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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Year Ended December 31, 1995 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
Securities Registered Under Section 12(b) of the Exchange Act-. None
Securities Registered Under Section 12(g) of the Exchange Act
Common Stock, $.0001 Par Value
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-
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B 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 in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year: $5,167,422.
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The aggregate market value of the registrant's common stock held by
non-affiliates of the registrant as of April 2, 1996 was approximately
$973,500. Solely for purposes of the foregoing calculation all of the
registrant's directors and officers are deemed to be affiliates
There were 1,970,666 shares of the registrant's common stock outstanding as of
March 20,1996.
PART I
ITEM 1 Business
OVERVIEW OF BUSINESS
Porter McLeod National Retail Inc. (the "COMPANY") was formed in March,
1992 primarily for the purpose of undertaking construction projects for
national retail clients, as well as undertaking other types of construction
projects, including projects in Colorado for clients with national operations.
See "Description of Business and Properties- Corporate History".
As a full service general contractor, the Company provides general
construction, construction management, design/build, turnkey and multiple
retail store improvement and interior construction services primarily for
national retail firms. The Company selects, coordinates and manages
subcontractors, and provides oversight and supervision of the construction, for
specific projects, by working dosely with the retail construction division of
its retail client. The largest portion of this work is performed in shopping
malls and other shopping centers. The Company's principal executive and
administrative offices are located at 5895 East Evans Avenue, Denver, Colorado
80222, telephone number (303) 756-2227.
DESCRIPTION OF BUSINESS
During 1995, approximately 39% of the Company's projects were obtained
by competitive bidding on a fixed price basis, and approximately 61% of its
business was obtained through contracts negotiated directly with clients. By
comparison, during 1994, approximately 90% of the Company's business resulted
from competitive bidding and only approximately 10% resulted from negotiated
contracts. The sixfold expansion of business based upon negotiated contracts
and the concomitant shrinkage in competitively bid fixed price business marks a
significant change of direction regarding the Company's basic business
philosophy. Such change primarily resulted from management's conclusion that a
focused effort to secure a greater number of negotiated contracts would
translate into higher profit margins, while creating
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more value for its customers, and eliminating the major risk inherent in
competitively bid projects, that the Company may invest the time and resources
necessary to submit a bid and then lose the contract to a competitor who has
submitted a lower bid. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Gross Profits."
A negotiated contract generally provides for payment based on a
"cost-plus" formula. Repeat jobs for the same client are a primary source of
negotiated contracts.
Inasmuch as the nature of the competitive bidding process requires a
contractor to be able to prepare accurate fixed bids in a timely manner, the
Company has heretofore relied on Porter- McLeod Management, Inc. ("PMM") to
perform such services for it. PMM is a wholly owned subsidiary of Porter McLeod
Holdings, Inc. ("PMH"). PMH is the holder of 48.82% of the Company's
outstanding common stock and is jointly owned by Messrs. Bruce Porter and
Joseph McLeod, the Chairman and President, respectively, of the Company.
Pursuant to an Administrative Services Agreement among the Company, PMM and
Porter McLeod Colorado, Inc. ("PMC") (the "Administrative Services Agreement"),
another wholly owned subsidiary of PMH, PMM provides to the Company as and when
needed estimators and project managers who are responsible for the preparation
of bids. See "Certain Relationships and Related Transactions - Transactions
Between the Company and Affiliated Corporations - Administrative Services
Agreement." In order to bid on a project or submit a proposal, the Company
assembles information from suppliers, obtains bids from potential
subcontractors, investigates code requirements, and reviews the client's
scheduling needs. The Company prepares the cost estimate for its bid not only
by drawing on cost data from other projects, but also by utilizing the
Company's self-generated data base of subcontractors in various regional
locations. This data base indudes information concerning previous bids and
previous work performed on behalf of the Company, including work performed on
behalf of the Company's affiliates prior to April 1992, by various
subcontractors in that region. In addition to information concerning specific
subcontractors, the data base also provides the estimator with information
concerning pricing in a particular region. By utilizing this data base and the
specific cost information concerning a region, the Company believes it can
prepare its bids more effectively and quickly.
In addition to evaluating a potential project from the perspective of
cost and scheduling estimates, the Company also undertakes a client
qualification
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process to determine whether the client appears to be suitable for the Company
to undertake the particular project - primarily from a financial perspective.
This is accomplished initially through a credit check, review of available
financial statements, and oral inquiries made to management of the prospective
client. If these procedures reveal the need for additional background review,
the Company will pursue it.
After a contract or a bid has been accepted, the Company assembles a
team of subcontractors and assigns a project manager (who is provided by PMM)
to the project to supervise all aspects of the construction and completion of
the work. Subcontractors generally are based in the project's geographic area,
and are hired specifically for the project. The project manager works closely
with the construction superintendent who personally oversees the day to day
construction of a particular project. Depending upon the size of a project, a
project manager may visit the site at least once or twice during the
construction period and is in daily communication with the on-site
superintendent.
During the construction period, the Company's supervisory team,
consisting of the project manager, a project coordinator, and the
superintendent, works closely with the client's construction management
department to assure that the project is completed to the client's
satisfaction. The Company believes that a good working relationship with the
client's personnel is essential to the Company's success and enhances its
ability to obtain future business.
The Company invoices its customers at monthly or other periodic
intervals based upon the percentage of work completed, up to 90%. The final 10%
of the contract price is paid when the Company delivers to the client the
"Closeout" book, including lien waivers from subcontractors, and satisfies all
final requirements. The closeout book includes as-built drawings, operating and
maintenance manuals, warranty letters from subcontractors, warranties for all
equipment installed on the project, lien waivers from all subcontractors, and
other details relating to the final completion of the project. At completion of
the project, the Company is paid for all changes to the project as originally
planned ("change orders"). In addition, the Company provides a full one-year
materials and labor warranty with each completed project.
Pursuant to the Company's arrangement with its subcontractors, the
Company is obligated to pay the subcontractors two weeks after the Company
receives payment from the client. The Company assumes no liability to the
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subcontractor for payment in the event that the client fails to pay.
INDUSTRY ENVIRONMENT AND BUSINESS STRATEGY
Management believes that the current industry environment complements
the Company's plan to focus on renovations and remodeling. In recent years,
renovations and remodeling have been an increasing portion of the available
business for construction companies. Although there is no assurance, management
believes that by focusing on renovations and remodeling, the Company will be at
a competitive advantage with respect to this growing portion of the
construction business for national retail clients. In addition, the Company
believes that new construction projects will be undertaken by national retail
clients mainly in the western and southwestern United States where the Company
is headquartered, and in other states where the Company has traditionally
garnered construction projects from its customer base. However, there is no
assurance that a meaningful increase in such new construction projects will
take place in such geographic regions, or that, if it does, that the Company
will be able to secure any or a material number of such projects.
After the Company completed its initial public offering in 1993, it
attempted to implement a strategy to expand its business internationally. In
connection therewith, the Company entered into a ten year agreement with an
unaffiliated consultant pursuant to which, in consideration for the consultants
agreement to (a) locate suitable projects within and without the United States,
(b) facilitate communications between the Company and potential clients, (c)
participate in negotiations with such potential clients and (d) assist the
Company in formulating bids for such projects, the Company issued 85,000 shares
of Common Stock and one option to purchase 100,000 shares of Common Stock at an
exercise price of $2.20 per share.
The Company's inability to undertake any international projects during
the period of time between execution of said consulting agreement and the end
of 1995, coupled with the decisions made by the Company's senior management in
1995 to concentrate its business focus on negotiated contracts within the
United States, and to concomitantly restructure its management team, resulted
in the Company's determination that it would not be able to make any material
efforts in regard to any projects outside of the United States within any
reasonably forseeable period of time. As a result of the foregoing, the Company
discontinued its planned international expansion efforts, and determined, in
accordance with Statement of Financial Accounting Standards No. 121, that its
aforementioned consulting agreement
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was impaired at December 31, 1995. See "Business - Description of Business;"
and "Management's Discussion and Analysis of Financial Condition and Results
of Operations - Non-Operating Loss Due to Discontinuance of International
Expansion Strategy. "
MARKETING AND COMPETITION
The Company obtains business primarily through recommendations from
existing customers and aggressive national marketing of its services. The
Company's primary targeted clients currently are national retailing firms that
either have, or are in the process of establishing, retail locations either
near to or directly in shopping malls and other shopping centers in numerous
locations across the nation. The Company's manager of business development (a
PMM employee) contacts retailing firms that meet this profile and attempts to
develop continuing relationships with the construction departments of retailing
firms with whom the Company desires to work in the future. The Company's vice
president of business development also attempts to strengthen relationships
with the construction departments of retailing firms with whom the Company has
conducted business in the past.
It is the Company's policy that after an initial project has been
completed for a client, the project manager from that project will be available
to the client for any future projects. This is a good marketing tool as clients
desire to work with supervisory level personnel who have become familiar with
the client's needs and preferences. They also appreciate that it reduces the
amount of preliminary work and planning that needs to be undertaken on future
projects and thereby shortens the time frame for completion.
The Company believes that shopping mall owners and developers have a
more limited budget than in prior years and therefore provide fewer financial
incentives in the form of tenant improvement allowances in order to attract
prospective retailers to locate in shopping centers. As a result, the retailer
is especially concerned with keeping down the costs of interior construction.
The Company believes it is able to monitor carefully the costs of tenant finish
and remodeling construction, with few costly change orders, while ensuring that
the project is completed on schedule without delays. The Company also believes
that it is well situated to respond quickly to a client's needs because of its
experience-in a number of areas throughout the United States.
In addition to the Company's primary target of national retailing firms
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with retail locations in shopping malls and shopping centers, the Company
is attempting to obtain projects for stand-alone facilities and contracts for
construction of discount retailer facilities, drug stores and commercial build
to suit projects. In order to enhance its ability to secure new business from
its existing and potential customers, the Company intends to seek permission
from its stockholders to merge PMH, PMM and PMC (who are hereinafter
collectively referred to as the "Affiliates") with and into the Company. The
Company believes that consummation of the intended transaction will provide
economies of scale and overhead reductions essential for the Company's
achievement and maintenance of profitable operations, and strengthen the
Company's financial condition, thereby enhancing its ability to obtain
sufficient funding, either through loans or equity financings, to enable it to
meet its future capital needs. See "Business - Proposed Merger of PMH, PMM and
PMC with the Company."
CORPORATE HISTORY
Porter McLeod National Retail Inc. was formed in March 1992 (to
commence business as of April 1, 1992) as a subsidiary of PMH to undertake
construction and remodeling business outside of Colorado, as well as work in
Colorado for clients with national operations. In August 1992 The Company
changed its state of incorporation from Colorado to Delaware. Also formed in
March 1992 (to commence business as of April 1, 1992) as subsidiaries of PMH
were PMC, to undertake construction and remodeling in Colorado primarily for
commercial office buildings and also for some retail clients who are not
involved in more than one geographic area; and PMM, to provide administrative
services for PMH and its subsidiaries. See "Certain Relationships and Related
Party Transactions".
Another subsidiary of PMH, Porter-McLeod, Inc. ("PMI"), was formed in
1985, with its office in Denver, Colorado, for the purpose of providing general
contracting services, including commercial and retail interior construction and
base buildings, for both corporate and retail clients. PMI opened regional
offices in Los Angeles, California, and in Sacramento, California. After having
opened these two additional offices, PMI operated its business through four
divisions: PMN, which operated national retail business through the Denver
office; PM Denver, which operated the commercial office space construction
business through the Denver office; PMSC, which operated all construction
business through the Los Angeles office; and PMNC, which operated all
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construction business through the Sacramento office. In March 1992, PMI was
reorganized and became a subsidiary of PMH, together with PMH's three other
subsidiaries. PMI and its subsidiaries, PMN, Inc., PM Denver, Inc., PMSC, Inc.,
and PMNC, Inc., began phasing out their operations and have not become involved
in any new construction projects. In November 1994, involuntary proceedings
under Chapter 7 of the Bankruptcy Code were commenced against PMI and its
subsidiaries. As of March 31, 1996, such proceedings are pending in the United
States Bankruptcy Court for the District of Colorado. See "Legal Proceedings."
