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 March 31, 1999
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF1934
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 April 23, 1999, Issuer had 6,356,247 shares of its Common Stock
outstanding.
Transitional Small Business Disclosure Format (check one): Yes ______ No X
<PAGE>
GREG MANNING AUCTIONS, INC.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Table of Contents Page Number
Consolidated Balance Sheet - March 31, 1999 (Unaudited) 3
Consolidated Statements of Operations 4
for the Three and Nine months ended March 31, 1998 and
1999 (Unaudited)
Consolidated Statement of Stockholders' Equity for the nine month 5
period ending March 31, 1999 (Unaudited)
Consolidated Statements of Cash Flows for the nine 6
months ended March 31, 1998 and 1999 (Unaudited)
Consolidated Statement of Comprehensive Income 7
Nine months ended March 31, 1998 and 1999 (Unaudited)
Notes to Consolidated Financial Statements 8
as of March 31, 1999
Item 2. Management's Discussion and Analysis 15
<PAGE>
<TABLE>
<CAPTION>
GREG MANNING AUCTIONS, INC.
Consolidated Balance Sheet
March 31, 1999
(Unaudited)
Assets
<S> <C>
Current Assets
Cash and cash equivalents $280,196
Accounts receivable
Auctions receivable 9,347,460
Advances to consignors 1,661,561
Inventory 3,716,992
Income taxes receivable 396,602
Deferred tax asset 171,413
Prepaid expenses and deposits 485,794
----------------
Total current assets 16,060,018
Property and equipment, net 730,496
Goodwill 4,545,081
Customer Lists 366,667
Trademarks 2,937,500
Marketable securities 66,880
Investment in joint venture 500,000
Other non-current assets
Inventory 2,108,902
Advances to consignors 665,901
Other 395,221
================
Total assets $28,376,665
================
Liabilities and Stockholders' Equity Current
liabilities:
Demand notes payable $4,102,000
Notes payable 923,401
Notes payable to shareholders 175,659
Payable to third party consignors 4,085,398
Accounts payable 928,954
Accrued expenses 1,731,729
----------------
Total current liabilities 11,947,142
Notes payable - long term 1,606,278
Notes payable to shareholders - long term 187,500
----------------
Total liabilities 13,740,919
----------------
Preferred stock, $.01 par value. Authorized
10,000,000 shares; none issued. 0
Common stock, $.01 par value. Authorized
20,000,000 shares; 6,343,247 issued
and outstanding. 63,433
Additional paid in capital 13,180,787
Retained earnings 1,373,276
Accumulated other comprehensive income
Unrealized gain on marketable securities 18,250
----------------
----------------
Total stockholders' equity 14,635,746
----------------
Total liabilities and stockholders' equity $28,376,665
================
</TABLE>
See accompanying notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
GREG MANNING AUCTIONS, INC.
Consolidated Statements of Operations and Retained Earnings
(Unaudited)
Three months ended Nine months ended
March 31, March 31,
------------------------------ -------------------------------
1998 1999 1998 1999
-------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Operating Revenues
Sales of merchandise $2,342,674 $3,275,902 $4,946,870 $7,726,866
Commissions earned 623,756 1,526,234 1,527,701 3,342,089
-------------- -------------- -------------- ---------------
2,966,430 4,802,135 6,474,571 11,068,954
-------------- -------------- -------------- ---------------
Operating expenses
Cost of merchandise sold 1,586,504 2,195,042 3,786,402 5,332,973
General and administrative 1,014,037 2,071,150 3,321,986 4,498,361
Marketing 100,602 499,237 423,025 934,147
-------------- -------------- -------------- ---------------
2,701,143 4,765,428 7,531,413 10,765,482
-------------- -------------- -------------- ---------------
Operating profit (loss) 265,287 36,707 (1,056,842) 303,472
Other income (expense)
Gain on sale of marketable securities 0 626,708 0 1,286,160
Interest and other income 74,283 76,405 263,267 278,854
Interest expense (115,242) (235,691) (468,689) (517,357)
-------------- -------------- -------------- ---------------
Income (loss) before income taxes 224,328 504,128 (1,262,264) 1,351,129
Provision for (benefit from) income taxes 126,234 250,044 (452,375) 631,173
============== ============== ============== ===============
Net income (loss) $ 98,094 $ 254,084 $ (809,889) $ 719,956
============== ============== ============== ===============
Basic Earnings (loss) per share
Weighted average shares outstanding 4,419,997 6,177,273 4,419,997 5,327,734
============== ============== ============== ===============
Basic earnings (loss) per share $0.02 $0.04 ($0.18) $0.13
============== ============== ============== ===============
Diluted Earnings (loss) per share
Weighted average shares outstanding 4,419,997 6,682,942 4,419,997 5,759,642
============== ============== ============== ===============
Diluted earnings (loss) per share $0.02 $0.04 ($0.18) $0.13
============== ============== ============== ===============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
Statement of Stockholders' Equity
For the Nine Month period ending March 31, 1999
Unrealized
Additional Gain (Loss) Total
Common Stock Paid-In on Marketable Retained Stockholders'
--------------------------
Shares $ Capital Securities Earnings Equity
------------- ----------- ---------------- --------------- ---------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1998 4,419,997 $44,200 $6,819,690 $18,496 $653,320 $7,535,706
Options Exercised 478,125 4,781 808,868 813,649
Unrecognized Tax Benefit
from exercise of options 916,681 916,681
Options issued relating to loan 200,000 200,000
Options issued relating to
acquisition of subsidiary 75,000 75,000
Unrealized gains from
sale of marketable securities 771,450 771,450
Reclassification adjustment for
gains included in net income (771,696) (771,696)
Shares Sold for cash 695,125 6,951 2,493,049 2,500,000
Shares Issued re.
Acquisition of subsidiary. 750,000 7,500 1,867,500 1,875,000
Refer to Note 5
Net Income, March 31, 1999 719,956 719,956
============= =========== ================ =============== ================ ==============
6,343,247 $63,433 $13,180,787 $18,250 $1,373,276 $14,635,746
============= =========== ================ =============== ================ ==============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
GREG MANNING AUCTIONS, INC.
Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended
March 31,
------------------------------------
1998 1999
---------------- ----------------
<S> <C> <C>
Cash flows from operating activities :
Net Income $568,497 $719,956
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation and amortization 258,213 486,772
Provision for bad debts 68,354 (160,685)
Gain on sale of marketable securities (1,286,160)
(Increase) decrease in assets:
Auctions receivable 976,393 (952,596)
Advances to consignors (2,125,483) 562,024
Notes receivable 299,970
Inventory (169,177) (1,674,056)
Due from affiliate (CRM) (7,171)
Income taxes receivable 103,834 631,079
Prepaid expenses and deposits 104,620 (251,808)
Other assets 10,000 913,486
Increase (decrease) in liabilities:
Payable to third-party consignors (1,002,087) (2,332,401)
Accounts payable 167,759 261,708
Accrued expenses and other liabilities (5,953) 904,671
---------------- ----------------
(752,231) (2,178,010)
---------------- ----------------
Cash flows from investing activities:
Capital expenditures for property and equipment (103,988) (228,810)
Additional goodwill (43,705) (43,233)
Purchase of Customer list (100,000)
Acquisition of Subsidiary (3,270,040)
Investment in joint venture (500,000)
Proceeds from sale of marketable securities 1,592,026
---------------- ----------------
(147,693) (2,550,057)
---------------- ----------------
Cash flows from financing activities:
Repayment of (proceeds from) demand notes payable 1,440,000 (101,000)
Repayment of loans and loans payable (738,137) (308,062)
Proceeds from notes payable 1,500,000
Proceeds from exercise of options 813,649
Proceeds from sale of common stock (27,580) 2,500,000
---------------- ----------------
674,283 4,404,633
---------------- ----------------
Net change in cash and cash equivalents (225,641) (323,434)
Cash and cash equivalents at beginning of period 558,506 603,630
================ ================
Cash and cash equivalents at end of period $332,865 $280,196
================ ================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
GREG MANNING AUCTIONS, INC.
Statement of Comprehensive Income
(Unaudited)
Nine months ended March 31,
1998 1999
--------------------------------------
<S> <C> <C>
Net Income (loss) $ (809,889) $ 719,956
Other comprehensive income (loss)
Unrealized gains on marketable
securities 176,950 771,450
Less:
reclassification
adjustment for gains included (771,696)
in net income
======================================
Comprehensive income (loss) $ (632,939) $ 719,710
======================================
</TABLE>
See accompanying notes to financial statements
<PAGE>
(1) Organization, Business and Basis of Presentation
Greg Manning Auctions, Inc., together with its wholly owned subsidiaries Ivy &
Mader Philatelic Auctions, Inc., Greg Manning Galleries, Inc. and Teletrade,
Inc. (collectively, the "Company"), is a full service public and internet
auctioneer of collectibles, including rare stamps, coins, sports cards and
memorabilia, movie posters, autographs, rare documents, Hollywood and Rock `n
Roll memorabilia, diamonds, stamp collections and stocks. The Company 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. The Company
also sells collectibles by private treaty for a commission, and sells its own
inventory at wholesale, retail and at auction.
In November 1998, the Company acquired the inventory and certain business
assets, including customer lists of Executive Collectibles. The purchase price
for the acquisition is not considered material.
On March 11, 1999, the Company announced the formation of GMAI-Asia.com, a joint
venture with New On-Line Group, Inc., formed to conduct retail and auction sales
primarily over the Internet in Asia, particularly in China. The Company has a
50% interest in GMAI-Asia.com. Subsequently, on March 31, 1999, the
GMAI-Asia.com entered into an agreement with Afinsa Bienes Tangibles, S.A., a
shareholder of the Company, to purchase a 15% interest in the joint venture.
GMAI-Asia.com is being accounted for under the Equity method of accounting.
The accompanying consolidated balance sheet as of March 31, 1999 and related
consolidated statements of operations for the three and nine months ended March
31, 1998 and 1999 and consolidated statements of Stockholders' Equity and Cash
Flows for the nine month periods then ended, have been prepared from the books
and records maintained by the Company, in accordance with the instructions to
Form 10-QSB and Item 310(b) of Regulation SB under the Securities Act of 1933,
as amended. 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, 1998 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. The Company does not 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.
The Company also sells its own inventory at public, mail, internet and telephone
auction at wholesale and retail. Revenue with respect to inventory at auction is
recognized when sold and for wholesale or retail sales, revenue is recognized
when delivered or released to the customer or to a common carrier for delivery.
The Company does not provide any guarantee with respect to the authenticity of
property offered for sale at auction. Each lot is sold as genuine and as
described by the Company in the catalog. When however, in the opinion of a
competent authority mutually acceptable to the Company and the purchaser, a lot
is declared otherwise, the purchase price will be refunded in full if the lot is
returned to the Company within a specified period. In such event, the Company
will return such lot to the consignor before a settlement payment has been made
to such consignor for such lot in question. To date, returns have not been
material. Large collections are generally sold on an "as is" basis.
Principles of Consolidation
The consolidated financial statements of the Company include the accounts of its
wholly owned subsidiaries. All intercompany accounts and transactions have been
eliminated in consolidation.
Business Segment
The Company operates in one segment, the auctioning or private treaty sale of
rare stamps and other collectibles. Set forth below is a table of aggregate
sales of the Company, subdivided by source and market:
<TABLE>
<CAPTION>
For the nine months ended
March 31, Percentages
----------------------------- -------------------------
1998 1999 1998 1999
-------------- -------------- ------------ ----------
<S> <C> <C> <C> <C>
Aggregate Sales $13,367,911 $28,233,715 100% 100%
============================= =========================
By Source:
A. Auction $8,421,040 $20,506,850 63% 73%
B. Sales of inventory 4,946,871 7,726,866 37% 27%
----------------------------- -------------------------
By Market:
A. Philatelics $12,774,219 $15,070,707 96% 53%
B. Coins 6,982,052 0% 25%
C. Sports 443,951 4,481,711 3% 16%
collectibles
D. Diamonds 312,743 0% 1%
E. Art 1,327,662 0% 5%
F. Other 149,741 58,840 1% 0%
----------------------------- -------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
For the three months ended
March 31, Percentages
----------------------------- -------------------------
1998 1999 1998 1999
-------------- -------------- ------------ ----------
<S> <C> <C> <C> <C>
Aggregate Sales $5,509,482 $12,983,248 100% 100%
============== ============== ============ ==========
By Source:
A. Auction $3,166,807 $9,707,347 57% 75%
B. Sales of inventory 2,342,675 3,275,901 43% 25%
-------------- -------------- ------------ ----------
By Market:
A. Philatelics $5,287,784 $4,993,680 96% 38%
B. Coins 4,071,367 0% 31%
C. Sports 131,957 2,829,961 2% 22%
collectibles
D. Diamonds 181,013 0% 1%
E. Art 902,937 0% 7%
F. Other 149,741 4,290 3% 0%
-------------- -------------- ------------ ----------
</TABLE>
Intangible Assets
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 March 31,
1998 and 1999 was $ 323,073 and $ 477,235, respectively. The recoverability of
goodwill is evaluated at each year end balance sheet date as events or
circumstances indicate a possible inability to recover its carrying amount. This
evaluation is based on historical and projected results of operations and gross
cash flows for the underlying businesses. Amortization expense charged to
operations for the nine months ended March 31, 1998 and 1999 was 68,573 and $
130,970, respectively.
