UNITED
STATES
SECURITIES AND
EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
| [X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the quarterly period ended September 30, 2016 | ||
| 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
MORGAN GROUP HOLDING
CO.
(Exact name of small
business issuing as specified in its charter)
| Delaware | 13-4196940 | |
| (State or other jurisdiction of | (IRS Employer | |
| Incorporation of organization) | Identification Number) | |
| 401 Theodore Fremd Avenue, Rye, New York | 10580 | |
| (Address of principal executive offices) | (Zip Code) | |
| (914) 921-1877 |
| (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 [ ] (Do not check if a smaller reporting company) | Smaller reporting company [X] |
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 October 30, 2016 | |
| Common Stock, $.01 par value | 3,359,055 |
MORGAN GROUP HOLDING
CO.
TABLE OF CONTENTS
| Page No. | ||||
| PART I –FINANCIAL INFORMATION | ||||
| Item 1. | Financial Statements. | 3-9 | ||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. | 9-10 | ||
| Item 3. | Quantitative and Qualitative Disclosure About Market Risk. | 10 | ||
| Item 4. | Controls and Procedures. | 10 | ||
| PART II – OTHER INFORMATION | ||||
| Item 6. | Exhibits. | 11 | ||
| Signatures | 12 | |||
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Unaudited Financial Statements
| Condensed Balance Sheets as of | |
| September 30, 2016, December 31, 2015 and September 30, 2015 | |
| Condensed Statements of Operations for the | |
| Three and Nine Months Ended September 30, 2016 and 2015 | |
| Condensed Statements of Cash Flows for the | |
| Nine Months Ended September 30, 2016 and 2015 | |
| Condensed Statement of Shareholders’ Equity for the | |
| Nine Months Ended September 30, 2016 | |
| Notes to Condensed Financial | |
| Statements as of September 30, 2016 | |
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Morgan Group Holding
Co.
Condensed Balance Sheets
(Unaudited)
| September 30, | December 31, | September 30, | ||||
| 2016 | 2015 | 2015 | ||||
| ASSETS | ||||||
| Current assets: | ||||||
| Cash and cash equivalents | $67,682 | $117,492 | $131,915 | |||
| Prepaid expenses | 9,255 | 6,722 | 8,719 | |||
| Total current assets | 76,937 | 124,214 | 140,634 | |||
| Equipment – net | -- | -- | 82 | |||
| Total assets | $76,937 | $124,214 | $140,716 | |||
| LIABILITIES | ||||||
| Current liabilities: | ||||||
| Accrued liabilities | $-- | $-- | $2,730 | |||
| Total current liabilities | -- | -- | 2,730 | |||
| Total liabilities | -- | -- | 2,730 | |||
| COMMITMENTS AND CONTINGENCIES | ||||||
| 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, 3,359,055 outstanding | 33,591 | 33,591 | 33,591 | |||
| Additional paid-in-capital | 5,772,368 | 5,772,368 | 5,772,368 | |||
| Accumulated deficit | (5,729,022) | (5,681,745) | (5,667,973) | |||
| Total shareholders' equity | 76,937 | 124,214 | 137,986 | |||
| Total liabilities and shareholders' equity | $76,937 | $124,214 | $140,716 | |||
See accompanying notes to condensed financial statements.
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Morgan Group Holding
Co.
Condensed Statements of Operations
(Unaudited)
| Three Months Ended | Nine Months Ended | |||||||
| September 30, | September 30, | |||||||
| 2016 | 2015 | 2016 | 2015 | |||||
| Revenues | $-- | $-- | $-- | $-- | ||||
| Administrative expenses | (11,230) | (12,675) | (47,421) | (50,840) | ||||
| Other income: | ||||||||
| Interest income | 44 | -- | 144 | -- | ||||
| Net loss before income taxes | (11,186) | (12,675) | (47,277) | (50,840) | ||||
| Income taxes | -- | -- | -- | -- | ||||
| Net loss | ($11,186) | ($12,675) | ($47,277) | ($50,840) | ||||
| Net loss per share, basic and diluted | ($0.00) | ($0.00) | ($0.01) | ($0.02) | ||||
| Shares outstanding, basic and diluted | 3,359,055 | 3,359,055 | 3,359,055 | 3,359,055 | ||||
See accompanying notes to condensed financial statements.
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Morgan Group Holding
Co.
Condensed Statements of Cash Flows
(Unaudited)
| Nine Months Ended | ||||
| September 30, | ||||
| 2016 | 2015 | |||
| Cash Flows from Operating Activities | ||||
| Interest income | $144 | $-- | ||
| Cash paid to suppliers | (49,954) | ($55,514) | ||
| Net cash used in operating activities | (49,810) | (55,514) | ||
| Net decrease in cash and cash equivalents | (49,810) | (55,514) | ||
| Cash and cash equivalents, beginning of the period | 117,492 | 187,429 | ||
| Cash and cash equivalents, end of the period | $67,682 | $131,915 | ||
| Reconciliation of net loss to net cash used in operating activities: | ||||
| Net loss | ($47,277) | ($50,840) | ||
| Depreciation | -- | 490 | ||
| (Increase) decrease in prepaid expenses | (2,533) | 363 | ||
| (Decrease) in accrued liabilities | -- | (5,527) | ||
| Net cash used in operating activities | ($49,810) | ($55,514) | ||
| Cash paid for interest | $-- | $-- | ||
| Cash paid for income taxes | $-- | $-- | ||
See accompanying notes to condensed financial statements.
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Morgan Group Holding
Co.
