UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) August 22, 2002
AMERICANA PUBLISHING, INC.
(Exact name of registrant as specified in charter)
Colorado 84-1453702
(State or other juris- (Commission (IRS Employer
diction of incorporation) file number) Idenrtification No.)
303 San Mateo NE, Suite 104A, Albuquerque, New Mexico 87108
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (505)265-6121
ITEM 7 - FINANCIAL STATEMENTS OF BUSINESS ACQUIRED JULY 16, 2001
INDEPENDENT AUDITOR'S REPORT
The Board of Directors
Corporate Media Group, Inc.
Cleveland, Tennessee
We have audited the accompanying balance sheet of Corporate Group, Inc. as of
December 31, 2000 and the related statements of operations and retained earnings
(deficit) and cash flows for the years ended December 31, 2000 and 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits 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
the overall financial statement presentation. We believe that our audits provide
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 Corporate Media Group, Inc. as
of December 31, 2000, and the results of its operations and its cash flows for
the years ended December 31, 2000 and 1999 in conformity with accounting
principles generally accepted in the United States of America.
Chattanooga, Tennessee
December 6, 2001
/s/ Henderson Hutcherson & McCullough, PLLC
CORPORATE MEDIA GROUP, INC.
BALANCE SHEET
DECEMBER 31, 2000
ASSETS
CURRENT ASSETS
Cash $ 74,339
Accounts receivable 1,096,917
Inventory 349,621
Prepaid corporate taxes 183,249
Tax refund receivable 249,302
Total current assets $1,953,428
PROPERTY AND EQUIPMENT
Production equipment 1,589,290
Office equipment 275,043
Furniture and fixtures 281,996
Transportation equipment 192,797
Leasehold improvements 758,037
3,097,163
Less accumulated depreciation (964,339)
Cost less accumulated depreciation 2,132,824
TOTAL ASSETS $4,086,252
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Line of credit $ 568,623
Current portion of notes payable 73,402
Current portion of capital lease obligations 140,596
Accounts payable 2,917,513
Payroll taxes payable 13,715
Loans from stockholders 366,330
Total current liabilities 4,080,179
LONG-TERM LIABILITIES
Notes payable less current portion 155,930
Capital lease obligations less current portion 369,595
Total long-term liabilities 525,525
TOTAL LIABILITIES 4,605,704
STOCKHOLDERS' EQUITY
Common stock - no par value, 1,000,000 shares
authorized, 1,000 shares issued and outstanding 1,000
Retained earnings (deficit) (520,452)
Total stockholders' equity (519,452)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,086,252
The accompanying notes are an integral part of the financial statements.
CORPORATE MEDIA GROUP, INC.
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (DEFICIT)
YEARS ENDED DECEMBER 31, 2000 AND 1999
2000 1999
Percent of Percent of
Amount Sales Amount Sales
INCOME
Sales $11,454,397 100.0% $28,809,857 100.0%
Total income 11,454,397 100.0 28,809,857 100.0
COST OF SALES
Beginning inventory 319,001 2.8 749,634 2.6
Purchases 7,361,545 64.2 21,234,382 73.6
Freight 264,384 2.3 689,521 2.4
Wages and salaries 1,227,523 10.7 1,170,535 4.1
Contract labor 263,499 2.3 85,730 .3
Payroll taxes 125,529 1.1 55,689 .2
Depreciation expense 522,392 4.6 267,906 .9
Equipment rental 78,417 .7 44,401 .2
Merchandise available for sale 10,162,290 88.7 24,297,798 84.3
Less ending inventory 349,621 3.0 319,001 1.1
Total cost of sales 9,812,669 85.7 23,978,797 83.2
GROSS PROFIT 1,641,728 14.3 4,831,060 16.8
OPERATING EXPENSES
Wages and salaries 1,224,844 10.8 1,775,713 6.1
Payroll and other taxes 78,941 .7 94,560 .3
Advertising 91,568 .8 102,738 .4
Auto expense 24,949 .2 22,390 .1
Commissions 153,070 1.3 1,007,162 3.5
Insurance 202,111 1.8 144,753 .5
Office expenses 100,359 .9 132,710 .5
Postage 54,495 .5 48,374 .2
Printing 4,293 .0 5,482 .0
Rent expense 216,000 1.9 177,450 .6
Repairs and maintenance 73,904 .7 50,700 .2
Telephone and utilities 206,926 1.8 184,775 .6
Travel and entertainment 171,572 1.5 221,362 .7
Security 11,957 .1 17,144 .1
Professional expenses 198,720 1.7 28,813 .1
Amortization 0 .0 204 .0
Contributions 0 .0 15,077 .1
Total operating expenses 2,883,709 24.7 4,029,407 14.0
OPERATING INCOME (LOSS) (1,191,981) (10.4) 801,653 2.8
