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 June 30, 1998
[ ] 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 1,525,565 as of August 7,
1998.
Transitional small business disclosure format Yes [ ] No [X]
<PAGE>
INDEX
Page No.
Part I FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed Consolidated Balance Sheet as of June 30, 1998 3
Condensed Consolidated Statements of Operations for the
Nine Months ended June 30, 1998 and 1997 5
Condensed Consolidated Statements of Operations for the
Three Months ended June 30, 1998 and 1997 6
Condensed Consolidated Statements of Cash Flows for the
Nine Months ended June 30, 1998 and 1997 7
Notes to Condensed Consolidated Financial Statements 9
Item 2. Management's Discussion and Analysis or Plan of Operation 12
Part II OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 6. Exhibits and Reports on Form 8-K 18
Signatures 18
2
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheet
June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
Assets
Cash $ 266,490
Cash deposits with clearing broker 1,828,667
Foreign currency deposits with clearing broker 21,617
Investments, at market value 1,200,532
Receivable from clearing broker 144,620
Other receivables 79,601
Securities owned, at market value 2,704,436
Income taxes receivable 25,616
Deferred income tax benefit 78,468
Property and equipment, at cost:
Leasehold improvements 52,953
Furniture and equipment 893,546
----------------
946,499
Less accumulated depreciation and amortization (567,848)
----------------
Net property and equipment 378,651
Other assets, net of accumulated amortization of $112,003 132,059
================
Total assets $ 6,860,757
================
See accompanying notes to condensed consolidated financial statements.
</TABLE>
3
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheet
June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
Liabilities and Stockholders' Equity
Liabilities:
Securities sold, but not yet purchased, at market value $ 389,537
Accounts payable 75,345
Accrued employee compensation and benefits 346,816
Other accrued expenses 235,450
Deferred income taxes 13,271
Other 118,940
----------------
Total liabilities 1,179,359
----------------
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 1,525,565 15,256
Additional paid-in capital 3,641,803
Retained earnings 2,024,339
----------------
Total stockholders' equity 5,681,398
================
Total liabilities and stockholders' equity $6,860,757
================
See accompanying notes to condensed consolidated financial statements.
</TABLE>
4
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
For the Nine Months Ended June 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1998 1997
Revenues:
Commissions $5,484,305 6,649,876
Net dealer inventory and investment gains 1,575,478 1,932,332
Other revenue 397,770 483,953
--------------- ---------------
Total revenues 7,457,553 9,066,161
---------------- ---------------
Expenses:
Commissions and clearing fees 3,310,120 3,806,636
Employee compensation and benefits 1,530,848 1,976,765
Communications and promotions 1,179,357 1,106,964
Other operating expenses 1,478,788 1,270,755
---------------- ---------------
Total expenses 7,499,113 8,161,120
---------------- ---------------
Income (loss) before income taxes (41,560) 905,041
Income tax expense 7,032 373,013
---------------- ---------------
Net income (loss) $ (48,592) 532,028
================ ===============
Basic earnings (loss) per share $ (.032) .335
Diluted earnings (loss) per share $ (.032) .325
Weighted average number of common shares outstanding 1,541,368 1,586,681
Weighted average number of common shares and dilutive
potential common shares outstanding 1,541,368 1,637,895
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
For the Three Months Ended June 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1998 1997
Revenues:
Commissions $1,627,252 2,494,030
Net dealer inventory and investment gains 420,970 746,598
Other revenue 160,094 182,018
------------------ ---------------
Total revenues 2,208,316 3,422,646
------------------ ---------------
Expenses:
Commissions and clearing fees 1,030,989 1,425,624
Employee compensation and benefits 490,951 721,056
Communications and promotions 339,021 363,442
Other operating expenses 348,111 497,242
------------------ ---------------
Total expenses 2,209,072 3,007,364
------------------ ---------------
Income (loss) before income taxes (756) 415,282
Income tax expense 7,312 166,375
------------------ ---------------
Net income (loss) $ (8,068) 248,907
================== ===============
Basic earnings (loss) per share $ (.005) .158
Diluted earnings (loss) per share $ (.005) .154
Weighted average number of common shares outstanding 1,528,184 1,578,421
Weighted average number of common shares and
dilutive potential common shares outstanding 1,528,184 1,618,447
</TABLE>
See accompanying notes to condensed consolidated financial
statements.
