=================================================================
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
\x\ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
\ \ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission file number 0-14772
JW CHARLES FINANCIAL SERVICES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 58-1545984
_______________________________ ___________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
980 North Federal Highway - Suite 210
Boca Raton, Florida 33432
__________________________________________ __________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (407) 338-2600
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 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 last 90 days. Yes X
___
No ___
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at November 2, 1995
-------------------------------------- -------------------------------
Common stock, $.001 par value per share 3,908,898
<PAGE>
<PAGE>
JW CHARLES FINANCIAL SERVICES, INC.
-----------------------------------
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Condensed Balance Sheets at September 30, 1995
and December 31, 1994 3
Consolidated Condensed Statements of Income for the Three Months
Ended September 30, 1995 and 1994 4
Consolidated Condensed Statements of Income for the Nine Months Ended
September 30, 1995 and 1994 5
Consolidated Condensed Statements of Cash Flows for the Nine Months
Ended September 30, 1995 and 1994 6
Notes to Consolidated Condensed Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
</TABLE>
2
<PAGE>
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
____________________________
<TABLE>
JW CHARLES FINANCIAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
--------------------------------------
<CAPTION>
September December
30, 31,
ASSETS 1995 1994(*)
- ------ --------------------------
(Unaudited)
<S> <C> <C>
Cash $ 7,352,000 $5,401,000
Cash and securities segregated under federal regulations 0 0
Commissions and other receivables from clearing broker and organizations 3,971,000 2,900,000
Receivables from customers, net 80,275,000 49,844,000
Receivables from brokers and dealers 6,837,000 5,984,000
Securities owned, at market value 13,807,000 11,338,000
Note receivable from affiliate 161,000 161,000
Furniture, equipment and leasehold improvements, net of
accumulated depreciation of $908,000 and $726,000 1,098,000 994,000
Deferred income taxes 477,000 360,000
Income taxes receivable 0 79,000
Other assets 3,378,000 5,157,000
---------------------------
$117,356,000 $82,218,000
===========================
LIABILITIES AND SHAREHOLDERS' EQUITY:
- ------------------------------------
Liabilities:
Short-term borrowings from banks $20,970,000 $ 7,303,000
Accounts payable and accrued expenses 11,366,000 5,604,000
Payable to customers 25,384,000 30,288,000
Payables to brokers and dealers 32,626,000 16,155,000
Securities sold, not yet purchased, at market value 7,269,000 4,948,000
Notes payable 3,911,000 5,161,000
Income taxes payable 649,000 0
---------------------------
102,175,000 69,459,000
---------------------------
Contingencies
Redeemable preferred stock 5,746,000 0
Shareholders' equity:
Preferred stock 0 1,000
Common Stock - $.001 par value per share; 9,056,000 authorized,
3,907,898, and 3,907,398 issued and outstanding 4,000 4,000
Additional paid-in capital 761,000 1,078,000
Retained earnings 8,670,000 11,676,000
---------------------------
Total shareholders' equity 9,435,000 12,759,000
---------------------------
$117,356,000 $82,218,000
===========================
* - Derived from audited financial statements contained in registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994.
</TABLE>
3
<PAGE>
<PAGE>
<TABLE>
JW CHARLES FINANCIAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
--------------------------------------------
(Unaudited)
<CAPTION>
Three Months Ended September 30,
--------------------------------
1995 1994
--------------------------------
<S> <C> <C>
REVENUES:
Commission and fee income $11,952,000 $5,416,000
Market making and principal transactions, net 5,226,000 5,884,000
Interest 1,960,000 1,314,000
Clearing fees 1,429,000 1,238,000
Other 1,394,000 983,000
----------------------------
21,961,000 14,835,000
Expenses:
Commissions and clearing costs 12,100,000 7,135,000
Employee compensation and benefits 3,380,000 2,931,000
General and administrative 3,519,000 2,866,000
Interest 784,000 479,000
----------------------------
19,783,000 13,411,000
----------------------------
Income before income taxes 2,178,000 1,424,000
Provision for income taxes 838,000 547,000
----------------------------
Net income $ 1,340,000 $ 877,000
============================
PER COMMON SHARE:
Net income available to common shareholders $.34 $.22
============================
Weighted average number of common shares
outstanding during the period 3,976,000 3,925,000
============================
</TABLE>
(The accompanying notes are an integral part of
these consolidated financial statements.)
