Form 10-KSB
U.S. Securities and Exchange Commission
Washington D.C. 20549
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 33-70334-A
INTERNATIONAL ASSETS HOLDING CORPORATION
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(Exact name of small business issuer as specified in its charter)
Delaware 59-2921318
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
250 Park Avenue South, Suite 200
Winter Park, FL 32789
(Address of principal executive offices)
(407) 629-1400
(Issuer's telephone number)
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.01 par value
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ].
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year: $12,280,941
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the last sale price of such stock as of December 15,
2000: $4,682,829
The number of shares outstanding of Common Stock was 2,218,940 as of December
15, 2000.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the registrants Proxy Statement, to be filed, for the Annual Meeting
of Stockholders to be held on February 15, 2001 are incorporated by reference
into Part III.
Transitional small business disclosure format Yes [ ] No [X]
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INTERNATIONAL ASSETS HOLDING CORPORATION
2000 FORM 10-KSB
TABLE OF CONTENTS
PART I Page
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Item 1. Description of Business............................................. 3
Item 2. Description of Property............................................. 11
Item 3. Legal Proceedings................................................... 11
Item 4. Submission of Matters to a Vote of Security Holders................. 12
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters....................................... 12
Item 6. Management's Discussion and Analysis or Plan of Operation.......... 13
Item 7. Consolidated Financial Statements.................................. 19
Item 8. Changes In and Disagreements With Accountants on Accounting
and Financial Disclosure.................................. 20
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act......... 20
Item 10. Executive Compensation............................................. 23
Item 11. Security Ownership of Certain Beneficial Owners
and Management............................................ 23
Item 12. Certain Relationships and Related Transactions..................... 23
Item 13. Exhibits and Reports on Form 8-K................................... 23
Signatures......................................................... 26
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
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 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 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.
General
International Assets Holding Corporation is a Delaware corporation formed in
October 1987 for the purpose of serving as a holding company for International
Assets Advisory Corp. ("IAAC") and other subsidiaries. Currently, the Company
has six wholly owned subsidiaries, IAAC, INTLTRADER.COM, INC. ("ITCI"), Global
Assets Advisors, Inc. ("GAA"), International Asset Management Corp. ("IAMC"),
International Financial Products, Inc. ("IFP") and OffshoreTrader.com Ltd
("OTCL"). All of the Company's subsidiaries are Florida corporations except OTCL
which is a Bermuda exempted company. As used in this Form 10-KSB, the term
"Company" refers, unless the context requires otherwise, to International Assets
Holding Corporation and its subsidiaries IAAC, ITCI, GAA, IAMC, IFP and OCTL.
IAAC operates as a market-maker of international equity securities and as a
full-service private client securities brokerage firm specializing in global
investing on behalf of its clients. ITCI provides on-line brokerage transactions
of foreign and domestic securities using the internet. GAA provides money
investment advisory and money management services. IAMC functions as the manager
of the physical assets of the Company. IFP, which is currently inactive, was
formed as a financial publishing and marketing group to sell products that are
not investments, but are related to the global financial market. OTCL was formed
to explore global internet securities trading for non-U.S. citizens. The Company
also has a 50% interest in International Assets New York, LLC, ("IANY") a
Delaware limited liability company. IANY is a 50/50 joint venture with Lakeside
Investments, LLC. IANY was formed as a branch office of IAAC for the purpose of
offering a variety of financial strategies to high net worth private investors
in the U.S. and certain foreign countries.
IAAC was formed in April 1981 by the Company's Chairman of the Board, Diego J.
Veitia. During its first two years of business, IAAC focused primarily on
private placements. In 1982, IAAC entered the securities brokerage business and
became a member of the National Association of Securities Dealers ("NASD"). In
1982 IAAC began to focus on the sale of global equity and debt securities to
high net worth private clients and, to a lesser degree, small to medium size
financial institutions.
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IAAC is currently registered as a securities broker-dealer under the Securities
Exchange Act of 1934 and the state securities statutes of 49 states and the
District of Columbia. IAAC is a member of the NASD, which is a self-regulatory
body exercising broad supervisory powers over securities broker-dealers
operating in the United States. IAAC is also a member of the Securities Investor
Protection Corporation ("SIPC"), which is a public corporation established to
afford a measure of protection to the account balances of customers of
securities broker-dealers that become insolvent.
ITCI is currently registered as a securities broker-dealer under the Securities
Exchange Act of 1934 and the state securities statutes of 49 states and the
District of Columbia. ITCI was formed by the Company in May 1998 to provide
on-line brokerage transactions of foreign and domestic securities using the
internet and was formerly known as International Trader Association, Inc. ITCI
commenced its on-line brokerage activities in January 2000. ITCI is also a
member of the NASD and SIPC.
IAAC and ITCI each act as an introducing broker, in that they do not clear their
own securities transactions, but instead contract to have such transactions
cleared through a clearing broker on a fully disclosed basis. In a fully
disclosed clearing transaction, the identity of the Company's client is known to
the clearing broker. Generally, a clearing broker physically maintains the
client's account and performs a variety of services as agent for the Company,
including clearing all securities transactions (delivery of securities sold,
receipt of securities purchased and transfer of related funds).
GAA is registered as an investment adviser with the Securities and Exchange
Commission ("SEC"), pursuant to the National Securities Markets Improvement Act
of 1996. GAA makes investment adviser notification filings to the states of
Florida and California. GAA is also regulated by the provisions of the
Investment Advisers Act of 1940. GAA serves as the money manager to one mutual
fund, the Global eFund, and as supervisor of seven proprietary Unit Investment
Trusts (UIT's). GAA also provides investment fee-based money management of
specialized accounts for high net worth private clients. GAA is dedicated to
providing the individual investor with domestic and international money
management and offers a series of investment portfolios tailor-made for the
individual investor seeking investment diversification across a variety of
economies and currencies in order to provide the opportunity for higher overall
investment returns. GAA's strategy is to capitalize on its experienced teams
specializing in the research, selection, trading, currency exchange and
execution of individual equity and fixed income products on a global basis.
IAMC was formed by the Company in 1988 to purchase and manage all of the fixed
assets of the Company. The assets held by IAMC are available for use by the
subsidiaries of the Company.
IFP was formed in 1995 to publish, advertise and sell a wide range of
informational investment tools such as books, newsletters, tapes and faxes
targeted at individual global investors. IFP is operationally inactive but the
legal entity remains active in its state of incorporation.
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.
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However, exempted Bermuda companies may trade with other exempted Bermuda
companies. OTCL has not yet generated operating revenues.
In September 1998 the Company entered into a 50/50 Joint Venture ("JV") with
Lakeside Investments, LLC (Lakeside) of New York. In October 1998 the JV
effected the incorporation of IANY, a 50/50 owned entity formed to transact
business out of an office in New York City as a brokerage branch of IAAC and
through the money management arm of GAA. IANY offers a variety of financial
strategies to high net worth private investors. Among the strategies to be
offered are selected approaches to international tax planning with the primary
goal of utilizing established, but less understood techniques to reduce the
exposure of wealthy clients living in a number of high tax jurisdictions.
Additionally, IANY will utilize strategies that are expected to provide clients
with a degree of asset protection in an increasingly litigious environment. The
New York City office of IANY opened in January 1999 and began generating
operating revenues during May 1999.
Business Strategy
The Company's original business strategy was to use its team of account
executives to assist sophisticated, high net worth individuals in the global
diversification of their investment portfolios. To complement this business and
to better serve its clients, IAAC next expanded its services to include a market
making function, committing its own capital to ensure liquidity and offer best
execution in the many foreign securities in which the Company's clients were
investing. As IAAC's experience and reputation grew, the trading desk of IAAC
began to attract the notice of other financial firms which similarly sought
liquidity for their own globally minded clients. The demand for IAAC's foreign
execution increased and eventually the trading desk became the center of the
Company's business strategy.
During the 1990s online technology began to transform the entire securities
industry and the eBrokerage business was created. In response to these dramatic
industry changes the Company responded and formed INTLTRADER.COM (ITCI) a global
online trading website. ITCI was launched in January 2000 giving the Company's
self-directed clients, for the first time, executable dollar denominated quotes
on foreign securities around the world, even while the local markets were
closed. The development of the proprietary executable quote technology developed
within ITCI became an important piece in executing the Company's strategy.
The current business strategy of the Company is to direct foreign equity order
flow to the Company's trading desk. This order-flow is primarily comprised of
unlisted American Depository Receipts (ADR's) and foreign ordinary equity
shares. Institutional relationships with top-tier securities firms currently
provide the primary source of securities order flow. The Company's strategy is
to offer INTLTRADER.COM's proprietary executable quotation technology to other
securities firms with the resulting international order flow routed to IAAC's
trading desk. The Company is currently pursuing strategic relationships with
top-tier eBrokerage firms to offer this electronic trading service which has
become a focal point of the Company's current business strategy. At the same
time, the Company will continue to pursue traditional institutional sales
trading with new financial institutions.
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The Company also generates foreign order flow from its private client retail
brokerage business. This complementary source of order flow for our trading desk
also provides commission revenues that help diversify the Company's revenue
sources.
The Company intends to use its marketing and global securities expertise to take
advantage of future opportunities for growth in the global securities market.
Management believes that there are favorable opportunities for growth in
institutional trading, online securities brokerage, fee-based money management,
and institutional sales areas of the international securities market.
The Company believes that its expertise in the global securities area presents
an opportunity for the Company to expand its market niche further with
eBrokerage strategic relationships, institutional trading and small
institutional sales. The Company also believes that it will grow and maintain
its retail brokerage business through an emphasis on fee-based money management
services. The Company further believes that this international market niche has
been relatively minimized by the major and mid-sized securities brokerage firms.
The Company expects to continue offering discretionary money management accounts
with specifically designated objectives in a defined investment area. The
Company also intends to continue to expand its activities in both the private
client and institutional sectors of international securities. In addition, the
Company plans to continue to sponsor the development of creative financial
products including proprietary unit investment trusts, where management believes
it can add value for its clients.
The International Securities Markets
The Company believes that investment in the international markets by U.S.
investors will continue to grow in the coming years, as the global capital
markets continue to grow. Over the past 15 years the market capitalization of
the non-U.S. markets grew more than eight fold to more than $19 trillion,
outpacing the growth of the U.S. market capitalization (according to IFC market
data). The U.S. now represents about 47% of the world total market
capitalization down from 49% last year. The number of American Depository
Receipts ("ADR's") that are now trading on U.S. exchanges further evidences this
growth. ADR's, which represent shares in foreign companies, issued by U.S. banks
and traded in this country as domestic shares simplify trading in foreign
securities by eliminating currency exchange and legal obstacles. So far this
year more than 27 billion ADR's exchanged hands, a number 18% greater than ADR
trading volume for all of 1999, with a total dollar value greater than $1
trillion, or a 31% increase over 1999 trading dollar value. (based on studies by
J.P. Morgan and Bank of New York).
Management believes that the two main justifications for the rapid growth in
international investing by U.S. investors are diversification and potentially
superior investment returns. Diversification can improve the risk profile of a
portfolio as markets tend to respond in varying degree to an economic event or
in some cases some countries may not be exposed to slowdown in a specific sector
of the U.S. economy.
Global Equity Trading
The Company acts as a principal in executing trades in over-the-counter equity
securities. When transactions are executed by the Company on a principal basis,
the Company receives, in lieu of
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commissions, markups or markdowns that constitute revenues from principal
transactions. To facilitate trading by its clients, the Company buys, sells and
maintains inventories of approximately 500 primarily international securities.
The Company primarily executes principal transactions from institutional order
flow and also from retail order flow. Institutional order flow is generated from
the execution of order flow directly from other securities broker/dealers
trading desks. Retail order flow is generated from the execution of principal
transactions originating from a retail client through a retail account
executive.
