-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GjIzc47tlYmU6/Jfvd5rKyS7YcfvV6jaHONeKIqmg/YlVQg8k5ZlP+sq151J4CwC MyHTSKtiIE5K8OLUShzsQA== 0000891554-95-000186.txt : 19951119 0000891554-95-000186.hdr.sgml : 19951119 ACCESSION NUMBER: 0000891554-95-000186 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BULL & BEAR GROUP INC CENTRAL INDEX KEY: 0000052234 STANDARD INDUSTRIAL CLASSIFICATION: SECURITY BROKERS, DEALERS & FLOTATION COMPANIES [6211] IRS NUMBER: 131897916 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-09667 FILM NUMBER: 95592103 BUSINESS ADDRESS: STREET 1: 11 HANOVER SQ CITY: NEW YORK STATE: NY ZIP: 10005 BUSINESS PHONE: 2127850900 MAIL ADDRESS: STREET 1: 11 HANOVER SQ CITY: NEW YORK STATE: NY ZIP: 10005 10-Q 1 QUARTERLY REPORT As filed with the Securities and Exchange Commission on November 14, 1995 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 September 30, 1995 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Transition Period From _____________ to ____________ For Quarter Ended September 30, 1995 Commission File Number 0-9667 BULL & BEAR GROUP, INC. (Exact name of registrant as specified in its charter) Delaware 13-1897916 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 11 Hanover Square, New York, New York 10005 (Address of principal executive offices) (Zip Code) 212-785-0900 (Company's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] The number of shares outstanding of each of the registrant's classes of common stock, as of October 31, 1995, were as follows: Class A Common Stock non-voting, par value $.01 per share - 1,229,152 shares Class B Common Stock voting, par value $.01 per share - 20,000 shares BULL & BEAR GROUP, INC. FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1995 INDEX
Page Number ------ PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets - (Unaudited) September 30, 1995 and December 31, 1994 3 Consolidated Statements of Income (Loss) - (Unaudited) Three and Nine Months Ended September 30, 1995 and September 30, 1994 4 Consolidated Statements of Changes in Shareholders' Equity - (Unaudited) Nine Months Ended September 30, 1995 and September 30, 1994 5 Consolidated Statements of Cash Flows - (Unaudited) Nine Months Ended September 30, 1995 and September 30, 1994 6 Notes to Consolidated Financial Statements (Unaudited) 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 13 PART II. OTHER INFORMATION Item 5. Other Information 14 Item 6. Exhibts and Reports on Form 8-K 14 Management's Representation and Signatures 15 2
BULL & BEAR GROUP, INC. CONSOLIDATED BALANCE SHEETS (Unaudited)
September 30, December 31, 1995 1994 ------------- ------------ ASSETS Current Assets: Cash and cash equivalents $1,392,776 $2,316,040 Marketable securities (Note 2) 1,209,374 183,534 Management, distribution and shareholder administrative fees receivable 145,889 160,567 Interest, dividends and other receivables 256,098 215,854 Prepaid expenses and other assets 321,564 234,269 ---------- ---------- Total Current Assets 3,325,701 3,110,264 ---------- ---------- Real estate held for investment, net 308,880 315,388 Furniture and fixtures, net 216,061 199,760 Excess of cost over net book value of subsidiaries, net 670,513 505,352 Other 119,175 109,477 ---------- ---------- 1,314,629 1,129,977 ---------- ---------- Total Assets $4,640,330 $4,240,241 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable $ 165,668 $ 197,523 Accrued expenses 202,172 118,919 Other 13,580 14,100 ---------- ----------- Total Current Liabilities 381,420 330,542 ---------- ----------- Shareholders' Equity: (Notes 3, 4, 5) Common Stock, $.01 par value Class A, 10,000,000 shares authorized; 1,229,152 shares in 1995 and 1,503,152 shares in 1994 issued and outstanding 12,292 15,032 Class B, 20,000 shares authorized; 20,000 shares issued and outstanding 200 200 Additional paid-in capital 6,206,536 6,497,796 Retained earnings (deficit) (2,018,181) (2,298,329) Unrealized gains on marketable securities (Notes 1, 2) 58,063 -- Notes receivable for common stock issued -- (305,000) ---------- ---------- Total Shareholders' Equity 4,258,910 3,909,699 ---------- ---------- Total Liabilities and Shareholders' Equity $4,640,330 $4,240,241 ========== ==========
