FORM 10-K
COLLECTORS UNIVERSE INC - CLCT
Filed: September 04, 2009 (period: June 30, 2009)
Annual report which provides a comprehensive overview of the company for the past year
Table of Contents
10-K - 10-K FISCAL YEAR ENDED JUNE 30, 2009
PART I
ITEM 1.
ITEM 1A
ITEM 1B.
ITEM 2.
ITEM 3.
ITEM 4.
PART II
ITEM 5.
ITEM 6.
ITEM 7.
ITEM 7A.
ITEM 8.
ITEM 9.
ITEM 9A.
ITEM 9B.
PART III
ITEM 10.
ITEM 11.
ITEM 12.
ITEM 13.
ITEM 14.
PART IV
BUSINESS
RISK FACTORS
UNRESOLVED STAFF COMMENTS
PROPERTIES
LEGAL PROCEEDINGS
SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
SELECTED CONSOLIDATED FINANCIAL DATA
MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
CONTROLS AND PROCEDURES
OTHER INFORMATION
DIRECTORS AND EXECUTIVE OFFICERS
EXECUTIVE COMPENSATION
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PRINCIPAL ACCOUNTANT FEES AND SERVICES
ITEM 15.
SIGNATURES
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
INDEX TO EXHIBITS
EX-10.43 (FISCAL 2010 MANAGEMENT INCENTIVE PLAN)
EX-10.44 (EXHIBIT 10-44-RESTRICTED STOCK AGREEMENT-MICHAEL J.
MCCONNELL)
EX-10.45 (EXHIBIT 10-45-RESTRICTED STOCK AGREEMENT-DAVID G.HALL)
EX-10.46 (EXHIBIT 10-46-RESTRICTED STOCK AGREEMENT-JOSEPH J.
WALLACE)
EX-21.1 (EXHIBIT 21-1-SUBSIDIARIES OF THE REGISTRANT)
EX-23.1 (EXHIBIT 23-1.HTM-CONSENT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM)
EX-31.1 (EXHIBIT 31-1-CEO CERTIFICATIONS UNDER SECTION 302 OF
SARBANES-OXLEY)
EX-31.2 (EXHIBIT 31-2-CFO CERTIFICATIONS UNDER SECTION 302 OF THE
SARBANES-OXLEY)
EX-32.1 (EXHIBIT 32-1-CEO CERTIFICATION OF PERIODIC REPORT UNDER
SECTION 906 OF SARBANES-OXLEY)
EX-32.2 (EXHIBIT 32-2-CFO CERTIFICATION OF PERIODIC REPORT UNDER
SECTION 906 OF THE SARBANES-OXLEY)
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
�
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended June 30, 2009
�
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _______ to _____
OR
Commission file number 1-34240
COLLECTORS UNIVERSE, INC.
(Exact name of Registrant as specified in its charter)
Delaware
(State or other jurisdiction of
Incorporation or organization)
1921 E. Alton Avenue, Santa Ana, California
(Address of principal executive offices)
33-0846191
(I.R.S. Employer Identification No.)
92705
(Zip Code)
(949) 567-1234
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: Common Stock, par value $.001 per share
Securities registered pursuant to Section 12(g) of the Act: None
Indicate, by check mark, whether the Registrant (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 such filing requirements for the past 90 days. Yes � No �
Indicate, by check mark, if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. �
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See
definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act, (check one):
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
Large accelerated filer �
Accelerated filer �
Non-accelerated filer �
Smaller reporting company �
Indicate by check mark whether the Registrant is a shell company (as defined in Securities Exchange Act Rule 12b-2).
YES � NO ⌧
As of December 31, 2008, the aggregate market value of the Common Stock held by non-affiliates was approximately
$23,082,994 based on the per share closing price of $2.93 of Registrant’s Common Stock as of such date as reported by the Nasdaq
Global Market.
As of August 12, 2009, a total of 7,408,516 shares of Registrant's Common Stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Except as otherwise stated therein, Items 10, 11, 12, 13 and 14 in Part III of the Form 10-K are incorporated by reference
from Registrant's Definitive Proxy Statement, which is expected to be filed with the Securities and Exchange Commission on or
before October 28, 2009, for its Annual Meeting of Stockholders scheduled to be held on December 8, 2009.
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
COLLECTORS UNIVERSE, INC.
FORM 10-K
FOR THE FISCAL YEAR ENDED JUNE 30, 2009
TABLE OF CONTENTS
Forward-Looking Statements
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Submission of Matters to a Vote of Security Holders
Executive Officers of Registrant
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Item 15.
Market for Common Stock and Related Stockholder Matters
Selected Consolidated Financial Data
Management’s Discussion and Analysis of Financial Condition and Results
of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets at June 30, 2009 and 2008
Consolidated Statements of Operations for the Years ended June 30, 2009,
2008 and 2007
Consolidated Statements of Stockholders' Equity for the Years Ended June
30, 2009, 2008 and 2007
Consolidated Statements of Cash Flows for the Years Ended June 30, 2009,
2008 and 2007
Notes to Consolidated Financial Statements for the Years Ended June 30,
2009, 2008 and 2007
Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Controls and Procedures
Other Information
Directors and Executive Officers
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management
Certain Relationships and Related Transactions
Principal Accountant Fees And Services
Exhibits and Financial Statement Schedules
Page
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16
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22
23
24
25
27
50
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55
56
58
87
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PART I
PART II
PART III
PART IV
SIGNATURES
INDEX TO EXHIBITS
S-1
E-1
i
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
FORWARD-LOOKING STATEMENTS
Statements contained in this Annual Report that are not historical facts or that discuss our expectations, beliefs or views
regarding our future operations or future financial performance, or financial or other trends in our business or markets, constitute
“forward-looking statements” as defined in the Private Securities Reform Act of 1995. Forward-looking statements can be identified
by the fact that they do not relate strictly to historical or current facts. Often, such statements include the words “believe,” “expect,”
“anticipate,” “intend,” “plan,” “estimate,” “project,” or words of similar meaning, or future or conditional verbs such as “will,”
“would,” “should,” “could,” or “may.” Forward looking statements are estimates or predictions about the future. Those estimates or
predictions are based on current information and are subject to a number of risks and uncertainties that could cause our financial
condition or operating results in the future to differ significantly from those expected at the current time, as described in the
forward-looking statements that are contained in this Annual Report. Those risks and uncertainties are described in Item 1A in Part I
of this Annual Report under the caption “Risk Factors,” and in Item 7 of Part II under the caption “Management’s Discussion and
Analysis of Financial Condition and Results of Operations.” Accordingly, readers of this Annual Report are urged to read the
cautionary statements contained in those items of this Annual Report. Due to these uncertainties and risks, readers are cautioned not
to place undue reliance on such forward-looking statements contained in this Annual Report, which speak only as of the date of this
Annual Report. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise, except as may be required by law or applicable Nasdaq rules.
ITEM 1. BUSINESS
Overview
PART I
We provide authentication and grading services to dealers and collectors of high-value coins, trading cards, event tickets,
autographs, memorabilia and stamps (“collectibles”). We believe that our authentication and grading services add value to these
collectibles by enhancing their marketability and thereby providing increased liquidity to the dealers, collectors and consumers that
own and buy and sell them.
Once we have authenticated and assigned a grade to a collectible, we encapsulate it in a tamper-evident, clear plastic holder,
or issue a certificate of authenticity, that (i) identifies the specific collectible, (ii) sets forth the quality grade we have assigned to it,
and (iii) bears one of our brand names and logos: “PCGS” for coins, “PSA” for trading cards and event tickets, “PSA/DNA” for
autographs and memorabilia and “PSE” for stamps. Additionally, we warrant our certification of authenticity and the grade that we
assign to the coins, trading cards and stamps bearing our brands. We do not warrant our authenticity determinations for autographs or
memorabilia.
We principally generate revenues from the fees paid for our authentication and grading services. To a much lesser extent, we
generate revenues from other related services, which consist of revenues from: (i) the sale of advertising on our websites; (ii) the sale
of printed publications and collectibles price guides and advertising in such publications; (iii) the sale of membership subscriptions in
our Collectors Club, which is designed to attract interest in high-value collectibles among new collectors; (iv) the sale of subscriptions
to our CCE dealer-to-dealer Internet bid-ask market for certified coins; and (v) collectibles trade show conventions that we
conduct. We also generate revenues from sales of our collectibles inventory, which is comprised primarily of collectible coins that we
have purchased under our coin grading warranty program; however, these activities are not the focus, and we do not consider them to
be an integral part of our business.
We have developed some of the leading brands in the collectibles markets in which we conduct our business:
���PCGS” (Professional Coin Grading Service), which is the brand name for our independent coin authentication and
grading service;
���“PSA” (Professional Sports Authenticator), which is the brand name for our independent sports and trading cards
authentication and grading service;
���“PSA/DNA” (PSA/DNA Authentication Services), which is the brand name for our independent authentication and
grading service for vintage autographs and memorabilia; and
1
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
���“PSE” (Professional Stamp Experts), which is the brand name for our independent stamp authentication and grading
service.
PCGS and PSA are among the leading independent authentication and grading services in the collectible coin and trading
cards markets in the United States. PSA/DNA and PSE also are among the leading independent authentication services in their
respective markets.
We began offering our PCGS coin authentication and grading services in 1986 and, from inception through fiscal year ended
June 30, 2009, we authenticated and graded more than 16 million coins. In 1991, we launched our PSA trading cards authentication
and grading service and, through June 30, 2009, authenticated and graded over 12 million trading cards. In 1999, we launched our
PSA/DNA vintage autograph authentication business and in June 2004 we extended that business by introducing vintage autograph
grading services to dealers and collectors of autographed sports memorabilia. We started our PSE stamp authentication and grading
service in 2000.
The following table provides information regarding the respective numbers of coins, trading cards, autographs and stamps
that we authenticated or graded from 2007 to 2009:
Coins
Trading cards
Autographs
Stamps
Total
2009
1,456,100
1,171,600
168,100
25,700
2,821,500
Units Processed
2008
52%
41%
6%
1%
100%
1,474,900
1,329,500
199,600
53,000
3,057,000
2007
48%
43%
7%
2%
100%
1,558,700
1,262,700
169,800
66,200
3,057,400
51%
41%
6%
2%
100%
The following table sets forth the estimated values at which our customers insured the coins, trading cards, autographs and
stamps that they submitted to us for authentication or grading.
Coins
Trading cards
Autographs
Stamps
Total
2009
$ 1,119,000
79,000
15,000
22,000
$ 1,235,000
Declared Values (000)
2008
2007
91% $ 1,327,000
90,000
26,000
25,000
100% $ 1,468,000
6%
1%
2%
90% $ 1,435,000
88,000
24,000
12,000
100% $ 1,559,000
6%
2%
2%
92%
6%
1%
1%
100%
Our revenues are comprised principally of our authentication and grading service fees. Those fees range from $4 to over
$200 per item authenticated and graded, based primarily on the type of item authenticated or graded and the turn-around times
selected by our customers, which range from 1 to approximately 60 days, and not the value of the collectible. In fiscal 2009 our
authentication and grading fees for all our businesses averaged $10.15 and, in the case of coins, ranged from $5 to $200 per coin, with
an average fee of $12.94 per coin and, in the case of trading cards ranged from $4 to $50 per card, with an average fee of $5.81 per
trading card. As a general rule, collectibles dealers and, to a lesser extent, individual collectors, request faster turn-around times and,
therefore, generally pay higher fees for more valuable, older or “vintage” collectibles than they do for modern collectibles.
Recent Developments
Discontinued Operations. In fiscal 2009, our Board of Directors approved a plan to discontinue and dispose of the
Company’s diamond and colored gemstone (“jewelry”) authentication and grading businesses (which were discontinued effective
March 2, 2009) and our Gemprint asset. We have substantially disposed of the assets of those businesses and have established certain
accruals, primarily related to real estate lease obligations of the jewelry businesses at June 30, 2009. In addition, we are in the process
of selling our patented Gemprint identification technology that was used primarily by our diamond authentication and grading
business to provide certain additional services to its customers. In the second quarter of fiscal 2009, our Board of Directors approved
a plan to dispose of our currency grading and authentication business and, pursuant to that plan, that business was sold in February
2009.
2
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
Accordingly, the remaining assets and liabilities of the jewelry (including Gemprint) and currency authentication and grading
businesses have been classified as held for sale at June 30, 2009 and 2008, and the operations of those businesses have been
reclassified as discontinued operations for all fiscal periods presented in this Annual Report. In addition, we continue to classify as
discontinued operations the remaining activities, consisting of the disposition of the remaining collectibles inventories of the
collectibles auctions and sales businesses which we sold in fiscal 2004. See Item 6 -- “Selected Consolidated Financial Data” and
Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional information
regarding our discontinued operations.
Departure of Chief Executive Officer. On March 16, 2009, we announced the departure of the Chief Executive Officer,
effective April 1, 2009 and our hiring of Michael McConnell, a director of the Company, as our interim Chief Executive Officer. As a
result of his service on the Board, Mr. McConnell is familiar with the Company’s businesses and, prior to his becoming our CEO, in
his capacity as a director worked with our executive officers and other key management employees.
Industry Background
The primary determinants of the prices of, and the willingness of sellers, purchasers and collectors to purchase high-value or
high-priced collectibles or other high-value assets, are their authenticity, quality and rarity. The authenticity of a collectible relates not
only to the genuineness of the collectible, but also to the absence of any alterations or repairs that may have been made to hide damage
or to restore the item. The quality of a collectible relates to its state of preservation relative to its original state of manufacture or
creation. The rarity of a collectible relates to its uniqueness and depends primarily on the number of identical collectibles of
equivalent or better quality that become available for purchase from time to time. With regard to value, confirmation of authenticity
generally is required before a buyer is willing to proceed with a purchase of a high-priced collectible. Quality and rarity directly affect
value and price, usually on an exponential basis, with higher quality and rare collectibles generally attracting dramatically higher
prices than those of lower quality and lesser rarity. Even a relatively modest difference in quality can translate into a significant
difference in perceived value and, therefore, in price. For example, a 1952 Mickey Mantle baseball card that received a PSA grade
from us of 9, on our PSA grading scale of 1-to-10, was sold at public auction in 2006 for $282,588. By comparison, a similar 1952
Mickey Mantle baseball card that received a PSA grade of 8 was sold at public auction, also in 2006, for $72,057.
Until the advent of independent third-party authentication and grading, most prospective buyers, including experienced
collectibles dealers and retailers, insisted on physically examining high-priced collectibles before consummating
transactions. However, unlike professionals in the trade, most purchasers and collectors lacked the experience and knowledge needed
to determine, with confidence, the authenticity, quality or rarity, and hence the value, of high-priced collectibles, even when they had
the opportunity to examine them physically. Therefore, they had to rely on representations made by sellers regarding authenticity,
quality and rarity. For these reasons, “buyer beware” characterized the high-value collectibles markets, and “sight-unseen” markets
for rare coins and other high-value collectibles were practically non-existent.
High-value collectibles have been traditionally marketed at retail by dealers through direct mail, catalogues, price lists and
advertisements in trade publications, and sold and purchased by them at collectibles shows, auction houses and local dealer
shops. These markets were highly inefficient because:
���they were fragmented and localized, which limited both the variety of available collectibles and the number of
potential buyers;
���transaction costs were often relatively high due to the number of intermediaries involved;
���buyers usually lacked the information needed to determine the authenticity and quality and, hence the value, of the
collectibles being sold; and
���buyers and sellers were vulnerable to fraudulent practices because they had to rely on the dealers or other sellers in
the often long distribution channel for opinions or representations as to authenticity, quality and rarity.
3
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
Coin Market. In an effort to overcome some of these inefficiencies, approximately 30 years ago, professional coin dealers
began using a numerical quality grading scale for coins. That scale ranged from 1 to 70, with higher numbers denoting a higher
quality. Previously, professional dealers used descriptive terms, such as “Fair,” “Fine” and “Uncirculated,” to characterize the quality
of the coins they sold, a practice that continued after the development of the numeric grading system. However, whether using a
numeric or a descriptive system, grading standards varied significantly from dealer to dealer, depending on a dealer’s subjective
criteria of quality. Moreover, dealers were hardly disinterested or independent since, as the sellers or buyers of the coins they were
grading, they stood to benefit financially from the assignment of a particular grade.
Trading Cards Market. Misrepresentations of authenticity, quality and rarity also operated as a barrier to the liquidity and
growth of the collectibles market for trading cards. Even experienced and knowledgeable dealers insisted on physically examining
purportedly rare and higher priced trading cards. Most collectors lacked the knowledge needed to purchase collectible trading cards
with confidence, even when they had physically examined them. Trading card dealers eventually developed a rudimentary adjectival
system to provide measures of quality, using descriptive terms such as “Poor,” “Very Good,” “Mint” and “Gem Mint.” These
measures of quality were assigned on the basis of such characteristics as the centering of the image on the card and the presence or
absence of bent or damaged corners, scratches and color imperfections. However, as was the case with coins, grading standards varied
significantly from dealer to dealer, depending on a dealer’s subjective criteria of quality. Additionally, since the dealers who bought
and sold trading cards were the ones that assigned these grades, collectors remained vulnerable to misrepresentations as to the
authenticity, quality and rarity of trading cards being sold or purchased by dealers.
Autographed Memorabilia Market. The market for autographed sports, entertainment and historical memorabilia has been
plagued by a high incidence of forgeries and misrepresentations of authenticity. For example, Operation Bullpen, initiated by the FBI
and other law enforcement agencies beginning in 1997, has uncovered a high volume of outright forgeries of signatures and
widespread misrepresentations as to the genuineness of sports memorabilia. We believe that the high incidence of such fraudulent
activities was due, in large part, to a dearth of independent third-party memorabilia authentication services and an absence of
systematic methodologies and specimen data needed for verification of authenticity.
Stamp Market. Stamp dealers developed an adjectival system, similar to the one developed for trading cards, by which they
valued and priced stamps based primarily on the centering of the stamp image on the stamp paper background, ignoring other faults in
the stamp. As a result, experienced and knowledgeable dealers insisted on physically examining purportedly rare and higher priced
stamps before purchasing them. Additionally, most collectors lacked the knowledge and experience needed to purchase higher priced
stamps with confidence. Consequently, as was the case with coins and trading cards, collectors were forced to depend on
representations of authenticity, quality and rarity from the very dealers from whom they purchased or to whom they sold
stamps. However, prior to our entry into the market, independent third-party stamp grading was non-existent.
These conditions created a need and the demand for independent authentication and grading services from which sellers,
purchasers and collectors could obtain:
���determinations, from independent, third-party experts, of the authenticity of the high-value collectibles that sellers,
purchasers and collectors purchased, particularly “sight-unseen” or over the Internet;
���representations of quality based on uniform standards applied by independent, third-party experts; and
���authoritative information, compiled by a credible third party, to help purchasers and collectors understand the factors that
affect an item’s perceived value and price, including:
— its rarity;
— its quality or grade; and
— its historical and recent selling prices.
4
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
The Impact of eBay and other e-Commerce Websites on the Collectible Markets. The advent of the Internet and, in
particular, eBay’s development of an Internet or “virtual” marketplace and other Internet-selling websites, such as eBay and Amazon,
have overcome many of the inefficiencies that had characterized the traditional collectibles markets. eBay and other online
marketplaces (i) offer enhanced interaction between and greater convenience for sellers and buyers of high-value collectibles;
(ii) eliminates or reduces the involvement of dealers and other “middlemen;” (iii) reduce transaction costs; (iv) allow trading at all
hours; and (v) continually provide updated information. However, Internet commerce still raises, and has even heightened, concerns
about the authenticity and quality of the collectibles that are listed for sale on the Internet. Buyers have no ability to physically
examine them, and no means to confirm the identity or the credibility of the dealers or sellers on the Internet. As a result, we believe
that the growth of Internet selling websites, such as eBay and Amazon, has increased awareness of the importance of, and the demand
for, independent third-party authentication and grading services of the type we provide. Our services enable purchasers and collectors
to use the Internet to purchase, without physical examination (“sight-unseen”), with the confidence of knowing that they are authentic
and are of the quality represented by sellers. The importance and value of our services to purchasers and collectors, we believe, are
demonstrated by eBay’s inclusion, on its collectibles websites, of information that identifies, and encourages visitors to use, our
independent third-party authentication and grading services, as well as similar services offered by some of our competitors.
Our Services
PCGS Coin Authentication and Grading Services. Recognizing the need for third-party authentication and grading services,
we launched Professional Coin Grading Service in 1986. PCGS employs expert coin graders, who are independent of coin buyers and
sellers, to provide impartial authentication and grading services. As of June 30, 2009, we employed 14 experts who have an average
of 36 years of experience in the collectible coin market. We also established uniform standards of quality measured against an actual
“benchmark” set of coins kept at our offices. We place each coin that we authenticate and grade in a tamper-evident, clear plastic
holder which bears our logo, so that any prospective buyer will know that it is a PCGS authenticated and graded coin. We also
provide a warranty as to the accuracy of our coin authentication and grading.
By providing an independent assessment by coin experts of the authenticity and quality of coins, we believe that PCGS has
increased the liquidity of the trading market for collectible coins. Following the introduction of our independent, third-party
authentication and grading service, buyer confidence, even between dealers, increased to such a degree that coins authenticated and
graded by PCGS were able to be traded “sight-unseen.” As a result, PCGS facilitated the development, in 1990, of a dealer market,
known as the “Certified Coin Exchange,” on which coin dealers traded rare coins “sight-unseen,” over a private satellite network,
which now operates on the Internet and which we now own.
In addition, we began to provide a range of authoritative content on coin collecting to inform and communicate with the
collector community, including guides and reports that track the trading prices and the rarity of PCGS-graded coins.
More recently, our coin authentication and grading services have facilitated the development of a growing Internet or
“virtual” marketplace for collectible coins. A prospective buyer, who might otherwise be reluctant to purchase a high-priced coin
listed sight unseen on the Internet, is able to rely on a PCGS certification, as well as authoritative information about the coin that is
accessible on our website, in deciding whether or not to bid and in determining the amount to offer for the coin. As a result, to
enhance the marketability of higher priced coins, many sellers submit their coins to PCGS for authentication and grading. That
enables the sellers to include, in their Internet sales listings, digital images of the coins in their tamper-evident, clear plastic holders,
which identify the coins as having been authenticated and graded by PCGS as well as their PCGS-assigned grades.
PSA Trading Authentication and Grading Services. Leveraging the credibility and using the methodologies that we had
established with PCGS in the coin market, in 1991 we launched Professional Sports Authenticator (PSA), which instituted a similar
authentication and grading system for trading cards. Our independent trading card experts certify the authenticity of and assign grades
to trading cards using a numeric system with a scale from 1-to-10 that we developed, together with an adjectival system to describe
their condition. At June 30, 2009, we employed 15 experts who have an average of 25 years of experience in the collectible trading
card market. We believe that our authentication and grading services have removed barriers that were created by the historical
seller-biased grading process and, thereby, have improved the overall marketability of and facilitated commerce in trading cards,
including over the Internet and at telephonic sports memorabilia auctions.
5
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
PSA/DNA Autograph Authentication and Grading Services. In 1999, we launched our vintage autograph authentication
business, initially offering authentication services for “vintage” sports autographs and memorabilia that were autographed or signed
prior to the time they were presented to us for authentication. The vintage autograph authentication business is distinctly different
from the “signed-in-the-presence” authentication of autographs where the “authenticator” is present and witnesses the actual
signing. Vintage autograph authentication can involve the rendering of an opinion of authenticity by an industry expert based on (i) an
analysis of the signed object, such as the signed document or autographed item of memorabilia, to confirm its consistency with similar
materials or items that existed during the signer’s lifetime; (ii) a comparison of the signature submitted for authentication with
exemplars of such signatures; and (iii) a handwriting analysis. As of June 30, 2009, we employed 3 autograph experts with an average
of 24 years of experience in the autograph memorabilia market, as well as other consultants that we use on a contract basis.
In June 2004, we also began offering grading services for autographs, beginning with baseballs containing a single signature
or autograph. We use uniform grading standards that we have developed and a numeric scale of 1-to-10, with the highest number
representing “Gem Mint” condition or top quality. We assign grades to the collectibles based on the physical condition or state of
preservation of the autograph. Autograph grading is in its infancy, and we cannot predict whether it will gain market acceptance.
PSE Stamp Authentication and Grading Services. In January 2000, we launched Professional Stamp Experts (PSE) as our
independent, third-party stamp authentication and grading service. We use both an adjectival system and a numeric scale from
1-to-100 to grade stamps. We assign grades based on the centering of the stamp image on the stamp paper background and the
absence or presence of other faults on the stamp. There have been viable third-party stamp authentication services in operation for
several decades, and stamp dealers and collectors had been using a subjective grading system based primarily on the centering of the
stamp image on the stamp paper background, ignoring other faults. However, prior to our entry into the stamp market, independent
third-party stamp grading was non-existent. As a result, we encountered some resistance to this concept in the stamp collectibles
market, which is steeped in tradition and slow to change, as we did from coin dealers when we launched PCGS and from trading card
dealers when we launched PSA. In October 2005 the Philatelic Foundation, based in New York, began using the numerical grades
assigned by PSE to stamps. In the spring of 2006, Scott Publishing Company, the long-time publisher of the Scott Catalogs also
began identifying the PSE numerical grades assigned to stamps that are included in its bi-annual valuing supplement to its
catalogs. These two events have established PSE’s numerical grading scale, and we believe has facilitated the continuing growth of
third-party stamp authentication and grading, throughout the philatelic industry. As of June 30, 2009, we employed 3 stamp graders,
and use another expert on a part-time basis. Those graders have an average of 26 years of experience in the collectible stamp market.
CCE Certified Coin Exchange and Collectors Corner. In September 2005, we acquired the Certified Coin Exchange (CCE),
a subscription-based, business-to-business Internet bid-ask market for third-party certified coins. CCE has been a marketplace in U.S.
certified rare coin trading between major coin dealers in the United States since 1990 with similar operations for uncertified coins
dating back to the 1960s. The CCE website now features over 170,000 bid and ask prices for certified coins at
www.certifiedcoinexchange.com The CCE provides liquidity in the geographically dispersed and highly fragmented market for rare
coins. In March 2007, we introduced the Collectors Corner, a business-to-consumer website that enables sellers on CCE to offer
many certified coins simultaneously at wholesale prices on CCE and at retail prices on Collectors Corner
(www.collectorscorner.com). Registration on Collectors Corner is free for consumers, who can search for and sort coins listed on
Collectors Corner. Coin sellers must register and pay a fixed monthly fee to CCE for access to and to effectuate sale transactions on
both CCE and Collectors Corner. Currently, there are over 100,000 collectibles, consisting primarily of coins, trading cards and
stamps that we have certified, which are offered for sale on Collectors Corner, with offering prices aggregating in excess of $85
million. The enhanced liquidity provided by CCE and Collectors Corner for certified coins, trading cards, and certified stamps, has
increased the volume and turnover of these items, which benefits us because, as a general rule, increases in sales and purchases of
coins, trading cards and stamps increases the demand for our authentication and grading services. If we succeed in growing CCE and
Collectors Corner, we believe that the CCE/Collectors Corner websites can become the preeminent online markets for PCGS certified
coins sold by dealers to other dealers, and for coins, trading cards and stamps certified by PCGS, PSA and PSE, respectively, bought
and sold between dealers and consumers.
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Publications and Advertising. We publish authoritative price guides, rarity reports and other collectibles data to provide
collectors with information that makes them better informed consumers and makes collecting more interesting and exciting. Our
publications also enable us to market our services, create increased brand awareness and to generate advertising revenues. We publish
Sports Market Report on a monthly basis primarily for distribution to approximately 7,000 PSA Collectors Club members and the
Stamp Market Quarterly for distribution to approximately 1,500 stamp dealers and collectors. We sell advertising to dealers and
vendors for placement in our publications. We manage a Collectors Universe website and individual websites for our authentication
and grading services. On those websites, we offer collectible content, relevant to the marketplace for that specific authentication and
grading service, some of which is available for a fee and some of which is available without charge. We believe our websites for
PCGS in coins and PSA in trading cards have the highest number of visitors and web traffic in their respective markets. We sell
advertising to dealers and vendors on these two websites and on the websites we maintain for PSA/DNA in autographs, PSE in stamps
and CCE and Collectors Corner in coins.
Our Mission
Our mission is to provide the finest available independent authentication and grading services to sellers and buyers of
high-value collectibles in order to:
���increase the values and liquidity of high-value collectibles;
���enable and facilitate transactions in high-value collectibles;
���generally enhance interest, activity and trading in high-value collectibles; and
���achieve profitable growth, build long-term value for our stockholders and provide rewarding opportunities for our
employees.
Our Growth Strategy
Our growth strategies include:
���Leveraging the strong-brand awareness that we have achieved in our existing collectibles markets by increasing the
demand for and use of our services not only by dealers, but also by collectors, only a relatively small percentage of
which use independent authentication or grading services; and by introducing new value-added content to customers in
our existing collectibles markets.
We are pursuing the following strategic initiatives in order to achieve these growth objectives:
Increasing the Demand for our Services in Existing Collectibles Markets. We have established leading brands in our existing
collectibles markets, including PCGS, PSA, PSA/DNA and PSE. We use those brands to promote Collectors Universe as the premier
independent provider of authentication and grading services in the high-value collectibles markets, in order (i) to increase our market
share among existing users of authentication and grading services and (ii) to increase the use of our services by the numerous
collectors that do not currently use any independent third-party authentication or grading services.
Although we have authenticated and graded over 16 million coins since the inception of PCGS and over 12 million trading
cards since the inception of PSA, we estimate that less than 10% of the vintage United States coins and vintage trading cards have
been authenticated and graded. According to recent data available on eBay’s websites, the number of coins available for sale at any
one time on eBay generally exceeds approximately 250,000, of which only approximately 10% are authenticated and graded by a
third-party authentication and grading service, such as ours. Similarly, the number of trading cards being sold at any one time on eBay
generally exceeds approximately 400,000, of which only about 10% are independently authenticated and graded. Additionally, we
estimate that we have authenticated and graded less than 5% of the potential market of autographs and stamps in the United
States. Moreover, new collectibles are introduced each year into the markets in which we operate, some of which are authenticated
and graded in the year of their introduction. Over time, these collectibles will increase the supply of vintage items that are sold by
dealers and
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collectors and, which we expect that many of them will be submitted for independent third-party authentication and grading.
To take advantage of these market opportunities, we continue to:
���enhance our marketing programs to promote our brands and services directly to Internet and other auction-related
businesses. These programs emphasize the benefits of using our services, including increased marketability and the
prospect of higher bids for collectibles;
���initiate joint marketing programs with collectibles dealers that are designed to make their customers aware of the
availability and benefits of our authentication and grading services;
���establish authorized PCGS and PSA dealer networks to increase the visibility of our brands and the use of our services
by those dealers and their customers;
���develop and expand our Set Registry
SM programs to increase demand for our collectible coin, trading card and stamp
authentication and grading services among collectors and to increase traffic on our websites;
���develop and link buying and selling demand from our Set Registry program to Collectors Corner in order to increase
the referral buyers to Collectors Corner dealer-subscribers, thereby enhancing the value of the subscription and
increasing the preference of our brands in their respective markets;
���expand the offerings and markets in which Collectors Corner provides a business-to-consumer website for the sale of
third-party collectibles certified by us;
���increase the promotion of our Collectors Clubs to attract and to provide incentives for collectors to use our services;
���participate at collectibles trade shows at which we offer on-site authentication and grading services to facilitate trading
activity at the shows; and
���expand our website information services, including auction results, reference materials and on-going price guides and
rarity reports.
Value-Added Content. We publish authoritative price guides and rarity reports for coins, trading cards, sports autographs and
memorabilia and stamps. This information is available on our website and in our publications, generally for a fee. These publications
include:
���Price Guides. We provide a wide variety of authoritative price guides for a number of collectible markets. For example,
we track the prices at which the 3,000 most actively-traded U.S. coins are sold, dating back to 1970, and compile and
publish this information in a generally recognized collectible coin index, known as the CU3000.
���Rarity Reports. We compile and publish reports that list the total number of coins and trading cards we have graded
since our inception, categorized by item type and grade determination. We can publish, for example, the exact number
of Mint State (MS) 67-grade 1881-S Morgan silver dollars that we have graded. We believe that collectors use this
information to make more informed decisions, as to rarity and value, when purchasing particular coins.
���Articles. Collecting is a passion for many and has nuances and anecdotes that are well suited to a library of articles for
each category of collectibles. We write informative articles and publish them on our websites. A sense of community
is also important to collectors. We, therefore, encourage our customers to communicate and to write articles which we
sometimes publish on our websites or include in our publications.
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���Historical Content. Collecting is often about history and, in many instances, historical events associated with a
collectible enhances its value. In our publications, we provide short histories about unusual and rare collectibles. We
believe that these historical accounts add to the attractiveness and excitement of purchasing such items. During 2004,
House of Collectibles, a division of Random House, published the second edition of the Official Guide to Coin
Grading and Counterfeit Detection, which was authored by our collectible coin experts. To enhance the historical
content that we are able to provide dealers and collectors, in the first quarter of fiscal 2006 we acquired
CoinFacts.com, which operates a website at www.coinfacts.com, at which we are now able to offer coin dealers and
collectors proprietary information about the date and mintmark combinations of U.S. Colonial Coins, early U.S. coins,
such as the Liberty Cap Half Cent of 1794, as well as the most recent U.S. minted coins, such as the Fifty State
Quarters™ and the One Ounce American Eagle Gold and Silver Bullion Coins currently being produced by the
U.S. Mint.
���News
. We provide market news and information that are accessible to collectors and dealers on our websites. The news
and information most often relate to recent events, such as sales of collectibles at record prices, the introduction of new
collectibles and trends and developments in the collectibles markets we serve.
Operations
We offer authentication and grading services for coins, trading cards, autographs and autographed memorabilia and
stamps. Our trained and experienced authentication and grading experts determine the authenticity of and, using uniform quality
standards, assign a quality grade to these collectibles.
PCGS. Since our inception in 1986, we have graded approximately 16 million coins. We now authenticate and grade
approximately 1.5 million coins per year. We typically charge authentication and grading fees that range between $5 and $200 per
coin, depending primarily on the turn-around time requested by the customer, which varies from one day for the highest level of
service to approximately 60 days for the lowest level of service. In the fiscal year ended June 30, 2009, our fee per coin averaged
approximately $12.94. We authenticate and grade coins in accordance with standards that we developed and which have become
generally accepted in the industry. We use both an adjectival and numeric system, with a scale of 1-to-70, to rate the quality of
collectible coins, with the highest number representing “gem” or perfect quality. We have authenticated and graded, either before or
after sale, two of the three highest priced U.S. coins ever sold at public auction, including an 1804 Draped Bust Silver Dollar, that was
sold by the owner at an auction in 1999 for approximately $4.1 million and a U.S. 1913 Liberty Head Nickel that was sold for
$4.15 million, the second highest price paid for any coin.
Our grading of coins involves an exacting and standardized process. We receive coins from dealers and collectors and
remove all packaging that identifies the submitter in any way. We then enter information regarding each coin into our proprietary
computerized inventory system, which tracks the coin at every stage of our authentication and grading process. Generally, our process
requires that two of our experts evaluate each coin independently, and no authenticity opinion is issued and no quality grade is
assigned unless their opinions of authenticity and the grades independently assigned by each of them are the same. In some cases,
depending on the type of coin being authenticated and graded or on the results of the initial review process, a third expert is involved
to make the final determinations of authenticity and grade. The coin, the determination of authenticity and its grade are then verified
by one of our senior experts, who have the authority to resubmit the coin for further review if deemed to be necessary. Only after this
process is complete is the coin reunited with its identifying paperwork, thus keeping the authentication and grading process
independent of the identity of the owner and the history of the coin. The coin is then sonically sealed in our specially-designed,
tamper-evident, clear plastic holder, which also encases a label describing the coin, the quality grade that we have assigned to it, a
unique certificate number and a bar code, and the PCGS hologram and brand name.
PSA. We launched our PSA trading card authentication and grading service in 1991 and, through June 30, 2009,
authenticated and graded over 12 million trading cards. Our trading card grading system uses both an adjectival and a numeric system
with a scale from 1-to-10, with the highest number representing “mint” condition or perfect quality. We employ trading card
authentication and grading procedures that are similar to our coin authentication and grading procedures and at a minimum, two
graders are assigned to every card. On receipt of trading cards from dealers and collectors, we remove all packaging that identifies the
submitter in any way and enter information regarding the trading cards into our proprietary computerized inventory system that
enables us to track the trading cards throughout our authentication and grading process. Only after the authentication and grading
process is complete is the trading card reunited with its identifying paperwork, thus keeping the authentication and grading process
independent of the identity of
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the owner and the history of the trading card. The trading card is then sonically sealed in our specially-designed, tamper-evident, clear
plastic holder, which also encases a label that identifies the trading card, the quality grade that we have assigned to it and a unique
certificate number, and the PSA hologram and brand name.
We primarily authenticate and grade baseball trading cards and, to a lesser extent, football, basketball and hockey trading
cards, as well as entertainment and other collectible cards. We typically charge fees ranging between $4 and $50 per card, with an
average fee of $5.81 per card in 2009. As is the case with coin authentication and grading, trading card authentication and grading
fees are based on the particular turn-around time requested by the submitter, ranging from one day’s turn-around for the highest level
of service to approximately 60 days for the lowest level of service.
The trading cards submitted to us for authentication and grading include primarily (i) older or vintage trading cards,
particularly of memorable or historically famous players, such as Honus Wagner, Joe DiMaggio, Ted Williams and Mickey Mantle,
and (ii) modern or newly produced trading cards of current or new athletes who have become popular with sports fans or have
achieved new records or milestones, such as Ken Griffey, Jr. and Derek Jeter. These trading cards have, or are perceived to have,
sufficient collectible value and are sold more frequently than are trading cards of less notable athletes, leading dealers and collectors to
submit them for grading to enhance their marketability. Also, the production and sale of each new series of trading cards, which take
place at the beginning and during the course of each new sports season, create new collectibles that provide a source of future
additional authentication and grading submissions to us. Among the trading cards that we have authenticated and graded is a 1909
Honus Wagner baseball card, which received a PSA grade of NM-MT8 and was sold by the owner, via auction in 2007, for
approximately $2.35 million and then resold in September 2007 for $2.8 million.
PSA/DNA. In 1999, we began offering authentication services for vintage sports autographs. Because of the variability in the
size of autographed memorabilia, the procedures we use necessarily differ from those used in authenticating and grading coins and
trading cards. Customers may ship the autographed memorabilia to us for authentication at our offices or, in the case of dealers or
collectors that desire to have a large number of items authenticated, we will sometimes send an expert to the customer’s location for
“on-site” examination and authentication. Our experts reference what we believe is one of the largest databases of known genuine
examples of signatures for comparison to a submitted specimen and draw upon their training and experience in handwriting analysis.
In most cases, we take a digital photograph of the autographs that we authenticate and store those photographs in a master
database. Before shipping the item back to the customer, a tamper-evident label is affixed to the collectible. The label contains our
PSA/DNA name and logo and a unique certificate number. For additional security, in all cases when an item is fully authenticated, we
tag the items with synthetic DNA-laced ink, which is odorless, colorless and tasteless and visible only when exposed to a narrow band
wavelength of laser light using a hand-held, battery-powered lamp. Additional verification can be obtained by a chemical analysis of
the ink to verify the unique DNA code used by PSA/DNA is, in fact, applied to the item. As a result, if the label is removed from the
item, it is still possible to verify that the item was authenticated by us.
Memorabilia that have been authenticated by our vintage autograph service include Mark McGwire’s 70th home run
baseball, which was sold at auction in 1999 for more than $3 million, and the baseball bat, autographed by Babe Ruth, which he used
to hit the first home run ever hit in Yankee Stadium in 1923. That bat was sold by Sotheby’s for more than $1.2 million.
We also offer grading services for autographs. We use uniform grading standards that we have developed to assign two
grades to the collectible, one based on the physical condition or state of preservation of the autograph and the other based on the
physical condition of the collectible, using a numeric scales of 1-to-10, with the highest number representing “Gem Mint” condition or
perfect quality.
PSE. We commenced our PSE stamp authentication and grading service in January 2000. In rating the quality of stamps, we
assign a numeric grade to each stamp that ranges from 1-to-100. The grade assigned to a stamp is based on several characteristics,
including the centering of the image on the stamp and the absence or presence of various faults, such as creases, perforation problems
and other imperfections that, if present, will reduce the value of the stamp. For a stamp to receive a grade of 100, which means that it
is in “gem” condition, the image on the stamp must be perfectly centered and the stamp must be faultless. Stamps submitted to us for
grading are independently examined and graded by at least two of our stamp experts. After a stamp has been authenticated and
graded, we generally issue a certificate of authentication that briefly describes the stamp and the grade assigned to it and has a digital
image of the stamp attached. The certificate bears the PSE name and logo and a unique certification number that we assign to the
stamp for record-
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keeping purposes. We also offer our customers the option of having the stamp encapsulated in a tamper-evident, clear plastic holder
with an encased label that, like the certificate, identifies the stamp and sets forth the grade assigned to it, its unique certification
number and the PSE name and logo.
Stamps that have been authenticated and graded by us include an 1868 1¢ “Z” Grill U.S. postage stamp, which received a
PSE grade of (XF) 90, indicating its quality was “Extremely Fine,” and which was last sold at auction in 1989 for more than
$900,000. The owner submitted the stamp to us shortly after we initiated our stamp authentication and grading service in 2000.
The volume of stamp authentication and grading submissions through fiscal 2009, relative to the number of coin and trading
card submissions, has not been material. Since stamp grading services are relatively new to the market, we cannot predict when or
even whether our services will gain the level of market acceptance needed for stamp grading to become a material contributor to our
operating results.
Marketing
We employ both “pull” and “push” strategies in marketing our services to dealers and collectors of high-value
collectibles. For collectibles, our “pull” strategies are designed to promote our brands and increase the preference among collectors
for our authentication and grading services and to encourage collectors to communicate that preference to their collectibles dealers,
because most authentication and grading submissions are made by dealers. In our experience, if a customer requests a particular
grading service, the dealer ordinarily will comply with that request. On the other hand, if the customer expresses no preference, the
dealer will make its own choice of authentication and grading service or may even decide not to submit the collectible to an
independent service for authentication and grading. Therefore, our “pull” oriented marketing programs emphasize (i) the protections
that collectors and retail customers will have if they purchase collectibles, that we have authenticated and graded, and (ii) the
improved marketability and higher prices that they and the associated retailers can realize if they use our independent third-party
authentication and grading services. Our “Push” Strategy, on the other hand, is designed to market our services directly to
collectibles dealers to encourage them to use and promote our services.
Our “Pull” Strategy. We have developed and implemented a number of marketing programs and initiatives designed to create
consumer preference for collectibles that have been authenticated and graded by us. Those programs and initiatives include:
���Direct Advertising. We directly address collectors by advertising our services in trade journals and periodicals in each of
our markets. Those journals include Coin World, Numismatic News and Linn’s Stamp News. We make personal
appearances at major, national-market and international trade shows around the World that are attended by collectors, as
well as dealers. We also participate in and support programs conducted by non-profit associations whose members are
primarily collectors, such as the American Numismatic Association and the American Stamp Dealers Association.
���Set Registry Programs
. We provide collectors with the opportunity to participate in free Internet “Set Registry”
programs that we host on our collectibles websites. These programs encourage collectors to assemble full sets of related
collectibles that have been authenticated and graded by us. Generally, each registered set is comprised of between 50
and 200 separate, but related, collectibles. Examples include particular issues of coins, such as Twenty Dollar Gold
Double Eagles or Morgan Silver Dollars; particular sets of trading cards, such as all Hall of Fame pitchers or a particular
team, like the 1961 Yankees; or sets of collectible stamps, such as Columbian Commemoratives or Graf Zeppelin
Airmail stamps. Our Set Registry programs enable collectors:
— to register their sets on our websites, which provides them with an off-site reference source for insurance and
informational purposes;
— to display on our websites, and compare the completeness and quality grades of, the collectibles making up their sets
to those of other collectors who have registered similar sets on our websites, thereby creating a competitive aspect to
collecting that adds to its excitement; and
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— to enter our annual Company-sponsored Set Registry competitions and awards programs in which collectors can win
awards for having collected the most complete and highest graded sets of particular series or issues of coins, trading
cards or stamps.
The collectibles that may be registered on our Set Registries and included in our Set Registry competitions are limited to
collectibles that have been authenticated and graded by us. To register the collectibles to be included in a particular set,
a collector is required to enter the unique certificate number that we had assigned to each of the collectibles when last
authenticated and graded by us. We use the certificate number to compare the information being submitted by the
collector with our database of information to verify that the collectibles being registered by a participant for inclusion in
a particular set qualify to be included in that set. We have found that our Set Registry competitions (i) create a
preference and increase demand among collectors for our brands, and (ii) promote the trading of collectibles
authenticated and graded by us by set registrants seeking to improve the completeness and overall quality of their sets,
which generally results in additional authentication and grading submissions to us. Annual awards for set completeness
and quality have been issued by PCGS and PSA each year since 2002 and by PSE beginning in 2004. As an indication
of the popularity of our Set Registry programs, more than 88,000 sets were registered on our Set Registries as of June 30,
2009, which represents a 22% increase over the number registered as of June 30, 2008.
���Collectors Clubs Subscription Program . We also have established “Collectors Clubs” for coin, currency and trading
card collectors. For an annual membership fee, ranging from $50 to $200, collectors receive a number of benefits,
including (i) the right to have, without any further charge, a specified number of collectibles authenticated and graded by
us, a privilege that non-member collectors do not have; and (ii) access to certain proprietary data that we make available
on our websites or in print. As of June 30, 2009, there were approximately 18,000 members in our Collectors Clubs.
���Certified Coin Exchange Business-to-Business Website
. The Certified Coin Exchange (CCE) website, which we
purchased in 2005, is a business-to-business website for recognized dealers in the trade. Currently, there are over
170,000 certified coins being offered at bid and ask at an aggregate value of approximately $200 million. The liquidity
afforded the units traded on CCE increases the demand for PCGS certified coins.
���Collectors Corner Business-to-Consumer Website
. We have launched Collectors Corner (www.collectorscorner.com),
which is a business-to-consumer website where consumers can visit, identify, search, sort over and select for purchase
coins, trading cards and items of currency that have been certified by us and are being offered for sale by
dealers. Currently, there are approximately 100,000 collectibles listed for sale on Collectors Corner. All items on
Collectors Corner are offered by dealer members who have applied for the right to offer such collectibles on Collectors
Corner. We believe that Collectors Corner has advantages over other business-to-consumer websites because the
counterparties to the consumer have been accepted as sellers on the Collectors Corner website and are known members
of the marketplace and selling community. Items listed are at fixed prices with the opportunity to negotiate lower
prices. We believe that the increased turnover offered for items listed on Collectors Corner, as well as the ability to use
Collectors Corner to improve a trading card set in the PSA Set Registry, create increased brand preference for PCGS,
PSA and PSE authenticated and graded items.
Our “Push” Strategy. We also market our services directly to collectibles dealers and auctioneers to promote their use of our
authentication and grading services. Our marketing message is focused on the potential increase in marketability of the collectibles
due to the increase in consumer confidence that is attributable to our independent authentication and grading of those
collectibles. These marketing programs include:
���Trade Publication Advertising and Direct Communications
. We communicate to dealers and auctioneers by direct
contact and through advertising in trade journals and publications in the respective markets. Those journals include Coin
World, Numismatic News and Linn’s Stamp New . We also communicate with our dealers and with auctioneers by direct
mail, email, and telephone.
���Trade Shows and Conventions
. There are numerous collectibles trade shows and conventions held annually in the
United States, of which approximately 15 generally are considered to be the largest and most significant in the collectible
coin, trading card, autograph and stamp markets. At these shows and conventions, collectibles dealers gather on a
trading floor or “bourse” to buy and sell collectibles. We offer
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same day, on-site authentication and grading services, which facilitate the trading and sales of collectibles at these shows
and conventions. At the same time, we obtain additional brand exposure and generate increased revenues, because
dealers and collectors generally are willing to pay higher fees for same day, on-site services.
���In July 2006, we acquired Expos Unlimited LLC (“Expos”), a trade show management company that operates two of the
larger and better known coin, stamp and collectibles shows in Long Beach and Santa Clara, California,
respectively. This acquisition assures us of the continued availability of these two show venues for our onsite
authentication and grading services, provides us a platform for inaugurating and conducting collectibles shows in our
other markets and adds management personnel who are experienced in managing and conducting collectibles trade
shows.
���Authorized Dealer Network
. We have implemented authorized dealer programs for coin and trading card collectibles
dealers and auction companies. Authorized dealers are able to use our marketing materials which are designed to
promote our services and those of our authorized dealers to collectors. Those materials include “point of sale” and
“point of purchase” displays and brochures and direct mail pieces for insertion in customer mailings. In addition,
authorized dealers may use our brand logotypes on their websites to attract buyers for coins and trading cards that have
been authenticated and graded by us. We also conduct joint marketing programs with our authorized dealers in which
we provide financial support for dealer marketing programs, approved by us, that promote both the dealer’s products and
services and our authentication and grading services.
Intellectual Property
Our intellectual property consists primarily of trademarks, copyrights, proprietary software and trade secrets. As part of our
confidentiality procedures, we generally enter into agreements with our employees and consultants and limit access to, and
distribution of, our software, documentation and other proprietary information. The following table sets forth a list of our trademarks,
both registered and unregistered, that are currently being used in the conduct of our business:
Registered Marks
Unregistered Marks
World Series of
Grading
CU3000
PSE
History in Your
Hands
Collectors Universe
PCGS
Professional Sports
Authenticator
PSA
PSA/DNA
First Strike
Quick Opinion
Sports Market Report
Coin Universe
Collectors.com
Record Universe
PCGS Currency
Set Registry
Expos Unlimited
Long Beach Coin, Stamp and
Collectibles Expo
Santa Clara Coin, Stamp and
Collectibles Expo
We have not conducted an exhaustive search of possible prior users of the unregistered trademarks listed above and,
therefore, it is possible that our use of some of these trademarks may conflict with others.
Collectibles Experts
As of June 30, 2009, we employed 35 experts in our authentication and grading operations, who have from 7 to 51 years, and
an overall average of 29 years, of experience. Our experts include individuals that either (i) had previously been collectibles dealers
or were recognized as experts in the markets we serve, or (ii) have been trained by us in our authentication and grading methodologies
and procedures, and/or had experience in grading in competing organizations. However, talented authentication and grading experts
in collectibles are in short supply and there is considerable competition among collectibles authentication and grading companies for
their services. As a result, we have recently increased our focus on training young authenticators and graders who we believe have the
skills or knowledge base to become collectibles experts. We also sometimes contract with outside experts, usually collectibles
dealers, to assist us with special grading issues or to enable us to address short-term increases in authentication and grading orders.
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Service Warranties
We issue an authenticity or grading warranty with every coin and trading card authenticated or graded by us. Under the
terms of the warranty, if a coin or trading card that was graded by us later receives a lower grade upon resubmission to us for grading,
we are obligated either to purchase the coin or trading card at the price paid by the then-owner of the coin or trading card or, instead, if
we so choose, to pay the difference in value of the item at its original grade as compared with its lower grade. Similarly, if a coin or
trading card that has been authenticated by us is later determined not to have been authentic, we are obligated under our warranty to
purchase the coin or trading card at the price that the then-owner paid for that collectible. We accrue for estimated warranty costs
based on historical claims experience. In the second quarter, and early in the third quarter of fiscal 2008, we incurred warranty claims
that were significant in relation to our historical claims experience and, as a result, we recognized, in the second quarter of 2008, an
additional expense of $822,000 for those claims. We also decided to increase our warranty accrual rate, effective January 1, 2008, to
reflect this higher warranty claims experience, and we will continue to monitor the adequacy of our warranty reserves on an on-going
basis. If warranty claims were to increase in relation to historical trends and experience, management would be required to increase
the warranty reserves and incur additional charges that would have the effect of reducing income in those periods during which the
warranty reserve is increased. Before returning an authenticated or graded coin or trading card to our customer, we place the coin or
trading card in a tamper-evident, clear plastic holder that encapsulates a label identifying the collectible as having been authenticated
and graded by us. The warranty is voided in the event the plastic holder has been broken or damaged or shows signs of tampering.
We do not provide a warranty with respect to our opinions regarding the authenticity or quality of autographs.
Customer Service and Support
We devote significant resources, including a 21-person staff, who provide personalized customer service and support in a
timely manner handling approximately 200 customer service calls per day and support our Set Registry and trade show programs. On
our websites, customers are able to check the status of their collectibles submissions throughout the authentication and grading process
and to confirm the authenticity of the collectibles that we have graded. When customers need services or have any questions, they can
telephone or e-mail our support staff, Monday through Friday between the hours of 7:00 A.M. and 5:00 P.M., Pacific Time. We also
involve our collectibles experts in providing support services when necessary to address special issues.
