SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from______________ to_______________.
Commission file number: 0-17304
CNH Holdings Company
--------------------
(Exact name of small business issuer as specified in its charter)
Nevada 11-2867201
------ ----------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
P.O. Box 832, Kilgore, Texas 75663
----------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (903) 984-6425
Indicate by check mark whether the issuer (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 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
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: As of December 17, 1998, there
were approximately 7,194,210 shares outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CNH HOLDINGS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, March 31,
1998 1998
---- ----
(Unaudited) (Audited)
ASSETS
Current Assets
Cash on deposit $ 51,048 $ 0
Accounts receivable-trade 59,978 0
Stock subscriptions receivable 28,083 100,000
Employee advances 45,550 0
Note receivable 34,500 0
Total Current Assets $ 219,159 $ 100,000
Property, Plant and Equipment
Land $ 70,000 $ 0
Oil and gas leasehold costs 144,146 0
Other equipment 263,490 0
$ 477,636 $ 0
Less accumulated depreciation and depletion 20,383 0
Net Property, Plant and Equipment $ 457,253 $ 0
Other Assets
Organizational costs, net of accumulated
amortization in the amount of $283 $ 1,717 $ 0
Utility deposits 3,350 0
Total Other Assets $ 5,067 $ 0
TOTAL ASSETS $ 681,479 $ 100,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable $ 172,808 $ 0
Accrued expenses 8,775 0
Note payable-shareholder 10,000 0
Current portion long term debt 6,609 0
Total Current Liabilities $ 198,192 0
Long Term Debt
Mortgage note payable $ 70,000 $ 0
Other notes payable 145,404 0
Total Long Term Debt $ 215,404 $ 0
TOTAL LIABILITIES $ 413,596 $ 0
STOCKHOLDERS' EQUITY
10% Class A preferred stock;
Authorized 1,000,000
shares, $.01 par value,
200,000 shares issued
and outstanding at
September 30 $ 2,000 $ 0
Common stock, 10,000,000
shares $.001 par value
authorized; issued and
outstanding 7,194,210 at
September 30 and 950,000
at March 31 7,194 950
Additional paid in capital 5,228,945 4,941,034
Retained earnings (deficit) (4,970,256) (4,841,984)
TOTAL STOCKHOLDERS' EQUITY $ 267,883 $ 100,000
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 681,479 $ 100,000
2
<PAGE>
CNH HOLDINGS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND SIX MONTHS ENDED SEPTEMBER 30, 1998
THREE SIX
MONTHS MONTHS
------ ------
REVENUES
Oil and gas revenues $ 21,848 $ 21,848
Overhead income 7,801 7,801
Service income 217,565 217,565
Equipment rental income 3,986 3,986
Other 11,265 11,265
Total revenues $ 262,465 $ 262,465
COSTS AND EXPENSES
Direct costs $ 242,353 $ 242,353
Depreciation and amortization 10,447 10,447
Selling, general and administrative 118,698 118,698
Total costs and expenses $ 371,498 $ 371,498
Net income (loss) from operations $(109,033) $(109,033)
OTHER INCOME (EXPENSES)
Interest income $ 167 $ 167
Interest expense (19,406) (19,406)
Total other income (expenses) $ (19,239) $ (19,239)
Net income (loss) $(128,272) $(128,272)
3
<PAGE>
CNH HOLDINGS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS AND SIX MONTHS ENDED SEPTEMBER 30, 1998
THREE SIX
MONTHS MONTHS
------ ------
OPERATING ACTIVITIES
Net income (loss) $(128,272) $(128,272)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 10,446 10,446
Decrease in stock subscriptions receivable 71,917 71,917
Increase in accounts receivable-trade (59,978) (59,978)
Increase in employee advances (45,550) (45,550)
Increase in note receivable (34,500) 34,500)
Increase in accounts payable 172,808 172,808
