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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2002 Commission file number 333-73996
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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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MORGAN GROUP HOLDING CO.
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(Exact name of Registrant as specified in its charter)
Delaware 13-4196940
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State of other jurisdiction (I.R.S. Employer
ncorporation or organization Identification No.)
401 Theodore Fremd Avenue, Rye, NY 10580
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Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (914) 921-1877
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to section 12(g) of the Act: None
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 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 by mark if disclosure of delinquent filers pursuant to Item 405 of
Regulations S-K is not contained herein, and will not be contained, to the best
of the Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K, or any amendment to
this Form 10-K. [ ]
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes No [X]
As of June 30, 2002, the aggregate market value of the Registrant's voting and
nonvoting common equity held by non-affiliates of the Registrant was
approximately $126,300, which value, solely for the purposes of this
calculation, excludes shares held by the Registrant's officers, directors, and
their affiliates. Such exclusion should not be deemed a determination or an
admission by the issuer that all such individuals are, in fact, affiliates of
the issuer.
The number of outstanding shares of the Registrant's Common Stock was 3,055,345
as of March 26, 2003.
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PART I
Item 1. Business.
Morgan Group Holding Co. (the "Company" or "MGHL") was incorporated in
November 2001 to serve, among other business purposes, as a holding company for
Lynch Interactive Corporation's controlling interest in The Morgan Group, Inc.
Upon the Company's formation as a wholly owned subsidiary of Lynch Interactive
Corporation, Lynch Interactive Corporation made a capital contribution to MGHL
of $500,000. Lynch Interactive Corporation also transferred to us 161,100 shares
of The Morgan Group, Inc.'s outstanding Class A common stock, warrants to
purchase an additional 161,100 such shares at $9.00 per share, 2,200,000 shares
of The Morgan Group, Inc.'s Class B common stock and warrants to purchase an
additional 2,200,000 such shares at $9.00 per share, giving MGHL control of more
than 80% of The Morgan Group, Inc.'s aggregate voting power. On January 24,
2002, Lynch Interactive spun off all but 235,294 of its shares in MGHL to its
stockholders.
Unfortunately, a combination of industry dynamics, poor management
decisions, and a surge in insurance costs crippled Morgan. On October 3, 2002
Morgan ceased operations when its liability insurance expired and it was unable
to secure replacement insurance. On October 18, 2002, The Morgan Group, Inc. 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. As of December 31, 2002, the
Debtors were conducting an orderly liquidation of their assets.
Effective October 15, 2002, the shares of The Morgan Group, Inc., Class A
Common Stock were delisted from the American Stock Exchange. The stock exchange
determined that The Morgan Group, Inc.'s Class A Common Stock no longer
satisfied Sections 1002, 1003 and 1009 of the listing rules.
On November 12, 2002, The Morgan Group, Inc. filed a Certification and
Notice of Termination of Registration under Section 12(g) of the Securities
Exchange Act of 1934.
The Company expects that its ownership interest in Then Morgan Group, Inc.
will have no residual value upon completion of the liquidation of the assets of
The Morgan Group Inc. The Company's strategy is to look for additional
investment opportunities. However, the loss did yield capital loss of about $4.0
million.
Item 2. Properties.
The Company owns no properties.
Item 3. Legal Proceedings.
The Company is not a party to any legal proceedings.
Item 4. Submission of Matters To a Vote of Security Holders.
The Company's Annual Meeting of Stockholders was held on August 9, 2002.
Votes were cast with respect to the election of three directors of the Board of
Directors to serve until the 2003 Annual Meeting of Stockholders as follows:
Number of Shares of
Number of Shares of ommon Stock as to which Authority
Nominees Common Stock Voted in Favor to Vote was Withheld
-------- --------------------------- --------------------
Mario J. Gabelli 1,583,849 10,812
Robert E. Dolan 1,583,849 10,812
John Fikre ..... 1,583,849 10,812
PART II
Item 5. Market For The Registrant's Common Equity And Related Stockholder
Matters.
The common stock commenced trading on the over-the-counter market on
February 21, 2002. The following table sets forth the high and low market prices
of the common stock for the periods indicated, as reported by published sources.
Low High
2002 Fiscal Year
First Quarter (beginning February 21, 2002) $ 1.75 $ 0.85
Second Quarter ............................ $ 1.40 $ 0.51
Third Quarter ............................. $ 0.55 $ 0.12
Fourth Quarter ............................ $ 0.20 $ 0.02
As of March 26, 2003, there were approximately 840 holders of record of the
Company's common stock.
The Company has never declared a cash dividend on its common stock and its
Board of Directors does not anticipate that it will pay cash dividends in the
foreseeable future.
Item 6. Selected Financial Data.
Morgan Group Holding Co.
Selected Financial Data
(Dollars and shares in thousands, except per share amounts)
December 31, (1)
-------------- ------------ ------------ ------------- -------
2002 2001 2000 1999 1998
-------------- ------------ ------------ ------------- -------
Administrative expenses ................................... $ (64) $-- $-- $-- $--
Investment income ......................................... 6 -- -- -- --
------- ------- ------ ------- ------
Loss from continuing operations ........................... (58) -- -- -- --
------- ------- ------ ------- ------
Discontinued operations:
Loss from operations before cumulative effect of
accounting change of The Morgan Group, Inc. - net of
income tax benefit (provision) of $1,125, $910, and
$(2,277), $(187) and $(594) respectively, and minority
interests of $3,021, $603, $2,133, $(28) and $(461)
respectively............................................... (5,358) (854) (2,492) (3) 420
Cumulative effect of accounting change at The Morgan
Group Inc., net of minority interests of $722 (1,568) -- -- -- --
Gain from the adoption of liquidation basis
of accounting at The Morgan Group, Inc. ................. 2,182 -- -- -- --
------- ------- ------ ------- ------
Net loss ............................................... $(4,802) $(854) $(2,492) $(3) $420
======= ======= ======= ======= ======
Basic and diluted loss per share:
Loss from continuing operations ............................ $ (0.02) $-- $-- $-- $--
Loss from operations before cumulative effect of
accounting change of The Morgan Group, Inc. ............... (1.75) (0.28) (0.82) (0.00) $0.14
Cumulative effect of accounting change at The Morgan
Group, Inc.................................................. (0.52) -- -- -- --
Gain from the adoption of liquidation basis
of accounting at The Morgan Group Inc. ..... 0.71 -- -- -- --
======= ======= ======= ======= ======
Net loss per common share .............................. $ (1.57) $ (0.28) $(0.82) $(0.00) $0.14
======= ======= ======= ======= ======
Weighted average shares outstanding ............. 3,055 3,055 3,055 3.055 3,055
December 31, (l)
------- ------- ------ ------- ------
2002 2001 2000 1999 1998
------- ------- ------ ------- ------
Cash ........................................................$ 433 $ 500 $-- $-- $--
Total Assets ................................................$ 433 $ 5,235 $3,661 $6,171 $6,486
Stockholders Equity .........................................$ 431 $ 5,235 $-- $-- $--
Equity, Investments by and advances from Lynch
Interactive Corporation ..................................$-- $-- $3,661 $ 6,171 $6,486
(l) We were incorporated in November 2001 to serve as a holding company for
Lynch Interactive Corporation's controlling interest in The Morgan Group,
Inc. The transfer of the controlling interest was made to us on December
18, 2001. The accompanying combined financial data represents the
combination, on a retroactive basis, of all of Lynch Interactive
Corporation's interest in The Morgan Group, Inc. and the consolidated
financial statements of The Morgan Group, Inc. as if the transfer by Lynch
Interactive Corporation occurred on January 1, 1998. Subsequent to December
18, 2001, the financial statements represent the consolidated results of
the Company. During 2002, due to Morgan's ceasing operations, its financial
results are treated as discontinued operations in the above data. On
October 18, 2002, Morgan filed for bankruptcy and adopted liquidation basis
of accounting and the Company deconsolidated Morgan at that point.
Item 7. Management's Discussion and Analysis of Financial Condition and Plan of
Operation.
