FORM 10-KSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] 15, ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended: 1/31/97
OR
[ ] 15, TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _______________
Commission file number: 0-25792
PRATT, WYLCE & LORDS, LTD.
(Exact name of registrant as specified in charter)
Nevada 84-1247085
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10 Office Park Road, Suite 222, Hilton Head Island, SC 29928
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code:
(803) 686-5590
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements
for at least the past 90 days. Yes __x__ No ____
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B is not contained in this form and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference to Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [X].
The Corporation's revenues for its most recent fiscal year were $685,512.
As of January 31, 1997, three market makers maintained bids in the Company's
securities. The current market value of the registrant's voting $.001 par
value common stock held by non-affiliates of the Registrant is approximately
$553,000. .
The number of shares outstanding of registrant's only class of common stock,
as of January 31, 1997 was 2,874,596 and at April 31, 1996 was 2,874,596
shares of its $.001 par value common stock.
No documents are incorporated into the text by reference.
Transitional Small Business Disclosure Format (check one):
Yes No x
Exhibit Index is located on Page 22 .
<PAGE> 2
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
A. Business Development. Pratt, Wylce & Lords, Ltd., (the
"Company") was incorporated in the State of Florida on May 22, 1986 using the
name Global Wrestling Alliance, Inc. The Company was authorized to issue
75,000,000 common shares at $.0001 par value. The Company had limited
operations from 1988 through 1990 and ceased operations at that time. The
Company experienced a change in control and pursuant to a Board of Directors
meeting and subsequent written consent of a majority of its shareholders on
May 31, 1993, the Company began operations of its present business under the
name Pratt, Wylce & Lords, Ltd. and a One for One Hundred reverse stock split
was effectuated. The Company was reincorporated in the State of Nevada on
August 18, 1993. Pursuant to the Articles of Merger, the Company is
authorized to issue 75,000,000 common shares at $.001 par value and there are
currently 2,874,596 common shares outstanding.
B. Business of Company.
General. The previous business objective of the Company was to provide
consulting services which assist the client company in becoming a publicly
traded company.
During January 1997, the Company determined that it was unable to complete
certain of its consulting projects and would be unable to accept new
consulting clients in the future. The Company has negotiated contract
termination agreements with all of its active clients which provide for the
immediate discontinuance of consulting services. The termination contracts
provide that the Company retain as revenue all cash paid to date and that the
Company return all or a major portion on common stock issued to it by client
companies.
The Company currently intends to provide management services for cash only,
and acquire businesses and assets as may provide gain for the shareholders.
The Company may also choose to form corporations for the purpose of pursuing
such business ventures as are deemed potentially profitable by the
Board of Directors.
Competition. The proposed business of the Company is very competitive. The
Company will encounter competition in its chosen business who are already
offering, or will in the future offer, the same or similar services as those
offered by the Company. Entities with greater established financial resources
and contacts than the Company are competitors in the Company's chosen business
industries. They may develop marketing strategies that are competitive with
or superior to the Company's services or which can be marketed more
effectively. The Company competes on the basis of price and quality of its
services.
Federal and/or State Regulation. The Company is not subject to any federal
or state regulations regarding its services or proposed activities. However,
the Company files required reports under Section 12g of the Securities Act of
1934. Additionally, the Company is subject to the requirements discussed
below as a Business Development Company.
Business Development Company. In July, 1995, the Company elected to be
treated as a Business Development Company ("BDC") pursuant to Section 54 of
the Investment Company Act of 1940 (the "1940 Act"). On October 21, 1980,
the 1940 Act was amended by a series of amendments which added sections 55
through 65. These sections comprise the Small Business Investment Incentive
Act of 1980 (the "SMIIA"). For purposes of the SMIIA, a business
development company is defined as a domestic closed-end company which is
operated for the purpose of making certain types of investments and which
makes available significant managerial assistance to the companies in which it
invests. Generally, a company which elects to be treated as a business
development company, or intends within 90 days to so elect, is exempt from
certain provisions of sections 1 through 53 of the 1940 Act.
To take advantage of these special regulatory provisions, a BDC must comply
with sections 55 through 65 of the 1940 Act, which require, among other
things, that:
a. a majority of the BDC's directors must not be "interested persons"
as defined in section 2(a)(19) of the 1940 Act;
b. A BDC is restricted in the kind of investments it can make, i.e.,
at least seventy percent of the BDC's assets (excluding assets necessary to
maintain the business, such as office furniture) must consist of securities of
small, developing business or financially troubled businesses and such liquid
assets as cash or cash items, Government securities or short-term, high
quality debt securities;
c. A BDC must annually furnish to its shareholders a statement, in
such form and manner as the Securities and Exchange Commission may prescribe,
about the risks involved in investing in a BDC due to the nature of its
portfolio, and;
d. A BDC must have a class of equity securities registered under the
1934 Act or have filed a registration statement under that section and must
comply with the periodic reporting requirements under the 1934 Act, including
annual reports, quarterly reports and reports of certain material changes,
rather than with those in section 30 of the 1940 Act.
<PAGE> 3
Due to the change in the business of the Company, the Company shall elect not
to be treated as a BDC as soon as practicable
Employees. The Company has one full time employee and no part time employees.
The Company shall employ additional individuals as required.
Seasonal Nature of Business Activities. The Company's current business
activities are not seasonal.
ITEM 2. DESCRIPTION OF PROPERTY.
The Company currently occupies an office facility of 400 square feet. It has
a month to month lease term with a monthly lease payment of $395. As of
January 31, 1997, the Company no longer has offices in Denver, Colorado where
the lease payments were $600.00 per month on a month to month basis.
ITEM 3. LEGAL PROCEEDINGS.
The Company knows of no material pending or threatened legal proceedings to
which the Company and its subsidiary is a party or of which any of its
properties is subject, and no such proceedings are known to the Company to be
contemplated by governmental authorities.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
During the fourth quarter of the fiscal year ended January 31, 1997, no
matters were submitted to a vote of the Company's security holders, through
the solicitation of proxies.
<PAGE> 4
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is traded in the over-the-counter market and listed
on the OTC Bulletin Board under the symbol "PWLS".
