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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): MARCH 11, 2000
COLLECTORS UNIVERSE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 33-0846191
(STATE OR OTHER JURISDICTION COMMISSION FILE NUMBER: 0-27887 (I.R.S. EMPLOYER
OF INCORPORATION) IDENTIFICATION NUMBER)
1936 DEERE STREET, SANTA ANA, CALIFORNIA 92705
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (949) 567-1234
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Item 2. Acquisition or Disposition of Assets
This filing is an amendment to the prior 8-K filing of March 11, 2000 regarding
the purchase of substantially all of the operating assets of Auctions by Bowers
and Merena, Inc., Bowers and Merena Galleries, Inc., and Bowers and Merena
Research, Inc. collectively ("Bowers and Merena"), in order to present the
required financial statements. On March 11, 2000, we consummated the purchase of
substantially all of the operating assets of Bowers and Merena. The effect of
these simultaneous transactions was the acquisition of the businesses conducted
by Bowers and Merena. Bowers and Merena was a privately held company based in
Wolfeboro, New Hampshire. Total consideration was $8.0 million in cash and
1,000,000 shares of Collectors Universe, Inc. common stock valued at $7,625,000.
Funds for this acquisition were obtained from the Company's cash balances. The
acquisition will be accounted for under the purchase method of accounting.
Bowers and Merena was founded in l986 and conducts auctions of rare coins and
sells rare coins at retail and through mail order. Bowers and Merena will
operate as a division of the Company. Prior to this transaction, the two owners
of Bowers and Merena, Q. David Bowers and Raymond N. Merena, owned an aggregate
of approximately 292,000 shares of common stock of the Company, and Mr. Bowers
held stock options to purchase 531,598 shares of common stock. Subsequent to the
transaction, Mr. Bowers was granted additional stock options for the purchase of
500,000 shares of Collectors Universe common stock and was elected to the Board
of Directors of the Company.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired for the Years Ended
October 31, 1999 and 1998
(1) Independent Auditors' Report
Combined Balance Sheets as of October 31, 1999 and 1998
Combined Statements of Operations for the Years Ended October
31, 1999 and 1998
Combined Statements of Changes in Shareholder Equity for the
Years Ended October 31, 1999 and 1998
Combined Statements of Comprehensive Income for the Years Ended
October 31, 1999 and 1998
Combined Statements of Cash Flows for the Years Ended October
31, 1999 and 1998
Notes to Combined Financial Statements for the Years Ended
October 31, 1999 and 1998
(2) Unaudited Interim Financial Statements
Condensed Combined Balance Sheets as of January 31, 2000 and
October 31, 1999
Condensed Combined Statements of Income for the Three Month
Periods Ended January 31, 2000 and January 31, 1999
Condensed Combined Statements of Cash Flows for the Three Month
Periods Ended January 31, 2000, and January 31, 1999
Notes to Unaudited Interim financial statements
(b) Pro Forma Financial Information
Unaudited Pro Forma Combined Statements of Operations for the
Nine Months Ended April 1, 2000
Unaudited Pro Forma Combined Statements of Operations for the
Year Ended June 30, 1999
Notes to the Unaudited Pro Forma Combined Financial Statements
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FINANCIAL STATEMENTS AND
REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
BOWERS AND MERENA GALLERIES, INC.
AUCTIONS BY BOWERS AND MERENA, INC.
OCTOBER 31, 1999 AND 1998
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CONTENTS
Page
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REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS....................... 5
FINANCIAL STATEMENTS..................................................... 6
COMBINED BALANCE SHEETS.................................................. 6
COMBINED STATEMENTS OF OPERATIONS........................................ 8
COMBINED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY................... 9
COMBINED STATEMENTS OF COMPREHENSIVE INCOME............................. 10
COMBINED STATEMENTS OF CASH FLOWS....................................... 11
NOTES TO COMBINED FINANCIAL STATEMENTS.................................. 12
UNAUDITED INTERIM FINANCIAL STATEMENTS.................................. 17
NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS......................... 20
UNAUDITED PRO FORMA FINANCIAL INFORMATION............................... 21
SIGNATURES.............................................................. 25
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To the Shareholders of
Bowers and Merena Galleries, Inc. and
Auctions By Bowers and Merena, Inc.
