SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 10-QSB
(X) Quarterly Report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act Of 1934.
For the period Ended March 31, 1997
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or
( ) Transition Report Pursuance to Section 13 or 15 (d) of the Securities
Exchange act of 1934.
For the transition period from ______________________ to ______________________
Commission File Number 0-24952
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PRENTICE CAPITAL, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 84-1139554
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2898 UNIVERSITY DRIVE, SUITE 43, CORAL SPRINGS, FLORIDA 33065
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(Address of principal executive offices) (Zip Code)
(954) 340-5916
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Registrant's telephone number, including area code
NONE
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(Former name, former address and former fiscal year,
if changed since last report)
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 Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicated by check mark whether the registrant filed all documents and reports
required to be filed by Section 12, 13 or 15 (d) of the Exchange Act of 1934
subsequent to the distribution of securities under a plan confirmed by a court.
Yes No
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APPLICABLE ONLY TO CORPORATE ISSUERS
As of June 30, 1997, Registrant had 11,529,142 shares of common stock, $.03 par
value, outstanding.
1
<PAGE>
ITEM 8. FINANCIAL INFORMATION
The financial statements are attached hereto as required by Rule 14(a)-
3(b)
(a) 1. Financial Statements
Page
Number
------
Consolidated Balance Sheets as of March 31, 1997
(Unaudited) and December 31, 1996 1
Consolidated Statements of Operations, for the Three
Months Ended March 31, 1997 and March 31, 1996 2
Consolidated Statements of Cash Flows, for the Three
Months Ended March 31, 1997 and March 31, 1996 3
Consolidated Statements of Stockholders' Equity, for
the Three Months Ended March 31, 1997 4
Notes to Consolidated Financial Statements 5
(a) 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operations 6 - 9
(a) 3. OTHER INFORMATION 10
SIGNATURES 11
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2
<PAGE>
PRENTICE CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
(Unaudited)
March 31, December 31,
1997 1996
------------ -----------
<S> <C> <C>
CURRENT ASSETS
Cash $ 100 $ 103
Accounts receivables, less allowance for
doubtful accounts of $-0- and $79,943 - 304,294
Other receivables 37,310 36,557
Prepaid expenses 31,755 70,122
------------ -----------
Total current assets 69,165 411,076
------------ -----------
PROPERTY AND EQUIPMENT
Property and equipment, net of accumulated
depreciation of $-0- and $19,870 - 178,139
------------ -----------
OTHER ASSETS
Note receivable - Casino International 500,000 -
Investment in Eco2, Inc. stock 1,100,000 -
Organization costs, net of accumulated
amortization of $3,203 and $3,124 2,367 2,946
------------ -----------
Total other assets 1,602,367 2,946
------------ -----------
TOTAL ASSETS $ 1,671,532 $ 592,161
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 21,954 $ 36,204
Accrued expenses 3,064 5,413
Current portion of long-term debt - 4,737
Due to related party 98,189 84,884
------------ -----------
Total current liabilities 123,207 131,238
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LONG-TERM DEBT - 10,871
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STOCKHOLDERS' EQUITY
Preferred stock, $.0001 par value;
10,000,000 shares authorized, none issued - -
Common stock, $.03 par value; 500,000,000
shares authorized, 4,528,555 and 12,328,889
shares issued and outstanding 135,867 369,867
Additional paid-in capital 1,597,897 9,658,732
Receivable for stock issued ( 30,552) ( 8,250,000)
------------ -----------
1,703,212 1,778,559
Retained deficit ( 154,887) (1,328,547)
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Total stockholders' equity 1,548,325 450,052
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,671,532 $ 592,161
============ ===========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
3
<PAGE>
PRENTICE CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
1997 1996
----------- ----------
REVENUE $ 279,912 $ 350,836
----------- ----------
COSTS AND EXPENSES
Accounting and Legal 20,864 9,545
Depreciation and Amortization 11,619 5,657
Consulting Services 16,667 117,567
Public company expenses - -
Salaries and benefits 180,822 199,323
General and Administrative 103,123 102,052
----------- ----------
Total costs and expenses 333,096 434,144
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LOSS FROM OPERATIONS $( 53,184) $( 83,308)
OTHER INCOME (EXPENSE)
Interest income 119,785 -
Interest expense ( 3,250) ( 1,550)
Net gain on disposition of subsidiaries 1,086,626 -
----------- ----------
Net other income (expense) 1,203,161 ( 1,550)
----------- ----------
NET LOSS $ 1,149,977 $( 84,858)
=========== ==========
NET LOSS PER SHARE OF
COMMON STOCK $ .25 $( .03)
=========== ==========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES AND COMMON SHARE EQUIVALENTS
OUTSTANDING (RESTATED) 4,528,889 3,288,889
=========== ==========
The accompanying notes are an integral part
of these financial statements.
