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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2004, or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
For the transition period from ___________ to _______________.
COMMISSION FILE NUMBER: 000-26585
MM COMPANIES, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 54-1811721
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation) Identification No.)
100 N. WILKES -BARRE BLVD, 4TH FLOOR,
WILKES-BARRE, PA 18702
(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code (570) 822-6277
Indicate by check |X| 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 the filing
requirements for the past 90 days. Yes [|X|] No [ ]
Indicate by check |X| whether the registrant is an accelerated filer (as defined
in Rule 12b-2 of the Exchange Act). Yes [ ] No [|X|]
As of August 16, 2004, 3,289,006 shares of the issuer's common stock, par value
$0.01 per share, were outstanding.
Index
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Page
----
PART I-- FINANCIAL INFORMATION
Item 1 Financial Statements
Balance Sheets
as of June 30, 2004 (unaudited) and December 31, 2003..............3
Statements of Operations (unaudited)
for the three and six months ended
June 30, 2004 and June 30, 2003....................................4
Statements of Cash Flows (unaudited)
for the six months ended
June 30, 2004 and June 30, 2003....................................5
Notes to Financial Statements......................................6
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations......................9
Item 3 Quantitative and Qualitative Disclosures
About Market Risk.................................................11
Item 4 Controls and Procedures...........................................11
PART II-- OTHER INFORMATION
Item 1 Legal Proceedings.................................................12
Item 2 Changes in Securities and Use of Proceeds.........................12
Item 3 Defaults upon Senior Securities...................................12
Item 4 Submission of Matters to a Vote of Securities Holders.............12
Item 5 Other Information.................................................12
Item 6 Exhibits and Reports on Form 8-K..................................12
Signatures........................................................13
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
MM COMPANIES, INC.
BALANCE SHEETS
June 30, December 31,
2004 2003
(unaudited)
--------------- ---------------
ASSETS
Current assets:
Cash and cash equivalents $3,717,637 $3,811,826
Precious metals 687,170 687,170
Notes receivable, current portion 78,261 95,652
Prepaid expenses and other current assets 264,050 162,273
--------------- ---------------
Total current assets 4,747,118 4,756,921
Notes receivable, less current portion 115,218 154,348
Investment in available-for-sale securities - 397,125
--------------- ---------------
Total assets $4,862,336 $5,308,394
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $121,672 $74,966
--------------- ---------------
Total current liabilities 121,672 74,966
--------------- ---------------
Commitments and contingencies
Stockholders' equity:
Common stock, $0.01 par value, 25,000,000 shares authorized; 3,358,444
shares issued at June 30, 2004 and December 31, 2003 and 3,289,006
shares outstanding at June 30,
2004 and December 31, 2003 33,585 33,585
Additional paid-in capital 185,457,862 185,457,862
Accumulated other comprehensive income - 189,516
Accumulated deficit (180,659,250) (180,356,002)
Treasury stock, 69,438 shares at cost (91,533) (91,533)
--------------- ---------------
Total stockholders' equity 4,740,664 5,233,428
--------------- ---------------
Total liabilities and stockholders' equity $4,862,336 $5,308,394
=============== ===============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
3
MM COMPANIES, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three months ended Six months ended
June 30, June 30,
-------------------------------------- ---------------------------------
2004 2003 2004 2003
----------------- ----------------- --------------- ---------------
Revenues
$13,723 $8,765 $28,587 $ 16,146
Interest and divided income
Dividend income from cash 190,318
distribution
Gain on sale of precious metals - 15,075 - 325,095
Gain on sale of available-for-
sale securities 300,468 - 300,468 -
----------------- ----------------- --------------- ---------------
314,191 23,840 329,055 531,559
Total revenues
General and administrative expenses 454,466 322,165 632,303 580,912
----------------- ----------------- --------------- ---------------
Net loss available to common
stockholders $(140,275) $(298,325) $(303,248) $(49,353)
Basic and diluted net loss per common
share $ (0.04) $ (0.09) $ (0.09) $ (0.02)
================= ================= =============== ===============
Weighted average shares outstanding 3,289,006 3,288,176 3,289,006 3,284,217
