Form 10-KSB
U.S. Securities and Exchange Commission
Washington D.C. 20549
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 33-70334-A
INTERNATIONAL ASSETS HOLDING CORPORATION
(Exact name of small business issuer as specified in its charter)
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Delaware 59-2921318
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
250 Park Avenue South, Suite 200
Winter Park, FL 32789
(Address of principal executive offices)
(407) 629-1400
(Issuer's telephone number)
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.01 par value
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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 [ ].
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will
be contained, to the best of the registrant's knowledge, in definitive
proxy or information statements incorporated by reference in part III of
this Form 10-KSB or any amendment to this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year: $11,321,295
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the last sale price of such stock as of December
20, 1996: $1,877,469
The number of shares outstanding of Common Stock was 1,444,769 as of
December 20, 1996.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the registrants Proxy Statement, to be filed, for the Annual
Meeting of Stockholders to be held in February 1997 are incorporated by
reference into Part III.
Transitional small business disclosure format Yes [ ] No [X]
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INTERNATIONAL ASSETS HOLDING CORPORATION
1996 FORM 10-KSB
TABLE OF CONTENTS
PART I
Item 1. Description of Business...................................... 3
Item 2. Description of Property...................................... 10
Item 3. Legal Proceedings............................................ 10
Item 4. Submission of Matters to a Vote of Security Holders.......... 10
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters.................................. 11
Item 6. Management's Discussion and Analysis or Plan of Operation.... 12
Item 7. Consolidated Financial Statement............................. 15
Item 8. Changes In and Disagreements With Accountants on Accounting
and Financial Disclosure..................................... 16
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act............ 16
Item 10. Executive Compensation....................................... 18
Item 11. Security Ownership of Certain Beneficial Owners and Management 18
Item 12. Certain Relationships and Related Transactions............... 18
Item 13. Exhibits and Reports on Form 8-K............................. 18
Signatures................................................... 21
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
General
International Assets Holding Corporation is a Delaware corporation formed in
October 1987 for the purpose of serving as a holding company for International
Assets Advisory Corp. ("IAAC") and other subsidiaries. Currently, the Company
has five wholly owned subsidiaries, IAAC, Global Assets Advisors, Inc. ("GAA"),
International Asset Management Corp. ("IAMC"), International Financial Products,
Inc. ("IFP") and GlobalNet Securities, Inc. ("GNSI"). All of the Company's
subsidiaries are Florida corporations. As used in this Form 10-KSB, the term
"Company" refers, unless the context requires otherwise, to International Assets
Holding Corporation and its subsidiaries IAAC, GAA, IAMC, IFP and GNSI. IAAC
operates a full-service securities brokerage firm specializing in global
investing on behalf of its clients. GAA provides investment advisory and money
management services. IAMC functions as the manager of the physical assets of the
Company. IFP was formed as a financial publishing and marketing group to sell
products which are not investments, but are related to the global financial
market. GNSI was formed to take advantage of future technology developments
within the securities industry.
IAAC was formed in April 1981 by the Company's Chairman of the Board, Diego J.
Veitia. During its first two years of business, IAAC focused primarily on
private placements. In 1982, IAAC entered the securities brokerage business and
became a member of the National Association of Securities Dealers ("NASD").
Since 1982, IAAC has focused on the sale of global debt and equity securities to
high net worth private clients and, to a lesser degree, small to medium size
financial institutions. Management believes that, until the last three to five
years, the global securities market has been relatively neglected by the major
securities firms and is a growing segment of the securities business.
The Company believes that it has developed an effective approach for attracting
the investment capital of high net worth private clients. This approach centers
on the need for such investors to diversify their investment portfolios by
purchasing global debt and equity securities. The reason for such
diversification is based primarily on the under-performance over the last two
decades of the U.S. dollar and equity markets versus certain foreign currencies
and equities. On the equity side, the Company emphasizes both capital and
currency appreciation. In the sale of debt securities, the higher yields
available overseas and the potential for currency appreciation are stressed.
Historically, the securities industry's focus for channeling private client
funds into international investments has been through mutual funds. While the
Company believes that its expertise in the international markets puts it in a
unique position to add value in the sale of global products such as mutual
funds, its main focus is on the direct investment in carefully selected
international securities by its private clients. The Company has developed an
experienced team specializing in the selection, research, trading, currency
exchange and execution of individual equity and fixed income products on a
global basis.
The Company acts as an introducing broker, in that it does not clear its own
securities transactions, but instead contracts to have such transactions cleared
through a clearing broker on a fully disclosed basis. In a fully disclosed
clearing transaction, the identity of the Company's client is known to the
clearing broker. Generally, a clearing broker physically maintains the client's
account and performs a variety of services as agent for the Company, including
clearing all securities transactions (delivery of securities sold, receipt of
securities purchased and transfer of related funds).
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IAAC is currently registered as a securities broker-dealer under the Securities
Exchange Act of 1934 and the state securities statutes of 49 states and the
District of Columbia. IAAC is a member of the NASD, which is a self-regulatory
body exercising broad supervisory powers over securities broker-dealers
operating in the United States. IAAC is also a member of the Securities Investor
Protection Corporation ("SIPC"), which is a public corporation established to
afford a measure of protection to the account balances of customers of
securities broker-dealers that become insolvent.
GAA is registered with the Securities and Exchange Commission ("SEC"), the State
of Florida and the State of California as an investment advisor. Investment
advisor registration in other states will proceed as is required by the various
states. This investment advisor's primary focus is on the development of
specialized accounts for high net worth private clients. GAA is dedicated to
providing the individual investor with domestic and international money
management and offers a series of investment portfolios tailor-made for the
individual investor seeking investment diversification across a variety of
economies and currencies in order to provide the opportunity for higher overall
investment returns. GAA plans to again capitalize on its experienced teams
specializing in the selection, research, trading, currency exchange and
execution of individual equity and fixed income products on a global basis.
IAMC was formed by the Company in 1988 to hold certain equipment and, in turn,
lease such equipment to IAAC. IAMC's present function is to hold all of the
physical assets of the Company.
IFP was formed in 1995 to publish, advertise, and sell a wide range of
informational investment tools, such as books, newsletters, tapes, and faxes,
targeted at knowledge-seeking individual global investors. As of October 1996,
Company funding for all current IFP operating activities has ceased due to the
unsuccessful efforts to date in generating revenues. However, the legal entity
will remain active in its state of incorporation.
GNSI was formed by the Company in 1995 to capitalize on the use of recent and
future technology developments that relate to the securities industry. As of
December 20, 1996, no operating activities have been commenced by this
subsidiary.
Business Strategy
The Company's business strategy is to use its marketing and global securities
expertise to take advantage of opportunities for growth in the global securities
market. Management believes that there are significant opportunities for growth
in the specialized account and institutional sales areas of the international
securities market.
The Company believes that its expertise in the global securities area presents
an opportunity for the Company to expand its market niche into small
institutional sales. The Company further believes that this market niche has
been relatively neglected by the major international brokerage firms. Examples
of the type of institutions the Company intends to target are pension funds of
corporations or municipalities, money managers, and the trust departments of
smaller commercial banks and other independent broker-dealers.
The Company expects to continue creating discretionary accounts with
specifically designated objectives in a defined investment area. The Company
also intends to continue to expand its activities in both the private client and
institutional sectors of international securities. In addition, the Company
plans to continue to sponsor the development of proprietary unit investment
trusts, where management believes it can add value for its clients.
The International Securities Markets
The Company believes that investment in the international markets by U.S.
investors will grow very rapidly in coming years, as international investments
become a larger portion of the world equity markets. According to the
International Finance Corporation, a member of the World Bank Group, in 1984,
the United States stock markets' share of the world market capitalization was
approximately 54%. At the end of 1995, that share had fallen to approximately
39%. In the twelve years from 1984 to 1995, non-U.S. market capitalization grew
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by approximately 581%, from approximately U.S. $1.6 trillion to approximately
U.S. $10.9 trillion. Similarly, in 1984, U.S. trading volume comprised
approximately 62% of the world's trading volume, while in 1995 this percentage
had fallen to approximately 43%. From 1984 to 1995, non-U.S. trading volume grew
approximately 1,250% from approximately U.S. $486 billion to approximately U.S.
$6.6 trillion.
Management believes that the two main justifications for the rapid growth in
international investing by U.S. investors are diversification and potentially
superior investment returns. As an example, the US market (represented by the
Standard & Poors' 500) has provided an annual compounded return of approximately
16.26% from 1984 to 1995, while investing in the Morgan Stanley Capital
International Europe-Australia-Far East Index would have returned approximately
17.29% over the same time period.
While investing in international markets involves risk considerations not
typically associated with investing in securities of U.S. issuers, the Company
believes that such considerations are outweighed by the benefits of
diversification and potentially superior returns.
Among the considerations involved in investing in international markets are that
less information may be available about foreign companies than about domestic
companies. Foreign companies are not generally subject to uniform accounting,
auditing and financial reporting standards or to other regulatory practices and
requirements comparable to those applicable to domestic companies. In addition,
unlike investing in U.S. companies, securities of non-U.S. companies are
generally denominated in foreign currencies, thereby subjecting each security to
changes in value when the underlying foreign currency strengthens or weakens
against the U.S. dollar. Currency exchange rates generally are determined by the
forces of supply and demand in the foreign exchange markets and the relative
merits of investments in different countries as seen from an international
perspective. Currency exchange rates can also be affected unpredictably by
intervention of U.S. or foreign governments or central banks or by currency
controls or political developments in the U.S. or abroad.
The value of international fixed income products also responds to interest rate
changes in the U.S. and abroad. In general, the value of such products will rise
when interest rates fall, and fall when interest rates rise. However, interest
rates in each foreign country and the U.S. may change independently of each
other.
International markets and securities may also not be as liquid as U.S.
securities and their markets. Securities of some foreign companies may involve
greater risk than securities of U.S. companies. Investing in international
securities may further result in higher expenses than investing in domestic
securities because of the cost of converting foreign currencies to U.S. dollars
and expenses relating to foreign custody. Investment in international securities
may also be subject to local economic or political risks, including instability
of some foreign governments, the possibility of currency blockage or the
imposition of withholding taxes on dividend or interest payments and the
potential for expropriation, nationalization or confiscatory taxation and
limitations on the use or removal of funds or other assets.
