1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1996
Commission File Number 0-21998
PORTER MCLEOD NATIONAL RETAIL, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 84-1195628
(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
5895 East Evans Avenue, Denver, Colorado, 80222
(Address and Zip Code of Principal Executive Offices)
Issuer's Telephone Number: (303) 756-2227
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
There were 1,970,866 shares of the registrant's common stock
outstanding as of August 14, 1996.
This Document Contains 10 Pages
There are No Exhibits
.
Item 1. Financial Statements
Porter McLeod National Retail, Inc.
Balance Sheets
June 30, December 31
1996 1995
(UNAUDITED)
Assets
Current Assets
Cash and cash equivalents $235,267 $ 354,050
Accounts receivable 99,696 642,848
less allowance for doubtful accounts (20,000) (20,000)
Costs and estimated earnings in excess
of billings 361,503 96,525
Prepaid expense and other assets 186,584 66,232
Total current assets 863,050 1,139,755
Property and equipment
Building 600,000 0
Office furniture and equipment 21,278 21,278
Leasehold improvements 34,634 34,634
655,912 55,912
Less accumulated depreciation (24,957) (21,655)
Total property and equipment 630,955 34,257
Other assets
Note receivable from affiliate 677,126 677,126
Advances to affiliates 116,959 92,997
Other assets 2,911 0
Total other assets 796,996 770,123
Total Assets $2,291,001 $1,944,135
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued expenses $319,957 $ 451,138
Mortgage payable - cuurent portion 18,190 0
Total current liabilities 338,147 451,138
Long- term liabilities
Mortage payable-less current portion 581,810 0
Stockholders' equity
Preferred stock, $.001 par value, authorized -
100,000 shares-no shares issued and outstanding -- --
Common stock, $.0001 par value, authorized -
3,000,000 shares-issued and outstanding:
1,970,666 197 197
Additional paid-in capital 3,931,116 3,931,116
Accumulated deficit (2,538,896) (2,374,199)
Consulting agreement (21,373) (64,117)
Total stockholders' equity 1,371,044 1,492,997
Total liabilities and stockholders' equity $2,291,001 $1,944,135
See note to financial statements.
Porter McLeod National Retail, Inc.
Statement of Operations
(Unaudited)
For the Three Months For the Six Months
Ended June 30 Ended June 30
1996 1995 1996 1995
Contract income $ 922,556 $2,143,198 $1,585,837 $2,243,707
Contract costs 747,183 2,061,614 1,324,039 2,010,548
Gross Profit 175,373 81,584 261,798 233,159
General and administrative
expenses 251,645 268,898 461,580 541,772
Income (loss) from
operations ( 76,272) (187,314) (199,782) (308,613)
Other income (expense): 14,045 10,499 30,859 ( 13,599)
Net income (loss) before
income taxes ( 62,227) (176,815) (168,923) (322,212)
Income tax benefit
(expense) 0 0 0 0
Net income (loss) $ ( 62,227) $ (176,815) $(168,923) $ (322,212)
Net income (loss)
per common share $ (.03) $ (.09) $ (.09) $ (.16)
See note to financial statements.
Porter McLeod National Retail, Inc.
Statement of Cash Flows
(Unaudited)
For the Six Months Ended
June 30
1996 1995
Cash flows from operating activities:
Cash received from contracts $ 448,325 $3,084,800
Cash paid to suppliers and employees (568,860) (3,376,228)
Interest received 30,859 (24,847)
Other expenses paid 0 38,446
Income taxes paid 0 0
Net cash provided (used in) operating
activities (118,783) (277,829)
Net cash provided (used in) investment
activities 0 225,560
Net cash provided (used in)
financing activities 33,492 162,187
Net increase (decrease) in cash and
cash equivalents (118,723) 109,918
Cash and cash equivalents - beginning
of period 354,050 236,583
Cash and cash equivalents - end of period $ 235,267 $ 346,501
Cash flows from operating activities:
Net loss $ (168,923) $ (322,212)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 46,045 114,235
Loss on sale of investment securities 0 (38,446)
Accrued interest on note
receivable-affiliate 23,922 22,839
Change in certain assets and
liabilities - net (19,827) (54,245)
Net cash provided (used in ) operating
activities $(118,783) $ (277,829)
See note to financial statements.
