x
|
ANNUAL
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31,
2009
|
Florida
|
56-3627212
|
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
|
incorporation
or organization)
|
Identification
No.)
|
Title of Each Class
|
Name of Each Exchange on Which
Registered
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Common
Stock, $.01 Par Value
|
NYSE
Amex
|
Page
|
|||
PART
I
|
|||
Item
1
|
Description
of Business
|
4
|
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Item
1A
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Risk
Factors
|
10
|
|
Item
1B
|
Unresolved
Staff Comments
|
16
|
|
Item
2
|
Description
of Property
|
17
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Item
3
|
Legal
Proceedings
|
17
|
|
Item
4
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[REMOVED
AND RESERVED]
|
17
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|
PART
II
|
|||
Item
5
|
Market
for Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
|
18
|
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Item
6
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Selected
Financial Data
|
19
|
|
Item
7
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Management's
Discussion and Analysis of Financial Condition and Results of
Operation
|
19
|
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Item
7A
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Quantitative
and Qualitative Disclosure about Market Risk
|
32
|
|
Item
8
|
Financial
Statements
|
32
|
|
Item
9
|
Changes
in and Disagreements With Accountants on Accounting and Financial
Disclosure
|
33
|
|
Item
9A(T)
|
Controls
and Procedures
|
33
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|
Item
9B
|
Other
Information
|
34
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|
Part
III
|
|||
Item
10
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Directors,
Executive Officers, Promoters, Control Persons and Corporate Governance;
Compliance With Section 16(a) of the Exchange Act
|
35
|
|
Item
11
|
Executive
Compensation
|
38
|
|
Item
12
|
Security
Ownership of Certain Beneficial Owners, Management and Related Stockholder
Matters
|
41
|
|
Item
13
|
Certain
Relationships, Related Transactions and Director
Independence
|
44
|
|
Item
14
|
Principal
Accountant Fees and Services
|
44
|
|
Part
IV
|
|||
Item
15
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Exhibits
|
46
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|
·
|
MARKET
DATA AND FINANCIAL INFORMATION. The Company continually receives a direct
line, or feed, of detailed quote data, market information and news. The
Company’s retail customers can create their own personal watch list of
stocks and options for quick access to current pricing information. The
Company provides customers with access to various real-time quotes
services.
|
|
·
|
PORTFOLIO
TRACKING AND RECORDS MANAGEMENT. Customers have online access to a listing
of all their portfolio assets held with the Company, cost basis (if
purchased through the Company), current price and current market value.
The system offers the ability to transfer data to popular software
programs such as Microsoft Money and Quicken to allow the customers to
calculate unrealized profits and losses for each asset held in addition to
the many other features these programs may offer. Online account holders
may elect to receive electronic confirmations and detailed monthly
statements. All clients receive printed confirmations and statements
unless they elect to receive confirmations and statements electronically.
The Company’s clearing firms provide for the transmittal of proxy, annual
report and tender offer materials to
customers.
|
|
·
|
CASH
MANAGEMENT SERVICES. Customer dividends, interest, sales proceeds and
deposits are credited to customer accounts. The Company also provides cash
management services to its customers. For example, funds not invested in
securities earn interest in a credit interest program or can be invested
in money market funds. In addition, the Company provides checking services
and debit cards for its customer accounts through a commercial
bank.
|
|
·
|
ACCOUNT
SECURITY. The Company uses a combination of proprietary and industry
standard security measures to protect customers' assets. Customers are
assigned unique account numbers, user identifications and passwords that
must be used each time they log on to the system. The Company relies on
encryption and authentication technology to provide the security necessary
to effect the confidential exchange of information. The Company does not
plan to share customer data with third
parties.
|
|
·
|
Investment
portfolio planning with recommendations on asset allocations on customers’
risk tolerances and long term
needs;
|
|
·
|
Recommendations
and separate account management and mutual fund research and due
diligence;
|
|
·
|
Portfolio
performance review and reallocation;
and
|
|
·
|
All-inclusive
wrap accounts for registered investment
advisors
|
|
·
|
THE
EXISTENCE AND TERMS OF OUTSTANDING OPTIONS, WARRANTS, CONVERTIBLE
PREFERRED STOCK, STOCK SUBSCRIBED AND CONVERTIBLE DEBT IMPAIRS THE
COMPANY’S ABILITY TO RAISE CAPITAL THROUGH SUBSEQUENT DEBT OR EQUITY
OFFERINGS AND COULD IMPAIR ABILITY TO OBTAIN ANY FINANCING ON FAVORABLE
TERMS.
|
|
·
|
FAILURE
OF SECURITIES BROKERAGE SUBSIDIARIES TO MAINTAIN REQUIRED MINIMUM NET
CAPITAL MAY SUBJECT THEM TO FINES, PENALTIES AND OTHER SANCTIONS INCLUDING
SUSPENSION OR EXPULSION AS
BROKER-DEALERS.
|
|
·
|
FAILURE
TO MAINTAIN NYSE AMEX LISTING.
|
|
·
|
THE
COMPANY IS AT COMPETITIVE DISADVANTAGES TO A NUMBER OF
COMPANIES.
|
|
·
|
THE
OCCURRENCE OF LOSSES NOT REFLECTED ON THE STATEMENT OF FINANCIAL CONDITION
COULD REDUCE THE COMPANY’S OPERATING RESULTS AND IMPAIR THE COMPANY’S
LIQUIDITY WITHOUT ADEQUATE PRIOR NOTICE TO
INVESTORS.
|
|
·
|
CONCENTRATIONS
OF CREDIT RISK INCREASE THE RISK OF MATERIAL HARM FROM
DEFAULTS.
|
|
·
|
POTENTIAL
LOSSES OR SANCTIONS AS A RESULT OF EMPLOYEE
MISCONDUCT.
|
|
·
|
MARKET
PRICE FLUCTUATIONS COULD RESULT IN LOST REVENUES TO THE COMPANY AND
ADVERSELY AFFECT PROFITABILITY.
|
|
·
|
TERMINATION
OF BUSINESS RELATIONSHIPS BY THE COMPANY NETWORK OF INDEPENDENT REGISTERED
REPRESENTATIVES.
|
|
·
|
REGULATORY
AND LEGAL UNCERTAINTIES COULD HARM THE COMPANY
BUSINESS
|
|
·
|
FUTURE
SALES OR THE POTENTIAL FOR SALE OF A SUBSTANTIAL NUMBER OF SHARES OF THE
COMPANY COMMON STOCK COULD CAUSE THE TRADING PRICE OF THE COMPANY’S COMMON
STOCK TO DECLINE.
|
|
·
|
THE
COMPANY MAY ISSUE SHARES OF PREFERRED STOCK IN THE FUTURE, WHICH COULD
DEPRESS THE PRICE OF THE COMPANY’S
STOCK.
|
|
·
|
THE
COMPANY MAY EXPERIENCE SIGNIFICANT FLUCTUATIONS IN QUARTERLY OPERATING
RESULTS DUE TO THE NATURE OF IT’S BUSINESS AND THEREFORE MAY FAIL TO MEET
PROFITABILITY EXPECTATIONS.
|
|
·
|
THE
COMPANY MAY INCUR SIGNIFICANT LOSSES FROM TRADING AND INVESTMENT
ACTIVITIES DUE TO MARKET FLUCTATIONS AND
VOLATILITY.
|
|
·
|
THE
COMPANY BUSINESS COULD BE ADVERSELY AFFECTED BY A DOWNTURN IN THE
FINANCIAL MARKETS.
|
|
·
|
THE
COMPANY INVESTMENT BANKING REVENUES MAY DECLINE IN ADVERSE MARKET OR
ECONOMIC CONDITIONS.
|
|
·
|
THE
COMPANY DEPENDS ON KEY EMPLOYEES AND THE LOSS OF THEIR SERVICES COULD HARM
THE COMPANY BUSINESS.
|
|
·
|
THE
COMPANY’S RISK MANAGEMENT POLICIES AND PROCEDURES MAY LEAVE THE COMPANY
EXPOSED TO UNIDENTIFIED RISKS OR AN UNANTICIPATED LEVEL OF
RISK.
|
|
·
|
CREDIT
RISK EXPOSES THE COMPANY TO LOSSES CAUSED BY FINANCIAL OR OTHER PROBLEMS
EXPERIENCED BY THIRD PARTIES.
|
|
·
|
trading
counterparties;
|
|
·
|
customers;
|
|
·
|
clearing
agents;
|
|
·
|
exchanges;
|
|
·
|
clearing
houses; and
|
|
·
|
other
financial intermediaries as well as issuers whose securities the Company
holds.
|
|
·
|
holding
securities of third parties;
|
|
·
|
executing
securities trades that fail to settle at the required time due to
non-delivery by the counterparty or systems failure by clearing agents,
exchanges, clearing houses or other financial intermediaries;
and
|
|
·
|
extending
credit to clients through bridge or margin loans or other
arrangements.
|
|
·
|
INTENSE
COMPETITION FROM EXISTING AND NEW ENTITIES MAY ADVERSELY AFFECT THE
COMPANY’S REVENUES AND
PROFITABILITY.
|
Location
|
Approx.
