UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[ X ] | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED September 30, 2003 |
Commission file number 000-31899
(Exact Name of Registrant as Specified in Its Charter)
Nevada | 33-0788293 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
4443 Birdie Dr., Corona, CA 92883 | ||
(Address of principal executive offices) Zip Code | ||
Registrant's telephone number, including area code: (909) 236-6977 | ||
Not Applicable | ||
(Registrant's Former Name and Address) |
Check whether the Issuer (1) 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 period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X] No[ ]
Indicate the number of shares outstanding of each of the issuer's class of common stock, as of the last practicable date.
Class | Outstanding at November 10, 2003 | |
Common Stock, $0.001 par value | 165,373,752 shares |
NICHOLAS INVESTMENT COMPANY, INC.
TABLE OF CONTENTS
PAGE NUMBER |
PART I - FINANCIAL INFORMATION | 3 | |||
Item 1. | Financial Statements | 3 | ||
Balance Sheet | 3 | |||
Statements of Operations | 4 | |||
Statements of Cash Flows | 5 | |||
Notes to Consolidated Financial Statements | 6 | |||
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 11 | ||
PART II - OTHER INFORMATION | 13 | |||
SIGNATURE PAGE | 14 | |||
SARBANNES-OXLEY CERTIFICATIONS |
|
ii
I
NICHOLAS INVESTMENT COMPANY, INC.
AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Balance Sheet
ASSETS | ||||||
September 30, 2003 (Unaudited) | ||||||
CURRENT ASSETS | ||||||
Cash | $ | 10,903 | ||||
Deposit | 10,000 | |||||
Total Current Assets | 20,903 | |||||
TOTAL ASSETS | $ | 20,903 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | ||||||
CURRENT LIABILITIES | ||||||
Accounts payable | $ | 20,780 | ||||
Payable-related party | 4,974 | |||||
Accrued interest | 387 | |||||
Convertible debentures, net of discount of $34,189 (Note 5) | 21,311 | |||||
Convertible debentures-related party, net of discount of $8,180 (Note 5) | 6,820 | |||||
Liabilities from discontinued operations (Note 6) | 5,500 | |||||
Total Current Liabilities | 59,772 | |||||
Total Liabilities | 59,772 | |||||
STOCKHOLDERS' EQUITY (DEFICIT) | ||||||
Preferred stock; $0.001 par value; 50,000,000 shares authorized; 2,000,000 shares issued and outstanding | 2,000 | |||||
| 577 | |||||
Additional paid-in capital | 1,988,903 | |||||
| (2,030,349) | |||||
| (38,869) | |||||
| $ | 20,903 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
3
NICHOLAS INVESTMENT COMPANY, INC.
AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Operations
(Unaudited)
For the Three Months | For the Nine Months | From Inception on March 1, 2001 through September 30, 2003 | ||||||||||||||
2003 | 2002 | 2003 | 2002 | |||||||||||||
REVENUES | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||
EXPENSES | ||||||||||||||||
General and administrative expense | 45,484 | - | 87,304 | - | 87,304 | |||||||||||
Total Expenses | 45,484 | - | 87,304 | - | 87,304 | |||||||||||
LOSS FROM OPERATIONS | (45,484) | - | (87,304) | - | (87,304) | |||||||||||
OTHER EXPENSES | ||||||||||||||||
Interest expense | (28,518) | - | (28,518) | - | (28,518) | |||||||||||
Total Other expense | (28,518) | - | (28,518) | - | (28,518) | |||||||||||
LOSS BEFORE DISCONTINUED OPERATIONS | (74,002) | - | (115,822) | - | (115,822) | |||||||||||
DISCOUNTED OPERATIONS (Note 6) | (125) | (1,090,364) | (653) | (1,284,690) | (1,914,527) | |||||||||||
NET LOSS | $ | (74,127) | $ | (1,090,364) | $ | (116,475) | $ | (1,284,690) | $ | (2,030,349) | ||||||
BASIC LOSS PER SHARE OF COMMON STOCK: | ||||||||||||||||
Loss before discontinued operations | $ | (0.13) | $ | - | $ | (0.22) | $ | - | ||||||||
Loss from discontinued operations | (0.00) | (12.27) | (0.00) | (21.67) | ||||||||||||
Basic loss per share of common stock | $ | (0.13) | $ | (12.27) | $ | (0.22) | $ | (21.67) | ||||||||
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING | $ | 576,869 | $ | 88,893 | $ | 535,242 | $ | 59,284 | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
4
NICHOLAS INVESTMENT COMPANY, INC.
AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Unaudited)
For the Nine | From Inception on March 1, 2001 through September 30, | |||||||||
2003 | 2002 | |||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||
Net loss | $ | (116,475) | $ | (1,284,690) | $ | (2,030,349) | ||||
Adjustments to reconcile net loss to net cash provided (used) in operating activities: | ||||||||||
Depreciation and amortization | - | 7,808 | 14,102 | |||||||
Amortization of debt discount | 28,131 | - | 28,131 | |||||||
Loss on sale of fixed assets | - | - | 8,327 | |||||||
Loss on impairment of fixed assets | - | - | 125,206 | |||||||
Common stock issued for services | - | 1,206,695 | 1,375,780 | |||||||
Bad debt expense | - | - | 8,585 | |||||||
Changes in asset and liability accounts: | ||||||||||
(Increase) in accounts receivable | - | 1,382 | (8,585) | |||||||
(Increase) in deposits | (10,000) | - | (10,000) | |||||||
Increase in accounts payable | 25,754 | 32,703 | 89,442 | |||||||
Increase in accrued expenses | 1,040 | (2,018) | 241,917 | |||||||
Net Cash Used by Operating Activities | (71,550) | (38,120) | (157,444) | |||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||||
Purchase of fixed assets | - | (13,363) | (17,828) | |||||||
Net Cash Used by Investing Activities | - | (13,363) | (17,828) | |||||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||
Bank overdraft | (1,396) | 1,502 | 4,698 | |||||||
Proceeds from related party debt | 30,260 | 5,798 | 41,459 | |||||||
Payments on related party debts | (6,931) | - | (8,297) | |||||||
Proceeds from debentures and notes payable | 81,000 | 48,179 | 94,201 | |||||||
Payments on debentures and notes payable | (25,500) | - | (28,385) | |||||||
Issuance of common stock for cash | - | - | 67,420 | |||||||
Issuance of preferred stock for cash | 5,000 | - | 5,000 | |||||||
Minority interest | - | (3,996) | (1,221) | |||||||
Net Cash Provided by Financing Activities | 82,433 | 51,483 | 174,875 | |||||||
NET INCREASE (DECREASE) IN CASH | 10,883 | - | (397) | |||||||
CASH AT BEGINNING OF PERIOD | 20 | - | 11,300 | |||||||
CASH AT END OF PERIOD | $ | 10,903 | $ | - | $ | 10,903 | ||||
CASH PAID FOR: | ||||||||||
Interest | $ | - | $ | - | $ | 9,311 | ||||
Income Tax | $ | - | $ | - | $ | - | ||||
SCHEDULE OF NON-CASH FINANCING ACTIVITIES | ||||||||||
Stock issued for services | $ | - | $ | 1,206,695 | $ | 1,375,780 | ||||
Stock issued for fixed assets | $ | - | $ | - | $ | 24,920 | ||||
Stock issued for accrued expenses | $ | 243,870 | $ | - | $ | 243,870 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
5
NICHOLAS INVESTMENT COMPANY
AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
September 30, 2003
NOTE 1 - CONDENSED FINANCIAL STATEMENTSThe accompanying consolidated financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the consolidated financial position as of September 30, 2003, and the results of operations and cash flows for all periods presented have been made.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company's December 31, 2002, audited consolidated financial statements. The results of operations for the period ended September 30, 2003 and 2002 are not necessarily indicative of the operating results for the full years.
NOTE 2 - GOING CONCERN
The Company's financial statements are prepared using generally accepted accounting principles applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. Additionally, the Company has discontinued all operations as of December 31, 2002.
In September 2003, the Company's Board of Directors elected to pursue establishing the Company as a holding company, making strategic investments in the medical device sales industry and in management consulting. The Company intends to raise capital for investment into small, cash-flow positive businesses in the targeted fields, then provide management assistance and growth capital. The ability of the Company to continue as a going concern is dependant upon its ability to successfully seek out and consummate investments, or to secure other sources of financing such that it may commence profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
6
NICHOLAS INVESTMENT COMPANY
AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
September 30, 2003
NOTE 3 - REORGANIZATION
On April 1, 2002, Nicholas Investment Company, Inc. ("Nicholas"), and Virgin Lakes Development Corporation ("Virgin Lakes"), completed an Agreement of Reorganization whereby Nicholas issued 30,000 shares of its common stock in exchange for all of the outstanding common stock of Virgin Lakes. Immediately prior to the Agreement of Reorganization, Nicholas had 56,726 shares of common stock issued and outstanding. The acquisition was accounted for as a recapitalization of Virgin Lakes because the management of Virgin Lakes controlled Nicholas after the acquisition was completed. At the effective date of the transaction, each share of Virgin Lakes was converted into 2.89 shares of Nicholas. Virgin Lakes was treated as the acquiring entity for accounting purposes and Nicholas was the surviving entity for legal purposes. There was no adjustment to the carrying value of the assets or liabilities of Virgin Lakes and its wholly owned subsidiaries, nor was there any adjustment to the carrying value of the net assets of Nicholas. All references to shares of common stock have been retroactively restated.
NOTE 3 - EQUITY TRANSACTIONS
On May 14, 2003, the Company's Board of Directors filed a certification of designation with the State of Nevada to establish a preferred class of stock designated as Series B Preferred Stock. The amended articles of incorporation authorize 2,000,000 shares at $0.001 par value. Each of the Series B Preferred Shares have voting rights equivalent to 100 common shares. All other rights associated with the Series B Preferred Shares shall be equivalent to one share of common stock.
On June 4, 2003, the Company issued 2,000,000 shares of Series B Preferred Stock to MRG California in exchange for $5,000 and a further commitment to provide working capital to the Company. Due to the 100 for 1 voting rights associated with the Series B Preferred Stock, this issuance effectively gave voting control of the Company to MRG California. See Note 7.
On August 1, 2003, the Board of Directors negotiated the return of the 2,000,000 shares of preferred stock to the Company in exchange for the return of the original $5,000 paid for the shares. These shares are presently held by the Company's Board of Directors.
On October 10, 2003, the Company's Board of Directors approved a resolution to enact a 1 for 200 reverse stock split of the Company's outstanding common stock. This vote was subsequently ratified by a vote of the Company's shareholders. All references to common stock have been retroactively restated to reflect the split.
NOTE 4 - RELATED PARTY TRANSACTIONS
On March 19, 2003, the Company's former CEO loaned the Company $12,410 in exchange for a formalized note covering this amount and the $376 advanced during the year ended December 31, 2002. The note was to accrue interest at 12% per annum and was due on December 13, 2004. This note was subsequently forgiven on April 6, 2003. See Note 5.
During the three months ended September 30, 2003, the Company raised $70,500 in operating capital in the form of convertible debentures. The debentures have varying terms of one to three months, accrue interest at 8% per annum, and convert at a discount of 50% of the closing bid for the Company's common stock on the date of conversion. Of the $70,500 in convertible notes, two debentures totaling $5,000 are held by the Company's CFO, and an additional $10,000 debenture is held by a company owned and controlled by the Company's CEO and CFO. See Note 5.
NOTE 5 - SIGNIFICANT EVENTSSale/Disposal of Subsidiaries
On April 29, 2003, the Company sold each of its subsidiaries (Virgin Lakes Development Corporation, The Town Square, Shadow Ridge Water Company, and H & L Specialties - all of which had discontinued operations as of December 31, 2003) to former officers, directors and shareholders of the Company in exchange for the assumption of all accounts payable and debts associated with the subsidiaries. As a result of this transaction, the Company recognized $87,722 of additional paid-in capital. This amount represents the combined shareholders' equity of the disposed subsidiaries.7
NICHOLAS INVESTMENT COMPANY
AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
September 30, 2003
Resignation and Appointment of Officers
On May 13, 2003, the Company's CEO, Daryl Schuttloffel, resigned due to a change in the strategic focus of the Company. Steven Peacock was appointed as the Company's new CEO, and Shane Traveler was appointed as CFO and Secretary.Convertible Debentures
During the three months ended September 30, 2003, the Company raised $70,500 of operating capital in the form of convertible debentures. The debentures have varying terms of one to three months, accrue interest at 8% per annum, and convert at a discount of 50% of the closing bid for the Company's common stock on the date of conversion. Of the $70,500 in convertible notes, two debentures totaling $5,000 are held by the Company's CFO, and an additional $10,000 debenture is held by a company owned and controlled by the Company's CEO and CFO.
Upon issuance of the debentures, the Company recognized a debt discount related to the beneficial conversion feature of the debentures totaling $70,500. This amount will be amortized over the respective terms of the debentures. As of September 30, 2003, $28,131 of the recorded debt discount has been amortized to interest expense, and an additional $388 has been recorded as interest related to the stated 8% interest rate associated with the debentures.
NOTE 6 - DISCONTINUED OPERATIONS
Effective December 31, 2002, the Company discontinued all operations. This discontinuation of operations included all operations of the company and its subsidiaries. The financial statements have been retroactively restated to reflect this event. No tax benefit has been attributed to the discontinued operations.
The following is a summary of liabilities from discontinued operations at September 30, 2003:
September 30,
2003CURRENT LIABILITIES Accrued interest $
500
Notes Payable 5,000 Total Current Liabilities 5,500 Total Liabilities 5,500
TOTAL LIABILITIES FROM DISCONTINUED OPERATIONS $ 5,500
8
NICHOLAS INVESTMENT COMPANY
AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
September 30, 2003
NOTE 6 - DISCONTINUED OPERATIONS (Continued)
The following is a summary of the loss from discontinued operations resulting from the elimination of all operations:
For the Nine Months
Ended September 30,From Inception on March 1, 2001 Through
September 30, 20032003 2002 REVENUES, NET
$ - $ 31,035 $ 94,897 COST OF SALES
- 28,588 100,968 GROSS MARGIN
- 2,447 (6,071) EXPENSES
Organizational costs
- - 17,070 Lease expense for water wells
- - 5,159 Depreciation and amortization
- 7,808 11,771 General and administrative
- 58,876 120,195 Consulting expense
- 244,514 631,215
Officer compensation -
998,300
998,300
Loss on impairment of fixed assets - - 125,521 Loss on sale of equipment - - 8,327 Total Operating Expenses
- 1,289,498 1,917,558 OPERATING LOSS
- (1,287,051) (1,923,629) OTHER INCOME (EXPENSE) Interest expense (653) (1,635) (10,553) Interest income - - 807 Total Other Income (Expense)
(653) (1,635) (9,746) LOSS BEFORE MINORITY INTEREST (653) (1,288,686) (1,933,375) MINORITY INTEREST IN NET LOSS
- 3,996 18,848 NET LOSS FROM DISCONTINUED OPERATIONS
$ (653) $ (1,284,690) $ (1,914,527) 9
NICHOLAS INVESTMENT COMPANY
AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
September 30, 2003
NOTE 7 - SUBSEQUENT EVENTSEquity Transactions
On October 10, 2003, the Company's Board of Directors approved a resolution to enact a 1 for 200 reverse stock split of the Company's outstanding common stock. This vote was subsequently ratified by a vote of the Company's shareholders. All references to common stock have been retroactively restated to reflect the split.
On October 10, 2003, the Company issued 250,000 shares of common stock related to consulting agreements entered into during the third and fourth quarters of fiscal 2003. The shares were valued at $0.20, which represents the post-split trading price of the Company's as of the date of issuance. Of the value attributed to the issuance, $10,100 has been recorded as a current period expense as of September 30, 2003.
Convertible Debentures
On November 1, 2003, the Company raised an additional $20,000 of operating capital in the form of convertible debentures. The debentures have a term of one to two months, accrue interest at 8% per annum, and convert at a discount of 50% of the closing bid for the Company's common stock on the date of conversion.
10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
GENERAL
The statements contained in this Quarterly Report on Form 10-QSB that are not historical facts may contain forward-looking statements that involve a number of known and unknown risks and uncertainties that could cause actual results to differ materially from those discussed or anticipated by management. Potential risks and uncertainties include, among other factors, general business conditions, government regulations, manufacturing practices, competitive market conditions, success of the Company's business strategy, delay of orders, changes in the mix of products sold, availability of suppliers, concentration of sales in markets and to certain customers, changes in manufacturing efficiencies, development and introduction of new products, fluctuations in margins, timing of significant orders, and other risks and uncertainties currently unknown to management.
