<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
/X/ Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended October 31, 1996
/ / Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from ________ to ________
Commission file number 0-26120
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IMPRINT RECORDS, INC.
- --------------------------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
Tennessee 62-1587889
- -------------------------------------- -------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
Cummins Station, 209 10th Avenue South, Suite 500, Nashville, TN 37203
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices)
(615) 244-9585
- --------------------------------------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
- --------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
----------- ------------
As of December 13, 1996, the Company had outstanding 4,738,000 shares of
common stock, no par value.
Traditional Small Business Disclosure Format (check one):
Yes X No
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<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
IMPRINT RECORDS, INC.
Formerly, Veritas Music Entertainment, Inc.
(A Development Stage Company)
BALANCE SHEETS
ASSETS
October 31, January 31,
1996 1996
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Current assets:
Cash and cash equivalents $ 1,297,412 $ 4,405,672
Investments, commercial paper - 999,733
Accounts receivable, net 85,358 -
Inventory 334,195 -
Other current assets 85,857 94,008
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1,802,822 5,499,413
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Fixed assets, net 401,083 348,631
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Other assets:
Organization and other costs, net 18,585 23,103
Other assets 21,817 45,108
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40,402 68,211
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$ 2,244,307 $ 5,916,255
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----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 184,166 $ 78,163
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Commitments
Shareholders' equity:
Common stock, no par value;
authorized, 9,000,000 shares;
issued and outstanding, 4,738,000 shares 6,301,792 6,301,792
Additional paid-in capital 577,425 577,425
Deficit accumulated during the
development stage ( 4,819,076) ( 1,041,125)
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2,060,141 5,838,092
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$ 2,244,307 $ 5,916,255
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See notes to financial statements. 2
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IMPRINT RECORDS, INC.
Formerly, Veritas Music Entertainment, Inc.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
December 8,
1994
Three months Three months Nine months Nine months (inception)
ended ended ended ended to October
October 31, October 31, October 31, October 31, 31, 1996
1996 1995 1996 1995 (cumulative)
-------------- ------------- -------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Sales, net of returns and allownaces $ 93,858 $ - $ 93,858 $ - $ 93,858
Cost of goods sold 13,173 - 13,173 - 13,173
------------- ------------ ------------ ---------- ------------
Gross profit 80,685 - 80,685 - 80,685
------------- ------------ ------------ ---------- ------------
Artist development and promotion 803,001 - 2,415,314 - 2,917,393
General and administrative expenses 498,405 352,443 1,569,183 389,826 2,182,878
------------- ------------ ------------ ---------- ------------
1,301,406 352,443 3,984,497 389,826 5,100,271
------------- ------------ ------------ ---------- ------------
Loss from operations ( 1,220,721) ( 352,443) ( 3,903,812) ( 389,826) ( 5,019,586)
------------- ------------ ------------ ---------- ------------
Interest expense - - - ( 98,071) ( 98,071)
Interest income 22,541 87,247 125,861 92,437 298,581
------------- ------------ ------------ ---------- ------------
22,541 ( 87,247) 125,861 ( 5,634) 200,510
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Net loss ($ 1,198,180) ($ 265,196) ($ 3,777,951) ($ 395,460) ($ 4,819,076)
------------- ------------ ------------ ---------- ------------
------------- ------------ ------------ ---------- ------------
Net loss per common stock share ($ .25) ($ .06) ($ .80) ($ .10) ($ 1.13)
------------- ------------ ------------ ---------- ------------
------------- ------------ ------------ ---------- ------------
Weighted average shares outstanding 4,738,000 4,738,000 4,738,000 3,879,333 4,270,000
------------- ------------ ------------ ---------- ------------
------------- ------------ ------------ ---------- ------------
</TABLE>
See notes to financial statements. 3
<PAGE>
IMPRINT RECORDS, INC.
