<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark one)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 0-23410
M. H. MEYERSON & CO., INC.
(Exact name of registrant as specified in its charter)
NEW JERSEY 13-1924455
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Newport Tower, 525 Washington Boulevard, Jersey City, New Jersey 07310
(Address of principal executive offices) (Zip Code)
(201) 459-9500
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the 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: 6,565,315 at May 17, 2000.
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M. H. Meyerson & Co., Inc.
Index
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Statement of Financial Condition,
April 30, 2000 and January 31, 2000 .........................1
Consolidated Statement of Operations, Three Months Ended
April 30, 2000 and 1999 .....................................2
Consolidated Statement of Changes in Stockholders' Equity
Three Months Ended April 30, 2000 ...........................3
Consolidated Statement of Cash Flows, Three Months Ended
April 30, 2000 and 1999 .....................................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 ............................9
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
M. H. Meyerson & Co., Inc.
Consolidated Statement of Financial Condition
April 30, January 31,
2000 2000
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 5,660,210 $ 6,674,095
Due from clearing brokers -
available for immediate withdrawal 27,691,186 9,299,226
Securities - trading - long at market 9,806,074 14,314,130
Other current assets 2,277,040 2,451,796
---------------- ---------------
45,434,510 32,739,247
Investments 3,688,412 2,505,848
Fixed assets net of accumulated
depreciation 1,025,330 1,116,427
---------------- ---------------
$ 50,148,252 $ 36,361,522
================ ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Securities - trading - short at market $ 1,598,934 $ 3,210,864
Sales commission payable 7,888,269 6,900,550
Other liabilities and accrued items 8,471,256 2,836,743
---------------- ---------------
17,958,459 12,948,157
MINORITY INTEREST IN SUBSIDIARY 2,556,946 680,852
SUBORDINATED LOAN 2,000,000 2,000,000
STOCKHOLDERS' EQUITY
Common stock 65,653 65,078
Additional paid-in capital 14,857,114 12,967,958
Retained earnings 12,710,080 7,699,477
---------------- ---------------
27,632,847 20,732,513
---------------- ---------------
$ 50,148,252 $ 36,361,522
================ ===============
See notes to financial statements
1
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M. H. Meyerson & Co., Inc.
Condensed Consolidated Statement of Operations
Three Months Ended April 30,
(Unaudited)
2000 1999
-------------- --------------
REVENUE
Trading profit $ 39,893,593 $ 15,143,319
Commission 756,330 543,010
Underwriting 1,228,069 295,363
Interest and other 325,407 87,210
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42,203,399 16,068,902
-------------- --------------
EXPENSES
Clearing charges 12,367,220 3,213,848
Salesmen's draw and commissions 12,270,233 5,170,091
Other personnel costs 4,329,138 1,706,215
Rent and office expenses 2,089,706 1,711,474
Legal and professional fees 2,086,452 182,242
Interest expense 36,823 35,751
Other expenses 1,008,736 1,036,845
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34,188,308 13,056,466
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Income before income taxes 8,015,091 3,012,436
Minority interest 166,615 0
Income tax expense 3,285,722 1,112,622
-------------- --------------
Net income $ 4,895,984 $ 1,899,814
============== ==============
Basic Earnings per common share $ 0.75 $ 0.34
============== ==============
Diluted Earnings per common share $ 0.69 $ 0.29
============== ==============
Weighted average number of shares 6,528,398 5,596,762
============== ==============
Diluted weighted average number of shares 7,060,392 6,633,917
============== ==============
See notes to financial statements
2
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M. H. Meyerson & Co., Inc.
Consolidated Statement of Changes in Shareholders' Equity
(Unaudited)
Three Months ended April 30, 2000
<TABLE>
<CAPTION>
COMMON
STOCK ADDITIONAL
$.01 PAR PAID-IN RETAINED
VALUE CAPITAL EARNINGS
------------------------------------------------------
<S> <C> <C> <C>
SHAREHOLDERS' EQUITY
FEBRUARY 1, 2000 $ 65,078 $ 12,967,958 $ 7,699,477
Net income for quarterly period 4,895,984
Equity in subsidiary 1,756,450 114,619
Options exercised 575 132,706
------------------------------------------------------
SHAREHOLDERS' EQUITY
APRIL 30, 2000 $ 65,653 $ 14,857,114 $ 12,710,080
======================================================
</TABLE>
See notes to financial statements
3
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M. H. Meyerson & Co., Inc.
