U.S. Securities and Exchange Commission
Washington D.C. 20549
Amendment No. 1 to
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, 1999
[ ] 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 1,718,828 as of August 5,
1999.
Transitional small business disclosure format Yes [ ] No [X]
<PAGE>
EXPLANITORY STATEMENT
This Amendment No. 1 to the Form 10-QSB for the quarterly period ended June 30,
1999 is being filed to amend Item 1 and Item 2 of Part I and Item 6 of Part II
as described more fully in Note (1) to Condensed Consolidated Financial
statements. The effect of this amendment is to increase previously reported net
earnings for the third quarter ended June 30, 1999 by $37,501 or $.017 cents per
diluted share.
This amended 10-QSB presents the restated earnings of the Company due to the
reversal of a single non-cash compensation expense recognition related to the
exercise of a nonqualified stock option. The original amount of this non-cash
compensation expense recognition was $63,330. The presentation of income tax
expense related to this expense recognition also required adjustment whereby the
income tax expense was increased by $25,829. The reversal of this single expense
recognition resulted in a $37,501 increase in reported net income
($63,330-$25,829) for the third quarter ended June 30, 1999 from net income of
$1,379, or $.001 per diluted share, to $38,880, or $.018 per diluted share. The
original expense recognition was recorded by the Company in relation to the
exercise of a stock option that did not need this expense recognition according
to the provisions of APB Opinion No. 25, "Accounting for Stock Issued to
Employees".
INDEX
Page No.
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of June 30,
1999 (RESTATED) and September 30, 1998 3
Condensed Consolidated Statements of Operations for the
Nine Months ended June 30, 1999 (RESTATED) and 1998 5
Condensed Consolidated Statements of Operations for the
Three Months ended June 30, 1999 (RESTATED) and 1998 6
Condensed Consolidated Statements of Cash Flows for the
Nine Months ended June 30, 1999 (RESTATED) and 1998 7
Notes to Condensed Consolidated Financial Statements 9
Item 2. Management's Discussion and Analysis or Plan of Operation 15
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 24
Signatures 24
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
RESTATED
(Unaudited)
June 30, September 30,
Assets 1999 1998
------ ---- ----
Cash $ 538,437 617,628
Cash deposits with clearing broker 3,945,869 2,424,486
Foreign currency 17,391 3,961
Receivable from clearing broker, net 0 791,753
Other receivables 53,990 63,523
Securities owned, at market value 3,175,504 2,014,734
Investment in Joint Venture 15,746 0
Income taxes receivable 53,874 67,398
Deferred income tax benefit 85,921 127,065
Property and equipment, at cost:
Leasehold improvements 52,953 52,953
Furniture and equipment 962,618 902,719
-------------------- --------------------
1,015,571 955,672
Less accumulated depreciation and
amortization (696,946) (605,059)
-------------------- --------------------
Net property and equipment 318,625 350,613
Other assets, net of accumulated
amortization of $138,007 in June 1999
and $118,504 in September 1998 108,847 98,920
==================== ====================
Total $ 8,314,204 6,560,081
assets ==================== ====================
See accompanying notes to condensed consolidated financial statements.
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
RESTATED
(Unaudited)
June 30, September 30,
Liabilities and Stockholders' Equity 1999 1998
- ------------------------------------ ---- ----
Liabilities:
Foreign currency sold, but not
yet purchased $ 32,487 7,206
Securities sold, but not yet
purchased, at market value 1,089,262 290,403
Payable to clearing broker, net 47,196 0
Accounts payable 50,662 72,600
Accrued employee compensation and benefits 603,363 291,536
Accrued expenses 271,598 352,544
Payable to joint venture 13,333 0
Deferred income taxes 12,442 16,797
Other liabilities 119,000 117,845
-------------------- --------------------
Total liabilities 2,239,343 1,148,931
-------------------- --------------------
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 1,718,828 shares in June 17,188 14,816
1999 and 1,481,574 shares in September 1998
Additional paid-in capital 4,558,997 3,564,648
Retained earnings 1,498,676 1,831,686
-------------------- --------------------
Total stockholders'equity 6,074,861 5,411,150
==================== ====================
Total liabilities and
stockholders' equity $ 8,314,204 6,560,081
==================== ====================
See accompanying notes to condensed consolidated financial statements.
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
For the Nine Months Ended June 30, 1999 and 1998
(Unaudited) RESTATED
1999 1998
---- ----
Revenues:
Commissions $4,700,005 5,484,305
Net dealer inventory and investment gains 2,437,717 1,549,350
Management and investment advisory fees 63,171 57,241
Account maintenance fees 108,314 132,366
Interest and dividends 184,466 206,666
Loss from joint venture (34,254) 0
Other 20,811 27,625
-------------- -------------
Total revenues 7,480,230 7,457,553
-------------- -------------
Expenses:
Commissions and clearing fees 3,017,469 3,324,935
Employees compensation and benefits 2,034,267 1,516,033
Communications 197,391 257,373
Promotion 534,522 921,984
Occupancy and equipment rental 332,062 263,435
Interest 2,345 3,015
Professional fees 198,809 334,671
Insurance 124,695 154,817
Depreciation and amortization 111,390 134,278
Other operating expenses 302,804 588,572
------------- -------------
Total expenses 6,855,754 7,499,113
------------- -------------
Income (loss) before income taxes 624,476 (41,560)
Income tax expense 261,442 7,032
------------- -------------
Net income (loss) $ 363,034 (48,592)
============= =============
Earnings (loss) per share:
Basic $ 0.22 (.03)
Diluted $ 0.19 (.03)
Weighted average number of common shares outstanding:
Basic 1,650,938 1,695,505
Diluted 1,948,964 1,695,505
See accompanying notes to condensed consolidated financial statements.