The following table sets forth the range of high and low bid quotations for
the Company's common stock for each quarter of the last two fiscal years, as
reported by the OTC Bulletin Board. The Company's market makers are Baron
Chase, Paragon and NAIB. The quotations represent inter-dealer prices
without retail markup, markdown or commission, and may not necessarily
represent actual transactions.
<TABLE>
<CAPTION>
Quarter Ended High Bid Low Bid
<S> <C> <C>
1/31/95 3/4 1/4
4/31/95 1 7/8 1/2
7/31/95 1 78 1 3/8
10/31/95 1 5/8 1
1/31/96 1 3/4 1 1/2
4/30/96 3 5/16 2 3/4
7/31/96 3 3/4 3 5/16
10/31/96 1 3/4 1 5/8
1/31/97 3/8 3/8
</TABLE>
The Company's common stock commenced trading on the over-the-counter market in
February, 1994. Prior to that time, there was no market for the securities
of the Company.
The Company has never paid any cash dividends nor does it intend, at this
time, to make any cash distributions to the Registrant's shareholders as
dividends in the near future.
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.
Distribution of these shares was 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. During the year ended January 31, 1996, the 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 $396,000 or
$.15 per share of the Company's common stock.
In connection with the cancellation of the Company's consulting contracts,
the Company canceled dividends accrued during 1996 and 1997 aggregating
$452,161. Additionally during 1997, the Company distributed 63,556 shares of
common stock of Gaming Ventures, Inc. and 99,003 shares of common stock of
Level Best Golf, Inc.
As of January 31, 1997, the number of holders of Company's common stock was
950.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Trends and Uncertainties. Due to its change in business, the Company can no
longer operate on revenues from its consulting fee income. The Company will
have to seek equity or debt financing to commence operations again. The
Company has tried to limit its general and administrative expenses now that
its operations have ceased. 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, received restricted and/or
unrestricted stock in its client companies. The receipt of common stock in
lieu of cash compensation has negatively affected the cash flow of the Company
specifically due to the termination of its consulting contracts and the
surrender of a substantial portion of its client common stock and also until,
if ever, the common stock of the client company becomes liquid.
The Company's policy was to distribute up to 50% of the securities received
from its client companies to its shareholders. The Company declared a
dividend in kind for a portion of the securities it received 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 year ended January 31, 1996, the Company
distributed 63,556 shares of Gaming Ventures, Inc., common stock and 99,003
shares of Level Best Golf, Inc common stock as dividends to its shareholders.
<PAGE> 5
The Company's basis in the stock at the time of the distribution was $95,334
and $148,505 respectively ($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.
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.
3
Distribution of these shares was 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. During the year ended January 31, 1996 the 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 $396,000 or
$.15 per share of the Company's common stock.
In connection with the cancellation of the Company's consulting contracts ,
the Company canceled dividends accrued during 1996 and 1997 aggregating
$452,161. Additionally during 1997, the Company distributed 63,556 shares of
common stock of Gaming Ventures, Inc. and 99,003 shares of common stock of
Level Best Golf, Inc.
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.
Capital Resources and Source of Liquidity. The Company currently has no
material commitments for capital expenditures. In connection with the
termination of its consulting contracts, the Company ceased operations in its
Denver, CO office and transferred $12,773 (net book value of $6,867) of
office equipment to a former employee in exchange for cash of $1,100.
The Company recorded $5,767 of compensation expense in connection with the
transfer of assets. This decrease in lease payments has a positive effect on
the cash flow and liquidity of the Company.
The Company can meet its short term cash flow needs from the sale of
investment securities ($104,123 for the year ended January 31, 1997) and
the proceeds of $185,750 received from a private placement of its common
shares to supplement its cash flow needs. Additionally, the Company
issued 150,000 shares of common stock for the exercise of common stock
options valued at $39,000 of which $31,500 remained unpaid at January 31,
1997.
In the long term, the Company shall utilize the sale of its investment
securities to meet its cash flow needs until the Company can implement its new
business plan.
Going Concern. The Company is not currently delinquent on any of its
obligations even though the Company has ceased to generate revenue from its
consulting services. Based upon the termination 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 not generate a positive cash flow before the end of its fiscal year 1998.
For the year ended January 31, 1997, the Company purchased fixed assets for
its office valued at $875 and received proceeds from investment sales of
$563,646 resulting in net cash used in investing activities for the year ended
January 31, 1997 of $562,771.
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.
<PAGE> 6
During the year ended January 31, 1997, 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. These efforts resulted in net
cash provided by financing activities of $185,750 for the year ended January
31, 1997.
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 year ended January 31, 1997 compared to the year ended January 31,
1996. The Company received total revenue of $685,512 (fee income of $679,955
and interest income of $5,557) for the year ended January 31, 1997 compared to
$1,305,938 (fee income of $1,303,509 and interest income of $2,429) for the
year ended January 31, 1996. This significant decrease was due to the delays
client companies were experiencing in obtaining effective registration
statements and, as such, the Company's abilities to move forward with other
client companies. General and administrative expense increased from $481,370
to $1,486,122 for the year ended January 31, 1997. 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 ($592,510),
professional fees ($91,073), telephone charges ($28,189), travel expenses
($42,477), advertising and promotion of $246,592), consulting fees ($200,000)
printing ($68,294), postage and freight $(19,482), payroll taxes ($24,705) and
other costs ($172,800). The Company experienced a net decrease in net assets
resulting from operations of (128,603) for the year ended January 31, 1997
compared to a net increase in net assets resulting from operations in 1996 of
$339,379. The net decrease is mainly due to delay in the registration of
its client companies filings and the large increase in general and
administrative costs associated with attempts to market the securities of
Level Best Golf, Inc. and Gaming Venture, Inc. Depreciation was $3,699
for the year ended January 31, 1996 compared to $2,584 in 1996. The
investment received for services was decreased dramatically by $421,825
compared to $1,641,000 in 1996 due to decision not to move forward with new
clients in light of the delays in client companies receiving effective
registration statements. Additionally, the Company realized a $540,221 gain
from the sale of its investments for the year ended January 31, 1997 and
$82,879 for the year ended January 31, 1996. This was due to the
increased liquidity of the Company's client companies stock in Gaming
Venture Corp., U.S.A. and Level Best Golf, Inc. and the Company's need
for additional cash flow. The Company had an increase in unrealized
investment appreciation of $445,636 for the year ended January 31, 1997 and
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. The Company abandoned fixed assets valued at $6,868. The
Company distributed free trading investment shares of its client companies
for services in 1997 valued at $395,156 compared to $9,947 in 1996.
