Morgan Group Holding Co 10-Q for FY2023 Q1
Morgan Group Holding Co (MGHL)
10-Q
2023-05-15
For: 2023-03-31
View Original
Added on
April 06, 2026
About this 10-Q
Morgan Group Holding Co filed this 10-Q on May 15, 2023, covering the quarter ended March 31, 2023 (FY2023 Q1).
Headline figures
Quarter ended March 31, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $497.2K
- down 2.3% from $508.79K a year earlier
- Net loss
- $276.44K
- compared with a net loss of $347.11K a year earlier
- Diluted EPS
- -$0.46
- compared with -$0.58 a year earlier
UNITED STATES
SECURITIES & EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended March 31, 2023
or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from ___ to ___
Commission File No. 333-73996
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(Exact name of Registrant as specified in its charter)
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(State of other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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(Address of principle executive offices)
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(Zip Code)
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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:
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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®
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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.
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 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. (Check one):
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Large accelerated filer ☐
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Accelerated filer ☐
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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 Section13(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 ☒
Indicate the number of shares outstanding of each of the Registrant’s classes of Common Stock, as of the latest practical date.
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Class
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Outstanding at April 30, 2023
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Common Stock, $0.01 par value
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MORGAN GROUP HOLDING CO. AND SUBSIDIARY
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PART I.
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FINANCIAL INFORMATION
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Page
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Item 1.
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Unaudited Condensed Consolidated Financial Statements
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1
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2
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3
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Item 2.
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12
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Item 3.
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15
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Item 4.
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15
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PART II.
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OTHER INFORMATION *
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Item 1.
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15
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Item 1A.
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15
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Item 6.
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15 | |
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* Items other than those listed above have been omitted because they are not applicable.
MORGAN GROUP HOLDING CO. AND SUBSIDIARY
| As of March 31, | As of December 31, | |||||||
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2023
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2022
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ASSETS
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Cash and cash equivalents
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$
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$
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Receivables from brokers and clearing organizations
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Receivables from affiliates
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Deposits with clearing organizations
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Income taxes receivable (including deferred tax asset of $
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Fixed assets, net of accumulated depreciation of $
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Other assets
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Total assets
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$
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$
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LIABILITIES AND EQUITY
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Compensation payable
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$
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$
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Payable to affiliates
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Income tax payable
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Accrued expenses and other liabilities
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Total liabilities
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Commitments and contingencies (Note J)
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Equity
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Common stock, $
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Additional paid-in capital
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Accumulated deficit
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(
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(
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Total equity
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Total liabilities and equity
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$
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$
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See accompanying notes.
MORGAN GROUP HOLDING CO. AND SUBSIDIARY
UNAUDITED
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Three Months Ended March 31,
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2023
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2022
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Revenues
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Commissions
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$
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$
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Principal transactions
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(
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)
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(
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Dividends and interest
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Other revenues
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Total revenues
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Expenses
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Compensation and related costs
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Clearing charges
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General and administrative
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Occupancy and equipment
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Total expenses
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Loss before income tax benefit
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(
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Income tax benefit
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Net loss
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$
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(
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$
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Net loss per share
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Basic and diluted
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$
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(
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$
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Weighted average shares outstanding:
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Basic and diluted
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See accompanying notes.
MORGAN GROUP HOLDING CO. AND SUBSIDIARY
UNAUDITED
| Additional | ||||||||||||||||||||
| Common | Paid-in | Accumulated | ||||||||||||||||||
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Shares
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Stock
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Capital
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Deficit
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Total
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Balance at December 31, 2022
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$
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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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(
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(
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Balance at March 31, 2023
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| Additional | ||||||||||||||||||||
| Common | Paid-in | Accumulated | ||||||||||||||||||
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Shares
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Stock
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Capital
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Deficit
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Total
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Balance at December 31, 2021
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$
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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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(
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(
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Balance at March 31, 2022
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See accompanying notes.
