-----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, OGTEqhpsSSMAPNuPFpb+vvoz7ODSomrzfdUFKl5F/rIGIZLrogN7jG9A9TfQgm1i /szIkd54BvpE/OB6a6B6Uw== 0000913760-99-000033.txt : 19990813 0000913760-99-000033.hdr.sgml : 19990813 ACCESSION NUMBER: 0000913760-99-000033 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990812 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: 99685402 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, 1999 [ ] 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 1,718,828 as of August 5, 1999. Transitional small business disclosure format Yes [ ] No [X] 1 INDEX Page No. Part I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Condensed Consolidated Balance Sheets as of June 30, 1999 and September 30, 1998 3 Condensed Consolidated Statements of Operations for the Nine Months ended June 30, 1999 and 1998 5 Condensed Consolidated Statements of Operations for the Three Months ended June 30, 1999 and 1998 6 Condensed Consolidated Statements of Cash Flows for the Nine Months ended June 30, 1999 and 1998 7 Notes to Condensed Consolidated Financial Statements 9 Item 2. Management's Discussion and Analysis or Plan of Operation 15 Part II. OTHER INFORMATION Item 1. Legal Proceedings 25 Item 6. Exhibits and Reports on Form 8-K 25 Signatures 26 2 INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES Condensed Consolidated Balance Sheets
(Unaudited) June 30, September 30, Assets 1999 1998 ------ ---- ---- Cash $ 538,437 617,628 Cash deposits with clearing broker 3,945,869 2,424,486 Foreign currency 17,391 3,961 Receivable from clearing broker, net 0 791,753 Other receivables 53,990 63,523 Securities owned, at market value 3,175,504 2,014,734 Investment in Joint Venture 15,746 0 Income taxes receivable 55,874 67,398 Deferred income tax benefit 85,921 127,065 Property and equipment, at cost: Leasehold improvements 52,953 52,953 Furniture and equipment 962,618 902,719 -------------------- -------------------- 1,015,571 955,672 Less accumulated depreciation and amortization (696,946) (605,059) -------------------- -------------------- Net property and equipment 318,625 350,613 Other assets, net of accumulated amortization of $138,007 in June 1999 and $118,504 in September 1998 108,847 98,920 ==================== ==================== Total assets $ 8,316,204 6,560,081 ==================== ====================
See accompanying notes to condensed consolidated financial statements. 3 INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES Condensed Consolidated Balance Sheets
(Unaudited) June 30, September 30, Liabilities and Stockholders' Equity 1999 1998 ------------------------------------ ---- ---- Liabilities: Foreign currency sold, but not yet purchased $ 32,487 7,206 Securities sold, but not yet purchased, at market value 1,089,262 290,403 Payable to clearing broker, net 47,196 0 Accounts payable 50,662 72,600 Accrued employee compensation and benefits 603,363 291,536 Accrued expenses 271,598 352,544 Payable to joint venture 13,333 0 Deferred income taxes 12,442 16,797 Other liabilities 119,000 117,845 -------------------- -------------------- Total liabilities 2,239,343 1,148,931 -------------------- -------------------- 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 1,718,828 shares in June 17,188 14,816 1999 and 1,481,574 shares in September 1998 Additional paid-in capital 4,598,496 3,564,648 Retained earnings 1,461,177 1,831,686 -------------------- -------------------- Total stockholders' equity 6,076,861 5,411,150 ==================== ==================== Total liabilities and stockholders' equity $ 8,316,204 6,560,081 ==================== ====================
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, 1999 and 1998 (Unaudited)
1999 1998 ---- ---- Revenues: Commissions $4,700,005 5,484,305 Net dealer inventory and investment gains 2,437,717 1,549,350 Management and investment advisory fees 63,171 57,241 Account maintenance fees 108,314 132,366 Interest and dividends 184,466 206,666 Loss from joint venture (34,254) 0 Other 20,811 27,625 ------------------ ----------------- Total revenues 7,480,230 7,457,553 ------------------ ----------------- Expenses: Commissions and clearing fees 3,017,469 3,324,935 Employees compensation and benefits 2,097,597 1,516,033 Communications 197,391 257,373 Promotion 534,522 921,984 Occupancy and equipment rental 332,062 263,435 Interest 2,345 3,015 Professional fees 198,809 334,671 Insurance 124,695 154,817 Depreciation and amortization 111,390 134,278 Other operating expenses 302,804 588,572 ------------------ ----------------- Total expenses 6,919,084 7,499,113 ------------------ ----------------- Income (loss) before income taxes 561,146 (41,560) Income tax expense 235,613 7,032 ------------------ ----------------- Net income (loss) $ 325,533 (48,592) ================== ================= Earnings (loss) per share: Basic $ 0.20 (.03) Diluted $ 0.17 (.03) Weighted average number of common shares outstanding: Basic 1,650,938 1,695,505 Diluted 1,948,964 1,695,505
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, 1999 and 1998 (Unaudited)
1999 1998 ---- ---- Revenues: Commissions $1,594,474 1,627,252 Net dealer inventory and investment gains 648,958 404,010 Management and investment advisory fees 18,775 30,510 Account maintenance fees 46,139 65,443 Interest and dividends 75,719 68,947 Loss from joint venture (16,711) 0 Other 5,916 12,154 ------------------ ---------------- Total revenues 2,373,270 2,208,316 ------------------ ---------------- Expenses: Commissions and clearing fees 975,596 1,044,104 Employees compensation and benefits 710,619 477,836 Communications 66,521 83,123 Promotion 205,782 255,898 Occupancy and equipment rental 116,479 97,291 Interest 1,249 490 Professional fees 85,316 67,133 Insurance 35,547 45,095 Depreciation and amortization 32,999 43,719 Other operating expenses 125,246 94,383 ------------------ ---------------- Total expenses 2,355,354 2,209,072 ------------------ ---------------- Income (loss) before income taxes 17,916 (756) Income tax expense 16,537 7,312 ------------------ ---------------- Net income (loss) $ 1,379 (8,068) ================== ================ Earnings (loss) per share: Basic $ 0.001 $ (0.005) Diluted $ 0.001 $ (0.005) Weighted average number of common shares outstanding: Basic 1,700,980 1,681,002 Diluted 2,172,267 1,681,002
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, 1999 and 1998 (Unaudited)
1999 1998 ---- ---- Cash flows from operating activities: Net income (loss) $ 325,533 (48,592) Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities: Depreciation and amortization 111,390 134,278 Deferred income taxes 36,789 (36,405) Non-cash compensation 93,601 0 Loss from joint venture 34,254 0 Cash provided by (used for) changes in: Receivable from clearing broker, net 791,753 260,430 Other receivables 9,533 (42,960) Securities owned, at market value (1,160,770) (76,324) Income tax receivable 11,524 0 Other assets (29,430) 21,135 Securities sold, but not yet purchased, at market value 798,859 (292,517) Payable to clearing broker, net 47,196 0 Accounts payable (21,938) (40,722) Accrued employee compensation and benefits 311,827 (554,157) Accrued expenses (80,946) (32,864) Payable to joint venture 13,333 0 Other liabilities 1,155 9,579 ------------------ ----------------- Net cash provided by (used for) operating activities 1,293,663 (699,119) ------------------ ----------------- Cash flows from investing activities: Investment in joint venture (50,000) 0 Acquisition of property, equipment and other assets (59,899) (49,550) ------------------ ----------------- Net cash used for investing activities (109,899) (49,550) ------------------ -----------------
(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, 1999 and 1998 (Unaudited)
1999 1998 ---- ---- Cash flows from financing activities: Exercise of stock options 259,473 0 Acquisition of common shares related to repurchase program 0 (30,609) Acquisition of common shares related to terminated ESOP and RSP participants (12,896) (66,795) ------------------ ----------------- Net cash provided by (used for) financing activities 246,577 (97,404) ------------------ ----------------- Net increase (decrease) in cash and cash equivalents 1,430,341 (846,073) Cash and cash equivalents at beginning of period 3,038,869 2,962,847 ------------------ ----------------- Cash and cash equivalents at end of period $4,469,210 2,116,774 ================== ================= Supplemental disclosure of cash flow information: Cash paid for interest $ 2,345 3,015 ================== ================= Income taxes paid $ 187,300 75,399 ================== =================
Supplemental disclosure of noncash financing activities: On March 26,1999, the Company issued 148,199 shares of common stock in conjunction with a ten percent stock dividend. On January 20, 1998, the Company issued 140,648 shares of common stock in conjunction with a ten percent stock dividend. See accompanying notes to condensed consolidated financial statements. 8 INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements June 30, 1999 and 1998 (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, 1998, 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 six wholly owned subsidiaries; International Assets Advisory Corp. ("IAAC"), Global Assets Advisors, Inc. ("GAA"), International Financial Products, Inc. ("IFP"), International Trader Association, Inc. now known as INTLTRADER.COM, INC.("ITCI") (name change filed July 15, 1999), International Asset Management Corp. ("IAMC") and OffshoreTrader.com Ltd. ("OTCL"): and a 50% interest in International Assets New York, LLC ("IANY") a joint venture. All significant intercompany balances and transactions have been eliminated in consolidation. OTCL was incorporated on April 15, 1999 as a Bermuda exempted company and is 100% owned by International Assets Holding Corporation. OTCL was incorporated to explore global internet securities trading for non-U.S. citizens. In June 1999 OTCL was funded with a $25,000 share capital contribution from International Assets Holding Corporation. Exempted Bermuda companies, although resident in Bermuda, may only carry on business that is external to Bermuda. However, exempted Bermuda companies may trade with other exempted companies which reside in Bermuda. (2) Reclassifications Certain prior year amounts have been reclassified to conform to fiscal 1999 presentation. These changes had no impact on previously reported results of operations or stockholders' equity. 9 INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements, continued (3) Stock Dividend On February 12, 1999 the Company's Board of Directors declared a 10% stock dividend for shareholders of record on March 5, 1999 and payable on March 26, 1999. The 10% stock dividend increased the Company's issued and outstanding common shares by 148,199 shares. Earnings per common share, weighted average shares outstanding, and all stock option activity have been restated to reflect the 10% stock dividend (4) Basic and Diluted Earnings (Loss) Per Share Basic earnings (loss) per share for the nine months ended June 30, 1999 and 1998, 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, 1999 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. Options to purchase 29,800 shares of common stock were excluded from the calculation of diluted earnings per share for the nine months ended June 30, 1999 because their exercise prices exceeded the average market price of common shares for the period. All options were excluded from the calculation of diluted loss per share for the nine months ended June 30, 1998, because their inclusion would have been antidilutive. Basic earnings (loss) per share for the three months ended June 30, 1999 and 1998, 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, 1999 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. No options to purchase shares of common stock were excluded from the calculation of diluted earnings per share for the three months ended June 30, 1999. All options were excluded from the calculation of diluted loss per share for the three months ended June 30, 1998, because their inclusion would have been antidilutive. 10 INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements, continued (5) Securities Owned and Securities Sold, But Not Yet Purchased Securities owned and Securities sold, but not yet purchased at June 30, 1999 and September 30, 1998 consist of trading and investment securities at quoted market values as follows:
Sold, but not Owned yet purchased June 30, 1999: Obligations of U.S. Government $ 264,711 - Common stock and American Depository Receipts 2,201,496 1,067,060 Corporate and municipal bonds 214,787 - Foreign government obligations 257,639 - Unit investment trusts, mutual funds and other investments 236,871 22,202 ----------- ----------- Total $ 3,175,504 1,089,262 =========== =========== September 30, 1998: Obligations of U.S. Government $ 373,841 - Common stock and American Depository Receipts 836,057 290,403 Corporate and municipal bonds 341,066 - Foreign government obligations 26,713 - Unit investment trusts, mutual funds and other investments 437,057 - --------- ---------- Total $ 2,014,734 290,403 ========== ==========
(6) Investment in Joint Venture In October 1998, the Company made an initial $20,000 capital contribution to International Assets New York, LLC (IANY), a 50/50 joint venture with Lakeside Investments, LLC, an unrelated party. In February 1999, the Company made an additional $30,000 capital contribution to this joint venture. The Company has recorded this investment under the equity method of accounting. For the nine months and three months ended June 30, 1999 the Company has recorded a loss of $34,254 and $16,711, respectively, for 50% of the joint venture's loss for both periods. As of June 30, 1999 the Company has a payable to the joint venture of $13,333 related to joint venture cash outlays which were made on behalf of the Company. (7) 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. 11 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 $255,134 and $204,925 for the nine months ended June 30, 1999, and 1998, respectively. The future minimum lease payments under noncancelable operating leases as of June 30, 1999 are as follows: Fiscal Year (12 month period) Ending September 30, --------------------------------------------------- 1999 346,900 2000 383,600 2001 289,700 2002 81,700 2003 50,500 Thereafter 3,300 Total future minimum lease payments $1,155,700 ========== The Company and Lakeside Investments, LLC, each executed a 100% guaranty for the joint venture office lease for IANY. Concurrently, the Company and Lakeside Investments, LLC executed indemnification agreements expressly agreeing to indemnify each other related to this lease guarantee in accordance with each parties proportionate ownership (50/50). This office lease is for a 38 month term from January 1, 1999 through February 28, 2002. The total rental commitment for IANY is $100,944 (Fiscal year ending: September 30, 1999, $19,628; September 30, 2000, $33,648; September 30, 2001, $33,648 and September 30, 2002, $14,020). (8) 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 year ended September 30, 1999. The stock purchases may 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 39,193 shares (as adjusted for the 10% stock dividends) in the open market at a total cost of $129,233. In addition to the Company's common stock repurchases in the open market, the Company has repurchased and retired an additional 104,580 shares (as adjusted for the 10% stock dividends) from terminated participants of the Company's Employee Stock Ownership Plan and Retirement Savings Plan for a total cost of $256,893. In total the Company has repurchased 143,773 shares (as adjusted for the 10% stock dividends) for a total cost of $386,126 since March 13, 1996. 12 INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements, continued (9) Commitments and Contingent Liabilities The Company is party to certain litigation as of June 30, 1999 which relates primarily to matters arising in the ordinary course of business. Management of the Company anticipates that the final resolution of these items will not have a material adverse effect on the Company's consolidated financial statements. (10) Stock Option Plan According to the terms of the Company's stock option plan the 10% stock dividend, declared by the Company's Board of Directors in March 1999, resulted in a corresponding 10% adjustment for all stock options issued prior to March 5, 1999. Previously issued option shares have been proportionally increased by 10% and the corresponding option exercise price has also been reduced by 10%. The total options authorized under this plan is also proportionally increased from 700,000 options to 770,000 options as a result of this stock dividend. On June 4, 1999 one non-qualified stock option for 10,000 shares, with an exercise price of $7.25 per share was granted. The 10,000 share option granted on June 4, 1999 has a 10 year term and vests at 20% per year beginning one year from the date of grant. Incentive Stock Options exercised during the quarter ended June 30, 1999:
Options Date Cash Exercise Original Exercised Exercised Proceeds Price Grant Date --------- --------- -------- ----- ---------- 1,100 April 6, 1999 $ 2,726.90 $2.479 March 7, 1996 7,000 April 13, 1999 $ 29,505.00 $4.215 January 23, 1993 13,200 April 14, 1999 $ 59,994.00 $4.545 August 12, 1994 46,200 April 15, 1999 $ 95,449.20 $2.066 December 28, 1995 5,000 April 26, 1999 $ 10,330.00 $2.066 December 28, 1995 5,000 June 17, 1999 $ 10,330.00 $2.066 December 28, 1995 ------ ------------ 77,500 $208,335.10 ====== Non-Qualified Options exercised during the quarter ended June 30, 1999: Options Date Cash Exercise Original Exercised Exercised Proceeds Price Grant Date --------- --------- -------- ----- ---------- 8,250 April 12, 1999 $ 38,354.25 $4.649 May 13, 1994 2,750 May 13, 1999 $ 12,784.75 $4.649 May 13, 1994 ------ ------------ 11,000 $ 51,139.00 ======
13 INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements, continued During the quarter ended June 30, 1999 the Company recognized $63,330 in non-cash compensation expense associated with the exercise of the 11,000 shares of non-qualified stock options. (11) ITCI Stock Option and Plan The Board of Directors of ITCI, a wholly owned subsidiary of the Company, adopted a stock option plan ("ITCI Plan") retroactively as of December 1, 1998. The ITCI Plan is intended to constitute both an "incentive stock option" and a "plan" within the meaning of and qualifying under Section 422 of the Internal Revenue Code of 1986, as amended, and the regulations thereunder. The ITCI Plan permits the granting of 111 common shares (approximately 10% of the total common shares) of ITCI to a sole participant. The ITCI Plan expires on December 31, 2002. Retroactively, as of December 1, 1998 this one incentive stock option was granted to a sole participant. The purchase price of the 111 common shares is $98.95 per common share, being 100% of the fair market value per share of common stock as of December 1, 1998. The right to exercise the options granted and purchase the option shares does not vest unless certain defined ITCI financial benchmarks are met. If the first of these financial benchmarks is met 55 option shares vest on September 30, 2000. If the second financial benchmark is met 56 option shares vest on September 30, 2001. Some defined partial vesting is allowed if the defined financial benchmarks are partially achieved. (12) 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, as amended, is effective for all fiscal quarters of fiscal years beginning after June 15, 2000. The Company is currently reviewing SFAS 133, as amended, to see what impact, if any, it will have on the Company. (13) Subsequent Events On July 15, 1999 the Company's wholly owned subsidiary International Trader Association, Inc. filed an amendment to its Articles of Incorporation with the Florida Department of State which changed its name to INTLTRADER.COM, INC. (ITCI). 14 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION. The following discussion and analysis should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this report. 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, Year 2000 issues and changes in laws and regulation 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 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. The Company's assets increased from $6,560,081 at September 30, 1998, to $8,316,204 at June 30, 1999, or an increase of $1,756,123. The Company's liabilities increased from $1,148,931 at September 30, 1998, to $2,239,343 at June 30, 1999, or an increase of $1,090,412. The increase in the net assets (assets less liabilities) of $665,711 resulted from net income of $325,533, cash proceeds of $259,473 from the exercise of stock options and the $93,601 non-cash expense related to the exercise of non-qualified stock options, net of the $12,896 cost of repurchased stock for the nine month period ended June 30, 1999. The Company's condensed consolidated balance sheet at June 30, 1999, reflects a net payable to clearing broker, for trades which had not yet settled for cash, due to the costs of securities purchased exceeding the proceeds from the sale of securities. 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, 1999, as Compared to the Nine Months Ended June 30, 1998 15 The Company's revenues are derived primarily from commissions earned on the sale of securities and net dealer inventory and investment gains (trading income) in securities purchased or sold for the Company's account. For the nine months ended June 30, 1999 and 1998, 63% and 74%, respectively, of the Company's revenues were derived from commissions earned on the sale of securities, with 33% and 21%, respectively, of revenues coming from net dealer inventory and investment gains. Total revenues increased by $22,677, or .3% to $7,480,230 for the nine months ended June 30, 1999 from $7,457,553 for the same period in 1998. This increase was primarily attributable to a $888,367 increase in net dealer inventory and investment gains which was offset by a $784,300 decrease in commission revenues as well as net decreases in other revenue sources totaling $81,390. Commission revenue decreased by $784,300, or 14% to $4,700,005 for the nine months ended June 30, 1999 from $5,484,305 for the same period in 1998. Revenues from commissions are affected by both retail trading volume and the dollar amount of retail trades. Based on the number of retail trades processed, 1999 volume decreased by 17% from 1998 levels. Partially offsetting this 17% decrease in volume is a 4% increase in the dollar average of retail trades for 1999 as compared with 1998. The average number of account executives decreased from an average of 43 for the nine months ended June 30, 1998 to an average of 30 for the nine months ended June 30, 1999, or a decrease of 30%. Net dealer inventory and investment gains increased by $888,367, or 57% to $2,437,717 for the nine months ended June 30, 1999 as compared to $1,549,350 for the same period in 1998. The increase in net dealer inventory and investment gains is primarily attributable to a $858,704 increase in wholesale trading income and a $223,552 increase in income generated from Company investment portfolio valuations in the nine months ended June 30, 1999 as compared to the same nine month period in 1998. The increase in wholesale trading is attributable to the ongoing development of new wholesale trading relationships by the Company as well as maintenance of existing wholesale relationships. Partially offsetting the significant increases in wholesale trading is a $209,082 decrease