SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   FORM 10-KSB


[ X ]  ANNUAL  REPORT  PURSUANT  TO  SECTION  13 OR 15(d) OF THE
       SECURITIES AND EXCHANGE ACT OF 1934 [FEE REQUIRED]
       For the fiscal year ended December 31, 1996

                                       OR

[   ]  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE
       SECURITIES  EXCHANGE  ACT OF 1934 [NO FEE REQUIRED]
       For the transition period from ________ to ________

                         Commission file number 0-17129


                      CLARK MELVIN SECURITIES CORPORATION
             (Exact name of registrant as specified in its charter)

          Delaware                                              52-0749204
(State or other jurisdiction of                             (I.R.S. Employer
incorporation  or organization)                            Identification No.)

170 Jennifer Road, Suite 270, Annapolis, Maryland                  21401
     (Address of principal executive offices)                    (Zip Code)

Registrant's telephone number, including area code   410-841-6422

         Securities registered pursuant to Section 12(b) of the Act:
                                             None

         Securities registered pursuant to Section 12(g) of the Act:
                               Units
                               Common Stock, $.01 par value
                               Common Stock Purchase Warrants
                                         (Title of Class)


<PAGE>



                  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  preceding  twelve  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
                                                               ---      ---

                  Indicate  by check mark if  disclosure  of  delinquent  filers
pursuant to Item 405 of Regulation S-K is not contained herein,  and will not be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information  statements  incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ ]

                  The  aggregate  market  value of the  Common  Stock,  $.01 par
value,  held by  non-affiliates  of the  registrant as of February 28, 1997, was
$86,218.

                  The number of shares of the  registrant's  Common Stock,  $.01
par value, outstanding as of February 28, 1997, was 18,523,096.

                      DOCUMENTS INCORPORATED BY REFERENCE

                  Portions of the  Registrant's  Information  Statement  for the
1997 Annual Meeting of Stockholders are incorporated by reference into Part III.


                                       2



<PAGE>



                                     PART I

Item 1.  Business.

Overview

                  Clark   Melvin   Securities   Corporation   (the   "Company"),
incorporated  in Delaware in December  1987,  is the  successor by merger to the
firm Clark  Melvin  Securities  Corporation,  a Maryland  corporation  which was
founded  in 1960 as  Clark,  Melvin  & Co.,  Inc.  The  Company  is  engaged  in
securities  brokerage and trading,  primarily serving  individual  investors and
financial  institutions,  from offices  located in Annapolis,  Maryland and Hato
Rey, Puerto Rico. In addition, the Company effects transactions in fixed income,
equity and other securities, both as principal and agent. In 1996, the Company's
total  revenues  were  derived  approximately  62%  from  individual  investors,
including interest on margin accounts,  3% from institutional  investors and the
balance  from  other  activities.  The  Company  is a  member  of  the  National
Association of Securities Dealers, Inc. (the "NASD").

                  In April 1991 the Company issued  14,461,176  shares of Common
Stock in exchange for all of the shares of Azimuth Capital Corporation, a Puerto
Rico  corporation.  In January  1992,  the Company  consummated  the purchase of
certain assets of Perkins-DeMaris, Inc., an Annapolis, Maryland based securities
brokerage firm.

                  At December 31, 1996, the Company had 31 employees  (including
24  registered  representatives)  in its Hato  Rey,  Puerto  Rico  office  and 8
employees  (including 5 registered  representatives) in its Annapolis,  Maryland
office.

                                       3

<PAGE>



                  The following  table sets forth the Company's  various sources
of revenues for the periods indicated:

<TABLE>
<CAPTION>
                                                       Year Ended
                                                       December 31,
                                  -----------------------------------------------------
                                      1996                 1995                 1994
                                      ----                 ----                 ----
<S> <C>
Securities commissions:
     Listed.......................$    459,856           $  441,663          $  325,909
     OTC agency transactions......     405,147              175,629             186,736
     Options......................      98,895               39,294              19,753
     Limited partnerships.........      57,562               17,869             114,481
     Mutual funds.................      41,783               45,022              87,861
Interest and other income.........     300,977              150,395             213,482
Advisory and fee income...........     724,825              306,472             653,048
Principal transactions............     488,535            1,128,470             850,036
                                    ----------           ----------          ----------
     Total revenues...............  $2,577,580           $2,302,814          $2,451,306
                                    ==========           ==========          ==========
</TABLE>

Retail Services

                  Securities   transactions  for  individual  and  institutional
customers  in which the  Company  acts on an agency  basis  generate  securities
commission   revenues.   Commissions   are   charged   on  both   exchange   and
over-the-counter  transactions  in accordance  with  guidelines  reviewed by the
NASD.  The  Company  executes  transactions  on all major  exchanges  and in the
over-the-counter  market.  Revenues  from  retail  securities  commissions  from
individual  customers have historically served as the Company's principal source
of income and will continue to do so for the foreseeable  future.  The Company's
investment banking activities have, however, reduced the percentage of its total
revenues generated by retail securities commissions.

                  For 1996 and 1995, retail securities  commissions  constituted
approximately  91% and 91%,  respectively,  of total  revenues  from  securities
commissions and approximately 41% and 31%, respectively,  of the Company's total
revenues.  As of December 31, 1996, the Company had approximately  1375 customer
accounts  for which it carried  funds or  securities  or  effected  at least one
transaction during the preceding 12 months.

Institutional Business

                  The Company is engaged in  executing  securities  transactions
for institutional  investors such as banks and savings and loans. Such investors
normally

                                       4

<PAGE>

purchase and sell securities in large quantities which require special marketing
and trading expertise.

                  Transactions  are executed by the Company  acting as broker or
as principal.  The Company permits discounts from its commission schedule to its
institutional  customers.  The size of such  discounts  varies  with the size of
particular  transactions and other factors.  For 1996 and 1995, revenues derived
from broker-dealer services to institutional investors constituted approximately
5% and 28%,  respectively,  of total revenues from  securities  commissions  and
customer-related  principal  transactions and 3% and 22%,  respectively,  of the
Company's total revenues.

Margin Transactions

                  Transactions  in  securities  may be effected on either a cash
or, to a limited extent,  margin basis.  In a margin account,  the customer pays
less  than the full  cost of a  security  purchased,  with  the  balance  of the
purchase price being  provided as a loan secured by the securities  purchased or
other  securities  owned by the  investor.  The amount of the loan in purchasing
securities  on margin is  subject  to the  margin  requirements  of the Board of
Governors of the Federal Reserve System  (Regulation T, which currently requires
50% equity for the initial  purchase of securities)  and the Company's  internal
policies  (30%  equity or $3.00 per share).  In  permitting  customers  to trade
securities on margin,  there is a risk that market  fluctuations  may reduce the
value of the collateral below the customers'  indebtedness and that the customer
might otherwise be unable to pay the indebtedness.

                  The customer is charged  interest on the margin loan. The rate
of interest presently charged to customers is the brokers' call margin rate (the
interest rate on bank loans to brokers  collateralized  by  securities)  plus an
additional  amount which varies  depending upon the size of the customer's debit
balances  and level of  account  activity.  For 1996 and 1995,  interest  income
derived from these sources was insignificant.

Principal Transactions

                  Principal  transactions  revenue is generated from the selling
of  securities  out  of  the  Company's  inventory  or in a  riskless  principal
transaction.  In 1996 and 1995,  revenue from principal  transactions  comprised
approximately 19% and 49%, respectively, of the Company's total revenues.

Corporate Finance

                  The Company  also  offers  financial  advice to its  corporate
clients  attempting to raise capital.  The Company  arranges  public and private
placements  of  equity  and debt

                                       5

<PAGE>

securities  directly  with  institutional  and individual   investors,   advises
clients  with  respect  to  matters  such  as acquisitions,  financial  planning
and  corporate  recapitalizations,   and  is responsible for selecting,
structuring and pricing underwritings.

