- -----------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
---------------
For the Quarterly Period ended Commission File Number
September 30, 1996 0-12926
---------------
JMC GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-2627415
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9710 Scranton Road, Suite 100, San Diego, California 92121
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 619-450-0055
---------------
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 past 90 days.
Yes X No
_____ _____
As of September 30, 1996, the registrant had 6,218,898 shares of its
common stock, $.01 par value, issued and outstanding.
- -----------------------------------------------------------------------------
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JMC GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30, December 31,
1996 1995
ASSETS ------------- ------------
CURRENT ASSETS
Cash and cash equivalents $ 2,836,842 $ 5,832,598
Cash segregated under securities
regulations 1,991,182 894,269
Receivables from insurance companies 882,660 826,971
Receivable from financial institution 100,000 109,450
Income taxes receivable 853,638 65,334
Deferred tax asset 213,229 159,354
Other assets 279,600 281,947
------------- ------------
TOTAL CURRENT ASSETS 7,157,151 8,169,923
Furniture, equipment and leasehold
improvements - net of accumulated
depreciation and amortization of
$1,588,239 in 1996 and $1,498,291
in 1995 226,909 362,261
Consulting and marketing agreement - net of
accumulated amortization of $234,747 1,330,253 -
Asset-based fees purchased - net of
accumulated amortization of $603,058
in 1996 and $417,485 in 1995 794,071 979,644
------------- ------------
TOTAL ASSETS $ 9,508,384 $9,511,828
============= ============
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accrued fees to financial institutions $ 396,333 $ 367,287
Customer funds segregated under
securities regulations 1,991,182 894,269
Accrued expenses and other liabilities 469,857 894,180
Allowance for contract cancellations 130,453 142,503
Accrued payroll and related expenses 214,506 212,767
------------- ------------
TOTAL CURRENT LIABILITIES 3,202,331 2,511,006
STOCKHOLDERS' EQUITY
Preferred stock, no par value; authorized - -
5,000,000 shares
Common stock, $.01 par value; authorized
20,000,000 shares; issued and outstanding
6,218,898 shares in 1996 and 6,198,898
in 1995 62,189 61,989
Additional paid-in-capital 959,651 624,851
Retained earnings 5,284,213 6,313,982
------------- ------------
TOTAL STOCKHOLDERS' EQUITY 6,306,053 7,000,822
------------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 9,508,384 $9,511,828
============= ============
The accompanying notes are an integral part of these financial statements.
JMC GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended September 30,
1996 1995
REVENUES --------------- --------------
Commissions $ 2,244,812 $ 3,453,664
Net gain on sale of rights to certain
future asset-based fees - 3,311,948
Interest 38,592 50,891
Other 102,307 444,265
--------------- --------------
TOTAL REVENUES 2,385,711 7,260,768
--------------- --------------
EXPENSES
Employee compensation and benefits 1,224,627 1,805,432
Fees to financial institutions 993,269 1,541,022
Professional fees 675,445 120,196
Rent 103,376 130,958
Telephone 33,234 86,834
Depreciation and amortization 129,434 102,628
Other general and administrative
expenses 344,687 418,608
--------------- --------------
TOTAL EXPENSES 3,504,072 4,205,678
--------------- --------------
INCOME (LOSS) BEFORE INCOME TAXES (1,118,361) 3,055,090
INCOME TAX PROVISION (BENEFIT) (435,955) 1,222,301
--------------- --------------
NET INCOME (LOSS) $ (682,406) $ 1,832,789
EARNINGS (LOSS) PER SHARE: $ (.11) $ 0.30
WEIGHTED AVERAGE SHARES 6,218,898 6,200,181
The accompanying notes are an integral part of these financial statements.
