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 November 30, 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 December 31,1995, 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
November 30, 1995 and February 28,1995 3
Condensed Consolidated Statement of Operations
of IDG for the nine months ended November 30,
1995 and 1994 4
Condensed Consolidated Statement of Operations
of IDG for the three months ended November 30,
1995 and 1994 5
Condensed Consolidated Statement of Cash Flows of
IDG for the nine months ended November 30, 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
NOVEMBER 30, FEBRUARY 28,
ASSETS 1995 1995
- -------------------------------------------------------------------- -------------------- ---------------------
<S> <C> <C>
CURRENT ASSETS:
Cash $674,223 $306,162
Marketable Securities $110,125 $129,276
Finance Receivables, less allowance
for doubtful accounts of $ 427,481
and $275,000 and unearned income of
$380,504 and $323,873 7,482,659 4,913,788
Drafts receivable 261,857 286,400
Current maturities of notes receivable 212,345 158,673
Prepaid expenses and other 20,493 18,476
-------------------- ---------------------
TOTAL CURRENT ASSETS 8,761,702 5,812,775
-------------------- ---------------------
PROPERTY AND EQUIPMENT- less
accumulated depreciation of $59,720 and
$36,220 91,731 92,135
NOTES RECEIVABLE - less current maturities 206,906 213,727
OTHER ASSETS, less accumulated amortization
of $15,000 and $12,000 15,620 13,776
-------------------- ---------------------
$9,075,959 $6,132,413
==================== =====================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ---------------------------------------------------------------------
CURRENT LIABILITIES:
Accounts payable, accrued expenses and other $246,848 $210,337
Drafts Payable 281,304 374,348
Notes payable 4,355,850 1,838,000
Liabilities under options sold 15,687 43,588
Notes Payable to Directors 1,500,000 1,150,000
-------------------- ---------------------
TOTAL CURRENT LIABILITIES 6,399,689 3,616,273
Class "A" Convertible redeemable preferred stock
$.01 par - 1,000,000 shares authorized, 500 issued
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 (3,287,094) (3,465,586)
TREASURY STOCK (21,247) (2,885)
-------------------- ---------------------
TOTAL STOCKHOLDERS' EQUITY 2,601,270 2,441,140
-------------------- ---------------------
$9,075,959 $6,132,413
==================== =====================
</TABLE>
See Notes to Condensed Financial Statements
-3-
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL DESIGN GROUP, INC
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED
NOVEMBER 30,
1995 1994
-------------------- ---------------------
<S> <C> <C>
REVENUES:
Finance charge income $1,157,032 $806,911
Origination fees 577,999 488,489
Late fees and other charges 512,791 439,448
Gain from Trading of Marketable Securities 43,973 1,941
Interest income and Other 39,670 61,539
-------------------- ---------------------
2,331,465 1,798,328
-------------------- ---------------------
EXPENSES:
General and administrative expenses 849,646 749,195
Sales and marketing 368,085 248,118
Provision for doubtful accounts 502,599 274,500
Interest expense 275,728 147,256
Interest expense to Directors 123,664 104,602
Depreciation and amortization 26,500 19,500
--------------------------------------------
2,146,222 1,543,171
--------------------------------------------
NET INCOME $185,243 $255,157
==================== =====================
NET INCOME PER COMMON SHARE:
PRIMARY: $0.06 $0.08
FULLY DILUTED: $0.05 $0.07
COMPUTATION OF FULLY DILUTED EARNINGS:
Net Income 185,243 255,157
Less: Preferred Dividends (6,750) (7,500)
-------------------- ---------------------
Primary net income 178,493 247,657
Assumed conversions:
Preferred dividends eliminated 6,750 7,500
-------------------- ---------------------
Fully diluted earnings $185,243 $255,157
-------------------- ---------------------
AVERAGE NUMBER OF COMMON SHARES
Primary 3,093,825 2,971,542
Fully Diluted 3,593,825 3,471,542
</TABLE>
See Notes to Condensed Financial Statements
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<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL DESIGN GROUP, INC
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED
NOVEMBER 30,
1995 1994
-------------------- ---------------------
<S> <C> <C>
REVENUES:
Finance charge income $408,492 $253,909
Origination fees 202,382 153,166
Late fees and other charges 177,046 140,302
Interest income and Other 1,549 (14,725)
-------------------- ---------------------
789,469 532,652
-------------------- ---------------------
EXPENSES
General and administrative expenses 304,601 238,474
Sales and marketing 113,514 74,613
Provision for doubtful accounts 185,476 85,000
Interest expense 105,178 46,822
Interest expense to Directors 45,399 35,602
Depreciation and amortization 10,000 7,000
-------------------- ---------------------
764,168 487,511
-------------------- ---------------------
NET INCOME $25,301 $45,141
==================== =====================
NET INCOME PER COMMON SHARE:
PRIMARY: $0.01 $0.01
FULLY DILUTED: $0.01 $0.01
COMPUTATION OF FULLY DILUTED EARNINGS
Net Income $25,301 45,141
Less: Preferred Dividends (2,250) (2,250)
-------------------- ---------------------
Primary net income 23,051 42,891
Assumed conversions:
Preferred dividends eliminated 2,250 2,250
-------------------- ---------------------
Fully diluted earnings $25,301 $45,141
-------------------- ---------------------
AVERAGE NUMBER OF COMMON SHARES
Primary 3,104,434 2,961,281
Fully Diluted 3,618,356 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
NINE MONTHS ENDED
NOVEMBER 30,
1995 1994
-------------------- ---------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from Continuing Operations: $185,243 255,157
Adjustments to reconcile net income (loss) to
net cash provide by (used in) operating activities:
Depreciation and amortization 26,500 19,500
Net change in allowance for doubtful accounts 152,481 27,732
Change in operating assets and liabilities:
Decrease (Increase) in prepaid expenses & other assets (6,861) 7,875