4
<PAGE>
PRENTICE CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
1997 1996
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CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $1,149,977 $( 84,858)
Adjustments to reconcile net loss to net
cash used in operating activity (1,556,084) 62,951
---------- ----------
Net cash used in operating activities $( 6,107) $( 21,907)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Loans from related parties - 89,198
Purchase of assets ( 2,128) -
Loan receivable ( 753) -
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Net cash used in investing activities ( 2,881) 89,198
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CASH FLOWS FROM FINANCING ACTIVITIES
Due to and from related party 10,467 -
Repayment of note payable ( 1,482) -
Cash as a result of merger - -
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Net cash provided by financing activities 8,985 -
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INCREASE (DECREASE) IN CASH ( 3) 67,291
CASH AT BEGINNING OF PERIOD 103 -
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CASH AT END OF PERIOD $ 100 $ 67,291
========== ==========
The accompanying notes are an integral part
of these financial statements.
5
<PAGE>
PRENTICE CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
(Restated)
Common Stock Additional Retained
------------------------ Paid-in Deficit
Shares Amount Capital Stage
--------- -------- ---------- -----------
<S> <C> <C> <C> <C>
STOCK ISSUANCES
BALANCE, December 31, 1996 12,328,889 $369,867 $1,408,732 $(1,328,547)
Cancellation of stock in exchange
for debts to the company (7,800,000) (234,000) 67,315 -
Disposition of subsidiaries,
Casino International, and
the operations of Universal
Footcare Cliniscs - - 91,298 23,683
Net profit for the period - - - 1,149,977
--------- -------- ---------- -----------
BALANCE, March 31, 1997 4,528,889 $135,867 $1,567,345 $( 154,887)
========= ======== ========== ===========
</TABLE>
The accompanying notes are an integral part of
these financial statements.
6
<PAGE>
PRENTICE CAPITAL, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
NOTE 1 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements included herein have been prepared by
Prentice Capital, Inc. without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in the financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted as
allowed by such rules and regulations. Prentice Capital, Inc. believes that the
disclosures are adequate to make the information presented not misleading. It is
suggested that these financial statements be read in conjunction with the
December 31, 1996 audited financial statements and the accompanying notes
thereto. While management believes the procedures followed in preparing these
financial statements are reasonable, the accuracy of the amounts are in some
respect dependent upon the facts that will exist, and procedures used by
Prentice Capital, Inc. later in the year.
The management of Prentice Capital, Inc. believes that the accompanying
unaudited condensed consolidated financial statements contain all adjustments,
including normal recurring adjustments, necessary to present fairly the
financial position as well as the operations and cash flows for the periods
presented.
NOTE 2 PREFERRED STOCK
On April 15, 1996, the Company sold to Roscom, Ltd., and Vietri Investments,
Ltd., two unrelated entities 4,000,000 and 1,000,000 shares of the Company's
Series A Preferred Stock in exchange for their promissory notes in the amount of
$2,000,000 and $500,000 respectively. On March 17, 1997, the Company, Roscom,
Ltd., and Vietri Investments, Ltd. agreed to rescind the sale of preferred stock
by returning the preferred shares issued and by the cancellation of the
promissory notes. Therefore, the issuance of the preferred shares were not
recorded in the accompanying financial statements.
NOTE 3 CANCELLATION OF DEBTS
On June 6, 1996, the Company authorized the issuance of 10,000,000 shares of the
Company's common stock, 5,000,000 shares to Alan S. Lipstein, and 5,000,000
shares to Gerard Norton, former president and vice-president of the Company
respectively, in exchange for their promissory notes from Mr. Lipstein and Mr.
Norton in the amount of $2,500,000 each.
On March 17, 1997, Mr. Lipstein and Mr. Norton agreed to return 7,800,000 shares
of the Company's common stock in exchange for the cancellation of promissory
notes due and payable to the Company in the following amounts due by the
respective parties: Mr. Lipstein - $2,500,000; Dr. Gerard Norton - $2,500,000;
Roscom, Ltd. - $500,000; Vietri Investments, Ltd. - $500,000, and a liability
assumed by Mr. Lipstein of $2,250,000 in connection with the purchase of 75,000
shares of common stock on March 31, 1995.
