<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended October 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File No. 1-13919
PAWNMART, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 75-2520896
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
6300 RIDGLEA PLACE, SUITE 724, FORT WORTH, TEXAS 76116
(Address of principal executive offices)
(817) 569-9305
(Registrant's telephone number)
Check whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
The number of shares of Common Stock outstanding as of December 13, 1999 was
7,209,445. The number of Series A Redeemable Common Stock Purchase Warrants
outstanding as of December 13, 1999 was 1,812,240. The number of Series B
Redeemable Common Stock Purchase Warrants outstanding as of December 13, 1999
was 1,380,000.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
PAWNMART, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
October 30, January 30,
1999 1999
---- ----
(Unaudited)
Assets
------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 637 $ 298
Accounts receivable 98 60
Pawn service charges receivable 754 446
Loans 6,826 4,419
Inventories, net 6,936 3,011
Prepaid expenses and other current assets 249 199
-------- --------
Total current assets 15,500 8,433
-------- --------
Property and equipment, net 2,730 2,232
Debt issuance costs, net 980 137
Other assets, net 688 390
-------- --------
Total assets $ 19,898 $ 11,192
-------- --------
-------- --------
Liabilities and Stockholders' Equitity
--------------------------------------
Current liabilities:
Accounts payable and accrued liabilities $ 1,124 $ 1,103
Current installments of notes payable 120 342
-------- --------
Total current liabilities 1,244 1,445
-------- --------
Long-term notes payable, net of current installments (note 2) 13,623 4,840
-------- --------
Total liabilities 14,867 6,285
-------- --------
Stockholders' equity (note 3):
Preferred stock, $.01 par value; authorized 10,000,000 shares - -
8% Convertible preferred stock, $6.00 par value; authorized 416,667
shares; 416,667 shares issued and outstanding (liquidation
preference $6.00 per share) 2,500 -
Common stock, $.01 par value; authorized 20,000,000 shares;
7,230,877 shares issued 72 72
Series A redeemable common stock purchase warrants, $0.125 par
value; 1,782,420 and 1,380,000 warrants issued and outstanding
at October 30, 1999 and January 30, 1999, respectively (note 2) 222 173
Series B redeemable common stock purchase warrants, $0.0625 par
value; 1,380,000 warrants issued and outstanding 86 86
Additional common stock purchase warrants 60 -
Additional paid-in capital 21,954 22,242
Accumulated deficit (19,793) (17,596)
-------- --------
5,101 4,977
Less treasury stock, at cost; 21,432 common shares (70) (70)
-------- --------
Total stockholders' equity 5,031 4,907
-------- --------
Total liabilities and stockholders' equity $ 19,898 $ 11,192
-------- --------
-------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
PAWNMART, INC. AND SUBSIDIARIES
Unaudited Consolidated Statements of Operations
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
October 30, October 31, October 30, October 31,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Merchandise sales $ 3,371 $ 1,998 $ 9,285 $ 5,525
Pawn service charges 1,807 887 4,910 2,438
Other 49 21 153 92
----------- ----------- ----------- -----------
Total revenues 5,227 2,906 14,348 8,055
Cost of sales 2,611 1,409 6,994 3,754
----------- ----------- ----------- -----------
Gross profit 2,616 1,497 7,354 4,301
----------- ----------- ----------- -----------
Expenses:
Store operating expenses 2,112 1,322 5,784 3,544
Corporate administrative expenses 757 785 2,236 2,308
Interest expense 382 35 893 866
Depreciation and amortization 213 161 605 419
----------- ----------- ----------- -----------
Total expenses 3,464 2,303 9,518 7,137
----------- ----------- ----------- -----------
Net loss (848) (806) (2,164) (2,836)
Preferred stock dividends 33 - 33 692
----------- ----------- ----------- -----------
Net loss to common
stockholders $ (881) $ (806) $ (2,197) $ (3,528)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Loss per common share (note 4):
Basic $ (0.12) $ (0.11) $ (0.30) $ (0.56)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Diluted $ (0.12) $ (0.11) $ (0.30) $ (0.56)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
PAWNMART, INC. AND SUBSIDIARIES
Unaudited Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------
October 30, October 31,
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (2,164) $ (2,836)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 605 419
Amortization of debt issuance costs 127 114
Amortization of debt discount 4 495
Common stock issued for services - 200
Changes in operating assets and liabilities:
Accounts receivable (38) (97)
Pawn service charges receivable (308) (66)
Inventories, net (3,925) (666)
Prepaid expenses and other current assets (50) (130)
Other assets (328) 226
Accounts payable and accrued liabilities 21 (137)
-------- --------
Net cash used in operating activities (6,056) (2,478)
-------- --------
Cash flows from investing activities:
Net increase in pawn loans (2,407) (537)
Purchases of property and equipment (1,073) (1,291)
-------- --------
Net cash used in investing activities (3,480) (1,828)
-------- --------
Cash flows from financing activities:
Proceeds from issuance of notes payable 15,476 2,166
Principal payments on notes payable (6,870) (3,280)
Net proceeds from issuance of common stock and warrants - 5,583
Net proceeds from issuance of preferred stock 2,272 -
Payment of debt issuance costs (970) (118)
Preferred stock dividends paid (33) (18)
-------- --------
Net cash provided by financing activities 9,875 4,333
-------- --------
Net increase in cash and cash equivalents 339 27
Cash and cash equivalents at beginning of period 298 151
-------- --------
Cash and cash equivalents at end of period $ 637 $ 178
-------- --------
-------- --------
Supplemental disclosures of cash flow information -
Cash paid for interest $ 681 $ 393
-------- --------
-------- --------
</TABLE>
NONCASH FINANCING ACTIVITIES:
On March 20, 1998, $9,520,000 in convertible subordinated debentures, net
of unamortized debt issuance costs of $443,000, were automatically converted
into 2,380,000 outstanding shares of common stock and 3,661,200 shares of
preferred stock were automatically converted into 1,482,766 outstanding shares
of common stock in connection with the completion of the Company's initial
public offering. During the six months ended August 1, 1998, the Company
recognized $674,000 in preferred stock dividends in connection with the
amortization of preferred stock discounts resulting from the preferred stock
beneficial conversion feature. On May 1, 1998, the Company issued 44,445 shares
of unregistered common stock to a corporation in exchange for $200,000 in
professional services associated with marketing and new store site selection
analysis.
During the nine months ended October 30, 1999, the Company issued 402,420
Series A Warrants in connection with the issuance of the 2004 Notes (see note
2). The Company has recorded a debt discount of $49,000 representing the value
of the underlying Series A Warrants and is amortizing such amount into interest
expense over the life of the 2004 Notes.
See accompanying notes to consolidated financial statements.
