<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
October 31, 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 Blvd., Jersey City, New Jersey 07310
(Address of principal executive offices) (Zip Code)
(201) 459-9500
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: 6,575,915 at
December 1, 2000.
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M. H. Meyerson & Co., Inc.
Index
<TABLE>
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated statement of financial condition, October 31, 2000 and January 31, 2000................... 1
Condensed consolidated statements of operations, three and nine months ended
October 31, 2000 and 1999..................................................................... 2
Statement of changes in shareholders' equity
nine months ended October 31, 2000............................................................ 3
Consolidated statement of cash flows, nine months ended
October 31, 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 4. Submission of Matters to a Vote of Security Holders........................................... 8
Item 6. Exhibits and Reports on Form 8-K.............................................................. 9
</TABLE>
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
M. H. Meyerson & Co., Inc.
Consolidated Statement of Financial Condition
<TABLE>
<CAPTION>
October 31, January 31,
2000 2000
(unaudited)
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 10,202,766 $ 6,674,095
Due from clearing brokers - available for
immediate withdrawal 7,028,095 9,299,226
Securities - trading - long at market 10,265,333 14,314,130
Other current assets 6,982,785 2,451,796
------------ -----------
34,478,979 32,739,247
Investments 3,024,452 2,505,848
Fixed assets net of accumulated depreciation 1,062,801 1,116,427
------------ -----------
$ 38,566,232 $ 36,361,522
============ ============
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Securities - trading - short at market $ 1,703,237 $ 3,210,864
Sales commission payable 4,858,014 6,900,550
Other liabilities and accrued items 3,809,183 2,836,743
------------ -----------
10,370,434 12,948,157
NON-CURRENT LIABILITIES
Minority interest in subsidiary 2,196,244 680,852
SUBORDINATED LOAN 2,000,000 2,000,000
STOCKHOLDERS' EQUITY
Common stock 65,759 65,078
Additional paid-in capital 14,306,880 12,967,958
Retained earnings 9,626,915 7,699,477
------------ -----------
23,999,554 20,732,513
------------ -----------
$ 38,566,232 $ 36,361,522
============ ============
</TABLE>
See notes to financial statements
1
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M. H. Meyerson & Co., Inc.
Condensed Consolidated Statements of Operations
Three and Nine Months Ended October 31,
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
October 31, October 31,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
REVENUE
Trading profit $ 8,992,706 $ 6,604,680 $57,832,488 $34,199,186
Commission 430,359 356,465 1,548,158 1,361,746
Underwriting 35,000 135,886 2,118,344 911,442
Interest and other 301,282 468,753 1,055,013 731,967
------------ ----------- ----------- -----------
9,759,347 7,565,784 62,554,003 37,204,341
------------ ----------- ----------- -----------
EXPENSES
Clearing charges 5,489,776 3,377,734 23,041,153 11,865,884
Salesmens' draw &
commissions 1,735,256 700,804 16,041,970 8,920,950
Other personnel costs 2,810,886 1,717,596 8,997,405 5,292,086
Rent and office expense 1,956,390 1,712,390 5,902,415 5,080,294
Legal and professional 1,060,328 652,142 4,124,032 1,857,495
Interest expense 35,283 36,892 108,974 108,929
Other expenses 651,358 601,684 2,383,400 1,933,330
------------ ----------- ----------- -----------
13,739,277 8,799,242 60,599,349 35,058,968
------------ ----------- ----------- -----------
Income(loss) before income taxes
and minority interest (3,979,930) (1,233,458) 1,954,654 2,145,373
Income taxes (1,500,270) (467,582) 1,044,931 825,650
Minority interest 193,846 3,299 527,317 20,185
Net income(loss) $ (2,285,814) $ (762,577) $ 1,437,040 $ 1,339,908
============ =========== ============ ===========
Earnings(loss) per common share:
Basic $ (0.35) $ (0.12) $ 0.22 $ 0.22
============ =========== ============ ===========
Diluted $ (0.35) $ (0.12) $ 0.21 $ 0.21
============ =========== ============ ===========
Weighted average basic shares 6,579,254 6,374,402 6,563,176 6,047,186
============ =========== ============ ===========
Diluted 6,579,254 6,374,402 6,989,188 6,301,717
============ =========== ============ ===========
</TABLE>
See notes to financial statements
2
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M. H. Meyerson & Co., Inc.
