FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended Commission File Number: March 31, 1999 0-19133 FIRST CASH FINANCIAL SERVICES, INC. (Exact name of registrant as specified in its charter) Delaware 75-2237318 (State of Incorporation) (IRS Employers Identification Number 690 East Lamar, Suite 400 Arlington, Texas 76011 (Address of principal executive offices) (Zip Code) (817)460-3947 (Registrant's telephone number, including area code) Indicate by check mark 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), and (2) has been subject to such filing requirements for the past 90 days. Yes x No --- --- As of May 14, 1999, there were 8,624,034 shares of Company common stock, par value $.01 per share ("Common Stock"), issued and outstanding. Part I. Financial Information Item 1. Financial Statements <TABLE> FIRST CASH FINANCIAL SERVICES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS ------------------------------------- March 31, December 31, 1999 1998 ---- ---- (unaudited) (unaudited) (in thousands, except share data) ASSETS <S> <C> <C> Cash and cash equivalents............................ $ 4,401 $ 4,458 Service charges receivable........................... 2,509 2,707 Receivables.......................................... 18,765 20,392 Inventories.......................................... 17,584 17,403 Income taxes receivable.............................. 386 1,471 Prepaid expenses and other current assets............ 3,102 2,908 -------- -------- Total current assets............................ 46,747 49,339 Property and equipment, net.......................... 9,568 9,146 Intangible assets, net............................... 54,709 54,494 Other................................................ 354 346 -------- -------- $111,378 $113,325 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current portion of long-term debt and notes payable....................................... $ 2,135 $ 2,177 Accounts payable and accrued expenses................ 6,684 6,752 Income taxes payable................................. 905 989 -------- -------- Total current liabilities....................... 9,724 9,918 Revolving credit facility............................ 29,700 33,450 Long-term debt and notes payable, net of current portion..................................... 6,286 6,283 Deferred income taxes................................ 3,116 2,966 -------- -------- 48,826 52,617 -------- -------- Stockholders' equity: Preferred stock; $.01 par value; 10,000,000 shares authorized; no shares issued or outstanding...................................... - - Common stock; $.01 par value; 20,000,000 shares authorized; 9,094,993 and 9,089,305 shares issued, respectively; 8,624,034 and 8,618,346 shares outstanding, respectively................. 91 91 Additional paid-in capital........................ 49,032 49,026 Retained earnings................................. 15,694 13,856 Common stock held in treasury, at cost, 470,959 shares................................... (2,265) (2,265) -------- -------- 62,552 60,708 -------- -------- $111,378 $113,325 ======== ======== </TABLE> The accompanying notes are an integral part of these condensed consolidated financial statements. <TABLE> FIRST CASH FINANCIAL SERVICES, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME ------------------------------------------- Three Months Ended March 31, 1999 1998 ---- ---- (unaudited) (unaudited) (in thousands, except per share amounts) Revenues: <S> <C> <C> Merchandise sales............................... $ 13,755 $ 9,625 Service charges................................. 8,959 4,805 Check cashing fees.............................. 561 - Other........................................... 531 115 -------- -------- 23,806 14,545 -------- -------- Cost of goods sold and expenses: Cost of goods sold.............................. 9,116 6,532 Operating expenses.............................. 9,019 4,516 Interest expense................................ 580 499 Depreciation.................................... 341 221 Amortization.................................... 370 172 Administrative expenses......................... 1,391 1,005 -------- -------- 20,817 12,945 -------- -------- Income before income taxes........................... 2,989 1,600 Provision for income taxes........................... 1,151 594 -------- -------- Net income........................................... $ 1,838 $ 1,006 ======== ======== Basic earnings per share............................. $ .21 $ .23 Diluted earnings per share........................... $ .20 $ .17 </TABLE> The accompanying notes are an integral part of these condensed consolidated financial statements. <TABLE> FIRST CASH FINANCIAL SERVICES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ----------------------------------------------- Three Months Ended March 31, 1999 1998 ---- ---- (unaudited) (unaudited) (in thousands) <S> <C> <C> Cash flows from operating activities: Net income........................................ $ 1,838 $ 1,006 Adjustments to reconcile net income to net cash used for operating activities: Depreciation and amortization................. 