4
<PAGE>
PAWNMART, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
October 30, 1999 and October 31, 1998
(Unaudited)
(1) Basis of Presentation
The accompanying consolidated financial statements were prepared
in accordance with generally accepted accounting principles for interim
financial information and therefore do not include all disclosures
necessary for complete financial statements. In the opinion of
management, all adjustments have been made that are necessary for a fair
presentation of the financial position and results of operations and cash
flows as of and for the periods presented. All such adjustments are of a
normal recurring nature. The results of operations for the three and nine
months ended October 30, 1999 are not necessarily indicative of the
results that may be expected for the entire fiscal year or any other
interim period.
The consolidated financial statements include the financial
statements of PawnMart, Inc. (the "Company") and its single purpose,
wholly owned subsidiaries PCI Finance 1994-I, Inc., PCI Finance 1995-I,
Inc., PCI Finance 1996-1, Inc., and PCI Finance 1996-2, Inc. All
significant intercompany balances and transactions have been eliminated
in consolidation. The consolidated financial statements should be read in
conjunction with the consolidated financial statements for the fiscal
year ended January 30, 1999 included in the Company's Form 10-K which has
been previously filed with the Securities and Exchange Commission.
(2) NOTES PAYABLE
REVOLVING CREDIT FACILITY-
The Company maintains a $10,000,000 revolving credit facility with
Comerica Bank (the "Credit Facility"). At October 30, 1999, $6,961,000
was outstanding under the Credit Facility and an additional $2,039,000
was available to the Company pursuant to the available borrowing base.
The Credit Facility bears interest at either (i) the prevailing prime
rate plus 0.75%, which was 9.00% at October 30, 1999, or (ii) the
prevailing LIBOR rate plus 3.35%, and matures on October 13, 2001.
Amounts available under the Credit Facility are limited to certain
percentages of pawn loans, inventories, and pawn service charges
receivable. The Credit Facility is collateralized by substantially all of
the unencumbered assets of the Company. Under the terms of the Credit
Facility, the Company is required to maintain certain financial ratios
and comply with certain technical covenants. The Company was in
compliance with these requirements and covenants as of October 30, 1999.
The Company is required to pay an annual commitment fee of 1/2 of 1% on
the average daily unused portion of the Credit Facility commitment. The
Company is prohibited from paying cash dividends or acquiring treasury
stock under the terms of the Credit Facility unless specifically approved
by Comerica Bank.
SUBORDINATED DEBT -
On March 11, 1999, the Company commenced a public offering of up
to $10,000,000 in principal amount of 12% Subordinated Notes due December
31, 2004 (the "2004 Notes"). The 2004 Notes are being offered on a "best
efforts" basis by participating National Association of Securities
Dealers, Inc. broker-dealers ("NASD Broker-Dealers"). Interest on the
2004 Notes is payable monthly commencing with the second full calendar
month following issuance. At the option of the Company, the 2004 Notes
may be redeemed prior to December 31, 2004 at stipulated redemption
prices. The Company had issued a total of $6,707,000 and $7,204,000 of
the 2004 Notes as of October 30, 1999 and December 13, 1999,
respectively.
In connection with the sale of the 2004 Notes, the Company will
issue Series A Warrants to participating NASD Broker-Dealers for the
purchase of up to 600,000 shares of the Company's common stock. As of
October 30, 1999, 402,420 Series A Warrants had been granted in
connection with the sale of the 2004 Notes. The Company has recorded a
debt discount of $49,000 representing the value of the Series A Warrants
and is amortizing such amount into interest expense over the life of the
2004 Notes.
5 (Continued)
<PAGE>
PAWNMART, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(3) 8% CONVERTIBLE PREFERRED STOCK
On September 1, 1999, the Company sold 416,667 shares of 8%
Convertible Preferred Stock, $6.00 par value per share (the "Preferred
Stock") resulting in net proceeds of $2,272,000. The Preferred Stock
bears dividends at 8% per annum and is payable quarterly in cash. The
Preferred Stock is not convertible into the Company's common stock until
March 1, 2001. From March 1, 2001 until August 31, 2002, the Preferred
Stock is convertible at the option of the purchaser at the lesser of (i)
80% of the average closing sales price of the Company's common stock for
the preceding 25 trading days as quoted on the NASDAQ market or (ii)
$6.00 per share. After August 31, 2002, the Preferred Stock is
convertible at the option of the purchaser at 66 2/3% of the average
closing sales price of the Company's common stock for the preceding 25
trading days as quoted on the NASDAQ market. The Company may redeem the
Preferred Stock, in whole or in part, prior to August 31, 2002 at 120% of
the par value of Preferred Stock then outstanding. After August 31, 2002,
the Company may redeem the Preferred Stock, in whole or in part, at 100%
of the par value of the Preferred Stock then outstanding. Each share of
the Preferred Stock shall be entitled to one vote per share, voting
together with the holders of the Company's common stock, on all matters
submitted to a vote of stockholders. In connection with the sale of the
Preferred Stock, the Company issued 312,500 warrants exercisable to
purchase shares of the Company's common stock through August 31, 2004 at
$5.00 per share and 90,000 warrants exercisable to purchase shares of the
Company's common stock through August 31, 2004 at $3.60 per share
(collectively referred to as the "Preferred Stock Warrants"). The fair
value of the Preferred Stock Warrants has been recorded as a reduction of
additional paid-in capital in the accompanying consolidated balance sheet
at October 30, 1999.
(4) NET LOSS PER COMMON SHARE
Net loss per common share is calculated as required by Financial
Accounting Standards Board's Statement of Financial Accounting Standards
No. 128, "Earnings Per Share" (Statement No. 128). Statement No. 128
requires a dual presentation of basic and diluted earnings per share and
a reconciliation between the two amounts. Basic earnings per share
excludes dilution, and diluted earnings per share reflects the potential
dilution that would occur if securities to issue common stock were
exercised and converted into common stock. In loss periods, dilutive
common equivalent shares are excluded as the effect would be
antidilutive.
The following table presents a reconciliation between basic and
diluted weighted average common shares outstanding for the three and nine
months ended October 30, 1999 and October 31, 1998, respectively. Since
the effect of using the weighted average number of shares on a diluted
basis was antidilutive to the diluted loss per share calculation for the
three and nine months ended October 30, 1999 and October 31, 1998,
diluted loss per share was calculated using the same weighted average
number of common shares in the basic loss per share calculation.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------------- ----------------------------
(In Thousands) October 30, October 31, October 30, October 31,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average shares - basic 7,209 7,209 7,209 6,272
Shares attributable to stock options, warrants
and convertible securities - - - 679
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Weighted average shares - diluted 7,209 7,209 7,209 6,951
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
STATEMENTS APPEARING IN THE FOLLOWING DISCUSSION THAT ARE NOT HISTORICAL
FACTS ARE FORWARD-LOOKING STATEMENTS ("FORWARD-LOOKING STATEMENTS") WITHIN THE
MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION
21E OF THE SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED, WHICH ARE INTENDED
TO BE COVERED BY THE SAFE HARBORS CREATED BY THOSE SECTIONS. SUCH
FORWARD-LOOKING STATEMENTS ARE NECESSARILY ESTIMATES REFLECTING THE BEST
JUDGMENT OF THE COMPANY'S MANAGEMENT BASED UPON CURRENT INFORMATION AND INVOLVE
KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE THE
ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY, OR INDUSTRY RESULTS,
TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS
EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. SUCH RISKS,
UNCERTAINTIES AND OTHER FACTORS, INCLUDE, BUT ARE NOT LIMITED TO, THOSE SET
FORTH AND THOSE APPEARING FROM TIME TO TIME IN FILINGS MADE BY THE COMPANY WITH
THE SECURITIES AND EXCHANGE COMMISSION. THESE RISKS, UNCERTAINTIES AND OTHER
FACTORS SHOULD NOT BE CONSTRUED AS EXHAUSTIVE AND THE COMPANY DOES NOT
UNDERTAKE, AND SPECIFICALLY DISCLAIMS ANY OBLIGATION, TO UPDATE ANY
FORWARD-LOOKING STATEMENTS TO REFLECT OCCURRENCES OR UNANTICIPATED EVENTS OR
CIRCUMSTANCES AFTER THE DATE OF SUCH STATEMENTS.
