FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the Quarter Ended August 31, 1995
Commission File Number 0-15076
VALUE HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Florida 59-2388734
(State of jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
3211 Ponce de Leon Blvd., Ste 201, Coral Gables, Florida, 33134
(Address of principal executive offices) (Zip Code)
(305) 666-3165
(Registrant's telephone number, including area code)
Indicate by check mark wether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for 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 _____
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
Common Stock, $0.0001 Par Value - 24,398,538 Shares as of
August 31, 1995
The Exhibit Index is on Page 19
This document contains 20 pages.
VALUE HOLDINGS, INC.
AND SUBSIDIARIES
INDEX
- -------------------------------------------------------------------
PAGE NO.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheet for August 31, 1995
and February 28, 1995................................3
Consolidated Statement of Operations for the three
months ended August 31, 1995 and 1994.................4
Consolidated Statement of Cash Flows for the three
months ended August 31, 1995 and 1994................5
Notes to Consolidated Financial Statements............6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.......14
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.....................16
SIGNATURES...........................................17
VALUE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
ASSETS
August 31, February 28,
1995 1995
---------- ------------
Current Assets
Cash $ -0- $ -0-
Certificate of deposit, restricted -0- 750,000
Inventories -0- 58,693
Prepaid expenses and other assets 101,011 123,181
--------- ---------
101,011 931,874
Receivable from Stockholders 52,533 3,533
Investment in and Advances to
Unconsolidated Subsidiaries 7,284,517 6,594,400
Property and Equipment - Net of
Accumulated Depreciation 671,097 844,321
Costs in Excess of Net Assets
of Business Acquired 988,125 1,020,000
Intangible Assets 466,242 517,665
Other Assets 60,878 64,773
--------- ---------
$ 9,624,403 $ 9,976,566
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Obligation to acquire unconsolidated
subsidiary $ 1,950,000 $ 1,950,000
Note payable, bank -0- 735,000
Note payable, other 43,500 52,181
Notes payable, stockholders and
directors 456,482 502,728
Accounts payable 273,202 618,213
Payroll and sales taxes payable 900,783 1,059,908
Accrued liabilities, other 279,570 536,200
--------- ---------
3,903,537 5,454,230
--------- ---------
Long - Term Liabilities
Stockholders 287,875 287,875
Minority interest -0- -0-
--------- ---------
287,875 287,875
--------- ---------
See accompanying notes.
Note: The balance sheet at February 28, 1995 has been taken from
the audited financial statement at that date.
VALUE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
Stockholders' Equity
Series A preferred stock, par value
$.0001, 20,000,000 shares authorized,
750,000 issued and outstanding at
August 31, 1995 and February 28,
1995, at liquidation value 750,000 750,000
Common stock, par value $.0001,
180,000,000 shares authorized;
issued and outstanding
24,398,538 and 14,471,732 at
August 31, 1995 and February 28,
1995 repectively 2,440 1,447
Common stock conversion rights under
exchange agreement 4,535,000 4,535,000
Capital in excess of par 10,489,772 9,133,971
Deficit (10,279,873) (10,053,157)
Deferred consulting agreements (64,348) (132,800)
----------- ----------
5,432,991 4,234,461
----------- ----------
$ 9,624,403 $ 9,976,566
=========== ==========
See accompanying notes.
Note: The balance sheet at February 28, 1995 has been taken from
the audited financial statement at that date.
VALUE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
QUARTER ENDED
August 31, August 31,
1995 1994
REVENUES ---------- ---------
Restaurant sales $ -0- $ 1,755,336
Equity in income (loss) of
unconsolidated subsidiaries (31,994) -0-
Licensing fee 48,104 -0-
Management fee 45,000 -0-
Interest and other 9,712 9,240
---------- ----------
70,822 1,764,576
---------- ----------
COSTS AND EXPENSES, Other than
Cost of restaurant sales -0- 719,787
Payroll and related costs -0- 599,379
Occupancy -0- 176,917
Other restaurant operating expenses -0- 338,104
Selling, general and administrative 137,914 368,581
---------- ----------
137,914 2,202,768
---------- ----------
INCOME (LOSS) BEFORE DEPRECIATION AND
AMORTIZATION, OTHER CHARGES AND
MINORITY INTEREST (67,092) (438,192)
--------- ----------
DEPRECIATION AND AMORTIZATION
Amortization consulting agreements 34,330 97,454
Depreciation 40,235 73,880
Amortization intangible assets 57,587 88,227
---------- ----------
132,152 259,561
---------- ----------
INCOME (LOSS) BEFORE OTHER CHARGES AND
MINORITY INTEREST (199,244) (697,753)
--------- ---------
OTHER CHARGES
Interest expense 21,401 59,090
---------- ----------
INCOME (LOSS) BEFORE MINORITY INTEREST (220,645) (756,843)
Minority Interest -0- 24,100
---------- ----------
NET INCOME (LOSS) $ (220,645) $ (732,743)
========== ==========
NET INCOME (LOSS) PER SHARE $ (0.01) $ (0.07)
========== ==========
See accompanying notes.