                  As of December  31,  1996,  the  Company  had 8  professionals
engaged  in  corporate  finance.  In 1996 and  1995,  revenues  from  this  area
constituted 21% and 10%, respectively, of the Company's total revenues.

Investment Banking

                  The  Company   participates   as  a  member  of   underwriting
syndicates managed by others.  Certain risks are involved in the underwriting of
securities.  Underwriting  syndicates  agree to purchase  securities,  on a firm
commitment or best efforts basis, at a discount from the initial public offering
price.  If the securities  must be sold below the syndicate cost, an underwriter
is exposed to losses on the  securities  that it has  committed to purchase.  In
addition,  an  underwriter  is subject to  substantial  potential  liability for
material misstatements or omissions in prospectuses or other communications with
respect to underwritten offerings.

                  Because underwriting  commitments  constitute a charge against
net  capital,  the Company  could find it  necessary  to limit its  underwriting
participations  to remain in compliance with the net capital  requirements.  See
"Net Capital Requirements." Also, in the last several years,  investment banking
firms have increasingly  underwritten  corporate  offerings with fewer syndicate
participants.

                  As of December  31,  1996,  the  Company  had 2  professionals
engaged in identifying potential underwriting opportunities.  During fiscal 1996
and 1995,  the Company's  participation  in  underwriting  syndicates  generated
revenue constituting 1% and 4%, respectively, of the Company's total revenues.

Other Services

                  The  Company  also  provides  investment  recommendations  and
market  information  to its  customers on certain  companies  in the  commercial
banking,  savings  and loan and  high  technology  industries.  The  Company  is
registered as an investment adviser with the Securities and Exchange  Commission
and receives a fee in  connection  with such  services.  During  fiscal 1996 and
1995, revenue from these activities was not material.

                                       6

<PAGE>



Operations

                  Administrative  and operations  personnel are  responsible for
the  processing  of  securities   transactions,   internal  financial  controls,
accounting functions, office services and the handling of margin accounts. As of
December 31, 1996,  the Company had four  full-time  employees  performing  such
functions.

                  The  Company  records  transactions  and  posts its books on a
daily  basis.  Operations  personnel  monitor  day-to-day  operations  to assure
compliance with applicable laws, rules and regulations.  Failure to keep current
and accurate books and records can subject the Company to disciplinary action by
governmental and self-regulatory organizations.

                  The Company  executes  transactions on all major exchanges and
in the  over-the-counter  market.  The  Company  clears  all  of its  securities
transactions  (delivery of securities sold, receipt of securities  purchased and
transfer of related funds) through the Pershing  Division of Donaldson,  Lufkin,
Jennette  Securities  Corporation  ("DLJ").  The Company pays a fee based on the
number  and type of  transactions  performed.  Fees  paid to DLJ for  1996  were
$151,309.

                  The Company is a member of the Securities  Investor Protection
Corporation  ("SIPC").  SIPC  provides  protection  for customers up to $500,000
each,  with a limitation of $100,000 for claims for cash balances.  In addition,
DLJ provides  protection  for  customers  up to an  additional  $50,000,000  per
customer (with a limitation of $100,000 for claims for cash balances).

                  The Company believes that its internal controls and safeguards
are adequate,  although  fraud and misconduct by customers and employees and the
possibility  of  theft  of  securities  are  risks  inherent  in the  securities
industry.  As required by certain  authorities,  the Company  carries a fidelity
insurance  bond  covering  loss of theft of  securities,  forgery  of checks and
drafts,  embezzlement,  fraud and misplacement of securities. Such bond provides
total coverage of up to $120,000, subject to a $5,000 deductible per claim.

Regulation

                  The  securities  industry  in the United  States is subject to
extensive  regulation  under federal and state laws. The Securities and Exchange
Commission (the "SEC") is the federal agency charged with  administration of the
federal  securities  laws.  Much of the  regulation of  broker-dealers  has been
delegated  to  self-regulatory  organizations,  principally  the  NASD  and  the
national securities  exchanges.  The  self-regulatory

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<PAGE>

organizations adopt rules (which are subject to approval by the SEC) which
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 are registered.  The
Company is currently licensed to conduct business as a broker-dealer in
California,  Colorado,  Illinois,  Maryland, New Hampshire, New York,  Ohio,
Oklahoma,  Pennsylvania,  Puerto  Rico,  Virginia,  Texas  and the District of
Columbia.

                  Broker-dealers  are  subject  to  regulations  that  cover all
aspects of the securities  business,  including  sales methods,  trade practices
among broker-dealers,  the capital structure of securities firms, the payment of
dividends and other types of  distributions,  uses and safekeeping of customers'
funds and securities,  recordkeeping and the conduct of directors,  officers and
employees.  Additional legislation,  changes in rules promulgated by the SEC and
self-regulatory  authorities, or changes in the interpretation or enforcement of
existing  laws  and  rules,  may  directly  affect  the  mode of  operation  and
profitability  of  broker-dealers.  The SEC, state  securities  commissions  and
self-regulatory  organizations may conduct administrative  proceedings which can
result in censure,  fine,  suspension  or  expulsion of the  broker-dealer,  its
officers or employees. Such administrative proceedings, whether or not resulting
in adverse rulings, can require substantial expenditures.  The principal purpose
of regulation and discipline of broker-dealers is the protection of customers in
the securities  market rather than the protection of creditors and  stockholders
of broker-dealers.

                  The Company is also  registered as an investment  adviser with
the SEC,  as from  time to time it  engages  in the  business  of  advising  its
clients,  either directly or through publications or reports, as to the value of
securities  or to the  advisability  of  investing  in,  purchasing  or  selling
securities.

Net Capital Requirements

                  As a registered  broker-dealer doing business with the public,
the Company is subject to the Uniform Net Capital Rule (Rule 15c3-1) promulgated
by the SEC. Securities and Exchange Act Rule 15c3-1 (the "Rule") provides that a
broker-dealer shall not permit its aggregate indebtedness to exceed 15 times its
net capital, or, alternatively,  that its net capital shall not be less than two
percent of aggregate  debit items  (primarily  receivables  from  customers  and
broker-dealers)  computed in accordance  with the Rule.  The Rule is designed to
measure the general financial integrity and liquidity of a broker-dealer and the
minimum net capital  deemed  necessary  to meet the  broker-dealer's  continuing
commitments  to its  customers.  Both methods allow  broker-dealers  to increase
their  customer  commitments  only to the  extent  their net  capital  is deemed
adequate to support an increase.  The Company computes its net capital under the
aggregate  indebtedness  method.  Under the  aggregate  indebtedness  method,  a
broker-dealer may be required to reduce its business and restrict  withdrawal of
subordinated  capital and

                                       8

<PAGE>

may be  prohibited  from  expanding  its  business and declaring cash dividends
if its ratio of aggregate  indebtedness  to net capital exceeds 12 to 1. If a
broker-dealer's  ratio of aggregate  indebtedness  to net capital exceeds 15 to
1, the broker-dealer must cease business.  In addition,  a broker-dealer in
violation of these  requirements may be subject to disciplinary actions  by the
SEC and  self-regulatory  agencies  such as the NASD,  including fines,
censure,  suspension  or expulsion.  In computing  net capital,  various
adjustments are made to net worth with a view to excluding  assets which are not
readily convertible into cash and with a view to discounting the firm's position
in securities  to take into account  market risk.  Compliance  with the Rule may
limit those operations of the Company which require the use of its capital for a
purpose such as maintaining the inventory required for trading in securities and
underwriting  securities.  As of  December  31,  1996  the  Company's  ratio  of
aggregate   indebtedness   to  net  capital  was  1.9  to  1,  net  capital  was
approximately $216,326, and the minimum net capital requirement was $100,000.

