SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(X) Annual Report pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934 for the fiscal year ended December 31, 1999.
( ) Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required) for the transition period
from to
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Commission File Number
Americana Publishing, Inc.
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(Exact name of registrant as specified in its charter)
Colorado 84-1453702
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(State or other jurisdiction of (IRS Employer ID No.)
incorporation or organization)
303 San Mateo NE, Suite 104A
Albuquerque, New Mexico 87108
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(Address of principal executive offices)
(505) 265-6121
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(Registrant's telephone number, including area code)
Securities registered pursuant to section 12(b) of the Act:
Common Stock $0.01 per share
Securities registered pursuant to Section 12(g)
of the Act:
None
Check 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 such
shorter period that the registrant was required to be file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes X No
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this form 10-KSB [ ]
State issuer's revenues for its most recent fiscal year: $9,515
State the aggregate market value of the voting and non-voting common equity
held non-affiliates computed by reference to the price at which the common
equity was, or the average bid and asked prices of such common equity, as of a
specified date within the past 60 days. (See definition of affiliate in Rule
12b-2 of the Exchange Act). As of January 15, 2000: $2,782,000. As of January
15, 2000 there were 4,283,000 shares outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
If the following documents are incorporated by reference, briefly describe them
and identify the part of the Form 10-KSB into which the document is
incorporated: (1) any annual report to security holders; (2) any proxy or
information statement; and (3) any prospectus filed pursuant to Rule 424(b) or
(c) of the Securities Act of 1933 (the "securities Act"). The listed documents
should be clearly described for identification purposes. None.
Transitional Small Business Disclosure Format (check one): Yes No X
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AMERICANA PUBLISHING, INC.
FORM 10-KSB
INDEX
PART I
Item 1. DESCRIPTION OF BUSINESS
Background of the Company
Factors Which May Affect Future Results
Business of Americana Publishing, Inc.
Unique Strategies and Website Development
More Money for Your Books and Other Unique Strategic Advantages
Development of additional Websites
AMERICANA CORPORATE FINANCE REPORTER
Possible Acquisitions & Merger Transactions
Employees
Item 2. DESCRIPTION OF PROPERTY
Item 3. LEGAL PROCEEDINGS
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
Results of Operations
Liquidity and Capital Resources
Item 7. CONSOLIDATED FINANCIAL STATEMENTS
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE;
PART III
Item 9. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
REGISTRANT COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Item 10. EXECUTIVE COMPENSATION
Other Non-Cash Compensation
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Stock Options Outstanding
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. EXHIBITS AND REPORTS ON FORM 8-K
Reports on Form 8-K
SIGNATURES
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PART I
Item 1. DESCRIPTION OF BUSINESS
This report on Form 10-KSB contains forward-looking statements that involve
risks and uncertainties. AMERICANA's actual results may differ significantly
from the results discussed in the forward-looking statements. Factors that might
cause such a difference include, but are not limited to, those discussed in Item
1a the section entitled "Factors Which May Affect Future Results."
Forward-Looking Information-General
This report contains a number of forward-looking statements, which reflect
AMERICANA's current views with respect to future events and financial
performance including statements regarding AMERICANA's strategy, product under
development and plans for operations. These forward-looking statements are
subject to certain risks and uncertainties that could cause actual results to
differ materially from historical results or those anticipated. In this report,
the words "anticipates," "believes," "expects," "intends," "future," "plans,"
"targets" and similar expressions identify forward-looking statements. Readers
are cautioned to consider the risk factors described below under the heading
"Factors Which May Affect Future Results," and not to place undue reliance on
the forward-looking statements contained herein, which speak only as of the date
hereof. AMERICANA undertakes no obligation to publicly revise these
forward-looking statements, to reflect events or circumstances that may arise
after the date hereof.
Additionally, these statements are based on certain assumptions that my prove to
be erroneous and are subject to certain risks including, but not limited to,
AMERICANA's ability to introduce new products, AMERICANA's dependence on limited
cash resources, and its dependence on certain key personnel within AMERICANA.
Accordingly, actual results may differ, possibly materially, from the
predictions contained herein.
BACKGROUND OF THE COMPANY
AMERICANA PUBLISHING, INC. (hereinafter referred to as "AMERICANA") was
incorporated under the laws of the State of Colorado on April 17, 1997. Prior to
that date AMERICANA operated as a division of B.H. Capital Limited for
approximately 18 months as a development stage enterprise. During the
development stage various activities such as publication design research,
industry and competition research, demographic research, and the formation of
the integrated publishing concept were achieved.
In March of 1999, AMERICANA completed a 504 private placement pursuant to
Regulation D of the Securities Act of 1933 as amended, in the amount of $232,500
or for 465,000 shares of AMERICANA'S $.001 par value Common Stock. During 1999,
AMERICANA completed the development of its first e-commerce website
americanabooks.com. On April 15th, 1999 AMERICANA filed its initial Form 10-SB
with the Securities and Exchange Commission to register 3,000,000 shares of
common stock. AMERICANA received a "No Further Comment Response" concerning the
Form 10-SB was declared effective by the Securities and Exchange Commission on
August 6, 1999. AMERICANA completed the sale of common stock on November 2, 1999
and sold 908,250 shares of common stock thus infusing $700,000 into AMERICANA.
On August 30, 1999 Hill, Thompson, Magid and Co., Inc. filed a Form 211 with the
National Association of Securities Dealers and received clearance to trade
AMERICANA's common stock on November 5th, 1999. Throughout this period AMERICANA
continued the final phase of development of the americanabooks.com and opened
the website on October 15, 1999. The common stock of AMERICANA (OTCBB:APBH)
began trading at $2.00 per share on November 8th, 1999. AMERICANA began actively
promoting the americanabooks.com website and began the final stage of
development of the americanasongs.com website.
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Item 1a. Factors Which May Affect Future Results
AMERICANA is still in a developmental stage and the common stock involves a high
degree of risk. In addition to other information contained in this Form 10-KSB,
prospective investors should carefully consider the following risk factors,
which may affect future results:
1. Continuing Losses. During fiscal year 1999, AMERICANA's most recent
fiscal year, AMERICANA's losses were $1,750,629 compared to losses of
$431,080 1998 and $54,676 in 1997. AMERICANA faces all the risks inherent
in a new business. There have been no significant sales as of December 31,
1999. There can be no assurance that any of the business activities will
result in any significant operating revenues or earnings. Investors should
be aware that they may lose all or substantially all of their investment.
2. Lack of Revenues. AMERICANA currently generates revenues from primarily
one website, americanabooks.com. This websites generates sales from books
and the ELECTRONICAGENT. There can be no assurance that AMERICANA will ever
generate sufficient revenues from this website to support AMERICANA's
overhead. Furthermore, AMERICANA may continue to incur losses and any
investor who purchases or acquires shares of AMERICANA's Common stock will
likely incur further substantial dilution and or loss in the value of their
investment.
3. Current Financing and Capital May be Insufficient. AMERICANA has
received a financing commitment from Altres Financial. This commitment will
allow AMERICANA to factor accounts receivable invoices. There can be no
assurance that this credit facility will be sufficient to finance the
timing difference of AMERICANA's outgoing payables versus its incoming
receivable payments. As of December 31, 1999, AMERICANA had $507,746 in
liquid reserves. There can be no assurance that these cash reserves will be
sufficient to support AMERICANA's continuing operating overhead. Any
adverse performance of AMERICANA's receivables or sudden demands on
Americana's cash reserves may result in an investor losing all or
substantially all of their investments.
4. Lack of Secondary Underwriting Commitment. AMERICANA's management
recognizes that additional capital from the sale of Common Stock may be
required in order to continue to fulfill AMERICANA's growth and development
demands. While AMERICANA may attempt to obtain a commitment from an
underwriter for a private placement or secondary public offering, there can
be no guarantee that a commitment can be obtained or furthermore that if a
commitment is obtained that the underwriter will be successful in raising
funds. Should AMERICANA not be successful in raising additional capital,
AMERICANA may suffer continuing losses and financial difficulties and, thus
may result in an investor losing all or substantially all of their
investment.
5. Significant Dilution From Stock Options and Future Stock Sales.
AMERICANA has issued Stock Options totaling 2,555,000 of Common Stock which
if purchased would infuse $511,000 in capital into AMERICANA, at $.20 per
share through December 2000. As a result of these Stock Options, in
addition to others, that may be issued from time to time in the future, the
investor may suffer substantial dilution and reduce significant value of
their investment. AMERICANA may be required to sell additional preferred
and common stock in order to infuse additional capital into AMERICANA.
Should AMERICANA be successful in obtaining additional capital through the
sale of its stock, existing shareholders will incur substantial dilution.
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6. Lack of Independent Market Study. AMERICANA's management has performed
limited market surveys and studies. However, no independent third party has
performed any surveys or studies that substantiate or validate Americana's
business plan. There can be no assurance that the marketing and or
vertically integrated publishing strategy will prove successful and
therefore the investor may lose all or substantially al of their
investment.
7. Lack of Dividends. AMERICANA has never paid any cash dividends on its
Common Stock. AMERICANA's board of directors intends to retain profits, if
any, to finance AMERICANA's business.
8. Limited Market for Common Stock. AMERICANA's Common Stock is traded on
the Electronic Bulletin Board (OTC) and has experienced limited liquidity
and may become highly price sensitive and volatile in the future. There can
be no assurance that a meaningful trading market for AMERICANA's Common
Stock will be established or if established if it can be maintained for any
significant period.
9. Possible Rule 144 Stock Sales. As of December 31, 1999, AMERICANA had
3,818,000 shares of AMERICANA'S outstanding common stock as "restricted
securities" which may be sold only in compliance with Rule 144 adopted
under the Securities Act of 1933, as amended, or other applicable
exemptions from registration. Rule 144 provides that persons classified or
affiliates, 5% or more shareholders, officers and directors, and statutory
underwriters holding restricted securities must wait a period of two years
and then may sell in a brokerage transaction, an amount not exceeding in
any three month period the greater of either (i) 1% of AMERICANA'S
outstanding common stock or (ii) the average weekly trading volume during a
period of four calendar weeks immediately proceeding any sale. Persons who
are not affiliates, 5% or more shareholders, officers and directors and
statutory underwriters must hold the stock for one year and are not subject
to the volume limitation. Possible or actual sales of AMERICANA's Common
Stock by present shareholders under Rule 144 may have a depressive effect
on the price of AMERICANA's Common Stock if any liquid trading market
develops.
10. Risks of Low Priced Stocks. Trading in AMERICANA's Common Stock is
limited. Consequently, a shareholder may find it more difficult to dispose
of, or to obtain accurate quotations as to the price of, AMERICANA's
securities. In the absence of a security being quoted on NASDAQ, or
AMERICANA having $2,000,000 in net tangible assets, trading in the Common
Stock is covered by Rule 3a51-1 promulgated under the Securities Exchange
Act of 1934 for non-NASDAQ and non-exchange listed securities.
Under such rules, broker/dealers who recommend such securities to persons
other than established customers and accredited investors (generally
institutions with assets in excess of $5,000,000 or individuals with net
worth in excess of $1,000,000 or an annual income exceeding $200,000 or
$300,000 jointly with their spouse) must make a special written suitability
determination for the purchaser and receive the purchaser's written
agreement to a transaction prior to sale. Securities are also exempt from
this rule if the market price is at lease $5.00 per share, or for warrants,
if the warrants have an exercise price of at least $5.00 per share. The
Securities Enforcement and Penny Stock Reform Act of 1990 requires
additional disclosure related to the market for penny stocks and for trades
in any stock defined as a penny stock.
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The Commission has recently adopted regulations under such Act, which
define a penny stock to be any NASDAQ, or non-NASDAQ equity security that
has a market price or exercise price of less than $5.00 per share and allow
for the enforcement against violators of the proposed rules.
In addition, unless exempt, the rules require the delivery, prior to any
transaction involving a penny stock, of a disclosure schedule prepared by
the Commission explaining important concepts involving a penny stock
market, the nature of such market terms used in such market, the
broker/dealer's duties to the customer a toll-free telephone number for
inquiries about the broker/dealer's disciplinary history, and the
customer's rights and remedies in case of fraud or abuse in the sale.
Disclosure also must be made about commissions payable to both the
broker/dealer and the registered representative current quotations for the
securities and if the broker/dealer is the sole market maker the
broker/dealer must disclose this fact and its control over the market.
Monthly statements must be sent disclosing recent price information for the
penny stock held in the account and information on the limited market in
penny stocks. While many NASDAQ stocks are covered by the proposed
definition of penny stock, transactions in NASDAQ stock are exempt from all
but the sole market-maker provision for (i) issuers who have $2,000,000 in
tangible assets ($5,000,000 if the issuer has not been in continuous
operation for three years), (ii) transactions in which the customer is an
institutional accredited investor and (iii) transactions that are not
recommended by the broker/dealer. In addition, transactions in a NASDAQ
security directly with the NASDAQ market maker for such securities are
subject only to the sole market-maker disclosure, and the disclosure with
regard to commissions to be paid to the broker/dealer and the registered
representatives.
Finally, all NASDAQ securities are exempt if NASDAQ raised its requirements
for continued listing so that any issuer with less than $2,000,000 in net
tangible assets or stockholder's equity would be subject to delisting.
These criteria are more stringent than the proposed increase in NASDAQ's
maintenance requirement. AMERICANA's securities are subject to the above
rules on penny stocks and the market liquidity for AMERICANA's securities
could be severely affected by limiting the ability of broker/dealers to
sell AMERICANA's securities.
11. Competition. AMERICANA is engaged in a series of business activities,
which are characterized, by intense competition, rapid technological change
and state of the art marketing and advertising strategies. Many of
AMERICANA's existing and potential competitors have substantially greater
financial, research and development, marketing and production resources
than those of AMERICANA and may be better equipped than AMERICANA to
develop, manufacture and market competitive e-commerce, media and
publishing products. These companies may develop and introduce products and
services competitive with, superior to, or less costly than those of
AMERICANA, thereby rendering some of AMERICANA's technologies and products
and services under development less competitive or obsolete.
BUSINESS OF AMERICANA PUBLISHING, INC.
AMERICANA has developed an integrated multimedia strategy. This strategy
incorporates the roll-up or acquisition of various interrelated publishing
enterprises; the introduction of a host of independent websites that sell
various published products and services as the primary point of sales while
exploiting a drop shipment/fulfillment strategy, and providing a series of
services to the publishing and media industries through the newly acquired
assets as a result of its roll up strategy.
