-----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, IZiy7vJllF7JwpC/q1Ht+W232yD4NnDyEWbTGwpCc5J6hycn/jJYJqgkyKO2hUCK alsrhNAbRG8g2tgu8BdVLA== 0000763730-99-000002.txt : 19990215 0000763730-99-000002.hdr.sgml : 19990215 ACCESSION NUMBER: 0000763730-99-000002 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990212 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: 99536801 BUSINESS ADDRESS: STREET 1: 3601 WEST SAHARA AVE STREET 2: PROMENADE SUITE 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3601 WEST SAHARA AVENUE CITY: LAS VEGAS STATE: NV ZIP: 89102 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN MUSEUM OF HISTORICAL DOCUMENTS CHARTERED/NV/ DATE OF NAME CHANGE: 19900816 10QSB 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB [x] QUARTERLY REPORT PURSUANT TO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, 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 5,564,784 shares of Common Stock, par value $.0005, outstanding as of February 1, 1999. Part 1 - FINANCIAL INFORMATION GALLERY OF HISTORY, INC. and SUBSIDIARIES CONSOLIDATED BALANCE SHEETS - UNAUDITED ______________________________________________________________________
DECEMBER 31, SEPTEMBER 30, 1998 1998 ----------- ------------ ASSETS Cash $ 12,501 $ 15,069 Accounts receivable 88,039 293,986 Prepaid expenses 92,475 84,421 Documents owned 6,543,479 6,557,812 Land and building-net 1,417,375 1,430,002 Property and equipment-net 235,803 235,004 Other assets 164,545 163,510 ---------- ---------- TOTAL ASSETS $ 8,554,217 $ 8,779,804 ========== ========== LIABILITIES Accounts payable $ 78,118 $ 82,050 Notes payable 727,565 517,803 Indebtedness to related parties 1,000,000 1,000,000 Deposits 28,964 31,596 Deferred tax 163,231 170,524 Accrued and other liabilities 124,056 92,619 ---------- ---------- TOTAL LIABILITIES 2,121,934 1,894,592 ---------- ---------- STOCKHOLDERS' EQUITY Common stock: $.0005 par value; 20,000,000 shares authorized; 11,835,308 shares issued and outstanding 5,918 5,918 Additional paid-in-capital 9,392,363 9,392,363 Accumulated deficit (101,982) (82,073) Common stock in treasury (6,270,524 and 5,710,240 shares), at cost (2,864,016) (2,430,996) ---------- ---------- TOTAL STOCKHOLDERS' EQUITY 6,432,283 6,885,212 ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 8,554,217 $ 8,779,804 ========== ========== See the accompanying notes to consolidated financial statements.
GALLERY OF HISTORY, INC. and SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED ______________________________________________________________________
THREE MONTHS ENDED DECEMBER 31, 1998 1997 -------- -------- REVENUES $ 628,502 $ 687,106 COST OF GOODS SOLD 237,641 253,469 -------- -------- GROSS PROFIT 390,861 433,637 -------- -------- OPERATING EXPENSES: Selling, general and administrative 357,483 311,747 Depreciation 16,459 19,230 Advertising 18,718 17,842 Maintenance & repairs 1,635 4,509 -------- -------- TOTAL OPERATING EXPENSES 394,295 353,328 -------- -------- OPERATING INCOME (LOSS) (3,434) 80,309 -------- -------- OTHER INCOME (EXPENSE) Interest expense (44,222) (34,782) Other 19,586 40,286 -------- -------- TOTAL OTHER INCOME (24,636) 5,504 -------- -------- INCOME (LOSS) BEFORE INCOME TAXES (28,070) 85,813 (PROVISION) CREDIT FOR INCOME TAXES 8,161 (18,800) -------- -------- NET INCOME (LOSS) $ (19,909) $ 67,013 ======== ======== EARNINGS (LOSS) PER SHARE: Basic $ -- $ .01 ==== ==== Diluted $ -- $ .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, 1998 1997 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income (Loss) $ (19,909) $ 67,013 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 32,973 35,338 (Increase) decrease in: Prepaid expenses (8,054) (56,707) Accounts receivable 205,947 16,888 Documents owned 14,333 64,451 Other assets (1,035) (5,458) (Decrease) increase in: Accounts payable (3,932) 78,970 Customer deposits (2,632) (10,701) Deferred tax (7,293) 18,800 Accrued and other liabilities 31,437 6,730 -------- -------- Net cash provided by operating activities 241,835 215,324 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (21,145) (46,073) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from mortgage and notes payable 691,520 270,027 Repayments of mortgage and notes payable (481,758) (338,839) Repurchase of common stock (433,020) (93,513) Net cash used in financing activities (223,258) (162,325) -------- -------- NET (DECREASE) INCREASE IN CASH (2,568) 6,926 CASH, BEGINNING OF PERIOD 15,069 20,095 -------- -------- CASH, END OF PERIOD $ 12,501 $ 27,021 ======== ======== See the accompanying notes to consolidated financial statements.
