-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LhxY9U2quhT/aQr+3D3qaQxgEGuxnGggbGhX86u4OujWp8pGW6uCoFSHQieSe0e0 pIrVg6NTDpKi9yoML3Kagw== 0001000045-96-000014.txt : 19961115 0001000045-96-000014.hdr.sgml : 19961115 ACCESSION NUMBER: 0001000045-96-000014 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961113 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NICHOLAS FINANCIAL INC CENTRAL INDEX KEY: 0001000045 STANDARD INDUSTRIAL CLASSIFICATION: SHORT-TERM BUSINESS CREDIT INSTITUTIONS [6153] IRS NUMBER: 87363354 STATE OF INCORPORATION: FL FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-26680 FILM NUMBER: 96661790 BUSINESS ADDRESS: STREET 1: 2454 MCMILLEN BOOTH RD STREET 2: BLDG C CITY: CLEARWATER STATE: FL ZIP: 34619 BUSINESS PHONE: 8137260763 MAIL ADDRESS: STREET 1: 2454 MCMULLEN BOOTH ROAD STREET 2: BLDG C SUITE 501B CITY: CLEARWATER STATE: FL ZIP: 34619 10QSB 1 QUARTERLY FILING 10-QSB UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-QSB x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934 FOR THE PERIOD ENDED SEPTEMBER 30, 1996 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: 0-26680 NICHOLAS FINANCIAL, INC. (Exact name of registrant as specified in its Charter) British Columbia, Canada 8736-3354 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 2454 McMullen Booth Road, Building C Clearwater, Florida 34619 (Address of Principal Executive Offices) (Zip Code) (813) 726-0763 (Registrant's telephone number, Including area code) Not applicable (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 and 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No . As of November 13th, 1996 there were 5,885,739 shares of common stock outstanding This Form 10-QSB consists of 17 pages. Exhibits are indexed at page 16. Nicholas Financial, Inc. Form 10-QSB Index Part I. Financial Information Page Item 1. Financial Statements (Unaudited) Condensed Consolidated Balance Sheet as of September 30, 1996 3 Condensed Consolidated Statements of Income for the three and six months ended September 30, 1996 and 1995 4 Condensed Consolidated Statements of Cash Flows for the six months ended September 30, 1996 and 1995 5 Notes to the Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of the Financial Condition and Results of Operations 8 Part II. Other Information Item 1. Legal Proceedings 13 Item 2. Changes in Securities 13 Item 3. Defaults upon Senior Securities 13 Item 4. Submission of Matters to a Vote of Security Holders 13 Item 5. Other Information 13 Item 6. Exhibits and Reports on Form 8-K 13 Signatures 14 Index of Exhibits 15 Exhibit 1.1- Statement Regarding Computation of Per Share Earnings 16 Nicholas Financial, Inc. Condensed Consolidated Balance Sheet (Unaudited)
September 30, 1996 Assets Cash $ 128,447 Accounts receivable 22,573 Prepaid expenses and other assets 429,974 Finance receivables, net 20,457,484 Property and equipment, net 189,259 Intangible assets 843 Deferred loan costs 12,175 Deferred income taxes 502,828 Total assets $21,743,583 Liabilities Line of credit $14,655,594 Notes payable - related party 2,256,095 Deferred revenues 210,600 Accounts payable 493,042 Other liabilities 346,319 Income taxes payable 37,918 17,999,568 Shareholders' equity Preferred stock, no par: 5,000,000 shares - authorized; none issued and outstanding Common stock, no par: 20,000,000 shares 1,771,026 authorized; 5,885,739 shares issued and outstanding Retained earnings 1,972,989 3,744,015 Total liabilities and shareholders' equity $21,743,583
See accompanying notes. Nicholas Financial, Inc. Condensed Consolidated Statements of Income (Unaudited)
Three months endedSix months ended September 30 September 30 1996 1995 1996 1995 Revenue: Interest income on finance receivables $1,499,907 $1,328,624 $2,847,960 $2,435,630 Sales 122,969 138,850 236,680 290,108 Interest income on term deposits and lease receivables 621 557 633 2,680 1,623,497 1,468,031 3,085,273 2,728,418 Expenses: Cost of sales 25,091 30,760 47,556 65,229 Marketing 61,827 47,234 121,415 93,480 Administrative 575,716 532,341 1,123,463 1,023,308 Provision for credit losses 131,808 78,978 186,121 119,764 Deferred compensation expense - (194,311) 29,947 128,828 Depreciation and amortization 21,422 23,186 42,187 52,341 Interest expense 423,972 377,252 818,602 708,882 1,239,836 895,440 2,369,291 2,191,832 Operating income before income taxes 383,661 572,591 715,981 536,586 Income tax expense (benefit): Current 150,052 82,023 289,835 340,583 Deferred (3,110) 141,099 (17,029) (131,498) 146,942 223,122 272,806 209,085 Net Income $236,719 $349,469 $443,175 $327,501 Primary Earnings per Share $0.04 $0.06 $0.07 $0.06 Fully Diluted Earnings per Share $0.04 $0.06 $0.07 $0.05 Weighted average number of common and common equivalent shares - Primary 6,322,458 6,124,537 6,325,194 6,124,318 Weighted average number of common and common equivalent shares - Fully Diluted 6,322,458 6,271,230 6,325,194 6,271,011
