10QSB 1 juneq.txt JUNE 30, 2001 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, 2001 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.) 2220 Otay Lake Rd., #50925, Eastlake, CA 91915 (Address of principal executive office) Registrants telephone no., including area code (619) 421-5492 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, 2001 Common Stock, $0.001 11,345,250 i TABLE OF CONTENTS PART 1. FINANCIAL INFORMATION Heading Page Item 1. Consolidated Financial Statements 1 Consolidated Balance Sheets December 31, 2000 And June 30, 2001 2 Consolidated Statements of Operations six months Ended June 30, 2001 and June 30, 2000 3 Consolidated Statement of Stockholders Equity 4 Consolidated Statements of Cash Flows six months Ended June 30, 2000 and 2001 5 Notes to Consolidated Financial Statements 6 Item 2. Managements Discussion and Analysis and Result 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, 2001, and the related audited balance sheet of the Company as of December 31, 2000, the unaudited statement of operations and cash flows for the six months ended June 30, 2001 and 2000 the audited statements of stockholders equity for the period from December 31, 1998 through December 31, 2000 and the unaudited Statement of Stock Holders Equity for the period of January 1, 2001 through June 30, 2001 are attached hereto and incorporated herein by this reference. Operating results for the quarters ended June 30, 2001 are not necessarily indicative of the results that can be expected for the year ending December 31, 2001. NICHOLAS INVESTMENT COMPANY FINANCIAL STATEMENTS June 30, 2001 and December 31, 2000 The accompanying notes are an integral part of these financial statements. NICHOLAS INVESTMENT COMPANY Balance Sheets ASSETS June 30, December 31, 2001 2000 (Unaudited) CURRENT ASSETS Cash$ 28,434 $ 47,338 Total Current Assets 28,434 47,338 PROPERTY - NET 534,128 538,561 TOTAL ASSETS $ 562,562 $ 585,899 LIABILITIES AND STOCKHOLDERS EQUITY CURRENT LIABILITIES Accounts payable $ 4,292 $ 2,115 Accrued expenses 30,000 40,000 Notes payable, current portion 5,675 9,242 Total Current Liabilities 39,967 51,357 LONG-TERM LIABILITIES Notes payable 453,093 453,093 Total Long-Term Liabilities 453,093 453,093 Total Liabilities 493,060 504,450 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS EQUITY Common stock: $0.001 par value, authorized 100,000,000 shares; 11,345,250 shares issued and outstanding 11,345 11,345 Additional paid-in capital 374,371 374,371 Accumulated deficit (316,214) (304,267) Total Stockholders Equity 69,502 81,449 TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $ 562,562 $ 585,899 NICHOLAS INVESTMENT COMPANY Statements of Operations (Unaudited) For the Three Months ended June 30 2001 2000 REVENUES Rental revenue $ 12,250 $ 11,405 Total Revenues 12,250 11,405 OPERATING COSTS Amortization and depreciation 2,216 2,216 General and administration 6,580 4,104 Total Operating Costs 8,796 6,320 INCOME FROM OPERATIONS 3,454 5,085 OTHER EXPENSE Interest expense 8,672 8,504 Total Other Expense 8,672 8,504 (LOSS) BEFORE TAXES (5,218) (3,419) INCOME TAX EXPENSE - - NET (LOSS) $ (5,218) $ (3,419) BASIC (LOSS) PER COMMON SHARE $ 0.00 $ (0.00) WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 11,345,250 11,345,250 For the Six Months Ended June 30 2001 2000 REVENUES Rental revenue $ 24,015 $ 24,428 Total Revenues 24,015 24,428 OPERATING COSTS Amortization and depreciation 4,433 4,433 General and administration 13,173 9,422 Total Operating Costs 17,606 13,855 INCOME FROM OPERATIONS 6,409 10,573 OTHER EXPENSE Interest expense 18,356 17,121 Total Other Expense 18,356 17,121 (LOSS) BEFORE TAXES (11,947) (6,548) INCOME TAX EXPENSE - - NET (LOSS) $ (11,947) $ (6,548) BASIC (LOSS) PER COMMON SHARE $ (0.00) $ (0.00) WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 11,115,580 11,345,250 NICHOLAS INVESTMENT COMPANY, INC. Statements of Stockholders Equity Common Stock shares amount Balance, December 31, 1999 10,795,250 $ 10,795 March 16, 2000 common stock issued at $0.20 per share for conversion of related party debt 550,000 550 Net loss for the year ended December 31, 2000 - - Balance, December 31, 