ECMN BID.03.10k out.They are cutting expenses very well.A SMALL FLOATER.WILL SEE WHERE IT WILL BE AFTER A FEW MONTHS.
RESULTS OF OPERATIONS
Total expenses, decreased by $ 6,305,000, or 52.9%, to $ 5,604,000 for the year ended December 31, 2002 from $ 11,909,000 for the prior comparable period. The reduction in expenses is the direct result of the cost containment strategy designed to offset market volatility and position the company for profitable growth during 2003.
Excluding the prior period non-cash adjustment of $6,676,000 eChapman realized an operating loss of $497,000 a decrease of $3,821,000 or 88.5% for the year ending December 31, 2002 from an operating loss of $4,318,000 for prior comparable period.
The net loss decreased by $ 10,497,000 or 95.5%, to $ 497,000 for the year ended December 31, 2002 from $ 10,994,000 for the prior comparable period, included in prior period is a net non-cash adjustment of $6,676,000 for the impairment of merger related goodwill.
PRO FORMA FINANCIAL DATA
The following audited pro forma consolidated statements of operations are provided for informational purposes only and do not purport to present the actual results of operations of eChapman. The audited pro forma consolidated statements of operations should be read in conjunction with the historical audited consolidated financial statements of eChapman, including the related notes, included elsewhere in this document.
The audited pro forma consolidated statement of operations gives effect to the consolidation of eChapman for the period December 31, 2002 compared to the year ended December 31, 2001. Because the eChapman, Chapman Holdings, Chapman Capital Management Holdings and Chapman Insurance Holdings merger was a merger of companies under common control, their merger was accounted for similar to a pooling of interest.
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RESULTS OF OPERATIONS
The following table reflects items in the Statements of Operations as dollar amounts and as percentages of total revenue:
eCHAPMAN.COM, INC. AND SUBSIDIARIES
COMBINED AND CONSOLIDATED PRO FORMA STATEMENTS OF OPERATIONS
(Audited)
Twelve Months Ended December 31, 2002
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2002 2001
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Percentage of Percentage of
Amounts Total Revenue Amounts Total Revenue
------------------------------- ----------------------------
REVENUE:
Commissions $ 2,748,000 53.8% $ 3,702,000 48.8%
Underwriting and management fees 246,000 4.8% 642,000 8.5%
Investment management fees 1,741,000 34.1% 3,779,000 49.8%
Interest, dividends and other income 396,000 7.8% 406,000 5.3%
Gain (loss) on trading 40,000 0.8% 50,000 0.7%
Loss on investments, net 0.0% (898,000) (11.8)%
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Total revenue 5,171,000 101.3% 7,681,000 101.2%
Interest expense 64,000 1.3% 90,000 1.2%
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Net revenue 5,107,000 100.0% 7,591,000 100.0%
OPERATING EXPENSE:
Compensation and benefits 2,712,000 53.1% 3,851,000 50.7%
Floor brokerage and clearing fees 264,000 5.2% 470,000 6.2%
Management fees 882,000 17.3% 1,074,000 14.1%
Depreciation and amortization expense 132,000 2.6% 1,884,000 24.8%
Impairment Adjustment 0.0% 0.0%
Other operating expense 1,614,000 31.6% 4,630,000 61.0%
---------------------------- -----------------------------
Total expenses 5,604,000 109.7% 11,909,000 156.9%
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Operating loss (497,000) -9.7% (4,318,000) (56.9)%
Other income (expense) - (6,676,000)
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Net loss $ (497,000) -9.7% $(10,994,000) (144.8)%
============================ =============================
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PRO FORMA RESULTS OF OPERATIONS
Net revenue decreased $ 2,484,000 or 32.7%, to $ 5,107,000 for the year ended December 31, 2002 from $ 7,591,000 for the prior comparable period. The decline in net revenues for the year ended December 31, 2002 reflects weakness in the overall equity market and the effects of September 11, resulting in a reduction in assets under management.