OTHER INCOME
Interest income 6,714 0.0 120,838 .4
OTHER EXPENSES
Bad debts 86,376 .8 536,284 1.9
Interest expen 108,228 .9 51,955 .1
Total other expenses 194,604 1.7 588,239 2.0
INCOME (LOSS) BEFORE TAXES (1,379,871) (12.1) 334,252 1.2
TAXES
State 0 .0 31,841 .1
Federal (249,302) .0 112,848 .4
Total taxes (249,302) .0 144,689 .5
NET INCOME (LOSS) (1,130,569) 9.9% 189,563 .7%
Retained earnings - beginning 610,117 420,554
Retained earnings (deficit) -
Ending $ (520,452) $ 610,117
EARNINGS (LOSS) PER
COMMON SHARE $ (1,130.57) $ 189.56
The accompanying notes are an integral part of the financial statements.
CORPORATE MEDIA GROUP, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDING DECEMBER 31, 2000 AND 1999
2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(1,130,569) $ 189,563
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 522,392 268,110
(Increase) decrease in accounts receivable 502,745 24,000
(Increase) decrease in prepaid expenses (67,844) (115,405)
(Increase) decrease in taxes receivable (249,302) (147,147)
(Increase) decrease in loans to stockholders 300,881 0
(Increase) decrease in inventories (30,620) 430,633
(Increase) decrease in other assets 0 204
Increase (decrease) in accounts payable 362,186 420,418
Increase (decrease) in accrued liabilities (373,058) 749,167
Total adjustments 967,380 1,629,980
Net cash provided (used) by operating activities (163,189) 1,819,543
CASH FLOWS FROM INVESTING ACTIVITIES
Cash payments for the purchase of property (278,750) (2,264,665)
Net cash used by investing activities (278,750) (2,264,665)
CASH FLOWS FROM FINANCING ACTIVITIES
Short-term borrowings 568,623 16,152
Long-term borrowings 50,620 727,918
Principal payments on long-term debt (102,965) (356,928)
Principal payments on short-term debt (16,152)
Net cash provided by financing activities 516,278 370,990
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 74,339 (74,132)
Cash and cash equivalents - beginning 0 74,132
Cash and cash equivalents - ending $ 74,339 $ 0
The accompanying notes are an integral part of the financial statements.
CORPORATE MEDIA GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Corporate Media Group,
Inc. (the Company) is presented to assist in understanding the Company's
financial statements. The financial statements and notes are
representations of the Company's management which is responsible for the
integrity and objectivity of the financial statements. These accounting
policies conform to generally accounting principles and have been
consistently applied in the preparation of the financial statements.
Nature of Operations
The Company provides an array of services which includes audio and video
duplication packaging, fulfillment, storage, and marketing. The Company
provides these services and credit to various customers throughout the
nation. Consequently, the Company's ability to collect the amounts due from
customers is affected by economic fluctuations in the industry.
Cash and Cash Equivalents
For purposes of the Statement of Cash Flows, cash is defined as cash on
hand and in banks.
The Company considers all highly liquid debt instruments purchased with
original maturities of three months or less to be cash equivalents. Bank
overdrafts are considered to be current liabilities similar to accounts
payable.
Accounts Receivable
The Company considers all accounts receivable to be fully collectible at
December 31, 2000. Bad debt expense amounted to $86,376 and $536,284 for
the years 2000 and 1999, respectively.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined
by the first-in, first-out method, and market represents the lower of
replacement cost or estimated net realizable value.
Property and Equipment
Property and equipment are carried at cost. Depreciation of property and
equipment is provided using the straight-line method for financial
reporting purposes at rates based on the following estimated useful lives:
Years Machinery and equipment 7 Furniture and fixtures 5-7 Leasehold
improvements 39
For federal income tax purposes, depreciation is computed using the
modified accelerated cost recovery system. This method approximates the
straight-line method. Expenditures for major renewals and betterments that
extend the useful lives of property and equipment are capitalized.
