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UNITED
  STATES 
  SECURITIES AND EXCHANGE COMMISSION
  WASHINGTON, D.C. 20549

FORM 10-KSB


(Mark One)


|              |                                                                                     
|------------- | ------------------------------------------------------------------------------------
|[
        X ] | ANNUAL REPORT UNDER
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the
  fiscal year ending December 31, 2002



Commission
  file number 000-27715



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NICHOLAS
  INVESTMENT COMPANY, INC.(Exact Name of Registrant as Specified in Its Charter)


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|                                                                           |  |                                                 
|-------------------------------------------------------------------------- |  | ------------------------------------------------
|                                                                           |  |                                                 
|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  
|                                                                           |  |                                                 
|                                                                           | 
|Securities
        to be registered under Section 12(g) of the Act:       
|Common
        Stock, $0.001 par value
        (Title of Class)           

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 [ ] No[X]

Check if there is no disclosure of delinquent filers in response to Item 405
  of Regulation S-B contained in this form, and no disclosure will be contained,
  to the best of registrants knowledge, in definitive proxy or information
  statements incorporated by reference in Part III of this Form 10-KSB or any
  amendment to this Form 10-KSB. [ ] The aggregate market
  value of the voting stock held by non affiliates computed by reference to the
  price at which the stock was sold, or the average bid and asked prices of such
  stock as May 12, 2003 was $0.03, based on the last sale price of $0.03 as reported
  by the Pink Sheets.
  The Registrant had 115,373,752 shares of common stock, $0.001 par value, outstanding
  as of September 18, 2003.



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NICHOLAS
    INVESTMENT COMPANY, INC.


TABLE OF CONTENTS


PAGE
        NUMBER PART
        IITEM
        1.
      
      BUSINESS
      3DESCRIPTION
        OF BUSINESS
      3COMPANY
        STRATEGY4ITEM
        2.
      
      DESCRIPTION
        OF PROPERTY4ITEM
          3.
      
      LEGAL
        PROCEEDINGS4ITEM
          4.
      
      SUBMISSION
        OF MATTERS TO A VOTE OF SECURITY HOLDERSPART IIITEM
          5.
      
      MARKET
        FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
      4MARKET
        INFORMATION
      4HOLDERS
      4DIVIDENDS
      5ITEM
        6.
      
      MANAGEMENT'S
        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
      6ITEM
        7.
      
      FINANCIAL
        STATEMENTS
      7ITEM
        8.
      
      CHANGES
        IN AND DISAGREEMENTS WITH ACCOUNTANTS
      7PART
        IIIITEM
          9.
      
      DIRECTORS
        AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH
        SECTION 16(A) OF THE EXCHANGE ACT
      7ITEM
          10.
      
      EXECUTIVE
        COMPENSATION
      8REMUNERATION
        PAID TO EXECUTIVES
      8REMUNERATION
        PAID TO DIRECTORS
      8EMPLOYMENT
        AGREEMENTS
      8EMPLOYEE
        BENEFITS
      8ITEM
          11.
      
      SECURITY
        OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
      9ITEM
          12.
      
      CERTAIN
        RELATIONSHIPS AND RELATED TRANSACTIONS
      9ITEM
          13.
      
      CONTROLS
        AND PROCEDURES
      10ITEM
          14.
      
      EXHIBITS
        AND REPORTS ON FORM 8-K
      10SIGNATURES
      11 ii


PART I Forward Looking Statements This document includes
    statements that may constitute forward-looking statements made pursuant to
    the Safe harbor provisions of the Private Securities Litigation reform Act
    of 1995. The Company would like to caution certain readers regarding certain
    forward-looking statements in this documents and in all if its communications
    to shareholders and others, on management's projections, estimates and all
    other communications. Statements that are based on management projections,
    estimates and assumptions are forward-looking statements, the words believe,
    expect, anticipate, intend and similar expressions generally identify forward-looking
    statements. While the Company believes in the veracity of all statements made
    herein, forward-looking statements are necessarily based upon a number of
    estimates, and assumptions that, while considered reasonable by the Company,
    are inherently subject to significant business, economic and competitive uncertainties
    and contingencies and know and unknown risks. Many of the uncertainties and
    contingencies can affect events and the Company's actual results and could
    cause its actual results to differ materially from this expressed in any forward-looking
    statements made by, or on behalf, of the Company. ITEM 1. DESCRIPTION OF BUSINESS
    Nicholas Investment Company, Inc. ("the Company" or "NIVI")
    was incorporated under the laws of Nevada on January 22, 1998 to engage in
    any lawful activity as shall be appropriate under laws of the State of Nevada.
    Until April 2003 Nicholas Investment Company was in the business of acquiring
    and leasing real estate. Nicholas Investment raised $202,800.00 in 1998 and
    purchased four single-family dwellings, which were subsequently sold.
    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. Virgin Lakes Development Corporation, had three
    subsidiaries, The Town Square, LLC (100% owned), Shadow Ridge Water Company
    (86% owned), and H & L Specialties (70% owned). 
    As of December 31, 2002, Management determined that the value of these businesses
    was substantially below book and determined to liquidate each of these holdings.
    As such, all assets, liabilities, and activities of these businesses have
    been included as discontinued operations. An impairment loss of $125,521 has
    been recorded to reduce the value of the assets associated with the discontinued
    operations to zero. In April 2003, the Company exchanged all of its ownership
    in each of these companies in exchange for the forgiveness of the related
    party debts and the assumption of trade payables associated with the businesses.
    
