-----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, Kwi+8TghqMSFTeqHdr1+xyEtL/4vs9c0vErVbgN3YI0MJqW2Q2rLArNw4SxO7CyE K6T+3XGKAIUcRe9GzrQ3JA== 0000763730-97-000004.txt : 19970507 0000763730-97-000004.hdr.sgml : 19970507 ACCESSION NUMBER: 0000763730-97-000004 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970506 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: 97595911 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3601 WEST SAHARA AVENUE CITY: LAS VEGAS STATE: NV ZIP: 89102 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN MUSEUM OF HISTORICAL DOCUMENTS CHARTERED/NV/ DATE OF NAME CHANGE: 19900816 10QSB 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB [x] QUARTERLY REPORT PURSUANT TO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 March 31, 1997 [ ] 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 May 1, 1997. Part 1 - FINANCIAL INFORMATION GALLERY OF HISTORY, INC. and SUBSIDIARIES CONSOLIDATED BALANCE SHEETS - UNAUDITED ______________________________________________________________________
MARCH 31, SEPTEMBER 30, 1997 1996 ----------- ------------ ASSETS Cash $ 623,800 $ 115,800 Prepaid expenses 76,689 53,198 Accounts receivable 13,648 98,301 Documents owned 6,997,134 8,677,725 Land and building-net 1,478,698 1,484,292 Property and equipment-net 245,062 194,232 Other assets 387,554 403,786 __________ __________ TOTAL ASSETS $ 9,822,585 $11,027,334 ---------- ---------- LIABILITIES Accounts payable $ 82,691 $ 84,117 Notes payable 203,060 196,889 Indebtedness to related parties 42,615 42,615 Mortgage notes payable 1,851,534 1,874,765 Deposits 31,058 30,073 Income taxes payable 99,800 -- Accrued and other liabilities 106,593 90,703 __________ __________ TOTAL LIABILITIES 2,417,351 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 earnings (deficit) 6,953 (690,109) __________ __________ TOTAL STOCKHOLDERS' EQUITY 7,405,234 8,708,172 ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 9,822,585 $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 SIX MONTHS ENDED MARCH 31, MARCH 31, 1997 1996 1997 1996 -------- -------- ---------- ---------- REVENUES $1,030,012 $ 273,783 $1,771,771 $ 909,404 COST OF GOODS SOLD 276,943 72,056 459,580 242,967 --------- -------- --------- --------- GROSS PROFIT 753,069 201,727 1,312,191 666,437 --------- -------- --------- --------- OPERATING EXPENSES: Selling, general and administrative 380,294 334,519 780,734 692,677 Depreciation 21,090 30,855 45,483 67,870 Advertising 29,297 1,371 40,975 11,083 Maintenance & repairs 7,587 7,089 14,807 13,879 Loss on gallery closure 941 201 941 5,877 --------- -------- --------- --------- TOTAL OPERATING EXPENSES 439,209 374,035 882,940 791,386 --------- -------- --------- --------- OPERATING INCOME (LOSS) 313,860 (172,308) 429,251 (124,949) --------- -------- --------- --------- OTHER INCOME (EXPENSE) Gain on repurchase of common stock -- -- 356,553 -- Interest expense (48,816) (58,586) (99,497) (117,419) Other 52,357 12,880 110,555 65,567 --------- -------- --------- --------- TOTAL OTHER INCOME (EXPENSE) 3,541 (45,706) 367,611 (51,852) --------- -------- --------- --------- INCOME (LOSS) BEFORE INCOME TAXES 317,401 (218,014) 796,862 (176,801) PROVISION FOR INCOME TAX (99,800) -- (99,800) (100) --------- -------- --------- --------- NET INCOME (LOSS) $ 217,601 $(218,014) $ 697,062 $ (176,901) ========= ======== ========= ========= EARNINGS (LOSS) PER SHARE: $ .07 $(.04) $ .20 $(.03) ==== ==== ==== ==== See the accompanying notes to consolidated financial statements.