Sq.
Feet
|
Lease
Expires
|
|||
Corporate
Headquarters, Sales, Investment Banking Office
|
|||||
650
Fifth Avenue, 3rd
Floor, New York, NY 10019
|
19,020 |
Month
to Month
|
|||
Sales
Offices
|
|||||
2170
West S.R. 434, Suite 100, Longwood, Florida
32779 (1)
|
6,500 |
3/31/2012
|
|||
60
State St, 18th Floor, Boston Massachusetts 02109
|
7,000 |
6/30/2013
|
|||
150
California Street, Suite 2100, San Francisco, California
94111
|
5,700 |
9/30/2011
|
|||
2500
N. Military Trail, 1st Floor, Boca Raton, Florida 33431
|
5,000 |
8/31/2014
|
|||
888
E. Las Olas Blvd, Suite 600, Ft. Lauderdale, Florida 33301
|
3,500 |
9/30/2012
|
|||
325
5th
Ave, Suite 103, Indialantic, Florida 32903
|
2,600 |
4/30/2014
|
|||
1011
High Ridge Rd, Stamford, Connecticut 06905
|
1,500 |
12/31/2011
|
|||
111
S. Wacker Dr, Chicago, Illinois 60606
|
3,700 |
06/30/2010
|
|||
299
Cherry Hill Rd., Parsippany, New Jersey 07054
|
5,600 |
4/30/2015
|
|||
5
Marine View Plaza, Suite 316, Hoboken, New Jersey 07030
|
2,500 |
9/30/2013
|
|||
190
North Canon Dr., Suite 204, Beverly Hills, California
90210
|
1,800 |
11/30/2012
|
Location
|
Approx.
Sq.
Feet
|
Lease
Expires
|
|||
3
Mill Road, Suite 304, Wilmington, DE 19806
|
2,800 |
7/31/2010
|
|||
399
Thornhall Street, Edison, NJ 08818
|
4,300 |
3/31/2011
|
|||
EAB
Plaza, Uniondale, New York
|
5,900 |
1/31/2011
|
2008
|
HIGH SALES PRICE
|
LOW SALES PRICE
|
||||||
First
Quarter
|
$ | 1.20 | $ | 0.50 | ||||
Second
Quarter
|
1.60 | 0.44 | ||||||
Third
Quarter
|
1.20 | 0.82 | ||||||
Fourth
Quarter
|
0.95 | 0.26 | ||||||
2009
|
HIGH SALES PRICE
|
LOW SALES PRICE
|
||||||
First
Quarter
|
$ | 0.71 | $ | 0.27 | ||||
Second
Quarter
|
0.43 | 0.26 | ||||||
Third
Quarter
|
0.74 | 0.29 | ||||||
Fourth
Quarter
|
0.67 | 0.40 |
Number of
|
||||||||||||
securities
|
||||||||||||
remaining available
|
||||||||||||
Number of
|
for future issuance
|
|||||||||||
securities to
|
under equity
|
|||||||||||
be issued upon
|
Weighted-average
|
compensation plans
|
||||||||||
exercise of
|
exercise price
|
(excluding
|
||||||||||
outstanding
|
of outstanding
|
securities reflected
|
||||||||||
options,
|
options,
|
in column (a)
|
||||||||||
Plan Category
|
(a)
|
(b)
|
(c)
|
|||||||||
Equity
Compensation plans approved by stockholders
|
8,000,000 | $ | 2.83 | 3,164,334 |
December 31, 2009
|
||||||||||||||||
Reporting
Unit
|
Carrying
Value
|
Estimated
Fair Value
|
Excess
Estimated Fair
Value Over
Carrying Value
|
Percent
Excess
Value
|
||||||||||||
JLSC
|
$ | 17,711,508 | $ | 25,911,000 | $ | 8,199,492 | 45 | % |
2010
|
2011
|
2012
|
2013
|
2014
|
2015
|
|||||||||||||||||||
Nominal
revenue growth rate*
|
30.0 | % | 7.9 | % | 8.0 | % | 8.5 | % | 9.2 | % | 7.5 | % | ||||||||||||
Direct
costs - variable
|
61.0 | % | 61.0 | % | 61.0 | % | 61.0 | % | 61.0 | % | 61.0 | % | ||||||||||||
Direct
costs – fixed ($000s)
|
$ | 10,617 | $ | 10,872 | $ | 11,133 | $ | 11,400 | $ | 11,674 | $ | 11,964 | ||||||||||||
Operating
expenses - variable
|
5.0 | % | 5.0 | % | 5.0 | % | 5.0 | % | 5.0 | % | 5.0 | % | ||||||||||||
Operating
expenses ($000’s)
|
$ | 5,160 | $ | 5,283 | $ | 5,410 | $ | 5,540 | $ | 5,673 | $ | 5,809 |
2016
|
2017
|
2018
|
2019
|
Residual
|
||||||||||||||||
Nominal
revenue growth rate
|
6.2 | % | 5.3 | % | 4.5 | % | 4.0 | % | 3.4 | % | ||||||||||
Direct
costs - variable
|
61.0 | % | 61.0 | % | 61.0 | % | 61.0 | % | 61.0 | % | ||||||||||
Direct
costs – fixed ($000s)
|
$ | 12,241 | $ | 12,535 | $ | 12,836 | $ | 13,144 | $ | 13,459 | ||||||||||
Operating
expenses - variable
|
5.0 | % | 5.0 | % | 5.0 | % | 5.0 | % | 5.0 | % | ||||||||||
Operating
expenses ($000’s)
|
$ | 5,948 | $ | 6,091 | $ | 6,238 | $ | 6,387 | $ | 6,541 |
Basis
used to develop forecasts
|
|
Years
that cash flow is projected
|
10
|
Derivation
of residual value at end of projection period
|
Gordon
growth model applied to the last year of projection
period
|
Weighted
average cost of capital
|
14.9%
|
Principal Assumption
|
Range of Impact
|
|||||
Nominal
revenue growth rates
|
$ | 850,000 - |
$
|
950,000 | ||
Direct
Costs
|
$ | 3,550,000 - |
$
|
3,800,000 | ||
Operating
Expenses
|
$ | 3,550,000 - |
$
|
3,800,000 | ||
Derivation
of Residual Value at End of Period
|
$ | 1,300,000 - |
$
|
1,500,000 | ||
Weighted
average cost of capital
|
$ | 3,500,000 - |
$
|
3,700,000
|
Year
|
Amount
|
|||
2010
|
$ | - | ||
2011
|
- | |||
2012
|
- | |||
2013
|
- | |||
2014
|
- | |||
Thereafter
|
38,600,000 | |||
Total
|
$ | 38,600,000 |
2009
|
2008
|
|||
Risk
free interest rate:
|
0.2
to 2.7%
|
0.3
to 1.6%
|
||
Volatility:
|
58%
- 112%
|
58%
- 119%
|
||
Dividend
rate:
|
None
|
None
|
||
Expected
life:
|
1 –
5 years
|
1 –
5 years
|
For
the Year Ended
|
||||||||||||||||
December 31
|
%
|
|||||||||||||||
2009
|
2008
|
Difference
|
Change
|
|||||||||||||
Commissions
and fees
|
$ | 30,543,894 | $ | 29,342,615 | $ | 1,201,279 | 4 | % | ||||||||
Less:
Independent Sales Groups
|
$ | (2,578,624 | ) | $ | (5,883,850 | ) | $ | (3,305,226 | ) | -56 | % | |||||
Commissions
and fees, net
|
$ | 27,965,270 | $ | 23,458,765 | $ | 4,506,505 | 19 | % |
For
the Year Ended
|
||||||||||||||||
December 31
|
%
|
|||||||||||||||
2009
|
2008
|
Difference
|
Change
|
|||||||||||||
Commissions,
clearing and execution costs
|
$ | 12,220,000 | $ | 20,063,213 | $ | (7,843,213 | ) | -39 | % | |||||||
Less:
Independent Sales Groups
|
$ | (2,193,332 | ) | $ | (5,157,424 | ) | $ | (2,964,092 | ) | -57 | % | |||||
Commissions,
clearing and execution costs, net
|
$ | 10,026,668 | $ | 14,905,789 | $ | (4,879,121 | ) | -33 | % |
December 31
|
%
|
|||||||||||||||
2009
|
2008
|
Difference
|
Change
|
|||||||||||||
Revenues
|
$ | 37,095,420 | $ | 38,070,661 | $ | (975,241 | ) | -3 | % | |||||||
Less:
Independent Contractors
|
$ | (8,048,343 | ) | $ | (7,012,258 | ) | $ | 1,036,085 | 15 | % | ||||||
Less:
Independent Sales Groups
|
$ | (2,578,624 | ) | $ | (5,883,850 | ) | $ | (3,305,226 | ) | -56 | % | |||||
Revenues,
net
|
$ | 26,468,453 | $ | 25,174,553 | $ | 1,293,900 | 5 | % |
December 31
|
%
|
|||||||||||||||
2009
|
2008
|
Difference
|
Change
|
|||||||||||||
Commissions,
clearing and execution costs
|
$ | 12,220,000 | $ | 20,063,213 | $ | (7,843,213 | ) | -39 | % | |||||||
Less:
Independent Contractors
|
$ | (5,719,634 | ) | $ | (6,892,258 | ) | $ | (1,172,624 | ) | -17 | % | |||||
Less:
Independent Sales Group
|
$ | (2,193,332 | ) | $ | (5,157,424 | ) | $ | (2,964,092 | ) | -57 | % | |||||
Commissions,
clearing and execution costs, net
|
$ | 4,307,034 | $ | 8,013,531 | $ | (3,706,497 | ) | -46 | % |
|
·
|
expanding
our trading capabilities by hiring experienced personnel in fixed income
that serve both institutional and retail
clients;
|
|
·
|
expanding
our institutional trading activities by continuing to add quality research
and sales personnel with existing institutional
clients;
|
|
·
|
continuing
to recruit quality registered
representatives;
|
|
·
|
expanding
our offering of financial products to our retail and institutional
customer;
|
|
·
|
negotiating
reductions from our clearing organizations in ticket charges and system
charges
|
Payment Due by Period
|
||||||||||||||||||||
Contractual
Obligations
|
Total
|
Less than 1
year
|
1-3 years
|
4-5 years
|
After 5
years
|
|||||||||||||||
Long-term
debt obligations
|
$ | 16,447,330 | $ | 3,970,597 | $ | 10,463,672 | $ | 2,013,061 | $ | - | ||||||||||
