FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 1997
Commission file number: 0-18291
U.S. PAWN, INC.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Colorado 84-0819941
------------------------------ ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7215 Lowell Boulevard
Westminster, CO 80030
--------------------------------------
(Address of principal executive offices)
(Zip Code)
(303) 657-3550
---------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter periods that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Common Stock, No Par Value, 3,763,912 shares as of August 14, 1997.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ------- --------------------
U.S. PAWN, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(amounts in thousands)
ASSETS
June December
30, 1997 31, 1996
-------- ---------
(Restated)
CURRENT ASSETS:
Cash $ 653 $ 677
Service charges receivable 673 575
Pawn loans 3,749 3,510
Accounts receivable, net 32 12
Notes receivable-related parties 92 74
Inventory 2,347 2,230
Prepaid expenses and other 197 191
------- ------
Total current assets 7,743 7,269
PROPERTY AND EQUIPMENT, at cost, net 1,599 1,361
INTANGIBLE ASSETS, net 801 852
OTHER ASSETS 39 29
------- ------
$10,182 $9,511
======= ======
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
2
<PAGE>
U.S. PAWN, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
(Unaudited)
(amounts in thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
June December
30, 1997 31, 1996
-------- --------
(Restated)
CURRENT LIABILITIES:
Accounts payable $ 57 $ 49
Customer layaway deposits 75 51
Accrued expenses 174 214
Due to stockholder of acquiree - 673
Income taxes payable - 17
Notes payable-related parties 761 639
Notes payable 1,576 781
Current portion of
long-term debt-related parties 100 100
Current portion of long-term debt 91 95
------- -----
Total current liabilities 2,834 2,619
LONG-TERM DEBT, less current portion:
Long-term debt-related parties 150 308
Long-term debt 12 91
DEFERRED INCOME TAXES 82 113
------- ------
Total Liabilities 3,078 3,131
COMMITMENTS AND CONTINGENCIES:
MINORITY INTEREST 33 42
STOCKHOLDERS' EQUITY:
Redeemable preferred stock, 9.5%,
$10 par value, 1,000,000 authorized:
37,500 shares issued and outstanding 378 378
Common stock, no par value, 30,000,000 shares
authorized; 3,763,912 and 3,572,155
shares issued and outstanding 4,383 3,989
Additional paid-in capital 902 922
Retained earnings 1,408 1,049
------ ------
Total Stockholders' Equity 7,071 6,338
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$10,182 $9,511
======= ======
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
3
<PAGE>
<TABLE>
<CAPTION>
U.S. PAWN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Amounts in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -----------------
1997 1996 1997 1996
---- ---- ---- ----
(Restated) (Restated)
REVENUES:
<S> <C> <C> <C> <C>
Sales $1,731 $1,401 $3,450 $2,843
Pawn service charges 1,416 1,088 2,878 2,192
Other income 29 28 50 51
------ ----- ------ ------
Total Revenues 3,176 2,517 6,378 5,086
COST OF SALES AND EXPENSES:
Cost of sales 1,306 1,037 2,637 2,139
Operations 990 837 1,994 1,646
Administration 415 247 778 492
Interest 96 52 173 103
Depreciation and
amortization 110 63 190 119
------ ------ ------ ------
Total Cost of Sales
and Expenses 2,917 2,236 5,772 4,499
------ ------ ------ ------
INCOME FROM OPERATIONS BEFORE
INCOME TAXES 259 281 606 587
PROVISION FOR INCOME TAXES 105 97 224 207
------ ------ ------ ------
NET INCOME BEFORE
MINORITY INTEREST 154 184 382 380
MINORITY INTEREST (3) (3) (4) (9)
------ ------ ------ ------
NET INCOME 151 181 378 371
DIVIDENDS ON PREFERRED STOCK (9) (9) (18) (18)
------ ------ ------ ------
EARNINGS AVAILABLE FOR
COMMON STOCKHOLDERS $ 142 $ 172 $ 360 $ 353
====== ====== ====== ======
EARNINGS PER COMMON SHARE
AND COMMON SHARE EQUIVALENTS $ 0.04 $ 0.05 $ 0.09 $ 0.10
------ ------ ------ ------
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES AND COMMON
SHARE EQUIVALENTS OUTSTANDING 3,966 3,479 3,941 3,386
====== ====== ====== ======
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
U.S. PAWN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in thousands)
Six Months Ended June 30,
1997 1996
--------- --------
(Restated)
CASH FLOWS FROM(TO) OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 378 $ 371
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 190 119
Deferred income taxes (31) (38)
Minority interest in subsidiary earnings 4 9
Changes in:
