UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
100 F
Street, NE
WASHINGTON,
D. C. 20549
FORM
10-Q
(Mark
One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF
1934
For the
quarterly period ended September 30, 2009
Or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF
1934
For the
transition period from: ______________________ to
______________________
Commission
File Number: 1-31292
(Exact
name of registrant as specified in its charter)
FLORIDA
|
59-3627212
|
(State
or Other Jurisdiction
|
(I.R.S.
Employer
|
of
Incorporation or Organization)
|
Identification
No.)
|
650 Fifth
Avenue, Third Floor New York, New York 10019
(Address
of Principal Executive Offices)
(Registrant's
Telephone Number, Including Area Code)
Indicate
by check mark whether the registrant (1) has filed all reports
required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934
during the preceding 12 months (or for such shorter period that the
registrant
was required to file such reports), and (2) has been subject to such
filing
requirements for the past 90 days. Yes
x
No
¨
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes
¨
No
¨
Indicate
by check mark whether the registrant is a large accelerated
filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.
See the definitions of "large accelerated filer," "accelerated filer"
and
"smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large
accelerated filer
¨
Accelerated
filer
¨
Non-accelerated
filer
¨
Smaller
reporting company
x
(Do not
check if a smaller reporting company)
Indicate
by check mark whether the registrant is a shell company (as
defined
in Rule 12b-2 of the Exchange
Act). Yes
¨
No
x
As of
October 31, 2009 there were 22,853,074 shares of common stock, par value
$.01 per
share, outstanding.
JESUP
& LAMONT, INC. AND SUBSIDIARIES
QUARTERLY
REPORT ON FORM 10-Q
FOR THE
QUARTERLY PERIOD ENDED SEPTEMBER 30, 2009
TABLE OF
CONTENTS
PART
I
FINANCIAL
INFORMATION
Item
1.
|
Financial
Statements
|
3
|
|
|
|
|
Condensed
Consolidated Statements of Financial Condition at September 30, 2009 and
December 31, 2008
|
3
|
|
|
|
|
Condensed
Consolidated Statements of Operations for the Three Months ended September
30, 2009 and 2008
|
4
|
|
|
|
|
Condensed
Consolidated Statements of Operations for the Nine Months ended September
30, 2009 and 2008
|
5
|
|
|
|
|
Condensed
Consolidated Statements of Cash Flows for the Nine Months Ended September
30, 2009 and 2008
|
6-7
|
|
|
|
|
Notes
to Condensed Consolidated Financial Statements
|
8-20
|
|
|
|
Item
2.
|
Management's
Discussion and Analysis of Financial Condition and
|
|
|
Results
of Operations
|
21-30
|
|
|
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
30
|
|
|
|
Item
4T.
|
Controls
and Procedures
|
30
|
|
|
|
PART
II
|
|
|
|
OTHER
INFORMATION
|
|
|
|
Item
1.
|
Legal
Proceedings
|
31
|
|
|
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
31
|
|
|
|
Item
3.
|
Defaults
Upon Senior Securities
|
31
|
|
|
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
31
|
|
|
|
Item
5.
|
Other
Information
|
31
|
|
|
|
Item
6.
|
Exhibits
|
31
|
|
|
|
Signatures
|
32
|
PART I -
FINANCIAL INFORMATION
ITEM
1. FINANCIAL STATEMENTS
JESUP
& LAMONT, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
|
|
September
30,
|
|
|
December
31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
1,084,235
|
|
|
$
|
410,840
|
|
Bank
certificate of deposit
|
|
|
2,005,288
|
|
|
|
-
|
|
Marketable
securities owned, at market value
|
|
|
238,544
|
|
|
|
37,027
|
|
Securities
not readily marketable, at estimated fair value
|
|
|
695,166
|
|
|
|
531,265
|
|
Commissions
and other receivables from clearing organizations
|
|
|
1,691,104
|
|
|
|
1,033,520
|
|
Other
receivables
|
|
|
1,838,253
|
|
|
|
1,849,816
|
|
Secured
demand note receivable
|
|
|
225,000
|
|
|
|
-
|
|
Deposits
at clearing organizations
|
|
|
2,999,497
|
|
|
|
655,359
|
|
Prepaid
expenses and other assets
|
|
|
663,880
|
|
|
|
513,393
|
|
Notes
receivable
|
|
|
1,578,656
|
|
|
|
1,310,889
|
|
Deferred
tax asset
|
|
|
2,117,000
|
|
|
|
2,117,000
|
|
Furniture
and equipment, net
|
|
|
565,518
|
|
|
|
527,692
|
|
Goodwill
|
|
|
13,272,165
|
|
|
|
13,272,165
|
|
Intangible
assets - customer lists and trademarks
|
|
|
4,101,806
|
|
|
|
4,143,601
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
33,076,112
|
|
|
$
|
26,402,567
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and Stockholders' Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable, accrued expenses and other liabilities
|
|
|
7,032,179
|
|
|
|
5,240,366
|
|
Due
to clearing organizations
|
|
|
1,287,839
|
|
|
|
1,180,108
|
|
Accrued
preferred stock dividends
|
|
|
666,753
|
|
|
|
445,568
|
|
Securities
sold, but not yet purchased, at market value
|
|
|
207,746
|
|
|
|
170,603
|
|
Notes
payable
|
|
|
15,871,238
|
|
|
|
12,552,317
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
25,065,755
|
|
|
|
19,588,962
|
|
|
|
|
|
|
|
|
|
|
Commitments
and Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subordinated
Note Payable
|
|
|
225,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity
|
|
|
|
|
|
|
|
|
Convertible
preferred stock, series C, F, and G
|
|
|
|
|
|
|
|
|
$.01
par value, 1,000,000 shares authorized
|
|
|
|
|
|
|
|
|
728,739
issued and outstanding
|
|
$
|
7,287
|
|
|
$
|
7,903
|
|
Common
stock, $.01 par value
|
|
|
|
|
|
|
|
|
100,000,000
shares authorized
|
|
|
|
|
|
|
|
|
22,853,074
shares issued and outstanding
|
|
|
228,531
|
|
|
|
223,977
|
|
Less:
Treasury Stock
|
|
|
(733,765
|
)
|
|
|
(733,765
|
)
|
Capital
stock subscribed
|
|
|
6,269,996
|
|
|
|
2,894,996
|
|
Additional
paid-in capital
|
|
|
38,109,172
|
|
|
|
37,328,573
|
|
Accumulated
deficit
|
|
|
(36,095,864
|
)
|
|
|
(32,908,079
|
)
|
|
|
|
|
|
|
|
|
|
Total
stockholders' equity
|
|
|
7,785,357
|
|
|
|
6,813,605
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders' equity
|
|
$
|
33,076,112
|
|
|
$
|
26,402,567
|
|
See
accompanying notes to the condensed consolidated financial
statements.
JESUP
& LAMONT, INC. AND SUBSIDIARIES (UNAUDITED)
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
Three
Months Ended
|
|
|
|
September
30,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
Commissions
and fees
|
|
$
|
7,994,432
|
|
|
$
|
6,960,884
|
|
Equity
market making trading revenues, net
|
|
|
1,098,565
|
|
|
|
1,547,917
|
|
Investment
banking income
|
|
|
945,405
|
|
|
|
1,333,375
|
|
Net
gain (loss) on securities received for banking services
|
|
|
76,179
|
|
|
|
(190,602
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
10,114,581
|
|
|
|
9,651,574
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
Employee
compensation and benefits
|
|
|
5,898,880
|
|
|
|
6,906,442
|
|
Commissions,
clearing and execution costs
|
|
|
3,440,927
|
|
|
|
4,343,310
|
|
General
and administrative
|
|
|
1,241,537
|
|
|
|
2,534,890
|
|
Communications
and data processing
|
|
|
229,219
|
|
|
|
187,493
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,810,563
|
|
|
|
13,972,135
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(695,982
|
)
|
|
|
(4,320,561
|
)
|
|
|
|
|
|
|
|
|
|
Other
income (expenses)
|
|
|
|
|
|
|
|
|
Other
income
|
|
|
7,844
|
|
|
|
-
|
|
Forgiveness
of indebtedness
|
|
|
541,833
|
|
|
|
-
|
|
Interest
income
|
|
|
-
|
|
|
|
8,229
|
|
Interest
expense
|
|
|
(325,724
|
)
|
|
|
(210,362
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
223,953
|
|
|
|
(202,133
|
)
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
(472,029
|
)
|
|
|
(4,522,694
|
)
|
|
|
|
|
|
|
|
|
|
Accrued
preferred stock dividends
|
|
|
(86,641
|
)
|
|
|
(91,143
|
)
|
|
|
|
|
|
|
|
|
|
Loss
applicable to common shareholders
|
|
$
|
(558,670
|
)
|
|
$
|
(4,613,837
|
)
|
|
|
|
|
|
|
|
|
|
Basic
and diluted loss per share applicable to common
shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
per share-basic
|
|
$
|
(0.02
|
)
|
|
$
|
(0.27
|
)
|
|
|
|
|
|
|
|
|
|
Loss
per share diluted
|
|
$
|
(0.02
|
)
|
|
$
|
(0.27
|
)
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
29,452,047
|
|
|
|
17,387,654
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
29,452,047
|
|
|
|
17,387,654
|
|
See
accompanying notes to the condensed consolidated financial
statements.
JESUP
& LAMONT, INC. AND SUBSIDIARIES (UNAUDITED)
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
Nine
Months Ended
|
|
|
|
September
30,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
Commissions
and fees
|
|
$
|
20,127,077
|
|
|
$
|
22,013,780
|
|
Equity
market making trading revenues, net
|
|
|
2,977,073
|
|
|
|
6,333,726
|
|
Investment
banking income
|
|
|
1,686,795
|
|
|
|
3,343,861
|
|
Net
gain (loss) on securities received for banking services
|
|
|
1,768,314
|
|
|
|
(424,565
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
26,559,259
|
|
|
|
31,266,802
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
Employee
compensation and benefits
|
|
|
15,328,582
|
|
|
|
16,720,583
|
|
Commissions,
clearing and execution costs
|
|
|
9,029,814
|
|
|
|
16,182,181
|
|
General
and administrative
|
|
|
4,271,122
|
|
|
|
6,709,379
|
|
Communications
and data processing
|
|
|
516,842
|
|
|
|
708,343
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,146,360
|
|
|
|
40,320,486
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(2,587,101
|
)
|
|
|
(9,053,684
|
)
|
|
|
|
|
|
|
|
|
|
Other
income (expenses)
|
|
|
|
|
|
|
|
|
Other
income
|
|
|
10,780
|
|
|
|
806,744
|
|
Forgiveness
of indebtedness
|
|
|
541,833
|
|
|
|
-
|
|
Interest
income
|
|
|
|
|
|
|
43,289
|
|
Interest
expense
|
|
|
(932,113
|
)
|
|
|
(1,307,974
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(379,500
|
)
|
|
|
(457,941
|
)
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
(2,966,601
|
)
|
|
|
(9,511,625
|
)
|
|
|
|
|
|
|
|
|
|
Accrued
preferred stock dividends
|
|
|
(221,185
|
)
|
|
|
(181,109
|
)
|
|
|
|
|
|
|
|
|
|
Loss
applicable to common shareholders
|
|
$
|
(3,187,786
|
)
|
|
$
|
(9,692,734
|
)
|
|
|
|
|
|
|
|
|
|
Basic
and diluted loss per share applicable to common
shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
per share-basic
|
|
$
|
(0.11
|
)
|
|
$
|
(0.56
|
)
|
|
|
|
|
|
|
|
|
|
Loss
per share diluted
|
|
$
|
(0.11
|
)
|
|
$
|
(0.56
|
)
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
29,279,722
|
|
|
|
17,313,253
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
29,279,722
|
|
|
|
17,313,253
|
|
See
accompanying notes to the condensed consolidated financial
statements.