See accompanying notes to consolidated financial statements. 3 BULL & BEAR GROUP, INC. CONSOLIDATED STATEMENTS OF INCOME (LOSS) (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, --------------------------- --------------------------- 1995 1994 1995 1994 ---------- ---------- ----------- ----------- Revenues: Management, distribution and shareholder administrative fees $ 850,023 $ 910,987 $2,516,320 $2,938,627 Brokerage fees and commissions 496,937 485,159 1,352,615 1,393,385 Dividends, interest and other 16,003 30,675 110,223 20,158 ---------- ---------- ---------- ---------- 1,362,963 1,426,821 3,979,158 4,352,170 ---------- ---------- ---------- ---------- Expenses: General and administrative (note 7) 982,146 856,767 2,681,517 2,504,849 Marketing 143,589 293,772 501,199 1,419,990 Clearing and brokerage charges 158,244 136,185 418,563 409,080 Amortization and depreciation 20,644 24,084 69,643 70,852 ---------- ---------- ---------- ---------- 1,304,623 1,310,808 3,670,922 4,404,771 ---------- ---------- ---------- ---------- Income (loss) before income taxes 58,340 116,013 308,236 (52,601) Income taxes (note 6) 7,446 22,371 28,088 30,310 ---------- ---------- ---------- ---------- Net income (loss) $ 50,894 $ 93,642 $ 280,148 $ (82,911) ========== ========= ========= ========== Per share data: Primary and fully diluted Net income (loss) $.03 $.06 $.18 $(.05) ==== ==== ==== ===== Average shares outstanding: Primary 1,572,375 1,597,832 1,577,525 1,523,152 ========= ========= ========= ========= Fully diluted 1,577,862 1,597,832 1,577,862 1,523,152 ========= ========= ========= =========
See accompanying notes to the consolidated financial statements. 4 BULL & BEAR GROUP, INC. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY Nine Months Ended September 30, 1995 and 1994 (Unaudited)
Notes Unrealized Additional Receivable Retained Gains On Total Class A Class B Class A Class B Paid-in- for Common Earnings Marketable Shareholders' Common Common Common Common Capital Stock Issued (Deficit) Securities Equity ------ ------ ------ ------ ---------- ------------ --------- ---------- ------- Nine Months Ended September 30, 1994 Balance, January 1, 1994 1,498,152 20,000 $14,982 $200 $6,491,596 $ (325,000) $(2,381,789) $ -- $3,799,989 Proceeds from issuance of Class A Common Stock, par value $.01 5,000 -- 50 -- 6,200 -- -- -- 6,250 Net loss -- -- -- -- -- -- (82,911) -- (82,911) --------- ------ ------- ---- ---------- ---------- ----------- -------- ---------- Balance, September 30, 1994 1,503,152 20,000 $15,032 $200 $6,497,796 $ (325,000) $(2,464,700) $ -- $3,723,328 ========= ====== ======= ==== ========== ========== =========== ========= ========== Nine Months Ended September 30, 1995 Balance, January 1, 1995 1,503,152 20,000 $15,032 $200 $6,497,796 $ (305,000) $(2,298,329) $ -- $3,909,699 Voiding of exercise of 1993 stock options and cancellation of related notes receivable (280,000) -- (2,800) -- (297,200) 300,000 -- -- -- Proceeds from issuance of Class A Common Stock, par value $.01 6,000 -- 60 -- 5,940 -- -- -- 6,000 Collection note receivable -- -- -- -- -- 5,000 -- -- 5,000 Net income -- -- -- -- -- -- 280,148 -- 280,148 Unrealized gains on marketable securities -- -- -- -- -- -- -- 58,063 58,063 --------- ------ ------- ---- ---------- ---------- ----------- -------- ---------- Balance, September 30, 1995 1,229,152 20,000 $12,292 $200 $6,206,536 $ -- $(2,018,181) $ 58,063 $4,258,910 ========= ====== ======= ==== ========== ========== =========== ======== ========== See accompanying notes to the consolidated financial statements.