The Company places its capital at risk by also trading as a "market maker" in a
select group of approximately 250 international securities which are traded by
the Company's clients. The Company's emphasis in such trades is on earning
revenues from the spread between customer buy and sell orders. A market maker is
a firm that stands ready to buy and sell a particular stock at a publicly quoted
price. Because they offer both bid and ask prices, market makers are a source of
liquidity to institutional clientele like banks, brokerages and other investment
companies. Market makers commit their own funds to maintain an inventory of
securities and to ensure order execution and the maintenance of fair and orderly
markets. As a market maker, International Assets Advisory Corporation provides
global equity investors - individuals and institutions alike - with the
liquidity and execution they need to buy and sell foreign securities.
International Assets Advisory Corporation offers rapid execution on over 8,000
foreign ordinary shares and ADRs around the globe.
Revenues from principal transactions depend upon the general trend of prices and
level of activity in the securities markets, the skill of employees responsible
for managing the Company's trading accounts and the size of its inventories. The
activities of the Company in trading as a principal require the commitment of
capital and create an opportunity for profit and risk of loss due to market
fluctuations.
The level of securities positions carried in the Company's trading accounts
fluctuates significantly. The size of such positions on any one date may not be
representative of the Company's exposure on any other date because the
securities positions vary substantially depending upon economic and market
conditions, the allocation of capital among types of inventories, customer
demands and trading volume. The aggregate value of the securities in the
Company's inventory is limited by certain requirements of the SEC Net Capital
Rule. See "Net Capital Requirements."
The Private Client Retail Brokerage Business
For the fiscal years ended September 30, 2000 and 1999, approximately 52% and
62%, respectively, of the Company's total revenues were derived from commissions
earned from transactions with its retail clients. The Company's client base is
composed primarily of high net worth individuals. The average age of its clients
is approximately 53 and a substantial portion are retirees. Clients are
distributed nationwide. However, a particularly large number of clients reside
in Florida, California, New York, Texas and Pennsylvania. The Company has
approximately 7,800 active client accounts at September 30, 2000.
The Company believes that it has developed an effective approach for attracting
the investment capital of high net worth private clients. This approach centers
on the need for such investors to diversify their investment portfolios by
purchasing global equity and debt securities. The Company believes it is proper
for investors to become increasingly global in their investment activities, to
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correspond to the increasingly globalized economy. On the equity side, the
Company emphasizes both capital and currency appreciation. In the sale of debt
securities, the higher yields available overseas and the potential for currency
appreciation are stressed.
Historically, the securities industry's focus for channeling private client
funds into international investments has been through mutual funds. While the
Company believes that its expertise in the international markets puts it in a
unique position to add value in the sale of global products such as mutual
funds, its main focus is on the direct investment in carefully selected
international securities by its private clients. The Company has developed an
experienced team specializing in the research, selection, trading, currency
exchange and execution of individual equity and fixed income products on a
global basis.
Retail commissions are charged on both exchange and over-the-counter agency
transactions based on a schedule, which is subject to change, that the Company
has formulated in accordance with guidelines promulgated by the NASD. During
1995 the Company began selling proprietary Unit Investment Trust ("UIT")
products. The Company acts as the managing underwriter for these UIT products.
Transactions in securities may be effected on either a cash or margin basis.
Through its clearing agent, the Company allows its clients to maintain margin
accounts for securities purchased or sold short through the Company.
Competition
The Company encounters competition in conducting its business and such
competition is expected to continue. Although the securities industry, in
general, is intensely competitive, the Company believes that competition is less
intense in its niche market. However, the Company competes with many firms with
capital and personnel resources far in excess of those which are presently
available to the Company or which are expected to be available to the Company in
the future. During the past several years the securities industry has seen the
emergence of the online securities business. The Company has addressed this
industry change by commenceing in the development of its own online securities
brokerage firm with ITCI. Additionally, the Company is affected and will
continue to be affected by the investing public's interest in international
securities. In this regard, international securities are in competition with
other investment vehicles offered by other securities broker-dealers and
financial intermediaries such as commercial banks, savings banks, insurance
companies and similar institutions. The Company believes that the principal
competitive factors in the securities industry are the quality and ability of
professional personnel and the relative prices of services and products offered.
The Company believes that, to date, it has been able to compete favorably with
other broker-dealers and financial intermediaries primarily on the basis of the
quality of its services and the depth of its expertise in the international
securities market.
Administration and Operations
The Company's operations personnel are responsible for executing orders,
transmitting information on all transactions to its clearing broker, mailing
confirmations to clients, receiving all funds and securities, depositing all
client funds into a bank account in the name of the clearing broker and
transmitting securities to the Company's clearing broker for custody.
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The Company's securities transactions are cleared through Wexford Clearing
Services Corporation ("Wexford"), a wholly owned, guaranteed subsidiary of
Prudential Securities Incorporated, on a fully disclosed basis. Wexford also
performs many back office functions for the Company in connection with its
duties as custodian of all client funds and securities. When a new account is
established, the new account information is sent to Wexford, which in turn sets
up and maintains the information for the account. All securities and monies are
held in custody by Wexford. Wexford prepares and mails account statements
directly to clients on behalf of the Company. Transaction confirmations for
customers are formatted through Wexford's wire system for printing and mailing
by IAAC. The Company's brokers and operations staff are also able to receive
on-line account information from Wexford. By engaging the processing services of
a clearing broker such as Wexford, the Company is exempt from certain reserve
requirements imposed by Rule 15c3-3 under the Securities Exchange Act of 1934,
as amended. See "Net Capital Requirements."
Wexford also extends credit to the Company and its customers to enable them to
purchase securities on margin. Margin accounts allow customers to deposit less
than the full cost of a security purchased with the balance of the purchase
price being provided as a loan to the customer secured by the securities
purchased. The amount of the loan in purchasing securities on margin is subject
to both the margin regulations ("Regulation T") of the Board of Governors of the
Federal Reserve System and the Company's clearing broker's internal policies. In
most transactions, Regulation T limits the amount loaned to a client for the
purchase of a particular security to 50% of the purchase price.
The Company maintains internal records of all transactions, which are compared
on a daily basis to clearing transaction generated reports. The Company uses
automated computer capabilities for these functions, which it will continue to
expand.
The Company believes that its internal controls and safeguards against
securities theft are adequate. As required by the NASD and other authorities,
the Company carries a fidelity bond covering any loss or theft of securities, as
well as embezzlement and forgery. The amount of the required fidelity bond is
based on 120% of the previous 12 months highest required net capital. IAAC
annually assesses the total required bond coverage and currently carries a
$600,000 limit. ITCI will also annually assess the total required bond coverage
and currently carries a $60,000 limit.
The Company's administrative staff oversees internal financial controls,
accounting functions, office services and compliance with regulatory
requirements.
Regulation
The securities industry in the United States is subject to extensive regulation
under Federal and state laws. The SEC is the Federal agency charged with
administration of the Federal securities laws. Much of the regulation of
broker-dealers, however, has been delegated to self-regulatory organizations,
principally the NASD and the national securities exchanges. The self-regulatory
organizations adopt rules (which are subject to approval by the SEC) that govern
the industry and conduct periodic examinations of member broker-dealers.
Securities firms are also subject to regulation by state securities commissions
in the states in which they do business. IAAC is registered as a securities
broker-dealer in 49 states and the District of Columbia. ITCI is registered as a
securities broker in 49 states and the District of Columbia.
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The regulations to which broker-dealers are subject cover all aspects of the
securities business, including sales methods, trading practices among
broker-dealers, capital structure of securities firms, uses and safekeeping of
customers' funds and securities, record keeping, the conduct of directors,
officers and employees and supervision of branches and registered
representatives. Lack of adequate supervision could subject the broker-dealer to
regulatory sanctions. Additional legislation, changes in rules promulgated by
the SEC and by self-regulatory organizations, or changes in the interpretation
or enforcement of existing laws and rules often directly affect the method of
operation and profitability of broker-dealers. The SEC, the self-regulatory
organizations and state securities commissions may conduct administrative
proceedings, which can result in censure, fine, suspension or expulsion of a
broker-dealer, its officers or employees. Such administrative proceedings,
whether or not resulting in adverse findings, can require substantial
expenditures. The principal purpose of regulation and discipline of
broker-dealers is the protection of customers and the securities markets, rather
than the protection of creditors and stockbrokers of broker-dealers.
IAAC and ITCI are required by Federal law to belong to SIPC. The SIPC fund
provides protection for securities held in customer accounts of up to $500,000
per customer, with a limitation of $100,000 on claims for cash balances. In
addition, securities in an account at the Company's clearing broker are afforded
additional protection by Wexford Clearing services Corporation. This additional
protection (known as "Net Equity" coverage) covers the total amount of fully
paid for securities and cash balances without limit, thus providing total
protection for each customer's equity position in the unlikely event of a SIPIC
liquidation.
Net Capital Requirements
IAAC is subject to the SEC's uniform net capital rule (Rule 15c3-1 (the
"Rule")), which is designed to measure the liquidity of a broker-dealer and the
maintenance of minimum net capital deemed necessary to meet its commitments to
its customers. The Rule provides that a broker-dealer doing business with the
public must not permit its aggregate indebtedness to exceed 15 times its net
capital (the "Basic Method") or, alternatively, that it not permit its net
capital to be less than 2% of aggregate debit items computed in accordance with
the Rule (the "Alternative Method"). The Rule requires IAAC to maintain minimum
net capital at an amount equal to the greater of $100,000, 6-2/3% of aggregate
indebtedness or $2,500 for each security in which it makes a market (unless a
security in which it makes a market has a market value of $5 or less, in which
event the amount of net capital shall not be less than $1,000 for each such
security) with a ceiling of $1,000,000.
ITCI is also subject to the Rule, which requires ITCI to maintain minimum net
capital at an amount equal to the greater of $50,000, 12.5% of aggregate
indebtedness (for the first year of operations) and 6-2/3% of aggregate
indebtedness after the first year of operations and requires that the ratio of
aggregate indebtedness to net capital not exceed 8 to 1 for the first year of
operations.
Any failure to maintain the required net capital may subject a broker-dealer to
expulsion by the NASD, the SEC or other regulatory bodies, and may ultimately
require its liquidation.
IAAC and ITCI are both in compliance with the Rule, as well as the applicable
minimum net capital requirements of the NASD. IAAC and ITCI have each elected to
compute net capital under the Basic Method. In computing net capital under the
Rule, various adjustments are made to net worth with a view to excluding assets
not readily convertible into cash and to providing a conservative
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statement of other assets, such as a firm's position in securities. To that end,
a deduction is made against the market value of securities to reflect the
possibility of a market decline before their disposition. For every dollar that
net capital is reduced, by means of such deductions or otherwise (for example,
through operating losses or capital distributions), the maximum aggregate
indebtedness a firm may carry is reduced. Thus, net capital rules, which are
unique to the securities industry, impose financial restrictions upon the
Company's business that are more severe than those imposed on other types of
businesses. Compliance with the net capital rules may limit the operations of
the Company because such rules require minimum capital for such purposes as
underwriting securities distributions, and maintaining the inventory required
for trading in securities.
Net capital changes from day to day. As of September 30, 2000 and 1999, IAAC had
excess net capital of $2,593,041 and $2,502,802, respectively, and a ratio of
aggregate indebtedness to net capital of .47 to 1 and .40 to 1, respectively. As
of September 30, 2000 and 1999, ITCI had excess net capital of $189,466 and
$251,680, respectively, and a ratio of aggregate indebtedness to net capital of
.47 to 1 and .27 to 1, respectively.
Pursuant to paragraph (k)(2)(ii) of SEC Rule 15c3-3, IAAC and ITCI are each
exempt from customer reserve requirements and providing information relating to
possession or control of securities.
Employees
At September 30, 2000, the Company had 73 employees, of which 70 were full time
employees. Of such employees, 10 have managerial responsibilities, 22 are
account executives, 8 are traders and 30 have administrative and operational
duties, including persons engaged in other service areas such as customer
service, research, money management, accounting, operations, compliance and
marketing. The Company considers its relationship with its employees to be good.
