As filed with the Securities and Exchange Commission on AUGUST 14, 1995
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(MARK ONE)
___X___ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1995
or
_______ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From _____________ to ____________
For Quarter Ended JUNE 30, 1995 Commission File Number 0-9667
BULL & BEAR GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-1897916
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11 HANOVER SQUARE, NEW YORK, NEW YORK 10005
(Address of principal executive offices) (Zip Code)
212-785-0900
(Company's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
The number of shares outstanding of each of the registrant's classes of
common stock, as of July 31, 1995, were as follows:
Class A Common Stock non-voting, par value $.01 per share - 1,509,152 shares
Class B Common Stock voting, par value $.01 per share - 20,000 shares
1
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BULL & BEAR GROUP, INC.
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1995
INDEX
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
- (Unaudited) June 30, 1995 and December 31, 1994 3
Consolidated Statements of Income (Loss)
- (Unaudited) Three and Six Months Ended June 30,
1995 and June 30, 1994 4
Consolidated Statements of Changes in Shareholders' Equity
- (Unaudited) Six Months Ended June 30, 1995 and June 30, 1994 5
Consolidated Statements of Cash Flows
- (Unaudited) Six Months Ended June 30, 1995 and June 30, 1994 6
Notes to Consolidated Financial Statements (Unaudited) 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 12
PART II. OTHER INFORMATION
Item 5. Other Information 13
Management's Representation and Signatures 14
Financial Data Schedule -- Article 5 of Regulation S-X 15
2
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BULL & BEAR GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $1,302,994 $ 2,316,040
Marketable securities (Note 2) 1,436,976 183,534
Management, distribution and
shareholder administrative fees receivable 158,040 160,567
Interest, dividends and other receivables 274,511 215,854
Prepaid expenses and other assets 216,612 234,269
----------- -----------
Total Current Assets 3,389,133 3,110,264
----------- -----------
Real estate held for investment, net 311,050 315,388
Furniture and fixtures, net 184,916 199,760
Excess of cost over net book value of
subsidiaries, net 482,126 505,352
Other 111,675 109,477
----------- ------------
1,089,767 1,129,977
----------- ------------
Total Assets $4,478,900 $ 4,240,241
========== ===========
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
<S> <C> <C>
Accounts payable $ 174,538 $ 197,523
Accrued expenses 99,729 118,919
Other 14,050 14,100
------------ -----------
Total Current Liabilities 288,317 330,542
---------- -----------
Shareholders' Equity: (Notes 3, 4, 5)
Common Stock, $.01 par value
Class A, 10,000,000 shares authorized;
1,509,152 shares in 1995 and
1,503,152 shares in 1994
issued and outstanding 15,092 15,032
Class B, 20,000 shares authorized;
20,000 shares issued and outstanding 200 200
Additional paid-in capital 6,503,736 6,497,796
Retained earnings (deficit) (2,069,075) (2,298,329)
Unrealized gains on marketable securities (Notes 1, 2) 40,630 --
Notes receivable for common stock issued (300,000) (305,000)
---------- ------------
Total Shareholders' Equity 4,190,583 3,909,699
---------- -----------
Total Liabilities and Shareholders' Equity $4,478,900 $ 4,240,241
========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
BULL & BEAR GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
---- ---- ---- ----
Revenues:
<S> <C> <C> <C> <C>
Management, distribution and shareholder
administrative fees $ 833,714 $ 947,371 $1,666,297 $2,027,640
Brokerage fees and commissions 438,336 413,353 846,479 895,601
Dividends, interest and other 51,570 8,126 103,419 2,107
---------- ---------- ----------- ------------
1,323,620 1,368,850 2,616,195 2,925,348
--------- --------- ---------- ----------
Expenses:
General and administrative (note 7) 885,973 658,270 1,699,371 1,648,083
Marketing 163,232 579,313 357,610 1,126,217
Clearing and brokerage charges 133,435 116,513 260,319 272,895
Amortization and depreciation 24,500 24,084 48,999 46,768
----------
1,207,140 1,378,180 2,366,299 3,093,963
--------- --------- ---------- ----------
Income (loss) before income taxes 116,480 (9,330) 249,896 (168,615)
Income taxes (note 6) 990 3,616 20,642 7,939
----------- ----------- ----------- ------------
Net income (loss) 115,490 (12,946) 229,254 (176,554)
========== ========== =========== ===========
Per share data:
Primary and fully diluted
Net income (loss) $.07 $(.01) $.14 $(.12)
==== ===== ==== =====
Average shares outstanding:
Primary and fully diluted 1,587,263 1,523,152 1,581,208 1,523,152
========= ========= ========== ==========
</TABLE>
See accompanying notes to the consolidated financial statements.
