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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2010
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Or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission File No. 333-73996
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MORGAN GROUP HOLDING CO.
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(Exact name of small business issuing as specified in its charter)
Delaware 13-4196940
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(State or other jurisdiction of (IRS Employer
Incorporation of organization) Identification Number)
401 Theodore Fremd Avenue, Rye, New York 10580
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(Address of principal executive offices) (Zip Code)
(914) 921-1877
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [ ] No
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
[X] Yes [ ] No
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practical date.
Class Outstanding at July 29, 2010
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Common Stock, $.01 par value 3,055,345
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Unaudited Financial Statements
Condensed Balance Sheets as of
June 30, 2010, December 31, 2009 and June 30, 2009
Condensed Statements of Operations for the
Three and Six Months Ended June 30, 2010 and 2009
Condensed Statements of Cash Flows for the
Six Months Ended June 30, 2010 and 2009
Notes to Condensed Financial
Statements as of June 30, 2010
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Morgan Group Holding Co.
Condensed Balance Sheets
(Unaudited)
June 30, December 31, June 30,
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2010 2009 2009
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ASSETS
Current assets:
Cash and cash equivalents
$ 99,352 $ 376,684 $ 392,652
Investments in marketable securities 266,625 -- --
Prepaid expenses -- 7,000 --
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Total current assets 365,977 383,684 392,652
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Total assets $ 365,977 $ 383,684 $ 392,652
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LIABILITIES AND SHAREHOLDERS' EQUITY
Accrued liabilities $ -- $ -- $ --
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Total current liabilities -- -- --
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SHAREHOLDERS' EQUITY
Preferred stock, $0.01 par value,
1,000,000 shares authorized,
none outstanding -- -- --
Common stock, $0.01 par value,
10,000,000 shares authorized,
3,055,345 outstanding 30,553 30,553 30,553
Additional paid-in-capital 5,611,447 5,611,447 5,611,447
Accumulated deficit (5,276,023) (5,258,316) (5,249,348)
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Shareholders' equity 365,977 383,684 392,652
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Total liabilities and shareholders' equity $ 365,977 $ 383,684 $ 392,652
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See accompanying notes to condensed financial statements
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Morgan Group Holding Co.
Condensed Statements of Operations
(Unaudited)
Three Months Ended Six Month Ended
June 30, June 30,
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2010 2009 2010 2009
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Revenue $ -- $ -- $ -- $ --
Administrative expenses (3,486) (4,056) (18,995) (20,342)
Investment income 1,237 216 1,288 618
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Net loss $ (2,249) $ (3,669) $ (17,707) $ (19,724)
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Basic and diluted net loss per share $ (0.00) $ (0.00) $ (0.01) $ (0.01)
Weighted average shares outstanding 3,055,345 3,055,345 3,055,345 3,055,345
See accompanying notes to condensed financial statements
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Morgan Group Holding Co.
Condensed Statements of Cash Flows
(Unaudited)
Six Months Ended
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June 30,
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2010 2009
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Cash Flows from Operating activities:
Interest received $ 98 $ 618
Cash paid to suppliers (11,995) (12,842)
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Net cash used in operating activities (11,897) (12,224)
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Cash Flow from Investing Activities:
Purchases of marketable securities (610,435) --
Proceeds from the sale of marketable securities 345,000 --
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Net cash used in Investing activities (265,435) --
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Cash Flow from Financing Activities -- --
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Net decrease in cash (277,332) (12,224)
Cash, Beginning of Period 376,684 404,876
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Cash, End of Period $ 99,352 $ 392,652
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Reconciliation of net loss to net cash used in operating activities:
Net loss $ (17,707) $ (19,724)
Realized gains from the sale of marketable securities (780)
Unrealized gains on investment in marketable securities (410)
Decrease in prepaid expenses 7,000 7,500
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Net cash used in operating activities $ (11,897) $ (12,224)
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See accompanying notes to condensed financial statements
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Morgan Group Holding Co.
Notes to Financial Statements
Note 1. Basis of Presentation
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Morgan Group Holding Co. ("Holding" or "the Company") was incorporated in
November 2001 as a wholly owned subsidiary of LICT Corporation ("LICT, formerly
Lynch Interactive Corporation") to serve, among other business purposes, as a
holding company for LICT's controlling interest in The Morgan Group, Inc.
("Morgan"). On January 24, 2002, LICT spun off 2,820,051 shares of Holding
common stock through a pro rata distribution ("Spin-Off") to its stockholders
and retained 235,294 shares.
