<PAGE>
                    U.S.  SECURITIES  AND  EXCHANGE  COMMISSION
                            Washington, D.C. 20549

                                  FORM  10-KSB
(Mark One)
    [ X ]    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
             EXCHANGE ACT OF 1934 [FEE REQUIRED] 

         For fiscal year ended  February 28, 1998.

    [   ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
             SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

    For the transition period from ____ to ____

Commission file number:  0-17879

                             BEST COLLATERAL, INC.
                  (Name of small business issuer in its charter)

             COLORADO                                         84-1107903
    (State or other jurisdiction                            (IRS Employer
    f incorporation or organization)                      Identification No.)

    2447 MISSION STREET, SAN FRANCISCO, CA                            94110  
    (Address of principal executive offices)                       (Zip code)

                 (Issuer's telephone number):  (415) 550-6674

         Securities registered under Section 12(b) of the Exchange Act:  NONE

            Securities registered under Section 12(g) of the Exchange Act:
                          $.10 Par Value Common Stock
                                (Title of class)

    Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), 
and (2) has been subject to such filing requirements for the past 90 days.
    Yes  [ X ]   No [   ]

    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.   [ X ]

    State issuer's revenues for its most recent fiscal year:  $4,310,761

    State the aggregate market value of the voting stock held by non-
affiliates of the registrant:   There is no established public trading market 
for the registrant's Common Stock.

    State the number of shares outstanding of each of the issuer's classes of 
common equity, as of the latest practicable date:       4,024,990 shares

    Documents incorporated by reference:  Definitive proxy statement to be 
filed on or before June 26, 1998, containing information required in Part III 
of this Form 10-KSB.

    Transitional Small Business Disclosure Format (Check one):
        Yes [   ]No [ X ]
<PAGE>
                             BEST COLLATERAL, INC.
                          YEAR ENDED FEBRUARY 28, 1998
                              INDEX TO FORM 10-KSB


PART I

Item                                                                     Page
 No.                                                                      No.
____                                                                     ____

  1.  Business  .....................................................       1
  2.  Properties  ...................................................       7
  3.  Legal Proceedings  ............................................       8
  4.  Submission of Matters to a Vote of Security Holders ...........       8

PART II

  5.  Market for Common Equity and Related Stockholder
          Matters  ..................................................       8
  6.  Management's Discussion and Analysis or Plan of
          Operation  ................................................       8
  7.  Financial Statements  ..........................................     13
  8.  Changes in and Disagreements with Accountants on
          Accounting and Financial Disclosure  .......................     13

PART III

  9.  Directors, Executive Officers, Promoters and Control
          Persons; Compliance with Section 16(a) of the
          Exchange Act  ..............................................     14
 10.  Executive Compensation  ........................................     14
 11.  Security Ownership of Certain Beneficial Owners
           and Management  ...........................................     14
 12.  Certain Relationships and Related Transactions  ................     14

PART IV

 13.  Exhibits and Reports on Form 8-K  ..............................     14

SIGNATURES





















<PAGE>
PART I

Item 1.  Business

General

    The Company is a specialty financial and retail services business engaged 
in owning and operating collateralized lending and previously-owned 
merchandise retail outlets, also known as pawnshops. Pawnshops function as 
convenient sources of consumer loans and as value-oriented retailers 
primarily of previously-owned merchandise. A major growth strategy of the 
Company involves the acquisition of existing pawnshops as well as 
establishing new locations. Since March 1, 1993, the Company has acquired 
seven pawnshops, two of which were consolidated with an existing location, 
and has established two new outlets. As of February 28, 1998, the Company 
owns and operates nine pawnshops located in California. The Company's 
principal executive offices are located at 2447 Mission Street, San 
Francisco, California 94110 and its telephone number is (415) 550-6674.

    Through its lending operation, the Company makes relatively small, non-
recourse loans secured by pledges of tangible personal property. The Company 
contracts for a pawn service charge, also referred to as an interest charge, 
to compensate it for each loan transaction. Maximum pawn service charges, 
which vary by loan amount, are regulated by the California Financial Code and 
consist of a fixed initial charge for one to ninety days of the loan period, 
with an additional charge for each subsequent month or portion thereof. On an 
annualized basis, the effective interest rate currently ranges from 1,800% on 
a $1 loan to 21.7% on a $2,499 loan. Loans of $2,500 or more are not 
regulated.

    Pledged property is held through the term of the loan, which, in 
California, is four months with a ten day grace period unless otherwise 
earlier repaid or renewed. In excess of 80% of the loans made by the Company 
are paid in full with accrued service charges or are renewed after payment of 
the accrued service charges. In the event that the borrower does not pay the 
loan in full or renew the loan by the end of the ten day grace period, all 
borrower's right, title and interest in the pledged property is forfeited and 
vests in the Company. The forfeited, or unredeemed, property then becomes 
inventory available for sale in the retail operations of the pawnshop.


Lending Operation

    The Company is engaged in the business of lending money on the security 
of pledged tangible personal property consisting primarily of jewelry. The 
Company also makes loans on tools, televisions and VCR's, stereophonic 
equipment, musical instruments and equipment, firearms and other 
miscellaneous items. The pledged property is intended to provide security to 
the Company for the repayment of the loan.

    As pawn loans are made without the borrower's personal liability, no 
element of credit investigation or evaluation is involved. Instead, the 
Company relies on its evaluation of the pledged personal property, and the 
possibility of its forfeiture, as a basis for its lending decision. The 
Company contracts for a pawn service charge to compensate it for the making 
of a loan. For the fiscal year ended February 28, 1998, pawn service charges 
accounted for approximately 33.1% of the Company's total revenues and 47.8% 
of its "net revenues", defined as total revenues less the cost of merchandise 
sold. The Company's procedure for making a loan is as follows:


                                     1
<PAGE>
    Determination of Collateral Value: The amount which the Company is 
willing to finance is typically based on a percentage of the pledged personal 
property's estimated resale value. The sources for the Company's 
determination of the estimated resale value are numerous and include 
catalogues, blue books, newspapers, direct mail advertisements and previously 
made similar pawn loan transactions. The Company utilizes several different 
types of electronic and manual equipment to verify authenticity and value of 
gold and precious stones. These sources, together with the employees' 
experience in selling similar items of merchandise within a pawnshop, 
influence the determination of the estimated resale value of such items. The 
Company does not utilize a standard or mandated percentage of estimated 
resale value in determining the amount to be financed. Rather, the employee 
has the authority to determine the ratio of loan amount to estimated resale 
value with the expectation that, if the item is subsequently forfeited, its 
resale would yield a gross profit margin within parameters established by 
management. If the loan is a renewal, the current estimated resale value is 
checked for a change from the previous loan value.

    Loan Ticket: At the time a pawn transaction is entered into, a pawn loan 
agreement, commonly referred to as a pawn ticket, is delivered to the 
borrower (pledgor) that sets forth, among other things, the name and address 
of the pawnshop, the name and address of the borrower, a description of the 
pledged goods, including serial number if applicable, the amount of the loan, 
the maturity date of the loan, the dollar amount of the maximum interest 
charge, any storage or handling fees and a statement of the annualized 
interest rate. Also, as required by law, an additional form is printed with a 
description of the borrower, including name, address, height, weight, date of 
birth, and the number of the driver's license or other approved 
identification. A copy of this form is retained in the pawnshop for its 
records and a copy, with a fingerprint of the borrower, is sent to the local 
police department.

    Redemption of Collateral: To redeem the loan, the borrower must present a 
cash payment of the loan plus accrued interest and fees with the loan ticket. 
If the borrower has lost the loan ticket, the customer must present the same 
identification as that which was recorded on the original loan ticket. The 
information on the identification and the physical characteristics of the 
presenter of the identification is checked against the records of the 
original transaction. If there is a match, the loan may be redeemed upon 
presentation of the full amount due.

    Collateral Not Redeemed: In the event a borrower does not redeem or renew 
the loan, the collateral is forfeited to the Company and becomes inventory 
available for sale in the retail operations of the pawnshop. Consistent with 
industry practice, the Company does not record loan losses or charge-offs 
because the principal amount loaned plus the accrued service charges becomes 
the carrying cost of the forfeited collateral ("inventory") that is to be 
recovered through the retail function described below. However, the Company 
does evaluate the salability of inventory and provides an allowance for 
shrinkage and over valuation.

    All of the Company's nine locations as of February 28, 1998 are located 
in California. Maximum interest and pawn service charges are set by the 
California Financial Code. On an annualized basis, the effective interest 
rate currently ranges from 1,800% on a $1 loan to 21.7% on a $2,499 loan. 
Loans of $2,500 or more are not regulated. During fiscal 1998, loans made by 
the Company were outstanding for a maximum period of four months and eleven 
days and were generally repaid or renewed at an earlier date. While the 
annualized interest rate for the full term on an $95.00 loan (the Company's 
approximate average loan in fiscal 1998) is about 54.7%, due to payment or 
renewal before the end of the loan term, the Company's actual average 
                                      2
<PAGE>
    Collateral Not Redeemed (continued):  annualized rate was approximately 
61.3%. The Company believes its pawn service charges comply with the rates 
promulgated in the California Financial 
Code.

    The table below shows the dollar amount of loans made (including 
renewals), loans acquired, loans repaid or renewed and loans forfeited for 
the Company for the years ended February 28, 1998 and 1997 and February 29, 
1996:
<TABLE>
                                          1998          1997         1996
<S>                                   <C>           <C>          <C>
Loans made                            $ 8,024,493   $ 6,445,292  $ 3,890,472
Loans acquired                             15,767       373,699            -
Loans repaid or renewed                (6,762,502)   (5,155,064)  (3,157,525)
Loans forfeited                          (953,976)     (729,234)    (461,358)
                                       ----------    ----------   ----------
Net increase in pawn loans 
  outstanding at fiscal year end      $   323,782   $   934,693  $   271,589
                                       ==========    ==========   ==========

Loans paid or renewed as a percent
  of loans made                             84.3%         80.0%        81.2%
                                       ==========    ==========   ==========
</TABLE>
    As of February 28, 1998, the Company had 26,736 loans outstanding with an 
aggregate balance outstanding of $2,504,608 for an average of $93.68 per loan 
outstanding.

