U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10Q-SB
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the nine months ended Commission File Number
September 30, 1997 33-48017-A
EXECUTIVE WEALTH MANAGEMENT SERVICES, INC.
(a Florida corporation)
(Exact name of Registrant as specified in its Charter)
Florida 59-2087068
State or other jurisdiction of I.R.S. Employer
incorporation or organization Identification Number
2323 Stickney Point Road, Sarasota, Florida 34231
(Address of principal executive offices, zip code)
Registrant's telephone number, including area code: (941) 921-9700
Securities registered pursuant to Section 12(b) of the Act:
Securities registered pursuant to Section 12(g) of the Act:
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//.
For the nine months ended September 30, 1997, the Registrant had
revenues of $3,140,044.
As of September 30, 1997, the Registrant had 5,000,000 Shares
authorized and 2,615,485 Shares outstanding. The aggregate market value of
the outstanding shares held by non-affiliates, computed by reference to the
price at which the stock was sold is $1,457,992.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Set forth below are the unaudited financial statements reflecting the
Company's financial condition as of September 30, 1997, and the related
statements of operations and shareholders' equity for the nine and three
months ended September 30, 1997 and 1996.
[THE BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK]
EXECUTIVE WEALTH MANAGEMENT SERVICES, INC.
BALANCE SHEET
September 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS
Cash $ 14,710
Accounts receivable from
correspondent brokers 379,661
Accounts receivable from affiliates 33,278
Accounts receivable from others 13,958
-------
TOTAL CURRENT ASSETS 441,607
INVESTMENTS ---
FURNITURE, FIXTURES AND EQUIPMENT at cost
Net of accumulated depreciation 28,100
OTHER ASSETS
Deposits with clearing organizations 44,771
Other Deposits 6,934
--------
TOTAL ASSETS $521,412
========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 38,436
Commissions payable 278,539
--------
TOTAL CURRENT LIABILITIES 316,975
STOCKHOLDERS' EQUITY
Preferred Stock - authorized 750,000
shares of $.01 par value; no shares
issued or outstanding ---
Common Stock - authorized 5,000,000
shares of $.002 par value; issued and
outstanding 2,615,485 shares 5,231
Additional paid-in capital 1,105,639
Additional paid-in capital, warrants 4,410
Retained earnings (910,843)
----------
TOTAL STOCKHOLDERS EQUITY $ 204,437
----------
TOTAL LIABILITIES & STOCKHOLDERS EQUITY $ 521,412
==========
</TABLE>
EXECUTIVE WEALTH MANAGEMENT SERVICES, INC.
STATEMENTS OF OPERATION
For the Three and Nine Months Ended September 30
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30 September 30
1997 1996 1997 1996
<S> <C> <C> <C> <C>
REVENUE
Commissions $2,896,686 $2,115,483 $1,124,606 $ 682,534
Underwriting fees 133,548 9,750 59,948 9,232
Other Income 109,810 66,257 39,410 22,362
---------- ---------- ---------- ---------
TOTAL REVENUE 3,140,044 2,191,490 1,223,964 714,128
EXPENSES
Advertising 1,921 3,890 308 293
Board of Directors fees 14,000 12,000 6,000 4,000
Branch office support 58,000 --- 55,000 ---
Clearing charges 241,182 180,402 104,458 55,461
Commissions 2,369,145 1,658,994 917,879 535,583
Consulting fees 40,236 40,737 17,045 5,254
Dues and Subscriptions 7,160 6,736 2,870 3,655
Depreciation 9,092 8,870 3,031 3,031
Insurance 9,565 9,503 6,363 2,112
Meetings and seminars (471) 1,867 (500) 1,062
Miscellaneous 17,951 7,351 3,736 2,445
Occupancy costs 64,722 67,870 21,311 21,483
Office expenses 20,854 21,632 7,725 5,565
Professional development 187 505 187 255
Regulatory 13,605 10,393 1,754 2,292
Rental Equipment 7,302 6,198 3,017 883
Salaries and wages 262,530 226,758 83,880 80,929
Taxes 26,382 25,340 6,609 6,762
Travel and lodging 24,123 38,458 8,356 12,748
Utilities 22,296 22,600 9,502 6,755
TOTAL ---------- ---------- ---------- --------
OPERATING EXPENSES 3,209,782 2,350,104 1,258,531 750,568
---------- ---------- ---------- --------
OPERATING
