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U. S. SECURITIES AND EXCHANGE COMMISSION
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Washington, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT UNDER SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended January 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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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 Office 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
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock, par value $0.01 per share
(Title of Class)
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 .
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-K contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ X ]
State issuer's revenues for its most recent fiscal year: $ 33,879,822
At April 7, 1999: (a) 5,527,335 shares of Common Stock, $0.01 par
value, of the registrant (the "Common Stock") were outstanding; (b) 3,217,520
shares of Common Stock were held by non-affiliates; and (c) the aggregate market
value of the Common Stock held by non-affiliates was $15,283,220 based on the
closing average price of $4.75 per share on April 7, 1999.
Certain statements set forth in the Company's Annual Report on Form
10-K for the year ended January 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 1 - Business, Item 7 - Management
Discussion and Analysis of Financial Condition and Results of Operations -
Viability of Operating Results and elsewhere as appropriate. This Annual Report
on Form 10-K, including the Statements of Financial Condition and the notes
thereto, should be read in its entirety for a complete understanding.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
General
Our Company, founded in 1960, is a registered securities broker-dealer
and member of the NASD. We are a full service financial and investment banking
firm which we regard as organized, for functional purposes, in eight (8)
operational divisions:
1. Wholesale Trading and Market Making - Here we engage in buying and
selling securities on behalf of our own trading accounts, usually with
other dealers on the other side of a transaction. In market making
transactions, we stand ready to buy or sell a particular security at a
price quoted by us. As of March 1, 1999, we were market makers in
approximately 3,100. We are a significant market maker in NASDAQ and
bulletin board securities; these trading activities have historically
accounted for the largest part of our revenues.
We employ 38 securities traders and 25 assistant traders in this
division. We incentivize our traders by structuring their compensation
to accord them with a sliding scale percentage of trading profits or
losses from their trading accounts, after deduction of general
expenses. Our management and compliance personnel supervise these
trading activities and require the maintenance of reserves and trading
position limits by these personnel so as to attempt to mitigate trading
losses. In so doing, we are in rigorous compliance with NASDAQ and
other regulatory requirements as well as the traditional standards of
commercial honor in conducting the brokerage business.
2. Correspondent Services - We provide execution services, primarily to
retail service firms and other customers, who wish to use our expertise
to enable them to purchase or sell securities on behalf of their retail
customers. Among our clients are large retail firms, discount
securities brokers, banks and financial institutions. We provide almost
instant execution of customer orders for these clients at very
competitive costs.
3. Retail Securities Services - We have approximately 14,500 retail
customer accounts which we service through 52 licensed registered
representatives, of whom 25 also hold higher licenses as registered
securities principals. Our clients consist of individuals and
institutions, many of whom are sophisticated securities investors and
who have maintained their accounts with us for a lengthy period of
time. Our retail customer accounts are carried on a "fully disclosed"
basis by Bear, Stearns Securities Corp., members of the New York and
other principal stock exchanges, pursuant to a clearing agreement. This
agreement provides that customer securities positions and credit
balances held at Bear, Stearns Securities Corp. are insured for an
unlimited amount; this includes $500,000 coverage by Securities
Investors Protection Corp, which maintains $100,000 coverage of cash
balances.
4. Institutional Sales - Our institutional sales division maintains
accounts with hundreds of investment and mutual funds, foreign and
domestic banks, investment trusts and other institutional investment
vehicles. These institutional clients are serviced by six of our sales,
investment and research staff.
5. Investment Banking - We have long focused our efforts in the investment
banking sector, where we assist small growing companies in the
structure and planning of their business activities and their
capital-raising plans. Our 10 investment banking professionals bring
vast experience to the evaluation of developmental and growth companies
who, in our judgment, have the potential, through business, management,
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proprietary assets and other factors, to become successful public
enterprises. Among our activities in this field, we assist early
capital formation by way of private placements of equity securities,
and assist more mature enterprises in the structuring of public
offerings. We bring value to these clients by assisting their business
plans, growth strategies, and expansion potential while also
identifying and advising them as to strategic alliances, mergers,
acquisitions and divestitures.
Since 1990, we have managed or co-managed 30 initial public offerings
and secondary offerings and acted as placement agent for over 20
private placements of securities, thereby raising for our clients more
than $460,000,000.00 for their capital formation activities. We favor
small companies in fields offering rapid potential growth, such as
computer software, electronic commerce, medical products and
pharmaceuticals.
Our investment banking division also prepares and disseminates research
reports on publicly traded companies which we believe present special
opportunities for purchase and investment by our clients and others.
6. Fixed Income - Since 1997, we acted as manager or co-manager for
various offerings of municipal bonds raising approximately $140,000,000
for state and local entities. We also acted as participants in selling
groups, which increases our ability to offer this type of investment to
our clients. Our fixed income department, comprised of 13
professionals, also advises clients on investments in municipal,
government and corporate bonds.
7. Syndicate - These activities have resulted in our being included in
approximately 197 equity underwritings since 1990. These are in
addition to equity offerings we have managed as underwriter or
co-underwriter in that time period. By virtue of participating in these
syndicates and underwriting activities, we are able to offer our
institutional and retail clients the ability to participate in these
placements of what we view as highly attractive offerings.
8. Emeyerson.com Electronic Trading Subsidiary - On January 29, 1999, we
organized our Emeyerson.com Inc. subsidiary. At this date, we own over
80% of this subsidiary, and have raised approximately $950,000 by
private placements of its stock, to point it to the commencement of
business. Emeyerson has filed its broker-dealer registration which is
now in the process of review and comment by the NASD and SEC. We are
also preparing to register Emeyerson as a broker-dealer in
substantially all of the states. We anticipate that, by the latter part
of this calendar year, Emeyerson's registration process will have been
completed at the national level and will be ongoing and continuing at
the state level. While the early stages of Emeyerson's development are
being assisted by our parent company, we are interviewing and preparing
to have Emeyerson hire executive and financial management which will
assist it in commencing its activities as a retail online brokerage
company. We intend to have Emeyerson license a cost efficient and fast
electronic trading system, including an instantaneous order input and
execution system so that our customers may, through their home computer
or other devices, purchase and sell stocks and other equity securities.
Our goal, through Emeyerson, will be to present investors with a
convenient, cost-effective manner in which to execute their
transactions and receive a vast array of current, constantly updating
financial information, consisting of investment reports, charts, and
instantaneous trading quotations.
Corporate Strategy
As we enter our fortieth anniversary year of investment banking, our
goal and strategy is to maintain our historic strengths in market making,
investment banking and capital formation activities while expanding our product
base and capabilities, on a well planned and controlled scale. We plan to do
this by:
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o Utilizing the latest electronic trading and information technology. We
have increased our trading and access to markets and information to
meet the new trading rules. We have, among other thing, linked a number
of automated trading systems to our arsenal, such as Selectnet, Redi,
Instinet and other electronic communications networks, and the
automated ticketless Brass trading program. The Brass system, which, in
effect, makes trading "paperless", enhances the ability of our traders
to focus on market conditions by eliminating the prior administrative
burden incumbent in trading. The Selectnet, Redi and Instinet networks
link us with trading partners throughout the United States, including
other brokerage firms, block trading desks and specialists on the
regional exchanges. These systems provide us with access into every
major securities exchange on a worldwide basis. We also employ the
Autex electronic volume monitoring system, which permits us to
determine our overall volume of trading as well as our relative trading
volume in a specific security. During Calendar 1998, Autex reported
that we ranked 24th in total market making volume in NASDAQ and
bulletin board securities.
o Our electronic commerce and internet investment banking activities are
being expanded to cover:
1. Raising private placement or other funding for small but
dynamically expanding electronic commerce entities, while
sometimes investing in these operations to secure a minority
position in the shareholdings for our firm.
