-----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, Hp1Hagf3UjYiNUPrLEe9XV2Wc5p0mAgG6Ey2hc29qJiMNnRDQNCQYHWwkoIqdhf2 dr8jhtdJL0EQ/2KnCH3H8Q== 0000763730-01-500007.txt : 20010815 0000763730-01-500007.hdr.sgml : 20010815 ACCESSION NUMBER: 0000763730-01-500007 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010814 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: 1934 Act SEC FILE NUMBER: 000-13757 FILM NUMBER: 1709004 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 STREET 2: PROMENADE SUITE 207 CITY: LAS VEGAS STATE: NV ZIP: 89102 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN MUSEUM OF HISTORICAL DOCUMENTS CHARTERED/NV/ DATE OF NAME CHANGE: 19900816 10QSB 1 r10qjun00.txt 10QSB FOR QUARTER ENDED JUNE 30, 2001 SECURITIES AND EXCHANGE COMMISSION Washington, D.C.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, 2001 [ ] 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 5,625,984 shares of Common Stock, par value $.0005, outstanding as of August 1, 2001. Part 1 - FINANCIAL INFORMATION GALLERY OF HISTORY, INC. and SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ______________________________________________________________________ JUNE 30, SEPTEMBER 30, 2001 2000 UNAUDITED ----------- ------------ ASSETS Cash $ 102,638 $ 30,138 Accounts receivable 23,109 60,388 Prepaid expenses 38,287 39,210 Documents owned 6,893,993 7,176,068 Land and building-net 1,291,111 1,328,990 Property and equipment-net 509,322 584,260 Other assets 127,916 131,329 ---------- ---------- TOTAL ASSETS $ 8,986,376 $ 9,350,383 ========== ========== LIABILITIES Accounts payable $ 36,324 $ 41,386 Notes payable 1,711,637 1,732,190 Indebtedness to related parties 2,191,239 1,801,890 Deposits 12,553 11,448 Accrued and other liabilities 166,109 125,899 ---------- ---------- TOTAL LIABILITIES 4,117,862 3,712,813 ---------- ---------- STOCKHOLDERS' EQUITY Common stock: $.0005 par value; 20,000,000 shares authorized; 11,935,308 shares issued and outstanding 5,968 5,968 Additional paid-in-capital 9,725,466 9,715,750 Deferred compensation (79,191) (183,992) Accumulated deficit (1,775,058) (891,485) Common stock in treasury (6,309,324 shares), at cost (3,008,671) (3,008,671) ---------- --------- TOTAL STOCKHOLDERS' EQUITY 4,868,514 5,637,570 ---------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 8,986,376 $ 9,350,383 ========== ========== 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, 2001 2000 2001 2000 -------- -------- -------- --------- REVENUES $ 319,246 $ 446,708 $ 954,886 $1,442,317 COST OF GOODS SOLD 169,830 184,782 466,579 619,292 -------- -------- --------- --------- GROSS PROFIT 149,416 261,926 488,307 823,025 -------- -------- --------- --------- OPERATING EXPENSES: Selling, general and administrative 350,038 384,180 1,056,245 1,044,795 Depreciation 39,301 30,760 119,740 84,787 Advertising 6,767 9,584 24,208 27,497 Maintenance & repairs 3,890 10,502 21,541 23,462 -------- -------- --------- --------- TOTAL OPERATING EXPENSES 399,996 435,026 1,221,734 1,180,541 -------- -------- --------- --------- OPERATING LOSS (250,580) (173,100) (733,427) (357,516) -------- -------- --------- --------- OTHER INCOME (EXPENSE) Interest expense (82,503) (70,600) (244,200) (192,453) Other 11,640 28,043 94,054 63,484 TOTAL OTHER EXPENSE (70,863) (42,557) (150,146) (128,969) -------- -------- --------- --------- LOSS BEFORE INCOME TAXES (321,443) (215,657) (883,573) (486,485) PROVISION FOR INCOME TAX -- -- -- -- -------- -------- --------- --------- NET LOSS $(321,443) $(215,657) $ (883,573) $ (486,485) ======== ======== ========= ========= LOSS PER SHARE: Basic $(.06) $(.04) $(.16) $(.09) ==== ==== ==== ==== Diluted $(.06) $(.04) $(.16) $(.09) ==== ==== ==== ==== 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, 2001 2000 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Loss $(883,573) $(486,485) Adjustments to reconcile net loss to net cash used for operating activities: Depreciation and amortization 158,688 134,326 Gain on disposal of property (20,773) -- Common stock issued for services 99,070 81,908 (Increase) decrease in: Accounts receivable 37,279 95,818 Prepaid expenses 923 3,407 Documents owned 153,944 (426,683) Other assets 3,413 5,948 (Decrease) increase in: Accounts payable (5,062) (77,442) Deposits 1,105 (3,000) Accrued and other liabilities 40,210 42,018 -------- -------- Net cash used for operating activities (414,776) (630,185) -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (66,097) (215,776) Proceeds from sale of property 23,094 -- -------- -------- Net cash used for investing activities (43,003) (215,776) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Net borrowings from credit facilities and related parties 530,279 809,551 Repurchase of common stock -- (81,118) -------- -------- Net cash provided by financing activities 530,279 728,433 -------- -------- NET INCREASE (DECREASE) IN CASH 72,500 (117,528) CASH, BEGINNING OF PERIOD 30,138 258,263 -------- -------- CASH, END OF PERIOD $ 102,638 $ 140,735 ======== ======== SUPPLEMENTAL SCHEDULE OF NON-CASH OPERATING AND INVESTING ACTIVITIES: For the nine month period ended June 30, 2001: (1) Documents with a net cost of $128,131 were exchanged for a reduction in related party debt of $143,578. (2) Sale of property included a note paid in full in the amount of $17,906. 