JESUP
& LAMONT, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
|
|
Nine
Months Ended
|
|
|
|
September
30,
|
|
|
|
2009
|
|
|
2008
|
|
Cash
flows from operating activities
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(2,966,601
|
)
|
|
$
|
(9,511,625
|
)
|
Adjustments
to reconcile net loss to net cash used by operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
508,701
|
|
|
|
804,414
|
|
Unrealized
(gain) loss on securities
|
|
|
(122,342
|
)
|
|
|
(121,336
|
)
|
Stock
compensation expense
|
|
|
159,537
|
|
|
|
692,166
|
|
Allowance
for notes receivable
|
|
|
411,000
|
|
|
|
-
|
|
Deferred
rent
|
|
|
5,849
|
|
|
|
-
|
|
Gain
on settlement with former officer
|
|
|
-
|
|
|
|
(806,744
|
)
|
Forgiveness
of note payable and interest
|
|
|
(541,833
|
)
|
|
|
-
|
|
Issuance
of stock to pay legal expenses
|
|
|
-
|
|
|
|
170,000
|
|
(Increase)
decrease in operating assets:
|
|
|
|
|
|
|
|
|
Commissions
receivable from clearing organizations
|
|
|
(657,584
|
)
|
|
|
50,818
|
|
Deposits
at clearing organizations
|
|
|
(2,344,138
|
)
|
|
|
2,116,337
|
|
Other
receivables
|
|
|
11,563
|
|
|
|
(108,550
|
)
|
Marketable
trading account securities, net
|
|
|
(243,076
|
)
|
|
|
4,680,695
|
|
Prepaid
expenses and other assets
|
|
|
(150,487
|
)
|
|
|
(5,824
|
)
|
Increase
(decrease) in operating liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable, accrued expenses and other liabilities
|
|
|
2,016,577
|
|
|
|
292,240
|
|
Payable
to clearing organizations
|
|
|
107,731
|
|
|
|
(6,128,305
|
)
|
Securities
sold, not yet purchased
|
|
|
37,143
|
|
|
|
(74,487
|
)
|
|
|
|
|
|
|
|
|
|
Total
adjustments
|
|
|
(801,359
|
)
|
|
|
1,561,424
|
|
|
|
|
|
|
|
|
|
|
Cash
used by operating activities
|
|
|
(3,767,960
|
)
|
|
|
(7,950,201
|
)
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities
|
|
|
|
|
|
|
|
|
Bank
certificate of deposits
|
|
|
(2,005,288
|
)
|
|
|
-
|
|
Purchases
of furniture and equipment
|
|
|
(226,350
|
)
|
|
|
(298,030
|
)
|
Issuance
of notes receivable
|
|
|
(910,015
|
)
|
|
|
(448,000
|
)
|
|
|
|
|
|
|
|
|
|
Total
cash used by investing activities
|
|
|
(3,141,653
|
)
|
|
|
(746,030
|
)
|
Continued
on next page
See
accompanying notes to the condensed consolidated financial
statements.
JESUP
& LAMONT, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Continued
|
|
Nine
Months Ended
|
|
|
|
September
30,
|
|
|
|
2009
|
|
|
2008
|
|
Cash
flows from financing activities
|
|
|
|
|
|
|
Payments
of notes payable
|
|
|
(641,992
|
)
|
|
|
(1,725,339
|
)
|
Proceeds
from 9% convertible debenture
|
|
|
2,000,000
|
|
|
|
-
|
|
Proceeds
from new loans
|
|
|
2,600,000
|
|
|
|
-
|
|
Proceeds
from sale of preferred stock
|
|
|
-
|
|
|
|
1,997,495
|
|
Proceeds
from common stock subscribed
|
|
|
3,550,000
|
|
|
|
2,619,996
|
|
Proceeds
from sale of common stock
|
|
|
|
|
|
|
6,038,105
|
|
Proceeds
from Clearing organization advance
|
|
|
75,000
|
|
|
|
-
|
|
Fees
and commissions paid for sale of stock
|
|
|
-
|
|
|
|
(288,183
|
)
|
|
|
|
|
|
|
|
|
|
Total
cash provided by financing activities
|
|
|
7,583,008
|
|
|
|
8,642,074
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
|
673,395
|
|
|
|
(54,157
|
)
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at beginning of period
|
|
|
410,840
|
|
|
|
535,536
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at end of period
|
|
$
|
1,084,235
|
|
|
$
|
481,379
|
|
|
|
|
|
|
|
|
|
|
Supplemental
cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
paid
|
|
$
|
130,948
|
|
|
$
|
244,269
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures of non-cash investing and financing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Converted
debenture note to common stock
|
|
$
|
450,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Accrued
preferred stock dividends, net of payments
|
|
$
|
221,185
|
|
|
$
|
181,109
|
|
|
|
|
|
|
|
|
|
|
Line
of credit converted to note payable
|
|
|
-
|
|
|
$
|
1,999,450
|
|
|
|
|
|
|
|
|
|
|
Notes
payable forgiven
|
|
$
|
311,220
|
|
|
$
|
861,105
|
|
|
|
|
|
|
|
|
|
|
Other
assets offset against notes payable
|
|
|
-
|
|
|
$
|
675,297
|
|
|
|
|
|
|
|
|
|
|
Secured
demand note receivable
|
|
|
225,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Secured
demand note payable
|
|
|
(225,000
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Issuance
of note to pay liability
|
|
|
-
|
|
|
$
|
50,640
|
|
|
|
|
|
|
|
|
|
|
Acquisition
of treasury stock
|
|
|
-
|
|
|
$
|
733,765
|
|
|
|
|
|
|
|
|
|
|
Conversion
of Series F preferred stock to common
|
|
$
|
615
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Issuance
of stock to pay liability
|
|
$
|
-
|
|
|
$
|
170,000
|
|
See
accompanying notes to the condensed consolidated financial
statements.
JESUP
& LAMONT, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
1.
Description of Business and Basis of Presentation
DESCRIPTION
OF BUSINESS - The accompanying financial statements include the accounts of
Jesup & Lamont, Inc. ("JLI"), a Florida corporation, and its consolidated
subsidiaries, Empire Financial Group, Inc. ("EFG"), Empire Investment Advisors,
Inc. ("EIA"), and Jesup & Lamont Securities Corporation ("JLSC"),
collectively “the Company”. All intercompany transactions and
accounts have been eliminated in consolidation.
JLSC is
an introducing securities broker-dealer that provides brokerage and advisory
services to retail and institutional customers and a trading platform, order
execution services and market making services for domestic and international
securities to its customers and network of independent registered
representatives. EIA and JLSC provide fee-based investment advisory
services to their customers. EFG ceased brokerage operations in
November 2008.
The
Company's executive offices are located in New York, New York with independent
registered representatives throughout the United States.
BASIS OF
PRESENTATION - The condensed consolidated financial statements are unaudited and
have been prepared in accordance with accounting principles generally accepted
in the United States of America (“GAAP”) for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X.
In the opinion of management, the interim data includes all adjustments,
consisting of normal recurring adjustments, necessary for a fair statement of
the results for the periods presented. Because of the nature of the Company’s
business, interim period results may not be indicative of full year or future
results.
The
unaudited condensed consolidated financial statements do not include all
information and notes required in annual financial statements in conformity with
GAAP. The statement of financial condition at December 31, 2008 has been
derived from the audited financial statements at that date, but does not include
all of the information and notes required by GAAP for complete financial
statement presentation. Please refer to the notes to the consolidated financial
statements included in the Company’s annual report on Form 10-K for the year
ended December 31, 2008, as amended (“Form 10-K”), filed with the SEC,
for additional disclosures and a description of the Company’s accounting
policies.
Certain
prior year items have been reclassified to conform to the current period’s
presentation. All intercompany balances and transactions have been
eliminated.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
RECENT
ACCOUNTING PRONOUNCEMENTS -
FASB Accounting
Standards Codification
(Accounting Standards Update (“ASU”)
2009-01)
In June
2009, FASB approved the FASB Accounting Standards Codification (“the
Codification”) as the single source of authoritative nongovernmental GAAP. All
existing accounting standard documents, such as FASB, American Institute of
Certified Public Accountants, Emerging Issues Task Force and other related
literature, excluding guidance from the Securities and Exchange Commission
(“SEC”), have been superseded by the Codification. All other non-grandfathered,
non-SEC accounting literature not included in the Codification has become
non authoritative. The Codification did not change GAAP, but instead
introduced a new structure that combines all authoritative standards into a
comprehensive, topically organized online database. The Codification is
effective for interim or annual periods ending after September 15, 2009, and
impacts the Company’s financial statements as all future references to
authoritative accounting literature will be referenced in accordance with the
Codification. There have been no changes to the content of the Company’s
financial statements or disclosures as a result of implementing the Codification
during the quarter ended September 30, 2009.
As a result of the Company’s
implementation of the Codification during the quarter ended September 30, 2009,
previous references to new accounting standards and literature are no longer
applicable. In the current quarter financial statements, the Company will
provide reference to both new and old guidance to assist in understanding the
impacts of recently adopted accounting literature, particularly for guidance
adopted since the beginning of the current fiscal year but prior to the
Codification.
JESUP
& LAMONT, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
SECURITIES
TRANSACTIONS - Securities transactions and the related revenue and expense are
recorded on a trade date basis.