Trademarks and Customer List
Part of the purchase price for Teletrade was allocated to Trademarks and
Customer List. These are being amortized on a straight-line basis over a 20-year
period for Trademarks and a 5-year period for Customer List. Total accumulated
amortization at March 31, 1999 was $ 95,833. Amortization expense charged to
operations for the nine months ended March 31, 1999 was $ 95,833.
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 for temporary changes
in fair value of marketable securities are credited or charged to a separate
component of Stockholders' Equity and is reflected in the Statement of
Comprehensive Income.
Earnings (loss) per common and common equivalent share
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 would be
reflected in diluted earnings per share by application of the treasury stock
method. The following table sets forth the computation of basic and diluted
earnings per share.
<TABLE>
<CAPTION>
For the three months ended For the nine months ended
March 31, March 31,
---------------------------- ---------------------------
1998 1999 1998 1999
-------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Numerator:
Net income (loss) $98,094 $254,084 ($809,889) $719,956
Denominator:
Denominator for basic earnings (loss) per share:
Weighted average shares outstanding 4,419,997 6,177,273 4,419,997 5,327,734
Effect of Dilutive Securities:
Dilutive options outstanding 0 505,669 0 431,908
Denominator for diluted earnings per share-
============== ============ ============= ============
Adjusted weighted average shares and assumed
conversions 4,419,997 6,682,942 4,419,997 5,759,642
============== ============ ============= ============
Basic Earnings (loss) per share $0.02 $0.04 ($0.18) $0.13
============== ============ ============= ============
Diluted Earnings (loss) per share $0.02 $0.04 ($0.18) $0.13
============== ============ ============= ============
</TABLE>
Comprehensive Income
During the nine months ended March 31, 1999, the Company adopted Statement of
Financial Accounting Standards No. 130 ("SFAS 130"), "Reporting Comprehensive
Income". Comprehensive income includes not only net earnings, but also revenues,
expenses, gains and losses that are excluded from net earnings under generally
accepted accounting principles. Examples include foreign currency translation
adjustments and unrealized gains and losses on investments. SFAS 130 requires
that all items required to be recognized as components of comprehensive income
be reported in a financial statement with equal prominence to the other
financial statements. Prior periods have been presented to conform with SFAS
130.
(3) Receivables
Advances to consignors represent advance payments, or loans, to the consignor
prior to the auction sale, collateralized by the items received and held by the
Company for the auction sale and the proceeds from such sale. Interest on such
amounts is generally charged at an annual rate of 12%. Such advances generally
are not outstanding for more than six months from the date of the note.
Non-current advances to consignors represents monies due upon the sale of
specific items held as consigned goods which management does not expect to sell
currently. Such items have an appraised value in excess of $1,000,000.
(4) Inventories
Inventories as of March 31, 1999 consisted of the following:
Current Non-Current Total
Stamps $1,712,881 $967,351 $2,680,232
Sports cards and sports memorabilia 665,575 429,471 1,095,046
Coins 52,119 52,119
Other collectibles 1,286,416 712,081 1,998,497
=========================================
$3,716,992 $2,108,902 $5,825,894
=========================================
The non-current inventory represents an estimate of total inventory which is not
expected to be sold within one year.
(5) Acquisition of Subsidiary
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) a private placement of 200,000 shares of the
Company's Common Stock to each of Leon Liebman, Greg Manning and Afinsa Bienes
Tangibles S.A. and (ii) a term loan, as described below. Please refer to Form
8-K/A1, which was filed by the Company on January 12, 1999.
(6) Marketable Securities
As of March 31, 1999, the Company owned approximately 1.5% or 550,000 common
shares of PICK Communications, which is primarily engaged in the business of
issuing prepaid telephone cards. During the nine months ended March 31, 1999,
the Company sold 1,882,289 shares for approximately $1,443,602 resulting in a
pre-tax gain on the sale of marketable securities of approximately $1,334,844.
The Company also sold 100,000 shares of Pro Net Link Corp., an internet service
provider, for approximately $148,424 resulting in a pre-tax loss on the sale of
securities of approximately $(48,684).
The fair value of PICK has been estimated by the Company's management utilizing
brokered transactions as well as arms-length private transactions in the
companies' common stock, as described in public filings under the Securities
Exchange Act of 1934, as amended. These securities are classified as available
for sale. The valuation assigned to this investment is contingent upon the
company's ability to generate future cash flows and it is reasonably possible,
based upon a review of such public filings, that the estimate could change
substantially in the near term.
Market Unrecognized
Cost Value Gain
-------------- -------------- ----------------
============== ============== ================
Pick Communications $ 31,779 $ 66,875 $ 35,096
============== ============== ================
The unrealized gain is classified as a separate component of stockholders'
equity, net of tax, in the amount of $18,250.
(7) 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"). Such
stamps and collectibles have been auctioned by the Company or sold at private
treaty under substantially the same terms as for third party customers and the
Company charges CRM a seller's commission for items valued at under $100,000 per
lot. In the case of auction, the hammer price of the sale, less any seller's
commission is paid to CRM upon successful auction, and in the case of private
treaty, the net price after selling commissions is paid to CRM. For the nine
months ended March 31, 1999, there were no such auction or private treaty sales
to CRM.