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, 2001 and 2000 _____________________________________________________________________________ 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 2000 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 2000, the Company purchased 22,500 shares of its common stock at an average price of $3.61 a share. 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 weighted average number of shares outstanding for the quarter periods ended June 30, 2001 and 2000 were 5,567,651 and 5,534,317, respectively. The weighted average number of shares outstanding for the nine months ended June 30, 2001 and 2000 were 5,559,286 and 5,529,081, respectively. Because of the Company's loss, no potential dilution has been considered; therefore the weighted average number of shares for diluted earnings per share is the same as the basic earnings per share. 5) Restricted Common Stock In April 2000, the Company entered into a consultant agreement with an expert investment banker and money manager. As compensation for the consulting services rendered, the Company has issued 100,000 restricted shares of its common stock which will vest over the three year term of the agreement. As of June 30, 2001, 41,667 shares have vested and the remaining 58,333 shares are restricted. The total 100,000 shares have been included in the Common Stock Issued and Outstanding presented in the Company's Balance Sheet. Additionally, $79,191 of deferred compensation was recorded to reflect the unvested balance of the shares as of June 30, 2001. 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 nine month period ended June 30, 2001, largely due to the net operating loss. Offsetting the operating loss, the Company realized a decrease in document inventory and accounts receivable together with an increase in accrued bonuses not yet paid. Because of the cash flow condition, the Company has curtailed its purchases of document inventory. Purchases totaled approximately $80,000 for the nine month period ended June 30, 2001 compared to approximately $740,000 for the nine month period ended June 30, 2000. Accounts receivable decreased because the Company was able to collect a higher percentage in credit card payments rather than checks for its end of June 2001 auction compared to the receipts of the previous year's June auction. 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 August 2, 2002. Loans under the line are secured by the Company's inventory. As of June 30, 2001, the had Company borrowed all funds available under this line of credit. 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 has also borrowed additional funds during the period, when necessary, from Mr. Axelrod. The Company pays the same interest rate as its bank revolving line of credit and has an outstanding balance of $1,191,239 as of June 30, 2001 on these additional borrowed funds. In November 2000, Todd Axelrod acquired 157 documents from the Company for his personal use. The cost of the documents amounted to $140,131. The Company obtained an outside specialist to perform an independent appraisal of the documents involved. The amount of the appraisal was $152,500. The Company offset this amount against debt owing Mr. Axelrod. The Company also purchased three documents from Mr. Axelrod for a cost to the Company of $12,000. The three documents had an appraised value of $18,000. In addition to reducing the Company's debt to Mr. Axelrod, this transaction also reduced its framed document inventory that was produced for the gallery operations that have since been discontinued. The Company believes that, by appropriately managing the timing and amount of additional document acquisitions and generating new revenues from its headquarters operations, the Company's 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, and inventory management techniques that have been utilized in the past. Results of Operations - --------------------- Document revenues decreased 29% comparing the three month periods