FORM 10-QSB
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 January 31, 2000
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)
2307 Douglas Road, Ste 400, Miami, Fla 33145
(Address of principal executive offices) (Zip Code)
(305) 868-3946
(Registrant's telephone number, including area code)
Indicate by check mark whether 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 - 107,757,039 Shares as of
January 31, 2000
The Exhibit Index is on Page 21
This document contains 22 pages.
VALUE HOLDINGS, INC.
AND SUBSIDIARIES
INDEX
- -------------------------------------------------------------------
PAGE NO.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheet for January 31, 2000.......3
Consolidated Statement of Operations for the three
months ended January 31, 2000 and 1999...............4
Consolidated Statement of Cash Flows for the three
months ended January 31, 2000 and 1999...............5
Notes to Consolidated Financial Statements............6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.......17
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.....................21
SIGNATURES...........................................22
VALUE HOLDINGS, INC. AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEET January 31,
1999
ASSETS ----------
CURRENT ASSETS
Cash $ 2,838
Marketable securities 211,460
Accounts receivable trade, net of doubtful
accounts of $575,323 12,164,340
Inventory 14,165,506
Note receivable affiliated Company 130,400
Prepaid expenses and other assets 321,688
----------
TOTAL CURRENT ASSETS 26,996,232
----------
PROPERTY AND EQUIPMENT, NET 1,282,938
COSTS IN EXCESS OF NET ASSETS OF
BUSINESSES ACQUIRED, NET 5,396,333
INTANGIBLE ASSETS, NET 137,631
INVESTMENT IN REAL ESTATE 206,654
-----------
TOTAL ASSETS $34,019,788
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable bank and other $20,360,123
Current portion of long-term debt 317,000
Note payable affiliate 323,481
Note payable stockholders and directors 295,006
Accounts payable and accrued expenses 3,285,025
-----------
TOTAL CURRENT LIABILITIES 24,580,635
-----------
LONG-TERM DEBT, NET OF CURRENT PORTION 1,293,396
-----------
DEFERRED GAIN 86,251
-----------
PREFERRED SECURITIES OF SUBSIDIARY 5,703,607
-----------
STOCKHOLDERS' EQUITY
Series A preferred stock, par value $.0001;
900,000,000 shares authorized; 750,000 issued
and outstanding at liquidation value 750,000
Common stock, par value $.0001; 900,000,000 shares
authorized, 107,757,039 issued and outstanding 10,775
Capital in excess of par 14,751,706
Deferred consulting agreements (210,833)
Accumulated deficit (13,063,746)
Accumulated comprehensive income 190,477
Dividends (72,480)
-----------
TOTAL STOCKHOLDERS' EQUITY 2,355,899
------------
VALUE HOLDINGS, INC. AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY (CONT)
TOTAL LIABILITIES AND EQUITY $34,019,788
===========
See accompanying notes.
VALUE HOLDINGS, INC. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
January 31, January 31,
2000 1999
Revenues ---------- -----------
Lumber sales $ 24,439,453 $ -0-
Licensing fee 77,997 88,538
Interest and other income 4,252 9,247
---------- ----------
24,521,702 97,785
Costs and expenses, Other than ---------- ----------
Depreciation, Amortization and
Other Charges
Cost of sales - lumber 20,074,426 -0-
Bad debt reserve - lumber oper. 17,122 -0-
Selling, general and administ. 1,696,322 23,388
---------- ----------
21,787,870 23,388
---------- ----------
Income (Loss) Before Depreciation,
Amortization and Other Charges 2,733,832 74,397
---------- ----------
Depreciation and Amortization
Amortization consulting agreements 86,666 37,516
Depreciation 123,279 -0-
Amortization goodwill and
intangible assets 126,265 42,500
---------- ----------
336,210 80,016
---------- ----------
Income (Loss) Before Other Charges 2,397,622 (5,619)
Other Charges ---------- ----------
Write off of fixed assets and
intangibles related to restaurant
operations -0- (130,464)
Interest expense (447,831) (30,803)
----------- ----------
(447,831) (161,267)
----------- ----------
Income (Loss) 1,949,791 (166,886)
----------- -----------
Other Comprehensive Income (Loss)
Foreing currency translation (31,415) -0-
----------- -----------
Comprehensive Income (Loss) $ 1,918,376 $ (166,886)
=========== ==========
Net Income (Loss) Per Share
Basic earnings per share $ 0.023 $ (0.002)
Diluted earnings per share $ 0.021 $ -
Outastanding shares for EPS Computation
Basic 107,757,039 92,306,068