Compliance with Environmental Regulations
The Company must comply with various federal, state and local regulations
relating to the protection of the environment. Federal, state and local
provisions which have been enacted or adopted regulating the discharge of
materials into the environment or otherwise relating to the protection of the
environment will not, in the opinion of the Company, have a material effect on
the capital expenditures, earnings, or the competitive position of the Company.
ITEM 2. DESCRIPTION OF PROPERTY.
The Company currently occupies leased office space of approximately 13,815
square feet at 250 Park Avenue South, Winter Park, Florida. The lease expires in
May, 2001. The Company believes that suitable additional space will be available
as needed to accommodate any future expansion of its operations.
ITEM 3. LEGAL PROCEEDINGS.
The Company is party to certain litigation as of September 30, 2000 which
relates primarily to matters arising in the ordinary course of business.
Management of the Company anticipates that the
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final resolution of these 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 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 any future results, performance
or achievements expressed or implied by such forward-looking statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
The Company's Common Stock trades on the NASDAQ SmallCap Market under the symbol
IAAC. The following table sets forth, for the periods indicated, the range of
high and low sales prices per Common Share as reported by NASDAQ, which prices
do not include retail mark-ups, mark-downs, or commissions and represent prices
between dealers and not necessarily actual transactions.
Dividends
On February 25, 2000 the Board of Directors of the Company declared a 10% stock
dividend for shareholders of record on March 10, 2000 and payable on March 24,
2000. Also, on February 12, 1999 the Board of Directors of the Company declared
a 10% stock dividend for shareholders of record on March 5, 1999 and payable on
March 26, 1999. As a result of the stock dividend of record date March 10, 2000
the common stock prices prior to March 10, 2000 (Fiscal Year 2000 second fiscal
quarter) presented have been restated (reduced) by 10%. Also, as a result of the
stock dividend of record date March 5, 1999 the common stock prices prior to
March 5, 1999 (Fiscal Year 1999 second fiscal quarter) presented have been
restated (reduced) by an additional 10%.
The Company has never paid nor declared cash dividends on its Common Stock and
does not intend to pay cash dividends on its Common Stock in the foreseeable
future. The Company presently expects to retain its earnings to finance the
development and expansion of its business. The payment by the Company of cash
dividends, if any, on its Common Stock in the future is subject to the
discretion of the Board of Directors and will depend on the Company's earnings,
financial condition, capital requirements and other relevant factors.
12
<PAGE>
High Low
---- ---
The Company's Common Stock, as traded under the symbol IAAC
Fiscal Year 1999
First Quarter........(Oct. 98 - Dec. 98)................ 1 29/32 43/64
Second Quarter....(Jan. 99 - Mar. 99)................... 11 15/32 1 3/32
Third Quarter.......(Apr. 99 - Jun. 99)................. 15 29/32 3 41/64
Fourth Quarter.....(Jul. 99 - Sep. 99).................. 8 13/32 5 11/64
Fiscal Year 2000
First Quarter........(Oct. 99 - Dec. 99)................ 8 11/64 4 13/64
Second Quarter....(Jan. 00 - Mar. 00)................... 24 35/64 5 31/32
Third Quarter.......(Apr. 00 - Jun. 00)................. 8 7/32 2 1/8
Fourth Quarter.....(Jul. 00 - Sep. 00).................. 6 1/8 3 1/8
Holders
As of September 30, 2000 there were approximately 97 shareholders of record of
the Company's Common Stock, according to the records maintained by the Company's
transfer agent. As of September 30, 2000 the Company estimates that there were
over 750 beneficial owners of the Company's Common Stock.
ITEM 6. 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 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 and changes in laws and
regulation applicable to the Company. Although the Company believes that its
expectation 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 any future results,
performance or achievements expressed or implied by such forward-looking
statements.
The Company's principal operating activities, market-making and trading in
international securities and private client securities brokerage, 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.
13
<PAGE>
Results of Operations:
2000 Compared to 1999
The Company's revenues were derived primarily from trading revenues (net dealer
inventory and investment gains) and commissions earned on the sale of
securities. For the years ended September 30, 2000 and 1999, 41% and 33%,
respectively, of total revenue was derived from trading revenue and 52% and 62%,
respectively, of the Company's revenues came from commissions earned on the sale
of securities.
Total revenue increased by approximately 24% to $12,280,941 in 2000 from
$9,916,924 in 1999. This increase was primarily attributable to a $1,724,953
increase in trading revenue.
Commission revenue increased by approximately 3% to $6,353,212 in 2000 from
$6,194,591 in 1999. Revenues from commissions are affected by both retail
trading volume and the average commission dollar value. Based on the number of
retail trades processed, 2000 volume increased by approximately 2% from 1999
levels. The dollar average of retail trades also increased by 2% for 2000 as
compared with 1999. The average number of account executives decreased from an
average of 30 in 1999 to an average of 26 in 2000, or a decrease of
approximately 13%. Despite this decrease in account executives, productivity per
account executive increased approximately 18% from the prior year.
Trading revenue (net dealer inventory and investment gains) increased by
approximately 53% to $4,987,624 in 2000 from $3,262,671 in 1999. The Company's
trading revenue is derived primarily from institutional clients. Institutional
trading revenues generated approximately 79% and 71% of total trading revenue
for the years ended September 30, 2000 and 1999, respectively. The growth in
institutional trading in 2000 is attributable to the ongoing development of new
institutional trading relationships by the Company as well as additional
business from existing institutional clients. The value of institutional shares
traded increased from $711 million in 1999 to $861 million in 2000. The number
of institutional shares traded increased from 52 million shares in 1999 to over
94 million shares in 2000. Trading revenues from retail trading generated
approximately 17% and 25% of total trading revenue for the years ended September
30, 2000 and 1999, respectively.
Revenues from management and investment advisory fees more than doubled to
$188,191 in 2000 from $83,236 in 1999. This revenue increase is mainly due to
increases in private client money management performance fees and increases in
management fees from the Global eFund, a mutual fund that the Company began
managing in May 2000.
Interest and dividend revenue increased by 55% to $375,095 for 2000 from
$242,580 in 1999. This increase is primarily attributable to a higher average
dollar amount of interest and dividend producing assets held by the Company as a
result of higher institutional trading activity.
The loss from the Company's joint venture was up 61% to $55,286 in 2000 from
$34,361 in 1999. The loss increased primarily due to higher sales force expenses
without an immediate corresponding improvement in revenue. The loss from the
Company's joint venture 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 operations in December
1998. The joint venture operates as a securities brokerage branch office of
International Assets Advisory Corporation.
14
<PAGE>
Other revenues increased to $432,105 in 2000 from $168,207 in 1999 mainly due to
the settlement of three arbitration matters.
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 and
promotion expense. Total expenses increased 28% to $11,758,594 in 2000, up from
$9,221,553 in 1999. This increase in total expenses is mainly related to higher
total revenues.
Commissions and clearing fees increased 8% to $4,315,884 in 2000, up from
$4,000,910 in 1999. Clearing expense increased by $167,421, or approximately 13%
for 2000 as compared to 1999. The increase in clearing expense is directly
related to higher trading volumes. Commission expense increased 5% or $147,553
in 2000 as compared to 1999. The increase in commissions expense corresponds
primarily to higher retail commission revenues as well as an increase in the
effective commission payout to account executives.
Employees compensation and benefits were up 35% or $959,253, in 2000 as compared
to 1999. The increase was primarily due to additional personnel associated with
INTLTRADER.COM's start-up, International Assets Advisory Corporation's staffing
needs and increases in performance-based bonus expense. The increase in bonus
expense is primarily attributable to significant improvements in institutional
trading revenues versus the prior year.
Communications expense was higher by $61,800, or approximately 23% for 2000 as
compared to 1999. This increase is primarily due to investments in technology as
additional communication links for INTLTRADER.COM and International Assets
Advisory Corporation were required.
Promotion expense was up by $383,109, or approximately 46% in 2000 versus 1999.
This increase was mainly due to the launch of INTLTRADER.COM. In addition, the
Company incurred higher travel expenses associated with the Company's private
capital raising efforts.
Occupancy and equipment rental expense increased by $30,950, or approximately 7%
in 2000. This increase over last year was mainly due to higher lease expense for
the Company's office facilities as well as increases in other operating lease
expenses.
Professional fees were up by $58,380 in 2000 as compared to 1999 due to higher
consulting fees.
Depreciation and amortization expense increased $215,116 in 2000 from a level of
$152,002 in 1999 as a result of higher amortization expense associated with
capitalized system development costs for INTLTRADER.COM.
Technology expenses were up $289,923 in 2000 from $45,782 in 1999 as new
technology enhancements were completed for INTLTRADER.COM to support systems
maintenance activities.
Other operating expenses were up $213,270, or 66% to $534,305 in 2000 over 1999
primarily related to increases in several operating expenses including dividend
expense from securities sold, but not yet purchased and other operating office
expenses.
15
<PAGE>
The Company has reported net income of $279,143 for the year ended September 30,
2000 compared to net income of $397,181 for the previous year. The Company's
effective income tax rate was approximately 47% in 2000 and 43% in 1999. The
effective tax rate differs from the expected federal rate due to state income
tax expense and the impact of permanent tax differences not deductible for tax
purposes. These permanent tax differences had a greater impact on the effective
tax rate in 2000 due to higher permanent tax differences and a lower net income
in 2000.
1999 Compared to 1998
Total revenues increased by approximately 6% to $9,916,924 in 1999 from
$9,350,223 in 1998. This increase was primarily attributable to a $1,470,932
increase in trading revenue (net dealer inventory and investment gains) that was
partially offset by an $805,478 decrease in commission revenue.
Commission revenue decreased by approximately 12% to $6,194,591 for 1999 from
$7,000,069 for 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 approximately 13% from 1998
levels. The dollar average of retail trades increased by 3% for 1999 as compared
with 1998. The average number of account executives decreased from an average of
39 in 1998 to an average of 30 in 1999, or a decrease of approximately 23%.
Trading revenue (net dealer inventory and investment gains) increased by
approximately 82% to $3,262,671 for 1999 from $1,791,739 for 1998. The increase
in trading revenue is primarily attributable to increases in both institutional
trading and increases in Company investment portfolio valuations. The increases
in institutional trading and investment portfolio valuations were partially
offset by decreases in retail equity and retail fixed income trading activity.
The increase in institutional trading is attributable to the ongoing development
of new institutional trading relationships by the Company as well as maintenance
of existing institutional relationships.
Revenues from management and investment advisory fees increased by approximately
13% to $83,236 for 1999 from $73,657 for 1998. The increase is primarily due to
increases in the dollar amount of money under management partially offset by
decreases in investment supervisory fees.
Interest and dividend revenue decreased by approximately 10% to $242,580 for
1999 from $269,855 in 1998. This decrease is primarily attributable to decreases
in interest bearing securities held by the Company throughout the year versus
the portion of equity securities held by the Company due to the increase in
institutional trading activity.
Total expenses decreased by $425,829, or approximately 4% for 1999 as compared
to 1998. The major expenses incurred by the Company relate to direct costs of
its securities operations such as commissions and clearing fees, employees
compensation and benefits, communications and promotion expense.
Commissions and clearing fees decreased by $289,059, or approximately 7% for
1999 as compared to 1998. This decrease in commissions and clearing fees is
directly related to the 12% decrease in commission revenue.
Employees compensation and benefits increased by $807,645, or approximately 42%
for 1999 as compared to 1998. The increase in employees compensation and
benefits expense is primarily due
16
<PAGE>
to the increase in performance based bonus expense and an increase in retirement
plan profit sharing expense. The increase in performance based bonus and
retirement plan profit sharing expense is based on the $695,371 income before
income taxes incurred for 1999 compared to the $297,159 loss before income taxes
for 1998. The increase in employees compensation and benefits is also due to the
creation of additional staff positions related to ITCI's start-up as well as
IAAC's staffing needs.
