EXHIBIT 99.3
NICHOLAS FINANCIAL, INC.
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(Unaudited)
Summary of Transaction
On June 15, 2024, Nicholas Financial, Inc. (the “Company”) closed the Share Purchase Agreement to acquire (the “Acquisition”) a majority ownership interest in Amplex Electric, Inc. ("Amplex”), which the sellers have agreed to sell, and the Company has agreed to purchase, 51% of the issued and outstanding common shares, no par value per share, of Amplex.
In conjunction with the closing of the Amplex Acquisition, the Company converted the outstanding principal and accrued interest of approximately $0.8 million under the Term Loan Advances into 421 shares of Amplex common stock at the share purchase price of $1,792.55 and purchased an additional 1,674 shares of Amplex common stock at a price of $1,792.55 per share for a total of $3.0 million. These transactions concurrently executed at the Transaction Closing Date increased the Company's ownership in Amplex to 56.5%.
The foregoing description of the Acquisition is qualified in its entirety by reference to the full text of the Share Purchase Agreement, which was filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K on May 6, 2024.
Pro Forma Information
The unaudited pro forma condensed combined statements of operations for the three months ended June 30, 2024 and June 30, 2023 combine the historical consolidated statements of operations of the Company and Amplex, giving effect to the Acquisition as if it had occurred on April 1, 2024 and April 1, 2023, respectively.
The unaudited pro forma condensed combined financial information (“pro forma information”) is based on, and should be read in conjunction with, the unaudited historical condensed consolidated financial statements of the Company as of June 30, 2024. The unaudited historical condensed combined financial statements of the Company as of June 30, 2024 include discontinued operations presentation related to the Company’s historical consumer finance business for which the historical assets were sold to Westlake Services, LLC dba Westlake Financial, a California limited liability company ("Westlake Financial"), as disclosed in the Company’s Current Report on Form 8-K on May 1, 2024.
The historical consolidated financial information has been adjusted in the pro forma information to give effect to pro forma events that are directly attributable to the Acquisition, factually supportable, and with respect to the unaudited pro forma condensed combined statements of operations, expected to have a continuing impact on the combined results of operations of more than one year.
The pro forma information has been prepared using the acquisition method of accounting in accordance with accounting principles generally accepted in the United States of America. The acquisition method of accounting is dependent upon certain valuations that are provisional and subject to change. The pro forma adjustments are based on the assumptions and information available at the time of the filing of this Form 8-K/A. The Company will finalize the acquisition accounting within the required measurement period, but no later than June 15, 2025.
1
The unaudited pro forma condensed combined statements of operations do not reflect any potential cost savings or synergies that may be realized as a result of the Acquisition and also do not reflect any integration-related costs to achieve those potential cost savings or synergies. The integration-related costs will continue to be expensed as incurred in the appropriate accounting periods following completion of the Acquisition. For a detailed discussion of these risk factors, please refer to the risk, uncertainties and other factors described in the Company’s filings with the Securities and Exchange Commission.
The pro forma information should be read in conjunction with the accompanying notes to the pro forma information. The pro forma information is not necessarily indicative of what the financial position or results of operations would have been had the Acquisition occurred as of the dates indicated nor does it project the future financial position or operating results of the combined company.
2
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2024
| NICK (Historical) |
|
| Amplex (Historical) |
|
| Transaction Accounting Adjustments |
| Notes | Pro Forma Condensed Combined |
| ||||
Revenue |
|
|
|
|
|
|
|
|
|
|
| ||||
Wireless internet services | $ | 319 |
|
| $ | 1,764 |
|
| $ | (319 | ) | A | $ | 1,764 |
|
Fiber internet services |
| 106 |
|
|
| 713 |
|
|
| (106 | ) | A |
| 713 |
|
Other revenue |
| 64 |
|
|
| 426 |
|
|
| (64 | ) | A |
| 426 |
|
Total revenue: |
| 489 |