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
For the Three Months Ended June 30, 1999 and 1998
(Unaudited) RESTATED
1999 1998
---- ----
Revenues:
Commissions $1,594,474 1,627,252
Net dealer inventory and investment gains 648,958 404,010
Management and investment advisory fees 18,775 30,510
Account maintenance fees 46,139 65,443
Interest and dividends 75,719 68,947
Loss from joint venture (16,711) 0
Other 5,916 12,154
------------ -------------
Total revenues 2,373,270 2,208,316
------------ -------------
Expenses:
Commissions and clearing fees 975,596 1,044,104
Employees compensation and benefits 647,289 477,836
Communications 66,521 83,123
Promotion 205,782 255,898
Occupancy and equipment rental 116,479 97,291
Interest 1,249 490
Professional fees 85,316 67,133
Insurance 35,547 45,095
Depreciation and amortization 32,999 43,719
Other operating expenses 125,246 94,383
------------- ------------
Total expenses 2,292,024 2,209,072
------------- ------------
Income (loss) before income taxes 81,246 (756)
Income tax expense 42,366 7,312
------------- ------------
Net income (loss) $ 38,880 (8,068)
============= ============
Earnings (loss) per share:
Basic $ 0.023 $ (0.005)
Diluted $ 0.018 $ (0.005)
Weighted average number of common shares outstanding:
Basic 1,700,980 1,681,002
Diluted 2,172,267 1,681,002
See accompanying notes to condensed consolidated financial statements.
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended June 30, 1999 and 1998
(Unaudited) RESTATED
1999 1998
---- ----
Cash flows from operating activities:
Net income (loss) $ 363,034 (48,592)
Adjustments to reconcile net income (loss)
to net cash provided by (used for) operating
activities:
Depreciation and amortization 111,390 134,278
Deferred income taxes 36,789 (36,405)
Non-cash compensation 30,271 0
Loss from joint venture 34,254 0
Tax benefit from exercise of nonqualified
stock option 23,829 0
Cash provided by (used for) changes in:
Receivable from clearing broker, net 791,753 260,430
Other receivables 9,533 (42,960)
Securities owned, at market value (1,160,770) (76,324)
Income tax receivable 13,524 0
Other assets (29,430) 21,135
Securities sold, but not yet purchased,
at market value 798,859 (292,517)
Payable to clearing broker, net 47,196 0
Accounts payable (21,938) (40,722)
Accrued employee compensation and
benefits 311,827 (554,157)
Accrued expenses (80,946) (32,864)
Payable to joint venture 13,333 0
Other liabilities 1,155 9,579
------------ ------------
Net cash provided by (used for)
operating activities 1,293,663 (699,119)
------------ ------------
Cash flows from investing activities:
Investment in joint venture (50,000) 0
Acquisition of property, equipment and
other assets (59,899) (49,550)
------------ ------------
Net cash used for investing activities (109,899) (49,550)
------------ ------------
(Continued)
See accompanying notes to condensed consolidated financial statements.
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows, Continued
For the Nine Months Ended June 30, 1999 and 1998
(Unaudited) RESTATED
1999 1998
---- ----
Cash flows from financing activities:
Exercise of stock options 259,473 0
Acquisition of common shares related to
repurchase program 0 (30,609)
Acquisition of common shares related to terminated
ESOP and RSP participants (12,896) (66,795)
-------------- -------------
Net cash provided by (used for)
financing activities 246,577 (97,404)
-------------- -------------
Net increase (decrease) in cash and
cash equivalents 1,430,341 (846,073)
Cash and cash equivalents at beginning of period 3,038,869 2,962,847
-------------- -------------
Cash and cash equivalents at end of period $4,469,210 2,116,774
============== =============
Supplemental disclosure of cash flow information:
Cash paid for interest $ 2,345 3,015
============== =============
Income taxes paid $ 187,300 75,399
============== =============
Supplemental disclosure of noncash financing activities:
On March 26,1999, the Company issued 148,199
shares of common stock in conjunction with a ten
percent stock dividend.
On January 20, 1998, the Company issued 140,648 shares of common stock in
conjunction with a ten percent stock dividend.
See accompanying notes to condensed consolidated financial statements.
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 1999 and 1998
(1) Basis of Presentation
In connection with preparation of the Company's year end financial
statements, management discovered that an adjustment to its third quarter
ended June 30, 1999 Condensed Consolidated Financial Statements was
required to present the restated earnings of the Company due to the
reversal of a single non-cash compensation expense recognition related to
the exercise of a nonqualified stock option. Accordingly, Amendment No. 1
to Form 10-QSB for the quarterly period ended June 30, 1999 is being
filed. The original amount of this non-cash compensation expense
recognition was $63,330. The presentation of income tax expense related
to this expense recognition also required adjustment whereby the income
tax expense was increased by $25,829. The reversal of this single expense
recognition resulted in a $37,501 increase in reported net income
($63,330-$25,829) for the third quarter ended June 30, 1999 from net
income of $1,379, or $.001 per diluted share, to $38,880, or $.018 per
diluted share. The original expense recognition was recorded by the
Company in relation to the exercise of a stock option that did not
require this expense recognition according to the provisions of APB
Opinion No. 25, "Accounting for Stock Issued to Employees."
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, 1998, 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 six wholly owned subsidiaries; International Assets Advisory
Corp. ("IAAC"), Global Assets Advisors, Inc.("GAA"), International
Financial Products, Inc. ("IFP"), International Trader Association, Inc.
now known as INTLTRADER.COM, INC. ("ITCI")(name change filed July 15,
1999), International Asset Management Corp. ("IAMC") and
OffshoreTrader.com Ltd.("OTCL"): and a 50% interest in International
Assets New York, LLC ("IANY") a joint venture. All significant
intercompany balances and transactions have been eliminated in
consolidation.