================= ================= =============== ===============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
4
MM COMPANIES INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six months ended
June 30,
----------------------------------
2004 2003
----------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (303,248) $ (49,353)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Gain on sale of available-for-sale securities (300,468) -
Services received in exchange for stock - 12,000
Changes in operating assets and liabilities:
Precious metals - 2,653,775
Prepaid expenses and other current assets (101,777) 913,763
Accounts payable and accrued expenses 46,706 (859,807)
Other current liabilities - (1,911,135)
----------- -----------
Net cash provided by (used in) operating activities (658,787) 759,243
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from return of investment - 1,446,932
Collection on notes receivable 56,521 -
Proceeds from sale of available-for-sale securities 508,077 -
----------- -----------
Net cash provided by investing activities 564,598 1,446,932
----------- -----------
Net increase (decrease) in cash and cash equivalents (94,189) 2,206,175
Cash and cash equivalents at beginning of period 3,811,826 575,454
----------- -----------
Cash and cash equivalents at end of period $ 3,717,637 $ 2,781,629
=========== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
5
MM COMPANIES, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION AND GOING CONCERN CONSIDERATION
On January 3, 2001, the Board of Directors of MM Companies, Inc. (the
"Company"), as then constituted, voted unanimously to cease the operations of
its Internet-based custom CD-marketing business as the Board concluded that this
business no longer represented a viable alternative to provide maximum value to
the Company's stockholders.
The accompanying financial statements as of June 30, 2004 and for the
three and six month periods then ended have been prepared assuming the Company
will continue as a going concern, which contemplates the realization of assets
and the settlement of liabilities and commitments in the normal course of
business. At June 30, 2004, the Company had $3,717,637 in cash and cash
equivalents and $687,170 in precious metals (see Note 3) compared to $3,811,826
and $687,170, respectively, at December 31, 2003. The Company expects to
experience negative cash flows for the foreseeable future and has not generated
any operating revenue in the last two years. Additionally, the Company has not
yet settled on an operating plan, and can give no assurance that the Company's
cash and cash equivalents are sufficient to fund the Company's current
operations and satisfy its obligations over the longer term. The Company
believes these obligations will primarily relate to costs associated with the
operation as a public company (legal, accounting, consulting, insurance, etc.),
as well as the expenses associated with any new business activities. These
factors, among others, indicate that the Company may be unable to continue
operations as a going concern. No adjustment has been made in the accompanying
financial statements to the amounts and classifications of assets and
liabilities which could result should the Company be unable to continue as a
going concern. The Company continues to consider future alternatives, including
the possible acquisition of other businesses or adopting a possible plan of
liquidation. However, the Company has not consummated any significant
transactions to date and the Company's business prospects remain uncertain. To
the extent that management of the Company moves forward on any alternative
strategy, such strategy may have an impact on the Company's liquidity.
The Investment Company Act of 1940 provides a set of regulations for
companies that are or that hold themselves out as being engaged primarily in the
business of investing, reinvesting, owning, holding or trading in securities. As
a result of the Company's lack of an operating business, the significant cash
balance as a percentage of the Company's total assets and its recent trading
activities, the Company may have inadvertently become, or may become in the
future if it fails to obtain an operating business, an investment company under
the Investment Company Act. Notwithstanding the foregoing, the Company believes
that at all relevant times prior to the date of filing this Quarterly Report on
Form 10-Q, the Company has not been subject to regulation as an investment
company under the Investment Company Act.
2. Summary of Significant Accounting Policies
Basis of Presentation
The financial statements as of June 30, 2004 and for the three and six
months ended June 30, 2004 have been prepared by the Company pursuant to the
rules and regulations of the Securities and Exchange Commission (the "SEC").
