<PAGE>
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 May 31, 1997
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.
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(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.)
3201 Griffin Road, Dania, Florida 33312
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(Address of principal executive offices) (Zip Code)
(954) 893-7555
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(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 June 30,1997, there were 3,754,849 shares of the Registrant's $.05 par
value common stock issued and 3,744,849 shares were outstanding.
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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
May 31, 1997 and February 28,1997 3
Condensed Consolidated Statement of Operations
of IDG for the three months ended May 31,
1997 and 1996 4
Condensed Consolidated Statement of Cash Flows of
IDG for the three months ended May 31, 1997 and 1996 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7-9
PART II. OTHER INFORMATION
Item 1.Legal Proceedings 10
Item 2.Changes in Securities 10
Item 3.Defaults Upon Senior Securities 10
Item 4.Submission of Matters to a Vote
of Security Holders 10
Item 5.Other Information 10
Item 6.Exhibits and Reports on Form 8- K. 10
Signatures 11
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INTERNATIONAL DESIGN GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MAY 31, FEBRUARY 28,
ASSETS 1997 1997
----------- -----------
CURRENT ASSETS:
Cash and Cash Equivalents $ 124,063 $ 273,577
Finance Receivables, less allowance
for doubtful accounts of $1,121,000
and $855,000 and unearned income of
$818,000 and $898,000 12,869,113 13,508,449
Drafts receivable 415,054 519,989
Current maturities of notes receivable 124,062 153,696
Prepaid expenses and other 21,415 23,846
----------- -----------
TOTAL CURRENT ASSETS 13,553,707 14,479,557
PROPERTY AND EQUIPMENT - less
accumulated depreciation of $84,818
and $73,318 174,378 156,258
NOTES RECEIVABLE - less current maturities 94,580 111,341
OTHER ASSETS, less accumulated
amortization of $20,000 and $20,000 45,840 49,311
----------- -----------
$13,868,505 $14,796,467
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable, accrued expenses
and other $ 390,370 $ 367,702
Drafts Payable 465,327 889,411
Notes payable 276,850 276,850
Liability under options sold 6,563 17,218
Notes Payable to Directors 500,000 500,000
----------- -----------
TOTAL CURRENT LIABILITIES 1,639,110 2,051,181
Notes payable to bank 9,366,856 9,961,635
----------- -----------
TOTAL LIABILITIES 11,005,966 12,012,816
STOCKHOLDERS' EQUITY:
Common stock $.05 par, shares authorized
10,000,000; 3,754,849 issued and
3,744,849 outstanding 187,742 187,742
ADDITIONAL PAID IN CAPITAL 5,834,470 5,834,470
DEFICIT (3,101,932) (3,180,820)
TREASURY STOCK (10,000 shares at cost) (4,375) (4,375)
COMMON STOCK SUBSCRIPTIONS RECEIVABLE (53,366) (53,366)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 2,862,539 2,783,651
----------- -----------
$13,868,505 $14,796,467
See Notes to Condensed Financial Statements
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INTERNATIONAL DESIGN GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MAY 31,
1997 1996
---------- ---------
REVENUES:
Finance charge income $ 794,979 $ 549,019
Origination fees 351,564 219,680
Late fees and other charges 327,601 193,626
Interest income and Other 19,387 18,804
---------- ---------
1,493,531 981,129
EXPENSES
General and administrative expenses 416,580 307,481
Sales and marketing 260,795 148,668
Provision for doubtful accounts 463,721 283,262
Interest expense 245,890 131,424
Interest expense to Directors 16,156 47,813
Depreciation and amortization 11,500 10,278
--------- ---------
1,414,642 928,926
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NET INCOME $ 78,889 $ 52,203
---------- ---------
---------- ---------
Net Income per Common Share:
Primary: $ 0.02 $ 0.02
Average Number of Common Shares
Primary 3,793,063 2,903,882
Fully Diluted 3,793,063 2,903,882
See Notes to Condensed Financial Statements
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INTERNATIONAL DESIGN GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MAY 31,
1997 1996
---------- ---------
OPERATING ACTIVITIES:
Net Income $ 78,889 $ 52,203
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 11,500 10,278
Provision for doubtful accounts 463,720 283,262
Change in operating assets and liabilities:
Increase (decrease) in unearned income (81,143) 39,010
Decrease (increase) in prepaid expenses
& other 5,902 (20,265)
Decrease in drafts receivable 104,935 98,431
Increase in accounts payable, accrued
expenses 22,668 71,058
Increase in drafts payable (424,084) (23,320)
