<PAGE>
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 October 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: 6,442,815 at
November 24, 1999.
<PAGE>
M. H. Meyerson & Co., Inc.
Index
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
<S> <C>
Statements of financial condition, October 31, 1999 and January 31, 1999........................1
Statements of operations, three and nine months ended
October 31, 1999 and 1998..............................................................2
Statement of changes in stockholders' equity
nine months ended October 31, 1999.....................................................3
Statement of cash flows, nine months ended
October 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 6. Exhibits and Reports on Form 8-K.......................................................8
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
M. H. Meyerson & Co., Inc.
Consolidated Statement of Financial Condition
(Unaudited)
<TABLE>
<CAPTION>
October 31, January 31,
1999 1999
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 5,057,855 $ 2,454,100
Due from clearing brokers - available for
immediate withdrawal 10,311,300 5,605,947
Securities - trading - long at market 8,044,432 10,641,496
Other current assets 2,586,374 687,041
---------------------- ----------------------
25,999,961 19,388,584
Investments 845,671 710,171
Fixed assets net of accumulated depreciation 1,368,295 1,479,044
---------------------- ----------------------
$ 28,213,927 $ 21,577,799
====================== ======================
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Securities - trading - short at market $ 2,667,192 $ 1,852,237
Sales commission payable 3,002,929 3,967,337
Other liabilities and accrued items 2,219,968 1,201,640
---------------------- ----------------------
7,890,089 7,021,214
NON-CURRENT LIABILITIES
Minority interest in subsidiary 160,657 0
SUBORDINATED LOAN 2,000,000 2,000,000
STOCKHOLDERS' EQUITY
Common stock 64,028 50,903
Additional paid-in capital 12,103,391 7,849,827
Retained earnings 5,995,762 4,655,855
---------------------- ----------------------
18,163,181 12,556,585
---------------------- ----------------------
$ 28,213,927 $ 21,577,799
====================== ======================
</TABLE>
See notes to financial statements
1
<PAGE>
M. H. Meyerson & Co., Inc.
Condensed Consolidated Statements of Operations
Three and Nine Months Ended October 31,
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
October 31, October 31,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
REVENUE
Trading profit $ 6,604,680 $ 1,737,238 $ 34,199,186 $ 14,741,308
Commission 356,465 446,890 1,361,746 1,209,792
Underwriting 135,886 554,481 911,442 2,838,569
Interest and other 468,753 53,379 731,967 917,542
------------------ ------------------ ------------------- ------------------
7,565,784 2,791,988 37,204,341 19,707,211
------------------ ------------------ ------------------- ------------------
EXPENSES
Clearing charges 3,377,734 1,293,454 11,865,884 5,035,201
Salesmens' draw &
commissions 700,804 920,445 8,920,950 5,148,216
Other personnel costs 1,717,596 1,424,939 5,292,086 4,481,151
Rent and office expense 1,712,390 1,282,965 5,080,294 3,860,043
Legal and professional 652,142 250,229 1,857,495 753,245
Interest expense 36,892 40,458 108,929 120,902
Other expenses 601,684 840,414 1,933,330 2,827,385
------------------ ------------------ ------------------- ------------------
8,799,242 6,052,904 35,058,968 22,226,143
------------------ ------------------ ------------------- ------------------
Income(loss) before income taxes
and minority interest (1,233,458) (3,260,916) 2,145,373 (2,518,932)
Income taxes (467,582) (1,096,877) 825,650 (805,804)
Minority interest 3,299 0 20,185 0
------------------ ------------------ ------------------- ------------------
Net income(loss) $(762,577) $(2,164,039)$ 1,339,908 $(1,713,128)
================== ================== =================== ==================
Earnings(loss) per common share:
Basic $(0.12) $(0.43)$ 0.22 $(0.34)
================== ================== =================== ==================
Diluted $(0.12) $(0.43)$ 0.21 $(0.34)
