Exhibit 99.5
Unaudited Pro Forma Condensed Financial Statements
On October 31, 2019, G.research and the Company entered into and closed the definitive Merger Agreement. Under the terms of the Merger Agreement, a total of 50,000,000 shares of Common Stock were issued to ISH upon the cancellation and conversion of the limited liability company interest in G.research held by ISH immediately prior to the effective time of the Merger.
The Merger has been approved by the board of directors of AC, the parent of ISH, and has received regulatory approval from FINRA.
On October 31, 2019 the Company entered into and closed a private placement pursuant to which it issued 5,150,000 shares of common stock to the Company's President and an employee for aggregate proceeds of $515,000.
The Company’s unaudited pro forma combined condensed statements of operations for the nine months ended September 30, 2019 and 2018 gives effects to the Merger and the Private Placement as if they had occurred on January 1, 2018 while the unaudited pro forma combined condensed statement of financial condition as of September 30, 2019 gives effect to the Merger and the Private Placement as if they had occurred on that date. Collectively, the unaudited pro forma combined condensed statements of operations and unaudited pro forma combined condensed statement of financial condition are referred to as Unaudited Pro Forma Combined Condensed Financial Statements.
G.research’s and the Company’s Unaudited Pro Forma Combined Condensed Financial Statements for the nine months ended September 30, 2019 and 2018 were derived from their historical financial statements, included in Exhibit 99.1 to this amendment to the Form 8-K or incorporated by reference to Morgan Group's Form 10-Q for the quarter ended September 30, 2019, and should be read in conjunction with those historical condensed financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Exhibit 99.1 to the Form 8-K and in Exhibits 99.1 and 99.2 to this amendment to Form 8-K. The unaudited pro forma combined condensed statement of financial condition as of September 30, 2019 was derived from the historical balance sheet of Morgan Group as of September 30, 2019 included in its Form 10-Q for the quarter ended September 30, 2019 and the historical unaudited statement of financial condition as of September 30, 2019 of G.research included in Exhibit 99.1 to this amendment to the Form 8-K.
The Unaudited Pro Forma Combined Condensed Financial Statements are for illustrative purposes only and do not reflect what G.research’s and the Company’s financial position and results of operations would have been had the Merger occurred on the dates indicated and are not necessarily indicative of our future financial position and future results of operations. Accordingly, the Unaudited Pro Forma Condensed Financial Statements include certain pro forma adjustments designed to reflect transactions that would be implemented in relation to the Merger.
The Unaudited Pro Forma Condensed Financial Statements constitute forward-looking information and are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated. See “Special Note Regarding Forward-Looking Statements” in the Form 8-K and accompanying information statement.
The unaudited pro forma condensed combined financial information was prepared based on the historical financial statements of G.research and the Company. The Merger transaction was a transaction among entities under common control and has been accounted for pursuant to ASC 805-50, Transactions Between Entities Under Common Control. A common-control transaction is similar to a business combination for the entity that receives the net assets or equity interests; however, such a transaction does not meet the definition of a business combination because there is no change in control over the entity by the parent. Therefore, the accounting and reporting for a transaction between entities under common control is outside the scope of the business combinations guidance in ASC 805-10, ASC 805-20, and ASC 805-30 and is addressed in ASC 805-50. For transactions between entities under common control, there is no change in basis in the net assets received and therefore they are recorded at their historical carrying amounts.
Morgan Group Holding Co.
