-----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, I0IkcYNIjeXP6EwylefoRnC/merbLCPMuPIJVvtQTKBpSZ1chFi8s84ZCXcK5hMs EFaSaJ5CI7xoKckN3266Mg== 0000763730-98-000010.txt : 19980803 0000763730-98-000010.hdr.sgml : 19980803 ACCESSION NUMBER: 0000763730-98-000010 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980731 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: GALLERY OF HISTORY INC CENTRAL INDEX KEY: 0000763730 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-RETAIL STORES, NEC [5990] IRS NUMBER: 880176525 STATE OF INCORPORATION: NV FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-13757 FILM NUMBER: 98674665 BUSINESS ADDRESS: STREET 1: 3601 WEST SAHARA AVE CITY: LAS VEGAS STATE: NV ZIP: 89102-5822 BUSINESS PHONE: 7023641000 MAIL ADDRESS: STREET 1: 3601 WEST SAHARA AVENUE CITY: LAS VEGAS STATE: NV ZIP: 89102 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN MUSEUM OF HISTORICAL DOCUMENTS CHARTERED/NV/ DATE OF NAME CHANGE: 19900816 10QSB 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1998 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 0-13757 GALLERY OF HISTORY, INC. (Exact Name of Small Business Issuer as Specified in Its Charter) Nevada 88-0176525 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 3601 West Sahara Avenue, Las Vegas, Nevada 89102-5822 (Address of principal executive offices) (Zip Code) Issuer's telephone number: (702) 364-1000 Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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. [X] Yes [ ] No The Registrant had 3,195,934 shares of Common Stock, par value $.001, outstanding as of July 15, 1998. Part 1 - FINANCIAL INFORMATION GALLERY OF HISTORY, INC. and SUBSIDIARIES CONSOLIDATED BALANCE SHEETS - UNAUDITED ______________________________________________________________________
JUNE 30, SEPTEMBER 30, 1998 1997 ----------- ------------ ASSETS Cash $ 51,820 $ 20,095 Accounts receivable 47,810 59,650 Prepaid expenses 72,916 50,928 Documents owned 6,719,713 6,980,816 Land and building-net 1,442,628 1,454,805 Property and equipment-net 246,375 258,536 Other assets 170,119 168,636 ---------- ---------- TOTAL ASSETS $ 8,751,381 $ 8,993,466 ========== ========== LIABILITIES Accounts payable $ 34,049 $ 74,409 Notes payable 53,263 62,600 Mortgage notes payable 1,200,327 1,376,239 Deposits 28,310 49,570 Deferred tax 145,885 144,043 Accrued and other liabilities 96,567 93,633 ---------- ---------- TOTAL LIABILITIES 1,558,401 1,800,494 ---------- ---------- STOCKHOLDERS' EQUITY Common stock: $.001 par value; 10,000,000 shares authorized; 5,917,654 shares issued 5,918 5,918 Additional paid-in-capital 9,392,363 9,392,363 Accumulated deficit (64,307) (157,828) Treasury stock (2,709,220 and 2,676,720 shares), at cost (2,140,994) (2,047,481) ---------- ---------- TOTAL STOCKHOLDERS' EQUITY 7,192,980 7,192,972 ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 8,751,381 $ 8,993,466 ========== ========== See the accompanying notes to consolidated financial statements.
GALLERY OF HISTORY, INC. and SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED ______________________________________________________________________
THREE MONTHS ENDED NINE MONTHS ENDED JUNE 30, JUNE 30, 1998 1997 1998 1997 -------- --------- --------- --------- REVENUES $ 692,288 $ 670,944 $2,097,409 $2,442,715 COST OF GOODS SOLD 277,059 193,740 812,398 653,320 --------- --------- --------- --------- GROSS PROFIT 415,229 477,204 1,285,011 1,789,395 --------- --------- --------- --------- OPERATING EXPENSES: Selling, general and administrative 356,397 343,809 1,081,789 1,124,544 Depreciation 17,010 17,632 55,857 63,115 Advertising 15,504 33,476 67,106 74,451 Maintenance & repairs 2,060 8,386 8,103 23,192 Loss on gallery closure -- -- -- 941 Restructuring charge -- 217,438 -- 217,438 --------- --------- --------- --------- TOTAL OPERATING EXPENSES 390,971 620,741 1,212,855 1,503,681 --------- --------- --------- --------- OPERATING INCOME (LOSS) 24,258 (143,537) 72,156 285,714 --------- --------- --------- --------- OTHER INCOME (EXPENSE) Gain on repurchase of common stock -- -- -- 356,553 Interest expense (32,373) (50,252) (100,584) (149,749) Other 41,207 51,946 122,436 162,501 --------- --------- --------- --------- TOTAL OTHER INCOME 8,834 1,694 21,852 369,305 --------- --------- --------- --------- INCOME (LOSS) BEFORE INCOME TAXES 33,092 (141,843) 94,008 655,019 (PROVISION) CREDIT FOR INCOME TAXES 2,923 92,356 (487) (7,444) --------- --------- --------- --------- NET INCOME (LOSS) $ 36,015 $ (49,487) $ 93,521 $ 647,575 ========= ========= ========= ========= EARNINGS (LOSS) PER SHARE: Basic $ .01 $(.02) $ .03 $ .19 ==== ==== ==== ==== Diluted $ .01 $(.02) $ .03 $ .19 ==== ==== ==== ==== See the accompanying notes to consolidated financial statements.