Supplies
In order to obtain volume discounts, we have chosen to purchase most of the injection-molded plastic parts for our clear
plastic holders principally from a single supplier. There are numerous suppliers for these items, however, and we believe that, if
necessary, we could obtain those items from any of those other suppliers without significant cost to us. However, if it were to become
necessary for us to obtain another supplier, we might have to arrange for the fabrication of a die for the new supplier. Fabrication of
high-value precision dies can be a lengthy process. Therefore, it is our practice to maintain at least a one month supply of these
molded plastic parts in inventory.
Competition
Coin Authentication and Grading. We have three primary competitors in the coin authentication and grading market:
Numismatic Guaranty Corporation of America (“NGC”), Independent Coin Grading and ANACS.
Trading card Authentication and Grading. We have two primary competitors in trading card authentication and grading:
Beckett Trading card Grading Corporation, and Trading Card Guaranty, LLC.
Autograph Authentication and Grading. In the vintage autograph authentication market, we compete with James Spence
Authentication (“JSA”) and a few smaller competitors.
Stamp Authentication and Grading. In stamp authentication, our principal competitors are the Philatelic Foundation and the
American Philatelic Society, both of which are non-profit organizations. The Philatelic Foundation also grades stamps.
14
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
The principal competitive factors in our collectibles authentication and grading markets are (i) brand recognition and
awareness, (ii) an established reputation for integrity, independence and consistency in the application of grading standards, and
(iii) responsiveness of service. Price is much less of a factor in the case of vintage collectibles, but is a more important consideration
with respect to modern coins and trading cards because of their significantly lower values. We believe that our PCGS, PSA,
PSA/DNA, and PSE brands compete favorably with respect to all of these factors and are among the leaders in each of their respective
markets. Barriers to entry into the authentication and grading market are relatively low, especially in the trading card authentication
and grading market. However, brand name recognition and a reputation for integrity, independence and consistency in the application
of grading standards can take several years to develop. The limited supply of experienced collectibles experts also operates as a
barrier to entry or expansion.
Information Technology
We have developed proprietary software systems for use in our authentication and grading operations, principally for order
tracking, processing and recordkeeping, as well as for the operation and maintenance of our Internet websites. These software systems
include Grading Management and Production Systems, Set Registry, Population Reports, Price Guides, Market Indexes, Article
Libraries, QuickOpinion Systems and Featured Dealer Systems. These applications are written in Microsoft Visual Basic.NET,
Microsoft C#, Microsoft ASP.NET and Microsoft SQL Server. We also have legacy systems, which we are in process of replacing, in
Cold Fusion and Visual Basic 6. Additionally, we maintain an integrated local area network that assists in and provides certain
controls on production, physical product movement, accounting and financial functions, data warehousing and other tasks. During the
fiscal year ending June 30, 2009, our systems tracked the authentication and grading process, generating records and data for
approximately 3,000,000 collectibles submitted to us for authentication and grading, without significant disruption or loss of service.
Although we do not primarily conduct our business on the Internet, we do use the Internet for information exchange and
delivery of market-oriented content, as well as for our Set Registry and certain of our other marketing programs. As a result, we have
over 55 Dell PowerEdge Servers with RAID protected storage, along with multiple fully redundant SQL Server 2000 and 2005
high-availability database clusters supporting over 10 terabytes of storage. The majority of this hardware resides at our headquarters
in a server room that has 24/7 environmental monitoring and alerting through hardware sensors, 24/7 network availability and
performance monitoring and alerting through network management software and 24/7 Internet availability and performance
monitoring and alerting through third-party providers. The Internet connectivity flows through multiple Internet providers with an
aggregate of 47 megabits of total Internet bandwidth using multiple layers of Internet firewall protection, including 5 Cisco PIX
firewalls (across multiple locations). We maintain a multi-tiered antivirus infrastructure. We use the FrontBridge Anti-Spam
managed service, which deploys multiple layers of technology to provide preventative and protective spam defense. Critical systems
are backed up nightly using a backup infrastructure with a 30 terabyte capacity (expandable through drive upgrades to hundreds of
terabytes). The network servers and infrastructure are managed by administrators certified by Microsoft, Cisco and CompTIA.
As a result, any damage to, or failure of, our computer systems due to a catastrophic event in Southern California, such as an
earthquake, could cause an interruption in our services.
Government Regulation
With the exception of laws in some states that require memorabilia authenticators to certify to the accuracy of their
authentication opinions, there are no material government regulations specifically relating to the authentication and grading businesses
that we conduct, other than regulations that apply generally to businesses operating in the markets where we maintain operations or
conduct business. However, our dealer finance program will be subject to numerous laws and regulations in those states in which we
may make loans to dealers.
Employees
As of June 30, 2009, we had 180 full-time employees and 36 part-time employees (primarily security personnel), of which
160 were employed in our authentication and grading-related businesses, including our 35 experts and 21 customer service and
support personnel. The other employees included 4 in information services, 4 in marketing, 4 in our CCE subscription business, 24 in
our Expos business, of which 23 were part-time employees, and 20 in other business and administrative services. We have never had
a work stoppage, and no employees are represented under collective bargaining agreements. We consider relations with our
employees to be good.
15
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
ITEM 1A RISK FACTORS
Our business is subject to a number of risks and uncertainties that could prevent us from achieving our business objectives
and that could hurt our future financial performance and the price performance of our common stock. Such risks and uncertainties
also could cause our future financial condition and future financial performance to differ significantly from our current expectations,
which are described in the forward-looking statements contained in this Annual Report. Those risks and uncertainties, many of which
are outside of our control, include the following:
A decline in the popularity of high-value collectibles and a resulting decrease in submissions for our services could adversely
impact our business.
The volume of collectibles submitted to us for authentication and grading is affected by the demand for and market value of
those collectibles. As the demand for and value of collectibles increase, authentication and grading submissions, as well as requests
by submitters for higher price, faster turn-around times, also increase. However, that also means that a decline in popularity and,
therefore in the value, of the collectibles that we authenticate and grade would cause decreases in authentication and grading
submissions and in the requests we receive for faster turn-around times and, therefore, also in our revenues and profitability. We have
found, over the years, that the popularity of collectibles can vary due to a number of factors, most of which are outside of our control,
including perceived scarcity of collectibles, general consumer confidence and trends and their impact on disposable income, precious
metals prices, interest rates and other general economic conditions.
Declines in general economic conditions could result in decreased demand for our services, which could adversely affect our
operating results.
The availability of discretionary or disposable income and the confidence of collectors and dealers about future economic
conditions are important factors that affect the willingness and ability of collectors and consumers to purchase, and the prices that they
are willing to pay for, high-value collectibles. Additionally, declines in the confidence and reductions in the cash flows of, and
reductions in credit that is available to collectibles dealers, can adversely affect their ability to purchase high-value collectibles and to
sell collectibles that may have declined in value due to adverse changes in economic conditions of this nature. Declines in purchases
and sales, and in the value of collectibles usually result, in turn, in declines in the use of authentication and grading services, as such
services are most often used by sellers and purchasers of collectibles in conjunction with and to facilitate sale and purchase
transactions. As a result, economic uncertainties, downturns and recessions can and do adversely affect our operating results by
(i) reducing the frequency with which collectibles dealers and collectors submit their coins, trading cards and other collectibles for
authentication and grading including, in particular, modern coins, trading cards and stamps, primarily because authentication and
grading fees are relatively high in relation to the value of such collectibles; (ii) causing collectibles dealers and collectors to request
longer turn-around times with respect to the collectibles they submit to us for grading, which would reduce our revenues, gross profit
margin and operating results, and (iii) reducing the ability of customers to pay outstanding accounts receivable.
The continuing economic recession and credit crisis in the United States that adversely affected our revenues in fiscal 2009
may lead to continued declines in our revenues and financial results.
Revenues in all our grading and authentication businesses declined by 9% in fiscal year 2009, compared to fiscal year 2008,
which we believe was primarily due to the economic recession and banking and credit crisis that prevailed throughout fiscal 2009 and
which are continuing into fiscal 2010. While our total coin grading and authentication revenues increased by 14% in the fourth
quarter of fiscal 2009, compared to the fourth quarter of 2008, there is no assurance that this represents a trend that will continue into
2010 nor that our other grading and authentication businesses will continue to experience declines in revenues in the fourth quarter of
fiscal 2009, compared to the same period of the prior year. We believe, uncertain economic conditions and the lack of credit will
continue to make business conditions challenging and could adversely affect our results of operations in fiscal 2010.
16
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
Temporary popularity of some collectibles may result in short-term increases, followed by decreases, in the volume of
submissions for our services, which could cause our revenues to fluctuate.
Temporary consumer popularity or “fads” among collectors or the popularity of certain marketing programs may lead to
short-term or temporary increases, followed by decreases, in the volume of collectibles that we authenticate and grade. These trends
may result in significant period-to-period fluctuations in our operating results and could result in declines in our net revenues and
profitability, not only because of a resulting decline in the volume of authenticating and grading submissions, but also because such
trends could lead to increased price competition, which could require us to reduce our authentication and grading fees in order to
maintain market share.
Our revenues and income depend significantly on revenues generated by our coin authentication and grading services. A
decrease in the level of submissions for these services, which historically has been impacted by changes in economic conditions,
could adversely affect our revenues and results of operations.
Coin authentication and grading, related services and product sales accounted for approximately 58%, 58% and 60% of our
net revenues in fiscal 2009, 2008 and 2007, respectively. We believe fluctuations in coin grading submissions can be due, at least in
part, to (i) economic downturns which can result in a decline in consumer confidence and disposable income and, therefore, the
willingness of dealers and collectors to buy collectible coins, and (ii) the performance of the stock markets, the level of interest rates
and fluctuations in the value of the U.S. Dollar, which can lead investors to shift some of their investments between stocks and bonds
and precious metals. The lack of diversity in our sources of revenues and our dependence on coin authentication and grading
submissions for a majority of our net revenues make us more vulnerable to adverse changes in these economic conditions. These
adverse changes include fluctuations in the value of precious metals or recessionary conditions that could result in declines in
collectibles authentication and grading submissions generally or, more particularly, in collectible coin submissions that would, in turn,
result in reductions in our total net revenues, gross margin and operating results.
Our top five customers account for approximately 10% of our total net revenues.
During the year ended June 30, 2009, five of our customers accounted, in the aggregate, for approximately 10% of our total
net revenues. As a result, the loss of any of those customers, each of which is a collectibles dealer, or a lower level of grading
submissions by any of those customers, could cause our net revenues to decline and, therefore, could harm our operating
results. Moreover, historically, same day on-site authentication and grading submissions at trade shows, on which we realize higher
margins than on other submissions, have represented a significant portion of the authentication and grading submissions we have
received from these customers. Consequently, a material decline in trade show attendance or submissions by these customers would
adversely affect our revenues and gross margin and, therefore, our operating results in the future.
There are risks associated with new service offerings, with which we have little experience.
We seek to introduce new services that we might offer to our existing authentication and grading customers as a means of
increasing our net revenues and profitability. Those new services, however, may prove to be unprofitable and negatively impact our
operating results.
We are dependent on our key management personnel.
Our performance is greatly dependent on the performance of our senior management and certain other key employees. As a
result, the loss of the services of any of our executive officers or other key management employees could harm our business. Some of
our executive officers and key employees are experts in the collectibles markets and have industry-wide reputations for authentication
and grading of collectibles. In particular, the loss of David G. Hall, our President, could have a negative effect on our reputation for
expertise in the collectible coin market and could lead to a reduction in coin authentication and grading submissions to us.
We are dependent on our collectibles experts.
In certain of our markets, there are a limited number of individuals who have the expertise to authenticate and grade
collectibles, and competition for available collectibles experts is intense. Accordingly, our business and our growth initiatives are
heavily dependent on our ability (i) to retain our existing collectibles experts, who have developed relatively
17
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
unique skills and enjoy a reputation for being experts within the collectibles markets, and (ii) to implement personnel programs that
will enable us to add collectibles experts, as necessary, to grow our business and offset employee turnover that can occur from time to
time. If we are not successful in retaining our existing collectibles experts or in hiring and training new collectibles experts, this could
limit our ability to grow our business and adversely affect our operating results and financial condition. Moreover, some of our
experts could leave our Company to join a competitor or start a competing business.
We could suffer losses on authentication and grading warranties.
We issue an authenticity or grading warranty with every coin, trading card and stamp that we authenticate or grade. Those
warranties provide that:
���if any coin, trading card or stamp that we authenticated and sealed in our tamper-evident plastic cases is later
determined not to have been genuine, we would have to purchase the collectible at the price paid for it by its then
owner; and
���if any coin, trading card or stamp that we graded and sealed in our tamper-evident plastic cases later receives a lower
grade upon resubmission to us for grading, we would be obligated either to purchase the collectible at the price paid by
its then owner or to pay the difference in its value at its original grade, as compared to its value at the lower grade.
We have no insurance coverage for claims made under these warranties and, therefore, we maintain reserves for such
warranty claims based on historical experience. However, there is no assurance that these warranty reserves will prove to be adequate
and, if they are not, our gross margin and operating results could be harmed. As a result, we monitor the adequacy of our warranty
reserves on an on-going basis. During 2008, we unexpectedly received certain coin grading warranty claims that were significant
when compared to our prior warranty claims experience. As a result, we recognized an additional expense of $822,000 in the second
quarter of 2008 to provide for those claims. We also increased our warranty accrual rate, effective January 1, 2008, to reflect this
higher warranty claims experience. Those actions contributed to an increase in our costs of sales in fiscal year 2008 and, therefore,
reduced the earnings that we would otherwise have earned from our continuing operations.
Increased competition could adversely affect our financial performance.
Although there are few major competitors in the collectibles authentication and grading markets in which we currently
operate, competition in these markets is, nevertheless, intense. Increased competition in our collectibles markets could adversely
affect our pricing and profit margins and our ability to achieve further growth, and we cannot provide assurances that we will continue
to be successful in competing against existing or future competitors in our collectibles markets. Also, if we were to enter into new
collectibles markets, it is likely we would face intense competition from competitors in those markets who are likely to have greater
brand name recognition and long term relationships with collectibles dealers and individual collectors in those markets than we will
have. Such competition could adversely affect our ability to generate profits and could cause us to incur losses in those markets and
damage our financial condition.
We may be unable to sublet leased facilities that we no longer occupy in New York, which could adversely affect
our cash flows.
We continue to have obligations to pay rent and other charges under two leases for office facilities in New York City that had
been occupied by our jewelry businesses prior to our discontinuance of and exit from those businesses in fiscal 2009. The remaining
duration of those leases is more than seven years ending in 2017, during which we are obligated to pay rent and other charges under
those leases which, as of June 30, 2009, totaled approximately $7,800,000. In an effort to reduce those financial obligations, we have
engaged an independent commercial real estate brokerage firm to find subtenants for these offices. The extent to which we will be
able to reduce those obligations will depend primarily on the time it will take to sublet those offices and rents we will be able to
charge the subtenants, which will be determined primarily by economic conditions in the New York City rental market over which we
have no control. As a result, we can not predict the extent to which we will be able to reduce those financial obligations and until such
time as we are able to sublet these facilities, we will have to pay the rents and other charges under the leases for these facilities, which
will reduce our cash flows and, therefore, could adversely affect our financial condition and increase the losses from discontinued
operations that we will have to record in the future, which will have the effect of reducing our net earnings.
18
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
Due to the uncertainties regarding the extent to which we will be able to reduce the financial obligations under those leases
by subletting the offices, we established accruals totaling $4,454,000 for the rents and other charges that we estimated we will have to
pay through the expiration of the leases. If conditions in the rental market in New York City were to continue to deteriorate, it would
become necessary for us to increase the accrual by a charge to discontinued operations that would have the effect of reducing our net
earnings.
Our reliance on a single source for principally all of our “tamper-evident,” clear plastic coin and trading card holders exposes
us to potential supply and quality problems.
We place all of the coins, trading cards and currency notes, and sometimes also the stamps that we authenticate and grade, in
tamper-evident, clear plastic holders. In order to take advantage of volume pricing discounts, we purchase substantially all of those
holders, on a purchase order basis, from one principal supplier. Our reliance on a single supplier for a substantial portion of those
plastic holders exposes us to the potential for delay in our ability to deliver timely authentication and grading services in the event that
supplier were to terminate its services to us or encounter financial or production problems. If, in such an event, we were unable to
obtain replacement holders in a relatively short period of time, we could lose customer orders, or incur additional production costs. In
addition, if the replacement holders were not of comparable quality to our existing supplier, we could expose ourselves to the potential
for additional warranty claims in the event that tampering with our holders was not evident. These occurrences could cause a decline
in our net revenues and increases in our costs of sales which would have a material adverse effect on our results of operations.
Our computer and network systems may be vulnerable to unforeseen problems and security risks, and we are vulnerable to
system failure due to a lack of redundant systems at another location.
Our operations are dependent upon our ability to protect our computer systems that we use in our authentication and grading
operations and to maintain our websites against damage from fire, power loss, telecommunications failure, earthquakes and similar
catastrophic events. In this regard, Southern California, where we are primarily located, is particularly vulnerable to earthquakes and
fires that could result in damage to our computer systems. We do not have redundant computer systems at any locations that are
remote from Southern California. Any damage to or failure of our computer systems could cause an interruption in our services that
could harm our business, operating results and financial condition.
In addition, our operations are dependent on our ability to protect our computer systems and network infrastructure from
damage that could occur from physical break-ins, security breaches and other disruptive problems caused by the technology that we
employ in our operations. Computer break-ins and security breaches also could jeopardize the security of information stored in and
transmitted through our computer systems and network infrastructure, which could cause us to incur significant liability and possibly
also damage our reputation. Other disruptions due to problems on the Internet or actions of Internet users could make it difficult for
our customers to access our websites. In either case, problems of this nature could adversely affect our business and operating results,
and security breaches that would adversely affect the privacy of customer information could lead existing customers to terminate their
business relationships with us. Although we intend to continue to implement and upgrade sophisticated technology to prevent such
disruptions and damage, there is no assurance that our security measures will prove to be adequate or successful.
We rely on third parties for various Internet and processing services.
Our operations depend on a number of third parties for Internet access and delivery services. We have limited control over
these third parties and no long-term relationships with any of them. For example, we do not own a gateway onto the Internet, but,
instead, rely on Internet service providers to connect our website to the Internet. Should the third parties that we rely on for Internet
access or delivery services be unable to serve our needs for a sustained time period as a result of a strike, natural disaster or for any
other reason, our revenues and business could be harmed.
Acquisitions and the commencement of new businesses present risks, and we may be unable to achieve the financial and
strategic goals of any acquisition or commencement of any new business.
While we are not currently focused on business acquisitions, there may be opportunities that present themselves in the future
to acquire existing businesses or commence new businesses that would give us the opportunity to offer additional services to our
existing customers or enter into new markets and, thereby increase our revenues and our earnings. The purchase or commencement of
a new business presents a number of risks and uncertainties, including
19
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
(i) difficulties in integrating the new business into our existing operations, as a result of which we may incur increased operating costs
that can adversely affect our operating results; (ii) the risk that our current and planned facilities, computer systems and personnel and
controls will not be adequate to support our expanded operations; (iii) diversion of management time and capital resources from our
existing businesses, which could adversely affect their performance and our operating results; (iv) dependence on key management
personnel of the acquired or newly started businesses and the risk that we will be unable to integrate or retain such personnel; and
(v) the risk that the anticipated benefits of any acquisition or of the commencement of any new business may not be realized, in which
event we will not be able to achieve an acceptable return or we may incur losses on our investment.
We are exposed to potential risks and we will continue to incur costs as a result of the internal control testing and evaluation
process mandated by Section 404 of the Sarbanes-Oxley Act of 2002.
Although we have documented and tested the effectiveness of our internal controls over financial reporting, as required by
Section 404 of the Sarbanes-Oxley Act of 2002 since fiscal 2005, we expect we will continue to incur costs in order to maintain
compliance with that Section of the Sarbanes-Oxley Act. Moreover, if our efforts to comply with new or changed laws, regulations
and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to our practices, or if our
internal procedures applied for testing internal controls prove to be inadequate, our reputation may be harmed or we may be subject to
litigation.
We depend on our ability to protect and enforce our intellectual property rights.
We believe that our patents, trademarks and other proprietary rights are important to our success and competitive position.
We rely on a combination of patents, trademarks, copyright and trade secret laws to establish and protect our proprietary
rights. However, the actions we take to establish and protect our intellectual and other proprietary rights may prove to be inadequate
to prevent imitation of our services or products or to prevent others from claiming violations of their intellectual and proprietary rights
by us. In addition, others may develop similar trade secrets or other intellectual property independently or assert rights in our
intellectual and other proprietary rights that could lead them to seek to block sales of our services based on allegations that use of
some of our marks or other intellectual property constitutes a violation of their intellectual property rights.
Our unregistered trademarks could conflict with trademarks of others.
We have not conducted an exhaustive search of possible prior users of our unregistered trademarks or service marks,
including Coin Universe, Collectors.com and PSE. Therefore, it is possible that our use of some of these trademarks or service marks
may conflict with the rights of others. As a result, we could face litigation or lose the use of some of these trademarks or service
marks, which could have an adverse effect on our name recognition and result in a decrease in our revenues and an increase in our
expenses.
The imposition of government regulations could increase our costs of doing business.
With the exception of state laws applicable to autograph authentication, the collectible coin and other high-value collectibles
markets are not currently subject to direct federal, state or local regulation. However, from time to time government authorities
discuss additional regulations which could impose restrictions on the collectibles industry, such as regulating collectibles as securities
or requiring collectibles dealers to meet registration or reporting requirements, or regulating the conduct of auction
businesses. Adoption of laws or regulations of this nature could lead to a decline in sales and purchases of collectibles and, therefore,
also to a decline in the volume of coins, trading cards and other collectibles that are submitted to us for authentication and grading.
The repurchase of our shares of common stock in July 2009 may reduce the public float for our shares, which may reduce
trading activity and adversely affect the trading value and liquidity of our common stock.
In July 2009, we completed a modified “Dutch Auction” tender offer pursuant to which we repurchased a total of 1,749,828
of our outstanding shares of common stock, reducing the number of our shares that are outstanding to approximately 7,408,516. Of
those outstanding shares, affiliates of the Company own a total of approximately 1,275,000 shares, the salability of which is restricted
under applicable securities laws and which are, as a result, not included in our public float. As a result, the trading volume of our
shares may decline, which would reduce the liquidity of our shares, making it more difficult for our stockholders to sell their shares
and could depress, and make it more difficult to achieve increases in, the trading prices of our shares.
20
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
If our quarterly results are below the expectations of securities market analysts and investors, the price of our common stock
may decline.
Many factors, including those described in this “Risk Factors” section, can affect our business, financial condition and results
of operations, which makes the prediction of our future financial results difficult and uncertain. These factors include:
���increases or decreases in number of collectibles graded from period to period;
���changes in market conditions that can affect the demand for our authentication and grading services, such as a decline in
the popularity of certain collectibles and volatility in the prices of gold and other precious metals;
���changes in economic conditions that reduce the availability of disposable income and may cause collectors and
collectibles dealers to reduce their purchases of collectibles, which could result in declines in the demand for the services
we provide; and
���the actions of our competitors.
If, as a result of these or other conditions or factors, our quarterly operating results fall below expectations, securities market
analysts may downgrade our common stock and some of our stockholders may sell their shares, which could adversely affect the
trading prices of our common stock. Additionally, in the past, companies that have experienced declines in the trading price of their
shares due to events of this nature have been the subject of securities class action litigation. If we become involved in a securities
class action litigation in the future, it could result in substantial costs and diversion of our management’s attention and resources, thus
harming our business.
Provisions in our charter documents or in Delaware law may make an acquisition of us more difficult or delay a change in
control, which may adversely affect the market price of our common stock.
Our Amended and Restated Certificate of Incorporation and Bylaws contain anti-takeover provisions, including those listed
below, that could make it more difficult for a third party to acquire control of us, even if that change of control would be beneficial to
our stockholders:
���our board of directors has the authority to issue additional common stock and preferred stock and to determine the
price, rights and preferences of any new series of preferred stock without stockholder approval;
���there are limitations on who can call special meetings of our stockholders; and
���stockholders may not take action by written consent.
In addition, provisions of Delaware law and our stock incentive plans may also discourage, delay or prevent a change in
control or unsolicited acquisition proposals.
Furthermore, on January 9, 2009, the Company’s Board of Directors unanimously adopted a limited duration Stockholder
Rights Plan, which could make a takeover attempt more costly for a potential acquirer and could delay or even prevent a change of
control.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None
21
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
ITEM 2. PROPERTIES
We lease approximately 46,000 square feet for our California-based headquarters under a nine-year lease that expires on
March 31, 2019. We currently sublease 2,184 square feet of this office space to a related party sub-tenant with an expiration date that
coincides with the expiration of the Company's lease. In connection with our Expos shows management business, we lease
approximately 1,000 square feet in Santa Barbara, CA under a lease agreement with a related party on a month-to-month basis.
Although we discontinued and exited our jewelry authentication and grading businesses in March 2009, we continue to be
obligated to pay rent and other charges under two leases, expiring in 2017, for a total of approximately 12,000 square feet of office
facilities that had formerly been occupied by those businesses in New York City. We are seeking to sublet those offices in order to
reduce our financial obligations under those leases. However, there are no assurances that we will succeed in subletting those offices
on terms that would significantly offset our financial obligations under the leases. See Risk Factors -- We may be unable to sublet
leased facilities that we no longer occupy in New York City, which could adversely affect our cash flows” in Item 1A above and
“Management Discussions and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources --
Outstanding Financial Obligations” for additional information regarding these lease obligations.
ITEM 3. LEGAL PROCEEDINGS
We are sometimes named as a defendant in lawsuits that arise in the ordinary course of business. We do not believe that any
of those lawsuits that are currently pending is likely to have a material adverse effect on our business, financial condition or results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
22
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
EXECUTIVE OFFICERS OF REGISTRANT
Name
Michael J. McConnell
David G.
Hall
Joseph J.
Wallace
Age
43
62
49
Positions
Chief Executive Officer
President
Chief Financial Officer
MICHAEL J. MCCONNELL, has served as Chief Executive Officer since April 1, 2009. He is a private investor. From
1998 to September 30, 2008, Mr. McConnell was a Managing Director of Shamrock Capital Advisors, Inc., which is a manager of
private equity, real estate and direct investment funds, including the Shamrock Activist Value Funds. Mr. McConnell also served as a
member of that firm’s Executive Committee. Prior to joining Shamrock in 1994, Mr. McConnell held various positions at PepsiCo,
Merrill Lynch and Kidder Peabody. Mr. McConnell formerly served on the boards of Ansell Limited, Nuplex Industries, Force
Corporation, iPass, Inc., and Port-link International. Mr. McConnell also serves on the Board of Governors of Opportunity
International. Mr. McConnell received his B.A. in economics from Harvard University and his MBA degree (with
distinction—Shermet Scholar) from the Darden School of the University of Virginia.
DAVID G. HALL has served as President of Collectors Universe, Inc. since September 2001. From April 2000 to
September 2001, Mr. Hall served as our Chairman of the Board and Chief Executive Officer. Mr. Hall also served as Chairman of the
Board and a Director of Professional Coin Grading Services, Inc., the Company’s predecessor, since it was founded in February 1986
and also served as its President and Chief Executive Officer until January 1999. Mr. Hall was honored in 1999 by COINage Magazine
as Numismatist of the Century, along with 14 others. In 1990, Mr. Hall was named an Orange County Entrepreneur of the Year by
INC. magazine. In addition, he has written A Mercenary’s Guide to the Rare Coin Market, a book dedicated to coin collecting. Mr.
Hall is also a member of the Professional Numismatists Guild.
JOSEPH J. WALLACE became the Company’s Chief Financial Officer in September 2005. Prior to becoming Chief
Financial Officer, he was the Company’s Vice President of Finance from November 2004 and Controller from June 2004. From 1997
to 2003, Mr. Wallace was Vice President of Finance, Chief Financial Officer and Secretary of STM Wireless, Inc., a public traded
company engaged in the business of developing, manufacturing and marketing satellite communications products and services. Mr.
Wallace is a Fellow of the Institute of Chartered Accountants in Ireland, and a CPA in the State of California.
23
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
PART II
ITEM 5. MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Our common stock is listed on the Nasdaq Global Market, trading under the symbol CLCT. The following table sets forth
the high and low closing prices of our common stock, as reported by NASDAQ, and the cash dividends that we paid to our
stockholders, in each of the fiscal quarters in the fiscal years ended June 30, 2009 and 2008. The stock prices and dividends per share
have been retroactively adjusted for the 10% stock dividend issued in November 2008.
Fiscal 2009
Closing Share Prices
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Fiscal 2008
First Quarter
Second Quarter
Third Quarter
First Quarter
High
Low
$
8.45
6.83
4.18
5.20
$
5.88
2.42
2.64
3.91
Closing Share Prices
High
Low
13.86
12.32
10.75
9.26
$
$
11.39
9.20
7.67
7.11
$
$
$
$
$
Cash
Dividend
Per Share
0.23
-
-
-
Cash
Dividend
Per Share
0.23
0.23
0.23
0.23
We had 73 holders of record and approximately 2,091 beneficial owners of our common stock as of June 30, 2009.
Dividends. In the fourth quarter of fiscal 2006, our Board of Directors approved a dividend policy that called for the payment
of regular quarterly cash dividends to our stockholders, initially in the amount of $0.07 per share per quarter, as adjusted retroactively
for the aforementioned 10% stock dividend. That quarterly dividend rate was subsequently increased on two occasions by our Board
of Directors and, during fiscal 2008, we paid quarterly cash dividends of $0.23 per common shares, as adjusted retroactively for the
aforementioned 10% stock dividend. As a result, we paid cash dividends in fiscal 2008 totaling $8,517,000.
As we had previously disclosed, the continued payment of cash dividends was subject to change or discontinuance based a
number of factors, including our financial performance and changes in market and financial conditions. On September 26, 2008, the
Board of Directors determined that, due primarily to adverse market and economic conditions, including the liquidity crisis in the
United States, the prudent course of action would be, and the Board of Directors voted, to suspend the future payment of cash
dividends in order to preserve the Company’s cash resources. At the same time, the Board of Directors approved a 10% stock
dividend on the Company’s outstanding shares that was issued in November 2008. During fiscal 2009, prior to that suspension of
dividend payments, the cash dividends we had paid to our stockholders totaled $2,090,000.
Share Buyback Program. In December 2005, our Board of Directors approved a share buyback program that authorized us to
repurchase up to $10,000,000 of our shares of common stock in open market or privately negotiated transactions, in accordance with
applicable Securities Exchange Commission (“SEC”) rules, when opportunities to make such repurchases, at attractive prices, became
available. During the fiscal years ended June 30, 2009, 2008 and 2007, we repurchased a total of 120,000, 232,152, and 72,517
shares, respectively, of our common stock under this program for aggregate purchase prices of approximately $484,000, $2,198,000
and $945,000, respectively (excluding transaction costs). We currently have $3.7 million available for share purchases under the
share buyback program.
24
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The selected operating data for the fiscal years ended June 30, 2009, 2008 and 2007, and the selected balance sheet data at
June 30, 2009 and 2008 set forth below are derived from the Company’s audited consolidated financial statements included elsewhere
in this Annual Report. The selected operating data for the fiscal years ended June 30, 2006 and 2005 and the related balance sheet
data at June 30, 2007, 2006 and 2005 were derived from audited consolidated financial statements that are not included in this Annual
Report. The following data should be read in conjunction with our consolidated financial statements and the related notes thereto and
with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included below in this Annual
Report.
Continuing Operations. In fiscal 2009, with the approval and at the direction of our Board of Directors, we discontinued and
disposed of our diamond and colored gemstone (“jewelry”) authentication and grading businesses effective as of March 2, 2009,
which were operated by Gem Certification and Assurance Lab, Inc. (“GCAL”) and American Gemological Laboratories, Inc.
(“AGL”) and sold our currency authentication and grading business effective as of February 4, 2009.
Consequently, the results of our continuing operations, as set forth in the table below, consist primarily of the results of
operations of our collectible coin, trading card, autographs and memorabilia, and stamp authentication grading businesses for each of
the fiscal years in the five year period ended June 30, 2009 and the results of operations of CoinFacts.com and Certified Coin
Exchange (“CCE”), from their respective dates of acquisition in fiscal 2005 and Expos LLC (“Expos”), from the date of its acquisition
in fiscal 2006.
Discontinued Operations. The results of our discontinued operations reflect (i) the operating activities of GCAL (including
Gemprint) and AGL from the dates of their acquisition in November 2005 and August 2006, respectively, impairment charges
recognized in connection with those businesses in fiscal 2008 and 2009 and losses incurred in connection with the closure and sales of
assets of those businesses in fiscal 2009, which include certain accruals for on-going real estate lease obligations of those businesses
established in fiscal 2009, (ii) the operating activities of our currency authentication and grading business from the date of its
commencement in fiscal 2005 and a loss incurred on its sale in February 2009, and (iii) to a much lesser extent, the remaining disposal
activities following the disposition, in fiscal 2004, of our collectibles sales businesses.
25
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
Consolidated Statement of Operations Data:
Net revenues(1)
Cost of revenues
Gross profit(1)
Selling, general and administrative expenses
Impairment losses
Amortization of intangible assets
Operating income
Interest income, net
Other income, net
Income before income taxes
Provision for income taxes
Income from continuing operations
Loss from discontinued operations, net of loss on
sales
of discontinued businesses (net of income
taxes)(2)
Net income (loss)
Net income (loss) per basic share:
Income from continuing operations
Loss from discontinued operations, net of loss on
sales
of discontinued businesses (net of income
taxes)
Net income (loss)
Net income (loss) per diluted share:
Income from continuing operations
Loss from discontinued operations, net of loss
on sales of discontinued businesses (net of
income taxes)
Net income (loss)
Weighted average shares outstanding:
Basic
Diluted
$
$
$
$
$
$
Cash dividends paid on common stock
Cash dividends paid per share of common stock
$
$
2009
Years Ended June 30,
2008
2006
2007
(In thousands, except per share data)
2005
35,914 $
16,385
19,529
15,921
649
871
2,088
284
14
2,386
1,183
1,203
39,505 $
19,779
19,726
17,930
-
490
1,306
1,138
6
2,450
2,155
295
38,686 $
16,736
21,950
18,444
16
505
2,985
2,149
7
5,141
2,336
2,805
36,060 $
14,074
21,986
16,567
-
17
5,402
2,349
26
7,777
3,390
4,387
33,540
12,172
21,368
14,177
-
-
7,191
906
26
8,123
3,230
4,893
(18,126)
(16,923) $
(15,927)
(15,632) $
(3,320)
(515) $
(687)
3,700 $
(75)
4,818
0.13 $
0.03 $
0.30 $
0.47 $
0.63
(1.99)
(1.86) $
(1.71)
(1.68) $
(0.36)
(0.06) $
(0.07)
0.40 $
(0.01)
0.62
0.13 $
0.03 $
0.30 $
0.45 $
0.60
(1.98)
(1.85) $
9,103
9,135
2,090 $
0.23 $
(1.69)
(1.66) $
9,295
9,419
8,517 $
0.91 $
(0.35)
(0.05) $
9,204
9,462
3,350 $
0.36 $
(0.07)
0.38 $
9,320
9,660
674 $
0.07 $
(0.01)
0.59
7,714
8,197
-
-
Balance Sheet Data:
2009
2008
At June 30,
2007
(In thousands)
2006
2005
$
Cash and cash equivalents
Working capital – continuing operations
Working capital (deficit)– discontinued operations
Goodwill and Intangibles – continuing
Goodwill and Intangibles – discontinued
Total assets – continuing operations
Total assets – discontinued operations
Stockholders' equity
23,870 $
23,108
(1,725)
5,402
-
35,989
284
24,779
23,345 $
26,771
(774)
6,661
5,805
42,567
9,451
43,830
42,386 $
42,720
(511)
5,935
17,315
57,315
20,786
68,891
52,110 $
54,844
44
2,866
11,607
65,470
12,751
71,906
65,439
68,565
349
79
-
75,092
442
70,566
1.
Include revenues from product sales, consisting primarily of sales of coins purchased under our warranty policy, of $394,000,
$1,046,000 and $284,000 in fiscal 2009, 2008 and 2007, respectively, and less than $50,000 in each of fiscal 2005 and
2006. Such product revenues are not considered an integral part of our on-going revenue generating activities. The gross margin
on product sales were (51)%, 7% and 33%, in fiscal 2009, 2008 and 2007, respectively.
2. Discontinued operations include aggregate impairment losses in 2009 and 2008 of $7,695,000 and $11,233,000, respectively, and
a loss on the closure of our jewelry businesses in fiscal 2009 of approximately $5,188,000, inclusive of an accrual for on-going
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
real estate lease obligations of those businesses. See note 4 to our Consolidated Financial Statements below in Item 8, Financial
Statements and Supplementary Data.
26
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with
the “Selected Consolidated Financial Data” and our Consolidated Financial Statements and related notes, included elsewhere in
Part II of this Annual Report. This discussion also should be read in conjunction with the information in Item IA of Part I of this
Report, entitled “Risk Factors,” which contains information about certain risks and uncertainties that can affect our business and our
financial performance in the future.
Introduction and Overview
Our Business
We provide grading and authentication services to dealers and collectors of high-value coins, trading cards, event tickets,
autographs, memorabilia and stamps (“collectibles”). We believe that our authentication and grading services add value to these
collectibles by enhancing their marketability and thereby providing increased liquidity to the dealers, collectors and consumers that
own, buy and sell them.
Once we have authenticated and assigned a grade to a collectible, we encapsulate it in a tamper-evident, clear plastic holder,
or issue a certificate of authenticity, that (i) identifies the specific collectible, (ii) sets forth the quality grade we have assigned to it and
(iii) bears one of our brand names and logos: “PCGS” for coins, “PSA” for trading cards and event tickets, “PSA/DNA” for
autographs and memorabilia and “PSE” for stamps. Additionally, we warrant our certification of the authenticity and the quality
grade that we assign to the coins, trading cards, currency and stamps bearing our brands. We do not warrant the authenticity
determinations we make with respect to autographs.
We principally generate revenues from the fees paid for our authentication and grading services. To a much lesser extent, we
generate revenues from other related services consisting of: (i) the sale of advertising on our websites; (ii) the sale of printed
publications and collectibles price guides and advertising in such publications and on our website; (iii) the sale of membership
subscriptions in our Collectors Club, which is designed principally to attract interest in high-value collectibles among new collectors;
(iv) the sale of subscriptions to our CCE dealer-to-dealer Internet bid-ask market for certified coins; and (v) the collectibles trade show
conventions that we conduct. We also generate revenues from sales of our collectibles inventory, which is comprised primarily of
collectible coins that we have purchased under our coin grading warranty program; however, these activities are not the focus of or an
integral part of our business.
Acquired Businesses in our Continuing Operations. On July 14, 2005, we purchased, for an aggregate purchase price of
$515,000 in cash, substantially all the assets of CoinFacts.com, which operated an Internet website on which it published detailed
proprietary information and history on U.S. Coins.
On September 2, 2005, we acquired, for an aggregate purchase price of $2,377,000 in cash, the common stock of Certified
Coin Exchange (“CCE”), which operates a subscription-based dealer-to-dealer Internet bid-ask market for third-party certified
coins. An affiliated, but unrelated business, CTP, was acquired as part of this acquisition and was disposed of by us in November
2005.
Effective July 1, 2006 we acquired, for an aggregate purchase price of $2,475,000 in cash, all of the outstanding ownership
interests of Expos Unlimited LLC (“Expos”), a California limited liability company engaged in the business of owning and conducting
collectibles trade shows and conventions.
Discontinued Operations
During the period from fiscal 2006 through the latter part of fiscal 2009, we were also engaged in the business of
authenticating and grading diamonds and colored gemstones (the “jewelry businesses”) and currency.
In the second quarter of fiscal 2009, the Board of Directors approved a plan to dispose of our currency grading and
authentication business, which we sold in February, 2009.
27
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
In March, 2009 our Board of Directors adopted a plan to dispose of our jewelry businesses in order to focus our financial and
managerial resources, and expertise, on our collectible coin, trading card, autographs and memorabilia and stamp authentication and
grading businesses (our “collectibles businesses”). The decision to implement this plan was based on a number of factors and
considerations that included, among others, the continued operating losses of the jewelry businesses, which had proved to be
disappointing and had not met expectations; the current economic climate prevailing in the United States, which has materially and
adversely affected the jewelry and other luxury goods markets; and the additional capital that would be required to grow the jewelry
businesses in comparison to the lower capital requirements of our collectibles grading and authentication businesses. See
BUSINESS—Recent Developments—Discontinued Operations of Collectibles Sales Businesses” in Part I of this Report. Pursuant to
that plan, in March 2009 we discontinued our jewelry businesses and have disposed of substantially all the assets of our jewelry
businesses.
In the fourth quarter of fiscal 2009, the Board of Directors decided that we cease internal development of the business or
assets of the Gemprint identification technologies, which we acquired in fiscal 2006, and we are currently in the process of selling the
Gemprint assets.
In accordance with Statement of Financial Accounting Standard ("SFAS") No. 144, the assets and related liabilities of these
businesses and their related operating results were classified as discontinued operations in our consolidated financial statements and
prior period financial statements have been restated on that same basis. See “Selected Financial Data” and our Consolidated
Financial Statements contained in Item 8 in Part II of this Report.
Additionally, as a result of our divestiture of our jewelry and currency authentication and grading businesses and their
classification as discontinued operations, our collectibles authentication and grading businesses comprise our continuing operations
and the discussion that follows focuses almost entirely on those businesses
Factors That Can Affect Operating Results and our Financial Position
Factors that Can Affect our Revenues. Our revenues generated by our continuing operations are comprised of (i) fees
generated by our authentication and grading of high-value collectibles, and (ii) to a lesser extent, revenues from sales of collectibles
club memberships, advertising on our websites and in printed publications and collectibles price guides, subscription-based revenues
primarily generated by our CCE dealer-to-dealer Internet bid-ask market for collectible coins that have been authenticated and graded
(collectively, “certified”) and fees earned from the management, operation and promotion of collectibles trade shows and
conventions. Our revenues also include revenues from sales of products, which consist primarily of coins that we purchase under our
warranty policy. However, those revenues, which vary from period to period depending on the volume and dollar amounts of the coin
warranty claims we receive, are not the focus and do not constitute an integral part of our business.
Our authentication and grading fees accounted for approximately 80% of our total net revenues in the fiscal years ended June
30, 2009 and 2008, respectively, and 84% in fiscal 2007. The amounts of such revenues are primarily affected by (i) the volume and
mix of authentication and grading submissions among coins and trading cards, on the one hand, and other collectibles on the other
hand, (ii) in the case of coins and trading cards, the “turn-around” times requested by our customers, because we charge higher fees
for faster service times, and (iii) the mix of authentication and grading submissions between vintage or “classic” coins and trading
cards, on the one hand, and modern coins and trading cards, on the other hand, because dealers generally request faster turn-around
times for vintage or classic coins and trading cards than they do for modern submissions, as vintage or classic collectibles are of
significantly higher value and are more saleable by dealers than modern coins and trading cards.
Our revenues also are affected by the level of coin authentication and grading submissions we receive at collectibles trade
shows where we provide on-site authentication and grading services to show attendees, because they typically request higher priced
same-day turn-around for the coins they submit at those shows. The level of trade show submissions will vary from period to period
depending upon a number of factors, including the number and the timing of the shows, the volume of collectible coins bought or sold
at those shows by dealers and collectors, and short-term decisions made by dealers during shows, In addition, the number of such
submissions and, therefore, the revenues we generate from the authentication and grading of coins at trade shows can be impacted by
short-term changes in the price of gold that sometimes occur around the time of the shows, which can affect the volume of coin
transactions that take place at the shows.
28
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
Five of our coin authentication and grading customers accounted, in the aggregate, for approximately 10% of our total net
revenues in the fiscal year ended June 30, 2009. As a result, the loss of any of those customers, or a significant decrease in the volume
of grading submissions from any of them to us, would cause our net revenues to decline and, therefore, could adversely affect our
results of operations.
Factors Affecting our Gross Profit Margins. The gross profit margins we earn on collectibles authentication and grading
submissions also are primarily affected by (i) the volume and mix of those submissions among coins, trading cards and other
collectibles, because we generally realize higher margins on coin submissions than on submissions of other collectibles; (ii) in the case
of coins and trading cards, the “turn-around” times requested by our customers, because we charge higher fees for faster service times,
and (iii) the mix of authentication and grading submissions between vintage or “classic” coins and trading cards, on the one hand, and
modern coins and trading cards, on the other hand, because dealers generally request faster turn-around times for vintage or classic
coins and trading cards than they do for modern submissions. Furthermore, because a significant proportion of our costs of sales are
fixed in nature in the short-term, our gross profit margin is also affected by the overall volume of collectibles that we authenticate and
grade in any period.
Impact of Economic Conditions on our Financial Performance. We generate all of our revenues from continuing operations
from the collectibles markets. As a result, the demand for our services and, therefore, our revenues, depend to a great extent on the
volume of purchases and sales of the high-value collectibles that we authenticate, because dealers and collectors most often submit
collectibles to us for authenticating and grading in anticipation of or in connection with their sales and purchases of those collectibles
(“collectibles transactions”). The volume of collectibles transactions is, in turn, primarily affected by (i) the disposable income
available to collectors and their confidence about future economic conditions, because high-value collectibles are generally viewed as
luxury goods and are purchased with disposable income; (ii) the cash flows generated by collectibles dealers and their confidence
about future economic conditions, which affect the willingness of such dealers to purchase collectibles for resale; (iii) the availability
and cost of borrowings because collectibles dealers often rely on borrowings to fund their purchases of collectibles, (iv) prevailing and
anticipated rates of inflation, because the threat of and actual increases in inflation often lead investors and consumers to purchase
gold and silver coins as a hedge against inflation, and (v) the performance and volatility of the gold and other precious metals markets
and the stock markets, which affects the level of purchases and sales of collectible coins, because investors and consumers will often
increase their purchases of gold coins if they believe that the market prices of gold will increase or the prices of stock will decline. As
a result, generally, collectibles transactions and, as a result, the demand for our authentication and grading services, increase during
periods characterized by economic growth, accessibility to lower cost borrowings, or increases in inflation or in gold prices. By
contrast, collectibles transactions and, therefore, the demand for our services generally decline during periods characterized by
economic downturns or recessions, declines in consumer and business confidence, an absence of inflationary pressure, or declines in
the market prices of gold. However, these conditions can sometimes counteract each other as it is not uncommon, for example, for
investors to shift funds from gold to stocks during periods of economic growth and consumer and business confidence.
The current economic recession in the United States, continued uncertainty about the ultimate severity and duration of that
recession, declines in cash flow that is available to collectibles dealers as a result of the credit crisis (which has made it difficult for
collectibles dealers to obtain borrowings to fund their purchases) and the carrying costs of maintaining an inventory of high-value
collectibles, combined to reduce the volume of collectibles transactions and the demand for our services during the fiscal year ended
June 30, 2009. As a result, during that year, we experienced declines in the demand for and in the revenues generated by all of our
authentication and grading businesses.
The following tables provide information regarding the respective number of coins, trading cards, autographs and stamps that
we graded or authenticated in the fiscal years ended June 30, 2009, 2008, and 2007.
Coins
Trading cards
Autographs
Stamps
Total
2009
1,456,100
1,171,600
168,100
25,700
2,821,500
Units Processed
2008
52%
41%
6%
1%
100%
1,474,900
1,329,500
199,600
53,000
3,057,000
2007
48%
43%
7%
2%
100%
1,558,700
1,262,700
169,800
66,200
3,057,400
51%
41%
6%
2%
100%
29
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
The following table sets forth the estimated values at which our customers insured the coins, trading cards, autographs and
stamps that they submitted to us for grading or authentication.
Coins
Trading cards
Autographs
Stamps
Total
2009
$ 1,119,000
79,000
15,000
22,000
$ 1,235,000
Declared Values (000)
2008
2007
91% $ 1,327,000
90,000
26,000
25,000
100% $ 1,468,000
6%
1%
2%
90% $ 1,435,000
88,000
24,000
12,000
100% $ 1,559,000
6%
2%
2%
92%
6%
1%
1%
100%
Factors That Can Affect our Financial Position. A substantial number of our authentication and grading customers prepay
our authentication and grading fees when they submit their collectibles to us for authentication and grading. As a result, historically,
we have been able to rely on internally generated cash and have never incurred borrowings to fund our continuing operations. We
expect that internally generated cash flow will be sufficient to fund our continuing operations.
Besides the day to day operating performance of our business, our overall financial position can also be affected by the
Company’s capital raising or stock buyback activities, the dividend policy adopted by the Board of Directors from time to time, and
the Company’s decisions to invest in and to fund the acquisition of new established businesses and or early-stage businesses. In
addition, our financial position reflects the Company’s tax position in that the Company may only be required to pay minimum taxes,
when it has net operating losses available to offset current period taxable income and the investment policy adopted for its cash
balances, as this will impact the level of interest income earned on those cash balances.
Trends and Challenges in and Opportunities for our Businesses
The principal trends affecting our business are the economic recession and credit crisis, and uncertainties as to the ultimate
severity and duration are continuing to adversely affect collectibles commerce and, as a result, the demand for our services and, hence,
our revenues.
We do not know and cannot predict, with any level of assurance, the changes in the spending and savings habits of
consumers and collectibles dealers and the effect of these changes on our business. As a result, we will continue to focus on
(i) achieving further reductions in our cost structure for cost of sales and our selling, general and administrative expenses during fiscal
2010 as a means to offset the potential impact of the economic recession and credit crisis on our net revenues and (ii) developing new
sources of revenues within the collectibles market, in order to increase our net revenues and, together with costs savings, to increase
our profitability.
30
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
Overview of Fiscal 2009 Operating Results
The following table sets forth comparative financial data for the years ended June 30, 2009 and 2008.
Net revenues
Cost of revenues
Gross profit
Selling and marketing expenses
General and administrative expenses
Impairment losses
Amortization of intangible assets
Operating income
Interest income, net
Other income
Income before provision for income taxes
Provision for income taxes
Income from continuing operations
Loss from discontinued operations
Net loss
Net loss per diluted share:
Income from continuing operations
Loss from discontinued operations
Net loss
Year Ended June 30, 2009
Percent of
Revenues
Amount
Year Ended June 30, 2008
Percent of
Revenues
Amount
$
$
$
$
35,914
16,385
19,529
4,306
11,615
649
871
2,088
284
14
2,386
1,183
1,203
(18,126)
(16,923)
0.13
(1.98)
(1.85)
100.0% $
45.6%
54.4%
12.0%
32.4%
1.8%
2.4%
5.8%
0.8%
-
6.6%
3.3%
3.3%
(50.4)%
(47.1)% $
$
$
39,505
19,779
19,726
5,137
12,793
-
490
1,306
1,138
6
2,450
2,155
295
(15,927)
(15,632)
0.03
(1.69)
(1.66)
100.0%
50.1%
49.9%
13.0%
32.4%
-
1.2%
3.3%
2.9%
-
6.2%
5.5%
0.7%
(40.3)%
(39.6)%
As the above table indicates, despite a $3.6 million, or 9.1% decrease in net revenues in fiscal 2009, as compared to fiscal
2008, our gross profits declined by only $197,000, or 1%, and our operating income (inclusive of an impairment loss of $649,000),
increased by $782,000, or 60%, in fiscal 2009, compared with 2008.
Due primarily to an $854,000 decrease in interest income in fiscal 2009, as compared to 2008, which more than offset the
increase in operating income that we achieved, our pre-tax income decreased by $64,000, or 2.6%, in 2009, compared to 2008. That
decrease in interest income was attributable to the combined effects of declines in our average cash balances and prevailing interest
rates during fiscal 2009.
The improved operating performance primarily reflects cost reductions and efficiencies implemented in fiscal 2009 and the
absence of the increased warranty costs of $822,000 that we recognized in fiscal 2008. See “Critical Accounting Policies and
Estimates – Grading Warranty Costs” below.
The loss from discontinued operations in fiscal 2009 of $18,126,000 was, primarily, the result of the operating losses,
impairment losses and losses we recognized on the closure and disposal of our former jewelry authentication and grading businesses
and our currency grading business that we exited in fiscal 2009. The losses on the closure and disposal of our jewelry businesses
included $4,000,000 for on-going lease commitments and other charges that we will have to pay under leases for office facilities, in
New York City, that had been occupied by our jewelry businesses prior to our discontinuance of and exit from those businesses. At
June 30, 2009, the amount of such accrual was $4,454,000.
These, as well as other factors affecting our operating results in the fiscal 2009, are described in more detail below. See
“Results of Operations”.
Critical Accounting Policies and Estimates
General. In accordance with accounting principles generally accepted in the United States of America (“GAAP”), we record
our assets at the lower of cost or fair value. In determining the fair value of certain of our assets, principally accounts and notes
receivable and inventories, we must make judgments, estimates and assumptions regarding circumstances or trends that could affect
the value of those assets, such as economic conditions or trends that could impact our ability to fully collect our accounts receivable or
realize the value of our inventories in future periods. Those judgments, estimates, and assumptions are based on current information
available to us at that time. Many of those conditions, trends and circumstances, however, are outside of our control and, if changes
were to occur in the events,
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
31
trends or other circumstances on which our judgments or estimates were based, or other unanticipated events were to happen that
might affect our operations, we may be required under GAAP to adjust our earlier estimates. Changes in such estimates may require
that we reduce the carrying value of the affected assets on our balance sheet (which are commonly referred to as “write-downs” of the
assets involved).
