U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
X Quarterly report pursuant to Section 13 or 15(d) of the Securities Act of
- --- 1934
For the quarterly period ended March 31, 1998
Transition report pursuant to Section 13 or 15(d) of the Securities
- --- Exchange Act of 1934
For the transition period from ______________________ to ______________________
Commission File number 0-25336
KIRLIN HOLDING CORP.
--------------------------
(Exact Name of Small Business Issuer as Specified in its Charter)
Delaware 11-3229358
- -------------------------------- ------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
6901 Jericho Turnpike, Syosset, New York 11791
----------------------------------------------
(Address of Principal Executive Offices)
(800) 899-9400
-----------------------------------------------
(Issuer's Telephone Number Including Area Code)
----------------------------------------------------------------------------
Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report
Check whether the issuer: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act 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 __.
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: At May 7, 1998, Issuer had
outstanding 2,802,764 shares of Common Stock, par value $.0001 per share.
<PAGE>
PART 1: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
KIRLIN HOLDING CORP. and SUBSIDIARY
Consolidated Statements of Financial Condition
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
ASSETS: -------------- ------------
(Unaudited)
<S> <C> <C>
Cash $ 223,353 $ 316,219
Securities Owned, at market value:
U.S. government and agency obligations 3,324,946 2,949,723
State and municipal obligations 2,223,794 1,618,284
Corporate bonds and other securities 9,744,239 10,063,391
Furniture, Fixtures and Leasehold Improvements, at cost, net of
accumulated depreciation of $781,035 and $713,626 for
March 31, 1998 and December 31, 1997, respectively 794,327 836,832
Other Assets 948,918 1,109,559
----------------- -------------
Total assets $ 17,259,577 $ 16,894,008
================= =============
LIABILITIES and STOCKHOLDERS' EQUITY:
Liabilities:
Securities sold, not yet purchased, at market value $ 1,836,787 $ 1,599,279
Payable to clearing broker 2,557,058 2,828,519
Accrued compensation 1,289,350 2,194,143
Accounts payable and accrued expenses 525,741 509,649
Deferred taxes payable 1,501,304 1,197,696
----------------- -------------
Total liabilities 7,710,240 8,329,286
----------------- -------------
Commitments
Stockholders' Equity (Note 2):
Common stock, $.0001 par value; authorized 15,000,000 shares,
issued and outstanding 2,802,764 and 2,720,264 shares, respectively 280 272
Additional paid-in capital 6,354,187 5,869,508
Retained earnings 3,194,870 2,694,942
----------------- -------------
Total stockholders' equity 9,549,337 8,564,722
----------------- -------------
Total liabilities and stockholders' equity $ 17,259,577 $ 16,894,008
================= =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE>
KIRLIN HOLDING CORP. and SUBSIDIARY
Consolidated Statements of Income
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------
1998 1997
------------ ---------
(Unaudited)
<S> <C> <C>
Revenues:
Principal transactions, net $ 3,501,833 $ 4,126,860
Commissions 1,475,940 1,070,673
Other income 110,737 107,071
-------------- --------------
5,088,510 5,304,604
-------------- --------------
Expenses:
Employee compensation and benefits 3,198,452 3,713,075
Promotion and advertising 74,733 47,071
Clearance and execution charges 205,614 243,120
Occupancy and communications 379,492 388,018
Professional fees 98,372 54,224
Interest 85,400 63,646
Other 140,239 133,494
------------- --------------
4,182,302 4,642,648
-------------- --------------
Income before provision for income taxes 906,208 661,956
Provision for income taxes (Note 3) 406,280 295,427
-------------- --------------
Net income $ 499,928 $ 366,529
============== ==============
Basic earnings per common share (Note 4) $ 0.18 $ 0.14
============== ==============
Diluted earnings per common share (Note 4) $ 0.18 $ 0.13
============== ==============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
KIRLIN HOLDING CORP. and SUBSIDIARY
Consolidated Statement of Changes in Stockholders' Equity
For the three months ended March 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Common Stock
----------------------------- Additional Retained
Shares Par Value Capital Earnings Total
------------- ------------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Stockholders' equity,