4
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BULL & BEAR GROUP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
Notes Unrealized
Receivable Retained
Gains on Total
Class A Class B Class A Class B Additional for Common Earnings Marketable Shareholders
Common Common Common Common Paid-in-Capital Stock Issued (Deficit) Securities Equity
------ ------ ------ ------ --------------- ------------ ----------- ---------- ----------
Six Months
Ended June 30, 1994
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, Jan. 1, 1994 1,498,152 20,000 $14,982 $200 $6,491,596 $ (325,000) $(2,381,789) -- $3,799,989
Proceeds from issuance
of Class A Common Stock, 5,000 - 50 - 6,200 - - -- 6,250
par value $.01
Net loss - - - - - - (176,554) -- (176,554)
----------- ------- -------- ----- ------------- -------------- ----------- -------- ----------
Balance, June 30, 1994 1,503,152 20,000 $15,032 $200 $6,497,796 $ (325,000) $(2,558,343) -- $3,629,685
========= ====== ======= ==== ========== ========== =========== -------- ==========
Six Months Ended
June 30, 1995
Balance, Jan. 1, 1995 1,503,152 20,000 $15,032 $200 $6,497,796 $ (305,000) $(2,298,329) $ -- $3,909,699
Proceeds from issuance
of Class A Common Stock, 6,000 -- 60 -- 5,940 -- -- -- 6,000
par value $.01
Collection of note -- -- -- -- -- 5,000 -- -- 5,000
receivable
Net income -- -- -- -- -- -- 229,254 -- 229,254
Unrealized gains on
marketable securities -- -- -- -- -- -- -- 40,630 40,630
---------- ------- ------- ----- ------------ ----------- ---------- -------- ----------
Balance, June 30, 1995 1,509,152 20,000 $15,092 $200 $6,503,736 $(300,000) $(2,069,075) $40,630 $4,190,583
========= ====== ======= ==== ========== ========== ============ ======= ==========
</TABLE>
See accompanying notes to the consolidated financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
BULL & BEAR GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended June, 30,
1995 1994
Cash Flows from Operating Activities:
<S> <C> <C>
Net income (loss) .................................................................. $ 229,254 $ (176,554)
----------- -----------
Adjustments to reconcile net income to net cash provided by
Operating Activities:
Depreciation and amortization .................................................... 48,999 46,768
Increase in cash value of life insurance ......................................... (15,000) --
Other ............................................................................ (23,360) 36,755
(Increase) decrease in:
Management, distribution and shareholder
administrative fees receivable .............................................. 2,527 41,919
Interest, dividends and other receivables ...................................... (58,657) 131,242
Prepaid expenses and other assets .............................................. 17,657 41,823
Other .......................................................................... 12,802 2,315
Increase (decrease) in:
Accounts payable ............................................................... (22,985) (106,407)
Accrued expenses ............................................................... (19,190) (75,155)
Other .......................................................................... (50) (2)
Minority Interest .............................................................. -- (804)
----------- -----------
Total adjustments .................................................................. (57,257) 118,454
----------- -----------
Net cash provided by Operating Activities ........................................ 171,997 (58,100)
----------- -----------
Cash Flows from Investing Activities:
Proceeds from sales of investments ................................................. 17,392 1,452,800
Purchases of investments ........................................................... (1,206,845) (1,054,840)
Capital expenditures ............................................................... (6,590) (241,694)
----------- -----------
Net cash provided by (used in) Investing Activities .............................. (1,196,043) 156,266
----------- -----------
Cash Flows from Financing Activities:
(Issuance) collection of note receivable ........................................... 5,000 (80,000)
Proceeds from issuance of Class A Common Stock ..................................... 6,000 6,250
----------- -----------
Net cash provided by (used in) Financing Activities .............................. 11,000 (73,750)
----------- -----------
Net increase (decrease) in cash and cash equivalents ............................... (1,013,046) 24,416
Cash and cash equivalents:
At beginning of period ............................................................. 2,316,040 1,522,059
----------- -----------
At end of period ................................................................... $ 1,302,994 $ 1,546,475
=========== ===========
</TABLE>
Supplemental disclosure: The Company did not pay any interest or Federal
income taxes during the six months ended June 30, 1995 or 1994.