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements, continued
OTCL was incorporated on April 15, 1999 as a Bermuda exempted company and
is 100% owned by International Assets Holding Corporation. OTCL was
incorporated to explore global internet securities trading for non-U.S.
citizens. In June 1999 OTCL was funded with a $25,000 share capital
contribution from International Assets Holding Corporation. Exempted
Bermuda companies, although resident in Bermuda, may only carry on
business that is external to Bermuda. However, exempted Bermuda companies
may trade with other exempted companies which reside in Bermuda.
(2) Reclassifications
Certain prior year amounts have been reclassified to conform to fiscal
1999 presentation. These changes had no impact on previously reported
results of operations or stockholders' equity.
(3) Stock Dividend
On February 12, 1999 the Company's Board of Directors declared a 10%
stock dividend for shareholders of record on March 5, 1999 and payable on
March 26, 1999. The 10% stock dividend increased the Company's issued and
outstanding common shares by 148,199 shares.
Earnings per common share, weighted average shares outstanding, and all
stock option activity have been restated to reflect the 10% stock
dividend
(4) Basic and Diluted Earnings (Loss) Per Share
Basic earnings (loss) per share for the nine months ended June 30, 1999
and 1998, 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, 1999 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.
Options to purchase 29,800 shares of common stock were excluded from the
calculation of diluted earnings per share for the nine months ended June
30, 1999 because their exercise prices exceeded the average market price
of common shares for the period. All options were excluded from the
calculation of diluted loss per share for the nine months ended June 30,
1998, because their inclusion would have been antidilutive.
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements, continued
Basic earnings (loss) per share for the three months ended June 30, 1999
and 1998, 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, 1999 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.
No options to purchase shares of common stock were excluded from the
calculation of diluted earnings per share for the three months ended June
30, 1999. All options were excluded from the calculation of diluted loss
per share for the three months ended June 30, 1998, because their
inclusion would have been antidilutive.
(5) Securities Owned and Securities Sold, But Not Yet Purchased Securities
owned and Securities sold, but not yet purchased at June 30, 1999 and
September 30, 1998 consist of trading and investment securities at
quoted market values as follows:
Sold, but not
Owned yet purchased
June 30, 1999:
Obligations of U.S. Government $ 264,711 -
Common stock and American Depository
Receipts 2,201,496 1,067,060
Corporate and municipal bonds 214,787 -
Foreign government obligations 257,639 -
Unit investment trusts, mutual funds
and other investments 236,871 22,202
----------- ----------
Total $ 3,175,504 1,089,262
=========== ==========
September 30, 1998:
Obligations of U.S. Government $ 373,841 -
Common stock and American Depository
Receipts 836,057 290,403
Corporate and municipal bonds 341,066 -
Foreign government obligations 26,713 -
Unit investment trusts, mutual funds and
other investments 437,057 -
---------- ----------
Total $ 2,014,734 290,403
========== ==========
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements, continued
(6) Investment in Joint Venture
In October 1998, the Company made an initial $20,000 capital contribution
to International Assets New York, LLC (IANY), a 50/50 joint venture with
Lakeside Investments, LLC, an unrelated party. In February 1999, the
Company made an additional $30,000 capital contribution to this joint
venture. The Company has recorded this investment under the equity method
of accounting. For the nine months and three months ended June 30, 1999
the Company has recorded a loss of $34,254 and $16,711, respectively, for
50% of the joint venture's loss for both periods. As of June 30, 1999 the
Company has a payable to the joint venture of $13,333 related to joint
venture cash outlays which were made on behalf of the Company.
(7) 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.
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 $255,134 and
$204,925 for the nine months ended June 30, 1999, and 1998, respectively.
The future minimum lease payments under noncancelable operating leases as
of June 30, 1999 are as follows:
Fiscal Year (12 month period) Ending September 30,
---------------------------------------------------
1999 346,900
2000 383,600
2001 289,700
2002 81,700
2003 50,500
Thereafter 3,300
Total future minimum lease payments $1,155,700
The Company and Lakeside Investments, LLC, each executed a 100% guaranty
for the joint venture office lease for IANY. Concurrently, the Company
and Lakeside Investments, LLC executed indemnification agreements
expressly agreeing to indemnify each other related to this lease
guarantee in accordance with each parties proportionate ownership
(50/50). This office lease is for a 38 month term from January 1, 1999
through February 28, 2002. The total rental commitment for IANY is
$100,944 (Fiscal year ending: September 30, 1999, $19,628; September 30,
2000, $33,648; September 30, 2001, $33,648 and September 30, 2002,
$14,020).
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements, continued
(8) 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 year ended September 30, 1999. The stock
purchases may 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 39,193 shares (as adjusted for the 10% stock
dividends) in the open market at a total cost of $129,233.
In addition to the Company's common stock repurchases in the open market,
the Company has repurchased and retired an additional 104,580 shares (as
adjusted for the 10% stock dividends) from terminated participants of the
Company's Employee Stock Ownership Plan and Retirement Savings Plan for a
total cost of $256,893.
In total the Company has repurchased 143,773 shares (as adjusted for
the 10% stock dividends) for a total cost of $386,126 since March 13,
1996.
(9) Commitments and Contingent Liabilities
The Company is party to certain litigation as of June 30, 1999 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.