Competition

                  The Company encounters  intense  competition in all aspects of
the securities  business and competes  directly with other  securities  firms, a
significant  number of which are national  rather than regional firms which have
substantially  greater  resources and offer a wide range of financial  services.
Discount  brokerage  firms  oriented  to  the  retail  market,  including  firms
affiliated  with  commercial  banks  and  thrift   institutions,   are  devoting
substantial  funds to advertising and direct  solicitation of customers in order
to increase  their  share of  commission  dollars  and other  securities-related
income.  In  many  instances  the  Company  is  competing   directly  with  such
organizations.

                  The Company  believes  that the  principal  factors  affecting
competition  in  the  securities   industry  are  the  quality  and  ability  of
professional personnel and relative prices of services and products offered. The
Company and its competitors  employ direct  solicitation of potential  customers
and furnish investment  research  publications in order to increase business and
in an effort to retain and  attract  potential  clients.  Many of the  Company's
competitors  engage in advertising  programs,  which the Company does not use to
any significant extent.

Employees

                  As of December 31, 1996, the Company  employed 39 persons,  25
of whom are full-time employees and 14 of whom are part-time  employees.  Of the
full-time  employees,  15 are employed as registered  representatives and 11 are
employed in administration and finance.   All  of  the part-time  employees  are
employed as registered representatives.

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<PAGE>

                  The Company  believes  that its future  success will depend in
large part upon its continued ability to recruit and retain qualified registered
representatives. Competition for qualified personnel is intense, particularly in
the  geographical  areas in which the Company is located.  The Company has never
experienced a work stoppage and none of its employees is  represented by a labor
organization.  The Company  considers its relationship  with its employees to be
good.

Factors Affecting the Company and the Securities Industry

                  The securities  industry is  characterized by frequent change,
the effects of which have been difficult to predict.  In addition to an evolving
regulatory  environment,  the industry  has been  subject to radical  changes in
pricing structure,  alternating periods of contraction and expansion and intense
competition from within and outside the industry.

Fluctuating Securities Volume and Prices

                  The securities industry is subject to substantial fluctuations
in volume and price levels of securities  transactions.  These  fluctuations can
occur on a daily  basis as well as over  longer  periods as a result of national
and international  economic and political  events,  and broad trends in business
and finance. Reduced volume and prices generally result in lower commissions and
investment  banking  revenues,  as well as losses from trading as principal  and
from  underwriting.  Profitability  is adversely  affected in periods of reduced
volume  because a  significant  amount of costs are fixed and remain  relatively
unchanged.  To the extent that  purchases of securities are permitted to be made
on margin,  securities  firms also are subject to risks  inherent  in  extending
credit,  especially  during periods of rapidly  declining  markets,  which could
reduce  collateral value below the amount of a customer's  indebtedness.  In the
past, heavy trading volume has caused clearance and processing problems for many
securities firms, and this could occur in the future. In addition, there is risk
of loss from errors which can occur in the execution and settlement process. See
"-Operations."

Industry Changes and Competitive Factors

                  Considerable  consolidation  has  occurred  in the  securities
industry as numerous  securities  firms have either  ceased  operations  or been
acquired  by other  securities  firms,  in many  cases  resulting  in firms with
greater  financial  resources  than firms such as the Company.  In  addition,  a
number  of  substantial  companies  not  previously  engaged  in the  securities
business  have  made  investments  in  and  acquired   securities  firms.  These
developments  have  resulted  in  significant  additional  competition  for  the
Company.  Increasing  competitive  pressures  in  the  securities  industry  are
requiring regional firms such as the Company to offer to their customers many of
the financial  services which are provided by much larger  securities firms that
have

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<PAGE>

substantially greater resources and may have greater operating efficiencies than
the Company.  A sizable number of new  investment  advisory firms have been
established  in  recent  years,  increasing  competition  in  that  area  of the
Company's activities.

                  Due to an increasingly competitive environment,  institutional
customers are now receiving substantial  discounts on commissions.  In addition,
there has been a trend in the  establishment  of an increasing  number of firms,
including  affiliates  of banks and thrift  institutions,  which offer  discount
brokerage   services  to  retail   customers.   These  firms  generally   effect
transactions at lower  commission  rates on an "execution  only" basis,  without
offering  other  services  such as  investment  advice  and  research  which are
provided by  "full-service"  brokerage  firms such as the Company.  In addition,
some discount  brokerage  firms have  increased the range of services which they
offer.  The  existence of and  anticipated  continued  increase in the number of
discount  brokerage  firms and  services  provided  by such firms may  adversely
affect the Company.

                  SEC Rule 415 permits  registration of certain  securities that
are to be offered on a delayed or continuous basis in the future. This procedure
provides a competitive  advantage to securities firms with  substantial  capital
and large in-house distribution  networks,  reducing  opportunities for regional
brokerage  firms such as the  Company  to  participate  in major  underwritings.
Additionally,  the prospect of "Company" registration,  rather than registration
of  discrete  offerings  of  securities  by  companies  could  provide a further
advantage to larger firms that could take advantage of economies of scale.

                  Certain  institutions,  notably  commercial  banks and  thrift
institutions,  have become a competitive  factor by offering certain  investment
banking and corporate and individual financial services  traditionally  provided
only  by  securities   firms.   The  Federal  Reserve  Board  has  approved  the
applications  of several  leading  bank holding  companies  to allow  affiliated
entities to underwrite equity securities,  municipal revenue bonds,  third-party
commercial  paper,  securities  backed by  mortgages  or consumer  debt and debt
securities.  The  total of all  securities  underwriting  activities  of such an
affiliate may not exceed 10% of its gross revenue. The Federal Reserve Board has
also approved the  application  of numerous bank holding  companies to establish
affiliates which offer investment advisory and brokerage services.

                  Various  groups  have  proposed  major  revisions  to the laws
governing the relationship between the banking and securities industries.  Under
many of these proposals,  banks would be able to establish  affiliates to engage
in a wide range of securities  activities not currently  permitted to be engaged
in by banks. In addition,  recently  proposed  Congressional  legislation  would
repeal the  Glass-Steagall  Act, which  restricts  banks from  affiliating  with
securities firms. It is presently not possible to predict the type and extent of
competitive services which banks and other institutions  ultimately may offer or
the extent to which  administrative or legislative  barriers will be repealed or

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<PAGE>

modified.  To the  extent  that such  services  are  offered  on a large  scale,
securities  firms such as the Company,  which are heavily oriented to individual
retail customers, may be adversely affected.

                  The SEC recently  instituted  rule changes  which  changed the
traditional securities  transactions settlement cycle from five business days to
three business days from trade date ("T+3"). The T+3 rules, although designed to
reduce risk in the  settlement  of securities  trades,  could  adversely  impact
trading by individual retail customers.

                  The  Securities  Reform Act of 1975 was enacted to promote the
establishment of a national market system and eliminate  barriers to competition
in the  securities  industry.  As a  result  of  actions  taken  by the  SEC and
self-regulatory authorities to implement this legislation,  the Company may find
it  necessary  in  some  instances  to  begin  making  markets  in and  carrying
inventories of securities  which it presently  purchases and sells for customers
only on an agency  basis on  securities  exchanges.  Such an  eventuality  could
require a  substantial  expansion  of the trading  capabilities  of the Company,
additional   capital  and  greater  exposure  to  the  risks  inherent  in  such
activities.

Regulation

                  The  business  of the  Company  and its  subsidiaries  in the
securities  industry is subject to regulation by various  regulatory
authorities  which are charged with protecting the interests of  broker-dealers'
customers.  See "Regulation."

Effect of Net Capital Requirements

                  The SEC has stringent  rules with respect to the net capital
requirements  of securities  firms. A significant  operating loss or
extraordinary  charge against net capital may adversely affect the ability of
the Company to expand or even  maintain  its present  level of  business.  In
addition,  the  Company's  ability to pay dividends  is  affected  by the
amount  of  capital  it has in excess of its net  capital  requirements.  See
"Net Capital Requirements."