See accompanying notes. Nicholas Financial, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited)
Six months ended September 30 1996 1995 Operating activities Net income $443,175 $327,501 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation of property and equipment 40,500 43,500 Provision for credit losses 186,121 119,764 Amortization of intangible assets and deferred loan costs 9,138 8,841 Deferred compensation expense 29,947 128,828 Deferred income taxes (17,029) (131,498) Changes in operating assets and liabilities: Accounts receivable 2,581 8,195 Prepaid expenses and other assets (159,274) (274,867) Deferred revenues 21,706 50,742 Accounts payable (41,496) (81,680) Other liabilities 795 (4,401) Income taxes payable (84,164) 15,583 Net cash provided by operating activities 432,000 210,508 Investing activities Increase in finance receivables, net of principal collected (2,316,821) (4,745,911) Purchase of property and equipment (49,342) (34,650) Increase in deferred loan costs - (14,261) Net cash used by investing activities (2,366,163) (4,794,822) Financing activities Net proceeds from notes payable-related party and line of credit borrowings 1,554,791 4,316,339 Proceeds from sale of the Company's common stock 17,028 50,650 Net cash provided by financing activities 1,571,819 4,366,989 Net decrease in cash (362,344) (217,325) Cash, beginning of period 490,791 283,342 Cash, end of period $128,447 $66,017
See accompanying notes. Nicholas Financial, Inc. Notes to the Condensed Consolidated Financial Statements (Unaudited) September 30, 1996 1. Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB pursuant to the Securities and Exchange Act of 1934, as amended in Article 10 of Regulation SB, as amended. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month and six month periods ended September 30, 1996 are not necessarily indicative of the results that may be expected for the year ended March 31, 1997. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended March 31, 1996. 2. Earnings Per Share Net Income per share is based upon the weighted average number of shares outstanding, adjusted for the dilutive effect of stock options and warrants. Supplementary earnings per share data described in APB 15 is not materially different from the net income per share which is presented. 3. Finance Receivables Finance receivables consist of consumer automobile finance installment contracts and are detailed as follows: Finance receivables, gross contract $30,617,153 Less: Unearned interest (6,815,947) 23,801,206 Nonrefundable dealer reserves (2,773,722) Allowance for credit losses (570,000) Finance receivables, net $20,457,484
The terms of the receivables range from 6 to 60 months and bear a weighted average effective interest rate of 25%. 4. Line of Credit The Company has a $25,000,000 line of credit facility (the Line) with BA Business Credit, Inc. which expires on June 3, 1998. Borrowings under the Line bear interest at the Bank of America prime rate plus 1.25% and 1.00%, when the outstanding balance exceeds $10,000,000 and $15,000,000, respectively (9.5% at September 30, 1996). If the outstanding balance falls below $10,000,000 the Line bears interest at the Bank of America prime rate plus 1.75%. Pledged as collateral for this credit facility are all of the assets of Nicholas Financial, Inc. and the unconditional guarantee of it's subsidiaries, Canadian parent and Peter L. Vosotas the majority shareholder. 5. Notes Payable - Related Party Notes payable consisted of the following: Notes payable, unsecured, with interest at varying rates up to 12%, quarterly and semiannual interest payments due through June 1998, at which time the entire principal balance and unpaid interest is due, subordinated to the Line. The notes are convertible at the option of the holder, into common shares at prices from $1.75 to $2.00 per share. $1,800,000 Note payable, unsecured, interest at 12%, quarterly interest due through April 2000, at which time entire balance and unpaid interest is due, subordinated to the Line. The note is convertible at $2.75 per share. 200,000 Notes payable, unsecured interest at 12%, principal and interest due through May 1998. 233,341 Note payable, unsecured, interest at 12%, quarterly interest due through August 1997, at which time the entire principal balance is due. 22,754 $2,256,095