TRADING
INCOME - Consists of net realized and net unrealized gains and losses on
securities traded for the Company's own account. Trading revenue is
generated from the difference between the price paid to buy securities and the
amount received from the sale of securities. Volatility of stock
prices, which can result in significant price fluctuations in short periods of
time, may result in trading gains or losses. Gains or losses are
recorded on a trade date basis.
MARKET-MAKING
ACTIVITIES - Securities owned and securities sold, but not yet purchased, which
primarily consist of listed, over-the-counter, American Depository Receipts and
foreign ordinary stocks, are carried at market value and are recorded on a trade
date basis. Market value is estimated daily using market quotations
available from major securities exchanges and dealers.
CLEARING
ARRANGEMENTS – The Company does not carry accounts for customers or perform
custodial functions related to customers' securities. The Company
introduces all of its customer transactions to its clearing brokers, who
maintain the Company’s customer accounts and clear such
transactions. Additionally, the clearing brokers provide the clearing
and depository operations for the Company’s proprietary securities
transactions. These activities may expose the Company to
off-balance-sheet risk in the event that customers do not fulfill their
obligations with the primary clearing brokers, as the Company has agreed to
indemnify its clearing brokers for any resulting losses. The Company
continually assesses the risk associated with each customer who is on margin
credit and records an estimated loss when it believes collection from the
customer is unlikely.
SHARE-BASED
COMPENSATION is accounted for under the fair value
method. Share-based payments to employees, including grants of stock
options, are charged to expense over the requisite service period based on the
grant date fair value of the awards. The Company uses the
Black-Scholes option valuation model to determine the fair value of the options
granted. The model includes subjective input assumptions that can materially
affect the fair value estimates. The model was developed for use in estimating
the fair value of traded options that have no vesting restrictions and that are
fully transferable. Options issued under the Company's option plan have
characteristics that differ from traded options. Principal
assumptions used in applying the Black-Scholes model are outlined below. In
selecting these assumptions, we considered the guidance for estimating expected
volatility as set forth in ASC 718 “Compensation – Stock Compensation” formerly
SFAS No. 123(R). Volatility is a measure of the amount by which the Company's
common stock price has fluctuated (historical volatility) or is expected to
fluctuate (expected volatility).
Expected
dividend yield
|
|
None
|
|
Risk-free
interest rate
|
|
|
3.5
|
%
|
Expected
life
|
|
5 -
8 years
|
|
Volatility
|
|
|
58%
- 112
|
%
|
JESUP
& LAMONT, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
FAIR
VALUE MEASUREMENT – Financial and non-financial assets and liabilities are
measured at their fair value. Assets are valued at fair value
determined based on the assets highest and best use. Non-financial
assets are valued based on the price that would be received in a current
exchange transaction. The fair value of liabilities is generally
determined assuming the liability is transferred to a market
participant. When quoted market prices for liabilities are not
available, the Company measures such liabilities at their present
value. The Company categorizes its assets and liabilities that are
measured at fair value into a three-level fair value hierarchy as set forth
below. The inputs used to measure fair value fall within different levels of the
hierarchy. The categorization is based on the lowest level input that is
significant to the fair value measurement. The three levels of the hierarchy are
defined as follows:
Level 1 —
inputs to the valuation methodology are quoted prices (unadjusted) for
identical assets or liabilities in active markets.
Level 2 —
inputs to the valuation methodology include quoted prices for similar assets and
liabilities in active markets, and inputs that are observable for the asset or
liability, either directly or indirectly, for substantially the full term of the
financial instrument.
Level 3 — inputs to the valuation
methodology are unobservable and significant to the fair value
measurement
.
They are
based on best information available in the absence of level 1 and 2
inputs.
The
Company’s Level 1 Assets which include marketable securities owned and our
securities sold, but not yet purchased, are valued at fair value using quoted
market prices in active markets for identical securities. Gains or
losses are recorded on a trade date basis and are included in the Company’s
consolidated statements of operations in “Equity market making trading, revenue,
net”.
The
Company’s Level 3 Assets which include securities not readily marketable are
valued at fair value using listed market prices, where possible. If
listed market prices are not available or if the liquidation of the Company’s
positions would reasonably be expected to impact market prices, then fair value
is determined based on other relevant factors, including dealer price quotations
and marketability. Warrants received from investment banking
engagements are generally valued using the Black-Scholes option valuation model
and the Company may reduce the value if there is a restriction as to when the
warrants may be exercised. The Black-Scholes method uses assumptions
such as volatility, interest rates, and dividend yields to determine
value. Realized gains or losses are recorded on a settlement date
basis and unrealized gains or losses are recorded on the valuation
date. Realized and unrealized gains or losses are included in our
consolidated statements of operations in “Net gain (loss) on securities received
for banking services”.
The
Company has no Level 2 Assets at September 30, 2009 or December 31,
2008. The Company had no material changes in its valuation techniques
for the nine months ended September 30, 2009 or year ended December 31,
2008.
COMMISSIONS
RECEIVABLE FROM CLEARING ORGANIZATIONS - Receivables from broker dealers and
clearing organizations represent monies due to the Company from its clearing
agents for transactions processed.
FURNITURE
AND EQUIPMENT, NET - Property and equipment are recorded at cost. Depreciation
on property and equipment is provided utilizing the straight-line method over
the estimated useful lives of the related assets, which range from five to seven
years. Upon the sale or retirement of an asset, the related costs and
accumulated depreciation are removed from the accounts and any gain or loss is
recognized in the Company’s results of operations.
JESUP
& LAMONT, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
GOODWILL
AND OTHER INTANGIBLE ASSETS – goodwill and intangible assets with indefinite
useful lives are not amortized. Intangible assets with finite useful
lives are amortized generally on a straight-line basis over the periods
benefited. Goodwill represents the excess of acquisition costs over the
fair value of net assets of businesses purchased. The reported
amounts of goodwill are reviewed for impairment on an annual basis and more
frequently when negative conditions such as significant current or projected
operating losses exist. The annual impairment test for Goodwill and
Other Intangible Assets is a two-step process and involves comparing the
estimated fair value of each reporting unit to the reporting unit's carrying
value, including goodwill. If the fair value of the reporting unit
exceeds its carrying amount, goodwill of the reporting unit is not considered
impaired, and the second step of the impairment test is
unnecessary. If the carrying amount of a reporting unit exceeds its
fair value, the second step of the goodwill impairment test would be performed
to measure the amount of impairment loss to be recorded, if any. The Company’s
annual impairment test resulted in no goodwill impairment. In
addition, based upon management’s assessment, the Company determined that no
goodwill impairment triggering events have occurred during the nine months ended
September 30, 2009.
INCOME
TAXES - The Company accounts for income taxes using the liability method in
accordance with SFAS No. 109,
Accounting for Income Taxes (now ASC
Topic 740, Income Taxes)
. Tax benefits or expenses are
recognized based on the temporary differences between the tax basis and
financial basis of its assets and liabilities. Therefore deferred
income tax assets and liabilities represent the tax effects differences between
the financial and tax basis of assets and liabilities that will result in
taxable or deductible amounts in the future, based on enacted tax laws and rates
applicable to the periods in which the differences are expected to affect
taxable income. A valuation allowance is recognized if, based on the
weight of available evidence, it is more likely than not that some portion or
all of the future tax benefits of deferred tax assets will not be
realized.
The
Company evaluates tax positions to determine whether the benefits of tax
positions are more likely than not of being sustained upon audit based on the
technical merits of the tax position. For tax positions that are more likely
than not of being sustained upon audit, the Company recognizes the largest
amount of the benefit that is greater than 50% likely of being realized upon
ultimate settlement in the financial statements. For tax positions that are not
more likely than not of being sustained upon audit, the Company does not
recognize any portion of the benefit in the financial statements.
USE OF
ESTIMATES - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenue and expense during the reporting period. Actual results could
differ from those estimates.
EARNINGS
(LOSS) PER SHARE - Basic earnings (loss) per share is computed by dividing net
income (loss) available to common stockholders by the weighted-average number of
common shares outstanding for the period. Diluted earnings (loss) per
share considers the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or resulted in issuance of common
stock. Diluted earnings (loss) per share reflects the potential
dilution that could occur if securities or other contracts to issue common
stock, such as options, convertible notes and convertible preferred stock, were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in earnings (loss). Such potential additional
common shares are included in the computation of diluted earnings per
share. Diluted loss per share is not computed because any potential
additional common shares would reduce the reported loss per share and therefore
have an antidilutive effect.
3. NOTES
RECEIVABLE
Notes
receivable represent advances made to certain registered representatives in
Company owned offices, and are presented net of an allowance for estimated
uncollectible amounts.
JESUP
& LAMONT, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
4.
INTANGIBLE ASSETS
At the
dates presented in the statements of financial condition intangible assets
consisted of the following:
|
|
September
30,
|
|
|
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
|
|
|
(337,537
|
)
|
|
|
(295,742
|
)
|
Net
Customer list
|
|
$
|
819,729
|
|
|
$
|
861,524
|
|
Amortization
expense for the customer list was $41,795 and $120,545 for the nine months ended
September 30, 2009 and 2008, respectively.
The
estimated annual aggregate amortization expense related to the customer list for
the five succeeding fiscal years is as follows:
Year
Ending
|
|
|
|
December 31
|
|
|
|
2009
|
|
$
|
115,727
|
|
2010
|
|
|
115,727
|
|
2011
|
|
|
115,727
|
|
2012
|
|
|
115,727
|
|
2013
|
|
|
115,727
|
|
The value
of the Company’s intangible assets is based on whether they make useful
contributions toward the generation of future earnings. The Company
performed an impairment test of its intangible assets as of December 31, 2008
and determined it had no impairment of intangible assets at that
date. See the Company’s 2008 Annual Report on Form 10-K for
details. However, because of the Company’s history of operating
losses, management continually evaluates the realization of future economic
benefits.
