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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2008
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Or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission File No. 333-73996
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MORGAN GROUP HOLDING CO.
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(Exact name of small business issuing as specified in its charter)
Delaware 13-4196940
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(State or other jurisdiction of (IRS Employer
Incorporation or organization) Identification Number)
401 Theodore Fremd Avenue, Rye, New York 10580
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(Address of principal executive offices) (Zip Code)
(914) 921-1877
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(Registrant's telephone number, including area code)
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. [X] Yes [ ] No
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] (Do not check if a Smaller reporting company [X]
smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). [X] Yes [ ] No
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practical date.
Class Outstanding at October 31, 2008
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Common Stock, $.01 par value 3,055,345
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Unaudited Financial Statements
Condensed Balance Sheets as of
September 30, 2008, December 31, 2007 and September 30, 2007
Condensed Statements of Operations for the
Three and Nine Months Ended September 30, 2008 and 2007
Condensed Statements of Cash Flows for the
Nine Months Ended September 30, 2008 and 2007
Notes to Condensed Financial
Statements as of September 30, 2008
2
Morgan Group Holding Co.
Condensed Balance Sheets
(Unaudited)
(Dollars in thousands)
September 30, December 31, September 30,
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2008 2007 2007
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ASSETS
Current assets:
Cash and cash equivalents $415 $440 $436
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Total current assets 415 440 436
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Net assets of The Morgan Group, Inc. - - -
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Total assets $415 $440 $436
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LIABILITIES AND SHAREHOLDERS' EQUITY
Accrued Liabilities $- $-- $-
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Total current liabilities - -- -
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SHAREHOLDERS' 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,
3,055,345 outstanding 30 30 30
Additional paid-in-capital 5,612 5,612 5,612
Accumulated deficit (5,227) (5,202) (5,206)
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Shareholders' equity 415 440 436
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Total liabilities and shareholders' equity $415 $440 $436
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See accompanying notes to condensed financial statements
3
Morgan Group Holding Co.
Condensed Statements of Operations
(Unaudited)
(Dollars and shares in thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
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2008 2007 2008 2007
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Administrative expenses $ (5) $ (-) $(32) $(2)
Investment income 2 5 7 15
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Net (loss) profit $(3) $5 $(25) $13
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Basic and diluted net (loss) profit per share $(0.00) $0.00 $(0.01) $0.00
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Weighted average shares outstanding 3,055 3,055 3,055 3,055
See accompanying notes to condensed financial statements
4
Morgan Group Holding Co.
Condensed Statements of Cash Flows
(Unaudited)
(Dollars in thousands)
Nine Months Ended
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September 30,
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2008 2007
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Cash Flows from Operating activities:
Interest received $7 $15
Cash paid to suppliers (32) (2)
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Net cash (used in) provided by operating activities (25) 13
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Cash Flow from Investing Activities -- --
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Cash Flow from Financing Activities -- --
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Net (decrease) increase in cash (25) 13
Cash, Beginning of Period 440 423
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Cash, End of Period $ 415 $436
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See accompanying notes to condensed financial statements
5
Morgan Group Holding Co.
Notes to Financial Statements
Note 1. Basis of Presentation
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Morgan Group Holding Co. ("Holding" or "the Company") was incorporated
in November 2001 as a wholly-owned subsidiary of LICT Corporation
("LICT, formerly Lynch Interactive Corporation") to serve, among other
business purposes, as a holding company for LICT's controlling interest
in The Morgan Group, Inc. ("Morgan"). On December 18, 2001, LICT's
controlling interest in Morgan was transferred to Holding. At the time,
Holding owned 68.5% of Morgan's equity interest and 80.8% of Morgan's
voting interest. On January 24, 2002, LICT spun off 2,820,051 shares of
Holding common stock through a pro rata distribution ("Spin-Off") to
its stockholders. LICT retained 235,294 shares of Holding common stock
to be distributed in connection with the potential conversion of a
convertible note that had been issued by LICT. Such note was
repurchased by LICT in 2002 and LICT retains the shares.
On October 3, 2002, Morgan ceased its operations when its liability
insurance expired and it was unable to secure replacement insurance. On
October 18, 2002, Morgan and two of its operating subsidiaries filed
voluntary petitions under Chapter 11 of the United States Bankruptcy
Code in the United States Bankruptcy Court for the Northern District of
Indiana, South Bend Division for the purpose of conducting an orderly
liquidation of Morgan's assets.
