<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB/A-1
GENERAL FORM FOR THE REGISTRATION OF SMALL
BUSINESS ISSUERS
Under Section 12 (b) or (g) of the Securities Exchange Act of
1934
MYRIAD INTERNATIONAL, INC.
(Name of Small Business Issuer in Its Charter)
DELAWARE 137-17176-7
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
4330 LA JOLLA VILLAGE DR
SAN DIEGO, CA 92122
(Address of Principal Executive Offices) (Zip Code)
ISSUER'S TELEPHONE NUMBER: (619) 677-6580 FAX (610) 677-6564
SECURITIES TO BE REGISTERED UNDER SECTION 12(b) OF THE EXCHANGE ACT:
NONE
SECURITIES TO BE REGISTERED UNDER SECTION 12(g) OF THE EXCHANGE ACT:
TITLE OF EACH CLASS
CLASS A COMMON STOCK, PAR VALUE $0.01
<PAGE> 2
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized on this 8th, day of October, 1996.
MYRIAD INTERNATIONAL, INC.
BY: /s/Jerome O. Crawford
------------------------------------
Jerome O. Crawford
Chairman and Chief Executive
Officer
41
<PAGE> 3
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of
Myriad International, Inc.
We have audited the accompanying consolidated balance sheets of Myriad
International, Inc. and Subsidiaries (the "Company") as of July 31, 1995 and
1994 and the related consolidated statements of operations, stockholders'
deficiency and cash flows for the years then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Myriad International, Inc. and
Subsidiaries as of July 31, 1995 and 1994, and the results of their operations
and their cash flows for the years then ended in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 and Note 3 to
the consolidated financial statements, the Company incurred a substantial loss
from operations which raises substantial doubt about its ability to continue as
a going concern. Management's plans concerning these matters are also described
in Note 3. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty referred to herein and in the
preceding paragraph.
Thefeld & Associates
San Diego, California
July 19, 1996
F - 1
<PAGE> 4
MYRIAD INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JULY 31, 1995 AND 1994
================================================================================
<TABLE>
<CAPTION>
1995 1994
======== ========
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents (Note 1) $ 4,000 $ 0
Deposits and prepaid expenses 62,000 1,000
-------- --------
Total current assets 66,000 1,000
Property, Plant and Equipment: (Note 1)
Furniture and fixtures 79,000 82,000
Computer equipment 51,000 53,000
-------- --------
130,000 135,000
Less: Accumulated depreciation 40,000 20,000
-------- --------
Net property and equipment 90,000 115,000
Other Assets:
Organization costs, net 17,000 0
Deferred compensation (Note 1) 185,000 150,000
Other 23,000 0
-------- --------
Total other assets 225,000 150,000
-------- --------
$381,000 $266,000
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
F - 2
<PAGE> 5
MYRIAD INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JULY 31, 1995 AND 1994
================================================================================
<TABLE>
<CAPTION>
1995 1994
============ ============
<S> <C> <C>
LIABILITIES
Current Liabilities:
Accounts payable $ 297,000 $ 193,000
Dividends payable 275,000 125,000
Other accrued expenses (Note 4) 5,304,000 4,610,000
Notes payable (Note 5) 6,648,000 6,160,000
------------ ------------
Total current liabilities 12,524,000 11,088,000
Minority interest in subsidiary (Note 1) 68,000 0
------------ ------------
Total liabilities 12,592,000 11,088,000
Commitments and contingencies (Note 7)
STOCKHOLDERS' DEFICIENCY (NOTES 9 AND 10):
Convertible preferred stock - $0.01 par value; 20,000,000
shares authorized:
7% Convertible Series 1 Preferred Stock, 292,000
shares issued and outstanding 3,000 3,000
6% Convertible Series 2 Preferred Stock, 500,000
shares issued and outstanding 5,000 5,000
Class A Common Stock - $0.01 par value; 75,000,000
shares authorized ; 10,682,000 and 5,423,000 shares
issued and outstanding, in 1995 and 1994, respectively 107,000 55,000
Class B Common Stock - $0.01 par value; 10,000,000
shares authorized ; 1,600,000 and 550,000 shares
issued and outstanding in 1995 and 1994, respectively 16,000 6,000
Additional paid-in capital 6,783,000 5,203,000
Accumulated deficit (19,125,000) (16,094,000)
------------ ------------
Total stockholders' deficiency (12,211,000) (10,822,000)
------------ ------------
$ 381,000 $ 266,000
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
F - 3
<PAGE> 6
MYRIAD INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR FISCAL YEARS ENDED JULY 31, 1995 AND 1994
