-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QFJimab1EgWhYQQpUpnaZLrJ/zpX5SvM9jsl9B0yhNxH71ZI6aZa0vq9tWlfZAHK BOpFxIXZe6/cKRRcpLZ0lA== 0001019687-05-001192.txt : 20050428 0001019687-05-001192.hdr.sgml : 20050428 20050428133404 ACCESSION NUMBER: 0001019687-05-001192 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20050426 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050428 DATE AS OF CHANGE: 20050428 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SUPERIOR GALLERIES INC CENTRAL INDEX KEY: 0001091539 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-JEWELRY, WATCHES, PRECIOUS STONES & METALS [5094] IRS NUMBER: 352208007 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-27121 FILM NUMBER: 05779627 BUSINESS ADDRESS: STREET 1: 9478 WEST OLYMPIC BLVD STREET 2: # CITY: BEVERLY HILLS STATE: CA ZIP: 90212 BUSINESS PHONE: 310-203-9855 MAIL ADDRESS: STREET 1: 9478 WEST OLYMPIC BLVD STREET 2: N/A CITY: BEVERLY HILLS STATE: CA ZIP: 90212 FORMER COMPANY: FORMER CONFORMED NAME: TANGIBLE ASSET GALLERIES INC DATE OF NAME CHANGE: 19991229 8-K 1 superior_8k-042705.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported): APRIL 26, 2005 SUPERIOR GALLERIES, INC. - -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in Its Charter) DELAWARE - -------------------------------------------------------------------------------- (State or Other Jurisdiction of Incorporation) 0-27121 35-2208007 - -------------------------------------------------------------------------------- (Commission File Number) (IRS Employer Identification No.) 9478 WEST OLYMPIC BOULEVARD, BEVERLY HILLS, CALIFORNIA 90212 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) (310) 203-9855 - -------------------------------------------------------------------------------- (Registrant's Telephone Number, Including Area Code) NOT APPLICABLE - -------------------------------------------------------------------------------- (Former Name or Former Address, if Changed Since Last Report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (SEE General Instruction A.2. below): |_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION On April 26, 2005, Superior Galleries, Inc., (the "Company") issued a press release announcing its financial results for the fiscal quarter and nine months ended March 31, 2005. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K. On April 26, 2005, the Company also hosted a public conference call featuring a presentation by senior management that included a discussion of the Company's results of operations and financial condition as of and for the fiscal quarter and nine months ended March 31, 2005. The full transcript of the conference call is attached as Exhibit 99.2 to this Current Report on Form 8-K. ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS. (a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED. Not applicable. (b) PRO FORMA FINANCIAL INFORMATION. Not applicable. (c) EXHIBITS. Exh. No. Description -------- ----------- 99.1 Press release dated April 26, 2005, titled "Superior Galleries Reports Record Third- Quarter and Nine-Month Revenues" 99.2 Transcript of the Superior Galleries Fiscal 2005 Third-Quarter Earnings Conference Call SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Dated: April 26, 2005 SUPERIOR GALLERIES, INC. By: /s/ Paul Biberkraut --------------------------------------- Paul Biberkraut Chief Financial Officer, Executive Vice President and Secretary EXHIBITS FILED WITH THIS REPORT ON FORM 8-K Number Description ------ ----------- 99.1 Press release dated April 26, 2005, titled "Superior Galleries Reports Record Third-Quarter and Nine-Month Revenues" 99.2 Transcript of the Superior Galleries Fiscal 2005 Third-Quarter Earnings Conference Call EX-99.1 2 superior_8kex99-1.txt Exhibit 99.1 SUPERIOR GALLERIES REPORTS RECORD THIRD-QUARTER AND NINE-MONTH REVENUES Beverly Hills, California - (Business Wire) - April 26, 2005 - Superior Galleries, Inc. ("Superior") (OTC Bulletin Board: SPGR) reported record revenues for its fiscal 2005 third quarter and the nine months ended March 31, 2005. The Company recorded revenues of $11.7 million for its fiscal 2005 third quarter, an increase of $2.2 million, or 23%, from $9.5 million for the three months ended March 31, 2004. The Company recorded revenues of $29.3 million for the first nine months of fiscal 2005, an increase of $8.8 million, or 43%, from $20.5 million for the nine months ended March 31, 2004. Management attributed the revenue increases to strong market demand for rare coins in both its wholesale and retail sales channels, and to higher levels of inventory resulting from the availability of additional financing for inventory purchases and customer auction advances. The Company recorded a quarterly net loss of $203,000, or $0.04 per share, for the quarter ended March 31, 2005 