Formerly, Veritas Music Entertainment, Inc.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
December 8, 1994
Nine months Nine months (inception) to
ended ended October 31, 1996
October 31, 1996 October 31, 1995 (cumulative)
---------------- ---------------- ----------------
<S> <C> <C> <C>
Cash flows from
operating activities:
Net loss ($3,777,951) ($ 395,460) ($4,819,076)
Adjustments to
reconcile net loss
to net cash used in
operating activities:
Amortization 72,057 100,034 176,471
Changes in assets and
liabilities:
Accounts receivable ( 85,358) - ( 85,358)
Inventory ( 334,195) - ( 334,195)
Other current assets 8,151 ( 47,985) ( 85,857)
Organization costs - ( 30,131) ( 30,131)
Other assets 23,291 ( 41,916) ( 21,817)
Accounts payable and
accrued expenses 106,003 30,219 184,164
----------- ------------- -----------
Net cash used in
operating activities ( 3,988,002) ( 385,239) ( 5,015,799)
----------- ------------- -----------
Cash flows from investing
activities:
Leasehold improvements ( 639) ( 128,196) ( 220,835)
Furniture and equipment ( 119,352) ( 66,665) ( 254,859)
Investments purchased,
commercial paper - (985,588) ( 999,733)
Investments sold,
commercial paper 999,733 - 999,733
----------- ------------- -----------
Cash provided (used) in
investing activities 879,742 ( 1,180,449) ( 475,694)
----------- ------------- -----------
Cash flows from financing
activities:
Deferred loan cost - ( 15,312) ( 15,312)
Deferred stock offering costs - ( 252,390) ( 252,390)
Shareholder loan - proceeds - 1,400 1,400
Shareholder loan - payment - ( 1,400) ( 1,400)
Notes payable - proceeds - 225,000 225,000
Notes payable - payment - ( 300,000) ( 300,000)
Issuance of common stock -
and warrants, net of stock
offering costs - 7,131,372 7,131,607
----------- ------------- -----------
Net cash provided by
financing activities - 6,788,670 6,788,905
----------- ------------- -----------
(Decrease) increase in cash ( 3,108,260) 5,222,982 1,297,412
Cash and cash equivalents,
beginning 4,405,672 235 0
----------- ------------- -----------
Cash and cash equivalents,
ending $ 1,297,412 $ 5,223,217 $ 1,297,412
----------- ------------- -----------
----------- ------------- -----------
</TABLE>
See notes to financial statements. 4
<PAGE>
IMPRINT RECORDS, INC.
Formerly, Veritas Music Entertainment, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
1. The condensed financial statements at October 31, 1996 and for the three
and nine month periods then ended are unaudited and reflect all
adjustments (consisting only of normal recurring adjustments) which are,
in the opinion of management, necessary for a fair presentation of the
financial position and operating results for the interim periods. The
condensed financial statements should be read in conjunction with the
financial statements and notes thereto, together with management's
discussion and analysis of financial condition and results of operations,
contained in the Company's Form 10-KSB for the fiscal year ended January
31, 1996. The results of operations for the three and nine months ended
October 31, 1996 are not necessarily indicative of the results for the
entire fiscal year ending January 31, 1997.
2. Significant accounting policies:
Revenue recognition:
Sales of records in the United States are recognized upon transfer of
title, which coincides with shipment of products to retail outlets and
other trade channels. A provision for expected returns is recorded at the
time a sale is recognized.
Inventory:
Inventory is valued at the lower of cost, (determined on a first in, first
out basis) or market.
3. Receivables, net:
Net receivables consist of the following:
October 31, January 31,
1996 1996
----------- -----------
Accounts receivable, trade $ 573,378 $ -
Allowance for returns ( 488,020) -
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$ 85,358 $ -
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5
<PAGE>
ITEM 2. PLAN OF OPERATIONS
The following discussion of the financial condition and results of
operations of Imprint Records, Inc. ("Imprint" or the "Company") should be read
in conjunction with the Financial Statements and Notes thereto appearing
elsewhere in this report.
OVERVIEW
Imprint was incorporated in December 1994 under the laws of
Tennessee, and began operations after its initial public offering in late July
1995. Since it began operations, the Company has signed five artists: Gretchen
Peters, Al Anderson, Jeff Wood, Ryan Reynolds and Bob Woodruff. Imprint has
licensed from BMG-Canada the rights to distribute recordings of Canadian Country
music artist Charlie Major in the United States.
The Company has released three albums, which combined have
achieved sales of approximately 87,700 units.