(10) Stock Option Plan
According to the terms of the Company's stock option plan the 10% stock
dividend, declared by the Company's Board of Directors in March 1999,
resulted in a corresponding 10% adjustment for all stock options issued
prior to March 5, 1999. Previously issued option shares have been
proportionally increased by 10% and the corresponding option exercise
price has also been reduced by 10%. The total options authorized under
this plan is also proportionally increased from 700,000 options to
770,000 options as a result of this stock dividend.
On June 4, 1999 one non-qualified stock option for 10,000 shares, with an
exercise price of $7.25 per share was granted. The 10,000 share option
granted on June 4, 1999 has a 10 year term and vests at 20% per year
beginning one year from the date of grant.
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements, continued
Incentive Stock Options exercised during the quarter ended June 30, 1999:
Options Date Cash Exercise Original
Exercised Exercised Proceeds Price Grant Date
--------- --------- ------------ -------- ---------------
1,100 April 6, 1999 $ 2,726.90 $2.479 March 7, 1996
7,000 April 13, 1999 $ 29,505.00 $4.215 January 23, 1993
13,200 April 14, 1999 $ 59,994.00 $4.545 August 12, 1994
46,200 April 15, 1999 $ 95,449.20 $2.066 December 28, 1995
5,000 April 26, 1999 $ 10,330.00 $2.066 December 28, 1995
5,000 June 17, 1999 $ 10,330.00 $2.066 December 28, 1995
------ ------------
77,500 $ 208,335.10
======
Non-Qualified Options exercised during the quarter ended June 30, 1999:
Options Date Cash Exercise Original
Exercised Exercised Proceeds Price Grant Date
--------- --------- -------- -------- ----------
8,250 April 12, 1999 $ 38,354.25 $4.649 May 13, 1994
2,750 May 13, 1999 $ 12,784.75 $4.649 May 13, 1994
------ ------------
11,000 $ 51,139.00
======
According to the provisions of APB Opinion No. 25, "Accounting for Stock
Issued to Employees" no non-cash compensation expense is required to be
recorded for the exercise of the 11,000 shares of non-qualified stock
options.
(11) ITCI Stock Option and Plan
The Board of Directors of ITCI, a wholly owned subsidiary of the Company,
adopted a stock option plan ("ITCI Plan") retroactively as of December 1,
1998. The ITCI Plan is intended to constitute both an "incentive stock
option" and a "plan" within the meaning of and qualifying under Section
422 of the Internal Revenue Code of 1986, as amended, and the regulations
thereunder. The ITCI Plan permits the granting of 111 common shares
(approximately 10% of the total common shares) of ITCI to a sole
participant. The ITCI Plan expires on December 31, 2002. Retroactively,
as of December 1, 1998 this one incentive stock option was granted to a
sole participant. The purchase price of the 111 common shares is $98.95
per common share, being 100% of the fair market value per share of common
stock as of December 1, 1998.
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements, continued
The right to exercise the options granted and purchase the option shares
does not vest unless certain defined ITCI financial benchmarks are met.
If the first of these financial benchmarks is met 55 option shares vest
on September 30, 2000. If the second financial benchmark is met 56 option
shares vest on September 30, 2001. Some defined partial vesting is
allowed if the defined financial benchmarks are partially achieved.
(12) 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, as amended, is effective for all fiscal quarters of
fiscal years beginning after June 15, 2000. The Company is currently
reviewing SFAS 133, as amended, to see what impact, if any, it will have
on the Company.
(13) Subsequent Events
On July 15, 1999 the Company's wholly owned subsidiary International
Trader Association, Inc. filed an amendment to its Articles of
Incorporation with the Florida Department of State which changed
its name to INTLTRADER.COM, INC. (ITCI).
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The following discussion and analysis should be read in conjunction with the
financial statements and notes thereto appearing elsewhere in this report.
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, Year 2000 issues and changes in laws and regulation
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 assurances that the actual results,
performance or achievement of the Company will not differ materially from
<PAGE>
any future results, performance or achievements expressed or implied by such
forward-looking statements.
The Company's assets increased from $6,560,081 at September 30, 1998, to
$8,314,204 at June 30, 1999, or an increase of $1,754,123. The Company's
liabilities increased from $1,148,931 at September 30, 1998, to $2,239,343
at June 30, 1999, or an increase of $1,090,412. The increase in the net
assets (assets less liabilities) of $663,711 resulted from net income of
$363,034, cash proceeds of $259,473 from the exercise of stock options,
$30,271 non-cash expense related to the exercise of a stock option that had
a variable exercise provision and $23,829 for the tax benefit related to the
exercise of a non-qualified stock option, net of the $12,896 cost of
repurchased stock for the nine month period ended June 30, 1999.
The Company's condensed consolidated balance sheet at June 30, 1999,
reflects a net payable to clearing broker, for trades which had not yet
settled for cash, due to the costs of securities purchased exceeding the
proceeds from the sale of securities.
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, 1999, as Compared to
the Nine Months Ended June 30, 1998
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
nine months ended June 30, 1999 and 1998, 63% and 74%, respectively, of the
Company's revenues were derived from commissions earned on the sale of
securities, with 33% and 21%, respectively, of revenues coming from net
dealer inventory and investment gains. Total revenues increased by $22,677,
or .3% to $7,480,230 for the nine months ended June 30, 1999 from $7,457,553
for the same period in 1998. This increase was primarily attributable to a
$888,367 increase in net dealer inventory and investment gains which was
offset by a $784,300 decrease in commission revenues as well as net
decreases in other revenue sources totaling $81,390.
Commission revenue decreased by $784,300, or 14% to $4,700,005 for the nine
months ended June 30, 1999 from $5,484,305 for the same period in 1998.