JESUP
& LAMONT, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
5. NOTES
PAYABLE
Notes
payable at September 30, 2009 and December 31, 2008, consisted of the
following:
|
|
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.
|
|
|
1,862,997
|
|
|
|
2,000,000
|
|
·
Convertible
debenture payable to Legent Clearing, LLC at an annual rate of
9.0%. The note matures February 26, 2014, and is convertible
into common stock at $.50 per share.
|
|
|
2,000,000
|
|
|
|
-
|
|
·
Unsecured note
payable to the stockholders of Jesup & Lamont Holding Corporation
(former parent of JLSC). The note 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 LIBOR rate plus 10% (currently 10.25%) due on demand with
monthly principal payments of $30,000. Converted from a line of
credit as explained in Note 6 below.
|
|
|
869,449
|
|
|
|
1,149,450
|
|
·
Short term
note payable to shareholder, with interest of 8%, originally due on April
2, 2009 but extended to December 31, 2009.
|
|
|
850,000
|
|
|
|
1,000,000
|
|
·
Unsecured note
payable to investor, interest is payable quarterly at 10% per year, with a
maturity of June 7, 2010.
|
|
|
500,000
|
|
|
|
-
|
|
·
Unsecured note
payable to a shareholder, principal and interest at 15% per annum, due at
maturity date of January 16, 2009; has since become payable on
demand.
|
|
|
400,000
|
|
|
|
400,000
|
|
·
Subordinated
note payable to EFH Partners, interest an annual rate of 20.0%, originally
payable at maturity on February 17, 2007. The note was extended
to April 1, 2009 at a 4.0% 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
5.0%. Principal and interest payable on demand.
|
|
|
66,534
|
|
|
|
66,534
|
|
·
Unsecured note
payable to the Financial Industry Regulatory Authority (“FINRA”), interest
at 8.25% per annum, payable monthly thru April 2012.
|
|
|
45,875
|
|
|
|
45,863
|
|
Total
principal payable
|
|
|
16,002,188
|
|
|
|
12,730,400
|
|
Less:
unamortized discount on note to stockholders of Jesup & Lamont Holding
Corporation
|
|
|
(130,950
|
)
|
|
|
(178,083
|
)
|
|
|
|
|
|
|
|
|
|
Total
notes payable net of discount
|
|
$
|
15,871,238
|
|
|
$
|
12,552,317
|
|
JESUP
& LAMONT, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
The
annual maturities of principal on the notes payable are as follows:
Year ending December 31
|
|
Principal
|
|
|
Interest
|
|
2009
– remaining balance
|
|
$
|
1,635,597
|
|
|
$
|
883,349
|
|
2010
|
|
|
2,973,125
|
|
|
|
920,382
|
|
2011
|
|
|
1,700,800
|
|
|
|
736,139
|
|
2012
|
|
|
5,829,669
|
|
|
|
376,232
|
|
2013
|
|
|
-
|
|
|
|
740,256
|
|
Thereafter
|
|
|
3,862,997
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
16,002,188
|
|
|
$
|
3,656,358
|
|
Interest
on these notes totaled $627,280 and $574,057 for the nine months ended September
30, 2009 and 2008, respectively.
6. NOTE
PAYABLE TO BANK
On
January 31, 2007, the Company obtained a $2 million credit line from Fifth Third
Bank. As part of that credit line agreement, we pledged 100% of EFG's
and JLSC's stock as collateral. At December 31, 2007 the Company had
drawn $1,999,450 of the line. The line expired on February 1, 2008
and was converted to a note payable due January 31, 2009 and then extended to
April 2, 2009. The note was further extended and converted to a
demand note on July 2, 2009. Principal is payable at $30,000 per
month. All prior requirements of the original note still exist
including the collateral. Should this note be called for payment and
the Company was not able to obtain an extension or alternative financing, it
could impair the Company’s liquidity and force it to reduce or curtail
operations. See Note 5.
7.
ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER LIABILITIES
Accounts
payable, accrued expenses and other liabilities consisted of the
following:
|
|
September
30,
|
|
|
December
31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
566,889
|
|
|
$
|
1,101,365
|
|
Accrued
payroll
|
|
|
2,382,010
|
|
|
|
1,282,490
|
|
Accrued
payroll taxes
|
|
|
1,772,545
|
|
|
|
112,298
|
|
EKN
settlement accrual
|
|
|
534,517
|
|
|
|
872,000
|
|
Accrued
legal
|
|
|
428,685
|
|
|
|
564,135
|
|
Accrued
interest on notes
|
|
|
432,234
|
|
|
|
356,899
|
|
Other
accrued expenses and liabilities
|
|
|
915,299
|
|
|
|
951,179
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
$
|
7,032,179
|
|
|
$
|
5,240,366
|
|
8. DUE TO
CLEARING ORGANIZATIONS
The
amount due to clearing organizations of $1,287,839 at September 30, 2009
includes a balance of $1,249,831 owed to EFG's former clearing firm, under a
promissory note to the clearing broker against whom the Company is in
litigation. A total of $500,000 of this balance relates to a fee
charged to enter into the promissory note agreement. This promissory
note documents JLI's previous agreement which precludes this clearing broker
from collecting this note from EFG. The note bears interest at the
Broker's Call Rate plus 2.45%. The note may be paid at anytime but has no
defined maturity. The note is personally guaranteed by JLI's Chairman
and JLI's President. The note, as had been previously agreed with the
clearing broker, is collateralized by warrants held by the Company and is
further cross collateralized by all of the shares of JLI held by EFH Partners,
Inc.
JESUP
& LAMONT, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
9. Equity
market making trading revenue
Trading
income includes market making revenue which consists of net realized and net
unrealized gains and losses on securities traded for the Company's own
account. Trading revenue is generated from the difference between the
price paid to buy securities and the amount received from the sale of
securities. Volatility of stock prices can result in significant
price fluctuations in short periods of time and may result in trading gains or
losses. Gains or losses are recorded on a trade date basis. Trading
revenue consisted of the following.
|
|
Nine
months ended
September
30,
|
|
|
Three
months ended
September
30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
Net
realized gains and losses
|
|
$
|
3,018,632
|
|
|
$
|
5,917,098
|
|
|
$
|
1,120,393
|
|
|
$
|
1,570,842
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
gains
|
|
|
-
|
|
|
|
860,957
|
|
|
|
-
|
|
|
|
116,770
|
|
Unrealized
losses
|
|
|
(41,559
|
)
|
|
|
(444,329
|
)
|
|
|
(21,828
|
)
|
|
|
(139,695
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading
income, net
|
|
$
|
2,977,073
|
|
|
$
|
6,333,726
|
|
|
$
|
1,098,565
|
|
|
$
|
1,547,917
|
|
10.
INVESTMENT BANKING INCOME
Investment
banking income consists of cash fees and warrants or other securities received
as payment for the Company’s investment banking services. The
Black-Scholes valuation model is used to estimate the fair value of the warrants
received and held for investment. The change in the valuation of
these warrants held for investment is accounted for as unrealized
gain/loss. When the warrants are sold the gain or loss is recognized
as realized gain/loss. The volatility of stock prices underlying
these warrants can result in significant price fluctuations in short periods of
time. The fluctuations in the value of the warrants result in
unrealized gains or losses. Investment banking revenue consisted of
the following:
|
|
Nine
months ended September 30,
|
|
|
Three
months ended September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
Investment
banking fees
|
|
$
|
1,686,795
|
|
|
$
|
3,343,861
|
|
|
$
|
945,405
|
|
|
$
|
1,333,375
|
|
Gains/(Loss)
from warrants
|
|
|
1,768,314
|
|
|
|
(424,565
|
)
|
|
|
76,179
|
|
|
|
(190,602
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,455,109
|
|
|
$
|
2,919,296
|
|
|
$
|
1,021,584
|
|
|
$
|
1,142,773
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains
and losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized
gains
|
|
$
|
1,604,903
|
|
|
$
|
230,224
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
Gain (losses)
|
|
|
163,411
|
|
|
|
(654,789
|
)
|
|
|
76,179
|
|
|
|
(190,602
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,768,314
|
|
|
$
|
(424,565
|
)
|
|
$
|
76,179
|
|
|
$
|
(190,602
|
)
|
JESUP
& LAMONT, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
11. LOSS
PER SHARE
The
calculation of loss per share is as follows:
|
|
Nine
months Ended September 30,
|
|
|
Three
months Ended September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
Numerator
for loss per share:
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(2,966,601
|
)
|
|
$
|
(9,511,625
|
)
|
|
$
|
(472,029
|
)
|
|
$
|
(4,522,694
|
)
|
Preferred
stock dividends
|
|
|
(221,185
|
)
|
|
|
(181,109
|
)
|
|
|
(86,641
|
)
|
|
|
(91,143
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
attributable to common stockholders
|
|
$
|
(3,187,786
|
)
|
|
$
|
(9,692,734
|
)
|
|
$
|
(558,670
|
)
|
|
$
|
(4,613,837
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator
for loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted weighted-average shares:
|
|
|
29,279,722
|
|
|
|
17,313,253
|
|
|
|
29,452,047
|
|
|
|
17,387,654
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
loss per share
|
|
$
|
(0.11
|
)
|
|
$
|
(0.56
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.27
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
loss per share
|
|
$
|
(0.11
|
)
|
|
$
|
(0.56
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.27
|
)
|
The
Company’s loss attributable to common stockholders, along with the dilutive
effect of potentially issuable common stock due to outstanding options,
warrants, and convertible securities causes the normal computation of diluted
loss per share to be smaller than the basic loss per share; thereby yielding a
result that is counterintuitive. Consequently, the diluted loss per
share amount presented does not differ from basic loss per share due to this
“anti-dilutive” effect.
At
September 30, 2009 and 2008, the Company had potentially dilutive common shares
attributable to the following:
|
|
Nine
months Ended September 30,
|
|
|
Three
months Ended September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
Warrants
|
|
|
6,974,242
|
|
|
|
8,583,828
|
|
|
|
6,974,242
|
|
|
|
8,583,828
|
|
Stock
options
|
|
|
2,033,022
|
|
|
|
3,431,522
|
|
|
|
2,033,022
|
|
|
|
3,431,522
|
|
Convertible
preferred stock Series C,F and G
|
|
|
3,554,449
|
|
|
|
3,615,987
|
|
|
|
3,554,449
|
|
|
|
3,615,987
|
|
Convertible
notes
|
|
|
6,408,840
|
|
|
|
2,597,124
|
|
|
|
6,408,840
|
|
|
|
2,597,124
|
|
Warrants
subscribed
|
|
|
2,481,670
|
|
|
|
293,812
|
|
|
|
2,015,075
|
|
|
|
293,812
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,452,223
|
|
|
|
18,522,273
|
|
|
|
20,985,628
|
|
|
|
18,522,273
|
|
12.
EQUITY
During
the nine months ended September 30, 2009 the Company received and recorded stock
subscriptions totaling $3,550,000 for stock offerings to be completed during the
fourth quarter of 2009. During the nine months ended September 30,
2009, 205,552 shares were issued for stock subscribed in 2008.
JESUP
& LAMONT, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
The table
below outlines the conversion price of all outstanding convertible
preferred
stock issues:
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.
|
|
|
719,989
|
|
|
|
4.0
|
%
|
|
|
719,989
|
|
|
$
|
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
|
|
|
728,739
|
|
|
|
|
|
|
|
3,554,449
|
|
|
|
|
|
13.