Expenditures for maintenance and repairs are charged to expense as
incurred. Depreciation expense amounted to $522,392 and $267,906 for the
years ended December 31, 2000 and 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 basis differences for financial and income tax
reporting, if any. In 2000, the Company recorded a credit to income tax
expense resulting from a carryback of losses to prior years. 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. During 2000, the Company
had no material differences gibing raise to deferred 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.
NOTE 2 - LONG-TERM DEBT
Long-term debt at December 31, 2000 consists of the following:
Notes payable to finance companies,
payable in monthly installments of
$2,384 including interest at 11.5%,
final payment due August 2002,
collateralized by furniture and equipment $ 42,126
Notes payable to banks, payable in monthly
installments of $3,411 including interest from
9.15% to 10.99%, final payment due December,
2005, secured by vehicles 101,895
Note payable to bank, due in monthly payments
of $2,114 including interest at 10.5%, final
payment due February 2005, collateralized by
equipment 85,311
--------
229,332
Less - current portion 73,402
Long-term debt $155,930
Maturities of long-term debt are as follows:
Year Ending
December 31, Amount
2001 $ 73,402
2002 62,389
2003 42,301
2004 34,687
2005 16,553
---------
$229,332
NOTE 3 - LINE OF CREDIT
The Company has a line of credit agreement with a bank. The maximum
borrowings available under the agreement amount to $600,000 with interest
at prime plus 1.5%. The agreement matures April 1, 2001 and is secured by
inventory and accounts receivable. At December 31, 2000, $568,623 had been
drawn on the line.
NOTE 4 - TRANSACTIONS WITH RELATED PARTIES
The Company leases its building from officers of the Company. The lease is
a month-to-month arrangement with a current monthly payment of $18,000.
Rent expense amounted to $216,000 and $177,450 for years ended December 31,
2000 and 1999, respectively.
NOTE 5 - LEASES
The Company leases part of its equipment under capital leases and all of
its operating facilities under an operating lease. The operating lease is
with related parties as discussed in Note 4.
The economic substance of the capital leases is that the Company is
financing the acquisition of the assets through the leases over their
terms, and accordingly, they are reflected in the Company's assets and
liabilities. The following is an analysis of the book value of the leased
assets included in equipment at December 31, 2000:
Cost $729,468
Accumulated depreciation 211,477
--------
$517,961
The following is a schedule by years of future minimum lease payments
required under the capital leases and no cancelable operating leases at
December 31, 2000:
Noncancelable
Capital Operating
Leases Leases
Year ending December 31
2001 $189,150 $36,141
2002 189,150 35,849
2003 137,453 25,048
2004 74,651 1,282
590,404 $98,320
Amounts representing interest 80,213
Present value of net minimum lease payments $510,191
NOTE 6 - ADVERTISING COSTS
Advertising costs are charged to expense as incurred. There are no
capitalized advertising costs at December 31, 2000 and 19999 and total
expense amounted to $91,568 and $102,738 for years ended December 31, 2000
and 1999, respectively.
NOTE 7 - CASH FLOWS INFORMATION
For the purposes of the statement of cash flows, cash and cash equivalents
are defined as demand deposit's at banks
Cash paid during the year for:
2000 1999
Interest $108,228 $ 51,955
Income taxes $ 0 $144,689
NOTE 8 - GOING CONCERN
These financial statements are presented on the basis that the Company is a
going concern. Going concern contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business over a
reasonable length of time. The accompanying financial statement shows that
current liabilities exceed current assets by $2,126,751 and a deficit in
stockholders' equity of $519,452 at December 31, 2000. These conditions
raise substantial doubt about its ability to continue as a going concern.
The financial statements do not include any judgments that might result
from the outcome of this uncertainty.
NOTE 9 - MAJOR CUSTOMER
A substantial portion of the Company's sales for the year ended December
31, 1999 was through infomercial videos produced for one customer.
SIGNATURE
Pursuant to 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.
(Registrant)
Dated: August 23, 2002 /s/ George Lovato, Jr.
---------------------------------
George Lovato, Jr.
President, Chief Executive Officer