-----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, EPLtr6MPUUW251oPjGHNVXzTIj34dDGkXc2MJOLOThR5DxJD+siZ+bvM6AoTyMoi hD5fXcsjWPqEDfYLdqkmHQ== 0000763730-97-000008.txt : 19970815 0000763730-97-000008.hdr.sgml : 19970815 ACCESSION NUMBER: 0000763730-97-000008 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 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: 97660008 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3601 WEST SAHARA AVENUE CITY: LAS VEGAS STATE: NV ZIP: 89102 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN MUSEUM OF HISTORICAL DOCUMENTS CHARTERED/NV/ DATE OF NAME CHANGE: 19900816 10QSB 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB [x] QUARTERLY REPORT PURSUANT TO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 June 30, 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 3,252,934 shares of Common Stock, par value $.001, outstanding as of August 1, 1997. Part 1 - FINANCIAL INFORMATION GALLERY OF HISTORY, INC. and SUBSIDIARIES CONSOLIDATED BALANCE SHEETS - UNAUDITED ______________________________________________________________________
JUNE 30, SEPTEMBER 30, 1997 1996 ----------- ------------ ASSETS Cash $ 466,173 $ 115,800 Prepaid expenses 49,399 53,198 Accounts receivable 30,460 98,301 Documents owned 7,043,279 8,677,725 Land and building-net 1,466,752 1,484,292 Property and equipment-net 245,186 194,232 Other assets 164,642 403,786 __________ __________ TOTAL ASSETS $ 9,465,891 $11,027,334 ========== ========== LIABILITIES Accounts payable $ 73,125 $ 84,117 Notes payable 65,611 196,889 Indebtedness to related parties -- 42,615 Mortgage notes payable 1,839,522 1,874,765 Deposits 47,292 30,073 Accrued and other liabilities 99,075 90,703 __________ __________ TOTAL LIABILITIES 2,124,625 2,319,162 ---------- ---------- STOCKHOLDERS' EQUITY Common stock: $.001 par value; 10,000,000 shares authorized; 5,917,654 shares issued; 3,252,934 and 5,917,654 outstanding 5,918 5,918 Additional paid-in-capital 9,392,363 9,392,363 Common stock in treasury (2,664,720 shares) (2,014,481) -- Accumulated deficit (42,534) (690,109) __________ __________ TOTAL STOCKHOLDERS' EQUITY 7,341,266 8,708,172 ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 9,465,891 $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 NINE MONTHS ENDED JUNE 30, JUNE 30, 1997 1996 1997 1996 -------- -------- ---------- ---------- REVENUES $ 670,944 $ 813,773 $2,442,715 $1,723,177 COST OF GOODS SOLD 193,740 248,476 653,320 491,443 -------- -------- --------- --------- GROSS PROFIT 477,204 565,297 1,789,395 1,231,734 -------- -------- --------- --------- OPERATING EXPENSES: Selling, general and administrative 343,809 304,902 1,124,544 997,578 Depreciation 17,632 29,374 63,115 97,245 Advertising 33,476 3,901 74,451 14,984 Maintenance & repairs 8,386 6,625 23,192 20,504 Loss on gallery closure -- -- 941 5,877 Restructuring charge 217,438 -- 217,438 -- -------- -------- --------- --------- TOTAL OPERATING EXPENSES 620,741 344,802 1,503,681 1,136,188 -------- -------- --------- --------- OPERATING INCOME (LOSS) (143,537) 220,495 285,714 95,546 OTHER INCOME (EXPENSE) Gain on repurchase of common stock -- -- 356,553 -- Interest expense (50,252) (56,973) (149,749) (174,392) Other 51,946 39,671 162,501 105,238 -------- -------- --------- --------- TOTAL OTHER INCOME (EXPENSE) 1,694 (17,302) 369,305 (69,154) -------- -------- --------- --------- INCOME (LOSS) BEFORE INCOME TAXES (141,843) 203,193 655,019 26,392 (PROVISION) CREDIT FOR INCOME TAX 92,356 -- (7,444) _ (100) -------- -------- --------- --------- NET INCOME (LOSS) $ (49,487) $ 203,193 $ 647,575 $ 26,292 ======== ======== ========= ========= EARNINGS (LOSS) PER SHARE: $(.02) $ .03 $ .19 $ -- === === === === 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, 1997 1996 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 647,575 $ 26,292 Adjustments to reconcile net income to net cash provided from (used in) operating activities: Depreciation and amortization 109,979 142,407 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 3,799 5,842 Accounts receivable 67,841 (152,659) Documents owned 187,954 379,502 Other assets 239,144 44,481 (Decrease) increase in: Accounts payable (10,992) 3,805 Customer deposits 17,219 (238,723) Accrued and other liabilities 8,372 (27,230) -------- -------- Net cash provided by operating activities 913,242 187,153 -------- -------- CASH FLOWS USED FOR INVESTING ACTIVITIES: Proceeds from sale of equipment 2,000 -- Purchase of property and equipment (73,798) (91,683) -------- -------- Net cash used for investing activities (71,798) (91,683) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from bank line of credit 137,500 85,000 Repayments of bank line of credit (137,500) (85,000) Proceeds from notes payable 55,000 185,400 Repayments of mortgage and notes payable (334,635) (213,936) Repurchase of common stock (211,436) -- -------- -------- Net cash used for financing activities (491,071) (28,536) -------- -------- NET INCREASE (DECREASE) IN CASH 350,373 66,934 CASH, BEGINNING OF PERIOD 115,800 171,295 -------- -------- CASH, END OF PERIOD $ 466,173 $ 238,229 ======== ======== SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: For the nine month period ended June 30, 1997: (1) Documents with a cost of $1,446,492 were exchanged for shares of the Company's common stock valued at $1,803,045. (2) Debt of $70,499 was incurred for the purchase of a truck. 