U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-23410
M. H. MEYERSON & CO., INC.
(Name of Small Business Issuer in its charter)
NEW JERSEY 13-1924455
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Newport Tower, 525 Washington Blvd., Jersey City, New Jersey 07310
(Address of principal executive offices) (Zip Code)
(201) 459-9500
(Issuer's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No .
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 5,055,335 at August 24, 1998.
<PAGE>
M. H. Meyerson & Co., Inc.
Index
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Statements of financial condition, July 31, 1998 and
January 31, 1998. . . . . . . . . . . . . . . . . . . . . . . 1
Statements of operations, three and six months ended
July 31, 1998 and 1997. . . . . . . . . . . . . . . . . . . . 2
Statement of changes in stockholders' equity
six months ended July 31, 1998. . . . . . . . . . . . . . . . 3
Statement of cash flows, six months ended
July 31, 1998 and 1997. . . . . . . . . . . . . . . . . . . . 4
Notes to financial statements. . . . . . . . . . . . . . . . . . . . . .5
Item 2. Management's Discussion and Analysis . . . . . . . . . . 6
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders. . . 8
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . 8
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 Financial Statements
M. H. Meyerson & Co., Inc.
Statement of Financial Condition
(Unaudited)
<TABLE>
<CAPTION>
July 31, January 31,
1998 1998
<S> <C> <C>
CURRENT ASSETS
Due from clearing brokers - available
for immediate withdrawal $ 4,369,118 $ 4,106,384
Cash at banks and on hand 1,183,024 1,433,126
Securities - trading - long at market 12,391,395 13,539,455
Other current assets 834,784 1,463,921
18,778,321 20,542,886
Investments 2,048,843 2,348,421
Fixed assets net of accumulated depreciation 1,547,615 1,635,600
$ 22,374,779 $ 24,526,907
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Securities - trading - short at market $ 3,559,596 $ 3,474,601
Payable to clearing brokers 0 2,868,462
Sales commission payable 2,966,678 2,756,111
Other liabilities and accrued items 1,112,458 1,150,097
7,638,732 10,249,271
SUBORDINATED LOAN 2,000,000 2,000,000
STOCKHOLDERS' EQUITY
Common stock 50,553 50,478
Additional paid-in capital 7,815,177 7,807,752
Retained earnings 4,870,317 4,419,406
12,736,047 12,277,636
$ 22,374,779 $ 24,526,907
</TABLE>
See notes to financial statements
<PAGE>
M. H. Meyerson & Co., Inc.
Condensed Statements of Operations
Three and Six Months Ended July 31,
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
July 31, July 31,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
REVENUE
Trading profit $ 5,468,411 $ 4,977,444 $ 13,004,070 $ 8,292,020
Commission 440,273 543,308 762,902 1,201,259
Underwriting 1,933,700 1,634,810 2,284,088 1,794,710
Interest and other 810,424 113,913 864,163 152,584
8,652,808 7,269,475 16,915,223 11,440,573
EXPENSES
Clearing charges 2,017,026 1,313,359 3,741,747 2,748,707
Salesmens' draw &
commissions 2,202,824 2,897,438 4,227,771 3,335,762
Other personnel costs 1,428,694 1,163,052 3,056,211 2,602,722
Rent and office expense 1,387,392 1,163,098 2,577,078 2,235,280
Legal and professional 320,943 243,993 503,016 439,505
Interest expense 40,444 0 80,444 0
Other expenses 940,854 1,043,448 1,986,972 2,044,135
8,338,177 7,824,388 16,173,239 13,406,111
Income(loss) before
income taxes 314,631 (554,913) 741,984 (1,965,538)
Income taxes 129,745 (190,754) 291,073 (728,959)
Net income(loss) $ 184,886 $ (364,159) $ 450,911 $(1,236,579)
Earnings(loss) per common share:
Basic $ 0.03 $ (0.07) $ 0.09 $ (0.25)
Diluted $ 0.03 $ (0.07) $ 0.08 $ (0.25)
