SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
COMMISSION FILE NUMBER 1-11988
GREG MANNING AUCTIONS, INC.
(Name of Small Business Issuer in Its Charter)
NEW YORK 22-2365834
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
775 PASSAIC AVENUE
WEST CALDWELL, NEW JERSEY 07006
(Address of Principal Executive Offices) (Zip code)
Registrant's telephone number, including area code: (201) 882-0004
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
TITLE OF EACH CLASS Which Registered
COMMON STOCK, $.01 PAR VALUE THE NASDAQ STOCK MARKET
BOSTON STOCK EXCHANGE
WARRANTS TO PURCHASE COMMON STOCK THE NASDAQ STOCK MARKET
BOSTON STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act: None
Check whether the issuer (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
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained herein, and no disclosure will 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-KSB or any
amendment to this Form 10-KSB. [ ]
The Issuer's revenues for its most recent fiscal year were $15,437,190.
The aggregate market value of the Common Stock held by non-affiliates of
the Issuer as of September 30, 1996 (based on closing sale price of $2.5625 per
share as reported on NASDAQ), was $7,994,992.
<PAGE>
As of September 30, 1996, Issuer had 4,419,997 shares of its Common
Stock outstanding.
Portions of the Registrant'a definitive proxy statement, which will be
filed within 120 days of June 30, 1996, are incorporated by reference int Part
III.
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE): Yes NO X
THE REMAINDER OF THIS PAGE WAS PURPOSELY LEFT BLANK
<PAGE>
PART I.
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
Greg Manning Auctions, Inc. (the "Company") was founded by Greg
Manning, its Chairman and Chief Executive Officer, who has conducted public
auctions of rare stamps, stamp collections and stocks since 1966. The Company
believes, based on its knowledge of the market, that it is one of the largest
auction houses of rare stamps in the world (although there is no publicly
available data with respect to stamp auction sales). In addition to stamps, the
Company has expanded its business to include other types of collectibles and
similar items, such as "Antiquities" collectibles and, to a lesser extent,
sports-related collectibles and rare autographs and documents, and the
reproduction and marketing of replicas of certain historical items.
The Company conducts its operations directly and through several
subsidiaries and affiliates. Greg Manning Auctions, Inc. ("GMA") and Ivy Shreve
& Mader Philatelic (now known as Ivy & Mader) ("Ivy & Mader"), a wholly-owned
subsidiary which was acquired by the Company on September 17, 1993, are engaged
in the stamp and stamp-related auction business. Since 1991, the Company has
also conducted auctions of sports trading cards and, to a lesser degree, sports
memorabilia.
Greg Manning Galleries, Inc. ("Galleries"), a wholly-owned subsidiary
of the Company which does business as Greg Manning Galleries and Harmer Rooke
Galleries, conducts an auction business primarily in Antiquities, which includes
stoneware, pottery, glassware and coins originating from the Middle East, Greece
and Asia and dating from approximately 2000 BC, as well as pre-Columbian
artifacts such as figurines, pottery and stoneware dating from approximately 600
AD. Until August 1995 (when the division was sold), Galleries also operated a
division involving "Americana" collectibles, which are more limited in variety
and include stoneware, art, pottery, glassware, memorabilia and similar items of
American origin.
In addition to auctions, which is the Company's primary method of sale,
the Company enters into "private treaty" transactions in which owners of
collectibles arrange to have their property sold to third-parties in privately
negotiated transactions. The Company also purchases collectibles for sale for
its own account.
The Company seeks to provide the highest quality service and personal
attention to its clients. The Company's longevity in its core business of rare
stamps, stamp collection and stock auctions has enabled it to develop an
international network of clients, both dealers and collectors, buyers and
sellers, who use the Company's services on a consistent basis. The Company
believes that its extensive auction and marketing experience in the rare stamp
markets can be applied and utilized in other areas of the collectibles business.
As a result, the Company expanded by taking advantage of such opportunities
through its acquisition of Ivy & Mader and the assets of Harmer Rooke. In
addition, in September 1995, the Company made an investment in a company engaged
in the business of issuing prepaid telephone cards, which the Company believes
will enable it to take advantage of the increasing collector (as well as user)
interest in telephone cards, and may offer the Company the opportunity at a
later date to become directly involved in the prepaid telephone card auction
business. See "Recent Expansion", "Future Planned Expansion" and "Management's
Discussion and Analysis", below.
PHILATELY (GREG MANNING AUCTIONS, INC. / IVY & MADER PHILATELIC AUCTIONS, INC.)
Philately, often referred to as stamp collecting, has grown steadily
during the twentieth century. The stamp market is currently worldwide and modern
telecommunications have facilitated the development of an international network
of dealers and collectors who interact regularly to pursue their interest in
philately.
<PAGE>
Transactions in the stamp industry are generally effected through
thousands of dealers and auction houses and directly between collectors or
dealers. Because the predominant participants in the long term philatelic
markets are collectors and dealers, and not speculative investors, rare stamps
have historically shown remarkable resilience, not only to stock market cycles,
but to economic conditions in general. Even after substantial declines between
1981 and 1985 (which was caused by speculators' selling investment holdings
following a significant rise in prices during the late 1970's due to speculative
investor demand), prices in the rare stamp market stabilized in 1986 and 1987
and have remained fairly constant since that time.
Rare stamp and stamp collection auctions are the Company's core
business. As a leading philatelic auction house, the Company provides the full
range of services necessary to facilitate the sale and purchase of stamp
collections, dealer stocks, accumulations, sets and single rare stamps. The
Company believes, based on its knowledge of the market, that it is one of the
world leaders in specialized auctions of stamp collections, dealer's stocks and
accumulations (although there is no publicly available data with respect to
stamp auction sales).
Ivy & Mader, acquired in 1993, holds auctions devoted primarily to the
sale of high quality, single rare stamps. In contrast, GMA typically holds
auctions in which each lot contains several thousand stamps. Ivy & Mader sells
to a larger number of collectors, and the Company sells to a larger number of
dealers. As with GMA, Ivy & Mader earns a commission, based on the hammer price
at auction, of approximately 10% from the seller and 15% from the buyer
Although Ivy & Mader offers potential consignors the opportunity to
sell their rare stamps through auction, private treaty, or by outright purchase,
the potential consignors for Ivy & Mader almost always decide to sell by public
auction. The availability of working capital to make cash advances to the
consignors is a major benefit to Ivy & Mader, as many of that firm's consignors
request cash advances.
As noted above, the Company believes that the combination of GMA with
Ivy & Mader creates one of the world's largest combined philatelic auction
houses, and provides a competitive advantage to the Company through the
complementary nature of the two companies' distinct specialty areas. Because of
the relative sophistication of the operations and computer support of the two
firms, the Company believes that significant efficiencies may be obtained by
combining the two systems, and taking the best features from both systems. The
resulting operating system and computer related auction support system may be
replicated many times over for use by other auction firms that are acquired or
merged into the Company's combined operations.
The Company's founder, Chairman and Chief Executive Officer, Greg
Manning, has been in the business of buying and selling stamps full time since
1964 and began to conduct public stamp auctions in 1966. Mr. Manning is a member
of numerous philatelic organizations throughout the world and is a regular
columnist for Linn's Stamp News, the largest stamp publication in the United
States.
ANTIQUITIES AND AMERICANA (GREG MANNING GALLERIES, INC)
In 1994, the Company, through its wholly-owned subsidiary Galleries,
purchased all of the assets and assumed certain liabilities of Harmer Rooke
Numismatics, Ltd. This purchase permitted Galleries to permanently hold auctions
under the trade name Harmer Rooke Galleries and otherwise transact business
under the Harmer Rooke Galleries trade name and other Harmer Rooke trade names
without restriction.
Operating under the trade names Greg Manning Galleries and Harmer Rooke
Galleries, during the years ended June 30, 1995 and 1996, Galleries sold at
auction both consigned property and inventory of the type and quality
historically sold by Harmer Rooke. The Antiquities collectibles sold by
Galleries include items originating from the Middle East, Greece and Asia and
dating from approximately 2000 BC, as well as pre-Columbian artifacts such as
figurines, pottery and stoneware dating from approximately 600 AD. The market
for these types of collectibles is broad and diverse and includes customers both
in the United States and from around the world. Management of the Company
believes that its customer base for Antiquities collectibles offers a potential
cross-over market for the sale of stamps and documents.
<PAGE>
The Company believes that its expansion into the market of the
Antiquities collectibles through the use of the Harmer Rooke trade name,
customers and reputation is important as these markets offer the Company a more
diversified revenue stream, provide opportunities for growth not otherwise
available to the Company and add to the broad base of collectibles expertise
available to the Company for other business ventures.
Until August 1995, Galleries also operated an Americana division (the
"Americana Division") under the Harmer Rooke Galleries trade name. The Americana
Division sold material of American origin, including stoneware, art, pottery,
glassware and memorabilia. Because the Americana collectibles area involves a
limited range of material and appeals to a fairly narrow and specialized
customer base, management determined that it was in the Company's best interests
to cease to be engaged in this field. Accordingly, on August 23, 1995, the
Company and Galleries entered into various agreements (collectively, the
"Americana Agreements") with Charles G. Moore, Americana, Ltd. ("Moore
Americana"), pursuant to which Galleries sold to Moore Americana all of the
assets of the Americana Division. (Mr. Charles Moore was formerly the director
of Galleries' Americana Division.) The purchase price for the Americana Division
assets consisted of (i) $210,000, payable over approximately two years,
commencing September 30, 1995, and (ii) with respect to the inventory, an amount
equal to the "original cost value" of such inventory (or approximately
$480,500), payable over approximately one year commencing March 1, 1996. In
connection with the transaction, Galleries was granted a first priority security
interest in the inventory sold to Moore Americana. In addition, Mr. Charles
Moore delivered to Galleries a personal guarantee of the obligations of Moore
Americana under the Americana Agreements up to a maximum of $250,000. Pursuant
to the Americana Agreements, all Americana consignments in the possession of or
with respect to which Galleries was under contract at the date of the Americana
Agreements were transferred to Moore Americana in September 1995 (subject to
consignor approval). The Americana Agreements further provide that, for a period
of three years from the date of the agreements (i) Galleries will use its best
efforts to forward all potential consignments of Americana material to Moore
Americana, and (ii) Moore Americana will use its best effort to forward all
potential consignments and sales of non-Americana products (specifically,
numismatic items, philatelic items, sports-related items as well as autograph
books and documents and artifacts from past civilizations, among other things)
to Galleries.
SPORTS TRADING CARDS AND SPORTS MEMORABILIA (GREG MANNING AUCTIONS, INC.)
Recognizing the growing interest in sports trading cards and sports
memorabilia, the Company broadened its business in November 1991 to include the
sale of such sports collectibles. The sports collectibles industry is relatively
new and immature, when compared to philately and certain other more traditional
collectibles such as rare coins and antiquities. However, it has grown rapidly
in recent years, with the emergence of price guides and hobby magazines, and
appears to be continuing to experience increasing collector interest.
Management believes that the Company can apply its expertise in the
rare stamp auction business to facilitate continued expansion in its sports
trading card and memorabilia auction business. The Company does not anticipate
significant difficulty in obtaining desirable amounts of sports trading cards
and sports memorabilia for sale, even though it will generally focus on pre-1980
manufactured cards, which are typically more scarce and expensive than more
recent cards and memorabilia.
The Company has also sought to expand into the area of documents and rare
autographs and in September 1995 held an auction of these types of collectibles.
<PAGE>
CLIENT SERVICES AND METHODS OF SALE FOR COLLECTIBLES OWNERS
The Company's business depends on its ability to attract owners of
collectibles who desire to sell their property at auction or by private treaty.
The Company seeks to provide the highest quality service to such owners,
providing them with an efficient and secure means by which to sell their
property. The Company's ability to provide quality service to its clients on a
consistent basis has enabled it to develop long-standing relationships with many
professional dealers and collectors and to develop a reputation in the industry
for client service. The Company enjoys repeat business and receives a
substantial amount of business as a result of referrals. In addition to its
industry reputation, the Company relies on advertising in trade publications to
promote its services to potential clients, such as professional dealers,
collectors, and estate administrators.
The Company is able to offer most clients several options for the sale
of their property. An owner desiring to sell property may choose to (1) consign
it to the Company for sale at auction to the highest bidder, (2) place it with
the Company under a private treaty for sale at a price negotiated by the Company
with a buyer, or (3) sell it directly to the Company for a negotiated price. The
Company has available to it a staff of experts who are knowledgeable in many
areas of collectibles, and who are able to make reasonable estimates of the
price at which an item may be expected to sell at auction or privately. The
Company's experts can examine an owner's property and furnish a presale auction
estimate, which represents the Company's opinion of the current value of the
property based on recent selling prices of similar properties, and the quality,
rarity, authenticity, physical condition and history of prior ownership of the
subject item. These capabilities permit the Company to assist a client in
deciding the appropriate method of sale.
Generally, an owner desiring to use the Company's services to sell
property at auction or by private treaty will deliver the property to the
Company on a consignment basis, contracting with the Company to sell the
property to the highest bidder. The Company and the consignor will enter into a
written contract which sets forth the terms and conditions of the consignment
with respect to settlement, commissions and cash advances, if any, and the
determination of the authenticity of the property. The Company will hold
consignment property until the next regularly scheduled auction sale, or if the
sale is to be by private treaty, for no longer than six months. With respect to
private treaty sales, if the consigned property is not sold within the agreed
upon price parameters during such time, the Company will inform the owner of the
situation and provide the owner with the following options: (a) continue for
another period under a private treaty arrangement at the existing or at new
price parameters, (b) consign the property for sale at the next auction, (c)
sell the property outright to the Company at a price determined by the Company's
experts, or (d) have the property returned.
The Company's range of client services for owners also includes making
necessary arrangements for the pick-up and transport of property (fully insured
for loss or damage) to the Company's vault for storage and safe-keeping, and all
matters relating to displaying and promoting the property to potential buyers.
Certain aspects of these services are discussed in more detail in the following
subsections.
AUCTION SALES
The Company sells property primarily by public auction. Selling by
auction generally provides owners the opportunity to realize the highest sales
price available in the market, although there is always the inherent risk that
the auction price may not be as high as a property owner expected or desired. At
public auction, the Company generally earns a commission from the seller of 10%
to 15% and a commission of 15% from the buyers. The Company earns a commission
from the buyers of 15% in all of the Company's markets, except it's auctions of
sports collectibles, which the Company earns 10%.
<PAGE>
One key to reducing the risks associated with the auction process for
property owners is achieving high levels of participation in the auctions by
potential buyers. Through the use of print advertisements in Linn's Stamp News
and other industry publications, the Company advertises its stamp auctions to
potential purchasers. For sports trading card and memorabilia auctions, the
Company advertises in Sports Collectors Digest and other major trade
publications. For other collectibles, the Company advertises in The Maine
Antique Digest, Minerva and other similar trade publications. In addition to
advertisements, the Company promotes each auction through advance distribution
of a catalogue for that auction to customers on the mailing lists of the Company
and to potential customers who respond to the Company's advertisements and
appearances at trade shows. Each catalogue describes and often depicts the items
to be sold at auction, contains the Company's estimates of prices to be realized
for each item, and depending on the market, may be produced in full color.
Auctions are generally open to public bidding and, in an effort to
increase international participation at auctions, the Company has facilities for
bidding by mail and facsimile, which may be done prior to auction. Thus,
although the Company's auctions take place primarily in New York and New Jersey,
purchasers and sellers throughout the world are able to participate at the
auctions.
