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U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT UNDER SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended January 31, 2001
[ ] TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-23410
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M. H. MEYERSON & CO., INC.
(Exact name of registrant as specified in its charter)
NEW JERSEY 13-1924455
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
NEWPORT TOWER, 525 WASHINGTON BLVD., JERSEY CITY, NEW JERSEY 07310
(Address of principal executive offices) (Zip Code)
(201) 459-9500
Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g)of the Exchange Act:
Common Stock, par value $0.01 per share
(Title of Class)
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. Yes [X] No [ ] .
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X ]
At March 30, 2001: 6,581,514 shares of Common Stock, $0.01 par
value, of the registrant (the "Common Stock") were outstanding. The aggregate
market value of the Common Stock held by non-affiliates of the registrant was
$12,302,292 based on the closing average price of $2.71875 per share on
March 30, 2001.
DOCUMENTS INCORPORATED BY REFERENCE
None.
Certain statements set forth in the Company's Annual Report on Form
10-K for the year ended January 31, 2001 constitute forward looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
are subject to the safe harbor created by such section. Certain factors that
could cause results to differ materially from those described in the forward
looking statements are described in Item 7 - Management Discussion and Analysis
of Financial Condition and Results of Operations - Viability of Operating
Results and elsewhere as appropriate. This Annual Report on Form 10-K, including
the Statements of Financial Condition and the notes thereto, should be read in
its entirety for a complete understanding.
PART I
ITEM 1. BUSINESS.
GENERAL
Our Company, founded in 1960, is a leading market maker in over 4,000
NASDAQ and OTC securities, a registered securities broker-dealer and member of
the NASD. We are a full service financial and investment banking firm which we
regard as organized, for functional purposes, in 8 operational divisions:
1. Wholesale Trading and Market Making - Here we engage in buying
and selling securities on behalf of our own trading accounts.
In market making transactions, we stand ready to buy or sell a
particular security at the national best bid or offer. As of
April 1, 2001, we were market makers in over 4,000 NASDAQ and
OTC securities. Our trading activities accounted for 92% of
our revenues this year.
We employ 50 securities traders and 32 assistant traders in
this division. We incentivize our traders by structuring their
compensation to accord them with a sliding scale percentage of
trading profits or losses from their trading accounts, after
deduction of general expenses. Our management and compliance
personnel supervise these trading activities and require
trading position limits by these personnel so as to attempt to
mitigate trading losses. In so doing, we maintain rigorous
compliance with NASDAQ and other regulatory requirements as
well as the traditional standards of commercial honor in
conducting the brokerage business.
2. Correspondent Services - We provide execution services,
primarily to retail service firms and other customers, who
wish to use our expertise to enable them to purchase or sell
securities on behalf of their retail customers. Among our
clients are large retail firms, online securities brokers,
banks and hedge funds.
3. Retail Securities Services - We have approximately 14,500
retail customer accounts which we service through 51 licensed
registered representatives, of whom 18 also hold higher
licenses as registered securities principals. Our clients
consist of individuals and institutions, many of whom are
sophisticated securities investors and who have maintained
their accounts with us for a lengthy period of time. Our
retail customer accounts are carried on a "fully disclosed "
basis by Investec Ernst Securities Corp., members of the New
York and other principal stock exchanges, pursuant to a
clearing agreement. This agreement provides that customer
securities positions and credit balances held at Investec
Ernst Securities Corp. are insured for up to $50 million; this
includes $500,000 coverage by Securities Investors Protection
Corp, which maintains $100,000 coverage of cash balances.
4. Institutional Services / Research - Our institutional sales
division maintains accounts with hundreds of investment and
mutual funds, foreign and domestic banks, investment trusts
and other institutional investment vehicles. We also prepare
and disseminate research reports on publicly traded companies
which we believe present special opportunities for purchase
and investment by our clients and others.
5. Investment Banking - We assist small growing companies in the
structure and planning of their business activities and their
capital-raising plans. Our 7 investment banking professionals
bring vast experience to the evaluation of developmental and
growth companies who, in our judgment, have the potential,
through business, management, proprietary assets and other
factors, to become successful public enterprises. Among our
activities in this field, we assist early capital formation by
way of private placements of equity securities, and assist
more mature enterprises in the structuring of public
offerings. We bring value to these clients by assisting their
business plans, growth strategies, and
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expansion potential while also identifying and advising them
as to strategic alliances, mergers, acquisitions and
divestitures.
6. Fixed Income - Since 1997, we acted as manager or co-manager
for various offerings of municipal bonds. We also acted as
participants in selling groups, which increases our ability to
offer this type of investment to our clients. Our fixed income
department, comprised of 9 professionals, also advises clients
on investments in municipal, government and corporate bonds.
7. Syndicate - By virtue of participating in syndicates and
underwriting activities, we are able to offer our
institutional and retail clients the ability to participate in
these placements of what we view as highly attractive
offerings.
8. eMeyerson.com electronic brokerage subsidiary - eMeyerson.com
Inc. ("EMEY") was formed in January 1999 for the purpose of
instituting business as an on-line Internet brokerage company,
providing (i) online brokerage, live market data, other
investment information and related services for its customers
and (ii) Internet-based Business-to-Business financial
products and solutions to other U.S. and international banks,
securities brokerage firms and other financial institutions,
including private labeled turnkey trading systems. As of
January 31, 2001, EMEY is not yet fully operational.
As of January 31, 2001, EMEY has raised approximately
$5,000,000 by private placements of its securities. We
presently own approximately 54% of EMEY's capital stock.
CORPORATE STRATEGY
As we enter our 42nd year, market making remains the core of our business.
Consistent with the past, our goal is to enhance our historic strengths while
expanding our product base and capabilities. We plan to do this by:
o Combining sophisticated training with the latest electronic trading and
information technology. We have increased our trading platform and
access to markets and information to meet the new trading demands. We
have, among other things, linked a number of automated trading systems
to our arsenal.
o Our investment banking activities are being expanded to cover:
1. Raising private placement or other funding for small but
dynamically expanding entities, while sometimes investing in
these operations to secure a minority position in the
shareholdings for our firm.
2. Analyzing the needs of clients involved in these fields so
that we may advise them in acquiring other operations or
expanding their activities to encompass other related
businesses, which utilize the same basic technology and
skills.
o Strategic Alliances with Other Institutions - Since we view the
securities industry and financial industries in general as involved in
a vast expansionist phase - both horizontally by taking on a variety of
banking, financial and securities products - and vertically by linking
up European, Far Eastern and American firms - we intend to explore
these possibilities for ourselves as well. We will do this so that:
1. We are able to offer our retail and institutional clients a
wider variety of products;
2. We gain access to other products and overseas markets for our
customers;
3. We are able to make available to overseas parties the ability
to gain access to U.S. securities markets and financial
products.
2
In this way, we seek to add value for our stockholders, provide greater
services for our clients, and participate in the product and global
expansionist surge of securities and financial firms. The movement to
greater communications resources and electronic commerce, through the
Internet and otherwise, has accelerated these trends. We intend to
participate, but only after carefully examining the risks and potential
rewards involved so that we are not exposing ourselves to significantly
greater financial risk in the implementation of our strategic plans. We
also will move forward only if we are able to assure ourselves and our
clients of being able to continue to provide at least the same
personalized and professional servicing of their financial needs and
accounts that we have historically provided to them.
