Business Context and Reporting Period
This Form 8-K, dated November 30, 2007, reports on New York Mortgage Trust, Inc. (the "Company"). The filing details the entry into a material definitive agreement for a capital raise and significant changes to the Company's board of directors and executive management structure. The closing of the transaction is scheduled to occur on or before January 4, 2008.
Key Financial Metrics and Transaction Details
- Capital Raise: Agreement to sell 1,000,000 shares of Series A Cumulative Redeemable Convertible Preferred Stock for an aggregate purchase price of $20,000,000.
- Preferred Stock Terms:
- Conversion Price: $4.00 per share of common stock (5:1 conversion rate).
- Dividend Rate: 10.0% annual cash dividend, payable quarterly.
- Liquidation Preference: $20.00 per share plus accrued dividends.
- Maturity Date: December 31, 2010.
- Investment Option: Investors have an option to purchase up to an additional 1,000,000 shares of Preferred Stock for $20.00 per share, exercisable by January 31, 2008.
- Advisory Fees: Base advisory fee of 1.50% per annum on the equity of the subsidiaries (defined as the greater of net asset value of new investments or $20 million plus 50% of new equity proceeds).
- Executive Compensation: New employment agreements for President/CEO Steven R. Mumma and CFO David A. Akre provide an initial base salary of $150,000 each, with potential special bonuses of up to $150,000 in 2008 and severance of $500,000 plus accelerated vesting upon termination without cause.
Material Changes Versus Prior Period
The filing does not provide comparative financial performance data (revenue, profit, or cash flow) as it is a current report regarding specific corporate events rather than a periodic financial statement. However, the following material structural changes are reported:
- Board Composition: Resignation of four directors (Steven B. Schnall, Mary Dwyer Pembroke, Jerome F. Sherman, and Thomas W. White) effective upon closing. Appointment of James J. Fowler as Non-Executive Chairman and Steven M. Abreu as a director.
- Management Structure: Transition to external management by JMP Asset Management LLC (an affiliate of the Investors) for the Company's subsidiaries.
- Investment Strategy: Subsidiaries will target non-Agency RMBS, other mortgage assets, and real estate-related investments under the new advisory agreement.
Guidance, Outlook, Risks, and Contingencies
- Registration Rights: The Company must file a resale registration statement by June 30, 2008. Failure to do so triggers an additional dividend of 0.50% per quarter until remedied.
- Redemption Contingency: If the Company fails to raise at least $50 million of new common equity by September 30, 2008, holders may redeem the Preferred Stock for cash or senior notes.
- Mandatory Conversion: Preferred Stock will convert to common stock if it represents less than 10% of the Company's total outstanding common stock on an as-converted basis.
- Termination Fees: The Advisory Agreement includes a termination fee equal to the sum of the average annual base advisory fee and average annual incentive compensation earned over the preceding 24 months if terminated without cause.
- Stockholder Rights: Former Chairman Steven B. Schnall has rights to sell up to 422,000 shares of common stock in future offerings or have the Company purchase them.
Key Facts for Investor Verification
- Confirm the closing date of the $20 million Preferred Stock sale and whether the additional $20 million option is exercised.
- Verify the Company's ability to raise the required $50 million in new common equity by September 30, 2008, to avoid redemption of the Preferred Stock.
- Monitor the filing status of the resale registration statement by the June 30, 2008 deadline to avoid penalty dividends.
- Assess the impact of the new external management structure and advisory fees on future profitability and capital deployment.
- Review the new employment agreements for executives to understand potential cash outflows related to bonuses and severance.