It is our practice to establish reserves or allowances to record such downward adjustments or write-downs in the carrying
value of assets, such as (for example) accounts and notes receivable and inventory. Such write-downs are recorded as charges to
income or increases in expense in our statement of operations in the periods when those reserves or allowances are established or
increased to take account of changed conditions or events. As a result, our judgments, estimates and assumptions about future events
and changes in the conditions, events or trends upon which those estimates and judgments were made, can and will affect not only the
amounts at which we record such assets on our balance sheet, but also our results of operations.
The decisions as to the timing of adjustments or write-downs of this nature also require subjective evaluations or assessments
about the effects and duration of events or changes in circumstances. For example, it is difficult to predict whether events or
conditions, such as increases in interest rates or economic slowdowns, will have short or longer term consequences for our business,
and it is not uncommon for it to take some time after the occurrence of an event or the onset of changes in economic circumstances for
their full effects to be recognized. Therefore, management makes such estimates based upon the information available at that time and
reevaluates and adjusts its reserves and allowances for potential write-downs on a quarterly basis.
During fiscal year 2006 and in the first quarter of fiscal year 2007, we acquired certain businesses and assets (some of which
are now classified as part of discontinued operations, as we have closed, or disposed of or are in the process of selling such assets)
and, in accordance with GAAP, we accounted for those acquisitions using the purchase method of accounting. That accounting
method required us to allocate amounts paid for those businesses in excess of the fair value of the assets acquired and the liabilities
assumed, and to classify that excess as goodwill. In accordance with GAAP, we evaluate goodwill for impairment at least annually or
more frequently if we believe that goodwill has been impaired in the interim due to changing facts or events (see “Goodwill”
below). Other intangible assets that are separable from goodwill and have definite lives are subject to amortization over their
remaining useful lives (see “Long-Lived Assets Other Than Goodwill” below). Indefinite-lived intangible assets are subject to
on-going evaluation for impairment. Management formally evaluates the carrying value of its goodwill and other indefinite-lived
intangible assets for impairment on the anniversary date of each of the business acquisitions that gave rise to the recording of such
assets. In the event it is determined, from any such impairment analysis, that the estimated fair value of any such assets has declined
below their carrying values, it would become necessary for us to recognize an impairment charge that would have the effect of
reducing our income in the period when that charge is recognized.
We also estimate losses associated with the disposal of a business or the sale of assets when a decision has been made to
dispose of or discontinue such business. In accordance with GAAP, assets available for sale are stated at the lower of costs or their net
realizable value. In addition, the estimated fair value of liabilities for employee terminations is recognized as of the date such
terminations are communicated to the affected employees and for lease obligations as of the date we cease using the real property or
equipment subject to the lease.
In making our estimates and assumptions, we follow GAAP in order to enable us to make fair and consistent estimates of the
fair value of assets and to establish adequate reserves or allowances for possible write-downs in the carrying values of our assets.
Set forth below is a summary of the accounting policies and critical estimates that we believe are material to an
understanding of our financial condition and results of operations.
Revenue Recognition Policies. We generally record revenue at the time of shipment of the authenticated and graded
collectible to the customer. Due to the insignificant delay between the completion of our grading and authentication services and the
shipment of the collectible or high-value asset back to the customer, the time of shipment corresponds to the completion of our
services. Many of our authentication and grading customers prepay our authentication and grading fees when they submit their
collectibles to us for authentication and grading. We record those prepayments as deferred revenue until the collectibles have been
authenticated and graded and shipped back to them. At that time, we record the revenues from the authentication and grading services
we have performed for the customer and
32
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
deduct this amount from deferred revenue. For certain dealers to whom we extend open account privileges, we record revenue at the
time of shipment of the authenticated and graded collectible to the dealer.
With respect to our Expos trade show business, we recognize revenue generated by the promotion, management and
operation of each of its collectibles conventions or trade shows in the fiscal period in which the convention or show takes place.
A portion of our net revenues is comprised of subscription fees paid by customers for memberships in our Collectors
Club. Those memberships entitle members to access our on-line and printed publications and, sometimes also to vouchers for free
grading services from us. We record revenue for this multi-element service arrangement in accordance with EITF 00-21, Accounting
for Revenue Arrangements With Multiple Deliverables, by recognizing approximately 60% of the subscription fee in the month
following the membership purchase, on the basis that Collectors Club members typically utilize their vouchers for free grading
services within 30 days of subscribing for memberships. We review this estimate at least semi-annually by recalculating the
percentage based on the relative values of the various elements in the Collectors Club offering and determining the appropriate
percentage to attribute to the grading services and the remaining subscription. Our estimates have proven to be consistently around
60% on an on-going basis. The balance of the membership fee is recognized as revenue over the life of the membership, which can
range from one to two years.
We recognize the revenue from the sale of a product when it is shipped to the customer and all the requirements of Staff
Accounting Bulletin No. 104, Revenue Recognition, issued by the Securities and Exchange Commission (“SEC”), have been
satisfied. Such products consist primarily of collectible coins that we purchased pursuant to our coin authentication and grading
warranty program and such sales are not considered an integral part of our on-going revenue generating activities.
Accrual for Losses on Facility Leases. As a result of the discontinuance of and our exit from the jewelry authentication and
grading businesses, we ceased the occupancy of facilities we had leased for their operations. We have retained a commercial real
estate broker to sublease those facilities on our behalf. At March 31, 2009, we recorded an expense of approximately $3,100,000 to
establish loss accruals totaling $3,740,000 for estimated losses under those leases. The amount of those lease accruals was determined
based on estimates on a discounted basis of (i) prevailing sublease rates in the real estate market where those facilities are located as
compared to our rental obligations under the leases; (ii) the time we expect it will take to sublet those facilities; and (iii) other direct
costs associated with the leases. Such estimates were reviewed and updated to approximately $4,454,000 based on an updated market
analysis at June 30, 2009. Such estimates continue to be uncertain due to the economic recession which has led to substantial
increases in vacancies and, therefore, in the space available for lease in commercial office buildings in the market where these
facilities are located. As a result, we will continue to review and, if necessary, make adjustments to the accruals on a quarterly
basis. If it becomes necessary to increase those accruals in the future as a result of, for example, changes in our estimate of market
rents or our estimate of the time it will take to sublet the facilities, such increases will be classified as an increase in the loss from
discontinued operations.
Accounts Receivable, Notes Receivable and the Allowance for Doubtful Accounts. In the normal course of our authentication
and grading business, we extend payment terms to many of the larger, more creditworthy dealers who submit collectibles to us for
authentication and grading on an-going basis. In addition, primarily in connection with our dealer financing program, we have made
advances or extended credit under notes receivable arrangements with selected dealers. We regularly review our accounts and notes
receivable, estimate the amounts of, and establish an allowance for, uncollectible accounts or notes in each quarterly period. The
amount of that allowance is based on several factors, including the age and extent of significant past due accounts, and in the case of
customer notes receivable, the current value of the collateral we hold as security for the payment obligations under the notes
receivable, and known conditions or trends that may affect the ability of account debtors or note obligors to pay their accounts or notes
receivable balances. Each quarter we review our estimates of uncollectible amounts and, if necessary, adjust the allowance to take
account of changes in economic or other conditions or trends that we believe will have an adverse effect on the ability of any of the
account debtors or note obligors to pay their accounts or notes in full. Since the allowance is increased by recording a charge against
income that is reflected in general and administrative expenses, an increase in the allowance will cause a decline in our operating
results.
Inventory Valuation Reserves. Our collectibles inventories are valued at the lower of cost or fair value and have been
reduced by an inventory valuation allowance to provide for potential declines in the value of those inventories below their carrying
values. The amount of the allowance is determined and is periodically adjusted on the basis of market
33
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
knowledge, historical experience and estimates concerning future economic conditions or trends that may impact the sale value of the
collectibles inventories. Additionally, due to the relative uniqueness and special features of some of the collectibles included in our
collectibles inventory and the volatility in the prices of precious metals, valuation of such collectibles often involves judgments that
are more subjective than those that are required when determining the market values of more standardized products. As a result, we
review the market values of the collectibles in our inventory on a quarterly basis and make adjustments to the valuation reserve that
we believe are necessary or prudent based on our judgments regarding these matters. In the event that a collectible is sold for a price
below its carrying value, we record a charge to operating income.
Grading Warranty Costs. We offer a limited warranty covering the coins, trading cards and stamps that we authenticate and
grade. Under the warranty, if such a collectible that was previously authenticated and graded by us is later submitted to us for
re-grading and either (i) receives a lower grade upon resubmittal or (ii) is determined not to have been authentic, we will offer to
purchase the collectible for a price equal to the value of collectible at its original grade, or, at our option, pay the difference between
the value of the collectible at its original grade as compared with the value at its lower grade. However this warranty is voided if the
collectible, upon resubmittal to us, is not in the same tamper-resistant holder in which it was placed at the time we last graded the item
or if we otherwise determine that the collectible had been altered after we had authenticated and graded it. If we purchase an item
under a warranty claim, we recognize the difference in the value of the item at its original grade and its re-graded estimated value as a
reduction in our warranty reserve. We include the purchased item in our inventory at the estimated re-graded value of the collectible,
which will be lower than the price we paid to purchase the item. We accrue for estimated warranty costs based on historical trends
and related experience. Certain warranty claims were received by us in the second quarter and early in third quarter of fiscal 2008 that
were significant in relation to our historical claims experience and, as a result, we recognized, in the second quarter of 2008, additional
warranty expense of $822,000 in respect of those claims. We also decided to increase our warranty accrual rate, effective January 1,
2008, to reflect this higher warranty claims experience, and we continue to monitor the adequacy of our warranty reserve on an
on-going basis. There also are a number of factors that can cause the estimated values of the collectibles purchased under our
warranty program to change over time and, as a result, we review the market values of those collectibles (see Inventory Valuation
Reserves above). However, once we have classified such items as inventory and they have been held in inventory beyond the end of
the fiscal quarter in which we purchased them, we classify any gains or losses on the subsequent disposal of such items as part of the
gain or loss on product sales and not as an adjustment to our warranty reserves.
Long-Lived Assets Other Than Goodwill. We regularly conduct reviews of property and equipment and other long-lived
assets other than goodwill, including certain identifiable intangibles, for possible impairment. Such reviews occur annually or more
frequently if events or changes in circumstances indicate the carrying amount of the asset may not be recoverable in full. In order to
determine if the value of a definite-lived asset is impaired, we make an estimate of the future undiscounted cash flows expected to
result from the use of that asset and its eventual disposition in order to determine if an impairment loss has occurred. If the projected
undiscounted cash flows are less than the carrying amount of the asset, an impairment loss is recorded to write down the asset to its
estimated fair value.
We incurred significant operating losses in our two jewelry businesses subsequent to their respective dates of acquisition as
those businesses failed to meet management’s revenue expectations and, as a result, we recognized initial impairment losses on our
identifiable tangible and intangible assets in those businesses totaling $2,169,000 in the three months and for the year ended June 30,
2008. In the three months ended December 31, 2008, we recognized additional impairment losses of $6,347,000 on our identifiable
tangible and intangible assets in the jewelry authentication and grading businesses, due to continued uncertainties as to the level of
revenues we could expect those businesses to generate in the future, worse than expected financial performance during the first six
months of fiscal 2009 and the increasing severity of the economic recession and credit crisis which adversely affected the future
prospects of those businesses. In the three months ended March 31, 2009, we decided to exit those businesses, and, in the three
months ended June 30, 2009, we decided to exit our related Gemprint business. As a result, the impairment losses that were
attributable to those jewelry businesses have been classified as part of discontinued operations in our consolidated financial
statements.
In addition, in the fourth quarter of fiscal 2009, we reviewed the long-lived assets of our continuing businesses and concluded
that certain capitalized software used in our autograph business was not recoverable in full due to technical and operational
inefficiency issues. As a result, we recognized an impairment loss of $649,000 in our continuing operations for the fourth quarter and
fiscal year ended June 30, 2009.
34
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
Goodwill. We test the carrying value of goodwill and other indefinite-lived intangible assets of our acquired businesses at
least annually on their respective acquisition anniversary dates, or more frequently if indicators of impairment are determined to
exist. We apply a discounted cash flow model or an income approach in estimating the fair value of each of those businesses that we
have determined constitutes a separate reporting unit, and we compare the estimated fair value of the reporting unit to its then carrying
value. If the fair value of the reporting unit exceeds its carrying value, no impairment of goodwill exists as of the measurement
date. If, instead, the fair value of the reporting unit is determined to be less than its carrying value, then there is the possibility of
goodwill impairment and further testing and re-measurement of goodwill is required.
In accordance with GAAP, we considered the diamond grading business and the colored gemstone grading business as
separate reporting units for the purpose of testing for the impairment of the goodwill. We incurred significant operating losses in each
of those reporting units subsequent to the respective dates of their acquisition, as those units failed to meet revenue expectations
established for them by management. As a result, in the three months and year ended June 30, 2008 we recognized initial impairment
losses to the goodwill and other indefinite-lived intangible assets of these businesses totaling $9,063,000. Due to continued
uncertainties as to the future revenues of these businesses, their worse than expected financial performance during the first half of
fiscal 2009 and the anticipated effects on those businesses of the increasing severity of the economic recession and credit crisis, in the
three months ended December 31, 2008 we recognized additional goodwill impairment losses in those businesses totaling $1,348,000,
which resulted in full impairment of goodwill in these businesses. As a result of our decision, made in March 2009, to exit the jewelry
grading and authentication businesses, these impairment losses have been classified as part of discontinued operations for the years
ended June 30, 2009 and 2008.
Stock-Based Compensation. We recognize share-based compensation expense based on the fair value recognition provision
of SFAS No. 123(R), Share-Based Payment, using the Black-Scholes option valuation method. Under that method, we make
assumptions with respect to the expected lives of the options or other stock awards that have been granted and are outstanding, the
expected volatility and the dividend yield percentage of our common stock and the risk-free interest rate at the respective dates of
grant. In addition, under SFAS No. 123(R), we recognize and report share-based compensation expense net of a forfeiture rate with
respect to outstanding awards that we expect will occur over their respective vesting periods, which we estimate on the basis of
historical forfeiture experience or other factors that could affect the likelihood of forfeiture. We monitor the forfeiture rate closely to
ensure that all stock awards that vest are fully expensed over their respective vesting periods using the straight-line attribution
method. During the years ended June 30, 2009, 2008 and 2007, we awarded restricted shares to the outside members of the Board of
Directors and to our senior management, and, accordingly, we recognize stock-based compensation over the respective vesting periods
of such awards based upon the closing stock prices of the shares on their respective dates of the grant, net of an estimated forfeiture
rate. Upon termination of employment or service with the Company, unvested restricted shares are cancelled and those shares are
returned to their status as unissued shares available for future stock awards.
Capitalized Software. In fiscal years 2009, 2008 and 2007 we capitalized, for continuing operations, approximately
$261,000, $1,220,000 and $761,000 respectively, of software development costs related to a number of in-house software
development projects, in accordance with Statement of Position (“SOP”) 98-1, Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use. In addition, during the fiscal years 2006 through 2009, we capitalized approximately
$1,036,000 of software developments costs relating to our discontinued businesses. SOP 98-1 requires that certain software
development costs incurred, either from internal or external sources, be capitalized as part of intangible assets and amortized on a
straight-line basis over the useful life of the software, which we believe is conservatively estimated at three years. On the other hand,
planning, training, support and maintenance costs incurred either prior to or following the implementation phase of a software
development project are recognized as expense in the periods in which they are incurred. During the fiscal years ended June 30, 2009,
2008 and 2007, we recorded approximately $710,000, $329,000 and $143,000, respectively, as amortization expense related to such
capitalized software projects. We evaluate the carrying values of capitalized software to determine if those values are impaired and, if
necessary, we record an impairment charge in the period in which we determine that an impairment has occurred. Based on such an
evaluation, we concluded that as of June 30, 2009 certain capitalized software used in our autograph and memorabilia authentication
and grading business was not recoverable in full due to technical and operational inefficiency issues. As a result, we recognized an
impairment loss of $649,000 in our continuing operations for the fourth quarter and fiscal year ended June 30, 2009. See “Long-Lived
Assets Other Than Goodwill” above.
35
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
Income Taxes and Deferred Tax Assets. We account for income taxes in accordance with SFAS No. 109, Accounting for
Income Taxes and FASB Interpretation 48, Accounting for Uncertainty in Income Taxes – An Interpretation of FASB Statement No.
109 (“FIN48”). SFAS No. 109 requires the recording of deferred tax assets and liabilities for the future consequences of events that
have been recognized in the Company’s financial statements or tax returns. Measurement of the deferred items is based on enacted
tax laws. In the event the future consequences of differences between financial reporting bases and tax bases of the Company’s assets
or liabilities result in a deferred tax asset, SFAS No. 109 requires that we evaluate the probability of realizing the future income tax
benefits comprising that asset based on a number of factors, which include projections of future taxable income and the nature of the
tax benefits and the respective expiration dates of tax credits and net operating losses. In the fourth quarter of fiscal 2008, due to the
length of time and the extent of the taxable income required to fully realize the deferred tax assets related to impairment losses
recognized in the fourth quarter of fiscal 2008, as well as certain California Enterprise Zone Credits, we recorded a valuation
allowance of approximately $4.6 million against deferred tax assets totaling $6.0 million at June 30, 2008. At that time we determined
that it was more likely than not that we would realize the tax benefits comprising the remaining $1.4 million net deferred tax assets at
June 30, 2008. At June 30, 2009, due to the recognition of additional impairment losses in our jewelry businesses, and uncertainties of
our future financial performance arising from the economic recession and credit crisis, we did not recognize any additional deferred
tax assets for the losses related to the impairment and disposal of our discontinued businesses in fiscal 2009. At June 30, 2009, we
had established valuation allowances against the entirety of our deferred tax assets.
Included in our deferred tax asset balances at June 30, 2008 and December 31, 2008, were deferred tax assets of $495,000
related to compensation expense recorded in connection with the grant of non-employee supplier stock options in 1999. Those options
expired unexercised during fiscal 2009 and, as a result, the amount of that deferred tax asset was ultimately written down to zero at
June 30, 2009. In accordance with SFAS 123R and related interpretations, that write-down has been recognized as a reduction to
additional paid-in capital of $495,000 at June 30, 2009.
We recorded a deferred income tax liability of $268,000 on our balance sheet at June 30, 2009, which arose out of timing
differences for goodwill and other indefinite-lived intangible assets that are amortizable for income tax purposes but not for financial
reporting purposes under GAAP.
FIN 48 clarifies the accounting for uncertainty in tax positions and prescribes a recognition threshold and measurement
attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return and, in
addition, requires us to disclose our policy for the classification of interest and penalties in our statements of operations. FIN 48
requires that we make adjustments in our financial statements to reflect only tax positions which we believe are more-likely-than-not
to be sustained on audit, based on the technical merits of the positions. FIN 48 requires that any necessary adjustment be recorded
directly to the beginning balance of retained earnings or accumulated deficit in the period of adoption of FIN 48 and reported as a
change in accounting principle, if material. During the first quarter of fiscal 2008, the cumulative effects of applying FIN 48 were
recorded as an increase of $170,000 to our accumulated deficit, an increase to income taxes payable of $279,000 and a decrease in
deferred tax liabilities of $109,000. We also recognized interest and penalties totaling $101,000 as of July 1, 2007, the date of the
adoption of FIN 48, which were accounted for as part of the total adjustment to accumulated deficit of $170,000. During the fiscal
years ended June 30, 2009 and 2008, which followed the adoption of FIN 48, we recorded approximately $7,000 and $13,000,
respectively, in interest and penalties as components of income tax expense. At June 30, 2009, certain of these uncertain tax positions
were resolved, and $96,000 (which was inclusive of accrual interest and penalties) was recognized as an income tax benefit in our
Consolidated Statement of Operations in fiscal 2009.
36
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
Results of Operations
The following table sets forth certain financial data, expressed as a percentage of net revenues, derived from our
Consolidated Statements of Operations for the respective periods indicated below:
Net revenues
Cost of revenues
Gross profit
Operating expenses:
Selling and marketing expenses
General & administrative expenses
Impairment losses
Amortization of intangible assets
Total operating expenses
Operating income
Interest income, net
Income before provision for income taxes
Provision for income taxes
Income from continuing operations
Loss from discontinued operations, net of loss on sales of discontinued
businesses (net of income taxes)
Net loss
Fiscal Years Ended June 30,
2008
2009
2007
100.0%
45.6%
54.4%
100.0%
50.1%
49.9%
100.0%
43.3%
56.7%
12.0%
32.4%
1.8%
2.4%
48.6%
5.8%
0.8%
6.6%
3.3%
3.3%
13.0%
32.4%
-
1.2%
46.6%
3.3%
2.9%
6.2%
5.5%
0.7%
(50.4)%
(47.1)%
(40.3)%
(39.6)%
12.7%
34.9%
0.1%
1.3%
49.0%
7.7%
5.6%
13.3%
6.0%
7.3%
(8.6)%
(1.3)%
Net Revenues. Our net revenues consist primarily of (i) fees that we generate from the authentication and grading of
high-value collectibles, including coins, trading cards, autographs and stamps and (ii) to a lesser extent, collectibles related service
revenues (referred to as “other related revenues”) generated by sales of Collectors Club memberships, advertising on our websites and
in printed publications and collectibles price guides, fees that are paid to us by coin dealers to subscribe to our CCE dealer-to-dealer
Internet bid-ask market for coins authenticated and graded by us (our “CCE Internet Coin Exchange”), interest earned by our CFC
Dealer Financing business, and fees earned from promoting, managing and operating collectibles trade shows and conventions. Net
revenues also include, to a significantly lesser extent, revenues from the sales of products, consisting primarily of coins that we
purchase under our warranty policy. We do not consider revenues from product sales to be an integral part of our on-going revenue
generating activities.
The following tables set forth our total net revenues for the fiscal years ended June 30, 2009, 2008 and 2007, broken out
between the revenues generated by our authentication and grading services and other related services (inclusive of revenues from
product sales), respectively:
2009
2008
Amount
% of Net
Revenues
Amount
% of Net
Revenues
(Dollars in thousands)
2009 vs. 2008
Increase (Decrease)
Amount
Percent
Grading and authentication
fees
Other related products and
services
Total net revenues
$
$
28,645
79.8% $
31,587
80.0% $
(2,942)
7,269
35,914
20.2%
100.0% $
7,918
39,505
20.0%
100.0% $
(649)
(3,591)
(9.3)%
(8.2)%
(9.1)%
2008
2007
Amount
% of Net
Revenues
Amount
% of Net
Revenues
(Dollars in thousands)
2008 vs. 2007
Increase (Decrease)
Amount
Percent
Grading and authentication
fees
Other related products and
services
Total net revenues
$
$
31,587
80.0% $
32,409
83.8% $
(822)
(2.5)%
7,918
39,505
20.0%
100.0% $
6,277
38,686
16.2%
100.0% $
1,641
819
26.1%
2.1%
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
37
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
The following tables set forth certain information regarding the increases or decreases in (i) net revenues from the
authentication and grading of collectible coins and trading cards and autographs, which are our two largest authentication and grading
businesses, and (ii) net revenues from our other businesses which, for purposes of this table, include the authentication and grading of
stamps and our non-grading businesses that generate our other related service revenues and product sales revenues.
2009
2008
% of Net
Amount Revenues
% of Net
Amount Revenues
(Dollars in thousands)
2009 vs. 2008
Increase (Decrease)
Revenues
Amounts Percent
Units Processed
Number
Percent
$
20,549
57.2% $
21,883
55.4% $
(1,334)
(6.1)%
(18,800)
(1.3)%
10,190
5,175
35,914
$
28.4%
14.4%
100.0% $
11,518
6,104
39,505
29.2%
15.4%
100.0% $
(1,328)
(929)
(3,591)
(11.5)%
(15.2)%
(9.1)%
(189,400)
(27,300)
(235,500)
(12.4)%
(51.5%)
(7.7)%
2008
2007
% of Net
Amount Revenues
% of Net
Amount Revenues
(Dollars in thousands)
2008 vs. 2007
Increase (Decrease)
Revenues
Amounts Percent
Units Processed
Number
Percent
$
21,883
55.4% $
23,075
59.6% $
(1,192)
(5.2)%
(83,800)
(5.4)%
11,518
6,104
39,505
$
29.2%
15.4%
100.0% $
10,966
4,645
38,686
28.4%
12.0%
100.0% $
552
1,459
819
5.0%
31.4%
2.1%
96,600
(13,200)
(400)
6.7%
(19.9)%
-
Coins
Cards and
Autographs(1)
Other (2)
Coins
Cards and
Autographs(1)
Other (2)
(1) Consists of revenues from our PSA trading card authentication and grading business and our PSA/DNA autograph
authentication and grading business.
(2) Includes the revenues of our stamp authentication and grading business, CCE subscription fees, CFC; interest income, the
revenues of our Expos convention business, and product sales revenues.
Fiscal 2009 vs. 2008. In fiscal 2009, our net revenues declined by $3,591,000, or 9.1%, compared to fiscal 2008. That
decline was attributable, primarily, to (i) a $2,942,000, or 9.3%, decrease in authentication and grading fees, and (ii) a $649,000, or
8.2%, decrease in the revenues generated by other related service businesses and our product sales. Excluding product sales, which
we do not consider to be an integral part of our revenue generating activities, in fiscal 2009, revenues generated by our other related
service businesses would have been substantially the same as in fiscal 2008 and our total net revenues would have declined by 7.6%,
as compared to the total net revenues that we generated in fiscal 2008.
The 9.3% decrease in authentication and grading fees in fiscal 2009 was attributable to decreases in the fees generated by all
of our authentication and grading businesses. Coin, trading card and autograph and stamp authentication and grading fees decreased
by approximately $1,200,000, or 6%, $1,200,000, or 12%, and approximately $500,000, or 34%, respectively, in fiscal 2009. The
decrease in coin authentication and grading fees was the result of (i) a $1.4 million or 30% decrease in the on-site authentication and
grading fees generated at coin trade shows and (ii) a $0.3 million or 6% decrease in modern coin grading fees, which were partially
offset by (iii) a $0.5 million or 5% increase in the fees generated from the authentication and grading of vintage coins, the submissions
of which increased in fiscal 2009 as compared to fiscal 2008.
These decreases in authentication and grading fees were due primarily to decreases in coin, trading card and autograph and
stamp authentication and grading submissions in 2009. We believe those decreases were primarily the result of the economic
recession and credit crisis in the United States, which caused declines in the confidence among dealers and collectors about future
economic conditions and reduced the availability of business and consumer credit. We also believe that uncertainties created by
increases and greater volatility in gold prices made collectibles dealers and collectors reluctant to engage in collectible coin
transactions, which resulted in declines in trade show authentication and grading submissions in fiscal 2009.
In the fourth quarter of fiscal 2009, however, our total authentication and grading revenues were approximately the same as
in the same quarter of fiscal 2008 due primarily to a 12% increase in coin authentication and grading fees which more than offset
decreases of 16% and 46% , respectively, in the fees from our authentication and grading of trading
38
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
cards and autographs and stamps. The increase in coin authentication and grading fees was attributable, primarily, to an increase of
the grading and authentication of modern coins in the quarter. However, due to the continuing uncertainties about the duration and
severity of the economic recession and credit crisis, we are not able to predict, with any assurance, whether or not the increase in coin
authentication and grading revenues will continue into fiscal 2010, nor the level of authentication and grading revenues for trading
cards, autographs and stamps in fiscal 2010.
Fiscal 2008 vs. 2007. In fiscal 2008, our net revenues increased by $819,000, or 2.1%, compared to fiscal 2007. That
increase was due primarily to an increase in other related service and product sales revenues totaling $1,641,000, or 26%, partially
offset by an $822,000, or 3%, decrease in authentication and grading fees. If product sales are excluded, our other-related service
revenues increased by $884,000, or 15%, in fiscal 2008, as compared to fiscal 2007; however, the increase in total revenues in fiscal
2008 would have been $62,000. That increase in product sales revenue was attributable to an increase in the number and dollar
amounts of coin warranty claims received in fiscal 2008 and, as a result, in the amount of coins we purchased in satisfaction of those
claims and then sold.
The $884,000 increase in other-related service revenues in fiscal 2008, compared with fiscal 2007, was primarily the result of
revenues that we generated from an increase in third party advertising in our coin and trading card publications and an increase in
revenues generated by our CFC dealer financing programs.
The $822,000 decrease in authentication and grading fees in fiscal 2008, compared to fiscal 2007, was primarily attributable
to a $1,355,000, or 6%, decrease in coin authentication and grading fees, which was partially offset by increases in revenues of
$347,000, or 4%, and $186,000, or 15%, from the authentication and grading of trading cards and autographs and stamps,
respectively. The decline in coin authentication and grading revenues in 2008, compared to fiscal 2007, was the result of a 23%
decrease in revenues generated at trade shows, as a result of (i) our attending two fewer collectibles trade shows in fiscal 2008 than in
fiscal 2007, and (ii) a decrease in grading submissions at the trade shows we attended in the second half of fiscal 2008. An increase in
vintage coin submissions, on which we usually generate higher revenues due primarily to faster turn-around times requested by
submitters, resulted in a 6% increase in revenues in fiscal 2008, as compared to fiscal 2007; however, that increase was largely offset
by a 6% decrease in revenues from modern coins authentication and grading submissions in fiscal 2008.
Gross Profit
Gross profit is calculated by subtracting the cost of revenues from net revenues. Gross profit margin is gross profit stated as
a percent of net revenues. The costs of authentication and grading revenues consist primarily of labor to authenticate and grade
collectibles, production costs, credit card fees, warranty expense, occupancy, security, depreciation, amortization and insurance costs
that directly relate to providing authentication and grading services. Cost of revenues also includes printing, other direct costs of the
revenues generated by our other related services businesses and the costs of product revenues, which represent the carrying value of
the inventory of products (primarily collectible coins) that we sold. In addition, costs of revenues include stock-based compensation
attributable to stock incentive awards granted to employees whose compensation is classified as part of the costs of authentication and
grading revenues.
Set forth below is information regarding our gross profits in the fiscal years ended June 30, 2009, 2008 and 2007.
Gross profit
Gross profit margin
Fiscal Year Ended June 30,
(Dollars in thousands)
2008
2009
2007
$
19,529
$
54.4%
19,726
$
49.9%
21,950
56.7%
Fiscal 2009 vs. 2008 As indicated in the above table, our total gross profit margin increased from 49.9% in fiscal 2008 to
54.4% in fiscal 2009. Excluding the effect of product revenues for all periods, which are not an integral part of our core revenues
generating activities, and increased warranty costs of $822,000 in fiscal 2008 as a result of unexpected claims in significant dollar
amounts that arose during that period, the gross profit margin for grading and authentication and other related services would have
been 55.5% for fiscal 2009, compared with 53.2% for fiscal 2008. The improvement in the gross profit margins are the result
primarily of cost improvement programs, including headcount and publications direct costs reductions, implemented in our coin
grading business in response to the decline in revenues in 2009, compared to 2008, partially offset by a lower gross margin on cards
and autographs.
39
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
In the fourth quarter of fiscal 2009, the gross profit margin, excluding the effect of coin sales, increased to 58%, compared to
52% in the fourth quarter of fiscal 2008. That increase was due the combined effects of the increase in coin authentication and
grading revenues and the cost savings, as discussed above.
However, we are not able to predict whether these improvements in gross margin represent the beginning of a trend, due to
the continued uncertainties for our business created by the continuing economic recession and credit crisis.
Fiscal 2008 vs. 2007. As indicated in the above table, our total gross profit margin declined from 56.7% in fiscal 2007 to
49.9% in fiscal 2008. Excluding the unusually higher warranty costs of $822,000 in 2008 and the effects of product sales on gross
margin both in fiscal 2008 and 2007, our gross profit margin would have been 53.2% in fiscal 2008 as compared to 56.9% in fiscal
2007. That decline was primarily attributable to (i) a decrease in coin authentication and grading revenues in fiscal 2008 that was due
to a decrease in the number of coins graded and a change in the mix of coin authentication and grading submissions to a higher
proportion of modern coin submissions on which we realize lower margins because the average service fee earned on modern coins is
lower than on vintage coins, and (ii) an increase in personnel, travel, printing, and on-going warranty costs in support of our coin
grading activities.
Selling and Marketing Expenses
Selling and marketing expenses are comprised primarily of advertising and promotions costs, trade-show expenses, customer
service personnel costs, depreciation and third-party consulting costs.
Selling and marketing expenses
As a percentage of net revenues
Fiscal Year Ended June 30,
(Dollars in thousands)
2008
2009
2007
$
4,306
$
12.0%
5,137
$
13.0%
4,924
12.7%
Fiscal 2009 vs. 2008. In fiscal 2009, selling and marketing expenses decreased by $831,000 and as a percentage of net
revenues, notwithstanding the 9.1% decrease in net revenues in fiscal 2009. That decrease was primarily attributable to the
implementation of a cost savings program that included reductions in personnel, media costs and the expenses of providing on-site
grading services at collectibles trade shows, as well as a reduction in fiscal 2009, as compared to fiscal 2008, in the mix of trade shows
at which we offered on-site trading card and stamp authentication and grading services.
Fiscal 2008 vs. 2007. The $213,000 increase in selling and marketing expenses in fiscal 2008, compared with fiscal 2007,
was primarily attributable to an increase in business development activities primarily by our collectibles grading and subscription
divisions, which included an increase in expenditures for promotional programs and increase in the number of trade shows at which
we offered on-site trading card and stamp authentication and grading services.
General and Administrative Expenses
General and administrative (“G&A”) expenses are comprised primarily of compensation paid to general and administrative
personnel, including executive management, finance and accounting personnel and information technology personnel, facilities
management costs, depreciation, amortization and other miscellaneous expenses. G&A expenses also include stock-based
compensation costs, determined in accordance with SFAS No. 123(R), arising from the grant of stock awards to general and
administrative personnel.
The following table compares our G&A expenses that we incurred in fiscal 2009 to the G&A expenses we incurred in fiscal
2008 and 2007.
General & administrative expenses
As a percentage of net revenues
$
11,615
$
32.4%
12,793
$
32.4%
13,520
34.9%
Fiscal Year Ended June 30,
(Dollars in thousands)
2008
2009
2007
40
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
The decrease in G&A expenses of $1,178,000 in fiscal 2009 compared to fiscal 2008, was due primarily to cost reduction
measures implemented in fiscal 2009 to bring G&A expenses more into line with revenues. Those measures, which included, among
others, workforce reductions and reductions in professional fees, enabled us to keep G&A expenses, as a percentage of revenues, at
32.4% despite the 9.1% decline in revenues in fiscal 2009. Those reductions in G&A expenses more than offset severance costs of
approximately $400,000 recognized, in the third quarter of fiscal 2009, in connection with the departure of the Company’s former
chief executive officer. Also contributing to the decrease in G&A expenses was a $420,000 decrease in stock-based compensation
expense in fiscal 2009, as compared to fiscal 2008, due to (i) a reduction in the number of stock awards granted in fiscal 2009 as
compared to fiscal 2008, and (ii) an increase in forfeitures of outstanding stock awards during the third quarter of 2009.
Fiscal 2008 vs. 2007. The reduction in G&A expenses of $727,000 in fiscal 2008, compared to fiscal 2007, was primarily
attributable to savings in legal, professional and outside services costs and a lower level of corporate information technology
personnel costs in fiscal 2008, compared to 2007. Those cost savings more than offset a $205,000 increase in stock-based
compensation costs due primarily to an increase in restricted stock awards granted to our officers and directors in fiscal 2008.
Impairment Losses
Fiscal Year Ended June 30,
(Dollars in thousands)
2008
2009
2007
Impairment losses
As a percentage of net revenues
$
649
$
1.8%
- $
-
16
0.1%
The impairment loss in fiscal 2009 was attributable to a determination that, due to technical and operational inefficiencies,
the carrying value of capitalized software developed for our autograph business was impaired at June 30, 2009.
Amortization of Intangible Assets
Fiscal Year Ended June 30,
(Dollars in thousands)
2008
2009
2007
Amortization expense
As a percentage of net revenues
$
871
$
2.4%
490
$
1.2%
505
1.3%
The increase in the amortization expense of $381,000 in fiscal 2009, compared to fiscal 2008, was primarily attributable to
the amortization of capitalized software costs, for which amortization commences as development projects are completed. In addition,
we also incur amortization costs in connection with the intangible assets acquired in business acquisitions that occurred during fiscal
2006 through the first quarter of fiscal 2007. Capitalized software costs and acquired intangible assets are being amortized over their
estimated useful lives as described in note 2 to our Consolidated Financial Statements included in Item 8 of this Report. Amortization
expense, for fiscal 2009, includes approximately $165,000 resulting from the amortization of capitalized software costs invested in the
development of software for our autograph business that we determined was impaired at June 30, 2009, and for which we recognized
an impairment loss in fiscal 2009 (see “Results of Operations -- Impairment Losses” above).
Stock-Based Compensation Expense
We recognized stock-based compensation expense, arising from the grant of restricted stock and stock option awards, of
$759,000, $1,179,000 and $854,000 during fiscal 2009, 2008 and 2007, respectively. Stock-based compensation expense is recorded
as part of (i) costs of sales, in the case of stock awards granted to employees whose costs are classified as cost of revenues, (ii) selling
and marketing expenses in the case of stock awards granted to marketing and sales personnel, and (iii) general and administrative
expenses in the case of stock awards granted to directors, executive and financial management and administrative personnel, as
follows:
41
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
Cost of revenues
Selling and marketing expenses
General and administrative expenses
Fiscal Year Ended June 30,
(Dollars in thousands)
2008
2009
2007
$
$
294 $
-
465
759 $
293 $
(7)
893
1,179 $
158
8
688
854
Generally, the vesting of stock option and restricted stock awards that we have granted to officers, employees and outside
directors is conditioned on continued employment or service with the Company during a specified time period or periods (“vesting
periods”). Typically, the vesting period is four years for officer and employee awards and shorter periods for director awards,
reflecting their service periods; although we have, on occasion, granted stock awards that become vested, in part or in whole, on the
date of grant. In accordance with SFAS 123R, stock-based compensation expense is determined over the respective vesting periods of
the awards, calculated on a straight-line basis, net of an estimated forfeiture rate which, in the case of restricted stock awards was 7%
in 2007 and 5% in both 2008 and 2009 and in the case of stock option grants was 5% in each of fiscal 2009 and 2008 and 9% in fiscal
2007. See “Critical Accounting Policies and Estimates – Stock-Based Compensation” above.
Stock-based compensation expense related to restricted stock grants of approximately $256,000, $352,000 and $164,000 was
recognized in fiscal 2009, 2008 and 2007, respectively. Compensation cost is determined based on the closing price per share of our
common stock, as reported by NASDAQ, as of the date of the grant and is recognized as stock-based compensation expense over the
vesting period on a straight-line basis, net of forfeitures.
There were no new options granted in fiscal 2009, although all options outstanding were adjusted for the 10% stock dividend
in October 2008, as required under the original terms of such option grants. We calculate stock-based compensation by estimating the
fair value of stock options as of their respective grant dates using the Black-Scholes option valuation model and various assumptions
that are described in Note 2 to our Consolidated Financial Statements included in Item 8 of this Report and recognize such costs on a
straight-line basis over the vesting period of the options.
A total of $176,000 of compensation expense related to unvested stock-based compensation awards remained unrecognized
as of June 30, 2009 and will be recognized as compensation expense as follows:
Year Ending June 30,
Amount
2010
2011
2012
Total
$
$
136,000
30,000
10,000
176,000
These amounts, which are non-cash expenses, do not include the cost of any additional stock-based compensation awards that
may be granted in future periods nor, as mentioned above, any changes that might occur in the Company’s forfeiture percentage.
Interest Income, Net
Interest income is generated on cash balances that we have invested, primarily in highly liquid money market accounts and
funds, short-term bank certificates of deposit and commercial paper instruments and tax-free funds. Such interest income does not
include the interest that we generate on loans we make pursuant to our dealer-finance program, which are included in net
revenues. The following table compares the interest income we earned in the fiscal years ended June 30, 2009, 2008 and 2007.
42
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
Interest income, net
Percent of net revenue
Fiscal Year Ended June 30,
(Dollars in thousands)
2008
2009
2007
$
284
$
0.8%
1,138
$
2.9%
2,149
5.6%
Fiscal 2009 and 2008. Interest income, net, was $284,000 in fiscal 2009, compared with $1,138,000 in fiscal 2008. That
decrease was primarily attributable to (i) a shift of our cash and cash equivalent balances into lower yielding government guaranteed
money market funds; (ii) a decrease in our average cash balances in fiscal 2009, compared to fiscal 2008, due to our use of a portion
of our available cash to fund quarterly dividends, share repurchases, capital expenditures, and the losses incurred by our discontinued
operations; and (iii) a decrease in interest rates earned on our cash and cash equivalent balances in fiscal 2009, compared to fiscal
2008, due to reductions in prevailing market rates of interest as a result of actions taken by the Federal Reserve Board in response to
the increased severity of the economic recession and credit crisis.
Fiscal 2008 vs. 2007. Interest income, net was $1,138,000 in 2008, compared with $2,149,000, in 2007. The decrease in
interest income was primarily attributable to (i) a shift of our cash and cash equivalent balances for part of the year into liquid tax-free
money funds from taxable investments; (ii) a decrease in our average cash balances in 2008, compared to 2007, due to our use of cash
to fund quarterly dividends, share repurchases, capital expenditures, increases in advances under our dealer-financing program and
operating losses of our discontinued operations; and (iii) a decrease in interest rates earned on our cash and cash equivalent balances
during 2008, compared with 2007, due to reductions in prevailing market rates of interest as a result of actions taken by the Federal
Reserve Board.
Provision for Income Taxes
Fiscal Year Ended June 30,
(Dollars in thousands)
2008
2009
2007
Provision for income taxes
$
1,183
$
2,155
$
2,336
The income tax provision for fiscal 2009 reflects valuation allowances that we established against the Company’s deferred
tax assets due to uncertainties with respect to the realization of the tax benefits comprising those assets, net of a tax benefit of $96,000,
related to the reversal of certain tax exposures for uncertain state tax positions recognized when the Company adopted FIN 48,
effective July 1, 2007, that have since been resolved. In accordance with SFAS 109, valuation allowances established in fiscal 2009
against deferred tax assets that existed at the beginning of the year are attributable to continuing operations. See “Critical Accounting
Policies and Estimates -- Income Tax and Deferred Tax Assets”.
The income tax provision recorded in fiscal 2008 reflects tax at the effective rate for fiscal 2008 and a valuation allowance
for California Enterprise Zone Tax Credits, due to our determination that it had become more likely than not that we would be unable
to recover, in full, the income tax benefits comprising our deferred tax assets in the fourth quarter of fiscal 2008.
For fiscal 2007, the effective tax benefit was approximately 45% and reflected the higher percentage of permanent
differences between income for book and income for tax purposes due to the level of losses in 2007.
Discontinued Operations
Fiscal Year Ended June 30,
(Dollars in thousands)
2008
2009
2007
Loss from discontinued operations, net of gains on sales of
discontinued businesses (net of income taxes)
$
18,126 $
15,927 $
3,320
The loss from discontinued operations for fiscal 2009, primarily reflects (i) losses of $5,219,000 that we recognized on the
discontinuance and exit from our jewelry authentication and grading businesses in the third and fourth quarters of fiscal 2009;
(ii) impairment losses of $7,695,000 recognized at December 31, 2008 to the carrying values of
43
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
long lived assets and goodwill of those jewelry businesses; and (iii) losses of $5,212,000 incurred from the on-going operations of our
discontinued businesses from July 1, 2009 through the date of their discontinuance, which was March 2, 2009. No income tax
benefits were recognized in connection with the recognition of those losses in fiscal 2009, due to uncertainly as to the realization of
our deferred tax assets in future periods. See “Critical Accounting Policies and Estimates--Long-Lived Assets Other Than
Goodwill—Goodwill and Income Taxes and Deferred Tax Assets” above for a discussion of the impairment losses to the carrying
values of our jewelry businesses recognized at December 31, 2008.
The losses that we recognized in fiscal 2009, in connection with the discontinuance of our jewelry authentication and grading
businesses, were comprised of (i) $4,000,000 of operating lease accruals representing the expected loss on the leases for the facilities
that had been occupied by those businesses, (ii) approximately $900,000 of estimated losses on the disposal of the assets of our
jewelry authentication and grading businesses, and (iii) approximately $400,000 of severance costs incurred in connection with the
termination of employment of the employees of those businesses. The amount of the operating lease accruals was determined based
on our estimates of the time that it will take to sublease those facilities and the rents at which we could expect to sublease those
facilities over the remaining duration of the leases, discounted to present value. Those estimates, in turn, were based primarily on
rental market surveys that were conducted for us by independent real estate consulting firms. We are in the process of seeking
subtenants for these facilities and we will re-evaluate these estimates and update this loss accrual as necessary to take account of the
results of those subleasing efforts and any changes that might occur in market rental rates or in commercial office space available for
rent in the market where these facilities are located. See “Critical Accounting Policies and Estimates -- Accrual for Losses on Facility
Leases” above.
The losses from discontinued operations for fiscal 2008, consist of (i) losses of $7,867,000 from the operations of our
discontinued businesses, including our jewelry authentication and grading businesses, incurred in the year ended June 30, 2008, and
(ii) impairment losses of $11,233,000, recognized at June 30, 2008, to the carrying value of long-lived assets and goodwill of our
jewelry businesses, partially offset by related income tax benefits recognized in fiscal 2008.
The losses from discontinued operations for fiscal 2007 are primarily comprised of the loss from the operations of our
jewelry businesses incurred during that year, partially offset by related income tax benefits recognized in fiscal 2007.
Quarterly Results of Operations and Seasonality
The following tables present unaudited selected quarterly financial data for each of the eight quarters beginning September
30, 2007 and ending on June 30, 2009. The information has been derived from our unaudited quarterly financial statements, which
have been prepared by us on a basis consistent with our audited Consolidated Financial Statements appearing elsewhere in this Form
10-K. The consolidated financial information set forth below includes all adjustments (consisting of normal adjustments and accruals)
that management considers necessary for a fair presentation of the unaudited quarterly results when read in conjunction with the
Consolidated Financial Statements and the notes thereto appearing elsewhere in this Form 10-K. These quarterly operating results are
not necessarily indicative of results that may be expected for any subsequent fiscal periods.
Generally, the revenues generated by our collectibles grading and authentication businesses are lower during our second
quarter, which ends on December 31, than in other quarterly periods, because collectibles commerce generally decreases during the
holiday season.
Our collectibles trade show business, which we acquired in July 2006, has added to the variability in our quarter-to-quarter
operating results, as its revenues vary based on the timing of the collectibles trade shows it conducts. As a general matter, the
revenues of this business are significantly higher in the first, third and fourth quarters of our fiscal years, compared to the second
quarter, because the Long Beach Collectibles Shows (the larger of the two trade shows that it conducts) take place during the first,
third and fourth quarters, while the smaller Santa Clara Collectibles Shows take place in the second and fourth quarters of the year.
44
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
Quarterly Reports of Operations
Statement of Operations Data:
Net revenues
Cost of revenues
Gross profit
Operating Expenses:
SG&A expenses
Impairment of other intangible assets
Amortization of intangible assets
Operating income (loss)
Interest and other income, net
Income (loss) before income taxes
Provision (benefit) for income taxes
Income (loss) from continuing
operations
Income (loss) from discontinued
operations, net of loss
on sales of discontinued businesses
(net of income taxes)
Net income (loss)
Net income (loss) per basic share:
From continuing operations
From discontinued operations, net of
loss on sales
of discontinued businesses (net of
income taxes)
Net income (loss)
Net income (loss) per diluted share:
From continuing operations
From discontinued operations, net of
loss on sales
of discontinued businesses (net of
income taxes)
Net income (loss)
Weighted average shares outstanding
Basic
Diluted
Quarters Ended
(In thousands, except per share data)
Sept. 30,
Dec. 31,
Mar. 31,
2007
2007
2008
June 30,
2008
Sept. 30,
2008
Dec. 31,
2008
Mar. 31,
2009
June 30,
2009
$ 10,264 $ 9,258 $ 10,345 $
4,928
5,417
5,785
3,473
4,332
5,932
9,638 $ 9,043 $
4,126
4,734
4,917
4,904
7,802 $ 9,315 $ 9,754
4,121
4,111
4,027
5,633
5,204
3,775
4,675
-
105
1,152
446
1,598
619
4,261
-
110
(898)
299
(599)
(241)
4,726
-
136
555
241
796
474
4,268
-
139
497
158
655
1,303
4,416
-
168
333
136
469
-
3,995
-
199
(419)
77
(342)
1,210
4,007
-
253
944
56
1,000
109
3,503
649
251
1,230
29
1,259
(136)
979
(358)
322
(648)
469
(1,552)
891
1,395
(1,089)
(1,085)
(110) $ (1,443) $
(1,288)
(5,679)
(1,766)
(966) $ (13,113) $ (1,297) $ (10,925) $ (4,788) $
(12,465)
(9,373)
(1,308)
87
0.11 $
(0.04) $
0.03 $
(0.07) $
0.05 $
(0.17) $
0.10 $
0.15
(0.12)
(0.01) $
(0.11)
(0.15) $
(0.13)
(0.10) $
(1.35)
(1.42) $
(0.19)
(0.14) $
(1.03)
(1.20) $
(0.63)
(0.53) $
(0.14)
0.01
0.10 $
(0.04) $
0.03 $
(0.07) $
0.05 $
(0.17) $
0.10 $
0.15
$
$
$
$
(0.11)
(0.01) $
(0.11)
(0.15) $
(0.13)
(0.10) $
(1.34)
(1.41) $
(0.19)
(0.14) $
(1.03)
(1.20) $
(0.63)
(0.53) $
(0.14)
0.01
$
9,310
9,509
9,340
9,340
9,317
9,406
9,211
9,274
9,146
9,186
9,079
9,079
9,083
9,108
9,102
9,140
Sept. 30,
2007
Dec. 31,
2007
Mar. 31,
2008
June 30,
2008
Sept. 30,
2008
Dec. 31,
2008
Mar. 31,
2009
June 30,
2009
Quarters Ended
(In thousands)
Selected Operating Data:
Units authenticated or graded
Coins
Trading cards
Autographs
Stamps
Total
367
338
45
20
770
293
313
50
11
667
331
351
56
9
747
328
302
42
7
679
291
292
48
7
638
405
273
41
6
725
432
305
37
6
780
484
327
49
13
873
45
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
Liquidity and Capital Resources
Cash and Cash Equivalent Balances. At June 30, 2009, we had cash and cash equivalents of approximately $23,870,000, as
compared to cash and cash equivalents of $23,345,000 at June 30, 2008 and $42,387,000 at June 30, 2007.
Historically, we have been able to rely on internally-generated funds, rather than borrowings, as our primary source of funds
to support our continuing grading operations, because many of our authentication and grading customers prepay our fees at the time
they submit their collectibles to us for authentication and grading. Additionally, in 2005 we completed a public offering of 3,450,000
of our shares of common stock, of which the net cash proceeds to the Company totaled approximately $35,657,000. We have used
those proceeds primarily to fund business acquisitions, cash dividends and share repurchases and the expansion of our jewelry
businesses, which we discontinued in fiscal 2009.
In July 2009, we used approximately $8,750,000 (excluding expenses) to purchase a total of 1,749,828 of our shares of
common stock in a “Dutch Auction” tender offer (see below).
Cash Flows.
Cash Flows from Continuing Operations. During the fiscal years ended June 30, 2009, 2008 and 2007, our operating
activities from continuing operations generated cash of $5,806,000, $531,000 and $6,966,000, respectively, reflecting income from
continuing operations, as adjusted for non-cash expenses (including impairment losses), and changes in current assets and current
liabilities, due to the timing of activities during those periods. In addition, changes in deferred tax balances and the timing of income
taxes receivables and payables impact our cash flows from continuing operating activities, although the level of such tax balances can
be affected by the activities of our discontinued operations, because all tax balances (whether as a result of continuing or discontinued
operations) are accounted for as part of continuing operations.
Cash Flows of Discontinued Operations. Discontinued operations used cash of $6,568,000, $4,034,000 and $10,783,000 in
the fiscal years ended June 30, 2009, 2008 and 2007 respectively. In 2009, cash used in discontinued operations consisted of
$18,126,000 of losses arising from the discontinuance of the jewelry authentication and grading businesses, adjusted for (i) a non-cash
impairment loss of $7,695,000; (ii) the $4,000,000 long-term operating lease accrual, discussed above, for the office facilities that had
been occupied by those businesses prior to their closure; and (iii) non-cash expenses and losses on disposal recognized in fiscal
2009. We expect that cash used by our discontinued operations will decline significantly in future periods, primarily because
substantially all of the costs of discontinuing and exiting the jewelry businesses were recognized in fiscal 2009. However, there will
continue to be cash obligations, consisting primarily of rents and related costs, payable under those facility leases. See “Outstanding
Financial Obligations -- Discontinued Operations” below.
