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 six months ended Commission File Number
June 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 six months ended June 30, 1997, the Registrant had revenues of
$1,916,081.
As of June 30, 1997, the Registrant had 5,000,000 Shares authorized
and 2,533,985 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 $1,294,992.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Set forth below are the unaudited financial statements reflecting the
Company's financial condition as of June 30, 1997, and the related
statements of operations and shareholders' equity for the six months ended
June 30, 1997 and 1996.
[THE BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK]
EXECUTIVE WEALTH MANAGEMENT SERVICES, INC.
BALANCE SHEET
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS
Cash $ 1,134
Accounts receivable from
correspondent brokers 259,749
Accounts receivable from affiliates 14,200
Accounts receivable from others 1,133
Prepaid expenses 5,885
---------
TOTAL CURRENT ASSETS 282,101
INVESTMENTS
Furniture, Fixtures and Equipment -
at cost net of accumulated depreciation 31,130
OTHER ASSETS
Deposits with clearing organizations 44,413
Other deposits 7,434
---------
TOTAL ASSETS $365,078
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 60,463
Commissions Payable 206,810
---------
TOTAL CURRENT LIABILITIES 267,273
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 2,533,985 shares 5,068
Additional paid-in capital 964,602
Additional paid-in capital, warrants 4,410
Retained earnings (876,275)
TOTAL STOCKHOLDERS EQUITY 97,805
---------
TOTAL LIABILITIES & STOCKHOLDERS EQUITY $ 365,078
=========
</TABLE>
EXECUTIVE WEALTH MANAGEMENT SERVICES, INC.
STATEMENTS OF OPERATION
For The Three and Six Months Ended June 30 (Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30 June 30
1997 1996 1997 1996
<S> <C> <C> <C> <C>
REVENUE
Commissions $1,772,081 $1,407,333 $ 946,152 $777,517
Underwriting fees 73,600 26,134 63,100 10,544
Other Income 70,400 31,895 39,421 13,344
---------- ---------- -------- --------
TOTAL REVENUE 1,916,081 1,465,362 1,048,673 801,405
EXPENSES
Advertising 1,613 3,597 813 2,425
Board of Directors
fees 8,000 8,000 4,000 4,000
Clearing charges 136,724 112,940 79,045 59,070
Commissions 1,451,188 1,108,410 781,569 611,304
Consulting fees 23,190 35,483 10,790 19,980
Dues and Subscriptions 4,290 3,080 3,428 1,420
Depreciation 6,061 5,839 3,031 2,975
Insurance 3,203 7,392 2,598 3,753
Meetings and seminars 29 806 --- 550
Miscellaneous 17,292 19,904 13,568 16,656
Occupancy costs 43,411 46,387 21,983 21,340
Office expenses 13,129 16,067 6,940 5,584
Professional development --- 250 --- ---
Regulatory 11,850 8,100 9,188 2,444
Rental Equipment 4,286 5,316 1,645 2,649
Salaries and wages 178,649 145,829 91,788 78,160
Taxes 19,773 18,578 9,504 9,266
Travel and lodging 15,767 25,710 6,040 13,936
Utilities 12,796 15,847 6,564 7,984
---------- ---------- --------- --------
TOTAL OPERATING
EXPENSES 1,951,251 1,587,535 1,052,494 863,496
---------- ---------- --------- --------
OPERATING
INCOME/(LOSS) (35,170) (122,173) (3,821) (62,091)
---------- ---------- --------- --------
NET
INCOME/(LOSS) $ (35,170) $ (122,173) $ (3,821) $(62,091)
=========== =========== ========= ========
NET INCOME/(LOSS)
PER SHARE $ (.02) $ (.05) $ (.01) $ (.03)
=========== =========== ========= ========
</TABLE>
EXECUTIVE WEALTH MANAGEMENT SERVICES, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For The Six Months Ended June 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 85 50,915 51,000
Net loss for the
six months ended
June 30, 1997 (35,170) (35,170)
-------- -------- ---------- --------- ----------- ---------
Balance at
June 30, 1997 $ - $ 5,068 $ 964,602 $ 4,410 $ (876,275) $ 97,805
======== ======== ========== ========= =========== =========
Additional Retained
Preferred Common Paid-In Earnings Stock
Stock Stock Capital (Deficit) Warrants Total
<S> <C> <C> <C> <C> <C> <C>
Balance at
January 1, 1996 - $ 4,629 $ 706,853 $ (629,060) $ 4,410 $ 86,832
Issuance of
Common Stock 202 121,098 121,300
Syndication Costs (9,675) (9,675)
Net loss for six
months ended
June 30, 1996 (122,173) (122,173)
--------- -------- ----------- ---------- --------- -----------
Balance at
June 30, 1996 $ - $ 4,831 $ 818,276 $(751,233) $ 4,410 $ 76,284
========= ======== =========== ========== ========= ===========
</TABLE>
EXECUTIVE WEALTH MANAGEMENT SERVICES, INC.