711 393 Changes in operating assets and liabilities, net of effect of purchases of existing stores: Service charges receivable.................... 231 206 Inventories................................... (28) 522 Prepaid expenses and other assets............. 883 (846) Accounts payable and accrued expenses......... (76) 53 Current and deferred income taxes............. 66 334 -------- -------- Net cash flows from operating activities... 3,625 1,668 -------- -------- Cash flows from investing activities: Net decrease in receivables....................... 1,818 1,326 Purchases of property and equipment............... (762) (267) Acquisition of existing stores.................... (432) (2,772) -------- -------- Net cash flows from investing activities.... 624 (1,713) -------- -------- Cash flows from financing activities: Proceeds from debt................................ 1,650 2,554 Repayments of debt................................ (5,962) (3,114) Registration fees................................. (13) - Proceeds from exercise of stock options........... 19 4 -------- -------- Net cash flows from financing activities.... (4,306) (556) -------- -------- Decrease in cash and cash equivalents............... (57) (601) Cash and cash equivalents at beginning of the period......................................... 4,458 1,588 -------- -------- Cash and cash equivalents at end of the period...... $ 4,401 $ 987 ======== ======== Supplemental disclosure of cash flow information: Cash paid during the period for: Interest...................................... $ 585 $ 495 ======== ======== Income taxes.................................. $ - $ 260 ======== ======== </TABLE> The accompanying notes are an integral part of these condensed consolidated financial statements. FIRST CASH FINANCIAL SERVICES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ---------------------------------------------------- (UNAUDITED) Note 1 - Basis of Presentation - ------------------------------ The accompanying unaudited condensed consolidated financial statements, including the notes thereto, include the accounts of First Cash Financial Services, Inc. (the "Company") and its wholly-owned subsidiaries. Such unaudited consolidated financial statements are condensed and do not include all disclosures and footnotes required by generally accepted accounting principles for complete financial statements. Such interim period financial statements should be read in conjunction with the Company's consolidated financial statements which are included in the Company's July 31, 1998 Annual Report to Stockholders. All significant intercompany accounts and transactions have been eliminated in consolidation. The consolidated financial statements as of March 31, 1999 and December 31, 1998 and for the periods ended March 31, 1999 and 1998 are unaudited, but in management's opinion, include all adjustments (consisting of only normal recurring adjustments) considered necessary to present fairly the financial position, results of operations and cash flows for such interim periods. Operating results for the period ended March 31, 1999 are not necessarily indicative of the results that may be expected for the full fiscal year. Note 2 - Revolving Credit Facility - ---------------------------------- The Company currently maintains a $40,000,000 long-term line of credit with its senior commercial lender (the "Credit Facility"). At March 31, 1999, $29,700,000 was outstanding under this Credit Facility and an additional $10,300,000 was available to the Company pursuant to the available borrowing base. The Credit Facility bears interest at the prevailing LIBOR rate (which was approximately 5% at March 31, 1999) plus one percent, and matures on November 1, 2000. Amounts available under the Credit Facility are limited to 325% of the Company's earnings before income taxes, interest, depreciation and amortization for the trailing twelve months. Under the terms of the Credit Facility, the Company is required to maintain certain financial ratios and comply with certain technical covenants. The Company was in compliance with these requirements and covenants during the three months ended March 31, 1999 and as of May 14, 1999. Note 3 - Business Acquisitions - ------------------------------ During the quarter ended March 31, 1999, the Company acquired two pawnshops in El Paso, Texas. These acquisitions brought the Company's total number of stores owned to 135 as of March 31, 1999. All acquisitions during the quarter were financed primarily with proceeds from the Company's Credit Facility, and seller-financed debt. Note 4 - Earnings Per Share - --------------------------- The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share data): <TABLE> Three Months Ended ------------------ March 31, March 31, 1999 1998 ---- ---- <S> <C> <C> Numerator: Net income for calculating basic earnings per share $ 1,838 $ 1,006 Plus interest expense, net of taxes, relating to convertible debentures - 118 -------- -------- Net income for calculating diluted earnings per share $ 1,838 $ 1,124 ======== ======== Denominator: Weighted-average common shares for calculating basic earnings per share 8,619 4,467 Effect of dilutive securities: Stock options and warrants 557 906 Contingently issuable shares due to acquisitions 198 - Convertible debentures - 1,402 -------- -------- Weighted-average common shares for calculating diluted earnings per share 9,374 6,775 ======== ======== Basic earnings per share $ .21 $ .23 Diluted earnings per share $ .20 $ .17 </TABLE> Note 5 - Stock Option and Warrant Exercises - ------------------------------------------- During the three months ending March 31, 1999, the Company issued 4,000 shares of common stock relating to the exercise of outstanding stock options for aggregate exercise proceeds of $19,000. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL - ------- The Company's pawnshop revenues are derived primarily from service charges on pawn loans, and the sale of unredeemed goods, or "merchandise sales". Pawn loans are made for a 30-day term with an automatic extension of 60 days in Texas, South Carolina and Missouri, 30 days in Oklahoma and 15 days in Maryland and Virginia. Pawn loans made in Washington, D.C. are made for a 30 day term with no automatic extension. All pawn loans are collateralized by tangible personal property placed in the custody of the Company. The annualized service charge rates on pawn loans are set by state laws and range between 12% and 240% in Texas and 36% and 240% in Oklahoma, depending on the size of the loan. Service charge rates are 144% to 240% on an annualized basis in Maryland, with a $6 monthly minimum charge. In Washington, D.C., loans up to $40 bear a flat $2 charge per month, while loans over $40 bear a 48% to 60% annualized rate. Missouri pawn loans bear service and storage charges totaling 240% per year, Virginia rates range from 120% to 180% annually, and South Carolina rates range from 60% to 300%. In its Texas stores, the Company recognizes service charges at the inception of the pawn loan at the lesser of the amount allowed by the state law for the initial 30-day term or $15, in accordance with state law. In Oklahoma, Maryland, Virginia, South Carolina, Missouri and Washington, D.C., the Company recognizes service charges at the inception of the loan at the amount allowed by law for the first 30 days. Pawn service charge income applicable to the remaining term and/or extension period is not recognized until the loan is repaid or renewed. If a loan is not repaid prior to the expiration of the automatic extension period, if applicable, the property is forfeited to the Company and held for resale. As a result of the Company's policy of accruing pawn service charges only for the initial 30-day term, unredeemed merchandise is transferred to inventory at a value equal to the loan principal plus one-month's accrued interest. The Company's accounting policy defers recognition of an amount of income equal to the amount of pawn service charges relating to the extension period until the loan is repaid or renewed, or until the merchandise is resold. This policy, in the Company's opinion, lessens the risk that the inventory's cost will exceed its realizable value when sold. Revenues at the Company's check cashing stores are derived primarily from check cashing fees, fees on payday advances, and fees from the sale of money orders and wire transfers. Payday advances have a term of thirty days or less, and carry a 15% service charge in both California and Washington, and a 10% service charge in Illinois. The Company recognizes service charge income on payday advances at the inception of the advance. Bad debts on payday advances are charged to operating expense in the month that the items are returned by the bank, and are credited to operating expense in the period the items are subsequently collected. Although the Company has had significant increases in revenues due primarily to acquisitions and secondarily to new store openings, the Company has also incurred increases in operating expenses attributable to the additional stores and increases in administrative expenses attributable to building a management team and the support personnel required by the Company's growth. Operating expenses consist of all items directly related to the operation of the Company's stores, including salaries and related payroll costs, rent, utilities, advertising, property taxes, licenses, supplies, security and net returned checks. Administrative expenses consist of items relating to the operation of the corporate office, including the salaries of corporate officers, area supervisors and other management, accounting and administrative costs, liability and casualty insurance, outside legal and accounting fees and stockholder related expenses. RESULTS OF OPERATIONS - --------------------- Three months ended March 31, 1999 compared to the three months ended March 31, 1998 Total revenues increased 64% to $23,806,000 for the three months ended March 31, 1999 ("the First Quarter of 1999") as compared to $14,545,000 for the three months ended March 31, 1998 ("the First Quarter of 1998"). Of the $9,261,000 increase in total revenues, $8,453,000 relates to revenues generated by the 69 stores acquired or opened subsequent to January 1, 1998. The remaining increase of $808,000 relates to the 6% same store revenue increase at the 66 stores which were in operation during all of the First Quarter of 1998 and the First Quarter of 1999. Of the $9,261,000 increase in total revenues, 45%, or $4,130,000 was attributable to increased merchandise sales, 45%, or $4,154,000 was attributable to increased service charges, 6%, or $561,000 was attributable to increased check cashing fees, and the remaining increase of $416,000 was attributable to an increase in other income. As a percentage of total revenues, merchandise sales decreased from 66% to 58%, service charges increased from 33% to 38%, check cashing fees increased from zero to 2%, and other income increased from 1% to 2% during the First Quarter of 1999 as compared to the First Quarter of 1998. The gross profit as a percentage of merchandise sales increased to 34% during the First Quarter of 1999 compared to 32% during the First Quarter of 1998. The aggregate receivables balance (pawn loans plus payday advances) increased 52% from $12,316,000 as of March 31, 1998 to $18,765,000 as of March 31, 1999. Of the $6,449,000 increase, $6,173,000 was attributable to the addition of 67 stores acquired subsequent to March 31, 1998. The remaining increase was attributable to increases in aggregate loan balances of $276,000 at the 68 stores in operation at both March 31, 1998 and March 31, 1999. Operating expenses increased 100% to $9,019,000 during the First Quarter of 1999 compared to $4,516,000 during the First Quarter of 1998, primarily as a result of the addition of the 69 stores subsequent to January 1, 1998. Administrative expenses increased 38% to $1,391,000 during the First Quarter of 1999 compared to $1,005,000 during the First Quarter of 1998, primarily due to the addition of supervisory staff and other overhead related to the above mentioned 69 stores acquired. Interest expense increased 16% from $499,000 in the First Quarter of 1998 to $580,000 in the First Quarter of 1999, primarily due to the overall higher level of debt relating to recent store acquisitions. For the First Quarter of 1999 and the First Quarter of 1998, the Company's tax provisions of 39% and 37%, respectively, of income before income taxes differed from the statutory federal rate of 34% primarily due to state income taxes, net of the federal tax benefit. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- The Company's operations and acquisitions have been financed with funds generated from operations, bank borrowings, and seller-financed indebtedness The Company currently maintains a $40,000,000 long-term line of credit with its senior commercial lender (the "Credit Facility"). At March 31, 1999, $29,700,000 was outstanding under this Credit Facility and an additional $10,300,000 was available to the Company pursuant to the available borrowing base. The Credit Facility bears interest at the prevailing LIBOR rate (which was approximately 5% at March 31, 1999) plus one percent, and matures on November 1, 2000. Amounts available under the Credit Facility are limited to 325% of the Company's earnings before income taxes, interest, depreciation and amortization for the trailing twelve months. Under the terms of the Credit Facility, the Company is required to maintain certain financial ratios and comply with certain technical covenants. The Company was in compliance with these requirements and covenants during the three months ended March 31, 1999 and as of May 14, 1999. During the quarter ended March 31, 1999, the Company acquired two pawnshops in El Paso, Texas. These acquisitions brought the Company's total number of stores owned to 135 as of March 31, 1999. These acquisitions were financed primarily with proceeds from the Company's Credit Facility, and seller-financed debt. As of March 31, 1999, the Company's primary sources of liquidity were $4,401,000 in cash and cash equivalents, $2,509,000 in service charges receivable, $18,765,000 in receivables, $17,584,000 in inventories and $10,300,000 of available and unused funds under the Company's Credit Facility. The Company had working capital as of March 31, 1999 of $37,023,000 and a total liabilities to equity ratio of 0.78 to 1. During the First Quarter of 1999, the Company received proceeds of $19,000 from the issuance of 4,000 shares of common stock relating to the exercise of outstanding common stock options. Net cash provided by operating activities for the Company during the First Quarter of 1999 was $3,625,000 as compared with $1,668,000 provided by operating activities during the First Quarter of 1998. Net cash provided by investing activities during the First Quarter of 1999 was $624,000 as compared with $1,713,000 used for investing activities during the First Quarter of 1998. Net cash used for financing activities of $4,306,000 during the First Quarter of 1999 compares to net cash used for financing activities of $556,000 during the First Quarter of 1998. The