CRITICAL ACCOUNTING POLICIES
The Company's financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States of America ("GAAP"). GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenue and expense amounts reported. These estimates can also affect supplemental information contained in the external disclosures of the Company including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. Valuations based on estimates are reviewed by us for reasonableness and conservatism on a consistent basis throughout the Company. Primary areas where financial information of the Company is subject to the use of estimates, assumptions and the application of judgment include acquisitions, valuation of long-lived and intangible assets, and the realizability of deferred tax assets. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions.
Valuation Of Long-Lived And Intangible Assets
The recoverability of long lived assets requires considerable judgment and is evaluated on an annual basis or more frequently if events or circumstances indicate that the assets may be impaired. As it relates to definite life intangible assets, we apply the impairment rules as required by SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and Assets to Be Disposed Of" as amended by SFAS No. 144, which also requires significant judgment and assumptions related to the expected future cash flows attributable to the intangible asset. The impact of modifying any of these assumptions can have a significant impact on the estimate of fair value and, thus, the recoverability of the asset.
Income Taxes
We recognize deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities. We regularly review our deferred tax assets for recoverability and establish a valuation allowance based upon historical losses, projected future taxable income and the expected timing of the reversals of existing temporary differences. As of September 30, 2003, we estimated the allowance on net deferred tax assets to be one hundred percent of the net deferred tax assets.
COMPANY STRATEGY
In December 2002, Management determined that the value of its operating businesses were substantially below book and determined to liquidate each of these holdings. In April 2003, the Company exchanged all of its ownership in each of these companies in exchange for hold harmless agreements.
On June 4, 2003, the Company issued two million (2,000,000) shares of preferred stock to MRG California in exchange for $5,000 and a further commitment to provide working capital to the Company. These preferred shares entitle the holder to 100 votes per share of preferred stock, effectively giving voting control of the Company to MRG California. On September 17, 2003, the Board of Directors negotiated the return of the preferred stock to the Company in exchange for approximately $33,500, which represented the original $5,000 plus all monies advanced to the Company by MRG and legal expenses incurred. These preferred shares are presently held by the Company's Board of Directors.
11
NICHOLAS INVESTMENT COMPANY
AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
September 30, 2003
In September 2003, the Company's Board of Directors elected to pursue establishing NIVI as a holding company, making strategic investments in the medical sales industry and in management consulting. The Company intends to raise capital for investment into small, cash-flow positive businesses in the targeted fields, then provide management assistance and growth capital. As of September 30, 2003, the Company had not raised substantial capital to do so and had not formalized arrangements to infuse such capital. The ability of the company to continue as a going concern is dependent upon its ability to successfully seek out and consummate investments, or to secure other sources of financing such that it may commence profitable operations.
On October 10, 2003, the Company's Board of Directors unanimously approved a resolution 1 for 200 reverse split of the Company's common stock, which was subsequently approved by a vote of the shareholders. This reverse split was effected to better position the capital structure of the Company in order to raise investment money to implement the Company's business strategy.
Currently, there are no commitments for material expenditures. It should be noted that the Company's auditors HJ Associates, LLC., have expressed in their audit opinion letter accompanying the financial statements for the year ended December 31, 2002 that there is substantial doubt about the Company's ability to continue as a going concern.
RESULTS OF OPERATIONS
Quarter ended September 30, 2003 compared to quarter ended September 30, 2002.
During the quarter ended September 30, 2003, the Company incurred a net loss of $74,127, of which $125 related to discontinued operations. During the same quarter of 2002, the Company incurred a loss of $1,090,364, all of which related to discontinued operations. As of December 31, 2002, the Company's Board of Directors determined to abandon its current operational strategy and elected to spin-off all of its operating assets. Accordingly, all operations associated with such operations have been classified as "discontinued operations" in the accompanying financial statements. During the quarter ended September 30, 2003, the Company has no operations and therefore did not incur substantial expenses.
Nine months ended September 30, 2003 compared to Nine months ended September 30, 2002.
During the period ended September 30, 2003, the Company incurred a net loss of $116,475, of which $653 related to discontinued operations, compared to a loss of $1,284,690, all of which is attributed to discontinued operations, for the nine months ended September 30, 2003. Total loss incurred since inception is $2,030,349, of which $1,914,527 relates to discontinued operations. Prior to April 2003, the Company operated as a real estate holding and development company. All such operations were subsequently spun off and the associated operations of such business has been classified as discontinued operations in the accompanying financial statements. During the nine-months ended September 30, 2003, the Company's sole activity revolved around developing a new business strategy and building a management team. Expenses incurred during this period consisted of legal and accounting fees incurred in the ordinary course of business, certain consulting fees paid to help formulate the business strategy, and interest costs associated with the discounts ascribed to convertible debentures issued during the period.