6. Impact of New Accounting Pronouncement Statement of Financial Accounting Standards No 123, "Accounting for Stock-Based Compensation " ("SFAS 123"), effective for the company in fiscal 1997, provides an alternative method for accounting for stock-based compensation and requires certain disclosures regarding the fair value of stock-based compensation. The Company does not expect to adopt the alternative method of accounting for stock-based compensation and, accordingly, the adoption of SFAS 123 will not have any effect on the Company's financial position or results of operations. The Company expects to expand its disclosure of stock-based compensation plans to include pro forma fair value information for grants in it's fiscal 1997 Annual Report. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Introduction The Company is a Florida-based consumer finance company, focused primarily on the purchase of Contracts from automobile dealers and the origination of small direct consumer loans. The Contracts are for the purchase of used cars and light trucks by borrowers who do not meet the credit standards of traditional lenders. The Company's small direct consumer loans are made primarily to borrowers under the Contracts. As of September 30, 1996, Contracts accounted for approximately 97.61% of the Company's aggregate loan portfolio and small direct consumer loans accounted for approximately 2.39%. As of September 30, 1996 the Company operated ten branch locations in the state of Florida and on October 14, 1996 the Company opened its first branch location in the State of Georgia.
Three Months Ended September 30, Six Months Ended September 30, 1996 1995 1996 1995 Average Net Finance Receivables (1) $23,564,289 $20,064,300 $22,948,376 $19,034,402 Average Indebtedness (2) 16,621,774 14,213,469 16,050,685 13,253,649 Total Revenues 1,499,907 1,328,624 2,847,960 2,435,630 Interest Expense 423,972 377,252 818,602 708,882 Net Interest Income 1,075,935 951,372 2,029,358 1,726,748 Gross Portfolio Yield (3) 25.46% 26.49% 24.82% 25.59% Average Cost of Borrowed Funds (2) 10.20% 10.62% 10.20% 10.70% Net Interest Spread (4) 15.26% 15.87% 14.62% 14.89% Net Portfolio Yield (3) 18.26% 18.97% 17.69% 18.14% Net Charge-Off Percentage (5) 12.19% 10.31% 11.52% 8.01%
_________________ (1) Average net finance receivables represents the average of net finance receivables throughout the year. Net finance receivables represents gross finance receivables less any unearned finance charges related to those receivables. (2) Average indebtedness represents the average outstanding borrowings under the Line of Credit and notes payable- related party. Average cost of borrowed funds represents interest expense as a percentage of average indebtedness. (3) Gross portfolio yield represents total revenues as a percentage of average finance receivables. Net portfolio yield represents net interest income as a percentage of average finance receivables. (4) Net interest spread represents the gross portfolio yield less the average cost of borrowed funds. (5) Net charge-off percentage represents net charge-offs divided by average net finance receivables outstanding during the period. Three months ended September 30, 1996 compared to three months ended September 30, 1995 Revenue increased 10.59% to $1,623,497 for the period ended September 30, 1996, from $1,468,031 for the period ended September 30, 1995. This increase is attributed to the increase in net finance receivables. The gross portfolio yield decreased to 25.46% for the period ended September 30, 1996 from 26.49% for the period ended September 30, 1995. Operating expenses, excluding provision for credit losses, stock compensation expense and interest expense, increased to $684,056 for the three month period ended September 30, 1996 from $633,521 for the