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: September 30, 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 September 30, 1996 was 18,523,096.
<PAGE>
CLARK MELVIN SECURITIES CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The statement of financial position as of September 30, 1996, the statements of
operations for the nine month period ended September 30, 1996, and 1995 and the
statements of cash flows for the nine month period ended September 30, 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 fairly present the financial position at September 30, 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 September 30, 1996 are not
necessarily indicative of the operating results for the full year.
2. Firm Trading Securities
Firm trading securities consisted of the following:
September 30, December 31,
1996 1995
Corporate Equities $ 0.00 $ 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 September 30, 1996 the Company has net capital of approximately $406,382
which was approximately $306,382 in excess of its required net capital and the
Company's ratio of aggregate indebtedness to net capital was .37. As of December
31, 1995 the Company had net capital of approximately $358,274, which was
approximately $258,274 in excess of its required net capital and the Company's
ratio of aggregate indebtedness to net capital was .65.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Results of Operations
Revenues
Total revenues decreased 5% through the third quarter of 1996 compared to the
same period in 1995.
Commission decreased by 16% due to decreases in all areas of equity and fixed
income transactions.
The 60% increase for the first nine months of 1996 in advisory and fee income
over the same period in 1995 is primarily due to increased volume of activity.
Interest and dividend income increased by 8% for the first nine months of 1996
compared to that of 1995, primarily due an increase of cash available for
investment.
As of September 30, 1996, margin income increased by 56% over the same period in
1995, primarily due to increased activity in this area.
Trailer Fees increased by 35% through the third quarter of 1996 compared to the
same period in 1995 due to an increase in activity in this area.
Expenses
Overall, expenses decreased 7% during the first nine months of 1996 compared to
that of 1995.
Compensation and benefits decreased by 11% due to decreases in all areas of
equity and fixed income transactions.
The clearing and exchange expenses through the third quarter of 1996 are
comparable to those over the same period in 1995.
The 14% decrease through the third quarter in occupancy expenses over the same
period in 1995 is due to a move made by the Annapolis office to smaller quarters
as well as a drop in equipment leasing expenses resulting from the completion of
a lease-purchase agreement.
Business development expenses decreased by 45% by the third quarter of 1996
compared to expenses made over the same period in 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 8% decrease in communication expenses through the third quarter of 1996 is
due to continuing cost-cutting measures.
The 27% increase in other expenses for the first nine months of 1996 is due
primarily to 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 September 30,
1996, the Company's net capital was approximately $406,382 which was
approximately $306,382 in excess of its required net capital.
<PAGE>
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The company's annual meeting of stockholders was held on May 28, 1996, at which
the following directors were elected by the votes indicated:
For Withhold
Aurelio Emanuelli All
James Finn All
Guillermo L. Martinez All
Cesar Montilla, Jr. All
Pedro R. Vasquez All
<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
Date: September 15, 1996
<PAGE>
PART 1: FINANCIAL INFORMATION
CLARK MELVIN SECURITIES CORPORATION
STATEMENT OF FINANCIAL POSITION
<TABLE>
<CAPTION>
(Unaudited)
September 30 December 31
1996 1995
<S> <C>
ASSETS
Cash & Savings $ 266,396 $ 265,243
Deposit with Clearing Broker 103,097 125,979
Broker & Dealer Receivable 237,706 201,123
Accounts Receivable 18,023 90,753
Firm Trading Securities & Investments 0 0
Prepaid Expenses 28,637 26,627
------------- -------------
Total Current Assets $ 653,859 $ 709,725
Furniture/Fixtures/Leasehold
(net of accum. depreciation and amortization) $ 37,916 $ 54,426
