SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1 TO FORM 8-K
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 29, 1998
New York 001-11988 22-2365834
- --------------------------------------------------------------------------------
(State or other jurisdiction of (Commission file number) (I.R.S. employer
incorporation or organization) identification no.)
775 Passaic Avenue,
West Caldwell, New Jersey 07006
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (973) 882-0004
Not Applicable
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
Page 1 of 24 pages.
<PAGE>
This Form 8-K/A amends the registrant's Current Report on Form 8-K dated
November 13, 1998. The following items have been amended:
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Business Acquired.
Set forth on pages 3 through 16 are the financial statements of the
business acquired required to be set forth in the registrant's Current
Report on Form 8-K dated November 13, 1998, which report is hereby
amended. The following are included:
Report of Independent Public Accountants.
Balance Sheet - December 31, 1997.
Statement of Operations for the year ended December 31, 1997.
Statement of Shareholders' Deficit for the year ended December
31, 1997.
Statement of Cash Flows for the year ended December 31, 1997.
Notes to Financial Statements.
Additional financial statements of business acquired:
Balance Sheets dated September 30, 1997 and 1998
(Unaudited).
Statements of Operations and Retained Earnings for the
nine month periods ended September 30, 1997 and 1998
(Unaudited).
Statements of Cash Flows for the nine month periods
ended September 30, 1997 and 1998 (Unaudited).
(b) Pro Forma Financial Information.
Set forth on pages 17 through 27 is pro forma financial information
required to be set forth in registrant's Current Report on Form 8-K
dated November 13, 1998, which report is hereby amended. The following
are included:
Pro Forma Consolidated Balance Sheets dated June 30, 1998 and
September 30, 1998 (Unaudited).
Pro Forma Consolidated Statements of Operations (Unaudited) for the
Year ended June 30, 1998.
Pro Forma Consolidated Statements of Operations (Unaudited) for the
three months ended September 30, 1997 and 1998.
Notes to Pro Forma Consolidated Financial Statements (Unaudited).
(c) Exhibits.
23 - Consent of Independent Accountants.
2
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of Teletrade, Inc.
We have audited the accompanying balance sheet of Teletrade, Inc. as of December
31, 1997, and the related statements of operations, shareholders' deficit and
cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform our audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Teletrade, Inc. as of December
31, 1997, and the results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles.
Trien Rosenberg Rosenberg Weinberg Ciullo & Fazzari LLP
Morristown, New Jersey
March 20, 1998
3
<PAGE>
TELETRADE, INC.
BALANCE SHEET
DECEMBER 31, 1997
ASSETS
Current assets
Cash (Note 4) $ 0
Auction accounts receivable, less
allowance for doubtful accounts of $8,687 (Note 1) 384,759
Advances to consignors 223,103
Inventory (Note 1) 193,195
Prepaid expenses and other
current assets 165,380
-------------
Total current assets 966,437
Property and equipment, less
accumulated depreciation and
amortization of $238,462 (Notes 1 and 2) 162,500
Security deposits 6,693
=============
Total assets $ 1,135,630
=============
See accompanying notes to financial statements.
4
<PAGE>
TELETRADE, INC.
BALANCE SHEET
DECEMBER 31, 1997
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities
Cash overdraft $ 46,612
Consignor accounts payable 562,932
Accounts payable and accrued expenses 172,560
Current maturities of long-term debt (Note 3) 170,669
Employment and consulting fees payable (Note 4) 98,000
-------------
Total current liabilities 1,050,773
-------------
Long-term debt, less current maturities (Note 3)
Notes payable to shareholders 308,106
Employment and consulting fees payable (Note 4) 56,000
Note payable to bank 21,763
-------------
Total long-term debt 385,869
-------------
Total liabilities 1,436,642
-------------
Commitments and contingencies (Note 4)
Shareholders' deficit
Common stock, $.01 par value
Authorized: 50,000 shares
Issued and outstanding: 45,300 shares 453
Additional paid-in capital 899,557
Accumulated deficit (1,201,022)
-------------
Total shareholders' deficit (301,012)
-------------
Total liabilities and shareholders' deficit $ 1,135,630
=============
See accompanying notes to financial statements.
5
<PAGE>
TELETRADE, INC.
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
Revenues
Auction commissions and fee revenues $ 3,699,423
House trading loss (6,314)
Information services income 19,407
-------------
3,712,516
Operating expenses
General and administrative (Note 4) 2,089,485
Advertising and promotion 1,005,864
Amortization of intangible assets 155,530
Interest expense 78,380
-------------
3,329,259
-------------
Income from operations before consulting fees 383,257
Consulting fees (Note 4) 323,178
-------------
Income from operations 60,079
-------------
Other income (expense)
Interest 56,729
Miscellaneous (4,318)
-------------
52,411
-------------
Net income $ 112,490
=============
See accompanying notes to financial statements.
6
<PAGE>
TELETRADE, INC.