2. Analyzing the needs of clients involved in these fields so
that we may advise them in acquiring other operations or
expanding their domain sites and activities to encompass other
related businesses, which utilize the same basic technology
and skills. In this regard, we are helping finance and advise
an electronic auction site, an internet [general commerce
site] and similar enterprises.
o Strategic Alliances with Other Institutions - Since we view the
securities industry and financial industries in general as involved in
a vast expansionist phase - both horizontally by taking on a variety of
banking, financial and securities products - and vertically by linking
up European, Far Eastern and American firms - we intend to explore
these possibilities for ourselves as well. We will do this so that:
1. We are able to offer our retail and institutional clients a
wider variety of products;
2. We gain access to other products and overseas markets for our
customers;
3. We are able to make available to overseas parties the ability
to gain access to U.S. securities markets and financial
products.
In this way, we seek to add value for our stockholders, provide greater
services for our clients, and participate in the product and global
expansionist surge of securities and financial firms. The movement to
greater communications resources and electronic commerce, through the
Internet and otherwise, has accelerated these trends. We intend to
participate, but only after carefully examining the risks and potential
rewards involved so that we are not exposing ourselves to significantly
greater financial risk in the implementation of our strategic plans. We
also will move forward only if we are able to assure ourselves and our
clients of being able to continue to provide at least the same
personalized and professional servicing of their financial needs and
accounts that we have historically provided to them.
Operations
We do not hold client funds or securities and do not directly process
back office operations. We clear most transactions for our institutional clients
and all transactions for our own proprietary trading accounts, with Spear, Leeds
& Kellogg, Inc., members of the New York Stock Exchange and other principle
stock exchanges. We clear all transactions for our retail customers with Bear
Stearns Securities Corp., a firm which clears for more brokers
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than any other national entity. All clearing activities are carried on a fully
disclosed basis with our customers. These clearing services are furnished to us
and our clients for a fee and include billing, custody of securities, credit
review (including for margin accounts) and similar activities. However, if our
customers do not pay or deliver securities for a trade or if they do not
properly maintain their credit balances on "margin" accounts, and there is a
loss for which we cannot collect from our customer, we are generally liable for
such losses. We maintain our back office and compliance divisions to supervise
our activities generally and to ensure financial and regulatory compliance with
applicable rules.
Vendors
We employ a multitude of third party vendors which supply us with
information services and software, including stock quotations, stock trading
charts, news and financial data. We have alternate sources for these services
and, accordingly, do not consider ourselves dependent on any one or more of
these suppliers.
Competition
The securities industry is very competitive and, with technical
innovation, is becoming even more so. Accordingly, we seek to compete, based
upon our traditional strengths built up over a forty year period of time of:
o quality
o efficiency
o price
o reliability of our trading abilities
o our reputation in the markets and with other market professionals
o relationships with our institutional and retail clients
o our skilled and experienced management team
o research data
We also utilize what we consider the best and most reliable of technological
advances in order to compete and maintain the quality of services provided. We
are competing with a galaxy of large and small brokerage firms which utilize
both traditional methods and electronic commerce to transact their business.
We encounter intense competition in all aspects of the securities
business and compete directly with other securities firms, a significant number
of which have substantially greater capital and other resources. Many of these
competitors now offer a wider range of financial services although our strategy
is to bridge this gap by broadening our product line. In addition to competition
from firms currently in the securities business there has recently been
increasing competition from other sources such as commercial banks and insurance
companies offering financial services. We believe that the principal competitive
factors in the securities industry are the quality and ability of professional
personnel and relative prices of services and products offered. We and our
competitors also directly solicit potential customers and furnish investment
research publications to investors in an effort to hold and attract existing and
potential clients.
Government Regulation
The securities industry in the United States is subject to extensive
regulation under both federal and state laws. We are registered as a
broker/dealer with the SEC. Much of the regulation of broker/dealers has been
delegated to self-regulated organizations, principally the NASD and national
securities exchanges such as NASDAQ. These self-regulatory organizations adopt
rules (subject to approval by the SEC) that govern the industry and conduct
periodic examinations of our operations. Securities firms are also subject to
regulation by state securities administrators in those states in which they
conduct business.
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Regulatory bodies are charged with safeguarding the integrity of the
securities and other financial markets and with protecting the interests of
clients participating in those markets, but not with protecting the interests of
our stockholders. Broker-dealers are subject to regulations covering all aspects
of the securities business, including sales methods, trade practices among
broker-dealers, use and safekeeping of clients' funds and securities, capital
structure, record keeping and the conduct of directors, officers and employees.
Net Capital Requirements
The SEC, NASD and various other regulatory agencies have rigid rules
requiring the maintenance of specific levels of net capital by securities
brokers, including the SEC's uniform net capital rule which we must comply with.
Net capital is defined as assets minus liabilities plus other allowable credits
and qualifying subordinated borrowings less mandatory deductions that result
from excluding assets that are not readily convertible into cash and from
valuing other assets, such as a firm's positions in securities, on a stringent
basis. Among these deductions are adjustments in the market value of securities
to reflect the possibility of a market decline prior to disposition.
As of January 31, 1999, we were required to maintain minimum net
capital, in accordance with SEC rules, of $1,000,000 and had total net capital
of approximately $9,445,000 or approximately $8,445,000 in excess of our minimum
net capital requirements.
If we fail to maintain the required net capital we may be subject to
suspension or revocation of registration by the SEC and suspension or expulsion
by the NASD and other regulatory bodies. In addition, a change in the net
capital rules, the imposition of new rules, a specific operating loss, or any
unusually large charge against net capital could limit our operations that
require the intensive use of capital and could limit our ability to expand our
business. The net capital rules also could restrict our ability to withdraw
capital, which could limit our ability to pay dividends, repay debt and
repurchase shares of our outstanding stock.
Personnel
As of March 31, 1999, we employ a total of 182 full-time persons, whose
primary roles are: 3 engaged in executive management, 5 accounting, 6
compliance, 18 back office personnel, 5 retail clerical, 52 retail
representatives, 6 institutional/research, 11 investment banking, 63 trading and
13 bonds and fixed income. Our relations with our employees are generally good
and we have no collective bargaining agreements with any labor unions.
Our registered representatives are required to take examinations
administered by the NASD and state authorities in order to be qualified to
transact business. Our success will depend on our ability to hire and retain
additional qualified trading, technical and financial personnel, who are
generally in high demand.
ITEM 2. DESCRIPTION OF PROPERTIES
Facilities
We currently lease approximately 30,000 sq. ft. of space in an office
building known as the Newport Office Tower located at 525 Washington Blvd.,
Jersey City, New Jersey. The lease is in effect through July 31, 2011. We paid
rent on this office for the years ended January 31, 1999 and January 31, 1998
totaling $950,848 and $912,321, respectively.
In addition, we also pay maintenance charges for additional space in
Aventura, Florida, under an agreement with our Chairman and principal
stockholder, Martin H. Meyerson, who owns the property in question. This space
is primarily used for entertainment and investment banking purposes. The total
maintenance charges for the years ending January 31, 1999 and 1998 were $10,440
and $10,440, respectively. We also pay rent for space in
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New York City, New York which is leased in the name of Martin H. Meyerson. This
property is also used primarily for entertainment and investment banking
purposes. The total rent paid on this space for the years ended January 31, 1999
and 1998 were $35,315 and $31,310, respectively. The maintenance charges paid on
the Florida property are the actual maintenance charges billed each month, and
the rent paid on the New York property is the actual rent specified in the lease
between Martin H. Meyerson and the building's landlord. We believe that it is
similar to what would be paid for a comparable property leased on an arm's
length basis. Neither of these properties is the permanent residence of Martin
H. Meyerson.
It is the opinion of our management that all these properties are
adequately covered by our insurance policies.
ITEM 3. LEGAL PROCEEDINGS
Our business involves substantial risks of liability, including
exposure to liability under federal and state securities laws in connection with
the underwriting or distribution of securities and claims by dissatisfied
clients for fraud, unauthorized trading, churning, mismanagement and breach of
duty. We are covered for fraud and unauthorized trading under our broker's
blanket bond.