INCOME/(LOSS) (69,738) (158,614) (34,567) (36,440)
----------- ----------- ---------- ---------
NET INCOME/(LOSS) $ (69,738) $ (158,614) $ (34,567) $(36,440)
=========== =========== ========== =========
NET INCOME/(LOSS)
PER SHARE $ (.027) $ (.064) $ (.013) $ (.015)
=========== =========== ========== =========
</TABLE>
EXECUTIVE WEALTH MANAGEMENT SERVICES, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For The Nine Months Ended September 30 (Unaudited)
<TABLE>
<CAPTION>
Additional
Additional Paid-In Retained
Preferred Common Paid-In Capital Earnings
Stock Stock Capital Warrants (Deficit) Total
----- ----- ------- -------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance at
January 1, 1997 - $ 4,983 $ 913,687 $ 4,410 $(841,105) $ 81,975
Issuance of
common stock 248 213,752 214,000
Syndication costs (21,800) (21,800)
Net loss for the Nine
months ended
September 30, 1997 (69,738) (69,738)
----- ------ --------- ---------- ---------- ---------
Balance at
September 30, 1997 $ - $ 5,231 $1,105,639 $ 4,410 $(910,843) $ 204,437
===== ======= ========== ======== ========== =========
Additional Retained
Preferred Common Paid-In Earnings Stock
Stock Stock Capital (Deficit) Warrants Total
--------- ------ ------- --------- -------- --------
Balance at
January 1, 1996 $ - $ 4,629 $ 706,853 $(629,060) $ 4,410 $ 86,832
Issuance of
Common Stock 366 200,628 200,994
Syndication Costs (15,803) (15,803)
Net loss for nine
months ended
September 30, 1996 (158,614) (158,614)
-------- -------- ---------- ----------- -------- ---------
Balance at
September 30, 1996 $ - $ 4,995 $ 891,678 $(787,674) $ 4,410 $ 113,409
======== ======== ========== =========== ======== =========
</TABLE>
EXECUTIVE WEALTH MANAGEMENT SERVICES, INC.
STATEMENT OF CASH FLOWS
For The Nine Months Ended September 30 (Unaudited)
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ (69,738) $(158,614)
Adjustments to reconcile net income
to net cash used in
operating activities:
Depreciation 9,092 8,870
(Increase) decrease in operating assets:
Receivable from correspondent
brokers (217,155) 16,278
Receivable - other (30,585) (39,633)
Deposits (1,030) (972)
Other assets (5,000) ---
Increase (decrease) in operating liabilities:
Accounts payable 1,953 (27,519)
Commissions payable 134,973 39,920
--------- --------
Net cash provided by (used in)
operating activities (177,490) (161,670)
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment ---
(5,035)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 214,000 201,100
Cash paid for syndication costs (21,800) (15,803)
Net cash provided by (used in) -------- --------
financing activities 192,200 185,297
-------- --------
NET INCREASE (DECREASE) IN CASH 14,710 18,592
CASH AT BEGINNING OF PERIOD --- 20,403
-------- -------
CASH AT END OF PERIOD $14,710 $ 20,403
======== =======
</TABLE>
EXECUTIVE WEALTH MANAGEMENT SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
For The Nine Months Ended September 30, 1997 and 1996
Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Executive Wealth Management Services, Inc., (the Company) is a
securities broker/dealer that transacts business through
correspondent brokers and does not handle any customer securities
or funds. Customer security transactions and related commission
revenue and expenses are recorded on the trade date. The Company
also markets insurance products and services, acts as a
broker/dealer in selling both public and private securities
offerings on a best efforts basis and markets to Affinity Groups .
In addition, the Company receives commissions, investment banking
and underwriting fees for its services.
Receivable from Correspondent Brokers
The receivable from correspondent brokers and broker/dealers
represent commissions earned which had not been received at
September 30, 1997. Management has determined that these amounts
are fully collectible.
Furniture, Fixtures and Equipment
Furniture, fixtures and equipment are recorded at cost.
Depreciation is provided for in amounts sufficient to relate the
cost of assets to operations over their estimated useful lives
using the straight-line method.