Wolfeboro, New Hampshire
INDEPENDENT AUDITOR'S REPORT
We have audited the accompanying combined balance sheets of Bowers and Merena
Galleries, Inc. and Auctions By Bowers and Merena, Inc. (S corporations) as of
October 31, 1999 and 1998, and the related combined statements of operations,
changes in shareholders' equity, comprehensive income and cash flows for the
years then ended. These combined financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
combined financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the combined 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 audits provide a reasonable basis
for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Bowers and Merena
Galleries, Inc. and Auctions By Bowers and Merena, Inc. as of October 31, 1999
and 1998, and the results of their operations and their cash flows for the years
then ended in conformity with generally accepted accounting principles.
Leone, McDowell & Roberts
Professional Association
March 31, 2000
Wolfeboro, New Hampshire
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BOWERS AND MERENA GALLERIES, INC.
AND
AUCTIONS BY BOWERS AND MERENA, INC.
(S CORPORATIONS)
COMBINED BALANCE SHEETS
OCTOBER 31, 1999 AND 1998
ASSETS
1999 1998
------------ -----------
CURRENT ASSETS
Cash and equivalents $ 7,453,088 $ 894,840
Marketable securities, at fair value 120,000
Accounts receivable and auction advances,
net of allowance for doubtful accounts
of $23,770 at October 31, 1999 and
$18,226 at October 31, 1998 12,236,931 1,251,784
Inventories 2,986,790 2,311,253
Prepaid expenses and other current assets 112,399 129,527
Deferred state income tax 89,544
------------ -----------
Total current assets 22,998,752 4,587,404
PROPERTY
Office equipment 323,794 241,899
Computer software 81,545 32,516
Vehicles 82,463 82,463
Leasehold improvements 140,104 140,104
Furniture and fixtures 69,498 69,911
------------ -----------
Total 697,404 566,893
Less accumulated depreciation and amortization (384,554) (296,832)
------------ -----------
Property - net 312,850 270,061
OTHER ASSETS
Federal income tax deposit 62,667 164,459
Other assets, net of accumulated amortization
of $1,349 at October 31, 1999 and $1,247
at October 31, 1998 1,501 1,603
Total other assets 64,168 166,062
------------ -----------
Total $ 23,375,770 $ 5,023,527
============ ===========
See Notes to Financial Statements
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LIABILITIES AND SHAREHOLDERS' EQUITY
1999 1998
------------ -----------
CURRENT LIABILITIES
Accounts payable $ 52,833 $ 89,940
Auction consignments payable 15,724,823 99,152
Auction deposits 90
Accrued payroll and related payroll taxes 55,736 20,189
Accrued profit sharing plan contribution 69,470 62,600
Dividends payable 200 200
Other current liabilities 697,727 182,399
------------ -----------
Total current liabilities 16,600,789 454,570
LONG TERM DEBT
Notes payable - shareholders 6,299,653 4,243,580
------------ -----------
Total liabilities 22,900,442 4,698,150
------------ -----------
SHAREHOLDERS' EQUITY
Common stock, 300 shares authorized,
100 shares issued and outstanding 2,000 2,000
Additional paid in capital 500,000 500,000
Accumulated other comprehensive income
Unrealized gains on securities available for sale 20,000
Retained (deficit) (46,672) (176,623)
------------ -----------
Total shareholders' equity 475,328 325,377
------------ -----------
Total $ 23,375,770 $ 5,023,527
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BOWERS AND MERENA GALLERIES, INC.
AND
AUCTIONS BY BOWERS AND MERENA, INC.
(S CORPORATIONS)
COMBINED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED OCTOBER 31, 1999 AND 1998
1999 1998
------------ -----------
NET SALES AND COMMISSION INCOME $ 12,199,949 $ 6,680,818
COST OF SALES 2,999,302 3,294,300
------------ -----------
GROSS PROFIT 9,200,647 3,386,518
------------ -----------
OPERATING EXPENSES
Officers' salaries 5,120,000 1,227,154
Selling, general and administrative 4,420,955 2,703,446
Depreciation and amortization 87,973 79,951
------------ -----------
Total operating expenses 9,628,928 4,010,551
------------ -----------
LOSS FROM OPERATIONS (428,281) (624,033)
INTEREST AND OTHER INCOME - NET 468,888 400,394
------------ -----------
NET INCOME (LOSS) BEFORE CREDIT
FOR DEFERRED STATE INCOME TAXES 40,607 (223,639)
CREDIT FOR DEFERRED STATE INCOME TAXES (89,544)
------------ -----------
NET INCOME (LOSS) $ 130,151 $ (223,639)
------------ -----------
SEE NOTES TO FINANCIAL STATEMENTS
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BOWERS AND MERENA GALLERIES, INC.
