<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 July 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
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Commission file number 0-23410
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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: 6,582,315 at
September 5, 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,
July 31, 2000 and January 31, 2000................................................. 1
Condensed Consolidated Statement of Operations,
Three and Six Months Ended
July 31, 2000 and 1999............................................................. 2
Statement of Changes in Shareholders' Equity
six months ended July 31, 2000..................................................... 3
Consolidated Statement of Cash Flows, Six Months Ended
July 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 6. Exhibits and Reports on Form 8-K..................................................... 8
</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>
July 31, January 31,
2000 2000
(unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $10,467,730 $ 6,674,095
Due from clearing brokers - available for immediate withdrawal 16,676,146 9,299,226
Securities - trading - long at market 10,630,434 14,314,130
Other current assets 2,798,289 2,451,796
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40,582,599 32,739,247
Investments 3,087,719 2,505,848
Fixed assets net of accumulated depreciation 966,066 1,116,427
----------- -----------
$44,626,384 $36,361,522
=========== ===========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Securities - trading - short at market $ 3,720,186 $ 3,210,864
Sales commission payable 5,977,782 6,900,550
Other liabilities and accrued items 4,293,411 2,836,743
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13,991,379 12,948,157
NON-CURRENT LIABILITIES
Minority interest in subsidiary 2,390,090 680,852
SUBORDINATED LOAN 2,000,000 2,000,000
STOCKHOLDERS' EQUITY
Common stock 65,823 65,078
Additional paid-in capital 14,984,518 12,967,958
Retained earnings 11,194,574 7,699,477
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26,244,915 20,732,513
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$44,626,384 $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 Six Months Ended July 31,
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
July 31, July 31,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
REVENUE
Trading profit $8,946,190 $ 12,451,186 $ 48,839,782 $ 27,594,505
Commission 361,468 462,272 1,117,799 1,005,282
Underwriting 855,275 480,192 2,083,344 775,555
Interest and other 428,324 176,004 753,731 263,214
--------------- ----------------- ------------------ ------------------
10,591,257 13,569,654 52,794,656 29,638,556
--------------- ----------------- ------------------ ------------------
EXPENSES
Clearing charges 5,184,156 5,274,302 17,551,376 8,488,150
Salesmens' draw & commissions 2,036,481 3,050,056 14,306,714 8,220,147
Other personnel costs 1,857,381 1,868,274 6,186,518 3,574,489
Rent and office expense 1,856,320 1,656,430 3,946,026 3,367,904
Legal and professional 977,253 654,394 3,063,705 1,205,353
Interest expense 36,869 36,286 73,692 72,037
Other expenses 723,304 663,518 1,732,040 1,331,646
--------------- ----------------- ------------------ ------------------
12,671,764 13,203,260 46,860,071 26,259,726
--------------- ----------------- ------------------ ------------------
Income(loss) before income taxes
and minority interest (2,080,507) 366,394 5,934,585 3,378,830
Income taxes (739,332) 179,690 2,547,578 1,292,312
Minority interest 166,856 16,886 333,471 16,886
Net income(loss) $(1,174,319) $ 203,590 $ 3,720,478 $ 2,103,404
=============== ================== ==================== ===================
Earnings(loss) per common share:
Basic $(0.18) $ 0.03 $ 0.57 $ 0.36
=============== ================== ==================== ===================
Diluted $(0.18) $ 0.03 $ 0.53 $ 0.32
=============== ================== ==================== ===================
Weighted average basic shares 6,581,119 6,155,708 6,555,049 5,880,867
=============== ================== ==================== ===================
Diluted 6,581,119 6,884,670 7,071,062 6,609,830
=============== ================== ==================== ===================
</TABLE>
See notes to financial statements
2
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M. H. Meyerson & Co., Inc.
Statement of Changes in Shareholders' Equity
(Unaudited)
Six Months ended July 31, 2000
<TABLE>
<CAPTION>
COMMON
STOCK $.01 PAR ADDITIONAL
VALUE PAID-IN CAPITAL RETAINED EARNINGS
--------------- --------------- -----------------
<S> <C> <C> <C>
SHAREHOLDERS' EQUITY $ 65,078 $ 12,967,958 $ 7,699,477
FEBRUARY 1, 2000
Net income for period 3,720,478
Equity in subsidiary 1,856,450 (225,381)
Employee stock purchase 500 199,500
Treasury stock canceled (630) (239,296)