Diluted 116,016,539 -
See accompanying notes
VALUE HOLDINGS, INC. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
January 31, January 31,
2000 1999
---------- -----------
Cash flows from operating activities:
Net Income (loss) $ 1,949,791 $ (166,886)
Adjustments to reconcile net
income from operations to net cash
provided by (used in) operations:
Write off of fixed assets and
intangibles re restaurant operations -0- 130,464
Depreciation 123,279 -0-
Amortization, goodwill and
intnagible assets 126,265 42,500
Amortization consulting agreements 86,666 37,516
Changes in working capital of
continuing operations:
(Increase) decrease in
Marketable securities (402) -0-
Accounts receivable (2,564,127) (32,814)
Inventory (7,212,610) -0-
Prepaid exp. and other assets 18,290 (2,822)
Increase (decrease) in
Accounts payable and accrued
expenses (1,399,563) 11,887
Other 102,152 -0-
Net cash used in operating ---------- ----------
activities (8,770,259) 19,845
---------- ----------
Cash Flows from Investing Activities:
Acquisitions of property and
equipment (150,445) -0-
Advances to related company -0- (10,000)
Net cash provided by (used in) --------- ----------
investing activities (150,445) (10,000)
--------- ---------
Cash flows from financing activities:
Proceeds (repayments) from
stockholders' borrowing (44,201) (10,993)
Proceeds (repayments) notes
payable other, net of currency
exchange 9,030,495 2,083
Net cash provided by (used in) --------- ---------
financing activities 8,986,294 (8,910)
--------- ---------
Currency exchange (94,596) -0-
--------- ---------
Increase (Decrease) in Cash (29,006) 935
Cash and Cash Equivalents Beginning 31,844 -0-
--------- ---------
Cash and Cash Equivalents Ending $ 2,838 $ 935
See accompanying notes ========= =========
VALUE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2000 AND 1999
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited financial statements have been prepared
in accordance with generally accepted accounting principles, and
include all the information and disclosures required for complete
financial statements.
Business
The Company is in the business of acquiring businesses with the
goal of building well-run, independent subsidiaries who have solid
market niches.
Until June 1, 1995, the Company operated a chain of seafood
restaurants (Cami s The Seafood Place) primarily in South Florida
(Dade and Broward counties). On that date, the Company licensed its
operations of the restaurants to an independent operator. The
Company currently has two licensees that operate seven restaurants.
On February 25, 1999, the Company, through a wholly-owned
subsidiary, acquired substantially all the assets of John Ziner
Lumber Limited, an Ontario Corporation involved in the distribution
and remanufacturing of lumber (See note 14).
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All significant
intercompany transactions are eliminated in consolidation.
Use of Estimates
The preparation of financial statements in accordance with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amount of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amount of revenues and expenses during the reported
period. Actual results could differ from those estimates.
Estimates that are particularly susceptible to change in the near
term include the evaluation of the recoverability of goodwill and
other intangible assets.
Inventory
Inventory is primarily composed of raw materials and is stated at
the lower of cost or market, using the first-in, first-out method.
VALUE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2000 AND 1999
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Property and Equipment
Property and equipment are stated at cost. Expenditures for major
betterment and additions are charged to the asset accounts, while
replacements, maintenance and repairs which do not extend the lives
of the respective assets are charged to expense in the period the
costs are incurred.
Cost in Excess of Net Assets of Businesses Acquired
Cost in excess of net assets of businesses acquired ( goodwill )
represents the unamortized excess of the cost of acquiring a
business over the fair value of the identifiable net assets
received at the date of acquisition, and is primarily from the
acquisition of the assets of John Ziner Lumber Limited and Cami s,
The Seafood Place restaurants. Such goodwill is being
amortized on the straight-line method over a period of 6 to 20
years.
