UNITED STATES
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, 1995
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 5,917,654 shares of Common Stock, par value $.001,
outstanding as of April 25, 1995.
<PAGE>
<TABLE>
Part 1 - FINANCIAL INFORMATION
GALLERY OF HISTORY, INC. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - UNAUDITED
<CAPTION>
MARCH 31, SEPTEMBER 30,
1995 1994
----------- -------------
<S> <C> <C>
ASSETS
Cash $ 117,368 $ 33,961
Prepaid expenses 67,476 66,312
Documents owned 9,231,227 9,449,788
Land and building-net 1,553,271 1,576,264
Property and equipment-net 287,333 386,288
Other assets 495,452 511,349
__________ ___________
TOTAL ASSETS $11,752,127 $12,023,962
LIABILITIES
Accounts payable $ 104,523 $ 93,190
Bank lines of credit -- 60,000
Notes payable 402,422 518,531
Indebtedness to related parties 236,118 314,453
Mortgage notes payable 1,938,523 1,957,940
Deposits 26,538 156,173
Accrued and other liabilities 194,154 156,962
__________ __________
TOTAL LIABILITIES $ 2,902,278 $ 3,257,249
STOCKHOLDERS' EQUITY
Common stock: $.001 par value;
authorized, 10,000,000 shares;
issued and outstanding,
5,917,654 and 5,910,154 shares 5,918 5,910
Additional paid-in-capital 9,392,363 9,373,621
Accumulated deficit (548,432) (612,818)
__________ __________
TOTAL STOCKHOLDERS' EQUITY $ 8,849,849 $ 8,766,713
__________ __________
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $11,752,127 $12,023,962
<FN>
See the accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
GALLERY OF HISTORY, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
1995 1994 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES $ 565,191 $ 543,469 $1,258,626 $1,087,753
COST OF REVENUES 150,061 113,097 335,740 239,792
_________ _________ _________ _________
GROSS PROFIT 415,130 430,372 922,886 847,961
OPERATING EXPENSES:
Selling, general and
administrative 371,854 390,575 745,522 843,085
Depreciation 46,309 62,247 99,252 147,256
Advertising 1,908 1,695 10,864 4,118
Maintenance & repairs 9,050 9,435 18,657 20,474
Loss on gallery closure -- 34,412 -- 42,056
_________ _________ _________ _________
TOTAL OPERATING EXPENSES 429,121 498,364 874,295 1,056,989
OPERATING INCOME (LOSS) (13,991) (67,992) 48,591 (209,028)
_________ _________ _________ _________
OTHER INCOME (EXPENSE):
Interest expense (66,121) (65,225) (134,802) (127,889)
Other 36,599 34,273 79,529 61,362
_________ _________ _________ _________
TOTAL OTHER INCOME(EXPENSE) (29,522) (30,952) (55,273) (66,527)
LOSS BEFORE INCOME TAX AND
CUMULATIVE EFFECT OF A CHANGE
IN ACCOUNTING PRINCIPLE (43,513) (98,944) (6,682) (275,555)
(PROVISION) CREDIT FOR
INCOME TAXES 71,138 -- 71,068 (1,939)
_________ _________ _________ _________
INCOME (LOSS) BEFORE CUMULA-
TIVE EFFECT OF A CHANGE IN
ACCOUNTING PRINCIPLE 27,655 (98,944) 64,386 (277,494)
CUMULATIVE EFFECT OF A CHANGE
IN ACCOUNTING PRINCIPLE -- -- -- 90,992
_________ _________ _________ _________
NET INCOME (LOSS) $ 27,655 $ (98,944) $ 64,386 $ (368,486)
EARNINGS (LOSS) PER SHARE:
Before cumulative effect of
a change in accounting
principle $ -- $(.02) $ .01 $(.04)
Cumulative effect of a change
in accounting principle -- -- -- ( 02)
_________ _________ _________ _________
Total net income (loss) $ -- $(.02) $ .01 $(.06)
<FN>
See the accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
GALLERY OF HISTORY, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
<CAPTION>
SIX MONTHS ENDED MARCH 31,
1995 1994
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 64,386 $(368,486)
Adjustments to reconcile net income
(loss) to net cash provided from
(used in) operating activities:
Depreciation and amortization 122,664 170,705
Loss on disposal of property -- 45,828
Deferred income taxes -- 91,231
(Increase) decrease in:
Prepaid expenses (1,164) (23,543)
Documents owned 218,561 81,606
Other assets 15,897 36,988
(Decrease) increase in:
Accounts payable 11,333 (7,192)
Customer deposits (129,635) (1,635)
Accrued and other liabilities 37,192 (46,140)
________ ________
Net cash provided by (used in)
operating activities 339,234 (20,638)
________ ________
CASH FLOWS USED FOR INVESTING ACTIVITIES:
Purchase of property and equipment (716) (10,375)
Proceeds from sale of equipment -- 12,750
________ ________
Net cash provided by (used in)
investing activities (716) 2,375
________ ________
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from bank line of credit 125,000 229,000
Repayments of bank line of credit (185,000) (260,000)
Proceeds from notes payable -- 290,260
Repayments of mortgage and notes payable (195,111) (206,465)
Net proceed from sale of common stock -- 50,000
________ ________
Net cash provided by (used in)
financing activities (255,111) 102,795
________ ________
NET INCREASE IN CASH 83,407 84,532
CASH, BEGINNING OF PERIOD 33,961 14,324
________ ________
CASH, END OF PERIOD $ 117,368 $ 98,856
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
For the six month period ended March 31, 1995:
(1) Stock options were exercised in part for the retirement of a
note payable in the amount of $18,750 to a related party.