    On May 14, 2003, two of the Company's officers and Directors submitted their
    resignations. The Company's remaining Director, Darryl Schuttloffel, appointed
    two new Directors and officers and charged them with developing and implementing
    a business strategy. On May 20, 2003, Mr. Schuttloffel also resigned as an
    officer and director of the Company.
    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.
    As of September 18, 2003, the Company had no operating business. 3  Company Strategy
    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 18,
    2003, the Company had not raised substantial capital to do so and had not
    formalized arrangements to infuse such capital.
    Management is negotiating to acquire a majority interest in several prospective
    businesses, but has not yet signed a letter of intent or definitive acquisition
    agreement.Employees
    Presently, Nicholas Investment has two employees who serve as the Company's
    Chief Executive Officer and Chief Financial Officer, respectively. Management
    intends to hire additional employees only as needed and as funds are available.
    In such cases compensation to management and employees will be considered
    with prevailing wages for services rendered. ITEM 2. DESCRIPTION OF PROPERTY Nicholas Investment currently
    has its offices located at 4443 Birdie Dr., Corona, CA 92883. The Company
    does not pay any rent associated with this facility. Management believes that
    its facilities are adequate for its present business. ITEM 3. LEGAL PROCEEDINGS
    Nicholas Investment is not a party to any material pending legal proceedings
    and no such action by, or to the best of its knowledge, against Nicholas Investment
    has been threatened. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    No matters were submitted to a vote of the Company's Securities Holders during
    the fourth quarter of the Company's fiscal year ending December 31, 2002. PART II ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERSMarket Information The Company's Common Stock
    has been traded on the Pink Sheets since March 2002 under the symbol "NIVI."
    The following table sets forth the trading history of the Common Stock on
    the Pink Sheets for each quarter since March 2001 through June 30, 2003, as
    reported by Dow Jones Interactive. The quotations reflect inter-dealer prices,
    without retail mark-up, markdown or commission and may not represent actual
    transactions. Quarter
          Endings
      Quarterly
          High
      Quarterly
          Low
      Quarterly
          Close3/29/2002
      0.30
      0.10
      0.306/28/2002
      0.45
      0.007
      0.0079/30/2002
      0.10
      0.0015
      0.001512/31/2002
      0.04
      0.001
      0.0013/31/2003
      0.01
      0.0006
      0.0086/30/2003
      0.001
      0.0006
      0.0006 Holders of record As of September 18, 2003
    there were approximately 76 holders of record of the Company's common stock. 4  Dividends The Company has never
    paid a cash dividend on its common stock. Payment of dividends is at the discretion
    of the Board of Directors. The Board of Directors plans to retain earnings,
    if any, for operations and does not intend to pay dividends in the foreseeable
    future.
    Recent Sales of Unregistered Securities Except as otherwise noted,
    the securities described in this Item 5 were issued pursuant to the exemption
    from registration provided by Section 4(2) of the Securities Act of 1933.
    Each such issuance was made pursuant to individual contracts which are discrete
    from one another and are made only with persons who were sophisticated in
    such transactions and who had knowledge of and access to sufficient information
    about the Company to make an informed investment decision. Among the information
    provided was the fact that the securities issued were restricted securities. No commissions were paid
    in connection with the transactions described below unless specifically noted.
    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. 
    600,000 shares of Preferred Convertible stock were issued to P.R. Businesses
    Incorporated for the down payment on the purchase of an office building in
    Las Vegas, NV. The purchase of this property was later abandoned and the 600,000
    shares of convertible preferred stock were returned to the Company and canceled
    in 2003. 
    33,700,000 shares of common stock restricted under Rule 144 and valued at
    par value, were issued to the Directors of the Corporation for their efforts
    in obtaining assets for the Corporation, their sharing of intellectual assets,
    and for services to the Company since inception. On August 19, 2002, the
    corporation issued 1,000,000 shares of Convertible Preferred Stock valued
    at $.001 per share to Career Worth Incorporated in exchange for 1,000,000
    shares of stock in the Career Worth Incorporation. In 2003, the Company and
    Career Worth agreed to unwind this transaction and, accordingly, the respective
    shares of stock were returned. The Convertible Preferred Stock was subsequently
    canceled by the Company.
    On October 1, 2002, the Company issued a total of 300,000 shares of common
    stock to Advantage Services Group in anticipation of acquiring this company.
    The acquisition was never consummated; however, the Company did not receive
    back the stock. The shares issued were restricted pursuant to Rule 144.
    During the year ended December 31, 2002, the Company sold a total of 4,050,000
    shares of common stock for cash of $42,500. The shares issued were restricted
    under Rule 144.
    In December 2002, the Company issued a total of 81,835 shares of common stock
    in exchange for an equivalent number of shares of common stock in a partially-owned
    subsidiary. The shares issued were restricted pursuant to Rule 144.
    As of September 18, 2003, Nicholas Investment had 115,373,752 shares of common
    stock outstanding. 5  ITEM 6. MANAGEMENT'S
    DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
    The following information should be read in conjunction with the consolidated
    financial statements and notes thereto appearing elsewhere in this Form 10-KSB.
    Plan of Operation
    Nicholas Investment was incorporated in January 22, 1998 under the laws of
    the state of Nevada. The Company was originally organized to invest in real
    estate, rental properties, notes secured by deeds of trust(s), discounted
    notes or smaller properties ready for development. The Company acquired several
    rental properties, which were subsequently sold. 
    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. Virgin Lakes Development Corporation, had three
    subsidiaries, The Town Square, LLC (100% owned), Shadow Ridge Water Company
    (86% owned), and H & L Specialties (70% owned). 
    During 2003, Management determined that the value of these businesses was
    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.
    As of September 18, 2003, the Company had no operating business. Management
    plans to operate NIVI as a holding company, though no letters of intent for
    the acquisition of an operating business have been signed as of September
    18, 2003.
    As of September 18, 2003, management has recognized that there is a deficiency
    in liquidity. Such deficiency has been noted in the notes to the financial
    statements and the audit opinion. Management has not yet decided a remedy
    and has not made any arrangements or definitive agreements for funding or
    the private placements of its securities and/or a public offering. 
    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 that there is substantial doubt about the Company's ability
    to continue as a going concern. Liquidity and Capital Resources
    The Company's financial statements present an impairment in terms of liquidity.
    As of December 31, 2002 the Company had $20 in current assets and the Company's
    total liabilities exceeded total assets by approximately $329,500. The Company
    has accumulated $1,913,874 of net operating losses through December 31, 2002,
    which may used to reduce taxes in future years through 2021. The use of these
    losses to reduce future income taxes will depend on the generation of sufficient
    taxable income prior to the expiration of the net operating loss carryforwards.
    The potential tax benefit of the net operating loss carryforwards have been
    offset by a valuation allowance of the same amount. The Company has not yet
    established revenues to cover its operating costs. Management believes that
    the Company will soon be able to generate revenues sufficient to cover its
    operating costs through the acquisition of operating subsidiaries. In the
    event the Company is unable to do so, and if suitable financing is unavailable,
    there is substantial doubt about the Company's ability to continue as a going
    concern. 6   Results of Operation
    For the year ended December 31, 2002 the Company had a net loss of $1,855,046
    compared to a net loss of $58,828 for the period from inception in March 2001
    through December 31, 2001. Most of the loss incurred in 2002 was attributed
    to 12,196,667 shares of common stock issued to various employees and consultants
    for services totaling $1,599,301. Accounting regulations require the Company
    to value all stock issued at market rates even though the shares issued are
    restricted and the market for the Company's stock is illiquid. During 2002,
    an impairment loss of $125,521 was recorded to reduce the value of the assets
    associated with the discontinued operations to zero..ITEM 7. FINANCIAL STATEMENTS
    See the financial statements annexed to this report. ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE
    Not applicable.  ITEM 9. DIRECTORS,
    EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS The executive officers and directors of the Company as of September 18, 2003
    are as follows: NAME
      AGE
      POSITIONSteven
        R. Peacock
      55
      Chief
        Executive Officer, DirectorShane
        H. Traveller
      36
      Chief
        Financial Officer, Director The business experience of each of the persons listed above is as follows:
    
    Steven R. Peacock - Mr. Peacock was appointed to the Board of Directors in
    May 2003 and also serves as the Company's Chief Executive Officer. Mr. Peacock
    is the founding partner of Peak Solutions, a business consulting company that
    specializes in start-up, troubled, and small-cap public companies. Before
    starting Peak Solutions, Mr. Peacock was President of Peacock Financial, a
    business development company he founded to invest in and acquire real estate,
    and various other operating businesses. Mr. Peacock has over fifteen years
    of experience in seeking out and identifying emerging growth investment opportunities,
    both startup companies and work out assignments, and twenty years of experience
    in the real estate development industry. Mr. Peacock has an extensive operating
    knowledge of the Business Development Company process, having operated the
    first BDC on the west coast from 1998 to 2000. During that period, he was
    directly responsible for raising approximately $8M under Regulation E, creating
    market liquidity for the company's stock and building the company's investor
    base from 250 to over 4,000 shareholders.
    Shane H. Traveller - Mr. Traveller was appointed to the Board of Directors
    in May 2003 and serves as the Company's Chief Financial Officer. A Certified
    Public Accountant, Mr. Traveller is also a partner with Peak Solutions, a
    business consulting company that specializes in startup and small-cap clients.
    Previously, Mr. Traveller was President and Chief Operating Officer of Trimedyne,
    Inc., a Nasdaq National Market company that developed and manufactured surgical
    lasers where, prior to becoming the company' president, he had served as the
    Chief Financial Officer. Before working for Trimedyne, Mr. Traveller was co-founder
    and Chief Financial Officer of Pyro Shield, Inc., a manufacturer and distributor
    of aerospace insulation materials and prior to that, served as Chief Financial
    Officer of Worldwide Investment Network, Inc., an asset management and financial
    services company. Mr. Traveller practiced public accounting with Arthur Andersen,
    LLP and with Corbin & Wertz, LLP, in their respective Orange County, California
    offices. Mr. Traveller holds Bachelor of Science degrees in accounting and
    finance from Brigham Young University. 7  Meetings
    During the year ended December 31, 2002, the Board of Directors met on 3 occasions.
    Each incumbent Director attended at least 75% of the total number of meetings
    of the Board of Directors.Compensation Of Directors
    We have no standard arrangement pursuant to which our Directors are compensated
    or services provided as a Director. During the year ended December 31, 2002,
    the then directors received a combined stock grant of 30 million shares of
    restricted common stock as compensation for their service on the Board of
    Directors. Such shares were divided between the various directors.ITEM 10. EXECUTIVE COMPENSATION
    The following table sets forth the annual and long-term compensation for services
    in all capacities for the year ended December 31, 2002 paid to Darryl Schuttloffel,
    our Chief Executive Officer during 2002. No other executive officers received
    compensation exceeding $100,000 during the year ended December 31, 2002. Summary
          Compensation TableAnnual
        Compensation
      Long
        Term CompensationAwardsName
        and Principal Position
      
      Year
      
      Salary
      
      Bonus
      
      Other Annual
        Compensation
      
      Restricted
        Stock Award(s)
      
      Securities
        Underlying Options
      
      All Other
        CompensationDarryl
        Schuttloffel
      
      2001
      
      $--
      
      $--
      
      $--
      
      --
      
      --
      
      --Chief Executive
          Officer(1)
      