The Brokerage Business
For the fiscal years ended September 30, 1996 and 1995, approximately 74% and
78%, respectively, of the Company's total revenues were derived from commissions
earned from transactions with its retail clients. The Company's client base is
composed primarily of high net worth individuals. The average age of its clients
is approximately 56 and a substantial portion are retirees. Clients are
distributed nationwide. However, a particularly large number of clients reside
in New York, Pennsylvania, Illinois, Florida, Texas and California. The Company
has approximately 10,300 active client accounts at September 30, 1996.
Retail commissions are charged on both exchange and over-the-counter agency
transactions based on a schedule, which is subject to change, that the Company
has formulated in accordance with guidelines promulgated by the NASD. During
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fiscal 1995, the Company also began selling proprietary Unit Investment Trust
("UIT") products. The Company acts as the underwriter for these UIT products.
The Company also earned commission income from institutional transactions
directed to its trading department by a closed-end management investment company
managed by a company affiliated through common ownership. During the years ended
September 30, 1996 and 1995, the institutional commissions earned from this
investment company amounted to $22,362 and $32,272, respectively. As of October
1996, the management of the investment company changed ownership and the Company
will no longer receive such institutional commissions. The termination of this
institutional relationship has no material effect on the Company due to the
small amount, less than .3% of total commission revenues for 1996, of such
commission revenues. Nevertheless, the Company is also commencing expanded
efforts to enhance its institutional revenues by the dedication of staff and
other resources towards seeking new institutional revenue sources. This new
business strategy is unrelated to the loss of the nominal institutional revenue
discussed above.
The Company has also developed a niche market in the sale of international debt
securities. The Company uses its capital to buy a block of debt securities and,
in turn, makes offerings as low as $10,000 available to its private clients.
Transactions in securities may be effected on either a cash or margin basis.
Through its clearing agent, the Company allows its clients to maintain margin
accounts for securities purchased or sold short through the Company.
Principal Transactions
In addition to executing trades as agent, the Company acts as a principal in
executing trades in over-the-counter debt and equity securities. When
transactions are executed by the Company on a principal basis, the Company
receives, in lieu of commissions, markups or markdowns which constitute revenues
from principal transactions. To facilitate trading by its clients, the Company
buys, sells and maintains inventories of approximately 75 primarily
international securities.
The Company places its capital at risk by also trading as a "market maker" in a
select group of approximately 35 international securities which are traded by
the Company's clients. The Company's emphasis in such trades is on earning
revenues from the spread between customer buy and sell orders.
Revenues from principal transactions depend upon the general trend of prices and
level of activity in the securities markets, the skill of employees responsible
for managing the Company's trading accounts and the size of its inventories. The
activities of the Company in trading as a principal require the commitment of
capital and create an opportunity for profit and risk of loss due to market
fluctuations.
The level of securities positions carried in the Company's trading accounts
fluctuates significantly. The size of such positions on any one date may not be
representative of the Company's exposure on any other date because the
securities positions vary substantially depending upon economic and market
conditions, the allocation of capital among types of inventories, customer
demands and trading volume. The aggregate value of inventories that the Company
may carry is limited by certain requirements of the SEC Net Capital Rule. See
"Net Capital Requirements."
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Marketing
The Company believes that its ability to deliver its global securities message
in a cost effective manner is a key element to its operations. The Company uses
a variety of marketing tools. These include presenting seminars, writing
articles for various publications, public appearances by Mr. Veitia, the
Company's Chairman and Chief Executive Officer, advertising in various media and
using targeted direct mail.
After some experimentation with a variety of marketing tools in the Company's
early years, management has found direct mail marketing to be the most cost
effective mechanism for attracting customers. The Company believes that it has
developed an expertise in attracting high net worth clients through the use of
low cost, direct mail marketing techniques. The Company further believes that
the most important aspect of its direct mail marketing effort is its database of
potential clients. The Company's database currently has access to over 450,000
names, including clients and potential clients.
In addition to direct mail marketing, the Company uses several other marketing
tools. The Company presents seminars and provides clients with two monthly
newsletters, "Global Insights" and "The International Assets Advisory". The
Company also sends existing clients separate mailings, such as research reports,
with a narrower focus than its newsletters.
Competition
The company encounters competition in conducting its business and such
competition is expected to continue. Although the securities industry, in
general is intensely competitive, the Company believes that competition is less
intense in its niche market. However, the Company competes with many firms with
capital and personnel resources far in excess of those which are presently
available to the Company or which are expected to be available to the Company in
the future. Additionally, the Company is affected and will continue to be
affected by the investing public's interest in international securities. In this
regard, international securities are in competition with other investment
vehicles offered by other securities broker-dealers and financial intermediaries
such as commercial banks, savings banks, insurance companies and similar
institutions. The Company believes that the principal competitive factors in the
securities industry are the quality and ability of professional personnel and
the relative prices of services and products offered. The Company believes that,
to date, it has been able to compete favorably with other broker-dealers and
financial intermediaries primarily on the basis of the quality of its services
and the depth of its expertise in the international securities market.
Research Services
The Company's research activities include reviewing general market conditions,
specific industries, and individual companies and providing information with
respect thereto in monthly newsletters, which discuss international economic and
currency trends and give readers specific investment recommendations and ideas.
These services are made available without charge to clients.
The Company's investment research committee (the "Investment Committee") makes
decisions concerning the overall investment policy of the Company based on its
assessment of macro-economic and macro-market factors. The Investment Committee
also makes determinations regarding the allocation of Company and client assets
into geographic, currency, and security type (debt, equity and cash) categories.
After this allocation decision has been made, the Investment Committee
recommends individual securities for investment. The focus is on the analysis of
a particular company and its debt or equity securities.
Once the investment committee has made its initial recommendations, a
subcommittee analyzes such recommendations to determine which recommendations
are appropriate for the Company's client base. The subcommittee focuses on
equity securities which are priced at a retail level, generally $50 per share or
less. In addition, since private clients are less diversified than institutions,
there is an emphasis on blue-chip and higher quality investments. Following its
analysis of these factors, the subcommittee creates an approved list of
international securities from which account executives can make recommendations
to their clients.
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Administration and Operations
The Company's trading and operations personnel are responsible for executing
orders, transmitting information on all transactions to its clearing broker,
mailing confirmations to clients, receiving all funds and securities, depositing
all client funds into a bank account in the name of the clearing broker and
transmitting securities to the Company's clearing broker for custody.
The Company also utilizes the services of a securities clearing broker. The
Company's clearing broker performs many back office functions for the Company in
connection with its duties as custodian of all client funds and securities. When
a new account is established, the new account information is sent to the
clearing broker, which in turn sets up and maintains the information for the
account. All securities and monies are held in custody by the clearing broker.
The clearing broker prepares and mails account statements directly to clients on
behalf of the Company. Transaction confirmations for customers are formatted
through the clearing broker's wire system for printing and mailing by IAAC. The
Company's brokers and operations staff are able to receive on-line account
information from the clearing broker. By engaging the processing services of a
clearing broker, the Company is exempt from certain reserve requirements imposed
by Rule 15c3-3 under the Securities Exchange Act of 1934, as amended. See "Net
Capital Requirements."
The Company's clearing broker also extends credit to the Company and its
customers to enable them to purchase securities on margin. Margin accounts allow
customers to deposit less than the full cost of a security purchased with the
balance of the purchase price being provided as a loan to the customer secured
by the securities purchased. The amount of the loan in purchasing securities on
margin is subject to both the margin regulations ("Regulation T") of the Board
of Governors of the Federal Reserve System and the Company's clearing broker's
internal policies. In most transactions, Regulation T limits the amount loaned
to a client for the purchase of a particular security to 50% of the purchase
price.
The Company maintains internal records of all transactions, which are compared
on a daily basis to clearing transaction generated reports. The Company uses
automated computer capabilities for these functions, which it will continue to
expand.
The Company believes that its internal controls and safeguards against
securities theft are adequate. As required by the NASD and other authorities,
the Company carries a fidelity bond covering any loss or theft of securities, as
well as embezzlement and forgery. The Company annually assesses the total
required bond coverage and increased such coverage from $125,000 to $180,000 in
November 1996. The Company believes total coverage of $180,000 (with a $5,000
deductible provision) is adequate for the upcoming year.
The Company's administrative staff oversees internal financial controls,
accounting functions, office services and compliance with regulatory
requirements.
Regulation
The securities industry in the United States is subject to extensive regulation
under Federal and state laws. The SEC is the Federal agency charged with
administration of the Federal securities laws. Much of the regulation of
broker-dealers, however, has been delegated to self-regulatory organizations,
principally the NASD and the national securities exchanges. The self-regulatory
organizations adopt rules (which are subject to approval by the SEC) that govern
the industry and conduct periodic examinations of member broker-dealers.
Securities firms are also subject to regulation by state securities commissions
in the states in which they do business. IAAC is currently registered as a
broker-dealer in 49 states and the District of Columbia.
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The regulations to which broker-dealers are subject cover all aspects of the
securities business, including sales methods, trading practices among
broker-dealers, capital structure of securities firms, uses and safekeeping of
customers' funds and securities, record keeping, the conduct of directors,
officers and employees and supervision of branches and registered
representatives. Lack of adequate supervision could subject the broker-dealer to
regulatory sanctions. Additional legislation, changes in rules promulgated by
the SEC and by self-regulatory organizations, or changes in the interpretation
or enforcement of existing laws and rules often directly affect the method of
operation and profitability of broker-dealers. The SEC, the self-regulatory
organizations and state securities commissions may conduct administrative
proceedings, which can result in censure, fine, suspension or expulsion of a
broker-dealer, its officers or employees. Such administrative proceedings,
whether or not resulting in adverse findings, can require substantial
expenditures. The principal purpose of regulation and discipline of
broker-dealers is the protection of customers and the securities markets, rather
than the protection of creditors and stockbrokers of broker-dealers.
IAAC is required by Federal law to belong to SIPC. The SIPC fund provides
protection for securities held in customer accounts of up to $500,000 per
customer, with a limitation of $100,000 on claims for cash balances. In
addition, securities in an account at the Company's clearing broker are afforded
additional protection by the clearing broker of up to $9,500,000.
During IAAC's 1991 examination by the NASD, several administrative and
operations violations were alleged. IAAC, without admitting or denying the
allegations, settled the matter in June 1992 by paying a fine of $15,500 and
instituting procedures to prevent future deficiencies in specified areas.
