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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the quarterly period ended September 30, 2004
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
Commission file number 000-25783
AMERICANA PUBLISHING, INC.
-------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
COLORADO 84-1453702
------------ --------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
303 SAN MATEO NE, SUITE 104A, ALBUQUERQUE, NM 87108
---------------------------------------------------
(Address of principal executive offices)
505-265-6121
(Issuer's telephone number)
- -------------------------------------------------------------------
(Former name, former address, and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes [X] No [
].
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
As of November 15, 2004, there were 8,496,910 shares of common stock outstanding.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [x].
INDEX
PAGE
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
December 31, 2003 (Audited) and
September 30, 2004 (Unaudited) 1
Condensed Consolidated Statement of Operations
Nine months ended September 30, 2004
and 2003 2
Condensed Consolidated Statements of Cash Flows
Nine months ended September 30, 2004
and 2003 3
Notes to Condensed Consolidated Financial Statements 4 - 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 6 - 10
Item 3. Controls and Procedures 11
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Americana Publishing, Inc.
Condensed Consolidated Balance Sheet
As of
September 30, December 31,
2004 2003
(Unaudited) (Audited)
ASSETS
Current Assets
Cash and cash equivalents $ - $ 30,790
Accounts receivable, less allowance
for doubtful accounts of $29,316
and $29,316, respectively 227,225 269,344
Inventory 187,553 83,340
Prepaid and other current assets 6,330 4,679
Assets from discontinued operations - 1,519,430
--------------- -------------
Total Current Assets 421,108 1,907,583
Property and Equipment, net 444,624 369,616
--------------- -------------
TOTAL ASSETS $ 865,732 $ 2,277,199
=============== =============
LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT)
Current Liabilities
Accounts payable 158,506 220,102
Factor payable 282,226 -
Accrued expenses 210,986 392,696
Notes payable 56,871 47,719
Notes payable - Officers and Directors 42,500 68,782
Convertible debt - related parties 72,000 387,500
Liabilities from discontinued operations - 3,686,233
--------------- -------------
Total current liabilities 823,089 4,803,032
Commitments and Contingencies
Shareholder's equity (deficit)
Preferred stock, no par
20,000,000 shares authorized
0(unaudited) no shares issued and
outstanding - -
Common stock, $0.001 par value
500,000,000 shares authorized - -
6,746,402 (unaudited) and 2,499,955
shares issued and outstanding for
September 30,2004 and December 31,2003,
respectively 6,746 99,998
Additional paid-in capital-warrants 72,789 -
Additional paid-in capital 15,598,552 12,760,818
Accumulated deficit (15,635,444) (15,386,649)
------------- -------------
Total shareholder's equity (deficit) 42,643 (2,525,833)
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 865,732 $ 2,277,199
============== =============
See Accompanying Notes to Financial Statements.
1
Americana Publishing, Inc.
Consolidated Statements of Operations
For the Period
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30 ENDED SEPTEMBER 30
2004 2003 2004 2003
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
---------- ---------- ---------- ----------
Revenue 251,513 279,728 901,839 924,198
Cost of Goods Sold 57,556 118,182 362,606 340,593
---------- ---------- --------- ---------
Gross Profit 193,957 161,546 539,233 583,605
Operating expenses
Compensation/Consulting expense 59,608 658,608 2,040,350 2,258,961
Selling, general and
administration 270,388 108,679 781,384 460,344
Depreciation and amortization 36,938 24,890 105,882 67,752
--------- ------- ----------- ---------
Total operating expenses 366,934 792,177 2,927,616 2,787,057
Loss from operations (172,977) (630,631) (2,388,383) (2,203,452)
Other Income (Expense)
Interest Expense - (19) - (1,333)
Other Income(Expense) (9,833) - (27,215) 5,314
----------- -------- --------- ----------
Total other income (expense) (9,833) (19) (27,215) 3,978
----------- -------- --------- ----------
Loss before extraordinary item (182,810) (630,650) (2,415,598) (2,199,474)
Extraordinary Item
(Discharge of Bankruptcy - CMG) - - 2,166,803 -
----------- --------- ----------- ---------
Loss after extraordinary item (182,810) (630,650) (248,795) (2,199,474)
----------- --------- ------------ ---------
Net Loss $ (182,810) $ (630,650) $ (248,795) $(2,199,474)
============ ============ ============ =========
Basic and diluted loss per share:
Before extraordinary item $ (0.02) $ (0.40) $ (0.56) $ (1.72)
After extraordinary item (0.02) - (0.05) -
(After 40:1 reverse split) ----------- ---------- ------------ ---------
Basic and diluted
weighted-average shares
outstanding 6,119,109 1,570,577 4,295,025 1,279,456
(After adjusted 40:1 reverse split)=========== =========== ============ ==========
See Accompanying Notes to Financial Statements.