6
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended June 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1998 1997
Cash flows from operating activities:
Net income (loss) (48,592) 532,028
Adjustments to reconcile net income (loss) to net cash
provided by (used for) operating activities:
Net amortization and appreciation of investments (25,710) (65,096)
Depreciation and amortization 134,278 121,264
Deferred income taxes (36,405) (39,607)
Cash provided by (used for) changes in:
Receivable from clearing broker, net 260,430 237,136
Receivable from affiliated company - 26,542
Other receivables (42,960) 26,888
Securities owned, at market value (176,176) (852,475)
Other assets 21,135 (135,362)
Securities sold, but not yet purchased,
at market value (292,517) (132,189)
Payable to clearing broker, net - 171,435
Accounts payable (40,722) 33,124
Accrued employee compensation and benefits (554,157) 49,109
Other accrued expenses (32,864) 84,027
Income taxes payable 0 (45,080)
Other liabilities 9,579 75
----------------- ----------
Net cash provided by (used for)
operating activities (824,681) 11,819
----------------- ----------
Cash flows from investing activities:
Disposal of investments 5,800,000 5,800,000
Acquisition of investments (5,674,438) (5,730,191)
Acquisition of property, equipment and other assets (49,550) (235,388)
----------------- ----------
Net cash provided by (used for)
investing activities 76,012 (165,579)
----------------- ----------
</TABLE>
(continued)
See accompanying notes to condensed consolidated financial statements.
7
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows, Continued
For the Nine Months Ended June 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1998 1997
Cash flows from financing activities:
Acquisition of common shares related to repurchase program (30,609) (32,321)
Acquisition of common shares related to terminated
ESOP participants (66,795) (67,822)
----------------- -----------------
Net cash used for financing activities (97,404) (100,143)
----------------- -----------------
Net decrease in cash and cash equivalents (846,073) (253,903)
Cash and cash equivalents at beginning of period 2,962,847 2,829,483
----------------- -----------------
Cash and cash equivalents at end of period $ 2,116,774 2,575,580
================= =================
Supplemental disclosure of cash flow information:
Cash paid for interest $ 3,015 2,166
================= =================
Income taxes paid $ 75,399 457,700
================= =================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
8
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 1998 and 1997
(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 (consisting of
normal recurring items) 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. These condensed consolidated
financial statements should be read in conjunction with the Company's audited
consolidated financial statements for the year ending September 30, 1997, 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"),
International Trader Association, Inc. ("ITA") 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 June 30, 1998,
consist of trading and investment securities at quoted market values as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Sold, but not
Owned yet purchased
Obligations of U.S. Government $ 387,979 -
Common stock and American Depository Receipts 1,030,729 389,537
Proprietary unit investment trusts 942,379 -
Corporate and municipal bonds 300,780 -
Foreign government obligations 42,569 -
--------- --------
$ 2,704,436 389,537
--------- --------
</TABLE>
9
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements, continued
(3) Stock Dividend
On November 14, 1997 the Company's Board of Directors declared a 10% stock
dividend for shareholders of record on December 26, 1997 and payable on January
20, 1998. The 10% stock dividend increased the Company's issued and outstanding
common shares by 140,648 shares.
(4) Basic and Diluted Earnings (Loss) Per Share
On October 1, 1997 the Company adopted the provisions of Statement of Financial
Accounting Standards (SFAS) No. 128, Earnings Per Share. Comparative earnings
per share data for the quarter ended June 30, 1997 has been restated to adhere
to the provisions of SFAS No. 128.
Basic earnings (loss) per share for the nine months ended June 30, 1998 and
1997, have been computed by dividing net income (loss) by the weighted average
number of common shares outstanding. Diluted earnings per share for the nine
months ended June 30, 1997 has been computed by dividing net income by the
weighted average number of common shares and dilutive potential common shares
outstanding. Diluted loss per share for the nine months ended June 30, 1998 is
the same as basic loss per share because of the anti-dilutive impact of the
potential common shares, due to the net loss for the period.
Basic earnings (loss) per share for the three months ended June 30, 1998 and
1997, have been computed by dividing net income (loss) by the weighted average
number of common shares outstanding. Diluted earnings per share for the three
months ended June 30, 1997, has been computed by dividing net income by the
weighted average number of common shares and dilutive potential common shares
outstanding. Diluted loss per share for the three months ended June 30, 1998 is
the same as basic loss per share because of the anti-dilutive impact of the
potential common shares, due to the net loss for the period.
Due to the issuance of the 10% stock dividend, the computations of basic and
diluted earnings (loss) per share have been adjusted retroactively for all
periods presented to reflect the additional number of shares issued.