Investments
The Company was issued 55,263 shares of common stock of Flight
Sciences, Inc. This stock was issued to the Company in relation to
a private offering of Flight Sciences' promissory notes. These
shares represented 5% of Flight Sciences, Inc.'s outstanding common
stock at the time. The Company has assigned no value to the stock
due to the fact that there is no ready market and its value is not
determinable.
Warrants Outlet Mall Network
The Company was issued 24,167 warrants of the Outlet Mall Network,
Inc. ( OMNI ). These warrants were issued in relation to a private
offering of OMNI stock. The warrants have an exercise price of
$2.00 and expire June 10, 2002. The Company has assigned no value
to the warrants due to the fact that there is no ready market and
their value is not determinable.
Loss Per Share
Loss per share is computed based upon 2,615,485 and 2,497,725
shares outstanding during the periods ended September 30, 1997 and
1996, respectively.
EXECUTIVE WEALTH MANAGEMENT SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
For The Nine months Ended September 30, 1997 and 1996
Note 2 - DEPOSIT WITH CLEARING ORGANIZATION
Deposits with clearing organizations represent investments in money
markets. The investments are required by the Company's clearing
brokers and are in accordance with the correspondent broker
agreements between the parties. Deposits are reflected at fair
market value.
Note 3 - FURNITURE, FIXTURES AND EQUIPMENT
A summary of furniture, fixtures and equipment follows:
<TABLE>
<CAPTION>
September 30, 1997
<S> <C>
Furniture and fixtures $ 37,951
Equipment 33,240
Leasehold improvements 6,622
---------
77,813
Less: Accumulated Depreciation (49,713)
---------
$28,100
=========
</TABLE>
Note 4 - Operating Leases
Rent expense for the nine months ended September 30, 1997 and 1996
was $63,722 and $67,870, respectively.
Note 5 - NET CAPITAL REQUIREMENT
Pursuant to the net capital provisions of Rule 15c3-1 of the
Securities and Exchange Act of 1934, the Company is required to
maintain a minimum net capital of $5,000. In December of 1991, the
National Association of Securities Dealers, Inc. approved the
Company as a fully disclosed broker/dealer. The Company has a
restrictive agreement to maintain a net capital of 130% of the
minimum requirement or 6 2/3% of aggregate indebtedness for each of
the nine month periods ended September 30, 1997 and 1996.
The Company had net capital of $131,521 or 622% and $58,922 or 411%
of the minimum requirement at September 30, 1997 and 1996,
respectively. The net capital rules may effectively restrict the
payment of dividends to the Company s stockholders. The Company
operates pursuant to the (K) (2) (ii) exemptive provisions of the
Securities and Exchange Commission s Rule 15c3-3 and does not hold
customers funds or securities.
EXECUTIVE WEALTH MANAGEMENT SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
For The Nine months Ended September 30, 1997 and 1996
NOTE 6 - INCOME TAXES
At December 31, 1996, the Company had a net operating loss carry
forward of approximately $657,000 that will begin to expire in the
year 2009. Due to the lack of historical operations, management
has elected to record a valuation allowance equal to the deferred
tax asset of $240,000, calculated using an effective income tax
rate of 37% for the Company.
NOTE 7 - RELATED PARTY TRANSACTIONS
During the nine months ended September 30, 1997 and 1996, companies
affiliated with the Company's majority stockholder shared office
space with the Company and paid rent of $17,188 and $17,469,
respectively, for the use of the space.
During the nine months ended September 30, 1997, the Company paid
rent of approximately $27,000 to the Company's majority stockholder
for the use of office space, compared to $24,000 for the nine
months ended September 30, 1996.
NOTE 8 - COMMON STOCK TRANSACTIONS
During 1995, the Company and the majority stockholder initiated a
private placement of 80,000 shares of the Company's common stock at
a price of $6.00 per share. The shares contained in the offering
are to be drawn equally from the authorized but unissued shares of
the Company and the majority stockholder. Accordingly, gross
proceed from the sale of the stock will be shared equally by the
Company and the majority stockholder. As of September 30, 1996,
approximately 20,200 shares of the Company's common stock had been
sold under this private placement. The proceeds from this private
placement were utilized for additional expansion and working
capital by the Company.
In November, 1995, the Company approved a plan to grant options to
certain employees to purchase the Company's common stock. The plan
provided for the granting of options to purchase a maximum of
100,000 shares of the Company's stock at a price to be determined
at the time of grant. The price, however, is not greater than
$3.00 per share. The plan required a participant to be employed by
the
Company for a number of years before exercise. Granted options
expire 10 years from the grant date. At September 30, 1997, none
of the options have been exercised.
