<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended December 31, 1997
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: (973) 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 February 9, 1998, Issuer had 4,419,997 shares of its Common Stock
outstanding.
Transitional Small Business Disclosure Format (check one): Yes ______ No X .
GREG MANNING AUCTIONS, INC.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Table of Contents Page Number
Consolidated Balance Sheet - December 31, 1997 (Unaudited) 3
Consolidated Statements of Operations and Retained Earnings - 4
Three months ended December 31, 1996 and 1997 (Unaudited)
Six months ended December 31, 1996 and 1997 (Unaudited)
Consolidated Statements of Cash Flows - 5
Six months ended December 31, 1996 and 1997 (Unaudited)
Notes to Consolidated Financial Statements 6
as of December 31, 1997
Item 2. Management's Discussion and Analysis 9
<PAGE>
<TABLE>
<CAPTION>
GREG MANNING AUCTIONS, INC.
Consolidated Balance Sheet
December 31, 1997
(Unaudited)
Assets
Current assets:
<S> <C>
Cash and cash equivalents $ 138,754
Accounts receivable
Auctions receivable 3,754,644
Advances to consignors 1,174,119
Notes receivable - current portion 440,795
Inventory 3,978,574
Taxes Receivable 637,383
Due from affiliate - CRM 183,088
Deferred tax asset 184,000
Prepaid expenses and deposits 573,064
----------------
Total current assets 11,064,421
Property and equipment, net 672,816
Goodwill 1,765,954
Marketable securities 592,150
Deferred Tax Asset 69,400
Other assets 357,276
================
Total assets $14,522,017
================
Liabilities and Stockholders' Equity
Current liabilities:
Demand notes payable $3,745,000
Notes payable - current portion 465,639
Payable to third party consignors 1,781,457
Accounts payable 351,251
Accrued expenses 910,461
----------------
Current liabilities 7,253,808
Notes payable - long-term portion 263,880
----------------
Total liabilities 7,521,392
----------------
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 6,819,690
Unrealized gain on marketable securities 163,550
Accumulated Deficit (23,111)
----------------
Total stockholders' equity 7,004,329
----------------
Total liabilities and stockholders' equity $14,522,017
================
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GREG MANNING AUCTIONS, INC.
Consolidated Statements of Operations and Retained Earnings
(Unaudited)
Three months ended Six months ended
December 31, December 31,
------------------------------ ------------------------------
1996 1997 1996 1997
-------------- -------------- -------------- --------------
Operating revenues
<S> <C> <C> <C> <C>
Sales of merchandise $ 2,816,137 $ 743,840 $ 4,073,486 $ 2,604,196
Commissions earned 559,696 374,439 1,213,834 903,945
-------------- -------------- -------------- --------------
3,375,833 1,118,279 5,287,320 3,508,141
-------------- -------------- -------------- --------------
Operating expenses
Cost of merchandise sold 1,722,960 644,388 2,556,247 2,199,898
General and administrative 1,081,081 1,186,940 1,987,197 2,307,949
Marketing 169,407 165,683 312,341 322,423
-------------- -------------- -------------- --------------
2,973,448 1,997,011 4,855,785 4,830,270
-------------- -------------- -------------- --------------
Operating profit (loss) 402,385 (878,732) 431,535 (1,322,129)
Other income (expense)
Interest and other income 153,713 91,133 332,749 188,984
Interest expense (214,641) (180,294) (401,060) (353,447)
-------------- -------------- -------------- --------------
Income (loss) before income taxes 341,457 (967,893) 363,224 (1,486,592)
Provision (benefit) for income taxes 159,292 (352,975) 176,890 (578,609)
-------------- -------------- -------------- --------------
Net income (loss) 182,165 (614,918) 186,334 (907,983)
Retained earnings, beginning of period 228,437 591,807 224,268 884,872
-------------- -------------- -------------- --------------
Retained earnings(Accumulated Deficit), end of period $ 410,602 $ (23,111) $ 410,602 $ (23,111)
============== ============== ============== ==============
Basic Earnings (Loss) per share:
Weighted Average shares outstanding 4,419,997 4,419,997 4,419,997 4,419,997
Basic Earnings (Loss) per share $ 0.04 $ (0.14) $ 0.04 $ (0.21)
============ =========== ============ =============
Diluted Earnings (loss) per share:
Weighted Average Shares outstanding 4,421,301 4,419,997 4,599,009 4,419,997
Diluted Earnings (Loss) per share $ 0.04 $ (0.14) $ 0.04 $ (0.21)
============ =========== ============ =============
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GREG MANNING AUCTIONS, INC.
