10-Q 1 d90175e10-q.txt FORM 10-Q FOR QUARTER ENDED JUNE 30, 2001 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED June 30, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO --------------- ------------------- INSTITUTIONAL EQUITY HOLDINGS, INC. (FORMERLY EUROMED, INC.) (Exact name of registrant as specified in its charter) COMMISSION FILE NUMBER 0-27720 NEVADA 88-0317700 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 5910 North Central Expressway, Suite 1480 DALLAS, TX 75206 (Address of principal executive offices) (Zip Code) (214) 237-3223 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 [ ] 3,881,143 shares of Common Stock, par value $.01 per share, were outstanding at August 15, 2001 1 2 FORM 10-QSB INDEX

PAGE NO. -------- PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (UNAUDITED): Consolidated Balance Sheets - ~~March~~June 3130, 2001 (unaudited) and December 31, 2000 3 Consolidated Statements of Operations - Three months and six months ended ~~March~~June 3130, 2001 and 2000(unaudited) 5 Consolidated Statements of Cash Flows - ~~Three~~Six months ended ~~March~~June 3130, 2001 and 2000(unaudited) 6 Notes to Financial Statements 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 10 PART II. OTHER INFORMATION ITEM 3. CHANGES IN SECURITIES AND USE OF PROCEEDS 1112 ITEM 4. OTHER INFORMATION 1112 ITEM 5. EXHIBITS AND REPORTS ON FORM 8-K 1112 SIGNATURES 12

2 3 PART 1 - FINANCIAL INFORMATION INSTITUTIONAL EQUITY HOLDINGS, INC. CONSOLIDATED BALANCE SHEETS ASSETS

~~March~~June 3130, December 31, 2001 2000 ------------ ------------ (Unaudited) ~~CURRENT~~Current ~~ASSETS~~Assets Cash $ ~~191~~105,~~383~~146 $ 11,669 Trading Securities, at market 9652,~~938~~327 -- Receivables 19,~~325~~353 44,585 Prepaid Expenses 62,~~511~~604 10,417 --------~~----~~ --------~~----~~ ~~TOTAL~~Total ~~CURRENT~~Current ~~ASSETS~~Assets ~~314~~179,~~157~~430 66,671 ~~------------ ------------~~ Furniture and Equipment, net of accumulated depreciation of $~~24,888 and $~~19,653, ~~respectively~~at ~~139~~December 31,~~941~~ 2000 -- 144,702 Other Assets -- 22,500 Net Assets of Discontinued Operations - Note 1 ~~234,268~~-- 734,431 --------~~----~~ --------~~----~~ ~~TOTAL~~Total ~~ASSETS~~Assets $ ~~688~~179,~~366~~430 $ 968,304 ========~~====~~ ========~~====~~

3 4 INSTITUTIONAL EQUITY HOLDINGS, INC. CONSOLIDATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' (DEFICIT)

~~March~~June 3130, December 31, 2001 2000 ------------- ------------- (Unaudited) ~~CURRENT~~Current ~~LIABILITIES~~Liabilities 10% Convertible Debentures $ 650,000 $ 650,000 Due to Broker 100,000 100,000 Accounts Payable and Accrued Liabilities ~~976~~1,~~732~~118,254 838,999 ------------- ------------- ~~TOTAL~~Total ~~CURRENT~~Current ~~LIABILITIES~~Liabilities 1,~~726~~868,~~732~~254 1,588,999 ~~------------- -------------~~ Restricted Investment Loan ~~387~~583,~~530~~204 1,190,672 Due to Related ~~Party~~Parties 370,000 370,000 Net Liabilities of Discontinued Operations - Note 1 1,142,498 -- ----------- ------------- ~~TOTAL~~Total ~~LIABILITIES~~Liabilities 23,~~484~~963,~~262~~956 3,149,671 ------------- ------------- Stockholders' (Deficit) Undesignated Preferred Stock, par value $.01 per share; 3,190,000 shares authorized, none outstanding -- -- 10% Designated Series A Preferred Stock, par value $.01 per share; 1,060,000 shares authorized, issued and outstanding 10,600 10,600 10% Designated Series B Preferred Stock, par value $.01 per share; 750,000 shares authorized; 75,000 ~~shares~~ issued and outstanding 750 750 Common Stock, par value $.01 per share; 20,000,000 shares authorized; 3,904,143 shares issued and outstanding, ~~respectively~~ 39,041 39,041 Additional Paid-inIn Capital 5,229,861 5,229,861 Retained (Deficit) (68,~~943~~932,~~898~~528) (7,329,369) ------------- ------------- (13,~~663~~652,~~646~~276) (2,049,117) Less 23,000 Treasury Shares, at cost (132,250) (132,250) ------------- ------------- Total Shareholders' (Deficit) (13,~~795~~784,~~896~~526) (2,181,367) ------------- ------------- Total Liabilities and ~~Stockholders~~Shareholders' (Deficit) $ ~~688~~179,~~366~~430 $ 968,304 ============= =============