(5) Leases
The Company occupies leased office space of approximately 13,815 square feet at
250 Park Avenue South, Winter Park, Florida. The expiration date of the office
lease is May 31, 2001. The lease includes an option to renew for an additional
three years at a rental rate determined by the landlord.
10
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements, continued
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 $204,925 and $230,583 for the nine
months ended June 30, 1998, and 1997, respectively. The minimum lease payments
under noncancelable operating leases as of June 30, 1998 are as follows:
Fiscal Year (12 month period) Ending September 30,
1998 282,800
1999 316,100
2000 326,900
2001 233,000
2002 17,500
Total future minimum lease payments $1,176,300
(6) Stock Repurchase Program
The Board of Directors has authorized the Company to continue its repurchase of
up to $500,000 in shares of the Company's common stock in the open market
through the period ended December 31, 1998. 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 and Regulation M of the Securities and
Exchange Commission which regulate the specific terms in which shares may be
repurchased. Since the inception of the repurchase program on March 13, 1996 the
Company has repurchased and retired a total of 35,630 shares (as adjusted for
the 10% stock dividend) in the open market at a total cost of $129,233.
In addition, concurrent with the open market repurchase program, the Company has
repurchased and retired an additional 45,766 shares (as adjusted for the 10%
stock dividend) from terminated participants of the Company's Employee Stock
Ownership Plan (ESOP) for a total cost of $142,495.
In total the Company has repurchased 81,396 shares (as adjusted for the 10%
stock dividend) for a total cost of $271,728 since March 13, 1996.
(7) Commitments and Contingent Liabilities
The Company was involved in a National Association of Securities Dealers (NASD)
arbitration hearing that concluded on November 7, 1997. On January 16, 1998, the
Company received notification from the NASD arbitration panel that an award of
$99,845 plus $100,000 reimbursement for a portion of the claimant's legal fees
was awarded to the claimant. The cost of both the award and legal fee
reimbursement was accrued in other accrued expenses in the December 31, 1997
condensed consolidated financial statements and was paid on January 22, 1998.
11
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements, continued
(8) New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (SFAS 133). SFAS 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, (collectively referred to as
derivatives) and for hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. SFAS 133 is effective for
all fiscal quarters of fiscal years beginning after June 5, 1999. The Company is
currently reviewing SFAS 133 to see what impact, if any, it will have on the
Company.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN
OF OPERATION.
Certain statements in this discussion may constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements involve known and unknown risks
including, but not limited to, changes in general economic and business
conditions, interest rate and securities market fluctuations, competition from
within and from outside the investment brokerage industry, new products and
services in the investment brokerage industry, changing trends in customer
profiles and changes in laws and regulations applicable to the Company. Although
the Company believes that its expectations with respect to the forward-looking
statements are based upon reasonable assumptions within the bounds of its
knowledge of its business and operations, there can be no assurance that the
actual results, performance or achievement of the Company will not differ
materially from any future results, performance or achievements expressed or
implied by such forward-looking statements.
The Company's assets decreased from $7,928,214 at September 30, 1997, to
$6,860,757 at June 30, 1998, or a decrease of $1,067,457. The Company's
liabilities decreased from $2,100,820 at September 30, 1997, to $1,179,359 at
June 30, 1998, or a decrease of $921,461. The decrease in the net assets (assets
less liabilities) of $145,996 relates to the $48,592 net loss incurred by the
Company for the nine month fiscal period ended June 30, 1998, and the stock
repurchase costs from the stock repurchase program totaling $97,404 for the same
period.
The Company's condensed consolidated balance sheet at June 30, 1998, reflects a
net 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.
12
<PAGE>
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.
Nine Months Ended June 30, 1998, as Compared to
the Nine Months Ended June 30,1997
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 decreased by approximately $1,609,000, or 18%
for the nine months ended June 30, 1998, as compared to the nine months ended
June 30, 1997. For the nine months ended June 30, 1998, and 1997, approximately
74% and 73%, respectively, of the Company's revenues were derived from
commissions earned on the sale of securities. For the nine months ended June 30,
1998, and 1997, approximately 21% of the Company's total revenues were from net
dealer inventory and investment gains (trading revenue).
Commission revenue decreased by approximately $1,166,000, or 18% for the nine
months ended June 30, 1998, as compared to the nine months ended June 30, 1997.
