For the Quarter Ended December 31, 2008 |
Commission
File Number 001-12629
|
Delaware
|
36-4128138
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
incorporation
or organization)
|
Identification
No.)
|
Large
Accelerated Filer [ ]
|
Accelerated
Filer [ ]
|
Non-Accelerated
Filer [ ]
|
Smaller
Reporting Company [X]
|
PART
I – FINANCIAL INFORMATION
|
|
Item
1 – Financial Statements
|
|
Unaudited
Condensed Consolidated Statements of Financial Condition
|
|
as
of December 31, 2008 and September 30, 2008
|
4
|
Unaudited
Condensed Consolidated Statements of Operations for the
|
|
Three
months Ended December 31, 2008 and 2007
|
5
|
Unaudited
Condensed Consolidated Statements of Cash Flows for the
|
|
Three
Months Ended December 31, 2008 and 2007
|
6
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Notes
to Unaudited Condensed Consolidated Financial Statements
|
7
|
Item
2 – Management’s Discussion and Analysis of Financial
Condition
|
|
and
Results of Operations
|
13
|
Item
3 – Quantitative & Qualitative Disclosures About Market
Risk
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18
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Item
4 – Controls and Procedures
|
18
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PART
II – OTHER INFORMATION
|
|
Item
1 – Legal Proceedings
|
19
|
Item
2 – Unregistered Sales of Equity Securities and Use of
Proceeds
|
19
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Item
6 – Exhibits
|
19
|
Signatures
|
20
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NATIONAL
HOLDINGS CORPORATION AND SUBSIDIARIES
|
|||||||||||||
CONDENSED
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
|
|||||||||||||
ASSETS
|
December
31,
|
September
30,
|
|||||||
2008
|
2008
|
|||||||
(unaudited)
|
(see
note below)
|
|||||||
Cash | $ | 7,352,000 | $ | 7,387,000 | ||||
Deposit
with clearing organizations
|
1,261,000 | 1,210,000 | ||||||
Receivables
from broker dealers and clearing organizations
|
2,711,000 | 3,691,000 | ||||||
Other
receivables, net of allowance for uncollectible accounts of
$164,000
|
||||||||
at
December 31, 2008 and September 30, 2008, respectively
|
800,000 | 580,000 | ||||||
Advances
to registered representatives
|
4,236,000 | 4,463,000 | ||||||
Securities
owned
|
||||||||
Marketable,
at market value
|
2,051,000 | 976,000 | ||||||
Non-marketable,
at fair value
|
41,000 | 48,000 | ||||||
Fixed
assets, net
|
1,249,000 | 1,243,000 | ||||||
Secured
demand note
|
500,000 | 500,000 | ||||||
Intangible
assets, net
|
2,795,000 | 2,950,000 | ||||||
Other
assets
|
1,444,000 | 1,429,000 | ||||||
Total
Assets
|
$ | 24,440,000 | $ | 24,477,000 | ||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
Payable
to broker dealers and clearing organizations
|
$ | 300,000 | $ | 730,000 | ||||
Securities
sold, but not yet purchased, at market
|
63,000 | 63,000 | ||||||
Accounts
payable, accrued expenses and other liabilities
|
13,542,000 | 12,335,000 | ||||||
Convertible
notes payable, net of debt discounts of $1,332,000
and
|
||||||||
$1,431,000
at December 31, 2008 and September 30, 2008, respectively
|
4,668,000 | 4,569,000 | ||||||
Notes
payable, net of debt discounts of $16,000 and $41,000
at
|
||||||||
December
31, 2008 and September 30, 2008, respectively
|
984,000 | 959,000 | ||||||
Total
Liabilities
|
19,557,000 | 18,656,000 | ||||||
Subordinated
borrowings
|
500,000 | 500,000 | ||||||
Stockholders'
Equity
|
||||||||
Preferred
stock, $.01 par value, 200,000 shares authorized; 50,000
shares
|
||||||||
designated
as Series A and 20,000 shares designated as Series B
|
||||||||
Series
A 9% cumulative convertible preferred stock, $.01 par value,
50,000
|
||||||||
shares
authorized; 37,550 shares issued and outstanding
(liquidation
|
||||||||
preference:
$3,755,000) at December 31, 2008 and September 30, 2008
|
- | - | ||||||
Series
B 9% cumulative convertible preferred stock, $.01 par value,
20,000
|
||||||||
shares
authorized; 0 shares issued and outstanding (liquidation
|
||||||||
preference:
$0) at December 31, 2008 and September 30, 2008
|
- | - | ||||||
Common
stock, $.02 par value, 50,000,000 shares authorized;
|
||||||||
16,421,538
shares issued and outstanding, at December 31, 2008
|
||||||||
and
September 30, 2008
|
328,000 | 328,000 | ||||||
Additional
paid-in capital
|
39,483,000 | 39,279,000 | ||||||
Accumulated
deficit
|
(35,428,000 | ) | (34,286,000 | ) | ||||
Total Stockholders'
Equity
|
4,383,000 | 5,321,000 | ||||||
Total
Liabilities and Stockholders' Equity
|
$ | 24,440,000 | $ | 24,477,000 |
Note:
The balance sheet at September 30, 2008 has been derived from the audited
consolidated financial statements at that date.