For the six month period ended March 31, 1994:
(1) Debt of $7,914 was incurred for the purchase of equipment.
<FN>
See the accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
GALLERY OF HISTORY, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Month Period Ended March 31, 1995 and 1994
_______________________________________________________________
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 be read in conjunction with the financial
statements and the notes thereto included in the Company's 1994
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 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) Income Taxes
The Company realized $71,138 credit for income taxes in its second
quarter of fiscal 1995 due to a federal income tax refund resulting
from a net operating loss carryback. The Company adopted the
Financial Accounting Standards Board Statement No. 109, "Accounting
for Income Taxes" in its first fiscal quarter of 1994 by reporting a
cumulative effect of a change in accounting principle and not
restating prior periods. The effect decreased net income as a non-
cash, non-recurring cumulative effect of a change in accounting
principle by an amount totaling $90,992.
4) Reclassifications
Certain amounts in the 1994 financial statements have been
reclassified to conform with the 1995 presentation.
5) 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. The average number of
shares of outstanding common stock for each of the three months ended
March 31, 1995 and 1994 was 5,917,654 and 5,827,543, respectively.
The average number of shares of outstanding common stock for each of
the six months ended March 31, 1995 and 1994 was 5,917,118 and
5,814,428, respectively.
<PAGE>
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 1 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 exceeded net cash used
in operating activities for the six month period ended March 31, 1995,
largely due to the net income from operations and a decrease in the
document inventory, in addition to the non-cash depreciation charge.
The decrease in the document inventory was due to increased sales and
reduced purchasing of inventory. Deposits for future sales the
Company had acquired as of September 30, 1994 was reduced by
approximately $130,000 during the six month period ended March 31,
1995 due to the completion of the September sales in the current six
month period. The cash generated from operations was primarily used
in financing activities to reduce the Company's bank line of credit
and other notes and mortgage payable. The line of credit the Company
has available from its bank is in the amount of $100,000 at an
interest rate of 1.5% over the prime rate with a maturity date of July
15, 1995 with a written commitment from its bank to renew the line
through July 1996. Loans under the line are secured by the Company's
inventory. As of March 31, 1995, there is no outstanding balance on
this line of credit.
The Company believes that by reducing its overhead by closing
unprofitable operations and increasing revenues generated from its
headquarters operations, the Company's current cash requirements 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.
<PAGE>
Results of Operations
Document sales increased 4% for the three month period ended
March 31, 1995 as compared to the three month period ended March 31,
1994 and sales increased 16% for the six month period ended March 31,
1995 as compared to the period ended March 31, 1994. The six month
period ended March 31, 1994 included approximately 10% of total sales
generated from two galleries that were closed in the second quarter of
fiscal 1994. The Company ran a promotional campaign during November
and December 1994 which accounted for approximately 14% of the current
six month period sales. The Company has elected to sell at auction
material which has proven not to be popular in its galleries, lesser
desirable material and material such as signed books which do not lend
themselves to framing or exhibition, in addition to the Company's good
marketable materials. Sales generated from the Company's headquarters
operation increased by 14% resulting in the Company's participation in
auctions during the current six month period. In addition, the Las
Vegas gallery sales increased 44% comparing the three month periods
and 78% comparing the six month periods largely due to an overall
better holiday season and increased tourism in the Las Vegas Strip
area. Cost of sales increased to 27% of net sales for both the three
month period and the six month period ended March 31, 1995 as compared
to 21% of net sales for the three month period and 22% of net sales
for the six month period ended March 31, 1994. This increase is
largely due to sales at wholesale pricing realized in the auction
sales during the current six month period, which resulted in a cost of
29% of net sales. The resulting gross profit decreased to 73% of net
sales for the three months and six month ended March 31, 1995 as
compared to a gross profit of 79% of net sales for the three months
and 78% of net sales for the six months ended March 31, 1994.
