United States Securities and Exchange Commission
Washington, D.C. 20549
Form 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL
BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
Pawnbrokers Exchange, Inc.
--------------------------
(Name of Small Business Issuer in its charter)
Utah 84-1421481
---- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
158 South State Street
Salt Lake City, Utah 84111
-------------------- -----
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, (801) 238-0111
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
None
---- ----------------
Securities to be registered under Section 12(g) of the Act:
Common Stock, no par value
--------------------------
(Title of class)
<PAGE>
Item 1. Description of Business.
(a) Business Development.
Pawnbrokers Exchange, Inc. (the "Company" or "PEI"), a development-stage
company, was organized under the laws of the State of Utah on July 9, 1997. The
Company is engaged in the pawn brokerage business, including, generally, the
following: (1) the lending of money on the security of pledged property and (2)
the retail sale of (i) merchandise forfeited upon default in the payment of
collateralized loans and (ii) new merchandise. The Company's executive offices
are located at 158 South State Street, Salt Lake City, Utah 84111, the location
of its sole pawnshop as of the date hereof, and its telephone and facsimile
numbers are (801) 238-0111 and (801) 532-0325, respectively.
On July 9, 1997, the Company raised a total of $50,020 from the sale of an
aggregate of 2,000,000 shares of common stock, no par value per share (the
"Common Stock"), to the four executive officers and/or directors of PEI,
including Mr. Michael Vardakis, President, Mr. Terry S. Pantelakis, Vice
President, Mr. Angelo Vardakis, Secretary/Treasurer, and Mr. Vincent C.
Lombardi, Director of Marketing and Shareholder Relations, and directors, of the
Company. Messrs. Michael Vardakis, Lombardi, Pantelakis and Angelo Vardakis paid
cash in the amounts of $27,820 (approximately $.02 per share), $20,000
(approximately $.07 per share), $1,200 (approximately $.02 per share) and $1,000
($.02 per share), respectively, in consideration for the purchase of 1,600,000
shares, 300,000 shares, 50,000 shares, and 50,000 shares, of Common Stock of the
Company, respectively. The 1,600,000 shares, 300,000 shares, 50,000 shares, and
50,000 shares, of Common Stock owned of record and beneficially by Messrs.
Michael Vardakis, Lombardi, Pantelakis and Angelo Vardakis, respectively,
represent approximately 74.5%, approximately 14%, approximately 2.3% and
approximately 2.3%, respectively, of the aggregate 2,149,000 shares of the
Company's Common Stock outstanding as of the date hereof. The sales of shares to
these four individuals were made in reliance upon the exemptions from
registration with the U.S. Securities and Exchange Commission (the "Commission")
provided by Section 4(2) of the Securities Act of 1933, as amended (the "1933
Act"), and with the Utah Division of Securities (the "Division") under Section
61-1-14(2)(q) of the Utah Uniform Securities Act, as amended (the "Utah Act").
The Company received gross proceeds in the amount of $149,000 from the sale
of a total of 149,000 shares of Common Stock, representing approximately 6.9% of
the outstanding shares of Common Stock of PEI as of the date hereof, to
forty-six persons in an offering conducted during the period from July 7, 1998,
through April 29, 1999, pursuant to the exemption from registration with the
Commission under Section 3(b) of the 1933 Act and Rule 504 of Regulation D
promulgated thereunder and via registration by qualification with the Division
under Section 61-1-10 of the Utah Act and Rule 164-10-2 thereunder.
See (b) "Business of the Issuer" immediately below for a description of the
Company's current operations and future proposed activities.
(b) Business of Issuer.
General
The services of a pawnshop provide the approximately 15% of the adult
population of the United States, which has poor credit or lacks credit and
cannot obtain loans from banks or other lending institutions, with access to
cash without the scrutiny of a credit check and the delay in time associated
with the loan approval process. Thus, PEI and numerous other pawn brokerage
businesses fill a void in consumer lending services unsatisfied by the general
banking system. The Company engages in all aspects of the pawn brokerage
2
<PAGE>
business, including, generally, the making of short-term loans secured by
pledged collateral and the buying and selling of previously-owned and new
merchandise.
The loan, or pawn, aspect of the Company's business involves the lending of
money on a short-term basis on the security of pledged property. The Company
charges a pawn service fee on each loan that is typically calculated as a
percentage of the amount of the loan and, accordingly, is based on the size of
the loan. The pawn service charge per month on each loan that exceeds $40.00 is
15% of the amount of the loan. This rate permits the Company to realize gross
profit margins of approximately 150% and be competitive in the Salt Lake City,
Utah, metropolitan area. Management may reduce the pawn service fees charged by
PEI at any given time in order to increase the Company's competitiveness. The
Company charges a minimum monthly service fee of $5.00 on each pawn that is
equivalent to, or less than, the sum of $40.00. As of December 31, 1998, and
1999, PEI had aggregate pawns receivable, or outstanding loans, in the amounts
of $22,711 and $28,014, respectively. The Company's experience has been that
approximately 40% of its pawns receivable will not be collected. The Company's
sales for the years ended December 31, 1998, and December 31, 1999, included
approximately $15,200 and approximately $30,600 of income from service charges
collected on pawns, respectively.
Each pawn receivable, or outstanding loan, is collateralized by property of
the debtor that has a higher value than the amount of the loan. Pledged
merchandise generally consists of jewelry, firearms, tools, television sets,
stereo systems, musical instruments and other miscellaneous property. Upon
default in the payment of a loan obligation, the Company converts the collateral
to inventory that can be sold for a price in excess of the amount of the loan.
The bulk of the merchandise marketed and sold by PEI from time-to-time is
obtained as a result of the forfeiture of personal property by debtors who have
defaulted in the payment of their loans. The balance of the merchandise is
comprised of goods purchased by PEI from customers who do not wish to pledge the
goods as collateral for a loan and, in addition, new merchandise. Management's
policy is to purchase only merchandise that it believes to be undervalued and
able to be sold quickly in a retail transaction. As of December 31, 1998, and
1999, the Company had inventory, consisting of items for sale in the normal
course of business valued at the lower of cost (first-in, first-out basis) or
market, of $44,901 and $60,349, respectively. At December 31, 1999,
approximately 25% and 75% of the Company's inventory was new and used,
respectively, with much of the used inventory consisting of collateral converted
to inventory when debtors defaulted on their pawns. The Company's sales for the
years ended December 31, 1998, and December 31, 1999, included income of
approximately $100,197 and approximately $129,946 from retail sales of
merchandise, respectively.
The Company operates one pawnshop located at its executive offices at 158
South State Street, Salt Lake City, Utah 84111. These offices are leased from an
affiliated Utah limited liability company of which Mr. Michael Vardakis, the
President and a director of the Company, is a 50%-owner. Management plans in the
future to expand the Company's operations to include as many as four additional
pawnshops within the Salt Lake City, Utah, metropolitan area. However, the
implementation of these plans is dependent upon PEI's ability to raise
additional capital from equity and/or debt financing and/or achieve profitable
operations. Depending upon the Company's financial position in the future, its
long-range plans include expansion to various geographic areas in the western
and central United States lacking sufficient pawn brokerage services. The
Company may also expand through the acquisition of existing pawnshops; however,
no negotiations to acquire any existing businesses are underway at this time.
Because of the nature of the pawn brokerage business, the Company cannot
anticipate the total amount of loans it will have outstanding at any given time.
Because of this, among other things, the Company has, since its inception,
experienced periods characterized by the receipt of revenue from pawn service
charges and retail sales insufficient in amount to satisfy its ongoing expenses.
As of December 31, 1999, the Company had a working capital deficit of $(18,814)
3
<PAGE>
and an accumulated deficit of $(177,147). The Company realized a net loss from
operations of $(71,232) for the year ended December 31, 1999. Accordingly, while
the Company's independent auditors have presented its financial statements on
the basis that PEI is a going concern, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business over
a reasonable length of time, they have indicated that the Company has a
substantial need for working capital. This working capital is expected to be
provided by loans from management so as to enable PEI to continue as a going
concern in the event that the Company fails in its efforts to raise additional
funding through equity and/or debt financing.
The pawn brokerage industry is seasonal, with the greatest number of retail
sales occurring during the holidays and decreasing immediately thereafter.
Additionally, demand for the Company's products and services fluctuates based
upon changes in general economic conditions, including, among others, inflation,
unemployment and interest rates.
Marketing
The Company's target market is the approximately 15% of the adult
population of the United States that has poor credit or lacks credit, and cannot
obtain loans from banks or other lending institutions. Accordingly, PEI,
together with numerous other pawn brokerage businesses, fills a void in consumer
lending services unsatisfied by the general banking system. The services of a
pawnshop provide this segment of the adult population with access to cash
without the scrutiny of a credit check and the delay in time associated with the
loan approval process.
The principal method by which PEI currently generates, and in the future
intends to generate, business is by locating its pawnshop(s) in high traffic
areas. This is the reason for the selection of 158 South State Street, Salt Lake
City, Utah 84111, as the site for the Company's first and sole existing
pawnshop. Management believes that this location is advantageous because, as a
direct result of the selection of the site, the Company has realized a
significant portion of its sales from "walk-in" business. Additionally, the
Company generates, and proposes to generate, business through multi-media
advertising on the radio and television, currently, and on the Internet in the
near future. While the Company has no web site on the Internet presently,
management estimates the cost of developing a site to be less than $2,000. The
Company's expenses for advertising increased from $8,356, representing
approximately 6% of PEI's total expenses, to $20,390, representing approximately
12% of total expenses, for the years ended December 31, 1998, and 1999,
respectively. Management believes that an additional marketing tool is the
Company's policy of offering customers a greater loan value than its
competitors; that is, making a larger loan to a customer for a given item
pledged by the customer as collateral. To date, the Company has not achieved
profitability or generated sales needed to fund growth as a result of
management's strategy of locating the Company's first pawnshop in a high traffic
area and allocating approximately 10% of the monthly budget for advertising.
Competition
The pawn brokerage industry is intensely competitive and, because of the
lucrative nature of the business, is growing at a rapid rate and becoming ever
increasingly competitive. The business is characterized by a large number of
independent owner/operators, some of whom own and operate multiple retail
locations. Accordingly, the Company is in competition with pawn brokerage
businesses of all sizes that have their central offices located both within and
without the State of Utah and other financial institutions, such as consumer
finance companies, that lend money on both a secured, and unsecured, basis. The
Company's principal competitor, however, is Cash America, a company with assets
4
<PAGE>
in excess of $325 million that operates over 380 pawnshops worldwide. As part of
its marketing strategy, PEI will endeavor to establish any additional retail
locations in geographic areas where Cash America has no presence.
Management hopes, to the extent practicable, to minimize the Company's
weaknesses, including, among others, its undercapitalization, cash shortage,
limitations with respect to personnel, technological, financial and other
resources and a limited customer base and market recognition through two
principal strategies: (1) the location of pawnshop(s) in high traffic areas so
as to obtain significant "walk-in" business and (2) offering customers a greater
loan value than its competitors. The Company may also reduce its monthly pawn
service charge (currently 15% of any loan amount in excess of $40.00) in order
to increase PEI's competitiveness. Nevertheless, the Company expects that its
opportunities may be limited by its financial resources and other assets. In
this regard, many of the companies and other organizations, such as Cash
America, with which PEI will be in competition are established and many such
entities have far greater financial resources, substantially greater experience
and larger staffs than the Company. Additionally, many of such organizations
have proven operating histories, which the Company lacks. Therefore, these
companies are in a better position than PEI to compete for the business of
individuals that have poor credit or lack credit. Additionally, many
corporations engaged in the pawn brokerage business have recently completed
securities offerings, which have provided them with the necessary capital to
limit competition through expansion and offer more favorable credit terms. The
Company has experienced, and expects to continue to face, strong competition
from both well-established companies and small independent companies like
itself. There can be no assurance that the Company will be successful in raising
additional capital and/or realizing profits from operations so as to enable PEI
to acquire existing pawnshops or otherwise establish pawnshops in addition to
the Company's existing location. In addition, the Company's operations may be
subject to decline because of generally increasing costs and expenses of doing
business, thus further increasing anticipated competition.
Regulation
Certain aspects of the pawn brokerage business are subject to regulation by
local government agencies. The Company has obtained all permits, including a
municipal pawnbroker's license and a retail sales tax license, necessary in
order to operate its business. Each state has different regulatory policies with
regard to the interest rate that may be charged in a pawn transaction. Interest
charged on loans typically ranges from 18% to 720% annually, as permitted by
state regulatory policies.
Employees
As of the date hereof, the Company has four part-time employees, including
Mr. Michael Vardakis, President, Mr. Terry S. Pantelakis, Vice President, Mr.
Angelo Vardakis, Secretary/Treasurer, and Mr. Vincent C. Lombardi, Director of
Marketing and Shareholder Relations, respectively, and directors, of PEI, and
three full-time employees, including one manager and two salespersons. Messrs.
Michael Vardakis, Pantelakis, Angelo Vardakis and Lombardi are responsible for,
among other things, management, refurbishing (preparing inventory for resale),
sales and shareholder relations, respectively. No cash compensation has been
awarded to, earned by or paid to Messrs. Michael Vardakis, Pantelakis, Angelo
Vardakis or Lombardi for all services rendered in all capacities to the Company
since PEI's inception on July 9, 1997. However, it is presently proposed that
these individuals receive salaries in modest amounts to be determined by the
Board of Directors in July 2000. On July 9, 1997, Messrs. Michael Vardakis,
Angelo Vardakis, Lombardi and Pantelakis received 1,600,000 shares, 50,000
shares, 300,000 shares, and 50,000 shares, of Common Stock of the Company,
respectively, in consideration for $27,820, $1,000, $20,000 and $1,200 in cash
paid by each
5
<PAGE>
said individual, respectively. None of the Company's employees is represented by
a labor union. The Company has never had a strike or lockout and considers its
employee relations to be good.
It is anticipated that at such time, if ever, as the Company's financial
position permits, assuming that the Company is successful in raising additional
funds through equity and/or debt financing and/or generating a sufficient level
of revenue from operations, the executive officers and/or directors of PEI will
receive reasonable salaries and other appropriate compensation, such as bonuses,
coverage under medical and/or life insurance benefits plans and participation in
stock option and/or other profit sharing or pension plans, for services as
executive officers of the Company and may receive fees for their attendance at
meetings of the Board of Directors. Additionally, if financing permits, the
Company intends to establish up to four additional locations in the Salt Lake
City, Utah, metropolitan area with approximately five employees, including a
manager, an individual in charge of refurbishing, a controller/accountant and
two salespersons to transact pawns, at each location. (See Item 6. "Executive
Compensation" and Item 7. "Certain Relationships and Related Transactions.")