IN ADDITION, THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN
CONJUNCTION WITH THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS AND NOTES
THERETO AND OTHER FINANCIAL DATA INCLUDED IN THE COMPANY'S FORM 10-K FOR THE
FISCAL YEAR ENDED JANUARY 30, 1999.
GENERAL
PawnMart, Inc. (the "Company") is a specialty finance and retail
enterprise principally engaged in establishing and operating stores which
advance money secured by the pledge of tangible personal property and sell
pre-owned merchandise to the value-conscious consumer. The Company generates
income in two ways: through collection of a monthly service charge from
advancing money to individuals based primarily upon the estimated resale value
of pledged personal property such as jewelry, consumer electronics, tools,
musical instruments, firearms, automobiles and other miscellaneous items and
through profit realized on the retail sale of the unredeemed or other purchased
pre-owned merchandise. As of December 13, 1999, the Company was one of five
publicly traded pawnshop operators in the United States, and it owned and
operated 42 stores located in Alabama, Georgia, North Carolina, South Carolina,
and Texas.
Prior to March 1998, the Company owned and operated 19 stores. The
completion of the Company's initial public offering of common stock in March
1998 resulted in net proceeds of $5,583,000 and enhanced the Company's ability
to implement its business strategy. In connection with the completion of the
initial public offering, the Company automatically converted $9,520,000 of its
debt into 2,380,000 outstanding shares of common stock and 3,661,200 shares of
preferred stock into 1,482,766 outstanding shares of common stock. Additionally,
the Company utilized $2,524,000 of the net proceeds to repay certain notes
payable.
In order to fund store expansion during the fiscal year ended January 30,
1999 ("Fiscal 1998"), the Company utilized the remaining proceeds from the
initial public offering and secured a $10 million revolving line of credit with
Comerica Bank. With the above, the Company was able to achieve a 68 percent
increase in the number of its stores by adding 13 stores during the last nine
months of Fiscal 1998. During the nine months ended October 30, 1999, the
Company has added eight stores and plans to add six additional stores during
last three months of the fiscal year ending January 29, 2000 ("Fiscal 1999")
bringing it to a total of 46 stores. The Company's fourth quarter expansion will
be funded through borrowings under its line of credit facility, borrowings under
the public offering of the 2004 Notes, and the net proceeds from the sale of the
Preferred Stock.
As discussed in the following section, the Company's results of operations
and cash flows are significantly impacted by (i) expansion through development
of new stores or acquisitions of existing stores in locations that meet site
selection, store size and configuration requirements in selected markets and
(ii) the maturation cycle of stores.
7
<PAGE>
INITIAL CAPITAL EXPENDITURES AND COSTS ASSOCIATED WITH EXPANSION
The Company's strategy is to develop or acquire stores in selected
regional and local markets meeting required store size, configuration, and site
selection requirements. The Company believes that such anticipated expansion
will continue to provide economies of scale in supervision, purchasing supplies
and inventory, administration and marketing by decreasing the overall average
cost of such functions per unit owned. After a suitable market has been
selected, management determines whether expansion through development of new
stores or through acquisitions would result in the most favorable impact on
profitability and capital requirements.
After a suitable location has been found and a lease and license are
obtained, a new store can be ready for business within six to eight weeks, with
completion of counters, vaults and security system and transfer of merchandise
from existing stores, and external purchases of pre-owned merchandise. The
Company projects the initial capital expenditures and costs associated with
opening a new PAWNMART-SM- store to total approximately $250,000 with additional
expenditures during the 12 months after opening of approximately $150,000 to
fund loan growth and planned start-up losses. Because of these start-up losses
and expenditures necessary to support anticipated growth, the Company expects to
incur losses during a high-growth phase. There can be no assurance that future
initial capital expenditures and costs and start-up losses with new store
operations will not vary from historical amounts.
The Company will generally acquire stores in locations meeting its site
selection criteria if (i) the total capital expenditures required to acquire the
existing store are less than or equal to the total costs to develop a new store,
(ii) the acquisition does not result in significant goodwill balances, and (iii)
demographic data and due diligence procedures indicate an acceptable growth
potential. Because acquired stores mature more quickly than new stores and
generally result in lower initial capital expenditures, the Company's
profitability and capital requirements are impacted by the number of stores
added through acquisition versus the number of new stores added.
MATURATION OF NEWLY ESTABLISHED STORES AND ACQUIRED STORES
The revenues and profitability of a new store are primarily impacted by
the Company's ability to increase pawn loans during the first 12 months of
operations. A new store is generally unprofitable during its first eight to ten
months of operations due to the initial loan growth during that period resulting
in lower pawn service charges. The Company's new stores experience substantially
higher levels of revenues and profitability after reaching two years of age. At
October 30, 1999, 21 of the Company's 40 stores were under two years of age.
These stores are expected to have a favorable impact on profitability if they
achieve the substantially increased lending and retail volumes experienced in
the Company's older stores.
An acquired store will generally mature faster than a new store due to an
established base of customers and the Company's ability to accelerate the
maturation of the store's pawn loan balances. The Company's profitability during
rapid expansion will be significantly impacted by its ability to acquire
existing stores meeting the Company's acquisition criteria. There can be no
assurance that future store revenues and store profitability will not vary from
historical amounts.
Selected elements of the Company's unaudited consolidated statement of
operations are shown below for the three and nine months ended October 30, 1999
and October 31, 1998 as a percentage of total revenues. The following table, as
well as the discussion following, should be read in conjunction with the
Company's consolidated financial statements and notes thereto and other
financial data included in the Company's Form 10-K for the fiscal year ended
January 30, 1999.