During the first quarter of 1997, the majority shareholder
purchased 42,500 shares of common stock at $1.20 per share.
EXECUTIVE WEALTH MANAGEMENT SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
For The Nine months Ended September 30, 1997 and 1996
NOTE 9 - COMMON STOCK TRANSACTIONS (CONTINUED)
In May, 1996, the Board of Directors passed a resolution to split
the outstanding common stock shares of Executive Wealth Management
Services, Inc. on a five for one basis effective September 20,
1996. Common stockholders of record as of September 20, 1996, were
entitled to the five for one forward common stock split.
On June 9, 1997, the Company initiated a private placement of
250,000 shares of the Company s Common Stock at a price of $2.00
per share. Net proceeds from the sale of stock are to be used for
general working capital and expansion of operations. As of
September 30, 1997, 81,500 shares were sold and the private
placement can remain open for two (2) ninety (90) day periods or
180 days.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
The table set forth below reflects the source of revenue earned
by the Company during the nine months ended September 30, 1997
and 1996.
<TABLE>
<CAPTION>
1997 1996 Increase/
(Decrease)
<S> <C> <C> <C>
Source of Revenue Earned
Commission:
Investment banking fees $ 133,548 $ 35,366 $ 98,182
Transactional 1,762,944 1,120,507 642,437
Mutual Fund Sales 443,847 563,482 (119,635)
Insurance/Annuity 468,558 210,666 257,892
Limited partnership sales 221,337 195,212 26,125
---------- ---------- ---------
Total Commissions 3,030,234 2,125,233 905,001
Other:
RIA income 28,784 1,148 27,636
Miscellaneous 81,026 65,109 15,917
---------- ---------- ---------
Total $3,140,044 $2,191,490 $ 948,554
========== ========== =========
</TABLE>
The Company received investment banking fees of $133,548 and
$35,366 from the sale of private placements for the nine months
ended September 30, 1997 and 1996, respectively. The increase
of $98,182, or 278% from the nine month period ended 1996
compared to the same period ended 1997, reflects only one
offering during 1997. The Company anticipates a significant
increase in income from other underwritings in the fourth
quarter of fiscal 1997.
Transactional revenues, increased by $642,437 or 58% for the nine
months ended September 30, 1997, as compared to the same period
in 1996. This increase relates directly to the increased
production of the Company s branch and satellite offices. This
level of increase is expected to continue throughout fiscal 1997.
Mutual fund revenue decreased approximately $119,635 or 22% for
the nine months ended September 30, 1997 as compared to the same
period ended 1996.
Limited partnership revenue increased $26,125 or 14% for the nine
months ended September 30, 1997 compared to the same period ended
1996.
The decrease in mutual fund revenue of $119,635 was essentially
offset with an increase in insurance/annuity and limited
partnership revenue. These revenue areas increased $284,017 or
70% for the nine month period ended September 30, 1997 as
compared to the same period ended 1996.
RIA (Registered Investment Advisory) fees increased $27,636 to
$28,784 from $1,148 for the nine month period ending September
30, 1997 and 1996, respectively. This represents a 2400%
increase over 1996. During the last fiscal quarter of 1997 and
well into fiscal 1998 such revenues are anticipated to continue
to increase. One of the Company s branch offices is and will
continue to be active in the development of the Company s RIA
division. As of September 30, 1997, assets under management were
approximately $3,000,000.
Increases are expected to occur due to the investment package
available under the RIA umbrella. Essentially, the managers
allot client funds into a variety of no load mutual funds grouped
as to the clients overall investment objectives and risk
tolerance. During the remainder of 1997 and into fiscal 1998,
the Company anticipates significant growth from this area. The
Company plans to market the investment product to its other
branches beginning in the fourth quarter of 1997 and beyond.
Overall, total revenue increased $948,554 or 44% for the nine
months ended September 30, 1997 as compared to the same period
ended 1996. Such increases are expected to continue throughout
the remainder of fiscal 1997.
