8-K/A 1 kl10028_8-ka.txt FORM 8-K/A Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) September 8, 2003 ----------------- Greg Manning Auctions, Inc. (Exact name of registrant as specified in charter) Delaware 1-11988 22-2365834 ------------------ ----------------- -------------- (State or other jurisdiction (Commission File Number) (IRS Employer) of incorporation) 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 29 pages. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits (a) Financial statements of business acquired. Set forth below on pages 3 through 23 are the financial statements of the business acquired required to be set forth in the registrant's Current Report on Form 8-K dated September 23, 2003, which report is hereby amended. The following are included: Report of Independent Public Accountants Combined Balance Sheet - June 30, 2003 Combined Income Statement for the year ended June 30, 2003 Combined Statement of Cash Flows for the year ended June 30, 2003 Notes to Combined Financial Statements Management Report on the Combination of Financial Statements as of June 30, 2003 (b) Pro Forma Financial Information Set forth on pages 24 through 28 is pro forma financial information required to be set forth in registrant's Current Report on Form 8-K dated September 23, 2003, which report is hereby amended. The following are included: Pro Forma Condensed Combined Balance Sheet dated June 30, 2003 (Unaudited) Pro Forma Condensed Combined Statements of Operations for the year ended June 30, 2003 (Unaudited) (c) Exhibits 23.1 Consent of Independent Accountants 2 Protocol number: 1539 July 25, 2003 AUDIT REPORT OF COMBINED FINANCIAL STATEMENTS OF THE COMPANIES Heinrich Kohler Auktionshaus GmbH & Co. KG, Heinrich Kohler Berliner Briefmarken-Auktionen GmbH, Corinphila Auktionen AG, Auctentia Deutschland GmbH, Heinrich Kohler Briefmarkenhandel GmbH & Co KG, Heinrich Kohler Verwaltungs GmbH and Auctentia Subastas S.L. As at June 30, 2003 3 INDEPENDENT AUDITORS' REPORT TO THE SHAREHOLDERS OF AUCTENTIA GROUP (COMBINED COMPANIES) We have audited the accompanying combined balance sheet of Auctentia Group (Combined Companies). Such companies include Heinrich Kohler Auktionshaus GmbH & Co. KG, Heinrich Kohler Berliner Briefmarken-Auktionen GmbH, Corinphila Auktionen AG, Auctentia Subastas S.L., Auctentia Deutschland GmbH, Heinrich Kohler Briefmarkenhandel GmbH & Co KG and Heinrich Kohler Verwaltungs GmbH ("Combined Companies") as at June 30, 2003, and the related combined statements of operations and retained earnings, and cash flows for the three and twelve months ended June 30, 2003. Those financial statements are the responsibility of the Combined Companies management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits 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. For comparative purposes, each one of the items from the Balance Sheet, Profit and Loss Account and Cash Flow Statement closed at June 30, 2003 is presented with those corresponding to the previous year. It should be noted that during this financial year, several companies have been incorporated in the combination perimeter, and therefore, the amounts are not strictly comparable. ( See Note 2.d ). In our opinion, the combined financial statement referred to above presents fairly, in all material respects, the financial position of the Combined Companies as of June 30, 2003 and the results of their operations and their cash flows for the three and twelve months ended June 30, 2003, in conformity with accounting principles generally accepted in the United States of America. Madrid, July 25, 2003 FABREGAS, MERCADE & Co. Auditores - Consultores Javier Mercade Campabadal 4 AUCTENTIA GROUP ----------------- Combined Balance Sheet ---------------------- (Amounts stated in Euro)* June 30, 2003 June 30, 2002 ASSETS Cash and Banks 2.577.233 2.716.808 Short-term Investments 15.993 151.332 Accounts Receivable 3.962.889 2.667.064 Accounts Receivable - Related parties 297.940 149.700 Inventory 266.065 52.188 Prepaid expenses 61.478 23.023 --------- --------- TOTAL CURRENT ASSETS 7.181.598 5.760.115 ========= ========= Investments --- 15.888 Tangibles Fixed Assets 291.146 42.320 Intangible Fixed Assets 524.726 275.423 --------- --------- TOTAL FIXED ASSETS 815.872 333.631 ========= ========= TOTAL 7.997.470 6.093.746 LIABILITIES AND STOCKHOLDERS' EQUITY Other Non-Trade Creditors 3.432.923 982.975 Other Non-Trade Creditors - Related Parties 175.028 1.369.369 Accounts Payable and Accrued Expenses 2.204.266 2.314.123 Accounts Payable and Accrued Expenses - Related Parties 14.039 64.269 Credit institutions and other debts 9.048 --- --------- --------- TOTAL CURRENT LIABILITIES 5.835.304 4.730.736 ========= ========= Long-term public entities --- --- Due to Related Parties - Long Term --- 51.745 TOTAL LONG TERM DEBTS --- 51.745 ========= ========= Common Stock 1.381.539 408.312 Retained Earnings - Opening 1.188.487 712.500 Net Income (loss) period (407.860) 190.453 --------- --------- TOTAL 2.162.166 1.311.265 ========= ========= TOTAL 7.997.470 6.093.746 5 AUCTENTIA GROUP COMBINED INCOME STATEMENT For the Periods Ended (Amounts stated in Euro)* (Unaudited) Twelve Three Months Three Months Months Twelve Months Ended Ended Ended Ended June 30, 2003 June 30, 2002 June 30, 2003 June 30, 2002 Revenues 1.931.638 813.184 4.280.608 3.631.852 Revenues Related Parties 610.171 171.770 1.892.354 473.378 ------- ------- ---------- ------- 2.541.809 984.954 6.172.962 4.105.230 Cost of goods