|
||
See
accompanying notes to unaudited condensed consolidated financial
statements
|
NATIONAL
HOLDINGS CORPORATION AND SUBSIDIARIES
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(Unaudited)
|
Three
Months Ended
|
||||||||
December
31,
|
||||||||
2008
|
2007
|
|||||||
Revenues:
|
||||||||
Commissions
|
$ | 12,273,000 | $ | 13,292,000 | ||||
Net
dealer inventory gains
|
10,229,000 | 4,194,000 | ||||||
Investment
banking
|
667,000 | - | ||||||
Total
commission and fee revenues
|
23,169,000 | 17,486,000 | ||||||
|
||||||||
Interest
and dividends
|
697,000 | 930,000 | ||||||
Transfer
fees and clearing services
|
2,750,000 | 1,311,000 | ||||||
Other
|
1,236,000 | 638,000 | ||||||
Total
Revenues
|
27,852,000 | 20,365,000 | ||||||
Expenses:
|
||||||||
Commissions
and fees
|
21,067,000 | 16,203,000 | ||||||
Employee
compensation and related expenses
|
3,074,000 | 2,240,000 | ||||||
Clearing
fees
|
1,193,000 | 613,000 | ||||||
Communications
|
862,000 | 356,000 | ||||||
Occupancy
and equipment costs
|
1,381,000 | 864,000 | ||||||
Professional
fees
|
763,000 | 588,000 | ||||||
Interest
|
325,000 | 73,000 | ||||||
Taxes,
licenses, registration
|
259,000 | 130,000 | ||||||
Other
administrative expenses
|
70,000 | 465,000 | ||||||
Total
Expenses
|
28,994,000 | 21,532,000 | ||||||
Net
loss
|
(1,142,000 | ) | (1,167,000 | ) | ||||
Preferred
stock dividends
|
(85,000 | ) | (85,000 | ) | ||||
Net
loss attributable to common stockholders
|
$ | (1,227,000 | ) | $ | (1,252,000 | ) | ||
Net
loss per common share
|
||||||||
Basic:
|
||||||||
Net
loss attributable to common stockholders
|
$ | (0.07 | ) | $ | (0.15 | ) | ||
Diluted:
|
||||||||
Net
loss attributable to common stockholders
|
$ | (0.07 | ) | $ | (0.15 | ) | ||
Weighted
average number of shares outstanding
|
||||||||
Basic
|
16,421,538 | 8,602,628 | ||||||
Diluted
|
16,421,538 | 8,602,628 |
See
accompanying notes to unaudited condensed consolidated financial
statements
|
NATIONAL
HOLDINGS CORPORATION AND SUBSIDIARIES
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(Unaudited)
|
Three
Months Ended
|
||||||||
December
31,
|
||||||||
2008
|
2007
|
|||||||
Cash
flows from operating activities
|
||||||||
Net
loss
|
$ | (1,142,000 | ) | $ | (1,167,000 | ) | ||
Adjustments
to reconcile net loss to net
|
||||||||
cash
provided by (used in) operating activities
|
||||||||
Depreciation
and amortization
|
324,000 | 56,000 | ||||||
Amortization
of deferred financing costs
|
14,000 | 3,000 | ||||||
Amortization
of note discount
|
123,000 | 25,000 | ||||||
Compensatory
element of common stock options issuance
|
237,000 | 102,000 | ||||||
Changes
in assets and liabilities
|
||||||||
Deposits
with clearing organizations
|
(51,000 | ) | - | |||||
Receivables
from broker-dealers, clearing organizations and others
|
987,000 | (182,000 | ) | |||||
Securities
owned: marketable, at market value
|
