MORGAN GROUP HOLDING CO - Quarter Report: 2019 September (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
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EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2019
Or
| ☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(D) OF THE SECURITIES
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EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission File No. 333-73996
MORGAN GROUP HOLDING CO.
(Exact name of small business issuing as specified in its charter)
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Delaware
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13-4196940
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(State or other jurisdiction of Incorporation of organization)
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(IRS Employer Identification Number)
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401 Theodore Fremd Avenue, Rye, New York
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10580
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(Address of principal executive offices)
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(Zip Code)
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(914) 921-1877
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(Registrant’s telephone number, including area code)
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Securities registered pursuant to Section 12(b) 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 Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large
accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer ☐
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Accelerated filer ☐
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Non-accelerated filer ☐ (Do not check if a smaller reporting company)
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Smaller reporting company ☒
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Emerging growth company ☐
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section
13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☒ Yes ☐ No
State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practical date.
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Class
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Outstanding at October 14, 2019
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Common Stock, $.01 par value
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4,859,055
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MORGAN GROUP HOLDING CO.
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PART I –FINANCIAL INFORMATION
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Page No.
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Item 1.
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1-5
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6-7
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Item 2.
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7-8
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Item 3.
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8
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Item 4.
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8-9
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PART II – OTHER INFORMATION
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Item 1.
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9
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Item 1a.
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9
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Item 2.
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9
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Item 3.
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9
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Item 4.
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9
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Item 5.
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9
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Item 6.
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10
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11
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PART I - FINANCIAL INFORMATION
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Unaudited Financial Statements
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Condensed Balance Sheets at September 30, 2019, December 31, 2018 and September 30, 2018
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2 | |
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Condensed Statements of Operations for the Three and Nine Months Ended September 30, 2019 and 2018
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3 |
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Condensed Statements of Cash Flows for the Nine Ended September 30, 2019 and 2018
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4 |
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Condensed Statement of Shareholders’ Equity for the Three Months Ended September 30, 2019, June 30, 2019, March 31, 2019, December 31, 2018, September 30, 2018, June 30, 2018, and March 31,
2018.
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5 |
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Notes to Condensed Financial Statements as of September 30, 2019
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6 | |
Morgan Group Holding Co.
Condensed Balance Sheets
(Unaudited)
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September 30,
2019
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December 31,
2018
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September 30,
2018
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ASSETS
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Current assets:
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Cash and cash equivalents
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$
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79,074
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$
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129,635
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$
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133,152
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Prepaid expenses
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9,875 |
7,454 |
12,613 |
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Total current assets
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88,949
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137,089
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145,765
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Total assets
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$
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88,949
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$
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137,089
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$
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145,765
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LIABILITIES
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Current liabilities:
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Accrued liabilities
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$
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18,193
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$
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222
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$
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222
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||||||
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Total current liabilities
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18,193
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222
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222
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Total liabilities
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18,193
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222
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222
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COMMITMENTS AND CONTINGENCIES
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SHAREHOLDERS’ EQUITY
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Preferred stock, $0.01 par value, 1,000,000 shares authorized, none outstanding
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--
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--
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--
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Common stock, $0.01 par value, 100,000,000 shares authorized at September 30, 2019 and 10,000,000 authorized at December 31, 2018 and September 30, 2018, 4,859,055 shares outstanding at all
periods
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48,591
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48,591
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48,591
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Additional paid-in-capital
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5,937,368
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5,937,368
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5,937,368
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Accumulated deficit
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(5,915,203
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)
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(5,849,092
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)
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(5,840,416
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)
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Total shareholders’ equity
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70,756
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136,867
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145,543
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Total liabilities and shareholders’ equity
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$
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88,949
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$
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137,089
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$
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145,765
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See accompanying notes to condensed financial statements.
Morgan Group Holding Co.
Condensed Statements of Operations
(Unaudited)
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Three Months Ended
September 30,
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Nine Months Ended
September 30,
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2019
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2018
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2019
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2018
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Revenues
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$
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--
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$
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--
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$
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--
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$
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--
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Administrative expenses
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(32,809
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)
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(9,616
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)
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(67,819
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)
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(48,381
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)
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Other income:
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Interest income
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461
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651
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1,708
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1,317
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Net loss before income taxes
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(32,348
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)
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(8,965
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)
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(66,111
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)
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(47,064
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)
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Income taxes
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--
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--
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--
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--
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Net loss
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$
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(32,348
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)
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$
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(8.965
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)
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$
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(66,111
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)
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$
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(47,064
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)
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Net loss per share, basic and diluted
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$
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(0.01
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)
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$
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(0.00
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)
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$
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(0.01
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)
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$
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(0.01
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)
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Shares outstanding, basic and diluted
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4,859,055
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4,859,055
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4,859,055
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4,430,484
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See accompanying notes to condensed financial statements.