As a result of expansion activities not only did the Company
experience increased revenues, but the related expenses have also
increased. The table set fourth below reflects the expense
categories of the Company in which there was a significant
increase or decrease for the nine months ended September 30,
1997, as compared to the same period in 1996:
<TABLE>
<CAPTION>
Increase/
1997 1996 Decrease
<S> <C> <C> <C>
Expense Category
Board of Directors fees $ 14,000 $ 12,000 $ 2,000
Branch office support 58,000 --- 58,000
Commissions 2,369,145 1,658,994 710,151
Clearing Charges 241,182 180,402 60,780
Miscellaneous expense 17,951 7,351 10,600
Salaries & Wages 262,530 226,758 35,772
Travel and lodging 24,123 38,458 (14,335)
</TABLE>
Board of Directors fees increased $2,000 for the period ended
September 30, 1997, as compared to the same period ended 1996.
This increase relates to Mr. Dennis B. Schroeder becoming a
member of the Board of Directors.
Branch office support of $58,000 for the nine months ended
September 30, 1997, includes $55,000 which was a reimbursement to
the majority shareholder from prior funding of branch support.
The reimbursement was detailed in the offering memorandum
discussed in Note 8 above, and more fully described in the
offering memorandum dated June 9, 1997.
Commission expense increased from $1,658,994 for the nine months
ended September 30, 1996, to $2,369,145 for the nine months ended
September 30, 1997. The increase in commission expense is
directly related to the aforementioned increase in revenues.
Clearing charges increased $60,780 or 34% for the period ended
September 30, 1997, as compared to the same period ended 1996.
Clearing charges relate to transaction revenue, hence, generally
an increase or decrease in transactional revenue will have the
same effect on charges.
Miscellaneous expense increased $10,600 from $7,351 for the nine
months ended September 30, 1996, to $17,951, for the same period
ended 1997. This increase is to be offset during October 1997
when charge backs to registered representatives are recorded.
Salaries and wages increased for the nine month period ended
September 30, 1997, as compared to the same period in 1996 by
$35,772. This increase relates to the Company increasing the
staff of the corporate office to oversee the growth of the sales
force in both the compliance and accounting areas. A revenue
growth rate of 44% over the prior year increases management of
both compliance and accounting, particularly in its review
process activities.
Travel and lodging decreased 14,335 to $24,123 for the nine month
period ended September 30, 1997, compared to $25,710 for the same
period ended 1996. The decrease relates to the stringent cost
controls and budget efforts on the part of management.
Future Operations
As of September 30, 1997, Executive had approximately 98
registered representatives and is in the process of recruiting
several new office locations.
During the remainder of 1997 and into fiscal year 1998,
management has and will be implementing several growth and
expansion related initiatives. These initiatives will include,
but are not limited to the following:
- Possible secondary public offering, - Expanded service
and marketing to "Affinity Groups",
- Continued branch development and expansion,
- Increased investment banking activities, and
- Market making.
The Company had been negotiating for the acquisition or merger of
one of its Altamonte Springs branch offices into a company owned
branch. In addition, the Company would have purchased with cash
and/or stock all of the outstanding shares of Allen Douglas
Securities, Inc. The Company and its President made advances and
loans to the principal and/or entities during such period. An
agreement in principle was offered on July 23, 1997. A
counteroffer received on July 29, 1997 was rejected by the
President and ratified by the Board of Directors as they were
unable able to justify the terms of such counteroffer. The firm,
however, agreed to help facilitate the transition of all
registered representatives in said office to the new broker
dealer on or before December 31, 1997. All advances and/or loans
amounting to $15,000 are to be paid in full.
The Company made advances and/or loans to certain principals
and/or entities at its other Altamonte Springs branch office for
their recruitment of an additional branch office in Delray Beach,
Florida. Such advances and/or loans are to be paid in full.
In addition, on October 6, 1997, Executive entered into an
agreement with Sun Insurance Marketing Network, Inc. ( Sun )
whereby Sun, which is the national marketing agent for AIG Life
Companies, Inc. s ( AIG ) Long Term Care Insurance Marketing
Program, has agreed to refer and recruit Series 6 and Series 7
securities licensed insurance agents to Executive and to
encourage said agents to contract with the Company to place their
variable life, variable annuity and mutual fund business.
Management believes it can recruit a significant number of these
agent/brokers during fiscal 1998.
