WSFL Woodstock Holdings Inc (CE)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarter Ended June 30, 2010

OR

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from ________ to ________

Woodstock Holdings, Inc.

(Exact name of registrant as specified in its charter)

Georgia		6211		58-2161804
(State of Jurisdiction of Incorporation or organization)		(Primary Standard Industrial Classification Code Number)		(I.R.S. Employer Identification No.)

117 Towne Lake Pkwy, Ste 200 Woodstock, Georgia		30188
(Address of principal executive offices)		(Zip Code)

770-516-6996

(Telephone Number)

Woodstock Financial Group, Inc.

(Former name)

Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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   ý   NO ¨

Indicate by check mark whether registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or small reporting company in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨		Accelerated filer	¨
Non-accelerated filer	¨		Smaller reporting company	ý
(Do not check if 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  ý No

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 17,619,028 shares of common stock, $.01 par value per share, issued and outstanding as of August 5, 2010.

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  WOODSTOCK HOLDINGS, INC.

(formerly Woodstock Financial Group, Inc.)

INDEX

			Page No.
PART I	FINANCIAL STATEMENTS
Item 1.	Consolidated Financial Statements		3
	Consolidated Balance Sheets (unaudited) at June 30, 2010 and (audited) at December 31, 2009		3
	Consolidated Statements of Operations (unaudited) for the Three Months and the Six Months   June 30, 2010 and 2009		4
	Consolidated Statements of Cash Flows (unaudited) for the Six Months Ended June 30, 2010 and 2009		5
	Notes to Consolidated Financial Statements (unaudited)		6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		8
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		11
Item 4.	Controls and Procedures		11
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings		12
Item 1A.	Risk Factors		12
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		12
Item 3.	Defaults Upon Senior Securities		12
Item 4.	Submission of Matters to a Vote of Security Holders		12
Item 5.	Other Information		12
Item 6.	Exhibits		12

This Report contains statements which constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements appear in a number of places in this Report and include all statements regarding the intent, belief or current expectations of the Company, its directors or its officers with respect to, among other things: (1) the Company’s financing plans; (2) trends affecting the Company’s financial condition or results of operations; (3) the Company’s growth strategy and operating strategy; and (4) the declaration and payment of dividends. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking statements as a result of various factors discussed herein and those factors discussed in detail in the Company’s filings with the Securities and Exchange Commission.

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PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

WOODSTOCK HOLDINGS, INC.

(formerly Woodstock Financial Group, Inc.)

Consolidated Balance Sheets

	June 30, 2010 (unaudited)		December 31, 2009 (audited)
ASSETS
Cash and cash equivalents	$ 795,060		$ 633,674
Clearing deposit	131,141		131,082
Commissions receivable	514,749		547,242
Furniture, fixtures, and equipment, at cost, net of accumulated depreciation
of $86,729 and $169,242, respectively	14,271		17,814
Building, at cost, net of accumulated depreciation
of $155,800 and $138,964, respectively	1,121,488		1,138,324
Other assets	182,415		189,069
Total  assets	$ 2,759,124		$ 2,657,205
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable	$ 114,522		$ 65,873
Commissions payable	421,940		430,498
Preferred dividends payable	30,274		30,274
Mortgage note	946,505		953,928
Other liabilities	9,875		3,507
Total liabilities	1,523,116		1,484,080
Commitments and contingencies
Shareholders' equity:
Series A preferred stock, $.01 par value; 5,000,000 shares authorized,
86,500 shares issued and outstanding (liquidation value of $865,000)	865		865
Common stock, $.01 par value; 50,000,000 shares authorized;
17,941,772 shares issued; 17,619,028 shares outstanding	179,418		179,418
Additional paid-in capital	3,697,278		3,697,278
Accumulated deficit	(2,485,598)		(2,548,481)
Treasury stock, 322,744 shares, carried at cost	(155,955)		(155,955)
Total shareholders' equity	1,236,008		1,173,125
Total liabilities and shareholders' equity	$ 2,759,124		$ 2,657,205

See accompanying notes to unaudited consolidated financial statements.

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WOODSTOCK HOLDINGS, INC.

(formerly Woodstock Financial Group, Inc.)