JMC GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Nine Months Ended September 30,
1996 1995
REVENUES ---------------- --------------
Commissions $ 7,499,812 $ 12,147,822
Net gain on sale of rights to certain
future asset-based fees - 3,311,948
Interest 162,328 165,611
Other 110,856 1,803,211
---------------- --------------
TOTAL REVENUES 7,772,996 17,428,592
---------------- --------------
EXPENSES
Employee compensation and benefits 3,827,450 5,999,296
Fees to financial institutions 3,097,129 5,416,232
Professional fees 797,916 532,141
Rent 284,116 396,161
Telephone 115,417 282,081
Depreciation and amortization 424,108 305,333
Other general and administrative
expenses 894,319 1,289,457
---------------- --------------
TOTAL EXPENSES 9,440,455 14,220,701
---------------- --------------
INCOME (LOSS) BEFORE INCOME TAXES (1,667,459) 3,207,891
INCOME TAX PROVISION (BENEFIT) (637,690) 1,290,910
================ ==============
NET INCOME (LOSS) $ (1,029,769) $ 1,916,981
EARNINGS (LOSS) PER SHARE: $ (0.17) $ 0.31
================ ==============
WEIGHTED AVERAGE SHARES 6,212,231 6,200,136
The accompanying notes are an integral part of these financial statements.
JMC GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended September 30,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES: -------------- ---------------
Net income (loss) $ (1,029,769) $ 1,916,981
Adjustments to reconcile net income
(loss) to net cash used by operating
activities:
Gain on sale of furniture and equipment (1,998) -
Depreciation and amortization 424,108 305,333
Amortization of asset-based fees
purchased 185,573 118,429
Deferred tax provision (53,875) 412,517
Changes in assets and liabilities:
Cash segregated under securities
regulations (1,096,913) (653,612)
Receivables from insurance companies (55,689) 483,802
Receivable from financial institution 9,450 (3,869,007)
Income taxes receivable (788,304) 744,335
Other assets (6,507) (57,862)
Accrued fees to financial institutions 29,046 (336,864)
Customer funds segregated under
securities regulations 1,096,913 653,612
Accrued expenses and other liabilities (424,323) (29,975)
Allowance for contract cancellations (12,050) (313,315)
Accrued payroll and related expenses 1,739 (237,708)
-------------- ---------------
NET CASH USED BY OPERATING ACTIVITIES (1,722,599) (863,334)
-------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of furniture, equipment and
leasehold improvements (55,341) (67,033)
Proceeds from sale of furniture and
equipment 12,184 -
Purchase of short-term investments - (164,000)
Payment for consulting and marketing
agreement (1,250,000) -
-------------- ---------------
NET CASH USED BY INVESTING ACTIVITIES (1,293,157) (231,033)
-------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stock options exercised 20,000 -
-------------- ---------------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 20,000 -
-------------- ---------------
NET DECREASE IN CASH AND CASH
EQUIVALENTS (2,995,756) (1,094,367)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 5,832,598 3,610,888
-------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $ 2,836,842 $ 2,516,521
============== ===============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid for:
Interest $ 520 $ -
Income taxes $ 221,349 $ 89,450
SUPPLEMENTAL DISCLOSURES OF NONCASH
INVESTING ACTIVITIES
Warrant issued in connection with
consulting and marketing agreement $ 315,000 $ -
The accompanying notes are an integral part of these financial statements.
Note 1. Basis of Presentation
The accompanying financial statements have been prepared in
accordance with the instructions to Form 10-Q and, therefore, do
not include all information and footnote disclosures that are
otherwise required by Regulation S-X and that will normally be
made in the Company's Annual Report on Form 10-K. The financial
statements do, however, reflect all adjustments which are, in the
opinion of management, necessary for a fair statement of the
results of the interim period presented.
The balance sheet at December 31, 1995 has been derived from the
audited financial statements at that date. It is recommended
that these financial statements be read in conjunction with the
Company's financial statements and notes thereto included in the
Company's Form 10-K for the year ended December 31, 1995. A
certain balance sheet item at December 31, 1995 was reclassified
to conform with the format of the balance sheet at September 30,
1996.
Note 2. JMCG/USBA Marketing and Consulting Agreements
The Company entered into a Consulting Agreement with USBA
Holdings, LTD ("USBA") on January 26, 1996. This agreement was
established to provide JMC with access to financial institutions
through the consulting and other relationships established by
USBA and its subsidiaries. In connection with this transaction,
the Company paid USBA $1.25 million on January 28, 1996 for the
preparation and implementation of a five year marketing plan. On
January 29, 1996, JMCG and USBA entered into a Marketing
Agreement with a five-year term. Under the terms of the
Marketing Agreement, JMCG granted USBA a five-year warrant to
purchase up to one million shares of the Company's common stock
at $2.50 per share which may be adjusted to approximately $1.44
per share under certain circumstances. The warrant, which is
exercisable after January 29, 1997, has an estimated value of
$315,000. The Company has the right to recover $1 million as a
Termination Fee under the Marketing Agreement under certain
circumstances.
