THIS DOCUMENT IS A COPY OF THE FORM 10-Q FILED ON OCTOBER 16, 1995
PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION.
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended August 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-13946
INTERNATIONAL DESIGN GROUP, INC.
------------------------------------------
(Exact name of registrant as specified in charter)
DELAWARE 59-2521916
-------- ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1815 GRIFFIN RD, DANIA, FLORIDA 33004
-------------------------------------
(Address of principal executive offices) (Zip Code)
(305) 927-9119
--------------
(Registrant's telephone number,
including area code)
Indicate by check mark whether registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period 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 September 30, 1995, there were 2,877,613 shares of the Registrant's $.05
par value common stock issued and outstanding.
<PAGE>
INTERNATIONAL DESIGN GROUP, INC.
CONTENTS
PART I - FINANCIAL INFORMATION PAGES
-----
Item 1. Financial Statements
Condensed Consolidated Balance Sheets of
International Design Group, Inc. ("IDG") as of
August 31, 1995 and February 28,1995 3
Condensed Consolidated Statement of Operations
of IDG for the six months ended August 31,
1995 and 1994 4
Condensed Consolidated Statement of Operations
of IDG for the three months ended August 31,1995
and 1994 5
Condensed Consolidated Statement of Cash Flows of
IDG for the six months ended August 31, 1995 and
1994 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8-10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote
of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K. 11
Signatures 12
-2-
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL DESIGN GROUP, INC
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AUGUST 31, FEBRUARY 28,
ASSETS 1995 1995
- ------------------------------------------------------------------- -------------------- ---------------------
<S> <C> <C>
CURRENT ASSETS:
Cash $536,933 $306,162
Marketable Securities $117,625 $129,276
Finance Receivables, less allowance
for doubtful accounts of $332,496
and $275,000 and unearned income of
$404,113 and $323,873 6,567,901 4,913,788
Drafts receivable 326,502 286,400
Current maturities of notes receivable 110,006 158,673
Prepaid expenses and other 19,694 18,476
-------------------- ---------------------
TOTAL CURRENT ASSETS 7,678,661 5,812,775
-------------------- ---------------------
PROPERTY AND EQUIPMENT - less
accumulated depreciation of $50,720 and
$36,220 90,162 92,135
NOTES RECEIVABLE - less current maturities 234,004 213,727
OTHER ASSETS, less accumulated amortization
of $14,000 and $12,000 15,700 13,776
-------------------- ---------------------
$8,018,527 $6,132,413
==================== =====================
LIABILITIES AND STOCKHOLDERS' EQUITY
- -------------------------------------------------------------------
CURRENT LIABILITIES:
Accounts payable, accrued expenses and other $204,894 $210,337
Drafts Payable 300,010 374,348
Notes payable 3,499,000 1,838,000
Net amount due under securities trading 7,156 43,588
Notes Payable to Directors 1,350,000 1,150,000
-------------------- ---------------------
TOTAL CURRENT LIABILITIES 5,361,060 3,616,273
Class "A" Convertible redeemable preferred stock
$.01 par - 1,000,000 shares authorized, 500 issued
and outstanding, at stated value 75,000 75,000
STOCKHOLDERS' EQUITY:
Common stock $.05 par, shares authorized
10,000,000; 2,877,613 and 2,877,613 issued
and outstanding 143,881 143,881
ADDITIONAL PAID IN CAPITAL 5,765,730 5,765,730
DEFICIT (3,310,144) (3,465,586)
TREASURY STOCK (17,000) (2,885)
-------------------- ---------------------
TOTAL STOCKHOLDERS' EQUITY 2,582,467 2,441,140
-------------------- ---------------------
$8,018,527 $6,132,413
==================== =====================
</TABLE>
See Notes to Condensed Financial Statements
-3-
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL DESIGN GROUP, INC
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED AUGUST 31,
1995 1994
-------------------- ---------------------
<S> <C> <C>
REVENUES:
Finance charge income $748,540 $553,002
Origination fees 375,617 335,323
Late fees and other charges 335,745 299,146
Interest income and Other 82,094 78,205
-------------------- ---------------------
1,541,996 1,265,676
-------------------- ---------------------
EXPENSES:
General and administrative expenses 545,045 510,721
Sales and marketing 254,571 173,505
Provision for doubtful accounts 317,123 189,500
Interest expense 170,550 100,434
Interest expense to Directors 78,265 69,000
Depreciation and amortization 16,500 12,500
-------------------- ---------------------
1,382,054 1,055,660
-------------------- ---------------------
NET INCOME $159,942 $210,016
==================== =====================