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The roll-up strategy allows AMERICANA through acquisition to grow both the
balance sheet and increase profit, due to economic efficiencies of combining
small companies into a larger company, as well as provide an array of much
needed services to small and medium sized book publishers. These services range
from audio book products, e-book development, printing, bookbinding sales and
marketing and e-commerce sales and distribution.
Website development focuses on combining the name AMERICANA with a product name
such as books. This branding makes the URL self explanatory to e-commerce
customers. Each product name will represent an independent website. AMERICANA
owns a number of URL's. As an example, AMERICANA owns americanasongs.com,
americanatextbooks.com, americanaartmart.com, americanavideo.com,
americanasoftware.com, americanaaudio.com, americanabroadcast.com and
amercianawarehouse.com. The web customer will be able to access the product
catalogue by use of the specific URL. These individual websites will have links
to other AMERICANA websites thus allowing the e-commerce customer to be
cross-marketed to these complementary sites. Each site proposes to emphasize
simplicity of navigation while exploiting the cost cutting drop
shipment/fulfillment strategy. Since the warehousing and fulfillment facilities
already exist, AMERICANA websites coordinates the shipment of the product
directly to the customer. By acting as an e-commerce conduit, AMERICANA speeds
the delivery, reduces operating expenses, which can be passed along to the
customer and remain price competitive with the competition while avoiding costly
real estate and infrastructure investments that do not yield high returns to
investors.
Ultimately, AMERICANA will set up americanawarehouse.com, which will link all
the independent websites together under an e-commerce shopping mall site.
Therefore, the web customer can be cross-marketed from site to site or from the
americanawarehouse.com umbrella site. This multi website strategy allows
AMERICANA to increase its brand name awareness while expanding its Internet
search engine registration frequency.
Overall, the integrated plan allows for AMERICANA to generate sales and balance
sheet growth from a multitude of websites, related services, direct sales and
the roll-up strategy. Therefore, AMERICANA can mitigate some of its reliance on
a single source revenue and balance sheet expansion.
E-COMMERCE INDUSTRY BACKGROUND
There are two large web-based book and media product e-commerce companies. They
are amazon.com and BarnesandNoble.com. These two e-commerce companies comprise
the majority of Internet book, music and various other related media product
sales. This is a relatively new industry and the precise percentage of total
Internet sales in these product categories is or cannot be determined
accurately. However, these two companies combined clearly dominate this segment
of E-commerce. These companies have substantially more capital available for
marketing and advertising and are more highly developed with respect to consumer
name identification. These two competitors have established themselves in the
E-commerce marketplace over the past four years. Price of books music and
various other related media products have been the main or primary thrust of the
competition between amazon.com and BarnesandNoble.com. The quantity of books and
availability of various products or in inventory and quick delivery of products
to customers has not been emphasized. Further, the design of these competitor
media seller websites emphasizes the sale of the top product sellers. Therefore,
the consumer has difficulty in utilizing these website search engines to easily
locate the hundreds of other published products listed in each category.
americanabooks.com has eliminated this discriminatory search engine feature
through the development of its own INTELLISEARCH ENGINE and allow for easy
access to all book titles in each category and the same operating system for
americanasongs.com site as well.
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UNIQUE STRATEGIES AND WEBSITE DEVELOPMENT
americanabooks.com focuses on simplifying the book and media product delivery
process by having the publisher drop ship the products to the consumer. The
current americanabooks.com bookseller agreement requires a publisher to drop
ship their product upon receipt of an americanabooks.com order.
americanabooks.com does not intend to warehouse books or other published
products such as the other website booksellers currently do. Should a publisher
or suppliers be unable to fulfill americanabooks.com orders, as the agreement
requires then americanabooks.com may not choose to do business with them. This
procedure avoids having the book shipped from the publisher to
americanabooks.com at the publishers expense and then shipped from
americanabooks.com central warehouse to the consumer. americanabooks.com,
currently at its websites, once the order is made by the customer, faxes or
e-mails a preprinted shipping label with the customers shipping information and
book title(s) or product information. The publisher then receives this
preprinted label, fills the order and ships the order directly to the customer
at the customer's expense. (When ordering, the customer pays for shipping and
handling.) The publisher is being able to lower shipping expenses.
americanabooks.com, therefore, does not incur substantial overhead associated
with fulfillment costs such as warehouse space, labor, inventory handling and
carrying costs. This process also reduces time taken to ship products to the
customer. The publisher by virtue of the publisher agreement is obligated to
fill orders within forty-eight hours or two business days and report available
inventory twice per month. The website software, is designed so that the
customer will not be able to confirm an order of a book(s) if they are not
readily available. The website system is designed to notify the customer that
they will receive a message by e-mail when the book is available for purchase.
This customer ordering feature reduces the customer waiting time for orders and
or left to wonder when an order may arrive.
Management feels that the website design, the order fulfillment and drop ship
features are competitive advantages and unique. Management has been unable to
identify any of these features in the amazon.com and BarnesandNoble.com websites
or other bookseller and media seller websites proposing to offer these order
fulfillment components.
MORE MONEY FOR YOUR BOOKS AND OTHER STRATEGIC ADVANTAGES
The standard discount is 45%. Americana proposes to pay publishers 5% more than
the two major competitors. The reason for this incentive is to attract
publishers to enter complete book information onto the website. This maybe
subject to change if market conditions warrant.
Price Program 1, Cover Price: Americana pays publisher 60% of title when
title is sold for cover price. No discounts apply. Digital Dollars and
Free Books incentives do apply to Customer purchase of these titles.
Americana will also pay 60% if Digital Dollars and other discount
programs do not exceed 20% off cover price.
PROGRAMS TO COMPETE ON PRICE WITH OTHER ONLINE BOOKSELLERS
Price Program 2, Standard Discounts and Bidding: Americana pays Publisher
40% of cover price for each title in this program. Americana
establishes price in AMERICANA book catalogue for a title. AMERICANA
's exclusive "Bid on Books" feature enables the customer to make a bid
on the book. Bid option only appears if customer exits book page
without adding title to shopping cart. A bid floor will be established
for each title to prevent underselling by the competition. The
rationale for bidding is to prevent a customer from escaping to
another Web bookseller for a better price. Digital dollars still apply
at pre-specified price breaks. AMERICANA reserves the right to sell
any title at any price.
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Price Program 3, Books by the Lb.: Publisher designates slow-selling
backlist titles. These titles are literally sold "by the pound" from a
special catalogue page at americanabooks.com. Price per pound is
determined by the Publisher. Publisher must provide weight of all
Publishers' books listed in Books by the Lb. catalogue. Books by the
Lb. titles may also be eligible for Free Book program (see below).
Price Program 4, Free Book: Customer receives a free book when he/she
purchases from AMERICANA more than $65 (actual sale) in books from
Publisher's titles. This program is offered as an incentive to
encourage Customer to buy multiple titles from tne Publisher.
Publisher is responsible for identifying books for Free Book program
on Book Profile page. Books identified by Publisher for Free Book
program are to be considered promotional expense by Publisher. These
titles may also be listed in Books by the Lb.
Digital Dollars: Digital Dollars are a customer incentive supported by
AMERICANA, not the Publisher. Customers accrue $2 Digital Dollars upon
purchasing $30 in books, $4 for $50 in books, and so forth. The
customer can carry over Digital Dollars from one purchase to the next,
but they expire in 30 days. Digital Dollars are not applicable to
Books by the Free Book program. To obtain Digital Dollars, Customer
must complete a demographic survey.
Price Program 5: Hot Sellers. Hot sellers will be featured in special
promotions by AMERICANA. This program is designed to penetrate the
market with new releases by combining a shared, deep discount by
Publisher and AMERICANA with featured presentation. AMERICANA will
purchase from the publisher those books meeting specified sales
criteria (high volume sellers). Publisher sells books to AMERICANA for
35% of cover price. AMERICANA offers Customer automatic 50% off cover
price. Digital Dollars cannot be applied to purchasing a Hot Seller.
AMERICANA guarantees no books will be returned to publisher. AMERICANA
can in any manner dispose, sell, or discount any books it purchases
from Publisher.
All of the ordering and operating features currently available on the
americanabooks.com website will be made available on the americanasongs.com
website. The americanasongs.com website will allow customers to order sheet
music by the song or by the book. In addition, to purchasing published music,
the web customer will be able to purchase rare music or music up loaded from
independent record labels, producers and artists by the song or mix and match
various song selections together. The web customer may then either download this
music selection(s) directly to their computer or Americana will produce and ship
their customized CD to the customer. Further, if the music is available from an
independent record label, producer or artist on CD, then americanasongs.com can
sell that specific CD product available to the web customer as well. The same
requirements from the supplier of the CD such as drop shipment/fulfillment and
availability reporting of the product will be the same as the americanabooks.com
site.
The americanasongs.com site competes with other music sites such as MP3, CD Now,
as well as, the major competitors previously mentioned. The unique difference is
that no one music site incorporates all the download, drop shipment, rare music,
sheet music, customized CD and single song purchase features all in one.
Management feels this is unique and presents a significant developmental
advantage over the competition.
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AMERICANA is currently promoting these websites through Internet search engine
registration, e-mail blasts, print media, and an aggressive public relations
campaign and through advertising in the AMERICANA CORPORATE FINANCE REPORTER.
The advertising thus far has been limited, however, the americanabooks.com site
is seeing sales from the sale of books and through fees generated from the
ELECTRONICAGENT. This first of its kind feature allows authors to submit an
excerpt and synopsis of an unpublished book for consideration for publishing by
AMERICANA as from its family of publishers participating in the
americanabooks.com website. AMERICANA charges the author $25.00 for these
submissions. The americanasongs.com website is now accepting music uploads from
independent record labels, producers and artists. This participation from these
music sources is being produced by a direct mail, print ad and telemarketing
campaign. The americanasongs.com website has two unique features similar to the
ELECTRONICAGENT. They are STARMAKER and RECORDMAKER. These features allow an
artist who does not have a record label to have their music considered for
recording, producing and publishing by AMERICANA. AMERICANA will allow the
artist to upload their music to the site and AMERICANA professionals will listen
and RATE these submissions in the same manner as is same in the ELECTRONICAGENT
process. The americanasongs.com website is scheduled to open on April 1, 2000.
DEVELOPMENT OF ADDITIONAL WEBSITES
AMERICANA is currently developing the americanatextbooks.com website. This
website will sell college textbooks and other related media products to college
students. This website will compete with varsitybooks.com and effollett.com. The
americanatextbooks.com will differ in many respects from the competition. The
site will offer as of yet an undetermined standard discount, unique customer
account and book credit features along with a host of free give a way items.
The americanatextbook.com site will also have streaming broadcasted music, game
links and prizes awarded for frequent site visitation and purchases. The
americanatextbooks.com website design, currently under development, emphasizes
simplicity of navigation while tailoring the graphics and operating features
specifically to the college student demographic.
The site will allow users to set up a password customer account that is
connected to a specific personal credit card. The customer can purchase
textbooks and receive credit on book returns at the end of use. AMERICANA will
then have the customer ship the book to a reseller who will supply the used book
to AMERICANA customers who care to purchase the used book through the
americanatextbooks.com site. Drop shipment/fulfillment will be handled in the
same fashion as on other AMERICANA websites. The customer will in some cases be
able to purchase used books at a much lower cost.
This site will also sell professional books for lawyers, accountants, doctors
and other professionals. The primary focus will be to get the site fully
functional by the summer of 2000 for beta testing and fully functional for use
by college students in the fall of 2000.
AMERICANA intends to introduce the following complementary websites over the
next 24 months; americanaartmart.com, americanasoftware.com, americanavideo.com,
americanaelectonics.com and americanawarehouse.com. These sites as previously
described will work in conjunction with one another to cross-market the customer
and increase search engine registration frequency and brand name awareness of
AMERICANA. Ultimately, the americanawarehouse.com site will act as a centralized
digital shopping mall with each of the other websites linked or housed under
this centralized site. Americana owns scores of other URL's in order to protect
it's primary website development in progress.
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AMERICANA CORPORATE FINANCE REPORTER -Unique Bridge of Information on the
Internet Highway Gathering Tolls in Both Directions
The AMERICANA CORPORATE FINANCE REPORTER connects both the corporate finance
industry to American enterprise and vice versa. That is why this publication is
a "unique bridge of information on the internet highway gathering tolls in both
directions."
The AMERICANA CORPORATE FINANCE REPORTER regularly discusses issues affecting
the availability of credit and capital, from whom it is available, and proper
application of various financing mechanisms. In other words, it emphasizes the
"how" of capital formation while directing readers to the "who." As a result of
the publication, business executives of all disciplines now have access to
important real-time information that can affect decisions of expansion
financing, merger and acquisition, refinancing, or general capitalization of a
going concern. The AMERICANA CORPORATE FINANCE REPORTER is a vital resource for
executives who are directly involved and regularly affected by the rapidly
expanding and diverse corporate finance industry. Subjects covered are:
* Asset-based lending
* Long-term financing
* Working capital financing
* Economic conditions and factors affecting commercial financing
* New methods in financial statement presentation
* Legal issues affecting commercial finance
* Dynamic structural techniques used to finance business
* Government regulations affecting the commercial finance industry
* New financing sources
* New financing products
* The cost of money
* Mergers and acquisitions
* Movers and shakers in the commercial finance industry
* Bankruptcy as a financing tool
* General management concepts that improve financing efficiencies
Demographic Development
During the formative months following the inception of AMERICANA, the process of
developing a demographic profile for the AMERICANA CORPORATE FINANCE REPORTER
encompassed an informal survey conducted by Americana through telephone and
direct mail reaching over 1,000 corporate finance industry professionals and
business owners attempting to identify the needs of the corporate finance
industry and American enterprise at large. The survey ascertained the needs for
information and access by each of these demographic segments from the other. The
informal survey concluded that businesses under $50 million in annual sales
wanted access to sources and specific methods of finance. Alternatively, the
corporate finance industry desired a cost-effective medium to reach American
enterprise as previously profiled.
A demographic profile was developed as a result of the aforementioned survey.
The profile is as follows:
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Age 45 years
Gender 75% male 25% female
Education 85% College Graduate
47% Post Graduate
Income $138,000 average household
$600,000 average net worth
Position 75% Top/Executive Management
35% CEO's
64% Partners
Readers per Copy 3.08 x
The following represents specific industry and professional readership:
* CEOs, CFOs, COOs of private and public companies ranging in size
between $1 million and $50 million in annual sales.