sold (675.121) 58.811 (1.741.450) (136.955) Cost of goods (2.952) (78.926) (29.187) (100.950) ------- -------- -------- --------- sold-Related Parties (678.073) (20.115) (1.770.637) (237.905) GROSS PROFIT 1.863.736 964.839 4.402.325 3.867.325 ========= ======= ========= ========= Operating Expenses General and Administrative (378.272) (140.217) (1.773.303) (1.286.005) Depreciation and Amortization (62.500) (22.857) (232.630) (61.884) Wages and Salaries (483.171) (271.238) (1.852.377) (1.127.700) Marketing (478.948) (447.374) (899.960) (1.101.756) Other --- (9.350) 3.956 --- --------- ------- --------- ---------- (1.402.891) (891.036) (4.754.314) (3.577.345) Interest Income 29.032 9.699 70.747 55.023 Interest Expense (5.751) (3.278) (37.705) (22.690) Extraordinary Income --- 0 --- --- Extraordinary Expenses (48) 0 (48) --- (LOSS) PROFIT BEFORE 484.078 80.224 (318.995) 322.313 TAXATION INCOME TAX 20.343 318 (88.865) (131.860) NET LOSS 504.421 80.542 (407.860) 190.453 ======= ====== ========= ======= 6 AUCTENTIA GROUP COMBINED STATEMENT OF CASH FLOWS 12 months ended June 30, 2003 (Amounts stated in Euro)* Twelve Months Twelve Months Ended Ended June 30, 2003 June 30, 2002 Cash Flows from operating activities: Net Loss (407.860) 190.453 Adjustments to reconcile net loss to net cash from operating activities: Depreciation and amortization 232.630 61.884 Provision for bad debts 38.908 (Increase) decrease in assets: Accounts receivable (1.444.065) 371.659 Inventory (213.877) 52.188 Prepaid expenses (38.455) 13.289 Increase (decrease) in Liabilities: Non-trade creditors, accounts payable and accrued expenses 2.340.091 1.118.161 Due to related parties (1.296.316) 43.712 ----------- ------ (827.852) 1.890.254 Cash flow from investing activities: Capital expenditures for purchase of fixed assets (714.871) (245.891) Decrease in short-term investments 135.339 ------- (579.532) Cash flow from financing activities: Net proceeds from credit institution debt 9.048 Cash Flow from equity 1.258.761 Net change in cash (139.575) 1.644.363 Cash Banks: Beginning of period 2.716.808 1.072.445 --------- --------- End of period 2.577.233 2.716.808 ========= ========= 7 NOTES TO THE COMBINED FINANCIAL STATEMENTS Of the Companies Heinrich Kohler Auktionshaus GmbH & Co. KG, Heinrich Kohler Berliner Briefmarken-Auktionen GmbH, Corinphila Auktionen AG, Auctentia Deutschland GmbH, Heinrich Kohler Briefmarkenhandel GmbH & Co KG, Heinrich Kohler Verwaltungs GmbH and Auctentia Subastas S.L. As at June 30, 2003 8 NOTES FOR THE TWELVE MONTH PERIOD ENDED JUNE 30, 2003 ----------------------------------------------------- 1. COMPANIES INCLUDED IN THE COMBINATION ------------------------------------- The Companies included in the Combination of the Financial Statements are the following, including social addresses: Heinrich Kohler Auktionshaus Gmbh & Co KG was incorporated on December 22, 2000, for an indefinite period of time and was domiciled in Wihelmstrasse 48, 65183 Wiesbaden, Germany. The corporate purpose is the holding of stamp auctions. Heinrich Kohler Berliner Briefmarken Auktionen GmbH was incorporated on May 16, 1991 for an indefinite period of time and was domiciled in Charlottenburg local court Department B No.40021 Berlin, Germany. The corporate purpose is trading and commercial auctioning of stamps. Corinphila Auktionen AG was incorporated on July 30, 1991 for an indefinite period of time and was domiciled in Zollikerstrasse 226, CH-8008 Zurich. The corporate purpose is purchasing and selling of stamp collections; especially on auctions. It was included in Auctentia Group during July 2002. Auctentia Subastas S.L. was incorporated on September 5, 2002 for an indefinite period of time and was addressed in Madrid, at Joaquin Maria Lopez Street, n(0)8 bis. Its corporate purpose is the holding of any type of goods and auction services. It has started its operations during this period taking on the activity of the Auctions Division of Auctentia S.L Holding, which was included in the combination perimeter in the previous periods. There are also Auctentia Deutschland GmbH, Heinrich Kohler Briefmarkenhandel GmbH & Co KG, Heinrich Kohler Verwaltungs GmbH which are little significant for the combination. We have used the Global Integration Method of Consolidation (adding of financial statements) for the companies, unless we have not made any elimination of equity because none of them has any directly or indirectly participation in the others. This methodology is consistent with Accounting Research Bulletin No. 51 because these entities are under common control. 9 2. BASES OF PRESENTATION OF THE COMBINED FINANCIAL STATEMENTS ---------------------------------------------------------- a) Accurate Picture: The financial statements have been obtained from the Company's accounts ledgers and include some adjustments and reclassifications necessary for temporal and value equalization with the Leading Company (considered Auctentia S.L., which is a Spanish company). b) Transactions included in the Combination Perimeter: During this fiscal year there has not been any significant transaction between the companies. c) Equalization for the individual accounts of the companies included in the Combination Perimeter: - Temporal Equalization- The Companies Heinrich Kohler Auktionshaus Gmbh & Co KG, Heinrich Kohler Berliner Briefmarken Auktionen GmbH, Heinrich Kohler Briefmarkenhandel GmbH & Co KG, Auctentia Deutschland GmbH and Heinrich Kohler Verwaltungs GmbH, Corinphila Auktionen