11
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1996
Commission File Number 0-21998
PORTER MCLEOD NATIONAL RETAIL, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 84-1195628
(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
5895 East Evans Avenue, Denver, Colorado, 80222
(Address and Zip Code of Principal Executive Offices)
Issuer's Telephone Number: (303) 756-2227
Check whether the issuer (1) filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the
past 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
There were 1,970,866 shares of the registrant's common stock
outstanding as of November 14, 1996.
This Document Contains 11 Pages
There is One Exhibit
.
Item 1. Financial Statements
Porter McLeod National Retail, Inc.
Balance Sheets
<TABLE>
<CAPTION>
September 30, December 31
1996 1995
<S> <C> <C>
(UNAUDITED)
Assets
Current Assets
Cash and cash equivalents $ 136,715 $ 354,050
Accounts receivable 700,771 642,848
less allowance for doubtful accounts (20,000) (20,000)
Costs and estimated earnings in excess
of billings 21,509 96,525
Prepaid expense and other assets 132,153 66,232
Total current assets 971,148 1,139,755
Property and equipment
Building 600,000 0
Office furniture and equipment 21,278 21,278
Leasehold improvements 34,634 34,634
655,912 55,912
Less accumulated depreciation (29,459) (21,655)
Total property and equipment 626,453 34,257
Other assets
Note receivable from affiliate 677,126 677,126
Advances to affiliates 128,809 92,997
Other assets 2,705 0
Total other assets 808,640 770,123
Total Assets $2,406,241 $1,944,135
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued
expenses $ 605,846 $ 451,138
Billings in excess of costs and
estimated earnings on uncompleted
contracts 33,661 0
Mortgage payable - current portion 18,649 0
Total current liabilities 658,256 451,138
Long- term liabilities
Mortgage payable-less current portion 579,903 0
Stockholders' equity
Preferred stock, $.001 par value,
authorized - 100,000 shares-no
shares issued and outstanding -- --
Common stock, $.0001 par value,
authorized - 3,000,000 shares-issued
and outstanding: 1,970,666 197 197
Additional paid-in capital 3,931,116 3,931,116
Accumulated deficit (2,763,230) (2,374,199)
Consulting agreement 0 (64,117)
Total stockholders' equity 1,168,082 1,492,997
Total liabilities and
stockholders' equity $2,406,241 $1,944,135
</TABLE>
See note to financial statements.
Porter McLeod National Retail, Inc.
Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30 Ended September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Contract income $1,226,612 $1,891,207 $2,812,449 $4,134,914
Contract costs 1,160,664 1,689,519 2,484,703 3,700,067
Gross Profit 65,948 201,688 327,746 434,847
General and administrative
expenses 295,526 273,429 757,106 815,201
Income (loss) from
operations (229,578) (71,741) (429,360) (380,354)
Other income (expense): 10,668 13,587 41,527 (12)
Net income (loss) before
income taxes (218,910) (58,154) (387,833) (380,366)
Income tax benefit
(expense) (1,198) 0 (1,198) 0
Net income (loss) $(220,108) $(58,154) $(389,031) $(380,366)
Net income (loss) per
common share $ (.11) $ (.03) $ (.20) $ (.20)
</TABLE>
See note to financial statements.
Porter McLeod National Retail, Inc.
Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net loss $(389,031) $(380,366)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation 7,804 5,147
Amortization 64,115 187,840
Loss on sale of security investments 0 41,743
Changes in assets and liabilities:
Receivables (57,923) (63,182)
Costs and estimated earnings
in excess of billings on contracts 75,116 894,833
Prepaid expenses and other (68,625) (2,082)
Accounts payable and accrued expenses 154,808 (1,524,753)
Payable to affiliates (35,812) (35,549)
Billings in excess of costs and
estimated earnings on contracts 33,661 586,641
Income taxes payable 0 0
Net cash (used in) operating
activities (215,887) (289,728)
Cash flows from investing activities:
Acquisition of property and equipment (600,000) 0
Proceeds from sale of investment
securities 0 357,853
Net cash (used in) provided by
investing activities (600,000) 357,853
Cash flows from financing activities:
Cash advances (to) from affiliate 0 (300,974)
Net proceeds from issuance of stock 0 8
Net proceeds from mortgage 598,552 0
Net cash (used in) provided by
financing activities 598,552 300,966
Net increase (decrease)
in cash and cash equivalents (217,335) (232,841)
Cash and cash equivalents -
beginning of period 354,050 236,583
Cash and cash equivalents -
end of period $135,715 $3,742
</TABLE>
See note to financial statements.
PORTER MCLEOD NATIONAL RETAIL, INC.
Note to Financial Statement
Note 1 - Summary of Significant Accounting Policies
The unaudited financial statements included herein were prepared
from the books of the Company in accordance with generally
accepted accounting principles and reflect all adjustments which
are, in the opinion of management, necessary to provide a fair
statement of the results of operations and financial position for
the statements presented. Such financial statements generally
conform to the presentation reflected in the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1995, and
reflect adjustments which are solely of a normal recurring
nature. These financial statements do not include all of the
disclosures normally made in the company's annual Form 10-KSB
filing. These financial statements should be read in conjunction
with the Company's Annual Report on Form 10-KSB.