AND
AUCTIONS BY BOWERS AND MERENA, INC.
(S CORPORATIONS)
COMBINED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED OCTOBER 31, 1999 AND 1998
ACCUMULATED
COMMON ADDITIONAL OTHER RETAINED TOTAL
SHARES COMMON PAID IN COMPREHENSIVE EARNINGS SHAREHOLDERS'
OUTSTANDING STOCK CAPITAL INCOME (DEFICIT) EQUITY
----------- ------ ---------- ------------- --------- -------------
BALANCE, OCTOBER 31, 1997 100 $2,000 $500,000 $ 47,216 $ 549,216
NET LOSS (223,639) (223,639)
CASH DIVIDENDS (200) (200)
--- ------ -------- --------- --------- ---------
BALANCE, OCTOBER 31, 1998 100 2,000 500,000 (176,623) 325,377
NET INCOME 130,151 130,151
CASH DIVIDENDS (200) (200)
OTHER COMPREHENSIVE INCOME $ 20,000 20,000
--- ------ -------- --------- --------- ---------
BALANCE, OCTOBER 31, 1999 100 $2,000 $500,000 $ 20,000 $ (46,672) $ 475,328
=== ====== ======== ========= ========= =========
SEE NOTES TO FINANCIAL STATEMENTS
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BOWERS AND MERENA GALLERIES, INC.
AND
AUCTIONS BY BOWERS AND MERENA, INC.
(S CORPORATIONS)
COMBINED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED OCTOBER 31, 1999 AND 1998
1999 1998
-------- ---------
NET INCOME (LOSS) $130,151 $(223,639)
OTHER COMPREHENSIVE INCOME
Unrealized holding gains 20,000
-------- ---------
COMPREHENSIVE INCOME (LOSS) $150,151 $(223,639)
======== =========
SEE NOTES TO FINANCIAL STATEMENTS
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BOWERS AND MERENA GALLERIES, INC.
AND
AUCTIONS BY BOWERS AND MERENA, INC.
(S CORPORATIONS)
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED OCTOBER 31, 1999 AND 1998
1999 1998
------------ -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 130,151 $ (223,639)
Adjustments to reconcile net income (loss) to
net cash from operating activities
Depreciation and amortization expense 87,973 79,951
(Increase) decrease in assets
Accounts receivable and auction advances (10,985,147) 294,761
Inventories (675,537) 86,222
Prepaid expenses and other current assets 17,128 22,976
Deferred state income tax (89,544)
Federal income tax deposit 101,792 (138,604)
Increase (decrease) in liabilities
Accounts payable (37,107) (257,243)
Auction consignments payable 15,625,671 (1,509,211)
Auction deposits (90) (13,472)
Accrued payroll and related payroll taxes 35,547 (604,516)
Accrued profit sharing plan contribution 6,870 745
Other current liabilities 515,328 (72,773)
------------ -----------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 4,733,035 (2,334,803)
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property (130,660) (91,140)
Purchase of marketable securities (100,000)
------------ -----------
NET CASH (USED IN) INVESTING ACTIVITIES (230,660) (91,140)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in notes payable - shareholders 2,056,073 246,971
Dividends paid (200) (200)
------------ -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,055,873 246,771
------------ -----------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS 6,558,248 (2,179,172)
CASH AND EQUIVALENTS - BEGINNING OF YEAR 894,840 3,074,012
------------ -----------
CASH AND EQUIVALENTS - END OF YEAR $ 7,453,088 $ 894,840
============ ===========
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BOWERS AND MERENA GALLERIES, INC.
AUCTIONS BY BOWERS AND MERENA, INC.
(S CORPORATIONS)
NOTES TO COMBINED FINANCIAL STATEMENTS
FOR THE YEARS ENDED OCTOBER 31, 1999 AND 1998
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL
Bowers and Merena Galleries, Inc. is engaged in the sale of rare coins,
currency and other numismatic related items. Auctions By Bowers and Merena,
Inc. is engaged in conducting auctions of rare coins, currency and other
numismatic related items. Bowers and Merena Galleries, Inc. and Auctions By
Bowers and Merena, Inc. are considered brother/sister corporations in that
they share identical ownership. The financial statements are prepared on
the accrual basis of accounting.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles 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.