Consolidated Statements of Operations

(unaudited)

	Three Months Ended June 30		Six Months Ended June 30
	2010		2009		2010		2009
OPERATING INCOME
Commission revenue	$ 2,474,709		$ 2,418,899		$ 4,479,738		$ 3,857,841
Interest income	79,974		31,524		131,107		63,294
Other fees	228,598		248,140		435,218		372,373
Total operating income	2,783,281		2,698,563		5,046,063		4,293,508
OPERATING EXPENSES
Commissions to brokers	2,117,738		2,067,556		3,834,561		3,263,284
Clearing costs	40,362		51,384		71,999		87,103
Selling, general, and administrative expenses	543,251		515,135		1,018,814		1,014,160
Interest expense	16,747		21,073		27,532		41,601
Total operating expenses	2,718,098		2,655,148		4,952,906		4,406,148
Net income (loss)	$ 65,183		$ 43,415		$ 93,157		$ (112,640)
Basic and diluted earnings (loss) per share	$ 0.00		$ 0.00		$ 0.01		$ (0.01)

See accompanying notes to unaudited consolidated financial statements.

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WOODSTOCK HOLDINGS, INC.

(formerly Woodstock Financial Group, Inc.)

Consolidated Statements of Cash Flows

(unaudited)

For the Six Months Ended June 30, 2010 and 2009

	2010		2009
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss)	$ 93,157		$ (112,640)
Adjustments to reconcile net earnings (loss) to net cash
flows from operating activities
Depreciation	20,379		22,923
Changes in operating assets and liabilities
Clearing deposit	(59)		-
Commissions receivable	32,493		(115,970)
Other assets	6,654		(205,455)
Accounts payable	48,649		(25,345)
Commissions payable	(8,558)		52,626
Other liabilities	6,368		1,603
Net cash flows from operating activities	199,083		(382,258)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of furniture, fixtures and equipment	-		(2,088)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on mortgage note	(7,423)		(7,399)
Dividends paid on preferred stock	(30,274)		(30,274)
Net cash flows from financing activities	(37,697)		(37,673)
NET CHANGE IN CASH AND CASH EQUIVALENTS	161,386		(422,019)
CASH AND CASH EQUIVALENTS , beginning of year	633,674		976,450
CASH AND CASH EQUIVALENTS, end of period	$ 795,060		$ 554,431
SUPPLEMENTAL DISCLOSURE OF CASH PAID
FOR INTEREST	$ 27,532		$ 41,601

See accompanying notes to unaudited consolidated financial statements.

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WOODSTOCK HOLDINGS, INC.

(formerly Woodstock Financial Group, Inc.)

Notes to Financial Statements

(1)

Organization

Woodstock Holdings, Inc. (the “Company”) is a holding company, engaged through a subsidiary, in full service securities brokerage and investment banking since 1995.  Effective January 20, 2010, the Company reorganized into a holding company and changed its name, transferring its former name, Woodstock Financial Group, Inc. (“WFG”), to a newly established 100% owned broker dealer subsidiary.   

The Company reported its financial position and results of operations for 2009 and earlier periods on a pre-reorganization basis.  For reporting periods beginning after February 2010, the Company reports its position and results of operations on a consolidated basis.

WFG is registered as a broker-dealer with the Financial Industry Regulatory Authority (“FINRA”) and 50 states, Puerto Rico, Washington D.C. and also as a municipal securities dealer with the Municipal Securities Regulation Board. WFG is subject to net capital and other regulations of the U.S. Securities and Exchange Commission. WFG trades securities as an agent and a principal on exchanges such as the NYSE, AMEX and NASDAQ. WFG maintains selling agreements with mutual fund families and insurance companies offering load and no load funds, annuities and insurance products.

WFG maintains a custody-clearing relationship with Southwest Securities, Inc.  In 2005, the Company, as a registered investment advisor, created a managed account program named the “RFG Stars Program”.  Through the RFG Stars Program, the Company provides investment advisory services to clients.  RFG Stars Program client accounts are maintained with Southwest Securities and Fidelity Registered Investment Advisor Group (“FRIAG”), an arm of Fidelity Investments.  FRIAG provides brokerage, custody, and clearing services to RFG Stars Program clients.

The Company maintains branch and other offices in a number of other jurisdictions and a complement of approximately 92 independent retail brokers.