three month period ended September 30, 1995. This increase is attributed to the opening of one additional branch and the increase in transaction volume at existing branches. Interest expense increased to $423,972 for the period ended September 30, 1996 as compared to $377,252 for the period ended September 30, 1995. This increase is attributed to the increase in average outstanding borrowings during the comparable periods. The average cost of funds borrowed by the Company was 10.20% for the period ended September 30, 1996 as compared to 10.62% for the period ended September 30, 1995. Provision for credit losses increased to $131,808 for the period ended September 30, 1996 as compared to $78,978 for the period ended September 30, 1995. The increase is attributed to the increased net charge-off percentage from 10.31% for the three months ended September 30, 1995 to 12.19% for the three months ended September 30, 1996. Net income for the three months ended September 30, 1996 decreased to $236,719 compared to $349,469 for the comparable period ended September 30, 1995. The decrease in net income is due to compensation expense recognized in previous periods and reversed due to the cancellation of a warrant in the quarter ended September 30, 1995. Net income, excluding the effect of compensation expense, would have been $230,875 for the three month period ended September 30, 1995 as compared to $236,719 for the three month period ended September 30, 1996. Six months ended September 30, 1996 compared to six months ended September 30, 1995 Revenue increased 13.08% to $3,085,273 for the period ended September 30, 1996, from $2,728,418 for the period ended September 30, 1995. This increase is attributed to the increase in net finance receivables. The gross portfolio yield decreased to 24.82% for the period ended September 30, 1996 from 25.59% for the period ended September 30, 1995. Operating expenses, excluding provision for credit losses, stock compensation expense and interest expense, increased to $1,334,621 for the three month period ended September 30, 1996 from $1,234,358 for the three month period ended September 30, 1995. This increase is attributed to the opening of one additional branch and the increase in transaction volume at existing branches. Interest expense increased to $818,602 for the period ended September 30, 1996 as compared to $708,882 for the period ended September 30, 1995. This increase is attributed to the increase in average outstanding borrowings during the comparable periods. The average cost of funds borrowed by the Company was 10.20% for the period ended September 30, 1996 as compared to 10.70% for the period ended September 30, 1995. Provision for credit losses increased to $186,121 for the period ended September 30, 1996 as compared to $119,764 for the period ended September 30, 1995. This increase is attributed to the increased net charge-off percentage from 8.01% for the three months ended September 30, 1995 to 11.52% for the three months ended September 30, 1995. Net income for the six months ended September 30, 1996 increased to $443,175 compared to $327,501 for the comparable period ended September 30, 1995. The six month period ended September 30, 1995 included non-cash stock compensation expense of $128,828 ($78,629 after income taxes) related to certain stock options and warrants previously granted to key executives and employees. The comparable six month period ended September 30, 1996 included $29,947 of stock compensation expense ($18,603 after income taxes). Net income excluding non-cash stock compensation expense would have been $461,780 compared to $406,130 an increase of 14% for the six month periods ended September 30, 1996 and 1995, respectively. Analysis of Credit Losses Because of the nature of the borrowers under the Contracts and its direct consumer loan program, the Company considers the establishment of adequate reserves for credit losses to be imperative. The Company batches its Contracts into pools for purposes of establishing reserves for losses. Each such pool consists of the loans processed by a Company branch office during a fiscal quarter. The average pool consists of 75 Contracts with an aggregate initial principal amount of approximately $521,700. As of September 30, 1996, the Company had 102 active pools. The effective APR for these pools ranges from 