Communications expense decreased by $59,454, or approximately 18% for 1999 as
compared to 1998. This decrease is due to decreased telephone expense due to the
corresponding decrease in average account executives from 39 in 1998 to 30 for
1999.
Promotion expense decreased by $352,539, or approximately 30% for 1999 as
compared to 1998. This decrease is primarily due to the planned reduction of
promotion expenditures for print media, including newsletter publication, lead
generation and related postage expense.
Occupancy and equipment rental expense increased by $83,039, or approximately
23% for 1999 as compared to 1998. This increase was due to a previously
negotiated lease increase for the Company's premises as well as increases in
other operating lease expense. The increase was also due to a negotiated, time
specific rent adjustment realized during the five months from September 1997
through January 1998.
Professional fees decreased by $175,704, or 41% for 1999 as compared to 1998.
This decrease is primarily due to significantly higher legal fees incurred
during 1998 related to a closed 1998 NASD arbitration matter.
As a result of the above, the Company is reporting net income of $397,181 for
the year ended September 30, 1999. This is compared to a net loss of $217,338
for the year ended September 30, 1998. The Company's effective income tax rate
was approximately 43% for 1999 compared to the effective income tax benefit of
27% for 1998. The effective tax rate decrease for 1998 from the expected 34%
benefit is primarily due to the effect of permanent differences.
Liquidity and Capital Resources
Substantial portions of the Company's assets are liquid. At September 30, 2000,
approximately 81% 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.
IAAC, a wholly owned registered securities broker/dealer subsidiary, is subject
to the requirements of the SEC and the NASD relating to liquidity and net
capital levels. At September 30, 2000, IAAC had net capital of $3,128,541 which
was $2,593,041 in excess of its minimum net capital requirement at that date.
ITCI, a wholly owned registered securities broker subsidiary, is also subject to
the requirements of the SEC and the NASD relating to liquidity and net capital
levels. At September 30, 2000, ITCI had net capital of $239,466, which was
$189,466 in excess of its minimum net capital requirement at that date.
17
<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. At this
time additional private financing is being sought for technology, staffing and
promotional efforts based upon the Company's strategic plan. This plan has an
operational emphasis on technology driven international securities order flow.
In conjunction with the Company's strategic plan, the Company has engaged UBS
Warburg (formerly known as Paine Webber) as its financial advisor to arrange and
negotiate a private placement of securities issued by the Company or to find a
strategic partner. UBS Warburg 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.
Effects of Inflation
Because the Company's assets are, to a large extent, liquid in nature, they are
not significantly affected by inflation. Increases in the Company's expenses,
such as employee compensation, rent and communications, due to inflation, may
not be readily recoverable in the prices of services offered by the Company. In
addition, to the extent that inflation results in rising interest rates and has
other adverse effects on the securities markets and on the value of the
securities held in inventory, it may adversely affect the Company's financial
position and results of operations.
18
<PAGE>
ITEM 7. CONSOLIDATED FINANCIAL STATEMENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
Independent Auditors' Report.................................................F-1
Consolidated Balance Sheets as of
September 30, 2000 and 1999.............................................F-2
Consolidated Statements of Operations for the Years Ended
September 30, 2000 and 1999.............................................F-3
Consolidated Statements of Stockholders' Equity for the Years Ended
September 30, 2000 and 1999.............................................F-4
Consolidated Statements of Cash Flows for the Years Ended
September 30, 2000 and 1999.............................................F-5
Notes to Consolidated Financial Statements...................................F-7
19
<PAGE>
[GRAPHIC OMITTED]
111 North Orange Avenue, Suite 1600
P.O. Box 3031
Orlando, FL 32802
Independent Auditors' Report
The Board of Directors
International Assets Holding Corporation
and Subsidiaries:
We have audited the accompanying consolidated balance sheets of International
Assets Holding Corporation and Subsidiaries as of September 30, 2000 and 1999
and the related consolidated statements of operations, changes in stockholders'
equity and cash flows for the years then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of International Assets
Holding Corporation and Subsidiaries as of September 30, 2000 and 1999 and the
results of their operations and their cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States of
America.
[GRAPHIC OMITTED]
November 3, 2000
Orlando, Florida
F-1
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
September 30, 2000 and 1999
<TABLE>
<CAPTION>
Assets 2000 1999
------------ ------------
<S> <C> <C>
Cash $ 529,681 380,070
Cash deposits with clearing broker 4,733,862 3,798,679
Foreign currency 8,316 30,255
Other receivables 90,115 42,694
Loans to officers 205,671 --
Securities owned, at market value 3,316,513 3,585,566
Investment in Joint Venture 20,353 15,639
Income taxes receivable 452,032 115,081
Deferred income tax benefit 44,442 84,033
Property and equipment, at cost:
Equipment, furniture and leasehold improvements 1,149,921 1,135,082
Less accumulated depreciation and amortization (765,065) (731,057)
------------ ------------
Net property and equipment 384,856 404,025
Software development, net of accumulated amortization of
$151,280 in 2000 and $0 in 1999 416,810 193,898
Prepaid expenses and other assets, net of accumulated amortization
of $170,512 in 2000 and $144,508 in 1999 260,103 127,598
------------ ------------
Total assets $ 10,462,754 8,777,538
============ ============
Liabilities and Stockholders' Equity
Liabilities:
Foreign currency sold, but not yet purchased $ 11,903 36,482
Securities sold, but not yet purchased, at market value 1,202,659 990,482
Payable to clearing broker, net 24,330 230,443
Accounts payable 260,718 154,950
Accrued employee compensation and benefits 1,055,238 744,076
Accrued expenses 191,725 260,565
Deferred income taxes 177,649 91,807
Payable to Joint Venture 2,027 9,384
Other liabilities 68,367 120,343
------------ ------------
Total liabilities 2,994,616 2,638,532
------------ ------------
Commitments and contingent liabilities
Stockholders' equity:
Preferred stock, $.01 par value. Authorized 3,000,000
shares; issued and outstanding 0 shares -- --
Common stock, $.01 par value. Authorized 8,000,000
shares; issued and outstanding 2,209,468 shares in
September 2000 and 1,725,428 shares in September 1999 22,095 17,254
Additional paid-in capital 7,666,333 4,588,928
Retained earnings (deficit) (220,290) 1,532,824
------------ ------------
Total stockholders' equity 7,468,138 6,139,006
------------ ------------
Total liabilities and stockholders' equity $ 10,462,754 8,777,538
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
Years ended September 30, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
Revenue:
Commissions $ 6,353,212 6,194,591
Net dealer inventory and investment gains 4,987,624 3,262,671
Management and investment advisory fees 188,191 83,236
Interest and dividends 375,095 242,580
Loss from joint venture (55,286) (34,361)
Other income 432,105 168,207
------------ ------------
Total revenue 12,280,941 9,916,924
------------ ------------
Expenses:
Commissions and clearing fees 4,315,884 4,000,910
Employees compensation and benefits 3,693,690 2,734,437
Communications 330,641 268,841
Promotion 1,216,914 833,805
Occupancy and equipment rental 475,223 444,273
Interest 5,109 4,829
Professional fees 308,967 250,587
Insurance 175,038 165,052
Depreciation and amortization 367,118 152,002
Technology 335,705 45,782
Other expenses 534,305 321,035
------------ ------------
Total expenses 11,758,594 9,221,553
------------ ------------
Income before income taxes 522,347 695,371
Income tax expense 243,204 298,190
------------ ------------
Net income $ 279,143 397,181
============ ============
Earnings per share:
Basic $ 0.13 0.22
============ ============
Diluted $ 0.12 0.18
============ ============
Weighted average number of common shares outstanding:
Basic 2,123,064 1,835,696
============ ============
Diluted 2,370,974 2,220,035
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
F-3
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
Years ended September 30, 2000 and 1999
<TABLE>
<CAPTION>
Additional Retained Total
Preferred Common paid-in earnings Treasury stockholders'
stock stock capital (deficit) stock equity
------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balances at September 30, 1998 $ -- 14,816 3,564,648 1,831,686 -- 5,411,150
Acquisition of 5,316 common shares -- -- -- -- (12,896) (12,896)
Retirement of 5,316 common shares
held in treasury -- (53) (11,485) (1,358) 12,896 --
Exercise of employee stock option -- 1,008 342,563 -- -- 343,571
10% stock dividend -- 1,483 693,202 (694,685) -- --
Net income -- -- -- 397,181 -- 397,181
------------- ---------- ---------- ---------- ---------- ----------
Balances at September 30, 1999 -- 17,254 4,588,928 1,532,824 -- 6,139,006
Issuance of common stock for services -- 81 42,909 -- -- 42,990
Income tax benefit from ISO
disqualifying dispositions -- -- 322,522 -- -- 322,522
Exercise of employee stock option -- 2,777 681,700 -- -- 684,477
10% stock dividend -- 1,983 2,030,274 (2,032,257) -- --
Net income -- -- -- 279,143 -- 279,143
------------- ---------- ---------- ---------- ---------- ----------
Balances at September 30, 2000 $ -- 22,095 7,666,333 (220,290) -- 7,468,138
============= ========== ========== ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended September 30, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 279,143 397,181
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 367,118 152,001
Deferred income taxes 125,433 118,043
Loss on disposals of property and equipment 300 --
Non-cash compensation -- 30,271
Loss from joint venture 55,286 34,361
Tax benefit from exercise of nonqualified stock option -- 23,829
Tax benefit from disqualifying dispositions
of incentive stock options 322,522 --
Cash provided by (used for) changes in:
Receivable from clearing broker, net -- 791,753
Other receivables (47,421) 20,829
Securities owned, at market value 269,053 (1,570,832)
Income taxes receivable (336,951) (47,683)
Prepaid expenses and other assets (158,509) (54,682)
Foreign currency sold, but not yet purchased (24,579) 29,276
Securities sold, but not yet purchased, at market
value 212,177 700,079
Payable to clearing broker, net (206,113) 230,443
Accounts payable 105,768 82,350
Accrued employee compensation and benefits 311,162 452,540
Accrued expenses (68,840) (91,979)
Payable to joint venture (7,357) 9,384
Other liabilities (51,976) 2,498
----------- -----------
Net cash provided by operating activities 1,146,216 1,309,662
----------- -----------
Cash flows from investing activities:
Investment in joint venture (60,000) (50,000)
Loans to officers (205,671) --
Costs of additional property, equipment and software
development (545,157) (373,308)
----------- -----------
Net cash used for investing activities (810,828) (423,308)
----------- -----------
Cash flows from financing activities:
Exercise of employee stock options 684,477 289,471
Issuance of common stock for services performed 42,990 --
Acquisition of common shares related to terminated
ESOP participants and RSP participants -- (12,896)
----------- -----------
Net cash provided by financing activities 727,467 276,575
----------- -----------
Net increase in cash and cash equivalents 1,062,855 1,162,929
Cash and cash equivalents at beginning of year 4,209,004 3,046,075
----------- -----------
Cash and cash equivalents at end of year $ 5,271,859 4,209,004
=========== ===========
</TABLE>
(Continued)
F-5
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended September 30, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
Supplemental disclosures of cash flow information:
Cash paid for interest: $ 5,109 4,829
=========== ===========
Income taxes paid $ 132,200 204,000
=========== ===========
Supplemental disclosure of noncash financing activities:
On March 24, 2000, the Company issued 198,269 shares of
common stock in conjunction with a ten percent stock
dividend
On March 26, 1999, the Company issued 148,199 shares of
common stock in conjunction with a ten percent stock
dividend
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2000 and 1999
(1) Summary of Significant Accounting Policies
(a) Principles of Consolidation
The consolidated financial statements include the accounts of
International Assets Holding Corporation (the Company or the parent
company) and its six wholly owned subsidiaries, International Assets
Advisory Corp. (IAAC), International Assets Management Corp., Global
Assets Advisors, Inc., International Financial Products, Inc.,
INTLTRADER.COM, Inc. (ITCI), and OffshoreTrader.com Ltd. International
Assets Advisory Corp. is a registered broker/dealer under the
Securities Act of 1934. Its securities transactions are cleared
through Wexford Clearing Services Corporation (a wholly owned,
guaranteed subsidiary of Prudential Securities Incorporated) on a
fully disclosed basis. International Assets Management Corp. was
formed to manage the physical assets of the Company. Global Assets
Advisors, Inc. provides investment advisory and account management
services. International Financial Products, Inc. is inactive but was
formed to market products, which were not investments, but were
related to the financial industry. INTLTRADER.COM, Inc. is a
registered broker under the Securities Act of 1934 and was formed to
provide on-line brokerage transactions of foreign and domestic
securities using the Internet. OffshoreTrader.com Ltd. was
incorporated to explore global internet securities trading for
non-U.S. citizens. All significant intercompany balances and
transactions have been eliminated in consolidation.