CASH EQUIVALENTS
The Companies consider all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
MARKETABLE SECURITIES
The Company's securities consist of common stock and are classified as
available-for-sale and, as such, are carried at fair value. Securities
classified as available-for-sale may be sold in response to changes in
interest rates, liquidity needs, and for other purposes.
Unrealized holding gains & losses for available-for-sale securities are
excluded from earnings and reported as a separate component of
shareholders' equity. Realized gains and losses for securities classified
as available-for-sale are reported in earnings based upon the adjusted cost
of the specific security sold.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
The Companies have provided for an allowance for doubtful accounts for the
years ended October 31, 1999 and 1998, based on management's estimate of
the collectibility of accounts receivable.
INVENTORIES
Coins and Collectibles inventories are stated at the lower of cost
(determined on the specific identification method) or market. Book
inventories are stated at the lower of average cost (determined on the
first-in, first-out method) or market. Prints are stated at the lower of
cost (determined on the specific identification method) or market.
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As of October 31, 1999 and 1998, inventories consisted of the following:
1999 1998
---------- ----------
Coins and Collectibles $2,741,147 $2,089,755
Books and Prints 245,643 221,498
---------- ----------
$2,986,790 $2,311,253
========== ==========
PROPERTY, DEPRECIATION AND AMORTIZATION Property is recorded at cost.
Material assets with a useful life in excess of one year are capitalized.
Depreciation and amortization are computed using straight-line and
accelerated methods over the estimated useful lives of the related assets
as follows:
Office equipment 5 and 7 years
Computer software 5 years
Vehicles 5 years
Leasehold improvements 31.5 - 39 years
Furniture and fixtures 5 and 7 years
Depreciation expense aggregated $87,067 and $78,427 for the years ended
October 31, 1999 and 1998, respectively. Amortization expense aggregated
$906 and $1,524 for the years ended October 31, 1999 and 1998,
respectively.
OTHER ASSETS AND AMORTIZATION
Other assets are recorded at cost and shown net of accumulated
amortization. Amortization is provided for using the straight-line method
in amounts designed to amortize the cost of the related assets as follows:
Copyrights 28 years
ADVERTISING
Bowers and Merena Galleries, Inc. and Auctions By Bowers and Merena, Inc.
follow the policy of expensing advertising costs as they are incurred.
SALES RETURN POLICY
With the exception of claims for refund that are based on a lack of
authenticity, the Companies sales return policy is as follows:
Claims for return or refund on certified coins must be made within
seven days of receipt of the coin by the purchaser. All other claims
for return or refund must be made within 30 days of receipt. Late
payment nullifies all return privileges.
The Companies will accept a return after 30 days if the reason for the
return is lack of authenticity.
INCOME TAXES
The Companies have elected, by consent of their shareholders, to be taxed
under the provisions of Subchapter S of the Internal Revenue Code. Under
those provisions, the Companies do not pay Federal corporate income taxes
on their taxable income and are not allowed a net operating loss carryover
or carryback as a deduction. Instead, the shareholders are liable for
individual Federal income taxes on their respective shares of the Companies
taxable income or include their respective shares of the Companies net
operating losses in their individual income tax returns. As S corporations
the Companies may be liable for New Hampshire state income taxes.
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FEDERAL INCOME TAX DEPOSIT
The Companies elected under Internal Revenue Code Section 444 to retain
their fiscal year end of October 31. In compliance with Code Section 444,
the Companies had deposits of $62,667 and $164,459 with the Internal
Revenue Service as of October 31, 1999 and 1998, respectively.
In January, 2000, the Companies elected to change their year end to
December 31. Accordingly, the amount on deposit with the Internal Revenue
Service at October 31, 1999 is expected to be fully refunded.
2. DEMAND NOTE PAYABLE
At October 31, 1999 and 1998, the Companies had available an unsecured
revolving line of credit with a bank. The maximum available credit is
$1,500,000. Interest is stated at the bank's base rate plus .5% which
resulted in interest rates of 8.75% and 8.25% as of October 31, 1999 and
1998, respectively. As of October 31, 1999 and 1998, there were no amounts
outstanding on this line of credit.