8
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
October 30, October 31, October 30, October 31,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Merchandise sales ................. 64.5% 68.8% 64.7% 68.6%
Pawn service charges .............. 34.6 30.5 34.2 30.3
Other income ...................... 0.9 0.7 1.1 1.1
----------- ----------- ----------- -----------
Total revenues ............... 100.0 100.0 100.0 100.0
Cost of sales ..................... 50.0 48.5 48.7 46.6
----------- ----------- ----------- -----------
Gross profit ................. 50.0 51.5 51.3 53.4
Store operating expenses .......... 40.4 45.5 40.4 44.0
----------- ----------- ----------- -----------
Store contribution margin .... 9.6 6.0 10.9 9.4
Corporate administrative expenses . 14.4 27.0 15.6 28.6
Interest expense .................. 7.3 1.2 6.2 10.8
Depreciation and amortization ..... 4.1 5.5 4.2 5.2
----------- ----------- ----------- -----------
Net loss ..................... (16.2)% (27.7)% (15.1)% (35.2)%
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED OCTOBER 30, 1999 COMPARED TO THREE MONTHS ENDED
OCTOBER 31, 1998
Total revenues increased 79.9% to $5,227,000 during the three months
ended October 30, 1999 (the "Three Month 1999 Period") as compared to $2,906,000
during the three months ended October 31, 1998 (the "Three Month 1998 Period").
The overall increase was attributable to a 29.5% increase in comparable store
revenues at 22 stores open for 12 full months or more as of October 30, 1999
("Comparable Stores") and revenues from 18 stores added during the 12 months
ended October 30, 1999 ("New Stores").
Merchandise sales increased 68.7% to $3,371,000 during the Three Month
1999 Period from $1,998,000 during the Three Month 1998 Period due to a 19.1%
increase in merchandise sales from Comparable Stores and merchandise sales from
New Stores. Average inventory per store increased 78.4% to $173,000 at October
30, 1999 from $97,000 at October 31, 1998 primarily due to continued improvement
in the Company's lending operations which have increased the levels of
merchandise available for sale and the maturation of New Stores.
Pawn service charges increased 103.7% to $1,807,000 during the Three
Month 1999 Period from $887,000 during the Three Month 1998 Period primarily due
to a 52.0% increase in pawn service charges from Comparable Stores and pawn
service charges from New Stores. The increased pawn services charges from
Comparable Stores resulted primarily from pawn loans increasing 67.0% to
$4,879,000 at October 30, 1999 from $2,921,000 at October 31, 1998.
Gross profit increased 74.8% to $2,616,000 during the Three Month 1999
Period from $1,497,000 during the Three Month 1998 Period primarily due to
$716,000 in gross profit generated from New Stores and a 27.2% increase in gross
profit from Comparable Stores. The increase in gross profit at Comparable Stores
is primarily attributable to increased pawn service charges which were offset
slightly by decreased gross profit dollars from merchandise sales. The Company's
consolidated annualized inventory turnover rate was 1.7 times during the Three
Month 1999 Period compared to 2.3 times during the Three Month 1998 Period. The
decrease is primarily due to a larger base of new stores existing during the
Three Month 1999 Period combined with the effects of increased loan activities
that have resulted in higher average amounts of merchandise available for sale.
On a Comparable Store basis, the Company's annualized inventory turnover rate
increased to 2.0 times during the Three Month 1999 Period from 2.6 times during
the Three Month 1998 Period. The decrease is primarily due to a conscious effort
to stage inventories for planned new store openings during the Fiscal 1999
fourth quarter and the effects of increased loan activities at the Comparable
Stores during the Three Month 1999 Period.
9
<PAGE>
Store operating expenses increased 59.8% to $2,112,000 during the Three
Month 1999 Period from $1,322,000 during the Three Month 1998 Period primarily
due to expenses attributable to New Stores. On a Comparable Store basis, store
operating expenses comprised 34.8% of total revenues during the Three Month 1999
Period compared to 43.0% of total revenues during the Three Month 1998 Period.
The overall decrease in Comparable Store operating expenses as a percent of
total revenues resulted from the Company's ability to leverage store operating
expenses due to the 29.5% increase in Comparable Store revenues.
Store contribution margin (defined as total store revenues less direct
operating expenses, which exclude corporate administrative expenses, interest
expense, and depreciation and amortization expense) increased 187.4% to
$504,000, or 9.6% of total revenues, during the Three Month 1999 Period compared
to $175,000, or 6.0% of total revenues, during the Three Month 1998 Period. The
increase is primarily due to significant improvements in the profitability of
the Company's Comparable Stores which were offset by planned start-up losses
associated with New Stores. Comparable Store contribution margin increased
141.9% to $588,000, or 15.7% of total revenues, during the Three Month 1999
Period compared to $243,000, or 8.4% of total revenues, during the Three Month
1998 Period. The following table presents an analysis of Comparable Store
performance for the Three Month 1999 Period compared to the Three Month 1998
Period.
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
October 30, October 31,
1999 1998
------------ -------------
<S> <C> <C>
Merchandise sales .......... $ 2,372 $ 1,991
Pawn service charges ....... 1,340 882
Other ...................... 33 18
------------ -------------
Total revenues .......... 3,745 2,891
Cost of sales .............. 1,855 1,405
------------ -------------
Gross profit ............ 1,890 1,486
Store operating expenses ... 1,302 1,243
------------ -------------
------------ -------------
Store contribution margin $ 588 $ 243
------------ -------------
------------ -------------
</TABLE>
Corporate administrative expenses decreased 3.6% to $757,000 during the
Three Month 1999 Period from $785,000 during the Three Month 1998 Period
primarily due to reductions in occupation costs associated with corporate
headquarters and reductions in professional fees. The Company's rapid growth has
reduced corporate administrative expenses from 27.0% of total revenues during
the Three Month 1998 Period to 14.4% of total revenues during the Three Month
1999 Period. Since the Company added 18 stores during the 12 months ended
October 30, 1999 and plans to add additional stores during the fiscal year
ending January 29, 2000, management anticipates corporate administrative
expenses to continue to decrease as a percentage of total revenues.
Earnings before interest, taxes, depreciation and amortization ("EBITDA")
improved 58.5% from an EBITDA loss of $610,000 during the Three Month 1998
Period to an EBITDA loss of $253,000 during the Three Month 1999 Period. The
improvement results from overall improvements in the profitability of the
Company's stores combined with significant reductions in corporate overhead as a
percentage of total revenues.
Interest expense increased to $382,000 during the Three Month 1999 Period
from $35,000 during the Three Month 1998 Period primarily due to interest
expense related to the Company's Credit Facility, the Company's 2004 Notes, and
other short-term borrowings. The Company's store expansion during the eighteen
months ended October 30, 1999 has resulted from borrowings under such debt
instruments. Interest expense during the Three Month 1998 Period was primarily
related to the Company's Credit Facility.
During the Three Month 1999 Period, the Company recognized $33,000 in
preferred stock dividends associated with its Preferred Stock.
10
<PAGE>
Net loss to common stockholders during the Three Month 1999 Period was
$881,000, or $0.12 per basic and diluted share, compared to $806,000, or $0.11
per basic and diluted share, during the Three Month 1998 Period.
