-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ADN7Y4g9PQPOY5DqZbHRxs5Y9gNr1p4OCIUn0vijJGeFhIPrl8NOaFsrwhP8Qzjg MRIH6926lXuBPQaCTjju8w== 0000913760-98-000009.txt : 19980212 0000913760-98-000009.hdr.sgml : 19980212 ACCESSION NUMBER: 0000913760-98-000009 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980211 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERNATIONAL ASSETS HOLDING CORP CENTRAL INDEX KEY: 0000913760 STANDARD INDUSTRIAL CLASSIFICATION: SECURITY BROKERS, DEALERS & FLOTATION COMPANIES [6211] IRS NUMBER: 592921318 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-23554 FILM NUMBER: 98530034 BUSINESS ADDRESS: STREET 1: 250 PARK AVENUE SOUTH STREET 2: SUITE 200 CITY: WINTER PARK STATE: FL ZIP: 32789 BUSINESS PHONE: 4076291400 MAIL ADDRESS: STREET 1: 250 PARK AVENUE SOUTH STREET 2: SUITE 200 CITY: WINTER PARK STATE: FL ZIP: 32789 10QSB 1 QUARTERLY REPORT U.S. Securities and Exchange Commission Washington D.C. 20549 Form 10-QSB [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 1997 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT Commission File Number 33-70334-A INTERNATIONAL ASSETS HOLDING CORPORATION (Exact name of small business issuer as specified in its charter) Delaware 59-2921318 - ------------------------------------------------------------------------------- (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 250 Park Avenue South, Suite 200 Winter Park, FL 32789 (Address of principal executive offices) (407) 629-1400 (Issuer's telephone number) NA - ------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) 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 [X] No [ ]. The number of shares outstanding of Common Stock was 1,547,201 as of February 2, 1998. Transitional small business disclosure format Yes [ ] No [X] INDEX
Page No. Part I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheet as of December 31, 1997 3 Condensed Consolidated Statements of Operations for the Three Months ended December 31, 1997 and 1996 5 Condensed Consolidated Statements of Cash Flows for the Three Months ended December 31, 1997 and 1996 6 Notes to Condensed Consolidated Financial Statements 8 Item 2. Management's Discussion and Analysis or Plan of Operation 10 Part II. OTHER INFORMATION Item 1. Legal Proceedings 14 Item 6. Exhibits and Reports on Form 8-K 14 Signatures 15
2 INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES Condensed Consolidated Balance Sheet December 31, 1997 (Unaudited)
Assets Cash $ 388,797 Cash deposits with clearing broker 2,284,189 Foreign currency deposits with clearing broker 6,821 Investments 1,313,689 Other receivables 152,917 Securities owned, at market value 2,561,131 Income tax receivable 3,655 Deferred income tax benefit 135,673 Property and equipment, at cost: Leasehold improvements 52,953 Furniture and equipment 882,407 ---------------- 935,360 Less accumulated depreciation and amortization (493,528) ---------------- Net property and equipment 441,832 Other assets, net of accumulated amortization of $99,000 145,328 ================ Total assets $ 7,434,032 ================ See accompanying notes to condensed consolidated financial statements.
3 INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES Condensed Consolidated Balance Sheet December 31, 1997 (Unaudited)
Liabilities and Stockholders' Equity Liabilities: Securities sold, but not yet purchased, at market value $ 285,986 Payable to clearing broker 360,006 Accounts payable 244,481 Accrued employee compensation and benefits 338,401 Other accrued expenses 379,508 Income taxes payable 27,904 Deferred income taxes 17,701 Other 110,175 ---------------- Total liabilities 1,764,162 ---------------- Stockholders' equity: Preferred stock, $.01 par value. Authorized 1,000,000 shares; issued and outstanding -0- shares - Common stock, $.01 par value. Authorized 3,000,000 shares; issued and outstanding 1,547,201 15,472 Additional paid-in capital 3,673,225 Retained earnings 1,981,173 ---------------- Total stockholders' equity 5,669,870 ================ Total liabilities and stockholders' equity $ 7,434,032 ================ See accompanying notes to condensed consolidated financial statements.
