WASHINGTON, D.C. 20549
SECURITIES AND EXCHANGE COMMISSION
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 DECEMBER 31, 1995
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 _____
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 - December 31, 1995 (Unaudited)
Consolidated Statements of Operations and Retained Earnings Three
months ended December 31, 1995 and 1994 (Unaudited) Six months ended
December 31, 1995 and 1994 (Unaudited)
Consolidated Statements of Cash Flows Six months ended December 31,
1995 and 1994 (Unaudited)
Notes to Consolidated Financial Statements
as of December 31, 1995
Item 2. Management's Discussion and Analysis
<PAGE>
GREG MANNING AUCTIONS, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current assets:
Cash and cash equivalents $ 601,205
Accounts receivable
Auctions receivables 5,198,630
Advances to consignors 1,667,183
Other receivables 88,948
Inventories 4,533,969
Due from affiliate - CRM 31,593
Income taxes receivable 616,677
Deferred tax asset 60,531
Prepaid expenses 366,335
---------------
Total current assets 13,165,071
Property and equipment, net 894,662
Goodwill, net 1,824,280
Marketable securities available for sale 2,185,000
Other assets 888,059
---------------
Total assets $ 18,957,072
===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Demand notes payable to bank $ 5,495,000
Loans payable - current portion 181,821
Payable to third party consignors 3,255,987
Accounts payable 420,070
Accrued expenses and other current liabilities 943,950
Income taxes payable 164,508
---------------
Total current liabilities 10,461,336
Loans payable - long term portion 384,647
Deferred income taxes 771,601
---------------
Total liabilities 11,617,584
Commitments and contingencies (Notes 8, 10, 11 and 12)
Preferred stock, $.01 par value. Authorized
10,000,000 shares; none issued
Common stock, $.01 par value. Authorized
20,000,000 shares; 3,607,661 issued and outstanding 42,600
Additional paid in capital 6,627,423
Unrealized gain on marketable securities 1,155,000
Accumulated deficit (485,535)
---------------
Total stockholders' equity 7,339,488
---------------
Total liabilities and stockholders' equity $18,957,072
===============
</TABLE>
See accompanying notes to financial statements
<PAGE>
GREG MANNING AUCTIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
-------------------------------- ---------------------------------
1994 1995 1994 1995
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Operating revenues
Sales of merchandise $ 1,868,081 3,631,424 3,418,325 4,742,794
Commissions from third parties 501,687 581,419 1,227,095 1,262,464
Commissions from affiliate consignor- CRM 3,445 620 14,187 1,685
--------------- --------------- --------------- ---------------
2,373,213 4,213,463 4,659,607 6,006,943
--------------- --------------- --------------- ---------------
Operating expenses
Cost of merchandise sold 1,476,851 3,022,936 2,538,603 3,863,499
General and administrative 1,070,108 1,010,635 2,147,091 2,145,836
Marketing 222,060 158,564 435,284 261,017
--------------- --------------- --------------- ---------------
2,769,019 4,192,135 5,120,978 6,270,352
--------------- --------------- --------------- ---------------
Operating profit (loss) (395,806) 21,328 (461,371) (263,409)
Other income (expense)
Interest income and other income 172,940 155,025 160,584 249,535
Interest expense (122,851) (132,831) (198,816) (263,958)
--------------- --------------- --------------- ---------------
Income (loss) before income taxes (345,717) 43,522 (499,603) (277,832)
Provision (benefit) for income taxes (129,599) 23,176 (188,002) (104,412)
--------------- --------------- --------------- ---------------
Net income (loss) $ (216,118) 20,346 (311,601) (173,420)
Retained earnings, beginning of period 419,557 (505,881) 515,040 (312,115)
--------------- --------------- --------------- ---------------
Retained earnings, end of period $ 203,439 (485,535) 203,439 (485,535)
=============== =============== =============== ===============
Weighted average number of shares outstanding 2,956,291 4,202,148 2,875,205 4,037,463
=============== =============== =============== ===============
Net income(loss) per common share (0.07) 0.00 (0.11) (0.04)
