<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 JUNE 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 July 31, 1999 there were 2,351,608 shares of common stock
outstanding
This Form 10-QSB consists of 18 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 June 30, 1999.............................................3
Condensed Consolidated Statements of Income
for the three months ended June 30, 1999.....................4
Condensed Consolidated Statements of Cash
Flows for the three months ended June 30, 1999...............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....................................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
<PAGE> 3
Nicholas Financial, Inc.
Condensed Consolidated Balance Sheet
(Unaudited)
<TABLE>
<CAPTION>
June 30,
1999
----------------
<S> <C>
Assets
Cash $ 269,073
Finance receivables, net 41,906,154
Accounts receivable 22,742
Prepaid expenses and other assets 344,548
Property and equipment, net 208,650
Deferred income taxes 1,400,056
-----------
Total assets $44,151,223
===========
Liabilities and Shareholders' equity
Line of credit $30,714,549
Notes payable - related parties 1,648,024
Accounts payable 1,935,243
Income taxes payable 376,858
Deferred revenues 413,627
Other liabilities 20,074
-----------
35,108,375
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 3,702,587
Retained earnings 5,340,261
-----------
9,042,848
-----------
Total liabilities and shareholders' equity $44,151,223
===========
See accompanying notes.
</TABLE>
<PAGE> 4
Nicholas Financial, Inc.
Condensed Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
June 30
1999 1998
------------------------
<S> <C> <C>
Revenue:
Interest income on
finance receivables $2,835,182 $2,078,087
Sales 135,448 109,793
-----------------------
2,970,630 2,187,880
Expenses:
Cost of sales 15,531 22,701
Marketing 91,794 73,492
Administrative 1,150,561 855,229
Provision for credit losses 250,678 184,457
Depreciation and amortization 24,140 25,451
Interest expense 623,509 603,063
-----------------------
2,156,213 1,764,393
-----------------------
Operating income before income taxes 814,417 423,487
Income tax expense (benefit):
Current 437,270 203,263
Deferred (125,000) (40,000)
-----------------------
312,270 163,263
-----------------------
Net Income $502,147 $260,224
=======================
Earnings per share - Basic $0.21 $0.11
=======================
Earnings per share - Diluted $0.20 $0.11
=======================
See accompanying notes.
</TABLE>
<PAGE> 5
Nicholas Financial, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three months ended June 30
1999 1998
--------------------------
<S> <C> <C>
Operating activities
Net income $ 502,147 $ 260,224
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation of property and equipment 24,140 25,451
Provision for credit losses 250,678 184,457
Deferred income taxes (125,000) (40,000)
Changes in operating assets and
liabilities:
Accounts receivable 190 3,203
Prepaid expenses and other assets (35,704) (176,077)
Deferred revenues 25,683 46,461
Accounts payable 199,887 (29,715)
Other liabilities (1,625) 1,083
Income taxes payable 376,858 21,122
-----------------------
Net cash provided by operating
activities 1,217,254 296,209
Investing activities
Increase in finance receivables,
net of principal collected (2,233,361) (2,773,181)
Purchase of property and equipment (15,497) (10,021)
-----------------------
Net cash used by investing activities (2,248,858) (2,783,202)
Financing activities
Net proceeds from line of credit
borrowings and notes payable -
related party 791,259 2,224,000
-----------------------
Net cash provided by financing
activities 791,259 2,224,000
-----------------------
Net decrease in cash (240,345) (262,993)
Cash, beginning of period 509,418 303,960
-----------------------
Cash, end of period $269,073 $40,967
=======================
See accompanying notes.
</TABLE>
<PAGE> 6
Nicholas Financial, Inc.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
June 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 three months ended
June 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 is computed based on the weighted-
average number of common shares outstanding during the periods.
Diluted earnings per share is computed based on the weighted-
average number of common shares plus the assumed issuance of
common shares for all potentially dilutive securities.
