-----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, E+NrGBCk8pBpxHESniFHiAnInCv8zfQxXrI9oJOwD0uOpxjOLzTSBlq5TrGLBBz1 psCNLDvrvJ35g1dOsh6lkg== 0000763730-98-000002.txt : 19980212 0000763730-98-000002.hdr.sgml : 19980212 ACCESSION NUMBER: 0000763730-98-000002 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980211 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: SEC FILE NUMBER: 000-13757 FILM NUMBER: 98530235 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3601 WEST SAHARA AVENUE CITY: LAS VEGAS STATE: NV ZIP: 89102 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN MUSEUM OF HISTORICAL DOCUMENTS CHARTERED/NV/ DATE OF NAME CHANGE: 19900816 10QSB 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB [x] QUARTERLY REPORT PURSUANT TO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, 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 3,208,434 shares of Common Stock, par value $.001, outstanding as of February 1, 1998. Part 1 - FINANCIAL INFORMATION GALLERY OF HISTORY, INC. and SUBSIDIARIES CONSOLIDATED BALANCE SHEETS - UNAUDITED ______________________________________________________________________
December 31, SEPTEMBER 30, 1997 1997 ----------- ------------ ASSETS Cash $ 27,021 $ 20,095 Accounts receivable 42,762 59,650 Prepaid expenses 107,635 50,928 Documents owned 6,916,365 6,980,816 Land and building-net 1,454,848 1,454,805 Property and equipment-net 269,228 258,536 Other assets 174,094 168,636 ---------- ---------- TOTAL ASSETS $ 8,991,953 $ 8,993,466 ========== ========== LIABILITIES Accounts payable $ 153,379 $ 74,409 Notes payable 59,549 62,600 Mortgage notes payable 1,310,478 1,376,239 Deposits 38,869 49,570 Deferred tax 162,843 144,043 Accrued and other liabilities 100,363 93,633 ---------- ---------- TOTAL LIABILITIES 1,825,481 1,800,494 ---------- ---------- STOCKHOLDERS' EQUITY Common stock: $.001 par value; 10,000,000 shares authorized; 5,917,654 shares issued 5,918 5,918 Additional paid-in-capital 9,392,363 9,392,363 Common stock in treasury (2,709,220 shares) (2,140,994) (2,047,481) Accumulated deficit (90,815) (157,828) ---------- ---------- TOTAL STOCKHOLDERS' EQUITY 7,166,472 7,192,972 ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 8,991,953 $ 8,993,466 ========== ========== See the accompanying notes to consolidated financial statements.
GALLERY OF HISTORY, INC. and SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED ______________________________________________________________________
THREE MONTHS ENDED DECEMBER 31, 1997 1996 -------- -------- REVENUES $ 687,106 $ 741,759 COST OF GOODS SOLD 253,469 182,637 -------- -------- GROSS PROFIT 433,637 559,122 -------- -------- OPERATING EXPENSES: Selling, general and administrative 311,747 400,441 Depreciation 19,230 24,393 Advertising 17,842 11,678 Maintenance & repairs 4,509 7,219 -------- -------- TOTAL OPERATING EXPENSES 353,328 443,731 -------- -------- OPERATING INCOME 80,309 115,391 -------- -------- OTHER INCOME (EXPENSE) Gain on repurchase of common stock -- 356,553 Interest expense (34,782) (50,681) Other 40,286 58,198 -------- -------- TOTAL OTHER INCOME 5,504 364,070 -------- -------- INCOME BEFORE INCOME TAXES 85,813 479,461 PROVISION FOR INCOME TAX 18,800 -- -------- --------- NET INCOME $ 67,013 $ 479,461 ======== ======== EARNINGS PER SHARE: Basic $ .02 $ .14 ==== ==== Diluted $ .02 $ .14 ==== ==== 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, 1997 1996 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 67,013 $ 479,461 Adjustments to reconcile net income to net cash provided from (used in) operating activities: Depreciation and amortization 35,338 39,759 Gain on exchange of inventory for purchase of treasury stock -- (356,553) (Increase) decrease in: Prepaid expenses (56,707) (56,697) Accounts receivable 16,888 19,347 Documents owned 64,451 103,771 Other assets (5,458) 5,927 (Decrease) increase in: Accounts payable 78,970 28,771 Customer deposits (10,701) (2,760) Deferred tax 18,800 -- Accrued and other liabilities 6,730 231 -------- -------- Net cash provided by operating activities 215,324 261,257 -------- -------- CASH FLOWS USED FOR INVESTING ACTIVITIES: Purchase of property and equipment (46,073) (27,298) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from bank line of credit -- 137,500 Repayments of bank line of credit -- (137,500) Proceeds from mortgage and notes payable 270,027 55,486 Repayments of mortgage and notes payable (338,839) (48,836) Repurchase of common stock (93,513) (196,955) -------- -------- Net cash used for financing activities (162,325) (190,305) -------- -------- NET INCREASE (DECREASE) IN CASH 6,926 43,654 CASH, BEGINNING OF PERIOD 20,095 115,800 -------- -------- CASH, END OF PERIOD $ 27,021 $ 159,454 ======== ======== 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, 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 are read in conjunction with the financial statements and the notes thereto included in the Company's 1997 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) 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. In May 1997, the Company purchased 5,000 shares of its common stock at a price of $2.875. In September 1997, it purchased 12,000 shares at $2.75; in October 1997, it purchased 30,000 at $2.865 and in December 1997, the Company purchased 2,500 shares at $2.563. 4) 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. In December 1997, the Company adopted SFAS No. 128, "Earnings per Share," effective December 15, 1997. As a result the Company's reported earnings per share for 1996 were restated.