Net Capital Requirements
IAAC is subject to the SEC's uniform net capital rule (Rule 15c3-1 (the
"Rule")), which is designed to measure the financial integrity and liquidity of
a broker-dealer and the minimum net capital deemed necessary to meet its
commitments to its customers. The Rule provides that a broker-dealer doing
business with the public must not permit its aggregate indebtedness to exceed 15
times its net capital (the "Basic Method") or, alternatively, that it not permit
its net capital to be less than 2% of aggregate debit items computed in
accordance with the Rule (the "Alternative Method"). The Rule requires IAAC to
maintain minimum net capital at an amount equal to the greater of $100,000,
6-2/3% of aggregate indebtedness or $2,500 for each security in which it makes a
market (unless a security in which it makes a market has a market value of $5 or
less, in which event the amount of net capital shall not be less than $1,000 for
each such security) with a ceiling of $1,000,000.
Any failure to maintain the required net capital may subject a broker-dealer to
expulsion by the NASD, the SEC or other regulatory bodies, and may ultimately
require its liquidation.
IAAC is in compliance with the Rule, as well as the
applicable minimum net capital requirements of the NASD. IAAC has elected to
compute its net capital under the Basic Method. In computing net capital under
the Rule, various adjustments are made to net worth with a view to excluding
assets not readily convertible into cash and to providing a conservative
statement of other assets, such as a firm's position in securities. To that end,
a deduction is made against the market value of securities to reflect the
possibility of a market decline before their disposition. For every dollar that
net capital is reduced, by means of such deductions or otherwise (for example,
through operating losses or capital distributions), the maximum aggregate
indebtedness a firm may carry is reduced. Thus, net capital rules, which are
unique to the securities industry, impose financial restrictions upon the
Company's business that are more severe than those imposed on other types of
businesses. Compliance with the net capital rules may limit the operations of
the Company because they require minimum capital for such purposes as
underwriting securities distributions, and maintaining the inventory required
for trading in securities.
Net capital changes from day to day, but at September 30, 1996 and 1995, IAAC
had excess net capital of $2,267,549 and $1,345,248, respectively, and a ratio
of aggregate indebtedness to net capital of .51 to 1 and .80 to 1, respectively.
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Pursuant to paragraph (k)(2)(ii) of SEC Rule 15c3-3, IAAC is exempt from
customer reserve requirements and providing information relating to possession
or control of securities.
Employees
At September 30, 1996, the Company employed 75 employees, of which 73 were full
time employees. Of such employees, 9 had managerial responsibilities, 38 were
account executives and 28 had administrative duties, including persons engaged
in other service areas such as research, money management, trading, accounting,
operations, compliance and marketing. The Company considers its relationship
with employees to be good.
Compliance with Environmental Regulations
The Company must comply with various federal, state and local regulations
relating to the protection of the environment. Federal, state and local
provisions which have been enacted or adopted regulating the discharge of
materials into the environment or otherwise relating to the protection of the
environment will not, in the opinion of the Company, have a material effect on
the capital expenditures, earnings, or the competitive position of the Company.
ITEM 2. DESCRIPTION OF PROPERTY.
Currently the Company occupies leased office space of approximately 13,815
square feet at 250 Park Avenue South, Winter Park, Florida. The lease expires in
November, 1999. The Company believes that suitable additional space will be
available as needed to accommodate the expansion of its operations.
ITEM 3. LEGAL PROCEEDINGS.
There are no legal proceedings to which the Company is a party, which, in the
opinion of management, could have a material adverse effect on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock trades on the NASDAQ SmallCap Market under the symbol
IAAC. The Company's Redeemable Warrants trade separately on the SmallCap Market
under the symbol IAACW. The Common Stock began trading independently from the
Redeemable Warrants on NASDAQ effective February 11, 1995. Prior to February 11,
1995, one share of Common Stock and a Warrant, which when exercised enabled the
holder thereof to purchase one share of the Company's Common Stock, traded as
one Unit on the NASDAQ SmallCap Market under the symbol IAACU. The Units began
trading on NASDAQ in March, 1994 and ceased trading in February, 1995.
The following table sets forth, for the periods indicated, the range of high and
low sales prices per Unit, Common Share and Warrant as reported by NASDAQ, which
prices do not include retail mark-ups, mark-downs, or commissions and represent
prices between dealers and not necessarily actual transactions.
High Low
The Company's Common Stock, as traded under the symbol IAAC
Fiscal Year 1995
Second Quarter... ...................... .....................3 2 1/2
Third Quarter.................................................3 1/4 2 1/4
Fourth Quarter................................................3 1/8 1 7/8
Fiscal Year 1996
First Quarter.................................................3 1/2 2 1/4
Second Quarter................................................4 1/4 2 1/2
Third Quarter.................................................4 1/2 3 1/2
Fourth Quarter................................................4 1/2 3 1/2
The Company's Warrants, as traded under the symbol IAACW
Fiscal Year 1995
Second Quarter..................................................1/4 1/4
Third Quarter...................................................3/8 1/16
Fourth Quarter..................................................1/16 1/32
Fiscal Year 1996
First Quarter...................................................1/16 1/32
Second Quarter..................................................1/16 1/32
Third Quarter...................................................3/16 1/16
Fourth Quarter..................................................1/8 1/8
The Company's Units, as traded under the symbol IAACU
Fiscal Year 1995
First Quarter.................................................5 2 3/4
Second Quarter................................................3 5/16 2 1/8
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There were approximately 228 shareholders of record of the Common Stock and
approximately 283 shareholders of record of the Redeemable Warrants at September
30, 1996. The total shareholders of record stated does not include the
approximate number of total beneficial shareholders.
The Company has never paid or declared cash dividends on its Common Stock and
does not intend to pay dividends on its Common Stock in the foreseeable future.
The Company presently expects to retain its earnings to finance the development
and expansion of its business. The payment by the Company of dividends, if any,
on its Common Stock in the future is subject to the discretion of the Board of
Directors and will depend on the Company's earnings, financial condition,
capital requirements and other relevant factors.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The Company's principal activities, securities brokerage and the trading of and
market-making in securities, are highly competitive and extremely volatile.
The earnings of the Company are subject to wide fluctuations since many factors
over which the Company has little or no control, particularly the overall volume
of trading and the volatility and general level of market prices, may
significantly affect its operations.
The Company's assets have increased from $6,101,325 in 1995 to $7,528,292 in
1996 and the Company's liabilities increased from $1,543,837 to $2,285,911 in
1996. The increase in assets is primarily attributable to the net earnings of
the Company and the corresponding increase in the amount of total liabilities at
September 30, 1996 as compared to September 30, 1995. The increase in total
liabilities is primarily attributable to an increase in Securities sold, but not
yet purchased as of September 30, 1996.
Results of Operations: 1996 Compared to 1995
The Company's revenues are derived primarily from commissions earned on the sale
of securities and net dealer inventory and investment gains (trading income) in
securities purchased or sold for the Company's account. For the years ended
September 30, 1996 and 1995, approximately 74% and 78%, respectively, of the
Company's revenues were derived from commissions earned on the sale of
securities, with approximately 21% and 17%, respectively, of revenues coming
from net dealer inventory and investment gains.
Total revenues increased by approximately 22% to $11,321,295 in 1996 from
$9,265,994 in 1995. This increase was derived primarily from a $1,160,278
increase in commission revenue primarily due to an increase in security order
flow. Commission revenue increased by approximately 16% to $8,386,828 for 1996
from $7,226,550 for 1995. Revenues from commissions are affected by both trading
volume and the dollar amount of trades. The average number of account executives
decreased from 41 in 1995 to 40 in 1996, or a decrease of approximately 2%.
Based on the number of trades processed, 1996 volume increased approximately 13%
from 1995 levels. This 13% increase in trades processed volume is directly
related to the 16% increase in commission revenue for 1996 over 1995 levels. The
increase in commission revenue was also favorably impacted by a higher dollar
average of trades for 1996 over 1995 amounts.
Net dealer inventory and investment gains increased by approximately 51% to
$2,340,719 for 1996 from $1,554,891 for 1995. The increase in net dealer
inventory and investment gains is primarily attributable to increases in both
retail and wholesale trading activities. The Company's trading department
primarily concentrates on global securities which it believes are likely to be
traded by the Company's clients. By focusing on these types of securities,
trading income is more directly related to commission income and order flow.
<PAGE>
13
Interest and dividend revenue increased by approximately 17% to $263,951 for
1996 from $226,351 in 1995. This increase is primarily attributable to higher
yields on securities and investments held by the Company throughout the 1996
fiscal year.
Total expenses increased by $1,783,821, or approximately 21% from 1995 as
compared to 1996. This increase in total expense is proportional to the overall
22% increase in total revenues. The major expenses incurred by the Company
relate to employees' compensation and benefits, direct costs of securities
operations, such as commissions and clearing fees, and communications and
promotions expense.
Commissions and clearing fees increased by $635,411, or approximately 16% from
1995 as compared to 1996. This increase in commissions and clearing fees is
directly related to the corresponding 16% increase in commission revenue.
Employee compensation and benefits increased by $591,432, or approximately 31%
from 1995 as compared to 1996. Approximately $250,000 of the increase in
employee compensation and benefit expense is due to increases in performance
based bonus accruals, based on the increase in income before taxes and trading
revenue by the Company, during 1996 as compared to 1995. Approximately $271,000
of the increase in employee compensation and benefits is due to additional
employees hired by the company and overall wage increases and the remaining
approximate $70,000 is due to increases in the cost of benefits and other
compensation.
Promotions expense increased by $340,600, or 35% from 1995 as compared to 1996.
This increase is primarily due to promotional expenses incurred by IFP during
fiscal 1996. The Company anticipates a reduction in overall promotional expenses
for fiscal year 1997 due to termination of internal funding for this
subsidiary's promotional activities as of October 1996.
Communications expense decreased by $23,531, or approximately 6% from 1995 as
compared to 1996. This decrease was due to reduced general corporate use
printing activities. Occupancy and equipment rental expense increased by
$70,203, or 25% from 1995 as compared to 1996. This increase was due to an
expansion of office space as well as scheduled annual lease increases.
As a result of the above, income before income taxes increased by $271,480, or
approximately 29% in 1996 over 1995. The Company's effective income tax rate was
approximately 40% for 1996.
1995 Compared to 1994
Total revenues increased by approximately 5% to $9,265,994 in 1995 from
$8,832,437 in 1994. This increase was derived primarily from a $349,464 increase
in net dealer inventory and investment gains due to personnel and technology
expansions in the trading department. The Company's trading department primarily
concentrates on global securities which it believes are likely to be traded by
the Company's clients. By focusing on these types of securities, trading income
is more directly related to commission income and order flow.