The decrease in commission revenue is primarily attributable to the volatility
of the Asian financial markets. During the nine months ended June 30, 1998, the
overall volume of customer ticket orders decreased by approximately 5% and the
average dollar amount of retail trades decreased by approximately 14%, as
compared to the nine months ended June 30, 1997. These decreases in ticket
volume and the average dollar amount of retail trades are directly related to
the decrease in total commission revenue for the nine months ended June 30, 1998
over the same period in 1997. The overall decrease in commission revenue was
despite an increase in the nine month average number of account executives from
42 as of June 30, 1997, to 43 as of June 30, 1998.
Revenues from net dealer inventory and investment gains decreased by
approximately $357,000, or 18% for the nine months ended June 30, 1998, as
compared to the nine months ended June 30, 1997. The decrease in trading revenue
is primarily attributable to a decrease in the Company's retail trading income
due to the volatility of the Asian financial markets. The decrease in retail
trading was partially offset by increases in wholesale trading. The increase in
wholesale trading is attributable to the ongoing development of new wholesale
trading relationships as well as maintaining existing wholesale relationships.
The Company's retail trading department primarily concentrates on global
securities that it believes are likely to be traded by the Company's retail
clients. By focusing on these types of securities, retail trading revenue is
more closely related to commission revenue and order flow.
13
<PAGE>
Other revenue decreased by approximately $86,000, or 18% during the nine months
ended June 30, 1998, as compared to the nine months ended June 30, 1997. The
decrease in other revenue is primarily due to decreases in list rental income
and newsletter subscription fee income.
The major expenses incurred by the Company relate to direct costs of its
securities operations such as commissions and clearing fees, employee
compensation and benefits, communications and promotions expense and other
operating expenses. Total expenses decreased by approximately $662,000, or 8%
for the nine months ended June 30, 1998, as compared to the same period in 1997.
This decrease in total expense is primarily attributable to decreases in
commissions and clearing fees and employee compensation and benefits expense.
Commissions and clearing fees decreased by approximately $497,000, or 13% during
the nine months ended June 30, 1998, as compared to the same period in 1997.
This decrease is primarily attributable to the corresponding approximate 18%
decrease in commission revenue for the nine months ended June 30, 1998, as
compared to the same period in 1997. The decrease in commissions and clearing
fees is also related to the 5% decrease in retail ticket volume.
Employee compensation and benefits expense decreased by approximately $446,000,
or 23% during the nine months ended June 30, 1998, as compared to the nine
months ended June 30, 1997. The decrease in employee compensation and benefits
is primarily due to a decrease in performance based bonus accruals and a
decrease in retirement plan profit sharing accruals. The decrease in these
employee compensation and benefits accruals is based on the approximate $42,000
loss before income taxes incurred for the nine months ended June 30, 1998
compared to the approximate $905,000 income before income taxes for the same
period in 1997.
Communications and promotions expense increased by approximately $72,000, or 7%
during the nine months ended June 30, 1998, as compared to the nine months ended
June 30, 1997. This increase is primarily related to increases in expenditures
for promotional print media including postage, printing and design costs.
Other operating expenses increased by approximately $208,000, or 16% during the
nine months ended June 30, 1998, as compared to the nine months ended June 30,
1997. Approximately $100,000 of the increase is for the award of an arbitration
matter and an additional $100,000 of the increase is for partial reimbursement
of the claimant's legal fees also awarded to the claimant in the same matter.
As a result of the above, the Company is reporting a loss before income taxes of
approximately $42,000 for the nine months ended June 30, 1998. This is compared
to income before income taxes of approximately $905,000 for the nine months
ended June 30, 1997.
14
<PAGE>
The Company did not record an expected income tax benefit for the nine months
ended June 30, 1998 due to the presence of offsetting permanent tax differences.
The Company's effective income tax rate was approximately 41% for the nine
months ended June 30, 1997.
Three Months Ended June 30, 1998, as Compared to
the Three Months Ended June 30,1997
Total revenues decreased by approximately $1,214,000, or 35% for the three
months ended June 30, 1998, as compared to the three months ended June 30, 1997.
For the three months ended June 30, 1998, and 1997, approximately 74% and 73%,
respectively, of the Company's revenues were derived from commissions earned on
the sale of securities. For the three months ended June 30, 1998, and 1997,
approximately 19% and 22%, respectively, of the Company's total revenues were
derived from net dealer inventory and investment gains (trading revenue).
Commission revenue decreased by approximately $867,000, or 35% for the three
months ended June 30, 1998, as compared to the three months ended June 30, 1997.