5 BULL & BEAR GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended September 30, ----------------------------------- 1995 1994 ----------- ------------ Cash Flows from Operating Activities: Net income (loss) $ 280,148 $ (82,911) ----------- ------------ Adjustments to reconcile net income to net cash provided by (used in) Operating Activities: Depreciation and amortization 69,643 70,852 Increase in cash value of life insurance (22,500) -- Other (29,183) 22,432 (Increase) decrease in: Management, distribution and shareholder administrative fees receivable 14,678 33,767 Interest, dividends and other receivables (40,244) (19,006) Prepaid expenses and other assets (87,295) 18,865 Other 12,802 3,492 Increase (decrease) in: Accounts payable (31,855) (121,861) Accrued expenses 83,253 29,884 Other (520) (802) Minority Interest -- (9,195) ----------- ------------ Total adjustments (31,221) 28,428 ----------- ------------ Net cash provided by (used in) Operating Activities 248,927 (54,483) ----------- ------------ Cash Flows from Investing Activities: Proceeds from sales of investments 275,331 1,454,000 Purchases of investments (1,213,924) (1,162,478) Capital expenditures (52,098) (256,231) Purchase of assets of acquired business (192,500) -- ----------- ------------ Net cash provided by (used in) Investing Activities (1,183,191) 35,291 ----------- ------------ Cash Flows from Financing Activities: (Issuance) collection of note receivable 5,000 (80,000) Proceeds from issuance of Class A Common Stock 6,000 6,250 ----------- ------------ Net cash provided by (used in) Financing Activities 11,000 (73,750) ----------- ------------ Net increase (decrease) in cash and cash equivalents (923,264) (92,942) Cash and cash equivalents: At beginning of period 2,316,040 1,522,059 ----------- ----------- At end of period $1,392,776 $ 1,429,117 ========== =========== Supplemental disclosure: The Company did not pay any interest or Federal income taxes during the nine months ended September 30, 1995 or 1994.
See accompanying notes to the consolidated financial statements. 6 BULL & BEAR GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 1995 and 1994 (Unaudited) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF BUSINESS Bull & Bear Group, Inc. ("Company"), through its subsidiaries, primarily provides investment management, distribution and shareholder administrative services for mutual funds and discount brokerage services for individual and institutional investors. BASIS OF PRESENTATION The consolidated financial statements include the accounts of Bull & Bear Group, Inc. and all of its majority-owned subsidiaries. Substantially all intercompany accounts and transactions have been eliminated. CASH AND CASH EQUIVALENTS Investments in money market funds are considered to be cash equivalents. At September 30, 1995 and December 31, 1994, the Company and subsidiaries had invested approximately $1,138,600 and $1,672,400, respectively, in an affiliated money market fund. MARKETABLE SECURITIES Marketable securities held by the Company's broker/dealer subsidiaries are valued at market with the unrealized gain or loss included in earnings. For the non-broker/dealer subsidiary companies, marketable securities are considered to be "available-for-sale" and are recorded at market value with the unrealized gain or loss included in stockholders' equity. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK In the normal course of business, the Company's activities involve the execution and settlement of customer transactions. These activities may expose the Company to risk of loss in the event the customer is unable to fulfill its contracted obligations, in which case the Company may have to purchase or sell financial instruments at prevailing market prices. Any loss from such transactions is not expected to have a material effect on the Company's financial statements. BROKERAGE INCOME AND EXPENSES Brokerage commission and fee income and clearing and brokerage expenses are recorded on a settlement date basis. The difference between recording such income and expenses on a settlement date basis as opposed to trade date, as required by generally accepted accounting principles, is not material to the consolidated financial statements. INCOME TAXES The Company and its wholly-owned subsidiaries file consolidated income tax returns. Deferred income taxes are provided for timing differences between financial and tax reporting. RECLASSIFICATIONS Certain reclassifications of the 1994 financial statements have been made to conform to the 1995 presentation. 