Interest and dividend revenue increased by approximately 68% to $226,351 for
1995 from $134,750 in 1994. This increase is primarily attributable to a full
year's income from the Company's short-term investments which were acquired with
a portion of the proceeds of its initial public offering which concluded in
March, 1994.
Revenues from commissions declined by 1.5% from $7,332,601 for 1994 to
$7,226,550 for 1995. Revenues from commissions are affected by both trading
volume and the dollar amount of trades. The average number of account executives
increased from 37 in 1994 to 41 in 1995 or an increase of approximately 11%.
Based on the number of trades processed, 1995 volume decreased approximately 7%
from 1994 levels. This decrease was somewhat reflected by the 1.5% decrease in
commission income for 1995 under 1994 levels. However, the decrease in the
number of trades processed was partially offset by a higher dollar average of
trades for 1995 over 1994 amounts.
<PAGE>
14
Total expenses increased by $352,019, or approximately 4% from 1994 as compared
to 1995. This increase in total expenses is proportional to the overall 5%
increase in total revenue and trading activity.
Commissions and clearing fees decreased by approximately 6% from 1994 due to the
related 1.5% decrease in commission revenue. During 1995, the Company began
selling UIT products that offer increased commission profitability for the
initial year of each UIT. The Company acts as the underwriter for these UIT
products. The offering of these proprietary products contributed to the overall
profitability increase of the Company in 1995. Employee compensation and
benefits increased by $130,080, or approximately 7% from 1994 as compared to
1995 due to overall wage increases and an increased staff for the entire fiscal
year compared to 1994 where additional staff were added throughout the fiscal
year.
Overall promotion and communication expenses increased by 27% in 1995 from 1994
levels. This increase is primarily due to additional personnel and increased
telephone expenses and increased promotional activities in 1995 compared to
1994. Increases in mass mailings, the use of television commercials, and the
1995 International Assets Investors Conference held in May, 1995 account for a
large portion of the increase in promotion costs.
As a result of the above, income before income taxes, cumulative effect of
change in accounting principle and minority interest in consolidated subsidiary
increased by approximately $82,000, or 9% in 1995 over 1994. The Company's
effective income tax rate was approximately 39% for 1995.
Liquidity and Capital Resources
A substantial portion of the Company's assets are liquid. At September 30, 1996,
approximately 87% of the Company's assets consisted of cash, cash equivalents,
and marketable securities including marketable investments. All assets are
financed by the Company's equity capital, short-term borrowings from securities
lending transactions and other payables.
The Company is subject to the requirements of the SEC and the NASD relating to
liquidity and net capital levels. At September 30, 1996, the Company had net
capital of $2,367,549, which was $2,267,549 in excess of its minimum net capital
requirement at that date.
In the opinion of management, the Company's existing capital and cash flow from
operations will be adequate to meet the Company's capital needs for at least the
next 12 months in light of known and reasonably estimated trends. In addition,
management believes that the Company will be able to obtain additional short or
medium-term financing that may be desirable in the ordinary conduct of its
business. The Company has no plans for additional financing and there can be no
assurance such financing will be available.
Effects of Inflation
Because the Company's assets are, to a large extent, liquid in nature, they are
not significantly affected by inflation. Increases in the Company's expenses,
such as employee compensation, rent and communications, due to inflation, may
not be readily recoverable in the prices of services offered by the Company. In
addition, to the extent that inflation results in rising interest rates and has
other adverse effects on the securities markets and on the value of the
securities held in inventory, it may adversely affect the Company's financial
position and results of operations.
<PAGE>
15
ITEM 7. CONSOLIDATED FINANCIAL STATEMENTS.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Independent Auditors' Report............................................ F-1
Consolidated Balance Sheets as of
September 30, 1996 and 1995........................................ F-2
Consolidated Statements of Operations for the Years Ended
September 30, 1996 and 1995........................................ F-4
Consolidated Statements of Stockholders' Equity for the Years Ended
September 30, 1996 and 1995........................................ F-6
Consolidated Statements of Cash Flows for the Years Ended
September 30, 1996 and 1995........................................ F-7
Notes to Consolidated Financial Statements.............................. F-9
<PAGE>
F-1
Independent Auditors' Report
--------------------------
The Board of Directors
International Assets Holding Corporation
and Subsidiaries:
We have audited the accompanying consolidated balance sheets of International
Assets Holding Corporation and Subsidiaries as of September 30, 1996 and 1995
and the related consolidated statements of operations, stockholders' equity and
cash flows for the years then ended. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of International Assets
Holding Corporation and Subsidiaries as of September-30, 1996 and 1995 and the
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Orlando, Florida
November 1, 1996
<PAGE>
F-2
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
September 30, 1996 and 1995
Assets 1996 1995
----- ---- ----
Cash ...................................... $ 446,936 379,105
Cash deposits with clearing broker ........ 2,382,119 1,186,851
Foreign currency .......................... 428 38,915
Investments (note 3) ...................... 1,318,997 1,760,577
Receivable from clearing broker ........... 237,136 152,734
Receivable from affiliated company (note 2) 26,542 40,772
Other receivables ......................... 108,085 122,902
Securities owned, at market value (note 4) 2,470,595 1,999,096
Deferred income tax benefit ............... 27,599 32,549
Property and equipment, at cost:
Leasehold improvements ...... 40,404 40,404
Furniture and equipment ..... 606,448 553,470
------- -------
646,852 593,874
Less accumulated depreciation 335,698 241,683
------- -------
Net property and equipment 311,154 352,191
Other assets, net of accumulated amortization of
$47,752 in 1996 and $15,750 in 1995 (note 2) 198,701 35,633
-------- ---------
$ 7,528,292 6,101,325
________ _________
See accompanying notes to consolidated financial statements.
<PAGE>
F-3
<TABLE>
<CAPTION>
<S> <C> <C>
Liabilities and Stockholders' Equity 1996 1995
------------------------------------ ---- ----
Liabilities:
Securities sold, but not yet purchased, at market value (note 4) $ 1,029,081 415,704
Accounts payable 111,033 96,807
Accrued employee compensation and benefits 843,944 670,960
Other accrued expenses 156,321 165,856
Income taxes payable 121,318 169,258
Deferred income taxes 16,651 17,861
Other 7,563 7,391
-------- --------
Total liabilities (note 6) 2,285,911 1,543,837
-------- --------
Stockholders' equity (notes 7, 11 and 12):
Preferred stock, $.01 par value. Authorized 1,000,000
shares; issued and outstanding -0- shares - -
Common stock, $.01 par value. Authorized 3,000,000
shares; issued and outstanding 1,450,787 and 1,460,887
shares in 1996 and 1995, respectively 14,508 14,609
Additional paid-in capital 3,237,125 3,292,574
Retained earnings 1,990,748 1,250,305
-------- --------
Total stockholders' equity 5,242,381 4,557,488
Commitments and contingent liabilities (notes 5, 8 and 13)
-------- --------
$ 7,528,292 6,101,325
________ ________
</TABLE>
<PAGE>
F-4
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
Years ended September 30, 1996 and 1995
1996 1995
---- ----
Revenues:
Commissions (note 2) .................... $8,386,828 7,226,550
Net dealer inventory and investment gains 2,340,719 1,554,891
Management fees ......................... 56,694 11,722
Maintenance fees ........................ 125,034 122,733
Interest and dividends .................. 263,951 226,351
Other ................................... 148,069 123,747
--------- --------
Total revenues 11,321,295 9,265,994
--------- --------
Expenses:
Commissions and clearing fees ........... 4,669,369 4,033,958
Employees compensation and benefits ..... 2,472,746 1,881,314
Communications .......................... 357,831 381,362
Promotion ............................... 1,303,134 962,534
Occupancy and equipment rental (note 8) 350,998 280,795
Interest ................................ 6,118 3,621
Professional fees ....................... 188,608 174,495
Insurance ............................... 203,706 177,148
Depreciation and amortization ........... 126,017 89,248
Other operating expenses ................ 427,607 337,838
--------- ---------
Total expenses 10,106,134 8,322,313
--------- --------
Income before income taxes 1,215,161 943,681
Income tax expense (note 9) 488,800 366,413
--------- --------
Net income $ 726,361 577,268
_________ ________
(Continued)
<PAGE>
F-5
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations, Continued
1996 1995
---- ----
Earnings per common and dilutive common equivalent
share:
Primary $ .40 .36
Fully diluted $ .40 .36
Weighted average number of common and dilutive common
shares outstanding:
Primary 2,172,849 2,011,254
Fully diluted 2,172,849 2,011,254
See accompanying notes to consolidated financial statements.