Unaudited Pro Forma Combined Condensed Statement of Operations
For the Nine Months Ended September 30, 2019
Income Statement Data | G.research | Morgan | Pro Forma | |||||||||
Revenues | ||||||||||||
Commission | $ | 4,549,985 | $ | – | $ | 4,549,985 | ||||||
Fees earned from affiliated entities pursuant to research services agreements | 1,127,500 | – | 1,127,500 | |||||||||
Principal transactions | (7,623 | ) | – | (7,623 | ) | |||||||
Dividends and interest | 158,195 | 1,708 | 159,903 | |||||||||
Underwriting fees | 75,000 | – | 75,000 | |||||||||
Sales manager fees | 590,761 | 590,761 | ||||||||||
Other revenues | 37,214 | – | 37,214 | |||||||||
Total revenues | 6,531,032 | 1,708 | 6,532,740 | |||||||||
Expenses: | ||||||||||||
Compensation and related costs | 6,955,176 | – | 6,955,176 | |||||||||
Clearing charges | 933,620 | – | 933,620 | |||||||||
General and administrative | 712,338 | 67,819 | 780,157 | |||||||||
Occupancy and equipment | 666,986 | – | 666,986 | |||||||||
Total expenses | 9,268,120 | 67,819 | 9,335,939 | |||||||||
Loss before income tax benefit | (2,737,088 | ) | (66,111 | ) | (2,803,199 | ) | ||||||
Income tax benefit | (596,386 | ) | – | (596,386 | ) | |||||||
Net loss | $ | (2,140,702 | ) | $ | (66,111 | ) | $ | (2,206,813 | ) | |||
Net loss attributable to Morgan Group shareholders per share: | ||||||||||||
Basic | $ | (10,703.51 | ) | $ | (0.01 | ) | $ | (0.04 | ) | |||
Diluted | $ | (10,703.51 | ) | $ | (0.01 | ) | $ | (0.04 | ) | |||
Weighted average shares outstanding: | ||||||||||||
Basic | 200 | 4,859,055 | 60,009,055 | (a) | ||||||||
Diluted | 200 | 4,859,055 | 60,009,055 | |||||||||
Actual shares outstanding | 200 | 4,859,055 | 60,009,055 |
(a) Includes the issuance of 50,000,000 and 5,150,000 shares of Common Stock issued pursuant to the Merger and the Private Placement, respectively.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Exhibit 99.1 to the Form 8-K and in Exhibit 99.2 to this amendment to Form 8‑K for a discussion of the expected impact of anticipated operational changes.
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Morgan Group Holding Co.
Unaudited Pro Forma Combined Condensed Statement of Financial Condition
As of September 30, 2019
G.research | Morgan | Adjustments | Pro Forma | |||||||||||||
Assets | ||||||||||||||||
Cash and cash equivalents | $ | 5,394,380 | $ | 79,074 | $ | 515,000 | (b) | $ | 5,988,454 | |||||||
Investment in securities | 16,725 | – | – | 16,725 | ||||||||||||
Receivables from affiliates | 136,482 | – | – | 136,482 | ||||||||||||
Commissions receivable | 124,087 | – | – | 124,087 | ||||||||||||
Deposits with clearing organizations | 200,000 | – | – | 200,000 | ||||||||||||
Income taxes receivable | 87,406 | – | – | 87,406 | ||||||||||||
Fixed assets, net of accumulated depreciation and amortization | 47,494 | – | – | 47,494 | ||||||||||||
Other assets | 217,863 | 9,875 | – | 227,738 | ||||||||||||
Total assets | $ | 6,224,437 | 88,949 | $ | 515,000 | $ | 6,828,386 | |||||||||
Liabilities and stockholder’s equity | ||||||||||||||||
Compensation payable | $ | 922,447 | $ | – | – | $ | 922,477 | |||||||||
Due to brokers | 279,500 | – | – | 279,500 | ||||||||||||
Deferred tax liability | 6,973 | – | – | 6,973 | ||||||||||||
Securities sold, not yet purchased | 562 | – | – | 562 | ||||||||||||
Accrued expenses and other liabilities | 274,479 | 18,193 | – | 292,672 | ||||||||||||
Total liabilities | 1,483,961 | 18,193 | – | 1,502,154 | ||||||||||||