NET INCOME PER COMMON SHARE:
PRIMARY: $0.05 $0.07
FULLY DILUTED: $0.04 $0.06
COMPUTATION OF FULLY DILUTED EARNINGS:
Net Income 159,942 210,016
Less: Preferred Dividends (4,500) (5,250)
-------------------- ---------------------
Primary net income 155,442 204,766
Assumed conversions:
Preferred dividends eliminated 4,500 5,250
-------------------- ---------------------
Fully diluted earnings $159,942 $210,016
-------------------- ---------------------
AVERAGE NUMBER OF COMMON SHARES
Primary 3,088,577 2,976,370
Fully Diluted 3,588,577 3,476,370
</TABLE>
See Notes to Condensed Financial Statements
-4-
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL DESIGN GROUP, INC
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED AUGUST 31,
1995 1994
-------------------- ---------------------
<S> <C> <C>
REVENUES:
Finance charge income $395,334 $270,848
Origination fees 196,022 164,180
Late fees and other charges 183,470 152,773
Interest income and Other 34,831 69,056
-------------------- ---------------------
809,657 656,857
-------------------- ---------------------
EXPENSES
General and administrative expenses 286,536 254,666
Sales and marketing 116,011 88,940
Provision for doubtful accounts 168,962 85,500
Interest expense 98,050 52,239
Interest expense to Directors 39,453 33,000
Depreciation and amortization 9,300 6,400
-------------------- ---------------------
718,312 520,745
-------------------- ---------------------
NET INCOME $91,345 $136,112
==================== =====================
NET INCOME PER COMMON SHARE:
PRIMARY: $0.03 $0.05
FULLY DILUTED: $0.03 $0.04
COMPUTATION OF FULLY DILUTED EARNINGS
Net Income 91,345 136,112
Less: Preferred Dividends (2,250) (2,250)
-------------------- ---------------------
Primary net income 89,095 133,862
Assumed conversions:
Prefered dividends eliminated 2,250 2,250
--------------------------------------------
Fully diluted earnings $91,345 $136,112
--------------------------------------------
AVERAGE NUMBER OF COMMON SHARES
Primary 3,128,356 2,961,281
Fully Diluted 3,628,356 3,461,281
</TABLE>
See Notes to Condensed Financial Statements
-5-
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL DESIGN GROUP, INC
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED AUGUST 31,
1995 1994
-------------------- ---------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from Continuing Operations: 159,942 210,016
Adjustments to reconcile net income (loss) to
net cash provide by (used in) operating activities:
Depreciation and amortization 16,500 12,500
Provision for doubtful accounts 309,623 189,500
Change in operating assets and
liabilities:
Decrease (Increase) in prepaid expenses & other assets (5,142) 3,193
Increase in drafts receivable (40,102) (5,531)
Increase (Decrease) in accounts payable, accrued
expenses and other (5,443) 94,411
Decrease in drafts payable (74,338) (144)
-------------------- ---------------------
Cash Provided by (Used) in Continuing Operations 361,040 503,945
-------------------- ---------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Premium finance loans (10,318,864) (7,182,503)
Payments received on finance loans 8,355,128 7,279,427
(Increase) Decrease in notes receivable 28,390 (55,832)
Capital expenditures (12,527) (15,168)
Investment in (Proceeds from) Marketable Securities 11,651 (152,939)
Cash Received (Used) from Securities trading (36,432) 2,466
-------------------- ---------------------
Net Cash (Used) Provided By Investing Activities (1,972,654) (124,549)
-------------------- ---------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (Repayment) of notes payable 1,661,000 (560,366)
Increase of notes payable to Directors 200,000 0
Payment of Preferred Dividends (4,500) (5,250)
Purchase of treasury stock (14,115) (22,446)
-------------------- ---------------------
Net Cash Provided by Financing Activities 1,842,385 (588,062)
-------------------- ---------------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS $230,771 ($208,666)
CASH AND CASH EQUIVALENTS,
BEGINNING OF THE PERIOD 306,162 571,103
-------------------- ---------------------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $536,933 $362,437
==================== =====================
</TABLE>
See Notes to Condensed Financial Statements
-6-
<PAGE>
INTERNATIONAL DESIGN GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE A -- Basis of Presentation
- -------------------------------
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. 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 month period ended August 31, 1995
are not necessarily indicative of the results that may be expected for the year
ending February 28, 1996. For further information, refer to the financial
statements and footnotes thereto included in the Company's annual report on Form
10-K for the year ended February 28, 1995.