It is the Company s policy to evaluate the recoverability of
goodwill and other intangible and long-lived assets on a periodic
basis, based primarily on estimated future net cash flows generated
by the assets giving rise to the goodwill, intangibles and other
long-lived assets, and the estimated recoverable values of these
assets. Such estimated future net cash flows take into
consideration management s plans with regard to future operations
(See Note 2), and represent management s best estimate of expected
future results. In the opinion of management, the results of the
projected future operations are considered adequate to recover the
Company s investment in the goodwill and other long-lived assets.
Intangible Assets
Intangible assets, mainly acquisition costs, are stated at cost and
are being amortized on a straight-line basis over their estimated
useful lives, 3 years.
Marketable Securities
Marketable securities are considered as available for sale and
reflected at market value.
Reclassification
Certain amounts in the 1999 consolidated statements have been
reclassified to conform with the current year presentation.
VALUE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2000 AND 1999
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Translation of Foreign Currency
The accounts of the Company's Canadian subsidiary are translated in
accordance with Statement of Financial Accounting Standards No. 52
( Foreign Currency Translation ), which require that foreign
currency assets and liabilities be translated using the average
exchange rates prevailing throughout the period. The effect of
unrealized exchange rate fluctuations on translating foreign
currency assets and liabilities into U.S. dollars are accumulated
as the cumulative translation adjustment in shareholders' equity.
Realized gains and losses from foreign currency translations are
included in other comprehensive income for the period. Fluctuations
arising from intercompany transactions that are of a long term
nature are accumulated as cumulative translation adjustments.
Net Income (Loss) Per Common Share
Net Income (Loss) per common share has been computed based on the
weighted average number of shares of common stock outstanding
during the periods.
NOTE 2. NOTE RECEIVABLE
On February 29, 1996, the Company sold its Libido license to
Virilite Neutracutical Corporation (Virilite) for $50,000
in cash, a $200,000 promissory note, and 500,000 shares of Virilite
common stock, representing 12.5% of that company's stock. During
May 1996, $100,000 of the promissory note was paid. The Company
has accounted for its investment in Virilite at cost. The gain on
the sale of the Libido license is being recognized on the
installment method of accounting.
NOTE 3. PROPERTY AND EQUIPMENT
January 31,
2000
---------
Plant and equipment $ 1,325,358
Computers 59,638
Trucks 31,329
Leasehold improvements 210,256
---------
1,626,581
Accumulated depreciation (343,643)
---------
$ 1,282,938
=========
VALUE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2000 AND 1999
NOTE 4. COST IN EXCESS OF NET ASSETS ACQUIRED (GOODWILL)
Cost in Excess of Net Assets Acquired consist of:
Janaury 31,
2000
----------
Goodwill on Acquisition of Assets
of John Ziner Lumber $ 5,417,449
Goodwill re Cami s 1,020,000
----------
6,779,687
Less accumulated amortization (1,041,116)
----------
$ 5,396,333
==========
It is the Company s policy, as discussed in Note 1, to evaluate
periodically the recoverability of goodwill.
On February 25, 1999 Value Holdings, Inc., through its wholly owned
subsidiary corporation, Network Forest Products Limited, acquired
substantially all of the assets of John Ziner Lumber Limited, an
Ontario corporation involved in the distribution and
remanufacturing of lumber. Goodwill resulting from the transaction
is being amortized over its estimated useful life, 20 years.
On June 1, 1995, the Company entered into a licensing agreement
effective as of June 1, 1995, whereby it licensed the operations
of its restaurant facilities to an independent operator.
These agreements were renewed on March 1, 1997, for an initial term
of five years. The term automatically renews for another five year
term provided that the Licensee meets the gross sales goals as set
forth in the agreement.
The Company currently has two licensees that operate seven
restaurants. The Company receives licensing fees equal to 3% of the
gross sales of five restaurants located in Dade and Broward County,
and 3% to 6% of the gross sales of a sixth restaurant located in
Pembroke Pines; operated under a license by Cam Fam, Inc.
Additionally, the Company receives licensing fees equal to 3% of
the gross sales of two restaurants operated under a license by
Oceancam, Inc.