January 1, 1998 2,720,264 $ 272 $ 5,869,508 $ 2,694,942 $ 8,564,722
Issuance of common stock 82,500 8 484,679 484,687
Net income 499,928 499,928
---------- ------------ ----------- ------------ -------------
Stockholders' equity,
March 31, 1998 2,802,764 $ 280 $ 6,354,187 $ 3,194,870 $ 9,549,337
========== ============== =========== ============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
KIRLIN HOLDING CORP. and SUBSIDIARY
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------------
1998 1997
------------- -------------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 499,928 $ 366,529
----------------- -----------------
Adjustments to reconcile net income to net cash used in operating
activities:
Depreciation and amortization 67,409 44,223
Deferred income taxes 303,608 (165,063)
(Increase) decrease in securities owned, at market value (661,581) 4,101,087
Decrease in other assets 160,641 22,958
Increase in securities sold, not yet purchased, at market value 237,508 518,094
(Decrease) in payable to clearing broker (271,461) (4,397,760)
(Decrease) increase in accrued compensation (904,793) 96,892
Increase (decrease) in accounts payable, taxes payable
and accrued expenses 16,092 (122,060)
----------------- -----------------
Total adjustments (1,052,577) 98,371
----------------- -----------------
Net cash provided by operating activities (552,649) 464,900
----------------- -----------------
Cash flows from investing activities:
Purchase of furniture, fixtures and leasehold improvements (24,904) (59,613)
----------------- -----------------
Net cash used in investing activities (24,904) (59,613)
----------------- -----------------
Cash flows from financing activities:
Issuance of common stock 484,687
----------------- -----------------
Net cash provided by financing activities 484,687
----------------- -----------------
Net (decrease) increase in cash (92,866) 405,287
Cash and cash equivalents, beginning of period 316,219 75,304
----------------- -----------------
Cash, end of period $ 223,353 $ 480,591
================= =================
Supplemental information:
Interest paid $ 85,400 $ 63,646
Income taxes paid $ 37,599 $ 448,320
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
KIRLIN HOLDING CORP. and SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited)
1. Organization and Summary of Significant Accounting Policies
The consolidated financial statements include the accounts of Kirlin
Holding Corp. and its wholly owned subsidiary, Kirlin Securities, Inc.
(collectively the "Company"). The Company, through Kirlin Securities,
Inc. ("Kirlin"), is a full-service, retail-oriented brokerage firm
specializing in the trading and sale of fixed income securities,
including collateralized mortgage obligations, corporate and municipal
bonds, and government and government agency securities and, to a lesser
extent, mutual funds and equity securities. Primarily all activity of
the Company has been through Kirlin. All material intercompany
transactions and balances have been eliminated in consolidation. Kirlin
has offices in New York, New Jersey and California.
The accompanying consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB.
Accordingly, they do not include all of the information and footnotes
as required by generally accepted accounting principles for annual
financial statements. In the opinion of management of the Company, all
adjustments (consisting only of normal recurring adjustments) necessary
in order to make the financial statements not misleading have been
included. The operations for the three-month period ended March 31,
1998 are not necessarily indicative of the results that may be expected
for the full year ending December 31, 1998. For further information,
refer to the consolidated financial statements and footnotes thereto
included in the Company's Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1997.
2. Stockholders' Equity
On January 5, 1998, the Company's Board of Directors authorized the
issuance of 82,500 shares of common stock (valued at the closing price
on that date) to officers of the Company in connection with their
bonuses related to the year ended December 31, 1997. Following this
action, the Company had 2,802,764 shares of Common Stock outstanding.
3. Income Taxes
The Company files consolidated federal income tax returns and separate
Company state income tax returns. The provision for income taxes
differs from the amount of income taxes determined by applying the
federal statutory rates principally because of the effect of state
taxes.