AG and Auctentia Subastas SL close their fiscal year on June 30, and they have provided us with Financial Statements at June 30, in order to prepare the Combination Financial Statements, so we have not made any task to equalize this matter. - Value Equalization- The Assets, Liabilities, Incomes and Expenses of the companies have been valued according with standard principles or in other case, we have not made any adjustments because it is not significant in the combination. These principles are the ones used by the Leading Company (a Spanish company) to prepare its own Financial Statements. d) Comparability of the information: During the financial year, several Companies have been incorporated in the combination of the financial statements, so it is necessary to remark that the items are not strictly comparable. e) Transactions in Foreign Currency: All the amounts are in Euro. 10 f) Intangible Fixed Assets: The items included in the Intangible Assets are registered at their net price cost, including the depreciating in accordance with their useful life. For the companies Heinrich Kohler Auktionshaus Gmbh & Co KG, Heinrich Kohler Berliner Briefmarken Auktionen GmbH, Corinphila Auktionen AG, Auctentia Subastas S.L., Auctentia Deutschland GmbH, Heinrich Kohler Briefmarkenhandel GmbH & Co KG, Heinrich Kohler Verwaltungs GmbH, the amortization has been calculated according with the lineal manner corresponding with its useful life. Computer applications 3, 5 and 10 years Transfer rights 10 and 20 years Industrial property 5 years g) Tangible Fixed Assets: The items included in the Tangible Assets are registered at their acquisition cost. For the Companies Heinrich Kohler Auktionshaus Gmbh & Co KG, Heinrich Kohler Berliner Briefmarken Auktionen Gmbh, Corinphila Auktinen AG, Auctentia Subastas S.L., Auctentia Deutschland GmbH, Heinrich Kohler Briefmarkenhandel GmbH & Co KG and Heinrich Kohler Verwaltungs GmbH, the amortization has been calculated according with the lineal manner corresponding with its useful life, estimated between 3 and 10 years depending on the characteristics of the good. h) Financial Investments: The Companies registered its long-term and short-term financial investments at their price cost, which approximates its market value. The Companies registered its investments in other companies at acquisition cost or theoretical book value (the minor). i) Non commercial Credits: They are registered for the amount given. The transfer to the profit and loss account provision is made depending on the risk of recovering the credits. Credits have been accounted as long-term or short-term depending on if their expiration date is over than twelve months, or less, respectively. 11 j) Stocks: The stocks appear valued at their cost price that it is not over their market value and such amounts are stated at the lower of cost or market. The company has a tax provision that reduces the stocks value, of 29.773 Euro. k) Other provisions and Accrued expenses: The provisions and accrued expenses were made up in the amount of the probable obligation. l) Debts: Debts appear in the Balance Sheet for their value of reimbursement. The difference between such value and the amount received appears separately at the balance assets. In case of considering the debts as doubtful debts the appropriate provisions for bad debts have to be done. All debts, both short and long-term debts, are registered by the total nominal amount to be refund (reimbursement value). The classification of the debts between short and long-term is done according to whether their maturity is less or greater than one year respectively. m) Company Profit Tax: The Company Tax for the period is calculated according to the Profit/Loss before taxation for each of the companies individually, increased or decreased in every case, with the permanent or temporally differences to the fiscal profit and loss. n) Income and Expenditure: The Income and Expenditure are registered according to the goods and services real current represented by them, independently of the moment when the monetary or financial current derived from them is produced. However, following the caution principle, the Companies only register the profit taking at the date of closure, while the risks and projected losses are registered as soon as they are known. 12 o) Use of Estimates The preparation of combined financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. p) Concentration of Credit Risk The Company frequently extends trade credit in connection with its auction sales, which are held throughout Europe. The Company evaluates each customer's creditworthiness on a case-by-case basis; generally the customers who receive trade credit are professional dealers who have regularly purchased property at the Company's auctions or whose reputation within the industry is known and respected by the Company. In situations where trade credit is extended, the purchaser generally takes possession of the property before payment is made by the purchaser to the Company, and the Company is liable to the consignor for the net sales proceeds (auction hammer price less commission to the Company). The Company pays the consignor generally not later than the 45th day after the sale, and when trade credit is extended, the Company assumes all risk of loss associated with the trade credit, and the responsibility of collection of the trade credit amount from the purchaser. Losses to date under these situations have not been material. q) Cash Equivalents and Concentration of Cash The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. The Company maintains its cash in bank deposit accounts, which, at times may exceed insured limits. The Company has not experienced any losses in such accounts. r) Financial Instruments The carrying amounts of financial instruments accounts receivable and accounts payable approximated fair value because of the relative short maturity of these instruments. The carrying value of loans payable approximated fair value at based upon quoted market prices for the same or similar instruments. 