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 March 31, 2009
--------------
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
---------
MORGAN GROUP HOLDING CO.
------------------------
(Exact name of small business issuing as specified in its charter)
Delaware 13-4196940
--------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer
Incorporation of organization) Identification Number)
401 Theodore Fremd Avenue, Rye, New York 10580
--------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(914) 921-1877
--------------------------------------------------------------------------------
(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 Smaller reporting company [X]
a 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 April 30, 2009
----- -----------------------------
Common Stock, $.01 par value 3,055,345
================================================================================
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Unaudited Financial Statements
Condensed Balance Sheets as of
March 31, 2009, December 31, 2008 and March 31, 2008
Condensed Statements of Operations for the
Three Months Ended March 31, 2009 and 2008
Condensed Statements of Cash Flows for the
Three Months Ended March 31, 2009 and 2008
Notes to Condensed Financial
Statements as of March 31, 2009
2
Morgan Group Holding Co.
Condensed Balance Sheets
(Unaudited)
March 31, December 31, March 31,
----------------------------------------------------------
2009 2008 2008
----------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $404,753 $404,876 $443,644
Prepaid expenses -- 7,500 --
----------------------------------------------------------
Total curent assets 404,753 412,376 443,644
Net assets of The Morgan Group, Inc. -- - - --
----------------------------------------------------------
Total assets $404,753 $412,376 $443,644
==========================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Accrued Liabilities $8,261 $-- $21,983
----------------------------------------------------------
Total current liabilities 8,261 -- 21,983
----------------------------------------------------------
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 30,553 30,553 30,553
Additional paid-in-capital 5,611,447 5,611,447 5,611,447
Accumulated deficit (5,245,508) (5,229,624) (5,220,339)
----------------------------------------------------------
Shareholders' equity 396,492 412,376 421,661
----------------------------------------------------------
Total liabilities and shareholders' equity $404,753 $412,376 $443,644
==========================================================
See accompanying notes to condensed financial statements
3
Morgan Group Holding Co.
Condensed Statements of Operations
(Unaudited)
Three Months Ended
March 31,
-------------------------
2009 2008
------------ ------------
Revenues $-- $--
Administrative expenses $ (16,286) $(22,038)
Other income - interest 402 3,453
-------------------------
Net loss $(15,884) $(18,585)
=========================
Basic and diluted net loss per share $(0.01) $(0.01)
=========================
Weighted average shares outstanding 3,055,345 3,055,345
See accompanying notes to condensed financial statements
4
Morgan Group Holding Co.
Condensed Statements of Cash Flows
(Unaudited)
Three Months Ended
-----------------------------
March 31,
-----------------------------
2009 2008
-----------------------------
Cash Flows from Operating activities:
Interest received $402 $3,453
Cash paid to suppliers (525) (55)
-----------------------------
Net cash (used in) provided by
operating activities (123) 3,398
-----------------------------
Cash Flow from Investing Activities -- --
-----------------------------
Cash Flow from Financing Activities -- --
-----------------------------
Net (decrease) increase in cash (123) 3,398
Cash, Beginning of Period 404,876 440,246
-----------------------------
Cash, End of Period $ 404,753 $443,644
=============================
Reconciliation of net (loss) to net cash
(used in) provided by operating activities:
Net loss $(15,884) $(18,585)
Decrease in prepaid expenses 7,500 --
Increase in accrued liabilities 8,261 21,983
-----------------------------
Net cash provided by operating
activities $(123) $3,398
=============================
See accompanying notes to condensed financial statements
5
Morgan Group Holding Co.