|
|
| 2,903 |
|
|
| (489 | ) |
|
| 2,903 |
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
| ||||
Cost of wireless and fiber internet services |
| 30 |
|
|
| 167 |
|
|
| (30 | ) | A |
| 167 |
|
Cost of other revenue |
| 36 |
|
|
| 196 |
|
|
| (36 | ) | A |
| 196 |
|
Plant specific operations |
| 74 |
|
|
| 316 |
|
|
| (74 | ) | A |
| 316 |
|
Plant nonspecific operations |
| 38 |
|
|
| 218 |
|
|
| (38 | ) | A |
| 218 |
|
General and administrative |
| 3,764 |
|
|
| 2,272 |
|
|
| (831 | ) | A |
| 4,105 |
|
|
|
|
|
|
|
|
| (1,100 | ) | C |
|
| |||
Depreciation and amortization |
| 94 |
|
|
| 437 |
|
|
| (80 | ) | A |
| 597 |
|
|
|
|
|
|
|
|
| 146 |
| B |
|
| |||
Total operating expenses |
| 4,036 |
|
|
| 3,606 |
|
|
| (2,043 | ) |
|
| 5,599 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
(Loss) income from operations |
| (3,547 | ) |
|
| (703 | ) |
|
| 1,554 |
|
|
| (2,696 | ) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Other (expense) income |
|
|
|
|
|
|
|
|
|
|
| ||||
Interest expense, net |
| - |
|
|
| (300 | ) |
|
| 300 |
| E |
| - |
|
Other income (expense) |
| - |
|
|
| 50 |
|
|
| - |
|
|
| 50 |
|
Gain on sale of assets |
| - |
|
|
| 1 |
|
|
| - |
|
|
| 1 |
|
Income from cash equivalents |
| 411 |
|
|
| - |
|
|
| - |
|
|
| 411 |
|
Emigration tax expense |
| (1,711 | ) |
|
| - |
|
|
| - |
|
|
| (1,711 | ) |
Loss on dissenting shareholders' liability |
| (829 | ) |
|
| - |
|
|
| - |
|
|
| (829 | ) |
Total other expense, net |
| (2,129 | ) |
|
| (249 | ) |
|
| 300 |
|
|
| (2,078 | ) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
(Loss) income before income taxes |
| (5,676 | ) |
|
| (952 | ) |
|
| 1,854 |
|
|
| (4,774 | ) |
Income tax expense (benefit) |
| (128 | ) |
|
| - |
|
|
| 128 |
|
|
| - |
|
(Loss) income from continuing operations |
| (5,548 | ) |
|
| (952 | ) |
|
| 1,726 |
|
|
| (4,774 | ) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Loss from continuing operations attributable to noncontrolling interest |
| (1 | ) |
|
| - |
|
|
| (13 | ) | D |
| (14 | ) |
Loss from continuing operations attributable to redeemable noncontrolling interest |
| (210 | ) |
|
| - |
|
|
| (180 | ) | D |
| (390 | ) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
(Loss) income from continuing operations attributable to common shareholders | $ | (5,337 | ) |
| $ | (952 | ) |
| $ | 1,919 |
|
| $ | (4,370 | ) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net loss per share attributable to common shareholders from continuing operations: |
|
|
|
|
|
|
|
|
|
|
| ||||
Basic | $ | (0.79 | ) |
|
|
|
|
|
|
| $ | (0.65 | ) | ||
Diluted | $ | (0.79 | ) |
|
|
|
|
|
|
| $ | (0.65 | ) |
3
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2023
| NICK (Historical) |
|
| Amplex (Historical) |
|
| Transaction Accounting Adjustments |
| Notes |
| Pro Forma Condensed Combined |
| ||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Wireless internet services | $ | - |
|
| $ | 1,826 |
|
| $ | - |
|
|
| $ | 1,826 |
|
Fiber internet services |
| - |
|
|
| 468 |
|
|
| - |
|
|
|
| 468 |
|
Other revenue |
| - |
|
|
| 362 |
|
|
| - |
|
|
|
| 362 |
|
Total revenue: |
| - |
|
|
| 2,656 |
|
|
| - |
|
|
|
| 2,656 |
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cost of wireless and fiber internet services |
| - |
|
|
| - |
|
|
| - |
|
|
|
| - |
|
Cost of other revenue |
| - |
|
|
| 147 |
|
|
| - |
|
|
|
| 147 |
|
Plant specific operations |
| - |
|
|
| 349 |
|
|
| - |
|
|
|
| 349 |
|
Plant nonspecific operations |
| - |
|
|
| 219 |
|
|
| - |
|
|
|
| 219 |
|
Fair value and other adjustments, net |
| - |
|
|
| - |
|
|
| - |
|
|
|
| - |
|
General and administrative |
| 1,478 |
|
|
| 1,023 |
|
|
| - |
|
|
|
| 2,501 |
|
Depreciation and amortization |
| 22 |
|
|
| 404 |
|
|
| 170 |
| F |
|
| 596 |
|
Total operating expenses |
| 1,500 |
|
|
| 2,142 |
|
|
| 170 |
|
|
|
| 3,812 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
(Loss) income from operations |
| (1,500 | ) |
|
| 514 |
|
|
| (170 | ) |
|
|
| (1,156 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Other (expense) income |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest expense, net |
| - |
|
|
| (134 | ) |
|
| 134 |
| H |
|
| - |
|
Other income |
| 12 |
|
|
| 1 |
|
|
| - |
|
|
|
| 13 |
|
Gain on sale of assets |
| - |
|
|
| - |
|
|
| - |
|
|
|
| - |
|
Income from cash equivalents |
| - |
|
|
| - |
|
|
| - |
|
|
|
| - |
|
Emigration tax expense |
| - |
|
|
| - |
|
|
| - |
|
|
|
| - |
|
Loss on dissenting shareholders' liability |
| - |
|
|
| - |
|
|
| - |
|
|
|
| - |
|
Other income |
| - |
|
|
| - |
|
|
| - |
|
|
|
| - |
|
Total other income (expense), net |
| 12 |
|
|
| (133 | ) |
|
| 134 |
|
|
|
| 13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
