-----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, T5zVdpSIa8QmNqKH1QDIEFs+6psYiWWUPjc5EEx+b/j0l1K93VGjWE1pHP18RqQj lODBuSyzWcT6L9cIuM5oYA== 0000913760-98-000021.txt : 19980817 0000913760-98-000021.hdr.sgml : 19980817 ACCESSION NUMBER: 0000913760-98-000021 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980814 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: 98687462 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 June 30, 1998 [ ] 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 1,525,565 as of August 7, 1998. Transitional small business disclosure format Yes [ ] No [X] INDEX Page No. Part I FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) Condensed Consolidated Balance Sheet as of June 30, 1998 3 Condensed Consolidated Statements of Operations for the Nine Months ended June 30, 1998 and 1997 5 Condensed Consolidated Statements of Operations for the Three Months ended June 30, 1998 and 1997 6 Condensed Consolidated Statements of Cash Flows for the Nine Months ended June 30, 1998 and 1997 7 Notes to Condensed Consolidated Financial Statements 9 Item 2. Management's Discussion and Analysis or Plan of Operation 12 Part II OTHER INFORMATION Item 1. Legal Proceedings 17 Item 6. Exhibits and Reports on Form 8-K 18 Signatures 18 2 INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES Condensed Consolidated Balance Sheet June 30, 1998 (Unaudited)
Assets Cash $ 266,490 Cash deposits with clearing broker 1,828,667 Foreign currency deposits with clearing broker 21,617 Investments, at market value 1,200,532 Receivable from clearing broker 144,620 Other receivables 79,601 Securities owned, at market value 2,704,436 Income taxes receivable 25,616 Deferred income tax benefit 78,468 Property and equipment, at cost: Leasehold improvements 52,953 Furniture and equipment 893,546 ---------------- 946,499 Less accumulated depreciation and amortization (567,848) ---------------- Net property and equipment 378,651 Other assets, net of accumulated amortization of $112,003 132,059 ================ Total assets $ 6,860,757 ================ See accompanying notes to condensed consolidated financial statements.
3 INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES Condensed Consolidated Balance Sheet June 30, 1998 (Unaudited)
Liabilities and Stockholders' Equity Liabilities: Securities sold, but not yet purchased, at market value $ 389,537 Accounts payable 75,345 Accrued employee compensation and benefits 346,816 Other accrued expenses 235,450 Deferred income taxes 13,271 Other 118,940 ---------------- Total liabilities 1,179,359 ---------------- 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 1,525,565 15,256 Additional paid-in capital 3,641,803 Retained earnings 2,024,339 ---------------- Total stockholders' equity 5,681,398 ================ Total liabilities and stockholders' equity $6,860,757 ================ See accompanying notes to condensed consolidated financial statements.
4 INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Operations For the Nine Months Ended June 30, 1998 and 1997 (Unaudited)
1998 1997 Revenues: Commissions $5,484,305 6,649,876 Net dealer inventory and investment gains 1,575,478 1,932,332 Other revenue 397,770 483,953 --------------- --------------- Total revenues 7,457,553 9,066,161 ---------------- --------------- Expenses: Commissions and clearing fees 3,310,120 3,806,636 Employee compensation and benefits 1,530,848 1,976,765 Communications and promotions 1,179,357 1,106,964 Other operating expenses 1,478,788 1,270,755 ---------------- --------------- Total expenses 7,499,113 8,161,120 ---------------- --------------- Income (loss) before income taxes (41,560) 905,041 Income tax expense 7,032 373,013 ---------------- --------------- Net income (loss) $ (48,592) 532,028 ================ =============== Basic earnings (loss) per share $ (.032) .335 Diluted earnings (loss) per share $ (.032) .325 Weighted average number of common shares outstanding 1,541,368 1,586,681 Weighted average number of common shares and dilutive potential common shares outstanding 1,541,368 1,637,895
See accompanying notes to condensed consolidated financial statements. 5 INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Operations For the Three Months Ended June 30, 1998 and 1997 (Unaudited)
1998 1997 Revenues: Commissions $1,627,252 2,494,030 Net dealer inventory and investment gains 420,970 746,598 Other revenue 160,094 182,018 ------------------ --------------- Total revenues 2,208,316 3,422,646 ------------------ --------------- Expenses: Commissions and clearing fees 1,030,989 1,425,624 Employee compensation and benefits 490,951 721,056 Communications and promotions 339,021 363,442 Other operating expenses 348,111 497,242 ------------------ --------------- Total expenses 2,209,072 3,007,364 ------------------ --------------- Income (loss) before income taxes (756) 415,282 Income tax expense 7,312 166,375 ------------------ --------------- Net income (loss) $ (8,068) 248,907 ================== =============== Basic earnings (loss) per share $ (.005) .158 Diluted earnings (loss) per share $ (.005) .154 Weighted average number of common shares outstanding 1,528,184 1,578,421 Weighted average number of common shares and dilutive potential common shares outstanding 1,528,184 1,618,447