Goodwill related to the restaurant operations is being amortized
over the initial term of the licensing agreement, six years.
Amortization expense for the three months ended January 31, 2000
and 1999 was $126,265 and $42,500 respectively.
VALUE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2000 AND 1999
NOTE 5. INTANGIBLE ASSETS
Intangible assets, consisting of acquisition costs are stated at
cost and are being amortized on a straight-line basis over their
estimated useful lives, 3 years.
NOTE 6. NOTE PAYABLE, BANK
Note payable bank consists of a revolving loan agreement with
interest at prime plus 1.25% (Canadian) per annum and matures on
February 25, 2002. This facility is collaterized by Networks
present and future assets and is guaranteed by the Company.
NOTE 7. NOTES PAYABLE AND ADVANCES FROM STOCKHOLDERS
Notes payable and advances from stockholders consists of the
following:
January 31,
2000
----------
Advances from stockholders $ 4,411
Notes payable to stockholders;
interest at 12% 290,595
----------
$ 295,006
==========
NOTE 8. NOTE PAYABLE AFFILIATE
Note payable affiliate consists of a note payable to a Company
related to a current Director. The note bears interest at 15% and
was due December 15, 1998. This note has been renewed and will be
due December 15, 2000.
VALUE HOLDINGS, INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2000 AND 1999
NOTE 9. LONG TERM DEBT
Long-term debt consists of the following:
January 31,
2000
----------
Note payable, stockholder (1),
bearing interest at 9% per
annum, due August 30, 2001 $ 287,875
Term loan from financing
Company, bears interest at
prime plus 2%, monthly payments
of C$8,333, matures February,
2002 294,702
Note payable John Zinner Lumber
LTD, bears interest at 15%,
monthly payments of C$16,667 for
60 months, collaterized by
equipment 631,442
Obligation under capital leases,
monthly payments of C$20,831
to Dec 1, 2002, collaterized
by equipment 396,377
----------
1,610,396
Less current portion 317,000
-----------
$ 1,293,396
===========
(1) This obligation was incurred in connection with the acquisition
of the restaurant operations in August of 1991. The terms of the
note provided for interest at the rate of 9% per annum, no interest
to be paid during the first year of the note; and calls for payment
of principal and interest starting on the second year and for the
next nine years, based on a thirty year amortization schedule, with
the unpaid principal balance due on August of 2001, or before, from
proceeds of a secondary offering of the Company's stock if there
were one. The note is collaterized by the assets of the Company,
and subordinated to the note payable related party (Note 8).
As of January 31, 2000 the note was in default. The Company has
obtained a waiver from this stockholder in connection with the
current payment terms of this note.
Annual maturities of long-term debt at January 31, 2000 and for
VALUE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2000 AND 1999
NOTE 9. LONG TERM DEBT (CONTINUED)
each of the following five years is summarized as following:
2001 $ 317,000
2002 597,683
2003 450,482
2004 163,762
2005 and after 81,469
----------
$ 1,610,396
==========
NOTE 10. PREFERRED SECURITIES OF SUBSIDIARY
Preferred securities of subsidiary consist primarily of preferred
stock issued by Network in connection with the acquisition. No gain
or loss was recognized as a result of the issuance of these
securities, and the Company owned all of the voting equity of
Network after the acquisition.
Preferred securities of subsidiary, as reflected in the
accompanying balance sheet, includes $3,456,018 of 5% cumulative
non-voting equity securities Series A redeemable at C$1 per share
by Network, and $2,247,589 of non-cumulative, non-voting equity
securities Series B redeemable at C$1 per share by Network. The
equity securities are exchangeable for common shares of the
Company, at the option of the holder, subject to adjustment as
defined in the respective exchange agreement.
NOTE 11. COMMON STOCK, WARRANTS AND STOCK OPTIONS
During the year ended February 28, 1995, the Company issued
warrants to purchase an aggregate of 910,000 shares of common stock
in connection with various loans made to the Company, including
140,000 shares to the Company s former president. These warrants
are exercisable for a period of five years at an exercise price of
$.1875 per share.
