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 September 30, 2000
Commission file number: 0-18291
U.S. PAWN, INC.
--------------------------------------------
(Name of Small Business Issuer 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
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(Address of principal executive offices)
(Zip Code)
(303) 657-3550
----------------------------------------------
(Issuer's telephone number, including area code)
Indicate by check mark whether the Issuer (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, 3,327,785 shares as of November 10, 2000.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
U.S. PAWN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Amounts in thousands, except share data)
Assets
September December
30, 2000 31, 1999
------- -------
Current Assets:
Cash $ 543 $ 514
Service charges receivable 332 476
Pawn loans 2,292 2,828
Accounts receivable, net 11 27
Income taxes receivable 219 224
Deferred income taxes -- 58
Inventory, net 2,313 2,147
Prepaid expenses and other 244 256
------- -------
Total current assets 5,954 6,530
Property and equipment, at cost, net 1,224 1,406
Intangible assets, net 251 285
Other assets 19 19
------- -------
$ 7,448 $ 8,240
======= =======
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 19 $ 170
Customer layaway deposits 36 33
Accrued expenses 226 365
Accrued losses on discontinued operations 2,291 --
Notes payable-related parties 50 186
Current portion of notes payable 55 85
------- -------
Total current liabilities 2,677 839
Line of credit 942 942
Notes payable, less current portion 655 660
------- -------
Total Liabilities 4,274 2,441
------- -------
Commitments and contingencies
Stockholders' equity:
Redeemable preferred stock, 9.5%,$10 par value
1,000,000 authorized: 37,800 shares issued
and outstanding 378 378
Common stock, no par value, 30,000,000 shares
authorized; 3,327,785 and 3,327,785
shares issued and outstanding 4,865 4,871
Accumulated earnings (deficit) (2,069) 550
------- -------
Total Stockholders' Equity 3,174 5,799
------- -------
$ 7,448 $ 8,240
======= =======
See notes to consolidated financial statements
2
<PAGE>
U.S. PAWN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Amounts in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
2000 1999 2000 1999
------- ------- ------- -------
REVENUES:
Sales $ 1,363 $ 1,245 $ 3,843 $ 3,689
Pawn service charges 922 1,074 2,868 3,147
Other income 12 13 40 56
------- ------- ------- -------
Total Revenues 2,297 2,332 6,751 6,892
------- ------- ------- -------
COST OF SALES AND EXPENSES:
Cost of sales 1,292 1,015 3,259 2,927
Operations 811 846 2,443 2,579
Administration 281 290 821 803
Depreciation and
amortization 83 86 247 257
------- ------- ------- -------
Total Cost of Sales
and Expenses 2,467 2,237 6,770 6,566
------- ------- ------- -------
INCOME (LOSS) FROM OPERATIONS (170) 95 (19) 326
------- ------- ------- -------
OTHER (EXPENSES)
Interest (66) (37) (200) (98)
Loss on settlement
of contract -- (339) -- (339)
Loss on disposal
of fixed assets -- -- (19) --
------- ------- ------- -------
Total other (expenses) (66) (376) (219) (437)
------- ------- ------- -------
LOSS BEFORE INCOME TAXES (236) (281) (238) (111)
INCOME TAXES (BENEFIT) 50 (98) 63 (42)
------- ------- ------- -------
LOSS FROM OPERATIONS (286) (183) (301) (69)
------- ------- ------- -------
DISCONTINUED OPERATIONS
Loss from operations of
discontinued segment (485) -- (485) --
Loss on disposal of
discontinued segment (1,806) -- (1,806) --
------- ------- ------- -------
Total discontinued operations (2,291) -- (2,291) --
------- ------- ------- -------
NET LOSS (2,577) (183) (2,592) (69)
------- ------- ------- -------
DIVIDENDS ON PREFERRED STOCK (9) (9) (27) (27)
------- ------- ------- -------
LOSS ATTRIBUTABLE
TO COMMON STOCKHOLDERS $(2,586) $ (192) $(2,619) $ (96)
======= ======= ======= =======
LOSS PER COMMON SHARE
ON OPERATIONS $ (.09) $ (.05) $ (.09) $ (.02)
======= ======= ======= =======
LOSS PER COMMON SHARE ON
DISCONTINUED OPERATIONS $ (.69) $ -- $ (.69) $ --
======= ======= ======= =======
NET LOSS PER COMMON SHARE $ (.78) $ (.05) $ (.79) $ (.05)
======= ======= ======= =======
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 3,328 3,686 3,328 3,686
======= ======= ======= =======
See notes to consolidated financial statements
3
<PAGE>
<TABLE>
<CAPTION>