Item 2. Management's Discussion and Analysis or Plan of Operation.
Plan of Operation
- -----------------
Since its inception, the Company has operated one pawnshop in Salt Lake
City, Utah, which has generated limited sales and a net loss. For the years
ended December 31, 1998, and December 31, 1999, the Company had total sales of
$115,397 and $160,546, respectively, and a net loss of $(67,874) and $(71,232),
respectively ($(.03) per share). The Company's income from service charges
collected on pawns increased for the years ended December 31, 1998, and December
31, 1999, from approximately $15,200 to approximately $30,600, respectively. The
Company's income from retail sales of merchandise increased from approximately
$100,197 to approximately $129,946 for the years ended December 31, 1998, and
December 31, 1999, respectively. General and administrative expenses increased
from $140,138 to $170,833 for the years ended December 31, 1998, and December
31, 1999, as a result of increases in expenditures for advertising
(approximately 144%) and payroll and payroll taxes (approximately 54%),
primarily. Interest on loans from related parties decreased by approximately 39%
during the year ended December 31, 1999, as compared to interest on loans paid
to affiliates during the year ended December 31, 1998.
While management has plans to open up to an additional four pawnshops in
the Salt Lake City, Utah, metropolitan area and, over the long-term, to expand
the Company's operations to various geographic areas in the western and central
United States lacking sufficient pawn brokerage services, the implementation of
these plans is dependent upon PEI's ability to raise additional capital from
equity and/or debt financing and/or achieve profitable operations. The Company
may also expand through the acquisition of existing pawnshops; however,
management has not targeted any existing businesses for acquisition as of the
date hereof. Based upon the Company's performance to date, management believes
that sales, comprised of pawn service charges and retail merchandise sales, will
not be sufficient to finance all future activities and that it will be necessary
to raise additional funds through equity and/or debt financing. Although
management intends to explore all available alternatives for debt and/or equity
financing, including, but not limited to, private and public securities
offerings, there can be no assurances that the Company will be able to generate
additional capital for expansion and/or other purposes. In the event that only
limited additional financing is received, PEI expects its opportunities in the
pawn brokerage business to be limited with regard to the establishment of
additional retail locations and increasing sales at the Company's sole existing
pawnshop in the Salt Lake City, Utah, metropolitan area. Further, even if the
Company succeeds in obtaining the level of funding necessary to increase sales
at its present location through the expenditure of additional funds for
6
<PAGE>
marketing, advertising and/or promotion and/or open additional pawnshops, this
will not ensure that the Company will be able to realize a profit from
operations.
Financial Condition, Capital Resources and Liquidity
- ----------------------------------------------------
As of December 31, 1998 and 1999, the Company had total assets of $115,671
and $125,553, respectively, which included total current assets of $76,410 and
$92,541, respectively, and property and equipment, less depreciation, of $39,261
and $33,039, respectively. The Company's current assets consisted, primarily, of
inventory, including items for sale in the normal course of business valued at
the lower of cost (first-in, first-out basis) or market, of $44,901 and $60,349
as of December 31, 1998, and December 31, 1999, respectively, and pawns
receivable of $22,711 and $28,014, respectively. At December 31, 1999,
approximately 25% and 75% of the Company's inventory was new and used,
respectively, with much of the used inventory consisting of collateral converted
to inventory when debtors defaulted on their pawns. Historically, PEI has been
unable to collect approximately 40% of its pawns receivable.
The Company had total current liabilities of $84,192 and $111,328 and a
working capital deficit of $(7,782) and $(18,814) as of December 31, 1998, and
December 31, 1999, respectively. The Company has experienced working capital
shortages from time-to-time since its inception on July 9, 1997, and management
expects such working capital shortages to continue for the foreseeable future.
While PEI's independent auditors have presented the Company's financial
statements on the basis that it is a going concern, which contemplates the
realization of assets and the satisfaction of liabilities in the normal course
of business over a reasonable length of time, they have noted that PEI has a
substantial need for working capital. Should the Company's efforts to raise
additional capital through equity and/or debt financing fail, management and
other related parties are expected to provide the necessary working capital so
as to permit the Company to continue as a going concern. Since the Company's
organization, it has received a total of $199,020 in cash contributed as
consideration for the issuance of shares of Common Stock, $50,020 of which
amount was received by PEI from its executive officers and directors.
Item 3. Description of Property.
The Company's executive offices and pawnshop are located at 158 South State
Street, Salt Lake City, Utah 84111. The facility, a storefront location
comprised of 3,500 square feet of useable space, is leased from M.N.V. Holdings,
LLC ("MNV Holdings"), an affiliated Utah limited liability company owned 50% by
Mr. Michael Vardakis, the President and a director of the Company, pursuant to a
triple net lease at a rental rate of $3,000 per month. During the year ended
December 31, 1999, the amount of $36,000 was paid or accrued and, during the
years ended December 31, 1997, and 1998, the amounts of $18,000 and $36,000,
respectively, were paid, to M.N.V. Holdings for rent under the terms and
conditions of the lease. The term of the lease, which commenced on June 19,
1997, and terminated on June 19, 1999, has been renewed for an additional two
years through June 19, 2001. The space is expected to be adequate to meet PEI's
foreseeable future needs at the South State Street location. However, while the
Company plans to establish pawnshops in up to four additional locations in the
Salt Lake City, Utah, metropolitan area, these plans have not yet been, and may
never be, implemented. The Company's telephone and facsimile numbers are (801)
238-0111 and (801) 532-0325, respectively. (See Item 7. "Certain Relationships
and Related Transactions."
Item 4. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of March 20, 2000, by each shareholder known by
the Company to be the beneficial owner of more than five per cent of its
outstanding shares of Common Stock, each director and all executive officers and
directors as a group. Under the General Rules and Regulations of the Commission,
7
<PAGE>
a person is deemed to be the beneficial owner of a security if such person has
or shares the power to vote or direct the voting, or dispose or direct the
disposition, of such security. Each of the shareholders named in the table has
sole voting and investment power with respect to the shares of Common Stock
beneficially owned.
Shares Percentage
Beneficially of
Beneficial Owner Owned (1) Class (1)
---------------- --------- ---------
Michael Vardakis (2)(3) 1,600,000 74.45%
47 East 400 South
Salt Lake City, Utah 84111
Vincent C. Lombardi (3) 300,000 13.96%
755 East Greg Street, Suite #25
Sparks, Nevada 89431
Terry S. Pantelakis (2)(3) 50,000 2.33%
350 South State Street
Salt Lake City, Utah 84111
Angelo Vardakis (2)(3) 50,000 2.33%
350 South State Street
Salt Lake City, Utah 84111
All executive officers and directors 2,000,000 93.07%
as a group (four persons)
- ------------------
(1) Represents the number of shares of Common Stock owned of record and
beneficially by each named person or group, expressed as a percentage of
2,149,000 shares of the Company's Common Stock outstanding as of March 20, 2000.
(2) Executive officer of the Company.
(3) Member of the Board of Directors of the Company.
Item 5. Directors, Executive Officers, Promoters and Control Persons.
Executive Officers and Directors
Set forth below is the name, age, position with the Company and business
experience of the executive officers, directors and key employees of the
Company.
Name Age Position
---- --- --------
Michael Vardakis* 35 President and Director
Terry S. Pantelakis* 59 Vice President and Director
Angelo Vardakis* 30 Secretary, Treasurer and Director
Vincent C. Lombardi* 34 Director of Marketing and Shareholder
Relations and Director
- ------------------
8
<PAGE>
*May be deemed to be a "promoter" and "parent" of the Company, as those
terms are defined under the General Rules and Regulations promulgated under the
Securities Act of 1933, as amended.
Directors hold office until the next annual meeting of the Company's
shareholders and until their respective successors have been elected and
qualify. Officers serve at the pleasure of the Board of Directors. The executive
officers and directors of the Company are expected to devote such time and
effort to the business and affairs of the Company as may be necessary to perform
their responsibilities as executive officers and/or directors.
Family Relationships
Mr. Michael Vardakis, the President and a director of the Company, and Mr.
Angelo Vardakis, the Secretary, the Treasurer and a director of PEI, are
brothers. Mr. Terry S. Pantelakis, the Vice President and a director of the
Company, is Mr. Michael Vardakis' father-in-law.
Business Experience
Michael Vardakis has served as the President and a director of the Company
since its organization on July 9, 1997. Since 1991, he has been employed as a
salesman, and served as the Secretary, for AAA Jewelry & Loan, Inc. ("AAA
Jewelry & Loan"), Salt Lake City, Utah, a closely-held pawn brokerage business
managed and co-owned by Mr. Terry S. Pantelakis, the Vice President and a
director of the Company and Mr. Vardakis' father-in-law. Since 1994, Mr.
Vardakis has served as an executive officer, a director and a controlling
shareholder of Michael Angelo Jewelers, Inc. ("Michael Angelo Jewelers"), Salt
Lake City, Utah, a closely-held retail jewelry business that he founded together
with Mr. Angelo Vardakis, his brother and the Secretary/Treasurer and a director
of the Company. He has been a manager and a 50%-owner of M.N.V. Holdings, LLC,
Salt Lake City, Utah, a real estate holding company from which the Company rents
office space for its executive offices and pawnshop, since August 1996. Since
November 1997, Mr. Vardakis has been a manager and a member of M.H.A., LLC, Salt
Lake City, Utah, a closely-held investment company co-owned together with his
brother, Mr. Angelo Vardakis, among others. Since June 1996, Mr. Vardakis has
served as a director and a controlling shareholder of TMV Holdings, Inc. ("TMV
Holdings"), Sparks, Nevada, an investment company that he co-owns with Mr.
Lombardi, a director of PEI and the President and a director of TMV Holdings. He
has been a manager and a member of two Salt Lake City, Utah, real estate holding
companies, V Financial, LLC, and BNO, LLC, since December 1999 and January 1997,
respectively. He attended the University of Utah, Salt Lake City, Utah, from
1983 through 1984.
Terry S. Pantelakis has served as the Vice President and a director of the
Company since its inception on July 9, 1997. He has served, since 1992, as the
President, a director and a controlling shareholder of AAA Jewelry & Loan, a
closely-held, Salt Lake City, Utah, pawn brokerage business founded by him;
which company employs Messrs. Michael and Angelo Vardakis, the President and
Secretary/Treasurer, respectively, of the Company, as salespersons. Since 1995,
Mr. Pantelakis has served as an executive officer and a director of Vis Viva
Corp., a publicly-held company engaged in the communications business. He
attended the University of Utah, Salt Lake City, Utah, for a period of two years
from 1958 through 1959.
Angelo Vardakis has served as the Secretary/Treasurer and a director of the
Company since its inception on July 9, 1997. He has been employed as a salesman
by AAA Jewelry & Loan, a Salt Lake City, Utah, pawn brokerage business co-owned
and managed by Mr. Pantelakis, the Vice President and a director of PEI and the
9
<PAGE>
father-in-law of his brother, Mr. Michael Vardakis, the President and a director
of the Company. Since 1994, Mr. Vardakis has served as an executive officer, a
director and a controlling shareholder of Michael Angelo Jewelers, the
closely-held, Salt Lake City, Utah, jewelry business founded by him and his
brother, Mr. Michael Vardakis. He has been a manager and a member of M.H.A.,
LLC, a closely-held, Salt Lake City, Utah, investment company, since November
1997. Mr. Vardakis has served as the Vice President of Vis Viva Corp., a
publicly-held communications company, since July 1999.
Vincent C. Lombardi has served as a director and held the position of
Director of Marketing and Shareholder Relations of the Company since its
organization on July 9, 1997. In February 1998, he founded Lombardi Research
Foundation, Inc., a Sparks, Nevada, company engaged in medical research of which
he is the sole owner, the President and a director. Since November 1993, Mr.
Lombardi has served as the President, a director and a controlling shareholder
of Casa Bella Holdings, Inc. ("Casa Bella Holdings"), a Nevada business
consulting firm that he founded. He has served, since June 1996, as the
President, a director and a controlling shareholder of TMV Holdings, Sparks,
Nevada, a closely-held investment company of which Mr. Michael Vardakis, the
President and an approximate 75% shareholder of the Company, serves as a
director and controlling shareholder. He served, from 1992 through 1994, as the
President of Borgen Internationell of Stockholm, a business consulting firm. Mr.
Lombardi received a B.S. degree in science from Sierra Nevada College in 1995.
Item 6. Executive Compensation
Executive Compensation
No cash compensation has been awarded to, earned by or paid to Mr. Michael
Vardakis, President, Mr. Terry S. Pantelakis, Vice President, Mr. Angelo
Vardakis, Secretary/Treasurer, and Mr. Vincent C. Lombardi, Director of
Marketing and Shareholder Relations, respectively, and directors of PEI, for all
services rendered in all capacities to the Company since PEI's inception on July
9, 1997. It is anticipated that, until July 2000 when the Board of Directors is
expected to authorize the payment of modest salaries to Messrs. Michael
Vardakis, Pantelakis, Angelo Vardakis and Lombardi, the executive officers
and/or directors of PEI will not receive any compensation in any form for
services to the Company in the capacities of executive officers and/or
directors. On July 9, 1997, the Company issued and sold 1,600,000 shares, 50,000
shares, 300,000 shares, and 50,000 shares (a total of 2,000,000 shares), of
Common Stock to Messrs. Michael Vardakis, Angelo Vardakis, Lombardi and
Pantelakis, respectively, in consideration for cash paid in the amounts of
$27,820, $1,000, $20,000 and $1,200, respectively (a total of $50,020). None of
the executive officers and/or directors holds options to purchase any of the
Company's securities. The executive officers and/or directors plan to devote
only such time to the affairs of PEI that is deemed necessary. (See Item 7.
"Certain Relationships and Related Transactions.")