In fiscal 2008 and 2007, cash used in discontinued operations consisted of the operating losses incurred by our jewelry
authentication and grading businesses and our other discontinued businesses and capital expenditures incurred in support of those
businesses. In 2008, the $15,927,000 loss from discontinued operations included a non-cash impairment loss of $11,233,000 that was
recognized in the fourth quarter of fiscal 2008. In fiscal 2007, cash used in discontinued operations included the cash we used to
purchase the colored gemstone authentication and grading business, which is one of the two jewelry authentication and grading
businesses that we discontinued in fiscal 2009.
Cash from or used in Investing Activities. Investing activities generated net cash of $3,700,000 during the year ended June
30, 2009, comprised primarily of (i) $3,285,000 of net cash generated from collections of notes evidencing loans that we made to
collectibles dealers as part of our CFC dealer financing program, as we wound down that program by discontinuing new loans in the
second half of the year; and (ii) $796,000 of cash generated from collection of receivables from discontinued operations and proceeds
from the sales of net assets of discontinued operations, partially offset by capitalized software costs of $261,000, which declined
significantly as compared to fiscal 2008 and 2007 because we completed our software development projects in 2009. By comparison,
in fiscal 2008 investing activities used cash of $5,054,000, consisting primarily of net cash of $3,106,000 to fund dealer loans and
$1,220,000 to fund capitalized software costs. In fiscal 2007, investing activities used cash of $1,884,000, consisting primarily of
$2,411,000 to fund the acquisition of Expos and approximately $761,000 to fund capitalized software costs, partially offset by net
cash of $1,378,000 generated by our dealer finance program.
46
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
Cash used in Financing Activities. In the fiscal years ended June 30, 2009, 2008 and 2007, financing activities used net cash
of $2,413,000, $10,484,000 and $4,023,000 respectively, primarily to pay cash dividends and repurchases of shares of our common
stock pursuant to a buyback program adopted by our Board of Directors. The decline in cash used in financing activities in fiscal
2009, as compared to the prior two fiscal years, was primarily due to a decision by our Board of Directors to suspend the payment of
cash dividends and the repurchase of shares in order to preserve cash to fund the Company’s jewelry businesses and support our
continuing operations in anticipation of the adverse impact of the economic recession and credit crisis on our cash flows.
Outstanding Financial Obligations
Continuing Operations.
In December 2008, we extended the term of operating lease for our corporate headquarters to March 2019. That extension,
which became effective in February 2009, provided for (i) a reduction in the square footage leased by the Company, (ii) a reduction in
the base rental rate per square foot for the first four years of the term of the extended lease and (iii) a contribution by the landlord of
up to $200,000 toward tenant improvements. In accordance with GAAP, the Company recognizes the rent expense under this lease on
a straight-line basis over the rental period. At June 30, 2009, we did not have any other material financial obligations in connection
with our continuing operations.
The following tables set forth the amounts of our financial obligations, consisting primarily of rent expense, and sublease
income, under operating leases for our continuing operations, in each of the years indicated below:
Fiscal Year
2010
2011
2012
2013
2014
Thereafter
Discontinued Operations
Net
Amount
Sublease
Income
985,000
986,000
1,009,000
990,000
982,000
5,080,000
10,032,000
$
41,000
42,000
43,000
45,000
46,000
238,000
455,000
$
At June 30, 2009, we had the following financial obligations under operating leases, for two facilities leased in New York
City, for our discontinued jewelry authentication and grading businesses, over the remaining duration of those leases which will expire
in December 31, 2015 and 2017.
Fiscal Year
2010
2011
2012
2013
2014
Thereafter
Less: Estimated fair value of minimum lease payments
accrued
Amount
885,000
906,000
941,000
981,000
1,022,000
3,064,000
7,799,000
(4,149,000)
3,650,000
$
$
$
In fiscal 2009, we recognized a loss of approximately $4,000,000 to establish an accrual for future rent obligations and
related costs under these leases which, when added to an accrual for straight-line rent recognized in periods prior to the discontinuance
of the jewelry businesses, totaled $4,454,000 at June 30, 2009.
The cash payment obligations under these two leases are to be paid in accordance with the schedule above. At March 31,
2009, we recognized an initial operating lease accrual of $3,740,000 (comprising an expense recognized of $3,110,000 and the
balance straight-lined rent recognized in prior periods) for these two facilities based on our estimates of the time that it will take to
sublease those facilities and the rents at which we could expect to sublease those facilities over
47
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
the remaining duration of the leases, discounted to present value. Those estimates, in turn, were based primarily on rental market
surveys that were conducted for us by an independent real estate valuation firm.
We have engaged a commercial real estate broker, familiar with the rental market in New York City, to seek subtenants for
these facilities. Due to current economic conditions, there has been a substantial increase in available rental space in commercial
buildings and a decline in market rental rates in New York City, which has increased the difficulties of subletting these facilities. As a
result, at June 30, 2009, we updated the estimates on which we had originally based our determination of the amount of the accrual for
changes in conditions in the rental market, which caused us to increase the initial lease accrual by approximately $815,000. We will
be re-evaluating these estimates and updating this loss accrual as may become necessary to take account of the results of our
subleasing efforts and any changes that might occur in market rental rates or in commercial office space available for rent in New
York City where these facilities are located. See “Critical Accounting Policies and Estimates -- Accrual for Losses on Facility
Leases” above.
With the exception of these lease obligations for continuing and discontinued operations, we do not have any material
financial obligations, such as long-term debt or capital lease or purchase obligations.
Dividends. In the fourth quarter of fiscal 2006, our Board of Directors approved a dividend policy that called for the payment
of regular quarterly cash dividends to our stockholders, initially in the amount of $0.072 per share. That quarterly dividend rate was
subsequently increased on two occasions by our Board of Directors and, during fiscal 2008, we paid quarterly cash dividends of $0.23
per common share for an expected annual cash dividend to stockholders of $0.91 per common share. As a result, we paid dividends
totaling $8,517,000 and $3,350,000 in fiscal 2008 and 2007, respectively.
As previously disclosed, the continued payment of cash dividends was subject to change or discontinuance based on a
number of factors, including our financial performance and changes in market and financial conditions. On September 26, 2008, the
Board of Directors determined that, due to adverse market and economic conditions, including the liquidity crisis in the United States,
the prudent course of action would be, and the Board of Directors voted, to suspend the future payment of cash dividends in order to
preserve the Company’s cash resources to support the continued implementation of the Company’s strategic plan and the growth of its
business. At the same time, the Board of Directors approved a 10% stock dividend on the Company’s outstanding shares, and it
declared this stock dividend will be distributed on November 3, 2008 to all stockholders of record on October 20, 2008. During fiscal
2009, prior to suspension of dividend payments, we paid dividends to our stockholders totaling $2,090,000.
Share Buyback Program. In December 2005, our Board of Directors approved a stock buyback program that authorized up
to $10,000,000 of stock repurchases in open market or privately negotiated transactions, in accordance with applicable Securities
Exchange Commission (“SEC”) rules, when opportunities to make such repurchases, at attractive prices, become available. During
the fiscal years ended June 30, 2009, 2008 and 2007, we repurchased a total of 120,000, 232,152 and 72,517 shares, respectively, of
our common stock under this program for aggregate purchase prices of approximately $484,000, $2,198,000 and $945,000,
respectively (excluding transaction costs). We continue to have a total of $3.7 million available for share purchases under the share
buyback program.
Dutch Auction Tender Offer. On June 2, 2009, we commenced a modified Dutch Auction tender offer for the purpose of
purchasing, for cash, up to 1,750,000 shares of our common stock at a price, per share, of not less than $5.00 and not greater than
$5.40. The principal purpose of the tender offer was to enhance stockholder value by providing our stockholders with greater
investment liquidity by giving them the opportunity to sell all or a substantial number of their shares in the tender offer. Additionally,
our decision to discontinue and cease expenditures for our jewelry authentication and grading businesses, meant that cash which
otherwise would have been used in those businesses was available to fund the repurchase of shares in the tender offer. The tender
offer, which expired on July 2, 2009, was oversubscribed and we purchased a total 1,749,828 shares in the tender offer, at a price of
$5.00 per share, resulting in an aggregate purchase price of approximately $8,749,140 (not including the fees and expenses incurred in
conducting the tender offer).
Future Uses and Sources of Cash. We plan to use our cash resources, consisting of available cash and cash equivalent
balances, together with internally generated cash flows, to (i) introduce new collectibles related services for our customers; (ii) fund
working capital requirements; and (iii) fund obligations associated with our discontinued businesses, and for other general corporate
purposes. In addition, because we expect that our continuing operations will generate positive cash flow in the future, we plan to
consider other uses for our available cash that we believe will enhance stockholder value, which could include the resumption of cash
dividends or additional buybacks of shares.
48
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
Although we have no current plans to do so, we also may seek borrowings and we may issue additional shares of our stock to
finance the growth of our collectibles businesses. However, due to the economic recession and the credit crisis in the United States,
there is no assurance that we would be able to obtain such borrowings or generate additional capital on terms acceptable to us, if at all.
Recent Accounting Pronouncements
In June 2009, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards
(SFAS) No. 168, The FASB Accounting Standards Codification TM and the Hierarchy of Generally Accepted Accounting Principles,
a replacement of FASB Statement No. 162, (the Codification). The Codification, which was launched on July 1, 2009, became the
single source of authoritative nongovernmental U.S. GAAP, superseding existing FASB, American Institute of Certified Public
Accountants (AICPA), Emerging Issues Task Force (EITF) and related literature. The Codification eliminates the GAAP hierarchy
contained in SFAS No. 162 and establishes one level of authoritative GAAP. All other literature is considered non-authoritative. This
Statement is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Company
will adopt this Statement for its first fiscal 2010 quarter ending September 30, 2009. There will be no change to the Company’s
Consolidated Financial Statements due to the implementation of this Statement.
In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R), and SFAS No. 166,
Accounting for Transfers of Financial Assets—an amendment of FASB Statement No. 140. SFAS No. 167 amends FASB
Interpretation 46(R) to eliminate the quantitative approach previously required for determining the primary beneficiary of a variable
interest entity and requires ongoing qualitative reassessments of whether an enterprise is the primary beneficiary of a variable interest
entity. SFAS No. 166 amends SFAS No. 140 by removing the exemption from consolidation for Qualifying Special Purpose Entities
(QSPEs). This Statement also limits the circumstances in which a financial asset, or portion of a financial asset, should be
derecognized when the transferor has not transferred the entire original financial asset to an entity that is not consolidated with the
transferor in the financial statements being presented and/or when the transferor has continuing involvement with the transferred
financial asset. The company will adopt these Statements for interim and annual reporting periods beginning on July 1, 2009. The
Company does not expect the adoption of these standards to have any material impact on the Consolidated Financial Statements.
In May 2009, the FASB issued SFAS No. 165, Subsequent Events. This Statement sets forth: (i) the period after the balance
sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential
recognition or disclosure in the financial statements; (ii) the circumstances under which an entity should recognize events or
transactions occurring after the balance sheet date in its financial statements; and (iii) the disclosures that an entity should make about
events or transactions that occurred after the balance sheet date. This Statement is effective for interim and annual periods ending after
June 15, 2009. The company adopted this Statement at June 30, 2009. This Statement did not impact the consolidated financial results
other than require additional disclosure (see Principles of Consolidation above in this note).
In April 2009, the FASB issued FASB Staff Position (FSP) Financial Accounting Standard (FAS) 157-4, Determining Fair
Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions
That Are Not Orderly. Based on the guidance, if an entity determines that the level of activity for an asset or liability has significantly
decreased and that a transaction is not orderly, further analysis of transactions or quoted prices is needed, and a significant adjustment
to the transaction or quoted prices may be necessary to estimate fair value in accordance with SFAS No. 157, Fair Value
Measurements. This FSP is to be applied prospectively and is effective for interim and annual periods ending after June 15, 2009 with
early adoption permitted for periods ending after March 15, 2009. The Company adopted this FSP in the fiscal year ended June 30,
2009, and there was no impact on the Consolidated Financial Statements.
In April 2009, the FASB issued FSP FAS 107-1 and Accounting Principles Board (APB) 28-1, Interim Disclosures about
Fair Value of Financial Instruments. The FSP amends SFAS No. 107, Disclosures about Fair Value of Financial Instruments, to
require an entity to provide disclosures about fair value of financial instruments in interim financial information. This FSP is to be
applied prospectively and is effective for interim and annual periods ending after June 15, 2009 with early adoption permitted for
periods ending after March 15, 2009. The Company adopted this FSP in the fiscal year ended June 30, 2009. There was no impact on
the Consolidated Financial Statements.
49
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
In December 2007, the FASB issued SFAS No. 141(R), Business Combinations, which became effective January 1, 2009 via
prospective application to business combinations. This Statement requires that the acquisition method of accounting be applied to a
broader set of business combinations, amends the definition of a business combination, provides a definition of a business, requires an
acquirer to recognize an acquired business at its fair value at the acquisition date and requires the assets and liabilities assumed in a
business combination to be measured and recognized at their fair values as of the acquisition date (with limited exceptions). The
company will adopt this Statement on July 1, 2009. The impact upon adoption and its effects on future periods will depend on the
nature and significance of business combinations subject to this statement.
In April 2009, the FASB issued FSP FAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business
Combination That Arise from Contingencies. This FSP requires that assets acquired and liabilities assumed in a business combination
that arise from contingencies be recognized at fair value if fair value can be reasonably estimated. If fair value cannot be reasonably
estimated, the asset or liability would generally be recognized in accordance with SFAS No. 5, Accounting for Contingencies and
FASB Interpretation No. 14, Reasonable Estimation of the Amount of a Loss. Further, the FASB removed the subsequent accounting
guidance for assets and liabilities arising from contingencies from SFAS No. 141(R). The requirements of this FSP carry forward
without significant revision the guidance on contingencies of SFAS No. 141, Business Combinations, which was superseded by SFAS
No. 141(R) (see previous paragraph). The FSP also eliminates the requirement to disclose an estimate of the range of possible
outcomes of recognized contingencies at the acquisition date. For unrecognized contingencies, the FASB requires that entities include
only the disclosures required by SFAS No. 5. This FSP will be adopted effective July 1, 2009. The impact upon adoption and its
effects on future periods will depend on the nature and significance of business combinations subject to this statement.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk represents the risk of loss that may impact our financial position, results of operations or cash flows due to
adverse changes in financial market prices, including interest rate risk, foreign currency exchange rate risk, commodity price risk and
other relevant market rate or price risks.
Due to the cash and cash equivalent balances that we maintain, we are exposed to risk of changes in short-term interest
rates. At June 30, 2009, we had approximately $23,870,000 in cash and cash equivalents, primarily invested in money market
funds. The $23,870,000 was prior to the buyback of shares under the Dutch Auction tender offer for $8,749,140, which occurred in
July 2009. Reductions in short-term interest rates could result in reductions in the amount of income we are able to generate on
available cash. However, any adverse impact on our operating results of reductions in interest rates is not expected to be material.
We do not engage in any activities that would expose us to foreign currency exchange rate risk or commodity price risks.
50
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statements
Report of Independent Registered Public Accounting
Firm
Consolidated Balance Sheets at June 30, 2009 and
2008
Consolidated Statements of Operations for the Years Ended June 30, 2009, 2008 and 2007
Consolidated Statements of Stockholders’ Equity For the Years Ended June 30, 2009, 2008 and 2007
Consolidated Statements of Cash Flows for the Years Ended June 30, 2009, 2008 and 2007
Notes to Consolidated Financial Statements For the Years Ended June 30, 2009, 2008 and 2007
Schedule II – Valuation and Qualifying
Accounts
Page
52
53
54
55
56
58
86
51
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
Collectors Universe, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Collectors Universe, Inc. and subsidiaries (the Company) as of
June 30, 2009 and 2008, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the
three years in the period ended June 30, 2009. Our audits of the basic financial statements included the financial statement schedule
listed in the index appearing under Item 15(a)(2). These financial statements and financial statement schedule are the responsibility of
the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule
based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over
financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial statements, 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of
Collectors Universe, Inc. and subsidiaries as of June 30, 2009 and 2008, and the results of their operations and their cash flows for
each of the three years in the period ended June 30, 2009 in conformity with accounting principles generally accepted in the United
States of America. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
/s/ GRANT THORNTON LLP
Irvine, California
September 1, 2009
52
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
COLLECTORS UNIVERSE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
ASSETS
Current assets:
Cash and cash equivalents
Accounts receivable, net of allowance of $63 in 2009 and $27 in 2008
Refundable income taxes
Inventories, net
Prepaid expenses and other current assets
Customer notes receivable, net of allowance of $31 in 2009 and 2008
Net deferred income tax asset
Customer notes receivables held for sale
Notes receivable from sale of net assets of discontinued operations
Current assets of discontinued operations
Total current assets
Property and equipment, net
Goodwill
Intangible assets, net
Net deferred income tax asset
Notes receivable from sale of net of assets of discontinued operations
Other assets
Non-current assets of discontinued operations
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
Accrued liabilities
Accrued compensation and benefits
Income taxes payable
Net deferred income tax liability
Deferred revenue
Current liabilities of discontinued operations
Total current liabilities
Deferred rent
Net deferred income tax liability
Non-current liabilities of discontinued operations
Commitments and contingencies (note 15)
$
$
$
June 30,
2009
2008
23,870 $
1,252
-
497
868
2,340
-
-
212
102
29,141
1,174
2,626
2,776
-
300
74
182
36,273 $
1,051 $
1,344
1,341
252
60
1,883
1,827
7,758
220
208
3,308
-
23,345
1,211
575
961
804
2,062
486
3,579
92
450
33,565
1,617
2,626
4,035
909
138
127
9,001
52,018
1,348
1,357
1,269
368
-
2,002
1,224
7,568
174
-
446
-
Stockholders’ equity:
Preferred stock, $.001 par value; 3,000 shares authorized at June 30, 2009 and 5,000 at June 30,
2008; no shares issued or outstanding
Common stock, $.001 par value; 20,000 shares authorized at June 30, 2009; 45,000 at June 30,
2008;
shares outstanding: 9,158 in 2009 and 8,361 in 2008
Additional paid-in capital
Accumulated deficit
Total stockholders’ equity
-
-
9
75,957
(51,187)
24,779
36,273 $
8
75,996
(32,174)
43,830
52,018
$
The accompanying notes are an integral part of these consolidated financial statements.
53
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
COLLECTORS UNIVERSE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Net revenues:
Grading, authentication and related services
Cost of revenues:
Cost of grading, authentication and related services
Gross profit
Operating expenses:
Selling and marketing expenses
General and administrative expenses
Impairment loss on intangible assets and other assets
Amortization of intangible assets
Total operating expenses
Operating income
Interest income, net
Other income, net
Income before provision for income taxes
Provision for income taxes
Income from continuing operations
Loss from discontinued operations, net of loss on sales of discontinued businesses
(net of income taxes)
Net loss
Net loss per basic share:
Income from continuing operations
Loss from discontinued operations, net of loss on sales of discontinued businesses
(net of income taxes)
Net loss
Net loss per diluted share:
Income from continuing operations
Loss from discontinued operations, net of loss on sales of discontinued businesses
(net of income taxes)
Net loss
Weighted average shares outstanding:
Basic
Diluted
Dividends declared per common share
Year Ended June 30,
2008
2009
2007
$
35,914 $
39,505 $
38,686
16,385
19,529
4,306
11,615
649
871
17,441
2,088
284
14
2,386
1,183
1,203
19,779
19,726
5,137
12,793
-
490
18,420
1,306
1,138
6
2,450
2,155
295
(18,126)
(16,923) $
(15,927)
(15,632) $
0.13 $
0.03 $
(1.99)
(1.86) $
(1.71)
(1.68) $
0.13 $
0.03 $
(1.98)
(1.85) $
9,103
9,135
0.23 $
(1.69)
(1.66) $
9,295
9,419
0.91 $
16,736
21,950
4,924
13,520
16
505
18,965
2,985
2,149
7
5,141
2,336
2,805
(3,320)
(515)
0.30
(0.36)
(0.06)
0.30
(0.35)
(0.05)
9,204
9,462
0.36
$
$
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
54
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
COLLECTORS UNIVERSE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)
Balance at June 30, 2006
8,475 $
8 $
76,909 $
Common Stock
Additional
Paid-in
Amount Capital
Shares
Accumulated
Deficit
Treasury Stock
Shares Amount
(125) $
(1,021) $
(3,990)
Total
Exercise of stock options
Stock compensation expense
Issuance of restricted shares
Tax benefit on exercise of
stock options
Shares repurchased and
cancelled under the Stock
Repurchase Plan
Net loss
Retirement of treasury shares
Dividends paid ($0.36 per
share)
Balance at June 30, 2007
Cumulative effects of
adoption of
FIN 48 (see note 9)
Exercise of stock options
Stock-based compensation -
options
Stock-based compensation –
restricted stock
Shares repurchased and
cancelled under the Stock
Repurchase Plan
Net loss
Dividends paid ($0.91 per
share)
Balance at June 30, 2008
10% stock dividend issued
November 2008
Shares sold to directors
Stock-based compensation –
options
1999 supplier stock options
expired in 2009
Stock-based compensation –
restricted stock
Shares repurchased and
cancelled under the Stock
Repurchase Plan
Net loss
Dividends paid ($0.23 per
share)
Balance at June 30, 2009
161
-
57
-
(72)
-
(125)
-
8,496 $
-
76
-
21
(232)
-
-
8,361 $
828
40
-
-
49
(120)
-
-
9,158 $
1
-
-
-
-
-
-
-
9 $
-
-
-
-
(1)
-
-
8 $
1
-
-
-
-
-
-
-
9 $
275
726
164
633
(949)
-
(1,021)
-
76,737 $
-
242
873
352
-
(515)
-
(3,350)
(7,855)
(170)
-
-
-
(2,208)
-
-
75,996 $
-
(15,632)
(8,517)
(32,174)
(1)
161
524
(495)
256
(484)
-
-
75,957 $
-
-
-
-
-
-
(16,923)
(2,090)
(51,187)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
125
-
-
1,021
71,906
276
726
164
633
(949)
(515)
-
-
- $
-
-
-
-
-
-
-
- $
-
-
-
-
-
-
-
-
- $
-
- $
(3,350)
68,891
-
-
-
-
(170)
242
873
352
-
-
-
- $
(2,209)
(15,632)
(8,517)
43,830
-
-
-
-
-
-
161
524
(495)
256
-
-
-
- $
(484)
(16,923)
(2,090)
24,779
The accompanying notes are an integral part of these consolidated financial statements.
55
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
COLLECTORS UNIVERSE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss
Adjustments to reconcile net loss to net cash provided
by operating activities:
Discontinued operations
Depreciation and amortization expense
Stock-based compensation expense
Tax benefit from exercise of stock options
Impairment losses on long-lived assets
Provision for (recovery of) bad debts
Provision for inventory write-down
(Gain) loss on sale of property and equipment
(Gain) loss on customer notes
Interest on note receivables
Deferred income taxes
Accounts receivable
Inventories
Prepaid expenses and other
Refundable income taxes
Other assets
Accounts payable and accrued liabilities
Accrued compensation and benefits
Income taxes payable
Deferred revenue
Deferred rent
Net cash provided by operating activities
Net cash used in operating activities of discontinued businesses
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment
Capital expenditures
Purchase of businesses, net of cash acquired
Advances on customer notes receivable
Proceeds from collection of customer notes receivable
Capitalized software
Cash received from sale of net assets of discontinued operations
Net cash provided by (used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock
Proceeds from exercise of stock options
Payments for retirement of common stock
Dividends paid to common stockholders
Net cash used in financing activities
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Year Ended June 30,
2008
2009
2007
$
(16,923) $
(15,632) $
(515)
18,126
1,401
759
-
649
42
176
2
(10)
(8)
1,168
(82)
288
(16)
575
60
(284)
72
(117)
(118)
46
5,806
(6,568)
3
(123)
-
(2,446)
5,731
(261)
796
3,700
161
-
(484)
(2,090)
(2,413)
525
23,345
23,870 $
15,927
1,081
1,179
-
-
27
23
(4)
-
(9)
(1,136)
(101)
(576)
36
645
8
(154)
(600)
82
(170)
(95)
531
(4,034)
143
(960)
(3)
(7,829)
4,723
(1,220)
92
(5,054)
-
242
(2,209)
(8,517)
(10,484)
(19,041)
42,386
23,345 $
$
3,320
1,030
854
633
16
(12)
(4)
-
-
(10)
1,606 Changes in operating assets and liabilities:
412
33
189
(1,220)
82
165
824
(673)
306
(70)
6,966
(10,783)
-
(575)
(2,411)
(5,038)
6,416
(761)
485
(1,884)
-
276
(949)
(3,350)
(4,023)
(9,724)
52,110
42,386
The accompanying notes are an integral part of these consolidated financial statements.
56
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
COLLECTORS UNIVERSE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(in thousands)
Year ended June 30,
2008
2009
2007
(488) $
59 $
(651) $
28 $
743
19
- $
-
-
- $
- $
-
-
- $
(385)
1,810
1,001
2,426
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Income taxes paid (refund), net
Interest paid
Effective July 1, 2006, the Company acquired Expos Unlimited, LLC (Expos) in a
transaction summarized as follows:
Fair value of net liabilities assumed
Intangible assets
Goodwill
Purchase price, net of $49 cash acquired
$
$
$
$
NON-CASH FINANCING ACTIVITY:
Supplier Warrants
During fiscal year 2009, approximately 165,000 warrants to acquire the Company’s
stock that were issued in 1999 to suppliers with an exercise price of $18.18 expired
unexercised. Prior to expiration of these warrants, the Company recognized a
deferred income tax asset of approximately $495,000 that was written off on the
dates of expiration and charged to additional paid-in capital on the Consolidated
Balance Sheet at June 30, 2009.
The accompanying notes are an integral part of these consolidated financial statements.
57
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
COLLECTORS UNIVERSE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Company Organization and Nature of Business
Organization
Collectors Universe, Inc. (“We,” “us,” the “Company” or “Collectors Universe”) is a Delaware corporation that was
organized on February 5, 1999 for the purpose of enabling Professional Coin Grading Service, Inc. (“PCGS”), the Company’s
predecessor corporation, to acquire other businesses that, like PCGS, would provide services to the collectibles markets. On February
5, 1999, Collectors Universe issued 4,327,000 shares of common stock in exchange for all of the outstanding shares of PCGS. As a
result of that exchange, the former stockholders of PCGS became stockholders of Collectors Universe, with each of them receiving a
number of our shares based on his or her percentage ownership of the shares of PCGS. Prior to this exchange, Collectors Universe
had no operating assets or liabilities and had not yet conducted any operations. The assets and liabilities acquired were recorded at the
PCGS’ basis as the transaction represented a transfer of assets and liabilities between entities under common control.
Concurrently, with the exchange transaction with PCGS, Collectors Universe acquired the assets of the auction businesses of
Lyn F. Knight Rare Coins, Inc. (“Lyn Knight”) and Kingswood Coin Auctions, LLC (“Kingswood”) and the minority ownership
interests in two majority-owned subsidiaries of PCGS, Superior Trading card Auctions, LLC (“Superior”) and Internet Universe, LLC
(“IU”), that were not already owned by PCGS at the time these acquisitions were consummated.
In fiscal year 2005, we organized Collectors Finance Corporation (“CFC”) as a 100% subsidiary to engage in the business of
making short-term loans to collectibles dealers pursuant to a dealer financing program. Following the receipt in March 2005 of a
California Finance Lenders License, CFC began making short-term loans to established collectibles dealers. The loans are secured by
the delivery of coins or other collectibles to us.
In fiscal years 2006 and 2007, the Company acquired the following businesses, the results of operations of which have been
consolidated into the financial statements of the Company, either as continuing or discontinued operations from their respective dates
of acquisition:
Business
CoinFacts.com
Certified Coin Exchange
Gem Certification & Appraisal Lab, LLC
Gemprint Corporation
Expos Unlimited LLC
American Gemological Laboratory
Acquisition Date
July 14, 2005
September 2, 2005
November 8, 2005
December 22, 2005
July 1, 2006
August 18, 2006
Purchase Price
$0.5 million
$2.4 million
$3.3 million (i)
$8.6 million (i)
$2.5 million (ii)
$3.9 million (i)
(i) Businesses were discontinued in the third and fourth quarters of fiscal 2009. See Nature of Our Business below and note 4.
(ii) Does not include contingent purchase price that we may become obligated to pay to the sellers of Expos Unlimited LLC
(“Expos”) based on its financial performance. See note 3 below.
Nature of Our Business
We are engaged in the business of providing third-party authentication, grading and related services for rare and high-value
collectibles consisting of coins, trading cards, stamps, sports memorabilia and autographs. We authenticate and grade the quality of
such collectibles and high-value assets for dealers, collectors and retail buyers and sellers of these collectibles and high-value
assets. We also publish magazines that provide market prices and information for certain collectibles and high-value assets, that is
accessible on our websites and sell advertising in those magazines and on those websites; own the CCE subscription business, which
operates an online market for graded collectible coins for dealers who subscribe to this service; and promote, manage and operate
collectibles trade shows.
58
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
During the period from 1999 through the latter part of fiscal 2004, we also were engaged in the business of marketing and
selling high-end collectible coins, trading cards and sports entertainment and historical memorabilia. Most of those sales were made
at multi-venue auctions that were conducted by our collectibles sales divisions. We also sold collectible coins by direct sales methods.
In December 2003, our Board of Directors adopted a plan to focus our financial and management resources and collectibles
expertise, on the operations and growth of our authentication and grading businesses, by divesting the collectibles auctions and direct
sales businesses comprising our collectibles sales segment. During the second and third quarters of fiscal year 2009, the Board of
Directors authorized the sale of the PCGS Currency grading business and the closure and sale of the jewelry grading businesses
consisting of GCAL and AGL, respectively. During the fourth quarter of the same fiscal year, the Board authorized the sale of the
Gemprint business. As of June 30, 2009, each of these businesses with the exception of the Gemprint business has been sold, and, in
accordance with Statement of Financial Accounting Standards (SFAS) No.144, Accounting for the Impairment or Disposal of
Long-Lived Assets, the results of operations, net operating assets and liabilities and related cash flows of those discontinued businesses
already sold or held for sale have been classified as part of discontinued operations in the Consolidated Financial Statements for all
periods shown. See note 4.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally
accepted in the United States of America.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of Collectors Universe, Inc. and its subsidiaries, all
of which are 100% owned by the Company. At June 30, 2009, such operating subsidiaries were Collectors Finance Corporation
(CFC), Certified Asset Exchange, Inc. (CAE) and Expos Unlimited, Inc. (Expos). All significant inter-company accounts and
transactions have been eliminated in consolidation.
We have evaluated subsequent events through September 3, 2009; the date of issuance of these Consolidated Financial
Statements.
In June 2008, we merged PCGS, our predecessor corporation that had been one of our wholly-owned subsidiaries since 1999,
into the Company. Prior to that merger, substantially all of the business of PCGS had been, and all of the business of PCGS is now,
operated as a division of Collectors Universe.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that can affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results from continuing operations could differ from results expected on the basis of
those estimates, and such differences could be material to our future results of operations and financial condition. Examples of such
estimates that could be material include determinations made with respect to the capitalization of software development costs, the
valuation of stock-based compensation awards, the amount of goodwill and the existence or non-existence of goodwill impairments,
warranty reserves and the provisions or benefits for income taxes. Included in the total liabilities of approximately $5,135,000 for
discontinued operations on the Consolidated Balance Sheet at June 30, 2009, we estimated the fair values of the remaining lease
obligations for facilities previously occupied by the jewelry grading businesses to be approximately $4,454,000. In accordance with
SFAS No. 146, Accounting For Costs Associated With Exit or Disposal Activities, we review, on a quarterly basis, our assumptions
used in the estimation of the fair value of those lease obligations over the remaining terms of the leases and would record additional
expense, if necessary, to adjust the fair values based on currently available information related to the subtenant market for office space
in New York City. Our quarterly reviews could have a material impact on our consolidated results of operations, related cash flows
and earnings or losses per share of common stock. Each of these estimates are discussed in more detail in this note 2 and note 4 to
these Consolidated
59
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
Financial Statements, and in the Critical Accounting Policies and Estimates section of Item 7, Management’s Discussion and Analysis
of Financial Condition and Results of Operations, contained elsewhere in this Report.
Cash and Cash Equivalents
We consider all highly liquid investments with original maturities of three months or less at the date of purchase to be cash
and cash equivalents. At June 30, 2009 and 2008, we had approximately $23,900,000 and $23,300,000, respectively, classified as
cash and cash equivalents on the consolidated balance sheets, of which approximately $20,200,000 and $21,500,000, respectively,
were invested primarily in high-quality money market funds. Our investment policy provides that the minimum credit quality of any
portfolio of trading securities in which we may temporarily invest cash may not be rated less than single-A long term or A1/P1 short
term, and any such portfolio may not contain more than 25% exposure to securities of issuers whose principal business activities are in
the same industry. However, the 25% limitation does not apply to securities guaranteed by the U.S. government or to obligations
issued by banks that are subject to U.S. banking regulations. In addition, the weighted average maturity of any such portfolio may not
exceed 90 days.
Concentrations
Credit Risks. Financial instruments that potentially subject the Company to significant concentrations of credit risk at June
30, 2009 consisted primarily of cash and cash equivalents, accounts receivables and notes receivables.
Financial Instruments and Cash Balances. At June 30, 2009 and 2008, the Company had funds of approximately
$20,200,000 and $21,500,000, respectively, in money market funds. In addition, at June 30, 2009 and 2008, the Company had
approximately $3,600,000 and $1,800,000 in a non-interest bearing bank account for general day-to-day operations.
Accounts Receivable. A substantial portion of accounts receivable is due from collectibles dealers. At June 30, 2009, no
individual customer accounts receivable exceeded 10% of the Company’s total gross accounts receivable balances. At June 30, 2008,
accounts receivable from four customers represented 45% of the Company’s total gross accounts receivable balances. We perform an
analysis of the expected collectability of accounts receivable based on several factors, including the age and extent of significant past
due accounts and economic conditions or trends that may impact the ability of the debtor to pay their account receivable
balances. Based on such review, we establish an allowance for doubtful accounts, when necessary. The allowance for doubtful
accounts receivable was $63,000 and $27,000 at June 30, 2009 and June 30, 2008, respectively.
Customers. The authentication and grading of collectible coins and related services accounted for approximately 58%,
58% and 60% of our net revenues for the years ended June 30, 2009, 2008 and 2007, respectively.
Customer Notes Receivable. At June 30, 2009 and 2008, the outstanding principal amount of customer notes receivable,
which evidenced primarily short term advances made to customers by CFC, totaled $2,340,000 and $5,641,000 (of which, $3,579,000
was classified as held for sale at June 30, 2008), respectively, net of allowances for uncollectible amounts of $31,000.
At June 30, 2009, one note represented 98% of the total principal outstanding as of that date. At June 30, 2008, three notes,
each greater than 10% of the total year-ended balance outstanding, represented 49% of the total principal outstanding.
Suppliers. We purchase injection-molded parts, holograms and printed labels for our grading services. There are numerous
suppliers for these items and, as a result, it is possible to change suppliers without significant delay or cost to the Company. However,
while there are numerous sources for injection-molded parts, these parts require a die to fabricate the part. The manufacturing of
high-value precision dies can be a lengthy process and requires considerable expertise in their fabrication. Although, we do not have
back-up dies for some of our high-value volume injection-molded parts and we rely on one supplier for these requirements, we believe
that this supplier maintains a large enough inventory of the injection-molded parts to allow time for us to have new molds
manufactured for us by other suppliers should the need to do so arise.
60
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
Fair Value of Financial Instruments
The carrying value of cash and cash equivalents, accounts receivable, customer notes receivable, receivables from sale of net
assets of discontinued operations, accounts payable and accrued liabilities approximate their respective fair values due to the
short-term nature of such instruments. The carrying value of the note receivable related to the sale of a discontinued operation
approximates fair value, as the interest rate on such note approximates an amount that would be extended to parties with similar credit
risk and remaining maturities.
Inventories
Our inventories consist primarily of (i) our coin and stamp collectibles inventories, and (ii) consumable supplies that we use
in our continuing authentication and grading businesses. We account for those collectibles inventories under the specific identification
method. Inventories are valued at the lower of cost or market. Inventories are periodically reviewed to identify slow moving items,
and the allowance for inventory loss is recognized, as necessary. The allowance for inventory loss was $102,000 and $91,000 at June
30, 2009 and 2008, respectively. It is possible that our estimates of market value could change in the near term due to market
conditions in the various collectibles markets served by the Company which could require us to increase that allowance.
Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization are provided using the straight-line method over
the estimated useful lives ranging from three to seven years. Leasehold improvements are amortized over the shorter of the estimated
useful lives of the improvements or the term of the related lease. Coin and stamp reference sets are non-depreciable assets. Repair and
maintenance costs are expensed as incurred.
Long-Lived Assets
Management regularly reviews property and equipment and other long-lived assets, including certain identifiable intangibles,
for possible impairment. This review occurs annually, or more frequently if events or changes in circumstances indicate the carrying
amount of the asset may not be recoverable in full. If there is indication of impairment of property, equipment or amortizable
intangible assets, then management prepares an estimate of future undiscounted cash flows expected to result from the use of that asset
and its eventual disposition. If these cash flows are less than the carrying amount of the asset, an impairment loss would be
recognized to write down the asset to its estimated fair value. The fair value would be estimated using the present value of the future
cash flows discounted at a rate commensurate with management’s estimates of the business risks. During fiscal years 2009, 2008, and
2007, approximately $649,000, $0 and $16,000, respectively, were recorded as impairment losses of long-lived assets, other than
goodwill, within the Consolidated Financial Statements for those years. The impairment loss of $649,000 in fiscal year 2009 was in
connection with capitalized software associated with our autograph authentication business that was not meeting performance
expectations and may result in certain aspects of that software being replaced or abandoned.
Revenue Recognition
Net revenues consist primarily of fees generated from the authentication and grading of coins, trading cards, autographs and
stamps. Authentication and grading revenues are recognized when those services have been performed by us and the item is shipped
back to the customer. Authentication and grading fees generally are prepaid, although we offer open account privileges to larger
dealers. Advance payments received for grading services are deferred until the service is performed and the graded item is shipped to
the customer. In the case of dealers to whom we have extended credit, we record revenues at the time the item is shipped to the
customer. With respect to our Expos trade show business, we recognize revenue generated by the promotion, management and
operation of collectibles conventions and trade shows in the periods in which the shows take place, which corresponds with the
revenue generating activities being complete.
A portion of our net revenues are comprised of subscription fees paid by customers for a membership in our Collectors
Club. Those memberships entitle members access to our on-line and printed publications, and sometimes also to vouchers for free
grading services. We record revenue for this multi-element service arrangement in accordance with EITF 00-21, Accounting for
Revenue Arrangements With Multiple Deliverables, by recognizing approximately 60% of the subscription fee in the month following
the membership purchase, on the basis that Collectors Club
61
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
members typically utilize their vouchers for free grading services within 30 days of subscribing for memberships. The balance of the
membership fee is recognized as revenue over the life of the membership, which can range from one to two years. We evaluate, at
least semi-annually, the relative fair values of the deliverables and the percentage factors used to allocate the membership fee between
the grading and the publication services provided under this membership service.
We recognize product sales when items are shipped and all the requirements of Staff Accounting Bulletin No. 104, Revenue
Recognition, issued by the Securities and Exchange Commission (“SEC”), have been satisfied. Product revenues consist primarily of
collectible coins that we purchased pursuant to our coin authentication and grading warranty program and are not considered an
integral part of the Company’s on-going revenue generating activities.
Shipping and Handling Costs
Shipping and handling costs incurred to return to our customers their collectibles property submitted to us for grading or
authentication are recorded as costs of revenues, net of amounts received from such customers.
Cooperative Marketing Arrangements
In accordance with EITF 01-09, Accounting for Consideration Given By a Vendor to a Customer (Including a Reseller of the
Vendor’s Products), marketing allowances given to a customer have been classified as a reduction of revenues in the year ended June
30, 2007. There were no such marketing allowances given to customers in fiscal years 2008 and 2009.
Warranty Costs
We offer a warranty covering the coins, trading cards and stamps that we authenticate and grade. Under the warranty, if any
collectible that was previously authenticated and graded by us is later submitted to us for re-grading and either (i) receives a lower
grade upon that resubmittal or (ii) is determined not to have been authentic, we will offer to purchase the collectible, or, in the
alternative, at our option, pay the difference in value of the item at its original grade as compared with its lower grade. However, this
warranty is voided if the collectible, upon resubmittal to us, is not in the same tamper-resistant holder in which it was placed at the
time we last graded it. We accrue for estimated warranty costs based on historical trends and related experience. We monitor the
adequacy of our warranty reserves on an on-going basis and significant claims resulting from resubmissions receiving lower grades or
deemed not to be authentic could result in a material adverse impact on our results of operation.
Advertising Costs
Advertising costs are expensed as incurred and amounted to approximately $524,000, $522,000 and $566,000 in the fiscal
years ended June 30, 2009, 2008 and 2007, respectively.
Income Taxes
We account for income taxes in accordance with SFAS No. 109, Accounting for Income Taxes and FIN 48, Accounting for
Uncertainty in Income Taxes – An Interpretation of FASB Statement No. 109. SFAS No. 109 requires the recording of deferred tax
assets and liabilities for the future consequences of events that have been recognized in the Company’s financial statements or tax
returns. Measurement of the deferred items is based on enacted tax laws. In the event the future consequences of differences between
financial reporting bases and tax bases of the Company’s assets or liabilities result in a deferred tax asset, SFAS No. 109 requires that
we evaluate the probability of realizing the future benefits comprising that asset. In fiscal 2009 and 2008, we recorded increases to
valuation allowances for deferred tax assets of approximately $8,390,000 and $4,550,000, respectively, as we determined that it was
more likely than not that we would not recover deferred tax assets related primarily to the $18,126,000 and $19,100,000 pre-tax losses
from discontinued operations in fiscal years 2009 and 2008, respectively, and the California Enterprise Zone Credits. FIN 48 clarifies
the accounting for uncertainty in tax positions and prescribes a recognition threshold and measurement attribute for the financial
statement recognition and measurement of a tax position taken or expected to be taken in a tax return and, in addition, our policy is to
classify related interest and penalties in our Statements of Operations as a component of income tax expense. FIN 48 requires that we
adjust our financial statements to reflect only those tax positions that are more-likely-than-not to be sustained on audit, based on the
technical merits of the position. FIN 48 further requires that any
62
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
necessary adjustment be recorded directly to the beginning balance of retained earnings or accumulated deficit in the period of
adoption of FIN 48 and reported as a change in accounting principle, if material. During the first quarter of fiscal 2008, the
cumulative effects of applying FIN 48 were recorded as an increase of $170,000 to accumulated deficit, an increase to income taxes
payable of $279,000 and an increase in deferred tax assets of $109,000 and those adjustments are reflected in the Consolidated
Balance Sheet as of June 30, 2008. Interest and penalties totaled $101,000 as of July 1, 2007, the date of the adoption of FIN 48, and
were accounted for as part of the total adjustment to accumulated deficit of $170,000. During fiscal 2009, we voluntarily filed tax
returns in two states, which resulted in an aggregate tax liability of approximately $54,000 for the tax years 2005 to 2008 and gave rise
to a reduction in our tax expenses in those states of $95,000, which was a benefit to income tax provision in fiscal 2009.
Capitalized Software
Through June 30, 2009 and 2008, we had capitalized approximately $2,590,000 and $2,329,000, respectively as capitalized
software and recognized related accumulated amortization of $1,842,000 and $483,000, respectively, in accordance with SOP 98-1,
Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. SOP 98-1 requires that certain costs
incurred, either from internal or external sources, be capitalized as part of intangible assets and amortized on a straight-line basis over
the useful life of the software. During fiscal years 2009, 2008 and 2007, the Company recorded approximately $710,000, $329,000
and $143,000, respectively, as amortization expense for certain software development projects that were completed. Planning,
training, support and maintenance costs incurred either prior to or following the implementation phase are recognized as expense in
the period in which they occur. The Company evaluates the carrying values of capitalized software to determine if the carrying values
are impaired, and, if necessary, an impairment loss is recorded in the period in which the impairment is determined to have
occurred. The Company recorded an impairment to capitalized software of $649,000 during fiscal 2009 and such amount is included
in accumulated amortization at June 30, 2009.
Stock-Based Compensation
The Company applies the fair-value recognition provisions of SFAS No. 123(R), Share-Based Payment, using the
modified-prospective transition method. Under this method, compensation cost recognized in each of the fiscal years ended June 30,
2009, 2008 and 2007 include: (a) compensation cost for all share-based payments granted and not vested prior to July 1, 2005, based
on the grant date fair value estimated in accordance with the original provisions of SFAS No. 123, and (b) compensation cost for all
share-based payments granted subsequent to June 30, 2005 based on the grant-date fair value estimated in accordance with the
provisions of SFAS No. 123(R).
Since stock-based compensation expense recognized in the Consolidated Statements of Operations for the fiscal years ended
June 30, 2009, 2008 and 2007 is based on awards expected to vest in the future, the compensation expense has been reduced for
estimated forfeitures of stock awards made in those years. SFAS No. 123(R) requires forfeitures to be estimated at the time of grant
and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company considers historical
forfeiture experience to be one of several indicators of future forfeitures and reduced the forfeiture rate from 9% at June 30, 2007 to
5% at June 30, 2008 and 2009.
For stock option grants, we calculate stock-based compensation by estimating the fair value of each option using the
Black-Scholes option pricing model. Our determination of the fair values of such stock option awards is made as of their respective
dates of grant using that option pricing model and that determination is affected by our stock price as well as assumptions regarding a
number of subjective variables. These variables include, but are not limited to, expected stock price volatility over the term of the
awards, the expected term of the options, the dividend yield and actual and projected employee stock option exercise behavior. The
Black-Scholes option pricing model was developed for use in estimating the value of traded options that have no vesting or hedging
restrictions and are fully transferable. Because the Company’s employee stock options have certain characteristics that are
significantly different from traded options, the Black-Scholes option pricing model may not provide an accurate measure of the fair
value of the outstanding stock options. Although the fair value of employee stock options is determined in accordance with SFAS
No. 123(R) using an option-pricing model, that fair value also may not be indicative of the fair value that would be paid in a willing
buyer/willing seller market transaction.
The calculated compensation cost, net of estimated forfeitures, is recognized on a straight-line basis over the vesting period
of the option beginning as of the adoption date of SFAS No. 123(R), which was July 1, 2005, or the date the option was granted,
whichever date is later.
63
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
We grant stock options and restricted stock awards to employees and outside directors with respect to which the only
condition for vesting is continued employment or service during the specified vesting periods. Typically, the vesting period is four
years for employee awards and one year for director awards, although awards are sometimes granted with immediate vesting or longer
vesting periods. The term of the options may not exceed ten years; however, an optionee’s options will terminate sooner in the event
of a cessation of the optionee’s service with the Company prior to the expiration date of the option. During fiscal years 2009, 2008
and 2007, we awarded an aggregate of 77,778, 23,495 and 62,436 shares of restricted stock, respectively, to the Company’s CEO and
CFO and to the non-management directors, and in connection with those awards, recorded, as part of general administrative expenses
in the Consolidated Statements of Operations for the years ended June 30, 2009, 2008 and 2007, approximately $256,000, $352,000
and $164,000 in stock-based compensation expense, respectively. Compensation expense for the grant of a restricted share award to
an employee or non-employee director is determined by amortizing over the requisite service period, or the vesting period, the
aggregate fair value of the restricted shares awarded based on the closing price of the Company’s common stock effective on the date
the award was made.
We recognized stock-based compensation (which includes compensation costs related to the grant of restricted stock awards
and stock options) of $780,000, $1,225,000 and $890,000 during fiscal 2009, 2008 and 2007, respectively. Stock-based compensation
is recorded as part of (i) costs of sales, in the case of stock awards granted to employees whose costs are classified as cost of revenues,
(ii) selling and marketing expenses in the case of stock awards granted to marketing and sales personnel; (iii) general and
administrative expenses in the case of stock awards granted to directors, executive and financial management and administrative
personnel; and (iv) discontinued operations for those employees associated with businesses that have been sold, or are held for sale, as
follows:
Included In:
Cost of revenues $
Selling and marketing
expenses
General and administrative expenses
Continuing
operations
Discontinued
operations
$
2009
Year Ended June 30,
2008
2007
294,000
$
293,000
$
158,000
-
465,000
(7,000)
893,000
8,000
688,000
759,000
1,179,000
854,000
21,000
780,000
$
46,000
1,225,000
$
36,000
890,000
The weighted-average grant date fair values of employee stock options granted during the fiscal years ended June 30, 2008
and 2007 were $3.80 and $5.56, respectively, which were determined using the Black-Scholes option pricing model and the following
weighted-average assumptions:
Dividend yield
Expected volatility
Risk-free interest rate
Expected lives
2009(a)
2008
2007
-
-
-
-
6.9%
48.0%
3.9%
2.6%
51.0%
4.6%
6.0 years
5.1 years
(a) No stock option grants were awarded in fiscal year 2009.
Beginning with the fourth quarter of fiscal year 2006 and ending with the first quarter of fiscal 2009, we made consecutive
quarterly dividend payments to our stockholders, and, accordingly, we incorporated a dividend yield assumption in the determination
of the fair value of stock options granted using the Black-Scholes option pricing model. For those options granted during fiscal years
2008 and 2007, the dividend yield assumptions were 6.9% and 2.6% respectively, which were determined by computing the
percentage of the annual dividend rate per share to the closing price of the Company’s common stock on the date of the grant.
64
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
The total amount of compensation expense related to unvested stock option and restricted stock awards not yet recognized at
June 30, 2009 was approximately $176,000 and that amount will be recognized as compensation expense as follows:
Fiscal Year Ending June 30,
2010
2011
2012
Amount
136,000
30,000
10,000
176,000
$
$
However, such amounts, which are non-cash expenses, do not include the cost of new stock option or restricted stock awards
that may be granted in future periods nor any changes in the Company’s forfeiture percentage. The weighted average period over
which the total compensation cost related to non-vested awards not yet recognized is approximately 1.3 years.
Net Loss Per Share
We compute net income or loss per share in accordance with SFAS No. 128, Earnings Per Share. SFAS No. 128 requires
the presentation of basic and diluted earnings per share. Basic net income per share is computed by dividing net income attributable to
common stockholders by the weighted-average number of common shares outstanding during the periods presented. Diluted net
income per share is computed by dividing net income attributable to common stockholders by the weighted-average number of
common and common equivalent shares outstanding during the period presented assuming the exercise of all outstanding stock
options and other dilutive securities. However, options with exercise prices that exceed the average market price of the Company’s
shares for any period for which the calculation of diluted net income per share is made are disregarded, because they are non-dilutive
in their effect.
During the second quarter of fiscal 2009, we issued on November 3, 2008 a one-time 10% stock dividend to all stockholders
of record as of October 20, 2008. As a result, the income or loss per common share for all periods shown in the Consolidated Financial
Statements has been retroactively adjusted for the 10% stock dividend had been in effect for all periods.
The following table sets forth the computation of basic and diluted net loss per common share (in thousands except per share
data):
Income from continuing operations
Income from discontinued operations, net of loss on sales of discontinued
businesses (net of income taxes)
Net loss
Net loss per basic share:
From continuing operations
From discontinued operations, net of loss on sales of discontinued businesses (net
of income taxes)
Net loss
Net loss per diluted share:
From continuing operations
From discontinued operations, net of loss on sales of discontinued businesses (net
of income taxes)
Net loss
$
$
$
$
$
$
Weighted-average shares outstanding:
Basic
Effect of dilutive shares
Diluted
Year Ended June 30,
2008
2009
2007
1,203 $
295 $
2,805
(18,126)
(16,923) $
(15,927)
(15,632) $
(3,320)
(515)
0.13 $
0.03 $
(1.99)
(1.86) $
(1.71)
(1.68) $
0.13 $
0.03 $
(1.98)
(1.85) $
(1.69)
(1.66) $
9,103
32
9,135
9,295
124
9,419
0.30
(0.36)
(0.06)
0.30
(0.35)
(0.05)
9,204
258
9,462
65
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
Options and warrants to purchase approximately 884,000, 860,000 and 825,000 shares of common stock for the years ended
June 30, 2009, 2008 and 2007, respectively, at exercise prices up to $21.82 per share, were not included in the computation of diluted
earnings per share because the respective exercise prices of those options and warrants were greater than the average market price of
our shares for the respective period.
Comprehensive Income
The Company does not have any items of other comprehensive income requiring separate disclosure.
Goodwill and Other Intangible Assets
In accordance with SFAS No. 142, Goodwill and Other Intangible Assets, the Company is required to evaluate the carrying
value of its goodwill and certain indefinite-lived intangible assets at least annually for impairment, or more frequently if facts and
circumstances indicate that impairment has occurred. Management formally evaluates the carrying value of its goodwill and other
indefinite-lived intangible assets for impairment on the anniversary date of each of the acquisitions that gave rise to the recording of
such assets. If the carrying value of a “reporting unit”, as defined by SFAS No. 142 as an operating segment of an entity that contains
goodwill, is determined to be less than the fair value of the reporting unit, there exists the possibility of impairment of goodwill. An
impairment loss of goodwill is measured in two steps by allocating first the current fair value of the reporting unit to net assets and
liabilities including recorded and unrecorded other intangible assets to determine the implied carrying value of goodwill. The next
step is to measure the difference between the carrying value of goodwill and the implied carrying value of goodwill, and, if the
implied goodwill is less than the carrying value of goodwill, record an impairment loss of goodwill as the difference between the
implied and carrying value amounts on the Consolidated Statements of Operations in the period in which the impairment is
determined.
