U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the three month and quarterly period ended May 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
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Commission file number 0-17879
BEST COLLATERAL, INC.
(Exact name of small business issuer as specified in its charter)
COLORADO 84-1107903
-------------------------------- ------------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
2447 MISSION STREET, SAN FRANCISCO, CA 94110
(Address of principal executive offices) (Zip code)
(415) 550 - 6674
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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: No: X
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State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 4,024,990 shares
Transitional Small Business Disclosure Format (check one):
Yes: No: X
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BEST COLLATERAL, INC.
BALANCE SHEETS
5/31/98 2/28/98
ASSETS (Unaudited) (Audited)
Current assets:
Cash $ 63,199 $ 139,304
Pawn service charges receivable 337,473 327,185
Pawn loans receivable 2,635,937 2,504,608
Layaway sales receivable, net 208,204 250,479
Inventory, net 1,068,506 1,053,101
Income taxes receivable 79,528 74,538
Prepaid expenses and other 48,418 39,049
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Total current assets 4,441,265 4,388,264
Property and equipment, net 639,293 614,510
Deferred tax asset 10,318 10,318
Other assets 11,076 12,528
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Total assets $5,101,952 $5,025,620
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank loans $2,974,000 $2,874,716
Accounts payable and accrued expenses 211,462 209,465
Accrued interest 167,751 167,800
Loans from stockholders 339,434 349,434
Deferred tax liability 65,861 65,861
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Total current liabilities 3,758,508 3,667,276
Convertible notes payable to employees
and directors 327,500 327,500
Convertible notes payable to others 75,000 75,000
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Total liabilities 4,161,008 4,069,776
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Stockholders' equity:
Preferred stock, no par value, 1,000,000
shares authorized; none issued - -
Common stock, $.10 par value, 50,000,000
shares authorized; 4,024,990 shares
issued and outstanding 402,499 402,499
Additional paid-in capital (235,180) (235,180)
Retained earnings 773,625 788,525
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Total stockholders' equity 940,944 955,844
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Total liabilities & stockholders equity $5,101,952 $5,025,620
========== ==========
The accompanying notes are an integral
part of these financial statements
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BEST COLLATERAL, INC.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTH PERIODS ENDED MAY 31, 1998 AND 1997
5/31/98 5/31/97
(Unaudited) (Unaudited)
Revenues:
Merchandise sales $ 698,338 $ 698,193
Pawn service charges 393,584 344,012
Gold melt (loss) income, net (3,598) -
---------- ----------
Total revenues 1,088,324 1,042,205
Cost of merchandise sales (316,912) (325,616)
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Revenues net of cost of sales 771,412 716,589
Selling, general & administrative expenses:
Store operating expenses (477,366) (396,336)
Administrative expenses (183,265) (139,979)
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Operating income 110,781 180,274
Other income (expense):
Rental income 22,155 22,155
Interest and financing costs (90,894) (74,896)
Depreciation and amortization (48,672) (33,850)
Amortization of excess of fair value
of net assets acquired over cost - 32,194
Other expenses (13,260) (20,278)
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(Loss) income before income taxes (19,890) 105,599
Income tax benefit (provision) 4,990 (32,300)
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Net (loss) income $ (14,900) $ 73,299
========== ==========
Net (loss) income per share of common
stock basic $ 0.00 $ 0.02
========== ==========
Net (loss) income per share of common
diluted $ 0.00 $ 0.02
========== ==========
Weighted average shares outstanding
used in basic income per share 4,024,990 3,999,990
========== ==========
Weighted average shares outstanding
used in diluted income per share 4,427,490 4,427,490
========== ==========
The accompanying notes are an integral
part of these financial statements
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BEST COLLATERAL, INC.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTH PERIODS ENDED MAY 31, 1998 AND 1997
5/31/98 5/31/97
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net (loss) income $ (14,900) $ 73,299
Adjustments to reconcile net (loss) income
to net cash provided by (used in)
operations:
Depreciation and amortization 48,672 33,850
Amortization of excess of fair value