Commission revenue decreased by $ 954,000, or 25.8%, to $ 2,748,000 for the year ended December 31, 2002 from $ 3,702,000 for the prior comparable period. The decrease was primarily due to an decrease in equity commission activity. Commission revenue from municipal participation increased $ 408,000, or 29.84%, to $ 1,774,000 for the year ended December 31, 2002 from $ 1,366,000 for the prior comparable period. eChapman participated in 51 municipal deals during the twelve month period ended December 31, 2002 compared to 58 municipal deals in the prior comparable period. The increase in municipal revenue can be attributed to larger deal sizes. This increases were partially offset by a decrease in institutional commission revenue and 12b1 fee commission. Commission revenue from the sale of institutional brokerage decreased $ 963,000, or 64.59%, to $ 528,000 for the year ended December 31, 2002 from $ 1,492,000 for the prior comparable period. 12b1 fee commission decreased $ 37,000, or 63.77%, to $ 21,000 for the year ended December 31, 2002 from $ 58,000 for the prior comparable period.
Underwriting and management fee revenue decreased by $ 396,000, or 61.7%, to $ 246,000 for the year ended December 31, 2002 from $ 642,000 for the prior comparable period. This decrease was due to shrinkage in the overall equity market volume. The decrease in underwriting and management fee revenue was due to a decrease in corporate finance revenue of $ 65,000, or 100%, to $ 0 for the year ended December 31, 2002 from $ 65,000 for the prior comparable period. This decreases was also due to a deccrease in management fee revenue of $ 121,000, or 48.94%, to $ 126,000 for the year then ended December 31, 2002 from $ 247,000 for the prior comparable period.
The firm's revenue from its asset management business was impacted by the ongoing weakness in the equity market and the effect of September 11, resulting in lower fee revenue for the year ended December 31, 2002 compared to the prior comparable period. Investment management fee revenue decreased $ 2,038,000, or 53.9%, to $ 1,741,000 for the year ended December 31, 2002 from $ 3,779,000 for the prior comparable period. The decrease was primarily due to a net decrease of $ 431.3 million in assets under management to $92 million as of December 31, 2002, from $ 523,3 million as of December 31, 2001.
Interest, dividends and other income decreased by $ 10,000, or 2.5%, to $ 396,000 for the year ended December 31, 2002 from $ 406,000 for the prior comparable period. The decrease in interest, dividends and other income was due to a decrease in interest and dividend revenue.
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Total expenses, decreased by $ 6,305,000, or 52.9%, to $ 5,604,000 for the year ended December 31, 2002 from $ 11,909,000 for the prior comparable period. The reduction in expenses is the direct result of the cost containment strategy designed to offset market volatility and position the company for profitable growth during 2003.
Compensation and benefits decreased by $ 1,139,000, or 29.6%, to $ 2,712,000 for the year ended December 31, 2002 from $ 3,851,000 for the prior comparable period. The decrease in compensation and benefits is due to a cost containment strategy and attrition. As a percentage of total revenue, these expenses were 53.1% and 50.7%, respectively, for the year ended December 31, 2002 and the prior comparable period. Compensation expense includes salaries and sales commissions paid to brokers, which varies in relation to changes in commission revenue.
Floor brokerage and clearing fees decreased by $ 206,000, or 43.8%, to $ 264,000 for the year ended December 31, 2002 from $ 470,000 for the prior comparable period. The decrease is due to a decline in equity trading resulting from market volatility.
Management fees, which consist primarily of Chapman Capital Management's payments to sub-advisors associated with its multi-manager investment product, the DEM-MET Trust, decreased by $ 192,000, or 17.9%, to $ 882,000 for the year ended December 31, 2002 from $ 1,074,000 for the prior comparable period. The decrease in management fee expense largely due to the closing of DEM_MET..
Depreciation and amortization expense decreased by $ 1,752,000, or 93.0% to $ 132,000 for the year ended December 31, 2002 from $ 1,884,000 for the prior comparable period. The decrease was due to depreciation for capitalized website development costs which began during the last quarter of calendar year 2000. These expenses primarily include merger related amortization.
Other expenses decreased by $ 3,016,000, or 65.1%, to $ 1,614,000 for the year ended December 31, 2002 from $ 4,630,000 for the prior comparable period. The decrease was primarily due to a decrease in advertising and promotion expense, travel expense, and conference and seminar costs. The decrease in these costs is the result of a change in business strategy.
Excluding the prior period non-cash adjustment of $6,676,000 eChapman realized an operating loss of $497,000 a decrease of $3,821,000 or 88.5% for the year ending December 31, 2002 from an operating loss of $4,318,000 for prior comparable period.
The net loss decreased by $ 10,497,000 or 95.5%, to $ 497,000 for the year ended December 31, 2002 from $ 10,994,000 for the prior comparable period, included in prior period is a net non-cash adjustment of $6,676,000 for the impairment of merger related goodwill. |