Certain amounts from the 1995 financial statements have been
reclassified to conform to the 1996 presentation.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operation.
Nine Months Ended September 30, 1996 as Compared with
the Nine Months Ended September 30, 1995
Results of Operations
Contract Income - The Company experienced a 31% decrease in
contract income from $4,134,914 during the nine months ended
September 30, 1995 to $2,812,449 for the nine months ended
September 30, 1996. During the nine months ended September 30,
1996, contract income was impacted as the management team has
focused on implementation of new systems and procedures and
negotiations with potential acquisition candidates. The
management team continues to focus on negotiated contracts as
opposed to the prior emphasis on competitively bid fixed price
contracts. The contract income for the nine month period ended
September 30, 1996, is representative of the change in focus of
the operations of the Company as 79% of the income resulted from
negotiated contracts while none of the Company's contract income
for the comparable period of 1995 resulted from negotiated
contracts. The average size construction project that the
Company had under contract at September 30, 1996 was $839,000 as
compared to $381,000 as of September 30, 1995.
Contract costs - The efforts of the Company's new management team
have resulted in levels of contract costs that are better than
the industry average as compiled by the Construction Financial
Management Association, which reported a 1995 industry contract
cost stated as a percentage of contract income of 91.7% . For
the nine months ended September 30, 1996, the Company experienced
contract costs, stated as a percentage of contract income, of
88.4%.
Gross Profit - For the first nine months of 1996 the Company
realized a gross profit percentage of 11.6% which reflects the
impact of new management personnel and improved systems on the
estimating, pricing and bidding of projects. The shift in
emphasis to negotiated contracts reduces the risk that is
attached to competitive bidding for projects. Negotiated
contracts complement the business strategy of focusing on
renovations and remodeling projects as these type of projects can
be negotiated, subcontracted out and completed in a short time
frame.
General and Administrative Expenses - The Company's general and
administrative expenses are generally fixed in nature. The
expenses decreased $58,095 from $815,201 in the first nine months
of 1995 to $757,106 during the comparable period of 1996.
Included in the general and administrative expenses for the nine
months ended September 30, 1996 is $139,645 of costs attributable
to the planned merger (discussed below under Accounts receivable
affiliates) and to discussions and negotiations with potential
acquisition candidates. Of the decrease in expenses, $80,980
was attributable to a reduction in amortization expenses related
to a marketing agreement and an advisory services contract. The
Company recognized the impairment of its International Marketing
Agreement in 1995 and the asset was written off in its entirety
in 1995 under the guidelines of Statement of Financial Accounting
Standards No. 121, while the advisory services contract is fully
amortized as of September 30, 1996. After adjusting for these non-
recurring types of expenses; consulting fees and amortization of
marketing and advisory contracts, the Company realized a
reduction in general and administrative expenses of $74,010 for
the nine months ended September 30, 1996 as compared to the same
period in 1995.
Income (Loss) from Operations - The Company experienced a net
operating loss of $(389,031) for the nine months ended September
30, 1996 as compared to a loss of $(380,366) for the nine months
ended September 30, 1995.
Other Income and Expense - The Company realized $43,038 in
interest income for the first nine months of 1996 as compared to
$41,731 in interest income during the same reporting period of
1995. However, in 1995 the Company also realized a $41,527 loss
from the sale of marketable securities.
Liquidity and Capital Resources
The Company's current assets decreased 40% to $971,148 over the
nine months ended September 30, 1996. Current liabilities
decreased by 39%, resulting in an increase in the current ratio
from 1.50 to 1.67 over the same period. Working capital
decreased 42% to $312,892 over the nine month period. The
decrease in current assets, current liabilities and working
capital resulted from a decrease in the Company's backlog of
contracts to be performed from $4,575,777 at September 30, 1995
to $2,434,143 at September 30, 1996. With less construction in
process, the relative accounts receivable and accounts payable
were at lower levels at September 30, 1996 as compared to the
same date in 1995.
Cash and Cash Equivalents - The $897,468 reduction in accounts
receivable combined with the $429,360 loss from operations
incurred during the nine month period ending September 30, 1996,
were the primary causes of the increase from $3,742 to $136,715
in the Company's cash and cash equivalents.
Net Cash Used in Operating Activities - Operating activities used
net cash of $215,887 during the nine months ended September 30,
1996 as compared to net cash used in operating activities of
$289,728 during the same period of 1995. The decrease in cash
usage was attributable to the lower level of construction
activity during the comparable nine month periods ending
September 30, 1996 and September 30, 1995.
Net Cash from (Used In) Investing Activities - During the nine
months ended September 30, 1995, the Company's source of cash
provided from investing activities was $357,853 in proceeds from
the sale of investment securities. The 1995 transaction resulted
in a complete liquidation of the Company's holdings of investment
securities. During the nine months ended September 30, 1996 the
Company acquired the building in which it maintains offices from
The Intermountain Companies, a general partnership of which Bruce
Porter and Joseph McLeod are the general partners. The
acquisition was made at appraised value of $600,000.
