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 March 31, 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, 4,006,996 shares as of May 14, 1997.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
U.S. PAWN, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(amounts in thousands)
ASSETS
------
March December
31, 1997 31, 1996
-------- ----------
(Restated)
CURRENT ASSETS:
Cash $ 1,233 $ 702
Service charges receivable 672 632
Pawn loans 3,712 3,702
Accounts receivable, net -- 12
Notes receivable-related parties 65 74
Inventory 2,329 2,291
Prepaid expenses and other 172 219
------- -------
Total current assets 8,183 7,632
PROPERTY AND EQUIPMENT, at cost, net 1,672 1,406
INTANGIBLE ASSETS, net 832 852
OTHER ASSETS 57 49
------- -------
$10,744 $ 9,939
======= =======
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
March December
31, 1997 31, 1996
-------- --------
(Restated)
CURRENT LIABILITIES:
Accounts payable $ 104 $ 50
Customer layaway deposits 67 51
Accrued expenses 225 218
Due to stockholder of acquiree 673 673
Income taxes payable 185 40
Notes payable-related parties 861 639
Notes payable 647 780
Current portion of
long-term debt-related parties 100 100
Current portion of long-term debt 89 95
------- -----
Total current liabilities 2,951 2,646
LONG-TERM DEBT, less current portion:
Long-term debt-related parties 323 308
Long-term debt 64 122
DEFERRED INCOME TAXES 95 113
------- ------
Total Liabilities 3,433 3,189
COMMITMENTS AND CONTINGENCIES:
MINORITY INTEREST 46 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; 3,978,864 and 3,815,239
shares issued and outstanding 4,349 3,990
Additional paid-in capital 1,114 1,149
Retained earnings 1,424 1,191
------ ------
Total Stockholders' Equity 7,265 6,708
------- ------
$10,744 $9,939
======= ======
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
3
<PAGE>
U.S. PAWN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Amounts in thousands, except per share data)
Three Months Ended
March 31,
1997 1996
------ -----
(Restated)
REVENUES:
Sales $1,784 $1,480
Pawn service charges 1,512 1,141
Other income 22 23
------ -----
Total Revenues 3,318 2,644
COST OF SALES AND EXPENSES:
Cost of sales 1,360 1,116
Operations 1,053 830
Administration 364 245
Interest 83 52
Depreciation and amortization 83 59
------ ------
Total Cost of Sales and Expenses 2,943 2,302
------ ------
INCOME FROM OPERATIONS BEFORE
INCOME TAXES 375 342
PROVISION FOR INCOME TAXES 128 122
------ ------
NET INCOME BEFORE MINORITY INTEREST 247 220
MINORITY INTEREST (4) (3)
------ ------
NET INCOME 243 217
DIVIDENDS ON PREFERRED STOCK (9) (9)
------ ------
EARNINGS AVAILABLE FOR
COMMON STOCKHOLDERS $ 234 $ 208
====== ======
EARNINGS PER COMMON SHARE
AND COMMON SHARE EQUIVALENTS $ 0.06 $ 0.06
------ ------
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES AND COMMON
SHARE EQUIVALENTS OUTSTANDING 4,191 3,539
====== ======
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
4
<PAGE>
<TABLE>
<CAPTION>
U.S. PAWN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in thousands)
Three Months Ended March 31,
1997 1996
--------- ----------
(Restated)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 243 $ 208
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 83 59
Deferred income taxes (18) (20)
Minority interest in subsidiary earnings 4 3
Changes in:
Service charges receivable (40) (12)
Inventory, excluding forfeited loan collateral 892 722
Accounts receivable 12 11
Prepaid expenses and other 47 (35)
Accounts payable 54 79
Accrued expenses 6 (13)
Income taxes payable 146 72
Customer layaway deposits 16 (3)
------- ------
Net Cash Provided by Operating Activities 1,445 1,071
CASH FLOWS (TO) INVESTING ACTIVITIES:
Pawn loans made (3,158) (2,633)
Pawn loans repaid 2,218 1,804
Purchase of property and equipment (330) (72)
Payments on notes receivables-related parties 9 3
Decrease(increase) in other assets (7) (53)
Acquisition of subsidiary company - (83)
------- -------
Net cash (Used) by Investing Activities (1,268) (1,034)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (9) (9)
Issuance of notes payable and long-term debt 4 170
Payments on notes payable and long-term debt (24) (210)
Issuance of notes payable-related parties 77 7
Payments on notes payable-related parties (18) (3)
Additional paid in capital - 46
Issuance of common stock, net of offering costs 324 113
------- -------
Net Cash Provided by Financing Activities 354 114
------- -------
NET INCREASE IN CASH 531 151
CASH, beginning of period 702 303
------- -------
Cash, end of period $ 1,233 $ 454
======= =======
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 82 $ 46
======= =======
Income taxes $ - $ 88
======= =======
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Conversion of forfeited loan collateral to
inventory $ 930 $ 849
======= =======
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 months ended March 31, 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 months ended March 31, 1996 have been restated to account for two
pooling of interests acquisitions during 1996 and 1997, which are 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.