<PAGE> 7
Nicholas Financial, Inc.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
June 30, 1999
The following table sets forth the computation of Basic and
Fully Diluted Earnings per Share:
<TABLE>
<CAPTION>
Three months ended
June 30,
1999 1998
----------------------------
<S> <C> <C>
Numerator:
Numerator for basic earnings
per share - Net income available
to common stockholders $502,147 $260,224
Effect of dilutive securities:
Convertible debt 24,909 24,909
-----------------------
Numerator for dilutive earnings
per share - income available to
common stockholders after assumed
conversions $527,056 $285,133
=======================
Denominator:
Denominator for basic earnings
per share - weighted average
shares 2,351,608 2,357,013
Effect of dilutive securities: (A)
Employee stock options 31,876 -
Convertible debt 264,798 264,798
-----------------------
Dilutive potential common shares 296,674 264,798
Denominator for diluted earnings
per share - adjusted weighted-
average shares and assumed
conversions 2,648,282 2,621,811
=======================
Earnings per share - basic $0.21 $0.11
=======================
Earnings per share - diluted $0.20 $0.11
=======================
</TABLE>
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
Warrants - 333,333
<PAGE> 8
Nicholas Financial, Inc.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
June 30, 1999
3. Finance Receivables
Finance receivables consist of consumer automobile finance
installment contracts and are detailed as follows:
<TABLE>
<CAPTION>
<S> <C>
Finance receivables, gross contract $67,225,583
Less:
Unearned interest (15,856,451)
-----------
51,369,132
Nonrefundable dealer reserves (7,919,331)
Allowance for credit losses (1,543,647)
-----------
Finance receivables, net $41,906,154
===========
</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)
with BA Business Credit, Inc. which expires on June 30, 2001.
Borrowings under the Line bear interest at the Bank of America
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 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.
<PAGE> 9
Nicholas Financial, Inc.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
June 30, 1999
5. Notes Payable - Related Parties
<TABLE>
<CAPTION>
<S> <C>
Notes payable consisted of the following:
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. 290,470
Note payable, unsecured, interest at 12%,
quarterly interest due through August 1999,
at which time the entire principal balance
is due. 7,554
----------
$1,648,024
==========
</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 June 30, 1999 to $502,147 from $260,224 for the three month
period ended June 30, 1998. Earnings for the quarter were
favorably impacted by growth in the outstanding loan portfolio,
improved portfolio performance and 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 June 30, 1999 or 1998.
<TABLE>
<CAPTION>
Three Months Ended June 30,
1999 1998
----------------------------
<S> <C> <C>
Average Net Finance Receivables(1) $50,413,662 $40,782,423
Average Indebtedness(2) 31,663,056 26,022,255
Total Revenues 2,835,182 2,078,087
Interest Expense 623,509 603,063
--------------------------
Net Interest Income 2,211,673 1,475,024
Gross Portfolio Yield(3) 22.50% 20.38%
Average Cost of Borrowed Funds(2) 7.88% 9.27%
--------------------------
Net Interest Spread(4) 14.62% 11.11%
Net Portfolio Yield(3) 17.55% 14.47%
Write-off to Liquidation(5) 5.31% 7.03%
Net Charge-Off Percentage(6) 4.49% 6.00%
<FOOTNOTE>
(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.
</TABLE>
<PAGE> 11
Three months ended June 30, 1999 compared to three months ended
June 30, 1998
Interest Income and Loan Portfolio
Interest income on finance receivables, predominately
finance charge income, increased 36% to $2.8 million for the
period ended June 30, 1999, from $2.1 million for the period
ended June 30, 1998. The net finance receivable balance totaled
$41.9 million at June 30, 1999, an increase of 20% from the $35.0
million at June 30, 1998. The gross finance receivable balance
increased 22% to $67.2 million at June 30, 1999 from $55.0
million at June 30, 1998. The primary reason interest revenue
increased was the increase in the outstanding loan portfolio. The
gross portfolio yield increased from 20.38% for the period ended
June 30, 1998 to 22.50% for the period ended June 30, 1999. The
primary reason that the gross portfolio yield increased was the
result of lower than anticipated write-off's on the existing
portfolio. The primary reason that net finance receivables
increased was the opening of one additional branch and the
increased size of several existing branches.