7 BULL & BEAR GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 1995 and 1994 (Unaudited) REAL ESTATE HELD FOR INVESTMENT AND EQUIPMENT Real estate held for investment is recorded at cost and is depreciated on a straight-line basis over its estimated useful life. At September 30, 1995 and December 31, 1994, accumulated depreciation amounted to $120,951 and $114,444, respectively. Equipment, furniture and fixtures are recorded at cost and are depreciated on the straight-line basis over their estimated useful lives, 5 to 10 years. At September 30, 1995 and December 31, 1994, accumulated depreciation amounted to $664,525 and $628,728, respectively. EXCESS OF COST OVER NET BOOK VALUE OF SUBSIDIARIES The excess of cost over net book value of subsidiaries is capitalized and amortized over five and forty years using the straight-line method. At September 30, 1995 and December 31, 1994, accumulated amortization amounted to $538,609 and $476,431, respectively. MARKETING COSTS Costs in connection with the sale of the Funds' shares are charged to operations as incurred. EARNINGS PER SHARE Primary and fully diluted earnings per share for the three and nine months ended September 30, 1995 is determined by dividing net income by the weighted average number of common shares outstanding after giving effect for common stock equivalents arising from stock options assumed converted to common stock. 2. MARKETABLE SECURITIES At September 30, 1995, marketable securities consisted of: Market Cost Value ---------- ---------- Broker/dealer subsidiaries - at market Affiliated mutual funds $ 53,523 $ 55,615 U.S. Treasury Note due 7/31/97 200,031 198,750 ---------- ---------- 253,554 254,365 ---------- ---------- Other companies Available-for-sale securities - at market Equity securities 127,728 167,740 Unaffiliated mutual funds 22,384 22,269 U.S. Treasury Notes due 5/15/97-6/30/99 746,834 765,000 ---------- ---------- 896,946 955,009 ---------- ---------- $1,150,500 $1,209,374 ========== ========== Unrealized gains on available-for-sale securities of $58,063 is included in the stockholders' equity on the balance sheet At December 31, 1994, marketable securities consisted of: Broker/dealer subsidiaries - at market Equity securities $ 63,276 $ 110,558 Affiliated mutual funds 59,527 53,941 Other companies Available-for-sale securities - at market Unaffiliated mutual funds 19,035 19,035 ----------- ----------- $ 141,838 $ 183,534 =========== =========== 8 BULL & BEAR GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 1995 and 1994 (Unaudited) 3. SHAREHOLDERS' EQUITY The Class A and Class B Common Stock are identical in all respects except for voting rights, which are vested solely in the Class B Common Stock. The Company also has 1,000,000 shares of Preferred Stock, $.01 par value, authorized. As of September 30, 1995 and December 31, 1994, none of the Preferred Stock was issued. 4. NET CAPITAL REQUIREMENTS The Company's broker/dealer subsidiaries are member firms of the National Association of Securities Dealers, Inc. and are registered with the Securities and Exchange Commission as broker/dealers. Under the Uniform Net Capital Rule (Rule 15c3-1 under the Securities Exchange Act of 1934), a broker/dealer subsidiary must maintain minimum net capital, as defined, of not less than (a) $250,000 or, when engaged solely in the sale of redeemable shares of registered investment companies, $25,000, or (b) 6-2/3% of aggregate indebtedness, whichever is greater; and a ratio of aggregate indebtedness to net capital, as defined, of not more than 15 to 1. At September 30, 1995, these subsidiaries had net capital of approximately $513,418 and $230,954; net capital requirements of approximately $250,000 and $25,000; excess net capital of approximately $263,418 and $205,954; and the ratios of aggregate indebtedness to net capital were approximately .45 to 1 and 1.06 to 1, respectively. 5. STOCK OPTIONS The Company has an Incentive Stock Option Plan ("Stock Option Plan"), which provides for the granting of options to officers, directors and key employees for the purchase of shares of Class A Common Stock of the Company. The plan provides for the issuance of options with respect to 500,000 shares and the option price may not be less than the greater of 100% of the fair market value or the par value of such shares on the day of the grant. Options granted under the Stock Option Plan must be exercised during a period not more than ten years from the date of grant and in installments at such time and in such amounts as the Board of Directors may determine. If the recipient of any options owns 10% or more of the total combined voting power of all classes of stock, the option price must be 110% of the fair market value and must be exercised within five years of the date of grant. Stock option activity from January 1, 1994 to September 30, 1995 is summarized as follows: Number Option Price of Shares Per Share Range --------- --------------- Outstanding options at December 31, 1993 165,000 $1.00 - $2.25 Granted 23,000 $1.50 Exercised (5,000) $1.25 Cancelled (37,000) $1.00 - $2.25 ------- Outstanding options at December 31, 1994 146,000 $1.00 - $1.875 Voided exercise of previously issued stock 280,000 $1.00 - $1.10 options (see below) Granted 29,000 $1.625 - $2.00 Cancelled (30,000) $1.00 - $1.875 ------- Outstanding options at September 30, 1995 425,000 $1.00 - $2.00 ======== 9 BULL & BEAR GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 