<PAGE>
U.S. 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, 1997
Commission File No. 0-27994
-------
The Publishing Company of North America, Inc.
(Exact name of small business issuer as specified in its charter)
Florida 59-3203301
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number
186 N. Industrial Park Drive
Lake Helen, FL 32744
904-228-1000
(Address and telephone number
of principal executive offices)
Indicate by check mark whether the issuer (1) filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act 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
--- ---
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
Class Outstanding at March 31, 1997
- --------------------------- --------------------------------
Common Stock: no par value 4,114,000
Transitional Small Business Disclosure Format (check one): Yes X No
---- ----
<PAGE>
THE PUBLISHING COMPANY OF NORTH AMERICA, INC.
FORM 10-QSB--MARCH 31, 1997
INDEX
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
PART I--FINANCIAL INFORMATION
ITEM 1. Financial Statements
Balance Sheets as of March 31, 1997 (unaudited) and December 31, 1996........ 3
Statements of Income for the three months ended
March 31, 1997 and 1996 (unaudited).......................................... 4
Statements of Cash Flows for the three months ended
March 31, 1997 and 1996 (unaudited).......................................... 5--6
Notes to unaudited interim financial statements.............................. 7--8
ITEM 2. Management's Discussion and Analysis of Interim Financial
Condition and Results of Operations..................................... 9--11
PART II--OTHER INFORMATION
ITEM 5. Other Information............................................................ 12
ITEM 6. Exhibits and Reports on Form 8-K
Exhibit 11--Statement re computation of per share earnings
Exhibit 27--Financial data schedule
</TABLE>
2
<PAGE>
THE PUBLISHING COMPANY OF NORTH AMERICA, INC.
FORM 10-QSB--MARCH 31, 1997
Balance Sheets
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
ASSETS 1997 1996
-----------------------------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents........................................... $ 1,100,784 $1,760,831
Available-for-sale securities....................................... 2,890,879 2,477,500
Accounts receivable, less allowance for doubtful accounts of
$325,767 at March 31, 1997 and $267,787 at December 31, 1996....... 404,712 228,997
Directories in progress............................................. 216,404 144,823
Refundable income taxes............................................. 72,068 72,068
Other current assets................................................ 84,507 17,544
------------ ------------
Total current assets.................................................. 4,769,354 4,701,763
Property and equipment, net........................................... 1,357,355 1,329,783
Other assets.......................................................... 110,037 66,417
------------ ------------
Total assets.......................................................... $ 6,236,746 $6,097,963
------------ ------------
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................... $ 262,409 $ 234,334
Accrued expenses.................................................... 192,078 205,670
Deferred revenue.................................................... 576,444 460,434
Mortgage payable.................................................... 53,333 48,889
------------ ------------
Total current liabilities............................................. 1,084,264 949,327
Mortgage payable after one year....................................... 733,333 751,111
------------ ------------
Total liabilities..................................................... 1,817,597 1,700,438
Shareholders' equity:
Common shares, no par value: 15,000,000 shares authorized;
4,114,000 shares issued and outstanding at March 31, 1997 and
at December 31, 1996............................................... 5,129,565 5,137,565
Unrealized gain (loss) on available-for-sale securities............. 573 (13,024)
Accumulated deficit................................................. (688,457) (691,495)
Unearned compensation, net.......................................... (22,532) (35,521)
------------ ------------
Total shareholders' equity............................................ 4,419,149 4,397,525
------------ ------------
Total liabilities and shareholders' equity............................ $ 6,236,746 $6,097,963
------------ ------------
------------ ------------
</TABLE>
See accompanying notes.
3
<PAGE>
THE PUBLISHING COMPANY OF NORTH AMERICA, Inc.
