<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, 1997
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 33759
(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, 1998 there were 2,354,346 shares of common
stock outstanding
This Form 10-QSB consists of 18 pages. Exhibits are indexed at
page 17.
<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, 1997..............3
Condensed Consolidated Statements of Income for the three and
nine months ended December 31, 1997 and 1996.........................4
Condensed Consolidated Statements of Cash Flows for the
nine months ended December 31, 1997 and 1996.........................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...............................................15
Item 2. Changes in Securities...........................................15
Item 3. Defaults upon Senior Securities.................................15
Item 4. Submission of Matters to a Vote of Security Holders.............15
Item 5. Other Information...............................................15
Item 6. Exhibits and Reports on Form 8-K................................15
Signatures......................................................16
Index of Exhibits...............................................17
Exhibit 1.1 - Statement Regarding Computation
of Per Share Earnings.............................18
Exhibit 2.1 - Reports on Form 8-K - Incorporated by reference
<PAGE> 3
<TABLE>
<CAPTION>
Nicholas Financial, Inc.
Condensed Consolidated Balance Sheet
(Unaudited)
December 31,
1997
---------------
<S> <C>
Assets
Cash $ 113,182
Finance receivables, net 29,794,264
Accounts receivable 15,742
Prepaid expenses and other assets 384,641
Property and equipment, net 188,840
Deferred income taxes 740,778
------------
Total assets $31,237,447
============
Liabilities
Line of credit $21,230,594
Notes payable - related party 1,741,595
Accounts payable 1,248,559
Income taxes payable 36,281
Deferred revenues 206,637
Other liabilities 23,682
------------
24,487,348
Shareholders' equity
Preferred stock, no par: 5,000,000 shares
authorized;none issued and outstanding -
Common stock, no par: 50,000,000 shares
authorized; 2,357,013 shares issued and
outstanding 3,772,553
Retained earnings 2,977,546
------------
6,750,099
------------
Total liabilities and shareholders' equity $31,237,447
============
See accompanying notes.
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
Nicholas Financial, Inc.
Condensed Consolidated Statements of Income
(Unaudited)
Three months ended Nine months ended
December 31 December 31
1997 1996 1997 1996
---------------------------------------------------
<S> <C> <C> <C> <C>
Revenue:
Interest income on
finance receivables $1,898,889 $1,344,454 $5,437,818 $4,192,414
Sales 105,175 112,301 326,915 349,613
---------------------------------------------------
2,004,064 1,456,755 5,764,733 4,542,027
Expenses:
Cost of sales 25,531 23,053 70,166 70,609
Marketing 77,101 59,708 236,507 181,122
Administrative 782,907 602,004 2,241,122 1,725,467
Provision for credit losses 250,115 177,000 530,540 363,121
Deferred compensation expense - (29,347) - 600
Depreciation and amortization 21,000 20,843 75,000 63,030
Interest expense 534,444 395,867 1,534,632 1,214,469
---------------------------------------------------
1,691,098 1,249,128 4,687,967 3,618,418
---------------------------------------------------
Operating income before income taxes 312,966 207,627 1,076,766 923,609
Income tax expense (benefit):
Current 380,107 (77,033) 750,699 212,804
Deferred (255,950) 159,113 (329,411) 142,083
---------------------------------------------------
124,157 82,080 421,288 354,887
---------------------------------------------------
Net Income $188,809 $125,547 $655,478 $568,722
===================================================
Earnings per share - Basic $0.08 $0.05 $0.28 $0.27
===================================================
Earnings per share - Diluted $0.08 $0.05 $0.28 $0.26
===================================================
See accompanying notes.