See accompanying notes to condensed consolidated financial statements. 6 INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows For the Nine Months Ended June 30, 1998 and 1997 (Unaudited)
1998 1997 Cash flows from operating activities: Net income (loss) (48,592) 532,028 Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities: Net amortization and appreciation of investments (25,710) (65,096) Depreciation and amortization 134,278 121,264 Deferred income taxes (36,405) (39,607) Cash provided by (used for) changes in: Receivable from clearing broker, net 260,430 237,136 Receivable from affiliated company - 26,542 Other receivables (42,960) 26,888 Securities owned, at market value (176,176) (852,475) Other assets 21,135 (135,362) Securities sold, but not yet purchased, at market value (292,517) (132,189) Payable to clearing broker, net - 171,435 Accounts payable (40,722) 33,124 Accrued employee compensation and benefits (554,157) 49,109 Other accrued expenses (32,864) 84,027 Income taxes payable 0 (45,080) Other liabilities 9,579 75 ----------------- ---------- Net cash provided by (used for) operating activities (824,681) 11,819 ----------------- ---------- Cash flows from investing activities: Disposal of investments 5,800,000 5,800,000 Acquisition of investments (5,674,438) (5,730,191) Acquisition of property, equipment and other assets (49,550) (235,388) ----------------- ---------- Net cash provided by (used for) investing activities 76,012 (165,579) ----------------- ----------
(continued) See accompanying notes to condensed consolidated financial statements. 7 INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows, Continued For the Nine Months Ended June 30, 1998 and 1997 (Unaudited)
1998 1997 Cash flows from financing activities: Acquisition of common shares related to repurchase program (30,609) (32,321) Acquisition of common shares related to terminated ESOP participants (66,795) (67,822) ----------------- ----------------- Net cash used for financing activities (97,404) (100,143) ----------------- ----------------- Net decrease in cash and cash equivalents (846,073) (253,903) Cash and cash equivalents at beginning of period 2,962,847 2,829,483 ----------------- ----------------- Cash and cash equivalents at end of period $ 2,116,774 2,575,580 ================= ================= Supplemental disclosure of cash flow information: Cash paid for interest $ 3,015 2,166 ================= ================= Income taxes paid $ 75,399 457,700 ================= =================
See accompanying notes to condensed consolidated financial statements. 8 INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements June 30, 1998 and 1997 (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 (consisting of normal recurring items) 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"), International Trader Association, Inc. ("ITA") 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 June 30, 1998, consist of trading and investment securities at quoted market values as follows:
Sold, but not Owned yet purchased Obligations of U.S. Government $ 387,979 - Common stock and American Depository Receipts 1,030,729 389,537 Proprietary unit investment trusts 942,379 - Corporate and municipal bonds 300,780 - Foreign government obligations 42,569 - --------- -------- $ 2,704,436 389,537 --------- --------
9 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 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 June 30, 1997 has been restated to adhere to the provisions of SFAS No. 128. Basic earnings (loss) per share for the nine months ended June 30, 1998 and 1997, have been computed by dividing net income (loss) by the weighted average number of common shares outstanding. Diluted earnings per share for the nine months ended June 30, 1997 has 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 nine months ended June 30, 1998 is the same as basic loss per share because of the anti-dilutive impact of the potential common shares, due to the net loss for the period. Basic earnings (loss) per share for the three months ended June 30, 1998 and 1997, 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 June 30, 1997, has 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 June 30, 1998 is the same as basic loss per share because of the anti-dilutive impact of the potential common shares, due to the net 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 the additional number of shares issued. (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. 