5
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., 20549
FORM 10-Q SB
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarter report ended June 30, 2002
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to ___________
Commission File number 000-31899
NICHOLAS INVESTMENT COMPANY, INC.
(Exact name of small business issuer as registrant as specified in charter)
Nevada 33-0788293
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5017 Cliffrose Drive, Las Vegas, NV 89130
(Address of principal executive office)
Registrants telephone no., including area code (702) 396-1890
N/A
(Former name, changed since last report)
Check 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 period that the registrant was required
to file such reports), Yes [X] No [ ] 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 issuers classes
of common stock, as of the last practicable date.
Class Outstanding as of June 30, 2002
Common Stock, $0.001 17,805,250
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TABLE OF CONTENTS
PART 1. FINANCIAL INFORMATION
Heading Page
Item 1. Consolidated Financial Statements 1
Consolidated Balance Sheets June 30, 2002
And December 31, 2001 2
Consolidated Statements of Operations six months
Ended June 30, 2002 and June 30, 2001 3
Consolidated Statement of Stockholders Equity 4
Consolidated Statements of Cash Flows six months
Ended June 30, 2002 and June 30, 2001 5
Notes to Consolidated Financial Statements 6
Item 2. Managements Discussion and Analysis and
Results of Operations 7-8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 8
Item 2. Changes in Security 8
Item 3. Defaults Upon Senior Securities 8
Item 4. Submission of Matter to a Vote of 8
Securities Holders
Item 5. Other Information 8
Item 6. Exhibits and Reports on Form 8-K 8
Signatures S-1
ii
PART 1 FINANCIAL INFORMATION
Item 1. Financial Statement
The accompanying unaudited financial statements have been prepared in
accordance with the instructions for Form 10-Q pursuant to the rules and
regulations of the Securities and Exchange Commission and, therefore, do not
include all information and footnotes necessary for a complete presentation of
the financial position, results of operations, cash flows, and stockholders
equity in conformity with generally accepted accounting principles. In the
opinion of management, all adjustments considered necessary for a fair
presentation of the results of operations and financial position have been
included and all such adjustments are of a normal recurring nature.
The unaudited balance sheet of the Company as of June 30, 2002, and the
balance sheet of the Company as of December 31, 2001, derived from the Companys
audited financial statements and the unaudited statement of operations and cash
flows for the six months ended June 30, 2002 and 2001, the statements of
stockholders equity for the period from April 17, 2001 through June 30, 2002 are
attached hereto and incorporated herein by this reference.
Operating results for the quarters ended June 30, 2002 are not necessarily
indicative of the results that can be expected for the year ending December 31,
2002.
NICHOLAS INVESTMENT COMPANY, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2002 and December 31, 2001
NICHOLAS INVESTMENT COMPANY, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
ASSETS
June 30, December 31,
2002 2001
(Unaudited)
CURRENT ASSETS
Cash$ 980 $ -
Contracts receivable 17,631 19,013
Accounts receivable related party 12,000 -
Deposits 315 315
Total Current Assets 30,926 19,328
FIXED ASSETS (NET) 139,087 115,921
TOTAL ASSETS $ 170,013 $ 135,249
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Cash overdraft $ - $ 2,444
Accounts payable 37,607 13,928
Accrued expenses 21,000 2,018
Notes payable 34,500 -
Notes payable related party 5,798 -
Total Current Liabilities 98,905 18,390
Total Liabilities 98,905 18,390
MINORITY INTEREST IN NET ASSETS 12,031 16,027
STOCKHOLDERS' EQUITY
Common stock, $0.001 par value, 100,000,000 shares
authorized; 17,805,250 and 6,000,000 shares
issued and outstanding at June 30, 2002, and
December 31, 2001, respectively 17,805 6,000