Litigation

                  Many aspects of the  Company's  business  involve  substantial
risks of liability.  There has been an increased  incidence of litigation in the
securities  industry  in  recent  years,  including  class  action  suits  which
generally seek substantial damages.

                                       12

<PAGE>


Item 2.  Properties.

                  The  Company's   administrative   offices   currently   occupy
approximately  4,200  square feet of a facility  located at 170  Jennifer  Road,
Suite 270, Annapolis,  Maryland 21401. The Company also leases 4,000 square feet
of space in the Banco Popular Center, 1414 Munoz Rivera Avenue, Hato Rey, Puerto
Rico 90918, which houses its executive offices. In 1996 and 1995, rental expense
was $160,957 and $155,082, respectively.

Item 3.  Legal Proceedings.

                  The Company is involved in litigation before the Commission of
Financial Institutions of Puerto Rico, the NASD and the Superior Court of Puerto
Rico involving a broker formerly  employed in its Puerto Rico Office relating to
complaints by certain  clients  regarding  unauthorized  trading.  The aggregate
claims exceed $500,000. See Note 11 to Consolidated Financial Statements.

Item 4.  Submission of Matters to a Vote of Security Holders.

                  None.

Item 4A. Executive Officers of the Company.

                  Executive  officers  are  elected  annually  by the  Board  of
Directors and serve at the  discretion  of the Board of  Directors.  Information
regarding  the  executive  officer of the  Company  who is not a director  is as
follows:

                  IRENE M. HARR, 70, has served as Senior Vice President of the
Company and its  predecessor  since January  1984.  Ms. Harr was Chief
Financial  Officer of the Company and its  predecessor  from January 1984 until
September 1988, and has also served in that position since September 1989.

                                       13

<PAGE>

                                    PART II

Item 5.  Market for Company's Common Equity and Related Stockholder Matters.

                  There was no offered bid for the Common  Stock  during 1995 or
1996.

         The  approximate  number of  stockholders  of record as of December 31,
1996 was 360. The Company has never paid cash dividends on its Common Stock, and
the Board of  Directors  currently  intends to continue the policy of not paying
cash dividends and of retaining all earnings for use in the Company's business.

                                       14

<PAGE>



Item 6.           Selected Financial Data.

<TABLE>
<CAPTION>
                                                                   Years Ended December 31,
                                                                   ------------------------
                                           1996              1995             1994             1993             1992
                                           ----              ----             ----             ----             ----
<S> <C>
OPERATING RESULTS
  Revenues                            $2,577,580       $2,302,814        $2,451,306       $2,411,007       $1,790,404

  Operating expenses                   2,386,618        2,293,912         2,723,676        2,304,294        2,064,864
                                      ----------       ----------        ----------       ----------       ----------
(Loss) earnings before
  income taxes                           190,962       $    8,902        $ (272,370)      $  106,713       $ (274,460)
Income taxes
                                               0                0                 0                0                0
                                      ----------       ----------        ----------       ----------       ----------

Net earnings (loss)                      190,962       $    8,902        $ (272,370)      $  106,713       $ (274,460)
                                      ==========       ==========        ==========       ==========       ==========
PER SHARE DATA
Earnings  (loss) per
  common share                        $      .01       $     ----        $    (0.01)      $     0.01       $    (0.01)
                                      ==========       ==========        ==========       ==========       ==========
FINANCIAL POSITION
 Total assets                          1,122,200       $  764,954        $  553,481       $  879,248       $  605,339
Total stockholders'
 equity                               $  712,121       $  531,490        $  438,851       $  646,603       $  453,543
</TABLE>


Item 7.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations.

Results of Operations

                  The Company, like other securities firms, is directly affected
by general economic and market conditions,  including fluctuations in volume and
price  levels of  securities  and  changes in levels of  interest  rates.  These
conditions impact the Company's commissions and principal transactions revenues,
and its  liquidity.  In periods of reduced  market  activity,  profitability  is
adversely  affected by expenses,  such as  communications  and  occupancy,  that
remain  relatively  fixed.  Due  to  changing  market  conditions,   substantial
fluctuations occur in the Company's business,  and results of operations for any
period shown should not be considered representative for any other period.

                  Highlights of revenues and expenses  expressed as a percentage
of total revenues for the years ending December 31:

                                       15

<PAGE>

<TABLE>
<CAPTION>
                                        1996                  1995                 1994
                                        ----                  ----                 ----
<S> <C>
Revenues:
  Commissions                        $1,063,243            $  717,477           $  734,740
  Principal Transactions                488,535             1,128,470              850,036
  Advisory & Fee Income                 724,825               306,472              653,048
  Interest & Other Income               300,977               150,395              213,482
                                     ----------            ----------           ----------
    Total Revenues                   $2,577,580            $2,302,814           $2,451,306
                                     ==========            ==========           ==========
Expenses as percentages:
   Compensation and benefits                59%                 58.5%                58.8%
   Clearing and exchange fees                8%                  7.1%                 5.8%
   Occupancy and equipment rental           11%                 13.4%                14.6%
   Business development                      4%                  3.2%                 5.6%
   Interest                                 .2%                 .001%                  .7%
   Communications                            8%                  8.7%                 9.6%
    Other                                    9%                  7.0%                16.1%
</TABLE>

Revenues

Comparison of Year Ended December 31, 1996 to Year Ended December 31, 1995

         Total  revenues  increased  12%  through  the  fourth  quarter  of 1996
compared to the same period in 1995 due to an increase in completed  projects by
the corporate division.

         Commissions   increased   by  48%  due  to   increases  in  OTC  agency
transactions, options commissions, and activity with limited partnerships.

         The 137%  increase  for 1996 in  advisory  and fee income over the same
period in 1995 is primarily due to increased volume of activity in the corporate
division.

         Interest and other  income  through the fourth  quarter of 1996
increased by 100% over the same period in 1995 due to the overall increase in
company revenue.

                                       16

<PAGE>

Comparison of Year Ended December 31, 1995 to Year Ended December 31, 1994

         Commission  income  decreased by 2.3% due to a sales  concentration  on
fixed income securities.

         Principal income increased by 32.3% due primarily to an increase in the
volume of corporation bond transactions.

         Advisory and fee income  decreased by 53% due to a decrease in
completed  projects by the  corporate  bond division.

         Interest  income  decreased  by 29.5% due  primarily to  reductions  in
interest rates.

Expenses

Comparison of Year Ended December 31, 1996 to Year Ended December 31, 1995

         Overall,  expenses  increased by 4% through the fourth  quarter of 1996
compared to that of 1995.

         Compensation  and  benefits  through  the  fourth  quarter  of 1996 are
comparable to those over the same period in 1995.

         The 22% increase in clearing and exchange  expenses  through the fourth
quarter of 1996  compared to that of 1995 is due to increased volume.

         The 12% decrease through the fourth quarter in occupancy  expenses over
the same period in 1995 is due to a move made by the Annapolis office to smaller
quarters.

         The 7% decrease in communication expenses through the fourth quarter of
1996 is due to continuing cost-cutting measures.

         Business  development  expenses  increased  by 38% by the  end of  1996
compared to expenses  incurred over the same period in 1995  primarily due to an
increase in advertising.

         The 30% increase in other  expenses for 1996 compared to 1995 is due
primarily to an overall  increase in volume and activity.

                                       17

<PAGE>

Comparison of Year Ended December 31, 1995 to Year Ended December 31, 1994

         Clearing and exchange fees increased by 15.1% due to increased volume.

         Business  development  expenses  decreased  by  46.4%  as  the  Company
continued to decrease its advertising and travel budgets.

         Interest  expense  decreased by 83.3%  primarily due to lower rates and
lower margin charges due to decreases in equity holdings.