During fiscal year 2009, we completed our annual review of the carrying value of goodwill acquired with the acquisitions of
CoinFacts, Inc. (“CFI”) and Certified Coin Exchange (“CCE”), which were consummated during fiscal year 2006 and Expos, which
we acquired in fiscal year 2007 and, on the basis of those reviews, determined that no impairments had occurred. During fiscal year
2009 and 2008, we recorded goodwill impairment losses of $1,348,000 and $9,064,000, respectively, in relation to our discontinued
jewelry businesses (see note 4).
The following table sets forth the carrying values of goodwill for those acquired businesses that are classified as continuing
operations as of June 30, 2009 and 2008:
At June 30, 2009 and 2008
CoinFacts, Inc.
Expos Unlimited
CCE
Amount
515,000
1,001,000
1,110,000
2,626,000
$
$
Approximately $1.5 million of the $2.6 million classified as goodwill on the Consolidated Balance Sheets at June 30, 2009 is
amortizable and deductible for tax purposes over a period of 15 years.
66
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
The following table sets forth, by asset class, the amounts classified as other intangible assets, net, on Consolidated Balance
Sheets as of June 30, 2009 and 2008 in thousands of dollars:
Gross Book
Value
As of June 30, 2009
Accumulated
Amortization
Net Book
Value
Gross Book
Value
As of June 30, 2008
Accumulated
Amortization
Net Book
Value
Amortized Intangible
Assets:
Expos Unlimited:
Auctioneer relationships $
Covenant not to compete
Customer database
CCE:
Covenant not to compete
Customer lists
Website
Capitalized Software
Unamortized Intangible
Assets:
Expos: Tradename
CCE: Tradename
$
$
$
$
150,000 $
130,000
790,000
1,070,000
(45,000) $
(49,000)
(237,000)
(331,000)
105,000 $
81,000
553,000
739,000
150,000 $
130,000
790,000
1,070,000
21,000
639,000
2,000
662,000
(15,000)
(135,000)
(2,000)
(152,000)
6,000
504,000
-
510,000
21,000
639,000
2,000
662,000
(30,000) $
(33,000)
(158,000)
(221,000)
(10,000)
(90,000)
(1,000)
(101,000)
120,000
97,000
632,000
849,000
11,000
549,000
1,000
561,000
2,590,000
4,322,000 $
(1,842,000)
(2,325,000) $
748,000
1,997,000 $
2,329,000
4,061,000 $
(483,000)
(805,000) $
1,846,000
3,256,000
740,000 $
39,000
779,000
5,101,000 $
- $
-
- $
(2,325,000) $
740,000 $
39,000
779,000 $
2,776,000 $
740,000 $
39,000
779,000 $
4,840,000 $
- $
-
- $
(805,000) $
740,000
39,000
779,000
4,035,000
Amortization expense was $871,000, $490,000 and $505,000 for the fiscal years ended June 30, 2009, 2008 and 2007,
respectively. In addition, an impairment charge of $649,000 was recognized in fiscal 2009. Estimated amortization expense for each
of the five succeeding years and thereafter relating to intangible assets with definite lives, is as follows:
Fiscal Year Ending June 30,
2010
2011
2012
2013
2014
Thereafter
Total
$
$
627,000
411,000
182,000
155,000
155,000
467,000
1,997,000
The weighted average amortization period remaining as of June 30, 2009 is approximately 3.5 years.
Intangible assets with finite lives are being amortized on a straight-line basis over their estimated useful lives, as follows:
Customer relationships
Website
Covenant not to compete
Auctioneer relationships
Capitalized software
CCE
Expos
15 years
3 years
5 years
-
-
10 years
-
8 years
10 years
-
Capitalized
Software
-
-
-
-
3 years
67
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
Recent Accounting Pronouncements
In June 2009, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards
(SFAS) No. 168, The FASB Accounting Standards Codification TM and the Hierarchy of Generally Accepted Accounting Principles,
a replacement of FASB Statement No. 162, (the Codification). The Codification, which was launched on July 1, 2009, became the
single source of authoritative nongovernmental U.S. GAAP, superseding existing FASB, American Institute of Certified Public
Accountants (AICPA), Emerging Issues Task Force (EITF) and related literature. The Codification eliminates the GAAP hierarchy
contained in SFAS No. 162 and establishes one level of authoritative GAAP. All other literature is considered non-authoritative. This
Statement is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Company
will adopt this Statement for its first fiscal 2010 quarter ending September 30, 2009. There will be no change to the Company’s
Consolidated Financial Statements due to the implementation of this Statement.
In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R), and SFAS No. 166,
Accounting for Transfers of Financial Assets—an amendment of FASB Statement No. 140. SFAS No. 167 amends FASB
Interpretation 46(R) to eliminate the quantitative approach previously required for determining the primary beneficiary of a variable
interest entity and requires ongoing qualitative reassessments of whether an enterprise is the primary beneficiary of a variable interest
entity. SFAS No. 166 amends SFAS No. 140 by removing the exemption from consolidation for Qualifying Special Purpose Entities
(QSPEs). This Statement also limits the circumstances in which a financial asset, or portion of a financial asset, should be
derecognized when the transferor has not transferred the entire original financial asset to an entity that is not consolidated with the
transferor in the financial statements being presented and/or when the transferor has continuing involvement with the transferred
financial asset. The company will adopt these Statements for interim and annual reporting periods beginning on July 1, 2009. The
Company does not expect the adoption of these standards to have any material impact on the Consolidated Financial Statements.
In May 2009, the FASB issued SFAS No. 165, Subsequent Events. This Statement sets forth: (i) the period after the balance
sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential
recognition or disclosure in the financial statements; (ii) the circumstances under which an entity should recognize events or
transactions occurring after the balance sheet date in its financial statements; and (iii) the disclosures that an entity should make about
events or transactions that occurred after the balance sheet date. This Statement is effective for interim and annual periods ending after
June 15, 2009. The company adopted this Statement at June 30, 2009. This Statement did not impact the consolidated financial results
other than require additional disclosure (see Principles of Consolidation above in this note).
In April 2009, the FASB issued FASB Staff Position (FSP) Financial Accounting Standard (FAS) 157-4, Determining Fair
Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions
That Are Not Orderly. Based on the guidance, if an entity determines that the level of activity for an asset or liability has significantly
decreased and that a transaction is not orderly, further analysis of transactions or quoted prices is needed, and a significant adjustment
to the transaction or quoted prices may be necessary to estimate fair value in accordance with SFAS No. 157, Fair Value
Measurements. This FSP is to be applied prospectively and is effective for interim and annual periods ending after June 15, 2009 with
early adoption permitted for periods ending after March 15, 2009. The Company adopted this FSP in the fiscal year ended June 30,
2009, and there was no impact on the Consolidated Financial Statements.
In April 2009, the FASB issued FSP FAS 107-1 and Accounting Principles Board (APB) 28-1, Interim Disclosures about
Fair Value of Financial Instruments. The FSP amends SFAS No. 107, Disclosures about Fair Value of Financial Instruments, to
require an entity to provide disclosures about fair value of financial instruments in interim financial information. This FSP is to be
applied prospectively and is effective for interim and annual periods ending after June 15, 2009 with early adoption permitted for
periods ending after March 15, 2009. The Company adopted this FSP in the fiscal year ended June 30, 2009. There was no impact on
the Consolidated Financial Statements.
In December 2007, the FASB issued SFAS No. 141(R), Business Combinations, which became effective December 15, 2008
for the first annual reporting period following December 15, 2008 via prospective application to business combinations. This
Statement requires that the acquisition method of accounting be applied to a broader set of business combinations, amends the
definition of a business combination, provides a definition of a business, requires an acquirer to recognize an acquired business at its
fair value at the acquisition date and requires the assets and liabilities
68
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
assumed in a business combination to be measured and recognized at their fair values as of the acquisition date (with limited
exceptions). The Company will adopt this Statement on July 1, 2009. The impact upon adoption and its effects on future periods will
depend on the nature and significance of business combinations subject to this Statement.
In April 2009, the FASB issued FSP FAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business
Combination That Arise from Contingencies. This FSP requires that assets acquired and liabilities assumed in a business combination
that arise from contingencies be recognized at fair value if fair value can be reasonably estimated. If fair value cannot be reasonably
estimated, the asset or liability would generally be recognized in accordance with SFAS No. 5, Accounting for Contingencies and
FASB Interpretation No. 14, Reasonable Estimation of the Amount of a Loss. Further, the FASB removed the subsequent accounting
guidance for assets and liabilities arising from contingencies from SFAS No. 141(R). The requirements of this FSP carry forward
without significant revision the guidance on contingencies of SFAS No. 141, Business Combinations, which was superseded by SFAS
No. 141(R) (see previous paragraph). The FSP also eliminates the requirement to disclose an estimate of the range of possible
outcomes of recognized contingencies at the acquisition date. For unrecognized contingencies, the FASB requires that entities include
only the disclosures required by SFAS No. 5. This FSP will be adopted effective July 1, 2009. The impact upon adoption and its
effects on future periods will depend on the nature and significance of business combinations subject to this Statement.
3.
Business Acquisitions
On July 14, 2005, we acquired substantially all the assets of CoinFacts.com for $500,000 in cash and $15,000 in
directly-related costs. CoinFacts.com operates an Internet website on which it publishes detailed proprietary historical information on
U.S. coins. The amount of $515,000 was classified as goodwill.
On September 2, 2005, we acquired all of the common stock of Certified Coin Exchange and all of the common stock of an
affiliated business, computertradingpost.com, Inc. (“CTP”), for an aggregate purchase price of $2,217,000 in cash and directly-related
costs of $160,000. At June 30, 2009 and 2008, $1,110,000 was classified as goodwill based upon the purchase price of $2,377,000
allocated over net tangible assets acquired of $320,000 and intangible assets acquired of $947,000. CCE operates a subscription-based
dealer-to-dealer Internet bid-ask market for third-party certified coins.
We were required to purchase CTP as a condition to its acquisition of CCE. At the time we consummated the CCE
acquisition, we intended to dispose of CTP, and effective November 30, 2005, disposed of CTP. See note 4 below.
Effective July 1, 2006, we acquired the assets and business of Expos Unlimited LLC (“Expos”), a trade show management
company, that operates the Long Beach and the Santa Clara, California coin, stamp and collectibles expositions. The purchase price
for this business was $2,400,000 in cash and other direct costs of approximately $75,000. Based on the revenues of Expos during the
five-year period ending June 30, 2011, the Company may be obligated to make contingent payments of up to an aggregate of $750,000
in July 2011. A fair value of $1,810,000 was assigned to identifiable intangible assets, and $193,000 and $529,000 were allocated to
net assets acquired and assumed liabilities, respectively. The excess of the purchase price that we paid for Expos over the fair values
of net assets acquired and liabilities assumed, which totaled $1,001,000, was recorded as goodwill.
In connection with the Company's acquisition of the business and assets of Expos, the Company assumed a lease for the
offices at which Expos conducts its operations. The landlord under that lease is a trust of which the trustee is the former president of
Expos, who has been retained to provide services to the Company under a five year consulting agreement for consulting fees of
$250,000 per year. The lease provides for lease payments by the Company of $3,000 per month for a term of three years with a
one-time security deposit of $3,000. The lease is renewable for successive periods of one year each, subject to the right of either party
to terminate the lease prior to commencement of any such one year renewal period. During fiscal year 2009, 2008 and 2007, the
Company paid $38,000, $37,000 and $36,000 in lease payments for the Expos office site. During fiscal year 2007, the Company paid
$3,000 as a security deposit for the lease.
69
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
4. Discontinued Operations
During fiscal 2009, the Board of Directors authorized the divesture and sale of GCAL, Gemprint and AGL (the “Jewelry
Businesses”) and the currency grading business, all of which have been reclassified in accordance with SFAS No. 144 as assets and
liabilities of discontinued operations held for sale on the Consolidated Balance Sheets as of June 30, 2009 and 2008. The Consolidated
Statements of Operations for the fiscal years ended June 30, 2009, 2008 and 2007 have also been restated to present the results of
operations for those discontinued operations under the caption of loss from discontinued operations, net of loss on sales of
discontinued businesses (net of income taxes); and, the Consolidated Statements of Cash Flows for the fiscal years ended June 30,
2009, 2008 and 2007 segregate the cash flows from discontinued operations from all other cash flow activities. Previously in fiscal
2004, we divested and sold certain assets and businesses of our collectibles auction businesses, our direct sales businesses, and
retained other assets and liabilities, which we disposed of or liquidated subsequently.
At June 30, 2009 our continuing operations consist of our collectibles grading and authentication businesses, our CCE
subscription business, our CFC dealer-financing business and our Expos collectibles convention business.
In connection with and as a condition of our acquisition of CCE in September 2005, we were required to purchase the
common stock of CTP, an entity affiliated with the owner of CCE. Our intent at the date of acquisition was to dispose of CTP, and we
disposed of CTP in November 2005. As part of the consideration for the sale of CTP, we recorded a note receivable of $458,000,
bearing interest at 10% per annum and payable over five years. We have a security interest in the assets of CTP and certain personal
assets of the purchaser. At June 30, 2009 and 2008, the carrying values of the note were $138,000 and $230,000, respectively, of
which the current portion, at June 30, 2009 and 2008 was approximately $92,000, and is included as part of the current portion of
receivables from sale of net assets of discontinued operations.
Jewelry Businesses
As previously reported in our Annual Report on Form 10-K for fiscal 2008 and in our Quarterly Reports on Form 10-Q
during fiscal 2009, we recorded impairment losses in the Consolidated Statements of Operations during those periods of $11,233,000
and $7,695,000, respectively, in connection with our jewelry businesses, which also comprised our jewelry operating segment (see
note 16). We also recorded impairment losses of $39,000 in fiscal 2007, primarily in relation to Gemprint equipment. Those
impairment losses were the result of management’s assessment that the fair values of goodwill, other intangible assets and property
and equipment were determined to be less than the then carrying values of those assets based upon future discounted and undiscounted
cash flows and, as a result, the carrying values of the goodwill and intangible assets were impaired and were ultimately written down
to zero in fiscal 2009.
During March 2009, the Company ceased operations in GCAL and AGL and announced the Company’s plan to sell the
assets of those businesses in an orderly manner. During March 2009, the Company sold the GCAL diamond grading business to
GCAL’s president and former owner and received $370,000 in cash as full payment for certain GCAL tangible and intangible assets
including the buyer’s right to use the GCAL trade name under a licensing agreement for a period of ten years until 2019. During May
2009, we concluded an asset sale agreement with a former AGL executive to whom we sold the AGL colored gemstone business for
approximately $133,250 in consideration of a $62,500 cash payment and a non-interest bearing promissory note due on November 8,
2009 in the amount of $70,750. The undiscounted amount of the note is classified as part of notes receivable from sale of net assets of
discontinued operations on the Consolidated Balance Sheet as of June 30, 2009. During fiscal 2009, we recognized an aggregate
pre-tax loss on the disposal of Jewelry Businesses, including the Gemprint business which we exited in the fourth quarter of fiscal
2009, of approximately $5,188,000, and is shown as part of loss from discontinued operations, net of loss on sales of discontinued
businesses (net of income taxes) within the Statements of Operations for the fiscal year ended June 30, 2009.
During the quarter ended June 30, 2009, in accordance with SFAS No.146, the Company recorded an increase of $815,000 to
the initial accrual of $3,740,000 that was established on March 31, 2009, in connection with the two leased laboratory facilities for
GCAL and AGL that we continue to lease through December 31, 2015 and 2017, respectively. Under SFAS No. 146, we update our
estimate of the fair values of the remaining lease obligations for each reporting period based upon the remaining minimum lease
payments we are required to make in the future, directly related costs that we expect to incur over the remaining term of the lease and
reduced by anticipated subtenant payments we expect to receive over the same term. In the fourth quarter of fiscal 2009, we noted that
the market rate for subtenant
70
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
space in New York City was less than our estimate at March 31, 2009 and the wait time to sublease was expected to be longer than our
original estimate, and, accordingly, we recognized an additional expense of $815,000 as part of the aggregate loss on the disposal of
the Jewelry Businesses during fiscal 2009. Following the exit of Gemprint in the fourth quarter of fiscal 2009, we reclassified a
$20,000 accrual related to a remaining obligation for a Gemprint facility in Toronto, Canada, which will expire in August 2010, to
discontinued operations. The total accrual at June 30, 2009 related to remaining lease obligations is approximately $4,454,000, of
which $1,182,000 is classified as a current liability of discontinued operations held for sale and the balance of $3,272,000 is classified
as non-current.
Currency Grading Business
As reported on our Quarterly Report on Form 10-Q for the second quarter of fiscal 2009, we disposed of our currency
grading business and classified it as a discontinued operation held for sale. In February 2009, we sold the assets of this business to Lyn
Knight Associates for approximately $354,000 in consideration of a cash payment of $50,000 and a promissory note (the “Note”) with
a face value of $304,000 with annual payments of $50,000 due on the annual anniversary dates in each year between February 2010 to
February 2012 and a $154,000 payment due in February 2013. The Note is discounted using an imputed rate of 7.25% and is carried
on the Consolidated Balance Sheets as of June 30, 2009 in the amount of $253,000 as part of notes receivable from sale of net assets
of discontinued operations. A net loss of $31,000 was recognized during the third quarter of fiscal 2009 as a loss on the disposal of
the currency grading business.
The operating results of the discontinued jewelry and the collectible sales businesses, which are included in the
accompanying Consolidated Statements of Operations, are as follows (in thousands):
Net revenues
$
1,437 $
2,506 $
1,850
Loss from operations of discontinued businesses
Impairment losses
Gain (loss) on sales of discontinued businesses
Loss before income tax benefit
Income tax benefit
Loss from discontinued operations
(5,212)
(7,695)
(5,219)
(18,126)
-
(18,126) $
(7,867)
(11,233)
-
(19,100)
(3,173)
(15,927) $
(5,744)
(39)
259
(5,524)
(2,204)
(3,320)
$
Years Ended June 30,
2008
2009
2007
71
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
Balance Sheet Data On Discontinued Operations
Current Assets:
Accounts receivable, net
Inventories
Assets held for sale
Prepaid expenses
Non-current assets:
Property and equipment
Intangible assets
Goodwill
Other assets
Current liabilities:
Accounts payable
Lease obligations
Other accrued expenses
Deferred revenue
Non-current liabilities:
Lease obligations
Deferred rent
Other long-term liabilities
5. Inventories
Inventories consist of the following at June 30:
Coins
Other collectibles
Grading raw materials consumable inventory
Less inventory reserve
June 30,
2009
2008
31
-
71
-
102
-
-
-
182
182
42
1,182
586
17
1,827
3,272
-
36
3,308
$
$
$
$
$
$
$
$
203
21
-
226
450
2,865
4,459
1,348
329
9,001
523
26
592
83
1,224
22
388
36
446
$
$
$
$
$
$
$
$
(in thousands)
2009
2008
336
31
232
599
(102)
497
$
$
750
28
274
1,052
(91)
961
$
$
The inventory reserve represents a valuation allowance on certain items of our coins and other collectibles inventories based
upon our review of the current market value of such coins and collectibles.
6.
Customer Notes Receivable
During the fourth quarter of 2005, our wholly-owned subsidiary, Collectors Finance Corporation (CFC), implemented a
dealer financing program, pursuant to which it offers short term loans to collectibles dealers and customers with established credit
histories that are willing to collateralize the loans with coins or other collectibles that have been or will be authenticated and graded by
us. A customer is required to repay the loan at maturity or, if sooner, on return to the customer of the coins or other collectibles that
collateralize the loan. In the event that we return only a portion of the coins or other collectibles being held as collateral for the loan,
then the customer is required to make a principal reduction payment at that time to maintain adequate collateral coverage for the loan
or to pledge other
72
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
collectibles as security for the loan. These short term loans bear interest at a rate based on the prevailing prime rate of interest at the
time the loan is made. On the Consolidated Balance Sheets at June 30, 2009 and 2008, approximately $2,340,000 and $5,641,000
were outstanding as customer notes receivable, of which $3,579,000 was classified separately as held for sale (see below). During
fiscal years 2009 and 2008, the average interest rates applied to the principal amounts outstanding for the purpose of recording interest
income from these notes receivables was 8.25% and 10%, respectively,
During the fourth quarter of fiscal year 2008, CFC made the decision to sell certain loans outstanding. In the event of a sale
of such notes, the related collateral will be transferred to the buyer. At June 30, 2008, approximately $3,579,000 of CFC customer
notes receivable were reclassified as held for sale on the Consolidated Balance Sheet in accordance with SOP No. 01-6, Accounting by
Certain Entities That Lend to or Finance the Activities of Others, which requires that financial instruments such as notes receivables
be classified as held for sale with a value that is the lower of cost or market once a decision has been made to sell such loans. During
fiscal 2009, we sold approximately $3,554,000 of the notes held for sale at June 30, 2008 for an amount that was about 0.7% over the
aggregate principal amount of the loans and at June 30, 2009, the balance of $25,000 was no longer held for sale.
In addition to the principal amounts loaned by CFC under this program, we recorded a note receivable from a customer in the
principal amount of $132,000 in September 2006 that matured and was repaid in December 2007. Approximately, $10,000 and
$8,000 were recorded as interest income during the fiscal years ended June 30, 2007 and 2008, respectively.
We routinely perform an analysis of the expected collectability of customer notes receivable based on several factors,
including the age and extent of significant past due amounts, economic conditions or trends that may adversely affect the ability of
customers to pay those notes and the value of the collateral securing the repayment of the outstanding balances and may establish an
allowance for possible losses on those notes based on those analyses. At June 30, 2009 and 2008, we had allowances for
uncollectible amounts of $31,000 to cover deficiencies in collateral.
7.
Property and Equipment
Property and equipment consist of the following at June 30:
Coins and stamp reference sets
Computer hardware and
equipment
Computer software
Equipment
Furniture and office equipment
Leasehold improvements
Trading card reference library
Less accumulated depreciation and amortization
Property and equipment, net
$
(in thousands)
2009
2008
$
515
$
506
1,345
990
1,823
897
665
52
6,287
(5,113)
1,174
$
1,579
990
1,878
886
664
52
6,555
(4,938)
1,617
Depreciation and amortization expense relating to property and equipment for fiscal 2009, 2008 and 2007 was $530,000,
$591,000 and $525,000, respectively.
8.
Accrued Liabilities
Accrued liabilities consisted of the following at June 30:
Warranty reserve
Professional fees
Other
(in thousands)
2009
2008
$
$
708
112
524
1,344
$
$
665
67
625
1,357
73
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
Warranty reserve activity and balances related to fiscal years 2009, 2008 and 2007, were as follows (in thousands):
Warranty reserve June 30, 2006
Charged to cost of revenues
Payments
Warranty reserve at June 30, 2007
Charged to cost of revenues
Payments
Warranty reserve at June 30, 2008
Charged to cost of revenues
Payments
Warranty reserve at June 30, 2009
$
$
$
705
375
(355)
725
1,315
(1,375)
665
576
(533)
708
9.
Income Taxes
Set forth below is the provision for income taxes for the years ended June 30:
Current:
Federal
State
Deferred:
Federal
State
Total provision for income taxes
2009
(in thousands)
2008
2007
$
$
(8) $
17
9
877
297
1,174
1,183 $
59 $
60
119
503
1,533
2,036
2,155 $
1,235
29
1,264
706
366
1,072
2,336
The reconciliation of the provision for income taxes computed at federal statutory rates to the provision for income taxes for
the years ended June 30 was as follows:
Provision at federal statutory rates
State income taxes, net
Meals and entertainment
Tax exempt interest
Stock-based compensation
Other
Valuation allowances
2009
(in thousands)
2008
2007
$
$
811
$
208
58
-
164
(89)
31
1,183 $
833 $
1,052
89
(162)
274
69
-
2,155 $
1,761
249
94
-
227
(17)
22
2,336
74
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of deferred taxes as
of June 30, 2009 and 2008 were as follows:
Deferred tax assets:
Stock compensation costs
Reserves and accruals
Net operating loss carryforward
Property and equipment
Credits
Intangible assets
Other
Less: valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Indefinite life
Other
Total deferred tax liabilities
Net deferred tax assets (liabilities)
Less: current portion
(in thousands)
2009
2008
$
$
263
3,139
4,636
964
1,632
2,363
94
(12,962)
129
(268)
(129)
(397)
(268)
60
(208)
$
$
682
1,093
2,210
-
1,049
867
141
(4,572)
1,470
-
(75)
(75)
1,395
(486)
909
Realization of the above deferred tax assets is dependent on generating sufficient taxable income in future periods and, in the
case of the net operating losses, we must generate sufficient income prior to their expiration and for the California Enterprise Zone
Credits, we must continue to generate taxable income in the California Enterprise Zone. Due to the length of time and the extent of
the taxable income required to fully realize the deferred tax assets, the Company recorded a valuation allowance against such assets at
June 30, 2009.
The Company files income tax returns in the U.S. federal jurisdiction and various states and has open tax periods for federal
taxes for the years ended June 30, 2006 through June 30, 2008 and for certain state tax jurisdictions for the years ended June 30, 1999
through June 30, 2008.
At June 30, 2009, the Company had $1,376,000 of California Enterprise Zone Credits. These credits have no expiration
dates, and can only be utilized to offset taxable income generated in the California Enterprise Zone. The Company also has federal
and state net operating losses of $10,475,000 and $11,654,000, respectively, which will primarily begin to expire in 2027 and 2017.
As discussed in note 2, during the first quarter of fiscal 2009, the cumulative effects of applying FIN 48 were recorded as an
increase of $170,000 to accumulated deficit, an increase to income taxes payable of $279,000 and an increase to net deferred tax assets
of $109,000. Interest and penalties totaled $101,000 as of the date of adoption of FIN 48 and were accounted for as part of the total
adjustment to accumulated deficit of $170,000.
As of June 30, 2009, the liability for income taxes associated with uncertain tax positions was $237,000, including accrued
penalties and interest of $86,000. The entire amount, if recognized, would favorably affect the Company’s effective tax rate.
75
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding interest and penalties, is as
follows (in 000’s):
Unrecognized tax benefits balance at June 30, 2008
Gross increased for tax positions of prior years
Gross decreases for tax positions of prior years
Gross increases for tax positions of current year
Settlements
Lapse of statute of limitations
Unrecognized tax benefits balance at June 30, 2009
$
$
249
-
-
-
(98)
-
151
The FIN 48 liability is reviewed quarterly and adjusted as events occur that affect potential liabilities for additional taxes,
such as lapsing of applicable statutes of limitations, proposed assessments by tax authorities, negotiations between tax authorities,
identification of new issues, and issuance of new legislation, regulations or case law. Managements believes that adequate amounts of
tax and related interest, if any, have been provided for any adjustments that may result from these examinations of uncertain tax
positions. The Company does not expect the FIN 48 liability to change significantly over the next year.
10. Fair Value Measurements
In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting
Standards (“SFAS”) No. 157, Fair Value Measurements. SFAS 157 defines fair value, establishes a framework for measuring fair
value in accordance with U.S. GAAP, and expands disclosures about fair value measurements. SFAS 157 is effective for financial
statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. In February 2008,
the FASB issued SFAS No. 157-2, Effective Date of FASB Statement No. 157, which delays the effective date of SFAS 157 to fiscal
years beginning after November 15, 2008 for all nonfinancial assets and nonfinancial liabilities, except for those that are recognized or
disclosed at fair value in the financial statements on a recurring basis. The Company adopted the provisions of SFAS 157 as of July 1,
2008 for financial assets, including cash and cash equivalents, and SFAS 157-2 will be adopted as of July 1, 2009 for nonfinancial
assets and nonfinancial liabilities.
SFAS 157 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers
include:
Level 1-defined as observable inputs such as quoted prices in active markets;
Level 2-defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and
Level 3-defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its
own assumptions.
As of June 30, 2009, the Company held certain assets and liabilities that are required to be measured at fair value on a
recurring basis. The fair value of operating lease obligations of $4,454,000 is in connection with the exiting of our jewelry grading
businesses during the third and fourth quarters of fiscal year 2009 (see note 4). The fair value of these financial assets and
liabilities were determined using the following inputs at June 30, 2009:
Assets:
Cash and cash equivalents
Liabilities:
Operating lease obligations
(in thousands)
Quoted
Prices in
Active
Markets or
Identical
Assets
(Level 1)
Total
As of
June 30,
2009
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
$
$
23,870 $
23,870 $
4,454 $
- $
- $
- $
-
4,454
76
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities.
SFAS No. 159 permits companies to choose to measure at fair value certain financial instruments and other items that are not currently
required to be measured at fair value. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. The Company
adopted SFAS No. 159 on July 1, 2008 and elected not to measure any additional financial instruments or other items at fair value.
11. Employee Benefit Plans
We established an employee benefit plan, effective July 1992, that features a 401(k) salary reduction provision covering all
employees who meet the eligibility requirements of the plan. Eligible employees are able to defer up to the lesser of 75% of their base
compensation or the statutorily prescribed annual limit.
12. Stockholders’ Equity
Dividends
On May 31, 2006, the Company adopted a dividend policy that called for the payment of quarterly cash dividends, each in
the amount of $0.07 per share for an expected total annual cash dividend of approximately $0.29 per common share. The first of such
quarterly cash dividends under this policy of $0.07 per share was paid on June 28, 2006 in the amount of $674,000.
During fiscal year 2009, 2008 and 2007, the Company paid cash quarterly dividends in the aggregate amounts of
approximately $2,090,000, $8,517,000 and $3,350,000, respectively.
The declaration of cash dividends in the future, pursuant to the Company’s dividend policy, are subject to final determination
each quarter by the Board of Directors based on a number of factors, including the Company’s financial performance and its available
cash resources, its cash requirements and alternative uses of cash that the Board may conclude would represent an opportunity to
generate a greater return on investment for the Company. On September 26, 2008, the Board of Directors approved a suspension of
the quarterly cash dividend and also approved a one-time 10% stock dividend, which was distributed on November 3, 2008 to all
stockholders of record as of October 20, 2008.
Stock Buyback Program
On December 6, 2005, we announced that our Board of Directors had approved a stock buyback program authorizing us to
make up to $10,000,000 of stock repurchases in the open market or private transactions, in accordance with applicable SEC
rules. During the fiscal years ended June 30, 2009, 2008 and 2007, pursuant to this program we repurchased and retired
approximately 120,000, 232,000 and 72,000 shares, respectively, of our common stock, for aggregate purchase prices (including
transaction costs) totaling approximately $484,000, $2,209,000 and $949,000, respectively. Accordingly, common stock at par value
and additional paid-in capital were reduced by the $484,000 and $2,209,000, respectively, the Consolidated Balance Sheets as of June
30, 2009 and 2008. We are under no obligation to repurchase any additional shares under this program, and the timing, actual number
and value of any additional shares that may be repurchased under this program will depend on a number of factors, including the
Company’s future financial performance, the Company’s available cash resources and competing uses for the cash, prevailing market
prices of the Company’s common stock and the number of shares that become available for sale at prices that the Company believes
are attractive.
On October 8, 2008, the Company acquired from its former CEO approximately 120,000 shares of the Company’s common
stock, and the Company paid approximately $484,000 in cash for these shares, or approximately $4.03 per share. The selling price of
$4.03 was determined based on a 10% discount from the volume weighted average price of the Company’s common stock on October
8, 2008 of $4.48. On October 9, 2008, two directors purchased an aggregate of 40,000 shares from the Company for a selling price of
$4.03, or approximately $161,000.
77
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
Stockholder Rights Plan
On January 9, 2009, the Company’s Board of Directors unanimously adopted a limited duration stockholder rights plan. In
accordance with ISS guidelines, the Plan has an initial term of one year ending in January 2010, but may be extended for two
additional years if the Plan is approved by our stockholders on or prior to the end of that initial one year term.
In connection with the adoption of the stockholder rights plan, the Board of Directors declared a non-taxable distribution of
rights to purchase shares of a new series of preferred stock to all stockholders of record as of January 23, 2009. Under the Plan, if
anyone becomes the beneficial owner of 20 percent or more of the Company’s outstanding shares, then, subject to limited exceptions,
each right (other than those held by that person) will become exercisable and entitle its holder to purchase, at the exercise price of the
right, a number of the Company’s shares having a market value of twice the right’s exercise price. If anyone announces or commences
a tender offer or exchange offer for the Company’s shares, then, subject to limited exceptions, each right will entitle its holder (other
than the offeror) to purchase, at the exercise price of the right, a number of the acquiring party’s shares having a market value at that
time of twice the right’s exercise price. Unless and until either of those events occurs, the rights will not be exercisable, will trade with
the Company’s common stock and no rights certificates will be issued.
Consulting Agreement
In July 1997, we granted options to an individual to purchase 133,000 shares of our common stock at an exercise price of
$1.31 per share as consideration for a five-year consulting agreement that commenced on July 1, 1997. The options vested in five
annual installments of 20% of the shares beginning on December 31, 1997 and continuing through December 31, 2001. In January
2007, these options were fully exercised, and as a result, the related estimated tax benefit of $623,000 was recorded as part of the
$633,000 credited to stockholders’ equity in fiscal 2007.
Supplier Warrants
During fiscal 1999, we granted warrants to purchase up to an aggregate of 165,000 shares of our common stock, at an
exercise price of $18.18 per share, to collectible experts providing content for our websites. These warrants vested immediately and
were exercisable over a ten-year term. The fair value of these warrants was expensed in fiscal 1999, and all of these warrants expired
during fiscal 2009.
13.
Stock Incentive Plans
Through December 5, 2006, we had various stock incentive plans (the “Existing Plans”) which set aside a total of 1,479,750
shares of our common stock for grants of stock options and awards of restricted stock to our officers and other key employees and
directors.
The Existing Plans provided that the exercise price of all options (whether incentive or non-statutory), and the purchase price
of shares issued pursuant to restricted stock purchase rights, could not be less than 100% of the fair market value of the shares subject
to such options or rights (as the case may be) on the date of grant. However, the exercise price of incentive stock options granted to
any individual possessing 10% or more of the voting power of all classes of our stock (a “10% stockholder”) may not be granted at
less than 110% of the fair market value of a share of common stock on the grant date. The timing of exercise for individual option
grants and restricted stock awards was at the discretion of the Compensation Committee of the Board of Directors. Options could be
granted for a term of not more than ten years after the grant date (five years in the case of incentive stock options to any 10%
stockholder). In the event of a change in control of the Company, an option or award of shares under the Existing Plans would
become fully exercisable if an agreement was not reached that provided for the surviving corporation to assume such options or
awards or to substitute comparable options or awards for the options and awards granted under these Plans and any options that were
not exercised by the consummation date of the change of control would automatically terminate.
78
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
On December 5, 2006, the Board of Directors adopted and our stockholders approved the 2006 Equity Incentive Plan (“2006
Plan”), which provides for the grant of stock options, stock appreciation rights (commonly referred to as “SARs”), restricted stock
purchase rights and restricted stock units (collectively, “stock awards”), to officers and other employees and non-employee directors
of and consultants to the Company or its subsidiaries. At the time of the adoption of the 2006 Plan, a total of 444,000 shares of
common stock were still available for the future grant of stock options and restricted stock awards under the Existing Plans.
Pursuant to the provisions of the 2006 Plan, those 444,000 shares were “rolled over” into and became available for grants of
stock awards only under the 2006 Plan and the right to grant additional stock awards under the Existing Plans terminated. In addition,
while the stock options and restricted shares that were outstanding under the Existing Plans, which covered a total of 911,000 shares at
the time the 2006 Plan was approved, were unaffected by the adoption of the 2006 Plan, in the event any of those stock awards were to
terminate or any shares that were subject to outstanding stock options or restricted stock awards under the Existing Plans were to be
reacquired by the Company, those shares will become available for future grants of stock awards under the 2006 Plan, rather than
under the Existing Plans. As a result, the adoption of the 2006 Plan did not increase the number of shares authorized for issuance
under the Company’s stock incentive plans. Instead, the 2006 Plan was adopted to provide greater flexibility to the Company in terms
of the types of stock incentives that could be granted to eligible participants. At June 30, 2009, a total of 685,000 shares of common
stock were available for future grants under the 2006 Plan and no shares were available for new grants under any of the other plans.
The following is a summary of stock option activity in the fiscal years 2009, 2008 and 2007 under the 2006 Plan, and each of
the Existing Plans (in thousands, except per share data).
Options outstanding as June 30, 2006
Granted
Cancelled
Exercised
Options outstanding at June 30, 2007
Granted
Cancelled
Exercised
Options outstanding at June 30, 2008
Granted
Cancelled
Expired
Exercised
Options outstanding at June 30, 2009
Number of
Shares
978 $
72
(15)
(32)
1,003 $
33
(25)
(84)
927 $
-
(264)
(78)
-
585 $
$
Exercise
Price Per Share
-
$
-
-
-
-
-
-
-
-
-
-
-
-
-
2.80
12.45
2.80
2.80
2.80
13.18
2.80
2.80
2.80
-
2.80
9.49
-
2.80
$
$
Weighted
Average
Exercise Price
Per Share
21.82 $
12.81
18.18
10.53
21.82 $
13.18
17.82
12.48
21.82 $
-
21.82
18.18
-
21.82 $
11.50
12.43
13.74
3.24
11.80
13.18
13.05
3.84
12.54
-
13.33
16.64
-
11.61
The total pre-tax intrinsic value of options exercised during fiscal years 2009, 2008 and 2007 were approximately $0,
$649,000 and $285,000, respectively. Total fair value of options vested during 2009, 2008 and 2007 were $1,101,000, $665,000 and
$656,000, respectively.
79
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
The following table summarizes information about stock options outstanding at June 30, 2009:
Range of Exercise
Price
2.80 $
6.91 $
9.09 $
14.17 $
21.82 $
3.45
7.27
12.73
18.18
21.82
$
$
$
$
$
Number
of Shares
Outstanding
66
91
266
132
30
585
Outstanding Options
Exercisable Options
Weighted
Average
Remaining
Contractual
Life (Years)
Weighted
Average
Exercise
Price
($000’s)
Aggregate
Intrinsic
Value
Number
of Shares
Exercisable
Weighted
Average
Exercise
Price
($000’s)
Aggregate
Intrinsic
Value
3.4 $
3.7 $
5.0 $
5.8 $
0.3 $
4.6 $
3.14 $
7.01
11.52
16.83
21.82
11.61 $
115
-
-
-
-
115
66 $
91 $
258 $
124 $
30 $
569 $
3.14 $
7.01
11.49
17.07
21.82
11.58 $
115
-
-
-
-
115
At June 30, 2009, unvested stock options to purchase up to a total of approximately 16,000 shares were outstanding with a
weighted average contractual remaining life of 7.6 years and at a weighted average exercise price of $12.80. As of the same date, the
aggregate intrinsic value of the unvested options (based on a closing price of our shares, as reported by Nasdaq, of $4.88) was $0. At
June 30, 2009, and based upon the estimated forfeiture rate of 5% per annum and the remaining vesting terms of these options, the
number of options expected to vest over their remaining vesting terms was approximately 15,700 options. At June 30, 2008, unvested
stock options to purchase up to a total of approximately 222,000 shares of our common stock were outstanding with a weighted
average contractual remaining life of 7.1 years and at a weighted average exercise price of $12.88. As of the same date, the aggregate
intrinsic value of the unvested options (based on a closing price of our shares, as reported by Nasdaq, of $8.11) was $0.
The weighted-average fair values of stock options granted during fiscal 2009, 2008 and 2007 were $0, $3.80 and $5.56 per
option share, respectively.
The following table presents the non-vested status of the restricted shares for the fiscal years ended June 30, 2009, 2008 and
2007 and their respective weighted average grant date fair values. No restricted shares were issued prior to fiscal year 2007.
Non-Vested Shares:
Non-vested at June 30, 2006
Granted
Vested
Forfeited or cancelled
Non-vested at June 30, 2007
Granted
Vested
Forfeited or cancelled
Non-vested at June 30, 2008
Granted
Vested
Forfeited or cancelled
Non-vested at June 30, 2009
14.
Related-Party Transactions
Weighted
Average
Grant-Date
Fair Value
-
12.41
12.18
-
12.44
12.84
12.48
-
12.60
2.70
5.73
12.48
3.80
Shares
-
62,436
(7,183)
-
55,253
23,495
(28,389)
-
50,359
77,778
(55,863)
(28,847)
43,427
$
$
$
$
DHRCC, which is wholly owned by David Hall, the President and a director and a stockholder of the Company, and Van
Simmons, who is a director and a stockholder of the Company, has subleased from the Company, through March 31, 2019,
approximately 2,200 square feet of office space, located at the Company’s offices in Santa Ana, California, at a rent equal to between
$1.50 and $2.00 per square foot per month. Under the original lease that was extended in February 2009, that rent, per square foot, is
equal to the rent that was being paid to the Company by a prior
80
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
unaffiliated subtenant for comparable space in the same building under a sublease entered into by the Company in March 2004. The
current rent is consistent with amounts being paid by the Company. Rent received under the DHRCC sublease, which commenced on
March 1, 2004, totaled $43,240 in fiscal 2009, $43,620 in fiscal 2008 and $42,370 in fiscal 2007.
During fiscal years 2009, 2008 and 2007, the Company charged, and DHRCC paid, approximately $13,700, $30,450 and
$35,000 for advertising fees, approximately $9,000, $2,000 and $1,000 for grading and authentication fees and DHRCC was paid
approximately $11,000, $20,000 and $52,000 for warranty claims, respectively. During fiscal year 2009 and 2008, DHRCC attended
the Expos Long Beach shows and paid approximately $5,800 and $7,300, respectively, in fees to Expos and also paid CCE $4,200 and
$5,800 in monthly subscriber fees during fiscal year 2009 and 2008, respectively.
During fiscal year 2009, David Hall paid $9,000 in grading and authentication fees for personal sportscards
submitted. Also, a member of the immediate family of David Hall paid $191,000 in grading and authentication fees to PCGS during
fiscal year 2009 and owed the Company approximately $31,000 at June 30, 2009 for services provided during fiscal 2009. The
grading fees charged by the Company to both individuals, were comparable to the fees charged by the Company in the ordinary course
of business to unaffiliated customers for similar services.
An individual, who served as a member of the board of directors for the first five months of fiscal 2007, is also a partner in a
professional services firm that provided legal services to the Company. In fiscal 2007, the member was paid $23,750 as Board fees;
and the professional services firm was paid $234,000, $211,000 and $189,000, respectively, for legal services rendered to the
Company during fiscal years 2009, 2008, and 2007. At June 30, 2009, amounts payable to this firm were $19,000 and approximately
$60,000 was accrued as part of accrued liabilities on the Consolidated Balance Sheet.
15. Commitments and Contingencies
Leases
The Company has various operating lease commitments for facilities and equipment that expire through March 2019. In
December 2008, the Company amended the current lease obligation for its Headquarters’ facility by entering into a new 10 year lease
obligation with aggregate payments of $9,711,000 that commenced on February 8, 2009 and continues to March 31, 2019. In March
and June 2009, the Company exited its jewelry businesses and recognized the fair value of the remaining minimum lease obligations
of those leases as part of current and non-current liabilities of discontinued operations in the Consolidated Balance Sheets at June 30,
2009, the scheduled payments of which are presented in the table further below.
In accordance with SFAS No. 13, the Company’s total rent expense is recognized on a straight-line basis over the lease
period. Total rent expense for the fiscal years ended June 30, 2009, 2008 and 2007 for those operations classified as continuing
operations were approximately $1,077,000, $1,118,000 and $1,117,000, respectively.
Future minimum lease payments (set forth in thousands) under those agreements associated with our continuing operations,
are as follows:
2010
2011
2012
2013
2014
Thereafter
Company’s
Gross Payment
985
986
1,009
990
982
5,080
10,032
Sublease
Income
Net
$
$
41
42
43
45
46
238
455
$
$
944
944
966
945
936
4,842
9,577
$
$
81
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
Future minimum lease payments (set forth in thousands) under those agreements associated with our discontinued operations
at June 30, 2009 are as follows:
Company’s
Gross
Payment
Sublease
Income
Net
2010
2011
2012
2013
2014
Thereafter
Less: Estimated fair value of minimum lease
payments
$
$
890
906
941
981
1,022
3,064
7,804
$
$
5
-
-
-
-
-
5
$
$
$
885
906
941
981
1,022
3,064
7,799
(4,149)
3,650
Employment Agreements
The Company has entered into employment agreements with certain executive officers and other key employees. The
employment agreements provide for minimum salary levels, incentive compensation and severance benefits, among other items.
Indemnification Obligations
The Company from time to time enters into certain types of contracts that contingently require the Company to indemnify
parties against third-party claims. These contracts primarily relate to (i) agreements pursuant to which the Company has sold its
discontinued collectibles sales businesses and which require the Company to indemnify the purchasers from certain contingent
liabilities that might arise from the operation of those businesses prior to their sale by the Company, which is customary in business
sale transactions such as these; (ii) certain real estate leases under which the Company may be required to indemnify property owners
for environmental or other liabilities and other claims arising from the Company’s use of the applicable premises; and (iii) certain
agreements with the Company’s officers and directors, under which the Company may be required to indemnify such persons for
liabilities arising out of their relationships as officers or directors of the Company. The terms of such indemnification obligations vary
by contract and in most instances a specific or maximum dollar amount is not explicitly stated therein. Historically, the Company has
not been obligated to make significant payments under, and no liabilities have been recorded in the accompanying Consolidated
Balance Sheets for these indemnification obligations.
Legal Actions and Settlements
Bill Miller v. Collectors Universe, Inc. Effective as of October 14, 2008, William Miller and the Company executed a
settlement and release agreement which provided for a complete release by each party of all known and unknown claims it has or may
have against the other relating to or arising out of the subject matter of the lawsuit that Miller had brought against the Company in
2004 in which he sought alleged statutory damages from the Company of up to approximately $10.5 million based on a claim that the
Company had used his name, allegedly without his consent, on Company authentication certificates. The released claims included
pending claims brought by each party seeking to recover its legal fees and expenses in that lawsuit from the other party. The
Company was not required to make any payments to Miller in exchange for the release.
Other Legal Actions
The Company is named from time to time, as a defendant in lawsuits that arise in the ordinary course of
business. Management of the Company believes that none of those lawsuits currently pending against it is likely to have a material
adverse effect on the Company.
82
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
16.
Business Segments
Operating segments are defined as the components or “segments” of an enterprise for which separate financial information is
available that is evaluated regularly by the Company’s chief operating decision maker, or decision-making group, in deciding how to
allocate resources to and in assessing performance of those components or “segments.” The Company’s chief operating
decision-maker is its Chief Executive Officer. The operating segments of the Company are organized based on the respective services
that they offer to customers of the Company. Similar operating segments have been aggregated to reportable operating segments
based on having similar services, types of customers, and other criteria that are set forth in SFAS No. 131, Disclosures About
Segments of an Enterprise and Related Information.
For our continuing operations, we operate principally in three reportable service segments: coins, trading cards and
autographs and other high-end collectibles. Services provided by these segments include authentication, grading, publication and
web-based advertising, subscription-based revenues and product sales. The other collectibles segment, includes stamps, the CCE
subscription business and our collectibles conventions business. During fiscal 2009, we exited the jewelry businesses and the
currency grading business; as a result, these businesses were classified as discontinued operations in the Consolidated Financial
Statements and excluded from consideration as operating segments of the Company. We do not disclose revenues from external
customers for each service or similar groups of services that we offer because it is impractical to do so.
We allocate operating expenses to each service segment based upon activity levels. The following tables set forth on a
business segment basis, including a reconciliation with the consolidated financial statements, (i) external revenues, (ii) amortization
and depreciation, (iii) impairment losses, (iv) stock-based compensation expense as significant other non-cash transactions, and (v)
operating income (loss) for the fiscal years ended June 30, 2009, 2008 and 2007. Net identifiable assets and goodwill are provided by
business segment as of June 30, 2009 and 2008. All of our sales and identifiable assets are located in the United States.
83
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
2009
Year Ended June 30,
2008
2007
20,943
10,190
4,781
35,914
303
365
414
1,082
319
1,401
-
649
-
649
-
649
195
83
22
300
459
759
$
$
$
$
$
$
$
$
22,924
11,518
5,063
39,505
$
$
248
205
287
740
341
1,081
-
-
-
-
-
-
194
88
58
340
839
1,179
$
$
$
$
$
$
$
6,825
598
396
7,819
(5,731)
2,088
$
$
6,404
2,161
585
9,150
(7,844)
1,306
$
23,317
10,966
4,403
38,686
205
100
409
714
316
1,030
-
-
-
16
16
80
79
51
210
644
854
9,658
1,806
406
11,870
(8,885)
2,985
At June 30,
2009
2008
2,683
1,003
7,051
10,737
25,536
36,273
515
2,111
2,626
$
$
$
$
3,346
1,115
10,975
15,436
36,582
52,018
515
2,111
2,626
$
$
$
$
Net revenues from external customers:
Coins
Trading cards and autographs
Other
Total revenue
Amortization and depreciation:
Coins
Trading cards and autographs
Other
Total
Unallocated amortization and depreciation
Consolidated amortization and depreciation
Impairment losses:
Coins
Trading cards and autographs
Other
Total
Unallocated impairment losses
Consolidated impairment losses
Stock-based compensation:
Coins
Trading cards and autographs
Other
Total
Unallocated stock-based compensation
Consolidated stock-based compensation
Operating income before unallocated expenses:
Coins
Trading cards and autographs
Other
Total
Unallocated operating expenses
Consolidated operating income
Identifiable Assets:
Coins
Trading cards and autographs
Other
Total
Unallocated assets
Consolidated assets
Goodwill:
Coins
Other
Consolidated goodwill
$
$
$
$
$
$
$
$
$
$
84
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
17. Quarterly Results (unaudited)
The following table sets forth the unaudited consolidated financial results for quarterly periods in fiscal years 2008 and 2009. The
operating income of $1,230,000 in the fourth quarter of fiscal 2009 includes an impairment loss of $649,000 related to capitalized
software in our autograph authentication and grading businesses.
Quarterly Reports of Operations
Statement of Operations Data:
Net revenues
Cost of revenues
Gross profit
Operating Expenses:
SG&A expenses
Impairment of other intangible assets
Amortization of intangible assets
Operating income (loss)
Interest and other income, net
Income (loss) before income taxes
Provision (benefit) for income taxes
Income (loss) from continuing
operations
Income (loss) from discontinued
operations, net of loss
on sales of discontinued businesses
(net of income taxes)
Net income (loss)
Net income (loss) per basic share:
From continuing operations
From discontinued operations, net of
loss on sales
of discontinued businesses (net of
income taxes)
Net income (loss)
Net income (loss) per diluted share:
From continuing operations
From discontinued operations, net of
loss on sales
of discontinued businesses (net of
income taxes)
Net income (loss)
Weighted average shares outstanding
Basic
Diluted
18. Subsequent Events
Quarters Ended
(In thousands, except per share data)
Sept. 30,
Dec. 31,
Mar. 31,
2007
2007
2008
June 30,
2008
Sept. 30,
2008
Dec. 31,
2008
Mar. 31,
2009
June 30,
2009
$ 10,264 $ 9,258 $ 10,345 $
4,928
5,417
5,785
3,473
4,332
5,932
9,638 $ 9,043 $
4,126
4,734
4,917
4,904
7,802 $ 9,315 $ 9,754
4,121
4,111
4,027
5,633
5,204
3,775
4,675
-
105
1,152
446
1,598
619
4,261
-
110
(898)
299
(599)
(241)
4,726
-
136
555
241
796
474
4,268
-
139
497
158
655
1,303
4,416
-
168
333
136
469
-
3,995
-
199
(419)
77
(342)
1,210
4,007
-
253
944
56
1,000
109
3,503
649
251
1,230
29
1,259
(136)
979
(358)
322
(648)
469
(1,552)
891
1,395
(1,089)
(1,085)
(110) $ (1,443) $
(1,288)
(5,679)
(1,766)
(966) $ (13,113) $ (1,297) $ (10,925) $ (4,788) $
(12,465)
(9,373)
(1,308)
87
0.11 $
(0.04) $
0.03 $
(0.07) $
0.05 $
(0.17) $
0.10 $
0.15
(0.12)
(0.01) $
(0.11)
(0.15) $
(0.13)
(0.10) $
(1.35)
(1.42) $
(0.19)
(0.14) $
(1.03)
(1.20) $
(0.63)
(0.53) $
(0.14)
0.01
0.10 $
(0.04) $
0.03 $
(0.07) $
0.05 $
(0.17) $
0.10 $
0.15
$
$
$
$
(0.11)
(0.01) $
(0.11)
(0.15) $
(0.13)
(0.10) $
(1.34)
(1.41) $
(0.19)
(0.14) $
(1.03)
(1.20) $
(0.63)
(0.53) $
(0.14)
0.01
$
9,310
9,509
9,340
9,340
9,317
9,406
9,211
9,274
9,146
9,186
9,079
9,079
9,083
9,108
9,102
9,140
Repurchase of Shares pursuant to Dutch Auction Tender Offer
On June 2, 2009, the Company commenced a modified “Dutch Auction” tender offer for the purpose of purchasing, for cash,
up to 1,750,000 shares of its common stock at a per share price of not less than $5.00 and not greater than $5.40. The tender offer,
which expired on July 2, 2009, was oversubscribed and the Company purchased a total 1,749,828 shares in the tender offer, at a price
of $5.00 per share, for a total purchase price of approximately $8,749,140 (not including the costs of conducting the tender
offer). With the completion of the tender offer, the total number of shares outstanding was reduced to 7,408,516 shares as of July 31,
2009.