These financial statements are unaudited and, in the opinion of management,
include all adjustments (consisting of normal recurring adjustments and
accruals) necessary to present fairly the results for the periods presented. The
balance sheet at December 31, 2003 has been derived from the audited financial
statements at that date. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been omitted pursuant to applicable SEC rules and
regulations. Operating results for the three and six months ended June 30, 2004
are not necessarily indicative of the results that may be expected for the year
ending December 31, 2004. The financial statements included herein should be
read in conjunction with the financial statements and the notes thereto included
in the Company's Annual Report on Form 10-K for the year ended December 31,
2003. Certain prior period balances have been reclassified to conform to the
current period presentation.
6
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less when purchased to be cash equivalents.
Stock-Based Compensation
In December 2002, the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 148 "Accounting for Stock-Based Compensation, Transition
and Disclosure." SFAS No. 148 provides alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation. SFAS No. 148 also requires that disclosures of the pro
forma effect of using the fair value method accounting for stock-based employee
compensation be displayed more prominently and in a tabular format.
Additionally, SFAS No. 148 requires disclosure of the pro forma effect on
interim financial statements. The transition and annual disclosure requirements
of SFAS No. 148 are effective for fiscal years ended after December 15, 2002.
The interim disclosure requirements are effective for interim periods ending
after December 15, 2002. The pro forma effect of using the fair value method
accounting for stock-based employee compensation was not material for the three
and six month periods ended June 30, 2004 and 2003.
Other Comprehensive Income (Loss)
The Company separately reports net income (loss) and comprehensive
income (loss) pursuant to SFAS No. 130, "Reporting Comprehensive Income."
Comprehensive income (loss) includes net income (loss) and other comprehensive
income (loss). Other comprehensive income (loss) includes accumulated unrealized
gain (loss) on investment in available-for-sale securities. The components of
comprehensive income (loss) are as follows:
Three months ended Six months ended
June 30, June 30,
----------------------------- --------------------------------
2004 2003 2004 2003
------------- ------------- -------------- --------------
Comprehensive income (loss):
Net income (loss)...................... $(140,275) $(298,325) $(303,248) $(49,353)
Reversal of previously recorded unrealized
gain on investment in available-for-sale
securities (306,047) (189,516)
Unrealized gain on investment in
available-for-sale securities.......... - 22,962 - 68,388
--------- --------- --------- --------
$(446,322) $(275,363) $(492,764) $ 19,035
========== ========== ========== =========
Net Income (Loss) Per Share
The Company complies with SFAS No. 128, "Earnings Per Share." SFAS No.
128 requires dual presentation of basic and diluted income (loss) per share for
all periods presented. Basic income (loss) per share excludes dilution and is
computed by dividing income (loss) available to common stockholders by the
weighted average number of common shares outstanding for the period. Diluted
income per share reflects the potential dilution that could occur if securities
or other contracts to issue common stock were exercised or converted into common
stock or resulted in the issuance of common stock that then shares in the income
of the Company. Diluted net loss per share excludes common equivalent shares,
unexercised stock options and warrants, as the computation would be
anti-dilutive. Unexercised stock options to purchase shares of the Company's
common stock as of June 30, 2004 were excluded in the computation of diluted
earnings per share for the three and six months ended June 30, 2004 because the
options' exercise price was greater than the average market price of the
Company's common stock.
7
Since the effects of the outstanding options and warrants are anti-dilutive in
the respective periods, they have been excluded from the computation of net loss
per common share.
3. PRECIOUS METAL
As of June 30, 2004 and December 31, 2003, the Company owned 2,200
ounces of gold bullion.