Increase in accrued expenses 8,775 8,775
Increase in current portion long term debt 6,609 0
Increase in note payable shareholder 10,000 10,000
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 12,255 $ 5,646
INVESTING ACTIVITIES
Purchase of oil and gas properties $ 0 $(144,146)
Purchased of land (70,000) (70,000)
Purchase of other equipment (38,783) (38,783)
Increase in organizational costs (767) (1,767)
Increase in utility deposits (3,350) (3,350)
Purchase of net book value of other equipment
due to acquisition (214,720) (214,720)
Increase in investment in NORM Services Group, LLC (40,520)
Decrease in investment in NORM Services Group, LLC 40,520 40,520
NET CASH PROVIDED (USED) IN INVESTING ACTIVITIES $(287,100) $(472,766)
FINANCING ACTIVITIES
Proceeds from mortgage note payable $ 70,000 $ 70,000
Proceeds from other long term borrowings 163,733 163,733
Repayment of long term debt (18,329) (11,720)
Proceeds from sale of preferred stock 2,000
Proceeds from sale of common stock 110,489 294,155
NET CASH PROVIDED BY FINANCING ACTIVITIES $ 325,893 $ 518,168
INCREASE IN CASH $ 51,048 $ 51,048
Cash at beginning of period 0 0
CASH AT END OF PERIOD $ 51,048 $ 51,048
4
<PAGE>
<TABLE>
<CAPTION>
CNH HOLDINGS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998
ADDITIONAL RETAINED
PREFERRED COMMON PAID IN EARNINGS
STOCK STOCK CAPITAL (DEFICIT) TOTAL
----- ----- ------- --------- -----
<S> <C> <C> <C> <C> <C>
Balance as of March 31, 1998 $ 0 $ 950 $ 4,941,034 $(4,841,984) $ 100,000
Issuance of 200,000 shares of
10% Class A preferred stock and
6,000,000 shares of common stock for
the acquisition of Southport Environmental
and Development, Inc. and a one-third
interest in NORM Services Group, LLC 2,000 6,000 177,666 185,666
Balance as of June 30, 1998 $ 2,000 $ 6,950 $ 5,118,700 $(4,841,984) $ 285,666
Issuance of 244,210 shares of
common stock for the acquisition
of the remaining two-thirds interest
in NORM Services Group, Inc. 244 110,245 110,489
Net income (loss) for the three
months ended September 30 (128,272) (128,272)
Balance as of September 30, 1998 $ 2,000 $ 7,194 $ 5,228,945 $(4,970,256) $ 267,883
</TABLE>
CNH HOLDINGS COMPANY AND SUBSIDIARIES
CONDENSED FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
1. Organization The financial statements include the Company and its
wholly-owned subsidiaries, Southport Environment and Development, Inc. (SEDI)
and NORM Services Group, Inc. (NORM) All significant inter-company transactions
have been eliminated.
SEDI was incorporated on June 1, 1998, and is involved in the exploration for
and development of oil and gas properties. It acquired oil and gas properties
with a remaining cost basis of $144,146 from two individuals, Messrs. Tate and
Pybas, in an IRC Section 351 transfer. In return, the shareholders received
40,000 shares of SEDI common stock. These individuals were the sole shareholders
of SEDI prior to June 15, 1998. On June 15, 1998, Messrs. Tate and Pybas
exchanged their 40,000 shares of SEDI and approximately 1/3rd of the outstanding
interest of NORM which they held for 200,000 shares of the Class A: 10% Dividend
Bearing Preferred Stock and 6,000,000 common shares of the Company. The exchange
was made on a tax free basis pursuant to IRC Section 368(b). SEDI became a
wholly-owned subsidiary of the Company and Messrs. Tate and Pybas acquired
control of the Company.
NORM was originally formed as a Texas limited liability company on February 26,
1997, and commenced operations in May, 1997. NORM is involved in the remediation
of naturally occurring radioactive and waste materials along the gulf coast of
Texas and Louisiana. NORM became a corporation on July 21, 1998.
