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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the Quarter ended July 31, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period to
Commission file number - 0-25792
PRATT, WYLCE & LORDS, LTD.
(Exact name of Registrant as specified in its charter)
NEVADA 84-1247085
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification Number)
P.O. Box 7571, Hilton Head Island, SC 29938
(Address of principal executive offices) (Zip Code)
(803) 686-5590
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and Exchange
Act of 1934 during the preceding twelve months (or such shorter period
that the Registrant was required to file such reports), and (2) has been
subject to file such filing requirements for the past thirty days.
Yes x No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report:
2,588,500 Shares of Common Stock ($.001 par value)
(Title of Class)
Transitional Small Business Disclosure Format (check one):
Yes No x
----- -----
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PRATT, WYLCE & LORDS, LTD.
PART I: Financial Information
ITEM 1 - Financial statements
ITEM 2 - Management's' discussion and analysis of financial
condition and results of operations
PART II: Other Information
ITEM 6 - Exhibits and Reports on Form 8-K
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PART I
Item 1. Financial Statements:
Pratt, Wylce & Lords, Ltd.
Balance Sheet
July 31, 1996
(Unaudited)
ASSETS:
Investments at market or fair value:
Investments in common stocks $ 5,862,048
Cash 76,732
Accounts receivable 3,028
Property and equipment, at cost, net of
accumulated depreciation of $4,977 14,179
Deferred tax asset 82,070
-----------
6,038,057
LIABILITIES:
Accounts payable and accrued expenses 255,217
Deferred revenue 2,782,245
Dividends accrued 1,521,750
Deferred tax liability 1,074,604
-----------
5,633,816
-----------
$ 404,241
===========
NET ASSETS
Common stock, $.001 par value,
75,000,000 shares authorized,
2,678,396 shares issued and outstanding $ 2,724
Additional paid-in capital 96,044
Undistributed operating income and investment
gains (losses):
Accumulated operating losses -
Unrealized accumulated depreciation
of investments 305,473
----------
305,473
Net assets applicable to outstanding common ----------
shares (equivalent to $.15 per share, based
on outstanding common shares of 2,678,396) $ 404,241
==========
See accompanying notes to financial statements.
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Pratt, Wylce & Lords, Ltd.
Statements of Operations
Three Months and Six Months Ended July 31, 1996 and 1995
(Unaudited)
Three Months Ended July 31, Six Months Ended July 31,
1996 1995 1996 1995
--------------------------------------------------------
Revenues:
Fee income $ 919,382 $ 74,863 $1,786,799 $ 334,563
Interest and dividend income 1,331 365 2,252 729
---------- ---------- ---------- ----------
920,713 75,228 1,789,051 335,292
Costs and expenses:
General and administrative 201,483 72,985 502,396 225,859
---------- ---------- ---------- ----------
Income (loss) from operations before
before income taxes 719,230 2,243 1,286,655 109,433
Income (taxes) benefit (295,378) 2,322 (506,494) (31,547)
---------- ---------- ---------- ----------
Income (loss) from operations 423,852 4,565 780,161 77,886
Realized gain (loss) on investments 2,970 7,813 2,970 7,813
Income (taxes) benefit (1,010) (2,656) (1,010) (2,656)
---------- ---------- ---------- ----------
1,960 5,157 1,960 5,157
Increase (decrease) in unrealized
appreciation of investments 828,566 (48,362) 802,232 20,519
Income (taxes) benefit (281,712) 16,443 (272,759) (6,976)
---------- ---------- ---------- ----------
546,854 (31,919) 529,473 13,543
---------- ---------- ---------- ----------
Net income (loss) $ 972,666 $ (22,197) $ 1,311,594 $ 96,586
========== ========== =========== ==========
Earnings (loss) per share:
Net income (loss) from
operations $ 0. 16 $ 0.00 $ 0.29 $ 0.03
Net realized gains (losses)
on investments - - - -
Net unrealized gains (losses)
on investments 0.20 (0.01) 0.20 0.01
---------- ----------- ----------- ----------
Net income (loss) $ 0.36 $ (0.01) $ 0.49 $ 0.04
========== =========== =========== ==========
2,716,196 2,646,229 2,681,213 2,646,229
========== =========== =========== ==========
See accompanying notes to financial statements.
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Pratt, Wylce & Lords, Ltd.
