<PAGE>
FILED PURSUANT TO
RULE 424(B)(3)
FILE NO: 333-51883
PROSPECTUS SUPPLEMENT DATED MAY 17, 1999
TO
PROSPECTUS DATED APRIL 5, 1999
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 March 31, 1999
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission File No. 0-24213
CHAPMAN CAPITAL MANAGEMENT HOLDINGS, INC.
(Name of small business issuer in its charter)
MARYLAND 52-2097010
- ---------------------------- ------------------------------------
(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation)
401 EAST PRATT STREET, 28TH FLOOR, BALTIMORE, MARYLAND 21202
------------------------------------------------------------
(Address of Principal Executive Office)
Issuer's telephone number, including area code: (410) 625-9656
---------------------------------------------------------------------------
(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 [ ]
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
COMMON STOCK, PAR VALUE $0.001 PER SHARE
----------------------------------------
(Title of Class)
As of May 17, 1999, 3,351,334 shares of the issuer's common stock, par value
$0.001 per share, were outstanding.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
PART I.................................................................... 1
ITEM 1 FINANCIAL STATEMENTS....................................... 1
ITEM 2 MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS................................................ 7
PART II................................................................... 12
ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS.................. 12
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K........................... 12
</TABLE>
i
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
The consolidated financial statements for the three months ended March 31,
1999 have not been audited but, in the opinion of management, contain all
adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the financial position and results of operations of the Company
as of such date and for such periods. The unaudited consolidated financial
statements should be read in conjunction with the Consolidated Financial
Statements of the Company and the Notes thereto appearing in the Company's
Annual Report on Form 10-KSB for the year ended December 31, 1998. The results
of operations for the three months ended March 31, 1999 are not necessarily
indicative of the results of operations that may be expected for the year ending
December 31, 1999 or any future periods.
1
<PAGE>
CHAPMAN CAPITAL MANAGEMENT HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1998, AND MARCH 31, 1999
ASSETS
<TABLE>
<CAPTION>
December 31, March 31,
1998 1999
----------- -----------
(Unaudited)
<S> <C> <C>
Cash and cash equivalents $ 4,242,000 $ 3,789,000
Investments 150,000 252,000
Management fees receivable:
From proprietary funds 107,000 115,000
From individually managed accounts 257,000 294,000
Receivables from affiliates 120,000 163,000
Advances to officer 118,000 119,000
Office equipment, net 21,000 25,000
Prepaids and other assets 123,000 202,000
Intangible assets, net 465,000 408,000
Deferred tax asset 45,000 45,000
----------- -----------
Total assets $ 5,648,000 $ 5,412,000
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses $ 172,000 $ 60,000
Due to affiliated company 285,000 76,000
Income taxes payable -- 30,000
Noncompete agreement obligation 150,000 150,000
----------- -----------
Total liabilities 607,000 316,000
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value, 20,000,000 shares authorized,
3,351,334 issued and outstanding 3,000 3,000
Additional paid-in capital 5,239,000 5,239,000
Accumulated deficit (201,000) (146,000)
----------- -----------
Total stockholders' equity 5,041,000 5,096,000
----------- -----------
Total liabilities and stockholders' equity $ 5,648,000 $ 5,412,000
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these
consolidated balance sheets.
2
<PAGE>
CHAPMAN CAPITAL MANAGEMENT HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE-MONTHS ENDED MARCH 31, 1998 AND 1999
<TABLE>
<CAPTION>
March 31,
-----------------------
1998 1999
---------- ----------
(Unaudited) (Unaudited)
<S> <C> <C>
REVENUE:
Advisory and administrative fees $ 769,000 $ 979,000
Interest and other income 3,000 43,000
---------- ----------
Total revenue 772,000 1,022,000
---------- ----------
OPERATING EXPENSE:
Management fees 307,000 351,000
Compensation and benefits 175,000 214,000
General and administrative 180,000 309,000
Amortization expense 57,000 57,000
Interest expense 13,000 6,000
---------- ----------
Total operating expense 732,000 937,000
---------- ----------
Income before income tax provision 40,000 85,000
INCOME TAX PROVISION 14,000 30,000
---------- ----------
Net income $ 26,000 $ 55,000
---------- ----------
---------- ----------
Basic and Diluted Earnings per Share $ .01 $ .02
---------- ----------
---------- ----------
Weighted Average Shares Outstanding 2,487,000 3,351,000
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of these
consolidated statements.
