U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the quarterly period ended September 30, 2000
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OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
Commission file number
AMERICANA PUBLISHING, INC.
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(Exact name of small business issuer as specified in its charter)
COLORADO 84-1453702
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
303 SAN MATEO NE, SUITE 104A, ALBUQUERQUE, NM 87108
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(Address of principal executive offices)
505-265-6121
(Issuer's telephone number)
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(Former name, former address, and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the 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. Yes X . No .
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes_____. No_____.
APPLICABLE ONLY TO CORPORATE ISSUERS
As of September 30, 2000, there were 6,264,396 shares of common stock
outstanding.
Transitional Small Business Disclosure Format (Check one): Yes_____. No_____.
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INDEX
PAGE
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets
September 30, 2000 (Unaudited) and
December 31, 1999 3
Condensed Statements of Operations
Three months and Nine Months
ended September 30, 2000 and
September 30, 1999 (Unaudited) 4
Condensed Statements of Cash Flows
Six months ended September 30, 2000 and
September 30, 1999(Unaudited) 5
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-10
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Defaults Upon Senior Securities 10
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
27.1 Financial Data Schedule
SIGNATURES
2
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PART I. FINANCIAL INFORMATION
Item 1. Financial statements
Americana Publishing, Inc.
Condensed Balance Sheet
As of
September 30, 2000 December 31, 1999
Assets (Unaudited)
Current Assets
Cash $ 38,177 $ 308,376
Marketable Securities 70,000 199,370
Accounts Receivable 7,707 892
Prepaid 180,550 197,231
Inventory 28,093
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Total Current Assets $324,527 705,869
Property & Equipment
Music 6,400
Telephone System 25,509
Audio Equipment 5,575 2,558
Database & Circulation 333,233 23,881
Computer Equipment 121,022 48,360
Software 14,099 4,014
Furniture & Fixtures 41,545 20,207
Website Development 43,463 36,713
Audio Production 145,009
Leasehold Improvements 5,299
Less: Accumulated Depreciation
and Amortization (59,377) (26,162)
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Total Property & Equipment 681,777 109,571
Total Asset $1,006,304 $ 815,440
============ =============
Liabilities & Stockholders Equity
Current Liabilities
Accounts Payables $ 28,293
Accrued Liabilities 17,708 3,894
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Total Current Liabilities 46,001 3,894
Stockholders Equity
Preferred Stock 20,000,000 Shares
No Par Value, Authorized, None Issued
Common stock 100,000,000 Shares Authorized
$.001 Par Value 6,264,396 & 4,283,000 6,264 4,283
Issued and outstanding for
September 30, 2000 and December 31, 1999,
respectively
Paid-In Capital 5,540,657 3,043,648
Accumulated Deficit (4,586,618) (2,236,385)
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Total Stockholders' Equity 960,303 811,546
Total Liabilities & Stockholders Equity $1,006,304 $ 815,440
========== ===========
See Accompanying Notes to Financial Statements.
3
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<TABLE>
<CAPTION>
Americana Publishing, Inc.
Condensed Statements of Operations
(Unaudited)
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPT 30 ENDED SEPT 30
2000 1999 2000 1999
------- ------- ------- ------
<S> <C> <C> <C> <C>
Net Revenues 10,931 2,128 40,658 12,036
Cost of Goods Sold 3,040 - 11,292 -
----- ----- ------ -----
Gross Profit 7,891 2,128 29,369 12,036
Administration Expense
Salary & Wages 95,711 21,949 206,280 25,038
Compensation Expense 149,003 87,003 1,155,757 312,006
Outside Consulting Fees 276,976 - 510,889 195,247
Depreciation & Amortization 16,392 3,285 33,217 9,490
Interest Expense - - 380 142
Management Fees 15,235 6,000 24,235 51,000
Bad Debt Expense 90,000 - 90,000 -
Other Operating Expense 101,085 35,517 358,839 86,320
------- ------- --------- -------
Total Expense 744,402 153,754 2,379,599 679,243
Other Income (Expense)
Interest Income
Income Tax Deferred - (3,055) - 5,335
-------- -------- --------- --------
- (3,055) - 5,335
Net Operating Income (Loss) (736,511) (148,571) (2,350,233) (672,542)
======== ======== ========== ========
Weighted Average Number
of Common Shares Outstanding 5,797,979 2,873,985 4,634,208 2,873,985
Income (Loss) Per Share - Basic (.13) (.07) (.51) (.18)
Income (Loss) Per Share - Diluted (.13) (.07) (.51) (.18)
Dividends Per Common Share $ - $ - $ - $ -
See Accompanying Notes to Financial Statements.
4
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Americana Publishing, Inc.