(b) Cash and Cash Equivalents
Cash equivalents consist of cash deposits with clearing broker and
foreign currency. Cash deposits with clearing broker consist of cash
and money market funds stated at cost, which approximate market. The
money market funds earn interest at varying rates on a daily basis.
For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid debt instruments with original maturities
of three months or less to be cash equivalents.
(c) Foreign Currency
The value of a foreign currency, including a foreign currency sold,
but not yet purchased, is converted into its U.S. dollar equivalent at
the foreign exchange rate in effect at the close of business on the
balance sheet date.
(Continued)
F-7
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2000 and 1999
(d) Financial Instruments
As of September 30, 2000 and 1999, the carrying value of the Company's
financial instruments including cash, cash deposits with clearing
broker, foreign currency, receivables, accounts payable and accrued
expenses approximate their fair values, based on the short-term
maturities of these instruments. Additionally, the carrying value of
securities owned and any securities and foreign currency sold, but not
yet purchased, approximate their fair value at September 30, 2000 and
1999 as they are based on quoted market prices.
(e) Valuation of Securities
Each listed security is valued at the last reported sale price on that
day. Listed securities not traded on an exchange that day, and other
securities, which are traded in the over-the-counter market, are
valued at the market's current bid price for securities owned and
current asked price for securities sold, but not yet purchased. The
value of a foreign security is determined in its national currency on
the exchange on which it is traded, which value is then converted into
its U.S. dollar equivalent at the foreign exchange rate in effect
following the close of the stock exchange in the country where the
security is issued and traded.
As of September 30, 2000, securities include a limited partnership
ownership interest of $86,992. The limited partnership ownership
interest is recorded at fair value, which has been determined by
management. This limited partnership ownership interest is held for
the Company's investing purposes and is not held for sale to the
Company's customers.
(f) Revenue Recognition
The revenues of the Company are derived principally from commissions
earned on the sale of securities from realized and unrealized trading
income in securities purchased or sold for the Company's account and
from management and investment advisory fees. Commissions and related
clearing expenses are recorded on a trade-date basis as securities
transactions occur. Interest income is recorded on the accrual basis
and dividend income is recognized upon receipt.
(g) Depreciation and Amortization
Depreciation on property and equipment is calculated using the
straight-line method over the estimated useful lives of the assets,
which range from three to seven years. Leasehold improvements are
amortized using the straight-line method over the estimated period of
benefit to be received from the assets, which approximates six years.
(Continued)
F-8
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2000 and 1999
Intangible assets, included in other assets in the accompanying
consolidated balance sheets, are amortized using the straight-line
method over the estimated period of benefit to be received from the
assets, which approximates five years.
Software development costs that have reached that stage of
functionality are amortized using the straight-line method over the
estimated period of benefit to be received from these costs, which
approximates two years.
(h) Income Taxes
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates as expected to apply to taxable
income in the years in which those temporary differences are expected
to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date. Valuation allowances are
established when necessary to reduce deferred tax assets to an amount
that, in the opinion of management, is more likely than not to be
realized.
The Company and its subsidiaries file consolidated federal and state
income tax returns.
(i) Advertising
The Company expenses costs of advertising as incurred and have
included these expenses in promotion expenses in the accompanying
consolidated statements of operations. Advertising costs for the years
ended September 30, 2000 and 1999 were $653,161 and $397,090,
respectively.
(j) Stock Option Plan
In October 1995, the FASB issued SFAS No. 123, "Accounting for
Stock-Based Compensation", which permits entities to recognize as
expense over the vesting period the fair value of all stock-based
awards on the date of grant. Alternatively, SFAS No. 123 also allows
entities to continue to apply the provisions of APB Opinion No. 25
which provides that compensation expense would be recorded on the date
of grant only if the current market price of the underlying stock
exceeded the exercise price and pro forma disclosures as if the
fair-value-based method defined in SFAS No. 123 had been applied. The
Company has elected to continue to apply the provisions of APB Opinion
No. 25 and provide the pro forma disclosure provisions of SFAS No.
123.
(Continued)
F-9
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2000 and 1999
(k) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that effect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at
the date of the financial statements and the reported revenues and
expenses during the period. Actual results could differ from these
estimates.
(l) Earnings Per Share
Basic earnings per share have been computed by dividing net income by
the weighted average number of common shares outstanding. Diluted
earnings per share have been computed by dividing net income by the
weighted average number of common shares and dilutive potential common
shares outstanding.
Option to purchase 77,480 and 10,900 shares of common stock were
excluded from the calculation of diluted earnings per share for the
years ended September 30, 2000 and 1999, respectively, because their
exercise price exceeded the average market price of common stock for
the period.
(m) Future Application of Accounting Standards
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. The
implementation date of SFAS 133 was amended by SFAS 137 and is now
effective for all fiscal quarters of fiscal years beginning after June
15, 2000. Assuming its future use of derivative instruments mirrors
its historic usage, the Company does not believe that the
implementation of SFAS 133 will have a significant impact on the
consolidated financial statements of the Company.
(n) Reclassification
Certain amounts in the 1999 financial statements have been
reclassified to conform with 2000.
(Continued)
F-10
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2000 and 1999
(2) Related Party Transactions
During November 1999 the Board of Directors of the Company approved a
consulting agreement with the former President of the Company, who
continues to serve on the Board of Directors of the Company, for a 6 month
duration from December 15, 1999 through June 15, 2000, for a fee of $6,000
per month. After June 15, 2000 this director was compensated in the same
manner as the Company's other outside Directors.
On January 4, 2000 the Company made a loan to the CEO of the Company
including the execution and receipt of a $250,000 promissory note due
January 3, 2001. The promissory note includes interest of 6 percent per
annum. The loan to officer was previously approved by the Company's Board
of Directors. As of September 30, 2000 the remaining principal balance of
the promissory note including accrued interest is approximately $139,285.
On August 28, 2000 the Company made a loan to a Vice President of the
Company including the execution and receipt of a $66,000 promissory note
due August 27, 2001. The promissory note includes interest of 6.27 percent
per annum. As of September 30, 2000 the remaining principal balance of the
promissory note including accrued interest is approximately $66,386.
The Company has engaged, on a task-by-task basis, a creative design firm
that is partially owned by a spouse of an officer of the Company. The
Company incurred promotional expense related to this creative design firm
totaling approximately $121,000 and $47,000 during the years ended
September 30, 2000 and 1999, respectively.
(3) Securities Owned and Securities Sold, But Not Yet Purchased
Securities owned and securities sold, but not yet purchased at September
30, 2000 and 1999 consist of trading and investment securities at market
values as follows:
<TABLE>
<CAPTION>
Sold, but
not yet
Owned purchased
---------- ----------
<S> <C> <C>
2000:
Obligations of U.S. Government $ 256,042 --
Common stock and American Depository Receipts 2,615,003 1,093,608
Corporate and municipal bonds 119,370 54,526
Foreign government obligations 91,210 54,525
Unit investment trusts, mutual funds and other investments 234,888 --
---------- ----------
$3,316,513 1,202,659
========== ==========
</TABLE>
(Continued)
F-11
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2000 and 1999
<TABLE>
<CAPTION>
Sold, but not
Owned yet purchased
---------- ----------
<S> <C> <C>
1999:
Obligations of U.S. Government $ 241,396 --
Common stock and American Depository Receipts 2,573,717 945,053
Corporate and municipal bonds 209,340 --
Foreign government obligations 257,083 --
Unit investment trusts, mutual funds and other investments 304,030 45,429
---------- ----------
$3,585,566 990,482
========== ==========
</TABLE>
(4) Receivable From and Payable to Clearing Organization
Amounts receivable from and payable to clearing organization at September
30, 2000 and 1999 consist of the following:
Receivable Payable
-------- --------
2000:
Commission income receivable $ 51,943 --
Clearing fee payable -- 7,392
Open transactions, net -- 68,881
-------- --------
$ 51,943 76,273
======== ========
1999:
Commission income receivable $ 69,465 --
Clearing fee payable -- 9,688
Open transactions, net -- 290,220
-------- --------
$ 69,465 299,908
======== ========
As these amounts are short-term in nature, the carrying amount is a
reasonable estimate of fair value.
(Continued)
F-12
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2000 and 1999
(5) Investment in Joint Venture
On September 30, 1998, the Company signed a 50/50 Joint Venture Agreement
(JV) with Lakeside Investments, LLC (Lakeside) of New York. On October 1,
1998, the joint venture effected the incorporation of International Assets
New York, LLC (IANY) a 50/50 owned entity formed to transact the business
for the JV. IANY has elected partnership federal income tax treatment. Each
party made an initial contribution of $50,000 during the year ended
September 30, 1999. During the years ended September 30, 2000 and 1999, the
parties made an equal subsequent capital contribution of $60,000 and
$50,000, respectively. Additionally, they committed to contribute an
additional optional $90,000 at a later date. A principal of Lakeside
actively manages this business. IANY offers a variety of financial
strategies to high net worth private investors resident in the United
States and certain foreign countries. The Company accounts for this
investment under the equity method of accounting.
For the years ended September 30, 2000 and 1999, the Company has recorded a
loss of $55,286 and $34,361, respectively for 50 percent of the joint
venture's loss for the period. As of September 30, 2000 and 1999, the
Company had a payable to the joint venture of $2,027 and $9,384,
respectively, which relates to joint venture cash outlays which were made
on behalf of the Company.
(6) Financial Instruments with Off-Balance Sheet Risk
The Company is party to certain financial instruments with off-balance
sheet risk in the normal course of business as a registered securities
broker/dealer. In addition, the Company has sold securities that it does
not currently own and will therefore be obligated to purchase such
securities at a future date. The Company has recorded these obligations in
the consolidated financial statements at September 30, 2000 at market
values of the related securities (totaling $1,202,659) and will incur a
loss if the market value of the securities increases subsequent to
September 30, 2000.
(7) Capital and Cash Reserve Requirements
As of September 30, 2000 and 1999, IAAC is subject to the Securities and
Exchange Commission uniform net capital rule (Rule 15c3-1), which requires
the maintenance of minimum net capital at an amount equal to the greater of
$100,000, 6-2/3 percent of aggregate indebtedness, or $2,500 for each
security in which a market is made with a bid price over $5 and $1,000 for
each security in which a market is made with a bid price of $5 or less with
a ceiling of $1,000,000, and requires that the ratio of aggregate
indebtedness to net capital not exceed 15 to 1. As of September 30, 2000,
the Company had excess net capital of $2,593,041 and a ratio of aggregate
indebtedness to net capital of 0.47 to 1.
(Continued)
F-13
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2000 and 1999
As of September 30, 2000, ITCI is subject to the SEC uniform net capital
rule (Rule 15c3-1), which requires the maintenance of minimum net capital
at an amount equal to the greater of $50,000, 12.5 percent of aggregate
indebtedness (for the first year of operations) and 6-2/3 percent of
aggregate indebtedness after the first year of operations. At September 30,
2000, the Company had excess net capital of $189,466 and a ratio of
aggregate indebtedness to net capital of approximately 0.47 to 1.