7
<PAGE>
PRENTICE CAPITAL, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
NOTE 4 PURCHASE OF MINERAL RIGHTS
PURCHASE OF MINERAL RIGHTS
On March 17, 1997, the Company and Chartwell International, Inc., a Navada
corporation (Chartwell) entered into a Purchase and Sale Agreement (Agreement)
pursuant to which the Company purchased certain gypsum mining property located
in Washington County, Utah, generally known as Riverview Placer Claims and New
Riverview Claims (Claims) in exchange for $4,000,000 in cash, cash equivalents
and restricted shares of the Company's Common Stock.
Under the terms of the Agreement, the Company delivered to Chartwell 1,000,000
shares of Common Stock of the Company (the "Closing Shares"). According to the
Agreement, in the event that on April 1, 1997 (which date was subsequently
extended until April 15, 1997 by that certain Extension Agreement), the market
value of the Closing Shares is less than $4,000,000, then the Company shall
deliver to Chartwell a sufficient number of additional shares of the Company's
Common Stock (the "Exchange Shares") having a market value equal to the
difference between the value of the closing shares on April 1, 1997 (extended
until April 15, 1997) and $4,000,000. Further, under the terms of an Amended
Purchase Agreement between the Company and Chartwell dated April 10, 1997
(Amended Agreement), for purposes of determining the market value of the Common
Stock under the Agreement the market value shall be determined based on the
closing bid price of the Company's Common Stock on April 15, 1997.
The Agreement also provided that in the event that on April 1, 1998, the date on
which all restrictions on the Closing Shares and the Exchange Shares shall be
removed, the market value of the Closing Shares and the Exchange Shares is not
equal to or in excess of $4,000,000, then at the option of the Company, the
Company shall have the right and obligation to issue Chartwell additional
shares, or deliver to Chartwell cash equal to the difference between the market
value of the Closing Shares and the Exchange Shares and $4,000,000, or, in lieu
thereof, return to Chartwell the Claims, with Chartwell retaining all shares of
Common Stock previously issued to it.
On April 2, 1997, the Company and Chartwell entered into an Extension Agreement
(Extension Agreement) pursuant to which each party agreed to extend the time
period established for valuing the market price of the Closing Shares from April
1, 1997 to April 15, 1997. Additionally, pursuant to the Extension Agreement,
the Company issued Chartwell 1,000,000 shares of the Company's Common Stock. The
parties also agreed that in the event that on April 15, 1997, the bid price of
the Company's Common Stock is $4.00 per share or greater, Chartwell shall return
to the Company the 1,000,000 shares referenced in the sentence above, or the
Exchange Shares, as that term is used in the Agreement such that the stock
retained by Chartwell has a market value on April 15, 1997 of $4,000,000.
Further, pursuant to the Extension Agreement, the Company paid Chartwell
$100,000 on April 15, 1997, plus shares of the Company's Common Stock
(unrestricted) that together with the $100,000 will equal $500,000 based on the
bid price on the day of delivery.
8
<PAGE>
PRENTICE CAPITAL, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
NOTE 4 PURCHASE OF MINERAL RIGHTS (Continued)
PURCHASE OF MINERAL RIGHTS (Continued)
All shares of Company Common Stock under the Agreement are restricted securities
under the Securities Act of 1933 and will be legended with the normal Securities
Act of 1933 restrictive legend. Further, the Company has agreed to grant
Chartwell, on customary terms, piggyback registration rights on all shares of
common Stock granted pursuant to the Agreement.
NOTE 5 CASINO INTERNATIONAL MERGER
On February 26, 1997, the Company, together with its wholly owned subsidiary
Casino International, Inc., entered into an Agreement and Plan of Reorganization
with Eco2, Inc., a publicly traded company, its wholly owned subsidiary, Eco2
Acquisition, Inc. whereby Casino International would be merged into Eco2
Acquisition, Inc. As a result of this merger contemplated by this agreement,
Prentice received 5,000,000 shares of Eco2, Inc. $.01 par value common stock and
a promissory note in the amount of $500,000 from Eco2 Acquisition, Inc.
Immediately after the merger the name of Eco2 Acquisition, Inc. was changed to
Casinos International, Inc.