3. OPERATING LEASE
Bowers and Merena Galleries, Inc. leased storage space under the terms of
an agreement that expired in April, 1998. The Company currently leases this
space as a tenant at will. Lease expense under this agreement aggregated
$9,072 and $9,540 for the years ended October 31, 1999 and 1998,
respectively.
See Note 5 for information regarding an operating lease with related
parties.
4. PROFIT SHARING PLAN
Bowers and Merena Galleries, Inc. maintains a qualified, non-contributory
profit sharing plan for the benefit of substantially all full-time
employees and substantially all full-time employees of Auctions By Bowers
and Merena, Inc. Total contributions for the years ended October 31, 1999
and 1998 were $69,470 and $62,600, respectively.
5. RELATED PARTY TRANSACTIONS
OPERATING LEASE
Bowers and Merena Galleries, Inc. and Auctions By Bowers and Merena, Inc.
rent facilities from a partnership owned by the two shareholders of the
Companies. The monthly base rent per the lease agreement is $4,000. Total
rent expense under this lease aggregated $48,000 and $53,000 for the years
ended October 31, 1999 and 1998, respectively.
NOTES PAYABLE - SHAREHOLDERS
Bowers and Merena Galleries, Inc. and Auctions By Bowers and Merena, Inc.
are indebted to the two shareholders of the Companies as follows:
As of October 31,
----------------------------
1999 1998
---------- ----------
Bowers and Merena Galleries, Inc. $5,279,653 $3,223,580
Auctions By Bowers and Merena, Inc. 1,020,000 1,020,000
---------- ----------
Total $6,299,653 $4,243,580
========== ==========
The promissory notes are unsecured and noninterest bearing with no
specified terms of repayment.
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6. MARKETABLE SECURITIES
Bowers and Merena Galleries, Inc. purchased marketable securities
classified as available-for-sale with unrealized gains as follows:
As of October 31, 1999
----------------------
Marketable securities, at market $120,000
Marketable securities, at cost 100,000
--------
Unrealized gain $ 20,000
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7. CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Companies to
concentrations of credit risk include cash and cash equivalents. The
Companies have cash deposits in a financial institution in excess of the
amount insured by the Federal Depository Insurance Corporation (FDIC) in
the amounts of $172,105 and $2,380,754 at October 31, 1999 and 1998,
respectively. The Companies also have amounts on deposit in uninsured money
market funds in the amounts of $7,044,484 and $442,608 at October 31, 1999
and 1998, respectively. The risk is managed by maintaining all deposits in
high quality financial institutions.
8. CASH FLOWS
Non cash investing activities:
1999
--------
Appreciation in unrealized
holding gains on
available-for-sale securities $ 20,000
========
9. STATE INCOME TAXES
The credit for state income taxes for the year ended October 31, 1999
consists of the following components:
Current $ 0
Deferred (89,544)
---------
$ (89,544)
=========
Temporary differences between the recognition of certain income and
expense items for income tax purposes and financial reporting purposes
are as follows:
Deductible (Taxable) Temporary Differences 1999 1998
------------------------------------------ --------- ---------
Unrealized holding gains on investments $ (20,000)
State net operating loss carryforward,
to begin expiring in 2001 $ 384,796 384,796
Allowance for doubtful accounts 23,770 18,226
Inventory reserve 50,000
---------
438,566 403,022
State tax rate x 8% x 8%
--------- ---------
35,085 32,242
State business enterprise tax credit,
to begin expiring in 2000 54,459 28,331
--------- ---------
Total deferred tax asset 89,544 60,573
Less valuation allowance (60,573)
--------- ---------
Net deferred tax asset $ 89,544 $ 0
========= =========
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At October 31, 1998, it was believed that the Companies would not benefit
from the net operating loss carryforward or the business enterprise tax
credit before they expired. Consequently, a valuation allowance was
established to reduce the deferred tax asset to the amount that was likely
to be realized based on the weight of evidence available at the time.
During March of 2000, the Companies sold assets at a profit significant
enough to ensure the full utilization of the net operating loss
carryforward and the business enterprise tax credit. Consequently, the
allowance was reversed and the deferred tax asset was recorded as of
October 31, 1999.