MORGAN GROUP HOLDING CO. AND SUBSIDIARY
UNAUDITED
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Three
months ended March 31,
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2023
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2022
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Cash flows from operating activities:
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Net loss
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$
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(
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$
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Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
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Depreciation
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(Increase)/decrease in assets:
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Receivables from brokers and clearing organizations
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Receivables from affiliates
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Income taxes receivable
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Other assets
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Increase/(decrease) in liabilities:
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Payable to affiliates
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Income taxes payable
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Compensation payable
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Accrued expenses and other liabilities
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Total adjustments
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Net cash provided by (used in) operating activities
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Net increase (decrease) in cash and cash equivalents and restricted cash
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Cash, cash equivalents, and restricted cash at beginning of period
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Cash, cash equivalents, and restricted cash at end of period
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$
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$
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Reconciliation to cash, cash equivalents, and restricted cash
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Cash and cash equivalents
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$
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$
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Restricted cash: deposits from clearing organizations
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Cash, cash equivalents, and restricted cash
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$
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$
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See accompanying notes.
MORGAN GROUP HOLDING CO. AND SUBSIDIARIES
March 31, 2023
(Unaudited)
Organization and Business
Description
Morgan Group Holding Co. (the
“Company,” “Morgan Group,” or “Morgan”) was incorporated in November 2001 as a Delaware corporation to serve as a holding company which seeks acquisitions as part of its strategic alternatives. Prior to the October 31, 2019 merger with
G.research, LLC (“G.research”), discussed below, Morgan Group had no operating companies.
The Company acquired
G.research from Associated Capital Group, Inc. (“AC”), an affiliate of the Company, on October 31, 2019, in exchange for issuing 500,000
shares of the Company’s common stock to AC (the “Merger”). Accordingly, G.research became a wholly owned subsidiary of the Company. Prior to the transaction, G.research was a wholly-owned subsidiary of Institutional Services holdings,
LLC, which, in turn, was a wholly-owned subsidiary of AC. After the transaction, AC had an 83.3 % ownership interest in the
Company. As a result of this common ownership, the transaction was treated as a combination between entities under common control that led to a change in the reporting entity. The recognized assets and liabilities were transferred at
their carrying amounts at the date of the transaction.
On March 16, 2020, AC’s Board of
Directors approved the spin-off of the Company to AC’s shareholders. Upon execution of the spin-off on August 5, 2020, AC distributed to its shareholders on a pro rata basis the 500,000 shares of Morgan that AC owned.
On May 5, 2020, the Morgan Group
board approved a reverse stock split of the issued and outstanding shares of their common stock, par value $0.01 per share, in
a ratio of 1 ‑for‑100 that was effective on June 10, 2020.
G.research is a broker-dealer
registered with the Securities and Exchange Commission (the “SEC”) and is regulated by the Financial Industry Regulatory Authority (“FINRA”).
The Company generates brokerage
commission revenues from securities transactions executed on an agency basis on behalf of institutional clients and mutual funds, private wealth management clients, and retail customers of affiliated companies. The Company may generate
revenue from syndicated underwriting activities. It primarily participates in the offerings of certain closed-end funds advised by Gabelli Funds, LLC, a wholly-owned subsidiary of GAMCO Investors, Inc. (“GBL”), an affiliate. The Company
also earns investment income generated from its proprietary trading activities.
The Company acts as an introducing
broker, and all securities transactions for the Company and its customers are cleared through and carried by three New York
Stock Exchange (“NYSE”) member firms on a fully disclosed basis. The Company has Proprietary Accounts of Introducing Brokers (“PAIB”) agreements with these firms. Accordingly, open customer transactions are not reflected in the
accompanying Condensed Consolidated Statement of Financial Condition. The Company is exposed to credit losses on these open transactions in the event of nonperformance by its customers, pursuant to conditions of its clearing agreements
with its clearing brokers. This exposure is mitigated by the clearing brokers’ policy of monitoring the collateral and credit of the counterparties until the transaction is completed.
The Company’s principal market is
in the United States (“U.S”).
1.
Significant Accounting Policies
Basis of Presentation
The unaudited interim condensed
consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, the unaudited interim condensed consolidated financial statements
reflect all adjustments, which are of a normal recurring nature, necessary for the fair presentation of financial position, results of operations, and cash flows of Morgan for the interim periods presented and are not necessarily
indicative of a full year’s results.
The interim condensed consolidated
financial statements include the accounts of the Company and its wholly-owned subsidiary, G.research. Intercompany accounts and transactions have been eliminated.