See accompanying notes to the consolidated financial statements.
6
<PAGE>
BULL & BEAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Bull & Bear Group, Inc. ("Company"), through its subsidiaries,
primarily provides investment management, distribution and
shareholder administrative services for mutual funds and discount
brokerage services for individual and institutional investors.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Bull &
Bear Group, Inc. and all of its majority-owned subsidiaries.
Substantially all intercompany accounts and transactions have been
eliminated.
CASH AND CASH EQUIVALENTS
Investments in money market funds are considered to be cash
equivalents. At June 30, 1995 and December 31, 1994, the Company and
subsidiaries had invested approximately $1,047,300 and $1,672,400,
respectively, in an affiliated money market fund.
MARKETABLE SECURITIES
Marketable securities held by the Company's broker/dealer
subsidiaries are valued at market with the unrealized gain or loss
included in earnings. For the non-broker/dealer subsidiary
companies, marketable securities are considered to be
"available-for-sale" and are recorded at market value with the
unrealized gain or loss included in stockholders' equity.
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
In the normal course of business, the Company's activities involve
the execution and settlement of customer transactions. These
activities may expose the Company to risk of loss in the event the
customer is unable to fulfill its contracted obligations, in which
case the Company may have to purchase or sell financial instruments
at prevailing market prices. Any loss from such transactions is not
expected to have a material effect on the Company's financial
statements.
BROKERAGE INCOME AND EXPENSES
Brokerage commission and fee income and clearing and brokerage
expenses are recorded on a settlement date basis. The difference
between recording such income and expenses on a settlement date
basis as opposed to trade date, as required by generally accepted
accounting principles, is not material to the consolidated financial
statements.
INCOME TAXES
The Company and its wholly-owned subsidiaries file consolidated
income tax returns. Deferred income taxes are provided for timing
differences between financial and tax reporting.
RECLASSIFICATIONS
Certain reclassifications of the 1994 financial statements have
been made to conform to the 1995 presentation.
REAL ESTATE HELD FOR INVESTMENT AND EQUIPMENT
Real estate held for investment is recorded at cost and is
depreciated on a straight-line basis over its estimated useful life.
At June 30, 1995 and December 31, 1994, accumulated depreciation
amounted to $118,782 and $114,444, respectively. Equipment,
furniture and fixtures are recorded at cost and are depreciated on
the straight-line basis over their estimated useful lives, 5 to 10
years. At June 30, 1995 and December 31, 1994, accumulated
depreciation amounted to $650,163 and $628,728, respectively.
7
<PAGE>
BULL & BEAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
(UNAUDITED)
EXCESS OF COST OVER NET BOOK VALUE OF SUBSIDIARIES
The excess of cost over net book value of subsidiaries is
capitalized and amortized over five and forty years using the
straight-line method. At June 30, 1995 and December 31, 1994,
accumulated amortization amounted to $534,496 and $476,431,
respectively.
MARKETING COSTS
Costs in connection with the sale of the Funds' shares are charged
to operations as incurred.
EARNINGS PER SHARE
Primary and fully diluted earnings per share for the three and six
months ended June 30, 1995 is determined by dividing net income by
the weighted average number of common shares outstanding after
giving effect for common stock equivalents arising from stock
options assumed converted to common stock.
2. MARKETABLE SECURITIES
<TABLE>
<CAPTION>
At June 30, 1995, marketable securities consisted of:
Cost Market Value
<S> <C> <C>
Broker/dealer subsidiaries - at market
Affiliated mutual funds $ 53,335 $ 51,664
U.S. Treasury Note due 7/31/97 200,031 198,626
----------- -----------
253,366 250,290
----------- -----------
Other companies
Available-for-sale securities - at market
Equity securities 128,095 145,389
Unaffiliated mutual funds 22,384 22,232
U.S. Treasury Notes due 5/15/97-6/30/99 995,577 1,019,065
----------- -----------
1,146,056 1,186,686
----------- -----------
$1,399,422 $1,436,976
========== ==========
Unrealized gains on available-for-sale securities of $40,630 is
included in the stockholders' equity on the balance sheet
At December 31, 1994, marketable securities consisted of:
Broker/dealer subsidiaries - at market
Equity securities $ 63,276 $ 110,558
Affiliated mutual funds 59,527 53,941
Other companies
Available-for-sale securities - at market
Unaffiliated mutual funds 19,035 19,035
------------ ------------
$ 141,838 $ 183,534
=========== ===========
</TABLE>
8
<PAGE>
BULL & BEAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
(UNAUDITED)
3. SHAREHOLDERS' EQUITY
The Class A and Class B Common Stock are identical in all respects except
for voting rights, which are vested solely in the Class B Common Stock.