INCOME TAXES
The
current loss for the nine months ended September 30, 2009 results in an increase
in the Company’s net operating loss carryforward and causes the net deferred tax
assets to increase by $1,000,000 to $13,482,000 at September 30, 2009 from
$12,482,000 at December 31, 2008. Management increased the valuation
allowance to $11,365,000 or a net of $2,117,000, resulting in no deferred taxes
for the nine months ended September 30, 2009.
The
Company has net operating loss carry forwards for federal tax purposes of
approximately $29,000,000 which expire in years 2022 through
2029. The amount deductible per year is limited to $576,000 on loss
carryforwards of $4,376,000 and unlimited on the remaining loss carryforwards
under current tax regulations.
The
Company would need to generate approximately $5.5 million of pre-tax income to
realize the remaining net deferred tax assets. The Company’s
projections show that this would be realized by the year 2017.
14.
COMMITMENTS AND CONTINGENCIES
Regulatory
and Legal Matters
A
competing brokerage firm commenced arbitration by filing a Statement of Claim on
October 14, 2005 before FINRA alleging, among other things, that EFG improperly
solicited Claimant's brokers for employment with EFG. To that end,
Claimant asserted claims against EFG for tortuous interference with contractual
relationships and aiding and abetting breach of fiduciary
duty. Claimant sought $10,000,000 in damages from EFG. This claim was
settled in 2009 with no damages to EFG.
JESUP
& LAMONT, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
A former
employee has filed a claim against the Company in the amount of $5 million
alleging employee discrimination. Another former employee has filed a
claim against the Company in the amount $500,000 alleging breach of contract and
wrongful termination. A former broker has filed a claim against the
Company in the amount of $1 million alleging excessive charges. The
Company intends to defend these claims vigorously and in the opinion of
management, based on its discussions with legal counsel, the outcome of these
claims will not result in a material adverse affect on the financial position or
results of operations of the Company or its subsidiaries.
Customer
Complaints and Arbitration
The
Company's subsidiary’s business involves substantial risks of liability,
including exposure to liability under federal and state securities laws in
connection with the underwriting or distribution of securities and claims by
dissatisfied clients for fraud, unauthorized trading, churning, mismanagement
and breach of fiduciary duty. In recent years there has been an
increasing incidence of litigation involving the securities industry, including
class actions which generally seek rescission and substantial
damages. In the ordinary course of business, the Company operating
through its subsidiaries and its principals is, and may become a party to
additional legal or regulatory proceedings or arbitrations. The
Company is not currently involved in any additional legal or regulatory
proceeding or arbitrations, the outcome of which is expected to have a material
adverse impact on the Company's business.
On
January 15, 2009, the Company announced that EFG had filed a $25 million
arbitration claim against one of its clearing brokers, Penson Financial
Services, Inc., a NASDAQ listed company, its CEO, Phil Pendergraft, its
President, Daniel Son and its Chairman, Roger Engemoen. EFG’s causes
of action include extortion, civil theft, conspiracy, tortuous interference with
contractual relationships and aiding and abetting breach of fiduciary
duty. The claims relate to the assistance Penson provided in
connection with a fraud perpetrated upon EFG, Penson’s collusion with a “raid”
of EFG’s global execution services business, and Penson’s inappropriate demands
for payments in connection with EFG’s closure by FINRA in April
2008.
EFG
further alleges that Penson sought to profit by making false statements to
FINRA, EFG’s primary regulator, in the interest of closing the
firm. Thereafter, Penson demanded payments of over $1 million before
EFG could reopen. Penson has also seized a $1.6 million clearing
deposit of EFG’s as well as commission revenue. As a result of these acts, the
brokerage firm has sustained significant harm. It is management’s
opinion, based on the advice of counsel that the Company will prevail in this
matter.
15. OFF
BALANCE SHEET RISKS
Clearing
Arrangements.
The
Company does not carry accounts for customers or perform custodial functions
related to customers' securities. The Company introduces all of its
customer transactions to its clearing brokers, who maintain the Company’s
customers' accounts and clear such transactions. Additionally, the
clearing brokers provide the clearing and depository operations for the
Company’s proprietary securities transactions. These activities may
expose the Company to off-balance-sheet risk in the event that customers do not
fulfill their obligations with the primary clearing brokers, as the Company has
agreed to indemnify our clearing brokers for any resulting
losses. The Company continually assesses risk associated with each
customer who is on margin credit and record an estimated loss when the Company
believes collection from the customer is unlikely.
Customer
Claims, Litigation and Regulatory Matters.
In the
normal course of business, the Company has been and continues to be the subject
of civil actions and arbitrations arising out of customer complaints relating to
the Company’s broker dealer activities, as an employer and as a result of other
business activities.
JESUP
& LAMONT, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
The
Company has sold securities which it does not currently own and therefore will
be obligated to purchase the securities at a future date. The Company
has recorded these obligations in its financial statements at September 30, 2009
at the market values of the securities and will incur a loss if the market value
increases subsequent to September 30, 2009. The occurrence of these
off-balance sheet losses could impair the Company’s liquidity and force it to
reduce or curtail operations.
16.
|
CONCENTRATION
OF CREDIT RISKS
|
The
Company is engaged in various trading and brokerage activities in which
counterparties primarily include broker-dealers, banks and other financial
institutions. In the event counterparties do not fulfill their
obligations, the Company may be exposed to risk. The risk of default
depends on the creditworthiness of the counterparty or issuer of the
instrument. It is the Company’s policy to review, as necessary, the
credit standing of the counterparty.
The
Company’s cash in bank accounts at times exceeds the Federal Deposit Insurance
Corporation ("FDIC") insurable limits however; management believes that the risk
of loss is negligible. The Company has not experienced any previous
losses, and does not anticipate any future losses due to this
condition.
17.
|
NET
CAPITAL REQUIREMENTS AND VIOLATIONS OF BROKER DEALER
SUBSIDIARIES
|
JLSC is
subject to the requirements of the Net Capital Rule (Rule 15c3-1) under the
Securities Exchange Act of 1934, which requires the maintenance of minimum net
capital and requires that the ratio of aggregate indebtedness to net capital,
both as defined, does not exceed 15 to 1. Net capital and related
ratio of aggregate indebtedness to net capital, as defined, may fluctuate on a
daily basis.
At
September 30, 2009, JLSC had net capital of $3,441,203, which was $3,139,656
above the required net capital of $301,547. JLSC ratio of aggregate
indebtedness to net capital was 1.31 to 1 as of September 30,
2009. JLSC is exempt from Rule 15c3-3 because all customer
transactions are cleared through other broker-dealers on a fully-disclosed
basis.
In
November 2008, EFG was out of compliance with the above Net Capital Rule and,
accordingly, EFG immediately ceased conducting a securities business, other than
liquidating transactions. In March 2009 EFG filed a Broker Dealer
withdrawal with FINRA.
18.
|
LIQUIDITY
MATTERS/GOING CONCERN CONSIDERATION
|
The
Company incurred losses for the past two years and for the nine months ended
September 30, 2009. In addition, the Company has an accumulated
deficit at September 30, 2009 of $36,095,864, and negative cash flows from
operating activities for the nine months ended September 30, 2009.
The
results of the Company’s operations have been adversely impacted due to the
general downturn of the market and economic conditions; the ceasing of business
of EFG in November 2008 due to an adverse litigation settlement; the slowdown in
activity due to the conversion to a new clearing firm; the startup of a fixed
income division which incurred substantial costs but has had slower revenue
growth than expected due to the economy and costs of building an equity research
platform.
The
Company’s plan for future operations has several different
aspects. The Company has reduced its overhead costs by combining
tasks which helped eliminate positions, restructured various contracts with
vendors to lower general and administrative expense and reworked payout
percentages to improve profit margin in its retail unit. In addition,
the Company has taken several steps to increase revenue as outlined
below:
|
·
|
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;
|
JESUP
& LAMONT, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
|
·
|
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.
|
If the
Company’s plans change, or its assumptions change or prove to be inaccurate, or
if its available cash otherwise proves to be insufficient to implement its
business plans, the Company may require additional financing through subsequent
equity or debt financings. The Company cannot predict whether additional funds
will be available in adequate amounts or on acceptable terms. If funds are
needed but not available, the Company's business would be
jeopardized.
Given the
uncertain economic environment and the pressure that the financial sector has
been under, the Company plans to raise additional equity capital or financing
for working capital. By doing so, the Company believes that it will protect
itself against any future negative consequences that may arise if the economy
continues to decline. During the nine months ended September 30, 2009, the
Company has been able to raise $8,150,000 through a combination of equity and
debt financing. The Company also has an acquisition plan which
contemplates raising debt and equity capital to finance the
acquisitions.
ITEM
2.
|
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS
OF
OPERATIONS
|
The
following discussion of our financial condition and results of operations should
be read in conjunction with the Selected Consolidated Financial Data and the
Consolidated Financial Statements and Notes thereto included in our Annual
Report on Form 10-K for the year ended December 31, 2008, as previously filed
with the Securities and Exchange Commission. Our significant accounting policies
are disclosed in the Notes to Consolidated Financial Statements found in our
Annual Report on Form 10-K for the year ended December 31, 2008.
This Form
10-Q contains statements about future events and expectations which are "forward
looking statements". Any statement in this Form 10-Q that is not a statement of
historical fact may be deemed to be a forward looking statement. Forward-looking
statements represent our judgment about the future and are not based on
historical facts. These statements include: forecasts for growth in the number
of customers using our service, statements regarding our anticipated revenue,
expense levels, liquidity and capital resources and other statements including
statements containing such words as "may," "will," "expect," "believe,"
"anticipate," "intend," "could," "estimate," "continue" or "plan" and similar
expressions or variations. These statements reflect the current risks,
uncertainties and assumptions related to various factors including, without
limitation, fluctuations in market prices, competition, changes in securities
regulations or other applicable governmental regulations, technological changes,
management disagreements and other factors described under the heading "Factors
affecting our operating results, business prospects, and market price of stock"
contained in our Annual Report on Form 10-K for the year ended December 31,
2008, as previously filed with the SEC. Based upon changing conditions, should
any one or more of these risks or uncertainties materialize, or should any
underlying assumptions prove incorrect, actual results may vary materially from
those described in this report as anticipated, believed, estimated or intended.
We undertake no obligation to update, and we do not have a policy of updating or
revising, these forward-looking statements. Except where the context otherwise
requires, the terms "we," "us," or "our" refer to the business of Jesup &
Lamont, Inc. and its wholly-owned subsidiaries.