The interim consolidated financial statements included herein are unaudited, but reflect all adjustments which, in the opinion of management, are necessary for a fair presentation of the financial position and results of operations for the interim period presented.  All such adjustments are of a normal recurring nature.  The results of operations for the period ended June 30, 2010 are not necessarily indicative of the results of a full year’s operations.

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) on the accrual basis of accounting and include the accounts of the Holding Company and its subsidiary.  All significant intercompany accounts and transactions have been eliminated in consolidation.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect amounts reported in the financial statements and disclosures. Actual results could differ from these estimates.

(2)

Stock-Based Compensation

The Company sponsors a stock-based incentive compensation plan for the benefit of certain employees.

The Company did not grant any options during the first and second quarter of 2010 and did not recognize any related expense during the periods.

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(3)

Recent Accounting Pronouncements

In June 2009, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2009-01, Topic 105 - Generally Accepted Accounting Principles - amendments based on Statement of Financial Accounting Standards No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles . This ASU reflected the issuance of FASB Statement No. 168. This Accounting Standards Update amends the FASB Accounting Standards Codification for the issuance of FASB Statement No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles . This Accounting Standards Update includes Statement 168 in its entirety, including the accounting standards update instructions contained in Appendix B of the Statement. The Codification does not change current U.S. GAAP, but is intended to simplify user access to all authoritative U.S. GAAP by providing all the authoritative literature related to a particular topic in one place. The Codification is effective for interim and annual periods ending after September 15, 2009, and as of the effective date, all existing accounting standard documents will be superseded. The Codification is effective for the third quarter of 2009, and accordingly, the Quarterly Report on Form 10-Q for the quarter ending September 30, 2009 and all subsequent public filings will reference the Codification as the sole source of authoritative literature.

(4)

Subsequent Events

In accordance with FASB ASC 855, Subsequent Events , the Company evaluated subsequent events through the date the Company’s quarterly report on Form 10-Q was ready for issue.

  

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Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

WOODSTOCK HOLDINGS, INC.

(formerly Woodstock Financial Group, Inc.)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

For the Six Months Ended June 30, 2010 and 2009

OVERVIEW

The following discussion should be read in conjunction with the Financial Statements of the Company and the Notes thereto appearing elsewhere herein.

FORWARD-LOOKING STATEMENTS

The following is our discussion and analysis of certain significant factors that have affected our financial position and operating results during the periods included in the accompanying financial statements.  This commentary should be read in conjunction with the financial statements and the related notes and the other statistical information included in this report.

This report contains “forward-looking statements” relating to, without limitation, future economic performance, plans and objectives of management for future operations, and projections of revenues and other financial items that are based on the beliefs of management, as well as assumptions made by and information currently available to management.  The words “may,” “will,” “anticipate,” “should,” “would,” “believe,” “contemplate,” “expect,” “estimate,” “continue,” and “intend,” as well as other similar words and expressions of the future, are intended to identify forward-looking statements.  Our actual results may differ materially from the results discussed in the forward-looking statements, and our operating performance each quarter is subject to various risks and uncertainties that are discussed in detail in our filings with the SEC, including, without limitation:

·

significant increases in competitive pressure in the financial services industries;

·

changes in political conditions or the legislative or regulatory environment;

·

general economic conditions, either nationally or regionally and especially in our primary service area, becoming less favorable than expected;

·

changes occurring in business conditions and inflation;

·

changes in technology;

·

changes in monetary and tax policies;

·

changes in the securities markets; and

·

other risks and uncertainties detailed from time to time in our filings with the SEC.

OVERVIEW AND GENERAL INDUSTRY CONDITIONS

Our primary sources of revenue are commissions earned from brokerage services. Our principal business activities are, by their nature, affected by many factors, including general economic and financial conditions, movement of interest rates, security valuations in the marketplace, regulatory changes, competitive conditions, transaction volume and market liquidity. Consequently, brokerage commission revenue and investment banking fees can be volatile. While we seek to maintain cost controls, a significant portion of our expenses is fixed and does not vary with market activity. As a result, substantial fluctuations can occur in our revenue and net income from period to period.

WFG is a licensed insurance broker and receives commission revenue as a result of its insurance operations.  The Company continues to grow this business; however does not regard insurance revenue as material at this time.