Scott Rosenblum, a director of the Company, is a partner of the law firm Kramer
Levin Naftalis & Frankel, L.L.P. ("Kramer Levin") which provides legal services
to the Company. Anthony L. Bongiovanni, Jr., also a director of the Company, is
president of Micro Strategies, Incorporated, which provides computer services to
the Company. Total expenditures for services rendered by these firms for the
nine months ended March 31, 1998 and 1999 were approximately $ 120,264 and $
240,793, respectively, in the case of Kramer Levin and approximately $ 56,300
and $ 98,255, respectively, in the case of Micro Strategies, Incorporated.
In the ordinary course of business, Afinsa Bienes Tangibles S.A. ("Afinsa"), the
beneficial owner of 1,117,624 shares of the Company's Common Stock, consigned
material to the Company which was auctioned during the nine months ended March
31, 1999 for a total hammer price of $316,600 and purchased artwork totaling
$850,000.
(8) Debt
The Company is party to a secured revolving credit and term loan facility with
Brown Brothers Harriman & Co. ("BBH&Co."). At March 31, 1999, borrowing under
the revolving credit facility and term loan totaled $ 4,102,000 and $ 106,250,
respectively. Absent a material adverse change or event of default as determined
by BBH&Co., with respect to the revolving credit loan, 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.
In addition, on October 27, 1998, the Company secured additional borrowing from
BBH&Co. totaling $1,500,000 related to the acquisition of Teletrade, Inc. The
note is payable in quarterly installments of $150,000 beginning on June 30, 2000
unless there is any breach of specific Financial and Operating Guidelines or the
default of the secured promissory note or any material adverse change (as
defined therein) in the Company. Absent a material adverse change or event of
default as determined by BBH&Co., BBH&Co. has agreed to provide the Company with
a 366-day notification period prior to issuing a demand for repayment, so long
as the Company is in compliance with certain financial and operating guidelines.
(9 Supplementary Cash Flow Information
Following is a summary of supplementary cash flow information:
Nine months ended
March 31,
--------------------------------
1998 1999
------------- --------------
Interest paid $ 583,689 $ 526,494
Income taxes paid 176,901 1,621
Summary of significant non-cash transactions:
Issuance of stock options relating to the
acquisition of Teletrade - $75,000
Issuance of 200,000 options relating to the
financing of the acquisition of Teletrade - 200,000
Issuance of notes payable to former shareholders
of Teletrade as part of the acquisition - 675,000
Issuance of 750,000 shares to Leon Liebman
as part of the acquisition of Teletrade - 1,875,000
Income tax effect of the exercise of options - 916,681
<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
5% to 15% (although the commission may be slightly lower on special high value
properties). During the three and nine month periods ended March 31, 1999, the
Company earned a commission of 10% to 15% from the buyers.
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 three and nine months ended March 31, 1998 and 1999. 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.
Three months ended March 31, 1999
Compared with the three months ended March 31, 1998
The Company recorded an increase in revenues of $ 1,835,705 (62%), from
$ 2,966,430 for the three months ended March 31, 1998 to $ 4,802,135 for the
three months ended March 31, 1999. This increase was primarily attributable to
increases in revenues from the sale of the Company's inventories of $ 933,228
(40%) for the three month period ended March 31, 1999 compared to the prior year
as a result of a more selective inventory purchase program in an effort to
improve the Company's gross profit margin. Of the total revenue increase, $
1,046,434 (76%) was attributable to the revenues of Teletrade which were not
included in the prior year.
Gross margins on the sales of the Company's inventory increased by $
324,692 (43%) in the three months ended March 31, 1999 compared to the three
months ended March 31, 1998. The overall gross margin increased to 33% on
inventory sales during the three months ended March 31, 1999 from 30% for the
comparable period in the prior year.
The Company's operating expenses increased by $ 1,455,456 (130%) in the
three months ended March 31, 1999 compared to the same period in the prior year.
These costs resulted in operating costs of 53% of operating revenues for the
three months ended March 31, 1998 compared to 37% for the comparable period in
the prior year. The primary cost increases were attributable to the inclusion of
the expenses of Teletrade which were not included in the prior period.
Interest income increased by $ 2,122 during the three months ended
March 31, 1999 as compared to the three months ended March 31, 1998.
Net Income: The Company's operating profits of $ 36,707 during the
three months ended March 31, 1999 and the net gain on sale of marketable
securities of $ 626,708 were the primary components of the net income of $
254,084 for the three months ended March 31, 1999 compared to $ 98,094 during
the three months ended March 31, 1998.
Nine months ended March 31, 1999
Compared with the nine months ended March 31, 1998
The Company had an increase in revenue of $ 4,594,383 (71%) to $
11,068,954 for the nine months ended March 31, 1999 as compared to the
comparable period ended March 31, 1998. This increase was attributable to the
increase in revenues from the sale of the Company's inventory by $ 2,779,996
(61%) and revenues from Teletrade which were not included in the comparable
period ended March 31, 1998.
Gross profits on the sales of the Company's inventory increased by $
1,546,571 for the nine months ended March 31, 1999 as compared to the comparable
period ended March 31, 1998. The overall gross profit margins increased to 31%
on inventory sales for the nine months ended March 31, 1999 from 23% for the
comparable period in the prior year. The primary reason for the increase was a
more selective inventory purchase program in an effort to improve our gross
profit margin.
The Company recorded an increase in operating expenses of $ 1,687,493
(45%) for the nine months ended March 31, 1999 as compared to the comparable
period ended March 31, 1998. The primary reason for the cost increase was the
inclusion of the expenses of Teletrade which were not included in the prior
period.
Interest expense increased approximately $ 48,668 in the nine months
ended March 31, 1999 as compared to the comparable period ended March 31, 1998.
The increase was primarily attributable to increased borrowings outstanding
during the current nine month period. Interest income increased approximately $
15,587 for the nine months ended March 31, 1999 as compared to the comparable
period ended March 31, 1998.
The Company recorded a net income of $ 719,956 for the nine months
ended March 31, 1999 as compared to a net loss of $ 809,889 for the nine months
ended March 31, 1998. This change was primarily due to those factors mentioned
above as well as the gain on sale of marketable securities of $ 1,286,160.
Year 2000
The Company is aware of the Year 2000 issue and has commenced a program
to identify, remediate, test and develop contingency plans for the Year 2000
issue (the "Y2K Program"), to be substantially completed by the summer of 1999.
The Company has retained a consultant who will assist in the management of the
Y2K Program as it relates to (1) the software and systems used in the Company's
internal business; and (2) third party vendors, manufacturers and suppliers. We
have, to date, identified several internal software programs and hardware, which
are in the process of being made Y2K compliant.