The Company manages three types of auctions: (1) live auctions; (2)
absentee auctions; and (3) telephone auctions. The type of auction utilized for
each sale is determined in advance of such auction, and the decision on which
type of auction to use is made based on a variety of factors including the type
of property to be sold, the market into which the property will be sold, the
size of the auction, and other factors. In each type of auction, a catalogue or
list of lots is mailed and otherwise distributed to all interested customers in
order to facilitate the bidding process by providing descriptions of each lot by
lot number.
In a live auction, bidders may bid in person or by telephone on each
lot as presented in the order shown in the catalogue at the time and date of the
auction. Before the auction, bidders may bid by lot as shown in the catalogue
and communicate such bids to the Company by mail, fax or by telephone. At the
auction, the auctioneer typically opens the bidding at levels based on bids
received prior to auction. The property being auctioned is sold to the highest
bidder, whether such bid was received before the auction or at the time of sale,
and such highest bidder must pay the hammer price, the applicable buyer's
premium and applicable sales tax. The auctioneer regulates the bidding and
reserves the right to refuse any bid believed by him not to be made in good
faith.
In an absentee auction, bidders may bid on each lot as shown in the
catalogue and communicate such bids to the Company by mail, fax and telephone
before the auction. At or about the closing date of the auction (as published in
the catalogue), the bids are compiled and ordered by lot, from highest to lowest
bid. In certain instances on certain lots, bidders are contacted with current
bid information on such lots, providing the bidders an opportunity to increase
the bids previously submitted. Once all bids have been received, posted and
finalized, the Company, acting as an agent for each bidder, determines the
highest bid on each lot as authorized by the bidder (up to the maximum limit as
authorized by the bidder) in an increment over the next highest bid as described
in the auction catalogue. The highest bidder on each lot is declared the winner,
and such bidder must pay the winning bid plus the applicable buyer's premium and
applicable sales tax.
In a telephone auction, bidders may bid on each lot as shown in the
catalogue and communicate such bids to the Company by mail, fax and telephone
before the auction. On the date of the auction, beginning usually 3-4 hours
before the published time of the end of the sale, the Company receives inquiries
by telephone from bidders and prospective bidders about current bids on specific
lots. During these telephone inquiries, the caller directs the Company to enter
or modify the caller's bids on such specific lots. At the end of the specified
time period, the highest bid on each lot is declared the winner and, as in other
types of auctions, the successful bidder must pay the winning bid plus the
applicable buyer's premium and applicable sales tax.
<PAGE>
The costs involved in conducting a typical auction include, among other
things, the cost of catalogues, insurance, transportation, auction advertising,
auction site rental fees, security, temporary personnel and expenses of certain
additional auction-related accounting and shiping functions. In general,
purchasers at public auctions pay a buyer's premium on auction purchases equal
to 15% of the hammer price of the property and sellers are charged a commission
of 10% to 15%, or slightly lower on high value properties, of the hammer price.
The Company does not provide any guarantee with respect to the
authenticity of property offered for sale at auction. Each lot is sold as
genuine and as described by the Company in the catalogue. However, when, in the
opinion of a competent authority mutually acceptable to the Company and the
purchaser, a lot is declared otherwise, the purchase price will be refunded in
full if the lot is returned to the Company within a specified period. In such
event, the Company will return such lot to the consignor before a settlement
payment has been made to such consignor for such lot. To date, returns have not
been material. Large collections are generally sold on an " as is" basis.
After an auction, purchasers must make arrangements to take possession
of the auctioned property. The Company generally forwards the property to its
buyer by mail unless other arrangements are requested. As agent of the
consignor, the Company bills the buyer for property purchased, receives payment
from the buyer, and remits to the consignor at the settlement date the
consignor's portion of the buyer's payment, less consignor cash advances, if
any, and commissions payable to the Company. The Company often releases property
sold at auction to buyers, primarily dealers, before the Company receives
payment, permitting such buyers to take immediate possession on an open credit
account basis (within established credit limits) and to make payment generally
within 30 days. Whether or not the Company has received payment from such well
established customers, it must pay the consignor and generally will do so not
later than the contracted settlement date (generally 45 days after the sale of
the consignor's property). In instances where the buyer has not paid as of
settlement date, the Company assumes all risks of loss and responsibility of
collection from the buyer. A lot which has been submitted by mutual consent of
the buyer and the Company for review by a competent authority is not considered
to be released to the buyer and settlement is not completed with the consignor
until such time as an opinion is rendered by such competent authority. If the
lot under review receives an affirmative opinion from such competent authority,
the settlement is immediately completed, and the applicable amount is paid to
the consignor. If such lot is returned to the Company with a negative opinion
from such competent authority, no sale is deemed to have occurred, and the
property is returned to the consignor in satisfaction of the consignment
agreement between the consignor and the Company.
Extending credit to credit worthy buyers at auction is an important
marketing tool for the Company because it allows buyers who may not have
immediately available funds to settle at auction, the opportunity to settle at a
later date. The Company will generally extend credit only to buyers who have
done business with the Company in the past and have an established credit
standing in the industry.
When the Company does not grant credit to a buyer, under the standard
terms and conditions of the Company's auction sales, it is not obligated to pay
the consignor of the property if it has not been paid by the buyer. In such
instances, the Company holds auctioned property until it receives payment from
the buyer. If the buyer defaults on payment, the Company may cancel the sale and
return the property to the owner, re-offer the property at another auction, or
contact other bidders to negotiate a private sale.
PRIVATE TREATY SALES
In a private treaty sale, the Company contracts with an owner of
property to sell such property to a third party at a privately negotiated price.
In such a transaction, the owner may set selling price parameters for the
Company, or the Company may solicit selling prices for the owner, with the owner
reserving the right to reject any solicited selling price. In certain
transactions, the owner may set a fixed price which would be payable to the
seller regardless of the actual sales price ultimately received by the Company.
The Company is compensated for a private treaty sale either by a commission
equal to a percentage of the sales price, or, in the case of an owner
established fixed price, by retaining the difference between the actual sales
price and the fixed price. Private treaty sales are generally settled more
promptly than auction sales, with the buyer paying all or substantially all of
the purchase price at the time of sale, although in certain circumstances, the
buyer may receive extended payment terms. Should extended payment terms be
granted, the Company and the seller will negotiate a settlement of the remaining
amounts due the seller, which may or may not include a sharing of the credit
risk or a deferral of final payment until the Company has collected all of the
outstanding balance from the buyer.
<PAGE>
A private treaty sale is attractive to some potential consignors
because it provides an opportunity for a sale at a fixed price or at a price
controlled by the consignor and not controlled by the bidders, as would be the
case at public auction. Often, a private treaty sale can be consummated more
quickly than the sale at auction, providing increased liquidity for the seller.
For the Company, private treaty sales provide an opportunity to realize
increased revenues because such sales involve less costs than auction sales,
primarily because there are minimal advertising expenses associated with such
sales.
SALES OF THE COMPANY'S INVENTORY
The Company offers potential consignors the option to sell their
property outright to the Company for an amount determined by the Company's
experts. In an outright purchase, the Company establishes a price it is willing
to pay for the property. If the price is acceptable to the seller, or if a price
can be negotiated between the Company and the seller, the Company typically pays
the purchase price in full and takes possession immediately.
Unlike sales of consigned property at auction or by private treaty,
when selling its own inventory, the Company earns a profit or incurs a loss on
the sale of inventory to the extent the sales price exceeds or is less than the
purchase price paid by the Company for such inventory, respectively. Generally,
the Company provides (and it is expected that it will continue to provide) for
the sale of portions of its inventory at its public auctions. Occasionally, the
Company may sell inventory to a customer directly without placing the inventory
for sale at auction. The Company intends to sell all its inventory as quickly
and efficiently as possible, thereby promoting a high level of inventory
turnover and maintaining maximum liquidity.
CONSIGNOR ADVANCES
Frequently, an owner consigning property to the Company will request a
cash advance at the time the property is delivered to the Company, prior to its
ultimate sale at auction or otherwise. The cash advance is in the form of a
self-liquidating secured loan, using the consigned property as collateral. The
amount of the cash advance (generally limited to one half of the estimated
value) appears on the financial statements of the Company as "Advances to
consignors", but the value of the collateral is not recorded on the Company's
financial statements since the Company does not hold title to the collateral.
The Company is a secured party with respect to the collateral, holds a security
interest in the collateral and maintains possession of the collateral until it
is sold.
The ability to offer cash advances is often critical to the Company's
ability to obtain consignments of desirable property. In the case of property
sold at an auction, an owner may have to wait up to 45 days after the auction
sale date for settlement and payment of the owner's portion of the sales
proceeds. In many instances, an owner's motivation to consign property for sale
may include a need for cash on an immediate basis. Offering cash advances allows
the Company to attract owners who desire immediate liquidity while preserving
the opportunity to sell at auction at the highest available price. The Company
believes that its ability to make consignor advances on a consistent basis has
enabled it to receive regular consignments of high value lots from professional
dealers and private collectors.
<PAGE>
The amount of a cash advance generally does not exceed 50% of the
Company's estimate of the value of the property when sold at auction. Consignors
are given the option of paying interest on such cash advances at a negotiated
rate, typically an annual rate of 12%, or allowing the Company to receive a
higher commission upon sale of the property.
COMPUTERIZATION AND SECURITY
The Company maintains computerized tracking systems which are used to
catalogue and describe all of the property delivered to the Company. Property is
stored in the Company's specialized vault until it is sold or put on public
exhibition, in the case of property to be sold at auction, generally 21 days
before auction.
Tracking the consigned property aids in the prompt and efficient
production of catalogues for auctions. Such catalogues are an important
marketing tool for the Company to solicit business with both potential
consignors and bidders. For potential consignors, the Company utilizes the
catalogues from prior auction sales to demonstrate its expertise in presenting
property to the bidders. For bidders, the Company utilizes the catalogue as a
direct solicitation and enticement for participation in a given auction. The
Company believes that the computerization of the auction operations enables it
to compete favorably with any auction house in terms of service. During the year
ended June 30, 1996, the Company substantially completed an extensive upgrade to
its existing computer and software system including upgrades of the financial
reporting system as well as the implementation of a state of the art inventory
tracking system. It is fully expected that upon completion the Company will
realize additional savings from the greater efficiency of this new system.
The Company stores consigned property in two high security vaults
located at the new West Caldwell headquarters and at the Company's gallery in
New York City. The security system installed at both locations is rated by the
alarm service companies, and the Company believes that there is a significant
level of protection of an owner's property from theft, fire and other causes of
damage.
In addition to the protection provided by the vault, the Company
provides insurance coverage for consigned property and the inventory of the
Company. The Company maintains a policy with Lloyds of London which management
believes provides adequate coverage for damage or loss while the property is
stored at the Company's offices. The policy also provides, what management
believes is adequate coverage for damage or loss during the transportation of
property from the customer to the Company's offices and from the Company's
offices to an auction location. The Company maintains the flexibility to obtain
higher limits for coverage as circumstances may require.
RECENT EXPANSION
In September 1995, the Company acquired for an aggregate purchase price
of $260,000, 13.1%, or 4,500,000 shares, of the outstanding common shares of
PICK Communications Corp. (name changed from Prime International Products, Inc.)
("PICK"), the parent company of Public Info/Comm Kiosk, Inc., which is primarily
engaged in the business of issuing prepaid telephone cards. (At October 8, 1996,
the Company owned 4,112,289, or 9.4% of the outstanding common stock of PICK.)
Prepaid telephone cards are wallet-sized cards that are used to prepay telephone
charges and are one of the newest areas of contemporary collectibles both in the
United States and in other parts of the world. Increasing collector interest in
telephone cards is reflected in the appearance of telephone card-related special
magazines, trade associations and international auction fairs. The Company
believes that this stock acquisition will enable it to take advantage of the
increasing collector and user interest in telephone cards, and may offer the
Company the opportunity at a later date to become directly involved in the
telephone card auction business. The securities purchased by the Company, which
were acquired directly from PICK, are restricted and accordingly are subject to
significant restrictions on transferability. Greg Manning, the Company's
President, Chief Executive Officer and Chairman of the Board, is a director of
PICK.
<PAGE>
FUTURE PLANNED EXPANSION
The Company continues to evaluate potential acquisition candidates in
the collectibles industry. The Company believes that a carefully analyzed and
structured acquisition of an existing operating company could be the most
effective manner to expand into certain new collectibles areas. The Company has
no current plans for any such acquisition, and there are no assurances that
attractive and appropriate acquisition opportunities will become available to
the Company on acceptable terms.
In addition, the Company will consider other types of opportunities, as
appropriate. Consistent with the foregoing, the Company is currently negotiating
to enter into a definitive joint venture agreement with P.C.T. Prepaid Cellular
Telephone, Inc., a majority-owned subsidiary of PICK (of which Greg Manning is a
director), pursuant to which the two companies would work together to provide
prepaid cellular telephone time and leased cellular telephones for a single
up-front fee. It is anticipated that the Company, in addition to providing
capital, would provide sales and marketing services to the venture, which is
expected to service seven states in the mid-Atlantic region and Washington, D.C.
The proposed transaction is subject to various conditions and approvals,
including the preparation of definitive documentation, and there can be no
assurance that this or any other venture considered by the Company will be
consummated. At October 8, 1996, the Company owned 2,000,000 shares of common
stock of P.C.T. Prepaid Cellular Telephone, Inc.
ARRANGEMENTS WITH CRM
CRM is wholly owned by Greg Manning, the Company's President, Chief
Executive Officer and Chairman of the Board. At June 30, 1995, CRM held 29% of
the Company's Common Stock. CRM had historically been engaged in the business of
acquiring collectibles (including collectibles of the type that are currently
being sold by the Company) and selling them both through direct sales and
through consignments for sale at auction. In the past, CRM has been an important
source of property consigned to the Company for sale at auction. Currently CRM
no longer purchases any collectibles for resale. Although CRM continues to
provide the Company with property, the amount in relation to the Company's
overall business has been decreasing. For the year ended June 30, 1996,
consignments by CRM accounted for $12,706 or less than 1% of the Company's
aggregate sales, generating $3,177 in commission revenues, or less than 1% of
aggregate revenues.
Pursuant to an Inventory Acquisition and Non-Competition Agreement (the
"CRM Inventory Agreement"), dated May 14, 1993, the Company was granted the
right to accept on a consignment basis any or all collectibles in CRM's existing
inventory on terms no less favorable than would be offered to third parties. The
CRM Inventory Agreement provides that, with respect to all property from CRM's
existing inventory that is accepted on consignment by the Company, the Company
will receive from CRM a commission in the amount of 10% of the sales price
(exclusive of any buyer's commission received by the Company); provided that the
Company will receive no commission from CRM with respect to items valued at over
$100,000 per lot (but will earn any commission or premium paid by the buyer).
The inventory available for consignment to the Company pursuant to the CRM
Inventory Agreement has been diminishing. The CRM Inventory Agreement also
provides that CRM will not compete with the Company for the acquisition of
collectibles from third parties that are suitable for acquisition by the Company
from time to time for use in its business.
<PAGE>
REGULATORY MATTERS
Regulation of the auction business varies from jurisdiction to
jurisdiction. In New York City, where some of the Company's auctions are held,
the New York City Department of Consumer Affairs licenses individual auctioneers
and administers a body of regulations that governs the conduct of auctions
occurring within New York City. The Company has on staff a New York City
licensed auctioneer who conducts most of the Company's auctions, and to the best
of management's knowledge and belief, the Company is in compliance with all
material and significant regulations governing its business activities.
COMPETITION
The world philatelic market, the sports trading card and memorabilia
market, the rare documents market and the Antiquities markets are highly
competitive. Among the Company's primary competitors in the domestic and
worldwide philatelic auction business are Christies International PLC, Charles
Shreve Galleries, Inc. and H.R. Harmer, and with respect to the sale of single
rare stamps, Robert A. Siegel Auction Galleries, Inc. With respect to the
Company's sports trading card and sports memorabilia auction business, the
Company's primary competitors are Superior Auctions, Richard Wolffers, Lelands
and Sotheby's Holdings, Inc. In the Antiquities markets, the Company's
competitors are Christies International PLC and Sotheby's Holdings, Inc..