10 INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements, continued 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 $204,925 and $230,583 for the nine months ended June 30, 1998, and 1997, respectively. The minimum lease payments under noncancelable operating leases as of June 30, 1998 are as follows: Fiscal Year (12 month period) Ending September 30, 1998 282,800 1999 316,100 2000 326,900 2001 233,000 2002 17,500 Total future minimum lease payments $1,176,300 (6) Stock Repurchase Program The Board of Directors has authorized the Company to continue its repurchase of up to $500,000 in shares of the Company's common stock in the open market through the period ended December 31, 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 35,630 shares (as adjusted for the 10% stock dividend) in the open market at a total cost of $129,233. In addition, concurrent with the open market repurchase program, the Company has repurchased and retired an additional 45,766 shares (as adjusted for the 10% stock dividend) from terminated participants of the Company's Employee Stock Ownership Plan (ESOP) for a total cost of $142,495. In total the Company has repurchased 81,396 shares (as adjusted for the 10% stock dividend) for a total cost of $271,728 since March 13, 1996. (7) Commitments and Contingent Liabilities 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 condensed consolidated financial statements and was paid on January 22, 1998. 11 INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements, continued (8) New Accounting Pronouncements In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133). SFAS 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, (collectively referred to as derivatives) and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. SFAS 133 is effective for all fiscal quarters of fiscal years beginning after June 5, 1999. The Company is currently reviewing SFAS 133 to see what impact, if any, it will have on the Company. 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. The Company's assets decreased from $7,928,214 at September 30, 1997, to $6,860,757 at June 30, 1998, or a decrease of $1,067,457. The Company's liabilities decreased from $2,100,820 at September 30, 1997, to $1,179,359 at June 30, 1998, or a decrease of $921,461. The decrease in the net assets (assets less liabilities) of $145,996 relates to the $48,592 net loss incurred by the Company for the nine month fiscal period ended June 30, 1998, and the stock repurchase costs from the stock repurchase program totaling $97,404 for the same period. The Company's condensed consolidated balance sheet at June 30, 1998, reflects a net receivable from clearing broker, for trades which had not yet settled for cash, due to the proceeds from the sale of securities exceeding the cost of securities purchased. 12 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. Nine Months Ended June 30, 1998, as Compared to the Nine Months Ended June 30,1997 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 $1,609,000, or 18% for the nine months ended June 30, 1998, as compared to the nine months ended June 30, 1997. For the nine months ended June 30, 1998, and 1997, approximately 74% and 73%, respectively, of the Company's revenues were derived from commissions earned on the sale of securities. For the nine months ended June 30, 1998, and 1997, approximately 21% of the Company's total revenues were from net dealer inventory and investment gains (trading revenue). Commission revenue decreased by approximately $1,166,000, or 18% for the nine months ended June 30, 1998, as compared to the nine months ended June 30, 1997. The decrease in commission revenue is primarily attributable to the volatility of the Asian financial markets. During the nine months ended June 30, 1998, the overall volume of customer ticket orders decreased by approximately 5% and the average dollar amount of retail trades decreased by approximately 14%, as compared to the nine months ended June 30, 1997. These decreases in ticket volume and the average dollar amount of retail trades are directly related to the decrease in total commission revenue for the nine months ended June 30, 1998 over the same period in 1997. The overall decrease in commission revenue was despite an increase in the nine month average number of account executives from 42 as of June 30, 1997, to 43 as of June 30, 1998. Revenues from net dealer inventory and investment gains decreased by approximately $357,000, or 18% for the nine months ended June 30, 1998, as compared to the nine months ended June 30, 1997. 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 decrease in retail trading was partially offset by increases in wholesale trading. The increase in wholesale trading is attributable to the ongoing development of new wholesale trading relationships as well as maintaining existing wholesale relationships. The Company's retail trading department primarily concentrates on global securities that it believes are likely to be traded by the Company's retail clients. By focusing on these types of securities, retail trading revenue is more closely related to commission revenue and order flow. 13 Other revenue decreased by approximately $86,000, or 18% during the nine months ended June 30, 1998, as compared to the nine months ended June 30, 1997. The decrease in other revenue is primarily due to decreases in list rental income and newsletter 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 decreased by approximately $662,000, or 8% for the nine months ended June 30, 1998, as compared to the same period in 1997. This decrease in total expense is primarily attributable to decreases in commissions and clearing fees and employee compensation and benefits expense. Commissions and clearing fees decreased by approximately $497,000, or 13% during the nine months ended June 30, 1998, as compared to the same period in 1997. This decrease is primarily attributable to the corresponding