VALUE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
SIX MONTHS ENDED
August 31, August 31,
1995 1994
REVENUES ---------- ---------
Restaurant sales $ 1,232,547 $ 3,495,620
Equity in income (loss) of
unconsolidated subsidiaries (62,216) -0-
Licensing fee 48,104 -0-
Management fee 45,000 -0-
Interest and other 93,576 60,046
---------- ----------
1,375,011 3,555,666
---------- ----------
COSTS AND EXPENSES, Other than
Cost of restaurant sales 518,694 1,445,246
Payroll and related costs 358,122 1,061,457
Occupancy 84,777 313,557
Other restaurant operating expenses 78,258 581,548
Selling, general and administrative 182,592 607,007
---------- ----------
1,222,443 4,008,815
---------- ----------
INCOME (LOSS) BEFORE DEPRECIATION AND
AMORTIZATION, OTHER CHARGES AND
MINORITY INTEREST 134,568 (453,149)
--------- ----------
DEPRECIATION AND AMORTIZATION
Amortization consulting agreements 79,702 255,472
Depreciation 92,451 144,060
Amortization intangible assets 83,298 176,455
---------- ----------
255,541 575,987
---------- ----------
INCOME (LOSS) BEFORE OTHER CHARGES AND
MINORITY INTEREST (120,973) (1,029,136)
OTHER CHARGES
Interest expense 73,458 80,058
---------- ----------
INCOME (LOSS) BEFORE MINORITY INTEREST (194,431) (1,109,194)
Minority Interest -0- 24,100
---------- ----------
NET INCOME (LOSS) $ (194,431) $ (1,085,094)
========== ==========
NET INCOME (LOSS) PER SHARE $ (0.01) $ (0.10)
========== ==========
See accompanying notes.
VALUE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
QUARTER ENDED
August 31, August 31,
1995 1994
--------- ---------
Cash Flows From Operating Activities:
Net (loss) $ (220,645) $ (732,743)
Adjustments to reconcile net loss
to net cash used by operating activities:
Stock issued for services 2,500 18,750
Depreciation 40,235 73,880
Amortization, intangible assets 57,587 88,227
Amortization, consulting agreements 34,330 97,454
Equity earnings unconsolidated subsidiary 28,481 -0-
Minority interest -0- (24,100)
(Increase) decrease in current assets:
Inventory 15,503 (25,665)
Prepaid expenses and other assets (99,269) 28,814
Increase (decrease) in current liabilities:
Accounts payable (153,263) 18,111
Accrued liabilities (47,850) 190,944
Other -0- 1,671
---------- ----------
Net cash provided (used) by operating (342,391) (264,657)
activities ---------- ----------
Cash Flows From Investing Activities:
(Additions) dispositions of property
and equipment 22,875 (210,888)
Cashing of Certificate of Deposit 750,000 -0-
Advances to unconsolidated subsidiaries (24,156) -0-
Advances (repayments) to stockholders -0- -0-
---------- ----------
Net cash used by investing activities 748,719 (210,888)
---------- ----------
Cash Flows From Financing Activities:
Proceeds (repayments) stockholder
borrowings (94,173) 362,277
Proceeds borrowings - others -0- 55,000
Issuance of common stock 436,996 -0-
Dividends paid (6,000) -0-
Payments on bank and long term debt (743,151) (11,179)
Minority interest -0- 69,210
---------- ----------
Net cash used by financing activities (406,328) 475,308
---------- ----------
Increase (Decrease) in Cash -0- (237)
Cash and Cash Equivalents at Beginning -0- 7,058
of Period ---------- ----------
Cash and Cash Equivalents at End
of Period $ -0- $ 6,821
See accompanying notes. ========== ==========
VALUE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
SIX MONTHS ENDED
August 31, August 31,
1995 1994
--------- ---------
Cash Flows From Operating Activities:
Net (loss) $ (194,431) $(1,085,094)
Adjustments to reconcile net loss
to net cash used by operating activities:
Stock issued for services 2,500 18,750
Depreciation 92,541 144,060
Amortization, intangible assets 83,298 176,455
Amortization, consulting agreements 79,702 255,472
Equity earnings unconsolidated subsidiary 62,216 -0-
