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, 1999
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 (I.R.S. employer
jurisdiction of Identification number)
incorporation or
organization)
P.O. Box 832, Kilgore, Texas 75663
(Address of principal (Zip Code)
executive offices)
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 November 25, 1999, there
were approximately 7,811,774 shares outstanding.
<PAGE>
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CNH HOLDINGS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30 March 31
ASSETS 1999 1999
- ------ ---- ----
Current Assets:
<S> <C> <C>
Cash on deposit $ 75,343 $ 9,309
Cash (restricted) 1,674 19,794
----------- -----------
Total cash 77,017 29,103
----------- -----------
Receivables:
Trade 439,023 80,736
Stock subscription 3,500 535
receivable
Employee advances 100 --
Note receivable 34,528 34,500
----------- -----------
477,151 115,771
Less allowance for doubtful accounts 93,356 59,673
----------- -----------
Total Receivables 383,795 56,098
----------- -----------
----------- -----------
Total current assets 460,812 85,201
----------- -----------
Property, Plant and Equipment
Land 70,000 70,000
Oil and gas leasehold costs 197,833 154,937
Other equipment 358,700 372,019
----------- -----------
Less accumulated depreciation and depletion 84,302 54,350
----------- -----------
Net property, plant and equipment 542,231 542,606
----------- -----------
Other assets:
Organization costs, net of accumulated amortization 1,317 1,517
Deposits 3,520 3,650
----------- -----------
Total Other Assets $ 4,837 $ 5,167
Total Assets $ 1,007,880 $ 632,974
=========== ===========
<PAGE>
CNH HOLDINGS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable $ 664,587 $ 296,149
Other payables 18,750 15,815
Accrued expenses 18,683 20,826
Notes-Banks 340,893 237,576
Note-other 10,000 10,000
Note-shareholder 20,000 118,600
Current portion
Long-term debt 43,450 42,000
----------- -----------
Total current liabilities 1,116,363 740,966
----------- -----------
Long term debt:
Notes payable, bank 71,180 105,076
Note payable-other 10,226 --
Less current portion 43,450 42,000
----------- -----------
Total long term debt 37,956 63,076
----------- -----------
Stockholders' Equity (Deficit)
Preferred Stock, $.01 par value, 1,000,000 authorized,
200,000 issued and outstanding 2,000 2,000
Common Stock, $.001 par value, 10,000,000 authorized,
7,811,774 issued and outstanding 7,812 7,259
Additional paid-in capital 1,133,307 581,495
Deficit (1,289,558) (761,822)
----------- -----------
Total Liabilities and Stockholders' Equity $ 1,118,413 $ 632,974
=========== ===========
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
CNH HOLDINGS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three and Six Months Ended September 30, 1999
REVENUES:
Oil and gas revenues $ 88,669 $ 161,382
Overhead income 17,160 35,678
Service income 100,905 522,669
Equipment rental income 8,000 8,000
Other 460 1,004
----------- -----------
Total Revenues $ 215,194 $ 728,733
=========== ===========
COSTS AND EXPENSES:
Direct Costs $ 501,074 $ 946,324
Depreciation, depletion and amortization 17,808 35,627
Selling, general and administrative 124,395 300,163
Total operating costs $ 643,277 $ 1,282,114
----------- -----------
Net loss from operations $ (428,083) $ (553,381)
OTHER INCOME (EXPENSES):
Interest income 130 279
Sale of assets 43,833 44,608
Interest expense (11,105) (19,243)
----------- -----------
Total other income
(Expenses) $ 32,858 $ 25,644
----------- -----------
Net income (loss) $ (395,225) $ (527,737)
=========== ===========
The accompanying notes are an integral part of these statements.
<PAGE>
CNH HOLDINGS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Three and Six Months Ended
September 30, 1999
Three Months Six Months
------------ ----------
OPERATING ACTIVITIES:
Net (loss) $(395,225) $(132,512)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation, depletion and amortization 17,808 35,627
Gain on sale of assets (43,833) (43,833)
(Increase)Decrease in accounts receivable-trade, net (37,504) (324,604)
(Increase)Decrease in stock subscriptions receivable (3,250) (2,965)
(Increase) decrease in employee advances 36,526 (100)
(Increase) decrease in notes receivable -- (28)
Increase (decrease) in accounts payable 244,044 368,438
Increase (decrease) in other payables 3,250 2,935
Increase (decrease) in accrued expenses 1,624 (2,143)
Increase (decrease) in notes payable - banks 47,296 103,317
Increase (decrease) in notes payable - other -- --
Increase (decrease) in notes payable - shareholders -- (98,600)
Increase (decrease) in current portion long-term debt 211 1,450
--------- ---------
Net cash provided(used) by operating activities $(129,053) $(488,243)
--------- ---------
INVESTING ACTIVITIES:
Proceeds from sale of assets $ 67,961 $ 67,961
Purchase of oil and gas properties (50,800) (50,800)
Net increase of other equipment (4,067) (8,379)
(Increase) decrease in utility deposits -- 130
--------- ---------
NET CASH PROVIDED (USED) IN INVESTING ACTIVITIES $ 13,374 $ 8,912
--------- ---------
FINANCING ACTIVITIES
Proceeds from other long term borrowings $ -- $ 13,317
Reduction of long term debt (11,734) (38,437)
Proceeds from sale of common stock -- 552,365
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES $ (11,734) $ 527,245
INCREASE IN CASH $(127,413) $ 47,914
Cash at beginning of period 204,430 29,103
--------- ---------
CASH AT END OF PERIOD $ 77,017 $ 77,017
========= =========
The accompanying notes are an integral part of these statements.