=============== =============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
GREG MANNING AUCTIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
SIX-MONTH PERIOD
ENDED DECEMBER 31,
----------------------------------
1994 1995
--------------- ---------------
<S> <C> <C>
Cash flows from operating activities
Net income (loss) $ (311,601) (173,420)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Depreciation and amortization 80,346 153,007
Provision for bad debts (85,000)
Deferred tax asset 250,392
Gain on sale of stock (80,103)
Changes in assets (increase) decrease:
Auctions receivables 1,698,313 3,398,172
Advances to consignors (380,089) (429,979)
Income taxes receivable (353,421)
Other receivables (119,926) 1,608
Inventories (312,578) (1,753,442)
Due from affiliate - CRM 8,007 (31,593)
Prepaid expenses (163,305) 49,809
Other assets 5,065 (22,480)
Changes in liabilities (decrease) increase:
Payable to third-party consignors 54,508 (2,441,736)
Accounts payable (1,339,517) 405,759
Customer deposits (79,720)
Accrued expenses & other liabilities 673,907 (153,852)
--------------- ---------------
Net cash used in operating activities (106,870) (1,345,999)
--------------- ---------------
Cash flows from investing activities:
Capital expenditures for property and equipment (63,163) (68,286)
Additional goodwill (20,302) (51,808)
Proceeds from sale of Americana division 70,000
Purchase of Prime International, Inc. stock (260,000)
--------------- ---------------
Net cash used in investing activities (83,465) (310,094)
--------------- ---------------
Cash flows from financing activities:
Repayment of loans payable (267,617) (375,423)
Proceeds from notes payable 750,000
Repayment of notes payable (450,000)
Net proceeds from issuance of stock 413,324 925,920
--------------- ---------------
Net cash provided by financing activities (304,293) 1,300,497
--------------- ---------------
Net decrease in cash and cash equivalents (494,628) (355,596)
Cash and cash equivalents at beginning of period 1,305,774 956,801
=============== ===============
Cash and cash equivalents at end of period $ 811,146 601,205
=============== ===============
</TABLE>
See accompanying notes to financial statements
<PAGE>
GREG MANNING AUCTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(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 December 31, 1995 and
related consolidated statements of operations and retained earnings for the
three and six months ended December 31, 1995 and 1994 and consolidated
statements of Cash Flows for the six months ended December 31, 1995 and 1994
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, DECEMBER 31, 1995 (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 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.
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 six months ended
December 31, Percentages
-------------------------------- ---------------------
1994 1995 1994 1995
-------------------------------- ---------------------
<S> <C> <C> <C> <C>
Aggregate Sales $ 10,449,430 $ 12,540,772 100% 100%
================================ =====================
By source:
A. Auction $ 6,956,906 $ 7,797,978 66% 62%
B. Sales of inventory 3,418,325 4,742,794 33% 38%
C. Private treaty 74,199 - 1% 0%
-------------------------------- ---------------------
By market:
A. Philatelics $ 8,692,625 $ 11,287,281 83% 90%
B. Sports collectibles 484,573 349,025 5% 3%
C. Other collectibles 1,272,232 904,466 12% 7%
-------------------------------- ---------------------
</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 December
31, 1995 was $103,108. 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.
<PAGE>
GREG MANNING AUCTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, DECEMBER 31, 1995 (UNAUDITED)
CONTINUED
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.
Net Income (Loss) per Common Share
Net income (loss) per common share of the Company's Common Stock
("Common Stock") is computed using the weighted average number of common shares
outstanding for each period. Outstanding stock options and warrants in the six
month periods ended December 31, 1995 and 1994 are considered common stock
equivalents but are excluded from earnings per common share computations because
they are antidilutive.