versus net income of $740,000, or $0.16 per basic share, $0.09 diluted, for the prior-year quarter. For the nine months ended March 31, 2005, the Company recorded a net loss of $208,000, or $0.05 per share, versus net income of $108,000, or $0.03 per basic share, $0.01 diluted, for the comparable period of fiscal 2004. The year-over-year comparisons reflect in part investments the Company continues to make in expanding its live auctions, online sales channels and operational infrastructure to support its overall revenue growth. Silvano DiGenova, CEO of Superior, commented, "Building upon our fifth consecutive quarter of record revenues, we see significant growth potential through our online sales channel, partly through our partnerships with eBay, Amazon.com and Overstock.com, partly through the enhanced e-commerce functionality of our own website at www.sgbh.com, and through other initiatives we are working on now. Thanks to the additional equity investment and the expanded line of credit we received last month from Stanford Financial, we now also have the ability to grow our business through all our sales channels by enhancing our inventory of rare coins and extending auction advances to our customers." Superior Galleries will hold a conference call, today, Tuesday, April 26, 2005 at 10:00 a.m. Pacific Time, to discuss the financial results of its fiscal 2005 third quarter and the nine-month period ended March 31, 2005. To participate in the conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: (877) 586-7724. International callers should dial (706) 679-0614. There is no pass code required for this call. If you are unable to participate in the call at this time, a replay will be available on Tuesday, April 26 at 12:00 noon PDT, through Tuesday, May 3 at 9:00 p.m. PDT. To access the replay dial (800) 642-1687 and enter the conference ID number 5538533. International callers please dial (706) 645-9291. Additionally, a transcript and audio webcast replay of the conference call will be made available on the Superior Galleries web site at www.sgbh.com following the conclusion of the live call. Superior Galleries, Inc. is a publicly traded company, acting as a dealer and auctioneer in rare coins and other fine collectibles. The firm markets its products through its prestigious location in Beverly Hills, California and the company's web site at www.sgbh.com. 1 Included in this release are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including express and implied statements concerning future growth potential, future revenues, income, results of operations, expansion plans and expectations. Although the company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that the expectations reflected in such forward looking statements will prove to have been correct. These forward-looking statements are subject to certain risks and uncertainties, including market and other conditions that may affect our ability to expand our auction and dealer activities and control our operating costs and risks identified in our SEC filings. The company's actual results could differ materially from those anticipated in the forward looking statements as a result of certain factors including sales levels, operating costs, distribution and competition trends, consumer preferences and other market factors. Past sales performance may not be indicative of future results. No assurances are given that sales trends or sales performance on behalf of consignors or customers will continue. (FINANCIAL TABLES AND CONTACTS FOLLOW) 2 SUPERIOR GALLERIES, INC. STATEMENTS OF OPERATIONS (UNAUDITED) (in thousands, except per share data) Nine Months Ended Three Months Ended March 31, March 31, March 31, March 31, 2005 2004 2005 2004 ----------- ----------- ----------- ----------- Net sales $ 27,700 $ 18,236 $ 10,933 $ 8,251 Commission income 1,630 2,294 725 1,208 ----------- ----------- ----------- ----------- TOTAL REVENUE 29,330 20,530 11,658 9,459 COST OF SALES 23,663 15,988 9,661 7,120 ----------- ----------- ----------- ----------- GROSS PROFIT 5,667 4,542 1,997 2,339 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 5,594 4,299 2,098 1,603 ----------- ----------- ----------- ----------- Income (loss) from operations 73 243 (101) 736 ----------- ----------- ----------- ----------- OTHER INCOME (EXPENSE) Interest income 298 384 95 124 Interest expense (575) (398) (196) (115) Other expense, net (3) (24) (1) -- ----------- ----------- ----------- ----------- Total other income (expense) (280) (38) (102) 9 ----------- ----------- ----------- ----------- INCOME (LOSS) BEFORE PROVISION FOR TAXES (207) (205) (203) 745 INCOME TAX PROVISION 1 10 -- 5 ----------- ----------- ----------- ----------- NET INCOME (LOSS) $ (208) $ 195 $ (203) $ 740 =========== =========== =========== =========== Calculation of