<PAGE>
<TABLE>
<CAPTION>
CNH HOLDINGS COMPANY AND SUBSIDIARIES
STATEMENT OF STOCKHOLDERS' EQUITY
(Nine Months Ended September 30, 1999)
Additional Retained
Preferred Common Paid-In Earnings Total
--------- ------ ------- -------- -----
<S> <C> <C> <C> <C> <C>
Balance at March 31, 1999 $ 2,000 $ 7,259 $ 581,495 $ 761,822) (171,068)
Exercise of Options -- 553 551,812 -- 552,365
Net loss for Three months
Ended June 30 -- -- -- (132,512) (132,512)
----------- ----------- ----------- ----------- -----------
Balance at June 30, 1999 2,000 7,812 1,133,307 (894,334) 248,785
Net loss for three months
ended September 30, 1999 -- -- -- (395,225) (395,225)
----------- ----------- ----------- ----------- -----------
Balance as of September 30, 1999 $ 2,000 $ 7,812 $ 1,133,307 $(1,289,599) $ (146,440)
=========== =========== =========== =========== ===========
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
CNH HOLDINGS COMPANY
AND SUBSIDIARIES
CONDENSED FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
1. ORGANIZATION
I.S.B.C. Corp. was incorporated in Delaware on April 15, 1987. On January 29,
1988, I.S.B.C. Corp. completed a public offering of 800,000 units at a price of
$.50 per unit, consisting of one share of common stock and three redeemable
warrants. All unexercised warrants have now expired.
On June 27, 1988, I.S.B.C. Corp. issued 21,000,000 shares of its common stock in
exchange for all of the outstanding shares of Coral Group, Inc. Subsequent to
the exchange of stock, I.S.B.C. Corp. changed its name to Coral Companies, Inc.
Coral Group, Inc. was incorporated on March 12, 1984, and commenced operations
in November, 1984. Coral Group, Inc.'s primary business was the marketing of
computer hardware and software as well as providing consulting services,
installation support, training programs and software maintenance for its
customers. Since the shareholders of Coral Group, Inc. owned approximately 85%
of Coral Companies, Inc. immediately after the exchange, the stock exchange was
accounted for as a reverse acquisition of Coral Companies, Inc. by Coral Group,
Inc. The Company, subsequent to the acquisition of the Coral Group changed its
name to CNH Holdings Company and its domicile to Nevada.
The Company previously had outstanding a class of preferred stock which was
entitled to one vote per share, was not entitled to receive any dividends that
may have been declared and had a liquidation preference of $0.02 per share. The
preferred stock was previously converted to common stock, and the liquidation
preference of $220,000 was reclassified from preferred stockholders' equity to
common stockholders' equity.
On May 30, 1996, the Company effected a reverse one for one thousand capital
share split. Concurrently, the authorized number of common shares was increased
to 10,000,000, $.001 par value per share and 1,000,000 preferred shares, $.01
par value. After the split, there were 19,228 common shares outstanding.
Subsequently, 380,772 shares of $.001 par value common shares were issued to
individuals in exchange for services rendered.
On December 9, 1997, the Company entered into a reorganization agreement (DRC
Reorganization Agreement) with GNC Corporation, a Nevada corporation (GNC), and
the sole shareholder of GNC, that being DRC, Inc., a Nevada corporation (DRC).
The Company agreed to acquire all of the outstanding proprietary interest of GNC
in a share for share exchange which subsequently resulted in GNC becoming a
wholly owned subsidiary of the Company and DRC acquiring control of the Company
through its share ownership. The acquisition was rescinded due to the failure of
GNC and DRC to deliver the required financial statements.