2
Americana Publishing, Inc.
Condensed Consolidated Statement of Cash Flows
(Unaudited)
Nine Months Ended Nine Months Ended
September 30, 2004 September 30, 2003
-------------------- --------------------
Cash Flows From Operating Activities:
Net Loss from continuing operations $(2,415,598) $(2,199,474)
Adjustments to reconcile net loss to net cash
provided by operating activities
Activities:
Depreciation and amortization 105,882 67,752
Issuance of common stock to board members
and employees for services rendered 724,500 551,471
Issuance of common stock to consultants
for services rendered 1,315,850 1,707,491
Provision for allowance for doubtful accounts -
(Increase) decrease in
Accounts receivable 42,119 61,251
Inventory 15,787 (56,658)
Prepaid expenses and other current assets (1,651) 2,617
Increase (decrease) in
Account payable (61,596) 27,612
Accrued expenses & Factor Payable 100,516 (12,509)
------------ ----------
Net cash provided in operating
activities (174,191) 149,553
------------ ----------
Net Cash Used by Operating Activities (174,191) 149,553
Cash Flows From Investing Activities
Purchase of property and equipment (96,315) (112,563)
------------ ----------
Net cash used in investing activities (96,315) (112,563)
------------ ----------
Cash flows from financing activities
Proceeds from notes payable 18,129 -
Payments on notes payable (4,935) (48,556)
Proceeds from the sale of warrants 257,312 50,000
------------ ----------
Net cash provided/used by financing
activities 270,506 1,444
Net increase in cash and cash equivalents - 38,434
Cash and cash equivalents, beginning of period - -
------------ ----------
Cash and cash equivalents, end of period - $ 38,434
============= ==========
Supplemental disclosures of cash flow information
Interest paid $ $ 1,333
============ ==========
Income taxes paid $ $ -
See Accompanying Notes to Financial Statements.
3
AMERICANA PUBLISHING, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 2004
NOTE 1. BASIS OF PRESENTATION
The unaudited financial statements of Americana Publishing, Inc. (the Company)
have been prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted pursuant to such rules and regulations. The results of
operations for interim periods are not necessarily indicative of the results to
be expected for the entire fiscal year, which will end on December 31, 2004. The
accompanying unaudited financial statements and related notes should be read in
conjunction with the audited financial statements and the Company's Annual Report
on Form 10-KSB for the fiscal year ended December 31, 2003.
NOTE 2. GOING CONCERN
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. As shown in the financial
statements, during the year ended December 31, 2003 and the nine months ended
September 30, 2004, the Company incurred operating losses of $2,520,972 and
$2,415,598, respectively. These factors, among others, raise substantial doubt
about its ability to continue as a going concern.
NOTE 3. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
None
4
NOTE 4. Liquidity
The Company has historically financed its operations through the sale of its securities.
The Company now supports its operations primarily through sales of its
products and, to a lesser extent, through sales of its securities. The Company's
revenues have averaged $100,000 per month during the 2004 fiscal year. This revenue
has not been adequate to cover current monthly cash expenditures thus requiring the Company to
raise additional capital to support its operations.
While management has also been successful during the quarter ended September 30, 2004
in reducing cash expenditures, there is no assurance that the Company's revenues
will increase, or that it's expenses will decrease, in amounts that will allow the
Company to achieve profitability.
Until it earns enough revenue from sales of its products to support its
operations, the Company will require additional financing. There is no guarantee
that the Company will be able to obtain additional financing when it needs it.
Note 5. Stock Transactions
During the first nine months of 2004 the Company issued 3,344,959 post-split shares of
common stock to various employees and consultants. The fair value of this stock was
booked as compensation expense and consulting expense in the amount of $2,040,350.
