MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION

Forward Looking Statements

This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended, relating to the Company's future operations and prospects, including statements that are based on current projections and expectations about the markets in which the Company operates, and management's beliefs concerning future performance and capital requirements based upon current available information. Such statements are based on management's beliefs as well as assumptions made by and information currently available to management. When used in this document, words like "may," "might," "will," "expect," "anticipate," "believe," and similar expressions are intended to identify forward looking statements. Those forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the Company's actual results, performance or achievements of those of the Company's industry to be materially different from any future results, performance or achievements expressed or implied by those forward-looking statements. Among the factors that could cause actual results, performance or achievement to differ materially from those described or implied in the forward- looking statements are the Company's ability to obtain additional capital, on reasonable terms, if at all, at such times and in such amounts as may be needed by the Company; competition by entities which may have greater resources than the Company; the Company's ability to market and sell its inventory of historical documents; the Company's ability to correctly value its inventory of documents; and other factors included in the Company's filings with the Securities and Exchange Commission (the "SEC"). Copies of the Company's SEC filings are available from the SEC, on its website (www.sec.gov), or may be obtained upon request from the Company. The Company does not undertake any obligation to update the information contained herein, which speaks only as of the date of this filing.

Overview

Gallery of History, Inc. and its 100%-owned subsidiaries (collectively the "Company") acquires documents of historical or social significance and markets these documents to the general public. Except for the cost of documents that are sold and certain selling expenses, most of the Company's other costs and expenses are relatively fixed. While management believes that the Company's inventory of documents has substantially appreciated, the Company has been unable to produce sufficient volume of sales to the general public and has incurred significant operating losses for the past several years. (See also discussion of the Company's operating cycle under "Critical Accounting Estimates, Policies, and Practices," below.) As a result, the Company has been (and will continue to be) dependent upon debt financing, including loans from its majority stockholder, to satisfy its obligations when due.

The unique characteristic of some documents held in inventory may cause them to become rarer with their current market value rising significantly over time. In many instances, the Company has a supply of similar documents that, if marketed simultaneously, could negatively impact market value. As a result, managing the rarity of certain types or categories of documents through the judicious marketing of only a selection of documents available in the Company's inventory is an important element of the Company's business. This element is one of the reasons that the Company has accumulated and maintains a supply of documents that is significantly greater than it intends to sell in a year or even aggressively market.

Liquidity and Capital Resources
The net cash flow deficiency from operating activities continues to be a problem for the Company mainly because of the net losses incurred. The reduction in acquiring new inventory has offset the deficiency somewhat. The cash deficiency from operating activities was mainly funded from increased borrowings from the Company's principal officer/stockholder, while we continue to decrease borrowing from outside sources.

The Company has a bank line of credit in the amount of $100,000 through August 2008, which the Company anticipates to renew for another year, of which no assurance can be given. Loans under the line of credit are secured by the Company's inventory of documents owned and bear interest at the prime rate plus 1.5%. As of June 30, 2008, there was $55,000 available against this line of credit. The Company's term mortgage note was renewed in July 2007 in the amount of $1,087,251 and has an 8.25% interest rate and a maturity date of July 15, 2012. The note is collateralized by the Company's building.

As discussed in the notes to the financial statements, prior to 2007, the Company borrowed $1,000,000 from its principal officer/stockholder, Todd Axelrod, which was converted into 800,000 shares of the company's common stock on June 11, 2008. The conversion rate of $1.25 represented a premium in relation to the closing price of the common stock on the date of the transaction. The shares were issued out of treasury stock held by the Company. The Company also has other loans outstanding from Mr. Axelrod, borrowed from time to time. These loans carry an interest rate of 3%. The principal balance of the funds borrowed totaled $1,232,752 and $786,393 as of June 30, 2008 and 2007, respectively. The borrowed funds were used to supplement cash flows from operating activities.

On January 20, 2006, the Company held a special meeting of stockholders and approved converting $3,231,722 of debt to its principal officer/stockholder into 1,615,861 shares of Series A convertible preferred stock. The preferred stock earns dividends at the annual rate of 3% applied to the liquidation value, and payable semi-annually so long as resources are legally available for that purpose (unless waived by the holder). Unpaid dividends are cumulative, are added to the liquidation value (upon which the annual dividend rate is applied), and are preferential in the event of liquidation and with respect to any dividends or other distributions to common stockholders. The preferred stock is non-voting (except as may be required by law) and convertible at any time at the option of the holder at a fixed rate of one common share for every $2 in liquidation value, as adjusted, per share of preferred stock at the time of conversion, subject to adjustment in the event of future increases or decreases in the number of outstanding shares of common stock for a price other than the then conversion price of the preferred stock or in the event of issuance of certain other securities. As of June 30, 2008 and 2007, including accrued dividends, a total of 1,715,016 and 1,664,700 shares of common stock were issuable upon conversion of the preferred stock.