GALLERY OF HISTORY, INC. and SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Three Month Period Ended June 30, 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 1998 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 5,319,440 shares of its common stock for total consideration of $2,000,000, consisting of 460 documents valued at $1,803,045 and $196,955 in cash. In fiscal 1998, the Company purchased 356,800 shares of its common stock at an average price of $1.07 a share. In October 1998, the Company purchased 560,284 shares of its common stock at an average price of $.77 a share. These purchases were made in the open market and privately negotiated transactions. 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. To derive basic earnings per share, the average number of shares outstanding for the three months ended December 31, 1998 and 1997 were 5,596,756 and 6,426,922, respectively. To derive diluted earnings per share, the average number of shares for the three months ended December 31, 1998 and 1997 were 6,060,337 and 6,478,238, respectively. These numbers have been restated to reflect the January 1999 two-for-one stock split. 5) Subsequent Event The Company declared a two-for-one stock split for its shareholders of record as of December 24, 1998. The distribution was made January 8, 1999. All common stock, per share data and par value numbers presented herein have been restated to reflect the stock split. 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 for the three months ended December 31, 1998 was largely due to the decrease in accounts receivable. The increase resulted due to an auction being held at the end of September 1998, hence most of the receivables were not yet collected compared to an auction held at the beginning of December 1998, resulting in most of the receivables being collected by the month end. In addition, accrued expenses increased during the period, largely due to accrued salaries. During the period, the Company utilized the cash provided from operations and proceeds from notes payable mainly for the repurchase of the Company's common stock. In October 1998, the Company purchased 560,284 shares of its common stock at an average price of $.77 per share. 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, 1999. Loans under the line are secured by the Company's inventory. As of December 31, 1998, there was no outstanding balance on 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 of the then current balance. This line of credit is collateralized by the Company's headquarters building. As of December 31, 1998, there was $1,085,285 available under this line of credit with a principal balance of $680,842. All excess cash is applied against this loan rather than maintaining excessive cash balances. In September 1998, the Company borrowed $1,000,000 from Nanna Corp., a company owned 100% by Todd Axelrod and his wife Pamela. This note is due in three years with interest payments monthly at a rate of 8.75%. The purpose of this note was to reduce the Company's outstanding line of credit and to finance its stock repurchase program. On January 15, 1999, the Company reached an agreement with the Georgetown Park lessor to immediately close the Company's last outside retail location. The lease had an expiration date of September 1999. This final gallery closure will complete the Company's marketing shift away from its traditional gallery retail market and enable it to focus on its phone, fax, mail and online auction programs. The Company's estimated cost to close the Washington, D.C. gallery is less than $10,000. The only remaining showroom gallery for the Company will be at its headquarters offices in Las Vegas, Nevada. 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 9% the quarter ended December 31, 1998 compared to the quarter ended December 31, 1997. This decrease is due to a reduction in retail sales that declined 61% comparing the periods. Retail sales amounted to 9% of total sales for the quarter ended December 1998 compared to 20% of total sales for the quarter ended December 1997. This decline in retail sales emphasizes the Company's objective to exit the traditional retail market. Auction sales increased 5% comparing the quarter ended December 31, 1998 compared to December 31, 1997. Both quarter periods included two auctions. Cost of goods sold remained fairly consistent comparing the two quarter periods; 38% of net sales for the current quarter compared to 37% of net sales for the quarter ended December 1997. Cost of documents declined to 24% of net sales for the quarter ended December 1998 compared to 25% for the quarter ended December 1997. Cost of catalogs increased in the current quarter to 14% of net sales compared to 12% of net sales in 1997. The increase is related to the cost of mailing additional copies of the catalogs that increased 34% comparing the two periods. Total operating expenses increased 12% to 63% of net sales for the current quarter from 51% of net sales for the quarter ended December 1997. The increase is largely due to an increase in selling, general and administrative expenses, which increased 15%, comparing the two periods. Credit card charges, recorded as a selling expense, increased by 17% comparing the quarter ended in 1998 to 1997 resulting from a larger number of sales being paid for by credit cards in the current period. Salaries increased 12% comparing the quarter ended December 1998 to the quarter ended December 1997. The increase was a result of general pay increases. Advertising increased 5% for the current quarter compared to the quarter ended December 1997, resulting from additional advertising in the current quarter. Maintenance and repair expenses decreased 64% comparing the two quarters largely due to the decreased cost of maintaining its computer system. Depreciation expense decreased 14% comparing the three month period ended December 31, 1998 to December 31, 1997 due to equipment and leasehold improvements becoming fully depreciated. Interest expense increased 27% to 7% of net sales for the quarter ended December 31, 1998 from 5% of net sales for the quarter ended December 31, 1997. The increase is a result of higher outstanding loan balances, which was drawn on for the purchase of the Company's common stock. Other income is largely the result of the rental operation for the Company's headquarters building. The decrease comparing the two quarter periods was a result of a reduction in leased square footage. Part II - Other Information Item 1-5. None. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. Financial Data Schedule. (b) Reports on Form 8-K. Form 8-K was filed with the Securities and Exchange Commission on October 1, 1998. The filing was made to report under Item 5 of Form 8-K the Company's purchase of 540,284 of its common stock at $.75 per share. Form 8-K was filed with the Securities and Exchange Commission on December 18, 1998. The filing was made to report under Item 5 of Form 8-K the Company declaring a two-for-one stock split of its common stock for all shareholders of record as of December 24, 1998, with a distribution date of January 8, 1999. 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 12, 1999 /s Todd M. Axelrod ______________________ ________________________________ Todd M. Axelrod President and Chairman of the Board (Principal Executive Officer) Date February 12, 1999 /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, 1998 and its Consolidated Statement of Operations covering the period from October 1, 1998 to December 31, 1998 and is qualified in its entirety by reference to such financial statement and notes thereof. 3-MOS SEP-30-1999 DEC-31-1998 12501 0 88039 0 6543479 0 2434894 1361715 8554217 0 1586267 0 0 5918 6426365 8554217 628502 628502 237641 237641 394295 0 44222 (28070) (8161) (19909) 0 0 0 (28070) 0 0
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