These interim condensed
consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2022.
Use of Estimates
The Company’s consolidated financial statements are prepared in
accordance with U.S. GAAP, which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses during that reporting period. Actual results could differ from those estimates.
2. Revenue from Contracts with Customers
The Company records revenue from contracts with customers in accordance
with Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (“Topic 606”). Under Topic 606, the Company must identify the contract with a customer, identify the
performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract, and recognize revenue when the Company satisfies a performance obligation.
Significant judgments that affect the amounts and timing of revenue
recognition:
The Company’s analysis of the timing of revenue recognition of each
revenue stream is based on the provisions of each respective contract. Performance obligations could, however, change from time to time if and when existing contracts are modified or new contracts are entered into. These changes could
potentially affect the timing of satisfaction of performance obligations, the determination of the transaction price, and the allocation of the price to performance obligations. In the case of the revenue streams discussed below, the
performance obligation is satisfied either at a point in time or over time. The judgments outlined below, where the determination as to these factors is discussed in detail, are continually reviewed and monitored by the Company when new
contracts or contract modifications occur. Transaction price is in all instances formulaic and not subject to significant (or any) judgment at the current time.
The Company’s assessment of the recognition of these revenues is as
follows:
Revenue from contracts with customers includes commissions, fees earned
from affiliated entities pursuant to research services agreements, underwriting fees, and sales manager fees.
Commissions
Brokerage commissions. Acting as agent, the Company buys and sells
securities on behalf of its customers. Commissions are charged on the execution of these securities transactions made on behalf of client accounts and are negotiated. The Company recognizes commission revenue when the related securities
transactions are executed on the trade date. The Company believes that the performance obligation is satisfied on the trade date because that is when the underlying financial instrument or purchaser is identified, the pricing is agreed
upon, and the risks and rewards of ownership have been transferred to/from the customer. Commissions earned are typically collected from the clearing brokers utilized by the Company on a daily or weekly basis.
Hard dollar payments. The Company provides research services to
unrelated parties, for which direct payment is received. The company may, or may not, have contracts for such services. Where a contract for such services is in place, the contractual fee for the period is recognized ratably over the
contract period, which is considered the period over which the Company satisfies its performance obligation. For payments where no research services contract exists, revenue is not recognized until agreement is reached with the client at
which time the performance obligation is considered to have been met and revenue is recognized.
Commission revenues are impacted by the perceived value of the research
services provided to clients, the volume of securities transactions, and the acquisition or loss of new client relationships.
Fees earned from affiliated entities pursuant to
research services agreements
The Company receives direct payments for research services provided to
related parties pursuant to contracts. The contractual fee for the period is fixed and recognized ratably over the contract period, typically a calendar year, which is considered the period over which the Company satisfies its performance
obligation. Payments for contracts with affiliated parties are collected monthly.
Underwriting fees
Underwriting fees. The
Company acts as underwriter in an agent capacity. Revenues are earned from fees arising from these offerings and the terms are set forth in contracts between the underwriters and the issuer. The Company’s underwriting revenue is
considered to be conditional revenue because it is subject to reduction to zero once the offsetting syndicate expenses have been quantified by the syndicate manager (i.e., lead underwriter) and allocated to each underwriter in proportion
to their participation in the offering. Revenue recognition is therefore delayed until it is probable that a significant reversal in the amount of revenue recognized will not occur. That is, it is recognized only when uncertainty
associated with the syndicate expenses is subsequently resolved and final settlement of syndicate accounts is affected by the syndicate manager. Payment is typically received from the syndicate manager within ninety days after settlement date.
Selling concessions. The Company participates as a member of the selling group of underwritten equity offerings and receives compensation based on the difference between what its customers pay for the securities sold to its
institutional clients and what the issuer receives. The terms of the selling concessions are set forth in contracts between the Company and the underwriter. Revenue is recognized on the trade date (the date on which the Company purchases
the securities from the issuer) for the portion the Company is contracted to buy. The Company believes that the trade date is the appropriate point in time to recognize revenue for securities underwriting transactions as there are no
significant actions the Company needs to take subsequent to this date, and the issuer obtains the control and benefit of the capital markets offering at this point. Selling concessions earned are typically collected from the clearing
brokers utilized by the Company on a daily or weekly basis.