In the ordinary course of business, we and our principals are, and may
become a party to legal proceedings or arbitrations. We are not currently
involved in any legal proceedings or arbitrations, the outcome of which is
expected to have a material adverse effect on our business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of our security holders during the
fourth quarter of fiscal 1999.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
In connection with our initial public offering of our stock,
consummated January 18, 1994, we sold an aggregate of 2,300,000 units of
securities for $4.00 per unit, each unit consisting of one share of Common Stock
and one Redeemable Common Stock Purchase Warrant (the "Warrants") exercisable at
$4.50, and received net proceeds of $7,580,948 therefrom. As of January 19,
1999, none of the Warrants had been exercised, and they expired, as scheduled.
From January 19, 1994 to March 17, 1994, our securities were traded on
the "Small Capitalization" market of NASDAQ. Since March 18, 1994, our Common
Stock has been traded on the NASDAQ - National Market.
The following sets forth for the fiscal quarters as indicated the high
and low bid closing quotations for our Common Stock on the NMS from February 1,
1996 through January 31, 1999. This information reflects interdealer quotations,
without retail mark-up, mark-down or commissions, and may not necessarily
represent actual transactions.
Common Stock
High Low
Fiscal Year 1997
1st Quarter $2.53 $1.78
2nd Quarter $4.31 $2.47
3rd Quarter $3.75 $2.88
4th Quarter $4.06 $2.38
Fiscal Year 1998
1st Quarter $6.31 $4.13
2nd Quarter $6.38 $4.88
3rd Quarter $6.38 $4.94
4th Quarter $5.38 $3.69
Fiscal Year 1999
1st Quarter $4.50 $1.75
2nd Quarter $2.31 $1.44
3rd Quarter $1.75 $0.66
4th Quarter $2.56 $0.69
The number of shareholders of record of our Company's Common Stock on
March 31, 1999 was approximately 50, and the number of beneficial holders of our
Common Stock is estimated by us to be approximately 4,200.
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ITEM 6. SELECTED FINANCIAL DATA
The historical selected financial data set forth below for the three
years ended January 31, 1999 are derived from the Company's Financial Statements
included elsewhere in this Annual Report on Form 10-K and should be read in
conjunction with those financial statements and notes thereto. Those financial
statements have been audited by Vincent R. Vassallo, independent certified
public accounts, whose report on the financial statements appears elsewhere.
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<CAPTION>
January 31,
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1999 1998 1997
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<S> <C> <C> <C>
Balance Sheet Data:
Assets $21,577,799 $ 24,526,907 $ 23,702,300
Liabilities 7,021,214 10,249,271 9,759,700
Subordinated Liability 2,000,000 2,000,000 0
Shareholders' Equity 12,556,585 12,277,636 13,942,600
Statement of Operations Data: Year Ended January 31,
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1999 1998 1997
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Revenues
Net gain on securities transactions $ 28,784,099 $ 20,637,323 $ 34,214,505
Underwriting 2,966,120 3,254,395 4,811,399
Commissions 1,728,938 2,025,672 2,396,754
Interest and other revenue 400,665 1,540,174 463,937
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Total Revenues 33,879,822 27,457,564 41,886,595
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Expenses
Compensation and benefits 16,451,594 14,383,715 22,226,110
Clearance charges 7,328,909 6,233,720 6,467,259
Communications 3,544,838 3,411,166 3,260,963
Professional fees 916,005 973,902 1,416,519
Occupancy and equipment costs 996,603 954,071 461,874
Other operating expenses 4,185,103 4,180,770 4,788,042
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Total Expenses 33,423,052 30,137,344 38,620,767
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Income (Loss) Before Taxes 456,770 (2,679,780) 3,265,828
Provision For Income Taxes 220,321 (960,316) 1,445,865
------------- ------------- -------------
Net Income $ 236,449 $ (1,719,464) $ 1,819,963
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ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
General
The following discussion of our financial condition and results of
operations should be read in conjunction with the Financial Statements and Notes
thereto appearing elsewhere in this Annual Report on Form 10-K.
Results of Operations
The following table sets forth for the periods indicated the percentage
of total revenue represented by certain line items in our Statement of
Operations:
Percent of Total Revenues
-------------------------
Year Ended January 31,
----------------------
1999 1998 1997
---- ---- ----
Net gain on securities transactions 85 75 82
Underwriting 9 12 11
Commissions 5 7 6
Interest and other 1 6 1
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100 100 100
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Compensation and benefits 49 52 53
Clearance charges 22 23 16
Communications 10 12 8
Professional fees 3 4 3
Occupancy and equipment costs 3 4 1
Other operating expenses 12 15 11
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Total expenses 99 110 92
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Income before income taxes 1 (10) 8
Provision for income taxes * (4) 3
--------- --------- ----------
Net income 1 (6) 4
========= ========= ==========
* represents amount less than 1%
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.
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Fiscal Year 1999 Compared with Fiscal Year 1998
Total revenues in fiscal year 1999 increased to $33,879,822 from
$27,457,564, or 23.4%. This is attributable mainly to the 39.5% increase in
trading revenue, offset by decreases in underwriting, commissions, and interest
and other revenue of 8.9%, 14.6%, and 74.0% respectively.
We believe that the increase in trading revenue is due to a significant
increase in volume, credited in large part, to the explosion in retail internet
and electronic trading activity. We were able to acclimate ourselves to the new
trading and technological environmental which had pressured our volume and
profitability in the prior fiscal year but was now contributing to the up-surge
in our trading revenue.
Compensation and benefits increased from $14,383,715 to $16,451,594, a
change of 14.4%. This resulted from increased commissions and draws to our
personnel, generated by the increase in trading revenues.
Clearing charges increased 17.65 from $6,233,720 to $7,328,909, which
was also due to increased volume.
Communications charges increased slightly by 3.9%, from $3,411,166 to
$3,544,838.
Other operating expenses, comprising professional fees, research fees,
occupancy, and various other operating costs decreased slightly from $6,108,743
to $6,097,711.
Net income for fiscal year 1999 was $236,449, compared with a loss of
($1,719,464) reported for fiscal 1998. The return to profitability was due to
the increase in gross revenues, mainly due to increased trading volume and
margins.
Fiscal Year 1998 Compared with Fiscal Year 1997
Total revenues in fiscal year 1998 decreased to $27,457,564 from
$41,886,595, or 34.4%. This is largely attributable to a 39.7% decrease in
trading revenues and a 32.4% decrease in underwriting revenue, along with a
smaller decrease in commissions, offset partially by an increase of 232.0% in
interest and other revenue.
We believe that a significant portion of the decrease in revenue was
due to the new order handling rules which took effect during the fiscal year
1998. Trading volume was lower, but not to the extent of the drop in revenues. A
not insignificant percentage of our trades last year were done at little or no
gross profit, due to the new rules' mechanisms. We also generated greater
revenue from the fixed income and investment banking areas, to replace some of
the lost revenue caused by the change in the equity marketplace.
Compensation and benefits decreased from $22,226,110 to $14,383,715, a
change of 35.3%. This resulted primarily from lower draws and commissions to
retail representatives and brokers, due to the lower revenue.
Clearing charges decreased from $6,467,259 to $6,233,720, representing
a decrease of approximately 3.6%.
Communications charges increased 4.6% from $3,260,963 to 3,411,166 as
we geared up with new trading systems to meet the challenge of the changes in
rules and electronic trading expansion.
Other operating expenses, comprising professional fees, research fees,
occupancy, and various other operating costs decreased from $6,666,435 to
$6,108,743, a decrease of 8.4%. Components of this decrease were expenses for
professional fees, and miscellaneous other expenses, partially offset by an
increase in occupancy costs.
We reported a net loss of ($1,719,464) for the fiscal year ended
January 31, 1998, as contrasts with the net profit of $1,819,963 reported for
fiscal 1997. This change was primarily caused by the reduction in revenue
experienced, due mainly to the imposition of new order handling rules during the
year.
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Viability of Operating Results
We, like other securities firms, are 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
our investment banking services. All of these factors have an impact on our net
gain from securities transactions, underwriting, and commission revenues. In
periods of reduced market activity, profitability can be adversely affected
because certain expenses, consisting primarily of non-officer compensation and
benefits, communications and occupancy charges and equipment costs remain
relatively fixed.
