<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 SEPTEMBER 30, 1999
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)
(727) 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 October 31st, 1999 there were 2,351,608 shares of common
stock outstanding
This Form 10-QSB consists of 19 pages.
<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 September 30,1999..............................3
Condensed Consolidated Statements of Income
for the three and six months ended
September 30, 1999 and 1998..........................4
Condensed Consolidated Statements of Cash Flows
for the six months ended September 30, 1999
and 1998.............................................5
Notes to the Condensed Consolidated Financial
Statements...........................................6
Item 2. Management's Discussion and Analysis of the
Financial Condition and Results of Operations.......10
Part II. Other Information
Item 1. Legal Proceedings....................................17
Item 2. Changes in Securities................................17
Item 3. Defaults upon Senior Securities......................17
Item 4. Submission of Matters to a Vote of Security Holders..17
Item 5. Other Information....................................17
Item 6. Exhibits and Reports on Form 8-K.....................17
Signatures...........................................18
Index of Exhibits....................................19
<PAGE> 3
<TABLE>
<HEADER>
Nicholas Financial, Inc.
Condensed Consolidated Balance Sheet
(Unaudited)
September 30
1999
-------------
<S> <C>
Assets
Cash $ 141,178
Finance receivables, net 43,567,292
Accounts receivable 17,797
Prepaid expenses and other assets 459,354
Property and equipment, net 207,063
Deferred income taxes 1,450,056
-------------
Total assets $45,842,740
=============
Liabilities
Line of credit $31,814,549
Notes payable - related party 1,603,024
Accounts payable 2,305,754
Income taxes payable 4,770
Deferred revenues 405,014
Other liabilities 18,803
-------------
36,151,914
Shareholders' equity
Preferred stock, no par: 5,000,000 shares
authorized; none issued and outstanding -
Common stock, no par: 50,000,000 shares
authorized; 2,351,608 shares issued and
outstanding 3,712,748
Retained earnings 5,978,078
-------------
9,690,826
-------------
Total liabilities and shareholders' equity $45,842,740
=============
See accompanying notes.
</TABLE>
<PAGE> 4
<TABLE>
<HEADER>
Nicholas Financial, Inc.
Condensed Consolidated Statements of Income
(Unaudited)
Three months ended Six months ended
September 30 September 30
1999 1998 1999 1998
---------------------------------------------
<S> <C> <C> <C> <C>
Revenue:
Interest income on
finance receivables $3,132,293 $2,382,605 $5,967,474 $4,460,692
Sales 130,000 107,536 265,448 217,329
----------------------------------------------
3,262,293 2,490,141 6,232,922 4,678,021
Expenses:
Cost of sales 22,295 22,976 37,826 45,677
Marketing 95,920 90,036 187,713 163,528
Administrative 1,186,054 951,463 2,336,615 1,806,692
Provision for credit losses 224,651 175,812 475,329 360,269
Depreciation and amortization 22,000 28,951 46,140 54,402
Interest expense 678,644 635,580 1,302,153 1,238,643
----------------------------------------------
2,229,564 1,904,818 4,385,776 3,669,211
----------------------------------------------
Operating income before
income taxes 1,032,729 585,323 1,847,146 1,008,810
Income tax expense (benefit):
Current 435,632 375,959 882,182 579,222
Deferred (40,720) (150,000) (175,000) (190,000)
----------------------------------------------
394,912 225,959 707,182 389,222
----------------------------------------------
Net Income $637,817 $359,364 $1,139,964 $619,588
==============================================
Earnings per share - basic $0.27 $0.15 $0.48 $0.26
==============================================
Earnings per share - diluted $0.25 $0.15 $0.45 $0.26
==============================================
See accompanying notes.