Condensed Statement of Cash Flows
(Unaudited)
Nine Months Ended Nine Months Ended
Sept 30, 2000 Sept 30, 1999
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Cash Flows From Operating Activities:
Net Loss $(2,350,233) $ (672,541)
Adjustments to Reconcile Net Income(Loss)
To Net Cash Provided by Operating
Activities:
Depreciation 33,217 9,490
allowance for Bad Debt 90,000 -
Capital Transactions 2,186,484 492,003
(Increase)Decrease in Accounts Receivable (6,815)
(Increase) Decrease in Accounts Payable 42,107 852
Increase in Inventory (28,093) -
Decrease in Income Tax Payable - 5,335
Decrease in Prepaids (73,319) (7,200)
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Total Adjustments 2,243,580 500,480
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Net Cash Used by Operating Activities (106,653) (172,061)
Cash Flows From Financing Activities:
Proceeds From Sale of Common Stock 210,000 232,500
Proceeds From Borrowings - -
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Net Cash Provided by Financing 210,000 232,500
Cash Flows From Investing Activities:
Purchase of Property and Equipment (303,546) (44,900)
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Net Cash Used in Investing Activities (303,546) (44,900)
Net Increase (Decrease) in Cash (200,199) 15,539
Cash and Cash Equivalents at
Beginning of Period 308,376 667
------- -------
Cash and Cash Equivalents at
End of Period $ 108,177 $ 16,206
============= ================
Non Cash Transactions:
Property Plant and Equipment
Exchanged for Common Stock 100,000 -
Supplemental Disclosures:
Interest Paid $ 0 $ 168
Taxes Paid $ 0 $ 0
See Accompanying Notes to Financial Statements.
</TABLE>
5
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AMERICANA PUBLISHING, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1.
The unaudited internal condensed financial statements and related notes have
been prepared by Americana Publishing, Inc. (the "Company"), and not subject to
an audit pursuant to the rules and regulations of the Securities and Exchange
Commission. In the opinion of management, all adjustments (which include only
normal recurring adjustments) necessary to present fairly the financial
position, results of operations and cash flows at June 30, 2000, and for all
periods presented, have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted. It is suggested that these condensed financial statements be
read in conjunction with the Company's audited financial statements and notes
thereto for the fiscal year ended December 31, 1999. The results of operations
for the three and nine months ended September 30, 2000 are not necessarily
indicative of the operating results for the full year.
NOTE 2. LIQUIDITY
The Company has historically financed its operations through the sale of common
stock. Since inception the Company has raised approximately $1.3 million in
capital. The proceeds have been used from start up activities including website
development and the registration of its common stock. The Company at June 30,
2000 had a working capital surplus of $0.3 million and does not anticipate the
need for any additional financing for the next twelve months. Although the
Company has not yet secured a financing commitment from a commercial financing
institution or a letter of intent with an investment banker/underwriter, the
Company remains confident that the financing resources should be available to
meet the Company's future financing needs. There can be no assurance that
favorable financing terms may be available to Americana at the time financing is
desired. Further, poor financial performance may adversely effect Americana's
ability to attract a commercial lending source or investment banker to
underwrite any future financings or stock offering.
Should the Company require the rapid infusion of capital it would consider the
sale of a land asset it owns. This property was given to the Company by Mr.
Lovato in exchange for common stock for the purpose to either sell or to
leverage and secure future borrowings for the Company. The value of the land is
estimated at $25,000. Although the Company does not anticipate the need for such
a transaction, the land remains available as a potentially liquidateable asset.
The Company will require future financing in various forms. The Company proposes
to finance working capital timing differences with an asset-based line of
credit. Capital improvements should be financed by intermediate-term debt. The
Company is not in possession of any commercial bank commitment letters or a
letter of intent from a capable underwriter at this time.
Note 3. Stock Transactions
During the first nine months of 2000 the Company issued 950,000 shares of common
stock to various employees and consultants. The fair value of this stock was
booked as compensation expense and consulting expense.
During March 2000 the Company sold 310,000 of common shares for $310,000 under
regulation 4(2). Regulation 4(2) provides for the sale of restricted shares of
common stock without the preparation of a prospectus. The share offered in March
cannot be sold for a period of one year.
Note 4 - Reserce of Prepaid Advertising
In 1999 the Company's president contributed approximately ($180,000) of prepaid
advertising space in a New Mexico magazine. This company has incurred financial
difficulties and has contacted the Company to restructure the advertising
credit. The Company has reserved ($90,000) as a result of the uncertainty as to
whether the magazine can fulfill its obligation.
6
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Independent Accountant's Report
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We have reviewed the accompanying condensed balance sheet of Americana
Publishing, Inc. as of September 30, 2000 and the related condensed statement of
operations for the three and nine month periods ending June 30, 2000 and 1999
and of cash flows for the six month periods ending June 30, 2000 and 1999. These
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with auditing standards generally accepted in the United States of America, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of material modifications that should be
made to the accompanying financial statements for them to be in conformity with
generally accepted accounting principles.
