-----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, OY+NSJPJJox4fNKrxgfIcpq/0cU8hdqTraLGSNgfAaL4z2kz3v9qmSd7V1gt0NX+ mpiPCHhr5HXm/oNpfHQV9Q== 0000763730-00-000002.txt : 20000215 0000763730-00-000002.hdr.sgml : 20000215 ACCESSION NUMBER: 0000763730-00-000002 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000214 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: 541970 BUSINESS ADDRESS: STREET 1: 3601 WEST SAHARA AVE STREET 2: PROMENADE SUITE 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3601 WEST SAHARA AVENUE CITY: LAS VEGAS STATE: NV ZIP: 89102 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN MUSEUM OF HISTORICAL DOCUMENTS CHARTERED/NV/ DATE OF NAME CHANGE: 19900816 10QSB 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB [x] QUARTERLY REPORT PURSUANT TO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 December 31, 1999 [ ] 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 5,525,984 shares of Common Stock, par value $.0005, outstanding as of February 1, 2000. Part 1 - FINANCIAL INFORMATION GALLERY OF HISTORY, INC. and SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ______________________________________________________________________
DECEMBER 31, SEPTEMBER 30, 1999 1999 UNAUDITED ----------- ------------ ASSETS Cash $ 10,751 $ 258,263 Accounts receivable 21,816 204,492 Prepaid expenses 91,928 35,808 Documents owned 6,997,867 6,768,573 Land and building-net 1,366,870 1,379,496 Property and equipment-net 475,261 467,834 Other assets 133,551 136,796 ---------- ---------- TOTAL ASSETS $ 9,098,044 $ 9,251,262 ========== ========== LIABILITIES Accounts payable $ 129,545 $ 177,867 Notes payable 1,736,310 1,596,621 Indebtedness to related parties 1,000,000 1,000,000 Deposits 29,795 21,154 Deferred tax 171,011 171,011 Accrued and other liabilities 101,595 79,395 ---------- ---------- TOTAL LIABILITIES 3,168,256 3,046,048 ---------- ---------- STOCKHOLDERS' EQUITY Common stock: $.0005 par value; 20,000,000 shares authorized; 11,835,308 shares issued and outstanding 5,918 5,918 Additional paid-in-capital 9,392,363 9,392,363 Accumulated deficit (459,822) (265,514) Common stock in treasury (6,309,324 and 6,286,824 shares), at cost (3,008,671) (2,927,553) ---------- ---------- TOTAL STOCKHOLDERS' EQUITY 5,929,788 6,205,214 ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 9,098,044 $ 9,251,262 ========== ========== See the accompanying notes to consolidated financial statements.
GALLERY OF HISTORY, INC. and SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED ___________________________________________________________________
THREE MONTHS ENDED DECEMBER 31, 1999 1998 --------- --------- REVENUES $ 421,296 $ 628,502 COST OF REVENUES 204,269 237,641 --------- --------- GROSS PROFIT 217,027 390,861 --------- --------- OPERATING EXPENSES: Selling, general and administrative 335,112 357,483 Depreciation 24,596 16,459 Advertising 9,113 18,718 Maintenance and repairs 3,699 1,635 --------- --------- TOTAL OPERATING EXPENSES 372,520 394,295 --------- --------- OPERATING LOSS (155,493) (3,434) --------- --------- OTHER INCOME (EXPENSE): Interest expense (55,531) (44,222) Other 16,716 19,586 --------- --------- TOTAL OTHER EXPENSE (38,815) (24,636) --------- --------- LOSS BEFORE INCOME TAXES (194,308) (28,070) CREDIT FOR INCOME TAXES -- 8,161 --------- --------- NET LOSS $ (194,308) $ (19,909) ========= ========= LOSS PER SHARE: Basic $(.04) $ -- Diluted $(.04) $ -- See the accompanying notes to consolidated financial statements.
GALLERY OF HISTORY, INC. and SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED ___________________________________________________________________________
THREE MONTHS ENDED DECEMBER 31, 1999 1998 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Loss $(194,308) $(19,909) Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 41,109 32,973 (Increase) decrease in: Prepaid expenses (56,120) (8,054) Accounts receivable 182,676 205,947 Documents owned (229,294) 14,333 Other assets 3,245 (1,035) (Decrease) increase in: Accounts payable (48,322) (3,932) Deposits 8,641 (2,632) Deferred tax -- (7,293) Accrued and other liabilities 22,200 31,437 -------- ------- Net cash provided by (used for) operating activities (270,173) 241,835 -------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (35,910) (21,145) -------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from notes payable 614,000 691,520 Repayments of notes payable (474,311) (481,758) Repurchase of common stock (81,118) (433,020) -------- ------- Net cash used in financing activities 58,571 (223,258) -------- ------- NET INCREASE (DECREASE) IN CASH (247,512) (2,568) CASH, BEGINNING OF PERIOD 258,263 15,069 -------- ------- CASH, END OF PERIOD $ 10,751 $ 12,501 ======== ======= See the accompanying notes to consolidated financial statements.
