SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______________ TO ____________________
INSTITUTIONAL EQUITY HOLDINGS, INC.
(FORMERLY EUROMED, INC.)
(Exact name of registrant as specified in its charter)
COMMISSION FILE NUMBER 0-27720
NEVADA 88-0317700
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5910 North Central Expressway, Suite 1480
DALLAS, TX 75206
(Address of principal executive offices) (Zip Code)
(214) 237-3223
(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 past 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
----- ------
2,359,000 shares of Common Stock, par value $.01 per share, were outstanding at
May 14, 2000
1
<PAGE>
FORM 10-QSB
<TABLE>
<CAPTION>
INDEX
PAGE NO.
PART I. FINANCIAL INFORMATION --------------
<S> <C>
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED):
Balance Sheets -
March 31, 2000 and December 31, 1999 3
Statements of Operations -
Three months ended March 31, 2000 and 1999 4
Statement of Stockholders' Equity
Three months ended March 31, 2000 and 1999 5
Statements of Cash Flows -
Three months ended March 31, 2000 and 1999 6
Notes to Financial Statements 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 11
PART II. OTHER INFORMATION
ITEM 3. CHANGES IN SECURITIES AND USE OF PROCEEDS 14
ITEM 4. OTHER INFORMATION 14
ITEM 5. EXHIBITS AND REPORTS ON FORM 8-K 14
SIGNATURES
</TABLE>
2
<PAGE>
PART 1 - FINANCIAL INFORMATION
INSTITUTIONAL EQUITY HOLDINGS, INC.
(FORMERLY EUROMED, INC.)
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
March 31,December 31,
2000 1999
------------ -----------------
(Unaudited)
Current Assets
<S> <C> <C>
Cash $ 349,609 $ 315,904
Trading Securities, at market 775,437 548,736
Receivables
Commissions 550,150 516,762
Good Faith Deposits 270,000 150,000
Other 195,575 56,623
Prepaid Expenses 270,159 301,413
----------- --------
Total Current Assets 2,410,930 1,889,438
Furniture and Equipment, net
of accumulated depreciation of $352,864
and $333,543, respectively 453,496 382,409
Restricted Investment, at market 687,856 1,304,043
Other Assets 229,471 259,185
----------- ---------
Total Assets $3,781,753 $3,835,075
========== ==========
</TABLE>
3
INSTITUTIONAL EQUITY HOLDINGS, INC.
(FORMERLY EUROMED, INC.)
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
March 31,December 31,
2000 1999
- - ----------- -----------------
(Unaudited)
Current Liabilities
<S> <C> <C>
Cash Overdraft $ 37,756 $ 31,649
Loans Payable - 527,170
Due to Broker - 96,594
Securities Sold, not yet purchased 6,540 25,034
Accounts Payable and Accrued Liabilities 1,629,214 1,106,333
---------- ----------
Total Current Liabilities 1,673,510 1,786,780
Loan Subordinated to Claims of
General Creditors 150,000 150,000
Restricted Investment Loan 1,519,306 1,304,043
Due to Related Party 245,000 245,000
--------- --------
Total Liabilities 3,587,816 3,485,823
---------- ----------
Stockholders' Equity
Undesignated Preferred Stock, par value
$.01 per share; 3,190,000 shares
authorized, none outstanding - -
10%Designated Series A Preferred Stock,
par value $.01 per share; 1,060,000
shares authorized, issued and
outstanding in 1999 10,600 10,600
10% Designated Series B Preferred Stock,
par value $.01 per share; 750,000
shares authorized; 37,500 shares
issued and outstanding in 1999 375 375
Common Stock, par value
$.01 per share; 20,000,000 shares
authorized; 2,382,000 and
2,312,000 issued and outstanding, respectively 23,820 23,120
Additional paid-in capital 3,847,534 3,778,234
Retained (deficit) (3,556,142) (3,330,827)
---------- -----------
326,187 481,502
Less Treasury Shares, at cost (132,250) (132,250)
----------- ----------
Total Shareholders' Equity 193,937 349,252
----------- ----------
Total Liabilities and
Shareholders' Equity $3,781,753 $3,835,075
========== ==========
</TABLE>
4
<PAGE>
INSTITUTIONAL EQUITY HOLDINGS, INC.
