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, 1995
[ ] 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 5,917,654 shares of Common Stock, par value $.001,
outstanding as of August 1, 1995.
<PAGE>
<TABLE>
Part 1 - FINANCIAL INFORMATION
GALLERY OF HISTORY, INC. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - UNAUDITED
<CAPTION>
JUNE 30, SEPTEMBER 30,
1995 1994
----------- -------------
<S> <C> <C>
ASSETS
Cash $ 64,533 $ 33,961
Prepaid expenses 63,022 66,312
Documents owned 9,168,704 9,449,788
Land and building-net 1,541,775 1,576,264
Property and equipment-net 242,919 386,288
Other assets 489,072 511,349
__________ __________
TOTAL ASSETS $11,570,025 $12,023,962
========== ==========
LIABILITIES
Accounts payable $ 76,818 $ 93,190
Bank lines of credit -- 60,000
Notes payable 352,039 518,531
Indebtedness to related parties 153,234 314,453
Mortgage notes payable 1,928,483 1,957,940
Deposits 29,897 156,173
Accrued and other liabilities 179,021 156,962
__________ __________
TOTAL LIABILITIES $ 2,719,492 $ 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 (547,748) (612,818)
__________ __________
TOTAL STOCKHOLDERS' EQUITY $ 8,850,533 $ 8,766,713
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $11,570,025 $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 NINE MONTHS ENDED
JUNE 30, JUNE 30,
1995 1994 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES $ 579,573 $ 309,824 $1,838,200 $1,397,577
COST OF REVENUES 124,458 66,091 460,199 305,883
-------- -------- --------- ---------
GROSS PROFIT 455,115 243,733 1,378,001 1,091,694
-------- -------- --------- ---------
OPERATING EXPENSES:
Selling, general and
administrative 372,505 398,068 1,118,027 1,241,152
Depreciation 44,205 59,801 143,457 207,057
Advertising 6,839 2,952 17,703 7,070
Maintenance & repairs 8,125 9,550 26,782 30,025
Loss on gallery closure -- -- -- 42,056
-------- -------- --------- ---------
TOTAL OPERATING EXPENSES 431,674 470,371 1,305,969 1,527,360
-------- -------- --------- ---------
OPERATING INCOME (LOSS) 23,441 (226,638) 72,032 (435,666)
OTHER INCOME (EXPENSE):
Interest expense (60,503) (66,984) (195,305) (194,872)
Other 39,116 21,891 118,775 83,253
-------- -------- --------- --------
TOTAL OTHER INCOME(EXPENSE) (21,387) (45,093) (76,530) (111,619)
-------- -------- --------- --------
INCOME (LOSS) BEFORE TAX AND
CUMULATIVE EFFECT OF A CHANGE
IN ACCOUNTING PRINCIPLE 2,054 (271,731) (4,498) (547,285)
(PROVISION) CREDIT FOR
INCOME TAXES (1,370) -- 69,568 (1,939)
-------- ------- --------- --------
INCOME (LOSS) BEFORE CUMULA-
TIVE EFFECT OF A CHANGE IN
ACCOUNTING PRINCIPLE 684 (271,731) 65,070 (549,224)
CUMULATIVE EFFECT OF A CHANGE
IN ACCOUNTING PRINCIPLE -- -- -- (90,992)
-------- --------- --------- ---------
NET INCOME (LOSS) $ 684 $ (271,731) $ 65,070 $ (640,216)
======== ========= ========= =========
EARNINGS (LOSS) PER SHARE:
Before cumulative effect of
a change in accounting
principle $ -- $(.05) $ .01 $(.09)
Cumulative effect of a change
in accounting principle -- -- -- ( 02)
---- ---- ---- ----
Total net income (loss) $ -- $(.05) $ .01 $(.11)
==== ==== ==== ====
<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>
NINE MONTHS ENDED JUNE 30,
1995 1994
------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 65,070 $(640,216)
Adjustments to reconcile net income
(loss) to net cash provided from
(used in) operating activities:
Depreciation and amortization 178,574 242,261
Loss on disposal of property -- 45,828
Deferred income taxes -- 91,231
(Increase) decrease in:
Prepaid expenses 3,290 (9,600)
Documents owned 281,084 81,896
Other assets 22,277 57,538
(Decrease) increase in:
Accounts payable (16,372) (16,006)
Customer deposits (126,276) 19,704
Accrued and other liabilities 22,059 (45,852)
Net cash provided by (used in) ------- -------
operating activities 429,706 (173,216)
------- -------
CASH FLOWS USED FOR INVESTING ACTIVITIES:
Purchase of property and equipment (716) (14,395)
Proceeds from sale of equipment -- 12,750
Net cash provided by (used in) ------- -------
investing activities (716) (1,645)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from bank line of credit 125,000 259,000
Repayments of bank line of credit (185,000) (290,000)
Proceeds from notes payable -- 400,260
Repayments of mortgage and notes payable (338,418) (340,390)
Net proceeds from sale of common stock
or exercise of stock options -- 232,580
Net cash provided by (used in) ------- -------
financing activities (398,418) 261,450
------- -------
NET INCREASE IN CASH 30,572 86,589
CASH, BEGINNING OF PERIOD 33,961 14,324
------- -------
CASH, END OF PERIOD $ 64,533 $ 100,913
======= =======
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:
For the nine month period ended June 30, 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 nine month period ended June 30, 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
Nine Month Period Ended June 30, 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 $69,568 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. As a result of an audit adjustment in
the prior periods, the three month and nine month period figures have been
adjusted. The effect on net income was an additional loss of $8,204 for the
three month period ended June 30, 1994 and $24,609 additional loss for the
nine month period ended June 30, 1994.
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 June 30, 1995 and 1994 was
5,917,654 and 5,910,154, respectively. The average number of shares of
outstanding common stock for each of the nine months ended June 30, 1995 and
1994 was 5,917,297 and 5,910,154, 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 nine month period ended June
30, 1995, by $429,706 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 from customers decreased $126,276 during the nine month
period ended June 30, 1995 due to the completion of September 1994
sales. 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 by $398,418 during the first
nine months of fiscal 1995. 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,
1996. Loans under the line are secured by the Company's inventory.
As of June 30, 1995, there was no outstanding balance on this line
of credit.
The Company believes that by continuing to reduce its overhead
and increasing revenues, 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
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.
Results of Operations
Document sales increased 87% for the three month period ended
June 30, 1995 as compared to the three month period ended June 30,
1994 and sales increased 32% for the nine month period ended June
30, 1995 as compared to the period ended June 30, 1994. The
Company ran a promotional campaign during November and December
1994 and another during May and June 1995, which accounted for
approximately 12% of the current nine 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. Based on past auction results, the Company intends to offer
better and more desirable materials in future auctions. Sales generated
from auctions during the current nine month period amount to 10% of
<PAGE>
total sales. Sales to wholesale and/or major customers (i.e., individual
customers whose purchases account for 10% or more of total document sales)
amounted to approximately 12% of the nine month sales total for the period
ended June 30, 1995 as compared to no major customer sales during
the nine month period ended June 30, 1994. Cost of sales remained
the same at 21% of sales for both three month periods ended June
30, 1995 and 1994. Cost of sales amounted to 25% of net sales for
the nine month period ended June 30, 1995 as compared to 22% of net
sales for the period ended June 30, 1994. This increase is largely
due to sales at wholesale pricing realized in the auction sales
during the current nine month period, which resulted in a cost of
29% of net sales. The resulting gross profit decreased to 75% of
net sales for the nine months ended June 30, 1995 as compared to a
gross profit of 78% of net sales for the nine months ended June 30,
1994.
Operating expenses decreased 8% to 74% of net sales for the
quarter ended June 30, 1995 from 152% of net sales for the quarter
ended June 30, 1994. For the nine month period, operating expenses
decreased 14% to 71% of net sales for 1995 compared to 109% of net
sales for 1994. Approximately 50% of the nine month decrease was
attributed to the closure of two galleries in fiscal 1994.
