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, 2001
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 31st, 2001 there were 2,370,819 shares of common stock
outstanding
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, 2001...................................3
Condensed Consolidated Statements of Income
for the three months ended June 30, 2001 and 2000.....4
Condensed Consolidated Statements of Cash Flows
for the three months ended June 30, 2001 and 2000.....5
Notes to the Condensed Consolidated
Financial Statements..................................6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................11
Part II. Other Information
Item 1. Legal Proceedings.....................................16
Item 2. Changes in Securities.................................16
Item 3. Defaults upon Senior Securities.......................16
Item 4. Submission of Matters to a Vote of Security Holders...16
Item 5. Other Information.....................................16
Item 6. Exhibits and Reports on Form 8-K......................16
Signatures............................................17
Exhibit Index.........................................18
3
Nicholas Financial, Inc.
Condensed Consolidated Balance Sheet
(Unaudited)
June 30
2001
------------
Assets
Cash $ 217,005
Finance receivables, net 67,114,006
Accounts receivable 15,387
Prepaid expenses and other assets 606,894
Property and equipment, net 326,099
Deferred income taxes 1,076,503
------------
Total assets $69,355,894
============
Liabilities
Line of credit $48,973,426
Notes payable - related party 768,008
Accounts payable 2,804,758
Derivatives 989,165
Income taxes payable 577,138
Deferred revenues 673,999
------------
Total liabilities 54,786,494
Shareholders' equity
Preferred stock, no par: 5,000,000 shares
authorized;none issued and outstanding -
Common stock, no par: 50,000,000 shares
authorized; 2,369,819 shares issued and
outstanding 3,832,852
Other comprehensive income (loss) (971,024)
Retained earnings 11,707,572
------------
14,569,400
------------
Total liabilities and shareholders' equity $69,355,894
============
See accompanying notes.
4
Nicholas Financial, Inc.
Condensed Consolidated Statements of Income
(Unaudited)
Three months ended
June 30
2001 2000
-----------------------
Revenue:
Interest income on finance receivables $4,531,751 $3,909,514
Sales 99,120 116,810
-----------------------
4,630,871 4,026,324
Expenses:
Cost of sales 23,689 25,857
Marketing 110,457 98,279
Administrative 1,684,526 1,524,134
Provision for credit losses 352,649 371,710
Depreciation and amortization 45,000 27,000
Interest expense 995,832 835,023
-----------------------
3,212,153 2,882,003
-----------------------
Operating income before income taxes 1,418,718 1,144,321
Income tax expense (benefit):
Current 543,320 516,007
Deferred (5,615) (75,000)
-----------------------
537,705 441,007
-----------------------
Net income $881,013 $703,314
=======================
Earnings per share - basic $0.38 $0.30
=======================
Earnings per share - diluted $0.35 $0.28
=======================
See accompanying notes.
5
Nicholas Financial, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Three months ended June 30
2001 2000
--------------------------
Operating activities
Net income $ 881,013 $ 703,314
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation of property and equipment 45,000 27,000
Provision for credit losses 352,649 371,710
Deferred income taxes (5,615) (75,000)
Changes in operating assets
and liabilities:
Accounts receivable (919) (6,681)
Prepaid expenses and other assets (57,708) (110,254)
Deferred revenues 62,270 51,999
Accounts payable (194,604) (359,648)
Income taxes payable 483,319 510,006
--------------------------
Net cash provided by
operating activities 1,565,405 1,112,446
Investing activities
Increase in finance receivables,
net of principal collected (2,425,787) (5,782,212)
Purchase of property and equipment (37,340) (35,618)
--------------------------
Net cash used in investing activities (2,463,127) (5,817,830)
Financing activities
Repayment of notes payable
- related party (200,000) (200,000)
Net proceeds from line of credit 850,000 4,800,000
Issuance (repurchase) of common stock 231,560 (48,905)
--------------------------
Net cash provided by
financing activities 881,560 4,551,095
--------------------------
Net decrease in cash (16,162) (154,289)
Cash, beginning of period 233,167 259,183
--------------------------
Cash, end of period $217,005 $104,894
==========================
See accompanying notes.