U.S. PAWN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in thousands)
Nine Months Ended Sept 30,
2000 1999
--------- ------
CASH FLOWS (TO) OPERATING ACTIVITIES:
<S> <C> <C>
Net income (loss) $(2,592) $ (69)
Adjustments to reconcile net income to net
cash provided by operating activities:
Discontinued operations 2,291 --
Loss on disposal of fixed assets 19 --
Depreciation and amortization 247 257
Deferred income taxes 58 (22)
Changes in:
Service charges receivable 144 (84)
Inventory (166) (337)
Accounts receivable 16 12
Income taxes receivable 5 (21)
Prepaid expenses and other 12 (122)
Accounts payable (151) 18
Accrued expenses (139) (97)
Customer layaway deposits 3 8
------- -------
Net Cash (Used) by Operating Activities (253) (457)
------- -------
CASH FLOWS (TO) FROM INVESTING ACTIVITIES:
Pawn loans made (5,950) (7,054)
Pawn loans repaid 4,025 4,562
Pawn loans forfeited 2,461 2,179
Purchase of property and equipment (50) (112)
------- -------
Net cash Provided (Used) by Investing Activities 486 (425)
------- -------
CASH FLOWS (TO) FROM FINANCING ACTIVITIES:
Dividends paid (27) (27)
Issuance of notes payable and long-term debt 525
Payments on notes payable and long-term debt (171) (65)
Issuance of notes payable-related parties -- 100
Payments on notes payable-related parties -- (51)
Stock issuance costs (6) --
------- ------
Net Cash Provided (Used) by Financing Activities (204) 482
------- -------
NET (DECREASE)INCREASE IN CASH 29 (400)
CASH, beginning of period 514 831
------- -------
CASH, end of period $ 543 $ 431
======= =======
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 179 $ 86
======= =======
See notes to consolidated financial statements
4
</TABLE>
<PAGE>
U.S. PAWN, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed 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 nine months ended September 30, 2000 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, 1999.
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.
NOTE 2 - DISCONTINUED OPERATIONS
During the three months ended September 30, 2000, the Company's Board of
Directors (the "Board") adopted a plan to divest itself of its pawn assets (the
"Plan"). The Plan contemplates the disposal of substantially all of the
Company's assets in exchange for cash, the payment of all its liabilities from
the proceeds of the disposal of its assets, and a merger with a non-pawnshop
operating company. The Board identified and selected U.S. Remodelers, Inc.
("USRM") as a merger candidate. The Company entered into a letter of intent to
merge USRM into a wholly owned subsidiary of the Company subject to, among other
conditions, the disposal of the Company's assets as contemplated in the Plan. On
September 29, 2000, the Company entered into an asset purchase agreement to sell
substantially all of its assets (the "Asset Sale") to an unaffiliated third
party. On the same date, the Company and the buyer entered into a management
agreement under which the buyer agreed to manage the Company's pawn shop
operations beginning on October 1, 2000 and until the earlier of the
consummation of the Asset Sale or March 31, 2001.
The accompanying unaudited financial statements reflect an estimated loss of
$485,000 from operations from September 30, 2000 to the anticipated disposal
date of December 31, 2000; and an estimated loss of $1,806,000 on disposal of
the assets calculated as of the anticipated disposal date of December 31, 2000.
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. The
Company's deferred tax assets of $1,032,000 have been fully allowed for at
September 30, 2000.
5
<PAGE>
NOTE 4 - 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.
NOTE 5 - SUBSEQUENT EVENTS
On November 3, 2000, the Company and USRM executed a definitive Agreement and
Plan of Merger (the "Merger"). Pursuant to the Merger, the Company will issue
shares of its common stock in exchange for all of the outstanding common stock
of USRM. The number of shares of the Company will issue in the Merger will
depend primarily upon the amount of cash, as defined in the agreement, held by
the Company on the date the merger is finalized.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
GENERAL
U.S. Pawn, Inc. (the "Company") is one of five 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 120% 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 thirteen (13) pawnshops, of which twelve (12) are located Colorado and
one (1) in Wyoming.