COMPANY
OVERVIEW
We were
incorporated in Florida in February 2000. Most of our business is conducted
through our wholly owned subsidiary Jesup & Lamont Securities Corporation
(JLSC). Empire Financial Group, Inc. (EFG) was founded in 1992 and merged into
Empire Financial Holding Company in 2000. On November 12, 2008, EFG was out of
compliance with the SEC's Net Capital Rule 15c3-1 and, accordingly, ceased
conducting a securities business, other than liquidating transactions, while
remaining out of compliance with this rule. EFG's out of compliance condition
was caused by an arbitration award against it for $772,000 plus costs and fees
of approximately $100,000, notice of which was received by EFG on November 12,
2008. See Note 14 to the financial statements for further
details. On November 10, 2006, effective as of November 1, 2006, we
acquired Jesup & Lamont Securities Corporation. Effective January 2, 2008,
we changed the name of Empire Financial Holding Company to Jesup & Lamont,
Inc. Accordingly, the following discussion and analysis of our
financial condition and results of operations is based on the combined results
of these businesses.
JLSC is
our financial brokerage services subsidiary providing brokerage services to full
service retail and institutional customers. We provide our employee and
independent registered representatives and advisors back office compliance and
administrative services over the telephone at 1-800-569-3337 or through their
designated registered representative. We provide our retail customers access to
useful financial products and services through our website and by telephone. Our
customers may, upon request, also receive advice from our brokers regarding
stock, bonds, mutual funds and insurance products. We also provide securities
execution and market making services, providing execution services involving
filling orders to purchase or sell securities received from unaffiliated broker
dealers on behalf of their retail customers. We typically act as principal in
these transactions and derive our net trading revenue from the difference
between the price paid when a security is bought and the price received when
that security is sold. We typically do not receive a fee or commission for
providing retail order execution services.
Additionally
through EIA and JLSC, we offer fee-based investment advisory services to our
customers, independent registered investment advisors and unaffiliated broker
dealers. These services are web-based and are delivered through a platform that
combines a variety of independent third party providers.
Services
include access to separate account money managers, managed mutual fund
portfolios, asset allocation tools, separate account manager and mutual fund
research, due diligence and quarterly performance review. We charge our
customers an all-inclusive fee for these services, which is based on assets
under management. As of December 31, 2008, the annual fee was equal to
approximately 140 basis points times the assets under management.
RESULTS
OF OPERATIONS:
New
senior management joined us at various times over the last 12 months. The focus
of management was to increase our profitability by focusing on more profitable
business sectors while exiting units that were marginal. A significant strategy
was to establish a fixed income division. In addition to having
higher margins than those in retail brokerage and institutional equities, fixed
income allowed us to enhance our retail brokerage business through fixed income
transactions and generating banking fees through participation in debt
issuances.
During
May 2008 we added a fixed income trading business to our product group and
recruited a well known individual with a proven history to build this business.
Although we believe that adding fixed income trading to our business model will
strengthen the foundation of our business for the future, we have incurred
substantial start up costs. Due to economic uncertainty, the revenue
growth has been slower than expected.
In
addition, we have also built a quality equity research department that focuses
on institutional sales. The building of this department also resulted in
increased compensation and other overhead expense. However, due to the downturn
in the economy and the uncertainty of the financial markets, the anticipated
revenue from this initiative has been slower than originally anticipated. In
March 2009, management decided to do a thorough review of our expense structure
and as a result, decided to reduce costs through staff reductions and
renegotiation of various contracts. As part of our cost reduction efforts,
senior management has taken significant reductions in their
compensation. Those cost reductions were completed in March 2009 and
we started seeing the benefit of these reductions in the second quarter of
2009.
Our plans
were stalled by the downturn in the economy and the negative impact that the
economy had in the financial markets. Additionally, our Empire Financial Group
(EFG) had certain legacy issues that eventually led to the shut down of that
unit’s brokerage activities. In response to those issues, management refocused
its business strategy. The two main objectives were a renewed focus on
recruitment with an emphasis in retail brokerage and expense reductions to have
the Company’s expense structure to better reflect with the downturn in the
financial markets. Most of those cost changes were implemented at the end of the
March 31, 2009, quarter and the results of those reductions have been realized
starting in the second quarter. As well, our recruitment has led to the
expansion of our retail brokerage unit and revenue from that sector has had
strong growth during the past quarter.
We expect
that with increased revenue from recently hired salespeople and the cost
reductions that were made earlier in 2009, that the Company is poised for
positive earnings on a go forward basis. Currently, we expect that our revenue
will be in the range of $45 to $50 million for the year-ending December 31,
2010. We expect that we will “break even” at an annual revenue run rate of $40
million. That break even point may be adjusted upward or downward
depending on the eventual actual mix of revenue. Using our current revenue
assumptions, which anticipate a lower contribution from investment banking which
is our highest margin business, we anticipate that generated free cash flow from
operations will be sufficient to meet all debt and working capital obligations
through December 31, 2010.
Additionally,
of our $15.8 million in debt, $7.7 million is convertible and we expect that
over time that debt will be converted into equity. We have also had preliminary
discussions with other holders of debt ($2.1 million) about converting those
amounts into equity as well. In addition, we have $1.863 million that
is due to our clearing firm, Legent Clearing LLC, which is being paid down
through higher ticket charges over the next ten years. As a result, we are
confident that our operations will support future cash needs and that long-term
debt obligations will be converted into equity.
The
results of our operations for the nine months ended September 30, 2009 as
compared to the same period in 2008 has shown a significant improvement as our
net operating loss has been reduced by 69% or $6,545,024. This
improvement is a reflection of management’s efforts to reorganize operations,
reduce costs, and increase sales volume.
Analysis
of our business platforms follow.
Retail
Commissions and Fees
In the
nine months and three months ended September 30, 2009, commissions generated
from retail, advisory fees, and other fees declined compared to the same period
in 2008. The reduction was primarily caused by a decline in revenue
from an Independent Sales Group offset by significant growth from our own retail
sales group. The gross margin received from the Independent Sales
Group is minimal. The following is an analysis of Commission revenue
and fees.
|
|
Nine Months Ended
|
|
|
|
|
|
|
|
|
|
September
30,
|
|
|
|
|
|
%
|
|
|
|
2009
|
|
|
2008
|
|
|
Difference
|
|
|
Change
|
|
Commissions
and fees
|
|
$
|
20,127,077
|
|
|
$
|
22,013,780
|
|
|
$
|
(1,886,703
|
)
|
|
|
-9
|
%
|
Less:
Independent Sales Group
|
|
$
|
(1,269,255
|
)
|
|
$
|
(5,402,042
|
)
|
|
$
|
4,132,787
|
|
|
|
-77
|
%
|
Retail
commissions and fees
|
|
$
|
18,857,822
|
|
|
$
|
16,611,738
|
|
|
$
|
2,246,084
|
|
|
|
14
|
%
|
For the
nine months ended September 30, 2009 our commission and fees revenue without the
Independent Sales Group has increased 14% which directly reflects our successful
efforts to expand our retail sales and fixed income sales
platforms.
|
|
Three Months Ended
|
|
|
|
|
|
|
|
|
|
September
30,
|
|
|
|
|
|
%
|
|
|
|
2009
|
|
|
2008
|
|
|
Difference
|
|
Change
|
|
Commissions
and fees
|
|
$
|
7,994,432
|
|
|
$
|
6,960,884
|
|
|
$
|
1,033,548
|
|
|
|
15
|
%
|
Less:
Independent Sales Group
|
|
$
|
(394,661
|
)
|
|
$
|
(2,442,000
|
)
|
|
$
|
2,047,339
|
|
|
|
-84
|
%
|
Retail
commissions and fees
|
|
$
|
7,599,771
|
|
|
$
|
4,518,884
|
|
|
$
|
3,080,887
|
|
|
|
68
|
%
|
For the
third quarter 2009 our commissions and fees excluding the Independent Sales
Group were up 68% over the same period in 2008. This significant
increase results from our continued efforts to expand our retail and fixed
income business.
Equity
Market Making Trading Revenue
Equity
market making trading revenue for the nine months ended September 30, 2009 were
$2,977,073 as compared to the same period in 2008 of $6,333,726, a decrease of
$3,356,653, or 53%. The reduction resulted from EFG ceasing business
which significantly reduced our equity trading staff. As noted above,
we have focused our business towards retail, and fixed income versus equity
trading which better serves our long term growth objectives.
Investment
Banking
Our
investment banking business has not returned to prior year levels as this
business continues to experience difficulty due to the tight credit
markets. During the second and third quarter of 2009 we benefited
from the sale of warrants earned from prior investment banking transactions, and
increase in the fair values of warrants earned and held for investment in the
third quarter. In the third quarter we have seen increased activity
and interest by investors as well as a slight improvement in available
financing. We are encouraged by these indicators and expect growth in
this area as the economy improves.
Further
discussions of the results of our operations are provided below.
Three
months ended September 30, 2009 compared to three months ended September 30,
2008:
Revenue:
Total
revenue for the three months ended September 30, 2009 were $10,114,581, an
increase of $463,007 or 5% from total revenue for the same period in 2008. This
increase is primarily attributable to the reasons described below.
Commission
and fee revenue for the three months ended September 30, 2009 was $7,994,432, an
increase of $1,033,548 or approximately 15%, from our commission and fee revenue
of $6,960,884 for the comparable period in 2008. The increase reflects our
successful efforts in transitioning our retail business from EFG, which was
closed in November 2008, to JLSC as noted above, and the addition of fixed
income trading in 2008. Commission and fee revenue accounted for
approximately 79% and 72%, of our total revenue for the three month periods
ended September 30, 2009 and 2008, respectively. As noted above, we
analyze our commissions and fees excluding the Independent Sales Group, see
above three month table for this analysis.
For the
three months ended September 30, 2009 equity market making trading revenue was
$1,098,565 a decrease of $449,352 or approximately 29%, from our equity market
making trading revenue of $1,547,917 for the comparable period in 2008. This
decrease is attributable to EFG ceasing operations in November 2008 which
significantly reduced our equity trading staff. In addition, we have
focused our business towards retail, and fixed income verses equity trading
which better serves our long term growth objectives. Equity market making
trading revenue accounted for approximately 11% and 16% of our total revenue for
the three month periods ended September 30, 2009 and 2008,
respectively.
For the
three months ended September 30, 2009, our investment banking revenue was
$945,405, a decrease of $387,970 or 29%, from our investment banking revenue of
$1,333,375 for the comparable period in 2008. The decrease was primarily due to
general market conditions confronting the financial services industry.
Investment banking revenue accounted for approximately 9% and 14% of our revenue
for the three month periods ended September 30, 2009 and 2008,
respectively.
