U.S. Securities and Exchange Commission
Washington D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended December 31, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
Commission File Number 33-70334-A
INTERNATIONAL ASSETS HOLDING CORPORATION
(Exact name of small business issuer as specified in its charter)
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)
NA
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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 [ ].
The number of shares outstanding of Common Stock was 1,444,769 as of January 29,
1997.
Transitional small business disclosure format Yes [ ] No [X]
1
<PAGE>
INDEX
Page No.
Part I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheet as of December 31, 1996 3
Condensed Consolidated Statements of Operations for the
Three Months ended December 31, 1996, and 1995 ............. 5
Condensed Consolidated Statements of Cash Flows for the
Three Months ended December 31, 1996, and 1995 ............. 6
Notes to Condensed Consolidated Financial Statements ....... 8
Item 2. Management's Discussion and Analysis or Plan of Operation .. 10
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K ..............................14
Signatures ....................................................15
2
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheet
December 31, 1996
(Unaudited)
Assets
Cash ......................................... $ 541,139
Cash deposits with clearing broker ........... 1,364,447
Foreign currency deposits with clearing broker 520
Investments .................................. 1,364,442
Receivable from clearing broker .............. 240,235
Receivable from affiliated company ........... 2,422
Other receivables ............................ 119,090
Securities owned, at market value ............ 2,734,187
Deferred income tax benefit .................. 32,310
Property and equipment, at cost:
Leasehold improvements .................. 41,805
Furniture and equipment ................. 707,997
-------
749,802
Less accumulated depreciation and amortization 363,019
-------
Net property and equipment ...... 386,783
Other assets, net of accumulated
amortization of $58,002 .................. 167,238
==========
$ 6,952,813
==========
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheet
December 31, 1996
(Unaudited)
Liabilities and Stockholders' Equity
Liabilities:
Securities sold, but not yet purchased, at market value $642,116
Accounts payable ...................................... 132,944
Accrued employee compensation and benefits ........... 472,306
Other accrued expenses ................................ 192,025
Income taxes payable .................................. 115,550
Deferred income taxes ................................. 12,199
Other ................................................. 7,601
--------
Total liabilities ........................ 1,574,741
--------
Stockholders' equity:
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 1,444,769 shares 14,448
Additional paid-in capital ....................... 3,204,086
Retained earnings ................................ 2,159,538
---------
Total stockholders' equity 5,378,072
=========
$ 6,952,813
=========
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
For the Three Months Ended December 31, 1996, and 1995
(Unaudited)
1996 1995
Revenues:
Commissions ........................... $2,021,907 1,881,360
Net dealer inventory and investment gains 521,784 620,918
Other revenue ......................... 144,031 157,054
---------- ----------
Total revenues ............. 2,687,722 2,659,332
---------- ----------
Expenses:
Commissions and clearing fees ......... 1,126,563 1,051,641
Employees compensation and benefits 575,657 548,304
Communications and promotions ......... 335,665 426,887
Other operating expenses .............. 378,717 310,110
--------- ---------
Total expenses ............. 2,416,602 2,336,942
--------- ---------
Income before income taxes .............. 271,120 322,390
Income tax expense ...................... 113,569 135,293
--------- ---------
Net income .............................. $ 157,551 187,097
======= =======
Earnings per common and dilutive common equivalent share:
Primary: $ .088 .110
Fully diluted: $ .088 .110
Weighted average number of common and dilutive
common equivalent shares outstanding:
Primary: 2,225,414 2,005,231
Fully diluted: 2,225,414 2,005,231
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
For the Three Months Ended December 31, 1996, and 1995
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
1996 1995
Cash flows from operating activities:
Net income $ 157,551 187,097
Adjustments to reconcile net income to net cash used
for operating activities:
Net amortization and appreciation of Investments (23,450) (21,355)
Depreciation and amortization 37,572 23,781
Deferred income taxes (9,163) (195)
Cash provided by (used for) changes in:
Receivable from clearing broker (3,099) (9,880)