Retail Operation

    The Company engages in the sale of unredeemed goods acquired when a pawn 
loan is not repaid, used goods purchased from the general public and to a 
minor extent new goods acquired from vendors. New goods consist primarily of 
accessory merchandise which enhances the marketability of unredeemed goods, 
such as watch bands, television remote controls and antennas and clasps for 
chains and bracelets. For the year ended February 28, 1998, gross profit from 
sales of inventory was approximately 52.1% of the Company's net revenues.

    The Company does not give its customers any warranties on the used 
merchandise sold. The Company accepts major credit cards and has a credit 
program whereby a customer purchasing jewelry may, on approved credit, take 
the merchandise with them and make payments over time. This program is 
administered by a major bank which approves the credit and accepts 
responsibility to collect the payments without recourse to the Company. 
Additionally, the Company allows its customers to purchase inventory on a 
"layaway" plan whereby the customer agrees to purchase an item by making an 
initial cash deposit representing a small part of the selling price 
(generally 10% - 20%) and agrees to make additional, non-interest bearing, 
payments on the balance of the selling price in accordance with a specified 
schedule. The Company then separates the layaway item from its inventory and 
holds the item until the selling price is paid in full. The Company records 
layaways as a sale at the time of receiving the initial cash deposit. Should 
the customer fail to make a required payment, the item is returned to 
inventory at original cost and all previous payments forfeited to the 
Company. To cover the difference between the inventory's original cost and 
the remaining layaway sales receivable upon forfeiture, the Company provides 
for an allowance against outstanding layaway receivables. At February 28, 
1998, the Company had layaway sales receivable of $263,727 with an allowance 
for the net cost on potential forfeited layaways of $13,249.

                                     3
<PAGE>
    The Company's inventory is stated at the lower of cost (specific 
identification) or market (net realizable value). Inventory consists of 
merchandise acquired from forfeited loans, merchandise purchased directly 
from the public and new merchandise purchased from vendors. The Company 
provides an allowance for obsolescence and valuation based on management's 
evaluation of the condition and salability of the merchandise. At February 
28, 1998, total stated value of inventory on hand was $1,053,101, after 
deducting $39,796 for the allowance.


Operations

General

    The predecessor company was founded as a privately held business some 
fifty years ago. Until the early 1990's, the Company did not stress 
significant increases in its outstanding pawn loans nor a rapid turnover of 
merchandise, but had as a primary goal the accumulation of inventory.

    In the early 1990's, management decided to participate in the 
consolidation of ownership taking place in the industry. In order to position 
itself for raising the capital necessary to fund the growth, the Company 
began having its financial statements audited. As part of its overall 
strategy, in June of 1992, the Company became a public company through a 
reverse merger with Macintosh Video News, Inc., a publicly held Colorado 
corporation. 

Employees

    Each pawnshop has a manager and assistant manager who are responsible for 
supervising store personnel, assuring that the store is run in accordance 
with the Company's established policies and procedures, and for operating 
their store according to performance parameters consistent with the Company's 
store operating plan. Store managers report to a Regional Manager of the 
Company.

    At February 28, 1998, the Company had 49 employees. Of the total 
employees, five were administrative and forty-four were store level. None of 
the Company's employees is covered by a collective bargaining agreement. The 
Company considers its employee relations to be satisfactory.

    The Company's training program for new pawnshop employees consists 
primarily of supervised on-the-job loan and sales experience conducted with 
Company policies and procedures. New employee orientation also includes 
formal jewelry sales and collateral evaluation training sessions, complete 
with manuals and video presentations. Employee and employer conduct and 
responsibilities are set forth in the Company's employee manual.

Management Information Systems And Controls

    The Company's computerized point-of-pawn and point-of-sale data 
processing system completely automates the recording of all transactions, 
operations and calculations that occur within a pawnshop. From a controls 
perspective, the system provides management with a database of all loans made 
and a perpetual inventory system. The system utilizes a microcomputer-based, 
multi-tasking, multi-user computer environment, which allows multiple 
transactions to occur simultaneously. The Company is a primary consultant to 
its software vendor as additional features and functions are considered and 
added to the system.


                                     4
<PAGE>
   The Company's management information system enables store managers and 
senior management to monitor, control and anticipate business changes at the 
Company's store operations. In addition to basic financial reporting, the 
system facilitates internal management reports detailing an aged loan trial 
balance, loans made, loans redeemed, loans forfeited, sales by category and 
by employee and gross profit analysis by category and employee. A store 
customer's complete loan history is maintained on-line, including their 
redemption history and profitability. This enables loan assessors and 
processors to utilize a customers' past payment history as well as the value 
of the collateral in order to determine an appropriate loan value. 
Additionally, repeat customers can be handled more expediently, thereby 
allowing a greater number of loans to be processed per employee.

    For inventory control and tracking, each collateral item taken in a pawn 
transaction is assigned a bar code during the lending process. This ensures 
that all the Company's inventory is properly bar coded as it becomes part of 
the store's inventory. Through the use of scanning technology, the Company 
has dramatically decreased the time requirement for physical inventories.


Future Expansion

    During fiscal 1998, the Company continued its strategy of expansion by 
acquiring one and opening one pawnshop in northern California. The Company's 
objective is to continue to expand the number of pawnshops it owns and 
operates primarily through acquiring existing pawnshops which, based on 
management's assessment, can benefit from the Company's management and 
operations expertise, or establishing new locations that meet the Company's 
strategic requirements. Management believes that such expansion will allow 
the Company to realize greater efficiency in its supervision, administration 
and marketing by decreasing the overall average cost of these activities per 
store.

    The Company expects to concentrate its expansion in areas where it 
believes the regulatory, demographic and competitive characteristics are 
conducive to a successful pawnshop operation. In identifying potential 
pawnshop acquisitions, the Company places emphasis on those with favorable 
lease arrangements, with outstanding loan balances which provide sufficient 
pawn service charge income to cover most of the store level fixed operating 
costs, where inventory and loans outstanding primarily consist of jewelry and 
where the store is strategically located in an area with significant foot 
traffic and easily accessible by public transportation. For start-up 
locations, favorable lease arrangements, strategic location and improving 
geographic density will constitute the primary decision criteria. Utilizing 
this criteria, the Company opened one location in the third quarter of fiscal 
1998.

    Since March 1, 1993, the Company acquired the operating assets of four 
stores, and acquired the pawn loans, and thus the customer base, of two other 
stores which were closed and incorporated into an existing location. In all 
acquisitions, the Company conducted its due diligence and negotiated the 
general terms of an asset purchase agreement. Upon taking a physical count of 
all inventory and loan collateral, final terms of the purchase agreement were 
negotiated and, within several days, the transaction was closed. After the 
date of closing, inventory on hand was entered into, and new loan 
transactions were processed through, the Company's point-of-sale/point-of-
pawn computer system. This methodology is expected to guide the Company 
through its future acquisitions.



                                     5
<PAGE>
    There are approximately 700 active licensed pawnshops in California, as 
indicated by the records of the Collateral Loan and Secondhand Dealers 
Association of California. While the Company believes it will be able to 
target an adequate number of stores available for acquisition, a number of 
unpredictable factors, including the Company's ability to raise additional 
capital for acquisition purposes, may limit the Company's expansion 
activities. Also, while the Company will seek existing personnel or hire new 
employees capable of assuming managerial positions, there can be no assurance 
that sufficient qualified personnel will be available to satisfy the 
Company's needs with respect to its planned expansion.

Competition

    In connection with the lending of money, the Company competes with other 
pawnshops and other types of financial institutions such as consumer finance 
companies, which generally lend on an unsecured as well as a secured basis. 
The vast majority of the Company's pawnshop competitors are independently 
owned and operated "mom and pop" stores. The Company believes that the 
primary elements of competition in the pawnshop industry are store location 
and design, the ability to offer competitive loan amounts on items pawned, 
effective management of store-level personnel and the quality of customer 
service. Additionally, as the pawnshop industry consolidates, the Company 
believes that the ability to compete effectively will be impacted by the 
sophistication level of a company's general management and management 
information systems, its regional focus, market concentration and access to 
capital.

    In connection with its retail operations, the Company competes with 
numerous other retail and wholesale stores, including jewelry stores and 
outlets, discount retail stores, consumer electronics stores, firearm 
retailers and other pawnshops. Competitive factors, in addition to several 
noted above, include the ability to provide the consumer with a variety of 
quality merchandise at a "bargain" price.

    In both areas of its business, the Company faces competitors which have 
greater financial resources. This, and certain of the conditions noted above, 
may adversely affect the Company's revenues, profitability and ability to 
expand.


Regulation

    The Company's pawnshop operations are subject to extensive regulation, 
supervision and licensing under various federal, state and local statutes, 
ordinances and regulations.