================================================================================
<TABLE>
<CAPTION>
1995 1994
=========== ===========
<S> <C> <C>
Revenues $ 0 $ 0
Expenses:
General and administrative 2,085,000 1,627,000
Interest 1,030,000 757,000
----------- -----------
3,115,000 2,384,000
----------- -----------
Loss from continuing operations before
discontinued operations (3,115,000) (2,384,000)
Discontinued operations: (Note 2)
Loss from operations 0 (8,186,000)
Gain on disposal 0 3,454,000
----------- -----------
0 (4,732,000)
----------- -----------
Net loss before minority interest (Note 1) $(3,115,000) $(7,116,000)
Minority interest in subsidiary's net loss 234,000 0
----------- -----------
Net loss $(2,881,000) $(7,116,000)
=========== ===========
Net loss per share: (Note 1)
Loss from continuing operations before
discontinued operations $ (0.35) $ (0.49)
Discontinued operations 0.00 (0.96)
----------- -----------
Net loss $ (0.35) $ (1.45)
=========== ===========
Weighted average number of common shares outstanding 8,141,000 4,906,000
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
F - 4
<PAGE> 7
MYRIAD INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR FISCAL YEARS ENDED JULY 31, 1995 AND 1994
================================================================================
<TABLE>
<CAPTION>
1995 1994
=========== ===========
Cash flows from operating activities:
<S> <C> <C>
Net loss $(2,881,000) $(7,116,000)
Adjustments to reconcile net loss to cash (used in)
Operating Activities:
Depreciation and amortization 162,000 70,000
Provision for doubtful accounts 110,000 0
Issuance of common stock for services rendered 256,000 0
Minority interest in subsidiary's loss (234,000) 0
Discontinued operations (Note 2) 0 (2,259,000)
Changes in net operating assets and liabilities:
Deposits and prepaid expenses (84,000) 0
Accounts payable 104,000 193,000
Other accrued expenses (Note 4) 694,000 4,443,000
----------- -----------
Net cash (used in) operating activities (1,873,000) (4,669,000)
Cash flows from investing activities:
Acquisition (disposition) of property and equipment (25,000) (135,000)
Advances to affiliate (110,000) 0
----------- -----------
Net cash provided by (used in) investing activities (135,000) (135,000)
----------- -----------
Cash flows from financing activities:
Proceeds from the issuance of common stock 1,055,000 2,001,000
Short-term borrowings (Notes 5 and 8) 957,000 2,773,000
Payment on short-term borrowings (Note 5) 0 (50,000)
----------- -----------
Net cash provided by (used in) financing activities 2,012,000 4,724,000
----------- -----------
Net increase (decrease) in cash and cash equivalents 4,000 (80,000)
Cash and cash equivalents, beginning of year 0 80,000
=========== ===========
Cash and cash equivalents, end of year $ 4,000 $ 0
=========== ===========
Supplemental cash flow information:
Interest payments $ 31,000 $ 11,000
=========== ===========
Income tax payments $ 3,000 $ 0
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
F - 5
<PAGE> 8
MYRIAD INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY
FOR FISCAL YEARS ENDED JULY 31, 1995 AND 1994
================================================================================
<TABLE>
<CAPTION>
ADDITIONAL
PREFERRED COMMON PAID-IN ACCUMULATED
STOCK STOCK CAPITAL DEFICIT TOTAL
============ ============ ============ ============ ============
<S> <C> <C> <C> <C> <C>
Balance July 31, 1993 $ 8,000 38,000 3,476,000 (8,828,000) $ (5,306,000)
Issuance of common stock 23,000 1,727,000 -- 1,750,000
Preferred dividends (150,000) (150,000)
Net loss (7,116,000) (7,116,000)
------------ ------------ ------------ ------------ ------------
Balance July 31, 1994 8,000 61,000 5,203,000 (16,094,000) (10,822,000)
Issuance of common stock 62,000 1,580,000 -- 1,642,000
Preferred dividends (150,000) (150,000)
Net loss (2,881,000) (2,881,000)
------------ ------------ ------------ ------------ ------------
Balance July 31, 1995 $ 8,000 123,000 6,783,000 (19,125,000) $(12,211,000)
============ ============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements
F - 6
<PAGE> 9
MYRIAD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1995 and 1994
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Myriad
International, Inc.("Myriad") and Subsidiaries (the "Company"). In
August 1994, the Company discontinued all operations related to ship
repairs. See Note 2 - Discontinued Operations. All significant
intercompany accounts and transactions have been eliminated in
consolidation.