Operating
lease obligations
|
4,756,873 | 2,065,736 | 1,710,419 | 934,224 | 46,494 | |||||||||||||||
Total
|
$ | 21,204,203 | $ | 6,036,333 | $ | 12,174,091 | $ | 2,947,285 | $ | 46,494 |
Director
|
||||||
Name
|
Age
|
Since
|
Position
|
|||
Donald
A. Wojnowski Jr.
|
50
|
2004
|
President
and Director
|
|||
Alan
Weichselbaum
|
45
|
2008
|
Chief
Executive Officer, Chief Financial Officer and Director
|
|||
James
B. Fellus
|
44
|
Chief
Executive Officer of Jesup & Lamont Securities
Corporation
|
||||
William
C. Holub
|
46
|
Chief
Financial Officer of Jesup & Lamont Securities
Corporation
|
||||
Steven
M. Rabinovici
|
57
|
2005
|
Chairman
of the Board
|
|||
John
C. Rudy
|
67
|
2005
|
Director
|
|||
Benjamin
J. Douek
|
59
|
2008
|
Director
|
|||
Mark
A. Wilton
|
63
|
2009
|
Director
|
Name and
Principal
Position
|
YEAR
|
SALARY
|
Bonus and
Commissions
|
Stock
Awards
|
Option
Awards
|
All Other
Compensation
|
Total
|
|||||||||||||||||||
Steven
Rabinovici, Chairman
|
2009
|
$ | 120,000 | $ | - | $ | - | $ | - | $ | 7,180 | $ | 127,180 | |||||||||||||
2008
|
120,000 | 5,464 | 125,464 | |||||||||||||||||||||||
Donald
Wojnowski Jr. President, & Director (1)
|
2009
|
184,333 | 133,550 | - | - | 11,401 | 329,284 | |||||||||||||||||||
2008
|
300,000 | 67,806 | - | - | 8,730 | 376,536 | ||||||||||||||||||||
Alan
Weichselbaum CEO, CFO & Secretary (2)
|
2009
|
218,750 | - | - | - | - | 218,750 | |||||||||||||||||||
2008
|
- | - | - | - | - | - | ||||||||||||||||||||
James
Fellus, Chief Executive Officer of JLSC (3)
|
2009
|
318,750 | 9,349 | - | - | 11,485 | 339,584 | |||||||||||||||||||
2008
|
300,000 | - | - | - | 4,876 | 304,876 |
OPTION AWARDS
|
STOCK AWARDS
|
|||||||||||||||||||||||||||||||||||
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
(1)
|
Equity
incentive
Plan
Awards:
Number of
Securities
underlying
Unexercised
Unearned
Options
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
Number
of
Shares
or units
of Stock
That
Have Not
Vested
(#)
|
Market
Value of
Shares
or Units
of Stock
That
Have Not
Vested
($)
(2)
|
Equity
Incentive
Plan
Awards:
Number of
unearned
Shares,
Units or
Other
Rights
That Have
Not
Vested
(#)
|
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shared,
Units or
Other
Rights
That Have
Not
Vested
(#)
|
||||||||||||||||||||||||||||
Donald
A. Wojnowski
|
125,000 | 2.00 |
6/15/2013
|
64,844 | 29,180 | |||||||||||||||||||||||||||||||
300,000 | 2.00 |
6/1/2015
|
||||||||||||||||||||||||||||||||||
Steven
Rabinovici
|
200,000 | 2.00 |
5/30/2015
|
|||||||||||||||||||||||||||||||||
Alan
Weichelsbaum
|
100,000 | 1.07 |
4/30/2013
|
|||||||||||||||||||||||||||||||||
James
Fellus
|
- |
Name
|
Fees
Earned
or Paid
in Cash
($)
|
Stock
Awards
($)
|
Option
Awards
($) (1)
|
Non-Equity
Incentive
Plan
Compensation
($)
|
Non-
Qualified Deferred
Compensation
Earnings
($)
|
All Other
Compensation
($)
|
Total
($)
|
|||||||||||||||||||||
Donald
A. Wojnowski, Jr.
|
- | - | - | - | - | - | - | |||||||||||||||||||||
John
C. Rudy
|
39,500 | - | 65,208 | - | - | - | 104,708 | |||||||||||||||||||||
Benjamin
J. Douek
|
19,500 | - | 5,208 | - | - | - | 24,708 | |||||||||||||||||||||
Alan
Weichselbaum(2)
|
- | - | 65,208 | - | - | - | 65,208 | |||||||||||||||||||||
Mark
A. Wilton
|
19,500 | - | - | - | - | - | 19,500 | |||||||||||||||||||||
Steven
Rabinovici
|
- | - | - | - | - | - | - |
Name and Address of
Beneficial Owner(1)
|
Amount and Nature of
Beneficial
Ownership(2)
|
Percent of Class
|
||||||
Donald
A. Wojnowski Jr. (3)
|
489,845 | 1.5 | % | |||||
Steven
M. Rabinovici (9)
|
3,649,422 | 11.2 | % | |||||
John
C. Rudy (4)
|
335,000 | 1.0 | % | |||||
Benjamin
J. Douek (5)
|
200,000 | 0.6 | % | |||||
Alan
Weichselbaum (6)
|
5,164,264 | 15.5 | % | |||||
Mark
A. Wilton (7)
|
3,005,139 | 8.6 | % | |||||
James
B. Fellus (8)
|
4,476,029 | 13.7 | % | |||||
EFH
Partners, LLC (10)
|
3,449,422 | 10.7 | % | |||||
Wexus
Capital
|
3,869,969 | 12.1 | % | |||||
Joab
Capital (11)
|
4,476,029 | 13.7 | % | |||||
Steven
A. Horowitz (12)
|
3,589,422 | 11.1 | % | |||||
Paul
H. Brown (13)
|
3,665,564 | 10.4 | % | |||||
Legent
Group LLC (14)
|
4,000,000 | 11.1 | % | |||||
Officers
and Directors as a group
(7
persons)
|
17,319,699 | 45.2 | % |
Exhibit No.