* Entrepreneurs and managers of private and public companies ranging in
size between $250,000 and $25 million in annual sales.
* Brokers of securities, loans, and real estate.
* Bankers and alternative lending professionals.
* Lawyers specializing in bankruptcy, transactional, real estate,
general corporate, business litigation, banking, tax, and contract
law.
* Business and finance consultant specialists that have developed a
practice learning toward commercial clientele.
* Venture capital professionals who focus on business development
investments.
* Investment bankers in all disciplines of securities, loans, and real
estate.
* Sophisticated investors with a net worth greater than $5 million.
Current circulation has been developed from scores of different databases that
have been researched and purchased over the past five years. These databases are
analyzed and then specific profile information such as annual sales, number of
employees, type of enterprise, etc. is applied. From this analysis, specific
listings are mined and extracted. This data mining process has been a very
dynamic and useful tool for AMERICANA. The AMERICANA CORPORATE FINANCE REPORTER
purchased several databases. When the databases were purchased they were
purchased with respect to only acquiring names that meet the AMERICANA CORPORATE
FINANCE REPORTER demographic profile. This process of purchasing specific names
that meet specific demographic profiles is defined, as a term of art is "data
mining". Currently, the circulation database consists of over 100,000 listings
and is updated from over 20 master database resources containing over 10,000,000
individual listings on a monthly basis.
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The current circulation reaches across the United States, Mexico, and Canada
with high concentration of distribution in major metropolitan cities. This type
of geographic and demographic distribution is considered in the publishing
industry to be controlled circulation.
Circulation Expansion
Controlled circulation development and data mining will continue in the same
manner as the primary database was developed. The goal is to reach controlled
circulation of 250,000. Contained development of paid circulation will be
accomplished through outsourcing circulation sales. More specifically,
multi-copy subscription sales will be emphasized. There are scores of
circulation sales companies in the U.S. and Canada. The subscription contractor
is given specific guidelines by Americana to sell multi unit subscriptions.
Typically large entities such as banks need more than one copy of a single
magazine issue. Therefore entities where there are large numbers of employees or
multiple locations or both are the target of this type of subscription sales.
Advertising Sales
The large number of listings in the existing database under the corporate
finance category are the most logical prospects for advertising sales. It is
rare that a publication can match its demographic to ad sales development. The
AMERICANA CORPORATE FINANCE REPORTER has that unique feature. As the integrated
publishing plan suggests, these financing resources want a cost-effective medium
that can reach businesses matching the AMERICANA CORPORATE FINANCE REPORTER
reader demographic. Ad sales can be generated from advertising in each AMERICANA
CORPORATE FINANCE REPORTER issue. The AMERICANA demographic includes 20,000
finance and banking organizations. These leads can then be turned over to the ad
sales division. Also, direct mail can be utilized to solicit ad sales from this
demographic group. AMERICANA has successfully sold advertising approximating
over $22,000 in the first three issues of the AMERICANA CORPORATE FINANCE
REPORTER. AMERICANA has developed a superior-quality media sales kit that it
incorporates into its currents sales activities. These rates have been sold at
the published rates to advertisers with the exception of B. H. Capital Limited
and North American Loan Brokers who have paid approximately half of the
advertising rates.
On the other side of the demographic, public companies may desire to advertise
completion of offerings, investor relations announcements, improvement of stock
trading, pricing, and/or general tombstone advertisements. Part of the AMERICANA
demographic includes over 12,000 public companies. This segment is a
well-developed prospecting list for a professional ad sales staff.
The term for payment is 50% of the total cost of the ad down and the balance due
when the issue is printed. For multi-issue advertising contracts, 25% of the
total contract is required upon signature of the contract and full payment for
each ad when each issue is printed.
The other prospective advertisers are:
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* Accountants * Business software companies
* Long-distance providers * Telephone equipment companies
* Lawyers * Marketing companies
* Financial printers Office equipment * Bookkeeping companies
suppliers * Consultants
* Banks * Office furniture companies
* Brokerage houses * Computer companies
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* Leasing companies * Internet suppliers
* Non-regulated lenders * Business colleges
* Real estate companies * Seminar providers
* Hotels/airlines * Business book publishers
* Car rental companies * Temporary personnel services
* Cellular phone companies * Travel agencies
* Pager companies * Commercial finance associations
* Overnight mail services * Appraisers
* Courier services * Convention planners
* United State Post Office
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The AMERICANA CORPORATE FINANCE REPORTER will range from 16-32 pages in length.
Advertising will account for 40% to 65% of the printed space, depending upon the
level reached by ad sales.
Other considerations are the quality of the advertisers. No advertising will be
accepted if the company or individual is financially impaired with a poor credit
rating and a negative reputation within the industry. Only one advertiser of
each type will advertise in each issue such as one loan broker will be allowed
to advertise; North American Loan Brokers of Houston, Texas. The one merchant
banking and corporate finance consulting firm will be B. H. Capital Limited.
These are currently the only advertising limitations.
Publication Specifics
The AMERICANA CORPORATE FINANCE REPORTER regularly features specific sections in
each magazine. These magazine sections are formatted consistently from issue to
issue. The subject matter is consistent and specific to the heading. Each issue
emphasizes these subject formats and topics.
The sections are:
Publishers Column This lead column is written by George Lovato, Jr. Advice,
opinions and observations will focus on current topics affecting finance for
American enterprise. Topics have included banking and finance trends, tips on
adding value to a business, and management systems that enhance a business.
Credit and Capital Index
Major Concern: where can a business go to identify the cost of money besides the
prime rate? Yet, the prime rate can be a misleading cost of commercial funds.
Depending on the type of financing, the current rate may vary. Our Credit and
Capital Index listed on the front page publishes cost of funds depending upon
the type of financing. An average cost of money from five different financing
sources will be displayed. From time to time, the lowest rate from a specific
source, such as leasing, is presented featuring the source. The finance source
pays for this front-page advantage.
Book Review
This section is written by the renowned and well-published Dr. David Poling. In
each issue, business book reviews are emphasized. In addition, a small
percentage of review books are of the fiction/non-fiction entertainment
category. Further, the AMERICANA website will allow subscribers to directly
purchase books reviewed here every issue.
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Grapevine
This category section emphasizes news releases and personality profiles that are
relevant to the corporate finance industry. Recently completed financing,
professional personnel changes in the finance industry, as well as new finance
products, are highlighted.
POSSIBLE ACQUISITIONS AND MERGER TRANSACTIONS
As part of integrated publishing and e-commerce strategy, AMERICANA proposes to
acquire other publishers, printing, book binding enterprises. AMERICANA's
management is currently in general discussion with various enterprises in these
fields. However, no letter(s) of intent are signed at this time.
EMPLOYEES AND FACALITIES
AMERICANA currently employs eight full time employees. In addition, there are
four independent contractors that are responsible for website programming and
development and various board members and advisors are active in various aspects
of AMERICANA'S operation. Currently, the Chairman of AMERICANA, AMERICANA leases
2,000 square feet of office space to AMERICANA at a cost of $3,000 per month,
which allows for use of all office equipment, word processing, direct mail
processing, telephone equipment, computers and computer network and use of
certain database processing software, which is owned by the Chairman of
AMERICANA. This full service lease allows for AMERICANA to reduce capital
expenditures dramatically. Mr. White a director and chief financial officer
receives $3,000 per month and provides 80 hours of services to perform his
duties and responsibilities. Mr. Ruther is compensated $2,500 per month for a
total of 120 hours various services and consulting provided concerning audio
book publishing and sales development. Additionally, 3,000 square feet of office
space is currently being built out in accordance with AMERICANA lease
specifications. This additional office space will allow for space to house the
expanded website development, CD productions and expanded marketing efforts. The
terms of this lease allow for AMERICANA to pay rent on an annual escalating
basis as follows: The first years monthly lease payments shall be $2,000/month
or $24,000 annually; The second years monthly lease payments shall be
$3,000/month or $36,000 annually; The third years monthly lease payments shall
be $4,000/month or $48,000; The fourth year monthly lease payments shall be
$5,000/month or $60,000 annually, payable in lawful money of the United States
with the first two years lease payments paid in advance upon execution of the
lease and on a per month basis beginning on January 5, 2002
This lease allows for AMERICANA to pay its own utilities in addition to the
monthly rent. The first two years of this lease have been prepaid in order to
obtain a lower per square foot rate. The building is owned by a partnership
comprised of certain board members. This lease contains cost and leasehold
improvement features that are commercially favorable to AMERICANA, which
AMERICANA could not obtain otherwise from other commercial lease sources. The
advance lease payment was used to make lease hold improvements required under
the lease.
Item 2. DESCRIPTION OF PROPERTY
The Company's principal offices are located at 303 San Mateo NE, Suite 104A,
Albuquerque, NM 87108. This leased location encompasses approximately 2,000
square feet. The Lease is between B. H. Capital Limited and the Company at a
cost of $3,000 per month and also provides complete use of B. H. Capital
Limited's up-to-date computing, data management, printing, duplicating and
direct mail processing equipment. This lease/retainer agreement began January 1,
1999 and is for a term of three years. The Company is expanding its operations
and has identified a location near its current offices, where it has leased
additional office and new warehouse space. The Company owns certain assets that
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were contributed to the Company by Mr. George Lovato, Jr. in exchange for stock.
(See Exhibit attached herewith) Americana has identified a building near its
current offices and leasehold improvements are currently underway. This office
space is currently under renovation and specific terms of the lease have been
negotiated. (See Employees and Facilities for discussion of this lease.)
Item 3. LEGAL PROCEEDINGS
There are no material lawsuits filed against Americana as of December 31, 1999.
AMERICANA expended $38,366.79 in legal, marketing, analysis and, general
overhead in an attempt to complete the purchase transaction through Sunset
Productions, Inc. bankruptcy proceedings. AMERICANA on January 14, 2000 withdrew
its offer as a petition plan proponent due to protracted shareholder disputes
between the Sunset Productions, Inc shareholders. AMERICANA is contemplating a
lawsuit against a Sunset Productions, Inc. shareholder (Kurt Mueller) for breach
of contract and monetary damages as a result of his tortuous actions. Mr.
Mueller's legal counsel has threatened a lawsuit against Americana of unknown
causes as of December 31, 1999.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters put to the security holders, for a vote, during the last
quarter of 1999.
Part II
Item 5. MARKET FOR AMERICANA COMMON STOCK
AND RELATED SHAREHOLDER MATTERS
AMERICANA's common stock (OTCBB:APBH) commenced trading on November 8, 1999. The
following tables represent the closing sales as reported by the exchange.
1999
Third Quarter HIGH CURRENT LOW
11-19-99 2 1/16
11-15-99 4 1/8
As of December 31, 199 3 1/2
[ GRAPHIC OMITTED ]
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There are approximately 44 shareholders of common stock as of December 31, 1999.
The Company has not paid any dividends in the past and currently has no plans to
pay dividends in the foreseeable future.
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
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
competitive pressures, inflation, trade restrictions, interest rate fluctuations
and other capital market conditions, weather, future and options trading of
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 operated,
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.
1997 vs. 1998
The revenue earned in the first two years is low due to the fact that the
Company is in a development stage mode. The printing cost dropped significantly
from 1997 to 1998 due to the use of a less expensive printing method and the use
of less expensive paper of the AMERICANA CORPORATE FINANCE REPORTER. The Company
did not own any depreciable assets in 1997 but did purchase assets in 1998,
hence the increase in depreciation expense in 1998 over 1997. Other "operating
expense" of $39,311 and $32,324 for 1998 and 1997 respectfully is comprised of
miscellaneous expense paid by George Lovato for the development of the database
and circulation list and other business development expenses. Compensation
expense and outside consulting services for 1998 primarily represent non-cash
items relating to the issuance of stock options,
The fiscal year in 1999 includes compensation expense of $ 800,288. This
represents $539,009 of the fair market value of stock options issued to the five
directors, plus $169,000 of forfeited compensation by George Lovato, Jr. Of the
$751,247 in consulting fees, 727,501 represents the fair market value of stock
options issued to non-employees. The increase in management fees of $33,000 is
the contractual obligation of $3,000 per month owed to BHCL, which began
February 1, 1999. The increase of $46,694 in professional fees are fees paid to
accountants and attorneys for the audit of Americana and legal advice of the
public registration. 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.
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Americana Publishing 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.
The Company prepared adequately for the Y2K and has not experienced any
difficulties at this time; all electronic and digital systems are Y2K compliant.
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, 1999. 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. George
Lovato, Jr. contributed to Americana prepaid advertising worth $195,000 in 1999.
The board of directors may elect in the year 2000 to issue common stock to Mr.
Lovato in exchange for this asset contribution.
For the period of inception to December 31, 1998, AMERICANA lost $485,756 from
operations. Of this amount, $7,396 was depreciation expense, a non-cash expense.
The majority of the loss came from the handling of certain stock transactions
between Americana, George Lovato, Jr., other directors and consultants. These
transactions resulted in an additional $380,613 of non-cash expense reflected on
the income statement.
For the period ended December 31, 1999, the operating loss was $1,750,629 of
which $18,766 consisted of depreciation expense. A majority of the loss resulted
from the treatment of stock options made available to the five directors and
certain outside consultants, which resulted in a non-cash expense of $1,206,676
reflected on the income statement. In addition, George Lovato, Jr. forfeited
$169,000 of compensation due him based on the Employment Agreement dated January
1, 1999. Equipment in the amount of $62,035 was purchased, primarily computers,
software and office equipment. $36,713 was expended on the development of the
website. Taxes payable increased by $4,197. In addition, 465,000 shares of
common stock were sold at $.50 per share in February, 1999 for a total of
$232,500, resulting in a cash balance of $201,431 on March 31, 1999 and 908,250
shares were sold on November 5, 1999 under 4(2) and infused $700,000 resulting
in a cash balance of $507,718 at December 31, 1999.
The Company raised and utilized through November 30, 1999, the maximum of
approximately $232,500 to subsidize past operations through a private placement
pursuant to Rule 504 of regulation D, of the Securities Act of 1933, as amended,
exemption. It also raised $700,000 in November of 1999 to supplement future
operations under Section 4(2) pursuant to the Securities Act of 1933, as
amended. These funds are to be used for:
1) Circulation Development--5% of proceeds--AMERICANA proposes to expand
circulation from 100,000 to 500,000 by the year 2001. More specifically
AMERICANA will purchase and mine more databases while focusing on selling
multi-unit subscriptions. This will involve printing, postage, and
telemarketing expenses.