PORTER MCLEOD NATIONAL RETAIL, INC.
Note to Financial Statement
Note 1 - Summary of Significant Accounting Policies
The unaudited financial statements included herein were prepared
from the books of the Company in accordance with generally
accepted accounting principles and reflect all adjustments which
are, in the opinion of management, necessary to provide a fair
statement of the results of operations and financial position for
the statements presented. Such financial statements generally
conform to the presentation reflected in the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1995, and
reflect adjustments which are solely of a normal recurring
nature. These financial statements do not include all of the
disclosures normally made in the company's annual Form 10-KSB
filing. These financial statements should be read in conjunction
with the Company's Annual Report on Form 10-KSB.
Certain amounts from the 1995 financial statements have been
reclassified to conform to the 1996 presentation.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operation.
Six Months Ended June 30, 1996 as Compared with the Six
Months Ended June 30, 1995
Results of Operations
Contract Income - The Company experienced an increase in contract
income from $100,509 during the six months ended June 30, 1995 to
$663,281 for the six months ended June 30, 1996. During the six
months ended June 30, 1995, contract income was impacted due to
delays in getting final plans from owners and/or architects as
well as delays caused by the complexity of the projects which the
Company was bidding. During the first six months of 1995 the
Company put in place a new management team that focused on
improving client selection and implementing systems in order to
improve the profitability of each project. The management team
has focused on negotiated contracts as opposed to the prior
emphasis on competitively bid fixed price contracts. The contract
income for the six month period ended June 30, 1996, is
representative of the change in focus of the operations of the
Company as 77% of the income resulted from negotiated contracts
while none of the Company's contract income for the comparable
period of 1995 resulted from negotiated contracts. The average
size construction project that the Company had under contract at
June 30, 1996 was $446,500 as compared to $880,800 as of June 30,
1995.
Contract costs - The efforts of the Company's new management
team, which commenced
approximately February 1995, have resulted in levels of contract
costs that are better than the industry average as compiled by
the Construction Financial Management Association, which reported
a 1994 industry contract cost stated as a percentage of contract
income of 91.9% . For the six months ended June 30, 1996, the
Company experienced contract costs, stated as a percentage of
contract income, of 87%.
Gross Profit - For the first six months of 1996 the Company
realized a gross profit percentage of 13% which reflects the
impact of new management personnel and improved systems on the
estimating, pricing and bidding of projects. The shift in
emphasis to negotiated contracts reduces the risk that is
attached to competitive bidding for projects. Negotiated
contracts complement the business strategy of focusing on
renovations and remodeling projects as these type of projects can
be negotiated, subcontracted out and completed in a short time
frame.
General and Administrative Expenses - The Company's general and
administrative expenses are generally fixed in nature. The
expenses decreased $60,240 from $270,175 in the first six months
of 1995 to $209,935 during the comparable period of 1996. Of that
decrease in expenses, $55,488 was attributable to a reduction in
amortization expense related to a marketing agreement. The
Company recognized the impairment of its International Marketing
Agreement in 1995 and the asset was written off in its entirety
in 1995 under the guidelines of Statement of Financial Accounting
Standards No. 121.
Income (Loss) from Operations - The Company experienced a net
operating loss of $(123,510) for the six months ended June 30,
1996 as compared to a loss of $(118,600) for the six months ended
June 30 1995.
Other Income and Expense - The Company realized $16,815 in
interest income for the first six months of 1996 as compared to
$14,348 in interest income during the same reporting period of
1995. However, in 1995 the Company also realized a $38, 446 loss
from the sale of marketable securities.
Liquidity and Capital Resources
The Company's current assets decreased 19% to $939,741 over the
six months ended June 30, 1996. Current liabilities decreased by
22%, resulting in an increase in the current ratio from 2.52 to
2.68 over the same period. Working capital decreased 17% to
$568,335 over the six month period. The decrease in current
assets, current liabilities and working capital resulted from a
decrease in the Company's backlog of contracts to be performed
from $5,031,619 at June 30, 1995 to $1,365,955 at June 30, 1996.
With less construction in process, the relative accounts
receivable and accounts payable were at lower levels at June 30,
1996 as compared to the same date in 1995.