Pacific Marine and Steel, Inc. ("PMSI"), a wholly-owned subsidiary of
Myriad, was established in September 1994. PMSI designs and builds
prefabricated steel framed buildings and other building systems for the
global marketplace, including homes (single and multiple dwellings),
schools, office buildings, and other public buildings. At July 31, 1995
approximately 27% of the common stock of PMSI was owned by shareholders
other than Myriad. This minority interest was acquired by Myriad in
December 1995. See Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- Minority Interest in Subsidiary and Note 10 - SUBSEQUENT EVENTS -
Pacific Marine and Steel, Inc.
Myriad Industries, Inc. - Peru S.A. ("Myriad - Peru"), a wholly-owned
subsidiary of Myriad was established in June 1995 to provide financing
for homes and other buildings to be built by PMSI.
Minority Interest in Subsidiary
Minority interest in subsidiary representing the minority shareholders'
proportionate share of interest in PMSI is classified with noncurrent
liabilities in the accompanying balance sheet. At July 31, 1995, Myriad
owned approximately 73% of the common stock of PMSI. The minority share
in the net loss of PMSI was $234,000 for the fiscal year ended July 31,
1995.
Basis of presentation
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 3,
the Company has incurred significant losses from operations, raising
substantial doubt about its ability to continue as a going concern. The
subsidiaries through which the Company conducted all of its operations
during 1994 are insolvent, have ceased operations and are reflected as
discontinued operations.
There is no assurance that the Company has or will be able to obtain
the working capital necessary to finance ongoing operations, or that
such operations will be profitable. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty. See Note 3 - Liquidity.
Cash and Cash Equivalents
Cash equivalents consist of highly liquid investments with an original
maturity of three months or less.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation and
amortization are provided on a straight-line basis over their estimated
useful lives, generally 3 to 30 years.
F - 7
<PAGE> 10
Deferred Compensation
Deferred compensation expense is recorded equal to the value of
unvested stock grants to employees. The deferred compensation is
amortized to expense as the restrictions on the stock lapse.
Income taxes
Beginning August 1, 1993, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 109," Accounting for Income Taxes."
Under this method, deferred tax assets and liabilities are recognized
based on differences between financial statements and tax basis of
assets and liabilities using presently enacted tax rates. The adoption
did not have a material effect on the financial statements presented
herein.
Net Loss Per Share
Net loss per share is calculated using the weighted average number of
shares of common stock and dilutive common stock equivalents
outstanding during the year. Common stock equivalents consist of stock
options and warrants.
Impact of Recently Issued Accounting Standards
In March 1995, the Financial Accounting Standards Board issued a new
statement titled "Accounting for Impairment of Long-Lived Assets." This
new standard is effective for years beginning after December 15, 1995,
and would change the Company's method of determining impairment of
long-lived assets. The Company does not believe that the adoption of
the new standard will have a material effect on the financial
statements.
In October, 1995, the Financial Accounting Standards Board issued a new
statement titled "Accounting for Stock-Based Compensation." The new
statement is effective for fiscal years beginning after December 15,
1995. The new standard encourages, but does not require, companies to
recognize compensation expense for grants of stock, stock options and
other equity instruments to employees based on fair value. Companies
that do not adopt the fair value accounting rules must disclose the
impact of adopting the new method in the notes to the financial
statements. Transactions in equity instruments with non employees for
goods or services must be accounted for on the fair value method. The
Company currently does not intend to adopt the fair value accounting
method prescribed and will only be subject to the footnote disclosure
requirements.
NOTE 2 - DISCONTINUED OPERATIONS
For the year ended July 31, 1994 the Company conducted all operating
activities through its wholly-owned subsidiaries: A&E Industries, Inc.
("A&E"), Advanced Test Systems, Inc ("ATS") and Remedquip International
Manufacturing, Inc. ("RIM), (collectively the "Former Subsidiaries").
A&E provided marine fabrication and repair services for both
governmental and commercial companies, usually as the prime contractor.
