FORM 10-QSB
U. S. Securities and Exchange Commission
Washington, D.C. 20549
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 0-25958
ND HOLDINGS, INC.
(Exact name of small business issuer as specified in its charter)
North Dakota 45-040406
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
1 North Main, Minot, North Dakota, 58703
(Address of principal executive offices)
(701) 852-5292
(Issuer's telephone number)
(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 or 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 April 28, 2000, there were 7,519,687 shares of common stock of the
registrant outstanding.
Transitional Small Business Disclosure Format (check one):
Yes No X
FORM 10-QSB
ND HOLDINGS, INC.
INDEX
Part I: FINANCIAL INFORMATION Page No.
Item 1 Financial Statements
Condensed Consolidated Balance Sheets-
March 31, 2000 and December 31, 1999 3
Condensed Consolidated Statements of Operations-
Three months ended March 31, 2000 and 1999 4
Condensed Consolidated Statements of Cash Flows-
Three months ended March 31, 2000 and 1999 5
Notes to Condensed Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis or Plan
Of Operations 7
Part II OTHER INFORMATION
Item 5 Other Information 12
Item 6 Exhibits and Reports on Form 8-K 12
Signatures 13
<TABLE>
<CAPTION>
ND HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, December 31,
2000 1999
-----------------------------
<S> <C> <C>
ASSETS CURRENT ASSETS
Cash and cash equivalents $ 1,676,861 $ 1,934,739
Securities available-for-sale 143,000 100,000
Accounts receivable 320,222 350,266
Prepaids 48,895 46,127
-----------------------------
Total current assets $ 2,188,978 $ 2,431,132
-----------------------------
PROPERTY AND EQUIPMENT $ 1,921,376 $ 1,690,186
Less accumulated depreciation 461,681 421,853
-----------------------------
Net equipment $ 1,459,695 $ 1,268,333
-----------------------------
OTHER ASSETS
Deferred sales commissions $ 2,336,203 $ 2,500,616
Covenant not to compete ( net of accumulated
Amortization of $327,249 for 2000 and
$313,624 for 1999 190,751 204,376
Investment advisor's agreements (net of
amortization of $1,219,080 and $1,142,210) 4,930,501 5,007,371
Other assets 762,862 661,145
------------------------------
Total other assets $ 8,220,317 $ 8,373,508
-----------------------------
TOTAL ASSETS $ 11,868,990 $ 12,072,973
=============================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Service fees payable $ 93,829 $ 105,951
Accounts payable 32,233 47,921
Other current liabilities 154,980 219,258
Short-term borrowings 0 200,000
Deferred tax liability 146,099 85,752
Current portion of long-term debt 11,317 11,082
-----------------------------
Total current liabilities $ 438,458 $ 669,964
-----------------------------
LONG-TERM LIABILITIES
Note payable $ 611,348 $ 613,047
Debenture certificates 950,000 950,000
Corporate notes 962,000 962,000
Less current portion (11,317) (11,082)
-----------------------------
Total long-term liabilities $ 2,512,031 $ 2,513,965
-----------------------------
TOTAL LIABILITIES $ 2,950,489 $ 3,183,929
-----------------------------
MINORITY INTEREST IN SUBSIDIARY 458,001 469,063
-----------------------------
STOCKHOLDERS' EQUITY
Common stock - 20,000,000 shares
authorized, no par value; 7,561,187 and
7,615,187 shares issued and outstanding,
respectively $ 9,799,746 $ 9,858,309
Receivable - unearned ESOP shares 0 (100,890)
Accumulated deficit (1,339,246) (1,337,438)
-----------------------------
Total stockholders' equity $ 8,460,500 $ 8,419,981
-----------------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 11,868,990 $ 12,072,973
=============================
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
ND HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31,
-------------------------
2000 1999
-------------------------
<S> <C> <C>
OPERATING REVENUES
Fee income $ 824,532 $ 911,436
Commissions 96,995 241,285
Internet revenues 163,234 0
-------------------------