<PAGE>
F-6
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Years ended September 30, 1996 and 1995
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Employee
Additional Ownership Total
Preferred Common paid-in Retained Treasury Plan stockholders'
stock stock capital earnings stock obligation equity
--------- ------ -------- ------ ----- --------- -------
Balances at September 30, 1994 $ -- 14,596 3,264,935 694,427 -- (54,000) 3,919,958
Repayments of loan to Employee
Stock Ownership Plan -- -- -- -- -- 54,000 54,000
Acquisition of 4,513 common
shares -- 45 21,390 -- (21,435) -- --
Retirement of 4,513 common
shares held in treasury -- (45) -- (21,390) 21,435 -- --
Expiration of 1,318 redeemable
common shares -- 13 6,249 -- -- -- 6,262
Net income -- -- -- 577,268 -- -- 577,268
---- ------ --------- --------- ------- ----- ---------
Balances at September 30, 1995 -- 14,609 3,292,574 1,250,305 -- -- 4,557,488
Acquisition of 10,100 common
shares (note 13) -- -- -- -- (41,468) -- (41,468)
Retirement of 10,100 common
shares held in treasury -- (101) (55,449) 14,082 41,468 -- --
Net income -- -- 726,361 -- -- 726,361
---- ----- --------- --------- ------- ----- ---------
Balances at September 30, 1996 $ -- 14,508 3,237,125 1,990,748 -- -- 5,242,381
____ ______ _________ _________ _______ _____ _________
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
F-7
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended September 30, 1996 and 1995
<TABLE>
<CAPTION>
<S> <C> <C>
1996 1995
---- ----
Cash flows from operating activities:
Net income $ 726,361 577,268
Adjustments to reconcile net income to net cash provided
by (used for) operating activities:
Net amortization and appreciation of investments (93,582) (88,361)
Loss on disposal of property and equipment -- 146
Depreciation and amortization 126,017 89,248
Deferred income taxes 3,740 (10,605)
Cash provided by (used for) changes in:
Receivable from clearing broker (84,402) (152,734)
Receivable from affiliated company 14,230 (30,791)
Other receivables 14,817 (25,102)
Securities owned (471,499) (299,770)
Other assets (45,068) (1,302)
Payable to clearing broker -- (573,394)
Securities sold, but not yet purchased 613,377 57,168
Accounts payable 14,226 8,946
Accrued employee compensation and benefits 172,984 164,871
Other accrued expenses (9,535) 60,116
Income taxes payable (47,940) (115,932)
Other liabilities 172 185
---------- ---------
Net cash provided by (used for) operating activities 933,898 (340,043)
---------- ---------
Cash flows from investing activities:
Disposal of investments 11,029,000 5,387,000
Acquisition of investments (10,493,838) (5,385,435)
Acquisition of property and equipment and other assets (202,980) (99,517)
Proceeds from disposal of property and equipment -- 35
Repayments of loan to Employee Stock Ownership Plan -- 54,000
---------- ---------
Net cash provided by (used for) investing activities 332,182 (43,917)
---------- ---------
(Continued)
</TABLE>
<PAGE>
F-8
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
<TABLE>
<CAPTION>
<S> <C> <C>
1996 1995
---- ----
Cash flows from financing activities:
Acquisition of common shares related to repurchase
program (41,468) --
Acquisition of common shares for treasury -- (21,435)
Net cash used for financing activities (41,468) (21,435)
---------- ---------
Net increase (decrease) in cash and cash
equivalents 1,224,612 (405,395)
Cash and cash equivalents at beginning of year 1,604,871 2,010,266
--------- ---------
Cash and cash equivalents at end of year $ 2,829,483 1,604,871
__________ _________
Supplemental disclosures of cash flow information:
Cash paid for interest $ 6,118 3,621
__________ ________
Income taxes paid $ 533,000 491,450
__________ ________
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
F-9
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 1996 and 1995
(1) Summary of Significant Accounting Policies
(a) Principles of Consolidation
The consolidated financial statements include the accounts of
International Assets Holding Corporation (the Company) and its five
wholly-owned subsidiaries, International Assets Advisory Corp.,
International Assets Management Corp., Global Assets Advisors, Inc.,
Global Net Securities, Inc. and International Financial Products, Inc.
International Assets Advisory Corp. is a registered broker/dealer
under the Securities Act of 1934. Its securities transactions are
cleared through Wexford Clearing Services Corporation (a wholly-owned,
guaranteed subsidiary of Prudential Securities Incorporated) on a
fully disclosed basis. International Assets Management Corp. was
formed to manage the physical assets of the Company. Global Assets
Advisors, Inc. provides investment advisory and management services.
Global Net Securities, Inc. was formed to capitalize on the use of
recent and future technology developments that relate to the
securities industry. International Financial Products, Inc. markets
products which are not investments, but are related to the financial
world. All significant intercompany balances and transactions have
been eliminated in consolidation.
(b) Cash Equivalents
Cash equivalents consist of cash deposits with clearing broker and
foreign currency. Cash deposits with clearing broker consist of cash
and money market funds stated at cost which approximates market. The
money market funds earn interest at varying rates on a daily basis.
For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid debt instruments with original maturities
of three months or less to be cash equivalents.
(c) Financial Instruments
As of September 30, 1996 and 1995, the carrying value of the Company's
financial instruments including cash, foreign currency, receivables,
account payable and accrued expenses approximate their fair values,
based on the short-term maturities of these instruments. Additionally,
the carrying value of investments, securities owned and securities
sold, but not yet purchased, approximate their fair value at September
30, 1996 and 1995 as they are based on quoted market prices.
(Continued)
<PAGE>
F-10
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(d) Investments
As of September 30, 1996, investments consist of a Federal Home Loan
note, a U.S. corporate bond fund, a foreign corporate bond, a foreign
government obligation and a limited partnership ownership interest.
The U.S. Federal Home Loan note is recorded at amortized cost, which
approximates market value. The U.S. corporate bond fund, foreign
corporate bond and foreign government obligation are recorded at
market value. The limited partnership ownership interest is recorded
at cost, which management has determined approximate its market value.
These investments are for the Company's investing purposes and are not
held for sale to the Company's customers.
(e) Valuation of Securities and Foreign Currency
Each listed security is valued at the last reported sale price. Listed
securities not traded on an exchange that day, and other securities,
which are traded in the over-the-counter market, are valued at the
market's current bid price for securities owned and current asked
price for securities sold, but not yet purchased. The value of a
foreign security is determined in its national currency on the
exchange on which it is traded, which value is then converted into its
U.S. dollar equivalent at the foreign exchange rate in effect
following the close of the stock exchange in the country where the
security is issued and traded.
The value of a foreign currency is converted into its U.S. dollar
equivalent at the foreign exchange rate in effect at the close of
business on the measurement date.
(f) Revenue Recognition
The revenues of the Company are derived from commissions earned on the
sale of securities, from maintenance fees charged to customers and
from realized and unrealized trading income in securities purchased or
sold for the Company's account. Commission and trading income are
recorded as of the trade date of the securities. Interest income is
recorded on the accrual basis and dividend income is recognized upon
receipt.
(Continued)
<PAGE>
F-11
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(g) Depreciation
Depreciation on property and equipment is calculated using the
straight-line method over the estimated useful lives of the assets,
which range from five to seven years. Leasehold improvements are
amortized using the straight-line method over the estimated period of
benefit to be received from the assets, which approximates six years.
(h) Income Taxes
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates as expected to apply to taxable
income in the years in which those temporary differences are expected
to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date. Valuation allowances are
established when necessary to reduce deferred tax assets to an amount
that, in the opinion of management, is more likely than not to be
realized.
The Company and its subsidiaries file consolidated federal and state
income tax returns.
(i) Advertising
The Company expenses costs of advertising as incurred. Advertising
costs for the years ended September 30, 1996 and 1995 were $1,303,134
and $962,534, respectively.
(j) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that effect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at
the date of the financial statements and the reported revenues and
expenses during the period. Actual results could differ from these
estimates.
(Continued)
<PAGE>
F-12
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(k) Earnings Per Common Share
Earnings per common and dilutive common equivalent share have been
computed by dividing adjusted net income by the weighted average
number of common and dilutive common equivalent shares outstanding.
Common equivalent shares included in the computation represent shares
issuable upon assumed exercise of stock options and warrants. The
adjustment to net income assumes the investment of excess proceeds
received from the assumed exercise of common stock equivalents, net of
income taxes. Fully diluted earnings per common and dilutive common
equivalent share amounts did not differ from amounts computed under
the primary computation for the years ended September-30, 1996 and
1995.
(l) Future Application of Accounting Standards
In March 1995, the Financial Accounting Standards Board (FASB) issued
SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," effective for financial
statements with fiscal years beginning after December-15, 1995. Among
other provisions, SFAS 121 requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed
for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. In
performing the review for recoverability, an entity should estimate
the future cash flows expected to result from the use of the assets
and their eventual disposition. Measurement of an impairment loss for
long-lived assets and identifiable intangibles expected to be held and
used should be based on the fair value of the asset. The Company has
determined that this pronouncement will not have a material financial
impact on the Company.
In October 1995, the FASB issued SFAS 123, "Accounting for Stock-Based
Compensation," effective for financial statements with fiscal years
beginning after December 15, 1995. Among other provisions, SFAS 123
establishes a new, alternative method, based on fair values, for
accounting for stock-based compensation arrangements with employees.
In addition, if an entity does not adopt the new, alternative method,
the statement requires disclosure in the footnotes of pro forma net
income and earnings per share as if the fair value method had been
adopted. The Company will adopt this standard in 1997 by providing pro
forma equivalent information in a footnote disclosure.
(Continued)
<PAGE>
F-13
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(2) Related Party Transactions
Receivable from an affiliated company represents the Company's payment
of costs on behalf of a company affiliated through common ownership.
The receivable is non-interest bearing and due on demand. As of
September-30, 1996 and 1995, $26,542 and $40,772, respectively, was
receivable from the affiliated company.
During the years ended September 30, 1996 and 1995, the Company earned
commission income of $22,362 and $32,272, respectively, from the
purchase and sale of securities to a closed end management investment
company managed by an affiliated company which is owned by an officer
and stockholder of the Company.
(3)Investments
Investments at September 30, 1996 and 1995 consist of the following:
Cost or
amortized cost Market value
----------- ------------
1996:
U.S. Federal Home Loan note .......................... $ 749,266 749,266
U.S. corporate bond fund ............................. 280,495 306,267
Foreign corporate bond ............................... 92,462 93,000
Foreign government obligation ........................ 71,162 70,464
Limited partnership ownership interest ............... 100,000 100,000
---------- ---------
$1,293,385 1,318,997
__________ _________
(Continued)
<PAGE>
F-14
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Cost or
amortized cost Market value
------------ ------------
1995:
U.S. Federal Home Loan note $1,229,391 1,229,391
U.S. corporate bond fund .. 256,042 266,611
U.S. Treasury bill ........ 264,575 264,575
---------- ----------
$1,750,008 1,760,577
__________ __________
(4) Securities Owned and Securities Sold, But Not Yet Purchased
Securities owned and securities sold, but not yet purchased at September 30,
1996 and 1995 consist of trading and investment securities at quoted market
values as follows:
Sold, but not
Owned yet purchased
------ ------------
1996:
Obligations of U.S. government .............. $1,047,097 --
Common stock and American Depository Receipts 864,884 1,029,081
Corporate bonds ............................. 99,462 --
Foreign government obligations .............. 23,050 --
Proprietary unit investment trust ........... 436,102 --
---------- ---------
$2,470,595 1,029,081
__________ _________
(Continued)
<PAGE>
F-15
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Sold, but not
Owned yet purchased
------ ------------
1995:
Obligations of U.S. government .............. $1,092,372 --
Common stock and American Depository Receipts 529,181 376,051
Corporate bonds ............................. 205,538 --
Foreign government obligations .............. 14,339 --
Proprietary unit investment trusts .......... 157,666 --
Other ....................................... -- 39,653
---------- -------
$1,999,096 415,704
__________ _______
(5) Financial Instruments with Off-Balance Sheet Risk
The Company is party to certain financial instruments with off-balance
sheet risk in the normal course of business as a registered securities
broker/dealer. As of September 30, 1996 and 1995, the Company remains
liable for a number of equity securities it has sold, which are owned by
outside parties (see note 3). Risks arise from movements in the value of
these securities which the Company must purchase to cover those
previously sold.