profitability and liquidity of the Company are affected by the amount of loans outstanding, which is controlled in part by the Company's loan decisions. The Company is able to influence the frequency of forfeiture of collateral by increasing or decreasing the amount loaned in relation to the resale value of the pledged property. Tighter credit decisions generally result in smaller loans in relation to the estimated resale value of the pledged property and can thereby decrease the Company's aggregate loan balance and, consequently, decrease pawn service charges. Additionally, small loans in relation to the pledged property's estimated sale value tend to increase loan redemptions and improve the Company's liquidity. Conversely, providing larger loans in relation to the estimated sale value of the pledged property can result in an increase in the Company's pawn service charge income. Also larger average loan balances can result in an increase in loan forfeitures, which increases the quantity of goods on hand and, unless the Company increases inventory turnover, reduces the Company's liquidity. In each of the Company's last three fiscal years, at least 70% of the amounts loaned were either paid in full or renewed. The Company's renewal policy allows customers to renew pawn loans by repaying all accrued interest on such pawn loans. In addition to these factors, the Company's liquidity is affected by merchandise sales and the pace of store expansions. Management believes that the Credit Facility, current assets and cash generated from operations will be sufficient to accommodate the Company's current operations for at least the next twelve months. The Company has no significant capital commitments as of May 14, 1999. The Company currently has no written commitments for additional borrowings or future acquisitions; however, the Company intends to continue to grow and will likely seek additional capital to facilitate expansion. The Company will evaluate acquisitions, if any, based upon opportunities, acceptable financing, purchase price, strategic fit and qualified management personnel. The Company intends to continue to engage in a plan of expansion through existing store acquisitions and new store openings. While the Company continually looks for, and is presented with, potential acquisition candidates, the Company has no definitive plans or commitments for further acquisitions. If the Company encounters an attractive opportunity to acquire or open a new store in the near future, the Company will seek additional financing, the terms of which will be negotiated on a case-by-case basis. Between April 1, 1999 and May 14, 1999, the Company opened one new check cashing store in Oregon. All store openings and acquisitions during and after the quarter ended March 31, 1999 were financed with proceeds from the Company's Credit Facility and with seller financed debt. The Company plans to open its first pawnshop in Mexico in May 1999, and anticipates opening three additional pawnshops in Mexico by the end of August 1999. Additional locations in Mexico may be added in the future. The Company has also invested significant capital and internal resources between January 1, 1999 and May 14, 1999 in an effort to upgrade and improve its internet website, "firstcash.com", including adding pictures of all inventory available for sale. The Company anticipates that this project will be completed by the end of June 1999. YEAR 2000 ISSUE - --------------- The "Year 2000 Issue" is the result of computer programs that use two digits instead of four to record the applicable year. Computer programs that have date-sensitive software might recognize a date using "00" as the Year 1900 instead of the Year 2000. This could result in a system failure or miscalculations causing disruptions of operations, including among other events, a temporary inability to process transactions or engage in similar normal business activities. The Year 2000 is a leap year, which may also lead to incorrect calculations, functions or system failure. The Company has established a committee to gather, test, and produce information about the Company's operations systems impacted by the Year 2000 transition. The Company has utilized both internal and external resources to identify, correct or reprogram, and test systems for Year 2000 compliance. Management currently believes that the Company has acquired all of the hardware and software necessary to be able to bring the Company's own internally developed point-of-sale operating system into Year 2000 compliance. Through March 31, 1999, the Company has incurred costs of approximately $20,000 to acquire the necessary hardware and software for its Year 2000 remediation. The Company is currently in the process of installing such hardware and software, and believes that its own point-of-sale system will be fully compliant by the end of August 1999. The Company's contingency plan in the event of a widespread Year 2000 failure includes operating the Company's stores on a manual, non computerized basis. Although the Company's Year 2000 remediation has not been