-----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, CgczTrGNRlPoo1qb+lz54P1w9ATRPp5jh/P44C/sU1s9EsL7PVrcVXDQO6sG+1hn Gihz093JAb1mglc1MxK+pg== 0000763730-04-000002.txt : 20040213 0000763730-04-000002.hdr.sgml : 20040213 20040213160613 ACCESSION NUMBER: 0000763730-04-000002 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20031231 FILED AS OF DATE: 20040213 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: 04599150 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2: PROMENADE SUITE 207 CITY: LAS VEGAS STATE: NV ZIP: 89102 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN MUSEUM OF HISTORICAL DOCUMENTS CHARTERED/NV/ DATE OF NAME CHANGE: 19900816 10QSB 1 r10q1203.txt FORM 10-QSB FOR QUATER ENDED 12/31/2003 UNITED STATES SECURITIES AND EXCHANGE COMMISSION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, 2003 [ ] 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, 2004. Part 1 - FINANCIAL INFORMATION GALLERY OF HISTORY, INC. and SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ________________________________________________________________________ DECEMBER 31, SEPTEMBER 30, 2003 2003 (Unaudited) ASSETS Cash $ 6,638 $ 2,034 Inventory of documents 6,312,775 6,303,706 Deferred tax assets 1,339,842 1,262,819 Property and equipment, net 1,416,478 1,465,499 Other assets 169,146 156,290 ---------- ---------- TOTAL ASSETS $ 9,244,879 $ 9,190,348 ========== ========== LIABILITIES Accounts payable $ 95,119 $ 40,124 Notes payable: Majority shareholder 3,250,963 3,158,355 Other 1,523,929 1,545,373 Accrued salaries due to majority shareholder 569,650 486,962 Other liabilities and accruals 97,680 98,073 ---------- ---------- TOTAL LIABILITIES 5,537,341 5,328,887 ---------- ---------- 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 9,851,655 Accumulated deficit (3,141,414) (2,987,491) Common stock in treasury, 6,309,324 shares, at cost (3,008,671) (3,008,671) ---------- ---------- TOTAL STOCKHOLDERS' EQUITY 3,707,538 3,861,461 ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 9,244,879 $ 9,190,348 ========== ========== See the accompanying notes to consolidated financial statements. GALLERY OF HISTORY, INC. and SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED __________________________________________________________________________ THREE MONTHS ENDED DECEMBER 31, 2003 2002 --------- --------- REVENUES $ 272,764 $ 368,114 COST OF REVENUES 44,000 132,280 --------- --------- GROSS PROFIT 228,764 235,834 --------- --------- OPERATING EXPENSES: Selling, general and administrative 358,290 346,063 Depreciation 41,683 42,110 --------- --------- TOTAL OPERATING EXPENSES 399,973 388,173 --------- --------- OPERATING LOSS (171,209) (152,339) --------- --------- OTHER INCOME (EXPENSE): Interest expense: Majority shareholder (48,137) (45,730) Other (34,447) (36,247) Rental income, net 22,650 14,456 Other 197 1,753 --------- --------- TOTAL OTHER INCOME (EXPENSE) (59,737) (65,768) --------- --------- NET LOSS BEFORE INCOME TAX BENEFIT (230,946) (218,107) INCOME TAX BENEFIT 77,023 74,146 --------- --------- NET LOSS $ (153,923) $ (143,951) ========= ========= BASIC AND DILUTED LOSS PER SHARE $(.03) $(.03) ==== ==== WEIGHTED AVERAGE SHARES 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, 2003 2002 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Loss $(153,923) $(143,951) Adjustments to reconcile net loss to net cash used for operating activities: Depreciation and amortization 49,022 48,891 Loss on disposal of property, net -- 5,450 Common stock issued for services -- (2,999) (Increase) decrease in: Deferred tax assets (77,023) (74,156) Inventory of documents (9,069) 105,616 Other assets (12,856) (11,885) (Decrease) increase in: Accounts payable 54,995 59,058 Accrued expenses and other 82,294 82,195 -------- -------- Net cash used in operating activities (66,560) 68,219 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment -- (76,770) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from borrowings: Majority shareholder 94,000 104,400 Other 35,000 66,214 Repayments of borrowings: Majority shareholder (1,392) (25,883) Other (56,444) (119,161) -------- -------- Net cash provided by financing activities 71,164 25,570 -------- -------- NET INCREASE (DECREASE) IN CASH 4,604 17,019 CASH, BEGINNING OF PERIOD 2,034 12,494 -------- -------- CASH, END OF PERIOD $ 6,638 $ 29,513 ======== ======== SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid during period for interest $ 82,584 $ 81,977 ======== ======== 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, 2003, and for the periods ended December 31, 2003 and 2002, 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 be read in conjunction with the audited financial statements and the notes thereto included in the Company's 2003 Annual Report on Form 10-KSB, from which the September 30, 2003, balance sheet information is derived. 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 rarer 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. For the three months ended December 31, 2003, the Company had a negative cash flow from operating activities due to inventory purchases and increases in prepaid expenses which were offset by an increase in accounts payable and accrued liabilities, primarily unpaid officer salaries. Historically, the cash flow deficiencies have been funded primarily from borrowings from the Company's bank line of credit and from the Company's majority shareholder and president, Todd Axelrod. The Company's monthly debt service requirement on $4,774,892 of borrowings, including $3,250,963 due to Todd Axelrod, is approximately $27,500. The Company plans to improve operating results by taking steps to increase sales through its direct purchase website, its highest margin distribution channel. The Company has seen steady increases in the revenue produced through this outlet. Because of the size and diversity of its inventory, management feels the Company is uniquely positioned to favorably compete with any, and all, firms offering similar products and has enlarged the website to include more than 17,000 document choices spread over a list of categories. In addition, with little added development costs, the Company will be adding much more of its available inventory. The Company believes that its current cash requirements will likely be met by appropriately managing the timing and volume of new document acquisitions, generating revenues from its operations, drawing amounts under its existing line of credit ($20,000 available at December 31, 2003), 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 2004. 