OPERATIONS
We do not hold client funds or securities and do not directly process back
office operations. We clear most transactions for our institutional clients and
all transactions for our own proprietary trading accounts, with Spear, Leeds &
Kellogg, Inc., members of the New York Stock Exchange and other principal stock
exchanges. We clear all transactions for our retail customers with Investec
Ernst Securities Corp. All clearing activities are carried on a fully disclosed
basis with our customers. These clearing services are furnished to us and our
clients for a fee and include billing, custody of securities, credit review
(including for margin accounts) and similar activities. However, if our
customers do not pay or deliver securities for a trade or if they do not
properly maintain their credit balances on "margin" accounts, and there is a
loss for which we cannot collect from our customer, we are generally liable for
such losses. We maintain our back office and compliance divisions to supervise
our activities generally and to ensure financial and regulatory compliance with
applicable rules.
VENDORS
We employ a multitude of third party vendors which supply us with
information services and software, including stock quotations, stock trading
charts, news and financial data. We have alternate sources for these services
and, accordingly, do not consider ourselves dependent on any one or more of
these suppliers.
COMPETITION
The securities industry is very competitive and, with technical
innovation, is becoming even more so. Accordingly, we seek to compete, based
upon our traditional strengths built up on an over forty year period of time:
o quality
o efficiency
o training
o reliability of our trading abilities
o our reputation in the markets and with other market professionals
o relationships with our institutional and retail clients
o our skilled and experienced management team
o research data
We also utilize what we consider the best and most reliable of
technological advances in order to compete and continually enhance the quality
of services provided. We are competing with a galaxy of large and small
brokerage firms which utilize both traditional methods and electronic commerce
to transact their business.
We encounter intense competition in all aspects of the securities business
and compete directly with other securities firms, a significant number of which
have substantially greater capital and other resources. Many of these
competitors now offer a wider range of financial services although our strategy
is to bridge this gap by broadening our product line. In addition to competition
from firms currently in the securities business there has recently been
increasing competition from other sources such as commercial banks and insurance
companies offering financial services. We believe that the principal competitive
factors in the securities industry are the quality and ability of professional
personnel and relative
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prices of services and products offered. We and our competitors also directly
solicit potential customers and furnish investment research publications to
investors in an effort to hold and attract existing and potential clients.
GOVERNMENT REGULATION
The securities industry in the United States is subject to extensive
regulation under both federal and state laws. We are registered as a
broker/dealer with the SEC. Much of the regulation of broker/dealers has been
delegated to self-regulated organizations, principally the NASD and national
securities exchanges such as NASDAQ. These self-regulatory organizations adopt
rules (subject to approval by the SEC) that govern the industry and conduct
periodic examinations of our operations. Securities firms are also subject to
regulation by state securities administrators in those states in which they
conduct business.
Regulatory bodies are charged with safeguarding the integrity of the
securities and other financial markets and with protecting the interests of
clients participating in those markets, but not with protecting the interests of
our stockholders. Broker-dealers are subject to regulations covering all aspects
of the securities business, including sales methods, trade practices among
broker-dealers, use and safekeeping of clients' funds and securities, capital
structure, record keeping and the conduct of directors, officers and employees.
NET CAPITAL REQUIREMENTS
The SEC, NASD and various other regulatory agencies have rigid rules
requiring the maintenance of specific levels of net capital by securities
brokers, including the SEC's uniform net capital rule which we must comply with.
Net capital is defined as assets minus liabilities plus other allowable credits
and qualifying subordinated borrowings less mandatory deductions that result
from excluding assets that are not readily convertible into cash and from
valuing other assets, such as a firm's positions in securities, on a stringent
basis. Among these deductions are adjustments in the market value of securities
to reflect the possibility of a market decline prior to disposition.
As of January 31, 2001, we were required to maintain minimum net capital,
in accordance with SEC rules, of $1,000,000 and had total net capital of
approximately $10,020,000 or approximately $9,020,000 in excess of our minimum
net capital requirements.
If we fail to maintain the required net capital we may be subject to
suspension or revocation of registration by the SEC and suspension or expulsion
by the NASD and other regulatory bodies. In addition, a change in the net
capital rules, the imposition of new rules, a specific operating loss, or any
unusually large charge against net capital could limit our operations that
require the intensive use of capital and could limit our ability to expand our
business. The net capital rules also could restrict our ability to withdraw
capital, which could limit our ability to pay dividends, repay debt and
repurchase shares of our outstanding stock.
PERSONNEL
As of March 31, 2001, we employed a total of 182 full-time persons, whose
primary roles are: 82 trading, 51 retail representatives, 10 back office
personnel, 9 bonds and fixed income, 7 investment banking, 6
institutional/research, 6 compliance, 5 accounting, 3 retail clerical, and 3 in
executive management. Our relations with our employees are generally good and we
have no collective bargaining agreements with any labor unions.
Our registered representatives are required to take examinations
administered by the NASD and state authorities in order to be qualified to
transact business. Our success will depend on our ability to hire and retain
additional qualified trading, technical and financial personnel, who are
generally in high demand.
4
ITEM 2. PROPERTIES
FACILITIES
The Company currently leases approximately 30,000 sq. ft. of space in an
office building known as the Newport Office Tower located at 525 Washington
Blvd., Jersey City, New Jersey. The lease is in effect through July 31, 2011.
Rent charges on this office for the years ended January 31, 2001 and January 31,
2000 were $1,002,680 and $985,945, respectively.
In addition, the Company also pays maintenance charges for additional
space in Aventura, Florida, under an agreement with Martin H. Meyerson, who owns
the property in question. This space is primarily used for entertainment and
investment banking purposes. The total maintenance charges for the years ending
January 31, 2001 and 2000 were $10,020 and $10,335, respectively. The Company
also pays rent for space in New York City, New York which is leased in the name
of Martin H. Meyerson. This property is also used primarily for entertainment
and investment banking purposes. The total rent paid on this space for the years
ended January 31, 2001 and 2000 were $32,000 and $38,400, respectively. The
maintenance charges paid on the Florida property are the actual maintenance
charges billed each month, and the rent paid on the New York property is the
actual rent specified in the lease between Martin H. Meyerson and the building's
landlord. The Company believes that it is similar to what would be paid for a
comparable property leased on an arm's length basis by the Company. Neither of
these properties is the permanent residence of Martin H. Meyerson.
ITEM 3. LEGAL PROCEEDINGS
Except as described herein, the Company is not a party to any litigation
which would have a material adverse impact on the Company or its operations. An
action styled as a class action has been initiated against Optomedic Medical
Technologies Ltd. ("Optomedic"), an executive officer of Optomedic and against
the Company in connection with an underwriting in June 1998 of Optomedic
securities by the Company. The action is in a preliminary stage, and the time
for the Company to respond to the plaintiffs' complaint has not yet occurred. No
class certification application as yet has been made. The Company believes that
plaintiffs have filed a deficient pleading, and has made a motion to dismiss the
plaintiffs' complaint. The Company intends to defend vigorously against
plaintiffs' claims.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders of the Company
during the fourth quarter of fiscal 2001.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock is traded on the NASDAQ National Market ("NMS")
under the symbol "MHMY". The following sets forth for the fiscal quarters as
indicated the high and low bid closing quotations for the Company's Common Stock
on the NMS from February 1, 1999 through January 31, 2001. Such information
reflects interdealer quotations, without retail mark-up, mark-down or
commissions, and may not necessarily represent actual transactions.