</TABLE>
<PAGE> 5
<TABLE>
<HEADER>
Nicholas Financial, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Six months ended September 30
1999 1998
--------------------------------
<S> <C> <C>
Operating activities
Net income $ 1,139,964 $ 619,588
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation of property and equipment 46,140 54,402
Provision for credit losses 475,329 360,269
Deferred income taxes (175,000) (190,000)
Changes in operating assets and
liabilities:
Accounts receivable 5,135 6,672
Prepaid expenses and other assets (150,510) (153,928)
Deferred revenues 17,070 92,982
Accounts payable 570,398 (294,292)
Other liabilities (2,896) 412
Income taxes payable 4,770 (72,919)
--------------------------------
Net cash provided by operating
activities 1,930,400 423,186
Investing activities
Increase in finance receivables,
net of principal collected (4,119,150) (3,378,606)
Purchase of property and equipment (35,910) (59,818)
--------------------------------
Net cash used by investing activities (4,155,060) (3,438,424)
Financing activities
Proceeds (repayment) of notes payable
- related party (3,741) 41,000
Net proceeds from line of credit 1,850,000 2,833,955
Sale of common stock 10,161 -
--------------------------------
Net cash provided by financing activities 1,856,420 2,874,955
--------------------------------
Net decrease in cash (368,240) (140,283)
Cash, beginning of period 509,418 303,960
--------------------------------
Cash, end of period $141,178 $163,677
================================
See accompanying notes.
</TABLE>
<PAGE> 6
Nicholas Financial, Inc.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
September 30, 1999
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 six months
ended September 30, 1999 are not necessarily indicative of the
results that may be expected for the year ended March 31, 2000. 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, 1999.
2. Earnings Per Share
Basic earnings per share excludes any dilutive effects of common
stock equivalents such as options, warrants, and convertible
securities. Diluted earnings per share includes the effects of
dilutive options, warrants, and convertible securities. Basic and
diluted earnings per share have been computed as follows:
<PAGE> 7
<TABLE>
<HEADER>
Nicholas Financial, Inc.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
September 30, 1999
Three months ended Six months ended
September 30, September 30,
1999 1998 1999 1998
------------------------------------------
<S> <C> <C> <C> <C>
Numerator:
Numerator for basic earnings per
share - Net income available to
common stockholders $637,817 $359,364 $1,139,964 $619,588
Effect of dilutive securities:
Convertible debt 24,909 24,909 49,818 49,818
-------------------------------------------
Numerator for dilutive earnings
per share - income available to
common stockholders after assumed
conversions $662,726 $384,273 $1,189,782 $669,406
===========================================
Denominator:
Denominator for basic earnings per
share - weighted average shares 2,351,756 2,357,013 2,351,682 2,357,013
Effect of dilutive securities: (A)
Employee stock options 52,721 - 42,299 -
Convertible debt 264,798 264,798 264,798 264,798
-------------------------------------------
Dilutive potential common shares 317,519 264,798 307,097 264,798
Denominator for diluted earnings
per share - adjusted weighted-
average shares and assumed
conversions 2,669,275 2,621,811 2,658,779 2,621,811
===========================================
Earnings per share - basic $0.27 $0.15 $0.48 $0.26
===========================================
Earnings per share - diluted $0.25 $0.15 $0.45 $0.26
===========================================
Footnote A:
The following options and warrants
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.
Options - 230,700 - 230,700
Warrants 333,333 333,333 333,333 333,333
</TABLE>
<PAGE> 8
Nicholas Financial, Inc.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
September 30, 1999
3. Finance Receivables
Finance receivables consist of consumer automobile finance installment
contracts and are detailed as follows:
<TABLE>
<S> <C>
Finance receivables, gross contract $69,790,065
Less:
Unearned interest (16,416,153)
-----------
53,373,912
Nonrefundable dealer reserves (7,509,261)
Allowance for credit losses (2,297,359)
-----------
Finance receivables, net $43,567,292
===========
</TABLE>
The terms of the receivables range from 6 to 60 months and bear a
weighted average effective interest rate of 24%.
4. Line of Credit
The Company has a $35,000,000 line of credit facility (the Line)
which expires on June 30, 2001. Borrowings under the Line bear
interest at the prime rate. The Company also has several LIBOR
pricing options available. If the outstanding balance falls below
$10,000,000 the Line bears interest at the prime rate plus 1.75%.
Pledged as collateral for this credit facility are all of the assets
of Nicholas Financial, Inc. and its subsidiaries.
On May 11, 1999 the Company entered into an interest rate swap with a
notional amount of $10 million at a fixed rate of 5.81%, maturing on
May 24, 2002. On May 21, 1999 the Company entered into two interest
rate swaps with notional amounts of $5 million each, at fixed rates
of 5.81% and 6.08%, maturing on May 24, 2001 and May 24, 2004,
respectively.
