☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Morgan Group Holding Co. |
(Exact name of Registrant as specified in its charter) |
Delaware | 13-4196940 | |
(State of other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
401 Theodore Fremd Avenue, Rye, NY | 10580 | |
(Address of principle executive offices) | (Zip Code) |
(914) 921-5216 |
(Registrant’s telephone number, including area code) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | |
Common Stock, par value $0.01 per share | MGHL | OTC Pink® |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ☐ | Accelerated filer ☐ | ||
Non-accelerated filer ☒ | Smaller reporting company ☒ | Emerging growth company ☐ |
Class | Outstanding at July 31, 2020 | |
Common Stock, $0.01 par value | 600,090 |
PART I. | FINANCIAL INFORMATION | Page |
Item 1. | Unaudited Condensed Consolidated Financial Statements | |
2 | ||
3 | ||
4 | ||
5 | ||
6 | ||
Item 2. | 14 | |
Item 3. | 18 | |
Item 4. | 18 | |
PART II. | OTHER INFORMATION * | |
Item 1. | 19 | |
Item 1A. | 19 | |
Item 6. | 19 | |
20 |
June 30, 2020 | December 31, 2019 | |||||||
ASSETS | ||||||||
Cash and cash equivalents | $ | 4,963,036 | $ | 6,587,097 | ||||
Receivables from brokers and clearing organizations | 701,272 | 808,686 | ||||||
Receivables from affiliates | 133,633 | 30,625 | ||||||
Deposits with clearing organizations | 200,000 | 200,000 | ||||||
Income taxes receivable (including deferred tax asset of $7,891 and $2,930, respectively) | 358,935 | 184,396 | ||||||
Fixed assets, net of accumulated depreciation of $34,511 and $28,435, respectively | 38,380 | 44,456 | ||||||
Other assets | 183,560 | 281,896 | ||||||
Total assets | $ | 6,578,816 | $ | 8,137,156 | ||||
LIABILITIES AND EQUITY | ||||||||
Compensation payable | $ | 401,193 | $ | 709,663 | ||||
Payable to affiliates | 106,505 | 985,632 | ||||||
Income tax payable | 52,046 | 53,572 | ||||||
Accrued expenses and other liabilities | 574,583 | 350,948 | ||||||
Total liabilities | 1,134,327 | 2,099,815 | ||||||
Commitments and contingencies (Note 9) | - | - | ||||||
Equity | ||||||||
Common stock, $0.01 par value; 100,000,000 shares authorized and 600,090 shares issued and outstanding | 6,001 | 6,001 | ||||||
Additional paid-in capital | 53,886,180 | 53,886,180 | ||||||
Accumulated deficit | (48,447,692 | ) | (47,854,840 | ) | ||||
Total equity | 5,444,489 | 6,037,341 | ||||||
Total liabilities and equity | $ | 6,578,816 | $ | 8,137,156 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Revenues | ||||||||||||||||
Commissions | $ | 1,100,225 | $ | 1,504,066 | $ | 2,139,168 | $ | 3,039,311 | ||||||||
Fees earned from affiliated entities pursuant to research services agreements | - | 375,000 | - | 752,500 | ||||||||||||
Principal transactions | (2,060 | ) | (1,190 | ) | (2,963 | ) | (1,270 | ) | ||||||||
Dividends and interest | 11,833 | 58,085 | 48,089 | 121,778 | ||||||||||||
Underwriting fees | - | 94,177 | 30,488 | 94,177 | ||||||||||||
Sales manager fees | - | 122,571 | 334,825 | 122,571 | ||||||||||||
Other revenues | 151 | 2,103 | 3,258 | 8,012 | ||||||||||||
Total revenues | 1,110,149 | 2,154,812 | 2,552,865 | 4,137,079 | ||||||||||||
Expenses | ||||||||||||||||
Compensation and related costs | 836,541 | 2,483,153 | 1,979,974 | 4,962,045 | ||||||||||||