Notes to Financial Statements
Note 1. Basis of Presentation
---------------------
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 assets 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 Article 8 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 months ended March 31, 2009 are not necessarily
indicative of the results that may be expected for the year ending
December 31, 2009. 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 May 2008, the FASB issued SFAS No. 163, "Accounting for Financial
Guarantee Insurance Contracts." SFAS No. 163 clarifies how SFAS No. 60,
"Accounting and Reporting by Insurance Enterprises," applies to
financial guarantee insurance contracts issued by insurance
enterprises, including the recognition and measurement of premium
revenue and claim liabilities. SFAS No. 163 also requires expanded
disclosures about financial guarantee insurance contracts. SFAS No. 163
is effective for financial statements issued for fiscal years beginning
after December 15, 2008, and all interim periods within those fiscal
years, except for disclosures about the insurance enterprise's
risk-management activities. Disclosures about the insurance
enterprise's risk-management activities are effective the first period
beginning after issuance of SFAS No. 163. The adoption of SFAS No. 163
had no impact on the Company's financial statements.
6
In December 2007, the FASB issued SFAS No. 141(R), Business
Combinations and SFAS No. 160, Noncontrolling Interest in Consolidated
Financial Statements. These Statements replace FASB Statement No. 141,
Business Combinations, and requires an acquirer 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. SFAS No. 141(R) also makes significant amendments to
other Statements and other authoritative guidance. The Statements are
effective for years beginning on or after December 15, 2008. The
adoption of SFAS No. 141(R) and SFAS No. 160 had no impact on the
Company's financial statements.
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 had no impact on the Company's financial
statements.
Note 2. Net assets of Morgan Group
--------------------------
Upon Morgan Group, Inc.'s bankruptcy filing, the Company has
deconsolidated its investment, as the Company believes it no longer has
controlling or significant influence. On March 31, 2008, the bankruptcy
proceeding was concluded and the bankruptcy court dismissed the
proceeding. The Company received no value for its equity ownership.
Note 3. Income Taxes
------------
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 carryforward, 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
-----------------------------
Holding had 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 March 31, 2009, the Company incurred about $16,286
(including $15,000 of 2008 audit fees) of expenses as compared to $22,038 of
expenses in the three months ended March 31, 2008. During the three months ended
March 31, 2008, the Company incurred an additional audit fee of $18,000 for the
audit of its 2007 and 2006 financial statements. Also, during 2008 approximately
$3,000 of legal expenses were incurred.
Investment income was $402 in the three months ended March 31, 2009 as compared
to $3,453 in the three months ended March 31, 2008, as a result of the Company's
investment in a United States Treasury money market fund. Lower interest rates
were the primary cause of the decrease in 2009.
Liquidity and Capital Resources
As of March 31, 2009, the Company's only assets consisted of approximately
$404,753 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 March 31, 2009, 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 May 2008, the FASB issued SFAS No. 163, "Accounting for Financial Guarantee
Insurance Contracts." SFAS No. 163 clarifies how SFAS No. 60, "Accounting and
Reporting by Insurance Enterprises," applies to financial guarantee insurance
contracts issued by insurance enterprises, including the recognition and
measurement of premium revenue and claim liabilities. SFAS No. 163 also requires
expanded disclosures about financial guarantee insurance contracts. SFAS No. 163
is effective for financial statements issued for fiscal years beginning after
December 15, 2008, and all interim periods within those fiscal years, except for
disclosures about the insurance enterprise's risk-management activities.
Disclosures about the insurance enterprise's risk-management activities are
effective the first period beginning after issuance of SFAS No. 163. The
adoption of SFAS No. 163 had no impact on the Company's financial statements.
In December 2007, the FASB issued SFAS No. 141(R), Business Combinations and
SFAS No. 160, Noncontrolling Interest in Consolidated Financial Statements.
These Statements replace FASB Statement No. 141, Business Combinations, and
requires an acquirer 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. SFAS No. 141(R) also makes
significant amendments to other Statements and other authoritative guidance. The
Statements are effective for years beginning on or after December 15, 2008. The
adoption of SFAS No. 141(R) and SFAS No. 160 had no impact on the Company's
financial statements.
8
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 had no
impact on the Company's financial statements.
Item 4T. Controls and Procedures
a) Evaluation of Disclosure Controls and Procedures
------------------------------------------------
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.
---------------
* 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
-------------------
ROBERT E. DOLAN
Chief Financial Officer
May 14, 2009
12