On August 18, 1999 the Company terminated a $5 million swap maturing
on May 24, 2004 in exchange for $52,000. In addition the Company
entered into an interest rate swap with a notional amount of $10
million at a fixed rate of 5.80% ,provided that 30 day libor does not
exceed 8%, maturing on May 24, 2003. In the event 30 day libor
exceeds 8.00% , the fixed rate of 5.80% would swap back to the
variable rate for all periods where 30 day libor exceeds 8.00%.
On November 1, 1999 the Company successfully renegotiated its
credit facility. The new agreement increases the total facility to
$45 million, reduces the effective interest rate charged to the
Company and extends the maturity date to November 1, 2002.
<PAGE> 9
Nicholas Financial, Inc.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
September 30, 1999
<TABLE>
<HEADER>
5. Notes Payable - Related Party
Notes payable consisted of the following:
<S> <C>
Notes payable, due through January 2002, unsecured,
subordinated to the Line, with interest at varying
rates up to 12% with quarterly and semiannual interest
payments. The notes are convertible at the option of
the holder, into common shares at prices from $4.50 to
$6.00 per share. $1,150,000
Notes payable, unsecured interest at 12%, quarterly
interest due through April 2000, at which time the
entire principal 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
Note payable, unsecured, interest at 12%, principal
and interest due through March 2000. 245,470
Note payable, unsecured, interest at 12%, quarterly
interest due through August 2000, at which time the
entire principal balance is due. 7,554
-------------
$1,603,024
=============
</TABLE>
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Introduction
Consolidated net income increased for the three month period ended
September 30, 1999 to $637,817 from $359,364 for the three month
period ended September 30, 1998. Earnings were favorably impacted by
an increase in the outstanding loan portfolio and net portfolio
yield. The Company's NDS subsidiary did not contribute significantly
to consolidated operations in the three month periods ended September
30, 1999 or 1998.
Consolidated net income increased for the six month period ended
September 30, 1999 to $1,139,964 from $619,588 for the six month
period ended September 30, 1998. Earnings were favorably impacted by
an increase in the outstanding loan portfolio and net portfolio
yield. The Company's NDS subsidiary did not contribute significantly
to consolidated operations in the six month periods ended September
30, 1999 or 1998.
<TABLE>
<HEADER>
Three Months Ended Six Months Ended
September 30 September 30
1999 1998 1999 1998
---------------------------------------------------
<S> <C> <C> <C> <C>
Average Net Finance
Receivables (1) $52,573,141 $42,353,786 $51,493,401 $41,568,105
Average Indebtedness(2) 32,964,239 27,299,143 32,313,647 26,660,699
Total Interest Revenues 3,132,293 2,382,605 5,967,474 4,460,692
Interest Expense 678,644 635,580 1,302,153 1,238,643
---------------------------------------------------
Net Interest Income 2,453,649 1,747,025 4,665,321 3,222,049
Gross Portfolio Yield(3) 23.83% 22.50% 23.18% 21.46%
Average Cost of
Borrowed Funds (2) 8.23% 9.31% 8.06% 9.29%
---------------------------------------------------
Net Interest Spread (4) 15.60% 13.19% 15.12% 12.17%
Net Portfolio Yield (3) 18.67% 16.50% 18.12% 15.50%
Write-off to Liquidation(5) 7.39% 6.91% 6.41% 6.97%
Net Charge-Off Percentage(6) 6.68% 5.78% 5.61% 5.87%
</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 net
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 refinances minus
ending receivable balance.
(6) Net charge-off percentage represents net charge-offs divided by
average net finance receivables outstanding during the period.
<PAGE> 11
Three months ended September 30, 1999 compared to three months ended
September 30, 1998
Interest Income and Loan Portfolio
Interest revenue increased 31% to $3.1 million for the period
ended September 30, 1999, from $2.4 million for the period ended
September 30, 1998. The net finance receivable balance totaled $43.6
million at September 30, 1999, an increase of 23% from the $35.4
million at September 30, 1998. The gross finance receivable balance
increased 24% to $69.8 million at September 30, 1999 from $56.1
million at September 30, 1998. The primary reason interest revenue
increased was the increase in the outstanding loan portfolio. The
gross portfolio yield increased from 22.50% for the period ended
September 30, 1998 to 23.83% for the period ended September 30, 1999.
The primary reason that net finance receivables increased was the
opening of two additional offices.