NINE MONTHS ENDED OCTOBER 30, 1999 COMPARED TO NINE MONTHS ENDED
OCTOBER 31, 1998
Total revenues increased 78.1% to $14,348,000 during the nine months
ended October 30, 1999 (the "Nine Month 1999 Period") as compared to $8,055,000
during the nine months ended October 31, 1998 (the "Nine Month 1998 Period").
The overall increase was attributable to a 30.5% increase in revenues from
Comparable Stores and revenues from New Stores.
Merchandise sales increased 68.1% to $9,285,000 during the Nine Month
1999 Period from $5,525,000 during the Nine Month 1998 Period due to a 20.9%
increase in merchandise sales from Comparable Stores and merchandise sales from
New Stores. Average inventory per store increased 78.4% to $173,000 at October
30, 1999 from $97,000 at October 31, 1998 primarily due to continued improvement
in the Company's lending operations which have increased the levels of
merchandise available for sale and the maturation of New Stores.
Pawn service charges increased 101.4% to $4,910,000 during the Nine Month
1999 Period from $2,438,000 during the Nine Month 1998 Period primarily due to a
51.2% increase in pawn service charges from Comparable Stores and pawn service
charges from New Stores. The increased pawn services charges from Comparable
Stores resulted primarily from pawn loans increasing 67.0% to $4,879,000 at
October 30, 1999 from $2,921,000 at October 31, 1998.
Gross profit increased 71.0% to $7,354,000 during the Nine Month 1999
Period from $4,301,000 during the Nine Month 1998 Period primarily due to
$1,940,000 in gross profit generated from New Stores and a 26.2% increase in
gross profit from Comparable Stores. The increase in gross profit at Comparable
Stores is primarily attributable to increased pawn service charges which were
offset slightly by decreased gross profit dollars from merchandise sales. The
Company's consolidated annualized inventory turnover rate was 2.0 times during
the Nine Month 1999 Period compared to 2.3 times during the Nine Month 1998
Period. The decrease is primarily due to a larger base of new stores existing
during the Nine Month 1999 Period combined with the effects of increased loan
activities that have resulted in higher average amounts of merchandise available
for sale. On a Comparable Store basis, the Company's annualized inventory
turnover rate remained constant at 2.4 times during both the Nine Month 1999
Period and the Nine Month 1998 Period.
Store operating expenses increased 63.2% to $5,784,000 during the Nine
Month 1999 Period from $3,544,000 during the Nine Month 1998 Period primarily
due to expenses attributable to New Stores. On a Comparable Store basis, store
operating expenses comprised 34.5% of total revenues during the Nine Month 1999
Period compared to 42.7% of total revenues during the Nine Month 1998 Period.
The overall decrease in Comparable Store operating expenses as a percent of
total revenues resulted from the Company's ability to leverage store operating
expenses due to the 30.5% increase in Comparable Store revenues.
Store contribution margin increased 107.4% to $1,570,000, or 10.9% of
total revenues, during the Nine Month 1999 Period compared to $757,000, or 9.4%
of total revenues, during the Nine Month 1998 Period primarily due to
significant improvements in the profitability of the Company's Comparable Stores
which were offset by the effects of planned start-up losses at New Stores.
Excluding the effects of planned start-up losses, the Comparable Store
contribution margin increased 110.3% to $1,771,000, or 17.0% of total revenues,
during the Nine Month 1999 Period compared to $842,000, or 10.5% of total
revenues, during the Nine Month 1998 Period. The following table presents an
analysis of Comparable Store performance for the Nine Month 1999 Period compared
to the Nine Month 1998 Period.
11
<PAGE>
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
October 30, October 31,
1999 1998
------------ ------------
<S> <C> <C>
Merchandise sales .......... $ 6,648 $ 5,498
Pawn service charges ....... 3,676 2,431
Other ...................... 98 56
------------ ------------
Total revenues .......... 10,422 7,985
Cost of sales .............. 5,058 3,734
------------ ------------
Gross profit ............ 5,364 4,251
Store operating expenses ... 3,593 3,409
------------ ------------
------------ ------------
Store contribution margin $ 1,771 $ 842
------------ ------------
------------ ------------
</TABLE>
Corporate administrative expenses decreased 3.1% to $2,236,000 during the
Nine Month 1999 Period from $2,308,000 during the Nine Month 1998 Period
primarily due to decreased professional fees and occupation costs associated
with corporate headquarters which were offset by increased labor costs
associated with the hiring of additional corporate field and administrative
personnel to support current and planned growth. The Company's rapid growth has
reduced corporate administrative expenses from 28.6% of total revenues during
the Nine Month 1998 Period to 15.6% of total revenues during the Nine Month 1999
Period. Since the Company added 18 stores during the 12 months ended October 30,
1999 and plans to add additional stores during the fiscal year ending January
29, 2000, management anticipates corporate administrative expenses to continue
to decrease as a percentage of total revenues.
EBITDA improved 57.1% from an EBITDA loss of $1,551,000 during the Nine
Month 1998 Period to an EBITDA loss of $666,000 during the Nine Month 1999
Period. The improvement results from overall improvements in the profitability
of the Company's stores combined with significant reductions in corporate
overhead as a percentage of total revenues.
Interest expense increased 3.1% to $893,000 during the Nine Month 1999
Period from $866,000 during the Nine Month 1998 Period. The Nine Month 1998
Period includes $495,000 in non-cash interest expense resulting from the
accounting treatment relating to the beneficial conversion feature associated
with the Company's convertible subordinated debentures and $313,000 in interest
expense related to debt that was either converted or repaid upon completion of
the Company's initial public offering. See note 6 to the consolidated financial
statements included in the Company's Form 10-K for the year ended January 30,
1999 for a discussion of the accounting treatment relating to the beneficial
conversion feature associated with the Company's convertible subordinated
debentures. Interest expense during the Nine Month 1999 Period was related to
the Company's Credit Facility, the Company's 2004 Notes, and other short-term
borrowings.
During the Nine Month 1998 Period, the Company recognized $674,000 in
noncash preferred stock dividends resulting from the accounting treatment
relating to the beneficial conversion feature associated with its convertible
preferred stock and $18,000 in preferred stock dividends associated with its 12%
Series D Convertible Exchangeable Preferred stock. See note 8 to the
consolidated financial statements included in the Company's Form 10-K for the
year ended January 30, 1999 for a discussion of the accounting treatment
relating to the beneficial conversion feature associated with the Company's
convertible preferred stock. All classes of the Company's preferred stock
converted to common stock upon completion of the Company's initial public
offering in March 1998. The Nine Month 1999 Period included $33,000 in preferred
stock dividends related to the Company's issuance of 8% Preferred Stock on
September 1, 1999.
Net loss to common stockholders during the Nine Month 1999 Period was
$2,197,000, or $0.30 per basic and diluted share, compared to $3,528,000, or
$0.56 per basic and diluted share, during the Nine Month 1998 Period.