in retail equity trading income for the nine months ended June 30, 1999 as compared to the same period in 1998. The Company's retail trading department primarily concentrates on global securities which it believes are likely to be traded by the Company's retail clients. By focusing on these types of securities, retail trading income is more directly related to commission income and order flow. Revenues from management and investment advisory fees increased by $5,930, or 10% to $63,171 for the nine months ended June 30, 1999 from $57,241 for the same period in 1998. The increase is primarily due to an increase in the dollar amount of fixed fee money under management. Interest and dividend revenue decreased by $22,200, or 11% to $184,466 for the nine months ended June 30, 1999 from $206,666 in the same period in 1998. This 16 decrease is primarily attributable to a lower average dollar amount of interest bearing investments held by the Company for the nine month period. Loss from joint venture of $34,254 for the nine months ended June 30, 1999 represents the Company's 50% share of the operating loss from the activity of International Assets New York, LLC, a 50/50 joint venture with Lakeside Investments, LLC of New York which began its operations in December 1998. The major expenses incurred by the Company relate to direct costs of its securities operations such as commissions and clearing fees (which includes commissions paid to account executives), employees compensation and benefits, communications and promotion expense. Total expenses decreased by $580,029, or 8% to $6,919,084 for the nine months ended June 30, 1999 from $7,499,113 in the same period ended June 30, 1998. This decrease is primarily attributable to decreases in commissions and clearing fees, communications, promotions, professional fees and other operating expenses. Commissions and clearing fees decreased by $307,466, or 9% to $3,017,469 for the nine months ended June 30, 1999 from $3,324,935 in the same period in 1998. The decrease in commission expense is directly related to the 14% decrease in commission revenue and the related 30% decrease in the average number of account executives for the nine month period. Employees compensation and benefits expense increased by $581,564, or 38% to $2,097,597 for the nine months ended June 30, 1999 from $1,516,033 for the same period in 1998. The increase in employees compensation and benefits expense is due to the creation of additional staff positions related to ITCI's start-up as well as IAAC's staffing needs, increases in performance based bonus expense and an increase in the accrual for retirement plan profit sharing expense. The increase in performance based bonus and retirement plan profit sharing expense is primarily based on the $561,146 income before income taxes incurred for the nine month period ended June 30, 1999 as compared to the $41,560 loss before income taxes for the same nine month period ended June 30, 1998. The increase in employees compensation and benefits for the nine month period ended June 30, 1999 also includes $93,601 of non-cash compensation expense related to the exercise of two non-qualified stock options. No non-cash compensation expense was reported for the same period in 1998. Communications expense decreased by $59,982, or 23% to $197,391 for the nine months ended June 30, 1999 from $257,373 for the same period in 1998. This decrease is due to lower telephone, printing and postage expense related to the corresponding decrease in the average number of account executives from 43 for the nine months ended June 30, 1998 to 30 for the same period in 1999. Promotion expense decreased by $387,462, or 42% to $534,522 for the nine months ended June 30, 1999 from $921,984 for the same period in 1998. This decrease is 17 primarily due to the planned reduction of promotion expenditures for print media, including newsletter publication, lead generation and the related postage expense. Occupancy and equipment rental expense increased by $68,627, or 26% to $332,062 for the nine months ended June 30, 1999 from $263,435 in the same period in 1998. This increase was primarily due to a negotiated, time specific rent adjustment realized during the five months from September 1997 through January 1998. Professional fees decreased by $135,862, or 41% to $198,809 for the nine months ended June 30, 1999 from $334,671 in the same period in 1998. This decrease is primarily due to significantly higher legal fees incurred during the nine month period ended June 30, 1998 related to a closed 1998 NASD arbitration matter. Other operating expenses decreased by $285,768, or 49% to $302,804 for the nine months ended June 30, 1999 from $588,572 in the same period in 1998. Approximately $100,000 of the decrease in other operating expenses represents the award in the closed arbitration matter which was incurred during the nine month period ended June 30, 1998 and an additional $100,000 of the decrease represents the partial reimbursement of the claimant's legal fees also awarded to the claimant in the same matter. Other operating expenses also included various other expenses that decreased from 1998 to 1999. As a result of the above, the Company is reporting net income of $325,533 for the nine months ended June 30, 1999. This is compared to a net loss of $48,592 for the nine months ended June 30, 1998. The Company's effective income tax rate was approximately 42% for the nine months ended June 30, 1999. The presence of income tax expense for the nine months ended June 30, 1998, given the loss before income taxes, is due to the amount of permanent tax differences exceeding the $41,560 loss before income taxes for the nine month period in 1998. Three Months Ended June 30, 1999, as Compared to the Three Months Ended June 30, 1998 For the three months ended June 30, 1999 and 1998, 67% and 74%, respectively, of the Company's revenues were derived from commissions earned on the sale of securities, with 27% and 18%, respectively, of revenues coming from net dealer inventory and investment gains. Total revenues increased by $164,954, or 7% to $2,373,270 for the three months ended June 30, 1999 from $2,208,316 for the same period in 1998. This increase was primarily attributable to a $244,948 increase in net dealer inventory and investment gains which was offset by a $32,778 decrease in commission revenues. Commission revenue decreased by $32,778, or 2% to $1,594,474 for the three months ended June 30, 1999 from $1,627,252 for the same period in 1998. The 18 decrease in commission revenue is related to the 9% decrease in ticket volume and largely offset by an 8% increase in the average dollar amount of trades during the three months ended June 30, 1999, as compared to the three months ended June 30, 1998. The average number of account executives decreased from an average of 38 for the three months ended June 30, 1998 to an average of 28 for the three months ended June 30, 1999, or a decrease of 26%. Net dealer inventory and investment gains increased by $244,948, or 61% to $648,958 for the three months ended June 30, 1999 as compared to $404,010 for the same period in 1998. The increase in net dealer inventory and investment gains is primarily attributable to a $88,916 increase in wholesale trading income and a $109,365 increase in income generated from Company investment portfolio valuations in the three months ended June 30, 1999 as compared to the same three month period in 1998. Revenues from management and investment advisory fees decreased by $11,735, or 38% to $18,775 for the three months ended June 30, 1999 from $30,510 for the same period in 1998. The decrease is due to decreases in unit investment trust supervisory fees as well as reduced client money management fees. Interest and dividend revenue increased by $6,772, or 10% to $75,719 for the three months ended June 30, 1999 from $68,947 in the same period in 1998. Loss from joint venture of $16,711 for the three months ended June 30, 1999 represents the Company's 50% share of the operating loss from the activity of International Assets New York, LLC, a 50/50 joint venture with Lakeside Investments, LLC of New York which began its operations in December 1998. Total expenses increased by $146,282, or 7% to $2,355,354 for the three months ended June 30, 1999 from $2,209,072 in the same period ended June 30, 1998. This increase is primarily attributable to increases in employees compensation and benefits, occupancy and equipment rental, professional fees and other operating expenses. These expense increases were partially offset by decreases in commissions and clearing fees, communications and promotions. Commissions and clearing fees decreased by $68,508, or 7% to $975,596 for the three months ended June 30, 1999 from $1,044,104 in the same period in 1998. The decrease in commission expense is directly related to the 2% decrease in commission revenue and the related 26% decrease in the average number of account executives for the three month period. Employees compensation and benefits expense increased by $232,783, or 49% to $710,619 for the three months ended June 30, 1999 from $477,836 for the same period in 1998. The increase in employees compensation and benefits expense is due to the creation of additional staff positions related to ITCI's start-up as well as IAAC's staffing needs and an increase in the accrual for retirement plan profit 19 sharing expense. The increase in employees compensation and benefits for the three month period ended June 30, 1999 also includes $63,330 of non-cash compensation expense related to the exercise of one non-qualified stock option. No non-cash compensation expense was reported for the same period in 1998. Communications expense decreased by $16,602, or 20% to $66,521 for the three months ended June 30, 1999 from $83,123 for the same period in 1998. This decrease is due to lower telephone, printing and postage expense related to the corresponding decrease in the average number of account executives from 38 for the three months ended June 30, 1998 to 28 for the same period in 1999. Promotion expense decreased by $50,116, or 20% to $205,782 for the three months ended June 30, 1999 from $255,898 for the same period in 1998. This decrease is primarily due to the planned reduction of promotion expenditures for print media, including newsletter publication, lead generation and the related postage expense. Occupancy and equipment rental expense increased by $19,188, or 20% to $116,479 for the three months ended June 30, 1999 from $97,291 in the same period in 1998. Professional fees increased by $18,183, or 27% to $85,316 for the three months ended June 30, 1999 from $67,133 in the same period in 1998. Other operating expenses increased by $30,863, or 33% to $125,246 for the three months ended June 30, 1999 from $94,383 in the same period in 1998. As a result of the above, the Company is reporting net income of $1,379 for the three months ended June 30, 1999 as compared to a net loss of $8,068 for the three month period ended June 30, 1998. Income tax expense increased by $9,225 to $16,537 for the three months ended June 30, 1999 from $7,312 in the same period in 1998. The Company is reporting book income tax expense in excess of the regular expected tax rate due to the impact of permanent tax differences that occurs near breakeven operating activity. In addition, the calculation of an effective tax rate reports a meaningless percentage due to the effects of these permanent tax differences. Liquidity and Capital ResourcesSubstantial portions of the Company's assets are liquid. At June 30, 1999, approximately 91% 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, 1999, IAAC had net capital of approximately 20 $2,741,000, which was approximately $2,609,000 in excess of its minimum net capital requirement at that date. The Company's wholly owned