Sales manager fees
The Company participates as sales manager of at-the-market offerings of
certain affiliated closed-end funds and receives a tiered percentage of proceeds as stipulated in agreements between the Company, the funds and the funds’ investment adviser. The Company recognizes sales manager fees upon sale of the
related closed-end funds. Sales manager fees earned are fixed and typically collected from the clearing brokers utilized by the Company on a daily or weekly basis.
Revenue Disaggregated
Total revenues from contracts with customers by type were as follows for
the three months ended March 31, 2023 and 2022:
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Three months ended March 31,
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2023
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2022
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Commissions
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$
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$
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Hard dollar payments
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| Total | $ |
$ |
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3. Related
Party Transactions
At March 31, 2023 and December 31, 2022, the Company had an investment of $2,269,032 and $2,259,801 , respectively, in The Gabelli U.S. Treasury Money Market Fund advised by Gabelli Funds, LLC, which is an affiliate of the Company.
The amount is recorded in cash and cash equivalents in the Condensed Consolidated Statements of Financial Condition. Income earned from this investment totaled $24,291 and $209 for the three months ended March 31,
2023 and 2022, respectively, and is included in dividends and interest revenues in the Condensed Consolidated Statements of Operations.
For the three months ended March 31, 2023 and 2022, the Company earned $329,070 and $274,895 , or approximately 70 %
and 55 %, respectively, of its commission revenue from transactions executed on behalf of funds advised by Gabelli Funds,
LLC. (“Gabelli Funds”) and private wealth management clients advised by GAMCO Asset Management Inc., (“GAMCO Asset”), each affiliates of the Company.
The Company’s rent is currently
being accounted for on a month-to-month basis. GAMI allocates this expense to the Company based on the percentage of square footage occupied by the Company’s employees (including pro rata allocation of common space). Pursuant to the
arrangement, GAMI and its affiliates shall pay a monthly fixed lease amount for the twelve month period. For the three
months ended March 31, 2023 and 2022, the Company paid $14,053
and $14,654 , respectively, under the rent arrangement. These amounts are included within occupancy and equipment expenses
on the consolidated statements of operations.
4. Fair Value
The carrying amounts of all
financial instruments in the Condensed Consolidated Statements of Financial Condition approximate their fair values.
The Company’s financial
instruments have been categorized based upon a fair value hierarchy:
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Level
1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 1 assets include cash equivalents.
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Level
2 inputs utilize inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active
markets and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals.
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| - |
Level
3 inputs are unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. These assets include infrequently traded common stocks.
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The following tables present information about the Company’s assets and liabilities by major category measured at fair value on a recurring basis as of March 31, 2023 and December 31, 2022 and indicates the fair
value hierarchy of the valuation techniques utilized by the Company to determine such fair value:
Assets Measured
at Fair Value on a Recurring Basis as of March 31,2023:
| March 31, 2023 |
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| Quoted Prices in Active | Significant Other | Significant | ||||||||||||||
| Markets for Identical | Observable | Unobservable | ||||||||||||||
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Assets
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Assets (Level 1)
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Inputs (Level 2)
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Inputs (Level 3)
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Total
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Cash equivalents
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$
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$
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$
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$
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Total assets at fair value
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$
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$
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$
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$
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There were no transfers between
any levels during the quarter ended March 31, 2023.
Assets Measured at Fair Value on a
Recurring Basis as of December 31, 2022:
| December 31, 2022 |
||||||||||||||||
| Quoted Prices in Active | Significant Other | Significant | ||||||||||||||
| Markets for Identical | Observable | Unobservable | ||||||||||||||
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Assets
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Assets (Level 1)
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Inputs (Level 2)
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Inputs (Level 3)
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Total
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Cash equivalents
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$
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$
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$
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$
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Total assets at fair value
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$
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$
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$
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$
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There were
no transfers between any levels during the three months ended March 31, 2023 and the year ended December 31, 2022.
Cash
equivalents primarily consist of an affiliated money market mutual fund which is invested solely in U.S. Treasuries and valued based on the net asset value of the fund.
Financial assets disclosed but not
carried at fair value
The carrying
value of other financial assets and liabilities approximates their fair value based on the short term nature of these items.