Condensed Statement of Shareholders’ Equity
Nine Months Ended
September 30, 2016
| Common Stock | Additional | |||||||||
| Par | Paid in | Accumulated | ||||||||
| Shares | Value | Capital | Deficit | Total | ||||||
| Shareholders’ equity, | ||||||||||
| December 31, 2015 | 3,359,055 | $33,591 | $5,772,368 | ($5,681,745) | $124,214 | |||||
| Net loss for nine | ||||||||||
| months ended | ||||||||||
| September 30, 2016 | -- | -- | -- | (47,277) | (47,277) | |||||
| Shareholders’ equity, | ||||||||||
| September 30, 2016 | 3,359,055 | $33,591 | $5,772,368 | ($5,729,022) | $76,937 | |||||
See accompanying notes to condensed financial statements.
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Morgan Group Holding
Co.
Notes to Condensed 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 LICT Corporation (“LICT”) 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. 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, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016. 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. | 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, 2016, December 31, 2015 and September 30, 2015, 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. | ||
| Note 3. | 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 $244,059 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 4. | Commitments and Contingencies | |
|
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. The Company has not guaranteed any of the obligations of Morgan and believes it currently has no commitment or obligation to fund any creditors. |
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| Note 5. | Shareholders’ Equity and Stock Options and Warrants | |
|
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 order to economize costs until necessary, the Company has not yet filed the Amended Certificate of Incorporation with its state of incorporation, Delaware, to effectuate the authorization. On December 21, 2012, the Company and Jonathan P. Evans, Chief Executive Officer of the Company, entered into a Nonqualified Stock Option Agreement, whereby the Company granted to Mr. Evans an option (the “Option”) to purchase 800,000 shares of the Company’s Common Stock at an exercise price of $0.15 per share of Common Stock, which was the closing price of the Common Stock as quoted on the OTC Markets’ inter-dealer quotation service on December 20, 2012. These options were exercisable at any time and the exercise period expired on December 21, 2015. As of September 30, 2015, these were the only options outstanding and as of September 30, 2016, there are no options outstanding. On December 21, 2012, the Company issued a warrant to purchase up to 1,000,000 shares of the Company’s Common Stock at $1.00 per share to Jonathan P. Evans in exchange for $10,000, which was received in 2013. In addition on that date, the Company issued a warrant to purchase up to 200,000 shares of the Company’s Common Stock to Robert E. Dolan, Chief Financial Officer of the Company, in exchange for $2,000. Both warrants are exercisable currently through December 21, 2017. |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
The Company currently has no operating businesses and is actively 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 to $100,000 per year.
Results of Operations
Three Months Ended September 30, 2016 and 2015
For the three months ended September 30, 2016, the Company incurred $11,230 of administrative expenses, a decrease of $1,445 from the $12,675 of administrative expenses for the three months ended September 30, 2015. The decrease was essentially due to lower legal costs in 2016 for acquisition projects.
During the third quarter of 2016, the Company earned $44 from its investment in a United States Treasury money market fund. No amounts were earned during the third quarter of 2015 due to lack of earnings by the fund.
Nine Months Ended September 30, 2016 and 2015
For the nine months ended September 30, 2016, the Company incurred $47,421 of administrative expenses, a decrease of $3,419 from the $50,840 of administrative expenses for the nine months ended September 30, 2015. The decrease was essentially due to lower legal costs in 2016 for acquisition projects and lower costs for making the Company’s regulatory filings in 2016.
During the nine months ended September 30, 2016, the Company earned $144 from its investment in a United States Treasury money market fund. No amounts were earned during the nine months ended September 30, 2015 due to lack of earnings by the fund.
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Liquidity and Capital Resources
As of September 30, 2016, the Company’s principal assets consisted of cash and cash equivalents of $67,682.
The Company has adopted a growth strategy to acquire US-based businesses of an appropriate type and size. The execution of such a strategy may require the Company to obtain significantly more financial resources than it currently possesses. Those resources could take the form of debt and equity offerings, or potentially a hybrid instrument. There is no assurance that the Company can obtain such financial resources to successfully implement this strategy.
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. This Charter Amendment gives the Company greater flexibility in considering and planning for future corporate needs, including, but not limited to, possible future capital raising activities, potential strategic transactions, including mergers, acquisitions, and business combinations, as well as other general corporate transactions. Such transactions may be undertaken with affiliates of the Company or unaffiliated third parties. The Board believes that additional authorized shares of common stock will enable the Company to take timely advantage of market conditions and favorable financing and acquisition opportunities that become available.
The Company has no current plan, commitment, arrangement, understanding or agreement regarding the issuance of the additional shares of common stock that will result from the Company’s adoption of this Charter Amendment.
The Company has not yet filed the Amended Certificate of Incorporation with its state of incorporation, Delaware.
Off Balance Sheet Arrangements
None.
Item 3. Quantitative and Qualitative Analysis of Market Risk
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.
Item 4. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
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
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.
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PART II - OTHER INFORMATION
| Item 6. | Exhibits. | ||
| 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. | ||
| EX-101.INS | XBRL INSTANCE DOCUMENT | ||
| EX-101.SCH | XBRL TAXONOMY EXTENSION SCHEMA | ||
| EX-101.PRE | XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE | ||
| EX-101.LAB | XBRL TAXONOMY LABEL LINKBASE | ||
| EX-101.CAL | XBRL TAXONOMY EXTENSION CALCULATION | ||
| EX-101.DEF | XBRL TAXONOMY EXTENSION DEFINITION LINKBASE | ||
| * | 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 |
| ROBERT E. DOLAN | |
| Chief Financial Officer |
November 2, 2016
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