STATEMENT OF SHAREHOLDERS' DEFICIT
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Common Stock
------------------------ Additional Total
Number of Paid-In Accumulated Shareholders'
Shares Amount Capital Deficit Deficit
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1997 45,300 $453 $899,557 $(1,313,512) $(413,502)
Net income 112,490 112,490
--------------------------------------------------------------------
Balance, December 31, 1997 45,300 $453 $899,557 $(1,201,022) $(301,012)
======= ===== ========= ============ ==========
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
TELETRADE, INC.
STATEMENT OF CASH FLOWS
Increase (Decrease) in Cash
YEAR ENDED DECEMBER 31, 1997
Cash flows from operating activities:
Net income $112,490
-----------
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 89,009
Amortization of intangible assets 155,530
Bad debts 14,000
(Increase) decrease in assets:
Auction accounts receivable (133,544)
Advances to consignors 158,043
Inventory (144,643)
Prepaid expenses and other current assets 48,120
Security deposits (12)
Increase (decrease) in liabilities:
Consignor accounts payable 78,902
Accounts payable and accrued expenses (42,563)
Employment and consulting fees payable (24,000)
----------
Total adjustments 198,842
-----------
Net cash provided by operating activities 311,332
----------
Net cash used in investing activities:
Acquisition of property and equipment (60,485)
----------
Cash flows from financing activities:
Decrease in cash overdraft (28,075)
Principal payments on shareholders' loans payable (209,253)
Principal payments on notes payable to bank (7,989)
Payments on capital leases (5,530)
----------
Net cash used in financing activities (250,847)
----------
Net change in cash 0
Cash, beginning of year 0
Cash, end of year $0
===========
Supplemental disclosure of cash flows information:
Cash paid during the year for interest $80,009
===========
See accompanying notes to financial statements.
8
<PAGE>
TELETRADE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
Note 1. - Nature of Business and Summary of Significant Accounting Policies
(a) Nature of Business
The Company is a public auctioneer of collectibles, principally
certified coins, trading cards and sports memorabilia. The Company
accepts property for sale at auctions from sellers on a consignment
basis, and earns a commission on the sale. All bidding takes place
through touch-tone telephones or personal computers connected to the
Company's computerized auction system. Revenues are also earned on the
auction sale of the Company's inventory.
(b) Revenue Recognition
Commission and fee revenues are recognized when commissions are earned
from the buyer and seller on the sale of collectibles.
(c) Auction Accounts Receivable
Auction accounts receivable represent the amounts receivable from
buyers for auctioned collectibles, commissions and fees, shipping and
delivery expenses and certification charges.
(d) Advances to Consignors
Advance payments, or loans to consignors prior to auction sales are
secured by the items received by the Company for auction and the
proceeds from such sales.
(e) Inventory
Inventory, primarily coins and sports cards received from consignors in
payment of commissions and other fees and inventory purchased for
resale, is stated at the lower of cost or market. Cost is determined by
specific identification.
(f) Property and Equipment
Property and equipment are carried at cost. Depreciation is computed
under the Modified Accelerated Cost Recovery System ("MACRS") over
prescribed lives, which results in no material differences from
generally accepted accounting principles. When assets are retired or
otherwise disposed of, the cost and related accumulated depreciation
are removed from the accounts., and any resulting gain or loss is
recognized in operations for the period. The cost of repairs and
maintenance is charged to operations as incurred.
(g) Intangible Assets
Intangible assets are carried at cost. Amortization is computed using
an accelerated method for intangible assets acquired pursuant to an
Asset Purchase Agreement dated January 4, 1993 and the straight-line
method for organization costs.
9
<PAGE>
(h) Income Taxes
The Company has elected to be taxed as an S corporation under the
applicable provisions of Federal and New York State tax laws. The
shareholders are liable for individual federal and state income taxes
on their share of the Company's taxable income. Accordingly, the
accompanying financial statements do not include a provision for
federal or state income taxes.
(i) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Note 2 - Property and Equipment
Major classifications of property and equipment and their estimated
useful lives are as follows:
December 31,
1997 Period
-------------------------------------
Computer software $ 25,966 36 months
Computer equipment 204,859 5 Years
Office equipment 108,863 5 - 7 Years
Leasehold improvements 61,274 5 - 7 Years
----------------------
400,962
Less: Accumulated
depreciation and
amortization (238,462)
======================
$162,500
======================
Included in office equipment as of December 31, 1997 is property under
capitalized leases with an aggregate cost of $30,359 (see Note 3 (c)).
Depreciation and amortization of property and equipment charged to
operations during 1997 amounted to $89,009.
10
<PAGE>
Note 3 - Long-Term Debt
(a) Notes Payable to Shareholders
Notes payable consist of the following:
Notes payable to shareholders with
interest at the rate of the U.S.