The Company endeavors to improve its operating results by increasing its internet exposure. Its direct website has become the Company's principal distribution channel. Because of the size and diversity of its inventory, management believes the Company is well positioned to compete favorably with other firms offering similar products, but has not yet generated sufficient sales to make a profit. To generate sufficient sales, the Company may need (but has not committed) to lower prices in addition to adding more of its available inventory to the website. The Company also continues to offer discount promotions on its website with some success, while still maintaining its profit margin in excess of 90%.

The Company believes that its current cash requirements will be met by generating revenues from operations, appropriately managing the timing and volume of new document acquisitions, including the use of the revenue-sharing agreement with Mr. Axelrod, drawing against its available line of credit, seeking additional borrowings collateralized by its documents inventory (although there can be no assurance that such financing will be obtainable on acceptable terms) and borrowing from Mr. Axelrod as required. Mr. Axelrod has also agreed not to demand payment on his loans to the Company and, if necessary, defer his right to receive interest payments and dividends on preferred stock through at least October 31, 2009.

Critical Accounting Estimates, Policies and Practices
Revenues. The Company recognizes revenues from document sales when title passes to the customer upon shipment. Typically, shipment does not occur until payment has been received. Shipping and handling costs and related customer charges are not significant in relation to selling prices. The Company's primary distribution channel currently is through its website which includes consignment sales related to the revenue-sharing arrangement with Mr. Axelrod. The balance of the Company's sales is from repeat customers through its corporate office.

Inventory of documents and operating cycle. Documents in inventory are stated at cost, which is determined on a specific- identification method, not to exceed estimated market value. Management reviews the recorded cost and estimated value of the documents owned individually on a regular basis (at least quarterly) to determine the adequacy of the allowance for market value declines, if any. Management believes that any future changes in such allowance are not likely to have any material effect on the Company.

Management believes that the Company's inventory of documents is generally appreciating in value. As a result, as stated earlier, managing the rarity of certain types or categories of documents through the judicious marketing of only a selection of documents available in the Company's inventory is an important element of the Company's business. This element is one of the reasons that the Company has (1) accumulated and maintains a supply of documents that is significantly greater than it intends or expects to market aggressively or even sell in a year and (2) has not committed to lowering prices as a long-term strategy to potentially generate increased sales to attain short-term profitability. Based on an aggregate historical cost (not number of documents), only about one- half of the Company's documents are listed and made available on one or more of the distribution channels or displayed for sale. As the Company's distribution channels have changed over the years and are expected to continue to change in the future, the volume of documents marketed in any one year, or succession of years, changes significantly. For these reasons, it has been impractical for the Company to define its operating cycle and, as a result, the Company presents its balance sheet on an unclassified basis. The Company believes that this presentation better reflects the nature of the Company's business and its principal asset.

Over the past several years, the cost of the Company's inventory has ranged from its present level of approximately $6.4 million, which management believes is a sufficient supply of documents to provide for managing rarity and its other purposes, to roughly $7.2 million. Management has no current intention of changing significantly the composition of its inventory but may supplement its base with such opportunities as the revenue-sharing arrangement with Mr. Axelrod.

Deferred tax assets and income taxes. The Company provides a valuation allowance against deferred tax assets (primarily associated with tax loss carryforwards) to the extent that such tax assets exceeds an amount considered by management as more likely than not to be utilized as a result of any gain on the Company's effective tax planning strategies, as defined in Financial Accounting Standards Board (FASB) Statement No. 109, Accounting for Income Taxes, consisting of the possible sale of appreciated document inventory, particularly if partially sold in bulk, and/or real estate, that would produce gains that may be realized as needed to protect the Company's loss carryforwards. The potential gain and related tax effect is estimated based on management's perception of current market activity and estimate of value and historical profit margins and trends. Such estimates are revisited and revised quarterly.

Effective with the quarter ended December 31, 2007, we were required to apply FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48). Based on our analysis of our tax provisions, deferred tax assets and the related valuation allowance, we determined that there was no impact to our financial statements upon initial adoption of the provisions of FIN 48, including with respect to our opening deficit or related disclosures.