6
Nicholas Financial, Inc.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
June 30, 2001
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial
statements of Nicholas Financial Inc (the "Company") have been
prepared in accordance with accounting principles generally
accepted in the United States 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, 2001 are not necessarily indicative of the results that
may be expected for the year ending March 31, 2002. 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, 2001.
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:
7
Nicholas Financial, Inc.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
June 30, 2001
Three months ended
June 30,
2001 2000
----------------------
Numerator:
Numerator for basic earnings per
share - Net income available to
common stockholders $881,013 $703,314
Effect of dilutive securities:
Convertible debt 13,098 15,554
----------------------
Numerator for dilutive earnings
per share -income available to
common stockholders after
assumed conversions $894,111 $718,868
======================
Denominator:
Denominator for basic earnings per
share -weighted average shares 2,319,107 2,351,709
Effect of dilutive securities: (A)
Employee stock options 107,574 70,433
Convertible debt 155,556 180,556
----------------------
Denominator for diluted earnings
per share -adjusted weighted-
average shares and assumed
conversions 2,582,237 2,602,698
======================
Earnings per share - basic $0.38 $0.30
======================
Earnings per share - diluted $0.35 $0.28
======================
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 - 35,500
Warrants - 333,333
8
Nicholas Financial, Inc.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
June 30, 2001
3. Finance Receivables
Finance receivables consist of automobile finance installment
contracts and direct consumer loans and are detailed as follows:
Finance receivables, gross contract $106,689,451
Less:
Unearned interest (25,179,387)
------------
81,510,064
Nonrefundable dealer reserves (10,789,149)
Allowance for credit losses (3,606,909)
------------
Finance receivables, net $67,114,006
============
The terms of the receivables range from 12 to 60 months and bear
a weighted average effective interest rate of 24%.
4. Line of Credit
The Company has a $75 million line of credit facility (the Line)
which expires on November 30, 2002. 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 million 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.
5. Notes Payable - Related Party
Notes payable consisted of the following:
Notes payable, due through January 2002, unsecured,
subordinated to the Line, with interest at 12% with
quarterly and semiannual interest payments. The
note is convertible at the option of the holder,
into common shares at $4.50 per share. $500,000
Note payable, unsecured, interest at 12%, principal
and interest due through August 2001, at which time
the entire principal balance is due. 268,008
---------
$768,008
9
Nicholas Financial, Inc.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
6. Derivatives and Hedging
In June 1998, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No.
133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS 133"). This statement establishes requirements
for accounting and reporting of derivative instruments and
hedging activities. SFAS 133 was updated by the issuance of SFAS
No. 137, "Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of SFAS No. 133" and
SFAS No. 138 "Accounting for Certain Derivative Instruments and
Certain Hedging Activities - amendment of FASB Statement No.
133." As amended, SFAS 133 establishes accounting and reporting
standards for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively
referred to as derivatives), and for hedging activities.
The Company adopted the provisions of SFAS 133, as amended by
SFAS 137 and SFAS 138, on April 1, 2001, which require that all
derivative instruments be recorded on the balance sheet at fair
value. The estimated fair value of derivative financial
instruments represents the amount required to enter into similar
offsetting contracts with similar remaining maturities based on
quoted market prices.
The Company utilizes interest rate swaps to manage its interest
rate exposure. The swaps effectively convert a portion of the
Company's floating rate debt to a fixed rate, more closely
matching the interest rate characteristics of the Company's
finance receivables. When entering into contracts intended by the
Company to receive hedge accounting treatment, the Company
formally designates and documents the financial instrument as a
hedge of a specific underlying exposure, as well as the risk
management objectives and strategies for undertaking the hedge
transaction.
The Company has entered into the following cash-flow hedges:
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%.
On May 17, 2000 the Company entered into an interest rate swap
with a notional amount of $10 million at a fixed rate of 6.87%.
On March 30, 2001 the Company entered into an interest rate swap
with a notional amount of $10 million at a fixed rate of 4.89%,
maturing on March 30, 2003.
The Company utilizes the above noted interest rate swaps to
manage its interest rate exposure. The swaps effectively convert
a portion of the Company's floating rate debt to a fixed rate,
more closely matching the interest rate characteristics of the
Company's finance receivables.