12
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Prior to the completion of its initial public offering in March 1998, the
Company's operations were financed from funds generated from private debt and
equity offerings and funds generated from operations. In March 1998, the Company
received net proceeds of approximately $5,583,000 from the completion of its
initial public offering. In connection with the completion of the initial public
offering, $9,520,000 in aggregate principal amount of the Company's 14%
convertible subordinated debentures were automatically converted into 2,380,000
outstanding shares of Common Stock and all classes of the Company's preferred
stock were automatically converted into an aggregate of 1,482,766 outstanding
shares of Common Stock. Additionally, the Company utilized $2,524,000 of the net
proceeds to repay certain notes payable.
On October 13, 1998, the Company entered into a $10 million revolving
credit facility with Comerica Bank (the "Credit Facility"). At October 30, 1999,
$6,961,000 was outstanding under the Credit Facility and an additional
$2,039,000 was available to the Company pursuant to the available borrowing
base. The Credit Facility bears interest at either (i) the prevailing prime rate
plus 0.75%, which was 9.00% at October 30, 1999, or (ii) the prevailing LIBOR
rate plus 3.35%, and matures on October 13, 2001. Amounts available under the
Credit Facility are limited to certain percentages of pawn loans, inventories,
and pawn service charges receivable. The Credit Facility is collateralized by
substantially all of the unencumbered assets of the Company. Under the terms of
the Credit Facility, the Company is required to maintain certain financial
ratios and comply with certain technical covenants. The Company was in
compliance with these requirements and covenants as of October 30, 1999. The
Company is required to pay an annual commitment fee of 1/2 of 1% on the average
daily unused portion of the Credit Facility commitment. The Company is
prohibited from paying cash dividends or acquiring treasury stock under the
terms of the Credit Facility unless specifically approved by Comerica Bank.
On March 11, 1999, the Company commenced a public offering of up to $10
million in principal amount of the 2004 Notes. The 2004 Notes are being offered
on a "best efforts" basis by participating NASD Broker-Dealers. Interest on the
2004 Notes is payable monthly commencing with the second full calendar month
following issuance. At the option of the Company, the 2004 Notes may be redeemed
prior to December 31, 2004 at stipulated redemption prices. The Company had
issued a total of $6,707,000 and $7,204,000 of the 2004 Notes as of October 30,
1999 and December 13, 1999, respectively.
On September 1, 1999, the Company sold 416,667 shares of 8% Convertible
Preferred Stock, $6.00 par value per share resulting in net proceeds of
$2,272,000. The Preferred Stock bears dividends at 8% per annum and is payable
quarterly in cash. The Preferred Stock is not convertible into the Company's
common stock until March 1, 2001. From March 1, 2001 until August 31, 2002, the
Preferred Stock is convertible at the option of the purchaser at the lesser of
(i) 80% of the average closing sales price of the Company's common stock for the
preceding 25 trading days as quoted on the NASDAQ market or (ii) $6.00 per
share. After August 31, 2002, the Preferred Stock is convertible at the option
of the purchaser at 66 2/3% of the average closing sales price of the Company's
common stock for the preceding 25 trading days as quoted on the NASDAQ market.
The Company may redeem the Preferred Stock, in whole or in part, prior to August
31, 2002 at 120% of the par value of Preferred Stock then outstanding. After
August 31, 2002, the Company may redeem the Preferred Stock, in whole or in
part, at 100% of the par value of the Preferred Stock then outstanding. Each
share of the Preferred Stock shall be entitled to one vote per share, voting
together with the holders of the Company's common stock, on all matters
submitted to a vote of stockholders. In connection with the sale of the
Preferred Stock, the Company issued 312,500 warrants exercisable to purchase
shares of the Company's common stock through August 31, 2004 at $5.00 per share
and 90,000 warrants exercisable to purchase shares of the Company's common stock
through August 31, 2004 at $3.60 per share
At October 30, 1999, the Company's primary sources of liquidity were
$637,000 in cash and cash equivalents, $754,000 in pawn service charges
receivable, $6,826,000 in pawn loans outstanding, $6,936,000 in inventories, and
$2,039,000 of available and unused funds under the Company's Credit Facility.
The Company had a current ratio of approximately 12.5 to 1.0 and 5.8 to 1.0 at
October 30, 1999 and January 30, 1999, respectively. Net cash used in operating
activities was $6,056,000 during the Nine Month 1999 Period and $2,478,000
during the Nine Month 1998 Period.
13
<PAGE>
The Company believes its planned roll-out of PAWNMART-SM- stores will be
funded by borrowings under the Credit Facility, cash flows generated from its
established stores, net proceeds from the offering of the 2004 Notes, net
proceeds from the issuance of the Preferred Stock, and future debt or equity
offerings. The Company's store expansion during the remainder of Fiscal 1999 and
during the next fiscal year will largely be dependent upon the amount of 2004
Notes sold, the Company's ability to utilize its remaining borrowing base under
its Credit Facility, and the Company's ability to obtain debt or equity
financing. In the event the Company is unable to sell the maximum subscription
or additional financing alternatives are not obtained, its planned expansion
schedule is likely to be reduced or modified. No assurance can be made that the
Company will be able to sell the maximum subscription of 2004 Notes or obtain
additional financing.
YEAR 2000 COMPLIANCE
The Year 2000 problem concerns the inability of information systems to
properly recognize date-sensitive information beyond December 31, 1999.
The Company has completed its project to bring its software and systems
into Year 2000 compliance in time to minimize any significant or detrimental
effects on its operations. The project covered information systems, operating
systems, other non-financial systems equipment and significant third-party
vendors. The Company adopted a five level process toward Year 2000 compliance:
(1) awareness; (2) assessment (identification of where failures may occur,
solutions, workarounds, and plans to repair or replace); (3) renovation (repair,
replace or retire systems that cannot properly process Year 2000 dates); (4)
validation; and (5) implementation.
The Company applied the five level process to both its information
technology ("IT") systems and non-IT systems. Computer equipment and software
commonly thought of as IT systems include point-of-sale, accounting, data
processing, telephone and other miscellaneous systems. Non-IT systems include
alarm systems, security observation equipment, HVAC units, fax machines, and
other miscellaneous systems. The Company believes that it has identified the
internal business systems that are susceptible to system failures or processing
errors as a result of the Year 2000 problem.
The Company's proprietary operating software system represents its only
critical internal business system. The proprietary operating software system has
been upgraded and tested for Year 2000 compliance. The vendors which supply the
Company's accounting applications, payroll, and other financial software systems
have certified or represented that their products are Year 2000 compliant. The
Company has upgraded all of its hardware to mitigate Year 2000 problems from
affecting its operations. Management currently believes that the Company has
achieved Year 2000 compliance for all of the hardware and software components
affecting its daily operations. In the event a Year 2000 problem exists,
management's contingency plans include operating the Company's stores on a
manual, non-computerized basis.
The Company has contacted its significant vendors and suppliers to
determine the extent to which the Company may be exposed to those parties'
failure to remediate their own Year 2000 issues. While there can be no guarantee
that the systems of these vendors and suppliers will be properly tested and
converted, management currently believes that all of its significant vendors and
suppliers have achieved Year 2000 compliance.
