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, 1997
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, Minot, North Dakota 58702
(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 June 30, 1997, the Company had 8,123,586 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-
June 30, 1997 and December 31, 1996 5
Condensed Consolidated Statements of Operations-
Three months ended June 30, 1997 and 1996 6
Condensed Consolidated Statements of Operations-
Six months ended June 30, 1997 and 1996 7
Condensed Consolidated Statements of Cash Flows-
Six months ended June 30, 1997 and 1996 8
Notes to Condensed Consolidated Financial Statements 9
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Part II OTHER INFORMATION
Item 1 Legal Proceedings 12
Item 4 Submission of Matters to a Vote of Security Holders 12
Item 5 Other Information 12
Item 6 Exhibits and Reports on Form 8-K 12
Signatures 13
2
<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, 1997 AND 1996
3
<PAGE>
ND HOLDINGS, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
Pages
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets 5
Consolidated Statements of Operations three months 6/30/97 6
Consolidated Statements of Operations six months 6/30/97 7
Consolidated Statements of Cash Flows 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 9
4
<PAGE>
<TABLE>
ND HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<CAPTION>
(Unaudited)
June 30, December 31,
1997 1996
___________ ___________
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 213,362 $ 167,912
Accounts receivable 374,823 332,649
Prepaids 43,605 22,655
Deferred tax benefit 375,000 440,000
___________ ___________
Total current assets $ 1,006,790 $ 963,216
___________ ___________
EQUIPMENT $ 533,700 $ 517,316
Less accumulated depreciation (197,563) (175,981)
___________ ___________
Net equipment $ 336,137 $ 341,335
___________ ___________
OTHER ASSETS
Deferred sales commissions $ 3,211,612 $ 3,059,344
Deferred tax benefit 245,090 363,142
Covenant not to compete (net of
amortization of $150,000 and $100,000) 150,000 200,000
Investment adviser's agreements (net of
amortization of $411,109 and $267,751) 5,327,230 5,466,559
Registration costs and other assets 334,050 330,689
___________ ___________
Total other assets $ 9,267,982 $ 9,419,734
___________ ___________
TOTAL ASSETS $10,610,909 $10,724,285
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Service fees payable $ 104,333 $ 108,556
Accounts payable 114,598 184,642
Current portion of long-term debt 1,172,822 132,881
Other current liabilities 25,294 16,835
___________ ___________
Total current liabilities $ 1,417,047 $ 442,914
___________ ___________
LONG-TERM LIABILITIES
Note payable $ 1,028,722 $ 1,172,962
Investment certificates 184,100 235,100
Less current portion (1,172,822) (132,881)
___________ ___________
Total long-term liabilities $ 40,000 $ 1,275,181
___________ ___________
TOTAL LIABILITIES $ 1,457,047 $ 1,718,095
___________ ___________
STOCKHOLDERS' EQUITY
Common stock - 20,000,000 shares
authorized, no par value; 8,143,989
and 8,123,586 shares issued and
outstanding, respectively $10,696,106 $10,633,367
Accumulated deficit (1,542,244) (1,627,177)
___________ ___________
Total stockholders' equity $ 9,153,862 $ 9,006,190
___________ ___________
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $10,610,909 $10,724,285
=========== ===========
<FN>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
</TABLE>
5
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<TABLE>
ND HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
(Unaudited)
Three Months Ended
June 30,
------------------------
1997 1996
___________ ___________
<S> <C> <C>
REVENUES
Fee income $ 798,273 $ 637,332
Commissions 79,690 78,072
___________ ___________
Total revenue $ 877,963 $ 715,404
___________ ___________
OPERATING EXPENSES
Compensation and benefits $ 220,404 $ 217,508
General and administrative expenses 277,872 245,833
Deferred sales costs recognized 133,418 263,747
Depreciation and amortization 107,470 93,820
Interest 33,756 24,683
___________ ___________
Total operating expenses $ 772,920 $ 845,591
___________ ___________
OPERATING INCOME (LOSS) $ 105,043 $ (130,187)
OTHER INCOME
Interest and dividends $ 6,142 $ 26,484
Trading securities gains - net - 24,679
Miscellaneous income 350 1,058
----------- -----------
Total other income 6,492 52,221
___________ ___________
INCOME (LOSS) BEFORE INCOME TAX EXPENSE $ 111,535 $ (77,966)
DEFERRED INCOME TAX EXPENSE (82,737) (16,800)
___________ ___________
NET INCOME (LOSS) $ 28,798 $ (94,766)
=========== ===========
NET INCOME (LOSS) PER SHARE: $ - $ (.01)
=========== ===========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 8,131,747 8,175,941
=========== ===========
<FN>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
</TABLE>
6
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<TABLE>
ND HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
(Unaudited)
Six Months Ended
June 30,
1997 1996
___________ ___________
<S> <C> <C>
