-----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, AVPTuNW7Aa3rGohSzUNHcAkVAlSeA40oHBCtC1GviR1Ku1w0doGgnTVHgWLJZZdc MAAWFgtx7DnteCweQeh45g== 0000763730-99-000007.txt : 19990816 0000763730-99-000007.hdr.sgml : 19990816 ACCESSION NUMBER: 0000763730-99-000007 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990813 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: 99689012 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3601 WEST SAHARA AVENUE CITY: LAS VEGAS STATE: NV ZIP: 89102 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN MUSEUM OF HISTORICAL DOCUMENTS CHARTERED/NV/ DATE OF NAME CHANGE: 19900816 10QSB 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB [x] QUARTERLY REPORT PURSUANT TO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 June 30, 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 August 1, 1999. Part 1 - FINANCIAL INFORMATION GALLERY OF HISTORY, INC. and SUBSIDIARIES CONSOLIDATED BALANCE SHEETS - UNAUDITED ______________________________________________________________________________
JUNE 30, SEPTEMBER 30, 1999 1998 ----------- ------------ ASSETS Cash $ 2,968 $ 15,069 Accounts receivable 43,978 293,986 Prepaid expenses 59,077 84,421 Documents owned 6,587,252 6,557,812 Land and building-net 1,392,123 1,430,002 Property and equipment-net 481,547 235,004 Other assets 152,369 163,510 ---------- ---------- TOTAL ASSETS $ 8,719,314 $ 8,779,804 ========== ========== LIABILITIES Accounts payable $ 181,177 $ 82,050 Notes payable 910,742 517,803 Indebtedness to related parties 1,000,000 1,000,000 Deposits 23,147 31,596 Deferred tax 162,850 170,524 Accrued and other liabilities 127,680 92,619 ---------- ---------- TOTAL LIABILITIES 2,405,596 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 (157,010) (82,073) Common stock in treasury (6,286,824 and 5,710,240 shares), at cost (2,927,553) (2,430,996) ---------- ---------- TOTAL STOCKHOLDERS' EQUITY 6,313,718 6,885,212 ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 8,719,314 $ 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 NINE MONTHS ENDED JUNE 30, JUNE 31, 1999 1998 1999 1998 -------- -------- ---------- ---------- REVENUES $ 616,560 $ 692,288 $1,866,886 $2,097,409 COST OF GOODS SOLD 233,763 277,059 712,159 812,398 -------- -------- --------- --------- GROSS PROFIT 382,797 415,229 1,154,727 1,285,011 -------- -------- --------- --------- OPERATING EXPENSES: Selling, general and administrative 329,009 356,397 1,061,886 1,081,789 Depreciation 21,358 17,010 55,130 55,857 Advertising 14,630 15,504 46,478 67,106 Maintenance & repairs 3,571 2,060 10,867 8,103 Loss on gallery closure -- -- 9,475 -- -------- -------- --------- --------- TOTAL OPERATING EXPENSES 368,568 390,971 1,183,836 1,212,855 -------- -------- --------- --------- OPERATING INCOME (LOSS) 14,229 24,258 (29,109) 72,156 -------- -------- --------- --------- OTHER INCOME (EXPENSE) Interest expense (37,250) (32,373) (119,959) (100,584) Other 23,114 41,207 65,970 122,436 -------- -------- --------- --------- TOTAL OTHER INCOME (EXPENSE) (14,136) 8,834 (53,989) 21,852 -------- -------- --------- --------- INCOME (LOSS) BEFORE INCOME TAXES 93 33,092 (83,098) 94,008 (PROVISION) CREDIT FOR INCOME TAX -- 2,923 8,161 (487) -------- -------- --------- --------- NET INCOME (LOSS) $ 93 $ 36,015 $ (74,937) $ 93,521 ======== ======== ========= ========= 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 ______________________________________________________________________________
NINE MONTHS ENDED JUNE 30, 1999 1998 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income (Loss) $ (74,937) $ 93,521 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 104,669 105,068 (Increase) decrease in: Prepaid expenses 25,344 (21,988) Accounts receivable 250,008 11,840 Documents owned (29,440) 261,103 Other assets 11,141 (1,483) (Decrease) increase in: Accounts payable 99,127 (40,360) Deposits (8,449) (21,260) Deferred tax (7,674) 1,842 Accrued and other liabilities 35,061 2,934 -------- -------- Net cash provided by operating activities 404,850 391,217 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (313,333) (80,730) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from notes payable 1,763,520 825,026 Repayments of notes payable (1,370,581) (1,010,275) Repurchase of common stock (496,557) (93,513) -------- -------- Net cash used in financing activities (103,618) (278,762) -------- -------- NET INCREASE (DECREASE) IN CASH (12,101) 31,725 CASH, BEGINNING OF PERIOD 15,069 20,095 -------- -------- CASH, END OF PERIOD $ 2,968 $ 51,820 ======== ======== 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, 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. In April 1999, the Company purchased 16,300 shares of its common stock at an average price of $3.90 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 June 30, 1999 and 1998 were 5,552,066 and 6,416,319, respectively; and for the nine month period ended June 30, 1999 and 1998, average shares outstanding were 5,571,320 and 6,420,073, respectively. To derive diluted earnings per share, the average number of shares for the three months ended June 30, 1999 and 1998 were 5,552,066 and 6,449,635, respectively; and for the nine month period ended June 30, 1999 and 1998, average shares outstanding were 5,900,656 and 6,470,035, 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 nine month periods ended June 30, 1999 and 1998. The increase was largely due to a decrease in accounts receivable and an increase in accounts payable. The decrease in accounts receivable resulted from an auction held at the end of September 1998. Hence, at year end, most of the receivables were not yet collected. An increase in accounts payable resulted during the current period due to payables for consigned sales for the June 1999 auction and for document purchases. The Company had previously engaged an outside consulting firm to thoroughly redesign its computer system, which would include improvements in the Company's computer operating system as well as custom designed applications software for maintaining its inventory, sales and auction operations. During the quarter the Company has been negatively impacted by the acknowledged negligence by this consulting firm. As a