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, 2001
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 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: 6,581,514 at June 8,
2001.
M. H. Meyerson & Co., Inc.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Statements of Financial Condition, April 30, 2001 and January 31, 2001........... 1
Consolidated Statements of Operations, Three Months Ended
April 30, 2001 and 2000.............................................................. 2
Consolidated Statement of Changes in Shareholders' Equity
Three Months Ended April 30, 2001.................................................... 3
Consolidated Statements of Cash Flows, Three Months Ended
April 30, 2001 and 2000.............................................................. 4
Notes to Consolidated 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
Signatures............................................................................................. 10
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
M. H. Meyerson & Co., Inc.
Consolidated Statements of Financial Condition
April 30, January 31,
2001 2001
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 4,094,640 $ 10,451,946
Due from clearing brokers - available for
immediate withdrawal 5,819,607 3,277,214
Securities - trading - long at market 9,580,487 13,640,805
Other current assets 5,970,428 5,232,910
----------- ------------
25,465,162 32,602,875
Investments 1,692,252 2,248,325
Fixed assets net of accumulated depreciation 990,630 1,027,087
----------- ------------
$28,148,044 $ 35,878,287
=========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Securities - trading - short at market $ 1,837,080 $ 2,853,217
Sales commission payable 2,524,232 4,273,059
Other liabilities and accrued items 2,436,696 2,787,714
----------- ------------
6,798,008 9,913,990
MINORITY INTEREST IN SUBSIDIARY 1,695,890 1,923,462
SUBORDINATED LOAN 2,000,000 2,000,000
SHAREHOLDERS' EQUITY
Common stock 65,815 65,717
Additional paid-in capital 14,365,505 14,783,913
Retained earnings 3,222,826 7,191,205
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17,654,146 22,040,835
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$28,148,044 $ 35,878,287
=========== ============
See notes to financial statements
1
M. H. Meyerson & Co., Inc.
Consolidated Statements of Operations
Three Months Ended April 30,
(Unaudited)
2001 2000
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REVENUE
Trading profit $ 3,138,323 $ 39,893,593
Commission 265,785 756,330
Underwriting 50,000 1,228,069
Interest and other 85,474 325,407
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3,539,582 42,203,399
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EXPENSES
Clearing charges 2,320,512 12,367,220
Salesmen's draw and commissions (251,812) 12,270,233
Other personnel costs 2,463,780 4,329,138
Rent and office expenses 2,104,359 2,089,706
Legal and professional fees 861,522 2,086,452
Interest expense 27,839 36,823
Other expenses 773,144 1,008,736
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8,299,344 34,188,308
----------- -----------
Income (loss) before income taxes (4,759,762) 8,015,091
Minority interest 227,573 166,615
Income tax expense (benefit) (563,810) 3,285,722
----------- -----------
Net income (loss) $(3,968,379) $ 4,895,984
=========== ===========
Basic Earnings (loss) per common share $ (0.60) $ 0.75
=========== ===========
Diluted Earnings (loss) per common share $ (0.60) $ 0.69
=========== ===========
Weighted average number of shares 6,578,104 6,528,398
=========== ===========
Diluted weighted average number of shares 6,578,104 7,060,392
=========== ===========
See notes to financial statements
2
M. H. Meyerson & Co., Inc.
Consolidated Statement of Changes in Shareholders' Equity
(Unaudited)
Three Months ended April 30, 2001
COMMON
STOCK ADDITIONAL
$.01 PAR PAID-IN RETAINED
VALUE CAPITAL EARNINGS
-------- ------------ -----------
SHAREHOLDERS' EQUITY
FEBRUARY 1, 2001 $ 65,717 $ 14,783,913 $ 7,191,205
Net loss for quarterly period (3,968,379)
Equity in subsidiary (442,808)