Both the payment of the $1.25 million and the value of the
warrant have been capitalized and are being amortized on a
straight line basis over their current estimated benefit periods
of five years.
Note 3. Merger-Related Costs
On May 20, 1996 the Company entered into an Agreement and Plan of
Merger with USBA. During the quarter ended June 30, 1996, the
Company capitalized direct costs of acquisition totaling $445,000
in anticipation of such merger.
On August 26, 1996, the Company terminated the Agreement and Plan
of Merger with USBA (See "Legal Proceedings"). In connection
with this termination, the Company expensed all costs related to
the merger which were incurred during the third quarter of 1996
as well as those costs previously capitalized in the second
quarter as described above. Such costs amounted to $445,000 and
$259,000, respectively.
The Company filed an action in U.S. District Court Southern
District of California in San Diego on October 11, 1996, alleging
various causes of action against USBA and certain individual
defendants seeking rescission of all agreements between JMCG and
USBA (See "Note 2. JMCG/USBA Marketing and Consulting
Agreements" and the Agreement and Plan of Merger described
above.) as well as damages and other relief. On November 7,
1996, USBA answered the complaint, asserted certain affirmative
defenses and stated counterclaims against the Company and certain
individuals seeking specific performance of the Plan of Merger
and other relief (See "Legal Proceedings").
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
Third Quarter 1996 Compared to Third Quarter 1995
The Company realized a net loss of $682,000 (or $0.11 per share) in the
third quarter of 1996 compared to net income of $1,833,000 (or $0.30 per
share) in the third quarter of 1995. The third quarter 1996 net loss
includes pre-tax effected expenses related to the proposed merger with USBA
of $704,000, as well as amortization of the payment of $78,000 for the
marketing plan and the valuation of the warrant. The impact of these two
items would be $433,000 and $48,000 (or $0.07 and $0.01 per share
respectively) after estimated tax benefit. The total amount of merger-
related costs expensed in the third quarter of 1996 includes costs which
were capitalized in the second quarter as well as additional costs incurred
during the third quarter (See "Note 3. Merger-Related Costs").
Third quarter 1995 results included revenues totaling $3,755,000 from the
Company's Florida financial institution client which consisted of a net
gain of $3,312,000 ($1,987,000 or $0.32 per share after estimated tax
provision) on the sale of the rights to certain future asset-based fee
revenues and $443,000 in transition fees which were included in other
revenues. Excluding the net gain on the sale of the rights to certain
future asset-based fee revenues from the third quarter of 1995, the Company
would have reported a net loss of $154,000 (or $0.02 per share).
For the nine months ended September 30, 1996, the Company reported net loss
of $1,030,000 (or $0.17 per share) compared to net income of $1,917,000 (or
$0.31 per share) during the first nine months of 1995. The nine months
ended September 30, 1996 included merger-related expenses of $800,000
($492,000 net after estimated tax benefit or $0.08 per share) as well as
amortization of costs, associated with the marketing plan and issuance of a
warrant to USBA, of $235,000 ($145,000 after estimated tax benefit or $0.02
per share). For 1995, in addition to the previously mentioned net gain on
the sale of the rights to certain future asset-based fee revenues and
transition fees, the nine-month results included revenues of $1,308,000
($785,000 or $0.13 per share after estimated tax provision) related to the
Company's Florida client financial institution's payment for the right to
hire certain employees of the Company's wholly owned subsidiary and certain
other services. Excluding the payment for the right to hire personnel and
the net gain on the sale of the rights to certain future asset-based fee
revenues, the Company would have realized a net loss of $855,000 (or $0.14
per share) for the nine-month period ending September 30, 1995.