Overview
The Company was incorporated in November 2001 as a wholly-owned subsidiary of
Lynch Interactive Corporation ("Interactive") to serve as an acquisition
vehicle. Initially, we received $500,000 cash and 68.5% of The Morgan Group,
Inc. (Morgan)'s equity interest and 80.8% of Morgan's voting interest. On
January 24, 2002, Interactive spun off 2,820,051 shares of our common stock
through a pro rata distribution ("Spin-Off") to its stockholders. Interactive
retained 235,274 shares at the time of the spin-off.
A combination of industry dynamics, poor management decisions, and a surge in
insurance costs crippled Morgan. On October 3, 2002 Morgan ceased 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.
As Morgan is in the process liquidation, in the accompanying financial
statements the assets and liabilities and results of operations of Morgan have
been reflected as a discontinued operation. In addition, the Company's
management currently believes that it is very unlikely that the Company will
realize any value from its equity ownership in Morgan. Given the fact that
Holding has no obligation or intention to fund any of Morgan's liabilities,
management believes that the Company's investment in Morgan will to have no
value after the liquidation. As the liquidation of Morgan is under the control
of the bankruptcy court, the Company believes it has relinquished control of
Morgan and accordingly has ceased consolidating the financial statements of
Morgan. As the Company's investment in Morgan was a negative of $2,182,000 at
the date of adoption of the plan of liquidation. This resulted in a gain to
Holdings of that amount.
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.
As of December 31, 2002, the Company's only assets consisted of $433,000 in cash
and an unrecognized asset relating to capital loss carryforward of about $4
million.
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 $50,000 to $100,000 per year.
Results of Operations
For the year ended December 31, 2002, the Company incurred administrative
expenses of $64,000. As the Company was formed in November 2001 and Lynch
Interactive paid the expenses associated with the spin-off, no such expenses
administration were incurred by the Company in the year ended December 31,
2001..
Item 8. Financial Statements and Supplementary Data.
Financial Statements
Balance Sheets as of
December 31, 2002 and December 31, 2001
Statements of Operations for the
Three Years Ended December 31, 2002
Statements of Cash Flows for the
Three Years Ended December 31,2002
Statements of Equity, Investments by
And Advances from Lynch Interactive
Corporation
Notes to Financial
Statements as of December 31, 2002
Morgan Group Holding Co.
Balance Sheets
(Dollars and shares in thousands, except per share amounts)
December 31,
-----------------------
2002 2001
-----------------------
ASSETS
Current assets:
Cash and cash equivalents ................... $ 433 $ 500
------- -------
Total current assets ..................... 433 500
Net assets of The Morgan Group, Inc. ....... -- 4,735
------- -------
Total assets ............................. $ 433 $ 5,235
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Current liabilities:
Accrued expenses ............................ $ 2 $ --
------- -------
Total current liabilities ................ 2 --
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
Additional paid-in-capital .................. 5,612 5,614
Accumulated deficit ......................... (5,211) (409)
------- -------
Total shareholders' equity ............... 431 5,235
------- -------
Total liabilities and shareholders' equity $ 433 $ 5,235
======= =======
See notes to financial statements.
Morgan Group Holding Co.
Statements of Operations
(Dollars and shares in thousands, except per share amounts)
December 31,
----------------------------
2002 2001 2000
----------------------------
Administrative expenses ....................................... $ (64) $-- $--
Investment income ............................................. 6 -- --
------- ------ -------
Loss from continuing operations ............................... (58) -- --
------- ------ -------
Discontinued operations (Notes 1 and 2):
Loss from operations before cumulative effect of
accounting change of The Morgan Group, Inc. - net of
income tax benefit (provision) of $1,125, $910, and $(2,277),
respectively, and minority interests of $3,021, $603, and
$2,133, respectively ........................................ (5,358) (854) (2,492)
Cumulative effect of accounting change at The Morgan Group
Inc., net of minority interests of $722 ..................... (1,568) -- --
Gain from the adoption of the liquidation basis of accounting
at The Morgan Group, Inc. ................................... 2,182 -- --
------- ------ -------
Net loss .................................................. $(4,802) $ (854) $(2,492)
======= ====== =======
Basic and diluted loss per share:
Loss from continuing operations ............................... $ (0.02) -- --
Loss from operations before cumulative effect of accounting
change of The Morgan Group, Inc. ........................... (1.75) $(0.28 $ (0.82)
Cumulative effect of accounting change at The Morgan Group,
Inc......................................................... (0.52) -- --
Gain from the adoption of the liquidation basis of accounting
at The Morgan Group Inc. .................................... 0.71 -- --
======= ====== =======
Net loss per common share ................................. $ (1.57) $(0.28) $ (0.82)
======= ====== =======
Weighted average shares outstanding ........... 3,055 3,055 3,055
See accompanying notes
Morgan Group Holding Co.
Statements of Cash Flows
(Dollars in thousands)
December 31,
-------------------------------
2002 2001 2000
-------------------------------
Operating activities:
Net loss ............................................ $(4,802) $ (854) $(2,492)
Adjustments to reconcile net loss to net
cash used in operating activities:
Increase in accrued expenses ...................... 2 -- --
Non-cash items and changes in operating assets
and liabilities relating to the operations of The
Morgan Group, Inc. ................................ 3,082 1,363 3,365
------- ------- -------
Net cash provided by (used in) operating activities (1,718) 509 873
------- ------- -------
Investing activities:
Investment in the Morgan Group Inc. ................. (11) (2,000) --
Other ............................................... -- -- 18
Investing activities relating to operations of The
Morgan Group, Inc. .................................. 453 (753) (124)
------- ------- -------
Net cash provided by (used in) investing activities . 442 (2,753) (106)
------- ------- -------
Financing activities:
Investment by and advances from(to)Lynch Interactive
Corporation ...................................... -- 2,500 (18)
Financing activities relating to operations of The
Morgan Group, Inc. ................................. 1,209 244 (749)
------- ------- -------
Net cash provided by (used in) financing activities .... 1,198 2,744 (767)
------- ------- -------
Net increase (decrease) in cash and equivalents ........ (67) 500 --
Cash and cash equivalents at beginning of period ....... 500 -- --
------- ------- -------
Cash and cash equivalents at end of period ............. $ 433 $ 500 $--
======= ======= =======
See accompanying notes
.
Morgan Group Holding Co.
Statements of Equity, Investments by and
Advances from Lynch Interactive Corporation
(Dollars in thousands)
Equity,
Investments
by and
Common Additional Advances from
Stock Common Paid-in Accumulated Lynch Interactive
Outstanding Stock Capital Deficit Corporation Total
------------- ----------- ------------- --------------- --------------- -------------
Balance at January 1, 2000 ....... $-- $-- $-- $-- $ 3,661 $ 3,661
Capital transactions of The Morgan
Group, Inc. .................... -- -- -- -- (72) (72)
Investment by Lynch Interactive
Corporation ................... -- -- -- -- 2,000 2,000
Net loss through December 18,
2001 -- -- -- -- (445) (445)
Issuance of shares to Lynch
Interactive Corporation ....... 3,055,345 30 5,614 -- (5,144) 500
Net loss subsequent to December
18, 2001 ...................... -- -- -- (409) -- (409)
---------- ---------- ---------- ---------- ---------- ----------
Balance at December 31, 2001 ..... 3,055,345 30 5,614 (409) -- 5,235
Capital transactions of The Morgan
Group, Inc. ................... -- -- (2) -- -- (2)
Net Loss for year ended December
31, 2002 ...................... -- -- -- (4,802) -- (4,802)
---------- ---------- ---------- ---------- ---------- ----------
Balance at December 31, 2002 ..... $3,055,345 $ 30 $ 5,612 $ (5,211) $-- $ 431
========== ========== ========== ========== ========== ==========
See accompanying notes.