Service charges receivable (99) (16)
Inventory, excluding forfeited loan collateral 1,690 1,405
Accounts receivable (19) 23
Prepaid expenses and other (6) (26)
Accounts payable 8 (6)
Accrued expenses (41) (31)
Income taxes payable (16) 31
Customer layaway deposits 24 (2)
------- ------
Net Cash Provided by Operating Activities 2,082 1,839
CASH FLOWS FROM(TO) INVESTING ACTIVITIES:
Pawn loans made (6,105) (4,811)
Pawn loans repaid 4,059 3,319
Purchase of property and equipment (378) (80)
Decrease(increase)in receivables-related parties (18) 4
Decrease(increase) in other assets (9) (91)
Acquisition of minority interest in subsidiary (14) -
Acquisition of subsidiary company (673) (83)
------- -------
Net cash (Used) by Investing Activities (3,138) (1,742)
CASH FLOWS FROM(TO) FINANCING ACTIVITIES:
Dividends paid (18) (18)
Issuance of notes payable and long-term debt 923 351
Payments on notes payable and long-term debt (211) (497)
Issuance of notes payable-related parties 134 11
Payments on notes payable-related parties (169) (3)
Issuance of common stock, net of offering costs 373 159
------- -------
Net Cash Provided by Financing Activities 1,032 3
------- -------
NET INCREASE(DECREASE) IN CASH (24) 100
CASH, beginning of period 677 282
------- -------
Cash, end of period $ 653 $ 382
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SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 155 $ 95
======= =======
Income taxes $ 288 $ 221
======= =======
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Conversion of forfeited loan collateral to
inventory $ 1,807 $ 1,643
======= =======
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
5
</TABLE>
<PAGE>
U.S. PAWN, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements (the "financial
statements") include the accounts of U.S. Pawn, Inc. and its subsidiaries (the
"Company"). All material inter-company transactions have been eliminated upon
consolidation. The financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
in accordance with the instructions for Form 10-QSB. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements.
In the opinion of management, the financial statements contain all material
adjustments, consisting only of normal recurring adjustments necessary to
present fairly the financial condition, results of operations, and cash flows of
the Company for the interim periods presented.
The results for the three and six months ended June 30, 1997 are not necessarily
indicative of the results of operations for the full year. These financial
statements and related footnotes should be read in conjunction with the
financial statements and footnotes thereto included in the Company's Form 10-KSB
filed with the Securities and Exchange Commission for the year ended December
31, 1996.
Certain amounts in the prior year's financial statements have been reclassified
for comparative purposes to conform with the current year. These
reclassification had no effect on results of operations or retained earnings as
previously reported.
The three and six months ended June 30, 1996 have been restated to account for a
pooling of interests acquisition in 1997, which is more fully described in Note
2 below.
NOTE 2 - ACQUISITIONS
On March 16, 1996, the Company acquired 80% of the outstanding common stock of
Advantage Pawn, a Wyoming corporation ("Advantage"), for $105,000 in cash and
45,000 shares of the Company's common stock, valued at $2.333 per share.
Goodwill of approximately $109,000 was recorded as a result of the transaction.
On August 2, 1996, the Company acquired substantially all of the assets and
business of City National Pawn, Inc. and Bohlinger, Inc., two privately held
pawn shop companies with common ownership d/b/a City National Pawn, with one
location in Fort Collins, Colorado and two in Cheyenne, Wyoming ("City
National"). The assets acquired from City National consisted of furniture, store
equipment, merchandise inventory, pawn loans, pawn service charges receivable,
and customer lists valued at approximately $515,000. The total purchase price
for City National was $775,000, paid in cash. The transaction was accounted for
using the purchase method of accounting.
On December 9, 1996, the Company acquired a 100% interest in Bobby's Pawnshop,
Inc. located in Las Vegas, Nevada in exchange for $700,000 in cash. The assets
acquired consist primarily of inventory and pawn loan receivables valued at
approximately $480,000. The transaction was accounted for using the purchase
method of accounting.