completed, management currently believes, based on available information, that the completion of these matters will not require any additional material expenditures, and that it will not have a material adverse impact on the Company's financial position or it's results of operations. In addition, the Company has contacted its significant vendors and suppliers to determine the extent to which the Company may be vulnerable to those parties' failure to remediate their own Year 2000 issues. While there can be no guarantee that the systems of other companies with which the Company's systems interface will be timely converted, or that a failure to convert by another company, or a conversion that is incompatible with the Company's systems would not require the Company to spend more time or money than anticipated, or even have a material adverse effect on the Company, management currently believes that all of its significant vendors and suppliers have achieved Year 2000 compliance. FORWARD-LOOKING INFORMATION - --------------------------- This report contains certain statements that are "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Forward-looking statements can be identified by the use of forward-looking terminology such as "believes," "expects," "may," "estimates," "will," "should," "plans," or "anticipates" or the negative thereof, or other variations thereon, or comparable terminology, or by discussions of strategy. Such statements include, but are not limited to, the discussions of the Company's operations, liquidity, and capital resources. Forward-looking statements are included in the "Liquidity and Capital Resources" section of this annual report. Although the Company believes that the expectations reflected in forward-looking statements are reasonable, there can be no assurances that such expectations will prove to be accurate. Generally, these statements relate to business plans, strategies, anticipated strategies, levels of capital expenditures, liquidity and anticipated capital funding needed to effect the business plan. All phases of the Company's operations are subject to a number of uncertainties, risks and other influences, many of which are outside the control of the Company and cannot be predicted with any degree of accuracy. Factors such as changes in regional or national economic conditions, changes in governmental regulations, unforeseen litigation, changes in interest rates or tax rates, significant changes in the prevailing market price of gold, future business decisions and other uncertainties may cause results to differ materially from those anticipated by some of the statements made in this report. In light of the significant uncertainties inherent in the forward-looking statements made in this report, the inclusion of such statements should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved. Security holders are cautioned that such forward-looking statements involve risks and uncertainties. The forward-looking statements contained this report speak only as of the date of this report and the Company expressly disclaims any obligation or undertaking to release any updates or revisions to any such statement to reflect any change in the Company's expectations or any change in events, conditions or circumstance on which any such statement is based. PART II. OTHER INFORMATION --------------------------- ITEM 2. Changes in securities b. During the three months ending March 31, 1999, the Company issued 4,000 shares of common stock relating to the exercise of outstanding stock options for an aggregate exercise price of $19,000. ITEM 4. Submission of matters to a vote of security holders On January 14, 1999, the Company held its annual meeting of stockholders and its stockholders voted for (or ratified) the following proxy proposals as a result of a majority of the Company's outstanding capital stock voting in favor of the proposals. The proposals ratified at the January 14, 1999 annual stockholders' meeting are as follows: 1. The stockholders re-elected Phillip E. Powell as a director of First Cash Financial Services, Inc. 2. The stockholders ratified the selection of Deloitte & Touche LLP as independent auditors of the Company for the five months ending December 31, 1998 and for the year ending December 31, 1999. 3. The stockholders ratified the change in the Company's name from "First Cash, Inc." to "First Cash Financial Services, Inc." 4. The stockholders ratified the 1999 Stock Option Plan. ITEM 6. Exhibits and reports on Form 8-K a. Exhibits 27.0 Financial Data Schedules (Edgar version only). b. On January 20, 1999, the Company filed a Form 8-K to report a change in the Company's name from "First Cash, Inc." to "First Cash Financial Services, Inc." 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 thereunto duly authorized. Dated: May 14, 1999 FIRST CASH FINANCIAL SERVICES, INC. ----------------------------------- (Registrant) Phillip E. Powell Rick L. Wessel - ---------------------- ------------------------ Phillip E. Powell Rick L. Wessel Chairman of the Board and Chief Accounting Officer Chief Executive Officer