Consolidated Statements of Cash Flows
(Unaudited)
Six months ended
December 31,
-------------------------------
1996 1997
--------------- --------------
Cash flows from operating activities:
<S> <C> <C>
Net income (loss) $ 186,334 $ (907,983)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 172,108 184,489
Provision for bad debts 28,354 95,000
Changes in assets (increase) decrease:
Auctions receivable 2,547,685 6,980,271
Advances to consignors (2,666,602) 4,533,178
Notes receivable 319,502 161,688
Inventories (705,052) (80,323)
Due from affiliate - CRM (5,917) (12,201)
Income taxes receivable 34,345 (637,383)
Prepaid expenses 77,263 (436,549)
Other assets 10,000 -
Changes in liabilities (decrease) increase
Payable to third-party consignors (1,609,636) (6,394,484)
Accounts payable 270,999 (1,245,598)
Accrued expenses and other liabilities (47,875) 497,599
Income taxes payable (23,110) (121,786)
--------------- --------------
(1,411,602) 2,615,918
--------------- --------------
Cash flows from investing activities:
Capital expenditures for property and equipment (86,193) (54,058)
Additional goodwill (14,629) (46,328)
--------------- --------------
(100,822) (100,386)
--------------- --------------
Cash flows from financing activities:
Net Proceeds (payments) from notes payable 1,320,000 (2,730,000)
Repayment of notes and loans payable (100,550) (281,999)
Net cost from issuance of stock (27,580)
--------------- --------------
1,191,870 (3,011,999)
--------------- --------------
Net decrease in cash and cash equivalents (320,554) (496,467)
Cash and cash equivalents at beginning of period 558,506 635,221
=============== ==============
Cash and cash equivalents at end of period $ 237,952 $ 138,754
=============== ==============
See accompanying notes to financial statements
</TABLE>
<PAGE>
(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. The Company also sells
collectibles by private treaty for a commission, and sells its own inventory at
auction, wholesale and retail.
In July, 1997, the Company acquired the assets and use of the trade
name of Cee Jay Auctions, Inc., whose operating results are included in Greg
Manning Galleries, Inc. The purchase price for the acquisition is not considered
material.
The accompanying consolidated balance sheet as of December 31, 1997 and
related consolidated statements of operations and retained earnings for the
three and six months ended December 31, 1996 and 1997 and consolidated
statements of Cash Flows for the six month periods then ended, 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,
1997 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.
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.
<PAGE>
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 six months ended
December 31, Percentages
------------------------------------- -----------------------------
1996 1997 1996 1997
------------------------------------- -----------------------------
<S> <C> <C> <C> <C>
Aggregate Sales $ 11,440,618 $ 7,858,429 100% 100%
===================================== =============================
By source:
A. Auction $ 9,010,805 $ 5,254,233 79% 67%
B. Sales of inventory 2,429,813 2,604,196 21% 33%
------------------------------------- -----------------------------
By market:
A. Philatelics $ 10,866,996 $ 7,546,435 95% 96%
B. Sports collectibles 538,872 311,994 5% 4%
C. Other collectibles 34,750 0 0% 0%
------------------------------------- -----------------------------
</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 twenty to twenty five years. Total accumulated
amortization at December 31, 1997 was $300,954. The recoverability of goodwill
is evaluated at each year end 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 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>
Earnings (loss) per common and common equivalent share
The Company has adopted Statement of Financial Accounting Standards No.
128 ("SFAS 128"), "Earnings Per Share". In accordance with SFAS 128, primary
earnings per share have been replaced with basic earnings per share, and fully
diluted earnings per share have been replaced with diluted earnings per share
which includes potentially dilutive securities such as outstanding options and
convertible securities. Prior periods have been presented to conform with SFAS
128, however, as the Company had a net loss in the current period, basic and
diluted loss per share are the same.
Basic earnings per share is computed by dividing income available to
common shareholders by the weighted-average number of common shares outstanding
during the period. Diluted earnings per share is computed by dividing income
available to common shareholders by the weighted-average number of common shares
outstanding during the period increased to include the number of additional
common shares that would have been outstanding if the dilutive potential common
shares had been issued. The dilutive effect of the outstanding options is
reflected in diluted earnings per share by application of the treasury stock
method. The dilutive effect of convertible securities is reflected using the
if-converted method. The following table sets forth the computation of basic and
diluted earnings per share.