Based on its completion of the five level Year 2000 process, the Company
does not foresee significant risks associated with the Year 2000 problem.
However, management believes that it is not possible to determine with complete
certainty that all Year 2000 problems have been identified or will be corrected.
With this in mind, management has developed contingency plans for implementation
in the event a significant third party vendor does not adequately address the
Year 2000 problem or unexpected problems occur in the Company's operations.
These plans primarily involve using backup sites, alternative vendors or
internal remediation. In the event of a Year 2000 problem, the Company could
likely suffer a number of operational inconveniences and inefficiencies for both
the Company and its customers that could divert management's time and attention
and financial and human resources from its ordinary business activities.
14
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's primary market risk exposure relates to changes in interest
rates related to its long-term notes payable. The Company's revolving line of
credit with Comerica Bank bears interest at a variable rate that is frequently
adjusted on the basis of market rate changes and is equal to rates available for
debt with similar characteristics. Accordingly, management believes that the
carrying value of such debt approximates its fair value. The 2004 Notes bear
interest at a fixed rate of 12% per annum. As a result, the Company's only
interest rate risk is the opportunity loss associated with this debt should
interest rates decline for debt with similar characteristics. The aggregate
maturities of long-term notes payable as of October 30, 1999 are as follows:
<TABLE>
<CAPTION>
Fiscal Years Ending January,
<S> <C> <C>
2000 $ 120
2001 -
2002 6,961
2003 -
2004 -
2005 6,662
-----------------
Total $ 13,743
-----------------
-----------------
</TABLE>
The carrying amount of all other financial instruments included in the
Company's consolidated balance sheets approximate fair value due to the short
maturity of these instruments.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS - None
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS -
On September 1, 1999, the Company sold 416,667 shares of 8%
Convertible Preferred Stock, $6.00 par value per share (the
"Preferred Stock") for $2,500,000 in a private placement to an
accredited investor. In connection with the issuance of the
Preferred Stock, the Company paid $228,000 in issuance costs and
finders fees. The Preferred Stock bears dividends at 8% per annum
and is payable quarterly in cash. The Preferred Stock is not
convertible into the Company's common stock until March 1, 2001.
From March 1, 2001 until August 31, 2002, the Preferred Stock is
convertible at the option of the purchaser at the lesser of (i)
80% of the average closing sales price of the Company's common
stock for the preceding 25 trading days as quoted on the NASDAQ
market or (ii) $6.00 per share. After August 31, 2002, the
Preferred Stock is convertible at the option of the purchaser at
66 2/3% of the average closing sales price of the Company's common
stock for the preceding 25 trading days as quoted on the NASDAQ
market. The Company may redeem the Preferred Stock, in whole or in
part, prior to August 31, 2002 at 120% of the par value of
Preferred Stock then outstanding. After August 31, 2002, the
Company may redeem the Preferred Stock, in whole or in part, at
100% of the par value of the Preferred Stock then outstanding.
Each share of the Preferred Stock shall be entitled to one vote
per share, voting together with the holders of the Company's
common stock, on all matters submitted to a vote of stockholders.
In connection with the sale of the Preferred Stock, the Company
issued 312,500 warrants exercisable to purchase shares of the
Company's common stock through August 31, 2004 at $5.00 per share
and 90,000 warrants exercisable to purchase shares of the
Company's common stock through August 31, 2004 at $3.60 per share.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES - None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - None
ITEM 5. OTHER INFORMATION - None
15
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number
-------
<S> <C>
3.1 PawnMart, Inc.'s Restated and Amended Certificate of Incorporation
(1)
3.2 PawnMart, Inc.'s Second Amended and Restated Bylaws (1)
4.1 Specimen Common Stock Certificate (2)
4.2 Specimen Series A Warrant Certificate (2)
4.3 Specimen Series B Warrant Certificate (2)
4.4 Form of Warrant Agreement, dated as of March 20, 1998 between
PawnMart, Inc. and Continental Stock Transfer & Trust Company (2)
4.5 Form of National Association of Securities Dealers, Inc.
broker-dealer warrants (3)
4.6 Form of Amendment to Warrant Agreement, Dated as of March 20, 1998
Between PawnMart, Inc. and Continental Stock Transfer & Trust
Company (6)
4.7 Indenture, Dated as of March 15, 1999 Between PawnMart, Inc. and
Trust Management, Inc., as Trustee, Relating to PawnMart, Inc.'s
12% Subordinated Notes Due 2004 (6)
4.8 Form of 12% Subordinated Note Due 2004 (included as part of
Exhibit 4.7 hereto)
4.9 Form of Broker-Dealer Selling Agreement (6)
4.10 Form of Subscription Escrow Agreement dated March 15, 1999 Between
PawnMart, Inc., Massie Capital, Ltd. and Norwest Bank Texas, N.A.
(7)
4.11 Certificate of Designations of the 8% Convertible Preferred Stock
(8)
4.12 8% Convertible Preferred Stock and Warrant Purchase Agreement,
dated as of August 19, 1999, by and between PawnMart, Inc. and
Jesse L. Upchuch, Trustee of Trust C of the Constance J. Upchurch
Family Trust Dated 10/14/94 (8)
4.13 Purchaser Warrant Agreement, dated as of September 1, 1999, by and
between PawnMart, Inc. and Jesse L. Upchuch, Trustee of Trust C of
the Constance J. Upchurch Family Trust Dated 10/14/94 (8)
4.14 Registration Rights Agreement, dated as of September 1, 1999, by
and between PawnMart, Inc. and Jesse L. Upchuch, Trustee of Trust
C of the Constance J. Upchurch Family Trust Dated 10/14/94 (8)
4.15 Transaction Warrant Agreement, dated as of September 1, 1999, by
and between PawnMart, Inc. and Andrew Garrett, Inc. (8)
10.1 Form of Indemnity Agreement with Officers and Directors of
PawnMart, Inc. (2)
10.2 1997 PawnMart, Inc. Employee Stock Option Plan (1)
10.3 1997 PawnMart, Inc. Director Stock Option Plan (2)
10.4 Revolving Credit Agreement Dated October 13, 1998 Between
PawnMart, Inc. and Comerica Bank (4)
10.5 Employment Agreement, Dated as of September 8, 1998, Between
PawnMart, Inc. and Michael D. Record (5)
27.1 Financial Data Schedule as of October 30, 1999 (Filed in EDGAR
version only) (9)
- -----------------------------------
</TABLE>
(1) Filed as an Exhibit to the registrant's Registration Statement on
Form SB-2, filed on October 23, 1997 (File No. 333-38597).
(2) Filed as an Exhibit to the registrant's Registration Statement on
Amendment No. 2 to Form SB-2, filed on February 9, 1998 (File No.
333-38597).
(3) Filed as an Exhibit to the registrant's Registration Statement on
Amendment No. 3 to Form SB-2, filed on March 11, 1998 (File No.