4
<PAGE>
<PAGE>
<TABLE>
JW CHARLES FINANCIAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
-------------------------------------------
(Unaudited)
<CAPTION>
Nine Months Ended September 30,
---------------------------------
1995 1994
---------------------------------
<S> <C> <C>
REVENUES:
Commission and fee income $29,928,000 $ 15,006,000
Market making and principal transactions, net 14,639,000 16,160,000
Interest 4,753,000 3,492,000
Clearing fees 4,182,000 3,705,000
Other 3,538,000 2,307,000
-------------------------------
57,040,000 40,670,000
-------------------------------
EXPENSES:
Commissions and clearing costs 31,138,000 19,863,000
Employee compensation and benefits 10,057,000 7,983,000
General and administrative 9,998,000 8,353,000
Interest 1,890,000 1,165,000
-------------------------------
53,083,000 37,364,000
-------------------------------
Income before income taxes 3,957,000 3,306,000
Provision for income taxes 1,535,000 1,218,000
-------------------------------
Net income $2,422,000 $2,088,000
================================
PER COMMON SHARE:
Net income available to common shareholders $.61 $.52
================================
Weighted average number of common shares
outstanding during the period 3,981,000 3,924,693
=================================
</TABLE>
(The accompanying notes are an integral part of
these consolidated financial statements.)
5
<PAGE>
<PAGE>
<TABLE>
JW CHARLES FINANCIAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Nine Months Ended September
30,
-------------------------------
1995 1994
-------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $2,422,000 $2,088,000
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 182,000 130,000
Changes in operating assets and liabilities:
Commissions and other receivables from
clearing broker and organizations (1,071,000) (1,773,000)
Receivables from customers, net (30,431,000) (1,691,000)
Receivables from brokers and dealers (853,000) (6,666,000)
Securities owned (2,469,000) 4,244,000
Deferred income taxes (117,000) (223,000)
Income taxes receivable 79,000 -
Other assets 1,779,000 (1,352,000)
Accounts payable and accrued expenses 5,762,000 5,009,000
Payables to customers (4,904,000) 1,313,000
Payable to brokers and dealers 16,471,000 5,823,000
Securities sold, not yet purchased 2,321,000 1,994,000
Income taxes payable 649,000 409,000
Preferred stock dividends payable - (14,000)
----------------------------------
Net cash provided (used) by operating activities (10,180,000) 9,291,000
----------------------------------
INVESTING ACTIVITY
Purchases of property and equipment, net (285,000) (383,000)
----------------------------------
FINANCING ACTIVITIES
Short-term borrowings from banks 13,667,000 (10,155,000)
(Repayment) proceeds from notes payable (1,250,000) 2,500,000
Cash flow distributions and redemptions of
preferred stock (1,000) (570,000)
Mandatory preferred stock dividends paid (48,000)
Issuance of common stock 4,000
-----------------------------------
Net cash provided (used) by financing activities 12,416,000 (8,269,000)
-----------------------------------
Net increase in cash 1,951,000 639,000
Cash and cash equivalents at beginning of period 5,401,000 3,289,000
-----------------------------------
Cash and cash equivalents at end of period $ 7,352,000 $ 3,928,000
===================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for income taxes $ 788,000 $1,378,000
==================================
Cash paid during the period for interest $1,890,000 $1,165,000
==================================
</TABLE>
(The accompanying notes are an integral part of
these consolidated financial statements.)
6 <PAGE>
<PAGE>
JW CHARLES FINANCIAL SERVICES, INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(Unaudited)
1. BASIS OF PRESENTATION
The interim financial information included herein is unaudited; however,
such information reflects all adjustments which are, in the opinion of
management, necessary for a fair presentation of the periods indicated.
The accompanying consolidated condensed financial statements include the
accounts of the Company and its subsidiaries. Certain information and
footnote disclosures normally included in financial statements prepared
in conformity with generally accepted accounting principles have been
condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission. These consolidated condensed
financial statements should be read in conjunction with the consolidated
financial statements and related notes contained in the Company's 1994
Annual Report on Form 10-K.
