SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended MARCH 31, 1996
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period ________ to ________
COMMISSION FILE NUMBER 1-11988
GREG MANNING AUCTIONS, INC.
(Exact name of Small Business Issuer as specified 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)
Issuer's telephone number, including area code: (201) 882-0004
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 filing requirements for the past 90
days.
YES X NO _____
As of May 14, 1996, Issuer had 4,419,997 shares of its Common Stock outstanding.
Transitional Small Business Disclosure Format (check one): YES ______ NO X
<PAGE>
GREG MANNING AUCTIONS, INC.
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS (Unaudited)
TABLE OF CONTENTS
Consolidated Balance Sheet - March 31, 1996 (Unaudited)
Consolidated Statements of Operations and Retained Earnings -
Three months ended March 31, 1996 and 1995 (Unaudited)
Nine months ended March 31, 1996 and 1995 (Unaudited)
Consolidated Statements of Cash Flows -
Nine months ended March 31, 1996 and 1995 (Unaudited)
Notes to Consolidated Financial Statements
as of March 31, 1996
Item 2. Management's Discussion and Analysis
<PAGE>
GREG MANNING AUCTIONS, INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
MARCH 31, 1996
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current assets:
Cash and cash equivalents $ 464,319
Accounts receivable
Auctions receivable 5,795,117
Advances to consignors 1,951,430
Other receivables 104,372
Inventory 4,225,423
Due from affiliate - CRM 33,291
Income tax receivable 362,241
Deferred tax asset 60,531
Prepaid expenses and deposits 381,120
----------------
Total current assets 13,377,844
Property and equipment, net 820,732
Goodwill 1,824,506
Marketable securities available for sale 2,580,000
Other assets 905,346
================
Total assets $19,508,428
================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Demand notes payable to bank $ 4,510,000
Loans Payable - current portion 144,958
Payable to third party consignors 3,320,891
Accounts payable 1,757,730
Accrued expenses 129,853
Income taxes payable 164,508
----------------
Current liablities 10,027,940
Loans payable - long term portion 344,441
Deferred income taxes 937,401
----------------
Total liabilities 11,309,782
----------------
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 6,865,823
Unrealized gain on marketable securities 1,405,000
Accumulated deficit (116,377)
----------------
Total stockholders' equity 8,198,646
----------------
Total liabilities and stockholders' equity $19,508,428
================
</TABLE>
See accompanying notes to financial statements
<PAGE>
GREG MANNING AUCTIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE-MONTH PERIOD NINE-MONTH PERIOD
ENDED MARCH 31, ENDED MARCH 31,
------------------------------ ------------------------------
1995 1996 1995 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Operating revenues
Sales of merchandise $ 2,781,913 2,735,117 6,200,238 7,477,911
Commissions from third parties 726,967 611,754 1,954,062 1,874,218
Commissions from affiliate - CRM 1,867 417 16,054 2,102
-------------- -------------- -------------- --------------
3,510,747 3,347,288 8,170,354 9,354,231
-------------- -------------- -------------- --------------
Operating expenses
Cost of merchandise sold 2,083,093 2,289,016 4,621,696 6,152,515
General and administrative 1,313,885 1,160,823 3,460,974 3,306,659
Marketing 117,610 173,127 552,894 434,144
-------------- -------------- -------------- --------------
3,514,588 3,622,966 8,635,564 9,893,318
-------------- -------------- -------------- --------------
Operating profit (loss) (3,841) (275,678) (465,210) (539,087)
Other income (expense)
Interest and other income 141,836 1,039,823 302,420 1,289,358
Interest expense (103,280) (150,128) (302,096) (414,086)
-------------- -------------- -------------- --------------
Income (loss) before income taxes 34,715 614,017 (464,886) 336,185
Provision (benefit) for income taxes 17,516 244,859 (170,484) 140,447
-------------- -------------- -------------- --------------
Net Income (loss) 17,199 369,158 (294,402) 195,738
Retained earnings., beginning of period 203,439 (485,535) 515,040 (312,115)
-------------- -------------- -------------- --------------
Retained earnings, end of period $ 220,638 (116,377) 220,638 (116,377)
============== ============== ============== ==============
Weighted average number of shares outstanding 3,052,500 4,300,437 2,933,654 4,124,483
============== ============== ============== ==============
Earnings (loss) per common and common equivalent share $ 0.01 0.08 (0.10) 0.05