EMPLOYEES
The Company presently has twenty-three full-time employees, including
its President, Chief Executive Officer and Chairman of the Board, Greg Manning;
Executive Vice President, William T. Tully, Jr.; Chief Financial Officer, Daniel
M. Kaplan; and Corporate Controller, Robert Gesso. Each of Messrs. Manning and
Tully are permitted under the terms of his employment arrangement with the
Company to devote some of his working time to the business of CRM, so long as,
in the judgment of a majority of the Company's outside directors, it does not
interfere with his complete and faithful performance of his duties to the
Company. The Company also employs David Graham as a Senior Vice President. The
Company also hires persons on a temporary basis to assist in organizing its
auctions and for other specialized purposes.
ITEM 2. DESCRIPTION OF PROPERY
The Company's headquarters are located in space leased under an
agreement that extends to May 31, 2000 (with an option to purchase) and consists
of approximately 18,600 square feet of office and warehouse facilities located
at 775 Passaic Avenue, West Caldwell New Jersey at an annual rental of
approximately $145,700.
Ivy & Mader leases approximately 3,570 square feet of office space in
New York City at an annual rental of approximately $114,240 subject to
escalation, until August 31, 2000. Galleries subleases approximately 3,570
square feet of office space in New York City (the "Galleries' Space") on the
floor immediately above the floor occupied by Ivy & Mader at an annual rental of
approximately $98,100 until March 30, 1998. Pursuant to the terms of the
Americana Agreements (see "Antiquities and Americana", above), Moore Americana
has agreed to sublease substantially all of the Galleries Space through the term
of Galleries' sublease, at an annual rate equal to approximately $90,000 per
year.
ITEM 3 LEGAL PROCEEDINGS
The Company is not a party to any litigation material to the Company's
financial position or results of operations nor, to the knowledge of the
Company, is any litigation of a material nature threatened.
<PAGE>
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the fiscal year covered by this report, no
matter was submitted to a vote of security holders of the Company.
PART II.
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
In May 1993, the Company completed a public offering (the "Public
Offering") of 747,500 units of its securities (the "Units") at $6.25 per Unit.
Each Unit consists of two shares of the Company's Common Stock and two callable
common stock purchase warrants (the "Warrants"), each of which initially
entitled the holder to purchase one share of common stock at an exercise price
of $3.4375 per share. As of June 30, 1996, after taking into account certain
adjustments, each Warrant entitles its holder to purchase 1.24 shares of Common
Stock at a price of $2.7733 per share and is exercisable for a four year period
commencing May 14, 1994. At June 30, 1996, none of these warrants had been
exercised. In connection with the Public Offering, the Company issued to the
underwriters in such offering unit purchase warrants (the "Unit Purchase
Warrants"), each of which initially entitled the holder to purchase, through May
14, 1998, one Unit (each consisting of two shares of Common Stock and two
Underwriters' Warrants (as hereinafter defined)) at an exercise price of $10.31
per Unit. As of June 30, 1996, after taking into account certain adjustments,
each Unit Purchase Warrant entitles the holder to purchase 1.50608 Units at an
exercise price of $6.8456 per Unit. The warrants (the "Underwriters' Warrants")
issuable upon exercise of the Unit Purchase Warrants will be subject to the same
terms and conditions of the Warrants, except that the Underwriters' Warrants
will not be freely transferable and will not be subject to repurchase by the
Company. At June 30, 1996, none of the Unit Purchase Warrants or Underwriters'
Warrants had been exercised.
On November 4, 1994, in a private placement to certain "accredited"
investors, the Company sold 257,500 shares of its common stock at $2.00 per
share. For the purchase price, each investor also received a warrant (the
"Purchaser Warrants") which initially entitled the holder to purchase one share
of Common Stock at of $1.75 per share (amended from $2.25 per share). The number
of shares of Common Stock issuable upon exercise of the Purchaser Warrants was
subsequently increased to 1.13 shares, and the exercise price was subsequently
reduced to $1.5528 per share. In connection with such private placement, the
Company also issued warrants (the "Agents' Warrants") to the placement agents in
the private placement, which warrants were similarly adjusted to entitle the
holders thereof to purchase 72,720 shares of Common Stock at an exercise price
of $1.74 per share. The Company registered the shares of Common Stock underlying
the Purchaser Warrants and the Agent's Warrants under the Securities Act of
1933, as amended (the "Act"). At June 30, 1996, all of the Purchaser Warrants
and Agents' Warrants had been exercised. The Company received approximately
$336,000 in net proceeds from the private placement offering in the year ended
June 30, 1995 and approximately $490,000 from the exercise of these warrants in
the year ended June 30, 1996.
On June 29, 1995, the Company consummated an offshore offering for sale
of 500,000 units of its securities (the "Regulation S Offering"). For a purchase
price of $1.50 per unit, each purchaser received one share of the Company's
Common Stock and one warrant to purchase an additional share at $1.50 per
warrant (subject to certain adjustments). The Regulation S Offering was made
solely to certain offshore investors in compliance with, and under the exemption
to registration provided by, Regulation S under the Act. The Company received
approximately $721,000 in net proceeds from the Regulation S Offering in the
year ended June 30, 1995 and $750,000 from the exercise of these warrants in the
year ended June 30, 1996.
In February 1996, the Company issued to an individual in a private
placement a warrant to purchase, at any time prior to March 1, 1997, 400,000
shares of the Company's Common Stock at an exercise price of $4.00 per share.
The purchase price for the warrant was $100,000, which was paid in full in April
1996. Upon request of the investor, the Company has agreed to register the
shares of Common Stock underlying the warrant under the Act, the cost of which
(other than allocable overhead) will be borne by the investor.
<PAGE>
The Company's Common Stock and Warrants are listed on the Boston Stock
Exchange ("BSE") under the symbols "GGM" and "GGMW", respectively, and these
securities are quoted on the Nasdaq SmallCap System ("NASDAQ") under the symbols
"GMAI", "GMAIW" , respectively. Prior to May 19, 1993, there was no public
market for the Company's securities. According to American Stock Transfer &
Trust, the holders of record of the Company's Common Stock and Warrants totaled
92 and 55, respectively, at October 8, 1996.
The Company has not paid any dividends. The Company expects that a
substantial portion of the Company's future earnings will be retained for
expansion or development of the Company's business. However, the Company
intends, to the extent that earnings are available, consistent with the above
objectives, to consider paying cash dividends on its Common Stock in the future.
The amount of any such dividend payments could be restricted by the covenants or
other terms of any loan agreements to which the Company is then a party.
The quarterly high and low bid ranges on the NASDAQ for the Common
Stock of the Company for the years ended June 30, 1995 and 1994 are shown in the
following schedule:
<TABLE>
<CAPTION>
FOR THE YEARS END JUNE 30,
_______________________________________
1995 1996
__________________ ___________________
(QUARTER) HIGH LOW HIGH LOW
---------------------------------------
<S> <C> <C> <C> <C>
FIRST $2.750 $2.375 $2.750 $1.50
SECOND $2.812 $2.250 $3.062 $1.938
THIRD $2.625 $2.000 $4.313 $2.125
FOURTH $2.625 $1.750 $3.938 $2.875
</TABLE>
The quotations shown above reflect inter-dealer prices, without retail
mark-up, mark-down or commission, and may not represent actual transactions.
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company's aggregate sales are generated by the sale of property at
auction, the primary method of selling employed by the Company, by private
treaty and by sale of the Company's inventory. The following table displays the
aggregate sales for the Company for the years ended June 30, 1995 and 1996, and
shows the comparisons for the respective years subdivided by source and market:
<TABLE>
<CAPTION>
For the twelve months
ended June 30 Percentages
---------------------------------- ---------------------
1995 1996 1995 1996
---------------------------------- ---------------------
<S> <C> <C> <C> <C>
Aggregate Sales $26,280,765 $29,710,971 100% 100%
---------------------------------- ---------------------
By source:
A. Auction $17,560,217 $16,959,411 67% 57%
B. Sales of inventory 8,532,935 12,751,560 32% 43%
C. Private treaty 187,613 1%
---------------------------------- ---------------------
By market:
A. Philatelics $21,538,553 $24,929,716 82% 84%
B. Sports collectibles 862,650 747,746 3% 2%
C. Other collectibles 3,879,562 4,033,509 15% 14%
---------------------------------- ---------------------
</TABLE>
Aggregate sales consist of the aggregate proceeds realized from the sale
of property, which include the Company's commissions when applicable. Property
sold by the Company is either consigned to it by the owner of the property, or
such property is owned by the Company. Aggregate sales of the Company's
inventory are classified as such without regard as to whether the inventory was
sold at auction or directly to a customer. Aggregate sales by auction and by
private treaty represent the sale of property consigned by third parties.
The Company's revenues are represented by the sum of (a) the proceeds
from the sale of the Company's inventory, and (b) the portion of sale proceeds
from auction or private treaty that the Company is entitled to retain after
remitting the sellers' share, consisting primarily of commissions paid by
sellers and buyers. Generally, the Company earns a commission from the seller of
10% to 15% (although the commission may be slightly lower on high value
properties) and a commission of 15% from the buyers.
YEAR ENDED JUNE 30, 1996 COMPARED WITH YEAR ENDED JUNE 30, 1995
REVENUES: For the year ended June 30, 1996, operating revenues increased
$3,885,539 (34%) to $15,437,190 compared with $11,551,651 for the year ended
June 30, 1995. This increase in revenues is largely attributable to an increase
in sales of Company owned inventory, which increased by $4,218,625 (49%). This
sales increase was comprised of an increase in sales of philatelic merchandise
of $2,603,708 and other collectibles merchandise of $1,614,095. Sales of sports
merchandise maintained substantially the same sales level in the year ended June
30, 1996 as that as for the year ended June 30, 1995. These increases in revenue
for the sales of merchandise were offset by a decrease in commissions earned
from consignment sales of $333,087.
The variation in any year in the composition of total revenues (as
between revenues resulting from inventory sales and commissions resulting from
consignment sales) is largely a function of market demand and conditions rather
than any deliberate attempt by the Company to emphasize one area over the other.
Sellers/consignors of property to the Company generally make their own
determinations as to whether the property should be sold to the Company for the
specified price offered by the Company or offered for sale at auction at a price
that cannot be predicted in advance. Such determination is based on the
potential risks and rewards involved, and includes an evaluation of the
marketability of the property and the potential pool of buyers. The Company
engages in a similar analysis in determining whether to acquire inventory for
its own account and the price it is willing to pay for such inventory.
Gross margins on the sale of Company owned inventory changed from
$1,743,864 for the year ended June 30, 1995 to $2,721,965 for the year ended
June 30, 1996.
This increase is partially attributable to a significant transaction
entered into June 25, 1996, see note 3. This transaction increased operating
profit approximately $713,000 and had a gross margin of 65%. This transaction
was with an associate of a stockholder who, as an individual has the financial
ability to cumlmenate the transaction, this customer intends to hold these items
for investment purposes and anticipates an increase in value. Without this
significant transaction, the gross margin on sales of Company owned inventory
decreased from 20 to 18%
<PAGE>
OPERATING EXPENSES: The Company's aggregate operating expenses,
exclusive of cost of merchandise sold, for the year ended June 30, 1996 totaled
$5,212,521 compared with $6,121,401 for the year ended June 30, 1995,
representing an decrease of $908,880 (or 15%). The cost reduction programs that
were initiated at the end of the year ended June 30, 1995 continued to have
positive results throughout the year ended June 30, 1996 with reductions in
costs from the previous year in the areas of salaries and wages of $258,000
(13%); operations consulting fees, $134,000 (49%); marketing, $74,000 (11%) and
contract labor, $71,000, (62%), as the significant improvement cost centers. The
reduction in overall costs in combination with the revenue increases had the
effect of reducing operating costs as a percent of operating revenue from 53%
during the year ended June 30, 1995 to 34% for the year ended June 30, 1996.
OTHER INCOME (EXPENSE): The increase in other income during the year ended
June 30, 1996 over the previous year was primarily attributible to a pretax gain
from the sale of common shares of PICK Communications Corp of $1,067,000.
Interest expense increased $156,944 (38%) to $567,848 for the year ended
June 30, 1996 as compared to that of the previous year. This increase was
attributable to higher average borrowings caused by the financing of the move to
the West Caldwell, New Jersey facilities for the entire year compared to only
part of the previous year and marginally higher investment in operating current
assets during the most recent year. The higher average borrowings contributed to
approximately $57,000 of the interest expense increase. The higher interest
rates the Company paid for financing contributed approximately $100,000 to this
increase in interest expense. The higher interest rates were caused by the
average prime rate being higher in the year ended June 30, 1996 than that of the
previous year in addition to (I) the increase on June 3, 1996 of the interest
rate in the revolving credit facility with Brown Brothers Harriman & Co. from
3/4 of 1% over the prime rate to 2% over LIBOR.
PROVISION (BENEFIT) FOR INCOME TAXES: For the year ended June 30, 1996,
the Company recorded an income tax provision of $439,056 compared to a benefit
for income taxes of $538,921 for the preceeding year. The provision included
approximately $217,000 of deferred tax expense which was provided from
carryforwards generated from the prior year's loss.
NET INCOME (LOSS): The Company recorded net income for the year ended
June 30, 1996 of $536,383 compared to a net loss of $827,155 for the year ended
June 30, 1995. The main components of this return to profitability during the
year ended June 30, 1996 was the increase in revenues and associated gross
margins in conjunction with certain cost containment efforts as outlined above.
LIQUIDITY AND CAPITAL RESOURCES
The Company experienced a negative cash flow from operating activities of
$2,284,410 for the year ended June 30, 1996 as compared to a negative cash flow
of $1,060,478 for fiscal 1995, an increase of $1,223,922. This increase was
primarily attributable to a decrease in payables to third party consignors by
approximately $1,400,000, largely due to a substantial increase in the amount of
company owned inventory sold in the fourth quarter of the fiscal year ended June
30, 1996. An increase in consignor advances of approximately $857,000 and an
increase in notes receivable of $914,690 attributable to a single sale of
company owned inventory (see significant transaction footnote)
The Company had a positive cash flow from investing activities of
$349,562 for the year ended June 30, 1996 as compared to negative cash flow of
$574,314 for the year ended June 30, 1995, an increase of $923,876 primarily
attributable to: (i) during fiscal 1995 the Company expended approximately
$562,000 related to the move to its new location and (ii) in fiscal 1996 the
Company purchased $460,000 of investment stock and sold a portion of it
resulting in proceeds of $1,008,000.
<PAGE>
During the years ended June 30, 1995 and 1996, the Company received net
proceeds of $1,143,978 and $1,121,078, respectively from the November 1994
private placement offering, the June 1995 Regulation S offering and the February
1996 issuance of a private placement warrant In addition, the Company increased
its borrowings under its revolving credit facility during the year ended June
30, 1996 in the amount of $895,000 and paid down on its term loans approximately
$480,000. This provided for a net increase in cash provided by financing
activities of approximately $1,536,000.
The revolving credit agreement with Brown Brothers Harriman & Co.
("Brown Brothers") was entered into in May 1995, and provides for a credit
facility for working capital purposes in an aggregate amount of $6,000,000.
Borrowings under this facility are based on a formula of account receivables,
inventory and consignor advances. This credit facility is used to fund cash
advances and inventory purchases as well as to provide additional liquidity
using the Company's auction receivables and other assets as collateral. At June
30, 1996, borrowings under this facility aggregated $5,640,000 and are payable
on demand. On June 29, 1995, the Company entered into a five year term agreement
for $375,000 ($312,500 balance at June 30, 1996) with Brown Brothers, the
proceeds which were used to fund expenses relating to the Company's move to and
refurbishment of its current West Caldwell, New Jersey location.
