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, 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 February 1, 1996.
<PAGE>
<TABLE>
Part 1 - FINANCIAL INFORMATION
GALLERY OF HISTORY, INC. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - UNAUDITED
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1995
----------- -------------
<S> <C> <C>
ASSETS
Cash $ 102,992 $ 171,295
Prepaid expenses 79,276 57,843
Documents owned 9,024,287 9,123,220
Land and building-net 1,518,781 1,530,278
Property and equipment-net 238,735 204,033
Other assets 487,408 460,359
__________ __________
TOTAL ASSETS $11,451,479 $11,547,028
LIABILITIES
Accounts payable $ 93,268 $ 60,950
Notes payable 290,802 321,553
Indebtedness to related parties 87,617 105,929
Mortgage notes payable 1,907,715 1,918,216
Deposits 136,075 266,828
Accrued and other liabilities 150,466 129,129
__________ __________
TOTAL LIABILITIES $ 2,665,943 $ 2,802,605
STOCKHOLDERS' EQUITY
Common stock: $.001 par value;
authorized, 10,000,000 shares;
issued and outstanding,
5,917,654 shares 5,918 5,918
Additional paid-in-capital 9,392,363 9,392,363
Accumulated deficit (612,745) (653,858)
__________ __________
TOTAL STOCKHOLDERS' EQUITY $ 8,785,536 $ 8,744,423
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $11,451,479 $11,547,028
========== ==========
<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
DECEMBER 31,
1995 1994
-------- --------
<S> <C> <C>
REVENUES $ 635,622 $ 693,435
COST OF REVENUES 170,911 185,679
-------- --------
GROSS PROFIT 464,711 507,756
-------- --------
OPERATING EXPENSES:
Selling, general and administrative 358,157 373,669
Depreciation 37,016 52,943
Advertising 9,712 8,955
Maintenance & repairs 6,791 9,607
Loss on gallery closure 5,676 --
-------- --------
TOTAL OPERATING EXPENSES 417,352 445,174
-------- --------
OPERATING INCOME 47,359 62,582
-------- --------
OTHER INCOME (EXPENSE):
Interest expense (58,833) (68,681)
Other 52,687 42,930
-------- --------
TOTAL OTHER INCOME(EXPENSE) (6,146) (25,751)
-------- --------
INCOME BEFORE INCOME TAXES 41,213 36,831
PROVISION FOR INCOME TAXES 100 100
-------- --------
NET INCOME $ 41,113 $ 36,731
======== ========
EARNINGS PER SHARE: $.01 $.01
=== ===
<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>
THREE MONTHS ENDED DECEMBER 31,
1995 1994
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 41,113 $ 36,731
Adjustments to reconcile net income
to net cash provided from (used in)
operating activities:
Depreciation and amortization 52,080 64,649
Loss on disposal of property 3,437 --
(Increase) decrease in:
Prepaid expenses (21,433) (11,252)
Documents owned 98,933 119,525
Other assets (27,049) 4,494
(Decrease) increase in:
Accounts payable 32,318 25,552
Customer deposits (130,753) (109,512)
Accrued and other liabilities 21,337 28,397
-------- --------
Net cash provided by (used in)
operating activities 69,983 147,584
CASH FLOWS USED FOR INVESTING ACTIVITIES:
Purchase of property and equipment (78,722) (716)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from bank line of credit -- 25,000
Repayments of bank line of credit -- (85,000)
Repayments of mortgage and notes payable (59,564) (111,387)
-------- --------
Net cash provided by (used in)
financing activities (59,564) (171,387)
-------- --------
NET DECREASE IN CASH (68,303) (24,519)
CASH, BEGINNING OF PERIOD 171,295 33,961
-------- --------
CASH, END OF PERIOD $ 102,992 $ 9,442
======== ========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
For the three month period ended December 31, 1994:
(1) Stock options were exercised in part for the retirement of a
note payable in the amount of $18,750 to a related party.
<FN>
See the accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
GALLERY OF HISTORY, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three Month Period Ended December 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 1995
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) 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
December 31, 1995 and 1994 was 5,917,654 and 5,916,594, 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 three month period ended December 31,
1995, by $69,982 due to the net income from operations, a decrease in
the document inventory and a decrease in customer deposits, in
addition to the non-cash depreciation charge. The decrease in the
document inventory was a result of reduced purchasing of inventory.