Total revenue $ 1,084,761 $ 1,152,721
-------------------------
OPERATING EXPENSES
Compensation and benefits $ 293,901 $ 243,388
Commission expense 86,382 207,674
General and administrative expenses 350,961 295,796
Sales commissions amortized 147,317 145,364
Depreciation and amortization 142,755 98,325
-------------------------
Total operating expenses $ 1,021,316 $ 990,548
-------------------------
OPERATING INCOME $ 63,444 $ 162,173
-------------------------
OTHER INCOME (EXPENSES)
Investment and other income $ 38,409 $ 28,124
Interest expense (54,378) (33,768)
-------------------------
Total other income (expense) $ (15,969) $ (5,644)
-------------------------
INCOME BEFORE INCOME TAX EXPENSE $ 47,475 $ 156,529
DEFERRED INCOME TAX EXPENSE $ (60,347) (89,660)
-------------------------
NET INCOME BEFORE MINORTIY INTEREST AND
CUMULATIVE EFFECT OF AN ACCOUNTING CHANGE $ (12,872) $ 66,869
MINORITY INTEREST IN SUBSIDIARY $ 11,062 0
CUMULATIVE EFFECT OF AN ACCOUNTING CHANGE
(net of tax effect) 0 (373,455)
-------------------------
NET INCOME (LOSS) AFTER MINORITY INTEREST AND
CUMULATIVE EFFECT OF AN ACCOUNTING CHANGE $ (1,810) $ (306,586)
=========================
NET INCOME PER SHARE: $ 0 $ (0.04)
AVERAGE COMMON SHARES OUTSTANDING 7,561,187 7,845,473
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
ND HOLDINGS, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
-------------------------
2000 1999
-------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (1,810) $ (306,586)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 142,755 96,903
Sales commissions amortized/charged off 147,317 724,013
Minority interest (11,062) 0
Loss on sale of equipment 0 283
(Increase) decrease in:
Accounts receivable 30,043 (63,800)
Prepaids (2,768) (4,780)
Deferred sales commissions capitalized 17,096 (155,665)
Deferred tax 60,347 (151,283)
Other assets (114,150) (7,177)
ESOP Receivable 100,890 0
Increase (decrease) in:
Service fees payable (12,119) 12,904
Accounts payable (15,688) 2,839
Other liabilities (64,278) 48,904
---------------------------------
Net cash provided by operating activities $ 276,573 $ 196,555
---------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment $ (231,190) $ (32,498)
Purchase of available-for-sale securities (43,000) 0
---------------------------------
Net cash used by investing activities $ (274,190) $ (32,498)
---------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Redemption of common stock (58,563) (233,044)
Increase in notes payable 0 200,000
Reduction of notes payable (201,699) (375,808)
Redemption of investment certificates 0 (30,000)
---------------------------------
Net cash provided (used) by financing activities $ (260,262) $ (438,852)
---------------------------------
NET DECREASE IN CASH AND CASH
EQUIVALENTS $ (257,879) $ (274,795)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 1,934,739 1,042,197
---------------------------------
CASH AND CASH EQUIVALENTS
AT END OF YEAR $ 1,676,860 $ 767,384
=================================
</TABLE>
ND HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
March 31, 2000 and 1999
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. These unaudited condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements and
the footnotes thereto contained in the Annual Report on Form 10-KSB for the
year ended December 31, 1999 of ND Holdings, Inc., as filed with the
Securities and Exchange Commission. The Condensed Consolidated Balance Sheet
at December 31, 1999, contained herein, was derived from audited financial
statements, but does not include all disclosures included in the Form 10-KSB
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.
In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (which are of
a normal recurring nature) necessary for a fair presentation of the
financial statements. The results of operations for the three months
ended March 31, 2000 are not necessarily indicative of operating results
for the entire year.