On August 7, 1998, NORM acquired all of the partnership assets and liabilities
of NSG Rentals, a Texas general partnership in exchange for common stock. The
operations of NSG Rentals are now a division of NORM. NSG Rentals commenced
operations on March 4, 1998, renting and servicing oil field equipment. Two of
the three equal partners in NSG Rentals were Messrs. Tate and Pybas.
5
<PAGE>
Also on August 7, 1998, the Company acquired the remaining outstanding interests
of NORM which it did not then own in a tax free exchange under IRC Section
368(b), issuing 450,000 shares of common stock in exchange.
2. Supplementary Oil and Gas Information.
Changes in present value of estimated future net cash
flows from proved oil and gas reserves:
Present value at beginning of the period $ 2,044,232
Additions and revisions, net of future estimated
development and production costs and net of
properties sold 0
Sales of oil and gas, net of lifting costs 2,523
Present value at end of period 2,041,709
Changes in proved oil and gas reserves:
Oil (Bbls)
Proved reserves
Balance at beginning of period 349,946
Properties sold 0
Additions and revisions to previous estimates 0
Production (1,581)
Balance at September 30, 1998 348,365
Future net cash flow from proved oil and gas reserves:
- --------------------------------------------------------------------------------
Future net cash flows
at September 31, 1998
---------------------
Total Proved Proved Developed
September 30 Reserves Reserve
- ------------ -------- -------
1999 $ 53,191 $ 53,191
2000 169,384 169,384
2001 181,848 181,848
Remainder 1,866,943 1,866,943
2,271,367 2,271,367
Present value of future net cash flows discounted at 10%:
- --------------------------------------------------------------------------------
Proved
September 30 Proved Developed
- ------------ ------ ---------
1998 $ 47,872 $ 47,872
1999 152,450 152,450
2000 163,660 163,660
Thereafter 1,680,250 1,680,250
2,044,232 2,044,232
6
<PAGE>
The following accounting policies have been used in preparing the Reserve
Recognition Accounting (RRA) presentation. The summary of oil and gas producing
activities on the basis of RRA was prepared based on the rules of the Securities
and Exchange Commission (SEC).
Under RRA, earnings are recognized as proved reserves are found based on the
estimated present value of such reserves, computed as described below.
Subsequent revisions to the RRA valuation of proven reserves are included in
earnings as they occur. Proved reserves are those quantities of oil and gas
which can be expected, with little doubt, to be recoverable commercially at
current prices and costs under existing operating methods.
The proved reserves and related valuations were computed by the Company in
accordance with the rules of the SEC. Estimated future net revenues were
computed by applying current prices received by the Company to estimated future
production of reserves, less estimated future development and production costs
and windfall profit taxes based on current costs. A discount factor of 10% was
applied to the estimated future revenues to compute the estimated present value
of proved oil and gas reserves. This valuation procedure does not necessarily
result in an estimate of the fair market value of the Company's oil and gas
properties.
Totals of proven reserves are inherently imprecise estimates and are continually
subject to revision based on production history, results of additional
exploration and development, price changes and other factors.
"Additions to reserves" are the result of current acquisitions and development
activities. Increases in prices are the approximate effect on the RRA valuation
of proven reserves due to price changes. Other revisions represent the net
effect of all revisions to estimated quantities of proven reserves. Accretion of
discount was computed by multiplying 10% times the present value of future net
revenues as of the beginning of the year, adjusted to reflect downward
revisions.
Evaluated acquisition, exploration, development and production costs include
current and estimated future costs associated with the current year reserve
additions. Such expenses include property acquisitions, well costs, lease
rentals and abandonment. The cost of acquiring unproven properties and drilling
exploratory wells are deferred until the properties are evaluated and determined
to be either productive or nonproductive, at which time they are charged to
expense. There were no deferred acquisition and exploration costs at September
30, 1998.
The provision for income taxes is based on the "liability" method computed by
applying the current statutory income tax rate to the difference between the
year end RRA valuation of proven reserves and the tax basis in the properties
less estimated investment tax credits and statutory depletion associated with
future development costs.
