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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2010
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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 of 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 [ ] Smaller reporting company [X]
(Do not check if 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 atOctober 29, 2010
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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, 2010, December 31, 2009 and September 30, 2009
Condensed Statements of Operations for the
Three and Nine Months Ended September 30, 2010 and 2009
Condensed Statements of Cash Flows for the
Nine Months Ended September 30, 2010 and 2009
Notes to Condensed Financial
Statements as of September 30, 2010
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Morgan Group Holding Co.
Condensed Balance Sheets
(Unaudited)
September 30, December 31, September 30,
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2010 2009 2009
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ASSETS
Current assets:
Cash and cash equivalents $ 307,413 $ 376,684 $ 387,572
Investments in marketable securities 97,840 -- --
Prepaid expenses -- 7,000 --
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Total current assents 405,253 383,684 387,572
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Total assets $ 405,253 $ 383,684 $ 387,572
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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 30,553 30,553 30,553
Additional paid-in-capital 5,611,447 5,611,447 5,611,447
Accumulated deficit (5,236,747) (5,258,316) (5,254,428)
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Shareholders' equity 405,253 383,684 387,572
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Total liabilities and shareholders' equity $ 405,253 $ 383,684 $ 387,572
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See accompanying notes to condensed financial statements
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Morgan Group Holding Co.
Condensed Statements of Operations
(Unaudited)
Three Months Ended Nine Month Ended
September 30, September 30,
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2010 2009 2010 2009
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Revenues $ -- $ -- $ -- $ --
Administrative expenses (4,286) (5,228) (23,281) (25,570)
Investment income 43,562 148 44,850 766
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Net profit(loss) $ 39,276 $ (5,080) $ 21,569 $ (24,804)
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Basic and diluted net loss per share $ 0.01 $ (0.00) $ 0.01 $ (0.01)
Weighted average shares outstanding 3,055,345 3,055,345 3,055,345 3,055,345
See accompanying notes to condensed financial statements
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Morgan Group Holding Co.
Condensed Statements of Cash Flows
(Unaudited)
Nine Months Ended
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September 30,
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2010 2009
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Cash Flows from Operating activities:
Interest received $ 134 $ 766
Cash paid to suppliers (16,281) (18,070)
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Net cash used in operating activities (16,147) (17,304)
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Cash Flow from Investing Activities:
Purchases of marketable securities (1,014,037) --
Proceeds from the sale of marketable securities 960,913 --
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Net cash used in Investing activities (53,124) --
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Cash Flow from Financing Activities -- --
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Net decrease in cash (69,271) (17,304)
Cash, Beginning of Period 376,684 404,876
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Cash, End of Period $ 307,413 $ 387,572
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Reconciliation of net loss to net cash used in operating activities:
Net profit (loss) $ 21,569 $ (24,804)
Realized gains from the sale of marketable securities (44,516)
Unrealized gains on investment in marketable securities (200)
Decrease in prepaid expenses 7,000 7,500
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Net cash used in operating activities $ (16,147) $ (17,304)
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See accompanying notes to condensed financial statements
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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 January 24, 2002,
LICT spun off 2,820,051 shares of Holding common stock through a pro
rata distribution ("Spin-Off") to its stockholders and retained
235,294 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 March 31, 2008, the
bankruptcy proceeding was concluded and the bankruptcy court dismissed
the proceeding. Holding 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 and nine months ended September 30,
2010 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2010. 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 January 2010, the Financial Accounting Standards Board issued
Accounting Standards Update ("ASU") No. 2010-06, Fair Value
Measurements and Disclosures (Topic 820) -- Improving Disclosures
about Fair Value Measurements ("ASU 2010-06"), which amends Accounting
Standards Codification 820 to require the disclosure of additional
information related to fair value measurement and provide
clarification to existing requirements for fair value measurement
disclosure. ASU 2010-06 was effective for the Company beginning
January 1, 2010. The Company's disclosures conform to the requirements
of ASU 2010-06.
Note 2. Marketable Securities and Related Party Transactions
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Marketable securities consist of publicly traded common stocks. The
Company's investments in marketable securities are classified as
trading under ASC 320 (formerly FASB 115, "Accounting for Certain
Investments in Debt and Equity Securities") and are carried at their
estimated fair value based on current market quotes. The Company
acquires its marketable securities on the open market through an
affiliate of its Chairman and securities are held in an account at the
same affiliate. The Company reports the unrealized gains or losses
through the current period Statement of Operations. At September 30,
2010, there was $200 of unrealized gains on the Company's investments
in marketable securities which was included in earning for the three
and nine months ended September 30, 2010.