<PAGE>
On June 18, 1998 the Company acquired Southport Environmental and Development,
Inc. in a share for share exchange, which resulted in the Company issuing
6,000,000 common shares and 200,000 preferred shares. Concurrent with the
acquisition, there was a change in control and the management of the Company.
The Company now operates under three divisions, Norm Services Group, Inc., an
oilfield services operation, Southport Environmental and Development, Inc., a
producing and exploration oil and gas company, and NSG Rentals, an equipment
leasing company, primarily to the oil and gas industry.
2. ACCOUNTING PRINCIPLES
A. Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affects the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements, and reported amounts of revenues and expenses during the reporting
periods. Actual results could differ from those estimates.
B. Cash: For purposes of the statements of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
and money market funds to be cash equivalents.
C. Depreciation and Depletion: Depreciable property, plant and equipment are
depreciated over their estimated useful lives using the straight line method
over estimated lives of three to seven years. Depletion of oil and gas
properties is computed on the units of production method. Organization costs are
amortized evenly over a period of sixty months.
D. RESTRICTED CASH
One of the Company's subsidiaries factors its accounts receivable to a bank. As
of September 30, 1999, $16,740 of accounts receivable had been factored and a
cash balance had been reserved by the bank in the amount of $1,674.
E. ACCOUNTS RECEIVABLE
Various accounts receivable of NORM Services Group, Inc. 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 factored is deposited. This is
the amount of restricted cash as presented on the balance sheet. The 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 reserve account in order to determine the reserve requirement.
Any excess amount in the reserve account is then transferred to the Company's
general operating account. Should the account have to be repurchased from the
financial institution, it is then restored to accounts receivable.
<PAGE>
F. NOTES PAYABLE
Notes payable to banks currently bears interest at rates varying from 8.75% to
10.5% per annum. The proceeds of the notes were used primarily for working
capital purposes. Management expects to renew these notes when they become due.
G. LONG TERM DEBT
The following is a summary of long term debt:
Note payable to Regions Bank,
in the original amount Of $95,000,
payable in monthly installments
of $3,553, including interest
at the rate of 9%, secured by equipment $71,180
Note payable to GMAC, in the
original amount of $13,317,
payable in monthly installments
of $613, including interest at
the rate of 9.75%, secured by
vehicle 10,226
81,406
Less current portion 43,454
-------
$37,956
=======
The following is a schedule of long term debt maturities:
09-30-00 $43,450
09-30-01 37,956
--------
$81,406
========
<PAGE>
3. REPORTABLE SEGMENT DATA
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Standards No. 131, Disclosures about Segments of an Enterprise and
Related Information (SFAS 131), which is effective for fiscal years beginning
after December 15, 1997. SFAS 131 introduces a new model for segment reporting
called the management approach. The management approach is based on the way the
chief operating decision maker organizes segments within a company for making
operating decisions and assessing performance.
SFAS 131 requires disclosures for each segment that are similar to those
required under previous standards with the addition of limited quarterly
disclosure requirements.
There are no differences to the 1998 annual report in the basis of segmentation
or in the basis of measurement of segment profit or loss included therein. In
addition, there has been no material change in total assets of the segments from
the amounts disclosed in the 1998 annual report. Financial information about the
Company's operating segments for the first quarter of 1999 as required under
SFAS 131 is as follows:
<TABLE>
<CAPTION>
Oil Field Oil & Gas Equipment
Services Production Rentals Administrative Total
-------- ---------- ------- -------------- -----
<S> <C> <C> <C> <C> <C>
Revenue from external Customers $ 530,669 $ 198,064 $ 0 $ 0 $ 728,733
Interest revenue 279 0 0 0 279
Interest expense 8,460 1,017 4,478 5,288 19,243
Depreciation, depletion
and amortization 17,784 6,300 11,175 368 35,627
Gain(Loss) sale of assets (11,759) 56,368 44,609
Segment profit (loss) (498,661) 65,809 (16,747) (78,138) (527,737)
Expenditures for segment assets 8,379 50,800 0 0 59,179
</TABLE>
<PAGE>
4. 1999 STOCK OPTION PLAN
On January 25, 1999, the Company's Board of Directors adopted a stock option
plan in which all full time employees of the Company and its subsidiaries are
eligible to participate. The plan will be administered by the Board, which may
subsequently appoint a committee for this purpose. The plan sets aside up to
1,000,000 shares of common stock to cover options to be granted over the term of
the plan. The plan has a ten year term commencing January 25, 1999. The Company
has filed a registration statement under the act to cover the shares issued
under the plan. As of September 30, 1999, 810,000 have been granted, of which,
617,564 have been exercised.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Introduction: The following discussion has been prepared assuming the Company
will continue as a going concern; however, the audit report for the financial
statements as of and for the periods ended March 31, 1999, includes a caveat on
this point. In reading the following, one should first consult the audit report,
financial statements and footnotes, while keeping in mind the significant
operating losses generated by the Company on a consolidated basis with its
subsidiaries.