PROPOSED MERGER OF PMH, PMM AND PMC WITH THE COMPANY
The Company intends to hold its 1996 annual meeting of stockholders on
or about June 17, 1997. At such meeting, the stockholders will be asked to
approve, among other things, a proposal to merge the Affiliates with and into
the Company. The stockholders of PMH, and the boards of directors of the
constituents to the proposed merger have authorized the consummation of the
merger, subject to the Company's receipt of approvals from its stockholders to
(a) to ratify certain transactions pursuant to which the Company advanced an
aggregate of $770,123 to PMI (the "Advances"); (b) to authorize the Company to
assume a bank indebtedness of PMI in the amount of $616,066 (the "Bank Debt");
(c) to authorize the Company to accept, in satisfaction of such indebtedness
and in consideration of such debt assumption, shares of the common stock of PMC
having a fair market value of $1,386,189; and (d) approve the merger.
The Company issued the Advances to PMM in order to provide it with
sufficient capital to meet its operating expenses as well as to enable it to
satisfy certain debt obligations. The Company made the Advances based upon the
belief that by enabling PMM to continue its business operations, the economic
benefits which the Company derived from the services provided to it by PMM
would be protected. The Bank Debt will become the Company's obligation by
operation of law upon consummation of the merger.
The Company believes that maintaining the operations of PMH and its
subsidiaries is unwieldy, has created duplication of expenses and, as such, is
not cost efficient. The Company further believes that a consolidation would
provide economies of scale and the overhead reductions essential for the
Company's achievement and maintenance of profitable operations, and that
elimination of the Advances which would result from the consolidation, would
provide the Company with a stronger balance sheet, thereby enhancing its
ability to obtain sufficient funding, either through loans or equity
financings,
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to enable it to meet its future capital needs.
GOVERNMENT REGULATION
The Company's business is subject to a variety of governmental
regulations and licensing requirements relating to construction activities.
Prior to commencing work on a project, the Company is required to obtain
building permits and, in some jurisdictions, a general contractor license is
required by the state or local licensing authorities. in addition, construction
projects are required to meet federal, state and local code requirements
relating to construction, building, fire and safety codes. In order to complete
a project and obtain a certificate of occupancy, the Company is required to
obtain the approval of local authorities confirming compliance with these
requirements.
RELIANCE ON MAJOR CUSTOMERS
During the year ended December 31, 1995, the Company had four customers
that accounted for approximately 33%, 18%, 12% and 12%, respectively, of the
Company's revenues, and no other customer that accounted for more than 5% of
the Company's revenues. Although the loss of any of these customers could have
at least a short-term adverse effect on the Company, management believes that
the nature of its business and of its customer relationships makes it unlikely
that there is a significant probability of loss of a significant customer for
which the Company would not be able to obtain compensating business from other
sources within a reasonable period thereafter. There is no particular
developer, leasing agent or other person or entity with whom the Company's
business has been concentrated.
EMPLOYEES
During 1995, the Company had one salaried executive (whose employment
ceased in April 1995) and no other salaried employees. Each of the executives
of the Company received his compensation from PMC and/or PMM. See "Executive
Compensation." As and when the Company needs project managers, superintendents,
financial, marketing, project estimating, project management and/or
administrative services personnel, either on a full or part time basis, PMM
provides such personnel to the Company from PMM's pool of employees, and the
costs associated therewith are paid for by the Company pursuant to the
Administrative Services Agreement. See "Certain Relationships and Related
Transactions - Administrative Services Agreement." The Company also relies on
local subcontractors as well as a base of traveling subcontractors for the
eight to ten subcontractors required on each project.
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The subcontractors act as independent contractors and are not employees of the
Company.
In the event that the proposed merger of the Affiliates with the
Company is approved, the Company will thereupon have four salaried executives
and 51 full time employees.
Each of the Company's officers serves at the pleasure of the Company's
Board of Directors. There are no family relationships among the Company's
officers and directors.
ITEM 2 PROPERTIES
The Company occupies, together with PMM and PMC, approximately 7,065
square feet of office space and 6,000 square feet of warehouse space at 5895
East Evans Avenue, Denver, Colorado. The building is owned by a general
partnership, the only two general partners of which are Messrs. Porter and
McLeod. The Company sublets the space it occupies at the premises from PMM on a
month-to-month basis. See "Certain Relationships and Related Transactions."
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in the following legal proceedings
Fetzers' Inc. a Utah corporation vs. Porter McLeod National Retail Inc.
a Colorado corporation. Porter McLeod Inc. a Colorado corporation. and First
Assurance & Casualty, an action pending in the United States District Court of
Utah, Central Division (Civil No. 93-C-366S). Plaintiff, a licensed contractor,
entered into a subcontract with PMI to act as PMI's subcontractor in connection
with the construction of a store. First Assurance & Casualty provided a payment
bond in connection with the project. Plaintiff seeks the sum of $117,004.87,
together with interest, attorneys' fees, and court costs against PMI, The
Company, and First Assurance. The basis of Fetzers' claim against The Company
is that PMI changed its name to Porter McLeod National Retail Inc. In a Motion
To Dismiss And Alternative Motion For Summary Judgment dated May 17, 1993, The
Company alleged that PMI and the Company are separate entities, that plaintiff
entered into a contract with PMI, not the Company, and therefore that the
Company is not liable to plaintiff for any amount. The Company's Motion To
Dismiss And Alternative Motion For Summary Judgment was denied in October 1993
because there is a factual dispute concerning whether PMI changed its name to
Porter McLeod National
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Retail Inc. The proceeding currently is stayed due to bankruptcy proceedings of
PMI. Management believes this case will not result in any liability to the
Company.
Harvey Sender, Trustee, et al. Against Bruce M. Porter, Joseph R.
McLeod, et al. United States Bankruptcy Court for the District of Colorado
(Case No. 94-21830 RJB). The trustee in bankruptcy of Porter McLeod, Inc.
("PMI") and its subsidiaries commenced an adversary proceeding on or about
March 29, 1996 against the Company, PMH, PMM, PMC, Messrs. Porter and McLeod,
and others, alleging among other things, that (A) in or about the first part of
1992, the defendants formulated a plan of reorganization to help PMI to deal
with losses that it had suffered in connection with operations it had conducted
in 1991 in Southern California; (B) such plan of reorganization included the
isolation of "problem contracts" in PMI and its subsidiaries, and the transfer
of "good contracts" to the Company, PMH and PMC, which allegedly had been
formed for the purpose of implementing such plan; and (C) through a series of
allegedly backdated documents, assets belonging to PMI and its subsidiaries
were purportedly transferred to the Company, PMC, PMM and PMH for deminimus or
non-existent consideration. By reason of such factual allegations, the
plaintiffs are seeking (I) to recover all of the assets of PMI which were
allegedly transferred without adequate consideration; (II) an accounting of all
the assets of PMI and its subsidiaries which were allegedly transferred without
adequate consideration; (III) a turnover of the proceeds derived by the
defendants from their performance of the "good contracts;" (IV) subordination
of the claims of the Company, PMC and PMM to the claims of all other unsecured
creditors in PMI's bankruptcy proceedings; (V) damages against the Company,
PMH, PMC and PMM for alleged breaches of contract in the aggregate amount of
approximately $4.7 million; (VI) unspecified damages and exemplary damages
against PMH and Messrs. Porter and McLeod by reason of their alleged breaches
of fiduciary duties owed to the plaintiffs; (VII) imposition of constructive
trust upon all of the assets of the Company, PMC, PMM, and Messrs. Porter and
McLeod by reason of their alleged breaches of fiduciary duties owed to the
plaintiffs; (VII) damages in the amount of approximately $5.4 million, plus
interest, costs and attorneys' fees, based upon the above-mentioned allegedly
wrongful acts purportedly undertaken by the Company, PMC, PMM, and Messrs.
Porter and McLeod as part of a civil conspiracy; and (IX) treble damages in the
amount of approximately $893,000 , plus interest, costs and attorneys' fees,
based upon an alleged conversion and civil theft of the proceeds of checks
which were allegedly property of the plaintiffs and deposited into accounts
maintained by PMC.
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A companion case was simultaneously commenced by the same plaintiffs against
the Company, PMH, PMC, and PMM in the District Court for the City and County of
Denver, Colorado (Case No. 96 CV 1240) which alleges that the Company, PMH,
PMC, and PMM are the successors to all the liabilities of the plaintiffs. By
reason thereof, the plaintiffs are seeking (I) judgment against the defendants
in the amount of the plaintiffs' indebtedness to their respective creditors,
i.e. the aggregate amount of approximately $4.7 million; and (II) preliminary
and permanent injunctive relief requiring the defendants to operate only in the
normal course of business.
It is the Company's position that (A) the reorganization was undertaken for
proper purposes, and was validly and legally executed; (B) none of the assets
of the plaintiffs were improperly or illegally transferred to any of the
defendants; (C) the plaintiffs received full and fair consideration for any
assets transferred to any of the defendants; (D) none of the defendants
breached any contractual or fiduciary obligation owed to any of the plaintiffs;
and (E) none of the defendants committed any of the wrongful acts alleged
against them by the plaintiffs. In addition to the above described substantive
defenses, the Company believes that many, if not all, of the claims alleged in
both proceedings have been time barred under applicable procedural rules.
Accordingly, the Company and other defendants intend to vigorously defend
themselves in both proceedings. However, because it appears that the evidence
regarding the factual allegations of the Trustee and other plaintiffs will be
in sharp dispute as between such parties, and the defendants, until completion
of the litigation, the outcome of the bankruptcy and related litigation cannot
be predicted
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) Market Information. The Company's Common Stock and Common Stock
Purchase Warrants are listed on the Nasdaq SmallCap Market under the respective
symbols of PMNR and PMNRW.. The ranges of high and
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low bid quotations for the Common Stock and Warrants during each quarterly
period of 1995, is as follows:
<TABLE>
<CAPTION>
Common Stock Warrants
------------ --------
Quarter Ended High Low High Low
- ------------- ---- --- ---- ----
<S> <C> <C> <C> <C>
March 31, 1995 $12.12 $2.12 $8.50 $.75
June 30, 1995 3.50 1.25 .12 .12
September 30, 1995 2.30 .75 .12 .06
December 31, 1995 1.69 .42 .03 .03
</TABLE>
On April 2, 1996, the last reported respective bid price was $1.00 per
share for the Common Stock.
The above quotations reflect inter-dealer prices, without retail
mark-up, retail markdown or commission, and may not represent actual
transactions.
(b) Holders. As of April 5, 1996, there were approximately 33 record
holders of the Company's Common Stock.
(c) Dividends. The Company has not paid any cash dividends since
its inception. The Company anticipates that all earnings will be retained for
development of the Company's business and that no dividends on the Company's
Common Stock will be declared in the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
1995 COMPARED WITH 1994
RESULTS OF OPERATIONS
CONTRACT INCOME - The Company experienced a 48% decrease in contract income
from $9,873,116 during 1994 to $5,167,422 during 1995. Such decrease was due to
lower than usual activity during the year, and a concentrated effort to
integrate and train new management personnel, and implement new management
systems in an effort to generate higher gross margins in the future. In
addition, a key client, which generated approximately four million dollars in
contract income in 1994, merged with another major retailer with which the
Company did not have a current relationship. Despite the decrease in volume,
the Company experienced an increase in gross margin dollars and percentage,
primarily as a result of bidding more selectively for projects.