5
Fiscal Year 2000 High Low
---------------- ------- -----
1st Quarter $ 12.38 $ 3.44
2nd Quarter $ 8.50 $ 4.56
3rd Quarter $ 4.56 $ 2.69
4th Quarter $ 5.69 $ 2.75
Fiscal Year 2001
----------------
1st Quarter $ 6.69 $ 4.00
2nd Quarter $ 4.56 $ 3.56
3rd Quarter $ 6.69 $ 3.75
4th Quarter $ 4.19 $ 2.13
The number of shareholders of record of the Company's Common Stock on
March 31, 2001 was approximately 50, and the number of beneficial holders of the
Company's Common Stock is estimated by management to be an additional 3,500
holders.
6
ITEM 6. SELECTED FINANCIAL DATA.
The historical selected financial data set forth below for the five
years ended January 31, 2001 are derived from the Company's Financial Statements
included elsewhere in this Annual Report on Form 10-K and should be read in
conjunction with those financial statements and notes thereto. Those financial
statements have been audited by Vincent R. Vassallo, independent certified
public accounts, whose report with respect thereto appears elsewhere in this
report.
January 31,
--------- --------------------- ------------ ------------- ------------
2001 2000 1999 1998 1997
---- ---- ---- ---- ----
BALANCE SHEET DATA:
Assets $35,878,287 $36,361,522 $21,577,799 $24,526,907 $23,702,300
Liabilities 9,913,990 12,948,157 7,021,214 10,249,271 9,759,700
Subordinated Liability 2,000,000 2,000,000 2,000,000 2,000,000 0
Minority Interest in Subsidiary 1,923,462 680,852 0 0 0
Shareholders' Equity 22,040,835 20,732,513 12,556,585 12,277,636 13,942,600
STATEMENT OF OPERATIONS
DATA:
Year Ended
January 31,
--------- --------------------- ------------ ------------- ------------
2001 2000 1999 1998 1997
---- ---- ---- ---- ----
REVENUES
Net gain on securities $ 66,937,422 $ 57,690,503 $ 28,784,099 $20,637,323 $34,214,505
transactions
Underwriting 2,274,166 1,621,399 2,966,120 3,254,395 4,811,399
Commissions 1,951,047 1,992,818 1,728,938 2,025,672 2,396,754
Interest and other revenue 1,227,089 816,820 400,665 1,540,174 463,937
-------------------- ------------------ --------------- ------------- ------------
Total revenues 72,389,724 62,121,540 33,879,822 27,457,564 41,886,595
-------------------- ------------------ --------------- ------------- ------------
EXPENSES
Compensation and benefits 29,995,573 27,181,296 16,451,594 14,383,715 22,226,110
Clearance charges 28,930,685 18,620,819 7,328,909 6,233,720 6,467,259
Communications 4,875,907 4,616,220 3,544,838 3,411,166 3,260,963
Professional fees 2,637,445 1,276,145 916,005 973,902 1,416,519
Occupancy and equipment 1,044,700 1,034,680 996,603 954,071 461,874
costs
Other operating expenses 6,429,984 4,446,301 4,185,103 4,180,770 4,788,042
-------------------- ------------------ --------------- ------------- ------------
Total expenses 73,914,294 57,175,461 33,423,052 30,137,344 38,620,767
-------------------- ------------------ --------------- ------------- ------------
INCOME (LOSS) BEFORE TAXES (1,524,570) 4,946,079 456,770 (2,679,780) 3,265,828
MINORITY INTEREST 800,099 100,920 0 0 0
PROVISION FOR INCOME TAXES (216,199) 2,003,377 220,321 (960,316) 1,445,865
-------------------- ------------------ --------------- ------------- ------------
NET INCOME $ (508,272) $ 3,043,622 $ 236,449 $(1,719,464) $1,819,963
==================== ================== =============== ============= ============
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
GENERAL
The following discussion of the Company's financial condition and
results of operations should be read in conjunction with the Financial
Statements and Notes thereto appearing elsewhere in this Annual Report on Form
10-K.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated the percentage
of total revenue represented by certain line items in the Company's Statement of
Operations:
PERCENT OF TOTAL REVENUES
YEAR ENDED JANUARY 31,
----------------------
2001 2000 1999
---- ---- ----
Net gain on securities transactions............ 92 93 85
Underwriting................................... 3 3 9
Commissions.................................... 3 3 5
Interest and other............................. 2 1 1
--------- ------- -------
100 100 100
--------- ------- -------
Compensation and benefits...................... 41 44 49
Clearance charges ............................. 40 30 22
Communications ................................ 7 7 10
Professional fees ............................. 4 2 3
Occupancy and equipment costs.................. 1 2 3
Other operating expenses....................... 9 7 12
--------- ------- -------
Total expenses...................... 102 92 99
--------- ------- -------
Income before income taxes.......... (2) 8 1
Minority interest 1 * 0
Provision for income taxes.......... * 3 *
--------- ------- -------
Net income.......................... (1) 5 1
========= ======= =======
* represents amount less than 1%
CALCULATION OF EARNINGS PER SHARE
The calculation of earnings per share on the financial statements
included in this report are based on the weighted average number of shares
outstanding, as calculated.
8
FISCAL YEAR 2001 COMPARED WITH FISCAL YEAR 2000
Total revenues in fiscal year 2001 increased to $72,389,724 from
$62,121,540, or 16.5%. This is attributable mainly to the 16.0% increase in
trading revenue, with increases also in underwriting and interest and other
revenue, offset by a small decrease in commissions. The increase in trading
revenue is mainly due to the very high trading volume during the first few
months of the fiscal year.
Compensation and benefits increased from $27,181,296 to $29,995,573, a
change of 10.4%. This was caused by the increase in revenue.
Clearing charges increased from $18,620,819 to $28,930,685, a change of
55.4%, caused by the increase in volume over last year.
Communications expense increased by 5.6%, from $4,616,220 to
$4,875,907.
Other operating expenses, comprising professional fees, research fees,
occupancy and various other operating costs increased from $6,097,711 to
$10,112,129.
FISCAL YEAR 2000 COMPARED WITH FISCAL YEAR 1999
Total revenues in fiscal year 2000 increased to $62,121,540 from
$33,879,822, or 83.4%. This is attributable mainly to the 100.4% increase in
trading revenue, offset by the decrease in underwriting revenue. The increase in
trading revenue is due to increases in trading volume over last fiscal year.
Compensation and benefits increased from $16,451,594 to $27,181,296, a
change of 65.2% This was caused by the increase in revenue.
Clearing charges increased from $7,328,909 to $18,620,819, also due to
the increase in volume over last year.
Communications expense increased by 30.2%, from $3,544,838 to
$4,616,220.
Other operating expenses, comprising professional fees, research fees,
occupancy, and various other operating costs increased from $6,097,711 to
$6,757,126.