History: CNH Holdings Company, a Nevada corporation (the Company), was
incorporated in Delaware on April 15, 1987. On June 15, 1998, the Company
entered into a reorganization agreement (the Southport Reorganization Agreement)
with Southport Environmental and Development, Inc., a Nevada corporation
(Southport Environmental or SEDI), and the shareholders of Southport
Environmental pursuant to which the Company acquired all of the outstanding
proprietary interest of Southport Environmental and 1/3rd of the outstanding
proprietary interest of NORM Services, Group, Inc. (NORM), in a share for share
exchange which resulted in Southport Environmental becoming a wholly owned
subsidiary of the Company, NORM becoming a minority owned subsidiary of the
Company and the shareholders of Southport Environmental acquiring control of the
Company through their share ownership. The Company issued 6,000,000 common
shares and 200,000 shares of the Class A: 10% Dividend Bearing Preferred Stock
in the exchange. Pursuant to the Reorganization Agreement, the existing director
and executive officer resigned and the Company appointed new directors and
executive officers.
Southport Environmental was incorporated on June 1, 1998, and is involved in the
exploration for and development of oil and gas properties.
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.
<PAGE>
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.
Results of Operations: The Company had no revenues, operating or otherwise, from
1991 through June 30, 1998. 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. SEDI and NORM did not have significant operations
during the corresponding period of the previous fiscal year. No meaningful
comparison, therefore, can be made between the fiscal period covered by this
report and the corresponding period of the previous fiscal year. For this
reason, the financial results for the first quarter of fiscal 1999 have not been
presented.
The primary revenue sources for the Company during the first six months of
fiscal 2000 were from oil field services and oil and gas sales. Operating costs
during the first fiscal quarter of 2000 primarily consisted of cost of sales,
administrative and general expenses and depreciation, depletion and
amortization. Operating costs during the first fiscal quarter of 1999 were
solely administrative in nature. The foregoing resulted in a net loss from
operations during the first six months of fiscal 2000.
Management at present is devoting itself to increasing gross revenues and
reducing administrative and general expenses, and has implemented steps and
procedures to better assure itself on the profitability of its services
contracts. There can be no assurance these efforts will be successful.
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 through 1998 and 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 common stock issued to them on May 3, 1996. Cash flows from operations
provided liquidity to SEDI and NORM for fiscal 1998 and fiscal 1999; however,
each of these entities suffered a loss from operations in each of these years.
NORM has factored various of its accounts receivable to a financial institution,
paying a 3% fee to the financial institution, which requires 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. On June 23, 1999, the
Company received approximately $500,000 in equity proceeds. The Company will use
these proceeds in operations. The Company has also increased its borrowings from
its financial institution.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Litigation
No material legal proceedings to which the Company (or any officer or director
of the Company, or any affiliate or owner of record or beneficially of more than
five percent of the Common Stock, to management's knowledge) is a party or to
which the property of the Company is subject is pending and no such material
proceeding is known by management of the Company to be contemplated.
Item 2. Change in Securities
This item is not applicable to the Company for the period covered by this
report.
Item 3. Defaults Upon Senior Securities
This item is not applicable to the Company for the period covered by this
report.
Item 4. Submission of Matters to a Vote of Security Holders
There were no meetings of security holders during the period covered by this
report; thus, this item is not applicable.
Item 5. Other Information
There is no additional information which the Company is electing to report under
this item at this time.
Item 6. Exhibits and Reports on Form 8-K
This item is not applicable to the Company for the period covered by this
report.
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 22nd day of November,
1999.
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
* * * * * * *
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 77,017
<SECURITIES> 0
<RECEIVABLES> 477,151
<ALLOWANCES> 93,356
<INVENTORY> 0
<CURRENT-ASSETS> 460,812
<PP&E> 626,533
<DEPRECIATION> 84,302
<TOTAL-ASSETS> 1,007,880
<CURRENT-LIABILITIES> 1,116,363
<BONDS> 0
0
7,812
<COMMON> 7,812
<OTHER-SE> (1,279,558)
<TOTAL-LIABILITY-AND-EQUITY> 1,007,880
<SALES> 215,194
<TOTAL-REVENUES> 215,194
<CGS> 643,277
<TOTAL-COSTS> 643,277
<OTHER-EXPENSES> 32,858
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 130
<INCOME-PRETAX> (395,225)
<INCOME-TAX> 0
<INCOME-CONTINUING> (395,225)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (395,225)
<EPS-BASIC> (.001)
<EPS-DILUTED> (.001)
</TABLE>