<TABLE>
<CAPTION>
For the three months For the six months ended
ended December 31, December 31,
1996 1997 1996 1997
Numerator:
<S> <C> <C> <C> <C>
Net income (loss) $ 182,165 $ (614,918) $ 186,334 $ (907,983)
Denominator:
Denominator for basic earnings (loss) per share -
weighted average shares outstanding 4,419,997 4,419,997 4,419,997 4,419,997
Effect of Dilutive Securities:
Dilutive options outstanding 1,304 - 179,012 -
Denominator for diluted earnings per share -
adjusted weighted average shares and assumed 4,421,301 4,419,997 4,599,009 4,419,997
conversions
Basic Earnings (loss) per share $ 0.04 $ (0.14) $ 0.04 $ (0.21)
Diluted Earnings (loss) per share $ 0.04 $ (0.14) $ 0.04 $ (0.21)
</TABLE>
(3) Inventories
Inventories as of December 31, 1997 consisted of the following:
Stamps $ 2,302,890
Sports Cards and Sports Memorabilia 553,864
Other collectibles 1,121,820
-----------
$ 3,978,574
===========
<PAGE>
(4) Marketable Securities
As of December 31, 1997, the Company owned 11.4% or 4,112,289 common
shares of PICK Communications, which is primarily engaged in the business of
selling blocks of telephone time. These securities are classified as available
for sale having a cost of $215,200 and a fair value of approximately $500,000
resulting in a cumulative unrealized gain of $284,800. The Company also owned
100,000 shares pf Pro Net Link Corp., an Internet service company. These
securities are classified as available for sale having a cost of $200,000 and a
fair value of approximately $78,750 resulting in a cumulative unrealized loss of
$121,250.
(5) 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%, as of December 31, 1997, 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, 1997, such auction and private treaty
sales were not material.
Scott Rosenblum, a director of the Company, is a partner of the law
firm Kramer, Levin, Naftalis & Frankel, which provides legal services to the
Company. Anthony L. Bongiovanni, Jr., also a director of the Company, is
president of Micro Strategies, Inc., which provides computer services to the
Company. Amounts charged to operations for services rendered by these firms for
the six months ended December 31, 1996 and 1997 were approximately $ 81,148 and
$ 87,767 respectively, in the case of Kramer, Levin, Naftalis & Frankel, and
approximately $ 63,410 and $ 38,147 respectively, in the case of Micro
Strategies, Inc.
(6) Debt
The Company is party to secured revolving credit and term loan facility
with Brown Brothers Harriman & Co. ("BBH&Co."). At December 31, 1997, borrowing
under the revolving credit facility and term loan totaled $3,745,000 and
$200,000 respectively. Absent a material adverse change or event of default as
determined by BBH & Co., BBH & Co. has agreed to provide of the revolving credit
loan, 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 six months ended December 31, 1997, 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. has the right under the credit agreement to demand immediate
payment of all amounts outstanding without the otherwise applicable 120 day
notice period.
<PAGE>
(7) Supplementary Cash Flow Information
<TABLE>
<CAPTION>
Following is a summary of supplementary cash flow information:
For the six months ended
December 31,
1996 1997
------------- -------------
<S> <C> <C>
Interest paid $425,653 $ 339,135
Income taxes paid 246,115 176,901
Noncash investing and financing activities:
Acquisition of inventory under note payable 700,000
</TABLE>
(8) Significant transactions
During the year ended June 30, 1997, two customers in three separate
transactions purchased certain inventory for an aggregate selling price of
$6,600,000, which increased operating profit by $2,241,500. Included in accounts
receivable at December 31, 1997, is $1,100,000 from one customer, collateralized
by certain assets.
During the year ended June 30, 1996, an individual and related entities
purchased certain inventory for $2,935,000, which increased operating profit by
$1,110,000. Included in notes receivable at December 31, 1997 is $441,000,
collateralized by certain assets.
In the foregoing transactions, the Company has physical possession of
the collateral, and has the right to sell such assets upon certain defined
circumstances of default.
It is reasonably possible that changes in this volatile and competitive
industry could occur in the near term which could adversely affect the value of
the collateral outlined above.
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, 1997, the Company
earned a commission of 15% from the buyers in all markets except for sports
cards, Greg Manning Galleries Philatelic Mail Order Auctions and Cee Jay
Auctions which earn a 10% premium.