20% to 30%, and the discount averages between 10% and 12%. Loan pools are analyzed monthly and the effective return for each pool is recomputed, if necessary, based upon changes during the month. The Company pools Contracts according to branch location because the branches purchase Contracts in different markets located in the State of Florida. All Contracts purchased by a branch during a fiscal quarter comprise a pool. This method of pooling by branch and quarter allows the Company to evaluate the different markets where the branches operate. The pools also allow the Company to evaluate the different levels of customer income, stability, credit history, and the types of automobiles purchased in each market. A pool retains an amount equal to 100% of the discount into a non-refundable dealer reserve. In situations where the discount is determined to be insufficient to absorb all of the potential losses associated with the pool, unearned income will be added to reserves until total reserves have reached the appropriate level. If the non-refundable reserve and the unearned revenue reserve are exhausted for a pool which is not fully liquidated, then a charge to income will be used to reestablish the reserves. If a pool is fully liquidated and has excess reserves, the excess reserves are credited to income. In analyzing a pool, the Company considers the performance of prior pools originated by the branch office, the performance of prior Contracts purchased from the dealers whose Contracts are included in the current pool, the credit rating of the borrowers under the Contracts in the pool, and current market and economic conditions. Each pool is analyzed monthly to determine if the loss reserves are adequate, and adjustments are made if they are determined to be necessary. As of September 30, 1996, the Company had established reserves for losses on Contracts of $3,320,666 , or 14.32% of net outstanding receivables. Of the 20% of Contracts that are never fully paid the Company has experienced a historical charge-off rate of 9.97%, 9.74% and 3.50% of average net receivables respectively, for the years ended March 31, 1996, 1995, and 1994. The experience of the Company is that the longer the period of time during which the borrower has made payments under his Contract, the less likelihood there is of a default. The Company utilizes a pooling arrangement similar to that used in connection with Contracts in establishing reserves for direct loans initiated. As of September 30, 1996, the Company had experienced immaterial losses under its direct consumer loan program; however, the program was implemented in April 1995 and these results cannot be considered representative of results that will be experienced in the future. As of September 30, 1996, the Company had established reserves for losses on direct consumer loans of $23,055 or 3.75% of outstanding receivables under the loans. The Company defines any account that is more than ten days past due as "delinquent." The following tables present certain information regarding the delinquency rates experienced by the Company with respect to Contracts and under its direct consumer loan program:
Six Months Ended Year Ended September 30, 1996 March 31,1996 Contracts Gross Amount Outstanding $29,884,667 $27,250,451
Dollar Dollar Delinquencies Amount Percent* Amount Percent* 30 to 59 days $1,533,922 5.13% $1,346,150 4.94% 60 to 89 days 252,658 0.85% 326,542 1.20% 90 + days 104,019 0.35% 44,746 0.16% Total Delinquencies $1,890,599 $1,717,438 *Total Delinquencies as percent of outstanding balance 6.33% 6.30%
Direct Loans Gross Amount Outstanding $732,486 $559,123
Delinquencies 30 to 59 days $17,711 2.42%$ 321 0.00% 60 to 89 days 0 0.00% 3,197 0.57% 90 + days 0 0.00% 0 0.00% Total Delinquencies $17,711 $3,518 *Total Delinquencies as a percent of outstanding balance 2.42% 0.57%
Income Taxes The provision for income taxes for the three months ended September 30, 1996 decreased to $146,942 from $223,122 for the three month period ended September 30, 1995. The Company's effective tax rate decreased from 38.97% for the three month period ended September 30, 1995 to 38.30% for the three month period ended September 30, 1996. Liquidity and Capital Resources The Company's cash flows for the six months ended September 30, 1996 and September 30, 1995 are summarized as follows:
Six months endedSix months ended September 30, September 30, 1996 1995 Cash provided by (used in): Operating Activities - $ 432,000 $ 210,508 Investing Activities - (primarily purchase of Contracts) (2,366,163) (4,794,822) Financing Activities 1,571,819 4,366,989 Net (decrease) in cash (362,344) (217,325)
The Company's primary use of working capital during the six months ended September 30, 1996 was the funding of the purchase of Contracts. The Contracts were financed partially through borrowings on the BankAmerica Line of Credit. The Line of Credit is secured primarily by Contracts and provides the Company with financing to increase the number of Contracts for its loan portfolio. Under the Line of Credit, the Company is subject to customary covenants such as the maintenance of certain financial ratios and minimum net worth requirements, and certain restrictions on the payment of cash dividends on the Common Stock and a requirement to maintain minimum subordinated indebtedness of $400,000. Since inception, the Company has funded operations from the following sources: borrowings under the Line of Credit, proceeds from the issuance of subordinated debt, funds provided from payments received under Contracts, and cash flows from operating activities. The decrease in net cash flows used in investing activities during the six months ended September 30, 1996 was primarily attributable to a decrease in the amount of contracts purchased as compared to the period ended September 30, 1995. In May 1996, through a series of negotiations, the Company increased its Line of Credit to $25 million from $20 million. The Company was also able to increase the percentage of Contracts that qualify for funding and reduce the amount of subordinated debt required by BankAmerica. The Company's Registration Statement on Form SB-2 under the Securities Act of 1933 was declared effective on October 1, 1996. On October 4, 1996 the Company and its underwriters Interstate/Johnson Lane agreed to an initial closing of 951,647 shares at $2.125 per share. The gross proceeds were $2,022,250 and the net proceeds were $1,762,785. On October 31, 1996 the Company agreed to a second and final closing of 150,558 shares at $2.125 per share. The gross proceeds were $319,936 and the net proceeds were approximately $273,000. The Company intends to use the proceeds from the offering to repay certain subordinated debt and outstanding indebtedness under its line of credit, and the balance to general corporate purposes, including future branch expansion. The Company will make additional capital expenditures as it opens new branches and increases the number of employees. The Company believes the cash flow from operations, current borrowing capacity under the Line of Credit and other available financing alternatives will be adequate to meet anticipated needs for working capital and capital expenditures, but no assurance can be given that the Line of Credit will be increased or that alternative sources of capital will be available on terms acceptable to permit the Company to finance future expansion. Future Expansion The Company intends to continue its expansion through the purchase of additional Contracts and the expansion of its direct consumer loan program. In order to increase the size of its loan portfolio of Contracts, it will be necessary for the Company to open additional branch offices and increase the size of its Line of Credit, either with BankAmerica or another lender. The Company believes that opportunity for growth continues to exist in the States of Florida and Georgia and for the foreseeable future intends generally to concentrate its expansion activities primarily there. The Company has identified Pensacola, Jacksonville and Boca Raton as areas in Florida and Macon, Valdosta, and Atlanta as areas in Georgia where it may open additional branch offices during fiscal 1997. Forward-Looking Information This 10-QSB contains various forward-looking statements and information that are based on management's beliefs and assumptions, as well as information currently available to management. When used in this document, the words "anticipate," "estimate," "expect," and similar expressions are intended to identify forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. Such statements are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or expected. Among the key factors