Accounts and notes receivable decreased $3,900 in 1997 compared to a
decrease in 1996 of $7,545. 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 $156,215 for the year ended January
31, 1997 compared to an increase of $3,536 for the year ended January
31, 1996 due to increased costs related to services performed on behalf
of its client companies. Deferred revenue decreased $1,180,058 for the year
ended January 31, 1997 compared to an increase of $609,166 for the year
ended January 31, 1996. The decreased amounts in 1997 were due the
Company's decision to decrease the number of client companies until current
client companies had effective registration statements. The increased
amounts in 1996 were due to increased operations and entering into consulting
agreements with additional client companies. The provision for income taxes
was $(212,270) for the year ended January 31, 1997 compared to $201,895 due
to decreased revenues and increased general and administrative costs as a
result of decreased operations. Dividends payable decreased by $243,839 in
1997 due to the Company's decision not to contract with additional client
companies until current client companies needs were met. Net cash used in
operating activities was $827,980 for the year ended January 31, 1997
compared to net cash used in operating activities of $112,980 for the year
ended January 31, 1996.
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
<PAGE> 7
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. During January 1997, the Company determined that it was
unable to complete certain of its consulting projects and would be unable to
accept new consulting clients in the future. The Company has negotiated contract
termination agreements with all of its active clients which provide for the
immediate discontinuance of consulting services. The termination contracts
provide that the Company retain as revenue all cash paid to date and that the
Company return all or a major portion on common stock issued to it by client
companies.
The Company currently intends to provide management services for cash only,
acquire businesses and assets as may provide gain for the shareholders. The
Company may also choose to form corporations for the purpose of pursuing such
business ventures as are deemed potentially profitable by the Board of
Directors.
<PAGE> 8
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial Statements
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Shareholders
Pratt, Wylce & Lords, Ltd.
We have audited the balance sheet of Pratt, Wylce & Lords, Ltd. as of January
31, 1997, and the related statements of operations, changes in net assets,
and cash flows for each of the two years then ended. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. 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
significant estimates made by management, as well as evaluating 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 Pratt, Wylce & Lords,
Ltd. as of January 31, 1997, and the results of its operations, changes in
net assets and cash flows for each of the two years then ended, in conformity
with generally accepted accounting principles.
As discussed in Note 1 to the financial statements, investment securities not
readily marketable amounting to $1,988,815 as of January 31, 1997, have been
valued at fair value as determined by the Board of Directors. We have
reviewed the procedures applied by the directors in valuing such securities
and investments and have inspected underlying documentation, and in the
circumstances, we believe the procedures are reasonable and the documentation
appropriate. However, because of the inherent uncertainty of valuation, the
Board of Directors' estimate of fair values may differ significantly from the
values that would have been used had a ready market existed for the
securities, and the difference could be material.
Winter, Scheifley & Associates, P.C.
Certified Public Accountants
Englewood, Colorado
February 21, 1997
<PAGE> 9
Pratt, Wylce & Lords, Ltd.
Balance Sheet
January 31, 1997
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Investments at market or fair value:
Investments in common stocks $ 673,809
Investments in common stocks - restricted 1,868,816
Cash 10,943
Account receivable 1,100
Property and equipment, at cost, net of
accumulated depreciation of $1,869 4,289
----------
2,558,957
LIABILITIES
Accounts payable 11,658
Accrued expenses 29,983
Payroll taxes payable 151,545
Accrued contract losses 1,868,816
----------
2,062,002
----------
$ 496,955
===========
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 455,460
Unpaid subscriptions to common stock (31,500)
Undistributed operating income and investment
gains (losses):
Accumulated operating losses -
Unrealized accumulated appreciation
of investments 70,120
----------
70,120
----------
Net assets applicable to outstanding common
shares (equivalent to $.17 per share, based
on outstanding common shares of 2,874,596) $ 496,955
==========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 10
Pratt, Wylce & Lords, Ltd.
Statements of Operations
Years Ended January 31, 1997 and 1996
1997 1996
<TABLE>
<CAPTION>
Revenues:
<S> <C> <C>
Fee income $ 679,955 $ 1,303,509
Interest and dividend income 5,557 2,429
----------- -----------
685,512 1,305,938
Costs and expenses:
General and administrative 1,486,122 481,370
Losses on contract cancellations 307,250 -
Interest expense 6,600 89
----------- -----------
1,799,972 481,459
----------- -----------
Income from operations before
before income taxes (1,114,460) 824,479
Income (taxes) benefit 335,191 (298,184)
----------- -----------
Income from operations (779,269) 526,295
Realized gain (loss) on investments 540,221 82,879
Income (taxes) (183,675) (28,179)
----------- -----------
356,546 54,700
Increase (decrease) in unrealized
appreciation of investments 445,636 (366,084)
Income (taxes) benefit (151,516) 124,468
----------- -----------
294,120 (241,616)
Net increase (decrease) in net assets
resulting from operations $ (128,603) $ 339,379
=========== ===========
Earnings (loss) per share:
Net income from operations $ (0.28) $ 0.20
Net realized gains on investments 0.13 0.02
Net unrealized gains (losses) on investments 0.10 (0.09)
----------- -----------
Net income $ (0.05) $ 0.13
=========== ===========
Weighted average shares outstanding 2,777,904 2,581,244
=========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 11
Pratt, Wylce & Lords, Ltd.