Minority interest -0- (24,100)
(Increase) decrease in current assets:
Inventory 31,780 (29,280)
Prepaid expenses and other assets (2,809) 45,907
Increase (decrease) in current liabilities:
Accounts payable (205,959) (4,512)
Accrued liabilities (344,250) 133,190
Other -0- -0-
---------- ----------
Net cash provided (used) by operating (395,412) (369,152)
activities ---------- ----------
Cash Flows From Investing Activities:
(Additions) dispositions of property
and equipment 17,890 (245,914)
Cashing of Certificate of Deposit 750,000 -0-
Advances to unconsolidated subsidiaries (316,316) -0-
Advances (repayments) to stockholders (1,500) (7,980)
---------- ----------
Net cash used by investing activities 450,074 253,894
---------- ----------
Cash Flows From Financing Activities:
Proceeds (repayments) stockholder
borrowings (105,490) 420,526
Proceeds borrowings - others -0- 55,000
Issuance of common stock 826,794 80,000
Dividends paid (32,285) -0-
Payments on bank and long term debt (743,681) (26,708)
Minority interest -0- 69,210
---------- ----------
Net cash used by financing activities (54,662) 598,028
---------- ----------
Increase (Decrease) in Cash -0- (25,018)
Cash and Cash Equivalents at Beginning -0- 31,839
of Period ---------- ----------
Cash and Cash Equivalents at End
of Period $ -0- $ 6,821
See accompanying notes. ========== ==========
VALUE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 1995, AUGUST 31, 1994 AND FEBRUARY 28. 1995
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions to Form 10Q and Article 10 of regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating
results for the three and six month periods ended August 31, 1995
and 1994 are not necessarily indicative of the results that may be
expected for the year ending February 29, 1996. For further
information, refer to the consolidated financial statements and
footnotes thereto included in the Company's annual report on Form
10-K for the year ended February 28, 1995.
NOTE 2: GOING CONCERN
The accompanying consolidated financial statements assume the
continuity of the Company as a going concern. However, as reflected
in the consolidated financial statements, the Company has incurred
net losses of $(194,431) and $(1,085,094) for the six months ended
August 31, 1995 and 1994 respectively; and suffered a net loss of
$(4,830,716) for the fiscal year ended February 28, 1995.In
addition, the Company's consolidated financial position reflects a
working capital deficiency of $3,802,526 at August 31, 1995 and
$4,522,356 at February 28, 1995.
Additionally, the Company has accumulated unpaid payroll and sales
taxes payable of $900,783 at August 31, 1995 and $1,059,908 at
February 28, 1995 and has significant investment in goodwill and
other intangible assets , the recoverability of which is dependent
upon the success of forecasted future operations.
These conditions, absent successful effectuation of management's
plans, raise substantial doubt as to the ability of the Company to
continue as a going concern.
Management's plans with regard to these matters encompass the
following actions:
VALUE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 1995, AUGUST 31, 1994 AND FEBRUARY 28. 1995
NOTE 2: GOING CONCERN (Continued)
1. Acquisition of businesses
The Company plans to make strategic acquisitions of other
profitable businesses as these opportunities develop. In this
connection, the Company acquired Readyfoods Limited and certain
affiliated companies in late February 1995 (See note 3), and
has entered into letters of intent to acquire Upper Canada
Beverage Company and Holly Foods Company (See note 6). The
Company has also entered into letters of intent with two
different Companies to acquire the distribution rights to new
products (See note 6).