    As all the Company's stores are within California, the Company is 
primarily affected by the California Business and Professions Code and 
Financial Code. These statutes prescribe, among other things, the term and 
maximum rates of interest which a pawnshop may charge for certain loans. 
Additionally, as a condition precedent to the issuance or renewal of a 
pawnbroker's license, an applicant must file a pawnbroker's two-year 
nonrevocable surety bond in the amount of $20,000 per store. As a condition 
precedent to the issuance of a new pawnbroker's license (holders of 
secondhand dealers' licenses, actively engaged as a pawnbroker as of October 
3, 1993, such as the Company, are not affected by this requirement), an 
applicant must file a financial statement, reviewed and signed by a 
California Certified Public Accountant, confirming the applicant has at least 
$100,000 in the form of liquid assets readily available for use in the 
business or an applicant may post a nonrevocable surety bond in the amount of 
$100,000.
                                     6
<PAGE>
    Stores that deal in firearms must comply with the regulations promulgated 
by the United States Department of Treasury, Bureau of Alcohol, Tobacco and 
Firearms which require each pawnshop dealing in firearms to maintain a 
permanent written record of all transactions involving the receipt or 
disposition of guns. As it is the Company's policy not to retail firearms in 
an urban area, only one of the Company's stores is currently subject to these 
regulations.

    At the local level, each of the Company's pawnshops voluntarily or 
pursuant to municipal ordinances provide, to the police department having 
jurisdiction, copies of all daily transactions involving pawn loans and goods 
purchased from the general public. These daily transaction reports are 
designed to provide local police with a detailed description of the goods 
involved, including serial numbers, if any, and the name and address of the 
pawnor obtained from a valid identification card. These tickets are used by 
law enforcement agencies to determine rightful ownership. Goods held to 
secure pawn loans or goods purchased which are determined to belong to an 
owner other than the borrower or seller are subject to recovery by the 
rightful owner. While a risk exists that pledged or acquired merchandise may 
be subject to claims of the rightful owner, historically, the Company has not 
experienced a material number of claims of this sort and the claims of this 
sort which the Company has experienced have not had a material adverse affect 
on the Company's results of operations.

Item 2. Properties

    As of April 30, 1998, the Company owned and operated nine pawnshops in 
California. All of its locations are operated under non-cancelable operating 
leases. Leased facilities are generally leased for a term of five years with 
one or more options to renew. The Company's existing leases expire in fiscal 
years 1999 through 2008. All leases provide for specific periodic rental 
payments. Most leases require the Company to maintain the property and pay 
the cost of insurance and taxes.

    One of the Company's pawnshop locations and it's corporate offices are 
owned by the Company's two principal stockholders. These properties are 
leased on a monthly basis and provide for market rental rates. At two other 
locations, the Company subleases to independent parties a portion of its 
leased property under a non-cancelable sublease. 

    The following table sets forth, as of May 27, 1998, the geographic 
markets served by the Company and the number of locations in such markets:

                                                  Number of Locations in Area
                                                  ---------------------------
    California:
        San Francisco                                          4
        San Bruno                                              1
        San Mateo                                              1
        Vallejo                                                1
        Sacramento                                             1
        Marysville                                             1
                                                            ----
                                                               9
                                                            ====

    The Company considers its equipment, furniture and fixtures to be in good 
condition. Property insurance is maintained on each of its locations in 
accordance with the terms of each lease. Additionally, the Company carries 
other business insurance on its inventories, pawn loan collateral and for 
general liability.
                                      7
<PAGE>
Item 3. Legal Proceedings

    No material legal proceedings to which the Company is a party or to which 
the property of the Company is subject are pending or, to the knowledge of 
management, is threatened.


Item 4. Submission Of Matters To A Vote Of Security Holders

    No matter was submitted to a vote of the security holders during the 
fourth quarter of the fiscal year covered by this report.


PART II


Item 5. Market For Common Equity And Related Stockholder Matters

    There is no established public trading market for the Company's common 
stock.

    As of April 22, 1998, there were 138 shareholders' of record of the 
Company's common stock. The total public float of the Company's common stock 
is 113,756 shares, approximately 2.8% of the 4,024,990 shares issued and 
outstanding.

    Information contained under the caption "Stock Options and Warrants" on 
page F-12 of this Form 10-KSB is incorporated herein by reference in response 
to this Item 5.


Item 6. Management's Discussion And Analysis Or Plan Of Operations


    The following is a discussion of the Company's financial condition, 
changes in its financial condition, and its results of operations for the two 
fiscal years ended February 28, 1997 and 1998 (designated as "1997" and 
"1998", respectively). This discussion should be read in conjunction with the 
financial statements, related notes and other information included elsewhere 
in this report.


Cautionary Factors That May Affect Future Results

    In addition to historical information, management's discussion and 
analysis includes certain forward-looking statements regarding events and 
financial trends which may affect the Company's future operating results and 
financial position. Such statements can be identified by their use of words 
such as "expects," "plans," "will," "estimates," "forecasts," "projects" and 
other words of similar meaning. These statements are subject to risks and 
uncertainties that could cause the Company's actual results and financial 
position to differ materially. Influential factors include, but are not 
limited to: a change in economic conditions in the markets served by the 
Company which could affect the level of demand for pawn loans or previously 
owned merchandise; a greater-than-anticipated competitive environment 
resulting from the entrance into the California market by a large pawnshop 
chain; a change in the regulatory environment including, but not limited to, 
a change in the allowable interest rate structure or a reduction in the 
ability to obtain required licenses and a limit on available investment 
capital which may affect the Company's ability to meet its growth 
expectations.
                                     8
<PAGE>
    The Company does not assume the obligation to update any forward-looking 
statement. Readers are cautioned not to place undue reliance on these 
forward-looking statements, which speak only as of the date hereof. One must 
carefully consider any such statement and should understand that many factors 
could cause actual results to differ from the Company's prior results or its 
forward-looking statements. One should carefully evaluate such statements in 
light of factors described in the Company's filings with the Securities and 
Exchange Commission, especially on Forms 10-KSB, 10-QSB and 8-K (if any).

Liquidity and Capital Resources

    During 1998, the Company invested $35,865 on the acquisition of the 
assets of a pawnshop and $328,030 for additions to its fixed assets. Working 
capital decreased by $78,575 as the Company used its line of credit to help 
finance its capital improvements. The acquisition was funded through the 
Company's primary line of credit. Operational growth was funded through net 
revenues, cash available at February 28, 1997 and bank borrowings.

    During 1998, the Company renewed its revolving line of credit arrangement 
with Bank of America, NA and increased its availability to four million 
dollars ($4,000,000). Borrowings under this line of credit bear interest at 
the Bank's Reference Rate (8.5% at February 28, 1998) plus 1.25%. Interest is 
payable monthly and all borrowings and accrued interest are due August 1, 
1998. As of February 28, 1998, the amount outstanding under this line of 
credit was $2,874,716 and it is management's expectation that the arrangement 
will be renewed by the bank upon its due date.

    During 1997, the Company invested $625,000 on the acquisition of the 
assets of a pawnshop and $83,267 for additions to its fixed assets. Working 
capital increased by $155,082 to meet operational growth needs in 1997. The 
acquisition was funded through a $700,000 increase in the Company's primary 
line of credit with operational growth funded through cash available at 
February 29, 1996, net cash provided by operations, loans from an employee 
and directors and bank borrowings.

    During 1997, the Company entered into a three million dollar ($3,000,000) 
revolving line of credit arrangement with Bank of America, NA. The new line 
was used to consolidate all of the Company's existing lines of credit and 
bank term loans and provide additional working capital. Until its renewal in 
1998, borrowings under the line of credit bore interest at the Bank's 
reference rate plus 1.5%.

    For continuing operations, the Company's liquidity is greatly affected by 
the amount of pawn loans outstanding. As it is a Company strategy to increase 
its average loan portfolio within each store, the Company will continue to be 
prudently aggressive in its loan policy and seek out opportunities to make 
loans on collateral with greater value. The Company plans to manage the 
growth in its inventory, by discounting prices or selling certain inventory 
items in the wholesale market, such that any growth in its inventory levels 
will not adversely impact availability of funds for loan growth.

    It is also the Company's strategy to expand its operations through 
acquisitions of existing or establishing new, start-up pawnshops. To this 
end, the Company continues to discuss its financing requirements with 
institutional lenders and private individuals. The Company believes that this 
type of financing will be the manner in which it funds its next several 
acquisitions or start-ups. It is expected that any such financing will be 
entered into on a case by case basis. The Company expects any funding of this 
nature to be adequate to allow for build out costs and pawn loan growth in 
the acquired or start-up store. 

                                      9
<PAGE>
Liquidity and Capital Resources (continued)

If adequate funding for acquiring or establishing additional pawnshops is not
available, the Company will have to further consider the effect of any
potential expansion on its liquidity.

Results of Operations

1998 vs. 1997

Sales and Gross Profit

    Merchandise sales in 1998 increased by $230,893 (8.8%) over 1997 as a 
result of a $143,759 (5.5%) increase in sales for stores open in excess of 
one year ("Comparable Stores") and a $87,134 (3.3%) contribution by stores 
open less than one year ("New Stores"). Management expects that the on-going 
operations of Comparable Stores will provide sales increases in the range of 
4% to 8%. Continued contributions from New Stores will be dependent on the 
Company's ability to identify, obtain financing for, complete the acquisition 
or establishment of, and successfully operate additional stores.

    Other revenues consist primarily of net income derived from the melting 
of excess precious metal. While income from melting excess precious metal is 
an aspect of the Company's on-going operations, due to the quantity of excess 
inventory obtained in a May 1996 acquisition, the amount of revenue derived 
in 1997 is higher than is typically expected and should not be counted on in 
future periods.

    While gross profits from merchandise sales increased by $114,201 (8.0%), 
the gross profit percentage (as a percentage of merchandise sales), declined 
to 54.0% in 1998 from 54.4% in 1997. Comparable Stores gross profits 
increased by $62,596 (4.4%) while their gross profit percentage declined to 
53.9% and New Stores contributed gross profits of $51,605 at a gross profit 
percentage of 59.3%.