VIABILITY OF OPERATING RESULTS
The Company, like other securities firms, is directly affected by
general economic conditions and market conditions, including fluctuations in
volume and price levels of securities, changes in levels of interest rates and
demand for the Company's investment banking services. All of these factors have
an impact on the Company's net gain from securities transactions, underwriting,
and commission revenues. In periods of reduced market activity, profitability
can be adversely affected because certain expenses, consisting primarily of
non-officer compensation and benefits, communications and occupancy and
equipment remain relatively fixed.
LIQUIDITY AND CAPITAL RESOURCES
The Company's statements of financial position reflect a liquid
financial position as cash and assets readily convertible to cash represent 76%
and 83% of total assets at January 31, 2001 and January 31, 2000 respectively.
The Company finances its operations primarily with existing capital and
funds generated from operations.
The Company believes that existing capital and cash flow from
operations will be sufficient to meet its cash requirements.
9
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Our market making activities expose us to significant risks, including but
not limited to changes in price and/or liquidity of our trading positions. We
use an automated trading system to provide management with a real-time overview
of our traders' activity, positions, and profitability. Each trader's total
positions are limited by management, based partially on the amount of the
trader's funds held in reserve at the Company, which helps to limit the
Company's risks. The automated trading system also alerts management to any
trades which exceed certain parameters as to position or trade size during the
day.
In the course of our business, we maintain inventory, consisting mainly of
NASDAQ and OTC securities and municipal bonds. The market value of our inventory
at January 31, 2001 was $13.6 million in long positions and $2.8 million in
short positions. The loss to the Company, assuming a 10% decline in prices,
would be $1.08 million due to the losses on the long positions being partially
offset by gains on the short positions.
We invest, from time to time, in certificates of deposit and/or maintain
interest bearing balances in our accounts with our clearing brokers, for working
capital purposes, which are classified as cash equivalents and receivables from
clearing brokers, respectively, in the Statement of Financial Condition. These
balances are all available for immediate withdrawal, or are for periods of 31
days or less, and do not present a material market risk. The Company does not
normally trade or carry positions in derivative securities.
ITEM 8. FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
Page
----
Report of Independent Public Accountants .................................. 11
Statements of Financial Condition
at January 31, 2001 and 2000 .......................................12
Statements of Operations for the years
ended January 31, 2001, 2000 and 1999...............................13
Statements of Stockholders' Equity for the years
ended January 31, 2001, 2000 and 1999 ..............................14
Statements of Cash Flows for the years
ended January 31, 2001, 2000 and 1999 ..............................15
Notes to Financial Statements................................................16
10
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Shareholders
M. H. Meyerson & Co., Inc.
We have audited the accompanying consolidated statement of financial
condition of M.H. Meyerson & Co., Inc. and subsidiary as of January 31, 2001 and
January 31, 2000 and the related consolidated statements of operations, changes
in shareholders' equity and cash flows for the years then ended and the related
statements of operations, changes in shareholders' equity and cash flows for the
year ended January 31, 1999. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of M.H. Meyerson & Co.,
Inc. and subsidiary as of January 31, 2001 and January 31, 2000 and the results
of their operations, changes in shareholders' equity and cash flows for each of
the three years in the period ended January 31, 2001 in conformity with
generally accepted accounting principles.
/s/ VINCENT R. VASSALLO, CPA
Sea Cliff, New York
April 21, 2001
11
M. H. MEYERSON & CO., INC.
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
YEARS ENDED JANUARY 31,
ASSETS 2001 2000
------ -------- -------
Cash and cash equivalents $ 10,451,946 $ 6,674,095
Receivable from clearing brokers (Note 3) 3,277,214 9,299,226
Securities owned - at market value (Notes 2 and 3) 13,640,805 14,314,130
Investments - not readily marketable (Note 2) 2,248,325 2,505,848
Property and equipment, net (Notes 2 and 3) 1,027,087 1,116,427
Other assets 5,232,910 2,451,796
------------ ------------
TOTAL ASSETS $ 35,878,287 $ 36,361,522
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
LIABILITIES
Securities sold, but not yet purchased - at market value
(Notes 2 and 3) $ 2,853,217 $ 3,210,864
Payable to trading representatives 4,273,059 6,900,550
Other liabilities and accrued expenses (Note 3) 2,787,714 2,836,743
------------ ------------
TOTAL LIABILITIES 9,913,990 12,948,157
------------ ------------
COMMITMENTS (Note 6)
MINORITY INTEREST IN SUBSIDIARY 1,923,462 680,852
------------ ------------
SUBORDINATED LOAN (Note 7) 2,000,000 2,000,000
------------ ------------
SHAREHOLDERS' EQUITY
Common Stock, $.01 par value, 25,000,000 shares authorized, 6,571,715 and
6,507,815 shares issued and 6,571,715 and 6,507,815 shares outstanding at
January 31, 2001 and 2000 65,717 65,078
Additional paid-in capital 14,783,913 12,967,958
Retained earnings 7,191,205 7,699,477
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 22,040,835 20,732,513
----------- ------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 35,878,287 $ 36,361,522
============ ============
The accompanying notes are an integral part of this statement.
12
M. H. MEYERSON & CO., INC.
CONSOLIDATED STATEMENT OF OPERATIONS
YEARS ENDED JANUARY 31,
REVENUES 2001 2000 1999
-------------- -------------- --------------
Net gain on securities transactions $ 66,937,422 $ 57,690,503 $ 28,784,099
Underwriting 2,274,166 1,621,399 2,966,120
Commissions 1,951,047 1,992,818 1,728,938
Interest / Other 1,227,089 816,820 400,665
-------------- -------------- --------------
TOTAL REVENUES 72,389,724 62,121,540 33,879,822
-------------- -------------- --------------
EXPENSES
Compensation and benefits 29,995,573 27,181,296 16,451,594
Clearance charges 28,930,685 18,620,819 7,328,909
Communications 4,875,907 4,616,220 3,544,838
Professional fees 2,637,445 1,276,145 916,005
Occupancy and equipment costs (Notes 4 and 6) 1,044,700 1,034,680 996,603
Other operating expenses 6,429,984 4,446,301 4,185,103
-------------- -------------- --------------
TOTAL EXPENSES 73,914,294 57,175,461 33,423,052
-------------- -------------- --------------
INCOME (LOSS) BEFORE INCOME TAXES
AND TAX BENEFITS (1,524,570) 4,946,079 456,770
Provision for income taxes and (tax benefits)
(Notes 2 and 5) (216,199) 2,003,377 220,321
MINORITY INTEREST 800,099 100,920 -
-------------- -------------- --------------
NET INCOME (LOSS) $(508,272) $ 3,043,622 $ 236,449
============== ============== ==============
BASIC EARNINGS (LOSS) PER SHARE OF
COMMON STOCK (Note 2) $ (0.08) $ 0.50 $ 0.05
============== ============== ==============
DILUTED EARNINGS (LOSS) PER SHARE OF
COMMON STOCK (Note 2) $ (0.08) $ 0.46 $ 0.04
============== ============== ==============
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 6,566,022 6,148,605 5,056,068
============== ============== ==============
DILUTED WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 6,566,022 6,650,562 5,543,784
============== ============== ==============
The accompanying notes are an integral part of this statement.