Receivable from affiliated company 24,120 8,071
Other receivables (11,005) (20,972)
Securities owned (263,592) (372,370)
Other assets 21,213 (556)
Securities sold, but not yet purchased (386,965) (22,733)
Accounts payable 21,911 36,485
Accrued salaries, commissions and benefits (371,638) (203,860)
Other accrued expenses 35,704 (30,892)
Income taxes payable (5,768) (39,512)
Other liabilities 38 45
----------------- ---------------
Net cash used for operating activities (776,571) (466,846)
----------------- ---------------
Cash flows from investing activities:
Disposal of Investments 2,250,000 2,737,000
Acquisition of Investments (2,271,996) (2,464,303)
Acquisition of property, equipment & other assets (102,950) (8,417)
----------------- ---------------
Net cash provided by (used for) investing activities (124,946) 264,280
----------------- ---------------
(continued)
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Condensed 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 (21,431) -
Acquisition of common shares for treasury (429) -
----------------- ---------------
Net cash used for financing activities (21,860) -
----------------- ---------------
Net decrease in cash and cash equivalents (923,377) (202,566)
Cash and cash equivalents at beginning of period 2,829,483 1,604,871
----------------- ---------------
Cash and cash equivalents at end of period $ 1,906,106 1,402,305
================= ===============
Supplemental disclosure of cash flow information:
Cash paid for interest $ 876 2,527
================= ===============
Income taxes paid $ 128,500 175,000
================= ===============
</TABLE>
7
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
December 31, 1996, and 1995
(1) Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with the instructions and
requirements of Form 10-QSB and, therefore, do not include all
information and footnotes necessary for a fair presentation of
financial position, results of operations, and cash flows in
conformity with generally accepted accounting principles. In the
opinion of Management, such financial statements reflect all
adjustments necessary for a fair statement of the results of
operations, cash flows and financial position for the interim periods
presented. Operating results for the interim periods are not
necessarily indicative of the results that may be expected for the
full year. It is suggested that these condensed consolidated financial
statements be read in conjunction with the Company's audited
consolidated financial statements for the year ending September 30,
1996, filed on Form 10-KSB (SEC File Number 33-70334-A).
As used in this Form 10-QSB, the term "Company" refers, unless the
context requires otherwise, to International Assets Holding
Corporation and its five wholly owned subsidiaries; International
Assets Advisory Corp. ("IAAC"), Global Assets Advisors, Inc. ("GAA"),
International Financial Products, Inc. ("IFP"), GlobalNet Securities,
Inc. ("GNSI") and International Asset Management Corp. ("IAMC"). All
significant intercompany balances and transactions have been
eliminated in consolidation.
(2) Securities Owned and Securities Sold, But Not Yet Purchased
Securities owned and Securities sold, but not yet purchased at
December 31, 1996, consist of trading and investment securities at
quoted market values as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Sold, but not
Owned yet purchased
Obligations of U.S. Government $ 1,057,730 -
Common stock and American Depository Receipts 1,021,761 608,778
Proprietary unit investment trusts 515,650 -
Corporate debt securities 131,614 -
Foreign government obligations 7,432 33,338
--------- -------
$ 2,734,187 642,116
</TABLE>
8
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements, continued
(3) Stock Options
On December 11, 1996, the Company granted 30,000 qualified incentive
stock options which are exercisable at 20% per year beginning three
years from the date of grant. The options granted on December 11, 1996
have an exercise price of $3.3125 per share and expire on December 11,
2006. As of December 31, 1996, options to purchase 455,000 shares have
been granted and are outstanding under the Company Stock Option Plan.
(4) Earnings Per Common Share
Primary and fully diluted earnings per common and dilutive common
equivalent share for the three months ended December 31, 1996 and
1995, have been computed by dividing adjusted net income by the
weighted average number of common and dilutive common equivalent
shares outstanding. Common equivalent shares represent shares of
common stock issuable upon the assumed exercise of stock options and
warrants.
(5) Leases
The Company occupies leased office space of approximately 13,815
square feet at 250 Park Avenue South, Winter Park, Florida. In
December 1996, the Company executed an amendment to enhance this
leased office space and extend the lease expiration from November 1999
to May 2001.