net income (loss) per share: Net income (loss) $ (208) $ 195 $ (203) $ 740 Preferred stock accretion -- (50) -- (17) Preferred stock dividend -- (37) -- (13) ----------- ----------- ----------- ----------- Net income (loss) applicable to common shares $ (208) $ 108 $ (203) $ 711 =========== =========== =========== =========== NET INCOME (LOSS) PER SHARE Basic $ (0.05) $ 0.03 $ (0.04) $ 0.16 =========== =========== =========== =========== Fully diluted $ (0.05) $ 0.01 $ (0.04) $ 0.09 =========== =========== =========== =========== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING Basic 4,563 4,331 4,685 4,486 =========== =========== =========== =========== Fully diluted 4,563 8,069 4,685 8,223 =========== =========== =========== =========== (MORE) 3
SUPERIOR GALLERIES, INC. BALANCE SHEETS (in thousands) March 31, June 30, 2005 2004 (Unaudited) ------------ ------------ ASSETS CURRENT ASSETS Cash $ 644 $ 447 Accounts receivable, net of allowance for uncollectible accounts of $122 (Mar. '05) and $259 (Jun. '04) 3,592 3,713 Auction and customer advances 3,486 6,402 Inventories 9,334 6,106 Prepaid expense and other 405 51 ------------ ------------ Total current assets 17,461 16,719 Property and equipment, net 198 135 Other assets -- 11 ------------ ------------ TOTAL ASSETS $ 17,659 $ 16,865 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Line of credit - related party $ 5,000 $ 6,600 Line of credit 2,200 2,500 Accounts payable and accrued expenses 6,694 7,261 Notes payable to a related party 400 300 Notes payable 650 -- Series A stock redemption payable 550 344 ------------ ------------ Total current liabilities 15,494 17,005 ------------ ------------ LONG-TERM LIABILITIES Notes payable to a related party, net of current portion 450 600 Series A stock redemption payable, net of current portion 138 344 ------------ ------------ Total long-term liabilities 588 944 ------------ ------------ TOTAL LIABILITIES 16,082 17,949 ------------ ------------ (MORE) 4
SUPERIOR GALLERIES, INC. BALANCE SHEETS, CONTINUED (in thousands) March 31, June 30, 2005 2004 (unaudited) ----------- ----------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY (DEFICIT) Preferred stock, 693,000 shares undesignated, none outstanding Series B convertible preferred stock $1.00 par value 3,400,000 shares designated 3,400,000 shares issued and outstanding with a liquidation preference of $3,400,000 2,967 2,967 Series D convertible preferred stock $1.00 par value 2,000,000 shares designated 2,000,000 shares issued and outstanding with a liquidation preference of $2,000,000 1,931 1,931 Series E convertible preferred stock $1.00 par value 2,500,000 shares designated 2,500,000 shares issued and outstanding with a liquidation preference of $2,500,000 2,497 -- Common stock, $0.001 par value, 12,500,000 shares authorized; 4,699,942 outstanding as of March 31, 2005 and 4,485,942 outstanding as of June 30, 2004 5 4 Additional paid in capital 8,283 7,912 Accumulated deficit (14,106) (13,898) ----------- ----------- Total stockholders' equity (deficit) 1,577 (1,084) ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 17,659 $ 16,865 =========== =========== See the Company's filing with the SEC on Form 10Q for notes to financial statements
Contact: Superior Galleries, Inc., Beverly Hills, California Paul Biberkraut, CFO, at 310-203-9855 or paulb@sgbh.com www.sgbh.com Investor Relations Contacts: CCG Investor Relations Sean Collins, Partner, at 818-789-0100 www.ccgir.com American Capital Ventures, Inc. Howard Gostfrand, President, at 305-918-7000 or hg@amcapventures.com www.amcapventures.com # # # 5 EX-99.2 3 superior_8kex99-2.txt Exhibit 99.2 SUPERIOR GALLERIES MODERATOR: GEORGE NEIL APRIL 26, 2005 12:00 PM CT Operator: Good afternoon. My name is Felicia and I'll be your conference facilitator. At this time I would like to welcome everyone to the Superior Galleries third quarter financial results conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question and answer period. If you would like to ask a question during this time simply press star and the number 1 on your telephone keypad. If you would like to withdraw your question press the pound key. I would now like to turn the call over to Mr. George Neil with CCG Investor Relations. Thank you. Sir you may begin. George Neil: Thank you Felicia. Good morning or good afternoon to everyone, depending on where you are in the country. Welcome to Superior Galleries' conference call on its financial results for fiscal 2005 third quarter and the nine months ended March 31, 2005. As the operator said I'm George Neil with CCG, the company's investor relations counsel. In a moment you will hear and have a chance to ask questions of the company's CEO, Silvano DiGenova, and its Executive Vice President and Chief Financial Officer, Paul Biberkraut, but before we begin I'd like to read the following statement in connection with this conference call. The company wishes to take advantage of the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995 with respect to statements that may be deemed to be forward-looking statements under the act. Such forward-looking statements could include general or specific comments by company officials about future performance as well as certain responses to questions posed to the company's officials about future operating matters. 