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: June 30, 1997
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 June 30, 1997 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 June 30, 1997, the statements of
operations for the six month period ended June 30, 1997, and 1996 and the
statements of cash flows for the six month period ended June 30, 1997 and 1996
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 June 30, 1997 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, 1996 Annual Shareholder Report.
The results of operations for the period ended June 30, 1997 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,
1997 1996
--------- ------------
Corporate Equities $ 16,725 $ 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 1996 and a valuation allowance was provided for the deferred asset of
$683,000.
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 June 30, 1997 the Company has net capital of approximately $265,835 which
was approximately $165,835 in excess of its required net capital and the
Company's ratio of aggregate indebtedness to net capital was 1.55. As of
December 31, 1996 the Company had net capital of approximately $216,326, which
was approximately $116,326 in excess of its required net capital and the
Company's ratio of aggregate indebtedness to net capital was 1.90.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Results of Operations
Revenues
Total revenues increased 73% through the second quarter of 1997 compared to the
same period in 1996.
Commission increased by 39% due to increases in sales transactions.
The 153% increase for the first six months of 1997 in advisory and fee income
over the same period in 1996 is primarily due to increased activity in corporate
finance.
Interest and dividend income for the second quarter of 1997 are comparable to
those over the same period in 1996.
As of June 30, 1997, margin income decreased by 33% over the same period in
1996, primarily due to variations in margin deposit balances.
Trailer Fees increased by 50% through the second quarter of 1997 compared to the
same period in 1996 due to an increase in size of money market funds and mutual
funds.
Miscellaneous Income increased significantly during the first six months of 1997
compared to that of 1996, primarily due to the addition of subsidiary activity.
Expenses
Overall, expenses increased 54% through the second quarter of 1997 compared to
that of 1996.
Compensation and benefits increased by 86% due to increases in sales
transactions and to the addition of subsidiary activity.
The clearing fees through the second quarter of 1997 increased by 40% compared
to those in 1996 due to an increase in transactions.
Occupancy expense during the second quarter of 1997 are comparable to those over
the same period in 1996.
Business development expenses increased by 104% through the second quarter of
1997 compared to expenses made over the same period in 1996, primarily due to an
increase in marketing for the corporate finance division.
Communication expenses through the second quarter of 1997 decreased by 17%
compared to those during the same period in 1996 due to continued cost-cutting
measures.
The 24% increase in other expenses for the first six months of 1997 is due
primarily to ongoing accounting reclassifications and to the addition of
subsidiary activity.
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 June 30, 1997
the Company's net capital was approximately $265,835 which was approximately
$165,835 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 June 20, 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
Joaquin Rodriguez All
Juan Perez Toledo 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: /s/ Irene M. Harr
__________________________
Irene M. Harr
Chief Financial Officer
Date: August 11, 1997
<PAGE>
PART 1: FINANCIAL INFORMATION
CLARK MELVIN SECURITIES CORPORATION
STATEMENT OF FINANCIAL POSITION
<TABLE>
<CAPTION>
(UNAUDITED)
JUNE 30 DECEMBER 31
1997 1996
<S> <C>
ASSETS
Cash & Savings $ 433,924 $ 405,609
Deposit with Clearing Broker 100,000 100,000
Broker & Dealer Receivable 145,872 130,414
Accounts Receivable 343,076 399,020
Firm Trading Securities & Investments 16,725 0
Prepaid Expenses 43,495 40,557
Other Assets 30,786 6,946
--------------- ----------------
TOTAL CURRENT ASSETS $ 1,113,878 $ 1,082,546
Furniture/Fixtures/Leasehold
(net of accum. depreciation and amortization) $ 66,186 $ 32,148
Wholly owned subsidiary 1,000 1,000
Investment in subsidiary 13,506 6,506
--------------- ----------------
TOTAL LONG-TERM FIXED ASSETS 80,692 39,654
Total Assets $ 1,194,570 $ 1,122,200