The Company also has 1,000,000 shares of Preferred Stock, $.01 par value,
authorized. As of June 30, 1995 and December 31, 1994, none of the
Preferred Stock was issued.
4. NET CAPITAL REQUIREMENTS
The Company's broker/dealer subsidiaries are member firms of the National
Association of Securities Dealers, Inc. and are registered with the
Securities and Exchange Commission as broker/dealer. Under the Uniform Net
Capital Rule (Rule 15c3-1 under the Securities Exchange Act of 1934), a
broker/dealer subsidiary must maintain minimum net capital, as defined, of
not less than (a) $250,000 or, when engaged solely in the sale of
redeemable shares of registered investment companies, $25,000, or (b)
6-2/3% of aggregate indebtedness, whichever is greater; and a ratio of
aggregate indebtedness to net capital, as defined, of not more than 15 to
1. At June 30, 1995, these subsidiaries had net capital of approximately
$506,776 and $243,110; net capital requirements of approximately $250,000
and $25,000; excess net capital of approximately $256,776 and $218,110;
and the ratios of aggregate indebtedness to net capital were approximately
.44 to 1 and .98 to 1, respectively.
5. STOCK OPTIONS
The Company has an Incentive Stock Option Plan ("Stock Option Plan"),
which provides for the granting of options to officers, directors and key
employees for the purchase of shares of Class A Common Stock of the
Company. The plan provides for the issuance of options with respect to
500,000 shares and the option price may not be less than the greater of
100% of the fair market value or the par value of such shares on the day
of the grant. Options granted under the Stock Option Plan must be
exercised during a period not more than ten years from the date of grant
and in installments at such time and in such amounts as the Board of
Directors may determine. If the recipient of any options owns 10% or more
of the total combined voting power of all classes of stock, the option
price must be 110% of the fair market value and must be exercised within
five years of the date of grant. Stock option activity from January 1,
1994 to June 30, 1995 is summarized as follows:
Number Option Price
of Shares Per Share Range
OUTSTANDING OPTIONS AT DECEMBER 31, 1993 .......... 165,000 $1.00 - $2.25
Granted ........................................ 23,000 $ 1.50
Exercised ...................................... (5,000) $ 1.25
Cancelled ...................................... (37,000) $1.00 - $2.25
------
OUTSTANDING OPTIONS AT DECEMBER 31, 1994 .......... 146,000 $1.00 - $1.875
Granted ........................................ 22,000 $ 2.00
Cancelled ...................................... (5,000) $ 1.875
------
OUTSTANDING OPTIONS AT JUNE 30, 1995 .............. 163,000 $1.00 - $2.00
======
At June 30, 1995, options to purchase 118,000 shares were exercisable. In
addition, there were 20,000 non-qualified stock options outstanding as of
June 30, 1995.
In connection with the exercise of options and related tax expense, the
Company received from certain officers and directors notes with an interest
rate of 4.86% per annum payable the earlier of November 1, 1998 or within
60 days after termination of employment. The balance of the notes was
$380,000 and $385,000, of which $300,000 was classified as notes receivable
for common stock issued and $80,000 included in other assets at June 30,
1995, and $305,000 was classified as notes receivable for common stock
issued and $80,000 included in other assets at December 31, 1994. Accrued
interest due on the notes was $9,880 and $17,049 at June 30, 1995 and
December 31, 1994, respectively.
9
<PAGE>
BULL & BEAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
(UNAUDITED)
6. INCOME TAXES
The provision for income taxes charged to operations for the six months
ended June 30, 1995 and 1994 was as follows:
1995 1994
---- ----
Current
State and local $20,642 $7,939
Federal -- --
-------- -------
$20,642 $7,939
======= ======
Deferred tax assets (liabilities) are comprised of the following at June
30, 1995 and December 31, 1994:
1995 1994
---- ----
Unrealized loss (gain) on investments $ (8,000) $ (14,200)
Net operating loss carryforwards 479,100 551,900
--------- ---------
Total deferred tax assets 471,100 537,700
Deferred tax asset valuation allowance (471,100) 537,700
--------- ---------
Net deferred tax assets $ - $ -
=========== ===========
The change in the valuation allowance for the six months ended June 30,
1995 was the result of the utilization of net operating loss carryforwards
and the increase in the unrealized gain on investments.