1 The company wishes to caution participants in this call that numerous factors could cause actual results to differ materially from any forward-looking statements made by the company. These factors include the risk factors set forth in the company's SEC filings. Any forward-looking statements made in this call speak only as of the date of this call and the company undertakes no obligation to revise or update any forward-looking statements whether as a result of new information, future results or otherwise. So with that said it's my pleasure to introduce the CEO of Superior Galleries, Silvano DiGenova. Silvano DiGenova: Thanks for joining us today. I'm Silvano DiGenova, CEO of Superior Galleries. Today we're very pleased to announce our fifth consecutive quarter of record revenues as reported in our press release we put out earlier today. Following our review of our finances I will update you on the the progress we have made in the third quarter on our previously announced growth initiatives. There are several areas in which we made significant headway, including our retail sales channel, our e-commerce sales channel and financing. On March 31, the final day of the third quarter, we were pleased to announce that our largest shareholder, Stanford Financial Group, made an additional $2-1/2 million equity investment in Superior Galleries and extended our line of credit from $7-1/2 million to $10 million. One of the most important features of this new equity investment is that it is the equivalent of $6.00 a common share investment with no dilution. This price is in excess of our current trading range of our common stock and we're very pleased. I believe that this investment clearly demonstrates Stanford's continued and long-term support for the company. But before I talk about these milestones and our future plans I'll introduce our Executive VP and CFO Paul Biberkraut, who will update you on the financial results we have made public this morning. Paul... Paul Biberkraut: Good morning everyone. I'll present the results of operations for the third quarter and nine month of our 2005 fiscal year and follow on with key balance sheet components as of March 31, 2005. As Sil mentioned, this morning we announced our fifth consecutive quarter of record revenues. In the fiscal 2005 third quarter ended March 31, 2005 Superior Galleries reported record revenue of $11.7 million, an increase of $2.2 million or 23% from $9.5 million for the three months ended March 31, 2004. Our revenue increase is primarily due to our continued investment in infrastructure, the financing that allows us to carry higher levels of inventory and continued rare coin market strength. The infrastructure investments we were 2 referring to include the addition of numismatic sales reps in New York and Chicago, the addition of our Vice President Numismatics, who started in March 2004, and the related marketing activities such as [an] increased level of trade-show participation. Our net loss for the three months ended March 31, 2005 was $203,000 or 4 cents per share as compared to a net income or $740,000 or 16 cents per share basic, 9 cents per share diluted, for the three months ended March 31, 2004. The principal reason that record revenues did not translate into improvements at the bottom line is that we have been investing in the growth initiatives that Sil will outline a little later, including additional staff and infrastructure. Other elements of the net loss include a decline in auction commission revenue due to new competitors that have undercut us on commission rates. There was also legal and audit cost due to Registration Statement filings and investor relations expenditures, all of which did not occur last year. In addition, our expense increases included significant non-cash components related to our investor relations expenditures and the cost of expensing non-employee stock options. Our cost of sales for the three months ended March 31, 2005 increased in dollar terms by $2.5 million to $9.7 million or 83% of total revenue. This compares to a cost of sales of $7.2 million or 75% of total revenue for the prior-year third quarter. The difference strongly reflects a year over year decline in commission income. Gross profit for the three months ended March 31, 2005 decreased $342,000 to $2 million or 