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 Lynch Interactive
Corporation ("Interactive") to serve, among other business purposes,
as a holding company for Interactive's controlling interest in The
Morgan Group, Inc. ("Morgan"). On December 18, 2001, Interactive'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, Interactive spun off
2,820,051 shares of our common stock through a pro rata distribution
("Spin-Off") to its stockholders. Interactive retained 235,294 shares
of our common stock to be distributed in connection with the potential
conversion of a convertible note that had been issued by Interactive.
Such note was repurchased by Interactive in 2002 and Interactive
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.
As Morgan has ceased operations and is in the process liquidating
itself, in the accompanying financial statements, the assets and
liabilities and results of operations of Morgan have been reflected as
a discontinued operation. In addition, Holding's management currently
believes, it is very unlikely that it will realize any value from its
equity ownership in Morgan, and given the fact that Holding has no
obligation or intention to fund any of Morgan's liabilities, its
investment in Morgan was believed to have no value after the
liquidation. As the liquidation of Morgan is under the control of the
bankruptcy court, the Company believes it has relinquished control of
Morgan and accordingly, has ceased consolidating the financial
statements of Morgan. As Holding's investment in Morgan was a negative
$2,182,000, at the date of adoption of the plan of liquidation. This
resulted in a gain to Holding of that amount.
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.
The financial statements have been prepared using the historical basis
of assets and liabilities and historical results of Interactive's
interest in Morgan, which were contributed to the Company on December
18, 2001. However, the historical financial information presented
herein reflects periods during which the Company did not operate as an
independent public company and accordingly, certain assumptions were
made in preparing such financial information. Such information,
therefore, may not necessarily reflect the results of operations,
financial condition or cash flows of the Company in the future or what
they would have been had the Company been an independent public
company during the reporting periods.
The financial statements represent combined financial statements
through December 18, 2001 and include the accounts of Holding, Morgan
and its subsidiaries. Subsequent to December 18, 2001, the financial
statements represent the consolidated results of those entities. As
noted above as of October 18, 2002, the Company deconsolidated the
operations of Morgan. Significant intercompany accounts and
transactions have been eliminated in combination/consolidation.
Net loss per common share ("EPS") is computed using the number of
common shares issued in connection with the Spin-Off as if such shares
had been outstanding for all periods presented.
All highly liquid investments with maturity of three months or less
when purchased are considered to be cash equivalents. The carrying
value of cash equivalents approximates its fair value based on its
liquid nature.
At December 31, 2002 and 2001, the carrying value of financial
instruments such as cash and cash equivalents, accounts receivable,
trade payables and long-term debt approximates their fair values. Fair
value is determined based on expected future cash flows, discounted at
market interest rates, and other appropriate valuation methodologies.
The accompanying unaudited consolidated financial statements reflect,
in the opinion of management, all adjustments (consisting of normal
recurring items) necessary for a fair presentation, in all material
respects, of the financial position and results of operations for the
periods presented. The preparation of financial statements in
accordance with generally accepted accounting principles requires
management to make estimates and assumptions. Such estimates and
assumptions affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates. The results of operations for the interim periods are not
necessarily indicative of the results for the entire year.
The financial statements include the accounts of the Company and
through October, 18, 2002, its majority owned subsidiary, Morgan.
Morgan has the following subsidiaries: Morgan Drive Away, Inc., TDI,
Inc., Interstate Indemnity Company, and Morgan Finance, Inc., all of
which are wholly owned. Morgan Drive Away, Inc. has two subsidiaries,
Transport Services Unlimited, Inc. and MDA Corp. Significant
intercompany accounts and transactions have been eliminated in
consolidation. During 2002, Morgan is treated as a discontinued
operations and previously issued financial statements have been
restated to reflect that presentation.
Certain 2001 amounts have been reclassified to conform to the 2002
presentation.
Note 2. Net assets of Discontinued Operation
At December 31, 2002, the estimated value of Morgan's assets in liquidation were
insufficient to satisfy its estimated obligations. Net assets(liabilities) of
the Morgan at December 31, 2001 are as follows:
ASSETS
Current assets:
Cash and cash equivalents ....................... $ 1,017
Investments - restricted ........................ 2,624
Accounts receivable ............................. 6,322
Refundable taxes ................................ 591
Prepaid insurance and other current assets ...... 2,203
--------
Total current assets ........................ 12,757
Property and equipment - net .................... 3,339
Goodwill and non-compete agreements, net ........ 6,256
Other assets .................................... 132
--------
Total assets ................................ 22,484
LIABILITIES
Current liabilities:
Trade accounts payable .......................... (4,505)
Notes payable to banks .......................... (580)
Accrued liabilities ............................. (2,500)
Accrued claims payable .......................... (3,028)
Refundable deposits ............................. (675)
Current portion of long-term debt ............... (169)
--------
Total current liabilities ................... (11,457)
Long-term debt less current portion ............. (13)
Long-term accrued claims payable ................ (4,078
--------
Total liabilities ........................... (15,540)
--------
Net assets (liabilities) before minority interest 6,936
MINORITY INTERESTS .............................. (2,201)
--------
Net assets (liabilities) attributable to Holding $ 4,735
========
Note 3.Issuance of Non-transferable Warrants
On December 12, 2001, Morgan issued non-transferable warrants to
purchase shares of common stock to the holders of Class A and Class B
common stock. Each warrant entitled the holder to purchase one share
of their same class of common stock at an exercise price of $9.00 per
share through the expiration date of December 12, 2006. The Class A
warrants provided that the exercise price would be reduced to $6.00
per share during a Reduction Period of at least 30 days during the
five-year exercise period.
On February 19, 2002, Morgan's Board of Directors agreed to set the
exercise price reduction period on the Class A warrants to begin on
February 26, 2002 and to extend for 63 days, expiring on April 30,
2002 (the "Reduction Period"). Morgan's Board of Directors agreed to
reduce the exercise price of the warrants to $2.25 per share, instead
of $6.00 per share, during the Reduction Period. Morgan's Board of
Directors reduced the exercise price to $2.25 to give warrant holders
the opportunity to purchase shares at a price in the range of recent
trading prices of the Class A common stock. All other terms regarding
the warrants, including the expiration date of the warrants, remain
the same. As of the close of the temporary Reduction Period on April
30, 2002, Morgan received $535,331 with the exercise of 237,925
warrants at $2.25 each. The Company exercised 5,000 of its warrants.
Subsequent to the exercise, the Company owned 64.2% of Morgan's equity
interest and 77.6% of Morgan's voting ownership. Unexercised warrants
remain outstanding and exercisable at $9.00 each.
Note 4 . Income Taxes
No income tax benefit has recorded in the accompanying financial
statements, as the realization of such losses, for income tax
purposes, is dependent upon the generation of future taxable income
during the period when such losses would be deductible. Therefore, the
recording of the deferred tax asset of $1.5 million would be
inconsistent with applicable accounting rules.
Note 5. Segment Reporting
As the results of operations of the Morgan Group are currently being
accounted for as discontinued operation and the Holding currently have
limited operations there is no Segment Reporting.
Note 6. Commitments and Contingencies
Holding has not guaranteed any of the obligations of Morgan and it has
no further commitment or obligation to fund any creditors.
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The following table sets forth the name, business address, present
principal occupation, employment history, positions, offices or employments for
the past five years and ages as of March 24, 2003 for our executive officers and
directors. Members of the board are elected and serve for one year terms or
until their successors are elected and qualify.
Name ........... Age Position
Mario J. Gabelli 60 Chief Executive Officer and Director
Robert E. Dolan 51 Chief Financial Officer and Director
John Fikre ..... 38 Vice President, Secretary and Director
--------------------------------------
Mario J. Gabelli has served as Chairman, Chief Executive Officer, Chief
Investment Officer and a director of Gabelli Asset Management Inc. and its
predecessors since November 1976. In connection with those responsibilities, he
serves as director or trustee and/or an officer of registered investment
companies managed by subsidiaries of Gabelli Asset Management. Mr. Gabelli
serves as Vice Chairman and Chief Executive Officer of Lynch Interactive
Corporation, a public company engaged in multimedia; and Vice Chairman of Lynch
Corporation, a public company engaged in manufacturing. In addition, Mr. Gabelli
is the Chairman and Chief Executive Officer of Gabelli Group Capital Partners,
Inc., a private company. Mr. Gabelli also serves as a Governor of the American
Stock Exchange; Overseer of Columbia University Graduate School of Business;
Trustee of Fairfield University, Roger Williams University, Winston Churchill
Foundation and E.L. Wiegand Foundation; Director of the National Italian
American Foundation and the American-Italian Cancer Foundation; and Chairman,
Patron's Committee of Immaculate Conception School.
