FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1999
[ ] TRANSITION REPORT PURSUANT TO 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.
(Exact name of registrant as specified 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
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since
last report)
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 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 .
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: 6,221,815 at July 31, 1999.
<PAGE>
M. H. Meyerson & Co., Inc.
Index
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Statements of financial condition, July 31, 1999 and
January 31, 1999. . . . . . . . . . . . . . . . . . . . 1
Statements of operations, three and six months ended
July 31, 1999 and 1998. . . . . . . . . . . . . . . . . . 2
Statement of changes in stockholders' equity
six months ended July 31, 1999. . . . . . . . . . . . . . 3
Statement of cash flows, six months ended
July 31, 1999 and 1998. . . . . . . . . . . . . . . . . . 4
Notes to financial statements. . . . . . . . . . . . . . . . . 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. . 6
Item 3. Quantitative and Qualitative Disclosures About
Market Risk. . . . . . . . . . . . . . . . . . . 8
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 . . . . . . . . . . 9
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
M. H. Meyerson & Co., Inc.
Consolidated Statement of Financial Condition
(Unaudited)
<TABLE>
<CAPTION>
July 31, January 31,
1999 1999
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 5,178,984 $ 2,454,100
Due from clearing brokers - available for
immediate withdrawal 10,382,887 5,605,947
Securities - trading - long at market 9,251,184 10,641,496
Other current assets 1,058,003 687,041
25,871,058 19,388,584
Investments 719,671 710,171
Fixed assets net of accumulated depreciation 1,396,375 1,479,044
$ 27,987,104 $ 21,577,799
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Securities - trading - short at market $ 1,406,019 $ 1,852,237
Sales commission payable 2,770,223 3,967,337
Other liabilities and accrued items 2,979,510 1,201,640
7,155,752 7,021,214
NON-CURRENT LIABILITIES
Minority interest in subsidiary 165,530 0
SUBORDINATED LOAN 2,000,000 2,000,000
STOCKHOLDERS' EQUITY
Common stock 62,218 50,903
Additional paid-in capital 11,844,345 7,849,827
Retained earnings 6,759,259 4,655,855
18,665,822 12,556,585
$ 27,987,104 $ 21,577,799
</TABLE>
See notes to financial statements
<PAGE>
M. H. Meyerson & Co., Inc.
Condensed Consolidated Statements of Operations
Three and Six Months Ended July 31,
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
July 31, July 31,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
REVENUE
Trading profit $12,451,186 $5,468,411 $27,594,505 $13,004,070
Commission 462,272 440,273 1,005,282 762,902
Underwriting 480,192 1,933,700 775,555 2,284,088
Interest and other 176,004 810,424 263,214 864,163
13,569,654 8,652,808 29,638,556 16,915,223
EXPENSES
Clearing charges 5,274,302 2,017,026 8,488,150 3,741,747
Salesmens' draw &
commissions 3,050,056 2,202,824 8,220,147 4,227,771
Other personnel costs 1,868,274 1,428,694 3,574,489 3,056,211
Rent and office expense 1,656,430 1,387,392 3,367,904 2,577,078
Legal and professional 654,394 320,943 1,205,353 503,016
Interest expense 36,286 40,444 72,037 80,444
Other expenses 663,518 940,854 1,331,646 1,986,972
13,203,260 8,338,177 26,259,726 16,173,239
Income(loss) before income
taxes and minority
interest 366,394 314,631 3,378,830 741,984
Income taxes 179,690 129,745 1,292,312 291,073
Minority interest 16,886 0 16,886 0
Net income(loss) $ 203,560 $ 184,886 $ 2,103,404 $ 450,911
Earnings(loss) per
common share:
Basic $ 0.03 $ 0.03 $ 0.36 $ 0.09
Diluted $ 0.03 $ 0.03 $ 0.32 $ 0.08
Weighted average
basic shares 6,155,708 5,055,335 5,880,867 5,054,299
Diluted 6,884,670 5,202,720 6,609,830 5,201,684
</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 RETAINED
VALUE PAID-IN CAPITAL EARNINGS
<S> <C> <C> <C>
SHAREHOLDERS' EQUITY
FEBRUARY 1, 1999 $ 50,903 $ 7,849,827 $ 4,655,855
Net income for period 2,103,404
Subsidiary private placement 709,584
Private placement 5,000 2,495,000
Options exercised 6,315 789,934
SHAREHOLDERS' EQUITY
JULY 31, 1999 $ 62,218 $ 11,844,345 $ 6,759,259
</TABLE>
See notes to financial statements
<PAGE>
M. H. Meyerson & Co., Inc.
Consolidated Statement of Cash Flows
(Unaudited)
Six Months ended July 31,
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income(loss) $ 2,103,404 $ 450,911
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation 200,930 174,753
Change in assets and liabilities
(Increase) decrease in:
Receivable from clearing brokers (4,776,940) (262,734)
Securities owned 1,390,312 1,148,060
Other current assets (370,962) 629,137
Increase (decrease) in:
Securities sold but not yet
purchased (446,218) 84,995
Payable to clearing brokers 0 (2,868,462)
Sales commission payable (1,197,114) 210,567
Other liabilities and accrued
items 1,777,870 (37,639)
Net cash provided by (used in)
operating activities (1,318,718) (470,412)
CASH FLOWS FROM INVESTING ACTIVITIES
Investments (9,500) 299,578
Fixed assets (118,261) (86,768)
Net cash provided by (used in)
investing activities (127,761) 212,810
CASH FLOWS FROM FINANCING ACTIVITIES
Exercise of employee stock options 796,249 7,500
Private placement 2,500,000 0
Subsidiary private placement 709,584 0
Increase in minority interest 165,530 0
Net cash provided by (used in)
financing activities 4,171,363 7,500
NET INCREASE (DECREASE) IN CASH 2,724,884 (250,102)
CASH, BEGINNING OF PERIOD 2,454,100 1,433,126
CASH, END OF PERIOD $5,178,984 $1,183,024
SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid $1,411,000 $170,000
Interest paid $ 72,037 $ 80,444
</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, 1999, the
statements of operations for the three months and six months ended July 31, 1999
and 1998, the statement of changes in stockholders' equity for the six month
period ended July 31, 1999, and the statements of cash flows for the six months
ended July 31, 1999 and 1998 have been prepared by the Company without audit.
The statement of financial condition as of January 31, 1999 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, 1999 and 1998 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, 1999 and
1998 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, 1999 Annual Report
to Shareholders. The results of the periods ended July 31, 1999 and 1998 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, as amended. 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, 1999, the Company's aggregate indebtedness and net
capital were $5,741,094 and $14,496,639 respectively, a ratio of 0.40 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, 1999 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,
1999 1998
Net gain on securities transactions. . . . . . 93.1 76.9
Commissions. . . . . . . . . . . . . . . . . . 3.4 4.5
Underwriting . . . . . . . . . . . . . . . . . 2.6 13.5
Interest and other . . . . . . . . . . . . . . 0.9 5.1
100.0 100.0
Clearing charges . . . . . . . . . . . . . . . 28.6 22.1
Compensation and benefits. . . . . . . . . . . 39.8 43.1
Rent and office. . . . . . . . . . . . . . . . 11.4 15.2
Professional fees. . . . . . . . . . . . . . . 4.1 3.0
Interest and other operating expenses. . . . . 4.7 12.2
Total expenses . . . . . . . . . . . 88.6 95.6
Income(loss) before income taxes and
minority interest . . . . . . . . 11.4 4.4
Income taxes . . . . . . . . . . . . 4.4 1.7
Minority interest. . . . . . . . . . 0.1 0.0
Net income(loss) . . . . . . . . . . 7.1 2.7
<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, 1999 compared with Quarter Ended July 31, 1998
Total revenues for the quarter ended July 31, 1999 were $13,569,654, a
56.8% increase from the $8,652,808 reported for the quarter ended July 31,
1998. This increase is attributable mainly to an increase in trading volume,
offset partially by decreases in underwriting and investment related revenue.
Retail services revenue was up, increasing 5.0% from $440,273 to $462,272.
Clearing charges increased from $2,017,026 to $5,274,302, a change of
161.5%. This is attributable to the increase in the Company's trading volume.
Compensation and benefits increased from $3,631,518 to $4,918,330,
representing an increase of 35.4%. This was the result of the increased trading
volume during the second quarter of fiscal 1999.
Interest expense is due to a subordinated loan, which was effective on
August 1, 1997, and renewed effective August 1, 1999.
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 89% and 87%
of total assets at July 31, 1999 and January 31, 1999 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>
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Our market making activities expose us to significant risks, including but
not limited to changes in price and/or liquidity of our trading positions. We
use an automated trading system to provide management with a real-time overview
of our traders' activity, positions, and profitability. Each trader's total
positions are limited by management, based partially on the amount of the
trader's funds held in reserve at the Company, which helps to limit the
Company's risks. The automated trading system also alerts management to any
trades which exceed certain parameters as to position or trade size during the
day.
In the course of our business, we maintain inventory, consisting mainly of
OTC securities and municipal bonds. The market value of our inventory at July
31, 1999 was $9.25 million in long positions and $1.41 million in short
positions. The loss to the Company, assuming a 10% decline in prices, would be
$780,000 due to the losses on the long positions being partially offset by gains
on the short positions.
