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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 March 31, 2008
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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 April 30, 2008
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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
March 31, 2008, December 31, 2007 and March 31, 2007
Condensed Statements of Operations for the
Three Months Ended March 31, 2008 and 2007
Condensed Statements of Cash Flows for the
Three Months Ended March 31, 2008 and 2007
Notes to Condensed Financial
Statements as of March 31, 2008
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Morgan Group Holding Co.
Condensed Balance Sheets
(Unaudited)
(Dollars in thousands)
March 31, December 31, March 31,
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2008 2007 2007
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ASSETS
Current assets:
Cash and cash equivalents $ 444 $ 440 $ 428
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Total curent assets 444 440 428
Net assets of The Morgan Group, Inc. -- - - --
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Total assets $ 444 $ 440 $ 428
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LIABILITIES AND SHAREHOLDERS' EQUITY
Accrued Liabilities $ 22 $ -- $ --
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Total current liabilities 22 -- --
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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 30 30
Additional paid-in-capital 5,612 5,612 5,612
Accumulated deficit (5,220) (5,202) (5,214)
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Shareholders' equity 422 440 428
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Total liabilities and shareholders'
equity $ 444 $ 440 $ 428
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See accompanying notes to condensed financial statements
3
Morgan Group Holding Co.
Condensed Statements of Operations
(Unaudited)
(Dollars and shares in thousands, except per share amounts)
Three Months Ended
March 31,
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2008 2007
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Administrative expenses $ (22) $ (1)
Investment income 4 5
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Net (loss) profit $ (18) $ 4
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Basic and diluted net (loss) profit per share $ (0.01) $ 0.00
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Weighted average shares outstanding 3,055 3,055
See accompanying notes to condensed financial statements
4
Morgan Group Holding Co.
Condensed Statements of Cash Flows
(Unaudited)
(Dollars in thousands)
Three Months Ended
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March 31,
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2007 2007
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Cash Flows from Operating activities:
Interest received $ 4 $ 5
Cash paid to suppliers -- (1)
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Net cash provided by operating activities 4 4
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Cash Flow from Investing Activities -- --
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Cash Flow from Financing Activities -- --
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Net increase in cash 4 4
Cash, Beginning of Period 440 423
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Cash, End of Period $ 444 $ 427
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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 December 18, 2001, LICT'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, LICT spun off 2,820,051 shares of Holding common stock
through a pro rata distribution ("Spin-Off") to its stockholders. LICT
retained 235,294 shares of Holding common stock to be distributed in
connection with the potential conversion of a convertible note that had
been issued by LICT. Such note was repurchased by LICT in 2002 and LICT
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.
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.
Management believed that it was unlikely that the Company would realize any
value from its equity ownership in Morgan and, given the fact that the
Company had no obligation or intention to fund any of Morgan's liabilities,
its investment in Morgan was believed to have no value after its
liquidation. Because the liquidation of Morgan was under the control of the
bankruptcy court, the Company believed it had relinquished control of
Morgan and, accordingly, deconsolidated its ownership interest Morgan in
its financial statements during 2002. On March 31, 2008, the bankruptcy
proceeding was concluded and the bankruptcy court dismissed the proceeding.
Morgan 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 Articles 10 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 months
ended March 31, 2008 are not necessarily indicative of the results that may
be expected for the year ending December 31, 2008. 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 September 2006, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 157, "Fair Value Measurements." This Statement defines fair value,
establishes a framework for measuring fair value in accordance with GAAP,
and expands disclosures about fair value measurements. The Statement
clarifies the rule that fair value be based on the assumptions that market
participants would use when pricing an asset or liability, and establishes
a fair value hierarchy that prioritizes the framework and information used
to develop those assumptions. FASB Staff Position 157-2 delays the
effective date of SFAS No. 157 to allow the FASB Board additional time to
consider the effect of various implementation issues that have arisen, or
that may arise, from the application of SFAS No. 157. Under FASB Staff
Position 157-2, the Company is required to adopt the provisions of SFAS No.