The loan agreements with Brown Brothers contain various financial and
operating guidelines to which the Company must adhere and which, among other
things, prohibit payment of dividends or like distributions without the consent
of Brown Brothers. Brown Brothers has agreed that, absent a material adverse
change (as determined by Brown Brothers) or event of default, it will provide
the Company with a 120-day notification period prior to issuing a demand for
repayment, provided that the Company is in compliance with such guidelines. At
June 30, 1995, the Company was not in compliance with a guideline relating to
the formula of earnings before interest, depreciation and taxes to interest
expense. Brown Brothers has advised the Company that, because the facility is a
demand credit facility rather than a contractually committed credit facility,
the failure of the Company to be in compliance with such guideline is not, in
itself, an event of default, and that the only consequence of its failure to be
in such compliance is that Brown Brothers has the right to demand immediate
repayment of all amounts outstanding without the otherwise applicable 120-day
advance notice period. The Company believes that at June 30, 1996, it was in
compliance with such guidelines.
A buyer of auctioned property may be permitted to take possession of the
property before payment is made. Most accounts receivable are collected within
30 to 60 days, which is consistent with business practice in the collectible
markets. For the years ended June 30, 1995 and 1996, the Company's expense
relating to bad debt was approximately $190,400 and $146,131 respectively. Over
the past ten years the Company's history of bad debts has been less than 1% of
aggregate sales. For the year ended June 30, 1995 and 1996 these amounted to
.97% and .49% respectively, of aggregate sales.
Because of the nature of the auction business of the Company, there is a
relationship between accounts receivable, advances to consignors, and payable to
consignors. Depending upon the relationship of the balance sheet date to a given
auction sale date and a settlement date for a given auction, these balances
could change substantially from one balance sheet date to another.
In the cycle of any single auction, the effect on the balance sheet and
on the Company's cash flows is significant when compared to the total assets of
the Company.
The cycle for a single auction begins with consignors contracting with
the Company to sell their property at auction. Typically these contracts are
signed from up to 8 to 16 weeks in advance of the auction sale date. No entry is
made on the balance sheet of the Company when the Company receives the property
for auction or when a contract for the consignment to the auction is signed.
Since the contract for the sale of the property is for services not yet
rendered, there is no financial statement impact.
<PAGE>
At the time of the consignment, or any time thereafter until the auction
sale date, the consignor may request a cash advance which is a prepaid portion
of the prices to be realized of the property irrevocably committed to be sold in
the auction. The cash advance takes the form of a self-liquidating, secured loan
to the consignor, using the property consigned as collateral. Cash advances to
consignors are often used as a marketing tool in order to obtain property for a
sale. When the cash advance is made, there is an increase of the accounts of the
Company in cash advances to consignors, and simultaneously, there is a
corresponding decrease in cash.
Approximately 6 weeks after the auction date, often referred to as the
settlement date, the payables to consignors decrease to zero as all the
consignors are paid and the Company withholds a portion of the amounts due the
consignor for the sale of the property as an offset to repay the principal
amount and the accrued interest on, the cash advances to consignors (or loans to
consignors), and there is a decrease in cash, corresponding to the net amount
paid to the consignors.
The entire cycle for a single auction typically is about 14 to 22 weeks
in duration. Because of the high level of activity in the Company, single
auction cycles do not occur in series, with the next cycle beginning immediately
after the previous cycle ends. Rather, single auction cycles occur in parallel.
For example, when a certain cycle ends, a second cycle may be at the midpoint,
while yet a third cycle is just beginning. Depending upon the relative values of
the property consigned to each sale in the three cycles in this example, and
depending upon the demand for auction advances in each of the cycles, the
cumulative effect on the balance sheet, and particularly the current assets and
current liabilities and the Company's cash flows, is very significant.
The Company's capital expenditures for property and equipment were
approximately $120,000 in fiscal 1996. These expenditures were primarily used to
fund certain computer systems upgrades which started during the year ended June
30, 1995 and as of June 30, 1996 were substantially complete.
The Company has developed both a customer and supplier base of major
stamp dealers throughout the world that services the Company's stamp operations,
which is the core the Company's business. Although intense competition exists
for the acquisition of quality properties for purchase or consignment from
estates and private collectors, the Company believes that the short-term and
long-term availability of these items will continue to be sufficient to augment
the core dealer-based business. While there can be no assurance that prices of
and demand for the collectibles offered by the Company will not decrease in the
future, demand has traditionally not been adversely affected by negative
economic conditions. Because the Company has observed an increase in the general
market for sports trading cards and sports memorabilia, it has moderately
expanded its operations in this area. The sports collectibles market is,
however, more volatile than the stamp market because the predominate
participants are investors rather than collectors and professional dealers.
However, the Company's need for liquidity and working capital may
increase as a result of its potential business expansion activities. In addition
to the need for such capital to enhance the Company's ability to offer cash
advances to a larger number of potential consignors of property (which is an
important aspect of the marketing of an auction business), the Company will
require additional working capital in the future in order to further expand its
sports trading card and sports memorabilia auction business, to acquire
collectibles for sale in the Company's business, to expand into sales of other
collectibles, such as autographs and antiques, and to initiate any other new
business activities.
In September 1995, the Company acquired for an aggregate purchase price
of $260,000, 13.1%, or 4,500,000 shares, of the outstanding common shares of
Prime International Products, Inc. (now known as PICK Communications Corp.)
("PICK"), the parent company of Public Info/Comm Kiosk, Inc., which is primarily
engaged in the business of issuing prepaid telephone cards. (At June 30, 1996,
the Company owned 4,112,289, or 9.5% of the outstanding common stock of PICK.)
Prepaid telephone cards are wallet-sized cards that are used to prepay telephone
charges and are one of the newest areas of contemporary collectibles both in the
United States and in other parts of the world. Increasing collector interest in
telephone cards is reflected in the appearance of telephone card-related special
magazines, trade associations and international auction fairs. The Company
believes that this stock acquisition will enable it to take advantage of the
increasing collector and user interest in telephone cards, and may offer the
Company the opportunity at a later date to become directly involved in the
telephone card auction business. (The securities purchased by the Company, which
were acquired directly from PICK, are restricted and accordingly are subject to
significant restrictions on transferability. Greg Manning, the Company's
President, Chief Executive Officer and Chairman of the Board, is a member of the
Board of PICK.)
<PAGE>
The fair value of the Company's investment in PICK, as stated in the
financial statements included herein, has been estimated by the Company
utilizing arms' length private transactions, in PICK's common stock, as
described in PICK's public filings under the Securities Exchange Act of 1934, as
amended. Such valuation is contingent upon PICK's ability to generate future
cash flows and the Company believes it is reasonably possible, based upon a
review of such public filings, that the estimated value could change
substantially in the near term.
Management believes that the Company's cash flow from ongoing operations
supplemented by the Company's working capital credit facilities will be adequate
to fund the company's working capital requirements for the next 12 months.
However, to complete any of the Company's proposed expansion activities or to
make any significant acquisitions, the Company will consider exploring financing
alternatives including increasing its working capital credit facilities or
raising additional debt or equity capital.
FINANCIAL REPORTING MATTERS
In March 1995, the Financial Accounting Standards Board issued Statement
No. 121, Accounting for Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of, which requires impairment losses to be recorded on
long-lived assets used in operations where indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amount. Statement 121 also addresses the
accounting for long-lived assets that are expected to be disposed of. The
Company will adopt Statement 121 in the first quarter of the year ended June 30,
1997 and, based on current circumstances, does not believe the effect of the
adoption will be material.
INFLATION
The effect of inflation on the Company has not been significant during
the last two fiscal years.
SAFE HARBOR STATEMENT
From time to time, information provided by the Company, including but
not limited to statements in this report, or other statements made by or on
behalf of the Company, may contain "forward-looking" information within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Such statements involve a number of risks and
uncertainties. The Company's actual results could differ materially from those
discussed in the forward-looking statements. The cautionary statements set forth
below identify important factors that could cause actual results to differ
materially from those in any forward-looking statements made by or on behalf of
the Company:
- The business of the Company is substantially dependent upon obtaining
collectibles on consignment for sale at auction, and to a lesser extent
the ability of the Company to purchase collectibles outright for sale
at auction. At times there is a limited supply of collectibles
available for sale by the Company, and such supply varies from time to
time. While the Company generally has not experienced a lack of
collectibles that has prevented it from conducting appropriately sized
auctions on an acceptable schedule, no assurance can be given that the
Company will be able to obtain consignments of suitable quantities of
collectibles in order to conduct auctions of the size, and at the
times, the Company may desire in the future. The Company's inability to
do so would have a material adverse effect on the Company.
- The development and success of the Company's business has been and
will continue to be dependent substantially upon its President,
Chairman and Chief Executive Officer, Greg Manning, and significantly
upon its Executive Vice President, William T. Tully, Jr. The
unavailability of Mr. Manning, for any reason, would have a material
adverse effect upon the business, operations and prospects of the
Company, and the unavailability of Mr. Tully could adversely affect the
Company's expansion prospects if a suitable replacement is not engaged.
- The Company frequently grants credit to certain purchasers at its
auctions permitting them to take immediate possession of auctioned
property on an open account basis, within established credit limits,
and to make payment in the future, generally within 30 days. This
practice facilitates the orderly conduct and settlement of auction
transactions, and enhances participation at the Company's auctions. In
such events, however, the Company is liable to the seller who consigned
the property to the Company for the net sale proceeds even if the buyer
defaults on payment to the Company. While this practice has not
resulted in any material loss to the Company, the dollar volume of the
Company's potential exposure from this practice could be substantial at
any particular point in time.
- The business of selling stamps and other collectibles at auction is
highly competitive. The Company competes with a number of auction
houses throughout the United States and the world. While the Company
believes that there is no dominant company in the stamp auction or
collectibles business in which it operates, there can be no assurances
that other concerns with greater financial and other resources and name
recognition will not enter the market.
- The Company may be adversely affected by the costs and other effects
associated with (i) legal and administrative cases and proceedings;
(ii) settlements, investigations, claims and changes in those items;
and (iii) adoption of new, or changes in, accounting policies and
practices and the application of such policies and practices.
- The Company's results of operations may also be affected by the
amount, type and cost of financing which the Company maintains, and any
changes to the financing.
- The Company intends to consider appropriate acquisition candidates as
described in "Future Planned Expansion" herein. There can be no
assurance that the Company will find or consummate transactions with
suitable acquisition candidates in the future.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
The Financial Statements of the Company, together with the report of
independent accountants thereon, are presented under this Item 7:
INDEX
Page
Number
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheet -- June 30, 1996 . . . . . . . . . . . . . . . . . .
Consolidated Statements Of Operations -- Years ended June 30, 1995 and
June 30, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Stockholders' Equity--Years ended June 30,
1995 and June 30, 1996 . . . . . . . . . . . . . . . . . . . . . . . .. . .
Consolidated Statements of Cash Flows -- Years ended June 30, 1994 and
June 30, 1996 . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . .
<PAGE>
Report of Independent Accountants
To the Board of Directors and
Stockholders of Greg Manning Auctions, Inc.
We have audited the accompanying consolidated balance sheet of Greg Manning
Auctions, Inc. as of June 30, 1996, and the related consolidated statements of
operations, retained earnings, and cash flows for the year then ended. 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 audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Greg Manning
Auctions, Inc. and its subsidiaries as of June 30, 1996, and the results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
Amper, Politziner & Mattia
October 15, 1996
Edison, New Jersey
<PAGE>
Report of Independent Accountants
To the Board of Directors and
Stockholders of Greg Manning Auctions, Inc.
In our opinion, the accompanying consolidated statements of operations, of
stockholders' equity and of cash flows for the year ended June 30, 1995 present
fairly, in all material respects, the results of operations and cash flows of
Greg Manning Auctions, Inc. and its subsidiaries for the year ended June 30,
1995, in conformity with generally accepted accounting principles. 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 audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We have
not audited the consolidated financial statements of Greg Manning Auctions, Inc.
for any period subsequent to June 30, 1995.
Price Waterhouse LLP
Morristown, New Jersey
October 12, 1995
.
<PAGE>
<TABLE>
<CAPTION>
GREG MANNING AUCTIONS, INC.
CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
ASSETS
<S> <C>
Current assets:
Cash and cash equivalents $558,506
Accounts receivable
Auctions receivable 8,593,414
Advances to consignors 2,094,485
Notes receivable - current portion 586,897
Inventory 2,796,226
Due from affiliate - CRM 38,622
Income tax receivable 34,345
Deferred tax asset 97,000
Prepaid expenses and deposits 309,833
----------------
Total current assets 15,109,328
Property and equipment, net 802,456
Goodwill 1,789,483
Marketable securities 2,580,000
Notes receivable - long-term portion 847,125
Other assets 732,275
================
Total assets $21,860,667
================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Demand notes payable $6,040,000
Notes Payable - current portion 226,506
Payable to third party consignors 4,302,790
Accounts payable 764,627
Accrued expenses 271,347
Income taxes payable 333,908
----------------
Current liabilities 11,939,178
Notes payable - long-term portion 486,519
Deferred income taxes 940,521
----------------
Total liabilities 13,366,218
----------------
Commitments and Contingencies -
Preferred Stock, $.01 par value. Authorized
10,000,000 shares; none issued
Common stock, $.01 par value. Authorized
20,000,000 shares; 4,419,997 issued and outstanding 44,200
Additional paid in capital 6,820,981
Unrealized gain on marketable securities 1,405,000
Retained earnings 224,268
----------------
Total stockholders' equity 8,494,449
----------------
Total liabilities and stockholders' equity $21,860,667
================
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GREG MANNING AUCTIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30,
----------------------------------
1995 1996
---------------- ----------------
<S> <C> <C>
Operating revenues
Sales of merchandise $8,532,935 $12,751,561
Commissions from third parties 2,998,644 2,682,452
Commissions from affiliate - CRM 20,072 3,177
---------------- ----------------
11,551,651 15,437,190
---------------- ----------------
Operating expenses
Cost of merchandise sold 6,789,071 10,029,596
General and administrative 5,455,963 4,620,947
Marketing 665,438 591,573
---------------- ----------------
12,910,472 15,242,116
---------------- ----------------
Operating profit (loss) 195,074
Other income (expense) (1,358,821)
Gain on sale of marketable securities - 1,067,303
Interest and other income 403,649 280,910
Interest expense (410,904) (567,848)
---------------- ----------------
Income (loss) before income taxes (1,366,076) 975,439
Provision (benefit) for income taxes (538,921) 439,056
---------------- ----------------
Net Income (loss) (827,155) 536,383
================ ================
Weighted average number of shares outstanding
and common share equivalents 2,968,971 4,379,673
---------------- ----------------
Earnings (loss) per common and common equivalent share $(0.28) $0.12
================ ================
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GREG MANNING AUCTIONS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1995 AND 1996
Unrealized Retained
PREFERRED STOCK COMMON STOCK Additional Gain on earnings/
Number Par Number Par Paid-in marketable (Accumulated
of Shares Value of Shares Value Capital Securities Deficit) Total
--------- -------- --------- -------- --------- ---------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, June 30. 1994 - - 2,795,000 $27,950 $4,572,175 $- $515,040 $5,115,165
Issuance of Stock, net 757,500 7,575 1,048,903 1,056,478
Proceeds from exercise
of warrants 55,161 552 86,948 87,500
Net (loss) (827,155) (827,155)
_________ ________ _________ ________ _________ __________ ______________ __________
Balance, June 30, 1995 - - 3,607,661 36,077 5,708,026 - (312,115) 5,431,988
Proceeds from exercise
of warrants - net 812,336 8,123 1,012,955 1,021,078
Proceeds from Sale Warrant 100,000 100,000
Unrealized gain on
marketable securities 1,405,000 1,405,000
Net income 536,383 536,383
_________ ________ _________ ________ __________ __________ _____________ ___________
Balance, June 30, 1996 - - 4,419,997 $44,200 $6,820,981 $1,405,000 $224,268 $8,494,449
========= ======== ========== ======== ========== =========== ============= ===========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GREG MANNING AUCTIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30,
-------------------------------
1995 1996
--------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (827,155) $536,383
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 190,949 339,013
Provision for bad debts 190,400 146,131
Gain on sale of marketable securities (1,067,303)
Deferred tax expense (benefit) (310,923) 217,043
Changes in assets (increase) decrease:
Auctions receivable (1,433,234) (227,743)
Advances to consignors 54,881 (857,281)
Other receivables 250,805
Notes receivable (737,466)
Inventory 382,038 54,301
Due from affiliate - CRM 514,407 (38,622)
Income taxes receivable (263,256) 228,911
Prepaid expenses (298,534) 106,311
Other assets (544,829) (2,696)
Changes in liabilities (decrease) increase
Payable to third-party consignors 2,543,179 (1,394,933)
Accounts payable (599,702) (273,354)
Customer deposits (515,871) -
Accrued expenses and other liabilities (393,633) 117,495
Income taxes payable - 169,400
--------------- --------------
(1,060,478) (2,284,410)
--------------- --------------
Cash flows from investing activities:
Capital expenditures for property and equipment (562,480) (119,260)
Additional goodwill (11,834) (79,178)
Purchase of marketable securities and other assets (460,000)
Proceeds from sale of marketable securities 1,008,000
--------------- --------------
(574,314) 349,562
--------------- --------------
Cash flows from financing activities:
Proceeds from notes payable 4,745,000 1,295,000
Repayment of Nat West-NJ (4,950,000)
Proceeds from loans payable 675,000
Repayment of loans payable (328,159) (479,525)
Net proceeds from issuance of stock 1,143,978 1,121,078
--------------- --------------
1,285,819 1,536,553
--------------- --------------
Net decrease in cash and cash equivalents (348,973) (398,295)
Cash and cash equivalents at beginning of period 1,305,774 956,801
=============== ==============
Cash and cash equivalents at end of period $956,801 $558,506
=============== ==============
See accompanying notes to financial statements
</TABLE>
<PAGE>
GREG MANNING AUCTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1996
(1) ORGANIZATION, BUSINESS AND BASIS OF PRESENTATION
The primary line of business of Greg Manning Auctions, Inc. and its
wholly-owned subsidiaries (the "Company") is conducting auctions, private sales
of collectibles, including rare stamps, stamp collections and stocks, as well as
other collectibles including sports trading cards and sports memorabilia,
antiquities and, until recently, Americana collectibles. Auction activities
occur in New York City and various locations in New Jersey.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
Revenue is recognized when the rare stamps and collectibles are sold
and is represented by a commission received from the buyer and seller. Auction
commissions represent a percentage of the hammer price at auction sales as paid
by the buyer and the seller.
