FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from
Commission file number 0-25958
ND HOLDINGS, INC.
(Exact Name of small business issuer as Specified in its Charter)
North Dakota 45-0404061
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number
201 S. Broadway, Minot, North Dakota 58701
(Address of principal executive offices) (Zip Code)
(701) 852-5292
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 of 15(d) of the Exchange Act during the past 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 May 1, 1996, the Company had 8,174,488 shares of its no par value
common stock outstanding.
Transitional Small Business Disclosure Format (check one): Yes No X
<PAGE>
FORM 10-QSB
ND HOLDINGS, INC.
INDEX
Part I: FINANCIAL INFORMATION Page No.
Item 1 Financial Statements 3
Condensed Consolidated Balance Sheets
March 31, 1996 and December 31, 1995 5
Condensed Consolidated Statements of Operations
Three months ended March 31, 1996 and 1995 6
Condensed Consolidated Statements of Cash Flows
Three months ended March 31, 1996 and 1995 7
Supplementary Information Consolidated Pro Forma
Statements of Operations 9
Notes to Condensed Consolidated Financial Statements 10
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Part II OTHER INFORMATION
Item 1 Legal Proceedings 13
Item 4 Submission of Matters to a Vote of Security Holders 13
Item 5 Other Information 14
Item 6 Exhibits and Reports on Form 8-K 18
Signatures 19
<PAGE>
PART 1 FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
ND HOLDINGS, INC. AND SUBSIDIARIES
MINOT, NORTH DAKOTA
MANAGEMENT'S UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
AS OF
MARCH 31, 1996 AND 1995
<PAGE>
ND HOLDINGS, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
Pages
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets 5
Consolidated Statements of Operations 6
Consolidated Statements of Cash Flows 7
Supplemental Information Consolidated Pro Forma
Statements of Operations 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10
<PAGE>
ND HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
CURRENT ASSETS ------------ ------------
<S> <C> <C>
Cash and cash equivalents $ 498,742 $ 4,894,838
Securities available-for-sale 332,060 322,900
Accounts receivable 365,464 161,907
Prepaids 87,651 44,235
------------ ------------
Total current assets $ 1,283,917 $ 5,423,880
------------ ------------
EQUIPMENT $ 240,977 $ 100,680
Less accumulated depreciation 124,918 53,631
------------ ------------
Net equipment $ 116,059 $ 47,049
------------ ------------
OTHER ASSETS
Deferred sales costs $ 2,862,961 $ 2,840,238
Deferred tax benefit 982,700 1,042,400
Covenant not to compete (net of
amortization of $23,000) 275,000 -
Investment adviser's agreement (net of
amortization of $65,821 for 1996) 5,375,416 -
Registration costs and other assets 111,830 117,019
------------ ------------
Total other assets $ 9,607,907 $ 3,999,657
------------ ------------
TOTAL ASSETS $ 11,007,883 $ 9,470,586
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Commissions and service fees payable $ 43,620 $ 17,781
Accounts payable 46,544 64,069
Notes payable 1,525,000 -
Current portion of investment certificates 5,000 10,000
Accrued interest payable 17,974 6,205
Payroll taxes payable 22,470 2,005
------------ ------------
Total current liabilities $ 1,660,608 $ 100,060
------------ ------------
LONG-TERM LIABILITIES
Investment certificates $ 240,100 $ 270,100
Less current portion 5,000 10,000
------------ ------------
$ 235,100 $ 260,100
------------ ------------
TOTAL LIABILITIES $ 1,895,708 $ 360,160
------------ ------------
STOCKHOLDERS' EQUITY
Common stock - 20,000,000 shares authorized,
no par value; 8,173,488 and 8,191,751
shares issued and outstanding, respectively $ 10,725,474 $ 10,760,074
Accumulated deficit (1,638,697) (1,671,548)
Unrealized gain on securities available-
for-sale 25,398 21,900
------------ ------------
Total stockholders' equity $ 9,112,175 $ 9,110,426
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 11,007,883 $ 9,470,586
============ ============
<FN>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
</TABLE>
<PAGE>
ND HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------
1996 1995 *
REVENUES --------- ---------
<S> <C> <C>
Fee income $ 821,369 $ 497,972
Commissions 49,044 76,226
--------- ---------
Total revenue $ 870,413 $ 574,198
--------- ---------
OPERATING EXPENSES
Compensation and benefits $ 181,221 $ 225,878
General and administrative expenses 246,884 311,083
Deferred sales costs recognized 232,768 190,283
Depreciation and amortization 93,821 102,802
Interest 48,516 7,028
--------- ---------
Total operating expenses $ 803,210 $ 837,074
--------- ---------
OPERATING INCOME (LOSS) $ 67,203 $(262,876)
--------- ---------
OTHER INCOME (LOSS)
Interest and dividends $ 20,284 $ 81,165
Miscellaneous income 6,055 300
Trading securities losses, net (991) (52,752)
--------- ---------
Total other income (loss) $ 25,348 $ 28,713
--------- ---------
INCOME (LOSS) BEFORE INCOME
TAX (EXPENSE) BENEFIT $ 92,551 $(234,163)
DEFERRED INCOME TAX (EXPENSE) BENEFIT (59,700) 44,740
--------- ---------
NET INCOME (LOSS) $ 32,851 $(189,423)
========= =========
NET INCOME (LOSS) PER SHARE: $ .004 $ (.023)
<FN>
* Proforma results (See Note 2)
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
</TABLE>
<PAGE>
ND HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES ----------- -----------
<S> <C> <C>
Net cash used by operating activities $ (39,278) $ (427,668)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investment adviser's agreement $(5,441,237) $ -
Purchase of covenant not to compete (300,000) -
Purchase of available-for-sale securities (9,160) -
Purchase of equipment (72,010) (7,996)
Other asset (increases) decreases 5,189 -
----------- -----------
Net cash used by investing activities $(5,817,218) $ (7,996)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term debt $ 1,525,000 $ -
Proceeds from issuing common stock
(net of stock issue costs) - 580,731
Redemption of common stock (34,600) -
Investment certificates redeemed (30,000) -
----------- -----------
Net cash provided by financing activities $ 1,460,400 $ 580,731
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS $(4,396,096) $ 145,067
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 4,894,838 1,160,063
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 498,742 $ 1,305,130
=========== ===========
<FN>
THE ACCOMPANY NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
</TABLE>
<PAGE>
SUPPLEMENTARY INFORMATION
<PAGE>
ND HOLDINGS, INC. AND SUBSIDIARIES AND
THE RANSON COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED PROFORMA STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31, 1995
-------------------------------------------------------
ND Holdings, The Ranson Company,
Inc. and Inc. and Pro Forma Pro Forma
Subsidiaries Subsidiaries Adjustment Results
--------- --------- -------- ---------
<S> <C> <C> <C> <C>
REVENUES
Fee income $ 342,709 $ 155,263 $ - $ 497,972
Commissions 49,270 26,956 - 76,226
--------- --------- -------- ---------
Total revenue $ 391,979 $ 182,219 $ - $ 574,198
--------- --------- -------- ---------
OPERATING EXPENSES
Compensation and benefits $ 184,116 $ 41,762 $ - $ 225,878
General and administrative
expenses 156,857 154,226 - 311,083
Deferred sales costs recognized 190,283 - - 190,283
Depreciation and amortization 11,161 821 90,820 102,802
Interest 7,028 - - 7,028
--------- --------- -------- ---------
Total operating expenses $ 549,445 $ 196,809 $ 90,820 $ 837,074
--------- --------- -------- ---------
OPERATING LOSS $(157,466) $ (14,590) $(90,820) $(262,876)
--------- --------- -------- ---------
OTHER INCOME (LOSS)
Interest and dividends $ 81,165 $ - $ - $ 81,165
Trading securities losses, net (52,752) - - (52,752)
Miscellaneous income 300 - - 300
--------- --------- -------- ---------
Total other income (loss) $ 28,713 $ - $ - $ 28,713
--------- --------- -------- ---------
LOSS BEFORE INCOME
TAX BENEFIT $(128,753) $ (14,590) $(90,820) $(234,163)
DEFERRED INCOME
TAX BENEFIT 39,050 5,690 - 44,740
--------- --------- -------- ---------
NET LOSS $ (89,703) $ (8,900) $(90,820) $(189,423)
========= ========= ======== =========
<FN>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF
THE PROFORMA SUPPLEMENTAL INFORMATION
</TABLE>
<PAGE>
ND HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996 AND 1995
NOTE 1 BASIS OF PRESENTATION
The consolidated financial statements of ND Holdings,
Inc., a North Dakota corporation, and its subsidiaries
(collectively, the "Company"), included herein, have been prepared
by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted
accounting principles have been omitted.
The consolidated financial statements include the accounts
of the Company and all of its subsidiaries after eliminating all
significant intercompany transactions and reflect all normally
recurring adjustments which are, in the opinion of management,
necessary to present a fair statement of the results of operations
of the interim periods reported. The results of operations for the
three months ended March 31, 1996 and 1995 are not necessarily
indicative of the results expected for the full year.
NOTE 2 PRO FORMA RESULTS
During the quarter ended March 31, 1996, the Company
acquired the outstanding stock of The Ranson Company, Inc. (Ranson).
The operating results for the quarter ended March 31, 1996 include
the revenue and expenses for the Ranson managed portfolios. The
operating results for the quarter ended March 31, 1995 include pro
forma information to include the results of the same period for
Ranson, as though the business combination occurred effective
January 1, 1995.
NOTE 3 The information included in the accompanying pro forma
supplemental information, as shown in the supplementary
information, is presented only to comply with the Securities and
Exchange Commission's accounting rule, Article 11 of Regulation S-X,
and should not be used for any other purpose. Such information has
been compiled by management, without independent audit or
review.
<PAGE>
1. ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Three Months ended March 31, 1996 compared to three months ended
March 31, 1995. (Management's Unaudited Statements of Operations)
Total operating revenues for the three months ended March 31, 1996
were $870,413 representing a 52% increase from the $574,198 for the
comparable period of 1995. Fee revenues were $821,369 in January
through March of 1996; (94% of operating revenues) as compared to
$497,972 for the first quarter of 1995 (87% of operating revenue),
representing a 65% increase over the previous period. Commission
income totaled $49,044 and $76,226 for the three months ended March
31, 1996 and 1995 respectively, a $27,182 decrease between periods.
The increase in management fee revenues in the first quarter of
1996 from the same period in 1994 can be directly attributed to a
combination of normal growth of the Funds upon which the fees are
based and for the majority of the growth, the purchase by the
Company of The Ranson Company, Inc., effective January 6, 1996,
which brought approximately $184,000,000 in additional assets under
the Company's management..
Expenses for the three months ended March 31, 1996 decreased 4%
from the same period of 1995 from $837,074 to $803,210.
Compensation and benefits at $225,878 and $181,221, respectively,
comprise 27% and 23%, of total expenses for the 1995 and 1996 first
quarter periods. Considering the additional assets now being
managed, compensation and benefits expenses were significantly
reduced from the same period of 1995 as were general and
administrative expenses which decreased $64,199 from $311,083 in
the first quarter 1995 to $246,884 in the March 31, 1996 quarter.
A significant expense item is "deferred sales costs recognized."
During the three month period ended March 31, 1996, the expense was
$232,768 compared to $190,283 for the same period of 1995. The
increase of 22% ($42,485) in this amortization expense item is a
result of prior accumulations of capitalized commissions paid on no
load funds which are now being amortized to expense in accordance
with the schedule established by the Company.
The Registrant recorded "other income" income from interests and
dividends of $20,284 in the three month period ended March 31, 1996
compared to $81,165 in the same period of 1995. Investment related
losses reduced the 1995 three month period's "other income" to
$28,713 compared to $25,348 in the three months ended March 31,
1996.
As a result of these factors, the Registrant reported net income
before income tax expense of $92,551 for the three months ended
March 31, 1996 versus a net loss of $234,163 for the comparable
period of 1995. Net income after Deferred Income Tax (Expense)
Benefit was $32,851 for the period ending March 31, 1996 compared
to a net loss of $189,423 for January 1995 through March 1995.
<PAGE>
Liquidity and Capital Resources
The Company's most liquid assets are cash and cash equivalents.
The levels of these assets are dependent on the Company's
operating, financing and investing activities during any given
period.
Cash and cash equivalents at March 31, 1996 totaled $498,742.
Although the Company has relied upon sales of its common stock for
its past liquidity and growth, management believes that its current
liquid position will be sufficient to meet the short and
intermediate term financing needs of the Company based on its
present and anticipated future operations.
The Ranson Company, Inc. Acquisition Effect Upon Liquidity and
Capital Resources
As described in Part II, Item 5 hereof the Company completed the
acquisition of The Ranson Company, Inc. on January 5, 1996.
The cost to the Company of the acquisition of The Ranson Company,
Inc. on January 5, 1996 was $6,196,403, subject to final adjustment
on July 3, 1996. $5,083,274 was paid directly to The Ranson
Company, Inc. shareholders on January 5, 1996 and $1,113,129 was
placed in escrow pending final determination of the purchase price
on July 3, 1996. $4,696,403 of the $6,196,403 purchase price came
from cash and cash equivalents held by the Company. $1,500,000 of
the purchase price was borrowed on a short term note obtained
January 5, 1996.
The Rescission Offer Effect on Liquidity and Capital Resources
As described in Part II, Item I hereof the Company has undertaken
to offer cash rescission to all unaffiliated purchaser's of the
Company's Common Stock after September 1, 1992. On February 14,
1996 the Company mailed preliminary prospectus' to all purchasers
of common stock between September 1, 1992 and March 9, 1995.
Holders of Common Stock totaling 4,859,207 shares were offered the
option of electing to revoke their ownership of the Company and
receive from the Company such purchaser's cash paid for the
unregistered Common Stock, plus accrued interest at the legal rate
in the state of purchase, or rescind the original purchase and
receive (after registration effectiveness) registered Common Stock
on a one share for one share basis.
To date, only two persons offered the cash rescission option
accepted such offer, a total of $34,809 in cash was paid to such
rescinding shareholders for a total of 17,263 common shares.
<PAGE>
ND HOLDINGS, INC. AND SUBSIDIARIES
PART II OTHER INFORMATION
Item 1: Legal Proceedings
Except for the regulatory issues described below, the Company is
not involved in any material pending legal proceedings, nor is
management aware of any threatened litigation.
The Company's broker/dealer Subsidiary, ND Capital, Inc., has
unresolved issues outstanding relating to a July, 1995 examination
of ND Capital by its regulatory organization, the NASD (National
Association of Securities Dealers). Subsequently, the Denver
Regional office of the SEC (Securities and Exchange Commission) has
also initiated an investigation of the same issues. These issues
relate to sales by ND Capital, Inc. and other broker/dealers
unrelated to Company, of common stock of the Company to a total of
eleven persons not residents of the State of North Dakota while the
Company was relying upon an intrastate exemption (Section 3(a)(11)
of the 1933 Securities Act). Sanctions or other remedial
requirements, could potentially be required. The Company and its
Subsidiary are actively working to resolve these issues. Offers of
cash rescission to any unaffiliated purchaser who purchased the
Company's Common Stock between September 1, 1992 and March 9, 1995
(common shares totaling 4,859,207) has been undertaken. Since this
matter is in informal preliminary stages, no opinion can be offered
as to any potential liability or other adverse consequence to the
Company.
Section 5(a) of the Securities Act of 1933 requires that a
registration statement pursuant to the requirements set forth in
Section 6 of the Securities Act of 1933 be filed with the U.S.
Securities and Exchange Commission (the "SEC") and in effect prior
to offers or sales of a security. The Company relied upon the
"intrastate" exemption provided by Section 3(11) of the Securities
Act of 1933 and the North Dakota exemption from registration
provided by NDCC 10-04-05(13) for securities issued by a venture
capital corporation organized under Chapter 10-30.1 in making sales
of its common stock. As a result of sales to eleven persons that
SEC and NASD examiners consider to be nonresidents of North Dakota,
the exemption from registration required by SEC 5(a) of the 1933
Securities Act may not be available, thereby creating liability
under federal securities laws. The Company does not believe that
sales to nonresidents of North Dakota effects its exemption from
registration with the North Dakota Securities Commission. Federal
law claims may be brought for up to three years after the date of
the offer of the unregistered Common Stock.
Although compliance with the requirements of the applicable
state rescission may bar future state claims, acceptance or
rejection of the offer of rescission may not bar holders from
asserting any claims against the Company for alleged violations of
Federal Securities Laws. Contingent liability of the Company may
not necessarily be eliminated by making the Rescission Offer.
Item 4: Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders was held March 22, 1996.
4,824,202 shares (58.9%) of the total of 8,191,751 shares
outstanding were voted at the meeting. Elections were held for all
directors and for approval of Brady Martz & Associates as
independent auditors. The results of the election were as follows:
<PAGE>
Matter 1. Election of Directors
Votes For Withhold Authority
Richard J. Backes 4,718,249 105,953
Vance A Castleman 4,718,249 105,953
Daniel L. Feist 4,718,249 105,953
Lyle E. McLain 4,718,249 105,953
Peter A. Quist 4,718,249 105,953
Robert E. Walstad 4,718,249 105,953
Richard H. Walstad 4,718,249 105,953
All Directors were re-elected.
Matter 2. Approval of Independent Auditors
For approval of Brady Martz & Associates, P.C. 4,737,740
Against Approval 4,762
Abstain 81,700
Brady Martz & Associates, P.C. was approved as Independent Auditors.
Item 5: Other Information
On January 5, 1996, ND Holdings, Inc. (the "Company") acquired 100%
of the Common Stock and complete ownership of The Ranson Company, Inc.,
a Kansas corporation, and Ranson Capital Corporation ("Ranson
Capital"), also a Kansas corporation, a wholly-owned subsidiary of
The Ranson Company, Inc.
The Company and the Selling Ranson Stockholders of The Ranson
Company, Inc., entered into a contract dated as of September 15,
1995 (the "Agreement") whereby the Company acquired all outstanding
shares of The Ranson Company, Inc. and therefore acquired all
business related to the Ranson Managed Portfolios through the
indirect acquisition of Ranson Capital (the "Acquisition"). Prior
to the Closing Date, Ranson Capital disposed of its Unit Trust
Business (separate from the Ranson Managed Portfolios) by transfer
of the Unit Trust Business, which transfer was made without any
consideration or payment to Ranson Capital or The Ranson Company, Inc.
The Ranson Company, Inc. is a holding company with no material
operations or transactions. Ranson Capital is the investment
adviser and manager for each Series of the Ranson Managed
Portfolios. Ranson Capital is a broker/dealer and registered
investment advisor registered with the Securities and Exchange
Commission. Ranson Capital was formed in 1990 and acts as
investment advisor and fund manager for the Ranson Managed
Portfolios, consisting of the Kansas Insured Municipal Fund -
Limited Maturity, Kansas Municipal Fund and the Nebraska Municipal
Fund. John A. Ranson, Alex R. Meitzner, Mark J. Kneedy, John J.
Hass, Robin K. Pinkerton, Stephen E. Shorgren and Douglas K. Rogers
(the "Selling Ranson Stockholders")
<PAGE>
previously owned all the
outstanding common stock of The Ranson Company, Inc. None of these
persons have any affiliation with the Company.
The transaction, completed January 5, 1996 allowed the Company to
acquire management of the approximately $184,000,000 of assets
contained in the Ranson Managed Portfolios (the "Ranson Managed
Portfolios"), through acquisition of their advisor, Ranson Capital
and its parent, The Ranson Company, Inc., as wholly-owned subsidiaries
of the Company. The initial purchase price was approximately
$6,196,402 (subject to 180 day adjustment based upon net
redemptions of the Ranson Managed Portfolios between January 5,
1996 and July 3, 1996). $5,083,273 (80%) of the initial purchase
price was paid to The Ranson Company, Inc. shareholders on January 5,
1996. $1,113,129 (the "Deferred Purchase Price") is held in escrow
pending final adjustment of the purchase price on July 3, 1996.
$4,696,402 of the $6,196,402 purchase price came from the Company's
assets, resulting from the sale of $367,649 of trading securities,
the sale of $1,477,678 of securities available-for-sale, and a
utilization of a combination of cash and cash equivalents held by
the Company. $1,500,000 of the purchase price was borrowed on a
short term note from First Western Bank and Trust Company of Minot,
North Dakota. Prior to this acquisition, the Company had no
affiliation with The Ranson Company, Inc., its subsidiary or its
shareholders.
The Ranson Company, Inc. is a holding company with no material
operations or transactions. Ranson Capital, a Kansas Corporation,
is the investment adviser and manager for each Series of the Ranson
Managed Portfolios. Ranson Capital is a broker/dealer and
registered investment advisor registered with the Securities and
Exchange Commission. Ranson Capital was formed in 1990 and acts as
investment advisor and fund manager for the Ranson Managed
Portfolios, consisting of the Kansas Insured Municipal Fund -
Limited Maturity, Kansas Municipal Fund and the Nebraska Municipal
Fund. John A. Ranson, Alex R. Meitzner, Mark J. Kneedy, John J.
Hass, Robin K. Pinkerton, Stephen E. Shorgren and Douglas K. Rogers
(the "Selling Ranson Stockholders") previously owned all the
outstanding common stock of The Ranson Company, Inc. None of these
persons have any affiliation with the Company. None of the Selling
Ranson Stockholders will be come a director or executive officer of
the Company.
Purchase Price. The total purchase price to be paid by the
Company to the Ranson Stockholders for the Purchased Stock
(hereinafter referred to as the "Purchase Price") was determined as
follows:
(a) an amount equal to the total consolidated stockholders'
equity of The Ranson Company, Inc. and Ranson Capital determined in
accordance with generally accepted accounting principles
consistently applied, but without audit and adjusted to exclude any
amount for goodwill carried on the books of The Ranson Company, Inc.
and Ranson Capital (the "Total Ranson Stockholders' Equity")
determined as the close of business on the date immediately
preceding the January 5, 1996 Closing Date;
(b) an amount equal to three percent (3%) of the net asset
value of the Ranson Managed Portfolios' assets determined in the
manner consistent with that described in the current prospectus for
the applicable Ranson Managed Portfolios (the
<PAGE>
"Asset Portion"), as
the close of business on the date immediately preceding the January
5, 1996 Closing Date.
Adjustment to Deferred Purchase Price. All or a portion of the
Deferred Purchase Price ($1,113,129) may be reduced and returned to
the Company in the event there are Net Fund Redemptions as of the
close of business on the 180th day following the Closing Date.
(July 3, 1996 being referred to as the "Reduction Date"). The term
"Net Fund Redemptions" shall mean the dollar amount of all Ranson
Fund redemptions, excluding from such calculation any redemptions
of Ranson Managed Portfolios shares owned or controlled by the
Company or any of its affiliates, in excess of the dollar amount of
all Ranson Managed Portfolios sales for the period from Closing
Date to the Reduction Date. The Deferred Purchase Price shall be
reduced by three percent (3%) of the amount of the Net Fund
Redemptions. The Deferred Purchase Price will not be subject to
upward adjustment in the event the Ranson Managed Portfolios sales
exceed the Ranson Managed Portfolios redemptions from the Closing
Date to the Reduction Date. Following any adjustment of the
Deferred Purchase Price and the payment, if any, as a result
thereof to the Company, together with all earnings of the Escrowed
Ranson Managed Portfolios, the balance of the Deferred Purchase
Price shall be paid to the Ranson Stockholders in accordance with
their respective Proportionate Amounts. In no event shall there be
any reduction of the Purchase Price in excess of the principal
amount of the Deferred Purchase Price, regardless of the amount of
the Net Fund Redemptions on the Reduction Date.
Termination of Employees. Prior to January 5, 1996, The Ranson
Company, Inc. and Ranson Capital terminated the employment of all
employees of The Ranson Company, Inc. and Ranson Capital, except for
three employees retained by the Company. All liabilities of The Ranson
Company, Inc. and Ranson Capital to such terminated employees for
accrued compensation, vacation pay or severance pay were paid prior
to the Closing or accrued as liabilities in connection with the
determination of the Total Ranson Stockholders' Equity. The Ranson
Capital's 401(k) Profit Sharing Plan was terminated prior to
Closing. Three management employees of Ranson Capital Company
remain after completion of The Ranson Company, Inc. acquisition.
None of the Selling Ranson Company, Inc. Shareholders is or will
become a director or executive officer of the Company.
Non-Competition Covenants. For a period of three (3) years
from the Closing Date, John A. Ranson and Alex R. Meitzner each
agreed that he would not conduct a business in competition with the
management of open-end investment companies (mutual funds)
registered under the Investment Company Act of 1940 (the "1940
Act"). For a period of three (3) years from the Closing Date,
Douglas K. Rogers agreed that he would not conduct a business which
consists of the management of open-end investment companies (mutual
funds) registered under the 1940 Act, the investments of which
consist of interest bearing obligation issued by or on behalf of
municipalities or other governmental authorities in the states of
Kansas or Nebraska, the interest income from which is exempt from
Federal and Kansas or Nebraska state income taxes.
<PAGE>
Investment Management Agreements With The Ranson Managed Portfolios
In anticipation of the Acquisition, new investment management
agreements (the "Contracts") between each Series of the Ranson
Managed Portfolio funds and Ranson Capital were proposed for
approval and accepted by Ranson Managed Portfolio fund shareholders
of each Series. The new management agreements for the Ranson
Managed Portfolios are on the same terms as the current management
agreements. Management of the Ranson Managed Portfolios will be
performed by the Company's current management team.
The Contracts provide that Ranson Capital will supply investment
research and portfolio management, including the selection of
securities for the Ranson Managed Portfolios to purchase, hold or
sell and the selection of brokers through whom the Ranson Fund's
portfolio transactions are executed. Ranson Capital also agrees to
administer the business affairs of the Ranson Managed Portfolios,
furnish offices, necessary facilities and equipment, provide
administrative services, and permit its officers and employees to
serve without compensation as Trustees and officers of the Ranson
Managed Portfolios if duly elected to such positions.
The Contracts will remain in effect until December 1, 1996. The
Contracts may continue in effect from year to year thereafter if
specifically approved at least annually by the Trustees of the
Ranson Managed Portfolios or by a vote of the majority of the
outstanding shares of the Ranson Managed Portfolios. The
continuation of the Contracts must also be approved by a vote of a
majority of the disinterested Trustees of the Ranson Managed
Portfolios, cast in person at a meeting called for such purpose.
The Contracts may be terminated by either party without penalty
with sixty days' written notice and will automatically terminate in
the event of assignment.
For Ranson Capital's services under each of the Contracts, the
Ranson Managed Portfolios agree to pay Ranson Capital a monthly
management and investment advisory fee equivalent on an annual
basis to .50 of 1% of the Ranson Fund's average daily net assets.
Under the terms of each of the Contracts, Ranson Capital has agreed
to pay all expenses of the Ranson Managed Portfolios, including the
Ranson Fund's management and investment advisory fee and the Ranson
Fund's dividend disbursing, administrative and accounting services
fees (but excluding taxes and brokerage fees and commissions, if
any) that exceed 1.25% (.75 in the case of Kansas Insured Municipal
Fund - Limited Maturity) of the Ranson Fund's average daily net
assets on an annual basis up to the amount of the investment
advisory and management fee payable by the Ranson Managed
Portfolios to Ranson Capital. Reimbursements by Ranson Capital for
the Ranson Fund's expenses will be paid monthly based on annualized
year-to-date expenses. All other expenses shall be paid by the
Ranson Managed Portfolios. From time to time and subject to
discontinuance at any time, Ranson Capital may voluntarily assume
certain expenses of the Ranson Managed Portfolios. This would have
the effect of lowering the overall expense ratio of the Ranson
Managed Portfolios and of increasing the yield to investors. The
Ranson Fund's expenses include, among others, taxes, brokerage fees
and commissions, if any, fees of disinterested Trustees, expenses
of Trustees' and Ranson Stockholders' meetings, insurance premiums,
expenses of redemption of shares, expenses of issue and sale of
shares (to
<PAGE>
the extent not borne by the distributors), expenses of
printing and mailing certificates, association membership dues,
charges of the Ranson Fund's custodian, and bookkeeping, auditing
and legal expenses, and the fees and expenses of registering the
Ranson Managed Portfolios and its shares with the Securities and
Exchange Commission, registering or qualifying its shares under
state securities laws and the expenses of preparing and mailing
prospectuses and reports to Ranson Stockholders. Ranson Capital
also acts as the Ranson Fund's administrative and accounting
services agent. For these services, Ranson Capital receives and
administrative and accounting services fee payable monthly by the
Ranson Managed Portfolios.
Item 6: Exhibits and Reports on Form 8-K
A report on Form 8-K was filed January 19, 1996 to report the
acquisition of The Ranson Company, Inc. on January 5, 1996. A Form
8-K/A was filed on February 8, 1996 to provide the required
financial statements.
<PAGE>
ND HOLDINGS, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
/s/ Robert E. Walstad May 14, 1996
Robert E. Walstad Date
President and Chairman of the Board
/s/ Dan Korgel May 14, 1996
Dan Korgel Date
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 498,742
<SECURITIES> 332,060
<RECEIVABLES> 365,464
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,283,917
<PP&E> 240,977
<DEPRECIATION> 124,918
<TOTAL-ASSETS> 11,007,883
<CURRENT-LIABILITIES> 1,660,608
<BONDS> 0
0
0
<COMMON> 10,725,474
<OTHER-SE> (1,613,299)
<TOTAL-LIABILITY-AND-EQUITY> 11,007,883
<SALES> 821,369
<TOTAL-REVENUES> 870,413
<CGS> 0
<TOTAL-COSTS> 754,694
<OTHER-EXPENSES> 25,348
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 48,516
<INCOME-PRETAX> 92,551
<INCOME-TAX> (59,700)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32,851
<EPS-PRIMARY> .004
<EPS-DILUTED> .004
</TABLE>