Computer Software Business
For the three month period ended June 30, 1999 revenues of NDS
were $135,448 compared with revenues of $109,793 for the three
month period ended June 30, 1998, an increase of 23%. This
increase was primarily due to an increase in the installations of
upgrades to existing customers, driven by the year 2000 issue.
Operating income for the three months ended June 30, 1999 was
$395 compared with an operating income of $18,118 for 1998. The
Company expects both operating revenues and income of NDS to
remain stable, although no assurance can be given in this regard.
Operating Expenses
Operating expenses, excluding provision for credit losses
and interest expense, increased to $1,282,026 for the period
ended June 30, 1999 from $976,873 for the period ended June 30,
1998. This increase of 31% was attributable to the opening of
one additional office, increased home office personnal and
increased general operating expenses.
Interest Expense
Interest expense increased to $623,509 for the period ended
June 30, 1999 as compared to $603,063 for the period ended June
30, 1998. This increase was due to an increase in average
outstanding borrowings from $26.0 million to $31.7 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
9.27% for the period ended June 30, 1998 to 7.88% for the period
ended June 30, 1999 .
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
$552,000. As of June 30, 1999, the Company had 211active pools.
The Company pools Contracts according to branch location
because the branches purchase contracts in different markets
located in Florida and Georgia. 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.
<PAGE> 12
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 June 30, 1999, the Company had
established reserves for losses on Contracts of $9,462,978 or
14.08% of gross outstanding receivables under the Contracts.
The provision for credit losses was $250,678 for the three
month period ended June 30, 1999 as compared to $184,457 for the
three month period ended June 30, 1998. This increase was due
primarily to the 20% increase in the net finance receivable
balance as of June 30, 1999 compared to June 30, 1998.
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>
Three months ended Three months ended
June 30, 1999 June 30, 1998
---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Contracts
Gross Balance Outstanding $64,799,801 $53,698,222
Dollar Dollar
Delinquencies Amount Percent* Amount Percent*
------- -------- ------ --------
30 to 59 days $1,633,902 2.52% $1,830,953 3.41%
60 to 89 days 431,504 0.67% 409,741 0.76%
90 + days 118,106 0.18% 225,804 0.42%
--------- ----- --------- -----
Total Delinquencies $2,183,512 $2,466,498
*Total Delinquencies
as percent of
outstanding balance 3.37% 4.59%
Direct Loans
Gross Balance Outstanding $2,425,782 $1,276,202
Delinquencies
30 to 59 days $8,273 0.34% $4,009 0.31%
60 to 89 days 8,812 0.36% 1,380 0.11%
90 + days 647 0.03% 692 0.06%
----- ------ ----- -----
Total Delinquencies $17,732 $6,081
*Total Delinquencies
as a percent of
outstanding balance 0.73% 0.48%
</TABLE>
<PAGE> 13
Income Taxes
The Company's effective tax rate remained relatively consistent
at 38.33% and 38.55% for the three months ended June 30, 1999 and
1998, respectively.
Liquidity and Capital Resources
The Company's cash flows for the three months ended June 30, 1999
and June 30, 1998 are summarized as follows:
<TABLE>
Three months ended Three months ended
June 30, June 30,
1999 1998
----------------------------------------
<S> <C> <C>
Cash provided by (used in):
Operating Activities - $1,217,254 $ 296,209
Investing Activities -
(primarily purchase
of Contracts) (2,248,858) (2,783,202)
Financing Activities 791,259 2,224,000
Net (decrease) in cash (240,345) (262,993)
</TABLE>
The Company's primary use of working capital during the
three months ended June 30, 1999 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 June 30,
1999 the Company had approximately $4.3 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 Company is currently negotiating with
its lending source to increase its Line of credit from $35
million to $40 million.