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2) Publication Development--5% of proceeds--The AMERICANA CORPORATE FINANCE
REPORTER will be expanded from 16 pages to 32 pages over the next 3 years
and convert from a quarterly publication to a monthly. The AMERICANA
CORPORATE FINANCE REPORTER will require editorial enhancement and design
improvements. A certain amount of editorial research will be required to
meet the continuing needs of the readership. These expenses will include
labor, direct mail, telemarketing, and editorial subcontract fees.
3) Publishing Company Acquisition Development--10% of proceeds--Various
professionals, such as lawyers and accountants, will be required to
examine, analyze and execute the proposed acquisition. These professional
fees will be allocated from these proceeds.
4) Continued Website Development and Marketing-45% of proceeds will be used to
develop and market the existing and new websites.
5) Working Capital--25% of proceeds--In order to operate the publishing
enterprise certain expenses will be incurred. To support these expenses in
addition to funds derived from revenues, these proceeds will be utilized
for general and administrative and working capital costs.
6) Cost of Offering an Investor Relations Program--5% of proceeds--Americana
proposes to manage its own investor relations program on an ongoing basis.
The Company does not intend to hire an investor relations firm and no
negotiations for such has taken place. AMERICANA will incur various
expenses such as professional fees, printing, postage, telemarketing,
federal and state offering registration fees, travel, entertainment, and
underwriters' fees and commissions.
Further the company intends to employ an investor relations program. This
will complement the stock trading activities after the company has
completed the public registration process.
7) Miscellaneous Expenses--5% of proceeds--The aforementioned expenses may
vary in type and size.
The Company does not anticipate the need for any additional financing until
after the end of this fiscal year for this operation. However, the Company now
has a financing commitment from Altres Financial for a factoring working capital
line of credit with a minimum of $250,000 availability. The Company currently is
considering the formation of new capital from a private placement as a secondary
public offering. The Company is in discussion with various underwriters but no
letter of intent has been executed. 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 or seek commercial credit in the form of a
long-term working capital loan. 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 liquiditable asset.
The Company does not anticipate the need for any additional financing until
after December 31, 2000, the end of its fiscal year.
The Company will require future financing in various forms. The Company proposes
to finance working capital timing differences through its current factoring line
of credit. Capital improvements should be financed by intermediate-term debt.
All future expansion and acquisition should be financed by a secondary equity
offering. The Company is not in possession of any letters or a letter of intent
from a capable underwriter at this time.
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The Company is somewhat dependent upon the successful active stock trading
activity on NASD's Bulletin Board (OTCBB:APBH). The Company proposes to utilize
its common stock to acquire other sponsored book publishing companies and other
business enterprises as previously described. 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. If the stock is not actively
traded, 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 in the future or that Americana will be able to
find financing.
The Company's assets equal $30,255 and $815,440 with equity of $27,666 and
$811,546 as of December 31, 1998 and 1999 respectively. The only liability
consisted of a deferred tax payable of $2,589 as of December 31, 1998 and an
accrued liability $3,510 as of December 31, 1999. Therefore, the asset to equity
ratio is basically 1:1 for both periods. The Company's total revenues since
inception to December 31, 1998 equals $13,819 and as of December 31, 1999,
$9,515. In 1999, the Company realized ad revenue of the AMERICANA CORPORATE
FINANCE REPORTER $8,000. However, AMERICANA projects $30,000 for the year 2000.
Capital Expenditures
The Company has expended $48,360 for computer equipment to handle the integrated
websites. Total expenditures equaled $33,731 for 1999. These websites are
designed to produce an additional source of revenue as a result of the digital
book catalogue and other product sales. The Company has retained the services of
various website developers and programmers to develop and administer the
websites at a cost of $36,713 over this 1999 fiscal year. The Company also added
additional office equipment approximating $16,263. The Company successfully
raised $235,000 through its recently completed private placement and $700,000
pursuant to Section 4(2) of the 1933 Securities Act, as amended. This capital
resource is the source of funds for the described expenditures.
As part of the integrated publishing concept, the Company intends to acquire a
book on cassette production company, state of the art digital recording studio,
a heat set web press, and a book binding company in order to lower overall
production costs of book reprint and conversion of book titles to audio books.
Acquisitions
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. Furthermore, the Company
intends to acquire a book-on-cassette production company, state of the art
digital recording studio, heat set web press company, and book binding company.
AMERICANA executed a letter of intent to purchase Sunset Productions, Inc. on
October 22, 1999. A principal of Sunset Productions, Inc. breached his
obligation to complete the purchase transaction and thus this transaction was
not completed. Sunset Productions, Inc. later filed a Chapter 11 Bankruptcy
Petition. AMERICANA offered to purchase Sunset Productions, Inc. as a
reorganization plan proponent.
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These various related publishing and service enterprises will vertically
integrate production and control quality of audio conversion and book re-prints
as well as consolidate profitability. The Company proposes the following method
and approach:
Accounting Aspects Of Business Combinations
Business combination occurs when a company and one or more businesses are
brought together into one accounting entity. These combinations are accounted
for under either the purchase or pooling of interest methods. As Americana
acquires the various companies it has targeted, a decision will have to be made
on a case-by-case basis as to which method is appropriate and in the best
interest of the shareholders.
Management is knowledgeable concerning the various tax consequences of
acquisitions and will strive at all times to ensure the interest of the
shareholders is best served.
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Item 7. FINANCIAL STATEMENTS
Independent Auditor's Report
To the Board of Directors
Americana Publishing, Inc.
(A Development Stage Company)
Albuquerque, New Mexico
We have audited the accompany balance sheet of Americana Publishing, Inc. as of
December 31, 1999 and 1998, and the related statements of income (loss), changes
in stockholder's equity and cash flows for the one year period ended December
31, 1999 and 1998 and the period April 17, 1997 (inception) through December 31,
1997. These statements are the responsibility of the Company's management. Our
responsibility is to express the opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Americana Publishing, Inc. as
of December 31, 1999 and 1998 and the results of its operations and cash flows
for the one year period ending December 31, 1999 and 1998 and the period April
17, 1997 (inception) through December 31, 1997 in conformity with generally
accepted accounting principles.
/s/ Blomstrom & Co., P.C.
Houston, TX
February 7, 2000
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Americana Publishing, Inc.
(A Development Stage Company)
Balance Sheet
December 31, 1999
ASSETS
Current Assets 1998 1999
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Cash $ 667 $ 308,376
Marketable Securities 199,370
Accounts Receivable 892
Prepaid -- 197,231
----------- -----------
Total Current Assets $ 667 $ 705,869
Property and Equipment
Audio Equipment 2,558
Database and Circulation List 18,411 23,881
Computer Equipment 14,629 48,360
Software 4,014
Furniture and Fixtures 3,944 20,207
Website Development 36,713
Less: Accumulated
depreciation and amortization (7,396) (26,162)
----------- -----------
Total Property and Equipment $ 29,588 $ 109,571
----------- -----------
TOTAL ASSETS $ 30,255 $ 815,440
=========== ===========
LIABILITIES AND STOCKHOLER'S EQUITY
Current Liabilities
Deferred Federal Income Taxes $ 2,589 $
Accounts Payable to Related Party
Accrued Liabilities -- 3,894
----------- -----------
Total Liabilities, All Current $ 2,589 $ 3,894
Stockholder's Equity
Preferred Stock 20,000,000 Shares
No Par Value, Authorized, None Issued
Common Stock 100,000,000 Shares Authorized
$.001 Par Value, 2,535,000, 4,283,000
Issued and Outstanding for 1998 & 1999 Respectively $ 2,535 $ 4,283
Paid-In Capital 510,887 3,043,648
Deficient Accumulated During the Development Stage (485,756) (2,236,385)
----------- -----------
27,666 811,546
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 30,255 $ 815,440
=========== ===========
The Accompanying Notes are an Integrated Part of these Financial Statements
23
<PAGE>
Americana Publishing, Inc.
(A Development Stage Company)
Statement of Income (Loss)
For the Periods
Inception Inception
April 17, 1997 to Year Ended Year Ended April 17, 1997 to
December 31, 1997 December 31, 1998 December 31, 1999 December 31, 1999
----------------- ----------------- ----------------- -----------------
Revenues
Publishing Fees $ 4,745 $ 9,074 $ 9,515 $ 23,334
Expenses
Compensation Expense 285,913 800,288 1,086,201
Outside Consulting Services 13,471 95,109 751,247 859,827
Printing 11,460 3,622 33,899 48,981
Postage & Freight 2,166 6,214 21,723 30,103
Depreciation 7,396 18,766 26,162
Management Fees 33,000 33,000
Professional Fees 46,694 46,694
Other Operating Expenses 32,324 39,311 59,897 131,532
----------- ----------- ----------- -----------
Total Expenses 59,421 437,565 1,765,514 2,262,500
Interest Income 2,781 2,781
Income (Loss) Before Income Taxes $ (54,676) $ (428,491) $(1,753,218) $(2,236,385)
Provisions for Income Taxes -- (2,589) 2,589 --
----------- ----------- ----------- -----------
Net Loss $ (54,676) $ (431,080) $(1,750,629) $(2,236,385)
=========== =========== =========== ===========
Basic and Diluted Loss Per Share $ (0.04) $ (0.33) $ (0.55) $ (1.08)
Weight Average Shares Outstanding 1,270,000 1,325,452 3,186,025 2,066,006
The Accompanying Notes are an Integrated Part of these Financial Statements
24
<PAGE>
Americana Publishing, Inc.
(A Development Stage Company)
Statement of Cash Flows
Inception Inception
April 17, 1997 to Year Ended Year Ended April 17, 1997 to
December 31, 1997 December 31, 1998 December 31, 1999 December 31, 1999
------------------ ----------------- ----------------- -----------------
Cash Flows From Operating Activities:
Net Loss $ (54,676) $ (431,080) $(1,750,629) $(2,236,385)
Adjustments to Reconcile Net Income (Loss)
To Net Cash Provided by Operating Activities
Depreciation 7,396 18,766 26,162
Capital Transactions 27,450 414,663 1,405,875 1,847,988
Increase in Receivables (892) (892)
Increase in Prepaid (2,231) (2,231)
Increase in Accounts Payable 22,163 3,894 26,057
Increase in Income Taxes Payable
-- 2,589 (2,589) --
----------- ----------- ----------- -----------
Total Adjustments 49,613 424,648 1,422,823 1,897,084
Net Cash Used by Operating Activities (5,063) (6,432) (327,806) (339,301)
Cash Flows From Financing Activities:
Proceeds From Sale of Common Stock 7,222 4,940 933,634 945,796
----------- ----------- ----------- -----------
Net Cash Provided by Financing Activities 7,222 4,940 933,634 1,140,796
Cash Flows From Investing Activities:
Purchase of Property and Equipment (98,749) (98,749)
Purchase of Marketable Securities -- -- (199,370) (199,370)
----------- ----------- ----------- -----------
Net Cash Used in Investing Activities -- -- (298,119) (298,119)
----------- ----------- ----------- -----------
Net Increase (Decrease) in Cash 2,159 (1,492) 307,709 308,376
Cash and Cash Equivalents at Beginning of Period -- 2,159 667 --
----------- ----------- ----------- -----------
Cash and Cash Equivalents at End of Period 2,159 667 308,376 308,376
=========== =========== =========== ===========
Supplemental Disclosures:
Interest Paid $ 0 $ 0 $ 0 $ 0
Taxes Paid $ 0 $ 0 $ 0 $ 0
Non-Cash Transaction
Contribution of property and equipment in $ 0 $ 36,984 $ 0 $ 36,984
exchange for common stock
Forgiveness of accounts payable in $ 0 $ 22,163 $ 0 $ 22,163
exchange for common stock
Contribution of advertising prepaids $ 0 $ 0 $ 195,000 $ 195,000
The Accompanying Notes are an Integrated Part of these Financial Statements
25
<PAGE>
Americana Publishing, Inc.
(A Development Stage Company)
Statement of Changes in Stockholder's Equity
For the Period April 17, 1997 (Inception)
Through December 31, 1999
Deficit Accumulated
Common Paid-In During the
Stock Capital Development Stage Total
----------------------------------------------------------------------
Stock Issued on May 1, 1997
1,000,000 Shares to Majority
Stockholder in Exchange for
$7,222 in Cash and Publishing
and Internet Distribution Expertise $ 1,000 $ 6,222 $ 0 $ 7,222
Stock Issued on May 1, 1997
270,000 Shares to Others in
Exchange for Services Rendered 270 1,680 1,950
Contributed Services 25,500 25,500
Deficit Accumulated During the
Period April 17, 1997 (inception)
through December 31, 1997 -- -- (54,676) (54,676)
----------- ----------- ----------- -----------
Balance December 31, 1997 $ 1,270 33,402 (54,676) (20,004)
=========== =========== =========== ===========
Stock Issued on December 15, 1998
1,000,000 Shares to Majority
Stockholder in Exchange for $4,940
in Cash, Forgiveness of Accounts
Payable Debt of $22,163,
Contribution of Property,
Equipment of $36,984 and Consulting Services 1,000 349,000 350,000
Stock Issued on December 15, 1998
265,000 Shares to Others in Exchange
for Services Rendered 265 92,485 92,750
Contributed Capital 36,000 36,000
Deficit Accumulated During the
Year Ended December 31, 1998 (431,080) (431,080)
----------- ----------- ----------- -----------
Balance December 31, 1998 $ 2,535 $ 510,887 $ (485,756) $ 27,666
=========== =========== =========== ===========
Stock Issued During February and March
1999 Through a Private Offering
Memorandum 465,000 Shares 465 232,035 232,500
Stock Issued During November
1999 Through a Private Offering
Memorandum 908,250 Shares 908 698,851 699,759
Stock Issued During November
1999 in exchange for services
Rendered 375,000 Shares 375 374,625 375,000
Deficit Accumulated During the (1,750,629) (1,750,629)
year ended December 31,1999
Stock Options 863,250 863,250
Capital Contribution -- 364,000 -- 364,000
----------- ----------- ----------- -----------
Balance December 31, 1999 $ 4,283 $ 3,043,648 $(2,236,385) $ 811,546
=========== =========== =========== ===========
The Accompanying Notes are an Integrated Part of these Financial Statements
26
</TABLE>
<PAGE>
Americana Publishing, Inc.