The following is an analysis of contract activity for the Company:
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<TABLE>
<CAPTION>
# of $ of Projected
Date Contracts Contracts Gross Profit *
- ---- --------- --------- --------------
<S> <C> <C> <C>
3/31/95 5 $ 770,000 $ 112,000
6/30/95 18 4,900,000 600,000
9/30/95 12 4,500,000 523,000
12/31/95 3 900,000 124,000
3/31/96 2 900,000 102,800
4/30/96 2 550,000 82,500
</TABLE>
* Projected Gross Profit represents management's estimate, as of the end
of each period indicated, of the amount of gross profit which
ultimately should be realized by the Company from all contracts in
place at such date. The amount of gross profit which is recognized
each quarter, and for 1995 as a whole, depended upon actual costs
recorded against actual revenues, and the timing of the recordation of
actual costs and the receipt of revenues. For fiscal 1995, gross
profits were $590,829.
A review of 1994 and 1995 contract income and gross profits shows the
following:
<TABLE>
<CAPTION>
Date Gross Revenue Gross Profit Gross Profit %
- ---- ------------- ------------ --------------
<S> <C> <C> <C>
1994 Actual $9,987,100 $ 298,800 3.0%
1995 Actual 5,167,000 590,800 11.4%
1996 Annualized (1) 4,240,400 443,700 10.5%
</TABLE>
The Company has realized greater gross profits both in actual dollars and as a
percent of contract income for 1995 as compared to 1994.
(1) Based on activity and contracts for the quarter ended March
31, 1996. There is no assurance full year operating results
will be the same as indicated by the first quarter. See
"Forward looking statements."
FORWARD LOOKING STATEMENTS. - The statements contained in this Report on Form
10-KSB ("Annual 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
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statements in this Annual Report could differ materially from those stated in
such forward-looking statements.
CONTRACT COSTS - Due primarily to the efforts undertaken by the Company's new
management team commencing in or about February 1995, better client selection
and improved management systems implemented for the purpose of reducing costs,
contract costs, stated as a percentage of contract income, decreased from 97%
during 1994 to 88% during 1995.
GROSS PROFIT - As a direct consequence of the above-described cost reduction
efforts and the higher profit margins of the contract work that the Company
performed in 1995 when compared to its 1994 contract work (11.4% versus 3.0%,
respectively), the Company's gross profit increased by approximately 97% from
$298,770 for 1994 to $590,829 during 1995. However, in an effort to improve the
Company's profitability, the new management team decided in mid- 1995 that it
was in the best interest of the Company to greatly reduce the number of
projects and hence gross revenues overall, in order to facilitate the
transition from the prior management team and focus on implementing systems to
increase the profitability of each project. As a result, there were eight
contracts in progress at December 31, 1994 versus two at December 31, 1995.
Four of those eight contracts negatively impacted earnings during 1995. The
average revenue per project increased from $229,607 for the year ended December
31, 1994, compared to $494,368 during 1995. The Company anticipates that its
gross profit margin percentages will continue to grow in fiscal 1996 and
thereafter. However, no assurance can be given in that regard. For detailed
quarterly information on the contracts, see "Contract Income", above.
GENERAL AND ADMINISTRATIVE EXPENSES - The Company's general and administrative
expenses are generally fixed in nature, as evidenced by the minimal ($2,642)
increase therein which was due primarily to replacement costs associated with
the abovementioned transition to the Company's new management team.
OTHER INCOME AND EXPENSE - Primarily as a result of the decrease in interest
income, other income decreased from $28,219 during 1994 to $12,788 in 1995.
LOSS DUE TO DISCONTINUANCE OF INTERNATIONAL EXPANSION STRATEGY - The above
mentioned increase in gross profit margin, coupled with the Company's ability
to keep general and administrative expenses at a relatively fixed level between
1994 and 1995, resulted in a significant improvement in its
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<PAGE> 16
operational results from a loss of $722,636 in 1994 to a loss of $533,219 in
1995. As a result of the Company's determination to discontinue its prior
strategy to expand its operations to encompass international projects (see
"Business - Industry Environment And Business Strategy"), the Company has
incurred a one time charge to its accumulated deficit, pursuant to Statement of
Financial Accounting Standards No. 121, of $1,109,766 with respect to its
declared impairment of an international consulting services agreement which it
had entered into with an unaffiliated party in 1994. Amortization expense with
respect to said agreement amounted to $147,969 and $221,953 during 1994 and
1995, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Although the Company's current ratio substantially improved (1.48 at December
31, 1994 versus 2.58 at December 31, 1995), the Company's current assets
decreased 62% to $1,139,755 during 1995 which resulted in a 30% decrease (to
$688,617) in working capital during such period. Such reduction in working
capital was primarily due to the reduction of contract activity for 1995 when
compared to 1994.
CASH AND CASH EQUIVALENTS The improvement in operations signalled by the
substantial increases in gross margins and gross profits, and the significant
decreases in contract costs and operating losses, resulted in 50% increase in
cash and cash equivalents from $236,583 at December 31, 1994 to $354,050 at
December 31, 1995.
NET CASH USED IN OPERATING ACTIVITIES - During 1995, net cash used in operating
activities decreased by 83% to $150,323, as compared to $888,207 of net cash
used in operating activities during the previous year. Such decrease resulted
primarily from the collection of contract receivables and payment of operating
liabilities.
NET CASH USED IN INVESTING ACTIVITIES - During 1995, the Company's major source
of cash provided from investing activities related to the $360,779 proceeds
from the sale of investment securities.
NET CASH USED IN FINANCING ACTIVITIES - During 1995, the major use of cash for
financing activities was advances made to PMM and PMC, both of which are wholly
owned subsidiaries of PMH, the Company's majority shareholder. During 1994, the
Company's major source of cash from finance activities related to proceeds from
the issuance of common stock.
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<PAGE> 17
As the following table shows, the Company's investment of capital resources in
contract activities decreased due to fewer contracts (see Contract Income) in
addition to improved operations, billing and collection systems.
<TABLE>
<CAPTION>
December 31, December 31,
1996 1995
------------ ------------
<S> <C> <C>
Accounts receivable - net $ 609,762 $ 1,145,852
Cost and estimated earnings in excess of
billings on uncompleted contracts 96,625 904,177
Retainage receivable 13,086 369,205
Billings in excess of costs and estimated
earnings on uncompleted contracts -- (4,245)
----------- -----------
Total investment in contracts $ 719,473 $ 2,414.989
=========== ===========
</TABLE>
ACCOUNTS RECEIVABLE AFFILIATES - The Company has advanced a total of $770,123 to
its affiliate, PMM, which provides key administrative services including
management, bidding, data processing, accounting, marketing and cash management
services. Management believes this relationship to be economically beneficial
to the Company through reduced overall administrative cost. PMM does not make
any profit with regard to such activities. The Company 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, PMM, 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 of 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
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<PAGE> 18
the time when such installment became due, the Company expects to correct the
full amount of such indebtedness through a merger of the Affiliates 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 June 17, 1996. See "Certain Transactions and Related Transactions -
Proposed Compensation to the Company With Respect to the Advances and the
Aurora Loans."
ITEM 7. FINANCIAL STATEMENTS
The Consolidated Financial Statements that constitute Item 7 are
attached at the end of this report.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The Company engaged the services of Ehrhardt Keefe Steiner & Hottman
PC ("EKS&H") as its independent accountants with effect on November 30, 1995
(the "Effective Date"). By reason of such new engagement, the services of
Lehman, Butterwick & Company, P.C. ("Lehman"), as auditor of the Company's
financial statements was terminated as of the Effective Date.
This change of certifying accountants was implemented solely as a result
of the Company's determination that its accounting needs, and the concomitant
need for implementation of faster and more sophisticated accounting systems and
services utilized by businesses involved in the construction industry warranted
its engagement of EKS&H, an accounting firm which possesses the resources and
facilities to satisfy those needs.
Neither of Lehman's reports on the Company's financial statements for
either of the Company's past two accounting years contained an adverse opinion
or disclaimer of opinion, or was modified as to uncertainty, audit scope or
accounting principles.
The decision to change certifying accountants was unanimously approved
by the Company's Board of Directors.
There were no disagreements, at any time during the Company's past two
fiscal years, or any later interim period, between the Company and Lehman,
whether resolved or not resolved, on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure.
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<PAGE> 19
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The Officers and Directors of the Company are as follows:
Name Age Position
- ---- --- --------
Bruce M. Porter 36 Chairman of the Board of
Directors
Joseph R. McLeod 36 President: Chief Executive
Officer; and Director
A.J. Shilling 52 Chief Financial Officer
Michael P. Mitchell 36 Vice President -
Sales/Estimating; Secretary
Mr. Porter has served as the Chairman of the Board of Directors of the
Company since its formation in March 1992. He also served as Chief Executive
Officer of the Company from May 1993 to January 1995. He served as Chief
Executive Officer, Chairman of the Board, and Secretary of PMI during the
period commencing with its inception in 1985 through November 30, 1994, the
date when involuntary proceedings under Chapter 7 of the Bankruptcy Act were
commenced against PMI. Mr. Porter serves as the President and Chairman of the
Board of PMH, and served as an officer and director of the subsidiaries of PMI
and PMH. Mr. Porter also serves as a general contractor and estimator for the
Company and concentrates on business development for the Company. Mr. Porter
spends approximately one third of his time on the business of the Company. From
July 1983 until 1985, Mr. Porter served as Manager of Sales for C. Lombardi
Construction where he assisted with estimating and contract negotiations. Prior
to 1983, Mr. Porter was associated with Amoco Production from December 1982 to
July 1983 as a Field Operator and with the Magcobar Division of Dresser
Industries from July 1981 to December 1982 as a Sales Engineer. Mr. Porter
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<PAGE> 20
received a B.S. degree in Geology from Adams State College in Alamosa, Colorado
with a minor in Marketing. Mr. Porter is a member of the Associated General
Contractors of America, the National Association of Industrial and Office
Parks, the Denver Metro Building Owners and Managers Association, the
International Counsel of Shopping Centers, the Greater Denver Chamber of
Commerce, and the Colorado Association of Commerce and Industry. Mr. Porter
also is involved in many civic organizations, including Denver Rotary Club,
Capitol Hill Community Services, Special Wish Foundation, and Anchor Center For
The Blind.
Mr. McLeod has served as President and Chief Executive Officer of the
Company since January 1995 and as a director of the Company since its formation
in March 1992. Mr. McLeod also serves as the Vice President and a director of
PMH, and is an officer and a director of its subsidiaries. In addition, Mr.
McLeod was the President and a director of PMI, and an officer and director of
its subsidiaries during the period commencing with their inception through
commencement of Chapter 7 proceedings against it. In addition to his duties as
an officer and director, Mr. McLeod served as a general contractor and project
manager for the Company and is responsible for overall direction of the
construction operations of the Company. From 1984 until 1985, Mr. McLeod served
as a Regional Construction Manager with Lerner Corp. Stores of America in New
York. From 1982 until 1984, Mr. McLeod served as a Field Operations Manager for
C. Lombardi Construction in Colorado, and from 1981 until 1982 in an operations
training program of Halliburton Services, the parent company of Brown & Root
Construction, in Rock Springs, Wyoming. Mr. McLeod received a B.S. degree in
Construction Management from Montana State University. Mr. McLeod is a member
of the Associated General Contractors of America, the Retail Contractors
Association, of which he is a Charter Member, Secretary and Treasurer, the
Greater Denver Chamber Of Commerce, and the Colorado Association Of Commerce
And Industry for which he served as the "50 For Colorado" representative in
1991.