(3) Inventories
<TABLE>
<CAPTION>
Inventories as of December 31, 1995 consisted of the following:
<S> <C>
Stamps $ 2,407,320
Sports Cards and Sports
Memorabilia 451,100
Antiquities 1,675,549
--------------------
$ 4,533,969
====================
</TABLE>
<PAGE>
GREG MANNING AUCTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, DECEMBER 31, 1995 (UNAUDITED)
CONTINUED
(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 30.5%, as of December 31, 1995, 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 six months ended December 31, 1995, 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 December 31, 1995, borrowing
under the revolving credit facility and term loan totaled $5,495,000 and
$350,000 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. For
the quarter ended December 31, 1995, the Company was not in compliance with the
guideline relating to the formula of earnings before interest, depreciation and
taxes to interest expense. As a result, BBH&Co. had the right under the credit
agreement to demand immediate payment of all amounts outstanding without the
otherwise applicable 120-day notice period. 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. ("Moore Americana"), 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 any amount equal to the "original cost value"
of such inventory (or approximately $480,500), payable over approximately one
year, commencing March 1, 1996. 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, 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. ("PICK"), the parent company of Public
Info/Comm Kiosk, Inc. , which is primarily engaged in the business of issuing
prepaid telephone cards. (At August 28, 1996, the Company owned 4,112,289 or
9.4% of the
<PAGE>
GREG MANNING AUCTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, DECEMBER 31, 1995 (UNAUDITED)
CONTINUED
outstanding common stock of PICK.) The securities purchased by the Company ,
which were acquired directly from PICK, are not registered 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.
At December 31, 1995, noncurrent marketable securities having a cost of
$258,399 and a fair value of approximately $2,185,000 resulted in an unrealized
gain of $1,925,000, which was offset by deferred income taxes of $770,000. The
increase in net valuation of $1,155,000 was credited to a separate component of
Stockholders Equity.
(8) Supplementary Cash Flow Information
Following is a summary of supplementary cash flow information:
FOR THE THREE MONTHS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1994 1995
---- ----
<S> <C> <C>
Interest paid $ 198,816 $263,958
Noncash investing and financing
activities:
Fixed assets under capital leases 135,312
Receivables from sale of division 140,000
Sale of stock 81,704
</TABLE>
(9) Subsequent Event
At May 20, 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 (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 and there
can be no assurance that this or any other venture considered by the Company
will be consummated.
<PAGE>
GREG MANNING AUCTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, DECEMBER 31, 1995 (UNAUDITED)
CONTINUED
On February 5, 1996 the Company sold 360,000 shares of common stock of PICK
owned by it in a private transaction to an unrelated third party for $1,008,000
and realized a gain of approximately $1,000,000 in a cash transaction.
On January 5, 1996, the Company and Greg Manning entered into a new
employment agreement, effective as of June 30, 1995 (when his prior employment
agreement terminated), providing, among other things, for a salary equal to
$175,000 per annum and a bonus equal to 10% of the Company's net income before
income taxes between $500,000 and $2,000,000 (subject to increase by the Board
of Directors). The new employment agreement will terminate on June 30, 1997.
<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 six month period ended December 31, 1995, 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 six months
ended December 31, 1994 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 DECEMBER 31, 1995
COMPARED WITH THE THREE MONTHS ENDED DECEMBER 31, 1994
The Company recorded an increase in revenues of $1,840,250 (78%), from
$2,373,213 for the three months ended December 31, 1994 to $4,213,463 for the
three months ended December 31, 1995. This increase was primarily attributable
to the increase in revenues from the sale of the Company's inventories of
$1,763,343 (94%) and commission revenue of $76,907 (15%) for the three month
period ended September 30, 1995 compared to the prior year.
OPERATING EXPENSES The Company's operating expenses totaled $1,169,199,
exclusive of cost of merchandise sold, for the three months ended December 31,
1995, and represented a decrease of $122,969 (9.5%) from $1,292,168 for the
three months ended December 31, 1994. 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 decreased by $9,980 in the three months ended December
31, 1995 compared to the three months ended December 31, 1994 primarily as a
result of the lower 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 increased by
$217,258 (56%) in the three months ended December 31, 1995 compared to the three
months ended December 31, 1994. This increase in margins was primarily
attributable to the above mentioned increase in the sales of merchandise offset
by the reduction of gross margin percent from 21% for the three months ended
December 31, 1994 to 17% for the three months ended December 31, 1995.
Net Income: The Company recorded income before income taxes of $43,522
for the three months ended December 31, 1995 compared to a loss before income
taxes of $345,717 for the three months ended December 31, 1994. The increase in
income was primarily due to not incurring carrying costs of the Americana
division which was sold in the quarter ended September 30, 1995, improved
overall gross margins and the increase in commissions revenue due to an increase
in consignment sales of $485,577 in the quarter ended December 31, 1995 compared
to the quarter ended December 31, 1994.