13
M. H. MEYERSON & CO., INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
YEAR ENDED JANUARY 31, 2001, 2000 AND 1999
COMMON
STOCK ADDITIONAL
$.01 PAR PAID-IN RETAINED
VALUE CAPITAL EARNINGS
------------- ------------ --------------
SHAREHOLDERS' EQUITY
FEBRUARY 1, 1998 $ 50,478 $ 7,807,752 $ 4,419,406
Options exercised 425 42,075
Net (loss) for year 236,449
------------ ----------- -----------
SHAREHOLDERS' EQUITY
JANUARY 31, 1999 50,903 7,849,827 4,655,855
Private placement 5,000 2,495,000
Options exercised 9,175 1,244,793
Equity in subsidiary 1,378,338
Net income for year 3,043,622
------------ ----------- -----------
SHAREHOLDERS' EQUITY
JANUARY 31, 2000 65,078 12,967,958 7,699,477
Options exercised 1,375 399,406
Treasury stock retired (736) (277,785)
Net (loss) for year (508,272)
Equity in subsidiary 1,694,334
SHAREHOLDERS' EQUITY ------------ ------------ -----------
JANUARY 31, 2001 $ 65,717 $ 14,783,913 $ 7,191,205
============ ============ ===========
The accompanying notes are an integral part of this statement.
14
M. H. MEYERSON & CO., INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
YEARS ENDED JANUARY 31,
2001 2000 1999
------------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ (508,272) $ 3,043,622 $ 236,449
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation 443,030 393,440 372,175
Change in assets and liabilities:
(Increase) decrease in:
Receivable from clearing brokers 6,022,012 (3,693,279) (1,499,563)
Securities owned 673,325 (3,672,634) 2,897,959
Income taxes receivable (3,285,433) 759,758
Other assets 504,318 (1,764,755) 17,122
Increase (decrease) in:
Securities sold, but not yet purchased (357,647) 1,358,627 (1,622,364)
Payable to trading representatives (2,627,491) 2,933,213 1,211,226
Payable to clearing brokers - - (2,868,462)
Other liabilities and accrued expenses (49,029) 1,635,103 51,543
Net cash provided by (used in) ------------ ----------- -----------
operating activities 814,813 233,337 (444,157)
------------ ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments 257,523 (1,795,677) 1,638,250
Investment in subsidiary 1,694,334 1,378,338 -
Purchase of property and equipment (353,690) (30,823) (215,619)
Minority interest in subsidiary 1,242,610 680,852 -
------------ ----------- -----------
Net cash provided by (used in) investing activities 2,840,777 232,690 1,442,631
------------ ----------- -----------
CASH FLOW FROM FINANCING ACTIVITIES:
Treasury stock purchased and retired (278,521) - -
Private placement - 2,500,000 -
Options exercised 400,782 1,253,968 42,500
------------ ----------- -----------
Net cash provided by (used in)
financing activities 122,261 3,753,968 42,500
------------ ----------- -----------
NET INCREASE(DECREASE) IN CASH 3,777,851 4,219,995 1,020,974
CASH, BEGINNING OF YEAR 6,674,095 2,454,100 1,433,126
------------ ----------- -----------
CASH, END OF YEAR $ 10,451,946 $ 6,674,095 $ 2,454,100
SUPPLEMENTAL CASH FLOW INFORMATION ============ =========== ===========
Income taxes paid $ 4,167,696 $ 1,411,000 $ 170,000
============ =========== ===========
Interest paid $ 141,140 $ 145,928 $ 157,669
============ =========== ===========
The accompanying notes are an integral part of this statement.
15
M. H. MEYERSON & CO., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2001, 2000 AND 1999
1. ORGANIZATION
The company is a registered broker-dealer under the Securities and Exchange Act
of 1934 which provides securities trading, underwriting, investment banking and
brokerage services for individuals, institutions and corporations.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements for the periods ended January 31, 2001 and
January 31, 2000 include the parent company and its subsidiary, which is in its
development stages and expects to be operational shortly. Balance sheet amounts
and income statement amounts are as of the same date. All significant
transactions among our businesses have been eliminated.
The preparation of financial statements in conformity with generally accepted
accounting principals 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 financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
SECURITY TRANSACTIONS
Customers' securities transactions are recorded on a settlement date basis,
which is generally three business days after trade date with related revenues
and expenses recorded on a trade date basis. The Company's securities
transactions are recorded on a trade date basis. Securities traded on a national
securities exchange are valued at the last sales price on January 31, 2001, 2000
and 1999. Securities traded on the over-the-counter market are valued at the bid
price for securities owned and at the ask price for securities sold but not yet
purchased. Unrealized gains and losses on security transactions are reflected in
income.
UNDERWRITING REVENUES
Underwriting fees are recorded at the time the underwriting is completed.
INVESTMENTS - NOT READILY MARKETABLE
Investments not readily marketable are valued at estimated fair value as
determined by management. Investments not readily marketable include restricted
securities which cannot be publicly offered or sold unless registration has been
effected under the Securities Act of 1933 or unless the applicable provisions of
Rule 144 of the Securities Act are met.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Office furniture, equipment and
vehicles are depreciated over the estimated useful lives, ranging from 3 to 7
years using accelerated methods. Leasehold improvements are amortized over the
shorter of the remaining life of the lease or the estimated economic life of the
improvements.
INCOME TAXES
The Company has adopted Statement of Financial Accounting Standards ("SFAS") No.
109 "Accounting for Income Taxes". There are no temporary differences between
tax and financial reporting.
16
EARNINGS PER COMMON SHARE
Earnings per common share is calculated using the weighted average number of
common shares outstanding during the period. Shares issuable upon the exercise
of stock options and warrants, that are dilutive, have been included in the
computation of earnings per share based on the modified treasury stock method.
3. COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS
CASH AND CASH EQUIVALENTS
Cash and cash equivalents represent funds on deposit in interest bearing and
non-interest bearing checking accounts and certificates of deposit with a
maturity of thirty days or less.
RECEIVABLE AND PAYABLES FROM/TO CLEARING BROKERS
Receivables and payables from/to clearing brokers are from trading activity and
funds deposited and are unsecured. The funds are available for immediate
withdrawal and are drawn upon as needed. Interest is paid on these funds at
fluctuating rates.
SECURITIES OWNED
Approximately ninety-two percent of securities owned consist of NASDAQ and
over-the-counter stocks and approximately eight percent consist of fixed income
securities.
PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
January 31,
--------------
2001 2000 1999
------------ -------------- -------------
Office furniture and equipment $ 2,026,364 $ 1,672,674 $ 1,641,851
Leasehold improvements 838,375 838,375 838,375
Vehicles 34,994 34,994 34,994
------------ ------------ -----------
2,899,733 2,546,043 2,515,220
Less accumulated depreciation and amortization 1,872,646 1,429,616 1,036,176
------------ ------------ -----------
$ 1,027,087 $ 1,116,427 $ 1,479,044
============ ============ ===========
SECURITIES SOLD, BUT NOT YET PURCHASED
Securities sold but not yet purchased represent obligations of the Company to
deliver the specified securities at some point in the future, thereby creating a
liability to purchase these securities at prevailing market prices in effect at
that time. Approximately ninety-three percent of securities sold, but not yet
purchased consist of NASDAQ and over-the-counter stocks and approximately seven
percent is fixed income securities.
