<PAGE>2
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 October 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 1427, Idaho Springs, CO 80452
(Address of principal executive offices) (Zip Code)
(303) 567-0839
(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:
2,874,596 Shares of Common Stock ($.001 par value)
(Title of Class)
Transitional Small Business Disclosure Format (check one):
Yes No x
<PAGE>3
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
<PAGE>4
PART I
Item 1. Financial Statements:
Pratt, Wylce & Lords, Ltd.
<TABLE>
<CAPTION>
Balance Sheet
October 31, 1996
(Unaudited)
ASSETS
<S> <C>
Investments at market or fair value:
Investments in common stocks $5,701,689
Cash 38,597
Accounts receivable 41,578
Property and equipment, at cost, net of
accumulated depreciation of $7,302 29,872
Deferred tax asset 82,070
-----------
5,893,806
LIABILITIES:
Accounts payable and accrued expenses 439,915
Deferred revenue 1,420,853
Dividends accrued 1,521,750
Deferred tax liability 1,429,094
-----------
4,811,612
-----------
$1,082,194
===========
NET ASSETS
Common stock, $.001 par value,
75,000,000 shares authorized,
2,874,596 shares issued and outstanding $ 2,875
Additional paid-in capital 548,824
Undistributed operating income and investment
gains (losses):
Accumulated operating income 215,705
Unrealized accumulated depreciation
of investments 314,790
--------
530,495
--------
Net assets applicable to outstanding common
shares (equivalent to $.38 per share, based
on outstanding common shares of 2,874,596) $1,082,194
==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>5
Pratt, Wylce & Lords, Ltd.
Statements of Operations
Three Months and Nine Months Ended October 31, 1996 and 1995
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
October 31, October 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues:
Fee income $1,368,817 $ 73,087 $3,155,616 $850,250
Interest and
dividend income 381 669 2,633 1,398
---------- --------- ---------- --------
1,369,198 73,756 3,158,249 851,648
Costs and expenses:
General and
administrative 594,308 101,311 1,096,704 296,906
Income (loss)
from operations before
before income taxes 774,890 (27,555) 2,061,545 554,742
Income (taxes) benefit (297,071) 15,270 (803,565) (236,454)
Income (loss)
from operations 477,819 (12,285) 1,257,980 318,288
Realized gain (loss)
on investments 230,026 87,530 232,996 82,879
Income (taxes) benefit (78,209) (29,760) (79,219) (28,179)
-------- -------- --------- -------
151,817 57,770 153,777 54,700
Increase (decrease)
in unrealized
appreciation of
investments 14,116 (46,343) 816,348 (307,291)
Income (taxes) benefit (4,799) 15,757 (277,558) 104,479
------- ------- --------- --------
9,317 (30,586) 538,790 (202,812)
Net income (loss) $ 638,953 $ 14,898 $1,950,547 $ 170,176
Earnings (loss) per share:
Net income (loss)
from operations $ 0.22 $ 0.02 $ 0.51 $0.14
Net unrealized gains
(losses) on investment 0.00 (0.01) 0.20 (0.08)
Net income (loss) $ 0.22 $ 0.01 $ 0.71 $0.07
2,874,596 2,588,500 2,745,674 2,577,889
</TABLE>
<PAGE>6
Pratt, Wylce & Lords, Ltd.
Statements of Changes in Net Assets
Nine Months Ended September 31, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Net income (loss) from operations $ 1,257,980 $ 318,288
Realized gain
(loss) from investment 153,777 54,700
Net increase (decrease) in unrealized
appreciation of investments 538,790 (202,812)
---------- ---------
Net increase (decrease) in net assets
resulting from operations 1,950,547 170,176
Capital share transactions:
Private sales of common stock 184,250 62,544
Exercise of common stock options 39,000 -
Dividends in kind (1,073,250) (73,901)
---------- ---------
Total capital share transactions (850,000) (11,357)
---------- ---------
Increase (decrease) in net assets 1,100,547 158,819
Net assets at beginning of period (18,353) -
---------- ---------
Net assets end of period $ 1,082,194 $ 158,819
========== =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>7
Pratt, Wylce & Lords, Ltd.
Statements of Cash Flows
Nine Months Ended September 31, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Net cash provided by (used in)
operating activities $(604,576) $(97,465)
Cash flows from investing activities:
Proceeds from sale of investments 391,659 104,123
Purchase of investment securities (1,250) -
Purchase of fixed assets (19,116) -
--------- ---------
Net cash provided by (used in)
investing activities 371,293 104,123
Cash flows from financing activities:
Repayment of notes payable (4,272) -
Sale of restricted common stock 188,750 62,544
--------- ---------
Net cash provided by (used in)
financing activities 184,478 62,544
--------- ---------
Increase (decrease) in cash (51,805) 68,202
Cash, beginning of period 90,402 41,148
--------- ---------
Cash, end of period $ 38,597 $110,350
========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>8
Pratt, Wylce & Lords, Ltd.