Computer Software Business
Sales for the period ended September 30, 1999 were $130,000
compared to $107,536 for the period ended September 30, 1998, an
increase of 21%. This increase was primarily due to a increase in new
installations during the period ended September 30, 1999.
Operating Expenses
Operating expenses, excluding provision for credit losses and
interest expense, increased to $1,326,269 for the period ended
September 30, 1999 from $1,093,426 for the period ended September 30,
1998. This increase of 21% was primarily attributable to the opening
of two additional branches, increased home office personnal and
increased general operating expenses.
Interest Expense
Interest expense increased to $678,644 for the period ended
September 30, 1999 as compared to $635,580 for the period ended
September 30, 1998. This increase was due to an increase in average
outstanding borrowings from $27.3 million to $33.0 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 9.31% for
the period ended September 30, 1998 to 8.23% for the period ended
September 30, 1999 .
<PAGE> 12
Six months ended September 30, 1999 compared to six months ended
September 30, 1998
Interest Income and Loan Portfolio
Interest revenue increased 34% to $6.0 million for the period
ended September 30, 1999, from $4.5 million for the period ended
September 30, 1998. The net finance receivable balance totaled $43.6
million at September 30, 1999, an increase of 23% from the $35.4
million at September 30, 1998. The gross finance receivable balance
increased 24% to $69.8 million at September 30, 1999 from $56.1
million at September 30, 1998. The primary reason interest revenue
increased was the increase in the outstanding loan portfolio. The
gross portfolio yield increased from 21.46% for the period ended
September 30, 1998 to 23.18% for the period ended September 30, 1999.
The primary reason that net finance receivables increased was the
opening of two additional offices.
Computer Software Business
Sales for the period ended September 30, 1999 were $265,448
compared to $217,329 for the period ended September 30, 1998, a
increase of 22%. This increase was primarily due to a increase in new
installations during the period ended September 30, 1999.
Operating Expenses
Operating expenses, excluding provision for credit losses and
interest expense, increased to $2,608,294 for the period ended
September 30, 1999 from $2,070,299 for the period ended September 30,
1998. This increase of 26% was primarily attributable to the opening
of two additional branches, increased home office personnal and
increased general operating expenses.
Interest Expense
Interest expense increased to $1,302,153 for the period ended
September 30, 1999 as compared to $1,238,643 for the period ended
September 30, 1998. This increase was due to an increase in average
outstanding borrowings from $26.7 million to $32.3 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 9.29% for
the period ended September 30, 1998 to 8.06% for the period ended
September 30, 1999 .
<PAGE> 13
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
segregates its Contracts into pools for purposes of establishing
reserves for losses. Each such pool consists of the loans purchased
by a Company branch office during a three month period. The average
pool consists of 68 Contracts with an aggregate initial principal
amount of approximately $542,000. As of September 30, 1999, the
Company had 218 active pools.
The Company pools Contracts according to branch location because
the branches purchase contracts in different markets located in
Florida, Georgia and North Carolina . 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 vehicles purchased in
each market.
A pool retains an amount equal to 100% of the discount into a
reserve for credit losses. In situations where, at the date of
purchase, 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. Subsequent to the purchase, if the reserve for
credit losses is determined to be inadequate for a pool which is not
fully liquidated, then a charge to income is used to reestablish
adequate 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 September 30, 1999, the Company had established
reserves for losses on Contracts of $9,599,376 or 17.99% of net
outstanding receivables.
<PAGE> 14
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>
<HEADER>
Six Months Ended Six Months Ended
September 30, 1999 September 30, 1998
--------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Contracts
Gross Balance Outstanding $66,884,736 $54,773,697
Dollar Dollar
Delinquencies Amount Percent* Amount Percent*
------ -------- ------ --------
30 to 59 days $1,913,208 2.86% $2,015,260 3.68%
60 to 89 days 413,991 0.62% 480,941 0.88%
90 + days 91,354 0.14% 346,103 0.63%
--------- ----- --------- -----
Total Delinquencies $2,418,553 $2,842,304
*Total Delinquencies
as percent of
outstanding balance 3.62% 5.19%
Direct Loans
Gross Balance Outstanding $2,905,329 $1,385,580
Delinquencies
30 to 59 days $26,579 0.92% $6,691 0.48%
60 to 89 days 4,445 0.15% 3,358 0.24%
90 + days 4,402 0.15% 2,175 0.16%
------- ----- ------ -----
Total Delinquencies $35,426 $12,224
*Total Delinquencies
as a percent of
outstanding balance 1.22% 0.88%
</TABLE>
The provision for credit losses was $224,651 for the three month
period ended September 30, 1999 and $475,329 for the six month period
ended September 30, 1999 as compared to $175,812 for the three month
period ended September 30, 1998 and $360,269 for the six month period
ended September 30, 1998. The Company increased its total reserve
percentage from 13.48% for the period ended March 31, 1999 to 14.05%
for the period ended September 30, 1999. Management believes that the
reserve adjustments made during the three and six month periods ended
September 30, 1999 are consistent with its conservative reserve
methodology.