The accompanying financial statements include the Company, its wholly owned
subsidiaries Finco Financial Corporation, QRS Acquisition, Inc., Reserve Funding
Corporation, VoiceSoft Corporation and Federal Funding Corporation. All
intercompany transactions and balances have been eliminated in consolidation.
-7-
<PAGE>
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - GENERAL
- -------------------------------
Revenues increased to approximately $1,541,996 during the six months ended
August 31, 1995 as compared to $1,265,676 during the comparable period in 1994
as a result of the Company's growth in the insurance premium finance business.
Insurance premiums financed increased to $10.3 million in 1995 compared to $7.2
million for the same period in 1994. The number of contracts financed increased
to 20,900 during 1995 as compared to 16,500 in 1994. This increase resulted
primarily from a new independent sales organization which began referring
finance business to the Company during April 1995. The relationship with this
sales organization was terminated, however, during June 1995. The Company is
continuing its efforts to increase growth in the premium finance business but is
meeting stiff competition from both new and existing premium finance companies.
Additionally, direct bill insurance companies, which generally offer lower down
payments than the Company, are increasing their presence in Florida. If this
trend continues, this could limit the Company's future growth prospects.
The following table reflects the company's expenses as a percentage of revenues
for the six months ended August 31,:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
General and Administrative Expenses 35% 40%
Sales and Marketing 17% 14%
Depreciation and Amortization 1% 1%
Provision for Doubtful Accounts 21% 15%
Interest Expense 16% 13%
Total Expenses 90% 83%
</TABLE>
General and administrative expenses, as a percentage of revenue, decreased as a
substantial portion of these expenses are fixed and do not directly correlate to
revenue. Sales and marketing expenses increased as a percentage of revenue as a
result of increased fees paid to independent sales representatives. The
provision for doubtful accounts increased as a result of lower down payments
being taken in 1995 as compared to 1994. The Company expects the trend towards
lower down payments to continue which may cause bad debt expense to increase.
Interest expense increased primarily as a result of the increase in the prime
rate as well as increased borrowings during the current period.
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Finance charge income $748,540 $553,002
Interest expense 245,815 169,434
Net interest margin 502,725 383,568
Margin Percent 67% 69%
</TABLE>
Net income in the Company's premium finance business decreased to approximately
$94,000 for the six months ended August 31, 1995 as compared to approximately
$173,000 during the comparable period in 1994. This decrease resulted from
increases in sales and marketing expense, interest expense, and the provision
for doubtful accounts as indicated above. Overall net income for the six months
ended
- 8-
<PAGE>
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONT'D)
August 31, 1995 decreased to approximately $160,000 as compared to $210,000
during the prior year. The decrease in net income during the current period by
the Company's Finco subsidiary was partially offset by gains associated with the
Company's securities trading activities.