Options exercised 98 24,400
-------- ------------ -----------
SHAREHOLDERS' EQUITY
APRIL 30, 2001 $ 65,815 $ 14,365,505 $ 3,222,826
======== ============ ===========
See notes to financial statements
3
M. H. Meyerson & Co., Inc.
Consolidated Statements of Cash Flows
(Unaudited)
Three Months ended April 30,
2001 2000
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CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ (3,968,379) $ 4,895,984
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation 62,138 98,164
Change in assets and liabilities
(Increase) decrease in:
Receivable from clearing brokers (2,542,393) (18,391,960)
Securities owned 4,060,318 4,508,056
Other current assets (737,518) 174,756
Increase (decrease) in:
Securities sold, but not yet purchased (1,016,137) (1,611,930)
Sales commission payable (1,748,827) 987,719
Other liabilities and accrued items (351,018) 5,634,513
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Net cash provided by
(used in) operating activities (6,241,816) (3,704,698)
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CASH FLOWS FROM INVESTING ACTIVITIES
Investments 556,073 (1,182,564)
Investment in subsidiary 0 0
Fixed assets (25,681) (7,067)
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Net cash provided by (used in) investing
activities 530,392 (1,189,631)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Change in minority interest in subsidiary (227,573) 1,876,094
Change in equity in subsidiary (442,807) 1,871,069
Options exercised 24,498 133,281
------------ ------------
Net cash provided by
financing activities (645,882) 3,880,444
------------ ------------
NET INCREASE (DECREASE) IN CASH (6,357,306) (1,013,885)
CASH, BEGINNING OF PERIOD 10,451,946 6,674,095
------------ ------------
CASH, END OF PERIOD $ 4,094,640 $ 5,660,210
============ ============
SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid $ 0 $ 240,490
============ ============
Interest paid $ 27,839 $ 36,823
============ ============
See notes to financial statements
4
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, 2001, the consolidated statements of operations for the
three months ended April 30, 2001 and 2000, the consolidated
statement of changes in shareholders' equity for the quarterly
period ended April 30, 2001, and the consolidated statements
of cash flows for the three months ended April 30, 2001 and
April 30, 2000 have been prepared by the Company without
audit. The consolidated statement of financial condition as of
January 31, 2001 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, 2001 and January 31, 2001, and
the results of operations and cash flows at April 30, 2001 and
April 30, 2000 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, 2001. The
results of the periods ended April 30, 2001 and 2000 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, 2001, the Company's aggregate indebtedness and
net capital were $4,892,762 and $6,423,348, respectively, a
ratio of 0.76 to 1.00.
5
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, 2001 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.
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,
-------------------------
2001 2000
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Net gain on securities transactions..... 88.7 94.5
Commissions............................. 7.5 1.8
Underwriting............................ 1.4 2.9
Interest and other...................... 2.4 0.8
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100.0 100.0
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Clearing charges........................ 65.6 29.3
Compensation and benefits............... 62.5 39.3
Rent and office......................... 59.5 5.0
Professional fees....................... 24.3 4.9
Interest and other operating expenses... 22.6 2.5
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Total expenses..................... 234.5 81.0
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Income (loss) before income taxes.. (134.5) 19.0
Minority interest.................. 6.5 0.4
Provision for income tax expense
(benefit).......................... (15.9) 7.8
----- -----
Net income (loss).................. (112.1) 11.6
===== =====
6
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, 2001 compared with Quarter Ended April 30, 2000
Total revenues for the quarter ended April 30, 2001 were $3,539,582, a
92% decrease from the $42,203,399 reported for the quarter ended April 30, 2000.
This decrease is attributable mainly to a decrease in trading volume and general
market malaise, which also caused major decreases in retail revenue, and
investment banking and underwriting activity.
Clearing charges decreased from $12,367,220 to $2,320,512, a change of
81%, due to the decreased trading volume during the quarter.
Compensation and benefits decreased from $16,599,371 to $2,211,968,
representing a decrease of 87%. This corresponds to the decrease 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 69%
and 76% of total assets at April 30, 2001 and January 31, 2001, 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.
Accounting for Taxes
At April 30, 2001 the Company has an NOL carryforward of $4,759,762
which is available to offset future income, expiring in 2021. Since it is
impossible to determine whether the Company will be able to use this asset in
the future, it has been fully reserved.
7
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
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. 11
(b) The Company did not file any reports on Form 8-K during the
quarter ended April 30, 2001.
9
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 8, 2001 By: /s/ Martin H. Meyerson
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Martin H. Meyerson
Chairman and Chief Executive Officer
Date: June 8, 2001 By: /s/ Eugene M. Whitehouse
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Eugene M. Whitehouse
Senior Vice President and
Chief Operating Officer
10