of net assets acquired over cost - (32,194)
Change in assets and liabilities:
Pawn service charges receivable (10,288) (1,414)
Layaway sales receivable 42,275 (16,861)
Income taxes receivable and payable (4,990) (84,700)
Inventory (15,405) (6,420)
Prepaid expenses and other (9,288) (2,191)
Accounts payable and accrued expenses 1,948 1,208
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Total adjustments 52,924 (108,722)
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Net cash provided by (used in) operating
activities 38,024 (35,423)
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Cash flows from investing activities:
Loans made, including loans renewed (2,240,687) (1,858,429)
Loans repaid, including loans renewed 1,886,073 1,647,398
Loans forfeited and transferred to
inventory 223,285 214,894
Purchase of property and equipment (72,084) (12,919)
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Net cash used in investing activities (203,413) (9,056)
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Cash flows from financing activities:
Borrowings under bank line of credit 421,000 160,000
Repayments of bank line of credit (321,716) (212,000)
Repayment of loan to stockholder (10,000) -
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Net cash provided by (used in) financing
activities 89,284 (52,000)
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Net decrease in cash (76,105) (96,479)
Cash at beginning of period 139,304 179,546
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Cash at end of period $ 63,199 $ 83,067
========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 85,346 $ 54,396
========== ==========
Income taxes $ - $ 119,500
========== ==========
The accompanying notes are an integral
part of these financial statements
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BEST COLLATERAL, INC.
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1998
(UNAUDITED)
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete fiscal year financial statements. In the
opinion of management, all normal adjustments, including normal
recurring accruals, considered necessary for a fair presentation of the
results for such interim periods have been included. The results of
operations for the three-month periods ended May 31, 1998 and 1997 may
not necessarily be indicative of the operating results for the full
year.
NOTE 2: RECLASSIFICATIONS
Certain items in previously reported financial statements have been
reclassified to conform to the presentation used in this Form 10-QSB.
There has been no change to previously reported net income or retained
earnings.
NOTE 3: BANK LOAN:
The bank loan contains covenants, including the requirements of a
minimum current ratio, a maximum debt to worth ratio and profitable
operations each quarter. At May 31, 1998 the Company was out of
compliance with the profitability covenant. The Company received a
waiver for the violation of the profitability covenant. At May 31,
1998 and 1997 the prime rate was 8.50% and 8.75% per annum,
respectively.
NOTE 4: NET (LOSS) INCOME PER COMMON SHARE
5/31/98 5/31/97
(Unaudited) (Unaudited)
Basic:
Earnings:
Net (loss) income applicable to basic
earning per share calculation $ (14,900) $ 73,299
Weighted average number of common
shares outstanding: 4,024,990 3,999,990
Net (loss) income per share - basic $ 0.00 $ 0.02
========== ==========
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BEST COLLATERAL, INC.
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1998
(UNAUDITED)
NOTE 4: NET INCOME PER COMMON SHARE (CONTINUED)
5/31/98 5/31/97
(Unaudited) (Unaudited)
Diluted:
Earnings:
Net (loss) income applicable to basic
earning per share calculation $ (14,900) $ 73,299
Add: Interest relating to 10%
convertible subordinate notes 5,813 5,348
Interest relating to 8%
convertible subordinate notes 1,388 1,277
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Net (loss) income applicable to
diluted earnings per share
calculations $ (7,699) $ 79,924
========== ==========
Weighted average number of shares
outstanding:
Common shares 4,024,990 3,999,990
Additional shares outstanding assuming
conversion of 10% convertible
subordinated notes 310,000 335,000
Additional shares outstanding assuming
conversion of 8% convertible
subordinated notes 92,500 92,500
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Weighted average number of shares
outstanding, as adjusted 4,427,490 4,427,490
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Net (loss) income per share - diluted $ 0.00 $ 0.02
========== ==========
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SIGNATURE
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 thereunto duly authorized.
Best Collateral, Inc.
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(Registrant)
Date: /s/ Robert E. Verhoeff
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Robert E. Verhoeff
Vice President and
Chief Financial Officer
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