         Occupancy and equipment rental expenses  decreased by 14% primarily due
to decreases in rental payments,  municipal and property taxes and office supply
expenses.

         Communications  expenses decreased by 14.9% as compared to 1994, as the
result of the  elimination of certain  computer and quotation  systems in Puerto
Rico.

         Other expenses decreased by 54% primarily due to reduced legal expense.

Net (Loss) Earnings and the Provision (Benefit) for Income Taxes

         The Company had net  earnings of $190,962 in 1996.  The Company has net
operating loss  carry-forwards  that expire at various dates through 2009, which
will be available to offset future  earnings that otherwise  would be subject to
federal and state income taxes.

         The Company had net  earnings of $8,902 in 1995  compared to a net loss
of $272,370 in 1994.

         The Company is required to comply with the Uniform Net Capital  Rule of
the  Securities  and  Exchange  Commission.  The Rule is intended to measure the
general  financial  soundness and liquidity of  broker-dealers.  The Company has
consistently  exceeded the minimum net capital  requirement.  As of December 31,
1995, the Company's net capital was approximately  $358,274,  which exceeded the
minimum net capital by  $258,274.  As of December 31, 1996,  the  Company's  net
capital  was  approximately  $216,326,  which  exceeded  the minimum net capital
requirement by $116,326.

Financial Position, Liquidity, and Capital Resources

         The Company is required to comply with the Uniform Net Capital  Rule of
the  Securities  and  Exchange  Commission.  The Rule is intended to measure the
general  financial  soundness and liquidity of  broker-dealers.  The Company has
consistently  exceeded the minimum net capital  requirement.  As of December 31,
1996,   the

                                       18

<PAGE>

Company's  net  capital  was   approximately   $216,326  which  was
approximately $116,326 in excess of its required net capital.

                                       19

<PAGE>


Item 8.  Financial Statements and Supplementary Data.

                                                           Page

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS          18

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION              19

CONSOLIDATED STATEMENTS OF EARNINGS                         20

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY  21

CONSOLIDATED STATEMENTS OF CASH FLOWS                       22

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                  24

                                       20

<PAGE>


                REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTS


Board of Directors
Clark Melvin Securities Corporation

We have audited the accompanying  consolidated statements of financial condition
of Clark Melvin Securities  Corporation and subsidiaries as of December 31, 1996
and 1995 and the  related  consolidated  statements  of  operations,  changes in
stockholders'  equity and cash  flows for each of the three  years in the period
ended December 31, 1996. These financial  statements are the  responsibility  of
the Company's  management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable  assurance about whether the financial  statements and per share data
and ratios 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 Clark  Melvin
Securities Corporation and subsidiaries as of December 31, 1996 and 1995 and the
results of its  operations and its cash flows for each of the three years in the
period ended December 31, 1996, in conformity with generally accepted accounting
principles.


Grant Thornton LLP

Baltimore, Maryland
January 23, 1997

                                       21

<PAGE>


                      Clark Melvin Securities Corporation
                                and Subsidiaries

                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

                                  December 31,

================================================================================

            ASSETS                                      1996            1995
                                                     ----------      ----------

Cash                                                 $  405,195      $  265,243
Receivables
   Brokers and dealers                                  129,376         201,123
   Advisory fee                                         300,000              -
   Employee advances                                     20,984          15,990
   Other                                                 79,489          74,763
Deposit with clearing broker                            100,000         125,979
Other                                                    55,008          27,430
Office equipment and leasehold improvements, net
   of accumulated depreciation and amortization of
   $271,073 ($327,879 in 1995)                           32,148          54,426
                                                     ----------      ----------

              Total assets                          $ 1,122,200     $   764,954
                                                     ==========      ==========

      LIABILITIES AND STOCKHOLDERS' EQUITY

Payable to clearing broker                          $    12,317     $     6,095
Accounts payable and accrued liabilities                397,762         227,369
                                                    -----------     -----------

              Total liabilities                         410,079         233,464

COMMITMENTS AND CONTINGENCIES                                 -              -

STOCKHOLDERS' EQUITY
   Preferred stock                                      145,000         145,000
   Common stock                                         185,231         185,231
   Additional paid-in capital                         2,888,028       2,888,028
   Accumulated deficit                               (2,471,138)     (2,651,769)
   Treasury stock, at cost                              (35,000)        (35,000)
                                                     ----------       ---------

              Total stockholders' equity                712,121         531,490
                                                     ----------       ---------

              Total liabilities and stockholders'
                equity                              $ 1,122,200      $  764,954
                                                     ==========       =========


    The accompanying notes are an integral part of these financial statements


                                       22


<PAGE>



                      Clark Melvin Securities Corporation
                                and Subsidiaries

                      CONSOLIDATED STATEMENTS OF EARNINGS

                            Years ended December 31,

================================================================================




                                       1996            1995              1994
                                   ------------    ------------    ------------

Revenues:
    Principal transactions          $  488,535      $1,128,470      $  850,036
    Commissions                      1,063,243         717,477         734,740
    Advisory and fee income            724,825         306,472         653,048
    Interest and other income          300,977         150,395         213,482
                                    ----------      ----------      ----------

           Total revenues            2,577,580       2,302,814       2,451,306

Expenses:
    Compensation and benefits        1,411,957       1,384,134       1,440,221
    Clearing and exchange fees         201,082         164,157         142,590
    Occupancy and equipment rental     271,123         307,547         357,558
    Communications                     185,780         200,116         234,701
    Business development               101,033          73,358         136,756
    Interest                             5,916           2,687          16,180
    Other                              209,727         161,913         395,670
                                    ----------      ----------      ----------

           Total expenses            2,386,618       2,293,912       2,723,676
                                    ----------      ----------      ----------

           EARNINGS (LOSS)          $  190,962      $    8,902      $ (272,370)
                                    ==========      ==========      ==========

Earnings (loss) per common share    $      .01              -       $     (.01)
                                    ==========      ==========      ==========

    The accompanying notes are an integral part of these financial statements

                                       23


<PAGE>


                      Clark Melvin Securities Corporation
                                and Subsidiaries

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

                              1996, 1995 and 1994

================================================================================

<TABLE>
<CAPTION>
                                       Preferred Stock                Common Stock
                                   -----------------------      --------------------------
                                    Shares        Amount          Shares          Amount
                                   ---------    ----------      ----------      ----------
<S> <C>
Balance at January 1, 1994           260,000    $  260,000      17,332,536       $173,326
    Subscriptions collected                -             -               -              -
    Common stock issued                    -             -       1,195,460         11,954
    Retirement of common stock
        held in treasury                   -             -          (4,900)           (49)
    Preferred stock dividend               -             -               -              -
        Acquisition of preferred
        stock for treasury                 -             -               -              -
    Retirement of preferred stock   (115,000)     (115,000)              -              -
    Net loss                               -             -               -              -
                                    --------    ----------      ----------       --------

Balance at December 31, 1994         145,000       145,000      18,523,096        185,231
    Subscriptions collected                -             -               -              -
    Preferred stock dividend               -             -               -              -
    Net earnings                           -             -               -              -
        Acquisition of preferred
        stock for treasury                 -             -               -              -
                                   ---------    ----------      ----------       --------

Balance at December 31, 1995         145,000       145,000      18,523,096        185,231

    Preferred stock dividend               -             -               -              -
    Net loss                               -             -               -              -
                                   ---------    ----------      ----------       --------

Balance at December 31, 1996         145,000     $ 145,000      18,523,096       $185,231
                                   =========    ==========      ==========       ========
</TABLE>