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, 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 June 30, 1997 and 1996 was 3,255,352 and 5,917,654, respectively. The average number of shares of outstanding common stock for the nine months ended June 30, 1997 and 1996 was 3,354,499 and 5,917,654, 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. As a directive passed by the Company's Board of Directors to purchase shares of the Company's Common Stock from time to time because the Board believes that the current stock price does not reflect its improved business activities nor the value of its asset base, the Company purchased 5,000 shares of its common stock at $2 7/8 in May 1997. 5) Restructuring Charge The Restructuring Charge represents the write down of certain assets, principally the Company's book inventory, associated with the Company's retail sales operations. The Company recently restructured the nature of its business shifting away from the retail sales to wholesale/auction sales. 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. At June 30, 1997, the Company's cash had increased $350,373 from the September 30, 1996 balance. The aggregate of cash, accounts receivable and prepaid expenses (approximately $545,000 at June 30, 1997) exceeded short-term liabilities (including the current portion of long-term debt) by approximately $310,000. This compares to approximately $65,000 of cash, accounts receivable and prepaid expenses in excess of short-term liabilites as of June 30, 1996. Net cash provided by operating activities exceeded net cash used in operating activities for the nine month period ended June 30, 1997 largely due to the increase in revenues in the current period and the resultant increase in net income. 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, 1998. Loans under the line are secured by the Company's inventory. As of June 30, 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 nine month period payable over a sixty-month term. In addition to the mortgage on the Company's headquarters' building, this is the only remaining loan outstanding; the Company has retired all its term notes, related party debt and equipment note during the current nine month period. The Company has converted its fixed term real estate loan maturing July 15, 1998 into a reducing revolving term loan with a maturity of July 15, 2002 at a fixed rate of interest of 9 percent. 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 has dramatically changed the mix of its business from the traditional retail sales to wholesale/auction sales. During the three month period ended June 30, 1997, the Company's wholesale/auction sales amounted to 94 percent of its total sales. Comparing the current quarter to the previous year quarter this was a 12 percent increase. Total sales decreased 18 percent comparing the two quarters. Comparing the two nine month periods, the Company experienced a 42 percent growth in total sales. For the nine month period ended June 30, 1997, wholesale/auction sales amounted to 76 percent of total sales compared to 50 percent of total sales for the nine month period ended June 30, 1996. This resulted in an increase of 115 percent in wholesale/auction sales for the current period. Retail sales, comparing the two nine month periods, decreased 32 percent largely due to the closure of two galleries. Cost of goods sold decreased to 29 percent of net sales for the three month period ended June 30, 1997 compared to 31 percent of net sales for the three month period ended June 30, 1996. For the nine month period, cost of goods sold decreased to 27 percent of net sales for the period ended June 30, 1997 compared to 29 percent for the previous year period. The document inventory cost decreased to 19 percent of net sales in the current nine month period compared to 25 percent of net sales in the previous year period. In addition, commissions amounted to 2 percent of net sales in the current nine month period compared to 5 percent of net sales in the previous year. However, the Company incurred catalog costs for its auctions amounting to 6 percent of net sales in the current nine month period. The Company recently restructured the nature of its business by shifting from retail sales to wholesale/auction sales. The Company's gallery retail operations have been significantly reduced following the closure of the Company's flagship Las Vegas retail gallery during the current period. In light of this change, management decided to write down certain assets associated with the Company's retail sales operations. As a result, the Company incurred a $217,438 restructuring charge in the current quarter. The