For the
three months ended September 30, 2009 gains on securities received from
investment banking services were $76,179, an increase of $266,781, or
approximately 140%, from a loss of ($190,602) for the comparable period in
2008. The increase was primarily due to unrealized gain on
warrants/stock earned from investment banking. The fair value of
these warrants/stocks held for investment purposes is based on market values and
Black Scholes model calculations. Unrealized gains or losses result
from the revaluation of these securities each quarter. Gain and loss
on securities received for investment banking services accounted for
approximately 1% and (2%) of our total revenue for the three month periods ended
September 30, 2009 and 2008, respectively.
Forgiveness of
Indebtedness:
Forgiveness
of indebtedness for the nine months ended September 30, 2009 includes
forgiveness of a note payable of $311,220 to a former owner of JLSC, and
interest on two notes payable to shareholders of $230,613. Agreements
were made with these shareholders to forgive the debt or interest to facilitate
our cost reductions.
Expenses:
Employee
compensation and benefits were $5,898,880 and $6,906,442 for the three months
ended September 30, 2009 and 2008, respectively. Employee compensation decreased
$1,007,562, or 15%. The reduction was due to reductions in employee commissions,
regular wages, employee benefits, and employee stock
compensation. Our cost and expense restructuring efforts started
earlier this year contributed to these compensation reductions.
Commissions,
clearing and execution costs were $3,440,927 and $4,343,310 for the three months
ended September 30, 2009 and 2008, respectively. The decrease of
$902,383, or 21%, includes two components. As noted earlier, the
first component is related to the Independent Sales Group. The second
component is our own retail sales group.
|
|
Three Months Ended
|
|
|
|
|
|
|
|
|
|
September
30,
|
|
|
|
|
|
%
|
|
|
|
2009
|
|
|
2008
|
|
|
Difference
|
|
Change
|
|
Commissions,Clearing
costs
|
|
$
|
3,440,927
|
|
|
$
|
4,343,310
|
|
|
$
|
(902,383
|
)
|
|
|
-21
|
%
|
Less:
Independent Sales Group
|
|
$
|
(394,661
|
)
|
|
$
|
(2,442,000
|
)
|
|
$
|
2,047,339
|
|
|
|
-84
|
%
|
Net
Commissions,Clearing costs
|
|
$
|
3,046,266
|
|
|
$
|
1,901,310
|
|
|
$
|
1,144,956
|
|
|
|
60
|
%
|
Our net
commissions costs without the Independent Sales Group has increased 60% over the
prior year in alignment with commissions and fees revenue increase of 68%, which
were somewhat offset by decreases in clearing and other fees. This
reflects our significant growth in retail and fixed income revenue
platforms.
General
and administrative expense was $1,241,537 and $2,534,890 for the three months
ended September 30, 2009 and 2008, respectively. The decrease of $1,293,353, or
51%, results from expense restructuring during the first quarter of
2009. Professional fees travel and entertainment, and rent expense
were significant components of this reduction.
Interest
expense was $325,724 and $210,362 for the three months ended September 30, 2009
and 2008, respectively. The increase of $115,362, or 55%, is attributable to
increased debt in 2009.
As a
result of the items discussed in the preceding paragraphs, we had a net loss of
$472,029 for the three months ended September 30, 2009 as compared to a net loss
of $4,522,694 for the three months ended September 30, 2008, a reduction in the
net loss of $4,050,665 or 90%.
Nine
months ended September 30, 2009 compared to nine months ended September 30,
2008:
Revenue:
Total
revenue for the nine months ended September 30, 2009 were $26,559,259, a
decrease of $4,707,543, or 15% from the same period in 2008. Commission and fee
revenue for the nine months ended September 30, 2009 were $20,127,077, a
decrease of $1,886,703 or approximately 9%, from our commission and fee revenue
of $22,013,780 for the comparable period in 2008. The decrease was primarily due
to a revenue reduction by our Independent Sales Group as shown
above. Commissions and fees revenue accounted for approximately 76%
and 70%, of our total revenue for the nine month periods ended September 30,
2009 and 2008, respectively. We analyze our commissions and fees
excluding the Independent Sales Group, see above nine month table for this
analysis.
For the
nine months ended September 30, 2009 equity market making trading revenue was
$2,977,073, a decrease of $3,356,653, or approximately 53%, from our equity
market making trading revenue of $6,333,726 for the comparable period in 2008.
This decrease is primarily due to EFG ceasing operations in November 2008 which
significantly reduced our equity trading staff. In addition, we have
focused our business towards retail and fixed income verses equity trading which
better serves our long term growth objectives. Equity market making
trading revenue accounted for approximately 11% and 20% of our total revenue for
the nine month periods ended September 30, 2009 and 2008,
respectively.
For the
nine months ended September 30, 2009, our investment banking revenue was
$1,686,795, a decrease of $1,657,066, or 50%, from our investment banking
revenue of $3,343,861 for the comparable period in 2008. The decrease was
primarily due to general market conditions confronting the financial services
industry. Investment banking revenue accounted for approximately 6% and 11% of
our revenue for the nine month periods ended September 30, 2009 and 2008,
respectively.
For the
nine months ended September 30, 2009 gain on securities received from investment
banking services was $1,768,314, an increase of $2,192,879 or approximately
517%, from our loss of $424,565 for the comparable period in 2008. The increase
was primarily due to sale of warrants we had earned from previous activities.
The fair value of these warrants/stocks held for investment purposes is based on
market values and Black Scholes model calculations. Unrealized gain
or loss results from the revaluation of these securities each
quarter. Gains and losses on securities received for investment
banking services accounted for approximately 7% and (1%), of our total revenue
for the nine month periods ended September 30, 2009 and 2008,
respectively.
Forgiveness of
Indebtedness:
Forgiveness
of indebtedness for the nine months ended September 30, 2009 includes
forgiveness of a note payable of $311,220 to a former owner of JLSC, and
interest on two notes payable to shareholders of $230,613. Agreements
were made with these shareholders to forgive the debt or interest to facilitate
our cost reductions.
Expenses:
Employee
compensation and benefits were $15,328,582 and $16,720,583 for the nine months
ended September 30, 2009 and 2008, respectively. Employee compensation decreased
$1,392,001, or 8%. The reduction was primarily due to reduced regular wages and
stock compensation expense.
Commissions,
clearing and execution costs were $9,029,814 and $16,182,181 for the nine months
ended September 30, 2009 and 2008, respectively. The decrease of
$7,152,367, or 44%, was due primarily to a decrease in commission costs, plus
decline in revenue in our Independent Sales Group. The following
analysis reflects these components.
|
|
Nine Months Ended
|
|
|
|
|
|
|
|
|
|
September
30,
|
|
|
|
|
|
%
|
|
|
|
2009
|
|
|
2008
|
|
|
Difference
|
|
|
Change
|
|
Commissions,Clearing
costs
|
|
$
|
9,029,814
|
|
|
$
|
16,182,181
|
|
|
$
|
(7,152,367
|
)
|
|
|
-44
|
%
|
Less:
Independent Sales Group
|
|
$
|
(1,269,255
|
)
|
|
$
|
(5,402,042
|
)
|
|
$
|
4,132,787
|
|
|
|
-77
|
%
|
Net
Commissions,Clearing cost
|
|
$
|
7,760,559
|
|
|
$
|
10,780,139
|
|
|
$
|
(3,019,580
|
)
|
|
|
-28
|
%
|
Our net
commissions, clearing costs, and fees without the independent sales group have
decreased 28% over the prior year. Commissions, clearing fees and
execution costs were reduced as our equity market making trading, and investment
banking revenue have declined versus the same period in 2008. In
addition, the change in the sales mix to more retail and fixed income sales
versus equity market making has reduced clearing fees and execution
costs.
General
and administrative expense was $4,271,122 and $6,709,379 for the nine months
ended September 30, 2009 and 2008, respectively. The decrease of $2,438,257, or
36%, was due primarily to decreases in travel and entertainment, professional
fees, and occupancy costs resulting from our cost reduction
efforts.
Interest
expense was $932,113 and $1,307,974 for the nine months ended September 30, 2009
and 2008, respectively. The decrease of $375,861, or 29%, was due primarily to a
one time financing fee of $500,000 to one of our clearing firms in
2008. See Note 8 to the Consolidated Financial Statements for
details.
In May
2008, we entered into settlement agreements with two former officers. The
agreements included offsetting receivables owed to JLI totaling $675,297 against
the note payable by JLI to the former officers totaling $861,105. As part of his
settlement agreement one of the former officers also received the rights to
certain investment banking engagements and transferred 524,118 shares of JLI's
common stock to JLI. We recorded the stock received as $733,765 of treasury
stock valued at the closing market price ($1.40 per share) on the date we
entered into the settlement agreement. The gain recognized on these transactions
totaled $806,744 after deduction of $112,829 of accelerated discount
amortization related to the canceled notes payable. This gain is
included in other income for 2008.
As a
result of the items discussed in the preceding paragraphs, we incurred a net
loss of $2,966,601 for the nine months ended September 30, 2009 as compared to a
net loss of $9,511,625 for the nine months ended September 30, 2008, a decrease
in the loss of $6,545,024 or 69%.
LIQUIDITY
AND CAPITAL RESOURCES
Our
principal sources of cash have been from new financing consisting of private
placements of stock, and debt offerings. Our historical use of funds
has been for operations, and payment of debt. As of September 30,
2009, we had $33,076,112 in total assets, of which, $8,018,668 or approximately
24% consisted of cash or assets readily convertible into cash, securities owned
and receivables from clearing brokers, which include interest bearing cash
balances held with our clearing organization. At September 30, 2009, we had
liabilities due within one year totaling $10,830,114.
Stockholders'
equity increased $971,752 to $7,785,357 at September 30, 2009, compared to
$6,813,605 at December 31, 2008. This increase is attributable to additional
stock subscriptions of $3,550,000, offset by net losses incurred for the period
of $2,966,601. Supplemental information pertaining to our historical
sources and uses of cash is presented below and should be read in conjunction
with our Condensed Consolidated Statements of Cash Flows and notes thereto
included elsewhere in this report.
Operating
Activities
Net cash
used by operations for the nine months ended September 30, 2009 was $3,767,960
as opposed to net cash used by operations for the same period in 2008 of
$7,950,201. The loss from operations accounted for most of the
operating cash used. Other significant items include increases
in clearing organization deposits of $2,344,000, and commission receivable of
$658,000 which were offset in part by an increase in accounts payable, accrued
expenses, and other liabilities of $2,017,000.
Investing
Activities
Cash used
in investing activities for the nine months ended September 30, 2009 was
$3,141,653. We invested $2,005,288 in a bank certificate of deposit, and
invested $910,015 in the form of notes receivable from registered sales
representatives primarily to expand our Boca Raton and Ft. Lauderdale
offices. We also used $226,350 to purchase furniture and equipment
during the nine months ended September 30, 2009.
