Collectors Universe Inc (CLCT) SEC Quarterly Report (10-Q) for Q4 2016

 (i)

		December 31, 2016				June 30, 2016
ASSETS
Current assets:
Cash and cash equivalents		$	10,097			$	11,967
Accounts receivable, net of allowance of $60 and $35 at December 31, 2016 and June 30, 2016, respectively			4,506				3,883
Inventories, net			2,347				1,835
Prepaid expenses and other current assets			1,188				1,273
Total current assets			18,138				18,958
Property and equipment, net			3,032				2,839
Goodwill			2,083				2,083
Intangible assets, net			1,798				1,762
Deferred income tax assets			2,229				2,229
Other assets			287				240
Non-current assets of discontinued operations			79				79
Total assets		$	27,646			$	28,190
LIABILITIES AND STOCKHOLDERS' E QUITY
Current liabilities:
Accounts payable		$	2,392			$	2,728
Accrued liabilities			2,725				2,491
Accrued compensation and benefits			3,319				3,414
Income taxes payable			1,615				782
Deferred revenue			2,867				2,563
Current liabilities of discontinued operations			624				619
Total current liabilities			13,542				12,597
Deferred rent			337				381
Non-current liabilities of discontinued operations			-				217
Commitments and contingencies (Note 10)
Stockholders' equity:
Preferred stock, $.001 par value; 3,000 shares authorized; no shares issued or outstanding			-				-
Common stock, $.001 par value; 20,000 shares authorized; 8,921 and 8,898 issued and outstanding at December 31, 2016 and June 30, 2016, respectively.			9				9
Additional paid-in capital			80,852				80,642
Accumulated deficit			(67,094	)			(65,656	)
Total stockholders' equity			13,767				14,995
Total liabilities and stockholders' equity		$	27,646			$	28,190

1

		Three Months Ended December 31,								Six Months Ended December 31,
		2016				2015				2016				2015
Net revenues		$	17,862			$	12,636			$	33,610			$	27,254
Cost of revenues			6,475				5,010				12,614				10,156
Gross profit			11,387				7,626				20,996				17,098
Operating expenses:
Selling and marketing expenses			2,327				2,040				4,748				4,209
General and administrative expenses			4,549				3,897				8,963				8,004
Total operating expenses			6,876				5,937				13,711				12,213
Operating income			4,511				1,689				7,285				4,885
Interest income and other expense, net			(96	)			(15	)			(72	)			(42	)
Income before provision for income taxes			4,415				1,674				7,213				4,843
Provision for income taxes			1,491				679				2,701				1,906
Income from continuing operations			2,924				995				4,512				2,937
Income (loss) from discontinued operations, net of income taxes			(2	)			(6	)			(10	)			(17	)
Net income		$	2,922			$	989			$	4,502			$	2,920
Net income per basic share:
Income from continuing operations		$	0.34			$	0.12			$	0.53			$	0.35
Income from discontinued operations			-				-				-				-
Net income per basic share		$	0.34			$	0.12			$	0.53			$	0.35
Net income per diluted share:
Income from continuing operations		$	0.34			$	0.12			$	0.53			$	0.34
Income (loss) from discontinued operations			-				-				-				-
Net income per diluted share		$	0.34			$	0.12			$	0.53			$	0.34
Weighted average shares outstanding:
Basic			8,478				8,441				8,476				8,438
Diluted			8,578				8,549				8,569				8,541
Dividends declared per common share		$	0.35			$	0.35			$	0.70			$	0.70

2

		Six Months Ended December 31,
		2016				201 5
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	4,502			$	2,920
Discontinued operations			10				17
Income from continuing operations			4,512				2,937
Adjustments to reconcile income from continuing operations to net cash provided by operating activities:
Depreciation and amortization expense			830				699
Stock-based compensation expense			210				291
Provision for bad debts			26				1
Provision for inventory write-down			29				42
Provision for warranty			336				224
Gain on sale of property and equipment			5				(2	)
Change in operating assets and liabilities:
Accounts receivable			(650	)			362
Inventories			(541	)			(188	)
Prepaid expenses and other			85				(51	)
Other assets			(46	)			(141	)
Accounts payable and accrued liabilities			(372	)			(657	)
Accrued compensation and benefits			(95	)			(1,724	)
Income taxes payable			832				382
Deferred revenue			305				293
Deferred rent			(44	)			(28	)
Net cash provided by operating activities of continuing operations			5,422				2,440
Net cash used in operating activities of discontinued businesses			(240	)			(199	)
Net cash provided by operating activities			5,182				2,241
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of business			9				9
Capital expenditures			(726	)			(292	)
Capitalized software			(371	)			(371	)
Patents and other intangibles			(5	)			(26	)
Net cash used in investing activities			(1,093	)			(680	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid to common stockholders			(5,959	)			(6,021	)
Net cash used in financing activities			(5,959	)			(6,021	)
Net decrease in cash and cash equivalents			(1,870	)			(4,460	)
Cash and cash equivalents at beginning of period			11,967				17,254
Cash and cash equivalents at end of period		$	10,097			$	12,794

3

		Six Months Ended December 31,
		201 6				201 5
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid during the period		$	-			$	-
Income taxes paid during the period		$	1,857			$	1,513

4

1.	SUMMARY OF Significant Accounting Policies

Principles of Consolidation

The accompanying unaudited interim condensed consolidated financial statements include the accounts of Collectors Universe, Inc. and its operating subsidiaries (the "Company", "we", "us", or "our"). At December 31, 2016, our operating subsidiaries were Certified Asset Exchange, Inc. ("CAE"), Collectors Universe (Hong Kong) Limited, Collectors Universe (Shanghai) Limited, and Expos, LLC. ("Expos"), all of which are ultimately 100% owned by Collectors Universe, Inc. All significant intercompany transactions and accounts have been eliminated in consolidation.

