-----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, OV8JrLCHBeuicwUwKz0WXM9Dt3Rbo8VMXHWX5Br0nPJGmsHJK3Z9r3+lz+wwkXpr BPjLbfJ5O+5FyFobLkT9Bg== 0000763730-99-000004.txt : 19990514 0000763730-99-000004.hdr.sgml : 19990514 ACCESSION NUMBER: 0000763730-99-000004 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990513 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: 99619059 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3601 WEST SAHARA AVENUE CITY: LAS VEGAS STATE: NV ZIP: 89102 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN MUSEUM OF HISTORICAL DOCUMENTS CHARTERED/NV/ DATE OF NAME CHANGE: 19900816 10QSB 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB [x] QUARTERLY REPORT PURSUANT TO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 March 31, 1999 [ ] 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 5,548,484 shares of Common Stock, par value $.0005, outstanding as of May 1, 1999. Part 1 - FINANCIAL INFORMATION GALLERY OF HISTORY, INC. and SUBSIDIARIES CONSOLIDATED BALANCE SHEETS - UNAUDITED ______________________________________________________________________
MARCH 31, SEPTEMBER 30, 1999 1998 ----------- ------------ ASSETS Cash $ 16,518 $ 15,069 Accounts receivable 35,282 293,986 Prepaid expenses 54,930 84,421 Documents owned 6,465,727 6,557,812 Land and building-net 1,404,749 1,430,002 Property and equipment-net 298,038 235,004 Other assets 157,658 163,510 ---------- ---------- TOTAL ASSETS $ 8,432,902 $ 8,779,804 ========== ========== LIABILITIES Accounts payable $ 175,680 $ 82,050 Notes payable 571,056 517,803 Indebtedness to related parties 1,000,000 1,000,000 Deposits 25,050 31,596 Deferred tax 162,850 170,524 Accrued and other liabilities 121,104 92,619 ---------- ---------- TOTAL LIABILITIES 2,055,740 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 (157,103) (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 6,377,162 6,885,212 ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 8,432,902 $ 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 SIX MONTHS ENDED MARCH 31, MARCH 31, 1999 1998 1999 1998 -------- -------- ---------- ---------- REVENUES $ 621,825 $ 718,015 $1,250,327 $1,405,121 COST OF GOODS SOLD 240,755 281,870 478,396 535,339 -------- -------- --------- --------- GROSS PROFIT 381,070 436,145 771,931 869,782 -------- -------- --------- --------- OPERATING EXPENSES: Selling, general and administrative 375,395 413,575 732,878 725,392 Depreciation 17,313 19,617 33,772 38,847 Advertising 13,130 33,761 31,848 51,602 Maintenance & repairs 5,660 1,603 7,296 6,043 Loss on gallery closure 9,475 -- 9,475 -- -------- -------- --------- --------- TOTAL OPERATING EXPENSES 420,973 468,556 815,269 821,884 -------- -------- --------- --------- OPERATING INCOME (LOSS) (39,903) (32,411) (43,338) 47,898 -------- -------- --------- --------- OTHER INCOME (EXPENSE) Interest expense (38,487) (33,429) (82,709) (68,211) Other 23,269 40,943 42,856 81,229 -------- -------- --------- --------- TOTAL OTHER INCOME (EXPENSE) (15,218) 7,514 (39,853) 13,018 -------- -------- --------- --------- INCOME (LOSS) BEFORE INCOME TAXES (55,121) (24,897) (83,191) 60,916 (PROVISION) CREDIT FOR INCOME TAX -- 15,390 8,161 (3,410) -------- -------- --------- --------- NET INCOME (LOSS) $ (55,121) $ (9,507) $ (75,030) $ 57,506 ======== ======== ========= ========= EARNINGS (LOSS) PER SHARE: Basic $(.01) $ -- $(.01) $ .01 ==== ==== ==== ==== Diluted $(.01) $ -- $(.01) $ .01 ==== ==== ==== ==== 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, 1999 1998 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income (Loss) $ (75,030) $ 57,506 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 66,798 71,545 (Increase) decrease in: Prepaid expenses 29,491 (44,792) Accounts receivable 258,704 (24,000) Documents owned 92,085 231,485 Other assets 5,852 (3,799) (Decrease) increase in: Accounts payable 93,630 (10,948) Customer deposits (6,546) (21,395) Deferred tax (7,674) 1,842 Accrued and other liabilities 28,485 11,215 -------- -------- Net cash provided by operating activities 485,795 268,659 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (104,579) (72,826) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from notes payable 1,032,020 625,026 Repayments of notes payable (978,767) (734,028) Repurchase of common stock (433,020) (93,513) -------- -------- Net cash used in financing activities (379,767) (202,515) -------- -------- NET INCREASE (DECREASE) IN CASH 1,449 (6,682) CASH, BEGINNING OF PERIOD 15,069 20,095 -------- -------- CASH, END OF PERIOD $ 16,518 $ 13,413 ======== ======== 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, 1999 and 1998 _____________________________________________________________________________ 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. Some of these purchases were made in the open market and others were 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 March 31, 1999 and 1998 were 5,564,784 and 6,416,868, respectively; and for the six month period ended March 31, 1999 and 1998, average shares outstanding were 5,580,945 and 6,421,950, respectively. To derive diluted earnings per share, the average number of shares for the three months ended March 31, 1999 and 1998 were 6,072,983 and 6,436,505, respectively; and for the six month period ended March 31, 1999 and 1998, average shares outstanding were 5,800,460 and 6,463,777, respectively. 