10. SUBSEQUENT EVENTS
NOTE PAYABLE
In November, 1999, Bowers and Merena Galleries, Inc. negotiated a 30 day
note payable to a bank. The terms of the note follow:
Amount borrowed: $1,500,000
Interest: Bank's base rate plus .5%
(8.75% at note inception)
Repayment terms: Principal and interest due at
maturity on December 17, 1999
Collateral: None
Guarantees: The note was personally guaranteed
by the shareholders of the Companies
The note was paid in full as of the date of this report.
NEW CORPORATION
On January 26, 2000, the shareholders formed a new company called Bowers
and Merena Research, Inc. The purpose of Bowers and Merena Research, Inc.
is to provide consulting and research services primarily in areas of
numismatic interest as well as the creation and production of materials of
primarily numismatic interest. The ownership of the new corporation is
identical to the ownership of Bowers and Merena Galleries, Inc. and
Auctions By Bowers and Merena, Inc.
SALE OF BUSINESS ASSETS
On March 10, 2000, the three companies (Bowers and Merena Galleries, Inc.,
Auctions By Bowers and Merena, Inc. and Bowers and Merena Research, Inc.)
sold substantially all of their assets to a public company. The total
combined sales price was valued at approximately $15,000,000 as of the date
of sale.
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Interim Period Financial Statements
Item 7(a)(2)
Unaudited Interim Statements
Bowers and Merena Galleries, Inc. and
Auctions by Bowers and Merena, Inc.
Condensed Combined Balance Sheets
(in thousands, except per share data)
January 31, October 31,
2000 1999
----------- -----------
ASSETS --
Current assets:
Cash and cash equivalents $ 2,400 $ 7,453
Marketable securities 100 120
Accounts receivable and auction advances, net 3,763 12,237
Inventories, net 2,524 2,987
Prepaid expenses and other 81 112
Deferred taxes -- 90
------- --------
Total current assets 8,868 22,999
Property and equipment, net 310 313
Other assets 2 2
Deferred taxes 63 62
------- --------
$ 9,243 $ 23,376
======= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,263 $ 15,778
Accrued expenses 48 698
Accrued compensation and benefits 78 125
------- --------
Total current liabilities 2,389 16,601
Notes payable to shareholders 6,166 6,300
Shareholders' equity:
Common stock 2 2
Additional paid-in capital 500 500
Retained earnings (deficit) 186 (27)
------- --------
Total shareholders' equity 688 475
------- --------
$ 9,243 $ 23,376
======= ========
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Item 7(a)(2)
Unaudited Interim Statements
Bowers and Merena Galleries, Inc. and
Auctions by Bowers and Merena, Inc.
Condensed Combined Statements of Income
For the Three Month Period Ending January 31, 2000 and 1999
(in thousands, except per share data)
2000 1999
------ ------
Net revenues $1,936 $2,712
Cost of revenues 918 725
------ ------
Gross profit 1,018 1,987
Selling, general and administrative expenses 859 864
------ ------
Operating income 159 1,123
Interest income, net 163 43
------ ------
Income before provision for income taxes 322 1,166
Provision for income taxes -- --
------ ------
Net income $ 322 $1,166
====== ======
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Item 7(a)(2)
Unaudited Interim Statements
Bowers and Merena Galleries, Inc. and
Auctions by Bowers and Merena, Inc.
Condensed Combined Statements of Cash Flows
For the Three Month Period Ending January 31, 2000 and 1999
(in thousands, except per share data)
2000 1999
-------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 322 $ 1,166
Adjustments to reconcile net income to net
cash (used in) provided by operating activities:
Depreciation and amortization 21 13
Market value adjustment to marketable securities 20 --
Changes in operating assets and liabilities:
Accounts receivable and auction advances 8,473 (4,295)
Inventories 463 (238)
Prepaid expenses and other 31 71
Deferred taxes 90 --
Accounts payable (13,515) 5,299
Accrued expenses (619) (170)
Accrued compensation and benefits (77) (37)
-------- -------
Net cash provided (used in) provided by
operating activities (4,791) 1,809
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (20) (7)
-------- -------
Net cash used in investing activities (20) (7)
CASH FLOWS FROM FINANCING ACTIVITIES:
Notes payable to shareholders (134) (426)
Dividends paid (108) --
-------- -------
Net cash used in financing activities (242) (426)
Net (decrease) increase in cash and
cash equivalents (5,053) 1,376
Cash and cash equivalents at beginning of year 7,453 895
-------- -------
Cash and cash equivalents at end of period $ 2,400 $ 2,271
======== =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ -- $ --
Income taxes $ -- $ --
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Bowers and Merena Galleries, Inc.