      2002
      
      $--
      
      $--
      
      $--
      
      20,875,000
      
      --
      
      --  (1) Mr. Schuttloffel
    became Chief Executive Officer effective as of April 2002. He resigned this
    position on May 20, 2003.
    There were no stock options granted during the year ended December 31, 2002.
    There were no stock options outstanding as of December 31, 2002.Employment Agreements
    The Company does not currently have any employment agreements in place.Indemnification
    As permitted by the provisions of the General Corporation Law of the State
    of Nevada, the Company has the power to indemnify any person who was or is
    a party or is threatened to be made a party to any threatened, pending or
    completed action, suit or proceeding, whether civil, criminal, administrative
    or investigative, by reason of the fact that the person is or was a director,
    officer, employee or agent of the corporation if such officer or director
    acted in good faith and in a manner reasonably believed to be in or not opposed
    to the best interest of the Company. Any such person may be indemnified against
    expenses, including attorneys' fees, judgments, fines and settlements in defense
    of any action, suit or proceeding. The Company does not maintain directors
    and officers liability insurance.Compliance With Section 16(a) of the Securities Act of 1934
    Section 16(a) of the Securities Exchange Act of 1934 requires directors and
    executive officers, and persons who own more than 10% of a registered class
    of our equity securities to file with the Securities and Exchange commission
    initial reports of ownership and reports of changes in ownership of Common
    Stock and other of our equity securities. Officers, directors and greater
    than 10% shareholders are required by SEC regulations to furnish the Company
    with copies of all Section 16(a) forms they file. To our knowledge, none of
    the officers and directors of the company have filed the required reports
    with respect to our stock. 8  ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
    The following table sets forth information, to the best knowledge of the Company,
    as of September 18, 2003, with respect to each person known by Nicholas Investment
    to own beneficially more than 5% of the outstanding Common Stock, each director
    and officer, and all directors and officers as a group. Name
        and Address (1)
      
      Title
          of Class
      
      Amount
        Owned
      
      Percentage
          of Class (2)Darryl
        Schuttloffel
      
      Common
      
      20,750,000
      
      17%Steven
        R. Peacock
        CEO and Director
      
      Series
        B Pref.
      
      1,000,000
      
      50%Shane
        H. Traveller
        CFO and Director
      
      Series
        B Pref.
      
      1,000,000
      
      50%All Directors
        and 
        Officers as a group
      
      Series
        B Pref.
        Common
      
      2,000,000
        -0-
      
      100%
        N/A (1) Unless indicated otherwise,
    the address for each of the above listed is c/o Nicholas Investment Company
    at 4443 Birdie Dr., Corona, CA 92883.
    (2) The above percentages are based on 115,373,752 outstanding common shares,
    and two million (2,000,000) shares of Series B preferred stock, as of September
    18, 2003. ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
    The Company's officers and directors are subject to the doctrine of corporate
    opportunities only insofar as it applies to business opportunities in which
    the Company has indicated an interest, either through its proposed business
    plan or by way of an express statement of interest contained in the Company's
    minutes. If directors are presented with business opportunities that may conflict
    with business interests identified by the Company, such opportunities must
    be promptly disclosed to the Board of Directors and made available to the
    Company. In the event the Board shall reject an opportunity to presented and
    only in that event, any of the Company's officers and directors may avail
    themselves of such an opportunity. Every effort will be made to resolve any
    conflicts that may arise in favor of the Company. There can be no assurance,
    however, that these efforts will be successful. 
    During the year ended December 31, 2002, the Company received loans from the
    primary minority shareholder of the H&L Specialties subsidiary totaling
    $10,823. The loans were considered to be short-term in nature and did not
    accrue interest. The loans were subsequently forgiven by the individual during
    the second quarter of fiscal 2003. During the year ended
    December 31, 2002, the Company received loans from the prior CEO of the Company
    totaling $376. The loans were considered to be short-term in nature and did
    not accrue interest. The loan was subsequently forgiven by the former CEO
    during the second quarter of fiscal 2003.
    On December 6, 2002, the Company received a $3,800 loan from a prior officer
    of the Company. The loan accrued interest at 10% per annum and was to be repaid
    on December 6, 2003. The Company has paid $2,000 towards the note as of December
    31, 2002, leaving a balance of $1,800. This remaining balance was subsequently
    forgiven by the former officer during the second quarter of fiscal 2003. 9  ITEM 13. CONTROLS AND PROCEDURES
    Evaluation of Disclosure Controls and Procedures. Based on an evaluation under
    the supervision and with the participation of the our management as of a date
    within 90 days of the filing date of this Annual Report on Form 10-KSB, our
    principal executive officer and principal financial officer have concluded
    that our disclosure controls and procedures (as defined in Rules 13a-14(c)
    and 15d-14(c) under the Securities Exchange Act of 1934, are effective to
    ensure that information required to be disclosed in reports that we file or
    submit under the Exchange Act is recorded, processed, summarized and reported
    within the time periods specified in SEC rules and forms. 
    Changes in Internal Controls. There were no significant changes in our internal
    controls or in other factors that could significantly affect these controls
    subsequent to the date of their evaluation. There were no significant deficiencies
    or material weaknesses, and therefore there were no corrective actions taken.
    However, the design of any system of controls is based in part upon certain
    assumptions about the likelihood of future events and there is no certainty
    that any design will succeed in achieving its stated goal under all potential
    future considerations, regardless of how remote. ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K (a)(1)(2) Financial Statements.
    See index to financial statements and supporting schedules. (a)(3) Exhibits.
    The following exhibits are filed as part of this statement: The exhibits listed below
    are required by Item 601 of Regulation S-B. Each management contract or compensatory
    plan or arrangement required to be filed as an exhibit to this Form 10-KSB
    has been identified. Exhibit
        No.
      Description
      Location3.1
      Articles
        of Incorporation
      Incorporated
        by reference to corresponding Exhibit previously filed.3.2
      Bylaws
      Incorporated
        by reference to corresponding Exhibit previously filed.4.1
      Form
        of Common Stock Certificate
      Incorporated
        by reference to corresponding Exhibit previously filed.99.1
      CEO Certification
        Pursuant to 18 USC, Section 1350, as Adopted Pursuant to Sections 302
        and 906 of the Sarbanes-Oxley Act of 2002
      Filed
        herewith.99.2
      CFO Certification
        Pursuant to 18 USC, Section 1350, as Adopted Pursuant to Sections 302
        and 906 of the Sarbanes-Oxley Act of 2002
      Filed
        herewith.  (b) Reports on Form 8-K
    Form 8-K filed April 15, 2002 in which the Company notified the SEC that it
    had acquired Virgin Lakes Development Corporation and named three new members
    to the Board of Directors. Form 8-K filed on October
    21, 2002 in which the Company notified the SEC that it had entered into an
    agreement to purchase an office building. Form 8-K filed on February
    3, 2003 in which the Company notified the SEC that is had canceled the agreement
    to acquire the office building as described in the Form 8-K filed on October
    21, 2002. Form 8-K filed on June
    12, 2003 in which the Company notified the SEC that the Board of Directors
    had issued 2,000,000 shares of Series B preferred stock to MRG California,
    Inc., such shares entitling the holder to 100 votes per share, effectively
    granting voting control of the Company to MRG. Also, that the Company had
    appointed a new Chief Executive Officer and Chief Financial Officer, that
    the two members of the Board of Directors has resigned, and that two new Directors
    had been appointed. Also, that the Company relocated its offices to Corona,
    California. Form 8-K filed on September
    18, 2003 in which the Company notified the SEC that MRG California had returned
    the Series B preferred stock to the Company and therefore no longer had voting
    control of the Company, and that the Series B preferred stock had been transferred
    to Peak Solutions, a private partnership controlled by the two members of
    the Company's board of directors. 10  SIGNATURES In accordance with Section
    13 or 15 (d) of the Exchange Act. The Registrant caused this report to be
    signed on its behalf by the undersigned, thereunto duly authorized.  NICHOLAS
        INVESTMENT COMPANY, INC.
        By:/S/ Steven R. Peacock
        Steven R. Peacock
        Chief Executive Officer Dated: September 18, 2003
    In accordance with the Exchange Act, this report has been signed below by
    the following persons on behalf of the Registrant and in the capacities and
    on the dates indicated.




|SIGNATURE                                             |  | TITLE                                                 |  | DATE                    
|----------------------------------------------------- |  | ----------------------------------------------------- |  | ------------------------
|                                                      |  |                                                       |  |                         
|/s/
      Steven R. Peacock
      Steven R. Peacock   |  | President,
      Chief Executive Officer and Director |  | September
      18, 2003
|                                                      |  |                                                       |  |                         
|/s/
      Shane H. Traveller
      Shane H. Traveller |  | Chief Financial
      Officer and Director            |  | September
      18, 2003
|                                                      |  |                                                       |  |                         

11

---



NICHOLAS
  INVESTMENT COMPANY, INC.
  a Nevada corporation
  CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Steven R.
  Peacock, certify that:

> 1. I have reviewed this
>     annual report on Form 10-KSB of Nicholas Investment Company, Inc.;
>     2. Based on my knowledge, this annual 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 annual
>     report; 
>     3. Based on my knowledge, the financial statements, and other financial information
>     included in this annual 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 annual 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 annual 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
>       annual report (the "Evaluation Date"); and 
>       c) presented in this annual 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 annual 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: September 18 2003
  /S/ Steven R. Peacock
  Steven R. Peacock
  Chief Executive Officer