4 5 INSTITUTIONAL EQUITY HOLDINGS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

~~For~~Three ~~the~~Months ~~Three~~Ended June 30, Six Months Ended ~~March~~June 3130, -------------------------- ------------------------- 2001 2000 2001 2000 ----------- ----------- ----------- ----------- Revenues: Gain (Loss) on Firm Securities Accounts $ ~~780~~(92,~~499~~262) $ (~~359~~102,~~959~~706) $ 688,237 $ (462,665) Other Income ~~1,219~~783 (29,~~500~~210) 2,002 290 ----------- ----------- ----------- ----------- Total Revenue ~~781~~(91,~~718~~479) (~~330~~131,~~459~~916) 690,239 (462,375) ----------- ----------- ----------- ----------- Costs and Expenses: Employee Compensation 7279,~~648~~266 ~~498~~265,~~945~~131 151,914 764,076 General and Administrative Expenses ~~105~~162,~~449~~913 ~~115~~176,~~393~~318 268,362 291,711 Interest Expense 6134,~~780~~513 4921,~~363~~670 96,293 71,033 Loss on Foreclosure of Furniture and Equipment 139,941 -- 139,941 ----------- ----------- ----------- ----------- Total Expenses ~~239~~416,~~877~~633 ~~663~~463,~~701~~119 656,510 1,126,820 ----------- ----------- ----------- ----------- Gain (Loss) ~~Before~~From ~~Federal~~Continuing ~~Income~~Operations ~~Tax,~~Before Preferred Stock ~~Dividends~~Dividend and ~~Discounted~~Discontinued Operations ~~541~~(508,~~841~~112) (~~994~~595,~~160~~035) 33,729 (1,589,195) Preferred Stock Dividend (56,750) (58,570) (113,500) (113,570) Federal Income Tax Expense -- -- ~~Preferred~~-- ~~Stock~~-- ~~Dividends~~----------- ~~(56,750)~~----------- ~~(55,000)~~ ----------- ----------- Net ~~Gain~~ (Loss) ~~Before~~From Continuing Operations (564,862) (653,605) (79,771) (1,702,765) Discontinued Operations ~~485~~Operating (Loss) (1,~~091~~423,768) (1,~~049~~922,~~160~~445) (1,523,388) (1,098,600) ----------- ----------- ~~Operating Gain (Loss) from Discontinued Operations (99,620) 823,845~~ ----------- ----------- Net ~~Income~~ (Loss) $(1,988,630) ~~385~~$(2,~~471~~576,050) $(1,603,159) $(~~225~~2,~~315~~801,365) =========== =========== ~~Weighted Average Number of Common Shares Outstanding 3,881,143 2,305,000~~ =========== =========== Net (Loss) Per ~~Common~~ Share Continuing Operations $ (.1215) $ (.4627) $ (.02) $ (.72) Discontinued Operations (.0236) (.3681) (.39) (.47) ----------- ----------- ----------- ----------- $ (.1051) $ (1.1008) $ (.41) $ (1.19) =========== =========== =========== =========== Weighted Average Number of Common Shares Outstanding 3,881,143 2,382,000 3,881,143 2,362,000 =========== =========== =========== ===========