============== ============== ============== ==============
</TABLE>
See accompanying notes to financial statements
<PAGE>
GREG MANNING AUCTIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE-MONTH PERIOD
ENDED MARCH 31,
-------------------------------
1995 1996
--------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (294,402) $ 195,738
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 102,036 227,255
Provision for bad debts 20,711
Gain on sale of stock (1,067,303)
Changes in assets (increase) decrease:
Auctions receivables 242,257 2,695,974
Advances to consignors (184,615) (714,226)
Other receivables 39,040 (8,816)
Inventory (844,096) (1,444,896)
Income tax receivable 151,407
Due from affiliate - CRM 514,407 (33,291)
Prepaid expenses (115,227) 35,024
Other assets (127,770) 135,233
Changes in liabilities (decrease) increase
Payable to third-party consignors 674,962 (2,376,832)
Accounts payable 279,245 799,469
Accrued expenses and other liabilities 30,479 (103,719)
--------------- --------------
Net cash (used in) provided by operating activities: 316,316 (1,488,272)
--------------- --------------
Cash flows from investing activities:
Capital expenditures for property and equipment (113,535) (75,271)
Additional goodwill (64,708)
Proceeds from sale of Americana division 90,000
Purchase of investment stock (460,000)
Proceeds from sale of investment stock 1,008,000
Purchase of Harmer Rooke and Ivy & Mader (20,302)
--------------- --------------
Net cash used in investing activities (133,837) 498,021
--------------- --------------
Net cash provided by (used in) financing activities:
Repayment of loans payable (293,959) (447,203)
Repayment of notes payable (1,200,000) (220,948)
Net proceeds from issuance of Company's stock 398,074 1,165,920
--------------- --------------
Net cash provided by (used in) financing activities (1,095,885) 497,769
--------------- --------------
Net increase (decrease) in cash and cash equivalents (913,406) (492,482)
Cash and cash equivalents at beginning of period 1,305,774 956,801
=============== ==============
Cash and cash equivalents at end of period 392,368 464,319
=============== ==============
</TABLE>
See accompanying notes to financial statements
<PAGE>
GREG MANNING AUCTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(UNAUDITED)
(1) Organization, Business and Basis of Presentation
Greg Manning Auctions, Inc. together with its wholly owned subsidiaries Ivy &
Mader Philatelic Auctions, Inc. and Greg Manning Galleries, Inc. (collectively,
the Company), is a public auctioneer of collectibles including rare stamps,
stamp collections and stocks, and regularly conducts rare stamp auctions
bringing together purchasers and sellers located throughout the world. The
Company accepts property for sale at auctions from sellers on a consignment
basis, and earns a commission on the sale. In addition to stamps, the other
collectibles auctioned by the Company include trading cards and sports
memorabilia and other collectibles such as antiquities and rare coins. The
Company also sells collectibles by private treaty for a commission, and sells
its own inventory at auction, wholesale and retail.
The accompanying consolidated balance sheet as of March 31, 1996 and
related consolidated statements of operations and retained earnings for the
three and nine months ended March 31, 1996 and 1995 and consolidated statements
of Cash Flows for the nine months ended March 31, 1996 and 1995 have been
prepared from the books and records maintained by the Company, in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-QSB and Item 310(b) of Regulation SB.
Accordingly, they do not include all information and disclosures required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments, which are of a normal recurring
nature, considered necessary for a fair presentation have been included. For
further information, refer to the consolidated financial statements and
disclosures thereto in the Company's Form 10-KSB for the year ended June 30,
1995 filed with the Securities and Exchange Commission.
(2) Summary of Certain Significant Accounting Policies
Revenue Recognition
Revenue is recognized by the Company 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.
<PAGE>
GREG MANNING AUCTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, MARCH 31, 1996 (UNAUDITED)
CONTINUED
The Company also sells its own inventory at auction, wholesale and
retail. Revenue with respect to these transactions is recognized at the time of
the sale and is billable.
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 catalog. 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.
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.