Revenues from commissions are affected by both retail trading volume and the
dollar amount of retail trades. Based on the number of retail trades
processed, 1999 volume decreased by 17% from 1998 levels. Partially
offsetting this 17% decrease in volume is a 4% increase in the dollar
average of retail trades for 1999 as compared with 1998.
<PAGE>
The average number of account executives decreased from an average of 43
for the nine months ended June 30, 1998 to an average of 30 for the nine
months ended June 30, 1999, or a decrease of 30%.
Net dealer inventory and investment gains increased by $888,367, or 57% to
$2,437,717 for the nine months ended June 30, 1999 as compared to $1,549,350
for the same period in 1998. The increase in net dealer inventory and
investment gains is primarily attributable to a $858,704 increase in
wholesale trading income and a $223,552 increase in income generated from
Company investment portfolio valuations in the nine months ended June 30,
1999 as compared to the same nine month period in 1998. The increase in
wholesale trading is attributable to the ongoing development of new
wholesale trading relationships by the Company as well as maintenance of
existing wholesale relationships. Partially offsetting the significant
increases in wholesale trading is a $209,082 decrease in retail equity
trading income for the nine months ended June 30, 1999 as compared to the
same period in 1998. The Company's retail trading department primarily
concentrates on global securities which it believes are likely to be traded
by the Company's retail clients. By focusing on these types of securities,
retail trading income is more directly related to commission income and
order flow.
Revenues from management and investment advisory fees increased by $5,930,
or 10% to $63,171 for the nine months ended June 30, 1999 from $57,241 for
the same period in 1998. The increase is primarily due to an increase in the
dollar amount of fixed fee money under management.
Interest and dividend revenue decreased by $22,200, or 11% to $184,466 for
the nine months ended June 30, 1999 from $206,666 in the same period in
1998. This decrease is primarily attributable to a lower average dollar
amount of interest bearing investments held by the Company for the nine
month period.
Loss from joint venture of $34,254 for the nine months ended June 30, 1999
represents the Company's 50% share of the operating loss from the activity
of International Assets New York, LLC, a 50/50 joint venture with Lakeside
Investments, LLC of New York which began its operations in December 1998.
The major expenses incurred by the Company relate to direct costs of its
securities operations such as commissions and clearing fees (which includes
commissions paid to account executives), employees compensation and
benefits, communications and promotion expense. Total expenses decreased by
$580,029, or 8% to $6,919,084 for the nine months ended June 30, 1999 from
$7,499,113 in the same period ended June 30, 1998. This decrease is
primarily attributable to decreases in commissions and clearing fees,
communications, promotions, professional fees and other operating expenses.
Commissions and clearing fees decreased by $307,466, or 9% to $3,017,469 for
the nine months ended June 30, 1999 from $3,324,935 in the same period in
<PAGE>
1998. The decrease in commission expense is directly related to the 14%
decrease in commission revenue and the related 30% decrease in the average
number of account executives for the nine month period.
Employees compensation and benefits expense increased by $518,234, or 34% to
$2,034,267 for the nine months ended June 30, 1999 from $1,516,033 for the
same period in 1998. The increase in employees compensation and benefits
expense is due to the creation of additional staff positions related to
ITCI's start-up as well as IAAC's staffing needs, increases in performance
based bonus expense and an increase in the accrual for retirement plan
profit sharing expense. The increase in performance based bonus and
retirement plan profit sharing expense is primarily based on the $624,476
income before income taxes incurred for the nine month period ended June 30,
1999 as compared to the $41,560 loss before income taxes for the same nine
month period ended June 30, 1998. The increase in employees compensation and
benefits for the nine month period ended June 30, 1999 also includes $30,271
of non-cash compensation expense related to the exercise of one
non-qualified stock option that had a variable exercise provision. No
non-cash compensation expense was reported for the same period in 1998.
Communications expense decreased by $59,982, or 23% to $197,391 for the nine
months ended June 30, 1999 from $257,373 for the same period in 1998. This
decrease is due to lower telephone, printing and postage expense related to
the corresponding decrease in the average number of account executives from
43 for the nine months ended June 30, 1998 to 30 for the same period in
1999.
Promotion expense decreased by $387,462, or 42% to $534,522 for the nine
months ended June 30, 1999 from $921,984 for the same period in 1998. This
decrease is primarily due to the planned reduction of promotion expenditures
for print media, including newsletter publication, lead generation and the
related postage expense.
Occupancy and equipment rental expense increased by $68,627, or 26% to
$332,062 for the nine months ended June 30, 1999 from $263,435 in the same
period in 1998. This increase was primarily due to a negotiated, time
specific rent adjustment realized during the five months from September 1997
through January 1998.
Professional fees decreased by $135,862, or 41% to $198,809 for the nine
months ended June 30, 1999 from $334,671 in the same period in 1998. This
decrease is primarily due to significantly higher legal fees incurred during
the nine month period ended June 30, 1998 related to a closed 1998 NASD
arbitration matter.
Other operating expenses decreased by $285,768, or 49% to $302,804 for the
nine months ended June 30, 1999 from $588,572 in the same period in 1998.
Approximately $100,000 of the decrease in other operating expenses
represents the award in the closed arbitration matter which was incurred
during the nine month period ended June 30, 1998 and an additional $100,000
of the decrease represents the partial reimbursement of the claimant's legal
fees also awarded to the claimant in the same matter. Other operating
<PAGE>
expenses also included various other expenses that decreased from 1998 to
1999.
As a result of the above, the Company is reporting net income of $363,034
for the nine months ended June 30, 1999. This is compared to a net loss of
$48,592 for the nine months ended June 30, 1998.
The Company's effective income tax rate was approximately 42% for the nine
months ended June 30, 1999. The presence of income tax expense for the nine
months ended June 30, 1998, given the loss before income taxes, is due to
the amount of permanent tax differences exceeding the $41,560 loss before
income taxes for the nine month period in 1998.
