<PAGE> 1
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 DECEMBER 31, 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 January 31, 1997 there were 6,990,544 shares of
common
stock outstanding
This Form 10-QSB consists of 17 pages. Exhibits are indexed
at page 16.
<PAGE> 2
Nicholas Financial, Inc.
Form 10-QSB
Index
Part I. Financial Information
Page
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheet as of December 31, 1996......3
Condensed Consolidated Statements of Income for the three and
nine months ended December 31, 1996 and 1995.....................4
Condensed Consolidated Statements of Cash Flows for the
nine months ended December 31, 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........................................14
Item 2. Changes in Securities....................................14
Item 3. Defaults upon Senior Securities..........................14
Item 4. Submission of Matters to a Vote of Security Holders......14
Item 5. Other Information........................................14
Item 6. Exhibits and Reports on Form 8-K.........................14
Signatures.......................................................15
Index of Exhibits................................................16
Exhibit 1.1- Statement Regarding Computation
of Per Share Earnings...........................................17
<PAGE> 3
Nicholas Financial, Inc.
Condensed Consolidated Balance Sheet
(Unaudited)
<TABLE>
<CAPTION>
December 31,
1996
-------------
<S> <C>
Assets
Cash $188,785
Accounts receivable 19,433
Finance receivables, net 21,225,550
Prepaid expenses and other assets 312,961
Deferred income taxes 343,715
Property and equipment, net 194,911
Prepaid income taxes 137,114
Deferred loan costs 5,625
-------------
Total assets $22,428,094
=============
Liabilities
Line of credit $13,755,594
Notes payable - related party 1,756,095
Deferred revenues 203,221
Accounts payable 675,270
Other liabilities 227,375
-------------
16,617,555
-------------
Shareholders' equity
Preferred stock, no par: 5,000,000 shares
authorized; -
none issued and outstanding
Common stock, no par: 20,000,000 shares
authorized; 6,990,544 shares issued and
outstanding 3,712,003
Retained earnings 2,098,536
-------------
5,810,539
-------------
Total liabilities and shareholders' equity $22,428,094
=============
</TABLE>
See accompanying notes.
<PAGE> 4
Nicholas Financial, Inc.
Condensed Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Three months endedNine months ended
December 31 December 31
1996 1995 1996 1995
--------------------------------------------------
<S> <C> <C> <C> <C>
Revenue:
Interest income on
finance receivables $1,344,454 $1,363,638 $4,192,414 $3,801,948
Sales 112,301 145,822 349,613 435,930
-----------------------------------------------------
1,456,755 1,509,460 4,542,027 4,237,878
Expenses:
Cost of sales 23,053 36,779 70,609 102,008
Marketing 59,708 56,015 181,122 149,495
Administrative 602,004 535,318 1,725,467 1,558,626
Provision for credit losses 177,000 177,673 363,121 297,437
Deferred compensation expense (29,347) (479) 600 128,349
Depreciation and amortization 20,843 22,719 63,030 75,060
Interest expense 395,867 411,177 1,214,469 1,120,059
-----------------------------------------------------
1,249,128 1,239,202 3,618,418 3,431,034
-----------------------------------------------------
Operating income before
income taxes 207,627 270,258 923,609 806,844
Income tax expense (benefit):
Current (77,033) 187,470 212,804 445,706
Deferred 159,113 (88,710) 142,083 (137,861)
------------------------------------------------------
82,080 98,760 354,887 307,845
------------------------------------------------------
Net Income $125,547 $171,498 $568,722 $498,999
======================================================
Primary Earnings per Share $0.02 $0.03 $0.09 $0.09
======================================================
Fully Diluted Earnings
per Share $0.02 $0.03 $0.09 $0.08
======================================================
Weighted average number
of common and common
equivalent shares - Primary 7,017,927 6,097,587 7,017,927 6,097,587
------------------------------------------------------
Weighted average number of
common and common equivalent
shares - Fully Diluted 7,017,927 6,250,674 7,017,927 6,250,674
------------------------------------------------------
</TABLE>
See accompanying notes.