Because of seasonal and other factors, the results of operations for the
three month and nine month periods ended September 30, 1995 are not
necessarily indicative of the results of operations to be expected for
the fiscal year ending December 31, 1995.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation - The accompanying consolidated financial
statements include the accounts JW Charles Financial Services, Inc. and
its subsidiaries which are, Corporate Securities Group, Inc. ("CSG"), JW
Charles Securities, Inc. ("JWC Securities"), JW Charles Clearing Corp.
("JWC Clearing"), JW Charles Capital Corp. ("JWC Capital"), JW Charles
Insurance Services, Inc. ("JWC Insurance"), and DMG Securities, Inc.
("DMG"). All significant intercompany transactions have been eliminated
in consolidation.
Reclassifications - Certain amounts in the prior period's financial
statements have been reclassified to conform to the current period's
presentation.
3. INCOME TAXES
At December 31, 1994 the Company had net operating loss carryforwards of
approximately $2 million for income tax purposes that expires in 2005.
The net operating loss carryforward, which was acquired as part of the
Company's merger with a privately owned financial services holding
company then known as JW Charles Financial Services, Inc. ("Old JWC
Financial") in 1990, is limited under the separate return limitation
year rules which allow each member of the Old JWC Financial group to
utilize its net operating loss carryforward only to the extent of its
taxable income. For financial statement purposes, a valuation allowance
of $821,000 has been recognized to offset the deferred tax assets related
to this carryforwards.
The reconciliation of income taxes attributable to continuing operations
computed at the U.S. federal statutory tax rates to income tax expense
for the three month period ended September 30, 1995 is as follows:
<TABLE>
<S> <C>
Tax at statutory rates 34.0%
Increase resulting from:
Effect of state income taxes 3.6%
Other 1.2%
----
38.8%
====
</TABLE>
The income tax provision for the three months ended September 30, 1995
consists of the following:
<TABLE>
<CAPTION>
September 30,
1995
-------------
<S> <C>
Current $1,652,000
Deferred (117,000)
----------
Total $1,535,000
==========
</TABLE>
7
<PAGE>
<PAGE>
4. CONTINGENCIES
The Company is involved in various claims and possible actions arising out of
the normal course of its business. Although the ultimate outcome of these
claims cannot be ascertained at this time, it is the opinion of the Company
based on knowledge of facts and advice of counsel, that the resolution of such
actions will not have a material adverse effect on the Company's financial
condition.
8 <PAGE>
<PAGE>
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
---------------------------------------------
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1995 (THE "1995 PERIOD")
VS. 1994 (THE "1994 PERIOD")
Commissions and fee income increased by $6,536,000 (or 121%)
to $11,952,000 in the 1995 Period compared to $5,416,000 in the
1994 Period. Market making and principal transactions - net,
which represents the net realized and unrealized gain or loss
experienced on securities transactions, decreased by $658,000 (or
11%) to $5,226,000 in the 1995 Period from $5,884,000 in the 1994
Period. The increase in the combined total of these two line
items reflects higher volume due both to improved market
conditions and the increase in the size of the retail sales
force. The relative changes in each of these line items is
attributable to an increasing percentage of the Company's
business being conducted on an agency basis as opposed to a
principal basis.
Interest income increased by $646,000 to $1,960,000 in the
1995 Period from $1,314,000 in the 1994 Period. Interest income
consists primarily of interest earned on receivables from
customers, securities owned and customer money market fund
balances. The increase in interest income is primarily due to
the increase in receivables from customers in the 1995 Period as
compared to the 1994 Period.
In addition to conducting its own securities business, the
Company, through JWCC, clears and executes securities
transactions, primarily on a fully-disclosed basis, for other
broker-dealers and financial institutions. The Company receives
clearing fees for providing this service. Such clearing fees
increased slightly to $1,429,000 in the 1995 Period from
$1,238,000 in the 1994 Period. The increase in clearing fees is
primarily due to generally more favorable market conditions
experienced in the 1995 Period and the continued addition of new
correspondents which were only utilizing the Company's clearing
services for, at most, a portion of the 1994 Period.
Commissions and clearing costs, which represents the portion
of fee income payable by the Company to registered
representatives or other broker-dealers as a result of securities
transactions (and the related costs associated with the execution
of such trades) increased by $4,965,000 to $12,100,000 in the
1995 Period from $7,135,000 in the 1994 Period. Commissions and
clearing costs as a percentage of commission and fee income and
market making and principal transactions-net (the "Clearing
Factor") increased to 70% in the 1995 Period as compared to 63%
in the 1994 Period. The Company believes that the increase in
the Clearing Factor is attributable to several factors including
(i) the utilization of special first year payouts to recruit
registered representatives to work in the Company's new offices
and (ii), an increase in the percentage of fee income generated
by the Company's independent affiliated branch offices.
