-----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, FEss/rJLgHbUmSQ+OR/y0A0nYWxH4RAroOEkPDqko3HrBp8PolMBEKZTAEeqAMh+ QXnRzHsJLCHmdwlB1dEaBw== 0000763730-03-000002.txt : 20030214 0000763730-03-000002.hdr.sgml : 20030214 20030214124208 ACCESSION NUMBER: 0000763730-03-000002 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20021231 FILED AS OF DATE: 20030214 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: 03564974 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2: PROMENADE SUITE 207 CITY: LAS VEGAS STATE: NV ZIP: 89102 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN MUSEUM OF HISTORICAL DOCUMENTS CHARTERED/NV/ DATE OF NAME CHANGE: 19900816 10QSB 1 dec10q.txt FORM 10-QSB FOR QUARTER ENDED 12/31/02 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549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, 2002 [ ] 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 February 1, 2003. Part 1 - FINANCIAL INFORMATION -------------------------------- GALLERY OF HISTORY, INC. and SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ______________________________________________________________________ DECEMBER 31, SEPTEMBER 30, 2002 2002 ----------- ------------ (Unaudited) ASSETS Cash $ 29,513 $ 12,494 Inventory of documents owned 6,354,509 6,460,125 Deferred tax assets 1,039,423 965,267 Property and equipment, net 1,590,982 1,568,553 Other assets 183,174 171,288 ---------- ---------- TOTAL ASSETS $ 9,197,601 $ 9,177,727 ========== ========== LIABILITIES Accounts payable $ 84,103 $ 25,046 Notes payable: Majority shareholder 2,887,650 2,809,133 Other 1,526,566 1,579,514 Accrued expenses and other 363,253 281,055 ---------- ---------- TOTAL LIABILITIES 4,861,572 4,694,748 ---------- ---------- STOCKHOLDERS' EQUITY Common stock: $.0005 par value; 20,000,000 shares authorized; 11,935,308 shares issued 5,968 5,968 Additional paid-in-capital 9,851,655 9,870,655 Deferred stock-based compensation (2,708) (18,709) Accumulated deficit (2,510,215) (2,366,264) Common stock in treasury, 6,309,324 shares, at cost (3,008,671) (3,008,671) ---------- ---------- TOTAL STOCKHOLDERS' EQUITY 4,336,029 4,482,979 ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 9,197,601 $ 9,177,727 ========== ========== See the accompanying notes to consolidated financial statements. GALLERY OF HISTORY, INC. and SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED __________________________________________________________________________ THREE MONTHS ENDED DECEMBER 31, 2002 2001 -------- -------- (Restated) REVENUES $ 368,114 $ 292,760 COST OF REVENUES 132,280 72,772 --------- --------- GROSS PROFIT 235,834 219,988 --------- --------- OPERATING EXPENSES: Selling, general and administrative 346,063 398,064 Depreciation 42,110 45,777 --------- --------- 388,173 443,841 --------- --------- OPERATING LOSS (152,339) (223,853) --------- --------- OTHER INCOME (EXPENSE): Interest expense: Majority shareholder (45,730) (42,149) Other (36,247) (38,569) Rental income, net 14,456 10,284 Other 1,753 2,740 --------- --------- (65,768) (67,694) --------- --------- NET LOSS BEFORE INCOME TAX BENEFIT (218,107) (291,547) INCOME TAX BENEFIT 74,156 107,872 --------- --------- NET LOSS $ (143,951) $ (183,675) ========= ========= BASIC AND DILUTED LOSS PER SHARE $(.03) $(.03) ==== ==== WEIGHTED AVERAGE SHAES OUTSTANDING 5,625,984 5,625,984 ========= ========= 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, 2002 2001 -------- -------- (Restated) CASH FLOWS FROM OPERATING ACTIVITIES: Net Loss $(143,951) $(183,675) Adjustments to reconcile net loss to net cash used for operating activities: Depreciation and amortization 48,891 52,366 (Gain)Loss on disposal of property, net 5,450 -- Common stock issued for services (2,999) 57,425 (Increase) decrease in: Prepaid expenses (13,255) (36,524) Deferred tax assets (74,156) (107,872) Inventory of documents owned 105,616 (13,586) Other assets 1,370 16,435 (Decrease) increase in: Accounts payable 59,058 50,329 Accrued expenses and other 82,195 5,837 -------- -------- Net cash provided by (used in) operating activities 68,219 (159,265) -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (76,770) (1,181) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from borrowings: Majority shareholder 104,400 117,000 Other 66,214 155,000 Repayments of borrowings: Majority shareholder (25,883) (9,518) Other (119,161) (107,426) -------- -------- Net cash provided by financing activities 25,570 155,056 -------- -------- NET INCREASE (DECREASE) IN CASH 17,019 (5,390) CASH, BEGINNING OF PERIOD 12,494 7,957 -------- -------- CASH, END OF PERIOD $ 29,513 $ 2,567 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during period for interest $ 81,977 $ 79,982 ======== ======== See the accompanying notes to consolidated financial statements. GALLERY OF HISTORY, INC. and SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ____________________________________________________________________________ Basis of Presentation - --------------------- The consolidated