GALLERY OF HISTORY, INC. and SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED ______________________________________________________________________________
NINE MONTHS ENDED JUNE 30, 1998 1997 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 93,521 $ 647,575 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 105,068 109,979 Gain on exchange of inventory for purchase of treasury stock -- (356,553) Gain on disposal of property -- (1,096) (Increase) decrease in: Prepaid expenses (21,988) 3,799 Accounts receivable 11,840 67,841 Documents owned 261,103 187,954 Other assets (1,483) 239,144 (Decrease) increase in: Accounts payable (40,360) (10,992) Customer deposits (21,260) 17,219 Deferred tax 1,842 -- Accrued and other liabilities 2,934 8,372 --------- -------- Net cash provided by operating activities 391,217 913,242 --------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of equipment -- 2,000 Purchase of property and equipment (80,730) (73,798) --------- -------- Net cash used in investing activities (80,730) (71,798) --------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from bank line of credit -- 137,500 Repayments of bank line of credit -- (137,500) Proceeds from mortgage and notes payable 825,026 55,000 Repayments of mortgage and notes payable (1,010,275) (334,635) Repurchase of common stock (93,513) (211,436) --------- -------- Net cash used in financing activities (278,762) (491,071) --------- -------- NET INCREASE IN CASH 31,725 350,373 CASH, BEGINNING OF PERIOD 20,095 115,800 --------- -------- CASH, END OF PERIOD $ 51,820 $ 466,173 ========= ======== SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: For the nine month period ended June 30, 1997: (1) Documents with a cost of $1,446,492 were exchanged for shares of the Company's common stock valued at $1,803,045. See the accompanying notes to consolidated financial statements.
GALLERY OF HISTORY, INC. and SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Nine Month Period Ended June 30, 1998 and 1997 _____________________________________________________________________________ 1) Summary of Significant Accounting Policies The consolidated financial statements included herein have been prepared by Gallery of History, Inc. (the Company), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, all adjustments, consisting of normal recurring items, necessary for a fair presentation of the results for the interim periods have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. It is suggested that these consolidated financial statements are read in conjunction with the financial statements and the notes thereto included in the Company's 1997 Annual Report on Form 10-KSB. 2) Unclassified Balance Sheet The Company includes in its financial statements an unclassified balance sheet because it believes that such presentation is more meaningful as a consequence of the Company's historical policy of acquiring documents in excess of its current needs, when feasible, and it is not practicable to determine what portion of the documents owned will be sold within the next twelve months. 3) Repurchase of Common Stock In October 1996, the Company repurchased 2,659,720 shares of its common stock, representing the entire interest of the Company's largest shareholder for total consideration of $2,000,000, consisting of 460 documents valued at $1,803,045 and $196,955 in cash. The parties negotiated the value of the inventory based on an independent expert's appraisal. The book value of the inventory was $1,446,492, resulting in a gain on disposition of $356,553. In May 1997, the Company purchased 5,000 shares of its common stock at a price of $2.875. In September 1997, it purchased 12,000 shares at $2.75; in October 1997, it purchased 30,000 at $2.865; in December 1997, it purchased 2,500 shares at $2.563 and July 2, 1998, the Company purchased 12,500 shares at $3.25. 4) Earnings per Share The computation of earnings or loss per share is based on the weighted average number of shares of common stock outstanding and stock options granted that are outstanding, if applicable. In December 1997, the Company adopted SFAS No. 128, "Earnings per Share," effective December 15, 1997. As a result the Company's reported earnings per share for 1997 were restated.