On October 18, 2002, Morgan adopted the liquidation basis of accounting
and, accordingly, Morgan's aFssets and liabilities have been adjusted
to estimate net realizable value. As the carry value of Morgan's
liabilities exceeded the fair value of its assets, the liabilities were
reduced to equal the estimated net realizable value of the assets.
Management believed that it was unlikely that the Company would realize
any value from its equity ownership in Morgan and, given the fact that
the Company had no obligation or intention to fund any of Morgan's
liabilities, its investment in Morgan was believed to have no value
after its liquidation. Because the liquidation of Morgan was under the
control of the bankruptcy court, the Company believed it had
relinquished control of Morgan and, accordingly, deconsolidated its
ownership interest Morgan in its financial statements during 2002. On
March 31, 2008, the bankruptcy proceeding was concluded and the
bankruptcy court dismissed the proceeding. Morgan received no value for
its equity ownership from the bankruptcy proceeding.
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with accounting principles generally
accepted in the United States for interim financial information and
with the instructions to Form 10-Q and Articles 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes
required by accounting principles generally accepted in the United
States for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results
for the three and nine months ended September 30, 2008 are not
necessarily indicative of the results that may be expected for the year
ending December 31, 2008. The preparation of consolidated financial
statements in conformity with accounting principles generally accepted
in the United States requires management to make estimates and
assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from
these estimates.
Recently Issued Accounting Pronouncements
In September 2006, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 157, "Fair Value Measurements." This Statement defines
fair value, establishes a framework for measuring fair value in
accordance with GAAP, and expands disclosures about fair value
measurements. The Statement clarifies the rule that fair value be based
on the assumptions that market participants would use when pricing an
asset or liability, and establishes a fair value hierarchy that
prioritizes the framework and information used to develop those
assumptions. FASB Staff Position 157-2 delays the effective date of
SFAS No. 157 to allow the FASB Board additional time to consider the
effect of various implementation issues that have arisen, or that may
arise, from the application of SFAS No. 157. Under FASB Staff Position
157-2, the Company is required to adopt the provisions of SFAS No. 157
for financial statements issued for fiscal years beginning after
November 15, 2008. The adoption of SFAS No. 157 is not expected to have
a material impact on the Company's consolidated financial statements.
6
In December 2007, the FASB issued SFAS No. 141(R), "Business
Combinations." SFAS No. 141(R) will require the acquirer in a business
combination to recognize the assets acquired, the liabilities assumed,
and any noncontrolling interest in the acquiree at the acquisition
date, measured at their fair values as of that date, with
acquisition-related costs recognized separately from the acquisition.
SFAS No. 141(R) applies prospectively to business combinations
occurring on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008.
In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option
for Financial Assets and Financial Liabilities - Including an amendment
of FASB Statement No. 115." SFAS No. 159 permits all entities to choose
to measure and report many financial instruments and certain other
items at fair value at specified election dates. If such an election is
made, any unrealized gains and losses on items for which fair value
option has been elected are required to be reported in earnings at each
subsequent reporting date. In addition, SFAS No. 159 establishes
presentation and disclosure requirements designed to facilitate
comparisons between companies that choose different measurement
attributes for similar types of assets and liabilities. We were
required to adopt the provisions of SFAS No. 159 for financial
statements issued for fiscal years beginning after November 15, 2007.
The adoption of SFAS No. 159 did not have material impact on our
condensed consolidated financial statements.
In December 2007, the FASB issued SFAS No. 160, "Noncontrolling
Interests in Consolidated Financial Statements." SFAS No. 160
establishes new accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of
a subsidiary. SFAS No. 160 is effective for fiscal years beginning on
or after December 15, 2008.
In March 2008, the FASB issued SFAS No. 161, Disclosures about
Derivative Instruments and Hedging Activities, an amendment of FASB
Statement No. 133 (SFAS No. 161). SFAS No. 161 requires enhanced
disclosures regarding an entity's derivative and hedging activities.