Liquidity and Capital Resources
Our statements of financial position reflect a liquid financial
position as cash and assets readily convertible to cash represent 87% and 81% of
total assets at January 31, 1999 and January 31, 1998 respectively.
We finance our operations primarily with existing capital and funds
generated from operations. In April, 1999, we sold 500,000 shares of our newly
issued common stock to several large investors at a price of $5.00 per share, or
an aggregate of $2,500,000.00. The net proceeds of this sale were added to our
working capital and, accordingly, strengthened our liquidity and capital
resources. We believe that existing capital and cash flow from operations will
be sufficient to meet our cash requirements.
Year 2000 Issues
We would be materially adversely affected if there are any failures or
interruptions in service resulting from the inability of our computing systems
or any third-party's systems to recognize the year 2000. We have devised a plan
and have substantially completed a review and assessment of all hardware and
software and believe that such hardware and software are substantially year 2000
compliant so that the computer programs do not cease functioning because of an
inability to process on a date occurring from and after January 1, 2000. Our
review has not revealed any year 2000 issues that cannot be remediated in a
timely and cost efficient manner. We are highly dependent upon third-party
financial information vendors, telecommunications suppliers and our clearing
brokers. We have sent letters to a number of these third parties requesting
assurances of their compliance and these parties have generally advised us that
their review of their operating systems indicate that their operating systems
are year 2000 compliant or will be year 2000 compliant in a timely manner. We
are currently developing a contingency plan in the event that any third parties
with which we do business have any material year 2000 compliance problems. We do
not expect to incur any significant expenditures related to year 2000 problems
with our primary information systems. However, any failure by our clearing
organization or other outside vendors to adequately address the date change
could have a material adverse effect on our financial condition and operations.
11
<PAGE>
ITEM 8 FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
Page
Report of Independent Public Accountants .................................. 13
Statements of Financial Condition
at January 31, 1999 and 1998 ...........................................14
Statements of Operations for the years
ended January 31, 1999, 1998 and 1997...................................15
Statements of Stockholders' Equity for the years
ended January 31, 1999, 1998 and 1997 ..................................16
Statements of Cash Flows for the years
ended January 31, 1999, 1998 and 1997 ..................................17
Notes to Financial Statements................................................18
12
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Shareholders
M. H. Meyerson & Co., Inc.
We have audited the accompanying statements of financial condition of
M. H. Meyerson & Co., Inc. as of January 31, 1999 and 1998, and the related
statements of operations, changes in shareholders' equity and cash flows for
each of the three years in the period ended January 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of M. H. Meyerson &
Co., Inc., as of January 31, 1999 and 1998, and the results of its operations
and its cash flows for each of the three years in the period ended January 31,
1999 in conformity with generally accepted accounting principles.
VINCENT R. VASSALLO, CPA
Sea Cliff, New York
March 19, 1999
13
<PAGE>
M. H. MEYERSON & CO., INC.
STATEMENT OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
JANUARY 31,
ASSETS 1999 1998
------ ---- ----
<S> <C> <C>
Cash and cash equivalents $ 2,454,100 $ 1,433,126
Receivable from clearing brokers (Note 3) 5,605,947 4,106,384
Securities owned - at market value (Notes 2 and 3) 10,641,496 13,539,455
Income tax refunds receivable (Notes 2 and 5) - 756,758
Investments - not readily marketable (Note 2) 710,171 2,348,421
Property and equipment, net (Notes 2 and 3) 1,479,044 1,635,600
Other assets 687,041 704,163
------------ ------------
TOTAL ASSETS $ 21,577,799 $ 24,526,907
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Securities sold, but not yet purchased - at market value
(Notes 2 and 3) $ 1,852,237 $ 3,474,601
Payable to trading representatives 3,967,337 2,756,111
Payable to clearing brokers (Note 3) - 2,868,462
Other liabilities and accrued expenses (Note 3) 1,201,640 1,150,097
------------ ------------
TOTAL LIABILITIES 7,021,214 10,249,271
------------ ------------
COMMITMENTS (Note 6)
SUBORDINATED LOAN (Note 7) 2,000,000 2,000,000
------------ ------------
SHAREHOLDERS' EQUITY
Common Stock, $.01 par value, 25,000,000 shares
authorized, 5,090,335 and 5,047,835 shares issued and
5,090,335 and 5,047,835 shares outstanding at
January 31, 1999 and 1998 50,903 50,478
Additional paid-in capital 7,849,827 7,807,752
Retained earnings 4,655,855 4,419,406
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 12,556,585 12,277,636
------------ ------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 21,577,799 $ 24,526,907
============ ============
</TABLE>
The accompanying notes are an integral part of this statement.
14
<PAGE>
M. H. MEYERSON & CO., INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
----------------------
REVENUES 1999 1998 1997
----------------- ---------------- -----------------
<S> <C> <C> <C>
Net gain on securities transactions $ 28,784,099 $20,627,323 $ 34,214,505
Underwriting 2,966,120 3,254,395 4,811,399
Commissions 1,728,938 2,025,672 2,396,754
Interest 214,384 217,294 380,752
Net gain on investments and disposal of assets 186,281 1,322,880 83,185
--------------- ---------------- ----------------
TOTAL REVENUES 33,879,822 27,457,564 41,886,595
--------------- ---------------- ----------------
EXPENSES
Compensation and benefits 16,451,594 14,383,715 22,226,110
Clearance charges 7,328,909 6,233,720 6,467,259
Communications 3,544,838 3,411,166 3,260,963
Professional fees 916,005 973,902 1,416,519
Occupancy and equipment costs (Notes 4 and 6) 996,603 954,071 461,874
Other operating expenses 4,185,103 4,180,770 4,788,042
--------------- ---------------- ----------------
TOTAL EXPENSES 33,423,052 30,137,344 38,620,767
--------------- ---------------- ----------------
INCOME (LOSS) BEFORE INCOME TAXES AND TAX
BENEFITS 456,770 (2,679,780) 3,265,828
Provision for income taxes and (tax benefits)
(Notes 2 and 5) 220,321 (960,316) 1,445,865
--------------- ---------------- ----------------
NET INCOME (LOSS) $ 236,449 $(1,719,464) $ 1,819,963
=============== ================ ================
BASIC EARNINGS (LOSS) PER SHARE OF COMMON
STOCK (Note 2) $ 0.05 $ (0.34) $ 0.36
=============== ================ ================
DILUTED EARNINGS (LOSS) PER SHARE OF COMMON
STOCK (Note 2) $ 0.04 $ (0.34) $ 0.33
=============== ================ ================
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 5,056,068 5,032,262 4,990,685
=============== ================ ================
DILUTED WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 5,543,784 5,032,262 5,521,016
=============== ================ ================
</TABLE>
The accompanying notes are an integral part of this statement.
15
<PAGE>
M. H. MEYERSON & CO., INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
YEARS ENDED JANUARY 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
COMMON
STOCK ADDITIONAL
$.01 PAR PAID-IN RETAINED LOANS TO OFFICERS FOR
VALUE CAPITAL EARNINGS PURCHASE OF COMPANY STOCK
<S> <C> <C> <C> <C>
SHAREHOLDERS' EQUITY
FEBRUARY 1, 1996 $ 49,833 $ 7,743,897 $ 4,318,907 $ (57,500)
Officer loan repayment 57,500
Options exercised 100 9,900
Net income for year 1,819,963
- -------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
JANUARY 31, 1997 49,933 7,753,797 6,138,870 $ 0
Options exercised 545 53,955
Net (loss) for year (1,719,464)
- -------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
JANUARY 31, 1998 50,478 7,807,752 4,419,406 $ 0
Options exercised 425 42,075
Net income for year 236,449
- -------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
JANUARY 31, 1999 $ 50,903 $ 7,849,827 $ 4,655,855 $ 0
=============================================================================================================
</TABLE>
The accompanying notes are an integral part of this statement.