FORM 10-QSB--MARCH 31, 1997
Statements of Income
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------
<S> <C> <C>
MARCH 31, MARCH 31,
1997 1996
------------ ----------
Net sales.......................................................... $ 1,433,696 $ 945,282
Costs and expenses:
Production........................................................ 365,089 191,631
Marketing and selling............................................. 491,102 261,188
Depreciation and amortization..................................... 41,057 16,936
General and administrative........................................ 543,862 241,192
------------ ----------
1,441,110 710,947
------------ ----------
Income (loss) from operations...................................... (7,414) 234,335
Other income (expense)
Interest income (expense), net.................................... 10,453 (19,575)
Other............................................................. 0 6,577
------------ ----------
Income before provision for income taxes........................... 3,039 221,337
Provision for income taxes......................................... 0 131,400
------------ ----------
Net income......................................................... $ 3,039 $ 89,937
------------ ----------
------------ ----------
Net income per share............................................... $ 0.00 $ 0.03
------------ ----------
------------ ----------
Shares used in computation of net income per share................. 4,130,909 2,955,000
------------ ----------
------------ ----------
</TABLE>
See accompanying notes.
4
<PAGE>
THE PUBLISHING COMPANY OF NORTH AMERICA, Inc.
FORM 10-QSB--MARCH 31, 1997
Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------
<S> <C> <C>
MARCH 31, MARCH 31,
CASH FLOWS FROM OPERATING ACTIVITIES 1997 1996
------------ ----------
Net income.......................................................... $ 3,039 $ 89,937
Adjustments to reconcile net income to net cash provided by (used
in) operating activities:
Depreciation and amortization...................................... 41,057 16,936
Accretion of unearned compensation................................. 4,989 --
Bad debt expense................................................... 199,878 59,128
Provision for deferred income taxes................................ -- 110,400
Exchange of advertising for machinery & equipment.................. (3,588) --
Accretion of bridge notes.......................................... -- 20,000
Interest accrued on promissory notes to shareholders............... -- 941
Increase in accounts receivable.................................... (375,593) (198,545)
(Increase) decrease in directories in progress..................... (71,581) 43,498
(Increase) decrease in other assets................................ (117,840) 7,385
Increase (decrease) in accounts payable............................ 28,075 (22,029)
Increase (decrease) in accrued expenses............................ (13,592) 53,255
Increase (decrease) in deferred revenue............................ 116,010 (137,769)
Increase in income taxes payable................................... -- 21,000
------------ ----------
Net cash provided by (used in) operating activities................ (189,146) 64,137
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of securities available-for-sale......................... (399,782) --
Purchases of property, plant and equipment......................... (57,785) (50,947)
------------ ----------
Net cash used in investing activities............................... (457,567) (50,947)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bridge notes and common stock........................ -- 300,000
Distributions to shareholders...................................... -- (178,871)
Deferred offering costs............................................ -- (136,827)
Reduction in mortgage principal.................................... (13,334) --
------------ ----------
Net cash used in financing activities............................... (13,334) (15,698)
Net decrease in cash and cash equivalents........................... (660,047) (2,508)
Cash and cash equivalents at beginning of period.................... 1,760,831 286,023
------------ ----------
Cash and cash equivalents at end of period.......................... $ 1,100,784 $ 283,515
------------ ----------
------------ ----------
</TABLE>
5
<PAGE>
THE PUBLISHING COMPANY OF NORTH AMERCIA, INC.
FORM 10-QSB--MARCH 31, 1997
Statements of Cash Flows (continued)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------
<S> <C> <C>
MARCH 31, MARCH 31,
SUPPLEMENTAL CASH FLOW INFORMATION 1997 1996
----------- ----------
Distributions to shareholders in exchange for promissory notes........ -- $ 268,307
----------- ----------
----------- ----------
Interest paid......................................................... $ 11,266 --
----------- ----------
----------- ----------
Exchange of advertising for supplies.................................. $ 6,957 --
----------- ----------
----------- ----------
</TABLE>
See accompanying notes.
6
<PAGE>
THE PUBLISHING COMPANY OF NORTH AMERCICA, Inc.
FORM 10-QSB--MARCH 31, 1997
NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements of The Publishing Company
of North America, Inc. (the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information
and with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B.
Accordingly, they do not include all the information and footnotes required
by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included in the accompanying unaudited financial statements. The results
of operations of any interim period are not necessarily indicative of the
results of operations for the fiscal year. Certain amounts in the 1996
financial statements have been reclassified to conform to the presentation
adopted in 1997.
2. CASH AND CASH EQUIVALENTS
The Company considers all highly-liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
3. AVAILABLE-FOR-SALE SECURITIES
Available-for-sale securities are carried at fair value, with the
unrealized gains and losses reported in a separate component of shareholders'
equity. Realized gains and losses and declines in value judged to be
other-than-temporary are included in investment income. The cost of
securities sold is based on the specific identification method. Interest and
dividends are included in investment income.