NOTE 2 - INCOME TAXES
The Company's effective tax rate differs from the U. S. Statutory rate
primarily due to nondeductible amortization expenses incurred as a result
of the Ranson acquisition. The Company's effective tax rates for 1999,
1998 and 1997 were 63%, 62% and 64%, respectively. The effective rate will
continue to reflect the nondeductible amortization associated with the
investment adviser's agreement acquired in the Ranson acquisition, which has
a remaining life of 16 years. Amortization of the Ranson non-compete
agreement was complete at December 31, 1998.
The Company is expensing deferred sales commissions as incurred for income
tax purposes. The Company will continue to capitalize and amortize the
commissions for financial reporting purposes (exception Integrity Fund of
Funds, which are expensed). The effects of the change will create timing
differences between when the commissions are deducted for income tax purposes
and expensed as amortization for financial reporting purposes. Deferred tax
assets or deferred tax liabilities may result from these timing differences.
NOTE 3 - RECLASSIFICATION
Certain amounts in the 1999 condensed consolidated financial statements have
been reclassified to conform with the 2000 presentation. These
reclassifications had no effect on the Company's net income.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
GENERAL
ND Holdings, Inc. ("the Company") is a holding company which operates in two
business segments, 1) as an investment adviser and provider of administrative
service to sponsored and non-proprietary mutual funds, and 2) as an internet
provider for the Minot and surrounding area.
<TABLE>
<CAPTION>
Segment 1 Segment 2
<S> <C> <C>
Revenues 922 163
Assets, net 1,215 245
Net Income (Loss) 9 (11)
</TABLE>
The Company provides investment management, distribution, shareholder
services, fund accounting and other related administrative services to the
open-end investment companies known as "Integrity Mutual Funds" and "Ranson
Managed Portfolios," hereinafter collectively referred to as "the Funds."
Integrity Mutual Funds currently consists of four (4) open-end investment
companies including ND Tax-Free Fund, Inc., Montana Tax-Free Fund, Inc.,
South Dakota Tax-Free Fund, Inc. and Integrity Fund of Funds, Inc. Ranson
Managed Portfolios consists of one open-end investment company containing
four (4) separate portfolios including The Kansas Municipal Fund, The Kansas
Insured Intermediate Fund, The Nebraska Municipal Fund, and The Oklahoma
Municipal Fund. Sales of Fund shares are marketed principally in Montana,
Kansas, Oklahoma, North Dakota, Nebraska and South Dakota. In addition, the
Company has commenced marketing shareholder services, fund accounting and
other administrative services offered by ND Resources, Inc. ("ND Resources")
to fund groups in the United States. As of April 28, 2000, ND Resources was
providing services to one outside fund group.
ASSETS UNDER MANAGEMENT/SERVICE
<TABLE>
<CAPTION>
By Investment Objective
In Millions
<S> <C> <C> <C>
As of March 31, 2000 1999 % Change
- --------------------------------------------------------------------------
FIXED INCOME Tax-Free Funds $ 308.9 $ 332.2 (7.0)%
EQUITY Fund of Funds $ 23.8 $ 20.8 14.4%
- --------------------------------------------------------------------------
TOTAL SPONSORED MUTUAL FUNDS-end of period $ 332.7 $ 353.0 (5.8)%
- --------------------------------------------------------------------------
Investors Research Fund $ 21.5 $ 21.8 (1.4)
- --------------------------------------------------------------------------
TOTAL ASSETS UNDER MANAGEMENT/SERVICE $ 354.2 $ 374.8 (5.5)%
==========================================================================
Average for the period $ 354.2 $ 376.3 (5.9)%
==========================================================================
</TABLE>
The Company's revenues depend primarily upon the amount of assets under its
management/service. Assets under management/service can be affected by the
addition of new funds to the group, the acquisition of another investment
management company, purchases and redemptions of mutual fund shares and
investment performance, which may depend on general market conditions.