Morgan Group Holding Co.
Condensed Statements of Cash Flows
(Unaudited)
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Nine Months Ended
September 30,
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2019
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2018
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Cash Flows from Operating Activities
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Interest income
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$
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1,708
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$
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1,317
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Cash paid to suppliers
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(52,269
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)
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(65,438
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)
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Net cash used in operating activities
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(50,561
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)
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(64,121
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)
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Cash Flows from Financing Activities
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Issuance of common stock
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--
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180,000
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Net cash provided by financing activities
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--
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180,000
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Net (decrease) increase in cash and cash equivalents
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(50,561
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)
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115,879
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Cash and cash equivalents, beginning of the period
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129,635
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17,273
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Cash and cash equivalents, end of the period
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$
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79,074
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$
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133,152
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Reconciliation of net loss to net cash used in operating activities:
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Net loss
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$
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(66,111
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)
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$
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(47,064
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)
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Increase in prepaid expenses
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(2,421
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)
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(12,284
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)
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Increase (decrease) in accrued liabilities
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17,971
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(4,773
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)
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Net cash used in operating activities
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$
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(50,561
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)
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$
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(64,121
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)
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Cash paid for interest
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$
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--
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$
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--
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Cash paid for income taxes
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$
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--
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$
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--
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See accompanying notes to condensed financial statements.
Morgan Group Holding Co.
Condensed Statement of Shareholders’ Equity
Three Months Ended September 30, 2019, June 30, 2019, March 31, 2019,
December 31, 2018, September 30, 2018, June 30, 2018, and March 31, 2018.
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Common Stock
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Additional
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|||||||||||||||||||
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Shares
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Par
Value
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Paid in
Capital
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Accumulated
Deficit
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Total
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Shareholders’ equity, December 31, 2017
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3,359,055
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$
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33,591
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$
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5,772,368
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$
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(5,793,352
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)
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$
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12,607
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Sale of common stock
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1,500,000
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15,000
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165,000
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-
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180,000
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Net loss for three months ended March 31, 2018
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--
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--
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--
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(26,976
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)
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(26,976
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)
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|||||||||||||
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Shareholders’ equity, March 31, 2018
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4,859,055
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48,591
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5,937,368
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(5,820,328
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)
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165,631
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||||||||||||||
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Net loss for three months ended June 30, 2018
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--
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--
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--
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(11,123
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)
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(11,123
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)
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|||||||||||||
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Shareholders’ equity. June 30, 2018
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4,859,055
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48,591
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5,937,368
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(5,831,451
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)
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154,508
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||||||||||||||
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Net loss for three months ended September 30, 2018
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--
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--
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--
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(8,965
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)
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(8,965
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)
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|||||||||||||
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Shareholders’ equity. September 30, 2018
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4,859.055
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48,591
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5,937,368
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(5,840,416
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)
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145,543
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||||||||||||||
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Net loss for three months ended December 31, 2018
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--
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--
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--
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(8,676
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)
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(8,676
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)
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|||||||||||||
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Shareholders’ equity. December 31, 2018
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4,859,055
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48,591
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5,937,368
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(5,849,092
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)
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136,867
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||||||||||||||
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Net loss for three months ended March 31, 2019
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--
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--
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--
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(22,684
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)
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(22,684
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)
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|||||||||||||
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Shareholders’ equity. March 31, 2019
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4,859,055
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48,591
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5,937,368
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(5.871,776
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)
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114,183
|
||||||||||||||
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Net loss for three months ended June 30, 2019
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--
|
--
|
--
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(11,079
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)
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(11,079
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)
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|||||||||||||
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Shareholders’ equity. June 30, 2019
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4,859,055
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48,591
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5,937,368
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(5,882,855
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)
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103,104
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||||||||||||||
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Net loss for three months ended September 30, 2019
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--
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--
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--
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(32,348
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)
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(32,348
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)
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Shareholders’ equity. September 30, 2019
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4,859,055
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$
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48,591
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$
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5,937,368
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$
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(5,915,203
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)
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$
|
70,756
|
||||||||||
See accompanying notes to condensed financial statements.
Morgan Group Holding Co.
| Note 1. |
Basis of Presentation
|
Morgan Group Holding Co. (“Morgan” or “the Company”) was incorporated in November 2001 as a wholly-owned subsidiary of LICT Corporation (“LICT”) to serve, among other business purposes, as a holding
company for LICT’s controlling interest in The Morgan Group, Inc. On January 24, 2002, LICT spun off 2,820,051 shares of the Company’s common stock through a pro rata distribution (“Spin-Off”) to its stockholders and retained 235,294 shares.