1995 and 1994 (Unaudited) At September 30, 1995, options to purchase 378,000 shares were exercisable. In addition, there were 20,000 non-qualified stock options outstanding, of which none were exercisable as of September 30, 1995. In connection with the exercise of options and related tax expense, the Company received from certain officers and directors notes with an interest rate of 4.86% per annum payable the earlier of November 1, 1998 or within 60 days after termination of employment. The balance of the notes was $385,000 of which $305,000 was classified as notes receivable for common stock issued and $80,000 included in other assets at December 31, 1994. Accrued interest due on the notes was $17,049 at December 31, 1994. In connection with the action by Maxus plaintiffs described in Note 8, the Company's Board of Directors determined, at a meeting of the board held on November 6, 1995, that the 1993 exercise of the 280,000 incentive stock options by certain officers should be voided and the promissory notes given in consideration ("1993 Notes") and Class A shares issued therefor ("1993 Shares") canceled. The cancellation of the 1993 Notes, with interest, and the 1993 Shares, is reflected at September 30, 1995, and reduced earnings by $27,945, or $.02 per share, for the three months and the nine months ended September 30, 1995. 6. INCOME TAXES The provision for income taxes charged to operations for the nine months ended September 30, 1995 and 1994 was as follows: 1995 1994 ---- ---- Current State and local $28,088 $30,310 Federal -- -- ------- ------- $28,088 $30,310 ======= ======= Deferred tax assets (liabilities) are comprised of the following at September 30, 1995 and December 31, 1994: 1995 1994 ---- ---- Unrealized loss (gain) on investments $ (20,000) $ 19,500 Net operating loss carryforwards 456,600 617,300 --------- --------- Total deferred tax assets 436,600 636,800 Deferred tax asset valuation allowance (436,600) (636,800) --------- --------- Net deferred tax assets $ -- $ -- ========= ========= The change in the valuation allowance for the nine months ended September 30, 1995 was the result of the utilization of net operating loss carryforwards and the increase in the unrealized gain on investments. The provision for income taxes differs from the amount of income taxes determined by applying the applicable U.S. statutory Federal tax rates to pre-tax income as a result of utilization of net operating loss carryforwards. 10 BULL & BEAR GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 1995 and 1994 (Unaudited) At December 31, 1994, the Company had net operating loss carryforwards for Federal income tax purposes of approximately $1,623,200, of which $11,500, $1,384,900, $180,100 and $46,700 expire in 2002, 2004, 2005 and 2006, respectively. In addition, the Company has a capital loss carryforward for Federal income tax purposes of approximately $32,100, which expires in 1995. 7. RELATED PARTIES All management and distribution fees are from providing services to the Funds, pursuant to written agreements that set forth the fees to be charged for these services. These agreements are subject to annual review and approval by each Fund's Board of Directors and a majority of the Fund's non-interested directors. Shareholder administrative fees represent reimbursement of costs incurred by subsidiaries of the Company on behalf of the Funds. Such reimbursement amounted to $312,259 and $368,190 for the nine months ended September 30, 1995, and 1994, respectively. In connection with management services, the Company's investment manager, Bull & Bear Advisers, Inc., waived or reimbursed management fees to the Funds in the amount of $222,604 and $191,932 for the nine months ended September 30, 1995 and 1994, respectively, and are included in general and administrative expenses in the Statement of Income (Loss). Certain officers of the Company also serve as officers and/or directors of the Funds. Commencing August 1992, the Company obtained a key man life insurance policy on the life of the Company's Chairman which provides for the payment of $1,000,000 to the Company upon his death. As of September 30, 1995, the policy had a cash surrender value of approximately $39,175 and is included in other assets in the balance sheet. The Company's discount brokerage subsidiary received brokerage commissions of approximately $130,923 and $89,355 from the Funds for the nine months ended September 30, 1995 and 1994, respectively. 