And
Auctions by Bowers and Merena, Inc.
Notes to Unaudited Combined Condensed Financial Statements
(amounts in thousands)
1. SIGNIFICANT ACCOUNTING POLICIES
The financial statements included herein are based in part on estimates and
include such adjustments (consisting solely of normal, recurring
adjustments) which management believes are necessary for fair presentation
of the Company's financial position at January 31, 2000 and the results of
its operations for the three-month periods ended January 31, 2000, and
January 31,1999. The financial statements and related notes are condensed
and have been prepared in accordance with generally accepted accounting
principles applicable to interim periods. Consequently, they do not include
all generally accepted accounting disclosures required for complete annual
financial statements. These condensed financial statements should be read
in conjunction with the audited financial statements and the notes thereto
for the years ended October 31, 1999, and October 31, 1998.
The results of operations for the periods presented are not necessarily
indicative of results to be expected for any subsequent fiscal year or
interim period thereof.
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(b) Pro Forma Financial Information
On March 11, 2000, Collectors Universe, Inc. (the "Company") purchased certain
assets of Auctions by Bowers and Merena, Inc., Bowers and Merena Galleries, Inc.
and Bowers and Merena Research, Inc., collectively, ("Bowers and Merena"). The
purchase of these assets effectively resulted in the acquisition of the
businesses conducted by Bowers and Merena. Total consideration was $8.0 million
in cash and 1,000,000 shares of Company Common Stock value at $7,625,000. The
total cash consideration is subject to adjustment based upon a final
determination of assets acquired and liabilities assumed. The Company recorded
goodwill of $13,006,000 as a result of this transaction. The goodwill amount is
not anticipated to change materially upon final determination of assets acquired
and liabilities assumed.
The accompanying unaudited pro forma condensed combined statements of operations
combine the historical consolidated statements of income of the Company and
Bowers and Merena for the nine months ended April 1, 2000 and for the year ended
June 30, 1999. The pro forma condensed consolidated statements of operations
have been prepared assuming the acquisition occurred as of the beginning of the
period and after giving effect to the adjustments described in Note 1.
The unaudited pro forma condensed combined statements of operations should be
read in conjunction with the separate historical financial statements and
related notes of Bowers and Merena appearing in answer to Item 7(a) of this
Current Report on Form 8K/A and the historical financial statements, related
notes and Management's Discussion and Analysis of Consolidated Financial
Condition and Results of Operations of the Company as contained in our
Registration Statement dated November 4, 1999 on Form S-1 filed with the
Securities and Exchange Commission and the Company's Form 10-Q for the first,
second, and third fiscal quarters ended October 2, 1999, January 1, 2000, and
April 1, 2000, respectively.
The pro forma information is not necessarily indicative of the results that
would have been reported had the acquisition actually occurred on the dates
specified, nor is it necessarily indicative of the future results of the
combined companies.
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Pro Forma Financial Information
Item 7(b)
Collectors Universe Inc. and Subsidiaries
Historical and Pro Forma Condensed Combined Statements of Operations
For the Nine Months Ended April 1, 2000
(Unaudited)
(in thousands, except per share data)
Pro Forma
Condensed
Collectors Bowers & Consolidated
Universe Merena Pro Forma Statements of
Historical(a) Historical(a) Adjustments Operations
------------- ------------- ----------- -------------
Net revenues $31,048 $ 9,896 $ (639)(b) $40,305
Cost of revenues 15,162 2,294 (536)(b) 16,920
------- ------- -------- -------
Gross profit 15,886 7,602 (103) 23,385
Stock-based compensation 48 -- -- 48
Selling, general and administrative expenses 14,303 8,848 (5,086)(c)(b) --
-- -- 650(d) 18,715
------- ------- -------- -------
Operating income (loss) 1,535 (1,246) 4,333 4,622
Interest income, net 542 505 (505)(e) --
(300)(f) 242
Minority interest -- -- -- --
------- ------- -------- -------
Income (loss) before provision (benefit) for
income taxes 2,077 (741) 3,528 4,864
Provision (benefit) for income taxes 1,002 (89) 1,143(g) 2,056
------- ------- -------- -------
Net income (loss) $ 1,075 $ (652) $ 2,385 $ 2,808
======= ======= ======== =======
Net income per share:
Basic $ 0.05 $ 0.12(h)
======= =======
Diluted $ 0.04 $ 0.11(h)
======= =======
Weighted average shares outstanding:
Basic 22,631 23,409(h)
======= =======
Diluted 23,985 24,763(h)
======= =======
See accompanying notes to Unaudited Pro Forma Condensed
Combined Statements of Operations.