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
Nicholas Financial, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine months ended December 31
1997 1996
-------------------------------
<S> <C> <C>
Operating activities
Net income $ 655,478 $ 568,722
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation of property and equipment 75,000 60,500
Provision for credit losses 530,540 363,121
Amortization of intangible assets
and deferred loan costs - 16,534
Deferred compensation expense - 600
Deferred income taxes (329,411) 142,083
Changes in operating assets and liabilities:
Accounts receivable 16,482 5,721
Prepaid expenses and other assets (21,071) (42,261)
Deferred revenues 32,623 14,327
Accounts payable (25,465) (175,988)
Other liabilities (4,128) 61,455
Income taxes payable (36,646) (122,082)
--------------------------------
Net cash provided by operating activities 893,402 892,732
Investing activities
Increase in finance receivables,
net of principal collected (4,401,712) (3,261,887)
Purchase of property and equipment (81,499) (74,994)
--------------------------------
Net cash used by investing activities (4,483,211) (3,336,881)
Financing activities
Net proceeds from notes payable-related
party and line of credit borrowings 3,535,500 154,791
Proceeds from sale of the Company's common stock 59,343 1,987,352
--------------------------------
Net cash provided by financing activities 3,594,843 2,142,143
--------------------------------
Net increase (decrease) in cash 5,034 (302,006)
Cash, beginning of period 108,148 490,791
--------------------------------
Cash, end of period $113,182 $188,785
================================
See accompanying notes.
</TABLE>
<PAGE> 6
Nicholas Financial, Inc.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
December 31, 1997
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial
statements of Nicholas Financial, Inc(the "Company") 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, 1997 are not necessarily
indicative of the results that may be expected for the year
ended March 31, 1998. 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, 1997.
2. Earnings Per Share
In 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, Earnings
per Share. Statement 128 replaced the previously reported
primary and fully diluted earnings per share with basic and
diluted earnings per share. Unlike primary earnings per share,
basic earnings per share excludes any dilutive effects of
options, warrants, and convertible securities. Diluted earnings
per share is very similar to the previously reported fully
diluted earnings per share. Effective December 31, 1997 the
Company adopted the provisions of Statement 128. All earnings
per share amounts for all periods have been presented, and where
necessary, restated to conform to the Statement 128
requirements.
3. Finance Receivables
Finance receivables consist of consumer automobile finance
installment contracts and are detailed as follows:
<TABLE>
<S> <C>
Finance receivables, gross contract $44,955,850
Less:
Unearned interest (9,995,142)
------------
34,960,708
Nonrefundable dealer reserves (3,774,310)
Allowance for credit losses (1,392,134)
------------
Finance receivables, net $29,794,264
============
</TABLE>
The terms of the receivables range from 6 to 60 months and bear
a weighted average effective interest rate of 24%.
<PAGE> 7
4. Stock Split
Effective September 5, 1997 the Company consolidated its common
shares on a one for three basis. All information contained
in this report has been restated to reflect the share
consolidation.
5. Line of Credit
The Company has a $30,000,000 line of credit facility (the Line)
with BA Business Credit, Inc. which expires on June 30, 2000.
Borrowings under the Line bear interest at the Bank of America
prime rate plus 0.50%. The Company also has several LIBOR pricing
options available. 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 its
subsidiaries.
<TABLE>
<CAPTION>
6. Notes Payable - Related Party
Notes payable consisted of the following:
<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 $5.00 to $6.00 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 $8.25 per share. 200,000
Notes payable, unsecured, interest at 12%, principal and
interest due through May 1998. 218,841
Note payable, unsecured, interest at 12%, quarterly
interest due through August 1998, which time the entire
principal balance is due. 22,754
-------------
$1,741,595
=============
</TABLE>
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Introduction
Consolidated net income increased for the three month period
ended December 31, 1997 to $188,809 from $125,547 for the three
month period ended December 31, 1996. Earnings were favorably
impacted by an increase in the outstanding loan portfolio coupled
with an improvement in the cost of funds. The Company's NDS
subsidiary did not contribute significantly to consolidated
operations in the three month periods ended December 31, 1997 or
1996.
Consolidated net income increased for the nine month period
ended December 31, 1997 to $655,478 from $568,722 for the nine
month period ended December 31, 1996. Earnings were favorably
impacted by an increase in the outstanding loan portfolio coupled
with a marginal improvement in the cost of funds. However,
increased operating expenses and an increase in the provision for
credit losses as compared to the period ended December 31, 1996,
partially offset the items that favorably impacted earnings. The
Company's NDS subsidiary did not contribute significantly to
consolidated operations in the nine month periods ended December
31, 1997 or 1996.