<TABLE>
<CAPTION>
                                       Paid-in        Accumulated        Treasury     Subscription
                                       Capital         (Deficit)          Stock        Receivable        Total
                                      ----------      ------------      ----------     ----------     -----------
<S> <C>
Balance at January 1, 1994            $2,815,767      $(2,361,227)      $  (1,906)      $(239,357)     $ 646,603
    Subscriptions collected                    -                -               -         113,139        113,139
    Common stock issued                   74,118                -               -               -         86,072
    Retirement of common stock
        held in treasury                  (1,857)               -           1,906               -              -
    Preferred stock dividend                   -          (14,593)              -               -        (14,593)
        Acquisition of preferred
        stock for treasury                     -                -        (115,000)              -       (115,000)
    Retirement of preferred stock              -                -         110,000               -         (5,000)
    Net loss                                   -         (272,370)              -               -       (272,370)
                                      ----------      -----------       ---------       ---------      ---------

Balance at December 31, 1994           2,888,028       (2,648,190)         (5,000)       (126,218)       438,851
    Subscriptions collected                    -                -               -         126,218        126,218
    Preferred stock dividend                   -          (12,481)              -               -        (12,481)
    Net earnings                               -            8,902               -               -          8,902
        Acquisition of preferred
        stock for treasury                     -                -         (30,000)              -        (30,000)
                                      ----------      -----------       ---------       ---------      ---------

Balance at December 31, 1995           2,888,028       (2,651,769)        (35,000)              -        531,490
    Preferred stock dividend                   -          (10,331)              -               -        (10,331)
    Net loss                                   -          190,962               -               -        190,962
                                      ----------      -----------       ---------       ---------      ---------

Balance at December 31, 1996          $2,888,028      $(2,471,138)      $ (35,000)      $       -      $ 712,121
                                      ==========      ===========       =========       =========      ==========
</TABLE>

    The accompanying notes are an integral part of these financial statements


                                       24


<PAGE>


                      Clark Melvin Securities Corporation
                                and Subsidiaries

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                            Years ended December 31,

================================================================================


<TABLE>
<CAPTION>
Increase (decrease) in cash                                1996              1995               1994
                                                        ----------        ----------         ----------
<S> <C>
Cash flows from operating activities
    Net earnings (loss)                                  $ 190,962         $   8,902         $(272,370)
    Adjustments to reconcile net earnings (loss) to
       net cash provided by operating activities:
           Depreciation and amortization                    27,361            44,652            51,701
           Changes in operating assets:
                Receivables
                    Clearing broker deposit                 25,979           (25,979)                -
                    Brokers and dealers                     71,747          (147,872)          292,177
                    Employee advances                       (4,994)            9,661           (14,540)
                    Other                                 (304,726)          (64,058)            9,701
                Firm trading securities                          -             4,800            (4,784)
                Other assets                               (27,578)            8,380            (1,421)
                Payable to clearing broker                   6,222            (5,188)           (6,082)
                Securities sold short                            -                 -          (107,950)
                Accounts payable and accrued
                    liabilities                            170,393           124,022            (3,983)
                                                         ---------         ---------         ---------

                        Net cash provided by (used in)
                            operating activities           155,366           (42,680)          (57,551)

Cash flows from investing activities
    Purchases of office equipment and leasehold
        improvements                                        (5,083)          (10,936)          (35,856)
                                                         ---------         ---------         ---------
</TABLE>

                                       25

<PAGE>
                      Clark Melvin Securities Corporation
                                and Subsidiaries

                  CONSOLIDATED STATEMENTS OF CASH FLOWS, CON'T

                            Years ended December 31,


================================================================================


<TABLE>
<CAPTION>
                                                           1996            1995              1994
                                                        ----------      ----------        ----------
<S> <C>
Cash flows from financing activities
    Collections on subscriptions receivable                    -          126,218           113,139
    Acquisition of treasury stock                              -          (30,000)         (115,000)
    Proceeds from issuance of common stock                     -                -            84,166
    Payment of dividends on preferred stock              (10,331)         (12,481)          (14,593)
    Other                                                      -                -            (3,094)
                                                        --------         --------         ---------

                      Net cash (used in) provided by
                          financing activities           (10,331)          83,737            64,618
                                                        --------         --------         ---------

                      NET INCREASE (DECREASE)
                          IN CASH                        139,952           30,121           (28,789)

Cash at beginning of year                                265,243          235,122           263,911
                                                        --------         --------         ---------

Cash and at end of year                                 $405,195         $265,243         $ 235,122
                                                        ========         ========         =========


SUPPLEMENTAL DISCLOSURE OF CASH
    FLOW INFORMATION

      Cash paid during the year for interest            $  5,916         $  2,687         $  16,180
                                                        ========         ========          ========


SUPPLEMENTAL DISCLOSURE OF
    NONCASH INVESTING AND
    FINANCING ACTIVITIES

        Retirement of common stock held in
            treasury                                    $      -         $      -         $   1,906
</TABLE>

   The accompanying notes are an integral part of these financial statements


                                      26

<PAGE>


NOTE 1 - DESCRIPTION OF BUSINESS

      Clark Melvin Securities  Corporation (Clark Melvin) is incorporated in the
      State of Delaware.  Clark Melvin is registered as both a broker/dealer  in
      securities  and an  investment  adviser with the  Securities  and Exchange
      Commission.  In this  capacity,  it executes  principal  transactions  and
      performs  underwriting  and  investment  banking  services.  Clark  Melvin
      conducts  business  primarily  with its  clearing  broker on behalf of its
      customers and for its own proprietary  accounts.  Clark Melvin's customers
      are primarily located in the mid-Atlantic region and in Puerto Rico.

      The consolidated financial statements include the accounts of Clark Melvin
      and its wholly-owned subsidiaries,  CineFund Management Corporation (Cine)
      and CMS Credit  Corporation  (CMS)  (collectively  "the  Company").  Clark
      Melvin  conducts the primary  business of the Company.  Cine is engaged in
      the management of Puerto Rico investment funds for which Clark Melvin acts
      as the underwriting agent. CMS is inactive at December 31, 1996.

      All material  intercompany  balances and  transactions  are  eliminated in
      consolidation.

      In the normal course of its business, the Company may enter into financial
      transactions where the risk of potential loss due to changes in the market
      (market risk) or failure of the other party to the  transaction to perform
      (credit risk) exceeds the amounts recorded for the transaction. The nature
      of these risks, if any, are described in the footnotes.


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      In  accordance  with  industry  practice,  the  Company  records  customer
      transactions  on a settlement date basis which is generally three business
      days after the trade date. Revenues and expenses on a trade date basis are
      not materially  different from revenues and expenses on a settlement  date
      basis. The Company is exposed to risk of loss on these transactions should
      customers or brokers  become unable to meet the terms of their  contracts.
      As a  result,  the  Company  may have to  purchase  or sell the  financial
      instruments at prevailing market prices.

                                       27

<PAGE>


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

      Firm trading and investment  securities are carried at market  quotations.
      Changes in unrealized  appreciation or depreciation of such securities are
      reflected in the statement of operations with interest and other income.

      In the  normal  course  of  business,  the  Company's  customers  may sell
      securities  short. The Company's policy is to obtain cash or securities as
      collateral for customers' short positions.  Subsequent market fluctuations
      may  require  the  Company  to  obtain  additional   collateral  from  the
      customers.

      Office equipment and leasehold  improvements are recorded at cost.  Office
      equipment is depreciated  using  accelerated  methods over useful lives of
      five  to  seven  years.   Leasehold  improvements  are  amortized  on  the
      straight-line method over the lesser of the estimated economic useful life
      of the improvements or the remaining term of the lease.  Included in other
      assets are organization  expenses of $800 in 1996 and 1995,  respectively,
      which have been amortized over 60 months on the straight-line method.

      In 1996,  Clark Melvin acquired a  noncontrolling  50% interest in Irurena
      Management Company  (Irurena).  This investment is accounted for under the
      equity  method.  The  Company's  proportionate  share of the net income of
      Irurena is included in the accompanying consolidated financial statements.
      The net assets and revenue of Irurena  were not  material at December  31,
      1996.