Business Segment
The company operates in one segment, the auctioning or private treaty
sale of rare stamps and other collectibles. Set forth below is a table of
aggregate sales of the Company, subdivided by source and market:
<TABLE>
<CAPTION>
For the nine months ended
March 31 Percentages
-------------------------------- ---------------------
1996 1995 1996 1995
-------------------------------- ---------------------
<S> <C> <C> <C> <C>
Aggregate Sales $ 19,622,303 $ 17,875,918 100% 100%
================================ =====================
By source:
A. Auction $12,144,394 $11,608,470 62% 65%
B. Sales of inventory 7,477,909 6,165,397 38% 34%
C. Private treaty 102,051 1%
-------------------------------- ---------------------
By market:
A. Philatelics $16,572,926 $ 14,559,931 84% 81%
B. Sports collectibles 520,631 649,623 3% 4%
C. Other collectibles 2,528,746 2,666,364 13% 15%
-------------------------------- ---------------------
</TABLE>
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 forty years. Total accumulated amortization at March
31, 1996 was $115,782. The recoverability of goodwill is evaluated at each
balance sheet date as events or circumstances indicate a possible inability to
recover their carrying
<PAGE>
GREG MANNING AUCTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, MARCH 31, 1996 (UNAUDITED)
CONTINUED
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.
Other investments consisted of nonmarketable investments in private
companies and venture capital partnerships, which are carried at the lower of
cost or net realizable value.
Earnings (loss) per common and common equivalent share
Earnings (loss) per common and common equivalent share of the Company's
Common Stock ("Common Stock") is computed using the weighted average number of
common and common equivalent shares outstanding for each period. Primary and
fully diluted earnings per share are the same for the three months and nine
months ended March 31, 1996. Outstanding stock options and warrants for the nine
months ended March 31, 1995 were excluded from earnings per common share
computations because they are antidilutive.
(3) Inventories
Inventories as of March 31, 1996 consisted of the following:
<TABLE>
<S> <C>
Stamps $ 3,187,045
Sports Cards and Sports Memorabilia 394,396
Antiquities 643,982
--------------------
$ 4,225,423
====================
</TABLE>
(4) Related-party Transactions
The Company accepts rare stamps and other collectibles for sale at
auction on a consignment basis from Collectibles Realty Management, Inc.,
("CRM") which owned approximately 29.4%, as of
<PAGE>
GREG MANNING AUCTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, DECEMBER 31, 1995 (UNAUDITED)
CONTINUED
March 31, 1996, of the Company's Common Stock. 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 for items valued at under $100,000 per lot. In the case of auction,
the hammer price of the sale, less any seller's commission, is paid to CRM upon
successful auction, and in the case of private treaty, the net price after
selling commissions is paid to CRM. For the nine months ended March 31, 1996,
such auction and private treaty sales (net of commission) were not material.
(5) Debt
The Company is party to secured revolving credit and term loan facility
with Brown Brothers Harriman & Co. ("BBH&Co."). At March 31, 1996, borrowing
under the revolving credit facility and term loan totaled $4,510,000 and
$331,250 respectively. Absent a material adverse change or event of default as
determined by BBH&Co., BBH&Co. has agreed to provide the Company with a 120-day
notification period prior to issuing a demand for repayment, so long as the
Company is in compliance with certain financial and operating guidelines. The
Company believes that at March 31, 1996, it was in compliance with such
guidelines.
(6) Sale of Division
On August 23, 1995, the Company and Galleries entered into various
agreements with Charles G. Moore Americana, Ltd., pursuant to which Galleries
sold to Moore Americana all of the assets of the Galleries' Americana Division.
(Mr. Charles Moore was formerly the director of that division.) The purchase
price for 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.
(7) Marketable Securities
In September, 1995 the Company acquired 13.1%, or 4,500,000 shares, of
the outstanding common shares of 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. During the nine months ended
March 31, 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 August 28, 1996 the Company owns 9.4%, or
4,112,289 shares of PICK. The stock is traded on the electronic bulletin board
under the symbol "PRMF". The shares acquired by the Company are 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.
At March 31, 1996, noncurrent marketable securities 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
<PAGE>
GREG MANNING AUCTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, DECEMBER 31, 1995 (UNAUDITED)
CONTINUED
income taxes of $937,000. The increase in net valuation of $1,405,000 was
credited to a separate component of Stockholders Equity.