The Company's operating expenses consist of the cost of sales of the
Company's inventory and general and administrative expenses and marketing
expenses for the six months ended December 31, 1996 and 1997. 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, 1997
COMPARED WITH THE THREE MONTHS ENDED DECEMBER 31, 1996
The Company recorded a decrease in revenues of $ 2,257,554 (67%), from
$3,375,833 for the three months ended December 31, 1996 to $1,118,279 for the
three months ended December 31, 1997. This decrease was primarily attributable
to the decrease in revenues from the sale of the Company's inventories of
$2,072,297 (74%) for the three month period ended December 31, 1997 compared to
the prior year. The primary reason for this decrease was that Ivy & Mader did
not hold an auction during the three months ended December 31, 1997 because of a
lack of material available for auction. The Company believes that the
unavailability of auction material was aberrational and is not likely to be an
issue in the future. Gross profits on the sales of the Company's inventory
decreased by $ 993,725 (91%) in the three months ended December 31, 1997
compared to the three months ended December 31, 1996. The decrease in margins
was primarily due to a significant decrease in the sales of stamp inventories
for the three months ended December 31, 1996 as compared to the comparable
period in the previous year.
The Company's operating expenses totaled $1,352,623 exclusive of cost
of merchandise sold, for the three months ended December 31, 1997, and
represented an increase of $102,135 (8%) from the three months ended December
31, 1996. The increase in General and Administrative costs by the Company is
primarily due to an expansion of the Greg Manning Galleries Philatelic Mail
Order Auctions and Cee Jay Auctions as well as an increase in the reserve for
bad debts of $70,000.
Interest expense decreased by $34,347 in the three months ended
December 31, 1997 compared to the three months ended December 31, 1996 as a
result of lower average daily borrowings for the comparable period .
Net Income: The Company recorded a loss before income taxes of $967,893
for the three months ended December 31, 1997 compared to income before income
taxes of $ 341,457 for the three months ended December 31, 1996. This change
was primarily due to significantly lower sales of owned inventory as well as
decreased material available for sale by consignors.
SIX MONTHS ENDED DECEMBER 31, 1997
COMPARED WITH THE SIX MONTHS ENDED DECEMBER 31, 1996
The Company had a decrease in revenue of $ 1,779,179 (34%) to
$3,508,141 for the six months ended December 31, 1997 as compared to the
comparable period ended December 31, 1996. This decrease was substantially
attributable to the reduction in revenues from the sale of the Company's
inventories by $1,469,290 (36%) for the six months ended December 31, 1997
compared to the prior year's comparable period. As noted above, the primary
reason for this decrease was the failure of Ivy & Mader to hold an auction
during the second quarter because of a lack of material available for auction.
Gross profits on the sales of the Company's inventory decreased by
$1,112,941 for the six months ended December 31, 1997 compared to the same
period ended December 31, 1996. The overall gross profit margins decreased to
16% on inventory sales for the six months ended December 31, 1997 from 37% for
the comparable period in the prior year. The primary reason for the decrease in
gross profit and gross profit margins was a decrease in non-auction stamp sales
of $1,642,175 resulting in a decrease in gross profits of $883,024 and gross
profit margins of 8%.
<PAGE>
The Company recorded an increase in operating expenses of $330,834
(14%) for the six months ended December 31, 1997 compared to the six months
ended December 13, 1996. The primary reason for the cost increases were
attributable to the approximately $268,885 in operating costs for the mail
auction operations which had its start up in the quarter ended June 30, 1997 as
well as an increase in the reserve for bad debts of $95,000.
Interest expense decreased approximately $47,613 in the six months
ended December 31, 1997 compared to the six months ended December 31, 1996. This
decrease was primarily attributable to lower average borrowings. Interest income
decreased approximately $143,765 for the six months ended December 31, 1997 as
compared to the comparable period of the prior year primarily due to a lower
level of outstanding interest bearing advances to consignors during the period
as compared to last year.
Net Income: The Company recorded a net loss before income taxes of
$1,486,592 for the six months ended December 31, 1997 compared to income before
income taxes of $363,224 for the six months ended December 31, 1996. This
change was primarily due to a decrease in operating profits of approximately
$1,113,000 during the six months ended December 31, 1997 compared to the prior
year as outlined above, a decrease in commission income of approximately
$310,000, an increase in operating expenses of approximately $330,000 and
a decrease in net interest income/expense of approximately $96,000.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1997, the Company's working capital position was
$3,810,613, compared to $4,645,765 as of June 30, 1997. This decrease of
$835,152 was primarily due to decreases in auctions receivable ($5,880,652)
andadvances to consignors ($5,432,797). These were offset by increases in
inventory purchased for future auctions ($80,323), income taxes receivable
($637,383), decreases in payables to consignors ($6,394,484) , accounts payable
($1,245,598) and loans payable ($ 3,011,999). These items were the material
cause of the positive cash flow from operating activities of $2,615,918.