Pawn Service Charges

    The 1998 increase in revenue from pawn service charges over 1997 of 
$174,736 (14.0%) is a result of a $152,114 (12.2%) increase in Comparable 
Stores pawn service charges and a contribution of $22,622 (1.6%) from New 
Stores.

    Pawn loans outstanding increased by $323,782 (14.9%) during the 1998 
period. Comparable Store pawn loans outstanding grew by $224,954 (10.4%) 
while the store obtained in the September acquisition added $58,314 ($15,767 
at time of acquisition) and the store opened in November added $40,514. The 
average annual yield on pawn loans decreased to approximately 61.3% in 1998 
compared to 68.4% and 76.5% in 1997 and 1996, respectively. This decrease is 
primarily due to an increase in the average loan amount to $95.00 from $80.00 
in 1997 and $60.00 in 1996. Under California law, the effective loan yield 
decreases as the loan amount goes up. As it has been a goal of management, 
through gathering a greater market share of the higher value pawn loans in 
its different marketplaces, to increase the Company's aggregate pawn loan 
outstanding balance and thus its gross pawn service charges revenue, the 
average annual yield decrease was expected. Management's intentions are to 
continue this practice until such point in time as the gross pawn service 
charges revenue increases no longer outweigh the increased investment in 
higher valued pawn loans.


                                     10
<PAGE>
Operating Expenses

    Store operating expenses, as a percent of total revenues, were 
approximately 40.1% in 1998 compared to 38.1% in 1997 and 41.8% in 1996. 
Comparable Stores operating expense were 38.6%, 36.8% and 39.2% in 1998, 1997 
and 1996, respectively. New Stores operating expenses were 98.5%, 63.3% and 
81.2% during the same periods.

    The fluctuation in the overall operating expense percentage is a result 
of the Company's practice of adding additional managerial personnel in 
anticipation of new store openings or acquisitions. Employees are placed into 
existing stores and trained on the Company's computer system, its operating 
policies and procedures, how to evaluate pawn collateral and on general 
industry information. Until it gains greater mass, management expects that 
similar small changes in the Company's overall operating expense percentage 
will continue as the Company adds new employees in anticipation of adding 
locations. As the Company continues to improve the operations of stores it 
has acquired and increase operations of newly established stores as they 
mature, it is expected that store operating expenses as a percent of total 
revenues will decline, for those stores.

    Corporate administrative expenses, as a percent of total revenues, was 
approximately 15.6% in 1998 compared to 12.3% in 1997 and 15.4% in 1996. 
Significant changes in the components of administrative expenses during 1998 
compared to 1997 were increased payroll and transition costs associated with 
the replacement of the Company's accounting manager with a corporate 
controller, the addition of a district stores manager and human resource 
administrator and costs incurred with the conceptual development of a 
cohesive marketing program. 


1997 vs. 1996

Sales and Gross Profit

    Merchandise sales in 1997 increased by $703,178 (36.2%) over 1996 as a 
result of a $437,214 (22.5%) increase in sales for stores open in excess of 
one year ("Comparable Stores") and a $265,964 (10.1%) contribution by stores 
open less than one year ("New Stores"). The Comparable Stores increase 
includes an estimated $240,000 improvement in sales due to the acquisition 
and consolidation into an existing location of the pawnshop acquired during 
the year. Additional improvement in sales from Comparable Stores came from 
inventory turnover programs and increased inventory flow from the acquired 
store. Continued contributions from New Stores will be dependent on the 
Company's ability to identify, obtain financing for, complete the acquisition 
or establishment of, and successfully operate additional stores.

    Other revenues consist primarily of net income derived from the melting 
of excess precious metal. While income from melting excess precious metal is 
an aspect of the Company's on-going operations, the amount of revenue derived 
in 1997 is higher than is typically expected due to the quantity of excess 
inventory obtained in a May 1996 acquisition.


    While gross profits from merchandise sales increased by $367,449 (34.3%), 
gross profit percentage (as a percentage of merchandise sales), declined to 
54.4% in 1997 from 55.1% in 1996. Comparable Stores gross profits increased 
by $206,016 (19.2%) while their gross profit percentage declined to 53.7% and 
New Stores contributed gross profits of $161,433 at a gross profit percentage 
of 60.7%.

                                      11
<PAGE>Pawn Service Charges

    The 1997 increase in revenue from pawn service charges over 1996 of 
$425,264 (51.5%) is a result of a $352,573 (42.7%) increase in Comparable 
Stores pawn service charges and a contribution of $72,691 (5.8%) from New 
Stores.

    Pawn loans outstanding increased by $934,693 (75.0%) during the 1997 
period. Comparable Store pawn loans outstanding grew by $560,994 (45.1%) 
while the loans obtained in the May acquisition added $373,699. The average 
annual yield on pawn loans decreased to approximately 68.4% in 1997 compared 
to 76.5% and 78.1% in 1996 and 1995, respectively. This decrease is primarily 
due to an increase in the average loan amount to $80.00 from $60.00 in 1996 
and $55.00 in 1995.


Operating Expenses

    Store operating expenses, as a percent of total revenues, decreased to 
approximately 38.1% in 1997 from 41.8% in 1996 and 39.9% in 1995. Comparable 
Stores operating expense were 36.8%, 39.2% and 38.1% in 1997, 1996 and 1995, 
respectively. New Stores operating expenses were 63.3%, 81.2% and 45.6% 
during the same periods.

    The overall reduction in the Comparable Stores operating expense 
percentage is a result of continued improvements in store operating 
productivity. The high store operating expense percentage for New Stores in 
1997 and 1996 is primarily due to the impact of the first year of operations 
for two newly established stores opened in the third quarter of 1996. As the 
Company continues to improve the operations of stores it has acquired and 
increase operations of newly established stores as they mature, it is 
expected that store operating expenses as a percent of total revenues will 
decline, for those stores.

    Corporate administrative expenses, as a percent of total revenues, 
decreased to approximately 12.3% in 1997 from 15.4% in 1996 and 21.9% in 
1995. While, as more stores are acquired or established, the Company will 
need to increase its overall administrative expenditures, management's goal 
is to continue to reduce the percentage of administrative expense in 
relationship to the Company's total revenues. No significant changes occurred 
in the components of administrative expenses during 1997 compared to 1996. 





















                                     12
<PAGE>
Item 7. Financial Statements


     The following financial statements of the Company are included as part 
of this Form 10-KSB:

                                                                         Page

    Report of Independent Accountants  .................................  F-1

    Financial Statements:

        Balance Sheets  ................................................  F-2

        Statements of Operations  ......................................  F-3

        Statements of Stockholders' Equity  ............................  F-4

        Statements of Cash Flows  ......................................  F-5

    Notes to Financial Statements  .....................................  F-6


Item 8.  Changes In And Disagreements With Accountants On Accounting and 
         Financial Disclosure

    There have been no changes in or disagreements with accountants on 
accounting and financial disclosure during the Company's two most recent 
fiscal years.
































                                      13
<PAGE>
PART III

Item 9.  Directors, Executive Officers, Promoters And Control Persons; 
         Compliance With Section 16(a) of The Exchange Act

    Information with respect to this Item is incorporated by reference to the 
Company's definitive proxy statement, to be filed on or before June 26, 1998.

Item 10.  Executive Compensation

    Information with respect to this Item is incorporated by reference to the 
Company's definitive proxy statement, to be filed on or before June 26, 1998.

Item 11.  Security Ownership Of Certain Beneficial Owners And Management

    Information with respect to this Item is incorporated by reference to the 
Company's definitive proxy statement, to be filed on or before June 26, 1998.

Item 12.  Certain Relationships And Related Transactions

    Information with respect to this Item is incorporated by reference to the 
Company's definitive proxy statement, to be filed on or before June 26, 1998.

Item 13.  Exhibits and Reports On Form 8-K

(a)  Exhibits

     3.  Articles of Incorporation and Bylaws

         (a)  Articles of Incorporation are incorporated by reference to the 
              Exhibits to the Registrant's Registration Statement on 
              Form S-18, Registration  No. 33-27926-D.

         (b)  Amendments to the Articles of Incorporation are incorporated by 
              reference to the Exhibits to the Registrant's Report on 
              Form 8-K dated June 17, 1992 (on file at the Commissions' 
              Washington, D.C. office, file # 0-17879).

         (c)  Articles of Merger are incorporated by reference to Exhibits to 
              the Registrant's Report on Form 8-K dated June 17, 1992 (on 
              file at the Commissions' Washington, D.C. office, 
              file # 0-17879).

         (d)  Bylaws are incorporated by reference to the Exhibits to the 
              Registrant's, Registration Statement on Form S-18, Registration 
              No. 33-27926-D.















                                      14
<PAGE>
    10.  Material Contracts

         (a)  Lease (as amended) dated March 31, 1967, between the Registrant 
              and the Hearst Corporation is incorporated by reference to the 
              Registrant's Form 10-KSB for the fiscal year ended February 28, 
              1993 (on file at the Commissions' Washington, D.C. office, file 
              # 0-17879).

         (b)  Lease dated October 15, 1991, between the registrant and Ronald 
              J. Verber and the Iscoff Family Trust (both affiliates of the 
              Company) is incorporated by reference to the Registrant's Form 
              10-KSB for the fiscal year ended February 28, 1993 (on file at 
              the Commissions' Washington, D.C. office, file # 0-17879).

         (c)  Employment Agreement dated June 17, 1992, between the 
              Registrant and Ronald J. Verber, a Director and Officer of the 
              Registrant is incorporated by reference to the Registrant's 
              Form 10-KSB for the fiscal year ended February 28, 1993 (on 
              file at the Commissions' Washington, D.C. office, 
              file # 0-17879).