Notes to Unaudited Financial Statements
October 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 October 31, 1996 the Company had investments in common
equity securities as follows:
<TABLE>
<CAPTION>
Historical
Fair
Shares Cost
Value
<S> <C> <C> <C>
Applied Cellular Technology, Inc. 3,502 $ 14,358 $8,482
Gaming Ventures, Inc. 77,944 116,916 ,262
Grand Slam Licensing, Inc. 160,000 240,000 240,000
Level Best Golf, Inc. 99,001 148,502 408,379
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
Casionvations, 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 -
--------- ----------
$5,038,174 $5,701,689
</TABLE>
Fair value of Applied Cellular Technologies, Gaming Ventures,
Inc. and Level Best Golf securities as of October 31, 1996 was
determined by reference to price quoted on the NASDAQ OTC
Bulletin Board. 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 October 31, 1996 the Company issued
128,250 shares of its common stock to a limited investor group
for cash aggregating $184,250. The Company also issued 151,000
shares of its restricted common stock to existing shareholders
for the exercise of stock purchase options for cash of $1,500
and client company securities of $37,500. The securities were
delivered to the Company subsequent to October 31, 1996.
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 companies
securities. The aggregate amount of the dividend was
$1,073,250, which represents approximately 33% of the value of
the stock received.
<PAGE> 8
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 October 31, 1996, 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.
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
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. 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
<PAGE>9
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.
The Company received $263,130 of its total compensation in cash for the
nine months ended October 31, 1996. The Company received additional
compensation in common stock of its client companies for the nine months ended
October 31, 1996 valued at $3,242,066. 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 nine months ended October 31, 1996,
$1,313,068 has been recognized as revenue and $2,192,128 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 $391,659 for the nine months ended October 31,
1996) and the proceeds of $185,750 received from a private placement of 128,250
of its common shares to a limited investor group to supplement its cash flow
needs. The Company also issued 151,000 shares of its restricted common stock to
existing shareholders for the exercise of stock purchase options for cash of
$1,500 and client company securities of $37,500. The securities were delivered
to the Company subsequent to October 31, 1996. 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.
For the nine months ended October 31, 1996, the Company purchased fixed
assets for its office valued at $19,116 and purchased investment securities of
$1,250. The Company received proceeds from the sale of investments of
$391,659 resulting in net cash used in investing activities for the nine
months ended October 31, 1996 of $371,293.
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 nine months ended October 31, 1996, the Company received net
cash proceeds of $185,750 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 nine
months ended October 31, 1996. These efforts resulted in net cash
provided by financing activities of $181,478 for the nine months ended October
31, 1996.
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 nine months ended October 31, 1996
compared to the nine months ended October 31, 1995. The Company
received total revenue of $3,158,249 (fee income of $3,155,616 and
interest income of $2,633) for the nine months ended October 31, 1996 compared
to $8501,648 (fee income of $850,250 and interest income of $1,398) for the
nine months ended October 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 $296,906 for the nine months ended October 31, 1995 to $1,096,913
for the nine months ended October 31, 1996. The increase ($148,039) is
attributed to the hiring of additional employees, 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 ($285,539), professional fees ($32,868),
telephone charges ($15,800), travel expenses ($40,327), advertising
($170,768), printing ($56,482), commissions ($150,000) and other costs
($48,223).
<PAGE>10
The Company experienced net income of $1,950,547 for the nine months
ended October 31, 1996 compared to a net income in 1995 of $170,176. 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 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 its securities.
Contracts which include additional services generally have greater amounts of
both cash and stock compensation.
<PAGE>11
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: December 20, 1996
/s/ Timothy Miles
Timothy Miles, President
<TABLE> <S> <C>
<ARTICLE> 5
<CAPTION>
<S>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-END> OCT-31-1996
<CASH> 38,597
<SECURITIES> 5,701,689
<RECEIVABLES> 41,578
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 29,872
<DEPRECIATION> 7,302
<TOTAL-ASSETS> 5,893,806
<CURRENT-LIABILITIES> 4,811,612
<BONDS> 0
<COMMON> 2,875
0
0
<OTHER-SE> 1,079,319
<TOTAL-LIABILITY-AND-EQUITY> 5,893,806
<SALES> 3,155,616
<TOTAL-REVENUES> 3,158,249
<CGS> 0
<TOTAL-COSTS> 1,086,704
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,061,545
<INCOME-TAX> 803,565
<INCOME-CONTINUING> 1,257,980
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,950,547
<EPS-PRIMARY> .72
<EPS-DILUTED> .72
</TABLE>