For the periods ended 31-Dec-96 31-Dec-97 ___________________________ _________________________ Income Shares Per-Share Income Shares Per-Share Amount Amount ___________________________ ________________________ Basic EPS Income available to common shareholders $479,461 3,547,034 $0.14 $67,013 3,213,461 $0.02 Effect of dilutive securities Options -- -- -- 128,972 ___________________ _________________ Diluted EPS Income available to common shareholders including assumed conversion $479,461 3,547,034 $0.14 $67,013 3,342,433 $0.02 ========================== ========================
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 increased due to the net income from operations, a decrease in the Company's document inventory and an increase in accounts payable and prepaid expenses during the three month period ended December 31, 1997. Purchases of documents during the three month period was approximately $100,000, however cost of documents sold during this period was approximately $164,000. Accounts payable increased largely due to outstanding consignments sold in the December auction that are due to consignors and amounts due related to purchases of inventory in late December. Prepaid expenses increased mainly due to payments made for catalogs for the January 1998 auction. 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 December 31, 1997, there was no outstanding balance on this line of credit. In addition, the Company has a reducing principal line of credit in the amount of approximately $60,000 as of December 31, 1997, with a maturity of March 1999. The principal is reduced by $4,667 a month. As of December 31, 1997, there were no funds drawn against this line of credit. Any funds drawn bear interest at prime plus 1.5%. In July 1997, the Company's term mortgage note was converted to a reducing revolving line of credit in the amount of $1,839,523. The line of credit has a 59 month amortization of principal at a 9% interest rate and a balloon payment due at maturity in July 2002 in the amount of $1,565,106. This line of credit is collateralized by the Company's headquarters building. As of September 30, 1997, there was approximately $460,000 available under 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 - --------------------- Document sales for the three month period ended December 31, 1997 decreased 7% from the three month period ended December 31, 1996. Generally, the decline was due to a decrease in retail sales as a result of the closure of the Fashion Show Mall gallery in the previous year. Retail sales in the current period amounted to 20% of total sales compared to 48% of total sales in the previous year period. The Company realized a 42% increase in auction sales in the current quarter compared to the previous year quarter. The Company conducted two auctions in the current quarter compared to one auction in the previous year period. Cost of goods sold increased to 37 percent of net sales for the three month period ended December 31, 1997 compared to 25 percent of net sales for the three month period ended December 31, 1996. This increase is directly related to the cost of catalogs for the auction sales which amount to 12 percent of net sales for the two auctions held during the quarter ended December 31, 1997 as compared to 3 percent of net sales for the one auction held during the quarter ended December 31, 1996. The document inventory cost of sales amounted to 25 percent of net sales for the current period compared to 22 percent of net sales for the previous year period. Total operating expenses decreased 20% for the quarter to 51% of net sales in the current period from 60% of net sales in the previous year period. The decrease was realized largely in selling, general and administrative expenses which decreased 22% to 45% of net sales in the period ended December 31, 1997 as compared to 54% of net sales in the period ended December 31, 1996. This decrease was due to the closure of the Fashion Show Mall gallery in the previous year period; rent expense decreased 44%, salaries decreased 8%, utilities and telephone expenses decreased 30% and property taxes decreased 18% comparing the two periods. In addition in the previous year period, abnormal fees were incurred for professional services relating to the stock repurchase transaction. Depreciation expense decreased 21% comparing the three month period ended December 31, 1997 to December 31, 1996 due to the closure of the Las Vegas gallery and equipment and leasehold improvements becoming fully depreciated. Advertising expenses increased 53% for the quarter ended December 31, 1997 compared to the quarter ended December 31, 1996. The increase is largely due to the Company's new advertising programs that promoted its auction operations. Repair expenses decreased 38% comparing the two quarters largely due to the decreased cost of maintaining its mainframe computer, which was replaced with a PC client/server network. Interest expense amounted to 5% of net sales for the quarter ended December 31, 1997, down 31% compared to 7% of net sales for the previous year quarter. The decrease is attributed to lower average outstanding loan balances in the current period including paying down on the term mortgage note that was converted to a revolving line of credit. 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 $40,229 operating profit for the three month period ended December 31, 1997 as compared to $65,132 operating profit for the three month period December 31, 1996. The decrease was due to a reduction in leased square footage. Also included in other income and expense in the previous year period was the gain on repurchase of common stock as discussed in Note 3 to the consolidated financial statements. 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 February 11, 1998 /s Todd M. Axelrod ______________________ ________________________________ Todd M. Axelrod President and Chairman of the Board (Principal Executive Officer) Date February 11, 1998 /s Rod Lynam ______________________ _______________________________ Rod Lynam Treasurer and Director (Principal Accounting Officer) EX-27 2 ARTICLE 5 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Company's Consolidated Balance Sheet dated December 31, 1997 and its Consolidated Statement of Operations covering the period from October 1, 1997 to December 31, 1997 and is qualified in its entirety by reference to such financial statement and notes thereof. 3-MOS SEP-30-1998 DEC-31-1997 27021 0 42762 0 6916365 0 2811262 1667186 8991953 0 1310478 0 0 5918 7160554 8991953 687106 687106 253469 253469 353328 0 34782 85813 18800 67013 0 0 0 67013 .02 .02 -----END PRIVACY-ENHANCED MESSAGE-----