17
There is a market risk associated with these securities if the security price
increases and the securities have to be purchased at a higher price to cover the
positions. There is no margin requirement for these transactions. The Company
seeks to control the risks associated with these positions by closely monitoring
the market fluctuations of the prices for these securities.
PAYABLE TO TRADING REPRESENTATIVES
Payable to trading representatives represents commissions earned by market
makers and retail representatives. Market makers are required to maintain a
balance with the Company equivalent to approximately twenty-five percent of
their net trading positions. The remaining balance of commissions is available
for immediate withdrawal.
OTHER LIABILITIES AND ACCRUED EXPENSES
January 31,
---------------
2001 2000 1999
------------------------ -------------------- ----------------------
Accrued salaries, taxes and fringe benefits $ 40,364 $ 274,476 $ 135,981
Other accrued liabilities 2,747,350 2,562,267 1,065,659
----------- ------------ -----------
$ 2,787,714 $ 2,836,743 $ 1,201,640
=========== ============ ===========
4. RELATED PARTY TRANSACTIONS
Transactions with related parties are summarized as follows:
Year ended January 31,
--------------------------
2001 2000 1999
-------------------- ----------------- --------------------
Maintenance charges paid on space owned by the
principal shareholder (included in rent expense) $ 10,020 $ 10,335 $ 10,440
Rent for space which is leased in the name of the
principal shareholder $ 32,000 $ 38,400 $ 31,315
5. INCOME TAXES
The provision for income taxes is as follows:
Year ended January 31,
--------------------------
2001 2000 1999
--------------- ------------- ------------
Current tax expense(benefit)
Federal $(196,643) $ 1,669,330 $ 220,321
State (19,556) 334,047 -
----------- ------------ ---------
$ (216,199) $ 2,003,377 $ 220,321
=========== ============ =========
18
Reconciliation from the statutory federal income tax rate to the effective tax
rate is as follows:
Year ended January 31,
----------------------
2001 2000 1999
---------------------- -------------------- --------------------
U.S. statutory rate (34.0)% 34.0% 34.0%
State taxes, net of federal benefit (6.7) 6.7 -
Other 26.5 (0.2) 14.2
---------------------- -------------------- --------------------
(14.2)% 40.5% 48.2%
====================== ==================== ====================
6. COMMITMENTS
LEASE COMMITMENTS
The Company signed a 15 year lease for new office space, effective August 1,
1996, and added additional space effective March 15, 1997. In addition the
Company also pays rent for additional space under agreements with the principal
shareholder.
Minimum annual rental and lease commitments for all office space with a
remaining term of one year or more at January 31, 2001 are as follows:
Year ending January 31,
2002 $ 824,725
2003 856,400
2004 856,400
2005 856,400
2006 856,400
Remainder through July 31, 2011 4,894,500
Net minimum lease payments ------------
$ 9,144,825
============
Rent expense for the years ended January 31, 2001, 2000 and 1999 was $1,044,700,
$1,034,680 and $996,603 respectively.
EMPLOYMENT AGREEMENTS
The Company has employment agreements with Martin H. Meyerson, Chairman and
Chief Executive Officer, and Eugene M. Whitehouse, Chief Operating Officer. The
agreements provide for base annual compensation of $600,000 and $200,000
respectively. The agreements were for a three (3) year period from October, 1993
and 2000 respectively and are renewed automatically for succeeding periods of
one year. In the event the Company terminates, without cause, the employees, the
employee shall receive an amount equal to one year's base salary plus accrued
benefits and incentive compensation.
19
7. SUBORDINATED LOANS
The Company entered into a NASD approved subordinated loan agreement with Spear,
Leeds & Kellogg, dated June 3, 1997 and effective August 1, 1997. The amount is
$2,000,000 and matured on August 31, 1999 but was extended to August 31, 2003.
It is subject to monthly interest payments at the rate of half a percent below
the Prime Rate and is unsecured.
8. NET CAPITAL REQUIREMENT
As a registered broker-dealer, the Company is subject to the requirements of
Rule 15c3-1 (the net capital rule) under the Securities Act of 1934. The basic
concept of the rule of liquidity is to require the broker-dealer to have at all
times sufficient liquid assets to cover its current indebtedness. Specifically,
the rule prohibits a broker-dealer from permitting its "aggregate indebtedness"
from exceeding fifteen times its net capital as those terms are defined.
The Company's aggregate indebtedness and net capital were $6,980,066 and
$10,020,976 on January 31, 2001, $9,625,763 and $14,555,034 on January 31, 2000
and $5,168,977 and $9,444,564 on January 31, 1999 respectively.
9. STOCK OPTIONS
The Company established an employee stock option plan administered by the Board
of Directors. Under the plan, options may be granted to employees of the Company
and other qualified individuals up to an aggregate of 3,000,000 shares of Common
stock. As of January 31, 2001, 2,947,553 options have been granted under this
plan, 2,782,500 of which became exercisable as of January 31, 2001 and the
balance will become exercisable at varying times through September 12, 2003. The
outstanding options have exercise prices of $1.10 to $7.8125 per share.
1,136,980 options were exercised and 1,810,573 are outstanding.
During the year, the Company established an additional stock option plan
administered by the Board of Directors. Under this plan, options may be granted
to employees of the Company and other qualified individuals up to an aggregate
of 500,000 shares of Common Stock. To date, no options have been issued under
this plan.
10. STOCK-BASED COMPENSATION
The Company uses the intrinsic value method to account for stock-based employee
compensation plans. Under this method, compensation cost is recognized for stock
option awards only if the quoted market price (or estimated fair market value of
the stock prior to the stock becoming publicly traded) is greater than the
amount the employee must pay to acquire the stock.
The Company has adopted the disclosure-only provisions of SFAS 123. Accordingly,
no compensation cost has been recognized for stock options granted under the
plan. Had compensation cost been determined based on the fair value at the grant
dates for stock option awards consistent with the method of SFAS 123, there
would have been no material effect on the company's net income and earnings per
share.
The exercise price of each option granted under the plan is determined by the
Company's Board of Directors at the time of grant. The exercise price of
incentive stock options must be at least equal to the fair market value of the
Company's stock on the date of the grant.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
20
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The executive officers, directors and key employees of the Company are
as follows:
Name Age Position with Company
---- --- ---------------------
Martin H. Meyerson 70 Chairman, Chief Executive Officer, Chief Financial Officer
and Director
Kenneth J. Koock 58 Vice Chairman and Director
Eugene M. Whitehouse 42 Senior Vice President, Chief Operating Officer, Controller,
Secretary, Treasurer and Director
Jeffrey E. Meyerson 35 Vice President, Trading, and Director(1)
Bertram Siegel, Esq. 63 Director
Martin Leventhal, CPA 64 Director
Alfred T. Duncan 57 Director
- ---------------------------
(1) Jeffrey E. Meyerson is the son of Martin H. Meyerson
BIOGRAPHICAL INFORMATION
Martin H. Meyerson, Chairman, Chief Executive Officer and Chief Financial
Officer
Martin H. Meyerson is the Chairman, Chief Executive Officer, Chief
Financial Officer and a director of the Company and was its President until
1984. Mr. Meyerson was also the President and a director of Bio Recovery
Technology, Inc., a research and development company involved in microbiological
and pollution control products, from 1984 through 1986. He was also the chairman
of the board of Bio Metallics, Inc., also involved in pollution control
products, from 1987 through 1990. Mr. Meyerson graduated from Packard College in
1952, majoring in Business Administration. Since February 1999, he has been
Chairman of the Board of Directors of the Company's EMEY subsidiary.