|
Description of Exhibit
|
|
3(i)(a)
|
Articles
of Incorporation (1)
|
|
3(i)(b)
|
Amendment
to Articles of Incorporation effective January 2, 2008 (18)
|
|
3(ii)
|
Bylaws,
as amended (2)
|
|
4.1
|
Form
of Common Stock Certificate (1)
|
|
4.2
|
Articles
of Amendment designating Series B Convertible Preferred Stock, Series C
Convertible Preferred Stock, and Series D Convertible Preferred Stock
dated May 19, 2005 (3)
|
|
4.3
|
Articles
of Amendment designating Series F Convertible Preferred Stock dated March
13, 2007 (4)
|
|
4.4
|
Articles
of Amendment designating Series G Convertible Preferred Stock, effective
March 28, 2008 (13)
|
|
10.1
|
Amended
and Restated 2000 Incentive Compensation Plan (5)
|
|
10.2
|
2007
Incentive Compensation Plan (6)
|
|
10.4+
|
Employment
Agreement between the Company and Donald A. Wojnowski Jr. dated as of
September 21, 2007(2)
|
|
10.5
|
Form
of Indemnification Agreement between the Company and each of its Directors
and executive officers(1)
|
|
10.6
|
Form
of Securities Purchase Agreement dated as of March 10, 2006 (4)
|
|
|
||
10.7
|
Form
of Warrant to be issued in connection with Securities Purchase Agreement
dated as of March 10, 2006 (4)
|
|
10.8
|
Stock
Purchase Agreement, dated September 14, 2006, among Empire Financial
Holding Company, Jesup & Lamont Securities Corporation, and Jesup
& Lamont Holding Corporation. (8)
|
|
10.9
|
Amendment
No. 1 to Stock Purchase Agreement, dated November 10, 2006
(9)
|
|
10.10
|
Amendment
No. 2 to Stock Purchase Agreement, dated November 10, 2007
(9)
|
|
10.11
|
Form
of Securities Purchase Agreement dated March 6,
2007(10)
|
|
10.12
|
Form
of Registration Rights Agreement dated March 6,
2007(10)
|
|
10.13
|
Form
of Debenture issuable in connection with Securities Purchase Agreement
dated March 6, 2007 (10)
|
|
10.14
|
Form
of Warrant issuable in connection with Securities Purchase Agreement dated
March 6, 2007
(10)
|
10.15
|
Form
of Subscription Agreement dated August 20, 2007 (11)
|
|
10.16
|
Form
of Warrant issuable in connection with Subscription Agreement dated August
20, 2007 (11)
|
|
10.17
|
Form
of Subscription Agreement dated as of March 3, 2008
(12)
|
|
10.18
|
Form
of Subscription Agreement dated as of April 9, 2008
(14)
|
|
10.19
|
Form
of Amendment No.1 to Subscription Agreement dated as of April 9,2008
(14)
|
|
10.20
|
Form
of Securities Purchase Agreement dated as of February 27, 2009
(15)
|
|
10.21
|
Form
of Debenture issuable in connection with Securities Purchase Agreement
dated as of February 27, 2009 (15)
|
|
10.22
|
Form
of Subscription Agreement dated February 2009 (15)
|
|
10.23
|
Form
of Warrant issuance in connection with Subscription Agreement dated
February 2009 (15)
|
|
14.1
|
Code
of Ethical Conduct(7)
|
|
21.1
|
Subsidiaries
of the Company (13)
|
|
31.1
|
Certification
by Principal Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of
the Securities and Exchange Act of 1934, as amended *
|
|
31.2
|
Certification
by Principal Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of
the Securities and Exchange Act of 1934, as amended *
|
|
32.1
|
Principal
Executive Officer Certification pursuant to Rule 13a-14(a) or Rule
15d-14(a) of the Securities and Exchange Act of 1934, as amended, and 18
U.S.C. Section 1350 *
|
|
32.2
|
Principal
Executive Officer Certification pursuant to Rule 13a-14(a) or Rule
15d-14(a) of the Securities and Exchange Act of 1934, as amended, and 18
U.S.C. Section 1350 *
|
(1)
|
Incorporated
by reference from the exhibits filed with the Company's Registration
Statement on Form S-1 Registration No. 333-86365.
|
|
|
||
(2)
|
Incorporated
by reference from the exhibits filed with the Company's Quarterly Report
on Form 10-QSB for the quarter ended September 30,
2007.
|
|
(3)
|
Incorporated
by reference from the exhibits filed with the Company's Current Report on
Form 8-K filed May 26, 2005.
|
|
(4)
|
Incorporated
by reference from the exhibits filed with the Company's Current Report on
Form 8-K filed on March 17, 2006.
|
|
(5)
|
Incorporated
by reference from Appendix A to the Company's definitive Proxy Statement
on Schedule 14A filed on August 1, 2006.
|
|
(6)
|
Incorporated
by reference from Appendix A to the Company's definitive Proxy Statement
on Schedule 14A filed on August 23, 2007.
|
|
(7)
|
Incorporated
by reference from the exhibits filed with the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 2003.
|
|
(8)
|
Incorporated
by reference from the exhibits filed with the Company's Current Report on
Form 8-K filed September 19, 2006.
|
|
(9)
|
Incorporated
by reference from the exhibits filed with the Company's Current Report on
Form 8-K filed November 16, 2006.
|
|
(10)
|
Incorporated
by reference from the exhibits filed with the Company's Current Report on
Form 8-K filed on March 13, 2007.
|
|
(11)
|
Incorporated
by reference from the exhibits filed with the Company's Current Report on
Form 8-K filed on August 24, 2007.
|
|
(12)
|
Incorporated
by reference from the exhibits filed with the Company's Current Report on
Form 8-K/A filed on March 12, 2008.
|
|
(13)
|
Incorporated
by reference from the exhibits filed with the Company's Annual Report on
Form 10-KSB filed on March 31, 2008.
|
|
(14)
|
Incorporated
by reference from the exhibits filed with the Company's Current Report on
Form 8-K filed on April 15, 2008.
|
|
(15)
|
Incorporated
by reference from the exhibits filed with the Company's Current Report on
Form 8-K filed on March 5,
2009.
|
JESUP
& LAMONT, INC.
|
||
Dated
March 26, 2010
|
By:
|
/s/ Alan Weichselbaum
|
Alan
Weichselbaum, Chief Executive Officer and
|
||
Chief
Financial Officer
|
||
(Principal
Executive Officer, Principal Financial
|
||
Officer
and Principal Accounting
Officer)
|
Signatures
|
Title
|
Date
|
||
/s/ Alan Weichselbaum
|
Chief
Executive Officer,
|
March
26, 2010
|
||
Alan
Weichselbaum
|
Chief
Financial Officer
|
|||
(Principal
Executive Officer,
|
||||
Principal
Financial Officer, and
|
||||
Principal
Accounting Officer)
|
||||
/s/ Steven M. Rabinovici
|
Director
|
March
26, 2010
|
||
Steven
M. Rabinovici
|
||||
/s/ Donald A. Wojnowski Jr.