<TABLE>
<CAPTION>
Three Months Ended December 31, Nine Months Ended December 31,
1997 1996 1997 1996
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Average Net Finance Receivables (1) $34,502,973 $24,322,645 $33,033,908 $23,406,466
Average Indebtedness (2) 22,372,189 15,178,355 21,257,411 15,759,909
Total Revenues 1,898,889 1,344,454 5,437,818 4,192,414
Interest Expense 534,444 395,867 1,534,632 1,214,469
Net Interest Income 1,364,445 948,587 3,903,186 2,977,945
Gross Portfolio Yield (3) 22.01% 22.11% 21.95% 23.88%
Average Cost of Borrowed Funds (2) 9.56% 10.43% 9.63% 10.27%
Net Interest Spread (4) 12.46% 11.68% 12.32% 13.61%
Net Portfolio Yield (3) 15.82% 15.60% 15.75% 16.96%
Write-off to Liquidation (5) 11.02% 11.65% 10.63% 11.43%
Net Charge-Off Percentage (6) 9.33% 11.61% 9.43% 11.64%
</TABLE>
(1) Average net finance receivables represents the average of
net finance receivables throughout the period. 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 net 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) Liquidation is defined as beginning receivable balance plus
current period purchases minus voids and minus ending
receivable balance.
(6) Net charge-off percentage represents net charge-offs divided
by average net finance receivables outstanding during the
period.
<PAGE> 9
Three months ended December 31, 1997 compared to three months
ended December 31, 1996
Interest Income and Loan Portfolio
Interest revenue increased 41% to $1.9 million for the
period ended December 31, 1997, from $1.3 million for the period
ended December 31, 1996. The net finance receivable balance
totaled $29.8 million at December 31, 1997, an increase of 40%
from the $21.2 million at December 31, 1996. The gross finance
receivable balance increased 42% to $45.0 million at December 31,
1997 from $31.6 million at December 31, 1996. The primary reason
interest revenue increased was the increase in the outstanding
loan portfolio. The gross portfolio yield decreased from 22.11%
for the period ended December 31, 1996 to 22.01% for the period
ended December 31, 1997. The primary reason that net finance
receivables increased was the opening of three additional
branches and increasing the transaction volume in several
existing branches.
Computer Software Business
Sales for the period ended December 31, 1997 were $105,175
compared to $112,301 for the period ended December 31, 1996, a
decrease of 6%. This decrease was primarily due to a decrease in
new installations during the period ended December 31, 1997.
Operating Expenses
Operating expenses, excluding provision for credit losses,
stock compensation expense and interest expense, increased to
$906,539 for the period ended December 31, 1997 from $705,608 for
the period ended December 31, 1996. This increase of 28% was
primarily attributable to the opening of three additional
branches. The Company also incurred additional operating expenses
as the result of increasing its number of regional managers from
two to three, as well as increasing the number of home-office
personnel.
Interest Expense
Interest expense increased to $534,444 for the period ended
December 31, 1997 as compared to $395,867 for the period ended
December 31, 1996. This increase was due to an increase in
average outstanding borrowings from $15.2 million to $22.4
million during the comparable periods. The impact of this
increase was offset, in part by a decrease in the average cost
of funds borrowed from 10.43% for the period ended December 31,
1996 to 9.56% for the period ended December 31, 1997 .
<PAGE> 10
Nine months ended December 31, 1997 compared to Nine months ended
December 31, 1996
Interest Income and Loan Portfolio
Interest revenue increased 30% to $5.4 million for the
period ended December 31, 1997, from $4.2 million for the period
ended December 31, 1996. The net finance receivable balance
totaled $29.8 million at December 31, 1997, an increase of 40%
from the $21.2 million at December 31, 1996. The gross finance
receivable balance increased 42% to $45.0 million at December 31,
1997 from $31.6 million at December 31, 1996. The primary reason
interest revenue increased was the increase in the outstanding
loan portfolio. The gross portfolio yield decreased from 23.88%
for the period ended December 31, 1996 to 21.95% for the period
ended December 31, 1997. This decrease was caused by the fact
that for contracts purchased during the last four quarters, the
Company, has reclassified a larger portion of future unearned
finance charges (at the time the contract was purchased) to the
reserve for credit losses as compared to previous quarters. In
addition, the Company has purchased contracts that represent
newer used vehicles that carry a lower rate of interest and at a
lower discount than the historical average of contracts purchased
by the Company. The primary reason that net finance receivables
increased was the opening of three additional branches and the
increased transaction volume in several existing branches.