In March, 1996 the Company acquired, for an aggregate purchase price of
$200,000, 200,000 common shares of Internet Channel, Inc., which is engaged in
the business of high speed Internet applications and overall expansion of
Internet access. The shares acquired by the Company are restricted shares and
accordingly are subject to restrictions on transferability. Internet Channel is
not currently a reporting company under the Securities Exchange Act of 1934 and
there is currently no public trading market for any of its shares of common
stock.
(8) Supplementary Cash Flow Information
<TABLE>
<CAPTION>
Following is a summary of supplementary cash flow information:
FOR THE NINE MONTHS ENDED MARCH 31,
1995 1996
<S> <C> <C>
Interest paid $ 302,096 $ 414,086
Non cash investing and financing
Additions to fixed assets under capital leases 135,312
Receivables from sale of division 120,000
Sale of Prime stock 81,704
Leases canceled 19,341
</TABLE>
(9) Subsequent Event
At May 14, 1996, the Company is negotiating to enter into a definitive
joint venture agreement with P.C.T. Prepaid Cellular Telephone Inc., a
majority-owned subsidiary of PICK, pursuant to which the 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 an
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 the venture will be consummated.
As noted above, Greg Manning, the Company's President, Chief Executive
Officer and Chairman of the Board, is a member of the Board of PICK.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations
GENERAL
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). During the nine month period ended March 31, 1996, the Company
earned a commission of 15% from the buyers in all markets except for sports
cards which is a 10% premium.
The Company's operating expenses consist of the cost of sales of the
Company's inventory and such expenses directly incurred by the Company relating
to general and administrative expenses and marketing expenses for the nine
months ended March 31, 1996 and 1995. General and administrative expenses are
incurred to pay employees and to provide support and services to those
employees, including the physical facilities and data processing. Marketing
expenses are incurred to promote the services of the Company to sellers and
buyers of collectibles through advertising and public relations, producing and
distributing its auction catalogs and conducting auctions.
<PAGE>
THREE MONTHS ENDED MARCH 31, 1996
COMPARED WITH THE THREE MONTHS ENDED MARCH 31, 1995
The Company recorded a decrease in revenues of $163,459 (5%), from
$3,510,747 for the three months ended March 31, 1995 to $3,347,288 for the three
months ended March 31, 1996. This decrease was primarily attributable to the
decrease in revenues from the sale of the Company's inventories of $46,796 (2%)
and commission revenue of $115,213 (16%) for the three month period ended March
31, 1996 compared to the prior year.
OPERATING EXPENSES The Company's operating expenses totaled $1,333,950
exclusive of cost of merchandise sold, for the three months ended March 31,
1996, and represented a decrease of $97,545 (7%) from $1,431,495 for the three
months ended March 31, 1995. The decrease in General and Administrative costs by
the Company is due to both the sale of the Galleries' Americana Division, and
the certain costs associated with it, and economies obtained in centralizing
various operations into one location. Management feels that permanent cost
containment can continue, which includes the reductions in marketing costs
pertaining to auctions and generally better economies of scale.
Interest expense increased by $46,848 in the three months ended March
31, 1996 compared to the three months ended March 31, 1995 primarily as a result
of the higher average daily borrowings for the comparable period. The borrowing
under the Company's secured revolving credit facility are utilized to support
the operations of the Company, including the advances to consignors, auctions
receivables and merchandise inventories.
Gross margins on the sales of the Company's inventory decreased by
$252,719 (36%) in the three months ended March 31, 1996 compared to the three
months ended March 31, 1995. This decrease in margins was primarily attributable
to the above mentioned decrease in the sales of merchandise and the reduction of
gross margin percent from 25% for the three months ended March 31, 1995 to 16%
for the three months ended March 31, 1996.
Net Income: The Company recorded income before income taxes of $614,017
for the three months ended March 31, 1996 compared to $34,715 for the three
months ended March 31, 1995. The increase in income was primarily due to a
pretax gain of $987,000 from the sale of 360,000 share of PICK common stock ,
offset by the operating loss of $275,678 primarily caused by the reductions in
gross margins as outlined above.