5. Retirement
Plan
The Company maintains its own incentive savings plan (the “Plan”) covering substantially all employees. Company contributions to the Plan are determined annually by Company Board of
Directors but may not exceed the amount permitted as a deductible expense under the Internal Revenue Code. There were no
6. Income Taxes
The effective tax rate for the three months ended March 31, 2023 and 2022 was (0.9 )%
and 0 % respectively. For the three months ended March 31, 2023 the impact to the effective tax rate was related to current
state taxes and the change in the deferred income taxes offset by an increase in the federal and state valuation allowances.
7. Earnings per Share
Basic earnings
per share is computed by dividing net income / (loss) attributable to shareholders by the weighted average number of shares outstanding during the period. There were no
The computations of basic and diluted net loss per share
are as follows:
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Three Months Ended March 31,
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2023
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2022
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|||||||
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Basic and diluted:
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Net loss attributable to shareholders
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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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Weighted average shares outstanding
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||||||
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Basic and diluted net loss per share
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$
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(
|
)
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$
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(
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)
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||
8. Equity
In conjunction with the Merger on
October 31, 2019, the Company issued 50,000,000 shares of common stock to AC. The common stock, additional paid in capital,
earnings per share, and accumulated deficit amounts in these consolidated financial statements for the period prior to the Merger have been restated to reflect the recapitalization in accordance with the shares issued as a result of the
Merger.
See the Organization and Business
Description Note above for detail.
9. Guarantees,
Contingencies, and Commitments
The Company has agreed to
indemnify its clearing brokers for losses they may sustain from the customer accounts that trade on margin introduced by the Company. At March 31, 2023 and December 31, 2022, the total amount of customer balances subject to
indemnification (i.e., unsecured margin debits) was immaterial. The Company also has entered into arrangements with various other third parties, many of which provide for indemnification of the third parties against losses, costs, claims,
and liabilities arising from the performance of the Company’s obligations under the agreements. The Company has had no claims or payments pursuant to these or prior agreements, and management believes the likelihood of a claim being made
is remote, and therefore, an accrual has not been made in the consolidated financial statements.
From time to time, the Company is
named in legal actions and proceedings. These actions may seek substantial or indeterminate compensatory as well as punitive damages or injunctive relief. The Company is also subject to governmental or regulatory examinations or
investigations. The examinations or investigations could result in adverse judgments, settlements, fines, injunctions, restitutions, or other relief. The Company cannot predict the ultimate outcome of such matters. The consolidated
financial statements include the necessary provisions for losses that the Company believes are probable and estimable, if any. Furthermore, the Company evaluates whether losses exist which may be reasonably possible and, if material,
makes the necessary disclosures. Such amounts, both those that are probable and those that are reasonably possible, are not considered material to the Company’s financial condition, operations, or cash flows.
10. Net Capital
Requirements
As a registered broker-dealer,
G.research is subject to the SEC Uniform Net Capital Rule 15c3-1 (the “Rule”), which specifies, among other requirements, minimum net capital requirements for registered broker-dealers. G.research computes its net capital under the
alternative method as permitted by the Rule, which requires that minimum net capital be the greater of $250,000 or 2% of the aggregate debit items in the reserve formula for those broker-dealers subject to Rule 15c3-3. G.research is
exempt from Rule 15c3-3 pursuant to paragraph (k)(2)(ii) of that rule which exempts all customer transactions cleared through another broker-dealer on a fully disclosed basis. In addition, our assets at the clearing broker-dealer are
treated as allowable assets for net capital purposes as we have in place PAIB agreements pursuant to Rule 15c3-3. These requirements also provide that equity capital may not be withdrawn, advances to affiliates may not be made, or cash
dividends paid if certain minimum net capital requirements are not met. G.research had net capital, as defined, of $1,702,549
and $1,670,151 exceeding the required amount of $250,000 by $1,452,549 and $1,420,151 at March 31, 2023 and December 31, 2022,
respectively.
11. Subsequent
Events
The Company has evaluated
subsequent events for adjustment to or disclosure through May 15, 2023, the date of this report and the Company has not identified any subsequent events not otherwise reported in these financial statements or the notes thereto, that
required recognition or additional disclosures in the financial statements.