17% of revenue. This compares to a gross profit of $2.3 million for the prior year, which was 25% of total revenue. This again reflects the reduction in commission revenue comparing the third quarters year over year, since profits from commission drop entirely into gross profit. Selling, general and administrative expenses for the three months ended March 31, 2005 increased in dollar terms to $2.1 million from $1.6 million a year ago, but decreased year over year as a percentage of revenue. That is, SG&A represented 17% of total revenue for the three months ended March 31, 2004 as compared to 18% in the prior year's quarter. The dollar increase in these expenses was primarily due to the hiring of new employees to enhance our operational infrastructure and to support our growth plan. Other increases in infrastructure and operational expenses included software enhancements and expanding marketing efforts, but at the same time we are pleased to see that investments in staffing stayed proportional with revenue growth. Additionally we incurred higher commission and travel cost that resulted from higher wholesale and retail sales. Finally, as indicated earlier, we incurred higher cost for legal, audit and investor relations expenditures. 3 Next I'll summarize the comparisons for the nine-month period ending March 31, 2005 versus the same period ended March 31, 2004. For the nine months of fiscal 2005 versus fiscal 2004 revenues grew $8.8 million or 43% year over year to $29.3 million. We recorded a net loss of $208,000 or 5 cents per share for the nine month period of 2005 as compared to net income of $195,000 or 3 cents per share basic, 1 cent diluted in the prior year period primarily due to the decline in our auction commission revenue and additional infrastructure cost we incurred in support of our strategy for future growth. We also incurred interest expenses due to higher levels of inventory comparing year over year. Nine month cost of sales increased $7.7 million to $23.7 million or 81% of total revenue in the nine months ended March 31, 2005. This was a 48% increase from $16 million or 78% of total revenue for the nine months ended March 31, 2004. This was primarily due to an increase in rare coin sales. Our cost of sales as a percentage of sales increased over the comparable period in 2004 due to a decrease in commission income. As noted earlier, commission income incurs minimal cost of sale. Gross profit for the nine months ended March 31, 2005 increased $1.1 million or 25% to $5.7 million or 19% of total revenue. This compares to gross profit of $4.5 million or 22% of total revenue from the prior year and nine-month period. Gross profit as a percentage of income varies with the percentage of commission sales, as previously noted. Selling, general and administrative expenses for the nine months ended March 31, 2005 increased $1.3 million or 30% to $5.6 million from $4.3 million for the comparable prior year period. These expenses represent 19% of total revenues for the nine months ended March 31, 2005 as compared to 21% of total revenue for the nine months ended March 31, 2004. The increase in these expenditures were due to the hiring of new employees and other operational cost to enhance our operational infrastructure. Additional employee compensation costs of $540,000 included commissions resulting from higher sales. Other selling, general and administrative items included $187,000 in investor and public relation expenses, which included non-cash expenses of $93,000, $124,000 in legal and audit costs primarily for our Registration Statement, travel and entertainment cost that increased $124,000 due to our participation in a larger number of trade shows, and an auction operation cost including marketing expenditures, which increased by $221,000. 4 Other expenses which are primarily made up of net interest expenses increased $242,000 over last year as a result of several factors including increases in interest rates, our use of our line of credit to expand our levels of inventory and lower interest rates charged to customers in response to competition. I will now summarize our Statement of Cash Flow for the nine months ended March 31, 2005. Cash increased $197,000 for the nine months ended March 31, 2005 to $644,000 from $447,000 at the fiscal year end June 30, 2004. Cash used in our operating activity totaled $887,000 primarily resulting from our net loss of $208,000, increases in inventory of $3.2 million and decreases in accounts payable of $567,000 that were partially offset by repayments of auction and customer advances of $2.9 million. On the last date of the quarter we received an additional equity investment of $2.5 million from our principal shareholder, Stanford Financial Group, as a result of which we ended the period with positive shareholder's equity. With