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 fifteen branch locations,
twelve 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 is
currently negotiating with its lending source to increase its
Line of credit.
The Company believes that opportunity for growth continues
to exist in the States of Florida and Georgia and continues to
evaluate other markets in these states. The Company has
identified Charlotte, North Carolina as its location for the
Company's sixteenth branch location. The Company is currently
evaluating other markets in North Carolina for possible expansion
during fiscal 2000.
<PAGE> 14
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 of all systems that could be
significantly affected by the Year 2000. The completed assessment
indicated that some of the Company's significant information
technology systems could be affected including the Company's
internally developed proprietary accounting application software
which is the integral component of the Financial subsidiary's
data processing systems and the Company's commercial application
software which is sold through the Company's software subsidiary
NDS. In addition the Company has identified Year 2000
deficiencies within its report-writer which the Company utilizes
to produce most of its internal accounting and operational
reports.
Based on recent assessments the Company determined that
it will be required to modify or replace significant portions of
its software and certain hardware so that those systems will
properly utilize dates beyond December 31, 1999. The Company
presently believes that with modifications or replacements of
existing software and certain hardware, the Year 2000 Issue can
be mitigated. However, if such modifications and replacements are
not completed timely, the Year 2000 Issue could have a material
impact on the operations of the Company.
For its information technology exposures, to date the
Company is 100% complete on the remediation phase. Once software
is reprogrammed or replaced for a system, the Company begins
testing and implementation. To date the Company has completed
100% of its testing and has implemented 75% of its remediated
systems. All remediated systems will be fully tested and
implemented by August 31, 1999, with 100% completion targeted for
September 30, 1999.
The remediation of operating equipment is not a Year
2000 issue with the Company because it has no operating equipment
that would be affected, therefore no testing is required.
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.
The Company will utilize both internal and external
resources to reprogram, or replace, test, and implement the
software and operating equipment for Year 2000 modifications. The
total cost of the Year 2000 project is estimated at $25,000 and
is being funded through operating cash flows. To date, the
Company has incurred approximately $15,000 related to all phases
of the Year 2000 project. The total remaining project costs are
attributable to the purchase of new software and operating
equipment, which will be capitalized.
<PAGE> 15
Management of the Company believes it has an effective
program in place to resolve the Year 2000 issue in a timely
manner. As noted above, the Company has not yet completed all
necessary phases of the Year 2000 program. In the event that the
Company does not complete any additional phases, the Company
might be unable to invoice customers, collect payments or produce
all the necessary reports to operate effectively. In addition,
disruptions in the economy generally resulting from Year 2000
issues could also materially adversely affect the Company. The
Company could be subject to litigation for computer systems
record failure. The amount of potential liability and lost
revenue cannot be reasonably estimated at this time.
The Company currently has no contingency plan in place
in the event it does not complete all phases of the Year 2000
program.
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.
<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
August 11, 1999.
NICHOLAS FINANCIAL, INC.
(Registrant)
Date: August 11, 1999 /s/ Peter L. Vosotas
------------------------
Peter L. Vosotas
Chairman, President, Chief
Executive Officer
(Principal Executive Officer)
Date: August 11, 1999 /s/ Ralph T. Finkenbrink
---------------------------
Ralph T. Finkenbrink
(Principal Financial Officer
and Accounting Officer)
<PAGE> 17
EXHIBIT INDEX
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Articles of Incorporation of Nicholas Financial,
Inc. and By-Laws
Incorporated by reference to the Company's Form
10-SB. File No. 0-26680
4.1 Stock Certificate
Incorporated by reference to Exhibit 4.1 to
the Company's Form 10-SB (File No. 0-26680)
10.1.1 Loan and Security Agreement dated March 31, 1993
between BA Business Credit, Inc. and Nicholas
Financial, Inc.
