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 October 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 November 16,
1998.
<PAGE>
M. H. Meyerson & Co., Inc.
Index
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Statements of financial condition, October 31, 1998
and January 31, 1998. . . . . . . . . . . . . . .1
Statements of operations, three and nine months ended
October 31, 1998 and 1997 . . . . . . . . . . . .2
Statement of changes in stockholders' equity
nine months ended October 31, 1998. . . . . . . .3
Statement of cash flows, nine months ended
October 31, 1998 and 1997 . . . . . . . . . . . .4
Notes to financial statements. . . . . . . . . . . . .5
Item 2. Management's Discussion and Analysis . . . .6
PART II. OTHER INFORMATION
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>
October 31, January 31,
1998 1998
<S> <C> <C>
CURRENT ASSETS
Due from clearing brokers - available for
immediate withdrawal $ 5,548,695 $ 4,106,384
Cash at banks and on hand 1,220,673 1,433,126
Securities - trading - long at market 5,983,543 13,539,455
Other current assets 1,601,682 1,463,921
14,354,593 20,542,886
Investments 2,108,103 2,348,421
Fixed assets net of accumulated depreciation 1,497,216 1,635,600
$ 17,959,912 $ 24,526,907
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Securities - trading - short at market $ 2,132,879 $ 3,474,601
Payable to clearing brokers 0 2,868,462
Sales commission payable 1,966,075 2,756,111
Other liabilities and accrued items 1,288,950 1,150,097
5,387,904 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 2,706,278 4,419,406
10,572,008 12,277,636
$ 17,959,912 $ 24,526,907
</TABLE>
See notes to financial statements
<PAGE>
M. H. Meyerson & Co., Inc.
Condensed Statements of Operations
Three and Nine Months Ended October 31,
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
October 31, October 31,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
REVENUE
Trading profit $ 1,737,238 $ 9,241,365 $14,741,308 $17,533,385
Commission 446,890 442,692 1,209,792 1,643,952
Underwriting 554,481 723,975 2,838,569 2,518,685
Interest and other 53,379 548,868 917,542 701,451
2,791,988 10,956,900 19,707,211 22,397,473
EXPENSES
Clearing charges 1,293,454 1,913,505 5,035,201 4,662,212
Salesmens' draw &
commissions 920,445 4,254,299 5,148,216 7,590,061
Other personnel costs 1,424,939 1,479,641 4,481,151 4,084,362
Rent and office expense 1,282,965 1,363,973 3,860,043 3,599,253
Legal and professional 250,229 227,222 753,245 666,727
Interest expense 40,458 40,000 120,902 40,000
Other expenses 840,414 986,632 2,827,385 3,028,767
6,052,904 10,265,272 22,226,143 23,671,382
Income(loss) before
income taxes (3,260,916) 691,628 (2,518,932) (1,273,909)
Income taxes (1,096,877) 295,880 (805,804) (433,079)
Net income(loss) $(2,164,039) $ 395,748 $(1,713,128) $ (840,830)
Earnings(loss) per common share:
Basic $ (0.43) $ 0.08 $ (0.34) $ (0.17)
Diluted $ (0.43) $ 0.07 $ (0.34) $ (0.17)
Weighted average number of shares:
Basic 5,055,335 5,041,775 5,054,648 5,028,297
Diluted* 5,055,335 6,718,008 5,054,648 5,028,297
</TABLE>
* Fully diluted average shares is computed giving effect to the potential
exercise of the Company's exercisable outstanding options and warrants, using
the modified treasury stock method, except where such calculation would be
anti-dilutive.
See notes to financial statements
<PAGE>
M. H. Meyerson & Co., Inc.
Statement of Changes in Shareholders' Equity
(Unaudited)
Nine Months ended October 31, 1998
<TABLE>
<CAPTION>
COMMON
STOCK $.01 PAR ADDITIONAL RETAINED
VALUE PAID-IN CAPITAL EARNINGS
<S> <C> <C> <C>
SHAREHOLDERS' EQUITY
FEBRUARY 1, 1998 $50,478 $7,807,752 $4,419,406
Net income (loss) for period (1,713,128)