Mr. Shilling has served as the Company's Chief Financial Officer since
February 1996. He spends approximately 50% of his time on the business of the
Company. He also serves as Chief Financial Officer of PMM and PMC. From May
1993 though January 1996, Mr. Shilling served as Chief Financial Officer of
Perlmutter & Co., a large privately owned shopping center developer and
management company located in Denver, Colorado. Mr. Shilling was Chief
Financial Officer of Pacific Adult Communities, Inc. a senior housing developer
in the California market from February 1988 through April 1993. Mr. Shilling
received a B.S. degree in Accounting and an M.B.A. from the University of
Colorado.
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<PAGE> 21
Mr. Mitchell served as the Vice President For Business Development of
the Company since the Company's formation in March 1992 until January 1995. Mr.
Mitchell now serves as Vice President - Sales/Estimating. Mr. Mitchell spends
substantially all his business time on the affairs of the Company. From
December 1988 through March 1992, Mr. Mitchell served as the Vice President For
Business Development of PMI. From June 1987 through December 1988, Mr. Mitchell
served as the Manager of Business Development for PMI. Mr. Mitchell received a
B.S. degree in Business Administration from the University of Montana. Mr.
Mitchell is a member of the Building Owners Management Association, the
International Council Of Shopping Centers, and the National Association of
Industrial And Office Parks.
Mr. Stephen J. Dow resigned as a Director of the Company upon his
voluntary resignation as an officer and employee of the Company on April 14,
1995. Mr. William T. Kyle resigned as a Director of the Company upon his
voluntary resignation as an officer and employee of the Company on September
18, 1995. Neither Mr. Dow nor Mr. Kyle resigned because of any disagreement
with the Company on any matter relating to the Company's operation, policies or
practices.
No family relationships exist between or among any of the Company's
officers and directors.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth compensation awarded to, eamed by or
paid to the Chief Executive Officer. No other executive of the Company earned a
salary and bonus of more than $100,000. Information with respect to salary,
bonus, other annual compensation, restricted stock and options is induded for
the years ended December 31, 1995, 1994 and 1993. No executive of the Company
has received a grant of restricted stock, options or SARS, or received payments
which may be categorized as "LTIP Payouts"
21
<PAGE> 22
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Other Securities
Name and Annual Restricted Underlying
Principal Compen- Stock Options/
Position Year Salary($) Bonus($) sation ($)(1) Awards($) SARs (#)
<S> <C> <C> <C> <C> <C> <C>
Joseph R.McLeod, CEO(2) 1995 $30,000 - $14,054 - -
Bruce Porter,
CEO (3) 1994 $32,693 - 7,500 - -
1993 28,435 - 8,410 - -
</TABLE>
- -----------------------
(1) Other annual compensation includes health insurance premiums and other
benefit payments.
(2) Assumed positions of President and Chief Executive Officer in January
1995. Mr. McLeod's compensation for services rendered to the Company
for the year ended December 31, 1995 was allocated to the Company
pursuant to the Administrative Services Agreement. The aggregate
compensation paid to Mr. McLeod during said year was salary in the.
amount of $60,000, plus other compensation in the amount of $28,108, of
which $30,000 and $14,054, respectively, were allocated to the Company.
No other compensation was paid to Mr.
McLeod for services rendered to the Company.
(3) Mr. Porter's compensation for services rendered to the Company for the
two years ended December 31, 1993 and 1994 was paid by PMM and was
allocated to the Company pursuant to the Administrative Services
Agreement. Mr. Porter also received compensation from PMI and PMM for
services performed for those entities during the same two years, and
from PMM for services performed for that entity in 1995. The aggregate
amount of salary and other annual compensation paid to Mr. Porter by
PMI and PMM in 1993 and 1994 was $71,509 and $74,843, respectively, of
which $28,435 and $32,693 of salary, respectively, and $8,410 and
$7,500, of other compensation, respectively, was allocated to the
Company, and paid by the Company to PMI and/or PMM. The aggregate
amount of salary and other annual compensation paid to Mr. Porter by
PMM in 1995 was $60,000 and $28,108, respectively, of which $30,000 and
$14,054, respectively, were allocated to the Company, and paid by the
Company to PMI and/or PMM. No other compensation was paid to Mr. Porter
for services rendered to the Company.
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<PAGE> 23
Compensation Of Directors.
The Company has no standard or other arrangement pursuant to which
directors of the Company are compensated for any services provided as a
director or for committee participation or special assignments.
Employment Contracts And Termination Of Employment And Change-In
Control Arrangements
The Company does not have any written employment contracts with
respect to any of its executive officers. The Company has no compensatory plan
or arrangement that results or will result from the resignation, retirement, or
any other termination of an executive officer's employment with the Company and
its subsidiaries or from a change-in-control of the Company or a change in an
executive officer's responsibilities following a change-in-control.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the holdings of the Common Stock
of the Company as of April 10, 1996 by (1) each person or entity known to the
Company to be the beneficial owner of more than five percent (5%) of the
outstanding shares of Common Stock of the Company; (2) each director and
executive officer; and (3) all directors and executive officers as a group. All
of the holders of the Company's Common Stock are entitled to one vote per
share.
<TABLE>
<CAPTION>
Name and Address Number of Shares Percent
Beneficial Owner Beneficially Owned Owned
- ---------------- ------------------ -------
<S> <C> <C>
Porter McLeod Holdings, Inc. 962,166 48.82%
Directors and Executive Officers
Joseph R. McLeod 962,166 (1) 48.82%
5895 E. Evans Avenue
Denver, CO 80222
</TABLE>
23
<PAGE> 24
<TABLE>
<S> <C> <C>
Michael P. Mitchell 35,000 1.76%
5895 E. Evans Avenue
Denver, CO 80222
Bruce M. Porter 962,166(1) 48.82%
5895 E. Evans Avenue
Denver, CO 80222
All Directors
and Executive Officers
as a Group (4 persons) 977,166 50.60%
</TABLE>
- --------------------
(1) Mr. McLeod is President, a director and a 50% shareholder of PMH.
Mr. Porter is Chief Executive Officer, a director and a 50%
shareholder of PMH. Each of Messrs. McLeod and Porter is deemed to be
the beneficial owner of the shares of the Company's Common Stock owned
by PMH The shares of PMH owned by Messrs. McLeod and Porter have been
pledged to secure certain commercial loan obligations of PMM. In the
event PMM defaults under such loan obligations, or in the event that
the proposed merger of the Affiliates with the Company is consummated,
if the Company were to so default, the lender would be entitled to
foreclose on its security interest in these shares. If this were to
occur, it would result in a change in control of the Company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The related transactions described below ("Related Transactions")
arose from various transactions and arrangements between and among the Company,
PMH, PMC, PMM and PMI. However, as a consequence of the involuntary petition
filed against PMI pursuant to Chapter 7 of the United States Bankruptcy Code,
all agreements between PMI and the Company were either terminated or the
obligations of PMI were assumed by PMM, PMC or PMH. In the event that the
proposed merger of the Affiliates with the Company is consummated, the
relationships described below will be discontinued, except for the office lease
transaction.
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<PAGE> 25
TRANSACTIONS BETWEEN THE COMPANY AND AFFILIATES
Following its incorporation in March 1992, the Company entered into a
series of transactions and arrangements with affiliated corporations in order
to establish and operate its business. These transactions and arrangements are
described below. There has been no independent determination of the fairness
and reasonableness of the terms of these transactions. However, the Company's
management believes that the terms of these transactions are fair and
reasonable due to the fact that the Company would be required to pay at least
as much to third parties as the Company pays to PMM for rent, equipment,
services, and overhead expenses pursuant to these arrangements and because
management believes the other terms of the arrangements are at least as
favorable to the Company as the terms that would be available from third
parties.
The Company heretofore acknowledged that its arrangements with PMM,
PMH and/or PMC (collectively, the "affiliates") could lead to conflicts in the
fiduciary obligations of the officers and directors who serve on behalf of
those corporations. In an effort to reconcile both the potential conflicts of
interest and the usurping of corporate opportunities among the Company and one
or more of the affiliates, the Company and those entities entered into a
conflicts of interest agreement concerning the division of the types of
construction business that would be performed by each of them. This agreement
is described below. The Company and said affiliates have no other agreements or
procedures in place concerning the exercise of the fiduciary obligations of the
officers and directors of the respective corporations. In the event that a
conflict were to arise that is not covered by the conflicts of interest
agreement, the Company believes that the exercise of the fiduciary obligations
of the officers and directors of the Company win resolve any conflicts of
interest between it and its affiliates in a manner consistent with their
respective fidudary obligations to the Company.
Conflicts Of Interest Agreement. PMH and PMC have committed to refer
to the Company any construction business with the Company's customers,
including customers of the Company with operations both within and without
Colorado. A conflicts of interest agreement to this effect has been entered
into between the Company and each of PMH and PMC.
Agreement To Provide Services. Pursuant to an Agreement to Provide
Services which the Company executed with PMM, the Company is obligated to
supply certain project management, administration and other forms of labor
requested by PMM, in order to supervise and undertake various construction
25
<PAGE> 26
projects which PMM has agreed to complete as agent for other parties. As
compensation for its services, the Company agreed to receive an amount equal to
the actual labor costs incurred by the Company, including actual wages,
salaries, insurance, taxes, subcontractor costs, and other direct labor costs
associated with the personnel performing services in connection with the
contract, together with an amount equal to 15 percent of the aggregate amount
of those costs and of any other subcontractor costs incurred with respect to
the project.
Administrative Services Agreement. PMM provides the Company and PMC
with certain services including project cost estimating, project management,
accounting, billing, invoicing, marketing, business development, personnel
services, banking, debt service and interest, bonding, insurance, overhead
administration, and providing use of computer hardware and software. For these
services, PMM charges the Company and PMC for PMM's actual costs to provide
these services, including allocations of all overhead items such as telephone,
electricity, rent, salaries, insurance, taxes and other items. The aggregate
allocable cost to the Company for these services was $195,048 for 1994 and
1995. In addition, the Company is obligated to reimburse PMM for amounts paid
to third parties by PMM on behalf of the Company; such amounts were $91,058 in
1994 and $228,750 in 1995. Allocations of PMM's costs are made between PMC and
the Company each month based on the ratio of their respective revenues.
Office Lease. The building in which the Company's offices are located
is owned by The Intermountain Companies ("Intermountain"), a general
partnership of which Bruce Porter and Joseph McLeod are the general partners.
The offices of PMH, PMM and PMC also are located in the building. The building
consists of approximately 7,065 square feet of office space and 6,000 square
feet of warehouse space. PMM leases the building from Intermountain at the rate
of $6,580 per month. PMH, PMC and the Company have agreed that the cost of the
space should be allocated 50% to PMC, 25% to PMM and 25% to the Company. The
rental charge to the Company is $1,645 per month for its 25% share of the
lease. The obligations of the Company, PMC and PMM are on a month-to-month
basis. In the event that the merger of the Affiliates with the Company is
consummated, the Company shall become the tenant under the lease.
Assumption by the Company of Certain PMC Contracts. The Company agreed
to assume all obligations under certain contracts previously entered into by
PMC with clients with national operations. The respective Boards Of Directors
of the Company and PMC determined that because future
26
<PAGE> 27
construction projects for these clients would likely be in various locations
throughout the United States, the Company would be better suited to undertake
any such projects and that by having the Company assume the current contracts
the dients would have an opportunity to become familiar with the Company.
Pursuant to the agreement between PMC and the Company, the Company has agreed
to complete all obligations under these current contracts, effective as of the
commencement date of each respective contract. The Company will pay PMC a fee
for each contract equal to 75% of the profit from that contract. Profit is to
be determined by subtracting from all revenues received with respect to each
contract all costs and expenses incurred in connection with each contract,
including material, labor, subcontractor and other costs, as well as an costs,
including overhead, that are allocable to the Company under the Administrative
Services Agreement (described above) as a result of the Company's performance
of the contracts assigned from PMC. If, after application of these costs, there
is no profit from a contract, PMC will not receive any fee from the Company. To
the extent that there is a loss for a particular contract, that loss is to be
borne by the Company and not by PMC.