<PAGE> 5
Nicholas Financial, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended December 31
1996 1995
------------------------------
<S> <C> <C>
Operating activities
Net income $568,722 $498,999
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation of property and equipment 60,500 63,500
Provision for credit losses 363,121 297,437
Amortization of intangible assets
and deferred loan costs 16,534 11,560
Deferred compensation expense 600 128,349
Deferred income taxes 142,083 (137,861)
Changes in operating assets
and liabilities:
Accounts receivable 5,721 (327)
Prepaid expenses and other assets (42,261) (261,090)
Deferred revenues 14,327 57,542
Accounts payable (175,988) (503,348)
Other liabilities 198,569 291,898
Prepaid income taxes (137,114) -
Income taxes payable (122,082) 27,534
----------------------------
- -Net cash provided by operating
activities 892,732 474,193
Investing activities
Increase in finance receivables,
net of principal collected (3,261,887) (5,424,432)
Purchase of property and equipment (74,994) (56,947)
Increase in deferred loan costs - (6,805)
----------------------------
- -Net cash used by investing activities (3,336,881) (5,488,184)
Financing activities
Net proceeds from notes payable-
related party and line of
credit borrowings 154,791 4,865,514
Proceeds from sale of the
Company's common stock 1,987,352 57,794
---------------------------
- -Net cash provided by financing
activities 2,142,143 4,923,308
---------------------------
- -Net decrease in cash (302,006) (90,683)
Cash, beginning of period 490,791 283,342
----------------------------
- -Cash, end of period $188,785 $192,659
=============================
</TABLE>
See accompanying notes.
<PAGE> 6
Nicholas Financial, Inc.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
December 31, 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 nine month
periods ended December 31, 1996 are not necessarily indicative
of the results that may be expected for the entire 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 $31,589,307
Less:
Unearned interest (6,755,188)
-------------
24,834,119
Nonrefundable dealer reserves (2,682,010)
Allowance for credit losses (926,559)
-------------
Finance receivables, net $21,225,550
=============
</TABLE>
The terms of the receivables range from 6 to 60 months and bear
a weighted average effective interest rate of 25%.
<PAGE> 7
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 December 31, 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 related party 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 $2.00 per share. $1,300,000
Note payable, unsecured, interest at 12%,
quarterly interest due through April 2000, at which
time the entire balance and unpaid interest is due,
subordinated to the Line. The note is convertible at
the option of the holder into common shares 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
------------
$1,756,095
============
</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> 8
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 installment loan
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
December 31, 1996, Contracts accounted for approximately
97.1% of the Company's aggregate loan portfolio and
small direct consumer loans accounted for approximately 2.9%.
As of December 31, 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 for a total of 11 branches in all.
<TABLE>
<CAPTION>
Three Months Ended December 31, Nine Months Ended December 31,
1996 1995 1996 1995
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Average Net Finance
Receivables (1) $24,322,645 $20,917,381 $23,406,466 $19,662,062
Average Indebtedness (2) 15,178,355 15,148,037 15,759,909 13,885,112
Total Revenues 1,344,454 1,363,638 4,192,414 3,801,948
Interest Expense 395,867 411,177 1,214,469 1,120,059
-----------------------------------------------------------------
Net Interest Income 948,587 952,461 2,977,945 2,681,889
Gross Portfolio Yield(3) 22.11% 26.08% 23.88% 25.78%
Average Cost of
Borrowed Funds (2) 10.43% 10.86% 10.27% 10.76%
-----------------------------------------------------------------
Net Interest Spread (4) 11.68% 15.22% 13.61% 15.03%
Net Portfolio Yield (3) 15.60% 18.21% 16.96% 18.19%
Net Charge-Off Percentage(5) 11.59% 14.30% 10.06% 10.24%
<FN>
_________________
(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 payablerelated 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.
</TABLE>
<PAGE> 9
Three months ended December 31, 1996 compared to three
months ended December 31, 1995
Revenue decreased 3% to $1,456,755 for the three
months ended December 31, 1996, from $1,509,460 for the
comparable period in 1995. This decrease is attributed
to the gross portfolio yield decreasing from 26.08% for the
three months ended December 31, 1995 to 22.11% for the
comparable period in 1996.
Operating expenses, excluding provision for credit
losses, deferred compensation expense and interest expense,
increased to $705,608 for the three months ended December
31, 1996 from $650,831 for the three months ended December
31, 1995. This increase is attributed to the opening of one
additional branch and the increase in transaction volume at
existing branches.
Interest expense decreased to $395,867 for the three
months ended December 31, 1996 as compared to $411,177
for the comparable period in 1995. This decrease is
attributed to using the proceeds from an offering of the
Company's Common stock to pay down the Company's credit
line. The average cost of funds borrowed by the Company was
10.43% for the three months ended December 31, 1996 as
compared to 10.86% for the comparable period in 1995.