our quarterly and nine month financial results outlined, I will now turn the call back to our Chairman and CO Silvano DiGenova. Sil:... Silvano DiGenova: Thanks Paul. With Paul's presentation as a background I'd like to update you on the strategic direction of Superior Galleries. In our [second]-quarter conference call earlier this year, we outlined several initiatives that we believe will enable us to continue to grow and sustain profitability. These included significant upgrades to our Web site, especially the streamlining of our e-commerce capabilities. I'm pleased to report that our upgraded Web site has gone live. Although this Web site is vastly improved, we are still in the process of making further significant upgrades to the Web site capabilities. I believe that with the completion of these enhancements that our Web site will have the most robust functionality in the industry. Since the first phase of enhancements occurred very late in the quarter it did not have a substantial upside impact on our third quarter or nine months results that Paul outlined but - however it did involve considerable one-time cost and valuable managerial time. We hope to see this and future upgrades contribute measurably to our revenues and operating efficiency going forward. We are hearing from customers that our Web site is truly functioning as an integrated e-commerce portal. 5 In our prior conference call I also mentioned key partnerships to grow our online sales channel. This was another big milestone in the quarter. We have active ongoing sales partnerships with eBay, Amazon.com and Overstock.com, three of the best recognized and highest volume e-commerce portals in the world. Now rare coins from our inventory are being sold both in their regular listing format and through the auction platforms. For some time all of our live auctions have been available to customers on both our Web site and eBay, which reports to us that coins have the highest sell-through rate of any type of item on their online auctions. We are very pleased to now expand the sales channels to include the marquee [sites] of Amazon and Overstock as well, both of which we started just recently. Amazon is still in a beta mode; however, both are yielding sales already. We continue to plan our expansion of auction operations that will include a new monthly Internet auction that will be held jointly with eBay. In addition, we are planning weekly auctions in the traditional eBay.com format as our recent Web site enhancements include the functionality to run these auctions. These activities will complement our seven major live auctions each year. We're anticipating ramping up towards weekly Internet only auctions by May, '05. We would hold Internet-only auctions every week except during the weeks where we hold a live auction, so not to compete with our live auctions simultaneously broadcast on the Internet. At our last auction we offered a live feed of the event on the Internet. This new technology is available to our company exclusively for the coin industry. This adds further entertainment value to the auction and we believe an additional stream of viewers. We are also considering adding an additional live auction event in the fiscal quarter ending December 2005, so that we have two live auctions each quarter. And on the retail channels, we are testing sales of our collector and anniversary sets. Collector sets and anniversary sets include one of each major coin design available for each year from 1960 to 2005 as well as many other interesting, obsolete and desirable coins presented in a framed format. We will market them through our sales channels and see a great future for them especially through catalog retailers and online. Since they are affordably priced, you can peg the set you buy to, say, the birth year of a friend or relative. They make very attractive gifts. Strategically we feel that the collectors and anniversary sets have a strong potential to generate new sales leads from the entry level customer. 6 The U.S. Mint figures show that 130 million Americans have collected the new state quarters, not to mention that they've sold over $100 million in coins on their Web site. Doubtless many of these people are new to coin collecting, and we had them in mind in creating the collector and anniversary sets. We believe that collectors and anniversary sets will enhance the seasonal sales during the traditionally lighter volume fiscal quarters. We are completing the testing phase of this initiative and plan to launch it in upcoming quarters. In response to the difficulties we encountered this year in our live auction business, we recently recruited a top player in the auction industry, Paul Song, to serve as our Vice President of Auctions. Paul brings over 15 years of extensive experience at the managerial level