On October 3, 2002, Morgan ceased its operations when its liability insurance
expired and it was unable to secure replacement insurance. On October 18, 2002,
Morgan and two of its operating subsidiaries filed voluntary petitions under
Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy
Court for the Northern District of Indiana, South Bend Division for the purpose
of conducting an orderly liquidation of Morgan's assets. On March 31, 2008, the
bankruptcy proceeding was concluded and the bankruptcy court dismissed the
proceeding. Holding received no value for its equity ownership from the
bankruptcy proceeding.
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States for interim financial information and with the instructions to
Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by accounting principles generally
accepted in the United States for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three and six months ended June 30, 2010 are not necessarily
indicative of the results that may be expected for the year ending December 31,
2010. The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results could differ
from these estimates.
Recently Issued Accounting Pronouncements
In August 2009, the FASB issued Accounting Standards Update ("ASU") No. 2009-05
which amended ASC 820 as it relates to the measurement of liabilities at fair
value, effective for interim reporting periods beginning after August 26, 2009.
More specifically, this amendment provided clarification for liabilities in
which a quoted price in an active market for an identical liability is not
available. The Company adopted this amendment during the first quarter of the
fiscal year 2010 and its adoption did not have a material effect on the
Company's financial position, results of operations or cash flows.
The Company adopted the provisions of ASC 855, Subsequent Events ("ASC 855"),
during the third quarter of the fiscal year 2009. ASC 855 establishes standards
of accounting for and disclosure of transactions and events that occur after the
balance sheet date but before the financial statements are issued and requires
the disclosure, among other things, of the date through which an entity has
evaluated subsequent events. In February 2010, the FASB issued ASU No. 2010-09
which amended ASC 855. This amendment, which was effective upon issuance,
removed the requirement for SEC registrants to disclose the date through which
such registrants have evaluated subsequent events.
Note 2. Marketable Securities
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Marketable securities consist of publicly traded common stocks. The Company's
investments in marketable securities are classified as trading under ASC 320
(formerly FASB 115, "Accounting for Certain Investments in Debt and Equity
Securities") and are carried at their estimated fair value based on current
market quotes. The Company acquires its marketable securities on a open market
through an affiliate of its Chairman. The Company reports the unrealized gains
or losses through the current period Statement of Operations. At June 30, 2010,
there was $410 of unrealized gains on the Company's investments in marketable
securities which was included in earning for the three and six months ended June
30, 2010.
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Note 3. Fair Value of Financial Instruments
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On January 1, 2008, the Company adopted ASC 820-10 (formerly Statement of
Financial Accounting Standard No. 157, "Fair Value Measurements") and
subsequently adopted the related FASB Staff Positions. The Company measures
fair value as the selling price that would be received for an asset, or paid to
transfer a liability, in the principal market on the measurement date. The
hierarchy established by the FASB prioritizes fair value measurements based on
the types of inputs used in the valuation technique. The inputs are categorized
into the following levels:
Level 1 - Observable inputs such as quoted prices in active markets for
identical assets or liabilities.
Level 2 - Inputs other than quoted prices that are observable, either
directly or indirectly, for identical or similar assets and liabilities in
active or non-active markets; or model-derived valuations or other inputs
that are observable or can be corroborated by observable market data for
substantially the full term of the assets or liability.
Level 3 - Unobservable inputs not corroborated by market data, therefore
requiring the entity to use the best available information, including
management assumptions.
Market value was determined using Level 1 inputs, which are quoted prices for
identical securities in active markets.
At June 30, 2010, the Gross Unrealized Gains are as follows:
Gross Estimated
Cost Unrealized Fair
Description Basis Gains Value
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Equity $266,215 $ 410 $ 266,625
While the above Estimated Fair Value was based on quoted prices (unadjusted) in
active markets for identical assets at the reporting date, the quoted price was
significantly impacted by offer to acquire all of the outstanding of stock of
that entity. The transaction closed subsequent to the reporting date at an
amount in excess of the above Estimated Fair Value.
Note 4. Income Taxes
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The Company is a "C" corporation for Federal tax purposes, and has provided for
deferred income taxes for temporary differences between the financial statement
and tax bases of its assets and liabilities. The Company has recorded a full
valuation allowance against its deferred tax asset of approximately $1.7 million
arising from its temporary basis differences and tax loss carryforward, as its
realization is dependent upon the generation of future taxable income during the
period when such losses would be deductible.
Pursuant to Sections 382 and 383 of the Internal Revenue Code, annual use of any
of the Company's net operating loss carry forwards may be limited if cumulative
changes in ownership of more than 50% occur during any three year period.
Note 5. Commitments and Contingencies
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On March 31, 2008, the bankruptcy court dismissed Morgan's bankruptcy
proceeding. Holding had not guaranteed any of the obligations of Morgan.