13 s) Advertising Costs Advertising and catalogue costs are included in marketing costs and are expensed as incurred, which occurs in the same quarter that the related auction takes place. Otherwise, if auction occurs in the following quarter, assets of the Company include some advertising costs, so that all auction costs are recorded in the same period than corresponding auction sales. t) Segment Information The Company operates principally in one segment consisting of auctions of various collectibles. All of the Company's sales and identifiable assets are located in Europe. u) Revenue Recognition: Revenue is recognized when the collectibles are sold at auction and is represented by an auction 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. Such amounts of revenue are recorded on a net basis as commission revenue. The Company also engages in private treaty sales represent sales of consigned property and sales of owned inventory. Private treaty sales of consigned property occur when an owner of property arranges with the Company to sell such consigned 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. Such amounts of revenue are recorded on a net basis as commission revenue and are recognized when sold. v) Business Combinations Acquisition of Auctions Business During July 2002, Auctentia S.L. Holding purchased 65% of the outstanding shares of Corinphila Auktionen AG ("Corinphila") for 1,950,000 Swiss Francs (1.456.087 Euro, including legal advisor expenses). The purchase price was allocated as follows: 629.546 Euro to net tangible assets and 826.541 Euro to goodwill under US GAAP in Auctentia S.L., a holding company which is not included in the Share Purchase Agreement with GMAI and, therefore, this goodwill does not appear in the combination of Financial Statements of the companies to be transferred to GMAI. 14 3. INTANGIBLE FIXED ASSETS ----------------------- 3.1. The movement of the account has been the following: -------------------------------------------------- a) Gross Values as at 30 June, 2003 -------------------------------- Euro H.K. H.K. Auctentia Corinphila Final Auktionsha Berliner Subastas S.L. Auktionen Balance Brief. AG -------------------------------------------------------------------------- Industrial --- --- 585 258.900 259.485 Property Transfer 4.999 2.812 --- --- 7.811 Rights Computer 5.255 43.540 344.113 --- 392.908 Applications -------------------------------------------------------------------------- TOTAL (A) 10.254 46.352 344.698 258.900 660.204 -------------------------------------------------------------------------- b) Depreciate funds as at 30 June, 2003 and depreciation charges of the period Euro H.K. H.K. Auctentia Corinphila Final Auktionshaus Berliner Subastas Auktionen Balance Brief. S.L. AG -------------------------------------------------------------------------- Industrial --- --- 37 51.910 51.947 Property Transfer Rights 1.419 2.810 --- --- 4.229 Computer 3.851 41.333 34.118 --- 79.302 Applications TOTAL (B) 5.270 44.143 34.155 51.910 135.478 -------------------------------------------------------------------------- NET VALUE 4.984 2.209 310.543 206.990 524.726 (A - B) -------------------------------------------------------------------------- 15 4. TANGIBLE FIXED ASSETS --------------------- 4.1. The movement of this account is as follows: ------------------------------------------- a) Gross Values as at 30 June, 2003 -------------------------------- Euro H.K. H.K. Auctentia Corinphil Auctentia Final Auktions. Berliner Subastas Auktionen Deutschlan Balance Brief. S.L. AG GmbH -------------------------------------------------------------------------- -Technical installations --- --- --- 421.515 --- 421.515 and Machinery -Tools and furniture --- --- 633 292.825 6.980 300.438 -Other fixed asset 306.093 94.409 17.622 120.421 4.115 542.660 -------------------------------------------------------------------------- TOTAL (A) 306.093 94.409 18.255 834.761 11.095 1.264.613 -------------------------------------------------------------------------- b) Depreciate funds as at 30 June 2003 and depreciation charges of the period Euro H.K. H.K. Auctentia Corinphila Auctentia Final Auktions. Berliner Subastas Auktionen Deutschland Balance Brief. S.L. AG GmbH -------------------------------------------------------------------------- -Technical installations --- --- --- 295.381 --- 295.381 and Machinery -Tools and --- --- --- 218.512 2.050 220.562 furniture -Other fixed 279.256 85.923 1.876 88.279 2.190 457.524 asset -------------------------------------------------------------------------- TOTAL ( B ) 279.256 85.923 1.876 602.172 4.240 973.467 -------------------------------------------------------------------------- NET VALUE (A- 26.837 8.486 16.379 232.589 6.855 291.146 B) -------------------------------------------------------------------------- The group fixed assets goods are situated in Spain, Switzerland and Germany. All tangible fixed assets goods are subject to normal trading activities. 