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, 1996
[ ] 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 May 1, 1996.
<PAGE>
<TABLE>
Part 1 - FINANCIAL INFORMATION
GALLERY OF HISTORY, INC. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - UNAUDITED
______________________________________________________________________
<CAPTION>
MARCH 31, SEPTEMBER 30,
1996 1995
----------- -------------
<S> <C> <C>
ASSETS
Cash $ 53,473 $ 171,295
Prepaid expenses 50,798 57,843
Documents owned 8,943,753 9,123,220
Land and building-net 1,507,285 1,530,278
Property and equipment-net 204,328 204,033
Other assets 465,678 460,359
__________ __________
TOTAL ASSETS $11,225,315 $11,547,028
========== ==========
LIABILITIES
Accounts payable $ 82,045 $ 60,950
Notes payable 405,612 321,553
Indebtedness to related parties 70,027 105,929
Mortgage notes payable 1,896,977 1,918,216
Deposits 54,223 266,828
Accrued and other liabilities 148,909 129,129
__________ __________
TOTAL LIABILITIES $ 2,657,793 $ 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 (830,759) (653,858)
__________ __________
TOTAL STOCKHOLDERS' EQUITY $ 8,567,522 $ 8,744,423
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $11,225,315 $11,547,028
========== ==========
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,
1996 1995 1996 1995
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES $ 273,783 $ 565,191 $ 909,404 $1,258,626
COST OF REVENUES 72,056 150,061 242,967 335,740
-------- -------- --------- ---------
GROSS PROFIT 201,727 415,130 666,437 922,886
-------- -------- --------- ---------
OPERATING EXPENSES:
Selling, general and
administrative 334,519 371,854 692,677 745,522
Depreciation 30,855 46,309 67,870 99,252
Advertising 1,371 1,908 11,083 10,864
Maintenance & repairs 7,089 9,050 13,879 18,657
Loss on gallery closure 201 -- 5,877 --
-------- -------- --------- ---------
TOTAL OPERATING EXPENSES 374,035 429,121 791,386 874,295
-------- -------- --------- ---------
OPERATING INCOME (LOSS) (172,308) (13,991) (124,949) 48,591
--------- -------- --------- ---------
OTHER INCOME (EXPENSE)
Interest expense (58,586) (66,121) (117,419) (134,802)
Other 12,880 36,599 65,567 79,529
--------- -------- --------- ---------
TOTAL OTHER INCOME
(EXPENSE) (45,706) (29,522) (51,852) (55,273)
--------- -------- --------- ---------
LOSS BEFORE INCOME TAXES (218,014) (43,513) (176,801) (6,682)
(PROVISION) CREDIT FOR
INCOME TAXES -- 71,138 (100) 71,068
--------- -------- --------- ---------
NET INCOME (LOSS) $(218,014) $ 27,625 $ (176,901) $ 64,386
========= ======== ========= =========
EARNINGS (LOSS)
PER SHARE: $(.04) $ -- $(.03) $ .01
==== ==== ==== ====
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,
1996 1995
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $(176,901) $ 64,386
Adjustments to reconcile net income
to net cash provided from (used in)
operating activities:
Depreciation and amortization 97,984 122,664
Loss on disposal of property 3,436 --
(Increase) decrease in:
Prepaid expenses 7,045 (1,164)
Documents owned 179,467 218,561
Other assets (5,319) 15,897
(Decrease) increase in:
Accounts payable 21,095 11,333
Customer deposits (212,605) (129,635)
Accrued and other liabilities 19,780 37,192
-------- --------
Net cash provided by (used in)
operating activities (66,018) 339,234
-------- --------
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 35,000 125,000
Repayments of bank line of credit (35,000) (185,000)
Proceed from notes payable 150,000 --
Repayments of mortgage and notes payable (123,082) (195,111)
-------- --------
Net cash provided by (used in)
financing activities 26,918 (255,111)
-------- --------
NET INCREASE (DECREASE) IN CASH (117,822) 83,407
CASH, BEGINNING OF PERIOD 171,295 33,961
-------- --------
CASH, END OF PERIOD $ 53,473 $ 117,368
======== ========
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.