16
<PAGE>
M. H. MEYERSON & CO., INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
----------------------
1999 1998 1997
---------------- --------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 236,449 $ (1,719,463) $ 1,819,963
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation 372,175 373,256 535,592
Change in assets and liabilities:
(Increase) decrease in:
Receivable from clearing brokers (1,499,563) (1,086,437) 5,312,639
Securities owned 2,897,959 (3,411) (4,768,219)
Income taxes receivable 759,758 179,808 (939,566)
Increase (decrease) in:
Securities sold, but not yet purchased (1,622,364) (19,112) 623,496
Payable to trading representatives 1,211,226 (1,915,428) 1,105,186
Payable to clearing brokers (2,868,462) 2,868,462 -
Income taxes payable - - (501,869)
Other liabilities and accrued expenses 51,543 (444,351) 1,208,038
--------------- --------------- ---------------
Net cash provided by (used in) operating
activities (444,157) (1,908,069) 4,276,363
--------------- --------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments 1,638,250 (649,337) (1,368,863)
Purchase of property and equipment (215,619) (248,269) (1,609,296)
--------------- --------------- ---------------
Net cash used in investing activities 1,422,631 (897,606) (2,978,159)
--------------- --------------- ---------------
CASH FLOW FROM FINANCING ACTIVITIES:
Subordinated loan - 2,000,000 -
Options exercised 42,500 54,500 10,000
Loans to officers repayment - - 57,500
--------------- --------------- ---------------
Net cash provided by (used in) financing
activities 42,500 2,054,500 67,500
--------------- --------------- ---------------
NET INCREASE (DECREASE) IN CASH 1,020,974 (751,175) 1,365,704
CASH, BEGINNING OF YEAR 1,433,126 2,184,301 818,597
--------------- --------------- ---------------
CASH, END OF YEAR $2,454,100 $ 1,433,126 $ 2,184,301
=============== =============== ===============
SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid $ 170,000 $ - $ 2,887,300
=============== =============== ===============
Interest paid $ 157,669 $ 67,556 $ -
=============== =============== ===============
</TABLE>
The accompanying notes are an integral part of this statement.
17
<PAGE>
M. H. MEYERSON & CO., INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1999, 1998 AND 1997
1. ORGANIZATION
Our Company is a registered broker-dealer under the Securities and Exchange Act
of 1934 which provides securities trading, underwriting, investment banking and
brokerage services for individuals, institutions and corporations.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The preparation of financial statements in conformity with generally accepted
accounting principals requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Security Transactions
Our customers' securities transactions are recorded on a settlement date basis,
which is generally three business days after trade date with related revenues
and expenses recorded on a trade date basis. Our securities transactions are
recorded on a trade date basis. Securities traded on a national securities
exchange are valued at the last sales price on January 31, 1999, 1998 and 1997.
Securities traded on the over-the-counter market are valued at the bid price for
securities owned and at the ask price for securities sold but not yet purchased.
Unrealized gains and losses on security transactions are reflected in income.
Underwriting Revenues
Underwriting fees are recorded at the time the underwriting is completed.
Investments - Not Readily Marketable
Investments not readily marketable are valued at estimated fair value as
determined by management. Investments not readily marketable include restricted
securities which cannot be publicly offered or sold unless registration has been
effected under the Securities Act of 1933 or unless the applicable provisions of
Rule 144 of the Securities Act are met.
Property and Equipment
Property and equipment is stated at cost. Office furniture, equipment and
vehicles are depreciated over the estimated useful lives, ranging from 3 to 7
years using accelerated methods. Leasehold improvements are amortized over the
shorter of the remaining life of the lease or the estimated economic life of the
improvements.
Income Taxes
We have adopted Statement of Financial Accounting Standards ("SFAS") No. 109
"Accounting for Income Taxes". There are no temporary differences between tax
and financial reporting.
18
<PAGE>
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.
3. COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS
Cash and Cash Equivalents
Cash and cash equivalents represent funds on deposit in interest bearing and
non-interest bearing checking accounts and certificates of deposit with a
maturity of three months or less.
Receivable and Payables From/To Clearing Brokers
Receivables and payables from/to clearing brokers are from trading activity and
funds deposited and are unsecured. The funds are available for immediate
withdrawal and are drawn upon as needed. Interest is paid on these funds at
fluctuating rates.
Securities Owned
Approximately seventy-four percent of securities owned consist of
over-the-counter stocks and approximately twenty-four percent consist of fixed
income securities.
Property and Equipment
Property and equipment consists of the following:
<TABLE>
<CAPTION>
January 31,
-----------
1999 1998 1997
------------------------------------------------------
<S> <C> <C> <C>
Office furniture and equipment $ 1,641,851 $ 1,426,232 $ 1,244,733
Leasehold improvements 838,375 838,375 734,035
Vehicles 34,994 34,994 128,797
------------------------------------------------------
2,515,220 2,299,601 2,107,565
Less accumulated depreciation and amortization 1,036,176 664,001 346,977
------------------------------------------------------
$ 1,479,044 $ 1,635,600 $ 1,760,588
======================================================
</TABLE>
Securities Sold, but not yet Purchased
Securities sold but not yet purchased represent obligations of our company to
deliver the specified securities at some point in the future, thereby creating a
liability to purchase these securities at prevailing market prices in effect at
that time. Approximately ninety-five percent of securities sold, but not yet
purchased consist of over-the-counter stocks and approximately five percent is
fixed income securities.
19
<PAGE>
There is a market risk associated with these securities if the security price
increases and the securities have to be purchased at a higher price to cover the
positions. There is no margin requirement for these transactions. We seek to
control the risks associated with these positions by closely monitoring the
market fluctuations of the prices for these securities.
Payable to Trading Representatives
Payable to trading representatives represents commissions earned by market
makers and retail representatives. Market makers are required to maintain a
balance with our company equivalent to approximately twenty-five percent of
their net trading positions. The remaining balance of commissions is available
for immediate withdrawal.
Other Liabilities and Accrued Expenses
Other liabilities and accrued expenses consist of:
<TABLE>
<CAPTION>
January 31,
1999 1998 1997
-------------------------------------------
<S> <C> <C> <C>
Accrued salaries, taxes and fringe benefits $ 135,981 $ 141,530 $ 116,145
Other accrued liabilities 5,032,996 3,764,678 1,478,302
-------------------------------------------
$ 5,168,977 $ 3,906,208 $ 1,594,447
===========================================
</TABLE>
4. RELATED PARTY TRANSACTIONS
Transactions with related parties are summarized as follows:
<TABLE>
<CAPTION>
Year ended
January 31,
1999 1998 1997
----------------------------------
<S> <C> <C> <C>
Maintenance charges paid on space owned by the
principal shareholder (included in rent expense) $ 10,440 $ 10,440 $ 17,977
Rent for space which is leased in the name of the
principal shareholder $ 35,315 $ 31,310 $ 31,310
</TABLE>
20
<PAGE>
5. INCOME TAXES
The provision for income taxes is as follows:
Year ended
January 31,
1999 1998 1997
------------------------------------------
Current tax expense(benefit)
Federal $220,321 $ (960,316) $ 1,120,057
State - - 325,808
------------------------------------------
$220,321 $ (960,316) $ 1,445,865
==========================================
A reconciliation from the statutory federal income tax rate to the effective tax
rate is as follows:
Year ended
January 31,
1999 1998 1997
------------------------------
U.S. statutory rate 34.0% (34.0)% 34.0%
State taxes, net of federal benefit - - 6.6
Other 14.2 (1.8) 3.7
------------------------------
48.2% (35.8)% 44.3%
==============================
6. COMMITMENTS
Lease Commitments
We signed a 15 year lease for new office space, effective August 1, 1996, and
added additional space effective March 15, 1997. In addition we also pay rent
for additional space under agreements with the principal shareholder.
Minimum annual rental and lease commitments for all office space with a
remaining term of one year or more at January 31, 1999 are as follows:
Year ending January 31,
2000 $ 793,040
2001 793,040
2002 824,725
2003 856,400
2004 856,400
Remainder through July 31, 2011 6,607,300
------------
Net minimum lease payments $ 10,730,905
============
21
<PAGE>
Rent expense for the years ended January 31, 1999, 1998 and 1997 was $996,603,
$954,071 and $429,459 respectively.