Consolidated Statement of Cash Flows
(Unaudited)
Three Months ended April 30,
<TABLE>
<CAPTION>
2000 1999
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 4,895,984 $ 1,899,814
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation 98,164 98,641
Change in assets and liabilities
(Increase) decrease in:
Receivable from clearing brokers (18,391,960) (7,578,399)
Securities owned 4,508,056 (253,896)
Other current assets 174,756 (234,963)
Increase (decrease) in:
Securities sold, but not yet purchased (1,611,930) 3,219,722
Sales commission payable 987,719 574,204
Other liabilities and accrued items 5,634,513 2,425,943
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Net cash provided by (used in)
operating activities (3,704,698) 151,066
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CASH FLOWS FROM INVESTING ACTIVITIES
Investments (1,182,564) (286,000)
Investment in subsidiary 0 (100,000)
Fixed assets (7,067) (74,553)
-------------- --------------
Net cash provided by (used
in) investing activities (1,189,631) (460,553)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Change in minority interest in subsidiary 1,876,094 2,500,000
Change in equity in subsidiary 1,871,069 0
Options exercised 133,281 514,500
-------------- --------------
Net cash provided by
financing activities 3,880,444 3,014,500
-------------- --------------
NET INCREASE (DECREASE) IN CASH (1,013,885) 2,705,013
CASH, BEGINNING OF PERIOD 6,674,095 2,454,100
-------------- --------------
CASH, END OF PERIOD $5,660,210 $5,159,113
============== ==============
SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid $240,490 $121,000
============== ==============
Interest paid $ 36,823 $ 35,751
============== ==============
</TABLE>
See notes to financial statements
4
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M. H. Meyerson & Co., Inc.
Notes to Consolidated Financial Statements
(Unaudited)
Note 1. Presentation of Financial Statements
The consolidated statement of financial condition as of April 30,
2000, the consolidated statements of operations for the three months
ended April 30, 2000 and 1999, the consolidated statement of changes
in stockholders' equity for the quarterly period ended April 30,
2000, and the consolidated statements of cash flows for the three
months ended April 30, 2000 and April 30, 1999 have been prepared by
the Company without audit. The consolidated statement of financial
condition as of January 31, 2000 has been audited. In the opinion of
management, all adjustments and accruals (which include only normal
recurring items) necessary to present fairly the financial position
at April 30, 2000 and January 31, 2000, and the results of
operations and cash flows at April 30, 2000 and April 30, 1999 have
been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is
suggested that these financial statements be read in conjunction
with the financial statements and notes to financial statements
included in the Company's Annual Report to Shareholders for the year
ended January 31, 2000. The results of the periods ended April 30,
2000 and 1999 are not necessarily indicative of the operating
results for the full year.
Note 2. Earnings Per Common Share
Earnings per common share is calculated using the weighted average
number of common shares outstanding during the period. Shares
issuable upon the exercise of stock options and warrants that are
dilutive have been included in the computation of earnings per share
based on the modified treasury stock method.
Note 3. Net Capital Requirements
As a registered broker-dealer, the Company is subject to the
requirements of Rule 15c3-1 (the net capital rule) under the
Securities Exchange Act of 1934, as amended. The object of the rule
is to require the broker-dealer to have at all times sufficient
liquid assets to cover its current indebtedness. Specifically, the
rule prohibits a broker-dealer from permitting its "aggregate
indebtedness" from exceeding fifteen times its net capital as those
terms are defined.
On April 30, 2000, the Company's aggregate indebtedness and net
capital were $16,314,462 and $19,493,694, respectively, a ratio of
0.84 to 1.00.
5
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
General
The following discussion of the Company's financial condition and results
of operations should be read in conjunction with the Financial Statements and
Notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q.
Certain statements set forth in the Company's Quarterly Report on Form
10-Q for the quarter ended April 30, 2000 are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. Investors
are cautioned that forward looking statements involve risks and uncertainties,
including general economic conditions, delays and risks associated with the
performance of contracts, the process of regulatory approval and supervision,
potential acquisitions, consumer and industry acceptance, litigation and the
volatility of domestic securities markets. This Quarterly Report on Form 10-Q,
including the Statements of Financial Condition and the notes thereto, should be
read in its entirety for a complete understanding.