---





NICHOLAS
  INVESTMENT COMPANY, INC.
  a Nevada corporation
  CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Shane H. Traveller,
  certify that:

> 1. I have reviewed this annual report on Form 10-KSB of Nicholas Investment
>     Company, Inc.;
>     2. Based on my knowledge, this annual 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 annual
>     report; 
>     3. Based on my knowledge, the financial statements, and other financial information
>     included in this annual 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 annual 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 annual 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
>       annual report (the "Evaluation Date"); and 
>       c) presented in this annual 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 annual 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: September 18, 2003
  /S/ Shane H. Traveller
  Shane H. Traveller
  Chief Executive Officer





---







Exhibit 99.1

CERTIFICATION

Pursuant to Section 906
  of the Corporate Fraud Accountability Act of 2002 (18 U.S.C. Section 1350, as
  adopted), Steven A Peacock, Chief Executive Officer of Nicholas Investment Company,
  Inc. (the "Company"), hereby certifies that, to the best of his knowledge:

> 1. the Annual Report on
>     Form 10-KSB of the Company for the fiscal year ended December 31, 2002 (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: September 18, 2003

| | /S/ Steven R. Peacock
        Steven A. Peacock
        CHIEF EXECUTIVE OFFICER
| | -------------------------------------------------------------------------------



---



Exhibit 99.2

CERTIFICATION

Pursuant to Section 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 Annual Report on
>     Form 10-KSB of the Company for the fiscal year ended December 31, 2002 (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: September 18, 2003



| | /S/ Shane H. Traveller
        Shane H. Traveller 
        CHIEF FINANCIAL OFFICER
| | ----------------------------------------------------------------------------------



---



INDEPENDENT
  AUDITORS' REPORT

To the Board of Directors and Stockholders
  Nicholas Investment Company, Inc. and Subsidiaries
  (A Development Stage Company)
  Corona, California

We have audited the accompanying
  consolidated balance sheet of Nicholas Investment Company, Inc. and Subsidiaries
  (a development stage company) as of December 31, 2002, and the related consolidated
  statements of operations, stockholders' equity (deficit) and cash flows for
  the year ended December 31, 2002, from inception on March 1, 2001, through December
  31, 2001, and from inception on March 1, 2001, through December 31, 2002. These
  consolidated financial statements are the responsibility of the Company's management.
  Our responsibility is to express an opinion on these consolidated financial
  statements based on our audits. We did not audit the financial statements of
  Virgin Lakes Development Corporation, a consolidated subsidiary, as of December
  31, 2001, and for the period from inception on March 1, 2001, through December
  31, 2001, which statements reflect total assets and revenue constituting 19.6%
  and 100%, respectively, of the related consolidated total for fiscal 2001. Those
  statements were audited by other auditors, whose report has been furnished to
  us, and our opinion for the year ended December 31, 2001, insofar as it relates
  to the amounts included for Virgin Lakes Development Corporation, is based solely
  on the report of the other auditors.

We conducted our audits
  in accordance with auditing standards generally accepted in the United States
  of America. Those standards require that we plan and perform the audit to obtain
  reasonable assurance about whether the financial statements are free of material
  misstatement. An audit includes examining on a test basis, evidence supporting
  the amounts and disclosures in the financial statements. An audit also includes
  assessing the accounting principles used and significant estimates made by management,
  as well as evaluating the overall financial statement presentation. We believe
  that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated
  financial statements referred to above present fairly, in all material respects,
  the consolidated financial position of Nicholas Investment Company, Inc. and
  Subsidiaries (a development stage company) as of December 31, 2002 and the results
  of their operations and their cash flows for the year ended December 31, 2002,
  from inception on March 1, 2001, through December 31, 2001, and from inception
  on March 1,2001, through December 31, 2002 in conformity with accounting principles
  generally accepted in the United States of America.

The accompanying financial
  statements have been prepared assuming that the Company will continue as a going
  concern. As discussed in Note 8 to the financial statements, the Company has
  current liabilities in excess of current assets of $329,485 and has generated
  significant losses for the years ended December 31, 2002, and 2001. These items
  raise substantial doubt about the Company's ability to continue as a going concern.
  Management's plans in regard to these matters are also described in Note 8.
  The financial statements do not include any adjustments that might result from
  the outcome of this uncertainty.



HJ Associates & Consultants,
  LLP
  Salt Lake City, Utah
  September 2, 2003

F-1

---



NICHOLAS
  INVESTMENT COMPANY, INC.
   AND SUBSIDIARIES(A Development Stage Company)
  Consolidated Balance Sheet




ASSETSDecember
        31, 2002CURRENT
        ASSETSCash
      $
      20Total Current
            Assets
      
      20TOTAL ASSETS
      $
      20LIABILITIES
          AND STOCKHOLDERS' EQUITY (DEFICIT)CURRENT
        LIABILITIESLiabilities
        from discontinued operations (Note 7)
      
      329,505Total Current
            Liabilities
      
      329,505Total Liabilities
      
      329,505STOCKHOLDERS'
        EQUITY (DEFICIT)Preferred
          stock; $0.001 par value; 50,000,000 shares authorized; zero shares issued
          and outstanding
      
      -Common stock;
            $0.001 par value; 500,000,000 shares 
            authorized; 67,673,752 shares issued and outstanding
      
      67,674Additional
          paid-in capital
      
      1,516,715Deficit accumulated
            during the development stage
      
      (1,913,874
        )Total Stockholders'
            Equity (Deficit)
      
      (329,485
        )TOTAL LIABILITIES
            AND STOCKHOLDERS' EQUITY (DEFICIT)
      $
      20




The accompanying
  notes are an integral part of these consolidated financial statements.



F-2

---

NICHOLAS INVESTMENT COMPANY, INC.
  AND SUBSIDIARIES
  (A Development Stage Company)
  Consolidated Statements of Operations


For the Year Ended
          
          December 31, 2002
      
      
      From
        Inception on March 1, 2001 through December 31, 2001
      
      
      From
        Inception on March 1, 2001 through December 31, 2002REVENUES
      $
      -
      
      $
      -
      
      $
      -EXPENSESGeneral
        and administrative expense
      $
      -
      
      $
      -
      
      $
      -Total Expenses
      
      -
      
      
      -
      
      
      -LOSS
        FROM OPERATIONS
      
      -
      
      
      -
      
      
      -OTHER
        EXPENSES
      
      -
      
      
      -
      
      
      -Interest
        Expense
      
      -
      
      
      -
      
      
      -Total Other Expense
      
      -
      
      
      -
      
      
      -LOSS
          BEFORE DISCONTINUED OPERATIONS
      
      -
      
      
      -
      
      
      -DISCONTINUED
          OPERATIONS (NOTE 7)
      $
      (1,855,046)
      
      $
      (58,828)
      
      $
      (1,913,874)NET
          LOSS
      $
      (1,855,046)
      
      $
      (58,828)
      
      $
      (1,913,874)BASIC
        LOSS PER SHARE:Loss before
          discontinued operations
      $
      (0.00)
      
      $
      (0.00)Discontinued
          operations
      
      (0.06)
      
      
      (0.01)Basic loss
          per share
      $
      (0.06)
      
      $
      (0.01)WEIGHTED
        AVERAGE SHARES OUTSTANDING
      $
      30,385,860
      
      $
      7,275,155


The accompanying
  notes are an integral part of these consolidated financial statements.



