<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended April 30, 1999
OR
[ ] 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 Boulevard, 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 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 equity, as of the latest practicable date: 6,032,335 at May 12, 1999.
<PAGE>
M. H. Meyerson & Co., Inc.
Index
PART I. FINANCIAL INFORMATION
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<S> <C>
Item 1. Financial Statements:
Statements of financial condition, April 30, 1999 and January 31, 1999................1
Statements of operations, three months ended
April 30, 1999 and 1998......................................................2
Statement of changes in stockholders' equity
three months ended April 30, 1999............................................3
Statement of cash flows, three months ended
April 30, 1999 and 1998......................................................4
Notes to financial statements.........................................................5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations...............................................6
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.............................................9
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
M. H. Meyerson & Co., Inc.
Statement of Financial Condition
(Unaudited)
April 30, January 31,
1999 1999
CURRENT ASSETS
Cash and cash equivalents $ 5,159,113 $ 2,454,100
Due from clearing brokers - available for
immediate withdrawal 13,184,346 5,605,947
Securities - trading - long at market 10,895,392 10,641,496
Other current assets 922,004 687,041
----------- -----------
30,160,855 19,388,584
Investments 996,171 710,171
Investment in subsidiary 100,000 0
Fixed assets net of accumulated depreciation 1,454,956 1,479,044
----------- -----------
$32,711,982 $21,577,799
=========== ===========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Securities - trading - short at market $ 5,071,959 $ 1,852,237
Sales commission payable 4,541,541 3,967,337
Other liabilities and accrued items 3,627,583 1,201,640
----------- -----------
13,241,083 7,021,214
SUBORDINATED LOAN 2,000,000 2,000,000
STOCKHOLDERS' EQUITY
Common stock 60,323 50,903
Additional paid-in capital 10,854,907 7,849,827
Retained earnings 6,555,669 4,655,855
----------- -----------
17,470,899 12,556,585
----------- -----------
$32,711,982 $21,577,799
=========== ===========
See notes to financial statements
1
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M. H. Meyerson & Co., Inc.
Condensed Statements of Operations
Three Months Ended April 30,
(Unaudited)
1999 1998
----------- -----------
REVENUE
Trading profit $15,143,319 $ 7,535,659
Commission 543,010 322,629
Underwriting 295,363 350,388
Interest & Other 87,210 53,739
----------- -----------
16,068,902 8,262,415
----------- -----------
EXPENSES
Clearing charges 3,213,848 1,724,721
Salesmen's draw & commissions 5,170,091 2,024,947
Other personnel costs 1,706,215 1,627,517
Rent and office expenses 1,711,474 1,189,687
Legal and professional fees 182,242 182,073
Interest expense 35,751 40,000
Other expenses 1,036,845 1,046,117
----------- -----------
13,056,466 7,835,062
----------- -----------
Income(loss) before income taxes 3,012,436 427,353
Income tax expense(benefit) 1,112,622 161,328
----------- -----------
Net income(loss) $ 1,899,814 $ 266,025
=========== ===========
Basic Earnings(loss) per common share $ 0.34 $ 0.05
=========== ===========
Diluted Earnings(loss) per common share $ 0.29 $ 0.05
=========== ===========
Weighted average number of shares 5,596,762 5,055,335
=========== ===========
Diluted weighted average number of shares 6,633,917 5,250,978
=========== ===========
See notes to financial statements
2
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M. H. Meyerson & Co., Inc.
Statement of Changes in Shareholders' Equity
(Unaudited)
Three Months ended April 30, 1999
COMMON
STOCK ADDITIONAL
$.01 PAR PAID-IN RETAINED
VALUE CAPITAL EARNINGS
-------------------------------------------
SHAREHOLDERS' EQUITY
FEBRUARY 1, 1999 $ 50,903 $ 7,849,827 $ 4,655,855
Net income for quarterly period 1,899,814
Private placement 5,000 2,495,000
Options exercised 4,420 510,080
-------------------------------------------
SHAREHOLDERS' EQUITY
APRIL 30, 1999 $ 60,323 $10,854,907 $ 6,555,669
===========================================
See notes to financial statements
3
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M. H. Meyerson & Co., Inc.