On February 23, 1995, the Company issued warrants to several groups
to purchase an aggregate of 5,350,000 shares of common stock,
exercisable for five years at an exercise price of $.25 per share:
Service warrants 3,750,000
Service warrants to stockholder 500,000
Directors' warrants 500,000
Employee warrants 350,000
Other warrants including 200,000 250,000
to a former president ----------
5,350,000
==========
VALUE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2000 AND 1999
NOTE 11. COMMON STOCK, WARRANTS AND STOCK OPTIONS (CONTINUED)
On March 30, 1994, the Board of Directors adopted the 1994 Employee
Stock Option Plan, subject to shareholder approval. A maximum of
1,000,000 shares of common stock are reserved for award under this
plan. The plan provides, among other things, that the exercise
price of an incentive stock option shall be at least 110% of the
fair market value at date of grant if granted to a 10% shareholder,
and 100% of the fair market value at date of grant to any other
person. No shares have been issued under the terms of this plan.
NOTE 12. PREFERRED STOCK
On July 29, 1994, the stockholders approved an amendment to the
Articles of Incorporation which provides, among other things, that
the authorized capital stock is to consist of 20,000,000 shares of
preferred stock having a par value of $.0001 per share and
180,000,000 shares of common stock having a par value of $.0001 per
share. The Board of Directors is authorized to provide for the
issuance of shares of preferred stock in series, and to establish,
from time to time, the number of shares to be issued in each such
series and to determine and fix the designations, powers,
preferences and rights of the shares of each such series.
The Company entered into a Preferred Stock Purchase as of December
30, 1993, which provides for the sale and issuance of 750,000
shares of Series A Preferred Stock for $750,000. The Series A
Preferred Stock shall, among other things, be entitled to cash
dividends at the rate of $.10 per annum, which shall accrue and be
cumulative from the issue date and be payable quarterly, commencing
on September 30, 1994; shall be entitled to $1.00 per share plus
any accrued and unpaid dividends upon liquidation; may be called
by the Company, commencing one year from the issue date, at a
redemption price of $1.00 per share plus any accrued and unpaid
dividends; and commencing one year from issue date, each share may,
at the option of the holder, be converted into 2 2/3 shares of
common stock.
During the quarter ended April 30, 1999, the Company issued
6,228,571 shares of common stock for $218,000 of dividends accrued
on the series A preferred shares. At April 30, 1999, current
accrued dividends on the preferred stock amounted to $75,750.
VALUE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2000 AND 1999
NOTE 13. INCOME TAXES
At January 31, 1999, the Company had net operating loss carry
forwards for income tax purposes of approximately $10,000,000 which
expire at various years to 2012.
NOTE 14. ACQUISITION OF LUMBER OPERATION
On February 25, 1999 Value Holdings, Inc., through its wholly owned
subsidiary corporation, Network Forest Products Limited, acquired
substantially all of the assets of John Ziner Lumber Limited, an
Ontario corporation. John Ziner Lumber Limited is involved in the
distribution and remanufacturing of lumber. Value Holdings intends
to use the acquired assets in the same type of business.
Value Holdings owns all of the issued and outstanding Class A
common shares, the only shares with voting rights, of Network
Forest Products. Robert Ziner, formerly an executive with John
Ziner Lumber, and president of Network Forest Products and Value
Holdings effective February 25, 1999, is the beneficial owner of
3,416,335 Series B Special shares of Network Forest Products, held
by 1341125 Ontario Limited, which have no voting rights, but which
are exchangeable for a certain number of common shares of Value
Holdings. Additionally, 5,253,147 Series A Preferred shares were
issued to John Ziner Lumber Limited as part of the purchase price.
The Series A Preferred shares are redeemable by the purchaser for
$1 Canadian dollar per share plus any declared unpaid dividends
thereon, and bear cumulative dividend at the rate of 5% per annum
calculated annually and payable semi-annually.
The Company purchased the assets for $21,044,335 Canadian dollars.
This amount includes $5,807,611 Canadian dollars for accounts
receivable, $5,531,025 Canadian dollars for inventory, $98,138 for
sundry receivables, and $6,761,302 to replace a bank operating
loan. Financing for the transaction was provided by BNY Financial
Corporation- Canada, a subsidiary of the Bank of New York. Value
holdings has provided a guarantee to BNY Financial Corporation -
Canada securing the indebtedness of Network Forest Products.