The Company currently does not anticipate that the cost of the Y2K
Program will be material to its financial condition or results of operations.
Nevertheless, satisfactorily addressing the Year 2000 issue is dependent on many
factors, some of which are not completely within the Company's control. Should
the Company's internal systems or the internal systems of one or more
significant vendors or suppliers fail to achieve Year 2000 compliance, the
Company's business and its results of operations could be adversely affected. In
addition, the Company's business is dependent on the continued successful
operation of the Internet and any interruption or significant degradation of
Internet operations, whether due to Year 2000 problems or otherwise, could have
a material adverse effect on the Company's business, results of operations and
financial position.
Liquidity and Capital Resources
At March 31, 1999, the Company's working capital position was
$ 4,112,876, compared to $ 1,455,028 as of June 30, 1998. This increase of
$ 2,657,848 was primarily due to increases in auctions receivable ($ 952,596),
inventory ($1,674,056)and decreases in payables to third-party consignors
($ 2,332,401) which was partly offset by an increase in accounts payable and
accrued expenses ($1,166,379). These items were the material cause of the
negative cash flow from operating activities of $ 2,178,010.
The Company experienced an decrease in cash flow from investing
activities for the nine months ended March 31, 1999 of $ 2,550,057 which was
primarily attributable to the acquisition of Teletrade and the investment in the
joint venture, GMAI-Asia.com.
The Company experienced an increase in cash flow from financing
activities for the nine months ended March 31, 1999 of $ 4,404,633. This was
attributable to the Company increasing its notes payable and term loans by $
1,090,961, the exercise of employee stock options of $ 813,672 and the sale of
the Company's Common Stock of $ 2,500,000.
On February 10, 1999, the Company entered into an agreement with Afinsa
whereby Afinsa agreed to purchase $5.0 million of the Company's Common Stock
over a nine month period. As of May 11, 1999, the Company has received $1.5
million from Afinsa and has issued 190,250 shares of Common Stock of the
Company.
The Company's need for liquidity and working capital is expected to
increase as a result of any proposed business expansion activities. In addition,
the need for such capital enhances 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.
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 possible 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. This will include 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
None
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-k.
(b) Exhibits
10 Employment Agreement between James Reiman and Registrant dated as of
March 31, 1999
27 Financial Data Schedule
(b) Reports on Form 8-k
On November 13, 1998, the Company filed a Report on
Form 8-K dated as of October 29, 1998 reporting under
Item 2 that the Company acquired the capital stock of
Teletrade, Inc. On January 12, 1999, the Company
filed an amendment to the Report on Form 8-K which
included the financial statements of Teletrade, Inc.
and the pro forma financial information as required
under Item 7.
<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: May 14, 1999
/s/ Greg Manning
Greg Manning
Chairman and Chief Executive Officer
/s/ James Smith
James Smith
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
- -------- ------------------------------------------
10 Employment Agreement between James Reiman and Registrant dated
as of March 31, 1999
27 Financial Data Schedule
<PAGE>
Exhibit 10
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of the 31st day of March, 1999,
by and between Greg Manning Auctions, Inc., a New York corporation having its
principal office as 775 Passaic Avenue, West Caldwell, New Jersey 07006 (the
"Company"), and James Andrew Reiman, residing at 1291 Asbury Avenue, Winnetka,
Illinois 60093 (the "Executive").
WHEREAS, the parties are entering into this Agreement to set
forth and confirm their respective rights and obligations with respect to the
Executive's employment by the Company.
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, the parties hereto, intending to be legally bound, mutually
agree as follows:
1. Employment and Term. The Company hereby employs the
Executive as the Executive Vice President-E-Commerce Strategic Business
Development of the Company and the Executive agrees to serve in the employ of
the Company as the Executive Vice President-E-Commerce Strategic Business
Development for a term which shall commence on April 1, 1999 and shall terminate
as provided in this Agreement (the "Employment Term").
<PAGE>
2. Duties. (a) The Executive shall serve as Executive Vice
President-E-Commerce Strategic Business Development of the Company. Subject to
the ultimate control and discretion of the Board of Directors of the Company and
the Chief Executive Officer of the Company to whom the Executive shall report
directly, the Executive shall have such duties as may be prescribed by the
Company.
(b) During the Employment Term, Executive may conduct
his duties at his office in Winnetka, Illinois and Executive shall not be
required to maintain his office at the Company's principal office.
Executive shall be entitled to reimbursement from the Company for up to $300.00
per month of his telephone expenses and Internet access expenses incurred
as a result of working from his home upon the submission to the Company of
appropriate supporting documentation.
(c) The Executive shall devote his entire working
time to the business of the Company, subject to
vacations and sick leave in accordance with the Company policy. During the
Employment Term, each year Executive shall be entitled to the personal vacations
with full compensation generally provided to executives of the same level and
responsibility as Executive.
Executive shall be entitled to a paid vacation during the period August 14
through 21, 1999.
3. Compensation. (a) For the full, prompt and faithful
performance of all his duties and services hereunder, the Company shall pay the
Executive an annual base salary of $140,000 per year, which annual base salary
may be increased at the Company's sole discretion. Such base salary and other
compensation shall be payable in accordance with the Company's normal payroll
practices as in effect from time to time.
(b) In addition to the options granted to Executive
pursuant to certain consulting agreements, dated
December 31, 1998 and February 28, 1999 (the "Initial Option Shares"), on April
1, 1999 the Company shall grant to Executive an option, pursuant to the
Company's 1997 Stock Incentive Plan, to purchase 20,000 shares of the Company's
common stock (the "Option Shares" and together with the Initial Option Shares,
the "Total Option Shares'). The exercise price for each Option Share shall be
$9.375 (the closing sale price of the Company's common stock on the Nasdaq Small
Cap Market on the last trading day immediately prior to the date of the grant).
The Option Shares shall vest in four equal annual installments beginning on the
first anniversary of the date of the grant. All other terms (including
exercisability) of the Option Shares shall be governed by the Company's 1997
Stock Incentive Plan, as well as the applicable option agreement entered into
pursuant to the terms of such plan.