The Company believes that its Clearing Factor is
representative of the prevailing experience in the industry,
although sufficient industry data is not available to make a
precise comparison. The major component, however, is commission
rates, and the Company's commission rates for its independent
affiliated branch office registered representatives and its in-
house employee registered representatives are comparable with
that paid by other firms in the securities brokerage industry
(ranging from 80% to 90% for registered representatives in
affiliated branch offices and 30% to 50% for its in-house
employee registered representatives, depending upon production
levels). Affiliated branch office registered representatives
receive higher commissions from the Company than registered
representatives who are Company employees, which reflects that
each affiliated branch office is responsible for its own
overhead. Accordingly, the Company's overhead attributable to
branch registered representatives is less than the overhead
attributable to the Company's in-house registered represen-
9
<PAGE>
tatives. As a result, the Company's margin is not adversely
affected by engaging additional affiliated branch office
registered representatives (and paying them higher commissions)
as opposed to hiring in-house employee registered
representatives.
Employee compensation and benefits increased by $449,000 to
$3,380,000 in the 1995 Period from $2,931,000 in the 1994 Period
primarily reflecting compensation and employee benefit costs
associated with an increase in professional and support staff
which resulted from the opening of new offices and a general
increase in transaction volume experienced due to improved market
conditions.
General and administrative expenses increased by $653,000 to
$3,519,000 in 1995 Period from $2,866,000 in the 1994 Period.
General and administrative expenses, as a percentage of total
revenues declined to 16% in the 1995 Period from 19% in 1994
Period. The increase in general and administrative expenses in
absolute terms is primarily attributable to a the opening of new
offices and a general increase in expenditures as a result of
increased transaction volume.
Interest expense, which consists primarily of interest
incurred on short-term borrowings to finance JWC Clearing
receivables from customers and securities owned, increased to
$784,000 in the 1995 Period from $479,000 in the 1994 Period.
The increase is primarily a result of an increase in the average
outstanding balance of receivables from customers which are
financed by the Company through short term borrowings.
Net income increased to $1,340,000 (or 6% of total revenues)
in the 1995 Period from $877,000 (or 6% of total revenues) in the
1994 Period. The increase in income before income taxes in
absolute terms is directly related to an increase in revenues.
NINE MONTHS ENDED SEPTEMBER 30, 1995 (THE "1995 PERIOD") VS.
1994 (THE "1994 PERIOD")
Commissions and fee income decreased by $14,922,000 or 99%
to $29,928,000 in the 1995 Period compared to $15,006,000 in the
1994 Period. Market making and principal transactions - net
decreased by $1,521,000 or 9% to $14,639,000 in the 1995 Period
from $16,160,000 in the 1994 Period. The increase in the total
of these two line items is directly related to the Company's
expanded market making and trading activities experienced in the
1995 Period as compared to the 1994 Period.
Interest income increased by $1,301,000 to $4,753,000 in the
1995 Period from $3,492,000 in the 1994 Period. The increase in
interest income is primarily due to the increase in interest
rates in the 1995 Period as compared to the 1994 Period.
Clearing fees amounted to $4,182,000 and $3,705,000 in the
1995 and 1994 Periods, respectively. The increase in clearing
fees is primarily due to generally more favorable market
conditions experienced in the 1995 Period and the continued
addition of new correspondents which were only utilizing the
Company's clearing services for, at most, a portion of the 1994
Period.
Commissions and clearing costs increased by $11,275,000 to
$31,138,000 in the 1995 Period from $19,863,000 in the 1994
Period. The Clearing Factor increased to 70% in the 1995 Period
as compared to 64% in the 1994 Period for the same reasons
discussed in the comparison of the three month period above.
Employee compensation and benefits increased by $2,074,000
to $10,057,000 in the 1995 Period from $7,983,000 in the 1994
Period primarily for the same reasons discussed in the comparison
of the three month period.
General and administrative expenses increased by $1,645,000
to $9,998,000 in 1995 Period from $8,353,000 in the 1994 Period.