5 6 INSTITUTIONAL EQUITY HOLDINGS, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)

~~For~~Six ~~the Three~~ Months Ended ~~March~~June 3130, ---------------------------- 2001 2000 ------------ ------------ Cash Flow from Operating Activities Net ~~gain~~ (loss) $ ~~385~~(1,~~471~~603,159) $ (~~225~~2,~~315~~801,365) Adjustment to reconcile net ~~income~~ (loss) to net cash flow from operating activities Depreciation 5and amortization 4,~~235~~761 716,~~821~~955 Change in restricted investment loan (607,468) 218,616 Loss on foreclosure of assets 139,941 25,601 Charge for Impairment of Goodwill 1,111,988 -- Changes in assets and liabilities Trading ~~securities~~Securities (9652,~~938~~327) -- Receivables 25,~~260~~232 (~~500~~1,200) Prepaid expenses 37,~~906~~813 1453,~~567~~778 Other assets 22,500 -- Cash overdraft -- 377,~~756~~131 ~~Accounts~~Due ~~payable~~to ~~and~~brokers ~~accrued~~-- ~~liabilities 137~~165,~~733~~000 ~~21,770~~Accounts ~~Increase~~payable ~~(decrease)~~and inaccrued ~~restricted~~liabilities ~~investment loan (803~~279,~~142)~~255 ~~215~~178,~~262~~604 ------------ ------------ Net Cash Flow ~~Provided~~ (Used) By Continuing Operating Activities (~~319~~671,~~975~~464) 71(2,~~361~~136,880) ------------ ------------ Net Cash Provided By (Used In) Discontinued Operations ~~500~~764,~~163~~941 ~~(368~~1,~~268)~~032,628 ------------ ------------ Net Cash Provided By (Used In) ~~Operating Activities 180~~93,~~188~~477 (~~296~~1,~~907~~104,252) ------------ ------------ Operating Activities Cash Flow ~~from~~From Investing Activities Equipment ~~Purchases~~purchases ~~(474)~~-- (72102,~~400~~540) Proceeds from sale of assets -- 73,100 ----------- ----------- Net Cash Flow (Used) By Investing Activities -- (29,440) ----------- ----------- Cash Flow ~~from~~From Financing Activities ~~Change~~Sale inof restricted ~~investments~~investment -- ~~616~~1,~~187~~304,043 ~~Notes~~Note payable payments -- (~~407~~507,170) ~~Sale~~Proceeds offrom ~~Common~~loans ~~Stock~~ -- 70100,000 ~~------------~~Sale ~~------------~~of ~~Net~~common ~~Cash~~stock ~~Flow~~-- ~~Provided~~70,000 BySale ~~Financing~~of ~~Activities~~preferred stock -- ~~279~~75,~~017~~000 ------------ ------------ Net ~~Increase (Decrease) In~~ Cash ~~179,714~~Flow ~~(90,290)~~Provided ~~Cash~~By atFinancing ~~the~~Activities ~~Beginning~~-- ~~of the Period 11~~1,~~669 91~~041,~~819~~873 ------------ -----------~~- Cash at the End of the Period $ 191,383 $ 1,529 ============ ============~~

(Continued) 6 7 INSTITUTIONAL EQUITY HOLDINGS, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) (CONTINUED)

~~For~~Six ~~the Three~~ Months Ended ~~March~~June 3130, --------------------------- 2001 2000 --------- --------- Net (Decrease) In Cash $ 93,477 $ (91,819) Cash at the Beginning of the Period 11,669 91,819 --------- --------- Cash at the End of the Period $ 105,146 $ -- ========= ========= Cash Paid During the Year For: Interest $ -- $ 73119,~~289~~386 =========~~===~~ =========~~===~~ Income Taxes $ -- $ -- =========~~===~~ =========~~===~~