Three Months Ended June 30, 1999, as Compared to
the Three Months Ended June 30, 1998
For the three months ended June 30, 1999 and 1998, 67% and 74%,
respectively, of the Company's revenues were derived from commissions earned
on the sale of securities, with 27% and 18%, respectively, of revenues
coming from net dealer inventory and investment gains. Total revenues
increased by $164,954, or 7% to $2,373,270 for the three months ended June
30, 1999 from $2,208,316 for the same period in 1998. This increase was
primarily attributable to a $244,948 increase in net dealer inventory and
investment gains which was offset by a $32,778 decrease in commission
revenues.
Commission revenue decreased by $32,778, or 2% to $1,594,474 for the three
months ended June 30, 1999 from $1,627,252 for the same period in 1998. The
decrease in commission revenue is related to the 9% decrease in ticket
volume and largely offset by an 8% increase in the average dollar amount of
trades during the three months ended June 30, 1999, as compared to the three
months ended June 30, 1998. The average number of account executives
decreased from an average of 38 for the three months ended June 30, 1998 to
an average of 28 for the three months ended June 30, 1999, or a decrease of
26%.
Net dealer inventory and investment gains increased by $244,948, or 61% to
$648,958 for the three months ended June 30, 1999 as compared to $404,010
for the same period in 1998. The increase in net dealer inventory and
investment gains is primarily attributable to a $88,916 increase in
wholesale trading income and a $109,365 increase in income generated from
Company investment portfolio valuations in the three months ended June 30,
1999 as compared to the same three month period in 1998.
Revenues from management and investment advisory fees decreased by $11,735,
or 38% to $18,775 for the three months ended June 30, 1999 from $30,510 for
the same period in 1998. The decrease is due to decreases in unit investment
trust supervisory fees as well as reduced client money management fees.
<PAGE>
Interest and dividend revenue increased by $6,772, or 10% to $75,719 for
the three months ended June 30, 1999 from $68,947 in the same period in
1998.
Loss from joint venture of $16,711 for the three months ended June 30, 1999
represents the Company's 50% share of the operating loss from the activity
of International Assets New York, LLC, a 50/50 joint venture with Lakeside
Investments, LLC of New York which began its operations in December 1998.
Total expenses increased by $146,282, or 7% to $2,355,354 for the three
months ended June 30, 1999 from $2,209,072 in the same period ended June 30,
1998. This increase is primarily attributable to increases in employees
compensation and benefits, occupancy and equipment rental, professional fees
and other operating expenses. These expense increases were partially offset
by decreases in commissions and clearing fees, communications and
promotions.
Commissions and clearing fees decreased by $68,508, or 7% to $975,596 for
the three months ended June 30, 1999 from $1,044,104 in the same period in
1998. The decrease in commission expense is directly related to the 2%
decrease in commission revenue and the related 26% decrease in the average
number of account executives for the three month period.
Employees compensation and benefits expense increased by $169,453, or 35% to
$647,289 for the three months ended June 30, 1999 from $477,836 for the same
period in 1998. The increase in employees compensation and benefits expense
is due to the creation of additional staff positions related to ITCI's
start-up as well as IAAC's staffing needs and an increase in the accrual for
retirement plan profit sharing expense.
Communications expense decreased by $16,602, or 20% to $66,521 for the three
months ended June 30, 1999 from $83,123 for the same period in 1998. This
decrease is due to lower telephone, printing and postage expense related to
the corresponding decrease in the average number of account executives from
38 for the three months ended June 30, 1998 to 28 for the same period in
1999.
Promotion expense decreased by $50,116, or 20% to $205,782 for the three
months ended June 30, 1999 from $255,898 for the same period in 1998. This
decrease is primarily due to the planned reduction of promotion expenditures
for print media, including newsletter publication, lead generation and the
related postage expense.
Occupancy and equipment rental expense increased by $19,188, or 20% to
$116,479 for the three months ended June 30, 1999 from $97,291 in the
same period in 1998.
Professional fees increased by $18,183, or 27% to $85,316 for the three
months ended June 30, 1999 from $67,133 in the same period in 1998.
<PAGE>
Other operating expenses increased by $30,863, or 33% to $125,246 for the
three months ended June 30, 1999 from $94,383 in the same period in 1998.
As a result of the above, Company is reporting net income of $38,880 for the
three months ended June 30, 1999 as compared to a net loss of $8,068 for the
three month period ended June 30, 1998.
Income tax expense increased by $35,054 to $42,366 for the three months
ended June 30, 1999 from $7,312 in the same period in 1998. The Company's
effective income tax rate was approximately 52% for the three months ended
June 30, 1999. For the three months ended June 30, 1998 the Company is
reporting book income tax expense in excess of the regular expected tax rate
due to the impact of permanent tax differences that occurs near breakeven
operating activity.
Liquidity and Capital Resources
Substantial portions of the Company's assets are liquid. At June 30, 1999,
approximately 91% 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, 1999, IAAC had net capital of
approximately $2,741,000, which was approximately $2,609,000 in excess of
its minimum net capital requirement at that date.
The Company's wholly owned registered securities broker subsidiary ITCI is
also subject to the requirements of the SEC and the NASD relating to
liquidity and net capital levels. ITCI has not yet commenced operations. The
net capital requirement for ITCI is based on ITCI's planned status as an
introducing securities broker. At June 30, 1999, ITCI had net capital of
approximately $173,000, which was approximately $123,000 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 twelve months in light of known and reasonably estimated
trends. The Company believes that it has the internal financial resources to
implement the initial online trading of foreign and domestic securities
activities and operations of ITCI without additional outside capital.