Weighted average
number of shares 5,055,335 5,034,139 5,054,299 5,021,445
Diluted 5,202,720 5,034,139 5,201,684 5,021,445
</TABLE>
See notes to financial statements
<PAGE>
M. H. Meyerson & Co., Inc.
Statement of Changes in Shareholders' Equity
(Unaudited)
Six Months ended July 31, 1998
<TABLE>
<CAPTION>
COMMON
STOCK $.01 PAR ADDITIONAL
VALUE PAID-IN CAPITAL RETAINED
EARNINGS
<S> <C> <C> <C>
SHAREHOLDERS' EQUITY
FEBRUARY 1, 1998 $50,478 $7,807,752 $4,419,406
Net income for period 450,911
Exercise of Employee
Stock Option 75 7,425
SHAREHOLDERS' EQUITY
JULY 31, 1998 $50,553 $7,815,177 $4,870,317
</TABLE>
See notes to financial statements
<PAGE>
M. H. Meyerson & Co., Inc.
Statement of Cash Flows
(Unaudited)
Six Months ended July 31,
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income(loss) $450,911 $(1,236,579)
Adjustments to reconcile net income to
net cash provided by (used in) operating
activities:
Depreciation 174,753 180,334
Change in assets and liabilities
(Increase) decrease in:
Receivable from clearing brokers (262,734) (2,228,645)
Securities owned 1,148,060 1,875,573
Other current assets 629,137 309,521
Increase (decrease) in:
Securities sold but not yet purchased 84,995 288,250
Payable to clearing brokers (2,868,462) 0
Sales commission payable 210,567 (1,706,775)
Other liabilities and accrued items (37,639) 214,056
Net cash provided by (used in)
operating activities (470,412) (2,304,265)
CASH FLOWS FROM INVESTING ACTIVITIES
Investments 299,578 888,832
Fixed assets (86,768) (77,838)
Net cash provided by (used in)
investing activities 212,810 810,994
CASH FLOWS FROM FINANCING ACTIVITIES
Exercise of Employee Stock Option 7,500 42,000
Repayments of loans to officers 0 0
Treasury stock purchased 0 0
Net cash provided by (used in)
financing activities 7,500 42,000
NET INCREASE (DECREASE) IN CASH (250,102) (1,451,271)
CASH, BEGINNING OF PERIOD 1,433,126 2,184,301
CASH, END OF PERIOD $1,183,024 $733,030
SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid $170,000 $0
Interest paid $80,444 $0
</TABLE>
See notes to financial statements
<PAGE>
M. H. Meyerson & Co., Inc.
Notes to Financial Statements
(Unaudited)
Note 1. Presentation of Financial Statements
The statement of financial condition as of July 31, 1998, the
statements of operations for the three months and six months ended
July 31, 1998 and 1997, the statement of changes in stockholders'
equity for the six month period ended July 31, 1998, and the
statements of cash flows for the six months ended July 31, 1998 and
1997 have been prepared by the Company without audit. The statement
of financial condition as of January 31, 1998 has been audited. In
the opinion of management, all adjustments and accruals (which include
only normal recurring items) necessary to present fairly the financial
positions, results of operations, and cash flows at July 31, 1998 and
1997 have been made.
The difference between the effective tax rate shown on the Condensed
Statements of Operations for the quarter and six months ended July
31, 1998 and 1997 and nominal rates is due mainly to the partial
non-deductibility of entertainment related expenses.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is
suggested that these financial statements be read in conjunction with
the financial statements and notes to financial statements included
in the Company's January 31, 1998 Annual Report to Shareholders.
The results of the periods ended July 31, 1998 and 1997 are not
necessarily indicative of the operating results for the full year.
Note 2. Earnings Per Common Share
Earnings per common share is calculated using the weighted average
number of common shares outstanding during the period. Shares
issuable upon the exercise of stock options and warrants, that are
dilutive, have been included in the computation of earnings per
share based on the modified treasury stock method.
Note 3. Net Capital Requirements
As a registered broker-dealer, the Company is subject to the
requirements of Rule 15c3-1 (the net capital rule) under the
Securities Act of 1934. The object of the rule is to require the
broker-dealer to have at all times sufficient liquid assets to
cover its current indebtedness. Specifically, the rule prohibits
a broker-dealer from permitting its "aggregate indebtedness" from
exceeding fifteen times its net capital as those terms are defined.