(c) The compensation provided for in Section 3(a)
above, shall be in addition to such rights as the
Executive may have during his employment hereunder, or thereafter, to
participate in and receive benefits from or under any stock option, pension,
profit sharing, insurance or other employee benefit plan or plans of the
Company, generally provided to executives of the same level and responsibility
as Executive; provided, however, Executive has the option to opt out of the
Company's medical insurance plan, in which event Executive shall be entitled to
the reimbursement of the premiums paid under Executive's personal medical
insurance policy in an amount not to exceed the amount the Company would have
paid had Executive participated in the Company's medical plan.
4. Expenses. (a) Executive is entitled to reimbursement for
reasonable travel and other reasonable business expenses duly incurred by
Executive in the performance of his duties under this Agreement, including
reasonable expenses incurred by Executive in traveling from Illinois to the
Company's principal offices, upon the submission to the Company of expense
vouchers and other appropriate supporting documentation.
(b) Executive shall be entitled to attend conventions,
conferences and seminars of the Direct Marketing Association and other trade and
business associations. Executive is entitled to reimbursement for fees and
expenses incurred in attending such conferences, conventions or seminars,
including reasonable travel expenses up to a maximum of $5,000 per year;
provided, however, the Company shall reimburse Executive for any fees and
expenses in excess of such amount if Executive has obtained the prior written
approval of the Company. Notwithstanding the foregoing provision,during the
Employment Term, the Company shall reimburse Executive for any fees and
expenses incurred in attending all conferences and seminars of the
Corporation Counsel Institute held annually in Chicago, Illinois.
5. Confidential Information. (a) The Company owns and has
developed and compiled, and will develop and compile, certain proprietary and
confidential information which have great value to its business (collectively,
"Confidential Information"). Confidential Information includes not only
information disclosed by the Company to Executive, but also information
developed or learned by Executive during the course or as a result of employment
with the Company, which information shall be the property of the Company.
Confidential Information includes all information that has or could have
commercial value or other utility in the business in which the Company is
engaged or contemplates engaging, and all information of which the unauthorized
disclosure could be detrimental to the interests of the Company, whether or not
such information is specifically labelled as Confidential Information by the
Company. By way of example and without limitation, Confidential Information
includes any and all information developed, obtained, licensed by or to or owned
by the Company concerning trade secrets, techniques, know-how, software,
computer programs and designs, development tools, and any other intellectual
property created, used or sold (through a license or otherwise) by the Company,
electronic data information know-how and processes, innovations, discoveries,
improvements, research, development, test results, reports, specifications,
data, formats, marketing data and plans, business plans, strategies, forecasts,
unpublished financial information, orders, agreements and other forms of
documents, price and cost information, expansion plans, budgets, projections,
customer, supplier, licensee, licensor and subcontractor identities,
characteristics, agreements and operating procedures, and salary, staffing and
employment information.
(b) Executive acknowledges and agrees that in the
performance of his duties hereunder the Company will disclose to and entrust
Executive with Confidential Information which is the exclusive property of
the Company and which Executive may possess or use only in the performance of
duties for the Company. Executive also acknowledges that Executive is aware
that the unauthorized disclosure of Confidential Information,among other things,
may be prejudicial to the Company's interests, an invasion of privacy and an
improper disclosure of trade secrets. Executive shall not, directly or
indirectly, use, make available, sell, disclose or otherwise communicate
to any corporation, partnership or other entity, individual or other
third party, other than in the course of Executive's assigned duties and for the
benefit of the Company, any Confidential Information, either during the
Employment Term or thereafter. Executive agrees not to publish, disclose or
otherwise disseminate such information without the prior written approval of the
Chief Executive Officer of the Company.
(c) In the event Executive's employment with the
Company ceases for any reason, Executive will not remove
from the Company's premises without its prior written consent any records
(written or electronic), files, drawings, documents, equipment, materials and
writings received from, created for or belonging to the Company, including but
not limited to those which relate to or contain Confidential Information, or any
copies thereof. Upon request or when employment with the Company terminates,
Executive will immediately deliver the same to the Company.
6. Non-Competition. (a) During the Employment Term, Executive
shall not: (i) engage in any activity which conflicts or interferes with or
derogates from the performance of Executive's duties hereunder nor shall
Executive engage in any other business activity, whether or not such business
activity is pursued for gain or profit, except as approved in advance in writing
by the Chief Executive Officer or the Board of Directors of the Company; or (ii)
accept any other employment, whether as an executive or consultant or in any
other capacity, and whether or not compensated therefor.
(b) Without limiting the generality of the
provisions of Section 2(a) or 3(a) of this Agreement, during the Employment Term
and for a period of one year thereafter, Executive shall not, directly or
indirectly, own, manage, operate, join, control, participate in, invest in
or otherwise be connected or associated with, in any manner, including as an
officer, director, employee, independent contractor, stockholder, member,
partner, consultant, advisor, agent, proprietor, trustee or investor, any
Competing Business; provided, however, that ownership of 5% or less of the
stock or other securities of a corporation, the stock of which is listed on a
national securities exchange or is quoted on The Nasdaq Stock Market,
shall not constitute a breach of this Section 6, so long as Executive
does not in fact have the power to control, or direct the management of, or is
not otherwise associated with, such corporation; provided further, however, that
if Executive's employment is terminated under Section 7(d) of this Agreement,
then the provisions of this Section 6(b) shall remain in effect only so long as
and during the period in which the Company continues to pay to Executive amounts
as severance pursuant to Section 7(d) of this Agreement.
For purposes hereof, the term "Competing Business"
shall mean (i) any business or venture which, directly
or indirectly, markets or sells the type of collectibles sold by the Company; or
(ii) any business or venture which, directly or indirectly, manages, markets,
sells, licenses, develops, produces or operates any internet-related service
that promotes, or provides a means for the conduct of, on-line marketing,
promotion, sales or distribution of the type of collectibles sold by the
Company; or (iii) any other business which is substantially similar to the whole
or any significant part of the business conducted by the Company.
(c) During the Employment Term, Executive shall not
(i) directly or indirectly solicit or attempt to solicit any of the employees,
agents, consultants or representatives of the Company to terminate his, her,
or its relationship with the Company; or (ii) directly or indirectly solicit
or attempt to solicit any of the employees, agents, consultants or
representatives of the Company to become employees, agents, representatives
or consultants of any other person or entity.