Transactions with Aurora National Bank. During 1991, PMI entered into
two separate loan agreements with Aurora National Bank ("Aurora"). On February
4, 1991, PMI entered into a Credit Line Agreement with Aurora pursuant to which
PMI borrowed an aggregate of $1,000,000 (the "Credit Loan"). The Credit Loan is
partially guaranteed by the Small Business Administration ("SBA") and is
evidenced by PMI's promissory note in the principal amount of $1,000,000. The
promissory note is payable seven years from February 4, 1991 with monthly
installments of prindpal and interest of $17,922. Interest accrues at the rate
of 12.5% per annum and is adjusted up or down on the first business day of each
quarter following the disbursement of funds to PMI under the Credit Loan and on
the first business day of each quarter thereafter by adding two and one-half
percentage points to the lowest New York prime rate as published in the Wall
Street journal. In the event of PMI's default under the Credit Loan, upon the
SBA"s purchase of its guaranteed portion of the Credit Loan, the rate of
interest is fixed at the rate in effect as of the initial date of default. The
Credit Loan is guaranteed by PMC, PMH, PMM and certain affiliates of PMI.
On March 11, 1991 PMI entered into a Term Loan Agreement with Aurora
pursuant to which PMI borrowed an aggregate of $252,528 (the "Term Loan," the
Credit Loan and the Term Loan are sometimes referred to hereinafter as the
"Aurora Loans"). The Term Loan was refinanced in November, 1994, and, as a
consequence thereof, the principal amount of the
27
<PAGE> 28
Term Loan was reduced to $247,500 and the maturity date was extended to
November 11, 1995. The Term Loan is evidenced by PMI's promissory note in the
principal amount of $247,500. The promissory note provides for monthly payments
of interest only charged at Aurora's index rate as announced from time to time
with the initial monthly rate set at 9.75%. The promissory note was guaranteed
by PMM, PMC, PMH, Bruce Porter, Joseph McLeod and certain affiliates of PMI.
On November 30, 1994, involuntary proceedings under Chapter 7 of the
United States Bankruptcy Code were commenced against PMI and its subsidiaries.
As a consequence of the commencement of such proceedings, PMM and PMC, in their
capacities as guarantors of the Aurora Loans, assumed PMI's payment
obligations. The Company has advanced PMM the necessary funds to enable it to
meet the periodic payment obligations under the Aurora Loans. See "Advances to
PMC and PMM." Subsequent to November 11, 1995, the maturity date of the Term
Loan, PMM advised Aurora that it did not have sufficient funds to pay the
principal balance of the Term Loan and accrued interest. Although PMM is in
default with respect to the Term Loan, Aurora has informally agreed to accept
quarterly payments of interest with respect to the Term Loan pending approval
by its loan committee of PMM's request to extend the maturity date of the Term
Loan up to and including December 31, 1996. In the event that the merger of the
Affiliates with the Company is consummated, the Company shall assume the
obligations of PMM and PMC with respect to the Aurora Loans. The aggregate
amount of such obligations as of March 31, 1996 was $616,066.
Advances to PMC And PMM. During the months of July through November
1993, the Company paid certain expenses on behalf of PMM and made certain cash
advances to PMC which, after deducting the amount of other transactions between
each of them, resulted in PMC's owing $380,150, and PMM's owing $405,010, to
the Company. In December 1993, a number of transactions occurred between and
among the Company, PMC and PMM by which various accounts and notes were
assigned, consolidated and offset. As a result of these transactions, PMM owed
the Company $605,928, which amount is represented by a promissory note from PMM
to the Company dated as of December 31, 1993 (the "Note"). This Note, which
accrues interest at the rate of seven percent per annum, is payable in three
equal payments of principal, together with all accrued interest to the
respective dates of payment, which are March 31, 1995, March 31, 1996, and
March 31, 1997. PMM is in default. with respect to the March 31, 1995 and 1996
principal payments. The Company does not intend to exercise the rights granted
to it in the event of a default under the Note. Payment of the Note
28
<PAGE> 29
has been secured by the personal guarantees of Bruce Porter and Joseph McLeod.
In addition to its indebtedness under the Note which, as of March 31, 1996
amounted to $677,126, PMM is also indebted to the Company for an additional
$92,997 incurred as a result of advances made by the Company to PMM during the
year ended December 31, 1995 in order to enable PMM to meet its obligations
with respect to the Aurora Loans. As a result of the foregoing, as of March 31,
1996, PMM was indebted to the Company in the aggregate amount of $770,123 (the
"Advances"). In the event that the merger of the Affiliates with the Company is
consummated, the Company"s entitlement to receive payment with respect to the
Advances will be extinguished.
Proposed Compensation to the Company With Respect to the Advances and
the Aurora Loans. At the Company's annual meeting of stockholders to be held on
or about June 17, 1996, the stockholders will be asked to (a) ratify the
transactions by which the Advances were created, and (b) authorize the Company
to accept, in satisfaction of such indebtedness and in consideration of its
assumption of the Aurora Loans, a transfer by PMH of shares of the common stock
of PMC having a fair market value of $1,386,189. As a result of such
transaction, the Company will become the owner of approximately 82% of PMC's
outstanding common stock. If the stockholders approve the foregoing
transactions, and they also authorize the merger of the Affiliates with the
Company, Messrs. Porter and McLeod will receive additional shares of the
Company's unregistered common stock equal in value to the approximately 18% of
PMC which the Company will be acquiring as a result of the merger. The Company
believes that the value of such common stock will be approximately $314,000.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Number Description
3.1(a) Certificate Of Incorporation filed with the Delaware Secretary
Of State on August 10, 1992 (incorporated by reference from
Exhibit 3.1 of Registrant's Registration Statement on Form
SB-2 filed September 29, 1992).
3.1(b) Certificate Of Amendment To The Certificate Of Incorporation
filed
29
<PAGE> 30
with the Delaware Secretary Of State on or about May 11, 1993
(incorporated by reference from Exhibit 3.1(b) of Amendment
No. 3 to the Registrant's Registration Statement on Form SB-2
filed May 14, 1993).
3.2 Bylaws (incorporated by reference from Exhibit 3.2 of
Registrant's Registration Statement on Form SB-2 filed
September 29, 1992).
10.1 Lease Agreement dated as of April 1, 1992 between The
Intermountain Companies and PMM (incorporated by reference
from Exhibit 10.1 of Registrant's Registration Statement on
Form SB-2 filed September 29, 1992).
10.2 Sublease Agreement dated as of April 1, 1992 between PMM,
Registrant, PMI, PMH, PMN, Inc. ("PMN"), PM Denver, Inc. ("PM
Denver"), PMNC, Inc. ("PMNC"), PMSC, Inc. ("PMSC"), and PMC
(incorporated by reference from Exhibit 10.2 of Registrant's
Registration Statement on Form SB-2 filed September 29,
1992).
10.3 Conflicts Of Interest Agreement dated August 26, 1992 between
and among PMH, the Registrant, and PMC (incorporated by
reference from Exhibit 10.3 of Registrant's Registration
Statement on Form SB-2 filed September 29, 1992).
10.4 Assignment And Assumption Agreement And Bill Of Sale dated
April 1, 1992 between PMI and PMN (incorporated by reference
from Exhibit 10.4 of Registrant's Registration Statement on
Form SB-2 filed September 29, 1992).
10.5 Assignment And Assumption Agreement And Bill Of Sale dated
April 1, 1992 between PMI and PMSC (incorporated by reference
from Exhibit 10.5 of Registrant's Registration Statement on
Form SB-2 filed September 29, 1992).
10.6 Assignment And Assumption Agreement And Bill Of Sale dated
April 1, 1992 between PMI and PM Denver (incorporated by
reference from Exhibit 10.6 of Registrant's Registration
Statement on Form SB-2 filed September 29, 1992).
10.7 Assignment And Assumption Agreement And Bill Of Sale dated
April 1, 1992 between PMI and PMNC (incorporated by reference
30
<PAGE> 31
from Exhibit 10.7 of Registrant's Registration Statement on
Form SB-2 filed September 29, 1992).
10.8 Assignment Agreement And Bill Of Sale dated April 2, 1992
between PM Denver and the Registrant (incorporated by
reference from Exhibit 10.8 of Registrant's Registration
Statement on Form SB-2 filed September 29, 1992).
10.9 Assignment Agreement And Bill Of Sale dated April 2,1992
between PMN and the Registrant (incorporated by reference
from Exhibit 10.9 of Registrant's Registration Statement on
Form SB-2 filed September 29, 1992).
10.10 Assignment Agreement And Bill Of Sale dated April 2, 1992
between PMSC and PMI (incorporated by reference from Exhibit
10.10 of Registrant's Registration Statement on Form SB-2
filed September 29, 1992).
10.11 Assignment Agreement And Bill Of Sale dated April 2, 1992
between PM Denver and PMC (incorporated by reference from
Exhibit 10.11 of Registrant's Registration Statement on Form
SB-2 filed September 29, 1992).
10.12 Assignment Agreement And Bill Of Sale dated April 2, 1992
between PMNC and PMI (incorporated by reference from Exhibit
10.12 of Registrant's Registration Statement on Form SB-2
filed September 29, 1992).
10.13 Lease Of Personal Property dated April 3, 1992 between PMI and
PMM (incorporated by reference from Exhibit 10.13 of
Registrant's Registration Statement on Form SB-2 filed
September 29, 1992).
10.14(a) Agreement To Provide Services dated April 4, 1992 between PMM
and the Registrant (incorporated by reference from Exhibit
1O.'14(a) of Registrant's Registration Statement on Form SB-2
filed September 29, 1992).
10.14(b) Amendment No. 1 dated as of April 4, 1992 to Agreement To
Provide Services between PMM and the Registrant (incorporated
by reference from Exhibit 10.14(b) of Registrant's
Registration Statement on Form SB-2 filed September 29,
1992).
31
<PAGE> 32
10.14(c) Amendment No. 2 dated April 29, 1993, to be effective as of
April 4, 1992, to Agreement To Provide Services Between PMM
and the Registrant (incorporated by reference from Exhibit
10.14(c) of Amendment No. 3 to Registrant's Registration
Statement on Form SB-2 filed May 14,1993).
10.15 Agreement To Provide Services dated April 4, 1992 between PMM
and PMC (incorporated by reference from Exhibit 10.15 of
Registrant's Registration Statement on Form SB-2 filed
September 29, 1992).
10.16 Management Agreement dated April 4, 1992 between PMM and PM
Denver (incorporated by reference from Exhibit 10.16 of
Registrant's Registration Statement on Form SB-2 filed
September 29, 1992).
10.17(a) Management Agreement dated April 4, 1992 between PMM and PMN
(incorporated by reference from Exhibit 10.17 of Registrant's
Registration Statement on Form SB- 2 filed September 29,
1992).
10-17(b) Amendment No. 1 dated April 29, 1993, to be effective as of
April 4, 1992, to Management Agreement between PMM and PMN
(incorporated by reference from Exhibit 10.17(b) of Amendment
No. 3 to Registrant's Registration Statement on Form SB-2
filed May 14, 1993).
10.18 Management Agreement dated April 4, 1992 between PMM and PMSC
(incorporated by reference from Exhibit 10.18 of Registrant's
Registration Statement on Form SB-2 filed September 29,
1992).
10.19 Management Agreement dated April 4, 1992 between PMM and PMNC
(incorporated by reference from Exhibit 10.19 of Registrant's
Registration Statement on Form SB-2 filed September 29,
1992).