4. NOTES RECEIVABLE
In connection with a royalty agreement signed on October 11, 1999, the
Company advanced $500,000 to an independent record label, in return for which
the Company received a note receivable that was due on April 11, 2000. In 2000,
the Company established a reserve for the entire receivable and pursued legal
action to collect the note. In January 2004 the parties agreed to a settlement
agreement whereby the Company would receive an aggregate of $250,000. The note
is payable in installments of $50,000 on each of May 1, 2004 and May 1, 2006 and
$6,522 per month, for twenty-three months, commencing June 1, 2004 and
continuing through May 1, 2006, less collection fees. The scheduled payments
have been received to date.
5. RELATED PARTY TRANSACTIONS
Under the terms of a Stock Purchase Agreement dated as of May 13, 2004
(the "Stock Purchase Agreement"), to which the Company was not a party, Jewelcor
Management, Inc. ("JMI" and, together with Seymour Holtzman and affiliates, the
"JMI Group") purchased 151,668 shares of the Company's common stock from
Barington Capital Group, L.P. ("Barington"), James Mitarotonda and affiliates
(together, the "Barington Group") and Ramius Securities, LLC ("Ramius") and
affiliates (together, the "Ramius Group"). In addition, the JMI Group acquired
1,209,866 shares of the Company's common stock from BCG Strategic Investors, LLC
("BCG"), a limited liability company partially owned by the JMI Group, in part
through redemption and subsequent transfer by BCG of the JMI Group's membership
interest in BCG and in part by purchase, and Mr. Mitarotonda transferred to Mr.
Holtzman certain stock appreciation rights with respect to shares of the Company
originally granted on or about December 31, 2002. Pursuant to the Stock Purchase
Agreement, the JMI Group also sold to the Barington Group and the Ramius Group
all of the JMI Group's common stock of three other companies in which the JMI
Group, the Barington Group and the Ramius Group had all had investments -- LQ
Corporation, Inc. ("LQ"), Dynabazaar, Inc. ("Dynabazaar") and Register.com --
and Mr. Holtzman transferred to Mr. Mitarotonda certain options to acquire
common stock of LQ originally granted on or about March 18 and April 15, 2003. A
copy of the Stock Purchase Agreement was attached as Exhibit 99.1 to a Schedule
13D/A filed with the SEC on May 25, 2004, on behalf of certain members of the
JMI Group, the Barington Group and the Ramius Group.
One of the conditions to the closing of the transactions contemplated by
the Stock Purchase Agreement was that Barington and Ramius (or their respective
designees) be able to purchase from the Company, for the market price of such
stock at the time the transactions were being negotiated, all of the 654,900
shares of common stock of LQ and the 627,890 shares of common stock of
Dynabazaar held by the Company. Following approval of such sales by the
disinterested directors of the Company, the Company agreed to the sale of such
shares for a purchase price of $281,607, or $0.43 per share, in the case of LQ,
and $226,040, or $0.36 per share, in the case of Dynabazaar.
Effective as of the closing of these transactions, Messrs. Mitarotonda,
William Fox, Joseph Wright and Melvyn Brunt resigned from any positions they
held as directors, officers or employees of the Company. However the Barington
Group agreed that it would make Mr. Brunt available to JMI for a reasonable
period of time for up to 90 days after the closing of these transactions to
assist JMI by performing the same services that he had rendered to the Company
through the Company's consulting agreement with Barington, which terminated upon
closing. JMI agreed to pay the Barington Group for such services at the rate of
$10,000 per month and to reimburse the Barington Group for its actual
out-of-pocket costs incurred in providing these services. Since these services
were provided to the Company, the Company reimbursed JMI for the initial payment
of $10,000 that was paid by JMI at closing. The Company has paid the two
subsequent $10,000 payments directly to the Barington Group. Mr. Brunt will be
providing services to the Company until August 16, 2004.
The Company has arranged with JMI (now the beneficial owner of
approximately 43% of the Company's common stock) for JMI to provide the Company,
beginning May 19, 2004, with certain legal, accounting, consulting, management
and other services similar to those which had been provided by Barington prior
to May 19. JMI receives a fee of $21,500 per month for such services. A
definitive consulting agreement with respect to such services is being
finalized.