Statements of Changes in Net Assets
Six Months Ended July 31, 1996 and 1995
(Unaudited)
1996 1995
Net income (loss) from operations $ 780,161 $ 77,886
Realized gain (loss) from investment 1,960 5,157
Net increase (decrease) in unrealized
appreciation of investments 529,473 13,543
---------- ----------
Net increase (decrease) in net assets
resulting from operations 1,311,594 96,586
Capital share transactions:
Private sales of common stock 184,250 61,875
Dividends in kind (1,073,250) (195,000)
---------- ----------
Total capital share transactions (889,000) (133,125)
---------- ----------
Increase (decrease) in net assets 422,594 (36,539)
Net assets at beginning of period (18,353) (28,901)
---------- ----------
Net assets end of period $ 404,241 $ (65,440)
========== ==========
See accompanying notes to financial statements.
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Pratt, Wylce & Lords, Ltd.
Statements of Cash Flows
Six Months Ended July 31, 1996 and 1995
(Unaudited)
1996 1995
---------- --------
Net cash provided by (used in)
operating activities $ (242,233) $ (78,334)
Cash flows from investing activities:
Proceeds from sale of investments 50,933 4,410
Purchase of investment securities (1,250) -
Purchase of fixed assets (1,098) -
------------ -----------
Net cash provided by (used in)
investing activities 48,585 4,410
Cash flows from financing activities:
Repayment of notes payable (4,272) -
Sale of restricted common stock 184,250 61,875
----------- ----------
Net cash provided by (used in)
financing activities 179,978 61,875
----------- ---------
Increase (decrease) in cash (13,670) (12,049)
Cash, beginning of period 90,402 41,148
----------- ---------
Cash, end of period $ 76,732 $ 29,099
============ ==========
See accompanying notes to financial statements.
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Pratt, Wylce & Lords, Ltd.
Notes to Unaudited Financial Statements
July 31, 1996
The accompanying unaudited financial statements have been
prepared in accordance with generally accepted accounting
principles for interim financial information and with the
provisions of Regulation SB. Accordingly, they do not include
all of the information and footnotes required by generally
accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered
necessary for a fair presentation have been included.
The results of operations for the periods presented are not
necessarily indicative of the results to be expected for the
full year.
Income (loss) per share was computed using the weighted average
number of common shares outstanding.
Investments
At July 31, 1996 the Company had investments in common equity
securities as follows:
Historical Fair
Shares Cost Value
Applied Cellular Technology, Inc. 3,502 $ 14,358 $ 8,482
Gaming Ventures, Inc. 120,000 180,000 375,000
Grand Slam Licensing, Inc. 160,000 240,000 240,000
Level Best Golf, Inc. 175,000 262,500 525,000
Sports Legends, 226,500 339 750 -
Trinity Works, Inc. 348,000 522,000 870,000
Players Network, Inc. 185,000 277,500 277,500
National Sorbents, Inc. 216,000 324,000 324,000
Immune Technologies, Inc. 350,877 526,316 526,316
Advanced Sterilizer Technology 230,000 345,000 345,000
Advanced Power Technologies 246,000 369,000 369,000
Casinovations, Inc. 225,000 337,500 337,500
Rubicon Sports, Inc. 400,000 600,000 600,000
Willow, CSN, Inc. 709,500 1,064,250 1,064,250
Sherman, Goelz & Associates 4,321,250 5,000 -
--------- ---------
$5,407,174 $5,862,048
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Pratt, Wylce & Lords, Ltd.
Notes to Unaudited Financial Statements
April 30, 1996
(Continued)
Fair value of Applied Cellular Technologies and Level Best Golf
securities as of July 31, 1996 was determined by reference to
price quoted on the NASDAQ OTC Bulletin Board. Gaming Ventures
securities began market trading during the first week of August
1996 at $3.00 per share. This price was used to determine fair
value for this security at July 31, 1996. No public market
exists for the other securities listed. Fair value of these
securities are based on the price paid by qualified investors
in recent private placements of the securities.
Capital share transactions
During the period covered by these financial statements the
Company issued shares of common stock without registration
under the Securities Act of 1933. Although the Company
believes that the sales did not involve a public offering of
its securities and that the Company did comply with the "safe
harbor" exceptions from registration under section 4(2), it
could still be liable for recision of the sales if such
exceptions were found not to apply.
During the period ended July 31, 1996 the Company issued
128,250 shares of its common stock to a limited investor group
for cash aggregating $184,250.