The Company has also entered into various interest rate option
agreements with maturities through May 17, 2004.
10
Nicholas Financial, Inc.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
For cash-flow hedge transactions, changes in the fair value of
the derivative instrument are recorded as a component of other
comprehensive income, and reclassified into earnings in the same
period or periods during which earnings are affected by the
variability of the cash flows of the hedged item. Any ineffective
portion of a derivative instrument's change in fair value is
immediately recognized in earnings.
In connection with the adoption of SFAS 133, the Company recorded
the fair value of its derivatives as a liability totaling
approximately ($975k) on April 1, 2001. The fair value of such
derivative was approximately ($989k) as of June 30, 2001. The
fair value of the options, approximately $18k, was accounted for
in the consolidated statement of income as a reduction to current
period earnings.
7. Subsequent Events
On August 7, 2001 the Board of Directors of Nicholas Financial,
Inc. declared a two-for-one stock split on the Company's
outstanding shares of common stock, payable in the form of a 100%
stock dividend on September 10, 2001 to shareholders of record as
of the close of business on August 28, 2001.
On August 8, 2001 the last subordinated debt holder of Nicholas
Financial, Inc converted their $500,000 note into common stock at
a price of $4.50 per share.
11
Part I. Item 2
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, 2001 to $881,013 from $703,314 for the three month
period ended June 30, 2000. Earnings were favorably impacted by
an increase in the outstanding loan portfolio. The Company's NDS
subsidiary did not contribute significantly to consolidated
operations in the three month periods ended June 30, 2001 or
2000.
Three Months Ended June 30
2001 2000
----------------------------
Average Net Finance Receivables(1) $80,590,601 $67,343,312
Average Indebtedness(2) 49,941,434 42,149,224
Total Interest Revenues 4,531,751 3,909,514
Interest Expense 995,832 835,023
----------------------------
Net Interest Income 3,535,919 3,074,491
Gross Portfolio Yield(3) 22.49% 23.22%
Average Cost of Borrowed Funds(2) 7.98% 7.92%
----------------------------
Net Interest Spread (4) 14.51% 15.30%
Net Portfolio Yield (3) 17.55% 18.26%
Write-off to Liquidation(5) 7.34% 5.68%
Net Charge-Off Percentage(6) 6.33% 4.81%
(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.
12
Three months ended June 30, 2001 compared to three months ended
June 30, 2000
Interest Income and Loan Portfolio
Interest revenue increased 16% to $4.5 million for the
period ended June 30, 2001, from $3.9 million for the period
ended June 30, 2000. The net finance receivable balance totaled
$67.1 million at June 30, 2001, an increase of 17% from the $57.4
million at June 30, 2000. The gross finance receivable balance
increased 16% to $106.7 million at June 30, 2001 from $92.0
million at June 30, 2000. The primary reason interest revenue
increased was the increase in the outstanding loan portfolio. The
gross portfolio yield decreased from 23.22% for the period ended
June 30, 2000 to 22.49% for the period ended June 30, 2001. The
primary reason that net finance receivables increased was the
increase in the receivable base of several existing branches.
Computer Software Business
Sales for the period ended June 30, 2001 were $99,120 compared
to $116,810 for the period ended June 30, 2000, a decrease of
15%. This decrease was primarily due to lower revenue from the
existing customer base and the continued emphasis on the finance
subsidiary.
Operating Expenses
Operating expenses, excluding provision for credit losses
and interest expense, increased to $1.9 million for the period
ended June 30, 2001 from $1.7 million for the period ended June
30, 2000. This increase of 11% was primarily attributable to the
additional staffing of several existing branches, increased home
office personnel and increased general operating expenses.
Interest Expense
Interest expense increased to $995,832 for the period ended
June 30, 2001 as compared to $835,023 for the period ended June
30, 2000. This increase was due to an increase in average
outstanding borrowings from $42.1 million to $49.9 million during
the comparable periods. The average cost of funds borrowed
increased from 7.92% for the period ended June 30, 2000 to 7.98%
for the period ended June 30, 2001.
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 83 Contracts
with an aggregate initial principal amount of approximately
$667,000. As of June 30, 2001, the Company had 303 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 accreted into 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 June 30, 2001, the Company had
established reserves for losses on Contracts of $14,114,163 or
18.09% of net outstanding receivables.