(A Development Stage Company)
Notes to Financial Statements
December 31, 1999
Note 1. Summary of Significant Accounting Policies Background and Nature
of Operations
Americana Publishing, Inc. (the Company) was organized as a Colorado corporation
on April 17, 1997 for the purpose of publishing books, audio books and
periodicals, and to utilize the Internet as its primary distribution channel to
prospective customers. Additionally the Company will utilize the latest
technology to download audio files directly to customers who desire to purchase
books and music and other audio materials immediately.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
short-term debt securities purchased with a maturity of three months or less to
be cash equivalents.
Property and Equipment
Property and equipment primarily consists of computer, furniture and equipment
and site development cost. A portion of the property and equipment were
contributed to the Company by the Company's chairman and majority stockholder in
exchange for common stock. This property and equipment is carried at the
contributors cost basis. Depreciation of property and equipment is provided
using the straight-line method for financial reporting purposes at rates bases
on their estimated useful lives. The estimated useful life for most property and
equipment is amortized over three years.
Revenue Recognition
Revenue from sales of services is recognized when the service is performed and
billable. Revenue from sales of services to related parties was approximately
50% 50% 95% and 84% for the period April 17, 1997 through December 31, 1997, the
one year period ending December 31, 1998 and 1999 and the period April 17, 1997
through December 31, 1999, respectively.
Income Taxes
Income taxes are provided for the tax effects of transactions reported in the
financial statements and consist of taxes currently due plus deferred taxes
related primarily to differences between the basis of property and equipment for
financial and income tax reporting. The deferred tax assets and liabilities
represent the future tax return consequences of those differences, which will
either be taxable or deductible when the assets and liabilities are recovered or
settled. Deferred taxes are also recognized for operating losses that are
available to offset future federal income taxes.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates. The most significant estimate made during
1999 was its valuation of the fair market value of non-monetary stock
transaction.
27
<PAGE>
Americana Publishing, Inc.
(A Development Stage Company)
Notes to Financial Statements
December 31, 1999
Note 2: Liquidity
The Company currently has insufficient revenue to meet forecasted operating
expenses for the next year. The Company's profitability and continued operation
are dependent upon significant assumptions, some of which are the ability of the
Company to acquire publishing companies and market products on a profitable
basis. There is no assurance that profitable operations will be achieved.
Subsequent to year-end, the Company did raise approximately $100,000 (refer to
note 6) to fund operations. Management believes cash available at December 31,
1999 along with the additional capital received subsequent to year end will be
adequate to fund operation for the next twelve months.
Note 3: Related Party Transactions
During the period April 17, 1997 (inception) through December 31, 1998, a
related party, B.H. Capital Limited (BHCL) which is a proprietorship of the
Company's chairman and majority stockholder, provided management, office space,
use of equipment and personnel to the Company. The estimated fair market value
of these services were recorded as an expense. Also refer to Note 1, Property
and Equipment regarding the contribution of property and equipment in exchange
for common stock.
In December 1998 the Company issued 1,000,000 shares to the Company's chairman
in exchange for approximately $64,087 of cash, property and equipment,
forgiveness of accounts payable and consulting services. The transaction was
recorded based on the estimated fair value of the Company's stock. In addition
640,000 shares were issued to other related parties in exchange for financial,
Internet and other consulting services performed for the Company. In addition,
in December 1999 the Company granted 375,000 shares of common stock to
Directors, employees and key consultants. These transactions were also recorded
at the estimated fair value of the Company's stock.
In January 2000 the Company entered into a four-year agreement with a
partnership comprised of certain board members to lease 3,000 square feet of
office space, which is currently being built out in accordance with the
Company's lease specifications. Annual lease payments will be $24,000, $36,000,
$48,000 and $60,000 for 2000, 2001, 2002 and 2003 respectively. The first two
years or lease payments were paid in advance.
Financial Consulting Agreement
On January 1, 1999, the Company entered into a non-cancelable Corporate
Financial Consulting Agreement with BHCL, a related party. The agreement calls
for the Company to pay BHCL a monthly fee of $3,000 for a period of five years
in consideration for BHCL providing general assistance in identifying
credit/capital resources as well as providing office, personnel and facilities
to the Company. In addition, the agreement calls for the Company to pay BHCL a
1% success fee for any gross amount of debt financing or net worth of any entity
merged or acquired on behalf of the Company by BHCL and a 1% renewal fee of the
amount of such financial arrangements for a period of five years. Management
believes that the monthly fee approximates the value of these services had the
Company obtained these services from an unaffiliated party. In addition, for the
year ended December 31, 1998 and for the periods April 17, 1997 (inception)
through December 31, 1997, management estimates that the value of Americana
Publishing, Inc. (A Development Stage Company) Notes to Financial Statements
December 31, 1999 services and facilities provided at no cost were $36,000 and
$25,500 respectively. The Company recognized these as expenses in their
respective period.
28
<PAGE>
Employment Agreement
On January 1, 1999, the Company entered into an employment agreement with its
chairman and majority stockholder. Under the terms of the one year agreement,
which shall be automatically be renewed for a period of three years provided
that either party has not elected to terminate the agreement as provided for
therein, the employee shall receive a salary of $250,000 per year or 5% of gross
revenue of the Company, whichever is greater. The Company may not terminate the
agreement for any reason as it relates to the employee's disability, illness or
incapacity. Should the employee die during the term of employment, the Company
shall pay the employee's estate $500,000 in fifty monthly installments of
$10,000. Subject to certain events, including the sale of substantially all of
the Company's assets to a single purchaser and bankruptcy, among others, the
Company may terminate the agreement upon 90 days written notice and pay the
employee $500,000 in twelve consecutive monthly installments. With cause, the
Company may terminate the agreement with twelve months written notice. During
the notice period, the employee shall be paid full compensation and, receive a
severance allowance of $250,000 in twelve consecutive monthly installments
beginning on the date of termination. Without cause, the employee may terminate
employment upon twelve months written notice to the Company. During that period
the employee may be required to perform his duties and will be paid the full
compensation described herein up to the termination date and shall receive a
severance allowance of $250,000 which shall be paid in twelve equal and
consecutive monthly installments beginning on the date of termination. Due to
the Company's limited liquidity, the employee has waived compensation of
$169,000 for the year ended December 31, 1999. This compensation was treated as
a capital contribution.
Note 4: Stock Purchase Options
On January 1, 1999, the Company granted to ten individuals, five of who are
directors, options to purchase a total of 1,950,000 shares of common stock for a
purchase option cost of $250 per individual. In addition, on December 1, 1999,
the Company granted to seven individuals including one director and one employee
options to purchase 705,000 shares of common stock. The purchase price for both
grants is $.10 per share if exercised on or before December 31, 1999, $.20 per
share if exercised on or before December 31, 2000 and, $.30 per share if
exercised on or before December 31, 2001.
For the options relating to Directors and employees, the Company applies APB
Opinion 25 and related interpretations in accounting for its stock option plan.
As a result of their plan, although no stock options were exercised, the Company
recognized $209,000 of compensation expense for the year ended December 31,
1999. Had compensation cost for the Company's purchase option plan been
determined based on the fair value at the grant date for such options consistent
with the method of Financial Accounting Standards Board 123 (FAS123), the
Company's net loss for the twelve months ended December 31, 1999 would have
increased by approximately $33,000. The effects of applying FAS 123 in this pro
forma disclosure are not indicative of future amounts. The fair value of each
option grant is estimated on the date of grant using a present value
calculation, risk free interest of 4.6%, no dividends and expected life of 3
years.
29
<PAGE>
Americana Publishing, Inc.
(A Development Stage Company)
Notes to Financial Statements
December 31, 1999
In the event of a merger, sale of the Company, a hostile take over attempt or
other sales of the Company's asset, each Director previously granted options
will have the option to purchase 300,000 additional shares for $1. The Company
recognized $863,250 of expense relating to options granted to non-employees or
directors.
Stock options available for future grant amounted to 2,655,000 shares at
December 31, 1999. Exercisable stock options amounted to 2,655,000 shares at
December 31, 1999.
Note 5: Earnings Per Share
Basic earnings per share are computed by dividing net loss available to common
stockholders by the weighted average number of common shares. Diluted earnings
per share are determined on the assumption that the outstanding stock options
have been converted using the average price for the quarter. Common stock
options have been excluded from the computation of diluted earnings per share as
in loss years it is anti-dilative.
Note 6: Income Taxes
The following is a reconciliation of the income tax provision computed by
applying the federal statutory income tax rate to net loss before income taxes.
<TABLE>
<CAPTION>
Inception Inception
April 17,1997 Year Ended Year Ended April 17, 1997
to December December 31 December 31, to December 31,
31,1997 1998 1999 1999
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Income Tax (Benefit) Computed
At the federal statutory rate of 35% $ (19,137) $(150,878) $(612,720) $(782,735)
Permanent Differences 9,608 158,157 481,703 649,468
Valuation Allowance 9,529 (4,690) 128,428 133,267
--------- --------- --------- ---------
Tax Expense $ 0 $ 2,589 $ (2,589) $ 0
========= ========= ========= =========
Net deferred income tax liability consists of the following at December 31,
1998 1997 1999
--------- --------- ---------
Deferred Tax Asset
Net operating loss carry forward $ 4,839 $ 9,529 $ 128,428
--------- --------- ---------
Less: valuation allowance (4,839) (9,529) (128,428)
--------- --------- ---------
Net Deferred Tax Asset $ 0 $ 0 $ 0
--------- --------- ----------
Deferred Tax Liability
Depreciation and amortization $ (2,589) $ 0 $ 0
--------- --------- ---------
Deferred tax liability, net $ (2,589) $ 0 $ 0
--------- --------- ---------
Net $ (2,589) $ 0 $ 0
The Company has generated approximately $367,000 in net operating loss carryforward which
$13,825, $13,000 and $340,175 expire 2018, 2019 and 2020, respectively.
30
</TABLE>
<PAGE>
Americana Publishing, Inc.
(A Development Stage Company)
Notes to Financial Statements
December 31, 1999
Note 7: Private Offering Memorandum
On February 10, 1999, the Company issued a Confidential Private Offering
Memorandum pursuant to Rule 504 of Regulation D of the Securities Act of 1933,
as amended, for 465,000 shares of $.001 par value common stock at $.50 per
share. The offering was totally subscribed in the total amount of $232,500. Of
the total 465,000 shares sold, 59,000 shares were sold to related parties.
On November 1, 1999, the Company issued a Confidential private Offering
Memorandum pursuant to Rule 144 4(2) of the Securities Act of 1933, as amended,
for 908,000 shares of $.001 par value common stock at $.50 to $1.00 per share.
The offering was totally subscribed in the total amount of approximately
$700,000.
Note 8: Subsequent Events
In January 2000, 55,000 shares of common stock were sold to unrelated parties at
$2.00 per share under the Securities Act of 1933, as amended, pursuant to 4(2)
on January 25, 2000.
Subsequent to year-end the Company entered into an accounts receivable financing
line with a third party. The Company will be able to receive a maximum amount of
$250,000 of advances or outstanding eligible accounts receivable. The financing
line will be for an initial term of 18 months with six-month renewal periods.
The borrowing rate will be calculated as the Prime Rate, as quoted in the Wall
Street Journal plus two percent. George Lovato Jr. has guaranteed this line.
Note 9: Other Matters
Management's Estimate of Value (Unaudited)
The balance sheet presents property and equipment at the contributor's cost.
Management believes that certain assets have a significantly higher fair market
value than reflected on the financial statements. Management's estimate of such
value is set forth below.
Database and Circulation List $175,000
Website (americanabooks.com) 250,000
Development Cost to Create Public Company 200,000
Computers and audio Equipment 50,918
Furniture and Fixtures 100,000
Publication Library 12,000
Land 25,000
--------
$812,918
These estimates reflect management's judgment as to the fair market value of
certain assets as of December 31, 1999. Therefore, management estimates that
$702,400 in market value appreciation could result to the existing stockholder
equity as of December 31,1999.
Management's determination of the fair market value for the database,
circulation list and website development was based on estimated cost of
contractors and outside parties to compile and develop such information and
31
<PAGE>
Americana Publishing, Inc.
(A Development Stage Company)
Notes to Financial Statements
December 31, 1999
technology. The computers and audio equipment, publication library and furniture
are based on their appropriate replacement cost. The value of the land was based
on the appraised value as set by a real estate professional. The value placed on
the cost to create a public company is based on the actual comparable selling
price of a public shell, and the estimated cost of taking a private company
public.
There will usually be differences between the estimated market value and the
market value ultimately realized and the differences may be material.
Quarterly Financial Summary (Unaudited)
<TABLE>
<CAPTION>
March 31, 1999 June 30, 1999 September 30, 1999 December 31, 1999
-------------- ------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Revenues $ 6,542 $ 586 $ 2,128 259
Operating Income (311,009) (205,157) (151,626) (1,750,633)
Net Income (311,930) (212,046) (148,571) (1,750,629)
Earnings per share
Basic and Diluted (0.11) (0.07) (0.05) (0.27)
</TABLE>
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There are no disagreements between Americana and the auditors.
PART III
Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF TE EXCHANGE ACT
Directors and Executive Officers and Advisors to the Board of Directors
<TABLE>
<CAPTION>
Date Elected
Name Age Position # of Shares As Director
- ---- --- -------- ----------- -----------
<S> <C> <C> <C> <C>
George Lovato, Jr.* 42 CEO/Chairman/President 2,004,000 March 6, 1999
Don White* 46 Director/Vice President 410,000 March 6, 1999
David Poling* 71 Director/Vice President 180,000 March 6, 1999
Robert Cochnar* 59 Advisor to the Board/Consultant 0 March 6, 1999
Jay Simon 41 Director/Secretary/Treasurer 50,000 March 6, 1999
Marjorie Lovato 67 Director 50,000 March 6, 1999
Jerry Ruther 66 Advisor to the Board/Consultant 63,000 N/A
Lowell S. Fixler 67 Advisor to the Board/Consultant 670,000 N/A
Philippe de La Chapelle 58 Advisor to the Board/Consultant 0 N/A
Stedman Walker, Ltd. Advisor to the Board/Consultant 0 N/A
</TABLE>
*These persons may be deemed "promoters" of the Company as that term is defined
under the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder. Jay Simon is Secretary/Treasurer of AMERICANA.
