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 June 30, 2014

 

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 July 30, 2014
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
 
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

2



PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

Unaudited Financial Statements

Condensed Balance Sheets as of
June 30, 2014, December 31, 2013 and June 30, 2013

Condensed Statements of Operations for the
Three and Six Months Ended June 30, 2014 and 2013

Condensed Statements of Cash Flows for the
Six Months Ended June 30, 2014 and 2013

Condensed Statement of Shareholders’ Equity for the
Six Months Ended June 30, 2014

Notes to Condensed Financial
Statements as of June 30, 2014

3



Morgan Group Holding Co.
Condensed Balance Sheets
(Unaudited)

June 30, December 31, June 30,
      2014       2013       2013
ASSETS
Current assets:
       Cash and cash equivalents $211,220 $8,981 $312,164
       Marketable securities -- 275,857 --
       Prepaid expenses 8,068 9,081 6,838
              Total current assets 219,288 293,919 319,002
Equipment – net 899 1,226 1,553
              Total assets $220,187 $295,145 $320,555
 
LIABILITIES
Current liabilities:
       Accrued liabilities $-- $-- $1,958
              Total current liabilities -- -- 1,958
              Total liabilities -- -- 1,958
 
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 (5,585,772) (5,510,814) (5,478,362)
                     Total shareholders' equity 220,187 295,145 318,597
                     Total liabilities and shareholders' equity $220,187 $295,145 $320,555

See accompanying notes to condensed financial statements

4



Morgan Group Holding Co.
Condensed Statements of Operations
(Unaudited)

      Three Months Ended June 30,       Six Months Ended June 30,
2014       2013 2014       2013
Revenues $--   $-- $--   $--
 
Administrative expenses (26,581) (12,050) (74,415) (38,377)
Other income:
       Interest and dividends -- 8 -- 20
       Realized and unrealized loss on  
              marketable securities -- -- (543) --
              Net loss before income taxes (26,581) (12,042) ($74,958) (38,357)
Income taxes -- -- -- --
       Net loss ($26,581) ($12,042) ($74,958) ($38,357)
 
Net loss per share, basic and diluted ($0.01) ($ 0.00) ($0.02) ($0.01)
 
Shares outstanding, basic and diluted 3,359,055 3,359,055 3,359,055 3,359,055

See accompanying notes to condensed financial statements

5



Morgan Group Holding Co.
Condensed Statements of Cash Flows
(Unaudited)

Six Months Ended
June 30,
      2014       2013
Cash Flows from Operating Activities
       Interest received $-- $20
       Cash paid to suppliers (73,075) (53,374)
              Net cash used in operating activities (73,075) (53.354)
 
Cash Flows from Investing Activities
       Proceeds from the sale of marketable securities 275,314 --
              Net cash provided by investing activities 275,314 --
 
Cash Flows from Financing Activities
       Proceeds from issuance of warrants -- 10,000
              Net cash provided by financing activities -- 10,000
Net increase (decrease) in cash and cash equivalents 202,239 (43,354)
       Cash and cash equivalents, beginning of the period 8,981 355,518
       Cash and cash equivalents, end of the period $211,220 $312,164
 
Reconciliation of net loss to net cash used in operating
activities:
                     Net loss ($74,958) ($38,357)
                     Depreciation 327 327
                     Realized losses from the sale of marketable securities 4,781 --
                     Change in unrealized gains from investment in
                            marketable securities (4,238) --
                     Decrease (increase) in prepaid expenses 1,013 (907)
                     Decrease in accrued liabilities -- (14,417)
Net cash used in operating activities ($73,075) ($53,354)
 
Cash paid for interest $-- $--
 
Cash paid for income taxes $-- $--

See accompanying notes to condensed financial statements

6



Morgan Group Holding Co.
Condensed Statement of Shareholders’ Equity
Six Months Ended June 30, 2014

Common Stock Additional
Par Paid in Accumulated
      Shares       Value       Capital       Deficit       Total
Shareholders’ equity,  
       December 31, 2013 3,359,055 $33,591   $5,772,368 ($5,510,814) $295,145
Net loss for six months
       ended June 30, 2014 -- -- - (74,958) (74,958)
Shareholders’ equity, June
       30, 2014 3,359,055 $33,591 $5,772,368 ($5,585,772) $220,187

See accompanying notes to condensed financial statements

7



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 six months ended June 30, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014. 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 June 30, 2014, December 31, 2013 and June 30, 2013 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 $187,725 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. The Company has not yet filed the Amended Certificate of with its state of incorporation, Delaware, to effectuate the authorization.

On December 21, 2012, the Company and Jonathan P. Evans, currently 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 is the closing price of the Common Stock as quoted on the OTC Markets’ inter-dealer quotation service on December 20, 2012. The Options are exercisable at any time and the exercise period expires December 21, 2015. As of June 30, 2014, these are the only options outstanding.

Also 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. As of June 30, 2014, these are the only warrants outstanding.

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 $25,000 to $75,000 per year.

Results of Operations

Three months Ended June 30, 2014 and 2013

For the three months ended June 30, 2014, the Company incurred $26,581 of administrative expenses, an increase of $14,531 from the $12,050 of expenses in the three months ended June 30, 2013, primarily due to cost of the Company’s Annual Meeting of Shareholders in June 2014.

Six months Ended June 30, 2014 and 2013

For the six months ended June 30, 2014, the Company incurred $74,415 of administrative expenses an increase of $36,038 from the $38,377 of expenses in the six months ended June 30, 2013, primarily due (1) activity associated with a possible acquisition evaluation and (2) the cost of the Company’s Annual Meeting of Shareholders in May 2014. Specifically during the first quarter of 2014, the Company incurred $22,500 related to a specific acquisition that it did not proceed with.

The company may from time to time invest in marketable securities that are subject to a publicly disclosed acquisition offer but are trading below the proposed acquisition price. During the six months ended June 30, 2014, the Company recorded $543 of net realized and unrealized losses from this activity; no realized or unrealized gains or losses were recorded during 2013.

Liquidity and Capital Resources

As of June 30, 2014, the Company’s principal assets consisted of cash and cash equivalents of $211,220.

9



The Company has implemented 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 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.

10



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).

11



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
 
August 5, 2014

12