Selling, general and administrative expense decreased 6% to 64% of
net sales for the three month period ended June 30, 1995 from 128%
of net sales for the three month period ended June 30, 1994.
Comparing the quarters, insurance cost decreased 17% due to reduced
document inventory, a reduction in travel expenses accounted for a
83% decrease and professional fees decreased 58%. For the nine
month period in the current year, selling, general and
administrative expenses decreased 10% to 61% of net sales as
compared to 89% of net sales for the previous year expenses. The
closing of the galleries in fiscal 1994 reduced these expenses
approximately $90,000 or 73% of the decrease comparing the two nine
month periods. General insurances decreased 23% comparing the nine
month periods for the reason stated above. A reduction in travel
expenses resulted in a decrease of 31% and reduced professional
fees resulted in a decrease of 37% comparing the two nine month
periods. Payroll and related benefits and taxes decreased 4% due
to reduced personnel in the current nine month period. Expenses
attributed to the headquarters building operation, part of which
are allocated to selling, general and administrative expenses,
decreased 17% comparing the two nine month periods primarily due to
a change in janitorial services. Depreciation expense decreased
26% to 8% of net sales for the three month period ended June 30,
1995 from 19% of net sales for the three months ended June 30,
1994. For the nine month periods ended June 30, depreciation
expense decreased 31% to 8% of net sales for 1995 as compared to
15% of net sales for 1994. Comparing the nine month periods,
gallery closures accounted for 27% of this decrease and the
remaining decrease can be attributed to a reduction of equipment
sold in previous periods. Advertising expenses increased
approximately $10,000 comparing the two nine month periods due to
promotional campaigns the Company employed during November and
December 1994 and again in May and June 1995. Repair expenses
decreased 15% comparing the two quarter periods and 11% comparing
the two nine month periods which was directly related to the
gallery closures.
<PAGE>
Interest expense amounted to 10% of net sales for the three
months ended June 30, 1995 as compared to 22% of net sales for the
three months ended June 30, 1994. For the two nine month periods
ended June 30, interest was 11% of net sales for 1995 as compared
to 14% of net sales for 1994. The decrease in interest expense can
be attributed to the lower average outstanding loan balances in the
current period. 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 operation. The remaining building operating expenses
plus the rental revenues realized are offset and included in other
income and expense. This amounted to approximately $38,000
operating profit for the three month period ended June 30, 1995 as
compared to approximately $24,000 operating profit for the three
month period ended June 30, 1994. For the nine month period ended
June 30, 1995, the operating profit was approximately $115,000
compared to approximately $72,000 operating profit for the nine
months ended June 30, 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 nine month period
ended June 30, 1995 resulting from a federal income tax refund due
to a carryback of last year's losses to a previous year's income.
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)
August 2, 1995 /s Todd M. Axelrod
Date _________________ ________________________________
Todd M. Axelrod
President and
Chairman of the Board
(Principal Executive Officer)
August 2, 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
6/30/95 CONSOLIDATED BALANCE SHEET AND ITS CONSOLIDATED STATEMENT OF
OPERATIONS COVERING THE PERIOD 10/1/94 THROUGH 6/30/95 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> JUN-30-1995
<CASH> 64533
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 9168704
<CURRENT-ASSETS> 92962595
<PP&E> 3485762
<DEPRECIATION> 2281068
<TOTAL-ASSETS> 11570025
<CURRENT-LIABILITIES> 629006
<BONDS> 0
<COMMON> 5918
0
0
<OTHER-SE> 8844615
<TOTAL-LIABILITY-AND-EQUITY> 11570025
<SALES> 1838200
<TOTAL-REVENUES> 1838200
<CGS> 460199
<TOTAL-COSTS> 460199
<OTHER-EXPENSES> 1305969
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 195305
<INCOME-PRETAX> (4498)
<INCOME-TAX> (69568)
<INCOME-CONTINUING> 65070
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 65070
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