These enhanced disclosures include information regarding how and why an
entity uses derivative instruments; how to account for derivative
instruments and related hedge items under SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, and its related
interpretations; and how derivative instruments and related hedge items
affect an entity's financial position, financial performance and cash
flows. SFAS No. 161 is effective for financial statements issued for
fiscal years and interim periods beginning after November 15, 2008. The
adoption of SFAS No. 161 will not have an impact on our financial
position, results of operations or liquidity.
Note 2. Net assets of Morgan Group
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At September 30, 2008, December 31, 2007 and September 30, 2007, the
estimated value of Morgan's assets in liquidation was insufficient to
satisfy its estimated obligations.
Note 3. Income Taxes
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The Company is a "C" corporation for Federal tax purposes, and has
provided for deferred income taxes for temporary differences between
the financial statement and tax bases of its assets and liabilities.
The Company has recorded a full valuation allowance against its
deferred tax asset of approximately $1.7 million arising from its
temporary basis differences and tax loss carry forward, as its
realization is dependent upon the generation of future taxable income
during the period when such losses would be deductible.
Pursuant to Sections 382 and 383 of the Internal Revenue Code, annual
use of any of the Company's net operating loss carry forwards may be
limited if cumulative changes in ownership of more than 50% occur
during any three year period.
Note 4. Commitments and Contingencies
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Holding has not guaranteed any of the obligations of Morgan and it has
no further commitment or obligation to fund any creditors.
7
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
On October 18, 2002, Morgan adopted the liquidation basis of accounting and
accordingly, Morgan's assets and liabilities have been adjusted to estimate net
realizable value. As the carrying value of Morgan's liabilities exceeded the
fair value of its assets, the liabilities were reduced to equal the estimated
net realizable value of the assets.
The Company currently has no operating businesses and will seek acquisitions as
part of its strategic alternatives. Its only costs are the administrative
expenses required to make the regulatory filings needed to maintain its public
status. These costs are estimated at $30,000 to $40,000 per year.
Results of Operations
For the three months ended September 30, 2008, the Company incurred
approximately $5,000 of expenses as compared to approximately $500 of expenses
in the three months ended September 30, 2007. During the three months ended
September 30, 2008, the Company incurred professional fees of associated with
the review and filing of its 2008 financial statements. No review expenses were
recorded during the previous year.
For the nine months ended September 30, 2008, the Company incurred approximately
$32,000 of expenses as compared to approximately $2,000 of expenses in the nine
months ended September 30, 2007. During the nine months ended September 30,
2008, the Company incurred $26,500 for the audit and review fees for its 2008,
2007 and 2006 financial statements. No audit or review expenses were recorded
during the previous year. Also, during 2008 $3,000 of legal expenses were
incurred.
Investment income was approximately $2,000 in the three months ended September
30, 2008 as compared to approximately $5,000 in the three months ended September
30, 2007, and approximately $7,000 in the nine months ended September 30, 2008
as compared to about $15,000 in the nine months ended September 30, 2007 as a
result of the Company's investment in a United States Treasury money market
fund. Lower interest rates caused the decreases in 2008.
Liquidity and Capital Resources
As of September 30, 2008, the Company's only assets consisted of approximately
$415,000 in cash and a capital loss carry forward of about $4.5 million which it
expects will substantially expire in 2013. The ability to utilize this carry
forward is dependent on the Company's ability to generate a capital gain prior
to its expiration.
Off Balance Sheet Arrangements
None.
Item 3. Quantitative and Qualitative Analysis of Market Risk
As of September 30, 2008, the Company had no market sensitive assets or
liabilities, and, as a result, management believes that the Company is minimally
exposed to changes in market risk.
Recently Issued Accounting Pronouncements
In September 2006, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 157, "Fair Value Measurements." This Statement defines fair value,
establishes a framework for measuring fair value in accordance with GAAP, and
expands disclosures about fair value measurements. The Statement clarifies the
rule that fair value be based on the assumptions that market participants would
use when pricing an asset or liability, and establishes a fair value hierarchy
that prioritizes the framework and information used to develop those
assumptions. FASB Staff Position 157-2 delays the effective date of SFAS No. 157
to allow the FASB Board additional time to consider the effect of various
implementation issues that have arisen, or that may arise, from the application
of SFAS No. 157. Under FASB Staff Position 157-2, the Company is required to
adopt the provisions of SFAS No. 157 for financial statements issued for fiscal
years beginning after November 15, 2008. The adoption of SFAS No. 157 is not
expected to have a material impact on the Company's consolidated financial
statements.