to this key position and has many great contacts in the industry. He has been in charge of both live auctions and Internet auctions for Sotheby's New York and London's Rare Coin Department, as well as Sotheby's/Amazon.com. He was the youngest individual in Sotheby's history to be appointed a vice presidency. He has also recently been the senior executive for Teletrade, a unit of Greg Manning Auctions, a NASDAQ company. He has been involved in all aspects of auctions including sales, marketing and operations. Adding him to our operations team headed by COO, Michael Wolfe, creates what we believe is a powerful combination of experience, energy and vision. We also opened a branch in Chicago during the third quarter. Our Chicago office is headed by a 30-year veteran in the rare coin industry; thus we have expanded not only our online capabilities but also our brick and mortar presence. Another highlight for the quarter is the area of financing. The greater our access to capital the greater our potential for growth. Our biggest shareholder and financier is Stanford Financial Group, which now owns 51% of the company and has an estimated 30 billion under management. On March 31, as I mentioned at the top of the call, we were pleased to announce that Stanford made an additional $2.5 million investment in Superior Galleries at the equivalent of $6.00 per common share, and expanded our line of credit to from $7-1/2 million to $10 million. Stanford also continues to recommend rare coins to their client base. Coins are after all a proven inflation hedge and a shrewd investment in uncertain economic times. Many investors have long known that rare coins have numerous benefits that include liquidity, investment potential and favorable tax treatment, for example in a case of like for like exchange, and they are also easily transportable and have no reporting requirements. For all these reasons Stanford is fond of this type of tangible asset. 7 Additionally we are also continuing to explore the idea of entering the television arena through a rare coin shopping show. By our estimates ShopAtHome is selling in excess of $100 million in coins per year. ShopAtHome is a division of Scribbs Network, one of the leading developers of lifestyle oriented content for television and Internet. We are currently evaluating whether to partner with existing networks for this idea or to launch our own show. Either way, we would have the most experience of any firm selling rare coins on television. So while we're reporting a quarterly loss, we are confident that our substantial growth and initiatives and expanding retail and e-commerce, along with our enhanced access to capital, will give us many potential areas of continued growth in upcoming quarters. At this point I'd like to take any questions. Any one out there like to propose any questions? Operator: At this time I would like to remind everyone if you would like to ask a question press star then the number 1 on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Rommel Dionisio with Wedbush Morgan. Rommel Dionisio: Good morning. Sil, I wonder if you could break out the breakdown between retail and the wholesale trading in the quarter and what the growth rates were for both businesses? Paul Biberkraut: Yes I can provide that information. One moment please. Rommel Dionisio: Thanks Paul. Paul Biberkraut: And also just so you know that that information is of course included in our [10]-Q, but give me one moment and I'll get the information. For the three months ended March 31, 2004, wholesale sales represented 62% of our overall revenue which was $7,157,000. That increase over the comparable quarter was 63%. Rare coin sales on a retail basis for the quarter ending March 31 were $3,776,000 or 32% of our total revenue and that was an increase of 64% over last year. I made one error. The actual increase in wholesale sales was 20% over the previous year. And again to repeat the increase in retail sales was 64% over the previous year. 8 Rommel Dionisio: Okay great and just one quick follow-up. You mentioned, you know, you've increased in hiring and different areas and you mentioned the hiring of Paul Song but are - what are some of the other areas that you've brought new people in just on the general infrastructure? Silvano DiGenova: Well we've certainly added people to the auction department, graphics department. Paul Biberkraut: Inventory control. Silvano DiGenova: The inventory control. Basically it's, you know, most of the infrastructure - also we've added three trading people, one in the wholesale and retail department - well actually two in wholesale and retail and one in auctions and wholesale and retail so over the last year. Two of those people are very recent. The whole Chicago department, you know, which is one individual, wholesale, retail and