4 INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Operations For the Three Months Ended December 31, 1997 and 1996 (Unaudited)
1997 1996 Revenues: Commissions $ 2,063,134 2,021,907 Net dealer inventory and investment gains 481,586 521,784 Other revenue 141,479 144,031 ---------------- ----------------- Total revenues 2,686,199 2,687,722 ---------------- ----------------- Expenses: Commissions and clearing fees 1,186,467 1,126,563 Employee compensation and benefits 525,410 575,657 Communications and promotions 457,272 335,665 Other operating expenses 713,028 378,717 ---------------- ----------------- Total expenses 2,882,177 2,416,602 ---------------- ----------------- Income (Loss) before income taxes (195,978) 271,120 Income tax expense (benefit) (61,276) 113,569 ---------------- ----------------- Net income (loss) $ (134,702) 157,551 ================ ================= Basic earnings (loss) per share $ (.087) .099 Diluted earnings (loss) per share $ (.087) .095 Weighted average number of common shares outstanding 1,548,962 1,592,951 Weighted average number of common shares and dilutive potential common shares outstanding 1,548,962 1,661,919 See accompanying notes to condensed consolidated financial statements.
5 INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows For the Three Months Ended December 31, 1997 and 1996 (Unaudited)
1997 1996 Cash flows from operating activities: Net income (loss) $ (134,702) 157,551 Adjustments to reconcile net income (loss) to net cash used for operating activities: Net amortization and appreciation of investments (21,432) (23,450) Depreciation and amortization 46,957 37,572 Deferred income taxes (89,180) (9,163) Cash provided by (used for) changes in: Receivable from clearing broker, net 405,050 (3,099) Receivable from affiliated company - 24,120 Other receivables (94,315) (11,005) Securities owned, at market value (32,871) (263,592) Other assets 20,868 21,213 Securities sold, but not yet purchased, at market value (396,068) (386,965) Payable to clearing broker, net 360,006 - Accounts payable 128,414 21,911 Accrued employee compensation and benefits (562,572) (371,638) Other accrued expenses 111,194 35,704 Income taxes payable 27,904 (5,768) Other liabilities 815 38 ----------------- ----------------- Net cash used for operating activities (229,932) (776,571) ----------------- ----------------- Cash flows from investing activities Disposal of investments 1,950,000 2,250,000 Acquisition of investments (1,941,874) (2,271,996) Acquisition of property, equipment and other assets (38,412) (102,950) ----------------- ----------------- Net cash used for investing activities (30,286) (124,946) ----------------- ----------------- (continued) See accompanying notes to condensed consolidated financial statements.
6 INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows, Continued
1997 1996 Cash flows from financing activities: Acquisition of common shares related to repurchase program (22,822) (21,431) Acquisition of common shares related to terminated ESOP participants - (429) ----------------- ----------------- Net cash used for financing activities (22,822) (21,860) ----------------- ----------------- Net decrease in cash and cash equivalents (283,040) (923,377) Cash and cash equivalents at beginning of period 2,962,847 2,829,483 ----------------- ----------------- Cash and cash equivalents at end of period 2,679,807 1,906,106 ================= ================= Supplemental disclosure of cash flow information: Cash paid for interest 479 876 ================= ================= Income taxes paid $ - 128,500 ================= =================
See accompanying notes to condensed consolidated financial statements. 7 INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements December 31, 1997 and 1996 (1) Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions and requirements of Form 10-QSB and, therefore, do not include all information and footnotes necessary for a fair presentation of financial position, results of operations, and cash flows in conformity with generally accepted accounting principles. In the opinion of Management, such financial statements reflect all adjustments necessary for a fair statement of the results of operations, cash flows and financial position for the interim periods presented. Operating results for the interim periods are not necessarily indicative of the results that may be expected for the full year. These condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements for the year ending September 30, 1997, filed on Form 10-KSB (SEC File Number 33-70334-A). As used in this Form 10-QSB, the term "Company" refers, unless the context requires otherwise, to International Assets Holding Corporation and its five wholly owned subsidiaries; International Assets Advisory Corp. ("IAAC"), Global Assets Advisors, Inc. ("GAA"), International Financial Products, Inc. ("IFP"), GlobalNet Securities, Inc. ("GNSI") and International Asset Management Corp. ("IAMC"). All significant intercompany balances and transactions have been eliminated in consolidation. (2) Securities Owned and Securities Sold, But Not Yet Purchased Securities owned and Securities sold, but not yet purchased at December 31, 1997, consist of trading and investment securities at quoted market values as follows:
Sold, but not Owned yet purchased Obligations of U.S. Government $ 229,722 - Common stock and American Depository Receipts 1,256,099 252,168 Proprietary unit investment trusts 777,881 - Corporate and municipal bonds 207,819 33,818 Foreign government obligations 89,610 - ___________ __________ $ 2,561,131 285,986
8 INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements, continued (3) Stock Dividend On November 14, 1997 the Company's Board of Directors declared a 10% stock dividend for shareholders of record on December 26, 1997 and payable on January 20, 1998. The 10% stock dividend increased the Company's issued and outstanding common shares by an additional 140,648 shares. (4) Basic and Diluted Earnings (Loss) Per Share On October 1, 1997 the Company adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 128, Earnings Per Share. Comparative earnings per share data for the quarter ended December 31, 1996 has been restated to adhere to the provisions of SFAS No. 128. Basic earnings (loss) per share for the three months ended December 31, 1997 and 1996, have been computed by dividing net income (loss) by the weighted average number of common shares outstanding. Diluted earnings per share for the three months ended December 31, 1996 have been computed by dividing net income by the weighted average number of common shares and dilutive potential common shares outstanding. Diluted loss per share for the three months ended December 31, 1997 is the same as basic loss per share because of the anti-dilutive impact of the potential common shares, due to the loss for the period. Due to the issuance of the 10% stock dividend, the computations of basic and diluted earnings (loss) per share have been adjusted retroactively for all periods presented to reflect this change in capital caused by the stock dividend. (5) Leases The Company occupies leased office space of approximately 13,815 square feet at 250 Park Avenue South, Winter Park, Florida. The expiration date of the office lease is May 31, 2001. The lease includes an option to renew for an additional three years at a rental rate determined by the landlord. The Company is obligated under various noncancelable operating leases for the rental of its office facilities and certain office equipment. Rent expense associated with operating leases amounted to $46,189 and $76,948 for the three months ended December 31, 1997, and 1996, respectively. The minimum lease payments under noncancelable operating leases as of December 31, 1997 are as follows: 9 INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements, continued Fiscal Year (12 month period) Ending September 30, 1998 265,200 1999 316,000 2000 327,000 2001 233,000 2002 17,500 Total future minimum lease payments $1,158,700 (6) Stock Repurchase Program On November 14, 1997 the Board of Directors authorized the Company to continue its repurchase of up to $500,000 in shares of the Company's common stock in the open market during the remainder of the fiscal year ended September 30, 1998. The stock purchases will be made in the open market from time to time as market conditions permit. The Company is required to comply with Rule 10b-18 and Regulation M of the Securities and Exchange Commission which regulate the specific terms in which shares may be repurchased. Since the inception of the repurchase program on March 13, 1996 the Company has repurchased and retired a total of 33,330 shares (as adjusted for the 10% stock dividend) at a total cost of $121,446. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION. Certain statements in this discussion may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks including, but not limited to, changes in general economic and business conditions, interest rate and securities market fluctuations, competition from within and from outside the investment brokerage industry, new products and services in the investment brokerage industry, changing trends in customer profiles and changes in laws and regulations applicable to the Company. Although the Company believes that its expectations with respect to the forward-looking statements are based upon reasonable assumptions within the bounds of its knowledge of its business and operations, there can be no assurance that the actual results, performance or achievement of the Company will not differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. 10 The Company's assets decreased from $7,928,214 at September 30, 1997, to $7,434,032 at December 31, 1997, or a decrease of $494,182. The Company's liabilities decreased from $2,100,820 at September 30, 1997, to $1,764,162 at December 31, 1997, or a decrease of $336,658. The decrease in the net assets (assets less liabilities) of $157,524 primarily relates to the $134,702 net loss incurred by the Company for the three month fiscal period ended December 31, 1997, net of stock repurchase costs from the stock repurchase program totaling $22,822 for the same period. The Company's condensed consolidated balance sheet at December 31, 1997, reflects a payable to clearing broker, for trades which had not yet settled for cash, due to the costs from the purchase of securities exceeding the proceeds of securities sold. Results of Operations: The Company's principal activities, securities brokerage and the trading of and market-making in securities, are highly competitive and extremely volatile. The earnings of the Company are subject