F-3

---

NICHOLAS INVESTMENT
  COMPANY, INC.
  AND SUBSIDIARIES
  (A Development Stage Company)
  Consolidated Statements of Stockholders' Equity (Deficit)





Common
          Stock
      Preferred
          Stock
      
      
      
      
      Deficit
          Accumulated 
          During the 
          Development StageShares
      
      
      Amount
      
      Shares
      
      
      Amount
      
      
      Additional
          Paid-In CapitalInception,
        April 17, 2001
      
      -
      
      $
      -
      
      -
      
      $
      -
      
      $
      -
      
      $
      -Common
        stock issued for organizational and management services at $0.01 per share
      
      1,762,000
      
      
      1763
      
      -
      
      
      -
      
      
      13,237
      
      
      -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
      
      -
      
      
      -
      
      
      30,371
      
      
      -Net
        loss for the period ended December 31, 2001
      
      -
      
      
      -
      
      -
      
      
      -
      
      
      -
      
      
      (58,828)Balance,
        December 31, 2001
      
      6,000,000
      
      
      6,000
      
      -
      
      
      -
      
      
      153,660
      
      
      (58,828)April
        1, 2002, recapitalization
      
      11,345,250
      
      
      11,345
      
      -
      
      
      -
      
      
      (3,018)
      
      
      -April
        1, 2002, common stock issued for services at $0.25 per share
      
      300,000
      
      
      300
      
      -
      
      
      -
      
      
      74,700
      
      
      -April
        16, 2002, common stock
        issued for services
        at $0.35 per share
      
      160,000
      
      
      160
      
      -
      
      
      -
      
      
      55,840
      
      
      -August
        18, 2002, common stock
        issued in exchange for equivalent
        outstanding shares in majority-
        owned subsidiary at par value
      
      81,835
      
      
      82
      
      -
      
      
      -
      
      
      -
      
      
      -August
        23, 2002, common stock
        issued to directors for services 
        rendered at $0.03 per share
      
      33,700,000
      
      
      33,700
      
      -
      
      
      -
      
      
      977,300
      
      
      -Balance
        Forward
      
      51,587,085
      
      $
      51,587
      
      -
      
      $
      -
      
      
      1,258,482
      
      $
      (58,828
        ) The accompanying
    notes are an integral part of these consolidated financial statements.  F-4  NICHOLAS INVESTMENT COMPANY, INC.
    AND SUBSIDIARIES
    (A Development Stage Company)
    Consolidated Statements of Stockholders' Equity (Deficit) (Continued) Common
          Stock
      Preferred
          Stock
      
      
      
      
      Deficit
          Accumulated 
          During the 
          Development StageShares
      
      
      Amount
      
      Shares
      
      
      Amount
      
      
      Additional
          Paid-In CapitalBalance
        Forward
      
      51,587,085
      
      $
      51,587
      
      -
      
      $
      -
      
      
      1,258,482
      
      $
      (58,828
        )August
        23, 2002, common stock
        issued for services at $0.03 
        per share
      
      2,416,667
      
      
      2,417
      
      -
      
      
      -
      
      
      70,083
      
      
      -October
        1, 2002, common stock
        issued for acquisition of
        Advantage Services Group
        at $0.04 per share
      
      300,000
      
      
      300
      
      -
      
      
      -
      
      
      11,700
      
      
      -October
        1, 2002, common stock
        issued to consultants for 
        services at $0.04 per share
      
      400,000
      
      
      400
      
      -
      
      
      -
      
      
      7,600
      
      
      -October 2, 2002,
          common stock
          issued to consultants for
          services at $0.02 per share
      
      300,000
      
      
      300
      
      -
      
      
      -
      
      
      11,700
      
      
      -November 4, 2002,
          common
          stock issued to consultants
          for services at $0.01 per share
      
      400,000
      
      
      400
      
      -
      
      
      -
      
      
      3,600
      
      
      -November
        6, 2002, common 
        stock issued to an officer of
        the Company for services 
        rendered at $0.04 per share
      
      1,500,000
      
      
      1,500
      
      -
      
      
      -
      
      
      58,500
      
      
      -November
        18, 2002, common
        stock issued to an officer of
        the Company for services 
        rendered at $0.01 per share
      
      1,500,000
      
      
      1,500
      
      -
      
      
      -
      
      
      13,500
      
      
      -November
        18, 2002, common
        stock issued to consultants
        for services at $0.01 per share
      
      250,000
      
      
      250
      
      -
      
      
      -
      
      
      2,250
      
      
      -November
        21, 2002, common
        stock issued to consultants
        for services at $0.02 per share
      
      300,000
      
      
      300
      
      -
      
      
      -
      
      
      6,900
      
      
      -December
        6, 2002, common
        stock issued to an officer of
        the Company for services 
        rendered at $0.01 per share
      
      1,500,000
      
      
      1,500
      
      -
      
      
      -
      
      
      15,000
      
      
      -December
        6, 2002, common
        stock issued to consultants
        for services at $0.01 per share
      
      620,000
      
      
      620
      
      -
      
      
      -
      
      
      6,200
      
      
      -Balance
        Forward
      
      61,073,752
      
      $
      61,074
      
      -
      
      $
      -
      
      $
      1,465,515
      
      $
      (58,828) The accompanying
    notes are an integral part of these consolidated financial statements.  F-5  NICHOLAS INVESTMENT COMPANY, INC.
    AND SUBSIDIARIES
    (A Development Stage Company)
    Consolidated Statements of Stockholders' Equity (Deficit) (Continued) Common
          Stock
      Preferred
          Stock
      
      
      
      
      Deficit
          Accumulated 
          During the 
          Development StageShares
      
      
      Amount
      
      Shares
      
      
      Amount
      
      
      Additional
          Paid-In CapitalBalance
        Forward
      
      61,073,752
      
      $
      61,074
      
      -
      
      $
      -
      
      $
      1,465,515
      
      $
      (58,828)December
        6, 2002, common
        stock issued for cash at 
        $0.01 per share
      
      4,050,000
      
      
      4,050
      
      -
      
      
      -
      
      
      38,450
      
      
      -December
        16, 2002, common
        stock issued to consultants
        for services at $0.01 per share
      
      2,300,000
      
      
      2,300
      
      -
      
      
      -
      
      
      11,500
      
      
      -December
        16, 2002, common
        stock issued to an officer of
        the Company for services 
        rendered at $0.01 per share
      
      250,000
      
      
      250
      
      -
      
      
      -
      
      
      1,250
      
      
      -Net
        loss for the year ended 
        December 31, 2002
      
      -
      
      
      -
      
      -
      
      
      -
      
      
      -
      
      
      (1,855,046)Balance,
        December 31, 2002
      
      67,673,752
      
      $
      67,674
      
      -
      
      $
      -
      
      $
      1,516,715
      
      $
      (1,913,874
        ) The accompanying
    notes are an integral part of these consolidated financial statements.  F-6            NICHOLAS INVESTMENT
    COMPANY, INC.
    AND SUBSIDIARIES
    (A Development Stage Company)
    Consolidated Statements of Cash Flows For the Year Ended
          
          December 31, 2002
      
      From
        Inception on March 1, 2001 through
        December 31, 2001
      
      
      From
        Inception on March 1, 2001 through December 31, 2002CASH
        FLOWS FROM OPERATING ACTIVITIESNet loss
      $
      (1,855,046
          )
      
      $
      (58,828
          )
      
      $
      (1,913,874
          )Adjustments
          to reconcile net loss to net cash used in operating activities:Depreciation
              and amortization
      
      9,062
      
      
      5,040
      
      
      14,102Loss on impairment
              of assets
      
      125,206
      
      
      -
      
      
      125,206Loss on sale
              of fixed assets
      
      8,327
      
      
      -
      
      
      8,327Common stock
              issued in recapitalization
      
      2,982
      
      
      -
      
      
      2,982Common stock
              issued for services
      
      1,357,798
      
      
      15,000
      
      
      1,372,798Bad debt expense
      
      8,585
      
      
      -
      
      
      8,585Change
        in operating asset and liability accounts:(Increase)
          decrease in accounts receivable, net
      
      10,428
      
      
      (19,013)
      
      
      (8,585)(Increase)
          decrease in other assets
      
      315
      
      
      (315)
      
      
      -Increase
          in accounts payable
      
      45,487
      
      
      18,201
      
      
      63,688Increase
          in accrued liabilities
      
      240,877
      
      
      -
      
      
      240,877Net Cash Used
              by Operating Activities
      
      (45,979)
      
      
      (39,915)
      
      
      (85,894)CASH
        FLOWS FROM INVESTING ACTIVITIESPurchase
          of fixed assets
      
      (17,828)
      
      
      -
      
      
      (17,828)Net Cash Used
              by Investing Activities
      
      (17,828)
      
      
      -
      
      
      (17,828)CASH
        FLOWS FROM FINANCING ACTIVITIESCash overdraft
      
      6,094
      
      
      -
      
      
      6,094Proceeds
          form the sale of common stock
      
      42,500
      
      
      24,920
      
      
      67,420Payments
          on notes payable
      
      (2,885)
      
      
      -
      
      
      (2,885)Payments
          on related party notes payable
      
      (1,366)
      
      
      -
      
      
      (1,366)Proceeds
          from notes payable
      
      11,183
      
      
      2,018
      
      
      13,201Proceeds
          from related party notes payable
      
      11,199
      
      
      -
      
      
      11,199Minority
          interest
      
      (16,027)
      
      
      14,806
      
      
      (1,221)Net Cash Provided
              by Financing Activities
      
      50,698
      
      
      41,744
      
      
      92,442NET
        INCREASE (DECREASE) IN CASH
      
      (13,109)
      