Clearing charges | 315,191 | 313,493 | 618,029 | 603,874 | ||||||||||||
General and administrative | 346,964 | 239,988 | 658,073 | 564,830 | ||||||||||||
Occupancy and equipment | 52,800 | 196,898 | 157,241 | 392,740 | ||||||||||||
Total expenses | 1,551,496 | 3,233,532 | 3,413,317 | 6,523,489 | ||||||||||||
Loss before income tax benefit | (441,347 | ) | (1,078,720 | ) | (860,452 | ) | (2,386,410 | ) | ||||||||
Income tax benefit | (130,949 | ) | (245,558 | ) | (267,600 | ) | (512,606 | ) | ||||||||
Net loss | $ | (310,398 | ) | $ | (833,162 | ) | $ | (592,852 | ) | $ | (1,873,804 | ) | ||||
Net loss per share | ||||||||||||||||
Basic and diluted | $ | (0.52 | ) | $ | (1.52 | ) | $ | (0.99 | ) | $ | (3.42 | ) | ||||
Weighted average shares outstanding: | ||||||||||||||||
Basic and diluted | 600,090 | 548,591 | 600,090 | 548,591 |
Shares | Common Stock | Additional Paid-in Capital | Accumulated Deficit | Total | ||||||||||||||||
Balance at December 31, 2019 | 600,090 | $ | 6,001 | $ | 53,886,180 | $ | (47,854,840 | ) | $ | 6,037,341 | ||||||||||
Net loss | - | - | - | (282,454 | ) | (282,454 | ) | |||||||||||||
Balance at March 31, 2020 | 600,090 | 6,001 | 53,886,180 | (48,137,294 | ) | 5,754,887 | ||||||||||||||
Net loss | - | - | - | (310,398 | ) | (310,398 | ) | |||||||||||||
Balance at June 30, 2020 | 600,090 | 6,001 | 53,886,180 | (48,447,692 | ) | 5,444,489 |
Shares | Common Stock | Additional Paid-in Capital | Accumulated Deficit | Total | ||||||||||||||||
Balance at December 31, 2018 | 548,590 | $ | 5,486 | $ | 56,260,806 | $ | (45,948,247 | ) | $ | 10,318,045 | ||||||||||
Net loss | - | - | - | (1,040,642 | ) | (1,040,642 | ) | |||||||||||||
Balance at March 31, 2019 | 548,590 | 5,486 | 56,260,806 | (46,988,889 | ) | 9,277,403 | ||||||||||||||
Net loss | - | - | - | (833,162 | ) | (833,162 | ) | |||||||||||||
Capital distribution | - | - | (3,300,000 | ) | - | (3,300,000 | ) | |||||||||||||
Balance at June 30, 2019 | 548,590 | 5,486 | 52,960,806 | (47,822,051 | ) | 5,144,241 |
Six months ended June 30, | ||||||||
2020 | 2019 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (592,852 | ) | $ | (1,873,804 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation | 6,076 | 6,319 | ||||||
Deferred income tax, net | (4,961 | ) | 280,931 | |||||
(Increase)/decrease in assets: | ||||||||
Receivables from brokers and clearing organizations | 107,414 | (13,659 | ) | |||||
Receivables from affiliates | (103,008 | ) | (42,919 | ) | ||||
Income taxes receivable | (169,578 | ) | (20,929 | ) | ||||
Other assets | 98,336 | (8,213 | ) | |||||
Increase/(decrease) in liabilities: | ||||||||
Compensation payable | (308,470 | ) | (536,749 | ) | ||||
Payable to affiliates | (879,127 | ) | (172,945 | ) | ||||
Income taxes payable | (1,526 | ) | - | |||||
Accrued expenses and other liabilities | 223,635 | 2,483 | ||||||
Total adjustments | (1,031,209 | ) | (505,681 | ) | ||||
Net cash used in operating activities | (1,624,061 | ) | (2,379,485 | ) | ||||
Cash flows from financing activities; | ||||||||
Capital distribution | - | (3,300,000 | ) | |||||
Cash used in financing activities | - | (3,300,000 | ) | |||||
Net decrease in cash, cash equivalents, and restricted cash | (1,624,061 | ) | (5,679,485 | ) | ||||
Cash, cash equivalents, and restricted cash at beginning of period | 6,787,097 | 11,530,705 | ||||||