Trust Company prime rate plus
2%, payable in monthly
installments of $7,500 plus
interest. These obligations
were incurred to finance the
purchase of business assets. $300,000
Notes payable to shareholders with
interest at 10.5%, payable
in monthly installments of
$2,652 plus interest, through
2002. This obligation was
incurred to finance advances
to consignors. 166,339
------------
466,339
Less: Current maturities (158,233)
============
$308,106
============
Annual maturities of notes payable to shareholders are due as follows:
Year Ending December 31
1998 $ 158,233
1999 121,818
2000 121,818
2001 61,818
2002 2,652
---------
$ 466,339
=========
(b) Note Payable to Bank
The note payable to bank, secured by specific equipment, is payable
over 60 months with interest at approximately 10.5%. The final payment
is due January 1, 2001. At December 31, 1997, $30,635 was outstanding.
Annual maturities of the note payable to bank are as follows:
11
<PAGE>
Year Ending December 31
1998 $ 8,872
1999 9,854
2000 10,944
2001 965
----------
$ 30,635
(c) Capital Lease Obligation
During the year ended December 31, 1993, the Company leased office
equipment ($30,359, less accumulated depreciation of $30,359 in 1997)
under a noncancelable capital lease. The lease expires in August,
1998, bears interest at the rate of 12.725% per annum and is
secured by the assets acquired. $ 3,564
Less: Current portion (3,564)
--------
$ 0
Note 4 - Commitments and Contingencies
(a) Operating Leases
The Company leases its office premises and certain equipment under
operating leases which expire in 2001 and 1998, respectively.
Minimum annual rental payments under operating leases are as follows:
Year Ending Equipment
December 31 Total Office and Other
----------------------------------------------------------------
1998 $84,100 $80,250 $3,850
1999 80,300 80,300
2000 87,000 87,000
2001 7,300 7,300
=====================================
$258,700 $254,850 $3,850
=====================================
The Company has the option to renew its office lease for an additional
five years at the same rent that is in effect on the fifth year of the
original lease.
Pursuant to these agreements, the accompanying statement of operations
for the year ended December 31, 1997 includes $87,395 in general and
administrative expenses.
(b) Employment and Consulting Agreements
The Company entered into an employment agreement and consulting
agreements with its shareholders.
Pursuant to these agreements, the accompanying statement of operations
for the year ended December 31, 1997 includes consulting fees of
$323,178 and payroll of $40,375 in general and administrative expenses.
At December 31, 1997, $154,000 remained unpaid on those agreements. The
shareholders have agreed to a monthly payment schedule of such fees
through December 2000. Interest incurred during 1997 on the unpaid
agreement amounts totaled $7,140.
12
<PAGE>
(c) Stock Options
On December 31, 1995, the Company granted options to its president to
purchase an aggregate of 900 shares of its common stock at $54.11 per
share subject to certain conditions. The options may be exercised
during a ten-year period commencing December 31, 1995. Through December
31, 1997, no options have been exercised.
(d) Cash
The Company maintains cash at various institutions, which is subject to
certain insurance limitations. Uninsured bank balances at December 31,
1997 totaled $572,898.
( e ) Consignment Inventory
The Company is contingently liable for the card and coin consigned
inventory. The Company maintains dealer's block insurance in an amount
that management believes is adequate.
Note 5 - Lawsuit
The Company is a defendant in a lawsuit in which the complaint asserts
causes of action for breach of contract and fraud in connection with
the auction by the Company of sports cards submitted to the Company by
Plaintiffs. The Company denies any liability to Plaintiffs and is
vigorously defending the case. The Company believes it will prevail.
13
<PAGE>
TELETRADE, INC.
BALANCE SHEETS
(UNAUDITED)
September 30,
---------------------------
1997 1998
------------- -----------
Assets
Cash $ 108,887 0
Accounts Receivable 436,174 577,920
Advances to consignors 423,771 372,031
Inventory 148,399 355,420
Prepaid Expenses 228,977 221,543
------------- -----------
Total Current Assets 1,346,208 1,526,914
Fixed Assets, net of depreciation 164,568 216,152
Goodwill 38,882
Deposits 6,681 7,118
============= ===========
Total Assets $1,556,339 $1,750,184
============= ===========
Liabilities & shareholders' equity
Consignor payable $804,094 $983,777
Accounts payable 149,219 160,959
Accrued expenses 143,345 159,163
Loans payable - current portion 397,879 186,557
------------- -----------
Total current liabilities 1,494,537 1,490,456
Loans payable-long term portion 360,079 257,372
------------- -----------
Total liabilities 1,854,616 1,747,828
------------- -----------
Capital stock 453 453
Additional paid in capital 899,557 899,557
Accumulated deficit (1,198,287) (897,654)
------------- -----------
Total shareholders' equity (deficit) (298,277) 2,356
============= ===========
Total liabilities and shareholders' equity $1,556,339 $1,750,184
============= ===========
14
<PAGE>
TELTRADE, INC.