approximate 18% decrease in commission revenue for the nine months ended June 30, 1998, as compared to the same period in 1997. The decrease in commissions and clearing fees is also related to the 5% decrease in retail ticket volume. Employee compensation and benefits expense decreased by approximately $446,000, or 23% during the nine months ended June 30, 1998, as compared to the nine months ended June 30, 1997. The decrease in employee compensation and benefits is primarily due to a decrease in performance based bonus accruals and a decrease in retirement plan profit sharing accruals. The decrease in these employee compensation and benefits accruals is based on the approximate $42,000 loss before income taxes incurred for the nine months ended June 30, 1998 compared to the approximate $905,000 income before income taxes for the same period in 1997. Communications and promotions expense increased by approximately $72,000, or 7% during the nine months ended June 30, 1998, as compared to the nine months ended June 30, 1997. This increase is primarily related to increases in expenditures for promotional print media including postage, printing and design costs. Other operating expenses increased by approximately $208,000, or 16% during the nine months ended June 30, 1998, as compared to the nine months ended June 30, 1997. Approximately $100,000 of the increase is for the award of an arbitration matter 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 $42,000 for the nine months ended June 30, 1998. This is compared to income before income taxes of approximately $905,000 for the nine months ended June 30, 1997. 14 The Company did not record an expected income tax benefit for the nine months ended June 30, 1998 due to the presence of offsetting permanent tax differences. The Company's effective income tax rate was approximately 41% for the nine months ended June 30, 1997. Three Months Ended June 30, 1998, as Compared to the Three Months Ended June 30,1997 Total revenues decreased by approximately $1,214,000, or 35% for the three months ended June 30, 1998, as compared to the three months ended June 30, 1997. For the three months ended June 30, 1998, and 1997, approximately 74% and 73%, respectively, of the Company's revenues were derived from commissions earned on the sale of securities. For the three months ended June 30, 1998, and 1997, approximately 19% and 22%, respectively, of the Company's total revenues were derived from net dealer inventory and investment gains (trading revenue). Commission revenue decreased by approximately $867,000, or 35% for the three months ended June 30, 1998, as compared to the three months ended June 30, 1997. The decrease in commission revenues is related to a 13% decrease in ticket volume and a 26% decrease in the average dollar amount of trades during the three months ended June 30, 1998, as compared to the three months ended June 30, 1997. Revenues from net dealer inventory and investment gains (trading income) decreased by approximately $326,000, or 44% for the three months ended June 30, 1998, as compared to the three months ended June 30, 1997. The decrease in trading revenue is attributable to decreases in the Company's retail equity and retail fixed-income trading income. The decrease in retail equity and retail fixed-income trading income is related to the decrease in retail order flow and an approximate 35% decrease in commission revenue for the three months ended June 30, 1998, as compared to the three months ended June 30, 1997. Other revenues decreased by approximately $22,000, or 12% during the three months ended June 30, 1998, as compared to the three months ended June 30, 1997. This decrease is primarily attributable to decreases in interest and dividend income, list rental and newsletter subscription revenues. The major expenses incurred by the Company relate to the direct costs of securities operations such as commissions and clearing fees, employee compensation and benefits, and communications and promotions expense. Total expenses decreased by approximately $798,000, or 27% for the three months ended June 30, 1998, as compared to the same period in 1997. This decrease in expenses is primarily attributable to decreases in commissions and clearing fees, employee compensation and benefits and other operating expenses. 15 Commissions and clearing fees decreased by approximately $395,000, or 28% during the three months ended June 30, 1998, as compared to the same period in 1997. This decrease in expense is directly related to the approximate 35% decrease in commission revenue for the same period. Employee compensation and benefits expense decreased by approximately $230,000, or 32% during the three months ended June 30, 1998, as compared to the three months ended June 30, 1997. The decrease in employee compensation and benefits is primarily due to a decrease in performance based bonus accruals and a decrease in retirement plan profit sharing accruals. The decrease in these employee compensation and benefits accruals is based on the approximate $1,000 loss before income taxes incurred for the three months ended June 30, 1998 compared to the approximate $415,000 income before income taxes for the same period in 1997. Communication and promotions