Note 6. Extraordinary Item
During the first quarter of 2004 the debts of our subsidiary, Corporate Media
Group, Inc., were discharged in bankruptcy and a one time extraordinary gain of
$2,166,803 was recorded for the forgiveness of debt. The forgiveness of debt
resulted from the elimination of $1,519,430 of assets and the elimination of
$3,686,233 in debt resulting in a net gain of $2,166,803.
Note 7. Reverse Stock Split
Effective August 26, 2004, the Company implemented a 40:1 reverse stock split.
The reverse split was implemented because the sub-penny per share price was an
ongoing hindrance to serious investor review and subjected the stock to downward
volatility. On the effective date, the Company stock symbol was changed to APBI.
5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
FORWARD-LOOKING STATEMENTS
This report by Americana Publishing, Inc. contains forward-looking
statements. These are statements regarding financial and operating performance
and results and other statements that are not historical facts. The words
"expect," "project," "estimate," "believe," "anticipate," "intend," "plan,"
"forecast," and similar expressions are intended to identify forward-looking
statements. Certain important risks could cause results to differ materially
from those anticipated by some of the forward-looking statements. Some, but not
all, of the risks that could cause actual results to differ from those suggested
by the forward-looking statements include, among other things:
o the loss of the services of any member of our management team and, in
particular, the loss of the services of George Lovato, our Chairman and
Chief Executive Officer;
o our ability to successfully integrate the business of Action Media Group,
LLC into our operations;
o increased competition in our niche market, truck stops, that would cause
us to reduce the sales prices of our products or that would otherwise
adversely impact our sales;
o our ability to obtain financing as and when we need it;
o whether or not our largest customer continues to purchase our products
as it has in the past;
o a downturn in the U.S. economy that could result in a reduction in consumer
discretionary spending;
and other factors, all of which are difficult to predict and many of which are beyond our control.
You are cautioned not to place undue reliance on these forward-looking
statements, which relate only to events as of the date on which the statements
are made. We undertake no obligation to publicly revise these forward-looking
statements to reflect events or circumstances that arise after the date hereof.
You should refer to and carefully review the information in future documents we
file with the Securities and Exchange Commission.
GENERAL
Management's discussion and analysis of results of operations and financial
condition are based upon our financial statements. These statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America. These principles require management to make certain
estimates, judgments and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses and related disclosure of contingent assets
and liabilities. On an on-going basis, we evaluate our estimates based on
historical experience and various other assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.
OVERVIEW
We were incorporated in Colorado in April 1997. We are a multi-media publishing
company. Our primary business is the publication and sale of audio books, but we
also offer print books and electronic books. Thus far, substantially all of our
revenues have been earned from the sale of audio books, which are recorded in
cassette and CD format. Approximately 70% of our sales of audio books are made
through truck-stops.
During the quarter ended September 30, 2004, the operations and assets of Action
Media Group, LLC (doing business as Coreflix)were integrated with our operations
in Albuquerque, New Mexico. Coreflix rents action sports DVDs from its website.
We acquired the assets and operations of Coreflix by issuing a total of 8,000,000
pre-split shares of our common stock to the members of Action Media Group LLC.
The acquisition of these assets will diversify our product offerings and, we believe,
expand our customer base. While acquiring the assets and operations of Coreflix
expanded our product offerings, it did not increase our employee costs since our
existing employees were able to integrate the Coreflix operations, which include
website maintenance, product ordering and fulfillment of orders, with our general
operations. During the quarter ended September 30, 2004, we retained the services
of Mr. Ben Padnos to assist our employees with integrating the Coreflix operations.
Mr. Padnos continues to render these services to us.
We currently do not earn enough in revenues to maintain our operations. To date, in
addition to our revenues, we have funded our operations with loans from our
officers and directors, sales of our securities, and the private placement of
convertible debentures. We will continue to need money to operate, and, other
than an asset-based line of credit factoring agreement with Langsam Borenstein
Partnership, which is described below, we have no commitments for funding from
any third party. Our officers and directors are not required to continue to loan
money to us and we cannot guarantee that sales of our securities will raise enough
money to continue our operations. If we are unsuccessful in obtaining funds when
we need them, we will be required to severely curtail, and possibly to even cease,
our operations.
We are committed to capital expenditures for the production of audio masters, for
the purchase of materials for audio masters and for improving or replacing DVDs
in the Coreflix inventory. During the quarter ended September 30, 2004, we spent
approximately $44,852 for the production of audio masters. In October 2004 we
began improving and replacing the DVDs in the Coreflix inventory and, to date,
we've spent approximately $1,298 for new disks.
In July 2001 we acquired Corporate Media Group, Inc., referred to in this
discussion as "CMG", as a wholly owned subsidiary in an attempt to vertically
integrate our reproduction and duplication activities as they relate to our
audio book operation. This was a "decentralized" attempt at production, as CMG
was a Tennessee business enterprise, and was scheduled to continue operations
at its existing locale and facilities.
CMG discontinued its operations in April 2002 and sought protection under the
provisions of the US Bankruptcy Code on August 5, 2003. CMG's debts were
discharged through the bankruptcy, and in accordance with certain provisions of
the US Bankruptcy Code, an adjustment was made to the our financial statements
during the quarter ended March 31, 2004 that eliminated $3.67 million in debt
and reduced our net loss to $65,986. There is no such adjustment to our
financial statements for the quarter ended September 30, 2004.
Other than a potential downturn in the U.S. economy, which would affect the
discretionary spending of consumers, we do not know of any trends, events or
uncertainties not already discussed herein that are expected to have a
materially adverse impact on our net sales and income from continuing
operations. We do not consider sales of our books to be seasonal in nature,
although we may experience an increase in sales during the year-end holidays.
We do not have any off-balance sheet arrangements.
6
RESULTS OF OPERATIONS
Quarter Ended September 30, 2004 As Compared To The Quarter Ended September 30, 2003
Our revenues from operations for the quarter ended September 30, 2004 were $251,513
as compared to revenues of $279,728 for the quarter ended September 30, 2003, a
decrease of $28,215 or approximately 10%. We attribute this decline in sales to
the slower economic conditions that were experienced nationwide during most of the
third quarter of the 2004 fiscal year.
Cost of goods sold for the quarter ended September 30, 2004 decreased by $60,626, or
approximately 51%, to $57,556 from $118,182 for the quarter ended September 30,
2003. The decrease in cost of goods sold resulted from our decision to duplicate,
in-house, our audio books on cassette and CD instead of outsourcing the duplication
to a third party.
Our gross profit from operations increased to $193,957 for the quarter ended
September 30, 2004 as compared to $161,546 for the quarter ended September 30, 2003, an
increase of $32,411 or approximately 20%. Our gross margin percent increased
to 77% for the quarter ended September 30, 2004 from 57% for the quarter ended September
30, 2003. The increase in gross profit from operations and gross margin percent
resulted from the savings we achieved by duplicating our audio books on cassette
and CD in house instead of outsourcing the duplication to a third party.
Compensation and consulting expense and selling, general and administration
expense decreased by $437,291, from $767,287 for the quarter ending September 30,
2003 to $329,996 for the quarter ending September 30, 2004. We attempt to conserve
cash by issuing stock to employees and consultants for services rendered to us.
The decrease in these expenses is due to a combination of a decline in our stock price
and the fact that we issued less common stock for compensation than we have in prior periods.
Our loss from operations was $182,810 for the quarter ended September 30, 2004 as
compared to a loss from operations of $630,650 for the quarter ended September 30,
2003, a decrease of $447,840 or 71%. The decrease in net loss from operations
was primarily attributable to cost savings from in-house
duplication, and decreased compensation and consulting expense.
Nine Months Ended September 30, 2004 As Compared To Nine Months Ended September 30, 2003
Revenues for the nine month period ended September 30, 2004 decreased by $22,359, to
$901,839, as compared to revenues of $924,198 for the nine month period ended
September 30, 2003, a decrease of less than 1%. Again, we attribute this decline
in revenues to the slow U.S. economy, which resulted in sluggish retail sales.
Costs of goods sold for the nine month period ended September 30, 2004 increased by
$22,013, to $362,606, as compared to costs of goods sold in the amount of
$340,593 for the nine month period ended September 30, 2003, an increase of approximately
6%. The increase in costs of goods sold was primarily due to increases in the
sale of clearance inventory, which carry a lower unit price. We decided to
reduce the price of our inventory to certain sales outlets as part of our marketing
and promotional activities.
Our gross profit decreased from $583,605 for the nine month period ended September 30,
2003 to $539,233 for the nine month period ended September 30, 2004, a decrease of
$44,372, and our gross margin percent decreased from 63% for the nine month
period ended September 30, 2003 to 59% for the nine month period ended September 30, 2004.
This decrease is attributable to increases in the sale of clearance inventory,
which carry a lower unit price.
Compensation expense and selling, general and administrative expense increased
by $102,429, from $2,719,305 for the nine month period ended September 30, 2003 to
$2,821,734 for the nine month period ended September 30, 2004, an increase of
approximately 4%. This increase was due to an increase in the expense of common
stock transferred to employees and consultants in exchange for services provided
to us during the first and second quarter of 2004.
Our loss from operations increased from $2,199,474 for the nine month period
ended September 30, 2003 to $2,415,598 for the nine month period ended September 30,
2004, an increase of $216,124, or approximately 10%. The increase in the loss
from operations is primarily due to an increase in the issuance of common stock
to employees and consultants.
In the first quarter of 2004 the bankruptcy of CMG was concluded, which resulted
in a one time extraordinary gain of $2,166,803 that was recorded as a
forgiveness of debt. The forgiveness of debt resulted from the elimination of
$1,519,430 of assets and $3,686,233 in debt from our financial statements. This
one time gain resulted in the reduction of our net loss for the nine month period
ended September 30, 2004 to $248,795 as compared to a net loss of $2,199,474
for the nine month period ended September 30,
2003.
7
GOING CONCERN
Our financial statements have been prepared on a going concern basis, which
contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business. During the year ended December 31, 2003 and the
nine month period ended September 30, 2004, we incurred net operating losses of
$2,520,972 and $2,415,598, respectively. Factors such as whether or not we can
obtain financing when we need it and whether or not sales of our products will
ever produce enough revenue to completely support our operations raise substantial
doubt about our ability to continue as a going concern.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2004 we had cash or cash equivalents of $0 on hand, as compared to
$30,790 cash or cash equivalents at December 31, 2003. Our primary source of
cash during the nine month period ended September 30, 2004 consisted of revenues from
sales of our products, proceeds from the sale of our securities and the repayment of loans.
Net cash used in operating activities was $(174,191) for the nine month period ended
September 30, 2004 as compared to net cash provided by operating activities of $149,553
for the nine month period ended September 30, 2003. Cash for the nine month period ended
September 30, 2004 was decreased primarily as a result of the costs associated
with the sale of clearance inventory. The decrease in inventory related to our
decision to reduce the price of our inventory to certain sales outlets as part of
our marketing and promotional activities. Of the loss of $2,415,598, $2,040,350
consisted of stock issuance expenses to employees and outside consultants.
Net cash used by investing activities was $96,315 during the nine month period ended
September 30, 2004 as compared to $112,563 net cash used by investing activities
during the nine month period ended September 30, 2003. The funds were used for the
purchase of audio masters requiring expenditures for studio time and voice talent.
Net cash provided by financing activities during the nine month period ended September
30, 2004 was $265,493 as compared to net cash provided by financing activities in the amount
of $1,444 for the nine month period ended September 30, 2003. We sold units consisting of
promissory notes convertible into our common stock and warrants to purchase our
common stock in exchange for a total purchase price of $257,312. We also received
$18,129 in loan payments. These amounts were offset by payments we made toward
loans in the amount of $4,935. During the nine months ended September 30, 2004 we paid
nothing in interest expense. During the nine months ended September 30, 2003, we paid
$1,333 in interest expense.
During 2002, we entered into an asset-based line of credit factoring agreement
with Langsam Borenstein Partnership. Pursuant to this agreement, we sell
selected accounts receivable to Langsam Borenstein Partnership in the face
amount of no less than $5,000 per month. Langsam Borenstein Partnership charges
a varying commission on each invoice sold, depending on the number of days
payment is outstanding. The commission may vary from 4% to 10%. This agreement
has no set term and may be cancelled by either party on notice to the other. As
part of this transaction, we granted to Langsam Borenstein Partnership a
security interest in our assets, including our receivables. This security
interest is subordinate to the security interest granted to the holders of our
6% Convertible Debentures.
Effective August 26, 2004, the Company implemented a 40:1 reverse stock split.
This action was taken because the sub-penny per share price was an ongoing hindrance
to serious investor review and subjected the stock to downward volatility. On the
effective date, the Company's ticker symbol was changed to APBI.
8
During the next 12 months we anticipate that we will continue financing our operations
through revenues from sales of our products, proceeds from sales of our securities
and related party loans. We currently have no commitments for future financing,
other than our continuing asset based financing through Langsam Borenstein Partnership
and we cannot guarantee that we will be successful in raising additional capital
when we need it. During the nine months ended September 30, 2004, we raised $257,312
from the private placement of our securities. We do not currently have any outstanding
subscriptions for the private placement of our securities or outstanding commitments
for related party loans. If we need money for our operations but we are not successful
in generating sufficient revenues, raising money through the sale of our securities
or borrowing money, we may be required to significantly curtail, or to cease, our
operations.
We are attempting to increase revenues by continuing to acquire new book titles and
by looking for niche markets for our products while contemporaneously reducing
our per unit costs. Additionally, we continue to look for business or asset
acquisitions, such as the acquisition of the assets of Coreflix, that will provide
near term expansion of our product offerings, customer base, and sales revenues.
We also continuously seek ways to reduce our expenses. During the second quarter
of the 2004 fiscal year we implemented the redesign of our cassette packaging.
During the third quarter of the 2004 fiscal year, this redesign reduced both the
costs of our raw materials and the labor required to assemble and ship the packaging.
We believe that the redesign will continue to provide us with cost savings in
subsequent quarters. Our cost-of-goods sold was also reduced by a change in CD
raw material that resulted in both higher product quality and a reduction in
production-duplication time.
We produce approximately 16 new titles each month, 6 in CD format and 10
in cassette format, along with 3 new Collector Editions series that are produced
in cassette format each quarter. We continue to offer promotions of excess inventory
items at reduced costs to our distributors and to expand our promotions at truck
stops. Due to improved inventory control we know what products are immediately
available for sale and, as a result of moving our production in-house, we are able
to better schedule new productions and have them available for release. As a result,
sales to consumers through our 800 number increased by $7,200 during the quarter
ended September 30, 2004, to $13,500, from $6,300 during the quarter ended June
30, 2004. By implementing a marketing program targeted directly to truck drivers,
we have experienced an increase in sales of approximately 250 units per month.
We have also expanded our marketing to include "e-mail blasts" which are sent to
approximately 500,000 individuals each week, the placement of Internet website
banners, and the strategic placement of physical advertisement banners at targeted
audience locations, including skate parks and sporting good stores. During the
fourth quarter of the 2004 fiscal year we intend to engage in a cross-selling,
direct mail campaign that we believe will benefit our business and that of the
sporting goods manufacturers and distributors who participate in it. We anticipate
that these various marketing efforts will increase our subscriber sales starting
in the fourth quarter of the 2004 fiscal year and continuing thereafter.
During the quarter ended September 30, 2004 we added a new client, The News Group
("TNG"). TNG operates from 10 major regions across North America. Its customer
sales and distribution network include the Army and Air Force Base Exchange Systems
as well as national networks of truck stops, groceries, convenience marts and drug
stores.
During the first nine months of the fiscal year, we also benefited from a substantial
increase in orders by our largest customer, Audio Adventure. Between January 1,
2004 and September 30, 2004, Audio Adventures placed orders totaling $197,721 as
compared to $67,663 during the 2003 fiscal year. We expect that Audio Adventures
will continue to place significant orders in the future.
9
ITEM 3. Controls and Procedures
We carried out an evaluation, under the supervision and with the participation
of our management, including our President and Chief Executive Officer and our
Chief Financial Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures as of the end of the period covered by this
report. The evaluation was undertaken in consultation with the Company's
accounting personnel. Based on that evaluation, the President and Chief
Executive Officer and the Chief Financial Officer concluded that our disclosure
controls and procedures are effective to ensure that information required to be
disclosed by us in the reports that we file or submit under the Securities
Exchange Act of 1934 is recorded, processed, summarized and reported within the
time periods specified in the Securities and Exchange Commission's rules and
forms.
There were no significant changes in our internal controls or in other factors
that could significantly affect internal controls subsequent to the date of
their evaluation.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
During the quarter ended September 30, 2004, the disputed, small claims court action
brought in Bernalillo, New Mexico by Left Field Designs, Inc. was resolved and paid.
During the quarter ended September 30, 2004, the disputed District Court action
brought in Hinnepin County, Minnesota by Challenge Printing, Inc. was resolved
through mediation.