As a result of increased competition, higher operating costs and increases in
the provision for doubtful accounts, management believes that the Company's
growth may be curtailed and that profit margins may diminish. Management is
currently exploring the possibility of expanding the premium finance business to
other states as well as seeking other business opportunities in an effort to
diversify. In August of 1995 the Company's Finco subsidiary began operating in
South Carolina under the name of Eagle Premium Finance. Management believes this
is the first step in diversifying the premium finance business.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital position at August 31, 1995 of $2,317,601
increased slightly from $2,196,502 at February 28, 1995 primarily as a result of
the net income for the period.
The Company increased borrowings under its bank revolving line of credit between
February 28, 1995 and August 31, 1995 by $1,641,000. This increase resulted from
an increase in financed loans during the period as evidenced by an increase in
finance receivables to approximately $6.6 million at August 31, 1995 from
approximately $4.9 million at February 28, 1995.
As of September 30, 1995, the Company's revolving credit arrangements are
summarized as follows:
<TABLE>
<CAPTION>
DESCRIPTION LENDER LOAN BALANCE EXPIRATION DATE
- ----------- ------ ------------ ---------------
<S> <C> <C> <C>
$4,500,000 Revolving Credit Agreement Bank $3,031,150 May 15, 1996
$1,000,000 Revolving Credit Agreement Chairman $1,000,000 March 31, 1996
</TABLE>
During July 1995, the Company also increased its borrowings with a director of
the Company from $150,000 to $350,000, which is payable on demand. Additionally,
the Company has approximately $468,000 in demand loans with several third
parties .
The Company's $2.5 million line of credit with a bank was increased to $4.5
million on May 15 ,1995. The new agreement, which is payable on demand, extends
the line of credit until May 15, 1996. The Company is able to borrow up to 80%
of its eligible receivables in excess of $1.8 million. The Company's $1,000,000
revolving credit facility with the Company's Chairman was extended until March
31, 1996.
-9-
<PAGE>
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CON'D)
As part of the Company's investment activities, the Company sells put options.
These options give the purchaser the right to sell to the Company a certain
security at a fixed price through a certain date. These options involve a high
degree of risk because if the value were to substantially decrease on a security
which the Company sold put options on, the loss to the Company could greatly
exceed the proceeds of the sale of the option.
It is the opinion of management that the Company will have sufficient funds to
satisfy its cash requirements for at least the next 12 months, unless the
Company is unsuccessful in its attempts to extend or replace its loan
facilities.
INFLATION AND FOREIGN CURRENCY FLUCTUATIONS:
Presently, inflation and foreign currency fluctuations do not have any adverse
effect on the Company's business. However, inflation would have an adverse
effect on the Company as its cost of money would increase while the maximum
interest rates the Company is allowed to charge are set by state law.
-10-
<PAGE>
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. Exhibits and Reports on Form 8-K
NONE
-11-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INTERNATIONAL DESIGN GROUP, INC.
September 13, 1995 /s/ David Raymond
-----------------------------
David Raymond, President and
Chief Financial Officer
-12-
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000773267
<NAME> INTERNATIONAL DESIGN GROUP, INC.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-28-1995
<PERIOD-START> JUN-01-1995
<PERIOD-END> AUG-31-1995
<CASH> 536,933
<SECURITIES> 117,625
<RECEIVABLES> 7,226,899
<ALLOWANCES> (332,496)
<INVENTORY> 0
<CURRENT-ASSETS> 7,678,661
<PP&E> 140,882
<DEPRECIATION> (50,720)
<TOTAL-ASSETS> 8,018,527
<CURRENT-LIABILITIES> 5,361,060
<BONDS> 0
<COMMON> 143,881
0
75,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 8,018,527
<SALES> 0
<TOTAL-REVENUES> 1,541,996
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 816,116
<LOSS-PROVISION> 317,123
<INTEREST-EXPENSE> 248,815
<INCOME-PRETAX> 159,942
<INCOME-TAX> 0
<INCOME-CONTINUING> 159,942
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 159,952
<EPS-PRIMARY> .05
<EPS-DILUTED> .04
</TABLE>