In addition to auction sales, the Company also sells via private treaty.
This occurs when an owner of property arranges with the Company to sell such
property to a third party at a privately negotiated price. In such a
transaction, the owner may set selling price parameters for the Company, or the
Company may solicit selling prices for the owner, and the owner may reserve the
right to reject any selling price. In certain transactions, the Company may be
requested to guarantee a fixed price to the owner, which would be payable
regardless of the actual sales price ultimately received. The Company recognizes
as private treaty revenue an amount equal to a percentage of the sales price, or
in the case of a guaranteed fixed price, the difference between the actual sales
price and the guaranteed fixed price when the properties are sold.
The Company also sells its own inventory at auction, wholesale and
retail. Revenue with respect to inventory at auction is recognized when sold,
and for wholesale or retail sales, revenue is recognized when delivered or
released to the customer or to a common carrier for delivery.
The Company does not provide any guarantee with respect to the
authenticity of property offered for sale at auction. Each lot is sold as
genuine and as described by the Company in the catalogue. When however, in the
opinion of a competent authority mutually acceptable to the Company and the
purchaser, a lot is declared otherwise, the purchase price will be refunded in
full if the lot is returned to the Company within a specified period. In such
event, the Company will return such lot to the consignor before a settlement
payment has been made to such consignor for the lot in question. To date,
returns have not been material. Large collections are generally sold on an "as
is" basis.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles 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.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of the Company include the
accounts of its wholly-owned subsidiaries. All intercompany accounts and
transactions have been eliminated in consolidation.
<PAGE>
GREG MANNING AUCTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1996
CONCENTRATION OF CREDIT RISK
The Company frequently extends trade credit in connection with its
auction sales which are held throughout the United States. The Company evaluates
each customer's creditworthiness on a case-by-case basis; generally the
customers who receive trade credit are professional dealers who have regularly
purchased property at the Company's auctions or whose reputation within the
industry is known and respected by the Company.
In situations where trade credit is extended, the purchaser generally
takes possession of the property before payment is made by the purchaser to the
Company, and the Company is liable to the consignor for the net sales proceeds
(auction hammer price less commission to the Company). The Company pays the
consignor generally not later than the 45th day after the sale, and when trade
credit is extended, the Company assumes all risk of loss associated with the
trade credit, and the responsibility of collection of the trade credit amount
from the purchaser. Losses to date under these situations have not been
material.
CASH EQUIVALENTS
The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined by
specific identification.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. Depreciation is computed
using the straight-line method. When assets are retired or otherwise disposed
of, the cost and related accumulated depreciation are removed from the accounts,
and any resulting gain or loss is recognized in operations for the period.
Leasehold improvements are amortized over the shorter of the estimated useful
lives or the remaining life of the lease. The cost of repairs and maintenance is
charged to operations as incurred.
GOODWILL
Goodwill primarily includes the excess purchase price paid over the fair
value of the net assets acquired. Goodwill is being amortized on a straight-line
basis over twenty to twenty five years. Total accumulated amortization at June
30, 1996 was $165,275. Amortization of goodwill was $51,352 and $86,233 for the
years ended June 30, 1995 and 1996, respectively. The recoverability of goodwill
is evaluated at each balance sheet date as events or circumstances indicate a
possible inability to recover their carrying amount. This evaluation is based on
historical and projected results of operations and gross cash flows for the
underlying businesses.
INVESTMENTS
The Company accounts for marketable securities pursuant to the Statement
of Financial Accounting Standards (SFAS) No. 115, Accounting for Certain
Investments in Debt and Equity Securities. Under this Statement, the Company's
marketable securities with a readily determinable fair value have been
classified as available for sale and are carried at fair value with an
offsetting adjustment to Stockholders' Equity. Net unrealized gains and losses
on marketable securities are credited or charged to a separate component of
Stockholders' Equity.
<PAGE>
GREG MANNING AUCTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1996
Approximately $456,000 of other investments, which consist of
nonmarketable investments in private companies and a venture capital
partnership, are carried at the lower of cost or net realizable value and are
included in other assets.
FINANCIAL INSTRUMENTS
The carrying amounts of financial instruments, including cash and cash
equivalents, accounts receivable and accounts payable approximated fair value as
of June 30, 1996 because of the relative short maturity of these instruments.
The carrying value of notes receivable, demand notes payable to bank and notes
payable approximated fair value at June 30, 1996 based upon quoted market prices
for the same or similar instruments.
STOCK ISSUED TO EMPLOYEES
The Company has elected to follow Accounting Principles Board Opinion
No. 25, Accounting for Stock Issued to Employees ("APB25") and related
interpretations in accounting for its employee stock options. Under APB25,
because the exercise price of the Company's employee stock options equals the
market price of the underlying stock on the date of grant, no compensation
expense is recognized.
MARKETING COSTS
Advertising and catalogue costs are the only costs included in marketing
costs under the direct-response advertising method. These costs are expensed as
incurred, which occurs in the same quarter that the related auction takes place.
As a result, assets of the Company do not include any of these costs.
EARNINGS (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE
Earnings (loss) per common and common equivalent share of the Company's
Common Stock is computed using the weighted average number of common and common
equivalent shares outstanding for each year. Primary and fully diluted earnings
per share are the same for the year ended June 30, 1996. Outstanding stock
options and warrants for the year ended June 30, 1995 were excluded from
earnings per common share computations because they are antidilutive.
(3) SIGNIFICANT TRANSACTIONS
On June 25, 1996 an individual purchased certain inventory for $1,200,000
which increased operating profit by $713,000. Included in notes receivable is
$913,000 related to the transaction.
Also during the fourth quarter and individual and related entities certain
inventory for $1,735,000 (included in receivables at June 30, 1996) which
increased operating profit by $397,000.
The foregoing transactions ar collateralized by certain assets. The Company
has the right to sell such assets upon certain defined circumstances of default.
(4) CONCENTRATION OF CASH
The Comapany maintains its cash in bank deposit accounts which, at
times may exceed federally insured limits. The Company has not experienced any
losses in such accounts.
(5) RECEIVABLES
Advances to consignors represent advance payments, or loans, to the
consignor prior to the auction sale, secured by the items received and held by
the Company for the auction sale and the proceeds from such sale. Interest on
such amounts is generally charged at an annual rate of 12%. Such advances,
generally are not outstanding for more than six months from the date of the
note.
As of June 30, 1996, the allowance for doubtful accounts included in
auction receivables was $125,000.
<PAGE>
GREG MANNING AUCTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1996
<TABLE>
<CAPTION>
(6) NOTES RECEIVABLE
<S> <C>
In connection with sale of Americana division, due
in quarterly installments of $20,000 $100,000
In connection with sale of merchandise, due in monthly installments
of $9,250, including interest at 11.08%, maturing June 30, 2001 419,332
In connection with sale of merchandise, due in quarterly installments
of $100,000, including interest at 8.25%, maturing November 4, 1998 914,690
---------
Total $ 1,434,022
Less: current portion 586,897
---------
Notes receivable - long-term portion 847,125
=========
<CAPTION>
(7) INVENTORIES
<S> <C>
Inventories as of June 30, 1996 consisted of the following:
Stamps $2,126,974
Sports Cards and Sports Memorabilia 431,640
Antiquities 237,612
----------
$2,796,226
==========
<CAPTION>
(8) PROPERTY AND EQUIPMENT, NET
Property and equipment and the related accumulated depreciation &
amortization at June 30, 1996 consisted of the following:
Estimated
USEFUL LIVES
<S> <C> <C>
Equipment $ 467,006 3-5 years
Furniture and fixtures 64,836 3-5 years
Vehicles 59,358 3-5 years
Property under capital leases 185,394 3-5 years
Leasehold Inprovements 401,332 5 years
---------
1,177,926
Less accumulated depreciation
and amortization 375,470
---------
Net property and equipment 802,456
=========
</TABLE>
Depreciation and amortization expense for the years ended June 30, 1995
and 1996 was $139,599 and $252,780, respectively. These amounts include
amortization expense relating to assets under capitalized leases of $42,177 and
$62,767 for the years ended June 30, 1995 and 1996, respectively.
<PAGE>
GREG MANNING AUCTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1996
<TABLE>
<CAPTION>
(9) INCOME TAXES
Deferred tax attributes resulting from differences between financial
accounting amounts and tax bases of assets and liabilities are as follows:
June 30,
-------------------------------------
1995 1996
---------------- ----------------
<S> <C> <C>
Current assets and liabilities
Allowance for doubtful accounts $57,540 $50,178
Inventory valuation reserve 5,460 19,970
Depreciation 9,966 -
Goodwill amortization (12,435) -
Net operating loss carryforward 250,392 26,852
--------- -------
Net current deferred tax asset $ 310,923 $97,000
--------- -------
Noncurrent assets and liabilities
Unrealized gain on marketable securities - (937,401)
Depreciation - 12,880
Goodwill amortization - (16,000)
--------- --------
Net noncurrent deferred tax asset (liability) $ - (940,521)
--------- ---------
<CAPTION>
The provisions for income taxes consist of the following:
Years ended June 30,
-------------------------------------
1995 1996
---------------- ----------------
<S> <C> <C>
Current tax expense (recovery) $(482,435) $222,013
Deferred tax expense (56,486) 217,043
-------- ---------
$(538,921) $439,056
-------- ---------
<CAPTION>
The provision for income taxes for the year ended June 30, 1996 have been
reduced by $130,000 from the benefit of net operating loss carryforwards.
A reconciliation between the actual income tax expense (benefit) and income
taxes computed by applying the statutory Federal income tax rate is as follows:
Years ended June 30,
-------------------------------------
1995 1996
---------------- ----------------
<S> <C> <C>
Federal Income Tax (Benefit) at 34% $(464,465) $332,000
State income Tax (Benefit) (72,129) 59,000
Non-deductible goodwill - 40,000
Other (2,327) 8,056
------- -------
$(538,921) $439,056
--------- -------
</TABLE>
The Company has net operating loss caryforwards for state tax purposes of
$450,000 expiring in 2002.
<PAGE>
GREG MANNING AUCTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1996
(10) MARKETABLE SECURITIES
In September 1995, The Company acquired 13.1%, or 4,500,000 shares of the
outstanding common shares of PICK Communications ("PICK") (name changed from
Prime International Products, Inc.), which is primarily engaged in the business
of issuing prepaid telephone cards. At June 30, 1996, these securities
classified as available for sale having a cost of $237,599 and a fair value of
approximately $2,580,000 resulted in an unrealized gain of $2,342,000, which was
offset by deferred income taxes of $937,000. The increase in net valuation of
$1,405,000 was credited to a separate component of Stockholders Equity. During
the year ended June 30, 1996, the Company sold 387,711 of its shares of PICK for
approximately $1,090,000, resulting in a pretax gain on the sale of marketable
securities of approximately $1,067,000. As of June 30, 1996, the Company owns
9.5% or 4,112,289 shares of PICK. The shares acquired by the Company were not
registered under the Securities Act and accordingly are subject to restrictions
on transferability. Greg Manning, the Company's President, Chief Executive
Officer and Chairman of the Board is a member of the Board of PICK.
The fair value of PICK has been estimated by the Company's management utilizing
arms-length private transactions in PICK's common stock, as described in PICK's
public filings under the Securities Exchange Act of 1934, as amended. The
valuation assigned to this investment is contingent upon PICK's ability to
generate future cash flows and it is reasonably possible, based upon a reading
of such public filings, that the estimate could change substantially in the near
term.
(11) LEASES
The Company conducts its business on premises leased in various locations under
leases that expire through the year 2000. The Company utilizes property and
equipment under both operating and capital leases. Future minimum lease payments
under noncancelable leases in effect at June 30, 1996 are set forth below:
1997 $330,298
1998 328,590
1999 304,065
2000 172,365
2001 19,040
Thereafter -
----------------
Total future minimum lease payments $1,154,358
================
Rent expense was $329,854 and $329,139 for the years ended June 30, 1995 and
1996, respectively.
<PAGE>
GREG MANNING AUCTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1996
(12) RELATED-PARTY TRANSACTIONS
One of the individuals included in the significant transactions footnote
(note 3), provides public relations and financial advice to the Company.
Included in prepaid expense is approximately $225,000 for these services to be
performed through June 1, 1998. In addition, the Company has issued this
individual a warrant to purchase 400,000 shares of the Company's stock (see Note
19).