VALUE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2000 AND 1999
NOTE 14. ACQUISITION OF LUMBER OPERATION (CONTINUED)
Summarized pro-forma results of operations for the quarter ended
January 31, 1999 giving effect to the transaction as of November 1,
1998 are as follows:
Sales $ 6,750,906
Other income 97,785
-----------
Total revenue 6,848,691
-----------
Cost of sales 5,200,629
Selling, general and administrative 1,301,713
Depreciation and amortization 243,828
Interest and other charges 361,267
-----------
Total expenses 7,107,437
-----------
Net Loss before tax $ ( 258,746)
===========
In a letter of agreement dated December 11, 1998, and ratified by
the Board of Directors, the Company agreed to pay a fee, payable
in common shares of the Company, to Robert Ziner, Lyon Wexler and
Leonard Rosenberg. This fee was in consideration of their efforts
in facilitating the acquisition of Ziner Lumber s assets and as an
inducement for Mr. Ziner and Mr. Wexler to continue with the
Company in an executive capacity. In that letter, the Company
agreed to issue 25 million common shares to Mr. Ziner, and 12.5
million share each to Mr. Wexler and Mr. Rosenberg. At the time of
the agreement the aggregate value of the shares was $250,000. The
shares were not to be registered by the Company and would contain
a legend restricting their transfer. As of January 31, 2000, the
Company has not issued such shares, but has accrued the liability.
NOTE 15. RELATED PARTY TRANSACTIONS
The Company has a note payable to a related party , which has an
outstanding balance of $323,481 (See note 8).
Network Forest Products Limited, a wholly owned subsidiary of the
Company issued a note payable to John Ziner Lumber Limited, as part
if the purchase price of the acquisition. Balance outstanding on
this note was $631,442 (See note 9).
VALUE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2000 AND 1999
NOTE 15. RELATED PARTY TRANSACTIONS (CONTINUED)
The Company through Network owns a 30% interest in land which is
being developed by a third party that will be constructing
townhouses on the property. The lumber for the construction will be
purchased from Network.
Included in prepaid expenses and other assets is approximately a
$170,000 first mortgage note receivable with a related party, due
in the current fiscal year.
NOTE 16. SUBSEQUENT EVENTS
On February 3, 2000 Network Forest Products purchased 100% of the
outstanding shares of 471372 Ontario Limited, which was doing
business as Harron Home Hardware ( Harron ). Harron is a wholesale
distributor of lumber and is located in Moorefield, Ontario. Harron
also sells hardware and building supplies. Prior to the
acquisition, Harron was a dealer for Home Hardware, a Canadian
hardware retailer.
Consideration for the shares was $8.5 million Canadian Dollars.
Approximately $6.5 million Canadian Dollars of the purchase price
was allocated to the satisfaction of outstanding debts. The
purchase price was provided by Network s line of credit with GMAC
Credit Corporation (formerly BNY Financial Corporation - Canada)
which has increased from $20 million Canadian Dollars to $40
million Canadian Dollars.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Lumber Sales
On February 25, 1999, the Company, through a wholly owned
subsidiary, acquired substantially all the assets of John Ziner
Lumber Limited, an Ontario company involved in the distribution
and remanufacturing of lumber (See note 14). The Company intends
to use the acquired assets in the same type of business.
For the quarter ended January 31, 2000, sales from the lumber
operation were $24,439,453. Proforma sales for the quarter ended in
1999, taking into consideration the lumber operation as if the
acquisition had taken place on November 1, 1998, would be
$6,750,906. Sales in the quarter ended 2000 show an increase of
262% over proforma sales for the quarter ended in 1999.
Licensing fees
Until June 1, 1995, the Company operated a chain of seafood
restaurants (Cami s The Seafood Place) primarily in South Florida
(Dade and Broward counties). On that date, the Company licensed its
operations of the restaurants to an independent operator.
The Company currently has two licensees that operate seven
restaurants under licensing agreements beginning March 1, 1997, for
an initial term of five years. The term automatically renews for
another five year term provided that the Licensee meets the gross
sales goals as set forth in the agreement.