Statements of Changes in Net Assets
Years Ended January 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Net income from operations $ (779,269) $ 526,295
Realized gain (loss) from investment 356,546 54,700
Net increase (decrease) in unrealized
appreciation of investments 294,120 (241,616)
------------ -----------
Net increase in net assets
resulting from operations (128,603) 339,379
------------ -----------
Capital share transactions:
Private sales of common stock 223,250 64,044
Common stock issued for services 3,125
Unpaid stock subscription (31,500)
Dividend in kind (396,000)
Cancellation of dividends 452,161
------------ -----------
Total capital share transactions 643,911 (328,831)
------------ -----------
Increase (decrease) in net assets 515,308 10,548
Net assets at beginning of period (18,353) (28,901)
------------ -----------
Net assets end of period $ 496,955 $ (18,353)
============ ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 12
Pratt, Wylce & Lords, Ltd.
Statements of Cash Flows
Years Ended January 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (128,603) $ 339,379
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 3,699 2,584
Investment stock received for services (421,825) (1,641,000)
Unrealized appreciation investment (445,636) 366,084
Gain from sale of investments (540,221) (82,879)
Common stock issued for services 3,125
Abandonment of fixed assets 6,868
Investment stock paid for services 395,156 9,947
Changes in assets and liabilities:
(Increase) decrease in:
Accounts and notes receivable 3,900 7,545
(Decrease) increase in:
Accounts payable 156,215 3,536
Accrued expenses 1,778,634 67,708
Deferred revenue (1,180,058) 609,166
Dividends payable (243,839)
Deferred income taxes (212,270) 201,895
----------- -----------
Total adjustments (699,377) (452,289)
----------- -----------
Net cash provided by (used in)
operating activities (827,980) (112,910)
----------- -----------
Cash flows from investing activities:
Proceeds from sale of investments 563,646 104,123
Purchase of fixed assets (875) (5,742)
----------- -----------
Net cash provided by (used in)
investing activities 562,771 98,381
----------- -----------
Cash flows from financing activities:
Common stock sold for cash 185,750 64,044
Repayment of notes payable (261)
----------- -----------
Net cash provided by (used in)
financing activities 185,750 63,783
----------- -----------
Increase (decrease) in cash (79,459) 49,254
Cash, beginning of period 90,402 41,148
----------- -----------
Cash, end of period $ 10,943 $ 90,402
=========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 13
Pratt, Wylce & Lords, Ltd.
Statements of Cash Flows
Years Ended January 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Amounts paid for:
Income taxes $ - $ -
Interest $ 6,600 $ -
Supplemental disclosure of non-cash investing
and financing:
Common stock issued for services $ - $ 1,500
Investment in common stocks received for
services provided $ 1,821,316 $ 882,000
Dividend in kind to stockholders $ 243,839 $ 360,000
Investment stock paid for services $ 395,156 $ 36,656
</TABLE>
See accompanying notes to financial statements.
<PAGE> 14
Pratt, Wylce & Lords, Ltd.
Notes to Financial Statements
Note 1. Summary of significant accounting policies.
Organization
The Company was incorporated in the State of Florida on May 22, 1986. The
Company had limited operations from 1988 through 1990 and ceased operations
at that time. The Company experienced a change in control and began
operations of its present business as of May 31, 1993. The Company was
reincorporated in the State of Nevada on August 18, 1993.
The Company is in the business of providing financial consulting services for
corporate clients. As compensation for these services, the Company receives
both cash and common stock of the companies to which it provides its
services. The Company has elected to be treated as a Business Development
Company pursuant to Section 54 of the Investment Company Act of 1940.
During January 1997, the Company determined that it was unable to complete
certain of its consulting projects and would be unable to accept new
consulting clients in the future. The Company has negotiated contract
termination agreements with all of its active clients which provide for the
immediate discontinuance of consulting services. The termination contracts
provide that the Company retain as revenue all cash paid to date and that the
Company return all or a major portion on common stock issued to it by client
companies.
securities valuation
Investments in unrestricted securities that are traded in the over-the-
counter market are generally valued at the closing bid price on the last day
of the year. Restricted securities and securities for which no public market
exist are valued at fair value as determined by the Board of Directors.
These securities are initially valued at the price per share provided for in
the client company's private sale of its securities. Periodic adjustments to
the initial fair value are made when deemed appropriate by the directors
based upon intervening events or circumstances that would have a material
effect on the Company's ability liquidate the securities. Such intervening
events and circumstances would include among others material changes in the
client's financial position and results of operations, doubts about the
client's ability to continue as a going concern, a petition in bankruptcy,
the discovery of a material legal or environmental claim, more recent sales
of non-trading securities or the abandonment of plans to complete a
registration of the securities for public sale.
Cash and cash equivalents
For purposes of the statement of cash flows, the Company considers all highly
liquid debt instruments purchased with a maturity of three months or less to
be cash equivalents. The Company had no cash equivalents during the periods
presented.
Furniture and equipment
Furniture and equipment are stated at cost. Depreciation is provided for by
the straight-line method over estimated useful lives as follows:
Equipment 5 years
Revenue
Revenue from the sale of investments is recorded on settlement dates as
determined by independent brokers and dealers in securities. The use of trade
dates for determination of such revenue would not have a material effect on
reported amounts. Revenue from consulting services is recorded ratably over
the term of the contract, usually a twelve month period. Services to be
provided by the Company are set forth in writing and consist of consulting
services associated with raising both private and public financing for a
client company. The company receives non-refundable cash payments and common
stock of the client company as compensation for its services.
Income taxes
Deferred taxes are provided to reflect the income tax effects of amounts
included for financial statement purposes in different periods than for tax
purposes, principally unrealized appreciation of investments and the
valuation of securities received as revenue, the constructive receipt of
which for income tax purposes precedes the establishment of fair value under
generally accepted accounting principles. Valuation of the securities for
income tax purposes is based on fair value at the date the shares are issued
to the Company, which is generally one to three months prior to the private
sale of stock by the client company.
Per share amounts
Per share amounts are computed using the weighted average number of shares
outstanding during the period
Concentration of credit risk
Financial instruments that potentially subject the Company to a concentration
of credit risk consist principally of cash and investments in client company
common stocks. During the year the Company did not maintain cash deposits at
financial institutions in excess of the $100,000 limit covered by the Federal
Deposit Insurance Corporation. Client company common stocks are generally
thinly traded new issues traded in the over-the-counter market or securities
<PAGE> 15
for which no market exists. Attempts by the Company or others to sell
substantial positions in these securities could have material negative
effects on quoted market prices and the resulting fair value of the
securities.
