-----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, O5pmdX0r9Dx6ibnk5O3W4c3F46ZrJdyzq8auGr5+BUUylR9Lo+qGmZQQfKOM8mnN SZnpH8P4TxLdl0Xn2J+Qaw== 0000763730-98-000006.txt : 19980515 0000763730-98-000006.hdr.sgml : 19980515 ACCESSION NUMBER: 0000763730-98-000006 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980514 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: 98619151 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3601 WEST SAHARA AVENUE CITY: LAS VEGAS STATE: NV ZIP: 89102 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN MUSEUM OF HISTORICAL DOCUMENTS CHARTERED/NV/ DATE OF NAME CHANGE: 19900816 10QSB 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB [x] QUARTERLY REPORT PURSUANT TO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, 1998 [ ] 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 May 1, 1998. Part 1 - FINANCIAL INFORMATION GALLERY OF HISTORY, INC. and SUBSIDIARIES CONSOLIDATED BALANCE SHEETS - UNAUDITED ___________________________________________________________________________
MARCH 31, SEPTEMBER 30, 1998 1997 ----------- ------------ ASSETS Cash $ 13,413 $ 20,095 Accounts receivable 83,650 59,650 Prepaid expenses 95,720 50,928 Documents owned 6,749,331 6,980,816 Land and building-net 1,455,255 1,454,805 Property and equipment-net 259,367 258,536 Other assets 172,435 168,636 ---------- ---------- TOTAL ASSETS $ 8,829,171 $ 8,993,466 ========== ========== LIABILITIES Accounts payable $ 63,461 $ 74,409 Notes payable 56,437 62,600 Mortgage notes payable 1,273,400 1,376,239 Deposits 28,175 49,570 Deferred tax 145,885 144,043 Accrued and other liabilities 104,848 93,633 ---------- ---------- TOTAL LIABILITIES 1,672,206 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 Accumulated deficit (100,322) (157,828) Treasury stock (2,709,220 and 2,676,720 shares), at cost (2,140,994) (2,047,481) ---------- ---------- TOTAL STOCKHOLDERS' EQUITY 7,156,965 7,192,972 ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 8,829,171 $ 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 SIX MONTHS ENDED MARCH 31, MARCH 31, 1998 1997 1998 1997 -------- --------- --------- --------- REVENUES $ 718,015 $1,030,012 $1,405,121 $1,771,771 COST OF GOODS SOLD 281,870 276,943 535,339 459,580 -------- --------- --------- --------- GROSS PROFIT 436,145 753,069 869,782 1,312,191 -------- --------- --------- --------- OPERATING EXPENSES: Selling, general and administrative 413,575 380,294 725,392 780,734 Depreciation 19,617 21,090 38,847 45,483 Advertising 33,761 29,297 51,602 40,975 Maintenance & repairs 1,603 7,587 6,043 14,807 Loss on gallery closure -- 941 -- 941 -------- --------- --------- --------- TOTAL OPERATING EXPENSES 468,556 439,209 821,884 882,940 -------- --------- --------- --------- OPERATING INCOME (LOSS) (32,411) 313,860 47,898 429,251 -------- --------- --------- --------- OTHER INCOME (EXPENSE) Gain on repurchase of common stock -- -- -- 356,553 Interest expense (33,429) (48,816) (68,211) (99,497) Other 40,943 52,357 81,229 110,555 -------- --------- --------- --------- TOTAL OTHER INCOME 7,514 3,541 13,018 367,611 -------- --------- --------- --------- INCOME (LOSS) BEFORE INCOME TAXES (24,897) 317,401 60,916 796,862 (PROVISION) CREDIT FOR INCOME TAXES 15,390 (99,800) (3,410) (99,800) -------- --------- --------- --------- NET INCOME (LOSS) $ (9,507) $ 217,601 $ 57,506 $ 697,062 ======== ========= ========= ========= EARNINGS PER SHARE: Basic $ -- $ .07 $ .02 $ .20 ==== ==== ==== ==== Diluted $ -- $ .07 $ .02 $ .20 ==== ==== ==== ==== 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, 1998 1997 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 57,506 $ 697,062 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 71,545 76,514 Gain on exchange of inventory for purchase of treasury stock -- (356,553) Gain on disposal of property -- (1,096) (Increase) decrease in: Prepaid expenses (44,792) (23,491) Accounts receivable (24,000) 84,653 Documents owned 231,485 234,099 Other assets (3,799) 16,232 (Decrease) increase in: Accounts payable (10,948) (1,426) Customer deposits (21,395) 985 Income taxes payable -- 99,800 Deferred tax 1,842 -- Accrued and other liabilities 11,215 15,890 -------- -------- Net cash provided by operating activities 268,659 842,669 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of equipment -- 2,000 Purchase of property and equipment (72,826) (122,654) -------- -------- Net cash used in investing activities (72,826) (120,654) -------- -------- 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 625,026 125,499 Repayments of mortgage and notes payable (734,028) (142,559) Repurchase of common stock (93,513) (196,955) -------- -------- Net cash used in financing activities (202,515) (214,015) -------- -------- NET INCREASE (DECREASE) IN CASH (6,682) 508,000 CASH, BEGINNING OF PERIOD 20,095 115,800 -------- -------- CASH, END OF PERIOD $ 13,413 $ 623,800 ======== ======== 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, 1998 and 1997 _____________________________________________________________________________ 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 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 1997 were restated.