registered securities broker subsidiary ITCI is also subject to the requirements of the SEC and the NASD relating to liquidity and net capital levels. ITCI has not yet commenced operations. The net capital requirement for ITCI is based on ITCI's planned status as an introducing securities broker. At June 30, 1999, ITCI had net capital of approximately $173,000, which was approximately $123,000 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 twelve months in light of known and reasonably estimated trends. The Company believes that it has the internal financial resources to implement the initial online trading of foreign and domestic securities activities and operations of ITCI without additional outside capital. However, at this time additional financing is being sought primarily for desired marketing efforts intended to generate potential online client and online securities transaction growth. Any additional financing will also support the required technology and staffing enhancements that would be required if the marketing efforts are successful in generating significant growth for ITCI. In conjunction with the Company's plans for ITCI, the Company has engaged PaineWebber as its exclusive financial advisor to arrange and negotiate a private placement of securities issued by the Company or to find a strategic partner. PaineWebber has been engaged to use its best efforts in connection with a private placement and does not have any obligation to purchase any securities issued by the Company or to provide financing of any kind to the Company. Year 2000 Compliance The securities industry is, to a significant extent, technologically driven and dependent. In addition to some internally utilized technological applications, the Company's businesses are materially dependant upon the performance of exchanges, market centers, counterparties, customers and vendors (collectively "the Company's material third parties") who, in turn, may be heavily reliant on technological applications. The securities industry is interdependent with each other, strengthened or weakened by the quality and performance of its attendant information and embedded technology. The Company is aware that the Year 2000 provides potential problems with the programming code in existing computer systems. The Year 2000 problem is extensive and complex as virtually every computer operation will be affected to some degree by the change of the two digit year value to 00. The issue is whether computer systems will properly recognize date-sensitive information when the year changes to 2000. Systems that do not properly recognize such information could generate erroneous data or fail. 21 The failure or faulty performance of computer systems could potentially have a far ranging impact on the Company's business such as a diminution in its ability to (a) ascertain information vital to strategic decision making by both the Company and its customers; (b) perform interest rate and pricing calculations; (c) execute and settle proprietary and customer transactions; (d) undertake regulatory surveillance and risk management; (e) maintain accurate books and records and provide timely reports; (f) maintain appropriate internal financial operations and accounting; and (g) access credit facilities for both the Company and its customers. Accordingly it is necessary for the Company, to the extent reasonably practicable, to identify the internal computer systems and software which are likely to have a critical impact on its operations, make an assessment of its Year 2000 readiness and modify or replace information and embedded technology as needed. Some of these critical internal data processing systems include the Company's internal Novel network, sales contact management software, general ledger accounting software, trading income calculation software and retail commission tracking programs. Assessment of these internal programs is primarily completed and final remediation is in process and largely completed. In addition, the Company has primarily completed a Year 2000 readiness assessment for the Company's material third parties. Because the Company utilizes the services of Wexford Clearing Services Corporation ("Wexford") in its business, data processing system aspects of the Year 2000 problem related to securities clearing, custody of client securities, back office operations, cashiering and margin and credit will be addressed by Wexford (a wholly owned guaranteed subsidiary of Prudential Securities Incorporated "Prudential"). Although Wexford is the contracting party for the provision of these critical services, Wexford in fact delivers those services through the operations of Prudential, a leading registered broker and dealer. Consequently, it is the readiness of Prudential that is critical when assessing the Year 2000 compliance of the clearing and operations capacity of the Company's active broker-dealer subsidiaries. Prudential has been assessed, by internal industry standards established by the Securities Industry Association, to be within the top tier of Year 2000 readiness. During industry-wide testing conducted by the Securities Industry Association, in which Prudential took part, Prudential and other participants were able to input transactions and send them to the appropriate markets for execution, confirmation and clearance under simulated Year 2000 conditions. Additionally, the Company has assessed the state of readiness of almost all known technologically oriented service vendors and believes, based on letters of certification, that the vast majority of these vendors are Year 2000 compliant with the remainder expected to be compliant before the end of August 1999. This determination does not mean that the vast majority of the Company's material third parties pose no Year 2000 risk to the Company. First, the Company is relying in large measure on these parties' assessments of their readiness. Second, there are several vendors, which account for a substantial portion of the Company's mission 22 critical operations, which may be partially or largely, but not fully, Year 2000 compliant. Finally, certain critical third parties, such as exchanges, clearing houses, depositaries and other service vendors have no direct functional contact with the Company (as they operate directly with Wexford) but may impact the Company's operations. During fiscal year 1997 the Company began the strategic review process as it relates to the Year 2000 process. The Board of Directors of the Company approved the Company's Year 2000 plan at its meeting on July 17, 1998. This plan includes all phases necessary and budgetary consideration for each fiscal year through the Year 2000. The Year 2000 remediation plan and process includes (1) identification, modification and testing of non-compliant Year 2000 code; (2) identification, inventory, assessment and, if necessary, modification of internal ad hoc systems or applications that may be material to the Company's operations; (3) with the exception of counterparties and customers, documentation of the assessment of the readiness of the Company's material third parties; and (4) a timetable for completion of all year 2000 plans implementation steps for amendment to the plan as required. During the year ended September 30, 1998 the Company incurred approximately $76,000 of costs related to the Year 2000 problem. During the nine months ended June 30, 1999 the Company incurred approximately $87,000 in costs related to the Year 2000 problem. The Company has budgeted a total of $193,000 for Year 2000 related costs for the 20 month period from June 1998 through January 2000. These Year 2000 costs include both capital expenditures and period expenses. This Year 2000 budget will be funded from the working capital of the Company. Provided there is an absence of unanticipated critical events, the Company does not expect Year 2000 costs to have a material effect on its operating results, financial condition or cash flows. As a contingency plan, the Company intends to have information systems personnel on site or on stand-by availability, from December 31, 1999 through January 2, 2000, on a 24-hour basis, to insure that any Year 2000 problems which may arise will be addressed and corrected immediately. The Company has been informed that Prudential intends to implement a similar contingency plan. The Company believes these measures will be sufficient because of the following reasons: (1) the Company has reviewed and modified, to the extent it can ascertain the problem, mission critical code and embedded technology (2) the Company has minimal internally generated systems and (3) the Company's vendors have represented that they are either currently Year 2000 compliant or will become so by the third quarter of 1999. However, it is the Company's position there are no alternatives in the event the exchanges or other market centers fail to perform. In such event, the Company believes it is highly likely that the factors which may prevent a particular clearing firm from performing would similarly affect all other clearing firms, which would either preclude the availability of alternative clearing service providers or 23 overwhelm the resources of surviving alternative clearing services providers. The Year 2000 presents a problem which is not likely to be susceptible to remediation at a future date if it is not fixed in advance. The Company is cautiously optimistic about its current state of readiness and its ability to make any further necessary modifications to internal systems in time for the Year 2000. The Company also believes that its major third party service provider, Prudential/Wexford, has undertaken a systematic approach to the Year 2000 problem and will complete its plan which is designed to achieve a state of readiness. However, there are factors outside the control of the Company which make certainty impossible such as: (1) the inability to assess the readiness of market counterparties and customers; (2) the inability to achieve assurance as to any material third parties' representations of readiness; (3) the global exposure of material third parties to Year 2000 problems outside the United States which have a corresponding effect within the global securities markets and operations; and (4) the limitations in anticipating all aspects of a problem with which there is no prior historical experience. The presence of any or all of these and other factors may well have a material adverse effect on the Company's business, operating results, financial condition and cash flows. 24 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company is party to certain arbitration and/or litigation matters as of June 30, 1999 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. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a). Exhibits (10.12) The Company's Employment Agreement, entered into as March 24, 1999, between the Company and Diego J. Veitia, is attached hereto as Exhibit 10.12. (10.13) The Company's Employment Agreement, entered into as March 24, 1999, between the Company and Jerome F. Miceli, is attached hereto as Exhibit 10.13. (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, 1999. 