Additionally, during this period, the Company declared
dividends in kind to its shareholders on a pro rata basis of a
portion of its investment in two new client company's
securities. The aggregate amount of the dividend was
$1,073,250, which represents approximately 33% of the value of
the stock received.
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PRATT, WYLCE & LORDS, LTD.
PART I (cont.)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Trends and Uncertainties. The Company intends to operate on revenues
from its consulting fee income and does not intend to seek debt financing.
The Company has tried to limit its general and administrative expenses now
that its operations have increased and the actual costs relating to its
services have been more accurately determined. The Company evaluates its
operating expense on a project to project basis depending on the amount and
type of consulting services to be provided. However, as the Company has
little or no control as to the demand for its services, inflation and changing
prices could have a material effect on the future profitability of the
Company.
Additionally, the Company, as partial compensation for its services,
receives restricted and/or unrestricted stock in its client companies. The
amount of common stock to be received as compensation compared to the
amount of cash to be received is determined in separate negotiations with
each client company depending on each client company's cash flow
situation. The receipt of common stock in lieu of cash compensation will
negatively affect the cash flow of the Company until, if ever, the common
stock of the client company becomes liquid.
The Company's policy is to distribute up to 50% of the securities received
from its client companies to its shareholders. The Company declares a
dividend in kind for a portion of the securities it receives from its client
companies on a pro rata basis to its stockholders at the time such shares are
received by the Company. The distribution of the dividend shares is made
at the effective date of a registration statement that establishes a public
market for the shares.
During the period ended July 31, 1996, the Company declared dividends in
kind to its shareholders on a pro rata basis of a portion of its investment in
seven new client company's securities, Immune Technologies, Inc, Advanced
Sterilizer Technology, Inc., Federated Financial Services, Inc. Advanced Power
Technologies, Inc., Rubicon Sports, Inc., Willow CSN, Inc. and
Casinovations, Inc. The aggregate amount of the dividend was $1,073,250,
which represents approximately 33% of the value of the stock received.
During the year ended January 31, 1995, the Company declared
and distributed 40,000 shares of Applied Cellular Technologies, Inc.
common stock (46.14% of the common stock received from Applied
Cellular Technology, Inc.) as a dividend to its shareholders. The
Company's basis in the stock at the time of the distribution was $60,000
($1.50 per share), which amount represents the fair value of the shares two
months prior to the commencement of public trading of the shares.
Additionally, during that period the Company declared dividends for
100,000 shares of Level Best Golf, Inc. and 100,000 shares of Sports
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Legends, Inc. at a time which the fair value of the stock was $1.50 per
share. Distribution of these shares is contingent upon the effective
registration of the shares for public sale. Since the Company maintained
insufficient retained earnings at the date the dividends were accrued, a
portion of the dividends have been accounted for as a return of paid-in-
capital. The amount of dividends that the Company can pay or accrue is
limited by the laws of the State of Nevada to an amount not in excess of the
Company's net assets. The value of the dividends paid or accrued during
the year ended January 31, 1995 amounted to $331,099 or $.14 per share
of the Company's common stock.
During the year ended January 31, 1996, the Company declared dividends
for 104,000 shares of Trinity Works, Inc., and 65,000 shares each for
Gaming Ventures, Inc., Grand Slam Licensing, Inc., Players Network and
National Sorbents, Inc. at a time when the fair value of the stock was $1.50
per share. There can be no certainty that the other client companies will
successfully register any or all of the securities obtained or to be distributed
and provide liquidity to the Company and its shareholders. Since the
Company maintained insufficient retained earnings at the date the dividends
were accrued, a portion of the dividends have been accounted for as a return
of paid-in-capital. During the year ended January 31, 1996, Sports
Legend's Inc. dividend was canceled as it is unlikely that the company will
complete its proposed public offering. The value of the dividends accrued
(net of the cancellation) during the year ended January 31, 1996 amounted
to $406,548 or $.16 per share of the Company's common stock.