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1997 AND 1998
(UNAUDITED)
September 30, September 30,
1997 1998
------------------------------
Revenues
Auction commissions and fee revenues $2,720,765 $3,014,616
House trading (loss) income (12,110) (9,732)
Information services income 22,868 19,069
------------------------------
2,731,523 3,023,953
Operating expenses
General and administrative 1,483,241 1,801,575
Advertising and promotion 714,917 695,246
Amortization of intangible assets (Note 4) 116,648 0
Interest expense 60,220 35,550
------------------------------
2,375,026 2,532,371
------------------------------
Income from operations before consulting fees 356,497 491,582
Consulting fees 291,706 130,844
------------------------------
Income from operations 64,791 360,738
------------------------------
Other income (expense)
Interest 50,434 19,913
------------------------------
50,434 19,913
------------------------------
Net income 115,225 380,651
Accumulated deficit, beginning of period (1,313,512) (1,201,022)
Distributions to shareholders (77,283)
==============================
Accumulated deficit, end of period ($1,198,287) ($897,654)
==============================
15
<PAGE>
TELETRADE, INC.
STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash
FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1997 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
9 Months Ended 9 Months Ended
September 30, 1997 September 30, 1998
(Unaudited) (Unaudited)
------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $115,225 $380,651
------------------------------------
Adjustments to reconcile net income
to net cash provided by operating
activities
Depreciation and amortization 61,647 65,577
Amortization of intangible assets 116,648 0
Bad debts (2,037) 6,434
(Increase) decrease in assets:
Auction accounts receivable (168,922) (199,595)
Advances to consignors (42,625) (148,928)
Inventory (99,847) (162,225)
Prepaid expenses and other current assets (15,477) (56,163)
Security deposits 0 (425)
Increase (decrease) in liabilities:
Consignor accounts payable 320,062 420,843
Accounts payable and accrued expenses 77,443 118,956
Employment and consulting fees payable 304,500 (73,503)
------------------------------------
Total adjustments 551,392 (29,029)
------------------------------------
Net cash provided by operating activities 666,617 351,622
------------------------------------
Net cash used in investing activities:
Acquisition of property and equipment (35,191) (119,229)
------------------------------------
Cash flows from financing activities:
Decrease in cash overdraft (74,687) (18,004)
Repayment on notes payable (net) (447,852) (137,106)
Distributions to shareholders (77,283)
------------------------------------
Net cash used in financing activities (522,539) (232,393)
------------------------------------
Net increase in cash 108,887 0
Cash, beginning of year 0 0
====================================
Cash, end of year $108,887 $0
====================================
</TABLE>
16
<PAGE>
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
GREG MANNING AUCTIONS, INC.
On October 29, 1998, Greg Manning Auctions, Inc. (the "Company") completed the
acquisition (the "Acquisition") of all of the capital stock of Teletrade, Inc.
from Leon Liebman, Richard Makely and Bernard Rome. The purchase price for the
Acquisition was $5,895,040 consisting of $1,875,000 in securities of the
Company, $3,000,000 in cash , $675,000 in promissory notes, $75,000 in options
to purchase the Company's common stock and $270,040 in acquisition related
expenses. The acquisition was recorded using the purchase method of accounting.
The amount of consideration paid was determined by arm's length negotiations
among the Company and Messrs. Liebman, Makely and Rome. The cash used for the
Acquisition was available from (i) the purchase by each of Leon Liebman, Greg
Manning and Afinsa Bienes Tangibles S.A. of 200,000 shares of common stock of
the Company and (ii) a term loan, as described below.
Mr. Liebman will continue to have a relationship with the Company. He was
elected to the board of directors of the Company and will be employed by the
Company as a consultant.
Teletrade, Inc. is a New York-based company which operates an electronic online,
telephone and internet-based auction system for the sale of collectibles,
principally certified coins, gemstones, sports trading cards and sports
memorabilia.
Prior to the consummation of the Acquisition, the Company secured an additional
term loan (the "Term Loan") from Brown Brothers Harriman & Co. in the amount of
$1,500,000, bearing interest at the rate of 10% per annum, payable monthly. The
Term Loan is secured by all personal property and fixtures of the Company,
including accounts, contract rights, equipment, inventory and general
intangibles, and including the personal property and fixtures of Teletrade, Inc.
In connection with the consummation of the Term Loan, the Company incurred
acquisition fees of $210,000.
The foregoing description of the Acquisition is qualified in its entirety by
reference to the full text of the Stock Purchase Agreement, dated as of October
29, 1998, by and among the Company, Leon Liebman, Richard Makely and Bernard
Rome, which was filed as Exhibit 10.1 to the 8-K filed by the Company on
November 16, 1998 and which is incorporated in its entirety herein by reference.
The foregoing description of the Term Loan is qualified in its entirety by
reference to the secured promissory note, as amended; such note was filed in its
original form as Exhibit 10.3 to the Form 8-K filed by the Company on November
16, 1998 and is incorporated in its entirety herein by reference. An amendment
to such note will be filed by the Company shortly.