85
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
Restricted Stock Awards
On June 1, 2009, the Compensation Committee of the Board of Directors approved a management incentive compensation
program for the fiscal year ending June 30, 2010 (the “2010 Stock Incentive Program”), for its three executive officers, Michael J.
McConnell, its CEO, David G. Hall, its President, and Joseph J. Wallace, its CFO (the “Participants”). Under the terms of that
Program, on July 31, 2009, the three Participants were awarded the following numbers of restricted shares: Mr. McConnell -- 101,034
shares; Mr. Hall -- 101,034 shares; and Mr. Wallace -- 50,517 shares. Retention by the Participants of their restricted shares is subject
to satisfaction of certain vesting requirements and, if a vesting requirement that applies to any of the shares is not satisfied, those
shares will be forfeited and cancelled. Those vesting requirements consist of the following:
(1) Performance-Based Vesting Requirement. The vesting of seventy-five (75%) of the restricted shares awarded to
each Participant will be contingent on the Company’s achievement of an operating income goal for fiscal 2010. If that goal is not
achieved, all of those shares will be forfeited and cancelled. On the other hand, if the Company achieves that financial performance
goal, then (i) one-third of the shares will vest when it is determined that the performance goal was achieved, provided that the
Participant was still in the Company’s service at the end of fiscal 2010, (ii) another one-third of those shares will vest on June 30,
2011, provided the Participant is still in the Company’s service at that time, and (iii) the final one-third of those shares will vest on
June 30, 2012, provided the Participant is still in the Company’s service at that time, subject to acceleration of such vesting if a
Participant’s service with the Company is terminated without cause.
(2) Time-Based Vesting. The vesting of the other 25% of the restricted shares granted to each Participant will be
contingent on the continued service of the Participant to July 31, 2010, except for the 25% of the restricted shares granted to
Mr. Wallace, the Company’s CFO, which became vested on the date of grant.
According to the Compensation Committee, the 2010 Stock Incentive Program was adopted in place of a cash-based
management incentive compensation plan of the type adopted in previous years.
The Company will determine the fair value of the 252,585 shares of restricted stock based on the July 31, 2009 closing price
of the Company’s common stock of $4.07 and will record stock-based compensation expense over the requisite service period that
commenced effective the grant date of July 31, 2009 and will continue to June 30, 2012. That portion of stock-based compensation
expense associated with the performance-based vesting will not be recorded during fiscal 2010 unless it is probable that, in accordance
with SFAS No. 5, Accounting for Contingencies, the Company will achieve the fiscal 2010 financial objectives established by the
Compensation Committee of the Board of Directors.
Schedule II
Valuation and Qualifying Accounts
Balance at
Beginning
of Period
Charged to
Operating
Expenses
Charged to
Cost of
Revenues
Charged
to Tax
Provision
Net
Deductions
Balance
at End
of Period
$
26,000 $
9,000 $
16,000
106,000
-
148,000 $
7,000
-
-
16,000 $
16,000 $
24,000 $
23,000
91,000
22,000
152,000 $
8,000
-
-
32,000 $
- $
-
-
-
- $
- $
-
23,000
- $
-
-
22,000
22,000 $
(19,000) $
16,000
-
(15,000)
-
(34,000) $
23,000
91,000
22,000
152,000
- $
-
-
(13,000) $
27,000
-
(23,000)
31,000
91,000
-
23,000 $
4,550,000
4,550,000 $
-
(36,000) $
4,572,000
4,721,000
27,000 $
50,000 $
- $
31,000
91,000
4,572,000
-
-
-
-
176,000
- $
-
-
(14,000) $
63,000
-
(165,000)
31,000
102,000
-
8,390,000
-
12,962,000
Description
Allowance for doubtful
accounts
Allowance for customer
notes receivable
Inventory reserve
Valuation allowance for
deferred taxes
Total at June 30, 2007
Allowance for doubtful
accounts
Allowance for customer
notes receivable
Inventory reserve
Valuation allowance for
deferred taxes
Total at June 30, 2008
Allowance for doubtful
accounts
Allowance for customer
notes receivable
Inventory reserve
Valuation allowance for
deferred taxes
$
$
$
$
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
Total at June 30, 2009
$
4,721,000 $
50,000 $
176,000 $
8,390,000 $
(179,000) $
13,158,000
86
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our
reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and
reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (the “SEC”), and that
such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial
Officer, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures,
our management recognized that any system of controls and procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives, as ours are designed to do, and management necessarily was required
to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
As required by SEC rules, an evaluation was performed under the supervision and with the participation of our Chief
Executive Officer and Chief Financial Officer of the effectiveness, as of June 30, 2009, of the Company’s disclosure controls and
procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based on that evaluation, our Chief Executive Officer and Chief
Financial Officer concluded that, as of June 30, 2009, the Company’s disclosure controls and procedures were effective to provide
reasonable assurance that information required to be disclosed in our reports that we file under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is
accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely
decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during our fourth fiscal quarter
ended June 30, 2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial
reporting.
Management’s Report on Internal Control Over Financial Reporting
Management of Collectors Universe, Inc. is responsible for establishing and maintaining adequate internal control over
financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting
is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with accounting principles generally accepted in the United States of
America. Internal control over financial reporting includes those written policies and procedures that:
���pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of our assets;
���provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with accounting principles generally accepted in the United States of America;
���provide reasonable assurance that our receipts and expenditures are being made only in accordance with authorization of
our management and directors; and
���provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of
assets that could have a material effect on our consolidated financial statements.
87
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
Internal control over financial reporting includes the controls themselves, monitoring and internal auditing practices and
actions taken to correct deficiencies as identified.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of
changes in conditions or because the degree of compliance with the policies or procedures may deteriorate.
Management’s Assessment and Determination
Our management assessed the effectiveness of Collectors Universe’s internal control over financial reporting as of June 30,
2009, based on criteria for effective internal control over financial reporting described in “Internal Control – Integrated Framework”
issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management’s assessment included an
evaluation of the design and the testing of the operational effectiveness of Collectors Universe’s internal control over financial
reporting. Management reviewed the results of its assessment with the Audit Committee of our Board of Directors.
Based on that assessment, management determined that, as of June 30, 2009, Collectors Universe, Inc. maintained effective
internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None
88
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
PART III
Except for information concerning the Company's executive officers, which is included in Part I of this Annual Report, the
information required by Item 10 is incorporated by reference from the Company's definitive proxy statement, expected to be filed with
the Commission on or before October 28, 2009 for the Company’s 2009 annual stockholders' meeting.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated herein by reference from the Company's definitive proxy statement,
expected to be filed with the Commission on or before October 28, 2009 for the Company’s 2009 annual stockholders' meeting.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Except for the information below regarding our equity compensation plans, the information required by Item 12 is
incorporated herein by reference from the Company's definitive proxy statement, expected to be filed with the Commission on or
before October 28, 2009 for the Company’s 2009 annual stockholders' meeting.
The following table provides information relating to our equity compensation plans as of June 30, 2009.
Column A
Column B
Number of
Securities to be
Issued Upon
Exercise of
Outstanding
Options,
Warrants and
Restricted
Shares
Weighted-Average
Exercise Price of
Outstanding
585,000
585,000 $
Options, Warrants
11.61
11.61 $
Column C
Number of
Securities
Remaining
Available for
Future Issuance
under Equity
Compensation
Plans (Excluding
Securities
Reflected in
Column A)
685,000
685,000
Equity compensation plans approved by stockholders
Total
$
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 is incorporated herein by reference from the Company's definitive proxy statement,
expected to be filed with the Commission on or before October 28, 2009 for the Company’s 2009 annual stockholders’ meeting.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by Item 14 is incorporated herein by reference from the Company's definitive proxy statement,
expected to be filed with the Commission on or before October 28, 2009 for the Company’s 2009 annual stockholders’ meeting.
89
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)(1)
Financial Statements
The following financial statements are included in Item 8 of Form 10-K:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of June 30, 2009 and 2008
Consolidated Statements of Operations for the years ended June 30, 2009, 2008 and 2007
Consolidated Statements of Stockholders’ Equity for the years ended June 30, 2009, 2008 and 2007
Consolidated Statements of Cash Flows for the years ended June 30, 2009, 2008 and 2007
Notes to the Consolidated Financial Statements
(a)(2)
Financial Statement Schedule
Schedule II Valuation and Qualifying Accounts
Other schedules are omitted because the required information is either inapplicable or has been disclosed in the
consolidated financial statements and notes thereto.
(a)(3)
Exhibits
See Index to Exhibits immediately following the Signature Page of this Annual Report for a list of the Exhibits required,
pursuant to Item 601 of Regulation S-K, to be filed with this Annual Report.
90
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the registrant has duly caused this Annual
Report to be signed on its behalf by the undersigned thereunto duly authorized.
SIGNATURES
Date: September 3, 2009
COLLECTORS UNIVERSE, INC
By: /s/ JOSEPH J. WALLACE
Joseph J. Wallace, Chief Financial Officer
POWER OF ATTORNEY
Each person whose signature to this Annual Report appears below hereby appoints Michael J. McConnell and Joseph J.
Wallace, and any of them, individually, to act severally as attorneys-in-fact and agents, with power of substitution and resubstitution,
for each of them, to sign on his or her behalf, individually and in the capacities stated below, and to file, any and all amendments to
this Annual Report, which amendment or amendments may make changes and additions as such attorneys-in-fact may deem necessary
or appropriate.
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed by the following
persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ A. CLINTON ALLEN
A. Clinton Allen
/s/ MICHAEL J. MCCONNELL
Michael J. McConnell
/s/ DAVID HALL
David G. Hall
/s/ JOSEPH J. WALLACE
Joseph J. Wallace
/s/ VAN D. SIMMONS
Van D. Simmons
/s/ A. J. BERT MOYER
A. J. Bert Moyer
/s/ DEBORAH A. FARRINGTON
Deborah A. Farrington
/s/ BRUCE A. STEVENS
Bruce A. Stevens
Chairman of the Board and Director
September 3, 2009
Chief Executive Officer and Director
September 3, 2009
President and Director
September 3, 2009
Chief Financial Officer
(Principal Financial and Accounting Officer)
Director
Director
Director
Director
S-1
September 3, 2009
September 3, 2009
September 3, 2009
September 3, 2009
September 3, 2009
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
Exhibit No.
Description
INDEX TO EXHIBITS
3.2
3.2.1
3.2.3
3.3
3..3.1
4.3
10.1
10.2
10.4
10.5
10.6
10.9
10.26
10.27
10.28
Amended and Restated Certificate of Incorporation of Collectors Universe. Incorporated by reference to
Exhibit 3.2 to the Company’s Registration Statement on Form S-3 (File No. 333-122129), filed on January
19, 2005.
Certificate of Amendment to Amended and Restated Certificate of Incorporation of Collectors
Universe. Incorporated by reference to Exhibit 3.2.1 to the Company’s Registration Statement on Form S-3
(File No. 333-122129), filed on January 19, 2005.
Certificate of Designation, Preferences and Rights of the Series A Junior Participating Preferred
Stock. Incorporated by reference to the same numbered exhibit to the Company’s Registration Statement on
Form 8-A filed with the SEC on January 14, 2009.
Certificate of Amendment to Section 2 of Article III of the Company’s Bylaws, effective as of September
26, 2008, establishing a Majority-Vote requirement for Directors. Incorporated by reference to Exhibit 3.4
to the Company’s Current Report on Form 8-K dated September 26, 2008.
Amended and Restated Bylaws of Collectors Universe, Inc. as adopted and effective September 26,
2008. Incorporated by reference to Exhibit 3.3 to Quarterly Report on Form 10-Q for the Quarter ended
September 30, 2008.
Rights Agreement, dated as of January 14, 2009, between Collectors Universe, Inc. and StockTrans, Inc., as
Rights Agent. Incorporated by reference to the same numbered exhibit to the Company’s Form 8-A
Registration Statement filed with the SEC on January 14, 2009.
Collectors Universe 1999 Stock Incentive Plan.*
Form of Stock Option Agreement for the Collectors Universe 1999 Plan.*
PCGS 1999 Stock Incentive Plan.*
Form of Stock Option Agreement for the PCGS 1999 Plan.*
Form of Indemnification Agreement.*
Collectors Universe/eBay Mutual Services Term Sheet dated February 10, 1999, between the Company and
eBay, Inc.*
Non-Competition Agreement dated February 19, 2004 between Collectors Universe, Inc. and Spectrum
Numismatics, Inc. (Incorporated by reference to Exhibit 10.2 to Registrant’s Current Report on Form 8-K,
dated February 19, 2004).
Collectors Universe 2003 Stock Incentive Plan. Incorporated by reference to Exhibit 10.1 to the Company’s
Registration Statement on Form S-8 (File No. 333-121035), filed on December 6, 2004.
Form of Stock Option Agreement for 2003 Stock Incentive Plan. Incorporated by reference to Exhibit 10.2
to the Company’s Registration Statement on Form S-8 (File No. 333-121035), filed on December 6, 2004.
10.29
10.30
Form of Restricted Stock Purchase Agreement for 2003 Stock Incentive Plan. Incorporated by reference to Exhibit
10.3 to the Company’s Registration Statement on Form S-8 (File No. 333-121035), filed on December 6, 2004.
Employment Agreement, dated January 1, 2003, between the Company and Michael Haynes. Incorporated by
10.30.1
10.30.2
10.34
10.38
10.41
10.42
10.43
10.44
10.45
reference to Exhibit 10.30 to the Company’s Registration Statement on Form S-3 (File No. 333-122129), filed on
January 19, 2005.
First Amendment to Employment Agreement, dated October 1, 2003, between the Company and Michael Haynes.
Incorporated by reference to Exhibit 10.30.1 to the Company’s Registration Statement on Form S-3 (File No.
333-122129), filed on January 19, 2005.
Second Amendment to Employment Agreement, dated November 1, 2004, between the Company and
Michael Haynes. Incorporated by reference to Exhibit 10.30.2 to the Company’s Registration Statement
on Form S-3 (File No. 333-122129), filed on January 19, 2005.
Asset Purchase Agreement among Collectors Universe, inc., Gemprint Corporation, CVF Technologies
Corporation, Heptagon Investments Ltd. and 1456733 Ontario, Inc., dated November 25, 2005,
providing for the Company’s acquisition of the assets of Gemprint Corporation. Incorporated by
reference to Exhibit 10.34 to the Company’s Quarterly Report on Form 10-Q for the quarter ended
December 31, 2005, filed with the Commission on February 9, 2006.
Description of 2007 Management Bonus Plan. Incorporated by reference to Exhibit 99.1 to the
Company’s Current Report on Form 8-K dated November 17, 2006.
Collectors Universe, Inc. 2008 Management Bonus Plan. Incorporated by reference to Exhibit 99.1 to
the Company’s Current Report on Form 8-K dated November 14, 2007.
Separation Agreement and Mutual Release dated as of March 16, 2009 between the Company and
Michael R. Haynes. Incorporated by reference from Exhibit 10.99 to the Company’s Quarterly Report
on Form 10-Q for the Quarter ended March 31, 2009.
Collectors Universe, Inc. Fiscal 2010 Management Incentive Plan adopted as of July 1, 2009.
Restricted Stock Agreement dated as of July 31, 2009 between Michael J. McConnell and the Company
providing for the grant of restricted shares pursuant to the 2010 Management Incentive Plan.
Restricted Stock Agreement dated as of July 31, 2009 between David G. Hall and the Company
providing for the grant
of restricted shares pursuant to the 2010 Management Incentive Plan.
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
10.46
Restricted Stock Agreement dated as of July 31, 2009 between Joseph J. Wallace and the Company
providing for
the grant of restricted shares pursuant to the 2010 Management Incentive Plan.
E-1
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
INDEX TO EXHIBITS
(Continued)
Exhibit No.
21.1
23.1
31.1
31.2
32.1
32.2
Description
Subsidiaries of the Registrant.
Consent of Independent Registered Public Accounting Firm
Certifications of CEO Under Section 302 Of The Sarbanes-Oxley Act.
Certifications of CFO Under Section 302 Of The Sarbanes-Oxley Act.
CEO Certification of Periodic Report Under Section 906 of the Sarbanes-Oxley Act.
CFO Certification of Periodic Report Under Section 906 of the Sarbanes-Oxley Act.
*
Incorporated by reference to the same numbered exhibit to the Company’s Registration Statement (No. 333-86449) on
Form S-1 filed with the Commission on September 2, 1999.
E-2
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
Exhibit 10.43
COLLECTORS UNIVERSE, INC.
FISCAL 2010 MANAGEMENT INCENTIVE PLAN
This FISCAL 2010 MANAGEMENT INCENTIVE PLAN (the “2010 Management Incentive Plan” or the “2010 Incentive
Plan”) of Collectors Universe, Inc, a Delaware corporation (the “Company”) is hereby adopted and approved as of June 1, 2009, with
reference to the following:
A. WHEREAS, in 2006 the Company’s Board of Directors adopted and its stockholders approved the Company’s 2006
Equity Incentive Plan (the “2006 Equity Plan” or the “2006 Plan”), which provides for the granting of options to purchase Common
Stock, Restricted Stock Awards, Stock Appreciation Rights and Restricted Stock Units (as defined in the 2006 Plan) to officers and
other key employees and directors of the Company or its Affiliates (as defined in Section 2.1 of the 2006 Equity Plan); and
B. WHEREAS, the Compensation Committee of the Board has determined that it is advisable and in the best interests
of the Company and its stockholders that this 2010 Management Incentive Plan be approved and implemented to provide for the grant
of Restricted Stock Awards, in accordance with the 2006 Equity Plan and the terms and provisions of this 2010 Management Incentive
Plan, to the Company’s three (3) executive officers: Michael J. McConnell, its CEO, David G. Hall, its President, and Joseph
J. Wallace, its CFO (collectively, the “Participants” and each a “Participant”).
1. Purposes and Administration of the 2010 Incentive Plan.
1.1 Purposes of the Plan. This 2010 Management Incentive Plan has been adopted in place of a cash-based
annual management incentive plan of the types adopted by the Compensation Committee in previous years, primarily for the
following purposes: (i) to establish incentives that will focus management on achieving a turn-around in the Company’s financial
performance in fiscal 2010, as well as providing incentives for them to remain in the Company’s employ thereafter, (ii) to reduce the
maximum compensation that the Participants can earn in fiscal 2010, as compared to fiscal years 2009 and 2008, and (iii) to reduce
cash outflows in fiscal 2010 by paying such incentive compensation, if earned, in Restricted Shares rather than cash.
1.2 Administration of the 2010 Incentive Plan. This 2010 Incentive Plan will be administered by the
Compensation Committee, which shall have the authority to interpret and construe, and to adopt all necessary rules and regulations for
administering, this Plan. All decisions and determinations of the Committee with respect to this 2010 Incentive Plan shall be final and
binding on and nonappealable by the Company and the Participants.
2. Definitions. Unless otherwise defined elsewhere in this 2010 Incentive Plan, the following terms shall have the
respective meanings given to them below in this Section 2.
“Board” means the Board of Directors of the Company.
“CEO” means the Company’s Chief Executive Officer.
“CFO” means the Company’s Chief Financial Officer.
regulations promulgated thereunder.
“Code” means the Internal Revenue Code of 1986, as heretofore amended and as may be amended hereafter, and the
“Compensation Committee” or “Committee” means the Compensation Committee of the Board. The Committee
has, for purposes of Section 162(m) of the Code, been designated by the Board as a compensation committee with the authority set
forth in Section 1.2 hereof and elsewhere in this Plan and is comprised of three or more directors, all of whom are outside directors
within the meaning of Section 162(m) of the Code.
1
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
“Common Stock” shall mean the Company’s common stock, par value $.001 per share, as the same may be changed
hereafter as a result of any recapitalization of the Company’s authorized or outstanding common stock or any amendment to the
Company’s Certificate of Incorporation.
“Company” shall mean Collectors Universe, Inc., a Delaware corporation, and any successor thereto.
“Consultant” shall mean any natural person who, in a capacity other than as an employee or Outside Director (as
defined in the 2006 Equity Plan), renders bona fide advisory or consulting services to the Company or any of its Affiliates pursuant to
a contract entered into directly with the Company or any such Affiliate, provided, that the services so rendered are not in connection
with the offer or sale of securities in a capital-raising transaction and do not directly or indirectly promote or maintain a market for the
Company’s securities.
“Continuous Service with the Company” shall mean (i) employment by the Company or an Affiliate thereof,
(ii) service as a member of the Board of the Company or of any Parent thereof, or (iii) service in the capacity of a Consultant to the
Company or any Affiliate thereof, which service is uninterrupted except by reason of an Excused Absence (as hereinafter
defined). For purposes of this Agreement, a cessation or termination of a Participant’s Continuous Service with the Company shall be
deemed to have occurred if such Participant ceases to provide services to the Company and its Affiliates in at least one of the three
capacities set forth above for any reason other than an Excused Absence. Notwithstanding the foregoing, however, a termination or
cessation of Continuous Service of a Participant shall not be deemed to have occurred if, within not more than ten (10) days following
the termination or cessation of his Continuous Services service with the Company or any Affiliate in any one of the three capacities set
forth above, Participant continues or commences the provision of service to the Company or any Affiliate in any of the other
capacities specified above. For purposes hereof, each of the following shall constitute an “Excused Absence”: (x) vacations,
(y) illnesses (other than permanent disability, as defined in Section 22(e)(3) of the Code), and (z) leaves of absence that have been
approved in writing by the Company or any Affiliate for which a Participant is providing services.
“Dutch Auction Tender Offer” shall mean that certain tender offer by the Company for the repurchase from its
stockholders of up to 1,750,000 shares of its Common Stock at a price per share of not less than $5.00 and not greater than $5.40,
which is to be publicly announced and to be commenced on June 2, 2010 (the “Commencement Date”).
“Fiscal 2010” means the Company’s fiscal year ending June 30, 2010.
“Fiscal 2010 COI” means the consolidated continuing operating income of the Company and its consolidated
subsidiaries in Fiscal 2010, determined in accordance with the same generally accepted accounting principles that are applied by the
Company’s independent registered public accountants in their audit of the consolidated financial statements of the Company and its
Subsidiaries for Fiscal 2010 (the “2010 Financial Statements”), except that there shall be excluded from the computation of such
consolidated operating income (i) all non-cash stock-based compensation costs, and (ii) all non-cash impairment charges, if any,
recognized in the Company’s 2010 Financial Statements.
The terms “herein”, “hereof”, “hereto”, “hereinafter”, “hereunder” and “hereinafter” and any similar terms shall
refer to this Plan as a whole and not to the Section, paragraph or clause where any such term appears, unless the context clearly
indicates otherwise.
The terms “including” and “include” mean “including but not limited to” or “includes without limitation”.
The term “Market Value” shall mean:
(a) the average of the closing sale prices per share of Common Stock during the applicable Measurement
Period ( as hereinafter defined) on the Nasdaq Stock Market or the principal stock exchange (as the case may be) on which the
Common Stock is then listed or admitted to trading, if the Company’s Common Stock during that Measurement Period is listed or
admitted to trading on the Nasdaq Stock Market or a stock exchange which reports closing sale prices, provided, that if no closing sale
price is quoted on any day during that Measurement Period, then the Market Value for such day shall be the closing sale price per
share of the Common Stock on the Nasdaq Stock Market or such principal stock exchange (as the case may be) on the next succeeding
day for which a closing sale price is reported;
2
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
(b) the average of the closing bid and asked prices per share of the Common Stock in the over-the-counter
market during the applicable Measurement Period, if the Company’s Common Stock is not then listed or admitted to trading on the
Nasdaq Stock Market or a stock exchange which reports closing sale prices; or
(c) if neither paragraph (a) nor (b) above is applicable during the Measurement Period, then the Market Value
shall be determined by the Committee in good faith using any reasonable method of evaluation, which determination shall be
conclusive and binding on all interested and affected parties.
“Measurement Period” shall mean whichever of the following periods is of longer duration: (i) the period
commencing (10) trading days preceding the Commencement Date of the Dutch Auction Tender Offer, or (ii) the forty (40) trading
days immediately preceding the date as of which the Restricted Shares are awarded to the Participants under this 2010 Plan.
“Permitted Assign” shall mean any Person to whom a Participant has transferred or assigned any of his Restricted
Shares, or any right thereto or interest therein, as and to the extent permitted by the 2006 Equity Plan or the Restricted Stock
Agreement evidencing the award hereunder of his Restricted Shares.
venture, trust, estate or any other lawfully organized and existing entity.
“Person” means any natural person, corporation, limited liability company, general or limited partnership, joint
“Plan Performance Goal” means Fiscal 2010 COI in an amount at least equal to ninety percent (90%) of the
Company’s Fiscal 2010 COI as set forth in the Company’s Annual Operating Plan for Fiscal 2010 as approved by the Company’s
Board of Directors at its meeting on May 21, 2009. Notwithstanding the foregoing, however, at any time prior to the end of Fiscal
2010, the Compensation Committee may adjust or change the Plan Performance Goal to reflect the occurrence of (i) any extraordinary
event, (ii) any material corporate transactions, (iii) any material changes in corporate capitalization, accounting rules or principles or
in the Company’s methods of accounting, (iv) any material changes in applicable law, or (v) any other material change or event of
similar nature (each, an “Extraordinary Event”), but only if any such Extraordinary Event was not reasonably foreseeable at the time
the Plan Performance Goal then in effect under this 2010 Incentive Plan had been established and would, in the sole opinion of the
Committee (x) make it unlikely that Plan Performance Goal will be achieved or (y) make it likely that the Plan Performance Goal
would be achieved solely by reason of occurrence of such Extraordinary Event. Notwithstanding the foregoing, however, the
occurrence of changes in the competitive environment or changes in economic or market conditions in the Company’s markets,
whether or not expected or reasonably foreseeable, shall not by themselves constitute Extraordinary Events that may be the basis of a
change in the Plan Performance Goal.
“Restricted Shares” means shares of Company Common Stock authorized for issuance under the 2006 Omnibus
Equity Incentive Plan and awarded hereunder subject to the restrictions and risks of forfeiture set forth in Sections 4 and 5,
respectively, of this 2010 Plan.
“SEC” means the Securities and Exchange Commission.
“Unvested Shares” means those of any Restricted Shares awarded hereunder as to which any of the Vesting
Conditions has not been satisfied and which, for that reason, are or remain subject to a risk of forfeiture and the Company’s
Reacquisition Rights under Section 5 of this Agreement.
“Vested Shares” means those of the Restricted Shares awarded pursuant hereto as to which the Vesting Conditions
have been satisfied and which, for that reason, are no longer subject to a risk of forfeiture or the Company’s Reacquisition Rights
under Section 5 of this Agreement.
“Vesting Conditions” means the conditions or contingencies set forth in Section 5 hereof that must be satisfied for
Unvested Shares to become Vested Shares.
3
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
3. Restricted Shares to be Awarded under 2010 Incentive Plan. Each Participant shall be awarded, pursuant to this 2010
Incentive Plan, a number of Restricted Shares that have an aggregate Market Value, over the applicable Measurement Period, set forth
opposite the name of such Participant in the following table:
Participants
Michael J. McConnell
David G. Hall
Joseph J. Wallace
Market Value
of
Restricted
Shares
$
$
$
464,000
464,000
232,000
An award of Restricted Shares to a Participant pursuant to this Plan shall be evidenced by a written Restricted Stock
Agreement to be entered into by the Company with such Participant substantially in the form approved by the Compensation
Committee containing terms and conditions not inconsistent with the 2006 Equity Plan or this 2010 Incentive Plan.
4. Restrictions on and Risk of Forfeiture of the Restricted Shares. Except as may otherwise be provided in this
Section 4 or in Section 5 below, the Restricted Shares to be granted pursuant to this 2010 Incentive Plan shall constitute “Unvested
Shares” until such time, if any, as they become Vested Shares as provided in Section 5 hereof, and for so long as they remain
Unvested Shares shall be subject to the following restrictions:
4.1 Restrictions on Transferability. No Participant shall be entitled to sell, assign or transfer or otherwise
dispose of any of his Unvested Shares, either in whole or in part, other than to a Permitted Assign, and any stock certificate(s)
evidencing Unvested Shares shall remain in the possession of the Company and shall bear restrictive legends to the effect that the
Shares evidenced thereby are subject to restrictions on transferability pursuant to this Plan and the Restricted Stock Agreement
pursuant to which such Restricted Shares are awarded.
4.2 Dividend Restrictions. If the Company pays any dividends or distributions, whether in cash, stock or
other property, to all of the holders of the Company’s outstanding shares of Common Stock at a time when any of the Restricted
Shares are Unvested Shares, the dividends or distributions that would otherwise be payable to each Participant on or in respect of such
Unvested Shares shall not be distributed to the Participant, but shall be deposited in a segregated bank account maintained on the
Company’s behalf by the transfer agent for the Company’s Common Stock or a bank or other depository institution as may be
designated by the Company (the “Deposit Account”). Upon the vesting of any of the Unvested Shares of a Participant, any dividends
or distributions that had previously been declared on such Shares and deposited in a Deposit Account shall be distributed to that
Participant or, if any such Shares had been transferred to a Permitted Assign, to that Permitted Assign in accordance with his or her
interests in such Shares. If, on the other hand, any of such Unvested Shares are reacquired by the Company pursuant to Section 5.2 of
this Plan, then, the dividends and distributions declared on those reacquired Unvested Shares shall revert and be returned to the
Company and neither the Participant nor any of his Permitted Assigns shall have any rights therein or claims thereto.
4.3 Voting Rights. Unless and until any Unvested Shares are reacquired pursuant to Section 5.2 hereof, a
Participant or any Permitted Assign thereof, as the case may be, shall be entitled to vote such Unvested Shares to the same extent as if
they were Vested Shares.
5. Vesting of Restricted Shares; Risks of Forfeiture and Company Reacquisition Rights.
5.1 Vesting of Restricted Shares. A Participant’s Restricted Shares awarded pursuant to this 2010 Incentive
Plan shall become Vested Shares and shall cease to be subject to the restrictions set forth in Section 4 above and the risk of forfeiture
set forth in Section 5.2 below, upon satisfaction of the following contingencies or conditions:
“Time-Contingent Shares”) will become Vested Shares, as follows:
(a) Time-Based Vesting. Twenty-five percent (25%) of a Participant’s Restricted Shares (his
4
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
Continuous Service until July 31, 2010, then, his Time-Contingent Shares will thereupon become Vested Shares.
(i) Messrs. McConnell and Hall. If Mr. McConnell or Mr. Hall remains in the Company’s
least the date on which the Company and Mr. Wallace enter into the Restricted Stock Agreement evidencing the award of Restricted
Shares to him pursuant to this 2010 Incentive Plan, then, his Time-Contingent Shares will thereupon become Vested Shares.
(ii) Mr. Wallace. If Mr. Wallace remains in the Continuous Service of the Company until at
(b) Performance-Based Vesting Contingency. The vesting of the other seventy-five (75%) of the
Restricted Shares to be awarded, respectively, to each Participant (the “Performance-Contingent Shares”) will be contingent on the
achievement by the Company, in Fiscal 2010, of the Plan Performance Goal (as defined above) and if that Plan Performance Goal is
achieved, then:
(33.3%) of the Performance Contingent Shares of a Participant shall become Vested Shares on the date it is determined that the Plan
Performance Goal was achieved or July 31, 2010 (whichever is later), provided that such Participant has remained in the Continuous
Service of the Company until at least July 31, 2010;
(i) Initial Installment of Performance-Contingent Shares. An initial installment of one-third
one-third (33.3%) of the Performance Contingent Shares of a Participant shall become Vested Shares on June 30, 2011, provided that
such Participant has remained in the Continuous Service of the Company until at least June 30, 2011; and
(ii) Second Installment of Performance-Contingent Shares. A second installment of
remaining one-third (33.3%) of the Unvested Performance Contingent Shares of a Participant shall become Vested Shares on June 30,
2012, provided that such Participant has remained in the Continuous Service of the Company until at least June 30, 2012.
(iii) Third Installment of Performance-Contingent Shares. A final installment of the
5.2 Risks of Forfeiture and Company Reacquisition Rights. The Company shall be entitled to reacquire,
without the payment of any sums or other consideration to a Participant, all or any portion of the Participant’s Unvested Shares (the
Company’s “Reacquisition Rights”), on the following terms and conditions:
(a) Failure of Time-Vesting Contingency. The Company shall have the right (but not the obligation)
to reacquire all of the Unvested Shares (comprised of both the Time-Vested Shares and the Performance-Contingent Shares) of a
Participant, or such lesser number thereof as the Committee deems in its sole and absolute discretion to be appropriate, in the event
that there is a cessation or termination of such Participant’s Continuous Service, other than by reason of a Termination Without Cause
or a Termination for Good Reason (as defined in the Participant’s Restricted Stock Agreement): (i) in the case of Messrs. McConnell
and Hall, prior to July 31, 2010, and (ii) in the case of Mr. Wallace, prior to the date on which he and the Company enter into the
Restricted Stock Agreement evidencing the award of the Restricted Shares to him hereunder.
(b) Failure of Plan Performance Goal. If Participant has remained in the Continuous Service of the
Company through July 31, 2010, but it is determined by the Committee that the Company has failed to achieve the Plan Performance
Goal, then, the Company shall become entitled to exercise its Reacquisition Rights to reacquire all of the Participant’s the
Performance-Contingent Shares or such lesser number thereof as the Committee deems in its sole and absolute discretion to be
appropriate.
has determined that the Performance Goal has been achieved, but:
(c) Cessation of Continuous Service After Achievement of Plan Performance Goal. If the Committee
5
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
June 30, 2010 (other than by reason of a Termination Without Cause or a Termination for Good Reason), the Company shall become
entitled to exercise its Reacquisition Rights to acquire all the Participant’s Performance-Contingent Shares or such lesser number
thereof as the Committee deems in its sole and absolute discretion to be appropriate;
(i) A Participant has ceased to remain in the Company’s Continuous Service through at least
(ii) A Participant has ceased to remain in the Company’s Continuous Service through at
least June 30, 2011 (other than by reason of a Termination Without Cause or a Termination for Good Reason), the Company shall
become entitled to exercise its Reacquisition Rights to acquire all of such Participant’s then remaining Unvested
Performance-Contingent Shares or such lesser number thereof as the Committee deems in its sole and absolute discretion to be
appropriate; or
2012 (other than by reason of a Termination Without Cause or a Termination for Good Reason), the Company shall become entitled to
exercise its Reacquisition Rights to acquire all of such Participant’s then remaining Unvested Performance-Contingent Shares or such
lesser number thereof as the Committee deems in its sole and absolute discretion to be appropriate.
(iii) A Participant’s Continuous Service has ceased after June 30, 2011, but prior to July 1,
(d) Procedure for Exercise of Reacquisition Right. If and whenever the Company becomes entitled,
pursuant to this Section 5.2, to reacquire any Unvested Shares of a Participant, whether as a result of a cessation of Participant’s
Continuous Service or the failure of the Plan Performance Goal, as the case may be, the Company shall have a period of sixty (60)
days thereafter within which to exercise its Reacquisition Rights with respect to such Unvested Shares (the “Reacquisition Shares”) by
giving Participant (or his Permitted Assign, if any, who has acquired ownership thereof) a written notice (a “Reacquisition Notice”)
setting forth the number of such Reacquisition Shares that the Company is electing to reacquire. Any of such Reacquisition Shares
which the Company does not elect, in the manner set forth above, to reacquire within such 60 day period shall become Vested Shares.
Plan, including Sections 5.1 and 5.2 above:
5.3 Accelerated Vesting. Notwithstanding anything to the contrary that may be contained elsewhere in this
(a) Acceleration of Vesting on a Termination of Participant’s Employment Without Cause or for
Good Reason. If there occurs a Termination of a Participant’s employment with the Company or any Affiliate thereof Without Cause
or for Good Reason, as defined in a Participant’s Restricted Stock Agreement, at any time that any of the Restricted Shares granted to
him are Unvested Shares, and Participant does not remain in the Continuous Service of the Company thereafter in another capacity,
then such Unvested Shares shall thereupon become Vested Shares without the necessity of any action by the Company or Participant.
while any of the Shares of a Participant continue to be Unvested Shares, then, the applicable provisions of Section 11 of the 2006
Equity Plan shall govern the vesting of such Unvested Shares by reason of the occurrence of such Change of Control.
(b) Effect of Change of Control. If a Change of Control (as defined in the 2006 Equity Plan) occurs
6. Amendments to and Termination of 2010 Incentive Plan. Notwithstanding anything to the contrary that may be
contained elsewhere in this 2010 Incentive Plan:
6.1 Amendments to and Modifications of the 2010 Incentive Plan. Subject to any limitations set forth in the
2006 Equity Incentive Plan, the Committee shall have the sole, absolute and unconditional discretion to amend or modify the 2010
Incentive Plan at any time or from time to time with or without notice to the Participants, provided, however, that, in no event shall
any amendment to the 2010 Incentive Plan affect any of a Participant’s Restricted Shares that have theretofore become Vested Shares
nor any of the Participants rights with respect thereto.
6
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
6.2 Compliance with Section 409A of the Code. This Incentive Plan is intended to comply with Section 409A
of the Code and any related regulations and guidance promulgated thereunder (“Section 409A”) and will be interpreted in a manner
intended to comply with Section 409A. In furtherance thereof, no payments may be accelerated under this Incentive Plan other than to
the extent permitted under Section 409A. To the extent that any provision of this Incentive Plan violates Section 409A such that
amounts would be taxable to a Participant prior to payment or would otherwise subject a Participant to a penalty tax under Section
409A, such provision shall be automatically reformed or stricken to preserve the intent hereof. Notwithstanding anything herein to the
contrary, (i) if at the time of a Participant’s termination of employment the Participant is a “specified employee” as defined in
Section 409A and the deferral of the commencement of any payments or benefits otherwise payable hereunder as a result of such
termination of employment is necessary in order to prevent any accelerated or additional tax under Section 409A, then the Company
shall defer the commencement of the payment of any such payments or benefits hereunder (without any reduction in such payments or
benefits ultimately paid or provided to the participant) until the date that is six (6) months following the Participant’s termination of
employment (or the earliest date as is permitted under Section 409A) and (ii) if any other payments due to a Participant hereunder
could cause the application of an accelerated or additional tax under Section 409A, such payments or other benefits shall be deferred if
deferral will make such payment compliant under Section 409A, or otherwise such payment shall be restructured, to the extent
possible, in a manner, as determined by the Committee, that does not cause such an accelerated or additional tax. The Committee
shall implement the provisions of this Section 6.2 in good faith; provided that none of the Company, the Committee or its members, or
any employees or representatives of the Company or any of its subsidiaries or business units shall have any liability to Participants
with respect to this Section 6.2.
7. Miscellaneous Provisions.
7.1 No Enlargement of Employee Rights. Nothing in this 2010 Incentive Plan shall be construed to create or
imply any contract of employment between any Participant and the Company, to confer upon any Participant any right to continue in
the employ of the Company or any Affiliate thereof or to confer upon the Company or any Affiliate any right to require any
Participant’s continued employment or service.
7.2 Rights Not Alienable. Any rights provided to a Participant under the Incentive Plan may not be assigned,
transferred or alienated, except as expressly permitted by the 2006 Omnibus Incentive Plan and the Participant’s Restricted Stock
Agreement.
7.3 Other Compensation Incentive Plans. The adoption of this 2010 Incentive Plan shall not affect any other
Company compensation plans, nor shall the Incentive Plan preclude the Company from establishing or awarding any other forms of
compensation for employees, officers or directors of the Company, including the Participants.
in accordance with the laws of the State of California.
7.4 Governing Law. To the extent not preempted by federal law, the 2010 Incentive Plan shall be determined
7.5 No Other Understandings or Agreements with respect to the 2010 Incentive Plan. Subject to the 2006
Omnibus Equity Plan, and except as otherwise expressly provided elsewhere herein, this 2010 Incentive Plan contains all of the terms
and provisions of and all conditions applicable to the 2010 Management Incentive Plan and supersedes any previous discussions,
communications, understandings or agreements, written or oral, between the Company and any Participant with respect to this 2010
Incentive Plan as well as all prior actions that may have been taken by the Committee relating to thereto.
and shall not be considered and shall not affect the construction, interpretation or application of any terms and provisions of this Plan.
7.6 Headings. Section and paragraph headings have been inserted herein for convenience of reference only
Adopted as of June 1, 2009.
7
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
Exhibit 10.44
COLLECTORS UNIVERSE, INC.
RESTRICTED STOCK AGREEMENT
THIS RESTRICTED STOCK AGREEMENT (the “Agreement”) is entered into as of July 31, 2009 by and between MICHAEL J.
MCCONNELL (hereinafter referred to as “Executive”), and COLLECTORS UNIVERSE, INC., a Delaware corporation (hereinafter
referred to as the “Company”), pursuant to the Company’s 2006 Equity Incentive Plan (the “Plan”).
R E C I T A L S:
A. Executive is the Chief Executive Officer and a director of the Company and in those capacities has rendered and is
continuing to render services to, for and on behalf of the Company.
B. The Compensation Committee of the Company’s Board of Directors (the “Committee”) (i) has adopted the Fiscal
2010 Management Incentive Plan (the “Management Incentive Plan”), which provides for awards of restricted shares of the
Company’s common stock, under the Company’s 2006 Equity Incentive Plan (the “Plan”), to be made to the three most senior
executives of the Company and (ii) by action of its members, has granted to Executive, effective as of July 31, 2009, as award of
101,034 shares of the Company’s common stock, on the terms and subject to the conditions and restrictions set forth hereinafter, to
provide incentives for Executive to remain in the Company’s service and to devote his utmost efforts to the achievement by the
Company, of the Performance Goal (set forth hereinafter), all as more specifically provided in this Agreement.
C. Executive was notified, on July 31, 2009, of the aforementioned award of such shares to him by the Committee.
A G R E E M E N T:
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth, and for other good and valuable consideration,
the adequacy and receipt of which is hereby acknowledged, the parties agree as follows:
1. Certain Definitions and Rules of Construction.
respective meanings:
1.1 Definitions. For purposes of this Agreement, the terms set forth below in this Section 1 shall have the following
(a) The term “Affiliate” when used with reference to the Company shall mean any corporation, limited
liability company, general partnership, joint venture or limited partnership or other entity that controls or is controlled by, or is under
common control with the Company. Accordingly, an Affiliate of the Company shall include any such entity (i) that owns voting
shares or other voting securities of the Company or any other Affiliate thereof that entitle it to vote in the election of, and enable it to
elect, either directly or indirectly, at least a majority of the Company’s directors (a “Parent”) and (ii) any such entity with respect to
which the Company is a general partner or owns shares or other securities that entitle it to vote in the election of, and to elect, either
directly or through one or more other Affiliates, at least a majority of the directors or persons holding similar positions with such
entity (a “Subsidiary”).
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
(b) The term “Code” means the Internal Revenue Code of 1986, as amended.
(c) The term “Company” shall mean Collectors Universe, Inc., a Delaware corporation and any Successor
thereto.
(d) The term “Consultant” shall mean any natural person who, in a capacity other than as an employee or
Director of the Company, renders bona fide advisory or consulting services (whether on a full time or part time basis) to the Company
or any Affiliate, pursuant to a contract entered into directly with the Company or any such Affiliate, provided, however, that the
services so rendered are not in connection with the offer or sale of securities in a capital-raising transaction and do not directly or
indirectly promote or maintain a market for the Company’s securities.
(e) The term “Continuous Service with the Company” shall mean (i) employment by an Employer Entity
(which shall be either the Company or an Affiliate thereof), (ii) service as a member of the Board of Directors of the Company or any
Parent thereof, or (iii) service in the capacity of a Consultant to the Company or any Affiliate thereof, which service is uninterrupted
except by reason of (x) vacations, (y) illnesses (other than permanent disability, as defined in Section 22(e)(3) of the Code), or
(z) leaves of absence that have been approved in writing by the Company (each, an “Excused Absence”). For purposes of this
Agreement, a cessation or termination of Executive’s Continuous Service with the Company shall be deemed to have occurred if
Executive ceases to provide services to the Company and its Affiliates, in any of the capacities set forth above in this Paragraph 1.1(e),
for any reason other than an Excused Absence. Notwithstanding the foregoing, a termination or cessation of Continuous Service of
Executive shall not be deemed to have occurred if, within not more than ten (10) days following the termination or cessation of
Executive’s service with the Company or any Affiliate thereof, in any one of the capacities set forth above, Executive continues or
commences the provision of service to the Company or any Affiliate in any of the other capacities specified above.
at any time during the term of this Agreement.
(f) The term “Employer Entity” means the Company or any Affiliate thereof that employs the Executive
2010.
(g) The term “Fiscal 2010” shall mean the year that commenced on July 1, 2009 and will end on June 30,
(h) The term “Fiscal 2010 COI” means the consolidated continuing operating income of the Company and
its consolidated subsidiaries for Fiscal 2010, determined in accordance with the same generally accepted accounting principles that are
applied by the Company’s independent registered public accountants in their audit of the consolidated financial statements of the
Company and its subsidiaries for Fiscal 2010 (the “2010 Financial Statements”), except that there shall be excluded from the
computation of such consolidated operating income (i) all non-cash stock-based compensation costs, and (ii) all non-cash impairment
charges, if any, recognized in the Company’s 2010 Financial Statements
(i) The term “Plan Performance Goal” means Fiscal 2010 COI in an amount at least equal to ninety
percent (90%) of the Fiscal 2010 COI that is set forth in the Company’s Annual Operating Plan for Fiscal 2010 as approved by the
Company’s Board of Directors at its meeting on May 21, 2009. Notwithstanding the foregoing, however, at any time prior to the end
of Fiscal 2010, the Compensation Committee may adjust or change the Plan Performance Goal to reflect the occurrence of (i) any
extraordinary event, (ii) any material corporate transactions, (iii) any material changes in corporate capitalization, accounting rules or
principles or in the Company’s methods of accounting, (iv) any material changes in applicable law, or (v) any other material change or
event of similar nature (each, an “Extraordinary Event”), but only if any such Extraordinary Event was not reasonably foreseeable at
the
2
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
time the Plan Performance Goal then in effect under this 2010 Incentive Plan had been established and would, in the sole opinion of
the Committee (x) make it unlikely that Plan Performance Goal will be achieved or (y) make it likely that the Plan Performance Goal
would be achieved solely by reason of occurrence of such Extraordinary Event. Notwithstanding the foregoing, however, the
occurrence of changes in the competitive environment or changes in economic or market conditions in the Company’s markets,
whether or not expected or reasonably foreseeable, shall not by themselves constitute Extraordinary Events that may be the basis of a
change in the Plan Performance Goal.
under applicable federal or state securities laws.
(j) The term “Securities Law Restrictions” shall mean restrictions on the transferability of the Shares
(k) The term “Successor” mean any entity that (i) is the surviving entity in a merger or consolidation with
or other statutory reorganization of the Company in which the separate existence of the Company ceases, whether or not such merger,
consolidation or reorganization results in a Change of Control of the Company or (ii) becomes the Parent of the Company by reason of
its direct or indirect acquisition of voting securities of the Company representing the power to vote, directly or indirectly, in the
election of directors of the Company and to elect at least a majority thereof, or (iii) acquires all or substantially all of the assets of the
Company (whether or not such transaction constitutes a Change of Control of the Company).
with his Employer Entity due to the taking of a Good Reason Action (as defined in Exhibit A hereto), provided such termination
meets the conditions expressly set forth in Exhibit A.
(l) The term “Termination for Good Reason” shall mean a termination by Executive of his employment
(m) The term “Termination Without Cause by the Company” shall mean a termination, by the Company
or Executive’s Employer Entity (if other than the Company), of Executive’s employment for any reason other than (i) the death or
disability of Executive or (ii) the Misconduct of Executive (as defined in Exhibit A hereto), provided that Executive does not continue
in the service of the Company or any of its Affiliates thereafter.
the Company’s Reacquisition Rights under Section 5 of this Agreement.
(n) The term “Unvested Shares” shall mean those of the Shares issued hereunder that are or remain subject
subject to the Company’s Reacquisition Rights under Section 5 of this Agreement.
(o) The term “Vested Shares” shall mean those of the Shares issued pursuant hereto that have ceased to be
satisfied for any or all of the Unvested Shares to become Vested Shares.
(p) The term “Vesting Conditions” shall mean the conditions set forth in Section 4 hereof that must be
not defined in Section 1.1 above shall have the respective meanings given to such terms elsewhere in this Agreement or in the Plan.
1.2 Definitions of Certain Other Terms. Other terms used in this Agreement with initial capital letters that are
1.3 Rules of Construction. The provisions of this Agreement will not be construed against a party by reason of
the fact that such party or its counsel was the principal draftsman of this Agreement or such provisions. Unless the context otherwise
requires: (i) words importing the singular include the plural and vice versa; (ii) words importing gender include all genders; (iii) the
terms “include” and “including” shall mean “include without limitation” or “including but not limited to” and (iii) unless the context
clearly indicates otherwise, the terms “herein,” “hereof,” “hereto,” “hereinafter” and “hereunder” and any similar terms shall refer to
this Agreement as a whole and not to the section, subsection, paragraph or clause where such term appears.
3
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
1.4 Headings. The Section, subsection and paragraph and any other headings in this Agreement have been inserted
for convenience of reference only and shall not affect the construction or interpretation or the application of any of the terms or
provisions of this Agreement.
2 Issuance of Shares. The Company hereby irrevocably offers to issue to Executive an aggregate of one hundred and
one thousand thirty-four (101,034) shares of its common stock (the “Shares”), on the terms and subject to the conditions and the
restrictions and the Company’s Reacquisition Rights set forth herein. Executive’s execution and delivery to the Company of this
Agreement, without condition or reservation of any kind whatsoever, together with the Spousal Consent in the form accompanying
this Agreement, duly executed by Executive’s Spouse, within ten (10) business days of July 31, 2009, the date as of which the
Company executed this Agreement, shall constitute Executive’s acceptance of this offer, on the terms and subject to such conditions,
restrictions and the Company Reacquisition Rights, and this Agreement shall thereupon represent a binding and enforceable
agreement of the parties.
3 Consideration. Executive acknowledges and agrees that he is not paying or providing any consideration (monetary
or other) to the Company for the issuance of the Shares to him pursuant to Section 2 above. Instead, the Company is entering into this
Agreement as an inducement to Executive to remain in the Company’s Continuous Service and to devote his utmost efforts to the
achievement of the Plan Performance Goal and the satisfaction of the other Vesting Conditions, which shall constitute good and
valuable consideration for the obligations of and the performance of this Agreement by the Company in accordance with and on the
terms and subject to the conditions set forth herein; provided, however, that it is further acknowledged and agreed by Executive that
the only consideration to be received by the Company for or in respect of the vesting of any of the Shares under Section 4 and the
termination of its Reacquisition Rights under Section 5 hereof with respect to any Unvested Shares shall be the satisfaction of the
Vesting Conditions.
4 Vesting of Shares. Subject to the following terms and satisfaction of the Vesting Conditions set forth below in this
Section 4, the Shares shall vest (that is, become Vested Shares) in four (4) annual installments, the first three (3) of which shall each
be in the amount of 25,258 of the Shares, with the fourth and final installment in the amount of 25,260 shares, as follows:
4.1 Time-Vested Shares. If and only if no cessation of Executive’s Continuous Service (as defined above) has
occurred prior to July 31, 2010, then, on that date the initial installment of 25,258 of the Shares shall become Vested Shares and shall,
therefore, cease to be subject to the Company’s Reacquisition Right and the other restrictions contained in this Agreement, other than
any applicable Securities Law Restrictions.
Company has achieved the Plan Performance Goal and:
4.2 Performance-Vested Shares. If a determination is made by the Administrator (as defined in the Plan) that
(a) the Executive has been in the Continuous Service of the Company or any other Employer Entity
between the date hereof and July 31, 2010, inclusive, then, on the date such determination is made, or July 31, 2010 (whichever is
later), the second installment of 25,258 of the Shares shall become Vested Shares and shall thereupon cease to be subject to the
Company’s Reacquisition Right and the other restrictions contained in this Agreement, other than any applicable Securities Law
Restrictions;
(b) the Executive has remained in the Continuous Service of the Company or any other Employer Entity
between the date hereof and June 30, 2011, inclusive, the third installment of 25,258 of the Shares shall, on June 30, 2011, become
Vested Shares and shall thereupon cease to be subject to the Reacquisition Right of the Company and the other restrictions contained
in this Agreement, other than any applicable Securities Law Restrictions;
4
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
(c) the Executive has remained in the Continuous Service of the Company or any other Employer Entity
between the date hereof and June 30, 2012, inclusive, then, the fourth and final installment of 25,260 of the Shares shall, on June 30,
2012, become Vested Shares and shall thereupon cease to be subject to the Reacquisition Right of the Company and the other
restrictions contained in this Agreement, other than any applicable Securities Law Restrictions.