10.20(a) Promissory Note dated May 12, 1992 from Registrant to PMM in
face amount of $5,000 (incorporated by reference from Exhibit
10.20(a) of Registrant's Registration Statement on Form SB-2
filed September 29, 1992).
10.20(b) Promissory Note dated May 19, 1992 from Registrant to PMM in
32
<PAGE> 33
face amount of $7,500 (incorporated by reference from Exhibit
10.20(b) of Registrant's Registration Statement on Form SB-2
filed September 29, 1992).
10.20(c) Promissory Note dated May 20, 1992 from Registrant to PMM in
face amount of $ 10,000 (incorporated by reference from
Exhibit 10.20(c) of Registrant's Registration Statement on
Form SB-2 filed September 29, 1992).
10.20(d) Promissory Note dated May 22, 1992 from Registrant to PMM in
face amount of $5,000 (incorporated by reference from Exhibit
10.20(d) of Registrant's Registration Statement on Form SB-2
filed September 29, 1992).
10.20(e) Promissory Note dated May 27, 1992 from Registrant to PMM in
face amount of $5,000 (incorporated by reference from Exhibit
10.20(e) of Registrant's Registration Statement on Form SB-2
filed September 29, 1992).
10.21 Administration And Allocation Agreement dated August 27, 1992
between and among Registrant, PMC, PMI, PM Denver, PMN, PMNC,
PMSC, and PMM (incorporated by reference from Exhibit 10.21
of Registrant's Registration Statement on Form SB-2 filed
September 29, 1992).
10-22(a) Agreement dated April 29,1993 between PMC and Registrant
concerning assumption of certain PMC contracts by Registrant
(incorporated by reference from Exhibit 10.22 of Amendment
No. 3 to Registrant's Registration Statement on Form SB-2
filed May 14,1993) .
10.22(b) Amendment No. I dated May 25, 1993, to be effective as of
April 29, 1993, to Agreement dated April 20, 1993 between PMC
and Registrant concerning assumption of certain PMC contracts
by Registrant (incorporated by reference from Exhibit
10.22(b) of Amendment No. 4 to Registrant's Registration
Statement on Form SB-2 filed May 26, 1993).
10.23 Payment Agreement dated as of April 30, 1993 between
Registrant and PMM (incorporated by reference from Exhibit
10.23 of Amendment No. 3 to Registrant's Registration
Statement on Form SB-2 filed May 14, 1993).
33
<PAGE> 34
10.24(a) Payment Agreement dated as of April 30, 1993 between
Registrant and PMC (incorporated by reference from Exhibit
10.24 of Amendment No. 3 to Registrant's Registration
Statement on Form SB-2 filed May 14, 1993).
10.24(b) Amendment No. 1 dated May 25, 1993, to be effective as of
April 30, 1993, to the Payment Agreement dated as of April
30, 1993 between Registrant and PMC (incorporated by
reference from Exhibit 10.24(b) of Amendment No. 4 to
Registrant's Registration Statement on Form SB-2 filed May
26, 1993).
10.25(a) Payment Agreement dated as of April 30, 1993 between
Registrant and PM Denver (incorporated by reference from
Exhibit 10.25 of Amendment No. 3 to Registrant's Registration
Statement on Form SB-2 filed May 14, 1993).
10.25(b) Amendment No. 1 dated June 8, 1993, to be effective as of
April 30, 1993, to the Payment Agreement dated as of April
30, 1993 between Registrant and PM Denver (incorporated by
reference from Exhibit 10.25(b) of Amendment No. 4 to
Registrant's Registration Statement on Form SB-2 filed May
26,19 ).
10.26 Payment Agreement dated as of April 30, 1993 between
Registrant and PNH (incorporated by reference from Exhibit
10-26 of Amendment No. 3 to Registrant's Registration
Statement on Form SB-2 filed May 14, 1993).
10.27 Payment Agreement dated as of April 30, 1993 between
Registrant and PMN (incorporated by reference from Exhibit
10.27 of Amendment No. 3 to Registrant's Registration
Statement on Form SB-2 filed May 14, 1993).
10.28 Promissory Note issued by PMM to the Company in the face
amount of $605,928 dated as of December 31,1993 (incorporated
by reference from Exhibit 10.28 to Registrant's Annual Report
on Form 10-KSB for the fiscal year ended December 31, 1993).
10.29 Guaranty Agreement between PMC and the Company dated as of
December 31, 1993 (incorporated by reference from Exhibit
10.29 to Registrant's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1993).
34
<PAGE> 35
10.30 Guaranty Agreement between PMH and the Company dated as of
December 31, 1993 (incorporated by reference from Exhibit
10.30 to Registrant"S Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1993).
10.31 Consulting Agreement dated as of August 25, 1994 to be
effective as of May 9, 1994, between the Company and Martin
Kelly, superseding the Employment Agreement dated as of May
9, 1994, between the Company and Martin Kelly.
(b) Reports On Form 8-K.
During the quarter ended December 31, 1995, the Company filed
one report on Form 8-K reporting the change of its auditors
which occurred on November 30, 1995.
35
<PAGE> 36
PORTER MCLEOD NATIONAL RETAIL, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report..............................................F - 1
Independent Auditors' Report..............................................F - 2
Financial Statements
Balance Sheets......................................................F - 3
Statements of Operations............................................F - 4
Statements of Stockholders' Equity..................................F - 5
Statements of Cash Flows............................................F - 6
Notes to Financial Statements.............................................F - 7
</TABLE>
<PAGE> 37
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Porter McLeod National Retail, Inc.
Lakewood, Colorado
We have audited the accompanying balance sheet of Porter McLeod National
Retail, Inc. as of December 31, 1995, and the related statements of operations,
stockholders' equity, and cash flows for the year then ended. These financial
statements are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these financial statements based on
our audit. The financial statements of Porter McLeod National Retail, Inc. as
of December 31, 1994 were audited by other auditors whose report dated February
10, 1995, expressed an unqualified opinion on those statements.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, the 1995 financial statements referred to above present fairly,
in all material respects, the financial position of Porter McLeod National
Retail, Inc. as of December 31, 1995 and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.
Ehrhardt Keefe Steiner & Hottman PC
April 3, 1996
Denver, Colorado
F - 1
<PAGE> 38
Board of Directors
Porter McLeod National Retail, Inc.
We have audited the accompanying balance sheets of Porter McLeod National
Retail, Inc. as of December 31, 1994 and 1993, and the related statements of
operations, changes in stockholders' equity, and cash flows for the 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 to present fairly,
in all material respects, the financial position of Porter McLeod National
Retail, Inc. as of December 31, 1994 and 1993, and the results of its
operations and cash flows for the years then ended in conformity with generally
accepted accounting principles.
/s/ Lehman, Butterwick & Company, P.C.
Denver, Colorado
February 10, 1995
F - 2
<PAGE> 39
PORTER MCLEOD NATIONAL RETAIL, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
----------------------------------------
1995 1994
-------------- -------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 354,050 $ 236,583
Investment securities available for sale, net (Note 4) - 348,384
Accounts receivable, less allowance for doubtful accounts of $20,000 in
1995 and 1994 609,762 1,145,852
Retainage receivable 13,086 369,205
Costs and estimated earnings in excess of billings (Note 2) 96,625 904,177
Prepaid expenses and other 66,232 23,411
-------------- -------------
Total current assets 1,139,755 3,027,612
-------------- -------------
Property and equipment
Office furniture and equipment 21,278 21,278
Leasehold improvements 34,634 34,634
-------------- -------------
55,912 55,912
Less accumulated depreciation (21,655) (14,843)
-------------- -------------
Total property and equipment 34,257 41,069
-------------- -------------
Other assets
Note receivable from affiliate (Note 10) 677,126 677,126
Advances to affiliates (Note 10) 92,997 -
-------------- -------------
Total other assets 770,123 677,126
-------------- -------------
Total assets $ 1,944,135 $ 3,745,807
============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $ 451,138 $ 2,010,770
Billings in excess of costs and estimated earnings contracts - 4,245
Payables to affiliates (Note 10) - 33,287
-------------- -------------
Total current liabilities 451,138 2,048,302
-------------- -------------
Commitments and contingencies (Notes 6, 8 and 9)
Stockholders' equity
Preferred stock, $.001 par value, 100,000 authorized - no shares issued
and outstanding - -
Common stock, $.0001 par value, authorized - 3,000,000 shares - issued
and outstanding; 1,970,666 (1995) and 1,885,666 (1994) 197 189
Additional paid-in capital 3,931,116 3,824,249
Accumulated deficit (2,374,199) (744,002)
Unrealized holding loss (Note 4) - (51,212)
Consulting agreement (Note 7) (64,117) -
International marketing contract (Note 7) - (1,331,719)
-------------- -------------
Total stockholders' equity 1,492,997 1,697,505
-------------- -------------
Total liabilities and stockholders' equity $ 1,944,135 $ 3,745,807
============== =============
</TABLE>
See notes to financial statements.
F - 3
<PAGE> 40
PORTER MCLEOD NATIONAL RETAIL, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended
December 31,
--------------------------
1995 1994
----------- -----------
<S> <C> <C>
Contract revenues $ 5,167,422 $ 9,873,116
Cost of contract revenues 4,576,593 9,574,346
----------- -----------
Gross profit 590,829 298,770
----------- -----------
General and administrative expenses 1,124,048 1,021,406
Interest income (54,531) (91,268)
Loss on sale of investment securities 41,743 53,072
Other expense -- 9,977
Impairment of international marketing agreement (Note 7) 1,109,766 --
----------- -----------
2,221,026 993,187
----------- -----------
Loss before income taxes (1,630,197) (694,417)
Income tax benefit (Note 5) -- 12,102
----------- -----------
Net income (loss) $(1,630,197) $ (682,315)
=========== ===========
Net income (loss) per common share $ (.85) $ (.37)
=========== ===========
Weighted average number of shares outstanding 1,923,999 1,823,999
=========== ===========
</TABLE>
See notes to financial statements.
F - 4
<PAGE> 41
PORTER MCLEOD NATIONAL RETAIL, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Additional Unrealized International
----------------------- Paid-in Accumulated Holding Marketing
Shares Amount Capital Deficit Loss Contract
--------- ------------ ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1993 1,700,666 $ 170 $ 2,124,580 $ (48,305) $ -- $ --
Distribution of net assets due to
reorganization -- -- -- (13,382) -- --
Issuance of common stock for marketing
services at $9.1875 per share (Note 7) 85,000 9 780,929 -- -- --
Issuance of common stock under option
agreement for marketing services at
$9.1875 per share (Note 7) 100,000 10 918,740 -- -- --
Unrealized holding loss (Note 4) -- -- -- -- (51,212) --
International marketing contract (Note 7) -- -- -- -- -- (1,331,719)
Net loss -- -- -- (682,315) -- --
----------- ----------- ----------- ----------- ----------- -----------
Balances at December 31, 1994 1,885,666 189 3,824,249 (744,002) (51,212) (1,331,719)
Issuance of common stock pursuant to
consulting agreement valued at 1.16 per
share (Note 7) 60,000 6 69,369 -- -- --
Issuance of common stock pursuant to
consulting agreement valued at 1.50 per
share (Note 7) 25,000 2 37,498 -- -- --
Unrealized holding loss (Note 4) -- -- -- -- 51,212 --
Amortization of international marketing
agreement -- -- -- -- -- 221,953
Impairment of international marketing
agreement -- -- -- -- -- 1,109,766
Consulting agreement (Note 7) -- -- -- -- -- --
Amortization of consulting agreement -- -- -- -- -- --
Net loss -- -- -- (1,630,197) -- --
----------- ----------- ----------- ----------- ----------- -----------
1,970,666 $ 197 $ 3,931,116 $(2,374,199) $ -- $ --
=========== =========== =========== =========== =========== ===========
<CAPTION>
Total
Consulting Stockholders'
Agreement Equity
---------- -------------
<S> <C> <C>
Balances at December 31, 1993 $ -- $ 2,076,445
Distribution of net assets due to
reorganization -- (13,382)
Issuance of common stock for marketing
services at $9.1875 per share (Note 7) -- 780,938
Issuance of common stock under option
agreement for marketing services at
$9.1875 per share (Note 7) -- 918,750
Unrealized holding loss (Note 4) -- (51,212)
International marketing contract (Note 7) -- (1,331,719)
Net loss -- (682,315)
------------ -----------
Balances at December 31, 1994 -- 1,697,505
Issuance of common stock pursuant to
consulting agreement valued at 1.16 per
share (Note 7) -- 69,375
Issuance of common stock pursuant to
consulting agreement valued at 1.50 per
share (Note 7) -- 37,500
Unrealized holding loss (Note 4) -- 51,212
Amortization of international marketing
agreement -- 221,953
Impairment of international marketing
agreement -- 1,109,766
Consulting agreement (Note 7) (106,867) (106,867)
Amortization of consulting agreement 42,750 42,750
Net loss -- (1,630,197)
------------ -----------
$ (64,117) $ 1,492,997
============ ===========
</TABLE>
See notes to financial statements.