Assets under the Company's management/service were $354.2 million at March 31,
2000, decrease of $9.9 million (-2.7%) from December 31, 1999 and a decrease
of $20.6 million (-5.9%) from March 31, 1999. March 2000's decrease in
assets under management/service compared to March 1999 was primarily the
result of a decrease in the net asset value (share price) of the fixed income
funds and a continuing shift by investors from tax-free income funds to
equity funds. According to the Investment Company Institute's "Trends in
Mutual Fund Activity" report, total net assets held in tax-free income funds
fell 9% from $298.6 billion to $271.6 billion during 1999 while the Company's
fixed income tax-free assets under management fell just 7%.
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
Three months ended
March 31 %
2000 1999 Change
<S> <C> <C> <C>
Net Income After Minority Interest
and Cumulative Effect $ (1,810) $ (306,586) (99)%
Earnings per share
Primary $ 0.00 $ (0.04)
Fully-diluted $ 0.00 $ (0.04)
Operating margin 6% 14%
- ---------------------------------------------------------------------
</TABLE>
Net income (loss) after minority interest and cumulative effect during the
quarter ended March 31, 2000 increased as compared to the same quarter in the
previous fiscal year primarily due to 1999's cumulative effect of an
accounting change of $373,455.
Operating revenues
Total operating revenues for the three months ended March 31, 2000 were
$1,084,761, a decrease of 5.9% from March 31, 1999. The decrease is a
primarily the result of a decrease in assets under management/service.
Fee income for the three months ended March 31, 2000 was a decrease of 9.5%
compared to March 31, 1999. The decrease is primarily the result of the
decrease in assets under management/service and to a lesser extent from the
reduction in fees charged to Class A shares converted from Class B shares.
Beginning January 2000, ND Tax-Free Fund, Montana Tax-Free Fund, and South
Dakota Tax-Free Fund issued another class of shares, Class A shares Front End
Sales Load (FESLs). These shares are subject to a maximum front-end sales load
of 4.25% scaled down to .75% minimum as the investment amount increases.
Shares subject to the CDSC (Class B shares) would automatically convert to
Class A shares (and would no longer be subject to the higher Rule 12b-1 fees)
approximately 8 years after the date on which such Class B shares were
purchased. The conversion would be made based on the relative net asset values
of Class A and Class B shares, without imposing any load, fee or other charge.
This trend will continue as more Class B shares are converted to Class A
shares.
Commission income decreased 59.8% from $241,285 for the first three months of
1999 to $96,995 for the same period this year. Commission income is down due
to a continuing shift by investors from tax-free fixed income funds to equity
funds.
Internet revenues added $163,234 to revenues. Magic Internet Services, Inc.
was added to the consolidated group October 1, 1999. The Company holds a 51%
interest in the corporation.
Operating expenses
Total operating expenses for the three months ended March 31, 2000 were
$1,021,317, an increase of 3.1% from March 31, 1999. The 3.1% increase is a
result of the net activity in the major expense categories as described in the
paragraphs that follow.
Compensation and benefits.
Total compensation and benefits for the three months ended March 31, 2000 were
$293,901, an increase of 20.8% from March 31, 1999. The increase in
compensation and benefits is primarily attributable to Magic Internet employee
compensation and benefits of $44,240.
Commission expense
Total commission expense for the three months ended March 31, 2000 was
$86,382, a decrease of 58.4% from March 31, 1999. The decrease is related to
the 59.8% decrease in commission income.
General and administrative expenses
Total general and administrative expenses for the three months ended March 31,
2000 were $350,961, an increase of 18.7% from March 31, 1999. The increase is
attributable to Magic Internet's general and administrative costs of $100,740.
The (preexisting) general and administrative costs were actually down 15.4%
from 1999, directly related to the reduced revenues.
Sales commissions amortized
Sales commissions paid to brokers and dealers in connection with the sale of
shares of the Funds sold without a (FESL) are capitalized and amortized on a
straight line basis over a period not exceeding nine years, which approximates
the period of time during which deferred sales commissions are expected to be
recovered from distribution plan payments received from various Funds and
management's estimate of the average life of investors' accounts in the
Integrity Mutual Funds and Ranson Managed Portfolios. Amortization of deferred
sales commissions were relatively unchanged in the first three months of 2000
over the same period in 1999.