/s/ Null Lairson
Houston, Texas
August 11, 2000
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
GENERAL
All phases of the Company's operations are subject to influences outside of the
Company's control. Any one, or a combination, of these factors could materially
affect the results of the Company's operations. These factors include
competition pressures, inflation, trade restrictions, interest rate fluctuations
and other capital market conditions, weather, future and options trading or
paper commodities, and the availability of natural resources and services from
other sources. Forward-looking statements are made by or on behalf of the
Company's knowledge of its business and the environment in which it operates,
but because of the factors listed above, as well as other environmental factors
over which the Company has no control, actual results may differ from those in
the forward-looking statements. Consequently, all of the forward-looking
statements made are qualified in their entirety by these cautionary statements
and there can be no assurance that the actual results or developments
anticipated by the Company will be realized, or even if substantially realized,
that they will have the expected effect on the business and/or operations of the
Company.
The Company currently has limited internal and external sources of liquidity. At
this time, the Company has no material commitment for capital expenditures.
There are no known trends, events or uncertainties that are expected to have a
material impact on the net sales and income from continuing operations.
Americana Publishing, Inc. is not subject to seasonal aspects, but by selling
books it is expected that the Christmas season will be the busiest part of its
fiscal year.
The fiscal year ended December 31, 1999, was marked by a number of events, which
in the opinion of management will strengthen the Company and ensure a continuous
growth pattern.
In the third quarter of 2000 Ingram Books, who became an equity partner during
the second quarter, provided their database of 530,000 books plus other
enhancements to Americana Publishing, Inc. By the end of the second quarter,
ordering procedures were refined and placed into operations to that visitors to
the americanabooks.com websites could place orders from a combined database
which includes Ingram Books inventory with Americana Publishing, Inc.
In May the Company moved into an 8,000 square foot facility. The rent is $2,000
per month for the next twenty-four (24) months, which has been paid.
8
<PAGE>
Site Development
The active operating pages for the americanasongs.com website are complete. The
site is now accepting uploads of music from independent record producers, labels
and artists. Further, the Company has uploaded an array of over 3,000 songs it
has licensed for sale from this site. The Company fully intends to pay royalties
to all artists and recording companies. All recordings sold from this site will
be protected as much as possible from unauthorized duplication. Americana
Publishing, Inc. is now in the process of installing a commercial database
operating system. This process is expected to be completed by December 2000 and
the site should be operational for consumer use by this same date. Americana
Publishing, Inc. has purchased a library of rare music on a non-exclusive basis,
of some 3,000 songs ranging from music of the 30's and 40's all the way to music
of the 70's. Further, Americana Publishing, Inc. is negotiating with The
Orchard, on of the nations's largest music distributors, to purchase the
database and CD's of The Orchard's approximately 750,000 songs with continuing
rights to upgrade so as to have access to The Orchards increase in inventory.
Americana Publishing, Inc. and John Wagner Studios are working on the
conversion of this music to a digital format so that it may be easily sold and
downloaded from the americanasongs.com website.
Additionally, Americana entered into a contractual relationship with S.P.
Richards Company during the third quarter. As of September 18, 2000, Americana
has uploaded the S.P. Richards database so that sales of S.P. Richards
merchandise from the S.P. Richards catalog can now be made through Americana
Publishing, Inc.
Ann Edenfield has been hired as director of development and marketing for the
americanatextbooks.com website. An employment and stock option agreement was
executed on March 15, 2000, which included performance based stock options
totaling 95,000 shares over three years.
The americanatextbooks.com website design and operation pages have been
completed. The site was fully operational on August 15, 2000.
The databases for both the americanasongs.com and americanatextbooks.com
websites are to be modified and accessed along with the americanabooks.com
database from a unified database server and platform.
This programming project will be completed in December 2000. This project
includes the installation of book distributor database such as Ingram Books,
with which Americana Publishing, Inc. has executed database licensing and
distribution agreements.
Audio Book Development
Americana has purchased the audio production rights to over sixty (60) books. In
cooperation with John Wagner Studios. Americana is currently producing recording
and duplicating these books in preparation for sale to some 17,000 retail stores
and 3,000 libraries around the United States. Americana has completed production
and duplicated for inventory twenty (20) audio books and is in various states of
production on an additional forty-two (42) titles. Sales of audio books on hand
was initiated during the third quarter. Total amount of $9,772.04 in invoiced
sales have been achieved to date. It is expected by year end that Americana will
have produced all sixty (60) titles which will be available for sale as a
download from the americanabooks.com website in addition to sales of audio
tapes.
9
<PAGE>
Liquidity and Capital Resources
The Company has historically financed its operations through capital infusion by
Mr. George Lovato, Jr., the Chairman of the Board and Chief Executive Officer.