Provision for credit losses decreased to $177,000 for the three
months period ended December 31, 1996 as compared to $177,673
for the comparable period in 1995. The decrease is attributed
to a decrease in the net charge-off percentage from 14.30%
for the three months ended December 31, 1995 to 11.59% for
the three months ended December 31, 1996.
Net income for the three months ended December 31,
1996 decreased to $125,547 compared to $171,498 for the
comparable period in 1995. The decrease in net income is
attributed to the reduction in portfolio yield coincided
with an increase in operating expenses.
Nine months ended December 31, 1996 compared to nine months
ended December 31, 1995
Revenue increased 7% to $4,542,027 for the nine months
ended December 31, 1996, from $4,237,878 for the comparable
period in 1995. This increase is attributed to the increase
in net finance receivables. The gross portfolio yield
decreased to 23.88% for the nine months ended December 31,
1996 from 25.78% for the comparable period in 1995.
Operating expenses, excluding provision for credit
losses, deferred compensation expense and interest expense,
increased to $2,040,228 for the nine months ended December
31, 1996 from $1,885,189 for the comparable period in 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 $1,214,469 for the
nine months ended December 31, 1996 as compared to $1,120,059
for the comparable period in 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 10.27% for the nine months ended
December 31, 1996 as compared to 10.76% for the comparable
period in 1995.
Provision for credit losses increased to $363,121 for the
nine months ended December 31, 1996 as compared to $297,437
for the comparable period in 1995. This increase is
attributed to the increase in net finance receivables for
the nine months ended December 31, 1996 as compared to the
nine months ended December 31, 1995.
Net income for the nine months ended December 31,
1996 increased to $568,722 compared to $498,999 for the
comparable period in 1995.
<PAGE> 10
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 62 Contracts with an aggregate initial principal
amount of approximately $429,000. As of December 31, 1996, the Company
had 113 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 December 31, 1996, the Company had established reserves
for losses on Contracts of $3,578,161, or 14.88% 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 December 31, 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 December 31, 1996, the Company had
established reserves for losses on direct consumer loans of
$30,409 or 3.90% of outstanding receivables under the loans.
<PAGE> 11
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>
Nine Months Ended Year Ended
December 31, 1996 March 31,1996
---------------------- -----------------
- --
<S> <C> <C>
Contracts
Gross Amount Outstanding $30,671,373 $27,250,451
</TABLE>
<TABLE>
<CAPTION>
Dollar Dollar
Delinquencies Amount Percent* Amount Percent
*
--------- ----------- --------- ---------
<S> <C> <C> <C> <C>
30 to 59 days $1,407,393 4.59% $1,346,150 4.94%
60 to 89 days 311,285 1.01% 326,542 1.20%
90 + days 159,333 0.52% 44,746 0.16%
Total Delinquencies $1,878,011 $1,717,438
*Total Delinquencies as
percent of outstanding balance 6.12% 6.30%
Direct Loans
Net Amount Outstanding $ 775,875 $ 559,123
Delinquencies
30 to 59 days $18,621 2.40% $ 321 0.06%
60 to 89 day 0 0.00% 3,197 0.57%
90 + days 0 0.00% 0 0.00%
Total Delinquencies $18,621 $3,518
*Total Delinquencies as a
percent of outstanding balance 2.40% 0.63%
</TABLE>
Income Taxes
The provision for income taxes for the three months ended
December 31, 1996 decreased to $82,080 from $98,760 for
the comparable period in 1995. The Company's effective tax
rate increased from 36.54% for the three month period ended
December 31, 1995 to 39.53% for the three month period ended
December 31, 1996.
<PAGE> 12
Liquidity and Capital Resources
The Company's cash flows for the Nine months ended December
31, 1996 and December 31, 1995 are summarized as follows:
<TABLE>
<CAPTION>
Nine months ended Nine months ended
December 31, December 31,
1996 1995
--------------------------------------
<S> <C> <C>
Cash provided by (used in):
Operating Activities- $ 892,732 $ 474,193
Investing Activities -
(primarily purchase
of Contracts) (3,336,881) (5,488,184)
Financing Activities 2,142,143 4,923,308
Net (decrease) in cash (302,006) (90,683)
</TABLE>
The Company's primary use of working capital during the
nine months ended December 31, 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 used in investing activities
during the nine months ended December 31, 1996 was
primarily attributable to a decrease in the net finance receivable
growth rate when compared to the growth rate for the
comparable period in 1995 and 1994.