Liquidity and Capital Resources
The accompanying financial statements have been prepared in conformity with principles of accounting applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred operating losses from inception and has generated an accumulated deficit of $2,030,349. The Company requires additional capital to meet its operating requirements. These factors raise substantial doubt regarding the Company's ability to continue as a going concern. Management plans to increase cash flows through the sale of securities (see following paragraph below) and, eventually, through the development of profitable operations. There are no assurances that such plans will be successful. No adjustments have been made to the accompanying financial statements as a result of this uncertainty.
12
As of September 30, 2003, the Company had total cash and current assets of $20,903 and current liabilities of $59,772. The Company's primary available source for generating cash for operations is through the issuance of common stock and notes payable. Commencing September 1, 2003, the Company began issuing subordinated convertible debentures. The debentures bear interest at 8%, mature sixty (60) days from the date of issuance, and are convertible into restricted common stock at a discount to market of 50% from the closing bid price on the date of conversion. Through September 30, 2003, a total of $70,500 had been raised under these terms and none of debentures had been converted. An additional $20,000 of operating capital was raised through the sale of convertible debentures on November 1, 2003. These debentures are based on the same terms and conditions as indicated above.
There is no assurance that the Company will be able to raise any additional funds through the issuance of the remaining convertible debentures or that any funds made available will be adequate for the Company to continue as a going concern. Further, if the Company is not able to generate positive cash flow from operations, or is unable to secure adequate funding under acceptable terms, there is substantial doubt that the company can continue as a going concern.
PART II.
Other Information
Item 1. Legal Proceedings
The Company is not presently a party to any legal actions.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
99.1 Chief Executive Officer Certification as Adopted Pursuant to Section 302 and 906 of the Sarbanes-Oxley Act of 2002.
99.2 Chief Financial Officer Certification as Adopted Pursuant to Section 302 and 906 of the Sarbanes-Oxley Act of 2002.
Form 8-K filed on September 18, 2003 in which the Company notified the SEC that the Board of Directors had repurchased the 2,000,000 shares of Series B preferred stock previously issued to MRG California, Inc., such shares entitling the holder to 100 votes per share. These shares are currently held by the Directors of the Company, effectively granting voting control of the Company to the Directors.
13
SIGNATURE PAGE
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: November 10, 2003 | /s/ Steven R. Peacock | |
STEVEN R. PEACOCK | ||
Chief Executive Officer | ||
14
NICHOLAS INVESTMENT COMPANY, INC.
a Nevada corporation
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Steven R. Peacock, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Nicholas Investment Company, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: November 10, 2003
/s/ Steven R. Peacock
STEVEN R. PEACOCK
Chief Executive Officer
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NICHOLAS INVESTMENT COMPANY, INC.
a Nevada corporation
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Shane H. Traveller, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Nicholas Investment Company, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: November 10, 2003
/s/ Shane H. Traveller
SHANE H. TRAVELLER
Chief Financial Officer
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Exhibit 99.1
CERTIFICATION
Pursuant to Sections 302 and 906 of the Corporate Fraud Accountability Act of 2002 (18 U.S.C. Section 1350, as adopted), Steven R. Peacock, Chief Executive Officer of Nicholas Investment Company, Inc. (the "Company"), hereby certifies that, to the best of his knowledge:
1. the Quarterly Report on Form 10-QSB of the Company for the fiscal quarter ended September 30, 2003 (the Report) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: November 10, 2003
/s/ Steven R. Peacock | ||
STEVEN R. PEACOCK | ||
Chief Executive Officer | ||
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Exhibit 99.2
CERTIFICATION
Pursuant to Sections 302 and 906 of the Corporate Fraud Accountability Act of 2002 (18 U.S.C. Section 1350, as adopted), Shane H. Traveller, Chief Financial Officer of Nicholas Investment Company, Inc. (the "Company"), hereby certifies that, to the best of his knowledge:
1. the Quarterly Report on Form 10-QSB of the Company for the fiscal quarter ended September 30, 2003 (the Report) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: November 10, 2003
/s/ Shane H. Traveller | ||
SHANE H. TRAVELLER | ||
Chief Financial Officer | ||
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