to wide fluctuations since many factors over which the Company has little or no control, particularly the overall volume of trading and the volatility and general level of market prices, may significantly affect its operations. Three Months Ended December 31, 1997, as Compared to the Three Months Ended December 31, 1996 The Company's revenues are derived primarily from commissions earned on the sale of securities and trading income in securities purchased or sold for the Company's account. Total revenues decreased by approximately $1,500, or .06% for the three months ended December 31, 1997, as compared to the three months ended December 31, 1996. For the three months ended December 31, 1997, and 1996, approximately 77% and 75%, respectively, of the Company's revenues were derived from commissions earned on the sale of securities. For the three months ended December 31, 1997, and 1996, approximately 18% and 19%, respectively, of the Company's total revenues were from net dealer inventory and investment gains (trading revenue). Commission revenue increased by approximately $41,000, or 2% for the three months ended December 31, 1997, as compared to the three months ended December 31, 1996. The average number of account executives increased from 41 as of December 31, 1996, to 49 as of December 31, 1997. During the three months ended December 31, 1997, the overall volume of customer ticket orders increased by approximately 12% and the average dollar amount of retail trades decreased by approximately 13%, as compared to the three months ended December 31, 1996. This approximate 12% increase in ticket volume was largely offset by the approximate 13% decrease in the average dollar amount of retail trades, resulting in the 11 approximate 2% increase in total commission revenue for the three months ended December 31, 1997 over the same period in 1996. Revenues from net dealer inventory and investment gains decreased by approximately $40,198, or 8% for the three months ended December 31, 1997, as compared to the three months ended December 31, 1996. The decrease in trading revenue is primarily attributable to a decrease in the Company's retail trading income due to the volatility of the Asian financial markets. The Company's trading department primarily concentrates on global securities that it believes are likely to be traded by the Company's clients. By focusing on these types of securities, trading revenue is more closely related to commission revenue and order flow. Other revenue decreased by approximately $2,500 or 2% during the three months ended December 31, 1997, as compared to the three months ended December 31, 1996. The decrease in other revenue is primarily due to decreases in list rental income and subscription fee income. The major expenses incurred by the Company relate to direct costs of its securities operations such as commissions and clearing fees, employee compensation and benefits, communications and promotions expense and other operating expenses. Total expenses increased by approximately $466,000, or 19% for the three months ended December 31, 1997, as compared to the same period in 1996. This increase in expenses is primarily attributable to increases in commissions and clearing fees, communications and promotions and other operating expenses. Commissions and clearing fees increased approximately $60,000, or 5% during the three months ended December 31, 1997, as compared to the same period in 1996. This increase is partly attributable to increases in commissions expense directly related to increases in new broker expenses based on the increase in the average number of account representatives. The increase is also partly related to increases in clearing fees based on the 12% increase in retail ticket volume. Employee compensation and benefits expense decreased by approximately $50,000, or 9% during the three months ended December 31, 1997, as compared to the three months ended December 31, 1996. The decrease in employee compensation and benefits is primarily due to a decrease in performance based bonus accruals based on the approximate $196,000 loss before income taxes incurred for the three months ended December 31, 1997 compared to the approximate $271,000 income before income taxes for the same period in 1996. Communications and promotions expense increased by approximately $121,000, or 36% during the three months ended December 31, 1997, as compared to the three months ended December 31, 1996. This increase is primarily related to increases in expenditures for promotional print media including postage, printing and design costs. 