(FORMERLY EUROMED, INC.)
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
(UNAUDITED)
Three Months Ended March 31,
2000 1999
------------- ------
<S> <C> <C>
Revenues:
Commission $2,440,352 $1,526,003
Gain (Loss) on Firm Securities Accounts 232,358 239,438
Underwriting and Syndicate Income 749,049 78,504
Other Income 97,893 -
Interest Income 11,143 -
---------- -------
Total Revenue 3,530,795 1,843,945
---------- ----------
Expenses:
Employee Compensation 2,635,617 1,087,220
Commissions Paid to Other Broker-Dealers 259,712 406,221
General and Administrative Expenses 732,492 536,445
Interest Expense 73,289 571,406
----------- -----------
Total Expenses 3,701,110 2,601,292
---------- ----------
(Loss) Before Federal Income Tax (170,315) (757,347)
Federal Income Tax Expense - -
Preferred Stock Dividends (55,000) -
----------- ----
Net (Loss) $ (225,315) $ (757,347)
=========== ==========
Weighted Average Number of Common
Shares Outstanding 2,305,000 2,542,000
========== ==========
Net (Loss) Per Common Share $ (0.10) $ (0.30)
============= ============
</TABLE>
5
<PAGE>
INSTITUTIONAL EQUITY HOLDINGS, INC.
(FORMERLY EUROMED, INC.)
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
2000 1999
----------- ------
<S> <C> <C>
Cash Flow from Operating Activities
Net (loss) $(225,315) $ (757,347)
Adjustment to reconcile net income (loss)
to net cash from operating activities
Depreciation 19,321 9,000
Issuance of stock warrants - 571,406
Changes in assets and liabilities
Investments (226,701) (361,963)
Receivables (292,340) 341,001
Prepaid expenses 31,254 28,593
Other assets 29,714 430
Cash overdraft 6,107 59,453
Due to brokers (96,594) (18,703)
Securities sold, not yet purchased (18,494) (6,828)
Accounts payable and accrued liabilities 522,881 66,992
--------- -------
Net Cash Flow (Used) By
Operating Activities (250,167) (67,966)
--------- ----------
Cash Flow from Investing Activities
Equipment Purchases (90,408) (8,903)
--------- -----------
Cash Flow from Financing Activities
Change in restricted investments 616,187 (1,859,140)
Increase in restricted investment loan 215,263 1,859,140
Notes payable payments (527,170) -
Sale of Common Stock 70,000 -
---------- ----------
Net Cash Flow Provided
By Financing Activities 374,280 -
---------- --------------
Net Increase (Decrease) In Cash 33,705 (76,869)
Cash at the Beginning of the Period 315,904 118,130
---------- ----------
Cash at the End of the Period $ 349,609 $ 41,261
========= ===========
</TABLE>
(Continued)
6
<PAGE>
INSTITUTIONAL EQUITY HOLDINGS, INC.
(FORMERLY EUROMED, INC.)
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(CONTINUED)
Three Months Ended March 31,
2000 1999
----------- ------
Cash Paid During the Year:
Interest $73,289 $ -
======= ============
Income Taxes $ $ -
=========== ==========
7
<PAGE>
INSTITUTIONAL EQUITY HOLDINGS, INC.