      The earnings or loss per share of common stock is  calculated  by dividing
      the net  earning  or  loss,  adjusted  for the  preferred  stock  dividend
      requirement,  by the weighted average number of common shares  outstanding
      during the year (18,523,096 in 1996 and 1995, and 17,853,375 in 1994). The
      effect  of  assuming  exercise  of  warrants   outstanding  has  not  been
      considered  because the market  price of the common stock  obtainable  has
      never been higher than the exercise price.

                                       28

<PAGE>


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

      In preparing  financial  statements  in conformity  with General  Accepted
      Accounting Principles (GAAP), management is required to make estimates and
      assumptions that affect the reported amounts of assets and liabilities and
      the  disclosure of contingent  assets and  liabilities  at the date of the
      financial statements and revenue and expenses during the reporting period.
      Actual results could differ from these estimates.


NOTE 3 - RELATED PARTY TRANSACTIONS

      Major stockholders are also officers of the Company.  Compensation expense
      for the Chairman of the Executive Committee (resigned December,  1995) was
      approximately  $178,800 and $119,300 in 1995 and 1994,  respectively based
      primarily on commissions earned as a broker of the Company.  The President
      and CEO, also a major  stockholder,  earned  compensation of approximately
      $133,000,  $117,000 and $135,800 in 1996, 1995 and 1994,  respectively.  A
      significant portion of his compensation was based on commissions earned.

      A member  of the  Board  of  Directors  is a  partner  of a law firm  that
      provides  legal  services to the Company.  Fees incurred for such services
      provided  during 1994 were  approximately  $20,000.  No fees were  charged
      subsequently.


NOTE 4 - ADVISORY FEE RECEIVABLE

      Effective  October 29, 1996,  the Company  earned a $300,000  advisory fee
      from a customer for services  rendered in connection with the modification
      of the  customer's  mortgage loan with the U.S.  Department of Housing and
      Urban Development (HUD).

      The Company holds a promissory  note for the amount of the fee payable by
      its customer and expects  payment upon final approval by HUD of the
      transaction documentation.

                                       29

<PAGE>


NOTE 5 - PAYABLE TO CLEARING BROKER

      Substantially  all of the  clearing  and  depository  operations  for  the
      Company's  proprietary  transactions  are performed by a clearing  broker.
      Amounts due the clearing  broker at December  31, 1996 and 1995  represent
      fees for services provided.

      The Company has agreed to indemnify the clearing  broker for losses it may
      sustain as a result of the failure of the  Company's  customers to satisfy
      their  obligations  in  connection  with  securities  transactions.  As of
      December  31,  1996,  no  customers of the Company held short or unsecured
      positions.


NOTE 6 - COMMITMENTS

      The Company conducts operations in two facilities. One lease which expires
      in July, 2001, is renewable at the market rental.  The other lease expired
      in March,  1996;  the Company  continues  payment at the lease rate.  Rent
      expense  was  $160,757,  $153,467  and  $161,412  in 1996,  1995 and 1994,
      respectively. The minimum annual rental commitments through the end of the
      present  lease term is  approximately  $59,000  in 1997,  $61,400 in 1998,
      $63,800 in 1999, $66,400 in 2000 and $33,800 in 2001.

      The Company  leased for $20,400 in 1994 certain  office  furniture  from a
      company owned by a relative of a major shareholder.


NOTE 7 - STOCKHOLDERS' EQUITY

      The authorized shares of capital stock were as follows:

            Preferred stock, cumulative,  $1.00 par value, callable;  authorized
      1,000,000 shares.

            Common stock, $.01 par value; authorized 40,000,000 shares.

                                       30

<PAGE>


NOTE 7 - STOCKHOLDERS' EQUITY - Continued

      The preferred stock is callable at par. Dividends at the annual rate of 1%
      over the  prime  rate,  as  determined  on the date of  payment,  are paid
      quarterly.  Substantially  all  outstanding  preferred  shares are held by
      related parties.

      In January 1989 the Board of Directors  adopted a key employee  restricted
      stock award plan and a stock option plan.  The vesting period is two years
      from the date of grant with one half of the shares vesting after the first
      year. The market value of grants is charged to  compensation  expense over
      the periods in which the employees are providing the related services.  As
      of December  31, 1996,  twenty-two  employees  had been granted  1,500,000
      shares in the aggregate.

      Under the stock option plan, a total of 250,000 shares of common stock may
      be purchased  by certain key  employees  and  directors.  Incentive  stock
      options and  non-qualified  stock  options may be granted  under the plan.
      Discounts from options  granted at exercise  prices that are less than the
      market  value of the common  stock at the date of grant are  amortized  to
      compensation  expense over the period in which the employees are providing
      the related services.  Options granted and outstanding under this plan are
      not material at December 31, 1996.

      In 1994, the Company  approved a separate stock option plan for its
      President and in May 1994,  granted  options for 1,752,500  shares of
      common stock at $.05 a share. These options expire after five years.

      No options were granted, exercised,  forfeited or canceled in 1996 or 1995
      for either plan.

      At December 31, 1994, the Company had outstanding  1,391,260  common stock
      purchase warrants that were exercisable at $.10 per share through July 22,
      1995 (in treasury  2,500 at December 31,  1994).  These  warrants  expired
      without being exercised.

                                       31

<PAGE>


NOTE 7 - STOCKHOLDERS' EQUITY - Continued

      Subscriptions  receivable  arose from the sale of common stock in 1991 for
      four notes  receivables  of $100,000,  each maturing in 1991 through 1994,
      plus interest at 7%. A subscription  for an additional  $500,000 of common
      stock was rescinded during 1993. In accordance with SEC accounting  rules,
      subscriptions  receivable have been shown as a reduction in  stockholders'
      equity. All subscriptions receivable had been collected as of December 31,
      1995.


NOTE 8 - INCOME TAXES

      The Company has adopted  Statement of Financial  Accounting  Standards No.
      109, "Accounting for Income Taxes".  Temporary differences between amounts
      reported  for  financial  reporting  purposes  and income tax purposes are
      insignificant.  The  deferred  tax asset  related  to the  Company's  loss
      carryforwards  amounts to approximately  $683,000 and $751,000 at December
      31,  1996 and  1995,  respectively.  The full  amount  of this  asset  was
      reserved.

      Net operating loss carryforwards for income tax purposes are approximately
      $1,816,000 and expire between years 2005 and 2009.

      Reconciliation of income taxes:

<TABLE>
<CAPTION>
                                                         1996            1995             1994
                                                      ----------      ----------       ----------
<S> <C>
         Federal statutory income tax rate                   34%             34%              34%
                                                      =========       =========        =========

         Income taxes (benefit) at statutory rate      $ 82,500        $ 14,790         $(92,606)

         Effect of net operating loss carryforward
             deferred (utilized)                        (82,500)        (14,790)          92,606
                                                      ---------       ---------        ---------

         Income tax                                    $      -        $      -         $      -
                                                      =========       =========        =========
</TABLE>

                                       32

<PAGE>


NOTE 9 - NET CAPITAL REQUIREMENTS

      As a registered  broker dealer and member of the National  Association  of
      Securities  Dealers,  Inc.,  the Company is subject to the  Securities and
      Exchange  Commission Uniform Net Capital Rule (Rule 15c3-1) which requires
      the  maintenance  of minimum net capital.  As applied to the Company,  the
      Rule requires minimum net capital of $100,000.

      As of December 31, 1996 the Company had net capital of $216,326, which was
$116,326 in excess of its requirement.


NOTE 10 - CONCENTRATION OF CREDIT RISK - CASH

      The Company  maintains its cash accounts in one financial  institution  in
      Maryland. At times, cash balances may exceed federally insured limits. The
      Company has not  experienced  any losses in such  account and believes the
      Company is not exposed to a significant credit risk.