Unless indicated otherwise, or the context otherwise requires, references in this report to the “Company,” “Morgan Group,” “Morgan,” “we,” “us,” and “our” or similar
terms are to Morgan Group Holding Co. and its subsidiary.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Our disclosure and analysis in this Form 10-Q contains some forward-looking statements. Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements because they do not relate
strictly to historical or current facts. They use words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “will,” “should,” “may,” and other words and terms of similar meaning. They also appear in any discussion
of future operating or financial performance. In particular, these include statements relating to future actions, future performance of our products, expenses, the outcome of any legal proceedings, and financial results. Although we believe that
we are basing our expectations and beliefs on reasonable assumptions within the bounds of what we currently know about our business and operations, there can be no assurance that our actual results will not differ materially from what we expect
or believe. We are providing these statements as permitted by the Private Litigation Reform Act of 1995. We do not undertake to update publicly any forward-looking statements if we subsequently learn that we are unlikely to achieve our
expectations or if we receive any additional information relating to the subject matters of our forward-looking statements.
OVERVIEW
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto included
in Part I, Item 1 of this Form 10-Q. This discussion contains forward-looking statements and involves numerous risks and uncertainties. Our actual results could differ materially from those anticipated by such
forward-looking statements as discussed under “Cautionary Statement Regarding Forward-Looking Statements” appearing elsewhere in this Form 10-Q.
Morgan Group (OTC Pink®: MGHL), through G.research, acts as an underwriter and provides institutional research services. Institutional research services revenues consist of brokerage commissions derived from
securities transactions executed on an agency basis or direct payments from institutional clients as well as underwriting profits, selling concessions and management fees associated with underwriting activities. Commission revenues vary
directly with the perceived value of the research provided, as well as account activity and new account generation.
RESULTS OF OPERATIONS
The following table (in thousands, except per share data) and discussion of our results of operations are based upon data derived from the Condensed Consolidated Statements of Income contained in our condensed consolidated financial statements
and should be read in conjunction with those statements included in Part I, Item 1 of this Form 10-Q:
|
Three Months Ended March 31,
|
||||||||
|
2023
|
2022
|
|||||||
|
Revenues
|
||||||||
|
Commissions
|
$
|
467
|
$
|
504
|
||||
|
Principal transactions
|
(2
|
)
|
(0
|
)
|
||||
|
Dividends and interest
|
31
|
5
|
||||||
|
Other revenues
|
1
|
0
|
||||||
|
Total revenues
|
497
|
509
|
||||||
|
Expenses
|
||||||||
|
Compensation and related costs
|
291
|
328
|
||||||
|
Clearing charges
|
217
|
230
|
||||||
|
General and administrative
|
221
|
225
|
||||||
|
Occupancy and equipment
|
45
|
73
|
||||||
|
Total expenses
|
774
|
856
|
||||||
|
Loss before income tax benefit
|
(276
|
)
|
(347
|
)
|
||||
|
Income tax benefit
|
-
|
-
|
||||||
|
Net loss
|
$
|
(276
|
)
|
$
|
(347
|
)
|
||
|
Net loss per share
|
||||||||
|
Basic and diluted
|
$
|
(0.46
|
)
|
$
|
(0.58
|
)
|
||
Three Months Ended March 31, 2023 as Compared to the Three Months Ended March 31, 2022
Revenues
Institutional research services revenues by revenue component, excluding principal transactions and dividends and interest, were as follows (dollars in thousands):
|
|
Three Months Ended March 31,
|
Increase (Decrease)
|
||||||||||||||
|
|
2023
|
2022
|
$
|
%
|
||||||||||||
|
Commissions
|
$
|
442
|
$
|
460
|
$
|
(18
|
)
|
(3.9%
|
)
|
|||||||
|
Hard dollar payments
|
25
|
44
|
(19
|
)
|
(42.5%
|
)
|
||||||||||
|
Total
|
$
|
467
|
$
|
504
|
$
|
(36
|
)
|
(7.2%
|
)
|
|||||||
Institutional research service revenues were $.5 million for three months ended March 31, 2023 and March 31, 2022, respectively. For the three months ended March 31, 2023 and 2022, respectively, G.research earned $0.3
million and $0.3 million, or approximately 70% and 55%, of its commission revenue from transactions executed on behalf of funds advised by Gabelli Funds, LLC (“Gabelli Funds”) and clients advised by GAMCO Asset Management Inc. (“GAMCO Asset”).