IAAC and ITCI are exempt from customer reserve requirements and providing
information relating to possession or control of securities pursuant to
Rule 15c3-3 of the Securities and Exchange Act of 1934. Both IAAC and ITCI
meet the exemptive provisions of Paragraph (k)(2)(ii).
(8) Leases
The Company is obligated under various noncancelable operating leases for
the rental of its office facilities and certain office equipment. Rent
expense associated with operating leases amounted to $386,900 and $344,900
for the years ended September 30, 2000 and 1999, respectively. Future
minimum lease payments under noncancelable operating leases as of September
30, 2000 are as follows:
Year ending September 30,
-------------------------
2001 $291,000
2002 81,000
2003 50,500
2004 3,300
--------
Total future minimum lease payments $425,800
========
During April 2000, IANY, the Company's joint venture, executed an amendment
for its leased office facilities. The amendment increases the square
footage leased from approximately 1,402 square feet to 1,975 square feet.
The amendment extended the lease term for a 36 month period commencing on
September 1, 2000. Based on this lease amendment the remaining base rental
commitment for IANY is $144,010 (Fiscal year ending: September 30, 2001,
$49,375; September 30, 2002, $49,375 and September 30, 2003, $45,260). The
Company and Lakeside Investments, LLC, each executed a 100 percent 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).
(Continued)
F-14
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2000 and 1999
(9) Income Taxes
Income tax expense for the years ended September 30, 2000 and 1999 consists
of:
Current Deferred Total
-------- -------- --------
2000:
Federal $100,807 107,100 207,907
State 16,964 18,333 35,297
-------- -------- --------
$117,771 125,433 243,204
======== ======== ========
1999:
Federal $154,065 100,790 254,855
State 26,082 17,253 43,335
-------- -------- --------
$180,147 118,043 298,190
======== ======== ========
Total income tax expense for the years ended September 30, 2000 and 1999
differed from the amounts computed by applying the U.S. federal income tax
rate of 34 percent to income before income taxes as a result of the
following:
<TABLE>
<CAPTION>
2000 1999
------------------------- -------------------------
% of pretax % of pretax
Amount income Amount income
-------- ------ -------- ------
<S> <C> <C> <C> <C>
Computed "expected" tax expense $177,598 34.0% $236,426 34.0%
Increase in income tax expense
resulting from:
State income taxes, net of
federal income tax benefit 23,296 4.5% 28,601 4.1%
Meals and entertainment expense not
deductible for tax purposes 31,590 6.0% 27,841 4.0%
Memberships 7,204 1.4% 4,822 0.7%
Other, net 3,516 0.7% 500 0.1%
-------- ------ -------- ------
$243,204 46.6% $298,190 42.9%
======== ====== ======== ======
</TABLE>
(Continued)
F-15
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2000 and 1999
Deferred income taxes as of September 30, 2000 and 1999 reflect the impact
of "temporary differences" between amounts of assets and liabilities for
financial statement purposes and such amounts as measured by tax laws. The
temporary differences give rise to deferred tax assets and liabilities,
which are summarized below as of September 30, 2000 and 1999:
<TABLE>
<CAPTION>
2000 1999
--------- ---------
<S> <C> <C>
Gross deferred tax liabilities:
Accumulated depreciation and amortization $ (20,803) (18,843)
Software development costs (156,846) (72,964)
--------- ---------
Total gross deferred tax liabilities (177,649) (91,807)
--------- ---------
Gross deferred tax assets:
Accrued reserves -- 39,696
Investment in Limited Partnership 3,770 3,802
Rent abatement -- 2,410
Amortization of other assets 40,672 35,279
Contributions carryover -- 2,846
--------- ---------
Total gross deferred tax assets 44,442 84,033
--------- ---------
$(133,207) (7,774)
========= =========
</TABLE>
There was no valuation allowance for deferred tax assets as of September
30, 2000 and 1999. In assessing the realizability of deferred tax assets,
management considers whether it is more likely than not that some portion
or all of the deferred tax assets will not be realized. The ultimate
realization of deferred tax assets is dependent upon the generation of
future taxable income or the reversal of deferred tax liabilities during
the periods in which those temporary differences become deductible.
Management considers the scheduled reversal of deferred tax liabilities,
projected future taxable income and tax planning strategies in making this
assessment. As of September 30, 2000, based upon the level of historical
taxable income and projections for future taxable income, management
believes it is more likely than not that the Company will realize the
benefits of these deductible differences.
(10) Employee Benefit Plans
Effective May 1, 1999, the Company implemented a defined contribution
401(k) Profit Sharing Plan ("401(k) Plan"). The 401(k) Plan amended and
restated the Company's employee stock ownership plan ("ESOP"), which was
effective December 30, 1992. This plan retains the 401(k) profit sharing
features of the December 30, 1992 plan, and effective May 1, 1999, deletes
the employee stock ownership plan provisions. Those participants who had
account balances in the ESOP portion of the plan, as of May 1, 1999 will
retain certain ESOP rights, such as the right to receive distributions in
the form of employer common stock.
(Continued)
F-16
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2000 and 1999
All Company employees who have completed one year of continuous service and
who have attained the age of twenty-one are eligible to participate in the
401(k) Plan. The 401(k) Plan allows employees to elect to defer a portion
of their salary into the 401(k). The amount contributed reduces the
employee's taxable compensation. IAAC has the option to make a matching
contribution at the sole discretion of IAAC.
IAAC implemented a defined contribution Retirement Savings Plan ("RSP")
effective January 1, 1995. All employees who have completed one year of
continuous service and who have attained the age of twenty-one are eligible
for the RSP. The contributions to the RSP are at the sole discretion of
IAAC.
IAAC's contributions to these employee benefit plans for the years ended
September 30, 2000 and 1999 are summarized as follows:
2000 1999
-------------- ------------
RSP $ 40,000 44,408
401(k) Plan - ESOP 40,000 25,592
-------------- ------------
$ 80,000 70,000
============== ============
Employer contributions gradually vest over seven years, and employee
contributions are fully vested at all times, are paid upon death,
disability, retirement or termination of employment.
As of September 30, 2000 and 1999, 163,270 and 275,189 common shares of the
Company were allocated to ESOP participants, respectively. During the years
ended September 30, 2000 and 1999, 0 and 4,283 common shares of the Company
were purchased from terminated ESOP participants.
As of September 30, 2000 and 1999, 69,694 and 71,173 common shares of the
Company were allocated to RSP participants, respectively. During the years
ended September 30, 2000 and 1999, 0 and 2,149, respectively, common shares
of the Company were purchased from terminated RSP participants.
(11) Stock Options
The International Assets Holding Corporation Stock Option Plan (the "Plan")
was adopted by the Board of Directors of the Company and approved by the
Company's stockholders during January 1993. The Plan permits the granting
of awards to employees and directors of the Company and its subsidiaries in
the form of stock options. Stock options granted under the Plan may be
"incentive stock options" meeting the requirements of Section 422 of the
Internal Revenue Code of 1986, as amended, or nonqualified stock options,
which do not meet the requirements of Section 422. As of September 30,
2000, a total of 839,300 shares of the Company's common stock had been
reserved for issuance pursuant to options granted under the Plan.
(Continued)
F-17
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2000 and 1999
The Plan is administered by the Company's Board of Directors or a committee
thereof. The Plan gives broad powers to the Board of Directors to
administer and interpret the Plan, including the authority to select the
individuals to be granted options and rights and to prescribe the
particular form and conditions of each option or right granted. All options
are granted at an exercise price equal to the fair market value or 110
percent of the fair market value of the Company's common stock on the date
of the grant. Awards may be granted pursuant to the Plan through January
2003. The Board of Directors at its sole discretion may terminate the Plan
earlier.
At September 30, 2000, there were 1,482 additional shares available for
grant under the Plan. Using the Black Scholes option-pricing model, the per
share weighted-average fair value of stock options granted during 2000 and
1999, where exercise price equals the market price of the stock on the
grant date, was $5.02 and $0.96, respectively.
The following weighted average assumptions were used:
<TABLE>
<CAPTION>
2000 1999
---------------- ----------------
<S> <C> <C>
Exercise price equal to market price on grant date:
Expected risk-free interest rate 6.32% 5.16%
Expected life 6.91 years 5.2 years
Expected volatility 73.5% 55.3%
Expected dividend yield 0.00% 0.00%
Exercise price greater than market price on grant date:
Expected risk free interest rate -- 5.14%
Expected life -- 5 years
Expected volume -- 54.2%
Expected dividend yield -- 0.00%
</TABLE>
The Company applies APB Opinion No. 25 in accounting for its Plan and,
accordingly, no compensation cost has been recognized for its stock options
in the consolidated financial statements. Had the Company determined
compensation cost based on the fair value at the grant date for its stock
options under SFAS No. 123, the Company's net income and earnings per share
would have been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
2000 1999
-------------- -------------
<S> <C> <C> <C>
Net income As reported $ 279,143 397,181
Pro forma $ 70,965 255,653
Basic earnings per share As reported $ 0.13 0.22
Pro forma $ 0.03 0.14
Diluted earnings per share As reported $ 0.12 0.18
Pro forma $ 0.03 0.12
</TABLE>
(Continued)
F-18
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2000 and 1999
Pro forma net income reflects only options granted from 1996 to 2000.
Therefore, the full impact of calculating compensation cost for stock
options under SFAS No. 123 is not reflected in the pro forma net income
amounts presented above because compensation cost is reflected over the
options' expected life ranging from 5 to 8.5 years and compensation cost
for options granted prior to October 1, 1995 is not considered.
Stock option activity during the fiscal years ended September 30, 1999 and
2000 is as follows:
<TABLE>
<CAPTION>
Weighted-
average
Number of exercise
shares price
---------------- ----------------
<S> <C> <C>
Outstanding at September 30, 1998 530,560 $ 2.70
Granted 304,655 1.50
Exercised (110,698) 2.74
Forfeited (25,933) 2.95
Expired -- --
---------------- ----------------
Outstanding at September 30, 1999 698,584 2.16
Granted 152,480 6.84
Exercised (300,840) 2.28
Forfeited (129,492) 1.77
Expired -- --
---------------- ----------------
Outstanding at September 30, 2000 420,732 $ 4.17
================ ================
</TABLE>
At September 30, 2000, the range of exercise prices and weighted-average
remaining contractual life of outstanding options was $1.25 - 11.70 and
7.85 years, respectively.
At September 30, 2000 and 1999, the number of options exercisable was
42,513 and 192,494, respectively, and the weighted-average exercise price
of those options was $3.62 and $2.95, respectively.
(Continued)
F-19
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2000 and 1999
Incentive Stock Options
As of September 30, 2000, options outstanding under qualified incentive
stock options, including their grant date, exercise price and expiration
date, were as follows:
<TABLE>
<CAPTION>
Options Exercise
outstanding Grant date price Expiration date
------------------- ---------------------- --------------- -------------------
<S> <C> <C> <C>
26,544 January 23, 1993 $ 3.87 January 23, 2003
4,796 August 12, 1994 4.17 August 12, 2004
7,194 December 21, 1995 2.28 December 21, 2005
26,378 December 28, 1995 2.09 December 28, 2005
8,393 December 28, 1995 1.90 December 28, 2005
3,597 March 7, 1996 2.28 March 7, 2006
23,381 December 11, 1996 2.51 December 11, 2006
11,990 August 26, 1997 3.27 August 26, 2007
5,995 October 1, 1998 1.49 October 1, 2008
83,930 November 2, 1998 1.38 November 2, 2008
19,184 November 2, 1998 1.25 November 2, 2008
11,990 January 6, 1999 1.25 January 6, 2009
29,430 December 9, 1999 7.17 December 9, 2009
21,800 January 28, 2000 11.70 January 28, 2010
26,250 March 10, 2000 11.63 March 10, 2010
75,000 April 27, 2000 5.19 April 27, 2010
-------------------
385,852
===================
</TABLE>
The options granted on January 23, 1993 are exercisable at 25% per year
beginning two years from the date of grant. The options granted on August
12, 1994, December 21, 1995, March 7, 1996, December 11, 1996, August 26,
1997, October 1, 1998, January 6, 1999 and December 9, 1999, are
exercisable at 20 percent per year beginning three years from the date of
grant. The options granted on December 28, 1995, January 28, 2000, March
10, 2000 and the 19,184 options granted on November 2, 1998 are exercisable
at 20 percent per year beginning one year from the date of grant. The
83,930 options granted on November 2, 1998 are exercisable at 30 percent,
30 percent, 40 percent over a three-year period beginning a year from the
date of grant. The options granted on January 28, 2000 are exercisable at
33 percent, 33 percent and 34 percent over a three-year period beginning a
year from the date of grant. The options granted on April 27, 2000 are
exercisable at 26 percent, 26 percent, 26 percent, 22 percent over a
four-year period beginning on October 1, 2000.