7. Termination of Employment. (a) Termination for Cause;
Termination by Reason of Death or Retirement or Voluntary Resignation. In the
event that Executive's employment hereunder is terminated during the Employment
Term (x) by the Company for Cause (as defined below), (y) by reason of
Executive's death or retirement or (z) by reason of Executive's voluntary
resignation, other than for "Good Reason" (as defined below), the Company shall
pay to Executive, within thirty (30) days of the date of such termination, only
the Base Salary through such date of termination. For purposes of this
Agreement, "Cause" shall mean (i) conviction of any crime (whether or not
involving the Company) constituting a felony in the jurisdiction involved or any
crime involving fraud or dishonesty; (ii) engaging in any substantiated act
involving moral turpitude; (iii) engaging in any act which, in each case,
subjects, or if generally known would subject, the Company to public ridicule or
embarrassment; (iv) gross neglect or misconduct in the performance of
Executive's duties hereunder, which is not cured within 10 days of Executive's
receipt of written notice specifying such gross neglect or misconduct; (v)
willful or repeated failure or refusal to perform such duties as may be
delegated to Executive commensurate with Executive's position; or (vi) material
breach of any provision of this Agreement by Executive.
(b) Disability. If, as a result of Executive's incapacity due
to physical or mental illness, Executive shall have been absent from Executive's
duties hereunder on a full time basis for either (i) one hundred twenty (120)
days within any three hundred sixty-five (365) day period, or (ii) ninety (90)
consecutive days, the Company may terminate Executive's employment hereunder for
"Disability," except as otherwise required by law or the policies of the
Company. In that event, the Company shall pay to Executive, within thirty (30)
days, of the date of such termination, only the Base Salary through such date of
termination. During any period that Executive fails to perform Executive's
duties hereunder as a result of incapacity due to physical or mental illness (a
"Disability Period"), Executive shall continue to receive the compensation and
benefits provided by Section 3 of this Agreement until Executive's employment
hereunder is terminated; provided, however, that the amount of compensation and
benefits received by Executive during the Disability Period shall be reduced by
the aggregate amounts, if any, payable to Executive under disability benefit
plans and programs of the Company.
(c)Resignation for Good Reason. Executive may resign
for "Good Reason," defined as Executive's written notice of resignation, at
least 14 days in advance of such resignation, upon the happening of any of the
following: (i) a material breach by the Company of its obligations to Executive
arising in connection with this Agreement; (ii) if the Company substantially,
materially, and without Executive's consent reduces Executive's title or
job responsibilities, reduces the benefits available to Executive or reduces
Executive's salary, except for general, across-the-board reductions in
benefits by the Company affecting all employees equally and not
disproportionately affecting Executive; or (iii) a Change in
Control. For purposes of this Agreement a "Change in Control" shall be deemed to
have occurred upon the happening of any of the following events: (a) any
"person", as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly,
whether by purchase or acquisition or agreement to act in concert or otherwise,
of 49% or more of the outstanding shares of common stock of the Company; or (b)
a cash tender or exchange offer for 50% or more of the outstanding shares of
common stock of the Company is commenced; or (c) the stockholders of the Company
approve an agreement to merge, consolidate, liquidate, or sell all or
substantially all of the assets of the Company; or (d) two or more directors are
elected to the Board of Directors without having previously been nominated and
approved by the members of the Board of Directors incumbent on the day
immediately preceding such election; provided, however, that in the event
Section 3.7.1(a) of the Company's 1997 Stock Incentive Plan is amended so that a
"change in control" is triggered by the purchase or acquisition or agreement to
act in concert or otherwise, of less than 49% of the outstanding shares of
Common Stock of the Company, then term "Change in Control" as used herein shall
be amended to conform with such new definition in the Company's stock incentive
plan, as amended.
(d) Termination By Company For Any Other Reason.
In the event that Executive's employment hereunder is terminated by the Company
during the Employment Term for any reason other than as provided in Section
7(a) or 7(b) of this Agreement, or if Executive resigns for "Good Reason"
as provided in Section 7(c) above, then ( i )the Company shall pay to
Executive the Base Salary through such date of termination and, in lieu of any
further compensation and benefits for the balance of the Employment Term, an
amount equal to $140,000 less any Option Profits ("Severance Pay"), and ( ii)
all unvested Option Shares and all option shares granted pursuant to the
December 31, 1998 consulting agreement shall immediately vest in full. For
purposes of this Section 7(d), "Option Profits" shall mean the
difference between the Fair Market Value (as such term is defined in the
Company's 1997 Stock Incentive Plan) of the Company's common stock on the date
of termination under this Agreement less the applicable option exercise price
multiplied by the number of (i) applicable Total Option Shares fully vested
and/or (ii) applicable shares of common stock issued upon exercise of any Total
Option Shares, as the case may be. Such Severance Pay shall be paid, in the
Company's sole discretion, either (i) commencing with such date of termination
at the times and in the amounts such Base Salary would have been paid, or (ii)
in a single lump sum payment to be paid no later than sixty (60) days after the
date of termination. Notwithstanding anything to the contrary contained herein,
in the event that Executive shall breach Section 5 or 6 of this Agreement, in
addition to any other remedies the Company may have in the event Executive
breaches this Agreement, the Company's obligation pursuant to this Section 7(d)
to continue such salary payment shall cease and Executive's rights thereto shall
terminate and shall be forfeited.
8. Assignment and Transfer. (a) This Agreement shall inure to
the benefit of and be enforceable by, and may be assigned by the Company to, any
purchaser of all or substantially all of the Company's business or assets, any
successor to the Company or any assignee thereof (whether direct or indirect, by
purchase, merger, consolidation or otherwise). The Company will require any such
purchaser, successor or assignee to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such purchase, succession or assignment had taken
place.
(b) Executive's rights and obligations under this
Agreement shall not be transferable by Executive by assignment or otherwise, and
any purported assignment, transfer or delegation thereof shall be void.
9. Miscellaneous. (a) Other Obligations. Executive represents
and warrants that neither Executive's employment with the Company nor
Executive's performance of Executive's obligations hereunder will conflict with
or violate or otherwise are inconsistent with any other obligations, legal or
otherwise, which Executive may have.
(b)License. The Company acknowledges that Executive
is not licensed to practice law in the States of New Jersey and New York and
Executive's employment with the Company is not conditioned on obtaining such
licenses.
(c)Governing Law. This Agreement, including the
validity, interpretation, construction and performance of this Agreement, shall
be governed by and construed in accordance with the internal laws of the State
of New York, without regard to principles of the conflicts of law thereof.