Principal Transactions
During the three months ended March 31, 2023 and 2022, net losses from principal transactions were negligible.
Interest and dividend income was $31 thousand for the three months ended March 31, 2023 an increase of $26 thousand from $5 thousand for the three months ended March 31, 2022 due to a sharp increase in short-term
interest rates during the same period.
Expenses
Total expenses were $.8 million for the three months ended March 31, 2023, a decrease of $0.1 million, or 9.6%, from $.9 million in the 2022 period. The decrease results primarily from lower compensation costs and a
reduction of expenses across all categories.
Compensation costs, which includes salaries, bonuses, and benefits, were $0.3 million for the three months ended March 31, 2023 and March 31, 2022, respectively.
Income Tax Benefit
We recorded an income tax provision of $0.0 million and $0 for the three months ended March 31, 2023 and 2022, respectively. The effective tax rate was (0.9)% and 0% for the periods ended March 31, 2023 and 2022,
respectively.
Net Loss
Net loss for the three months ended March 31, 2023 was $0.3 million versus $0.3 million for the three months ended March 31, 2022.
LIQUIDITY AND CAPITAL RESOURCES
Our principal assets are highly liquid in nature and consist of cash and cash equivalents, comprised primarily of a 100% U.S. Treasury money market fund, The Gabelli U.S. Treasury Money Market Fund, advised by
Gabelli Funds, LLC, which is an affiliate of the Company. Summary cash flow data for the first three months of 2023 and 2022 was as follows (in thousands):
|
Three Months Ended March 31,
|
||||||||
|
2023
|
2022
|
|||||||
|
Cash flows provided by (used in):
|
||||||||
|
Operating activities
|
$
|
65
|
$
|
36
|
||||
|
Net increase (decrease) in cash and cash equivalents
|
65
|
36
|
||||||
|
Cash and cash equivalents at beginning of period
|
2,635
|
3,239
|
||||||
|
Cash and cash equivalents at end of period
|
$
|
2,700
|
$
|
3,275
|
||||
Net cash provided by operating activities was $0.07 million for the three months ended March 31, 2023, resulting from a net loss of $0.3 million and net increase in operating liabilities of $0.1 million offset by and a
decrease in operating assets of $0.3 million. Net cash provided by operating activities was less than $0.1 million for the three months ended March 31, 2022, resulting from a net loss of $0.3 million less a net decrease in operating liabilities
of $0.1 million offset by a net decrease in operating assets of $0.5 million.
Critical Accounting Policies
The preparation of the condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting
periods presented. Actual results could differ significantly from those estimates. See Note B in Part II, Item 8, Financial Statements and Supplementary Data, and the Company’s Critical Accounting
Policies in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in Morgan Group’s 2022 annual report on Form 10-K filed with the SEC on March 31, 2023
for details on Critical Accounting Policies.
Smaller reporting companies are not required to provide the information required by this item.
The Company maintains a system of disclosure controls and procedures that is designed to provide reasonable assurance that information, which is required to be timely disclosed, is recorded, processed, summarized, and
reported to management within the time periods specified in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. The Company’s principal executive officer and principal financial officer, after evaluating the effectiveness of the Company’s
disclosure controls and procedures (as defined in the Exchange Act) as of the end of the period covered by this report, have concluded that the Company’s disclosure controls and procedures are effective to provide reasonable assurance that
information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial
officer, as appropriate, to allow timely decisions regarding required disclosure and are effective to provide reasonable assurance that such information is recorded, processed, summarized and reported within the time periods specified in the
SEC’s rules and forms.