16 5. FINANCIAL INVESTMENTS --------------------- 5.1. Long-term Financial Investments as at 30 June, 2003 --------------------------------------------------- At this date, the combined companies do not hold any long-term financial inversion. 5.2. Short-term Financial Investments as at 30 June, 2003 ---------------------------------------------------- Euro H.K. H.K.Berlin Auctentia Corinphila Auktionshaus Brief. Subastas Auktionen Final S.L. AG Balance --------------------------------------------------------------------------- Securities portfolio --- --- --- --- --- Guaranties deposits --- 15.993 --- --- 15.993 --------------------------------------------------------------------------- TOTAL --- 15.993 --- --- 15.993 --------------------------------------------------------------------------- 6. TRANSACTIONS MADE WITH GROUP COMPANIES AND ASSOCIATE COMPANIES -------------------------------------------------------------- The debts that the Companies maintain with group companies and associate companies for commercial transactions, are detailed as follows: Balance at 30/06/03 Debit Credit ------------------------------------------------------------------------- GROUP COMPANIES LONG-TERM --- --- GROUP COMPANIES SHORT-TERM 297.940 189.067 ------------------------------------------------------------------------- 297.940 189.067 TOTAL GROUP COMPANIES ------------------------------------------------------------------------- 17 The most significant transactions made for the Companies with other group companies and associate companies are detailed as follows, in Euro: EXPENSES AFINSA BT Mundisinter Doocollect Philagentur Domfil -------------------------------------------------------------------------- Supplies 27.837 1.350 --- --- --- Other expenses 14.534 2.529 3.552 12.352 506 ------------------------------------------------------------------------- TOTAL 42.371 3.879 3.552 12.352 506 ------------------------------------------------------------------------- INCOMES AFINSA BT Mundisinter Doocollect Philagentur Domfil -------------------------------------------------------------------------- Sales 1.857.179 --- 15.210 --- --- Other incomes 19.965 --- --- --- --- -------------------------------------------------------------------------- TOTAL 1.877.144 --- 15.210 --- --- -------------------------------------------------------------------------- 7. INVENTORIES ----------- The inventories breakdown as at June 30, 2003 is as follows: Final Balance --------------------------------------------------- Commercial Inventories 271.074 Advance to Suppliers 24.764 Provisions (29.773) --------------------------------------------------- TOTAL 266.065 --------------------------------------------------- 18 8. EQUITY ------ 8.1.The equity detail as at June 30, 2003 is detailed as follows in Euro: -------------------------------------------------------------------------
Auctent H.K. H.K. Corinphila Auctentia H.K. H.K. Final Subasta Berliner Auktion Auktionen Deutsch. Brief-marken. Verwal-tungs Balance Brief. -haus --------------------------------------------------------------------------------------------------------------------------- Capital 455.902 153.388 50.000 647.249 25.000 25.000 25.000 1.381.539 Results from previous periods (17.961) 113.197 535.482 522.370 32.433 (1.361) 4.327 1.188.487 Combination result (37.279) (68.901) 109.897 (472.829) 12.185 48.293 774 (407.860) --------------------------------------------------------------------------------------------------------------------------- TOTAL 400.662 197.684 695.379 696.790 69.618 71.932 30.101 2.162.166 COMBINED EQUITY ---------------------------------------------------------------------------------------------------------------------------
8.2. Capital: ------- The stock capital of the company Heinrich Kohler Berliner Briefmarken Auktionen GmbH at June 30, 2003 is divided into 4 registered shares, nominative, with a face value of 91.800 Euro, another share with a face value of 10.458 Euro and 2 more with a face value of 25.564 Euro each, fully subscribed and paid in. The stake held corresponds to Auctentia S.L Holding (66,66%), Christian Burmeister (16,67%) and Hans-Joachim Bull (16,67%). The stock capital of the company Heinrich Kohler Auktionshaus GmbH & Co KG at June 30, 2003 consists into 1 registered share, nominative, with a face value of 50.000 Euro, fully subscribed and paid in. The shareholder is Auctentia S.L. Holding that has got the 100% of the participation. The stock capital of the company Corinphila Auktionen AG at June 30, 2003 is divided into 10.000 registered shares, nominative, with a face value of 100 CHF each, numbered consecutively from 1 to 10.000, both inclusive, fully subscribed and paid in. The Auctentia S.L. Holding has the 65% of the shares. The stock capital of the company Auctentia Subastas S.L. at June 30, 2003 is divided into 455.902 shares of one Euro of nominal value. All the shares have been subscribed and fully disbursed by Auctentia S.L. Holding 19 The Stock Capital of the company Auctentia Deutschland GmbH at June 30, 2003 consists into 1 registered share, nominative, with a face value of 25.000 Euro, fully subscribed and paid in. The shareholder is Auctentia S.L. Holding that has got the 100% of the participation. The Stock Capital of the company Heinrich Kohler Briefmarkenhandel GmbH & Co KG at June 30, 2003 is divided into 1 registered share, nominative with a face value of 25.000 Euro, fully subscribed and paid in. The shareholder is Auctentia S.L. Holding that has got the 100% of the participation. The Stock Capital of the company Heinrich Kohler Verwaltungs GmbH at June 30, 2003 is divided into 1 registered share, nominative, with a face value of 25.000 Euro, fully subscribed and paid in. The shareholder is Auctentia S.L. Holding that has got the 100% of the participation. None of the Companies have shares stand in a market. 9. EXTERNAL PARTNERS INTEREST -------------------------- It does not apply, because it is a Combination of Financial Statements without any participation between the companies. If we had included Auctentia S.L. Holding in the Combined Financial Statements, the minority interest could be detailed as follows:
Auctent. H.K. H.K. Corinphila Auctentia H.K. H.K. Final Subastas Berliner Auktions- Auktionen Deutsch. Briefmar- Verwal- Balance S.L. Brief. haus AG GmbH kenhandel tungs -------------------------------------------------------------------------------------------------------- Equity 400.662 197.684 695.379 696.790 69.618 71.932 30.101 2.162.166 Participation of Auctentia S.L. 100% 66,66% 100% 65% 100% 100% 100% Participation of external partners --- 33,34% --- 35% --- --- --- MINORITY INTEREST --- 65.908 --- 243.877 --- --- --- 309.785 --------------------------------------------------------------------------------------------------------
20 10. DEBTS ----- 10.1 The breakdown of this balance is shown below: --------------------------------------------- Euro DEBTS WITH CREDIT INSTITUTIONS AND OTHERS Short-term Long-term ------------------------------------------------------------ Loans and other debts 248 --- Debts for interests 8.800 --- ------------------------------------------------------------ TOTAL 9.048 --- ------------------------------------------------------------ Euro OTHER DEBTS Short-term Long-term ------------------------------------------------------------ Public Entities 222.194 --- Accrued wages and salaries 229.492 --- Other debts 2.866.852 --- Other provisions 114.385 --- TOTAL 3.432.923 --- Debts for purchases or provision of service 2.186.948 --- Accrued expenses 17.318 --- TOTAL 2.204.266 --- ------------------------------------------------------------ TOTAL 5.637.189 --- ------------------------------------------------------------ 11. GUARANTEES COMMITTED WITH THIRD PARTIES AND OTHER CONTINGENT LIABILITIES ------------------------------------------------------------------------ Not applicable. 21 12. OTHER INFORMATION ----------------- The breakdown of the sales for geographic areas is shown below: Euro Final balance --------------------------------------- Germany 4.637.317 Spain 590.415 Switzerland 945.230 --------------------------------------- TOTAL 6.172.962 --------------------------------------- Detail of revenues by source is shown below: Euro Final balance --------------------------------------- Auctions 4.181.986 Sales of inventory 1.990.976 ---------------------------------------- TOTAL 6.172.962 --------------------------------------- Hammer prices negotiated in auctions during the period amount to 14.480.023 Euro. 13. EVENTS AFTER THE CLOSURE ------------------------ See explanations in the Management Report. 22 MANAGEMENT REPORT OF THE COMBINED FINANCIAL STATEMENTS AS AT JUNE 30TH, 2003 Main companies and businesses on collectibles owned by Auctentia S.L. Holding are expected to be integrated in Greg Manning Auctions Inc. during 2003: o Auctentia Subastas S.L. is a society created at December 5, 2002 in order to separate the Auctions Division from Auctentia S.L. Holding, dedicated to philatelic and numismatic auctions. o Heinrich Kohler Auktionshaus GmbH & Co.KG (main philatelic auctioneer of Germany, with site in Wiesbaden, wholly owned by Auctentia S.L. Holding). o Heinrich Kohler Berliner Briefmarken-Auktionen GmbH (Kohler auctions in Berlin, Germany, 66% owned by Auctentia S.L. Holding). o Auctentia Deutschland GmbH, Heinrich Kohler Briefmarkenhandel GmbH & Co. KG and Heinrich Kohler Verwaltungs GmbH . o Corinphila Auktionen AG of Zurich, Switzerland (probably the most prestigious philatelic auctioneer of the world, with site in Zurich, Switzerland, 65% acquired by Auctentia S.L. Holding in September 30, 2002). GMAI-Auctentia Central de Compras, S.L., created on September 5, 2002, is also expected to be integrated in Greg Manning Auctions Inc., but since it has not started its operations, it is not included in the combination. Its main asset is a wide and valuable stock of stamps, coins and art, and its corporate purpose will be commercialisation, distribution, mediation, promotion, production and direct and indirect sales, of any kind of goods and services, and in particular, those related to the collectionable items. Excepting Corinphila Auktionen AG, whose fiscal and accounting year was already similar to Greg Manning Auctions Inc., recently all the outstanding companies have adapted their fiscal and accounting year, so that current year begins on January 1st, 2003 and finishes on June 30th, 2003, and from next year onwards will begin on July 1st to June 30th. However, quarterly financial statements as of June 30th, 2003, have been prepared by Management in accordance with accounting principles generally accepted in their respective countries, including the necessary adjustments to accounting principles generally accepted in the United States, and audited by independent public accountants, who have expressed their opinion with respect to the