4. Earnings Per Share
Net income per common share is calculated by dividing net income by the
weighted average number of shares of common stock outstanding. The
following is a reconciliation of the numerators and denominators of the
basic and diluted earnings per share computations:
6
<PAGE>
KIRLIN HOLDING CORP. and SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited)
<TABLE>
<CAPTION>
Income Shares Per-Share
(Numerator) (Denominator) Amount
-------------- ---------------- ------------
<S> <C> <C> <C>
Three months ended March 31, 1998:
Basic EPS:
Income available to
common stockholders $ 499,928 2,799,098 $ 0.18
Effect of Dilutive
Securities - options 45,258
------------- -------------- --------------
Diluted EPS:
Income available to common
stockholders and assumed
exercise $ 499,928 2,844,356 $ 0.18
-------------- -------------- --------------
Three months ended March 31, 1997:
Basic EPS:
Income available to
common stockholders $ 366,529 2,604,660 $ 0.14
Effect of Dilutive
Securities - options 328,958
Diluted EPS:
Income available to common
stockholders and assumed
exercise $ 366,529 2,933,618 $ 0.13
------------- --------------- --------------
</TABLE>
In 1997, the Company adopted SFAS No. 128, "Earnings per Share." Accordingly,
the above amounts for 1997 have been restated.
7
<PAGE>
KIRLIN HOLDING CORP. and SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Forward-Looking Statements
When used in this Form 10-QSB and in future filings by the Company with
the Commission, the words or phrases "will likely result," "management expects"
or "the Company expects," "will continue," "is anticipated," "estimated" or
similar expressions are intended to identify "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. Readers are
cautioned not to place undue reliance on any such forward-looking statements,
each of which speak only as of the date made. Such statements are subject to
certain risks and uncertainties that could cause actual results to differ
materially from historical earnings and those presently anticipated or
projected. The Company has no obligation to publicly release the result of any
revisions which may be made to any forward-looking statements to reflect
anticipated or unanticipated events or circumstances occurring after the date of
such statements.
Results of Operations
Three Months Ended March 31, 1998 compared with Three Months Ended
March 31, 1997
Total revenues for the three-month period ended March 31, 1998
decreased 4.1% to $5,088,510 from $5,304,604 in the comparable period in 1997.
This decrease is primarily attributable to a reduction in the number of
registered representatives employed by the Company as a result of the
termination of those registered representatives not achieving and maintaining a
specific level of performance.
Employee compensation and benefits for the three-month period ended
March 31, 1998 decreased 13.9% to $3,198,452 from $3,713,075 in the comparable
period in 1997. This decrease is primarily due to the closing of a branch office
during the first quarter of 1997 and the reduction of registered representatives
referred to above.
Promotion and advertising for the three-month period ended March 31,
1998 increased 58.8% to $74,733 from $47,071 in the comparable period in 1997
primarily as a result of the Company's planned increase in advertising
expenditures to attract new customers.
Clearance and execution charges in the three-month period ended March
31, 1998 decreased 15.4% to $205,614 from $243,120 in the comparable period in
1997 as a result of lower ticket volume.
Occupancy and communications costs in the three-month periods ended
March 31, 1998 and 1997 were comparable.
Professional fees in the three-month period ended March 31, 1998
increased 81.4% to $98,372 from $54,224 in the comparable period in 1997 as a
result of an increase in external consultation with outside professionals
related to litigation commenced by the Company.
Interest expense in the three-month period ended March 31, 1998
increased 34.2% to $85,400 from $63,646 in the comparable period in 1997 as a
result of inventory positions purchased on margin and securities sold short,
which are held at the clearing broker and charged interest. The Company seeks to
minimize its cash balances and withdraws cash for operations from its trading
accounts as needed. To the extent necessary, inventory positions are utilized as
collateral for such withdrawals.
Income tax provision for the three-month period ended March 31, 1998
was $406,280 as compared to $295,427 in the comparable period in 1997, which is
consistent with the increase in income before this income tax provision.
8
<PAGE>
Net income of $499,928 in the three month-period ended March 31, 1998
compares to net income of $366,529 for the three-month period in 1997 primarily
as a result of the Company's ability to reduce its operating expenses,
particularly related to compensation and benefits.
Liquidity and Capital Resources
Securities owned, at market value, at March 31, 1998 were $15,292,979
as compared to $14,631,398 at December 31, 1997. This 4.5% increase is primarily
attributable to an increase in the value of positions held in relation to the
Company's merchant banking activities. To a significant extent, the Company's
inventory requirement for securities is market driven, with a more active market
and greater sales generally necessitating higher inventory levels. Approximately
63% of the Company's assets at March 31, 1998 were comprised of cash and highly
liquid securities.
Furniture, fixtures and leasehold improvements, net, at March 31, 1998,
decreased to $794,327 as compared to $836,832 at December 31, 1997. This 5.1%
decrease results from the depreciation of the Company's furniture, fixtures and
leasehold improvements.