Robert E. Dolan has served as Chief Financial Officer of Lynch Interactive
Corporation (September 1999 to present), Director of Sunshine PCS Corporation
(November 2000 to present), and Chief Financial Officer of Lynch Corporation
(1993 to January 2000).
John Fikre has served as Vice President--Corporate Development, Secretary
and General Counsel of Lynch Interactive Corporation since August 2001. Prior to
joining Lynch Interactive Corporation, Mr. Fikre was an associate at the law
firm of Willkie Farr & Gallagher.
Compensation of Directors
The Company does not compensate its directors at the present time, although
it may do so in the future. The Company does, however, indemnify directors
pursuant to Delaware law and may reimburse them for certain out-of-pocket costs
in connection with serving as directors.
Indemnification of Directors and Officers
Under Section 145 of the Delaware General Corporation Law, the Company has
broad powers to indemnify its directors and officers against liabilities they
may incur in such capacities. The Company's certificate of incorporation
provides that its directors and officers shall be indemnified to the fullest
extent permitted by the Delaware law. The certificate of incorporation also
provides that the Company shall, to the fullest extent permitted by Delaware
law, as amended from time to time, indemnify and advance expenses to each of its
currently acting and former directors, officers, employees and agents.
Delaware law provides that a corporation may limit the liability of each
director to the corporation or its stockholders for monetary damages except for
liability:
o for any breach of the director's duty of loyalty to the corporation or its
stockholders,
o for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law,
o in respect of certain unlawful dividend payments or stock redemptions
or repurchases and
o for any transaction which the director derives an improper personal
benefit.
The Company's certificate of incorporation provides for the elimination and
limitation of the personal liability of its directors for monetary damages to
the fullest extent permitted by Delaware law. In addition, the certificate of
incorporation provides that if Delaware law is amended to authorize the further
elimination or limitation of the liability of a director, then the liability of
our directors shall be eliminated or limited to the fullest extent permitted by
Delaware law, as amended. The effect of this provision is to eliminate the
Company's rights and its stockholders rights, through stockholders' derivative
suits, to recover monetary damages against a director for breach of the
fiduciary duty of care as a director, except in the situations described above.
This provision does not limit or eliminate the Company's rights or its
stockholders' rights to seek non-monetary relief such as an injunction or
rescission in the event of a breach of a director's duty of care.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted for its directors, officers, and
controlling persons, pursuant to the foregoing provisions, or otherwise, the
Company has been advised that in the opinion of the Securities and Exchange
Commission that this sort of indemnification is against public policy as
expressed in the Securities Act of 1933, as amended, and is therefore
unenforceable.
At present, there is no pending litigation or proceeding involving any of
our directors, officers, employees or agents where indemnification will be
required or permitted.
Item 11. Executive Compensation.
The Company does not pay any compensation to any person, including its
directors and executive officers.
Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters.
The following table sets forth information concerning ownership of our
common stock as of March 26, 2003 by each person known by us to be the
beneficial owner of more than five percent of the common stock, each director,
each executive officer, and by all directors and executive officers as a group.
We believe that each stockholder has sole voting power and sole dispositive
power with respect to the shares beneficially owned by him. Unless otherwise
indicated, the address of each person listed below is 401 Theodore Fremd Avenue,
Rye, New York 10580.
Number of Shares of
Common Stock Percent of
Beneficial Owner Beneficially Owned Ownership
Mario J. Gabelli 858,384(1) 28.1%
Robert E. Dolan 529(2) **
John Fikre -- --
Lynch Interactive Corporation 235,294 7.7%
All directors and executive
officers as a group (3 in total) 858,963 28.1%
-------------------
** Less than 1%
(1) Represents 283,090 shares of common stock owned directly by Mr. Gabelli,
340,000 shares owned by a limited partnership in which Mr. Gabelli is the
general partner and has approximately a 5% interest, and 235,294 shares
owned by Lynch Interactive Corporation (Mr. Gabelli is a "control person"
of Lynch Interactive Corporation and therefore shares owned by Lynch
Interactive Corporation are set forth in the table as also beneficially
owned by Mr. Gabelli). Mr. Gabelli disclaims beneficial ownership of the
shares owned by the partnership and Lynch Interactive Corporation, except
for his interest therein.
(2) Includes 70 shares registered in the name of Mr. Dolan's children with
respect to which Mr. Dolan has voting and investment power and 258 shares
owned by Mr. Dolan through the Lynch Interactive Corporation 401(k) Savings
Plan.
Item 13. Certain Relationships and Related Transactions.
Each of our directors and officers is also an officer of Lynch Interactive
Corporation.
On December 18, 2001, Lynch Interactive Corporation made a capital
contribution to us of $500,000 and assigned to us a services agreement with The
Morgan Group, Inc. pursuant to which The Morgan Group, Inc. agreed to pay
$100,000 per year for certain management services. The Morgan Group, Inc. has
not made any payments under this agreement since the first quarter of 2001 and
as a result of the bankruptcy and liquidation of its assets, the Company does
not expect to recover any amounts due under such agreement.
Immediately after the spin-off, Lynch Interactive Corporation retained
235,294 shares of the Company's common stock, which it held as escrow agent for
Cascade Investment LLC, the holder of an outstanding convertible promissory note
issued by Lynch Interactive Corporation. In the event that Cascade Investment
LLC converted all or a portion of the principal amount of that note into shares
of Lynch Interactive Corporation common stock prior to December 10, 2004, Lynch
Interactive Corporation would have transferred to Cascade Investment LLC a pro
rata portion of those 235,294 shares of common stock, depending on how much of
the principal amount of such note was converted, to Cascade Investment LLC.
However, on November 29, 2002, Lynch Interactive repurchased the remaining
outstanding principal amount such notes from Cascade Investment LLC and, as a
result, the 235,294 shares will be retained by Lynch Interactive Corporation.
Lynch Interactive Corporation has advised the Company that it will sell or
dispose of any shares of our common stock retained by it prior to the fifth
anniversary of the spin-off.
Item 14. Controls And Procedures.
(a) Evaluation of disclosure controls and procedures.
Our chief executive officer and chief financial officer have evaluated
the effectiveness of the Registrant's disclosure controls and
procedures (as defined in Rules 13a-14(c) and 15d-14(c) of the
Securities Exchange Act of 1934 (the "Act")) as of a date within 90
days of the filing date of this annual report (Evaluation Date). They
have concluded that, as of the Evaluation Date, the Registrant's
disclosure controls and procedures were adequate and effective to
ensure that information required to be disclosed by the Registrant in
the reports that if files or submits 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.
(b) Changes in internal controls.
There were no significant changes in the Registrant's internal
controls or in other factors that could significantly affect these
controls subsequent to the Evaluation Date, nor were there any
significant deficiencies or material weaknesses in these controls
requiring corrective actions.
PART IV
Item 15. Exhibits, Financial Statements, Schedules And Reports On Form 8-K.
(a) The following documents are filed as part of this Report:
(1) Financial Statements.
See Item 8.
(2) Financial Statement Schedules.
None
(3) Exhibits.
Exhibit Number Description
3.1 Certificate of Incorporation of the Company*
3.2 By-laws of the Company*
4.1 Revolving Credit and Term Loan Agreement, dated January 28, 1999,
among The Morgan Group, Inc. and Subsidiaries and Bank Boston, N.A.,
is incorporated by reference to Exhibit 4(1) to The Morgan Group,
Inc.'s Current Report on Form 8-K filed February 12, 1999.