REVENUES
Fee income $ 1,563,779 $ 1,458,701
Commissions 151,907 127,116
___________ ___________
Total revenue $ 1,715,686 $ 1,585,817
___________ ___________
OPERATING EXPENSES
Compensation and benefits $ 438,678 $ 398,729
General and administrative expenses 483,055 492,717
Deferred sales costs recognized 261,277 496,515
Depreciation and amortization 214,940 187,641
Interest 58,106 73,199
___________ ___________
Total operating expenses $ 1,456,056 $ 1,648,801
___________ ___________
OPERATING INCOME (LOSS) $ 259,630 $ (62,984)
OTHER INCOME
Interest and dividends $ 12,288 $ 46,768
Trading securities gains - net - 23,688
Miscellaneous income 740 7,113
----------- -----------
Total other income 13,028 77,569
___________ ___________
INCOME (LOSS) BEFORE INCOME TAX EXPENSE $ 272,658 $ 14,585
DEFERRED INCOME TAX EXPENSE (187,725) (76,500)
___________ ___________
NET INCOME (LOSS) $ 84,933 $ (61,915)
=========== ===========
NET INCOME (LOSS) PER SHARE: $ .01 $ (.01)
=========== ===========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 8,129,415 8,180,172
=========== ===========
<FN>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
</TABLE>
7
<PAGE>
<TABLE>
ND HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
(Unaudited)
Six Months Ended
June 30
------------------------
1997 1996
___________ ___________
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash provided (used) by operating activities $ 201,725 $ (73,732)
___________ ___________
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investment adviser's agreement $ (4,029) $(5,422,455)
Purchase of covenant not to compete - (300,000)
Purchase of available-for-sale securities - (5,662)
Proceeds from sale of available-for-sale securities - 324,688
Purchase of equipment (16,384) (134,934)
Other asset (increases) decreases (3,361) 1,033
___________ ___________
Net cash used by investing activities $ (23,774) $(5,537,330)
___________ ___________
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt $ - $ 1,525,000
Payments on long-term debt (144,240) (200,000)
Proceeds from issuing common stock (net of
issue costs) 62,739 -
Redemption of common stock - (34,600)
Investment certificates redeemed (51,000) (35,000)
___________ ___________
Net cash provided (used) by financing activities $ (132,501) $ 1,255,400
___________ ___________
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS $ 45,450 $(4,355,662)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 167,912 4,894,838
___________ ___________
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 213,362 $ 539,176
=========== ===========
<FN>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
</TABLE>
8
<PAGE>
ND HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
NOTE 1 - BASIS OF PRESENTATION
The accompanying condensed 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. The Condensed Consolidated
Balance Sheet at December 31, 1996, contained herein, was derived from
audited financial statements, but does not include all disclosures
included in the 1996 Annual Report and applicable under generally
accepted accounting principles. Certain information and footnote
disclosures normally included in interim financial statements prepared
in accordance with generally accepted accounting principles have been
omitted.
NOTE 2 - CHANGE IN ACCOUNTING ESTIMATE
Subsequent to June 30, 1996, the Company changed its period for
amortizing deferred sales commissions from the contingent deferred
sales charge period of five years to nine years. The change in the
amortizable life of the deferred sales commissions is based on the
period of time during which deferred sales commissions are expected to
be recovered from distribution plan payments and management's estimate
of the average life of investors' in the Company's sponsored mutual
funds. Contingent deferred sales charges received by the Company will
directly reduce the value of the deferred sales commissions asset.
NOTE 3 - INCOME TAXES
Estimated effective annual income tax rates differ from statutory
rates, primarily due to nondeductible amortization expenses.
NOTE 4 - RECLASSIFICATION
Certain amounts in the 1996 condensed consolidated financial
statements have been reclassified to conform with the 1997
presentation. These reclassifications had no effect on the
Company's net income.
9
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Six Months ended June 30, 1997 compared to six months ended June 30, 1996.
(Management's Unaudited Statements of Operations)
Total operating revenues for the six months ended June 30, 1997 were $1,715,686
representing a 8% increase from the $1,585,817 recorded for the comparable
period of 1996. Fee revenues were $1,563,779 in January through June of 1997;
(91% of operating revenues) as compared to $1,458,701 for the first half of 1996
(92% of operating revenue), representing a 7% increase over the previous period.
Commission income totaled $151,907 and $127,116 for the six months ended June
30, 1997 and 1996 respectively, a $24,791 increase between periods.