Other assets decreased to $948,918 at March 31, 1998, from $1,109,559
at December 31, 1997, a 14.5% decrease. This decrease is primarily attributable
to the repayment of advances by registered representatives, repayment of a loan
related to one of the Company's investment undertakings, the reduction of
prepaid operating expenses, and an adjustment for income taxes related to the
current period's earnings.
Securities sold short amounted to $1,836,787 at March 31, 1998 as
compared to $1,599,279 at December 31, 1997. Management monitors these positions
on a daily basis and covers short positions when deemed appropriate. A portion
of the short position at March 31, 1998 was covered during the subsequent month.
Payable to clearing broker amounted to $2,557,058 at March 31, 1998 as
compared to $2,828,519 at December 31, 1997. This 9.6% decrease is a result of
decreased inventory purchases on margin.
Accrued compensation was $1,289,350 at March 31, 1998 as compared to
$2,194,143 at December 31, 1997, a 41.2% decrease attributable to the payment of
bonuses in the first quarter of 1998, which were accrued at December 31, 1997.
Accounts payable and accrued expenses at March 31, 1998 and December
31, 1997 were comparable.
Deferred Income Taxes Payable were $1,501,304 at March 31, 1998 as
compared to $1,197,696 at December 31, 1997. This increase is reflective of the
adjustment for deferred income taxes payable resulting from unrealized
appreciation on securities positions.
The Company, as guarantor of its customer accounts to its clearing
broker, is exposed to off- balance-sheet risk in the event that its customers do
not fulfill their obligations with the clearing broker. In addition, to the
extent the Company maintains a short position in certain securities, it is
exposed to further off-balance-sheet market risk, since the Company's ultimate
obligation may exceed the amount recognized in the financial statements.
The Company believes its financial resources will be sufficient to fund
the Company's operations and capital requirements for the foreseeable future.
9
<PAGE>
PART II: OTHER INFORMATION
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.7 Agreement, dated April 27, 1998, between the Registrant and
Robert A. Paduano
27.1 Financial Data Schedule (3/31/98)
27.2 Restated Financial Data Schedule (3/31/97)
(b) Reports on Form 8-K
None
10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Kirlin Holding Corp.
------------------------
(Registrant)
Dated: May 7, 1998 By: /s/ Anthony J. Kirincic
-----------------------------
Anthony J. Kirincic
President and Chief Financial Officer
11
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
10.7 Agreement, dated April 27, 1998, between the Registrant and
Robert A. Paduano
27.1 Financial Data Schedule (3/31/98)
27.2 Restated Financial Data Schedule (3/31/97)
12
<PAGE>
EXHIBIT 10.7
AGREEMENT
AGREEMENT, dated as of April 27, 1998, between Kirlin Securities, Inc.
("Kirlin"), Kirlin Holding Corp. ("Holding;" and together with Kirlin,
"Company"), each a Delaware corporation with principal offices at 6901 Jericho
Turnpike, Syosset, New York 11791, and Robert A. Paduano, residing at 207-03
Estates Drive, Bayside, New York 11360.
WHEREAS, Paduano has been employed by Kirlin and serves as a Director and
Executive Vice President of Kirlin, and as a Director and Executive Vice
President and Secretary of Holding, and the parties hereto now mutually desire
to provide for the termination of Paduano's employment by Kirlin and otherwise
make provision with respect to certain other matters;
NOW, THEREFORE, In consideration of the mutual promises herein contained,
the parties hereto agree as follows:
1. Paduano hereby resigns as a Director and as an officer of both Holding
and Kirlin, effective April 30, 1998.
2. Paduano's employment by Kirlin shall terminate effective May 15, 1998
("Termination Date"), which date shall be reflected on Form U-5. Paduano's
employment subsequent to April 30, 1998, shall be solely as a registered
representative servicing the accounts of Kirlin's customers for which he is the
designated account representative ("Paduano Accounts") and he shall have no
further managerial, supervisory or recruiting responsibilities or duties. By
April 30, 1998, Paduano shall vacate his office in Syosset, New York and his
reserved parking space at that location shall be rescinded. Paduano's continued
employment through the Termination Date shall be performed exclusively in
Kirlin's New Jersey branch office.