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 $76,948 and
$71,421 for the three months ended December 31, 1996, and 1995,
respectively. The minimum lease payments under noncancelable operating
leases as of December 31, 1996, are as follows:
Fiscal Year (12 month period) Ending September 30,
1997 $ 310,100
1998 302,000
1999 297,100
2000 299,900
2001 205,000
Thereafter -
---------
Total future minimum lease payments $1,414,100
---------
9
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements, continued
(6) Stock Repurchase Program
On October 4, 1996, the Company announced that the Board of Directors
has authorized the Company to continue its repurchase of common stock
up to $500,000 in the open market during the remainder of the fiscal
year which ends September 30, 1997. The Board of Directors originally
authorized the Company to repurchase up to $500,000 in shares of
common stock in the open market during the remainder of the fiscal
year ended September 30, 1996 on March 13, 1996. 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 January 29, 1997, the
Company has repurchased a total of 16,000 shares under this repurchase
program at a total cost of $62,899.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The Company's assets decreased from $7,528,292 at September 30, 1996,
to $6,952,813 at December 31, 1996, or a decrease of $575,479. The
Company's liabilities decreased from $2,285,911 at September 30, 1996,
to $1,574,741 at December 31, 1996, or a decrease of $711,170. The
increase in the net assets (assets less liabilities) of $135,691
primarily relates to the net income earned for the three month fiscal
period.
The Company's condensed consolidated balance sheet at December 31,
1996, reflects a receivable from clearing broker, for trades which had
not yet settled for cash, due to the proceeds from the sale of
securities exceeding the cost of securities purchased.
Results of Operations:
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.
10
<PAGE>
Three Months Ended December 31, 1996, as Compared to
the Three Months Ended December 31, 1995
The Company's revenues are derived primarily from commissions earned
on the sale of securities and trading income in securities purchased
or sold for the Company's account. Total revenues increased by
approximately 1% for the three months ended December 31, 1996, as
compared to the three months ended December 31, 1995. For the three
months ended December 31, 1996, and 1995, approximately 75% and 71%,
respectively, of the Company's revenues were derived from commissions
earned on the sale of securities. For the three months ended December
31, 1996, and 1995, approximately 19% and 23%, respectively, of the
Company's total revenues were from net dealer inventory and investment
gains (trading revenue).
Commission revenue increased by approximately $141,000, or 7% for the
three months ended December 31, 1996, as compared to the three months
ended December 31, 1995. During the three months ended December 31,
1996, the overall volume of customer ticket orders increased by 14%
and the average dollar amount of retail trades decreased 6% as
compared to the three months ended December 31, 1995. This increase in
commission revenue is despite a slight decrease in the average number
of account executives from 42, as of December 31, 1995, to 41, as of
December 31, 1996, or a decrease of approximately 2%.
Revenues from net dealer inventory and investment gains decreased by
approximately $99,000, or 16% for the three months ended December 31,
1996, as compared to the three months ended December 31, 1995. The
decrease in trading revenue is primarily attributable to decreases in
the Company's retail, fixed income and wholesale trading activities
due to decreases in the volume of trading activity. 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 revenue is more
directly related to commission revenue and order flow.
Other revenues decreased by approximately $13,000 or 8% during the
three months ended December 31, 1996, as compared to the three months
ended December 31, 1995. The decrease in other revenue is primarily
due to decreases in list rental income and seminar fee income.
The major expenses incurred by the Company relate to direct costs of
securities operations such as commissions and clearing fees,
employees' compensation and benefits and communications and promotions
expense.
11
<PAGE>
Total expenses increased by approximately $80,000, or 3% for the three
months ended December 31, 1996, as compared to the same period in
1995. This increase is primarily attributable to increases in
commissions and clearing fees, employee compensation and benefits and
other operating expenses.
Commissions and clearing expenses increased approximately $75,000, or
7% during the three months ended December 31, 1996, as compared to the
same period in 1995. This increase is directly related to the 7%
increase in commission revenue for the same period. Employee
compensation and benefits expense rose approximately $27,000, or 5%
during the three months ended December 31, 1996, as compared to the
three months ended December 31, 1995. The increase in employee
compensation and benefits is primarily due to additional employees
hired by the Company and salary increases during the three months
ended December 31, 1996, as compared to the three months ended
December 31, 1995.
Overall promotion and communication expenses decreased by
approximately $91,000, or 21% during the three months ended December
31, 1996, as compared to the three months ended December 31, 1995.
This decrease is primarily due to the elimination of funding from the
Company to IFP for promotional activities. As of October 1996, Company
funding for all IFP promotional activities was ceased due to the
unsuccessful efforts of IFP in generating revenues.