Estimates
The preparation of the Company's financial statements requires management to
make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ
from these estimates. Management estimates the fair value of its investments
in securities for which no public market exists based on the factors
mentioned above. It is reasonably possible that changes may occur in the
near future with respect to client company activities that would require
adjustment of the fair value of these securities.
Note 2. Investments
Common stock of client companies is issued to the Company as payment for its
services and is recorded as revenue ratably over the term of the consulting
contract. As indicated in Note 1, the Company has completed termination
agreements with all of its consulting clients.
Common stocks of client companies in the Company's possession at January 31,
1997 which returned to the client subsequent to that in accordance with the
termination agreements are valued at fair value and are shown as restricted
investments at that date and a corresponding liability has been recorded.
Revenues for the year ended January 31, 1997 do not include allocations of
the fair value of the securities returned to clients and the fair value of
the returned securities recorded as revenue in prior years as well as other
costs associated with the contract terminations are included in the provision
for contract termination losses in the accompanying statement of operations.
At January 31, 1997 the Company had investments in listed common equity
securities as follows:
<TABLE>
<CAPTION>
Historical Fair
Shares Cost Value
<S> <C> <C> <C>
Free trading shares:
Level Best Golf, Inc. 51,601 $ 77,402 $148,352
Gaming Venture Corp. 13,444 20,166 55,457
First Nordic (formerly Sherman Goelz) 55,000 5,000 -
-------- --------
$102,568 $203,809
Restricted shares:
Coronado Industries, Inc. 100,000 $ 60,000 $350,000
</TABLE>
Fair value of securities as of January 31, 1997 was determined by reference
to prices quoted on the NASDAQ OTC Bulletin Board.
At January 31, 1997 the Company had investments in common equity securities
for which no public market exists as follows:
<TABLE>
<CAPTION>
Historical Fair
Shares Cost Value
<S> <C> <C> <C>
Advanced Sterilizer Technology 230,000 $ 345,000 $ 345,000
Rubicon Sports, Inc. 400,000 600,000 600,000
Grand Slam Licensing, Inc. 160,000 240,000 240,000
Immune Technologies, Inc. 350,877 526,315 526,315
Players Network 185,000 277,500 277,500
National Sorbents, Inc. 216,000 324,000 -
Sports Legends, Inc. 226,500 339,750 -
---------- ----------
$2,652,565 $1,988,815
Subsequent to January 31, 1997 the Company returned a substantial portion of
these securities to the respective issuers. The shares retained by the
Company are as follows:
</TABLE>
<TABLE>
<CAPTION>
Shares Fair Value
<S> <C> <C>
Advanced Sterilizer Technology 10,000 $ 15,000
Rubicon Sports, Inc. 25,000 37,500
Grand Slam Licensing, Inc. 10,000 15,000
Immune Technologies, Inc. 10,000 15,000
Players Network 25,000 37,500
Sports Legends, Inc. 226,500 -
----------
$ 120,000
</TABLE>
<PAGE> 16
The shares of Sports Legends, Inc. were issued to the Company during
September 1994. The Board of Directors has determined that intervening
events and circumstances have arisen that would require adjustment of the
fair value of these securities as of January 31, 1996 to zero value.
Specifically, the company has suffered significant deterioration of financial
position and results of operations, has filed for bankruptcy and has halted
its efforts to register its securities for public sale. Consequently, the
Board of Directors has serious doubts about its ability to recover its
investment in Sports Legends, Inc
The shares of National Sorbents, Inc. were issued to the Company during
November 1995. The Board of Directors has determined that intervening events
and circumstances have arisen that would require adjustment of the fair value
of these securities as of January 31, 1997 to zero value. Specifically, the
company has suffered significant deterioration of financial position and
results of operations and has halted its efforts to register its securities
for public sale. Consequently, the Board of Directors has serious doubts
about its ability to recover its investment in National Sorbents, Inc.
Other securities for which no public market exists as of January 31, 1997
were valued at their initial fair value, which in all cases amounted to $1.50
per share. No intervening events or circumstances occurred subject to the
initial valuation of these securities that would require an adjustment to
their valuation as of January 31, 1997.
During the year ended January 31, 1996, the Company sold 16,063 shares of
Applied Cellular Technology, Inc. (ACT) shares for which it received an
aggregate of $104,123. The Company's cost basis in the shares was $24,095.
Additionally during the year the Company transferred 2,000 ACT shares to
others for services provided to the Company. The aggregate market value of
the shares at the transfer dates was $9,947 and such amount was charged to
operations during the period. The Company's cost basis in the shares was
$3,000. The Company recorded a gain from disposition of its ACT shares of
$82,879 for the year ended January 31, 1996. Additionally during 1996 the
Company received 13,336 ACT shares for services performed after expiration of
the original service contract. These shares were valued at the market price
for ACT stock at the issue date which amounted to an aggregate of $53,000 for
10,000 free trading shares and at the market price for 3,336 restricted
shares for an aggregate of $12,000.
During the year ended January 31, 1997, the Company completed the following
transactions with respect to its portfolio of listed securities:
Sales for cash
<TABLE>
<CAPTION>
Shares Proceeds Gain
<S> <C> <C> <C>
Applied Cellular Technologies 11,502 $ 52,674 $ 5,516
Gaming Ventures, Inc. 45,500 $158,290 $ 90,040
Level Best Golf 95,500 $352,682 $209,432
</TABLE>
Distribution for services
<TABLE>
<CAPTION>
Shares Proceeds Gain
<S> <C> <C> <C>
Applied Cellular Technologies 5,843 $ 23,919 $ -
Gaming Ventures, Inc. 62,500 $248,437 $155,777
Level Best Golf 28,896 $122,800 $ 79,456
</TABLE>
Distribution as dividends
<TABLE>
<CAPTION>
Shares Cost
<S> <C> <C>
Gaming Ventures, Inc. 63,556 $ 95,334
Level Best Golf 99,003 $148,505
</TABLE>
Company owns less than 15% of outstanding common stock of its client
companies.