5) Stock Split 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 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 Company realized an increase in cash provided by operating activities comparing the two six month periods ended March 31, 1999 and 1998. The increase was largely due to a decrease in document inventory and accounts receivable and an increase in accounts payable. The decrease in document inventory was attributed to costs of documents sold. The decrease in accounts receivable resulted due to an auction being held at the end of September 1998, hence most of the receivables were not yet collected. An increase in accounts payable resulted during the current period due to a larger amount outstanding for consigned sales for the March 1999 auction. The Company has engaged an outside consulting firm to thoroughly redesign its computer system at an estimated cost of $200,000. This will include improvements in the Company's computer operating system as well as custom designed software for maintaining its inventory, sales and auction operations. The increase in cash used for investing activities includes these consulting fees incurred to date in addition to added hardware requirements. Other utilization of the cash provided from operations and a slight increase in notes payable was 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. Subsequently, in April 1999, the Company purchased 16,300 shares of its common stock at an average price of $3.90 a 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 March 31, 1999, there was no outstanding balance on this line of credit. 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 March 31, 1999, there was $1,224,484 available under this line of credit with a principal balance of $527,696. 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. Nanna Corp. has since dissolved, thus the note will be transferred to Mr. Axelrod. This note is due April 30, 2002, with interest payments monthly at a rate of 8%. 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 cost to close the Washington, D.C. gallery was $9,475. 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 13% for the quarter and 11% for the six months comparing the periods ended March 31, 1999 and 1998. This decrease is due to a reduction in retail sales that declined 47% comparing the quarters and 57% comparing the six month periods. However, retail sales amounted to only 6% of total sales for the three month period ended March 31, 1999 compared to representing 9% of total sales for the three month period ended March 31, 1998. For the six month periods, retail sales amounted to 7% of total sales for 1999 compared to 15% of total sales for 1998. The decline in retail sales is the result of the closure of the Georgetown gallery. Auction sales decreased 10% comparing the quarter ended March 31, 1999 to the quarter ended March 31, 1998 which resulted in a decrease of 3% comparing the six month periods. This decrease was due to a larger quantity of consigned items presented in the Company's March 1999 auction. Recording consigned items, the Company realizes commissions and premiums but not the sales amount. Cost of goods sold remained fairly consistent comparing the two quarter periods; 39% of net sales for the current quarter compared to 39% of net sales for the quarter ended March 1998. The same is true comparing the six month periods, which resulted in 38% of net sales for both periods. The breakdown between the cost of documents and the cost of catalogs also remained fairly constant. Cost of documents was 24% of net sales for the six month period ended March 31, 1999 compared to 25% of net sales for the six month period ended March 31, 1998. Cost of catalogs amounted to 14% of net sales for the current six month period compared to 13% of net sales for the previous year six month period. Total operating expenses decreased 10% comparing the quarter ended March 31, 1999 to March 31, 1998. Comparing the six month periods, total operating expenses decreased 1%; however, because of lower net sales, the current period's operating expenses were 65% of net sales compared to 58% of net sales for the previous period. The decrease is largely due to the decrease in advertising that fell 61% comparing the quarters to 2% of net sales for 1999 from 5% of net sales for 1998. For the six month period, advertising decreased 38% to 3% of net sales for 1999 compared to 4% for 1998. The Company has become more selective in the current fiscal year for its auction advertising. Selling, general and administrative expenses decreased 9% comparing the two quarter periods but increased 1% comparing the six month periods. The decrease for the quarter period was a direct result of the Georgetown gallery closure in January 1998. The increase in selling, general and administrative expenses comparing the six month periods resulted from an increase in professional fees incurred in the current period for the Company's common stock split. Maintenance and repair expenses increased during the periods largely due to refurbishing some of the Company's framing equipment. Depreciation expense decreased 12% comparing the three month periods and 13% comparing the six month periods due to the Georgetown gallery closure and the Company's headquarters equipment and leasehold improvements becoming fully depreciated. Interest expense increased 15% to 6% of net sales for the quarter ended March 31, 1999 from 5% of net sales for the quarter ended March 31, 1998. Interest for the six month period ended March 31, 1999 increased 21% to 7% of net sales compared to 5% of net sales for the six month period ended March 31, 1998. 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 periods was a result of a reduction in leased square footage to outside tenants. Part II - Other Information Item 1-5. None. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. (27) Financial Data Schedule. (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 13, 1999 /s Todd M. Axelrod ______________________ ________________________________ Todd M. Axelrod President and Chairman of the Board (Principal Executive Officer) Date May 13, 1999 /s Rod Lynam ______________________ _______________________________ Rod Lynam Treasurer and Director (Principal Accounting Officer) EX-27 2 ARTICLE 5 FIN. DATA SCHEDULE FOR 2ND QTR 10-QSB
5 This schedule contains summary financial information extracted from the Company's Consolidated Balance Sheet dated March 31, 1999 and its Consolidated Statement of Operations covering the period from October 1, 1998 to March 31, 1999 and is qualified in its entirety by reference to such financial statement and notes thereof. 6-MOS SEP-30-1999 MAR-31-1999 16518 0 35282 0 6465727 0 2445121 1322334 8432902 0 1571056 0 0 5918 6371244 8432902 1250327 1250327 478396 478396 815269 0 82709 (83191) 0 (75030) 0 0 0 (75030) (.01) (.01)
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