2. Licensing of restaurant operations
Effective June 1, 1995, the Company entered into a licensing
agreement whereby it licensed the operations of its restaurant
operations to an independent operator (See note 6). The
company expects that this licensing agreement should result in
net earnings and cash flows from operating activities of
approximately $300,000 annually over the term of the agreement.
3. Equity infusion from sale of securities
The Company has raised, and plans to continue to raise, equity
funds from private placements of its common stock, and plans to
sell additional shares of common stock in a proposed public
offering.
4. Stockholder financing
Certain stockholders of the Company have provided financing by
means of debt financing. The Company expects that these
stockholders will continue to provide financing for the Company,
by means of additional debt or equity financing.
The eventual outcome of the success of management's plans cannot be
ascertained with any degree of certainty. The accompanying
consolidated statements do not include any adjustments that might
result from the outcome of this uncertainty.
VALUE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 1995, AUGUST 31, 1994 AND FEBRUARY 28. 1995
NOTE 3: BUSINESS ACQUISITION
On February 24, 1995 the Company, through a newly established
subsidiary, Readyfoods Acquisition Corp. ("RAC"), acquired all of
the outstanding capital stock of Readyfoods Limited and certain
affiliated companies ("Readyfoods"), which had been owned and
controlled by Cyril Levenstein and his family members and trusts
(the "Levenstein Group"). Readyfoods and its affiliated companies
both import and process poultry products for sale to retail chains,
specialty stores and institutions in the Canada and U.S. markets;
these products are sold under brand names as well as through
private labels.
The Company owns 12,000,001 Class B voting shares, which represents
the majority of the presently issued and outstanding voting shares
of RAC.
In consideration for the acquisition of all the outstanding stock
of Readyfoods and its affiliates, RAC issued to the Levenstein
Group 9,000,000 Class A voting shares and a total of 3,000,000
shares of voting, non-cumulative Class C,D,E and F shares. The
Company is obligated to acquire all of the 3,000,000 class C,D,E,
and F shares for an aggregate purchase price of approximately
$1,950,000 (net of unamortized discount of $192,000) by February
29, 1996 (Share Purchase Agreement). It is anticipated that
proceeds for this purchase will be obtained from a public offering
of the Company's common shares.
During the quarter ended May 31, 1995, as part of the purchase
agreement, the Company arranged a second mortgage refinancing for
one of the affiliates of Readyfoods in the amount of approximately
$428,000, and provided a term loan of $292,160 to Readyfoods
(Bridge Financing Obligation). The Company issued a total of
600,000 shares of its common stock as an inducement to the parties
who provided the second mortgage financing. The funds for the term
loan were obtained by the Company from the proceeds of the private
placement of 2,069,988 shares of common stock. The term of the loan
to Readyfoods provide for interest at 12%, maturity on June 1,
1996, and guarantees of RAC and certain affiliated companies of
Readyfoods.
In June, 1995 Readyfoods paid off BNY Canada from the proceeds of
a new bank loan arranged for it by Value's consultants. This new
credit facility is in the amount of C$13,400,000 (canadian
dollars). Part of the proceeds were used to retire the first
mortgage on Readyfoods manufacturing plant in Winnipeg, Manitoba.
The balance of the credit facility will be used to finance the
Company's receivables and inventory.
VALUE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 1995, AUGUST 31, 1994 AND FEBRUARY 28. 1995
NOTE 3: BUSINESS ACQUISITION (CONTINUED)
The Company is obligated to advance to RAC by way of additional
capital contributions with respect to the class B shares by
February 29, 1996, the amount necessary to retire the outstanding
debt of Readyfoods to Barclay Bank of Canada and Newcourt Credit,
and all amounts owing to any secured lenders which have advanced
monies to replace such indebtedness (the "Permanent Financing
Obligations"). Such debt totals approximately $4,826,500 as of
August 31, 1995. It is anticipated by the Company that the funds to
retire such debt will be obtained from the proceeds of a public
offering of its common stock.