3
<PAGE>
CHAPMAN CAPITAL MANAGEMENT HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE-MONTHS ENDED MARCH 31, 1998 AND 1999
<TABLE>
<CAPTION>
March 31,
--------------------------
1998 1999
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 26,000 $ 55,000
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization 58,000 58,000
Effect of changes in assets and liabilities-
Management fees receivable (44,000) (45,000)
Receivables from affiliates 1,000 (43,000)
Advances to officer 72,000 (1,000)
Prepaids and other assets (11,000) (79,000)
Accounts payable and accrued expenses 42,000 (112,000)
Income taxes payable (34,000) 30,000
Deferred tax asset (66,000) --
Due to affiliated company (28,000) (209,000)
----------- -----------
Net cash provided by (used in) operating activities 16,000 (346,000)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of office equipment -- (5,000)
Purchase of investments (1,000) (102,000)
----------- -----------
Net cash used in investing activities (1,000) (107,000)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of due to officer (15,000) --
----------- -----------
Net cash used in financing activities (15,000) --
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS -- (453,000)
CASH and cash equivalents, beginning of year 8,000 4,242,000
----------- -----------
CASH and cash equivalents, end of year $ 8,000 $ 3,789,000
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these
consolidated statements.
4
<PAGE>
CHAPMAN CAPITAL MANAGEMENT HOLDINGS, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
AS OF MARCH 31, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
Chapman Capital Management Holdings, Inc. is an investment advisory and
investment management company. The accompanying unaudited consolidated financial
statements include the accounts of Chapman Capital Management Holdings, Inc.
(CCMH) and its wholly owned subsidiary, Chapman Capital Management, Inc.
(collectively, the Company). All significant intercompany accounts and
transactions have been eliminated in consolidation. The accompanying
consolidated financial statements are presented on the accrual basis of
accounting in accordance with generally accepted accounting principles. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities as of the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
INTERIM FINANCIAL STATEMENTS
The consolidated financial statements for the three-months ended March 31,
1998 and 1999, are unaudited, but in the opinion of management, such
financial statements have been presented on the same basis as the audited
consolidated financial statements for the year ended December 31, 1998 and
include all adjustments, consisting only of normal recurring adjustments
necessary for a fair presentation of the financial position and results of
operations, for these periods.
As permitted under the applicable rules and regulations of the Securities and
Exchange Commission, these financial statements do not include all disclosures
normally included with audited consolidated financial statements, and
accordingly, should be read in conjunction with the consolidated financial
statements and notes thereto as of December 31, 1998, included in the Company's
Form 10-KSB filed. The Company's operating results are significantly affected by
the size of the portfolio it manages. The results of operations presented in the
accompanying consolidated financial statements are not necessarily
representative of operations for an entire year and because of the nature of the
Company's operations can be materially different between periods.
5
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Note Regarding Forward-Looking Information
Certain statements under the caption "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and elsewhere in this Report
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, uncertainties and other factors which may cause
the actual results, performance or achievements of the Company, or industry
results, to be materially different from any future results, performance, or
achievements expressed or implied by such forward-looking statements. Such
factors include, among others, general economic and business conditions in the
Company's market area, inflation, fluctuations in interest rates, changes in
government regulations, competition and the ability of the Company to implement
its business strategy and other risks discussed in the Company's Annual Report
on Form 10-KSB for the year ended December 31, 1998, and in this and other
reports filed by the Company.
Forward-looking statements are intended to apply only at the time they are
made. Moreover, whether or not stated in connection with a forward-looking
statement, the Company undertakes no obligation to correct or update a
forward-looking statement should the Company later become aware that it is not
likely to be achieved. If the Company were to update or correct a
forward-looking statement, investors and others should not conclude that the
Company will make additional updates or corrections thereafter.
The following discussion should be read in conjunction with the financial
statements contained in Item 1 of Part I of this Form 10-QSB.
The Company's revenues are derived primarily from fees for investment
advisory services provided to institutional and other clients. Investment
advisory fees are generally a function of the overall fee rate charged to each
account and the level of assets under management. Assets under management can be
affected by the addition of new client accounts or client contributions to
existing accounts, withdrawals of assets from or terminations of client accounts
and investment performance, which may depend on general market conditions.