6
<PAGE>
U.S. PAWN, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 2 - ACQUISITIONS(continued)
On February 26, 1997, the Company agreed to acquire 100% of the outstanding
common stock of Pawn Warehouse Outlet, Inc. ("PWOI") located in Papillion,
Nebraska in exchange for 75,666 shares of the Company's common stock valued at
$275,000. The transaction will be accounted for using the pooling of interests
method of accounting. PWOI began operations in February 1996, and accordingly,
the three and six months ended June 30, 1996 have been restated to give effect
to the pooling with PWOI.
NOTE 3 - INCOME TAXES
The provision for income taxes has been recorded based upon the Company's
estimate of the expected annualized effective tax rate for each interim period
presented. Deferred income taxes have been recorded in accordance with generally
accepted accounting principles under SFAS 109.
NOTE 4 - EARNING PER COMMON SHARE
Earnings per share is computed by dividing net income available to common
shareholders by the weighted average number of common stock and common stock
equivalents outstanding during each interim period presented. When common stock
equivalents have an anti-dilutive effect on earnings per share, they are
excluded from the calculation.
NOTE 5 - CONTINGENCIES
The Company is party to a number lawsuits arising in the normal course of
business. In the opinion of management, the resolution of these matters will not
have a material effect on the Company's financial position.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- --------------------------------------------------------------------------------
GENERAL
U.S. Pawn, Inc. (the "Company") is one of four publicly traded pawnshop
operators in the United States. The Company operates pawnshops that lend money
on the security of pledged tangible personal property (a transaction commonly
referred to as a "pawn loan"), for which the Company receives a pawn service
charge to compensate it for the pawn loan. The pawn service charge is calculated
as a percentage of the pawn loan amount, in a manner similar to which interest
is charged on a loan, and has generally ranged from 96% to 240% annually. The
pledged property is held through the term of the pawn loan, which generally is
30 to 120 days, unless otherwise earlier paid or renewed. Generally, the
customer repays the pawn loan and accrued service charge in full, redeeming the
pledged property, or pays the accrued service charge and renews the pawn loan.
In the event the customer does not redeem the pledged property or renew the pawn
loan, the unredeemed collateral is forfeited to the Company and becomes
inventory available for sale in the pawnshop. The Company currently owns and
operates seventeen (17) pawnshops, of which twelve (12) are located Colorado,
three (3) in Wyoming, one (1) in Nevada, and one (1) in Nebraska.
Except for the historical information contained herein, certain matters set
forth in this report are froward- looking statements within the meaning of the
"safe harbor" provisions of the Private Securities Litigation Reform Act of
1995. These forward-looking statements are subject to risks and uncertainties
that may cause actual results to differ materially. These risks are detailed
from time to time in the Company's periodic reports filed with the Securities
and Exchange Commission. These forward-looking statements speak only as of the
date hereof. The Company disclaims any intent or obligation to update these
forward-looking statements.
Expansion of Operations
As an integral part of its business strategy, the Company intends to continue
concentrating multiple pawnshops in single markets in order to improve market
penetration, enhance name recognition and reinforce market programs. Consistent
with this philosophy, the Company added 1, 4, 2, 2 and 3 stores to its
operations during Fiscal 1997, 1996, 1994, 1993 and 1992, respectively.
On March 16, 1996, the Company acquired 80% of the outstanding common stock of
Advantage Pawn, a Wyoming corporation ("Advantage"), for $105,000 in cash and
45,000 shares of the Company's common stock, valued at $2.333 per share.
Goodwill of approximately $109,000 was recorded as a result of the transaction.
On August 2, 1996, the Company acquired substantially all of the assets and
business of City National Pawn, Inc. and Bohlinger, Inc., two privately held
pawn shop companies with common ownership d/b/a City National Pawn, with one
location in Fort Collins, Colorado and two in Cheyenne, Wyoming ("City
National"). The assets acquired from City National consisted of furniture, store
equipment, merchandise inventory, pawn loans, pawn service charges receivable,
and customer lists valued at approximately $515,000. The total purchase price
for City National was $775,000, paid in cash. The transaction was accounted for
using the purchase method of accounting.