Exercise of Employee Stock Option 75 7,425
SHAREHOLDERS' EQUITY
OCTOBER 31, 1998 $50,553 $7,815,177 $2,706,278
</TABLE>
See notes to financial statements
<PAGE>
M. H. Meyerson & Co., Inc.
Statement of Cash Flows
(Unaudited)
Nine Months ended October 31,
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income(loss) $(1,713,128) $(840,830)
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation 265,481 273,138
Change in assets and liabilities
(Increase) decrease in:
Receivable from clearing brokers (1,442,311) (4,374,081)
Securities owned 7,555,912 (1,035,799)
Other current assets (137,761) 433,924
Increase (decrease) in:
Securities sold but not yet purchased (1,341,722) 1,304,095
Payable to clearing brokers (2,868,462) 0
Sales commission payable (790,036) 418,819
Other liabilities and accrued items 138,853 692,737
Net cash provided by (used in)
operating activities (333,174) (3,117,997)
CASH FLOWS FROM INVESTING ACTIVITIES
Investments 240,318 608,663
Fixed assets (127,097) (239,621)
Net cash provided by (used in)
investing activities 113,221 369,042
CASH FLOWS FROM FINANCING ACTIVITIES
Exercise of Employee Stock Option 7,500 49,500
Subordinated loan 0 2,000,000
Net cash provided by (used in)
financing activities 7,500 2,049,500
NET INCREASE (DECREASE) IN CASH (212,453) (699,455)
CASH, BEGINNING OF PERIOD 1,433,126 2,184,301
CASH, END OF PERIOD $1,220,673 $1,484,846
SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid $170,000 $0
Interest paid $120,902 $13,333
</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 October 31, 1998, the
statements of operations for the three months and nine months ended October 31,
1998 and 1997, the statement of changes in stockholders' equity for the nine
month period ended October 31, 1998, and the statements of cash flows for the
nine months ended October 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 October 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 nine months ended October 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 October 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 October 31, 1998, the Company's aggregate indebtedness and net
capital were $3,255,025 and $6,413,881 respectively, a ratio of 0.51 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 October 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
Nine Months Ended October 31,
1998 1997
Net gain on securities transactions. . . . . . 74.8 78.3
Commissions. . . . . . . . . . . . . . . . . . 6.1 7.3
Underwriting . . . . . . . . . . . . . . . . . 14.4 11.3
Interest and other . . . . . . . . . . . . . . 4.7 3.1
100.0 100.0
Clearing charges . . . . . . . . . . . . . . . 25.6 20.8
Compensation and benefits. . . . . . . . . . . 48.9 52.1
Rent and office. . . . . . . . . . . . . . . . 19.6 16.1
Professional fees. . . . . . . . . . . . . . . 3.8 3.0
Interest and other operating expenses. . . . . 15.0 13.7
Total expenses . . . . . . . . . . . . . . . . 112.9 105.7
Income(loss) before income taxes . . . . . . . (12.9) (5.7)
Provision for income taxes . . . . . . . . . . (4.1) (1.9)
Net Income(loss) . . . . . . . . . . . . . . . (8.8) (3.8)
<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 October 31, 1998 compared with Quarter Ended October 31, 1997
Total revenues for the quarter ended October 31, 1998 were $2,791,988, a
74.5% decrease from the $10,956,900 reported for the quarter ended October 31,
1997. This decrease is attributable mainly to a decrease in trading volume,
and a one-time loss on a trading position related to a recent underwriting.
There was also a decrease of $169,494, or 23.4% in underwriting revenue, and a
decrease of 90.3%, or $495,489 in interest and other income.
Clearing charges decreased from $1,913,505 to $1,293,454, a change of
32.4%. This is attributable to the decrease in the Company's trading volume.
Compensation and benefits decreased from $5,733,940 to $2,345,384,
representing a decrease of 59.1%. This was the result of the decreased trading
volume and revenue during the quarter, coupled with 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 71% and 81%
of total assets at October 31, 1998 and January 31, 1998 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 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 third 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: 11/30/98 By: /s/ Michael Silvestri
Michael Silvestri
President and Chief Operating Officer
Date: 11/30/98 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:
Nine months ended October 31, 1997
Shares outstanding during the nine months ended October 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 August 13, 1997 83 days 417,932,805
5,042,835 shares from August 14, to October 31, 1997 79 days 398,383,965
273 days 1,372,724,955
1,372,724,955 shares divided by 273 days = 5,028,297 average shares
outstanding.
Calculation of equivalent shares would be anti-dilutive.
Nine months ended October 31, 1998
Shares outstanding during the nine months ended October 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 October 31, 1998 248 days 1,253,723,080
273 days 1,379,918,955
1,379,918,955 shares divided by 273 days = 5,054,648 average shares
outstanding.
Calculation of equivalent shares would be anti-dilutive.
<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> OCT-31-1998
<CASH> 1220673
<RECEIVABLES> 5548695
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 5983543
<PP&E> 1497216
<TOTAL-ASSETS> 17959912
<SHORT-TERM> 0
<PAYABLES> 3255025
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 2132879
<LONG-TERM> 2000000
0
0
<COMMON> 50553
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 17959912
<TRADING-REVENUE> 1737238
<INTEREST-DIVIDENDS> 53379
<COMMISSIONS> 446890
<INVESTMENT-BANKING-REVENUES> 554481
<FEE-REVENUE> 0
<INTEREST-EXPENSE> 40458
<COMPENSATION> 2345384
<INCOME-PRETAX> (3260916)
<INCOME-PRE-EXTRAORDINARY> (3260916)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2164039)
<EPS-PRIMARY> (0.43)
<EPS-DILUTED> (0.43)
</TABLE>