<PAGE>
NINE MONTHS ENDED MARCH 31, 1996
COMPARED WITH THE NINE MONTHS ENDED MARCH 31, 1995
The Company recorded an increase in revenues of $1,183,877 (14%) to $9,354,231
for the nine months ended March 31, 1996 as compared to revenues of $8,170,354
for the comparable period ended March 31, 1995. This increase was primarily
attributable to the $1,277,673 (21%) increase in revenues from the sale of the
Company's inventories to $7,477,911 for the nine months ended March 31, 1996
over the comparable period from the prior year.
OPERATING EXPENSES: The Company's total operating expenses exclusive of the cost
of merchandise sold, was $3,740,803 for the nine months ended March 31, 1996 and
represented a decrease of $273,065 (7%) from $4,013,868 for the nine months
ended March 31, 1995. The decrease was mainly due to the decrease in marketing
costs of $118,750 for the nine months ended March 31, 1996 compared the
comparable period for the prior year. Further reductions in the general and
administrative areas are anticipated in connection with ongoing cost containment
programs.
Interest expense increased by $111,990 for the nine months ended March
31, 1996 compared to the nine months ended March 31, 1995 due to the effective
borrowing rate during the nine months ended March 31, 1996 was approximately 15%
higher than for the same period for the prior year. In addition, the borrowing
requirements increased to support increased receivables and inventories have
increased during the nine months ended March 31, 1996 compared to the nine
months ended March 31, 1995.
Gross margins on the sales of the Company's inventory declined by
$252,846 (from 25% to 18%) for the nine months ended March 31, 1995 from the
comparable nine month period ended March 31, 1995. The decline in gross margin
percentages was partially offset by the increase in sales of inventory of as
discussed above for the nine months ended March 31, 1996 compared to the prior
year's comparable period.
NET INCOME: The Company recorded income before income taxes of $336,185
for the nine months ended March 31, 1996 compared to loss before taxes of
$464,886 for the nine months ended March 31, 1995. The increase in income was
primarily due to a pretax gain from the sale of certain investment securities of
$1,067,000, offset by the operating loss of $539,087 primarily caused by the
reductions in gross margins as outlined above
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1996, the Company's working capital position was
$3,349,904, compared to $2,144,596 as of June 30, 1995. This increase of
$1,205,308 was primarily due to an increase in inventories purchased for future
auctions ($1,444,896). This increase in inventories was offset by an increase in
accounts payable of $799,469 during this same period. These items were the
material cause of the negative cash flow from operating activities of
$1,067,303.
The Company experienced a positive cash flow from investing activities
for the nine months ended March 31, 1996 of $509,979. This was primarily
attributable to the sale of 360,000 shares of PICK for $1,008,000, subsequent to
the purchase of 4,500,000 shares of PICK in the amount of $260,000 and 200,000
shares of Internet Channel, Inc. in the amount of $200,000.
The Company experienced an increase in cash flow from financing
activities for the nine months ended March 31, 1996 of $497,769. This was
primarily attributable to the Company's receipt of net proceeds of $1,165,920
from the issuance of stock from the exercise of warrants issued in connection
with the November 1994 private placement offering and the June 1995 Regulation S
offering. This was offset by the reduction of certain debt in the amount of
$668,151.
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, pursuant to which the 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 the venture will be consummated.
The Company's need for liquidity and working capital is expected to
increase if the above described venture is consumated or otherwise as a result
of any other proposed business expansion activities. In addition to the need for
such capital, and to enhance the Company's ability to offer cash advances to a
larger number of potential consignors of property (which management believes is
an important aspect of the marketing of an auction business), the Company will
likely require additional working capital in the future in order to further
expand its sports trading card and sports memorabilia auction business as well
as to acquire collectibles for sale in the Company's business.
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 may consider exploring
financing alternatives including increasing its working capital credit
facilities or raising additional debt or equity capital.
The decision to expand, the desired rate of expansion, and the areas of
expansion will be determined by management and the Board of Directors only after
careful consideration of all relevant factors, including the Company's financial
resources and working capital needs, and needs to continue its growth and
position in its core business area of stamp auctions.