General and administrative expenses represented approximately 18%
of total revenues in the 1995 Period as compared to 21% in the
1994 Period. The increase in general and administrative expenses
in absolute terms is primarily attributable the same reasons
discussed in the comparison of the three month period.
10 <PAGE>
Net income increased to $2,422,000 (or 4% of total revenues)
in the 1995 Period from $2,088,000 (or 5% of total revenues) in
the 1994 Period. The increase in net income is directly related
the overall increase in revenues experienced in the 1995 Period
as compared to the 1994 Period.
LIQUIDITY AND CAPITAL RESOURCES
The Company maintains a highly liquid balance sheet with the
majority of the Company's assets consisting of securities owned,
which are marked to market daily and receivables from customers
arising from customer related securities transactions.
Receivables from customers consist primarily of collateralized
customer margin loans and securities borrowed which are typically
secured with marketable corporate debt and equity securities. The
nature of the Company's business as a market maker and securities
dealer requires it to carry significant levels of securities
inventories in order to meet its customer and internal trading
needs. Additionally, the Company's role as a financial
intermediary for customer activities, which it conducts on a
principal basis, results in significant levels of customer
related balances. Accordingly, the Company's total assets and
financial leverage can fluctuate significantly depending largely
upon general economic and market conditions, volume of activity,
customer demand and underwriting commitments. The Company's
ability to support increases in its total assets is a function of
its ability to generate funds internally and obtain short-term
borrowings from banks.
The Company has borrowed over the past few years an
aggregate of $5,000,000 from Gilman CMG, Inc. ("GCMG") or an
affiliate thereof, which owns approximately 49% of the Company's
outstanding shares of Common Stock. On May 15, 1995, the Company
and GCMG entered into a new Loan Agreement for a refinancing of
that debt, pursuant to which the debt was converted to a term
loan, bearing interest at a rate of 10% per annum, with
$1,000,000 of principal paid on May 16, 1995, and the remaining
$4,000,000 of principal payable in equal quarterly installments
of $250,000 on July 15, October 15, January 15, and April 15, of
each year until paid in full. Interest accrues on the principal
outstanding from time to time and is payable quarterly on the
same dates that principal payments are required. The Company has
the option to prepay principal, in whole or in part at any time,
without premium or penalty.
On May 15, 1995, the Company and GCMG also entered into a
Stock Repurchase Agreement, pursuant to which the Company agreed
to repurchase the shares of Common Stock of the Company owned by
GCMG. Under the Stock Repurchase Agreement, the Company is
required to use its Modified Net Income to repurchase annually
(on or before each April 15, commencing on April 15, 1996) shares
of Common Stock at a price of $3.00 per share, subject to
possible upward adjustment based on certain increases to the
Company's net tangible book value occurring after March 31, 1995.
"Modified Net Income" for each year means 50% of the Company's
audited net income for the immediately preceding fiscal year
after subtracting the aggregate amount of principal payments made
to GCMG on the above debt during such fiscal year. The Company
is obligated, however, to repurchase all shares of Common Stock
owned by GCMG on or before April 15, 2003, or it will incur a
$672,000 repurchase delay penalty that will be due and payable in
two equal installments on April 16, 2003 and April 16, 2004. The
Stock Repurchase Agreement also caused GCMG to sell and surrender
to the Company for retirement all shares of Series A Special
Distribution Stock owned by GCMG, for a an aggregate purchase
price of $700.
As a result of the Company entering into this Stock
Repurchase Agreement, $5,746,000 was reclassified from the
shareholder's equity section of condensed balance sheet to
redeemable preferred stock. Such amount represents the Company's
minimum purchase obligation to GCMG.
11
<PAGE>
The Company believes that its current borrowing arrangements
combined with anticipated levels of internally generated funds
will be sufficient to fund its financial requirements for the
foreseeable future. This estimate is based on the Company's
current level of operations and certain assumptions relating to
the Company's business and planned growth. Should the Company
significantly expand either its market making activities or its
underwriting of securities on a "firm-commitment" basis, however,
the Company may need to obtain additional capital to support such
activities and to comply with regulatory requirements. The
Company is not dependent upon raising additional capital,
however, in order to maintain its current levels of operations,
and therefore does not propose to raise additional capital unless
it is available on acceptable terms. In the event that the
Company should find that its ability to generate funds internally
is insufficient to satisfy its future capital needs, the Company
will require additional financing from outside sources.