financial statements as of December 31, 2002 and for the periods ended December 31, 2002 and 2001, included herein have been prepared by Gallery of History, Inc. and subsidiaries (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 audited financial statements and the notes thereto included in the Company's 2002 Annual Report on Form 10-KSB, from which the September 30, 2002 balance sheet information is derived. Reclassifications - ----------------- Certain prior year amounts have been reclassified to conform with the current year presentation. Prior period adjustments - ------------------------ In the Company's previously issued December 2001 interim statement of operations, the tax valuation allowance was determined to be overstated as a result of not considering unrecorded appreciation in the inventory of documents owned required by Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes. Therefore, the December 2001 interim statement of operations has been retroactively restated. The effects of the restatement were to increase the income tax benefit and decrease the net loss for that period by $107,872. Part 1 - Item 2 Financial Information MANAGEMENT'S DISCUSSION AND ANALYSIS FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward Looking Statements - -------------------------- This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 relating to the Company's future operations and prospects, including statements that are based on current projections and expectations about the markets in which the Company operates, and management's beliefs concerning future performance and capital requirements based upon current available information. Such statements are based on management's beliefs as well as assumptions made by and information currently available to management. When used in this document, words like "may", "might", "will", "expect", "anticipate", "believe", and similar expressions are intended to identify forward looking statements. Actual results could differ materially from management's current expectations. For example, there can be no assurance that additional capital will not be required or that additional capital, if required, will be available on reasonable terms, if at all, at such times and in such amounts as may be needed by the Company. Liquidity and Capital Resources - ------------------------------- The unique characteristic of some documents owned may become more rare with their current market value rising significantly over time. In many instances the Company has a supply of similar documents that, if marketed simultaneously, may negatively impact market value. As a result, managing the rarity of certain types or categories of documents through the judicious marketing of only a selection of documents available in the Company's inventory is an important element of the Company's business. This element is one of the reasons that the Company has accumulated and maintains a supply of documents that is significantly greater than it intends to sell in a year or even aggressively market. The Company anticipates no material purchases of documents in the near term. The Company's monthly debt service requirement on $4,414,216 of borrowings, including $2,887,650 due to the Company's majority shareholder and president, Todd Axelrod, is approximately $18,000. Historically, the Company has experienced cash flow deficiencies which may continue and have been funded primarily with borrowings from Mr. Axelrod. Management believes, but there is no assurance, that the need for such borrowings should diminish and profitability and cash flows should improve with the full implementation of the Company's strategic plans (see Results of Operations). For the three months ended December 31, 2002, the Company had a positive cash flow from operating activities of approximately $68,000, over $227,000 higher than for the comparable prior year period. The increase resulted from efforts to reduce operating expenses ($55,668), additional gross profit ($15,846), and a reduction of inventory ($106,000) combined with increases in accrued expenses. The Company believes that its current cash requirements will be met by appropriately managing the timing and volume of new document acquisitions and availability for sale, generating revenues from its operations, drawing amounts under its existing line of credit ($100,000 available at December 31, 2002), seeking additional borrowings collateralized by its documents inventory (although there can be no assurance that such financing will be obtainable on favorable terms or at all) and borrowing amounts from Mr. Axelrod as required. Mr. Axelrod has also agreed not to demand payment on amounts the Company has borrowed and, if necessary, defer his right to receive interest payments through at least October 1, 2003. Critical Accounting Policies and Practices - ------------------------------------------ Revenues. The Company recognizes revenues from document sales when title passes to the customer upon shipment. Typically, shipment