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, 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 March 31, 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-
March 31, 1997 and December 31, 1996 5
Condensed Consolidated Statements of
Operations-Three months ended March 31,
1997 and 1996 6
Condensed Consolidated Statements of
Cash Flows-Three months ended March 31,
1997 and 1996 7
Notes to Condensed Consolidated
Financial Statements 8
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9
Part II OTHER INFORMATION
Item 1 Legal Proceedings 11
Item 4 Submission of Matters to a Vote of
Security Holders 11
Item 5 Other Information 11
Item 6 Exhibits and Reports on Form 8-K 11
Signatures 11
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
MARCH 31, 1997 AND 1996
3
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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
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 8
4
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<TABLE>
ND HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
ASSETS
(Unaudited)
March 31, December 31,
1997 1996
------------- -------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 195,082 $ 167,912
Accounts receivable 355,782 332,649
Prepaids 57,901 22,655
Deferred tax benefit 440,000 440,000
------------- -------------
Total current assets $ 1,048,765 $ 963,216
------------- -------------
EQUIPMENT $ 522,547 $ 517,316
Less accumulated depreciation 186,772 175,981
------------- -------------
Net equipment $ 335,775 $ 341,335
------------- -------------
OTHER ASSETS
Deferred sales commissions $ 3,126,034 $ 3,059,344
Deferred tax benefit 262,827 363,142
Covenant not to compete
(net of amortization of
$125,000 and $100,000) 175,000 200,000
Investment adviser's agreements
(net of amortization of
$339,430 and $267,751) 5,393,561 5,466,559
Registration costs and
other assets 348,986 330,689
------------- -------------
Total other assets $ 9,306,408 $ 9,419,734
------------- -------------
TOTAL ASSETS $ 10,690,948 $ 10,724,285
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Service fees payable $ 109,766 $ 108,556
Accounts payable 93,057 184,642
Current portion of long-term debt 132,881 132,881
Other current liabilities 17,738 16,835
------------- -------------
Total current liabilities $ 353,442 $ 442,914
------------- -------------
LONG-TERM LIABILITIES
Notes payable $ 1,172,962 $ 1,172,962
Investment certificates 235,100 235,100
Less current portion (132,881) (132,881)
------------- -------------
Total long-term liabilities $ 1,275,181 $ 1,275,181
------------- -------------
TOTAL LIABILITIES $ 1,628,623 $ 1,718,095
------------- -------------
STOCKHOLDERS' EQUITY
Common stock - 20,000,000
shares authorized, no par
value; 8,123,586 shares
issued and outstanding $ 10,633,367 $ 10,633,367
Accumulated deficit (1,571,042) (1,627,177)
------------- -------------
Total stockholders' equity $ 9,062,325 $ 9,006,190
------------- -------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 10,690,948 $ 10,724,285
============= =============
</TABLE>
5
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<TABLE>
ND HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
(Unaudited)
Three Months Ended
March 31,
1997 1996
------------- -------------
<S> <C> <C>
REVENUES
Fee income $ 765,506 $ 821,369
Commissions 72,217 49,044
------------- -------------
Total revenue $ 837,723 $ 870,413
------------- -------------
OPERATING EXPENSES
Compensation and benefits $ 218,274 $ 181,221
General and administrative
expenses 205,183 246,884
Deferred sales costs recognized 127,859 232,768
Depreciation and amortization 107,470 93,821
Interest 24,350 48,516
------------- -------------
Total operating expenses $ 683,136 $ 803,210
------------- -------------
OPERATING INCOME $ 154,587 $ 67,203
------------- -------------
OTHER INCOME
Interest and dividends $ 6,146 $ 20,284
Miscellaneous income 390 6,055
Trading securities losses, net - (991)
------------- -------------
Total other income $ 6,536 $ 25,348
------------- -------------
INCOME BEFORE INCOME TAX EXPENSE $ 161,123 $ 92,551
DEFERRED INCOME TAX EXPENSE (104,988) (59,700)
------------- -------------
NET INCOME $ 56,135 $ 32,851
============= =============
NET INCOME PER SHARE: $ .01 $ .00
</TABLE>
6
<PAGE>
<TABLE>
ND HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
(Unaudited)
Three Months Ended
March 31,
1997 1996
------------ -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash provided (used) by
operating activities $ 49,379 $ (39,278)
------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investment adviser's
agreements $ 1,319 $ (5,441,237)
Purchase of covenant not to compete - (300,000)
Purchase of available-for-sale
securities - (9,160)
Purchase of equipment (5,231) (72,010)
Other asset (increases) decreases (18,297) 5,189
------------ -------------
Net cash used by investing
activities $ (22,209) $ (5,817,218)
------------ -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term debt $ - $ 1,525,000
Redemption of common stock - (34,600)
Investment certificates redeemed - (30,000)
------------ -------------
Net cash provided by financing
activities $ - $ 1,460,400
------------ -------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS $ 27,170 $ (4,396,096)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 167,912 4,894,838
------------ -------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 195,082 $ 498,742
============ ==============
</TABLE>
7
<PAGE>
ND HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997 AND 1996
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, 1997 and 1996 are not necessarily
indicative of the results expected for the full year.