Organizational Expenses 0 803
------------- -------------
Total Long-Term Fixed Assets 37,916 55,229
Total Assets $ 691,775 $ 764,954
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Payable to clearing broker $ 2,926 $ 6,095
Accounts payable and accrued liabilities 148,615 227,369
------------- -------------
Total Liabilities $ 151,541 $ 233,464
Stockholders' equity
Common stock, 40,000,000 shares
18,523,096 issued & outstanding $ 185,231 $ 185,231
Preferred stock, 145,000 shares 145,000 145,000
Additional Paid-in Capital 2,888,028 2,888,028
Retained Earnings (2,656,899) (2,660,671)
Treasury stock - preferred (35,000) (35,000)
Current Period Profit / (Loss) 13,874 8,902
------------- -------------
Total Stockholder's Equity $ 540,234 $ 531,490
Total Liabilities & Stockholders' Equity $ 691,775 $ 764,954
============= =============
</TABLE>
<PAGE>
CLARK MELVIN SECURITIES CORPORATION
STATEMENT OF OPERATIONS
(Unaudited)
Nine Months Ended
September 30,
1996 1995
REVENUES
Commissions $1,096,835 $1,308,194
Advisory and Fee Income 302,910 189,447
Interest / Dividends 15,155 14,093
Margin 33,818 21,735
Trailer Fees 51,906 38,486
Miscellaneous 25,459 27,908
---------- ----------
Total Revenues $1,526,083 $1,599,864
EXPENSES
Compensation and Benefits $ 871,514 $ 982,637
Clearing Fees 127,546 125,129
Occupancy 104,013 121,261
Business Development 38,431 70,380
Interest 3,904 1,489
Communications 146,009 157,875
Other 220,792 173,734
---------- ----------
Total Expenses $1,512,209 $1,632,505
Profit / (Loss) Before Income Taxes $ 13,874 $ (32,641)
========== ==========
Income Taxes:
Current Tax Expense - -
Benefit of Loss Carryover - -
---------- ----------
Net Profit (Loss) $ 13,874 $ (32,641)
========== ==========
Profit (Loss) per common share $ 0.00 $ (0.00)
========== ==========
Accompanying notes are an integral part of these financial statements.
<PAGE>
CLARK MELVIN SECURITIES CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(Unaudited)
Nine Months Ended
September 30,
Increase (Decrease) in cash 1996 1995
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net profit (loss) $ 13,874 $ (32,641)
Adjustments to reconcile net profit (loss) to net
cash (used for) provided by operating activities:
Depreciation and amortization 22,396 40,278
(Increase) decrease in operating assets:
Receivables:
Brokers and dealers 38,181 (99,635)
Employee advances (5,756) 2,715
Other 4,702 7,523
Firm trading securities/Investments 4,800
Securities sold short
Other 19,893 (21,197)
Increase (decrease) in operating liabilities:
Payable to clearing broker (3,169) 4,059
Accounts payable and accrued liabilities (78,755) 20,686
-------- ---------
NET CASH (USED FOR) PROVIDED BY OPERATING ACTIVITIES $ 11,366 $ (73,412)
======== =========
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of office equipment and leasehold improvements (5,083) (4,189)
Proceeds from sales of other investments (1,500)
-------- ---------
NET CASH (USED FOR) PROVIDED BY INVESTING ACTIVITIES $ (5,083) $ (5,689)
======== =========
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock
Payment of preferred stock dividend (5,130) (9,426)
Redemption of preferred stock (30,000)
Payment of subscriptions 100,000
-------- ---------
NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES $ (5,130) $ 60,574
======== =========
NET DECREASE IN CASH AND CASH EQUIVALENTS $ 1,153 $ (18,527)
======== =========
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD $265,243 $ 235,122
CASH AND CASH EQUIVALENTS AT END OF PERIOD $266,396 $ 216,595
======== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest $ 3,904 $ 1,489
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE> <S> <C>
<ARTICLE> BD
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 266,396
<RECEIVABLES> 255,729
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 0
<PP&E> 37,916
<TOTAL-ASSETS> 691,775
<SHORT-TERM> 653,859
<PAYABLES> 151,541
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 0
<LONG-TERM> 0
145,000
0
<COMMON> 185,231
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 691,775
<TRADING-REVENUE> 0
<INTEREST-DIVIDENDS> 15,155
<COMMISSIONS> 1,096,835
<INVESTMENT-BANKING-REVENUES> 0
<FEE-REVENUE> 302,910
<INTEREST-EXPENSE> 3,904
<COMPENSATION> 871,514
<INCOME-PRETAX> 13,874
<INCOME-PRE-EXTRAORDINARY> 13,874
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,874
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