auctions, and then in New York in the auctions and wholesale and retail. Rommel Dionisio: Okay. Thanks very much everyone. Operator: Your next question comes from Matt Brideir with Cyndel & Company. Matt Brideir: Hi guys. How you doing? Silvano DiGenova: Very good. Matt Brideir: I was just - had a question about opening more offices around the country. In a previous call you guys had alluded to several other cities. Are there still any plans with that going forward? Silvano DiGenova: Yes. Right this minute we were exploring possibilities. We hired a rep in the New York area. Because of the, you know, expensive nature of New York City, we're moving slowly on that but we are contemplating actual physical office in New York City. We're also looking at Miami. We actually did some exploration and looking at locations in Miami. That's highly likely that we would move in that arena. What we're also doing right now and we didn't actually elaborate on this is we are seeking out acquisitions. And part of the strategy here on the acquisition side is to find a key person, you know, in a key city, which is what we did in Chicago. So, you know, part of our strategy for opening a city is to find the right person that's already strategically there with a book of business, so right now we're looking at people like that in Miami. 9 We also have someone we're looking in the Boston area and one of the cities that we're interested in that we've not found a candidate yet that we may have to, you know, transplant somebody is Las Vegas. That's another key city that we are interested in in the near future. Matt Brideir: Okay. Thank you. Silvano DiGenova: You're welcome. Operator: Your next question comes from (Matt) Steinberg with American Capital Ventures. Michael Steinberg: Hi. It's Michael Steinberg. I'm just curious is this business cyclical at all? Silvano DiGenova: Well there are some cycles. Typically speaking, the last calendar quarter, you know, is a little slower, particularly because in December in the rare coin market there are no major conventions. There are no major auctions. Michael Steinberg: Uh-huh. Silvano DiGenova: And this would certainly hamper a wholesale and to some degree retail sales not to mention that, you know, in the holiday month not a lot of people are interested in acquiring new investment or, you know, very expensive items. Michael Steinberg: Right. Silvano DiGenova: However, our plan is to launch these anniversary and collector sets in the November, December time period, which we think would make excellent holiday gifts. Michael Steinberg: Correct. Silvano DiGenova: So that is our plan to kind of change the cyclical nature. We know that a lot of other firms that specialize in this arena do very well as holiday gifts. We know the U.S. Mint sells a lot during that time period, Shop At Home... Michael Steinberg: Right. 10 Silvano DiGenova: ...television sells a lot during that time period, so we are directly attacking that issue. Michael Steinberg: Okay, and without putting out guidance is it safe to say that you should come real close to $40 million for year? Silvano DiGenova: Paul what is our total right now? Paul Biberkraut: Our total right now is just under $30 million - about $29 million. Michael Steinberg: Okay. Silvano DiGenova: Yes, I mean, the reality is that we've been doing, you know, we did - what was our total? Over $11 million this quarter? Paul Biberkraut: Eleven point six million. Michael Steinberg: Right. Silvano DiGenova: So we're at $11.6 million this quarter, you know... Paul Biberkraut: If you use extrapolation, based on using the extrapolation only and not giving guidance, you would probably get to that number. Michael Steinberg: Right, okay. Congratulations on a great quarter by the way. Paul Biberkraut: Thank you. Silvano DiGenova: Thank you. Operator: At this time there are no further questions. Mr. Biberkraut are there any closing remarks? Paul Biberkraut: Sil, do you have any closing remarks? Silvano DiGenova: I have just to say that we're pleased with the performance. We believe that we can do a lot better. Basically we decided to invest in the company and as a result the profit performance was not as great as we would like it to be. We intend to, as time moves on, you know, shift to profitability. We're obviously right on the borderline and if any one of these big initiatives that we're discussing work well we should be in the black. 11 That's about it. Any other questions - otherwise we'll be signing off. Operator: At this time sir there are no further questions. Silvano DiGenova: Well- everyone, I thank you for joining us and we look forward to hearing from you at our next conference call. Operator: This concludes today's Superior Galleries third quarter financial results conference call. END 12 -----END PRIVACY-ENHANCED MESSAGE-----