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 used 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> 13
Bulk Receivable Acquisition
On January 28, 1997 the Company successfully
acquired approximately $3,850,000 in gross contracts
outstanding from a new/used car dealership located in
the State of Florida. The contracts bear an average APR
of 21.5% and an average remaining maturity of 24 months.
The acquisition represents approximately a 12% increase in
the total assets of the Company. The Company intends to
pursue other possible bulk transactions in the future.
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 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> 14
<TABLE>
<CAPTION>
Part II - Other Information
<S> <C>
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
December 31, 1996
</TABLE>
<PAGE> 15
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 January 31, 1997.
<TABLE>
<CAPTION>
NICHOLAS FINANCIAL, INC.
(Registrant)
<S> <C>
Date: January 31, 1997 /s/ Peter L. Vosotas
--------------------
Peter L. Vosotas
Chairman, President,
Chief Executive Officer
(Principal Executive Officer)
Date: January 31, 1997 /s/ Ralph T. Finkenbrink
-------------------------
Ralph T. Finkenbrink
(Principal Financial Officer
and Accounting Officer)
</TABLE>
<PAGE> 16
<TABLE>
<CAPTION>
EXHIBIT INDEX
Exhibit Document
<S> <C>
1.1 Schedule for Computation of Earnings Per
Share
</TABLE>
<PAGE> 17
<TABLE>
<CAPTION>
Nicholas Financial, Inc.
Exhibit 1.1
Schedule for Computation of Earnings Per Share
(Unaudited)
Three Months Nine Months
Ended December 31, Ended December 31,
1996 1995 1996 1995
------------------------------------------------
<S> <C> <C> <C> <C>
Net income $ 125,547 $ 171,498 $ 568,722 $ 498,999
================================================
Weighted average number of
common shares outstanding
during the period 6,897,743 5,827,247 6,897,743 5,827,247
Add: Primary common equivalent
shares determined using the
"treasury stock" method
representing shares issuable
upon exercise of stock options
and warrants 120,184 270,340 120,184 270,340
------------------------------------------------
Weighted average number of
shares used in Primary
EPS calculation 7,017,927 6,097,587 7,017,927 6,097,587
=================================================
Add: Fully Diluted common
equivalent shares determined
using the "treasury stock"
method representing shares
issuable upon exercise of
stock options and warrants 120,184 423,427 120,184 423,427
-------------------------------------------------
-Weighted average number of
shares used in Fully Diluted
EPS calculation 7,017,927 6,250,674 7,017,927 6,250,674
=================================================
Primary Earnings Per Share $0.02 $0.03 $0.09 $0.09
=================================================
Fully Diluted Earnings
Per Share $0.02 $0.03 $0.09 $0.08
=================================================
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from the condensed
consolidated balance sheet at December 31, 1996 and the condensed consolidated
statements of income for the three months ended December 31, 1996 and
December 31, 1995 and is qualified in its entirety by reference to
such. </LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> MAR-31-1997 MAR-31-1996
<PERIOD-END> DEC-31-1996 DEC-31-1995
<CASH> 188,785 0
<SECURITIES> 0 0
<RECEIVABLES> 21,225,550 0
<ALLOWANCES> 3,608,569 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 0
<PP&E> 513,761 0
<DEPRECIATION> 318,850 0
<TOTAL-ASSETS> 22,428,094 0
<CURRENT-LIABILITIES> 16,617,555 0
<BONDS> 0 0
0 0
0 0
<COMMON> 3,712,003 0
<OTHER-SE> 2,098,536 0
<TOTAL-LIABILITY-AND-EQUITY> 22,428,094 0
<SALES> 112,301 145,822
<TOTAL-REVENUES> 1,456,755 1,509,460
<CGS> 23,053 36,779
<TOTAL-COSTS> 595,920 625,629
<OTHER-EXPENSES> 653,208 613,573
<LOSS-PROVISION> 177,000 177,673
<INTEREST-EXPENSE> 395,867 411,177
<INCOME-PRETAX> 207,627 270,258
<INCOME-TAX> 82,080 98,760
<INCOME-CONTINUING> 125,547 171,498
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 125,547 171,498
<EPS-PRIMARY> .02 .03
<EPS-DILUTED> .02 .03
<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.
</TABLE>