(FORMERLY EUROMED, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 2000
NOTE 1: BUSINESS
Swiss Nassau Corporation was incorporated on May 17, 1994 in the state of
Nevada, United States of America, with authorized and issued share capital of
1,000 shares of common stock with no par value (the "Common Stock") and on June
15,1994, all authorized shares of Swiss Nassau Corporation were issued. On
October 20, 1995, Swiss Nassau Corporation changed its name into EuroMed, Inc.
and increased its authorized shares to 20,000,000 shares of Common Stock with a
new par value of $0.01 per share, and 5,000,000 preferred shares with a par
value of $0.01 per share. On October 20, 1995, EuroMed, Inc. effected a 150 for
1 stock split of its Common Stock. On April 23, 1999, EuroMed, Inc. changed its
name to Institutional Equity Holdings, Inc. (the "Company" or "IEH").
In November 1995, the Company began acquiring pharmaceutical companies operating
exclusively in Europe. The Company completed the acquisitions using the net
proceeds from the sale of 1,150,000 shares of its common stock (issue price was
$6.50 per share) in March 1996 and the issuance of 2,700,000 shares of its
common stock. Subsequent to the acquisitions, laws relating to the pricing of
pharmaceuticals in Europe were changed and as a result the operations of the
pharmaceutical companies owned by the Company were severely impacted, resulting
in significant operating losses. The Company realized approximately $1,146,000
in cash and cancelled 2,700,000 shares of its common stock upon sale of its
European subsidiaries in 1997.
The Company had no business activities in the calendar year of 1998, except that
on November 6, 1998, the Company's Board of Directors approved and executed the
"Agreement and Plan of Reorganization" by and among the Company, Institutional
Equity Corporation ("IEC", a wholly owned subsidiary of the Company and formerly
known as Redstone Acquisition Corp.) and Redstone Securities, Inc. ("Redstone"),
a licensed broker and dealer of securities.
Effective February 16, 1999, Redstone was merged into the newly organized
subsidiary IEC. The Company issued 600,000 shares of its Common Stock to the
three principals of Redstone, Thomas Laundrie, Gary Prucell, and Richard Belz
(collectively referred to as the "Redstone Shareholders") and was obligated to
issue an additional 500,000 shares (the "Restricted Shares") upon the market
price of the Company's Common Stock reaching certain price levels or IEC
reporting certain levels of net income. Notwithstanding the price levels of the
Common Stock or net income performance levels, the Restricted Shares fully vest
on February 16, 2002. Redstone has been a registered broker dealer since 1988.
The Redstone Shareholders agreed to terminate their relationship with the
Company in February 2000 subject to certain compensation payments, to forgo the
collections of the Company's subordinate notes due the Redstone Shareholders, to
assume an investment in a certain security at its book value and to modify the
number of shares of the Company's common stock from 1,100,000 to 500,000 shares
of fully vested common stock. The Company has a right to repurchase these shares
of its common stock at a price of $2.00 per share as follows:
Number of Redemption
Shares Period
----------- ----------------------------------
100,000 Calendar year 2000
100,000 Calendar year 2001
300,000 On or before February 16, 2002
(Continued)
8
<PAGE>
INSTITUTIONAL EQUITY HOLDINGS, INC.
(FORMERLY EUROMED, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 2000
NOTE 1: BUSINESS (CONTINUED)
The termination of the relationship with the Redstone Shareholders is reflected
in the consolidated financial statement for the year ended December 31, 1999.
IEH is a holding company whose only operating subsidiary is IEC a full service
brokerage firm engaged in the purchase and sale of securities from and to the
public and for its own account and investment banking activities. The Company
operates in one industry segment, the financial services industry.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 regulations S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation of the results of
operations for the periods presented have been included.
The financial data at December 31, 1999 is derived from audited financial
statements, which are included in the Company's Form 10-KSB and should be read
in conjunction with the audited financial statements and notes thereto. Interim
results are not necessarily indicative of results for the full year.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
NOTE 3: NET LOSS PER COMMON SHARE
Basic (loss) per common share has been calculated using the weighted average
number of shares of common stock outstanding during the periods. Diluted (loss)
per common share is not disclosed because the effect of the exercise of the
common stock warrants and options would be anti-dilutive.