For the periods ended June 30, 1997 June 30, 1998 ___________________________ ________________________ Income Shares Per-Share Income Shares Per-Share Amount Amount ___________________________ ________________________ Basic EPS Income available to common shareholders $647,575 3,354,499 $0.19 $93,521 3,210,036 $0.03 Effect of dilutive securities Options -- -- -- 24,853 ___________________ _________________ Diluted EPS Income available to common shareholders including assumed conversion $647,575 3,354,499 $0.19 $93,521 3,234,889 $0.03 ========================== ========================
5) Restructuring Charge The restructuring charge appearing in the period ended June 30, 1997, represents the write down of certain assets, principally the Company's book inventory. Part 1 - Item 2 Financial Information MANAGEMENT'S DISCUSSION AND ANALYSIS FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources - ------------------------------- Due to the nature of the Company's inventory of documents owned, the Company has presented an unclassified balance sheet (see Note 2 to the consolidated financial statements). Accordingly, the traditional measures of liquidity in terms of changes in working capital are not applicable. The increase in net cash provided by operating activities for the nine months ended June 30, 1998 was largely due to the decrease in the Company's document inventory. Purchases of documents during the nine month period ended June 1998 were approximately $225,000 compared to approximately $270,000 for the nine month period ended June 1997. An increase in prepaid expenses is attributed to the prepayment for catalogs in process for an upcoming auction. The Company utilizes the cash provided from operations to pay down its mortgage revolving line of credit rather than maintaining larger cash balances. In addition, the Company has also utilized cash generated from operations to purchase shares of its Common Stock in the open market or privately negotiated transactions. The Company has available a line of credit from its bank in the amount of $100,000 at an interest rate of 1.5% over the prime rate with a maturity date of July 15, 1999. Loans under the line are secured by the Company's inventory. As of June 30, 1998, there was no outstanding balance on this line of credit. In addition, the Company has a reducing principal line of credit in the amount of approximately $35,000 as of June 30, 1998, with a maturity of March 1999. The principal is reduced by $4,667 a month. As of June 30, 1998, there were no funds drawn against this line of credit. Any funds drawn bear interest at the bank's prime rate plus 1.5%. In July 1997, the Company's term mortgage note was converted to a reducing revolving line of credit in the amount of $1,839,523. The line of credit has a 59 month amortization of principal at a 9% interest rate and a balloon payment due at maturity in July 2002 in the amount of $1,565,106. This line of credit is collateralized by the Company's headquarters building. As of June 30, 1998, there was $592,775 available under this line of credit with a mortgage balance of $1,200,327. As stated above, all excess cash is applied against this loan rather than maintaining excessive cash balances. The Company believes its current cash and working capital requirements will be satisfied for the near term by revenue generated from operations and amounts available under the existing lines of credit. In the event the Company does not generate sufficient working capital from operations, the Company will seek alternative equity and/or debt financing, the availability and terms of which cannot be assured. Results of Operations - --------------------- Document revenues increased 3% comparing the quarter period ended June 1998 to June 1997. Revenues decreased 14% for the nine month period ended June 30, 1998 compared to the nine month period ended June 30, 1997. This nine month period decrease is the result of the closure of the Fashion Show Mall gallery in March 1997. Retail sales decreased 65% comparing the nine month periods, of which the closure amounted to 74% of the decrease. Retail sales amounted to 14% of total sales for the nine month period ended June 30, 1998 as compared to 33% of total sales for the nine month period ended June 30, 1997. Auction sales increased 14% comparing the quarter periods and 11% comparing the two nine month periods. Both quarter periods had two auctions included; six auctions were held in the nine month period ended June 30, 1998 compared to five auctions held in the previous year period. Cost of goods sold increased to 40% of revenues for the three month period ended June 30, 1998 compared to 29% of revenues for the three month period ended June 30, 1997. Costs of goods sold were 39% of revenues for the nine month period ended June 30, 1998 compared to 27% of revenues for June 30, 1997. The increase is related to the cost of printing and mailing the catalogs for the auction sales which amount to 18% of revenues for the three month period ended June 30, 1998 compared to 13% for the three month period ended June 30, 1997. Catalog costs amounted to 16% of revenues for the nine month period ended June 30, 1998 as compared to 8% for the nine month period ended June 30, 1997. The Company is testing new markets in an effort to expand its bidder base. As a result, the Company is printing and