Deposits from customers decreased $130,753 during the three month
period ended December 31, 1995 due to a reduction of deposits received
and held for future auction sales. The cash generated from operations
was primarily used for the purchase of new air conditioning units at
the headquarters building and the reduction of mortgage and notes
payable.
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, 1996. Loans under the line are
secured by the Company's inventory. As of December 31, 1995, there
was no outstanding balance on this line of credit.
The Company closed its Dallas, Texas gallery December 26, 1995.
The loss realized in the current period for the closure amounted to
$5,676, which was primarily the write-off of leasehold improvements.
The Company believes that by continuing to reduce its overhead
expenses 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 decreased 8% for the three month period ended
December 31, 1995 as compared to the three month period ended December
31, 1994. The Las Vegas and Dallas gallery sales were down an average
of 15% comparing the quarters ended December 31, 1995 to 1994. This
was largely due to general decline in retail sales in the current
quarter. The Georgetown gallery sales increased 34% comparing the
quarters due to a very poor holiday season in the 1994 quarter in
<PAGE>
addition to a major customer sale amounting to 9.6% of total sales in
November 1995. Sales generated from auctions during the current three
month period amounted to 24% of total sales compared to 21% of total
sales in the quarter ended December 31, 1994. Cost of sales remained
the same at 27% of net sales for both three month periods ended
December 31, 1995 and 1994.
Total operating expenses decreased 6% for the quarter ended
December 31, 1995 compared to the quarter ended December 31, 1994.
However, due to the decrease in sales, operating expenses increased to
66% of net sales in 1995 compared to 64% of net sales in 1994.
Selling, general and administrative expense decreased 4% (56% of net
sales) for the three month period ended December 31, 1995 compared to
the three month period ended December 31, 1994 (54% of net sales).
Comparing the quarters, salaries and related payroll taxes decreased
8% due to a reduction of staff at the headquarters operation. In
addition, freight expense decreased 44% in the current period compared
to the previous quarter due to a reduction in intercompany shipments.
Depreciation expense decreased 30% to 6% of net sales for the three
month period ended December 31, 1995 from 8% of net sales for the
three months ended December 31, 1994. The decrease can be attributed
to a reduction of furnishings and equipment largely due to the closure
of galleries. Advertising expenses increased 8% to 2% of net sales in
the current quarter as compared to 1% of net sales in the quarter
ended December 31, 1994 due to expanded promotional campaigns the
Company employed. Repair expenses decreased 29% comparing the two
quarter periods which was directly related to the gallery closures.
Interest expense amounted to 9% of net sales for the three months
ended December 31, 1995 as compared to 10% of net sales for the three
months ended December 31, 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 $45,000 operating profit for the three
month period ended December 31, 1995 as compared to approximately
$37,000 operating profit for the three month period ended December 31,
1994. The increase is due to an increase in the square footage leased
in addition to increased rents.
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)
February 6, 1996 /s Todd M. Axelrod
Date _________________ ________________________________
Todd M. Axelrod
President and
Chairman of the Board
(Principal Executive Officer)
February 6, 1996 /s Rod Lynam
Date _________________ _______________________________
Rod Lynam
Treasurer and Director
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's Consolidated Balance Sheet dated December 31, 1995 and its
Consolidated Statement of Operations covering the period from October 1,
1995 to December 31, 1995 andis qualified in its entirety by reference
to such financial statement and notes thereof.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> DEC-31-1995
<CASH> 102992
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 9024287
<CURRENT-ASSETS> 0
<PP&E> 3332748
<DEPRECIATION> 2155231
<TOTAL-ASSETS> 11451479
<CURRENT-LIABILITIES> 0
<BONDS> 1907715
0
0
<COMMON> 5918
<OTHER-SE> 8779618
<TOTAL-LIABILITY-AND-EQUITY> 11451479
<SALES> 635622
<TOTAL-REVENUES> 635622
<CGS> 170911
<TOTAL-COSTS> 170911
<OTHER-EXPENSES> 417352
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 58833
<INCOME-PRETAX> 41213
<INCOME-TAX> 100
<INCOME-CONTINUING> 41113
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 41113
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