(1,075,000 | ) | 91,000 | |||||
Securities
owned: non-marketable, at fair value
|
7,000 | - | ||||||
Other
assets
|
(15,000 | ) | (102,000 | ) | ||||
Payables
|
723,000 | (2,328,000 | ) | |||||
Securities
sold, but not yet purchased, at market
|
- | 255,000 | ||||||
Net
cash provided by (used in) operating activities
|
132,000 | (3,247,000 | ) | |||||
Cash
flows from investing activities
|
||||||||
Purchase
of fixed assets
|
(167,000 | ) | (63,000 | ) | ||||
Net
cash (used in) investing activities
|
(167,000 | ) | (63,000 | ) | ||||
Cash
flows from financing activities
|
||||||||
Deferred
merger costs
|
- | (162,000 | ) | |||||
Net
cash (used in) financing activities
|
- | (162,000 | ) | |||||
Net
decrease in cash
|
(35,000 | ) | (3,472,000 | ) | ||||
Cash
balance
|
||||||||
Beginning
of the period
|
7,387,000 | 4,957,000 | ||||||
End
of the period
|
$ | 7,352,000 | $ | 1,485,000 | ||||
Supplemental
disclosures of cash flow information
|
||||||||
Cash
paid during the period for:
|
||||||||
Interest
|
$ | 188,000 | $ | 45,000 | ||||
Income
taxes
|
$ | - | $ | 23,000 |
See
accompanying notes to unaudited condensed consolidated financial
statements
|
Weighted
|
||||||||||||||||
Weighted
|
Average
|
|||||||||||||||
Average
|
Remaining
|
Aggregate
|
||||||||||||||
Exercise
|
Contractual
|
Intrinsic
|
||||||||||||||
Shares
|
Price
|
Term
|
Value
|
|||||||||||||
Outstanding
at September 30, 2008
|
6,887,640 | $ | 1.58 | 0.00 | $ | - | ||||||||||
Granted
|
- | - | - | - | ||||||||||||
Expired
|
279,475 | 1.42 | 2.05 | - | ||||||||||||
Outstanding
at December 31, 2008
|
6,608,165 | $ | 1.59 | 3.80 | $ | - | ||||||||||
Exerciseable
at December 31, 2008
|
3,266,053 | $ | 1.48 | 2.82 | $ | - |
Weighted
|
||||||||
Average
|
||||||||
Grant
Date
|
||||||||
Nonvested
Shares
|
Shares
|
Fair
Value
|
||||||
Nonvested
at September 30, 2008
|
3,828,774 | $ | 0.92 | |||||
Granted
|
- | |||||||
Vested
|
398,860 | $ | 1.38 | |||||
Expired
|
87,802 | $ | 0.90 | |||||
Nonvested
at December 31, 2008
|
3,342,112 | $ | 0.79 |
NOTE
5. SECURITIES OWNED AND SECURITIES SOLD, BUT NOT YET
PURCHASED
|
Securities
|
Securities
sold, but
|
|||||||
owned
|
not
yet purchased
|
|||||||
Corporate
stocks
|
$ | 207,000 | $ | 15,000 | ||||
Corporate
bonds
|
34,000 | 15,000 | ||||||
Government
obligations
|
1,810,000 | 33,000 | ||||||
Non-marketable
securities
|
41,000 | - | ||||||
$ | 2,092,000 | $ | 63,000 |
Three
Months Ended
|
||||||||
December
31, 2008
|
December
31, 2007
|
|||||||
Stock
options
|
3,266,054 | 2,007,000 | ||||||
Warrants
|
1,979,374 | 750,000 | ||||||
Assumed
conversion of:
|
||||||||
Series
A Preferred Stock
|
3,004,000 | 3,004,000 | ||||||
Notes
|
3,375,000 | - | ||||||
Dilutive
potential common shares
|
11,624,428 | 5,761,000 |
December
31, 2008
|
September
30, 2008
|
|||||||
Commissions
payable
|
$ | 6,044,000 | $ | 6,537,000 | ||||
Deferred
clearing fee credits