NOTE 11 - PENDING LITIGATION

      The Company is  considering  pursuing  arbitration  proceedings  against a
      former  broker  in its  Puerto  Rico  office  as a result  of  losses  and
      complaints from certain clients regarding  unauthorized  trading. In 1994,
      the Company charged  approximately  $154,000 against earnings for this and
      another  unrelated  claim as  nonrecurring  expenses  that are included in
      other expenses in the statement of operations.

      Three  customers  have  filed  suits  claiming   damages  of  $542,000  in
      connection  with  these  allegations.  The  actual  trading  loss  to  the
      plaintiffs aggregated  approximately $184,000. One other party's claim was
      dismissed  because the  plaintiff had executed an  arbitration  agreement.
      That individual has not filed an arbitration claim and suffered no trading
      loss.

33

<PAGE>


NOTE 11 - PENDING LITIGATION - Continued

      Management  believes it has meritorious  defenses and will prevail against
      all parties.  However,  in the interest of  conservatism,  it has provided
      additional reserves of $10,000 and $33,000 in 1996 and 1995,  respectively
      against the litigation and costs associated with these suits.

34

<PAGE>


Item 9.  Changes in and Disagreements on Accounting and Financial Disclosure.

                  None.


                                    PART III

Item 10. Directors and Executive Officers.

                  For information  with respect to the executive  officer of the
Company  who is  not a  director,  see  "Item  4A -  Executive  Officers  of the
Company".  For  information  with respect to the  directors of the Company,  see
information set forth under the caption "Election of Directors" in the Company's
Information  Statement  issued in  connection  with the  Company's  1997  Annual
Meeting of Stockholders, incorporated herein by reference.

Item 11. Executive Compensation.

                  The  information  required by this item is contained under the
caption "Management  Compensation" in the Company's Information Statement issued
in  connection   with  the  Company's  1997  Annual  Meeting  of   Stockholders,
incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management.

                  The  information  required by this item is contained under the
caption  "Security  Ownership of Management and Principal  Stockholders"  in the
Company's  Information  Statement  issued in connection  with the Company's 1997
Annual Meeting of Stockholders, incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions.

                  The  information  required by this item is contained under the
caption "Certain  Transactions" in the Company's Information Statement issued in
connection with the Company's 1997 Annual Meeting of Stockholders,  incorporated
herein by reference.

                                    PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

(a)      The following documents are filed as a part of this report:

                                       35

<PAGE>

1.       The following report and financial statements have been included under
         Item 8 of this Report:

                  Report of Independent Certified Public Accountants

                  Statements of Financial Condition

                  Statements of Earnings

                  Statements of Changes in Stockholders' Equity

                  Statements of Cash Flows

                  Notes to Financial Statements

The schedules to the  financial  statements  for which  provision is made in the
accounting regulations of the Commission are not applicable, not required or the
information  is  included  in the  financial  statements  or notes  thereto  and
therefore have been omitted.

3.       Exhibits

         3.1.1             Certificate of Incorporation  of the Company
                           (incorporated  by reference to Exhibit 3.1 filed with
                           Registration  Statement on Form S-18 (No.
                           33-20106A)).

         3.1.2             Certificate of Correction to the  Certificate of
                           incorporation  of the Company,  dated May 18, 1989
                           (incorporated  by reference to Exhibit 3.1.2 filed
                           with Form 10-K for the year ended December 31, 1989).

         3.1.3             Certificate of Amendment to the  Certificate  of
                           Incorporation  of the Company,  dated May 18, 1989
                           (incorporated  by reference to Exhibit 3.1.3 filed
                           with Form 10-K for the year ended December 31, 1989).

         3.1.4             Certificate of Designation  dated May 18, 1989
                           (incorporated  by  reference  to Exhibit  3.1.4 filed
                           with Form 10-K for the year ended December 31, 1989).

         3.1.5             Certificate  of  Amendment to  Certificate  of
                           Incorporation  of the Company,  dated  September  27,
                           1990  (incorporated  by  reference  to Exhibit  3.1.5
                           filed with Form 10-K for the year ended  December 31,
                           1990).

                                       36

<PAGE>

         3.2               By-laws of the Company as  currently  in effect
                           (incorporated  by reference to  Exhibit 3.2  filed
                           with  Registration  Statement on Form S-18 (No.
                           33-20106A)).

         10.1              Agreement of Lease dated July 24, 1987 between J. R.
                           Annapolis Associates and Clark Melvin Financial
                           Services,  Inc.  (incorporated by reference to
                           Exhibit 10.2 filed with Form 10-K for the year ended
                           December 31, 1988).

         10.2              First  Amendment  of  Agreement of Lease dated
                           January 15,  1988 between  J. R.  Annapolis
                           Associates  and Clark Melvin  Financial Services,
                           Inc. (incorporated by reference to Exhibit 10.3 filed
                           with Form 10-K for the year ended December 31, 1988).

         10.3              Second Amendment to Lease Agreement dated July 19,
                           1991 by and between J.R. Annapolis  Associates,
                           Clark Melvin Financial Services, Inc. and the Company
                           (incorporated by reference to Exhibit 10.3 filed with
                           Form 10-K for the year ended December 31, 1991).

         10.4              Agreement of Lease dated March 28, 1991 between Banco
                           Popular de Puerto Rico and the Company  (incorporated
                           by reference to Exhibit 10.4 filed with Form 10-K for
                           the year ended December 31, 1991).

         10.5              Clark Melvin Securities  Corporation 1989 Stock
                           Option Plan  (incorporated by reference to Exhibit
                           10.4 filed with Form 10-K for the year ended December
                           31, 1989).

         10.6              Clark Melvin Securities  Corporation  Stock Bonus
                           Plan  (incorporated by reference to Exhibit 10.5
                           filed with Form 10-K for the year ended

         10.7              Stock  Exchange  Agreement  dated August 17, 1990 by
                           and among  Azimuth  Capital  Corporation,  the
                           Azimuth  Group,  the Company and Lawrence T. Lewis,
                           III (incorporated by reference to Exhibit 10.6 filed
                           with Form 10-K for the year ended December 31, 1990).

         21.               Subsidiaries of the Company (incorporated by
                           reference to Exhibit 22 filed with Form 10-K for the
                           year ended December 31, 1991).

         27.               Financial Data Schedule

(b)      The Company did not file a report on Form 8-K for the quarter ended
         December 31, 1996.

                                       37

<PAGE>


                                   SIGNATURES

                  Pursuant  to the  requirements  of  Section 13 or 15(d) 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.

                                       CLARK MELVIN SECURITIES CORPORATION
                                       -----------------------------------
                                                   (Registrant)

                                       By: /s/Irene M. Harr
                                           -------------------------------
                                             Irene M. Harr
                                             Senior Vice President and
                                             Chief Financial Officer

                                       Date: March 28, 1997

                  Pursuant to the requirements of the Securities Exchange Act of
1934,  this report has been signed below by the  following  persons on behalf of
the Registrant in the capacities and on the dates indicated.

        Signature                         Title                       Date
        ---------                         -----                       ----

/s/ Cesar A. Montilla, Jr.      Chairman, President, Chief        March 28, 1997
---------------------------     Executive Officer and Director
Cesar A. Montilla, Jr.          (Principal Executive Officer)


/s/ Irene M. Harr               Senior Vice President and Chief   March 28, 1997
---------------------------     Financial Officer (Principal
Irene M. Harr                   Financial and Accounting Officer)


/s/ James Finn                  Director                          March 28, 1997
---------------------------
James Finn

/s/ Aurelio Emanuelli           Director                          March 28, 1997
---------------------------
Aurelio Emanuelli

/s/ Joaquin Rodriguez           Director                          March 28, 1997
---------------------------
Joaquin Rodriguez

/s/ Guillermo L. Martinez
---------------------------     Director                          March 28, 1997
Guillermo L. Martinez