Employment Agreements
We have employment agreements with Martin H. Meyerson, Chairman and Chief
Executive Officer, and Michael Silvestri, President and Chief Operating
Officer. The agreements provide for base annual compensation of $600,000 and
$200,000 respectively. The agreements were for a three (3) year period from
October, 1993 and were renewed automatically for succeeding periods of one year.
In the event that we terminate, without cause, the employees, the employee shall
receive an amount equal to one year's base salary plus accrued benefits and
incentive compensation.
7. SUBORDINATED LOANS
Our company entered into a NASD approved subordinated loan agreement with Spear,
Leeds & Kellogg, dated June 3, 1997 and effective August 1, 1997. The amount is
$2,000,000 and matures on August 31, 1999. It is subject to monthly interest
payments at the rate of half a percent below the Prime Rate and is unsecured.
8. NET CAPITAL REQUIREMENT
As a registered broker-dealer, our company is subject to the requirements of
Rule 15c3-1 (the net capital rule) under the Securities Act of 1934. The basic
concept of the rule of liquidity 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.
Our company's aggregate indebtedness and net capital were $ 5,168,977 and
$ 9,444,564 on January 31, 1999, $ 6,774,670 and $ 6,952,975 on January 31, 1998
and $ 6,265,987 and $ 6,908,273 on January 31, 1997 respectively, with ratios of
.55, .97 and .91 to 1.00.
9. STOCK OPTIONS
Our company established an employee stock option plan administered by the Board
of Directors. Under the plan, options may be granted to employees of our company
and other qualified individuals up to an aggregate of 2,500,000 shares of Common
stock. As of January 31, 1999, 1,993,000 options have been granted under this
plan, 1,801,000 of which became exercisable as of January 31, 1999 and the
balance will become exercisable at varying times through April, 2000. The
outstanding options have exercise prices of $1.00 to $3.50 per share. 107,000
options were exercised and 1,886,000 are outstanding.
10. STOCK-BASED COMPENSATION
Our company uses the intrinsic value method to account for stock-based employee
compensation plans. Under this method, compensation cost is recognized for stock
option awards only if the quoted market price (or estimated fair market value of
the stock prior to the stock becoming publicly traded) is greater than the
amount the employee must pay to acquire the stock.
Our company has adopted the disclosure-only provisions of SFAS 123. Accordingly,
no compensation cost has been recognized for stock options granted under the
plan. Had compensation cost been determined based on the fair value at the grant
dates for stock option awards consistent with the method of SFAS 123, there
would have been no material effect on our company's net income and earnings per
share.
22
<PAGE>
The exercise price of each option granted under the plan is determined by our
company's Board of Directors at the time of grant. The exercise price of
incentive stock options must be at least equal to the fair market value of our
company's stock on the date of the grant.
11. YEAR 2000 ISSUE (UNAUDITED)
Our company has developed a plan to be year 2000 compliant. Our management
estimates that the expense of year 2000 issues will not have a material impact
on the financial position of our company or the results of its operations.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
23
<PAGE>
PART III
ITEM 10. EXECUTIVE OFFICERS AND DIRECTORS
Our executive officers and directors are as follows:
Name Age Position with Company
Martin H. Meyerson 68 Chairman, Chief Executive Officer, Chief
Financial Officer and Director
Michael Silvestri 51 President, Chief Operating Officer and
Director
Kenneth J. Koock 56 Vice Chairman and Director
Jeffrey E. Meyerson 33 Vice President, Foreign Trading, and
Director
Eugene M. Whitehouse 40 Vice President, Controller, Secretary,
Treasurer and Director
Bertram Siegel, Esq. 61 Director
Martin Leventhal, CPA 62 Director
Alfred T. Duncan 55 Director
Biographical Information
Martin H. Meyerson, Chairman, Chief Executive Officer and
Chief Financial Officer
Martin H. Meyerson is our Chairman, Chief Executive Officer, Chief
Financial Officer and a director since finding our company in 1960. Mr. Meyerson
also acts as Chairman of our Emeyerson.com Inc. subsidiary. Mr. Meyerson was
also the President and a director of Bio Recovery Technology, Inc., a research
and development company involved in microbiological and pollution control
products, from 1984 through 1986. He was also the chairman of the board of Bio
Metallics, Inc., a firm also involved in pollution control products, from 1987
through 1990. Mr. Meyerson graduated from Packard College in 1952, majoring in
Business Administration.
Michael Silvestri, President, Chief Operating Officer and Director
Michael Silvestri joined us in 1978 as Manager and Cashier and has been
our President and Chief Operating Officer since 1984. Mr. Silvestri became a
Director in 1993. He has been actively involved in the securities business for
thirty (30) years. His previous experience at Fahnstock & Company enabled him to
expand his operational expertise in all trading areas. He has established new
compliance and accounting procedures for us. Mr. Silvestri received a sociology
and business degree from Brooklyn College in 1974.
Kenneth J. Koock, Vice Chairman and Director
Kenneth J. Koock has been with us since 1977 and became a director in
1993. Mr. Koock also acts as Vice Chairman of Emeyerson.com Inc. Mr. Koock
received his B.A. degree from Duke University in 1963 and a law degree in 1966
from St. John's University. He was president of Bio Metallics, Inc. from 1987
through 1990 and is a member of the New York State Bar Association.
24
<PAGE>
Jeffrey E. Meyerson, Vice President, Foreign Trading and Director
Jeffrey E. Meyerson has been with us since 1987. He became Vice
President of the Foreign Trading Department in 1989 and a Director in 1993. He
received an Economics/Management degree from Ithaca College in 1987. He is the
son of our Chairman.
Eugene M. Whitehouse, Vice President, Controller, Secretary, Treasurer and
Director
Eugene M. Whitehouse has been associated with us since 1983 and became
our Vice President and Controller in 1994, and a director in 1996. He received a
B.B.A. degree from Pace University in 1982, and an M.B.A. from St. Peter's
College with a concentration in MIS in 1994, and a concentration in
International Business in 1997.
Bertram Siegel, Esq., Director
Bertram Siegel became a director in 1994. Mr. Siegel is a partner in
the law firm of Siegel and Siegel, and was a member of the Board of Directors of
Bio Metallics, Inc., from 1987 through 1990. He is a member of the New Jersey
and Bergen County Bar Associations, and received his Juris Doctor degree from
Rutgers, the State University of New Jersey in 1963.
Martin Leventhal, CPA, Director
Martin Leventhal graduated from Brooklyn College in 1958 and became a
Certified Public Accountant in 1963. He became a director in 1994. With the
exception of time spent in military service, he has been actively involved in
public accounting since his graduation. In 1971, he founded the firm most
recently known as Martin Leventhal & Company, a CPA firm with approximately 25
employees. In 1997 Martin Leventhal & Company merged with Weinick, Sanders & Co.
to form Weinick, Sanders, Leventhal & Co., LLP, with approximately 100
employees, of which Mr. Leventhal is the executive partner. He is a member of
the American Institute of Certified Public Accountants and the New York Society
of Certified Public Accountants, for which he served on numerous committees. He
has also held a principal's license in the securities industry.
Alfred T. Duncan, Director
Alfred T. Duncan has been an independent management consultant since
1992, specializing in financial management for small growth firms. He became a
director in 1997. Prior to 1992, he held numerous senior positions with
Commodore International, Ltd. including General Manager of Latin America and
Eastern Europe (1990-1991) and General Manager of U. S. operations (1987-1990).
He was President and Chief Executive Officer of Victor Technologies (1986-1987)
and has held financial management positions with A. M. International, Abbott
Laboratories, First National Bank of Chicago, and Ford Motor Company. He is
currently Executive Vice President and Chief Financial Officer of On Site
Sourcing Inc. He received an M.B.A. degree from Harvard University in 1972 and a
B.S.C.E. degree from Duke University in 1965.
Our directors and executive officers hold office until their terms
expire and until their successors have been elected and qualified.