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, 1996 and 1995
_______________________________________________________________
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 both three months ended March
31, 1996 and 1995 was 5,917,654. The average number of shares of
outstanding common stock for each of the six months ended March 31,
1996 and 1995 was 5,917,654 and 5,917,118, 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 used for operating activities exceeded net cash provided
by operating activities for the six month period ended March 31, 1996
by $66,018 largely due to the net loss from operations. The Company
realized a decrease in its document inventory resulting from the
reduced purchasing of inventory. Deposits from customers decreased
during the six month period ended March 31, 1996 due to a reduction of
deposits received and held for future auction sales. The Company
supplemented its working capital with a $150,000 term loan obtained
from its bank maturing March 1999 at an interest rate of 1.5% over the
prime rate.
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, 1997. Loans under the line are
secured by the Company's inventory. As of March 31, 1996, 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
$5,877, which was primarily the write-off of leasehold improvements.
The Company believes that the reduction of overhead expenses
resulting from the gallery closures, 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 52% for the three month period and 28%
for the six month ended March 31, 1996 as compared to the previous
year periods. Comparing the six month period ended March 31, 1996 to
that of 1995, retail sales decreased 40%. In this period, sales at
the gallery locations decreased 27% and retail sales generated from
the Company's headquarters location decreased 86%. Sales generated
from auctions increased 47% during the current six month period which
amounted to 29% of total sales compared to 14% of total sales in the
six month period ended March 31, 1995. Cost of retail sales remained
the same at 26% of net retail sales as did cost of auction sales at
29% of net auction sales for both six month periods ended March 31,
1996 and 1995.
<PAGE>
Total operating expenses decreased 13% for the quarter ended
March 31, 1996 compared to the quarter ended March 31, 1995. Total
expenses decreased 9% for the six month period ended March 31, 1996
compared to the six month period ended March 31, 1995. However, due
to the decrease in sales, operating expenses increased to 87% of net
sales in the six month period of 1996 compared to 69% of net sales in
1995. Selling, general and administrative expense decreased 10%
comparing the quarter periods and decreased 7% comparing the six month
periods. Comparing the quarters, salaries and related payroll taxes
and benefits decreased 4%, and for the six month period these expenses
decreased 6% due to the closing of galleries and a reduction of staff
at the headquarters operation. Also related to the closing of
galleries, travel expenses decreased 69% comparing the quarters and
56% comparing the six month periods; utilities decreased 38% comparing
the quarters and 18% comparing the six month periods; and freight
expenses decreased 38% for the quarter periods and 41% for the six
month periods. Depreciation expense decreased 33% for the three month
period ended March 31, 1996 compared to the three month period ended
March 31, 1995. Comparing the six month periods, depreciation
expenses decreased 32%. The decrease can be attributed to a reduction
of furnishings and equipment largely due to the closure of galleries.
Advertising expenses decreased 28% in the current quarter as compared
to the previous year quarter, however, the expenses increased by 2%
comparing the six month periods due to expanded promotional campaigns
the Company employed. Repair expenses decreased 22% comparing the two
quarter periods and 26% comparing the two six month periods that was
directly related to the gallery closures.
Interest expense decreased 11% for the three month period and 13%
for the six month period ended March 31, 1996 compared to the previous
year periods. The decrease in interest expense can be attributed to
the reduced interest rates and lower average outstanding loan balances
in the current periods. 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 $75,000 operating
profit for the three month period ended March 31, 1996 as compared to
approximately $40,000 operating profit for the three month period
ended March 31, 1995. For the six month period, the operating profit
amounted to $92,000 for 1996 compared to $77,000 for 1995. The
increase is due to an increase in the square footage leased in
addition to increased rents. Also included as an other expense in the
current six month period is approximately $40,000 of inventory write
down due to discovery of fraudulent signatures.
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 14, 1996 /s Todd M. Axelrod
Date _________________ ________________________________
Todd M. Axelrod
President and
Chairman of the Board
(Principal Executive Officer)
May 14, 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 March 31, 1996 and its
Consolidated Statement of Operations covering the period from October 1,
1995 to March 31, 1996 and is qualified in its entirety by reference
to such financial statement and notes thereof.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 53473
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 8943753
<CURRENT-ASSETS> 0
<PP&E> 3332748
<DEPRECIATION> 2201135
<TOTAL-ASSETS> 11225315
<CURRENT-LIABILITIES> 0
<BONDS> 1896977
0
0
<COMMON> 5918
<OTHER-SE> 7561604
<TOTAL-LIABILITY-AND-EQUITY> 11225315
<SALES> 909404
<TOTAL-REVENUES> 909404
<CGS> 242967
<TOTAL-COSTS> 242967
<OTHER-EXPENSES> 791386
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 117419
<INCOME-PRETAX> (176801)
<INCOME-TAX> 100
<INCOME-CONTINUING> (176901)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (176901)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