Cash, cash equivalents, and restricted cash at end of period | $ | 5,163,036 | $ | 5,851,220 | ||||
Supplemental disclosures of cash flow information: | ||||||||
Cash received from Associated Capital Group, Inc. for income taxes | $ | 91,536 | $ | 781,478 | ||||
Reconciliation to cash, cash equivalents, and restricted cash: | ||||||||
Cash and cash equivalents | $ | 4,963,036 | $ | 5,651,220 | ||||
Restricted cash: deposits with clearing organizations | 200,000 | 200,000 | ||||||
Cash, cash equivalents, and restricted cash | $ | 5,163,036 | $ | 5,851,220 |
1. | Significant Accounting Policies |
2. | Revenue from Contracts with Customers |
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Commissions | $ | 999,541 | $ | 1,415,928 | $ | 1,936,325 | $ | 2,842,163 | ||||||||
Hard dollar payments | 100,684 | 88,138 | 202,843 | 197,148 | ||||||||||||
1,100,225 | 1,504,066 | 2,139,168 | 3,039,311 | |||||||||||||
Research services | - | 375,000 | - | 752,500 | ||||||||||||
Underwriting fees | - | 94,177 | 30,488 | 94,177 | ||||||||||||
Sales manager fees | - | 122,571 | 334,825 | 122,571 | ||||||||||||
$ | 1,100,225 | $ | 2,095,814 | $ | 2,504,481 | $ | 4,008,559 |
4. | Fair Value |
- | Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 1 assets include cash equivalents. |
- | Level 2 inputs utilize inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals. |
- | Level 3 inputs are unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. These assets include infrequently traded common stocks. |
Assets | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||
Cash equivalents | $ | 4,938,005 | $ | - | $ | - | $ | 4,938,005 | ||||||||
Total assets at fair value | $ | 4,938,005 | $ | - | $ | - | $ | 4,938,005 |
Assets | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||
Cash equivalents | $ | 6,579,577 | $ | - | $ | - | $ | 6,579,577 | ||||||||
Total assets at fair value | $ | 6,579,577 | $ | - | $ | - | $ | 6,579,577 |
5. | Retirement Plan |
6. | Income Taxes |
7. | Earnings per Share |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Basic and diluted: | ||||||||||||||||
Net loss attributable to shareholders | $ | (310,398 | ) | $ | (833,162 | ) | $ | (592,852 | ) | $ | (1,873,804 | ) | ||||
Weighted average shares outstanding | 600,090 | 548,591 | 600,090 | 548,591 | ||||||||||||
Basic and diluted net loss per share | $ | (0.52 | ) | $ | (1.52 | ) | $ | (0.99 | ) | $ | (3.42 | ) |
8. | Equity |
9. | Guarantees, Contingencies, and Commitments |
10. | Net Capital Requirements |
11. | Subsequent Events |
ITEM 2: |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Revenues | ||||||||||||||||
Commissions | $ | 1,100 | $ | 1,504 | $ | 2,139 | $ | 3,039 | ||||||||
Fees earned from affiliated entities pursuant to research services agreements | - | 375 | - | 753 | ||||||||||||
Principal transactions | (2 | ) | (1 | ) | (3 | ) | (1 | ) | ||||||||
Dividends and interest | 12 | 58 | 48 | 122 | ||||||||||||
Underwriting fees | - | 94 | 30 | 94 | ||||||||||||
Sales manager fees | - | 123 | 335 | 123 | ||||||||||||
Other revenues | 0 | 2 | 3 | 8 | ||||||||||||
Total revenues | 1,110 | 2,155 | 2,553 | 4,137 | ||||||||||||
Expenses | ||||||||||||||||
Compensation and related costs | 837 | 2,483 | 1,980 | 4,962 | ||||||||||||