Income Taxes
The Company's effective tax rate remained relatively consistent at
38.24% and 38.29% for the three and six months ended September 30,
1999, as compared to 38.60% and 38.58% for the three and six months
ended September 30, 1998, respectively.
<PAGE> 15
Liquidity and Capital Resources
The Company's cash flows for the six months ended September 30, 1999
and September 30, 1998 are summarized as follows:
<TABLE>
<HEADER>
Six months ended Six months ended
September 30, September 30,
1999 1998
----------------------------------------
<S> <C> <C>
Cash provided by (used in):
Operating Activities - $1,930,400 $ 423,186
Investing Activities -
(primarily purchase of
Contracts) (4,155,060) (3,438,424)
Financing Activities - 1,856,420 2,874,955
Net (decrease) in cash (368,240) (140,283)
</TABLE>
The Company's primary use of working capital during the six
months ended September 30, 1999 was the funding of the purchase of
Contracts. The Contracts were financed substantially through
borrowings on 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 September 30, 1999 the
Company had approximately $3.2 million available under the line of
credit. The Company is currently negotiating to increase the size of
its line of credit. Since inception, the Company has also funded a
portion of its working capital needs through cash flows from
operating activities.
On November 1, 1999 the Company successfully renegotiated its
credit facility. The new agreement increases the total facility to
$45 million, reduces the effective interest rate charged to the
Company and extends the maturity date to November 1, 2002.
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 and, or the
sale of additional securities in the capital markets or both.
Future Expansion
The Company currently operates sixteen branch locations, twelve
in the State of Florida, three in the State of Georgia and one in the
State of North Carolina. Each office is budgeted {size of branch,
number of employees and location} to handle up to 1,000 accounts and
up to $7,500,000 in outstanding receivables. To date none of our
branches have reached this capacity.
The Company intends to continue its expansion through the
purchase of additional Contracts and the expansion of its direct
consumer loan program. As the branches continue to add customers, the
size of the loan portfolio will continue to grow. With the added
volume in each branch and as the company adds new branches, it will
be necessary for the Company to increase the size of its Line of
Credit.
The Company believes that opportunity for growth continues to exist
in the States of Florida, Georgia and North Carolina and for the
foreseeable future intends generally to concentrate its expansion
activities in these States. The Company has identified Atlanta,
Georgia, Raleigh, North Carolina and West Palm Beach, Florida as
areas where it may open additional branch offices during fiscal 2000.
<PAGE> 16
Impact of Year 2000
The year 2000 Issue is the result of computer programs being
written using two digits rather than four to define the applicable
year. Any of the Company's computer programs or hardware that have
date-sensitive software or embedded chips may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in
a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to
process transactions, send invoices, or engage in similar business
activities.
The Company's plan to resolve the Year 2000 Issue involves the
following four phases: assessment, remediation, testing, and
implementation. To date, the Company has fully completed its
assessment, remediation, testing and implementation of all systems
that could be significantly affected by the Year 2000.
The Company has queried its significant suppliers and vendors
that do not share information systems with the Company. To date, the
Company is not aware of any external agent with a Year 2000 issue
that would materially impact the Company's results of operations,
liquidity, or capital resources. However, the Company has no means of
ensuring that external agents will be Year 2000 ready. The inability
of external agents to complete their Year 2000 resolution process in
a timely fashion could materially impact the Company. The effect of
non-compliance by external agents is not determinable.
To date, the Company has incurred approximately $25,000 related
to all phases of the Year 2000 project. The total costs have been
expense as incurred.