The Company does not provide its officers or employees with pension, stock
appreciation rights, long-term incentive or other plans and has no intention of
implementing any such plans for the foreseeable future. In the future, PEI may
offer stock options to employees, including members of management and others;
however, no such options have been granted as of the date hereof. It is possible
that in the future the Company may establish various executive incentive
programs and other benefits, including reimbursement for expenses incurred in
connection with the Company's operations, Company automobiles and life and
health insurance, for its executive officers and directors, but none has yet
been granted. The provisions of such plans and benefits will be at the
discretion of PEI's Board of Directors.
10
<PAGE>
Compensation of Directors
Directors of PEI receive no compensation pursuant to any standard
arrangement for their services as directors.
Item 7. Certain Relationships and Related Transactions.
On July 9, 1997, the Company issued and sold 1,600,000 shares, 300,000
shares, 50,000 shares, and 50,000 shares, of Common Stock (a total of 2,000,000
shares) to Messrs. Michael Vardakis, Vincent C. Lombardi, Terry S. Pantelakis
and Angelo Vardakis, respectively, in consideration for the payment by each
individual of cash in the amount of $27,820 (approximately $.02 per share),
$20,000 (approximately $.07 per share), $1,200 (approximately $.02 per share)
and $1,000 ($.02 per share), respectively (a total of $50,020). Each of the
foregoing individuals serves as a director of PEI and each said individual,
except Mr. Lombardi, is an executive officer of the Company. Mr. Lombardi is a
key employee of the Company employed in the position of Director of Marketing
and Shareholder Relations. The 1,600,000 shares, 300,000 shares, 50,000 shares,
and 50,000 shares, of the Company's Common Stock owned of record and
beneficially by Messrs. Michael Vardakis, Lombardi, Pantelakis and Angelo
Vardakis, respectively, represent approximately 74.5%, approximately 14%,
approximately 2.3% and approximately 2.3%, respectively, of the aggregate
2,149,000 shares of the Company's Common Stock outstanding as of the date
hereof.
The Company's executive offices and pawn shop are located at 158 South
State Street, Salt Lake City, Utah 84111. The facility, a storefront location
comprised of approximately 3,500 useable square feet, is leased from M.N.V.
Holdings, LLC, a limited liability company 50%-owned by Mr. Michael Vardakis,
the President, a director and an approximate 75%-shareholder of PEI, pursuant to
a triple net lease at a rental rate of $3,000 per month. The term of the lease,
which commenced on June 19, 1997, and terminated on June 19, 1999, has been
renewed for an additional two years through June 19, 2001. During the Company's
fiscal year ended December 31, 1999, the amount of $36,000 was paid or accrued,
and during the fiscal years ended December 31, 1997, and 1998, the amounts of
$18,000 and $36,000 were paid, to M.N.V. Holdings for rent under the terms of
the lease. The Company believes that the terms of the lease are comparable to
those that could have been obtained from an unaffiliated third party for
comparable office space in the Salt Lake City, Utah, area.
On November 15, 1997, the Company borrowed the sums of $50,000 and $15,000
from Michael Angelo Jewelers, Inc., and Casa Bella Holdings, Inc., respectively,
two corporations affiliated with the Company because of the positions of Messrs.
Michael Vardakis and Vincent C. Lombardi as executive officers, directors and
controlling shareholders of Michael Angelo Jewelers and Casa Bella Holdings,
respectively, pursuant to demand promissory notes bearing interest at the rate
of 24% per annum. On April 27, 1998, and July 16, 1998, PEI borrowed an
additional $12,000 and $15,000 from Michael Angelo Jewelers and Casa Bella
Holdings, respectively; which amounts, together with the original indebtedness,
are evidenced by those certain demand Amended Promissory Notes in the principal
amounts of $62,000 and $30,000, dated July 16, 1998, and April 27, 1998,
respectively, payable to Michael Angelo Jewelers and Casa Bella Holdings, as the
holders, respectively, bearing interest at the rate of 24% per annum. The
principal balance of the Amended Promissory Note held by Michael Angelo
Jewelers was reduced to $12,000 as of December 31, 1999. On May 6, 1998, PEI
borrowed the sum of $10,000 from M.N.V. Holdings, LLC. The loan is evidenced by
that certain demand Promissory Note dated May 6, 1998, in the principal amount
of $10,000, bearing interest at the rate of 24% per annum. The Company paid
$1,000 in interest to M.N.V. Holdings during its fiscal year ended December 31,
1998, and interest on the loans from all three affiliated lenders in the
aggregate amounts of $15,250, $14,000 and $4,500 was accrued during the fiscal
years ended December 31, 1999, 1998, and 1997, respectively.
11
<PAGE>
Item 8. Description of Securities.
Description of Capital Stock
- ----------------------------
The Company's authorized capital stock consists of 50,000,000 shares of
Common Stock, no par value per share.
Description of Common Stock
- ---------------------------
All shares of Common Stock have equal voting rights and, when validly
issued and outstanding, are entitled to one vote per share in all matters to be
voted upon by shareholders. The shares of Common Stock have no preemptive,
subscription, conversion or redemption rights and may be issued only as
fully-paid and nonassessable shares. Cumulative voting in the election of
directors is not permitted; which means that the holders of a majority of the
issued and outstanding shares of Common Stock represented at any meeting at
which a quorum is present will be able to elect the entire Board of Directors if
they so choose and, in such event, the holders of the remaining shares of Common
Stock will not be able to elect any directors. In the event of liquidation of
the Company, each shareholder is entitled to receive a proportionate share of
the Company's assets available for distribution to shareholders after the
payment of liabilities. All shares of the Company's Common Stock issued and
outstanding are fully-paid and nonassessable.
Dividend Policy. Holders of shares of Common Stock are entitled to share
pro rata in dividends and distributions with respect to the Common Stock when,
and if, declared by the Board of Directors out of funds legally available
therefor. The Company has not paid any dividends on its Common Stock and intends
to retain earnings, if any, to finance the development and expansion of its
business. Future dividend policy is subject to the discretion of the Board of
Directors and will depend upon a number of factors, including future earnings,
capital requirements and the financial condition of the Company.
Transfer Agent and Registrar. The Transfer Agent and Registrar for the
Company's Common Stock is OTC Stock Transfer, Inc., 231 East 2100 South, Salt
Lake City, Utah 84115.
Part II
Item 1. Market Price of and Dividends on Registrant's Common Equity and Related
Shareholder Matters.
(a) Market Information.
There has been no established public trading market for the Common Stock
since the Company's inception on July 9, 1997.
(b) Holders.
As of March 20, 2000, the Company had fifty shareholders of record of its
2,149,000 issued and outstanding shares of Common Stock, no par value per share.
(c) Dividends.
The Company has never paid or declared any dividends on its Common Stock
and does not anticipate paying cash dividends in the foreseeable future.
12
<PAGE>
Item 2. Legal Proceedings.
The Company knows of no legal proceedings to which it is a party or to
which any of its property is the subject that are pending, threatened or
contemplated or any unsatisfied judgments against the Company.
Item 3. Changes in and Disagreements with Accountants.
Smith & Company, a Professional Corporation of Certified Public Accountants
("Smith & Company"), 10 West 100 South, Suite 700, Salt Lake City, Utah
84101-1554, has reported upon the Company's Balance Sheets as of December 31,
1999, and 1998, and the related Statements of Operations, Changes in
Shareholders' Equity and Cash Flows for the years ended December 31, 1999, and
1998, and for the period from inception (July 9, 1997) to December 31, 1999, and
has been appointed as the Company's independent accountant for the fiscal year
ending December 31, 2000. There has been no change in the Company's independent
accountant during the period commencing with the Company's retention of Smith &
Company through the date hereof.
Item 4. Recent Sales of Unregistered Securities.
On July 9, 1997, the Company issued and sold 1,600,000 shares, 300,000
shares, 50,000 shares, and 50,000 shares, of Common Stock, no par value per
share (a total of 2,000,000 shares), to Messrs. Michael Vardakis, Vincent C.
Lombardi, Terry S. Pantelakis and Angelo Vardakis, respectively, in
consideration for cash paid by each individual in the amount of $27,820
(approximately $.02 per share), $20,000 (approximately $.07 per share), $1,200
(approximately $.02 per share) and $1,000 ($.02 per share), respectively (a
total of $50,020). Each of the foregoing individuals serves as a director, and
each said individual, except Mr. Lombardi, is an executive officer, of the
Company; i.e., Messrs. Michael Vardakis, Pantelakis and Angelo Vardakis serve as
President, Vice President and Secretary/Treasurer, respectively. Mr. Lombardi is
a key employee employed by PEI in the position of Director of Marketing and
Shareholder Relations. The 1,600,000 shares, 300,000 shares, 50,000 shares, and
50,000 shares, of the Company's Common Stock owned of record and beneficially by
Messrs. Michael Vardakis, Lombardi, Pantelakis and Angelo Vardakis,
respectively, represent approximately 74.5%, approximately 14%, approximately
2.3% and approximately 2.3%, respectively, of the aggregate 2,149,000 shares of
the Company's Common Stock outstanding as of the date hereof. The Company
relied, in connection with the sales of the shares, upon the exemptions from
registration afforded by Section 4(2) of the Securities Act of 1933, as amended,
and Section 61-1-14(2)(q) of the Utah Uniform Securities Act, as amended. The
Company relied upon the fact that the issuance and sale of the shares by the
Company did not constitute a public securities offering together with the fact
that Messrs. Michael Vardakis, Lombardi, Pantelakis and Angelo Vardakis were
directors, executive officers and/or controlling shareholders of PEI at the time
of the sales, to make the exemptions available. (See Part I, Item 7. "Certain
Relationships and Related Transactions.")
During the period from July 7, 1998, through April 29, 1999, the Company
issued and sold an aggregate of 149,000 shares of Common Stock to a total of
forty-six persons, forty-five of which are residents of the State of Utah and
one of which is a non-United States resident, for cash consideration totaling
$149,000. The sales were made by the Company in reliance upon the exemption from
registration with the U.S. Securities and Exchange Commission provided under
Section 3(b) of the 1933 Act and Rule 504 of Regulation D promulgated thereunder
and via registration by qualification with the Utah Division of Securities under
Section 61-1-10 of the Utah Act and Rule 164-10-2 thereunder. The Company's Form
U-7 Disclosure Document became effective with the Division on April 30, 1998. No
underwriter was employed in connection with the offering and sale of the shares.
13
<PAGE>
The facts relied upon by the Company to make the Federal exemption available
include, among others, the following: (i) the aggregate offering price for the
offering of the shares of Common Stock did not exceed $1,000,000, less the
aggregate offering price for all securities sold within the twelve months before
the start of and during the offering in reliance on any exemption under Section
3(b) of, or in violation of Section 5(a) of, the 1933 Act; (ii) the required
number of manually executed originals and true copies of Form D were duly and
timely filed with the U.S. Securities and Exchange Commission; (iii) no general
solicitation or advertising was conducted by the Company in connection with the
offering of any of the shares; and (iv) the fact that the Company has not been
since its inception (a) subject to the reporting requirements of Section 13 or
15(d) of the Securities Exchange Act of 1934, as amended; (b) an "investment
company" within the meaning the Investment Company Act of 1940, as amended; or
(c) a development stage company that either has no specific business plan or
purpose or has indicated that its business plan is to engage in a merger or
acquisition with an unidentified company or companies, or other entity or
person.
Item 5. Indemnification of Directors and Officers.
Article VIII of the Company's Bylaws contains provisions providing for the
indemnification of directors and officers of the Company as follows:
Section 8.1 Indemnification. No officer or director shall be personally
liable for any obligations arising out of any acts or conduct of said officer or
director performed for or on behalf of the Corporation by reason of his/her
office. The Corporation shall and does hereby indemnify and hold harmless each
person and his/her heirs and administrators who shall serve at any time
hereafter as a director or officer of the Corporation from and against any and
all claims, judgments and liabilities to which such persons shall become subject
by reason of his/her having heretofore or hereafter been a director or officer
of the Corporation, or by reason of any action alleged to have been heretofore
or hereafter taken or omitted to have been taken by him/her as such director or
officer, and shall reimburse each such person for all legal and other expenses
reasonably incurred by him/her in connection with any such claim or liability;
including power to defend such person from all suits as provided for under the
provisions of the Utah Business Corporation Act; provided, however that no such
person shall be indemnified against, or be reimbursed for, any expense incurred
in connection with any claim or liability arising out of his/her own negligence
or willful misconduct. The rights accruing to any person under the foregoing
provisions of this section shall not exclude any other right to which he may
lawfully be entitled, nor shall anything herein contained restrict the right of
the Corporation to indemnify or reimburse such person in any proper case, even
though not specifically herein provided for. The Corporation, its directors,
officers, employees and agents shall be fully protected in taking any action or
making any payment or in refusing so to do in reliance upon the advice of
counsel.
Section 8.2 Other Indemnification. The indemnification herein provided
shall not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any Bylaw, agreement, vote of shareholders
or disinterested directors, or otherwise, both as to action in his/her official
capacity and as to action in another capacity while holding such office, and
shall continue as to a person who has ceased to be a director, officer or
employee and shall inure to the benefit of the heirs, executors and
administrators of such a person.
Section 8.3 Insurance. The Corporation may purchase and maintain insurance
on behalf of any person who is or was a director, officer or employee of the
Corporation, or is or was serving at the request of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him/her and incurred by him/her in any capacity, or arising out
of his/her status as such, whether or not the Corporation would have the power
to indemnify him/her against liability under the provisions of this Article VIII
or of the Utah Business Corporation Act.
14
<PAGE>
Section 8.4 Settlement by Corporation. The right of any person to be
indemnified shall be subject always to the right of the Corporation by its Board
of Directors, in lieu of such indemnity, to settle any such claim, action, suit
or proceeding at the expense of the Corporation by the payment of the amount of
such settlement and the costs and expenses incurred in connection therewith.
The Company has no agreements with any of its directors or executive
officers providing for indemnification of any such persons with respect to
liability arising out of his or her capacity or status as an officer and/or
director.
At present, there is no pending litigation or proceeding involving a
director or executive officer of the Company as to which indemnification is
being sought.
PART F/S
The Financial Statements of Pawnbrokers Exchange, Inc., required by
Regulation SB commence on page F-1 hereof in response to Part F/S of this
Registration Statement on Form 10-SB and are incorporated herein by this
reference.
PART III
Item 1. Index to Exhibits.
Item
Number Description
- ------ -----------
3.1* Articles of Incorporation of Pawnbrokers Exchange, Inc., filed July 9,
1997.
3.2* Amended and Restated Articles of Incorporation of Pawnbrokers
Exchange, Inc., filed August 14, 1997.
