<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, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period to
Commission file number - 0-25792
PRATT, WYLCE & LORDS, LTD.
(Exact name of Registrant as specified in its charter)
NEVADA 84-1247085
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification Number)
P.O. Box 7571, Hilton Head Island, SC 29938
(Address of principal executive offices) (Zip Code)
(803) 686-5590
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
and Exchange Act of 1934 during the preceding twelve months (or such
shorter period that the Registrant was required to file such reports),
and (2) has been subject to file such filing requirements for the
past thirty days. Yes x No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the close of the period covered by this
report:
3,102,596 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.
Balance Sheet
October 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Investments at market or fair value:
Investments in common stocks $ 509,650
Cash 374
Property and equipment, at cost, net of
accumulated depreciation of $2,877 4,281
-----------
514,305
LIABILITIES:
Accounts payable and accrued expenses 36,008
Payroll taxes payable 75,317
------------
111,325
------------
$ 402,980
============
NET ASSETS
Common stock, $.001 par value,
75,000,000 shares authorized,
3,102,596 shares issued and outstanding $ 3,103
Additional paid-in capital 517,232
Undistributed operating income and investment
gains (losses):
Accumulated operating income (302,815)
Unrealized accumulated depreciation
of investments 185,460
------------
(117,355)
Net assets applicable to outstanding common ------------
shares (equivalent to $.13 per share, based
on outstanding common shares of 3,102,596) $ 402,980
============
</TABLE>
See accompanying notes to financial statements.
<PAGE>5
Pratt, Wylce & Lords, Ltd.
Statements of Operations
Three Months and Nine Months Ended October 31, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
October 31, October 31,
1997 1996 1997 1996
Revenues: -------------- --------------- ------------- ----------
<S> <C> <C> <C> <C>
Fee income $ - $ 1,368,817 $ - $3,155,616
Interest and dividend income - 381 - 2,633
-------------- --------------- -------------- ----------
1,369,198 3,158,249 0
Costs and expenses:
General and administrative
24,952 594,308 425,960 1,096,704
-------------- --------------- --------------- - --------
Income (loss) from operations before
before income taxes (24,952) 774,890 (425,960) 2,061,545
Income (taxes) benefit (17,400) (297,071) 81,085 (803,565)
-------------- -------------- -------------- ------------
Income (loss) from operations (42,352) 477,819 (344,875)
1,257,980
Realized gain (loss) on investments (4,300) 230,026 63,727 232,996
Income (taxes) benefit 1,462 (78,209) (21,667) (79,219)
--------------- -------------- -------------- -------------
(2,838) 151,817 42,060 153,777
Increase (decrease) in unrealized
appreciation of investments (46,878) 14,116 174,758 819,348
Income (taxes) benefit 15,939 (4,799) (59,418) (277,558)
--------------- -------------- -------------- -------------
(30,939) 9,317 115,340 541,790
---------------- ------------- -------------- -------------
Net income (loss) $ (76,130) $638,953 $(187,475) $ 1,953,547
============ ============ ============
============
Earnings (loss) per share:
Net income (loss) from operations $ (0.02) $ 0.22 $ (0.10) $ 0.51
Net realized gains (losses) on investments - - - -
Net unrealized gains (losses) on investments (0.01) 0.00 0.04 0.20
-------------- -------------- -------------- ------------
Net income (loss) $ (0.03) $ 0.22 $ (0.06) $ 0.71
============ ============ ============
============
2,964,485 2,874,596 2,914,559 2,745,674
============ ============ ============
============
</TABLE>
See accompanying notes to financial statements.
<PAGE>6
Pratt, Wylce & Lords, Ltd.
Statements of Changes in Net Assets
Nine Months Ended October 31, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Net income (loss) from operations $ (344,875) $1,257,980
Realized gain (loss) from investment 42,060 153,777
Net increase (decrease) in unrealized
appreciation of investments 115,340 538,790
-------------- ------------------
Net increase (decrease) in net assets
resulting from operations (187,475) 1,950,547
Capital share transactions:
Private sales of common stock 62,000 184,250
Stock subscription paid in kind 31,500 39,000
Dividends in kind - (1,073,250)
-------------- ------------------
Total capital share transactions 93,500 (850,000)
-------------- ------------------
Increase (decrease) in net assets (93,975) 1,100,547
Net assets at beginning of period 496,955 (18,353)
-------------- -----------------
Net assets end of period $ 402,980 $1,082,194
============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>7
Pratt, Wylce & Lords, Ltd.
