SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For Quarter Ended: March 31, 1996
Commission File Number: 000-17129
Clark Melvin Securities Corporation
(Exact name of registrant as specified in its charter)
Delaware 52-0749204
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
170 Jennifer Road, Suite 270, Annapolis, Maryland 21401
(Address of principal executive offices) (Zip Code)
(410) 266-5250
(Registrant's telephone number, including area code)
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 __
The number of shares of the registrant's common stock, $.01 par value per share,
outstanding as of March 30, 1996 was 18,523,096.
<PAGE>
PART 1: FINANCIAL INFORMATION
Item 1: Financial Statements
CLARK MELVIN SECURITIES CORPORATION
<TABLE>
<CAPTION>
STATEMENTS OF FINANCIAL POSITION (Unaudited)
March 31 December 31,
1996 1995
-------------- ---------------
<S> <C> <C>
ASSETS
Cash $ 320,997 $ 265,243
Receivables
Brokers and dealers 88,659 275,886
Employee advances/receivables
Other 14,126 15,990
Firm trading securities & investments at market
Deposit with clearing broker 107,318 125,979
Office and transportation equipment and leasehold
improvements, net of accumulated depreciation
and amortization of $317,051 and $290,995 47,100 55,229
Other 38,571 26,627
----------- -----------
Total Assets $ 616,771 $ 764,954
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Payable to clearing broker $ 2,622 $ 6,095
Accounts payable and accrued liabilities 90,933 194,370
----------- -----------
Total liabilities $ 93,555 $ 200,465
Stockholders' equity
Cumulative, callable preferred stock, prime rate
plus 1%, 145,000 shares issued and outstanding $ 145,000 $ 145,000
Common stock, $.01 par value; 40,000,000 shares
authorized, 18,523,096 issued and outstanding 185,231 185,231
Additional paid-in capital 2,888,028 2,888,028
Accumulated deficit (2,651,769) (2,660,671)
Treasury stock - preferred (35,000) (35,000)
Subscriptions and interest receivable --
Current period profit $ (8,274) 41,902
----------- -----------
Total stockholder's equity $ 523,216 $ 564,490
----------- -----------
Total liabilities & stockholders' equity $ 616,771 $ 764,955
=========== ===========
</TABLE>
<PAGE>
CLARK MELVIN SECURITIES CORPORATION
STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
<S> <C> <C>
Revenues:
Commissions & Principal Transactions $ 318,870 $ 257,133
Advisory and fee Income 87,697 45,722
Interest and other 45,729 34,948
--------- ---------
Total Revenues $ 452,296 $ 337,803
Expenses:
Compensation and benefits $ 248,669 $ 243,869
Clearing Fees 39,658 35,101
Occupancy 34,319 77,184
Business development 9,703 (524)
Interest 244 454
Communications 45,832 49,294
Other 82,145 23,025
--------- ---------
Total Expenses $ 460,570 $ 428,403
Profit (Loss) before income taxes $ (8,274) $ (90,600)
--------- ---------
Income Taxes
Current tax expense (2,813) -
Benefit of loss carryover 2,813 -
--------- ---------
Net profit (loss) $ (8,274) $ (90,600)
========= =========
Profit (Loss) per common share (Note 3 ) $ (0.00) $ (0.01)
========= =========
</TABLE>
Accompanying notes are an integral part of these financial statements.
2
<PAGE>
CLARK MELVIN SECURITIES CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(Unaudited)
Three Months Ended
March 31,
1996 1995
<S> <C> <C>
Increase (decrease) in cash
CASH FLOWS FROM OPERATING ACTIVITIES:
Net profit (loss) $ (8,248) $ (90,599)
Adjustments to reconcile net profit (loss) to net
cash (used for) provided by operating activities:
Depreciation and amortization 10,913 12,756
(Increase) decrease in operating assets:
Receivables:
Brokers and dealers 187,227 (14,196)
Employee advances (3,500) (2,188)
Other 4,560 7,971
Firm trading securities/Investments 2,590 4,800
Securities sold short 10,111
Other (1,401)
Increase (decrease) in operating liabilities:
Payable to clearing broker (884) 6,047
Accounts payable and accrued liabilities (138,951) (48,715)
--------- ---------
NET CASH (USED FOR) PROVIDED BY OPERATING ACTIVITIES $ 63,818 $(125,525)
========= =========
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of office equipment and leasehold improvements $ (2,784) $ (775)
Proceeds from sales of other investments 0
--------- ---------
NET CASH (USED FOR) PROVIDED BY INVESTING ACTIVITIES $ (2,784) $ (775)
========= =========
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock $ $
Payment of preferred stock dividend
Redemption of preferred stock
Payment of subscriptions 100,000
--------- ---------
NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES $ 0 $ 100,000
========= =========
NET DECREASE IN CASH AND CASH EQUIVALENTS $ 61,034 $ (26,300)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 265,243 235,122
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 326,277 $ 208,822
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest $ 244 $ 454
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
CLARK MELVIN SECURITIES CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The statement of financial position as of March 31, 1996, the statements of
operations for the three month period ended March 31, 1996, and 1995 and the
statements of cash flows for the three month period ended March 31, 1996 and
1995 have been prepared by the Company without audit. In the opinion of
management, all adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position at March 31, 1996 and for all
periods presented have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's December 31, 1995 Annual Shareholder Report.