9
<PAGE>
ITEM 2
INSTITUTIONAL EQUITY HOLDINGS, INC.
(FORMERLY EUROMED, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 2000
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
SAFE HARBOR STATEMENT
Certain statements in this Form 10-QSB, including information set forth under
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1955 (the Act). The
Company desires to avail itself of certain "safe harbor" provisions of the Act
and is therefore including this special note to enable the Company to do so.
Forward-looking statements in this Form 10-QSB or hereafter included in other
publicly available statements issued or released by the Company involve known
and unknown risks, uncertainties and other factors which could cause the
Company's actual results, performance (financial or operating) or achievements
to digger from the future results, performance (financial or operating) or
achievements expressed or implied by such forward-looking statements. Such
future results are based upon management's best estimates based upon current
conditions and the most recent results of operations.
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999
Revenues for the three months ended March 31, 2000, increased 91% to $3,530,795
compared to $1,843,945 for the three months ended March 31, 1999. In 1999, the
Company had three (3) offices in New York and one (1) office in Florida. In
2000, the Company added three (3) offices, two in Texas, and one in New Jersey.
The new offices were the source of increased commission revenue. In 1999, the
Company did not act as managing underwriter on any public or private security
offerings, while in 2000, the Company was the managing underwriter for four (4)
securities offerings, raising approximately $11,750,000. These underwriting
activities resulted in the 854% increase in underwriting revenue.
Expenses for the three months ended March 31, 2000, increased 42% to $3,701,110
compared to $2,601,292 for the three months ended March 31, 1999. The following
summarizes the changes in expenses:
10
<TABLE>
<CAPTION>
2000
Percentage
Increase (Decrease)
Percentage of Total Expenses In Expenses
------------------------------ --------------------
1998 1999
---------- ------
<S> <C> <C> <C>
Employee Compensation 71% 42% 142%
Commissions Paid to
Other Broker-Dealers 7 16 (36)%
General And
Administrative Expenses 20 20 36%
Interest Expense 2 22 (87)%
-- -----
Total Expenses 100% 100% 42%
==== ====
Total Expenses as a Per-
Centage of Revenues 104% 141%
==== ====
</TABLE>
Overall expenses increased 42% in 2000, as compared to 1999. The most
significant increase in expenses was the 142% increase in employer compensation
to $2,635,617 for the three months ended March 31, 2000, compared to $1,087,220
for the three months ended March 31, 1999. The employee compensation increase is
attributable to the increased number of brokers and other support staff in the
new offices and the increased compensation related to the underwriting activity.
The brokers and officers generally received approximately sixty percent (60%) of
the revenues derived from the underwritings plus an allocation of the
underwriter's warrants. The decrease in commissions paid to other broker dealers
was the result of the reduction in independent brokers closing their sales
through the Company.
In March 1999, the Company entered into an agreement with an individual for
delivery to the Company of a stock certificate representing 66,250 shares of
common stock of Westower Corporation (which has subsequently converted into
119,912 shares of Spectrasite Holdings, Inc.). The agreement included a
provision that the individual was to receive compensation equal to five percent
(5%) of the average daily closing sales price of the common stock and warrants
to purchase 414,062 shares of the Company's common stock at an exercise price of
$2.00 per share (estimated fair value of the warrants at date of issue was
$(571,406). The $571,406 of compensation to the individual was included in
interest expense for the three months ended March 31, 1999.
For the three months ended March 31, 2000, the Company reported a net loss of
$225,315 compared to a loss of $757,347 for the three months ended March 31,
1999. The decrease in the loss was the result of the reduction in interest
expense associated with the issuance of stock warrants in 1999, offset by the
growth in employee and non-employee compensation, which could not be off set by
increased revenues.