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. Shipping and handling costs and related customer charges are not significant. The Company's primary distribution channel over the past few years has been internally promoted and managed auctions to sell its documents. For each item sold through the Company's internal auctions, a 15% premium is charged. Recently, the Company has greatly increased its use of its website distribution channel to profitably increase sales. The Company's website now includes a list of more than 17,000 documents available for sale. The balance of the Company's sales is from repeat customers through its corporate office. Inventory of documents and operating cycle. Documents in inventory 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 or expects 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. 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 has ranged from its present level of approximately $6.3 million, which management believes is a sufficient supply of documents to provide for managing rarity and its other purposes, to roughly $7.2 million. 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 decreased 26% for the three month periods ended December 31, 2003 compared to December 31, 2002. The decrease was a result of the Company not participating in external auctions as it did in the previous year. The Company had consigned document inventory to other organizations to participate in their auctions. The competitive nature of the document auction market, and the resulting decline in document values, has rendered it difficult for the Company to produce acceptable margins and, therefore, the Company has currently reduced its involvement with external auctions. Consigned external auctions amounted to 40% of total revenues generated in the previous year period. In addition, the Company's internally conducted auction revenues decreased 36% comparing the current quarter with the previous year. The major reason for the decrease is attributed to the competition and frequency of other similar auctions currently being conducted. Internet related revenues increased 154% comparing the quarter periods to 55% of total revenues for the current quarter compared to 16% of total revenues for the previous year quarter. The Company has enhanced its websites and made available a larger selection of documents that are aggressively priced to compete with the price-driven collector. Total cost of revenues decreased 67% to 16% of net revenues for the quarter ended December 31, 2003 compared to 36% of net revenues for the quarter ended December 31, 2002. The decrease in document costs of revenues can be attributed to the decreased revenues generated from externally conducted auctions. Revenues generated from external auctions result in a higher cost because the Company has less control setting the minimum selling price; the reason the Company no longer participates in these external auctions. For the quarters ended December 31, 2003 and 2002, cost of revenues generated from internet sales was 15% and 27%. This compares to internal auctions cost of revenues of 18% and 22% and external auctions in the prior year quarter of 52%. Total operating expenses increased 3% comparing the quarter periods ended December 2003 to December 2002. The increase is solely attributed to a 124% increase in advertising charges from 2% of net revenues for the quarter ended December 2002, to 7% of net revenues for the current quarter. The increases are the result of advertising world wide through the internet. Depreciation costs decreased slightly due to certain assets that became fully depreciated. 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 31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a). Exhibit 31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a). Exhibit 32.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(b). Exhibit 32.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(b). (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 13, 2004 /s/ Todd M. Axelrod _________________ _______________________________ Todd M. Axelrod President and Chairman of the Board (Principal Executive Officer) Date February 13, 2004 /s/ Rod Lynam _________________ _______________________________ Rod Lynam Treasurer and Director (Principal Financial and Accounting Officer) EX-31 4 q-ex311.txt EXHIBIT 31.1 - CERTIFICATION OF CEO EXHIBIT 31.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO RULE 13a-14(a) I, Todd Axelrod, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Gallery of History, Inc.; 2. Based on my knowledge, this quarterly 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 quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly 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 quarterly 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 quarterly report (the "Evaluation Date"); and c) presented in this quarterly 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. Date: February 13, 2004 /s/ TODD AXELROD _______________________ Todd Axelrod Chief Executive Officer EX-31 5 q-ex312.txt EXHIBIT 31.2 - CERTIFICATION OF CFO EXHIBIT 31.2 - CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO RULE 13a-14(a) I, Rod Lynam, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Gallery of History, Inc.; 2. Based on my knowledge, this quarterly 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 quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly 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 quarterly 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 quarterly report (the "Evaluation Date"); and c) presented in this quarterly 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. Date: February 13, 2004 /s/ ROD LYNAM _______________________ Rod Lynam Chief Financial Officer EX-32 6 q-ex321.txt EXHIBIT 32.1 - CERTIFICATION OF CEO EXHIBIT 32.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO RULE 13a-14(b) In connection with the Quarterly Report of Gallery of History, Inc. (the "Company") on Form 10-QSB for the quarter ended December 31, 2003 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 1350, 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 , 2004 A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. EX-32 7 q-ex322.txt EXHIBIT 32.2 - CERTIFICATION OF CFO EXHIBIT 32.2 - CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO RULE 13a-14(b) In connection with the Quarter Report of Gallery of History, Inc. (the "Company") on Form 10-QSB for the quarter ended December 31, 2003 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 1350, 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 13, 2004 A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----