Note 3. Furniture and equipment
Furniture and equipment consists of the following at January 31, 1997:
Office equipment $ 6,158
Less accumulated depreciation (1,869)
---------
$ 13,981
Depreciation expense charged to operations was $3,699 and $2,584 during the
years ended January 31, 1997 and 1996 respectively.
<PAGE> 17
In connection with the termination of its consulting contracts as discussed
in Note 1, the Company ceased operations in its Denver, CO office and
transferred $12,773 (net book value of $6,867) of office equipment to a
former employee in exchange for cash of $1,100. The Company recorded $5,767
of compensation expense in connection with the transfer of assets.
Note 4. 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 rescission of the sales if such exceptions were found not to
apply.
During the year ended January 31, 1996 the Company issued 72,146 shares of
its common stock to a limited investor group for cash aggregating $64,044 and
issued 2,500 shares of common stock to an employee for services valued at
$3,125.
During the year ended January 31, 1997 the Company issued 161,950 shares of
its common stock to a limited investor group for cash aggregating $185,750
and issued 150,000 shares of common stock for the exercise of common stock
options valued at $39,000 of which $31,500 remained unpaid at January 31,
1997.
Note 5. Commitments
The Company rents equipment under an operating lease which provides for
annual base rents through August 31, 1997 of $7,677. The operating lease
was for equipment in use in the Denver, CO office and the lease agreement
has been assumed by a former employee of the Company.
During the year ended January 31, 1996, the Company negotiated operating
leases for executive office space in two locations. The resulting lease
commitment under these agreements is as follows:
Years ending
January 31,
1998 $ 790
-----
Total $ 790
Rent expense for office facilities and equipment amounted to $14,338 and
$7,254 for the years ended January 31, 1997 and 1996, respectively.
Note 6. Dividends in kind
The Company's declares a dividend in kind for a portion of the securities it
receives from its clients 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 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. 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. During the year ended January 31, 1996 the 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 $396,000 or
$.15 per share of the Company's common stock.
In connection with the cancellation of the Company's consulting contracts as
described in Note 1, the Company canceled dividends accrued during 1996 and
1997 aggregating $452,161. Additionally during 1997, the Company distributed
shares of client common stocks to its shareholders as described in Note 2.
Note 7. Note payable
Note payable at January 31, 1996 consists of an equipment purchase contract
due in monthly installments of $117 including interest at 11.75% through
October 1999. Principal repayments are due $972 in 1997, $1,085 in 1998,
$1,213 in 1999 and $1,002 in fiscal year 2000. The Company's telephone
system (historical cost $4,563) serves as collateral for this note. The note
was assumed by a former employee in connection with closure of the Company's
Denver office.
<PAGE> 18
Note 8. Income taxes
The income tax provision recorded in the year ended January 31, 1995 consists
of deferred income taxes on unrealized gains on the Company's investment
portfolio and assumes full utilization of the net operating loss carryforward
available from the prior year. The provision recorded for 1996 consists of
deferred income taxes due to timing differences in recording investment stock
revenue for federal income tax purposes. A deferred tax asset has been
recorded for the tax effect of unrealized losses in investments.
A reconciliation of federal income taxes computed at statutory rates to the
provision for income taxes is as follows at January 31, 1996:
<TABLE>
<CAPTION>
1996
<S> <C>
Taxes computed at statutory rates (34%) $ 184,033
Utilization of net operating
loss carryforward (44,336)
Surtax (exemption) (10,970)
State income taxes 17,862
Provision for income taxes $ 201,895
</TABLE>
Note 9. Sales to major customers
During the years ended January 31, 1997 and 1996, the Company recorded
revenue for services provided to client companies that comprise greater than
10% of total revenues as follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Applied Cellular Technology $ - $ 106,188
Level Best Golf, Inc. $ 68,642 $ 268,667
Sports Legends, Inc. $ 183,571
Gaming Ventures, Inc. $ 271,542
Grand Slam Licensing, Inc. $ 200,000
Trinity Works, Inc. $ 73,252 $ 154,250
Casinovations, Inc. $ 82,500
Immune Technologies, Inc. $ 90,000
</TABLE>
Note 10. Stock option plan
During 1995, the Company adopted the 1995 Non-Statutory Stock Option
Plan which provides for granting to the Company's officers, directors,
employees and certain other individuals who consult with or advise the
Company, options to acquire up to 750,000 shares of the Company's common
stock. The shares issuable under the 1995 plan are at a price not less
than 85% of the fair market value of the stock on the date of grant. The
exercise periods of the options are not to exceed ten years. No options
have been granted pursuant to the plan as of January 31, 1997.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Neither during the twenty-four months prior to the date of the Company's
financial statements included herein nor in any subsequent period thereafter
did the Company file a Form 8-K with the Securities and Exchange Commission
reporting a change of accountants involving a disagreement of any matter of
accounting principles or practices of financial statement disclosure.
<PAGE> 19
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Board of Directors. The following persons listed below have been retained to
provide services as director until the qualification and election of his
successor, except for Mr. and Mrs. Miles who are not directors of the Company.
All holders of Common Stock will have the right to vote for Directors of the
Company. The Board of Directors has primary responsibility for adopting and
reviewing implementation of the business plan of the Company, supervising the
development business plan, review of the officers' performance of specific
business functions. The Board is responsible for monitoring management, and
from time to time, to revise the strategic and operational plans of the
Company. Directors receive no compensation or fees for their services
rendered in such capacity.
The Executive Officers and Directors are:
<TABLE>
<CAPTION>
Name Position Term(s) of Office
<S> <C> <C>
Timothy Miles, age 49 President/Treasurer May 1993 to present
MaryEllen Miles, age 35 Vice President/Secretary May 1993 to present
Elizabeth Gheen, age 49 Director May 1993 to present
Mitsuo Tatsugawa, age 62 Director May 1993 to present
</TABLE>
Mr. Alan Filson and Mr. Stephen Jones resigned as directors in December, 1996
due to the requirements of the Investment Company Act of 1940 regarding
disinterested directors.