The Company's assets under management were $637.1 million as of March 31,
1999, compared to $591.4 million under management on December 31, 1998. The net
$45.7 million increase in assets under management during the quarter resulted
from investment gains of $10.7 million and net positive client cash flow of
$35.0 million. As of March 31, 1999, five clients accounted for approximately
71.5% of the Company's revenue.
7
<PAGE>
RESULTS OF OPERATIONS
The following table reflects items in the Statements of Operations as
dollar amounts and as percentages of total revenue.
<TABLE>
<CAPTION>
Percentage of Percentage of
Three months ended Total Three months ended Total
March 31, 1999 Revenues March 31, 1998 Revenues
-------------- -------- -------------- --------
REVENUES:
<S> <C> <C> <C> <C>
Advisory and administrative fees .... $ 979,000 95.8% $ 769,000 99.6%
Interest and other income ........... 43,000 4.2 3,000 0.4
---------- ----- ---------- -----
Total Revenue ................... 1,022,000 100 772,000 100.0
---------- ----- ---------- -----
OPERATING EXPENSE:
Management fees ..................... 351,000 34.3% 307,000 39.8%
Compensation and benefits ........... 214,000 21.0 175,000 22.6
General and Administrative .......... 309,000 30.2 180,000 23.3
Amortization Expense ................ 57,000 5.6 57,000 7.4
Interest expense .................... 6,000 0.6 13,000 1.7
---------- ----- ---------- -----
Total operating expenses ........ 937,000 91.7 732,000 94.8
---------- ----------
Income before income tax ............ 85,000 8.3 40,000 5.2
Income tax provision ................ 30,000 2.9 14,000 1.8
---------- ----- ---------- -----
Net income .......................... $ 55,000 5.4% $ 26,000 3.4%
---------- ----- ---------- -----
---------- ----- ---------- -----
</TABLE>
Total Revenue increased by $250,000 or 32.4% to $1,022,000 for the three
months ended March 31, 1999 from $772,000 for the prior comparable period.
Advisory and administrative fees revenue increased $210,000 or 27.3% to
$979,000 for the three months ended March 31, 1999 from $769,000 for the
prior comparable period. This increase was primarily due to a 7.7% increase
in assets under management resulting from investment performance and earnings
as well as additional investment from existing clients. Interest and other
income increased by $40,000 to $43,000 for the three months ended March 31,
1999 from $3,000 for the prior comparable period. This increase is due to
higher cash balances associated with the net proceeds from the Company's
public offering of common stock.
Total expense for the three months ended March 31, 1999 increased by
$205,000, or 28.0%, to $937,000 for the three months ended March 31, 1999 from
$732,000 for the prior comparable period. Total expense decreased to 91.7% of
total revenue for the three months ended March 31, 1999 as compared to 94.8% of
total revenue for the prior comparable period. Expenses increased in all areas
due to expanded operations and marketing efforts.
Management fees expense, which consists primarily of the Company's
payments to sub-advisors in connection with its multi-manager investment
product, the DEM-MET Trust, increased by $44,000 or 14.3%, to $351,000 for
the three months ended March 31, 1999 from $307,000 for the prior comparable
8
<PAGE>
period. The Company's increase in management fee expense largely reflects an
increase in assets under management of the DEM-MET Trust as a result of
investment performance and additional investments from existing clients in
DEM-MET.
Compensation and benefits increased by $39,000 or 22.3%, to $214,000 for
the three months ended March 31, 1999 from $175,000 for the prior comparable
period. This increase is largely due to the addition of employees and increases
in annual compensation to certain existing employees. As a percentage of total
revenue, these expenses decreased to 21.0% in March 31, 1999 from 22.6% in March
31, 1998.
General and administrative expense increased by $129,000 or 71.7%, to
$309,000 for the three months ended March 31, 1999 from $180,000 for the prior
comparable period due to increased expenses for travel, advertising, publicity
and business development, and increases in charges from The Chapman Co. to pay
costs associated with additional employees and new equipment.
Interest expense decreased by $7,000, or 53.8%, to $6,000 for the three
months ended March 31, 1999 from $13,000 for the prior comparable period. This
decrease is attributable the retirement of a note payable to The Chapman Co.