3. Paduano's compensation from May 1, 1998 through the Termination Date
shall consist solely of a 55% payout on commissions earned with respect to the
Paduano Accounts. Subsequent to April 30, 1998, Paduano shall not receive any
further salary, car allowance, expense reimbursement or allocation of
underwriter warrants.
4. As consideration for Paduano's agreement to the provisions of paragraphs
5 through 8 below, Kirlin agrees to pay severance to Paduano equal to $300,000,
payable in fifteen equal monthly installments of $20,000 each commencing on the
Termination Date.
5. Paduano agrees that during the time of his continued employment by
Kirlin and thereafter he shall take no action or make any statement or comment
that directly or indirectly disparages the reputation of Kirlin or Holding or
any of their directors, officers, employees or businesses. The Company agrees
that it shall take no action or make any statement or comment that directly or
indirectly disparages the reputation of Paduano.
6. Paduano acknowledges that he has had access to trade secrets of Kirlin
including, but not limited to, secret proprietary information used to identify
clients, actual customer leads, customer lists, information concerning customers
and other Kirlin employees, and other information pertaining to Kirlin's and
Holding's operations which is valuable proprietary information that Kirlin or
Holding, as the case may be, has acquired at great expense and has been imparted
to Paduano on a confidential basis. Paduano agrees that all such information and
related records shall remain the sole and exclusive property of Kirlin or
Holding, as the case may be, at all times and shall be treated as confidential
<PAGE>
information by Paduano. No such records, including, but not limited to,
Paduano's copies of employee directories, new account documents, account
statements, confirmations and holding sheets of any Kirlin customer, shall be
removed by Paduano from the premises of the Company except with the express
permission of the Chairman or President of Kirlin. On the Termination Date or
earlier if requested by the Chairman or President of Kirlin, Paduano shall
surrender all original records and purge or destroy all computerized, duplicated
or otherwise copied records, regardless of whether made by Paduano or others.
Notwithstanding the foregoing, it is agreed by Kirlin that Paduano may retain
duplicate copies of information pertaining to the Paduano Accounts that transfer
to another firm with whom Paduano is registered and Paduano may use information
pertaining to such transfer accounts at such firm.
7. Paduano agrees that all ideas, marketing concepts, slogans, advertising
campaigns, characters, proposals and plans invented or developed by him which
relate directly or indirectly to the business of Kirlin or arose out of his
employment by Kirlin or the use of Kirlin's property or resources, including,
without limitation, any ideas, proposals, or plans which may be copyrighted,
trademarked, patented or otherwise protected (collectively "Intellectual
Property") are and shall be the sole and exclusive property of Kirlin. Paduano
understands and agrees that all such Intellectual Property constitutes a "work
for hire." In the event any such Intellectual Property is not regarded as a
"work for hire," Paduano hereby assigns to Kirlin the sole and exclusive right
to such Intellectual Property. Paduano agrees that upon the request of Kirlin he
shall deliver any and all documents and instruments and take any other action
which Kirlin shall deem necessary to assign to Kirlin all right, title and
interest in such Intellectual Property, to perfect, trademark, copyright and
patent protection with respect thereto, or to otherwise protect Kirlin's trade
secrets and proprietary interest in such Intellectual Property.
8. During the time of his continued employment by Kirlin and for two years
thereafter, Paduano shall not directly or indirectly solicit the business of any
customers of Kirlin other than customers for the Paduano Accounts. In addition,
during the time of his continued employment by Kirlin and for two years
thereafter, Paduano shall not solicit or influence any employee now or hereafter
employed by Kirlin to work in any way for Paduano or for any business enterprise
in which Paduano is participating, whether as an employee, consultant, advisor,
agent, owner, partner, co-venture, principal, stockholder, director or
otherwise, directly or indirectly.