expense decreased by approximately $24,000, or 7% during the three months ended June 30, 1998, as compared to the three months ended June 30, 1997. This decrease is primarily due to decreased communications activity and the related expense. Other operating expenses decreased by approximately $149,000, or 30% during the three months ended June 30, 1998, as compared to the three months ended June 30, 1997. As a result of the above, the Company is reporting a loss before income taxes of approximately $1,000 for the three months ended June 30, 1998. This is compared to income before income taxes of approximately $415,000 for the three months ended June 30, 1997. The Company did not record an expected income tax benefit for the three months ended June 30, 1998 due to the presence of offsetting permanent tax differences. The Company's effective income tax rate was approximately 40% for the three months ended June 30, 1997. Liquidity and Capital Resources Substantial portions of the Company's assets are liquid. At June 30, 1998, 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 June 30, 1998, IAAC had net capital of approximately $2,602,000, which was approximately $2,484,000 in excess of its minimum net capital requirement at that date. 16 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 twelve 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. 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 condensed consolidated financial statements and was paid on January 22, 1998. The Company is party to certain additional arbitration and/or litigation matters as of June 30, 1998 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 is 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. 17 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. (21) Subsidiaries of the Registrant is attached hereto as Exhibit 21. (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 nine months ended June 30, 1998. 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 08/11/98 /s/ Jerome F. Miceli Jerome F. Miceli President and Chief Operating Officer Date 08/11/98 /s/ Jonathan C. Hinz Jonathan C. Hinz Chief Accounting Officer 18 EXHIBIT 11 INTERNATIONAL ASSETS HOLDING CORPORATION STATEMENT OF COMPUTATION OF EARNINGS PER SHARE For the Nine Months Ended June 30, 1998 and 1997
1998 (1) 1997 Basic Earnings (Loss) Per Share Net income (loss) $ (48,592) $ 532,028 Weighted average number of common shares outstanding 1,541,368 1,586,681 Basic earnings (loss) per share $ (0.032) $ 0.335 Diluted Earnings (Loss) Per Share Net income (loss) $ (48,592) $ 532,028 Weighted average number of common shares outstanding 1,541,368 1,586,681 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) 51,214 Weighted average number of common shares and dilutive potential common shares outstanding 1,541,368 1,637,895 Diluted earnings (loss) per share $ (0.032) $ 0.325 - -------------------------------------------------------------------------------------------------------------------------- (1) Diluted loss per share is the same as basic loss per share for 1998 because of the anti-dilutive impact of the dilutive potential common shares due to the net loss for 1998. (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.
19 EXHIBIT 11 INTERNATIONAL ASSETS HOLDING CORPORATION STATEMENT OF COMPUTATION OF EARNINGS PER SHARE For the Three Months Ended June 30, 1998 and 1997
1998 (1) 1997 Basic Earnings (Loss) Per Share Net income (loss) $ (8,068) $ 248,907 Weighted average number of common shares outstanding 1,528,184 1,578,421 Basic earnings (loss) per share $ (0.005) $ 0.158 Diluted Earnings (Loss) Per Share Net income (loss) $ (8,068) $ 248,907 Weighted average number of common shares outstanding 1,528,184 1,578,421 Weighted average number of net common shares that would be issued upon exercise of dilutive options assuming proceeds used to repurchase shares pursuant to the treasury stock method (2) 40,026 Weighted average number of common shares and dilutive potential common shares outstanding 1,528,184 1,618,447 Diluted earnings (loss) per share $ (0.005) $ 0.154 - -------------------------------------------------------------------------------------------------------------------------- (1) Diluted loss per share is the same as basic loss per share for 1998 because of the anti-dilutive impact of the dilutive potential common shares due to the net loss for 1998. (2) The treasury stock method recognizes the use of proceeds that could be obtained upon exercise of options in computing diluted earnings per share. It assumes exercise of options 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.
20
EXHIBIT 21 INTERNATIONAL ASSETS HOLDING CORPORATION SUBSIDIARIES OF THE REGISTRANT Name State of Incorporation International Assets Advisory Corp. Florida International Asset Management Corp. Florida Global Assets Advisors, Inc. Florida International Financial Products, Inc. Florida International Trader Association, Inc. Florida
21 EX-27 2 FDS FOR 10QSB
BD 1 9-MOS SEP-30-1998 JUN-30-1998 2,116,774 249,837 0 0 3,904,968 378,651 6,860,757 0 657,611 0 0 389,537 0 0 0 15,256 5,666,142 6,860,757 1,575,478 206,666 5,484,305 0 189,607 3,015 3,824,378 (41,560) (41,560) 0 0 (48,592) (.032) (.032)
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