Effective October 31, 1995, the Company no longer provides services to
Applied Cellular Technology, Inc. and no longer provides services to
Olympic Entertainment Group, Inc. The Company recorded revenue for
services of $106,188 in the year ended January 31, 1996 and $123,563 for
the year ended January 31, 1995 from Applied Cellular Technology, Inc.
and $27,500 in revenues from Olympic Entertainment Group, Inc. The
Company was paid 3,336 additional shares valued at $12,000. The
Company has entered into agreements with several other client companies
and does not believe that the loss of these customers will have a material
effect on the cash flow of the Company. Level Best Golf, Inc. and Gaming
Venture Corp., U.S.A. successfully registered the securities to be distributed
by the Company to its shareholders in June, 1996. However, there can be no
certainty that the other client companies will successfully register any or
all of the securities obtained or to be distributed and provide liquidity to
the Company and its shareholders.
Capital Resources and Source of Liquidity. The Company currently has
no material commitments for capital expenditures. Recently, the Company
moved its main office and leased additional office space. The monthly lease
payment increased from $200 per month to a total of $1,195 per month.
This increase in lease payments has a negative effect on the cash flow and
liquidity of the Company.
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The Company received $60,630 of its total compensation in cash for the six
months ended July 31, 1996. The Company received additional compensation
in common stock of its client companies for the six months ended July 31,
1996 valued at $2,873,066. .
Revenue from consulting services is recorded ratably over the term of the
contract, usually a twelve month period. Of the total compensation
received for the six months ended July 31, 1996, $846,924 has been
recognized as revenue and $2,186,772 has been deferred for
recognition over the remaining contract terms. The Company can meet its
short term cash flow needs from the cash compensation received by its
client companies, sale of investment securities ($104,123 for the year ended
January 31, 1996 and $50,933 for the six months ended July 31, 1996) and
the proceeds of $184,250 received from a private placement of its common
shares to supplement its cash flow needs. In the long term, the Company
shall utilize its cash compensation and the sale of its investment securities
to meet its cash flow needs. Additionally, certain employees of the Company
may accept securities in the client companies as partial compensation to
lower the cash flow needs of the Company.
Going Concern. The Company is not currently delinquent on any of its
obligations and the Company has begun to generate revenue from its
consulting services. Based upon the increased number of the Company's
consulting agreements to provide the services described in "Business
Activities" entered into with all of the listed client companies, the Company
believes that it will begin to generate a positive cash flow before the end of
its fiscal year 1997.
In additional to the above described proceeds from the sale of investments,
for the six months ended July 31, 1996, the Company purchased fixed
assets for its office valued at $1,098 and the purchase of investment
securities of $1,250 resulting in net cash provided by investing activities for
the six months ended July 31, 1996 of $48,585.
For the year ended January 31, 1995, the Company purchased fixed assets for its
office valued at $4,212 and the purchase of investment securities of $1,250
resulting in net cash used in investing activities for the year ended January
31, 1995 of $5,462.
For the year ended January 31, 1996, the Company received proceeds from
investment sales of $104,123 and purchased fixed assets for $5,742
resulting in net cash provided by investing activities for the year ended
January 31, 1996 of $98,381.
During the six months ended July 31, 1996, the Company received net
cash proceeds of $184,250 from the sale of its common stock in a private
placement pursuant to Regulation D of the Securities Act of 1933.
Additionally, the Company repaid notes payable of $4,272 during the six
months ended July 31, 1996. These efforts resulted in net cash provided
by financing activities of $179,978 for the six months ended July 31, 1996.
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During the year ended January 31, 1995, the Company received net cash
proceeds of $87,214 from the sale of its common stock in a private
placement pursuant to Regulation D of the Securities Act of 1933. These
efforts resulted in net cash provided by financing activities of $87,214 for
the year ended January 31, 1995.
During the year ended January 31, 1996, the Company received net cash
proceeds of $64,044 from the sale of its common stock in a private
placement pursuant to Regulation D of the Securities Act of 1933. The
Company repaid $261 of notes payable. These efforts resulted in net cash
provided by financing activities of $63,783 for the year ended January 31,
1996.
Results of Operations: For the six months ended July 31, 1996
compared to the six months ended July 31, 1995. The Company
received total revenue of $1,789,051 (fee income of $1,786,799 and interest
income of $2,252 for the six months ended July 31, 1996 compared to
$335,292 (fee income of $334,563 and interest income of $729) for the
six months ended July 31, 1995. This significant increase was due to
the increased number of client companies which entered into consulting
agreements with the Company. General and administrative expense
increased from $225,859 for the six months ended July 31, 1995 to
$502,396 for the six months ended July 31, 1996. The increase
is attributed to expanded efforts to generate new business and to
service the needs of an increased number of client companies. The increase
is composed primarily of larger amounts incurred for salaries and wages
($170,800), professional fees ($31,704), telephone charges ($6,271), travel
expenses ($15,755) and other costs.