|
Director,
|
March
26, 2010
|
||
Donald
A. Wojnowski Jr.
|
||||
/s/ John C. Rudy
|
Director
|
March
26, 2010
|
||
John
C. Rudy
|
||||
/s/ Mark A. Wilton
|
Director
|
March
26, 2010
|
||
Mark
A. Wilton
|
||||
/s/ Benjamin J. Douek
|
Director
|
March
26, 2010
|
||
Benjamin
J. Douek
|
Page
|
||
Report
of Independent Registered Public Accounting Firm
|
F-2
|
|
Consolidated
Statement of Financial Condition December 31, 2009 and
2008
|
F-3
|
|
Consolidated
Statements of Operations for the Years Ended December 31, 2009and
2008
|
F-4
|
|
Consolidated
Statements of Cash Flows for the Years Ended December 31, 2009 and
2008
|
F-5
|
|
Consolidated
Statements of Changes in Stockholders' Equity for the Years Ended December
31, 2009 and 2008
|
F-7
|
|
Notes
to Consolidated Financial Statements
|
F-9
|
December 31,
|
||||||||
2009
|
2008
|
|||||||
Assets
|
||||||||
Cash
and cash equivalents
|
$ | 345,170 | $ | 410,840 | ||||
Bank
certificate of deposit
|
2,014,102 | - | ||||||
Marketable
securities owned, at market value
|
23,288 | 37,027 | ||||||
Securities
not readily marketable, at estimated fair value
|
946,080 | 531,265 | ||||||
Commissions
and other receivables from clearing organizations
|
1,559,391 | 1,033,520 | ||||||
Other
receivables
|
2,437,989 | 1,849,816 | ||||||
Securities
borrowed under a secured demand note
|
225,000 | - | ||||||
Deposits
at clearing organizations
|
1,312,294 | 655,359 | ||||||
Prepaid
expenses and other assets
|
959,710 | 513,393 | ||||||
Notes
receivable, net of allowance of $561,000
|
1,370,984 | 1,310,889 | ||||||
Deferred
tax asset
|
2,117,000 | 2,117,000 | ||||||
Furniture
and equipment, net
|
669,974 | 527,692 | ||||||
Goodwill
|
13,272,165 | 13,272,165 | ||||||
Intangible
assets - customer lists and trademarks
|
4,072,875 | 4,143,601 | ||||||
Total
assets
|
$ | 31,326,022 | $ | 26,402,567 | ||||
Liabilities
and Stockholders' Equity
|
||||||||
Accounts
payable, accrued expenses and other liabilities
|
8,360,666 | 5,240,367 | ||||||
Due
to clearing organizations
|
1,314,213 | 1,180,108 | ||||||
Accrued
preferred stock dividends
|
753,394 | 445,568 | ||||||
Securities
sold, but not yet purchased, at market value
|
170,892 | 170,603 | ||||||
Secured
demand note payable
|
225,000 | - | ||||||
Notes
payable
|
16,332,091 | 12,552,317 | ||||||
Total
liabilities
|
27,156,256 | 19,588,963 | ||||||
Stockholders'
equity
|
||||||||
Convertible
preferred stock, series C, F, and G $.01 par value, 1,000,000 shares
authorized 728,575 issued and outstanding
|
$ | 7,285 | $ | 7,902 | ||||
Common
stock, $.01 par value 100,000,000 shares authorized 32,548,715 shares
issued and outstanding
|
325,487 | 223,978 | ||||||
Less:
Treasury Stock
|
(733,765 | ) | (733,765 | ) | ||||
Capital
stock subscribed
|
1,635,000 | 2,894,996 | ||||||
Additional
paid-in capital
|
43,225,707 | 37,328,572 | ||||||
Accumulated
deficit
|
(40,289,948 | ) | (32,908,079 | ) | ||||
Total
stockholders' equity
|
4,169,766 | 6,813,604 | ||||||
Total
liabilities and stockholders' equity
|
$ | 31,326,022 | $ | 26,402,567 |
Years ended December 31,
|
||||||||
2009
|
2008
|
|||||||
Revenues
|
||||||||
Commissions
and fees
|
$ | 30,543,894 | $ | 29,342,615 | ||||
Equity
market making trading revenues, net
|
2,231,211 | 6,369,618 | ||||||
Investment
banking income
|
2,297,885 | 2,778,153 | ||||||
Net
gain (loss) on securities received for banking services
|
2,022,430 | (419,725 | ) | |||||
37,095,420 | 38,070,661 | |||||||
Expenses
|
||||||||
Employee
compensation and benefits
|
22,803,468 | 22,488,833 | ||||||
Commissions,
clearing and execution costs
|
12,220,000 | 20,063,213 | ||||||
General
and administrative
|
7,094,118 | 9,969,048 | ||||||
Communications
and data processing
|
732,288 | 898,428 | ||||||
42,849,874 | 53,419,522 | |||||||
Loss
from operations
|
(5,754,454 | ) | (15,348,861 | ) | ||||
Other
income (expenses)
|
||||||||
Gain
on settlement
|
- | 806,744 | ||||||
Interest
income
|
20,002 | 45,787 | ||||||
Forgiveness
of indebtedness
|
311,220 | - | ||||||
Abandonment
of premises
|
(292,230 | ) | - | |||||
Interest
expense
|
(1,354,489 | ) | (1,077,161 | ) | ||||
Other
expense
|
(4,092 | ) | (200,000 | ) | ||||
(1,319,589 | ) | (424,630 | ) | |||||
Net
loss
|
(7,074,043 | ) | (15,773,491 | ) | ||||
Accrued
preferred stock dividends
|
(307,826 | ) | (272,593 | ) | ||||
Loss
applicable to common shareholders
|
$ | (7,381,869 | ) | $ | (16,046,084 | ) | ||
Basic
and diluted loss per share applicable to common
shareholders:
|
||||||||
Loss
per share-basic
|
$ | (0.24 | ) | $ | (0.82 | ) | ||
Loss
per share diluted
|
$ | (0.24 | ) | $ | (0.82 | ) | ||
Weighted
average shares outstanding:
|
||||||||
Basic
|
30,365,265 | 19,506,828 | ||||||
Diluted
|
30,365,265 | 19,506,828 |
Years ended December 31,
|
||||||||
2009
|
2008
|
|||||||
Cash
flows from operating activities
|
||||||||
Net
loss
|
$ | (7,074,043 | ) | $ | (15,773,491 | ) | ||
Adjustments
to reconcile net loss to net cash used by operating
activities:
|
||||||||
Depreciation
and amortization
|
372,217 | 944,154 | ||||||
Unrealized
loss on securities
|
69,106 | 450,497 | ||||||
Stock
compensation expense
|
177,417 | 933,651 | ||||||
Allowance
for notes receivable
|
561,000 | - | ||||||
Abandonment
of premises
|
292,230 | - | ||||||
Deferred
rent
|
127,534 | 14,136 | ||||||
Gain
on settlement with former officer
|
- | (806,744 | ) | |||||
Forgiveness
of note payable
|
(311,220 | ) | - | |||||
Non-marketable
securities earned as income
|
(469,573 | ) | - | |||||
Issuance
of stock to pay legal expenses
|
330,000 | 180,000 | ||||||
Accrued
interest income on certificate of deposit
|
(14,102 | ) | - | |||||
(Increase)
decrease in operating assets:
|
||||||||
Commissions
receivable from clearing organizations
|
(525,871 | ) | 638,808 | |||||
Deposits
at clearing organizations
|
(656,935 | ) | 3,522,478 | |||||
Other
receivables
|
(588,173 | ) | (1,054,786 | ) | ||||
Marketable
trading account securities, net
|
(609 | ) | 5,389,859 | |||||
Prepaid
expenses and other assets
|
(446,317 | ) | 482,525 | |||||
Increase
(decrease) in operating liabilities:
|
||||||||
Accounts
payable, accrued expenses and other liabilities
|
2,931,149 | 459,856 | ||||||
Payable
to clearing organizations
|
134,105 | (6,509,721 | ) | |||||
Securities
sold, not yet purchased
|
289 | (352,168 | ) | |||||
Total
adjustments
|
1,982,247 | 4,292,545 | ||||||
Cash
used by operating activities
|
(5,091,796 | ) | (11,480,946 | ) | ||||
Cash
flows from investing activities
|
||||||||
Purchases
of certificate of deposit
|
(2,000,000 | ) | - | |||||
Purchases
of furniture and equipment
|
(472,391 | ) | (305,533 | ) | ||||
Sale
of furniture and equipment
|
91,462 | - | ||||||
Repayment
of notes receivable
|
513,020 | - | ||||||
Issuance
of notes receivable
|
(1,134,115 | ) | (641,500 | ) | ||||
Total
cash used by investing activities
|
(3,002,024 | ) | (947,033 | ) |
Years ended December 31,
|
||||||||
2009
|
2008
|
|||||||
Cash
flows from financing activities
|
||||||||
Payments
of notes payable
|
(1,131,992 | ) | (1,994,136 | ) | ||||
Proceeds
from 9% convertible debenture
|
2,000,000 | - | ||||||
Proceeds
from new loans
|
3,535,142 | 3,452,500 | ||||||
Proceeds
from sale of preferred stock
|
- | 2,000,000 | ||||||
Proceeds
from common stock subscribed
|
3,550,000 | 2,894,996 | ||||||
Proceeds
from sale of common stock
|