Other operating expenses increased approximately $69,000, or 22%
during the three months ended December 31, 1996, as compared to the
three months ended December 31, 1995. This increase is primarily
attributable to increases in expenses incurred for rental of leased
premises, insurance expense, professional fees and amortization and
depreciation expense.
As a result of the above, income before income taxes decreased by
approximately $51,000, or 16% during the three months ended December
31, 1996, as compared to the three months ended December 31, 1995. The
Company's effective income tax rate was approximately 42% for the
three months ended December 31, 1996, and 1995.
Liquidity and Capital Resources
A substantial portion of the Company's assets are liquid. At December
31, 1996, approximately 85% of the Company's assets consisted of cash,
cash equivalents, and marketable securities. All assets are financed
by the Company's equity capital, short-term borrowings from securities
lending transactions and other payables.
12
<PAGE>
IAAC is subject to the requirements of the SEC and the NASD relating
to liquidity and net capital levels. At December 31, 1996, IAAC had
net capital of approximately $2,458,000, which was approximately
$2,358,000 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.
13
<PAGE>
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a). Exhibits
(11) The Statement of Computation of Earnings Per Share
is attached hereto as Exhibit 11.
(27) Broker-Dealers and Broker Dealer Holding Companies
Financial Data Schedule BD is attached hereto as
Exhibit 27
b). Form 8-K
No reports were filed on Form 8-K during the three months
ended December 31, 1996.
14
<PAGE>
Signatures
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
INTERNATIONAL ASSETS HOLDING CORPORATION
Date 02/14/97 /s/ Jerome F. Miceli
Jerome F. Miceli
President and Chief Operating Officer
Date 02/14/97 /s/ Jonathan C. Hinz
Jonathan C. Hinz
Chief Accounting Officer
15
<PAGE>
Exhibit 11
INTERNATIONAL ASSETS HOLDING CORPORATION
STATEMENT OF COMPUTATION OF EARNINGS PER SHARE
For the Three Months Ended December 31, 1996, and 1995
<TABLE>
<CAPTION>
<S> <C> <C>
1996 1995
Adjustment of shares outstanding:
Weighted average number of actual common shares outstanding 1,448,138 1,460,887
Weighted average number of additional common shares outstanding
assuming the exercise of common stock equivalents (1) 777,276 544,344
Weighted average number of common and dilutive ============== ==============
common equivalent shares outstanding 2,225,414 2,005,231
============== ==============
Adjustment of net income:
Actual net income $157,551 $187,097
Adjustment to net income assuming the investment of
excess proceeds received from the assumed exercise
of common stock equivalents, net of income taxes $37,899 $34,354
============== ==============
Adjusted net income $195,450 $221,451
============== ==============
Earnings per common and dilutive common equivalent share:
Primary: $.088 $.110
Fully diluted (2): $.088 $.110
</TABLE>
- --------------------------------------------------------------------------------
(1) This calculation assumes that of all the additional common shares
outstanding, assuming the exercise of all common stock
equivalents, 288,954 shares of common stock are re-acquired with
the proceeds therefrom as of October 1, 1996 and 292,177 shares
are re-acquired as of October 1, 1995.
(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>
<TABLE> <S> <C>
<ARTICLE> BD
<MULTIPLIER> 1
<CAPTION>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> Dec-31-1996
<CASH> 1,906,106
<RECEIVABLES> 361,747
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 4,098,629
<PP&E> 386,783
<TOTAL-ASSETS> 6,952,813
<SHORT-TERM> 0
<PAYABLES> 720,800
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 642,116
<LONG-TERM> 0
0
0
<COMMON> 14,448
<OTHER-SE> 5,363,624
<TOTAL-LIABILITY-AND-EQUITY> 6,952,813
<TRADING-REVENUE> 521,784
<INTEREST-DIVIDENDS> 72,928
<COMMISSIONS> 2,021,907
<INVESTMENT-BANKING-REVENUES> 0
<FEE-REVENUE> 41,702
<INTEREST-EXPENSE> 876
<COMPENSATION> 1,425,107
<INCOME-PRETAX> 271,120
<INCOME-PRE-EXTRAORDINARY> 271,120
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 157,551
<EPS-PRIMARY> .088
<EPS-DILUTED> .088
</TABLE>