Options exercised 875 199,906
SHAREHOLDERS' EQUITY
------------ ------------ ------------
JULY 31, 2000 $ 65,823 $ 14,984,518 $ 11,194,574
============ ============ ============
</TABLE>
See notes to financial statements
3
<PAGE>
M. H. Meyerson & Co., Inc.
Consolidated Statement of Cash Flows
(Unaudited)
Six Months ended July 31,
<TABLE>
<CAPTION>
2000 1999
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CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income(loss) $ 3,720,478 $ 2,103,404
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation 196,744 200,930
Change in assets and liabilities
(Increase) decrease in:
Receivable from clearing brokers (7,376,920) (4,776,940)
Securities owned 3,683,696 1,390,312
Other current assets (346,493) (370,962)
Increase (decrease) in:
Securities sold but not yet purchased 509,322 (446,218)
Sales commission payable (922,768) (1,197,114)
Other liabilities and accrued items 1,456,668 1,777,870
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Net cash provided by (used in)
operating activities 920,727 (1,318,718)
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CASH FLOWS FROM INVESTING ACTIVITIES
Investments (581,871) (9,500)
Fixed assets (46,383) (118,261)
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Net cash provided by (used in)
investing activities (628,254) (127,761)
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CASH FLOWS FROM FINANCING ACTIVITIES
Exercise of employee stock options 200,781 796,249
Private placement 0 2,500,000
Employee stock purchase 200,000 0
Treasury stock purchased (239,296) 0
Subsidiary private placement 0 709,584
Change in equity in subsidiary 1,630,439 0
Increase in minority interest 1,709,238 165,530
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Net cash provided by (used in) financing activities
3,501,162 4,171,363
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NET INCREASE (DECREASE) IN CASH 3,793,635 2,724,884
CASH, BEGINNING OF PERIOD 6,674,095 2,454,100
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CASH, END OF PERIOD $ 10,467,730 $ 5,178,984
============ ============
SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid $ 4,045,490 $ 1,411,000
============ ============
Interest paid $ 73,692 $ 72,037
============ ============
</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 July 31, 2000, the
statements of operations for the three months and six months
ended July 31, 2000 and 1999, the statement of changes in
shareholders' equity for the six month period ended July 31,
2000, and the statements of cash flows for the six months
ended July 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
July 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 six
months ended July 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 July 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 July 31, 2000, the Company's aggregate indebtedness and
net capital were $10,203,921 and $18,034,338, respectively, a
ratio of 0.57 to 1.00.
5
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M. H. Meyerson & Co., Inc.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
General
The following discussion of the Company's financial condition and
results of operations should be read in conjunction with the Financial
Statements and Notes thereto appearing elsewhere in this Quarterly Report on
Form 10-Q.
Certain statements set forth in the Company's Quarterly Report on
Form 10-Q for the quarter ended July 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
-------------------------
Six Months Ended July 31,
-------------------------
2000 1999
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<S> <C> <C>
Net gain on securities transactions ................... 92.5 93.1
Commissions ........................................... 2.1 3.4
Underwriting .......................................... 3.9 2.6
Interest and other .................................... 1.5 0.9
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100.0 100.0
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Clearing charges ...................................... 33.2 28.6
Compensation and benefits ............................. 38.8 39.8
Rent and office ....................................... 7.5 11.4
Professional fees ..................................... 5.8 4.1
Interest and other operating expenses ................. 3.5 4.7
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Total expenses ..................... 88.8 88.6
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Income(loss) before income taxes and
minority interest ....... 11.2 11.7
Income taxes ....................... 4.8 4.4
Minority interest .................. 0.6 0.1
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Net income(loss) ................... 7.0 7.1
===== =====
</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 July 31, 2000 compared with Quarter Ended July 31, 1999
Total revenues for the quarter ended July 31, 2000 were
$10,591,257, a 21.9% decrease from the $13,569,654 reported for the quarter
ended July 31, 1999. This decrease is attributable mainly to a decrease in
trading volume, offset partially by increases in underwriting revenue and
interest. Retail services revenue was down, decreasing 21.8% from $462,272 to
$341,468.
Compensation and benefits decreased from $4,918,330 to
$3,893,862, representing a decrease of 20.8%. This was the result of the
decreased trading volume during the second 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.
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 85%
and 83% of total assets at July 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 July 31, 2000 was $10.63 million in long positions and $3.72 million in short
positions. The loss to the Company, assuming a 10% decline in prices, would be
$691,025 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 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
second quarter of fiscal year 2001.
8
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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: September 8, 2000 By: /s/ Martin H. Meyerson
----------------- -----------------------
Martin H. Meyerson
Chairman and Chief Executive Officer
Date: September 8, 2000 By: /s/ Eugene M. Whitehouse
----------------- -----------------------------
Eugene M. Whitehouse
Chief Operating Officer and Controller
9