4.3 Effect of a Termination of Executive’s Employment Without Cause or for Good Reason. Notwithstanding
anything to the contrary that may be contained elsewhere in this Agreement, if there occurs a Termination Without Cause or a
Termination for Good Reason of Executive’s employment with the Company or any Affiliate thereof at any time that any of the
Shares are Unvested Shares, and Executive does not continue in the Continuous Service of the Company or any of its Affiliates
thereafter, then such Unvested Shares shall thereupon become Vested Shares without the necessity of any action by the Company or
Executive.
4.4 Effect of Change of Control. If a Change of Control (as defined in the Plan) occurs, while any of the
Shares continue to be Unvested Shares, then the applicable provisions of Section 11 of the Plan shall govern the vesting of any
Unvested Shares by reason of such Change of Control.
5. Reacquisition and Reconveyance of Unvested Shares upon a Termination of Continuous Service.
Agreement, the Company shall have the right to reacquire some or all of the Unvested Shares (the “Reacquisition Right”), as follows:
5.1 Reacquisition Rights. Notwithstanding anything to the contrary that may be contained elsewhere in this
(a) Termination of Continuous Service Prior to July 31, 2010. The Company shall have the right (but not
the obligation) to exercise its Reacquisition Right to reacquire all 101,034 Unvested Shares or such lesser number thereof as the
Administrator deems in its sole and absolute discretion to be appropriate, in the event that there is a cessation or termination of
Executive’s Continuous Service (other than by reason of a Termination Without Cause or a Termination for Good Reason) prior to
July 31, 2010.
(b) Failure of Plan Performance Goal. If Executive has remained in the Continuous Service of the
Company through July 31, 2010, but it is determined by the Administrator that the Company has failed to achieve the Plan
Performance Goal, then, the Company shall become entitled to exercise its Reacquisition Rights to reacquire all of the then remaining
75,776 Unvested Shares or such lesser number thereof as the Administrator deems in its sole and absolute discretion to be appropriate.
determined that the Performance Goal has been achieved, but:
(c) Cessation of Continuous Service After Achievement of Performance Goal. If the Administrator has
2011 (other than by reason of a Termination Without Cause or a Termination for Good Reason), the Company shall become entitled to
exercise its Reacquisition Right to acquire all of the then remaining 50,518 Unvested Shares or such lesser number thereof as the
Administrator deems in its sole and absolute discretion to be appropriate; or
(i) Executive ceases to remain in the Company’s Continuous Service through at least June 30,
5
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
than by reason of a Termination Without Cause or a Termination for Good Reason), the Company shall become entitled to exercise its
Reacquisition Right to acquire all of the then remaining 25,260 Unvested Shares or such lesser number thereof as the Administrator
deems in its sole and absolute discretion to be appropriate.
(ii) Executive’s Continuous Service ceases after June 30, 2011, but prior to July 1, 2012 (other
5.2 Consideration for Repurchase Right. It is expressly agreed by Executive that, since Executive is not
making any monetary payment or incurring any monetary obligation to the Company for the issuance of the Shares and satisfaction of
the Vesting Conditions is a condition precedent to and the only consideration for the vesting of the Shares, no purchase price or other
consideration shall be payable to Executive by the Company for the Company’s reacquisition of any of the Unvested Shares pursuant
to Section 5.1 hereof.
5.3 Procedure for Exercise of Reacquisition Right. For sixty (60) days after the effective date of the cessation
of Executive’s Continuous Service or the failure of the Plan Performance Goal, as the case may be, the Company may exercise the
Reacquisition Right by giving Executive, or any Permitted Assign (as defined in Section 6 below) of Executive who has acquired
ownership of any of the Unvested Shares, written notice (a “Reacquisition Notice”) of the number of the then Unvested Shares which
the Company is entitled, pursuant to Section 5.1, and has elected to reacquire (the “Reacquisition Shares”).
5.4 Settlement and Closing of Reacquisition. If the Company has elected to exercise its Reacquisition Right as
to part or all of the then Unvested Shares within the 60-day period described above, then, within ten (10) business days following the
date of the Reacquisition Notice, Executive or his Permitted Assigns (as the case may be) shall deliver or cause to be delivered to the
Company (i) the certificate(s) representing the Reacquisition Shares, together with a stock assignment separate from certificate, duly
endorsed in blank, in full reconveyance and transfer of such Reacquisition Shares to the Company, or any Company Assignee (as the
case may be) pursuant to this Section 5 and (ii) such other documents and instruments, including any agreements, that the Company
may request to evidence and effectuate (x) the reconveyance and transfer of the Reacquisition Shares to the Company or the Company
Assignee, if any, free and clear of any and all claims, liens, pledges, security interests, options, encumbrances and adverse interests of
any kind or nature whatsoever (collectively, “Liens and Encumbrances”) and (y) the termination and release by Executive (and his
Permitted Assigns, if any) of all rights, title and interest in and to and all claims of any nature whatsoever that Executive or his
Permitted Assigns may have or may assert with respect to such Reacquisition Shares. Such additional documents and instruments
may include written representations and warranties by the Executive and his Permitted Assigns (if any) that, upon such reconveyance
and transfer, the Company shall become the beneficial and record owner of such Unvested Shares, free and clear of any and all Liens
and Encumbrances and a release agreement, in such form as the Company may request, forever releasing the aforementioned rights
and claims. Executive, on his behalf and on behalf of any Permitted Assigns to whom he may transfer any of the Unvested Shares in
accordance with Section 6 below, hereby irrevocably appoints the Company as the attorney-in-fact for Executive and his Permitted
Assigns (if any) and irrevocably grants to the Company a power of attorney, with full power of substitution and resubstitution, to take
such actions and to execute and deliver such documents and instruments, in the name and on behalf of Executive or any of
his Permitted Assigns, as the Company deems necessary, appropriate or desirable to effectuate such reconveyance and transfer of the
Reacquisition Shares to the Company or any Company Assigns and the execution of the related documents, instruments and
agreements as contemplated by this Section 5.4. Such appointment and power of attorney is being given by Executive as security for
the performance of Executive’s obligations hereunder and is, therefore, coupled with an interest, and shall be irrevocable and shall
continue in full force and effect following the death or any incapacity, whether physical or mental, of Executive or any Permitted
Assign to whom any
6
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
of the Unvested Shares have been transferred until the earlier of (x) the vesting of all of the Unvested Shares or (y) the Reacquisition
of the Unvested Shares that the Company has elected to reacquire pursuant to this Section 5. In the event that the Company (i) sends a
Reacquisition Notice to Executive within the aforesaid sixty (60) day period, as to some, but not all, of the Unvested Shares it is then
entitled to reacquire, or (ii) fails to send any Reacquisition Notice to Executive within the aforesaid 60-day period, then all of the then
Unvested Shares that it was entitled, but did not elect, to reacquire shall thereupon become Vested Shares.
5.5 Deposit of Unvested Shares and Dividends; Voting Rights.
(a) Deposit of Unvested Shares. Upon Executive’s acceptance of the Company’s offer to issue the
Shares to Executive within the time period and in the manner provided in Section 2 of this Agreement, Executive shall deposit or
cause to be deposited with the Company, or such person or entity as the Company may designate in writing, the certificate or
certificates (as the case may be) representing all of the Unvested Shares, together with a stock assignment separate from certificate
duly executed by Executive, in blank, which shall be held by the Company or such designated person, as the case may be, until such
Unvested Shares have become Vested Shares.
(b) Dividends and Distributions. If the Company pays any dividends or distributions, whether in
cash, stock or other property, to all of the holders of the Company’s outstanding shares at a time when any of the Shares are Unvested
Shares, the dividends or distributions that would otherwise be payable to Executive on or in respect of such Unvested Shares shall not
be distributed to Executive, but shall be deposited in a segregated bank account maintained on the Company’s behalf by the transfer
agent for the Company’s common stock or a bank or other depository institution as may be designated by the Company (the “Deposit
Account”). Upon the vesting of any Unvested Shares, any dividends or distributions that had previously been declared on such Shares
and deposited in the Deposit Account shall be distributed to Executive or, if any such Shares had been transferred to a Permitted
Assign, to that Assign in accordance with its interests in such Shares. If, on the other hand, any of such Unvested Shares are
reacquired by the Company pursuant to Section 5.1 hereof, then, notwithstanding anything to the contrary that may be contained in
this Agreement, the dividends and distributions declared on those reacquired Unvested Shares shall revert and be returned to the
Company and neither the Executive nor any of his Permitted Assigns shall have any rights therein or claims thereto.
hereof, Executive (or any of his Permitted Assigns, as the case may be) shall be entitled to vote such Unvested Shares to the same
extent as if they were Vested Shares.
(c) Voting Rights. Unless and until any Unvested Shares are reacquired pursuant to Section 5.1
5.6 Assignment by the Company. The Company may assign its Reacquisition Right, in whole or in part,
without the consent of the Executive to any person or entity (a “Company Assignee”). In the event of any such assignment, the
Company shall give written notice thereof to Executive, provided that the failure to give such notice shall not invalidate any such
assignment or preclude the exercise of the Company’s Reacquisition Rights or any other rights of the Company hereunder by any such
Company Assignee.
6. Restrictions on Transferability of the Unvested Shares. Unvested Shares may not be sold, transferred, pledged or
hypothecated, or otherwise disposed of or encumbered, except that Unvested Shares may be transferred to Executive’s estate or heirs
upon his death in accordance with the laws of descent and distribution or to his former spouse pursuant to a qualified domestic
relations order issued by a court in settlement of marital property rights (each such person to whom any of the Unvested Shares are
transferred, a “Permitted Assign”). Any Unvested Shares that are transferred to a Permitted Assign as provided in this Section 6, shall
remain subject to all of the terms, conditions and restrictions of
7
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
this Agreement, including the Company’s Reacquisition Rights under Section 5, and any Permitted Assign shall, as a condition
precedent to the effectiveness of any such transfer of any of the Unvested Shares, execute and deliver to the Company an instrument,
in a form reasonably acceptable to the Company, by which such Permitted Assign shall agree to comply with, and which shall provide
that the Unvested Shares being assigned or transferred to the Permitted Assign shall remain subject to, all of the terms, restrictions and
conditions, of this Agreement. If the foregoing condition is not satisfied, the purported transfer to such Permitted Assign shall be null
and void ab initio and of no force or effect, and the Company shall not be required to recognize such assignment or transfer. Any
stock certificates evidencing any Unvested Shares to be reissued in the name of any Permitted Assign shall bear a restrictive legend
substantially in the form of Exhibit B hereto for so long as such Shares remain Unvested Shares and, upon the issuance of such
Unvested Shares such Permitted Assign shall deposit or caused to be deposited each such stock certificate, together with a stock
assignment separate from certificate duly executed, in blank, by such Permitted Assign.
7. Issuance of Certificates upon Vesting of Shares. If any of the Unvested Shares have become Vested Shares, then, as
soon as practicable thereafter, the Company shall issue or cause to be issued to Executive or his Permitted Assigns (if any) one or
more stock certificates, in the name of the Executive or such Permitted Assigns (as the case may be), evidencing his or such Permitted
Assigns’ ownership of those Vested Shares, free of the restrictive legend set forth in Exhibit B hereto; provided, however, that if
Executive or any such Permitted Assign is a director or executive officer of, or owns beneficially, more than 10% of the Company’s
outstanding shares of common stock, at the Company’s election that certificate may bear a legend to the effect that any sale, transfer,
pledge or other disposition of any of such Shares may be made only pursuant to a registration statement that has been filed with and
declared effective by the Securities Exchange Commission under, or an exemption from the registration provisions of, the Securities
Act of 1933, as amended, and in compliance with any applicable state securities laws.
8. Adjustments upon Changes in Capital Structure. In the event that the outstanding shares of common stock of the
Company are hereafter increased or decreased or changed into or exchanged for a different number or kind of shares or other
securities of the Company by reason of a recapitalization, stock split, combination of shares, reclassification, stock dividend, or other
change in the capital structure of the Company, then Executive or his Permitted Assigns, if any, as the case may be, shall be entitled to
exchange, for the stock certificate(s) evidencing the then Unvested Shares, new or additional or different shares of stock or securities,
in order to preserve, as nearly as practical, but not to increase, the benefits of Executive or such Permitted Assigns under this
Agreement, in accordance with the provisions of Section 11.1 of the Plan. Such new, additional or different shares shall be deemed
“Unvested Shares” for purposes of this Agreement and subject to all of the terms and conditions hereof, including the Company’s
Reacquisition Rights under Section 5 hereof.
9. Limitation of Company’s Liability for Nonissuance; Nonpermitted Transfers.
9.1 The Company agrees to use its reasonable best efforts to obtain from any applicable regulatory agency
such authority or approval as may be required in order to issue and sell the Shares to Executive pursuant to this Agreement. The
inability of the Company to obtain, from any such regulatory agency, authority or approval deemed by the Company’s counsel to be
necessary for the lawful issuance and sale of the Shares hereunder and under the Plan shall relieve the Company of any liability in
respect of the nonissuance or sale of such Shares as to which such requisite authority or approval has not been obtained.
8
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
9.2 The Company shall not be required to: (i) transfer on its books any Shares of the Company which shall
have been sold or transferred in violation of any of the provisions set forth in this Agreement, or (ii) treat as owner of such Shares or
to accord the right to vote or to pay dividends or other distributions to any transferee to whom such Shares shall have been so
transferred.
10. Notices. Any notice, demand or request required or permitted to be given under this Agreement shall be in writing
and shall be deemed given when delivered personally or three (3) days after being deposited in the United States mail, as certified or
registered mail, with postage prepaid, (or by such other method as the Administrator may from time to time deem appropriate), and
addressed, if to the Company, at its principal place of business, Attention: the Chief Financial Officer, and if to the Executive, at his
or her most recent address as shown in the employment or stock records of the Company.
11. Binding Obligations. All covenants and agreements herein contained by or on behalf of any of the parties hereto
shall bind and inure to the benefit of the parties hereto and their successors and, in the case of the Company, any Company Assignees
and, in the case of Executive, any of his Permitted Assigns.
12. Amendments and Waivers. This Agreement may not be amended, discharged or terminated other than by written
agreement executed by the parties. No waiver by either party of any of its rights or the obligations of the other party under this
Agreement shall be effective unless such waiver is set forth in a writing executed and delivered by the party purported to have granted
such waiver. No such written waiver by a party shall constitute (i) a waiver of the same rights or obligations in any other instance or
(ii) any of the other rights of such party or any of the other obligations of the other party under this Agreement unless the written
waiver expressly provides otherwise.
13. Assignment. Executive shall have no right, without the prior written consent of the Company, to (i) sell, assign,
mortgage, pledge, grant options with respect to or otherwise transfer any interest or right created by or under this Agreement, or
(ii) delegate his duties or obligations under this Agreement, except as otherwise permitted under and to the extent set forth in Section 6
hereof.
14. Severability. Should any provision or portion of this Agreement be held to be unenforceable or invalid for any
reason, the remaining provisions and portions of this Agreement shall be unaffected by such holding and shall remain in full force and
effect.
15. Counterparts. This Agreement may be executed in one or more counterparts, and each of such executed
counterparts, and any photocopies or facsimile copies thereof, shall constitute an original of this Agreement, but all of which, when
taken together, shall constitute one and the same instrument.
16. Applicable Law and Equitable Remedies. This Agreement shall be construed in accordance with the laws of the
State of California without reference to choice of law principles, as to all matters, including, but not limited to, matters of validity,
construction, effect or performance. In the event of a breach or threatened breach by Executive, or any of his Permitted Assigns, of
any of their obligations under this Agreement, including the obligations set forth in Sections 5 and 6 of this Agreement, then, without
limiting any other rights or remedies that the Company may have at law or in equity or otherwise, the Company shall be entitled to
obtain temporary, preliminary and permanent injunctive relief to cause Executive or his Permitted Assigns (as the case may be) to halt
any such breach or to prevent any threatened breach from taking place, and an order of specific performance of the obligation or
obligations being breached or threatened to be breached, without the necessity of having to post a bond or other security as a condition
to the issuance or maintenance of any such equitable relief.
9
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
17. No Agreement to Employ. The right of the Company or any of its Affiliates to terminate, at will, the Executive’s
employment with the Company or any such Affiliates at any time (whether by dismissal, discharge or otherwise), with or without
Cause, is specifically reserved, subject to the provisions of Section 4.3 and the applicable terms of any other written employment or
other agreements to which the Company and Executive may be a party.
18. “Market Stand-Off” Agreement. Executive agrees, and each of his Permitted Assigns, if any, will agree, in
connection with any registration of the Company’s securities that, upon the request of the Company or the underwriters managing any
public offering of the Company’s securities, Executive and any such Permitted Assign will not sell or otherwise dispose, in whole or
in part, of any of the Shares, whether Vested or Unvested, without the prior written consent of the Company or such underwriters, as
the case may be, for a period of time (not to exceed 180 days) from the effective date of such registration as the Company or the
underwriters may specify.
19. Entire Agreement. This Agreement, together with the Exhibits hereto and the applicable provisions of the Plan,
constitute the entire agreement and understanding of the Company and Executive with respect to, and supersede all other
contemporaneous or prior agreements and understandings, oral or written, between the Company and Executive relating to, the subject
matter of this Agreement. In the event of any conflict between any of the terms or provisions of this Agreement and any terms or
provisions of the Plan, then, in such event, the terms of the Plan shall govern over the conflicting terms of this Agreement.
20. Tax Elections. Executive understands that Executive (and not the Company) shall be responsible for the
Executive’s own tax liability that may arise as a result of the acquisition or vesting of the Shares. Executive acknowledges and
represents and warrants that (i) the Company is not providing and has not provided any tax advice to Executive with respect
to the acquisition by Executive of the Shares or any tax elections available to him in respect thereof and he is relying solely on
his own personal tax advisors for such advice; (ii) Executive has considered the advisability of all tax elections in connection
with the acquisition of the Shares, including the making of an election under Section 83(b) under the Internal Revenue Code of
1986, as amended (“Code”); and (iii) the Company has no responsibility for the making of such Section 83(b) election or any
other tax elections, whether under federal or state laws or regulations. In the event Executive determines to make a Section
83(b) election, Executive agrees to timely provide a copy of the election to the Company as required under the Code.
21. Attorneys’ Fees. If any party shall bring an action in law or equity against the other to enforce or interpret any of the
terms, covenants and provisions of this Agreement, the prevailing party in such action shall be entitled to recover reasonable
attorneys’ fees and costs from the other party.
[Signature Page Follows]
10
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
THE COMPANY:
COLLECTORS UNIVERSE, INC.
By: /s/ JOSEPH J. WALLACE
Name: Joseph J. Wallace
Title: Chief Financial Officer
EXECUTIVE:
/s/ MICHAEL J. MCCONNELL
Michael J. McConnell
(Print Name)
Address:
11
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
EXHIBIT A
DEFINITIONS OF GOOD REASON ACTION AND MISCONDUCT
For purposes of this Agreement the following terms shall have the respective meanings set forth below:
1. The term “Good Reason Action” shall mean the occurrence of any of the following:
(a) Reduction or Adverse Change of Authority and Responsibilities. The Employer Entity (whether that is the
Company or any Affiliate thereof) materially reduces Executive's authority, duties or responsibilities with the Employer Entity, unless
such reduction is made as a consequence of (i) any acts or omissions of Executive which would entitle Employer to terminate
Executive’s employment for Misconduct (as defined below in this Exhibit A), or (ii) Executive’s permanent disability, as defined in
Section 22(e)(3) of the Code);
(b) Material Reduction in Salary. The Company or Employer Entity materially reduces Executive's base
salary or base compensation below the amount thereof as in effect on the day prior to the such action, unless such reduction is made
(i) as part of an across-the-board cost-cutting measure that is applied equally or proportionately to all senior executives of the
Employer Entity, rather than discriminatorily against Executive, or (ii) as a result of any acts or omissions of Executive which would
entitle Employer to terminate Executive’s employment for Misconduct, or (iii) by and at the election of the Employer as a result of
Executive’s disability;
(c) Relocation. Company or Employer Entity relocates Executive’s principal place of employment to an
office (other than the headquarters offices of the Company or the Employer Entity) located more than thirty (30) miles from
Executive’s then principal place of employment (other than for temporary assignments or required travel in connection with the
performance by Executive of his duties for the Employer Entity); or
(d) Breach of Material Employment Obligations. The Company commits a breach of any of its material
obligations to Executive under this Agreement or there is a breach by the Company or the Employer Entity of any of such party ‘s
material obligations under any employment agreement it may have with Executive as of the date of this Agreement or at any time
thereafter, which breach continues uncured for a period of thirty (30) days following written notice thereof from Executive.
PROVIDED, HOWEVER, that, notwithstanding anything to the contrary that may be contained above in this Section 1 or
elsewhere in this Agreement the following conditions must be satisfied in order for such termination of employment to constitute a
Termination for Good Reason and for the Unvested Shares to become Vested Shares by reason of the taking or occurrence of any of
the Good Reason Actions set forth above: (i) Executive shall not have consented to the taking of any such Good Reason Action by the
Company or the Employer Entity (as the case may be), (ii) within ten (10) calendar days immediately following the date that
Executive is first notified in writing by the Company or such other Employer Entity (as the case may be) of the taking of such Good
Reason Action, Executive shall have given Employer a Good Reason Termination Notice (as hereinafter defined), (iii) neither the
Company nor the Employer Entity (if other than the Company) shall have failed to rescind, or cure the adverse effects on Executive
of, such Good Reason Action within a period of thirty (30) consecutive calendar days following the Company’s receipt of such Good
Reason Termination Notice (the “Cure Period”), (iv) Executive shall have, in fact, terminated his employment with the Company or
the Employer Entity, as the case may be, and ceased altogether his Continuous Service with the Company and its Affiliates within ten
(10) calendar days after the expiration of the Cure Period, and (v) neither the Company or the
12
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
Employer Entity is required to take any of the above-described Good Reason Actions in order to comply with any applicable laws or
government regulations or any order, ruling, instruction or determination of any court or other tribunal or any government agency
having jurisdiction over the Company or any of its Affiliates.
2. The term “Good Reason Termination Notice” shall mean a written notice from Executive to the Company stating that he is
terminating his Employment with the Employer Entity for Good Reason and also ceasing his Continuous Service with the Company
and any of its Affiliates, and describing in reasonable detail the Good Reason Action (as defined above) that has led Executive to
terminate his employment with the Company or other Employer Entity (as the case may be) for Good Reason.
3. The term “Misconduct” shall mean:
adversely affects the business of the Company or any of its Affiliates;
(a) The commission of any act of fraud, embezzlement or dishonesty by Executive which materially and
Company or any of its Affiliates;
(b) Any unauthorized use or disclosure by Executive of confidential information or trade secrets of the
(c) The voluntary resignation by Executive of his employment with the Company and any Affiliates of the
Company or the refusal by Executive to perform any material duties required of him if such duties are consistent with duties
customary for the position that he holds with the Company or any Affiliate thereof;
(d) Any material act or omission by Executive involving gross negligence or intentional misconduct in the
performance of Executive’s duties to, or material deviation from any of the policies or directives of, the Company or the acquiring or
successor entity (or parent or any subsidiary thereof) that adversely affects the business or public reputation of the Company or any of
its Affiliates;
loyalty to the Company or any of its Affiliates; or
(e) Conduct on the part of Executive which constitutes the breach of any statutory or common law duty of
(f) Any illegal act by Executive which materially and adversely affects the business or business reputation of
the Company or any of its Affiliates or any felony committed by Executive, as evidenced by his conviction thereof or a plea of nolo
contendere by Executive.
its Affiliates may terminate Executive’s employment or his Continuous Service.
The definition of Misconduct shall not limit the grounds on which or the reasons for which the Company or any of
13
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
EXHIBIT B
FORM OF RESTRICTIVE LEGEND
THE TRANSFERABILITY OF THE SHARES REPRESENTED BY THIS STOCK CERTIFICATE IS RESTRICTED
UNDER, AND SUCH SHARES MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF,
EITHER IN WHOLE OR IN PART, EXCEPT AS AND TO THE LIMITED EXTENT PERMITTED BY, THAT CERTAIN
RESTRICTED STOCK AGREEMENT, DATED AS OF JULY 31, 2009, BETWEEN THE ISSUER OF THE SHARES
AND THE HOLDER THEREOF, AND ANY ATTEMPTED SALE, TRANSFER, PLEDGE OR OTHER DISPOSITION
OF ANY OF THE SHARES NOT IN STRICT COMPLIANCE WITH THE PROVISIONS OF THAT AGREEMENT
SHALL CONSTITUTE A BREACH OF THAT AGREEMENT AND SHALL BE VOID AND INEFFECTIVE TO
CONVEY ANY RIGHT, TITLE OR INTEREST, OF ANY KIND OR NATURE, IN OR TO ANY OF THE SHARES.
14
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
CONSENT AND RATIFICATION OF SPOUSE
The undersigned is the spouse of Michael J. McConnell, who is a party to the attached Restricted Stock Agreement (the
“Agreement”), dated as of July 31, 2009. I hereby (i) consent to the execution and delivery of that Agreement by my spouse; and
(ii) ratify, approve, confirm and adopt, and agree to be bound by each and every term and condition of, that Agreement, as if I had
been a signatory to the Agreement, with respect to the Shares (as defined in the Agreement) which are the subject of said Agreement
and in which I have or may have an interest, including but not limited to, any community property interest therein. I understand that
that the Agreement provides that the Shares are subject to possible forfeiture or reacquisition by the Company, without the payment of
any consideration to my spouse or me, and I hereby also consent to the application of those forfeiture and reacquisition provisions to
any interest, including, but not limited to, any community property interest, that I may have at any time in the Shares.
I also acknowledge that I have been advised to obtain independent counsel to represent my interests with respect to this
Agreement and the Shares but that I have declined to do so and I hereby expressly waive my right to such independent counsel.
Date: August __, 2009
/s/ INGRID MCCONNELL
(Signature)
Ingrid McConnell
(Print Name)
Michael J. McConnell
(Print Name of Spouse that is a party to
this Agreement)
15
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
Exhibit 10.45
COLLECTORS UNIVERSE, INC.
RESTRICTED STOCK AGREEMENT
THIS RESTRICTED STOCK AGREEMENT (the “Agreement”) is entered into as of July 31, 2009 by and between DAVID G.
HALL (hereinafter referred to as “Executive”), and COLLECTORS UNIVERSE, INC., a Delaware corporation (hereinafter referred
to as the “Company”), pursuant to the Company’s 2006 Equity Incentive Plan (the “Plan”).
R E C I T A L S:
A. Executive is the President and a director of the Company and in those capacities has rendered and is continuing to
render services to, for and on behalf of the Company.
B. The Compensation Committee of the Company’s Board of Directors (the “Committee”) (i) has adopted the Fiscal
2010 Management Incentive Plan (the “Management Incentive Plan”), which provides for awards of restricted shares of the
Company’s common stock, under the Company’s 2006 Equity Incentive Plan (the “Plan”), to be made to the three most senior
executives of the Company and (ii) by action of its members, has granted to Executive, effective as of July 31, 2009, as award of
101,034 shares of the Company’s common stock, on the terms and subject to the conditions and restrictions set forth hereinafter, to
provide incentives for Executive to remain in the Company’s service and to devote his utmost efforts to the achievement by the
Company, of the Performance Goal (set forth hereinafter), all as more specifically provided in this Agreement.
C. Executive was notified, on July 31, 2009, of the aforementioned award of such shares to him by the Committee.
A G R E E M E N T:
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth, and for other good and valuable consideration,
the adequacy and receipt of which is hereby acknowledged, the parties agree as follows:
1. Certain Definitions and Rules of Construction.
following respective meanings:
1.1 Definitions. For purposes of this Agreement, the terms set forth below in this Section 1 shall have the
(a) The term “Affiliate” when used with reference to the Company shall mean any corporation, limited
liability company, general partnership, joint venture or limited partnership or other entity that controls or is controlled by, or is under
common control with the Company. Accordingly, an Affiliate of the Company shall include any such entity (i) that owns voting
shares or other voting securities of the Company or any other Affiliate thereof that entitle it to vote in the election of, and enable it to
elect, either directly or indirectly, at least a majority of the Company’s directors (a “Parent”) and (ii) any such entity with respect to
which the Company is a general partner or owns shares or other securities that entitle it to vote in the election of, and to elect, either
directly or through one or more other Affiliates, at least a majority of the directors or persons holding similar positions with such
entity (a “Subsidiary”).
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
(b) The term “Code” means the Internal Revenue Code of 1986, as amended.
(c) The term “Company” shall mean Collectors Universe, Inc., a Delaware corporation and any Successor
thereto.
(d) The term “Consultant” shall mean any natural person who, in a capacity other than as an employee or
Director of the Company, renders bona fide advisory or consulting services (whether on a full time or part time basis) to the Company
or any Affiliate, pursuant to a contract entered into directly with the Company or any such Affiliate, provided, however, that the
services so rendered are not in connection with the offer or sale of securities in a capital-raising transaction and do not directly or
indirectly promote or maintain a market for the Company’s securities.
(e) The term “Continuous Service with the Company” shall mean (i) employment by an Employer Entity
(which shall be either the Company or an Affiliate thereof), (ii) service as a member of the Board of Directors of the Company or any
Parent thereof, or (iii) service in the capacity of a Consultant to the Company or any Affiliate thereof, which service is uninterrupted
except by reason of (x) vacations, (y) illnesses (other than permanent disability, as defined in Section 22(e)(3) of the Code), or
(z) leaves of absence that have been approved in writing by the Company (each, an “Excused Absence”). For purposes of this
Agreement, a cessation or termination of Executive’s Continuous Service with the Company shall be deemed to have occurred if
Executive ceases to provide services to the Company and its Affiliates, in any of the capacities set forth above in this Paragraph 1.1(e),
for any reason other than an Excused Absence. Notwithstanding the foregoing, a termination or cessation of Continuous Service of
Executive shall not be deemed to have occurred if, within not more than ten (10) days following the termination or cessation of
Executive’s service with the Company or any Affiliate thereof, in any one of the capacities set forth above, Executive continues or
commences the provision of service to the Company or any Affiliate in any of the other capacities specified above.
at any time during the term of this Agreement.
(f) The term “Employer Entity” means the Company or any Affiliate thereof that employs the Executive
2010.
(g) The term “Fiscal 2010” shall mean the year that commenced on July 1, 2009 and will end on June 30,
(h) The term “Fiscal 2010 COI” means the consolidated continuing operating income of the Company and
its consolidated subsidiaries for Fiscal 2010, determined in accordance with the same generally accepted accounting principles that are
applied by the Company’s independent registered public accountants in their audit of the consolidated financial statements of the
Company and its Subsidiaries for Fiscal 2010 (the “2010 Financial Statements”), except that there shall be excluded from the
computation of such consolidated operating income (i) all non-cash stock-based compensation costs, and (ii) all non-cash impairment
charges, if any, recognized in the Company’s 2010 Financial Statements.
(i) The term “Plan Performance Goal” means Fiscal 2010 COI in an amount at least equal to ninety
percent (90%) of the Fiscal 2010 COI that is set forth in the Company’s Annual Operating Plan for Fiscal 2010 as approved by the
Company’s Board of Directors at its meeting on May 21, 2009. Notwithstanding the foregoing, however, at any time prior to the end
of Fiscal 2010, the Compensation Committee may adjust or change the Plan Performance Goal to reflect the occurrence of (i) any
extraordinary event, (ii) any material corporate transactions, (iii) any material changes in corporate capitalization, accounting rules or
principles or in the Company’s methods of accounting, (iv) any material changes in applicable law, or (v) any other material change or
event of similar nature (each, an “Extraordinary Event”), but only if any such Extraordinary Event was not reasonably
2
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
foreseeable at the time the Plan Performance Goal then in effect under this 2010 Incentive Plan had been established and would, in the
sole opinion of the Committee (x) make it unlikely that Plan Performance Goal will be achieved or (y) make it likely that the Plan
Performance Goal would be achieved solely by reason of occurrence of such Extraordinary Event. Notwithstanding the foregoing,
however, the occurrence of changes in the competitive environment or changes in economic or market conditions in the Company’s
markets, whether or not expected or reasonably foreseeable, shall not by themselves constitute Extraordinary Events that may be the
basis of a change in the Plan Performance Goal.
under applicable federal or state securities laws.
(j) The term “Securities Law Restrictions” shall mean restrictions on the transferability of the Shares
(k) The term “Successor” mean any entity that (i) is the surviving entity in a merger or consolidation with
or other statutory reorganization of the Company in which the separate existence of the Company ceases, whether or not such merger,
consolidation or reorganization results in a Change of Control of the Company or (ii) becomes the Parent of the Company by reason of
its direct or indirect acquisition of voting securities of the Company representing the power to vote, directly or indirectly, in the
election of directors of the Company and to elect at least a majority thereof, or (iii) acquires all or substantially all of the assets of the
Company (whether or not such transaction constitutes a Change of Control of the Company).
with his Employer Entity due to the taking of a Good Reason Action (as defined in Exhibit A hereto), provided such termination
meets the conditions expressly set forth in Exhibit A.
(l) The term “Termination for Good Reason” shall mean a termination by Executive of his employment
(m) The term “Termination Without Cause by the Company” shall mean a termination, by the Company
or Executive’s Employer Entity (if other than the Company), of Executive’s employment for any reason other than (i) the death or
disability of Executive or (ii) the Misconduct of Executive (as defined in Exhibit A hereto), provided that Executive does not continue
in the service of the Company or any of its Affiliates thereafter).
the Company’s Reacquisition Rights under Section 5 of this Agreement.
(n) The term “Unvested Shares” shall mean those of the Shares issued hereunder that are or remain subject
subject to the Company’s Reacquisition Rights under Section 5 of this Agreement.
(o) The term “Vested Shares” shall mean those of the Shares issued pursuant hereto that have ceased to be
satisfied for any or all of the Unvested Shares to become Vested Shares.
(p) The term “Vesting Conditions” shall mean the conditions set forth in Section 4 hereof that must be
not defined in Section 1.1 above shall have the respective meanings given to such terms elsewhere in this Agreement or in the Plan.
1.2 Definitions of Certain Other Terms. Other terms used in this Agreement with initial capital letters that are
1.3 Rules of Construction. The provisions of this Agreement will not be construed against a party by reason of
the fact that such party or its counsel was the principal draftsman of this Agreement or such provisions. Unless the context otherwise
requires: (i) words importing the singular include the plural and vice versa; (ii) words importing gender include all genders; (iii) the
terms “include” and “including” shall mean “include without limitation” or “including but not limited to” and (iii) unless the context
clearly indicates otherwise, the terms “herein,” “hereof,” “hereto,” “hereinafter” and “hereunder” and any similar terms shall refer to
this Agreement as a whole and not to the section, subsection, paragraph or clause where such term appears.
3
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
1.4 Headings. The Section, subsection and paragraph and any other headings in this Agreement have been
inserted for convenience of reference only and shall not affect the construction or interpretation or the application of any of the terms
or provisions of this Agreement.
2. Issuance of Shares. The Company hereby irrevocably offers to issue to Executive an aggregate of one hundred and
one thousand thirty-four (101,034) shares of its common stock (the “Shares”), on the terms and subject to the conditions and the
restrictions and the Company’s Reacquisition Rights set forth herein. Executive’s execution and delivery to the Company of this
Agreement, without condition or reservation of any kind whatsoever, together with the Spousal Consent in the form accompanying
this Agreement, duly executed by Executive’s Spouse, , within ten (10) business days of July 31, 2009, the date as of which the
Company executed this Agreement, shall constitute Executive’s acceptance of this offer, on the terms and subject to such conditions,
restrictions and the Company Reacquisition Rights, and this Agreement shall thereupon represent a binding and enforceable
agreement of the parties.
3. Consideration. Executive acknowledges and agrees that he is not paying or providing any consideration (monetary
or other) to the Company for the issuance of the Shares to him pu rsuant to Section 2 above. Instead, the Company is entering into this
Agreement as an inducement to Executive to remain in the Company’s Continuous Service and to devote his utmost efforts to the
achievement of the Plan Performance Goal and the satisfaction of the other Vesting Conditions, which shall constitute good and
valuable consideration for the obligations of and the performance of this Agreement by the Company in accordance with and on the
terms and subject to the conditions set forth herein; provided, however, that it is further acknowledged and agreed by Executive that
the only consideration to be received by the Company for or in respect of the vesting of any of the Shares under Section 4 and the
termination of its Reacquisition Rights under Section 5 hereof with respect to any Unvested Shares shall be the satisfaction of the
Vesting Conditions.
4. Vesting of Shares. Subject to the following terms and satisfaction of the Vesting Conditions set forth below in this
Section 4, the Shares shall vest (that is, become Vested Shares) in four (4) annual installments, the first three (3) of which shall each
be in the amount of 25,258 of the Shares, with the fourth and final installment in the amount of 25,260 shares, as follows:
4.1 Time-Vested Shares. If and only if no cessation of Executive’s Continuous Service (as defined above) has
occurred prior to July 31, 2010, then, on of that date, the initial installment of 25,258 of the Shares shall become Vested Shares and
shall, therefore, cease to be subject to the Company’s Reacquisition Right and the other restrictions contained in this Agreement, other
than any applicable Securities Law Restrictions.
Company has achieved the Plan Performance Goal and:
4.2 Performance-Vested Shares. If a determination is made by the Administrator (as defined in the Plan) that
(a) the Executive has been in the Continuous Service of the Company or any other Employer Entity
between the date hereof and July 31, 2010, inclusive, then, on the date such determination is made, or July 31, 2010 (whichever is
late), the second installment of 25,258 of the Shares shall become Vested Shares and shall thereupon cease to be subject to the
Company’s Reacquisition Right and the other restrictions contained in this Agreement, other than any applicable Securities Law
Restrictions;
4
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
(b) the Executive has remained in the Continuous Service of the Company or any other Employer Entity
between the date hereof and June 30, 2011, inclusive, the third installment of 25,258 of the Shares shall, on June 30, 2011, become
Vested Shares and shall thereupon cease to be subject to the Reacquisition Right of the Company and the other restrictions contained
in this Agreement, other than any applicable Securities Law Restrictions;
(c) the Executive has remained in the Continuous Service of the Company or any other Employer Entity
between the date hereof and June 30, 2012, inclusive, then, the fourth and final installment of 25,260 of the Shares shall, on June 30,
2012, become Vested Shares and shall thereupon cease to be subject to the Reacquisition Right of the Company and the other
restrictions contained in this Agreement, other than any applicable Securities Law Restrictions.
4.3 Effect of a Termination of Executive’s Employment Without Cause or for Good Reason. Notwithstanding
anything to the contrary that may be contained elsewhere in this Agreement, if there occurs a Termination Without Cause or a
Termination for Good Reason of Executive’s employment with the Company or any Affiliate thereof at any time that any of the
Shares are Unvested Shares, and Executive does not continue in the Continuous Service of the Company or any of its Affiliates
thereafter, then such Unvested Shares shall thereupon become Vested Shares without the necessity of any action by the Company or
Executive.
4.4 Effect of Change of Control. If a Change of Control (as defined in the Plan) occurs, while any of the
Shares continue to be Unvested Shares, then the applicable provisions of Section 11 of the Plan shall govern the vesting of any
Unvested Shares by reason of such Change of Control.
5. Reacquisition and Reconveyance of Unvested Shares upon a Termination of Continuous Service.
Agreement, the Company shall have the right to reacquire some or all of the Unvested Shares (the “Reacquisition Right”), as follows:
5.1 Reacquisition Rights. Notwithstanding anything to the contrary that may be contained elsewhere in this
(a) Termination of Continuous Service Prior to July 31, 2010. The Company shall have the right (but not
the obligation) to exercise its Reacquisition Right to reacquire all 101,034 Unvested Shares or such lesser number thereof as the
Administrator deems in its sole and absolute discretion to be appropriate, in the event that there is a cessation or termination of
Executive’s Continuous Service (other than by reason of a Termination Without Cause or a Termination for Good Reason) prior to
July 31, 2010.
(b) Failure of Plan Performance Goal. If Executive has remained in the Continuous Service of the
Company through July 31, 2010, but it is determined by the Administrator that the Company has failed to achieve the Plan
Performance Goal, then, the Company shall become entitled to exercise its Reacquisition Rights to reacquire all of the then remaining
75,776 Unvested Shares or such lesser number thereof as the Administrator deems in its sole and absolute discretion to be appropriate.
determined that the Performance Goal has been achieved, but:
(c) Cessation of Continuous Service After Achievement of Performance Goal. If the Administrator has
5
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
2011 (other than by reason of a Termination Without Cause or a Termination for Good Reason), the Company shall become entitled to
exercise its Reacquisition Right to acquire all of the then remaining 50,518 Unvested Shares or such lesser number thereof as the
Administrator deems in its sole and absolute discretion to be appropriate; or
(i) Executive ceases to remain in the Company’s Continuous Service through at least June 30,
than by reason of a Termination Without Cause or a Termination for Good Reason), the Company shall become entitled to exercise its
Reacquisition Right to acquire all of the then remaining 25,260 Unvested Shares or such lesser number thereof as the Administrator
deems in its sole and absolute discretion to be appropriate.
(ii) Executive’s Continuous Service ceases after June 30, 2011, but prior to July 1, 2012 (other
5.2 Consideration for Repurchase Right. It is expressly agreed by Executive that, since Executive is not
making any monetary payment or incurring any monetary obligation to the Company for the issuance of the Shares and satisfaction of
the Vesting Conditions is a condition precedent to and the only consideration for the vesting of the Shares, no purchase price or other
consideration shall be payable to Executive by the Company for the Company’s reacquisition of any of the Unvested Shares pursuant
to Section 5.1 hereof.
5.3 Procedure for Exercise of Reacquisition Right. For sixty (60) days after the effective date of the cessation
of Executive’s Continuous Service or the failure of the Plan Performance Goal, as the case may be, the Company may exercise the
Reacquisition Right by giving Executive, or any Permitted Assign (as defined in Section 6 below) of Executive who has acquired
ownership of any of the Unvested Shares, written notice (a “Reacquisition Notice”) of the number of the then Unvested Shares which
the Company is entitled, pursuant to Section 5.1, and has elected to reacquire (the “Reacquisition Shares”).
5.4 Settlement and Closing of Reacquisition. If the Company has elected to exercise its Reacquisition Right
as to part or all of the then Unvested Shares within the 60-day period described above, then, within ten (10) business days following
the date of the Reacquisition Notice, Executive or his Permitted Assigns (as the case may be) shall deliver or cause to be delivered to
the Company (i) the certificate(s) representing the Reacquisition Shares, together with a stock assignment separate from certificate,
duly endorsed in blank, in full reconveyance and transfer of such Reacquisition Shares to the Company, or any Company Assignee (as
the case may be) pursuant to this Section 5 and (ii) such other documents and instruments, including any agreements, that the
Company may request to evidence and effectuate (x) the reconveyance and transfer of the Reacquisition Shares to the Company or the
Company Assignee, if any, free and clear of any and all claims, liens, pledges, security interests, options, encumbrances and adverse
interests of any kind or nature whatsoever (collectively, “Liens and Encumbrances”) and (y) the termination and release by Executive
(and his Permitted Assigns, if any) of all rights, title and interest in and to and all claims of any nature whatsoever that Executive or
his Permitted Assigns may have or may assert with respect to such Reacquisition Shares. Such additional documents and instruments
may include written representations and warranties by the Executive and his Permitted Assigns (if any) that, upon such reconveyance
and transfer, the Company shall become the beneficial and record owner of such Unvested Shares, free and clear of any and all Liens
and Encumbrances and a release agreement, in such form as the Company may request, forever releasing the aforementioned rights
and claims. Executive, on his behalf and on behalf of any Permitted Assigns to whom he may transfer any of the Unvested Shares in
accordance with Section 6 below, hereby irrevocably appoints the Company as attorney-in-fact for Executive and his Permitted
Assigns (if any) and irrevocably grants to the Company a power of attorney, with full power of substitution and resubstitution, to take
such actions and to execute and deliver such documents and instruments, in the name and on behalf of Executive or any of
his Permitted Assigns, as the Company deems necessary, appropriate or desirable to effectuate such reconveyance and transfer of the
Reacquisition Shares to the
6
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
5.5 Deposit of Unvested Shares and Dividends; Voting Rights.
(a) Deposit of Unvested Shares. Upon Executive’s acceptance of the Company’s offer to issue the Shares
to Executive within the time period and in the manner provided in Section 2 of this Agreement, Executive shall deposit or cause to be
deposited with the Company, or such person or entity as the Company may designate in writing, the certificate or certificates (as the
case may be) representing all of the Unvested Shares, together with a stock assignment separate from certificate duly executed by
Executive, in blank, which shall be held by the Company or such designated person, as the case may be, until such Unvested Shares
have become Vested Shares.
(b) Dividends and Distributions. If the Company pays any dividends or distributions, whether in cash,
stock or other property, to all of the holders of the Company’s outstanding shares at a time when any of the Shares are Unvested
Shares, the dividends or distributions that would otherwise be payable to Executive on or in respect of such Unvested Shares shall not
be distributed to Executive, but shall be deposited in a segregated bank account maintained on the Company’s behalf by the transfer
agent for the Company’s common stock or a bank or other depository institution as may be designated by the Company (the “Deposit
Account”). Upon the vesting of any Unvested Shares, any dividends or distributions that had previously been declared on such Shares
and deposited in the Deposit Account shall be distributed to Executive or, if any such Shares had been transferred to a Permitted
Assign, to that Assign in accordance with its interests in such Shares. If, on the other hand, any of such Unvested Shares are
reacquired by the Company pursuant to Section 5.1 hereof, then, notwithstanding anything to the contrary that may be contained in
this Agreement, the dividends and distributions declared on those reacquired Unvested Shares shall revert and be returned to the
Company and neither the Executive nor any of his Permitted Assigns shall have any rights therein or claims thereto.
Executive (or any of his Permitted Assigns, as the case may be) shall be entitled to vote such Unvested Shares to the same extent as if
they were Vested Shares.
(c) Voting Rights. Unless and until any Unvested Shares are reacquired pursuant to Section 5.1 hereof,
5.6 Assignment by the Company. The Company may assign its Reacquisition Right, in whole or in part,
without the consent of the Executive to any person or entity (a “Company Assignee”). In the event of any such assignment, the
Company shall give written notice thereof to Executive, provided that the failure to give such notice shall not invalidate any such
assignment or preclude the exercise of the Company’s Reacquisition Rights or any other rights of the Company hereunder by any such
Company Assignee.
6. Restrictions on Transferability of the Unvested Shares. Unvested Shares may not be sold, transferred, pledged or
hypothecated, or otherwise disposed of or encumbered, except that Unvested Shares may be transferred to Executive’s estate or heirs
upon his death in accordance with the laws of descent and distribution or to his former spouse pursuant to a qualified domestic
relations order issued by
7
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
a court in settlement of marital property rights (each such person to whom any of the Unvested Shares are transferred, a “Permitted
Assign”). Any Unvested Shares that are transferred to a Permitted Assign as provided in this Section 6, shall remain subject to all of
the terms, conditions and restrictions of this Agreement, including the Company’s Reacquisition Rights under Section 5, and any
Permitted Assign shall, as a condition precedent to the effectiveness of any such transfer of any of the Unvested Shares, execute and
deliver to the Company an instrument, in a form reasonably acceptable to the Company, by which such Permitted Assign shall agree
to comply with, and which shall provide that the Unvested Shares being assigned or transferred to the Permitted Assign shall remain
subject to, all of the terms, restrictions and conditions of, this Agreement. If the foregoing condition is not satisfied, the purported
transfer to such Permitted Assign shall be null and void ab initio and of no force or effect, and the Company shall not be required to
recognize such assignment or transfer. Any stock certificates evidencing any Unvested Shares to be reissued in the name of any
Permitted Assign shall bear a restrictive legend substantially in the form of Exhibit B hereto for so long as such Shares remain
Unvested Shares and, upon the issuance of such Unvested Shares such Permitted Assign shall deposit or caused to be deposited each
such stock certificate, together with a stock assignment separate from certificate duly executed, in blank, by such Permitted Assign.
7. Issuance of Certificates upon Vesting of Shares. If any of the Unvested Shares have become Vested Shares, then,
as soon as practicable thereafter, the Company shall issue or cause to be issued to Executive or his Permitted Assigns (if any) one or
more stock certificates, in the name of the Executive or such Permitted Assigns (as the case may be), evidencing his or such Permitted
Assigns’ ownership of those Vested Shares, free of the restrictive legend set forth in Exhibit B hereto; provided, however, that if
Executive or any such Permitted Assign is a director or executive officer of, or owns beneficially, more than 10% of the Company’s
outstanding shares of common stock, at the Company’s election that certificate may bear a legend to the effect that any sale, transfer,
pledge or other disposition of any of such Shares may be made only pursuant to a registration statement that has been filed with and
declared effective by the Securities Exchange Commission under, or an exemption from the registration provisions of, the Securities
Act of 1933, as amended, and in compliance with any applicable state securities laws.
8. Adjustments upon Changes in Capital Structure. In the event that the outstanding shares of common stock of the
Company are hereafter increased or decreased or changed into or exchanged for a different number or kind of shares or other
securities of the Company by reason of a recapitalization, stock split, combination of shares, reclassification, stock dividend, or other
change in the capital structure of the Company, then Executive or his Permitted Assigns, if any, as the case may be, shall be entitled to
exchange, for the stock certificate(s) evidencing the then Unvested Shares, new or additional or different shares of stock or securities,
in order to preserve, as nearly as practical, but not to increase, the benefits of Executive or such Permitted Assigns under this
Agreement, in accordance with the provisions of Section 11.1 of the Plan. Such new, additional or different shares shall be deemed
“Unvested Shares” for purposes of this Agreement and subject to all of the terms and conditions hereof, including the Company’s
Reacquisition Rights under Section 5 hereof.
9. Limitation of Company’s Liability for Nonissuance; Nonpermitted Transfers.
9.1 The Company agrees to use its reasonable best efforts to obtain from any applicable regulatory agency
such authority or approval as may be required in order to issue and sell the Shares to Executive pursuant to this Agreement. The
inability of the Company to obtain, from any such regulatory agency, authority or approval deemed by the Company’s counsel to be
necessary for the lawful issuance and sale of the Shares hereunder and under the Plan shall relieve the Company of any liability in
respect of the nonissuance or sale of such Shares as to which such requisite authority or approval has not been obtained.
8
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
9.2 The Company shall not be required to: (i) transfer on its books any Shares of the Company which shall
have been sold or transferred in violation of any of the provisions set forth in this Agreement, or (ii) treat as owner of such Shares or
to accord the right to vote or to pay dividends or other distributions to any transferee to whom such Shares shall have been so
transferred.
10. Notices. Any notice, demand or request required or permitted to be given under this Agreement shall be in writing
and shall be deemed given when delivered personally or three (3) days after being deposited in the United States mail, as certified or
registered mail, with postage prepaid, (or by such other method as the Administrator may from time to time deem appropriate), and
addressed, if to the Company, at its principal place of business, Attention: the Chief Financial Officer, and if to the Executive, at his
or her most recent address as shown in the employment or stock records of the Company.
11. Binding Obligations. All covenants and agreements herein contained by or on behalf of any of the parties hereto
shall bind and inure to the benefit of the parties hereto and their successors and, in the case of the Company, any Company Assignees
and, in the case of Executive, any of his Permitted Assigns.
12. Amendments and Waivers. This Agreement may not be amended, discharged or terminated other than by written
agreement executed by the parties. No waiver by either party of any of its rights or the obligations of the other party under this
Agreement shall be effective unless such waiver is set forth in a writing executed and delivered by the party purported to have granted
such waiver. No such written waiver by a party shall constitute (i) a waiver of the same rights or obligations in any other instance or
(ii) any of the other rights of such party or any of the other obligations of the other party under this Agreement unless the written
waiver expressly provides otherwise.
13. Assignment. Executive shall have no right, without the prior written consent of the Company, to (i) sell, assign,
mortgage, pledge, grant options with respect to or otherwise transfer any interest or right created by or under this Agreement, or
(ii) delegate his duties or obligations under this Agreement, except as otherwise permitted under and to the extent set forth in Section 6
hereof.
14. Severability. Should any provision or portion of this Agreement be held to be unenforceable or invalid for any
reason, the remaining provisions and portions of this Agreement shall be unaffected by such holding and shall remain in full force and
effect.
15. Counterparts. This Agreement may be executed in one or more counterparts, and each of such executed
counterparts, and any photocopies or facsimile copies thereof, shall constitute an original of this Agreement, but all of which, when
taken together, shall constitute one and the same instrument.