25 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 08/12/99 /s/ Diego J. Veitia Diego J. Veitia Chairman and Chief Executive Officer Date 08/12/99 /s/ Jonathan C. Hinz -------- -------------------- Jonathan C. Hinz Vice President and Controller (Person Performing Similar Functions of Principal Financial Officer and Principal Accounting Officer) 26 Exhibit 10.12 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of the 24th day of March, 1999, by and between INTERNATIONAL ASSETS HOLDING CORPORATION, a Delaware corporation (the "Company"), and Diego J. Veitia (the "Executive"); this Agreement shall become effective as of March 24, 1999 (the "Effective Date"). R E C I T A L S A. The Company, directly or through its subsidiaries, operates a financial services company, including a full-service securities brokerage firm specializing in global investing, a registered investment advisor providing clients with investment advisory services, and other securities businesses servicing its clients. B. The Executive is the Chairman of the Board and Chief Executive Officer of the Company, and may hold such offices in its subsidiaries as may be appropriate for the conduct of its business. C. The Company is a publicly held entity, having previously offered shares of the Company's common stock pursuant to a registration statement, and continues to file reports as to the Companies business. D. The Board of Directors of the Company (the "Board") considers it essential to the best interests of the Company that the Executive remain with the Company after the completion of the present term of his employment. E. In order to induce the Executive to continue to be employed by the Company, the Company desires to enter into this Agreement with the Executive. F. The Executive desires to continue in the employ of the Company, and agrees to continue his employment, and in furtherance thereof agrees to be bound by the covenants herein. NOW THEREFORE, in consideration of the mutual covenants and agreements set forth hereinafter, the Company and the Executive agree as follows: 1. Recitals. All of the above recitals are true and correct. 2. Term. The term of this Agreement shall be for a period of two years commencing on the Effective Date, subject, however, to prior termination as herein provided. Thereafter, this Agreement may be extended by the mutual written agreement of the Company and the Executive. 3. Duties. During the period of employment (except as otherwise agreed by the Executive), the Executive will be employed as the Chairman of the Board and Chief Executive Officer of the Company and shall have powers and duties as may from time to time be delegated to the Executive by the Board. The Executive shall report to the Board of Directors. The Company acknowledges that Executive is not required to devote his full-time business efforts to the conduct of the duties specified in this Agreement. The Company acknowledges that the Executive is involved in the conduct of other business entities, and may continue such involvement during the term of this Agreement. 4. Indemnification. The Company agrees to defend, indemnify and hold harmless the Executive ("Indemnified Party") for acts in his capacity as Executive to the fullest extent permitted by Delaware corporate law at the present time (or as such right of indemnity may be increased in the future). The Company agrees to reimburse the Indemnified Party on a monthly basis for any cost of defending any action or investigation (including reasonable attorneys' fees and expenses) subject to an undertaking from the Indemnified Party to repay the Company if the Indemnified Party is determined not to be entitled to such indemnity by a court of competent jurisdiction. 5. Compensation and Related Matters. (a) Basic Salary. As a compensation for the duties to be performed by the Executive hereunder, the Company will pay the Executive a base salary at a rate of $143,504 during the current year and shall thereafter increase effective as of the first day of each suceeding fiscal year by the greater of (i) the change in the consumer price index, or (ii) such other amount as the Board in its discretion determines to be appropriate. The Executive's base salary shall be payable in accordance with the customary payroll practices of the company, during the period of employment. (b) Bonus Plan. (i) In addition to the base salary, the Executive shall be entitled to additional compensation in an amount equal to a percentage of the adjusted consolidated pre-tax earnings of the Company (including its subsidiaries) for each fiscal year which ends during the term hereof. (ii) For purposes of this Section 5(b), the "consolidated pre-tax earnings of the Company" shall be determined by the independent public accountants then regularly servicing the Company, in accordance with generally accepted accounting principles, consistently applied, based on the audited consolidated financial statements of the Company for such fiscal year, which determination shall be binding on the parties hereto. In calculating the amount of the consolidated pre-tax earnings of the Company certain financial transactions (including start-up costs arising from the creation of the Company's branch office in New York, New York) may be excluded if so directed by a unanimous vote of all directors of the Company excluding the Executive. (iii) The consolidated Return on Equity (ROE) percentage shall be calculated by dividing the audited fiscal year end net income of the Company by the Average Shareholders Equity. The Average Shareholders Equity for each fiscal year shall be determined by averaging the shareholders' equity reported in the audited financial statements of the Company as of the beginning and the end of that fiscal year. (iv) The executive bonus percentage for a fiscal year shall be calculated by applying the consolidated ROE percentage for that year to the consolidated pre-tax earnings as adjusted before the deduction for officers bonus expense and as adjusted for certain financial transactions pursuant to Section 5(b)(ii). The executive bonus percentage shall be subject to a minimum of 5% and a maximum of 15% of adjusted consolidated pre-tax earnings of the Company. (v) Such compensation shall be determined and paid within 60 days after delivery by the Company's independent accountants of the audited consolidated financial statements of the Company for such fiscal year. (c) Stock Options. The Executive shall be eligible to participate in the Stock Option Plan (the "Plan") and shall be considered by the Company's Board or the Compensation Committee to receive grants of options thereunder at the same times as consideration shall be given by the Board or such committee to the grants of stock options generally to senior executive officers of the Company. If the Plan shall be terminated or if no options remain available for grant thereunder, the Executive shall be entitled to participate in such other incentive program as the Company may substitute for the Plan for its senior executive officers. Any options which have not vested in the Executive, or which have not been exercised by the Executive at the time of the termination of the employment of the Executive shall be deemed cancelled, withdrawn, void, or otherwise not operative. (d) Additional Compensation. The Company may award additional bonuses to the Executive from time to time in amounts as determined by the Board or a committee of the Board. (e) Reimbursement of Expenses. During the term of this Agreement, the Company shall promptly pay or reimburse the Executive for all reasonable business expenses actually incurred or paid by the Executive in the performance of his services hereunder (including annual membership dues in connection with the Executive's affiliations with any organizations or clubs) in accordance with the policies and procedures of the Company for the reimbursement of business expenses of its senior executive officers, provided that the Executive properly accounts therefor in accordance with Company policy. (f) Benefits. The Company shall, at its sole cost and expense, provide life insurance, medical insurance, disability insurance and other benefits comparable to those provided by comparable companies to their senior executive officers. (g) Automobile. During the term of this Agreement, the Company shall furnish the Executive, without cost to him, a Company-owned or leased automobile, of year type, and model to be agreed upon between the Company and the Executive, or provide Executive with a monthly car allowance in the amount of $600.00. 6. Vacation, Days Off. The Executive may take a maximum of 4 weeks vacation, at times to be determined in the manner most convenient for the business of the Company. In addition, the Executive may take time off at such times as may be determined by the Board to attend such meetings and postgraduate courses as may comply with regulatory and licensing requirements of the businesses conducted by the Company, or which otherwise directly advance the interests of the Company. The Company may, in its discretion, reimburse the Executive for some or all of the expenses incurred to register for or attend such training courses. 7. Termination Provisions. (a) Termination (i) The Executive's employment hereunder shall automatically terminate (A) upon the Executive's death or Disability (as hereinafter defined); (B) upon written notice by the Company for "Cause" (as hereinafter defined); or (C) upon 30 days written notice by either party. (ii) For purposes of this Agreement, "Disability" shall have the same meaning as that term has under a disability policy maintained for the Executive by the Company. If no such policy exists, or if payment of benefits under the policy is not conditioned on meeting such a definition, then "Disability" shall mean that the Executive is unable to perform his duties hereunder on a full-time basis for three consecutive months after reasonable accommodation by the Company. (iii) For purposes of this Agreement, the Company shall have "Cause" to terminate the Executive's employment hereunder upon (A) the willful failure by the Executive to substantially perform the Executive's duties (other than any such failure resulting by the Executive's Disability) and continuance of such failure for more than 30 days after the Company notifies the Executive in writing of the Executive's failure to perform; (B) the engaging by the Executive in willful misconduct which is injurious to the Company; (C) the conviction of the Executive in a court of proper jurisdiction of a crime which constitutes a felony in respect of the conduct of the business of the Company;or (D) a finding by the National Association of Securities Dealers, Inc. the "NASD"), another self-regulatory body of competent jurisdiction (the "SRO"), or U.S. Securities and exchange Commission (the "SEC") that the Executive personally violated its rules or regulations, and such finding or penalty therefore restricts the Executive's ability to perform his obligations under this Agreement. Notwithstanding the foregoing, the Executive shall not be deemed to have personally violated rules or regulations of the NASD, an SRO, or the SEC, if a finding or penalty imposed is based upon a finding that the Executive did not adequately supervise such employee, but was not otherwise a party to the acts constituting the misconduct by such other person. Further, the Executive shall not be deemed to have been terminated for Cause unless and until there has been delivered to the Executive notice that a resolution has been duly adopted by the Board which finds that the Company has "Cause" to terminate the Executive as contemplated in this Section 7(a), provided, that the Executive is terminated for Cause upon conviction of a felony as identified in clause (C) above, and upon the revocation of any license required under applicable law for the conduct of the business of the Company by the Executive. (b) Compensation Upon Termination. If either (i) the Company shall terminate the employment of the Executive for Cause pursuant to the provisions of Section 7(a) hereof, or (ii) the Executive shall resign (other than as a result of the violation of this Agreement by the Company), then the Company shall pay the Executive 100% of the compensation set forth in Section 5 hereof for 30 days following the date of termination of employment. If the Company shall terminate the employment of the Executive without Cause or the Executive resigns as a result of a breach by the Company of its obligations to the Executive, whether set forth herein or otherwise, then the Company shall pay the Executive 100% of the compensation set forth in Section 5 hereof for 24 months following the date of termination. 