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Note 3. Fair Value of Financial Instruments
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On January 1, 2008, the Company adopted ASC 820-10 (formerly Statement
of Financial Accounting Standard No. 157, "Fair Value Measurements")
and subsequently adopted the related FASB Staff Positions. The Company
measures fair value as the selling price that would be received for an
asset, or paid to transfer a liability, in the principal market on the
measurement date. The hierarchy established by the FASB prioritizes
fair value measurements based on the types of inputs used in the
valuation technique. The inputs are categorized into the following
levels:
Level 1 - Observable inputs such as quoted prices in active
markets for identical assets or liabilities.
Level 2 - Inputs other than quoted prices that are observable,
either directly or indirectly, for identical or similar assets
and liabilities in active or non-active markets; or model-derived
valuations or other inputs that are observable or can be
corroborated by observable market data for substantially the full
term of the assets or liability.
Level 3 - Unobservable inputs not corroborated by market data,
therefore requiring the entity to use the best available
information, including management assumptions.
Market value was determined using Level 1 inputs, which are quoted
prices for identical securities in active markets.
At September 30, 2010, the Gross Unrealized Gains are as follows:
Gross Estimated
Cost Unrealized Fair
Description Basis Gains Value
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Equity $ 97,640 $ 200 $ 97,840
While the above Estimated Fair Value was based on quoted prices
(unadjusted) in active markets for identical assets at the reporting
date, the quoted price was significantly impacted by an offer to
acquire all of the outstanding of stock of that entity. The
transaction closed subsequent to the reporting date at an amount in
excess of the above Estimated Fair Value.
Note 4. 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 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 5. Commitments and Contingencies
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On March 31, 2008, the bankruptcy court dismissed Morgan's bankruptcy
proceeding. Holding had not guaranteed any of the obligations of
Morgan. Management believes that the Company has no commitment or
obligation to fund any creditors of Morgan.
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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 but is continuing actively to
seek acquisitions of such businesses as its primary strategic alternative. 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, 2010, the Company incurred $4,286 of
expenses down from $5,228 of expenses in the three months ended September 30,
2009. Lower professional fees in 2010 caused the slight decrease in this
quarter. For the nine months ended September 30, 2010, the Company incurred
$23,281 of expenses down from $25,570 of expenses in the nine months ended
September 30, 2009, also due to lower professional fees in 2010.
Investment income was $43,562 in the three months ended September 30, 2010 as
compared to $148 in the three months ended September 30, 2009. During the third
quarter of 2010, the Company recorded $43,526 of realized and unrealized gains
from the purchase and sale of certain marketable securities. There was no
activity in marketable securities in 2009. The remaining investment income of
$36 is as a result of the Company's investment in a United States Treasury money
market fund. Investment income was $44,850 in the nine months ended September
30, 2010 as compared to $766 in the nine months ended September 30, 2009.
Realized and unrealized gains in marketable securities of $44,716 were the cause
of the increase. The Company intends to use such cash management activities to
cover its administrative expenses.
Liquidity and Capital Resources
As of September 30, 2010, the Company's assets consisted of approximately
$405,253 in cash, cash equivalents and marketable securities and a capital loss
carry forward of about $4.5 million. The ability to utilize this asset is
dependent on the Company's ability to generate a capital gain prior to its
expiration (2013).
Off Balance Sheet Arrangements
None.
Item 3. Quantitative and Qualitative Analysis of Market Risk
As of September 30, 2010, the Company only asset or liability that is market
sensitive is its investment in marketable securities. Because the Company
primarily invests in marketable securities that are subject to a publicly
disclosed acquisition offer but are trading below the proposed acquisition
price, management believes that the Company that is minimally exposed to changes
in market risk.
Recently Issued Accounting Pronouncements
For a discussion of accounting standards updates that have been adopted or will
be adopted in the future, please read Note 1 of the Notes to Condensed Financial
Statements included under Item 1.
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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
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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.
Forward Looking Discussion
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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.
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).
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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 5, 2010
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