Recently issued accounting pronouncements. In March 2008, the Financial Accounting Standards Board (FASB) issued Statement of Accounting Standards (SFAS) No. 161, Disclosures About Derivative Instruments and Hedging Activities - an amendment of FASB Statement No 133. SFAS 161 expands the disclosure requirements in SFAS 133, Accounting for Derivative Instruments and Hedging Activities, regarding derivative instruments and hedging activities. SFAS 161 will be effective for the Company's fiscal year beginning October 1, 2008. As SFAS 161 relates specifically to disclosures regarding matters that the Company is typically not involved in, SFAS 161 will likely have no impact on the Company's future financial condition, results of operations or cash flows.

In December 2007, the FASB issued SFAS 160, Noncontrolling Interests in Consolidated Financial Statements. It requires that a noncontrolling (minority) interest in a subsidiary, including a variable interest entity, should be reported as equity in the consolidated financial statements. Although technically effective for the Company's fiscal year beginning October 1, 2009, SFAS 160 will not likely have any effect on the Company's consolidated financial statements since we are not presently contemplating investing in, establishing or acquiring a subsidiary with a noncontrolling interest.

In December 2007, the FASB issued SFAS 141R, Business Combinations, which replaces SFAS 141, Business Combinations. We have not yet evaluated SFAS 141R for the impact, if any, that SFAS 141R might have on our future financial statements in the event we make any business combination or other covered acquisitions after its effective date, which for us will be September 30, 2009. No such transactions are presently contemplated.

In September 2006, the FASB issued SFAS 157, Fair Value Measurements. This standard defines fair value, establishes a framework for measuring fair value in accounting principles generally accepted in the United States, and expands disclosure about fair value measurements in the financial statements, if any. In February 2007, the FASB issued SFAS 159, The Fair Value Option for Financial Assets and Financial Liabilities - Including an Amendment of FASB Statement 115, which will permit the option of choosing to measure certain eligible items at fair value at specified election dates and report unrealized gains and losses in earnings. SFAS 157 and 159 was scheduled to become effective for us for fiscal year 2009, and interim periods within those fiscal years; however, the effective date for SFAS 157 was delayed one year with respect to nonfinancial assets and liabilities carried at fair value, if any, to the extent not already adopted, which we have not. We are not currently carrying any assets or liabilities at fair value. Therefore, the requirements of SFAS 157 will not apply to our financial statements unless we elect to do so under SFAS 159, which election is presently not expected. Accordingly, there is no likely impact on our future financial statements expected of either of these two standards.

Results of Operations
Revenues increased 36% comparing the quarter period ended June 30, 2008 to the quarter period ended June 30, 2007. However, revenues are still down 20% comparing the year-to-date periods ended June 30, 2008 to June 30, 2007. Revenues generated from the Company's internet website increased 61% comparing the quarter periods and are down 15% comparing the nine month periods. Revenues generated from our eBay site improved by 83% comparing the year over year quarter periods and decreased 15% comparing the nine month periods. The increases in the current quarter period can be attributed to the discounting policy in effect. The overall decrease in revenues in the year to date amounts would be largely due to the general decrease in discretionary spending and to the economic slowdown.

Included in revenues is the 80% of gross profit from the sales generated through the revenue-sharing arrangement the Company has with Mr. Axelrod, as explained earlier. For the three month periods ended June 30, 2008 and 2007, are fees of $1,095 and $22,832, respectively, associated with this arrangement. For the nine month period, the fees were $7,096 for 2008 and $73,512 for 2007. The increase in the fees for fiscal 2007 included a large sale in the first and third quarters.

Cost of documents sold increased slightly comparing the quarter periods to 6.7% of net revenues for the quarter ended June 30, 2008 from 6.3% of net revenues for the quarter ended June 30, 2007. Cost of documents sold decreased slightly comparing the nine month periods from 8% of net revenues for year to date 2008 from 8.3% of net revenues for 2007.

Total operating expenses continue to increase mainly from the additional salary expenses realized over the prior period. Operating expenses increased 12% for the three month period ended June 30, 2008 compared to the previous year period and they increased 13% comparing the nine month periods. Because of additional salaries realized in the current period, the expense increased 48% comparing the nine month period ended June 2008 compared to June 2007. In addition to the salary, the Company had granted 50,000 options to purchase the Company's common stock as an employment inducement on April 16, 2007. The current fiscal year's salary expense included approximately $27,000 associated with these options. The Company also realized a legal fee settlement in the previous fiscal year that resulted in a decrease of approximately $49,000 in the previous year's professional fees.

Included in selling, general and administrative expenses is 50% of the operating cost to maintain the headquarters building. This percentage is the ratio that the square footage occupied by the Company's headquarters operation bears to the total leasable space of the building. The remaining building operating expenses plus the rental income realized are included net in other income and expense ($71,576 for the nine month period ended June 30, 2008, as compared to $81,926 for nine month period ended June 30, 2007).