Total revenues for the quarter ended September 30, 1996 were $2,386,000, a
decrease of $4,875,000 (or 67%) from $7,261,000 in the third quarter of
1995. Excluding the 1995 net gain of $3,312,000, as described above,
revenues for the third quarter of 1996 would have decreased $1,563,000 or
40% compared to the same quarter in 1995. This reduction in revenues is
primarily a result of the following:
* A decrease in sales production related revenues, net of chargeback
expense, of $724,000 or 33%. This decrease is a result of gross sales
production volumes declining $15 million or 35% in the third quarter of
1996 as compared to the third quarter of 1995. This decline in sales
volume is primarily attributable to the termination of the Company's
Florida operations in the third quarter of 1995 and the reconfiguring of
the Company's Tennessee operations effective February 1, 1996. (See
"Trends and Uncertainties -- Declining Revenues"). These two operations
combined for a $21 million decrease in gross sales production while the
Company's remaining client base generated an increase of $5 million in
gross sales production the third quarter of 1996 compared to 1995.
Offsetting the decrease in gross sales production was an increase of
approximately 9% in the combined annuity and mutual fund gross revenue rate
as a result of a change in product mix and a restructuring of compensation
rates.
* A decrease in asset-based fee revenues of approximately $582,000 in
the third quarter of 1996 compared to 1995 as a result of the sale of the
rights to the portion of such asset-based fee revenues that related to the
Company's Florida operations during the third quarter of 1995.
* A decrease in transition fee revenue of approximately $343,000. The
Company generated transition fee revenue through contractual relationships
with current and former client financial institutions of $100,000 and
$443,000 in the third quarter of 1996 and 1995 respectively.
* An increase in service fee revenues of $97,000 as a result of the
reconfigured Tennessee operations.
Total revenues for the first nine months of 1996 were $7,773,000 versus
$17,429,000 for the comparable prior year period, a decrease of $9,656,000
or 55%. Excluding the 1995 net gain and payment for the rights to hire
certain personnel (totaling $4,620,000), as previously described, revenues
in the nine-month period of 1996 would have decreased $5,036,000 or 39%
compared to the same period of 1995. The decrease in revenues for the nine
month period of 1996 as compared to 1995 is also a result of a decrease in
gross sales production of 38%; a decrease in asset-based revenues of 51%;
and a decrease in transition fees of $343,000; offset by an increase in
service fee revenue of $260,000.
Total expenses for the quarters ended September 30, 1996 and 1995 were
$3,504,000 and $4,206,000, respectively. Excluding the previously
described merger-related expenses of $704,000 and amortization of $78,000,
total expenses for the quarter ended September 30, 1996 would have been
$2,722,000, a decrease of $1,484,000 or 35% compared to the same period in
1995. This decrease is primarily attributable to:
* A $491,000 or 31% decrease in employee compensation and benefits
primarily as a result of the discontinued Tennessee operations and a
reduction in Corporate personnel with the downsized operations.
* A $548,000 or 36% reduction in fees to financial institutions due to
lower sales volume.
* A reduction of $90,000 or 41% in salespersons' commissions also due to
lower sales volume
* A $355,000 or 41% reduction in the remaining base operating expenses
primarily due to the reduction in client base and reduction in base
corporate overhead expenses.
Total expenses for the nine months ended September 30, 1996 and 1995 were
$9,440,000 (or $8,405,000 excluding the previously described merger-related
expenses and amortization) and $14,221,000 respectively. Excluding the
expenses described above in 1996, total expenses for the nine months ended
September 30, 1996 decreased $5,816,000 or 41% compared to the same period
in 1995. This decrease is primarily a result of the same factors which
generated the decrease in third quarter 1996 compared to third quarter
1995.
Third Quarter 1996 Compared to Second Quarter 1996
The Company realized a net loss of $682,000 (or $0.11 per share) in the
third quarter of 1996 compared to net loss of $215,000 (or $.03 per share)
in the second quarter of 1996. Included in the third quarter of 1996 but
not in the second quarter of 1996 were merger-related expenses of $704,000
($433,000 after estimated tax benefit or $0.07 per share).
Total revenues declined $161,000 or 6% to $2,386,000 in the third quarter
of 1996 from $2,547,000 in the second quarter of 1996. The decrease is a
result of a 10% decrease in gross sales production offset by $100,000 in
revenues generated as a result of a transition agreement between the
Company and its Virginia client financial institution (See "Trends and
Uncertainties - Declining Revenues"). Total expenses in the third quarter
of 1996 were $3,504,000 versus $2,889,000 in the second quarter of 1996.