Depreciation and amortization
Depreciation and amortization increased 45.2% from 1999 primarily due to
assets acquired for Magic Internet in October 1, 1999.
Other income (expenses)
Total other income, net of other expenses is a 36.6% increase in the first
three months of 2000 compared with the same period in 1999. Investment and
other income is 36.5% higher for the three months ended March 31, 2000 compared
to the same period in 1999 due to interest income earned on cash in the bank.
Interest Expense is 61.0% higher for the three months ended March 31, 2000
compared to the same period in 1999 due to $24,050 interest owed for $962,000
in Corporate Notes issued subsequent to this period last year.
Liquidity and Capital Resources
Net cash from operating activities was $276,573 during the three month period
ended March 31, 2000, a increase of 40.7% from $196,555 during the three month
period ended March 31, 1999. Depreciation and amortization are a 47.3%
increase for the three months ended March 31, 2000 over the same period in
1999. The primary reason is an increase in assets acquired in regards to
Magic Internet Services, Inc. Sales commissions amortized for the three months
ended March 31, 2000 were slightly higher than the same period in 1999
exclusive of the effect in 1999 for a cumulative effect of an accounting change
of $578,648. The 2000 decrease in accounts receivable is directly related to
reduction in fee income from the decrease in assets under management/service
while 1999 increase was the opposite.
Net cash used by investing activities for the three months ended March 31,
2000 increased by 743.7% to $274,190 from $32,498 for the three months ended
March 31, 1999, primarily for the remodeling of the second floor of the
company's office building.
Net cash used by financing activities during the three months ended March 31,
2000 was $260,262. The financing activities for the period were paying debt of
$201,699, and the redemption of $58,563 of Company Common Stock.
At March 31, 2000, the Company held $1,676,861 in cash and cash equivalents,
as compared to $1,934,739 at December 31, 1999. Liquid assets, which consist
of cash and cash equivalents, securities available-for-sale and current
receivables decreased to $2,140,083 at March 31, 2000 from $2,385.005 at
December 31, 1999, primarily the result of paying off debt and the purchase
of property and equipment.
Although the Company has historically relied upon sales of its Common Stock
and debt instruments for liquidity and growth, management believes that the
Company's existing liquid assets, together with the expected continuing cash
flow from operations and borrowing capacity under its line of credit, which at
April 28, 2000 had $2,000,000 in available borrowings, will provide the Company
with sufficient resources to meet its cash requirements during the next twelve
months. Management expects that the principal needs for cash may be to advance
sales commissions on Funds subject to contingent deferred sales charges,
acquire additional investment management firms, repurchase shares of the
Company's Common Stock and service debt.
FORWARD-LOOKING STATEMENTS
When used in this Form 10-QSB, in future filings by the Company with the
Securities and Exchange Commission, in the Company's press releases and in
other Company-authorized written or oral statements, the words and phrases
"can be", "expects," "anticipates," "may affect," "may depend," "believes,"
"estimate" or similar expressions are intended to identify "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. The Company cautions readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made. Such
statements are subject to certain risks and uncertainties, including those set
forth in this "Forward-Looking Statements" section, that could cause actual
results for future periods to differ materially from those presently
anticipated or projected. The Company does not undertake and specifically
disclaims any obligation to update any forward-looking statement to reflect
events or circumstances after the date of such statements.
The Company derives substantially all of its revenues from fees relating to
the management of, and provision of services to, the Funds. The fees earned by
the Company are generally calculated as a percentage of assets under management
/service. If the Company's assets under management/service decline, or do not
grow in accordance with the Company's plans, fee revenues and earnings would be
materially adversely affected. Assets under management/service may decline
because redemptions of fund shares exceed sales of fund shares, or because of
a decline in the market value of securities held by the Funds, or a
combination of both.