On December 9, 1996, the Company acquired a 100% interest in Bobby's Pawnshop,
Inc. located in Las Vegas, Nevada in exchange for $700,000 in cash. The assets
acquired consist primarily of inventory and pawn loan receivables valued at
approximately $480,000. The transaction was accounted for using the purchase
method of accounting.
8
<PAGE>
On February 26, 1997, the Company agreed to acquire 100% of the outstanding
common stock of Pawn Warehouse Outlet, Inc. ("PWOI") located in Papillion,
Nebraska in exchange for 75,666 shares of the Company's common stock valued at
$275,000. The transaction will be accounted for using the pooling of interests
method of accounting. PWOI began operations in February 1996, and accordingly,
the three and six months ended June 30, 1996 have been restated to give effect
to the pooling with PWOI.
Profitability vs. Liquidity
The profitability and liquidity of the Company is affected by the amount of the
Company's outstanding pawn loans, which in turn is affected in part by the
Company's pawn loan decisions. The Company is generally able to influence the
frequency of pawn loan redemptions and forfeitures of pawn loan collateral by
increasing or decreasing the amount loaned in relation to the estimated resale
value of the pledged property. A more conservative loan policy, i.e. smaller
loans in relation to the pledged property's estimated resale value, generally
results in fewer and smaller transactions being entered into, a decrease in the
Company's aggregate loan balance and a decrease in pawn service charge income.
However, smaller loans also tend to increase loan redemptions and improve the
Company's liquidity. A conservative loan policy also tends to decrease the cost
of merchandise inventory, thereby improving the margins possible through resale
of forfeited loan collateral. Conversely, a more aggressive loan policy which
provides for larger loans in relation to the estimated resale value of the
pledged property generally results in increased pawn service charge income, but
also tends to increase loan forfeitures, thereby increasing the quantity of
inventory on hand and, unless the Company is able to increase inventory turns,
reducing the Company's liquidity.
RESULTS OF OPERATIONS
Three and Six Months Ended June 30, 1997 ("1997 Periods") Compared to Three and
Six Months Ended June 30, 1996, Restated ("1996 Periods")
Revenues
Total revenues for the 1997 Periods increased by 26% and 25% to $3,176,000 and
$6,378,000 from $2,517,000 and $5,086,000 for the 1996 Periods, respectively.
During the 1997 Periods, same store operations (13 stores) generated revenues of
$2,664,000 and $5,389,000 and stores acquired after the 1996 Periods (4 stores)
contributed revenues of $512,000 and $989,000, respectively. The increase in
revenues reflects an improvement of 23.5% and 21.3% in merchandise sales to
$1,731,000 and $3,450,000 from $1,401,000 and $2,843,000, an improvement of
30.2% and 31.3% in pawn service charges to $1,416,000 and $2,878,000 from
$1,088,000 and $2,192,000, and no material change in other income from $28,000
and $51,000. As a percentage of total revenues, merchandise sales decreased to
54% from 56% and pawn service charges increased to 45% from 43% during the 1997
Periods as compared to the 1996 Periods. The shift in the revenue mix is due
primarily to slower inventory turns in the stores acquired after the 1996
Quarter as compared to same store operations. The Company expects that
merchandise sales will increase as a percentage of revenues as Company
merchandising programs are fully implemented in the acquired stores.
Merchandise Sales
During the 1997 Periods, same store operations generated merchandise sales of
$1,441,000 and $2,950,000 and stores acquired after the 1996 Periods posted
merchandise sales of $290,000 and $500,000. For the 1997 Periods, the Company's
annualized inventory turnover rate was 2.2 and 2.3 times with a gross profit
margin on sales of 24.5% and 23.5% as compared to 2.5 and 2.7 times and 26.0%
and 24.7% for the 1996 Periods. The decrease in the gross profit on sales
percentage is due primarily to the Company's initial efforts to increase
inventory turns in stores acquired after the 1996 Periods through the
discounting of slower moving merchandise.
The Company expects its annualized inventory turnover rate to approximate 3.0
times and to produce gross margins on sales of more than 20% for the twelve
months ending December 31, 1997 (Fiscal 1997).