Imprint has also entered into foreign licensing agreements with
BMG-Canada and Paradoxx Records, which grant those licensees the right to
release Imprint records in their respective licensed territories. These
agreements cover the territories of Canada and Brazil, respectively.
Paradoxx released Gretchen Peters's and Al Anderson's first albums on the
Imprint label in this last quarter of 1996.
Imprint's records are currently being distributed in the United
States by Distribution North America of Cambridge, Massachusetts under a
distribution agreement.
RESULTS OF OPERATIONS
The Company is considered to be in the development stage, as no
significant revenues from operations have been earned.
As is industry practice, Imprint records revenues for sales of its
cassettes and compact disks when those products are shipped to retailers. Also
consistent with industry practice, the Company's recordings are sold to
retailers on a returnable basis. Because the Company has no historical sales
pattern upon which to estimate the return rate for its products, the Company's
reserve for returns and allowances is based solely on data obtained from
SoundScan, an industry organization which tracks retail sales.
For the three months ended October 31, 1996, the Company had
revenues from operations, net of returns and allowances, of $93,858.
RECENT DEVELOPMENTS
Imprint artist Gretchen Peters's first album, THE SECRET OF LIFE,
continues to receive national media critical acclaim. According to SoundScan,
Imprint has sold approximately 10,000 units of Ms. Peters's album. THE SECRET
OF LIFE was released in the United Kingdom in November 1996. Imprint plans to
release a second single for radio air play from the album in January 1997.
_________________________
(1) The last 10-QSB states that Paradoxx had plans to release two albums
and BMG one during the quarter ended October 31, 1996.
6
<PAGE>
Al Anderson, noted Country songwriter and former member of the
band "NRBQ," released his first album on the Imprint label, PAY BEFORE YOU
PUMP, in September 1996. 10,000 units have been distributed for sale at music
retail locations in the United States. The first song released for radio from
PAY BEFORE YOU PUMP received and is currently receiving air play from the
radio format known as "Americana".
Canadian Country music artist Charlie Major's previously recorded
BMG-Canada album HERE AND NOW was released by Imprint in the United States in
October 1996. 15,000 units have been distributed for sale at music retail
locations in the United States. One single from HERE AND NOW was released for
radio air play at the time the album was released, and a second single from the
album will be released within the next ninety days.
Imprint artist Jeff Wood has completed recording his first album,
BETWEEN THE EARTH AND THE STARS, for scheduled release in January 1997. The
first single from this album, "You Just Get One," was number 59 on the Country
music singles chart in the December 14, 1996 issue of BILLBOARD MAGAZINE.
BETWEEN THE EARTH AND THE STARS was produced by Mark Bright, who also produced
the successful Blackhawk band albums for Arista Records. The Company plans to
release additional singles from this album following "You Just Get One,"
which continues to build favorable air play.
Through the efforts of Imprint President Bud Schaetzle,
nationally-known talk show host Kathy Lee Gifford invited Jeff Wood to appear on
her annual CBS Television Christmas Special, JUST IN TIME FOR CHRISTMAS,
broadcast on December 11, 1996. During the special, he performed "Use Mine," a
song from his new album. The Company views this television appearance as an
important introduction of Jeff Wood to a national audience.
The Company is in the process of negotiating the rights to a
Country music version of "The Macarena," by The GrooveGrassBoyz. Though the
contract is not complete, an understanding has been reached allowing the Company
to release this single to radio stations, which occurred in November 1996 and
has generated favorable air play. The Company has currently processed retail
orders for more than 70,000 units of the single recording.
During the period from August 1 through October 31, 1996, the
Company has incurred approximately $100,000 in direct recording costs.
The Company is continuing negotiations for licensing agreements
for distribution of its product in Australia, the United Kingdom, and the rest
of Europe.
During the next twelve months, the Company plans the following
activities with respect to its operations.
PLAN OF OPERATIONS
The Company plans to release Jeff Wood's first album, BETWEEN THE
EARTH AND THE STARS, in late January 1997. Once the radio air play of "You Just
Get One" has subsided, the Company intends to release a second single form the
album, "Use Mine," accompanied by a music video of that song. The Company also
plans for Wood to support the release of the album with a touring schedule
of live performances around the country.