8. Nondisclosure and Noncompetition. During the period of employment hereunder and for a period of one year after termination of this Agreement (for whatever reason), the Executive shall not, without the written consent of the Board or a person authorized thereby, disclose to any person, information, knowledge or data which is not theretofore publicly known and in the public domain, and obtained by the Executive while in the employ of the Company (which for purposes of this Section 8 shall include the Company or any of its subsidiaries), respecting information about the Company, or of any products, improvements, designs or styles, customers, methods of distribution, sales, prices, profits, costs, contracts, suppliers, business prospects, business methods, techniques, research, trade secrets, or know-how of the Company, except as the Executive may, in good faith, reasonably believe to be for the Company's benefit. Notwithstanding the foregoing, for a period of one year following the termination of employment hereunder, the Executive may disclose any information, knowledge or data of the type described to the extent required by law in connection with any judicial or administrative proceeding or inquiry. In addition to the foregoing and in the interest of protecting the Company's trade secrets, during the term of this Agreement and for a period of one year after termination of this Agreement for any reason, the Executive shall not, without the written consent of the Board or a person authorized thereby, directly or indirectly, do any business with respect to, or solicit any business similar to the business of the Company from, any of the Company's customers, clients, or accounts without the consent of the Company. In addition, Executive shall not directly, or through any company of which Executive is an officer, employee, or more than 5% owner, hire any employee of the Company, or attempt to solicit any employee of, or independent contractor used by, the Company to leave the service of the Company. Executive agrees that the restrictions of this Section 8 are reasonable as to time, area, subject matter and otherwise due to the confidential nature of the information and trade secrets of the Company, and the unique role and substantial compensation of the Executive. The Executive acknowledges that he entered into the covenants imposed by this Section 8 in connection with a prior employment agreement, and that such restrictions are continued without interruption under this Agreement. The covenants contained in this Section 8 shall survive the termination of the Executive's employment pursuant to this Agreement. The foregoing provisions of this Section 8 shall be binding upon the Executive's heirs, successors and legal representatives. 9. Repurchase of Stock. It is agreed that within fifteen days following the termination of this Agreement by virtue of the death or Disability of the Executive; or by action of the Company other than for Cause; or at the time of the resignation of the Executive as a result of a breach by the Company of its obligations under this Agreement, then the Executive may give notice to the Company (a "Section 9 Notice") that the Company shall repurchase from the Executive a specified number of shares of stock of the Company then owned by the Executive. For the purpose of this determination, shares which are not vested in the Executive, and shares which are the subject of options which have not been exercised by the Executive, shall not be deemed to be shares "then owned by the Executive." The giving of such notice shall constitute a revocable offer of such shares to the Company. Upon the receipt of a Section 9 Notice, the Company shall be obligated to purchase on or about the first business day of each of the next twenty months thereafter, a number of shares equal to five percent of the number of shares identified in the notice given hereunder, to the extent such shares are tendered for delivery to the Company, and to the extent that such purchase may be made under applicable law. If the Executive shall fail to tender in any month the number of shares which the Company is obligated to purchase during such month, then the offer to the Company of such number of shares (but not other shares covered by the Section 9 Notice during future months), shall be deemed to have been waived. In the event that a change in control of the Company occurs, or is proposed to occur, during the period the Company is obligated to purchase shares pursuant to this Section 9, then the duty of the Company to acquire from the Executive any shares covered in the Executive's Section 9 Notice is hereby accelerated, and such purchase (including full payment for such shares) must be completed on or before the date of a proposed change of control, or within twenty days after a change of control which occurs other than with the cooperation of the Company. If the Executive would be entitled to deliver a Section 9 Notice to the Company in connection with events arising from a proposed change of control event involving the Company, then such Section 9 Notice may provide for the offer and purchase of such shares concurrently with the triggering change of control event. Each purchase of shares under this Section 9 shall be made at current market price per share of the stock in effect at the time such purchase are made. The Company shall not be obligated to purchase any shares, and the Executive is not empowered to offer his shares to the Company pursuant to this provision upon the expiration of this Agreement by the passage of time. 10. Tax Returns. During the term of this Agreement, the Company shall promptly pay or reimburse the Executive for all costs and expenses associated with the preparation of the Executive's personal income tax returns. The Executive represents and warrants that he will file all tax returns he is required by law to file, as and when due on the original due date or a lawfully extended filing date. 11. Other Directorships. The Company acknowledges and understands that the Executive will sit on the Board of Directors of other public and private companies not in competition with the Company and its affiliates. The Company agrees that the Executive shall be entitled to any fees or salary received for his participation on the Boards of Directors of such companies. 12. Attorneys' Fees. In the event a proceeding is brought to enforce or interpret any part of this Agreement or the rights or obligations or any party to this Agreement, the prevailing party shall be entitled to recover as an element of such party's costs of suit, through all appeals, and not as damages, reasonable attorneys' fees and paralegals' fees to be fixed by the arbitrator(s) or court. The prevailing party shall be the party who is entitled to recover his costs of suit or proceeding whether or not the action proceeds to final judgment. A party not entitled to recover his costs shall not recover attorneys' fees. 13. Successors and Assigns. This Agreement and the benefits hereunder are personal to the Company and are not assignable or transferable by the Executive without the written consent of the Company. The services to be performed by the Executive hereunder may not be assigned by the Company, without the written consent of the Executive, to any person, firm, corporation or other entity, with the exception of a parent or subsidiary of the Company. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the Company and the Executive and the Executive's heirs and legal representatives, and the Company's successors and permitted assigns. 14. Governing Law. This Agreement shall be construed in accordance with and governed by the law of the State of Delaware, without regard to the application of principles of conflict of laws. 15. Notices. All notices and other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been given if delivered personally or sent by certified mail, return receipt requested, postage prepaid, to the parties to this Agreement shall specify by notice to the other: If to the Company: International Assets Holding Corporation Suite 200 250 Park Avenue South Winter Park, Florida 32789 With a copy to: Steven M. Felsenstein, Esq. Stradley, Ronon, Stevens & Young LLP 2600 Commerce Square Philadelphia, Pennsylvania 19103 If to the Executive: Mr. Diego J. Veitia Winter Park, FL 32789 All notices and communications shall be deemed to have been received on the date of delivery or on the third business day after the mailing thereof. 16. Modification; Waiver. No provisions of this Agreement may be modified, waived or discharged unless such modification, waiver or discharge is approved by the Board or a person authorized thereby, and is agreed to in a writing signed by the Executive and such officer as may be specifically designated by the Board. No waiver by either party hereto at the time of any breach by the other party hereto of any condition or provision of this Agreement, or compliance therewith, by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same time, or at any prior or subsequent time. 17. Complete Understanding. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. 18. Headings. The headings in this Agreement are for convenience of reference only and shall not control or affect the meaning or construction of this Agreement. 19. Severability. The invalidity of any one or more of the words, phrases, sentences, clauses or sections contained in this Agreement shall not affect the enforceability of the remaining portions of this Agreement or any part thereof, all of which are inserted conditionally on their being valid in law, and if any one or more of the words, phrases, sentences, clauses or sections contained in this Agreement shall be declared invalid, this Agreement shall be construed as if such invalid word or words, phrase or phrases, sentence or sentences, clause or clauses, or section or sections had not been inserted. 20. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 21. Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in Orlando, Florida, in accordance with the rules of the American Arbitration Association then in effect. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first above written. COMPANY: INTERNATIONAL ASSETS HOLDING CORPORATION, a Delaware corporation By: Jerome F. Miceli Name: Jerome F. Miceli Title: President & COO EXECUTIVE: Diego J. Veitia Diego J. Veitia Exhibit 10.13 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of the 24th day of March, 1999, by and between INTERNATIONAL ASSETS HOLDING CORPORATION, a Delaware corporation (the "Company"), and Jerome F. Miceli (the "Executive"); this Agreement shall become effective as of March 24, 1999 (the "Effective Date"). R E C I T A L S A. The Company, directly or through its subsidiaries, operates a financial services company, including a full-service securities brokerage firm specializing in global investing, a registered investment advisor providing clients with investment advisory services, and other securities businesses servicing its clients. B. The Executive is the President, Chief Operating Officer and Treasurer of the Company, and shall hold such offices of its subsidiaries as may be appropriate for the conduct of its business. C. The Company is a publicly held entity, having previously offered shares of the Company's common stock pursuant to a registration statement, and continues to file reports as to the Companies business. D. The Board of Directors of the Company (the "Board") considers it essential to the best interests of the Company that the Executive remain with the Company after the completion of the present term of his employment. E. In order to induce the Executive to continue to be employed by the Company, the Company desires to enter into this Agreement with the Executive. F. The Executive desires to continue in the employ of the Company, and agrees to continue his employment, and in furtherance thereof agrees to be bound by the covenants herein. NOW THEREFORE, in consideration of the mutual covenants and agreements set forth hereinafter, the Company and the Executive agree as follows: 1. Recitals. All of the above recitals are true and correct. 