Mr. Lovato has also paid certain expenses on behalf of the Company from other
business, such as B. H. Capital Limited, of which he is sole owner. Mr. Lovato
has provided office space, complete use of his equipment, facilities, and
personnel free of charge up to March 1st, 1999. The Company as of that date
began to pay B. H. Capital Limited the Corporate Finance Consulting Agreement
dated January 1st, 1998. The Company will be obligated to pay B. H. Capital
Limited a monthly retainer/lease payment of $3,000 per month for continued use
of Mr. Lovato's equipment and facility, along with some personnel.
The Company completed the sale of $700,000 of securities under 4(2)as of
November 4th, 1999 and 310,000 as of March 2000. The use of these proceeds for
the $700,000 will be used for working capital, including the completion of the
website(s), for an acquisition and advertising. The use of proceeds for the
310,000 was for leasehold improvements, furniture, fixtures, equipment and
pre-paid rent on Americana's new facility. Any future capital infused in to the
Company is expected to be used to support working capital and acquisitions.
The Company is currently in discussion with a number of private and corporate
investors concerning a private placement.
The Company proposes to utilize the common stock to acquire other sponsored book
publishing companies and other business enterprises. Therefore, active trading
of the stock will be important to the principals of the target companies.
Americana is very dependent on the active trading of its stock. Currently the
Company's stock has not been actively trading. The Company plans on using the
stock to acquire publishing companies and other enterprises that benefit growth.
If the stock continues to trade flatly, the ability of Americana to acquire
these companies would be seriously jeopardized. Without financing, it would be
difficult to cover working capital requirements and future capital expenditures.
No assurance can be given that the stock will be actively traded or that
Americana will be able to find financing.
In June of 2000 audio book production commenced and as of September 30, 2000
twenty (20) audio books had been produced and were available for sale. It is
anticipated that by November 1, 2000 an additional twenty (20) audio books will
be complete and available for distribution. Americana also anticipates a
production rate of one to two audio books per week.
Capital Expenditure
During the nine month period Americana made approximately $88,000 in capital
expenditures. The expenditures were for an improved telephone system, computer
equipment and furniture and fixtures, plus additional capitalization of audio
production equipment.
10
<PAGE>
Acquisition
As part of the "Integrated Publishing Plan" the Company anticipates it will
acquire small sponsored book publishing companies and list their book titles on
its website as well as list book titles they do not own, that complement and
enhance the consumer appeal of the catalogue overall. These enterprises will
account for the majority of revenue of the Company in the future. The Company
has identified hundreds of potential targets. These acquisitions will be
transacted with the use of the Company's common stock. Americana Publishing,
Inc. executed a direct mail campaign to over 4,000 book publishers nationwide to
encourage responses concerning interest in selling their companies to Americana
Publishing, Inc. As of April 15, 2999 Americana Publishing, Inc. had received 12
communications from various quality publishing enterprises that have expressed
interest in a potential sale transaction. Americana Publishing, Inc. has been
actively evaluating these businesses and has issued five letters of intent.
These letters of intent indicate to the interested party that Americana
Publishing, Inc. is interested in pursuing negotiations and entering into a
formal purchase and sale agreement. Although on June 30, 2000 formal purchase
agreements were sent to two publishers which did not mature into executed
purchase agreements, Americana Publishing, Inc. presently has outstanding an
offer to purchase all of the outstanding stock in one closely held publisher. It
is anticipated that this may result in actual acquisition during the fourth
quarter of the calendar year.
The Company intends to acquire a heat set web press company, and book binding
company. These enterprises will vertically integrate production and control of
quality audio books as well as re-print books for its family of over 100
publishers now supplying books through americanabooks.com. The Company currently
has upgraded its existing recording studio to accommodate digital equipment.
This currently serves as an additional facility to record audio books.
Results of Operations
Quarter ended September 30, 2000 equal to quarter ended September 30,1999.
Revenue increased to $10,931 from $2,128. The current quarter marked the first
quarter the company began selling audio books it had produced. Compensation
expense, consulting fees and salaries were up $412,738, a majority of this
expense is related to the issuance of stock to employees and consultants and the
expense of stock options by certain directors and contractors.
Year to date ended September 30, 2000 to September 30, 1999.
Revenue increased to 40,658 from $12,616. The primary increase in revenue was
due to the sales of audio books, both on consignment from Sunset Productions,
Inc., as well as selling audio books produced by Americana Publishing, Inc.
Salaries, compensation expense and consulting fees increased $1,340,635. A
majority of the expense relates to stock issued to employees, consultants and
officers and the expense of stock options by employees, consultants and
officers.
Part II. Other Information
Item 1. Legal Proceedings - None
Item 2. Changes in Security - None
Item 3. Defaults upon Senior Securities
11
