cash store financial/the (CSF) Snapshot

The Ontario government has launched legal proceedings against The Cash Store Financial Services Inc. over its operations and licences. The application to begin legal action in the Ontario Superior Court of Justice, filed by the Ministry of Consumer Services on June 7, asks the court to declare that by providing consumers with lines of credit, Cash Store is essentially in the payday loan business and is therefore subject to Ontario's Payday Loans Act. At the same time, the government wants the court to order the company to obtain a payday-loan broker licence. The lawsuit follows a decision by the consumer protection branch of Ontario's Ministry of Consumer Affairs to revoke Cash Store's payday lender licences on Feb. 4. Ontario served notice that it intended to strip the licence of the Edmonton-based company, which has 512 branches across Canada and 25 in the United Kingdom, because it alleges that by charging fees it allowed Cash Store to end-run the province's maximum borrowing cap of $21 per $100 lent. Cash Store disagreed, arguing that its lines of credit are not governed by the provincial act, and filed for a judicial review on April 29 seeking a declaration that the product is not a payday loan.

The Cash Store Financial Services Inc. announced that proposed class action proceedings have been commenced in Ontario and Alberta against the company and certain of its present and former directors and officers. The plaintiffs each allege, among other things, that the company made misrepresentations during the period from November 24, 2010 to May 24, 2013 regarding the company's internal controls and financial reporting and the third-party loan portfolio acquisition. These proceedings are in addition to the previously disclosed civil claim filed on May 20, 2013 by Globis Capital Partners L.P. against the company and Gordon J. Reykdal, the company's Chief Executive Officer, in the United States District Court of the Southern District of New York for alleged violations of Sections 10(a) and 20(a) of the Securities Exchange Act of 1934 claiming unspecified damages.

The Cash Store Financial Services, Inc. restated unaudited consolidated earnings results for the quarter ended December 31, 2012. For the quarter, the company restated revenues of CAD 49.503 million, operating margin of CAD 11.686 million, loss before income taxes of CAD 1.834 million, net loss and comprehensive loss of CAD 1.702 million or CAD 0.10 per basic and diluted share compared to the revenues of CAD 45.848 million, operating margin of CAD 7.043 million, loss before income taxes of CAD 1.334 million, net loss and comprehensive loss of CAD 0.960 million or CAD 0.05 per diluted share for the same quarter year ago. Cash proved by operating activities was CAD 4.778 million compared to the cash used in operating activities of CAD 2.837 million for the same quarter year ago. Purchase of property, plant and equipment was CAD 1.113 million compared to the CAD 1.766 million for the same quarter year ago. Purchase of intangible assets was CAD 0.269 million compared to the CAD 0.41 million for the same quarter year ago.