Additional paid-in capital 294,426 153,660
Accumulated deficit (253,154) (58,828)
Total Stockholders' Equity (Deficit) 59,077 100,832
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 170,013 $ 135,249
NICHOLAS INVESTMENT COMPANY, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
From
inception
For the six For the three on April 17,
months ended months ended 2001, through
June 30, June 30, June 30,
2002 2002 2001
REVENUES $ 31,035 $ 6,747 $ -
COST OF SERVICES 28,588 419 -
GROSS PROFIT 2,447 6,328 -
OPERATING EXPENSES
General and administrative 29,952 29,946 44,888
Consulting and professional 144,290 144,290 200
Officer compensation 21,000 21,000 -
Depreciation 5,040 2,530 -
Total Operating Expenses 200,282 197,766 45,088
OPERATING LOSS (197,835) (191,438) (45,088)
OTHER (EXPENSE)
Interest expense (487) (487) -
Total Other (Expense) (487) (487) -
NET LOSS BEFORE
MINORITY INTEREST (198,322) (191,925) (45,088)
MINORITY INTEREST IN LOSS 3,996 2,122 1,335
NET LOSS $ (194,326) $ (189,803) $ (43,753)
BASIC LOSS PER SHARE $ (0.02) $ (0.01) $ (0.01)
WEIGHTED AVERAGE
SHARES OUTSTANDING 11,856,754 17,778,583 6,000,000
NOTE: The Company commenced activity on April 17, 2001. As such, this
presentation of the statement of operations omits the comparative figures for
the three and six months ended June 30, 2001.
NICHOLAS INVESTMENT COMPANY, INC. AND SUBSIDIARIES
Statements of Stockholders Equity
Additional
Common Stock Paid-in Accumulated
Shares Amount Capital Deficit
Inception, April
17, 2001 $ - $ - $ - -
Common stock issued for
organizational and management
services at $0.01
per share 1,762,500 1,763 13,238 -
Common stock issued for cash
at $0.125
per share 160,000 160 19,840 -
Capital
contribution - - 4,920 -
Common stock issued for
assets and in reorganization
of Town
Square, LLC 1,815,000 1,815 53,243 -
Common stock issued for
approximately 70% of the
outstanding common stock of
H&L Specialties 1,000,000 1,000 32,049 -
Common stock issued for
approximately 86% of the
outstanding common stock of
Shadow Ridge
Water Company 1,262,500 1,262 30,370 -
Net loss for the period ended
December
31, 2001 - - - (58,828)
Balance, December
31, 2001 6,000,000 6,000 153,660 (58,828)
Recapitalization
(Unaudited) 11,345,250 11,345 (5,346) -
Common stock issued for services
at $0.25 per share
(Unaudited) 300,000 300 74,700 -
Common stock issued for services
at $0.35 per share
(Unaudited) 160,000 160 55,840 -
Capital contribution
(Unaudited) - - 15,572 -
Net loss for the three months
ended March 31, 2002
(Unaudited) - - - (194,326)
Balance, March 31, 2002
(Unaudited) 17,805,250 $ 17,805 $ 294,426 $(253,154)
NICHOLAS INVESTMENT COMPANY, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
From
inception on
For the six April 17,
months ended 2001, through
June 30, June 30,
2002 2001
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(194,326) $ (43,753)
Adjustments to reconcile net
loss to net cash
used by operating
activities:
Depreciation 5,040 -
Common stock issued
for services 131,000 15,000
Changes in operating assets
and liabilities:
(Increase) decrease in
contracts receivable 1,382 (7,100)
(Increase) accounts receivable
related party (12,000) -
(Increase) in deposits and
prepaid expenses - (5,000)
Increase in accounts
payable 23,677 5,972
Increase in accrued
liabilities 18,982 -
Net Cash Used by
Operating Activities (26,245) (34,881)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of fixed
assets (12,633) (5,335)
Recapitalization 6,000 -
Net Cash Used by
Investing Activities (6,633) (5,335)
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in bank
overdraft (2,444) -
Proceeds from
notes payable 34,500 -
Proceeds from notes
payable related party 5,798 8,213
Proceeds from the issuance
of common stock - 20,000
Minority interest (3,996) 12,829
Net Cash Provided by
Financing Activities 33,858 41,042
NET INCREASE IN CASH 980 826
CASH AT BEGINNING OF PERIOD - -
CASH AT END OF PERIOD $ 980 $ 826
NOTE: The Company commenced activity on April 17, 2001. As such, this
presentation of the statements of cash flows omits the comparative figures for
the three and six months ended June 30, 2001.