ATS provided marine electrical subcontractor services to A&E and other
ship repair prime contractors. Ship repair and marine electrical work
performed for the U.S. Navy were the dominant source of revenues for
A&E and ATS. RIM was a fabricator of environmental remediation
equipment.
Upon the completion of a major ship repair contract, A&E filed for
protection under Chapter 11 of the U.S. Bankruptcy Code on August 2,
1994 as result of a substantial loss at July 31, 1994, a deterioration
of working capital and pending or threatened vendor collection actions.
The United States Bankruptcy Court for the Southern District of
California, upon the request of A&E, converted the action to a Chapter
7 liquidation on November 30, 1994 and appointed a trustee. Although
ATS and RIM have not filed for protection under the U.S. Bankruptcy
Code, they are insolvent and ceased all operations concurrently with
A&E. Accordingly, the financial position and results of operations of
the Former Subsidiaries have been reported as discontinued operations
as of and for the periods ended July 31, 1995 and 1994.
F - 8
<PAGE> 11
At the time of the discontinuance of the operations of the Former
Subsidiaries, the liabilities of the Former Subsidiaries exceeded the
investment of Myriad in these companies. Included with discontinued
operations in 1994 is a gain of $3,454,000 arising from the exclusion
of liabilities in excess of Myriad's investment. This gain is net of an
accrual of $4,032,000 by Myriad to provide for anticipated expenses
related to the discontinued operations. These expenses related to
obligations of the Former Subsidiaries for which Myriad was legally
obligated, as well as obligations related to Former Subsidiary payroll
tax obligations. Upon the bankruptcy of A&E and the discontinuance of
ATS and RIM, the Former Subsidiaries had unpaid payroll taxes due to
the Internal Revenue Service ("IRS") and the State of California
Employment Development Department ("EDD") aggregating $ 1,136,000 and
$403,000, respectively. Although Myriad is not directly responsible for
the liabilities of the Former Subsidiaries, it is required to indemnify
officers of Myriad for expenses incurred during the performance of
their duties. As part of their Myriad corporate responsibilities,
officers of Myriad also served as officers of the Former Subsidiaries.
As officers of the Former Subsidiaries they have been personally
assessed for an amount equal to 100% of the unpaid taxes by the IRS and
the EDD. Myriad has accrued an amount equal to this assessment to
properly reflect its responsibility to indemnify the officers. To the
extent that these taxes are paid from the proceeds of the liquidation
of A&E, the assessment against the officers by the IRS and the EDD will
be reduced accordingly with a dollar-for-dollar reduction in Myriad's
indemnification obligations.
Net revenues and components of net assets of the Companies are as
follows:
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Net Revenues $ -0- $ 16,863,000
============ ============
Working Capital: None None
Noncurrent: None None
Total net assets of discontinued operations None None
</TABLE>
NOTE 3 - LIQUIDITY
As indicated in the accompanying financial statements, the Company
recognized net losses of $3,115,000 in 1995 and $7,116,000 in 1994 and
had a net stockholder's deficit of $12,445,000 at July 31, 1995. In
addition, as discussed in Note 2 - Discontinued Operations, the Company
recorded a loss on discontinued operations of $8,186,000 during 1994.
This amount includes a $4,032,000 ($3,513,000 at July 31, 1995)
provision for the payment of certain obligations of the Former
Subsidiaries for which the Company is legally obligated, either
directly as a result of guarantees or indirectly as a result of its
indemnification obligations to officers of the Company who served as
officers of one or more of the former subsidiaries. The loss on
discontinued operations and the expenses of starting up certain new
businesses has resulted in the Company having cash shortages and
delayed payment of certain obligations when they became due, including
certain federal and state payroll tax obligations of both the Company
and the Former Subsidiaries. This cash shortage has in turn resulted in
several creditors having obtained judgments against the Company and/or
its officers for non-payment of trade payables or loans made to the
Company. The Company is in the process of renegotiating the timing of
certain payments. Management believes that cash generated from its new
businesses will be adequate to meet the Company's debt and operating
requirements commencing during the second quarter of fiscal 1997; and
that it will be current on all of its obligations by the end of fiscal
1997. Until such time the Company continues to rely on funds provided
by the sale of equity securities and short-term loans to meet its
operating needs and to retire past due obligations.