In seeking to sell fund shares, and market its other services, the Company
operates in the highly competitive financial services industry. The Company
competes with approximately 8,000 open-end investment companies which offer
their shares to the investing public in the United States. In addition, the
Company also competes with the financial services and other investment
alternatives offered by stock brokerage and investment banking firms, insurance
companies, banks, savings and loans associations and other financial
institutions, as well as investment advisory firms. Most of these competitors
have substantially greater resources than the Company. The Company sells fund
shares principally through third party broker-dealers. The Company competes
for the services of such third party broker-dealers with other sponsors of
mutual funds who generally have substantially greater resources than the
Company. Banks in particular have increased, and continue to increase, their
sponsorship of proprietary mutual funds distributed through third party
distributors. Many broker-dealer firms also sponsor their own proprietary
mutual funds which may limit the Company's ability to secure the distribution
services of such broker-dealer firms. In seeking to sell fund shares, the
Company also competes with increasing numbers of mutual funds which sell their
shares without the imposition of sales loads. No-load mutual funds are
attractive to investors because they do not have to pay sales charges on the
purchase or redemption of such mutual funds' shares. This competition may
place pressure on the Company to reduce the FESLs and CDSCs charged upon the
sale or redemption of fund shares. However, reduced sales loads would make
the sale of fund shares less attractive to the broker-dealers upon whom the
Company depends for the distribution of fund shares. In the alternative, the
Company might itself be required to pay additional fees, expenses, commissions
or charges in connection with the distribution of fund shares which could have
a material adverse effect on the Company's earnings. The ability of the
Company to sell fund shares may also be affected by general economic
conditions including, amongst other factors, changes in interest rates and the
inflation rate. Interest and inflation rate changes may particularly impact
the flow of money into mutual funds which invest in fixed-income securities.
Each of the Funds except Integrity Fund of Funds invests substantially all of
its assets in fixed-income securities.
General economic conditions, including interest and inflation rate changes,
may also adversely affect the market value of the securities held by the
Funds, thus negatively impacting the value of assets under management, and
hence the fees earned by the Company. The fact that the investments of each
fund (except Integrity Fund of Funds) are geographically concentrated within
a single state makes the market value of such investments particularly
vulnerable to economic conditions within such state. In addition, the states
in which the investments of the Funds as a group are concentrated are
themselves concentrated in certain regions of the United States. The
Company's fee revenues may therefore be adversely affected by economic
conditions within such regions.
Sales of fund shares with FESLs provide current distribution revenue to the
Company in the form of the Company's share of the FESLs and distribution
revenue over time in the form of 12b-1 payments. Sales of fund shares with
CDSCs provide distribution revenue over time in the form of 12b-1 payments
and, if shares are redeemed within 5 years, CDSCs. However, the Company pays
commissions on sales of fund shares with CDSCs, reflects such commissions as a
deferred expense on its balance sheet and amortizes such commissions over a
period of up to nine years, thereby recognizing distribution expenses.
Therefore, to the extent that sales of fund shares with CDSCs increases over
time relative to sales of shares with FESLs, current distribution expenses
may increase relative to current distribution revenues in certain periods,
which would negatively impact the Company's earnings in such periods. In
addition, the Company may need to find additional sources of funding if
existing cash flow and debt facilities are insufficient to fund commissions
payable to selling broker-dealers on CDSC shares.
Item 5: Other Information
May 1, 2000 - ND Holdings, Inc. entered into a stock purchase agreement to
acquire ARM Securities Corporation of Louisville, Kentucky. ARM Securities
Corporation is a broker dealer with approximately 60 registered representatives
located in several midwestern states and California. ARM markets mainly mutual
funds and annuities, and at year-end 1999 handled client assets in excess of
$1 billion.
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits
None
(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 April 28, 2000
- -----------------------------------
Robert E. Walstad Date
President and Chairman of the Board
(CFO and CAO)