STATEMENT OF CASH FLOWS
For The Six Months Ended June 30 (Unaudited)
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $(35,170) $ (122,173)
Adjustments to reconcile net income
to net cash used in operating
activities:
Depreciation 6,062 5,839
(Increase) decrease in operating
assets:
Receivable from correspondent
brokers ( 97,206) (37,610)
Receivable - other 1,280 (30,573)
Deposits (671) (641)
Prepaid expense (5,885) ---
Increase (decrease) in operating
liabilities:
Accounts payable 23,980 8,399
Commissions payable (63,244) 61,298
--------- ----------
Net cash provided by(used in)
operating activities (44,466) (115,461
--------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase Equipment --- (5,035)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 51,000 121,300
Cash paid for syndication costs (5,500) (9,567)
--------- ----------
Net cash provided by (used in)
financing activities 45,500 111,733
--------- ----------
NET INCREASE (DECREASE) IN CASH 1,134 (8,763)
CASH AT BEGINNING OF PERIOD - 20,403
--------- ----------
CASH AT END OF PERIOD $ 1,134 $11,640
========= ==========
</TABLE>
EXECUTIVE WEALTH MANAGEMENT SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
For The Six Months Ended June 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 acts as a broker/dealer in selling both public and private
securities offerings on a best efforts basis. 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 June
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 are being 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 its value is not determined.
Loss Per Share
Loss per share is computed based upon 2,533,985 and 2,415,335
shares outstanding during the periods ended June 30, 1997 and 1996,
respectively.
EXECUTIVE WEALTH MANAGEMENT SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
For The Six months Ended June 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
agreement 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>
June 30, 1997
-------------
<S> <C>
Furniture and fixtures $ 37,951
Equipment 33,240
Leasehold improvements 6,622
-------------
77,813
Less: Accumulated Depreciation (46,682)
-------------
$31,131
=============
</TABLE>
Note 4 - Operating Leases
Rent expense for the six months ended June 30, 1997 and 1996 was
$43,411 and $46,387, 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 six month periods ended June 30, 1997 and 1996.
The Company had net capital of $37,864 or 213% and $29,952 or 165%
of the minimum requirement at June 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 Six months Ended June 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 six months ended June 30, 1997 and 1996, companies
affiliated with the Company's majority stockholder shared office
space with the Company and paid rent of $11,448 and $11,739,
respectively, for the use of the space.
During the six months ended June 30, 1997, the Company paid rent of
approximately $18,000 to the Company's majority stockholder for the
use of office space.
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 June 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 June 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 Six months Ended June 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 June
30, 1997, there were no shares sold under this private placement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
Item 2. Management's Discussion and Analysis of Financial
Condition and
Results of Operation.
Current Operations
The table set forth below reflects the source of revenue earned
by the Company during the six months ended June 30, 1997 and
1996.
<TABLE>
<CAPTION>
1997 1996 Increase/
(Decrease)
<S> <C> <C> <C>
Source of Revenue Earned
Commission:
Proprietary Products $ 47,500 $ 19,634 $ 27,866
Transactional 963,740 790,290 173,450
Mutual Fund Sales 293,144 364,700 (71,556)
Insurance/Annuity 383,761 103,491 280,270
Sale of non-proprietary
limited partnerships 131,436 148,852 (17,416)
----------- -------- ----------
Total Commissions 1,819,581 1,426,967 392,614
Other:
Underwriting fees 26,100 6,500 19,600
Miscellaneous 70,400 31,895 38,505
----------- --------- ----------
Total $ 1,916,081 $1,465,362 $450,719
=========== ========= ==========
</TABLE>
The Company received commissions and underwriting fees of $73,600
and $26,134 from the sale of proprietary products or commissions
which were "in house" in character for the six months ended June
30, 1997 and 1996, respectively. The increase of $47,466, or
182% from the six 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
proprietary products and underwritings in the second and third
quarters of fiscal 1997. This is due to the Company s private
offering of its common shares discussed in note 8 and an offering
of an affiliated company. It is anticipated that both offerings
will be open during the third and fourth fiscal quarters of 1997.
Transactional revenues, increased by $173,450 or 22% for the six
months ended June 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 increase is
expected to continue to increase throughout fiscal 1997, with the
addition of the Delray Beach office during late June 1997.
Mutual fund revenue decreased approximately $71,556 or 20% for
the six months ended June 30, 1997 as compared to the same period
ended 1996.
Limited partnership revenue decreased $17,416 or 12% for the six
months ended June 30, 1997 compared to the same period ended
1996.
The decreases in mutual fund and limited partnership revenue of
$88,972 are offset with an increase of insurance/annuity revenue.
Insurance/annuity revenue incre
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,134
<SECURITIES> 44,413
<RECEIVABLES> 288,401
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 333,948
<PP&E> 77,813
<DEPRECIATION> (46,682)
<TOTAL-ASSETS> 365,078
<CURRENT-LIABILITIES> 267,273
<BONDS> 0
0
0
<COMMON> 5,068
<OTHER-SE> 92,737
<TOTAL-LIABILITY-AND-EQUITY> 365,078
<SALES> 0
<TOTAL-REVENUES> 1,916,081
<CGS> 0
<TOTAL-COSTS> 1,951,251
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (35,170)
<INCOME-TAX> 0
<INCOME-CONTINUING> (35,170)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (35,170)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