Statements of Cash Flows
Months Ended October 31, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
------------- -----------
<S> <C> <C>
Net cash provided by (used in)
operating activities $ (237,523) $ (604,576)
Cash flows from investing activities:
Proceeds from sale of investments 165,954 391,659
Purchase of investment securities (1,250)
Purchase of fixed assets (1,000) (19,116)
-------------- --------------
Net cash provided by (used in) investing activities 164,954 371,293
Cash flows from financing activities:
Repayment of notes payable - (4,272)
Sale of restricted common stock 62,000 185,750
-------------- --------------
Net cash provided by (used in) financing activities 62,000 181,478
-------------- --------------
Increase (decrease) in cash (10,569) (51,805)
Cash, beginning of period 10,943 90,402
-------------- --------------
Cash, end of period $ 374 $ 38,597
============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>8
Pratt, Wylce & Lords, Ltd.
Notes to Unaudited Financial Statements
October 31, 1997
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. These
financial statements should be read in conjunction with
information provided in the Company's report on Form 10-K for
the year ended January 31, 1997.
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, 1997 the Company had investments in common
equity securities as follows:
Historical Fair
Shares Cost Value
Grand Slam Licensing, Inc. 10,000 15,000 -
Players Network, Inc. 25,000 37,500 37,500
Immune Technologies, Inc. 10 000 15,000 30,000
Advanced Sterilizer Technology 10,000 15,000 15,000
Casinovations, Inc. 29,100 43,650 43,650
National Sorbents, Inc. 216,000 324,000 108,000
Rubicon Sports, Inc. 25,000 37,500 62,500
Coronado Industries 100,000 60,000 213,000
First Nordic 55,000 5,000 -
--------- ---------
$552,650 $509,650
Fair value of National Sorbents Inc. and Coronado Industries as
of October 31, 1997 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 as adjusted by management
to reflect significant changes in investee company financial
conditions.
During the six months ended October 31, 1997, the Company
received net proceeds from the sale of investment securities
aggregating $165,594 and recorded gains from the transactions
aggregating $63,727. Additionally the Company returned
investee company securities to the issuers aggregating
$1,864,544, which amount had been fully reserved at January 31,
1997. During the nine months ended October 31, 1997, the
Company issued 228,000 shares of its restricted common stock to
a limited group of investors for cash aggregating $62,000. The
price paid per share by the investors approximated the bid
value of the stock at the issue dates.
<PAGE> 9
Item 2. 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 o 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.
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.
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.
During the nine months ended October 31, 1997, the Company returned investee
company securities to the issuers aggregating $1,864,544, which amount had
been fully reserved at January 31, 1997. The Company can meet its short
term cash flow needs from the sale of investment securities ($165,594 for
the nine months ended October 31, 1997 and $104,123 for the year ended January
31, 1997). During the nine months ended October 31, 1997, the Company issued
228,000 shares of its restricted common stock to a limited group of investors
for cash aggregating $62,000.
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 nine months ended October 31, 1997, the Company received the proceeds
from the sale of investment securities of $165,954 and purchased fixed assets
of $1,000 resulting in net cash provided by investing activities of $164,954.
<PAGE>10
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.
Net cash provided by financing activities for the nine months ended July 31,
1997 was $62,000 from the sale of its common stock.
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 nine months ended October 31, 1997, the Company did not receive any
revenue due to the cessation of operations compared to revenues of $3,155,616
for the nine months ended October 31, 1996. The Company had general and
administrative expenses of $425,960 for the nine months ended October 31, 1997
which consisted primarily of contract losses of $220,968, salaries and wages
of $118,003, legal of $15,700, accounting of $4,571, travel of $15,062,
advertising of $3,085, telephone of $8,317, printing of $3,387, interest of
$6,600 and other expenses of $30,170.
The Company had general and administrative expenses of #1,096,704 for the nine
months ended October 31, 1996 which consisted primarily of salaries and wages
of $428,137, accounting of $3,125, travel of $51,883, advertising of
$175,182, telephone of $25,699, legal of $65,481, printing of $57,724,
and other expenses of $138,728.
For the year ended January 31, 1997 compared to the year ended January 31,
1996. The Company receives 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. 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
<PAGE>11
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
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 of 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.
(a) Exhibits (numbered in accordance with Item 601 of Regulation S-K)
None
(b) Reports on Form 8-K
None
<PAGE>12
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 1, 1997
/s/ L. Alan Schafler
L. Alan Schafler, President
<TABLE> <S> <C>
<ARTICLE> 5
<CAPTION>
<S> <C>
<PERIOD-TYPE> 9-MOs
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> OCT-31-1997
<CASH> 374
<SECURITIES> 509,650
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 374
<PP&E> 4,287
<DEPRECIATION> (2,877)
<TOTAL-ASSETS> 514,305
<CURRENT-LIABILITIES> 111,325
<BONDS> 0
<COMMON> 3,103
0
0
<OTHER-SE> 399,877
<TOTAL-LIABILITY-AND-EQUITY> 514,305
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 425,960
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,600
<INCOME-PRETAX> (187,475)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (187,475)
<EPS-PRIMARY> (.10)
<EPS-DILUTED> (.10)
</TABLE>