(6) Subordinated Claims of General Creditors
During the years ended September 30, 1996 and 1995, International Assets
Advisory Corp. (IAAC) did not have any liabilities which were subordinated
to the claims of general creditors.
(Continued)
<PAGE>
F-16
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(7) Capital and Cash Reserve Requirements
As of September 30, 1996, IAAC is subject to the Securities and Exchange
Commission uniform net capital rule (Rule 15c3-1), which requires the
maintenance of minimum net capital at an amount equal to the greater of
$100,000, 6-2/3% of aggregate indebtedness, or $2,500 for each security in
which a market is made with a bid price over $5 and $1,000 for each
security in which a market is made with a bid price of $5 or less with a
ceiling of $1,000,000, and requires that the ratio of aggregate
indebtedness to net capital not exceed 15 to 1. At September 30, 1996, IAAC
had excess net capital of approximately $2,267,549 and a ratio of aggregate
indebtedness to net capital of approximately .51 to 1.
At September 30, 1995, IAAC had excess net capital of $1,345,248 and a
ratio of aggregate indebtedness to net capital of .80 to 1.
IAAC is exempt from customer reserve requirements and providing information
relating to possession or control of securities pursuant to Rule 15c3-3 of
the Securities and Exchange Act of 1934. IAAC meets the exemptive
provisions of Paragraph (k)(2)(ii).
(8) Leases
The Company is obligated under various noncancelable operating leases for
the rental of its office facilities and certain office equipment. Rent
expense associated with operating leases amounted to $296,153 and $278,474
for the years ended September 30, 1996 and 1995, respectively. The future
minimum lease payments under noncancelable operating leases as of September
30, 1996 are as follows:
Year ending September 30,
-----------------------
1997 $ 280,036
1998 265,247
1999 258,937
2000 105,532
-------
Total future minimum lease payments $ 909,752
_______
(Continued)
<PAGE>
F-17
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(9) Income Tax Expense
Income tax expense for the years ended September 30, 1996 and 1995 consists of:
Current Deferred Total
------- -------- -----
1996:
Federal $ 414,419 3,194 417,613
State 70,641 546 71,187
_______ ______ _______
$ 485,060 3,740 488,800
_______ ______ _______
1995:
Federal 322,171 (8,888) 313,283
State 54,847 (1,717) 53,130
------- ------ -------
$ 377,018 (10,605) 366,413
_______ ______ _______
Total income tax expense for the years ended September 30, 1996 and 1995
differed from the amounts computed by applying the U.S. federal income tax
rate of 34% to income before income taxes as a result of the following:
1996 1995
---- ----
Computed "expected" tax expense ......................... $413,154 320,852
Increase (decrease) in income tax expense resulting from:
State income taxes, net of federal income tax benefit 47,151 35,066
Officers life insurance premiums not deductible for
tax purposes ..................................... 2,527 2,284
Meals and entertainment expense not deductible for
tax purposes ..................................... 21,264 11,927
Other, net ........................................... 4,704 (3,716)
-------- --------
$488,800 366,413
_______ _______
(Continued)
<PAGE>
F-18
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the year ended September 30, 1996, deferred income tax expense of
$3,740 resulted primarily from the amortization of rent expense over the
term of a lease.
For the year ended September 30, 1995, deferred income tax benefit of
$10,605 resulted primarily from the amortization of rent expense over the
term of a lease.
The tax effects of temporary differences that give rise to deferred tax
assets at September 30, 1996 and 1995 of $27,599 and $32,549, respectively,
result primarily from the deduction for financial statement purposes of
estimated loss reserves established and the amortization of rent over the
term of a lease which are not deductible for income tax purposes until
paid. The tax effects of temporary differences that give rise to deferred
tax liabilities at September 30, 1996 and 1995 of $16,651 and $17,861,
respectively, result from income tax basis accumulated depreciation and
amortization in excess of amounts reported for financial statement
purposes.
There was no valuation allowance for deferred tax assets as of
September 30, 1996 and 1995. In assessing the realizability of deferred tax
assets, management considers whether it is more likely than not that some
portion or all of the deferred tax assets will not be realized. The
ultimate realization of deferred tax assets is dependent upon the
generation of future taxable income or the reversal of deferred tax
liabilities during the periods in which those temporary differences become
deductible. Management considers the scheduled reversal of deferred tax
liabilities, projected future taxable income and tax planning strategies in
making this assessment. As of September 30, 1996, based upon the level of
historical taxable income and projections for future taxable income,
management believes it is more likely than not that the Company will
realize the benefits of these deductible differences.
(Continued)
<PAGE>
F-19
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(10) Employee Benefit Plan
The Company has an Employee Stock Ownership Plan (ESOP) with 401(k)
features which enables generally all Company employees who have completed
one year of continuous service and who have attained the age of twenty-one
to acquire shares of the parent Company's common stock. The 401(k) feature
allows employees to elect to defer a portion of their salary (not to exceed
$9,500 and $9,240 in 1996 and 1995, respectively) into the ESOP. The amount
contributed reduces the employee's taxable compensation. The Company has
the option to make a matching contribution based on a percentage of the
participants' contributions. The ESOP is a "nonleveraged" ESOP as of
September 30, 1996 and 1995.
The Company implemented a Retirement Savings Plan (the Plan) during the
year ended September-30, 1995 which was retroactively effective January 1,
1995. All employees who have completed one year of continuous service and
who have attained the age of twenty-one are eligible for the Plan. The
contributions to the Plan will be at the sole discretion of the Company.
Company contributions to the various employee benefit plans for the years
ended September 30, 1996 and 1995 are summarized as follows:
1996 1995
---- ----
ESOP $ -- 65,548
Retirement Savings Plan 78,524 37,503
401(k) 58,545 104,155
------- -------
$ 137,069 207,206
_______ _______
Benefits under the ESOP feature of the Plan, which gradually vest over
seven years, and benefits under the 401(k) feature of the Plan relative to
participant contributions, which are fully vested at all times, are paid
upon death, disability, retirement or termination of employment.
(Continued)
<PAGE>
F-20
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
As of September 30, 1996 and 1995, 360,715 and 357,715 common shares of the
Company were allocated to ESOP participants, whereas there were -0- and
3,000 of unallocated shares, respectively. As of September 30, 1995, the
3,000 unallocated ESOP shares were the only shares which were registered.
On August 23, 1996, the Company filed a registration statement which
effectively registered the remaining 357,715 common shares of the ESOP.
Thus, all shares allocated to ESOP participants are registered as of
September 30, 1996.
(11) Stock Options
The International Assets Holding Corporation Stock Option Plan (the "Plan")
was adopted by the Board of Directors of the Company and approved by the
Company's stockholders during January 1993. The Plan permits the granting
of awards to employees and directors of the Company and its subsidiaries in
the form of stock options. Stock options granted under the Plan may be
"incentive stock options" meeting the requirements of Section 422 of the
Internal Revenue Code of 1986, as amended, or nonqualified options which do
not meet the requirements of Section 422. As of September 30, 1995 a total
of 250,000 shares of the Company's common stock had been reserved for
issuance pursuant to options granted under the Plan. During 1996 the Plan
was amended to increase the total number of shares available for issuance
under the Plan from 250,000 to 500,000 shares.
The Plan is administered by the Company's Board of Directors or a committee
thereof. The Plan gives broad powers to the Board of Directors to
administer and interpret the Plan, including the authority to select the
individuals to be granted options and rights and to prescribe the
particular form and conditions of each option or right granted. All options
are granted at an exercise price equal to the fair market value or 110
percent of the fair market value of the Company's common stock on the date
of the grant. Awards may be granted pursuant to the Plan through January
2003. The Plan may be terminated earlier by the Board of Directors at its
sole discretion.
(Continued)
<PAGE>
F-21
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Qualified Incentive Stock Options
As of September 30, 1995, the following shares were outstanding under
qualified incentive stock options, including their grant date, exercise
price and expiration date:
Shares Grant Exercise Expiration
outstanding date price date
----------- ---- ---- ----
100,000 January 23, 1993 $ 5.10 January 23, 2003
70,000 August 12, 1994 5.50 August 12, 2004
-------
170,000
_______
The shares granted on January 23, 1993 are exercisable at 25% per year
beginning two years from the date of grant. The shares granted on August
12, 1994 are exercisable at 20% per year beginning three years from the
date of grant. During fiscal year 1996, 30,000 shares under qualified
incentive stock options, granted on August 12, 1994, expired as a result of
the termination of two participants whose options were not exercisable.
Furthermore, during fiscal year 1996 the Company granted the purchase of
additional shares of its common stock through qualified incentive stock
options, which are still outstanding as of September 30, 1996, as follows:
Shares Grant Exercise Expiration
outstanding date price date
----------- ---- ---- ----
10,000 December 21, 1995 $ 3.00 December 21, 2005
110,000 December 28, 1995 2.75 December 28, 2005
105,000 December 28, 1995 2.50 December 28, 2005
5,000 March 7, 1996 3.00 March 7, 2006
------
230,000
_______
(Continued)
<PAGE>
F-22
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The shares granted on December 21, 1995 and March 7, 1996 are exercisable
at 20% per year beginning three years from the date of grant. The shares
granted on December 28, 1995 are exercisable at 20% per year beginning one
year from the date of grant. Thus, as a result of the expiration and
granting of qualified incentive stock options during fiscal year 1996, the
following represents the shares outstanding under qualified incentive stock
options, including their grant date, exercise price and expiration date, as
of September 30, 1996:
Shares Grant Exercise Expiration
outstanding date price date
----------- ---- ---- ----
100,000 January 23, 1993 $ 5.10 January 23, 2003
40,000 August 12, 1994 5.50 August 12, 2004
10,000 December 21, 1995 3.00 December 21, 2005
110,000 December 28, 1995 2.75 December 28, 2005
105,000 December 28, 1995 2.50 December 28, 2005
5,000 March 7, 1996 3.00 March 7, 2006
-------
370,000
_______
As of September 30, 1996 and 1995, no options have been exercised and
50,000 and 25,000 shares, respectively, were vested under qualified
incentive stock options.