The Company's principal executive offices are in a space leased by JMI
from Mr. Holtzman and his wife, and made available to the Company (without
separate charge) through the Company's consulting arrangement with JMI.
8
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Note Regarding Forward Looking Information
The statements contained in this quarterly report that are not
historical are forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, including statements regarding the
expectations, beliefs, intentions or strategies regarding the future. Without
limiting the foregoing, the words "anticipates," "believes," "expects,"
"intends," "may" and "plans" and similar expressions are intended to identify
forward-looking statements. The Company intends that all forward-looking
statements be subject to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements reflect the
Company's views as of the date they are made with respect to future events, but
are subject to many risks and uncertainties, which could cause the actual
results of the Company to differ materially from any future results expressed or
implied by such forward-looking statements. These statements speak only as of
the date hereof. We are under no duty to update, and do not undertake to update,
any of the forward-looking statements contained in this quarterly report to
conform them to actual results or to changes in our expectations. The following
discussion should be read in conjunction with the financial statements contained
in Item 1 of Part I of this Form 10-Q.
Overview
The Company was incorporated on April 23, 1996. On January 3, 2001, the
Board of Directors of the Company as then constituted voted unanimously to cease
its operations as a provider of customized music CD compilations and music
digital downloads. The Company had sold its products primarily over the Internet
through its website and through marketing partners, strategic alliances and
direct mail order promotions. The then-Board concluded at that time that this
business no longer represented a viable alternative to provide maximum value to
the Company's stockholders. In connection with the Company's cessation of its
Internet-based custom CD-marketing business, the Company sold all of the
Company's remaining furniture and equipment.
The Board then determined to review alternatives for the Company going
forward, which included, among other things, potential dispositions of assets,
the possibility of one or more cash distributions to stockholders, and the
potential continued operation of the Company as a public company which might
pursue other business opportunities as they arise, as well as other possible
steps intended to provide stockholder value, all subject to the ongoing review
and consideration of the Board, some of which would require stockholder
approval. On February 15, 2001, the Company announced that the Board of
Directors had approved a cash distribution in the amount of $3.00 per share to
the holders of record of Common Stock as of March 1, 2001, the record date,
pursuant to which the Company distributed $9,941,998 to its stockholders.
Thereafter, the Board determined to seek to pursue one or more
potential acquisitions of other publicly traded or privately held companies or
significant interests in such companies, with a view to refocusing the Company's
strategic direction. While the Company continues to actively examine certain
potential acquisition transactions and believes that attractive opportunities
exist, there can be no assurance whether, when, or on what terms the Company
will complete any such acquisition.
The Company's principal executive offices are in a space leased by JMI
from Seymour Holtzman and his wife and made available to the Company (without
separate charge) through the Company's consulting arrangement with JMI, a
Company controlled by Mr. Holtzman. JMI is now the beneficial owner of
approximately 43% of the Company's common stock, and Mr. Holtzman is the Chief
Executive Officer of the Company. JMI has also made available to the Company the
services of JMI employees to serve as the Chief Financial Officer and the
Secretary of the Company, as well as General Counsel, and provides the Company
with certain legal, accounting, consulting, management and other services. A
definitive consulting agreement with respect to such services is being
finalized.
On August 9, 2002, in connection with the review of the Company's
contested solicitation of proxies for the annual shareholders meeting of another
public company, the Company received a letter from the SEC's Division of
Investment Management inquiring as to the possible status of the Company as an
unregistered "investment company" within the meaning of the Investment Company
Act of 1940. The Company believes that, consistent with the discussion of
Investment Company Act matters in its Annual Reports on Form 10-K for the year
ended December 31, 2003, and prior years, the Company may have become an
inadvertent investment company during
9
2001. The Company has relied on the "transient investment company" exemption
from the applicable provisions of the Investment Company Act contained in Rule
3a-2 thereunder, which provides for a one-year "safe harbor."