Statement of Changes in Shareholders' Equity
(Unaudited)
Nine months ended October 31, 2000
<TABLE>
<CAPTION>
COMMON STOCK
$.01 PAR ADDITIONAL PAID-IN RETAINED
VALUE CAPITAL EARNINGS
------------- ------------------ ------------
<S> <C> <C> <C>
SHAREHOLDERS' EQUITY $ 65,078 $ 12,967,958 $ 7,699,477
FEBRUARY 1, 2000
Net income for period 1,437,040
Equity in subsidiary 1,203,560 490,398
Employee stock purchase 500 199,500
Treasury stock canceled (694) (264,044)
Options exercised 875 199,906
-------------- --------------- -----------
SHAREHOLDERS' EQUITY
OCTOBER 31, 2000 $ 65,759 $ 14,306,880 $ 9,626,915
============== =============== ===========
</TABLE>
See notes to financial statements
3
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M. H. Meyerson & Co., Inc.
Consolidated Statement of Cash Flows
(Unaudited)
Nine Months ended October 31,
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income(loss) $ 1,437,040 $ 1,339,908
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation 297,942 308,899
Change in assets and liabilities
(Increase) decrease in:
Receivable from clearing brokers 2,271,131 (4,705,353)
Securities owned 4,048,797 2,597,064
Other current assets (4,530,989) (1,899,333)
Increase (decrease) in:
Securities sold but not yet purchased (1,507,627) 814,955
Sales commission payable (2,042,536) (964,408)
Other liabilities and accrued items 972,440 1,018,328
----------- -----------
Net cash provided by (used in)
operating activities 946,198 (1,489,940)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Investments (518,604) (135,500)
Fixed assets (244,316) (198,150)
----------- -----------
Net cash provided by (used in) investing
activities (762,920) (333,650)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Exercise of employee stock options 200,781 1,057,105
Private placement 0 2,500,000
Employee stock purchase 200,000 0
Treasury stock purchased (264,738) 0
Subsidiary private placement 0 709,584
Change in equity in subsidiary 1,693,958 0
Increase in minority interest 1,515,392 160,657
----------- -----------
Net cash provided by (used in) financing
activities 3,345,393 4,427,346
----------- -----------
NET INCREASE (DECREASE) IN CASH 3,528,671 2,603,756
CASH, BEGINNING OF PERIOD 6,674,095 2,454,100
----------- -----------
CASH, END OF PERIOD $10,202,766 $ 5,057,855
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid $ 4,045,490 $ 1,411,000
=========== ===========
Interest paid $ 108,974 $ 108,929
=========== ===========
</TABLE>
See notes to financial statements
4
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M. H. Meyerson & Co., Inc.
Notes to Financial Statements
(Unaudited)
Note 1. Presentation of Financial Statements
The statement of financial condition as of October 31, 2000,
the statements of operations for the three months and nine
months ended October 31, 2000 and 1999, the statement of
changes in shareholders' equity for the nine month period
ended October 31, 2000, and the statements of cash flows for
the nine months ended October 31, 2000 and 1999 have been
prepared by the Company without audit. The 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 condition, results of operations,
and cash flows at October 31, 2000 and 1999 have been made.
The difference between the effective tax rate shown on the
Condensed Statements of Operations for the quarter and nine
months ended October 31, 2000 and 1999 and nominal rates is
due mainly to the partial non-deductibility of entertainment
related expenses.
Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted.
It is suggested that these financial statements be read in
conjunction with the financial statements and notes to
financial statements included in the Company's January 31,
2000 Annual Report to Shareholders. The results of the periods
ended October 31, 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 October 31, 2000, the Company's aggregate indebtedness and
net capital were $8,590,474 and $14,097,753, respectively, a
ratio of 0.61 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 October 31, 2000 constitute forward looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and are subject to the safe harbor created by such section. Certain
factors that could cause results to differ materially from those described in
the forward looking statements are described in this Item 2 and elsewhere as
appropriate. This Quarterly Report on Form 10-Q, including the Statements of
Financial Condition and the notes thereto, should be read in its entirety for a
complete understanding.