Cash and Cash Equivalents - The $103,720 loss from operations
incurred during the six month period ending June 30, 1996, was
the primary cause of the 20% decrease to $283,822 in the
Company's cash and cash equivalents.
Net Cash Used in Operating Activities - Operating activities used
net cash of $103,720 during the six months ended June 30, 1996 as
compared to net cash used in operating activities of $19,583
during the same period of 1995. Such increase in cash usage was
attributable to the lower level of construction in process at
June 30, 1996 than at June 30, 1995 resulting in more funds being
applied to accounts payable and less funds being provided by
accounts receivable during the comparable three month periods.
Net Cash Used In Investing Activities - During the six months
ended June 30, 1996, the Company's source of cash provided from
investing activities was $357,853 in proceeds from the sale of
investment securities. The 1995 transaction resulted in a
complete liquidation of the Company's holdings of investment
securities.
Net Cash Used in Financing Activities - For the six months ended
June 30, 1996, and the six months ended June 30, 1995, the major
use of cash for financing activities was advances made to Porter
McLeod Management, Inc. ("PMM") and Porter McLeod Colorado, Inc.
("PMC"), both of which are subsidiaries of Porter McLeod
Holdings, Inc. ("PMH"), the Company's major shareholder. As the
following table shows, the Company's investment of capital
resources in contract activities decreased due to fewer contracts
as well as improved operations, billing and collection systems.
June 30
1996 1995
Accounts receivable - net $ 478,120 $ 489,944
Costs and estimated earnings in
excess of billings on uncompleted
contracts 94,955 293,698
Billings in excess of costs and
estimated earnings on uncompleted
contracts 0 (36,767)
Total investment in contracts $ 573,075 $ 746,875
Accounts receivable affiliates - PMM, an affiliate of the
Company, owes $794,085 to the Company, representing advances made
to PMM with respect to the provision of key administrative
services including management, bidding, data processing,
accounting, marketing, and cash management services. The increase
of $23,962 over the balance due at December 31, 1995 represents
interest accrual on that portion of the accounts receivable that
is evidenced by the promissory note discussed below. Management
believes this relationship to be economically beneficial to the
Company through reduced overall administrative costs. PMM does
not make any profit with regard to such activities. The Company
has made such advances to protect the economic benefits and
preserve the above-mentioned business benefits which the Company
derives from its dealings with its affiliate. PMM's obligation to
repay approximately $605,000 of such advanced funds, plus
interest thereon computed at the rate of seven percent per annum,
is evidenced by a promissory note providing for payment of said
obligation in three annual installments of $201,976, plus accrued
interest, commencing on March 31, 1995 and continuing yearly
thereafter through 1997. Payment of such indebtedness was
guaranteed by PMC, PMH, and by Messrs. Bruce Porter and Joseph
McLeod, both of whom are officers and directors of the Company,
and the sole shareholders of PMH. PMM failed to pay the first two
such installments, and the default created thereby remains in
effect through March 31, 1996. Based upon a plan which management
began to formulate prior to the time when such installment became
due, the Company expects to collect the full amount of such
indebtedness through a transfer of ownership of more than 80% of
the outstanding common stock of PMC by PMH to the Company, and a
merger of PMH, PMC and PMM with and into the Company. Management
presently anticipates that the Company's shareholders will be
asked to consider and grant approval of such transaction at the
annual meeting of stockholders which is scheduled to take place
on or about October 1996.
Item 6. Exhibits and Reports on Form 8-K
(a) No exhibits have ben filed with this report.
(b) Form 8-K was filed on May 20, 1996 evidencing the
company's compliance with the $2,000,000
total assets listing requirement
of The Nasdaq SmallCap Market. Exhibits filed with
the Report
included Unaudited Balance Sheet at April 30, 1996
and Unaudited
Statement of Operations and Retained
Earnings(Deficit) for the four
Months ended April 30, 1996.
Signature
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.
Porter McLeod National Retail,
Inc.
Dated: August 14, 1996 By /s/ Joseph R. McLeod
Joseph R. McLeod, President
By /s/ A.J. Shilling
A.J. Shilling, Treasurer and
Chief Financial
Officer