The Company accepts rare stamps and other collectibles for sale at auction
on a consignment basis from CRM. Such stamps and collectibles have been
auctioned by the Company or sold at private treaty under substantially the same
terms as for third party customers and the Company charges CRM a seller's
commission. In the case of auction, the hammer price of the sale, less the
seller's commission (for lots valued at under $100,000; no sellers commission is
payable for lots valued at over $100,000), is paid to CRM upon successful sale,
and in the case of private treaty, the net price after selling commissions is
paid to CRM. For the years ended June 30, 1995 and 1996, such auction and
private treaty sales (net of commission) amounted to $65,489 and $9,529,
respectively.
Greg Manning, Chairman and Chief Executive Officer of the
Company, owns all of the outstanding shares of CRM common stock. Messrs. Manning
and William Tully are executive officers of CRM and the Company. CRM owned 100%
of the common stock of the Company prior to the May 1993 public offering, and at
June 30, 1996, owned 29% of the shares of the Company's common stock.
(13) Demand Notes Payable
The Company has a revolving credit agreement with Brown Brothers Harriman &
Co. ("Brown Brothers") pursuant to which Brown Brothers agreed to provide the
Company with a credit facility of up to $6,000,000. The Company pays an annual
fee for the facility equal to one quarter of one percent of the total amount of
such facility. Borrowings under the facility bear interest at the rate of 2%
above Brown Brothers base rate, which was 8 1/4% at June 30, 1996. Borrowings
outstanding at June 30, 1996 aggregated $5,640,000 and are payable on demand.
The initial borrowings under the facility were used to pay off outstanding
amounts under the Company's previous credit facility.
Unsecured note payable to an individual, due on demand monthly interest
payments at 12%.
The Company's obligations under the above revolving credit and
term loan facilities are collateralized by the Company's accounts receivable,
advances to consignors, and inventory. The loan agreements contain various
guidelines (including those relating to minimum tangible net worth and interest
coverage ratio) which the Company must adhere to and which prohibits payment of
dividends or like distributions without the consent of Brown Brothers. The
Company believes that at June 30, 1996, it was in compliance with such
guidelines.
(14) Notes Payable
Note payable to Brown Brothers, monthly principal
payments of $6,250 plus interest at the banks base rate
plus 1 1/2%, through June 2000. Personally guaranteed by the
Chairman of the Company. (see note 13) $312,500
Note payable in connection with purchase of inventory,
quarterly principal payments of $33,750 plus interest at
8%, through August 1998. 270,000
Various capital lease obligations, agregate monthly
payments of $5,300, through October 2000. 130,525
---------
713,025
Less current portion 226,506
---------
Notes payable - long-term portion 486,519
=========
<PAGE>
GREG MANNING AUCTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1996
The approximate aggregate amount of all long-term maturities for the years
ending June 30 are as follows:
1997 $226,506
1998 263,125
1999 105,434
2000 100,540
2001 17,420
(15) SALE OF DIVISION
On August 23, 1995, the Company entered into various
agreements with Charles G. Moore Americana, Ltd., pursuant to which the Company
sold to Moore Americana all of the assets of the Americana Division. (Mr.
Charles Moore was formerly the director of that division.) The selling price of
the Americana Division consisted of (i) $210,000, payable over approximately two
years, commencing September 30, 1995, and (ii) the sale of inventory, at an
amount equal to the "original cost value" of such inventory ( or approximately
$480,500). The inventory sale resulted in no gain or loss. The $210,000 purchase
price was accounted for as a direct reduction of goodwill.
(16) COMMITMENTS AND CONTINGENCIES
As part of the purchase of the Ivy & Mader Philatelic Auctions,
Inc. in 1993, the Company is required to pay additional amounts for fifteen
years from the date of purchase depending upon the financial performance of Ivy.
These additional amounts totaled $34,507 and $79,178 for the years ended June
30, 1995 and 1996, respectively, and are accounted for as an increase to
goodwill and amortized over the goodwill's remaining life.
(17) SIGNIFICANT AGREEMENTS
AGREEMENTS WITH CRM
CRM had historically been engaged in the business of acquiring
collectibles (including collectibles of the type that are currently sold by the
Company) and selling them both through direct sales and through consignments for
sale at auction. Currently CRM no longer purchases any collectibles for resale.
In the past, CRM has been an important source of property consigned to the
Company for sale at auction. Although CRM continues to provide the Company with
property, the amount in relation to the Company's overall business has been
decreasing. For the year ended June 30, 1996, consignments by CRM accounted for
$12,706, or less than 1% of the Company's aggregate sales, generating $3,177 in
commission revenues, or less than 1% of aggregate revenues.
<PAGE>
GREG MANNING AUCTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1996
The CRM Inventory Agreement also provides that CRM will not
compete with the Company for the acquisition of collectibles from third parties
that are suitable for acquisition by the Company from time to time for use in
its business.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with Mr. Greg
Manning, Chief Executive Officer of the Company and Mr. William Tully, Executive
Vice President of the Company. The agreement with Mr. Manning has a term which
ends on June 30, 1997 and provided for Mr. Manning's services as President and
Chief Executive Officer of the Company, with an annual salary of $175,000 for
the years ended June 30, 1996 and 1997, plus a bonus based on the net income
before income taxes of the Company
The agreement with Mr. Tully, as amended, has a term ending on
June 30, 1998 and provides for his services as Executive Vice President with an
annual salary of $124,353 for the year ended June 30, 1996, plus an annual bonus
based on the income before income taxes of the Company.
The Company currently maintains a $1,000,000 life insurance
policy on the life of Mr. Manning with benefits payable to the Company.
(18) SUPPLEMENTARY CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Following is a summary of supplementary cash flow information:
For the years ended June 30,
---------------------------------
1995 1996
------------- -------------
<S> <C> <C>
Interest paid $379,139 $556,801
Income taxes paid - 53,121
Noncash investing and financing activities:
Acquisition of fixed assets under capital leases 30,280 115,971
Note receivable in conjunction with sale of division 210,000
Sale of PICK stock relating to purchase of inventory 81,704
Acquisition of PCT stock relating to sale of inventory 200,000
Acquisition of inventory under note payable 270,000
</TABLE>
(19) CAPITAL STOCK AND WARRANTS
In May 1993, the Company completed a public offering (the
"Public Offering") of 747,500 units of its securities (the "Units") at $6.25 per
Unit. Each Unit consists of two shares of the Company's Common Stock and two
callable common stock purchase warrants (the "Warrants"), each of which
initially entitled the holder to purchase one share of common stock at an
exercise price of $3.4375 per share. As of June 29, 1995, after taking into
account certain adjustments, each Warrant entitles its holder to purchase 1.24
shares of Common Stock at a price of $2.7733 per share
<PAGE>
GREG MANNING AUCTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1996
and is exercisable for a four year period commencing May 14, 1994. At June 30,
1996, none of these warrants had been exercised. In connection with the Public
Offering, the Company issued to the underwriters in such offering 65,000 unit
purchase warrants (the "Unit Purchase Warrants"), each of which initially
entitled the holder to purchase, through May 14, 1998, one Unit (each consisting
of two shares of Common Stock and two Underwriters' Warrants (as hereinafter
defined)) at an exercise price of $10.31 per Unit. As a result of the private
placement offering, the Regulation S offering and the issuance of the warrant
referred to below, the underwriters to whom Unit Purchase Warrants were issued
in connection with the Company's initial public offering were entitled to an
adjustment in the exercise price of such Unit Purchase Warrants from $10.31 to
$6.8456 each, and an adjustment in the number of units for which the Unit
Purchase Warrants are exercisable from one unit per Unit Purchase Warrant to
1.50608 units per Unit Purchase Warrant. The warrants (the "Underwriters'
Warrants") issuable upon exercise of the Unit Purchase Warrants will be subject
to the same terms and conditions of the Warrants, except that the Underwriters'
Warrants will not be freely transferable and will not be subject to repurchase
by the Company. At June 30, 1996, none of the Unit Purchase Warrants or
Underwriters' Warrants had been exercised.
On November 4, 1994, in a private placement to certain
"accredited" investors, the Company sold 257,500 shares of its common stock at
$2.00 per share. For the purchase price, each investor also received a warrant
(the "Purchaser Warrants") which initially entitled the holder to purchase one
share of Common Stock at $1.75 per share (amended from $2.25 per share). The
number of shares of Common Stock issuable upon exercise of the Purchaser
Warrants was subsequently increased to 1.13 shares, and the exercise price was
subsequently reduced to $1.5528 per share. In connection with such private
placement, the Company also issued warrants (the "Agents' Warrants") to the
placement agents in the private placement, exercisable for 72,720 shares of
Common Stock at an exercise price of $1.74 per share. At June 30, 1996, all of
the Purchaser Warrants and Agents' Warrants had been exercised. . The Company
received approximately $336,000 in net proceeds from the private placement
offering in the year ended June 30, 1995 and approximately $490,000 from the
exercise of these warrants in the year ended June 30, 1996.
On June 29, 1995, the Company consummated an offshore offering
for sale of 500,000 units of its securities (the "Regulation S Offering"). For a
purchase price of $1.50 per unit, each purchaser received one share of the
Company's Common Stock and one warrant to purchase an additional share at $1.50
per warrant (subject to certain adjustments). The Regulation S Offering was made
solely to certain offshore investors in compliance with, and under the exemption
to registration provided by, Regulation S under the Act. At June 30, 1996, all
the warrants had been exercised. The Company received approximately $721,000 in
net proceeds from the Regulation S Offering in the year ended June 30, 1995 and
$750,000 from the exercise of these warrants in the year ended June 30, 1996.
In February 1996, the Company issued to an individual in a
private placement, a warrant to purchase, at any time prior to March 1, 1997,
400,000 shares of the Company's Common Stock at an exercise price of $4.00 per
share. The purchase price for the warrant was $100,000. Upon request of the
investor, the Company has agreed to register the shares of Common Stock
underlying the warrant under the Securities Act of 1933, as amended, the cost of
which (other than allocable overhead) will be borne by the investor.
STOCK OPTION PLAN
The Company's 1993 Stock Option Plan, as amended (the "Plan"),
that provides for the grant of options to purchase shares of common stock to
such officers, directors and employees of the Company, consultants to the
Company, and other persons or entities as the Stock Option Committee (the
Committee) of the Board of Directors shall
<PAGE>
GREG MANNING AUCTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1996
select. A total of 650,000 shares of common stock has been reserved for issuance
pursuant to the plan. The option exercise price per share shall be determined by
the Committee in its sole discretion; provided, however, that the option
exercise price of an option shall be at least 100% of the fair market value (as
defined) of a share of common stock on the date the option is granted. Outlined
below is a summary of the changes under the Plan:
<TABLE>
<CAPTION>
Number Option prices
of shares per share
----------------- -------------------
<S> <C> <C>
Outstanding at June 30, 1994 304,500 $ 3.375-3.875
Granted 80,000 2.00-2.375
Exercised - -
Canceled (77,000) 3.375-3.875
----------------- -------------------
Outstanding at June 30, 1995 307,500 $ 2.00-3.375
Granted 221,000 2.812-3.312
Exercised - -
Canceled (34,000) 2.812-3.375
----------------- -------------------
Outstanding at June 30, 1996 494,500 $ 2.00-3.375
----------------- -------------------
Exercisable at June 30, 1996 271,250 $ 2.00-3.375
----------------- -------------------
</TABLE>
Unless otherwise determined by the stock option committee of the
company's board of directors, each option shall become exercisable in four
substantially equal installments, the first of which shall become exercisable on
the first anniversary of the date of the grant, and the remaining three of which
shall become exercisable, respectively, on the second, third and fourth
anniversaries of the date of the grant.
CERTAIN ANTI-TAKEOVER PROVISIONS
The company's certificate of incorporation and by-laws contain
certain anti-takeover provisions that could have the effect of making it more
difficult for a third party to acquire, or of discouraging a third party from
attempting to acquire, control of the company without negotiating with its board
of directors. Such provisions could limit the price that certain investors might
be willing to pay in the future for the company's securities. Certain of such
provisions provide for a board of directors with staggered terms, allow the
company to issue preferred stock with rights senior to those of the common
stock, or impose various procedural and other requirements which could make it
more difficult for stockholders to effect certain corporate actions.
(20) SUBSEQUENT EVENT
In september 1996, the company entered into a letter agreement setting
forth the principal terms of the acquisition of the Latham Companies, inc.
("LCI"), the parent company of Larry Latham Auctioneers, Inc. ("LLA"), among
other companies. LLA is engaged in the business of conducting sales of real
estate through public auction.
Under the terms of the letter agreement, the Company will acquire all of
the stock of LCI in exchange for 1,661,874 shares of common stock of the
Company. LCI will become a wholly owned subsidiary of the Company, and larry
latham, currently the chief executive officer of LCI, will remain in such
position.
The transaction is subject to the completion of additional documentation
and the obtaining of various approvals.
<PAGE>
ITEM 8 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
---------------------------------------------------------------------------
On October 31, 1995, the Company dismissed, with Board of Directors approval,
Price Waterhouse, LLP (PW) as its independent auditors and engaged Amper,
Politziner & Mattia as its independent auditors for the Company's fiscal year
ended June 30, 1996.
PART III.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT
---------------------------------------------------------------------------
The following persons are all of the directors and executive
officers of the Company:
Greg Manning, age 50, has been Chairman of the Board of the Company since its
inception in 1981 and Chief Executive Officer since December 8, 1992. Mr.
Manning was the Company's President from 1981 until August 12, 1993. Mr. Manning
also has been Chairman of the Board and President of CRM since its inception,
which he founded as "Greg Manning Company, Inc." in 1961. Mr. Manning is
currently on the Board of Directors of the State Bank of South Orange, New
Jersey and is Chairman of the bank's audit committee and member of the bank's
executive committee.
William T. Tully, Jr., age 50, has been Executive Vice President of the Company
since August 14, 1994. From August 12, 1993 to August 14, 1994, Mr. Tully was
Chief Operating Officer. From the Company's inception in 1981 until August 14,
1994, Mr. Tully was Secretary and Treasurer of the Company, and from December 8,
1992 until August 14, 1994, Mr. Tully was a director. Mr. Tully was Executive
Vice President of the Company since its inception in 1981 until August 12, 1993.
Mr. Tully has been Executive Vice President of CRM from August 1990, and has
served CRM in other management capacities since 1974.
David C. Graham, age 56, has been a Senior Vice President of the Company since
August 1990 and has been Senior Vice President of CRM since August 1990. Mr.
Graham has served the Company and CRM in various capacities since September
1978. Mr. Graham has been a licensed auctioneer since 1965. Prior to joining the
Company, Mr. Graham was employed by H.R. Harmer, a public auction house, from
1955 to 1977.
Robert J. Gesso, age 44, has been Secretary of the Company since September 12,
1994. Mr. Gesso was the secretary, treasurer and controller of Y & S Candies,
Inc. from 1985 to 1994.
Daniel M. Kaplan, age 51, was retained by the Company to serve as Chief
Financial Officer on October 18, 1995. Mr. Kaplan served as controller of
Horowitz Rae Book Manufacturers, Inc. from 1994 to 1995, as controller of Apex
One, Inc. during 1993 and as a private management consultant from 1991 to 1993.
Mr. Kaplan was associated with Spectra Physics, Inc. And The Newark Group, Inc.
from 1976 to 1991.
William J. Dolan, age 47, has been a director of the Company since December 8,
1992. Mr. Dolan has been President of Dolan/Wohlers, a printing company which he
co-founded, since 1973. In 1990, Mr. Dolan co-founded Limtech, Inc., a
manufacturer and distributer of printing chemicals, and has served as its
President since its inception.
Scott S. Rosenblum, age 47, has been a director of the Company since December 8,
1992. Mr. Rosenblum has been a partner (since 1991) in the law firm of Kramer,
Levin, Naftalis & Frankel, and previously (from 1984 to 1991) was a partner in
the law firm of Stroock & Stroock & Lavan. Mr. Rosenblum received his J.D.
degree from the University of Pennsylvania.