6,038,106 | |||||||
Proceeds
from Clearing organization loan
|
75,000 | - | ||||||
Fees
and commissions paid for sale of stock
|
- | (88,183 | ) | |||||
Total
cash provided by financing activities
|
8,028,150 | 12,303,283 | ||||||
Net
increase (decrease) in cash and cash equivalents
|
(65,670 | ) | (124,696 | ) | ||||
Cash
and cash equivalents at beginning of period
|
410,840 | 535,536 | ||||||
Cash
and cash equivalents at end of period
|
$ | 345,170 | $ | 410,840 | ||||
Supplemental
cash flow information:
|
||||||||
Interest
paid
|
$ | 929,816 | $ | 851,362 | ||||
Supplemental
disclosures of non-cash investing and financing
activities:
|
||||||||
Converted
debenture note to common stock
|
$ | 450,000 | - | |||||
Accrued
preferred stock dividends, net of payments
|
$ | 307,826 | $ | 272,593 | ||||
Line
of credit converted to note payable
|
- | $ | 1,999,450 | |||||
Note
payable forgiven
|
$ | 311,220 | $ | 861,105 | ||||
Other
assets offset against notes payable
|
- | $ | 675,297 | |||||
Securities
borrowed under a secured demand note
|
$ | 225,000 | - | |||||
Secured
demand note payable
|
$ | (225,000 | ) | - | ||||
Issuance
of note to pay liability
|
- | $ | 50,640 | |||||
Acquisition
of treasury stock
|
- | $ | 733,765 | |||||
Issuance
of stock to pay liability
|
$ | 330,000 | $ | 170,000 | ||||
Conversion
of Series F preferred stock to common
|
$ | 615 | $ | 385 | ||||
Issuance
of stock to pay preferred dividends
|
- | $ | 52,965 | |||||
Note
interest forgiven by stockholders
|
$ | 230,613 | $ | - |
Series C
|
Series F
|
Series G
|
||||||||||||||||||||||||||||||
Preferred Stock
|
Preferred Stock
|
Preferred Stock
|
Common Stock
|
|||||||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Shares
|
Amount
|
Shares
|
Amount
|
|||||||||||||||||||||||||
Balance
at December 31, 2007
|
7,062 | $ | 71 | 819,987 | $ | 8,199 | - | $ | - | 11,106,442 | $ | 111,065 | ||||||||||||||||||||
Sale
of common stock
|
- | - | - | - | - | - | 8,959,301 | 89,593 | ||||||||||||||||||||||||
Exercise
of options on common stock
|
- | - | - | - | - | - | 214,844 | 2,148 | ||||||||||||||||||||||||
Issuance
of subscribed stock
|
- | - | - | - | - | - | 1,622,718 | 16,227 | ||||||||||||||||||||||||
Exercise
of warrants to common stock
|
- | - | - | - | - | - | 38,568 | 386 | ||||||||||||||||||||||||
Issuance
of Series G preferred stock
|
- | - | - | - | 1,688 | 17 | - | - | ||||||||||||||||||||||||
Conversion
of Series F preferred stock
|
- | (38,460 | ) | (385 | ) | 38,460 | 385 | |||||||||||||||||||||||||
Payment
of dividends in stock
|
- | - | - | - | - | - | 113,497 | 1,135 | ||||||||||||||||||||||||
Stock
compensation
|
- | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Payment
of fees with common stock
|
- | - | - | - | - | - | 303,870 | 3,039 | ||||||||||||||||||||||||
Payment
of fees for sale of stock
|
- | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Treasury
shares received in connection with settlement with former
officer
|
- | - | - | - | - | - | (524,118 | ) | - | |||||||||||||||||||||||
Preferred
stock dividends
|
- | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Net
loss
|
- | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Balance
at December 31, 2008
|
7,062 | $ | 71 | 781,527 | $ | 7,814 | 1,688 | $ | 17 | 21,873,582 | $ | 223,978 | ||||||||||||||||||||
Sale
of common stock
|
- | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Issuance
of subscribed stock
|
- | - | - | - | - | - | 8,857,666 | 88,576 | ||||||||||||||||||||||||
Conversion
of Series F preferred stock to common stock
|
- | - | (61,702 | ) | $ | (617 | ) | - | - | 302,618 | 3,026 | |||||||||||||||||||||
Stock
compensation
|
- | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Payment
of fees with common stock
|
- | - | - | - | - | - | 802,447 | 8,024 | ||||||||||||||||||||||||
Conversion
of debenture to common stock
|
- | - | - | - | - | - | 188,284 | 1,883 | ||||||||||||||||||||||||
Note
interest forgiven by stockholders
|
- | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Preferred
stock dividends
|
- | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Net
loss
|
- | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Balance
at December 31, 2009
|
7,062 | $ | 71 | 719,825 | $ | 7,197 | 1,688 | $ | 17 | 32,024,597 | $ | 325,487 |
Additional
|
Less:
|
|||||||||||||||||||
paid-in
|
Stock
|
Treasury
|
Accumulated
|
|||||||||||||||||
capital
|
subscriptions
|
Shares
|
deficit
|
Totals
|
||||||||||||||||
Balance
at December 31, 2007
|
$ | 26,324,579 | $ | 2,000,000 | - | $ | (16,861,995 | ) | $ | 11,581,919 | ||||||||||
Sale
of common stock
|
5,948,512 | 2,894,996 | - | 8,933,101 | ||||||||||||||||
Exercise
of options on common stock
|
(2,148 | ) | - | - | - | - | ||||||||||||||
Issuance
of subscribed stock
|
1,983,773 | (2,000,000 | ) | - | - | - | ||||||||||||||
Exercise
of warrants to common stock
|
(386 | ) | - | - | - | - | ||||||||||||||
Issuance
of Series G preferred stock
|
1,999,983 | - | - | - | 2,000,000 | |||||||||||||||
Conversion
of Series F preferred stock
|
- | - | - | - | ||||||||||||||||
Payment
of dividends in stock
|
51,830 | - | - | - | 52,965 | |||||||||||||||
Stock
compensation
|
933,651 | - | - | - | 933,651 | |||||||||||||||
Payment
of fees with common stock
|
176,961 | - | - | - | 180,000 | |||||||||||||||
Payment
of fees for sale of stock
|
(88,183 | ) | - | - | - | (88,183 | ) | |||||||||||||
Treasury
shares received in connection with settlement with former
officer
|
- | - | (733,765 | ) | (733,765 | ) | ||||||||||||||
Preferred
stock dividends
|
- | - | - | (272,593 | ) | (272,593 | ) | |||||||||||||
Net
loss
|
- | - | - | (15,773,491 | ) | (15,773,491 | ) | |||||||||||||
Balance
at December 31, 2008
|
$ | 37,328,572 | $ | 2,894,996 | $ | (733,765 | ) | $ | (32,908,079 | ) | $ | 6,813,604 | ||||||||
Sale
of common stock
|
- | 3,550,000 | - | - | 3,550,000 | |||||||||||||||
Issuance
of subscribed stock
|
4,721,420 | (4,809,996 | ) | - | - | - | ||||||||||||||
Conversion
of Series F preferred stock to common stock
|
(2,409 | ) | - | - | - | - | ||||||||||||||
Stock
compensation
|
177,418 | - | - | - | 177,418 | |||||||||||||||
Payment
of fees with common stock
|
321,976 | - | - | - | 330,000 | |||||||||||||||
Conversion
of debenture to common stock
|
448,117 | - | - | - | 450,000 | |||||||||||||||
Note
interest forgiven by stockholders
|
230,613 | - | - | - | 230,613 | |||||||||||||||
Preferred
stock dividends
|
- | - | - | (307,826 | ) | (307,826 | ) | |||||||||||||
Net
loss
|
- | - | - | (7,074,043 | ) | (7,074,043 | ) | |||||||||||||
Balance
at December 31, 2009
|
$ | 43,225,707 | $ | 1,635,000 | $ | (733,765 | ) | $ | (40,289,948 | ) | $ | 4,169,766 |
|
·
|
Level
1 inputs are quoted prices (unadjusted) in active markets for identical
assets or liabilities the Company has the ability to
access.
|
|
·
|
Level
2 inputs are inputs (other than quoted prices included within level 1)
that are observable for the asset or liability, either directly or
indirectly.
|
|
·
|
Level
3 are unobservable inputs for the asset or liability and rely on
management’s own assumptions about the assumptions that market
participants would use in pricing the asset or liability. (The
unobservable inputs should be developed based on the best information
available in the circumstances and may include the Company’s own
data.)