Excluding the $704,000 of merger-related expenses (See "Note 3. Merger-
Related Costs"), third quarter expenses would have been $2,800,000
representing a decrease of $89,000 from second quarter expenses.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
As of September 30, 1996, the Company had cash and cash equivalents of
approximately $2,837,000, a decrease of approximately $2,996,000 from
$5,833,000 in cash and cash equivalents at December 31, 1995. The primary
reasons for the decrease in such amounts is as follows:
* A payment of $1,250,000 in the first quarter of 1996 to USBA for a
consulting agreement established in connection with a five year marketing
alliance.
* Income tax payments of $221,000.
* Pre-tax losses incurred in the first nine months of 1996 of
approximately $1,667,000 offset by non-cash expenses of approximately
$424,000 relating to depreciation and amortization. The tax benefit
generated by such losses is expected to have a positive cash flow impact in
future periods, primarily to be utilized on the expected net gain from the
sale of rights to future asset fee revenues, as described below.
While the Company's cash balances were reduced, as described above, during
the first nine months of 1996, the Company's base operating expenses,
excluding non-cash expenses such as depreciation and amortization, as well
as merger-related costs have been reduced by more than $3.0 million in the
first nine months of 1996 as compared to the first nine months of 1995.
Subsequent to the end of the second quarter of 1996 the Company was
notified that its Virginia-based client financial institution will not
renew its contract with the Company after December 31, 1996. Based on the
terms discussed and agreed upon, the Company will receive transition fees
of $250,000 through the end of the fourth quarter of the current year as
well as guarantees on production levels through the end of 1996, supported
by cost subsidies if necessary. This event will have an impact on cash
flow in periods subsequent to December 31, 1996, however the Company
anticipates a one-time payment for such client's purchase of the right to
all future asset-based fees associated with the client's program at the end
of 1996.
Based on the Company's cash position as of September 30, 1996, as well as
the reduced operating expense base and the anticipated cash flow from the
sale of the rights to future asset fees at the end of 1996, as described
above, management believes it has sufficient capital resources to support
current operations and to pursue expansion of its business beyond its
current market place.
TRENDS AND UNCERTAINTIES
- ------------------------
Declining Revenues
The Company's sales production decreased 35% when comparing the third
quarter of 1996 to the third quarter of 1995. This decrease is primarily
attributed to the Florida operations closing in the third quarter of 1995
and the transition of the Tennessee operations on February 1, 1996. Sales
production decreased 10% in the third quarter of 1996 compared to the
second quarter. Subsequent to the end of the second quarter of 1996 the
Company was notified that its Virginia-based client financial institution will
not renew its contract with the Company after December 31, 1996. In response
to this decline in sales production, the Company reduced base operating
expenses by approximately $850,000 in the third quarter of 1996 compared
to the third quarter of 1995.
In addition to the reduced cost structure, the Company reconfigured its
Tennessee operations in the first quarter of 1996 to provide sales support,
product development and back office support services on a fee basis. The
fees generated by the Company include transaction-based fees (with a
monthly minimum) as well as an ongoing and increasing share of asset-based
fee revenues on the blocks of business generated prior to the transition.
Factoring in the minimum transactional fee revenues and the significantly
reduced cost structure the Company expects pre-tax operating results
generated by this client to be comparable to those operating results
generated by the same client when the Company provided its fully managed
program.
The Company continues to pursue expansion of its existing core business of
product distribution as well as support services for product distribution
with a more cost efficient and technology-based operating structure. In
addition, the Company is pursuing opportunities to utilize its developed
strengths for new marketing media.
JMCG/USBA Merger
On April 3, 1996 the Company and USBA signed a letter of intent to
pursue a merger of the two companies based on a structure as a merger
of equals. An Agreement and Plan of Merger memorializing the
intentions of the parties was approved by the Company's Board on May
20, 1996. On August 26, 1996, the Company's Board concluded that,
based upon due diligence review and information then available to the
Board, the proposed combination was not in the best interests of the
Company's stockholders and noticed USBA of the Company's election to
terminate the Agreement. The required fairness opinion from the
Company's financial advisor, which had been delivered to the Board on
May 20, 1996 by J. C. Bradford & Co., was also withdrawn.