The increase in management fee revenues in the first half of 1997 from the same
period in 1996 can be attributed to normal growth in the Funds under the
Company's management as well as increased marketing efforts by the Company.
Expenses for the six months ended June 30, 1997 decreased 12% from the same
period of 1996 from $1,648,801 to $1,456,056. Compensation and benefits at
$398,729 and $438,678, respectively, comprise 24% and 30%, of total expenses for
the 1996 and 1997 first half periods. Considering the additional assets now
being managed, compensation and benefits expenses were not significantly
increased from the same period of 1996. General and administrative expenses
decreased $9662 from $492,717 in the first half 1996 to $483,055 in the June 30,
1997 quarter. A significant expense item is "deferred sales costs recognized."
During the six month period ended June 30, 1997, the expense was $261,277
compared to $496,515 for the same period of 1996. The decrease of 47%
($235,238) 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
decrease of 47% ($235,238) is a result of a change (increase) in the
amortization period (based upon experience history) by which the item is
expensed.
The Registrant recorded "other income" income from interests and dividends of
$12,288 in the six month period ended June 30, 1997 compared to $46,768 in the
same period of 1996. The 1996 six month period's "other income" was $77,569
compared to $13,028 in the six months ended June 30, 1997. The reduction in
income from interests and dividends is a result of the use of capital in January
1996 to purchase The Ranson Company.
As a result of these factors, the Registrant reported net income before income
tax expense of $272,658 for the six months ended June 30, 1997 versus net income
before income tax expense of $14,585 for the comparable period of 1996, a
$258,073 increase. Net income after Deferred Income Tax Expense was $84,933 for
the period ending June 30, 1997 compared to a net loss of $61,915 for January
1996 through June 1996, a $146,848 increase in net income.
Net Income per share was $.01 for the period ended June 30, 1997 compared to the
$.01 loss
10
<PAGE>
per share recorded in the prior year first half.
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, 1997 totaled $213,362.
Although the Company has relied upon sales of its common stock for its past
liquidity and growth, the Company is now generating positive cash flows from
operations and 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 operations.
11
<PAGE>
ND HOLDINGS, INC. AND SUBSIDIARIES
PART II-OTHER INFORMATION
Item 1: Legal Proceedings
None.
Item 4: Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders was held May 9, 1997. An excess of 50% of
the total of 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:
Matter 1. Election of Directors
Richard J. Backes Elected by a Majority of the Shareholders
Vance A Castleman Elected by a Majority of the Shareholders
Daniel L. Feist Elected by a Majority of the Shareholders
Lyle E. McLain Elected by a Majority of the Shareholders
Peter A. Quist Elected by a Majority of the Shareholders
Robert E. Walstad Elected by a Majority of the Shareholders
Richard H. Walstad Elected by a Majority of the Shareholders
All Directors were re-elected.
Matter 2. Approval of Independent Auditors
Brady Martz & Associates, P.C. was approved as Independent Auditors.
Item 5: Other Information
During the quarter ended June 30, 1997 the Company was in the
selling phase of a Best Efforts offering of up to 2,546,419 shares of its common
stock, SEC Registration Number 333-11509 Form S-1, effective February 4th 1997,
most recently amended by Post-Effective Amendment No. 1, effective May 1, 1997.
The shares were offered through an unaffiliated underwriter at a Best Efforts
Price of $3.50 per share.
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits
EX-27 Financial Data Schedule
(b) Reports on Form 8-K
None
12
<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 12, 1997
Robert E. Walstad Date
President and Chairman of the Board
/s/ Dan Korgel August 12, 1997
Dan Korgel Date
Chief Financial Officer
13
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ND HOLDINGS, INC.
Exhibit Index to Quarterly Report on Form 10-QSB
For the Quarter Ended June 30, 1997
EXHIBITS Page No.
EX-27 Financial Data Schedule ............................... 15
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE PERIOD ENDED JUNE 30, 1997, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 213
<SECURITIES> 0
<RECEIVABLES> 375
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,007
<PP&E> 534
<DEPRECIATION> 198
<TOTAL-ASSETS> 10,611
<CURRENT-LIABILITIES> 1,417
<BONDS> 40
0
0
<COMMON> 10,696
<OTHER-SE> (1,542)
<TOTAL-LIABILITY-AND-EQUITY> 10,611
<SALES> 1,716
<TOTAL-REVENUES> 1,729
<CGS> 0
<TOTAL-COSTS> 1,398
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 58
<INCOME-PRETAX> 273
<INCOME-TAX> 188
<INCOME-CONTINUING> 85
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 85
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>