4.2 Guaranty, dated January 28, 1999, among The Morgan Group, Inc. and
Subsidiaries and BankBoston, N.A. is incorporated by reference to
Exhibit 4(2) to The Morgan Group, Inc.'s Current Report on Form 8-K
filed February 12, 1999.
4.3 Security Agreement, dated January 28, 1999, among The Morgan Group,
Inc. and Subsidiaries and BankBoston, N.A. is incorporated by
reference to Exhibit 4(3) to The Morgan Group, Inc.'s Current Report
on Form 8-K filed February 12, 1999.
4.4 Stock Pledge Agreement, dated January 28, 1999, among The Morgan
Group, Inc. and Subsidiaries and BankBoston, N.A. is incorporated by
reference to Exhibit 4(4) to The Morgan Group, Inc.'s Current Report
on Form 8-K filed February 12, 1999.
4.5 Revolving Credit Note, dated January 28, 1999, among The Morgan Group,
Inc. and Subsidiaries and BankBoston, N.A. is incorporated by
reference to Exhibit 4(5) to The Morgan Group, Inc.'s Current Report
on Form 8-K filed February 12,1999.
4.6 Amendment Agreement No. 1 to that Certain Revolving Credit Agreement
and Term Loan Agreement among The Morgan Group, Inc. and its
Subsidiaries and BankBoston dated as of March 31, 2000, is
incorporated by reference to Exhibit 4.9 to The Morgan Group, Inc.'s
Annual Report on Form 10-K for the year ended December 31, 2000.
4.7 Amendment Agreement No. 2 to that Certain Revolving Credit Agreement
and Term Loan Agreement among The Morgan Group, Inc. and its
Subsidiaries and BankBoston dated as of November 10, 2000, is
incorporated by reference to Exhibit 4.10 to The Morgan Group, Inc.'s
Annual Report on Form 10-K for the year ended December 31, 2000.
4.8 Form of Class A Warrant Certificate is incorporated by reference to
Exhibit 4.11 of Amendment No. 1 to The Morgan Group, Inc.'s
Registration Statement on Form S-2, File No. 333-63188, filed August
15, 2001.
4.9 Form of Warrant Services Agreement between The Morgan Group, Inc. and
American Stock Transfer and Trust Company is incorporated by reference
to Exhibit 4.12 of Amendment No. 1 to The Morgan Group, Inc.'s
Registration Statement on Form S-2, File No. 333-63188, filed August
15, 2001.
4.10 Revolving Credit and Security Agreement, dated July 27, 2001, among
GMAC Commercial Credit LLC, Morgan Drive Away, Inc. and TDI, Inc., is
incorporated by reference to Exhibit 4.1 to The Morgan Group, Inc.'s
Quarterly Report on Form 10-Q for the period ended June 30, 2001,
filed August 14, 2001.
4.11 Guaranty, dated July 27, 2001, between The Morgan Group, Inc. and GMAC
Commercial Credit LLC, is incorporated by reference to Exhibit 4.2 to
The Morgan Group, Inc.'s Quarterly Report on Form 10-Q for the period
ended June 30, 2001, filed August 14, 2001.
4.12 Letter of Credit Financing Supplement to Revolving Credit Agreement,
dated July 27, 2001, among GMAC Commercial Credit LLC, Morgan Drive
Away, Inc., and TDI, Inc., is incorporated by reference to Exhibit 4.2
to The Morgan Group, Inc.'s Quarterly Report on Form 10-Q for the
period ended September 30, 2001.
4.13 Amendment to that certain Revolving Credit and Security Agreement
among GMAC Commercial Credit, LLC, Morgan Drive Away, Inc., and TDI,
Inc., dated as of November 8, 2001, is incorporated by reference to
Exhibit 4.1 to The Morgan Group, Inc.'s Quarterly Report on Form 10-Q
for the period ended September 30, 2001.
4.14 Mortgage, dated July 31, 2001, between Morgan Drive Away, Inc. and Old
Kent Bank, is incorporated by reference to Exhibit 4.3 to The Morgan
Group, Inc.'s Quarterly Report on Form 10-Q for the period ended June
30, 2001, filed August 14, 2001.
4.15 Guaranty, dated July 31, 2001, between The Morgan Group, Inc. and Old
Kent Bank, is incorporated by reference to Exhibit 4.4 to The Morgan
Group, Inc.'s Quarterly Report on Form 10-Q for the period ended June
30, 2001, filed August 14, 2001.
10.1 Separation and Distribution Agreement, dated as of December ___, 2001
by and among Lynch Interactive Corporation, Morgan Group Holding Co.
and The Morgan Group, Inc.*
10.2 The Morgan Group, Inc. Incentive Stock Plan is incorporated by
reference to Exhibit 10.1 to The Morgan Group, Inc.'s Registration
Statement on Form S-1, File No. 33-641-22, effective July 22, 1993.
10.3 First Amendment to The Morgan Group, Inc. Incentive Stock Plan is
incorporated by reference to Exhibit 10.1 to The Morgan Group, Inc.'s
Quarterly Report on Form 10-Q for the period ended September 30, 1997,
filed November 14, 1997.
10.4 Memorandum to Charles Baum and Philip Ringo from Lynch Corporation,
dated December 8, 1992, respecting Bonus Pool, is incorporated by
reference to Exhibit 10.2 to The Morgan Group, Inc.'s Registration
Statement on Form S-1, File No. 33-641-22, effective July 22, 1993.
10.5 Term Life Policy from Northwestern Mutual Life Insurance Company
insuring Paul D. Borghesani, dated August 1, 1991, is incorporated by
reference to Exhibit 10.4 to The Morgan Group, Inc.'s Registration
Statement on Form S-1, File No. 33-641-22, effective July 22, 1993.
10.6 Long Term Disability Insurance Policy from Northwestern Mutual Life
Insurance Company, dated March 1, 1990, is incorporated by reference
to The Morgan Group, Inc.'s Registration Statement on Form S-1, File
No. 33-641-22, effective July 22, 1993.
10.7 Long Term Disability Insurance Policy from CNA Insurance Companies,
effective January 1, 1998 is incorporated by reference to Exhibit 10.6
to The Morgan Group, Inc.'s Annual Report on Form 10-K for the year
ended December 31, 1997, filed March 31, 1998.
10.8 The Morgan Group, Inc. Employee Stock Purchase Plan, as amended, is
incorporated by reference to Exhibit 10.16 to The Morgan Group, Inc.'s
Annual Report on Form 10-K for the year ended December 31, 1994, filed
on March 30, 1995.
10.9 Consulting Agreement between Morgan Drive Away, Inc. and Paul D.
Borghesani, effective as of April 1, 1996, is incorporated by
reference to Exhibit 10.19 The Morgan Group, Inc.'s Annual Report on
Form 10-K for the year ended December 31, 1995, filed on April 1,
1996.
10.10Employment Agreement, dated January 12, 2000 between The Morgan
Group, Inc. and Anthony T. Castor, III is incorporated by reference to
Exhibit 10.9 to The Morgan Group, Inc.'s Annual Report on Form 10-K
for the year ended December 31, 1999.
10.11Non-Qualified Stock Option Plan and Agreement, dated January 11,
2000, between The Morgan Group, Inc. and Anthony T. Castor, III is
incorporated by reference to Exhibit 10.10 to The Morgan Group, Inc.'s
Annual Report on Form 10-K for the year ended December 31, 1999.
10.12Management Agreement between Skandia International and Risk
Management (Vermont), Inc. and Interstate Indemnity Company, dated
December 15, 1992, is incorporated by reference to Exhibit 10.12 to
The Morgan Group, Inc.'s Registration Statement on Form S-1, File No.
33-641-22, effective July 22, 1993.
10.13Agreement for the Allocation of Income Tax Liability between Lynch
Corporation and its Consolidated Subsidiaries, including The Morgan
Group (formerly Lynch Services Corporation), dated December 13, 1988,
as amended, is incorporated by reference to Exhibit 10.13 The Morgan
Group, Inc.'s Registration Statement on Form S-1, File No. 33-641-22,
effective July 22, 1993.