F - 9
<PAGE> 12
NOTE 4 - ACCRUED EXPENSES
Accrued expenses are summarized as follows:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Reserve for loss on discontinued operations (Note 2) $3,513,000 $4,032,000
Accrued interest 1,361,000 369,000
Accrued payroll 211,000 47,000
Payroll tax liability in arrears 202,000 162,000
Misc.Expenses 17,000 - 0-
---------- ----------
$5,304,000 $4,610,000
========== ==========
</TABLE>
NOTE 5 - NOTES PAYABLE
Notes payable are summarized as follows:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Secured note payable, interest at 8%
interest and principal payable in
full March 4, 1994. (1)(2) $ 55,000 $ 55,000
Unsecured note payable, interest at 8%
due on demand. (1) 25,000 25,000
Unsecured note payable, interest at 10%
interest and principal payable in
full March 15, 1994. (1) 48,000 39,000
Unsecured note payable, interest at 8%
interest and principal payable
full February 11, 1994 - 0 - 10,000
Unsecured PMSI note payable, interest at 12%
interest and principal payable in
full August 23, 1995(1) 50,000 -0-
Unsecured PMSI note payable, interest at 12%
interest and principal payable in
full August 23, 1995(1) 50,000 -0-
Unsecured note payable, interest at 62%
interest and principal payable in
full August 24, 1994 (3) 125,000 250,000
Secured note payable, interest at 14%,
interest and principal payable in
full November 1, 1996 (4) 6,295,000 5,781,000
---------- ----------
$6,648,000 $6,160,000
========== ==========
</TABLE>
(1) Note is in default.
(2) Secured by 100% of the issued and outstanding stock of PMSI.
(3) $125,000 converted to equity August 24, 1994. See Note 7.
(4) Subject to terms of Capital Contribution and Debt Cancellation
Agreement dated June 26, 1996. See Note 10.
F - 10
<PAGE> 13
NOTE 6 - INCOME TAXES
Effective August 1, 1993, the Company adopted SFAS 109, "Accounting for
Income Taxes," which requires an asset and liability approach to
financial accounting and reporting for income taxes. Deferred income tax
assets and liabilities are computed annually for differences between the
financial statement and tax bases of assets and liabilities that result
in taxable or deductible amounts in the future based on enacted tax laws
and rates applicable to the periods in which the differences are
expected to affect taxable income. Valuation allowances are established
when necessary to reduce deferred tax assets to the amount expected to
be realized. Income tax expense is the tax payable or refundable for the
period plus or minus the change during the period in deferred tax assets
and liabilities. The cumulative effect of the accounting change of
adopting Statement 109 was not material.
At July 31, 1995 the Company had a net operating loss carryforward
("NOL") of approximately $15,645,000 which expire from 1999 to 2010.
Since the Company does not presently file a consolidated federal tax
return, this NOL may only be utilized by Myriad and may not be used to
offset the taxable income of its wholly-owned subsidiary PMSI. PMSI has
an NOL of $758,000 at July 31, 1995 which expires in 2010. Should there
be significant changes in ownership, these NOL's may be subject to
annual limitations.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
Subsidiary Liabilities
At the time of the discontinuance of A&E, ATS and RIM the liabilities of
these Former Subsidiaries exceeded the investment of Myriad in these
companies. Accordingly, the liabilities in excess of Myriad's investment
were excluded from consolidated operations and the related gain of
$3,454,000 included with discontinued operations. As discussed in Note 2
- Discontinued Operations, the Company has recorded the sum of
$4,032,000 at July 31, 1994 to accrue the liabilities of the Former
Subsidiaries for which Myriad is legally obligated, either directly or
as a result of its indemnification obligation to its officers. This
amount has been reduced to $3,513,000 at July 31, 1995.
Leases
The Company leases its San Diego, CA office facilities under an
operating lease through April 30, 1998; and PMSI-Peru leases its Lima
office facilities under an operating lease through May 2,1997 . Both of
these leases require the Company to pay certain taxes, maintenance and
other costs. Rent expense for operating leases was $ 129,000 and
$47,000 for the years ended July 31, 1995 and 1994, respectively.
In April 1995 PMSI entered into an operating lease for a facility in
Tongue Point, Oregon, which was to be the site of PMSI's small ship
design and manufacturing division. See Note 10 - Subsequent Events. This
lease required a monthly payment of $25,000 in addition to taxes,
maintenance and other costs. In February 1996 the lessor terminated the
lease for non-payment. PMSI is obligated to pay the lessor past due rent
($95,000) and other payments ("$10,000) of approximately $105,000 for
October 15, 1995 through February 14, 1996 plus interest of $1,184 per
month from March 15, 1996 until the past due rent of $95,000 has been
paid.