However, at this time additional financing is being sought primarily for
desired marketing efforts intended to generate potential online client and
online securities transaction growth. Any additional financing will also
support the required technology and staffing enhancements that would be
required if the marketing efforts are successful in generating significant
growth for ITCI. In conjunction with the Company's plans for ITCI, the
Company has engaged PaineWebber as its exclusive financial advisor to
<PAGE>
arrange and negotiate a private placement of securities issued by the
Company or to find a strategic partner. PaineWebber has been engaged to use
its best efforts in connection with a private placement and does not have
any obligation to purchase any securities issued by the Company or to
provide financing of any kind to the Company.
Year 2000 Compliance
The securities industry is, to a significant extent, technologically driven
and dependent. In addition to some internally utilized technological
applications, the Company's businesses are materially dependant upon the
performance of exchanges, market centers, counterparties, customers and
vendors (collectively "the Company's material third parties") who, in turn,
may be heavily reliant on technological applications. The securities
industry is interdependent with each other, strengthened or weakened by the
quality and performance of its attendant information and embedded
technology.
The Company is aware that the Year 2000 provides potential problems with the
programming code in existing computer systems. The Year 2000 problem is
extensive and complex as virtually every computer operation will be affected
to some degree by the change of the two digit year value to 00. The issue is
whether computer systems will properly recognize date-sensitive information
when the year changes to 2000. Systems that do not properly recognize such
information could generate erroneous data or fail.
The failure or faulty performance of computer systems could potentially have
a far ranging impact on the Company's business such as a diminution in its
ability to (a) ascertain information vital to strategic decision making by
both the Company and its customers; (b) perform interest rate and pricing
calculations; (c) execute and settle proprietary and customer transactions;
(d) undertake regulatory surveillance and risk management; (e) maintain
accurate books and records and provide timely reports; (f) maintain
appropriate internal financial operations and accounting; and (g) access
credit facilities for both the Company and its customers.
Accordingly it is necessary for the Company, to the extent reasonably
practicable, to identify the internal computer systems and software which
are likely to have a critical impact on its operations, make an assessment
of its Year 2000 readiness and modify or replace information and embedded
technology as needed. Some of these critical internal data processing
systems include the Company's internal Novel network, sales contact
management software, general ledger accounting software, trading income
calculation software and retail commission tracking programs. Assessment of
these internal programs is primarily completed and final remediation is in
process and largely completed. In addition, the Company has primarily
completed a Year 2000 readiness assessment for the Company's material third
parties.
Because the Company utilizes the services of Wexford Clearing Services
Corporation ("Wexford") in its business, data processing system aspects of
<PAGE>
the Year 2000 problem related to securities clearing, custody of client
securities, back office operations, cashiering and margin and credit will be
addressed by Wexford (a wholly owned guaranteed subsidiary of Prudential
Securities Incorporated "Prudential"). Although Wexford is the contracting
party for the provision of these critical services, Wexford in fact delivers
those services through the operations of Prudential, a leading registered
broker and dealer. Consequently, it is the readiness of Prudential that is
critical when assessing the Year 2000 compliance of the clearing and
operations capacity of the Company's active broker-dealer subsidiaries.
Prudential has been assessed, by internal industry standards established by
the Securities Industry Association, to be within the top tier of Year 2000
readiness. During industry-wide testing conducted by the Securities Industry
Association, in which Prudential took part, Prudential and other
participants were able to input transactions and send them to the
appropriate markets for execution, confirmation and clearance under
simulated Year 2000 conditions.
Additionally, the Company has assessed the state of readiness of almost all
known technologically oriented service vendors and believes, based on
letters of certification, that the vast majority of these vendors are Year
2000 compliant with the remainder expected to be compliant before the end of
August 1999. This determination does not mean that the vast majority of the
Company's material third parties pose no Year 2000 risk to the Company.
First, the Company is relying in large measure on these parties' assessments
of their readiness. Second, there are several vendors, which account for a
substantial portion of the Company's mission critical operations, which may
be partially or largely, but not fully, Year 2000 compliant. Finally,
certain critical third parties, such as exchanges, clearing houses,
depositaries and other service vendors have no direct functional contact
with the Company (as they operate directly with Wexford) but may impact the
Company's operations.
During fiscal year 1997 the Company began the strategic review process as it
relates to the Year 2000 process. The Board of Directors of the Company
approved the Company's Year 2000 plan at its meeting on July 17, 1998. This
plan includes all phases necessary and budgetary consideration for each
fiscal year through the Year 2000.
The Year 2000 remediation plan and process includes (1) identification,
modification and testing of non-compliant Year 2000 code; (2)
identification, inventory, assessment and, if necessary, modification of
internal ad hoc systems or applications that may be material to the
Company's operations; (3) with the exception of counterparties and
customers, documentation of the assessment of the readiness of the Company's
material third parties; and (4) a timetable for completion of all year 2000
plans implementation steps for amendment to the plan as required. During the
year ended September 30, 1998 the Company incurred approximately $76,000 of
costs related to the Year 2000 problem. During the nine months ended June
30, 1999 the Company incurred approximately $87,000 in costs related to the
Year 2000 problem. The Company has budgeted a total of $193,000 for Year
<PAGE>
2000 related costs for the 20 month period from June 1998 through January
2000. These Year 2000 costs include both capital expenditures and period
expenses. This Year 2000 budget will be funded from the working capital of
the Company. Provided there is an absence of unanticipated critical events,
the Company does not expect Year 2000 costs to have a material effect on its
operating results, financial condition or cash flows.