If the Company fails to complete the transactions contemplated by
the Permanent Financing Obligations by the dates indicated, the
Levenstein Group has the right to require the Company to sell
10,800,001 class B shares of RAC for a purchase price equal to the
redemption amount thereof. Immediately thereafter, the Company is
to assign to RAC the amount receivable by the Company with respect
to the Bridge Financing Obligation, which will be considered
capital contribution on the part of the Company to RAC. In the
event the Levenstein Group does not exercise the option described
above, RAC has the right to redeem 11,370,000 of its issued class
B shares for a purchase price equal to the redemption amount
thereof.Immediately thereafter, the Company is to assign to RAC the
amount receivable by the Company with respect to the Bridge
Financing Obligation which will be considered a capital
contribution on the part of the Company to RAC.
Under the terms of the Exchange Agreement dated February 24, 1995,
the Levenstein Group has the right to exchange their class A shares
of RAC for shares of the Company's common stock. In the year ending
February 23, 1997, the Levenstein Group may exchange shares equal
to the lesser of 9.9% of the aggregate number of shares of common
stock of the Company then outstanding, or one-third of the number
of class A shares of RAC held by the Levenstein Group; in the year
ending February 23, 1998, the lesser of 9.9% of the outstanding
common shares of the Company, or two-thirds of the class A shares
of RAC; and after February 23, 1998, the Levenstein Group may
exchange up to 100% of the class A shares of RAC for Company
shares. In accordance with the provisions of the Exchange
Agreement, a total of approximately 26,978,400 shares of the
Company's common stock are issuable upon conversion of all class A
shares of RAC. In the opinion of management, based upon the intent
of the parties to the Share Purchase Agreement, the substance of
the acquisition agreement is that rights inherent in the conversion
into shares of the Company's common stock are reasonably expected
to be exercised. Accordingly, the fair value of the common stock
conversion rights under the Exchange Agreement has been reflected
VALUE HOLDINGS, INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 1995, AUGUST 31, 1994 AND FEBRUARY 28. 1995
NOTE 3: BUSINESS ACQUISITION (CONTINUED)
as an element of stockholders' equity in the accompanying financial
statements.
The Company has recorded its investment in RAC at the present value
of its obligation under the Share Purchase Obligation ($1,950,000),
the estimated fair value of the shares of common stock which the
Company will issue under the conversion rights of the class A
shares of RAC ($4,535,000), and direct costs incurred ($109,400).
The Company is accounting for its investment on the equity method
until such time as it has fulfilled its various obligations under
the Permanent Financing Obligations and Share Purchase Obligations;
upon fulfillment of these obligations, the Company will account for
these acquisition under the purchase method.
The following is a condensed balance sheet of Readyfoods and its
affiliates as of August 31, 1995 and February 28, 1995 and a
condensed statement of loss for the six months ended August 31,
1995:
August 31, 1995 February 28, 1995
ASSETS
Current Assets $ 4,355,194 $ 5,613,664
Fixed Assets 2,007,754 2,755,475
Other Assets 594,777 1,516,241
---------- ----------
$ 6,957,726 $ 9,885,380
========== ==========
LIABILITIES
Current Liabilities $ 4,797,803 $ 7,846,576
Long-term Liabilities 1,110,416 673,529
----------- ----------
5,908,219 8,520,105
----------- ----------
SHAREHOLDERS' EQUITY
Capital Stock 88,726 230,455
Contributed Surplus 51,928 71,046
Retained Earnings 908,854 1,063,774
---------- ----------
1,049,508 1,365,275
---------- ----------
$ 6,957,726 $ 9,885,380
========== ==========
VALUE HOLDINGS, INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 1995, AUGUST 31, 1994 AND FEBRUARY 28. 1995
NOTE 3: BUSINESS ACQUISITION (CONTINUED)
August 31, 1995
STATEMENT OF LOSS
Revenues $16,921,427
Operating Expenses 16,412,015
----------
Income before interest,
depreciation and
amortization 509,412
Interest 269,655
Depreciation and amortization 386,420
----------
Net (loss) $ (146,663)
==========
NOTE 4: JOINT VENTURE AGREEMENT
On June, 1994 the Company entered into a joint venture agreement
with Family Steak Houses of Miami, Inc. to convert two of
Family's 8 Sizzler restaurants to the Cami concept and operate
them. The Company has a 51% interest in the joint venture and
had been accounting for same on a consolidated basis. The joint
venture agreement will be terminated on December 31, 1995, for
which the Company has decided to account for its interest in the
operations of the joint venture for the current fiscal year on
an equity basis.