NOTE 2 - CHANGE IN ACCOUNTING ESTIMATE
Subsequent to March 31, 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' accounts 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.
NOTE 4 - RECLASSIFICATION
Certain amounts have been reclassified to conform with the
current year presentation.
8
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Three Months ended March 31, 1997 compared to three months ended
March 31, 1996. (Management's Unaudited Statements of Operations)
Total operating revenues for the three months ended March 31, 1997
were $837,723 representing a 4% decrease from the $870,413 recorded
for the comparable period of 1996. Fee revenues were $765,506 in
January through March of 1997; (91% of operating revenues) as
compared to $821,369 for the first quarter of 1996 (94% of
operating revenue), representing a 7% decrease over the previous
period. Commission income totaled $72,217 and $49,044 for the
three months ended March 31, 1997 and 1996 respectively, a $23,173
increase between periods.
The decrease in management fee revenues in the first quarter of
1997 from the same period in 1996 can be attributed to normal
change of fund manager attrition in the Funds brought under the
Company's management as a result of 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, 1997 decreased 15%
from the same period of 1996 from $803,210 to $683,136.
Compensation and benefits at $181,221 and $218,274, respectively,
comprise 23% and 32%, of total expenses for the 1996 and 1997 first
quarter 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 $41,701 from $246,884 in the first quarter 1996
to $205,183 in the March 31, 1997 quarter. A significant expense
item is "deferred sales costs recognized." During the three month
period ended March 31, 1997, the expense was $127,859 compared to
$232,768 for the same period of 1996. The decrease of 45%
($104,909) 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 45% ($104,909)
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 $6,146 in the three month period ended March 31, 1997
compared to $20,284 in the same period of 1996. The 1996 three
month period's "other income" was $25,348 compared to $6536 in the
three months ended March 31, 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 $161,123 for the three months ended
March 31, 1997 versus net income before income tax expense of
$92,551 for the comparable period of 1996, a 74% increase. Net
income after Deferred Income Tax Expense was $56,135 for the period
ending March 31, 1997 compared to a net income of $32,851 for
January 1996 through March 1996, a 71% increase in net income.
9
<PAGE>
Net Income per share was $.01 for the period ended March 31, 1997
compared to the zero earning per share recorded in the prior year
first quarter.
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, 1997 totaled $195,082.
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.
10
<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
None.
Item 5: Other Information
The Company is currently 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 are 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
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 13, 1997
Robert E. Walstad Date
President and Chairman of the Board
/s/ Dan Korgel May 13, 1997
Dan Korgel Date
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE PERIODS ENDED DECEMBER 31, 1996 AND MARCH 31, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-END> DEC-31-1996 MAR-31-1997
<CASH> 168 195
<SECURITIES> 0 0
<RECEIVABLES> 333 356
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 963 1,049
<PP&E> 517 523
<DEPRECIATION> 176 187
<TOTAL-ASSETS> 10,724 10,691
<CURRENT-LIABILITIES> 443 353
<BONDS> 1,275 1,276
0 0
0 0
<COMMON> 10,633 10,633
<OTHER-SE> (1,627) (1,571)
<TOTAL-LIABILITY-AND-EQUITY> 10,724 10,691
<SALES> 3,418 838
<TOTAL-REVENUES> 3,578 844
<CGS> 0 0
<TOTAL-COSTS> 3,157 659
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 161 24
<INCOME-PRETAX> 260 161
<INCOME-TAX> 216 105
<INCOME-CONTINUING> 44 56
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 44 56
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