ended June 30, 2001 to June 30, 2000 and decreased 34% comparing the two nine month periods ended June 30, 2001 to June 30, 2000. Auction sales decreased 32% comparing the three month period ended June 30, 2001 to the three month period ended June 30, 2000. Auction sales decreased 40% comparing the two nine month periods ended June 30, 2001 to June 30, 2000. The decrease is the result of increased competition in the auction market and the economy slowdown in general. The average number of winning bidders decreased 5% comparing the six auctions in the two nine month periods. The number of units sold decreased 20% comparing the nine month periods. Retail sales generated out of the headquarters operation increased 14% comparing the quarter periods and increased 41% comparing the nine month period ended June 30, 2001 to June 30, 2000. Retail sales were 15% of total sales for the nine month period ended June 30, 2001 compared to 7% of total sales for the nine month period in 2000. The increase can be attributed to the increased exposure on the internet in addition to increased traffic at the headquarters' gallery. Total cost of revenues increased to 53% of revenues for the quarter ended June 30, 2001 compared to 41% of revenues for the quarter ended June 30, 2000. For the nine month periods, cost of revenues increased to 49% of revenues for 2001 compared to 43% of revenues for 2000. The increase is due to the decrease in revenues which increased the cost of auction catalogs as a percentage of revenues. Document costs were 23% of revenues for the nine month period in 2001, the same as they were in the nine months of 2000. Cost of catalogs increased to 26% of revenues for the current quarter 2001 compared to 19% of revenues for the previous year quarter. For the nine month periods, cost of catalogs amounted to 26% of revenues in 2001 compared to 20% of revenues for 2000. The Company has decreased the average cost of printing and mailing of catalogs by 13% comparing the two nine month periods. Total operating expenses decreased 8% for the three month period ended June 30, 2001 compared to June 30, 2000. Comparing the two nine month periods, total operating expenses increased 3%. Selling, general and administrative expenses decreased 9% comparing the quarter periods and increased 1% comparing the nine month periods. The decrease comparing the quarter periods was largely due to a decrease in professional fees. Professional fees decreased due to the initial transaction recording a consultant agreement that the Company had entered into during June 2000 - see note 5 to Notes to Consolidated Financial Statements. The increase comparing the nine month periods resulted from an increase in its medical insurance premiums for additional covered employees in addition to a premium increase resulting from expanded document inventory coverage. Depreciation increased 28% to 12% of revenues for the quarter ended June 30, 2001 compared to 7% of revenues for the quarter ended June 30, 2000. For the nine month periods, depreciation increased 41% to 13% of revenues for 2001 compared to 6% of revenues for 2000. The increase is largely due to a complete rewrite of its inventory system software and the creation of auction software which is currently being amortized. Advertising expense decreased 29% comparing the quarter periods and decreased 12% comparing the nine month periods. This decrease is a result of a new contract with a major advertiser of the Company. Maintenance and repair expenses decreased 63% comparing the quarter periods and decreased 8% comparing the nine month periods. This decrease is attributed to the Company utilizing an outside specialist to maintain its computer systems in the previous year on a full-time basis. This service has been renegotiated in the current year reducing the cost to the Company. Interest expense increased 17% comparing the quarter periods and 27% comparing the nine month periods. The increase is a result of higher outstanding loan balances that were utilized to finance the Company's operations. Other income is largely the result of the rental operation for the Company's headquarters building. The increase in the current nine month period is a result of a lease buyout option that was exercised. 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 August 14, 2001 /s Todd M. Axelrod ______________________ ________________________________ Todd M. Axelrod President and Chairman of the Board (Principal Executive Officer) Date August 14, 2001 /s Rod Lynam ______________________ _______________________________ Rod Lynam Treasurer and Director (Principal Accounting Officer) -----END PRIVACY-ENHANCED MESSAGE-----