3.3* Bylaws of Pawnbrokers Exchange, Inc.
10.1* Lease agreement dated June 19, 1997, between Pawnbrokers Exchange,
Inc., and M.N.V. Holdings, LLC.
10.2* Amended Promissory Note dated April 27, 1998, in the principal amount
of $30,000 payable by Pawnbrokers Exchange, Inc., to Casa Bella
Holdings, Inc.
10.3* Promissory Note dated May 6, 1998, in the principal amount of $10,000
payable by Pawnbrokers Exchange, Inc., to M.N.V. Holdings, LLC.
10.4* Amended Promissory Note dated July 16, 1998, in the principal amount
of $62,000 payable by Pawnbrokers Exchange, Inc., to Michael Angelo
Jewelers, Inc.
10.5* Amended Promissory Note dated May 5, 1999, in the principal amount of
$10,000 payable by Pawnbrokers Exchange, Inc., to Brian Armstrong.
- ------------------
*Filed herewith.
15
<PAGE>
Item 2. Description of Exhibits.
The documents required to be filed as Exhibit Number 2 in Part III of Form
1-A filed as part of this Registration Statement on Form 10-SB are listed in
Item 1 of this Part III above. No documents are required to be filed as Exhibit
Numbers 3, 5, 6 or 7 in Part III of Form 1-A, and the reference to such Exhibit
Numbers is therefore omitted. No additional exhibits are filed hereto.
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
PAWNBROKERS EXCHANGE, INC.
(Registrant)
Date: March 21, 2000 By: /s/ Michael Vardakis
------------------------
Michael Vardakis, President
16
<PAGE>
CONTENTS
PAGE
INDEPENDENT AUDITOR'S REPORT.............................................. F-2
BALANCE SHEETS............................................................ F-3
STATEMENTS OF OPERATIONS.................................................. F-4
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY............................ F-5
STATEMENTS OF CASH FLOWS.................................................. F-6
NOTES TO FINANCIAL STATEMENTS............................................. F-7
F-1
<PAGE>
Smith
&
Company
A Professional Corporation of Certified Public Accountants
INDEPENDENT AUDITOR'S REPORT
Officers and Directors
Pawnbrokers Exchange, Inc.
Salt Lake City, Utah
We have audited the accompanying balance sheets of Pawnbrokers Exchange, Inc. (a
development stage company) as of December 31, 1999 and 1998, and the related
statements of operations, shareholders' equity, and cash flows for the years
ended December 31, 1999 and 1998, and for the period of July 9, 1997 (date of
inception) to December 31, 1999. 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 present fairly, in
all material respects, the financial position of Pawnbrokers Exchange, Inc. (a
development stage company) as of December 31, 1999 and 1998, and the results of
its operations, shareholders' equity, and cash flows for the years ended
December 31, 1999 and 1998, and for the period of July 9, 1997 (date of
inception) to December 31, 1999, in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial statements,
the Company has an accumulated deficit of $177,147 at December 31, 1999. The
Company has suffered losses from operations and has a substantial need for
working capital. This raises substantial doubt about its ability to continue as
a going concern. Management's plans in regard to these matters are described in
Note 7 to the financial statements. The accompanying financial statements do not
include any adjustments that may result from the outcome of this uncertainty.
/s/ Smith & Company
-------------------
Smith & Company
CERTIFIED PUBLIC ACCOUNTANTS
Salt Lake City, Utah
January 26, 2000
10 West 100 South, Suite 700 * Salt Lake City, Utah 84101-1554
Telephone: (801) 575-8297 * Facsimile: (801) 575-8306
E-mail: [email protected]
Members: American Institute of Certified Public Accountants
Utah Association of Certified Public Accountants
F-2
<PAGE>
<TABLE>
<CAPTION>
PAWNBROKERS EXCHANGE, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
ASSETS
December 31,
----------------------
1999 1998
--------- ---------
CURRENT ASSETS
<S> <C> <C>
Cash $ 4,151 $ 8,798
Pawns receivable (Note 1) 28,014 22,711
Inventory (Note 1) 60,349 44,901
--------- ---------
TOTAL CURRENT ASSETS 92,514 76,410
Property & equipment (Note 1) 33,039 39,261
--------- ---------
$ 125,553 $ 115,671
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 7,640 $ 5,876
Accrued expenses 7,838 4,946
Loan Payable (Note 8) 10,000 0
Accrued expenses - related parties (Note 9) 33,750 21,270
Franchise tax payable 100 100
Loans payable - related parties (Note 9) 52,000 52,000
--------- ---------
TOTAL CURRENT LIABILITIES 111,328 84,192
--------- ---------
TOTAL LIABILITIES 111,328 84,192
SHAREHOLDERS' EQUITY
Common stock no par value, 50,000,000 shares authorized;
2,149,000 shares issued (2,095,300 in 1998) 191,372 137,394
Deficit accumulated during development stage (177,147) (105,915)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 14,225 31,479
--------- ---------
$ 125,553 $ 115,671
========= =========
See Notes to the Financial Statements.
F-3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAWNBROKERS EXCHANGE, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
Period
from
Year Ended 7/9/97
December 31, (Date of
-------------------------- inception) to
1999 1998 12/31/99
----------- ----------- -----------
<S> <C> <C> <C>
Sales $ 160,546 $ 115,397 $ 276,953
Cost of Sales 60,845 43,033 104,692
----------- ----------- -----------
GROSS PROFIT 99,701 72,364 172,261
Expenses:
General and Administrative expenses:
Advertising 20,390 8,356 29,346
Bank charges 641 614 1,789
Depreciation 7,922 7,397 15,884
Insurance 1,091 1,580 2,671
Interest - related parties 12,480 20,470 34,750
Miscellaneous overhead 5,260 2,403 8,664
Office supplies 4,937 6,684 15,001
Outside services 7,147 3,686 15,951
Payroll and payroll taxes 65,149 42,274 107,423
Property taxes 3,783 354 7,234
Rent - related party 36,000 36,000 90,000
Repairs 1,080 5,173 9,375
Utilities 4,953 5,147 11,020
----------- ----------- -----------
170,833 140,138 349,108
----------- ----------- -----------
(LOSS) BEFORE INCOME TAXES (71,132) (67,774) (176,847)
PROVISION FOR INCOME TAXES 100 100 300
----------- ----------- -----------
NET (LOSS) $ (71,232) $ (67,874) $ (177,147)
=========== =========== ===========
(LOSS) PER COMMON SHARE
Net (loss) per weighted average common
share outstanding $ (.03) $ (.03)
=========== ===========
Weighted average number of common
shares outstanding (Note 1) 2,133,939 2,000,000
=========== ===========
See Notes to the Financial Statements.
F-4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAWNBROKERS EXCHANGE, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Period from July 9, 1997 (date of inception) to December 31, 1999
Deficit
Accumulated
Common Stock During
------------------------ Development
Shares Amount Stage
---------- ---------- ----------
<S> <C> <C> <C>
Balances at July 9, 1997 0 $ 0 $ 0
Sale of common stock at $.025 per share 8/15/97 2,000,000 50,020
Net loss for period (38,041)
---------- ---------- ----------
Balances at December 31, 1997 2,000,000 50,020 (38,041)
Sale of common stock at $1.00 per share July through October 95,300 95,300
Capital raising costs (7,926)
Net loss for year (67,874)
---------- ---------- ----------
Balances at December 31, 1998 2,095,300 137,394 (105,915)
Sale of common stock at $1.00 per share February through April 53,700 53,978
Net loss for year (71,232)
---------- ---------- ----------
Balances at December 31, 1999 2,149,000 $ 191,372 $ (177,147)
========== ========== ==========
See Notes to the Financial Statements.
F-5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAWNBROKERS EXCHANGE, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
Period
from
Year Ended 7/9/97
December 31, (Date of
---------------------- inception) to
1999 1998 12/31/99
--------- --------- ---------
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net (loss) $ (71,232) $ (67,874) $(177,147)
Adjustments to reconcile net (loss) to net cash required
by operating activities:
Depreciation 7,922 7,397 15,884
Changes in:
Prepaid expense 0 7,626 0
Pawns receivable (5,303) (18,284) (28,014)
Inventory (15,448) (37,734) (60,349)
Franchise tax payable 0 0 100
Accounts payable and accrued expenses 17,136 19,336 49,228
--------- --------- ---------
NET CASH REQUIRED BY OPERATING ACTIVITIES (66,925) (89,533) (200,298)
INVESTING ACTIVITIES
Purchase of equipment (1,700) (5,545) (48,923)
--------- --------- ---------
NET CASH USED IN INVESTING ACTIVITIES (1,700) (5,545) (48,923)
FINANCING ACTIVITIES
Stock sold 53,978 87,374 191,372
Loan 10,000 0 10,000
Loans - related parties 0 62,000 127,000
Loan repayments - related parties 0 (75,000) (75,000)
--------- --------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 63,978 74,374 253,372
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH (4,647) (20,704) 4,151
CASH AT BEGINNING OF PERIOD 8,798 29,502 0
--------- --------- ---------
CASH AT END OF YEAR $ 4,151 $ 8,798 $ 4,151
========= ========= =========
SUPPLEMENTAL INFORMATION
Cash paid for:
Interest $ 0 $ 1,000 $ 1,000
Income taxes 100 100 200
See Notes to the Financial Statements.
F-6
</TABLE>
<PAGE>
PAWNBROKERS EXCHANGE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
December 31, 1999, 1998, and 1997
NOTE 1: SUMMARY OF HISTORY AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
- --------------------
The Company was incorporated in the State of Utah on July 9, 1997. The Company
is engaged in the business of pawnbrokering.
Development Stage Company
- -------------------------
The financial statements present the Company as a development stage company
because of its short operating history.
Pawns Receivable
- ----------------
These amounts are collateralized by property of the debtor which has a higher
value than the receivable. The Company's experience has been that about 40% of
the receivable will not be collected and the Company will convert the collateral
to inventory that can be sold for more than the receivable.
Property and Equipment
- ----------------------
Property and equipment is recorded at cost and is being depreciated over its
useful life of five to seven years under the straight-line method. Cost and
allowance for depreciation is $48,923 and $(15,884) and $47,223 and $(7,962) at
December 31, 1999 and 1998 respectively.
Cash and Cash Equivalents
- -------------------------
For financial statement purposes, the Company considers all highly liquid
investments with an original maturity of three months or less when purchased to
be cash equivalents.
Estimates
- ---------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenues, and expenses
during the reporting period. Estimates also affect the disclosure of contingent
assets and liabilities at the date of the financial statements. Actual results
could differ from these estimates.
Inventory
- ---------
Inventory consists of items for sale in the normal course of business, and is
valued at the lower of cost (first-in, first-out basis) or market. At December
31, 1999, about 25% of the inventory is new and 75% is used, with much of the
used inventory consisting of collateral converted to inventory when debtors
defaulted on their pawns.
Income Taxes
- ------------
The Company utilizes the liability method of accounting for income taxes as set
forth in Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes" (SFAS 109). Under the liability method, deferred taxes are
determined based on the difference between the financial statement and tax bases
of assets and liabilities using enacted tax rates in effect in the years in
which the differences are expected to reverse. An allowance against deferred tax
assets is recorded when it is more likely than not that such tax benefits will
not be realized.
Revenue Recognition
- -------------------
Revenue on retail sales is recognized at the time of sale. Service fee revenue
on pawns is recognized when collected due to the high default rate on pawns.
Income (Loss) Per Common Share
- ------------------------------
Income (Loss) per common share is computed using the weighted average number of
common shares outstanding.
NOTE 2: INCOME TAXES
At December 31, 1999, the Company has a deferred tax asset in the amount of $0.
There may be a deferred tax asset, but the amount, if any, cannot be determined
at this time. In any event, the amount has been reserved 100% due to the
Company's current losses. There is not sufficient basis for recognition of any
deferred tax asset at this time.
F-7
<PAGE>
PAWNBROKERS EXCHANGE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 1999, 1998, and 1997
NOTE 2: INCOME TAXES (continued)
The Company has a net operating loss carryforward which expires as follows:
Federal Utah
--------------------- ---------------------
Expiration Expiration
Amount Date Amount Date
------ ---- ------ ----
Year ended December 31, 1997 $ 38,041 12/31/2012 $ 37,941 12/31/2012
Year ended December 31, 1998 67,874 12/31/2018 67,774 12/31/2013
Year ended December 31, 1999 71,232 12/31/2019 71,132 12/31/2014
-------- --------
$177,147 $176,847
======== ========
NOTE 3: COMMITMENTS
The Company had a triple net lease through June 30, 1999 on its facility owned
by a related entity (owned 50% by the Company's President). The Company
exercised its option to renew the lease through June 2001. Monthly lease
payments are $3,000. Future minimum lease payments are as follows:
Year ended December 31, 2000 $36,000
Year ended December 31, 2001 18,000
-------
$54,000
=======
NOTE 4: RELATED PARTY TRANSACTIONS
During the year ended December 31, 1999, $36,000 was paid or accrued to a
related party for rent and $12,480 was accrued to related parties for interest
on loans.
During the year ended December 31, 1998, $36,000 was paid to a related party for
rent and $1,000 was paid and $19,470 was accrued to related parties for interest
on loans.
During the period ended December 31, 1997, $18,000 was paid to a related party
for rent and $1,800 was accrued to related parties for interest on loans.
NOTE 5: STOCK TRANSACTIONS
In 1999, the Company raised $53,978 from the sale of 53,700 shares of its common
stock.
In 1998, the Company raised $95,300 from the sale of 95,300 shares of its common
stock.
In 1997, the Company raised $50,020 from four(4) related parties from the sale
of its common stock.
NOTE 6: FUTURE PLANS
The Company intends to sell 250,000 shares of its common stock for $1.00 per
share pursuant to a Regulation 504 D offering. 95,300 shares were sold in 1998
and 53,700 shares were sold in 1999.
F-8
<PAGE>
PAWNBROKERS EXCHANGE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 1999, 1998, and 1997
NOTE 7: GOING CONCERN ITEMS
The financial statements are presented on the basis that the Company is a going
concern, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business over a reasonable length of time.
At December 31, 1999, the Company has a working capital deficit of $(18,814), an
accumulated deficit of $(177,147), and a loss from operations for 1999 of
$(71,232). The Company only began operations in December, 1997 and has a
substantial need for working capital.