16. Applicable Law and Equitable Remedies. This Agreement shall be construed in accordance with the laws of the
State of California without reference to choice of law principles, as to all matters, including, but not limited to, matters of validity,
construction, effect or performance. In the event of a breach or threatened breach by Executive, or any of his Permitted Assigns, of
any of their obligations under this Agreement, including the obligations set forth in Sections 5 and 6 of this Agreement, then, without
limiting any other rights or remedies that the Company may have at law or in equity or otherwise, the Company shall be entitled to
obtain temporary, preliminary and permanent injunctive relief to cause Executive or his Permitted Assigns (as the case may be) to halt
any such breach or to prevent any threatened breach from taking place, and an order of specific performance of the obligation or
obligations being breached or threatened to be breached, without the necessity of having to post a bond or other security as a condition
to the issuance or maintenance of any such equitable relief.
9
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
17. No Agreement to Employ. The right of the Company or any of its Affiliates to terminate, at will, the Executive’s
employment with the Company or any such Affiliates at any time (whether by dismissal, discharge or otherwise), with or without
Cause, is specifically reserved, subject to the provisions of Section 4.3 and the applicable terms of any other written employment or
other agreements to which the Company and Executive may be a party.
18. “Market Stand-Off” Agreement. Executive agrees, and each of his Permitted Assigns, if any, will agree, in
connection with any registration of the Company’s securities that, upon the request of the Company or the underwriters managing any
public offering of the Company’s securities, Executive and any such Permitted Assign will not sell or otherwise dispose, in whole or
in part, of any of the Shares, whether Vested or Unvested, without the prior written consent of the Company or such underwriters, as
the case may be, for a period of time (not to exceed 180 days) from the effective date of such registration as the Company or the
underwriters may specify.
19. Entire Agreement. This Agreement, together with the Exhibits hereto and the applicable provisions of the Plan,
constitute the entire agreement and understanding of the Company and Executive with respect to, and supersede all other
contemporaneous or prior agreements and understandings, oral or written, between the Company and Executive relating to, the subject
matter of this Agreement. In the event of any conflict between any of the terms or provisions of this Agreement and any terms or
provisions of the Plan, then, in such event, the terms of the Plan shall govern over the conflicting terms of this Agreement.
20. Tax Elections. Executive understands that Executive (and not the Company) shall be responsible for the
Executive’s own tax liability that may arise as a result of the acquisition or vesting of the Shares. Executive acknowledges and
represents and warrants that (i) the Company is not providing and has not provided any tax advice to Executive with respect
to the acquisition by Executive of the Shares or any tax elections available to him in respect thereof and he is relying solely on
his own personal tax advisors for such advice; (ii) Executive has considered the advisability of all tax elections in connection
with the acquisition of the Shares, including the making of an election under Section 83(b) under the Internal Revenue Code of
1986, as amended (“Code”); and (iii) the Company has no responsibility for the making of such Section 83(b) election or any
other tax elections, whether under federal or state laws or regulations. In the event Executive determines to make a Section
83(b) election, Executive agrees to timely provide a copy of the election to the Company as required under the Code.
21. Attorneys’ Fees. If any party shall bring an action in law or equity against the other to enforce or interpret any of
the terms, covenants and provisions of this Agreement, the prevailing party in such action shall be entitled to recover reasonable
attorneys’ fees and costs from the other party.
[Signature Page Follows]
10
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
THE COMPANY:
EXECUTIVE:
COLLECTORS UNIVERSE, INC.
By: /s/ JOSEPH J. WALLACE
Name: Joseph J. Wallace
Title: Chief Financial Officer
/s/ DAVID G. HALL
David G. Hall
(Print Name)
Address:
11
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
EXHIBIT A
DEFINITIONS OF GOOD REASON ACTION AND MISCONDUCT
For purposes of this Agreement the following terms shall have the respective meanings set forth below:
1. The term “Good Reason Action” shall mean the occurrence of any of the following:
(a) Reduction or Adverse Change of Authority and Responsibilities. The Employer Entity (whether that is the
Company or any Affiliate thereof) materially reduces Executive's authority, duties or responsibilities with the Employer Entity, unless
such reduction is made as a consequence of (i) any acts or omissions of Executive which would entitle Employer to terminate
Executive’s employment for Misconduct (as defined below in this Exhibit A), or (ii) Executive’s permanent disability, as defined in
Section 22(e)(3) of the Code);
(b) Material Reduction in Salary. The Company or Employer Entity materially reduces Executive's base
salary or base compensation below the amount thereof as in effect on the day prior to the such action, unless such reduction is made
(i) as part of an across-the-board cost-cutting measure that is applied equally or proportionately to all senior executives of the
Employer Entity, rather than discriminatorily against Executive, or (ii) as a result of any acts or omissions of Executive which would
entitle Employer to terminate Executive’s employment for Misconduct, or (iii) by and at the election of the Employer as a result of
Executive’s disability;
(c) Relocation. Company or Employer Entity relocates Executive’s principal place of employment to an
office (other than the headquarters offices of the Company or the Employer Entity) located more than thirty (30) miles from
Executive’s then principal place of employment (other than for temporary assignments or required travel in connection with the
performance by Executive of his duties for the Employer Entity); or
(d) Breach of Material Employment Obligations. The Company commits a breach of any of its material
obligations to Executive under this Agreement or there is a breach by the Company or the Employer Entity of any of such party ‘s
material obligations under any employment agreement it may have with Executive as of the date of this Agreement or at any time
thereafter, which breach continues uncured for a period of thirty (30) days following written notice thereof from Executive.
PROVIDED, HOWEVER, that, notwithstanding anything to the contrary that may be contained above in this Section 1 or
elsewhere in this Agreement the following conditions must be satisfied in order for such termination of employment to constitute a
Termination for Good Reason and for the Unvested Shares to become Vested Shares by reason of the taking or occurrence of any of
the Good Reason Actions set forth above: (i) Executive shall not have consented to the taking of any such Good Reason Action by the
Company or the Employer Entity (as the case may be), (ii) within ten (10) calendar days immediately following the date that
Executive is first notified in writing by the Company or such other Employer Entity (as the case may be) of the taking of such Good
Reason Action, Executive shall have given Employer a Good Reason Termination Notice (as hereinafter defined), (iii) neither the
Company nor the Employer Entity (if other than the Company) shall have failed to rescind, or cure the adverse effects on Executive
of, such Good Reason Action within a period of thirty (30) consecutive calendar days following the Company’s receipt of such Good
Reason Termination Notice (the “Cure Period”), (iv) Executive shall have, in fact, terminated his employment with the Company or
the Employer Entity, as the case may be, and ceased altogether his Continuous Service with the Company and its Affiliates within ten
(10) calendar days after the expiration of the Cure Period, and (v) neither the Company or the
12
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
Employer Entity is required to take any of the above-described Good Reason Actions in order to comply with any applicable laws or
government regulations or any order, ruling, instruction or determination of any court or other tribunal or any government agency
having jurisdiction over the Company or any of its Affiliates.
2. The term “Good Reason Termination Notice” shall mean a written notice from Executive to the Company stating
that he is terminating his Employment with the Employer Entity for Good Reason and also ceasing his Continuous Service with the
Company and any of its Affiliates to which he is then providing services, and describing in reasonable detail the Good Reason Action
(as defined above) that has led Executive to terminate his employment with the Company or other Employer Entity (as the case may
be) for Good Reason.
3. The term “Misconduct” shall mean:
adversely affects the business of the Company or any of its Affiliates;
(a) The commission of any act of fraud, embezzlement or dishonesty by Executive which materially and
Company or any of its Affiliates;
(b) Any unauthorized use or disclosure by Executive of confidential information or trade secrets of the
(c) The voluntary resignation by Executive of his employment with the Company and any Affiliates of the
Company or the refusal by Executive to perform any material duties required of him if such duties are consistent with duties
customary for the position that he holds with the Company or any Affiliate thereof;
(d) Any material act or omission by Executive involving gross negligence or intentional misconduct in the
performance of Executive’s duties to, or material deviation from any of the policies or directives of, the Company or the acquiring or
successor entity (or parent or any subsidiary thereof) that adversely affects the business or public reputation of the Company or any of
its Affiliates;
loyalty to the Company or any of its Affiliates; or
(e) Conduct on the part of Executive which constitutes the breach of any statutory or common law duty of
(f) Any illegal act by Executive which materially and adversely affects the business or business reputation of
the Company or any of its Affiliates or any felony committed by Executive, as evidenced by his conviction thereof or a plea of nolo
contendere by Executive.
its Affiliates may terminate Executive’s employment or his Continuous Service.
The definition of Misconduct shall not limit the grounds on which or the reasons for which the Company or any of
13
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
EXHIBIT B
FORM OF RESTRICTIVE LEGEND
THE TRANSFERABILITY OF THE SHARES REPRESENTED BY THIS STOCK CERTIFICATE IS RESTRICTED
UNDER, AND SUCH SHARES MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF,
EITHER IN WHOLE OR IN PART, EXCEPT AS AND TO THE LIMITED EXTENT PERMITTED BY, THAT CERTAIN
RESTRICTED STOCK AGREEMENT, DATED AS OF JULY 31, 2009, BETWEEN THE ISSUER OF THE SHARES
AND THE HOLDER THEREOF, AND ANY ATTEMPTED SALE, TRANSFER, PLEDGE OR OTHER DISPOSITION
OF ANY OF THE SHARES NOT IN STRICT COMPLIANCE WITH THE PROVISIONS OF THAT AGREEMENT
SHALL CONSTITUTE A BREACH OF THAT AGREEMENT AND SHALL BE VOID AND INEFFECTIVE TO
CONVEY ANY RIGHT, TITLE OR INTEREST, OF ANY KIND OR NATURE, IN OR TO ANY OF THE SHARES.
14
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
CONSENT AND RATIFICATION OF SPOUSE
The undersigned is the spouse of David G. Hall, who is a party to the attached Restricted Stock Agreement (the
“Agreement”), dated as of July 31, 2009. I hereby (i) consent to the execution and delivery of that Agreement by my spouse; and
(ii) ratify, approve, confirm and adopt, and agree to be bound by each and every term and condition of, that Agreement, as if I had
been a signatory to the Agreement, with respect to the Shares (as defined in the Agreement) which are the subject of said Agreement
and in which I have or may have an interest, including but not limited to, any community property interest therein. I understand that
that the Agreement provides that the Shares are subject to possible forfeiture or reacquisition by the Company, without the payment of
any consideration to my spouse or me, and I hereby also consent to the application of those forfeiture and reacquisition provisions to
any interest, including, but not limited to, any community property interest, that I may have at any time in the Shares.
I also acknowledge that I have been advised to obtain independent counsel to represent my interests with respect to this
Agreement and the Shares but that I have declined to do so and I hereby expressly waive my right to such independent counsel.
Date: August __, 2009
/s/ ELLEN DENISE HALL
(Signature)
Ellen Denise Hall
(Print Name)
David G. Hall
(Print Name of Spouse that is a party to this
Agreement)
15
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
Exhibit 10.46
COLLECTORS UNIVERSE, INC.
RESTRICTED STOCK AGREEMENT
THIS RESTRICTED STOCK AGREEMENT (the “Agreement”) is entered into as of July 31, 2009 by and between JOSEPH J.
WALLACE (hereinafter referred to as “Executive”), and COLLECTORS UNIVERSE, INC., a Delaware corporation (hereinafter
referred to as the “Company”), pursuant to the Company’s 2006 Equity Incentive Plan (the “Plan”).
A. Executive is the Chief Financial Officer of the Company and in that capacity has rendered and is continuing to
render services to, for and on behalf of the Company.
R E C I T A L S:
B. The Compensation Committee of the Company’s Board of Directors (the “Committee”) (i) has adopted the Fiscal
2010 Management Incentive Plan (the “Management Incentive Plan”), which provides for awards of restricted shares of the
Company’s common stock, under the Company’s 2006 Equity Incentive Plan (the “Plan”), to be made to the three most senior
executives of the Company, and (ii) by action of its members, has granted to Executive, effective as of July 31, 2009, an award of
50,517 shares of the Company’s common stock, on the terms and subject to the conditions and restrictions set forth hereinafter, to
provide incentives for Executive to remain in the Company’s service and to devote his utmost efforts to the achievement by the
Company of the Performance Goal (set forth hereinafter), all as more specifically provided in this Agreement
C. Executive was notified, on July 31, 2009, of the afore-mentioned award of such shares to him by the Committee.
A G R E E M E N T:
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth, and for other good and valuable consideration,
the adequacy and receipt of which is hereby acknowledged, the parties agree as follows:
1. Certain Definitions and Rules of Construction.
1.1 Definitions. For purposes of this Agreement, the terms set forth below in this Section 1 shall have the
following respective meanings:
(a) The term “Affiliate” when used with reference to the Company shall mean any corporation, limited
liability company, general partnership, joint venture or limited partnership or other entity that controls or is controlled by, or is under
common control with the Company. Accordingly, an Affiliate of the Company shall include any such entity (i) that owns voting
shares or other voting securities of the Company or any other Affiliate thereof that entitle it to vote in the election of, and enable it to
elect, either directly or indirectly, at least a majority of the Company’s directors (a “Parent”) and (ii) any such entity with respect to
which the Company is a general partner or owns shares or other securities that entitle it to vote in the election of, and to elect, either
directly or through one or more other Affiliates, at least a majority of the directors or persons holding similar positions with such
entity (a “Subsidiary”).
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
(b) The term “Code” means the Internal Revenue Code of 1986, as amended.
(c) The term “Company” shall mean Collectors Universe, Inc., a Delaware corporation and any Successor
thereto.
(d) The term “Consultant” shall mean any natural person who, in a capacity other than as an employee or
Director of the Company, renders bona fide advisory or consulting services (whether on a full time or part time basis) to the Company
or any Affiliate, pursuant to a contract entered into directly with the Company or any such Affiliate, provided, however, that the
services so rendered are not in connection with the offer or sale of securities in a capital-raising transaction and do not directly or
indirectly promote or maintain a market for the Company’s securities.
(e) The term “Continuous Service with the Company” shall mean (i) employment by an Employer Entity
(which shall be either the Company or an Affiliate thereof), (ii) service as a member of the Board of Directors of the Company or any
Parent thereof, or (iii) service in the capacity of a Consultant to the Company or any Affiliate thereof, which service is uninterrupted
except by reason of (x) vacations, (y) illnesses (other than permanent disability, as defined in Section 22(e)(3) of the Code), or
(z) leaves of absence that have been approved in writing by the Company (each, an “Excused Absence”). For purposes of this
Agreement, a cessation or termination of Executive’s Continuous Service with the Company shall be deemed to have occurred if
Executive ceases to provide services to the Company and its Affiliates, in any of the capacity set forth above in this Paragraph 1.1(e),
for any reason other than an Excused Absence. Notwithstanding the foregoing, a termination or cessation of Continuous Service of
Executive shall not be deemed to have occurred if, within not more than ten (10) days following the termination or cessation of
Executive’s service with the Company or any Affiliate thereof, in any one of the capacities set forth above, Executive continues or
commences the provision of service to the Company or any Affiliate in any of the other capacities specified above.
at any time during the term of this Agreement.
(f) The term “Employer Entity” means the Company or any Affiliate thereof that employs the Executive
2010.
(g) The term “Fiscal 2010” shall mean the year that commenced on July 1, 2009 and will end on June 30,
(h) The term “Fiscal 2010 COI” means the consolidated continuing operating income of the Company
and its consolidated subsidiaries for Fiscal 2010, determined in accordance with the same generally accepted accounting principles
that are applied by the Company’s independent registered public accountants in their audit of the consolidated financial statements of
the Company and its Subsidiaries for Fiscal 2010 (the “2010 Financial Statements”), except that there shall be excluded from the
computation of such consolidated operating income (i) all non-cash stock-based compensation costs, and (ii) all non-cash impairment
charges, if any, recognized in the Company’s 2010 Financial Statements.
(i) The term “Plan Performance Goal” means Fiscal 2010 COI in an amount at least equal to ninety
percent (90%) of the Fiscal 2010 COI that is set forth in the Company’s Annual Operating Plan for Fiscal 2010 as approved by the
Company’s Board of Directors at its meeting on May 21, 2009. Notwithstanding the foregoing, however, at any time prior to the end
of Fiscal 2010, the Compensation Committee may adjust or change the Plan Performance Goal to reflect the occurrence of (i) any
extraordinary event, (ii) any material corporate transactions, (iii) any material changes in corporate capitalization, accounting rules or
principles or in the Company’s methods of accounting, (iv) any material changes in applicable law, or (v) any other material change or
event of similar nature (each, an “Extraordinary Event”), but only if any such Extraordinary Event was not reasonably foreseeable at
the time the Plan Performance Goal then in effect under this 2010 Incentive Plan had been established and
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Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
would, in the sole opinion of the Committee (x) make it unlikely that Plan Performance Goal will be achieved or (y) make it likely that
the Plan Performance Goal would be achieved solely by reason of occurrence of such Extraordinary Event. Notwithstanding the
foregoing, however, the occurrence of changes in the competitive environment or changes in economic or market conditions in the
Company’s markets, whether or not expected or reasonably foreseeable, shall not by themselves constitute Extraordinary Events that
may be the basis of a change in the Plan Performance Goal.
under applicable federal or state securities laws.
(j) The term “Securities Law Restrictions” shall mean restrictions on the transferability of the Shares
(k) The term “Successor” mean any entity that (i) is the surviving entity in a merger or consolidation with
or other statutory reorganization of the Company in which the separate existence of the Company ceases, whether or not such merger,
consolidation or reorganization results in a Change of Control of the Company or (ii) becomes the Parent of the Company by reason of
its direct or indirect acquisition of voting securities of the Company representing the power to vote, directly or indirectly, in the
election of directors of the Company and to elect at least a majority thereof, or (iii) acquires all or substantially all of the assets of the
Company (whether or not such transaction constitutes a Change of Control of the Company).
with his Employer Entity due to the taking of a Good Reason Action (as defined in Exhibit A hereto), provided such termination
meets the conditions expressly set forth in Exhibit A.
(l) The term “Termination for Good Reason” shall mean a termination by Executive of his employment
(m) The term “Termination Without Cause by the Company” shall mean a termination, by the Company
or Executive’s Employer Entity (if other than the Company), of Executive’s employment for any reason other than (i) the death or
disability of Executive or (ii) the Misconduct of Executive (as defined in Exhibit A hereto), provided that Executive does not continue
in the service of the Company or any of its Affiliates thereafter.
subject to the Company’s Reacquisition Rights under Section 5 of this Agreement.
(n) The term “Unvested Shares” shall mean those of the Shares issued hereunder that are or remain
be or otherwise are not subject to the Company’s Reacquisition Rights under Section 5 of this Agreement.
(o) The term “Vested Shares” shall mean those of the Shares issued pursuant hereto that have ceased to
satisfied for any or all of the Unvested Shares to become Vested Shares.
(p) The term “Vesting Conditions” shall mean the conditions set forth in Section 4 hereof that must be
not defined in Section 1.1 above shall have the respective meanings given to such terms elsewhere in this Agreement or in the Plan.
1.2 Definitions of Certain Other Terms. Other terms used in this Agreement with initial capital letters that are
1.3 Rules of Construction. The provisions of this Agreement will not be construed against a party by reason
of the fact that such party or its counsel was the principal draftsman of this Agreement or such provisions. Unless the context
otherwise requires: (i) words importing the singular include the plural and vice versa; (ii) words importing gender include all genders;
(iii) the terms “include” and “including” shall mean “include without limitation” or “including but not limited to” and (iii) unless the
context clearly indicates otherwise, the terms “herein,” “hereof,” “hereto,” “hereinafter” and “hereunder” and any similar terms shall
refer to this Agreement as a whole and not to the section, subsection, paragraph or clause where such term appears.
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Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
1.4 Headings. The Section, subsection and paragraph and any other headings in this Agreement have been
inserted for convenience of reference only and shall not affect the construction or interpretation or the application of any of the terms
or provisions of this Agreement.
2 Issuance of Shares. The Company hereby irrevocably offers to issue to Executive an aggregate of fifty thousand
five hundred seventeen (50,517) shares of its common stock (the “Shares”), on the terms and subject to the conditions and the
restrictions and the Company’s Reacquisition Rights set forth herein. Executive’s execution and delivery to the Company of this
Agreement, without condition or reservation of any kind whatsoever, together with the Spousal Consent in the form accompanying
this Agreement, duly executed by Executive’s Spouse, within ten (10) business days of July 31, 2009, the date as of which the
Company executed this Agreement, shall constitute Executive’s acceptance of this offer, on the terms and subject to such conditions,
restrictions and the Company Reacquisition Rights, and this Agreement shall thereupon represent a binding and enforceable
agreement of the parties.
3 Consideration. Executive acknowledges and agrees that he is not paying or providing any consideration (monetary
or other) to the Company for the issuance of the Shares to him pursuant to Section 2 above. Instead, the Company is entering into this
Agreement as an inducement to Executive to remain in the Company’s Continuous Service and to devote his utmost efforts to the
achievement of the Plan Performance Goal and the satisfaction of the other Vesting Conditions, which shall constitute good and
valuable consideration for the obligations of and the performance of this Agreement by the Company in accordance with and on the
terms and subject to the conditions set forth herein; provided, however, that it is further acknowledged and agreed by Executive that
the only consideration to be received by the Company for or in respect of the vesting of any of the Shares under Section 4 and the
termination of its Reacquisition Rights under Section 5 hereof with respect to any Unvested Shares shall be the satisfaction of the
Vesting Conditions.
4 Vesting of Shares. Subject to the following terms and satisfaction of the Vesting Conditions set forth below in this
Section 4, the Shares shall vest (that is, become Vested Shares) in four (4) annual installments, the first three (3) of which shall each
be in the amount of 12,629 of the Shares, with the fourth and final installment in the amount of 12,630 shares, as follows:
4.1 Initial Installment of Shares. The initial installment of 12,629 of the Shares shall become Vested Shares
and shall, therefore, cease to be subject to the Company’s Reacquisition Right and the other restrictions contained in this Agreement,
other than any applicable Securities Law Restrictions, on the date that Executive executes and delivers to the Company a counterpart
of this Agreement, together with an executed copy of the Spousal Consent.
Company has achieved the Plan Performance Goal and:
4.2 Performance-Vested Shares. If a determination is made by the Administrator (as defined in the Plan) that
(a) the Executive has been in the Continuous Service of the Company or any other Employer Entity
between the date hereof and July 31, 2010, inclusive, then, on the date such determination is made, or July 31, 2010 (whichever is
later), the second installment of 12,629 of the Shares shall become Vested Shares and shall thereupon cease to be subject to the
Company’s Reacquisition Right and the other restrictions contained in this Agreement, other than any applicable Securities Law
Restrictions;
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Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
(b) the Executive has remained in the Continuous Service of the Company or any other Employer Entity
between the date hereof and June 30, 2011, inclusive, the third installment of 12,629 of the Shares shall, on June 30, 2011, become
Vested Shares and shall thereupon cease to be subject to the Reacquisition Right of the Company and the other restrictions contained
in this Agreement, other than any applicable Securities Law Restrictions;
(c) the Executive has remained in the Continuous Service of the Company or any other Employer Entity
between the date hereof and June 30, 2012, inclusive, then, the fourth and final installment of 12,630 of the Shares shall, on June 30,
2012, become Vested Shares and shall thereupon cease to be subject to the Reacquisition Right of the Company and the other
restrictions contained in this Agreement, other than any applicable Securities Law Restrictions.
4.3 Effect of a Termination of Executive’s Employment Without Cause or for Good Reason. Notwithstanding
anything to the contrary that may be contained elsewhere in this Agreement, if there occurs a Termination Without Cause or a
Termination for Good Reason of Executive’s employment with the Company or any Affiliate thereof at any time that any of the
Shares are Unvested Shares, and Executive does not continue in the Continuous Service of the Company or any of its Affiliates
thereafter, then such Unvested Shares shall thereupon become Vested Shares without the necessity of any action by the Company or
Executive.
4.4 Effect of Change of Control. If a Change of Control (as defined in the Plan) occurs, while any of the
Shares continue to be Unvested Shares, then the applicable provisions of Section 11 of the Plan shall govern the vesting of any
Unvested Shares by reason of such Change of Control.
5 Reacquisition and Reconveyance of Unvested Shares upon a Termination of Continuous Service.
Agreement, the Company shall have the right to reacquire some or all of the Unvested Shares (the “Reacquisition Right”), as follows:
5.1 Reacquisition Rights. Notwithstanding anything to the contrary that may be contained elsewhere in this
(a) Termination of Continuous Service Prior to July 31, 2010. The Company shall have the right (but not
the obligation) to exercise its Reacquisition Right to reacquire all of then remaining 37,888 Unvested Shares, or such lesser number
thereof as the Administrator deems in its sole and absolute discretion to be appropriate, in the event that there is a cessation or
termination of Executive’s Continuous Service (other than by reason of a Termination Without Cause or a Termination for Good
Reason) prior to July 31, 2010.
(b) Failure of Plan Performance Goal. If Executive has remained in the Continuous Service of the
Company through July 31, 2010, but it is determined by the Administrator that the Company has failed to achieve the Plan
Performance Goal, then, the Company shall become entitled to exercise its Reacquisition Rights to reacquire all of the then remaining
38,888 Unvested Shares or such lesser number thereof as the Administrator deems in its sole and absolute discretion to be appropriate.
determined that the Performance Goal has been achieved, but:
(c) Cessation of Continuous Service After Achievement of Performance Goal. If the Administrator has
5
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
2011 (other than by reason of a Termination Without Cause or a Termination for Good Reason), the Company shall become entitled to
exercise its Reacquisition Right to acquire all of the then remaining 25,259 Unvested Shares or such lesser number thereof as the
Administrator deems in its sole and absolute discretion to be appropriate; or
(i) Executive ceases to remain in the Company’s Continuous Service through at least June 30,
than by reason of a Termination Without Cause or a Termination for Good Reason), the Company shall become entitled to exercise its
Reacquisition Right to acquire all of the then remaining 12,630 Unvested Shares or such lesser number thereof as the Administrator
deems in its sole and absolute discretion to be appropriate.
(ii) Executive’s Continuous Service ceases after June 30, 2011, but prior to July 1, 2012 (other
5.2 Consideration for Repurchase Right. It is expressly agreed by Executive that, since Executive is not
making any monetary payment or incurring any monetary obligation to the Company for the issuance of the Shares and satisfaction of
the Vesting Conditions is a condition precedent to and the only consideration for the vesting of the Shares, no purchase price or other
consideration shall be payable to Executive by the Company for the Company’s reacquisition of any of the Unvested Shares pursuant
to Section 5.1 hereof.
5.3 Procedure for Exercise of Reacquisition Right. For sixty (60) days after the effective date of the cessation
of Executive’s Continuous Service or the failure of the Plan Performance Goal, as the case may be, the Company may exercise the
Reacquisition Right by giving Executive, or any Permitted Assign (as defined in Section 6 below) of Executive who has acquired
ownership of any of the Unvested Shares, written notice (a “Reacquisition Notice”) of the number of the then Unvested Shares which
the Company is entitled, pursuant to Section 5.1, and has elected to reacquire (the “Reacquisition Shares”).
5.4 Settlement and Closing of Reacquisition. If the Company has elected to exercise its Reacquisition Right
as to part or all of the then Unvested Shares within the 60-day period described above, then, within ten (10) business days following
the date of the Reacquisition Notice, Executive or his Permitted Assigns (as the case may be) shall deliver or cause to be delivered to
the Company (i) the certificate(s) representing the Reacquisition Shares, together with a stock assignment separate from certificate,
duly endorsed in blank, in full reconveyance and transfer of such Reacquisition Shares to the Company, or any Company Assignee (as
the case may be), pursuant to this Section 5 and (ii) such other documents and instruments, including any agreements, that the
Company may request to evidence and effectuate (x) the reconveyance and transfer of the Reacquisition Shares to the Company or the
Company Assignee, if any, free and clear of any and all claims, liens, pledges, security interests, options, encumbrances and adverse
interests of any kind or nature whatsoever (collectively, “Liens and Encumbrances”) and (y) the termination and release by Executive
(and his Permitted Assigns, if any) of all rights, title and interest in or to and all claims of any nature whatsoever that Executive or his
Permitted Assigns may have or may assert with respect to such Reacquisition Shares. Such additional documents and instruments
may include written representations and warranties by the Executive and his Permitted Assigns (if any) that, upon such reconveyance
and transfer, the Company shall become the beneficial and record owner of such Unvested Shares, free and clear of any and all Liens
and Encumbrances and a release agreement, in such form as the Company may request, forever releasing the aforementioned rights
and claims. Executive, on his behalf and on behalf of any Permitted Assigns to whom he may transfer any of the Unvested Shares in
accordance with Section 6 below, hereby irrevocably appoints the Company as the attorney-in-fact for Executive and his Permitted
Assigns (if any) and irrevocably grants to the Company a power of attorney, with full power of substitution and resubstitution, to take
such actions and to execute and deliver such documents and instruments, in the name and on behalf of Executive or any of his
Permitted Assigns, as the Company deems necessary, appropriate or desirable to
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Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
effectuate such reconveyance and transfer of the Reacquisition Shares to the Company or any Company Assigns and the execution of
the related documents, instruments and agreements as contemplated by this Section 5.4. Such appointment and power of attorney is
being given by Executive as security for the performance of Executive’s obligations hereunder and is, therefore, coupled with an
interest, and shall be irrevocable and shall continue in full force and effect following the death or any incapacity, whether physical or
mental, of Executive or any Permitted Assign to whom any of the Unvested Shares have been transferred until the earlier of (x) the
vesting of all of the Unvested Shares or (y) the Reacquisition of the Unvested Shares that the Company has elected to reacquire
pursuant to this Section 5. In the event that the Company (i) sends a Reacquisition Notice to Executive within the aforesaid sixty (60)
day period, as to some, but not all, of the Unvested Shares it is then entitled to reacquire; or (ii) fails to send any Reacquisition Notice
to Executive within the aforesaid 60-day period, then all of the then Unvested Shares that it was entitled, but did not elect, to reacquire
shall thereupon become Vested Shares.
5.5 Deposit of Unvested Shares and Dividends; Voting Rights.
(a) Deposit of Unvested Shares. Upon Executive’s acceptance of the Company’s offer to issue the
Shares to Executive within the time period and in the manner provided in Section 2 of this Agreement, Executive shall deposit or
cause to be deposited with the Company, or such person or entity as the Company may designate in writing, the certificate or
certificates (as the case may be) representing all of the Unvested Shares, together with a stock assignment separate from certificate
duly executed by Executive, in blank, which shall be held by the Company or such designated person, as the case may be, until such
Unvested Shares have become Vested Shares.
(b) Dividends and Distributions. If the Company pays any dividends or distributions, whether in cash,
stock or other property, to all of the holders of the Company’s outstanding shares at a time when any of the Shares are Unvested
Shares, the dividends or distributions that would otherwise be payable to Executive on or in respect of such Unvested Shares shall not
be distributed to Executive, but shall be deposited in a segregated bank account maintained on the Company’s behalf by the transfer
agent for the Company’s common stock or a bank or other depository institution as may be designated by the Company (the “Deposit
Account”). Upon the vesting of any Unvested Shares, any dividends or distributions that had previously been declared on such Shares
and deposited in the Deposit Account shall be distributed to Executive or, if any such Shares had been transferred to a Permitted
Assign, to that Assign in accordance with its interests in such Shares. If, on the other hand, any of such Unvested Shares are
reacquired by the Company pursuant to Section 5.1 hereof, then, notwithstanding anything to the contrary that may be contained in
this Agreement, the dividends and distributions declared on those reacquired Unvested Shares shall revert and be returned to the
Company and neither the Executive nor any of his Permitted Assigns shall have any rights therein or claims thereto.
(c) Voting Rights. Unless and until any Unvested Shares are reacquired pursuant to Section 5.1 hereof,
Executive (or any of his Permitted Assigns, as the case may be) shall be entitled to vote such Unvested Shares to the same extent as if
they were Vested Shares.
5.6 Assignment by the Company. The Company may assign its Reacquisition Right, in whole or in part,
without the consent of the Executive to any person or entity (a “Company Assignee”). In the event of any such assignment, the
Company shall give written notice thereof to Executive, provided that the failure to give such notice shall not invalidate any such
assignment or preclude the exercise of the Company’s Reacquisition Rights or any other rights of the Company hereunder by any such
Company Assignee.
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Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
6 Restrictions on Transferability of the Unvested Shares. Unvested Shares may not be sold, transferred, pledged or
hypothecated, or otherwise disposed of or encumbered, except that Unvested Shares may be transferred to Executive’s estate or heirs
upon his death in accordance with the laws of descent and distribution or to his former spouse pursuant to a qualified domestic
relations order issued by a court in settlement of marital property rights (each such person to whom any of the Unvested Shares are
transferred, a “Permitted Assign”). Any Unvested Shares that are transferred to a Permitted Assign as provided in this Section 6, shall
remain subject to all of the terms, conditions and restrictions of this Agreement, including the Company’s Reacquisition Rights under
Section 5, and any Permitted Assign shall, as a condition precedent to the effectiveness of any such transfer of any of the Unvested
Shares, execute and deliver to the Company an instrument, in a form reasonably acceptable to the Company, by which such Permitted
Assign shall agree to comply with, and which shall provide that the Unvested Shares being assigned or transferred to the Permitted
Assign shall remain subject to, all of the terms, restrictions and conditions of, this Agreement. If the foregoing condition is not
satisfied, the purported transfer to such Permitted Assign shall be null and void ab initio and of no force or effect, and the Company
shall not be required to recognize such assignment or transfer. Any stock certificates evidencing any Unvested Shares to be reissued
in the name of any Permitted Assign shall bear a restrictive legend substantially in the form of Exhibit B hereto for so long as such
Shares remain Unvested Shares and, upon the issuance of such Unvested Shares such Permitted Assign shall deposit or caused to be
deposited each such stock certificate, together with a stock assignment separate from certificate duly executed, in blank, by such
Permitted Assign.
7. Issuance of Certificates upon Vesting of Shares. If any of the Unvested Shares have become Vested Shares, then,
as soon as practicable thereafter, the Company shall issue or cause to be issued to Executive or his Permitted Assigns (if any) one or
more stock certificates, in the name of the Executive or such Permitted Assigns (as the case may be), evidencing his or such Permitted
Assigns’ ownership of those Vested Shares, free of the restrictive legend set forth in Exhibit B hereto; provided, however, that if
Executive or any such Permitted Assign is a director or executive officer of, or owns beneficially, more than 10% of the Company’s
outstanding shares of common stock, at the Company’s election that certificate may bear a legend to the effect that any sale, transfer,
pledge or other disposition of any of such Shares may be made only pursuant to a registration statement that has been filed with and
declared effective by the Securities Exchange Commission under, or an exemption from the registration provisions of, the Securities
Act of 1933, as amended, and in compliance with any applicable state securities laws.
8. Adjustments upon Changes in Capital Structure. In the event that the outstanding shares of common stock of the
Company are hereafter increased or decreased or changed into or exchanged for a different number or kind of shares or other
securities of the Company by reason of a recapitalization, stock split, combination of shares, reclassification, stock dividend, or other
change in the capital structure of the Company, then Executive or his Permitted Assigns, if any, as the case may be, shall be entitled to
exchange, for the stock certificate(s) evidencing the then Unvested Shares, new or additional or different shares of stock or securities,
in order to preserve, as nearly as practical, but not to increase, the benefits of Executive or such Permitted Assigns under this
Agreement, in accordance with the provisions of Section 11.1 of the Plan. Such new, additional or different shares shall be deemed
“Unvested Shares” for purposes of this Agreement and subject to all of the terms and conditions hereof, including the Company’s
Reacquisition Rights under Section 5 hereof.
9. Limitation of Company’s Liability for Nonissuance; Nonpermitted Transfers.
9.1 The Company agrees to use its reasonable best efforts to obtain from any applicable regulatory agency such
authority or approval as may be required in order to issue and sell the Shares to Executive pursuant to this Agreement. The inability
of the Company to obtain, from any such regulatory agency, authority or approval deemed by the Company’s counsel to be necessary
for the lawful issuance and sale of the Shares hereunder and under the Plan shall relieve the Company of any liability in respect of the
nonissuance or sale of such Shares as to which such requisite authority or approval has not been obtained.
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Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
9.2 The Company shall not be required to: (i) transfer on its books any Shares of the Company which shall
have been sold or transferred in violation of any of the provisions set forth in this Agreement, or (ii) treat as owner of such Shares or
to accord the right to vote or to pay dividends or other distributions to any transferee to whom such Shares shall have been so
transferred.
10. Notices. Any notice, demand or request required or permitted to be given under this Agreement shall be in writing
and shall be deemed given when delivered personally or three (3) days after being deposited in the United States mail, as certified or
registered mail, with postage prepaid, (or by such other method as the Administrator may from time to time deem appropriate), and
addressed, if to the Company, at its principal place of business, Attention: the Chief Financial Officer, and if to the Executive, at his
or her most recent address as shown in the employment or stock records of the Company.
11. Binding Obligations. All covenants and agreements herein contained by or on behalf of any of the parties hereto
shall bind and inure to the benefit of the parties hereto and their successors and, in the case of the Company, any Company Assignees
and, in the case of Executive, any of his Permitted Assigns.
12. Amendments and Waivers. This Agreement may not be amended, discharged or terminated other than by written
agreement executed by the parties. No waiver by either party of any of its rights or the obligations of the other party under this
Agreement shall be effective unless such waiver is set forth in a writing executed and delivered by the party purported to have granted
such waiver. No such written waiver by a party shall constitute (i) a waiver of the same rights or obligations in any other instance or
(ii) any of the other rights of such party or any of the other obligations of the other party under this Agreement unless the written
waiver expressly provides otherwise.
13. Assignment. Executive shall have no right, without the prior written consent of the Company, to (i) sell, assign,
mortgage, pledge, grant options with respect to or otherwise transfer any interest or right created by or under this Agreement, or
(ii) delegate his duties or obligations under this Agreement, except as otherwise permitted under and to the extent set forth in Section 6
hereof.
14. Severability. Should any provision or portion of this Agreement be held to be unenforceable or invalid for any
reason, the remaining provisions and portions of this Agreement shall be unaffected by such holding and shall remain in full force and
effect.
15. Counterparts. This Agreement may be executed in one or more counterparts, and each of such executed
counterparts, and any photocopies or facsimile copies thereof, shall constitute an original of this Agreement, but all of which, when
taken together, shall constitute one and the same instrument.
16. Applicable Law and Equitable Remedies. This Agreement shall be construed in accordance with the laws of the
State of California without reference to choice of law principles, as to all matters, including, but not limited to, matters of validity,
construction, effect or performance. In the event of a breach or threatened breach by Executive, or any of his Permitted Assigns, of
any of their obligations under this Agreement, including the obligations set forth in Sections 5 and 6 of this Agreement, then, without
limiting any other rights or remedies that the Company may have at law or in equity or otherwise, the Company shall be entitled to
obtain temporary, preliminary and permanent injunctive relief to cause Executive or his Permitted Assigns (as the case may be) to halt
any such breach or to prevent any threatened breach from taking place, and an order of specific performance of the obligation or
obligations being breached or threatened to be breached, without the necessity of having to post a bond or other security as a condition
to the issuance or maintenance of any such equitable relief.
9
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
17. No Agreement to Employ. The right of the Company or any of its Affiliates to terminate, at will, the Executive’s
employment with the Company or any such Affiliates at any time (whether by dismissal, discharge or otherwise), with or without
Cause, is specifically reserved, subject to the provisions of Section 4.3 and the applicable terms of any other written employment or
other agreements to which the Company and Executive may be a party.
18. “Market Stand-Off” Agreement. Executive agrees, and each of his Permitted Assigns, if any, will agree, in
connection with any registration of the Company’s securities that, upon the request of the Company or the underwriters managing any
public offering of the Company’s securities, Executive and any such Permitted Assign will not sell or otherwise dispose, in whole or
in part, of any of the Shares, whether Vested or Unvested, without the prior written consent of the Company or such underwriters, as
the case may be, for a period of time (not to exceed 180 days) from the effective date of such registration as the Company or the
underwriters may specify.
19. Entire Agreement. This Agreement, together with the Exhibits hereto and the applicable provisions of the Plan,
constitute the entire agreement and understanding of the Company and Executive with respect to, and supersede all other
contemporaneous or prior agreements and understandings, oral or written, between the Company and Executive relating to, the subject
matter of this Agreement. In the event of any conflict between any of the terms or provisions of this Agreement and any terms or
provisions of the Plan, then, in such event, the terms of the Plan shall govern over the conflicting terms of this Agreement.
20. Tax Elections. Executive understands that Executive (and not the Company) shall be responsible for the
Executive’s own tax liability that may arise as a result of the acquisition or vesting of the Shares. Executive acknowledges and
represents and warrants that (i) the Company is not providing and has not provided any tax advice to Executive with respect
to the acquisition by Executive of the Shares or any tax elections available to him in respect thereof and he is relying solely on
his own personal tax advisors for such advice; (ii) Executive has considered the advisability of all tax elections in connection
with the acquisition of the Shares, including the making of an election under Section 83(b) under the Internal Revenue Code of
1986, as amended (“Code”); and (iii) the Company has no responsibility for the making of such Section 83(b) election or any
other tax elections, whether under federal or state laws or regulations. In the event Executive determines to make a Section
83(b) election, Executive agrees to timely provide a copy of the election to the Company as required under the Code.
21. Attorneys’ Fees. If any party shall bring an action in law or equity against the other to enforce or interpret any of
the terms, covenants and provisions of this Agreement, the prevailing party in such action shall be entitled to recover reasonable
attorneys’ fees and costs from the other party.
[Signature Page Follows]
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Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
THE COMPANY:
EXECUTIVE:
COLLECTORS UNIVERSE, INC.
By: /s/ MICHAEL J. MCCONNELL
Name: Michael J. McConnell
Title: Chief Executive Officer
/s/ JOSEPH J. WALLACE
Joseph J. Wallace
(Print Name)
Address:
11
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
EXHIBIT A
DEFINITIONS OF GOOD REASON ACTION AND MISCONDUCT
For purposes of this Agreement the following terms shall have the respective meanings set forth below:
1. The term “Good Reason Action” shall mean the occurrence of any of the following:
(a) Reduction or Adverse Change of Authority and Responsibilities. The Employer Entity (whether that is the
Company or any Affiliate thereof) materially reduces Executive's authority, duties or responsibilities with the Employer Entity, unless
such reduction is made as a consequence of (i) any acts or omissions of Executive which would entitle Employer to terminate
Executive’s employment for Misconduct (as defined below in this Exhibit A), or (ii) Executive’s permanent disability, as defined in
Section 22(e)(3) of the Code);
(b) Material Reduction in Salary. The Company or Employer Entity materially reduces Executive's base
salary or base compensation below the amount thereof as in effect on the day prior to the such action, unless such reduction is made
(i) as part of an across-the-board cost-cutting measure that is applied equally or proportionately to all senior executives of the
Employer Entity, rather than discriminatorily against Executive, or (ii) as a result of any acts or omissions of Executive which would
entitle Employer to terminate Executive’s employment for Misconduct, or (iii) by and at the election of the Employer as a result of
Executive’s disability;
(c) Relocation. Company or Employer Entity relocates Executive’s principal place of employment to an
office (other than the headquarters offices of the Company or the Employer Entity) located more than thirty (30) miles from
Executive’s then principal place of employment (other than for temporary assignments or required travel in connection with the
performance by Executive of his duties for the Employer Entity); or
(d) Breach of Material Employment Obligations. The Company commits a breach of any of its material
obligations to Executive under this Agreement or there is a breach by the Company or the Employer Entity of any of such party‘s
material obligations under any employment agreement it may have with Executive as of the date of this Agreement or at any time
thereafter, which breach continues uncured for a period of thirty (30) days following written notice thereof from Executive.
PROVIDED, HOWEVER, that, notwithstanding anything to the contrary that may be contained above in this Section 1 or
elsewhere in this Agreement, the following conditions must be satisfied in order for such termination of employment to constitute a
Termination for Good Reason and for the Unvested Shares to become Vested Shares by reason of the taking or occurrence of any of
the Good Reason Actions set forth above: (i) Executive shall not have consented to the taking of any such Good Reason Action by the
Company or the Employer Entity (as the case may be), (ii) within ten (10) calendar days immediately following the date that
Executive is first notified in writing by the Company or such other Employer Entity (as the case may be) of the taking of such Good
Reason Action, Executive shall have given Employer a Good Reason Termination Notice (as hereinafter defined), (iii) neither the
Company nor the Employer Entity (if other than the Company) shall have failed to rescind, or cure the adverse effects on Executive
of, such Good Reason Action within a period of thirty (30) consecutive calendar days following the Company’s receipt of such Good
Reason Termination Notice (the “Cure Period”), (iv) Executive shall have, in fact, terminated his employment with the Company or
the Employer Entity, as the case may be, and ceased altogether his Continuous Service with the Company and its Affiliates
within ten (10) calendar days after the expiration of the Cure Period, and (v) neither the Company or the
12
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
Employer Entity is required to take any of the above-described Good Reason Actions in order to comply with any applicable laws or
government regulations or any order, ruling, instruction or determination of any court or other tribunal or any government agency
having jurisdiction over the Company or any of its Affiliates.
2. The term “Good Reason Termination Notice” shall mean a written notice from Executive to the Company stating that he is
terminating his Employment with the Employer Entity for Good Reason and also ceasing his Continuous Service with the Company
and any of its Affiliates, and describing in reasonable detail the Good Reason Action (as defined above) that has led Executive to
terminate his employment with the Company or other Employer Entity (as the case may be) for Good Reason.
3. The term “Misconduct” shall mean:
adversely affects the business of the Company or any of its Affiliates;
(a) The commission of any act of fraud, embezzlement or dishonesty by Executive which materially and
Company or any of its Affiliates;
(b) Any unauthorized use or disclosure by Executive of confidential information or trade secrets of the
(c) the voluntary resignation by Executive of his employment with the Company and any Affiliates of the
Company or the refusal by Executive to perform any material duties required of him if such duties are consistent with duties
customary for the position that he holds with the Company or any Affiliate thereof;
(d) Any material act or omission by Executive involving gross negligence or intentional misconduct in the
performance of Executive’s duties to, or material deviation from any of the policies or directives of, the Company or the acquiring or
successor entity (or parent or any subsidiary thereof) that adversely affects the business or public reputation of the Company or any of
its Affiliates;
loyalty to the Company or any of its Affiliates; or
(e) Conduct on the part of Executive which constitutes the breach of any statutory or common law duty of
(f) Any illegal act by Executive which materially and adversely affects the business or business reputation of
the Company or any of its Affiliates or any felony committed by Executive, as evidenced by his conviction thereof or a plea of nolo
contendre by Executive.
its Affiliates may terminate Executive’s employment or his Continuous Service.
The definition of Misconduct shall not limit the grounds on which or the reasons for which the Company or any of
13
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
EXHIBIT B
FORM OF RESTRICTIVE LEGEND
THE TRANSFERABILITY OF THE SHARES REPRESENTED BY THIS STOCK CERTIFICATE IS RESTRICTED
UNDER, AND SUCH SHARES MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF,
EITHER IN WHOLE OR IN PART, EXCEPT AS AND TO THE LIMITED EXTENT PERMITTED BY, THAT CERTAIN
RESTRICTED STOCK AGREEMENT, DATED AS OF JULY 31, 2009, BETWEEN THE ISSUER OF THE SHARES
AND THE HOLDER THEREOF, AND ANY ATTEMPTED SALE, TRANSFER, PLEDGE OR OTHER DISPOSITION
OF ANY OF THE SHARES NOT IN STRICT COMPLIANCE WITH THE PROVISIONS OF THAT AGREEMENT
SHALL CONSTITUTE A BREACH OF THAT AGREEMENT AND SHALL BE VOID AND INEFFECTIVE TO
CONVEY ANY RIGHT, TITLE OR INTEREST, OF ANY KIND OR NATURE, IN OR TO ANY OF THE SHARES.
14
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
CONSENT AND RATIFICATION OF SPOUSE
The undersigned is the spouse of Joseph J. Wallace, who is a party to the attached Restricted Stock Agreement (the
“Agreement”), dated as of July 31, 2009. I hereby (i) consent to the execution and delivery of that Agreement by my spouse; and
(ii) ratify, approve, confirm and adopt, and agree to be bound by each and every term and condition of, that Agreement, as if I had
been a signatory to the Agreement, with respect to the Shares (as defined in the Agreement) which are the subject of said Agreement
and in which I have or may have an interest, including but not limited to, any community property interest therein. I understand that
that the Agreement provides that the Shares are subject to possible forfeiture or reacquisition by the Company, without the payment of
any consideration to my spouse or me, and I hereby also consent to the application of those forfeiture and reacquisition provisions to
any interest, including, but not limited to, any community property interest, that I may have at any time in the Shares.
I also acknowledge that I have been advised to obtain independent counsel to represent my interests with respect to this
Agreement and the Shares but that I have declined to do so and I hereby expressly waive my right to such independent counsel.
Date: August __, 2009
/s/ KAREN PARKS WALLACE
(Signature)
Karen Parks Wallace
(Print Name)
Joseph J. Wallace
(Print Name of Spouse that is a party to this
Agreement)
15
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
EXHIBIT 21.1
SUBSIDIARIES OF REGISTRANT
State of
Incorporation/Organization
Collectors Universe
Ownership Percentage
California
Delaware
Delaware
New York
New York
California
100%
100%
100%
100%
100%
100%
Name
Collectors Finance Corporation
Certified Asset Exchange, Inc.
CU Assets 1, Inc.
CU Assets 2, Inc.
CU Assets 3, LLC
Expos Unlimited, LLC
In accordance with the instructions set forth in Paragraph (b) of Item 601 of Regulation S-K, there has been omitted those
subsidiaries that, if considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary as of June 30,
2009.
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have issued our report dated September 1, 2009, with respect to the consolidated financial statements and financial
statement schedule included in the Annual Report of Collectors Universe, Inc. and subsidiaries on Form 10-K for the year ended June
30, 2009. We hereby consent to the incorporation by reference of that report in Registration Statements No. 333-34554,
No. 333-34558, No. 333-85962, No. 333-121035, No. 333-137375 and No. 333-139513 of Collectors Universe, Inc. and subsidiaries,
each filed with the Securities and Exchange Commission on Form S-8.
/s/ GRANT THORNTON LLP
Irvine, California
September 1, 2009
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
CERTIFICATIONS OF CHIEF EXECUTIVE OFFICER
UNDER
SECTION 302 OF THE SARBANES-OXLEY ACT
“Exhibit 31.1
I, Michael J. McConnell, certify that:
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of Collectors Universe, Inc.;
Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this Report;
Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this Report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is
being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this Report our
conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this
Report based on such evaluation; and
(d) disclosed in this Report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons
performing the equivalent function):
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: September 3, 2009
/s/ MICHAEL J. MCCONNELL
Michael J. McConnell
Chief Executive Officer
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
CERTIFICATIONS OF CHIEF FINANCIAL OFFICER
UNDER
SECTION 302 OF THE SARBANES-OXLEY ACT
Exhibit 31.2
I, Joseph J. Wallace, certify that:
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of Collectors Universe, Inc.;
Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this Report;
Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this Report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is
being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this Report our
conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this
Report based on such evaluation; and
(d) disclosed in this Report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons
performing the equivalent function):
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: September 3, 2009
/s/ JOSEPH J. WALLACE
Joseph J. Wallace
Chief Financial Officer
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
Exhibit 32.1
COLLECTORS UNIVERSE, INC.
Annual Report on Form 10-K
for the Year Ended June 30, 2009
CERTIFICATION OF PERIODIC REPORT
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
The undersigned, who is the Chief Executive Officer of Collectors Universe, Inc. (the “Company”), hereby certifies that
(i) the Annual Report on Form 10-K for the year ended June 30, 2009, as filed by the Company with the Securities and Exchange
Commission (the “Report”), to which this Certification is an Exhibit, fully complies with the applicable requirements of Section 13(a)
and 15(d) of the Exchange Act; and (ii) the information contained in this Report fairly presents, in all material respects, the financial
condition and results of operations of the Company.
Date: September 3, 2009
/s/ MICHAEL J. MCCONNELL
Michael J. McConnell
Chief Executive Officer
A signed original of this written statement required
by Section 906 has been provided to Collectors
Universe, Inc. and will be retained by Collectors
Universe, Inc. and furnished to the Securities and
Exchange Commission or its staff upon request.
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009
Exhibit 32.2
COLLECTORS UNIVERSE, INC.
Annual Report on Form 10-K
for the Year Ended June 30, 2009
CERTIFICATION OF PERIODIC REPORT
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
The undersigned, who is the Chief Financial Officer of Collectors Universe, Inc. (the “Company”), hereby certifies that
(i) the Annual Report on Form 10-K for the year ended June 30, 2009, as filed by the Company with the Securities and Exchange
Commission (the “Report”), to which this Certification is an Exhibit, fully complies with the applicable requirements of Section 13(a)
and 15(d) of the Exchange Act; and (ii) the information contained in this Report fairly presents, in all material respects, the financial
condition and results of operations of the Company.
Date: September 3, 2009
/s/ JOSEPH J. WALLACE
Joseph J. Wallace
Chief Financial Officer
A signed original of this written statement
required by Section 906 has been provided to
Collectors Universe, Inc. and will be retained by
Collectors Universe, Inc. and furnished to the
Securities and Exchange Commission or its staff
upon request.
_______________________________________________
Created by Morningstar Document Research documentresearch.morningstar.com
Source: COLLECTORS UNIVERSE INC, 10-K, September 04, 2009