<PAGE>
On November 4, 1994, in a private placement to certain "accredited"
investors (the "Purchasers"), the Company sold 257,500 shares of its common
stock at $2.00 per share. For the purchase price, each Purchaser also received a
warrant to purchase, through May 3, 1996, one share of the Company's common
stock at an exercise price of $2.25 per share subject to certain adjustments. In
connection with the private placement, the Company also issued 45,063 warrants
to the placement agents of such private placement, with each warrant entitling
the holder to purchase, through November 4, 1999. a share of the Company's
common stock at $2.80 per share subject to certain adjustments, Net proceeds to
the Company of the private placement, after expenses, amounted to approximately
$336,000. On March 22, 1995 the terms of the Purchaser Warrants were amended to
lower the exercise price from $2.225 to $1.75 per share and to extend the
exercise period by six months to May 3, 1996. As a result of the Regulation S
offering referred to below, holders of Purchaser warrants were entitled to an
adjustment in the exercise price of the Purchaser Warrants from $1.75 to $1.5528
and to an adjustment in the number of shares for which the Purchaser Warrants
are exercisable from one share per Purchaser Warrant. The Company registered
such shares and the shares underlying the Purchaser Warrants under the
Securities Act of 1933, as amended. The Regulation S offering also resulted in a
reduction of the exercise price of, and concomitant increase in the number of
shares of Common Stock issuable under the warrants issued to the placement
agents in the private placement.
On June 29, 1995, the Company consummated an offshore offering for the
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 one share of common stock at
$1.50 for two years from the date of issuance. The warrant contains standard
anti-dilution provisions in case of recapitalization, consolidation or merger,
and stock dividends or splits. Regulation S Offering was made solely to certain
offshore investors in compliance with, and under the exemption to registration
provided by, Regulation under the Securities Act of 1933. Net proceeds to the
Company after expenses amounted to approximately $721,000. At March 31, 1996 all
of these warrants had been exercised and the Company received an additional
$750,000 in gross proceeds.
As a result of the Private Placement and Regulation S Offerings
referred to above, certain adjustments were made to Callable Stock Purchase
Warrants (the "Public Warrants") issued to the public in connection with the
Company's May, 1993 initial public offering. Holders of the Public Warrants were
entitled to an adjustment in the exercise price of these Public Warrants from
$3.475 to $2.7733 each and to an adjustment in the number of shares for which
the warrants are exercisable from one share per Public Warrant to 1.24 shares
each
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 Securities Act of
1933, as amended, the cost of which (other than allocable overhead) will be
borne by the investor.
As a result of the private placement offering, the Regulation S
offering and the issuance of the warrant referred to above, 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. Each
Unit Purchase Warrant consists of two shares of the Company's common stock, $.01
par value per share and two Callable Stock Purchase Warrants, each to purchase
one share of Common Stock.
<PAGE>
The exercise of warrants for shares of the Company's common stock
issued in connection with the November 4, 1994 private placement offering and
June 1995 Regulation S offering resulted in net proceeds of $1,165,920 after
associated registration expenses for the nine months ended March 31, 1996.
Proceeds from the exercise of the above warrants will be used to fund the
Company's working capital requirements.
<PAGE>
GREG MANNING AUCTIONS, INC.
Part II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-k.
(a) Exhibits
27 Financial Data Schedule
(b) Reports on form 8-k
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized
GREG MANNING AUCTIONS, INC.
Dated: August 29, 1996
Greg Manning
Chairman and Chief Executive Officer
Daniel Kaplan
Vice President and Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
- -------- ------------------------------------------ ---------------
27 Financial Data Schedule
<PAGE>
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<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 464319
<SECURITIES> 2580000
<RECEIVABLES> 5872117
<ALLOWANCES> 77000
<INVENTORY> 4225423
<CURRENT-ASSETS> 13377844
<PP&E> 1133936
<DEPRECIATION> 313204
<TOTAL-ASSETS> 19508428
<CURRENT-LIABILITIES> 10027940
<BONDS> 0
0
0
<COMMON> 44200
<OTHER-SE> 8154446
<TOTAL-LIABILITY-AND-EQUITY> 19508646
<SALES> 9354231
<TOTAL-REVENUES> 9354231
<CGS> 6152515
<TOTAL-COSTS> 9893318
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 20711
<INTEREST-EXPENSE> 414086
<INCOME-PRETAX> 336187
<INCOME-TAX> 140447
<INCOME-CONTINUING> 195738
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 195738
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