Computer Software Business
Sales for the period ended December 31, 1997 were $326,915
compared to $349,613 for the period ended December 31, 1996, a
decrease of 6%. This decrease was primarily due to a decrease in
new installations during the period ended December 31, 1997.
Operating Expenses
Operating expenses, excluding provision for credit losses,
stock compensation expense and interest expense, increased to
$2,622,795 for the period ended December 31, 1997 from $2,040,828
for the period ended December 31, 1996. This increase of 29%
was primarily attributable to the opening of three additional
branches. The Company also incurred additional operating expenses
as the result of increasing its number of regional managers from
two to three, as well as increasing the number of home-office
personnel.
.
Interest Expense
Interest expense increased to $1,534,632 for the period
ended December 31, 1997 as compared to $1,214,469 for the period
ended December 31, 1996. This increase was due to an increase in
average outstanding borrowings from $15.8 million to $21.3
million during the comparable periods. The impact of this
increase was offset, in part by a decrease in the average cost
of funds borrowed from 10.27% for the period ended December 31,
1996 to 9.63% for the period ended December 31, 1997 .
<PAGE> 11
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 65 Contracts with
an aggregate initial principal amount of approximately $458,000.
As of December 31, 1997, the Company had 146 active pools.
The Company pools Contracts according to branch locations,
which are located in the States of Florida and Georgia. Pooling
by branch and quarter allows the Company to evaluate the
different markets where the branches operate. The pools allow
the Company to evaluate the performance of the branch personnel,
who are given the responsibility at the branch level to
underwrite and service their loan portfolio.
A pool retains an amount equal to 100% of the discount as a
reserve for credit losses. In situations where the discount is
determined to be insufficient to absorb all potential losses
associated with the pool, a portion of future unearned income
associated with that specific pool will be added to the reserves
for credit losses until total reserves have reached the
appropriate level. If the reserve for credit losses established
at inception is 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 any
remaining reserves, the excess reserves are recognized as 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, 1997, the Company
had established reserves for losses on Contracts of $5,166,444,
or 15% of net outstanding receivables.
Because of the small number of direct consumer loans currently
outstanding, a reserve for losses is established at the time the
loan is made. As of December 31, 1997, the Company had
established reserves for losses on direct loans of $62,204 or 7%
of net outstanding receivables. When the volume of such loans
increases, the Company intends to utilize a pooling arrangement
similar to that used in connection with Contracts in establishing
reserves. As of December 31, 1997, the Company had not
experienced material losses under its direct consumer loan
program.
The provision for credit losses was $250,115 for the three
month period ended December 31, 1997 and $530,540 for the nine
month period ended December 31, 1997 as compared to $177,000 for
the three month period ended December 31, 1996 and $363,121 for
the nine month period ended December 31, 1996. This increase was
due primarily to the 40% increase in the net finance receivable
balance as of December 31, 1997 compared to December 31, 1996.
<PAGE> 12
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 Nine months Ended
December 31, 1997 December 31,1996
---------------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Contracts
Gross Balance Outstanding $43,891,053 $30,671,373
Dollar Dollar
Delinquencies Amount Percent* Amount Percent*
---------------------- ---------------------
30 to 59 days $2,002,041 4.56% $1,407,393 4.59%
60 to 89 days 649,417 1.48% 311,285 1.01%
90 + days 248,104 0.57% 159,333 0.52%
----------------------- ---------------------
Total Delinquencies $2,899,562 $1,878,011
*Total Delinquencies as
percent of outstanding balance 6.61% 6.12%
Direct Loans
Net Balance Outstanding $893,655 $775,875
Delinquencies
30 to 59 days $ 12,336 1.38% $ 18,621 2.40%
60 to 89 days 1,087 0.12% 0 0.00%
90 + days 682 0.08% 0 0.00%
----------- ----------
Total Delinquencies $ 14,105 $ 18,621
*Total Delinquencies as a
percent of outstanding balance 1.58% 2.40%
</TABLE>
Income Taxes
The Company's effective tax rate remained relatively consistent
at 39.67% and 39.13% for the three and nine months ended December
31, 1997, as compared to 39.53% and 38.42% for the three and nine
months ended December 31, 1996, respectively.