The provision for income taxes differs from the amount of income taxes
determined by applying the applicable U.S. statutory Federal tax rates to
pre-tax income as a result of utilization of net operating loss
carryforwards.
At December 31, 1994, the Company had net operating loss carryforwards for
Federal income tax purposes of approximately $1,623,200, of which $11,500,
$1,384,900, $180,100 and $46,700 expire in 2002, 2004, 2005 and 2006,
respectively. In addition, the Company has a capital loss carryforward for
Federal income tax purposes of approximately $32,100, which expires in
1995.
7. RELATED PARTIES
All management and distribution fees are from providing services to the Funds,
pursuant to written agreements that set forth the fees to be charged for these
services. These agreements are subject to annual review and approval by each
Fund's Board of Directors and a majority of the Fund's non-interested directors.
Shareholder administrative fees represent reimbursement of costs incurred by
subsidiaries of the Company on behalf of the Funds. Such reimbursement amounted
to $229,700 and $250,445 for the six months ended June 30, 1995, and 1994,
respectively.
10
<PAGE>
BULL & BEAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
(UNAUDITED)
In connection with management services, the Company's investment manager, Bull &
Bear Advisers, Inc., waived or reimbursed management fees to the Funds in the
amount of $150,092 and $122,722 for the six months ended June 30, 1995 and 1994,
respectively, and are included in general and administrative expenses in the
Statement of Income (Loss).
Certain officers of the Company also serve as officers and/or directors of the
Funds.
Commencing August 1992, the Company obtained a key man life insurance policy on
the life of the Company's Chairman which provides for the payment of $1,000,000
to the Company upon his death. As of June 30, 1995, the policy had a cash
surrender value of approximately $31,675 and is included in other assets in the
balance sheet.
The Company's discount brokerage subsidiary received brokerage commissions of
approximately $105,242 and $26,400 from the Funds for the six months ended June
30, 1995 and 1994, respectively.
8. COMMITMENTS AND CONTINGENCIES
The Company has a lease for approximately 9,300 square feet of office space. The
rent is approximately $116,250 per annum plus $23,250 per annum for electricity.
The lease expires December 31, 1996 and is cancelable at the option of the
Company on three months' notice. In addition, the Company's discount brokerage
subsidiary has a branch office in Boca Raton, Florida consisting of
approximately 1,000 square feet. The rent is approximately $20,800 per annum and
is cancelable at the option of the Company on six months' notice.
In connection with its lawsuit successfully collecting principal and interest on
a promissory note issued to the Company to purchase shares of the Company's
stock in 1985, the Company commenced an action against the maker of the note to
recover legal and other expenses, which is pending and the ultimate outcome is
uncertain at this time. In 1991, the maker of the note commenced an action
against the Company and one of its officers seeking $1,000,000 in damages. With
settlement discussions pending, the parties have entered into standstill
agreements with respect to currently outstanding claims.
From time to time, the Company and/or its subsidiaries are threatened or named
as defendants in litigation arising in the normal course of business. The
Company, its present directors, and certain former and present officers are
defendants in a lawsuit brought on April 24, 1995 by Maxus Investment Group,
Maxus Capital Partners, Maxus Asset Management, Inc., and Maxus Securities Corp.
as plaintiffs claiming to collectively own or control 357,500 shares, or
approximately 23%, of the Class A non-voting common stock of the Company. The
action, seeking declaratory and injunctive relief, was filed in the federal
district court for the Southern District of New York and purports to be brought
on the plaintiffs' own behalf and derivatively on behalf of the Company. The
complaint alleges that defendants breached their fiduciary duties to the Company
regarding the adoption and implementation of the Company's 1990 incentive stock
option plan ("ISOP") and the Company's 1986 purchase of an office building.
Plaintiffs also allege that all the individual defendants have received
excessive compensation and other unspecified benefits. The complaint seeks
rescission of the 1990 ISOP and an accounting, the imposition of a constructive
trust and restitution regarding all allegedly improper benefits. The Company
believes that the lawsuit is without merit and intends to defend it vigorously.