does not occur until payment has been received. The Company's primary distribution channel over the past few years has been internally promoted and managed auctions to sell its documents and certain documents it may hold from time to time on consignment. For each item sold through the Company's internal auctions, a 15% premium (processing fee) is charged plus a commission on consigned sales. Shipping and handling costs and related customer charges are not significant. The Company also sells its documents through externally managed and promoted auctions, which is becoming a large share of its revenues. The outside auction operator's shares in the document's selling price (approximately 5%) and the Company records the balance as revenue. The balance of the Company's sales are from repeat customers through its corporate office and web shoppers. Inventory of documents owned and operating cycle. Documents owned are stated at cost on a specific-identification method, not in excess of estimated market value. Management reviews the recorded cost and estimated value of the documents owned on a regular basis (at least quarterly) to determine the adequacy of the allowance for market value declines, if any. Management believes that the Company's inventory of documents is generally appreciating, not depreciating, in value. As a result, managing the rarity of certain types or categories of documents through the judicious marketing of only a selection of documents available in the Company's inventory is an important element of the Company's business. This element is one of the reasons that the Company has accumulated and maintains a supply of documents that is significantly greater than it intends to sell in a year or even aggressively market. On an aggregate historical cost basis (not number of documents), only about one-third of the Company's documents are listed on one or more of the various distribution channels or displayed for sale. By point of reference, the aggregate cost of these actively marketed items is approximately three times the cost of documents sold during the year. As the Company's distribution channels have changed over the years and are expected to continue to change in the future, the volume of documents marketed in any one year, or succession of years, changes significantly. For these reasons, it has been impractical, for the Company to define its operating cycle and, as a result, presents its balance sheet on an unclassified basis. The Company believes that this presentation better reflects the nature of the Company's business and its principal asset. Over the past several years the cost of the Company's inventory as of its fiscal year end has ranged from its present level of approximately $6.4 million to roughly $7.2 million, which management believes is a sufficient supply of documents to provide for managing rarity and its other purposes. Management has no current intention of significantly changing the composition of its inventory and, as a result, the Company accounts for changes in the cost of documents owned as an adjustment to arrive at cash flows from operating activities. Results of Operations - --------------------- Total revenues increased 26% for the three month period ended December 31, 2002 compared to the comparable period of the previous year. Revenues generated from the Company's headquarters operation including the internet increased 19% comparing the two quarter periods. Internet revenues generated in the Company's first quarter ended December 31, 2002 amounted to 16% of the total quarter's revenues. Revenues generated from outside auctions amounted to 40% of the current quarter's revenues, up from zero in the comparable prior period. Revenues generated from the Company's catalog auction decreased 43% in its first quarter ended December 31, 2002 compared to last year's first quarter period ended December 31, 2001. The Company conducted only one auction during the current quarter compared to two auctions in the quarter period ended December 2001. Total cost of revenues increased to 36% of net revenues for the quarter ended December 31, 2002 compared to 25% of net revenues for the quarter ended December 31, 2001. The increase in document costs of revenues can be attributed to a larger percentage of total revenues generated from outside auctions, which tends to result in lower profit margins. However, as indicated in the following paragraph, lower margins were more than offset by reduced selling costs associated with internally managed auctions. As a result, overall profitability improved during the current period compared to the previous year period. This is consistent with management's plan to improve cash flows and operating results by shifting its sales efforts from internally managed and promoted auctions as the Company's primary distribution channel to participation in external auctions promoted and managed by others and direct-purchase website sales. Continued development of the Company's direct-purchase website, another lower