result, the Company is without the application software which was to be completed by April 30, 1999 and the Company's original $200,000 budget for the project, including the software and hardware requirements, will be exceeded by at least another $100,000 before completion. As a settlement agreement, the consulting firm had agreed to provide the Company with two additional software applications; subsequently, this consulting firm has reneged on its settlement agreement. As a result, the Company is currently negotiating with a new software consulting firm to provide the two new software applications and provide ongoing maintenance for both the Company's software applications and hardware networks. The increase in cash used for investing activities included these consulting fees incurred to date in addition to added hardware requirements. Other utilization of the cash provided from operations and an 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 and 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, 2000. Loans under the line are secured by the Company's inventory. As of June 30, 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 June 30, 1999, there was $867,097 available under this line of credit with a principal balance of $870,818. 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, as a result the note was 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. The Company's cost to close the Washington, D.C. gallery was $9,475. The only remaining showroom gallery for the Company is 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 11% for the quarter and for the nine months comparing the periods ended June 30, 1999 and 1998. This decrease is due to a reduction in retail sales that declined 68% comparing the quarters and 140% comparing the nine month periods. However, retail sales amounted to only 6% of total sales for the nine month period ending June 30, 1999 compared to 14% of total sales for the nine month period ended June 30, 1998. The decline in retail sales is the result of the closure of the Georgetown gallery in addition to a decrease at the headquarter office sales. Auction sales decreased 3% for both the quarter and nine month periods comparing June 30, 1999 to June 30, 1998. This decrease was due to a larger quantity of consigned items presented in the Company's auctions during the current fiscal period. Consignments amounted to 10% of total sales for the nine month period ended June 30, 1999 compared to 4.5% of total sales for the nine month period ended June 30, 1998. Recording consigned items, the Company realizes commissions and premiums but not the sales amount. Cost of goods sold remained consistent comparing the two quarter periods ended June 30, 1999 and 1998; 38% of net sales for 1999 compared to 40% of net sales for 1998. The same is true comparing the six month periods, which resulted in 38% of net sales for the current nine month period compared to 39% of net sales for the previous year nine month period. Document costs amount to 23% of net sales for the quarter and 24% of net sales for the nine month period ended June 30, 1999 compared to 24% for the quarter and 25% for the nine month period ended June 30, 1998. Cost of catalogs amounted to 15% of net sales for both the quarter and the nine month period ended June 30, 1999 compared to 16% of net sales for the quarter and 14% for the nine month period ended June 30, 1998. Total operating expenses decreased 6% comparing the quarter ended June 30, 1999 to June 30, 1998. Comparing the nine month periods, total operating expenses decreased 2%. Selling, general and administrative expenses decreased 8% comparing the quarter periods and 2% comparing the nine month periods. The decrease is a direct result of the Georgetown gallery closure: comparing June 1999 to June 1998, rent expenses decreased 97% for the quarter and 55% for the nine month period, general insurance decreased 43% for the quarter and 22% for the nine month period, and property taxes decreased 52% for the quarter and 29% for the nine month period. Professional fees increased during the current period due to fees incurred for the Company's common stock split. Depreciation expense increased by 26% comparing the quarter ended June 30, 1999 to June 30, 1998 as a result of the Company's expanded computer equipment and software acquisitions. Depreciation expense decreased 1% comparing the nine month periods due to the Georgetown gallery closure. Advertising decreased 6% for the quarter and 31% for the nine month period comparing June 1999 to June 1998. The Company has become more selective in the current fiscal year for its auction advertising. Maintenance and repair expenses increased during the periods largely due to refurbishing some of the Company's engraving equipment used for framing. Interest expense increased 15% for the quarter ended June 30, 1999 compared to June 30, 1998 and 19% comparing the nine month periods. 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 1-3. None. Item 4. Submission of Matters to a Vote of Security Holders. On August 6, 1999, 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, 1999. At the Meeting the following Directors were elected by a vote of 5,449,618 for and 212 withholding authority: Todd M. Axelrod, Rod Lynam, Pamela Axelrod, Bernard Duke and Barry Fink. Voting for the appointment of Arthur Andersen LLP, as the Company's independent auditors, 5,449,478 shares were in favor, 212 shares abstain and 140 against. Item 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 August 13, 1999 /s Todd M. Axelrod ______________________ ________________________________ Todd M. Axelrod President and Chairman of the Board (Principal Executive Officer) Date August 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 June 30, 1999 and its Consolidated Statement of Operations covering the period from October 1, 1998 to June 30, 1999 and is qualified in its entirety by reference to such financial statement and notes thereof. 9-MOS SEP-30-1999 JUN-30-1999 2968 0 43978 0 6587252 0 2637720 1344050 8719314 0 1910742 0 0 5918 6307800 8719314 1866886 1866886 712159 712159 1183836 0 119959 (83098) 8161 (74937) 0 0 0 (74937) (.01) (.01)
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