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Item 7(b)
Collectors Universe Inc. and Subsidiaries
Historical and Pro Forma Condensed Combined Statements of Operations
For the Year Ended June 30, 1999
(Unaudited)
(in thousands, except per share data)
Pro Forma
Condensed
Collectors Bowers & Consolidated
Universe Merena Pro Forma Statements of
Historical(a) Historical(a) Adjustments Operations
------------- ------------- ----------- -------------
Net revenues $ 22,563 $ 12,200 $ -- $ 34,763
Cost of revenues 8,654 2,999 -- 11,653
-------- -------- -------- --------
Gross profit 13,909 9,201 -- 23,110
Stock-based compensation 1,244 -- -- 1,244
Selling, general and administrative expenses 13,461 9,629 (4,636)(c)
-- -- 867(d) 19,321
-------- -------- -------- --------
Operating income (loss) (796) (428) 3,769 2,545
Interest income, net 30 469 (469)(e) --
(400)(f) (370)
Minority interest (28) -- -- (28)
-------- -------- -------- --------
Income (loss) before provision (benefit) for
income taxes (794) 41 2,900 2,147
Provision (benefit) for income taxes (624) (89) 1,205(g) 492
-------- -------- -------- --------
Net income (loss) $ (170) $ 130 $ 1,695 1,655
======== ======== ======== ========
Net income per share:
Basic $ 0.01 $ 0.09(h)
======== ========
Diluted $ 0.01 $ 0.08(h)
======== ========
Weighted average shares outstanding:
Basic $ 17,644 18,644(h)
======== ========
Diluted $ 18,765 19,765(h)
======== ========
See accompanying notes to Unaudited Pro Forma Condensed
Combined Statements of Operations.
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NOTES TO THE UNAUDITED PRO FORMA
CONDENSED COMBINED STATEMENTS OF OPERATIONS
Pro forma adjustments for the unaudited pro forma condensed combined statements
of operations for the nine months ended April 1, 2000, and the year ended June
30, 1999 are as follows:
(a) The unaudited pro forma condensed combined statements of operations for the
nine months ended April 1, 2000 includes Collectors Universe's historical
results of operations for the nine months ended April 1, 2000 and Bowers
and Merena's historical results of operations for the nine month period
ended January 31, 2000. The unaudited pro forma condensed combined
statement of operations for the year ended June 30, 1999 includes
Collectors Universe's historical results of operations for the year ended
June 30, 1999 and Bowers and Merena's historical results of operations for
the twelve month period ended September 30, 1999.
(b) Reflects the elimination of the results of operations of Bowers and Merena
for the period from March 11, 2000 through April 1, 2000. The operations of
Bowers and Merena are included in the historical operations of the Company
from the date of acquisition through April 1, 2000.
(c) Reflects the elimination of officer compensation paid to the two owners of
Bowers and Merena in excess of the annual contractual employment agreement
entered into by a former stockholder/employee with the company.
(d) Reflects the additional amortization of goodwill that would have been
recognized had the acquisition occurred on July 1, 1999 based on a 15-year
amortization period.
(e) Reflects the elimination of interest income earned on Bowers and Merena's
cash and cash equivalents balances, as such balances were not acquired and
therefore, no interest income would be earned on a pro forma basis.
(f) Reflects the reduction of interest income earned on Collectors Universe's
cash and cash equivalent balances resulting from the $8.0 million cash used
in the acquisition.
(g) Reflects the estimated tax effects of Bowers and Merena as if they were a
taxable corporation and the pro forma adjustments, based upon Collectors
Universe's estimated incremental tax rate of approximately 41%.
(h) The pro forma net income reflects the impact of the pro forma adjustments
above. Pro forma basic and diluted net income per share is computed using
the historical weighted average shares outstanding, adjusted to give effect
to the issuance of one million shares of Collectors Universe common stock
as partial consideration for the acquisition.
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SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COLLECTORS UNIVERSE, INC.
/s/ GARY N. PATTEN
Date: May 18, 2000 ---------------------------------------
Gary N. Patten, President
and Chief Financial Officer
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