Imprint has scheduled Bob Woodruff's first album on the Company's
label for release in March 1997. The release of the album will be supported by
live performances by Woodruff scheduled to coincide with radio station air play
and retail music store promotions.
7
<PAGE>
The Company plans to introduce new Country music artist Ryan
Reynolds to the public in the first half of 1997. Reynolds is currently
recording material for his first album, the first single from which Imprint
plans to release for radio station air play sometime in April or May 1997. The
Company will spend the first part of 1997 promoting this new artist to Country
music radio stations throughout the United States.
BMG-Canada plans to release Gretchen Peters's THE SECRET OF LIFE
album in Canada during the first quarter of 1997.
LIQUIDITY AND CAPITAL RESOURCES
Based on the Company's current business plan, the Company believes
that it can continue to satisfy its cash requirements for operations for
approximately six or seven months. In order to conserve capital resources, Roy
Wunsch, Chairman and Chief Executive Officer of the Company, and Bud Schaetzle,
President of the Company, agreed to temporarily defer 50% of their salaries
commencing on or about September 1, 1996, and 100% of their salaries as of
December 1, 1996.
The Company has begun considering sources of additional capital to
finance its operations following the expiration of the six to seven month period
for which it currently has cash on hand to finance operations.
SAFE HARBOR PROVISION REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report contains so-called forward-looking
statements (within the meaning of the Private Securities Litigation Reform Act
of 1995), the occurrence or non-occurrence of which entail substantial risks and
uncertainties. When used herein, the words "anticipate," "intend," "plan,"
"believe," "hope," "estimate' and "expect," and any similar words or phrases as
they relate to the Company or its operations, are intended to identify such
forward-looking statements. Several significant variables could cause the
Company's actual results, performance or achievement for fiscal 1998 and beyond
to deviate materially from those set forth in such forward-looking statements.
These factors include but are not limited to: the commercial success of
Imprint's new and existing artists, relationships with Imprint artists, and
producers and other industry professionals, attraction and retention of key
personnel, general economic and business conditions, and new competitors and
increased competition from existing competitors in the recorded music industry.
8
<PAGE>
PART II
OTHER INFORMATION
ITEM 5 - OTHER INFORMATION
The Company's application for registration of the tradename
"Imprint Records," filed on February 9, 1996 with the U.S. Patent and Trademark
Office, remains pending.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBIT INDEX
27 Financial Data Schedule
(b) The Company has not filed any reports on Form 8-K.
9
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
IMPRINT RECORDS, INC.
DATE: December 13, 1996 By: /s/Roy W. Wunsch
-------------------------------
Roy W. Wunsch, Chairman
and Chief Executive Officer
DATE: December 13, 1996 By: /s/Wayne Halper
-------------------------------
Wayne Halper, Chief Financial
Officer/Vice President -
Business Development
10
<PAGE>
EXHIBIT INDEX
Exhibit Page No.
- ------- -------
27 Financial Data Schedule
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF IMPRINT RECORDS, INC. FORMERLY, VERITAS MUSIC ENTERTAINMENT, INC.
(A DEVELOPMENT STAGE COMPANY) AS OF OCTOBER 31, 1996 AND FOR THE QUARTER ENDED
OCTOBER 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-START> AUG-01-1996
<PERIOD-END> OCT-31-1996
<CASH> 1,297
<SECURITIES> 0
<RECEIVABLES> 85
<ALLOWANCES> 0
<INVENTORY> 334
<CURRENT-ASSETS> 1,803
<PP&E> 476
<DEPRECIATION> 75
<TOTAL-ASSETS> 2,244
<CURRENT-LIABILITIES> 184
<BONDS> 0
0
0
<COMMON> 6,302
<OTHER-SE> (4,242)
<TOTAL-LIABILITY-AND-EQUITY> 2,244
<SALES> 94
<TOTAL-REVENUES> 94
<CGS> 13
<TOTAL-COSTS> 13
<OTHER-EXPENSES> 1,301
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,198)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,198)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,198)
<EPS-PRIMARY> (.25)
<EPS-DILUTED> (.25)
</TABLE>
