-----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, Dzhvkt7FHj2//85rZ6OJp3AKT3Uj/erA6TC+wr+VEa14G7dyYOf200J2KaEH97T6 2+BxoZMJSk0pbbvwYoVvvg== 0000763730-97-000002.txt : 19970221 0000763730-97-000002.hdr.sgml : 19970221 ACCESSION NUMBER: 0000763730-97-000002 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970211 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: 1934 Act SEC FILE NUMBER: 000-13757 FILM NUMBER: 97523264 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3601 WEST SAHARA AVENUE CITY: LAS VEGAS STATE: NV ZIP: 89102 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN MUSEUM OF HISTORICAL DOCUMENTS CHARTERED/NV/ DATE OF NAME CHANGE: 19900816 10QSB 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB [x] QUARTERLY REPORT PURSUANT TO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 December 31, 1996 [ ] 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 3,257,934 shares of Common Stock, par value $.001, outstanding as of February 1, 1997. Part 1 - FINANCIAL INFORMATION GALLERY OF HISTORY, INC. and SUBSIDIARIES CONSOLIDATED BALANCE SHEETS - UNAUDITED ______________________________________________________________________
DECEMBER 31, SEPTEMBER 30, 1996 1996 ----------- ------------- ASSETS Cash $ 159,454 $ 115,800 Prepaid expenses 109,895 53,198 Accounts receivable 78,954 98,301 Documents owned 7,127,462 8,677,725 Land and building-net 1,490,645 1,484,292 Property and equipment-net 175,418 194,232 Other assets 397,859 403,786 __________ __________ TOTAL ASSETS $ 9,539,687 $11,027,334 ========== ========== LIABILITIES Accounts payable $ 112,888 $ 84,117 Notes payable 165,008 196,889 Indebtedness to related parties 92,631 42,615 Mortgage notes payable 1,863,280 1,874,765 Deposits 27,313 30,073 Accrued and other liabilities 90,934 90,703 __________ __________ TOTAL LIABILITIES 2,352,054 2,319,162 ---------- ---------- STOCKHOLDERS' EQUITY Common stock: $.001 par value; 10,000,000 shares authorized; 5,917,654 shares issued; 3,257,934 and 5,917,654 outstanding 5,918 5,918 Additional paid-in-capital 9,392,363 9,392,363 Common stock in treasury (2,659,720 shares) (2,000,000) -- Accumulated deficit (210,648) (690,109) __________ __________ TOTAL STOCKHOLDERS' EQUITY 7,187,633 8,708,172 ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 9,539,687 $11,027,334 ========== ========== See the accompanying notes to consolidated financial statements.
GALLERY OF HISTORY, INC. and SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED ______________________________________________________________________
THREE MONTHS ENDED DECEMBER 31, 1996 1995 --------- --------- REVENUES $ 741,759 $ 635,622 COST OF REVENUES 182,637 170,911 -------- -------- GROSS PROFIT 559,122 464,711 -------- -------- OPERATING EXPENSES: Selling, general and administrative 400,441 358,157 Depreciation 24,393 37,016 Advertising 11,678 9,712 Maintenance and repairs 7,219 6,791 Loss on gallery closure -- 5,676 -------- -------- TOTAL OPERATING EXPENSES 443,731 417,352 -------- -------- OPERATING INCOME 115,391 47,359 -------- -------- OTHER INCOME (EXPENSE): Gain on repurchase of common stock 356,553 -- Interest expense (50,681) (58,833) Other 58,198 52,687 -------- -------- TOTAL OTHER INCOME (EXPENSE) 364,070 (6,146) -------- -------- INCOME BEFORE INCOME TAXES 479,461 41,213 PROVISION FOR INCOME TAXES -- 100 -------- -------- NET INCOME $ 479,461 $ 41,113 ======== ======== EARNINGS PER SHARE $ .14 $ .01 ==== ==== 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, 1996 1995 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 479,461 $ 41,113 Adjustments to reconcile net income to net cash provided from (used in) operating activities: Depreciation and amortization 39,759 52,080 Gain on exchange of inventory for purchase of treasury stock (356,553) -- Loss on disposal of property -- 3,437 (Increase) decrease in: Prepaid expenses (56,697) (21,433) Accounts receivable 19,347 -- Documents owned 103,771 98,933 Other assets 5,927 (27,049) (Decrease) increase in: Accounts payable 28,771 32,318 Customer deposits (2,760) (130,753) Accrued and other liabilities 231 21,337 -------- -------- Net cash provided by operating activities 261,257 69,983 -------- -------- CASH FLOWS USED FOR INVESTING ACTIVITIES: Purchase of property and equipment (27,298) (78,722) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from bank line of credit 137,500 -- Repayments of bank line of credit (137,500) -- Proceeds from notes payable 55,486 -- Repayments of mortgage and notes payable (48,836) (59,564) Repurchase of common stock (196,955) -- -------- -------- Net cash used in financing activities (190,305) (59,564) -------- -------- NET INCREASE (DECREASE) IN CASH 43,654 (68,303) CASH, BEGINNING OF PERIOD 115,800 171,295 -------- -------- CASH, END OF PERIOD $ 159,454 $ 102,992 ======== ======== SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: For the three month period ended December 31, 1996: (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 Three Month Period Ended December 31, 1996 and 1995 _______________________________________________________________ 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 be read in conjunction with the financial statements and the notes thereto included in the Company's 1996 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 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) Earnings (Loss) 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. The average number of shares of outstanding common stock for the three months ended December 31, 1996 and 1995 was 3,356,875 and 5,917,654, respectively. 