8. COMMITMENTS AND CONTINGENCIES The Company has a lease for approximately 9,300 square feet of office space. The rent is approximately $116,250 per annum plus $23,250 per annum (effective September 1, 1995 increased to $32,550 per annum) for electricity. The lease expires December 31, 1996 and is cancelable at the option of the Company on three months' notice. In addition, the Company's discount brokerage subsidiary has a branch office in Boca Raton, Florida consisting of approximately 1,000 square feet. The rent is approximately $20,800 per annum and is cancelable at the option of the Company on six months' notice. In connection with its lawsuit successfully collecting principal and interest on a promissory note issued to the Company to purchase shares of the Company's stock in 1985, the Company commenced an action against the maker of the note to recover legal and other expenses, which is pending and the ultimate outcome is uncertain at this time. In 1991, the maker of the note commenced an action against the Company and one of its officers seeking $1,000,000 in damages. With settlement discussions pending, the parties have entered into standstill agreements with respect to currently outstanding claims. From time to time, the Company and/or its subsidiaries are threatened or named as defendants in litigation arising in the normal course of business. The Company, its present directors, and certain former and present officers are defendants in a lawsuit brought on April 24, 1995 by Maxus Investment Group, Maxus Capital Partners, Maxus Asset Management, Inc., and Maxus Securities Corp. as plaintiffs claiming to collectively 11 BULL & BEAR GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 1995 and 1994 (Unaudited) own or control 357,500 shares, or approximately 29%, of the Class A non-voting common stock of the Company. The action, seeking declaratory and injunctive relief, was filed in the federal district court for the Southern District of New York and purports to be brought on the plaintiffs' own behalf and derivatively on behalf of the Company. The complaint alleges that defendants breached their fiduciary duties to the Company regarding the adoption and implementation of the Company's 1990 incentive stock option plan ("ISOP") and the Company's 1986 purchase of an office building. Plaintiffs also allege that all the individual defendants have received excessive compensation and other unspecified benefits. The complaint seeks rescission of the 1990 ISOP and an accounting, the imposition of a constructive trust and restitution regarding all allegedly improper benefits. The Company believes that the lawsuit is without merit and intends to defend it vigorously. As of September 30, 1995, neither the Company nor any of its subsidiaries was involved in any other litigation that, in the opinion of management, would have a material adverse impact on the Consolidated Financial Statements. In July 1994, the Company entered into a Death Benefit Agreement ("Agreement") with the Company's Chairman. The Agreement provides for annual payments to his wife following his death amounting to 80% of his average annual salary for the three year period prior to his death subject to certain adjustments. The Company's obligations under the Agreement are not secured and will terminate if he leaves the Company's employ under certain conditions. 12 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Three Months Ended September 30, 1995 compared to Three Months Ended September 30, 1994 Drastic declines in the securities markets can have a significant effect on the Company's business. Volatile stock markets may affect management and distribution fees earned by the Company's subsidiaries. If the market value of securities owned by the Funds declines, shareholder redemptions may occur, either by transfer out of the equity Funds and into the fixed income Funds, which generally have lower management and distribution fee rates than the equity Funds, or by transfer out of the Funds entirely. Lower asset levels in the Funds may also cause or increase reimbursements to the Funds pursuant to expense limitations as described in Note 7 of the financial statements. In addition, volatile stock markets could have a significant effect on the brokerage commissions earned by BBSI by affecting the number of transactions processed. Total revenues decreased $63,858 or 4% which was primarily due to a decrease in management, distribution and shareholder administrative fees of $60,964 because of a lower level of net assets under management. Brokerage fees and commissions increased $11,778 or 2% because of an increased level of customer transactions processed. Net assets under management were approximately $251.6 million at June 30, 1994, $255.6 million at September 30, 1994, $237.5 million at June 30, 1995 and $247.2 million at September 30, 1995. Dividends, interest and other income increased $14,672 due to lower earnings on the Company's short term investments. Total expenses decreased $6,185 primarily as a result of a decrease in marketing expenses of $150,183. General and administrative expenses increased $125,379 or 15% because of an increase in the Funds' expense guaranty due to lower levels of net assets under management, higher equipment costs, and professional services. Clearing and brokerage charges increased $22,059 or 16% because of an increased level of customer transactions processed. Net income for the period was $50,894 or $.03 per share as compared to net income of $93,642 or $.06 per share for 1994. Nine Months Ended September 