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February 1, 2002

Wholesaler Faces Battle for Survival

By Staff Reports

M. H. Meyerson, a beleaguered wholesaler, received some more bad news in recent weeks from the National Association of Securities Dealers.

In arbitration, the regulator found Meyerson liable for $5 million in damages for the unauthorized transfer of shares in Whitehall Enterprises, a Bulletin Board stock. (By contrast, top wholesaler Knight Securities, was ordered recently to pay $1.5 millon by NASD Regulation, though for decidedly different market violations.) The shares transferred by Meyerson had been left in its custody by the claimant, CVI Group.

Meyerson, which trades about 4,000 Nasdaq SmallCap and over-the-counter issues, denied the charges and appealed the ruling to the Superior Court of New Jersey. It intends to pay no money until the court settles the matter, it said in a statement.

Nevertheless, Meyerson warned its investors that failure to win an appeal or settle with CVI could have "a materially adverse impact on the company." Total assets stood at $15 million at the end of October, down from $36 million in January. During the same nine-month period, the firm lost a whopping $10 million.

That's largely because its trading profits plunged to $11 million from $57 million a year earlier. In December, management blamed the poor results on slack trading volume and said it was trying to raise additional capital from a private placement of preferred stock. It was also pinning its hopes on the possibility of charging a fee for some of its transaction services.

News of the award cut Meyerson's stock price nearly in half to 38 cents. During the heyday of the Internet craze, it had reached $12. CEO Martin Meyerson, 70, took the biggest blow. He owns 28 percent of the company.