GALLERY OF HISTORY, INC. and SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Three Month Period Ended December 31, 1999 and 1998 _____________________________________________________________________________ 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 1999 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 fiscal 1999, the Company purchased 576,584 shares of its common stock at an average price of $.86 a share. In October 1999, the Company purchased 22,500 shares of its common stock at an average price of $3.61 a share. Some of these purchases were made in the open market and others were privately negotiated transactions. 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. To derive basic earnings per share, the average number of shares outstanding for the three months ended December 31, 1999 and 1998 were 5,526,962 and 5,596,756, respectively. Because of the loss situation, no potential dilution has been considered, therefore the average number of shares for diluted earning per share is the same as the basic earning per share. 5) Stock Split The Company declared a two-for-one stock split for its shareholders of record as of December 24, 1998. The distribution was made January 8, 1999. All common stock numbers presented herein have been restated to reflect the stock split. 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 Company incurred a decrease in cash provided by operating activities in its first quarter resulting from the net loss and an increase in the purchasing of new document inventory. Document inventory purchases increased during the quarter due to favorable buying opportunities. A decrease in accounts receivable resulted from the timing of auctions held. In October 1999, the Company purchased 22,500 shares of its Common Stock for $3.61 a share. The Company has utilized its bank lines of credit to finance its operations and common stock repurchase. 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, 2000. Loans under the line are secured by the Company's inventory. As of December 31, 1999, there was no outstanding balance on this line of credit. 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 of the then current balance. This line of credit is collateralized by the Company's headquarters building. As of December 31, 1999, there was approximately $5,000 available under this line of credit with a principal balance of $1,703,466. All excess cash is applied against this loan rather than maintaining excessive cash balances. In March 1999, the Company borrowed $1,000,000 from Mr. Axelrod. This note is due April 30, 2002, with interest payments monthly at a rate of 8%. The purpose of this note was to reduce the Company's outstanding line of credit and to finance its stock repurchase program. 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 decreased 33% for the current quarter compared to the quarter ended December 31, 1998. Retail revenues decreased 28% comparing the two quarters ended December 1999 to 1998, however, both periods resulted in approximately 9% of total revenues. Auction revenues decreased 33% comparing the quarters with both quarter periods consisting of two auctions. In the previous quarter period, the Company had several customers purchasing large quantities of documents; those larger sales were not realized in the current quarter auctions. The proximity of the current quarter auctions could have resulted in a reduced interest among the Company's customers; an auction was held in November 1999 and another in December 1999, rather than the normal six weeks separation between auctions. Furthermore, the competition is increasing with auctions becoming commonplace on the internet. Cost of goods sold increased from 38% of net revenues for the quarter ended December 1998 compared to 49% of net revenues for the quarter ended December 1999. Document costs remained consistent at 24% of net revenues for the two quarter periods. Cost of catalogs increased 17% comparing the quarter ended December 1999 to 1998 or 25% of net revenues for 1999 compared to 14% of net revenues for 1998. The increase is due to enhancements in the printing of the catalogs. Total operating expenses decreased 6% comparing the quarter ended December 31, 1999 to December 31, 1998. Selling, general and administrative expenses decreased 6% comparing the quarter periods. The decrease is attributed to a decrease in salaries and rent expense related to the closure of the Company's retail gallery in Washington, D.C. in January 1999. Depreciation expense increased by 49% comparing the quarter ended December 31, 1999 to December 31, 1998 as a result of the Company's expanded computer equipment and software acquisitions. The added computer equipment also resulted in an increase in repair and maintenance expenses. Advertising decreased 51% for the quarter ended December 1999 compared to December 1998. Because of the increased number of catalog mailings, the Company has scaled back its auction advertising expenditure. Interest expense increased 26% for the quarter ended December 31, 1999 compared to December 31, 1998. The increase is a result of higher outstanding loan balances on the Company's lines of credit, which was drawn on to finance its operations and the purchase of its common stock. Other income is largely the result of the rental operation for the Company's headquarters building. The decrease comparing the periods was a result of a reduction in leased square footage to outside tenants. Part II - Other Information Item 1-5. None. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. (27) Financial Data Schedule. (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 February 14, 2000 /s Todd M. Axelrod ______________________ ________________________________ Todd M. Axelrod President and Chairman of the Board (Principal Executive Officer) Date February 14, 2000 /s Rod Lynam ______________________ _______________________________ Rod Lynam Treasurer and Director (Principal Accounting Officer) EX-27 2 ARTICLE 5 FIN. DATA SCHEDULE FOR 1ST QTR 10-QSB
5 This schedule contains summary financial information extracted from the Company's Consolidated Balance Sheet dated December 31, 1999 and its Consolidated Statement of Operations covering the period from October 1, 1999 to December 31, 1999 and is qualified in its entirety by reference to such financial statement and notes thereof. 3-MOS SEP-30-2000 DEC-31-1999 10751 0 21816 0 6997867 0 2685918 1423787 9098044 0 2736310 0 0 5918 5923870 9098044 421296 421296 204269 204269 372520 0 55531 (194308) 0 (194308) 0 0 0 (194308) (.04) (.04)
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