For the periods ended March 31, 1997 March 31, 1998 ___________________________ ________________________ Income Shares Per-Share Income Shares Per-Share Amount Amount ___________________________ ________________________ Basic EPS Income available to common shareholders $697,062 3,404,073 $0.20 $57,506 3,213,461 $0.02 Effect of dilutive securities Options -- -- -- 20,913 ___________________ _________________ Diluted EPS Income available to common shareholders including assumed conversion $697,062 3,404,073 $0.20 $57,506 3,213,889 $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. The increase in net cash provided by operating activities in the first six months of fiscal 1998 was largely due to the decrease in the Company's document inventory. Purchases of documents during the six month period were approximately $106,000 in contrast to approximately $346,000 for cost of documents sold. An increase in prepaid expenses is attributed to prepayment for catalogs in process for an upcoming auction. Accounts receivable increased due to funds due the Company for its March 1998 auction. The Company utilizes the cash provided from operations to pay down its revolving line of credit rather than maintaining larger cash balances. 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 March 31, 1998, 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 $45,000 as of March 31, 1998, with a maturity of March 1999. The principal is reduced by $4,667 a month. As of March 31, 1998, there were no funds drawn against this line of credit. Any funds drawn bear interest at the bank's prime rate 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 March 31, 1998, there was $533,000 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 lines 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 revenues decreased 30% for the quarter and 21% for the six month period ended March 31, 1998 compared to the quarter and six month period ended March 31, 1997. Retail sales declined 87% because of the closure of the Fashion Show Mall gallery in the previous year comparing the two six month periods. Retail sales amounted to 5% of total sales for the six month period ended March 31, 1998 as compared to 31% of total sales in the previous year period. However, auction sales increased 10%, consisting of four auctions for the period ended March 31, 1998 compared to three auctions for the period ended March 31, 1997. Cost of goods sold increased to 39 percent of revenues for the three month period ended March 31, 1998 compared to 27 percent of revenues for the three month period ended March 31, 1997. Costs were 38% of revenues for the six month period ended March 31, 1998 compared to 26% of revenues for March 31, 1997. The increase is related to the cost of catalogs for the auction sales which amount to 14% of revenues for the four auctions held during the six month period ended March 31, 1998 as compared to 5% of revenues for the three auctions held during the six month period ended March 31, 1997. The Company is increasing the mailing of its catalogs and is averaging approximately $30,000 for catalogs and $16,000 in mailing cost for each auction held in the current six month period compared to an average catalog cost of approximately $18,300 and mailing cost of $6,500 per auction in the previous year six month period. The document inventory cost portion of total cost of goods sold increased slightly due to the greater share of sales at wholesale/auction pricing compared to retail pricing. Total operating expenses increased 7% comparing the 1998 quarter to the 1997 quarter and total expenses decreased 7% comparing the six month periods. The increase, comparing the quarter periods, related to higher advertising and selling expenses. The decrease, comparing the six month periods, was realized largely in selling, general and administrative expenses. Selling, general and administrative expenses increased 9% or 58% of net sales for the quarter ended March 31, 1998 compared to 37% of net sales for the quarter ended March 31, 1997. This increase was largely due to approximately $50,000 the Company has written off as a miscellaneous expense for non-authentic material. Comparing the six month periods, selling, general and administrative expenses decreased largely due to the closure of the Fashion Show Mall gallery in the previous year period. Rent expense decreased 50%, salaries and payroll taxes decreased 2%, utilities and telephone expenses decreased 32% and property taxes decreased 13% comparing the two periods. In addition in the previous year six month period, abnormal fees were incurred for professional services relating to the stock repurchase transaction. Depreciation expense decreased 7% comparing the three month period ended March 31, 1998 to March 31, 1997 and 15% comparing the two six month periods. The decrease was due to the closure of the Las Vegas gallery and equipment and leasehold improvements becoming fully depreciated. Advertising expenses increased 15% for the quarter ended March 31, 1998 or 5% of net sales compared to 2% of net sales for the quarter ended March 31, 1997. Advertising increased 26% to 4% of net sales for the six month period ended March 31, 1998 compared to 2% of net sales for the six month period ended March 31, 1997. The Company is continuing to expand its campaigns to promote its auction operations. Repair expenses decreased 79% comparing the two quarters and decreased 59% comparing the six month periods largely due to the decreased cost of maintaining its mainframe computer, which was replaced with a PC client/server network. Interest expense decreased 32% comparing the quarter ended March 31, 1998 to the quarter ended March 31, 1997 and decreased 31% or 5% of net sales for the six month period ended March 31, 1998 compared to 6% of net sales for the six months ended March 31, 1997. 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 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 May 14, 1998 /s Todd M. Axelrod ______________________ ________________________________ Todd M. Axelrod President and Chairman of the Board (Principal Executive Officer) Date May 14, 1998 /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, 1998 and its Consolidated Statement of Operations covering the period from October 1, 1997 to March 31, 1998 and is qualified in its entirety by reference to such financial statement and notes thereof. 6-MOS SEP-30-1998 MAR-31-1998 13413 0 83650 0 6749331 0 2838015 1703393 8829171 0 1273400 0 0 5918 7151047 8829171 1405121 1405121 535339 535339 821884 0 68211 60916 3410 57506 0 0 0 57506 .02 .02
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