=============== ================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Payable to clearing broker $ 3,074 $ 12,317
Accounts payable and accrued liabilities 409,319 397,762
--------------- ----------------
TOTAL LIABILITIES $ 412,393 $ 410,079
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 (2,473,751) (2,662,100)
Treasury stock - preferred (35,000) (35,000)
Current Period Profit / (Loss) 72,669 190,962
--------------- ----------------
TOTAL STOCKHOLDER'S EQUITY $ 782,177 $ 712,121
Total Liabilities & Stockholders' Equity $ 1,194,570 $ 1,122,200
=============== ================
</TABLE>
<PAGE>
CLARK MELVIN SECURITIES CORPORATION
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
(UNAUDITED) (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1997 1996 1997 1996
<S> <C>
REVENUES
Commissions $ 404,854 $ 350,402 $ 931,462 $ 669,271
Advisory and Fee Income 324,739 79,963 423,853 167,660
Interest / Dividends 4,928 5,527 9,749 10,083
Margin 5,620 10,863 14,304 21,291
Trailer Fees 21,765 16,917 46,926 31,309
Miscellaneous 108,917 5,530 172,259 21,884
-------------- -------------- -------------- -------------
TOTAL REVENUES $ 870,823 $ 469,202 $ 1,598,553 $ 921,498
EXPENSES
Compensation and Benefits $ 524,343 $ 267,006 $ 958,461 $ 515,673
Clearing Fees 51,938 43,098 117,597 84,295
Occupancy 32,514 35,024 67,224 69,344
Business Development 33,477 22,712 66,195 32,415
Interest (6) 2,589 455 2,833
Communications 32,105 50,190 79,377 96,023
Other 120,727 109,912 236,575 190,494
-------------- -------------- -------------- -------------
TOTAL EXPENSES $ 795,098 $ 530,532 $ 1,525,884 $ 991,077
PROFIT / (LOSS) BEFORE INCOME TAXES $ 75,725 $ (61,330) $ 72,669 $ (69,579)
============== ============== ============== =============
INCOME TAXES:
Current Tax Expense - - - -
Benefit of Loss Carryover - - - -
-------------- -------------- -------------- -------------
NET PROFIT (LOSS) $ 75,725 $ (61,330) $ 72,669 $ (69,579)
============== ============== ============== =============
PROFIT (LOSS) PER COMMON SHARE $ 0.00 $ (0.00) $ 0.00 $ (0.00)
============== ============== ============== =============
</TABLE>
Accompanying notes are an integral part of these financial statements.
<PAGE>
CLARK MELVIN SECURITIES CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30,
INCREASE (DECREASE) IN CASH 1997 1996
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net profit (loss) $ 72,669 $ (69,579)
Adjustments to reconcile net profit (loss) to net
cash (used for) provided by operating activities:
Depreciation and amortization 10,622 16,772
(Increase) decrease in operating assets:
Receivables:
Brokers and dealers (15,459) 166,821
Employee advances 12,784 (9,500)
Other 43,575 (405)
Firm trading securities/Investments (16,725)
Securities sold short
Other (33,779) 17,857
Increase (decrease) in operating liabilities:
Payable to clearing broker (7,546) (2,632)
Accounts payable and accrued liabilities 9,860 (128,737)
------------- --------------
NET CASH (USED FOR) PROVIDED BY OPERATING ACTIVITIES $ 76,001 $ (9,403)
============= ==============
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of office equipment and leasehold improvements (44,660) (2,784)
Proceeds from sales of other investments
------------- --------------
NET CASH (USED FOR) PROVIDED BY INVESTING ACTIVITIES $ (44,660) $ (2,784)
============= ==============
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock
Payment of preferred stock dividend (2,613) (5,130)
Redemption of preferred stock
Payment of subscriptions
------------- --------------
NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES $ (2,613) $ (5,130)
============= ==============
NET DECREASE IN CASH AND CASH EQUIVALENTS $ 28,728 $ (17,317)
============= ==============
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD $ 405,195 $ 265,243
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 433,923 $ 247,926
============= ==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest $ 454 $ 2,589
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE> <S> <C>
<ARTICLE> BD
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 433,924
<RECEIVABLES> 488,948
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 0
<PP&E> 66,186
<TOTAL-ASSETS> 1,194,570
<SHORT-TERM> 1,113,878
<PAYABLES> 412,393
<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> 1,194,570
<TRADING-REVENUE> 0
<INTEREST-DIVIDENDS> 4,928
<COMMISSIONS> 404,854
<INVESTMENT-BANKING-REVENUES> 0
<FEE-REVENUE> 324,739
<INTEREST-EXPENSE> (6)
<COMPENSATION> 524,343
<INCOME-PRETAX> 75,725
<INCOME-PRE-EXTRAORDINARY> 75,725
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 75,725
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