LIQUIDITY AND CAPITAL RESOURCES
Cash used in operations was $250,167 for the three months ended March 31, 2000,
compared with cash used in operations of $67,966 for the three months ended
March 31, 1999. This significant increase in cash used was attributable to
increases in employee and operating costs associated with the new offices. The
Company is currently reassessing its staffing levels and need for branch
offices. With changes being considered by management, the Company expects that
it can achieve profitable operations by June 2000.
11
In February 2000, the Company sold 40,000 shares of Spectrasite Holdings, Inc.
for an aggregate value of approximately $830,000. The proceeds, from the sale of
shares, were used to repay a $407,170 loan from a brokerage firm and to finance
current operations. The shares of Spectrasite Holdings, Inc. were owned by an
individual and were loaned to the Company. The Company must return these shares
to the individual; therefore, the Company will be required to purchase 40,000
shares of Spectrasite Holdings, Inc. in the public market. The trading price of
these shares has ranged from a high of $28.31 (March 31, 2000) to a low of
$11.06 (January 3, 2000) with a trading price of $21.25 on May 8, 2000.
In 2000, the Company will require substantial amount of cash to funds its
operations. Management of the Company is currently assessing the manner in which
the funds can be acquired with the minimum advise effect upon the current
shareholders.
For the month ended March 31, 2000, the Company expended $90,408 for the
purchase of furniture and equipment.
Year 2000 Efforts
In 1999 and 2000, the Company took various steps to address the issue of
computer programs and embedded computer chips being unable to distinguish
between the year 1900 and the year 2000 (the "Y2K" issue). The Company has no
proprietary operating system or applications software, nor do any of its
operations use main frame or mini-computer systems. Therefore, the company's
focus with respect to the Y2K issue was: (1) its PC hardware and software
purchased from third parties; and (2) external suppliers and service providers.
While there is no assurance that associated problems may not arise in the
future, to date the Company has not experienced any material problems relating
to the Y2K issue.
PART II - OTHER INFORMATION
ITEM 3: CHANGES IN SECURITIES AND USE OF PROCEEDS
In March 2000, the Company sold 70,000 shares of its common stock to an
individual for $1.00 per share. The proceeds have been used to fund operations
of the Company.
ITEM 4: OTHER INFORMATION
None
12
ITEM 5: EXHIBITS AND REPORTS ON FORM 8-K
(a) Number Exhibit Description
27.1 Financial Data Schedule.(*)
* Filed herewith.
(b) Reports of Form 8-K:
None
<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.
Institutional Equity Holdings, Inc.
Dated:
Signature Title
/s/ Robert A. Shuey, III President and
- ---------------------------------------------------
Robert A. Shuey, III Chief Executive Officer
/s/ Mike Vinez Chief Financial Officer,
- ----------------------------------------------------
Michael E. Vinez Treasurer and Secretary
13
<PAGE>
Exhibit Index
Exhibit No. Description
27.1 Financial Data Schedule.(*)
(*) Filed herewith
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000852447
<NAME> EUROMED INC
<MULTIPLIER> 1
<CURRENCY> $US
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-1-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 349,609
<SECURITIES> 775,437
<RECEIVABLES> 1,015,725
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,410,930
<PP&E> 806,360
<DEPRECIATION> (352,864)
<TOTAL-ASSETS> 3,381,753
<CURRENT-LIABILITIES> 1,673,510
<BONDS> 0
0
10,975
<COMMON> 23,820
<OTHER-SE> 159,142
<TOTAL-LIABILITY-AND-EQUITY> 3,781,753
<SALES> 3,530,795
<TOTAL-REVENUES> 3,530,795
<CGS> 0
<TOTAL-COSTS> 3,627,821
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 73,289
<INCOME-PRETAX> (225,315)
<INCOME-TAX> 0
<INCOME-CONTINUING> (225,315)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (225,315)
<EPS-BASIC> (0.10)
<EPS-DILUTED> (0.10)
</TABLE>