================== ================== =================== ==================
Weighted average basic shares 6,374,402 5,055,335 6,047,186 5,054,648
================== ================== =================== ==================
Diluted 6,374,402 5,055,335 6,301,717 5,054,648
================== ================== =================== ==================
</TABLE>
See notes to financial statements
2
<PAGE>
M. H. Meyerson & Co., Inc.
Statement of Changes in Shareholders' Equity
(Unaudited)
Nine Months ended October 31, 1999
<TABLE>
<CAPTION>
COMMON
STOCK $.01 PAR ADDITIONAL PAID-
VALUE IN CAPITAL RETAINED
EARNINGS
-------------------- ---------------------- ---------------------
<S> <C> <C> <C>
SHAREHOLDERS' EQUITY $ 50,903 $ 7,849,827 $ 4,655,855
FEBRUARY 1, 1999
Net income for period 1,339,908
Subsidiary private placement 709,584
Private placement 5,000 2,495,000
Options exercised 8,125 1,048,980
-------------------- ---------------------- ---------------------
SHAREHOLDERS' EQUITY
OCTOBER 31, 1999 $ 64,028 $ 12,103,391 $ 5,995,762
==================== ====================== =====================
</TABLE>
See notes to financial statements
3
<PAGE>
M. H. Meyerson & Co., Inc.
Consolidated Statement of Cash Flows
(Unaudited)
Nine Months ended October 31,
<TABLE>
<CAPTION>
1999 1998
------------------- --------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income(loss) $ 1,339,908 $(1,713,128)
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation 308,899 265,481
Change in assets and liabilities
(Increase) decrease in:
Receivable from clearing brokers (4,705,353) (1,442,311)
Securities owned 2,597,064 7,555,912
Other current assets (1,899,333) (137,761)
Increase (decrease) in:
Securities sold but not yet purchased 814,955 (1,341,722)
Payable to clearing brokers 0 (2,868,462)
Sales commission payable (964,408) (790,036)
Other liabilities and accrued items 1,018,328 138,853
------------------- --------------------
Net cash provided by (used in)
operating activities (1,489,940) (333,174)
------------------- --------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Investments (135,500) 240,318
Fixed assets (198,150) (127,097)
------------------- --------------------
Net cash provided by (used in)
investing activities (333,650) 113,221
------------------- --------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Exercise of employee stock options 1,057,105 7,500
Private placement 2,500,000 0
Subsidiary private placement 709,584 0
Increase in minority interest 160,657 0
------------------- --------------------
Net cash provided by (used in)
financing activities 4,427,346 7,500
------------------- --------------------
NET INCREASE (DECREASE) IN CASH 2,603,756 (212,453)
CASH, BEGINNING OF PERIOD 2,454,100 1,433,126
------------------- --------------------
CASH, END OF PERIOD $ 5,057,855 $ 1,220,673
=================== ====================
SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid $ 1,411,000 $ 170,000
=================== ====================
Interest paid $ 108,929 $ 120,902
=================== ====================
</TABLE>
See notes to financial statements
4
<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, 1999,
the statements of operations for the three months and nine
months ended October 31, 1999 and 1998, the statement of
changes in stockholders' equity for the nine month period
ended October 31, 1999, and the statements of cash flows for
the nine months ended October 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 October 31, 1999 and 1998 have been made.
The difference between the effective tax rate shown on the
statements of operations for the quarter and nine months ended
October 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 October 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 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 October 31, 1999, the Company's aggregate indebtedness and
net capital were $5,222,896 and $12,203,788 respectively, a
ratio of 0.43 to 1.00.
5
<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, 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 this 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:
<TABLE>
<CAPTION>
Percent of Total Revenues
--------------------------------------------
Nine Months Ended October 31,
--------------------------------------------
1999 1998
------------------ -----------------
<S> <C> <C>
Net gain on securities transactions............................ 91.9 74.8
Commissions.................................................... 3.7 6.1
Underwriting................................................... 2.4 14.4
Interest and other............................................. 2.0 4.7
------------------ -----------------
100.0 100.0
------------------ -----------------
Clearing charges............................................... 31.9 25.6
Compensation and benefits...................................... 38.2 48.9
Rent and office................................................ 13.7 19.6
Professional fees.............................................. 5.0 3.8
Interest and other operating expenses.......................... 5.4 15.0
------------------ -----------------
Total expenses...................................... 94.2 112.9
------------------ -----------------
Income(loss) before income taxes and
minority interest........................ 5.8 (12.9)
Income taxes........................................ 2.2 (4.1)
Minority interest................................... 0.1 0.0
------------------ -----------------
Net income(loss).................................... 3.6 (8.8)
================== =================
</TABLE>
6
<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, 1999 compared with Quarter Ended October 31, 1998
Total revenues for the quarter ended October 31, 1999 were $7,565,784,
a 171.0% increase from the $2,791,988 reported for the quarter ended October 31,
1998. This increase is attributable mainly to an increase in trading volume,
offset partially by decreases in underwriting and retail services revenue.