---------- ----------
Net cash provided by operating activities 182,387 510,657
INVESTING ACTIVITIES:
Premium finance loans - net of writeoffs (9,273,102) (7,814,655)
Payments received on premium finance loans 9,529,860 5,802,389
Increase in notes receivable (21,250) (98,013)
Payments received on notes receivable 67,645 43,692
Capital expenditures (29,620) (63,779)
Investment in Marketable Securities 0 58,105
Decrease in liability under options sold (10,655) (25,469)
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Net Cash Used In Investing Activities 262,878 (2,097,730)
FINANCING ACTIVITIES:
Increase in notes payable to bank 11,359,000 10,965,000
Paydowns in notes payable to bank (11,953,779) (9,305,072)
Paydowns in notes payable 0 (18,000)
---------- ----------
Net Cash (Used In) Provided by
Financing Activities (594,779) 1,641,928
NET INCREASE IN CASH
AND CASH EQUIVALENTS $ (149,514) $ 54,855
CASH AND CASH EQUIVALENTS,
beginning of the period 273,577 130,679
---------- ----------
CASH AND CASH EQUIVALENTS,
end of period $ 124,063 $ 185,534
See Notes to Condensed Financial Statements
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<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 three month
period ended May 31, 1997 are not necessarily indicative of the results that
may be expected for the year ending February 28, 1998. 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,
1997.
The accompanying financial statements include the Company, its wholly owned
subsidiaries Finco Financial Corporation, Eagle Premium Finance, Inc., QRS
Acquisition, Inc., Reserve Funding Corporation, VoiceSoft Corporation and
Federal Funding Corporation. All intercompany transactions and balances have
been eliminated in consolidation.
-6-
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PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS - GENERAL
Revenues increased to $1,493,531 during the three months ended May 31, 1997 as
compared to $981,129 during the comparable period in 1996 as a result of the
Company's growth in the insurance premium finance business. Insurance premiums
financed increased to $9.3 million in 1997 compared to $7.8 million for the
same period in 1996. The number of contracts financed increased to 16,161
during 1997 as compared to 13,365 in 1995. This increase resulted primarily
from increased volume in Florida.
The following table reflects the company's expenses as a percentage of
revenues for the three months ended May 31,:
1997 1996
---- ----
General and Administrative Expenses 28% 31%
Sales and Marketing 17% 15%
Depreciation and Amortization 1% 1%
Provision for Doubtful Accounts 31% 29%
Interest Expense 18% 18%
Total Expenses 95% 94%
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. The provision for doubtful accounts has increased
substantially as the Company has been accepting lower down payments on its
finance agreements in an effort to compete effectively. These lower down
payments translate into higher bad debt write-offs when an insurance contract
is canceled. In determining the provision for doubtful accounts, management
takes into account factors such as its average down payment rate, cancellation
rate, unrefunded canceled contracts, specific problems with insurance agents,
and financial condition of insurance companies among other factors. Sales &
Marketing increased slightly due to the cost per contract increasing in 1997.
1997 1996
---------- --------
Finance charge income $ 794,979 $549,019
Interest expense 262,046 179,237
Net interest margin 532,933 369,782
Margin Percent 67% 67%
Overall, net income increased to approximately $79,000 for the three months
ended May 31, 1997 as compared to $52,000 during the same period in 1996. This
increase in net income is primarily attributable to an increase in income from
the Company's Florida finance business as well as a decrease in losses in the
Company's South Carolina finance business. Since August 1996 the Company has
not written any new premium finance business in South Carolina, Tennessee, or
Maryland due to poor profit margins.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital position at May 31, 1997 increased to
$11,914,597 as compared to $12,428,376 at February 29, 1997. This decrease was
due primarily to a decreased level of premium finance activity during the
period which was funded by long term debt.
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<PAGE>
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)
The Company decreased borrowings under its bank revolving line of credit by
approximately $600,000 between February 28, 1997 and May 31, 1997. This
decrease resulted from a decrease in premium finance loans during the period.