4. ACCOUNTS RECEIVABLE
Accounts receivable are comprised primarily of amounts due from
advertisers in the bar association directories. The Company revised its
allowance for doubtful accounts at March 31, 1997 to 9%; in addition, the
Company maintained a full reserve for amounts owed more than six months,
based upon an expectation that a small percentage of these monies will be
collected. The effect of the revision was a reduction of bad debt expense by
$12,119. All amounts owed more than one year are written off.
5. REVENUE RECOGNITION
Revenues and related costs are recorded by the Company upon shipment of
directories. Costs accumulated under directories in progress are stated at
estimated costs, not in excess of estimated realizable value. Deferred
revenue represents amounts received from advertisers prior to shipment of the
related directories.
7
<PAGE>
THE PUBLISHING COMPANY OF NORTH AMERCICA, Inc.
FORM 10-QSB--MARCH 31, 1997
NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS
6. NET INCOME PER SHARE
Net income per share is computed based on the weighted average number of
common shares and common stock options using the treasury stock method. In
accordance with the Securities and Exchange Commission requirements, common
and common equivalent shares issued by the Company at prices below the public
offering price during the 12-month period prior to the date of the initial
public offering on May 17, 1996 have been included in the calculation as if
they were outstanding for all periods prior to the offering using the
treasury stock method and the initial public offering price.
7. STOCK-BASED COMPENSATION
In October 1995, the FASB issued Statement of Financial Accounting Standards
No. 123, Accounting and Disclosure of Stock-Based Compensation, which
encourages but does not require companies to recognize stock awards based on
their fair value at the date of grant. The Company currently follows, and
expects to continue to follow, the provisions of Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees (APB 25), and
related interpretations in accounting for its employee stock options. Under
APB 25, no compensation expense is recognized when the exercise price of the
Company's employee stock options equals or exceeds the market price of the
underlying stock on the date of grant.
8. USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates. The Company revised
its estimate of the costs associated with directories in progress at March
31, 1997; the revision resulted in an additional $41,716 of costs which were
deferred.
9. INITIAL PUBLIC OFFERING OF THE COMPANY'S COMMON STOCK
Pursuant to a registration statement on Form SB-2 with the Securities and
Exchange Commission, on May 17, 1996 the Company's common stock commenced
trading on the Nasdaq National Market System under the symbol PCNA. Gross
proceeds of $6,325,000 were raised from the sale of 1,150,000 shares at $5.50
per share. Net proceeds to the Company after paying all related costs of the
offering were approximately $4,900,000.
8
<PAGE>
THE PUBLISHING COMPANY OF NORTH AMERCICA, Inc.
FORM 10-QSB--MARCH 31, 1997
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
INTERIM FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales increased 52% to $1,433,696 for the quarter ended March 31,
1997 from $945,282 for the same period a year earlier. Average net
advertising revenues per directory increased 35% to $88,960 on 16 directories
published during the most recent quarter, compared to $65,805 on 14
directories published a year earlier.
The Company realized net income of $3,039 for the quarter ended March 31,
1997 compared to $89,937 for the same period a year earlier. A loss from
operations of $7,414 was incurred in the most recent quarter whereas income
from operations of $234,335 was recognized in the same quarter in 1996. Total
operating costs rose $730,163 or 103% to $1,441,110 in the first quarter of
1997 from $710,947 in the first quarter of 1996.
The Company has begun to allocate its salaries and commissions expense
among production, marketing and selling, and general and administrative
expense. Previously, total salaries and commissions were reported as a single
item in the Statements of Income. Salaries and commissions expense for the
first quarter of 1996 were approximately $312,615; this expense rose 119% to
approximately $685,760 for the first quarter of 1997. During 1996 employment
at the Company grew from approximately 43 at the beginning of the year to
approximately 124 at year-end with most of the increase being in the sales
staff. Staffing levels did not increase during the first quarter of 1997
during which net sales increased 41%.
Production costs rose to 25% of net sales in the first quarter of 1997
from 20% of net sales a year earlier primarily due to an increase in outside
costs such as printing and binding. Management is planning for new sources of
revenues, primarily in larger bar directories, as a means of increasing
revenues per directory without a proportionate increase in production costs.