Income tax provision increased by $16,000 to $30,000 in March 31, 1999 from
a tax provision of $14,000 for the prior comparable period. This increase was
associated with the increase in pre-tax income.
The Company had net income of $55,000 for the three months ended March 31,
1999 verses net income of $26,000 for the three months ended March 31, 1999.
This increase is the result of the items discussed above.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations through capital contributions
from its principal stockholder, loans from affiliates and cash flow from
operations and the public offering of its stock.
A majority of the Company's assets are liquid and consist primarily of
cash and cash equivalents and receivables from advisory clients. A relatively
small percentage of the Company's total assets are fixed. The Company's total
assets as of March 31, 1999 were $5,412,000 compared to $5,648,000 as of
December 31, 1998.
The final payment of $150,000 on a non-compete agreement pertaining to the
DEM-MET Trust is due on demand. Management expects that the Company's liquid
assets and cash provided by operations will be sufficient to make this demand
payment. The Company may seek lines of credit in the future.
The Company's overall capital and funding needs are continually reviewed
to ensure that the capital base can support the estimated needs of the
business. Based upon these reviews, the Company believes its capital base
is sufficient to implement the Company's DEM & DEM Multi-Manager
strategies for the foreseeable future.
The Company's cash was $3,789,000 as of March 31, 1999 compared to
$4,242,000 as of December 31, 1998.
9
<PAGE>
YEAR 2000 SOFTWARE ISSUE
As the Year 2000 approaches, existing software programs and operating
systems must be reviewed to determine if they can accommodate information
that employs dates after December 31, 1999. As of March 31, 1999, the Company
has paid direct Year 2000 compliance costs of approximately $41,000, to cover
assessment of systems, internal testing, point-to-point testing, training,
and replacement and modification of existing systems. The Company's Year 2000
compliance costs consist of direct expenses incurred in respect of software,
consulting and employee time and the Company's share of compliance expenses
for upgraded computers, software, and communication systems to be paid or
financed by Chapman Holdings, Inc., an affiliate of the Company. The Company
will reimburse Chapman Holdings, Inc. for its share of these Year 2000
expenses under the terms of its expense allocation agreement with Chapman
Holdings, Inc.
During 1999, the Company's Year 2000 compliance costs are estimated at
approximately $65,000. The Company estimates that over the next three years its
total Year 2000 compliance costs, direct and allocated by Chapman Holdings,
Inc., will be approximately $145,000.
Management has prepared a written plan detailing the Company's software and
operating systems compliance issues for the Year 2000. The plan identifies
critical and non-critical operating systems of the Company and addresses
external interfaces with third-party computer systems. The Company is currently
working with its hardware and software vendors and other third parties to
prepare for the Year 2000. The Company anticipates that most of the necessary
hardware and software renovations needed to render the Company Year 2000
compliant have been or will be completed during the second quarter of 1999.
Management plans to test its systems during the second and third quarters of
1999 to determine the effect of its compliance efforts. According to the
Company's plan, the testing phase is scheduled to be completed during the third
quarter of 1999.
The Company's Year 2000 compliance plan involves four phases:
10
<PAGE>
Phase I - Assessment. This phase involves the identification of all systems
that are date dependent. This phase was substantially completed during the first
quarter of 1998.
Phase II - Renovation. This phase involves the identification and
replacement of critical systems that cannot be updated or certified as
compliant. This phase commenced in the first quarter of 1998 and the Company
expects to complete the substantial majority of this phase before the end of the
third quarter of 1999.
Phase III - Testing. This phase involves testing all systems that are
date dependent and upgrading all non-compliant systems. The Company expects
to complete this phase during the third quarter of 1999.
Phase IV - Contingency. This phase involves an assessment of all
critical systems for potential problems that would result from Year 2000
related failures of software or hardware and development of plans and
strategies to continue operations should such failures occur. The Company
expects to complete this phase by the end of the third quarter of 1999.