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and
with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2019 are not necessarily
indicative of the results that may be expected for the year ending December 31, 2019. The preparation of 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. |
Acquisition of G.Research, LLC
|
On June 18, 2019, the Company announced an agreement in principle with Associated Capital Group (“AC,” NYSE:AC), to acquire a subsidiary of AC, G.Research, LLC (“G.Research”). Under the proposed terms, Morgan will
acquire G.Research for 50,000,000 shares of Morgan’s common stock. The transaction is subject to the execution of definitive documents and the satisfaction of customary closing conditions and regulatory approvals. Accordingly, no assurances can be
given that a binding agreement will be entered into, that the proposed transaction will be consummated or the timing thereof. If the transaction is completed, AC will hold approximately 91% of Morgan’s outstanding common stock.
| Note 3. |
Significant Accounting Policies
|
All highly liquid investments with maturity of three months or less when purchased are considered to be cash equivalents. The carrying value of a cash equivalent approximates its fair value based on
its nature.
At September 30, 2019, December 31, 2018, and September 30, 2018, all cash and cash equivalents were invested in a United States Treasury money market fund, of which an affiliate of the Company
serves as the investment manager.
The Company may from time to time invest in marketable securities that are bought and held principally for the purpose of selling them in the near term and are classified as
trading securities. Trading securities are recorded at fair value on the balance sheet in current assets, with the change in fair value during the period included in earnings.
Basic earnings per share is based on the weighted-average number of common shares outstanding during each period. Diluted earnings per share is based on basic shares plus the incremental shares that
would be issued upon the assumed exercise of in-the-money stock options and unvested restricted stock using the treasury stock method, and if dilutive.
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Note 4.
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Fair Value of Financial Instruments
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The Company measures fair value as the selling price that would be received for an asset, or paid to transfer a liability, in the principal market on the measurement date. The hierarchy established
by the FASB prioritizes fair value measurements based on the types of inputs used in the valuation technique. The inputs are categorized into the following levels:
Level 1 – Observable inputs such as quoted prices in active markets for identical assets or liabilities.
Level 2 – Inputs other than quoted prices that are observable, either directly or indirectly, for identical or similar assets and liabilities in active or non-active markets; or model-derived
valuations or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liability.
Level 3 – Unobservable inputs not corroborated by market data, therefore requiring the entity to use the best available information, including management assumptions.
At September 30, 2019, December 31, 2018, and September 30, 2018, the Company’s cash equivalents included money market securities. These securities are valued utilizing quoted market prices from
identical instruments and are categorized in Level 1 of the fair value hierarchy.
At September 30, 2019, December 31, 2018, and September 30, 2018, there were no gross unrealized gains or losses.
| Note 5. |
Income Taxes
|
The Company is a “C” corporation for Federal tax purposes, and has provided for deferred income taxes for temporary differences between the financial statement and tax bases of its assets and
liabilities. The Company has recorded a full valuation allowance against its deferred tax asset of approximately $213,321 arising from its temporary basis differences and tax loss carryforward, as its realization is dependent upon the generation of
future taxable income during the period when such losses would be deductible.
Pursuant to Sections 382 and 383 of the Internal Revenue Code, annual use of any of the Company’s net operating loss carry forwards may be limited if cumulative changes in ownership of more than 50%
occur during any three year period.
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Note 6.
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Commitments and Contingencies
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From time to time the Company may be subject to certain asserted and unasserted claims. It is the Company’s belief that the resolution of these matters will not have a material
adverse effect on its financial position.
| Note 7. |
Shareholders’ Equity
|
On March 19, 2018, the Company sold in a private placement to LICT, 1,500,000 of its shares common stock for $180,000, or $0.12 per share. These funds were intended to be used to pay administrative
costs for the subsequent three years, until an acquisition candidate could be found, and appropriate financing obtained. The funds from the sale were received on April 3, 2018.
At the Company’s Annual Meeting of Stockholders on May 8, 2014, its stockholders voted to amend the Company’s Certificate of Incorporation (the “Charter Amendment”) to increase the number of
authorized shares of common stock, par value $0.01 per share, from 10,000,000 to 100,000,000. In connection with the proposed acquisition of G.Research, as further described in Note 2, and in order to effectuate this increase in authorized capital,
on July 15, 2019, the Company filed the Charter Amendment with the State of Delaware.
