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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2006
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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 issuer 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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Insurer's telephone number, including area code
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practical date.
Class Outstanding At October 31, 2006
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Common Stock, $.01 par value 3,055,345
Transitional Small Business Disclosure Format (Check One): Yes ( ) No (X)
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Financial Statements Unaudited
Balance Sheets as of
September 30, 2006, December 31, 2005 and September 30, 2005
Statements of Operations for the
Three and Nine Months Ended September 30, 2006 and 2005
Statements of Cash Flows for the
Nine Months Ended September 30, 2006 and 2005
Notes to Financial
Statements as of September 30, 2006
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Morgan Group Holding Co.
Balance Sheets
(Unaudited)
(Dollars in thousands)
September 30, December 31, September 30,
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2006 2005 2005
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ASSETS
Current assets:
Cash and cash equivalents $ 420 $ 408 $ 407
------- ------- -------
Total curent assets 420 408 407
Net assets of The Morgan Group, Inc. -- -- --
------- ------- -------
Total assets $ 420 $ 408 $ 407
======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Accrued Liabilities $ 1 $-- $ 2
------- ------- -------
Total current liabilities 1 -- 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 30
Additional paid-in-capital 5,612 5,612 5,612
Accumulated deficit (5,223) (5,234) (5,237)
------- ------- -------
Shareholders equity 419 408 405
======= ======= =======
Total liabilities and shareholders' equity $ 420 $ 408 $ 407
======= ======= =======
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
3
Morgan Group Holding Co.
Statements of Operations
(Unaudited)
(Dollars and shares in thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
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2006 2005 2006 2005
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Administrative expenses $ (2) $ (1) $ (3) $ (3)
Investment income 6 3 14 7
------- ------- ------- -------
Net profit $ 4 $ 2 $ 11 $ 4
======= ======= ======= =======
Basic and diluted net loss per share $ 0.00 $ 0.00 $ 0.00 $ 0.00
======= ======= ======= =======
Weighted average shares outstanding 3,055 3,055 3,055 3,055
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
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Morgan Group Holding Co.
Statements of Cash Flows
(Unaudited)
(Dollars in thousands)
Nine Months Ended
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September 30,
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2006 2005
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Operating activities:
Net profit $ 11 $ 4
Adjustments to reconcile net profit to net -- --
cash used in operating activities:
Increase in accrued liabilities 1 2
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Net cash provided by operating activities 12 6
---- ----
Net change in cash and equivalents 12 6
Cash and cash equivalents at beginning of period 408 401
---- ----
Cash and cash equivalents at end of period $420 $407
==== ====
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
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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
the Company's common stock through a pro rata distribution ("Spin-Off")
to its stockholders. Interactive retained 235,294 shares of the
Company's 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 balance sheet, the assets and liabilities
of Morgan have been reflected as one line. Holding's management
currently believes that it is very unlikely that Holding will realize
any value from its equity ownership in Morgan. Furthermore, Holding has
no obligation or intention to fund any of Morgan's liabilities;
therefore, Holding's 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, Holding believes it has relinquished
control of Morgan and accordingly, has ceased consolidating the
financial statements of Morgan.
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.
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
nature.
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-QSB and Articles 10 and 11 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 nine months ended September 30, 2006 are not
necessarily indicative of the results that may be expected for the year
ending December 31, 2006. 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.
Note 2. NET ASSETS OF MORGAN GROUP
At September 30, 2006, December 31, 2005, and September 30, 2005, the
estimated value of Morgan's assets in liquidation was insufficient to
satisfy its estimated obligations.
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Note 3. INCOME TAXES
No income tax benefit has been 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 4. 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.
Note 5. FINANCIAL STATEMENTS NOT REVIEWED BY INDEPENDENT PUBLIC ACCOUNTANTS
On May 2, 2003, the client-auditor relationship between Holding and
Ernst & Young LLP ceased. As a result, these interim financial
statements have not been reviewed by independent public accountants.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF
OPERATION.
OVERVIEW
On October 18, 2002, Morgan adopted the liquidation basis of accounting and
accordingly, Morgan's assets and liabilities have been adjusted to estimate net
realizable value. As the carrying value of Morgan's liabilities exceeded the
fair value of its assets, the liabilities were reduced to equal the estimated
net realizable value of the assets.
The Company currently has no operating businesses and will seek acquisitions as
part of its strategic alternatives. Its only costs are the administrative
expenses required to make the regulatory filings needed to maintain its public
status. These costs are estimated at $10,000 to $20,000 per year.
RESULTS OF OPERATIONS
For the three months ended September 30, 2006, the Company incurred about $2,000
of expenses as compared to $1,000 of expenses in the three months ended
September 30, 2005. For the nine months ended September 30, 2006, the Company
incurred about $3,000 of expenses, the same as the nine months ended September
30, 2005. Administrative expenses are lower than expected due to the Company's
inability to retain an independent auditor.
As a result of higher interest rates in 2006 for the Company's investment in a
United States Treasury money market fund, investment income was $6,000 in the
three months ended September 30, 2006 as compared to $3,000 in the three months
ended September 30, 2005 and $14,000 in the nine months ended September 30, 2006
as compared to $7,000 in the nine months ended September 30, 2005.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2006, the Company's only assets consisted of $420,000 in
cash and an unrecognized asset relating to a tax loss carry forward, primarily
capital, of about $4 million.
OFF BALANCE SHEET ARRANGEMENTS
None.
QUANTITATIVE AND QUALITATIVE ANALYSIS OF MARKET RISK
The Company is minimally exposed to changes in market risk because, as of
September 30, 2006, the Company has no market sensitive assets or liabilities.
ITEM 3. CONTROLS AND PROCEDURES
As a result of the Bankruptcy, Morgan's corporate, financial and accounting
staff has been substantially reduced, thereby impairing the ability of Morgan to
maintain internal controls and adequate disclosure controls and procedures. On
November 12, 2002, Morgan filed a Form 15 with the Securities and Exchange
Commission to terminate its registration under Section 12(g) of the Exchange
Act. Given the current status of Morgan, neither the chief executive officer nor
the chief financial officer of Holding has been able to evaluate the
effectiveness of the disclosure controls and procedures of Morgan.
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FORWARD LOOKING DISCUSSION
This report contains a number of forward-looking statements, including
statements regarding the prospective adequacy of the Company's liquidity and
capital resources in the near term. From time to time, the Company may make
other oral or written forward-looking statements regarding its anticipated
operating revenues, costs and expenses, earnings and other matters affecting its
operations and condition. Such forward-looking statements are subject to a
number of material factors, which could cause the statements or projections
contained therein, to be materially inaccurate. Such factors include the
estimated administrative expenses of the Company on a go forward basis.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS
None.
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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 13, 2006
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