The table below summarizes the Company's estimate of the status of key
elements of the Company's Year 2000 compliance plan:
<TABLE>
<CAPTION>
NUMBER
OF CRITICAL
NUMBER OF SYSTEMS
NUMBER OF CRITICAL FOR WHICH
CRITICAL SYSTEMS NUMBER OF CRITICAL PHASE NOT
PHASE SYSTEMS COMPLETE SYSTEMS IN PROCESS APPLICABLE
- ----- --------- --------- ------------------ -----------
<S> <C> <C> <C> <C>
Assessment............................... 32 32
Renovation............................... 32 12 11 9
Testing.................................. 32 23 9
Contingency Planning..................... 32 32
</TABLE>
Testing and contingency planning are system-wide phases which can not be
assessed on the basis of separate pieces of hardware or software. The chart
above reports the completion status of these unitary activities.
The Company has relationships with third parties that may have computer
systems that are not Year 2000 compliant. The Company has identified the third
parties upon which it relies for mission-critical systems and has contacted or
is contacting such third parties to confirm that their systems are in compliance
with the Year 2000 requirements.
While the Company believes that it is taking prudent and necessary action
to comply with Year 2000 requirements, there can be no assurance that the Year
2000 issue will not result in information or communications systems
interruptions. Any such interruptions could be expected to have a material
adverse effect on the Company's business, financial condition, results of
operations and business prospects and may subject the Company to liability to
its clients. The Company is currently building upon its existing contingency
plan in the event that the Company or third parties do not successfully complete
their compliance efforts, or if vendors or third parties controlling systems
critical to the Company are unable to confirm that their systems will be Year
2000 compliant. These efforts may result in additional costs in excess of
current allocations and estimates.
11
<PAGE>
PART II
OTHER INFORMATION
ITEM 2- CHANGES IN SECURITIES AND USE OF PROCEEDS
On June 30, 1998, the Company's Registration Statement on Form SB-2 (File
No. 333-51883) pertaining to its initial public offering of shares of the
Company's common stock, par value $0.001 (the "Offering") was declared
effective.
The Company has applied Offering proceeds in the amount of $304,000 toward
the creation of new investment products; $280,000 for expanded sales and
marketing efforts; $259,000 for promotion of the Company's Domestic Emerging
Markets and DEM Multi-Manager Strategies; $813,000 for repayments of
indebtedness to affiliates and $850,000 for working capital and general
corporate purposes. The remaining Offering proceeds have been invested by the
Company in The Chapman U.S. Treasury Money Fund, an affiliate, pending final
application of such proceeds.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits required by Item 601 of Regulation S-B:
Exhibit 10.1 Agreement between the Company and Chapman Holdings, Inc. as
to Allocation of Shared Expenses dated as of January 1,
1999.
Exhibit 27: Financial Data Schedule
B. Reports on Form 8-K:
None.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CHAPMAN CAPITAL MANAGEMENT HOLDINGS, INC.
By: /S/ NATHAN A. CHAPMAN, JR.
---------------------------------------------
Nathan A. Chapman, Jr.
President, Chairman of the Board and Director
/S/ MARIA MARKHAM THOMPSON
---------------------------------------------
Maria Markham Thompson
Chief Financial Officer
(Principal Financial Officer and Principal
Accounting Officer)
Date: May 14, 1999
13
<PAGE>
EXHIBIT INDEX
Exhibit 10.1 Agreement between the Company and Chapman Holdings, Inc. as to
Allocation of Shared Expenses dated as of January 1, 1999.
Exhibit 27: Financial Data Schedule
14
<PAGE>
EXPENSE ALLOCATION AGREEMENT
THIS AGREEMENT is made as of the 1st day of January 1999 (the
"Agreement"), by and between Chapman Capital Management, Inc., a District of
Columbia corporation ("CCM") and The Chapman Co., a Maryland corporation ("CCO")
to allocate certain business expenses among CCO and CCM.
WHEREAS, CCM and CCO are affiliated entities, each controlled as of
the date of this Agreement by Nathan A. Chapman, Jr.;
WHEREAS, CCM and CCO have shared and seek to continue to share, certain
administrative, equipment and personnel expenses incurred in connection with the
operation of their respective businesses;
WHEREAS, CCM and CCO desire to enter into this Agreement governing the
future allocation of certain expenses shared between CCM and CCO in connection
with the operation of their respective businesses;
NOW THEREFORE, in consideration of the mutual agreements and terms
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, CCM and CCO do hereby agree as
follows:
AGREEMENT
1. CCM hereby agrees to provide for monthly payment to CCO for shared
expenses incurred in connection with the operation of the businesses of CCM and
CCO as detailed and expressly set forth in the column entitled "Basis of
Allocation" on Schedule I to this Agreement (the "Basis of Allocation").