As of June 30, 1995, neither the Company nor any of its subsidiaries was
involved in any other litigation that, in the opinion of management, would have
a material adverse impact on the Consolidated Financial Statements.
In July 1994, the Company entered into a Death Benefit Agreement ("Agreement")
with the Company's Chairman. The Agreement provides for annual payments to his
wife following his death amounting to 80% of his average annual salary for the
three year period prior to his death subject to certain adjustments. The
Company's obligations under the Agreement are not secured and will terminate if
he leaves the Company's employ under certain conditions.
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Three Months Ended June 30, 1995 compared to Three Months Ended June 30, 1994
Drastic declines in the securities markets can have a significant effect
on the Company's business. Volatile stock markets may affect management and
distribution fees earned by the Company's subsidiaries. If the market value of
securities owned by the Funds declines, shareholder redemptions may occur,
either by transfer out of the equity Funds and into the fixed income Funds,
which generally have lower management and distribution fee rates than the equity
Funds, or by transfer out of the Funds entirely. Lower asset levels in the Funds
may also cause or increase reimbursements to the Funds pursuant to expense
limitations as described in Note 8 of the financial statements. In addition,
volatile stock markets could have a significant effect on the brokerage
commissions earned by BBSI by affecting the number of transactions processed.
Total revenues decreased $45,230 or 3% which was primarily due to a
decrease in management, distribution and shareholder administrative fees of
$113,657 because of a lower level of net assets under management. Brokerage fees
and commissions increased $24,983 or 6% because of an increased level of
customer transactions processed. Net assets under management were approximately
$278.3 million at March 31, 1994, $251.6 million at June 30, 1994, $235.1
million at March 31, 1995 and $237.5 million at June 30, 1995. Dividends,
interest and other income increased $43,444 due to higher earnings on the
Company's short term investments.
Total expenses decreased $171,040 or 12% primarily as a result of a
decrease in marketing expenses of $416,081. General and administrative expenses
increased $227,703 or 35% because of an increase in the Funds' expense guaranty
due to lower levels of net assets under management, higher equipment costs, and
staffing realignment. Clearing and brokerage charges increased $16,922 or 15%
because of an increased level of customer transactions processed. Net income for
the period was $115,490 or $.07 per share as compared to net loss of $12,946 or
$.01 per share for 1994.
Six Months Ended June 30, 1995 compared to Six Months Ended June 30, 1994
Total revenues decreased $309,153 or 11% which was primarily due to a
decrease in management, distribution and shareholder administrative fees of
$361,343 or 18% because of a lower level of net assets under management.
Brokerage fees and commissions decreased $49,122 or 5% because of a decreased
level of customer transactions processed. Net assets under management were
approximately $317.3 million at December 31, 1993, $278.3 million at March 31,
1994, $251.6 million at June 30, 1994, $236.1 million at December 31, 1994,
$235.1 million at March 31, 1995 and $237.5 million at June 30, 1995. Dividends,
interest and other income increased $101,312 due to higher earnings on the
Company's short term investments.
Total expenses decreased $727,664 or 24% primarily as a result of a
decrease in marketing expenses of $768,607. General and administrative expenses
increased $51,288 or 3%. Clearing and brokerage charges decreased $12,576 or 5%
because of a decreased level of customer transactions processed. Net income for
the period was $229,254 or $.14 per share as compared to net loss of $176,554 or
$.12 per share for 1994.
Liquidity and Capital Resources
The following table reflects the Company's consolidated working capital,
total assets, long term debt and shareholders' equity as of the dates indicated:
June 30, 1995 December 31, 1994
------------- -----------------
Working Capital $3,100,816 $2,779,722
Total Assets $4,478,900 $4,240,241
Long Term Debt -- --
Shareholders' Equity $4,190,583 $3,909,699
Working capital, total assets and shareholders' equity increased $321,094,
$238,659 and $280,884, respectively for the six months ended June 30, 1995
primarily as a result of the net income for the period.
As discussed previously, significant changes in the securities markets can
have a dramatic effect on the Company's results of operations. Based on current
information available, management believes that current resources are sufficient
to meet its liquidity needs.
12
<PAGE>
Effects of Inflation and Changing Prices
Since the Company derives most of its revenues from acting as the manager
and distributor of mutual funds, discount brokerage services and from general
investments, it is not possible for it to discuss or predict with accuracy the
impact of inflation and changing prices on its revenue from continuing
operations.