<PAGE> 13
Liquidity and Capital Resources
The Company's cash flows for the nine months ended December 31,
1997 and December 31, 1996 are summarized as follows:
<TABLE>
<CAPTION>
Nine months ended Nine months ended
December 31, December 31,
1997 1996
----------------- -----------------
<S> <C> <C>
Cash provided by (used in):
Operating Activities - $ 893,402 $ 892,732
Investing Activities -
(primarily purchase of Contracts) (4,483,211) (3,336,881)
Financing Activities 3,594,843 2,142,143
Net increase (decrease) in cash 5,034 (302,006)
</TABLE>
The Company's primary use of working capital during the nine
months ended December 31, 1997 was funding the purchase of
Contracts. The Contracts were financed substantially through
borrowings from the Company's Line of credit. The line of credit
is secured primarily by Contracts, and available borrowings are
based on a percentage of qualifying Contracts. As of December 31,
1997 the Company had approximately $8.8 million available under
the line of credit. Since inception, the Company has also funded
a portion of its working capital needs through cash flows from
operating activities.
The self-liquidating nature of installment Contracts and
other loans enables the Company to assume a higher debt-to-equity
ratio than in most businesses. The amount of debt the Company
incurs from time to time under these financing mechanisms depends
on the Company's need for cash and it's ability to borrow under
the terms of its line of credit. The Company believes that
borrowings available under the line of credit as well as cash
flow from operations and, if necessary, the issuance of
additional subordinated debt or the sale of additional securities
in the capital markets, will be sufficient to meet its short and
long-term funding needs.
Future Expansion
The Company currently operates fourteen branch locations,
eleven in the State of Florida and three in the State of Georgia.
The Company expects to evaluate several markets in the southeast
for possible 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, the Company believes it will be necessary
to increase the size of its Line of Credit.
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 in those states. The Company has identified Pensacola,
and Boca Raton as areas in Florida and Macon and Valdosta as
areas in Georgia where it may open additional branch offices
during fiscal 1999.
<PAGE> 14
Impact of Year 2000
The Company has completed an assessment that it will have to
modify portions of its software so that its computer systems will
function properly with respect to dates in the year 2000 and
thereafter. The total Year 2000 project cost is estimated to be
immaterial. The Company's NDS software subsidiary has designed,
implemented and maintained all in-house computer systems. To
date the Company has not incurred any material expenses related
to the Year 2000 issue and does not expect to incur any material
costs.
The project is expected to be completed no later than
December 31, 1998, which is prior to any anticipated impact on
its operating systems. The Company believes that with
modifications to existing software and conversions to new
software, the Year 2000 Issue will not pose any significant
operational problems for its computer systems.
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> 15
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 - Effective December 23, 1997
the Company's common stock was approved for listing
on the NASDAQ SmallCap System and commenced
trading on December 29, 1997,under the symbol NICKF.
<PAGE> 16
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
February 11, 1998.
NICHOLAS FINANCIAL, INC.
(Registrant)
Date: February 11, 1998 /s/ Peter L. Vosotas
Peter L. Vosotas
Chairman, President, Chief
Executive Officer
(Principal Executive Officer)
Date: February 11, 1998 /s/ Ralph T. Finkenbrink
Ralph T. Finkenbrink
(Principal Financial Officer
and Accounting Officer)
<PAGE> 17
EXHIBIT INDEX
Exhibit Document
1.1 Schedule for Computation of Earnings Per Share
2.1 Reports on Form 8-K - Incorporated by reference
<PAGE> 18
<TABLE>
<CAPTION>
Nicholas Financial, Inc.