Statement of Cash Flows
(Unaudited)
Three Months ended April 30,
<TABLE>
<CAPTION>
1999 1998
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CASH FLOWS FROM OPERATING ACTIVITIES
Net income(loss) $ 1,899,814 $ 266,025
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation 98,641 87,957
Change in assets and liabilities
(Increase) decrease in:
Receivable from clearing brokers (7,578,399) (1,215,575)
Securities owned (253,896) (63,364)
Other current assets (234,963) 245,713
Increase (decrease) in:
Securities sold, but not yet purchased 3,219,722 2,488,802
Payable to clearing brokers 0 (2,868,462)
Sales commission payable 574,204 131,649
Other liabilities and accrued items 2,425,943 (645,791)
----------- -----------
Net cash provided by
(used in) operating activities 151,066 (1,573,046)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Investments (286,000) 922,470
Investment in subsidiary (100,000) 0
Fixed assets (74,553) (20,944)
----------- -----------
Net cash provided by (used in)
investing activities (460,553) 901,526
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Private placement 2,500,000 0
Options exercised 514,500 7,500
Net cash provided by
financing activities 3,014,500 7,500
----------- -----------
NET INCREASE (DECREASE) IN CASH 2,705,013 (664,020)
CASH, BEGINNING OF PERIOD 2,454,100 1,433,126
----------- -----------
CASH, END OF PERIOD $ 5,159,113 $ 769,106
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid $ 121,000 $ 0
=========== ===========
Interest paid $ 35,751 $ 40,000
=========== ===========
</TABLE>
See notes to financial statements
4
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M. H. Meyerson & Co., Inc.
Notes to Financial Statements
(Unaudited)
Note 1. Presentation of Financial Statements
The statement of financial condition as of April 30, 1999, the
statements of operations for the three months ended April 30,
1999 and 1998, the statement of changes in stockholders' equity
for the quarterly period ended April 30, 1999, and the statement
of cash flows for the three months ended April 30, 1999 and April
30, 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 at April 30, 1999 and
January 31, 1999,and the results of operations and cash flows at
April 30, 1999 and April 30, 1998 have been made.
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 April
30, 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 Exchange 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 April 30, 1999, the Company's aggregate indebtedness and net
capital were $8,169,124 and $14,573,640 respectively, a ratio of
0.56 to 1.00.
5
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M. H. Meyerson & Co., Inc.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
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 April 30, 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. 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
-----------------------
Quarter Ended April 30,
-----------------------
1999 1998
------ ------
Net gain on securities transactions................. 94.2 91.2
Commissions......................................... 3.4 3.9
Underwriting........................................ 1.8 4.2
Interest and other.................................. 0.6 0.7
------ ------
100.0 100.0
------ ------
Clearing charges.................................... 20.0 20.9
Compensation and benefits........................... 42.8 44.2
Rent and office..................................... 10.7 14.4
Professional fees................................... 1.1 2.2
Interest and other operating expenses............... 6.7 13.1
------ ------
Total expenses................................. 81.3 94.8
------ ------
Income(loss) before income taxes............... 18.7 5.2
Provision for income tax expense(benefit)...... 6.9 2.0
------ ------
Net income(loss)............................... 11.8 3.2
====== ======
Calculation of Earnings Per Share
The calculation of earnings per share in the financial statements included
in this report are based on the weighted average number of shares outstanding.
6
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Quarter Ended April 30, 1999 compared with Quarter Ended April 30, 1998
Total revenues for the quarter ended April 30, 1999 were $16,068,902, a 94%
increase from the $8,262,415 reported for the quarter ended April 30, 1998. This
increase is attributable mainly to an increase in trading volume, which we
attribute to the explosion in internet trading, and a 68% increase in
commissions.
Clearing charges increased from $1,724,721 to $3,213,848, a change of 86%,
due to the increased trading volume during the quarter.
Compensation and benefits increased from $3,652,464 to $6,876,306,
representing an increase of 88%. This corresponds to the increase in revenue, as
a large portion of compensation expense is tied to percentages of profits in
trading accounts.
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 89% and 87% of
total assets at April 30, 1999 and April 30, 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.
7
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Market Risk Disclosures
The following discussion about the Company's market risk disclosures
involves forward-looking statements. Actual results could differ materially from
those projected in the forward-looking statements. The Company is exposed to
market risk related to changes in interest rates and equity price fluctuations.
The Company does not presently use derivative financial instruments for
speculative or trading purposes.
Interest Rate Sensitivity
Much of the Company's liquidity derives from sums due from its two clearing
brokers, which are kept in the Company's accounts with such brokers and generate
interest to the Company at floating rates based on federal funds and broker loan
rates. These rates rise and fall with interest rates in general, hence the
Company does not believe that it is subject to interest rate risk with respect
to these investments.
Equity Price Risk
The Company holds a small portfolio of marketable and non-marketable
securities for investment purposes that are subject to market price volatility.
Price fluctuations of plus or minus 15 percent would not have a material impact
on the Company.