On July 31, 1998, the Company's aggregate indebtedness and net
capital were $4,079,136 and $8,567,230 respectively, a ratio of
0.48 to 1.00.
<PAGE>
M. H. Meyerson & Co., Inc.
Item 2. Management's Discussion and Analysis
General
The following discussion of the Company's financial condition and results
of operations should be read in conjunction with the Financial Statements and
Notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q.
Certain statements set forth in the Company's Quarterly Report on Form 10-Q
for the quarter ended July 31, 1998 constitute forward looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and are
subject to the safe harbor created by such section. Certain factors that could
cause results to differ materially from those described in the forward looking
statements are described in Item 2 - Management's Discussion and Analysis of
Results of Operations and elsewhere as appropriate. This Quarterly Report on
Form 10-Q, including the Statements of Financial Condition and the notes
thereto, should be read in its entirety for a complete understanding.
Results of Operations
The following table sets forth for the periods indicated the percentage of
total revenue represented by certain line items in the Company's Statement of
Operations:
Percent of Total Revenues
Six Months Ended July 31,
1998 1997
Net gain on securities transactions. . . . . . . 76.9 72.5
Commissions. . . . . . . . . . . . . . . . . . . . . 4.5 10.5
Underwriting . . . . . . . . . . . . . . . . . . . .13.5 15.7
Interest and other . . . . . . . . . . . . . . . . . 5.1 1.3
100.0 100.0
Clearing charges . . . . . . . . . . . . . . . . . .22.1 24.0
Compensation and benefits. . . . . . . . . . . . . .43.1 51.9
Rent and office. . . . . . . . . . . . . . . . . . .15.2 19.5
Professional fees. . . . . . . . . . . . . . . . . . 3.0 3.8
Interest and other operating expenses. . . . . . . .12.2 18.0
Total expenses . . . . . . . . . . . . . . . . . 95.6 117.2
Income(loss) before income taxes. . . . . . . . . 4.4 (17.2)
Provision for income taxes . . . . . . . . . . . .1.7 (6.4)
Net Income(loss) . . . . . . . . . . . . . . . . .2.7 (10.8)
<PAGE>
Calculation of Earnings Per Share
The calculation of earnings per share on the financial statements included
in this report are based on the weighted average number of shares outstanding,
as calculated.
Quarter Ended July 31, 1998 compared with Quarter Ended July 31, 1997
Total revenues for the quarter ended July 31, 1998 were $8,652,808, a
19.0% increase from the $7,269,475 reported for the quarter ended July 31,
1997. This increase is attributable mainly to an increase in trading volume,
and in increase in investment related revenue. Retail services revenue was down,
decreasing 19.0% from $543,308 to $440,273.
Clearing charges increased from $1,313,359 to $2,017,026, a change of
53.6%. This is attributable to the increase in the Company's trading volume.
Compensation and benefits decreased from $4,060,490 to $3,631,518,
representing a decrease of 10.6%. This was the result of the increased
trading volume during the second quarter of fiscal 1998, offset by the fact
that a greater percentage of that volume was not profitable, due to the new
order handling rules now in effect.
Interest expense is due to a subordinated loan, which was effective on
August 1, 1997.
Viability of Operating Results
The Company, like other securities firms, is directly affected by general
economic conditions and market conditions, including fluctuations in volume
and price levels of securities, changes in levels of interest rates and
demand for the Company's investment banking services. All of these factors
have an impact on the Company's net gain from securities transactions,
underwriting, and commission revenues. In periods of reduced market activity,
profitability is adversely affected because certain expenses, consisting
primarily of non-commission compensation and benefits, communications and
occupancy and equipment remain relatively fixed.
Liquidity and Capital Resources
The Company's statements of financial position reflect a liquid financial
position as cash and assets readily convertible to cash represent 80% and 83%
of total assets at July 31, 1998 and July 31, 1997 respectively.
The Company finances its operations primarily with existing capital and
funds generated from operations. The Company believes that existing capital
and cash flow from operations will be sufficient to meet its cash requirements.