Results of Operations
The following table sets forth for the periods indicated the percentage of
total revenue represented by certain line items in the Company's Statement of
Operations:
Percent of Total Revenues
---------------------------
Quarter Ended April 30,
---------------------------
2000 1999
----------- ----------
Net gain on securities transactions ........ 94.5 94.2
Commissions ................................ 1.8 3.4
Underwriting ............................... 2.9 1.8
Interest and other ......................... 0.8 0.6
----------- ----------
100.0 100.0
----------- ----------
Clearing charges ........................... 29.3 20.0
Compensation and benefits .................. 39.3 42.8
Rent and office ............................ 5.0 10.7
Professional fees .......................... 4.9 1.1
Interest and other operating expenses ...... 2.5 6.7
----------- ----------
Total expenses ..................... 81.0 81.3
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Income (loss) before income taxes .. 19.0 18.7
Minority interest .................. 0.4 0.0
Provision for income tax expense
(benefit) .......................... 7.8 6.9
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Net income (loss) .................. 11.6 11.8
=========== ==========
6
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Calculation of Earnings Per Share
The calculation of earnings per share in the financial statements included
in this report are based on the weighted average number of shares outstanding.
Quarter Ended April 30, 2000 compared with Quarter Ended April 30, 1999
Total revenues for the quarter ended April 30, 2000 were $42,203,399, a
163% increase from the $16,068,902 reported for the quarter ended April 30,
1999. This increase is attributable mainly to an increase in trading volume,
which we attribute to the explosion in third party internet trading, and an
increase in underwriting revenue derived mainly from private placements.
Clearing charges increased from $3,213,848 to $12,367,220, a change of
285%, due to the increased trading volume during the quarter.
Compensation and benefits increased from $6,876,306 to $16,599,371,
representing an increase of 141%. This corresponds to the increase in revenue,
as a large portion of compensation expense is tied to percentages of profits in
trading accounts.
Interest expense is due to a subordinated loan, which was effective on
August 1, 1997 and renewed on August 1, 1999.
Viability of Operating Results
The Company, like other securities firms, is directly affected by general
economic conditions and market conditions, including fluctuations in volume and
price levels of securities, changes in levels of interest rates and demand for
the Company's investment banking services. All of these factors have an impact
on the Company's net gain from securities transactions, underwriting, and
commission revenues. In periods of reduced market activity, profitability is
adversely affected because certain expenses, consisting primarily of
non-commission compensation and benefits, communications and occupancy and
equipment, remain relatively fixed.
Liquidity and Capital Resources
The Company's statements of financial position reflect a liquid financial
position as cash and assets readily convertible to cash represent 86% and 89% of
total assets at April 30, 2000 and April 30, 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
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Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Market Risk Disclosures
The following discussion about the Company's market risk disclosures
involves forward-looking statements. Actual results could differ materially from
those projected in the forward-looking statements. The Company is exposed to
market risk related to changes in interest rates and equity price fluctuations.
The Company does not presently use derivative financial instruments for
speculative or trading purposes.
Interest Rate Sensitivity
Much of the Company's liquidity derives from sums due from its two
clearing brokers, which are kept in the Company's accounts with such brokers and
generate interest to the Company at floating rates based on federal funds and
broker loan rates. These rates rise and fall with interest rates in general,
hence the Company does not believe that it is subject to interest rate risk with
respect to these investments.
Equity Price Risk
The Company holds a small portfolio of marketable and non-marketable
securities for investment purposes that are subject to market price volatility.
Price fluctuations of plus or minus 15 percent would not have a material impact
on the Company.
The Company, in the course of its trading activities which constitute the
bulk of its revenues, maintains large portfolios of securities and/or short
positions in securities. Equity price fluctuations affecting the prices of these
securities could have a material impact on the Company, which the Company
mitigates by adjusting and hedging these positions in accordance with trading
requirements and market conditions.
Financial Instruments
The portion of the Company's working capital that is not held at the
Company's clearing brokers is kept in bank accounts and certificates of deposit.
The certificates of deposit are short term and do not present a material market
risk.
8
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
Exhibit Number Description of Exhibit
-------------- ----------------------
11 Calculation of Earnings per Share of
the Company pg. 10
27 Financial Data Schedule (1)
(1) Filed with EDGAR filing of this Report on Form 10-Q.
(b) Reports on Form 8-K.
The Company did not file any reports on Form 8-K during the
quarter ended April 30, 2000.
9
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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: June 9, 2000 By: /s/ Michael Silvestri
----------------- ------------------------------
Michael Silvestri
President and Chief Operating Officer
Date: June 9, 2000 By: /s/ Eugene M. Whitehouse
----------------- ------------------------------
Eugene M. Whitehouse
Senior Vice President and Controller
10