<PAGE>
SIX MONTHS ENDED DECEMBER 31, 1995
COMPARED WITH THE SIX MONTHS ENDED DECEMBER 31, 1994
The Company recorded an increase in revenues of $1,347,336 (29%) to $6,006,943
for the six months ended December 31, 1995 as compared to revenues of $4,659,607
for the comparable period ended December 31, 1994. This increase was primarily
attributable to the $1,324,469 (39%) increase in revenues from the sale of the
Company's inventories to $4,742,794 for the six months ended December 31, 1995
over the comparable period from the prior year.
OPERATING EXPENSES: The Company's total operating expenses exclusive of the cost
of merchandise sold, was $2,406,853 for the six months ended December 31, 1995
and represented a decrease of $175,522 (15%) from $2,582,375 for the six months
ended December 31, 1994. The decrease was mainly due to the decrease in
marketing costs of $174,267 for the six months ended December 31, 1995 compared
the comparable period for the prior year as part of the management's cost
containment programs Further reductions in the general and administrative areas
are anticipated in connection with these reduction efforts.
Interest expense increased by $65,142 for the six months ended December
31, 1995 compared to the six months ended December 31, 1994 due to the effective
borrowing rate during the six months ended December 31, 1995 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 six months ended December 31, 1995
compared to the six months ended December 31, 1994.
Gross margins percentages on the sales of the Company's inventory
declined from 26% to 19% for the six months ended December 31, 1995 from the
comparable six month period ended December 31, 1994. This was offset by an
increase in sales of inventory of $1,324,469 for the six months ended December
31, 1995 compared to the prior year's comparable period resulting in the gross
margins for the sales of inventories for the six months ended December 31, 1995
and 1994 being approximately $879,000 for both periods. Interest and other
income increased by $88,951 for the six months ended December 31, 1995 compare
to the six months ended December 31, 1994 due primarily to the gain on the sale
of investments totaling approximately $80,000 during the six months ended
December 31, 1995.
NET INCOME: The Company recorded a net loss of $173,420 for the six
months ended December 31, 1995 compared to a net loss of $311,601 for the six
months ended December 31, 1994. The decrease in the loss is primarily
attributable the sale of the Galleries' Americana division being sold in the
quarter ended September 30, 1995, certain cost containment programs having their
effect and higher sales volumes supporting the fixed costs of the operations.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1995, the Company's working capital position was
$2,703,735 compared to $2,144,596 as of June 30, 1995. This increase of $559,139
was primarily due to an increase in inventories purchased for future auctions
($1,835,146) after settlement of previous auctions had provided for $526,457 in
positive cash flow. These items were the material cause of the negative cash
flow from operating activities of $1,345,999.
The Company experienced a negative cash flow from investing activities
for the six months ended December 31, 1995 of $310,094, which was attributable
primarily to the purchase of 4,500,000 shares of common stock of PICK in the
amount of $260,000.
The Company experienced an increase in cash flow from financing
activities for the six months ended December 31, 1995 of $1,300,497, which was
attributable primarily to (i) the Company's receipt of net proceeds of $925,920
resulting from the exercise of warrants issued in connection with the November
1994 private placement offering and the June 1995 Regulation S offering, and
(ii) an increase in borrowing in the amount of $750,000 under the Company's
revolving credit facility.
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 and there can be no assurance that this or any
other venture considered by the Company will be consummated.
The Company's need for liquidity and working capital is expected to
increase if the above-described venture is consummated 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 November 4, 1995, 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 $2.25 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 to 1.13 shares 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
a 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. If all the warrants
are exercised, the Company will receive an additional $750,000 in gross
proceeds. As of December 31, 1995, 340,000 of these warrants had been exercised
and the Company has received $510,000 in 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. Underwriters holding Unit Purchase Warrants were entitled to an adjustment
in the exercise price of these units from $10.31 to $7.0893 each and to an
adjustment in the number of units for which the warrants are exercisable from
one unit per Unit Purchase Warrant to 1.45431 units each. 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.
Proceeds from the future exercise of the above warrants will be used to
fund the Company's working capital requirements.
<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.
Date: August 29, 1996
Greg Manning
Chairman and Chief Executive Officer
Daniel Kaplan
Vice President and Chief Financial Officer