The decrease in commission revenues is related to a 13% decrease in ticket
volume and a 26% decrease in the average dollar amount of trades during the
three months ended June 30, 1998, as compared to the three months ended June 30,
1997.
Revenues from net dealer inventory and investment gains (trading income)
decreased by approximately $326,000, or 44% for the three months ended June 30,
1998, as compared to the three months ended June 30, 1997. The decrease in
trading revenue is attributable to decreases in the Company's retail equity and
retail fixed-income trading income. The decrease in retail equity and retail
fixed-income trading income is related to the decrease in retail order flow and
an approximate 35% decrease in commission revenue for the three months ended
June 30, 1998, as compared to the three months ended June 30, 1997.
Other revenues decreased by approximately $22,000, or 12% during the three
months ended June 30, 1998, as compared to the three months ended June 30, 1997.
This decrease is primarily attributable to decreases in interest and dividend
income, list rental and newsletter subscription revenues.
The major expenses incurred by the Company relate to the direct costs of
securities operations such as commissions and clearing fees, employee
compensation and benefits, and communications and promotions expense. Total
expenses decreased by approximately $798,000, or 27% for the three months ended
June 30, 1998, as compared to the same period in 1997. This decrease in expenses
is primarily attributable to decreases in commissions and clearing fees,
employee compensation and benefits and other operating expenses.
15
<PAGE>
Commissions and clearing fees decreased by approximately $395,000, or 28% during
the three months ended June 30, 1998, as compared to the same period in 1997.
This decrease in expense is directly related to the approximate 35% decrease in
commission revenue for the same period.
Employee compensation and benefits expense decreased by approximately $230,000,
or 32% during the three months ended June 30, 1998, as compared to the three
months ended June 30, 1997. The decrease in employee compensation and benefits
is primarily due to a decrease in performance based bonus accruals and a
decrease in retirement plan profit sharing accruals. The decrease in these
employee compensation and benefits accruals is based on the approximate $1,000
loss before income taxes incurred for the three months ended June 30, 1998
compared to the approximate $415,000 income before income taxes for the same
period in 1997.
Communication and promotions expense decreased by approximately $24,000, or 7%
during the three months ended June 30, 1998, as compared to the three months
ended June 30, 1997. This decrease is primarily due to decreased communications
activity and the related expense. Other operating expenses decreased by
approximately $149,000, or 30% during the three months ended June 30, 1998, as
compared to the three months ended June 30, 1997.
As a result of the above, the Company is reporting a loss before income taxes of
approximately $1,000 for the three months ended June 30, 1998. This is compared
to income before income taxes of approximately $415,000 for the three months
ended June 30, 1997.
The Company did not record an expected income tax benefit for the three months
ended June 30, 1998 due to the presence of offsetting permanent tax differences.
The Company's effective income tax rate was approximately 40% for the three
months ended June 30, 1997.
Liquidity and Capital Resources
Substantial portions of the Company's assets are liquid. At June 30, 1998,
approximately 87% 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.
The Company's wholly owned registered securities broker/dealer subsidiary IAAC
is subject to the requirements of the SEC and the NASD relating to liquidity and
net capital levels. At June 30, 1998, IAAC had net capital of approximately
$2,602,000, which was approximately $2,484,000 in excess of its minimum net
capital requirement at that date.
16
<PAGE>
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 twelve 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.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company was involved in a National Association of Securities Dealers (NASD)
arbitration hearing that concluded on November 7, 1997. On January 16, 1998, the
Company received notification from the NASD arbitration panel that an award of
$99,845 plus $100,000 reimbursement for a portion of the claimant's legal fees
was awarded to the claimant. The cost of both the award and legal fee
reimbursement was accrued in other accrued expenses in the December 31, 1997
condensed consolidated financial statements and was paid on January 22, 1998.
The Company is party to certain additional arbitration and/or litigation matters
as of June 30, 1998 which relate primarily to matters arising in the ordinary
course of business. Management of the Company anticipates that the final
resolution of these additional items will not have a material adverse effect on
the Company's consolidated financial statements.
The foregoing discussion contains certain "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve various risks and uncertainties with respect
to current legal proceedings. Although the Company believes that its expectation
with respect to the forward-looking statements is based upon reasonable
assumptions within the bounds of its knowledge of its business and operations,
there can be no assurances that the actual results, performance or achievement
of the Company will not differ materially from any future results, performance
or achievements expressed or implied by such forward-looking statements.
17
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
(11) The Statements of Computation of Earnings Per Share are
attached hereto as Exhibit 11.