The promissory note, including interest at the rate of 8% per annum, is payable
in sixty equal monthly installments of $10,138, the first installment being
payable on March 31, 1997. No payments have been received by the Company. The
promissory note is secured by 100 shares of common stock of Casino
International, Inc. held in escrow in accordance with an Escrow and Disposition
Agreement of even date.
On the effective date of the merger, the existing members of the Board of
Directors of Eco2, Inc. appointed Alan S. Lipstein, the president of the
Company, as director of Eco2, Inc., and immediately thereafter the former
members of the Board of Directors and Officers of Eco2, Inc. resigned.
Eco2, Inc. and Prentice jointly and severally agreed to indemnify Charles
Ledford, Vivian Ledford, and Raymond Ledford, all of the officers and directors
of Eco2, Inc., as well as Energy Systems, Inc., a company owned by the Ledfords,
(hereinafter collectively referred to as "Indemnitees") from and against any and
all damages, losses, obligations, deficiencies, liabilities, claims,
encumbrances, penalties, costs and expenses, including reasonable attorney's
fees, which the Indemnitees may suffer or incur, resulting from (a) their being
an officer or director of Eco2, Inc.; (b) the transaction contemplated under the
merger contemplated under this agreement; (c) misrepresentations, breach of
warranty, or nonfulfillment of any of the covenants or agreements of Casinos
International in this agreement or from any misrepresentation in or omission
from any certificate or document furnished or to be furnished to the Indemnitees
hereunder, and; (d) any and all actions, suits, investigations, proceedings,
demands, assessments, audits, judgments, and claims arising out of the
foregoing.
9
<PAGE>
PRENTICE CAPITAL, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
NOTE 6 UNIVERSAL FOOTCARE MERGER
ORIGINAL MERGER
On February 10, 1995, Prentice Capital, the Company's subsidiary, Universal
Footcare, Inc. (Universal) and Dameron Levy & Baker, P.A. (the "Clinic"),
completed a "forward triangular merger", merging the Clinic with and into
Universal, at the conclusion of which Universal, remained the surviving entity
and the corporate existence of the Clinic terminated and expired.
In connection with such merger the Company issued 316,666 shares (10,555 after
the 1 for 30 split of June 10, 1996) to the former shareholders of the Clinic,
and agreed to register these shares as part of a future registration of
securities by the Company. These shares were not registered by the Company.
The Company also committed to issued additional shares to the former
shareholders of the Clinic, if on July 1, 1996 the value of the shares issued to
them in connection with the merger is less than $3 per share. The Company would
issue such additional shares so that the value of the original shares issued
plus the additional shares equal the product of $3 per share. No additional
shares were issued under this agreement.
The agreement also specified that if on July 1, 1997, the value of the shares
then held by the former shareholder of the Clinic, plus the gross proceeds of
any shares previously sold is less than the product of the 316,666 multiplied by
$3, then the Company will issue the former shareholders of the Clinic a
non-interest bearing promissory note for the deficiency, payable within 90 days
thereafter.
CURRENT MERGER
On March 26, 1997, the Company, together with its wholly owned subsidiary
Universal Footcare, Inc., and its wholly owned subsidiary Universal Operations,
Inc. (collectively referred to as "Universal") entered into an Agreement of
Merger with Footcare Centers of America, Inc. (FCA), its wholly owned subsidiary
Footcare Acquisition, Inc. (Acquisition), and Drs. Joel M. Levy, D.P.M., James
P. Dameron, D.P.M., and Steven Baker, D.P.M.
(Podiatrists).
In accordance with the agreement, the assets and liabilities of the Clinics were
transferred to Acquisition in exchange for the Company being relieved
responsibility and liability under the Original Merger to issued additional
shares and/or to pay the former shareholders of Dameron, Levy & Baker, P.A.
(Clinic) the difference in shares value and the agreed price paid for the
Clinic.
On the effective date of the merger, the existing members of the Board of
Directors of Acquisition immediately prior to the merger remain as officers and
directors of the surviving company.
10
<PAGE>
PRENTICE CAPITAL, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
NOTE 6 UNIVERSAL FOOTCARE MERGER
EMPLOYMENT AGREEMENTS
On February 10, 1995, the Company entered into ten-year employment agreements
with the Podiatrists. The agreements specified that upon premature termination
of the employment agreements, all patient records of the Podiatrists would be
returned to them, and in addition each Podiatrist would be paid his normal
compensation for a 90 day period. In lieu of this payment, the Company allowed
the Podiatrists to retain the 10,555 shares issued to them in connection with
the acquisition of the Clinics by the Company in 1995.
