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: June 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 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 September 1, 1999, there
were approximately 7,611,415 shares outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
- ----------------------------
CNH HOLDINGS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, March 31,
1999 1999
---- ----
ASSETS
Current Assets:
Cash $ 167,113 $ 9,309
Cash (restricted) 37,317 19,794
Total cash 204,430 29,103
----------- -----------
Receivables:
Trade 401,519 80,736
Stock subscription 250 535
Employee advances 36,626 --
Note 34,528 34,500
----------- -----------
472,923 115,771
Less allowance for doubtful accounts 93,356 59,673
----------- -----------
379,567 56,098
----------- -----------
Total current assets 583,997 85,201
----------- -----------
Property, Plant and Equipment
Land 70,000 70,000
Oil and gas leasehold costs 154,937 154,937
Other equipment 373,294 372,019
----------- -----------
598,231 596,956
Less accumulated depreciation 69,082 54,350
----------- -----------
529,149 542,606
----------- -----------
Other assets:
Organization costs 1,467 1,517
Deposits 3,800 3,650
----------- -----------
5,267 5,167
----------- -----------
Total Assets $ 1,118,413 $ 632,974
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long term debt $ 43,239 $ 42,000
Notes payable, bank 293,597 237,576
Notes payable, shareholders 20,000 118,600
Note payable, other 10,000 10,000
Accounts payable, trade 420,543 296,149
Accrued expenses 17,059 20,826
Other payables 15,500 15,815
----------- -----------
Total current liabilities 819,938 740,966
----------- -----------
Long term debt:
Notes payable, bank 80,626 105,076
Note payable-other 12,303 --
Less current portion 43,239 42,000
----------- -----------
Total long term debt 49,690 63,076
----------- -----------
Stockholders' Equity (Deficit)
Preferred Stock, $.01 par value,
1,000,000 shares authorized,
200,000 shares issued and
outstanding 2,000 2,000
Common Stock, $.001 par value,
10,000,000 shares authorized,
7,811,774 shares at June 30, 1999
and 7,259,410 at March 31,
1999 issued and outstanding 7,812 7,259
Additional paid-in capital 1,133,307 581,495
Deficit (894,334) (761,822)
----------- -----------
Total Liabilities and
Stockholders' Equity $ 1,118,413 $ 632,974
=========== ===========
The accompanying notes are an integral part of these statements.
<PAGE>
CNH HOLDINGS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
June 30,
1999
----
Operating revenues:
Oil and gas revenues $ 72,713
Overhead income 18,518
Service income 421,764
Equipment rental income --
All other income 544
---------
Gross revenue 513,539
---------
Operational costs:
Direct Costs 445,250
Depreciation, depletion and amortization 17,819
Selling, general and administrative 175,768
---------
Total operating costs 638,837
---------
Net loss from operations (125,298)
Other income (expenses)
Interest income 149
Sale of assets 775
Interest expense (8,138)
---------
Net income (loss) $(132,512)
=========
The accompanying notes are an integral part of these statements.
<PAGE>
CNH HOLDINGS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Three Months Ended
June 30, 1999
-------------
Cash flows from operating activities:
Net (loss) $(132,512)
Add non-cash items:
Depreciation, depletion and amortization 17,819
Decrease in accounts receivable, net (287,100)
Decrease in stock subscriptions receivable 285
(Increase) in employee advances (36,626)
(Increase) in notes receivable (28)
Increase in accounts payable 124,394
(Decrease) in other payables (315)
(Decrease) in accrued expenses (3,767)
Increase in notes payable - banks 56,021
(Decrease in notes payable - shareholders (98,600)
Increase in current portion long-term debt 1,239
---------
Net cash flows (used) in operating activities (359,190)
---------
Cash flows from investing activities:
Net increase of other equipment (4,312)
Increase in utility deposits (150)
---------
Net cash flows (used) in investing activities (4,462)
---------
Cash flows from financing activities:
Proceeds from other long term borrowing 13,317
Reduction of long term debt (26,703)
Proceeds from sale of common stock 552,365
---------
Net cash flows from financing activities 538,979
---------
Net increase in cash 175,327
Cash at beginning of period 29,103
---------
Cash at end of period $ 204,430
=========
The accompanying notes are an integral part of these statements.
<PAGE>
<TABLE>
<CAPTION>
CNH HOLDINGS COMPANY AND SUBSIDIARIES
STATEMENT OF STOCKHOLDERS' EQUITY
Total
Preferred Common Preferred Stock Common Stock Accumulated Equity
Shares Shares Amount Amount APIC Deficit (Deficit)
------ ------ ------ ------ ---- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at
March 31, 1999 200,000 7,259,410 $ 2,000 7,259 581,495 (761,822) (171,068)
Exercise of
Options -- 617,564 -- 553 551,812 -- 552,365
Net loss for
Three months
Ended June 30 -- -- -- -- -- (132,512) (132,512)
Balance at
June 30, 1999 200,000 7,811,774 2,000 7,812 1,133,307 (894,334) 248,785
========= ========= ========= ========= ========= ========= =========
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
CNH HOLDINGS COMPANY AND SUBSIDIARIES
CONDENSED FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
ORGANIZATION
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.
ACCOUNTING PRINCIPLES
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.
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.
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.
RESTRICTED CASH
One of the Company's subsidiaries factors its accounts receivable to a bank. As
of June 30, 1999, $200,000 of accounts receivable had been factored and a cash
balance had been reserved by the bank in the amount of $37,317.
<PAGE>
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.
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.
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 $80,626
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 12,303
-------
92,929
Less current portion 43,239
-------
$49,690
=======
The following is a schedule of long term debt maturities:
06-30-00 $43,239
06-30-01 46,164
06-30-02 3,526
-------
$92,929
=======
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.
<PAGE>
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 $ 421,764 $ 91,775 $ 0 $ 0 $ 513,539
Interest revenue 149 0 0 0 149
Interest expense 3,175 0 1,919 3,044 8,138
Depreciation, depletion
and amortization 9,081 3,150 5,588 0 17,819
Segment profit (loss) (88,852) (107) (8,397) (35,156) (132,512)
Expenditures for segment
assets 4,312 0 0 0 4,312
</TABLE>
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 June 30, 1999, 810,000 shares have been granted, of which,
617,564 had 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.
<PAGE>
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.
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 quarter 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 quarter 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.
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.
<PAGE>
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 1st day of September,
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> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 204,430
<SECURITIES> 0
<RECEIVABLES> 472,923
<ALLOWANCES> (93,356)
<INVENTORY> 0
<CURRENT-ASSETS> 583,997
<PP&E> 598,231
<DEPRECIATION> 69,082
<TOTAL-ASSETS> 1,118,413
<CURRENT-LIABILITIES> 819,938
<BONDS> 0
0
2,000
<COMMON> 7,812
<OTHER-SE> 238,973
<TOTAL-LIABILITY-AND-EQUITY> 1,118,413
<SALES> 513,539
<TOTAL-REVENUES> 513,539
<CGS> 445,250
<TOTAL-COSTS> 193,587
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 149
<INCOME-PRETAX> (132,512)
<INCOME-TAX> 0
<INCOME-CONTINUING> (132,512)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (132,512)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
