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.
<PAGE>
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
<PAGE>
Nicholas Financial, Inc.
Condensed Consolidated Balance Sheet
(Unaudited)
<TABLE>
<CAPTION>
September 30,
1996
<S>
Assets <C>
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
</TABLE>
See accompanying notes.
<PAGE>
Nicholas Financial, Inc.
Condensed Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Three months endedSix months ended
September 30 September 30
1996 1995 1996 1995
<S> <C> <C> <C> <C>
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
</TABLE>
See accompanying notes.
<PAGE>
Nicholas Financial, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six months ended September 30
1996 1995
<S> <C> <C>
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
</TABLE>
See accompanying notes.
<PAGE>
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:
<TABLE>
<S> <C>
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
</TABLE>
The terms of the receivables range from 6 to 60 months and bear a
weighted average effective interest rate of 25%.
<PAGE>
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:
<TABLE>
<S> <C>
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
</TABLE>
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.
<PAGE>
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.
<TABLE>
<CAPTION>
Three Months Ended September 30, Six Months Ended September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
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%
</TABLE>
_________________
(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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
September 30, 1996 March 31,1996
<S> <C> <C>
Contracts
Gross Amount Outstanding $29,884,667 $27,250,451
</TABLE>
<TABLE>
<CAPTION>
Dollar Dollar
Delinquencies Amount Percent* Amount Percent*
<S> <C> <C> <C> <C>
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%
</TABLE>
<TABLE>
<S> <C> <C>
Direct Loans
Gross Amount Outstanding $732,486 $559,123
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
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%
</TABLE>
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.
<PAGE>
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:
<TABLE>
<CAPTION>
Six months endedSix months ended
September 30, September 30,
1996 1995
<S> <C> <C>
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)
</TABLE>
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.
<PAGE>
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.
<PAGE>
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
<PAGE>
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)
<PAGE>
EXHIBIT INDEX
Exhibit Document
1.1 Schedule for Computation of Earnings Per Share
<PAGE>
Nicholas Financial, Inc.
Exhibit 1.1
Schedule for Computation of Earnings Per Share
(Unaudited)
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<CAPTION>
Three Months Six Months
Ended September 30, Ended September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
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
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[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.
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<S> <C> <C>
[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
<F1> [RECEIVABLES] ARE PRESENTED NET OF UNEARNED FINANCE CHARGES,
NON-REFUNDABLE DEALER RESERVE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS.
<F2> [ALLOWANCES] ARE PRESENTED AS TOTAL RESERVES, COMPRISED OF
NON-REFUNDABLE DEALER RESERVE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS.
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