NOTE 5: PENDING LITIGATION
In June, 1994 a lawsuit was filed in the Circuit Court for Dade
County, Florida in which the plaintiff alleges that the Company's
wholly-owned subsidiary corporation, Cami Restaurant Corp., and
certain indirect wholly-owned subsidiary corporations of the
Company breached a certain agreement for and failed to make certain
payments on a promissory note given in connection with, the
purchase of certain assets by Cami Restaurant Corp. in 1991. The
plaintiff also alleges that certain present and former officers of
VALUE HOLDINGS, INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 1995, AUGUST 31, 1994 AND FEBRUARY 28. 1995
NOTE 5: PENDING LITIGATION (CONTINUED):
the Company or Cami Restaurant Corp., including the President of
the Company and of Cami Restaurant Corp., defrauded the plaintiff,
engaged in conspiracy to defraud the plaintiff and breached certain
fiduciary duties to the plaintiff. The plaintiff seeks damages in
excess of $4,600,000, interest and attorneys' fees, as well as an
order declaring the purchase of assets void. Management of the
Company believes this suit to be without merit and intends to
contest it vigorously; however, an estimate of the likelihood of an
unfavorable result cannot be made at this time.
NOTE 6: OTHER INCOME
Other income for the six months ended August 31, 1995 includes
$76,000 representing the reversal of rents accrued during last
fiscal for the Company's store in Cocoa Beach, Florida, which was
closed in 1994 as part of the Company's restructuring plan. The
Company is currently negotiating a settlement with Holiday Inn, the
landlord, for past due rents and liens in exchange for monies due
them by landlord for room and other charges; and firmly believes
that the settlement will result in this reduction of amount due
landlord.
NOTE 7: LICENSING AGREEMENT:
One June 1, 1995, the Company entered into a licensing agreement
effective as of that date, whereby it licensed the operations of
its restaurant facilities to an independent operator who is
involved as a joint venture partner in one of the Company's other
restaurant locations. The Company is to receive a monthly license
fee ranging from 3% to 6% based upon monthly revenues of the
restaurants ranging from $100,000 to over $200,000. The licensing
agreement is for an initial term of three years, with an option on
the part of the licensee to renew the agreement for an additional
three years.
Licensing fee income for the quarter ended August 31, 1995 was
$48,104.
NOTE 8: RESTAURANT OPERATIONS:
There were no restaurant operations for the quarter ended August
31, 1995, since the restaurants were operated under a licensing
agreement as per note 7 above, and under a joint venture agreement
as per note 4 above.
VALUE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 1995, AUGUST 31, 1994 AND FEBRUARY 28, 1995
NOTE 9: PENDING ACQUISITIONS
On June 23, 1995, the Company rescinded the purchase agreement of
Excelle Brand Foods, Inc. which it had entered into on April 6,
1995, due to unexpected losses recorded by Excelle for their first
quarter of 1995, and their inability to provide satisfactory
business, contingency plans and cash flows.
In February 1995, the Company entered into a letter of intent to
acquire all of the capital stock of Upper Canada Beverage Company,
the U.S. distributor of Upper Canada Beer, a well known premium
Canadian brand. The terms of the letter of intent provide, in part,
for the Company to acquire UCBC for ten times earnings of UCBC for
1995, payable one quarter in cash and the balance in such number of
shares of common stock based upon a value to be mutually agreed
upon.
On July 27, 1995, the Company and Holly Foods accepted a letter of
intent purchase 100% of the shares of Holly Foods, a company which
manufactures fine cheese products. The purchase will be for
$750,000 cash and shares. The actual purchase price will be
determined by the 1995 year end profits of Holly Foods
On August 1, 1995, the Company entered into a letter of intent with
MPS Research and Developments, a company in Barbados, to purchase
50% of their rights to all of Canada for the libido enhancing
product known as Libido TM. Subsequently on August 7, 1995 the
Company paid a deposit of $10,000 to MPS International Food Works,
Inc. for the purchase of their rights to the United States and
Mexico. The closing of the purchase rights has not taken place as
of the date of this report and is pending on the Company's being
able to complete its due diligence. There can be no guarantee that
this transaction will close.