      
      1,829
      
      
      (11,280)CASH
        AT BEGINNING OF PERIOD
      
      13,129
      
      
      11,300
      
      
      11,300CASH
        AT END OF PERIOD
      $
      20
      
      $
      13,129
      
      $
      20CASH
        PAID FOR:Interest
      $
      9,113
      
      $
      -
      
      $
      9,113Income
          Tax
      $
      -
      
      $
      -
      
      $
      -SCHEDULE
        OF NON-CASH INVESTING AND FINANCING ACTIVITIESIssuance
          of common stock for services
      $
      1,357,798
      
      $
      15,000
      
      $
      1,372,798Issuance
          of common stock for fixed assets
      $
      -
      
      $
      24,920
      
      $
      24,920  The accompanying
    notes are an integral part of these consolidated financial statements.  F-7   NICHOLAS
    INVESTMENT COMPANY, INC.
    AND SUBSIDIARIES
    (A Development Stage Company)
    Notes to the Consolidated Financial Statements
    December 31, 2002 NOTE 1 - NATURE OF ORGANIZATION


> This summary
>     of significant accounting policies of Nicholas Investment Company, Inc. and
>     Subsidiaries is presented to assist in understanding the Company's consolidated
>     financial statements. The consolidated financial statements and notes are
>     representations of the Company's management who are responsible for their
>     integrity and objectivity. These accounting policies conform to accounting
>     principles generally accepted in the United States of America and have been
>     consistently applied in the preparation of the consolidated financial statements.
>   a. Organization and Business Activities
>   The Company was incorporated on January 28, 1998 under the laws of the State
>     of Nevada as Nicholas Investment Company, Inc. to engage in any lawful activity
>     as shall be appropriate under laws of the State of Nevada. Primarily, the
>     Company is in the business of acquiring and leasing real estate.
>   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.
>     The accounting history presented in these financial statements is that of
>     Virgin Lakes prior to the reorganization, and as such, the date of inception
>     presented is that of Virgin Lakes.
>   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".
>   From the date of the acquisition through December 31, 2002, the Company
>       generally engaged in activities related to the construction and real estate
>       development industries. As the Company was never able to fully commence
>       operations and develop a sustainable source of revenues, all operations
>       of the Company were discontinued on December 31, 2002. See Note 7.
>       b. Accounting Method
>       The Company's consolidated financial statements are prepared using the accrual
>       method of accounting. The Company has elected a December 31 year-end.
>     
>     F-8

NICHOLAS
    INVESTMENT COMPANY, INC.
    AND SUBSIDIARIES
    (A Development Stage Company)
    Notes to the Consolidated Financial Statements
    December 31, 2002 NOTE 1 - NATURE OF ORGANIZATION (Continued)


> c. Cash
>       and Cash Equivalents
>   For the purpose of the
>       statement of cash flows, the Company considers all highly liquid investments
>       purchased with a maturity of three months or less to be cash equivalents.
>       
>       d. Estimates
>       The preparation of financial statements in conformity with accounting principles
>       generally accepted in the United States of America requires management to
>       make estimates and assumptions that affect the reported amounts of assets
>       and liabilities and disclosure of contingent assets and liabilities at the
>       date of the financial statements and the reported amounts of revenues and
>       expenses during the reporting period. Actual results could differ from the
>       estimates.
>       e. Basic Loss Per Share
>       The computation of basic loss per share of common stock is based on the
>       weighted average number of shares outstanding during the period of the financial
>       statements. Fully diluted loss per share is not presented as any common
>       stock equivalents are antidilutive in nature.
>       f. Income Taxes 
>       Deferred taxes are provided on a liability method whereby deferred tax assets
>       are recognized for deductible temporary differences and operating loss and
>       tax credit carryforwards and deferred tax assets are recognized for taxable
>       temporary differences. Temporary differences are the differences between
>       the reported amounts of assets and liabilities and their tax bases. Deferred
>       tax assets are reduced by a valuation allowance when, in the opinion of
>       management, it is more likely than not that some portion or all of the deferred
>       tax assets will not be realized. Deferred tax assets and liabilities are
>       adjusted for the effects of changes in tax laws and rates on the date of
>       enactment.
>       Net deferred tax assets consist of the following components as of December
>       31, 2002:
>     2002Deferred
>           tax assetsNOL Carryover
>         
>         $
>         340,250Deferred
>           tax liabilities
>         
>         
>         -Valuation
>           allowance
>         
>         
>         (340,250)Net
>           deferred tax asset
>         
>         $
>         -
>     F-9

NICHOLAS INVESTMENT COMPANY, INC.
    AND SUBSIDIARIES
    (A Development Stage Company)
    Notes to the Consolidated Financial Statements
    December 31, 2002 NOTE 1 - NATURE OF ORGANIZATION (Continued)


> f. Income
>     Taxes (continued)
>   The income tax provision differs from the amount of income tax determined
>       by applying the U.S. federal income tax rate to pretax income from continuing
>       operations for the years ended December 31, 2002 due to the following:
>     2002Book
>           income
>         $
>         (723,470)Gain/Loss
>           on Disposal
>         
>         (144,890)Loss
>           on impairment
>         
>         48,830Stock
>           for service
>         
>         529,541Accrued
>           liabilities
>         
>         93,942Other
>         
>         (263)Valuation
>           allowance
>         
>         196,310$
>         -
>   At December 31, 2002,
>       the Company had net operating loss carryforwards of approximately $631,000
>       that may be offset against future taxable income from the year 2002 through
>       2022. No tax benefit has been reported in the December 31, 2002 consolidated
>       financial statements since the potential tax benefit is offset by a valuation
>       allowance of the same amount.
>   Due to
>     the change in ownership provisions of the Tax Reform Act of 1986, net operating
>     loss carryforwards for Federal income tax reporting purposes are subject to
>     annual limitations. Should a change in ownership occur, net operating loss
>     carryforwards may be limited as to use in future years.
>   g. Recent Accounting Pronouncements
>   During the years ended December 31, 2002, and 2001, the Company adopted the
>     following Statements of Financial Accounting Standards:
>   SFAS
>         No. 141, Business Combinations;
>     SFAS
>         No. 142, Goodwill and Other Intangible Assets;
>     SFAS
>         No. 143, Accounting for Asset Retirement Obligations;
>     SFAS
>         No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets;
>     SFAS
>         No. 145, Decision of FASB Statements 4, 44, and 64, Amendment of Statement
>         13, and Technical Corrections;
>     SFAS
>         No. 146, Accounting for Exit or Disposal Activities;
>     SFAS
>         No. 147, Acquisitions of certain Financial Institutions; and
>     SFAS
>         No. 148, Accounting for Stock Based Compensation.
>   F-10

NICHOLAS INVESTMENT COMPANY, INC.
  AND SUBSIDIARIES
  (A Development Stage Company)
  Notes to the Consolidated Financial Statements
  December 31, 2002

NOTE 1 - NATURE OF ORGANIZATION (Continued)

> h. Recent Accounting Pronouncements
>     (continued)
>   These newly issued accounting
>     pronouncements had no effect on the Company's current financial statements
>     and did not impact the Company.
>   h. Reclassification
>   Certain December 31, 2001
>     balances have been reclassified to conform with the December 31, 2002 financial
>     statement presentation.
>   j. Principles of Consolidation
>   The consolidated financial
>     statements presented include the accounts of Nicholas Investment Company,
>     Inc. and Subsidiaries, Virgin Lakes Development Corporation, The Town Square,
>     LLC, Shadow Ridge Water Company, and H & L Specialties. All significant
>     intercompany accounts have been eliminated.
>   k. Revenue Recognition
>   Prior to the discontinuation
>     of operations on December 31, 2002 (See Note 7), the Company's revenue was
>     created primarily from the contracting of various small-scale construction
>     projects. The Company recognized revenues based upon the contractual price
>     of services performed. Revenue was recorded as the projects were completed
>     and as the amounts were determined to be receivable.
>   Additional revenue recognition
>     policies will be determined when operations commence again.

NOTE 2 - 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 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.
>   
>   
>   F-11
>   NICHOLAS
>     INVESTMENT COMPANY, INC.
>     AND SUBSIDIARIES
>     (A Development Stage Company)
>     Notes to the Consolidated Financial Statements
>     December 31, 2002

NOTE 3 - NOTES PAYABLE

> On September 20, 2002,
>     the Company received a $5,000 loan from a consulting and management group
>     who had provided services for the Company during fiscal 2002. The note accrues
>     interest at 10% per annum and is due upon demand.
>   On October 7, 2002, the
>     Company received a $1,383 loan from a private investor in exchange for a note
>     payable valued at the same amount. The note accrues interest at 10% per annum
>     and is due in a lump sum payment on October 7, 2003. This same investor also
>     loaned the Company $1,000 on September 15, 2001. The prior year loan was never
>     formalized by a note. It is considered to accrue interest at 10% per annum,
>     and is due on demand.