F - 5
<PAGE> 42
PORTER MCLEOD NATIONAL RETAIL, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Years Ended
December 31,
--------------------------
1995 1994
----------- -----------
<S> <C> <C>
Cash flows from operating activities
Net loss $(1,630,197) $ (682,315)
----------- -----------
Adjustments to reconcile net loss to net cash provided by operating
activities -
Depreciation 6,812 5,687
Amortization 264,703 147,762
Loss on sale of investment securities 38,817 53,072
Impairment of marketing agreement 1,109,766
Operating distributions to net assets - (27,431)
Changes in assets and liabilities -
Receivables 892,209 (839,627)
Cost and estimated earnings in excess of billings on contracts 807,552 (719,370)
Prepaid expenses and other (42,821) (20,123)
Investment securities -- (42,073)
Accounts payable and accrued expenses (1,559,632) 1,320,942
Payables to affiliates (33,287) (42,138)
Billings in excess of costs and estimated earnings on contracts (4,245) (34,770)
Income taxes payable -- (7,823)
----------- -----------
1,479,874 (205,892)
----------- -----------
Net cash (used in) operating activities (150,323) (888,207)
----------- -----------
Cash flows from investing activities
Acquisition of property and equipment -- (1,559)
Proceeds from sale of investment securities 360,779 400,000
----------- -----------
Net cash provided by investment activities 360,779 398,441
----------- -----------
Cash flows from financing activities
Cash advances (to) from affiliate, net (92,997) 4,227
Net proceeds from issuance of common stock 8 220,000
Non-operating distribution of net assets -- 14,049
----------- -----------
Net cash (used in) provided by financing activities (92,989) 238,276
----------- -----------
Net increase (decrease) in cash and cash equivalents 117,467 (251,490)
Cash and cash equivalents - beginning of period 236,583 488,073
----------- -----------
Cash and cash equivalents - end of period $ 354,050 $ 236,583
=========== ===========
</TABLE>
Supplemental disclosures of cash flow information:
Cash paid during the year for income taxes $0 and $8,590 for 1995 and
1994, respectively.
Supplemental disclosures of non-cash financing activities:
During 1995, the Company issued stock in the amount of $106,867 for
consulting services pursuant to a consulting agreement (Note 7).
During 1994, the Company issued stock in the amount of $1,749,688 for
consulting services pursuant to an international marketing agreement
(Note 7).
See notes to financial statements.
F - 5
<PAGE> 43
PORTER MCLEOD NATIONAL RETAIL, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PORTER McLEOD NATIONAL RETAIL INC. (PMNR) (the Company), is a subsidiary of
PORTER McLEOD HOLDINGS, INC. (PMH). PMH owned approximately 49% and 52% of the
outstanding common stock of PMNR at December 31, 1995 and 1994, respectively.
Both PMNR and PMH were formed in March 1992. On April 1, 1992, Porter-McLeod,
Inc. (PMI), a construction contractor, went through a reorganization, whereby
PMI became a wholly-owned subsidiary of PMH.
The Company is a general contractor providing construction management services
primarily for retail interior construction by national retail firms, including
original construction and remodeling of retail stores, throughout the United
States. Substantially all of the Company's work is performed under negotiated
fixed price contracts. The length of the Company's contracts varies but is
typically one year or less. Accordingly, the Company classifies all contract
related assets and liabilities as current.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Management believes that such estimates
have been based on reasonable assumptions and that such estimates are adequate,
however, actual results could differ from those estimates.
Adoption of New Accounting Rules
In 1995, the Financial Accounting Standards Board issued Statement No. 123,
"Accounting for Stock Based Compensation," (FAS 123) which encourages, but does
not require, companies to recognize compensation expense for grants of stock,
stock options, and other equity instruments to employees. FAS 123 is required
for such grants, described above, to acquire goods or services form
nonemployees. Additionally, although expense recognition is not mandatory, FAS
123 requires companies that choose not to adopt the new fair value accounting
rules to disclose pro forma net income and earnings per share information using
the new method. The Company will adopt the disclosure requirements of FAS 123
in the first quarter of fiscal 1996 and, does not believe the effect of the
adoption will be material.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an original
maturity of three months of less to be cash equivalents.
F - 6
<PAGE> 44
PORTER MCLEOD NATIONAL RETAIL, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Investments
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 115, Accounting for Certain Investments in Debt
and Equity Securities. Under SFAS No. 115, management determines the
appropriate classification of securities at the time of the purchase. If
management has the intent and the Company has the ability at the time of
purchase to hold securities until maturity, they are classified as held to
maturity investments and carried at amortized historical cost. Securities to be
held for indefinite periods of time and not intended to be held to maturity are
classified as available for sale and carried at fair value.
Realized gains and losses on dispositions are based on the net proceeds and the
adjusted book value of the securities sold, using the specific identification
method. Unrealized gains and losses on investment securities available for sale
are charged to shareholder's equity, whereas realized gains and losses flow
through the Company's annual operations.
Concentration of Credit Risk
The Company grants credit in the normal course of business to customers who are
primarily commercial and retail chain owners located throughout the United
States. To reduce credit risk, the Company monitors the financial condition and
performs credit analysis prior to entering into construction contracts.
Additionally, at times, the Company maintains cash balances in excess of FDIC
limits. As of December 31, 1995, the balance in excess of the federally insured
limits was approximately $348,000.
For the year ended December 31, 1995, the Company had three customers
representing 33.8%, 18.8% and 15.6%, respectively, of the sales and 86.3% of
the outstanding accounts receivable balance. For the year ended December 31,
1994, the Company's had two customers representing 55.1% and 20.8%,
respectively, of the sales and 78.1% of the outstanding accountings receivable
balance.
Property and Equipment
Property and equipment is stated at cost. Depreciation is provided principally
on the straight-line method over the estimated useful lives of the assets which
range from 5 to 15 years.
Income Taxes
The Company accounts for income taxes whereby deferred tax liabilities and
assets are determined based on the difference between the financial statement
assets and liabilities and tax basis assets and liabilities using enacted tax
rates in effect for the year in which the differences are expected to reverse.
F - 7
<PAGE> 45
PORTER MCLEOD NATIONAL RETAIL, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue and Cost Recognition
Revenues from fixed-price construction contracts are recognized on the
percentage-of-completion method, measured by the percentage of total cost
incurred to date to estimated total costs for each contract. This method is
used because management considers cost to date to be the best available measure
of progress on these contracts.
Contract costs include all direct job costs and those indirect costs related to
contract performance, such as indirect labor, supplies, insurance, equipment
repairs and depreciation costs. General and administrative costs are charged to
expense as incurred.
Provisions for estimated losses on uncompleted contracts are made in the period
in which such losses become known.
Changes in job performance, job conditions and estimated profitability,
including those arising from final contract settlements, may result in
revisions to costs and income. These revisions are recognized in the period in
which the changes are determined. Profit incentives are included in revenues
when their realization is reasonably assured. An amount equal to contract costs
attributable to claims is included in revenues when realization is probable and
the amount can be reliably estimates.
The asset account, "Costs and estimated earnings in excess of billings on
contracts," represents revenues recognized in excess of amounts billed. The
liability account, "Billings in excess of costs and estimated earnings on
contracts," represents billings in excess of revenues recognized.
Loss Per Share
Loss per common share is computed by dividing the net loss by the weighted
average number of shares of common stock outstanding during the year. Common
stock equivalents are not considered in this calculation as their inclusion
would be anti-dilutive.
Reclassifications
Certain accounts in the 1994 financial statements have been reclassified to
conform to the 1995 presentation.
F - 8
<PAGE> 46
PORTER MCLEOD NATIONAL RETAIL, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Long-Lived Assets
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 121 Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of. Under SFAS 121, the Company reviews its
long-lived assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of these assets my not be recovered. The
Company looks primarily to the future cash flows of an asset to determine if it
is impaired. At December 31, 1995, the Company determined an impairment of the
International Marketing Contract was appropriate (Note 7).
NOTE 2 - COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
The Company's costs and estimated earnings on uncompleted contracts consist of
the following:
<TABLE>
<CAPTION>
December 31,
--------------------------
1995 1994
----------- -----------
<S> <C> <C>
Costs incurred on uncompleted contracts $ 199,462 $ 5,618,782
Estimated earnings 28,020 320,622
----------- -----------
227,482 5,939,404
Less billings to date (130,857) (5,039,472)
----------- -----------
$ 96,625 $ 899,932
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
December 31,
---------------------
1995 1994
--------- ---------
<S> <C> <C>
Included in the accompanying balance sheet under the following captions:
Costs and estimated earnings in excess of billings on uncompleted
contracts $ 96,625 $ 904,177
Billings in excess of costs and estimated earnings on uncompleted
contracts -- (4,245)
--------- ---------
$ 96,625 $ 899,932
========= =========
</TABLE>
F - 9
<PAGE> 47
PORTER MCLEOD NATIONAL RETAIL, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 3 - BACKLOG
The following schedule shows a reconciliation of backlog representing signed
contracts in existence:
<TABLE>
<CAPTION>
December 31,
----------------------------
1995 1994
------------ ------------
<S> <C> <C>
Balance - beginning of year $ 1,192,123 $ 1,451,747
New contracts, added during year 4,680,930 9,613,492
------------ ------------
5,873,053 11,065,239
Less contracts revenue earned (5,167,422) (9,873,116)
------------ ------------
Balance - end of year $ 705,631 $ 1,192,123
============ ============
</TABLE>
NOTE 4 - INVESTMENTS
At December 31, 1994, the investment securities portfolio was comprised of
securities classified as available for sale, in conjunction with the adoption
of SFAS No. 115, resulting in investment securities available for sale being
carried at market value. The amortized cost and fair values of investment
securities at December 31, 1995 and 1994, are as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
December 31, 1994
Available for sale:
Equity securities $399,596 $ -- $(51,212) $348,384
======== ========= ======== ========
</TABLE>
Included in stockholder's equity at December 31, 1994, is $51,212 of net
unrealized losses on investment securities available for sale.
NOTE 5 - INCOME TAXES
Deferred tax liabilities and assets are determined based on the difference
between the financial statement assets and liabilities and tax basis assets and
liabilities using the enacted tax rates in effect for the year in which the
differences are expected to occur. The measurement of deferred tax assets is
reduced, if necessary, by the amount of any tax benefits that, based on
available evidence, are not expected to be realized.