12 Other operating expenses increased by approximately $334,000, or 88% during the three months ended December 31, 1997, as compared to the three months ended December 31, 1996. Approximately $130,000 of this increase is related to professional fees incurred by the Company for the defense of an arbitration matter. In addition, approximately $100,000 of the increase is for the arbitration award for a portion of the claimant's claim and an additional $100,000 of the increase is for partial reimbursement of the claimant's legal fees also awarded to the claimant in the same matter. As a result of the above, the Company is reporting a loss before income taxes of approximately $196,000 for the three months ended December 31, 1997. This is compared to income before income taxes of approximately $271,000 for the three months ended December 31, 1996. The Company's effective income tax rate was approximately 31% for the three months ended December 31, 1997 and approximately 42% for the three months ended December 31, 1996. Liquidity and Capital Resources Substantial portions of the Company's assets are liquid. At December 31, 1997, approximately 87% of the Company's assets consisted of cash, cash equivalents, and marketable securities. All assets are financed by the Company's equity capital, short-term borrowings from securities lending transactions and other payables. The Company's wholly owned registered securities broker/dealer subsidiary IAAC is subject to the requirements of the SEC and the NASD relating to liquidity and net capital levels. At December 31, 1997, IAAC had net capital of approximately $2,560,000, which was approximately $2,431,000 in excess of its minimum net capital requirement at that date. In the opinion of management, the Company's existing capital and cash flow from operations will be adequate to meet the Company's capital needs for at least the next 12 months in light of known and reasonably estimated trends. In addition, management believes that the Company will be able to obtain additional short or medium-term financing that may be desirable in the ordinary conduct of its business. The Company has no plans for additional financing and there can be no assurance such financing will be available. 13 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company was involved in a National Association of Securities Dealers (NASD) arbitration hearing that concluded on November 7, 1997. On January 16, 1998, the Company received notification from the NASD arbitration panel that an award of $99,845 plus $100,000 reimbursement for a portion of the claimant's legal fees was awarded to the claimant. The cost of both the award and legal fee reimbursement was accrued in other accrued expenses in the December 31, 1997 financial statements and was paid on January 22, 1998. The Company is party to certain additional arbitration and/or litigation matters as of December 31, 1997 which relate primarily to matters arising in the ordinary course of business. Management of the Company anticipates that the final resolution of these additional items will not have a material adverse effect on the Company's consolidated financial statements. The foregoing discussion contains certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve various risks and uncertainties with respect to current legal proceedings. Although the Company believes that its expectation with respect to the forward-looking statements are based upon reasonable assumptions within the bounds of its knowledge of its business and operations, there can be no assurances that the actual results, performance or achievement of the Company will not differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a). Exhibits (11) The Statements of Computation of Earnings Per Share are attached hereto as Exhibit 11. (27) Broker-Dealers and Broker Dealer Holding Companies Financial Data Schedule BD is attached hereto as Exhibit 27 b). Form 8-K No reports were filed on Form 8-K during the three months ended December 31, 1997 14 Signatures In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. INTERNATIONAL ASSETS HOLDING CORPORATION Date 02/10/98 /s/ Jerome F. Miceli Jerome F. Miceli President and Chief Operating Officer Date 02/10/98 /s/ Jonathan C. Hinz Jonathan C. Hinz Chief Accounting Officer 15 INTERNATIONAL ASSETS HOLDING CORPORATION STATEMENT OF COMPUTATION OF EARNINGS PER SHARE EXHIBIT 11 For the Three Months Ended December 31, 1997 and 1996
1997 (1) 1996 Basic Earnings (Loss) Per Share Net income (loss) $ (134,702) $ 157,551 Weighted average number of common shares outstanding 1,548,962 1,592,951 Basic earnings (loss) per share $ (0.087) $ 0.099 Diluted Earnings (Loss) Per Share Net income (loss) $ (134,702) $ 157,551 Weighted average number of common shares outstanding 1,548,962 1,592,951 Weighted average number of net common shares that would be issued upon exercise of dilutive options and warrants assuming proceeds used to repurchase shares pursuant to the treasury stock method (2) 68,968 Weighted average number of common shares and dilutive potential common shares outstanding 1,548,962 1,661,919 Diluted earnings (loss) per share $ (0.087) $ 0.095
- ------------------------------------------------------------------------------ (1) Diluted earnings (loss) per share is the same as basic earnings (loss) per share for 1997 because of the anti-dilutive impact of the dilutive potential common shares due to the net loss for 1997. (2) The treasury stock method recognizes the use of proceeds that could be obtained upon exercise of options and warrants in computing diluted earnings per share. It assumes exercise of options and warrants as of the beginning of the period or when issued, if later, and that any proceeds would be used to purchase common stock at the average market price during the period. 16 EX-27 2 FDS FOR 10QSB
BD 1 3-MOS SEP-30-1998 DEC-31-1997 2,679,807 156,572 0 0 3,874,820 441,832 7,434,032 0 970,792 0 0 285,986 0 0 0 15,472 5,654,398 7,434,032 481,586 78,870 2,063,134 0 45,351 479 1,387,729 (195,978) (195,978) 0 0 (134,702) (.087) (.087)
-----END PRIVACY-ENHANCED MESSAGE-----