Net Cash From (Used in) Financing Activities - For the nine
months ended September 30, 1995, the major use of cash for
financing activities was advances made to Porter McLeod
Management, Inc. ("PMM") and Porter McLeod Colorado, Inc.
("PMC"), both of which are subsidiaries of Porter McLeod
Holdings, Inc. ("PMH"), the Company's major shareholder. During
the nine months ended September 30, 1996, the Company realized
funds from the financing of the acquisition of the building in
which it maintains offices (See above). The financing was for
100% of the purchase price of $600,000. As the following table
shows, the Company's investment of capital resources in contract
activities decreased due to fewer contracts as well as improved
operations, billing and collection systems.
<TABLE>
<CAPTION>
September 30
1996 1995
<S> <C> <C>
Accounts receivable - net $ 680,771 $1,578,239
Costs and estimated earnings in
excess of billings on uncompleted
contracts 21,509 9,344
Billings in excess of costs and
estimated earnings on uncompleted
contracts (33,661) 0
Total investment in contracts $ 668,619 $1,587,583
</TABLE>
Accounts receivable affiliates - PMM, an affiliate of the
Company, owes $805,935 to the Company, representing advances made
to PMM with respect to the provision of key administrative
services including management, bidding, data processing,
accounting, marketing, and cash management services. The
increase of $38,517 over the balance due at December 31, 1995
represents interest accrual on that portion of the accounts
receivable that is evidenced by the promissory note discussed
below. Management believes this relationship to be economically
beneficial to the Company through reduced overall administrative
costs. PMM does not make any profit with regard to such
activities. The Company has made such advances to protect the
economic benefits and preserve the above-mentioned business
benefits which the Company derives from its dealings with its
affiliate. PMM's obligation to repay approximately $605,000 of
such advanced funds, plus interest thereon computed at the rate
of seven percent per annum, is evidenced by a promissory note
providing for payment of said obligation in three annual
installments of $201,976, plus accrued interest, commencing on
March 31, 1995 and continuing yearly thereafter through 1997.
Payment of such indebtedness was guaranteed by PMC, PMH, and by
Messrs. Bruce Porter and Joseph McLeod, both of whom are officers
and directors of the Company, and the sole shareholders of PMH.
PMM failed to pay the first two such installments, and the
default created thereby remains in effect through March 31, 1996.
Based upon a plan which management began to formulate prior to
the time when such installment became due, the Company expects to
collect the full amount of such indebtedness through a transfer
of ownership of more than 80% of the outstanding common stock of
PMC by PMH to the Company, and a merger of PMH, PMC and PMM with
and into the Company. Management presently anticipates that the
Company's shareholders will be asked to consider and grant
approval of such transaction at the annual meeting of
stockholders which is scheduled to take place on or about
December 1996.
Forward looking statements. - The statements contained in this
Report on Form 10-QSB ("Quarterly Report") which are not
historical facts, including, but not limited to, statements found
under the captions "Results of Operations" and "Liquidity and
Capital Resources", both contained in Management's Discussion and
Analysis of Financial Condition and Results of Operations, are
forward-looking statements that involve a number of risks and
uncertainties. The actual results of the future events described
in such forward-looking statements in this Quarterly Report could
differ materially from those stated in such forward-looking
statements. Among the factors that could cause actual results to
differ materially are the risks and uncertainties discussed in
the Quarterly Report, including, without limitation, the approval
of shareholders of the merger transaction (see "Accounts
receivable affiliates").
Item 6. Exhibits and Reports on Form 8-K
(a) List of Exhibits:
27.0 Financial Data Schedule
(b) There were no reports filed on Form 8-K during the
quarter ended September 30, 1996.
Signature
In accordance with the requirements of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Porter McLeod National Retail, Inc.
Dated: November 14, 1996 By /s/ Joseph R. McLeod
Joseph R. McLeod, President
By /s/ A.J. Shilling A.J. Shilling,
Treasurer and Chief Financial Officer
Exhibit 27
Porter McLeod National Retail, Inc.
This schedule contains summary financial information extracted
from the financial statements of Porter McLeod National Retail,
Inc. for the quarterly period ended September 30, 1996 and is
qualified in its entirety by reference to such financial
statements.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 136,000
<SECURITIES> 0
<RECEIVABLES> 701,000
<ALLOWANCES> 20,000
<INVENTORY> 0
<CURRENT-ASSETS> 971,000
<PP&E> 656,000
<DEPRECIATION> 29,000
<TOTAL-ASSETS> 2,406,000
<CURRENT-LIABILITIES> 580,000
<BONDS> 0
0
0
<COMMON> 197,000
<OTHER-SE> 1,168,000
<TOTAL-LIABILITY-AND-EQUITY> 2,406,000
<SALES> 2,812,000
<TOTAL-REVENUES> 2,812,000
<CGS> 2,484,000
<TOTAL-COSTS> 757,000
<OTHER-EXPENSES> 46,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,000
<INCOME-PRETAX> (388,000)
<INCOME-TAX> 1,000
<INCOME-CONTINUING> (389,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (389,000)
<EPS-PRIMARY> (.20)
<EPS-DILUTED> (.20)
</TABLE>