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
Assets
|
||||||||||||||||
Marketable
securities owned
|
$ | 23,288 | $ | - | $ | - | $ | 23,288 | ||||||||
Securities
not readily marketable
|
- | - | 946,080 | 946,080 | ||||||||||||
Totals
|
$ | 23,288 | $ | - | $ | 946,080 | $ | 969,368 | ||||||||
Liabilities
|
||||||||||||||||
Securities
sold, but not yet purchased
|
$ | 170,892 | $ | - | $ | - | $ | 170,892 |
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
Assets
|
||||||||||||||||
Marketable
securities owned
|
$ | 37,027 | $ | - | $ | - | $ | 37,027 | ||||||||
Securities
not readily marketable
|
- | - | 531,265 | 531,265 | ||||||||||||
Totals
|
$ | 37,027 | $ | - | $ | 531,265 | $ | 568,292 | ||||||||
Liabilities
|
||||||||||||||||
Securities
sold, but not yet purchased
|
$ | 170,603 | $ | - | $ | - | $ | 170,603 |
Year Ended
December 31,
|
Beginning
Balance
|
Unrealized Gains and
(Losses) Related to
Assets Held at Year
End
|
Purchases,
Issuances, and
Settlements
|
Ending Balance
|
||||||||||||
2009
|
||||||||||||||||
Assets
|
||||||||||||||||
Marketable
securities owned
|
$ | 531,265 | $ | (152,906 | ) | $ | 567,721 | $ | 946,080 | |||||||
2008
|
||||||||||||||||
Assets
|
||||||||||||||||
Marketable
securities owned
|
$ | 1,229,659 | $ | (698,394 | ) | $ | - | $ | 531,265 |
2009
|
2008
|
|||
Expected
dividend yield:
|
None
|
None
|
||
Risk
free interest rate:
|
3.5%
|
3.5%
|
||
Expected
life:
|
4 –
8 years
|
4 –
8 years
|
||
Expected
volatility:
|
58%
- 112%
|
58
- 119%
|
Estimated
|
||||||||||
2009
|
2008
|
Useful Life
|
||||||||
Equipment
|
$ | 325,081 | $ | 290,418 |
5-7
years
|
|||||
Computers
|
1,409,581 | 1,198,215 |
5
years
|
|||||||
Furniture
and fixtures
|
519,929 | 436,620 |
7
years
|
|||||||
Leasehold
improvements
|
373,805 | 322,214 |
Life
of lease
|
|||||||
2,628,396 | 2,247,467 | |||||||||
Less
accumulated depreciation
|
(1,958,422 | ) | (1,719,775 | ) | ||||||
$ | 669,974 | $ | 527,692 |
December 31,
|
||||||||
2009
|
2008
|
|||||||
Goodwill
(indefinite useful life)
|
$ | 13,272,165 | $ | 13,272,165 | ||||
Trademarks
(indefinite useful life)
|
$ | 3,282,077 | $ | 3,282,077 | ||||
Customer
List (10 year life)
|
$ | 1,157,266 | $ | 1,157,266 | ||||
Less:
accumulated amortization
|
(366,468 | ) | (295,742 | ) | ||||
Net
Customer list
|
$ | 790,798 | $ | 861,524 |
Year ending
December 31,
|
Amortization
|
|||
2010
|
$ | 115,727 | ||
2011
|
115,727 | |||
2012
|
115,727 | |||
2013
|
115,727 | |||
2014
|
115,727 |
December 31, 2009
|
||||||||||||||||
Reporting
Unit
|
Carrying
Value
|
Estimated
Fair Value
|
Excess
Estimated Fair
Value Over
Carrying Value
|
Percent
Excess
Value
|
||||||||||||
JLSC
|
$ | 17,711,508 | $ | 25,911,000 | $ | 8,199,492 | 45 | % |
2010
|
2011
|
2012
|
2013
|
2014
|
2015
|
|||||||||||||||||||
Nominal
revenue growth rate*
|
30.0 | % | 7.9 | % | 8.0 | % | 8.5 | % | 9.2 | % | 7.5 | % | ||||||||||||
Direct
costs - variable
|
61.0 | % | 61.0 | % | 61.0 | % | 61.0 | % | 61.0 | % | 61.0 | % | ||||||||||||
Direct
costs – fixed ($000s)
|
$ | 10,617 | $ | 10,872 | $ | 11,133 | $ | 11,400 | $ | 11,674 | $ | 11,964 | ||||||||||||
Operating
expenses - variable
|
5.0 | % | 5.0 | % | 5.0 | % | 5.0 | % | 5.0 | % | 5.0 | % | ||||||||||||
Operating
expenses ($000’s)
|
$ | 5,160 | $ | 5,283 | $ | 5,410 | $ | 5,540 | $ | 5,673 | $ | 5,809 |
2016
|
2017
|
2018
|
2019
|
Residual
|
||||||||||||||||
Nominal
revenue growth rate
|
6.2 | % | 5.3 | % | 4.5 | % | 4.0 | % | 3.4 | % | ||||||||||
Direct
costs - variable
|
61.0 | % | 61.0 | % | 61.0 | % | 61.0 | % | 61.0 | % | ||||||||||
Direct
costs – fixed ($000s)
|
$ | 12,241 | $ | 12,535 | $ | 12,836 | $ | 13,144 | $ | 13,459 | ||||||||||
Operating
expenses - variable
|
5.0 | % | 5.0 | % | 5.0 | % | 5.0 | % | 5.0 | % | ||||||||||
Operating
expenses ($000’s)
|
$ | 5,948 | $ | 6,091 | $ | 6,238 | $ | 6,387 | $ | 6,541 |
Bases
used to develop forecasts
|
|
Years
that cash flow is projected
|
10
|
Derivation
of residual value at end of projection period
|
Gordon
growth model applied to the last year of projection
period
|
Weighted
average cost of capital
|
14.9%
|
Principal Assumption
|
Range of Impact
|
|||||
Nominal
revenue growth rates
|
$ | 850,000 - |
$
|
950,000 | ||
Direct
Costs
|
$ | 3,550,000 - |
$
|
3,800,000 | ||
Operating
Expenses
|
$ | 3,550,000 - |
$
|
3,800,000 | ||
Derivation
of Residual Value at End of Period
|
$ | 1,300,000 - |
$
|
1,500,000 | ||
Weighted
average cost of capital
|
$ | 3,500,000 - |
$
|
3,700,000
|
2009
|
2008
|
|||||||
·
Convertible notes payable to investors, interest payable quarterly
at an annual rate of 6.5%. The notes mature March 28, 2012 and
are convertible into common stock at $2.39 per share.
|
$ | 5,757,158 | $ | 6,207,158 | ||||
·
Unsecured note payable to a bank, interest payable monthly at an
annual rate of 3.8%, with a maturity of May 28, 2010.
|
2,100,000 | - | ||||||
·
Unsecured note payable to Legent Clearing LLC, interest at a base
annual rate of 4.25% plus prime, with a maturity of November 3,
2018. Principal repaid at $55,000 per month (increased to
$75,000 per month in January 2010)
|
1,697,997 | 2,000,000 | ||||||
·
Convertible debenture payable to Legent Clearing, LLC at an annual
rate of 9%. The note matures February 26, 2014, and is
convertible into common stock at $0.50 per share.
|
2,000,000 | - | ||||||
·
Unsecured notes payable to the stockholders of Jesup & Lamont
Holding Corporation (former parent of JLSC). The notes accrues
interest at an annual rate of 4.0%. Interest is payable annually, and the
principal is payable at maturity on October 1, 2011.
|
1,327,675 | 1,638,895 | ||||||
· Note
payable to bank at an annual rate of LIBOR plus 10% (currently 10.29%) due
on demand with monthly principal payments of $30,000. Converted
from a line of credit as explained in Note 9 below.
|
779,449 | 1,149,450 | ||||||
·
Unsecured note payable with no interest currently charged to a
shareholder was due December 3, 2009, and which has been amended
subsequent to year end to become due in April 2011
|
900,000 | - | ||||||
· Short
term note payable to a shareholder, with interest at an annual rate of 8%,
originally due on April 2, 2009 but extended to December 31, 2009; has
since become payable on demand
|
850,000 | 1,000,000 | ||||||
·
Unsecured note payable, interest is payable quarterly at an annual
rate of 10%, with a maturity of June 7, 2010.
|
265,000 | - | ||||||
·
Unsecured note payable to a shareholder, principal and interest at
an annual rate of 15%, due at maturity date of January 16, 2009; has since
become payable on demand.
|
400,000 | 400,000 |
· Subordinated
note payable to EFH Partners, a shareholder, with interest at an annual
rate of 20%, originally payable at maturity on February 17,
2007. The note was extended to April 1, 2009 at a 4% annual
interest rate and then modified to become due on demand and is
subordinated to notes payable to banks.
|
222,500 | 222,500 | ||||||
·
Unsecured note payable which accrues interest at an annual rate of
5%. Principal and interest payable on demand.