32
<PAGE>
Officers and Directors
All Directors of the Company will hold office until the next annual meeting of
shareholders of the Company or until their successors are duly elected and
qualified.
The Officers of the Company are elected by the Board of Directors at the first
meeting after each annual meeting of the Company's shareholders, and hold office
until their death, or until they shall resign or have been removed.
George Lovato, Jr.
Mr. Lovato is founder and has been a Director and Chairman and President since
inception, and has extensive management experience with startup companies,
corporate finance, computer system and software development, international trade
and relations, strategic planning, and sales and marketing development over the
last 15 years. He has been employed by and associated with companies engaged in
business management, public relations, advertising, corporate finance,
agriculture, automotive industry consulting, travel, auto rental and leasing,
and insurance.
Mr. Lovato was educated in New Mexico and has founded and developed several
nationally recognized companies ranging from local financial firms such as CEO
and President of TRVLSYS, Inc. to international travel and
communications-related businesses. His expertise in marketing, management and
corporate finance, in addition to numerous international contacts, coupled with
his service on the Governor Business Advisory Board of New Mexico, offer a
diverse alternative resource not often found in the marketplace. His
accomplishments have been featured in several national publications and books
such as Venture, Inc., The Wall Street Journal, New Mexico Business Journal, and
The New Mexico Experience. He devotes substantially full time necessary to the
management and general affairs of AMERICANA. Mr. Lovato is the principal and
sole owner of B. H. Capital Limited, a successful 14-year-old Merchant Banking
and corporate finance consulting enterprise, located in Albuquerque, New Mexico
with branch offices in Denver, Colorado and Houston, Texas.
Don White
Mr. White is a Director/Vice President of Americana, and is a CPA in Houston,
Texas, and has operated a successful accounting practice for over 20 years. Mr.
White was educated at Sam Houston State University and received his degree in
accounting in 1972. Mr. White has broad expertise in the development of market
value financial statements. He currently advises the company on general
financial matters and corporate development and oversees the audit and
acquisition committee. Mr. White will fulfill the duties and responsibilities of
the Chief Financial Officer of AMERICANA when it requires his expertise. He
devotes 20 to 40 hours per month to oversee the audit and acquisition committees
and general management affairs of AMERICANA. Mr. White has served on the board
as director and vice president since inception of the company, April 17,1997 and
serve on the board for a period of one year until otherwise re-elected at the
next annual shareholders meeting.
Dr. David Poling
Chairman, Sierra Publishing Group. Author of a dozen books; nationally
syndicated columnist, 600 newspapers. As New York publisher headed The Christian
Herald, half million monthly circulation. Also, President of the Family
Bookshelf, largest religious book club in the U.S. Poling, a Presbyterian
clergyman educated at College of Wooster, Ohio and Yale University. Special
interests: ecumenical, inter-faith expressions of life. He devotes 20 to 40
hours per month to oversee the acquisition committee and general management
affairs of AMERICANA and is also Director/Vice President of AMERICANA. Dr.
Poling has served on the board as director and vice president since inception of
the company, April 17,1997 and serve on the board for a period of one year until
otherwise re-elected at the next annual shareholders meeting.
33
<PAGE>
Jay Simon
Mr. Simon is currently employed as Director/Syncor oversees the Caribbean, Latin
America and South Africa of Syncor International Corporation, one of the worlds
largest nuclear pharmaceutical companies. His duties with Syncor International
Corporation involve international business development. Mr. Simon advises the
management on corporate finance matters and international circulation and
acquisition development and is Secretary/Treasurer and Director of AMERICANA.
Mr. Simon has served on the board as director and secretary/treasurer since
inception of the company, April 17,1997 and serve on the board for a period of
one year until otherwise re-elected at the next annual shareholders meeting.
Marjorie N. Lovato
Mother of the chairman, Mrs. Lovato is a Director, and has vast experience in
business administration with General Dynamics Corporation and consumer retail
store management as Retail Supervisor at the J.C. Penny Corporation. She has
worked in management for major aerospace corporations during her business
career. Mrs. Lovato advises the chairman in general business matters and
circulation development. Mrs. Lovato has served on the board as director since
inception of the company, April 17,1997 and serve on the board for a period of
one year until otherwise re-elected at the next annual shareholders meeting.
Advisor to the Board of Directors is Robert Cochnar
Sierra Publishing, Inc.'s president and CEO, is a publishing executive who has
edited newspapers in California (including the San Francisco Chronicle, the San
Jose Mercury News, and The Oakland Tribune) and South Carolina and is former
publisher of the World Almanac. He has been vice president and editorial
director of Newspaper Enterprise Association, New York, one of the country's
largest newspaper syndicates, a Scripps Howard subsidiary. Mr. Cochnar provides
design and production services on the AMERICANA CORPORATE FINANCE REPORTER in
exchange for corporate finance, marketing, and management consulting services
that B. H. Capital Limited/Mr. Lovato provides to Sierra Publishing. Mr. Cochnar
has served as advisor to the board of directors since inception.
Advisor to the Board of Directors is Jerry Ruther
Mr. Ruther graduated from Northeastern University in 1954 with a degree in
accounting. Later Mr. Ruther attended Northeastern University Law School and
graduated with jurist doctorate and practiced law for approximately 20 years.
Mr. Ruther was involved in various media business, real estate developments and
was a controlling shareholder of Sunset Productions, Inc., audio book production
company.
Advisor to the Board of Directors is Lowell S. Fixler
Mr. Fixler graduated from Northwestern University in 1954. Mr. Fixler was
president and controlling shareholder in NEEDLECRAFT Corporation of America.
NEEDLECRAFT was later purchased by Quaker Oats Co., and Mr. Fixler was the
president of the division. Mr. Fixler has been an investor in various start-up
companies and has been an investor in numerous business enterprises over his
lifetime.
Advisor to the Board of Directors is Philippe de La Chapelle
Mr. de La Chapelle formally Managing Director of Hill Thompson Capital Markets,
Inc., an investment banking firm founded in 1932. De La Chepelle concentrates on
business development of U.S. and offshore corporate finance opportunities. A
graduate of Georgetown Law School, he has been international counsel for W.R.
Grace & Co. Currently, he is Executive Vice President of Warnaco.
34
<PAGE>
Advisor to the Board of Directors is Stedman Walker, Ltd.
Stedman Walker, Ltd. is a corporate finance and investor relations consulting
firm with over 100 years of experience in these fields. The principals of this
firm have served a variety of clientele from a variety of different industries.
Item 10. EXECUTIVE COMPENSATION
On January 1, 1999, the Company entered into an employment agreement with its
chairman and majority stockholder. Under the terms of the one year agreement,
which shall be automatically be renewed for a period of three years provided
that either party has not elected to terminate the agreement as provided for
therein, the employee shall receive a salary of $250,000 per year or 5% of gross
revenue of the Company, whichever is greater. Mr. Lovato will not receive any
back pay from Americana and Americana is not responsible for such. The Company
may not terminate the agreement for any reason as it relates to the employee's
disability, illness or incapacity. Should the employee die during the term of
employment, the Company shall pay the employee's estate $500,000 in fifty
monthly installments of $10,000. Subject to certain events, including the sale
of substantially all of the Company's assets to a single purchaser and
bankruptcy, among others, the Company may terminate the agreement upon 90 days
written notice and pay the employee $500,000 in twelve consecutive monthly
installments. With cause, the Company may terminate the agreement with twelve
months written notice. During the notice period, the employee shall be paid full
compensation and, receive a severance allowance of $250,000 in twelve
consecutive monthly installments beginning on the date of termination. Without
cause, the employee may terminate employment upon twelve months written notice
to the Company. Directors of Americana do not currently receive any form of cash
compensation for their participation in Americana's activities. Don White, CFO
and Director, is being paid $3,000 per month for his services. Mr. White
oversees the accounting and is on the acquisition committee. Jerry Ruther,
Advisor to the Board, is compensated $2,500 per month. Mr. Ruther is assisting
Americana in the set-up and development of its audio book division.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
ANNUAL COMPENSATION AWARDS PAYOUTS
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Rest- Secur- All
Name Annual ricted ities
Other
And Compen Stock Underlying LTIP Other
Principal Salary Bonus sation Award(s) options Payouts Compen
Position Year ($) ($) ($) ($) SAR(#) sation
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
George Lovato 1997 0 0 0 1,950 0 0 0
CEO/Director 1998 0 0 0 285,913 0 0 0
1999 81,000 0 0 0 0 0 0
Jay Simon 1997 0 0 0 0 0 0 0
Sec/Treasurer/Director 1998 0 0 0 8,750 0 0 0
David Poling 1997 0 0 0 0 0 0 0
Vice 1998 0 0 0 17,500 0 0 0
President/Director
1999 0 0 0 75,000 0 0 0
Marjorie Lovato 1997 0 0 0 0 0 0 0
Director 1998 0 0 0 8,750 0 0 0
Don White 1997 0 0 0 0 0 0 0
Vice 1998 0 0 0 52,500 0 0 0
President/Director
1999 10,750 0 0 200,000 0 0 0
</TABLE>
35
<PAGE>
Non-Cash Compensation:
1. Stock Compensation
In November 1999 two directors, Don White and David Poling were given stock
awards of 200,000 and 75,000 respectively. The shares were valued at $1.00 per
share and are restricted under the 144 Rule.
2. Other Non-Cash Compensation
Non-applicable
3. Stock Option Compensation In 1998 stock options were issued to five directors
each received a 300,000 options exercisable for a period of 3 years, expiring
January 1, 2001. The option price is as follows, $.10, $.20, and $.30, if issued
by December 31, 1999, 2000 or 2001, respectively.
All Directors/Advisors/Employees
George Lovato, Jr. 300,000
Marjorie Lovato 300,000
David Poling 300,000
Jay Simon 300,000
Don White 300,000
Lowell S. Fixler 200,000
Jerry Ruther 150,000
Stedman Walker, Ltd. 150,000
Bob Cochnar 100,000
Philippe de La Chapelle 100,000
Sarah Moyers 100,000
Mark Whitman 100,000
Raul Rodriguez 50,000
Alex Cherepkahov 50,000
David Bromberg 30,000
John Wagner 25,000
---------
Total 2,555,000
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, the stock ownership of each person known by the
Company to be a beneficial owner of five percent (5%) or more of the Company's
equity securities, each Director individually and all, Directors and Officers of
the Company as a group. Each person has sole voting and investment power with
respect to the Shares shown unless otherwise indicated.
Shares
Title of Class Amount Owned Beneficially
Name and Address of Owned % of
Beneficial Owner Class
- --------------------------------------------------------------------------------
George Lovato, Jr. Common 2,004,000 46.7
12310 Claremont NE
Albuquerque, NM 87112
Don White Common 410,000 9.6
8106 Devonwood
Houston, TX 77070
36
<PAGE>
Shares
Title of Class Amount Owned Beneficially
Name and Address of Owned % of
Beneficial Owner Class
- --------------------------------------------------------------------------------
Marjorie N. Lovato Common 50,000 1.1
6951 Forest Hills Dr., NE
Albuquerque, NM 87109
Jay Simon Common 180,000 1.1
5528 E. Cheryl Drive
Paradise Valley, AZ 85253
David Poling Common 670,000 4.2
3616 San Rio Place NW
Albuquerque, NM 87107
Lowell Fixler Common 63,000 15.6
1081 Sheridan Rd.
Highland Park, IL 60035
1.5
Jerry Ruther Common 3,427,000
1208 N. Summit Drive
Santa Fe, NM 87501
Total Shares of Officers and Total 80%
Directors as a Group
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
AMERICANA has executed a Corporate Finance Consulting Agreement with B. H.
Capital Limited as of January 1, 1999. This agreement calls for among other
things for a 1% success fee to be paid by AMERICANA to B. H. Capital Limited of
the gross amount of financing for a period of five years. This transaction was
approved by the board of directors and was considered to be within fair
standards, which would be offered to or by any third party in an arms length
transaction.
AMERICANA will also pay B. H. Capital Limited a $3,000.00 monthly facility use
fee for use of B. H. Capital Limited's office, personnel, and facilities for a
period of five years.
The Directors of AMERICANA have each been issued stock option agreements dated
January 1, 1999 that allows for the purchase of 300,000 shares of stock over a
period of three years. Should the purchase be exercised by December 31, 1999,
the cost per share is $.10 cents; by December 31, 2000, $.20 cents; and by
December 31, 2001, $.30 cents. The directors may purchase all or a portion of
the shares at any time in any of the denomination described therein. Directors
also are allowed out-of-pocket expenses reimbursements of up to $400.00 per
meeting. Stock option agreements dated January 1, 1999, have been issued to each
Sarah Moyers and Robert Cochnar whereby 100,000 shares may be purchased over the
next three years under the same terms and conditions as the directors stock
option agreements allow for inclusive of the additional purchase of stock as a
poison pill caveat for 100,000 shares each. Similar stock options have been
issued to Mr. Ruther, Mr. Fixler, Mr. de La Chapelle, Mr. Wagner, Mr. Rodriquez,
Mr. Bromberg, Mr. Whitman, Stedman Walker, Ltd., and Mr. Cherepkahov.
Mr. Lovato contributed all of the assets of AMERICANA and provided services and
use of the B. H. Capital Limited facility and paid certain cash expenses on
behalf of AMERICANA for a period of eighteen months in exchange for common stock
in AMERICANA. Mr. Lovato provided a total of $71,309 in cash and equipment. In
addition, he provided $287,863 worth of services and received 2,000,000 shares
covering the period from inception to December 31, 1998.
37
<PAGE>
A poison pill is also incorporated into the option agreement, whereby all the
directors may purchase 300,000 additional shares for $1.00 should any of the
following occur:
a) The sale of substantially all of the Company's assets to a single
purchaser or group of associated purchasers; or
b) The purchase of substantially all of the Company's issued and
outstanding stock in an effort to take the Company Private; or
c) The attempt by an individual or associated group of individuals or
corporation or entity to purchase stock in the Company for the
purposes of a hostile take over; or
d) The sale, exchange, or other disposition, in one transaction of the
majority of the Company's outstanding corporate shares; or
e) The Company's decision to terminate its business and liquidate its
assets; or
f) The merger or consolidation of the Company with another company where
by the directors of the Company as a whole are no longer majority
shareholders.
AMERICANA hired additional personnel, which includes Mr. Don White and Mr. Jerry
Ruther and these employment agreements are similar to that of Mr. Lovato's.