         (d)  Form of Non-Qualified Stock Option Agreement with Messes. 
              Bartlett, Gans and Strobin, Directors of the Registrant is 
              incorporated by reference to the Registrant's Form 10-KSB for 
              the fiscal year ended February 28, 1993 (on file at the 
              Commissions' Washington, D.C. office, file # 0-17879).

         (e)  Asset Purchase Agreement dated June 30, 1993, between the 
              Registrant and Paula Elaine Newhouse, d.b.a. San Francisco Loan 
              Association is incorporated by reference to the Exhibits to the 
              Registrant's Form 10-QSB for the quarterly period ended May 31, 
              1993.

         (f)  Lease (including assignment, lessor's consent and extension 
              option) for premises located at 1013 Mission Street, San 
              Francisco, California, originally dated March 18, 1976 is 
              incorporated by reference to the Exhibits to the Registrant's
              Form 10-QSB for the quarterly period ended May 31, 1993.

         (g)  Asset Purchase Agreement dated September 30, 1993 between the 
              Registrant and Reliable Mercantile & Loan Company, by and 
              through its owner, Bernard Blumenthal is incorporated by 
              reference to the Exhibits to the Registrant's Form 10-QSB for 
              the quarterly period ended August 31, 1993.

         (h)  Commercial lease for the premises located at 35 6th Street, San 
              Francisco, California, dated September 30, 1993 is incorporated 
              by reference to the Exhibits to the Registrant's Form 10-QSB 
              for the quarterly period ended August 31, 1993.

         (i)  Business Loan Agreement and Promissory Note dated September 17, 
              1993, between the Registrant and Commercial Bank of San 
              Francisco is incorporated by reference to the Exhibits to the 
              Registrant's Form 10-KSB for the fiscal year ended February 28, 
              1994.

         (j)  Business Loan Agreement and Promissory Note dated February 3, 
              1994, between the Registrant and Wells Fargo Bank, NA 
              incorporated by reference to the Exhibits to the Registrant's 
              Form 10-KSB for the fiscal year ended February 28, 1994.

                                      15
<PAGE>
    10.  Material Contracts (continued)

         (k)  Business Loan Agreement and Promissory Note(s) dated June 27, 
              1994, between the Registrant and Wells Fargo Bank, NA is 
              incorporated by reference to the Exhibits to the Registrant's 
              Form 10-QSB for the quarterly period ended May 31, 1994.

         (l)  Asset Purchase Agreement dated June 30, 1994, between the 
              Registrant and American Jewelry, Loan & Sports, Inc. is 
              incorporated by reference to the Exhibits to the Registrant's 
              Form 10-QSB for the quarterly period ended May 31, 1994.

         (m)  Commercial lease for the premises located at 402 E Street, 
              Marysville, California, dated June 30, 1994 is incorporated by 
              reference to the Exhibits to the Registrant's Form 10-QSB for 
              the quarterly period ended May 31, 1994.

         (n)  Loan Agreement and Promissory Note(s) dated December 28, 1994 
              between the Registrant and Commercial Bank of San Francisco is 
              incorporated by reference to the Exhibits to the Registrant's 
              Form 10-QSB for the quarterly period ended November 30, 1994.

         (o)  Loan Agreement and Promissory Note(s) dated May 1, 1996 between 
              the Registrant and Commercial Bank of San Francisco is 
              incorporated by reference to the Exhibits to the Registrant's 
              Form 10-KSB for the fiscal year ended February 29, 1996.

         (p)  Asset Purchase Agreement dated May 1, 1996, between the 
              Registrant and Phillip R. Director, Personal Representative of 
              the Estate of George Elkins is incorporated by reference to the 
              Exhibits to the Registrant's Form 10-KSB for the fiscal year 
              ended February 29, 1996.

         (q)  Business Loan Agreement dated September 9, 1996 between the 
              Registrant and Bank of America N.A. is incorporated by 
              reference to the Exhibits to the Registrant's Form 10-KSB for 
              the fiscal year ended February 28, 1997.


(b)  Reports on Form 8-K

    No reports on Form 8-K were filed by the Company during the last quarter 
of the period covered by this report.


















                                      16
<PAGE>
SIGNATURES

    In accordance with Section 13 or 15(d) of the Securities Exchange Act of 
1934, the registrant has duly caused this report to be signed on its behalf 
by the undersigned, thereunto duly authorized.

BEST COLLATERAL, INC.                                            May 28, 1998

By  /s/  Ronald J. Verber                         By  /s/  Robert E. Verhoeff
    ---------------------                             -----------------------
    Ronald J. Verber                                  Robert E. Verhoeff
    President and Chief Executive Officer             Vice President and
                                                      Chief Financial Officer

    In accordance with the Securities Exchange Act of 1934, 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/  Ronald J. Verber                                            May 28, 1998
-----------------------
Ronald J. Verber              President and Chairman
                              of the Board of Directors

/s/  Robert E. Verhoeff                                          May 28, 1998
-----------------------
Robert E. Verhoeff            Vice President and 
                              Chief Financial Officer

/s/  Michael K. White                                            May 28, 1998
-----------------------
Michael K. White              Controller

/s/  Roean Iscoff                                                May 28, 1998
-----------------------
Roean Iscoff                  Vice President, 
                              Secretary and Director

/s/  Flora B. Verber                                             May 28, 1998
-----------------------
Flora B. Verber               Vice President
                              and Director

/s/  David B. Verber                                             May 28, 1998
-----------------------
David B. Verber               Vice President
                              and Director

/s/  John P. Carver                                              May 28, 1998
-----------------------
John P. Carver                Director

/s/  Martin S. Gans                                              May 28, 1998
-----------------------
Martin S. Gans                Director

/s/  Edward A. Strobin                                           May 28, 1998
-----------------------
Edward A. Strobin             Director

                                       17
<PAGE>






















                             BEST COLLATERAL, INC.
                    REPORT ON AUDITS OF FINANCIAL STATEMENTS
                  for the years ended February 28, 1998 and 1997
























<PAGE>









                       REPORT OF INDEPENDENT ACCOUNTANTS



To the Board of Directors
Best Collateral, Inc.:

We have audited the accompanying balance sheets of Best Collateral, Inc. as 
of February 28, 1998 and 1997, and the related statements of operations, 
stockholders' equity, and cash flows for the years then ended.  These 
financial statements are the responsibility of the Company's management.  Our 
responsibility is to express an opinion on these financial statements based 
on our audits.

We conducted our audits in accordance with generally accepted auditing 
standards.  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 financial statements referred to above present fairly, in 
all material respects, the financial position of Best Collateral, Inc. as of 
February 28, 1998 and 1997, and the results of its operations and its cash 
flows for the years then ended in conformity with generally accepted 
accounting principles.





San Francisco, California
April 6, 1998
















                                      F-1
<PAGE>
                              BEST COLLATERAL, INC.
                                 BALANCE SHEETS
                            February 28, 1998 and 1997
<TABLE>
<CAPTION>
                                                     1998            1997
                ASSETS
<S>                                              <C>             <C>
Current assets:
  Cash                                           $   139,304     $   179,546
  Pawn service charges receivable                    327,185         307,839
  Pawn loans receivable                            2,504,608       2,180,826
  Layaway sales receivable, net of 
    allowances of $13,249 in 1998 and 
    $46,000 in 1997, respectively                    250,479         274,153
  Inventory, net of allowance of $39,796 in
    1998 and $15,000 in 1997, respectively         1,053,101         931,452
  Income taxes receivable                             74,538               -
  Prepaid expenses and other                          39,049          13,801
                                                  ----------      ----------
    Total current assets                            4,388264       3,887,617
Property and equipment, net                          614,510         424,897
Deferred tax assets                                   10,318          39,458
Other assets                                          12,528          18,338
                                                  ----------      ----------
      Total asset                                $ 5,025,620     $ 4,370,310
                                                  ==========      ==========
                       LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Bank loans                                     $ 2,874,716     $ 2,177,216
  Accounts payable and accrued expenses              209,465         206,243
  Income tax payable                                       -         109,097
  Accrued interest1                                  167,800         157,900
  Loans from stockholders                            349,434         349,434
  Deferred tax liability                              65,861         107,645
                                                  ----------      ----------
    Total current liabilities                      3,667,276       3,107,535
Convertible notes payable to employee
  and director                                       327,500         327,500
Convertible notes payable to others                   75,000         100,000
                                                  ----------      ----------
    Total liabilities                              4,069,776       3,535,035
                                                  ----------      ----------
Excess of fair value of net assets 
  acquired over cost, net                                  -          32,194
Stockholders' equity:
  Preferred stock, no par value, 1,000,000
    shares authorized; none issued                         -               -
  Common stock, $.10 par value, 50,000,000
    shares authorized; 4,024,990 and 3,999,990
    shares issued and outstanding as of 
    February 28, 1998 and 1997, respectively         402,499         399,999
  Additional paid-in capital                        (235,180)       (257,680)
  Retained earnings                                  788,525         660,762
                                                  ----------      ----------
    Total stockholders' equity                       955,844         803,081
                                                  ----------      ----------
      Total liabilities & stockholders equity    $ 5,025,620     $ 4,370,310
                                                  ==========      ==========
</TABLE>
   The accompanying notes are an integral part of these financial statements
                                      F-2
<PAGE>
                              BEST COLLATERAL, INC.
                            STATEMENTS OF OPERATIONS
                  for the years ended February 28, 1998 and 1997


<TABLE>
<CAPTION>
                                                     1998            1997
<S>                                              <C>             <C>
Revenues:
  Merchandise sales                              $ 2,880,096     $ 2,649,203
  Pawn service charges                             1,426,704       1,251,968
  Gold melt income, net                                3,961          98,631
                                                  ----------      ----------
    Total revenues                                 4,310,761       3,999,802

Cost of merchandise sales                         (1,324,663)     (1,207,971)
                                                  ----------      ----------
    Revenues net of cost of sales                  2,986,098       2,791,831