The following pro forma consolidated balance sheets (unaudited) as of June 30,
1998 and September 30, 1998 and statements of operations (unaudited) for the
year ended June 30, 1998, and for the three month periods ended September 30,
1997 and 1998, give effect to the acquisition of all of the outstanding shares
of Teletrade, Inc. ("Teletrade") by Greg Manning Auctions, Inc. ("GMAI"), which
acquisition was completed on October 29, 1998. The pro forma information for the
year ended June 30, 1998 and for the three months ended September 30, 1997 and
1998 is based on the historical financial statements of GMAI and Teletrade. The
pro forma information for the year ended June 30, 1998 and for the three month
periods ended September 30, 1997 and 1998 includes the effect of the acquisition
under the purchase method of accounting and the assumptions and adjustments set
forth in the accompanying notes to the pro forma consolidated statement of
operations.
The pro forma consolidated balance sheets (unaudited) as of June 30, 1998 and
statements of operations (unaudited) for the year ended June 30, 1998, and for
the three month periods ended September 30, 1997 and 1998, have been prepared by
GMAI management based upon the financial statements of Teletrade included
elsewhere herein. The pro forma consolidated balance sheets (unaudited) as of
June 30, 1998 and statements of operations (unaudited) for the year ended June
30, 1998 and for the three month periods ended September 30, 1997 and 1998 may
not be indicative of the results that actually would have occurred if the
combination
17
<PAGE>
had been in effect on the dates indicated or which may be obtained in the
future. The pro forma consolidated balance sheets (unaudited) as of June 30,
1998 and statements of operations (unaudited) for the year ended June 30, 1998
and for the three month periods ended September 30, 1997 and 1998 should be read
in conjunction with the audited financial statements and notes of GMAI included
in GMAI's Annual Report on form 10-KSB for the year ended June 30, 1998, and the
Teletrade audited financial statements and notes contained elsewhere herein.
The GMAI consolidated balance sheet (unaudited) of September 30, 1998, which was
included in the Form 10-QSB filed on October 26, 1998, did not reflect the
acquisition of Teletrade.
The pro forma consolidated balance sheets (unaudited) as of June 30, 1998 and
statements of operations (unaudited) for the year ended June 30, 1998 and for
the three month period ended September 30, 1998 presents the results of
operations of GMAI as if GMAI had acquired Teletrade as of July 1, 1997.
18
<PAGE>
Greg Manning Auctions, Inc. And Subsidiaries
Pro Forma Consolidated Balance Sheets
June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Greg Manning Pro forma
---------------------------------
Auctions Teletrade Adjustments Total
---------------- -------------- --------------- --------------
Assets
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $603,630 $288,974 $892,604
Accounts receivable
Auctions receivable 7,707,860 332,134 8,039,994
Advances to consignors 1,744,010 199,889 1,943,899
Inventory 2,042,729 247,874 2,290,603
Taxes Receivable 111,000 1 104,165 215,165
Deferred tax asset 176,000 176,000
Prepaid expenses and deposits 79,846 265,308 2 (75,833) 269,321
---------------- -------------- --------------- --------------
Total current assets 12,465,075 1,334,179 28,332 13,827,586
Property and equipment, net 540,236 196,338 736,574
Goodwill 1,727,717 3 2,704,909 4,432,626
Customer List 4 240,000 240,000
Trademarks 5 2,850,000 2,850,000
Marketable securities 368,405 368,405
Other non-current assets:
Inventory 1,801,225 1,801,225
Advances to consignors 639,218 639,218
Other receivables 964,226 964,226
Other assets 157,275 7,118 6 168,000 332,393
================ ============== =============== ==============
Total assets $18,663,377 $1,537,635 $5,991,241 $26,192,253
================ ============== =============== ==============
Liabilities and Stockholders' Equity
Current liabilities:
Demand notes payable $4,203,000 $4,203,000
Notes payable-current portion 309,211 243,608 7 675,000 1,227,819
Payable to third party consignors 5,403,169 683,447 6,086,616
Accounts payable 442,683 383,819 826,502
Accrued expenses 651,984 8 688,752 1,340,736
---------------- -------------- --------------- --------------
Total current liabilities 11,010,047 1,310,874 1,363,752 13,684,673
Notes payable-long term portion 117,624 293,660 9 1,500,000 1,911,284
---------------- -------------- --------------- --------------
Total liabilities 11,127,671 1,604,534 2,863,752 15,595,957
---------------- -------------- --------------- --------------
Preferred stock, $.01 par value. Authorized
10,000,000 shares; none issued 0 0
Common stock, $.01 par value. Authorized
20,000,000 shares; 5,769,997 issued
and outstanding 44,200 453 10 13,047 57,700
Additional paid in capital 6,819,690 899,557 11 2,736,943 10,456,190