fairness of these statements. Madrid, 24th July 2003 23 SELECTED UNAUDITED PRO FORMA FINANCIAL DATA OF GMAI AND THE AUCTENTIA SUBSIDIARIES The unaudited pro forma condensed combined financial statements assume a business combination between GMAI and the following wholly or majority owned subsidiaries of Auctentia, S.L., a wholly owned subsidiary of Afinsa which were sold to GMAI pursuant to the share purchase agreement: H. Kohler Berliner Briefmarken Auktionen GmbH, Kohler Auktionshaus GmbH, H Kohler Verwaltungs Gmbh, H. Kohler Briefmarkenhandel GmbH, Corinphila Auktionen AG, Auctentia Subastas S.L. and Auctentia Deutschland GmbH (the "Auctentia subsidiaries"). The transaction was approved by the Company's stockholders on September 8, 2003. The unaudited pro forma condensed combined statements of operations combine the historical combined statements of operations of GMAI and the Auctentia subsidiaries, giving effect to the share purchase transaction as if it had occurred on July 1, 2002 and reflects the pro forma adjustments to give effect to the share purchase transaction. The unaudited pro forma condensed combined balance sheet combines the historical consolidated balance sheet of GMAI and the historical consolidated balance sheet of the Auctentia subsidiaries, giving effect to the share purchase transaction as if it had been consummated on July 1, 2002 and reflects the pro forma adjustments to give effect to the share purchase transaction and the other transactions. You should read this information in conjunction with: o the accompanying notes to the unaudited pro forma condensed combined financial statements; o the separate historical audited financial statements of GMAI as of and for the year ended June 30, 2003 included in GMAI's Annual Report on Form 10-K for the year ended June 30, 2003, which is incorporated herein by reference in its entirety; and o the separate historical audited financial statements of the Auctentia subsidiaries as of and for the year ended June 30, 2003, included in this report. We present the unaudited pro forma condensed combined financial information for informational purposes only. The pro forma information is not necessarily indicative of what GMAI's financial position or results of operations actually would have been had it completed the acquisition at the dates indicated. In addition, the unaudited pro forma condensed combined financial information does not purport to project the future financial position or operating results of the combined company. 24
Unaudited Pro Forma Condensed Combined Statement of Operations (amounts in thousands except per share data) For the year ended June 30, 2003 Historical Greg Manning Auctentia Pro Forma Pro Forma Auctions, Inc. Subsidiaries Adjustments Combined ------------- ------------ ----------- -------- Operating Revenue Sales of Merchandise $ 89,268 $ 4,469 $ 93,737 Revenues-related party 7,654 1,976 9,630 Commissions earned 4,269 --- 4,269 --------- --------- --------- --------- Total Revenue 101,191 6,445 --- 107,636 Cost of merchandise sold 86,672 1,848 88,520 Cost of merchandise sold-related parties --- --- --- --------- --------- --------- --------- 86,672 1,848 --- 88,520 Gross Profit 14,519 4,597 --- 19,116 Operating expense General and administrative 5,175 1,851 7,026 Depreciation and amortization 557 243 800 Intangible impairment --- --- --- Salaries and Wages 5,457 1,934 7,391 Marketing 1,561 940 2,501 Other expenses --- (4) (4) --------- --------- --------- --------- Total operating expenses 12,750 4,964 --- 17,714 Operating income (loss) (1,769) 367 --- (1,402) Other Income (expense) Interest Income 172 74 246 Interest expense (874) (39) (913) Loss on marketable securities (87) --- (87) Gain on sale of investee - related party 2,035 --- 2,035 --------- --------- --------- --------- Income (loss) before income taxes 3,015 (332) --- 2,683 Provision for (Benefit from) Income taxes 192 --- --- 192 --------- --------- --------- --------- Net Income (loss) $ 2,823 $ (332) $ --- $ 2,491 ========= ========= ========= ========= Basic and Diluted Earnings (loss) per share: Weighted average shares outstanding - Basic 12,739 (6) 10,174 22,913 Earnings (loss) per share - Basic $ 0.22 $ 0.11 Weighted average shares outstanding - Diluted 12,816 (6) 10,174 22,990 Earnings (loss) per share - Diluted $ 0.22 $ 0.11
See Notes to the Accompanying Unaudited Pro Forma Condensed Combined Financial Statements 25
Unaudited Pro Forma Condensed Combined Balance Sheet (amounts in thousands except per share data) June 30, 2003 Historical Greg Manning Auctentia Pro Forma Pro Forma Auctions, Inc. Subsidiaries Adjustments Combined ------------- ------------ ----------- -------- Assets Current Assets Cash and Cash Equivalents $ 2,250 $ 2,947 $ 5,197 Accounts Receivable, net Auctions and Trade Receivables 7,948 4,531 12,479 Related parties 4,588 343 4,931 Advances to Consignors 781 --- 781 Inventory 15,871 304 (4b) 10,118 26,293 Investments --- 18 18 Prepaid Expenses 1,177 70 1,247 -------- -------- --------- -------- Total Current Assets 32,615 8,213 10,118 50,946 Property and Equipment, Net 744 933 1,677 Goodwill and other purchased intangibles, Net 1,516 --- (4a) 5,387 6,903 Other Purchased Intangibles, net 943 --- 943 Marketable Securities 49 --- 49 Investment in Investees 500 --- 500 Other Non-Current Assets Loans Receivable - Related Party 600 --- 600 Inventory 850 --- 850 Other 90 --- 90 -------- -------- ---------- -------- Total Assets $ 37,907 $ 9,146 $ 15,505 $ 62,558 ======== ======== ========== ======== Liabilities and Stockholders' Equity Current Liabilities Demand Notes Payable $ 2,500 $ --- $ $ 2,500 Notes Payable and Capital Leases 4,522 10 4,532 Payable to Third Party Consignors 2,468 --- 2,468 Accounts Payable 9,741 2,536 12,277 Accrued Expenses 2,612 4,128 6,740 Due to related parties 827 --- 827 -------- -------- -------- -------- Total Current Liabilities 22,670 6,674 --- 29,344 Notes Payable - Long Term 43 --- 43 Due to related parties --- --- --- -------- -------- -------- -------- Total Liabilities 22,713 6,674 --- 29,387 Stockholders' Equity 15,194 2,472 (4c) (1,717) 15,949 (4a) 7,104 7,104 (4b) 10,118 10,118 Total Liabilities and Stockholders' Equity $ 37,907 $ 9,146 $ 15,505 $ 62,558 ======== ======== ========= ========