2. Term. The term of this Agreement shall be for a period of two years commencing on the Effective Date, subject, however, to prior termination as herein provided. Thereafter, this Agreement may be extended by the mutual written agreement of the Company and the Executive. 3. Duties. During the period of employment (except as otherwise agreed by the Executive), the Executive will be employed as the President, Chief Operating Officer and Treasurer of the company and shall have powers and duties as may from time to time be delegated to the Executive by the Board. The Executive shall report to the Chairman of the Board. The Executive shall devote substantially all of the Executive's business time to the affairs of the Company. 4. Indemnification. The Company agrees to defend, indemnify and hold harmless the Executive ("Indemnified Party") for acts in his capacity as Executive to the fullest extent permitted by Delaware corporate law at the present time (or as such right of indemnity may be increased in the future). The Company agrees to reimburse the Indemnified Party on a monthly basis for any cost of defending any action or investigation (including reasonable attorneys' fees and expenses) subject to an undertaking from the Indemnified Party to repay the Company if the Indemnified Party is determined not to be entitled to such indemnity by a court of competent jurisdiction. 5. Compensation and Related Matters. (a) Basic Salary. As a compensation for the duties to be performed by the Executive hereunder, the Company will pay the Executive a base salary at a rate of $143,504 during the current year and such salary shall thereafter increase effective as of the first day of each succeeding fiscal year by the greater of (i) the change in the consumer price index, or (ii) such other amount as the Board in its discretion determines to be appropriate. The Executive's base salary shall be payable in accordance with the customary payroll practices of the company, during the period of employment. (b) Bonus Plan. (i) In addition to the base salary, the Executive shall be entitled to additional compensation in an amount equal to a percentage of the adjusted consolidated pre-tax earnings of the Company (including its subsidiaries) for each fiscal year which ends during the term hereof. (ii) For purposes of this Section 5(b), the "consolidated pre-tax earnings of the Company" shall be determined by the independent public accountants then regularly servicing the Company, in accordance with generally accepted accounting principles, consistently applied, based on the audited consolidated financial statements of the Company for such fiscal year, which determination shall be binding on the parties hereto. In calculating the amount of the consolidated pre-tax earnings of the Company certain financial transactions (including start-up costs arising from the creation of the Company's branch office in New York, New York) may be excluded if so directed by a unanimous vote of all directors of the Company excluding the Executive. (iii) The consolidated Return on Equity (ROE) percentage shall be calculated by dividing the audited fiscal year end net income of the Company by the Average Shareholders Equity. The Average Shareholders Equity for each fiscal year shall be determined by averaging the shareholders' equity reported in the audited financial statements of the Company as of the beginning and the end of that fiscal year. (iv) The executive bonus percentage for a fiscal year shall be calculated by applying the consolidated ROE percentage for that year to the consolidated pre-tax earnings as adjusted before the deduction for officers bonus expense and as adjusted for certain financial transactions pursuant to Section 5(b)(ii). The executive bonus percentage shall be subject to a minimum of 5% and a maximum of 15% of adjusted consolidated pre-tax earnings of the Company. (v) Such compensation shall be determined and paid within 60 days after delivery by the Company's independent accountants of the audited consolidated financial statements of the Company for such fiscal year. (c) Stock Options. The Executive shall be eligible to participate in the Stock Option Plan (the "Plan") and shall be considered by the Company's Board or the Compensation Committee to receive grants of options thereunder at the same times as consideration shall be given by the Board or such committee to the grants of stock options generally to senior executive officers of the Company. If the Plan shall be terminated or if no options remain available for grant thereunder, the Executive shall be entitled to participate in such other incentive program as the Company may substitute for the Plan for its senior executive officers. Any options which have not vested in the Executive, or which have not been exercised by the Executive at the time of the termination of the employment of the Executive shall be deemed cancelled, withdrawn, void, or otherwise not operative. (d) Additional Compensation. The Company may award additional bonuses to the Executive from time to time in amounts as determined by the Board or a committee of the Board. (e) Reimbursement of Expenses. During the term of this Agreement, the Company shall promptly pay or reimburse the Executive for all reasonable business expenses actually incurred or paid by the Executive in the performance of his services hereunder (including annual membership dues in connection with the Executive's affiliations with any organizations or clubs) in accordance with the policies and procedures of the Company for the reimbursement of business expenses of its senior executive officers, provided that the Executive properly accounts therefor in accordance with Company policy. (f) Benefits. The Company shall, at its sole cost and expense, provide life insurance, medical insurance, disability insurance and other benefits comparable to those provided by comparable companies to their senior executive officers. (g) Automobile. During the term of this Agreement, the Company shall furnish the Executive, without cost to him, a Company-owned or leased automobile, of year type, and model to be agreed upon between the Company and the Executive, or provide Executive with a monthly car allowance in the amount of $600.00. 6. Vacation, Days Off. The Executive may take a maximum of 4 weeks vacation, at times to be determined in the manner most convenient for the business of the Company. In addition, the Executive may take time off at such times as may be determined by the Board to attend such meetings and postgraduate courses as may comply with regulatory and licensing requirements of the businesses conducted by the Company, or which otherwise directly advance the interests of the Company. The Company may, in its discretion, reimburse the Executive for some or all of the expenses incurred to register for or attend such training courses. 7. Termination Provisions. (a) Termination (iv) The Executive's employment hereunder shall automatically terminate (A) upon the Executive's death or Disability (as hereinafter defined); (B) upon written notice by the Company for "Cause" (as hereinafter defined); or (C) upon 30 days written notice by either party. (v) For purposes of this Agreement, "Disability" shall have the same meaning as that term has under a disability policy maintained for the Executive by the Company. If no such policy exists, or if payment of benefits under the policy is not conditioned on meeting such a definition, then "Disability" shall mean that the Executive is unable to perform his duties hereunder on a full-time basis for three consecutive months after reasonable accommodation by the Company. (vi) For purposes of this Agreement, the Company shall have "Cause" to terminate the Executive's employment hereunder upon (A) the willful failure by the Executive to substantially perform the Executive's duties (other than any such failure resulting by the Executive's Disability) and continuance of such failure for more than 30 days after the Company notifies the Executive in writing of the Executive's failure to perform; (B) the engaging by the Executive in willful misconduct which is injurious to the Company; (C) the conviction of the Executive in a court of proper jurisdiction of a crime which constitutes a felony in respect of the conduct of the business of the Company; or (D) a finding by the National Association of Securities Dealers, Inc. (the "NASD"), another self-regulatory body of competent jurisdiction (the "SRO"), or U.S. Securities and exchange Commission (the "SEC") that the Executive personally violated its rules or regulations, and such finding or penalty therefore restricts the Executive's ability to perform his obligations under this Agreement. Notwithstanding the foregoing, the Executive shall not be deemed to have personally violated rules or regulations of the NASD, an SRO, or the SEC, if a finding or penalty imposed is based upon a finding that the Executive did not adequately supervise such employee, but was not otherwise a party to the acts constituting the misconduct by such other person. Further, the Executive shall not be deemed to have been terminated for Cause unless and until there has been delivered to the Executive notice that a resolution has been duly adopted by the Board which finds that the Company has "Cause" to terminate the Executive as contemplated in this Section 7(a), provided, that the Executive is terminated for Cause upon conviction of a felony as identified in clause (C) above, and upon the revocation of any license required under applicable law for the conduct of the business of the Company by the Executive. (b) Compensation Upon Termination. If either (i) the Company shall terminate the employment of the Executive for Cause pursuant to the provisions of Section 7(a) hereof, or (ii) the Executive shall resign (other than as a result of the violation of this Agreement by the Company), then the Company shall pay the Executive 100% of the compensation set forth in Section 5 hereof for 30 days following the date of termination of employment. If the Company shall terminate the employment of the Executive without Cause or the Executive resigns as a result of a breach by the Company of its obligations to the Executive, whether set forth herein or otherwise, then the Company shall pay the Executive 100% of the compensation set forth in Section 5 hereof for 24months following the date of termination. 