Except for the historical information contained herein, certain matters set
forth in this report are forward-looking statements which can be identified by
the use of forward-looking terms such as "believes", "estimates", "plans",
"expects", "anticipates", "intends" or by discussions of strategy, future
operating results or events. These forward-looking statements are subject to
risks and uncertainties that may cause the Company's actual results, performance
or achievements to differ materially from those discussed in the forward-looking
statements. These risks and uncertainties are detailed from time to time in the
Company's periodic reports filed with the Securities and Exchange Commission.
These risks and uncertainties are beyond the ability of the Company to control,
and, in many cases, the Company cannot predict all of the risks and
uncertainties that could cause its actual results, performance or achievements
to differ materially from those indicated by the forward-looking statements.
These forward-looking statements speak only as of the date hereof and the
Company and its management cannot assure that future results covered by any
forward-looking statements will be achieved and disclaim any intent or
obligation to update these forward-looking statements.
Plan to Discontinue Pawn Operations
During the three months ended September 30, 2000, the Company's Board of
Directors (the "Board") adopted a plan to divest itself of its pawn assets (the
"Plan"). The Plan contemplates the disposal of substantially all of the
Company's assets in exchange for cash, the payment of all its liabilities from
the proceeds of the disposal of its assets, and a merger with a non-pawnshop
operating company. The Board identified and selected U.S. Remodelers, Inc.
("USRM") as such a merger candidate. USRM is a Dallas, Texas based privately
held company which is engaged, through direct consumer marketing, in the design,
manufacture and installation of specialty home improvement products. As a result
of negotiations with USRM, the Company entered into a letter of intent to merge
USRM into a wholly owned subsidiary of the Company subject to, among other
conditions, the disposal of the Company's assets as contemplated in the Plan. On
September 29, 2000, the Company entered into an asset purchase agreement to sell
substantially all of its assets (the "Asset Sale") to Pawn-One, Inc., a
privately held company based in Wheatridge, Colorado. On the same date, the
Company and Pawn-One, Inc. entered into a management agreement under which
Pawn-One, Inc. agreed to manage the Company's pawn shop operations beginning on
October 1, 2000 and until the earlier of the consummation of the Asset Sale or
March 31, 2001.
7
<PAGE>
On November 3, 2000, the Company and USRM executed a definitive Agreement and
Plan of Merger (the "Merger"). Pursuant to the Merger, the Company will issue
shares of its common stock in exchange for all of the outstanding common stock
of USRM. The number of shares of the Company will issue in the Merger will
depend primarily upon the amount of cash, as defined in the agreement, held by
the Company on the date the merger is finalized. It is anticipated, but not
assured, that following the closing of the contemplated merger, the current
shareholders of the Company will own between 17% and 25% of the Company's common
stock outstanding. The Asset Sale and the Merger are subject to certain
conditions contained in the agreements including, without limitation, the
approval of the Company's shareholders. Such shareholder approval will be
solicited in a proxy statement to be sent to the Company's shareholders.
RESULTS OF OPERATIONS
Three and Nine Months Ended September 30, 2000 ("2000Q" and "2000",
respectively) Compared to Three and Nine Months Ended September 30, 1999
("1999Q" and "1999", respectively)
Revenues
Total revenues for 2000Q and 2000 decreased 1.5% and 2.0% to $2,297,000 and
$6,751,000 from $2,332,000 and $6,892,000 for 1999Q and 1999, respectively. The
decrease in revenues is primarily due to a drop in pawn service charges to
$922,000 and $2,868,000 from $1,074,000 and $3,147,000, respectively, during
2000 as compared to 1999. As a percentage of total revenues, merchandise sales
represented 57% and pawn service charges were 42%, respectively, during the 2000
reporting periods as compared to 54% and 46% for 1999. This revenue mix is
consistent with the Company's expectations. The increase in the percentage of
total revenues from sales of merchandise is due to increased liquidation of aged
inventories during the 2000Q. During 2000, the Company encountered intense
competition from other pawn shops for pawn loan customers and in the sales of
merchandise from other pawn shops, thrift shops and general retail businesses.
Merchandise Sales
During the 2000 reporting periods, store operations generated merchandise sales
of $1,363,000 and $3,843,000 as compared to $1,245,000 and $3,689,000 during
1999. For the 2000 reporting periods, the Company's annualized inventory
turnover rate was 2.2 and 2.0 times with a gross profit margin on sales of 5.2%
and 15.2% as compared to 2.1 and 2.0 times with gross profit margin on sales of
18.5% and 20.7% for the 1999 reporting periods. The decrease in the gross profit
percentage is due primarily to the liquidation of aged inventory at deep
discounts in anticipation of the Asset Sale and Merger. The Company expects its
annualized inventory turnover rate to approximate 2.75 times and to produce
gross margins on sales of 10% or higher for 2000.