Year 2000
The Company's internal accounting systems and the computers that run these
systems have been audited and it has been confirmed that we do not expect them
to be affected by the year 2000 bug'. The Company's trading and customer
transaction systems are supplied and managed by our clearing brokers and outside
independent vendors. The Company is in the process of assessing what steps it
must take to avoid being indirectly affected by potential year 2000 problems
occurring in the systems of clearing brokers and other outside vendors. The
Company does not expect to incur any significant expenditures related to year
2000 problems with its primary information systems. However, any failure by
the Company's clearing organization or other outside vendors to adequately
address the date change could have material adverse effect on the Company's
financial condition and operations.
<PAGE>
M. H. Meyerson & Co., Inc.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) Annual meeting of shareholders, June 9, 1998
(b) Directors elected to serve three year terms:
Michael Silvestri
Eugene M. Whitehouse
Alfred T. Duncan
Directors whose term of office continued after the meeting:
Martin H. Meyerson
Kenneth J. Koock
Jeffrey E. Meyerson
Joelle A. Meyerson
Martin Leventhal, CPA
Bertram Siegel, Esq.
(c) Other matters voted on:
Appointment of Vincent R. Vassallo, CPA as Company's auditor for
fiscal year ending January 31, 1999
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Index of Exhibits as required by Item 601 of Regulation S-B.
Exhibit Number Description of Exhibit
11 Calculation of Earnings per Share of
the Company pg. 10
(b) Reports on Form 8-K:
The Company filed no reports on Form 8-K during the second quarter of
fiscal year 1999.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
M. H. MEYERSON & CO., INC.
(registrant)
Date: 8/26/98 By: /s/ Michael Silvestri
Michael Silvestri
President and Chief Operating Officer
Date: 8/26/98 By: /s/ Eugene M. Whitehouse
Eugene M. Whitehouse
Vice President and Controller
M. H. Meyerson & Co., Inc.
Exhibit 11
Statement of Earnings Per Share
The earnings per share during the periods presented were calculated as follows:
Six months ended July 31, 1997
Shares outstanding during the six months ended July 31, 1997:
4,993,335 shares from February 1 to February 12, 1997 12 days 59,920,020
4,995,335 shares from February 13 to February 27, 1997 15 days 74,930,025
5,000,335 shares from February 28 to April 1, 1997 33 days 165,011,055
5,030,335 shares from April 2 to May 22, 1997 51 days 256,547,085
5,035,335 shares from May 23 to July 31, 1997 70 days 352,473,450
181 days 908,881,635
908,881,635 shares divided by 181 days = 5,021,445 average shares outstanding.
Calculation of equivalent shares would be anti-dilutive.
Six months ended July 31, 1998
Shares outstanding during the six months ended July 31, 1998:
5,047,835 shares from February 1 to February 25, 1998 25 days 126,195,875
5,055,335 shares from February 26 to July 31, 1998 156 days 788,632,260
181 days 914,828,135
914,828,135 shares divided by 181 days = 5,054,299 average shares outstanding.
Equivalent shares using modified treasury stock method
Shares assumed sold:
211,000 $1.00 $211,000.00
205,000 $1.10 225,000.00
Shares assumed bought: (268,615) $1.625 (436,500.00)
Total: 147,385 0.00
Total weighted average outstanding shares: 5,201,684
$450,911/5,201,684 = $0.08 earnings per diluted share.
<TABLE> <S> <C>
<ARTICLE> BD
<LEGEND>
This schedule contains summary financial information extracted from SEC
Form 10-Q and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-END> JUL-31-1998
<CASH> 1183024
<RECEIVABLES> 4369118
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 12391395
<PP&E> 1547615
<TOTAL-ASSETS> 22374779
<SHORT-TERM> 0
<PAYABLES> 2966678
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 3559596
<LONG-TERM> 2000000
0
0
<COMMON> 50553
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 22374779
<TRADING-REVENUE> 5468411
<INTEREST-DIVIDENDS> 53907
<COMMISSIONS> 440273
<INVESTMENT-BANKING-REVENUES> 1933700
<FEE-REVENUE> 0
<INTEREST-EXPENSE> 40444
<COMPENSATION> 3631518
<INCOME-PRETAX> 314631
<INCOME-PRE-EXTRAORDINARY> 314631
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 184886
<EPS-PRIMARY> 0.03
<EPS-DILUTED> 0.03
</TABLE>