6
<PAGE>
U.S. PAWN, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 2 - ACQUISITIONS (continued)
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 agreed to acquire 100% of the outstanding
common stock of Pawnbroker, Inc. d/b/a Quick Bill's ("Bill's") in Henderson,
Nevada in exchange for approximately 250,000 shares of the Company's common
stock valued at $1,000,000. The transaction will be accounted for using the
pooling of interests method of accounting. Bill's began operations in late
December 1994, and accordingly, the three months ended March 31, 1996 have been
restated to give effect to the pooling with Bill's.
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.
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 approximately 68,750 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 months ended March 31, 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.
7
<PAGE>
U.S. PAWN, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
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.
8
<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 nineteen (19) pawnshops, of which twelve (12) are located Colorado,
four (4) in Wyoming, two (2) 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, 6, 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.
9
<PAGE>
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 agreed to acquire 100% of the outstanding
common stock of Pawnbroker, Inc. d/b/a Quick Bill's ("Bill's") in Henderson,
Nevada in exchange for approximately 250,000 shares of the Company's common
stock valued at $1,000,000. The transaction will be accounted for using the
pooling of interests method of accounting. Bill's began operations in late
December 1994, and accordingly, the three months ended March 31, 1996 have been
restated to give effect to the pooling with Bill's.
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.
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 approximately 68,750 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 months ended March 31, 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
10
<PAGE>
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 Months Ended March 31, 1997 ("1997 Quarter") Compared to Three Months
Ended March 31, 1996, Restated ("1996 Quarter")
Revenues
Total revenues for the 1997 Quarter increased by 25.5 % to $3,318,000 from
$2,644,000 for the 1996 Quarter. During the 1997 Quarter, same store operations
(13 stores) generated revenues of $2,568,000 and stores acquired after the 1996
Quarter (6 stores) contributed revenues of $750,000. The increase in revenues
reflects an improvement of 20.5% in merchandise sales to $1,784,000 from
$1,480,000, an improvement of 32.5% in pawn service charges to $1,512,000 from
$1,141,000, and a 4.3% decrease in other income to $22,000 from $23,000. 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 Quarter as
compared to the 1996 Quarter. 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 Quarter, same store operations generated merchandise sales of
$1,378,000 and stores acquired after the 1996 Quarter posted merchandise sales
of $406,000. For the 1997 Quarter, the Company's annualized inventory turnover
rate was 2.4 times with a gross profit margin on sales of 23.8% as compared to
2.4 times and 24.6% for the 1996 Quarter. 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 Quarter 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).
Pawn Service Charges
During the 1997 Quarter, same store operations generated pawn service charges of
$1,171,000 and stores acquired after the 1996 Quarter contributed pawn service
charges of $341,000. The Company's pawn loan balance outstanding increased
slightly to $3,712,000 from $3,702,000 at December 31, 1996; and has increased
by 27.5% from $2,910,000 at March 31, 1996. The increase in the pawn loan
balance outstanding is due primarily to stores acquired after the 1996 Quarter.
New pawn loans written during the 1997 Quarter increased by 20% to $3,158,000
11
<PAGE>
from $2,633,000 as compared to the 1996 Quarter due primarily to stores acquired
after the 1996 Quarter. 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 30% for the 1997 Quarter from 32% as compared to the 1996 Quarter. 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 Quarter increased 27.8% to
$2,942,000 as compared to $2,302,000 for the 1996 Quarter. As a percentage of
total revenues, total cost of sales and expenses for the 1997 Quarter increased
to 88.7% from 87.1% as compared to the 1996 Quarter. The increase in total cost
of sales and expenses as a percentage of total revenues is comprised primarily
of a 1.2% decrease in cost of sales, a 0.3% increase in operating expenses, a
1.7% increase in administration, and a 0.8% increase in interest and
depreciation. 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 Quarter by $223,000 or 27% to
$1,053,000 from $830,000 as compared to the 1996 Quarter. The increase in
operating expenses is due primarily to stores acquired after the 1996 Quarter.