9
<PAGE>
Pawn Service Charges
During the 1997 Periods, same store operations generated pawn service charges of
$1,206,000 and $2,405,000 and stores acquired after the 1996 Periods contributed
pawn service charges of $210,000 and $473,000. The Company's pawn loan balance
outstanding increased by 6.8% to $3,749,000 from $3,510,000 at December 31,
1996; and has increased by 38.7% from $2,703,000 at June 30, 1996. The increase
in the pawn loan balance outstanding is due primarily to stores acquired after
the 1996 Periods. New pawn loans written during the 1997 Periods increased by
26.9% to $6,105,000 from $4,811,000 as compared to the 1996 Periods due
primarily to stores acquired after the 1996 Periods. The Company expects the
demand for pawn loans to remain strong for the remainder of Fiscal 1997.
The forfeiture rate for pawn loans (calculated as total current period new loans
plus previous period ending loan balance minus current period ending loan
balance in relationship to total forfeited amount during the period) decreased
to 31% for the 1997 Periods from 34% as compared to the 1996 Periods. The
Company's forfeiture rate is slightly higher than industry comparisons primarily
due to the Company's aggressive loan policy which provides for slightly higher
loan to value ratios than competing pawn shops in an effort to attract more pawn
customers. The Company plans to continue this loan strategy for the reasonably
foreseeable future and expects the forfeiture rate to approximate 35% for Fiscal
1997.
Total Cost of Sales and Expenses
Total cost of sales and expenses for the 1997 Periods increased 30.5% and 28.3%
to $2,917,000 and $5,772,000 as compared to $2,236,000 and $4,499,000 for the
1996 Periods. As a percentage of total revenues, total cost of sales and
expenses for the 1997 Periods increased to 91.8% and 90.5% from 88.8% and 88.5%
as compared to the 1996 Periods. The increase in total cost of sales and
expenses as a percentage of total revenues is comprised primarily of a 3.3% and
2.5% increase in administration for the 1997 Periods as compared to the 1996
Periods. The Company will strive to reduce, whenever possible, cost of sales and
expenses as a percentage of total revenues in the future.
Operating Expenses
Operating expenses increased during the 1997 Periods by $153,000 and $348,000 or
18% and 21% to $990,000 and $1,994,000 from $837,000 and $1,646,000 as compared
to the 1996 Periods. The increase in operating expenses is due primarily to
stores acquired after the 1996 Periods. However, as a percentage of total
revenues, operating expenses decreased to 31.2% and 31.3% for the 1997 Periods
as compared to 33.2% and 32.4% for the 1996 Periods.
Administration
Administrative overhead increased during the 1997 Periods by $168,000 and
$287,000 or 68.0% and 58.3% to $415,000 and $778,000 from $247,000 and $492,000
as compared to the 1996 Periods. As a percentage of total revenues,
administrative overhead increased to 13.1% and 12.2% from 9.8% and 9.7%. The
increase in administrative overhead is due primarily to staff additions in the
executive, internal audit, systems, accounting and training departments, as well
as increased travel expenses incurred in overseeing stores acquired after the
1996 Periods. Management believes that these increases are prudent and necessary
in light of recent expansion. As its operating programs are implemented in the
stores recently acquired, management believes that administrative expenses as a
percentage of total revenues will decrease.
Other
Interest expense increased for the 1997 Periods due to the Company's increased
use of its bank line of credit and private debt financing. Depreciation expense
increased due to stores acquired after the 1996 Periods and new equipment
purchased to replace fully used older equipment.
10
<PAGE>
Operating Results
Income from operations before income taxes for the 1997 Quarter decreased by
7.8% to $259,000 from $281,000 as compared to the 1996 Quarter. Income from
operations before income taxes for the 1997 six month period increased by 3.2%
to $606,000 from $587,000 as compared to the 1996 six month period. After
accounting for the effects of income taxes, preferred dividends and minority
interest, net income for the 1997 Quarter decreased 17.4% to $142,000 from
$172,000 as compared to the 1996 Quarter. After accounting for the effects of
income taxes, preferred dividends and minority interest, net income for the 1997
six month period increased 1.9% to $360,000 from $353,000 as compared to the
1996 six month period. Management believes that its recent acquisitions have yet
to fulfill their full profit potential. As its marketing programs are
implemented in the coming months in these pawn shops, management believes that
economies of scale will be achieved in supervision, purchasing, and
administration.