(Continued)
<PAGE>
F-23
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Nonqualified Options
As of September 30, 1995, the Company had granted nonqualified options to
purchase 10,000 shares of its common stock to two outside directors at
exercise prices of $5.10 and $5.63 per share, respectively. These options
become exercisable at 25% per year beginning two years from the date of
grant. During fiscal year 1996 the Company granted additional nonqualified
options to purchase 35,000 shares of its common stock to the two outside
directors at an exercise price of $2.50 per share. The additional options
become exercisable at 20% per year beginning one year from the date of
grant. The following represents the shares outstanding under the
nonqualified options, including their grant date, exercise price and
expiration date, at September 30, 1996:
Shares Grant Exercise Expiration
outstanding date price date
----------- ---- ---- ----
10,000 January 23, 1993 $ 5.10 January 23, 2003
10,000 May 13, 1994 5.63 May 13, 2004
35,000 December 28, 1995 2.50 December 28, 2005
------
55,000
______
As of September 30, 1996 and 1995, no options have been exercised and 7,500
and 2,500 shares, respectively, were vested under nonqualified stock
options.
(12) Outstanding Warrants
The Company has reserved 634,456 shares of its common stock for issuance
upon exercise of 634,456 outstanding warrants. The warrants, which were
issued in connection with the Company's initial offering of common stock to
the public in March of 1994, are exercisable commencing on February 11,
1995 through February 11, 1997 and carry an exercise price of $6 per share
("initial exercise price"). The Company, at its option during the exercise
period of the warrants, upon 30 days notice to the warrant holders, may
redeem in whole, but not in part, all remaining outstanding warrants at the
end of that 30 day period at a price of $.25 per warrant at such time as
the market price of shares of the Company's common stock has exceeded the
initial exercise price of the warrants for a period of not less than 20
consecutive business days by 20%.
As of September 30, 1996, no warrants have been exercised.
(Continued)
<PAGE>
F-24
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(13) Commitments and Contingent Liabilities
During the year ended September 30, 1994, the Company entered into
employment agreements with its chief executive officer and chief operating
officer. Under the terms of the agreements, the two officers will receive a
specified annual compensation, a bonus to each equal to 10% of consolidated
income before income taxes and monthly automobile allowances. In the event
of termination of the agreements by the Company other than for cause, as
defined, or if the executives resign as a result of a breach by the
Company, the agreements provide for payments to such individuals in an
amount equal to 100% of their total compensation for 24 months following
the date of termination. In addition, upon termination of the agreements by
the Company other than for cause or if the executives resign as a result of
a breach by the Company, the Company has agreed, at the option of the
executives, to the extent such payments may be made under applicable law,
to repurchase within 60 days of such termination at market value (average
of bid and asked prices) all shares of stock of the Company owned by the
executives which amount to approximately 533,000 common shares as of
September 30, 1996. The agreements also contain nondisclosure and
noncompetition provisions.
On March 13, 1996, the Company announced that the board of directors has
authorized the Company to repurchase up to $500,000 of its common stock in
the open market for the remainder of fiscal year 1996. On October 1, 1996,
the Company, being authorized by the board of directors, extended the
buyback program through the end of fiscal year 1997. The stock purchases
will be made in the open market from time to time as market conditions
permit. The Company is required to comply with Rule 10b-18 of the
Securities and Exchange Commission which regulates the specific terms in
which shares may be repurchased. As of September 30, 1996, the Company has
repurchased 10,100 shares under this program at a total repurchase cost of
$41,468. The shares purchased were retired.
The Company is party to certain litigation as of September 30, 1996 which
relates primarily to matters arising in the ordinary course of business.
Management of the Company anticipates that the final resolution of these
items will not have a material adverse effect on the Company's consolidated
financial statements.
<PAGE>
16
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a)OF THE EXCHANGE ACT.
The following table lists certain information about the directors,
executive officers and significant employees of the Company:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Director Officer
Name Age Since Since Position
Diego J. Veitia 53 1987 1987 Director, Chairman of the Board and Chief
Executive Officer
Jerome F. Miceli 53 1990 1991 Director, President, Chief Operating Officer and
Treasurer
Stephen A. Saker 50 1990 1991 Director, Vice President and Secretary
Jonathan C. Hinz 34 - 1995 Vice President and Controller
Donald A. Halliday 53 1990 - Director of the Company
Elmer L. Jacobs 61 1994 - Director of the Company
</TABLE>
Each of the Company's directors have been elected to serve until the next
annual meeting of stockholders and until his respective successor is
elected and qualified. Officers are elected annually by the Board of
Directors.
Diego J. Veitia founded the Company in 1987 to serve as a holding company
for IAAC and other subsidiaries. He has served as Chairman of the Board,
director and Chief Executive Officer of the Company since its inception. He
also served as President of the Company from 1987 until 1991. Mr. Veitia
founded IAAC in 1981 and has served as Chairman of the Board and director
since that time. Mr. Veitia is also currently serving as Chairman and Chief
Executive Officer of GAA, IAMC, IFP and GNSI. Mr. Veitia also serves as
Chairman of Veitia and Associates, Inc., a registered investment advisor.
During the last nine years Mr. Veitia served as Chairman of All Seasons
Global Fund, Inc., a publicly held closed-end management investment company
from October 1987 until October 1996. During the last five years, Mr.
Veitia has also served as director of both America's All Seasons Income,
Fund, Inc., an inactive management investment company, and Cassidy &
Veitia, an independent insurance agency, and Chairman of Global Income
Advisors, Inc. and Global Advisors, Inc., investment advisors that have
been dissolved.
<PAGE>
17
Jerome F. Miceli has been a director of the Company since 1990 and has
served as President, Chief Operating Officer and Treasurer of the Company
since 1991. Mr. Miceli has also served as President, Chief Executive
Officer, Treasurer and director of IAAC since 1990. Mr. Miceli also
currently serves as President, Treasurer and Director of GAA, IAMC, IFP and
GNSI. In addition, from December 1990 until October 1996, Mr. Miceli served
as Treasurer and director of All Seasons Global Fund Inc., a publicly held
closed-end management investment company. Mr. Miceli is also President of
Veitia and Associates, Inc., a registered investment advisor. Prior to
joining the Company, Mr. Miceli was Chief Operating Officer of Williams
Securities from December 1988 to May 1990. Williams Securities is a
securities broker-dealer firm.
Stephen A. Saker has been a director of the Company since 1990 and has
served as Secretary and Vice President of the Company since 1991. Mr. Saker
has also served as director, Executive Vice President and Secretary of IAAC
since 1985. Mr. Saker currently serves as Vice President , Secretary and
Director of GAA, IAMC and GNSI. Since November 1991, Mr. Saker has served
as Vice President and Secretary of Veitia and Associates, Inc. From 1988 to
February 1992, he served as Secretary and Treasurer of Global Advisors,
Inc., a registered investment advisor. Mr. Saker also served as Secretary
and director of All Seasons Global Fund, Inc. from October 1987 until
October 1996.
Jonathan C. Hinz joined the Company in October 1995 and serves as Vice
President and Controller for the Company and Controller of IAAC and GAA.
Prior to joining the Company, Mr. Hinz served as Chief Financial Officer
and Controller of Computer Science Innovations, Inc. from 1987 to 1995. Mr.
Hinz is a certified public accountant.
Donald A. Halliday has served as a director of the Company since 1990.
Since 1976, he has served as President of D. Halliday and Co., Inc., an
international trading company, and also serves as a consultant on business
development and trade financing issues for the tropical agribusiness and
shipping industries.
Elmer L. Jacobs became a director of the Company in May 1994. He has served
as an independent consultant on agribusiness development and bulk
transportation issues for agribusiness since 1990. From 1987 to 1990, he
was a partner with the Sparks Group, a consulting company. Before entering
private consultation, Mr. Jacobs was Group President of six divisions of
Continental Grain, a leading worldwide agribusiness firm.
Compliance with Section 16(a) of the Exchange Act
Pursuant to Section 16(a) of the Exchange Act and the rules issued
thereunder, the Company's executive officers, directors and owners of in
excess of 10% of the issued and outstanding common stock are required to
file with the SEC reports of ownership and changes in ownership of the
common stock of the Company. Copies of such reports are required to
furnished to the Company. Based solely on the review of such reports
furnished to the Company, the Company believes that during fiscal year
1996, all of its executive officers and four of its five directors complied
with the Section 16(a) requirements.
On Wednesday, May 8, 1996 one of the Company's directors, Donald A.
Halliday prepared a timely Form 4 that was due on Friday, May 10, 1996.
This Form 4 was the first electronic EDGAR filing submitted by the Company.
The Form 4 was filed through EDGAR inadvertently as a test filing on
Wednesday, May 8, 1996, two days early. On Monday, May 13, 1996, the
Company received notification that the filing was submitted as a test
filing and not as a live filing. The Company resubmitted the Form 4 on
Monday, May 13, 1996 as a live filing. Since this initial EDGAR filing the
Company has become more familiar with the EDGAR filing system and does not
expect reoccurrence of this filing error.
<PAGE>
18
ITEM 10. EXECUTIVE COMPENSATION.
Information with respect to this item will be contained in the Proxy
Statement for the 1997 Annual meeting of Shareholders, which is
incorporated herein by reference.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information with respect to this item will be contained in the Proxy
Statement for the 1997 Annual meeting of Shareholders, which is
incorporated herein by reference.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to this item will be contained in the Proxy
Statement for the 1997 Annual meeting of Shareholders, which is
incorporated herein by reference.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The Company's consolidated financial statements are listed in the
index set forth in Item 7 on this Form 10-KSB. Financial statement
schedules are not required under the related instructions of the SEC
or are inapplicable, and therefore, have been omitted.
(b) There were no reports filed on Form 8-K.
(c) The following exhibits are incorporated by reference herein unless
otherwise indicated:
(3.1)The Company's Certificate of Incorporation and amendments are
incorporated by reference to Exhibits 3.1, 3.2, and 3.3 of the
Registrant's Registration Statement on Form SB-2 (No. 33-70334-A), as
amended, filed with the SEC on February 2, 1994.
(3.2)The Company's By-laws are incorporated by reference to Exhibit 3.4,
of the Registrant's Registration Statement on Form SB-2 (No.
33-70334-A), as amended, filed with the SEC on February 2, 1994.