The Company currently has no contingency plan in place. In the
event that such a contingency plan is determined to be required the
Company will evaluate and implement a contingency plan.
<PAGE> 17
Forward-Looking Information
This 10-QSB contains various forward-looking statements and
information that are based on management's beliefs and assumptions,
as well as information currently available to management. When used
in this document, the words "anticipate", "estimate", "expect", and
similar expressions are intended to identify forward-looking
statements. Although the Company believes that the expectations
reflected in such forward-looking statements are reasonable, it can
give no assurance that such expectations will prove to be correct.
Such statements are subject to certain risks, uncertainties and
assumptions. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual
results may vary materially from those anticipated, estimated or
expected. Among the key factors that may have a direct bearing on
the Company's operating results are fluctuations in the economy, the
degree and nature of competition, demand for consumer financing in
the markets served by the Company, the Company's products and
services, increases in the default rates experienced on Contracts,
adverse regulatory changes in the Company's existing and future
markets, the Company's ability to expand its business, including its
ability to complete acquisitions and integrate the operations of
acquired businesses, to recruit and retain qualified employees, to
expand into new markets and to maintain profit margins in the face of
increased pricing competition.
Part II - Other Information
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - None
Item 3. Defaults upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - None
Item 6. (a)Exhibits - See exhibit index following the signature page.
(b)Reports on Form 8-K - None
<PAGE> 18
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 12, 1999.
NICHOLAS FINANCIAL, INC.
(Registrant)
Date: November 12, 1999 /s/ Peter L. Vosotas
----------------------------
Peter L. Vosotas
Chairman, President,
Chief Executive Officer
(Principal Executive Officer)
Date: November 12, 1999 /s/ Ralph T. Finkenbrink
-----------------------------
Ralph T. Finkenbrink
(Principal Financial Officer
and Accounting Officer)
<PAGE> 19
EXHIBIT INDEX
Exhibit Document
-------- ---------
none
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from the condensed
consolidated balance sheet at September 30, 1999, and the condensed
consolidated statements of income for the 3 and 6 months ended
September 30, 1999 and 1998. 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-31-2000 MAR-31-1999 MAR-31-2000 MAR-31-1999
<PERIOD-END> SEP-30-1999 SEP-30-1998 SEP-30-1999 SEP-30-1998
<CASH> 141,178 0 0 0
<SECURITIES> 0 0 0 0
<RECEIVABLES> 43,567,292 0 0 0
<ALLOWANCES> 9,806,620 0 0 0
<INVENTORY> 0 0 0 0
<CURRENT-ASSETS> 0 0 0 0
<PP&E> 568,290 0 0 0
<DEPRECIATION> 361,227 0 0 0
<TOTAL-ASSETS> 45,842,740 0 0 0
<CURRENT-LIABILITIES> 36,151,914 0 0 0
<BONDS> 0 0 0 0
0 0 0 0
0 0 0 0
<COMMON> 3,712,748 0 0 0
<OTHER-SE> 5,978,078 0 0 0
<TOTAL-LIABILITY-AND-EQUITY>45,842,740 0 0 0
<SALES> 130,000 107,536 265,448 217,329
<TOTAL-REVENUES> 3,262,293 2,490,141 6,232,922 4,678,021
<CGS> 22,295 22,976 37,826 45,677
<TOTAL-COSTS> 1,304,269 1,064,475 2,562,154 2,015,897
<OTHER-EXPENSES> 22,000 28,951 46,140 54,402
<LOSS-PROVISION> 224,651 175,812 475,329 360,269
<INTEREST-EXPENSE> 678,644 635,580 1,302,153 1,238,643
<INCOME-PRETAX> 1,032,729 585,323 1,847,146 1,008,810
<INCOME-TAX> 394,912 225,959 707,182 389,222
<INCOME-CONTINUING> 637,817 359,364 1,139,964 619,588
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 637,817 359,364 1,139,964 619,588
<EPS-BASIC> .27 .15 .48 .26
<EPS-DILUTED> .25 .15 .45 .26
<FN>
<F1> Receivables are presented net of unearned finance charges, non-refundable
dealer reserve and allowance for doubtful accounts.
<F2> Allowances are presented and total reserves for credit losses, comprised
of non-refundable dealer reserve and allowances for doubtful accounts.
</TABLE>