We invest, from time to time, in certificates of deposit and/or maintain
interest bearing balances in our accounts with our clearing brokers, for working
capital purposes, which are classified as cash equivalents and receivables from
clearing brokers, respectively, in the Statement of Financial Condition. These
balances are all available for immediate withdrawal, or are for periods of 31
days or less, and do not present a material market risk. The Company does not
normally trade or carry positions in derivative securities.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
(a) Annual meeting of shareholders, June 22, 1999
(b) Directors elected to serve three year terms:
Kenneth J. Koock
Martin Leventhal, CPA
Directors whose term of office continued after the meeting:
Martin H. Meyerson
Michael Silvestri
Jeffrey E. Meyerson
Eugene M. Whitehouse
Bertram Siegel, Esq.
Alfred T. Duncan
(c) 1.) Kenneth J Koock 5,283,928 for, 19,025 against
Martin Leventhal, CPA 5,283,928 for, 19,025 against
2.) Appointment of Vincent R. Vassallo, CPA as Company's auditor
for fiscal year ending January 31, 2000
5,262,816 for, 13,022 against
3.) Amendments to the 1993 Employees Stock Option Plan to
increase the number of shares covered by the plan from
2,500,000 to 3,000,000 and to extend the term from the
current expiration date of October 1, 2003 to June 21,
2008.
2,338,168 for, 67,218 against, 2,869,002 broker
non-votes.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
Exhibit Number Description of Exhibit
11 Calculation of Earnings per Share of
the Company pg. 11
(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
Pursuant to the requirements 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.
M. H. MEYERSON & CO., INC.
(registrant)
Date: 08/30/99 By: /s/ Michael Silvestri
Michael Silvestri
President and Chief Operating Officer
Date: 08/30/99 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, 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.
<PAGE>
Six months ended July 31, 1999
5,090,335 shares from February 1 to February 4 4 days 20,361,340
5,340,335 shares from February 5 to February 10 6 days 32,042,010
5,490,335 shares from February 11 to February 23 13 days 71,374,355
5,510,335 shares from February 24 to February 24 1 day 5,510,335
5,525,335 shares from February 25 to March 30 34 days 187,861,390
5,527,335 shares from March 31 to April 7 8 days 44,218,680
5,532,335 shares from April 8 to April 11 4 days 22,129,340
6,032,335 shares from April 12 to May 17 36 days 217,164,060
6,037,335 shares from May 18 to May 26 9 days 54,336,015
6,042,335 shares from May 27 to May 27 1 day 6,042,335
6,043,335 shares from May 28 to May 31 4 days 24,173,340
6,204,815 shares from June 1 to June 3 3 days 18,614,445
6,209,815 shares from June 4 to June 16 13 days 80,727,595
6,214,815 shares from June 17 to June 22 6 days 37,288,890
6,219,815 shares from June 23 to July 21 29 days 180,374,635
6,221,815 shares from July 21 to July 31 10 days 62,218,150
181 days 1,064,436,915
1,064,436,915 shares divided by 181 days=5,880,867 average shares outstanding.
Equivalent shares using modified treasury stock method:
Shares assumed sold:
131,000 1 131,000
114,091 1.1 125,500
20,000 1.375 27,500
45,000 1.96875 88,594
12,500 2.0625 25,781
159,429 2.1875 348,751
715,000 2.25 1,608,750
12,500 2.5 31,250
10,000 3.5 35,000
Shares assumed bought: (490,557) 4.9375 (2,422,126)
Total: 728,963 0
Total weighted average outstanding shares: 6,609,830
$2,103,404 / 6,609,830 = $0.32 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-31-2000
<PERIOD-END> JUL-31-1999
<CASH> 5178984
<RECEIVABLES> 10382887
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 9251184
<PP&E> 1396375
<TOTAL-ASSETS> 27987104
<SHORT-TERM> 0
<PAYABLES> 5749733
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 1406019
<LONG-TERM> 2000000
0
0
<COMMON> 62218
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 27987104
<TRADING-REVENUE> 12451186
<INTEREST-DIVIDENDS> 176004
<COMMISSIONS> 462272
<INVESTMENT-BANKING-REVENUES> 480192
<FEE-REVENUE> 0
<INTEREST-EXPENSE> 36286
<COMPENSATION> 4918330
<INCOME-PRETAX> 366394
<INCOME-PRE-EXTRAORDINARY> 366394
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 203560
<EPS-BASIC> 0.03
<EPS-DILUTED> 0.03
</TABLE>