|
555,000 | 578,000 | ||||||
Telecommunications
vendors payable
|
42,000 | 209,000 | ||||||
Legal
payable
|
559,000 | 646,000 | ||||||
Deferred
rent payable
|
151,000 | 313,000 | ||||||
Accrued
compensation
|
633,000 | 679,000 | ||||||
Commission
payable - Triparty clearing
|
280,000 | 359,000 | ||||||
Capital
lease liability
|
649,000 | 613,000 | ||||||
Other
vendors
|
4,629,000 | 2,401,000 | ||||||
Total
|
$ | 13,542,000 | $ | 12,335,000 |
Three
Months Ended
|
||||||||||||||||
December
31,
|
Increase
(Decrease)
|
|||||||||||||||
2008
|
2007
|
Amount
|
Percent
|
|||||||||||||
Commissions
|
$ | 12,273,000 | $ | 13,292,000 | $ | (1,019,000 | ) |
-8%
|
||||||||
Net
dealer inventory gains
|
10,229,000 | 4,194,000 | 6,035,000 |
144%
|
||||||||||||
Investment
banking
|
667,000 | - | 667,000 |
na
|
||||||||||||
Interest
and dividends
|
697,000 | 930,000 | (233,000 | ) |
-25%
|
|||||||||||
Transfer
fees and clearance services
|
2,750,000 | 1,311,000 | 1,439,000 |
110%
|
||||||||||||
Other
|
1,236,000 | 638,000 | 598,000 |
94%
|
||||||||||||
$ | 27,852,000 | $ | 20,365,000 | $ | 7,487,000 |
37%
|
Three
Months Ended
|
||||||||||||||||
December
31,
|
Increase
(Decrease)
|
|||||||||||||||
2008
|
2007
|
Amount
|
Percent
|
|||||||||||||
Commissions
|
$ | 21,067,000 | $ | 16,203,000 | $ | 4,864,000 |
30%
|
|||||||||
Employee
compensation
|
3,074,000 | 2,240,000 | 834,000 |
37%
|
|
|||||||||||
Clearing
fees
|
1,193,000 | 613,000 | 580,000 |
95%
|
||||||||||||
Communications
|
862,000 | 356,000 | 506,000 |
142%
|
||||||||||||
Occupancy
and equipment costs
|
1,381,000 | 864,000 | 517,000 |
60%
|
||||||||||||
Professional
fees
|
763,000 | 588,000 | 175,000 |
30%
|
||||||||||||
Interest
|
325,000 | 73,000 | 252,000 |
345%
|
||||||||||||
Taxes,
licenses and registration
|
259,000 | 130,000 | 129,000 |
99%
|
||||||||||||
Other
administrative expenses
|
70,000 | 465,000 | (395,000 | ) |
-85%
|
|||||||||||
$ | 28,994,000 | $ | 21,532,000 | $ | 7,462,000 |
35%
|
Long
|
Short
|
Net
|
||||||||||
Corporate
stocks
|
$ | 207,000 | $ | 15,000 | $ | 192,000 | ||||||
Corporate
bonds
|
34,000 | 15,000 | 19,000 | |||||||||
Government
obligations
|
1,810,000 | 33,000 | 1,777,000 | |||||||||
$ | 2,051,000 | $ | 63,000 | $ | 1,988,000 |
31.1
|
Chief
Executive Officer’s Certificate pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
31.2
|
Chief
Financial Officer’s Certificate pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
32.1
|
Chief
Executive Officer’s Certificate pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|
32.2
|
Chief
Financial Officer’s Certificate pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|
NATIONAL
HOLDINGS CORPORATION AND SUBSIDIARIES
|
|||
February
17, 2009
|
By:
|
/s/ Mark Goldwasser | |
Mark
Goldwasser
Chief
Executive Officer
|
|||
February 17, 2009 |
By:
|
/s/ Alan B. Levin | |
Alan
B. Levin
Chief
Financial Officer
|