(21) Subsidiaries of the Registrant is attached hereto as Exhibit 21.
(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 nine months ended
June 30, 1998.
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 08/11/98 /s/ Jerome F. Miceli
Jerome F. Miceli
President and Chief Operating Officer
Date 08/11/98 /s/ Jonathan C. Hinz
Jonathan C. Hinz
Chief Accounting Officer
18
<PAGE>
EXHIBIT 11
INTERNATIONAL ASSETS HOLDING CORPORATION
STATEMENT OF COMPUTATION OF EARNINGS PER SHARE
For the Nine Months Ended June 30, 1998 and 1997
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1998 (1) 1997
Basic Earnings (Loss) Per Share
Net income (loss) $ (48,592) $ 532,028
Weighted average number of common shares outstanding 1,541,368 1,586,681
Basic earnings (loss) per share $ (0.032) $ 0.335
Diluted Earnings (Loss) Per Share
Net income (loss) $ (48,592) $ 532,028
Weighted average number of common shares outstanding 1,541,368 1,586,681
Weighted average number of net common shares that would
be issued upon exercise of dilutive options and warrants assuming
proceeds used to repurchase shares pursuant to the treasury
stock method (2) 51,214
Weighted average number of common shares and dilutive
potential common shares outstanding 1,541,368 1,637,895
Diluted earnings (loss) per share $ (0.032) $ 0.325
- --------------------------------------------------------------------------------------------------------------------------
(1) Diluted loss per share is the same as basic loss per share for 1998 because of the anti-dilutive
impact of the dilutive potential common shares due to the net loss for 1998.
(2) The treasury stock method recognizes the use of proceeds that could be obtained upon exercise of
options and warrants in computing diluted earnings per share. It assumes exercise of options and
warrants as of the beginning of the period or when issued, if later, and that any proceeds would be
used to purchase common stock at the average market price during the period.
</TABLE>
19
<PAGE>
EXHIBIT 11
INTERNATIONAL ASSETS HOLDING CORPORATION
STATEMENT OF COMPUTATION OF EARNINGS PER SHARE
For the Three Months Ended June 30, 1998 and 1997
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1998 (1) 1997
Basic Earnings (Loss) Per Share
Net income (loss) $ (8,068) $ 248,907
Weighted average number of common shares outstanding 1,528,184 1,578,421
Basic earnings (loss) per share $ (0.005) $ 0.158
Diluted Earnings (Loss) Per Share
Net income (loss) $ (8,068) $ 248,907
Weighted average number of common shares outstanding 1,528,184 1,578,421
Weighted average number of net common shares that would
be issued upon exercise of dilutive options assuming
proceeds used to repurchase shares pursuant to the treasury
stock method (2) 40,026
Weighted average number of common shares and dilutive
potential common shares outstanding 1,528,184 1,618,447
Diluted earnings (loss) per share $ (0.005) $ 0.154
- --------------------------------------------------------------------------------------------------------------------------
(1) Diluted loss per share is the same as basic loss per share for 1998 because of the anti-dilutive
impact of the dilutive potential common shares due to the net loss for 1998.
(2) The treasury stock method recognizes the use of proceeds that could be obtained upon exercise
of options in computing diluted earnings per share. It assumes exercise of options as of the
beginning of the period or when issued, if later, and that any proceeds would be used to
purchase common stock at the average market price during the period.
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
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
International Trader Association, Inc. Florida
</TABLE>
21
<PAGE>
<TABLE> <S> <C>
<ARTICLE> BD
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 2,116,774
<RECEIVABLES> 249,837
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 3,904,968
<PP&E> 378,651
<TOTAL-ASSETS> 6,860,757
<SHORT-TERM> 0
<PAYABLES> 657,611
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 389,537
<LONG-TERM> 0
0
0
<COMMON> 15,256
<OTHER-SE> 5,666,142
<TOTAL-LIABILITY-AND-EQUITY> 6,860,757
<TRADING-REVENUE> 1,575,478
<INTEREST-DIVIDENDS> 206,666
<COMMISSIONS> 5,484,305
<INVESTMENT-BANKING-REVENUES> 0
<FEE-REVENUE> 189,607
<INTEREST-EXPENSE> 3,015
<COMPENSATION> 3,824,378
<INCOME-PRETAX> (41,560)
<INCOME-PRE-EXTRAORDINARY> (41,560)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (48,592)
<EPS-PRIMARY> (.032)
<EPS-DILUTED> (.032)
</TABLE>