NOTE 10: SUBSEQUENT EVENTS
On October 6, 1995 Value Holdings received a letter form Indian
Manufacturing Limited carrying on business as Indian Motorcycle
regarding the granting of a non transferable exclusive license in
trust for a company incorporated by Value Holdings, Inc., to
manufacture package and distribute a new line of beer. Negotiations
are ongoing and there can be no guarantee that they will be
successful.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company's results of operations reflect a net loss of
$(220,645) for the quarter ended August 31, 1995 compared to a loss
of ($732,743) for the same period in 1994; and $(194,431) for the
six months ended August 31, 1995 compared to $(1,085,094) in 1994.
Effective June 1, 1995 the restaurant operations were licensed to
an independent operator (See note 2), therefore the Company shows
no restaurant sales for the quarter ended August 31, 1995.
Licensing fee revenue for the quarter was $48,104.
For the quarter and six months ended August 31, 1995, the Company
reflects management fee revenue of $45,000, which consists of a
monthly fee of $15,000 charged to Readyfoods Acquisition Corp.,
commencing June 1, 1995.
For the three and six months ended August 31, 1995 the Company is
reflecting a $31,994 and $62,216 charge for its equity in the
losses of unconsolidated subsidiaries Readyfoods Limited and
affiliates, a company acquired on February 24, 1995 (See note 3);
and CAMFAM,Inc., joint venture with Family Steakhouse, Inc. (See
note 4).
Other income for the six months ended August 31, 1995 include
$76,000 representing the reversal of rents accrued in fiscal year
ended February 28, 1995, for the Company's store in Cocoa Beach
(See note 6).
COSTS AND EXPENSES
During the quarter ended August 31, 1995, there were no costs or
operating expenses for the restaurants as a result of the licensing
agreement which commenced on June 1, 1995 (See note 2).
Selling, general and administrative expenses for the quarter
decreased from $368,581 in 1994 to $137,914 in 1995; and for the
six months decreased from $607,007 in 1994 to $182,592 in 1994.
The decrease is the result of a significant reduction in
administrative expenses and overhead as part of management plan to
reduce expenses and increase cash flows from operations.
The Company has entered into a number of Consulting agreements for
professional services. These agreements are being amortized over
their term. The amortization relating to such agreements was
$34,330 for the three months ended August 31, 1995 versus $97,454
for the comparable period in 1994; and $79,702 for the six months
ended August 31, 1995 versus $255,472 for the same period in 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Company's current objective is to grow through the acquisition
of other profitable businesses (see Note 3 and 6) and to reduce its
overhead expenses through the licensing of its restaurant
operations (see Note 3 and 9). The Company also plans to continue
raising equity funds from private placements of its common stock
and through a proposed public offering (see Note 2).
As of August 31, 1995, the Company had outstanding payroll and
sales taxes payable in the amount of $900,783, which represent
outstanding payroll and sales tax liability, plus accrued penalties
and interest, for periods prior to 1995. The Company has been
paying the payroll and sales taxes for 1995 on a current basis. In
February, 1995 the Company submitted an offer in compromise to the
Internal Revenue Service and the Florida Department of Revenue,
proposing to settle the amount of payroll and sales taxes payable
through December 31, 1994 for approximately $365,000 and $270,000,
respectively; payment to be made on October 1, 1995 or within
acceptance of the offer, whichever is later. Neither entities have
completed their review and consideration of the pending offers. The
Company expects to obtain the funds necessary to satisfy these
obligations from a proposed public offering of its securities.
CAPITAL EXPENDITURES AND DEPRECIATION
The Company did not make any major capital expenditure during the
quarter ended August 31, 1995.
VALUE HOLDINGS, INC. AND SUBSIDIARIES
FORM 10 Q
FOR THE THREE MONTHS ENDED AUGUST 31, 1995
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.
VALUE HOLDINGS, INC.
DATE: October 14, 1995 By: /s/ Alison Cohen
Alison Rosenberg Cohen
President
DATE: October 14, 1995 By: /s/ Ida C. Ovies
Ida C. Ovies
Chief Financial Officer
PART II - OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits
(b) The Company filed no report on form 8-K during the
quarter ended August 31, 1995
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<PERIOD-END> AUG-31-1995
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