However, as a percentage of total revenues, operating expenses increased
slightly to 31.7% for the 1996 Quarter as compared to 31.4% for the 1996
Quarter.
Administration
Administrative overhead increased during the 1997 Quarter by $119,000 or 48.4%
to $364,000 from $245,000 as compared to the 1996 Quarter. As a percentage of
total revenues, administrative overhead increased to 10.9% from 9.3%. 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 Quarter. The Company believes that these increases are prudent and
necessary in light of recent expansion and future possibilities of additional
acquisitions and/or start-up locations. As its operating programs are
implemented in the stores recently acquired, the Company believes that
administrative expenses as a percentage of total revenues will decrease.
12
<PAGE>
Other
Interest expense increased for the 1997 Quarter 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 Quarter and new equipment
purchased to replace fully used older equipment.
Operating Results
Income from operations before income taxes for the 1997 Quarter increased by
9.6% to $375,000 from $342,000 as compared to the 1996 Quarter. After accounting
for the effects of income taxes, preferred dividends and minority interest, net
income for the 1997 Quarter increased 12.5% to $234,000 from $208,000 as
compared to the 1996 Quarter. The Company 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, the Company believes that
economies of scale will be achieved in supervision, purchasing, and
administration.
Earnings Per Share
Earnings per share for the 1997 Quarter equaled $0.06 as compared to $0.06 for
the 1996 Quarter. The weighted average number of shares and common share
equivalents outstanding increased by 18.4% in the 1997 Quarter to 4,191,000 from
3,539,000. 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
Quarter 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% to $5,232,000 at March 31, 1996 from $4,986,000
at December 31, 1996. Total assets increased during the 1997 Quarter by $805,000
mainly due to increases in cash, and inventories. Total shareholders' equity
increased during the 1996 Quarter by $557,000 as a result of profits, net of
income taxes and preferred dividends, of $234,000 and common stock transactions
of $323,000.
The Company's operations have been financed from funds generated from
operations, bank borrowing, private borrowing, and public offerings. During the
1997 Quarter, the Company raised sufficient capital to satisfy all capital
requirements.
13
<PAGE>
During the 1997 Quarter, the Company maintained a bank line of credit totaling
$650,000. As of March 31, 1997, the Company had borrowed $23,000 under this
credit facility. The line of credit was increased to $1,000,000 on April 1,
1997. The agreement is renewable on an annual basis and is due April 1, 1998.
The private borrowing which comprises $1,620,000 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.
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.
14
<PAGE>
ITEM 3. Defaults upon senior securities
None.
ITEM 4. Submission of matters to a vote of security holders
None.
ITEM 5. Other information
None.
ITEM 6. Exhibits and reports on Form 8-K
Exhibits: none.
Reports on Form 8-K: None.
15
<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: May 15, 1997 U.S. PAWN, INC.
------------------------------------
(Registrant)
/s/ MELVIN WEDGLE
-----------------------------------
Melvin Wedgle
Chief Executive Officer
/s/ CHARLES C. VAN GUNDY
-----------------------------------
Charles C. Van Gundy
Chief Financial Officer
(Principal Accounting Officer)
16
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,233
<SECURITIES> 0
<RECEIVABLES> 4,449
<ALLOWANCES> 0
<INVENTORY> 2,329
<CURRENT-ASSETS> 8,183
<PP&E> 2,994
<DEPRECIATION> (1,322)
<TOTAL-ASSETS> 10,744
<CURRENT-LIABILITIES> 2,951
<BONDS> 0
0
378
<COMMON> 4,349
<OTHER-SE> 2,538
<TOTAL-LIABILITY-AND-EQUITY> 10,744
<SALES> 1,784
<TOTAL-REVENUES> 3,318
<CGS> 1,360
<TOTAL-COSTS> 2,860
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 83
<INCOME-PRETAX> 375
<INCOME-TAX> 128
<INCOME-CONTINUING> 247
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 247
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