For approximately two and one half years, the Company has
aggressively engaged in, and committed significant financial and
personnel resources to an extensive market study and analysis of
the viability of marketing, on an exclusive and endorsed basis,
various insurance, financial and securities-related products, and
other services to members of large medical affinity groups and
associations. In this regard, Executive has established contacts
and relationships with various medical associations and affinity
groups and has presented comprehensive marketing proposals to
specific groups. The Company will continue to develop these
relationships along with attempting to establish additional
relationships with new groups in 1997.
Effective March, 1997, the Company has entered into an exclusive
"Service and Non-Circumvention Agreement" with Financial
Marketing Consultants, Inc. ("FMC") of Naples, Florida. Under
the Agreement, among other things, FMC shall make introductions
to and presentations with and/or on behalf of the Company to
underwriters, broker/dealers, corporations, partnerships or
individuals that may invest and/or assist Executive with a
secondary public offering of securities issued by Executive. FMC
has agreed to provide these services on a contingency basis.
Executive will issue warrants to FMC equal to 1.5% of the
securities and warrants placed as a direct effort of FMC as well
as a cash fee in the amount of 1.5% of the value of amounts
obtained or to be obtained by Executive under the Agreement.
In conjunction with and concurrent to the aforementioned
Agreement, the Company has retained the services of James D.
Cullen, P.A. to provide legal services with regard to the
structuring, documentation and other corporate matters required
and necessary for a secondary public offering of the Company's
stock. Legal fees related to such work are not to exceed $20,000
plus reimbursement for costs incurred on behalf of the Company.
The Company has provided James D. Cullen, P.A. with a $5,000
retainer, with a balance of $15,000 due only upon closing of any
secondary public offering transaction by the Company.
The Company expects to make presentations under the guidance of
FMC and James D. Cullen, P.A. to underwriters during the fourth
quarter of fiscal 1997.
Executive is exploring the possibility of establishing market
making. Management anticipates that upon NASD approval, it will
initially engage in market making of a limited number of specific
listed stocks, assuming the successful completion of its
secondary public offering.
With the increase of the in-house securities/insurance brokers
and outside independent brokers, coupled with the increased
investment banking activities and the sale of insurance-related
products and services, it is management's belief that it has and
will have the resources to not only sustain its operations, but
become profitable during fiscal 1997.
The Company has negotiated a contract with a board member, Dr.
Robert E. Windom. Under this agreement Dr. Windom shall be
compensated $2,000 per month to expand marketing and servicing of
Affinity Groups.
Regulatory Net Capital
As a securities broker-dealer, the Company is subject to the net
capital rules of the United States Securities and Exchange
Commission and similar rules in force in the states where the
Company is registered as a securities broker-dealer. The
aggregate indebtedness of a securities broker-dealer in relation
to its net capital is also subject to Commission rules. Such
rules are somewhat complex in the manner that regulatory net
capital is computed. In summary, however, the computation of
regulatory net capital relates to the stockholder's equity of the
Company taking into account deductions from such stockholder's
equity which relate to non-allowable assets which are a non-
liquid type and reductions in the market value of investment
securities owned by the Company in accordance with rule-
prescribed "haircuts". Under the rules, the aggregate
indebtedness of the Company in relation to its net capital may
not exceed a ration of 15 to 1.
The table set forth below, with respect to the Company, the
amount of regulatory net capital and the amount of aggregate
indebtedness and the ratio thereof to such regulatory net capital
as of September 30, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Net Capital $ 131,521 $ 58,922
Aggregate Indebtedness 316,975 215,104
Ratio of aggregate
indebtedness
to net capital 2.41 to 1 3.65 to 1
</TABLE>
The National Association of Securities Dealers, Inc. (the "NASD")
requires certain members, such as the Company, to maintain net
capital equal to the greater of 130% of the Commission's net
capital requirement or 6 2/3% of aggregate indebtedness.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Not Applicable
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.
Not Applicable
Item 5. Other Information.
Not Applicable
Item 6. Exhibits and Reports on Form 8-K.
Not Applicable
[THE BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK]
In accordance with the requirements of the Exchange Act, the
registrant causes this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
EXECUTIVE WEALTH MANAGEMENT
SERVICES, INC.
September 30, 1997
BY Guy S. Della Penna
-------------------
Guy S. Della Penna,
President and
Chief Executive Officer
September 30, 1997
BY Bonnie S. Gilmore
-----------------
Bonnie S. Gilmore, Senior Vice
President
Chief Financial Officer and
Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 14,710
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0
0
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</TABLE>