7 8 INSTITUTIONAL EQUITY HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) JUNE 30, 2001 NOTE 1: BUSINESS Swiss Nassau Corporation was incorporated on May 17, 1994 in the state of Nevada, United States of America, and on October 20, 1995, changed its name into EuroMed, Inc. On April 23, 1999, EuroMed, Inc. changed its name to Institutional Equity Holdings, Inc. (the "Company" or "IEH"). The Company had no business activities in the calendar year of 1998, except that on November 6, 1998, the Company's Board of Directors approved and executed the "Agreement and Plan of Reorganization" by and among the Company, Institutional Equity Corporation ("IEC", a wholly owned subsidiary of the Company and formerly known as Redstone Acquisition Corp.) and Redstone Securities, Inc. ("Redstone"), a licensed broker and dealer of securities. Effective February 16, 1999, Redstone was merged into the newly organized subsidiary IEC. The Company issued 600,000 shares of its Common Stock to the three principals of Redstone, Thomas Laundrie, Gary Prucell, and Richard Belz (collectively referred to as the "Redstone Shareholders") and was obligated to issue an additional 500,000 shares (the "Restricted Shares") upon the market price of the Company's Common Stock reaching certain price levels or IEC reporting certain levels of net income. Notwithstanding the price levels of the Common Stock or net income performance levels, the Restricted Shares fully vest on February 16, 2002. The Redstone Shareholders agreed to terminate their relationship with the Company in February 2000, subject to certain compensation payments, to forgo the collections of the Company's subordinate notes due the Redstone Shareholders, to assume an investment in a certain security at its book value and to modify the number of shares of the Company's common stock from 1,100,000 to 500,000 shares of fully vested common stock. The Company has a right to repurchase these shares of its common stock at a price of $2.00 per share as follows:

Number of Redemption Shares Period --------- ----------- ---------------~~----~~ 100,000 Calendar year 2000 100,000 Calendar year 2001 300,000 On or before February 16, 2002