9. Paduano acknowledges that the provisions of paragraphs 5 through 8 are
reasonable and necessary for the protection of the business of Holding and
Kirlin. Paduano agrees that if he commits a breach, or threatens to commit a
breach, of the provisions of paragraphs 5 through 8, Holding and/or Kirlin, as
the case may be, shall have the right and remedy: (i) to have the provisions of
paragraphs 5 through 8 specifically enforced by any court having equity
jurisdiction, it being acknowledged and agreed by Paduano that any breach or
threatened breach will cause irreparable injury to Holding and/or Kirlin and
that money damages will not provide an adequate remedy to same; (ii) require
Paduano to account for and pay to Holding and/or Kirlin, as the case may be, all
compensation, profits, monies, accruals, increments, or other benefits
(collectively "Benefits") derived or received by Paduano as a result of any
breach or threatened breach of any of paragraphs 5 through 8 and Paduano hereby
agrees to account for any such Benefits to Holding and/or Kirlin, as the case
may be; and (iii) Kirlin may discontinue all severance payments that remain
unpaid.
Each of the rights and remedies enumerated in this paragraph 9 shall be
independent of the other and shall be separately enforceable, and such rights
2
<PAGE>
and remedies shall be an addition to, and not in lieu of, any other rights or
remedies available to Holding and/or Company at law or in equity.
10. Paduano does hereby release and forever discharge Holding and Kirlin
and each of their respective successors and assigns, officers, directors,
employees and agents, and each of their respective heirs, executors,
administrators, successors and assigns (hereinafter referenced to as RELEASEES),
from, all actions, causes of action, suits, debts, dues, sums of money,
accounts, reckonings, bonds, bills, specialties, covenants, contracts,
controversies, agreements, promises, variances, trespasses, damages, judgements,
extents, executions, claims, and demands of any kind whatsoever, in law,
admiralty or equity, which against the RELEASEES, Paduano and Paduano's heirs,
executors, administrators, successors and assigns ever had, now have or
hereafter can, shall or may have for, upon, or by reason of any matter, cause or
thing whatsoever from the beginning of the world to the day of the date of this
Agreement, except for matters arising out of a breach of the obligations under
this Agreement.
11. If any provision of this Agreement shall be held invalid and
unenforceable, the remainder of this Agreement shall remain in full force and
effect. If any provision is held invalid or unenforceable with respect to
particular circumstances, it shall remain in full force and effect and all other
circumstances.
12. This Agreement supersedes and replaces any and all other agreements,
written or oral, with respect to subject matter hereof including all other
compensation arrangements that may have existed between Holding and/or Kirlin
and Paduano. This Agreement contains the entire agreement for the parties hereto
and may not be amended except by an agreement in writing signed by the each of
the parties hereto.
13. Any dispute arising out of the interpretation, application or
performance of the Agreement, with the sole exception of a claim by Holding
and/or the Company arising under paragraphs 5 through 9 shall be settled through
final and binding arbitration before a single arbitrator in accordance with the
rules of the National Association of Securities Dealers, Inc. Any judgment upon
any such arbitration award may be entered in any court having competent
jurisdiction over the parties. Any party prevailing in an arbitration or court
proceeding to enforce its rights hereunder shall be entitled to its reasonable
attorney's fees and expenses as deemed appropriate by the arbitrator or court.
14. This Agreement shall be governed by and construed in accordance with
the internal law of the State of New York without regard to principles or
conflicts of laws.
15. This Agreement shall be binding upon and inure to the benefit of
Holding and Kirlin and their respective successors and assigns, and Paduano and
his heirs, executors and administrators.
16. Paduano acknowledges and understands that Graubard Mollen & Miller has
acted solely as counsel for the Company in connection with this Agreement.
17. This Agreement may be signed in counterparts, each of which shall be
deemed an original but which taken together shall constitute one and the same
Agreement.
3
<PAGE>
IN WITNESS THEREOF, the parties hereto have duly executed this Agreement as
the date and year first above written.
KIRLIN SECURITIES, INC.
By:_______________________
David Lindner, Chairman
KIRLIN HOLDING CORP.
By:________________________
David Lindner, Chairman
___________________________
Robert Paduano
4
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 223,353
<SECURITIES> 15,292,979
<RECEIVABLES> 948,918
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 16,465,250
<PP&E> 1,575,362
<DEPRECIATION> (781,035)
<TOTAL-ASSETS> 17,259,577
<CURRENT-LIABILITIES> 7,710,240
<BONDS> 0
<COMMON> 280
0
0
<OTHER-SE> 9,549,057
<TOTAL-LIABILITY-AND-EQUITY> 17,259,577
<SALES> 5,088,510
<TOTAL-REVENUES> 5,088,510
<CGS> 3,478,799
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