4) 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 value of the inventory was negotiated by the parties 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. 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 1 to the consolidated financial statements). Accordingly, the traditional measures of liquidity in terms of changes in working capital are not applicable. Net cash provided by operating activities exceeded net cash used for operating activities for the three month period ended December 31, 1996 largely due to the increase in net income for the current period. In addition, deposits from customers decreased during the three month period ended December 31, 1996 due to the elimination of deposits received and held for future auction sales in the prior periods. The Company realized a decrease in its document inventory resulting from an increase in sales in the current quarter. Prepaid expenses increased in the current quarter resulting from the prepayment of officers' bonuses. 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, 1997. Loans under the line are secured by the Company's inventory. As of December 31, 1996, there was no outstanding balance on this line of credit. 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 line 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 - --------------------- In December 1996, the Company had its first mail/phone/fax auction at it headquarters location. This resulted in sales revenue of $384,487. These two events resulted in an increase in sales of 17% comparing the quarter ended December 1996 to December 1995. Retail sales for the quarter decreased 42% comparing 1996 to 1995. The closure of the Dallas, Texas gallery accounted for 62% of this decrease. Cost of goods sold decreased as a percentage of net sales from 27% for the period ended December 31, 1995 to 25% for the period ended December 31, 1996. Cost of goods sold for the auction amounted to 25% of the auction net sales, of which 5% of this cost was attributed to the cost of the catalog. Cost of retail sales decreased slightly for the current quarter, 24% of net sales for the period ended December 31, 1996 as compared to 26% of net sales for the period ended December 31, 1995. The resulting gross profit increased 20% comparing December 1996 to 1995. Total operating expenses increased 6% for the quarter ended December 31, 1996 which was 60% of net sales as compared to the quarter ended December 31, 1995 which amounted to 66% of net sales. Selling, general and administrative expense increased 12% comparing the quarter periods. Abnormal fees were incurred for professional services, which increased 242% for the current quarter compared to the previous quarter due to the stock repurchase transaction. Salaries and related payroll taxes and benefits increased 13% comparing the quarters due to increased salaries for the auction operation and computer programming for the Company's PC conversion. Depreciation expense decreased 34% for the three month period ended December 31, 1996 to 3% of net sales compared to the three month period ended December 31, 1995 which was at 6% of net sales. The decrease can be attributed to a reduction of furnishings and equipment largely due to the closure of the Dallas gallery. Advertising expenses increased 20% in the current quarter as compared to the previous year quarter. The Company has initiated advertising programs to promote its auction operations. Repair expenses increased 6% comparing the two quarter periods largely due to the increased cost of maintaining its mainframe computer which will soon be replaced with a PC client/server network. Interest expense decreased 14% for the three month period ended December 31, 1996 compared to the previous year periods. The decrease in interest expense can be attributed to lower average outstanding loan balances in the current period. Included in selling, general and administrative expenses is 50% of the operating cost to maintain the headquarters building. This percentage is the approximate percentage of leasable space of the building occupied by the Company's headquarters operation. The remaining building operating expenses plus the rental revenues realized are offset and included in other income and expense. This amounted to approximately $65,000 operating profit for the three month period ended December 31, 1996 as compared to approximately $45,000 operating profit for the three month period ended December 31, 1995. The increase is due to an increase in the square footage leased in addition to increased rents. Part II - Other Information Item 1-5. None. Item 6. Exhibits and Reports on Form 8-K. -------------------------------- (a) Exhibits 10.6 Agreement and Release dated October 11, 1996 between Ethelmae Stuart Haldan, as trustee of the Ethelmae S. Haldan Trust dated March 30, 1987, and Gallery of History, Inc. (Incorporated by reference to exhibit 10.6 to the Company's annual report on Form 10-KSB for the year ended September 30, 1996. (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 10, 1997 /s Todd M. Axelrod ----------------- ----------------------------- Todd M. Axelrod President and Chairman of the Board (Principal Executive Officer) Date February 10, 1997 /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 December 31, 1996 and its Consolidated Statement of Operations covering the period from October 1, 1996 to December 31, 1996 and is qualified in its entirety by reference to such financial statement and notes thereof. 3-MOS SEP-30-1997 DEC-31-1996 159454 0 78954 0 7127462 0 3413914 2327851 9539687 0 1863280 0 0 5918 7181715 9539687 741759 741759 182637 182637 443731 0 50681 479461 0 479461 0 0 0 479461 .14 .14
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