Stockholder’s Equity: | ||||||||||||||||
Preferred stock, $0.01 par value, 1,000,000 shares authorized, none outstanding | – | – | – | – | ||||||||||||
Common stock, $0.01 par value, 10,000,000 shares authorized,4,589,055 outstanding | – | 48,591 | 5,515,000 | (a),(b) | 5,563,591 | |||||||||||
Common stock, $0.01 par value, 200 shares issued and outstanding | 2 | – | (2 | )(a) | – | |||||||||||
Additional paid in capital | 46,980,331 | 5,937,368 | (4,999,998 | )(a) | 47,917,701 | |||||||||||
Accumulated deficit | (42,239,857 | ) | (5,915,203 | ) | – | (48,155,060 | ) | |||||||||
Total stockholder’s equity | 4,740,476 | 70,756 | 515,000 | 5,326,232 | ||||||||||||
Total liabilities and stockholder’s equity | $ | 6,224,437 | $ | 88,949 | $ | 515,000 | $ | 6,828,386 |
(a) Includes the issuance of 50,000,000 and 5,150,000 shares of Common Stock issued pursuant to the Merger and the Private Placement, respectively
(b) Issuance of 5,150,000 shares of Common Stock pursuant to the Private Placement at $0.10 per share for total proceeds of $515,000.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Exhibit 99.1 to the Form 8-K and in Exhibit 99.2 to this amendment to Form 8‑K for a discussion of the expected impact of anticipated operational changes.
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Morgan Group Holding Co.
Unaudited Pro Forma Combined Condensed Statement of Operations
For the Nine Months Ended September 30, 2018
Income Statement Data | G.research | Morgan | Pro Forma | |||||||||
Revenues | ||||||||||||
Commission income | $ | 4,432,059 | $ | – | $ | 4,432,059 | ||||||
Fees earned from affiliated entities pursuant to research services agreements | 1,649,000 | – | 1,649,000 | |||||||||
Principal transactions | (13,576,471 | ) | – | (13,576,471 | ) | |||||||
Dividends and interest | 727,424 | 1,317 | 728,741 | |||||||||
Underwriting fees | 18,832 | – | 18,832 | |||||||||
Sale Manager Fees | 99,715 | – | 99,715 | |||||||||
Other revenues | 15,447 | – | 15,447 | |||||||||
Total revenues | (6,633,994 | ) | 1,317 | (6,632,677 | ) | |||||||
Expenses: | ||||||||||||
Compensation and related costs | 8,769,294 | – | 8,769,294 | |||||||||
Clearing charges | 1,013,867 | – | 1,013,867 | |||||||||
General and administrative expenses | 800,450 | 48,381 | 848,831 | |||||||||
Occupancy and equipment rental | 799,527 | – | 799,527 | |||||||||
Total expenses | 11,383,138 | 48,381 | 11,431,519 | |||||||||
Loss before income tax benefit | (18,017,132 | ) | (47,064 | ) | (18,064,196 | ) | ||||||
Income tax benefit | (4,402,697 | ) | – | (4,402,697 | ) | |||||||
Net loss | $ | (13,614,435 | ) | $ | (47,064 | ) | $ | (13,661,499 | ) | |||
Net loss attributable to Morgan Group shareholders per share: | ||||||||||||
Basic | $ | (68,072.18 | ) | $ | (0.01 | ) | $ | (0.23 | ) | |||
Diluted | $ | (68,072.18 | ) | $ | (0.01 | ) | $ | (0.23 | ) | |||
Weighted average shares outstanding: | ||||||||||||
Basic | 200 | 4,430,484 | 59,580,484(a | ) | ||||||||
Diluted | 200 | 4,430,484 | 59,580,484 | |||||||||
Actual shares outstanding | 200 | 4,859,055 | 60,009,055 |
(a) Includes the issuance of 50,000,000 and 5,150,000 shares of Common Stock issued pursuant to the Merger and the Private Placement, respectively.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a discussion of the expected impact of anticipated operational changes included in Exhibit 99.1 to the Form 8-K and in Exhibit 99.2 to this amendment to Form 8‑K.
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