Pawn Service Charges
During the 2000 reporting periods, store operations generated pawn service
charges of $922,000 and $2,868,000 as compared to $1,074,000 and $3,147,000 for
the 1999 periods. During 2000, the Company's pawn loan balance outstanding
decreased $536,000 or 18.9% to $2,292,000 from $2,828,000 at December 31, 1999.
Based on historical comparisons (e.g., during the comparable 1999 nine month
period, the Company's pawn loan balance outstanding increased 11%), such a
decrease was not anticipated for 2000.
New pawn loans written decreased by $1,104,000 or 16% during 2000 as compared to
1999. Management believes that the decrease in new pawn loans written is due
primarily to the strong overall economy in Colorado ( which may have had the
effect of dampening the demand for pawn loans) and increased competition for
pawn loan customers.
8
<PAGE>
Management is hopeful that demand for pawn loans will increase during the
remainder of fiscal 2000. The Company's annualized pawn service charge on
average pawn loans outstanding during 2000 equaled 149% as compared to 144% for
1999.
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) was 38% for
2000 as compared to 32% for 1999. The Company's forfeiture rate is believed to
be comparable within the pawn shop industry, and is meeting the Company's
expectations. The Company anticipates the forfeiture rate to approximate 37% for
Fiscal 2000.
Total Cost of Sales and Expenses
Total cost of sales and expenses for the 2000 reporting periods increased to
$2,467,000 and $6,770,000 as compared to $2,237,000 and $6,566,000 for the 1999
reporting periods. As a percentage of total revenues, total cost of sales and
expenses for the 2000 reporting periods were 107% and 102% as compared to 96%
and 95% for 1999 reporting periods. The increase in total costs and expenses as
a percentage of total revenues is due primarily to increased cost of sales as a
result of the liquidation of aged inventory during the 2000Q.
Operating Expenses
Operating expenses decreased by $35,000, or 4%, and $136,000, or 5%, during the
2000 reporting periods as compared to the 1999 reporting periods. As a
percentage of total revenues, operating expenses decreased to 35% and 36% for
the 2000 reporting periods as compared to 36% and 37% for the 1999 reporting
periods, respectively. The decrease in operating expenses as a percentage of
revenues for 2000 is primarily attributable to a decrease in accrued lease
obligations for a store closure and a decrease in store personnel costs during
the 2000 reporting periods.
Administration
Administrative overhead decreased during the 2000Q by $9,000, or 3% and
increased during 2000 by $18,000, or 2% as compared to the 1999 reporting
periods. As a percentage of total revenues, administrative overhead remained at
12% for the 2000 reporting periods as compared to the 1999 reporting periods.
The increase in administrative overhead is due primarily to market adjustments
in middle management salaries and related employee benefits during 2000 as
compared to 1999.
Depreciation and Amortization Expense
Depreciation and amortization expense decreased slightly during the 2000
reporting periods as compared to the 1999 reporting periods as various
depreciable assets reached their estimated useful lives and became fully
amortized to expense.
Other Expense
Interest expense for the 2000 reporting periods increased by $29,000 and
$102,000 as compared to the 1999 reporting periods. During 2000, the Company's
outstanding balance on its revolving bank line of credit was $942,000. No such
bank debt was outstanding during 1999.
Loss Before Income Taxes (Results from Continuing Operations)
Loss from operations before income taxes for the 2000Q decreased by $45,000 to a
loss of $(236,000) from a loss of $(281,000) as compared to 1999Q. Loss from
operations before income taxes for 2000 increased by $127,000 to a loss of
$(238,000) from a loss of $(111,000) as compared to 1999. After accounting for
the effects of income taxes, loss from operations for the 2000 reporting periods
was $(286,000) and $(301,000) as compared to $(183,000) and $(69,000)as compared
to the 1999 reporting periods.
9
<PAGE>
Discontinued Operations
Loss on operations of discontinued operations was $(485,000), net of any
estimated realizable tax effects, due to the Company's implementation of its
plan to divest itself of its pawn operations. Loss on disposal of discontinued
operations was $(1,806,000), net of any estimated realizable tax effects, due to
the Company's implementation of its plan to divest itself of its pawn operating
assets.