Unrealized gain on marketable securities 18,496 18,496
Retained earnings 653,320 (966,909) 12 377,499 63,910
---------------- -------------- --------------- --------------
Total stockholders' equity 7,535,706 (66,899) 3,127,489 10,596,296
---------------- -------------- --------------- --------------
Total liabilities and stockholders' equity $18,663,377 $1,537,635 $5,991,241 $26,192,253
================ ============== =============== ==============
See accompanying notes to financial statements
19
<PAGE>
Greg Manning Auctions, Inc. And Subsidiaries
Pro Forma Consolidated Balance Sheets
September 30, 1998
(Unaudited)
Pro forma
Greg Manning ------------------------------------
Auctions Teletrade Adjustments Total
---------------- ------------- --------------- ----------------
Assets
Current assets:
Cash and cash equivalents $193,431 $193,431
Accounts receivable
Auctions receivable 5,294,136 577,920 5,872,056
Advances to consignors 1,108,732 372,031 1,480,763
Inventory 2,421,089 355,420 2,776,509
Taxes Receivable 111,000 1 141,996 252,996
Deferred tax asset 200,971 200,971
Prepaid expenses and deposits 54,724 221,543 2 (75,833) 200,434
---------------- ------------- --------------- ----------------
Total current assets 9,384,083 1,526,914 66,163 10,977,160
Property and equipment, net 508,956 216,152 725,108
Goodwill 1,722,842 3 2,669,318 4,392,160
Customer List 4 225,000 225,000
Trademarks 5 2,812,500 2,812,500
Marketable securities 249,253 249,253
Other non-current assets:
Inventory 1,801,225 1,801,225
Advances to consignors 639,218 639,218
Other receivables 974,053 974,053
Other assets 387,428 7,118 6 157,500 552,046
================ ============= =============== ================
Total assets $15,667,058 $1,750,184 $5,930,482 $23,347,724
================ ============= =============== ================
Liabilities and Stockholders' Equity
Current liabilities:
Demand notes payable $3,522,000 $3,522,000
Notes payable-current portion 166,710 186,557 7 675,000 1,028,267
Payable to third party consignors 3,069,736 983,777 4,053,513
Accounts payable 430,133 160,959 591,092
Accrued expenses 432,583 159,163 8 749,633 1,341,379
Income taxes payable 225,071 225,071
---------------- ------------- --------------- ----------------
Total current liabilities 7,846,233 1,490,456 1,424,633 10,761,322
Notes payable-long term portion 113,055 257,372 9 1,500,000 1,870,427
---------------- ------------- --------------- ----------------
Total liabilities 7,959,288 1,747,828 2,924,633 12,631,749
---------------- ------------- --------------- ----------------
Preferred stock, $.01 par value. Authorized
10,000,000 shares; none issued 0 0
Common stock, $.01 par value. Authorized
20,000,000 shares; 5,769,997 issued
and outstanding 44,200 453 10 13,047 57,700
Additional paid in capital 6,819,690 899,557 11 2,736,943 10,456,190
Unrealized loss on marketable securities (19,061) (19,061)
Retained earnings 862,941 (897,654)12 255,859 221,146
---------------- ------------- --------------- ----------------
Total stockholders' equity 7,707,770 2,356 3,005,849 10,715,975
---------------- ------------- --------------- ----------------
Total liabilities and stockholders' equity $15,667,058 $1,750,184 $5,930,482 $23,347,724
================ ============= =============== ================
See accompanying notes to financial statements
</TABLE>
20
<PAGE>
GREG MANNING AUCTIONS, INC.
Notes to Pro Forma Consolidated Balance Sheets
As of June 30, 1998 and September 30, 1998
(1) Income Taxes Receivable
To record the tax effect of income statement adjustments of $104,165 for the
year ended June 30, 1998 and $141,996 for the three months ended September 31,
1998 (including the $104,165 from June 30, 1998).
(2) Prepaid Expenses
To record the elimination of historical balance of prepaid consulting fees to a
former shareholder of Teletrade as of the acquisition date.
(3) Goodwill
To record the allocation of the purchase price of $2,847,273 and accumulated
amortization of $142,364 as of June 30, 1998 and $177,955 as of September 31,
1998.
(4) Customer List
To record the allocation of the purchase price of $300,000 and accumulated
amortization of $60,000 as of June 30, 1998 and $75,000 as of September 31,
1998.
(5) Trademark
To record the allocation of the purchase price of $3,000,000 and accumulated
amortization of $150,000 as of June 30, 1998 and $187,500 as of September 31,
1998.
(6) Other Assets
To record loan origination fees incurred in connection with a loan incurred
relating to the acquisition of $210,000 and accumulated amortization of $42,000
as of June 30, 1998, and $52,500 as of September 30, 1998.
(7) Notes Payable
To record notes payable to former owners of Teletrade incurred as part of the
acquisition.
(8) Accrued Expenses
To record acquisition related expenses of $280,040 and pro forma statement of
operations expenses of $242,412 as of June 30, 1998 and $303,293 as of September
31, 1998 ( including the $242,412 from June 30, 1998).