Finance receivables decreased to approximately $12.9 million at May 31, 1997
from approximately $13.5 million at February 28, 1997.
As of May 31, 1997, the Company's revolving credit arrangements are summarized
as follows:
Description Lender Loan Balance Expiration Date
- -------------------------------------- -------- ------------ ---------------
$11,000,000 Revolving Credit Agreement Bank $ 9,366,856 Feb. 23, 1999
$1,000,000 Revolving Credit Agreement Chairman $ 500,000 On Demand
The Company extended its line of credit with a bank to $11.0 million in
February 1997. The new agreement, which matures in 1999, also requires the
Company to maintain certain financial ratios. Borrowings under the line are
based on eligible finance receivables, interest is payable monthly at the
Company's choice of LIBOR plus 3.25% or the bank s prime rate plus 1.25%.
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 .
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.
CHANGE IN OWNERSHIP:
The Controlling stockholders of the Company implemented a restructuring in the
form of a one-for-twelve thousand five hundred share reverse stock split which
became effective July 10, 1997 and resulted in the Company becoming
privately-held as of that date. Marilyn Gardner, Robert L. Gardner, Kenneth
Gardner, Lisa Gardner and David Raymond as of July 10,1997 own 100% of the
Company's outstanding Common Stock. The reverse stock split is designed to
significantly decrease the number of existing stockholders of the Company to
reduce the expenses, allow flexibility in attempting to negotiate future
transactions and to facilitate further restructuring if necessary.
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<PAGE>
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)
The Company no longer meets SEC requirements of a reporting Company and
expects that no further reports will be required to be filed after this Form
10-Q for the quarter ended May 31, 1997.
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<PAGE>
PART II. - OTHER INFORMATION
Item 1. Legal Proceedings - NONE
Item 2. Changes in Securities
On July 10, 1997 there was a reverse stock split of one-for-twelve thousand
five hundred. After the reverse stock split the number of authorized common
and preferred shares will be 350 and 25 shares of each class respectively.
Item 3. Defaults Upon Senior Securities - NONE
Item 4. Submission of Matters To A Vote of Security Holders
The Controlling stockholders of the Company implemented a restructuring in the
form of a one-for-twelve thousand five hundred share reverse stock split which
became effective July 10, 1997 and resulted in the Company becoming
privately-held as of that date. Marilyn Gardner, Robert L. Gardner, Kenneth
Gardner, Lisa Gardner and David Raymond as of July 10,1997 own 100% of the
Company's outstanding Common Stock. The reverse stock split is designed to
significantly decrease the number of existing stockholders of the Company to
reduce the expenses, allow flexibility in attempting to negotiate future
transactions and to facilitate further restructuring if necessary.
The Company no longer meets SEC requirements of a reporting Company and
expects that no further reports will be required to be filed after this Form
10-Q for the quarter ended May 31, 1997.
Item 5. Other Information - NONE
Item 6. Exhibits and Reports on Form 8-K - NONE
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<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.
July 14, 1997 By:/s/ David Raymond
_____________________________
David Raymond, President and
Chief Financial Officer
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EXHIBIT INDEX
EXHIBIT METHOD OF FILING
- ------- -----------------------------
27. FINANCIAL DATA SCHEDULE Filed herewith electronically
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited condensed consolidated balance sheets and unaudited condensed
consolidated statements of operations found on pages 3 and 4 of the Company's
Form 10-Q for the year to date, and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-END> MAY-31-1997
<CASH> 124,063
<SECURITIES> 0
<RECEIVABLES> 13,408,229
<ALLOWANCES> 1,939,000
<INVENTORY> 0
<CURRENT-ASSETS> 13,553,707
<PP&E> 259,196
<DEPRECIATION> 84,818
<TOTAL-ASSETS> 13,868,505
<CURRENT-LIABILITIES> 1,639,110
<BONDS> 0
<COMMON> 187,742
0
0
<OTHER-SE> 2,674,797
<TOTAL-LIABILITY-AND-EQUITY> 13,868,505
<SALES> 1,493,531
<TOTAL-REVENUES> 1,493,531
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,152,596
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 262,046
<INCOME-PRETAX> 78,889
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 78,889
<EPS-PRIMARY> .02
<EPS-DILUTED> 0
</TABLE>