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WOODSTOCK HOLDINGS, INC.

(formerly Woodstock Financial Group, Inc.)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS, continued

For the Six Months Ended June 30, 2010 and 2009

RESULTS OF OPERATIONS – QUARTERS ENDED June 30, 2010 AND 2009

Total operating income for the quarter ended June 30, 2010 increased by $84,718, or approximately 3%, to $2,783,281, from $2,698,563 for the comparable period in 2009.  

Commission revenue for the quarter ended June 30, 2010 increased by $55,810, or approximately 2%, to $2,474,709 from $2,418,899 for the comparable period in 2009. This increase was principally due to an increase in the fee based business for the quarter.  

Interest income for the quarter ended June 30, 2010 increased by $48,450, or approximately 154%, to $79,974 from $31,524 for the comparable period in 2009.  This increase is due to the increase in interest charged on margin accounts and customer accounts held by our clearing agent.

Other fees, from clearing transaction charges and other income, for the quarter ended June 30, 2010 decreased by $19,542, or approximately 8%, to $228,598 from $248,140 compared to the comparable period in 2009.  This decrease was principally due to a decrease in transactional business during the second quarter, also WFG decreased the transactional fee charged to the customers.

Total operating expenses for the quarter ended June 30, 2010 increased by $62,950, or approximately 2%, to $2,718,098 from $2,655,148 for the same period in 2009.  The increased expense was due primarily to the increased commissions paid to brokers, which correlates with the increase in commission revenue during the quarter.

Commissions to brokers for the quarter ended June 30, 2010 increased by $50,182, or approximately 2%, to $2,117,738 from $2,067,556 for the comparable period in 2009.  This increase correlates with the increase in commission revenue during the quarter.

Clearing costs were $40,362 for the quarter ended June 30, 2010, down from $51,384 the prior year.  As a percentage of commission revenue, clearing costs were approximately 1.6% for the quarter ended June 30, 2010, compared to approximately 2.1% for the comparable period in 2009.

Selling, general and administrative expense for the quarter ended June 30, 2010 increased by $28,116, or approximately 5%, to $543,251 from $515,135 for the comparable period in 2009.  

Net profit was $65,183 for the quarter ended June 30, 2010, compared to a net profit of $43,415 for the comparable period in 2009.

RESULTS OF OPERATIONS – SIX MONTHS ENDED JUNE 30, 2010 AND 2009

Total operating income for the six months ended June 30, 2010 increased by $752,554, or approximately 18%, to $5,046,063, from $4,293,508 for the comparable period in 2009.  

Commission revenue for the six months ended June 30, 2010 increased by 621,897, approximately 16%, to $4,479,738 from $3,857,841 for the comparable period in 2009. This increase was principally due to an increase in transactional business for the first quarter and fee based business in the second quarter.  

Interest income for the six months ended June 30, 2010 increased $67,813, or approximately 107%, to $131,107 from $63,294 during the six months ended June 30, 2010 compared to the same period in 2009.  This increase is due to the increase in interest charged on margin accounts and customer accounts held by our clearing agent.

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Other fees, from clearing transaction charges and other income increased by $62,845, or approximately 17% for the six months ended June 30, 2010, to $435,218 from $372,373 compared to the comparable period in 2009.  This increase was principally due to fees on transactional business during the first quarter, which correlates with the increase in commission revenue during that quarter.  In addition there is additional income from a sub-tenant.

Total operating expenses for the six months ended June 30, 2010 increased by $546,758 or approximately 12%, to $4,952,906 from $4,406,148 for the same period in 2009.  The increased expense was due primarily to the increased commissions paid to brokers, which correlates with the increase in commission revenue.

Commissions to brokers increased by $571,277, or approximately 18%, to $3,834,561 for the six months ended June 30, 2010 from $3,263,284 in the prior year.  This increase correlates with the increase in commission revenue during the six months.

Clearing costs decreased by $15,104 or 17% to $71,999 for the six months ended June 30, 2010 in the prior year.  As a percentage of commission revenue, clearing costs were approximately 1.6% in 2010 compared to 2.3% in 2009.