that may have a direct bearing on the Company's operating results are fluctuations in the economy, the degree and nature of competition, demand for consumer financing in the markets served by the Company, the Company's products and services, increases in the default rates experienced on Contracts, adverse regulatory changes in the Company's existing and future markets, the Company's ability to expand its business, including its ability to complete acquisitions and integrate the operations of acquired businesses, to recruit and retain qualified employees, to expand into new markets and to maintain profit margins in the face of increased pricing competition. Part II - Other Information Item 1. Legal Proceedings - None Item 2. Changes in Securities - None Item 3. Defaults upon Senior Securities - None Item 4. Submission of Matters to a Vote of Security Holders -None Item 5. Other Information - None Item 6. (a) Exhibits - See exhibit index following the signature page. (b) Reports on Form 8-K - No reports on From 8-K were filed during the fiscal quarter ending September 30, 1996 SIGNATURES In accordance with the requirements of the Securities Act of 1934, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form 10-QSB and authorized this Report to be signed on its behalf by the undersigned, in the City of Clearwater, State of Florida, on November 13, 1996. NICHOLAS FINANCIAL, INC. (Registrant) Date: November 13, 1996 /s/ Peter L. Vosotas Peter L. Vosotas Chairman, President, Chief Executive Officer (Principal Executive Officer) Date: November 13, 1996 /s/ Ralph T. Finkenbrink Ralph T. Finkenbrink (Principal Financial Officer and Accounting Officer) EXHIBIT INDEX Exhibit Document 1.1 Schedule for Computation of Earnings Per Share Nicholas Financial, Inc. Exhibit 1.1 Schedule for Computation of Earnings Per Share (Unaudited)
Three Months Six Months Ended September 30, Ended September 30, 1996 1995 1996 1995 Net income 236,719 349,469 443,175 327,501 Weighted average number of common shares outstanding during the period 5,872,648 5,795,005 5,865,384 5,794,786 Add: Primary common equivalent shares determined using the "treasury stock" method representing shares issuable upon exercise of stock options and warrants 459,810 329,532 459,810 329,532 Weighted average number of shares used in Primary EPS calculation 6,332,458 6,124,537 6,325,194 6,124,318 Add: Fully Diluted common equivalent shares determined using the "treasury stock" method representing shares issuable upon exercise of stock options and warrants 459,810 476,225 459,810 476,225 Weighted average number of shares used in Fully Diluted EPS calculation 6,332,458 6,271,230 6,325,194 6,271,011 Primary Earnings Per Share $0.04 $0.06 $0.07 $0.06 Fully Diluted Earnings Per Share $0.04 $0.06 $0.07 $0.05
[ARTICLE] 5 [LEGEND] This Schedule Contains Summary Information Extracted From The Condensed Consolidated Balance Sheet At September 30, 1996 And The Condensed Consolidated Statements Of Income For The Three Months Ended September 30,1996 And September 30, 1995 And Is Qualified In Its Entirety By Reference To Such Financial Statements. [PERIOD-TYPE] 3-MOS 3-MOS [FISCAL-YEAR-END] MAR-31-1997 MAR-31-1996 [PERIOD-END] SEP-30-1996 SEP-30-1995 [CASH] 128,447 0 [SECURITIES] 0 0 [RECEIVABLES] 20,480,057 0 [ALLOWANCES] 3,343,722 0 [INVENTORY] 0 0 [CURRENT-ASSETS] 0 0 [PP&E] 488,109 0 [DEPRECIATION] 298,850 0 [TOTAL-ASSETS] 21,743,583 0 [CURRENT-LIABILITIES] 17,999,568 0 [BONDS] 0 0 [PREFERRED-MANDATORY] 0 0 [PREFERRED] 0 0 [COMMON] 1,771,026 0 [OTHER-SE] 1,972,989 0 [TOTAL-LIABILITY-AND-EQUITY] 21,743,583 0 [SALES] 122,969 138,850 [TOTAL-REVENUES] 1,623,497 1,468,031 [CGS] 25,091 30,760 [TOTAL-COSTS] 580,871 486,990 [OTHER-EXPENSES] 658,965 408,450 [LOSS-PROVISION] 131,808 78,978 [INTEREST-EXPENSE] 423,972 377,252 [INCOME-PRETAX] 383,661 572,591 [INCOME-TAX] 146,942 223,122 [INCOME-CONTINUING] 236,719 349,469 [DISCONTINUED] 0 0 [EXTRAORDINARY] 0 0 [CHANGES] 0 0 [NET-INCOME] 236,719 349,469 [EPS-PRIMARY] .04 .06 [EPS-DILUTED] .04 .06 [RECEIVABLES] ARE PRESENTED NET OF UNEARNED FINANCE CHARGES, NON-REFUNDABLE DEALER RESERVE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS. [ALLOWANCES] ARE PRESENTED AS TOTAL RESERVES, COMPRISED OF NON-REFUNDABLE DEALER RESERVE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS.
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