157 for financial statements issued for fiscal years beginning after
November 15, 2008. The adoption of SFAS No. 157 is not expected to have a
material impact on the Company's consolidated financial statements.
6
In December 2007, the FASB issued SFAS No. 141(R), "Business Combinations."
SFAS No. 141(R) will require the acquirer in a business combination to
recognize the assets acquired, the liabilities assumed, and any
noncontrolling interest in the acquiree at the acquisition date, measured
at their fair values as of that date, with acquisition-related costs
recognized separately from the acquisition. SFAS No. 141(R) applies
prospectively to business combinations occurring on or after the beginning
of the first annual reporting period beginning on or after December 15,
2008.
In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests
in Consolidated Financial Statements." SFAS No. 160 establishes new
accounting and reporting standards for the noncontrolling interest in a
subsidiary and for the deconsolidation of a subsidiary. SFAS No. 160 is
effective for fiscal years beginning on or after December 15, 2008.
Note 2. Net assets of Morgan Group
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At March 31, 2008, December 31, 2007, and March 31, 2007, the estimated
value of Morgan's assets in liquidation was insufficient to satisfy its
estimated obligations.
Note 3. Income Taxes
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The Company is a "C" coporation 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 4. Commitments and Contingencies
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Holding has not guaranteed any of the obligations of Morgan and it has no
further commitment or obligation to fund any creditors.
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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 March 31, 2008, the Company incurred about $22,000 of
expenses as compared to less than $1,000 of expenses in the three months ended
March 31, 2007. During the three months ended March 31, 2008, the Company
accrued $18,000 for the audit fees and its 2007 and 2006 financial statements.
No audit expenses were recorded during the previous year. Also, during 2008
$3,000 of legal expenses were incurred.
Investment income was approximately $4,000 in the three months ended March 31,
2008 as compared to $5,000 in the three months ended March 31, 2007, as a result
of the Company's investment in a United States Treasury money market fund. Lower
interest rates caused the decrease in 2008.
Liquidity and Capital Resources
As of March 31, 2008, the Company's only assets consisted of approximately
$440,000 in cash and a capital loss carry forward of about $4 million which it
expects will 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 March 31, 2008, 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
In September 2006, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 157, "Fair Value Measurements." This Statement defines fair value,
establishes a framework for measuring fair value in accordance with GAAP, and
expands disclosures about fair value measurements. The Statement clarifies the
rule that fair value be based on the assumptions that market participants would
use when pricing an asset or liability, and establishes a fair value hierarchy
that prioritizes the framework and information used to develop those
assumptions. FASB Staff Position 157-2 delays the effective date of SFAS No. 157
to allow the FASB Board additional time to consider the effect of various
implementation issues that have arisen, or that may arise, from the application
of SFAS No. 157. Under FASB Staff Position 157-2, the Company is required to
adopt the provisions of SFAS No. 157 for financial statements issued for fiscal
years beginning after November 15, 2008. The adoption of SFAS No. 157 is not
expected to have a material impact on the Company's consolidated financial
statements.
In December 2007, the FASB issued SFAS No. 141(R), "Business Combinations." SFAS
No. 141(R) will require the acquirer in a business combination to recognize the
assets acquired, the liabilities assumed, and any noncontrolling interest in the
acquiree at the acquisition date, measured at their fair values as of that date,
with acquisition-related costs recognized separately from the acquisition. SFAS
No. 141(R) applies prospectively to business combinations occurring on or after
the beginning of the first annual reporting period beginning on or after
December 15, 2008.
8
In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in
Consolidated Financial Statements." SFAS No. 160 establishes new accounting and
reporting standards for the noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary. SFAS No. 160 is effective for fiscal years
beginning on or after December 15, 2008.
None.
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.
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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.
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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
May 12, 2008
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