Selling, general and administrative expenses:
  Store operating expenses                        (1,727,164)     (1,524,315)
  Administrative expenses                           (670,320)       (489,635)
                                                  ----------      ----------
    Operating income                                 588,614         777,881

Other income (expense):
  Rental income                                       88,620          87,176
  Interest expense and financing costs              (321,132)       (362,599)
  Depreciation and amortization                     (158,211)       (134,150)
  Amortization of excess of fair value of net
    Assets acquired over cost                         32,194          96,581
  Other expenses                                     (60,369)        (75,062)
                                                  ----------      ----------
                                                    (418,898)       (388,054)
                                                  ----------      ----------
    Income before income taxes                       169,716         389,827

Income tax provision                                 (41,953)       (116,895)
                                                  ----------      ----------
    Net income                                   $   127,763     $   272,932
                                                  ==========      ==========


Income per share of common stock, basic          $      0.03     $      0.07
                                                  ==========      ==========
Income per share of common stock, diluted        $      0.04     $      0.07
                                                  ==========      ==========
Weighted average shares outstanding used in
  the basic income per share calculation           4,012,490       3,999,990
                                                  ==========      ==========
Weighted average shares outstanding used in
  the diluted income per share calculation         4,012,490       3,999,990
                                                  ==========      ==========
</TABLE>





   The accompanying notes are an integral part of these financial statements
                                     F-3
<PAGE>
                             BEST COLLATERAL, INC.
                       STATEMENTS OF STOCKHOLDERS' EQUITY
                   for the years ended February 28, 1998 and 1997



<TABLE>
                              Common Stock
                          ---------------------
                                               Additional
                            Number               Paid-in   Retained
                          of Shares  Par Value  Capital    Earnings   Total
                          ---------  --------  ---------   --------  --------
<S>                       <C>        <C>       <C>         <C>       <C>
Balance at February 28,
  1996                    3,999,990  $399,999  $(321,180)  $387,830  $466,649

Issuance of warrants to
  purchase common stock
  (Note 7)                        -         -     63,500          -    63,500

Net Income for the year
  ended February 28, 1997         -         -          -    272,932   272,932
                          ---------  --------  ---------   --------  --------
Balance at February 28,
  1997                    3,999,990   399,999   (257,680)   660,762   803,081
                          ---------  --------  ---------   --------  --------
Stock issued for 
  convertible debt
  (Note 6)                   25,000     2,500     22,500          -    25,000

Net income for the year
  ended February 28, 1998         -         -          -    127,763   127,763
                          ---------  --------  ---------   --------  --------
Balance at February 28,
  1998                    4,024,990  $402,499  $(235,180)  $788,525  $955,844
                          =========  ========  =========   ========  ========
</TABLE>






















   The accompanying notes are an integral part of these financial statements
                                     F-4
<PAGE>
                              BEST COLLATERAL, INC.
                            STATEMENTS OF CASH FLOWS
                  for the years ended February 28, 1998 and 1997

<TABLE>
<CAPTION>
                                                     1998            1997
<S>                                              <C>              <C>     
Cash flows from operating activities:
  Net income                                     $   127,763      $  272,932
  Adjustments to reconcile net income to
      net cash (used in)provided by operating
      activities:
    Depreciation and amortization                    158,211         134,150
    Amortization of excess of fair value of
      net assets acquired over cost                  (32,194)        (96,581)
    Financing costs relating to issuance of
      warrants                                             -          63,500
    Change in assets and liabilities:
      Pawn service charges receivable                (19,042)        (49,473)
      Layaway sales receivable, net                   23,674        (118,912)
      Income taxes payable and receivable, net      (184,406)         96,653
      Inventory                                     (121,649)         68,426
      Prepaid expenses and other assets              (19,438)         40,306
      Accounts payable and accrued expenses           13,122          51,931
      Deferred taxes                                 (11,873)         (1,760)
                                                 -----------      ----------
        Total adjustments                           (193,595)        188,240
Net cash (used in) provided by operating         -----------      ----------
  activities                                         (65,832)        461,172
Cash flows used in investing activities:
  Loans made, including loans renewed             (8,024,493)     (6,445,292)
  Loans repaid, including loans renewed            6,762,502       5,155,064
  Loans forfeited and transferred to inventory       953,976         729,234
  Purchase of property and equipment                (328,030)        (83,267)
  Acquisition of pawn shop assets                    (35,865)       (625,000)
                                                 -----------      ----------
Net cash used in investing activities               (671,910)     (1,269,261)
Cash flows from financing activities:
  Repayment of loans to directors                          -         (34,677)
  Borrowings under bank lines of credit            1,127,000       2,323,338
  Repayments of bank lines of credit                (429,500)       (943,027)
  Repayments of bank term loans                            -        (410,416)
                                                 -----------      ----------
  Net cash provided by financing activities          697,500         935,218
                                                 -----------      ----------
Net (decrease) increase in cash                      (40,242)        127,129
Cash at beginning of year                            179,546          52,417
                                                 -----------      ----------
Cash at end of year                              $   139,304      $  179,546
                                                 ===========      ==========
Supplemental disclosures of cash flow information:
  Cash paid during the period for:
    Interest                                     $   278,151      $  323,570
                                                 ===========      ==========
    Income taxes                                 $   224,500      $    4,200
                                                 ===========      ==========
  Conversion of notes payable to equity          $    25,000               -
                                                 ===========      ==========
</TABLE>
   The accompanying notes are an integral part of these financial statements
                                       F-5
<PAGE>
1.   Organization:

       Best Collateral, Inc. (the Company) is engaged in acquiring, 
establishing and operating pawnshops which lend money on the security of 
pledged tangible personal property.  The Company currently operates nine 
stores in Northern California.

2.   Summary of Significant Accounting Policies:

     Use of Estimates and Assumptions:

       The preparation of financial statements in conformity with generally 
accepted accounting principles 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 periods.  Actual results could differ from those estimates.

     Loans and Income Recognition:

       Pawn loans (loans) are generally made on the pledge of tangible 
personal property for four months plus a ten-day grace period.  Pawn service 
charges on loans, in excess of loan origination costs, are recognized as 
income on a constant yield basis over the expected loan term.

       If the loan is not repaid, the principal amount loaned plus accrued 
pawn service charges become the cost of the forfeited collateral, which is 
transferred into inventory.

       Management limits its credit risk by lending against pledged property 
in amounts less than the estimated resale value of the property.

     Layaways:

       Layaway sales are recorded as sales upon receipt of the initial 
payment.  The sales amount less the initial payment is recorded as a 
receivable and classified as a current asset.  If the receivable is not paid 
as agreed, the layaway defaults and the layaway item reverts back to 
inventory at original cost.  Amounts already paid on the defaulted layaways 
are considered income and are not returned to the buyer.  The Company 
provides an allowance for layaway sales receivable based on management's 
estimate of the amount by which uncollectible receivables would exceed the 
cost of the items reverting back to inventory.

2.   Summary of Significant Accounting Policies, continued:

     Inventory:

      Inventory represents merchandise acquired from forfeited loans, 
merchandise purchased directly from the public and new merchandise purchased 
from vendors.  Inventory is stated at the lower of cost or market.  The 
Company provides an allowance for obsolescence based on management's 
evaluation of the merchandise.

     Property and Equipment:

       Property and equipment are recorded at cost.  Depreciation expense is 
generally provided using the straight-line method over the estimated lives of 
the assets or the related lease terms, whichever is less.  Estimated lives 
are as follows:

                                       F-6
<PAGE>
     Property and Equipment (continued):

       Equipment	5 years
       Furniture and fixtures	5 years	
       Leasehold improvements	4-10 years

       The cost of assets sold or otherwise disposed of and the accumulated 
depreciation thereon are eliminated from the accounts at the time of 
disposition, and any resulting gain or loss is credited or charged to income.

     Noncompete Agreements:

       Noncompete agreements are recorded at the price agreed upon by the 
Company and sellers, and are amortized on the straight-line basis over the 
term of the agreement.

     Net Income Per Common Share:

       In February 1997, the Financial Accounting Standards Board issued 
Statement of Financial Accounting Standards (SFAS) No. 128, Earnings Per 
Share, which establishes standards for computing and presenting earnings per 
share.  Under the new standards, basic earnings per share is computed based 
on the weighted average number of common shares outstanding and excludes any 
potential dilution; diluted earnings per share reflects potential dilution 
from the exercise or conversion of securities into common stock.  SFAS No. 
128 is effective for financial statements issued for periods ending after 
December 15, 1997 and earlier adoption is not permitted.  The financial 
statements presented have been prepared in accordance with SFAS No. 128 and 
earnings per share data for all prior periods presented have been restated to 
conform with current year presentation.

       For the years ended February 28, 1998 and 1997, the diluted net income 
per share calculation excludes effects of outstanding stock options and 
warrants as such inclusion would be antidilutive.