Financing
Activities
Cash
provided from financing activities for the nine months ended September 30, 2009
was $7,583,008. We raised $3,550,000 and $4,600,000 from the sale of common
stock subscriptions and new loans, respectively, and made payments of $641,992
against notes payable. An additional $75,000 was raised by an advance
from one of our clearing firms.
Prospective
Liquidity Requirements
New
senior management joined us at various times over the last 12
months. The focus of management was to increase our profitability by
focusing on more profitable business sectors while exiting units that were
marginal. We also focused on significant expense reductions to better
align our expenses with our revenue and new business model. We have
reduced our overhead costs by combining tasks which helped eliminate positions,
restructured various contracts with vendors to lower general and administrative
expense and reworked payout percentages to improve profit margin in our retail
unit. In addition to reducing costs we have taken several steps to
increase revenue as outlined below:
|
·
|
Increase
our trading revenue by adding additional stocks in which we make a
market;
|
|
·
|
Expand
our trading capabilities by establishing fixed income trading desks that
serve both institutional and retail
clients;
|
|
·
|
Expand
our institutional trading activities by continuing to add quality trading
personnel with existing institutional
clients;
|
|
·
|
Continue
to recruit quality registered
representatives;
|
|
·
|
Expand
our offering of proprietary financial products to our retail and
institutional customers;
|
|
·
|
Continue
to look for and close acquisitions of similar
businesses.
|
As a
result of the above, we believe the historical operating losses will not
continue into the future, and our financings to provide operating cash would
also be reduced.
Our plans
also include raising additional cash from equity offerings for operations as
well as to pay off substantial amounts of our liabilities. Our
shareholders approved the issuance of additional shares to fund these needs at
our June 23, 2009 annual shareholder meeting. Raising additional
capital will also allow us to increase our broker dealer’s net regulatory
capital which we believe will lead to attracting even larger and more profitable
customers, and also increase our trading revenue from customers which require a
minimum level of net regulatory capital from their vendor firms. During the nine
months ended September 30, 2009, we raised a total of $8,225,000 from equity and
debt financings. We cannot predict whether additional funds will be
available in adequate amounts or on acceptable terms in the future.
If our
plans change, or our assumptions change or prove to be inaccurate, or if our
available cash otherwise proves to be insufficient to implement our business
plans, we may require additional financing through subsequent equity or debt
financings. If funds are needed but not available, our business would be
impaired and we could be forced to reduce or curtail
operations.
MARKET
RISK
Market
risk generally represents the risk of loss that may result from the potential
change in the value of a financial instrument as a result of fluctuations in
interest and currency exchange rates, equity and commodity prices, changes in
the implied volatility of interest rates, foreign exchange rates, equity and
commodity prices and also changes in the credit ratings of either the issuer or
its related country of origin. Market risk is inherent to both derivative and
non-derivative financial instruments, and accordingly, the scope of our market
risk management procedures extends beyond derivatives to include all market risk
sensitive financial instruments.
We have
sold securities which we do not currently own and therefore will be obligated to
purchase the securities at a future date. We have recorded these obligations in
our financial statements at September 30, 2009 at the market value of the
securities and will incur a loss if the market value increases subsequent to
September 30, 2009. The occurrence of these off-balance sheet losses could
impair our liquidity and force us to reduce or curtail operations.
We are
engaged in various trading and brokerage activities in which counterparties
primarily include broker-dealers, banks and other financial institutions. In the
event counterparties do no fulfill their obligations, we may be exposed to risk.
The risk of default depends on the creditworthiness of the counterparty or
issuer of the instrument. It is our policy to review, as necessary, the credit
standing of each counterparty. We have performed a company wide analysis of our
financial instruments and assessed the related risk. Based on this analysis, we
believe the market risk associated with our financial instruments at September
30, 2009 will not have a material adverse effect on our consolidated financial
position or results of operations.
CRITICAL
ACCOUNTING POLICIES
Our
discussion and analysis of our financial condition and results of operations are
based on our consolidated financial statements which have been prepared in
conformity with accounting principles generally accepted in the United States of
America. Because we operate in the financial services industry, we follow
certain accounting guidance used by the brokerage industry. Our consolidated
balance sheet is not separated into current and non-current assets and
liabilities. Certain financial assets, such as trading securities are carried at
fair market value on our consolidated statements of financial condition while
other assets are carried at historic values. See Note 1 to the
Condensed Consolidated Financial Statements for a summary of our significant
accounting policies.
For
further information regarding the accounting policies that we believe to be
critical accounting policies and that affect our more significant judgments and
estimates used in preparing our interim Condensed Consolidated Financial
Statements see our December 31, 2008 Annual Report on Form
10-K.
ACCOUNTING
FOR CONTINGENCIES
We accrue
for contingencies based on events that have occurred, when it is probable that a
liability has been incurred and the amount can be reasonably estimated.
Contingencies by their nature relate to uncertainties that require our exercise
of judgment both in assessing whether or not a liability or loss has been
incurred and estimating the amount of loss.
USE OF
ESTIMATES
Note 2 to
our consolidated financial statements contain a summary of our significant
accounting policies, many of which require the use of estimates. When we prepare
these financial statements, we are required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expense during the reporting period. On an
on-going basis, we evaluate our estimates and judgments, including those related
to accounts receivable, inventories, deferred tax assets, goodwill and
intangible assets and long-lived assets. We base our estimates and judgments on
historical experience and on various other factors that we believe to be
reasonable under the circumstances, the results of which form the basis for our
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.
GOODWILL
AND OTHER INTANGIBLE ASSETS
The fair
value of goodwill and other intangible assets ultimately depends on the fair
value of the reporting unit to which they relate. The fair value of a
reporting unit refers to the amount at which the unit as a whole could be bought
or sold in a current transaction between willing parties. Quoted
market prices in active markets are the best evidence of fair value and shall be
used as the basis for the measurement, if available. However, the market price
of an individual equity security (and thus the market capitalization of a
reporting unit with publicly traded equity securities) may not be representative
of the fair value of the reporting unit as a whole. The quoted market price of
an individual equity security, therefore, need not be the sole measurement basis
of the fair value of a reporting unit. Substantial value may arise from the
ability to take advantage of synergies and other benefits that flow from control
over another entity. Consequently, measuring the fair value of a collection of
assets and liabilities that operate together in a controlled entity is different
from measuring the fair value of that entity's individual equity securities. An
acquiring entity often is willing to pay more for equity securities that give it
a controlling interest than an investor would pay for a number of equity
securities representing less than a controlling interest. That control premium
may cause the fair value of a reporting unit to exceed its market
capitalization.
To test
goodwill for impairment requires judgment, including the identification of
reporting units, assignment of assets and liabilities to reporting units,
assignment of goodwill to reporting units, and determination of the fair value
of each reporting unit. The fair value of each reporting unit is estimated using
a discounted cash flow methodology. This requires significant judgments
including estimation of future cash flows, which is dependent on internal
forecasts, estimation of the long-term rate of growth of the Company's business,
the useful life over which cash flows will occur, and determination of the
Company's weighted average cost of capital. Changes in these estimates and
assumptions could materially affect the determination of fair value and
potential goodwill impairment for each reporting unit.
If the
Company determines its goodwill and other intangible assets have been impaired,
the Company may have to write off a portion or all of such goodwill and other
intangible assets. If all goodwill and other intangible assets were written off,
the Company would record a non cash loss approximating $17.4 million to
operations and stockholders' equity.
MARKET-MAKING
ACTIVITIES
Securities
owned and securities sold, but not yet purchased, which primarily consist of
listed, over-the-counter, American Depository Receipts, foreign ordinary stocks,
and domestic fixed income securities are carried at market value and are
recorded on a trade date basis. Market value is estimated daily using market
quotations available from major securities exchanges and dealers.
RECENTLY
ISSUED ACCOUNTING PRONOUNCEMENTS NOT YET EFFECTIVE
There are
no recently issued accounting pronouncements which are not yet effective which
would have a material effect on our financial condition or results of
operations.
ITEM
3.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
As a
smaller reporting company, we are not required to provide the information
required by this item.
ITEM
4T.
|
CONTROLS
AND PROCEDURES
|
Our
management, including the principal executive officer and principal financial
officer, has evaluated the effectiveness of the design and operation of our
disclosure controls and procedures (as defined in Exchange Act Rules 13a and
15(d)-15(e)) as of the end of the period covered by this
report. Based upon that evaluation, our principal executive officer
and principal financial officer have concluded that the disclosure controls and
procedures as of September 30, 2009 are effective to ensure that information
required to be disclosed in the reports we file or submit under the Exchange Act
is recorded, processed, summarized and reported within the time periods
specified in the SEC’s rules and forms, and that such information is accumulated
and communicated to our management, including the principal executive officer
and principal financial officer, to allow timely decisions regarding
disclosure.
There
were no changes in our internal control over financial reporting identified in
connection with the evaluation that occurred during our last fiscal quarter that
have materially affected, or that are reasonably likely to materially affect,
our internal controls over financial reporting.
PART II -
OTHER INFORMATION
ITEM
1.
|
LEGAL
PROCEEDINGS
|
See
Footnote 14 of the Notes to Condensed Consolidated Financial
Statements.
ITEM
2.
|
UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
|
During
the nine months ended September 30, 2009 JLI received stock subscriptions
totaling $3,550,000 for a stock offering to be issued during the fourth quarter
of 2009.
The above
sales were made for investment by accredited investors and will be issued
without registration under the Securities Act of 1933, as amended, pursuant to
the exemptions provided under sections 4(6) and 4(2) thereof, and pursuant to
the exemption provided by Regulation D. All the securities are restricted
securities and will bear a restrictive legend and be subject to stop transfer
restrictions.
ITEM
3.
|
DEFAULTS
UPON SENIOR SECURITIES
|
None.
ITEM
4.
|
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY
HOLDERS
|
None.
ITEM
5.
|
OTHER
INFORMATION
|
None.
31.1
|
Certification
of Principal Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
|
31.2
|
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
|
|
32.1
|
Principal
Executive Officer Certification pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
|
|
32.2
|
Principal
Financial Officer Certification pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
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.
|
JESUP
& LAMONT, INC.
|
|
(Registrant)
|
Date:
November 13, 2009
|
By:
|
/s/ Steven M. Rabinovici
|
|
|
Steven
M. Rabinovici
|
|
|
Principal
Executive
Officer
|
Date:
November 13, 2009
|
/s/ Alan Weichselbaum
|
|
Alan
Weichselbaum
|
|
Principal
Financial Officer
|
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