The Company experienced net income of $1,311,594 for the six months
ended July 31, 1996 compared to a net income in 1995 of $96,586. The
net income is mainly due to an increased number of active contracts with
client companies.
For the year ended January 31, 1996 compared to the year ended January
31, 1995. The Company received total revenue of $1,305,938 (fee income
of $1,303,509 and interest income of $2,429) for the year ended January
31, 1996 compared to $387,675 (fee income of $387,208 and interest
income of $467) for the year ended January 31, 1995. This significant
increase was due to the increased number of client companies which entered
into consulting agreements with the Company. General and administrative
expense increased from $214,391 to $481,370 for the year ended January
31, 1996. The increase ($266,979) is attributed to expanded efforts to
generate new business and to service the needs of an increased number of
client companies. The increase is composed primarily of larger amounts
incurred for salaries and wages ($184,000), professional fees $11,000),
telephone charges ($9,500), travel expenses ($18,000), employee benefits
($8,600) and other costs. The Company experienced net income of
$339,379 for the year ended January 31, 1996 compared to a net income in
1995 of $187,960. The net income is mainly due to an increased number
of active contracts with client companies. Depreciation was $2,584 for the
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year ended January 31, 1996 compared to $1,136 in 1995. The investment
received for services was increased dramatically by $1,641,000 compared
to $882,000 in 1995 due to increased operations.. Additionally, the
Company realized a $82,879 gain on its investments for the year ended
January 31, 1996 and $0 for the year ended January 31, 1995. The
Company had a decrease in unrealized investment appreciation of $366,084
for the year ended January 31, 1996 due to the writedown of the Sports
Legends, Inc. investment and an increase for the year ended January 31,
1995 of ($26,716). The Company distributed free trading investment
shares of Applied Cellular Technology, Inc. for services in 1996 valued at
$9,947 compared to $36,656 in 1995. The decrease minus the decreased
level of service provided by the Company's employees related to the
Applied Cellular Technology, Inc. contract in 1996. The Company expects
that similar distributions of client company securities may be made in the
future as these shares become registered, however, there is no formal plan
or obligation to distribute the share. Accounts and notes receivable
decreased $7,545 in 1996 compared to a decrease in 1995 of $22,965. The
1995 decrease related to the collection of a $35,000 account receivable for a
stock subscription collected in February, 1995. The 1996 decrease reflects
the collection of non-recurring advances during 1996. The Company does
not usually record amounts receivable for its services to clients as these
services are paid for in advance by cash deposits and the issuance of
common stock. Such amounts are carried in the deferred revenue account
until earned by the Company. Accounts payable increased by $3,536 for
the year ended January 31, 1996 compared to an increase of $953 for the
year ended January 31, 1995. Deferred revenue increased $609,166 for
the year ended January 31, 1996 compared to an increase of $570,892 for
the year ended January 31, 1995. These increased amounts in 1996 were
due to increased operations and entering into consulting agreements with
additional client companies. The provision for income taxes was $201,895
for the year ended January 31, 1996 compared to $10,375 due to increased
revenues as a result of increased operations. The 1995 amount was
reduced by the use of a net operating loss that arose in the prior year. Net
cash used in operating activities was $112,910 for the year ended January
31, 1996 compared to net cash used in operating activities of $55,054 for
the year ended January 31, 1995.
Plan of Operation. The Company charges its client companies an initial
cash fee the services relating to the entry of the client company into the
public market for its securities. Additionally, the Company receives partial
compensation of these services in securities of the client companies usually
at the start of the consulting agreement. The Company distributes, as a
dividend, a portion of the securities received from some of the client
companies to the stockholders of the Company. Revenue from the
provision of services is recorded ratably over the contract term. The client
companies have the option of utilizing the Company to package the
information dissemination regarding the client company business and/or it's
securities. Contracts which include additional services generally have
greater amounts of both cash and stock compensation.
15
PRATT, WYLCE & LORDS, LTD.
PART II
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits (numbered in accordance with Item 601 of Regulation S-K)
None
(b) Reports on Form 8-K
None
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 thereunto duly authorized.
Date: September 14, 1996
/s/ Timothy Miles
- - ---------------------------
Timothy Miles, President