Section 16(a) Beneficial Ownership Reporting Compliance
To the best of our knowledge and belief, based solely on a review of
the copies of the required filings and written representations furnished to our
Company, no director, officer or beneficial owner of more than ten percent
25
<PAGE>
of any class of equity securities of the registrant failed to file on a timely
basis reports required by Section 16(a) of the Exchange Act during fiscal year
1999.
11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation
The following table sets forth as of the years ended January 31, 1999,
1998 and 1997 the compensation we paid for services rendered in all capacities
to all executive officers whose cash compensation exceeded $100,000 during these
years:
<TABLE>
<CAPTION>
Long Term
Compensation
------------
Securities
Fiscal Underlying
Name and Principal Position Year Salary Bonus Options/SARS(#)
- --------------------------- ---- ------ ----- ---------------
<S> <C> <C> <C> <C>
Martin H. Meyerson, Chairman.................... 1999 $ 512,500 -- --
1998 600,000 -- 15,000
1997 600,000 $200,000 5,000
Kenneth J. Koock, Vice Chairman................. 1999 434,800 -- --
1998 574,800 -- 10,000
1997 1,448,800 -- 255,000
Michael Silvestri, President and Chief
Operating Officer...................... 1999 225,018 100,000 115,000
1998 215,018 -- 5,000
1997 270,111 100,000 5,000
</TABLE>
This table does not specify "other compensation" since it is less than 10% of
the total salary and bonus reported for each officer. Mr. Koock does not receive
a base salary. His compensation is based on commissions earned. Mr. Silvestri
earns compensation based on commissions earned in addition to his contracted
salary and incentive amounts.
Option Grants in Last Fiscal Year
The following table contains information concerning options granted to
executive officers named in the Summary Compensation Table during the fiscal
year ended January 31, 1999:
<TABLE>
<CAPTION>
Potential
% of Total realizable Value at
Options Assumed annual
Number of Granted to Rates of Stock
Securities Employees Price Appreciation
Underlying in Fiscal Exercise Expiration for Option Term
Options --------- Price ---------- ------------------
Granted (#) Year ($/sh) Date 5%($) 10%($)
----------- ---- -------- ---- -- ---
<S> <C> <C> <C> <C> <C>
Michael Silvestri 15,000 2.636 $1.96875 6/9/03 8,163.75 18,033.75
100,000 17.543 1.375 8/4/03 38,000.00 83,900.00
</TABLE>
The options granted to Mr. Silvestri became exercisable in June and August 1998,
respectively. In accordance with SEC rules, the last two columns shows gains
that might exist for the respective options, assuming the market price of our
common stock appreciates from the date of grant over a period of five years (the
end of the option term) at the annualized rates of five and ten percent,
respectively. If the stock price does not increase above the exercise price at
the time of exercise, realized value to the named executives from these options
will be zero.
26
<PAGE>
Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
No options were exercised by any executive officer named in the Summary
Compensation Table during the fiscal year ended January 31, 1999. The following
table contains information concerning the number and value, at January 31, 1999,
of unexercised options held by executive officers named in the Summary
Compensation Table:
<TABLE>
<CAPTION>
[This table represents the difference
between the exercise price of the
outstanding options and the estimated market
price of the Common Stock on January 29,
Number of Shares Underlying Unexercised 1999 of $2.3125 per share.]
Options at FY-End(#) Value of Unexercised In-the Money
Name (Exercisable /Unexercisable) Options at FY-End
---- -------------------------- (Exercisable /Unexercisable)
--------------------------
<S> <C> <C>
Martin H. Meyerson 430,000/0 $275,625/0
Kenneth J. Koock 275,000/0 $23,437/0
Michael Silvestri 130,000/0 $99,843/0
</TABLE>
Executive Compensation Committee Report
Compensation Policies. The principal goal of our compensation program
as administered by the Board of Directors is to help us attract, motivate and
retain the executive talent required to develop and achieve our strategic and
operating goals with a view to maximizing shareholder value. The key elements of
this program and the objectives of each element are as follows:
Base Salary. Base salaries paid to our executive officers are intended
to be competitive with those paid to executives holding comparable positions in
the marketplace. Individual performance and our performance are considered when
setting salaries within the range for each position. Annual reviews are held and
adjustments are made based on attainment of individual goals in a manner
consistent with operating and financial performance.
Bonuses. Annual cash bonuses are intended to motivate performance by
creating the potential to earn annual incentive awards that are contingent upon
personal and business performance. We set goals of revenue and profitability for
each group.
Long Term Incentives. We provide our executive officers with long-term
incentive compensation through grants of stock options our stock option plan.
The grant of stock option aligns the executive's interests with those of our
stockholders by providing the executive with an opportunity to purchase and
maintain an equity interest in our stock and to share in the appreciation of its
value Stock. In fiscal 1999, options to purchase an aggregate of 100,000 shares
of our Common Stock were granted to our executive officers other than the Chief
Executive Officer. Each of these options vested at grant.
27
<PAGE>
CEO's Compensation. As discussed in the Executive Compensation Table,
Mr. Meyerson received a base salary of $512,500 for fiscal 1999 but did not
receive a bonus. During the third quarter of Fiscal 1999, when securities
markets were in dislocation and our operations were under pressure, Mr. Meyerson
voluntarily, on a temporary basis, reduced his base salary, as part of a company
wide cost reduction program. In the absence of these special circumstances, the
factors involved in determining our CEO's compensation are our revenues and
profits, his lengthy experience and business acumen, his responsibilities, and
the efforts exerted by him in performance of his duties.
Reported upon by the Board of Directors:
Martin H. Meyerson Eugene M. Whitehouse
Kenneth J. Koock Bertram Siegel
Michael Silvestri Martin Leventhal
Jeffrey E. Meyerson Alfred T. Duncan
Employment Agreements
We have employment agreements with Martin H. Meyerson and Michael
Silvestri. The agreements provide for base annual compensation of $600,000 and
$200,000 respectively, plus certain incentive compensation. The agreements
expire in October, 1999 and are automatically renewable for periods of one (1)
year. In the event we terminate without cause the employment of either Mr.
Meyerson or Mr. Silvestri (except by causing non-renewal of their employment
agreement), they would receive a severance payment equal to one year's base
salary plus accrued benefits and incentive compensation.
Share Performance Graph
Nasdaq Nasdaq
Financial Stock M. H. Meyerson
Stocks Market & Co., Inc.
------ ------ -----------
1/31/94 100.000 100.000 100.000
1/31/95 101.052 95.414 17.021
1/31/96 143.072 134.843 34.043
1/31/97 190.173 176.735 69.149
1/30/98 268.016 208.582 62.766
1/29/99 268.172 326.274 39.362
The above graph shows changes over the past five year period ending
January 31, 1999 of $100 invested in: (1) the Nasdaq Stock Market,
(2) The Nasdaq Financial Stocks, and (3) our Common Stock.
28
<PAGE>
ITEM 12. SECURITY OWNERSHIP
The following table sets forth as of April 7, 1999 certain information
with regard to ownership of our common stock by (i) each beneficial owner of
more than 5% of our common stock; (ii) each Director and nominee for Director;
(iii) each executive officer named in the "Executive Compensation Table" above
and (iv) all our executive officers and directors as a group. Unless otherwise
stated, the persons named in the table have sole voting and investment power
with respect to all common stock shown as beneficially owned by them. This
information is based upon 5,527,335 outstanding shares of common stock and
presently exercisable options to acquire 1,060,000 shares of common stock held
by the persons noted:
Common Stock
Name and Address Beneficially Owned Percent of Class
- ---------------- ------------------ ----------------
Martin H. Meyerson 2,465,190 44.657%
Michael Silvestri 130,000 2.339%
Kenneth J. Koock 399,625 7.448%
Jeffrey E. Meyerson 130,000 2.298%
Eugene M. Whitehouse 75,000 1.350%
Bertram Siegel 80,000 1.427%
Martin Leventhal 75,000 1.339%
Alfred Duncan 15,000 0.271%
All executive officers and
directors as a group (8 people) 3,369,815 51.156%
Unless otherwise stated, the business address of each of the named individuals
in this table is c/o M.H. Meyerson & Co., Inc., 525 Washington Boulevard, Jersey
City, New Jersey 07310.