See Notes to the Accompanying Unaudited Pro Forma Condensed Combined Financial Statements 26 Notes to Unaudited Pro Forma Condensed Combined Financial Statements (Dollar amounts in thousands, except for per share or as noted) 1. Basis of Presentation The acquisition will be accounted for as a purchase by GMAI under accounting principles generally accepted in the United States of America. We prepared the unaudited pro forma condensed combined financial information using the purchase method of accounting with GMAI treated as the acquirer. Accordingly, GMAI's cost to acquire the Auctentia subsidiaries will be allocated to the assets acquired and liabilities assumed based upon their estimated fair values as of the date of acquisition. The final allocation is dependent upon completion of certain valuations. For purpose of this pro forma analysis the purchase price has been allocated based upon preliminary estimates. Accordingly, the purchase price allocation pro forma adjustments are preliminary and have been made solely for the purpose of providing unaudited pro forma condensed combined financial information. 2. Purchase Price The following is a preliminary estimate of the purchase price for the Auctentia subsidiaries: Number of shares issued in exchange for equity interest of seven of Auctentia's operating subsidiaries 3,729,226 Share price (1) $ 1.61 ----------- Purchase price $ 6,004 Estimated transaction costs 1,100 ----------- Estimated purchase price $ 7,104 =========== Estimated Purchase Price: Fair value of net assets acquired $ 1,717 Goodwill 5,387 ----------- Estimated Purchase Price $ 7,104 =========== (1) The price per share of $1.61 is based on the average market price per share from January 21, 2003 through January 27, 2003, two days before and after January 23, 2003, the date the transaction agreements were entered into. 3. Accounting Policies and Financial Statement Classifications Upon completion of the acquisition, GMAI and the Auctentia subsidiaries will review their accounting policies and financial statement classifications. As a result of that review, it may become necessary to make certain reclassifications to the combined company's financial statements to conform to those accounting policies and classifications that are determined to be more appropriate. 27 Notes to Unaudited Pro Forma Condensed Combined Financial Statements - (continued) (Dollar amounts in thousands, except for per share or as noted) 4. Pro Forma Adjustments Adjustments included in the column under the heading "Pro Forma Adjustments" primarily relate to the following: (a) Record excess purchase price paid over the fair market value of the assets acquired (see Note 2 for calculation of goodwill). (b) Concurrent with the share purchase agreement the Company entered into an inventory purchase agreement in which the Company agreed to purchase inventory valued, by appraisals, at $11,400 through the acquisition of the outstanding interests of GMAI Auctentia Central de Compras, S.L. ("CdC"). During December 2002, CdC was formed for the sole purpose of being a holding company, which was used to facilitate this transaction. CdC's sole asset is inventory. The operations of CdC will commence upon the closing of this transaction following approval of this transaction by the shareholders. There are no historical business operations of CdC. The fair value of the philatelic inventory was based upon a third party appraisal and the fair value of the art inventory was based on management's appraisal. On the date the transaction agreements were entered into, the closing trading price of the company's common stock on the NASDAQ National Market was $1.57; as such, the inventory, for pro forma purposes, is $10,118 (based upon 6,444,318 shares at $1.57 per share). (c) To eliminate the historical equity values of Auctentia subsidiaries as of September 8, 2003 (the effective date of the acquisition) upon consolidation. 5. Subscription Agreement The Company also entered into a subscription agreement for the sale of 2,826,456 shares of stock for $5,000 concurrently with the share purchase agreement and inventory purchase agreement. This agreement is not reflected in the pro forma financial statements. 6. Basic and Diluted Earnings (Loss) per share The pro forma combined basic and diluted earnings (loss) per share assumes the issuance of 10,174,000 shares related to the share purchase agreement and the inventory purchase agreement as if the transactions had occurred on July 1, 2002. 28 SIGNATURE 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 hereunto duly authorized. Dated: November 5, 2003 GREG MANNING AUCTIONS, INC. By: /s/ Larry Crawford ----------------------- Larry Crawford Chief Financial Officer