LIQUIDITY AND CAPITAL RESOURCES
Working Capital
Working capital decreased to $3,277,000 at September 30, 2000 from $5,691,000 at
December 31, 1999. Total assets decreased during 2000 by $792,000 mainly due to
decreases in service charges receivable, pawn loans, property, equipment and
intangible assets. Total liabilities increased by $1,833,000 at September 30,
2000 to $4,274,000 from $2,441,000 at December 31, 1999 mainly due to the
accrual of operating losses and estimated loss on disposal of discontinued
operations, offset by decreases in accounts payable, other accrued expenses and
repayments of long-term debt. Total stockholders' equity decreased during 2000
by $2,625,000 as a result of losses, net of income taxes and preferred
dividends.
The Company's operations have been financed from funds generated from
operations, bank borrowing, private borrowing, and public offerings. During
2000, the Company raised sufficient capital to satisfy its capital requirements.
On August 26, 1999, the Company entered into an agreement for a revolving bank
line of credit totaling $2,500,000. The agreement matures on August 26, 2001. As
of the date of this report, the outstanding principal balance owing under this
credit facility was $942,000. Management intends to repay this obligation from
the proceeds of the disposal of its pawn operating assets.
The private borrowings which comprise $542,000 of the total liabilities are due
in 2000 through 2002. Management intends to repay these obligations from the
proceeds of the disposal of its pawn operating assets.
The Company expects to meet its on-going working capital needs with internally
generated funds.
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 pawn loan balance and a decrease in pawn service charge
income. However, smaller pawn loans also tend to increase pawn loan redemptions
and improve the Company's liquidity. A conservative pawn loan policy also tends
to decrease the cost of merchandise inventory, thereby improving the margins
possible through resale of forfeited pawn loan collateral. Conversely, a more
aggressive pawn loan policy which provides for larger pawn 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 pawn 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.
10
<PAGE>
Unprecedented and/or unexpected pawn loan demand tends to drain liquidity
reserves, and if other external sources of working capital are unavailable, the
implementation of a more conservative pawn loan policy and increasing inventory
turns will generate cash at the expense of profitability if not optimally
balanced.
Recently Issued Accounting Pronouncements
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities"
requires companies to record derivatives on the balance sheet as assets or
liabilities, measured at fair market value. Gains or losses resulting from
changes in the values of those derivatives are accounted for depending on the
use of the derivative and whether it qualifies for hedge accounting. The key
criterion for hedge accounting is that the hedging relationship must be highly
effective in achieving offsetting changes in fair value or cash flows. SFAS No.
133 is effective for fiscal years beginning after June 15, 2000. Management
believes that the adoption of SFAS No. 133 will have no material effect on its
financial statements.
In March 2000, the FASB issued FASB Interpretation No. 44, "Accounting for
Certain Transactions Involving Stock Compensation" ("FIN 44"), which was
effective July 1, 2000, except that certain conclusions in this Interpretation,
which cover specific events that occur after either December 15, 1998 or January
12, 2000 are recognized on a prospective basis from July 1, 2000. This
Interpretation clarifies the application of APB Opinion 25 for certain issues
related to stock issued to employees. The Company believes its existing stock
based compensation policies and procedures are in compliance with FIN 44 and
therefore, the adoption of FIN 44 had no material impact on the Company's
financial condition, results of operations or cash flows.
In December 1999, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin ("SAB") 101, which provides guidance on applying generally
accepted accounting principles to selected revenue recognition issues.
Management believes that the Company's revenue recognition policies are in
accordance with SAB 101.
Inflation
The Company does not believe that inflation has had a material effect on the
Company's results of operations.
Seasonality
The Company's pawn loan demand and sales follow slight seasonal trends. Sales
are generally highest during the fourth calendar quarter of the year, while pawn
loan demand is general lower during the first and second calendar quarters than
during the third and fourth calendar quarters.
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
None.
ITEM 5. Other information
None.
ITEM 6. Exhibits and reports on Form 8-K
(a) Exhibit #27.1 Financial Data Schedule.
(b) Reports on Form 8-K: On October 13, 2000, the Company filed a Form 8-K
reporting under Item 2 the disposition of substantially all of its assets
to Pawn-One, Inc.
11
<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: November 10, 2000 U.S. PAWN, INC.
-------------------
(Registrant)
By: /s/ Charles C. Van Gundy
-----------------------------------
Charles C. Van Gundy
President
Chief Executive Officer
Chief Financial Officer
(Principal Accounting Officer)
12