The following table sets forth opposite the name of each of the following
people, the number of shares of our common stock which that person has the right
to acquire upon exercise of currently outstanding and exercisable stock options:
Name Option Shares
Martin H. Meyerson 430,000
Michael Silvestri 30,000
Kenneth J. Koock 275,000
Jeffrey E. Meyerson 130,000
Eugene M. Whitehouse 25,000
Bertram Siegel 80,000
Martin Leventhal 75,000
Alfred Duncan 15,000
29
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding relationships and related transactions is
disclosed in the notes to financial statements included in Item 7 of this
report.
ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Index of Exhibits as required by Item 601 of Regulations S-K.
Exhibit Number Description of Exhibit
-------------- ----------------------
3.1 Articles of Incorporation (1)
3.2 Bylaws (1)
4.1 Common Stock Specimen (1)
4.2 Warrant Specimen (1)
4.3 Unit Specimen (1)
4.4 Warrant Agreement (1)
10.1 Employment Agreement between the Company and
Martin H. Meyerson (1)
10.2 Employment Agreement between the Company and
Michael Silvestri (1)
11 Calculation of Earnings Per Share of the
Company pg. 32
27 Financial Data Schedule (2)
(1) Incorporated herein by reference from the Exhibits filed with
the Registration Statement number 33-70566 on Form SB-2
(2) Filed with EDGAR filing of this report on Form 10-K.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during fiscal year ended
January 31, 1999.
30
<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)
By: /s/ Michael Silvestri
----------------------
Michael Silvestri
President and Chief Operating Officer
Date: April 28, 1999
--------------------
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Martin H. Meyerson and Michael Silvestri,
or any one of them, his attorney-in-fact and agent, with full power of
substitution, for him in any and all capacities, to sign any amendments to this
Annual Report, and to file the same, with exhibits thereto and other documents
in connection therewith, with the Securities and Exchange commission, hereby
ratifying and confirming that all said attorneys-in-fact, or their substitutes,
may do or cause to be done by virtue hereof.
In accordance with the Exchange Act, this Report has been signed below
by the following persons on behalf of the Registrant and in the capacities
indicated and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
Chairman, Chief Executive
/s/ Martin H. Meyerson Officer, Chief Financial
- ------------------------ Officer and Director April 28, 1999
Martin H. Meyerson
/s/ Michael Silvestri President, Chief Operating
- ------------------------ Officer and Director April 28, 1999
Michael Silvestri
/s/ Kenneth J. Koock
- ------------------------ Vice Chairman and Director April 28, 1999
Kenneth J. Koock
/s/ Jeffrey E. Meyerson Vice President, Foreign Trading,
- ------------------------ and Director April 28, 1999
Jeffrey E. Meyerson
/s/ Eugene M. Whitehouse
- ------------------------ Vice President, Controller,
Eugene M. Whitehouse Secretary, Treasurer and Director April 28, 1999
/s/ Bertram Siegel
- ------------------------ Director April 28, 1999
Bertram Siegel, Esq.
- ------------------------ Director
Martin Leventhal, CPA
- ------------------------ Director
Alfred T. Duncan
</TABLE>
31
<PAGE>
EXHIBIT 11
----------
M. H. MEYERSON & CO., INC.
STATEMENT OF EARNINGS PER SHARE
Year ended January 31, 1997
Shares outstanding during the year ended January 31, 1997:
<TABLE>
<S> <C> <C>
4,983,335 shares from February 1 to May 7 1996 97 days 483,383,495
4,993,335 shares from May 8, 1996 to January 31, 1997 269 days 1,343,207,115
366 1,826,590,610
</TABLE>
1,826,590,610 shares divided by 366 days = 4,990,685 average shares outstanding.
Earnings year ended January 31, 1997 = $1,819,963
Basic earnings per share = $1,819,963/4,990,685 = $0.36
Equivalent shares using the modified treasury stock method:
268,000 options, exercise price $1.00 268,000 1.00 $ 268,000
205,000 options, exercise price $1.10 205,000 1.10 $ 225,500
90,000 options, exercise price $2.25 90,000 2.25 $ 202,500
200,000 options, exercise price $2.1875 200,000 2.1875 $ 437,500
12,500 options, exercise price $2.50 12,500 2.50 $ 31,250
300,000 options, exercise price $3.50 300,000 3.50 $ 1,050,000
Less: shares assumed to be purchased (545,169) $ (2,214,750)
--------- -------------
530,331 $ 0
======= == =====
Total weighted average outstanding shares: 4,990,685 + 530,331 = 5,521,016
Earnings - year ended January 31, 1997 = $1,819,963
Diluted earnings per share = $1,819,963 / 5,521,016 = $0.33 earnings per share.
32
<PAGE>
M. H. MEYERSON & CO., INC.
STATEMENT OF EARNINGS PER SHARE (CONT.)
<TABLE>
<S> <C> <C>
Year ended January 31, 1998
Shares outstanding during the year ended January 31, 1998:
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 24, 1997 12 days 59,944,020
5,000,335 shares from February 25 to April 1, 1997 36 days 180,012,060
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, 1997 to January 12, 1998 152 days 766,510,920
5,047,835 shares from January 13 to January 31, 1998 19 days 95,908,865
365 1,836,775,775
</TABLE>
1,836,775,775 shares divided by 365 days = 5,032,262 average shares outstanding.
Loss year ended January 31, 1998 = $(1,719,464)
Basic and diluted loss per share = $(1,719,464)/5,032,262 = $(0.34)
Calculation of equivalent shares was not included as it would be anti-dilutive.
33
<PAGE>
M. H. MEYERSON & CO., INC.
STATEMENT OF EARNINGS PER SHARE (CONT.)
<TABLE>
<S> <C> <C>
Year ended January 31, 1999
Shares outstanding during the year ended January 31, 1999:
5,047,835 shares from February 1 to February 25, 1998 25 days 126,195,875
5,055,335 shares from February 26 to January 19, 1999 327 days 1,653,094,545
5,090,335 shares from January 20 to January 31, 1999 13 days 66,174,355
365 1,845,464,775
</TABLE>
1,845,464,775 shares divided by 365 days = 5,056,068 average shares outstanding.
Earnings year ended January 31, 1999 = $236,449
Basic earnings per share = $236,449/5,056,068 = $0.05
Equivalent shares using the modified treasury stock method:
Options assumed exercised:
576,000 options, exercise price $1.00 576,000
205,000 options, exercise price 1.10 225,500
725,000 options, exercise price 2.25 1,631,250
200,000 options, exercise price 2.1875 437,500
45,000 options, exercise price 1.96875 88,594
40,000 options, exercise price 1.375 55,000
1,791,000 3,013,844
(1,303,284) shares assumed to be purchased (3,013,844)
487,716 0
Total weighted average outstanding shares:
5,056,068 + 487,716 = 5,543,784.
Earnings year ended January 31, 1999 = $236,449.
Diluted earnings per share = $236,449 / 5,543,784 = $0.04.
34
<TABLE> <S> <C>
<ARTICLE> BD
<LEGEND>
This schedule contains summary financial information extracted from SEC
Form 10-K and is qualified in its entirety by reference to such
financial statemnts.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-END> JAN-31-1999
<CASH> 2454100
<RECEIVABLES> 5605947
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 10641496
<PP&E> 1479044
<TOTAL-ASSETS> 21577799
<SHORT-TERM> 0
<PAYABLES> 5168977
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 1852237
<LONG-TERM> 2000000
0
0
<COMMON> 50903
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 21577799
<TRADING-REVENUE> 28784099
<INTEREST-DIVIDENDS> 214384
<COMMISSIONS> 1728938
<INVESTMENT-BANKING-REVENUES> 2966120
<FEE-REVENUE> 0
<INTEREST-EXPENSE> 0
<COMPENSATION> 16451594
<INCOME-PRETAX> 456770
<INCOME-PRE-EXTRAORDINARY> 456770
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 236449
<EPS-PRIMARY> 0.05
<EPS-DILUTED> 0.04
</TABLE>