(Loss) income before income taxes |
| (1,488 | ) |
|
| 381 |
|
|
| (36 | ) |
|
|
| (1,143 | ) |
Income tax expense (benefit) |
| - |
|
|
| - |
|
|
| - |
|
|
|
| - |
|
(Loss) income from continuing operations |
| (1,488 | ) |
|
| 381 |
|
|
| (36 | ) |
|
|
| (1,143 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Loss from continuing operations attributable to noncontrolling interest |
| - |
|
|
|
|
|
| (8 | ) | G |
|
| (8 | ) | |
Income from continuing operations attributable to redeemable noncontrolling interest |
| - |
|
|
|
|
|
| 112 |
| G |
|
| 112 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
(Loss) income from continuing operations attributable to common shareholders | $ | (1,488 | ) |
| $ | 381 |
|
| $ | (140 | ) |
|
| $ | (1,247 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net loss per share attributable to common shareholders from continuing operations: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Basic | $ | (0.20 | ) |
|
|
|
|
|
|
|
| $ | (0.17 | ) | ||
Diluted | $ | (0.20 | ) |
|
|
|
|
|
|
|
| $ | (0.17 | ) |
4
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Note 1 – Description of Transaction
On June 15, 2024, the Company closed upon the acquisition of 51% of the issued and outstanding common shares of Amplex for a total purchase consideration of $18.4 million, which was paid in cash pursuant to the terms and conditions of the Share Purchase Agreement dated as of June 15, 2024. Amplex is an Ohio-based provider of rural broadband services to business and residential customers. The Company acquired Amplex in order to provide better shareholder value over time.
In conjunction with the closing of the Amplex Acquisition, the Company converted the outstanding principal and accrued interest of approximately $0.8 million under the Term Loan Advances into 421 shares of Amplex common stock at the share purchase price of $1,792.55 and purchased an additional 1,674 shares of Amplex common stock at a price of $1,792.55 per share for a total of $3.0 million. These transactions concurrently executed at the Transaction Closing Date increased the Company's ownership in Amplex to 56.5%.
The foregoing description of the Acquisition is qualified in its entirety by reference to the full text of the Share Purchase Agreement, which was filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K on May 6, 2024.
Note 2 – Basis of Presentation
Pro Forma Presentation
The unaudited pro forma condensed combined financial information (“pro forma information”) has been prepared in accordance with Article 11, Pro Forma Financial Information, under Regulation S-X of the Securities and Exchange Act of 1934 (the “Exchange Act”), and is for informational purposes only.
The unaudited pro forma condensed combined statements of operations for the three months ended June 30, 2024 and 2023 combine the historical consolidated statements of operations of the Company and Amplex, giving effect to the Acquisition as if it had occurred on April 1, 2024 and 2023, respectively.
The historical consolidated financial information has been adjusted in the pro forma information to give effect to pro forma events that are directly attributable to the Acquisition, factually supportable, and with respect to the unaudited pro forma condensed combined statements of operations, expected to have a continuing impact on the results of operations of the combined company of more than one year.
The pro forma information has been prepared using the acquisition method of accounting in accordance with accounting principles generally accepted in the United States of America. Under the acquisition method of accounting, the Acquisition is accounted for by recognizing the acquired assets, including separately identifiable intangible assets, and assumed liabilities at their acquisition-date fair values. Any excess of the purchase consideration over the acquisition-date fair values of these identifiable assets and liabilities is recognized as goodwill. The pro forma adjustments are based upon the assumptions and information available at the time of the preparation of this Form 8-K/A and may be subject to change. The Company will finalize the acquisition accounting within the required measurement period, but no later than June 15, 2025. Differences between these estimates of fair value and the final acquisition accounting may occur, and those differences could have a material impact on the pro forma information and the combined company’s future results of operations and financial position. At the time of the filing of this Form 8-K/A, the Company does not expect material changes to the assets acquired or liabilities assumed.