The results of operations for the period ended March 31, 1996 are not
necessarily indicative of the operating results for the full year.
2. Firm Trading Securities
Firm trading securities consisted of the following:
March 31, December 31,
1996 1995
Corporate Equities $ 2,590 $ 0.00
3. Stockholders' Equity
Profit (Loss) per share of common stock is calculated by dividing net profit
(loss), less the preferred stock dividend requirement by the weighted average
number of common shares outstanding during the period, which was 18,523,096
shares.
4. Income Taxes
During 1992 the Company adopted Financial Accounting Statement No. 109,
Accounting for Income Taxes. The Company recorded no benefit from income taxes
in 1995 and a valuation allowance was provided for the deferred asset of
$751,000.
Temporary differences between amounts reported for financial reporting purposes
and income tax purposes are insignificant.
5. Net Capital Requirements
The Company is subject to the Securities and Exchange Commission Uniform Net
Capital Rule (Rule 15c3-1), which requires the maintenance of minimum net
capital and requires that the ratio of aggregate indebtedness to net capital,
both as defined, shall not exceed 15 to 1. The Rule also provides that equity
capital may not be withdrawn or cash dividends paid if the resulting net capital
ratio would exceed 10 to 1.
As of March 31, 1996 the Company has net capital of approximately $420,747 which
was approximately $320,747 in excess of its required net capital and the
Company's ratio of aggregate indebtedness to net capital was .31. As of December
31, 1995 the Company had net capital of approximately $466,094, which was
approximately $346,094 in excess of its required net capital and the Company's
ratio of aggregate indebtedness to net capital was .43 to 1.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Results of Operations
Revenues
Total revenues increased 34% for the first quarter of 1996 compared to the first
quarter of 1995.
Commission and principal revenues increased by 24% due to increases in all areas
of equity and option transactions.
Interest and other income increased by 31% for the first quarter, primarily due
an increase of cash available for investment.
The 92% increase for the first quarter in advisory and fee income over the same
periods in 1995 is primarily due to increased volume of activity.
Expenses
Overall, expenses increased 7% for the first quarter of 1996 compared to the
first quarter of 1995.
Compensation and benefits were comparable in the first quarter of 1996 to the
same period in 1995.
The 13% increase in the first quarter ending March 31, 1996 in clearing and
exchange expenses is due to increased transactions over the same period in 1995.
The 55% decrease for the first quarter in occupancy expenses over the same
period in 1995 is due to a move made by the Annapolis office to smaller quarters
and a drop in equipment leasing expenses resulting from the completion of a
lease-purchase agreement.
Actual business development expenses for the first quarter of 1996 were
comparable with expenses made during the same period of 1995. The 1995 first
quarter expenses included a prepayment of advertising expenses related to
promotion of tax credit seminars which was not repeated during the first quarter
in 1996.
The 7% decrease in communication expenses for the first quarter of 1996 is due
to continuing cost-cutting measures.
The 256% increase in other expenses for the first quarter of 1996 is due to
primarily ongoing accounting reclassifications.
Financial Position, Liquidity, and Capital Resources
The Company is required to comply with the Uniform Net Capital Rule of the
Securities and Exchange Commission. The Rule is intended to measure the general
financial soundness and liquidity of broker-dealers. The Company has
consistently exceeded the minimum net capital requirement. As of March 31, 1996,
the Company's net capital was approximately $420,747, which was approximately
$320,747 in excess of its required net capital.
<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.
Clark Melvin Securities Corporation
(Registrant)
By: _______________________
Irene M. Harr
Chief Financial Officer
By: _______________________
Cesar A. Montilla, Jr.
President and CEO
Date: April 30, 1996
<TABLE> <S> <C>
<ARTICLE> BD
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 320,997
<RECEIVABLES> 102,785
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 0
<PP&E> 47,100
<TOTAL-ASSETS> 616,771
<SHORT-TERM> 423,782
<PAYABLES> 93,615
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 0
<LONG-TERM> 431,540
<COMMON> 185,231
145,000
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 616,771
<TRADING-REVENUE> 0
<INTEREST-DIVIDENDS> 45,729
<COMMISSIONS> 318,870
<INVESTMENT-BANKING-REVENUES> 0
<FEE-REVENUE> 87,697
<INTEREST-EXPENSE> 244
<COMPENSATION> 248,669
<INCOME-PRETAX> (8,274)
<INCOME-PRE-EXTRAORDINARY> (8,274)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,274)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