Incorporated by reference to Exhibit 10.1.1 to
the Company's Form 10-SB (File No. 0-26680)
10.1.2 Loan Modification Agreement dated January 14, 1994
Incorporated by reference to Exhibit 10.1.2 to the
Company's Form 10-SB (File No. 0-26680)
10.1.3 Temporary Line Increase Agreement dated
Mach 28, 1994
Incorporated by reference to Exhibit 10.1.3 to
the Company's Form 10-SB (File No. 0-26680)
10.1.4 Second Loan Modification Agreement dated
June 3, 1994
Incorporated by reference to Exhibit 10.1.4
to the Company's Form 10-SB (File No. 0-26680)
10.1.5 Amendment No. 3 to Loan Agreement dated
July 5, 1994
Incorporated by reference to Exhibit 10.1.5 to
the Company's Form 10-SB (File No. 0-26680)
10.1.6 Amendment No. 4 to Loan Agreement and Security
Agreement
Incorporated by reference to Exhibit 10.1.6 to
the Company's Form 10-SB (File No. 0-26680)
10.1.7 Fifth Loan Modification Agreement dated
July 13, 1995
Incorporated by reference to Exhibit
10.1.7 to the Company's Form 10-KSB for the
fiscal year ended March 31, 1996
10.1.8 Sixth Loan Modification Agreement dated
May 13, 1996
Incorporated by reference to Exhibit 10.1.8 to
the Company's Form 10-QSB for the three months
ended June 30, 1996
<PAGE> 18
10.1.9 Amendment No. 7 to Loan and Security Agreement
dated July 5, 1997
Incorporated by reference to Exhibit 10.1.9 to
the Company's Form 10-QSB for the three months
ended September 30, 1997
10.2.0 Amendment No. 8 to Loan and Security Agreement
dated September 18, 1998
Incorporated by reference to Exhibit 10.2.0 to
the Company's Form 10-QSB for the three months
ended September 30, 1998
10.2.1 Amendment No. 9 to Loan and Security Agreement
dated November 25, 1998
Incorporated by reference to Exhibit 10.2.1 to
the Company's Form 10-QSB for the three months
ended December 31, 1998
27 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
None
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from the
condensed consolidated balance sheet at June 30, 1999, and the
condensed consolidated statements of income for the 3 months
ended June 30, 1999 and 1998. Both are qualified in their
entirety by reference to such.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> MAR-31-2000 MAR-31-1999
<PERIOD-END> JUN-30-1999 JUN-30-1998
<CASH> 269,073 0
<SECURITIES> 0 0
<RECEIVABLES> 41,906,154 0
<ALLOWANCES> 9,462,978 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 0
<PP&E> 547,876 0
<DEPRECIATION> 339,226 0
<TOTAL-ASSETS> 44,151,223 0
<CURRENT-LIABILITIES> 35,108,375 0
<BONDS> 0 0
0 0
0 0
<COMMON> 3,702,587 0
<OTHER-SE> 5,340,261 0
<TOTAL-LIABILITY-AND-EQUITY> 44,151,223 0
<SALES> 135,448 109,793
<TOTAL-REVENUES> 2,970,630 2,187,880
<CGS> 15,531 22,701
<TOTAL-COSTS> 1,242,355 928,721
<OTHER-EXPENSES> 24,140 25,451
<LOSS-PROVISION> 250,678 184,457
<INTEREST-EXPENSE> 623,509 603,063
<INCOME-PRETAX> 814,417 423,487
<INCOME-TAX> 312,270 163,263
<INCOME-CONTINUING> 502,147 260,224
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 502,147 260,224
<EPS-BASIC> .21 .11
<EPS-DILUTED> .20 .11
<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>