5
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The unaudited pro forma condensed combined statements of operations do not reflect any potential cost savings or synergies that may be realized as a result of the Acquisition and also do not reflect any integration-related costs to achieve those potential cost savings or synergies. Integration-related costs will continue to be expensed as incurred in the appropriate accounting periods following completion of the Acquisition. Although the Company projects that cost savings and synergies will result from the Acquisition, there can be no assurance that they will be achieved and such potential cost savings or synergies are subject to risks, uncertainties and other factors. For a detailed discussion of these risk factors, please refer to the risk, uncertainties and other factors described in the Company’s filings with the Securities and Exchange Commission.
Accounting policies
As part of preparing these unaudited pro forma condensed combined financial statements, certain reclassifications were made to align the Company and Amplex’s financial statement presentation. Upon consummation of the Transaction, management performed a comprehensive review of the two entities’ accounting policies and concluded that the differences between the accounting policies of the two companies are not material. The accounting policies used in the presentation of the pro forma information are those disclosed in the Company’s unaudited condensed consolidated financial statements for the three months ended June 30, 2024 and 2023, respectively.
Note 3 – Estimated Fair Value of Assets Acquired and Liabilities Assumed
The unaudited pro forma condensed combined financial information includes various assumptions, including those related to the preliminary purchase price allocation of the assets acquired and liabilities assumed from Amplex based on management's best estimates of fair value. The final purchase price allocation may vary based on final valuations and analyses of the fair value of the acquired assets and assumed liabilities. Accordingly, the pro forma adjustments are preliminary.
The following table shows the preliminary allocation of the purchase price for Amplex to the acquired identifiable assets, assumed liabilities and pro forma goodwill.
(In thousands) |
|
|
| |
|
|
|
| |
Cash and cash equivalents | $ | 32 |
| |
Accounts receivable |
| 124 |
| |
Materials and supplies |
| 538 |
| |
Operating lease right-of-use |
| 502 |
| |
Prepaid expenses and other assets |
| 266 |
| |
Property, plant, and equipment |
|
| 23,750 |
|
Intangible assets |
|
| 11,130 |
|
Goodwill |
|
| 10,434 |
|
Total assets acquired |
|
| 46,776 |
|
|
|
|
| |
Accounts payable |
|
| 1,260 |
|
Accrued expenses and other liabilities |
| 231 |
| |
Lease liabilities |
| 502 |
| |
Deferred income taxes |
|
| 4,668 |
|
Deferred revenue |
| 556 |
| |
Total liabilities assumed |
|
| 7,217 |
|
|
|
|
| |
Total fair value of net assets acquired |
|
| 39,559 |
|
Less: redeemable noncontrolling interest |
|
| (17,644 | ) |
Less: noncontrolling interest |
|
| (3,551 | ) |
Total purchase price | $ |
| 18,364 |
|
6
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Note 4 – Statements of Operations Pro Forma Adjustments
Adjustments included in the columns under the heading “Notes” represent the following for the three months ended June 30, 2024:
| Three Months Ended June 30, 2024 |
| |
Quarterly depreciation after purchase price allocation | $ | 447 |
|
Less: historical depreciation previously recorded |
| (428 | ) |
Quarterly amortization after purchase price allocation |
| 136 |
|
Less: historical amortization previously recorded |
| (9 | ) |
Total | $ | 146 |
|
Adjustments included in the columns under the heading “Notes” represent the following for the three months ended June 30, 2023:
| Three Months Ended June 30, 2023 |
| |
Quarterly depreciation after purchase price allocation | $ | 447 |
|
Less: historical depreciation previously recorded |
| (404 | ) |
Quarterly amortization after purchase price allocation |
| 136 |
|
Less: historical amortization previously recorded |
| (9 | ) |
Total | $ | 170 |
|
7
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Note 5 – Earnings per Share
The components of basic and diluted earnings per share were as follows:
| Three months ended June 30, |
| ||||||
| (In thousands, except per share amounts) |
| ||||||
|
| 2024 |
|
| 2023 |
| ||
Numerator |
|
|
|
|
| |||
Loss from continuing operations attributable to common shareholders |
| $ | (4,370 | ) |
| $ | (1,247 | ) |
|
|
|
|
|
|
| ||
Denominator |
|
|
|
|
|
| ||
Denominator for basic loss per share - weighted-average shares outstanding |
|
| 6,749 |
|
|
| 7,279 |
|
Dilutive effect of stock options |
| 5 |
|
| 10 |
| ||
Denominator for diluted earnings per share |
| $ | 6,754 |
|
| $ | 7,289 |
|
|
|
|
|
|
|
| ||
Per share loss attributable to common shareholders from continuing operations |
|
|
|
|
|
| ||
Basic |
| $ | (0.65 | ) |
| $ | (0.17 | ) |
Diluted |
| $ | (0.65 | ) |
| $ | (0.17 | ) |
8