<PAGE>
The Company's directors are elected at the annual meeting of stockholders. The
Certificate of Incorporation provides that the members of the Board of Directors
be divided into three classes, as nearly equal in size as possible, with the
term of office of one class expiring each year. Accordingly, only those
directors of a single class can be changed in any one year and it would take
elections in three consecutive years to change the entire Board. William Tully
has been elected to serve until the 1996 annual meeting of stockholders. Messrs.
William Dolan and Scott S. Rosenblum have been elected to serve until the 1997
annual meeting of stockholders. Greg Manning has been elected to serve until the
1998 annual meeting of stockholders. The Certificate of Incorporation also
provides that directors may be removed only for cause and that any such removal
must be approved by the affirmative vote of at least a majority of the
outstanding shares of capital stock of the Company entitled to vote generally in
the election of directors. While the Company believes that the foregoing
provisions are in the best interests of the Company and its stockholders, such
requirements may have the effect of protecting management against outside
interests and in retaining its position.
There are no family relationships among any of the directors or executive
officers of the Company.
The following sets forth the name of each officer, director and beneficial owner
of more than 10% of the Common Stock of the Company who failed to file on a
timely basis, as described on Forms 3, 4 and 5 and amendments thereto furnished
to the Company, reports required by Section 16 (a) of the Securities Exchange
Act of 1934 during the year ended June 30, 1996 and prior years and, for each
such person, the number of late reports, the number of transactions that were
not reported on a timely basis and any known failure to file a required form:
Daniel M. Kaplan (officer) : For year ended June 30, 1996, one late report.
ADVISORY COMMITTEE
The Company has an advisory committee (the "Advisory Committee") that includes
prominent collectors and other individuals involved in the philatelic and
collectibles business, with whom Mr. Manning has developed relationships over
the years. The members of the Advisory Committee individually meet from time to
time with the Company's Chairman and Chief Executive Officer to discuss current
trends or developments in the collectibles market. Members of the Advisory
Committee receive no compensation for their services, and their availability is
subject to their personal schedules and other time commitments. The Company
reimburses members for their reasonable out-of-pocket expenses in serving on the
Advisory Committee.
The Company believes that the members of the Advisory Committee have no
fiduciary or other duties, obligations or responsibilities to the Company or its
stockholders, and they will not acquire any such duty, obligation or
responsibility as a result of any meeting or consultation they may have with
management of the Company. Each member of the Advisory Committee has entered
into an agreement with the Company which, among other things, confirms that the
member has no such duty, obligation or responsibility, but also commits the
member to keep confidential and not disclose (or in any manner use for personal
benefit or attempt to profit from) any non-public information relating to the
Company that the member receives in such capacity, except to the extent that
disclosure is required by applicable law or legal process or to the extent the
information becomes public other than as a result of a breach of any member's
confidentiality agreement. The members serve at will and may resign, or be asked
to discontinue their services, at any time.
The members of the current Advisory Committee and their principal occupations
are as follows:
Anthony L. Bongiovanni, Jr., age 37, is President of Micro Strategies,
Incorporation, a leading developer and supplier of microcomputer based business
applications throughout the New York, New Jersey and Pennsylvania areas, which
he founded in 1983. Mr. Bongiovanni has a B.S. in mechanical engineering from
Rensellaer Polytechnical Institute.
<PAGE>
Sir Ronald Brierley, age 58, is Founder/President of Brierley Investments,
Limited, a publicly held New Zealand investment company. Sir Ronald is also
Chairman of GPG P/C, an investment company based in London, England. Sir Ronald
serves on the boards of Advance Bank, Australia, Ltd., Adriadne Australia Ltd.,
Australia Oil & Gas Corporation, Ltd., and the Australian Gaslight Company, and
he is also a trustee of Sydney Cricket and Sports Ground Trust. Sir Ronald has
had a life-long interest in stamps, beginning as a schoolboy, when he formed
Kiwi Stamp Company and acquired a dealer's certificate from the New Zealand
Stamp Dealers Federation. Sir Ronald has been selling and collecting stamps
since that time, and in 1989, he acquired a significant interest in Stanley
Gibbons, Ltd., a world renown stamp company located in London, England.
Robert G. Driscoll, age 64, has been Chief Executive Officer (since 1981) of
Barrett & Worthen, Inc. and the Brookman Stamp Company of Bedford, New
Hampshire, both of which are engaged in the business of buying and selling
stamps. Mr. Driscoll served as Vice President of H.E. Harris Company, a
subsidiary of General Mills from 1978 to 1981, after having founded R&R Stamp
Company in 1958 and serving as its President until it was sold in 1978 to
General Mills. Mr. Driscoll is a past President of the American Stamp Dealers
Association (from 1977 to 1978) and is a lifetime member of the American First
Day Cover Society. He has been a member of the American Philatelic Society for
over 45 years.
Herman Herst, Jr., age 87, is recognized as the most prolific philatelic author
in the world, and has written numerous articles on philately and has authored
several stamp related books, including Nassau Street. Mr. Herst was President of
Herman Herst Jr. Auctions Inc., a public auction house (from 1934 to 1972) and
conducted a private retail stamp business as a sole proprietorship. He was also
an active philatelic auctioneer for many years, until his semi-retirement in
1981. He is a former President of the Society of Philatelic Americans and served
two terms on the Board of Directors of the American Stamp Dealers Association.
Among his many accomplishments, Mr. Herst received the John Luff Award from the
American Philatelic Society, the merit award from the Society of Philatelic
Americans and the Collectors Club of New York's award for Service to Philately.
He is currently a senior member of the American Society of Appraisers, an
honorary life member of the Philatelic Traders' Society of London and an
honorary life member of the American Stamp Dealers Association, a life member of
the Philatelic Traders' Society of London and an honorary life member of the
Writer's Unit of the American Philatelic Society. He is also the only American
stamp dealer to have ever served on the council of the Philatelic Traders'
Society of London.
Herbert LaTuchie, age 77, is President of House of Collectors, a retail
collectibles business, as well as President of Herb LaTuchie Auctions, a public
auction house of stamps. He was Chairman of the Board and Chief Executive
Officer (from 1954 to 1986) of Modern Builders Supply Company, Inc. and Modern
Manufacturing, Inc., the latter of which is one of the ten leading distributors
of building products in the United States. Mr. LaTuchie has been a life-long
collector of rare stamps, and he also collects sheet music and other paper
collectibles.
Joseph Levy, Jr., age 70, is president of Levy Venture Management, a real estate
rental development group involved in automotive retailing real estate in three
states. He is also a real estate developer of several properties located in
Illinois. Prior to joining Levy Venture Management, Mr. Levy was President of
Walton Chrysler-Plymouth (from 1953 to 1960), a car dealership in Chicago,
Illinois, and of Carol Buick (from 1961 to 1984), a car dealership in Evanston,
Illinois. He serves as a director of the Evanston Historical Society. He is also
a trustee of Evanston Hospital and the Culver Educational Foundation, a trustee
of the Chicago Historical Society and the Levy Senior Centers. Mr. Levy is a
collector of stamps, coins, watches and other collectibles.
Hector D. Wiltshire, age 54, is President and CEO of Wiltshire Technologies,
Inc., a high technology venture capital and consulting group, and is an
experienced collector of rare stamps. Mr. Wiltshire is a member of the
Association of Certified and Corporate Accountants (A.C.C.A) and the British
Computer Society (M.B.C.S.). Mr. Wiltshire holds degrees in Executive Business
Administration and marketing.
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
Information regarding Executive Compensation will be in the
definitive proxy statement of the Company to be filed within 120 days of June
30, 1996 and is incorporated by reference.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding Security Ownership of Certain Beneficial
Owners and Management will be in the definitive proxy statement of the Company
to be filed within 120 days of June 30, 1996 and is incorporated by reference.
ITEM 12. CERTAIN RELATIONSHIPS AND TRANSACTIONS
Information regarding Certain Relationships and Transactions will
be in the definitive proxy statement of the Company to be filed within 120 days
of June 30, 1996 and is incorporated by reference.
ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K
EXHIBIT NO. DESCRIPTION
---------------------------------------------------------------------------
(a) (1) All Financial Statements of the Company for the year ended
June 30, 1996 are filed herewith. See Item 7 of this Report
for a list of such financial statements.
(2) Exhibits -- See response to paragraph (c) below.
(b) Reports on Form 8-K
None
(c) Exhibits
3.1 Restated Certificate of Incorporation of Registrant. Incorporated by
reference to Exhibit 3(a) to the Company's Form SB-2, Registration Number
33-55792-NY, dated May 14, 1993 (the "1993 Form SB-2").
3.2 By-laws, as amended, of Registrant. Incorporated by reference to
Exhibit 3(b)to the 1993 Form SB-2.
10.1 1993 Stock Option Plan. Incorporated by reference to Exhibit 10(a) to
the 1993 Form SB-2 and incorporated by reference to Exhibit A to the Proxy
Statement of the Company dated January 31, 1994.
10.2 Employment Agreement between Greg Manning and Registrant dated as of
May 14, 1993. Incorporated by reference to Exhibit 10(b) to the Form SB-2 and
incorporated by reference to Exhibit 4.1 to Form 10-QSB of the Company for the
period ended December 31, 1995, dated February 13, 1996, as amended.
10.3 Employment Agreement between William T. Tully and Registrant, dated as
of May 14, 1993. Incorporated by reference to exhibit 10(c) to the form 1993
Form SB-2 and incorporated by reference to Exhibit 10.26 to Form 10-QSB of the
Company for the period ended December 31, 1993 and dated February 22, 1994.
<PAGE>
10.4 Inventory Acquisition and Non Competition Agreement between
Collectibles Realty Management, Inc. and Registrant, dated as of July 1, 1993.
Incorporated by reference to Exhibit 10(e) to the 1993 Form SB-2.
10.5 Financial Consulting Agreement with JWCharles Securities, Inc. and
Corporate Securities, Inc. Incorporated by reference to Exhibit 10(f) to the
1993 Form SB-2.
10.6 Registration Rights Agreement dated November 4, 1994, among the
Company and the holders of restricted stock. Incorporated by reference to
Exhibit 10.1 of the Company's Report on Form 8-K, dated November 4, 1994.
10.7 Shareholder's Common Stock Purchase Warrant, dated November 4, 1994,
among the Company and the Selling Shareholders. Incorporated by reference to
Exhibit 10.2 of the Company's Report on Form 8-K, dated November 4, 1994.
10.8 Placement Agent's Common Stock Purchase Warrant, dated November
4,1994, among the Company and JW Charles Securities, Inc. and Corporate
Securities Group, Inc. Incorporated by reference to Exhibit 10.3 of the
Company's Report on Form 8-K, dated November 4, 1994.
10.9 Demand Promissory Note, dated June 1, 1995, of Greg Manning Auctions,
Inc.(Maker) to Brown Brothers Harriman & Co. (Holder). Incorporated by reference
to Exhibit 10.1 of the Company's Report on Form 8-K, dated May 26, 1995.
10.10 Demand Promissory Note, dated June 3, 1996, of Greg Manning Auctions,
Inc.(Maker) to Brown Brothers Harriman & Co. (Holder).*
10.11 General Security Agreement, dated May 26, 1995, from Greg Manning
Auctions,Inc. to Brown Brothers Harriman & Co. Incorporated by reference to
Exhibit 10.2 of the Company's Report on Form 8-K, dated May 26, 1995.
10.12 Guaranty, dated May 26, 1995, from Greg Manning Auctions, Inc. and
Ivy & Mader Philatelic Auctions, Inc. to Brown Brothers Harriman & Co.
Incorporated by reference to Exhibit 10.3 of the Company's Report on Form 8-K,
dated May 26, 1995.
10.13 Form of Stock Purchase Agreement, in connection with the offering
made pursuant to the exemption from registration provided by Regulation S under
the Securities Act of 1933. Incorporated by reference to the Company's Report on
Form 8-K, dated July 3, 1995.
10.14 Form of Purchase Warrant, in connection with the offering made
pursuant tothe exemption from registration provided by Regulation S under the
Securities Act of 1933. Incorporated by reference to the Company's Report on
Form 8-K,dated July 3, 1993.
23.1 Consent of Independent Accountants.*
23.2 Consent of Independent Accountants*
27 Financial Data Schedule*
* Filed herewith
<PAGE>
SIGNATURES
IN ACCORDANCE WITH SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934,
THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
GREG MANNING AUCTIONS, INC.
DATE: OCTOBER 14, 1996
GREG MANNING
CHAIRMAN OF THE BOARD
CHIEF EXECUTIVE OFFICER & DIRECTOR
IN ACCORDANCE WITH THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN
SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE
CAPACITIES AND ON THE DATES INDICATED BELOW.
DATE: OCTOBER 14, 1996
GREG MANNING
CHAIRMAN OF THE BOARD
CHIEF EXECUTIVE OFFICER & DIRECTOR
(PRINCIPAL EXECUTIVE OFFICER)
DANIEL M. KAPLAN,
CHIEF FINANCIAL OFFCIER
(PRINCIPAL FINANCIAL OFFCIER)
WILLIAM J. DOLAN
DIRECTOR
WILLIAM T. TULLY, JR.,
EXECUTIVE VICE PRESIDENT
ROBERT J. GESSO
SECRETARY
SECURED PROMISSORY NOTE (GRID)
(PLEDGE OF COLLATERAL)
$6,000,000.00 Date: JUNE 3,1996
Name of Maker: GREG MANNING AUCTIONS, INC,
Address of Maker:
State of Incorporation (if applicable):
Partnership Certificate Filed With (if applicable):
Due On: DEMAND
Interest Payable on: LAST DAY OF EACH MONTH
FOR VALUE RECEIVED the Maker promises to pay on the due date set forth above, to
the order of BROWN BROTHERS HARRIMAN & CO. (-Payee-) at its office at 59 Wall
Street, New York, New York 10005, the face amount hereof. Interest on the
balance from time to time outstanding shall accrue at the rate of (B+2) 10.25%
annum, and shall be payable asset forth above.
All advances pursuant to this Note and all repayments of principal due hereunder
shall be endorsed by the Payee on the schedule on the reverse side hereof, or
any continuation of such schedule attached hereto and denominated it part
hereof. Said endorsement on such schedule by an authorized agent of the Payee
shall be conclusive evidence of the unpaid balance due on this Note.
The indebtedness evidenced hereunder, as well as all other indebtedness now or
hereafter owing by the Maker to the Payee ('Obligation(s)') is secured by
certain collateral more fully described in the annexed Schedule 'A', together
with all the Maker's personal property now or hereafter existing or acquired, of
any type or description, including but not limited to inventory, documents of
title covering any inventory, equipment, accounts, Contract rights, general
intangibles (including tax refunds, instruments, investment securities, chattel
paper, notes, drafts, acceptances and all bank balances of the undersigned
("Collateral") which the Maker his pledged, deposited and delivered to the Payee
and granted to the Payee a security interest in.
The rate of interest hereunder is based upon the Payee's present base rate of
8.2 5 % per annum (the 'Base Rate'). In the event of an increase or decrease in
the Base Rate, then the rate of interest hereunder shall be automatically
increased or decreased to the same extent and on the same day as any increase or
decrease in the Base Rate. Post-maturity or post-demand (as the case may be)
interest shall accrue and be payable at 120% of the rate payable on the due date
or demand, computed from said date to the date of actual payment.
Maker affirms and certifies that the Obligation evidenced by this Note was not
and will not be incurred for the purposes of purchasing, carrying or trading in
securities as defined in the Federal Reserve Board's Regulation T, except in
compliance with said Regulation.