Management feels that loans from related parties will provide sufficient working
capital to allow the Company to continue as a going concern in the event the
offering described in Note 6 does not provide sufficient working capital.
NOTE 8: LOAN PAYABLE
In 1999, the Company obtained a $10,000 loan. The demand promissory note bears
interest at 10% per year.
NOTE 9: LOANS PAYABLE - RELATED PARTIES
At December 31, 1999, the Company owes $10,000, $12,000, and $30,000 to three
related parties ($10,000, $12,000, and $30,000 in 1998). The loans are due on
demand and bear interest at 24% per year. Accrued interest on these loans is
$33,750 at December 31, 1999 ($21,270 at December 31, 1998).
NOTE 10: SEGMENT INFORMATION
Sales for 1999 included about $30,600 ($15,200 in 1998) of service charge income
collected on pawns. The balance of the sales is from retail sales.
F-9
ARTICLES OF INCORPORATION
OF
PAWNBROKERS EXCHANGE, INC.
The undersigned, acting as incorporators of a corporation under the Utah
Revised Business Corporation Act, as amended, hereby adopt the following
Articles of Incorporation for such corporation:
ARTICLE I
NAME
----
The name of the corporation is: PAWNBROKERS EXCHANGE, INC.
ARTICLE II
CORPORATE PURPOSES
------------------
The purpose of the Corporation is to engage in the business of pawn
brokering and any other lawful enterprise or activity for which corporations may
be organized under the Utah Revised Business Corporation Act.
ARTICLE III
CAPITALIZATION
--------------
The aggregate number of shares the Corporation is authorized to issue shall
be 50,000 shares. All such shares shall have no par value and shall be offered
and sold at such price and on such terms as the directors of the Corporation
may, in their sole discretion and consistent with applicable laws, deem
appropriate. Each share shall entitle the holder thereof to one (1) vote on each
matter submitted to a vote at a meeting of shareholders or otherwise requiring
the approval of the Corporation's shareholders. All stock of the Corporation
shall be of the same class and shall have the same rights and preferences. The
capital stock of the Corporation shall be issued as fully paid and the private
property of the shareholders shall not be liable for the debts, obligations or
liabilities of the Corporation. Fully paid stock of this Corporation shall not
be liable to any further call or assessment.
<PAGE>
ARTICLE IV
DIRECTOR
--------
The name and address of the initial director of the Corporation is as
follows:
Name Address
---- -------
Michael Vardakis 47 East 400 South
Salt Lake City, Utah 84111
ARTICLE V
REGISTERED OFFICE AND REGISTERED AGENT
--------------------------------------
The registered agent of the Corporation and the address of the registered
office of the Corporation in the State of Utah shall be Scott O. Mercer, 2000
Beneficial Life Tower, 36 South State Street, Salt Lake City, Utah 84111. A
consent to appointment signed on behalf of said registered agent is attached to
these articles and filed herewith.
ARTICLE VI
INCORPORATOR
------------
The name and address of the incorporator of the corporation is as follows:
Scott O. Mercer Suite 2000, 36 South State Street,
Salt Lake City, Utah 84111
IN WITNESS WHEREOF, the undersigned, being the incorporator of the
Corporation, executes these Articles of Incorporation and certifies to the truth
of the facts herein stated, this 9th day of July, 1997.
KESLER & RUST, P.C.
By: /s/ Scott O. Mercer
-----------------------
Scott O. Mercer
Appointment as registered agent for the above Corporation is hereby
accepted:
BY: /s/ Scott O. Mercer
-----------------------
Scott O. Mercer
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
PAWNBROKERS EXCHANGE, INC.
Pursuant to the Utah Revised Business Corporation Act, as amended, the
Board of Directors of Pawnbrokers Exchange, Inc., as represented by the
undersigned Chairman, hereby adopt and amend the following Articles of
Incorporation for such corporation, specifically amending the number of
authorized shares of the corporation:
ARTICLE I
NAME
----
The name of the corporation is: PAWNBROKERS EXCHANGE, INC.
ARTICLE II
CORPORATE PURPOSES
------------------
The purpose of the Corporation is to engage in the business of pawn
brokering and any other lawful enterprise or activity for which corporations may
be organized under the Utah Revised Business Corporation Act.
ARTICLE III
CAPITALIZATION
--------------
The aggregate number of shares the Corporation is authorized to issue shall
be 50,000,000 shares. All such shares shall have no par value and shall be
offered and sold at such price and on such terms as the directors of the
Corporation may, in their sole discretion and consistent with applicable laws,
deem appropriate. Each share shall entitle the holder thereof to one (1) vote on
each matter submitted to a vote at a meeting of shareholders or otherwise
requiring the approval of the Corporation's shareholders. All stock of the
Corporation shall be of the same class and shall have the same rights and
preferences. The capital stock of the Corporation shall be issued as fully paid
and the private property of the shareholders shall not be liable for the debts,
obligations or liabilities of the Corporation. Fully paid stock of this
Corporation shall not be liable to any further call or assessment.
<PAGE>
ARTICLE IV
DIRECTOR
--------
The name and address of the initial director of the Corporation is as
follows:
Name Address
---- -------
Michael Vardakis 47 East 400 South
Salt Lake City, Utah 84111
ARTICLE V
REGISTERED OFFICE AND REGISTERED AGENT
--------------------------------------
The registered agent of the Corporation and the address of the registered
office of the Corporation in the State of Utah shall be Scott O. Mercer, 2000
Beneficial Life Tower, 36 South State Street, Salt Lake City, Utah 84111. A
consent to appointment signed on behalf of said registered agent is attached to
these articles and filed herewith.
ARTICLE VI
INCORPORATOR
------------
The name and address of the incorporator of the corporation is as follows:
Scott O. Mercer Suite 2000, 36 South State Street,
Salt Lake City, Utah 84111
<PAGE>
STATEMENT REGARDING AMENDMENT ADOPTION
--------------------------------------
The undersigned, being the sole director of the corporation, states that
the corporation, by and through its Board of Directors, adopted the above
amendment without shareholder approval pursuant to Utah Code Ann. ss.
16-10a-1002.
IN WITNESS WHEREOF, the undersigned, being the sole director of the
Corporation, executes these Amended and Restated Articles of Incorporation and
certifies to the truth of the facts herein stated, this 14 day of August, 1997.
/s/ MICHAEL VARDAKIS
--------------------------
MICHAEL VARDAKIS
Director
Appointment as registered agent for the above Corporation is hereby
accepted:
BY: /s/ Scott O. Mercer
-----------------------
Scott O. Mercer
BYLAWS
OF
PAWNBROKERS EXCHANGE, INC.
ARTICLE I
Office
------
Section 1.1 Office. The Company shall maintain such offices, within or
without the State of Utah, as the Board of Directors may from time to time
designate. The location of the principal office may be changed by the Board of
Directors.
ARTICLE II
Shareholders' Meeting
---------------------
Section 2.1 Annual Meetings. The annual meeting of the shareholders of the
Corporation shall be held at such place within or without the State of Utah as
shall be set forth in compliance with these Bylaws. The annual meeting shall be
held on the second Friday of May of each year beginning with the year 1998 at
the hour of 10:00 a.m. If such day is a legal holiday, the meeting shall be on
the next business day. This meeting shall be for the election of directors and
for the transaction of such other business as may come before it.
Section 2.2 Special Meetings. Special meetings of shareholders, other than
those prescribed and regulated by statute, may be called at any time by the
President, or a majority of the directors, and must be called by the President
upon written request of the holders of not less than 10% of the issued and
outstanding shares entitled to vote at such special meeting. Written notice of
such meeting stating the place, the date and hour of the meeting, the purpose or
purposes for which it is called, and the name of the person by whom or at whose
direction the meeting is called shall be given to each shareholder of record in
the same manner as notice of the annual meeting.
Section 2.3 Notice of Shareholders' Meetings. The Secretary shall give
written notice stating the place, day and hour of the meeting, and in the case
of a special meeting the purpose or purposes for which the meeting is called,
which shall be delivered not less than ten (10) nor more than fifty (50) days
before the day of the meeting, either personally or by mail to each shareholder
of record entitled to vote at such meeting. If mailed, such notice shall be
deemed to be delivered when deposited in the United States mail addressed to the
shareholder at his/her address as it appears on the books of the Corporation,
with postage thereon prepaid.
Section 2.4. Place of Meeting. The Board of Directors may designate any
place, either within or without the State of Utah, as the place of meeting for
any annual meeting or for any special meeting called by the Board of Directors.
A waiver of notice signed by all shareholders entitled to vote at a meeting may
designate any place, either within or without the state as the place for the
holding of such meeting unless otherwise described by statute. If no designation
is made, or if a special meeting is otherwise called, the place of meeting shall
be the principal business office of the Corporation.
<PAGE>
Section 2.5 Record Date. The Board of Directors may fix a date not less
than ten (10) nor more than fifty (50) days prior to any meeting as the record
date for the purpose of determining shareholders entitled to notice of and to
vote at, such meetings of the shareholders. The transfer books may be closed by
the Board of Directors for a stated period not to exceed fifty (50) days for the
purpose of determining shareholders entitled to receive payment of any dividend,
or in order to make a determination of shareholders for any other purpose. If
the stock transfer books are not closed and no record date is fixed for the
determination of shareholders entitled to notice of or to vote at a meeting of
shareholders, or shareholders entitled to receive payment of a dividend, the
date on which notice of the meeting is mailed or the date on which the
resolution of the Board of Directors declaring such dividend is adopted, as the
case may be, shall be the record date for such determination.
Section 2.6 Quorum. A majority of the outstanding shares of the Corporation
entitled to vote, represented in person or by proxy, shall constitute a quorum
at a meeting of shareholders. If less than a majority of the outstanding shares
are represented at a meeting, a majority of the shares so represented may
adjourn the meeting from time to time without further notice. At a meeting
resumed after any such adjournment at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally noticed. The shareholders present at a duly organized
meeting may continue to transact business until adjournment, notwithstanding the
withdrawal of shareholders in such number that less than a quorum remain.
Section 2.7 Voting. A holder of an outstanding share entitled to vote at a
meeting in accordance with the terms and provisions of the Articles of
Incorporation and these Bylaws may vote at such meeting in person or by proxy.
Except as may otherwise be provided in the Articles of Incorporation, every
shareholder shall be entitled to one vote for each share entitled to vote held
in his/her name on the record of shareholders. Except as herein or in the
Articles of Incorporation otherwise provided, all corporate action shall be
determined by a majority of the votes cast at a meeting of shareholders by the
holders of shares entitled to vote thereon. Upon demand of any shareholder, the
vote for directors and upon any question before a meeting of the shareholders
shall be by ballot.
Section 2.8. Proxies. At all meetings of shareholders, a shareholder may
vote in person or by proxy executed in writing by the shareholder or by his/her
duly authorized attorney in fact. Such proxy shall be filed with the secretary
of the Corporation before or at the time of the meeting. No proxy shall be valid
after eleven (11) months from the date of its execution, unless provided in the
proxy.
Section 2.9 Informal Action by Shareholders. Unless otherwise provided by
law, any action required to be taken at a meeting of the shareholders, or any
other action which may be taken at a meeting of the shareholders, may be taken
without a meeting if a consent in writing, setting forth the action so taken,
shall be signed by all of the shareholders entitled to vote with respect to the
subject matter thereof.
Section 2.10 Order of Business. Order of business at meetings of the
shareholders shall be substantially as follows:
(a) Roll call.
(b) Proof of notice of meeting or waiver of notice.
(c) Reading of minutes of preceding meeting.
(d) Reports of officers.
(e) Election of directors.
(f) Unfinished business.
(g) New business.
2
<PAGE>
ARTICLE III
Board of Directors
------------------
Section 3.1 General Powers. The business and affairs of the Corporation
shall be managed by its Board of Directors. The directors shall, in all cases,
act as a Board and may adopt such rules and regulations for the conduct of their
meetings and the management of the Corporation as they deem proper, consistent
with these Bylaws and the laws of this state.
Section 3.2 Number, Tenure, and Qualifications. The number of directors for
the initial Board of Directors of the corporation shall be four (4). Each
director shall hold office until the next annual meeting of shareholders and
until his/her successor shall have been elected and qualified. Directors need
not be residents of the State of Utah or shareholders of the Corporation. The
number of directors may be changed by resolution adopted by the Board of
Directors.
Section 3.3 Regular Meetings. A regular meeting of the Board of Directors
shall be held without other notice than this Bylaw, immediately following and at
the same place as the annual meeting of shareholders. The Board of Directors may
provide, by resolution, the time and place for the holding of additional regular
meetings without other notice than such resolution.
Section 3.4 Special Meetings. Special meetings of the Board of Directors
may be called by order of the Chairman of the Board, the President or by two (2)
of the directors. The Secretary shall give notice of the time, place, and
purpose or purposes of such special meeting by delivering the written notice
personally or by mailing the same at least two (2) days before the meeting or by
telephoning, telexing or telefaxing the same at least one (1) day before the
meeting to each director.
Section 3.5 Quorum. A majority of the members of the Board of Directors
shall constitute a quorum for the transaction of business, but less than a
quorum may adjourn any meeting from time to time until a quorum shall be
present, whereupon the meeting may be held, as adjourned, without further
notice. At any meeting at which every director shall be present, even though
without any notice, any business may be transacted.
Section 3.6 Manner of Acting. At all meetings of the Board of Directors,
each director shall have one (1) vote. The act of a majority present at a
meeting shall be the act of the Board of Directors, provided a quorum is
present. Any action required to be taken or which may be taken at a meeting of
the directors may be taken without a meeting if a consent in writing setting
forth the action so taken shall be signed by all the directors. The directors
may conduct a meeting by means of a telephone conference or any similar
communications equipment by which all persons participating in the meeting can
hear each other.
Section 3.7 Vacancies. A vacancy in the Board of Directors shall be deemed
to exist in case of death, resignation or removal of any director, or if the
authorized number of directors be increased, or if the shareholders fail at any
meeting of shareholders at which any director is to be elected, to elect the
full authorized number to be elected at that meeting. Newly created
directorships resulting from an increase in the number of directors and
vacancies occurring in the Board for any reason except removal of a director
without cause may be filled by vote of a majority of the directors then in
office, although less than a quorum exists. Vacancies occurring by reason of the
removal of a director without cause shall be filled by vote of the shareholders.