30, 1995 compared to Nine Months Ended September 30, 1994 Total revenues decreased $373,012 or 9% which was primarily due to a decrease in management, distribution and shareholder administrative fees of $422,307 or 14% because of a lower level of net assets under management. Brokerage fees and commissions decreased $40,770 or 3% because of a decreased level of customer transactions processed. Net assets under management were approximately $251.6 million at June 30, 1994, $255.6 million at September 30, 1994, $236.1 million at December 31, 1994, $235.1 million at March 31, 1995, $237.5 million at June 30, 1995 and $247.2 million at September 30, 1995. Dividends, interest and other income increased $90,065 due to higher earnings on the Company's short term investments. Total expenses decreased $733,849 or 17% primarily as a result of a decrease in marketing expenses of $918,791. General and administrative expenses increased $176,668 or 7%. Clearing and brokerage charges decreased $9,483 or 2% because of a decreased level of customer transactions processed. Net income for the period was $280,148 or $.18 per share as compared to net loss of $82,911 or $.05 per share for 1994. Liquidity and Capital Resources The following table reflects the Company's consolidated working capital, total assets, long term debt and shareholders' equity as of the dates indicated: September 30, 1995 December 31, 1994 ------------------ ----------------- Working Capital $2,944,281 $2,779,722 Total Assets $4,640,330 $4,240,241 Long Term Debt -- -- Shareholders' Equity $4,258,910 $3,909,699 Working capital, total assets and shareholders' equity increased $164,559, $400,089 and $349,211, respectively for the nine months ended September 30, 1995 primarily as a result of the net income for the period and the purchase of assets of acquired business. 13 As discussed previously, significant changes in the securities markets can have a dramatic effect on the Company's results of operations. Based on current information available, management believes that current resources are sufficient to meet its liquidity needs. Effects of Inflation and Changing Prices Since the Company derives most of its revenues from acting as the manager and distributor of mutual funds, discount brokerage services and from general investments, it is not possible for it to discuss or predict with accuracy the impact of inflation and changing prices on its revenue from continuing operations. Part II. Other Information Item 5. Other Information On November 6, 1995, certain officers exercised incentive stock options for an aggregate of 241,020 Class A shares in return for an aggregate of 149,155 previously owned Class A shares. Item 6. Exhibits and Reports on Form 8-K The Company filed Form 8-K on October 6, 1995 reporting under Item 2 that the Company investment management subsidiary has purchased the assets of Excel Midas Gold Shares, Inc. ("Midas Gold") and entered into subadvisory agreements with Lion Resource Management Limited with respect to Midas Gold and Bull & Bear Gold Investors Ltd. Each of the above items was approved by the respective Fund's shareholders on August 25, 1995. Although this Form 8-K reported Item 2, no financial statements were filed due to the immateriality of the transaction in that the Company paid $182,500 as the purchase price and $10,000 to Lion Resource Management Limited as a finder's fee. 14 MANAGEMENT'S REPRESENTATION The information furnished in this report reflects all adjustments which are, in the opinion of management, necessary to a fair statement of the results of the period. 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. BULL & BEAR GROUP, INC. Dated: November 14, 1995 By: /s/ William K. Dean ------------------- William K. Dean Treasurer, Chief Accounting Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the date indicated. Dated: November 14, 1995 /s/ Bassett S. Winmill ---------------------- Bassett S. Winmill Chairman of the Board, Director Dated: November 14, 1995 /s/ Robert D. Anderson ---------------------- Robert D. Anderson Vice Chairman, Director Dated: November 14, 1995 /s/ Mark C. Winmill ------------------- Mark C. Winmill Co-President, Chief Financial Officer, Director Dated: November 14, 1995 /s/ Thomas B. Winmill --------------------- Thomas B. Winmill, Esq. Co-President, General Counsel, Director Dated: November 14, 1995 /s/ Charles A. Carroll ---------------------- Charles A. Carroll, Director Dated: November 14, 1995 /s/ Edward G. Webb, Jr. ----------------------- Edward G. Webb, Jr., Director 15 EX-27 2 10-Q
5 This Schedule contains summary financial information extracted from 3rd Quarter 9/95 and is qualified in its entiredy by reference to such financial statements 9-MOS DEC-31-1995 JAN-01-1995 SEP-30-1995 1,392,776 1,209,374 401,987 0 0 440,739 2,519,540 (1,324,086) 4,640,330 381,420 0 6,219,028 0 0 (1,960,118) 4,640,330 0 3,979,158 0 3,670,922 0 0 0 308,236 28,088 280,148 0 0 0 280,148 0.18 0.18
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