In no contingency or event whatsoever shall the interest rate charged hereunder
exceed the highest rate permissible under any law which a court of competent
jurisdiction shall, in a final determination, deem applicable hereto. In the
event that such a court determines that the Payee has received interest
hereunder in excess of said highest permissible rate, Payee shall promptly
refund such excess interest to Maker.
So long as the Obligations are not in default, the Maker shall have the right to
vote any shares of stock included in the Collateral on all corporate questions
and the Payee shall, if required, execute due and timely proxies in favor of the
Maker to this end.
The Maker warrants and represents that there are no restrictions upon the
transfer of the Collateral, other than may appear on the face of the
certificates, and that the Maker has the right to pledge the Collateral free of
any encumbrances and without obtaining the consents of the other shareholders.
In the event that, prior to repayment of the Obligations, any stock dividend,
reclassification, readjustment or other change is declared or made in the
capital structure of any issuer of the Collateral, all new, substituted and
additional shares or other securities issued to Maker by reason of any such
change shall be delivered to Payee in kind to be held by the Payee under the
terms of this agreement in the same manner as all other Collateral. The Payee
may at any time, without notice to the Maker, transfer to and/or register in
Payee's name, or in the name of Payee's nominee, any or all of the Collateral.
In the event that it becomes necessary, in Payee's opinion, to comply with any
Federal or State law or regulation or to make or file any registration
thereunder in order for Payee to exercise any of its rights hereunder, Maker
expressly agrees to do or will cause to be done all acts and prepare and execute
all documents necessary to effect such compliance or registration, and to bear
all costs in connection therewith. Maker agrees to indemnify and to hold Payee
harmless from and against any claim or liability caused by any untrue statement
of material fact, or omission to state a material fact, as may be required in
any registration statement or prospectus; or caused by a failure to register or
comply with any such law or regulation. The Maker shall pay any and all
expenses, including reasonable attorneys' fees incurred by Payee in registering
the Collateral, or in securing in exemption for any such registration.
The Payee shall have no reasonability of any kind, nature or description to
arrange for the redelivery of the Collateral or any part thereof to any issuer
or transfer agent in order to preserve or maintain any conversion or dividend
rights with respect thereto; the Payee's only obligation being to maintain
physical possession or control thereof. The Payee agrees to comply with any
request received by it from Maker with respect to conversion, reclassification,
or the like of the Collateral, to the extent that such instructions are not
inconsistent with the intents and purposes hereof. Upon payment and performance
of all Obligations the Payee shall, at the request of the Maker. redeliver the
Collateral to the Maker.
Upon the occurrence of any of the following events of default, to wit: the
non-payment when due of any Obligation; the failure of the Maker forthwith, upon
demand, to furnish satisfactory additional Collateral, or to make payments on
account as may be agreed in any of the Obligations; the death, failure in
business, dissolution or termination of existence of the Maker of any endorser,
guarantor or surety of any Obligation(hereinafter referred to as "Obligor(s)");
any petition for relief under the Bankruptcy Code being filed by or against any
Obligor or any proceedings in bankruptcy, or under any Acts of Congress relating
to the relief of debtors, being commenced for the relief or readjustment of any
indebtedness of any Obligor either through reorganization, composition,
extension or Otherwise; the making by any Obligor of an assignment for the
benefit of creditors or for taking advantage by any of the some of any
insolvency law; any seizure. vesting or intervention by or under authority of a
government, by which the management of any Obligor is displaced or its authority
in the conduct of its business is curtailed; the appointment of any receiver of
any property of any Obligor; the attachment or distraint of any of the
Collateral or of same becoming subject at any time to any mandatory court order
or other legal process; the failure of any Obligor to perform any of its duties
as specified in any agreement (s) with respect to the Obligations; the expulsion
or suspension of any Obligor from membership in any national securities
association or any national securities exchange or other organized exchange, or
any clearing association; the admission in writing by any Obligor of inability
to pay its debts generally as they become due; the commencement of any
proceedings against any Obligor under Article 51 or 52 of the New York Civil
Practice Law and Rules (as heretofore or hereafter amended); the Pension Benefit
Guaranty Corporation shall commence proceedings (including proceedings under
ss.4042 of the Employee Retirement Income Security Act of 1974) to terminate any
employee pension benefit plan of the Maker; any misstatement or false statement
of any Obligor in connection with any agreement between any Obligor and the
Payee has been made; then in such event the Maker shall immediately be liable
without notice and shall pay on demand all Obligations (whether or not otherwise
due), together with all collection costs and expenses, including reasonable
attorneys' fees, in connection with the collection of such indebtedness.
Payee shall have all rights and remedies of a secured party under the Uniform
Commercial Code. Further, upon the occurrence of any Event of Default, all
Obligations shall automatically become due and payable without notice and
Payee's commitment to make further loans or extensions of credit or other
financial accommodations to the Maker shall thereupon automatically and without
notice be terminated. In addition thereto, the Maker further agrees that (i) in
the event notice is necessary under applicable law, written notice mailed to the
Maker at the address then reflected in Payee's records 5 business days prior to
the date of public sale of any of the Collateral or prior to the date after
which private sale or any other disposition of the Collateral will be made shall
constitute reasonable notice, but notice given in any other reasonable manner or
at any other time shall be sufficient; (ii) in the event of the sale or other
disposition of any Collateral, Payee may apply the net proceeds thereof first to
the satisfaction of Payee's reasonable attorneys' fees, legal expenses, and
other costs and expenses incurred in connection with Payee's taking, re-taking,
holding, preparing for sale, and selling of the Collateral; then to repayment of
principal and interest on the Obligations, with the Maker remaining liable for
any deficiency; (iii) without precluding any other methods of sale, the sale of
Collateral shall have been made in a commercially reasonable manner if conducted
in conformity with reasonable commercial practices of banks disposing of similar
property, but in any event Payee may sell on such terms as Payee may choose,
without assuming any credit risk and without any obligation to advertise or give
notice of any kind; and (iv) Payee may require the Maker to assemble Collateral,
taking all necessary or appropriate action to preserve and keep in good
condition; and make such available to Payee at a place and time convenient to
both parties; all at the expense of the Maker. To the extent permitted under
applicable law, full power and authority is hereby given Payee to sell, assign,
and deliver all or any part of the Collateral, at any time at any brokerage
board, or at public or private sale, at Payee's option, and no delay on Payee's
part in exercising any power of sale or any other rights or options hereunder,
and no notice or demand, which may be given to or made upon the Maker by Payee
with respect to any power or sale or other right or option hereunder, shall
constitute a waiver thereof, or limit or impair Payee's right to take any action
or to exercise any power of sale and any other rights hereunder, without notice
or demand, or prejudice Payee's rights as against the Maker in any respect.
Payee may be a purchaser, free from any right of redemption (which the Maker
hereby expressly waives and releases) at any public or private sale of
Collateral. Should such net proceeds be inadequate to pay all the Obligations,
the Maker agrees to pay the Payee on demand any balance that may be due to the
Payee.
The Maker recognizes that the Payee may be unable to effect a public sale of all
or part of the Collateral by reason of certain prohibitions contained in the
Securities Act of 1933, as amended, as now or hereafter in effect, or applicable
Blue Sky or other state securities law, as now or hereafter in effect, but may
be compelled to resort to one or more private sales to a restricted group of
purchasers who will be obliged to agree, among other things, to acquire the
Collateral for their own account, for investment and not with a view to the
distribution or resale thereof. The Maker agrees that private sales so made may
be at prices and other terms less favorable to the Payee than if such Collateral
were sold at public sales, and that the Payee his no obligation to delay sale of
any such Collateral for the period of time necessary to permit the issuer of the
Collateral, even if such issuer would agree, to register the Collateral for
public sale under such applicable securities laws, The Maker agrees that private
sales made under the foregoing circumstances shall be deemed to have been made
in a commercially reasonable manner.
The Maker at the request of the Payee will sign and deliver to the Payee a
security agreement or a trust receipt or other writing, together with financing
statement(s) or a statement of trust receipt financing or other writing,
covering any Collateral in order to comply with or to enable the Payee to obtain
the benefits of the Uniform Commercial Code or any other similar statute now of
hereafter enacted, of New York or of any other jurisdiction where the Collateral
may at any time be located. The Maker agrees to supply the Payee with any
information the Payee may reasonably request with respect to any financing
statement(s) or security agreement relating to the Maker or to any property of
the Maker, and the Maker agrees that without written consent of the Payee the
Maker will not enter into any security agreement which creates a security
interest in any category of the Maker's personal property generally (as
distinguished from any specific items thereof) or in any after-acquired property
other than accessions and fixtures. The rights of the Payee specified herein
shall be in addition to those previously of otherwise created or existing. The
Maker agrees to use every effort and to take every action that may be necessary
or appropriate to enable the Payee to enforce, protect and preserve its rights
and interests hereunder, hereby granting unto the Payee. as the Maker's
attorney-in-fact, full power and authority to take any and all such action,
either in the name of the Payee or in the name of the Maker as the Payee may in
its sole discretion determine.
The Maker authorizes the Payee, with or without notice to the Maker, to cause to
be transferred or registered at the expense of the Maker any of the Collateral
into the name of the Payee or its nominee and to receive any income derived
therefrom and to hold such income as security for any of the Obligations or
apply it upon principal or interest due on any such Obligations. The Maker will
execute and deliver to the Payee such consents, endorsements, assignments and
stock powers as may appear to the Payee proper to further the negotiability of
any of the Collateral and will pay the expenses and charges of so furthering
negotiability. The Payee may at any time demand, sue for, collect or make any
compromise or settlement with reference to the Collateral as the Payee in its
sole discretion may determine. Any bonds or other obligations of or guaranteed
by the United States Government constituting part of the Collateral may be
pledged by the Payee (either alone or so mingled with other securities) to
secure deposits or other obligations of the Payee, whether or not such deposits
or other obligations be in excess of the Obligations.
The Maker agrees that the Payee assumes no responsibility for the correctness,
validity, genuineness or sufficiency of the instruments, documents and/or
chattel paper constituting the Collateral. or for the existence, character,
quantity, quality condition, weight, packing, value or delivery of any goods
specified in any such documents. The Payee shall not be required to take any
steps necessary to preserve any rights against prior parties to any of the
Collateral. The Maker hereby waives presentment, notice of dishonor and protest
of all instruments evidencing or included in the Obligations and the Collateral.
The Maker will keep the Collateral adequately covered by insurance satisfactory
to the Payee, and will assign the policies or certificates of insurance to the
Payee, or make the loss or adjustment payable to the Payee, at the option of the
Payee; and the Maker will furni3h to the Payee evidence of acceptance by the
insurers of such assignment. Should the Maker fail to effect and maintain such
insurance, the Payee may do so for the account of the Maker.
No failure on the part of Payee to exercise. and no delay in exercising any
right, power or remedy hereunder shall operate as a waiver thereof, not shall
any single or partial exercise by Payee of any right, power or remedy hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy.
If any provision hereof is held invalid or unenforceable, the remainder and the
application of such provision to other parties or circumstances will not be
affected thereby, the provisions being severable in any such instance.
In any litigation hereunder, all Obligors hereby waive trial by jury and waive
the right to interpose any defense based upon any Statute of Limitations or any
claim of laches. Each Obligor hereby consents to the IN PERSONAM jurisdiction of
the Courts of New York State, and the United States District Court, the Southern
District of New York in connection with any claim arising hereunder. In the
event that any action is commenced hereunder in any such court, service of
process may be made on any Obligor by mailing a copy of the Summons to said
party at its address then reflected in Payee's records.
This Note shall be governed by the laws of the State of New York.
All Obligors hereby forever waive presentment, demand, protest, notice of
protest and notice of dishonor of this Note and consent without notice to any
and all extensions of time or terms of payment including any compromise or
settlement thereof.
BY: Daniel Kaplan
TITLE: VP & CFO
BY: Greg Manning
TITLE: CEO, Chairman & President
ENDORSEMENT
FOR VALUE RECEIVED each of the undersigned endorsers assent to all of the terms
and conditions of the within Note and hereby forever waive presentment, demand,
protest, notice of protest, and notice of dishonor of the within Note, and trial
by jury, and the undersigned and each of them guarantees the payment of said
Note when due and consents without notice to any and all extensions of time or
terms of payment, and the release or substitution, or failure to perfect a
security interest in any collateral made, agreed to or granted to or by the
Payee.
<PAGE>
SCHEDULE "A"
LIST OF COLLATERAL
ALL PERSONAL PROPERTY AND FIXTURES OF THE DEBTOR WHETHER NOW EXISTING OR
HEREAFTER ARISING AND WHEREVER LOCATED, OF EVERY KIND AND DESCRIPTION, TANGIBLE
OR INTANGIBLE, INCLUDING WITHOUT LIMITATION ALL GOODS, INCLUDING WITHOUT
LIMITATION EQUIPMENT AND INVENTORY; ACCOUNTS; CONTRACT RIGHTS; DOCUMENTS,
INCLUDING WITHOUT LIMITATION BILLS OF LADING, DOCK WARRANTS, DOCK RECEIPTS,
WAREHOUSE RECEIPTS AND OTHER DOCUMENTS OF TITLE; CHATTEL PAPER; GENERAL
INTANGIBLES, INCLUDING WITHOUT LIMITATION TAX REFUNDS, DUTY DRAWBACKS AND
PROCEEDS OF INSURANCE AS TO ANY PROPERTY OF THE DEBTOR DESCRIBED HEREIN;
INSTRUMENTS, INCLUDING WITHOUT LIMITATION LETTERS OF CREDIT NAMING DEBITOR AS
BENEFICIARY; THE BALANCE OF EVERY DEPOSIT ACCOUNT; ALL SECURITIES, OPTIONS,
FUTURES CONTACTS AND OTHER ASSETS DUE FROM OR HELD WITH ANY BANK, BROKER OR
DEPOSITORY INSTITUTION; MONEY; COMMODITIES; CREDITS, CLAIMS, DEMANDS AND
SECURITY INTERESTS ARISING IN FAVOR OF THE DEBTOR AND ANY OTHER PROPERTY, RIGHTS
AND INTERESTS OF THE DEBTOR; AND ALL CASH AND NON-CASH PROCEEDS, PRODUCTS AND
ACCESSIONS FROM THE SALE, LIQUIDATION OR DISPOSITION OF ANY OF THE FOREGOING.
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by references in the Prospectus
constituting part of Amendment No. 2 to the Registration Statement on Form S-3
(No. 333-1044)of Greg Manning Auctions, Inc. of our report dated October 12,
1995 appearing on page 23 of this Form 10-KSB.
Price Waterhouse LLP
Morristown, New Jersey
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by references in the Prospectus
constituting part of the Registration Statement on Form S-3 (nos. 333-1044 and
33-55792-NY) of our report dated October 15, 1996, appearing on page 22 of Greg
Manning Auctions, Inc.'s Annual Report on Form 10-KSB for the year ended June
30, 1996.
Amper Politziner & Mattia
Edison, New Jersey
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<LEGEND>
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<CIK> 0000895516
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<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<CASH> 558506
<SECURITIES> 2980000
<RECEIVABLES> 8718414
<ALLOWANCES> 125000
<INVENTORY> 2796226
<CURRENT-ASSETS> 15109328
<PP&E> 1177926
<DEPRECIATION> 375470
<TOTAL-ASSETS> 21860667
<CURRENT-LIABILITIES> 11939178
<BONDS> 0
0
0
<COMMON> 44200
<OTHER-SE> 8450249
<TOTAL-LIABILITY-AND-EQUITY> 21860667
<SALES> 12751561
<TOTAL-REVENUES> 15437190
<CGS> 10029596
<TOTAL-COSTS> 15242116
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 146131
<INTEREST-EXPENSE> 567848
<INCOME-PRETAX> 975439
<INCOME-TAX> 439056
<INCOME-CONTINUING> 536383
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