NICHOLAS INVESTMENT COMPANY, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Continued)
(Unaudited)
From
inception on
For the six April 17,
months ended 2001, through
June 30, June 30,
2002 2001
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
CASH PAID FOR:
Income taxes $ - $ -
Interest $ - $ -
NON-CASH FINANCING ACTIVITIES
Stock issued for services $131,000 $ 15,000
NOTE 1 - BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted in accordance with
such rules and regulations. The information furnished in the interim condensed
consolidated financial statements include normal recurring adjustments and
reflects all adjustments, which, in the opinion of management, are necessary for
a fair presentation of such financial statements. Although management believes
the disclosures and information presented are adequate to make the information
not misleading, it is suggested that these interim condensed consolidated
financial statements be read in conjunction with the Companys most recent
audited financial statements and notes thereto included in its December 31, 2001
Annual Report on Form 10-KSB. Operating results for the six months ended June
30, 2002 are not necessarily indicative of the results that may be expected for
the year ending December 31, 2002.
NOTE 2 - RECAPITALIZATION
On April 1, 2002, Nicholas Investment Company, Inc. (Nicholas), and
Virgin Lakes Development Corporation (Virgin Lakes), completed an Agreement of
Reorganization whereby Nicholas issued 6,000,000 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 11,345,250 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.
Virgin Lakes Development Corporation, has three subsidiaries, The Town
Square, LLC (100% owned), Shadow Ridge Water Company (86% owned), and H & L
Specialties (70% owned). All of the entities, including Nicholas Investment
Company, Inc., are collectively referred to as the Company.
NOTE 3 - GOING CONCERN
The Companys condensed consolidated financial statements have been prepared
using generally accepting 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, however, has a deficit in working
capital, a deficit in stockholders equity and does not have sufficient cash or
other current assets nor sufficient revenues to cover its operating costs and to
allow it to continue as a going concern. The Company intends to continue its
attempts to raise capital through planned debt and equity offerings. The Company
also expects an increase in revenues as the Shadow Ridge Subdivision enters the
construction phase. The financial statements do not include any adjustments that
might result from the outcome of these uncertainties.
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Going Concern and Ability of the Company to Continue
The Company has a net operating loss carry forward of $253,154 since
inception through June 30, 2002.
The Companys consolidated 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 established revenues sufficient to cover its
operating costs and allow it to continue as a going concern. Management believes
that the Company will soon be able to generate revenues sufficient to cover its
operating costs. In the interim, the Company intends to raise additional capital
through private placements of its common stock.
Liquidity and Capital Resources
As of June 30, 2002 the Company has $30,926 in total current assets
compared to total current assets of $ 19,328 as of December 31, 2001. The
current assets are comprised of $980 in cash, $29,631 in accounts receivable and
$315 in deposits. It should be noted that $12,000 of the accounts receivable is
due from a related party. The Company has total current liabilities of $98,905
as of June 30, 2002 compared to current liabilities of $18,390 as of December
31, 2001. The current liabilities are comprised of $ 37,607 in accounts payable,
$21,000 in accrued expenses, and $ 40,478 in notes payable. It should be noted
that $5,798 of the notes payable is due to a related party. The Companys
management realizes that there is a impairment to liquidity. As of June 30, 2002
the Company has a .31 to 1 current ratio. The Company is involved in a best
efforts financing in order to increase the Companys liquidity and capital
resources.
Results of Operations
For the three months ended June 30, 2002 the Company had revenues of
$6,747, cost of services performed of $419, and operating expenses of $ 197,766.