PART II. OTHER INFORMATION
ITEMS 5. OTHER INFORMATION
A Company investment management subsidiary (the "Investment Manager") has
entered into an Asset Purchase Agreement with Excel Advisors, Inc. ("Excel
Advisors"), providing for the Investment Manager's purchase of the assets that
relate to the management of Excel Midas Gold Shares, Inc. ("Midas Gold") for
$182,500. The transfer of these assets will result in the assignment and
automatic termination of the current investment management agreement between the
Excel Advisors and Midas Gold (the "Current Agreement"). Accordingly, as a
result of the anticipated termination of the Current Agreement, shareholders of
Midas Gold are being asked to consider a new investment management agreement
("New Agreement") between Midas Gold and the Investment Manager that would
become effective upon the termination of the Current Investment Management
Agreement. In connection such matters, shareholders are also being asked to
consider a subadvisory agreement, described below, and a reorganization of Midas
Gold, resulting in its reincorporation as a Maryland company to be named "Midas
Fund, Inc." and authorizing the approval of agreements for Midas Fund, Inc.
identical to the New Agreement and the subadvisory agreement, as well as a plan
of distribution with a Company broker/dealer subsidiary, and to elect a new
board of directors comprised similarly to the boards of directors of the Bull &
Bear Funds.
With respect to Midas Gold and Bull & Bear Gold Investors Ltd. (the
"Funds"), the Company investment management subsidiaries (the "Investment
Managers") have entered into subadvisory agreements with Lion Resource
Management Limited (the "Subadviser") regarding Fund portfolio investments.
Pursuant to the agreements, the Subadviser advises and consults with the
Investment Managers regarding the selection, clearing and safekeeping of the
Funds' portfolio investments and assists in pricing and generally monitoring
such investments. The Subadviser also provides the Investment Managers with
advice as to allocating the Funds' portfolio assets among various countries,
including the United States, and among equities, bullion, and other types of
investments, including recommendations of specific investments. The Investment
Managers, not the Funds, pay the Subadviser monthly up to fifty percent of the
Investment Manager's net investment management fee for each fund, as defined,
based upon the respective Fund's performance and total net assets. Each
agreement is subject to approval by that Fund's shareholders at a meeting
scheduled for each Fund on August 25, 1995.
13
<PAGE>
MANAGEMENT'S REPRESENTATION
The information furnished in this report reflects all adjustments which
are, in the opinion of management, necessary to a fair statement of the results
of the period.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
BULL & BEAR GROUP, INC.
Dated: August 14, 1995 By: /s/William K. Dean
William K. Dean
Treasurer, Chief Accounting Officer
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 Company and in
the capacities and on the date indicated.
Dated: August 14, 1995 /s/Bassett S. Winmill
Bassett S. Winmill
Chairman of the Board,
Director
Dated: August 14, 1995 /s/Robert D. Anderson
Robert D. Anderson
Vice Chairman, Director
Dated: August 14, 1995 /s/Mark C. Winmill
Mark C. Winmill
Co-President,
Chief Financial Officer,
Director
Dated: August 14, 1995 /s/Thomas B. Winmill
Thomas B. Winmill, Esq.
Co-President,
General Counsel,
Director
Dated: August 14, 1995 /s/Charles A. Carroll
Charles A. Carroll,
Director
Dated: August 14, 1995 /s/Edward G. Webb
Edward G. Webb, Jr.,
Director
14
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 2ND
QUARTER 6/95 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CAPTION>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 1,302,994
<SECURITIES> 1,436,976
<RECEIVABLES> 432,551
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 328,287
<PP&E> 1,027,091
<DEPRECIATION> (48,999)
<TOTAL-ASSETS> 4,478,900
<CURRENT-LIABILITIES> 288,317
<BONDS> 0
<COMMON> 6,519,028
0
0
<OTHER-SE> (2,328,445)
<TOTAL-LIABILITY-AND-EQUITY> 4,478,900
<SALES> 0
<TOTAL-REVENUES> 2,616,195
<CGS> 0
<TOTAL-COSTS> 2,366,299
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 249,896
<INCOME-TAX> 20,642
<INCOME-CONTINUING> 229,254
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 229,254
<EPS-PRIMARY> 0.14
<EPS-DILUTED> 0.14
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