In December 2002 we filed an action against Richard Durand and Susan Durand in
the District Court of Bernalillo County, New Mexico, alleging fraud and
misrepresentation with respect to the value of certain assets of Corporate Media
Group, Inc. that were transferred to us. We are seeking the return of 624,000
pre-split shares of common stock that were transferred to Richard Durand and
Susan Durand as consideration for our purchase of the outstanding stock of
Corporate Media Group, Inc. We are also seeking judgment against Richard Durand
and Susan Durand for $612,000 in damages. During the quarter ended September 30,
2004, the District Court denied the Durands' Motion to dismiss our Complaint.
The Durands have filed an Answer to our Complaint, as ordered by the Court, and
the action is now at issue.
In the previously reported action in the United States Bankruptcy Court proceeding
involving our subsidiary, Corporate Media Group, Inc., wherein Richard
and Susan Durand sought a default judgment against Americana via an ancillary,
adversarial proceeding, Americana appealed the matter to the Federal District
Court. The District Court entered an Order overturning the Bankruptcy Court's
finding of default and denying the entry of a default judgment against us.
Our Answer and Counter-Claim against the Durands for breach of contract and
fraudulent inducement has been filed in the Federal District Court and the matter
is at issue. We are further requesting that the District Court grant our Motion
and enter an order either dismissing the Durands' Complaint, or in the alternative
abstaining from the matter under Federal rules of procedure, as the State District
Court of New Mexico has now taken jurisdiction over the identical complaints and parties.
Item 2. Changes in Securities
In June 2004 we completed a private offering of securities to accredited investors,
which included three of our directors. We offered units consisting of convertible
promissory notes coupled with warrants. The convertible promissory notes bear
interest at the rate of 10% per annum. The principal and interest amounts due
under the promissory notes may be converted at the option of the note holder.
The note holder may calculate the conversion amount by using one of three methods,
at his option: 50% of the average closing bid price over the 30 consecutive trading
days immediately preceding the conversion date, 25% of the average closing bid
price over the five consecutive trading days immediately preceding the conversion
date or 25% of the average closing bid price over the 30 consecutive trading days
immediately preceding the original issuance date. Each note holder also received
three warrants. The first warrant allows the note holder to purchase a number of
shares of common stock equal to the product of the principal amount of the note
multiplied by 120. The exercise price is $0.011 per share. The second warrant
allows the note holder to purchase a number of shares of common stock equal to
the product of the principal amount of the note multiplied by 40. The exercise
price is $0.02 per share. The third warrant allows the note holder to purchase
a number of shares of common stock equal to the product of the principal amount
of the note multiplied by 40. The exercise price is $0.04 per share. Each of the
warrants has a two year term. During July 2004, we completed the final documentation
for this offering and closed it. The securities were issued in reliance on an
exemption provided by section 506 of Regulation D promulgated under the Securities
Act of 1933. The offering was made without any form of solicitation or advertising
and the offerees represented that they were "accredited" as that term is defined
in Rule 501 of Regulation D.
On August 9, 2004, we issued 1,000,000 pre-split shares of restricted common stock with
a value of $0.01 per share to Joe Agliozzo in consideration for services rendered to us.
The securities were issued pursuant to an exemption provided by section 4(2) of the
Securities Act of 1933 in that the offering was made without any form of solicitation
or advertising and the offeree occupied an insider status relative to the Company
that afforded him effective access to the information registration would otherwise provide.
On August 9, 2004, we issued 1,000,000 pre-split shares of restricted common stock with
a value of $0.01 per share to Benjamin Padnos in consideration for services rendered
to us. The securities were issued pursuant to an exemption provided by section
4(2) of the Securities Act of 1933 in that the offering was made without any form
of solicitation or advertising and the offeree occupied an insider status relative
to the Company that afforded him effective access to the information registration
would otherwise provide.
10
Item 3. Defaults upon Senior Securities
NONE
Item 4. Submission of Matters to a Vote of Security Holders
NONE
Item 5. Other Information
Effective August 26, 2004, the Company implemented a 40:1 reverse stock split.
This action was authorized by the Company's Board of Directors and approved by
its stockholders on January 30, 2004. This action was taken because the sub-penny
per share price was an ongoing hindrance to serious investor review and subjected the stock
to downward volatility. On the effective date, the
Company's ticker symbol was changed to APBI.