F - 10
<PAGE> 48
PORTER MCLEOD NATIONAL RETAIL, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 5 - INCOME TAXES (CONTINUED)
The components of the provision for income tax (benefit) expense for the years
ended December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
Years Ended
December 31,
--------------------------
1995 1994
-------- --------
<S> <C> <C>
Current $ -- $(12,102)
Deferred -- --
-------- --------
$ -- $(12,102)
======== ========
</TABLE>
The differences between the federal income tax rate and the effective income
tax rate as elected in the accompanying statements of operations are:
<TABLE>
<CAPTION>
Years Ended
December 31,
---------------------------
1995 1994
-------- --------
<S> <C> <C>
Statutory federal income tax rate (benefit) (34.0)% (34.0)%
Valuation allowance for net operating loss 34.0 32.3
-------- --------
Effective tax rate (benefit) - % (1.7)%
======== =======
</TABLE>
The deferred income tax liabilities results primarily from the recognition of
tax net operating loss carryforwards and the amortization and impairment of the
International Marketing Agreement, and is composed of the following:
<TABLE>
<CAPTION>
Years Ended
December 31,
---------------------------
1995 1994
-------- --------
<S> <C> <C>
Total deferred tax asset $ 820,000 $ 114,857
Total deferred tax liability -- --
Valuation allowance (820,000) (114,857)
--------- ---------
$ - $ -
========= =========
</TABLE>
For federal and state income tax purposes, the Company has net operating loss
carryforwards of approximately $1,078,000 which substantially expire in fiscal
years 2008 through 2010. The net operating loss carryforwards and timing
differences generated a deferred tax asset in the amount of $820,000 which has
been fully reserved for due to lack of profitable operating history.
F - 11
<PAGE> 49
PORTER MCLEOD NATIONAL RETAIL, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 6 - COMMITMENTS AND CONTINGENCIES
Related Party Lease
The Company leases office space from an affiliated party, the Intermountain
companies, which is a partnership between the two shareholders of PMH. This
lease is on a month-to-month basis. Presently, the monthly expense is $1,645,
and it is management's intent to continue to lease the office space. Rent
expense for the years ended December 31, 1995 and 1994, was $19,740 and
$17,520, respectively.
Litigation
There is an action pending in the United States District Court of Utah in which
the Company is named as a co-defendant. The Plaintiff, a licensed contractor,
entered into a subcontract with Porter McLeod, Inc. (PMI) to act as PMI's
subcontractor in connection with the construction of a store. The Plaintiff
seeks the sum of approximately $117,005 together with interest, attorney's fees
and court costs against PMI, the Company and another co-defendant. The basis of
the plaintiff's claim against the Company is that PMI changed it name to Porter
McLeod National Retail, Inc. The proceeding currently is stayed due to
bankruptcy proceeding of PMI. No determination can be made at this time as to
the potential range of settlement, if any, or the likelihood of an unfavorable
outcome to the Company. As such, no adjustment has been made to these
financial statements as a result of this uncertainty. Management believes this
case will not result in any liability to the Company.
NOTE 7 - STOCKHOLDERS' EQUITY
Warrants
Each of the 534,000 warrants issued in connection with the offering entitles
the holder to purchase one share of the Company's common stock at a price of
$6.00, through September 1996. The warrants are redeemable by the Company at
any time prior to their exercise or expiration. The redemption price is $.05
per warrant. No warrants have been exercised or redeemed as of December 31,
1995.
F - 12
<PAGE> 50
PORTER MCLEOD NATIONAL RETAIL, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 7 - STOCKHOLDERS' EQUITY (CONTINUED)
International Marketing Agreement
In 1994, the Company entered into an agreement with an individual for
international marketing consulting services. The consultant's services were
intended to develop contacts, for the Company, with international organizations
seeking contractors for construction projects. The agreement extended for ten
years, and the consultants could terminate the contract once $2.4 million of
gross profit had been generated from international business. For services to be
performed, the consultant was given 85,000 shares of common stock and options
to purchase 100,000 more shares at an option price of $2.20 per share. The
total amount of stock issued for marketing services under this agreement was
$1,479,688 net of $220,000 of option proceeds. Under SFAS 121, the Company
determines if an impairment has occurred when events or circumstances change.
In late 1995, management made the decision to focus its operations domestically
and abandon its international efforts. Management has attempted to capitalize
on international opportunities since the inception of the contract with no
success. The lack of success coupled with the management's determination that
it would not be able to make any material efforts in regard to international
projects was the event which caused management to review the agreement in
accordance with SFAS No. 121. Future cash flows from this contract are
estimated to be negligible; therefore, the asset was fully impaired.
Amortization expense of the International Marketing Agreement for the year
ended December 31, 1995 and 1994 was $221,953 and $147,969, respectively.
Consulting Agreement
In 1995, the Company entered into an agreement with an individual for
consulting services. The consultant's services are intended to provide ongoing
operations advice. The agreement extends for 15 months. For services to be
performed, the consultant was given a total of 85,000 shares of common stock.
The cost recorded pursuant to this consulting agreement was $106,867 which was
the fair market value of the stock issued. The cost is being amortized over the
term of the underlying agreement. Amortization expense for the year ended
December 31, 1995 was $42,750.
NOTE 8 - STOCK OPTION PLAN
The Company adopted a stock option plan in 1993. The plan provides for the
grant of qualified incentive options to key employees and for the grant of
non-qualified options to other individuals. A maximum of 150,000 shares of
common stock in total can be issued for the two types of options combined. The
exercise price of options granted and the granting of options will not be less
than the fair market value of the common stock at the date of the grant (110%
for anyone who owns 10% or more of the Company's voting stock at the date of
grant).
F - 13
<PAGE> 51
PORTER MCLEOD NATIONAL RETAIL, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 8 - STOCK OPTION PLAN (CONTINUED)
The plan is administered by the Option Committee, which may provide vesting
requirements and specific expiration provisions with respect to the options
granted. The plan expires on May 6, 2006. No options have been granted under
this plan.
NOTE 9 - EMPLOYEE BENEFITS
The Company has a profit sharing plan for all eligible employees which is
established under the provisions of Internal Revenue Code Section 401(k). The
plan became effective January 1, 1994. The Company's contributions to the plan
are determined by the employee's elective salary reductions, but may not exceed
the maximum allowable deduction permitted under the Internal Revenue Code at
the time of the contribution. Total profit sharing expense was $1,740 and
$2,614 for the years ended December 31, 1995 and 1994, respectively.
The Company has established an employee health insurance plan under which the
Company is partially self-insured. The Company has an excess risk insurance
policy limiting the maximum liability based on the plan type and claims
incurred by each individual covered under the plan. The policy with the
insurance company covers any claims in excess of $5,000 per individual, per
year and limits total Company claims to a maximum of the calculated amount
based upon the number of employees and the dollar value of premiums. At
December 31, 1995 and 1994, the Company's maximum medical claim liability under
this stop-loss insurance policy was $0 and $4,544, respectively.
NOTE 10 - RELATED PARTY TRANSACTION
The Company has the following note receivable, and note payable with
affiliates:
<TABLE>
<CAPTION>
December 31,
-----------------------------------
1995 1994
---------------- ----------------
<S> <C> <C>
Note receivable from affiliate by common ownership
(Porter McLeod Management, Inc. (PMM)) at 7%, due in
annual installments of $225,709 plus interest, beginning
March 1995 and maturing March 31, 1997; unsecured
$ 677,126 $ 677,126
================ ================
Advances to affiliate (PMM), non-interest bearing due on
demand
$ 92,997 $ --
================ ================
Payable to affiliate (PMM), repaid in 1995 $ -- $ 33,287
================ ================
</TABLE>
During 1995 and 1994, the Company both received and advanced funds to an
affiliated company (PMM) to fund operations.
F - 14
<PAGE> 52
PORTER MCLEOD NATIONAL RETAIL, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 10 - RELATED PARTY TRANSACTION (CONTINUED)
An affiliated company (PMM) provides administrative services for the Company.
Management fee expense related to these administrative services was $195,048
and $195,048 for the years ended December 31, 1995 and 1994, respectively. In
addition, the Company reimbursed the affiliate (PMM) for costs incurred on
behalf of the Company in the amounts of $228,750 and $91,058 for the years
ended December 31, 1995 and 1994, respectively. The total of the management
fees and reimbursed expenses are included in the general and administrative
expenses on the income statement.
The following schedule summarizes the activity with affiliated companies for
1995 and 1994:
<TABLE>
<S> <C>
NET RECEIVABLES FROM AFFILIATES AT DECEMBER 31, 1993 $ 605,928
---------
Administrative services incurred (286,106)
Cash payments applied to administrative services incurred 286,106
Cash advances to affiliate (PMM) 132,401
Cash advances received from affiliate (PMM) (136,628)
Accrued interest on note receivable from affiliate (PMM) 42,138
NET RECEIVABLES FROM AFFILIATES AT DECEMBER 31, 1994 643,839
---------
Administrative services incurred (423,798)
Cash payments applied to administrative services incurred 423,798
Cash advances to affiliate (PMM) 78,865
Accrued interest on note receivable from affiliate (PMM) 47,419
---------
NET RECEIVABLES FROM AFFILIATES AT DECEMBER 31, 1995 $ 770,123
=========
</TABLE>
F - 15
<PAGE> 53
PORTER MCLEOD NATIONAL RETAIL, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 10 - RELATED PARTY TRANSACTION (CONTINUED)
The Company has advanced funds to an affiliated Company (PMM) totaling $770,123
(the advance) as of December 31, 1995. The affiliate does not have the ability
to satisfy this obligation. Management and officers of the Company have
developed a plan to satisfy this obligation through the assumption of
additional indebtedness of PMM in the amount of $616,066 (the indebtedness) as
of December 31, 1995. Officers of the Company would then satisfy the advance
and the indebtedness through shares of common stock of another affiliate,
Porter McLeod Colorado, Inc. (PMC), a corporation indirectly wholly owned by
the officers and controlling stockholders of the Company. The officers and
management believe the fair market value of PMC is approximately $1,700,000.
The Company and management believe that this proposed transaction is fair to
the outside stockholder stocks; however, the realization is dependent on many
factors including approval by the Company stockholders. No estimate can be made
as to the probability of obtaining shareholder approval. No adjustment has been
made to these financial statements as a result of this uncertainty.
F - 16
<PAGE> 54
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Registrant caused this report on Form 10-KSB/A to be signed on
its behalf by the undersigned, thereunto duly authorized.
PORTER MCLEOD NATIONAL RETAIL, INC.
Date: January 8, 1997 By: /s/ Joseph R. McLeod
-------------------------------
Joseph R. McLeod, President
(Chief Executive Officer)
Date: January 8, 1997 By: /s/ A.J. Shilling
-------------------------------
A.J. Shilling, Treasurer
and Chief Financial Officer
In accordance with the Securities Exchange Act of 1934, 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: January 8, 1997 By: /s/ Joseph R. McLeod
-------------------------------
Joseph R. McLeod, Director
Date: January 8, 1997 By: /s/ Bruce M. Porter
-------------------------------
Bruce M. Porter, Director
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 354,050
<SECURITIES> 0
<RECEIVABLES> 609,762
<ALLOWANCES> 20,000
<INVENTORY> 0
<CURRENT-ASSETS> 1,139,755
<PP&E> 55,912
<DEPRECIATION> 21,695
<TOTAL-ASSETS> 1,444,155
<CURRENT-LIABILITIES> 451,138
<BONDS> 0
0
0
<COMMON> 3,931,313
<OTHER-SE> (2,438,316)
<TOTAL-LIABILITY-AND-EQUITY> 1,944,135
<SALES> 5,167,422
<TOTAL-REVENUES> 5,167,422
<CGS> 4,576,593
<TOTAL-COSTS> 5,700,641
<OTHER-EXPENSES> 1,151,509
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,630,197)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,630,197)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,630,197)
<EPS-PRIMARY> (.85)
<EPS-DILUTED> 0
</TABLE>