Operating expenses decreased 14% to 76% of net sales for the
quarter ended March 31, 1995 from 92% of net sales for the quarter
ended March 31, 1994. Total operating expenses decreased 17% to 69%
of net sales for the six month period ended March 31, 1995 compared to
97% of net sales for the six month period ended March 31, 1994.
Approximately 83% of the six month decrease is attributed to the
closure of two galleries in fiscal 1994. Selling, general and
administrative expense decreased 5% to 66% of net sales for the three
month period ended March 31, 1995 from 72% of net sales for the three
month period ended March 31, 1994. Comparing the quarters, insurance
cost decreased 23% due to reduced document inventory and salaries and
related benefits decreased 7% due to reduced personnel. For the six
month period in the current year, selling, general and administrative
expenses decreased 12% to 59% of net sales as compared to 78% of net
sales for the previous year expenses. The closing of the galleries in
fiscal 1994 reduced these expenses approximately $91,000 or 11% of the
<PAGE>
decrease comparing the two six month periods. For ongoing operations,
general insurances decreased 18% comparing the six month periods due
to a decreased document inventory. Medical insurance decreased 12%
and salaries decreased 2% due to reduced personnel. Expenses
attributed to the headquarters building operation, part of which are
allocated to selling, general and administrative expenses, decreased
18% comparing the two six month periods primarily due to a change in
janitorial services which, comparing the two six month periods,
resulted in a reduction of 56%. Depreciation expense decreased 26% to
8% of net sales for the three month period ended March 31, 1995 from
11% of net sales for the three months ended March 31, 1994. For the
six month period ended March 31, 1995, depreciation expense decreased
33% to 8% of net sales compared to the six month period ended March
31, 1994 which amounted to 14% of net sales. Comparing the six month
periods, gallery closures accounted for 12% of this decrease and 24%
of the decrease can be attributed to a reduction of equipment sold at
the headquarters operation in previous periods. Advertising expenses
increased approximately $6,700 comparing the two six month periods due
to a campaign the Company employed during November and December 1994.
Repair expenses decreased 9% comparing the six month periods which was
directly related to the gallery closures.
Interest expense was 12% of net sales for both three month
periods ended March 31, 1995 and 1994; overall interest rates were
higher in the current quarter however, the loan balances were
generally lower. Interest expense increased 5% comparing the six
month periods ended March 31, 1995 to 1994 due to the rising interest
rates. 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 operations. The
remaining building operating expenses plus the rental revenues
realized are offset and included in other income and expense. This
amounted to a $40,060 operating profit for the three month period and
a $77,057 operating profit for the six month period ended March 31,
1995 compared to a $25,160 operating profit for the three month period
and $50,477 operating profit for the six month period ended March 31,
1994. The increase is due to an increase in the square footage
leased, increased rents and a reduction in operating expenses.
A credit for income taxes was realized in the three month period ended
March 31, 1995 resulting from a federal income tax refund due to a
carryback of last year's losses to a previous year's income.
<PAGE>
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.
<PAGE>
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)
May 1, 1995 /s Todd M. Axelrod
Date _________________ ________________________________
Todd M. Axelrod
President and
Chairman of the Board
(Principal Executive Officer)
May 1, 1995 /s Rod Lynam
Date _________________ _______________________________
Rod Lynam
Treasurer and Director
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S
3/31/95 CONSOLIDATED BALANCE SHEET AND ITS CONSOLIDATED STATEMENT OF
OPERATIONS COVERING THE PERIOD 10/1/94 THROUGH 3/31/95 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> MAR-31-1995
<CASH> 117368
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 9231227
<CURRENT-ASSETS> 9911523
<PP&E> 3506717
<DEPRECIATION> 2246113
<TOTAL-ASSETS> 11752127
<CURRENT-LIABILITIES> 668663
<BONDS> 0
<COMMON> 5918
0
0
<OTHER-SE> 8843931
<TOTAL-LIABILITY-AND-EQUITY> 11752127
<SALES> 1258626
<TOTAL-REVENUES> 1258626
<CGS> 335740
<TOTAL-COSTS> 335740
<OTHER-EXPENSES> 874295
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 134802
<INCOME-PRETAX> (6682)
<INCOME-TAX> (71068)
<INCOME-CONTINUING> 64386
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 64386
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