       The following table provides reconciliation of the numerators and 
denominators used in calculating basic and diluted earnings per share for the 
prior two years.
<TABLE>
<S>                                                  <C>          <C>
                                                        1998         1997
Basic:
  Earnings:
    Net income applicable to basic earning
      per share calculation                          $  127,763   $  272,932

  Weighted average number of shares outstanding:
    Common shares                                     4,012,490    3,999,990
                                                     ----------   ----------
      Net income per share - basic                   $     0.03   $     0.07
                                                     ==========   ==========
</TABLE>









                                       F-7
<PAGE>
2.   Summary of Significant Accounting Policies, continued:

     Net Income Per Common Share, continued:
<TABLE>
<S>                                                  <C>          <C>
Diluted:
  Earnings:
    Net income applicable to basic earning
      per share calculation                          $  127,763   $  272,932
    Add:  Interest relating to 10% convertible
          subordinated notes                             24,188       23,450
          Interest relating to 8% convertible
          subordinated notes                              5,550        5,180
                                                     ----------   ----------
    Net income applicable to diluted earning
      per share calculations                         $  157,501   $  301,502
                                                     ==========   ==========

  Weighted average number of shares outstanding:
    Common shares                                     4,012,490    3,999,990
    Additional shares outstanding assuming
      conversion of 10% convertible subordinated
      notes                                             310,000      335,000
    Additional shares outstanding assuming
      conversion of 8% convertible subordinated
      notes                                              92,500       92,500
                                                     ----------   ----------
Weighted average number of shares outstanding,
  as adjusted                                         4,414,990    4,427,490
                                                     ----------   ----------

        Net income per share - diluted               $     0.04   $     0.07
                                                     ==========   ==========
</TABLE>
2.   Summary of Significant Accounting Policies, continued:

     Reclassifications:

       Certain amounts in the 1997 financial statements have been 
reclassified to correspond to the 1998 presentation.  These reclassifications 
did not affect previously reported net income or retained earnings.


     Income Taxes:

       The Company reports income taxes in accordance with Statement of 
Financial Accounting Standards No. 109, which requires an asset and liability 
approach in accounting for income taxes.  Accordingly, deferred tax assets 
and liabilities arise from the differences between the tax basis of an asset 
or liability and its reported amount in the financial statements.  Deferred 
tax amounts are determined by using the tax rates expected to be in effect 
when the taxes will actually be paid or refunds received, as provided under 
currently enacted tax law.  Valuation allowances are established when 
necessary to reduce deferred tax assets to the amount expected to be 
realized.  Income tax expense or benefit is the tax payable or refundable, 
respectively, for the period plus or minus the change during the period in 
deferred tax assets and liabilities.




                                      F-8
<PAGE>
     Fair Value of Financial Instruments:

       Carrying amounts of certain of the Company's financial instruments 
including cash, pawn service charges receivable, pawn loans receivable, 
layaway sales receivable, accounts payable, and other accrued liabilities 
approximate fair value due to their short maturities.

       Pawn loans are outstanding for a relatively short period, generally 
120 days or less.  The rate of pawn service charge bears no relationship to 
interest rate market movements.  Generally, pawn loans may not be resold to 
anyone but a licensed pawnbroker.  For these reasons, management believes 
that the fair value of pawn loans approximates their carrying value.

       Based on borrowing rates currently available to the Company for notes 
and loans with similar terms, the carrying value of its long-term convertible 
notes and bank term loans approximates fair value.

2.   Summary of Significant Accounting Policies, continued:

     Other Recent Pronouncements:

       In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive 
Income.  This statement establishes standards for reporting and presentation 
of comprehensive income and its components, specifically the change in equity 
during a period from transactions and other events and circumstances from 
non-owner sources, in a full set of general purpose financial statements.  
This statement is effective for periods beginning after December 15, 1997.  
Application of this standard is not expected to have a material effect on the 
Company's financial position or results of operations.  

       In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments 
of an Enterprise and Related Information.  SFAS No. 131 establishes standards 
for the way that a public enterprise reports information about operating 
segments in annual financial statements and requires that those enterprises 
report selected information about operating segments in interim financial 
reports issued to shareholders.  SFAS No. 131 is effective for fiscal years 
beginning after December 15, 1997 and requires restatement of earlier periods 
presented.  Application of this standard is not expected to have a material 
effect on the Company's financial position or results of operations.  

       In February 1998, the FASB issued SFAS No. 132, Employers' Disclosure 
about Pensions and Other Postretirement Benefits.  SFAS No. 132 standardizes 
the disclosure requirements for pensions and other postretirement benefits to 
the extent practicable.  SFAS No. 132 is effective for fiscal years beginning 
after December 15, 1997.  Application of this standard is not expected to 
have a material effect on the Company's financial position or results of 
operations.  














                                       F-9
<PAGE>
3.   Property and Equipment:

       Major classifications of property and equipment at February 28, 1998 
and 1997 were as follows:
                                                        1998         1997

       Equipment                                     $  272,649     $184,056
       Furniture and fixtures                           466,191      264,824
       Leasehold improvements                           488,026      433,573
                                                      ---------      -------
                                                      1,226,866      882,453
       Accumulated depreciation                        (612,356)    (457,556)
                                                      ---------      -------
                                                     $  614,510     $424,897
                                                      =========      =======

       Depreciation expense amounted to $154,800 and $130,751 for 1998 and 
1997, respectively.

4.   Bank Loans:
                                                        1998         1997
     Prime plus 1.25%, $4,000,000 revolving
     line of credit available through maturity
     at August 1, 1998, interest due monthly,
     collteralized by all inventory and receivables 
     of the Company, guaranteed by the Company's two
     principle stockholders.                           $2,874,716  $2,177,216
                                                       ==========  ==========

       The bank loan contains covenants, including the requirements of a 
minimum current ratio, a maximum debt to worth ratio and profitable 
operations each quarter.  At February 28, 1998 and February 28, 1997, the 
prime rate was 8.50% and 8.25% per annum, respectively.

5.   Loans from Related Parties:

       Certain stockholders of the Company have made uncollateralized loans 
to the Company in the amount of $349,434 at February 28, 1998 and 1997.  The 
loans are subordinate to the facilities covered under the bank loan 
agreements, are due on demand and bear annual interest at the prime rate 
(8.50% at February 28, 1998).

       Total interest expense related to loans from related parties for the 
years 1998 and 1997 was $29,632 and $28,828, respectively.

6.   Convertible Notes:

       At February 28, 1998, the Company had outstanding a $92,500 
convertible note payable to an employee bearing annual interest at 8%.  This 
note was issued in connection with the acquisition of a pawnshop in fiscal 
1994, prior to the seller becoming an employee of the Company.  During the 
year, this note was renewed and is now due on June 30, 1999.  This note may 
be converted into the Company's common stock for $1.00 per share at the 
employee's option.  

       At February 28, 1998, the Company also had outstanding $235,000 of 
noncurrent convertible notes payable to an employee and directors and $75,000 
of noncurrent convertible notes payable to others, bearing annual interest at 
10%.  Payments of interest only are made in October and April.  Principal of 
$160,000 on these notes is payable on April 30, 2000 and $150,000 on 
April 30, 2002.  These notes may be converted into the Company's common stock 
                                     F-10
<PAGE>
6.   Convertible Notes (continued):

for $1.00 per share at the payee's option.  At the election of the Company, 
$160,000 of these notes may be redeemed after April 30, 1997, and $150,000 of 
these notes after April 30, 1999, at the redemption price of 105% of the 
principal amount plus accrued and unpaid interest.

       In August 1997, notes payable of $25,000 was converted to 25,000 
shares of common stock at a par value of $.10.

       Total interest expense related to convertible notes payable to an 
employee and directors for 1998 and 1997 approximated $38,400 and $40,900, 
respectively.  

       The Company's debt is scheduled to mature as follows:
<TABLE>
<S>         <C>           <C>          <C>            <C>          <C>
                                       Loans from
                                         Related      Convertible
            Fiscal        Bank loans     parties         notes       Total
             1999         $2,874,716     $349,434           -      $3,224,150
             2000                -            -        $ 92,500        95,500
             2001                -            -         160,000       160,000
             2002                -            -             -             -
             2003                -            -         150,000       150,000
                          ----------     --------      --------    ----------
                          $2,874,716     $349,434      $402,500    $3,626,650
                          ==========     ========      ========    ==========
</TABLE>
7.   Stock Options and Warrants:

       In March 1993, in connection with entering into consulting 
arrangements, the Company granted options to purchase shares of the Company's 
common stock to three members of the Board of Directors.  Under the 
Nonqualified Stock Option Agreements, each option provides the holder the 
right to purchase 200,000 shares of common stock at an option price of $1.00 
per share.  The options are exercisable in equal increments after each of the 
first three years in which these board members serve as consultants to the 
Company.  In August 1996, the Company granted an option to purchase 200,000 
shares of common stock at an option price of $1.00 per share to a new 
Director under provisions consistent with the 1993 Option Agreements.  At 
February 28, 1998, options for 666,000 of these shares are vested and 
exercisable.  The options expire ten years after their grant date.

       In June 1993, the Company granted options to purchase shares of the 
Company's common stock to a senior member of management.  The options provide 
the right to purchase 60,000 shares of common stock at an option price of 
$1.00 per share after one year of service, and another 60,000 shares after 
two years of service.   At February 28, 1998, options for these 120,000 
shares are vested and exercisable.  The options expire ten years after their 
grant date.

       In January 1997, the Board of Directors modified the options which 
provide the right to purchase 720,000 shares of common stock by reducing the 
exercise price from $1.00 per share to $0.40 per share.  No compensation cost 
was recognized in the Company's financial statements as the modified exercise 
price approximated the current market value of the stock as of the
remeasurement date.  Additional compensation cost in relation to this
modification has been included in the 1997 pro forma amounts below.
                                     F-11
<PAGE>
7.   Stock Options and Warrants, continued:

       In April 1996, in connection with the negotiation of the terms of
certain credit accommodations to be extended in favor of the Company, the
Company granted warrants to a commercial financial institution which entitles
the financial institution to purchase 125,000 shares at the exercise price of
the lower of $1.00 or the lowest price granted to any other investor ($0.40
per share as at February 28, 1998). The warrants were immediately vested and
exercisable upon grant, and expire ten years after their grant date.  
Financing costs of $63,500 were recognized in 1997 in relation to this grant.