Item 13. EXHIBITS AND REPORTS ON FORM 8-K
3.1 (i) * Articles of Incorporation
3.1 (ii)* By-Laws
10.1* Employment Agreement dated January 1, 1999 between George
Lovato, Jr. and the Company
10.2 Employment Agreement dated November 1, 1999 between Don White
and the Company
10.3 Accounts Receivable Financing Line dated January 18, 2000
between Altres Financial and the Company
10.4 Lease Agreement between Tierra Americana Real Estate, LLC and the
Company
27.1 Financial Data Schedule
* These Exhibits have been previously filed.
38
Exhibit 10.2
Employment Agreement
Employment Agreement, between Americana Publishing, Inc. (the "Company") and Don
White (the "Employee"), for good consideration, the Company employs the Employee
on the following terms and conditions:
1. Term of Employment. Subject to the provisions for termination set
forth below, this agreement will begin on November 1st, 1999.
2. Salary. The Company shall pay Employee a salary of $36,000 per year
payable on the 1st of each month.
3. Duties and Position. The Company hires the Employee in the capacity of
Chief Financial Officer. The duties may be reasonably modified at the
Company's discretion from time to time.
4. Employee to Devote Time Necessary to Company. The Employee will devote
the time necessary, attention and energies to the business of the
Company, and during this employment, however, may engage in other
business activities related to or unrelated to the company for profit,
gain and or primary advantage. These activities by the Employee are
not prohibited by the Company and further does not prohibit Employee
from making personal investments in any other business of any kind.
5. Confidentiality of Proprietary Information. Employee agrees during or
after the term of this employment, not to reveal confidential
information, or trade secrets to any person, firms, corporation or
entity.
6. Reimbursement of Expenses. The Employee may incur reasonable expenses
for furthering the Company's business including entertainment, travel
and similar items. The Company shall reimburse Employee within seven
working days for all business expenses after the Employee presents an
itemized account of expenditures.
7. Vacation. The Employee shall be entitled to a yearly vacation of a
total of five weeks at full pay. The Employee may take such time off
for vacation at any time and in any quantity of days.
8. Disability. If Employee cannot perform the duties because of illness
or incapacity for more than two weeks, the compensation otherwise due
during said illness or incapacity will continue as stated herein. The
Company may not terminate this agreement for any reason as it relates
to any disability, illness or incapacity.
9. Termination of Agreement. With cause, the Company may terminate this
agreement with twelve months written notice to the Employee. The
Employee may continue to perform his duties and will be paid the full
compensation during regular pay periods stated herein during the
notice period of twelve months. In addition, the Company will pay the
Employee on the date of termination a severance allowance of one full
year of minimum salary of two hundred and fifty thousand dollars
($250,000) which may be made in twelve equal and consecutive monthly
installments beginning on the date of termination. Without cause, the
Employee may terminate employment upon twelve months written notice to
the Company. Employee may be required to perform his duties and will
39
<PAGE>
be paid the full compensation described herein up to the termination
date and shall receive a severance allowance of two hundred and fifty
thousand dollars ($250,000) which may be made in twelve equal and
consecutive monthly installments beginning on the date of termination.
The Company may terminate the Employees employment upon 90 days
written notice to the Employee and be responsible to pay two years
minimum salary of a total of five hundred thousand dollars ($500,000)
in twelve consecutive monthly installments beginning on the date of
termination should any of the following events occur:
a) The sale of substantially all of the Company's assets to a single
purchaser or group of associated purchasers; or
b) The purchase of substantially all of the Company's issued and
outstanding stock in an effort to take the Company Private; or
c) The attempt by an individual or associated group of individuals
or corporation or entity to purchase stock in the Company for the
purposes of a hostile take over; or
d) The sale, exchange, or other disposition, in one transaction of
the majority of the Company's outstanding corporate shares; or
e) The Company's decision to terminate its business and liquidate
its assets; or
f) The merger or consolidation of the Company with another company
where by the directors of the Company as a whole are no longer
majority shareholders; or
g) Bankruptcy or Chapter 11 reorganization.
10. Assistance in Litigation. Employee shall upon reasonable notice,
furnish such information and proper assistance to the Company as it
may reasonably require in connection with any litigation in which it
is, or may become, a party either during or after employment. Should
the Employee be involved in any litigation personally as a result of
activities or association with or for the Company, the Company agrees
to pay for all such legal and professional fees incurred by the
Employee.
11. Settlement by Arbitration. Any claim or controversy that arises out of
or relates to this agreement, or breach of it, shall be settled by
arbitration in accordance with the rules of the American Arbitration
Association. Judgment upon the award rendered may be entered in any
court with jurisdiction.
12. Limited Effect of Waiver by Company. Should the Company waive breach
of any provision of this agreement by the Employee, that waiver will
not operate or be construed as a waiver of further breach by the
Employee.
13. Assumption of Agreement by Company's Successor and Assignees. The
Company's rights and obligations under this agreement will inure to
the benefit and be binding upon the Company's successors and
assignees.
14. Oral Modification Not Binding. This instrument is the entire agreement
of the Company and the Employee. Oral changes shall have no effect. It
may be altered only by a written agreement signed by the party against
whom the enforcement of any waiver, change, modification, extension,
or discharge is sought.
15. Sites of This Agreement. The terms and conditions of this agreement
shall be interpreted under the laws of the state of New Mexico.
40
<PAGE>
16. Automatic Renewal. This agreement shall automatically be renewed for a
period of three years provided that either party has not otherwise
elected to terminate this agreement as provided for herein.
- ---------------------------------- ----------------------------------
Company Date
- ---------------------------------- ----------------------------------
Employee Date
- ---------------------------------- ----------------------------------
Witness Date
41
Exhibit 10.3
ALTRES Financial Letterhead
January 18, 2000
George Lovato, Jr.
Americana Publishing
303 San Mateo NE, Suite 104A
Albuquerque, NM
RE: Financing Proposal - Accounts Receivable Financing Line
Dear George,
Thank you for your continued interest in the financial services of ALTRES
Financial, L.P. We have evaluated your request for financing and are please to
present you with the following Proposal to Finance your accounts receivable. The
proposed terms and conditions are as follows:
Maximum Account Receivable Financing Line: Two Hundred Fifty Thousand
Dollars ($250,000) of advances on outstanding eligible accounts receivable.
Advance Rate: Seventy Percent (70%) of invoice amounts submitted for
funding.
Funds Rate: Prime Rate (as quoted in the Wall Street Journal) plus Two
Percent (2%)
Collateral Management Fee: One and One Quarter Percent (1.25%) for each
Thirty (30) day period. The Collateral Management Fee shall be the rate
calculated on the face value of each financed invoice for each specific
period or part thereof from time of funding until payment is received.
Minimum Monthly Usage: Fifty Thousand Dollars ($50,000) of eligible
accounts submitted for funding each monthly period.
Term of Relationship: The minimum term of the relationship will be for a
period of Eighteen (18) months, with automatic Six (6) month renewal
periods.
Recourse: Altres Financial will guarantee the solvency of approved debtors
from the invoice date to 90 days outstanding. During said period if an
approved debtor files for bankruptcy Altres Financial will cover the
advanced amount.
Guarantees: A Validity Guarantee from George Lovato, Jr., CEO/Director
Origination Fee: The Origination Fee shall be One Percent (1%) of the
Maximum Account Receivable Financing Line. This fee will be due from you on
the initial funding date.
Good Faith Deposit: Five Hundred Dollars ($500). This deposit will be
applied to all costs incurred during the credit review, underwriting and
documentation process. Except as stated below, any surplus will be refunded
to you. If ALTRES Financial declines to provide financing because of
international misrepresentations, omissions, distortions or unsatisfactory
results of the due diligence or because of the failure of other conditions
not within the control of ALTRES Financial, L.P., any surplus deposit
monies will not be refunded.
page 1 of 2 Init.____ Date ____
<PAGE>
Financing Proposal
Page 2 of 2
- ---------------------------
Additional Terms/Requirements: ALTRESS Financial, L.P. requires quarterly
financial statements, accounts receivable and payable aging, and proof of
tax compliance. Each invoice will have instructions to make and mail the
payment to Altres Financial to a P.O. Box controlled by Altres Financial.
Please be aware that funding shall be contingent upon ALTRES Financial,
L.P. securing a first lien position on the accounts receivable, inventory,
and unencumbered equipment, and our completing the necessary due diligence
with satisfactory outcome in regards to credit verifications, UCC filings,
and lien searches.
It is mutually understood between the parties that this Proposal to Finance
your Accounts Receivable shall in no way serve as a legally binding
contract to provide funding, but merely serves as a proposal for a contract
which may be entered into. This proposal shall be superceded by a fully
executed Accounts Receivable Financing Agreement. This proposal shall
remain valid until Friday, February 21, 2000 at 5:00 p.m. Mountain Standard
Time after which the proposal shall become null and void at ALTRES
Financial's discretion.
After fully reviewing this proposal, should you have any comments and/or
questions please do not hesitate to call me. Once we have received the
endorsed Proposal to Finance and Good Faith Deposit, ALTRES Financial, L.P.
will immediately begin he necessary documentation process, which will
initiate the Financing Agreement. Once again, I want to thank you for you
interest in the financial services of ALTRES Financial, L.P.
Sincerely,
Reviewed and Agreed:
Andrew Osborn /s/ George Lovato, Jr.
ALTRES Financial, L.P. ----------------------------------
George Lovato, Jr., CEO & Chairman
Americana Publishing, Inc.
43
Exhibit 10.6
OFFICE LEASE
THIS LEASE, made this 5th day of January, 2000, between Americana
Publishing, Inc., 142 Truman NE, Albuquerque, New Mexico, hereinafter referred
to "Tenant", and George Lovato, Jr./Tierra Americana Real Estate, LLC
hereinafter referred to as "Landlord".
WITNESSETH:
NOW, THEREFORE, it is mutually agreed by and between the parties as
follows:
WHEREAS, Tenant is desirous of leasing and hiring from Landlord certain
premises located in that certain building located at 303 San Mateo Blvd., N.E.,
City of Albuquerque, County of Bernalillo, State of New Mexico, hereafter
referred to as the "Building".
DESCRIPTION OF PROPERTY AND TERM:
1. (a) For and in consideration of the agreement of Tenant to pay the
rental and other sums herein provided for and to perform the terms, covenants
and conditions on its part herein contained, the full performance and observance
of which and all thereof being hereby agreed by Tenant to the conditions
precedent and subsequent to the covenants on the part of Landlord, and, at the
option of Landlord, to the continuance of this lease, Landlord hereby leases to
Tenant, and Tenant hereby hires and takes from Landlord certain space located on
the 1st floor of the building and designated on the attached Exhibit "A".
(b) The term of this lease shall be for a period of 4 years,
commencing on January 5, 2000.
RENTAL:
2. (a) Tenant agrees to pay, as minimum rental, at such place as may be
designated from time to time, by Landlord, with lease payments on a monthly
basis as follows: The first years monthly lease payments shall be $2,000/month
or $24,000 annually; The second years monthly lease payments shall be
$3,000/month or $36,000 annually; The third years monthly lease payments shall
be $4,000/month or $48,000; The fourth year monthly lease payments shall be
$5,000/month or $60,000 annually, payable in lawful money of the United States
with the first two year lease payments paid in advance upon execution of this
lease and on a per month basis beginning on January 5, 2002. If the term
commences on any day other than the first day of the calendar month, a prorata
friction of a full month's rental shall be paid on the first day of said lease
term and a corresponding prorata fraction shall be paid for the partial month at
the end of said lease term. Tenant further agrees to pay Landlord any excise,
sales or privilege tax imposed or levied by any government or governmental
agency upon Landlord on account of this lease or the rental paid hereunder.
(b) Tenant agrees to be liable for damage to the premises in an amount
not to exceed $2,000, normal wear and tear accepted. The Landlord and Tenant
shall jointly inspect and verify the existing condition of the premises
following lease execution.
3. (a) Tenant shall use the premises for Offices and for no other purpose.
44
<PAGE>
(b) Tenant shall not commit, or suffer to be committed any nuisance or
other act or thing against public policy, or which may disturb the quiet
enjoyment of any other tenant of the building. Tenant agrees not to deface or
damage the building in any manner or overload the floors of the premises.
(c) Tenant agrees not to use or permit the use of the premises or any
part thereof for any purpose prohibited by law, and Tenant agrees, at its sole
expense, to comply with and conform to all of the requirements of all
governmental authorities having jurisdiction thereof, present or future,
relating in any way to the condition, use and occupancy of the premises
throughout the entire term of this lease.
(d) No goods, merchandise or materials shall be kept, stored or sold
by Tenant in or about the premises which are in any way hazardous, and Tenant
shall not suffer or permit any acts of omission or commission to be done on or
about the premises which will increase the existing rate of fire insurance. If
the said insurance rate is increased by such an act, then the increased cost of
such insurance on the building shall be paid by Tenant to Landlord with the next
succeeding installment of rental. Tenant, at its sole expense, shall comply with
any and all requirements of any insurance organization or company necessary for
the maintenance of reasonable fire and public liability insurance covering the
premises and the building.
SERVICES AND UTILITIES:
4. (a.) Landlord agrees to provide 110 volt wiring and electricity for
lighting and light office machines, water, heat, refrigerated air-conditioning,
window cleaning, janitorial service three times a week, and building maintenance
service. Landlord shall not be liable for the stoppage or interruption of any
said services or utilities caused by riots, strikes, labor disputes, or
accidents, necessary repairs or conditions beyond Landlord's control.
(b.) Landlord shall furnish heating, ventilation and air conditioning
("HVAC") for the premises as required in Landlord's judgment for the condonable
and normal occupancy of the premises, however, the tenant shall pay all
utilities for the square footage leased by the tenant.
PARKING:
5. Landlord agrees to provide designated off street parking spaces for the
joint use of all the tenants of the 303 San Mateo Blvd., N.E., Building and
their invitees. It is understood and agreed that if, in the sole opinion of the
Landlord, Parking in the common area parking lot of the building becomes
overcrowded, Landlord may specifically restrict Tenants use of said parking lot
to not more than fourteen (14) vehicles at any one time.
ACCEPTANCE OF PREMISES:
6. No representations, except such as are contained herein, have been made
to Tenant respecting the condition of the premises. By entry hereunder, Tenant
accepts the premises as being free from defects and in good, clean sanitary
order, condition and repair, and agrees to keep the premises in such condition.