Management believes that the Company has no commitment or obligation to fund any
creditors of Morgan.
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ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
On October 18, 2002, Morgan adopted the liquidation basis of accounting and
accordingly, Morgan's assets and liabilities have been adjusted to estimate net
realizable value. As the carrying value of Morgan's liabilities exceeded the
fair value of its assets, the liabilities were reduced to equal the estimated
net realizable value of the assets.
The Company currently has no operating businesses and will seek acquisitions as
part of its strategic alternatives. Its only costs are the administrative
expenses required to make the regulatory filings needed to maintain its public
status. These costs are estimated at $30,000 to $40,000 per year.
Results of Operations
For the three months ended June 30, 2010, the Company incurred $3,486 of
expenses down slightly from $4,056 of expenses in the three months ended June
30, 2009. Lower professional fees in 2010 caused the slight decrease in this
quarter. For the six months ended June 30, 2010, the Company incurred $18,995 of
expenses down slightly from $20,342 of expenses in the six months ended June 30,
2009, also due to lower professional fees in 2010.
Investment income was $1,237 in the three months ended June 30, 2010 as compared
to $216 in the three months ended June 30, 2009. During the second quarter of
2010, the Company recorded $1,190 of realized and unrealized gains from the
purchase and sale of certain marketable securities. There was no activity in
marketable securities in 2009. The remaining investment income is as a result
of the Company's investment in a United States Treasury money market fund.
Investment income was $1,288 in the six months ended June 30, 2010 as compared
to $618 in the six months ended June 30, 2009. The increase was due to the
aforementioned gains in marketable securities.
Liquidity and Capital Resources
As of June 30, 2010, the Company's only assets consisted of approximately
$365,977 in cash, cash equivalents and marketable securities and a capital loss
carry forward of about $4.5 million, which it expects, will substantially expire
in 2013. The ability to utilize this carry forward is dependent on the
Company's ability to generate a capital gain prior to its expiration.
Off Balance Sheet Arrangements
None.
Item 3. Quantitative and Qualitative Analysis of Market Risk
As of June 30, 2010, the Company had no market sensitive assets or liabilities,
and, as a result, management believes that the Company is minimally exposed to
changes in market risk.
Recently Issued Accounting Pronouncements
For a discussion of accounting standards updates that have been adopted or will
be adopted in the future, please read Note 1 of the Notes to Condensed Financial
Statements included under Item 1.
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Item 4T. Controls and Procedures
a) Evaluation of Disclosure Controls and Procedures
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Our Chief Executive Officer and Chief Financial Officer have evaluated the
effectiveness of the Company's disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the
"Act")) as of the end of the period covered by this report. Based on that
evaluation, the Chief Executive Officer and Chief Financial Officer have
concluded that the Company's disclosure controls and procedures as of the end of
the period covered by this report were designed and were functioning effectively
to provide reasonable assurance that the information required to be disclosed by
the Company in reports filed under the Act is recorded, processed, summarized
and reported within the time periods specified in the rules and forms of the
Securities and Exchange Commission. The Company believes that a controls
system, no matter how well designed and operated, cannot provide absolute
assurance that the objectives of the controls system are met, and no evaluation
of controls can provide absolute assurance that all control issues and instances
of fraud, if any, within a company have been detected.
(b) Changes in Internal Controls
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During the period covered by this report, there have been no changes in our
internal control over financial reporting that have materially affected, or are
reasonably likely to materially affect, our financial statements.
Forward Looking Discussion
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This report contains a number of forward-looking statements, including
statements regarding the prospective adequacy of the Company's liquidity and
capital resources in the near term. From time to time, the Company may make
other oral or written forward-looking statements regarding its anticipated
operating revenues, costs and expenses, earnings and other matters affecting its
operations and condition. Such forward-looking statements are subject to a
number of material factors, which could cause the statements or projections
contained therein, to be materially inaccurate. Such factors include the
estimated administrative expenses of the Company on a go forward basis.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
Exhibit 3.1 Certificate of Incorporation of the Company*
Exhibit 3.2 By-laws of the Company*
Exhibit 31.1 Chief Executive Officer Rule 15d-14(a) Certification.
Exhibit 31.2 Principal Financial Officer Rule 15d-14(a) Certification.
Exhibit 32.1 Chief Executive Officer Section 1350 Certification.
Exhibit 32.2 Principal Financial Officer Section 1350 Certification.
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* Incorporated by reference to the exhibits to the Company's Registration
Statement on Form S-1 (Registration No. 333-73996).
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
MORGAN GROUP HOLDING CO.
By: /s/ ROBERT E. DOLAN
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ROBERT E. DOLAN
Chief Financial Officer
July 30, 2010
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