11
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Articles of Incorporation (1)
3.2 Bylaws (1)
31.1 Certification of Chairman of Board and
Chief Executive Officer pursuant to Section 302.(2)
31.2 Certification of Vice President and Chief
Financial Officer pursuant to Section 302.(2)
32. Certification of Chief Executive Officer
and Chief Financial Officer pursuant to 18
USC Section 1350.(2)
____________________________________
(1) Previously filed as an exhibit to our report on Form 10-SB filed with
the SEC on April 15, 1999.
(2) Filed herewith.
(b) Reports on Form 8-K
None
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934
the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
Americana Publishing, Inc.
By: /s/ George Lovato, Jr.
------------------------
Date: November 15, 2004 George Lovato, Jr., Chief Executive Officer/Chairman
By: /s/ Don White
----------------------------
Don White, Chief Financial
Officer
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO RULES 13a-14 AND 15d-14
OF THE SECURITIES EXCHANGE ACT OF 1934
I, George Lovato, Jr., President and Chief Executive Officer of Americana
Publishing, Inc. (the "Company"), certify that:
I have reviewed this quarterly report on Form 10-QSB of Americana Publishing,
Inc.
Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report.
Based on my knowledge, the financial statements, and other financial information
included in the report, fairly present in all material respects the financial
condition, results of operations and cash flows of the Company as of, and for,
the periods presented in the report.
The Company's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the Company and have:
(a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the Company, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which the periodic report is
being prepared;
(b) evaluated the effectiveness of the Company's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this quarterly report based on such evaluation; and
(c) disclosed in this quarterly report any change in the Company's
internal control over financial reporting that occurred during the
Company's most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the Company's internal control over
financial reporting; and
The Company's other certifying officers and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
Company's auditors and to the audit committee of the board of directors (or
persons fulfilling the equivalent function):
(i) all significant deficiencies in the design or operation of
internal control over financial reporting which are reasonably likely to
adversely affect the Company's ability to record, process, summarize and
report financial information; and
(ii) any fraud, whether or not material, that involves management or
other employees who have a significant role in the Company's internal
control over financial reporting.
Dated: November 15, 2004
/s/ George Lovato, Jr.
George Lovato, Jr.
President and Chief Executive Officer
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO RULES 13a-14 AND 15d-14
OF THE SECURITIES EXCHANGE ACT OF 1934
I, Don White, Chief Financial Officer of Americana Publishing, Inc. (the
"Company"), certify that:
I have reviewed this quarterly report on Form 10-QSB of Americana Publishing,
Inc.
Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report.
Based on my knowledge, the financial statements, and other financial information
included in the report, fairly present in all material respects the financial
condition, results of operations and cash flows of the Company as of, and for,
the periods presented in the report.
The Company's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the Company and have:
(a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the Company, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which the periodic report is
being prepared;
(b) evaluated the effectiveness of the Company's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this quarterly report based on such evaluation; and
(c) disclosed in this quarterly report any change in the Company's
internal control over financial reporting that occurred during the
Company's most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the Company's internal control over
financial reporting; and
The Company's other certifying officers and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
Company's auditors and to the audit committee of the board of directors (or
persons fulfilling the equivalent function):
(i) all significant deficiencies in the design or operation of
internal control over financial reporting which are reasonably likely to
adversely affect the Company's ability to record, process, summarize and
report financial information; and
(ii) any fraud, whether or not material, that involves management or
other employees who have a significant role in the Company's internal
control over financial reporting.
Dated: November 15, 2004
/s/Don White
Don White
Chief Financial Officer
Exhibit 32
CERTIFICATION OF OFFICERS
OF AMERICANA PUBLISHING, INC.
PURSUANT TO 18 USC § 1350
Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and
(b) of Section 1350, Chapter 63 of Title 18, United States Code) each of the
undersigned officers of Americana Publishing, Inc. (the "Company") does hereby
certify, to such officer's knowledge, that:
The quarterly report on Form 10-QSB for the quarter ended September 30, 2004 of the
Company fully complies with the requirements of section 13(a) or 15(d) of the
Securities Exchange Act of 1934 and the information contained in the Form 10-QSB
fairly presents, in all material respects, the financial condition and results
of operations of the Company.
Dated: November 15, 2004
/s/George Lovato, Jr.
George Lovato, Jr.
President and Chief Executive Officer
Dated: November 15, 2004
/s/Don White
Don White,
Chief Financial Officer