8. Nondisclosure and Noncompetition. During the period of employment hereunder and for a period of one year after termination of this Agreement (for whatever reason), the Executive shall not, without the written consent of the Board or a person authorized thereby, disclose to any person, information, knowledge or data which is not theretofore publicly known and in the public domain, and obtained by the Executive while in the employ of the Company (which for purposes of this Section 8 shall include the Company or any of its subsidiaries), respecting information about the Company, or of any products, improvements, designs or styles, customers, methods of distribution, sales, prices, profits, costs, contracts, suppliers, business prospects, business methods, techniques, research, trade secrets, or know-how of the Company, except as the Executive may, in good faith, reasonably believe to be for the Company's benefit. Notwithstanding the foregoing, for a period of one year following the termination of employment hereunder, the Executive may disclose any information, knowledge or data of the type described to the extent required by law in connection with any judicial or administrative proceeding or inquiry. In addition to the foregoing and in the interest of protecting the Company's trade secrets, during the term of this Agreement and for a period of one year after termination of this Agreement for any reason, the Executive shall not, without the written consent of the Board or a person authorized thereby, directly or indirectly, do any business with respect to, or solicit any business similar to the business of the Company from, any of the Company's customers, clients, or accounts without the consent of the Company. In addition, Executive shall not directly, or through any company of which Executive is an officer, employee, or more than 5% owner, hire any employee of the Company, or attempt to solicit any employee of, or independent contractor used by, the Company to leave the service of the Company. Executive agrees that the restrictions of this Section 8 are reasonable as to time, area, subject matter and otherwise due to the confidential nature of the information and trade secrets of the Company, and the unique role and substantial compensation of the Executive. The Executive acknowledges that he entered into the covenants imposed by this Section 8 in connection with a prior employment agreement, and that such restrictions are continued without interruption under this Agreement. The covenants contained in this Section 8 shall survive the termination of the Executive's employment pursuant to this Agreement. The foregoing provisions of this Section 8 shall be binding upon the Executive's heirs, successors and legal representatives. 9. Repurchase of Stock. It is agreed that within fifteen days following the termination of this Agreement by virtue of the death or Disability of the Executive; or by action of the Company other than for Cause; or at the time of the resignation of the Executive as a result of a breach by the Company of its obligations under this Agreement, then the Executive may give notice to the Company (a "Section 9 Notice") that the Company shall repurchase from the Executive a specified number of shares of stock of the Company then owned by the Executive. For the purpose of this determination, shares which are not vested in the Executive, and shares which are the subject of options which have not been exercised by the Executive, shall not be deemed to be shares "then owned by the Executive." The giving of such notice shall constitute a revocable offer of such shares to the Company. Upon the receipt of a Section 9 Notice, the Company shall be obligated to purchase on or about the first business day of each of the next twenty months thereafter, a number of shares equal to five percent of the number of shares identified in the notice given hereunder, to the extent such shares are tendered for delivery to the Company, and to the extent that such purchase may be made under applicable law. If the Executive shall fail to tender in any month the number of shares which the Company is obligated to purchase during such month, then the offer to the Company of such number of shares (but not other shares covered by the Section 9 Notice during future months), shall be deemed to have been waived. In the event that a change in control of the Company occurs, or is proposed to occur, during the period the Company is obligated to purchase shares pursuant to this Section 9, then the duty of the Company to acquire from the Executive any shares covered in the Executive's Section 9 Notice is hereby accelerated, and such purchase (including full payment for such shares) must be completed on or before the date of a proposed change of control, or within twenty days after a change of control which occurs other than with the cooperation of the Company. If the Executive would be entitled to deliver a Section 9 Notice to the Company in connection with events arising from a proposed change of control event involving the Company, then such Section 9 Notice may provide for the offer and purchase of such shares concurrently with the triggering change of control event. Each purchase of shares under this Section 9 shall be made at current market price per share of the stock in effect at the time such purchase are made. The Company shall not be obligated to purchase any shares, and the Executive is not empowered to offer his shares to the Company pursuant to this provision upon the expiration of this Agreement by the passage of time. 10. Tax Returns. During the term of this Agreement, the Company shall promptly pay or reimburse the Executive for all costs and expenses associated with the preparation of the Executive's personal income tax returns. The Executive represents and warrants that he will file all tax returns he is required by law to file, as and when due on the original due date or a lawfully extended filing date. 11. Other Directorships. The Company acknowledges and understands that the Executive will sit on the Board of Directors of other public and private companies not in competition with the Company and its affiliates. The Company agrees that the Executive shall be entitled to any fees or salary received for his participation on the Boards of Directors of such companies. 12. Attorneys' Fees. In the event a proceeding is brought to enforce or interpret any part of this Agreement or the rights or obligations or any party to this Agreement, the prevailing party shall be entitled to recover as an element of such party's costs of suit, through all appeals, and not as damages, reasonable attorneys' fees and paralegals' fees to be fixed by the arbitrator(s) or court. The prevailing party shall be the party who is entitled to recover his costs of suit or proceeding whether or not the action proceeds to final judgment. A party not entitled to recover his costs shall not recover attorneys' fees. 13. Successors and Assigns. This Agreement and the benefits hereunder are personal to the Company and are not assignable or transferable by the Executive without the written consent of the Company. The services to be performed by the Executive hereunder may not be assigned by the Company, without the written consent of the Executive, to any person, firm, corporation or other entity, with the exception of a parent or subsidiary of the Company. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the Company and the Executive and the Executive's heirs and legal representatives, and the Company's successors and permitted assigns. 14. Governing Law. This Agreement shall be construed in accordance with and governed by the law of the State of Delaware, without regard to the application of principles of conflict of laws. 15. Notices. All notices and other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been given if delivered personally or sent by certified mail, return receipt requested, postage prepaid, to the parties to this Agreement shall specify by notice to the other: If to the Company: International Assets Holding Corporation Suite 200 250 Park Avenue South Winter Park, Florida 32789 With a copy to: Steven M. Felsenstein, Esq. Stradley, Ronon, Stevens & Young LLP 2600 Commerce Square Philadelphia, Pennsylvania 19103 If to the Executive: Mr. Jerome F. Miceli Heathrow, FL 33746 All notices and communications shall be deemed to have been received on the date of delivery or on the third business day after the mailing thereof. 16. Modification; Waiver. No provisions of this Agreement may be modified, waived or discharged unless such modification, waiver or discharge is approved by the Board or a person authorized thereby, and is agreed to in a writing signed by the Executive and such officer as may be specifically designated by the Board. No waiver by either party hereto at the time of any breach by the other party hereto of any condition or provision of this Agreement, or compliance therewith, by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same time, or at any prior or subsequent time. 17. Complete Understanding. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. 18. Headings. The headings in this Agreement are for convenience of reference only and shall not control or affect the meaning or construction of this Agreement. 19. Severability. The invalidity of any one or more of the words, phrases, sentences, clauses or sections contained in this Agreement shall not affect the enforceability of the remaining portions of this Agreement or any part thereof, all of which are inserted conditionally on their being valid in law, and if any one or more of the words, phrases, sentences, clauses or sections contained in this Agreement shall be declared invalid, this Agreement shall be construed as if such invalid word or words, phrase or phrases, sentence or sentences, clause or clauses, or section or sections had not been inserted. 20. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 21. Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in Orlando, Florida, in accordance with the rules of the American Arbitration Association then in effect. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first above written. COMPANY: INTERNATIONAL ASSETS HOLDING CORPORATION, a Delaware corporation By: Diego J. Veitia Name: Diego J. Veitia Title: Chairman & CEO EXECUTIVE: Jerome F. Miceli Jerome F. Miceli EXHIBIT 11 INTERNATIONAL ASSETS HOLDING CORPORATION STATEMENT OF COMPUTATION OF EARNINGS PER SHARE For the Nine Months Ended June 30, 1999 and 1998
1999 1998 (1) ---- -------- Basic Earnings (Loss) Per Share Numerator: Net income (loss) $ 325,533 $ (48,592) Denominator: Weighted average number of common shares outstanding 1,650,938 1,695,505 Basic earnings (loss) per share $ 0.20 $ (0.03) Diluted Earnings (Loss) Per Share Numerator: Net income (loss) $ 325,533 $ (48,592) Denominator: Weighted average number of common shares outstanding 1,650,938 1,695,505 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) 298,026 - Weighted average number of common shares and dilutive potential common shares outstanding 1,948,964 1,695,505 Diluted earnings (loss) per share $ 0.17 $ (0.03)
- ------------------------------------------------------------------------------- (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. EXHIBIT 11 INTERNATIONAL ASSETS HOLDING CORPORATION STATEMENT OF COMPUTATION OF EARNINGS PER SHARE For the Three Months Ended June 30, 1999 and 1998
1999 1998 (1) ---- -------- Basic Earnings (Loss) Per Share Numerator: Net income (loss) $ 1,379 $ (8,068) Denominator: Weighted average number of common shares outstanding 1,700,980 1,681,002 Basic earnings (loss) per share $ 0.001 $ (0.005) Diluted Earnings (Loss) Per Share Numerator: Net income (loss) $ 1,379 $ (8,068) Denominator: Weighted average number of common shares outstanding 1,700,980 1,681,002 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) 471,287 - Weighted average number of common shares and dilutive potential common shares outstanding 2,172,267 1,681,002 Diluted earnings (loss) per share $ 0.001 $ (0.005)
- ------------------------------------------------------------------------------- (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. EXHIBIT 21 INTERNATIONAL ASSETS HOLDING CORPORATION SUBSIDIARIES OF THE REGISTRANT Name Place of Incorporation International Assets Advisory Corp. Florida International Asset Management Corp. Florida Global Assets Advisors, Inc. Florida International Financial Products, Inc. Florida INTLTRADER.COM, INC. Florida Offshoretrader.com Ltd. Bermuda EX-27 2 FDS FOR 10QSB
BD 1 9-MOS SEP-30-1999 JUN-30-1999 4,469,210 109,864 0 0 3,175,504 318,625 8,316,204 0 986,152 0 0 1,089,262 0 0 0 17,188 6,059,673 8,316,204 2,437,717 184,466 4,700,005 0 171,485 2,345 4,148,558 561,146 561,146 0 0 325,533 0.20 0.17
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