Accordingly, prior to the expiration of such one-year safe harbor
period, on August 29, 2002, the Company acquired ownership of gold bullion with
a purchase price of $4,028,115. The Company borrowed approximately $1.9 million
secured by that gold bullion, which has since been repaid from the proceeds of
the sale of some of the gold bullion. As a result, "investment securities" held
by the Company no longer exceed 40% of its total assets (excluding cash and
government securities), and the Company believes that it is no longer within the
relevant definition of "investment company" for purposes of the Investment
Company Act. Notwithstanding the fact that the Company has purchased gold
bullion, and "investment securities" held by the Company no longer exceed 40% of
its total assets (excluding cash and government securities), the Company could
be deemed to be an investment company under Section 3(a)(1)(A) of the Investment
Company Act, which covers companies that are engaged primarily in the business
of investing, reinvesting or trading in securities.
The Company believes that, at all relevant times prior to the date of
filing this Quarterly Report, it has either not been an investment company as
defined in the Investment Company Act, or it has been a "transient investment
company" exempt from the Investment Company Act. The Company believes that
because of the character of its assets it does not currently fall within the
definition of an investment company.
The Company intends to seek to acquire one or more operating businesses
in the near term, which the Company believes would, among other things,
eliminate any concern that it may be deemed to be primarily engaged in the
business of investing, reinvesting or trading in securities. A determination by
the SEC that the Company is in fact an unregistered investment company could
have a material adverse effect on the Company's business. An unregistered
investment company can be prohibited from, among other things, engaging in
interstate commerce.
The Company's financial statements as of June 30, 2004 have been
prepared on a going concern basis, which contemplates the realization of assets
and the settlement of liabilities and commitments in the normal course of
business. As of June 30, 2004, the Company had $3,717,637 in cash and cash
equivalents and $687,170 in precious metals. Substantially all of the Company's
remaining cash was provided by our initial public offering of common stock. The
Company expects to experience negative cash flows for the foreseeable future.
The Company has not generated any operating revenue for the last two years. The
Company has not yet settled on an operating plan, and can give no assurance that
the Company's cash and cash equivalents are sufficient to fund the Company's
current operations and satisfy its obligations over the longer term. The Company
believes these obligations will primarily relate to costs associated with the
operation as a public company (legal, accounting, consulting, insurance, etc.),
as well as the expenses associated with any new business activities. These
factors, among others, indicate that the Company may be unable to continue
operations as a going concern. No adjustment has been made in the accompanying
financial statements to the amounts and classifications of assets and
liabilities which could result should the Company be unable to continue as a
going concern. The Company continues to consider future alternatives, including
the possible acquisition of other businesses or adopting a possible plan of
liquidation. However, the Company has not consummated any significant
transactions to date and the Company's business prospects remain uncertain. To
the extent that management of the Company moves forward on any alternative
strategy, such strategy may have an impact on the Company's liquidity.
Results of Operations
---------------------
REVENUE Revenue principally consisted of gains on the sale of
available-for-sale securities as well as interest and dividend income. In May
2004, in connection with the Securities Purchase Agreement (see Related Party
Transactions - Note 5) the Company sold its available-for-sale securities
resulting in a gain of $300,468. Interest income was $13,723 and $28,587, for
the three and six months ended June 30, 2004, respectively, compared to $8,765
and $16,146, for the three and six months ended June 30, 2003, respectively.
Revenue for the three and six months ended June 30, 2004, respectively, was
$314,191 and $329,055, compared to $23,840 and $531,559, for the three and six
months ended June 30, 2003, respectively. Revenue in the three and six month
periods ended June 30, 2003 included $190,318 related to the cash distribution
from the Company's investment in LQ Corporation, Inc. and a gain on sale of
precious metals of $325,095.
10
GENERAL AND ADMINISTRATIVE EXPENSES During the three and six months
ended June 30, 2004, general and administrative expenses primarily consisted of
professional and consulting fees, the payment of insurance premiums for the
Directors and Officers liability policy, and other general corporate expenses.