To record the remaining principal balance of consulting fees due to a former
shareholder of Teletrade assumed by the Company of $166,300.
(9) Notes Payable
To record a bank note payable of $1,500,000 relating to the acquisition.
(10) Common Stock
21
<PAGE>
To record the issuance of 750,000 shares issued to a former owner of Teletrade
and the sale of 600,000 shares to Greg Manning, Leon Liebman and Afinsa Bienes
Tangibles, S.A. ($13,500) and the elimination of historical Teletrade opening
balances as of the acquisition date (-$453).
(11) Additional Paid-In Capital
To record the issuance of 750,000 shares issued to a former owner of Teletrade,
the sale of 600,000 shares to Greg Manning, Leon Liebman and Afinsa Bienes
Tangibles, S.A. and the issuance of 265,000 options ($3,636,500) and the
elimination of historical Teletrade opening balances as of the acquisition date
(-$899,557).
(12) Retained Earnings
To record the elimination of historical Teletrade opening balances as of the
acquisition date ($910,110) and to record the pro-forma net loss for the periods
ending June 30, 1998 ($532,611) and September 31, 1998 ($654,252 including the
$532,611 from June 30, 1998).
22
<PAGE>
GREG MANNING AUCTIONS, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the year ended June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
For the year ended June 30, 1998
--------------------------------------------------------------------
Greg Manning Teletrade Pro Forma
---------------------------------
Auctions, Inc. Inc. Adjustments Total
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating Revenues
Sales of Merchandise $6,143,990 $ 328,228 $6,472,218
Commissions Earned 2,546,431 4,005,331 6,551,762
--------------------------------------------------------------------
8,690,421 4,333,559 0 13,023,980
--------------------------------------------------------------------
Operating Expenses
Cost of merchandise sold 4,568,670 350,155 4,918,825
General and administrative 4,266,507 2,624,362 352,364 7,243,233
Marketing 580,999 944,061 1,525,060
--------------------------------------------------------------------
9,416,176 3,918,578 352,364 13,687,118
--------------------------------------------------------------------
Operating profit (loss) (725,755) 414,981 (352,364) (663,138)
Other income (expense)
Gain on sale of marketable securities 672,452 672,452
Interest income 376,932 42,324 419,256
Interest expense (610,181) (63,487) (284,412) (958,080)
--------------------------------------------------------------------
Income (loss) before income taxes (286,552) 393,818 (730,457) (623,191)
Provision for (benefit from) income taxes (55,000) (104,165) (159,165)
====================================================================
Net income (loss) ($231,552) $ 393,818 ($532,611) ($370,345)
====================================================================
Basic and diluted earnings (loss) per share ($0.05) ($0.06)
====================================================================
Weighted average shares outstanding 4,419,997 5,769,997
====================================================================
See accompanying notes to financial statements.
23
<PAGE>
GREG MANNING AUCTIONS, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the three months ended September 30, 1997
(Unaudited)
For the three months ended September 30, 1997
----------------------------------------------------------
Greg Manning Pro Forma
----------------------------
Auctions, Inc. Teletrade, Adjustments Total
Inc.
----------------------------------------------------------
Operating Revenues:
Sales of Merchandise 1,860,356 39,851 1,900,207
Commissions Earned 529,506 1,028,913 1,558,419
----------------------------------------------------------
Total Revenues 2,389,862 1,068,764 0 3,458,626
----------------------------------------------------------
Operating Expenses:
Cost of Merchandise Sold 1,555,510 41,844 1,597,354
General and Administrative 1,121,009 693,019 88,091 1,902,119
Marketing 156,740 246,897 403,637
----------------------------------------------------------
Total Operating Expenses 2,833,259 981,760 88,091 3,903,110
Operating profit (loss) (443,397) 87,004 (88,091) (444,484)
Other Income (Expense)
Gain on sale of marketable securities 0 0
Interest income 97,851 18,521 116,372
Interest expense (173,153) (20,234) (71,381) (264,768)
----------------------------------------------------------
Income (loss) before taxes (518,699) 85,291 (159,472) (592,880)
Provision for (benefit from)income taxes (225,634) (48,624) (274,258)
==========================================================
Pro forma Net income (loss) (293,065) 85,291 (110,848) (318,622)
==========================================================
Basic and diluted earnings (loss) per share ($0.07) ($0.06)
==========================================================
Weighted average shares outstanding 4,419,997 5,769,997
==========================================================
See accompanying notes to financial statements.