8
In December 2007, the FASB issued SFAS No. 141(R), "Business Combinations." SFAS
No. 141(R) will require the acquirer in a business combination to recognize the
assets acquired, the liabilities assumed, and any noncontrolling interest in the
acquiree at the acquisition date, measured at their fair values as of that date,
with acquisition-related costs recognized separately from the acquisition. SFAS
No. 141(R) applies prospectively to business combinations occurring on or after
the beginning of the first annual reporting period beginning on or after
December 15, 2008.
In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities - Including an amendment of FASB
Statement No. 115." SFAS No. 159 permits all entities to choose to measure and
report many financial instruments and certain other items at fair value at
specified election dates. If such an election is made, any unrealized gains and
losses on items for which fair value option has been elected are required to be
reported in earnings at each subsequent reporting date. In addition, SFAS No.
159 establishes presentation and disclosure requirements designed to facilitate
comparisons between companies that choose different measurement attributes for
similar types of assets and liabilities. We were required to adopt the
provisions of SFAS No. 159 for financial statements issued for fiscal years
beginning after November 15, 2007. The adoption of SFAS No. 159 did not have
material impact on our condensed consolidated financial statements.
In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in
Consolidated Financial Statements." SFAS No. 160 establishes new accounting and
reporting standards for the noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary. SFAS No. 160 is effective for fiscal years
beginning on or after December 15, 2008.
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities, an amendment of FASB Statement No. 133 (SFAS
No. 161). SFAS No. 161 requires enhanced disclosures regarding an entity's
derivative and hedging activities. These enhanced disclosures include
information regarding how and why an entity uses derivative instruments; how to
account for derivative instruments and related hedge items under SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities, and its related
interpretations; and how derivative instruments and related hedge items affect
an entity's financial position, financial performance and cash flows. SFAS No.
161 is effective for financial statements issued for fiscal years and interim
periods beginning after November 15, 2008. The adoption of SFAS No. 161 will not
have an impact on our financial position, results of operations or liquidity.
Item 4T. Controls and Procedures
a) Evaluation of Disclosure Controls and Procedures
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Our Chief Executive Officer and Chief Financial Officer have evaluated
the effectiveness of the Company's disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934
(the "Act")) as of the end of the period covered by this report. Based on that
evaluation, the Chief Executive Officer and Chief Financial Officer have
concluded that the Company's disclosure controls and procedures as of the end of
the period covered by this report were designed and were functioning effectively
to provide reasonable assurance that the information required to be disclosed by
the Company in reports filed under the Act is recorded, processed, summarized
and reported within the time periods specified in the rules and forms of the
Securities and Exchange Commission. The Company believes that a controls system,
no matter how well designed and operated, cannot provide absolute assurance that
the objectives of the controls system are met, and no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, within a company have been detected.
(b) Changes in Internal Controls
----------------------------
During the period covered by this report, there have been no changes in
our internal control over financial reporting that have materially affected, or
are reasonably likely to materially affect, our financial statements.
9
Forward Looking Discussion
--------------------------
This report contains a number of forward-looking statements, including
statements regarding the prospective adequacy of the Company's liquidity and
capital resources in the near term. From time to time, the Company may make
other oral or written forward-looking statements regarding its anticipated
operating revenues, costs and expenses, earnings and other matters affecting its
operations and condition. Such forward-looking statements are subject to a
number of material factors, which could cause the statements or projections
contained therein, to be materially inaccurate. Such factors include the
estimated administrative expenses of the Company on a go forward basis.
10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
Exhibit 3.1 Certificate of Incorporation of the
Company*
Exhibit 3.2 By-laws of the Company*
Exhibit 31.1 Chief Executive Officer Rule 15d-14(a)
Certification.
Exhibit 31.2 Principal Financial Officer Rule 15d-14(a)
Certification.
Exhibit 32.1 Chief Executive Officer Section 1350
Certification.
Exhibit 32.2 Principal Financial Officer Section 1350
Certification.
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* Incorporated by reference to the exhibits to the Company's Registration
Statement on Form S-1 (Registration No. 333-73996).
11
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
and Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
MORGAN GROUP HOLDING CO.
By: /s/ Robert E. Dolan
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ROBERT E. DOLAN
Chief Financial Officer
November 11, 2008
12