Marketing and selling expense rose to 34% of net sales in the quarter
ended March 31, 1997 from 28% of net sales in the same period a year earlier.
Nearly all of this expense in both periods is related to the sale of
advertising in the Company's publications; only a small portion is related to
the Company's marketing to the bar associations for which it publishes. Of
the $229,914 increase in marketing and selling expense, nearly all relates to
increases in salaries and commissions and telephone expense as a result of
the increase in staff. The Company is considering the procurement of personal
computers and specialized software later in 1997 which may automate and
increase efficiencies in the sales functions.
General and administrative expenses rose $302,670, or 125%, to 38% of net
sales in the first quarter of 1997 from 26% a year earlier. Bad debt expense
accounted for $140,750 or 47% of the increase and was 14% of net sales in the
most recent quarter compared to 13% for all of 1996. Professional services
such as independent auditors and legal accounted for $74,342 or 25% of the
increase and can be attributed to the requirements of being a publicly-owned
company. General and administrative expenses relating to payroll accounted
for 14% of the increase but decreased as a percentage of net sales to
approximately 11% in the first quarter of 1997 compared to 12% for the same
period in 1996.
9
<PAGE>
THE PUBLISHING COMPANY OF NORTH AMERCICA, Inc.
FORM 10-QSB--MARCH 31, 1997
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operations was $189,146 for the three months ended March
31, 1997 compared to $64,137 provided by operations for the same period a
year earlier. The most significant reason for the decrease in cash provided
from operations in 1997 from 1996 was the increase in accounts receivable and
in other assets. Deferred revenue, which represents amounts received from
advertisers prior to shipment of the related directories, increased $116,010
during the quarter ended March 31, 1997 whereas it decreased $137,769 during
the same period a year earlier. This was the result of a general increase in
the number of directories the Company had in progress at March 31, 1997 from
the same time in 1996. Directories in progress, which represents costs
accumulated for directories unpublished at the end of the period, increased
$71,581 for the most recent quarter compared to a decrease of $43,498 during
the same period a year earlier for the same reason as the increase in
deferred revenue and because of a change in the estimate used by management
to estimate costs associated with directories in progress. The change in
management's estimate resulted in an additional $41,716 of costs which were
deferred.
During the quarter ended March 31, 1996 the Company distributed the 1995
S Corporation earnings of $447,178 to shareholders as of December 31, 1995;
of this amount, $178,871 was distributed in cash payments and $268,307 was
distributed in promissory notes which were fully paid in July, 1996.
At March 31, 1997 the Company had investments of $2,882,879 in U.S.
Treasury securities, $8,000 in stocks, and $1,100,784 in cash and cash
equivalents; the Company's only debt is the mortgage on its corporate
headquarters.
During the quarter ended March 31, 1997 the Company purchased a software
system designed specifically for its industry for $83,950. Also during the
quarter, the Company pre-paid $68,370 for the purchase of data which it will
acquire throughout 1997 for use in developing sales leads; the pre-payment
was made to secure a lower unit cost.
The Company has no commitments at this time to acquire a material amount
of capital assets, although the Company may invest an estimated $175,000 in
software and computer hardware for automation of its sales functions later in
1997.
As described in the Company's registration statement on Form SB-2 dated
May 17, 1996, the Company intends to seek to increase market share through
the acquisition of print directory competitors or the rights to certain
publishing contracts held by such competitors. As of the date of this filing,
the Company has not entered into any agreements, understandings, or
commitments relating to any potential acquisition. Such transactions are
expected to involve a combination of cash, Company stock, and payments from
the future earnings of the acquired operations; the cash requirements for
these transactions is not expected to exceed the $1,000,000 identified in the
registration statement.
Based on current cash and investment balances and the Company's
anticipated results of future operations, the Company believes that it has
sufficient cash resources to fund its operations for the next twelve months
or more.
10
<PAGE>
THE PUBLISHING COMPANY OF NORTH AMERCICA, Inc.