Tenant further agrees on the last day of the term hereby created, or sooner
termination of this lease, to surrender auto Landlord the premises in the same
condition as when received, ordinary wear and tear excepted.
DESTRUCTION OF PREMISES:
7. In the event of a partial or total destruction of the premises during
the lease term from any cause other than by failure or neglect on the part of
the Tenant to perform or observe any term, covenant or condition hereof,
Landlord shall forthwith repair the same, unless Landlord shall elect to
terminate this lease as hereinafter set forth. Such destruction shall in nowise
annul or void this lease, except that Tenant shall be entitled to a
45
<PAGE>
proportionate reduction of the rental while such repairs are being made, such
proportionate reduction to be based upon the extent to which the making of such
repairs shall interfere with business carried on by Tenant on or about said
premises. In respect to any damage or destruction which Landlord is obligated to
repair or my elect to repair under the terms of this paragraph, Tenant hereby
waives all rights under any law in existence during the term of this lease
authorizing the termination of a lease upon the complete or partial destruction
of the leased premises. In the event that the premises are partially or totally
destroyed by a cause or casualty other than those covered by fire and extended
coverage insurance, or in the event that the building is destroyed by any cause
or casualty to the extent of not less than thirty-three and one-third (33 1/3%)
percent of the replacement cost thereof, whether the premises be damaged or not,
Landlord may elect to terminate this lease by giving notice to Tenant within
ninety (90) days after the occurrence of such destruction.
EMINENT DOMAIN:
8. If any part of the premises shall be taken for public or quasi-public
use by right of eminent domain or transferred by agreement in connection with
such public or quasi-public use, with or without any condemnation action or
proceeding being instituted, this lease shall terminate as of the date title
shall vest in the condemnor. All compensation or damages awarded upon such
taking or transfer shall go to Landlord and Tenant shall have no claim thereto.
ALTERATION AND IMROVEMENTS:
9. (a) Tenant shall construct and install at its sole expense any and all
leasehold improvements and fixtures, subject to the terms and conditions herein
contained, it being expressly understood that Landlord's sole construction
obligation is to construct and install, in accordance with the general standards
of the building, the walls, doors, carpeting, furnished ceiling, central toilet
facilities, and such finished partitioning, electrical outlets and electrical
fixtures as may be shown on Exhibit "A" attached hereto. Tenant agrees not to
make any alterations of, or additions to the premises without the prior written
consent of Landlord, and any alterations of, or additions to the premises except
movable trade fixtures and equipment shall take place under the supervision of
Landlord and shall become a part of the realty. Tenant shall keep the premises
and improvements thereon free and clear of all liens arising out of or claimed
by reason of any work performed, material furnished or obligations incurred by
or at the instance of Tenant, and indemnify and save Landlord the premises and
the building harmless of all such liens or claims of lien and all attorney's
fees and other costs and expenses incurred by reason thereof.
(b) Landlord shall have the right at any time to alter, repair or
improve the premises and the building, subject to the terms of the Real Estate
Contract and Landlord and its representatives for that purpose may enter on and
about the premises and the building with such material as Landlord may deem
necessary, and may erect scaffolding and all other necessary structures on or
about the premises and the building. Tenant waives any claim for damages
including loss of business resulting there from. In the exercise of its rights
under this subparagraph Landlord shall not unreasonably interfere with the
conduct of Tenants business.
TAXES:
10. In addition to the minimum monthly rent in Paragraph 2. (a) above,
Tenant agrees to pay WAIVED percent of any and all increases in real estate
taxes levied or assessed against the real property of which the building and the
premises are a paid over and above the amount of such taxes or assessments
during the calendar year 2000 Tenant, upon demand, shall pay such amounts to
Landlord with the next succeeding installment of rental.
46
<PAGE>
LIABILITY:
11. Tenant agrees that Landlord shall not at any time or to any extent
whatsoever be liable, responsible or in anywise accountable for any loss,
injury, death or damage to persons or property, from any cause or causes
whatsoever, which at any time may be suffered or sustained by Tenant, or by any
person whosoever at any time may be using occupying or visiting the premises,
and Tenant agrees to indemnify and save Landlord harmless from any and all
claims, liabilities, losses, damages, costs and expenses whatsoever arising out
of any such loss, injury, death or damage however occurring. Tenant agrees to
pay for all damages done to the premises or the building by Tenant or any person
or persons permitted on the premises by Tenant.
ENTRY BY LANDLORD:
12. Landlord and its representatives shall have the right to enter the
premises at all reasonable times to inspect the same, to make repairs and to
maintain the building, to post such reasonable notices as Landlord may desire to
protect its rights, or, during the ninety (90) days prior to the expiration of
this lease, to exhibit the premises to prospective tenants and to place upon the
doors or in the windows of the premises any usual or ordinary "to Let" or "to
Lease" signs.
TENANT'S FIXTURES:
13. Tenant, at any time Tenant is not in default hereunder, may remove its
movable trade fixtures and equipment, and upon expiration or termination of this
lease, if so requested by Landlord, shall remove all fixtures and equipment
installed on the premises by Tenant, whether of not such fixtures and equipment
are fastened to the building and regardless of the manner in which they are so
fastened; provided, however, that Tenant shall fully repair damage of any kind
or character occasioned by the removal of any such fixtures or equipment and
shall leave the premises and building in a good, clean and sanitary condition.
ASSIGNMENT AND SUBLETTING:
14. (a) Tenant shall not assign this lease, nor sublet all or any portion
of the premises, not permit the use of all or any part of the premises by
persons other than Tenant, its servants and agents, without the prior written
consent of Landlord, and any such assignment, sublease or permission without
such consent shall be void and, at the option of Landlord ' shall terminate this
lease.
(b) Tenant agrees that in the event any proceedings under the
Bankruptcy Act or any amendment thereto be commenced by or against Tenant and if
against Tenant, said proceedings shall not be dismissed before either an
adjudication in bankruptcy or the confirmation of a composition arrangement or
plan of reorganization, or in the event Tenant be adjudged insolvent or make an
assignment for the benefit of its creditors, or if a writ of attachment or
execution be levied on the leasehold estate hereby created and be not released
or satisfied within fifteen (15) days thereafter, or if a receiver be appointed
in any proceeding or action to which Tenant is a party with authority to take
possession or control of the premises or the business conducted thereon by
Tenant and such receiver be not discharged within a period of fifteen (15) days
after his appointment any such event shall constitute a breach of this lease by
Tenant and, at the option of Landlord and without notice or entry or other
action of Landlord, shall terminate this lease and also all rights of Tenant
under this lease and any and all persons claiming under Tenant, in and to the
premises.
47
<PAGE>
RULES AND REGULATIONS:
15. Landlord shall have the right from time to time to prescribe rules and
regulations, which in its judgment may be desirable, for the use, entry,
operation and management of the premises and the building, each of which rules
and regulations shall become a part of this lease. Tenant agrees to comply with
such rules and regulations, provided, however, that such rules and regulations
shall not contradict or abrogate any right or privilege herein expressly granted
to Tenant. SIGNS:
16. Tenant shall not place or permit to be placed any sign, advertisement
notice or other display on any part of the inside or outside of the premises,
except of such color, size and style and in such locations as shall be
designated by Landlord. Tenant upon request of Landlord, shall immediately
remove any sign, advertisement, notice or other display which Tenant has placed
or permitted to be placed on any part of the inside or outside of the premises,
which, in the opinion of Landlord, is objectionable, offensive or not in good
taste, and if Tenant shall fail to do so, Landlord may enter the premises and
remove the same at the expense of Tenant.
DEFAULT:
17. If Tenant shall fail to pay any part of the rent herein provided or any
other sum required by this lease to be paid to Landlord at the times or in the
term provided, or if default shall be made in any of the other covenants or
conditions on its part agreed to be performed, and if such failure to pay rent
or such other such default shall continue for ten (10) days after written notice
thereof from Landlord to Tenant, then Landlord, besides such other rights or
remedies it may have, may either (a) terminate this lease, or (b) re-enter the
premises by summary proceedings or otherwise, remove all persons and property
from the premises without liability to any person for damages, sustained by
reason of such removal, and re-let the premises at such rental and upon such
other terms and conditions as Landlord in its sole discretion may deem
advisable. In such event Tenant shall remain liable for the monthly rent
reserved in this lease, plus the reasonable cost of obtaining possession of the
premises and of any repairs and alterations necessary to prepare them for
re-letting, less the refits received from such re-letting, if any. Any and all
monthly deficiencies so payable by Tenant shall be paid monthly on the date
herein provided for the payment of rent. No such re-entry or taking possession
of the premises by Landlord shall be construed as an election on its part to
terminate this lease unless a written notice of such intention be given to
Tenant or unless the termination thereof be decreed by a court of competent
jurisdiction. Notwithstanding any such re-letting without termination, Landlord
may at any time thereafter elect to terminate this lease for such previous
breach. Should Landlord at any time terminate this lease for any breach in
addition to any other remedies it may have, it may recover from Tenant all
damages it may incur by reason of such breach, including the cost of recovering
the premises, and including the worth at the time of such termination of the
excess, if any, of the amount of rent and charges equivalent to rent reserved in
this lease for the remainder of the stated term over the then reasonable rental
value of the premises for the remainder of the stated term all of which amounts
shall be immediately due and payable from Tenant to Landlord.
ATTORNEY'S FEES:
18. (a) If any person not a party to this lease shall institute an action
against Tenant in which Landlord, involuntarily and without cause, shall be made
a party defendant, Tenant shall indemnify and save Landlord harmless from all
liabilities by reason thereof, including reasonable attorney's fees and all
costs incurred by Landlord in such action.
(b) If any action shall be brought to recover any rental under this
lease, or for or on account of any breach of or to enforce or interpret any of
the terms, covenants or conditions of this lease, or for the recovery of
possession of the premises, the prevailing party shall be entitled to recover
from the other party, as part of prevailing party's costs, a reasonable
attorney's fee, the amount of which shall be fixed by the court and shall be
made a part of any judgment rendered.
48
<PAGE>
HOLDING OVER:
19. In the event of any holding over by Tenant after the expiration or
termination of this lease, unless the parties hereto otherwise agree in writing,
Tenant shall become a tenant at sufferance only, subject to termination by
Landlord or Tenant at any time upon at least thirty (30) days advance written
notice, and all other terms and provisions of this Lease shall be applicable
during that period. Acceptance by Landlord of rent after such expiration or
earlier termination shall not constitute a consent to a hold over hereunder or
result in an extension of this Lease.
SUBORDINATION:
20. Landlord expressly reserves the right at any time to place liens and
encumbrances on and against the premises and the building, superior in lien and
effect to this lease and the estate created hereby. This lease, at the option of
Landlord, is and shall be subject, subordinate and inferior to the lien and
estate of any liens and encumbrances, renewals, extensions or replacements
thereof now or hereafter imposed by Landlord upon the premises or the building.
Tenant agrees to execute and deliver upon demand such further instrument or
instruments subordinating this lease to any such liens or encumbrances as shall
be desired by Landlord, and hereby irrevocably appoints Landlord its attorney in
fact to execute and deliver any such instrument or instruments for or in the
name of Tenant.
NOTICES:
21. All notices, demands or other writing in this lease provided to be
given, made or sent by either party hereto to the other shall be deemed to have
been fully given, made or sent when made in writing and deposited in the United
States mail registered and, postage prepaid and addressed as follows:
TO LANDLORD 303 San Mateo NE, Suite 104A
Albuquerque, New Mexico 87108
TO TENANT On the leased premises
The address to which any notice, demand or other writing may be given, made or
sent to either party may be changed by written notice given by such party as
above provided.
49
<PAGE>
REMEDIES CUMULATIVE:
22. All remedies herein conferred upon Landlord shall be cumulative and no
one exclusive of any other remedy conferred herein or by law.
WAIVER:
23. The waiver by Landlord of any breach of any term covenant or condition
herein contained shall not be deemed to be a waiver of such term covenant or
condition or any subsequent breach of the same or any other term covenant or
condition herein contained. The subsequent acceptance of rental hereunder by
Landlord shall not be deemed a waiver of any preceding breach by Tenant of any
term, covenant or condition of this lease, other than the failure of Tenant to
pay the particular rental so accepted, regardless of Landlord's knowledge of
such preceding breach at the time of acceptance of such rental. None of the
terms, covenants or conditions of this lease can be waived by either Landlord or
Tenant except by appropriate written instrument.
CONSTRUCTION OF LEASE:
24. The language in all parts of this lease shall in all cases be construed
as a whole according to its fair meaning and not strictly for or against either
Landlord or Tenant. Paragraph headings in this lease are for convenience only
and are not to be construed as a part of this lease or in any way defining,
limiting or amplifying the provisions hereof. Time is of the essence of this
lease and of every term, covenant and condition hereof The words "Landlord" and
"Tenant", as herein used, shall include the plural as well as the singular. The
neuter gender includes the masculine and feminine. In the event there is more
than one Tenant, the obligations to be performed shall be joint and several.
Landlord and Tenant agree that in the event any term, covenant or condition
herein contained is held to be invalid or void by any court of competent
jurisdiction, the invalidity of any such term, covenant or condition shall in no
way affect any other term, covenant or condition herein contained.
25. The tenant understands this is a non-smoking building and that smoking
within the building will subject this lease to default with full amount of lease
due to Landlord on liquidated damages.
26. A deposit of WAIVED is due upon execution of this Lease. The deposit is
refundable, less and costs associated with the default of this lease or any
damage to the premises by Tenant.
SUCCESSORS AND ASSIGNS:
27. Subject to the provisions of Paragraph 16 hereof, all the terms,
covenants and conditions of this lease shall be binding upon and inure to the
benefit of and shall apply to the respective heirs, executors, administrators,
successors, assigns and legal representatives of Landlord and Tenant. REASONABLE
CONSENT:
28. Landlord agrees not to unreasonably withhold its approval of or consent
to any act of Tenant, where such approval or consent is required by the terms of
this lease.
IN WITNESS HEREOF, the parties hereto have executed this instrument by
proper persons thereunto duly authorized to do so on this 5th day of January
2000.
50
<PAGE>
Tenant: Landlord:
By: /s/ George Lovato, Jr. By: /s/ Don White
---------------------------- -----------------------------
By: By:
---------------------------- -----------------------------
Its:
-----------------------------
By:
-----------------------------
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