The Company has since commenced litigation in connection with the
terminated Agreement and Plan of Merger. The suit, which was filed in U.S.
District Court Southern District of California in San Diego on October 11,
1996, alleges various causes of action against USBA and certain individual
defendants and seeks rescission of JMCG's relationships with USBA as well
as damages and other relief. On November 7, 1996, USBA answered the
complaint, asserted certain affirmative defenses and stated counterclaims
against the Company and certain individuals seeking specific performance of
the Plan of Merger and other relief (See "Legal Proceedings").
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On October 11, 1996, JMCG commenced litigation in
connection with its terminated Agreement and Plan of
Merger and the outstanding Marketing Agreement and
Consulting Agreement with USBA Holdings, Ltd. The suit,
which was filed in U.S. District Court Southern District
of California in San Diego, alleges various causes of
action against USBA and certain individual defendants and
seeks rescission of the Company's agreements with USBA as
well as damages and other relief. On November 7, 1996,
USBA answered the complaint, asserted certain affirmative
defenses and stated counterclaims against the Company and
certain individuals seeking specific performance of the
Plan of Merger and other relief. While the Company is
confident of the merits of its claims against USBA, the
outcome of the litigation is uncertain. The costs
associated with the terminated Agreement and Plan of
Merger, previously capitalized, have been taken into
expense in the third quarter.
On July 7, 1995, the Florida Department of Insurance (the
"Department") issued a Final Order in its administrative
proceeding against the Company which was commenced on
March 11, 1993. The enforcement of the majority of the
Final Order has been stayed pending appeal. JMC has
complied with all operative aspects of the Final Order.
JMC filed its appellate brief on November 13, 1995 and
presented oral arguments on April 11, 1996. The District
Court of Appeal denied the Appeal on August 30, 1996 and
upheld all but one portion of the Final Order. JMC has
petitioned for a review of its case by the Supreme Court
of Florida. On November 8, 1996, the Court granted the
Company's Motion For Stay Of Proceedings pending
disposition of the Petition for Review. While management
cannot predict the outcome of the appeal process, the
Company anticipates no future financial impact as JMC
ceased operations in Florida in October 1995.
The Company's broker-dealer subsidiary, Priority
Investment Services, Inc. (formerly Spear Rees & Co.),
has been named as a defendant in lawsuits arising out of
the sale of real estate limited partnerships to customers
of Spear Rees & Co. and Rees Financial Group, Inc. and
Rees Capital Group, Inc. ("Rees") prior to 1992. Spear
Rees & Co. was a full service brokerage firm which
acquired the assets of Rees in September 1991. In the
first quarter of 1996, the Company reached a settlement
with certain of the Plaintiffs in this case which was
approved by the Bankruptcy Court on May 7, 1996, while
other claims remain the subject of NASD arbitration.
Management does not believe that resolution of any NASD
arbitration which may be filed in the future will have a
material adverse effect on the Company.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of JMC Group, Inc.
was held on October 7, 1996. The following matter was
submitted to a vote of security holders:
Election of Directors: Barton Beek, Robert A. Cervoni
and Herbert G. Kawahara, were elected to serve a three-
year term, until the annual meeting of stockholders in
1999, or until their successors are duly elected.
The tally of voting for each nominee was as follows:
For Withheld
--------- --------
Barton Beek 5,386,937 35,195
Robert A. Cervoni 5,386,937 35,195
Herbert G. Kawahara 5,386,937 55,195
The term of office for each of Edward Baran, Charles H.
Black, Brian J. Finneran, James K Mitchell, Robert G.
Sharp and Donald E. Weeden continued after the meeting.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a.) Exhibits.
The following exhibit is filed herewith:
27 Financial Data Schedule
b.) Reports on Form 8-K.
None.
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.
Date: November 14, 1996 /s/ James K. Mitchell
-------------------------------
James K. Mitchell, Chairman and
Chief Executive Officer
Date: November 14, 1996 /s/ D. Mark Carlson
-------------------------------
D. Mark Carlson, Senior Vice President
and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from JMC Group,
Inc.'s 1996 Form 10Q and is qualified in its entirety by reference to such 10-Q
filing.
</LEGEND>
<CIK> 0000746425
<NAME> JMC GROUP, INC.
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