As of September 30, 2000 and 1999, 33,139 and 190,096 options,
respectively, were exercisable under qualified incentive stock options.
During the year ended September 30, 2000, 300,840 options were exercised
with a weighted average exercise price of $2.28.
(Continued)
F-20
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2000 and 1999
Nonqualified Stock Options
As of September 30, 2000, options outstanding under nonqualified options,
including their grant date, exercise price and expiration date, were as
follows:
<TABLE>
<CAPTION>
Options Exercise
outstanding Grant date price Expiration date
------------------- ---------------------- --------------- -------------------
<S> <C> <C> <C>
11,990 July 20, 1998 $ 2.40 July 20, 2008
11,990 January 6, 1999 1.25 January 1, 2009
10,900 June 4, 1999 6.65 June 4, 2009
-------------------
34,880
===================
</TABLE>
The nonqualified stock options granted July 20, 1998, January 6, 1999 and
June 4, 1999 are exercisable at 20 percent per year beginning one year from
the date of grant.
As of September 30, 2000 and 1999, 9,374 and 2,398 options, respectively,
were exercisable under nonqualified stock options. During the year ended
September 30, 2000, none of the nonqualified stock options were exercised.
(12) ITCI Stock Option and Plan
The Board of Directors of ITCI adopted a stock option plan ("ITCI Plan')
retroactively as of December 31, 1998. The ITCI Plan is intended to
constitute both an "incentive stock option" and a "plan" within the meaning
of qualifying under Section 422 of the Internal Revenue Code of 1986, as
amended, and the regulations thereunder. The ITCI Plan permits the granting
of an option of 111 common shares (approximately 10 percent 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 percent of the
estimated fair market value per share of common stock as of December 1,
1998.
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.
(Continued)
F-21
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2000 and 1999
There has been no vesting as of September 30, 2000, and like the Parent,
the Company recognizes compensation expense under APB No. 25 and no such
expense would be recognized until the achievement of the financial
benchmarks.
(13) Preferred Stock
The Company has authorized 3,000,000 shares of its preferred stock for
issuance at a par value of $.01 per share. As of September 30, 2000 and
1999, no shares have been issued and the Board of Directors has not yet
determined the specific rights and privileges of these shares.
(14) Stock Dividend
On February 25, 2000, the Company declared a ten percent stock dividend to
shareholders of record as of March 10, 2000. On March 24, 2000 the Company
issued 198,269 shares of common stock in conjunction with this dividend.
Accordingly, amounts equal to the fair market value (based on quoted market
prices as adjusted) of the additional shares issued have been charged to
retained earnings and credited to common stock and additional paid-in
capital.
On February 12, 1999, the Company declared a ten percent stock dividend to
shareholders of record as of March 5, 1999. On March 26, 1999 the Company
issued 148,199 shares of common stock in conjunction with this dividend.
Accordingly, amounts equal to the fair market value (based on quoted market
prices as adjusted) of the additional shares issued have been charged to
retained earnings and credited to common stock and additional paid-in
capital.
Earnings per common share, weighted average shares outstanding, and all
stock option activity have been restated to reflect both ten percent stock
dividends.
(15) Commitments and Contingent Liabilities
The Company has entered into an employment agreement with its chief
executive officer, which expires March 24, 2001. Under the terms of the
agreement, the officer will receive specified annual compensation, a bonus,
a monthly automobile allowance and reimbursement for personal income tax
preparation fees. The bonus is calculated by applying the consolidated
return-on-equity percentage for that year to the consolidated pre-tax
earnings adjusted before the deduction for officer bonus expense and as
adjusted for certain financial transactions. The executive bonus percentage
is subject to a minimum of 5 percent and a maximum of 15 percent of
adjusted consolidated pre-tax earnings of the Company. In the event of
termination of the agreements by the Company other than for cause, as
defined, or if the executive resigns as a result of a breach by the
Company, the agreements provide for payments to such individual in an
amount equal to 100 percent of his total compensation for 24 months
following the date of termination.
(Continued)
F-22
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2000 and 1999
The Company has entered into an employment agreement with its chief
operating officer, which expires September 7, 2002. Under the terms of the
agreement, the officer will receive specified annual compensation, a bonus,
stock options, a monthly automobile allowance and reimbursement for certain
expenses. The bonus is calculated by applying the consolidated
return-on-equity percentage for that year to the consolidated pre-tax
earnings adjusted before the deduction for officer bonus expense and as
adjusted for certain financial transactions. The executive bonus percentage
is subject to a minimum of 5 percent and a maximum of 15 percent of
adjusted consolidated pre-tax earnings of the Company. In the event of
termination of the agreements by the Company other than for cause, as
defined, or if the executive resigns as a result of a breach by the
Company, the agreements provide for payments to such individual in an
amount equal to 100 percent of his total compensation for the remaining
term of the agreement.
ITCI, a wholly owned subsidiary of the Company, has entered into an
employment agreement with its chief operating officer, which expires
September 30, 2001. Under the terms of the agreement, the officer will
receive a specified annual compensation to be paid by the Company, an
annual bonus, $5,000 moving allowance, and a temporary housing allowance.
The annual bonus will be equal to the greater of $20,000 or 10 percent of
the Company's net profits before tax for fiscal years 1999 and 2000 and 10
percent of the Company's net profits before tax for fiscal year 2001.
On September 8, 2000, the Company entered into a development agreement for
certain software development related to the Company's web site. To date,
$117,450 in cash and stock related to software development has been paid
and capitalized; the remaining $486,450 will be paid based upon certain
milestones and progress of the development of the software.
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, 2000. 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 43,112 shares (as adjusted for the 10 percent stock
dividends) in the open market at a total of $129,233. During the fiscal
years ended September 30, 2000 and 1999, the Company did not repurchase any
Company shares through open market repurchases.
In addition, concurrent with the open market repurchase program, the
Company has repurchased and retired an additional 115,038 shares from
terminated participants of the Company's 401(k) Plan and RSP for a total
cost of $256,893 since the inception of the program.
F-23
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
The following table lists certain information about the directors, executive
officers and significant employees of the Company:
<TABLE>
<CAPTION>
Director Officer
Name Age Since Since Position
---- --- ----- ----- --------
<S> <C> <C> <C> <C>
Diego J. Veitia 57 1987 1987 Director, Chairman of the Board and Chief
Executive Officer
William C. Dennis 57 - 2000 Director, President and Chief Operating
Officer
Stephen A. Saker 54 1990 1991 Director, Vice President and Secretary
Jerome F. Miceli 57 1990 - Director of the Company
Robert A. Miller, PhD 57 1998 - Director of the Company
Jeffrey L. Rush, M.D. 60 1999 - Director of the Company
Gregory T. Gerard 40 - 2000 Senior Vice President of Global Business
Development
Jonathan C. Hinz 38 - 1995 Chief Financial Officer and Treasurer
Tresa Veitia-Williamson 35 - 1999 Vice President and Director of Marketing
</TABLE>
Each of the Company's directors have been elected to serve until the next annual
meeting of stockholders and until his respective successor is elected and
qualified. Officers are elected annually by the Board of Directors.
Diego J. Veitia founded the Company in 1987 to serve as a holding company for
IAAC and other subsidiaries. He has served as Chairman of the Board, director
and Chief Executive Officer of the Company since its inception. He also served
as President of the Company from 1987 until 1991. Mr. Veitia resumed the role of
President of the Company during the interim period of November 1999 through
August 2000. Mr. Veitia founded IAAC in 1981 and has served as Chairman of the
Board and director since that time. In November 1999 Mr. Veitia resumed the role
of President of all of the subsidiaries of the Company. Mr. Veitia is currently
serving as Chairman, Chief
20
<PAGE>
Executive Officer and President of GAA, ITCI, IAMC, IFP and OTCL. Mr. Veitia
also serves as Chairman and President of Veitia and Associates, Inc., an
inactive registered investment advisor. Mr. Veitia served as Chairman of the All
Seasons Global Fund, Inc., a publicly held closed-end management investment
company from October 1987 until October 1996. During the last five years Mr.
Veitia has also served as director of America's All Seasons Income Fund, Inc.,
an inactive management investment company.
William C. Dennis joined the Company in April 2000 and became a director,
President and Chief Operating Officer in September 2000. Prior to joining the
Company Mr. Dennis served as Executive Vice President and Chief Financial
Officer of Tucker, Anthony Sutro (formerly known as Freedom Securities Corp) in
Boston, MA, from 1997 until 2000. From 1996 to 1997 Mr. Dennis was a director
and Chief Financial Officer of Rodman and Renshaw Capital Group, Inc., a
financial services firm in New York City. Previously, Mr. Dennis was a managing
director of MIS, Inc., a database management company, and prior to joining MIS,
Inc. he was Chief Financial Officer of the Capital Markets Sector of Merrill
Lynch and Co. Earlier in his career, Mr. Dennis was a senior financial executive
of Exxon Corporation.
Stephen A. Saker has been a director of the Company since 1990 and has served as
Secretary and Vice President of the Company since 1991. Mr. Saker has also
served as director, Executive Vice President and Secretary of IAAC since 1985.
Mr. Saker currently serves as Vice President, Secretary and Director of GAA,
IAMC, OTCL and ITCI. Since November 1991, Mr. Saker has served as Vice
President, Treasurer and Secretary of Veitia and Associates, Inc., an inactive
registered investment advisor. Mr. Saker also served as Secretary and director
of All Seasons Global Fund, Inc. from October 1987 until October 1996.
Jerome F. Miceli has been a director of the Company since 1990. In November 1999
Mr. Miceli resigned, due to medical reasons, from all of his officer positions
with the Company and all of his officer and director positions of the Company's
subsidiaries. Mr. Miceli continues to serve as a Director of the Company. Mr.
Miceli served as President, Chief Operating Officer and Treasurer of the Company
from 1991 to 1999. Mr. Miceli has also served as President, Chief Executive
Officer, Treasurer and director of IAAC from 1990 to 1999. Until November 1999
Mr. Miceli also served as President, Treasurer and Director of ITCI, GAA, IAMC,
IFP and OTCL. In addition, from December 1990 until October 1996, Mr. Miceli
served as Treasurer and director of All Seasons Global Fund Inc., a publicly
held closed-end management investment company. Mr. Miceli also served as
President of Veitia and Associates, Inc., an inactive registered investment
advisor, from 1990 until 1999.
Robert A. Miller, Ph.D. became a director of the Company in February 1998. Dr.
Miller has served as President of Nazareth College in Rochester, New York since
1998. In November 2000 Dr. Miller became a Director of Bergmann Associates LLC,
a privately owned architectural and engineering firm with headquarters in
Rochester, NY. Dr. Miller served as the Academic Vice President of Queens
College in Charlotte, North Carolina from 1994 to 1998. In addition, Dr. Miller
served as Provost of Antioch University in Ohio from 1991 to 1994. Dr. Miller
served as a director of All Seasons Global Fund, Inc. from 1988 until 1996.