A director elected to fill a vacancy caused by resignation, death or removal
shall hold office for the unexpired term of his/her predecessor.
3
<PAGE>
Section 3.8 Removal. Directors may be removed at any time with or without
cause, by a vote of the shareholders holding a majority of the shares issued and
outstanding and entitled to vote. Directors may also be removed for cause by
vote of a majority of the Board of Directors (excluding the affected director).
Such vacancy shall be filled by the directors then in office, though less than a
quorum, to hold office until the next annual meeting or until his/her successor
is duly elected and qualified, except that any directorship to be filled by
reason of removal by the shareholders may be filled by election, by the
shareholders, at the meeting at which the director is removed. No reduction of
the authorized number of directors shall have the effect of removing any
director prior to the expiration of this term of office.
Section 3.9 Resignations. A director may resign at any time by giving
written notice thereof to the Board of Directors, the President or the Secretary
of the Corporation. Such resignation shall become effective upon its acceptance
by the Board of directors; provided, however, that if the Board of Directors has
not acted thereon within ten days from the date of its delivery, the resignation
shall be deemed effective upon the tenth day following receipt thereof.
Section 3.10 Presumption of Assent. A director of the Corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
his/her dissent shall be entered in the minutes of the meeting or unless he
shall file his/her written dissent to such action with the person acting as the
secretary of the meeting before the adjournment thereof or shall forward such
dissent by registered mail to the Secretary of the Corporation immediately after
the adjournment of the meeting. Such right to dissent shall not apply to a
director who voted in favor of such action.
Section 3.11 Compensation. By resolution of the Board of Directors, the
directors may be paid their expenses, if any, for attendance at any meeting of
the Board of Directors, and may be paid a fixed sum for attendance at each
meeting of the Board of Directors or a stated salary as a director. No such
payment shall preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor.
Section 3.12 Emergency Power. A director of the Corporation who is present
at a meeting of the Board at which action on any corporate matter is taken shall
be presumed to have assented to the action taken unless the dissent of such
director shall be entered in the minutes of the meeting, filed in writing with
the person acting as the secretary of the meeting before the adjournment thereof
or forwarded by registered mail to the Secretary of the Corporation immediately
after the meeting. Such right to dissent shall not apply to a director who voted
in favor of such action.
Section 3.13 Chairman. The Board of Directors may elect from its own number
a Chairman of the Board, who shall initiate, organize and preside at all
meetings of the Board of directors, provide the agenda therefor and shall
perform such other duties as may be prescribed from time to time by the Board of
Directors.
Section 13.14 Executive and Other Committees. The Board of Directors may,
by resolution, designate only from among its members an executive committee and
other committees each consisting of not less than three (3) directors. Such
committees shall serve at the pleasure of and report to the Board of directors
as provided in Article V.
4
<PAGE>
ARTICLE IV
Officers
--------
Section 4.1 Number. The officers of the Corporation shall be a President,
one or more Vice Presidents, a Secretary, and a Treasurer, each of whom shall be
elected by a majority of the Board of Directors. Such other officers and
assistant officers as may be deemed necessary may also be elected or appointed
by the Board of Directors. In its discretion, the Board of directors may leave
unfilled for any such period as it may determine any office except those of
President and Secretary. Any two or more offices may be held by the same person,
except the offices of President and Secretary. Any two or more offices may be
held by the same person, except the offices of President and Secretary. Officers
may or may not be directors or shareholders of the Corporation.
Section 4.2 Election and Term of Office. The officers of the Corporation
are to be elected annually by the Board of Directors at the first meeting of the
Board of Directors held after the annual meeting of the shareholders. If the
election of officers shall not be held at such meeting, such election shall be
held as soon thereafter as convenient. Each officer shall hold office until
his/her successor shall have been duly elected and shall have qualified or until
his/her death or until he shall resign or shall have been removed in the manner
hereinafter provided.
Section 4.3 Resignations. Any officer may resign at any time by giving
written resignation either to the President or to the Secretary of the
Corporation. Unless otherwise specified therein, such resignation shall take
effect upon delivery.
Section 4.4 Removal. Any officer or agent elected or appointed by the Board
may be removed by the Board of Directors whenever, in its judgment, the best
interests of the Corporation will be served thereby, but such removal shall be
without prejudice to the contract rights, if any, of the person so removed.
Election or appointment of an officer or agent shall not of itself create
contract rights. Any such removal shall require a majority vote of the Board of
directors, exclusive of the office in question if he is also a director.
Section 4.5 Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, or if a new office shall be
created, may be filled by the Board of Directors for the unexpired portion of
the term.
Section 4.6 The President. The President shall be the chief executive and
administrative officer of the Corporation. He/she shall preside at all meetings
of the shareholders and, in the absence of the Chairman of the Board, at
meetings of the Board of Directors. He/she shall exercise such duties as
customarily pertain to the office of President and, subject to the control of
the Board of Directors, shall have general and active supervision and control
over the property, business, and affairs of the Corporation. He/she shall, when
present, preside over all meetings of the shareholders. He/she may appoint
officers, agents, or employees other than those appointed by the Board of
Directors. He/she may, with the Secretary, sign, execute and deliver in the name
of the corporation powers of attorney, contracts, bonds, certificates for
shares, mortgages, deeds and other instruments which the directors have
authorized except in cases where the signing or execution thereof is expressly
delegated by the Board of Directors or by these Bylaws or by law to some other
officer or agent of the Corporation and, in general, shall perform all duties
incident to the office and such other duties as prescribed from time to time by
the Board of Directors or by the Bylaws.
Section 4.7 Vice President. The Vice President shall have such powers and
perform such duties as may be assigned to them by the Board of Directors or the
President. In the absence or disability of the President, the Vice President
designated by the Board or the President shall perform the duties and exercise
the powers of the President. In the event there is more than one Vice President
and the Board of directors has not designated which vice President is to act as
President, then the Vice President who was elected first shall act as President.
5
<PAGE>
Section 4.8 The Secretary. The Secretary shall keep the minutes of all
meetings of the shareholders and of the Board of Directors in one or more books
provided for that purpose and to the extent ordered by the Board of Directors or
the President, shall keep the minutes of meetings of all committees. He/she
shall cause notice to be duly given of meetings of shareholders, of the Board of
Directors, and of any committee appointed by the Board. He/she shall have
custody of the corporate seal and general charge of the records, documents, and
papers of the Corporation not pertaining to the performance of the duties vested
in other officers, which shall at all reasonable times be open to the
examination of any director. The Secretary shall keep a register of the mailing
address of each shareholder and shall have general charge of the stock transfer
books of the Corporation. He/she may sign or execute contracts with the
president or a Vice President thereunto authorized in the name of the company
and affix the seal of the Corporation thereto. He/she shall perform any and all
such other duties as may be prescribed from time to time by the Board of
Directors or by the Bylaws. He/she shall be sworn to the faithful discharge of
his/her duties. Assistant Secretaries shall assist the Secretary and shall keep
and record such minutes of meetings as shall be directed by the Board of
Directors.
Section 4.9 Treasurer. The Treasurer shall have general custody of and be
responsible for the collection and disbursement of funds and securities of the
Corporation. He/she shall endorse on behalf of the Corporation for collecting
checks, notes, and other obligations, and shall deposit the same to the credit
of the Corporation in such bank or banks or depositories as the Board of
Directors may designate. He/she shall enter or cause to be entered regularly in
the books of the Corporation full and accurate accounts of all monies received
and paid by him/her on account of the Corporation shall at all reasonable times
exhibit his/her books and accounts to any director of the Corporation upon
application at the office of the Corporation during business hours; and,
whenever required by the Board of directors or the President, shall render a
statement of his/her accounts. He/she shall perform such other duties as may be
prescribed from time to time by the Board of directors or by the Bylaws.
Section 4.10 General Manager. The Board of Directors may employ and appoint
a General Manager who may, or may not, be one of the officers or directors of
the Corporation. If employed by the Board of directors he/she shall be the chief
operating officer of the Corporation and, subject to the directions of the Board
of directors, shall have general charge of the business operations of the
Corporation and general supervision over its employees and agents. He/she shall
have the exclusive management of the business of the Corporation and of all of
its dealings, but at all times subject to the control of the Board of Directors.
Subject to the approval of the Board of Directors or the executive committee,
he/she shall employ all employees of the Corporation, or delegate such
employment to subordinate officers, or such division officers, or such division
chiefs, and shall have authority to discharge any person so employed. He/she
shall make a report to the President and directors quarterly, or more often if
required to do so, setting forth the result of the operations under his/her
charge, together with suggestions looking to the improvement and betterment of
the condition of the Corporation, and to perform such other duties as the Board
of directors shall require.
Section 4.11 Other Officers. Other officers appointed by the Board of
Directors shall perform such duties and have such powers as may be assigned to
them by the Board of Directors.
Section 4.12 Salaries. The salaries or other compensation of the officers
of the Corporation shall be fixed from time to time by the Board of directors
except that the Board of directors may delegate to any person or group of
persons the power to fix the salaries or other compensation of any subordinate
officers or agents. No officer shall be prevented from receiving any such salary
or compensation by reason of the fact that he/she is also a director of the
Corporation.
6
<PAGE>
Section 4.13 Surety Bonds. In case the Board of Directors shall so require,
any officer or agent of the Corporation shall execute to the Corporation a bond
in such sums and with surety or sureties as the Board of Directors may direct,
conditioned upon the faithful performance of his/her duties to the corporation,
including responsibility for negligence and for the accounting for all property,
monies or securities of the Corporation which may come into his/her hands.
ARTICLE V
Committees
----------
Section 5.1 Executive Committee. The Board of Directors may appoint from
among its members an Executive Committee of not less than three (3) nor more
than seven (7) members, one (1) of whom shall be the President, and shall
designate one or more of its members as alternates to serve as a member or
members of the Executive Committee in the absence of a regular member or
members. The Board of Directors reserves to its3elf alone the power to declare
dividends, issue stock, recommend to shareholders any action requiring their
approval, change the membership of any committee at any time, fill vacancies
therein, and discharge any committee either with or without cause at any time.
Subject to the foregoing limitations, the Executive Committee when and as
established shall possess and exercise all other powers of the Board of
Directors during the intervals between regular meetings of the Board.
Section 5.2 Other Committees. The Board of Directors may also appoint from
among its own members such other committees as the Board may determine, which
shall in each case consist of not less than three (3) directors, and which shall
have such powers and duties as shall from time to time be prescribed by the
Board. The President shall be a member ex officio of each committee appointed by
the Board of Directors. A majority of the members of any committee may fix its
rules of procedure, consistent with these Bylaws and the Articles of
Incorporation.
ARTICLE VI
Contracts, Loans, Checks and Deposits
-------------------------------------
Section 6.1 Contracts. The Board of Directors may authorize any office or
officers, agents or agent, to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the Corporation, and such authority
may be general or confined to specific instances.
Section 6.2 Loans. No loan or advances shall be contracted on behalf of the
Corporation, no negotiable paper or other evidence of its obligation or
indebtedness under any loan or advance shall be issued in its name, and no
property of the Corporation shall be mortgaged, pledged, hypothecated or
transferred as security for the payment of any loan, advance, indebtedness or
liability of the Corporation unless and except as authorized in writing by
resolution of the Board of Directors. Any such authorization may be general or
confined to specific instances.
Section 6.3 Deposits. All funds of the corporation not otherwise employed
shall be deposited from time to time to the credit of the Corporation in such
banks, trust companies or other depositories as the Board of Directors may
select, or as may be selected by any officer or agent authorized to do so by
resolution of the Board of Directors.
7
<PAGE>
Section 6.4 Checks and Drafts. All notes, drafts, acceptances, checks,
endorsements and evidences of indebtedness of the Corporation shall be signed by
such officer or officers or such agent or agents of the Corporation and in such
manner as the Board of Directors from time to time may, by resolution,
determine. Endorsements for deposit to the credit of the Corporation in any of
its duly authorized depositories shall be made in such manner as the Board of
Directors from time to time may, by resolution, determine.
Section 6.5 Bonds and Debentures. Every bond or debenture issued by the
Corporation shall be evidenced by an appropriate instrument which shall be
signed by the President or a Vice President and by the Treasurer or by the
Secretary, and sealed with the seal of the Corporation. The seal may be
facsimile, engraved or printed. Where such bond or debenture is authenticated
with the annual signature of an authorized officer of the Corporation or other
trustee designated by the indenture of trust or other agreement under which such
security is issued, the signature of any of the Corporation's officers named
thereon may be facsimile. In case any officer who signed, or whose facsimile
signature has been used on any such bond or debenture, shall cease to be an
officer of the Corporation for any reason before the same has been delivered by
the Corporation, such bond or debenture may nevertheless be adopted by the
corporation and issued and delivered as though the person who signed it or whose
facsimile signature has been used thereon had not ceased to be such officer.
ARTICLE VII
Capital Stock
-------------
Section 7.1 Certificates for Shares. The shares of the Corporation shall be
represented by certificates prepared by the Board of Directors and signed by the
President and by the Secretary or such other officers authorized bylaw and
authorized by the Board of Directors and sealed with the seal of the Corporation
or a facsimile. The signatures of such officers upon a certificate may be
facsimiles if the certificate is countersigned by a transfer agent or registered
by a registrar other than the Corporation itself or one of its employees. All
certificates for shares shall be consecutively numbered or otherwise identified.
The name and address of the shareholder, with the number of shares and date of
issue, shall be entered on the stock transfer books for the Corporation. All
certificates surrendered to the Corporation for transfer shall be canceled and
no new certificate shall be issued until the former certificate for a like
number of shares shall have been surrendered and canceled, except that in case
of a lost, destroyed or mutilated certificate a new one may be issued therefor
upon such terms and indemnity to the Corporation as the Board of Directors may
prescribe.
Section 7.2 Transfer of Shares. Transfer of shares of the Corporation shall
be made only on the stock transfer books of the Corporation by the holder of
record thereof or by his/her legal representative, who shall furnish proper
evidence of authority to transfer, or by his/her attorney thereunto authorized
by power of attorney duly executed and filed with the Secretary of the
Corporation, and on surrender for cancellation of the certificate for such
shares. The person in whose name shares stand on the books of the Corporation
shall be deemed by the Corporation to be the owner thereof for all purposes.