Kenneth J. Koock, Vice Chairman and Director
Kenneth Koock has been with the Company since 1977. In 1993, Mr. Koock
became a Director of the Company. Mr. Koock received his B.A. degree from Duke
University in 1963 and a law degree in 1966 from St. John's University. He was
president of Bio Metallics, Inc. from 1987 through 1990 and is a member of the
New York State Bar Association. Since February 1999, he has been Vice-Chairman
of the Board of Directors of EMEY.
Eugene M. Whitehouse, Senior Vice President, Chief Operating Officer,
Controller, Secretary, Treasurer and Director
Eugene M. Whitehouse has been associated with the firm since 1983, became
a Vice President and the Company's Controller in 1994, became Senior Vice
President and Chief Operating Officer in 2000, became Secretary in 1998, became
Treasurer in 1999 and became a Director in 1996. He received a B.B.A. degree
from Pace University in 1982, and an M.B.A. from St. Peter's College with a
concentration in MIS in 1994, and a concentration in International Business in
1997. Since February 1999, he has been Chief Financial Officer of EMEY, and has
been a member of the Board of Directors of EMEY since 2000.
21
Jeffrey E. Meyerson, Vice President, Trading and Director
Jeffrey E. Meyerson has been with the Company since 1987. He became
Vice President of the Trading Department in 1989. He received an
Economics/Management degree from Ithaca College in 1987. Mr. Meyerson became a
Director of the Company in 1993. Since November 1999, he has been President, CEO
and a director of EMEY.
Bertram Siegel, Esq., Director
Bertram Siegel became a Director of the Company in 1994. Mr. Siegel is a
partner in the law firm of Siegel and Siegel, and was a member of the Board of
Directors of Bio Metallics, Inc. from 1987 through 1990. He is a member of the
New Jersey and Bergen County Bar Associations, and received his Juris Doctor
degree from Rutgers, the State University of New Jersey in 1963.
Martin Leventhal, CPA, Director
Martin Leventhal graduated from Brooklyn College in 1958 and became a
Certified Public Accountant in 1963. With the exception of time spent in
military service, he has been actively involved in public accounting since his
graduation. In 1971, he founded the firm most recently known as Martin Leventhal
& Company, a CPA firm with approximately 25 employees. In 1997, Martin Leventhal
& Company merged with Weinick, Sanders & Co. to form Weinick, Sanders, Leventhal
& Co., LLP, with approximately 100 employees, of which Mr. Leventhal is the
executive partner. He is a member of the American Institute of Certified Public
Accountants and the New York Society of Certified Public Accountants, for which
he served on numerous committees. He has also held a principal's license in the
securities industry.
Alfred T. Duncan, Director
Alfred T. Duncan has been an independent management consultant since
1992, specializing in financial management for small growth firms. Prior to
1992, he held numerous senior positions with Commodore International, Ltd.
including General Manager of Latin America and Eastern Europe (1990-1991) and
General Manager of U. S. operations (1987-1990). He was President and Chief
Executive Officer of Victor Technologies (1986-1987) and has held financial
management positions with A. M. International, Abbott Laboratories, First
National Bank of Chicago, and Ford Motor Company. He is currently Executive Vice
President and Chief Financial Officer of On Site Sourcing Inc. He received an
M.B.A. degree from Harvard University in 1972 and a B.S.C.E. degree from Duke
University in 1965.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
During the fiscal year ended January 31, 2001, based upon an
examination of the public filings, all of the Company's officers and directors
timely filed reports on Form 4.
22
ITEM 11. EXECUTIVE COMPENSATION.
The following table sets forth as of the years ended January 31, 2001,
2000, and 1999 the compensation we paid for services rendered in all capacities
to all executive officers whose compensation exceeded $100,000 during these
years:
Long Term
Compensation
Name and Principal Position Securities
Fiscal Underlying
Year Salary Bonus Options/SARS(#)
------ -------- ------- ---------------
Martin H. Meyerson, Chairman....................... 2001 $ 600,000 $ 200,000 24,000
2000 600,000 200,000 -
1999 512,500 - -
Kenneth J. Koock, Vice Chairman.................... 2001 1,307,558 - 1,500
2000 1,149,800 - 22,500
1999 434,800 - -
Michael Silvestri, President and Chief
Operating Officer(1)........................ 2001 142,095 50,000 -
2000 200,018 200,000 -
1999 225,018 100,000 115,000
Eugene M. Whitehouse, Senior Vice President and
Chief Operating Officer.................... 2001 177,002 75,000 76,238
2000 146,712 - -
1999 110,006 57,500 50,000
Jeffrey E. Meyerson, Vice President, Trading....... 2001 336,578 - 24,000
2000 207,000 - -
1999 220,000 - -
- ---------------------------
(1) Mr. Silvestri retired during fiscal year 2001.
This table does not specify "other compensation" since it is less than 10% of
the total salary and bonus reported for each officer. Mr. Koock does not receive
a base salary. His compensation is based on commissions earned. Mr. Silvestri,
Mr. Whitehouse, and Mr. J. Meyerson earn compensation based on commissions
earned in addition to their contracted salary and incentive amounts.
23
OPTION GRANTS IN LAST FISCAL YEAR
Number of % of Total Exercise Expiration Date Potential Realizable Value at
Securities Options Price($/sh) Assumed Annual Rates of
Underlying Granted to Stock Price Appreciation for
Options Employees in Term ($)
Name Granted Fiscal Year 5% 10%
Martin H. Meyerson 22,500 3.4 4.40 8/1/10 675 59,625
1,500 0.2 2.50 1/1/04 975 1,680
Eugene M. Whitehouse 75,000 11.3 4.53 2/1/05 0 0
1,238 0.2 2.50 1/1/04 805 1,387
Jeffrey E. Meyerson 22,500 3.4 4.00 8/1/10 9,450 68,625
1,500 0.2 2.50 1/1/04 975 1,680
OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table contains information concerning (i) option
exercises during the fiscal year ended January 31, 2001 by executive officers
named in the Summary Compensation Table, and (ii) the number and value, at
January 31, 2001 of unexercised options held by executive officers named in the
Summary Compensation Table:
Value of
Underlying Unexercised In-the-
Unexercised Money Options at
Options at FY-End FY-End
Shares Acquired on (#) (Exercisable/ (Exercisable/
Name Exercise (#) Value Realized ($) Unexercisable) Unexercisable)($)
Martin H. Meyerson - - 297,520/0 553,699/0
Kenneth J. Koock 5,000 7,500 289,000/0 399,375/0
Eugene M. Whitehouse - - 26,238/50,000 1,857/0
Jeffrey E. Meyerson 5,000 7,500 144,000/0 182,344/0
EXECUTIVE COMPENSATION COMMITTEE REPORT
Compensation Policies. The principal goal of our compensation program as
administered by the Board of Directors is to help us attract, motivate and
retain the executive talent required to develop and achieve our strategic and
operating goals with a view to maximizing shareholder value. The key elements of
this program and the objectives of each element are as follows:
Base Salary. Base salaries paid to our executive officers are intended to
be competitive with those paid to executives holding comparable positions in the
marketplace. Individual performance and our performance are considered when
24
setting salaries within the range for each position. Annual reviews are held and
adjustments are made based on attainment of individual goals in a manner
consistent with operating and financial performance.