Jeffrey L. Rush, M.D. became a director of the Company in February 1999. Dr.
Rush is a graduate of Dartmouth and State University New York Medical School in
1966. He has been a Board Certified Radiologist since 1972. Dr. Rush served as
Chairman of the Radiology Department at
21
<PAGE>
Alvarado Medical Center, San Diego, CA from 1972 - 1994. In addition, he served
on the Advisory Board, National Medical Enterprises (Tenet Health) from 1982 -
1990. Dr. Rush presently serves as Chairman of Pacific Medical Building, LP, a
developer and owner of medical office buildings and clinics. He has served in
that capacity since 1991.
Gregory T. Gerard joined the Company in January 2000 and currently serves as
Senior Vice President of Global Business Development. Mr. Gerard was formerly a
Managing Director for Credit Lyonnais Securities in New York from 1998 through
1999 and was responsible for North American Mergers and Acquisitions. Prior to
that, Mr. Gerard was a Vice President at Chase Securities Inc., from 1994
through 1998. Mr. Gerard served as a Senior Associate with BANEXI, the mergers
and acquisition department of Banque Nationale de Paris from 1991 through 1994.
Mr. Gerard received an MBA from Columbia University in 1987.
Jonathan C. Hinz joined the Company in October 1995 and currently serves as
Chief Financial Officer and Treasurer for the Company, IAAC, GAA, ITCI, IFP,
IAMC and OTCL. Prior to joining the Company, Mr. Hinz served as Chief Financial
Officer and Controller of Computer Science Innovations, Inc. from 1987 to 1995.
Mr. Hinz is a certified public accountant.
Tresa Veitia-Williamson joined IAAC in September 1995 and currently serves as
Vice President and Director of Marketing for the Company, IAAC, GAA, ITCI, IFP
and OTCL. Prior to joining the Company, Ms. Veitia was an account supervisor at
Ogilvy & Mather in New York. Ms. Veitia received an MBA from Columbia University
in 1989.
Compliance with Section 16(a) of the Exchange Act
Pursuant to Section 16(a) of the Exchange Act and the rules issued thereunder,
the Company's executive officers, directors and owners of in excess of 10% of
the issued and outstanding common stock are required to file with the SEC
reports of ownership and changes in ownership of the common stock of the
Company. Copies of such reports are required to be furnished to the Company.
Based solely on the review of such reports, the Company is aware of one matter
that resulted in late filings under Section 16(a) by three reporting individuals
and the Company's 401(k) Profit Sharing Plan (the "Plan"). On November 30, 2000,
Diego J. Veitia, Jerome F. Miceli, Stephen A. Saker and the Plan filed Form 5
reports reflecting share ownership changes resulting from a name and structure
change whereby the former International Assets Advisory Corporation Employee
Stock Ownership Plan was restructured into the Plan. The changes in ownership
resulting from these changes to the Plan should have been reported by Messrs.
Veitia, Miceli and Saker and the Plan under Section 16(a) when the Plan was
originally restated in May, 1999 and subsequently in January, 2000 when the Plan
disposed of some of its Company shares.
In addition, Stephen A. Saker, an executive officer and director of the Company,
did not report in a timely manner under Section 16(a) a gift of 600shares of the
common stock of the Company to a charity on September 28, 2000. Mr. Saker
subsequently reported this gift on a Form 5 filed on November 30, 2000. The
Company believes that during fiscal year 2000, all other executive officers and
directors complied with the Section 16(a) requirements.
22
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION.
Information with respect to this item will be contained in the Proxy Statement
for the 2000 Annual meeting of Shareholders, which is incorporated herein by
reference.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information with respect to this item will be contained in the Proxy Statement
for the 2000 Annual meeting of Shareholders, which is incorporated herein by
reference.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to this item will be contained in the Proxy Statement
for the 2000 Annual meeting of Shareholders, which is incorporated herein by
reference.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The Company's consolidated financial statements are listed in the index
set forth in Item 7 on this Form 10-KSB. Financial statement schedules
are not required under the related instructions of the SEC or are
inapplicable, and therefore, have been omitted.
(b) The Company filed one report on Form 8-K during the last quarter of the
period covered by this report. On September 13, 2000 the Company
announced on form 8-K that William C. Dennis had been appointed to the
position of President and Chief Operating Officer as of September 7,
2000.
(c) The following exhibits are incorporated by reference herein unless
otherwise indicated:
(3.1) The Company's Certificate of Incorporation and amendments are
incorporated by reference to Exhibits 3.1, 3.2, and 3.3 of the
Registrant's Registration Statement on Form SB-2 (No. 33-70334-A), as
amended, filed with the SEC on February 2, 1994.
(3.2) The Company's By-laws are incorporated by reference to Exhibit 3.4, of
the Registrant's Registration Statement on Form SB-2 (No. 33-70334-A),
as amended, filed with the SEC on February 2, 1994.
(4.1) The Company's Form of Common Stock Certificate is incorporated by
reference to Exhibit 4.1, of the Registrant's Registration Statement on
Form SB-2 (No. 33-70334-A), as amended, filed with the SEC on February
2, 1994.
(4.2) The Company's Revised Form of Warrant Certificate is incorporated by
reference to Exhibit 4.2, of the Registrant's Registration Statement on
Form SB-2 (No. 33-70334-A), as amended, filed with the SEC on February
2, 1994.
(4.3) The Company's Warrant Agreement dated January 31, 1994, between the
Company and Chemical Bank is incorporated by reference to Exhibit 4.3,
of the Registrant's Registration Statement on Form SB-2 (No.
33-70334-A), as amended, filed with the SEC on February 2, 1994.
(4.4) The Company's Revised Form of Subscription Agreement is incorporated by
reference to Exhibit 4.4, of the Registrant's Registration Statement on
Form SB-2 (No. 33-70334-A), as amended, filed with the SEC on February
2, 1994.
23
<PAGE>
(10.1) The Company's International Assets Holding Corporation Stock Option
Plan is incorporated by reference to Exhibit 10.2, of the Registrant's
Registration Statement on Form SB-2 (No. 33-70334-A), as amended, filed
with the SEC on February 2, 1994.
(10.1.a) The Company's International Assets Holding Corporation Stock Option
Plan, Amendment dated December 28, 1995, is incorporated by reference
to Exhibit 10.2 (a), of the Registrant's Registration Statement on Form
S-8 (No. 333-10727), filed with the SEC on August 23, 1996.
(10.2) The Company's International Assets Advisory Corporation Employee Stock
Ownership Plan and Trust ("ESOP") is incorporated by reference to
Exhibit 10.3, of the Registrant's Registration Statement on Form SB-2
(No. 33-70334-A), as amended, filed with the SEC on February 2, 1994.
(10.2.a) The Company's International Assets Advisory Corporation Employee Stock
Ownership Plan and Trust ("ESOP"), First Amendment dated November 4,
1993, is incorporated by reference to Exhibit 10.3(a), of the
Registrant's Registration Statement on Form S-8 (No. 333-10727), filed
with the SEC on August 23, 1996.
(10.2.b) The Company's International Assets Advisory Corporation Employee Stock
Ownership Plan and Trust ("ESOP"), Amendment 1994-1, dated July 19,
1994, is incorporated by reference to Exhibit 10.3(b), of the
Registrant's Registration Statement on Form S-8 (No. 333-10727), filed
with the SEC on August 23, 1996.
(10.2.c) The Company's International Assets Advisory Corporation Employee Stock
Ownership Plan and Trust ("ESOP"), Amendment 1994-1, dated December 30,
1994, is incorporated by reference to Exhibit 10.3(c), of the
Registrant's Registration Statement on Form S-8 (No. 333-10727), filed
with the SEC on August 23, 1996.
(10.2.d) The Company's International Assets Advisory Corporation Employee Stock
Ownership Plan and Trust ("ESOP"), Amendment 1995-1, dated July 21,
1995, is incorporated by reference to Exhibit 10.3(d), of the
Registrant's Registration Statement on Form S-8 (No. 333-10727), filed
with the SEC on August 23, 1996.
(10.2.e) The Company's International Assets Advisory Corporation 401(k) Profit
Sharing Plan, entered into as of May 1, 1999 is incorporated by
reference to Exhibit 10.2(e) of the Registrant's Form 10-KSB filed with
the SEC for the fiscal year ended September 30, 1999.
(10.6) The Company's Clearing Agreement dated February 29, 1984, between
Prudential Securities, Inc. and IAAC, as amended, is incorporated by
reference to Exhibit 10.10, of the Registrant's Registration Statement
on Form SB-2 (No. 33-70334-A), as amended, filed with the SEC on
February 2, 1994.
(10.9) The Company's Lease dated November 5, 1993, by and between Barnett Bank
of Central Florida and IAAC is incorporated by reference to Exhibit
10.15, of the Registrant's Registration Statement on Form SB-2 (No.
33-70334-A), as amended, filed with the SEC on February 2, 1994.
(10.10) The Company's Joint Venture Agreement dated September 30, 1998, by and
between the Company and Lakeside Investments, LLC, a limited liability
company organized under the laws of Delaware, is incorporated by
reference to Exhibit 10.10 of Form 10-KSB, for the fiscal year ended
September 30, 1998, as filed with the SEC on December 24, 1998.
(10.11) The Company's Limited Liability Company Agreement dated September 30,
1998, by and between the Company and Lakeside Investments, LLC,. for
International Assets
24
<PAGE>
New York, LLC, a limited liability company organized under the laws of
Delaware, is incorporated by reference to Exhibit 10.11 of Form 10-KSB,
for the fiscal year ended September 30, 1998, as filed with the SEC on
December 24, 1998.
(10.12) The Company's Employment Agreement, entered into as of March 24, 1999,
between the Company and Diego J. Veitia, is incorporated by reference
to Exhibit 10.12 of Form 10-QSB, for the quarterly period ending June
30, 1999, as filed with the SEC on August 12, 1999.
(10.14)* The Company's Employment Agreement, entered into as of September 7,
2000, between the Company and William C. Dennis.
(11)* The Statement of Computation of per share earnings is attached hereto
as Exhibit 11.
(21) The Company's list of subsidiaries as filed with the SEC is
incorporated by reference to Exhibit 21 of the Registrants Form 10-KSB
filed with the SEC for the fiscal year ended September 30, 1999.
(99) The Articles of Incorporation, and amendments thereto, and the By-laws
of IAAC are incorporated by reference to Exhibits 99.1,99.2 and 99.3 of
the Registrant's Registration Statement on Form SB-2 (No. 33-70334-A),
as amended, filed with the SEC on February 2, 1994.
---------------
* Filed herewith
25
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the under signed, thereunto duly authorized.
INTERNATIONAL ASSETS HOLDING
CORPORATION
Dated: December 22, 2000 By: /s/ Diego J. Veitia
-----------------------------
Diego J. Veitia,
Chief Executive Officer
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
report has been signed below by the following persons in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Diego J. Veitia Chief Executive Officer December 22, 2000
------------------------- and Chairman of the Board
Diego J. Veitia
/s/ William C. Dennis President, Chief Operating December 22, 2000
------------------------- Officer and Director
William C. Dennis
/s/ Stephen A. Saker Vice President, Secretary, December 22, 2000
------------------------- and Director
Stephen A. Saker
/s/ Jerome F. Miceli Director December 22, 2000
-------------------------
Jerome F. Miceli
/s/ Robert A. Miller Director December 22, 2000
-------------------------
Robert A. Miller
/s/ Jeffrey L. Rush Director December 22, 2000
-------------------------
Jeffrey L. Rush
/s/ Jonathan C. Hinz Chief Financial Officer and December 22, 2000
------------------------- Treasurer
Jonathan C. Hinz
</TABLE>
26
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. EXHIBIT DESCRIPTION
----------- -------------------
10.14 Employment Agreement
11 Statement of Earnings per share
27 Financial Data Schedule