GALLERY OF HISTORY, INC. and SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED ____________________________________________________________________________
SIX MONTHS ENDED MARCH 31, 1997 1996 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income (Loss) $ 697,062 $(176,901) Adjustments to reconcile net income to net cash provided from (used in) operating activities: Depreciation and amortization 76,514 97,984 Gain on exchange of inventory for purchase of treasury stock (356,553) -- (Gain) loss on disposal of property (1,096) 3,436 (Increase) decrease in: Prepaid expenses (23,491) 7,045 Accounts receivable 84,653 -- Documents owned 234,099 179,467 Other assets 16,232 (5,319) (Decrease) increase in: Accounts payable (1,426) 21,095 Customer deposits 985 (212,605) Income taxes payable 99,800 -- Accrued and other liabilities 15,890 19,780 -------- -------- Net cash provided by(used in) operating activities 842,669 (66,018) -------- -------- CASH FLOWS USED FOR INVESTING ACTIVITIES: Proceeds from sale of equipment 2,000 -- Purchase of property and equipment (122,654) (78,722) -------- -------- Net cash used for investing activities (120,654) (78,722) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from bank line of credit 137,500 35,000 Repayments of bank line of credit (137,500) (35,000) Proceeds from notes payable 125,499 150,000 Repayments of mortgage and notes payable (142,559) (123,082) Repurchase of common stock (196,955) -- -------- -------- Net cash provided by(used in) financing activities (214,015) 26,918 -------- -------- NET INCREASE (DECREASE) IN CASH 508,000 (117,822) CASH, BEGINNING OF PERIOD 115,800 171,295 -------- -------- CASH, END OF PERIOD $ 623,800 $ 53,473 ======== ======== 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 Six Month Period Ended March 31, 1997 and 1996 _____________________________________________________________________________ 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 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) 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 March 31, 1997 and 1996 was 3,257,934 and 5,917,654, respectively. The average number of shares of outstanding common stock for the six months ended March 31, 1997 and 1996 was 3,404,072 and 5,917,118, respectively. In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128 ("SFAS 128", "Earnings Per Share." SFAS 128 established new accounting standards for the computation and financial statement presentation of earnings per share data. SFAS 128 is effective for statements issued for periods ending after December 15, 1997 and earlier implementation is not permitted. The Company expects that there will be no material effect upon implementing SFAS 128 on its earnings per share calculations. 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 parties negotiated the value of the inventory 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 2 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 in operating activities for the six month period ended March 31, 1997 largely due to the increase in revenues in the current period and the resultant increase in net income, and a reduction in the Company's document inventory purchases. Deposits from customers decreased during the first part of the current period due to the elimination of deposits received and held for future auction sales in the prior period. The Company incurred an income tax liability in the second quarter of fiscal 1997 after using up its tax loss carryforward during the first quarter of fiscal 1997. 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 March 31, 1997, there was no outstanding balance on this line of credit. The Company incurred a truck loan in the amount of $70,000 at a fixed interest rate of 7.9% during the current period payable over a sixty-month term. The lease for the Company's gallery located at the Fashion Show Mall in Las Vegas expired March 31, 1997. The Company decided not to renew this lease but rather to move the retail operation to its Las Vegas headquarters' building. 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 - --------------------- The Company experienced a 95 percent growth in net revenues for the six month period ended March 31, 1997 compared to March 31, 1996 due to two mail/phone/fax/internet auctions and one live auction. The auctions generated sales revenue of $1.1 million in the current six month period. The Company generated approximately $360,000 in outside auctions during the six month period ended March 31, 1996. Retail sales for the quarter increased 75 percent but decreased 11 percent for the six month period comparing 1997 to 1996. This was largely due to a gallery closure in the first quarter of 1996. Cost of goods sold remained constant between 26% and 27% as a percentage of net sales for both the two quarter periods and the two six month periods ending March 31, 1997 and 1996. Cost of goods sold for the auctions amounted to 25% of the auction net sales for the first two auctions but increased to 32% for the third auction due to increased catalog costs. Cost of retail goods sold decreased for the six month period ended March 31, 1997 to 24% of net sales as compared to 26% of net sales for the period ended March 31, 1996. Total operating expenses increased 17% for the quarter and 12% for the six month period ended March 31, 1997 compared to March 31, 1996, while declining as a percentage of net sales to 50% in 1997 from 87% in 1996. Selling, general and administrative expense increased 14% comparing the quarter periods and 13% comparing the six month periods. Abnormal fees were incurred for professional services, which increased 85% for the current six month period compared to the previous six month period due to the stock repurchase transaction. Increases also resulted due to an addition of sales and administrative personnel and other expenses associated with the Company's higher sales volume. Salaries increased 16% comparing the quarters and six month periods due to increased salaries for the auction operation and computer programming for the Company's PC conversion program. Advertising expenses increased largely due to the Company's new advertising programs that promoted its auction operations. Depreciation expense decreased approximately 30% for the quarter and six month periods due to equipment and leasehold improvements becoming fully depreciated. Repair expenses increased 7% comparing the two quarter and six month 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 17% for the three month period and 15% for the six month period ended March 31, 1997 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 $47,255 operating profit for the three month period and $112,388 for the six month period ended March 31, 1997 as compared to $46,705 operating profit for the three month period and $92,012 for the six month period ended March 31, 1996. The increase comparing the six month periods was due to an increase in the square footage leased in addition to increased rents. In addition, other income included interest received on the Company's excess cash balances in the current six month period. Part II - Other Information - --------------------------- Item 1-5. None. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. None. (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 May 5, 1997 /s Todd M. Axelrod ______________________ ________________________________ Todd M. Axelrod President and Chairman of the Board (Principal Executive Officer) Date May 5, 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 March 31, 1997 and its Consolidated Statement of Operations covering the period from October 1, 1996 to March 31, 1997 and is qualified in its entirety by reference to such financial statements and notes thereof. 6-MOS SEP-30-1997 MAR-31-1997 623800 0 13648 0 6997134 0 3264191 2120431 9822585 0 1851534 0 0 5918 7399316 9822585 1771771 1771771 459580 459580 882940 0 99497 796862 99800 697062 0 0 0 697062 .20 .20
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