10.14Certain Services Agreement, dated January 1, 1995, between Lynch
Corporation and The Morgan Group, Inc.*
-----------------
* Incorporated by reference to the exhibits to the Company's
Registration Statement on Form S-1 (Registration No. 333-73996).
(b) Reports on Form 8-K filed in the fourth quarter of the period covered
by this Report.
The Company filed one report on Form 8-K during the fourth quarter of the
fiscal year ended December 31, 2002. The Form 8-K was filed on November 1, 2002
under Item 5 - Other Events and Regulation FD Disclosure
(c) Exhibits.
See Item 15 (a)(3).
(d) Financial Statement Schedules.
None.
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
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Capacity Date
/s/ Mario J. Gabelli Chief Executive Officer March 31, 2003
----------------
MARIO J. GABELLI (Principal Executive Officer)
and Director
/s/ Robert E. Dolan Chief Financial Officer March 31, 2003
------------------- (Principal and Accounting
ROBERT E. DOLAN Officer) and Director
/s/ John Fikre Director March 31, 2003
--------------
JOHN FIKRE
CERTIFICATIONS
I, Mario J. Gabelli, certify that:
1. I have reviewed this annual report on Form 10-K of Morgan Group Holding
Co.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: March 31, 2003
/s/ Mario J. Gabelli
--------------------
MARIO J. GABELLI,
Chief Executive Officer of
Morgan Group Holding Co.
I, Robert E. Dolan, certify that:
1. I have reviewed this annual report on Form 10-K of Morgan Group Holding
Co.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: March 31, 2003
/s/ Robert E. Dolan
-------------------
ROBERT E. DOLAN,
Chief Financial Officer of
Morgan Group Holding Co.
EXHIBIT INDEX
3.1 Certificate of Incorporation of the Company*
3.2 By-laws of the Company*
4.1 Revolving Credit and Term Loan Agreement, dated January 28, 1999, among The
Morgan Group, Inc. and Subsidiaries and Bank Boston, N.A., is incorporated
by reference to Exhibit 4(1) to The Morgan Group, Inc.'s Current Report on
Form 8-K filed February 12, 1999.
4.2 Guaranty, dated January 28, 1999, among The Morgan Group, Inc. and
Subsidiaries and BankBoston, N.A. is incorporated by reference to Exhibit
4(2) to The Morgan Group, Inc.'s Current Report on Form 8-K filed February
12, 1999.
4.3 Security Agreement, dated January 28, 1999, among The Morgan Group, Inc.
and Subsidiaries and BankBoston, N.A. is incorporated by reference to
Exhibit 4(3) to The Morgan Group, Inc.'s Current Report on Form 8-K filed
February 12, 1999.
4.4 Stock Pledge Agreement, dated January 28, 1999, among The Morgan Group,
Inc. and Subsidiaries and BankBoston, N.A. is incorporated by reference to
Exhibit 4(4) to The Morgan Group, Inc.'s Current Report on Form 8-K filed
February 12, 1999.
4.5 Revolving Credit Note, dated January 28, 1999, among The Morgan Group, Inc.
and Subsidiaries and BankBoston, N.A. is incorporated by reference to
Exhibit 4(5) to The Morgan Group, Inc.'s Current Report on Form 8-K filed
February 12,1999.
4.6 Amendment Agreement No. 1 to that Certain Revolving Credit Agreement and
Term Loan Agreement among The Morgan Group, Inc. and its Subsidiaries and
BankBoston dated as of March 31, 2000, is incorporated by reference to
Exhibit 4.9 to The Morgan Group, Inc.'s Annual Report on Form 10-K for the
year ended December 31, 2000.
4.7 Amendment Agreement No. 2 to that Certain Revolving Credit Agreement and
Term Loan Agreement among The Morgan Group, Inc. and its Subsidiaries and
BankBoston dated as of November 10, 2000, is incorporated by reference to
Exhibit 4.10 to The Morgan Group, Inc.'s Annual Report on Form 10-K for the
year ended December 31, 2000.
4.8 Form of Class A Warrant Certificate is incorporated by reference to Exhibit
4.11 of Amendment No. 1 to The Morgan Group, Inc.'s Registration Statement
on Form S-2, File No. 333-63188, filed August 15, 2001.
4.9 Form of Warrant Services Agreement between The Morgan Group, Inc. and
American Stock Transfer and Trust Company is incorporated by reference to
Exhibit 4.12 of Amendment No. 1 to The Morgan Group, Inc.'s Registration
Statement on Form S-2, File No. 333-63188, filed August 15, 2001.
4.10 Revolving Credit and Security Agreement, dated July 27, 2001, among GMAC
Commercial Credit LLC, Morgan Drive Away, Inc. and TDI, Inc., is
incorporated by reference to Exhibit 4.1 to The Morgan Group, Inc.'s
Quarterly Report on Form 10-Q for the period ended June 30, 2001, filed
August 14, 2001.
4.11 Guaranty, dated July 27, 2001, between The Morgan Group, Inc. and GMAC
Commercial Credit LLC, is incorporated by reference to Exhibit 4.2 to The
Morgan Group, Inc.'s Quarterly Report on Form 10-Q for the period ended
June 30, 2001, filed August 14, 2001.
4.12 Letter of Credit Financing Supplement to Revolving Credit Agreement, dated
July 27, 2001, among GMAC Commercial Credit LLC, Morgan Drive Away, Inc.,
and TDI, Inc., is incorporated by reference to Exhibit 4.2 to The Morgan
Group, Inc.'s Quarterly Report on Form 10-Q for the period ended September
30, 2001.
4.13 Amendment to that certain Revolving Credit and Security Agreement among
GMAC Commercial Credit, LLC, Morgan Drive Away, Inc., and TDI, Inc., dated
as of November 8, 2001, is incorporated by reference to Exhibit 4.1 to The
Morgan Group, Inc.'s Quarterly Report on Form 10-Q for the period ended
September 30, 2001.
4.14 Mortgage, dated July 31, 2001, between Morgan Drive Away, Inc. and Old Kent
Bank, is incorporated by reference to Exhibit 4.3 to The Morgan Group,
Inc.'s Quarterly Report on Form 10-Q for the period ended June 30, 2001,
filed August 14, 2001.
4.15 Guaranty, dated July 31, 2001, between The Morgan Group, Inc. and Old Kent
Bank, is incorporated by reference to Exhibit 4.4 to The Morgan Group,
Inc.'s Quarterly Report on Form 10-Q for the period ended June 30, 2001,
filed August 14, 2001.
10.1 Separation and Distribution Agreement, dated as of December ___, 2001 by
and among Lynch Interactive Corporation, Morgan Group Holding Co. and The
Morgan Group, Inc.*
10.2 The Morgan Group, Inc. Incentive Stock Plan is incorporated by reference to
Exhibit 10.1 to The Morgan Group, Inc.'s Registration Statement on Form
S-1, File No. 33-641-22, effective July 22, 1993.
10.3 First Amendment to The Morgan Group, Inc. Incentive Stock Plan is
incorporated by reference to Exhibit 10.1 to The Morgan Group, Inc.'s
Quarterly Report on Form 10-Q for the period ended September 30, 1997,
filed November 14, 1997.
10.4 Memorandum to Charles Baum and Philip Ringo from Lynch Corporation, dated
December 8, 1992, respecting Bonus Pool, is incorporated by reference to
Exhibit 10.2 to The Morgan Group, Inc.'s Registration Statement on Form
S-1, File No. 33-641-22, effective July 22, 1993.
10.5 Term Life Policy from Northwestern Mutual Life Insurance Company insuring
Paul D. Borghesani, dated August 1, 1991, is incorporated by reference to
Exhibit 10.4 to The Morgan Group, Inc.'s Registration Statement on Form
S-1, File No. 33-641-22, effective July 22, 1993.
10.6 Long Term Disability Insurance Policy from Northwestern Mutual Life
Insurance Company, dated March 1, 1990, is incorporated by reference to The
Morgan Group, Inc.'s Registration Statement on Form S-1, File No.