Earnings Per Share
Earnings per share for the 1997 Periods equaled $0.04 and $0.09 as compared to
$0.05 and $0.10 for the 1996 Periods. The weighted average number of shares and
common share equivalents outstanding increased by 14% and 16.4 % in the 1997
Periods to 3,966,000 and 3,941,000 from 3,479,000 and 3,386,000 for the 1996
Periods. The increase in the number of weighted average shares and common share
equivalents outstanding is primarily due to the issuance of common shares in
connection with the acquisitions, additional common share equivalents due to the
increase in the average market price for the Company's stock during the 1997
Periods as compared to the 1996 Quarter, and exercises of stock purchase options
during the 1997 Quarter.
LIQUIDITY AND CAPITAL RESOURCES
Working Capital
Working capital increased by 5.6% to $4,909,000 at June 30, 1997 from $4,649,000
at December 31, 1996. Total assets increased during the 1997 Periods by $670,000
mainly due to increases in pawn loans, inventories and equipment. Total
shareholders' equity increased during the 1997 Periods by $733,000 as a result
of profits, net of income taxes and preferred dividends, of $360,000 and common
stock transactions of $373,000.
The Company's operations have been financed from funds generated from
operations, bank borrowing, private borrowing, and public offerings. During the
1997 Periods, the Company raised sufficient capital to satisfy all capital
requirements.
During the 1997 Periods, the Company maintained a bank line of credit totaling
$1,000,000. As of June 30, 1997, the Company had borrowed $488,000 under this
credit facility. The agreement is renewable on an annual basis and is due April
1, 1998.
The private borrowing which comprises $2,099,000 of the total liabilities are
due in 1997, 1998 and 1999 and there is no indication that these notes will not
be renewed.
The Company plans to continue expanding its operating base with acquisitions of
existing pawn companies, but will review potential start-up locations that may
become available. The Company expects to fund this expansion and meet its
on-going working capital needs with internally generated funds, debt or equity
offerings if needed and additional lines of credit. There can be no assurance
however, that such debt or equity offerings and lines of credit will be
available to the Company.
11
<PAGE>
The Company has experienced that new start-up stores generally result in
operating losses during the first three to twelve months of operations.
Leasehold improvements and equipment costs for new stores have ranged from
approximately $75,000 to $100,000 per store. Acquisition of existing pawn
companies generally result in immediate increases in operating income. However,
acquisitions also generally result in an increase in intangibles due to purchase
prices which may be in excess of the value of assets acquired. Such intangibles
are then amortized to expense over their estimated useful lives.
Inflation
The Company does not believe that inflation has had a material effect on the
loans made or unredeemed goods sold by the Company or on its results of
operations.
Seasonality
The Company's loan demand and sales follow slight seasonal trends, with loan
demand decreasing during the first calendar quarter and sales increasing during
the fourth calendar quarter.
PART II. OTHER INFORMATION
ITEM 1. Legal proceedings
- ------- -----------------
None.
ITEM 2. Changes in securities
- ------- ---------------------
None.
ITEM 3. Defaults upon senior securities
- ------- -------------------------------
None.
ITEM 4. Submission of matters to a vote of security holders
- ------- ---------------------------------------------------
On June 20, 1997, the Company held its Annual Meeting of Shareholders ("Annual
Meeting"). At the Annual Meeting, the shareholders of the Company, by an
affirmative vote of a majority of the Company's issued and outstanding shares
present at the Annual Meeting, re-elected Melvin Wedgle and Charles C. Van Gundy
as directors of the Company.
ITEM 5. Other information
- ------- -----------------
None.
ITEM 6. Exhibits and reports on Form 8-K
- ------- --------------------------------
Exhibits: none.
Reports on Form 8-K: None.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
Date: August 19, 1997 U.S. PAWN, INC.
----------------------------------------
(Registrant)
/s/ MELVIN WEDGLE
---------------------------------------
Melvin Wedgle
Chief Executive Officer
13
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 653
<SECURITIES> 0
<RECEIVABLES> 4,454
<ALLOWANCES> 0
<INVENTORY> 2,347
<CURRENT-ASSETS> 7,743
<PP&E> 3,929
<DEPRECIATION> (1,529)
<TOTAL-ASSETS> 10,182
<CURRENT-LIABILITIES> 2,834
<BONDS> 162
0
378
<COMMON> 4,383
<OTHER-SE> 2,343
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<EPS-PRIMARY> .09
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</TABLE>