Results of Operations
The following table sets forth for the periods indicated the percentage
of total revenue represented by certain line items in the Company's Statement of
Operations:
<TABLE>
<CAPTION>
Percent of Total Revenues
Nine Months Ended October 31,
2000 1999
---- ----
<S> <C> <C>
Net gain on securities transactions 92.5 91.9
Commissions 2.5 3.7
Underwriting 3.4 2.4
Interest and other 1.6 2.0
----- -----
100.0 100.0
----- -----
Clearing charges 36.8 31.9
Compensation and benefits 40.0 38.2
Rent and office 9.4 13.7
Professional fees 6.6 5.0
Interest and other operating expenses 4.1 5.4
----- -----
Total expenses 96.9 94.2
----- -----
Income(loss) before income taxes and
minority interest 3.1 5.8
Income taxes 1.7 2.2
Minority interest 0.8 0.1
----- -----
Net income(loss) 2.2 3.6
===== =====
</TABLE>
6
<PAGE>
Calculation of Earnings Per Share
The calculation of earnings per share on the financial statements
included in this report are based on the weighted average number of shares
outstanding, as calculated.
Quarter Ended October 31, 2000 compared with Quarter Ended October 31, 1999
Total revenues for the quarter ended October 31, 2000 were $9,759,347,
a 29.0% increase from the $7,565,784 reported for the quarter ended October 31,
1999. This increase is attributable mainly to an increase in trading volume,
offset partially by decreases in underwriting revenue and interest. Retail
services revenue was up, increasing 20.7% from $356,465 to $430,359.
Compensation and benefits increased from $2,418,400 to $4,546,142,
representing an increase of 88.0%. This was the result of the increased trading
volume during the third quarter of fiscal 2001.
Interest expense is due to a subordinated loan, which was effective on
August 1, 1997, and renewed effective August 1, 1999.
Overall profitability was adversely effected by the continuing
volatility in the marketplace, and the changing product mix of the firm.
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 71%
and 83% of total assets at October 31, 2000 and January 31, 2000, respectively.
The Company finances its operations primarily with existing capital and
funds generated from operations. The Company believes that existing capital and
cash flow from operations will be sufficient to meet its cash requirements.
7
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Our market making activities expose us to significant risks, including
but not limited to changes in price and/or liquidity of our trading positions.
We use an automated trading system to provide management with a real-time
overview of our traders' activity, positions, and profitability. Each trader's
total positions are limited by management, based partially on the amount of the
trader's funds held in reserve at the Company, which helps to limit the
Company's risks. The automated trading system also alerts management to any
trades which exceed certain parameters as to position or trade size during the
day.
In the course of our business, we maintain inventory, consisting mainly
of OTC securities and municipal bonds. The market value of our inventory at
October 31, 2000 was $10.27 million in long positions and $1.70 million in short
positions. The loss to the Company, assuming a 10% decline in prices, would be
$857,000 due to the losses on the long positions being partially offset by gains
on the short positions.
We invest, from time to time, in certificates of deposit and/or
maintain interest bearing balances in our accounts with our clearing brokers,
for working capital purposes, which are classified as cash equivalents and
receivables from clearing brokers, respectively, in the Statement of Financial
Condition. These balances are all available for immediate withdrawal, or are for
periods of 60 days or less, and do not present a material market risk. The
Company does not normally trade or carry positions in derivative securities.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
(a) Annual Meeting of Shareholders, August 1, 2000.
(b) Directors elected to serve three year terms:
Martin H. Meyerson
Jeffrey E. Meyerson
Bertram Siegel, Esq.
Directors whose term of office continued after the meeting:
Kenneth J. Koock
Eugene M. Whitehouse
Martin Leventhal, CPA
Alfred T. Duncan
(c) Election of Directors
<TABLE>
<S> <C> <C> <C>
1.) Martin H. Meyerson 5,035 244 for 665,950 against 527,900 withheld
Jeffrey E. Meyerson 5,035,244 for 665,950 against 527,900 withheld
Bertram Siegel, Esq. 5,035,244 for 665,950 against 527,900 withheld
</TABLE>
2.) Amendment to Certificate of Incorporation
authorizing issuance of up to 200,000 shares of
preferred stock, $0.001 par value
2,864,368 for 416,510 against 527,900 abstained
3.) Approval of the 2000 stock option plan
2,820,903 for 454,575 against 527,900 abstained
4.) Appointment of Vincent R. Vassallo, CPA as Company's
auditor for fiscal year ending January 31, 2001
5,831,549 for 36,725 against
8
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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
(b) Reports on Form 8-K:
The Company filed no reports on Form 8-K during the third
quarter of fiscal year 2001.
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: 12/14/00 By: /s/ Martin H. Meyerson
---------- --------------------------------------
Martin H. Meyerson
Chairman and Chief Executive Officer
Date: 12/14/00 By: /s/ Eugene M. Whitehouse
---------- --------------------------------------
Eugene M. Whitehouse
Chief Operating Officer and Controller
10