(4.1)The Company's Form of Common Stock Certificate is incorporated by
reference to Exhibit 4.1, of the Registrant's Registration Statement
on Form SB-2 (No. 33-70334-A), as amended, filed with the SEC on
February 2, 1994.
(4.2)The Company's Revised Form of Warrant Certificate is incorporated by
reference to Exhibit 4.2, of the Registrant's Registration Statement
on Form SB-2 (No. 33-70334-A), as amended, filed with the SEC on
February 2, 1994.
(4.3)The Company's Warrant Agreement dated January 31, 1994, between the
Company and Chemical Bank is incorporated by reference to Exhibit 4.3,
of the Registrant's Registration Statement on Form SB-2 (No.
33-70334-A), as amended, filed with the SEC on February 2, 1994.
(4.4)The Company's Revised Form of Subscription Agreement is incorporated
by reference to Exhibit 4.4, of the Registrant's Registration
Statement on Form SB-2 (No. 33-70334-A), as amended, filed with the
SEC on February 2, 1994.
<PAGE>
19
(10.1) The Company's International Assets Holding Corporation Stock Option
Plan is incorporated by reference to Exhibit 10.2, of the Registrant's
Registration Statement on Form SB-2 (No. 33-70334-A), as amended,
filed with the SEC on February 2, 1994.
(10.1.a) The Company's International Assets Holding Corporation Stock
Option Plan, Amendment dated December 28, 1995, is incorporated by
reference to Exhibit 10.2(a), of the Registrant's Registration
Statement on Form S-8 (No. 333-10727), filed with the SEC on August
23, 1996.
(10.2) The Company's International Assets Advisory Corporation Employee
Stock Ownership Plan and Trust ("ESOP") is incorporated by reference
to Exhibit 10.3, of the Registrant's Registration Statement on Form
SB-2 (No. 33-70334-A), as amended, filed with the SEC on February 2,
1994.
(10.2.a) The Company's International Assets Advisory Corporation Employee
Stock Ownership Plan and Trust ("ESOP"), First Amendment dated
November 4, 1993, is incorporated by reference to Exhibit 10.3(a), of
the Registrant's Registration Statement on Form S-8 (No. 333-10727),
filed with the SEC on August 23, 1996.
(10.2.b) The Company's International Assets Advisory Corporation Employee
Stock Ownership Plan and Trust ("ESOP"), Amendment 1994-1, dated July
19, 1994, is incorporated by reference to Exhibit 10.3(b), of the
Registrant's Registration Statement on Form S-8 (No. 333-10727), filed
with the SEC on August 23, 1996.
(10.2.c) The Company's International Assets Advisory Corporation Employee
Stock Ownership Plan and Trust ("ESOP"), Amendment 1994-1, dated
December 30, 1994, is incorporated by reference to Exhibit 10.3(c), of
the Registrant's Registration Statement on Form S-8 (No. 333-10727),
filed with the SEC on August 23, 1996.
(10.2.d) The Company's International Assets Advisory Corporation Employee
Stock Ownership Plan and Trust ("ESOP"), Amendment 1995-1, dated July
21, 1995, is incorporated by reference to Exhibit 10.3(d), of the
Registrant's Registration Statement on Form S-8 (No. 333-10727), filed
with the SEC on August 23, 1996.
(10.3) The Company's $200,000 ESOP Loan Agreement dated as of December 30,
1992, is incorporated by reference to Exhibit 10.4, of the
Registrant's Registration Statement on Form SB-2 (No. 33-70334-A), as
amended, filed with the SEC on February 2, 1994.
(10.4) The Company's $200,000 ESOP Note dated December 30, 1992, payable to
the Company, is incorporated by reference to Exhibit 10.5, of the
Registrant's Registration Statement on Form SB-2 (No. 33-70334-A), as
amended, filed with the SEC on February 2, 1994.
(10.5) The Company's ESOP Pledge Agreement dated December 30, 1992, between
the Company and the ESOP, is incorporated by reference to Exhibit
10.6, of the Registrant's Registration Statement on Form SB-2 (No.
33-70334-A), as amended, filed with the SEC on February 2, 1994.
(10.6) The Company's Clearing Agreement dated February 29, 1984, between
Prudential Securities, Inc. and IAAC, as amended, is incorporated by
reference to Exhibit 10.10, of the Registrant's Registration Statement
on Form SB-2 (No. 33-70334-A), as amended, filed with the SEC on
February 2, 1994.
<PAGE>
20
(10.7) The Company's Revised Form of Employment Agreement, between the
Company and Jerome F. Miceli is incorporated by reference to Exhibit
10.11, of the Registrant's Registration Statement on Form SB-2 (No.
33-70334-A), as amended, filed with the SEC on February 2, 1994.
(10.8) The Company's Revised Form of Employment Agreement, between the
Company and Diego J. Veitia is incorporated by reference to Exhibit
10.12, of the Registrant's Registration Statement on Form SB-2 (No.
33-70334-A), as amended, filed with the SEC on February 2, 1994.
(10.9) The Company's Lease dated November 5, 1993, by and between Barnett
Bank of Central Florida and IAAC is incorporated by reference to
Exhibits 10.15, of the Registrant's Registration Statement on Form
SB-2 (No. 33-70334-A), as amended, filed with the SEC on February 2,
1994.
(11)*The Statement of Computation of per share earnings is attached hereto
as Exhibit 11.
(21)* List of Subsidiaries of the Company.
(23)* Consent of KPMG Peat Marwick LLP
(99) The Articles of Incorporation, and amendments thereto, and the By-laws
of IAAC are incorporated by reference to Exhibits 99.1,99.2 and 99.3
of the Registrant's Registration Statement on Form SB-2 (No.
33-70334-A), as amended, filed with the SEC on February 2, 1994.
_______________
*Filed herewith
<PAGE>
21
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the under signed, thereunto duly authorized.
INTERNATIONAL ASSETS HOLDING
CORPORATION
Dated: December 23, 1996 By: /s/ Jerome F. Miceli
Jerome F. Miceli, President
and Chief Operating Officer
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
report has been signed below by the following persons in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
Signature Title Date
/s/ Diego J. Veitia Chief Executive Officer and December 23, 1996
Diego J. Veitia Chairman of the Board
/s/ Jerome F. Miceli President, Chief Operating Officer, December 23, 1996
Jerome F. Miceli Treasurer and Director
/s/ Stephen A. Saker Vice President, Secretary, December 23, 1996
Stephen A. Saker and Director
/s/ Donald A. Halliday Director December 23, 1996
Donald A. Halliday
/s/ Elmer L. Jacobs Director December 23, 1996
Elmer L. Jacobs
/s/ Jonathan C. Hinz Vice President and Controller December 23, 1996
Jonathan C. Hinz (Person Performing Similar Functions
of Principal Financial Officer and
Principal Accounting Officer)
</TABLE>
<PAGE>
22
EXHIBIT 11
INTERNATIONAL ASSETS HOLDING CORPORATION
STATEMENT OF COMPUTATION OF EARNINGS PER SHARE
For the Year Ended September 30, 1996, and 1995
<TABLE>
<CAPTION>
<S> <C> <C>
1996 1995
Adjustment of shares outstanding:
Weighted average number of actual common shares outstanding 1,458,073 1,461,476
Weighted average number of additional common shares outstanding
assuming the exercise of common stock equivalents (1) 714,776 549,778
Weighted average number of common and dilutive
============== ==============
common equivalent shares outstanding 2,172,849 2,011,254
============== ==============
Adjustment of net income:
Actual net income $726,361 $577,268
Adjustment to net income assuming the investment of
excess proceeds received from the assumed exercise
of common stock equivalents, net of income taxes $142,758 $147,304
============== ==============
Adjusted net income $869,119 $724,572
============== ==============
Earnings per common and dilutive common equivalent share:
Primary: $.40 $.36
Fully diluted (2): $.40 $.36
</TABLE>
- --------------------------------------------------------------------------------
(1) This calculation assumes that of all the additional common shares
outstanding, assuming the exercise of all common stock equivalents, 290,157
shares of common stock are re-acquired as of the beginning of the 1996 fiscal
year and 292,177 shares are re-acquired as of the beginning of the 1995 fiscal
year.
(2) In 1996 and 1995 there were no other potentially dilutive securities present
other than the common stock equivalents (common stock warrants and common stock
options), therefore, primary and fully diluted earnings per share amounts are
the same.
<PAGE>
23
EXHIBIT 21
INTERNATIONAL ASSETS HOLDING CORPORATION
SUBSIDIARIES OF THE REGISTRANT
Name State of Incorporation
International Assets Advisory Corp. Florida
International Asset Management Corp. Florida
Global Assets Advisors, Inc. Florida
International Financial Products, Inc. Florida
GlobalNet Securities, Inc. Florida
<PAGE>
24
EXHIBIT 23
Independent Accountants' Consent
The Board of Directors
International Assets Holding Corporation:
We consent to the incorporation by reference in the Registration Statement (No.
333-10727) on Form S-8 of International Assets Holding Corporation (the
"Company") of our report dated November 1, 1996, relating to the consolidated
balance sheets of the Company and its subsidiaries as of September 30, 1996 and
1995 and the related consolidated statements of operations, stockholders' equity
and cash flows for the years ended September 30, 1996 and 1995, which report
appears in the September 30, 1996 annual report on Form 10-KSB of the Company.
/s/ KPMG Peat Marwick LLP
Orlando, Florida
December 23, 1996
<TABLE> <S> <C>
<ARTICLE> BD
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<CASH> 2,829,483
<RECEIVABLES> 371,763
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 3,789,592
<PP&E> 311,154
<TOTAL-ASSETS> 7,528,292
<SHORT-TERM> 0
<PAYABLES> 1,076,295
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 1,029,081
<LONG-TERM> 0
0
0
<COMMON> 14,508
<OTHER-SE> 5,227,873
<TOTAL-LIABILITY-AND-EQUITY> 7,528,292
<TRADING-REVENUE> 2,340,719
<INTEREST-DIVIDENDS> 263,951
<COMMISSIONS> 8,386,828
<INVESTMENT-BANKING-REVENUES> 0
<FEE-REVENUE> 181,728
<INTEREST-EXPENSE> 6,118
<COMPENSATION> 6,033,160
<INCOME-PRETAX> 1,215,161
<INCOME-PRE-EXTRAORDINARY> 1,215,161
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 726,361
<EPS-PRIMARY> .400
<EPS-DILUTED> .400
</TABLE>