There have been no changes in our internal control over financial reporting, as defined by Rule 13a-15(f) that occurred during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
PART II: OTHER INFORMATION
From time to time, the Company may be named in legal actions and proceedings. These actions may seek substantial or indeterminate compensatory as well as punitive damages or injunctive relief. The Company is also subject to governmental or
regulatory examinations or investigations. The examinations or investigations could result in adverse judgments, settlements, fines, injunctions, restitutions or other relief. For any such matters, the condensed consolidated financial statements
include the necessary provisions for losses that the Company believes are probable and estimable. Furthermore, the Company evaluates whether there exist losses which may be reasonably possible and will, if material, make the necessary
disclosures. However, management believes such amounts, both those that are probable and those that are reasonably possible, are not material to the Company’s financial condition, results of operations, or cash flows at March 31, 2023. See also
Note 9, Guarantees, Contingencies, and Commitments, to the condensed consolidated financial statements in Part I, Item I of this Form 10-Q.
Smaller reporting companies are not required to provide the information required by this item.
|
Certification of CEO pursuant to Rule 13a-14(a).
|
|
| 31.2 | Certification of CAO pursuant to Rule 13a-14(a). |
| 32.1 | Certification of CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| 32.2 | Certification of CAO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002. |
| 101.INS | XBRL Instance Document |
| 101.SCH | XBRL Taxonomy Extension Schema Document |
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
SIGNATURE
Pursuant to the requirements of the Securities 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.
|
|
(Registrant)
|
|
|
|
By: /s/ Joseph L. Fernandez
|
|
Name: Joseph L. Fernandez
|
|
Title: Executive Vice President - Finance
|
|
Date: May 15, 2023
|
16
|
|
|
Certification
|
|
|
|
I, Vincent Amabile, Jr., certify that:
|
| 1. |
I have reviewed this quarterly report on Form 10-Q of Morgan Group Holding Co.;
|
| 2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
| 3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
| 4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
| a) |
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
| b) |
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
| c) |
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation; and
|
| d) |
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s
fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
| 5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the
audit committee of registrant’s board of directors (or persons performing the equivalent functions):
|
| a) |
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the
registrant’s ability to record, process, summarize and report financial data; and
|
| b) |
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
By:
|
/s/ Vincent Amabile, Jr.
|
|
|
|
Vincent Amabile, Jr.
|
|
|
|
Chief Executive Officer
(Principal Executive Officer)
|
|
|
|
|
|
|
Date:
|
May 15, 2023
|
|
|
Exhibit 31.2
|
|
|
|
Certification
|
|
|
|
I, Joseph L Fernandez, certify that:
|
| 1. |
I have reviewed this quarterly report on Form 10-Q of Morgan Group Holding Co.;
|
| 2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
| 3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
| 4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
| a) |
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
| b) |
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
| c) |
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation; and
|
| d) |
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s
fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
| 5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the
audit committee of registrant’s board of directors (or persons performing the equivalent functions):
|
| a) |
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the
registrant’s ability to record, process, summarize and report financial data; and
|
| b) |
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
By:
|
/s/ Joseph L Fernandez
|
|
|
|
Joseph L Fernandez
|
|
|
|
Executive Vice President – Finance
(Principal Financial Officer)
|
|
|
|
|
|
|
Date:
|
May 15, 2023
|
|
Exhibit 32.1
Certification of CEO Pursuant to
18 U.S.C. Section 1350,
as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-Q of Morgan Group Holding Co. (the
“Company”) for the quarterly period ended March 31, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Vincent Amabile, Jr.,
as Chief Executive Officer (Principal Executive Officer) of the Company, hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:
| (1) |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
| (2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ Vincent Amabile, Jr.
Vincent Amabile, Jr.
Chief Executive Officer
(Principal Executive Officer)
May 15, 2023
This certification accompanies the Report pursuant to § 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of
2002, be deemed filed by the Company for purposes of §18 of the Securities Exchange Act of 1934, as amended.
Exhibit 32.2
Certification of PFO Pursuant to
18 U.S.C. Section 1350,
as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-Q of Morgan Group Holding Co. (the “Company”) for the quarterly period ended March 31, 2023 as filed with the Securities
and Exchange Commission on the date hereof (the “Report”), Joseph L Fernandez, as Executive Vice President – Finance (Principal Financial Officer) of the Company,
hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:
| (1) |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
| (2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ Joseph L Fernandez
Joseph L Fernandez
Executive Vice President – Finance
(Principal Financial Officer)
May 15, 2023
This certification accompanies the Report pursuant to § 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of
2002, be deemed filed by the Company for purposes of §18 of the Securities Exchange Act of 1934, as amended.