Unaudited Interim Financial Information

The accompanying interim condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC") for interim financial reporting. These interim condensed consolidated financial statements are unaudited and, in the opinion of management, include all adjustments (consisting of normal recurring adjustments and accruals) necessary to present fairly the Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Operations, and Condensed Consolidated Statements of Cash Flows for the periods presented in accordance with generally accepted accounting principles in the United States of America ("GAAP"). Operating results for the three and six months ended December 31, 2016 are not necessarily indicative of the results that may be expected for the year ending June 30, 2017 or for any other interim period during such year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted in accordance with the rules and regulations of the SEC. These interim condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and notes thereto contained in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2016, as filed with the SEC (our "Fiscal 2016 10-K"). Amounts related to disclosure of June 30, 2016 balances within these interim condensed consolidated financial statements were derived from the aforementioned audited consolidated financial statements and the notes thereto.

Reclassification s

Certain prior period amounts have been reclassified to conform to the current period presentation.

Revenue Recognition Policies

We record revenue at the time of shipment of the authenticated and graded collectible to the customer, net of any taxes collected. Due to the insignificant delay between the completion of our authentication and grading 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 authentication and grading services. We recognize revenue from the sale of special coin inserts at the time the customer takes legal title to the insert. 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 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 from each show in the period in which the show takes place.

A portion of our net revenues are comprised of subscription fees paid by customers for one year memberships in our Collectors Club. Those membership subscription fees entitle members to access our on-line and printed publications and, in some cases, to receive limited life vouchers for free grading services. We recognize revenue attributable to free grading vouchers on a specific basis and classify those revenues as part of authentication and grading fees. The balance of the membership fee is recognized over the life of the one year membership on a time-apportioned basis.

We recognize product sales when items are shipped to customers. Product revenues consist primarily of sales of collectible coins that we purchase pursuant to our coin authentication and grading warranty program. However, those sales are not considered an integral part of the Company's ongoing revenue generating activities.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires us 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 and discontinued 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 and recovery of software development costs, the valuation of stock-based compensation awards and the timing of the recognition of related stock-based compensation expense, the valuation of coin inventory, the amount and assessment of goodwill for impairment, the sufficiency of warranty reserves, the provision or benefit for income taxes and related valuation allowances, and adjustments to the fair value of remaining lease obligations for our discontinued jewelry businesses.

Goodwill and Other Long-Lived Assets

We evaluate the carrying value of goodwill and indefinite-lived intangible assets at least annually, or more frequently if facts and circumstances indicate that impairment may have occurred. Qualitative factors are considered in performing our goodwill impairment assessment, including the significant excess of fair value over carrying value in prior years, and any material changes in the estimated cash flows of the reporting unit. We also evaluate the carrying values of all other tangible and intangible assets for impairment if circumstances arise in which the carrying values of these assets may not be recoverable on the basis of future undiscounted cash flows. We determined that no impairment of goodwill or other long-lived assets existed as of December 31, 2016.

Foreign Currency

The Company has determined that the U.S. Dollar is the functional currency for its French branch office and its Hong Kong and China subsidiaries. Based on this determination, the Company's foreign operations are re-measured by reflecting the financial results of such operations as if they had taken place within a U.S. dollar-based economic environment. Fixed assets and other non-monetary assets and liabilities are re-measured from foreign currencies to U.S. dollars at historical exchange rates; whereas cash, accounts receivable and other monetary assets and liabilities are re-measured at current exchange rates. Gains and losses resulting from those re-measurements, which are included in income for the current period, were not material.

Stock-Based Compensation

We recognize stock-based compensation attributable to service-based equity grants over the service period based on the grant date fair value. For performance-based equity grants with financial performance goals, we begin recognizing compensation expense based on the grant date fair value when it becomes probable that we will achieve the financial performance goals.

Restricted Stock Awards

As previously disclosed, in fiscal 2013, the Compensation Committee of the Board of Directors adopted a Long-Term Incentive Plan ("LTIP") for the Company's Chief Executive Officer and Chief Financial Officer, as well as for other selected key management employees (collectively, "Participants") and currently there are approximately 411,000 unvested restricted shares outstanding under the LTIP. At the time of the adoption of the LTIP, the Compensation Committee established a threshold annual financial performance goal, and four increasingly higher financial performance goals and made the vesting of the LTIP shares conditioned on the Company's achievement of one or more of those financial performance goals during any fiscal year within a six year period ending on June 30, 2018 (the "Performance Period"). Through fiscal 2015, the Company had achieved the threshold and the first of the other financial performance goals, resulting in the vesting of 25% of the restricted shares that had been granted under the LTIP.