General and administrative expenses were $454,466 and $632,303 for the three and
six months ended June 30, 2004, respectively, compared to $322,165 and $580,912,
for the three and six months ended June 30, 2003, respectively.
Liquidity and Capital Resources
-------------------------------
Net cash (used in) provided by operating activities was ($658,787) for
the six months ended June 30, 2004, compared to net cash provided of $759,243
for the six months ended June 30, 2003. Net cash used for the six months ended
June 30, 2004, primarily reflects the Company's net loss for the period of
($303,248) and the gain on the sale of available-for-sale securities of
$300,468. During the six months ended June 30, 2003, cash provided of $2,653,775
was from the Company's sale of 10,700 ounces of gold bullion and the receipt of
$929,000 for reimbursed legal expenses in the settlement of a stockholder
derivative action. During the six months ended June 30, 2003, the Company repaid
an outstanding liability of $1.9 million, which was secured by the gold bullion.
In addition, payment of $190,000 was made in settlement of the Koch
Entertainment lawsuit.
Cash provided by investing activities was $564,598 for the six months
ended June 30, 2004, as compared to cash provided of $1,446,932 for the six
months ended June 30, 2003. Cash provided during the six months ended June 30,
2004, was primarily from the sale of stock in connection with Securities
Purchase Agreement (see Related Party Transactions - Note 5). Cash provided
during the six months ended June 30, 2003, was from the January 29, 2003
distribution by LQ Corporation, Inc. of $2.50 per share, of which $1,446,932
represented a return of capital.
At June 30, 2004, the Company had $3,717,637 in cash and cash
equivalents compared to $3,811,826 at December 31, 2003. Substantially all of
the Company's remaining cash was provided by our initial public offering of
Common Stock in 1999. The Company expects to experience negative cash flows for
the foreseeable future. The Company believes these obligations will primarily
relate to costs associated with the operation as a public company (legal,
accounting, consulting, insurance, etc.), as well as the expenses associated
with any new business activities.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Foreign Currency Risk. Currently substantially all of the Company's
transactions are denominated in U.S. dollars and as a result, foreign exchange
gains and losses to date have been insignificant. While the Company may effect
some transactions in foreign currencies during 2004, it does not expect that any
related gains or losses will be significant. The Company has not engaged in
foreign currency transactions or foreign currency hedging to date.
Item 4. Controls and Procedures
The Company maintains a system of controls and procedures designed to
provide reasonable assurance as to the reliability of the financial statements
and other disclosures included in this report, as well as to safeguard assets
from unauthorized use or disposition. The Company's management, including the
Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness
of the design and operation of the Company's disclosure controls and procedures
as of June 30, 2004, pursuant to Exchange Act Rule 13a-15(e) and 15d-15(e).
Based on that evaluation, the Chief Executive Officer and Chief Financial
Officer concluded that the Company's disclosure controls and procedures are
effective in ensuring that all material information required to be filed in this
quarterly report has been made known to them in a timely fashion.
There have been no changes in internal controls that materially
affected or are reasonably likely to materially affect the Company's internal
control over financial reporting, subsequent to the date the Chief Executive
Officer and Chief Financial Officer completed their evaluation.
11
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities and Use of Proceeds
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Securities Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits required by Item 601 of Regulation S-K:
------------------------------------------------
31.1 Certification of the Chief Executive Officer Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
31.2 Certification of the Chief Financial Officer Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
32.1 Certification of the Chief Executive Officer Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
32.2 Certification of the Chief Financial Officer Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
B. Reports on Form 8-K:
--------------------
None.
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SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
MM COMPANIES, INC.
By: /s/ Seymour Holtzman
-------------------------
Seymour Holtzman
Chief Executive Officer
By: /s/ Jeremy Anderson
-------------------------
Jeremy Anderson
Chief Financial Officer
Date: August 16, 2004
13