       Information regarding the Company's outstanding stock options and 
warrants at February 28, 1998 is presented below:
<TABLE>
                                              1998                 1997
                                    -------------------     -----------------
                                               Weighted              Weighted
                                                Average               Average
                                               Exercise              Exercise
                                      Shares     Price       Shares    Price
                                     ---------  -------    ---------  -------
<S>                                  <C>          <C>        <C>        <C>
Outstanding at beginning of year     1,045,000    $0.52      720,000    $0.57
Granted                                    -         -       325,000    $0.40
Exercised                                  -         -           -         - 
Forfeited                                  -         -           -         - 
Expired                                    -         -           -         - 
                                     ---------    -----    ---------    -----
Outstanding at end of year           1,045,000    $0.52    1,045,000    $0.57
                                     =========    =====    =========    =====
Options exercisable at year end        911,000               845,000
</TABLE>
       The weighted average exercise price in the above table for 1998 and 
1997 has been adjusted for modifications of the stock options which occurred 
in 1997.

       The following table summarizes information about stock options and 
warrants outstanding at February 28, 1998:
<TABLE>
        Options & warrants outstanding         Options & warrants exercisable
--------------------------------------------   ------------------------------
                                    Weighted                     Weighted
Range of                Remaining   Average         Number       Average
Exercise     Number    Contractual  Exercise       Exercisable    Exercise
 Prices    Outstanding    Life       Price                         Price
--------   ----------- -----------  ---------     ------------   ----------
<S>       <C>            <C>        <C>            <C>           <C>
$0.40       520,000      5 years    $0.40          520,000       $0.40
$0.40       200,000      9 years    $0.40           66,000       $0.40
$0.40       125,000      9 years    $0.40          125,000       $0.40
$1.00       200,000      5 years    $1.00          200,000       $1.00
          ---------                                -------
          1,045,000                                911,000
          =========                                =======
</TABLE>
       The Company adopted the disclosure provisions of SFAS 123, Accounting 
for Stock Based Compensation, in 1997 and has applied APB Opinion 25 and 
related Interpretations in accounting for its nonqualified stock options.  
Accordingly, no compensation cost has been recognized for its stock options.  
Had compensation cost for the Company's stock-based compensation been 

                                      F-12
<PAGE>
7.   Stock Options and Warrants, continued:

determined based on the fair value at the grant dates as calculated in 
accordance with SFAS 123, the Company's net income and basic earnings per 
share for the years ended February 28, 1998 and February 28, 1997 would have 
been reduced to the pro forma amounts indicated below:

7.   Stock Options and Warrants, continued:
<TABLE>
                                    February 28, 1998       February 28, 1997
                                   ------------------      ------------------
                                             Earning                 Earnings
                                      Net      per            Net       Per
                                    Income    share         Income     share
                                    --------   -----         --------  ------
<S>                                 <C>        <C>           <C>        <C>
    As reported                     $127,763   $0.03         $272,932   $0.07

    Pro forma                       $107,587   $0.03         $220,605   $0.06
</TABLE>
       The Black-Scholes option pricing model is a mathematical model by 
which a fair value of equity instruments at a specified point in time is 
determined, taking into account the time value of money, the expected 
volatility of the underlying stock price and other variables.

       The fair value of each of the Company's stock options and warrants is 
estimated on the grant date using a modified Black-Scholes option pricing 
model with the following weighted average assumptions:  an expected life of 3 
years, expected volatility of 40%, a dividend yield of 0%, and a risk free 
interest rate of 6.14%.  Using this model, the weighted average fair value of 
options and warrants granted or repriced during 1997 was $0.26 per share.  
Other option valuation models and the use of other assumptions could produce 
differing option values.  This fair value is not necessarily representative 
of the underlying stock value.

       The effect on the reported net income and earnings per share amounts 
in the year ended February 28, 1998, is not considered representative of the 
effects of the statement on reported net income and earnings per share in 
future years.

8.   Income Taxes:

       The provision (benefit) for income taxes for the years ended February 
28, 1998 and 1997 is comprised of the following:
<TABLE>
<S>                                                     <C>         <C>
                                                         1998        1997
       Current:
         Federal                                        $ 38,948    $ 93,025
         State                                            14,878      25,630
                                                        --------    --------
                                                          53,826     118,655
                                                        --------    --------
       Deferred:
         Federal                                          (9,307)     (1,150)
         State                                            (2,566)       (610)
                                                         (11,873)     (1,760)
                                                        --------    --------
            Total provision                             $ 41,953    $116,895
                                                        ========    ========
</TABLE?
                                       F-13
<PAGE>
8.   Income Taxes, continued:

       The primary components of temporary differences which give rise to 
deferred tax assets (liabilities) at February 28, 1998 and 1997 are as 
follows:

</TABLE>
<TABLE>
<S>                                                     <C>        <C>
                                                         1998       1997
    Current deferrred tax assets (liabilities):
      Reserve - layaway sales receivable                $  5,676   $ 93,025
      Reserve - inventory valuation                       17,048      6,495
      Accrued vacation                                    23,686      4,809
      Financing costs related to warrants                 27,203          -
      Pawn service charges receivable                   (147,877)   (133,294)
      Other                                                8,403       4,431
                                                        --------   ---------
        Net deferred tax liabilty, current              $(65,861)  $(107,645)
                                                        ========   =========

    Noncurrent deferred tax assets (liabilities):
      Depreciation and amortization                     $  6,150   $  11,962
      Deferred financing costs                             4,168      27,496
      Shareholder interest                                59,109      53,691
                                                        --------   ---------
                                                          69,427      93,149
      Valuation alowance                                 (59,109)    (53,691)
                                                        --------   ---------
        Net deferred tax asset, noncurrent              $ 10,318   $  39,458
                                                        ========   =========
</TABLE>
       Management has determined that the Company will be able to realize the 
tax benefit of the net deferred tax asset based on the future reversal of 
taxable temporary differences, except for shareholder interest.

       The change in valuation allowance for the years ended February 28, 
1998 and 1997 was $5,418 and $5,774, respectively.

       The Company's effective tax rate differs from the statutory federal 
rate of 34% as follows:
<TABLE>
<S>                                                    <C>          <C>
                                                         1998        1997
       Tax at statutory federal rate                   $ 56,324     $132,541
       State taxes                                        7,957       15,183
       Permanent differences                             (9,957)     (32,454)
       Other                                            (12,731)       1,625
                                                       --------     --------
                                                       $ 41,953     $116,895
</TABLE>
9.   Commitments:

       The Company leases its facilities and automobiles under operating 
leases with terms expiring in fiscal years 1999 through 2007.  The two 
principal stockholders of the Company are the lessor for one of the 
facilities.  The Company subleases to independent parties a portion of its 
leased properties under noncancelable subleases.  Five of the facilities and 
one of the subleases have five-year renewal options.

       At February 28, 1998, future minimum payments and sublease income 
under these lease agreements are as follows:

                                    F-14
<PAGE>
9.   Commitments (continued):

       Total rent expense and sublease income for the years ended February 
28, 1998 and 1997 are summarized 
<TABLE>
<S>                                                     <C>         <C>
                                                          1998        1997
       Rent expense                    
         Related party                                  $ 72,000    $ 72,000
         Third parties                                   238,871     210,445
                                                        --------    --------
                                                         310,871     282,445
       Sublease income                                   (88,620)    (87,176)
                                                        --------    --------
           Net rent expense                              222,251     195,269
                                                        ========    ========
</TABLE>
10.  Profit Sharing Plan:

       The Company established a Defined Contribution Plan (the Plan) 
effective for the year ended on February 28, 1997.  The Plan is available to 
all eligible employees, except those employees covered by a collective 
bargaining agreement who have elected to be excluded from the Plan. Employees 
are allowed to contribute up to 25% of their compensation to the Plan, not to 
exceed $10,000.  The employer matches 25% of contributions.

       In addition, the Company offers profit sharing incentives to Plan 
participants.  The Plan provides for contributions to be made from the 
Company's profit, at the discretion of the Board of Directors, not to exceed 
15% of total covered compensation.  Contribution expense related to the Plan 
amounted to $50,091 and $68,394 for the years ended February 28, 1998 and 
1997, respectively.

11.  Acquitisions:

       During the year ended February 28, 1998, the Company acquired 
substantially all the assets of a pawnshop for $35,865.  

       On May 1, 1996, the Company acquired substantially all the assets of a 
pawnshop for $625,000, funded through an increase in its primary line of 
credit.  The significant assets acquired include pawn loans receivable, 
inventory and furniture and fixtures.  This acquisition was recorded using 
the purchase method.

11.  Acquitisions, continued:

       The fair value of the acquired assets exceeded the purchase price.  A 
portion of the excess of the fair value of net assets acquired over cost has 
been applied to reduce the amounts assigned to acquired noncurrent assets.  
The remaining deferred credit, amounting to $128,775, represents the 
unallocated portion of the excess of fair value of net assets acquired over 
cost and is being amortized on the straight-line method over twelve months.  
At February 28, 1997, the unamortized balance amounted to $32,194.

       Unaudited pro forma financial information, as if the transaction 
occurred at the beginning of the fiscal years presented, is not available.





                                       F-15
<PAGE>
12.  Fourth Quarter Adjustment:

       During the fourth quarter, the Company recorded an adjustment of 
approximately $36,000 to reduce its income tax expense for the year in order 
to apply an effective tax rate of 24.7% instead of the 37.9% used for the 
nine months ended November 30, 1997.  This adjustment is mainly due to the 
effect of the graduated federal tax rate.  Had the Company used a 24.7% 
effective tax rate throughout the year, its reported net income would have 
been $79,516 ($0.02 per share), $39,877 ($0.01 per share) and $35,740 ($0.01 
per share) instead of $73,299 ($0.02 per share), $31,558 ($0.01 per share) 
and $23,164 ($0.01 per share) for the first, second and third quarters of the 
year, respectively.

















































                                       F-16