TDZ Holdings Inc.

August 18, 2005 12:03 ET

TDZ Holdings Inc.-Results for the Six Months Ended June 30, 2005

TORONTO, ONTARIO--(CCNMatthews - Aug. 18, 2005) - TDZ HOLDINGS INC., today announced its results for the six months ended June 30, 2005.

Overview

The Company was formed on April 28, 1999 upon amalgamation. The Company has a 33% direct equity interest in Nualt Enterprises Inc. ("Nualt"), the parent company for the former Construction Technology Business carried on by Aluma Enterprises Inc. ("Aluma") and its subsidiaries, and the principal holding company for the former Residential Real Estate Business (collectively the "Businesses"). The Company's investment in Nualt has been pledged to Nualt's principal lenders (the "Lenders") to secure guarantee obligations.

Summary of results

Net loss for the six months ended June 30, 2005 was $45,000 ($0.00 per share) on revenues of $2,000 as compared to a net loss of $1,895,000 ($0.05 per share) on revenues of $233,000 for the six months ended June 30, 2004. The net loss for the six months ended June 30, 2004 was the result of the equity share of Nualt's loss.

Cash used in operations before other working capital items was $45,000 ($0.00 per share) during the six months ended June 30, 2005. Overall there was a $32,000 net decrease in cash during this period. Prior to July 29, 2004, all of the general and administrative costs of the Company had been reimbursed by the Businesses as revenue to the Company. After this date, the Company is solely responsible for funding these costs.

Net investment in Nualt

At April 28, 1999, Nualt had a shareholder's deficiency of $69,776,000. Since the Company (as a result of its amalgamation) assumed guarantee obligations for approximately $190,000,000 of the debt of Nualt and its subsidiaries, the Company recorded a liability for the estimated fair value of the guarantee. The fair value of these obligations at April 28, 1999 has been determined to be the full amount of Nualt's shareholder deficiency at that date.

From April 28, 1999 to July 29, 2004 the net investment in Nualt was accounted for by the equity method and accordingly included the Company's share of net income or loss of Nualt during that period. During the period April 29, 1999 to July 29, 2004, Nualt has had cumulative net losses of $3,742,000. The Company recorded its 33% cumulative share in the amount of $1,235,000.

On July 29, 2004 the Company announced that the Residential Real Estate Business had been sold to a corporation in which an affiliate of Tridel Financial Corporation ("TFC") has a significant interest. TFC owns approximately 41% of the outstanding shares of the Company. In addition, the Company received sufficient funds to pay the balance owing on its outstanding Contingent Rights, with the result that the Company's obligations with respect to the Contingent Rights have been discharged. The net proceeds from the sale of the Residential Real Estate Business were applied to the repayment of the outstanding indebtedness of Nualt, a portion of which is guaranteed by the Company.

As part of the transaction, pursuant to the terms of a Release Agreement, the unlimited guarantee of the Company in respect of the indebtedness of Nualt was changed to a limited recourse obligation. As a result, the Lenders now have recourse only to the shares of Nualt held by the Company to satisfy any claims made under the guarantee. The Company, in turn, relinquished its rights under certain restructuring agreements to have its administrative and operating costs reimbursed, with the result that the Company is now solely responsible for those expenses.



At July 29, 2004, the Company reflected the above as follows
(in thousands of dollars):

Adjustment to fair value of the
original net investment in Nualt $ 69,776
Adjustment to fair value of the
equity accounting in Nualt up to July 29, 2004 1,235
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$ 71,011
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Since the Company has no legal obligation beyond the pledge of shares of Nualt to the Lenders, the Company has adjusted this balance to nil to reflect the results of the Release Agreement.

The Company has determined that it no longer exercises significant influence over Nualt and will account for its investment in Nualt on a cost basis after July 29, 2004.

Sale of the Construction Technology Business

Aluma has advised that the closing of the sale of substantially all of its assets to Brand Services Inc., a subsidiary of J.P. Morgan Partners, occurred on July 29, 2005. Substantially all of the net proceeds from the sale will be applied to repay indebtedness of Nualt, which indebtedness has been guaranteed by Aluma.

As previously disclosed, the Company is entitled to receive certain payments as a result of the completion of this sale pursuant to the Construction Technology Business Debt Restructuring Agreement entered into on November 28, 2001. An initial payment of $976,800 was made on account of the Company's entitlement on the closing and the balance of the Company's entitlement is payable within two years following the closing. The amount of the balance payable to the Company cannot be predicted at this time as it is dependent upon various closing and post closing adjustments which are to be made over this two year period. The financial statements have not recorded any amount in respect of the Company's entitlement for these amounts. $976,800 received July 29, 2005 will be recorded as revenue in the Company's third quarter financial statements.

Contact Information

  • TDZ Holdings Inc.
    Mr. Harvey Fruitman
    Executive Vice President, Secretary,
    and Chief Financial Officer
    (416) 661-9290