NOTE 4 - NOTES
  PAYABLE - RELATED PARTY

> During the year ended
>     December 31, 2002, the Company received loans from the primary minority shareholder
>     of the H&L Specialties subsidiary totaling $10,823. The loans were considered
>     to be short-term in nature and did not accrue interest. The loans were subsequently
>     forgiven by the individual during the second quarter of fiscal 2003.
>   During the year ended
>     December 31, 2002, the Company received loans from the prior CEO of the Company
>     totaling $376. The loans were considered to be short-term in nature and did
>     not accrue interest. The loan was subsequently forgiven by the former CEO
>     during the second quarter of fiscal 2003.
>   On December 6, 2002, the
>     Company received a $3,800 loan from a prior officer of the Company. The loan
>     accrued interest at 10% per annum and was to be repaid on December 6, 2003.
>     The Company has paid $2,000 towards the note as of December 31, 2002, leaving
>     a balance of $1,800. This remaining balance was subsequently forgiven by the
>     former officer during the second quarter of fiscal 2003.

NOTE 5 - MINORITY
  INTEREST

> The Company owns 86% of
>     its consolidated subsidiary, Shadow Ridge Water Company. The minority interest
>     in net assets, of $3,971 as of December 31, 2001, has been reduced to zero
>     by the minority owners' share of the subsidiary's net losses, of $62,313,
>     for the year ended December 31, 2002. As all operations of Shadow Ridge Water
>     Company have been discontinued as of December 31, 2002, all activity and balances
>     related to this minority interest have been included in as discontinued operations.
>     See Note 7.
>   The Company owns 70% of
>     its consolidated subsidiary, H&L Specialties. The minority interest in
>     net assets, of $12,056 as of December 31, 2001, has been reduced to zero by
>     the minority owners' share of the subsidiary's net losses, of $53,491, for
>     the year ended December 31, 2002. As all operations of H&L Specialties
>     have been discontinued as of December 31, 2002, all activity and balances
>     related to this minority interest have been included in as discontinued operations.
>     See Note 7.
>   
>   F-12
>   
>   NICHOLAS INVESTMENT COMPANY, INC.
>     AND SUBSIDIARIES
>     (A Development Stage Company)
>     Notes to the Consolidated Financial Statements
>     December 31, 2002

NOTE 6 - EQUITY TRANSACTIONS

> On April 1, 2002, the
>     Company issued 300,000 shares of Rule 144 restricted common stock to consultants
>     for their services relating the reorganization (See Note 3). The shares were
>     valued at $0.25 per share, which represents the fair market value of the shares
>     as of the date of issuance. The expense associated with this issuance has
>     been included in discontinued operations. See Note 7.
>   On April 16, 2002, the
>     Company issued 160,000 shares of Rule 144 restricted common stock to consultants
>     for services rendered. The shares were valued at $0.35 per share, which represents
>     the fair market value of the shares as of the date of issuance. The expense
>     associated with this issuance has been included in discontinued operations.
>     See Note 7.
>   During the year ended
>     December 31, 2002, the Company entered into exchange agreements with several
>     holders of minority interests in Shadow Ridge Water Company (An 86% owned
>     subsidiary - See Note 1), whereby the Company would exchange 81,835 shares
>     of its Rule 144 restricted common stock for an equivalent number of Shadow
>     Ridge common stock. The exchanges, however, were so insignificant in size,
>     that the percent ownership of Shadow Ridge Water Company held by the Company
>     did not change. The shares have been recorded at par value.
>   On August 8, 2002, the
>     Company's Board of Directors approved an amendment to the Company's articles
>     of incorporation to increase in the authorized common shares from 100,000,000
>     to 500,000,000. 
>     On August 8, 2002, the Company's Board of Directors approved an amendment
>     to the Company's articles of incorporation to establish a preferred class
>     of stock designated as Series A Preferred Stock. The amended articles of incorporation
>     authorize 50,000,000 shares at $0.001 par value. As of December 31, 2002,
>     there are no Series A Preferred Shares issued or outstanding. 
>     On August 23, 2002, the Company issued 1,700,000 shares of free trading S-8
>     common stock and 32,000,000 shares of Rule 144 restricted common stock to
>     officers and directors of the Company in exchange for services rendered. The
>     shares were valued at $0.03 per share, which represents the fair market value
>     of the shares as of the date of issuance. The expense associated with this
>     issuance has been included in discontinued operations. See Note 7.
>   On August 23, 2002, the
>     Company issued 2,416,667 shares of free trading S-8 common stock to consultants
>     for services rendered. The shares were valued at $0.03 per share, which represents
>     the fair market value of the shares as of the date of issuance. The expense
>     associated with this issuance has been included in discontinued operations.
>     See Note 7.



F-13

---



NICHOLAS INVESTMENT COMPANY, INC.
  AND SUBSIDIARIES
  (A Development Stage Company)
  Notes to the Consolidated Financial Statements
  December 31, 2002

NOTE 6 - EQUITY TRANSACTIONS (Continued)

> On October 1, 2002, the
>     Company issued 300,000 shares of Rule 144 restricted common stock in the acquisition
>     of Advantage Services Group. Advantage Service Group had no operations, assets,
>     liabilities, or equity, and as such, the value of the shares was immediately
>     expensed. The shares were valued at $0.04 per share, which represents the
>     fair market value of the shares as of the date of issuance. The expense associated
>     with this issuance has been included in discontinued operations. See Note
>     7.
>   On October 1, 2002, the
>     Company issued 400,000 shares of free trading S-8 common stock to consultants
>     for services rendered. The shares were valued at $0.04 per share, which represents
>     the fair market value of the shares as of the date of issuance. The expense
>     associated with this issuance has been included in discontinued operations.
>     See Note 7.
>   On October 2, 2002, the
>     Company issued 300,000 shares of free trading S-8 common stock to consultants
>     for services rendered. The shares were valued at $0.02 per share, which represents
>     the fair market value of the shares as of the date of issuance. The expense
>     associated with this issuance has been included in discontinued operations.
>     See Note 7.
>   On November 4, 2002,
>     the Company issued 400,000 shares of free trading S-8 common stock to consultants
>     for services rendered. The shares were valued at $0.01 per share, which represents
>     the fair market value of the shares as of the date of issuance. The expense
>     associated with this issuance has been included in discontinued operations.
>     See Note 7.
>   On November 6, 2002,
>     the Company issued 1,500,000 shares of free trading S-8 common stock to an
>     officer of the Company for services rendered. The shares were valued at $0.04
>     per share, which represents the fair market value of the shares as of the
>     date of issuance. The expense associated with this issuance has been included
>     in discontinued operations. See Note 7.
>   On November 18, 2002,
>     the Company issued 1,500,000 shares of free trading S-8 common stock to an
>     officer of the Company for services rendered. The shares were valued at $0.01
>     per share, which represents the fair market value of the shares as of the
>     date of issuance. The expense associated with this issuance has been included
>     in discontinued operations. See Note 7.
>   On November 18, 2002,
>     the Company issued 250,000 free trading S-8 shares of common stock to consultants
>     for services rendered. The shares were valued at $0.01 per share, which represents
>     the fair market value of the shares as of the date of issuance. The expense
>     associated with this issuance has been included in discontinued operations.
>     See Note 7.
>   On November 21, 2002,
>     the Company issued 300,000 shares of free trading S-8 common stock to consultants
>     for services rendered. The shares were valued at $0.02 per share, which represents
>     the fair market value of the shares as of the date of issuance. The expense
>     associated with this issuance has been included in discontinued operations.
>     See Note 7.
>   
>   
>   F-14
>   
>   NICHOLAS
>     INVESTMENT COMPANY, INC.
>     AND SUBSIDIARIES
>     (A Development Stage Company)
>     Notes to the Consolidated Financial Statements
>     December 31, 2002

NOTE 6 - EQUITY TRANSACTIONS (Continued)

> On December 6, 2002,
>     the Company issued 1,500,000 shares of free trading S-8 common stock to an
>     officer of the Company for services rendered. The shares were valued at $0.01
>     per share, which represents the fair market value of the shares as of the
>     date of issuance. The expense associated with this issuance has been included
>     in discontinued operations. See Note 7.
>   On December 6, 2002,
>     the Company issued 620,000 shares of free trading S-8 common stock to consultants
>     for services rendered. The shares were valued at $0.01 per share, which represents
>     the fair market value of the shares as of the date of issuance. The expense
>     associated with this issuance has been included in discontinued operations.
>     See Note 7.
>   On December 6, 2002,
>     the Company issued 4,050,000 shares of Rule 144 restricted common stock in
>     exchange for cash at $0.01 per share.
>   On December 16, 2002,
>     the Company issued 2,300,000 shares of free trading S-8 common stock to consultants
>     for services rendered. The shares were valued at $0.01 per share, which represents
>     the fair market value of the shares as of the date of issuance. The expense
>     associated with this issuance has been included in discontinued operations.
>     See Note 7.
>   On December 16, 2002,
>     the Company issued 250,000 shares of free trading S-8 common stock to the
>     former CEO for services rendered. The shares were valued at $0.01 per share,
>     which represents the fair market value of the shares as of the date of issuance.
>     The expense associated with this issuance has been included in discontinued
>     operations. See Note 7.