3. Accounts Receivable
Various accounts receivable of NORM have been factored to a financial
institution. As the accounts are factored, it is the Company's policy to show
that account as having been paid. The Company pays a 3% fee to the financial
institution as the accounts are factored. In addition, a reserve account has
been established whereby 10% of the amount factored is deposited. This reserve
account was established in order to cover any losses which may arise due to
non-payment of the account by the customer to the financial institution. At the
end of every month the financial institution evaluates the unpaid invoices and
the balance in the reserved account in order to determine the reserve
requirements. Any excess amounts in the reserve account are then transferred to
the Company's general operating account. As of September 30, 1998, no account
has been repurchased from the financial institution.
As of September 30, 1998, the balance of the factored accounts was $194,960.
4. Property Plant and Equipment
The Company depreciates it's property, plant and equipment over the estimated
useful lives using the straight line depreciation method for financial statement
purposes and using the Modified Accelerated Cost Recovery System for federal
income tax purposes.
7
<PAGE>
5. Mortgage Payable.
The mortgage note is payable to Messrs. Tate and Pybas, and is secured by a deed
of trust dated January 2, 1998. The deed of trust is for approximately 47.6
acres which are used for the disposal of non-hazardous oil field waste
materials. The note provides for interest at ten percent per annum and is due,
principal and interest, on or before January 2, 1999. is the intention of the
note holders, Messrs. Tate and Pybas, to renew the note at maturity for one
year; therefore, no provision for current portion has been provided for.
6. Other Notes Payable.
A summary of the other notes payable follows:
Note payable to City National Bank, in the original amount of
$120,000, payable on demand, but if no demand is made, then interest
only monthly and principal and accrued interest due April, 1999,
bearing interest at 9.50%, secured by equipment $113,000
Note payable to Citizens State Bank, in the original amount of $27,000,
payable on demand, but if no demand is made, then unpaid principal and
interest due December, 1998, secured by equipment 27,000
Note payable to Guaranty Federal Bank, in the original
amount of $16,566, payable in monthly installments of
$625, including interest at 9.95%, secured by vehicle 12,013
Sub-Total 152,013
Less current portion 6,609
Total 145,404
No provision for current portion of long-term debt has been provided for the two
demand notes payable because management intends to renew, and fully expects the
financial institutions to renew, at maturity.
7. Commitments and Contingent Liabilities:
A. As of September 30, 1998, NORM had entered into several equipment lease
agreements for the leasing of heavy-duty tractors and trailers. The leases have
been classified as operating leases because, according to their terms, NORM is
required to return the equipment to the leasing company at the end of the term;
however, management has the option to purchase the leased equipment at the end
of the term for the then current fair market value. Management does not at this
time intend to exercise this right. The leases were entered into in January,
1998, and will expire January, 2002. The monthly lease amount is $4,304.
B. NORM leases it's offices in South Texas. This two-year lease calls for
monthly rentals of $2,500 through July 31, 1999, and $3,000 from August 1, 1999,
through July 31, 2000. NORM has the option of purchasing the property at any
time prior to expiration for $295,000. Should NORM elect to purchase, the sum
of$1,250 per month for the first year of the lease and $1,750 per month for the
second will be credited against the purchase price. At the present time,
management does not intent to exercise this option; therefore, all rental
payments have been classified as a current period expense.
C. NORM has factored, with recourse, certain of it's accounts receivable to a
financial institution. The financial institution notifies the customer of each
invoice factored, who is requested to remit payment directly to the institution.
8
<PAGE>
The agreement stipulates that should any of the invoices remain unpaid after
ninety days NORM will repay the invoice. As of September 30, 1998, the amount
factored was $194,961, and all accounts factored were current.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations: The Company had no revenues, operating or otherwise, from
1991 through the period covered by this report. Correspondingly, all expenses
during these periods were administrative in nature and immaterial in amount.