2000 11,345,250 11,345 Net loss for the six months ended June 30, 2001(unaudited) - - Balance, June 30, 2001 (unaudited) 11,345,250 $ 11,345 Adiitional Paid in Accumulated Capital Deficit Balance, December 31, 1999 $ 264,921 $(218,520) March 16, 2000 common stock issued at $0.20 per share for conversion of related party debt 109,450 - Net loss for the year ended December 31, 2000 - (85,747) Balance, December 31, 2000 374,371 (304,267) Net loss for the six months ended June 30, 2001(unaudited) - (11,947) Balance, June 30, 2001 (unaudited) $ 374,371 $(316,214) NICHOLAS INVESTMENT COMPANY, INC. Statements of Cash Flows (Unaudited) For the Six Months Ended June 30 2001 2000 CASH FLOWS FROM OPERATING ACTIVITIES Income (loss) from operations $ (11,947) $ (6,548) Adjustments to reconcile net income to net cash used by operating activities: Amortization and depreciation expense 4,433 4,433 Changes in operating assets and liabilities: Decrease in accounts payable 2,177 1,917 Decrease in accrued expenses (10,000) (1,306) Increase in security deposit - 1,100 Net Cash Provided (Used) by Operating Activities (15,337) (404) CASH FLOWS FROM INVESTING ACTIVITIES - - CASH FLOWS FROM FINANCING ACTIVITIES Principal payments in long-term debt (3,567) (2,185) Net Cash Provided (Used) by Financing Activities (3,567) (2,185) INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (18,904) (2,589) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 47,338 15,491 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 28,434 $ 12,902 Cash paid for: Interest $ 18,356 $ 17,121 Income tax $ -$ - Non-Cash Financing Activities: Common stock issued for conversion of debt $ - $ 110,000 NICHOLAS INVESTMENT COMPANY, INC. Notes to the Financial Statements June 30, 2001 and December 31, 2000 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, 2000 Annual Report on Form 10-KSB. Operating results for the six months ended June 30, 2001 are not necessarily indicative of the results that may be expected for the year ending December 31, 2001. NOTE 2 - GOING CONCERN The Companys 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. However, the Company does not have significant cash or other material assets, nor does it have an established source of revenues sufficient to cover its operating costs and to allow it to continue as a going concern. It is the intent of the Company to complete a limited offering of its common stock. In the interim, shareholders of the Company have committed to meeting its minimal operating expenses; however, there can be no assurance that the plans of management will prove successful. ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Going Concern and Ability of the Company to Continue The Company had a net operating loss carry forward of $316,214 since inception through June 30, 2001. 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, 2001 the Company had $28,434 in total current assets and equity of $69,502 with which to pay its obligations. 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, 2001 the Company had revenues of $12,250, of operating costs of $8,796, other expenses of $8,672 and a net loss of $5,218 for the same period of 2000. This is compared to revenues of $11,405, operating costs of $6,320, other expenses of $8,504 and a net loss of $3,419. For the six months ended June 30, 2001 the Company had revenues of $24,015, operating costs of $17,606, other expenses of $18,356, and a net loss of $11,947. This is compared to revenues of $24,428, operating costs of $13,855, other expenses of $7,121 and a net loss of $6,548 for the same period of 2000. Net Operating Loss The Company has accumulated approximately $316,214 of net operating losses carryforwards as of June 30, 2001, 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 2015. 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. 7 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 None. 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 10A filed by reference on May 14, 2001. b. Form 10SB12G/A filed by reference on May 14, 2001. 8 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 13, 2001, 2001 By:/S/ John Kirchner John Kirchner President S-1