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:
Three Months Ended Three Months Ended
June 30, 2001 June 30, 2000
---------------------------------------
Contracts
Gross Balance Outstanding $102,217,743 $88,141,806
Dollar Dollar
Delinquencies Amount Percent* Amount Percent*
------- -------- -------- --------
30 to 59 days $2,096,637 2.05% $1,973,156 2.24%
60 to 89 days 570,215 0.56% 515,065 0.58%
90 + days 176,730 0.17% 110,227 0.13%
---------- ----- ---------- -----
Total Delinquencies $2,843,582 $2,598,448
*Total Delinquencies as
percent of outstanding
balance 2.78% 2.95%
Direct Loans
Gross Balance Outstanding $ 4,471,708 $ 3,898,563
Delinquencies
30 to 59 days $ 41,706 0.93% $ 28,812 0.74%
60 to 89 days 16,646 0.37% 5,405 0.14%
90 + days 609 0.01% 10,671 0.27%
-------- ----- ------- -----
Total Delinquencies $ 58,961 $ 44,888
*Total Delinquencies as a
percent of outstanding
balance 1.31% 1.15%
The provision for credit losses was $352,649 for the three
month period ended June 30, 2001 as compared to $371,710 for the
three month period ended June 30, 2000. The Company decreased its
total reserve percentage from 13.53% for the period ended June
30, 2000 to 13.49% for the period ended June 30, 2001. Management
believes that the reserve adjustments made during the three month
period ended June 30, 2001 are consistent with its reserve
methodology.
Income Taxes
The Company's effective tax rate remained relatively consistent
at 37.91% for the three months ended June 30, 2001, as compared
to 38.54% for the three months ended June 30, 2000.
15
Liquidity and Capital Resources
The Company's cash flows for the three months ended June 30, 2001
and June 30, 2000 are summarized as follows:
Three months ended Three months ended
June 30, 2001 June 30, 2000
--------------------------------------
Cash provided by (used in):
Operating Activities - $ 1,540,648 $ 1,112,446
Investing Activities -
(primarily purchase
of Contracts) (2,463,127) (5,817,830)
Financing Activities 906,317 4,551,095
Net decrease in cash (16,162) (154,289)
The Company's primary use of working capital during the
three months ended June 30, 2001 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 June 30,
2001 the Company had approximately $26.0 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 and, or the sale of additional
securities in the capital markets, will be sufficient to meet its
short term funding needs.
Future Expansion
The Company currently operates twenty-one branch locations,
fifteen in the State of Florida, three in the State of Georgia
and three 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 three 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 receivable growth
continues to exist in the States of Florida, Georgia and North
Carolina. The Company has identified Columbia, South Carolina as
an area where it may open its next branch location during fiscal
2002. The Company is also exploring expansion into additional
States where it currently has no presence. As of this date no
commitments have been made for additional expansion.
16
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
On June 30, 2001, the Company issued 44,444 shares of its
Common Stock to the Roger T. Mahan Grantor Trust (the "Grantor
Trust") pursuant to the Grantor Trust's exercise of its
conversion right under a Convertible Promissory Note, dated June
30, 1995 (the "Grantor Trust Note"), issued by the Company in
favor of the Grantor Trust. The aggregate principal amount of
the Grantor Trust Note was $200,000 and the maturity date was
June 30, 2001. The conversion price was $4.50 per share. As a
result of such conversion, the Grantor Trust Note was cancelled.
The issuance of shares of the Company's Common Stock pursuant to
this transaction is claimed to be exempt from registration under
the Securities Act of 1933, as amended, pursuant to Section 4(2)
thereof.
On August 9, 2001, the Company issued 111,111 shares of its
Common Stock to the Mahan Family Trust (the "Family Trust")
pursuant to the Family Trust's exercise of its conversion right
under a Convertible Promissory Note, dated November 30, 1992 (the
"Family Trust Note"), issued by the Company in favor of the
Family Trust. The aggregate principal amount of the Family Trust
Note was $500,000 and the maturity date was November 30, 2001,
subject to certain prepayment rights granted to the Company
thereunder. Pursuant to such rights, the Company gave notice on
July 10, 2001 that it intended to prepay the Family Trust Note in
full. Under the terms of the Family Trust Note, this
notification entitled the Family Trust to convert the note into
shares of Common Stock, at a conversion price of $4.50 per share.