Section 7.3 Transfer Agent and Registrar. The Board of Directors shall have
power to appoint one or more transfer agents and registrars for the transfer and
registration of certificates of stock of any class, and may require that stock
certificates shall be countersigned and registered by one or more of such
transfer agents and registrars.
Section 7.4 Lost or Destroyed Certificates. The Corporation may issue a new
certificate to replace any certificate theretofore issued by it alleged to have
been lost or destroyed. The Board of Directors may require the owner of such a
certificate or his/her legal representatives to give the Corporation a bond in
8
<PAGE>
such sum and with such sureties as the Board of Directors may direct to
indemnify the Corporation and its transfer agents and registrars, if any,
against claims that may be made on account of the issuance of such new
certificates. At the direction of the Board, a new certificate may be issued
without requiring any bond.
Section 7.5 Consideration for Shares. The capital stock of the Corporation
shall be issued for such consideration, but not less than the par value thereof,
as shall be fixed from time to time by the board of Directors. In the absence of
fraud, the determination of the Board of Directors as to the value of any
property or services received in full or partial payment of shares shall be
conclusive.
Section 7.6 Registered Shareholders. The Corporation shall be entitled to
treat the holder of record of any share or shares of stock as the holder thereof
in fact, and shall not be bound to recognize any equitable or other claim to or
on behalf of the Corporation, any and all of the rights and powers incident to
the ownership of such stock at any such meeting, and shall have power and
authority to execute and deliver proxies and consents on behalf of the
Corporation in connection with the exercise by the Corporation of the rights and
powers incident to the ownership of such stock. The Board of Directors, from
time to time, may confer like powers upon any other person or persons.
ARTICLE VIII
Indemnification
---------------
Section 8.1 Indemnification. No officer or director shall be personally
liable for any obligations arising out of any acts or conduct of said officer or
director performed for or on behalf of the Corporation by reason of his/her
office. The Corporation shall and does hereby indemnify and hold harmless each
person and his/her heirs and administrators who shall serve at any time
hereafter as a director or officer of the Corporation from and against any and
all claims, judgments and liabilities to which such persons shall become subject
by reason of his/her having heretofore or hereafter been a director or officer
of the Corporation from and against any and all claims, judgments and
liabilities to which such persons shall become subject by reason of his/her
having heretofore or hereafter been a director or officer of the Corporation, or
by reason of any action alleged to have been heretofore or hereafter taken or
omitted to have been taken by him/her as such director or officer, and shall
reimburse each such person for all legal and other expenses reasonably incurred
by him/her in connection with any such claim or liability; including power to
defend such person from all suits as provided for under the provisions of the
Utah Business Corporation Act; provided, however, that no such person shall be
indemnified against, or be reimbursed for, any expense incurred in connection
with any claim or liability arising out of his/her own negligence or willful
misconduct. The rights accruing to any person under the foregoing provisions of
this section shall not exclude any other right to which he may lawfully be
entitled, nor shall anything herein contained restrict the right of the
Corporation to indemnify or reimburse such person in any proper case, even
though not specifically herein provided for. The Corporation, its directors,
officers, employees and agents shall be fully protected in taking any action or
making any payment or in refusing so to do in reliance upon the advice of
counsel.
Section 8.2 Other Indemnification. The indemnification herein provided
shall not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any Bylaw, agreement, vote of shareholders
or disinterested directors, or otherwise, both as to action in his/her official
capacity and as to action in another capacity while holding such office, and
shall continue as to a person who has ceased to be a director, officer or
employee and shall inure to the benefit of the heirs, executors and
administrators of such a person.
9
<PAGE>
Section 8.3 Insurance. The Corporation may purchase and maintain insurance
on behalf of any person who is or was a director, officer or employee of the
Corporation, or is or was serving at the request of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him/her and incurred by him/her in any capacity, or arising out
of his/her status as such, whether or not the Corporation would have the power
to indemnify him/her against liability under the provisions of this Article VIII
or of the Utah Business Corporation Act.
Section 8.4 Settlement by Corporation. The right of any person to be
indemnified shall be subject always to the right of the Corporation by its Board
of Directors, in lieu of such indemnity, to settle any such claim, action, suit
or proceeding at the expense of the Corporation by the payment of the amount of
such settlement and the costs and expenses incurred in connection therewith.
ARTICLE IX
Waiver of Notice
----------------
Whenever any notice is required to be given to any shareholder or director
of the Corporation under the provisions of these Bylaws or under the provisions
of the Articles of Incorporation o under the provisions of the Utah Business
Corporation Act, a waiver thereof in writing signed by the person or persons
entitled to such notice, whether before or after the time stated therein, shall
be deemed equivalent to the giving of such notice. Attendance at any meeting
shall constitute a waiver of notice of such meetings, except where attendance is
for the express purpose of objecting to the legality of that meeting.
ARTICLE X
Amendments
----------
These Bylaws may be altered, amended, repealed, or added to by the
affirmative vote of the holders of a majority of the shares entitled to vote in
the election of any director at an annual meeting or at a special meeting called
for that purpose, provided that a written notice shall have been sent to each
shareholder of record entitled to vote at such meetings at least ten days before
the date of such annual or special meeting, which notice shall state the
alterations, amendments, additions, or changes which are proposed to be made in
such Bylaws. Only such changes shall be made as have been specified in the
notice. The Bylaws may also be altered, amended, repealed, or new Bylaws adopted
by a majority of the entire Board of Directors at any regular or special
meeting. Any Bylaws adopted by the Board may be altered, amended, or repealed by
a majority of the shareholders entitled to vote.
ARTICLE XI
Fiscal Year
-----------
The fiscal year of the Corporation shall be fixed and may be varied by
resolution of the Board of Directors.
10
<PAGE>
ARTICLE XII
Dividends
---------
The Board of Directors may at any regular or special meeting, as they deem
advisable, declare dividends on its outstanding shares payable out of the
surplus of the Corporation in the manner and upon the terms and conditions
provided by law.
ARTICLE XIII
Corporate Seal
--------------
The seal of the Corporation shall be in the form of a circle and shall have
inscribed thereon the name of the Corporation, the year and state of
incorporation and the words "Corporate Seal."
Adopted by resolution of the Board of Directors on the 9th day of July,
1997.
/s/ Angelo Vardakis
-------------------
Angelo Vardakis
(Lessor): Lisa Vardakis, SLC, UT 84111 of: M.N.V. Holdings, LLC
Lessee hereby offer to lease from Lessor the premises situates in the City of
Salt Lake City, County of Salt Lake, State of Utah, described as;
- --------------------------------------------------------------------------------
upon the following term and conditions.
(1) TERMS & RENT: Lessor demises the above promises for a term of (2)
(Check One) |_| Months, |X| Years, to commence on this 19 day of June, 1997, and
terminating on this 19 day of June, 1999 or sooner as provided herein at the
annual rental of ($36,000) _______________________________________ DOLLARS,
payable in equal installments in advance on the first day of each month for that
month's rental, during the term of this lease. All rental payments shall be made
to Lessor, at the address specified above.
(2) USE: Lessee shall use and occupy the premises for Pawn Shop. The
premises shall be used for no other purpose. Lessor represents that the premises
may lawfully be used for such purpose.
(3) CARE & MAINTENANCE OF PREMISES: Lessee acknowledges that the
premises are in good order and repair, unless otherwise indicated herein. Lessee
shall, at his own expense and at all times, maintain the premises in good and
safe condition, including plate glass, electrical wiring, plumbing and heating
installations and any other system or equipment upon the premises and shall
surrender the same, at termination hereof, in as good condition as received,
normal wear and tear expected. Lessee shall be responsible for all repairs
required, excepting the roof, exterior walls, structural foundation, and: Net
Net Net
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
which shall be maintained by the Lessor. Lessee shall also maintain in good
condition adjacent to the premises, such as sidewalks, driveways, lawns, and
shrubbery, which would otherwise be required to be maintained by Lessor.
(4) ALTERATIONS: Lessee shall not, without first obtaining the written
consent of Lessor, make any alterations, additions, or improvements, in, to or
about the premises.
(5) ORDINANCES & STATUTES: Lessee shall comply with all statutes,
ordinances and requirements of all municipal, state and federal authorities now
in force, or which may hereafter be in force, pertaining to the premises,
occasioned by or affecting the use thereof by Lessee.
(6) ASSIGNMENT & SUBLETTING: Lessee shall not assign this lease or
sublet any portion of the premises without prior written consent of the Lessor,
which shall not be unreasonably withheld. Any such assignment or subletting
without consent shall be void and, at the option of the Lessor, may terminate
this lease.
(7) UTILITIES: All applications and connections for necessary utility
services on the demised premises shall be made in the name of the Lessee only,
and Lessee shall be solely liable for utility charges as they become due,
including those for sewer, water, gas, electricity, and telephone services.
<PAGE>
(8) ENTRY & INSPECTION: Lessee shall permit Lessor or Lessor's agents,
to enter upon the premises at reasonable times and upon reasonable notice, for
the purpose of inspecting the same, and will permit Lessor at any time within
sixty (60) days prior to the expiration of this lease, to place upon the
premises any usual "To Let" or "For Lease" signs, and permit persons desiring to
lease the same to inspect the premises thereafter.
(9) POSSESSION: If Lessor is unable to deliver possession of the
premises at the commencement hereof, Lessor shall not be liable for any damage
caused thereby, nor shall this lease be void or voidable, but Lessee shall not
be liable for any rent until possession is delivered. Lessee may terminate this
lease if possession is not delivered within ______ days of the commencement of
the term hereof.
(10) INDEMNIFICATION OF LESSOR: Lessor shall not be liable for any
damage or injury to Lessee, or any other person or to any property, occurring on
the demised premises or any part thereof, and Lessee agrees to hold Lessor
harmless from any claims for damages, no matter how caused.
(11) INSURANCE: Lessee, at his expense, shall maintain plate glass and
public liability insurance including bodily injury and property damage insuring
Lessee and Lessor with minimum coverage as follows:
Five percent increase
- --------------------------------------------------------------------------------
Lessee shall provide Lessor with a Certificate of Insurance showing Lessor as
additional insured. The Certificate shall provide for a ten-day written notice
to Lessor in the event of cancellation or material change of coverage. To the
maximum extent permitted by insurance policies which may be owned by Lessor or
Lessee, Lessee and Lessor, for the benefit of each other, waive any and all
rights of subrogation which might otherwise exist.
(12) OTHER AGREEMENTS NOT COVERED: (To be made a part of this Lease
Agreement)
Lessor grants an option to extend for 2 additional years.
Signed this 19 day of June, 1997 in the presence of each other.
/s/ Vincent C. Lombardi, Director /s/ Michael Verdakis
--------------------------------- -------------------------------
(Lessee's Signature) (Lessor's Signature)
/s/ Pawnbrokers Exchange, Inc. /s/ M.N.V. Holdings, LLC
--------------------------------- -------------------------------
(Lessee's Signature) (Agent for Lessor)
--------------------------------- -------------------------------
(Phone) (Phone)
AMENDED PROMISSORY NOTE
Salt Lake City, Utah
$30,000.00 April 27, 1998
FOR VALUE RECEIVED, the undersigned, Pawnbrokers Exchange, Inc., a Utah
corporation (hereinafter referred to as the "Maker"), with its address at 158
South State Street, Salt Lake City, Utah 84111, agrees and promises to pay to
the order of Casa Bella Holdings, Inc. (hereinafter referred to as the
"Holder"), at 755 East Greg Street, Suite #25, Sparks, Nevada 89431, or such
other place as the Holder may designate in writing, in coin or currency of the
United States of America, which at the time of payment is legal tender for the
payment of public and private debts, the principal sum of thirty thousand
dollars ($30,000.00), together with interest thereon at the rate of twenty-four
per cent (24%) per annum, from the date hereof until maturity, as hereinafter
provided. The principal balance of this Promissory Note (hereinafter referred to
as the "Note"), together with all interest then accrued and unpaid, shall be due
and payable on demand.
This Amended Promissory Note amends and supercedes that certain demand
Promissory Note dated November 15, 1997, in the principal amount of $15,000,
bearing interest at the rate of twenty-four per cent (24%) per annum, from the
Maker to the Holder.
The Maker may prepay any part or all of this Note at any time without
penalty. Each payment or pre-payment made by the Maker hereunder shall be
applied first to the payment or pre-payment of accrued and unpaid interest, if
any, due on the unpaid principal balance of this Note and the remainder of each
payment or pre-payment made by the Maker shall be applied to the reduction of
the unpaid principal balance hereof.
If default is made in the payment of this Note, as and when the same is or
becomes due, the Holder may, after notice and failure to cure as hereinafter
provided, without additional notice or demand, declare the entire unpaid
principal balance hereof and accrued and unpaid interest, if any, at once due
and payable.
Except as otherwise specifically set out herein, the Maker waives demand
and presentment for payment, notice of non-payment, protest, notice of protest,
notice of acceleration of the indebtedness due hereunder, bringing of suit and
diligence in taking any action to collect amounts called for hereunder, and
agrees that the time of payments hereof may be extended without notice at any
time and from time-to-time, and for periods of time for a term or terms in
excess of the original term without notice or consideration to, or consent from,
the Maker, without same constituting a waiver of the Holder's rights under this
Note.
If payment hereunder is not made when due or in the event of default in any
other covenant, condition or promise under this Note, the Holder may at its
election accelerate this Note. From and after the date of such default, the
principal sum and all interest then accrued shall bear interest at the rate of
twenty-four per cent (24%) per annum until paid.
If the entire outstanding principal balance becomes due, the Maker agrees
to pay the Holder's reasonable costs (including reasonable attorney's fees and
court costs) in collecting on this Note, including the reasonable costs of
obtaining and enforcing a judgment for any balance due on this Note.
This Note has been executed in the City identified in the heading and
delivered to the Holder at the address stated herein. It is to be performed, in
whole or in part, in the State of Utah, and the laws of such state shall govern
the validity, construction, enforcement and interpretation of this Note.
Jurisdiction and venue for any action hereunder shall be in the County of the
City identified in the heading.
<PAGE>
The Maker represents that it is duly authorized and empowered to enter
into, deliver, perform and be fully bound by all of the terms, provisions and
conditions of this Note. The Maker also represents that the making and delivery
of this Note, and the performance of any agreement or instrument made in
connection herewith, does not conflict with or violate any other agreement to
which the Maker is a party.