For the three months ended June 30, 2002 the Company also had interest expense
of $487 and a minority interest in the operating loss of $2,122. For the three
months ended June 30, 2002 the Company had a net loss of ($189,803). Included in
the net operating loss was $131,000 in common stock issuances that were issued
for services rendered in the quarter.
For the six months ended June 30, 2002 the Company had revenues of 31,035,
cost of services performed of $28,588, and operating expenses of $ 200,282. For
the six months ended June 30, 2002 the Company also had interest expense of $487
and a minority interest in the operating loss of $3,996. For the six months
ended June 30, 2002 the Company had a net loss of ($194,326) Included in the net
operating loss was $131,000 in common stock issuances that were issued for
services rendered in the quarter ending June 30, 2002.
Net Operating Loss
The Company has accumulated approximately $253,154 of net operating loss
carryforwards as of June 30, 2002, which maybe offset against taxable income and
income taxes in future years. The use of these to losses to reduce future income
taxes will depend on the generation of sufficient taxable income prior to the
expiration of the net loss carryforwards. The carryforwards expire in the year
2022. In the event of certain changes in control of the Company, there will be
an annual limitation on the amount of carryforwards, which can be used.
Recapitalization
On April 1, 2002, Nicholas Investment Company, Inc. and Virgin Lakes
Development Corporation completed an Agreement of Reorganization whereby
Nicholas issued 6,000,000 shares of its common stock in exchange for all the
outstanding common stock of Virgin Lakes. Immediately prior to the Agreement of
Reorganization, Nicholas had 11,345,250 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.
Virgin Lakes Development Corporation , has three subsidiaries, The Town
Square, LLC (100% owned), Shadow Ridge Water Company (86% owned), and H&L
Specialties (70% owned). All of the entities, including Nicholas Investment
Company, Inc., are collectively referred to as the Company.
Sale of Common Capital Stock
None.
Risk Factors and Cautionary Statements
Forward-looking statements in this report are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995. The
Company wished to advise readers that actual results may differ substantially
from such forward-looking statements. Forward-looking statements involve risks
and uncertainties that could cause actual results to differ materially from
those expressed on or implied by the statements, including, but not limited to,
the following: the ability of the Company to successfully meet its cash and
working capital needs, the ability of the Company to successfully market its
product, and other risks detailed in the Companys periodic report filings with
the Securities and Exchange Commission.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
On April 1, 2002 the Company issued 11,345,250 shares of common stock to
the shareholders of Nicholas Investment Company in order to recapitalize the
Company.
On April 1, 2002 the Company issued 300,000 shares of common stock at $.25
per share for consideration of $75,000 to one entity for services rendered in
conjunction with the above mentioned recapitalization. The shares were issued
under section 4(2) of the 1933 Securities Act and bear a restrictive legend.
On April 16, 2002 the Company issued 160,000 shares of common stock at $.25
per share for consideration of $56,000 to one entity for services rendered. The
shares were issued under section 4(2) of the 1933 Securities Act and bear a
restrictive legend.
As of June 30, 2002 the Company had 17,805,250 shares issued and
outstanding.
ITEM 3. DEFAULTS UPON SENIOR SECURITES
None.
ITEM 4. SUBMISSION OF MATTERS TO BE A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON 8-K
a. Form 10SBA filed by reference on March 7, 2001.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Report to be signed in its behalf by the
undersigned hereto duly authorized.
NICHOLAS INVESTMENT COMPANY INC.
Dated: August 16, 2002
By: __________________
Darryl Schuttloffel
President
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Nicholas Investment Company (the
Company) on Form 10-Q(SB) for the period ending June 30, 2002 as filed with the
Securities and Exchange Commission on the date hereof (the Report), I Darryl
Schuttloffel , Chief Executive Officer of the Company, certify, pursuant to 18
U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002, that,
to the best of my knowledge and belief:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations of the
Company.
Darryl Schuttloffel
Chief Executive Officer
Dated: August 16, 2002
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