FORM 10-QSB--MARCH 31, 1997
FORWARD-LOOKING STATEMENTS
The statements made above relating to management's plan for new sources
of revenues, primarily in larger bar directories, as a means of increasing
revenues per directory without a proportionate increase in production costs,
to the Company's consideration of automating and improving efficiencies in
the sales functions through the procurement of personal computers and
specialized software, and to the Company's intentions or expectations
regarding an increase in market share through the acquisition of print
directory competitors or the right to certain publishing contracts held by
such competitors are forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934. The results anticipated by any or all of these forward-looking
statements may not occur. Important factors that may cause actual results to
differ materially from the forward-looking statements include the following:
(1) management's ability to successfully develop and implement a plan which
has the result of increasing revenues per directory without incurring
proportionate increases in costs; (2) the Company's ability to find a
suitable specialized software system for its sales functions; (3) the
Company's ability to successfully install and implement such a software
system; and (4) the Company's ability to identify, or consummate the
acquisition of, or successfully operate, suitable print directory competitors
or rights to suitable publishing contracts held by such competitors.
11
<PAGE>
THE PUBLISHING COMPANY OF NORTH AMERCICA, Inc.
FORM 10-QSB--MARCH 31, 1997
PART II--OTHER INFORMATION
ITEM 5. Other Information
Not applicable.
ITEM 6. Exhibits and Reports on Form 8-K
a. Exhibits
1. Exhibit 11--Statement re computation of per share earnings
2. Exhibit 27--Financial Data Schedule
b. No reports on Form 8-K were filed during the quarter ended March 31,
1997.
12
<PAGE>
THE PUBLISHING COMPANY OF NORTH AMERCICA, Inc.
FORM 10-QSB--MARCH 31, 1997
In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf on May 14, 1997
by the undersigned, thereunto duly authorized.
The Publishing Company of North America, Inc.
/s/ Peter S. Balise
-----------------------------------
President (Chief Executive Officer)
/s/ James M. Koller
------------------------------------
Chief Financial Officer (Principal
Financial and Accounting Officer)
13
<PAGE>
THE PUBLISHING COMPANY OF NORTH AMERCICA, Inc.
FORM 10-QSB--MARCH 31, 1997
EXHIBITS
ITEM 6. Exhibits and Reports on Form 8-K
a. Exhibits
1. Exhibit 11--Statement re computation of per share earnings
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
PRIMARY MAR. 31,1997 MAR. 31,1996
------------- -------------
<S> <C> <C>
Average shares outstanding...................................... 4,118,753 2,955,000
Net effect of dilutive stock options based on the treasury stock
method using the average market price......................... 12,156 --
------------- -------------
Total........................................................... 4,130,909 2,955,000
------------- -------------
------------- -------------
Net income...................................................... $ 3,039 $ 89,937
------------- -------------
------------- -------------
Per share amount................................................ $ 0.00 $ 0.03
------------- -------------
------------- -------------
Fully-diluted
Average shares outstanding...................................... 4,118,753 2,955,000
Net effect of dilutive stock options based on the treasury stock
method using the market price at end of period or the average
market price, whichever is higher............................. 12,156 --
------------- -------------
Total........................................................... 4,130,909 2,955,000
------------- -------------
------------- -------------
Net income...................................................... $ 3,039 $ 89,937
------------- -------------
------------- -------------
Per share amount................................................ $ 0.00 $ 0.03
------------- -------------
------------- -------------
</TABLE>
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S UNAUDITED FINANCIAL STATEMENTS FOR THE PERIOD ENDED
MARCH 31,1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,100,784
<SECURITIES> 2,890,879
<RECEIVABLES> 730,479
<ALLOWANCES> (325,767)
<INVENTORY> 0
<CURRENT-ASSETS> 4,769,354
<PP&E> 1,514,530
<DEPRECIATION> (157,175)
<TOTAL-ASSETS> 6,236,746
<CURRENT-LIABILITIES> 1,084,264
<BONDS> 786,666
0
0
<COMMON> 5,129,565
<OTHER-SE> (710,416)
<TOTAL-LIABILITY-AND-EQUITY> 6,236,746
<SALES> 1,433,696
<TOTAL-REVENUES> 1,433,696
<CGS> 365,089
<TOTAL-COSTS> 1,441,110
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,453
<INCOME-PRETAX> 3,039
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,039
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,039
<EPS-PRIMARY> (0.00)
<EPS-DILUTED> (0.00)
</TABLE>