33-641-22, effective July 22, 1993.
10.7 Long Term Disability Insurance Policy from CNA Insurance Companies,
effective January 1, 1998 is incorporated by reference to Exhibit 10.6 to
The Morgan Group, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1997, filed March 31, 1998.
10.8 The Morgan Group, Inc. Employee Stock Purchase Plan, as amended, is
incorporated by reference to Exhibit 10.16 to The Morgan Group, Inc.'s
Annual Report on Form 10-K for the year ended December 31, 1994, filed
on March 30, 1995.
10.9 Consulting Agreement between Morgan Drive Away, Inc. and Paul D.
Borghesani, effective as of April 1, 1996, is incorporated by reference to
Exhibit 10.19 The Morgan Group, Inc.'s Annual Report on Form 10-K for the
year ended December 31, 1995, filed on April 1, 1996.
10.10Employment Agreement, dated January 12, 2000 between The Morgan Group,
Inc. and Anthony T. Castor, III is incorporated by reference to Exhibit
10.9 to The Morgan Group, Inc.'s Annual Report on Form 10-K for the year
ended December 31, 1999.
10.11Non-Qualified Stock Option Plan and Agreement, dated January 11, 2000,
between The Morgan Group, Inc. and Anthony T. Castor, III is incorporated
by reference to Exhibit 10.10 to The Morgan Group, Inc.'s Annual Report on
Form 10-K for the year ended December 31, 1999.
10.12Management Agreement between Skandia International and Risk Management
(Vermont), Inc. and Interstate Indemnity Company, dated December 15, 1992,
is incorporated by reference to Exhibit 10.12 to The Morgan Group, Inc.'s
Registration Statement on Form S-1, File No. 33-641-22, effective July 22,
1993.
10.13Agreement for the Allocation of Income Tax Liability between Lynch
Corporation and its Consolidated Subsidiaries, including The Morgan Group
(formerly Lynch Services Corporation), dated December 13, 1988, as amended,
is incorporated by reference to Exhibit 10.13 The Morgan Group, Inc.'s
Registration Statement on Form S-1, File No. 33-641-22, effective July 22,
1993.
10.15Certain Services Agreement, dated January 1, 1995, between Lynch
Corporation and The Morgan Group, Inc.*
-----------------
* Incorporated by reference to the exhibits to the Company's Registration
Statement on Form S-1 (Registration No. 333-73996).
The Exhibits listed above have been filed separately with the Securities and
Exchange Commission in conjunction with this Annual Report on Form 10-K or have
been incorporated by reference into this Annual Report on Form 10-K. Morgan
Group Holding Co. will furnish to each of its shareholders a copy of any such
Exhibit for a fee equal to Morgan Group Holding Co.'s cost in furnishing such
Exhibit. Requests should be addressed to the Office of the Secretary, Morgan
Group Holding Co., 401 Theodore Fremd Avenue, Rye, New York 10580.
Supplemental Information to be Furnished With Reports Filed
Pursuant to Section 15(d) of the Act by Registrants Which Have Not Registered
Securities Pursuant to Section 12 of the Act
(a)(2) Proxy statement and form of proxy sent to registratnt's security
holders with respect to annual meeting of stockholders:
MORGAN GROUP HOLDING CO.
----------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 9, 2002
----------------------
To the Stockholders:
NOTICE IS HEREBY GIVEN that the 2002 Annual Meeting of Stockholders (the
"Meeting") of MORGAN GROUP HOLDING CO., a Delaware corporation (the "Company"),
will be held at 4:30 p.m., local time, on Friday, August 9, 2002, at the Bruce
Museum, One Museum Drive, Greenwich, Connecticut, for the following purposes:
(1) To elect three members of the Board of Directors to serve until
the next annual meeting of stockholders and until their
successors have been duly elected and qualify; and
(2) To transact such other business as may properly be brought before
the Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on July 2, 2002, as the
record date for the Meeting. Only stockholders of record on the stock transfer
books of the Company at the close of business on that date are entitled to
notice of, and to vote at, the Meeting.
By Order of the Board of Directors
John Fikre
Secretary
Dated: July 5, 2002
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, YOU ARE URGED
TO FILL IN, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ENVELOPE THAT IS
PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
MORGAN GROUP HOLDING CO.
401 Theodore Fremd Avenue
Rye, New York 10580
----------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
AUGUST 9, 2002
----------------------
INTRODUCTION
This proxy statement is being furnished to you by the Board of Directors of
Morgan Group Holding Co., a Delaware corporation (the "Company"), in connection
with the solicitation of the accompanying Proxy for use at the 2002 Annual
Meeting of Stockholders of the Company (the "Meeting") to be held at 4:30 p.m.,
local time, on Friday, August 9, 2002, at the Bruce Museum, One Museum Drive,
Greenwich, Connecticut, or any adjournment thereof.
The principal executive offices of the Company are located at 401 Theodore Fremd
Avenue, Rye, New York 10580. The approximate date on which this Proxy Statement
and the accompanying Proxy will first be sent or given to stockholders is July
5, 2002.
RECORD DATE AND VOTING SECURITIES
Only stockholders of record at the close of business on July 2, 2002 (the
"Record Date") will be entitled to notice of, and to vote at, the Meeting and
any adjournment thereof. As of the close of business on the Record Date, there
were 3,055,345 outstanding shares of the Company's common stock, $.01 par value
(the "Common Stock"). Each holder of Common Stock is entitled to one vote per
share. The presence in person or by proxy of holders of a majority of the
outstanding shares of Common Stock is required for a quorum.
VOTING OF PROXIES
Shares of Common Stock represented by Proxies that are properly executed,
duly returned and not revoked will be voted in accordance with the instructions
contained therein. If no specification is indicated on the Proxy, the shares of
Common Stock represented thereby will be voted (i) for the election as directors
of each person who has been nominated by the Board of Directors and (ii) on any
other matter that may properly be brought before the Meeting in accordance with
the judgment of the person or persons voting the Proxies.
The execution of a Proxy will in no way affect a stockholder's right to
attend the Meeting and vote in person. Any Proxy executed and returned by a
stockholder may be revoked at any time thereafter if written notice of
revocation is given to the Secretary of the Company prior to the vote to be
taken at the Meeting, or by execution of a subsequent proxy that is presented at
the Meeting, or if the stockholder attends the Meeting and votes by ballot,
except as to any matter or matters upon which a vote shall have been cast
pursuant to the authority conferred by such Proxy prior to such revocation.
Broker "non-votes" and the shares as to which a stockholder abstains from
voting are included for purposes of determining whether a quorum of shares is
present at a meeting. A broker "non-vote" occurs when a nominee holding shares
for a beneficial owner does not vote on a particular proposal because the
nominee does not have discretionary voting power with respect to that item and
has not received instructions from the beneficial owner.
The three candidates for election as directors who receive the highest
number of affirmative votes will be elected. In tabulating the vote on the
election of directors, withholding of authority and broker "non-votes" will be
disregarded and will have no effect on the outcome of such vote.
The cost of solicitation of the Proxies being solicited on behalf of the
Board of Directors will be borne by the Company. In addition to the use of the
mails, proxy solicitation may be made by telephone, telegraph and personal
interview by officers, directors and employees of the Company. The Company will,
upon request, reimburse brokerage houses and persons holding Common Stock in the
names of their nominees for their reasonable expenses in sending soliciting
material to their principals.
SECURITY OWNERSHIP
Based upon information available to the Company, the following table sets forth
information concerning ownership of the Company's Common Stock as of June 24,
2002, by each person known by the Company to be the beneficial owner of more
than five percent of the Common Stock, each director, each executive officer,
each nominee for election as a director and by all directors and executive
officers of the Company as a group. The Company believes that each stockholder
has sole voting power and sole dispositive power with respect to the shares
beneficially owned by him.