major portion of this amount was a write down of the Company's book inventory. The Company sells this book largely through its retail sales operation in its galleries. Because of the shift away from retail sales, the Company reduced the book inventory to more accurately reflect management's estimate of its current market value. In addition, the Company's framing raw material inventory was written down to reflect damaged and obsolete inventory. Total operating expenses increased 80% for the quarter and 32% for the nine month period ended June 30, 1997 compared to June 30, 1996. The restructuring charge amounted to 79% of this increase for the current quarter and 59% of the increase for the nine month period. Without the restructuring charge, total operating expenses increased 17% or 60% of net sales for the three month period ended June 30, 1997 compared to 42% of net sales for the three month period ended June 30, 1996. For the current nine month period without the restructuring charge, total operating expenses increased 13% or 53% of net sales compared to 66% of net sales for the previous year nine month period. Selling, general and administrative expenses increased 13% comparing the three month periods and the nine month periods. Abnormal fees were incurred for professional services, which increased 73% for the current nine month period compared to the previous nine month period due to the stock repurchase transaction. Salaries increased 21% comparing the three month periods and 17% comparing the nine month periods due to increased salaries for the auction operation and computer programming for the Company's PC conversion program. Travel expenses increased 185% comparing the three month periods and 224% comparing the nine month periods due to travel related to an outside consultant for the auction operation. Depreciation expense decreased 40% comparing the three month period ended June 30, 1997 to June 30, 1996 and 35% for the nine month periods due to equipment and leasehold improvements becoming fully depreciated. Advertising expenses increased to 5% of net sales for the quarter ended June 30, 1997 compared to 1/2% of net sales for the quarter ended June 30, 1996. For the nine month period ended June 30, 1997, advertising increased to 3% of net sales as compared to 1% of net sales for the pervious year period. The increase is largely due to the Company's new advertising programs that promoted its new auction operations. Repair expenses increased 27% comparing the two quarter and 13% comparing the nine 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 amounted to 7% of net sales for the quarter ended June 30, 1997, the same as for the previous year quarter. Interest decreased to 6% of net sales for the nine month period ended June 30, 1997 as compared to 10% of net sales for the previous year. In June 1997, the Company restructured its existing term real estate loan to a reducing revolving term loan and wrote off approximately $4,000 for the early retirement of the existing loan. The decrease in the nine month interest expense amount is 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 $53,423 operating profit for the three month period and $165,811 for the nine month period ended June 30, 1997 as compared to $53,236 operating profit for the three month period and $145,249 for the nine month period ended June 30, 1996. The increase was due to an increase in the square footage leased in addition to increased rents. Part II - Other Information Item 1-3. None. Item 4. Submission of Matters to a Vote of Security Holders. ---------------------------------------------------- On June 27, 1997, the Company held its annual meeting of shareholders for the following purposes: (1) to elect five Directors to serve until the next annual meeting of shareholders; and (2) to approve the appointment of Arthur Andersen LLP, as the Company's independent auditors for the fiscal year ending September 30, 1997. At the Meeting the following Directors were elected by a vote of 3,236,906 for and 220 withholding authority: Todd M. Axelrod, Rod Lynam, Marc DuCharme, Pamela Axelrod and Roger Croteau. Voting for the appointment of Arthur Andersen LLP, as the Company's independent auditors, 3,236,905 shares were in favor and 221 shares against. Item 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 August 14, 1997 /s Todd M. Axelrod ______________________ ________________________________ Todd M. Axelrod President and Chairman of the Board (Principal Executive Officer) Date August 14, 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 June 30, 1997 and its Consolidated Statement of Operations covering the period from October 1, 1996 to June 30, 1997 and is qualified in its entirety by reference to such financial statement and notes thereof. 9-MOS SEP-30-1997 JUN-30-1997 466173 0 30460 0 7043279 0 3285833 2153896 9465891 0 1839522 0 0 5918 7335348 9465891 2442715 2442715 653320 653320 1503681 0 149749 655019 7444 647575 0 0 0 647575 .19 .19
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