NOTE 7 COMMITMENTS
Subsequent to the end of the year, the Company entered into a month to month
lease for its executive offices located in Coral Spring, Florida at $418 per
month.
On December 1, 1994, the Company entered into a five year employment agreement
with Alan S. Lipstein, the Company's president at the time at a base
compensation of $240,000 per year. In connection with Mr. Lipstein's resignation
as president, the employment agreement was terminated.
NOTE 8 SUBSEQUENT EVENTS
SALE OF COMMON STOCK
On March 10, 1997, the Company and Lee J. Unger, president of the Company,
entered into an agreement (Agreement) pursuant to which the Company agreed to
sell to Mr. Unger 5,000,000 shares of its restricted common stock at a price of
$.05 per share to be effected by delivery to the Company an assignable
Promissory Note bearing interest at 6% per annum and due payable one year from
the date of the Agreement.
On May 28, 1997, the Company sold 5,000,000 shares of its common stock to Mr.
Unger in exchange for two non-recourse promissory notes in the amounts of
$200,000 and $50,000 respectively. The notes are due and payable on May 27,
1998, including accrued interest at the rate of 6% per annum. The notes are
secured with 5,000,000 shares of the Company common stock issued to Mr.
Unger.
PURCHASE OF MRI BUSINESS
On June 3, 1997, the Company entered into a Stock Purchase Agreement (Agreement)
with U.S.A. Diagnostics, Inc., a Florida corporation (Diagnostics) and its sole
shareholder, Nate Hollander, for the acquisition of 100% of the capital stock of
Diagnostics and the assets of MRI Management Services, Inc. (MMS) and Bentley
Designers and Builders, Inc. (BDB) consisting of two Magnetic Resonance
Imagining (MRI) units. Mr. Hollander is the sole shareholder of MMS and BDB,
each of which owns one MRI unit with an estimated value of $500,000 each.
11
<PAGE>
PRENTICE CAPITAL, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
NOTE 8 SUBSEQUENT EVENTS (Continued)
Diagnostics is in the business of magnetic resonance imaging and neurological
nerve conduction testing in the South Florida area.
The aggregate purchase price of Diagnostics and the two MRI units is $5,500,000
payable $4,000,000 in cash at the closing, and shares of restricted common stock
of the Company having a value of $1,500,000, determined by the average closing
bid price over the five trading day period preceding the date of the Agreement.
Within 45 days of signing the Agreement, the Company is to deposit $1,750,000
into an escrow account, and within 75 days the Company is to use its best
efforts to obtain a firm commitment underwriting, represented by a letter of
intent satisfactory to Mr. Hollander, to raise net proceeds of no less than
$2,500,000 to be used as part of the cash required for closing. According to the
Agreement, the Company is to have a firm commitment underwriting within 45 days
or have an effective registration within 75 days, or such longer period as the
parties may mutually agree, then the escrowed funds will be returned to the
Company and the Agreement will terminate.
The shares representing the $1,500,000 are to be paid 10% at the closing and the
remaining 90% on February 2, 1998. However, in the event closing does not occur
prior to February 2, 1998, then the entire 100% of the shares will be paid at
closing.
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12
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
Prentice Capital, Inc. ("Prentice") was organized as a Delaware corporation on
March 26, 1990, in order to evaluate, structure and complete a merger with, or
acquisition of, prospects consisting of private companies.
Effective February 15, 1995, the Company established a Florida corporation,
Casinos International, Inc. as a wholly owned subsidiary in order to operate its
proposed gaming cruise ship.
Universal Footcare, Inc. ("Universal") was organized as a Florida corporation on
May 10, 1994 to investigate, acquire and operate podiatry clinics.
Effective March 26, 1997, Universal established a Florida corporation, Universal
Operations, Inc. as a wholly owned subsidiary in order to consummate the sale of
the assets of its Clinics to Footcare Centers of America, Inc.
Effective on September 6, 1994 Prentice acquired all of the issued and
outstanding common and preferred stock of Universal in exchange for which
Prentice issued to the shareholders of Universal 64,444 shares of Prentice's
$.03 par value common stock. The acquisition was accounted as a purchase. The
assets of Universal consisted primarily of $971,000 in cash, $11,000 in
receivables and $5,500 in organization costs. The accounts of Universal were
consolidated with those of Prentice as of September 6, 1994.