The termination of the relationship with the Redstone Shareholders is reflected in the consolidated financial statement for the year ended December 31, 1999. On August 18, 2000, IEH acquired all of the members' ownership interest in First Atlanta Securities, L.L.C. (FAS), a Georgia limited liability company, in exchange for 1,300,000 shares of IEH's $.01 par value, common stock. FAS was a full service brokerage firm, located in Atlanta, Georgia. During 2000, IEC sustained significant operating losses and IEH was unable to continue to fund IEC's losses and as a result IEC ceased operations during December of 2000, and all brokers and employees of IEC were terminated. (Continued) 8 9 INSTITUTIONAL EQUITY HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) JUNE 30, 2001 NOTE 1: BUSINESS (CONTINUED) During April 2001, FAS shut down its operations because it did not meet the minimum capital requirements of the National Association of Security Dealers (NASD). The offices in Atlanta were closed, all brokers and employees were terminated and the furniture, books and records were moved to Destin Florida. If and when FAS resumes any operations, it is likely to be as a broker of bonds rather than a broker dealer in equity securities. In connection with the closing of FAS's office, the goodwill associated with FAS became impaired and all of the remaining goodwill ($1,111,988) was charged off. As a result of the cessation of operations of IEC and FAS the net assets and net liabilities of IEC and FAS have been shown in the consolidated balance sheets as assets or liabilities of discontinued operations and the net operations of IEC and FAS have been shown as discontinued operations in the consolidated statement of operations. As of August 15, 2001, IEH is a holding company with no operating subsidiaries. NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the results of operations for the periods presented have been included. The financial data at December 31, 2000, is derived from audited financial statements, which are included in the Company's Form 10-KSB and should be read in conjunction with the audited financial statements and notes thereto. As noted above discontinued operations have been shown as one line items at December 31, 2000 and June 30, 2001. Interim results are not necessarily indicative of results for the full year. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. NOTE 3: NET LOSS PER COMMON SHARE Basic earnings (loss) per common share has been calculated using the weighted average number of shares of common stock outstanding during the periods. Diluted (loss) per common share is not disclosed because the effect of the exercise of the common stock warrants and options would be anti-dilutive. 9 10 ITEM 2 INSTITUTIONAL EQUITY HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) JUNE 30, 2001 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SAFE HARBOR STATEMENT Certain statements in this Form 10-QSB, including information set forth under Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1955 (the Act). The Company desires to avail itself of certain "safe harbor" provisions of the Act and is therefore including this special note to enable the Company to do so. Forward-looking statements in this Form 10-QSB or hereafter included in other publicly available statements issued or released by the Company involve known and unknown risks, uncertainties and other factors which could cause the Company's actual results, performance (financial or operating) or achievements to differ from the future results, performance (financial or operating) or achievements expressed or implied by such forward-looking statements. Such future results are based upon management's best estimates based upon current conditions and the most recent results of operations. THREE MONTHS ENDED JUNE 30, 2001 COMPARED TO THREE MONTHS ENDED JUNE 30, 2000 Revenues for the three months ended June 30, 2001, increased to $(91,479) compared to $(131,916) for the three months ended June 30, 2000. The closing of all brokerage operations has necessitated the accounting for all brokerage operations as discontinued operations. The change in revenue is primarily related to the change in the market value of equity investments held by IEH or the decline in the market value of the borrowed stock owed by the Company. Expenses for the three months ended June 30, 2001, decreased 10% to $416,633 compared to $463,119 for the three months ended June 30, 2000. The decrease is primarily the result of the termination of all employees except two directors and a secretary of the Company in December of 2000. For the three months ended June 30, 2001, the Company reported a net loss of $1,988,630 compared to a loss of $2,576,050 for the three months ended June 30, 2000. The decrease in the net loss in 2001, is primarily the result of the decrease in the market value of the borrowed stock the Company has sold, which it still owes to the lender which was offset by the $1,111,988 impairment of the goodwill associated with the discontinued operations of FAS. 10 11 SIX MONTHS ENDED JUNE 30, 2001 COMPARED TO SIX MONTHS ENDED JUNE 30, 2000 Revenues for the six months ended June 30, 2001, increased to $690,239 compared to $(462,376) for the six months ended June 30, 2000. The closing of all brokerage operations has necessitated the accounting of all brokerage operations as discontinued operations. The change in revenue is primarily related to the change in the market value of equity investments held by IEH or the decline in the market value of the borrowed stock owed by the Company. Expenses for the six months ended June 30, 2001, decreased 42% to $656,510 compared to $1,126,820 for the six months ended June 30, 2000. The decrease is primarily the result of the termination of all employees except two directors and a secretary of the Company in December of 2000. For the six months ended June 30, 2001, the Company reported a net loss of $1,603,159 compared to a loss of $2,801,365 for the six months ended June 30, 2000. The reduction in the loss is primarily related to gains in equity securities held, a reduction in the liability for borrowed stock and decreased general and administrative expenses associated with the termination of employees mentioned above which was partially offset by the $1,111,988 impairment of the goodwill associated with the discontinued operations of FAS. LIQUIDITY AND CAPITAL RESOURCES Cash provided from operations was $93,477 for the six months ended June 30, 2001, compared with cash used in operations of $1,104,252 for the six months ended June 30, 2000. This significant decrease in cash used was attributable to the reduction in cash used by discontinued operations and the reduction in the market value of the borrowed stock owed by the Company. 11 12 PART II - OTHER INFORMATION ITEM 3: CHANGES IN SECURITIES AND USE OF PROCEEDS None ITEM 4: OTHER INFORMATION None ITEM 5: EXHIBITS AND REPORTS ON FORM 8-K (a) Number Exhibit Description None (b) Reports of Form 8-K: None 12 13 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Institutional Equity Holdings, Inc. Dated: August 20, 2001 Signature Title --------- ----- /s/ Elbert Gene Tindell Chief Executive Officer -------------------------------------- /s/ Bill Rapaglia President and Secretary -------------------------------------- 13

Signature Title --------- ----- /s/ Elbert Gene Tindell President and ------------------------------ Chief Executive Officer /s/ Elbert Gene Tindell Chief Financial Officer, ------------------------------ Treasurer and Secretary

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