24
<PAGE>
GREG MANNING AUCTIONS, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the three months ended September 30, 1998
(Unaudited)
For the three months ended September 30, 1998
--------------------------------------------------------------
Greg Manning Teletrade Pro Forma
------------------------------
Auctions, Inc. Inc. Adjustments Total
--------------------------------------------------------------
Operating Revenues
Sales of Merchandise $996,629 $171,678 $1,168,307
Commissions Earned 601,449 983,457 1,584,906
--------------------------------------------------------------
1,598,078 1,155,135 0 2,753,213
--------------------------------------------------------------
Operating Expenses
Cost of merchandise sold 722,166 176,940 899,106
General and administrative 859,771 664,501 88,091 1,612,363
Marketing 132,218 240,829 373,047
--------------------------------------------------------------
1,714,155 1,082,270 88,091 2,884,516
--------------------------------------------------------------
Operating profit (loss) (116,077) 72,865 (88,091) (131,303)
Other income (expense)
Gain on sale of marketable securities 556,817 556,817
Interest income 96,642 6,849 103,491
Interest expense (102,690) (10,457) (71,381) (184,528)
--------------------------------------------------------------
Income (loss) before income taxes 434,692 69,257 (159,472) 344,477
Provision for (benefit from) income taxes 225,071 (37,831) 187,240
==============================================================
Net income (loss) $209,621 $69,257 ($121,641) $157,237
==============================================================
Basic and diluted earnings (loss) per share $0.05 $0.03
==============================================================
Weighted average shares outstanding 4,419,997 5,769,997
==============================================================
</TABLE>
See accompanying notes to financial statements.
25
<PAGE>
GREG MANNING AUCTIONS, INC.
Notes to Pro Forma Consolidated Statements of Operations
For the year ended June 30, 1998 and for
the three month periods ended September 30, 1997 and 1998
(1) General
The Company's September 30, 1998 consolidated balance sheets and statements of
operations (unaudited), which was included with the Form 10-QSB filed on October
26, 1998, did not reflect the acquisition of Teletrade, Inc.
("Teletrade").
The Statement of Operations of Teletrade included in the Pro Forma Consolidated
Statement of Operations (Unaudited) for the year ended June 30, 1998 and for the
three month periods ended September 30, 1997 and 1998 represent the operations
of Teletrade prior to the acquisition for the year ended June 30, 1998 and for
the three month periods ended September 30, 1997 and 1998.
The Pro Forma Consolidated Statements of Operations (Unaudited) for the year
ended June 30, 1998 and for the three month periods ended September 30, 1997 and
1998 do not purport to be indicative of the results that actually would have
been obtained if the operations were combined at the beginning of the fiscal
year ended June 30, 1998, and this presentation is not intended to be a
projection of future results or trends.
(2) General and Administrative Operating Expenses
The pro forma adjustments to General and Administrative Operating Expenses for
the year ended June 30, 1998 and for the three month periods ended September 30,
1997 and 1998 consist of an adjustment to amortization, by increasing
amortization in the amount of $352,364 and $88,091, respectively, to reflect the
pro forma amortization of goodwill, trademarks and customer lists for the twelve
and three month periods.
(3) Goodwill
Part of the purchase price was allocated to Trademarks and Customer Lists. The
excess of the purchase price over the fair market value of the net assets
acquired was $2,847,273 and was recorded as goodwill. Trademarks and goodwill
are being amortized on a straight-line basis over a 20 year period. Customer
lists are being amortized on a straight-line basis over a 5 year period. The pro
forma adjustment to the General and Administrative Operating Expenses represents
the amortization of the goodwill, customer list and trademark.
(4) Interest Expense
The pro forma adjustments to interest expense for the year ended June 30, 1998
and for the three month periods ended September 30, 1997 and 1998 consist of the
additional interest incurred from the additional borrowing from Brown Brothers
Harriman & Co. and the notes and consulting agreements payable to former
shareholders for those periods.
(5) Income Tax and Tax Benefit
The pro forma adjustments for the income tax and tax benefit for the year ended
June 30, 1998 and for the three month periods ended September 30, 1997 and 1998
are the estimates of the federal and state income tax that would be due assuming
Teletrade was acquired on July 1, 1997. No federal or state income tax or tax
benefit was previously recorded by Teletrade because Teletrade had elected to be
taxed under the S Corporation provisions of the Internal Revenue Code.
26
<PAGE>
(6) Earnings per share
The effect of options issued with respect to the acquisition has not been
reflected because the potential incremental shares have been deemed to be
immaterial.
27
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page No.
- ----------- ----------- --------
23 Consent of Independent Accountants
28
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GREG MANNING AUCTIONS, INC.
By: /s/ Greg Manning
----------------
Name: Greg Manning
Title: Chairman, President and
Chief Executive Officer
By: /s/ James Smith
----------------
Name: James Smith
Title: Chief financial Officer
Date: January 12, 1999
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference of our report dated March
20, 1998, on the audited financial statements of Teletrade, Inc. as of December
31, 1997 and for the year then ended which is included in Form 8-K/A filed by
Greg Manning Auctions, Inc. on or about January 13, 1999.
/s/ TRIEN ROSENBERG ROSENBERG WEINBERG CIULLO & FAZZARI LLP
Morristown, New Jersey
January 12, 1999