On February 10, 1995, Prentice Capital, Universal and Dameron Levy & Baker, P.A.
(the "Clinic") effectuated a "forward triangular merger", merging the Clinic
with and into Universal, at the conclusion of which Universal, remained the
surviving entity and the corporate existence of the Clinic terminated. The
issued and outstanding common shares of the Clinic, which were canceled and
voided, were converted into an aggregate of 316,332 shares (10,555 shares after
the reverse split of June 24, 1996) of Prentice Capital's common stock and in
addition the former shareholder of the Clinic were paid $100,002 in cash.
In addition to the concept of acquiring and operating podiatry clinics, the
Company has developed a plan to attract a core of 40-60 podiatry clinics to
which the Company will provide management services, including assistance with
practice development, centralized accounting, billing, advertising, space
utilization, etc. This concept was not developed by the Company. Up to the date
of disposition of the assets of the Clinics, the Company received letters of
intent from a number of these doctors, however, none of the management
agreements have been concluded.
On February 26, 1997, the Company, along with its subsidiary Casino
International, Inc., entered into an Agreement and Plan of Reorganization with
Eco2, Inc., a publicly traded company, its wholly owned subsidiary, Eco2
Acquisition, Inc. whereby Casino International was merged into Eco2 Acquisition,
Inc. As a result of this merger Prentice received 5,000,000 shares of Eco2, Inc.
$.01 par value common stock and a promissory note in the amount of $500,000 from
Eco2 Acquisition, Inc.
13
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
AND RESULTS OF OPERATIONS (Continued)
-------------------------------------
On March 17, 1997, the Company and Chartwell International, Inc., a Navada
corporation (Chartwell) entered into a Purchase and Sale Agreement (Agreement)
pursuant to which the Company purchased certain gypsum mining property located
in Washington County, Utah, generally known as Riverview Placer Claims and New
Riverview Claims (Claims) in exchange for 2,000,000 restricted shares of the
Company's common stock and $100,000 in cash.
On March 26, 1997, the Company, along with its subsidiary Universal Footcare,
Inc., and its wholly owned subsidiary Universal Operations, Inc. and Drs. Joel
M. Levy, D.P.M., James P. Dameron, D.P.M., and Steven Baker, D.P.M.
(Podiatrists) entered into an Agreement of Merger with Footcare Centers of
America, Inc. (FCA), its wholly owned subsidiary Footcare Acquisition, Inc.
(Acquisition) whereby the assets and liabilities of the Clinics were transferred
to Acquisition in exchange for the Company being relieved responsibility and
liability under the Original Merger to issued additional shares and/or to pay
the former shareholders of Clinic the difference in shares value and the agreed
price paid for the Clinic.
On June 3, 1997, the Company entered into an agreement with U.S.A. Diagnostics,
Inc., a Florida corporation and its sole shareholder, Nate Hollander, for the
acquisition of 100% of the capital stock of that company, and two Magnetic
Resonance Imagining (MRI) units owned by MRI Management Services, Inc. (MMS) and
Bentley Designers and Builders, Inc. (BDB). Mr. Hollander is the sole
shareholder of MMS and DBD, each of which owns one MRI unit.
The aggregate purchase price of Diagnostics and the two MRI units is $5,500,000
payable $4,000,000 in cash at the closing, and shares of restricted common stock
of the Company having a value of $1,500,000, determined by the average closing
bid price over the five trading day period preceding the date of the Agreement.
GENERAL
On August 14, 1991 the Prentice completed a public offering of 7,500,000 Units
at $.01 per Unit, for net proceeds of approximately $57,075 after payment of
offering expenses. Each Unit consisted of one (1) share of the Company's $.0001
par value common stock, 8 Class A, 8 Class B, 8 Class C Common Stock Purchase
Warrants. All of the Warrants expired on February 12, 1995.
RESULTS OF OPERATIONS
The Company completed the merger with Dameron Levy & Baker, P.A. on February 10,
1995 in a transaction recorded as a purchase, and merged its operations as of
that date, therefore as of that date, the Company is no longer in the
development stage. Prior to that time, the Company had no revenues, other than
interest income.