(d)Jurisdiction; Forum. Each party hereto consents
and submits to the jurisdiction of any state court sitting in the county of New
York or federal court sitting in the Southern District of New York in connection
with any dispute arising out of or relating to this Agreement.Each party hereto
waives any objection to the laying of venue in such courts and any claim that
any such action has been brought in an inconvenient forum. To the extent
permitted by law,any judgment in respect of a dispute arising out of or relating
to this Agreement may be enforced in any other jurisdiction within or outside
the United States by suit on the judgment, a certified copy of such judgment
being conclusive evidence of the fact and amount of such judgment.
(e)Entire Agreement. This Agreement contains the
entire agreement and understanding between the
parties hereto in respect of the subject matter hereof and supersede, cancel and
annul any prior or contemporaneous written or oral agreements, understandings,
commitments and practices between them respecting the subject matter hereof,
including all prior employment agreements, if any, between the Company and
Executive, which agreement(s) hereby are terminated and shall be of no further
force or effect.
(f) Amendment. This Agreement may be amended
only by a writing which makes express reference to this
Agreement as the subject of such amendment and which is signed by Executive and
a duly authorized officer of the Company.
(g) Severability. If any term, provision,
covenant or condition of this Agreement or part thereof, or
the application thereof to any person, place or circumstance, shall be held to
be invalid, unenforceable or void by a court of competent jurisdiction, the
remainder of this Agreement and such term, provision, covenant or condition
shall remain in full force and effect, and any such invalid, unenforceable or
void term, provision, covenant or condition or part thereof shall be deemed,
without further action on the part of the parties hereto, modified, amended and
limited, and the court shall have the power to modify, to the extent necessary
to render the same and the remainder of this Agreement valid, enforceable and
lawful. In this regard, Executive acknowledges that the provisions of Sections 4
and 6 of this Agreement are reasonable and necessary for the protection of the
Company.
(h) Construction. The headings and captions of
this Agreement are provided for convenience only and
are intended to have no effect in construing or interpreting this Agreement. The
language in all parts of this Agreement shall be in all cases construed
according to its fair meaning and not strictly for or against the Company or
Executive. The use herein of the word "including," when following any general
provision, sentence, clause, statement, term or matter, shall be deemed to mean
"including, without limitation." As used herein, "Company" shall mean the
Company and its subsidiaries and any purchaser of, successor to or assignee
(whether direct or indirect, by purchase, merger, consolidation or otherwise) of
all or substantially all of the Company's business or assets which is obligated
to perform this Agreement by operation of law, agreement pursuant to Section 7
of this Agreement or otherwise. As used herein, the words "day" or "days" shall
mean a calendar day or days.
(i) Nonwaiver. Neither any course of dealing
nor any failure or neglect of either party hereto in any
instance to exercise any right, power or privilege hereunder or under law shall
constitute a waiver of any other right, power or privilege or of the same right,
power or privilege in any other instance. All waivers by either party hereto
must be contained in a written instrument signed by the party to be charged and,
in the case of the Company, by its duly authorized officer.
(j) Remedies for Breach. The parties hereto
agree that Executive is obligated under this Agreement to
render personal services during the Employment Term of a special, unique,
unusual, extraordinary and intellectual character, thereby giving this Agreement
peculiar value, and, in the event of a breach or threatened breach of any
covenant of Executive herein, the injury or imminent injury to the value and the
goodwill of the Company's business could not be reasonably or adequately
compensated in damages in an action at law. Accordingly, Executive expressly
acknowledges that the Company shall be entitled to specific performance,
injunctive relief or any other equitable remedy against Executive, without the
posting of a bond, in the event of any breach or threatened breach of any
provision of this Agreement by Executive (including, without limitation,
Sections 5 and 6 of this Agreement). Without limiting the generality of the
foregoing, if Executive breaches or threatens to breach Section 5 or 6 of this
Agreement, such breach or threatened breach will entitle the Company to enjoin
Executive from disclosing any Confidential Information to any Competing
Business, to enjoin such Competing Business from receiving from Executive or
using any such Confidential Information and/or to enjoin Executive from,
indirectly or directly, owning, managing, operating, joining, controlling,
participating in, investing in or otherwise being connected or associated with,
in any manner, any such Competing Business. The rights and remedies of the
parties hereto are cumulative and shall not be exclusive, and each such party
shall be entitled to pursue all legal and equitable rights and remedies and to
secure performance of the obligations and duties of the other under this
Agreement, and the enforcement of one or more of such rights and remedies by a
party shall in no way preclude such party from pursuing, at the same time or
subsequently, any and all other rights and remedies available to it.
(k) Notices. Any notice, request, consent or
approval required or permitted to be given under this
Agreement or pursuant to law shall be sufficient if in writing, and if and when
sent by courier, such as Federal Express, which provides next business day
delivery and tracking of delivery ("Courier"), or certified or registered mail,
return receipt requested, with postage prepaid, to Executive's residence (as
reflected in the Company's records or as otherwise designated by Executive on
thirty (30) days' prior written notice to the Company) or to the Company's
principal executive office, attention: Chief Executive Officer, as the case may
be. All such notices, requests, consents and approvals shall be effective one
business day after being sent by Courier for next business day delivery or,
three days after being deposited in the United States mail. However, the time
period in which a response thereto must be given shall commence to run from the
date of receipt on the return receipt of the notice, request, consent or
approval by the addressee thereof. Rejection or other refusal to accept, or the
inability to deliver because of changed address of which no notice was given as
provided herein, shall be deemed to be receipt of the notice, request, consent
or approval sent.
(l) Survival. Cessation or termination of
Executive's employment with the Company shall not result in
termination of this Agreement. The respective obligations of Executive and
rights and benefits afforded to the Company as provided in this Agreement shall
survive cessation or termination of Executive's employment hereunder, except as
set forth herein. This Agreement shall not terminate upon, and shall remain in
full force and effect following, expiration of the Employment Term and all
rights and obligations of the parties hereto as and to the extent provided
herein shall survive such expiration.
IN WITNESS WHEREOF, the Company has caused this Agreement to
be duly executed on its behalf by an officer thereunto duly authorized and
Executive has duly executed this Agreement, all as of the date and year first
written above.
GREG MANNING AUCTIONS, INC.: EXECUTIVE:
By: /s/Greg Manning /s/James Reiman
Name: Greg Manning James Andrew Reiman
Title: President, Chief Executive Officer
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