using a hypothetical 10% decline in prices, is estimated to
be $803,460 as of March 31, 2000. A 10% hypothetical decline was used to
represent a significant and plausible market change.
Tejas Securities' investment securities are typically those reported on by Tejas
Securities' research analysts. These positions often consist of high-yield debt
securities and the related equity securities, and other equity positions of
telecommunication and technology related companies. Westech monitors this risk
by maintaining current operating and financial data on the companies involved,
and projecting future valuations based upon the occurrence of critical future
events.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There have been no material changes to the claims or legal actions in which
Westech is involved since December 31, 1999. Additionally, there are no other
liabilities arising from claims or legal actions that management believes would
have a significant adverse effect on the consolidated financial condition or
results of operations of Westech.
ITEM 6. EXHIBITS AND REPORTS ON 8-K
a) Exhibits
Exhibit list
b) Current reports on Form 8-K
None
11
<PAGE> 13
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, The Company
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Westech Capital Corp.
Date: May 15, 2000
/s/ JAY VAN ERT
------------------------------------
Jay Van Ert
President
/s/ KURT RECHNER
------------------------------------
Kurt Rechner
Chief Financial Officer
/s/ JOHN GARBER
------------------------------------
John Garber
Director of Finance (Principal
Accounting Officer)
12
<PAGE> 14
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
-------- -----------------------
2.1 Agreement and Plan of Merger (Incorporated herein by
reference to Exhibit 1.1 to the registrant's Current
Report on Form 8-K/A filed on October 22, 1999)
3.1 Certificate of Incorporation (Incorporated herein by
reference to Exhibit 3.1 to the registrant's Registration
Statement on Form 10-12(g) (File No. 000-29235))
3.2 Bylaws (Incorporated herein by reference to Exhibit 3.2 to
the registrant's Registration Statement on Form 10-12(g)
(File No. 000-29235))
4.1 NASD Subordinated Loan Agreement, Form SL-1, dated October
13, 1998, between Clark N. Wilson and the Company
(Incorporated herein by reference to Exhibit 4.1 to the
registrant's Registration Statement on Form 10-12(g) (File
No. 000-29235))
4.2 NASD Subordinated Loan Agreement, Form SL-1, dated June 4,
1999, between Clark N. Wilson and the Company
(Incorporated herein by reference to Exhibit 4.2 to the
registrant's Registration Statement on Form 10-12(g) (File
No. 000-29235))
4.3 Shareholder Agreement, dated November 23, 1999, between
John Ohmstede, John Glade, Michael Hidalgo, Jon McDonald,
Britt Rodgers, Bob Sternberg, Mike Wolf, Greg Woodby and
the Company (Incorporated herein by reference to Exhibit
4.3 to the registrant's Registration Statement on Form
10-12(g) (File No. 000-29235))
4.4 Certificate of Incorporation (Incorporated herein by
reference to Exhibit 3.1 above)
4.5 Bylaws (Incorporated herein by reference to Exhibit 3.2
above)
10.1 Agreement, dated June 5, 1997, with Schroder Wertheim &
Co. Incorporated (Incorporated herein by reference to
Exhibit 10.1 to the registrant's Registration Statement on
Form 10-12(g) (File No. 000-29235))
10.2 Westech Capital Corp. 1999 Stock Option Plan (Incorporated
herein by reference to Exhibit 10.2 to the registrant's
Registration Statement on Form 10-12(g) (File No.
000-29235))
10.3 Form of Incentive Stock Option Agreement (Incorporated
herein by reference to Exhibit 10.3 to the registrant's
Registration Statement on Form 10-12(g) (File No.
000-29235))
10.4 Form of Nonqualified Stock Option Agreement (Incorporated
herein by reference to Exhibit 10.4 to the registrant's
Registration Statement on Form 10-12(g) (File No.
000-29235))
10.5 Lease Agreement, effective as of September 30, 1999, by
and between Westech Capital Corp. and Desta Two
Partnership, Ltd. (Incorporated herein by reference to
Exhibit 10.5 to the registrant's Registration Statement on
Form 10-12(g) (File No. 000-29235))
10.6 Employment and Confidentiality Agreement, dated as of
August 30, 1999, between Tejas Securities Group, Inc. and
Charles Mayer (Incorporated herein by reference to Exhibit
10.6 to the registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1999)
10.7 Employment and Confidentiality Agreement, dated as of
November 16, 1999, between Tejas Securities Group, Inc.
and Michael L. McAllister (Incorporated herein by
reference to Exhibit 10.7 to the registrant's Annual
Report on Form 10-K for the fiscal year ended December 31,
1999)
10.8 Employment and Confidentiality Agreement, dated as of
March 3, 1999, between Tejas Securities Group, Inc. and
Robert Gillette (Incorporated herein by reference to
Exhibit 10.8 to the registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1999)
10.9 Employment and Confidentiality Agreement, dated as of
October 29, 1998, between Tejas Securities Group, Inc. and
Reed Durant (Incorporated herein by reference to Exhibit
10.9 to the registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1999)
10.10 Employment and Confidentiality Agreement, dated as of
January 10, 2000, between Tejas Securities Group, Inc. and
Kurt Rechner (Incorporated herein by reference to Exhibit
10.10 to the registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1999)
10.11 Employment and Confidentiality Agreement, dated as of
November 1, 1998, between Tejas Securities Group, Inc. and
John F. Garber (Incorporated herein by reference to
Exhibit 10.11 to the registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1999)
10.12 Letter of Agreement, dated November 1, 1999, between Tejas
Securities Group, Inc. and Barry Williamson regarding
consulting services (Incorporated herein by reference to
Exhibit 10.12 to the registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1999)
27.1* Financial Data Schedule
13
<PAGE> 15
99.1 Articles of Incorporation of Tejas Securities Group, Inc.
(Incorporated herein by reference to Exhibit 99.1 to the
registrant's Registration Statement on Form 10-12(g) (File
No. 000-29235))
99.2 Bylaws of Tejas Securities Group, Inc. (Incorporated
herein by reference to Exhibit 99.2 to the registrant's
Registration Statement on Form 10-12(g) (File No.
000-29235))
99.3 Articles of Incorporation of Tejas Securities Group
Holding Company (Incorporated herein by reference to
Exhibit 99.3 to the registrant's Registration Statement on
Form 10-12(g) (File No. 000-29235))
99.4 Bylaws of Tejas Securities Group Holding Company
(Incorporated herein by reference to Exhibit 99.4 to the
registrant's Registration Statement on Form 10-12(g) (File
No. 000-29235))
* Filed herewith.
<TABLE> <S> <C>
<ARTICLE> BD
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 1,123,413
<RECEIVABLES> 6,478,162
<SECURITIES-RESALE> 7,563,189
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 0
<PP&E> 333,392
<TOTAL-ASSETS> 17,522,282
<SHORT-TERM> 0
<PAYABLES> 5,759,808
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 0
<LONG-TERM> 1,000,000
0
0
<COMMON> 12,537
<OTHER-SE> 1,669,473
<TOTAL-LIABILITY-AND-EQUITY> 17,522,282
<TRADING-REVENUE> 70,390
<INTEREST-DIVIDENDS> 0
<COMMISSIONS> 8,516,778
<INVESTMENT-BANKING-REVENUES> 1,071,165
<FEE-REVENUE> 0
<INTEREST-EXPENSE> 0
<COMPENSATION> 6,311,019
<INCOME-PRETAX> 1,373,372
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 658,325
<EPS-BASIC> 0.05
<EPS-DILUTED> 0.04
</TABLE>