The Company receives licensing fees equal to 3% of the gross sales
of five restaurants located in Dade and Broward County, and 3% to
6% of the gross sales of a sixth restaurant located in Pembroke
Pines; operated under a license by Cam Fam, Inc. Additionally, the
Company receives licensing fees equal to 3% of the gross sales of
two restaurants operated under a license by Oceancam, Inc.
Licensing fee revenue for the three months ended January 31, 2000
and 1999 were $77,997 and $88,538, respectively.
The Company is currently seeking to expand its operations through
licensing agreements with recognized restaurant operators, whereby
existing restaurant chains or management teams would convert and/or
develop new restaurants utilizing the Cami s format in return for
a license fee based on a percentage of sales. For this purpose the
Company is developing promotional material and advertising. Such
materials are to be developed by the Company in conjunction with
CamFam but belong to the Registrant. Future licensed units will pay
a fee as a percentage of monthly sales to contribute to this fund.
As of the date of this report the Company has not negotiated with
or entered into similar arrangements with any other party.
Interest and Other Income
Other income, mainly from interest on notes receivable, for the
three months ended January 31, 2000 and 1999 was $4,252 and $9,247
respectively.
COSTS AND EXPENSES
Costs and Expenses Lumber Operation
Cost of sales of lumber for the quarter ended January 31, 2000 was
$20,074,426, or 82% of sales. Proforma cost of sales for the
quarter ended in 1999 would be $5,200,629, or 77% of sales. The
increase in cost of sales as a percentage of sales in 2000 is
consistent with the increase in volume of sales of 262%.
Selling, General and Administrative
Selling, general and administrative expenses for the three months
ended January 31, 2000 were $1,696,322 compared to $23,388 for the
same quarter in 1999. The increase is due the consolidated
operations of Ziner Limber in 2000 (See note 14).
Proforma selling, general and administrative for the quarter ended
in 2000, including Ziner Lumber, would be $1,301,713. The quarter
ended in 2000 shows an increase of 30% over the proforma amount for
the quarter ended in 1999. This increase is consistent with the
increased volume of operations (See Lumber Sales).
Depreciation and amortization
In 1998, 1999 and 2000, the Company issued shares of common stock
in exchange for services to be rendered over periods exceeding a
year. A portion of these services were deferred and are being
amortized over the term of the agreements. Amortization of
consulting agreements for the three months ended January 31, 2000
and 1999 was $86,666 and $37,516, respectively.
Depreciation for the three months ended January 31, 2000 and 1999
was $123,279 and $-0-. Depreciation in 2000 relates to the assets
acquired from John Ziner Lumber Limited (See note 14).
Amortization of goodwill and intangible assets for the three months
ended January 31, 2000 and 1999 was $126,265 and $42,500,
respectively. The increase was due to goodwill and intangible
assets resulting from the acquisition of the assets of John Ziner
Lumber Limited (See note 14).
Other Income and (Charges)
During the quarter ended January 31, 1999 the Company wrote off the
carrying value of its fixed assets and intangible assets related
to its restaurant operations, resulting in a charge to income
of $130,463.
Interest expense for the three months ended January 31, 2000 and
1999 was $447,831 and $30,803 respectively. The increase was due
primarily to interest on debt incurred in connection with the
acquisition of the assets of John Ziner Lumber Limited (See note
14).
Capital Expenditures and Depreciation
During the quarter ended January 31, 2000 the Company had capital
expenditures of approximately $150,000 related to the lumber
operation.
Other
The Company has obtained a timely review of its quarterly
information as required by the new SEC regulations.
PART II - OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits
(b) The Company filed the following reports on form 8-K during
the quarter ended January 31, 2000.
January 10th, 2000
January 13th, 2000
VALUE HOLDINGS, INC. AND SUBSIDIARIES
FORM 10Q
FOR THE THREE MONTHS ENDED JANUARY 31, 2000
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: March 14, 2000 By: /s/ Robert Ziner
Robert Ziner
President
DATE: March 14, 2000 By: /s/ Ida C. Ovies
Ida C. Ovies
Chief Financial Officer
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