As result of such conversion, the Family Trust Note was
cancelled. The issuance of shares of the Company's Common Stock
pursuant to this transaction is claimed to be exempt from
registration under the Securities Act of 1933, as amended,
pursuant to Section 4(2) thereof.
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
17
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 14, 2001.
NICHOLAS FINANCIAL, INC.
(Registrant)
Date: August 14, 2001 /s/ Peter L. Vosotas
-----------------------------
Peter L. Vosotas
Chairman, President,
Chief Executive Officer
(Principal Executive Officer)
Date: August 14, 2001 /s/ Ralph T. Finkenbrink
-----------------------------
Ralph T. Finkenbrink
(Principal Financial Officer
and Accounting Officer)
18
EXHIBIT INDEX
Item 13. Exhibits and Reports on Form 8-K
3.1 Articles of Incorporation and By-Laws of Nicholas Financial,
Inc. Incorporated by reference to the Company's Form 10-SB
(File No. 0-26680) filed on March 13, 1996
4.1 Stock Certificate
Incorporated by reference to Exhibit 4.1 to the Company's
Form 10-SB (File No. 0-26680) filed on March 13, 1996
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) filed on March 13, 1996
10.1.2 Amendment No. 1 to Loan Agreement dated January 14, 1994
Incorporated by reference to Exhibit 10.1.2 to the Company's
Form 10-SB (File No. 0-26680) filed on March 13, 1996
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) filed on March 13, 1996
10.1.4 Amendment No. 2 to Loan Agreement dated June 3, 1994
Incorporated by reference to Exhibit 10.1.4 to the Company's
Form 10-SB (File No. 0-26680) filed on March 13, 1996
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) filed on March 13, 1996
10.1.6 Amendment No. 4 to Loan Agreement dated March 31, 1995
Incorporated by reference to Exhibit 10.1.6 to the Company's
Form 10-SB (File No. 0-26680) filed on March 13, 1996
10.1.7 Amendment No. 5 to Loan 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 Amendment No. 6 to Loan 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
10.1.9 Amendment No. 7 to Loan 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
19
10.1.10 Amendment No. 8 to Loan 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
10.1.11 Amendment No. 9 to Loan 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
10.1.12 Amendment No. 10 to Loan Agreement dated November 24, 1999
Incorporated by reference to Exhibit 10.2.2 to the Company's
Form 10-QSB for the three months ended December 31, 1999
10.1.13 Amendment No. 11 to Loan Agreement dated August 1, 2000
Incorporated by reference to Exhibit 10.1.13 to the
Company's Form 10-KSB for the year ended March 31, 2001
10.1.14 Amendment No. 12 to Loan Agreement dated March 16, 2001
Incorporated by reference to Exhibit 10.1.14 to the
Company's Form 10-KSB for the year ended March 31, 2001
10.3.1 Employee Stock Option Plan
Incorporated by reference to the Company's 1999 Annual proxy
statement dated June 29, 1999
10.3.2 Non-Employee Stock Option Plan
Incorporated by reference to the Company's 1999 Annual proxy
statement dated June 29, 1999
10.4.1 Employment Contract, dated November 22, 1999,between Nicholas
Financial, Inc. and Ralph Finkenbrink, Senior Vice President
of Finance.
Incorporated by reference to Exhibit 10.2.1 to the Company's
Form 10-QSB for the three months ended December 31, 1999
10.4.2 Employment Contract, dated March 16, 2001, between Nicholas
Financial, Inc. and Peter L. Vosotas President & Chief
Executive Officer.
Incorporated by reference to the Company's 2001 Annual proxy
statement dated July 2, 2001
21 Subsidiaries of Nicholas Financial, Inc.
Incorporated by reference to the Company's Form 10-SB (File
No. 0-26680) filed on March 13, 1996
24 Powers of Attorney (included on signature page hereto)
(b) Reports on Form 8-K
The Company did not file any Current Reports on Form 8-K
during the first quarter ended June 30, 2001.