cost distribution tool, and links to other media events with similar customer profiles is also a priority. By aggressively participating in externally managed and promoted auctions and increasing the effectiveness of its direct-purchase website, the Company believes it may double the number of documents that it can market without adversely impacting the perceived rarity of its documents in inventory. However, there can be no assurance that the Company will be able to accomplish this goal. In addition, professional fees decreased in the current quarter compared to the last year quarter due to the expiration of a consulting contract and depreciation decreased because certain assets became fully depreciated. Interest expense increased only slightly due to a corresponding increase in outstanding debt. Item 3. Controls and Procedures. ----------------------- Based on their evaluation, as of a date within 90 days of the filing date of this form 10-QSB, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rule 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as amended) are effective. There have been no significant changes in internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Part 2 - Other Information Item 1-5. None. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. Exhibit 99.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes- Oxley Act of 2002. Exhibit 99.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes- Oxley Act of 2002. (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, 2003 /s/ Todd M. Axelrod ______________________ ________________________________ Todd M. Axelrod President and Chairman of the Board (Principal Executive Officer) Date February 14, 2003 /s/ Rod Lynam ______________________ _______________________________ Rod Lynam Treasurer and Director (Principal Accounting Officer) STATEMENT PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 BY PRINCIPAL EXECUTIVE OFFICER REGARDING FACTS AND CIRCUMSTANCES RELATING TO EXCHANGE ACT FILINGS I, Todd Axelrod, certify that: 1. I have reviewed this quarter report on Form 10-QSB of Gallery of History, Inc.; 2. Based on my knowledge, this quarter report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarter report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarter report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarter report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarter report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarter report (the "Evaluation Date"); and c) presented in this quarter report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarter report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: February 14, 2003 /s/ TODD AXELROD ---------------- Todd Axelrod Chief Executive Officer STATEMENT PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 BY PRINCIPAL FINANCIAL OFFICER REGARDING FACTS AND CIRCUMSTANCES RELATING TO EXCHANGE ACT FILINGS I, Rod Lynam, certify that: 1. I have reviewed this quarter report on Form 10-KSB of Gallery of History, Inc.; 2. Based on my knowledge, this quarter report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarter report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarter report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarter report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarter report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarter report (the "Evaluation Date"); and c) presented in this quarter report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarter report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: February 14, 2003 /s/ ROD LYNAM -------------- Rod Lynam Chief Financial Officer EX-99 4 q991-ex.txt EXHIBIT 99.1 - CERTIFICATION OF CEO Exhibit 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Gallery of History, Inc. (the "Company") on Form 10-QSB for the period ended December 31, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Todd Axelrod, Chief Executive Office of the Company, hereby certify, pursuant to 18 U.S.C. Section 1359, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that: 1. The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presented, in all material respects, the financial condition and results of operations of the Company. /s/ Todd Axelrod - ------------------ Todd Axelrod Chief Executive Officer February 14, 2003 EX-99 5 q992-ex.txt EXHIBIT 99.2 - CERTIFICATION OF CFO Exhibit 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Gallery of History, Inc. (the "Company") on Form 10-QSB for the period ended December 31, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Rod Lynam, Chief Financial Office of the Company, hereby certify, pursuant to 18 U.S.C. Section 1359, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that: 1. The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presented, in all material respects, the financial condition and results of operations of the Company. /s/ Rod Lynam - --------------- Rod Lynam Chief Financial Officer February 14, 2003 -----END PRIVACY-ENHANCED MESSAGE-----