Further, the acquisition by the Company of Southport Environmental, Inc. (SEDI),
and 1/3rd of the outstanding interest of NORM Services Group, LLC, (subsequently
exchanged for 1/3rd of NORM Services Group, Inc., in a tax-free roll-up of the
LLC into a corporation) did not occur until June 15, 1998, and the acquisition
by the Company of the remaining 2/3rds interest in NORM Services Group, Inc.,
did not occur until August 7, 1998, substantially after the beginning of the
period covered by this report. SEDI and NORM did not have significant operations
during the corresponding period of the previous fiscal year; thus, no meaningful
comparison can be made between the fiscal period covered by this report and the
corresponding period of the previous fiscal year.
SEDI and NORM both continued to exert their efforts in the further development
of their respective businesses during the period covered by this report.
Liquidity and Capital Resources: The Company had no liquidity sources from
fiscal 1990 through the calendar year ended 1997, however, a stock subscription
by a consultant provided a source of liquidity during the first three months of
fiscal 1999. All administrative matters through June 15, 1998, were provided for
by the executive officer of and attorney for the Company in exchange for those
shares issued to them on May 3, 1996. Cash flows from operations provided
liquidity to SEDI and NORM for the period covered by this report; however, each
of these entities suffered a loss from operations. NORM has factored various of
its accounts receivable to a financial institution. NORM pays a 3% fee to the
financial institution on factoring and established a reserve where 10% of the
amount factored is deposited so as to cover any collection failures. The reserve
account is balanced out at the end of each month. At September 30, 1998, no
account had failed to pay.
Cash flows from operations amounted to $12,255, primarily as a result in an
increase in accounts payable of $172,808 and a decrease in stock subscriptions
receivable of $71,917. Investing activities decreased cash by $287,100,
primarily as a result of the payment of $70,000 to Messrs. Tate and Pybas for
the purchase of certain land from them which is used in the business of NORM,
the purchase of equipment ($38,783) and the net book value of other equipment
($214,720) acquired from SEDI and NORM on June 15, 1998, and August 7, 1998.
Financing Activities provided $70,000 in borrowings from Messrs. Tate and Pybas,
$163,733 from long term borrowings and $110,489 from the sale of common stock of
the Company. The result of the foregoing was an increase in cash of $51,048 for
the six months ended September 30, 1998.
PART II - OTHER INFORMATION
Item 1. Litigation
This item is not applicable to the Company.
Item 2. Change in Securities
This item is not applicable to the Company.
Item 3. Defaults Upon Senior Securities
This item is not applicable to the Company.
Item 4. Submission of Matters to a Vote of Security Holders
This item is not applicable to the Company.
9
<PAGE>
Item 5. Other Information
This item is not applicable to the Company.
Item 6. Exhibits and Reports on Form 8-K
This item is not applicable to the Company.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 this 17th day of December,
1998.
CNH Holdings Company (Registrant)
By: /s/ Larry V. Tate
--------------------------------------
Larry V. Tate, Chief Executive Officer
By: /s/ Helen Wallace
--------------------------------------
Helen Wallace, Chief Financial
and Accounting Officer
and Treasurer
* * * * * * *
10
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 51,048
<SECURITIES> 0
<RECEIVABLES> 59,978
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 219,159
<PP&E> 457,253
<DEPRECIATION> 20,383
<TOTAL-ASSETS> 681,479
<CURRENT-LIABILITIES> 198,192
<BONDS> 0
0
2,000
<COMMON> 7,194
<OTHER-SE> 258,689
<TOTAL-LIABILITY-AND-EQUITY> 681,479
<SALES> 217,565
<TOTAL-REVENUES> 262,465
<CGS> 242,353
<TOTAL-COSTS> 371,498
<OTHER-EXPENSES> 19,239
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,406
<INCOME-PRETAX> (128,272)
<INCOME-TAX> 0
<INCOME-CONTINUING> (128,272)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (128,272)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