As a contingency plan, the Company intends to have information systems
personnel on site or on stand-by availability, from December 31, 1999
through January 2, 2000, on a 24-hour basis, to insure that any Year 2000
problems which may arise will be addressed and corrected immediately. The
Company has been informed that Prudential intends to implement a similar
contingency plan. The Company believes these measures will be sufficient
because of the following reasons: (1) the Company has reviewed and modified,
to the extent it can ascertain the problem, mission critical code and
embedded technology (2) the Company has minimal internally generated systems
and (3) the Company's vendors have represented that they are either
currently Year 2000 compliant or will become so by the third quarter of
1999.
However, it is the Company's position there are no alternatives in the event
the exchanges or other market centers fail to perform. In such event, the
Company believes it is highly likely that the factors which may prevent a
particular clearing firm from performing would similarly affect all other
clearing firms, which would either preclude the availability of alternative
clearing service providers or overwhelm the resources of surviving
alternative clearing services providers. The Year 2000 presents a problem
which is not likely to be susceptible to remediation at a future date if it
is not fixed in advance.
The Company is cautiously optimistic about its current state of readiness
and its ability to make any further necessary modifications to internal
systems in time for the Year 2000. The Company also believes that its major
third party service provider, Prudential/Wexford, has undertaken a
systematic approach to the Year 2000 problem and will complete its plan
which is designed to achieve a state of readiness. However, there are
factors outside the control of the Company which make certainty impossible
such as: (1) the inability to assess the readiness of market counterparties
and customers; (2) the inability to achieve assurance as to any material
third parties' representations of readiness; (3) the global exposure of
material third parties to Year 2000 problems outside the United States which
have a corresponding effect within the global securities markets and
operations; and (4) the limitations in anticipating all aspects of a problem
with which there is no prior historical experience. The presence of any or
all of these and other factors may well have a material adverse effect on
the Company's business, operating results, financial condition and cash
flows.
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a). Exhibits
(10.12)* The Company's Employment Agreement, entered into as
of March 24, 1999, between the Company and Diego J.
Veitia.
(10.13)* The Company's Employment Agreement, entered into as
of March 24, 1999, between the Company and Jerome F.
Miceli.
(11)** The Statements of Computation of Earnings Per Share
are attached hereto as Exhibit 11.
(21)* Subsidiaries of the Registrant.
(27)** Broker-Dealers and Broker Dealer Holding Companies
Financial Data Schedule BD is attached hereto
as Exhibit 27.
* Previously filed with the SEC on August 12, 1999 on form 10-KSB, for
the quarterly period ending June 30, 1999.
** Filed herewith.
b). Form 8-K
No reports were filed on Form 8-K during the nine months
ended June 30, 1999.
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 12/20/99 /s/ Diego J. Veitia
Diego J. Veitia
Chairman and Chief Executive Officer
Date 12/20/99 /s/ Jonathan C. Hinz
Jonathan C. Hinz
Chief Financial Officer and Treasurer
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION
STATEMENT OF COMPUTATION OF EARNINGS PER SHARE
For the Nine Months Ended June 30, 1999 and 1998
RESTATED
1999 1998 (1)
---- --------
Basic Earnings (Loss) Per Share
Numerator:
Net income (loss) $ 363,034 $ (48,592)
Denominator:
Weighted average number of common
shares outstanding 1,650,938 1,695,505
Basic earnings (loss) per share $ 0.22 $ (0.03)
Diluted Earnings (Loss) Per Share
Numerator:
Net income (loss) $ 363,034 $ (48,592)
Denominator:
Weighted average number of common
shares outstanding 1,650,938 1,695,505
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) 298,026 -
Weighted average number of common shares
and dilutive potential common shares
outstanding 1,948,964 1,695,505
Diluted earnings (loss) per share $ 0.19 $ (0.03)
- -------------------------------------------------------------------------------
(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.
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION
STATEMENT OF COMPUTATION OF EARNINGS PER SHARE
For the Three Months Ended June 30, 1999 and 1998
RESTATED
1999 1998 (1)
---- --------
Basic Earnings (Loss) Per Share
Numerator:
Net income (loss) $ 38,880 $ (8,068)
Denominator:
Weighted average number of common shares
outstanding 1,700,980 1,681,002
Basic earnings (loss) per share $ 0.023 $ (0.005)
Diluted Earnings (Loss) Per Share
Numerator:
Net income (loss) $ 38,880 $ (8,068)
Denominator:
Weighted average number of common shares
outstanding 1,700,980 1,681,002
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) 471,287 -
Weighted average number of common shares
and dilutive potential common shares
outstanding 2,172,267 1,681,002
Diluted earnings (loss) per share $ 0.018 $ (0.005)
- ------------------------------------------------------------------------------
(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> <S> <C>
<ARTICLE> BD
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> JUN-30-1999
<CASH> 4,469,210
<RECEIVABLES> 107,864
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 3,175,504
<PP&E> 318,625
<TOTAL-ASSETS> 8,316,204
<SHORT-TERM> 0
<PAYABLES> 986,152
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 1,089,262
<LONG-TERM> 0
0
0
<COMMON> 17,188
<OTHER-SE> 6,057,673
<TOTAL-LIABILITY-AND-EQUITY> 8,314,204
<TRADING-REVENUE> 2,437,717
<INTEREST-DIVIDENDS> 184,466
<COMMISSIONS> 4,700,005
<INVESTMENT-BANKING-REVENUES> 0
<FEE-REVENUE> 171,485
<INTEREST-EXPENSE> 2,345
<COMPENSATION> 4,085,228
<INCOME-PRETAX> 624,476
<INCOME-PRE-EXTRAORDINARY> 624,476
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 363,034
<EPS-BASIC> 0.22
<EPS-DILUTED> 0.19
</TABLE>