NOTE 7 - 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.
>   As a result of the discontinuation
>     of operations, the Company has written off all undepreciated fixed assets,
>     and has recognized a related impairment loss of $125,521 for the year ended
>     December 31, 2002.













F-15

---



NICHOLAS
  INVESTMENT COMPANY, INC.
  AND SUBSIDIARIES
  (A Development Stage Company)
  Notes to the Consolidated Financial Statements
  December 31, 2002

NOTE 7 - DISCONTINUED OPERATIONS (Continued)

> The following is a summary
>     of liabilities related to discontinued operations:

| |                                                      |   | December
        31,
        2002 | 
| | ---------------------------------------------------- | - | --------------------------------- | 
| |                                                      |   |                                   | 
| | CURRENT
      LIABILITIES                            |   |                                   | 
| | Bank
      overdraft                                 | $ | 6,094                             | 
| | Accounts
      payable                               |   | 58,931                            | 
| | Accrued
      liabilities (Note 9)                   |   | 244,098                           | 
| | Notes
      payable (Note 3)                         |   | 7,383                             | 
| | Notes
      payable-related party (Note 4)           |   | 12,999                            | 
| |                                                      |   |                                   | 
| | Total
      Current Liabilities                      |   | 329,505                           | 
| |                                                      |   |                                   | 
| | Total
      Liabilities                              |   | 329,505                           | 
| |                                                      |   |                                   | 
| | MINORITY
        INTEREST IN NET ASSETS (NOTE 5)     |   | -                                 | 
| |                                                      |   |                                   | 
| | TOTAL
      LIABILITIES FROM DISCONTINUED OPERATIONS | $ | 329,505                           | 
| |                                                      |   |                                   | 





F-16

---





NICHOLAS
  INVESTMENT COMPANY, INC.
  AND SUBSIDIARIES
  (A Development Stage Company)
  Notes to the Consolidated Financial Statements
  December 31, 2002

NOTE 7 - DISCONTINUED OPERATIONS (Continued)

> The following is a summary
>     of the loss from discontinued operations resulting from the elimination of
>     all operations:

|                                                |   |             |                                                       |   |                                                                       |  | 
|----------------------------------------------- | - | ----------- | ----------------------------------------------------- | - | --------------------------------------------------------------------- |  | 
|                                                |   |             | For the Year Ended
        
        December 31, 2002 |   | From
      Inception on March 1, 2001 through
      December 31, 2001
|                                                |   |             |                                                       |   |                                                                      
|                                                |   |             |                                                       |   |                                                                       |  | 
|CASH
      FLOWS FROM OPERATING ACTIVITIES      |   |             |                                                       |   |                                                                      
|REVENUES, NET                                   | $ | 44,784      |                                                       | $ | 50,113                                                               
|                                                |   |             |                                                       |   |                                                                      
|COST OF SALES                                   |   | 47,482      |                                                       |   | 53,486                                                               
|                                                |   |             |                                                       |   |                                                                      
|GROSS MARGIN                                    |   | (2,698)     |                                                       |   | (3,373)                                                              
|                                                |   |             |                                                       |   |                                                                      
|EXPENSES                                        |   |             |                                                       |   |                                                                      
|Organizational costs                            |   | -           |                                                       |   | 17,070                                                               
|Lease expense for
          water wells         |   | -           |                                                       |   | 5,159                                                                
|Depreciation and
          amortization expense |   | 6,731       |                                                       |   | 5,040                                                                
|General and administrative                      |   | 88,381      |                                                       |   | 31,814                                                               
|Consulting expense                              |   | 1,629,515   |                                                       |   | -                                                                    
|Loss on impairment
        of fixed assets      |   | 125,521     |                                                       |   | -                                                                    
|Loss on sale
        of equipment               |   | 8,327       |                                                       |   | -                                                                    
|                                                |   |             |                                                       |   |                                                                      
|Total Operating
            Expenses            |   | 1,858,475   |                                                       |   | 59,083                                                               
|                                                |   |             |                                                       |   |                                                                      
|OPERATING LOSS                                  |   | (1,861,173) |                                                       |   | (62,456)                                                             
|                                                |   |             |                                                       |   |                                                                      
|OTHER
      INCOME (EXPENSE)                    |   |             |                                                       |   |                                                                      
|                                                |   |             |                                                       |   |                                                                      
|Interest
        expense                        |   | (9,900)     |                                                       |   | -                                                                    
|Interest
        income                         |   | -           |                                                       |   | 807                                                                  
|                                                |   |             |                                                       |   |                                                                      
|Total Other Income
            (Expense)        |   | (9,900)     |                                                       |   | 807                                                                  
|                                                |   |             |                                                       |   |                                                                      
|                                                |   |             |                                                       |   |                                                                      
|NET
      LOSS BEFORE MINORITY INTEREST         |   | (1,871,073) |                                                       |   | (61,649)                                                             
|MINORITY INTEREST
        IN NET LOSS (Note 5)  |   | 16,027      |                                                       |   | 2,821                                                                
|                                                |   |             |                                                       |   |                                                                      
|NET LOSS FROM DISCONTINUED
        OPERATIONS   | $ | (1,855,046) |                                                       | $ | (58,828)                                                             
|                                                |   |             |                                                       |   |                                                                      
|                                                |   |             |                                                       |   |                                                                      





F-17

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NICHOLAS
  INVESTMENT COMPANY, INC.
  AND SUBSIDIARIES
  (A Development Stage Company)
  Notes to the Consolidated Financial Statements
  December 31, 2002

NOTE 8 - GOING CONCERN

> The Company's financial
>     statements are prepared using accounting principles generally accepted in
>     the United States of America applicable to a going concern which contemplates
>     the relation of assets and liquidation of liabilities in the normal course
>     of business. However, the Company has current liabilities in excess of current
>     assets of $329,485 and has generated significant losses for the years ended
>     December 31, 2002, and 2001. 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.

NOTE 9 - SUBSEQUENT
  EVENTS

> Equity Transactions
>   On January 15, 2003,
>     the Company issued 2,400,000 shares of free trading S-8 common stock to consultants
>     for services rendered. The shares were valued at $0.004 per share, which represents
>     the fair market value for the shares as of the date of issuance. As the consulting
>     services were rendered during the year ended December 31, 2002, the Company
>     has recorded an accrual of $10,320 related to the services.
>   On February 15, 2003,
>     the Company issued 30,000,000 shares of free trading S-8 common stock to consultants
>     for services rendered. The shares were valued at $0.005 per share, which represents
>     the fair market value for the shares as of the date of issuance. As the consulting
>     services were rendered during the year ended December 31, 2002, the Company
>     has recorded an accrual of $180,000 related to the services.
>   On February 15, 2003,
>     the Company issued 11,300,000 shares of free trading S-8 common stock to consultants
>     for services rendered. The shares were valued at $0.002 per share, which represents
>     the fair market value for the shares as of the date of issuance. As the consulting
>     services were rendered during the year ended December 31, 2002, the Company
>     has recorded an accrual of $39,550 related to the services.
>   On February 15, 2003,
>     the Company issued 4,000,000 shares of common stock to a former officer of
>     the Company for services rendered. The shares were valued at $0.002 per share,
>     which represents the fair market value for the shares as of the date of issuance.
>     As the services were rendered during the year ended December 31, 2002, the
>     Company has recorded an accrual of $14,000 related to the services.
>   
>   
>   F-18
>   
>   NICHOLAS
>     INVESTMENT COMPANY, INC.
>     AND SUBSIDIARIES
>     (A Development Stage Company)
>     Notes to the Consolidated Financial Statements
>     December 31, 2002

NOTE 9 - SUBSEQUENT EVENTS (Continued)

> 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 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.
>   On June 4, 2003, the
>     Company issued two million (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.
>   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.
>   Notes Payable - Related
>     Party
>     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 (See Note 4). 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.
>     During the second quarter of fiscal 2003, the Company successfully raised
>     $70,500 in operating capital in the form of convertible notes payable. The
>     two-month convertible notes 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 $67,000 in convertible notes, one $5,000 note is
>     held by the Company's CFO.



F-19

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