14
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
AND RESULTS OF OPERATIONS (Continued)
-------------------------------------
Comparison of operations for the quarter ended March 31, 1997 with the quarter
- --------------------------------------------------------------------------------
ended March 31, 1996.
- ---------------------
For the quarter ended March 31, 1997, net revenues from operations amounted to
$279,912 compared to $350,836 for the quarter ended March 31, 1996.
Accounting and legal expenses increased from $9,545 in 1996 to $14,039 in 1997.
Expenses during the first quarter of 1997 was higher due to (1) the
investigation of business opportunities relating to mineral rights, (2) the
negotiations and merger of the Company's subsidiaries Casino International and
Universal Footcare, Inc. and, (3) the filing with SEC for annual reports.
Depreciation and amortization expense increase from $5,657 in 1996 to $11,619 in
1997 reflecting the acquisition of additional operating assets in the for the
footcare Clinics.
Consulting fees expense decreased from $117,567 in 1996 to $16,667 in 1997
reflecting the write off of prvious commitment by the Company for banking
services and independent evaluation of business activity of the Clinic.
Salaries expense decrease from $199,323 in 1996 to $180,822 in 1997 reflecting
the termination of the employment agreement with Alan S. Lipstein on February
28, 1997. The Company has not yet entered into an employment agreement with its
new president, Mr. Lee Unger. The termination of the employment agreement with
the professional employees of the Clinic are not fully reflected in the
accompanying statements, since the Clinics were sold on March 26, 1997.
General and administrative expenses in 1996 were $102,054 compared to $103,102
in 1997 reflecting the level activity of operations by the Company after the
merger with Dameron Levy & Baker.
Comparison of the major components of general and administrative expenses are as
follows: advertising, $2,209 in 1997, $3,044 in 1996; contract labor, $4,699 in
1997, $3,358 in 1996; insurance, $16,900 in 1997, $16,390 in 1996; medical
supplies, $21,568 in 1997, $18,898 in 1996; office expenses, $10,950 in 1997,
$5,183 in 1996; rent, $21,156 in 1997, $22,704 in 1996; taxes, $11,184 in 1997,
$11,022 in 1996; telephone, $10,867 in 1997, travel, $14,066 in 1997, $53 in
1996; $6,395 in 1996, and utilities $1,849 in 1997, $1,758 in 1996.
LIQUIDITY AND CAPITAL RESOURCES
Although the Company's capital is limited, management believes it has sufficient
resources to continue its current business operations and the evaluation of
business opportunities relating to the acquisition of MRI units and centers. The
Company anticipates operational costs will be limited until such time as the MRI
center is operational.
15
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
AND RESULTS OF OPERATIONS (Continued)
-------------------------------------
Comparison of operations for the quarter ended March 31, 1997 with the quarter
ended March 31, 1996 (Continued).
LIQUIDITY AND CAPITAL RESOURCES (Continued)
The Company anticipates securing the appropriate private placement financing to
close on the MRI center within the appropriate time period, and has been
negotiating with various sources. Additionally, the Company has also been
negotiating with underwriters and anticipates securing a firm commitment
underwriting of at least $2,500,000 required to complete the closing on the MRI
center.
The Company was successful in locating and/or negotiating terms advantageous to
the Company for gypsum mineral property rights, and anticipates raising capital
through the sale of securities for the mining of such property. Once mining
operation begins, the Company anticipates receiving title deed to the mining
property.
At March 31, 1997, the Company had no material commitments for capital
expenditures.
(Remainder of page left blank intentionally)
16
<PAGE>
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None.
Item 2. CHANGES IN SECURITIES.
None.
Item 3. DEFAULTS UPON SENIOR SECURITIES.
None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(a) None
(b) None
(c) None
Item 5. OTHER INFORMATION.
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
Exhibit 27 - Financial Data Schedule (Electronic filing only)
(Remainder of page left blank intentionally)
17
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
PRENTICE CAPITAL, INC.
Dated: 07/24/97 By /s/ Lee Unger
------------------ -----------------------------------
Mr. Lee Unger, President
In accordance with the Exchange Act, this Report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
Signature Capacity Date
- ------------------------- -------------------------- ---------------------
/s/ Lee Unger President, Chief Executive 07/24/97
- ------------------------- Officer, Chief Financial ---------------------
Lee Unger and Accounting Officer and
Director
18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF ML DIRECT INC. FOR THE SIX MONTHS ENDED MAY 31, 1997,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
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<PERIOD-END> MAY-31-1997
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