No provision of this Note shall require the payment or permit the
collection of interest in excess of the maximum permitted by law, and in the
event of any such excess, neither the Maker nor its successors or assigns shall
be obligated to pay any such excess to the extent that it is more than the
amount permitted by law. If an excess amount is received, charged, collected or
applied as interest, it shall automatically be made so as to reduce the rate to
that permitted by law and any excess interest then received, charged or
collected shall be applied to reduce the amount of any collateral to which the
Holder is entitled.
In the event that any word, phrase, clause, sentence or other provision
hereof shall violate any applicable statute, ordinance or rule of law in any
jurisdiction in which it is used, such provision shall be ineffective to the
extent of such violation without invalidating any other provision hereof.
IN WITNESS HEREOF, this Note is executed on the date and year above
written.
PAWNBROKERS EXCHANGE, INC.
By: /s/ Michael Vardakis
------------------------
Michael Vardakis, President
PROMISSORY NOTE
Salt Lake City, Utah
$10,000.00 May 6, 1998
FOR VALUE RECEIVED, the undersigned, Pawnbrokers Exchange, Inc., a Utah
corporation (hereinafter referred to as the "Maker"), with its address at 158
South State Street, Salt Lake City, Utah 84111, agrees and promises to pay to
the order of M.N.V. Holdings, LLC (hereinafter referred to as the "Holder"), at
158 South State Street, Salt Lake City, Utah 84111, or such other place as the
Holder may designate in writing, in coin or currency of the United States of
America, which at the time of payment is legal tender for the payment of public
and private debts, the principal sum of ten thousand dollars ($10,000.00),
together with interest thereon at the rate of twenty-four per cent (24%) per
annum, from the date hereof until maturity, as hereinafter provided. The
principal balance of this Promissory Note (hereinafter referred to as the
"Note"), together with all interest then accrued and unpaid, shall be due and
payable on demand.
The Maker may prepay any part or all of this Note at any time without
penalty. Each payment or pre-payment made by the Maker hereunder shall be
applied first to the payment or pre-payment of accrued and unpaid interest, if
any, due on the unpaid principal balance of this Note and the remainder of each
payment or pre-payment made by the Maker shall be applied to the reduction of
the unpaid principal balance hereof.
If default is made in the payment of this Note, as and when the same is or
becomes due, the Holder may, after notice and failure to cure as hereinafter
provided, without additional notice or demand, declare the entire unpaid
principal balance hereof and accrued and unpaid interest, if any, at once due
and payable.
Except as otherwise specifically set out herein, the Maker waives demand
and presentment for payment, notice of non-payment, protest, notice of protest,
notice of acceleration of the indebtedness due hereunder, bringing of suit and
diligence in taking any action to collect amounts called for hereunder, and
agrees that the time of payments hereof may be extended without notice at any
time and from time-to-time, and for periods of time for a term or terms in
excess of the original term without notice or consideration to, or consent from,
the Maker, without same constituting a waiver of the Holder's rights under this
Note.
If payment hereunder is not made when due or in the event of default in any
other covenant, condition or promise under this Note, the Holder may at its
election accelerate this Note. From and after the date of such default, the
principal sum and all interest then accrued shall bear interest at the rate of
twenty-four per cent (24%) per annum until paid.
If the entire outstanding principal balance becomes due, the Maker agrees
to pay the Holder's reasonable costs (including reasonable attorney's fees and
court costs) in collecting on this Note, including the reasonable costs of
obtaining and enforcing a judgment for any balance due on this Note.
This Note has been executed in the City identified in the heading and
delivered to the Holder at the address stated herein. It is to be performed, in
whole or in part, in the State of Utah, and the laws of such state shall govern
the validity, construction, enforcement and interpretation of this Note.
Jurisdiction and venue for any action hereunder shall be in the County of the
City identified in the heading.
<PAGE>
The Maker represents that it is duly authorized and empowered to enter
into, deliver, perform and be fully bound by all of the terms, provisions and
conditions of this Note. The Maker also represents that the making and delivery
of this Note, and the performance of any agreement or instrument made in
connection herewith, does not conflict with or violate any other agreement to
which the Maker is a party.
No provision of this Note shall require the payment or permit the
collection of interest in excess of the maximum permitted by law, and in the
event of any such excess, neither the Maker nor its successors or assigns shall
be obligated to pay any such excess to the extent that it is more than the
amount permitted by law. If an excess amount is received, charged, collected or
applied as interest, it shall automatically be made so as to reduce the rate to
that permitted by law and any excess interest then received, charged or
collected shall be applied to reduce the amount of any collateral to which the
Holder is entitled.
In the event that any word, phrase, clause, sentence or other provision
hereof shall violate any applicable statute, ordinance or rule of law in any
jurisdiction in which it is used, such provision shall be ineffective to the
extent of such violation without invalidating any other provision hereof.
IN WITNESS HEREOF, this Note is executed on the date and year above
written.
PAWNBROKERS EXCHANGE, INC.
By: /s/ Michael Vardakis
------------------------
Michael Vardakis, President
AMENDED PROMISSORY NOTE
Salt Lake City, Utah
$62,000.00 July 16, 1998
FOR VALUE RECEIVED, the undersigned, Pawnbrokers Exchange, Inc., a Utah
corporation (hereinafter referred to as the "Maker"), with its address at 158
South State Street, Salt Lake City, Utah 84111, agrees and promises to pay to
the order of Michael Angelo Jewelers, Inc. (hereinafter referred to as the
"Holder"), at 47 East 400 South, Salt Lake City, Utah 84111, or such other place
as the Holder may designate in writing, in coin or currency of the United States
of America, which at the time of payment is legal tender for the payment of
public and private debts, the principal sum of sixty-two thousand dollars
($62,000.00), together with interest thereon at the rate of twenty-four per cent
(24%) per annum, from the date hereof until maturity, as hereinafter provided.
The principal balance of this Promissory Note (hereinafter referred to as the
"Note"), together with all interest then accrued and unpaid, shall be due and
payable on demand.
This Amended Promissory Note amends and supercedes that certain demand
Promissory Note dated November 15, 1997, in the principal amount of $50,000,
bearing interest at the rate of twenty-four per cent (24%) per annum, from the
Maker to the Holder.
The Maker may prepay any part or all of this Note at any time without
penalty. Each payment or pre-payment made by the Maker hereunder shall be
applied first to the payment or pre-payment of accrued and unpaid interest, if
any, due on the unpaid principal balance of this Note and the remainder of each
payment or pre-payment made by the Maker shall be applied to the reduction of
the unpaid principal balance hereof.
If default is made in the payment of this Note, as and when the same is or
becomes due, the Holder may, after notice and failure to cure as hereinafter
provided, without additional notice or demand, declare the entire unpaid
principal balance hereof and accrued and unpaid interest, if any, at once due
and payable.
Except as otherwise specifically set out herein, the Maker waives demand
and presentment for payment, notice of non-payment, protest, notice of protest,
notice of acceleration of the indebtedness due hereunder, bringing of suit and
diligence in taking any action to collect amounts called for hereunder, and
agrees that the time of payments hereof may be extended without notice at any
time and from time-to-time, and for periods of time for a term or terms in
excess of the original term without notice or consideration to, or consent from,
the Maker, without same constituting a waiver of the Holder's rights under this
Note.
If payment hereunder is not made when due or in the event of default in any
other covenant, condition or promise under this Note, the Holder may at its
election accelerate this Note. From and after the date of such default, the
principal sum and all interest then accrued shall bear interest at the rate of
twenty-four per cent (24%) per annum until paid.
If the entire outstanding principal balance becomes due, the Maker agrees
to pay the Holder's reasonable costs (including reasonable attorney's fees and
court costs) in collecting on this Note, including the reasonable costs of
obtaining and enforcing a judgment for any balance due on this Note.
This Note has been executed in the City identified in the heading and
delivered to the Holder at the address stated herein. It is to be performed, in
whole or in part, in the State of Utah, and the laws of such state shall govern
the validity, construction, enforcement and interpretation of this Note.
Jurisdiction and venue for any action hereunder shall be in the County of the
City identified in the heading.
<PAGE>
The Maker represents that it is duly authorized and empowered to enter
into, deliver, perform and be fully bound by all of the terms, provisions and
conditions of this Note. The Maker also represents that the making and delivery
of this Note, and the performance of any agreement or instrument made in
connection herewith, does not conflict with or violate any other agreement to
which the Maker is a party.
No provision of this Note shall require the payment or permit the
collection of interest in excess of the maximum permitted by law, and in the
event of any such excess, neither the Maker nor its successors or assigns shall
be obligated to pay any such excess to the extent that it is more than the
amount permitted by law. If an excess amount is received, charged, collected or
applied as interest, it shall automatically be made so as to reduce the rate to
that permitted by law and any excess interest then received, charged or
collected shall be applied to reduce the amount of any collateral to which the
Holder is entitled.
In the event that any word, phrase, clause, sentence or other provision
hereof shall violate any applicable statute, ordinance or rule of law in any
jurisdiction in which it is used, such provision shall be ineffective to the
extent of such violation without invalidating any other provision hereof.
IN WITNESS HEREOF, this Note is executed on the date and year above
written.
PAWNBROKERS EXCHANGE, INC.
By: /s/ Michael Vardakis
------------------------
Michael Vardakis, President
AMENDED PROMISSORY NOTE
Salt Lake City, Utah
$10,000.00 May 5, 1999
FOR VALUE RECEIVED, the undersigned, Pawnbrokers Exchange, Inc., a Utah
corporation (hereinafter referred to as the "Maker"), with its address at 158
South State Street, Salt Lake City, Utah 84111, agrees and promises to pay to
the order of Brian Armstrong (hereinafter referred to as the "Holder"), at 1145
Hill View Drive, Salt Lake City, Utah 84124, or such other place as the Holder
may designate in writing, in coin or currency of the United States of America,
which at the time of payment is legal tender for the payment of public and
private debts, the principal sum of ten thousand dollars ($10,000.00), together
with interest thereon at the rate of ten per cent (10%) per annum, from the date
hereof until maturity, as hereinafter provided. The principal balance of this
Promissory Note (hereinafter referred to as the "Note"), together with all
interest then accrued and unpaid, shall be due and payable on demand.
This Amended Promissory Note amends and supercedes that certain demand
Promissory Note dated May 5, 1999, in the principal amount of $10,000, bearing
interest at the rate of ten per cent (10%) per annum, from the Maker to the
Holder.
The Maker may prepay any part or all of this Note at any time without
penalty. Each payment or pre-payment made by the Maker hereunder shall be
applied first to the payment or pre-payment of accrued and unpaid interest, if
any, due on the unpaid principal balance of this Note and the remainder of each
payment or pre-payment made by the Maker shall be applied to the reduction of
the unpaid principal balance hereof.
If default is made in the payment of this Note, as and when the same is or
becomes due, the Holder may, after notice and failure to cure as hereinafter
provided, without additional notice or demand, declare the entire unpaid
principal balance hereof and accrued and unpaid interest, if any, at once due
and payable.
Except as otherwise specifically set out herein, the Maker waives demand
and presentment for payment, notice of non-payment, protest, notice of protest,
notice of acceleration of the indebtedness due hereunder, bringing of suit and
diligence in taking any action to collect amounts called for hereunder, and
agrees that the time of payments hereof may be extended without notice at any
time and from time-to-time, and for periods of time for a term or terms in
excess of the original term without notice or consideration to, or consent from,
the Maker, without same constituting a waiver of the Holder's rights under this
Note.
If payment hereunder is not made when due or in the event of default in any
other covenant, condition or promise under this Note, the Holder may at its
election accelerate this Note. From and after the date of such default, the
principal sum and all interest then accrued shall bear interest at the rate of
ten per cent (10%) per annum until paid.
If the entire outstanding principal balance becomes due, the Maker agrees
to pay the Holder's reasonable costs (including reasonable attorney's fees and
court costs) in collecting on this Note, including the reasonable costs of
obtaining and enforcing a judgment for any balance due on this Note.
This Note has been executed in the City identified in the heading and
delivered to the Holder at the address stated herein. It is to be performed, in
whole or in part, in the State of Utah, and the laws of such state shall govern
the validity, construction, enforcement and interpretation of this Note.
Jurisdiction and venue for any action hereunder shall be in the County of the
City identified in the heading.
<PAGE>
The Maker represents that it is duly authorized and empowered to enter
into, deliver, perform and be fully bound by all of the terms, provisions and
conditions of this Note. The Maker also represents that the making and delivery
of this Note, and the performance of any agreement or instrument made in
connection herewith, does not conflict with or violate any other agreement to
which the Maker is a party.
No provision of this Note shall require the payment or permit the
collection of interest in excess of the maximum permitted by law, and in the
event of any such excess, neither the Maker nor its successors or assigns shall
be obligated to pay any such excess to the extent that it is more than the
amount permitted by law. If an excess amount is received, charged, collected or
applied as interest, it shall automatically be made so as to reduce the rate to
that permitted by law and any excess interest then received, charged or
collected shall be applied to reduce the amount of any collateral to which the
Holder is entitled.
In the event that any word, phrase, clause, sentence or other provision
hereof shall violate any applicable statute, ordinance or rule of law in any
jurisdiction in which it is used, such provision shall be ineffective to the
extent of such violation without invalidating any other provision hereof.
IN WITNESS HEREOF, this Note is executed on the date and year above
written.
PAWNBROKERS EXCHANGE, INC.
By: /s/ Michael Vardakis
------------------------
Michael Vardakis, President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Pawnbrokers
Exchange, Inc. December 31, 1999 financial statements and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 4,151
<SECURITIES> 0
<RECEIVABLES> 28,014
<ALLOWANCES> 0
<INVENTORY> 60,349
<CURRENT-ASSETS> 92,514
<PP&E> 48,923
<DEPRECIATION> 15,884
<TOTAL-ASSETS> 125,553
<CURRENT-LIABILITIES> 111,328
<BONDS> 0
0
0
<COMMON> 191,372
<OTHER-SE> (177,147)
<TOTAL-LIABILITY-AND-EQUITY> 125,553
<SALES> 160,546
<TOTAL-REVENUES> 160,546
<CGS> 60,845
<TOTAL-COSTS> 60,845
<OTHER-EXPENSES> 170,833
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,480
<INCOME-PRETAX> (71,132)
<INCOME-TAX> 100
<INCOME-CONTINUING> (71,232)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (71,232)
<EPS-BASIC> (.03)
<EPS-DILUTED> (.03)
</TABLE>