Bonuses. Annual cash bonuses are intended to motivate performance by
creating the potential to earn annual incentive awards that are contingent upon
personal and business performance. We set goals of revenue and profitability for
each group.
Long Term Incentives. We provide our executive officers with long-term
incentive compensation through grants of stock options under our stock option
plan. The grant of stock options aligns the executive's interests with those of
our stockholders by providing the executive with an opportunity to purchase and
maintain an equity interest in our stock and to share in the appreciation of its
value.
CEO's Compensation. As discussed in the Executive Compensation Table, Mr.
Meyerson received a base salary of $600,000 for fiscal 2001 and received a bonus
of $200,000. The factors involved in determining our CEO's compensation are our
revenues and profits, his lengthy experience and business acumen, his
responsibilities, and the efforts exerted by him in performance of his duties.
Reported upon by the Board of Directors:
Martin H. Meyerson Eugene M. Whitehouse
Kenneth J. Koock Bertram Siegel
Jeffrey E. Meyerson Martin Leventhal
Alfred T. Duncan
EMPLOYMENT AGREEMENTS
We have employment agreements with Martin H. Meyerson and Eugene M.
Whitehouse. The agreements provide for base annual compensation of $600,000 and
$200,000 respectively, plus certain incentive compensation. The agreements
expire in October, 2000 and October 2003 respectively and are automatically
renewable for periods of one (1) year. In the event we terminate without cause
the employment of either Mr. Meyerson or Mr. Whitehouse (except by causing
non-renewal of their employment agreement), they would receive a severance
payment equal to one year's base salary plus accrued benefits and incentive
compensation.
SHARE PERFORMANCE GRAPH
[GRAPHIC OMITTED]
25
Nasdaq Financial Stocks Nasdaq US Market M.H. Meyerson & Co., Inc.
----------------------- ---------------- -------------------------
1/31/96 100.000 100.000 100.000
1/31/97 133.119 131.109 203.125
1/31/98 187.841 154.690 184.375
1/30/99 189.626 242.142 115.625
1/29/00 177.464 378.429 225.000
1/31/01 206.552 265.458 187.500
The above graph shows changes over the past five year period ending January 31,
2001 of $100 invested in: (1) the Nasdaq Stock Market, (2) The Nasdaq Financial
Stocks, and (3) our Common Stock.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth information known to Meyerson, as of April
25, 2001, relating to the beneficial ownership of shares of Common Stock by:
each person who is known by the Company to be the beneficial owner of more than
five percent of the outstanding shares of Common Stock; each director; and all
executive officers and directors as a group.
Percent of
Number of Shares Shares
Name and Address of Beneficially Beneficially
Beneficial Owner Owned Owned
------------------- ----------------- ------------
Martin H. Meyerson 1,922,190 27.9%
Electronic Trading Group, L.L.C.
111 Broadway
New York NY 10006 908,209 13.8%
Dimensional Fund Advisors Inc.
1299 Ocean Avenue
Santa Monica, CA 90401 404,300 6.1%
Kenneth J. Koock 381,625 5.6%
Jeffrey E. Meyerson 334,000 5.0%
Eugene M. Whitehouse 151,238 2.3%
Bertram Siegel, Esq 110,500 1.7%
Martin Leventhal, CPA 47,500 *
Alfred T. Duncan 40,000 *
All directors and executive officers as
a group (7 people) 2,987,053 39.8%
- ----------
* Less than 1%
26
The number of shares beneficially owned by Martin H. Meyerson includes 297,520
shares of common stock issuable upon exercise of currently exercisable options.
The number of shares beneficially owned by Kenneth J. Koock includes 289,000
shares of common stock issuable upon exercise of currently exercisable options.
The number of shares beneficially owned by Jeffrey E. Meyerson includes 144,000
shares of common stock issuable upon exercise of currently exercisable options
and 50,000 shares of common stock owned by trusts for the benefit of Jeffrey E.
Meyerson's children. Mr. Meyerson is the trustee of such trusts.
The number of shares beneficially owned by Eugene M. Whitehouse include 75,000
shares of common stock issuable upon exercise of currently exercisable options.
The number of shares beneficially owned by Bertram Siegal includes 52,500 shares
of common stock issuable upon exercise of currently exercisable options.
The number of shares beneficially owned by Martin Leventhal includes 32,500
shares of common stock issuable upon exercise of currently exercisable options.
The number of shares beneficially owned by Alfred T. Duncan includes 40,000
shares of common stock issuable upon exercise of currently exercisable options.
The number of shares beneficially owned by all of our officers and directors are
a group includes 930,520 shares of common stock issuable upon exercise of
currently exercisable options.
Unless otherwise stated, the business address of each of the named individuals
in this table is c/o M.H. Meyerson & Co., Inc., 525 Washington Boulevard, Jersey
City, New Jersey 07310.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding relationships and related transactions is
disclosed in the notes to financial statements included in Item 7 of this
report.
ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit Number Description of Exhibit
- -------------- ----------------------
3.1 Articles of Incorporation (1)
3.2 Bylaws (1)
4.1 Common Stock Specimen (1)
10.1 Employment Agreement between the
Company and Martin H. Meyerson (1)
10.2 Employment Agreement between the
Company and Eugene M. Whitehouse
11 Calculation of Earnings Per Share of the
Company
- ----------
(1) Incorporated herein by reference from the Registration Statement number
33-70566 filed by the Company on Form SB-2
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the last quarter of
the fiscal year ended January 31, 2001.
27
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
M. H. MEYERSON & CO., INC.
(Registrant)
By: /s/ Eugene M. Whitehouse
-------------------------------------------------
Eugene M. Whitehouse
Senior Vice President and Chief Operating Officer
Date: 4/26/01
In accordance with the Exchange Act, this Report has been signed below
by the following persons on behalf of the Registrant and in the capacities
indicated and on the dates indicated.
Signature Title Date
--------- ----- ----
Chairman, Chief Executive
Officer, Chief Financial
/s/ Martin H. Meyerson Officer and Director 4/26/01
- -------------------------
Martin H. Meyerson
/s/ Kenneth J. Koock Vice Chairman and Director 4/26/01
- -------------------------
Kenneth J. Koock
Vice President, Trading,
/s/ Jeffrey E. Meyerson and Director 4/26/01
- -------------------------
Jeffrey E. Meyerson
Senior Vice President, Chief
Operating Officer, Controller,
Treasurer, Secretary,
/s/ Eugene M. Whitehouse and Director 4/26/01
- -------------------------
Eugene M. Whitehouse
/s/ Bertram Siegel Director 4/26/01
- -------------------------
Bertram Siegel, Esq.
/s/ Martin Leventhal Director 4/26/01
- -------------------------
Martin Leventhal, CPA
/s/ Alfred T. Duncan Director 4/26/01
- -------------------------
Alfred T. Duncan
28