Overview
The Company currently has no operating businesses and is seeking acquisitions as part of its strategic alternatives. Its only costs are the expenses required to make the regulatory filings needed to maintain its public status and to find and
evaluate potential acquisitions. These costs are estimated at $50,000 per year.
Recent Developments
On June 18, 2019, the Company announced an agreement in principle with AC, to acquire a subsidiary of AC, G.Research. Under the proposed terms, Morgan will acquire G.Research for 50,000,000
shares of Morgan’s common stock. The transaction is subject to the execution of definitive documents and the satisfaction of customary closing conditions and regulatory approvals. Accordingly, no assurances can be given that a binding agreement
will be entered into, that the proposed transaction will be consummated or the timing thereof. If the transaction is completed, AC will hold approximately 91% of Morgan’s outstanding common stock.
Results of Operations
Three Months Ended September 30, 2019 and 2018
For the three months ended September 30, 2019, the Company incurred $32,809 of administrative expenses, an increase of $23,193 from the administrative expenses for the three months ended September 30, 2018 of $9,616.
$22,419 of legal fees in 2019 associated with the proposed acquisition of G.Research was the primary cause of the variance.
During the third fiscal quarter of 2019, the Company earned $461 from its investment in a United States Treasury money market fund, as compared to $651 in the third quarter of 2018 due to lower average investment
balances in 2018.
Nine Months Ended September 30, 2019 and 2018
For the nine months ended September 30, 2019, the Company incurred $67,819 of administrative expenses, $19,438 more than the $48,381 of administrative expenses incurred for the nine months ended September 30, 2018. The
increase was primarily due to increased legal fees in 2019. The $22,419 of legal fees in 2019 associated with the proposed acquisition of G.Research was the primary cause of the variance, offset by lower legal fees in the first half of 2019 as
compared to the first half of 2018.
During the first three quarters of 2019, the Company earned $1,708 from its investment in a United States Treasury money market fund, as compared to $1,317 in the first three quarters of 2018 due to higher average
investment balances in 2019.
Liquidity and Capital Resources
At September 30, 2019, the Company’s principal assets consisted of cash and cash equivalents of $79,074 as compared to $129,685 at December 31, 2018.
On March 19, 2018 the Company sold in a private placement to LICT Corporation 1,500,000 shares of its common stock for $180,000, or $0.12 per share. These funds were intended to be used to pay administrative costs for
the subsequent three years, until an acquisition candidate could be found, and appropriate financing obtained. The funds from this sale were received on April 3, 2018.
Off Balance Sheet Arrangements
None.
The Company is a smaller reporting company as defined in Item 10(f)(1) of Regulation S-K and thus is not required to report the Quantitative and Qualitative Analysis of Market Risk
specified in Item 305 of Regulation S-K.
|
(a)
|
Evaluation of Disclosure Controls and Procedures
|
Our Acting Chief Executive Officer/Chief Financial Officer has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act
of 1934 (the “Act”) as of the end of the period covered by this report. Based on that evaluation, the Acting Chief Executive Officer/Chief Financial Officer has concluded that the Company’s disclosure controls and procedures as of the end of the
period covered by this report were designed and were functioning effectively to provide reasonable assurance that the information required to be disclosed by the Company in reports filed under the Act is recorded, processed, summarized and reported
within the time periods specified in the rules and forms of the Securities and Exchange Commission. The Company believes that a controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the
controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.
|
(b)
|
Changes in Internal Controls
|
During the period covered by this report, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our financial
statements.
Forward Looking Discussion
This report contains a number of forward-looking statements, including but not limited to 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 going-forward basis.
PART II - OTHER INFORMATION
The Company is not a party to any legal proceedings.
Not applicable
None
None
Not applicable
None
|
Acting Chief Executive Officer and Chief Financial Officer Rule 15d-14(a) Certification.
|
||
|
Acting Chief Executive Officer and Chief Financial Officer Section 1350 Certification.
|
||
|
EX-101.INS
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XBRL INSTANCE DOCUMENT
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EX-101.SCH
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XBRL TAXONOMY EXTENSION SCHEMA
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EX-101.PRE
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XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE
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EX-101.LAB
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XBRL TAXONOMY LABEL LINKBASE
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EX-101.CAL
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XBRL TAXONOMY EXTENSION CALCULATION
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EX-101.DEF
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XBRL TAXONOMY EXTENSION DEFINITION LINKBASE
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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.
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MORGAN GROUP HOLDING CO.
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By:
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/s/ Robert E. Dolan
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ROBERT E. DOLAN
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Acting Chief Executive Officer/Chief Financial Officer
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October 15, 2019
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