Clearing charges | 315 | 313 | 618 | 604 | ||||||||||||
General and administrative | 347 | 240 | 658 | 565 | ||||||||||||
Occupancy and equipment | 53 | 197 | 157 | 393 | ||||||||||||
Total expenses | 1,551 | 3,234 | 3,413 | 6,523 | ||||||||||||
Loss before income tax benefit | (441 | ) | (1,079 | ) | (860 | ) | (2,386 | ) | ||||||||
Income tax benefit | (131 | ) | (246 | ) | (268 | ) | (513 | ) | ||||||||
Net loss | $ | (310 | ) | $ | (833 | ) | $ | (593 | ) | $ | (1,874 | ) | ||||
Net loss per share | ||||||||||||||||
Basic and diluted | $ | (0.52 | ) | $ | (1.52 | ) | $ | (0.99 | ) | $ | (3.42 | ) |
Three Months Ended June 30, | Increase (Decrease) | |||||||||||||||
2020 | 2019 | $ | % | |||||||||||||
Commissions | $ | 1,000 | $ | 1,416 | $ | (416 | ) | -29.4 | % | |||||||
Hard dollar payments | 101 | 88 | 13 | 14.2 | % | |||||||||||
1,100 | 1,504 | $ | (404 | ) | -26.8 | % | ||||||||||
Research services | - | 375 | (375 | ) | -100.0 | % | ||||||||||
Underwriting fees | - | 94 | (94 | ) | -100.0 | % | ||||||||||
Sales manager fees | - | 123 | (123 | ) | -100.0 | % | ||||||||||
Total | $ | 1,100 | $ | 2,096 | $ | (996 | ) | -47.5 | % |
Commissions and hard dollar payments for the three months ended June 30, 2020 were $1.1 million, a $0.4 million, or 26.8%, decrease from $1.5 million in the comparable 2019 period. The decrease was primarily due to lower brokerage commissions from securities transactions executed on an agency basis. For the three months ended June 30, 2020 and 2019, respectively, G.research earned $0.8 million and $1.2 million, or approximately 72% and 77%, of its commission revenue from transactions executed on behalf of funds advised by Gabelli Funds, LLC (“Gabelli Funds”) and clients advised by GAMCO Asset Management Inc. (“GAMCO Asset”).
Six Months Ended June 30, | Increase (Decrease) | |||||||||||||||
2020 | 2019 | $ | % | |||||||||||||
Commissions | $ | 1,936 | $ | 2,842 | $ | (906 | ) | -31.9 | % | |||||||
Hard dollar payments | 203 | 197 | 6 | 2.9 | % | |||||||||||
2,139 | 3,039 | $ | (900 | ) | -29.6 | % | ||||||||||
Research services | - | 753 | (753 | ) | -100.0 | % | ||||||||||
Underwriting fees | 30 | 94 | (64 | ) | -67.6 | % | ||||||||||
Sales manager fees | 335 | 123 | 212 | 173.2 | % | |||||||||||
Total | $ | 2,504 | $ | 4,009 | $ | (1,504 | ) | -37.5 | % |
Six months ended June 30, | ||||||||
2020 | 2019 | |||||||
Cash flows provided by (used in) activities: | ||||||||
Operating activities | $ | (1,624 | ) | $ | (2,379 | ) | ||
Financing activities | - | (3,300 | ) | |||||
Net decrease in cash and cash equivalents | (1,624 | ) | (5,679 | ) | ||||
Cash and cash equivalents, beginning of period | 6,587 | 11,331 | ||||||
Cash and cash equivalents, end of period | $ | 4,963 | $ | 5,651 |
ITEM 3. |
ITEM 4. |
PART II: | OTHER INFORMATION |
ITEM 1. |
ITEM 1A. |
ITEM 6. |
Certification of CEO pursuant to Rule 13a-14(a). | ||
Certification of CAO pursuant to Rule 13a-14(a). | ||
Certification of CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||
Certification of CAO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002. |
101.INS | XBRL Instance Document | |
101.SCH | XBRL Taxonomy Extension Schema Document | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | |
104. | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |