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 June 30, 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
1 North Main St., Minot, North Dakota 58701
(Address of principal executive offices) (Zip Code)
(701) 852-5292
(Registrant's telephone number, including area code)
201 S. Broadway, Minot, North Dakota 58701
(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 August 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
Consolidated Balance Sheets
June 30, 1996 and December 31, 1995 (Unaudited) 5
Consolidated Statements of Operations
Three months ended June 30, 1996 and 1995 (Unaudited) 6
Consolidated Statements of Operations
Six months ended June 30, 1996 and 1995 (Unaudited) 7
Consolidated Statements of Cash Flows
Six months ended June 30, 1996 and 1995 (Unaudited) 8
Notes to Unaudited Consolidated Financial Statements 9
Supplementary Information Consolidated Pro Forma
Statements of Operations (Unaudited) 11
Financial Data Schedule 13
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Part II OTHER INFORMATION
Item 1 Legal Proceedings 16
Item 6 Exhibits and Reports on Form 8-K 16
Signatures 17
<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
JUNE 30, 1996 AND 1995
<PAGE>
ND HOLDINGS, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
Pages
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
SUPPLEMENTAL INFORMATION
Consolidated Proforma Statement of Operations
<PAGE>
ND HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
June 30, December 31,
1996 1995
------------ -----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 539,176 $ 4,894,838
Securities available-for-sale 5,570 322,900
Accounts receivable 415,732 161,907
Prepaids 68,567 44,235
------------ -----------
$ 1,029,045 $ 5,423,880
------------ -----------
PROPERTY AND EQUIPMENT $ 303,901 $ 100,680
Less accumulated depreciation 127,918 53,631
------------ -----------
Net property and equipment $ 175,983 $ 47,049
------------ -----------
OTHER ASSETS
Deferred sales costs $ 2,813,182 $ 2,840,238
Deferred tax benefit 965,900 1,042,400
Covenant not to compete (net of
amortization of $50,000 for 1996) 250,000 -
Investment adviser's agreement (net of
amortization of $109,701 for 1996) 5,312,754 -
Registration costs and other assets 115,986 117,019
------------ -----------
$ 9,457,822 $ 3,999,657
------------ -----------
$ 10,662,850 $ 9,470,586
============ ===========
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Commissions and service fees payable $ 83,533 $ 17,781
Accounts payable 22,656 64,069
Notes payable 1,325,000 -
Current portion of investment certificates 5,000 10,000
Accrued interest payable 1,264 6,205
Payroll taxes payable 3,379 2,005
------------ -----------
$ 1,440,832 $ 100,060
------------ -----------
LONG-TERM LIABILITIES
Investment certificates $ 235,100 $ 270,100
Less current portion 5,000 10,000
------------ -----------
$ 230,100 $ 260,100
------------ -----------
REDEEMABLE STOCK
Common stock subject to rescission exchange offer
(4,839,944 and 4,859,207 shares respectively) $ 9,600,000 $ 9,600,000
------------ -----------
COMMON STOCK AND ACCUMULATED DEFICIT
Common stock - 20,000,000 shares authorized, no
par value; 3,332,544 shares issued and outstanding $ 3,149,908 $ 3,149,908
Accumulated deficit (3,757,897) (3,661,382)
Unrealized gain (loss) on securities available-for-sale (93) 21,900
------------ -----------
$ (608,082) $ (489,574)
------------ -----------
$ 10,662,850 $ 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
June 30,
----------------------
1996 1995 *
--------- ---------
<S> <C> <C>
REVENUES
Fee income $ 637,332 $ 556,344
Commissions 78,072 30,560
--------- ---------
Total revenue $ 715,404 $ 586,904
--------- ---------
OPERATING EXPENSES
Compensation and benefits $ 217,508 $ 175,761
General and administrative expenses 245,833 224,072
Deferred sales costs recognized 263,747 191,503
Depreciation and amortization 93,820 94,404
Interest 24,683 9,355
--------- ---------
Total operating expenses $ 845,591 $ 695,095
--------- ---------
OPERATING INCOME (LOSS) $(130,187) $(108,191)
--------- ---------
OTHER INCOME
Interest and dividends $ 26,484 $ 54,661
Trading securities gains (losses), net 24,679 (48,196)
Miscellaneous income 1,058 226
--------- ---------
Total other income (loss) $ 52,221 $ 6,691
--------- ---------
INCOME (LOSS) BEFORE INCOME
TAX (EXPENSE) BENEFIT $ (77,966) $(101,500)
DEFERRED INCOME TAX (EXPENSE) BENEFIT (16,800) (2,490)
--------- ---------
NET INCOME (LOSS) $ (94,766) $(103,990)
========= =========
NET INCOME (LOSS) PER SHARE: $ (.01) $ (.01)
<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 OPERATIONS (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------------------------
1996 1995 *
----------- -----------
<S> <C> <C>
REVENUES
Fee income $ 1,458,701 $ 985,438
Commissions 127,116 106,786
----------- -----------
Total revenue $ 1,585,817 $ 1,092,224
----------- -----------
OPERATING EXPENSES
Compensation and benefits $ 398,729 $ 388,961
General and administrative expenses 492,717 556,528
Deferred sales costs recognized 496,515 381,786
Depreciation and amortization 187,641 197,206
Interest 73,199 7,688
----------- -----------
Total operating expenses $ 1,648,801 $ 1,532,169
----------- -----------
OPERATING INCOME (LOSS) $ (62,984) $ (439,945)
----------- -----------
OTHER INCOME (LOSS)
Interest and dividends $ 46,768 $ 151,922
Trading securities gains (losses), net 23,688 (48,196)
Miscellaneous income 7,113 556
----------- -----------
Total other income (loss) $ 77,569 $ 104,282
----------- -----------
INCOME (LOSS) BEFORE INCOME
TAX (EXPENSE) BENEFIT $ 14,585 $ (335,663)
DEFERRED INCOME TAX (EXPENSE) BENEFIT (76,500) 42,250
----------- -----------
NET INCOME (LOSS) $ (61,915) $ (293,413)
----------- -----------
NET INCOME (LOSS) PER SHARE: $ (.01) $ (.04)
<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>
Six Months Ended
June 30,
--------------------------
1996 1995
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash used by operating activities $ (73,732) $ (596,969)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investment adviser's agreement $(5,422,455) $ (25,000)
Purchase of covenant not to compete (300,000) -
Purchase of available-for-sale securities (5,662) (1,121,000)
Proceeds from sale of available-for-sale securities 324,688 159,926
Purchase of equipment (134,934) (9,918)
Other asset (increases) decreases 1,033 -
----------- -----------
Net cash used by investing activities $(5,537,330) $ (995,992)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term debt $ 1,525,000 $ -
Payments on short-term debt (200,000) -
Proceeds from issuing common stock
(net of stock issue costs) - 663,746
Redemption of common stock (34,600) (226,059)
Investment certificates redeemed (35,000) -
----------- -----------
Net cash provided by financing activities $ 1,255,400 $ 437,687
----------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS $(4,355,662) $(1,155,274)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 4,894,838 1,160,063
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 539,176 $ 4,789
=========== ===========
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
ND HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 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 six
months ended June 30, 1996 and 1995 are not necessarily indicative of
the results expected for the full year.
NOTE 2 - PROFORMA RESULTS
During the six months ended June 30, 1996, the Company acquired
the outstanding stock of Ranson Company, Inc. (Ranson). The
operating results for the quarter and six months ended June 30, 1996
include the revenue and expenses for the Ranson managed portfolios.
The operating results for the quarter and six months ended March 31,
1995 include proforma information to include the results of the same
period for Ranson, as though the business combination occurred
effective January 1, 1995.
NOTE 3 - SUPPLEMENTAL INFORMATION
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>
SUPPLEMENTAL INFORMATION
<PAGE>
ND HOLDINGS, INC. AND SUBSIDIARIES AND
RANSON COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED PROFORMA STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended June 30, 1995
------------------------------------------------------
ND Holdings, Ranson Company,
Inc. and Inc. and Pro Forma Pro Forma
Subsidiaries Subsidiaries Adjustment Results
------------ -------------- ---------- ---------
<S> <C> <C> <C> <C>
REVENUES
Fee income $ 420,046 $ 136,298 $ - $ 556,344
Commissions 3,197 27,363 - 30,560
--------- --------- -------- ---------
Total revenue $ 423,243 $ 163,661 $ - $ 586,904
--------- --------- -------- ---------
OPERATING EXPENSES
Compensation and benefits $ 139,687 $ 36,074 $ - $ 175,761
General and administrative
expenses 158,589 65,483 - 224,072
Deferred sales costs recognized 191,503 - - 191,503
Depreciation and amortization 3,000 584 90,820 94,404
Interest 9,355 - - 9,355
--------- --------- -------- ---------
Total operating expenses $ 502,134 $ 102,141 $ 90,820 $ 695,095
--------- --------- -------- ---------
OPERATING INCOME (LOSS) $ (78,891) $ 61,520 $(90,820) $(108,191)
--------- --------- -------- ---------
OTHER INCOME (LOSS)
Interest and dividends $ 54,661 $ - $ - $ 54,661
Trading securities gains
(losses), net (52,751) 4,555 - (48,196)
Miscellaneous income 226 - - 226
--------- --------- -------- ---------
Total other income (loss) $ 2,136 $ 4,555 $ - $ 6,691
--------- --------- -------- ---------
INCOME (LOSS) BEFORE
INCOME TAX (EXPENSE)
BENEFIT $ (76,755) $ 66,075 $(90,820) $(101,500)
DEFERRED INCOME
TAX (EXPENSE) BENEFIT 23,280 (25,770) - (2,490)
--------- --------- -------- ---------
NET INCOME (LOSS) $ (53,475) $ 40,305 $(90,820) $ 103,990
========= ========= ======== =========
</TABLE>
<PAGE>
ND HOLDINGS, INC. AND SUBSIDIARIES AND
RANSON COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED PROFORMA STATEMENTS OF OPERATIONS (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30, 1995
--------------------------------------------------------
ND Holdings, Ranson Company,
Inc. and Inc. and Pro Forma Pro Forma
Subsidiaries Subsidiaries Adjustment Results
------------ -------------- ---------- -----------
<S> <C> <C> <C> <C>
REVENUES
Fee income $ 693,877 $ 291,561 $ - $ 985,438
Commissions 52,467 54,319 - 106,786
----------- --------- --------- -----------
Total revenue $ 746,344 $ 345,880 $ - $ 1,092,224
----------- --------- --------- -----------
OPERATING EXPENSES
Compensation and benefits $ 311,125 $ 77,836 $ - $ 388,961
General and administrative
expenses 336,819 219,709 - 556,528
Deferred sales costs recognized 381,786 - - 381,786
Depreciation and amortization 14,161 1,405 181,640 197,206
Interest 7,688 - - 7,688
----------- --------- --------- -----------
Total operating expenses $ 1,051,579 $ 298,950 $ 181,640 $ 1,532,169
----------- --------- --------- -----------
OPERATING INCOME (LOSS) $ (305,235) $ 46,930 $(181,640) $ (439,945)
----------- --------- --------- -----------
OTHER INCOME (LOSS)
Interest and dividends $ 151,922 $ - $ - $ 151,922
Trading securities gains
(losses), net (52,751) 4,555 - (48,196)
Miscellaneous income 556 - - 556
----------- --------- --------- -----------
Total other income (loss) $ 99,727 $ 4,555 $ - $ 104,282
----------- --------- --------- -----------
INCOME (LOSS) BEFORE
INCOME TAX (EXPENSE)
BENEFIT $ (205,508) $ 51,485 $(181,640) $ (335,663)
DEFERRED INCOME
TAX (EXPENSE) BENEFIT 62,330 (20,080) - 42,250
----------- --------- --------- -----------
NET INCOME (LOSS) $ (143,178) $ 31,405 $(181,640) $ (293,413)
=========== ========= ========= ===========
</TABLE>
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Six Months ended June 30, 1996 compared to six months ended June
30, 1995. (Management's Unaudited Statements of Operations)
Total operating revenues for the six months ended June 30, 1996
were $1,585,817 representing a 45% increase from the $1,092,224 for
the comparable period of 1995. Fee revenues were $1,458,701 in
January through June of 1996; (92% of operating revenues) as
compared to $985,438 for the first half of 1995 (90% of operating
revenue), representing a 48% increase over the previous period.
Commission income totaled $127,116 and $106,786 for the six months
ended June 30, 1996 and 1995 respectively, a $20,330 increase
between periods.
The increase in management fee revenues in the first half of 1996
from the same period in 1995 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 six months ended June 30, 1996 increased less than
8% from the same period of 1995 from $1,532,169 to $1,648,801.
Compensation and benefits at $388,961 and $398,729, respectively,
comprise 25% and 24%, of total expenses for the 1995 and 1996 first
six month periods. Even with the additional assets now being
managed, compensation and benefits expenses were only slightly
increased (3%) from the same period of 1995. General and
administrative expenses actually decreased $63,811 from $556,528 in
the first half of 1995 to $492,717 in the June 30, 1996 half year.
A significant expense item is "deferred sales costs recognized."
During the six month period ended June 30, 1996, the expense was
$496,515 compared to $381,786 for the same period of 1995. The
increase of 30% ($114,729) 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 $46,768 in the six month period ended June 30, 1996
compared to $151,922 in the same period of 1995. Investment
related losses reduced the 1995 six month period's "other income"
to $104,282, investment gains brought other income to $77,569 in
the six months ended June 30, 1996.
As a result of these factors, the Registrant reported net income
before income tax expense of $14,585 for the six months ended June
30, 1996 versus a net loss of $335,663 for the comparable period of
1995. Net income after Deferred Income Tax (Expense) Benefit was
$61,915 for the period ending June 30, 1996 compared to a net loss
of $293,413 for January 1995 through June 1995.
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 June 30, 1996 totaled $539,176.
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 operating needs of the Company based on its
present and anticipated future operations.
<PAGE>
The Rescission Offer Effect on Liquidity and Capital Resources
Between September 1, 1992 and March 9, 1995, 4,859,207 shares of
the Company's no par Common Stock were issued to persons
unaffiliated with the Company at prices ranging from $1.30 to $2.10
per share. Such offering was intended to be a North Dakota
intrastate placement exempt from registration, however, under
federal securities laws, the exemption may be unavailable, thus
requiring registration. The Company, therefore, is currently
registering Common Stock for re-offer and re-sale pursuant to the
U.S. Securities Act of 1993 in connection with rescission of the
unregistered Common Stock. A purchaser who purchased between
September 1, 1992 and March 9, 1995 (Common Stock totaling
4,859,207) is offered the option of electing to revoke his
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 registered Common Stock
offered hereby on a one share for one share basis.
If all persons offered the cash rescission option accepted such
offer, a total of approximately $9,600,000 in cash would be
required. The Company does not have liquid assets sufficient to
fund such an amount. Current assets (in excess of accrued payables
and necessary working capital) of approximately $600,000 could
potentially be utilized to fund the cash rescission. Any further
cash rescissions would require the Company to borrow funds. The
Company has a current unused credit line of $500,000. Further
borrowing of $8,500,000 could potentially be required. Management
believes that as much as $8,500,000 in additional funds could be
borrowed if necessary, however, no assurances can be made that such
amount could be borrowed. Such borrowing would likely be in the
form of intermediate term loans requiring monthly payments of
principal and interest. The Company has not entered into any
tentative or written agreements with any lender(s) with respect to
such borrowing. Interest costs on borrowed amounts and debt
service on any such loan would also significantly adversely effect
future cash flow, liquidity and potential income. As an extreme
scenario, assuming that a loan of $9,000,000 would be required to
fund a total rescission, repayments of a loan of $9,000,000 could
require monthly amortized payments of approximately $130,000 to
$140,000 per month for a period of seven years at an assumed annual
interest rate of 6.5% to 8%.
If the rescission offer is partially (to material degree) or
completely accepted, the liquidity of the Company would be
substantially impaired. Future growth and expansion would also be
impaired since liquid assets and borrowing capacity would be
unavailable for expansion. Additionally, if the Company is
required to borrow funds, significant earnings would be offset by
interest payments and cash flow from operations would be utilized
for debt services rather than uses beneficial to the Company's
growth.
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, 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.
As was indicated by the red lettering on the face of the "red
herring" preliminary prospectus, first distributed approximately
February 14, 1996 to certain shareholders of ND Holdings, such
document was subject to completion and not the definitive and final
prospectus. Completion of rescission offers prior to the effective
date of the registration may be a violation of Section 5(a) of the
Securities Act of 1933 which requires that a registration statement
pursuant to the requirements set forth in Section 6 of the
Securities Act of 1933 be filed with the US Securities and Exchange
Commission and in effect prior to offers or sales of securities.
As a result, the previous cash payments to the two persons electing
rescission following the distribution of the February 14, 1996
preliminary prospectus may be a violation by the Company of Section
5(a).
Item 6: Exhibits and Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
June 30, 1996.
<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 August 13, 1996
Robert E. Walstad Date
President and Chairman of the Board
/s/ Dan Korgel August 13, 1996
Dan Korgel Date
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE PERIOD ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 539
<SECURITIES> 6
<RECEIVABLES> 416
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,029
<PP&E> 304
<DEPRECIATION> 128
<TOTAL-ASSETS> 10,663
<CURRENT-LIABILITIES> 1,441
<BONDS> 230
0
0
<COMMON> 10,725
<OTHER-SE> (1,733)
<TOTAL-LIABILITY-AND-EQUITY> 10,663
<SALES> 1,586
<TOTAL-REVENUES> 1,664
<CGS> 0
<TOTAL-COSTS> 1,576
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 73
<INCOME-PRETAX> 15
<INCOME-TAX> 77
<INCOME-CONTINUING> (62)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (62)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