Interest and other revenue, consisting mainly of investment gains, was up,
increasing 778.2% from $53,379 to $468,753.
Clearing charges increased from $1,293,454 to $3,377,734, a change of
161.1%. This is attributable to the increase in the Company's trading volume.
Compensation and benefits increased from $2,345,384 to $2,418,400,
representing an increase of 3.1%. This was the result of the increased trading
volume during the third quarter of fiscal 1999 offset by differing percentage
payouts based on the mix of revenue sources.
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, 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 83%
and 87% of total assets at October 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.
7
<PAGE>
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 has been 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.
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
October 31, 1999 was $8.04 million in long positions and $2.67 million in short
positions. The loss to the Company, assuming a 10% decline in prices, would be
$537,000 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 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
<TABLE>
<CAPTION>
Exhibit Number Description of Exhibit
-------------- ----------------------
<S> <C> <C> <C>
11 Calculation of Earnings per Share of
the Company pg. 10
</TABLE>
(b) Reports on Form 8-K:
The Company filed no reports on Form 8-K during the quarter
ended October 31, 1999.
8
<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: 12/07/99 By: /s/ Michael Silvestri
-------- -------------------------
Michael Silvestri
President and Chief Operating Officer
Date: 12/07/99 By: /s/ Eugene M. Whitehouse
-------- ----------------------------
Eugene M. Whitehouse
Vice President and Controller
9
<PAGE>
M. H. Meyerson & Co., Inc.
Exhibit 11
Statement of Earnings Per Share
The earnings per share during the periods presented were calculated as follows:
<TABLE>
<CAPTION>
Nine months ended October 31, 1998
- ----------------------------------
<S> <C> <C>
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
============== ===========================
</TABLE>
1,379,918,955 shares divided by 273 days = 5,054,648 average shares outstanding.
Calculation of equivalent shares would be anti-dilutive.
<TABLE>
<CAPTION>
Nine months ended October 31, 1999
- ----------------------------------
<S> <C> <C>
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 22 to August 2 12 days 74,661,780
6,241,815 shares from August 3 to August 3 1 day 6,241,815
6,291,815 shares from August 4 to August 9 6 days 37,750,890
6,346,815 shares from August 10 to August 10 1 day 6,346,815
</TABLE>
10
<PAGE>
<TABLE>
<S> <C> <C>
6,356,815 shares from August 11 to August 11 1 day 6,356,815
6,371,815 shares from August 12 to August 18 7 days 44,602,705
6,374,815 shares from August 19 to September 2 15 days 95,622,225
6,384,815 shares from September 3 to October 4 32 days 204,314,080
6,386,815 shares from October 5 to October 6 2 days 12,773,630
6,396,815 shares from October 7 to October 19 13 days 83,158,595
6,402,815 shares from October 20 to October 31 12 days 76,833,780
----------------------- ---------------------
273 days 1,650,881,895
======================= =====================
</TABLE>
1,650,881,895 shares divided by 273 days = 6,047,186 average shares outstanding.
Equivalent shares using modified treasury stock method:
<TABLE>
<S> <C> <C> <C>
Shares assumed sold: 25,000 1 25,000
114,091 1.1 125,500
30,000 1.96875 59,063
12,500 2.0625 25,781
159,429 2.1875 348,751
680,000 2.25 1,530,000
10,000 2.4375 24,375
12,500 2.5 31,250
Shares assumed bought: (788,989) 4.9375 (2,169,780)
Total: 254,531 0
</TABLE>
Total weighted average outstanding shares: 6,301,717
$1,339,908 / 6,301,717 = $0.21 earnings per diluted share.
11
<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> OCT-31-1999
<CASH> 5057855
<RECEIVABLES> 10311300
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 8044432
<PP&E> 1368295
<TOTAL-ASSETS> 28213927
<SHORT-TERM> 0
<PAYABLES> 5222897
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 2667192
<LONG-TERM> 2000000
0
0
<COMMON> 64028
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 28213927
<TRADING-REVENUE> 6604680
<INTEREST-DIVIDENDS> 468753
<COMMISSIONS> 356465
<INVESTMENT-BANKING-REVENUES> 135886
<FEE-REVENUE> 0
<INTEREST-EXPENSE> 36892
<COMPENSATION> 2418400
<INCOME-PRETAX> (1233458)
<INCOME-PRE-EXTRAORDINARY> (1233458)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (762577)
<EPS-BASIC> (0.12)
<EPS-DILUTED> (0.12)
</TABLE>