At September 30, 1995, the Company had shareholders' equity
of $9,435,000, representing a decrease of $3,324,000 from
December 31, 1995. The decrease in shareholders' equity is
solely due to the reclassification of $5,746,000 from
shareholder's equity to redeemable preferred stock as discussed
above net of reported net income of $2,422,000 for the period.
CSG , DMG, JWC Securities and JWC Clearing are subject to
the Securities and Exchange Commission's Uniform Net Capital Rule
(Rule 15c3-1 under the Securities Exchange Act of 1934), which
requires the maintenance of minimum net capital and requires that
CSG's, DMG's and JWC Securities' ratio of aggregate indebtedness
to net capital (excess net capital), as defined by the Rule, not
exceed 15 to 1. JWC Clearing has elected to comply with the
"alternative net capital requirement" of Rule 15c3-1, which
requires net capital equal to or greater than 2% of aggregate
debit items computed in applying the formula for determination of
reserve requirements. Additionally, JWC Clearing and JWC
Securities are subject to the minimum net capital requirements of
the NYSE, which provide that equity capital may not be withdrawn
or cash dividends paid if the resulting net capital would be less
than 5% of aggregate debits. As of September 30, 1995, CSG, JWC
Securities and DMG had net capital of $2,979,000, $2,526,000 and
$460,000, respectively and excess net capital of $2,729,000,
$2,276,000 and $360,000, respectively. At September 30, 1995,
JWC Clearing's net capital was 7.3% of aggregate debit items as
compared with the minimum of 2%, and its Rule 15c3-1 net capital
was $6,395,000 as compared with the minimum of $4,650,000.
In its capacity as a general partner in an affiliated real
estate limited partnership, the Company has guaranteed certain
partnership indebtedness. Additionally, under applicable
partnership law, the Company is contingently liable for any
obligations of such limited partnership that remain unpaid after
any dissolution of the partnership. The Company has not made any
provision in its financial statements for the possible effect on
the Company's financial condition of the above guarantee and the
Company's contingent liability as a general partner of its
affiliated partnership. The Company does not expect to incur any
significant losses or obligations that may materially affect the
Company's liquidity as a result of this matter.
12
<PAGE>
<PAGE>
II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no material legal proceedings pending or threatened in
which the Company is party or of which the Company's property is
the subject. The Company has been named in various arbitration
and legal proceedings arising in the ordinary course of its
securities brokerage business. Although arbitration and
litigation involves contingencies that cannot be definitively
predicted, including the unpredictability of actions that might
be taken by an arbitration panel or jury on matters that are
submitted to them, the Company expects that the ultimate
disposition of arbitration and litigation arising from the
ordinary course of business will not have a material adverse
impact upon its financial position.
ITEM 2. CHANGES IN SECURITIES.
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 27 - Financial Data Schedule
(b) Reports on From 8-K:
None.
13<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
JW CHARLES FINANCIAL SERVICES, INC.
Date: November 13, 1995 /s/ Joel E. Marks
-------------------------------------
(Joel E. Marks, Senior Vice President)
(Duly Authorized Officer)
Date: November 13, 1995 /s/ Joel E. Marks
--------------------------------------
(Joel E. Marks, Vice President,
Principal Financial and Accounting
Officer)
14<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000741557
<NAME> JW CHARLES FINANCIAL SERVICES, INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 7,352,000
<SECURITIES> 13,807,000
<RECEIVABLES> 91,083,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 112,242,000
<PP&E> 2,006,000
<DEPRECIATION> 908,000
<TOTAL-ASSETS> 117,356,000
<CURRENT-LIABILITIES> 98,264,000
<BONDS> 0
<COMMON> 765,000
5,746,000
0
<OTHER-SE> 8,670,000
<TOTAL-LIABILITY-AND-EQUITY> 117,356,000
<SALES> 44,567,000
<TOTAL-REVENUES> 57,040,000
<CGS> 31,138,000
<TOTAL-COSTS> 31,138,000
<OTHER-EXPENSES> 20,055,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,890,000
<INCOME-PRETAX> 3,957,000
<INCOME-TAX> 1,535,000
<INCOME-CONTINUING> 2,422,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,422,000
<EPS-PRIMARY> 0.61
<EPS-DILUTED> 0.61
</TABLE>