The Company experienced a decrease in cash flow from investing activities
for the six months ended December 31, 1997 of $ 100,386. This was primarily
attributable to the purchase of equipment of $54,057 and additional goodwill
related to the purchase of Ivy and Mader, in the amount of $ 46,328.
The Company experienced a decrease in cash flow from financing
activities for the six months ended December 31, 1997 of $3,011,999 which was
attributable to the Company's repayment of bank loans during the six months
ended December 31, 1997.
The Company's need for liquidity and working capital is expected to
increase as a result of any 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). In addition, 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.
<PAGE>
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 the necessity of continuing its growth
and position in its core business area of stamp auctions.
<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
The Company's Annual Meeting of Shareholders was held on December 10,
1997. At the Annual Meeting, each of Anthony L. Bongiovanni, Jr. and Scott S.
Rosenblum were elected to hold office as directors of the Company until the
third successive Annual Meeting of Shareholders in 2000, and until their
respective successors have been elected and qualified. The term of office as a
director of each of Greg Manning, William T. Tully, Jr., and Albertino de
Figueiredo continued after the meeting.
Set forth below is information concerning the voting results of matters
voted upon at the Annual Meeting.
1. Election of Directors:
Anthony L. Bongiovanni, Jr.
For: 4,105,461
Against: 35,000
Scott S. Rosenblum
For: 4,105,861
Against: 34,600
2. Ratification of the appointment of Amper, Politziner & Mattia as
the Company's independent public accountants for the Company's
fiscal year ending June 30, 1998.
For: 4,100,311
Against: 10,350
Abstentions: 29,800
PROPOSAL APPROVED
<PAGE>
3. Approval of the adoption of the Company's 1997 Stock Incentive
Plan, (which, among other things, increases the number of shares
available to be issued under the Company's 1993 Stock Option Plan,
as amended, and the 1997 Stock Incentive Plan to 850,000 in the
aggregate).
For:1,796,829
Against: 81,060
Abstentions: 44,100
Non-Votes: 2,218,472
PROPOSAL APPROVED
4. Approval of the Repricing Plan to reprice certain options awarded
under the Company's 1993 Stock Option Plan, as amended (pursuant
to which employees and consultants (including executive officers
and directors) with non-qualified stock options awarded under the
1993 Plan and bearing exercise prices equal to or in excess of
$2.8125 per share, with certain exceptions, will be permitted to
exchange their Old Options for new options under the 1993 Plan,
exercisable at a price equal to the Fair Market Value of the
Company's Common Stock on December 10, 1997, provided that such
Fair Market Value is less than the exercise price of the related
old options).
For: 3,607,090
Against: 175,000
Abstentions: 63,310
Non-Votes: 295,061
PROPOSAL APPROVED
Item 5. Other Information.
Effective December 8, 1997, the Company retained James Smith as
Chief Financial Officer.
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: February 10, 1997
/s/ Greg Manning
Greg Manning
Chairman and Chief Executive Officer
/s/ James Smith
James Smith
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
- -------- ------------------------------------------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000895516
<NAME> GREG MANNING AUCTIONS, INC.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 138754
<SECURITIES> 592150
<RECEIVABLES> 4089644
<ALLOWANCES> 335000
<INVENTORY> 3978574
<CURRENT-ASSETS> 11064421
<PP&E> 1420206
<DEPRECIATION> 747390
<TOTAL-ASSETS> 14522017
<CURRENT-LIABILITIES> 7253808
<BONDS> 0
0
0
<COMMON> 44200
<OTHER-SE> 6960129
<TOTAL-LIABILITY-AND-EQUITY> 14522017
<SALES> 2604196
<TOTAL-REVENUES> 3508141
<CGS> 2199898
<TOTAL-COSTS> 2630372
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 95000
<INTEREST-EXPENSE> 353447
<INCOME-PRETAX> (1486592)
<INCOME-TAX> (578609)
<INCOME-CONTINUING> (907983)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (907983)
<EPS-PRIMARY> (0.21)
<EPS-DILUTED> (0.21)
</TABLE>