Decrease in drafts receivable 24,543 38,874
Increase in accounts payable,accrued expenses
and other 36,511 127,835
Increase (Decrease) in drafts payable (93,044) 26,867
-------------------- ---------------------
Cash Provided by Continuing Operations 325,373 503,840
-------------------- ---------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Premium finance loans (16,596,528) (10,527,077)
Payments received on finance loans 13,875,175 11,034,969
(Increase) in notes receivable (46,851) (206,267)
Capital expenditures (23,096) (27,390)
Investment in Marketable Securities 19,151 (51,937)
Cash Used in Securities trading (27,901) 43,590
-------------------- ---------------------
Net Cash (Used) Provided By Investing Activities (2,800,050) 265,888
-------------------- ---------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (Repayment) of notes payable 2,517,850 (780,000)
Increase (Repayment) of notes payable to Directors 350,000 0
Payment of Preferred Dividends (6,750) (7,500)
Purchase of treasury stock (18,362) (22,446)
-------------------- ---------------------
Net Cash Provided by Financing Activities 2,842,738 (809,946)
-------------------- ---------------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS $368,061 ($40,218)
CASH AND CASH EQUIVALENTS,
BEGINNING OF THE PERIOD 306,162 571,103
-------------------- ---------------------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $674,223 $530,885
==================== =====================
</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 nine month period ended November 30,
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 $2,331,465 during the nine months ended
November 30, 1995 as compared to $1,798,328 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 $16.6 million in 1995 compared to $10.8
million for the same period in 1994. The number of contracts financed increased
to 31,800 during 1995 as compared to 23,800 in 1994. This increase resulted from
a new independent sales organization which began referring finance business to
the Company during April, 1995, as well as from the expansion of the Company's
premium finance business to South Carolina. The relationship with the new 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 nine months ended November 30,:
1995 1994
---- ----
General and Administrative Expenses 36% 42%
Sales and Marketing 16% 14%
Depreciation and Amortization 1% 1%
Provision for Doubtful Accounts 22% 15%
Interest Expense 17% 14%
Total Expenses 92% 86%
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 compared to 1994. Due to competitive conditions, the Company
expects the trend towards lower down payments to continue which may cause bad
debt expense to increase further.
Interest expense increased primarily as a result of the increase in the prime
rate as well as increased borrowings during the current period.
1995 1994
---- ----
Finance charge income $1,157,032 $ 806,911
Interest expense 399,392 251,858
Net interest margin 757,640 555,053
Margin Percent 65% 69%
Overall net income decreased to approximately $185,000 for the nine months ended
November 30, 1995 as compared to $255,000 during the same period in 1994. This
decrease in net income is attributable to the Company's premium finance activity
which had net income of approximately $ 135,000 for the nine months ended
-8.-
<PAGE>
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONT'D)
November 30, 1995, a $97,000 decrease from the prior period. This decrease
resulted from increases in sales and marketing expense, interest expense, and
the provision for doubtful accounts as indicated above. The Company's Finco
subsidiary also experienced losses in its new premium finance business in South
Carolina, primarily attributed to start - up expenses. 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. The
Company recorded net income of $25,301 for the three months ended November 30,
1995 as compared to $45,141 during the comparable period in 1994. This decrease
is attributable to reduced earnings from the Company's premium finance business
as explained above.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital position at November 30, 1995 increased to
$2,362,013 as compared to $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 by
approximately $2.5 million between February 28, 1995 and November 30, 1995. This
increase resulted from an increase in financed loans during the period as
evidenced by an increase in finance receivables to approximately $7.5 million at
November 30, 1995 from approximately $4.9 million at February 28, 1995.
As of November 30, 1995, the Company's revolving credit arrangements are
summarized as follows:
DESCRIPTION LENDER LOAN BALANCE EXPIRATION DATE
- ----------- ------ ------------ ---------------
$4,500,000 Revolving Credit Agreement Bank $3,888,000 May 15, 1996
$1,000,000 Revolving Credit Agreement Chairman $1,000,000 March 31,1996
During November 1995, the Company also increased its borrowings with a director
of the Company from $150,000 to $500,000, 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 can 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. The Company is presently seeking to increase the amounts available
under its revolving credit line.
-9.-
<PAGE>
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONT'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.
January 15, 1996 /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> 9-MOS
<FISCAL-YEAR-END> FEB-28-1995
<PERIOD-START> MAR-01-1995
<PERIOD-END> NOV-30-1995
<CASH> 674,223
<SECURITIES> 110,125
<RECEIVABLES> 7,803,170
<ALLOWANCES> (320,511)
<INVENTORY> 0
<CURRENT-ASSETS> 8,761,702
<PP&E> 151,451
<DEPRECIATION> (59,720)
<TOTAL-ASSETS> 9,075,959
<CURRENT-LIABILITIES> 6,399,689
<BONDS> 0
143,881
0
<COMMON> 75,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 9,075,959
<SALES> 0
<TOTAL-REVENUES> 2,331,465
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,244,231
<LOSS-PROVISION> 502,599
<INTEREST-EXPENSE> 399,392
<INCOME-PRETAX> 185,243
<INCOME-TAX> 0
<INCOME-CONTINUING> 185,243
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 185,243
<EPS-PRIMARY> .06
<EPS-DILUTED> .05
</TABLE>