mailing a substantial number of its catalogs in excess of its proven bidder population. The Company is averaging approximately $30,000 for catalogs and $18,000 in mailing cost for each auction held in the current nine month period compared to an average catalog cost of approximately $25,000 and mailing cost of $10,500 per auction in the previous year nine month period. The document inventory cost portion of total cost of goods sold increased slightly due to the greater share of sales at wholesale/auction pricing compared to retail pricing. In the quarter ended June 1997, the Company incurred a $217,438 restructuring charge due to the change in the nature of its business by shifting from retail sales to wholesale/auction sales. The major portion of this charge was a write down in the Company's book inventory, that was previously sold through its retail galleries. Total operating expenses, without including the restructuring charge in the comparison, decreased 3% to 56% of revenues for the quarter ended June 30, 1998 from 60% of revenues for the quarter ended June 30, 1997. Total operating expenses decreased 6% to 58% of revenues for the nine month period ended June 30, 1998 compared to 53% of revenues for the nine months ended June 30, 1997. The decrease is a result of a decrease in advertising cost and repair charges. Advertising decreased to 2% of revenues for the quarter period ended June 30, 1998 compared to 5% for the quarter ended June 30, 1997. Advertising costs amount to 3% of revenues for both the nine months ended June 1998 and 1997. Maintenance and repair expenses decreased 75% comparing the two quarters and decreased 65% comparing the nine month periods largely due to the decreased cost of maintaining its mainframe computer, which was replaced with a PC client/server network. Selling, general and administrative expenses increased 4% and were 51% of revenues for the quarter ended June 30, 1998 compared to the quarter ended June 30, 1997. This increase was largely due to an 11% increase in salaries comparing the quarters reflecting retroactive pay increases. Comparing the nine month periods, selling, general and administrative expenses decreased 4% largely due to the closure of the Fashion Show Mall gallery in the previous year period. Rent expense decreased 40%, utilities and telephone expenses decreased 32% and property taxes decreased 12% comparing the two periods. In addition, in the previous year nine month period, abnormal fees were incurred for professional services relating to the stock repurchase transaction. Depreciation expense decreased 4% comparing the three month period ended June 30, 1998 to June 30, 1997 and 11% comparing the two nine month periods. The decrease was due to the closure of the Las Vegas gallery and equipment and leasehold improvements becoming fully depreciated. Interest expense decreased 36% to 5% of revenues for the three month period ended June 30, 1998 from 7% of revenues for the quarter ended June 30, 1997. Interest decreased 33% to 5% of revenues for the nine month period ended June 30, 1998 compared to 6% of revenues for the nine months ended June 30, 1997. The decrease is attributed to lower average outstanding loan balances in the current period including paying down on the term mortgage note that was converted to a revolving line of credit. Included in other income and expense in the previous year period was the gain on repurchase of common stock as discussed in Note 3 to the consolidated financial statements. Part II - Other Information Item 1-3. None. Item 4. Submission of Matters to a Vote of Security Holders. On June 5, 1998, the Company held its annual meeting of shareholders for the following purposes: (1) to elect five Directors to serve until the next annual meeting of shareholders; and (2) to approve the appointment of Arthur Andersen LLP, as the Company's independent auditors for the fiscal year ending September 30, 1998. At the Meeting the following Directors were elected by a vote of 1,160,648 for and 101 withholding authority: Todd M. Axelrod, Rod Lynam, Pamela Axelrod, Roger Croteau and Bernard Duke. Voting for the appointment of Arthur Andersen LLP, as the Company's independent auditors, 1,160,680 shares were in favor and 69 shares abstain. Item 5. None. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. None. (b) Reports on Form 8-K. None. SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Gallery of History, Inc. _______________________________ (Registrant) Date July 31, 1998 /s Todd M. Axelrod ______________________ ________________________________ Todd M. Axelrod President and Chairman of the Board (Principal Executive Officer) Date July 31, 1998 /s Rod Lynam ______________________ _______________________________ Rod Lynam Treasurer and Director (Principal Accounting Officer) EX-27 2
5 This schedule contains summary financial information extracted from the Company's Consolidated Balance Sheet dated June 30, 1998 and its Consolidated Statement of Operations covering the period from October 1, 1997 to June 30, 1998 and is qualified in its entirety by reference to such financial statement and notes thereof. 9-MOS SEP-30-1998 JUN-30-1998 51820 0 47810 0 6719713 0 2748583 1639580 8751381 0 1200327 0 0 5918 7187062 8751381 2097409 2097409 812398 812398 1212855 0 100584 94008 487 93521 0 0 0 93521 .03 .03 -----END PRIVACY-ENHANCED MESSAGE-----