Resumes:
Timothy J. Miles. Mr. Miles is currently the President and Treasurer of the
Company. Mr. Miles works full time for the Company. Previously, Mr. Miles
was a stock broker for Paulson Securities from 1991 to May, 1993 when he
became President/Treasurer of the Company. From 1989 to 1991, Mr. Miles was
a stock broker for Exel Securities.
MaryEllen Miles. Mrs. Miles is currently the Vice President and Secretary
for the Company. She is married to Mr. Timothy Miles, President of the
Company. Mrs. Miles worked full time as a foster care provider for Clear
Creek County and was the President of Clear Creek Foster Parents Association
from January, 1995 to January, 1996. From 1988 to 1991, she worked as a
legal assistant at Rothgerber, Appel, Powers & Johnson. Mrs. Miles is
certified as a Paralegal through the Denver Paralegal Institute. From 1986
to 1987, Mrs. Miles worked as an Officer Manager for Lifespring, Inc., a
corporation which conducts personal growth seminars in San Rafael, California.
From 1984 to 1986, she worked as a Sale Administrator for J-Tron, Inc. in San
Jose, California.
Elizabeth Gheen. Mrs. Gheen is currently a Director the Company. Since
1990, she has been employed as an office manager for South County Feed and
Ranch Supply, Inc. in Gonzales, California. From 1989 to 1990, she was an
Administrative Assistant for Insurance Center of Salinas in Salinas,
California. Prior to that, Mrs. Gheen was the Bookkeeper and in charge of
Personnel for Salinas Disposal, Inc. from 1984 to 1989. Mrs. Gheen is a
member of the Monterey Bay Equestrians.
Mitsuo Tatsugawa. Mr. Tatsugawa is currently a Director of the Company. Mr.
Tatsugawa received his Bachelor of Science degree from Utah State University
in 1959 and a Master in Business Administration from the University of Utah.
He served in the US Army at US Army Europe Headquarters in Heidelberg,
Germany. Mr. Tatsugawa worked for fifteen years in various program
management duties with United Technology Center. Upon receiving his masters
degree, he entered the perishables commodity market as general manager,
secretary/treasurer of a large cut flower nursery. During this period, he
also taught at the junior college level on various business subjects and holds
a lifetime teaching credential from the California State Junior College
System. Mr. Tatsugawa has been self employed as a consultant/broker in
Mitsuo Tatsugawa Sales and Service, a sales/brokerage business of cut flowers
and strawberries and raspberries since 1988. Mitsuo Tatsugawa Sales and
Service sells these products to wholesalers and jobbers nationwide. Mr.
Tatsugawa provides consulting advise to producers of cut flowers on the
marketing of their product.
Conflicts of Interest. The Corporation will be subject to various conflicts
of interest between the Corporation and its Affiliates. Since the executive
officers and directors will control the daily operations of the Corporation
and its Affiliates, there may be occasions when the interests of the
Corporation's Affiliates may be inconsistent with the interests of the
Corporation. The risk exists that such conflicts will not be resolved in the
best interest of the Corporation.
Allocation of Management Time. The Corporation will rely on its sole
officer to manage the Corporation's business operations. Currently Mr.
Timothy Miles is controlling the operations of the Corporation. Mr. Miles
<PAGE> 20
currently devotes all of his time for the operation of the Corporation.
Mrs. Miles currently devotes approximately less than 5% of her time for the
operation of the Corporation and will devote as much of her time to the
business of the Corporation as in her judgment is reasonably necessary to
operate the Corporation in a profitable manner. As such, and until all of
their positions become "full time," there will be conflicts of interest in
allocating management time, services and functions between the Corporation and
its Affiliates. These individuals may engage for their own account, or for
the account of others in other business ventures for which the Corporation
shall not be entitled to any interest.
The Corporation may, at some time in the future, compete for the management
services of the current and future officers of the Corporation. As a result,
these individuals may be placed in a position where their decision to favor
other operations in which they are associated over those of the Corporation
will result in a conflict of interest. It should also be noted that it may
be expedient for them to favor one operation over another since their
participation in such operations will vary. In allocating their time, they
will recognize their fiduciary obligations to the Corporation, the prevailing
industry standards and the financial situation of the Corporation.
Conflicts of Interest Policy. The Corporation has adopted a policy that
any transactions with directors, officers or entities of which they are also
officers or directors or in which they have a financial interest, will only be
on terms consistent with industry standards and approved by a majority of the
disinterested directors of the Corporation's Board of Directors. No such
transactions by the Corporation shall be either void or voidable solely
because of such relationship or interest of directors or officers or solely
because such directors are present at the meeting of the Board of Directors of
the Corporation or a committee thereof which approves such transactions, or
solely because their votes are counted for such purpose if: (i) the fact of
such common directorship or financial interest is disclosed or known by the
Board of Directors or committee and noted in the minutes, and the Board or
committee authorizes, approves or ratifies the contract or transaction in good
faith by a vote for that purpose without counting the vote or votes of such
interested directors; or (ii) the fact of such common directorship or
financial interest is disclosed to or known by the shareholders entitled to
vote and they approve or ratify the contract or transaction in good faith by a
majority vote or written consent of shareholders holding a majority of the
Common Shares entitled to vote (the votes of the common or interested
directors or officers shall be counted in any such vote of shareholders), or
(iii) the contract or transaction is fair and reasonable to the Corporation
based on the material similarity of terms to recent consulting agreements not
involving interested parties, or in all other agreements by competitive bids,
at the time it is authorized or approved. In addition, interested directors
may be counted in determining the presence of a quorum at a meeting of the
Board of Directors of the Corporation or a committee thereof which approves
such transactions.
Non-Qualified and Incentive Stock Option Plans. During 1995, the Company
adopted the 1995 Non-Statutory Stock Option Plan which provides for granting
to the Company's officers, directors, employees and certain other individuals
who consult with or advise the Company, options to acquire 750,000 shares of
the Company's common stock. The shares issuable under the 1995 plan are at a
price not less than 85% of the fair market value of the stock on the date of
grant. The exercise periods of the options are not to exceed ten years.