Common Stock
Beneficial Owner* Shares Percentage(1)
---------------- ------ ----------
Kinetics Asset Management, Inc.................152,015 5.0%
Mario J. Gabelli..............................858,384(2)(3) 28.1%
Robert E. Dolan............................. 470(4) **
John Fikre.................................... -- --
Lynch Interactive Corporation.................235,294(3) 7.7%
All directors and executive officers as a
group (3 in total)............................858,854(2)(3)(4) 28.1%
------------------
* The address of each holder of more than 5% of our common stock is as
follows: Kinetics Asset Management, Inc. - 342 Madison Avenue, Suite 702,
New York, NY 10173; Messrs. Gabelli, Dolan and Fikre - 401 Theodore Fremd
Avenue, Rye, New York 10580. The Company believes that all persons and
entities named in the table above exercise sole voting and investment power
with respect to shares beneficially owned by them.
** Less than 1%
(3) All percentages in this column are based on a total of 3,055,345 shares.
(4) Represents 283,090 shares of Common Stock owned directly by Mr. Gabelli,
235,294 shares of common stock currently being held by Lynch Interactive
Corporation, and 340,000 shares owned by a limited partnership in which Mr.
Gabelli is the general partner and has an approximate 6% interest. Mario J.
Gabelli is a "control person" of Lynch Interactive Corporation and
therefore shares owned by Lynch Interactive Corporation and referred to in
Note (3) below are set forth in the table as beneficially owned by Mr.
Gabelli. Mr. Gabelli disclaims beneficial ownership of the shares owned by
Lynch Interactive Corporation and, except for his approximate 6% interest
therein, by the partnership.
(5) Represents 235,294 shares of common stock currently being held by Lynch
Interactive Corporation as escrow agent, that are to be delivered to
Cascade Investment LLC in the event of full conversion of a convertible
promissory note issued to Cascade Investment LLC by Lynch Interactive
Corporation. The actual number of shares that will be delivered to Cascade
Investment LLC is dependent upon how much of the principal amount of such
note is converted by Cascade Investment LLC into shares of Lynch
Interactive Corporation.
(6) Includes 70 shares registered in the name of Mr. Dolan's children.
PROPOSAL NO. 1 ELECTION OF DIRECTORS
Nominees
Three directors are to be elected at the Annual Meeting to serve until the
next Annual Meeting of Stockholders and until their respective successors are
elected and qualify. Except where authority to vote for directors has been
withheld, it is intended that the Proxies received pursuant to this solicitation
will be voted FOR the nominees named below. If for any reason any nominee is
unable or unwilling to serve as a director, an event that the Board of Directors
does not anticipate, such Proxies will be voted in favor of the remainder of
those named and may be voted for substitute nominees in place of those who
decline to be candidates.
Biographical summaries and ages, as of June 25, 2002, of the nominees are
set forth below.
Name Age Position
Mario J. Gabelli 60 Chief Executive Officer and Director
Robert E. Dolan 50 Chief Financial Officer and Director
John Fikre ..... 37 Vice President, Secretary and Director
Mario J. Gabelli. Mr. Gabelli has served as the Chief Executive Officer and
Director of Morgan Group Holding Co. since its formation in November 2001. He is
the Chairman and Chief Executive Officer of Lynch Interactive Corporation (since
September 1999), a diversified holding company with subsidiaries principally
engaged in multimedia and telecommunications services; Vice Chairman of Lynch
Corporation, a public company engaged in manufacturing (since August 2001)
(Chairman from 1986 to August 2001 and Chief Executive Officer from 1986 to
January 2000 and from January 2001 to August 2001); Chairman and Chief Executive
Officer of Gabelli Group Capital Partners, Inc. (since 1980), a private
corporation; Chairman and Chief Executive Officer of Gabelli Asset Management
Inc. (since 1999), a NYSE listed holding corporation for subsidiaries engaged in
various aspects of the securities business; Director/Trustee and/or President of
all registered investment companies managed by Gabelli Funds, LLC (since 1986);
Governor of the American Stock Exchange; Overseer of Columbia University
Graduate School of Business; Trustee of Fairfield University, Roger Williams
University, Winston Churchill Foundation and E.L. Wiegand Foundation; Director
of The National Italian American Foundation and The American-Italian Cancer
Foundation; Chairman, Patron's Committee of Immaculate Conception School; and
former trustee of Fordham Preparatory School.
Robert E. Dolan. Mr. Dolan has served as the Chief Financial Officer and
Director of Morgan Group Holding Co. since its formation in November 2001. Mr.
Dolan became a Director of The Morgan Group, Inc. in 2002, a provider of
outsourcing transportation services to the manufactured housing and recreational
vehicle industries. Mr. Dolan has served as Chief Financial Officer of Lynch
Interactive Corporation (September 1999 to present), Director of Sunshine PCS
Corporation (November 2000 to present), a holder of personal communications
services licenses, and Chief Financial Officer of Lynch Corporation (1993 to
January 2000).
John Fikre. Mr. Fikre has served Vice President, Secretary and Director of
Morgan Group Holding Co. since its formation in November 2001. Mr. Fikre became
a Director of The Morgan Group, Inc. in 2002. Mr. Fikre has served as Vice
President, Corporate Development, Secretary and General Counsel of Lynch
Interactive Corporation since August 2001. Prior to joining Lynch Interactive
Corporation, Mr. Fikre was an associate at the law firm of Willkie Farr &
Gallagher, New York, New York.
Directors' Meetings and Compensation
The Board of Directors did not meet during 2001, but rather acted from time to
time by unanimous written consent pursuant to the laws of the State of Delaware.
The Company does not have a standing audit, compensation or nominating committee
of the Board, or other committees performing similar functions.
The members of the Board of Directors did not receive any compensation for
their services during 2001.
EXECUTIVE COMPENSATION
No executive officer of the Company received any compensation during fiscal
2001.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Each of our directors and officers is also an officer of Lynch Interactive
Corporation.
On December 18, 2001, Lynch Interactive Corporation made a capital
contribution to us of $500,000 and assigned to us a services agreement with The
Morgan Group, Inc. pursuant to which The Morgan Group, Inc. has agreed to pay
$100,000 per year for certain management services. The Morgan Group, Inc. has
not made any payments to us under this agreement or to Lynch Interactive
Corporation thereunder since the first quarter of 2001.
Lynch Interactive Corporation holds 235,294 shares of our Common Stock.
Should Cascade Investment LLC, the holder of an outstanding convertible
promissory note issued by Lynch Interactive Corporation convert all or a portion
of the principal amount of that note into shares of Lynch Interactive
Corporation, common stock prior to December 10, 2004, Lynch Interactive
Corporation will transfer to Cascade Investment LLC a pro rata portion of those
235,294 shares of Common Stock, depending on how much of the principal amount of
such note is converted. Should Cascade Investment LLC fail to convert any or all
of the principal amount of such note into shares of Lynch Interactive
Corporation common stock prior to December 10, 2004, ownership of any shares of
our Common Stock then remaining in that escrow account will be retained by Lynch
Interactive Corporation. Lynch Interactive Corporation has advised us that it
will sell or dispose of any shares of our Common Stock retained by it prior to
the fifth anniversary of our spin-off from Lynch Interactive Corporation, which
occurred on January 18, 2002.
INDEPENDENT AUDITORS
A representative of McGladrey & Pullen, LLP, is expected to be present at
the Annual Meeting. Such representative will have an opportunity to make a
statement if he desires to do so and will be available to respond to appropriate
questions from stockholders.
The Company's auditor for the year ended December 31, 2001 was Ernst &
Young LLP.
Audit Fees: The aggregate fees billed for professional services for the
audit of the Company's annual financial statements for the year ended December
31, 2001 was $20,000.
Financial Information Systems Design and Implementation Fees: None
All Other Fees: No fees other than audit fees were billed for services
rendered by Ernst & Young LLP for the year ended December 31, 2001.
OTHER MATTERS
So far as now known, there is no business other than that described above
to be presented for action by the stockholders at the Meeting, but it is
intended that the proxies will be voted upon any other matters and proposals
that may legally come before the Meeting or any adjournment thereof, in
accordance with the discretion of the persons named therein.
John Fikre
Secretary
Dated: July 5, 2002