2. To the extent that the calculation contained in the Basis of
Allocation, does not provide for the payment of a fixed sum each month, the
amount owed by CCM shall be automatically re-valued each month in accordance
with the provisions of the Basis of Allocation and the calculations contained
therein. Such automatic monthly valuations, provided that they do not deviate
from the calculations and provisions of the Basis of Allocation, shall not
constitute an amendment to the Agreement.
3. Payment by CCM, contemplated above, shall be received by CCO by the
tenth (10th) day of each month in which an amount is due. Failure to provide for
payment by this date shall give rise to, at the election of and upon written
notification by CCO, an additional fee at an annualized rate of five percent
(5%) of the late balance outstanding.
<PAGE>
4. CCO hereby agrees to make timely payments, on behalf of CCM, to
lessors, vendors, employees, officers or any other party to whom shared expenses
of CCM and CCO are owed, as contemplated by this Agreement.
5. This Agreement may be amended at any time by mutual written
agreement executed by the parties.
6. This Agreement may be terminated by either party upon 30 days prior
written notice.
7. This Agreement shall continue in effect until properly terminated by
either party.
8. This Agreement shall be governed by and shall be construed in
accordance with the laws of the state of Maryland without regard to principals
of conflicts of law.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
CHAPMAN CAPITAL MANAGEMENT, INC.
BY: /S/NATHAN A. CHAPMAN, JR.
---------------------------------------
Nathan A. Chapman, Jr.
President
THE CHAPMAN CO.
BY: /S/NATHAN A. CHAPMAN, JR.
---------------------------------------
Nathan A. Chapman, Jr.
President
<PAGE>
SCHEDULE I
EXPENSE ALLOCATION
DESCRIPTION BASIS OF ALLOCATION
Administrative Costs CCM shall pay a fixed sum of $12,000 per
month for various administrative costs such as
supplies, faxes, postage and office space utilized
by CCM.
Salaries Expense CCM shall pay 50% of the base salaries of
its officers. CCM shall pay a percentage of the
compensation expense of its other employees in an
amount equal to the percentage of time such
employees spend on CCM's business.
Equipment Rental CCM shall pay monthly equipment rental fees
in an amount equal to the percentage of total
compensation expense (excluding bonus) allocated
to CCM pursuant to the Basis of Allocation
governing "Salaries Expense" above.
Bonuses CCM shall pay bonuses to its employees and
officers pursuant to terms determined and approved
by its Board of Directors.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the financial
statements of the Company for the fiscal year ended December 31, 1998 and for
the three months ended March 31, 1998 and 1999, and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1998 JAN-01-1999 JAN-01-1998
<PERIOD-END> DEC-31-1998 MAR-31-1999 MAR-31-1998
<CASH> 4,242,000 3,789,000 0
<SECURITIES> 150,000 252,000 0
<RECEIVABLES> 602,000 691,000 0
<ALLOWANCES> 0 0 0
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 5,117,000 4,934,000 0
<PP&E> 29,000 34,000 0
<DEPRECIATION> (8,000) (9,000) 0
<TOTAL-ASSETS> 5,648,000 5,412,000 0
<CURRENT-LIABILITIES> 607,000 316,000 0
<BONDS> 0 0 0
0 0 0
0 0 0
<COMMON> 3,000 3,000 0
<OTHER-SE> 5,038,000 5,093,000 0
<TOTAL-LIABILITY-AND-EQUITY> 5,648,000 5,412,000 0
<SALES> 0 979,000 769,000
<TOTAL-REVENUES> 0 1,022,000 772,000
<CGS> 0 0 0
<TOTAL-COSTS> 0 937,000 732,000
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 0 6,000 13,000
<INCOME-PRETAX> 0 85,000 40,000
<INCOME-TAX> 0 30,000 14,000
<INCOME-CONTINUING> 0 55,000 26,000
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 0 55,000 26,000
<EPS-PRIMARY> 0 0.02 0.01
<EPS-DILUTED> 0 0.02 0.01
</TABLE>