The Plan was suspended by the Board of Directors on June 12, 1996 and any
options granted in 1996 were suspended.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth certain summary information concerning the
total remuneration paid or accrued by the Company, to or on behalf of the
Company's Chief Executive Officer and the Company's executive officers
determined as of the end of each of the last three years.
<PAGE> 21
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards Payouts
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other All
Name Annual Restricted LTIP Other
and Compen- Stock Options/ Pay- Compen-
Principal Salary Bonus sation Awards SARs Outs sation
Position Year ($) ($) ($) ($) ($) ($) ($)
Timothy Miles
President,
Treasurer 1994 $32,500 - - - - - -
Chief Financial
Officer 1995 $52,500 - - - - - -
1996 $177,000 - - - - - -
</TABLE>
(1) No other officer has received compensation in the last three years. The
above compensation refers to the year ended January 31, 1994, for the year
ended January 31, 1995 and for the year ended January 31, 1996. Additionally,
in the year ended January 31, 1995, Mr. Miles received 7,785 common shares of
Applied Cellular Technology, Inc.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tabulates holdings of shares of the Company by each person who,
subject to the above, at the date of this prospectus, holds of record or is
known by Management to own beneficially more than 5.0% of the Common Shares
and, in addition, by all directors and officers of the Company individually
and as a group. Each named beneficial owner has sole voting and investment
power with respect to the shares set forth opposite his name.
Shareholdings at Date of
This Prospectus
<TABLE>
<CAPTION>
Percentage of
Number & Class Outstanding
Name and Address of Shares Common Shares
<S> <C> <C>
Timothy Miles(1)(2)
#9 Niblick
Hilton Head Island, SC 29938 451,183 17.40%
MaryEllen Miles(1)(2)
#9 Niblick
Hilton Head Island, SC 29938 451,183 17.40%
Elizabeth Gheen
9070 Coker Road
Salinas, CA 93907 300,770 11.60%
Mitsuo Tatsugawa
220A San Benancio Road
Salinas, CA 93908 360,924 13.92%
Stephen A. Jones
24285 Hillview Drive
Laguna Niguel, CA 92677 160,501 6.19%
Alan R. Filson
7270 Oakbay Drive
Noblesville, IN 46060 150,693 5.81%
All Directors & Officers
as a group (4) 1,112,807 42.90%
</TABLE>
(1)Pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended, beneficial ownership of a security consists of sole or shared voting
power (including the power to vote or direct the voting) and/or sole or shared
investment power (including the power to dispose or direct the disposition)
with respect to a security whether through a contract, arrangement,
understanding, relationship or otherwise.
Unless otherwise indicated, each person indicated above has sole power to
vote, or dispose or direct the disposition of all shares beneficially owned,
subject to applicable community property laws.
(2)Includes Timothy Miles and MaryEllen Miles, who is married to Mr. Miles,
who together constitute a "group," as that term is defined in Section 13D of
the Securities Exchange Act of 1934, as amended.
<PAGE> 22
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Marital Relationship. Mr. Timothy Miles and Mrs. MaryEllen Miles are
married.
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Financial Statements and Schedules
The following financial statements and schedules are filed as part of
this report:
Independent Auditor's Report
Balance Sheet as of January 31, 1996
Statement of Operations for Period from Inception to January 31, 1996
Statement of Cash Flows for Period from Inception to January 31, 1996
Statement of Changes in Stockholder's Equity for Period from Inception
to January 31, 1996
Notes to Financial Statements
(b) List of Exhibits
The following of exhibits are filed with this report:
(2) Articles of Incorporation incorporated by reference to Form 10SB
File Number 0-25792
(2.1) Articles of Merger incorporated by reference to Form 10SB,
File Number 0-25792
(2.2) Bylaws incorporated by reference to Form 10SB, File
Number 0-25792
(3) Common Stock Certificate incorporated by reference to Form
10SB, File Number 0-25792
(6) Consulting Agreement with Applied Cellular Technology
(formerly Axcom Information Technology, Inc.) incorporated
by reference to Form 10SB, File Number 0-25792
(6.1) Consulting Agreement with Level Best Golf, Inc. incorporated
by reference to Form 10SB, File Number 0-25792
(6.2) Consulting Agreement with Sports Legends, Inc. incorporated
by reference to Form 10SB, File Number 0-25792
(6.3) Consulting Agreement with Gaming Venture Corp. USA
incorporated by reference to Amendment 1 to Form 10SB,
File Number 0-25792
(6.4) Consulting Agreement with Grand Slam Licensing, Inc.
incorporated by reference to Form 10SB, File Number 0-25792
(6.5) Consulting Agreement with Trinity Works, Inc. incorporated
by reference to Amendment 1 to Form 10SB, File Number
0-25792
(6.6) Consulting Agreement with Players Network incorporated by
reference to Amendment 2 to Form 10SB, File Number 0-25792
(6.7) Consulting Agreement with National Sorbents, Inc. incorporated
by reference to Amendment 2 to Form 10SB, File Number 0-25792
(6.8) Consulting Agreement with Federated Financial Services, Inc.
incorporated by reference to Amendment 2 to Form 10SB, File
Number 0-25792
(12) 1995 Non-Statutory Stock Option Plan incorporated by reference to
Amendment 3 to Form 10SB, File Number 0-25792
Reports filed on Form 8-K.
The Company filed no reports on Form 8-K during the fourth quarter of the
Company's fiscal year ended January 31, 1997.
<PAGE>23
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this Report
to be signed on its behalf by the undersigned duly authorized person.
Date: June 2, 1997 PRATT, WYLCE & LORDS, LTD.
/s/ Timothy Miles
---------------------------
By: Timothy Miles, President
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
Date: June 2, 1997
/s/ Timothy Miles
- ---------------------------
Timothy Miles, President, Chief Financial Officer,
Controller, Chief Executive Officer
Date: June 2, 1997
/s/ Mits Tatsugawa
- ---------------------------
Mits Tatsugawa, Director
Date: June 2, 1997
/s/ Elizabeth Gheen
- ---------------------------
Elizabeth Gheen, Director