|
66,534 | 66,534 | ||||||
· Unsecured
operating notes payable to various vendors at prevailing market
rates. Due dates range from 2010 to
2013
|
81,017 | 45,863 | ||||||
Total
principal payable
|
16,447,330 | 12,730,400 | ||||||
Less:
unamortized discount on note to stockholders of Jesup & Lamont Holding
Corporation
|
(115,239 | ) | (178,083 | ) | ||||
Total
notes payable net of discount
|
$ | 16,332,091 | $ | 12,552,317 |
Year ending December 31
|
Principal
|
Interest
|
||||||
2010
|
$ | 3,970,597 | $ | 965,506 | ||||
2011
|
3,306,265 | 806,340 | ||||||
2012
|
7,157,407 | 702,972 | ||||||
2013
|
13,061 | 366,519 | ||||||
Thereafter
|
2,000,000 | 693,292 | ||||||
Total
|
$ | 16,447,330 | $ | 3,534,629 |
Year
ended December 31,
|
||||||||
2009
|
2008
|
|||||||
Trade
accounts payable
|
$ | 1,311,874 | $ | 1,101,366 | ||||
Accrued
payroll
|
2,088,489 | 1,282,490 | ||||||
Payroll
taxes payable
|
2,287,834 | 112,298 | ||||||
EKN
settlement accrual
|
534,517 | 872,000 | ||||||
Accrued
legal
|
233,124 | 564,135 | ||||||
Accrued
interest on notes payable
|
647,728 | 356,899 | ||||||
Other
accrued expenses and liabilities
|
1,482,100 | 951,179 | ||||||
TOTAL
|
$ | 8,585,666 | $ | 5,240,367 |
Year
ended December 31,
|
||||||||
2009
|
2008
|
|||||||
Net
realized gains and losses
|
$ | 2,245,559 | $ | 6,121,720 | ||||
Unrealized
gain/(loss)
|
(14,348 | ) | 247,898 | |||||
Trading
income, net
|
$ | 2,231,211 | $ | 6,369,618 |
2009
|
2008
|
|||
Risk
free interest rate:
|
0.2
to 2.7%
|
0.3
to 1.6%
|
||
Volatility:
|
66%
-785%
|
5%
-735%
|
||
Dividend
rate:
|
None
|
None
|
||
Expected
life:
|
1 –
5 years
|
1 –
5 years
|
Year ended December 31,
|
||||||||
2009
|
2008
|
|||||||
Investment
banking fees
|
$ | 2,297,885 | $ | 2,778,153 | ||||
Gains/(Loss)
from warrants
|
2,022,430 | (419,725 | ) | |||||
$ | 4,320,315 | $ | 2,358,428 | |||||
Gains
and losses:
|
||||||||
Realized
gains
|
$ | 1,552,857 | $ | 281,516 | ||||
Unrealized
Gain/(losses)
|
469,573 | (701,241 | ) | |||||
$ | 2,022,430 | $ | (419,725 | ) |
Year
Ended December 31,
|
||||||||
2009
|
2008
|
|||||||
Numerator
for loss per share:
|
||||||||
Net
loss
|
$ | (7,074,043 | ) | $ | (15,773,491 | ) | ||
Preferred
stock dividends
|
(307,826 | ) | (272,593 | ) | ||||
Loss
attributable to common stockholders
|
$ | (7,381,869 | ) | $ | (16,046,084 | ) | ||
Denominator
for loss per share:
|
||||||||
Basic
and diluted weighted-average shares:
|
30,365,265 | 19,506,828 | ||||||
Basic
and diluted loss per share:
|
||||||||
Basic
loss per share
|
$ | (0.24 | ) | $ | (0.82 | ) | ||
Diluted
loss per share
|
$ | (0.24 | ) | $ | (0.82 | ) |
Year
Ended December 31,
|
||||||||
2009
|
2008
|
|||||||
Warrants
|
9,231,266 | 7,024,242 | ||||||
Stock
options
|
1,989,522 | 3,611,366 | ||||||
Convertible
preferred stock Series C,F and G
|
3,554,285 | 3,615,987 | ||||||
Convertible
notes
|
6,408,840 | 2,597,124 | ||||||
Warrants
subscribed
|
648,821 | 293,812 | ||||||
21,832,734 | 17,142,531 |
Convertible Issues
|
Outstanding
Shares
|
Preferred
Dividend
Rate
|
Convertible
to Common
Shares
|
Conversion
Price
|
||||||||||||
Series
C participating, cumulative convertible preferred stock, 8000 shares
authorized, liquidation preference at the $100 per share stated
value.
|
7,062 | 7.5 | % | 353,100 | $ | 2.00 | ||||||||||
Series
F participating, cumulative convertible preferred stock, 877,000 shares
authorized, liquidation preference at the $3.25 per share stated
value.
|
719,825 | 4.0 | % | 719,825 | $ | 3.25 | ||||||||||
Series
G participating, cumulative convertible preferred stock, 4000 shares
authorized, liquidation preference at the $1000 per share stated
value.
|
1,688 | 10.0 | % | 2,481,360 | $ | 0.68 | ||||||||||
Totals
|
728,575 | 3,554,285 |
2009
|
2008
|
|||||||||||||||
Shares
|
Weighted
Average
Exercise
Price
|
Shares
|
Weighted
Average
Exercise
Price
|
|||||||||||||
Outstanding
at beginning of year
|
2,962,522 | $ | 2.20 | 4,360,822 | $ | 2.83 | ||||||||||
Granted
|
- | - | 625,000 | 1.28 | ||||||||||||
Exercised
|
- | - | - | - | ||||||||||||
Cancelled
|
(973,000 | ) | 2.48 | (2,023,300 | ) | 2.94 | ||||||||||
Outstanding
at end of year
|
1,989,522 | 2.17 | 2,962,522 | 2.20 | ||||||||||||
Exercisable
at end of year
|
1,897,855 | 2.17 | 2,345,402 | 2.23 | ||||||||||||
Weighted
average fair value of options granted during the year
|
$ | 0.00 | $ | 0.84 |
Outstanding Stock Options
|
Exercisable Stock Options
|
||||||||||||||||||||||||
Exercise
Price
Range
|
Shares
|
Weighted
Average
Remaining
Contractual
Life
|
Weighted
Average
Exercise
Price
|
Shares
|
Weighted
Average
Remaining
Contractual
Life |
Weighted
Average
Exercise
Price
|
|||||||||||||||||||
$ |
1.01
– 2.00
|
1,380,000 | 7.46 | $ | 1.66 | 1,321,667 | 7.57 | $ | 1.66 | ||||||||||||||||
2.01
– 3.00
|
315,000 | 8.41 | 2.40 | 281,667 | 8.82 | 2.36 | |||||||||||||||||||
3.01
– 4.00
|
8,522 | 6.62 | 3.38 | 8,522 | 6.62 | 3.38 | |||||||||||||||||||
4.01
– 5.00
|
286,000 | 5.66 | 4.34 | 286,000 | 5.66 | 4.34 |
2009
|
2008
|
|||||||
Current:
|
||||||||
Federal
|
$ | - | $ | - | ||||
State
|
- | - | ||||||
- | - | |||||||
Deferred:
|
||||||||
Federal
|
- | - | ||||||
State
|
- | - | ||||||
- | - | |||||||
Total
provision (benefit) for income taxes
|
$ | - | $ | - |
Years ended December 31,
|
||||||||
2009
|
2008
|
|||||||
Deferred
tax assets:
|
||||||||
Net
operating loss carryforwards
|
$ | 15,425,000 | $ | 11,572,000 | ||||
Stock
compensation
|
433,000 | 362,000 | ||||||
Unrealized
gains (losses) on warrants received for investment banking
services
|
143,000 | 187,000 | ||||||
Deferred
tax assets
|
16,001,000 | 12,121,000 | ||||||
Deferred
tax liabilities:
|
||||||||
Depreciation
and amortization
|
(55,000 | ) | (68,000 | ) | ||||
Amortization
of intangibles
|
(1,496,000 | ) | (1,288,000 | ) | ||||
Deferred
tax liabilities
|
(1,551,000 | ) | (1,356,000 | ) | ||||
Net
deferred tax assets before valuation allowance
|
14,450,000 | 10,765,000 | ||||||
Less:
Valuation allowance
|
(12,333,000 | ) | (8,648,000 | ) | ||||
Net
deferred tax assets
|
$ | 2,117,000 | $ | 2,117,000 |
2009
|
2008
|
|||||||
Computed
tax at the federal statutory rate of 34%
|
$ | (2,405,000 | ) | $ | (5,218,000 | ) | ||
State
taxes, net of federal benefit
|
(157,000 | ) | (332,000 | ) | ||||
Operating
loss carryforwards
|
2,491,000 | 317,000 | ||||||
Valuation
allowance
|
109,000 | 2,558,000 | ||||||
Amortization
of intangibles
|
(181,000 | ) | (59,000 | ) | ||||
Non-deductible
compensation
|
60,000 | 317,000 | ||||||
Unrealized
gains (losses) on warrants received for investment banking
services
|
37,000 | 237,000 | ||||||
Other
non-deductible expenses
|
46,000 | 116,000 | ||||||
$ | - | $ | - |
Year Ending
|
||||||||||||
December 31,
|
Offices
|
Equipment
|
Total
|
|||||||||
2010
|
$ | 1,964,838 | $ | 100,898 | $ | 2,065,736 | ||||||
2011
|
1,050,501 | 19,878 | 1,070,379 | |||||||||
2012
|
629,629 | 10,410 | 640,039 | |||||||||
2013
|
508,010 | - | 508,010 | |||||||||
2014
|
426,214 | - | 426,214 | |||||||||
Thereafter
|
46,494 | - | 46,494 | |||||||||
$ | 4,625,686 | $ | 131,186 | $ | 4,756,872 |
•
|
Increase
the Company’s trading revenue by adding additional stocks in which we
make
a market;
|
•
|
Expand
the Company’s trading capabilities by establishing fixed income trading
desks
that serve both institutional and retail
clients;
|
•
|
Expand
the Company’s institutional trading activities by continuing to add
quality
trading personnel with existing institutional
clients;
|
•
|
Continue
to recruit quality registered
representatives;
|
•
|
Expand
the Company’s offering of proprietary financial products to its retail
and
institutional customers;
|
•
|
Continue
to look for and close acquisitions of similar
businesses;
|
•
|
Added
an option team in the late part of
2009
|