The Company, in the course of its trading activities which constitute the
bulk of its revenues, maintains large portfolios of securities and/or short
positions in securities. Equity price fluctuations affecting the prices of these
securities could have a material impact on the Company, which the Company
mitigates by adjusting and hedging these positions in accordance with trading
requirements and market conditions.
Financial Instruments
The portion of the Company's working capital that is not held at the
Company's clearing brokers is kept in bank accounts and certificates of deposit.
The certificates of deposit are short term and do not present a material market
risk.
8
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M. H. Meyerson & Co., Inc.
PART II. OTHER INFORMATION
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. 10
27 Financial Data Schedule (1)
(1) Filed with EDGAR filing of this report on Form 10-Q.
(b) Reports on Form 8-K:
The Company did not file any reports on Form 8-K during the quarter
ended April 30, 1999.
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: May 25, 1999 By: /s/ Michael Silvestri
-------------- ----------------------------------
Michael Silvestri
President and Chief Operating Officer
Date: May 25, 1999 By: /s/ Eugene M. Whitehouse
-------------- ----------------------------------
Eugene M. Whitehouse
Vice President and Controller
9
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M. H. Meyerson & Co., Inc.
Exhibit 11
Statement of Earnings Per Share
The earnings per share during the periods presented were calculated as follows:
Three months ended April 30, 1999
5,090,335 shares from 2/1/99 to 2/4/99 4 days 20,361,340
5,340,335 shares from 2/5/99 to 2/10/99 6 days 32,042,010
5,490,335 shares from 2/11/99 to 2/23/99 13 days 71,374,355
5,510,335 shares from 2/24/99 to 2/24/99 1 day 5,510,335
5,525,335 shares from 2/25/99 to 3/30/99 34 days 187,861,390
5,527,335 shares from 3/31/99 to 4/7/99 8 days 44,218,680
5,532,335 shares from 4/8/99 to 4/11/99 4 days 22,129,340
6,032,335 shares from 4/12/99 to 4/30/99 19 days 114,614,365
89 days 498,111,815
498,111,815 / 89 days = 5,596,762 weighted average shares outstanding.
Net income - three months ended April 30, 1999 = $1,899,814
$1,899,814 / 5,596,762 = $0.34 basic earnings per share.
Equivalent shares using the modified treasury stock method
Shares assumed sold: 161,000 $1.00 $ 161,000
205,000 1.10 225,500
743,000 2.25 1,671,750
200,000 2.1875 437,500
45,000 1.96875 88,594
10,000 3.50 35,000
12,500 2.0625 25,781
20,000 1.375 27,500
1,396,500 2,672,625
Shares assumed purchased: (359,345) 7.4375 (2,672,625)
Total: 1,037,155
Total weighted average outstanding shares: 6,633,917
Net income - three months ended April 30, 1999 = $1,899,814
$1,899,814 / 6,633,917 = $0.29 earnings per diluted share.
<PAGE>
Three months ended April 30, 1998
Shares outstanding during the three months ended April 30, 1998:
5,047,835 shares from 2/1/98 to 2/25/98 25 days 126,195,875
5,055,335 shares from 2/26/98 to 4/30/98 64 days 323,541,440
89 days 449,737,315
449,737,315 / 89 days = 5,053,228 weighted average shares outstanding.
Net income - three months ended April 30, 1998 = $266,025
$266,025 / 5,053,228 = $0.05 basic earnings per share.
Equivalent shares using the modified treasury stock method
Shares assumed sold: 211,000 $1.00 $211,000
205,000 $1.10 225,500
Shares assumed purchased: (218,250) $2.00 (436,500)
Total: 197,750 0
Total weighted average outstanding shares: 5,250,978
Net income - three months ended April 30, 1998 = $266,025
$266,025 / 5,250,978 = $0.05 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> APR-30-1999
<CASH> 5159113
<RECEIVABLES> 13184346
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 10895392
<PP&E> 1454956
<TOTAL-ASSETS> 32711982
<SHORT-TERM> 0
<PAYABLES> 8169124
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 5071959
<LONG-TERM> 2000000
0
0
<COMMON> 60323
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 32711982
<TRADING-REVENUE> 15143319
<INTEREST-DIVIDENDS> 87210
<COMMISSIONS> 543010
<INVESTMENT-BANKING-REVENUES> 295363
<FEE-REVENUE> 0
<INTEREST-EXPENSE> 35751
<COMPENSATION> 6876306
<INCOME-PRETAX> 3012436
<INCOME-PRE-EXTRAORDINARY> 3012436
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1899814
<EPS-BASIC> 0.34
<EPS-DILUTED> 0.29
</TABLE>