Exhibit 1.1
Schedule for Computation of Basic and Diluted Earnings Per Share:
(Unaudited)
Three Months Nine Months
Ended December,31 Ended December,31
1997 1996 1997 1996
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<S> <C> <C> <C> <C>
Numerator:
Net income $188,809 $125,547 $655,478 $568,722
Numerator for basic earnings
per share - income Available
to common stockholders 188,809 125,547 655,478 568,722
Numerator for dilutive earnings
per share - income Available to
common stockholders $188,809 $125,547 $655,478 $568,722
Denominator:
Denominator for basic earnings
per share - Weighted average
shares 2,353,263 2,299,248 2,339,526 2,069,834
Effect of dilutive securities:
Employee stock options (A) 6,229 42,210 14,403 52,737
Stock warrants (A) 0 0 0 0
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Dilutive potential common shares 6,229 42,210 14,403 101,192
Denominator for diluted earnings
per share--
Adjusted weighted-average shares 2,359,492 2,341,458 2,353,929 2,171,026
==============================================
Basic earnings per share $0.08 $0.05 $0.28 $0.27
Diluted earnings per share $0.08 $0.05 $0.28 $0.26
Footnote A:
Options 87,293 38,833 86,097 14,833
Warrants 333,333 333,333 333,333 111,111
The options and warrants above were outstanding but not
included in the computation of diluted earnings per share
because the exercise price was greater than the average
market price of the common shares and, therefore, the
effect would be antidilutive.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from the condensed
consolidated balance sheet at December 31, 1997, and the condensed
consolidated statements of income for the 3 and 6 months ended December
31, 1997 and 1996. Both are qualified in their entirety by reference
to such.
</LEGEND>
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS 6-MOS 6-MOS
<FISCAL-YEAR-END> MAR-31-1998 MAR-31-1997 MAR-31-1998 MAR-31-1997
<PERIOD-END> DEC-31-1997 DEC-31-1996 DEC-31-1997 DEC-31-1996
<CASH> 113,182 0 0 0
<SECURITIES> 0 0 0 0
<RECEIVABLES> 29,794,264 0 0 0
<ALLOWANCES> 5,166,444 0 0 0
<INVENTORY> 0 0 0 0
<CURRENT-ASSETS> 0 0 0 0
<PP&E> 602,046 0 0 0
<DEPRECIATION> 413,206 0 0 0
<TOTAL-ASSETS> 31,237,447 0 0 0
<CURRENT-LIABILITIES> 24,487,348 0 0 0
<BONDS> 0 0 0 0
0 0 0 0
0 0 0 0
<COMMON> 3,772,553 0 0 0
<OTHER-SE> 2,977,546 0 0 0
<TOTAL-LIABILITY-AND-EQUITY>31,237,447 0 0 0
<SALES> 105,175 112,301 326,915 349,613
<TOTAL-REVENUES> 2,004,064 1,456,755 5,764,733 4,542,027
<CGS> 25,531 23,053 70,166 70,609
<TOTAL-COSTS> 860,008 632,365 2,477,629 1,907,189
<OTHER-EXPENSES> 21,000 20,843 75,000 63,030
<LOSS-PROVISION> 250,115 177,000 530,540 363,121
<INTEREST-EXPENSE> 534,444 395,867 1,534,632 1,214,469
<INCOME-PRETAX> 312,966 207,627 1,076,766 923,609
<INCOME-TAX> 124,157 82,080 421,288 354,887
<INCOME-CONTINUING> 188,809 125,547 655,478 568,722
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 188,809 125,547 655,478 568,722
<EPS-PRIMARY> .08 .05 .28 .27
<EPS-DILUTED> .08 .05 .28 .26
<FN>
<F1> Receivables are presented net of unearned finance charges,
non-refundable dealer reserve and allowance for doubtful accounts.
<F2> Allowances are total reserves for credit losses, comprised
of non-refundable dealer reserve and allowances for doubtful accounts.
</TABLE>