333-38597).
(4) Filed as an Exhibit to the registrant's Form 10-QSB for the
quarter ended October 31, 1998, filed on December 14, 1998 (File
No. 1-13919).
(5) Filed as an Exhibit to the registrant's Registration Statement on
Form S-1, filed on January 15, 1999 (File No. 333-70635).
(6) Filed as an Exhibit to the registrant's Registration Statement on
Amendment No. 1 to Form S-1, filed on February 24, 1999 (File No.
333-70635).
(7) Filed as an Exhibit to the registrant's Registration Statement on
Amendment No. 2 to Form S-1, filed on March 10, 1999 (File No.
333-70635).
(8) Filed as an Exhibit to the registrant's Form 8-K, filed on
September 1, 1999 (File No. 1-13919).
(9) Filed herewith.
16
<PAGE>
(B) REPORTS ON FORM 8-K -
On September 1, 1999, the Company filed a Form 8-K relating to the
issuance of 416,667 shares of 8% Convertible Preferred Stock, par value
$6.00 per share, for $2,500,000.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PAWNMART, INC.
<TABLE>
<S> <C> <C> <C>
By: /s/ Carson R. Thompson December 14, 1999 By: /s/ Thomas W. White December 14, 1999
---------------------- ----------------- ------------------- -----------------
Carson R. Thompson Date Thomas W. White Date
Chief Executive Officer, Director Senior Vice President
and Chairman of the Board Chief Financial Officer
</TABLE>
17
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number
-------
<S> <C>
3.1 PawnMart, Inc.'s Restated and Amended Certificate of Incorporation
(1)
3.2 PawnMart, Inc.'s Second Amended and Restated Bylaws (1)
4.1 Specimen Common Stock Certificate (2)
4.2 Specimen Series A Warrant Certificate (2)
4.3 Specimen Series B Warrant Certificate (2)
4.4 Form of Warrant Agreement, dated as of March 20, 1998 between
PawnMart, Inc. and Continental Stock Transfer & Trust Company (2)
4.5 Form of National Association of Securities Dealers, Inc.
broker-dealer warrants (3)
4.6 Form of Amendment to Warrant Agreement, Dated as of March 20, 1998
Between PawnMart, Inc. and Continental Stock Transfer & Trust
Company (6)
4.7 Indenture, Dated as of March 15, 1999 Between PawnMart, Inc. and
Trust Management, Inc., as Trustee, Relating to PawnMart, Inc.'s
12% Subordinated Notes Due 2004 (6)
4.8 Form of 12% Subordinated Note Due 2004 (included as part of
Exhibit 4.7 hereto)
4.9 Form of Broker-Dealer Selling Agreement (6)
4.10 Form of Subscription Escrow Agreement dated March 15, 1999 Between
PawnMart, Inc., Massie Capital, Ltd. and Norwest Bank Texas, N.A.
(7)
4.11 Certificate of Designations of the 8% Convertible Preferred Stock
(8)
4.12 8% Convertible Preferred Stock and Warrant Purchase Agreement,
dated as of August 19, 1999, by and between PawnMart, Inc. and
Jesse L. Upchuch, Trustee of Trust C of the Constance J. Upchurch
Family Trust Dated 10/14/94 (8)
4.13 Purchaser Warrant Agreement, dated as of September 1, 1999, by and
between PawnMart, Inc. and Jesse L. Upchuch, Trustee of Trust C of
the Constance J. Upchurch Family Trust Dated 10/14/94 (8)
4.14 Registration Rights Agreement, dated as of September 1, 1999, by
and between PawnMart, Inc. and Jesse L. Upchuch, Trustee of
Trust C of the Constance J. Upchurch Family Trust Dated 10/14/94
(8)
4.15 Transaction Warrant Agreement, dated as of September 1, 1999, by
and between PawnMart, Inc. and Andrew Garrett, Inc. (8)
10.1 Form of Indemnity Agreement with Officers and Directors of
PawnMart, Inc. (2)
10.2 1997 PawnMart, Inc. Employee Stock Option Plan (1)
10.3 1997 PawnMart, Inc. Director Stock Option Plan (2)
10.4 Revolving Credit Agreement Dated October 13, 1998 Between
PawnMart, Inc. and Comerica Bank (4)
10.5 Employment Agreement, Dated as of September 8, 1998, Between
PawnMart, Inc. and Michael D. Record (5)
27.1 Financial Data Schedule as of October 30, 1999 (Filed in EDGAR
version only) (9)
</TABLE>
-----------------------------------
(1) Filed as an Exhibit to the registrant's Registration Statement on
Form SB-2, filed on October 23, 1997 (File No. 333-38597).
(2) Filed as an Exhibit to the registrant's Registration Statement on
Amendment No. 2 to Form SB-2, filed on February 9, 1998 (File No.
333-38597).
(3) Filed as an Exhibit to the registrant's Registration Statement on
Amendment No. 3 to Form SB-2, filed on March 11, 1998 (File No.
333-38597).
(4) Filed as an Exhibit to the registrant's Form 10-QSB for the
quarter ended October 31, 1998, filed on December 14, 1998 (File
No. 1-13919).
(5) Filed as an Exhibit to the registrant's Registration Statement on
Form S-1, filed on January 15, 1999 (File No. 333-70635).
(6) Filed as an Exhibit to the registrant's Registration Statement on
Amendment No. 1 to Form S-1, filed on February 24, 1999 (File No.
333-70635).
(7) Filed as an Exhibit to the registrant's Registration Statement on
Amendment No. 2 to Form S-1, filed on March 10, 1999 (File No.
333-70635).
(8) Filed as an Exhibit to the registrant's Form 8-K, filed on
September 1, 1999 (File No. 1-13919).
(9) Filed herewith.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF PAWNMART, INC. AND SUBSIDIARIES
AS OF AND FOR THE NINE MONTHS ENDED OCTOBER 30, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-29-2000
<PERIOD-START> JAN-31-1999
<PERIOD-END> OCT-30-1999
<CASH> $637,000
<SECURITIES> 0
<RECEIVABLES> 7,678,000
<ALLOWANCES> 0
<INVENTORY> 6,936,000
<CURRENT-ASSETS> 15,500,000
<PP&E> 5,192,000
<DEPRECIATION> (2,462,000)
<TOTAL-ASSETS> 19,898,000
<CURRENT-LIABILITIES> 1,244,000
<BONDS> 13,623,000
0
2,500,000
<COMMON> 72,000
<OTHER-SE> 2,459,000
<TOTAL-LIABILITY-AND-EQUITY> 19,898,000
<SALES> 9,285,000
<TOTAL-REVENUES> 14,348,000
<CGS> 6,994,000
<TOTAL-COSTS> 12,778,000
<OTHER-EXPENSES> 2,841,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 893,000
<INCOME-PRETAX> (2,164,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,164,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,164,000)
<EPS-BASIC> (0.30)
<EPS-DILUTED> (0.30)
</TABLE>