Selling, general and administrative expenses decreased $4,654, or approximately 0.5% to $1,018,814 for the six months ended June 30, 2010 from $1,014,160 in the prior year.  

Net profit was $93,157 for the six months ended June 30, 2010 compared to a net loss of $112,640 for the comparable period in the prior year.

LIQUIDITY AND CAPITAL RESOURCES

Our assets are reasonably liquid with a substantial portion consisting of cash and cash equivalents, and receivables from other broker-dealers and our clearing agent, all of which fluctuate depending upon the levels of customer business and trading activity. Receivables from broker-dealers and our clearing agent turn over rapidly.  Both our total assets, as well as the individual components as a percentage of total assets, may vary significantly from period to period because of changes relating to customer demand, economic, market conditions and proprietary trading strategies.  Our total net assets at June 30, 2010 were $2,759,124 of which $795,060 is cash and cash equivalents.

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WOODSTOCK HOLDINGS, INC.

(formerly Woodstock Financial Group, Inc.)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS, continued

For the Six Months Ended June 30, 2010 and 2009

As a broker-dealer, WFG is subject to the Securities and Exchange Commission Uniform Net Capital Rule (Rule15c3-1).  The Rule requires maintenance of minimum net capital and that WFG maintains a ratio of aggregate indebtedness (as defined) to net capital (as defined) not to exceed 15 to 1.  WFG’s minimum net capital requirement is $100,000.  Under the Rule WFG is subject to certain restrictions on the use of capital and its related liquidity.  WFG’s net capital position at June 30, 2010 was $831,467 and its ratio of aggregate indebtedness to net capital was .66 to 1.

Historically, we have financed our operations through cash flow from operations and the private placement of equity securities. We have not employed any significant leverage or debt to fund operating needs.

We believe that our capital structure is adequate for our current operations.  We continually review our overall capital and funding needs to ensure that our capital base can support the estimated needs of the business.  These reviews take into account business needs as well as the Company's regulatory capital requirements.  Based upon these reviews, to take advantage of strong market conditions and to fully implement our expansion strategy, we will continue to pursue avenues to decrease costs and increase our capital position.

The Company's cash and cash equivalents increased by $161,386 to $795,060 as of June 30, 2010, from $633,674 as of December 31, 2009.  This overall increase was due to net cash from operating activities of $199,083 and cash used by financing activities of $37,697.

The Company holds a mortgage note on the current office space at 117 Towne Lake Parkway, Woodstock, GA  30188.  The mortgage note is a 5-year balloon maturing in September 2014, amortized on a 25-year basis at a fixed rate interest rate of 7.00%, and is collateralized by the building. Mortgage payments and condo association fees of $6,770 and $4,700, respectively, are payable monthly.

EFFECTS OF INFLATION AND OTHER ECONOMIC FACTORS

Market prices of securities are generally influenced by changes in rates of inflation, changes in interest rates and economic activity generally.  Our revenues and net income are, in turn, principally affected by changes in market prices and levels of market activity.  Moreover, the rate of inflation affects our expenses, such as employee compensation, occupancy expenses and communications costs, which may not be readily recoverable in the prices of services, offered to our customers.  To the extent inflation, interest rates or levels of economic activity adversely affect market prices of securities, our financial condition and results of operations will also be adversely affected.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

The Company does not invest or trade in market sensitive investments.

Item 4.

Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e).  Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our current disclosure controls and procedures are effective in timely alerting them to material information relating to the Company that is required to be included in the Company’s periodic filings with the SEC.  There have been no significant changes in the Company’s internal controls over financial reporting during the quarter ended June 30, 2010 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II.  OTHER INFORMATION

Item 1.

Legal Proceedings

In the normal course of business, the Company, as a regulated broker dealer, is subject to examinations, inquiries and requests from Customers, the SEC, FINRA and state regulators.  We are not aware of any matter at this time that would have material impact on the company’s financial position.

Item 1A.

Risk Factors

None.

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Item 3.

Defaults Upon Senior Securities

Not applicable.

Item 4.

Submission of Matters to a Vote of Security Holders

None.

Item 5.

Other Information

None.

Item 6.

Exhibits

31.1

Certification of Chief Executive Officer Pursuant to 18 U.S.C.  Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of Chief Financial Officer Pursuant to 18 U.S.C.  Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32

Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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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.

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