Litigation
The Company and/or its officers are parties to several lawsuits arising
out of the discontinuance of the businesses of the Former Subsidiaries
and the Company's resulting lack of liquidity. See Note 3 - Liquidity.
The Company has made provision on its balance sheet in the Reserve for
Loss on Discontinued Operations for all amounts which it believes may
become due and payable as a result of such lawsuits and is in the
process of negotiating settlements and payment terms.
F - 11
<PAGE> 14
The Company is also a defendant in an action for payment of a $250,000
note payable. The Company is disputing the amount due on the note and
has made provision on its balance sheet for the $125,000 and accrued
interest which it believes is properly due. See Note 5 - Notes Payable.
NOTE 8 - RELATED PARTY TRANSACTIONS
(a) During February and March of 1995 a shareholder, who is an independent
investor and who has no business, family or personal relationship with
the Company or any of its officers or directors, purchased, in a series
of arms-length transactions, 2,100,000 shares of Class A Common Stock at
an average price of $0.24 per share. The shareholder received warrants
to purchase 2,000,000 shares of Class A Common Stock as additional
consideration for his stock purchases. The warrants had an average
exercise price of $0.49 and were exercisable for two years from the date
of issuance.
During the period of May through July of 1995, the shareholder made
short-term loans to the Company in the principal amount of $650,000.
These loans were negotiated at arms-length and carried interest at
8 1/2%. $500,000 of this amount was repaid during this same period
through the exercise of 710,204 warrants at an exercise price of $0.49.
In addition, the shareholder received 10,094 shares of Class A stock
valued at $5,007 as payment for interest for loans outstanding during
this period. The shareholder also received 20,000 shares of Class A
Stock valued at $10,000 and 1,000,000 warrants as consideration for
making and converting loans during this period. The shareholder also
received a 1% profit participation from one of the Company's
joint-venture partners in the Company's Peruvian fish meal venture as
consideration for making a $150,000 loan, a 5% profit participation in
the Company's Peruvian finance subsidiary and a 5% profit participation
in the Company's Egyptian hotel/casino project for making a $500,000
loan, all during this period.
Between August 1995 and July 1996 the shareholder made additional
short-term loans to the Company in the principal amount of $116,500. As
of July 31, 1996 $109,000 had been repaid, leaving a balance of $7,500.
Of this amount $80,000 was repaid through proceeds made available by the
conversion to 160,000 shares of Class A Common Stock at $0.50 per share.
During this period the shareholder extended the payment dates of these
loans on numerous occasions. In consideration of the making of the loans
and the granting of such extensions the shareholder received 57,147
shares of Class A Common Stock valued at $30,182 and 472,147 warrants.
As additional consideration for the loans and loan extensions the
shareholder received profit participation of from 1/2% to 20% in various
projects and joint ventures of the Company. In January 1996 the
shareholder and the Company entered into an agreement whereby the
shareholder gave up or substantially reduced such profit participation
in return for 1,500,000 warrants, 500,000 exercisable at $1.00 for two
years, 500,000 exercisable at $1.50 for two years and 500,000
exercisable at $2.00 for two years. The shareholder retained a 5% profit
participation in each of the Company's South Africa and Venezuela
housing projects, neither of which are under active development at this
time, in addition to the 5% profit participation in the Company's
Peruvian finance subsidiary.
(b) During the fiscal year ending July 31, 1995 a shareholder of the Company
(who also served as a Director from December 1, 1995 through April 4,
1996) and a partnership of which he is the managing partner, received an
aggregate of 150,000 shares of Class A Common Stock, valued at $37,500
and 243,000 common stock purchase warrants exercisable at prices ranging
from $0.13 to $0.49, having a nominal value, for financial and investor
relations consulting services. During the nine months ending April 30,
1996 this shareholder and his related partnership were issued an
additional 65,672 shares of common stock, valued at $32,836 and 300,000
common stock purchase warrants exercisable at a price of $0.45, having a
nominal value, for financial and investor relations consulting services.
This shareholder also received 150,000 shares of common stock through
the PMSI exchange offer discussed in Note 10.
(c) During the nine months ending April 30, 1996 a shareholder received
1,643,810 common stock purchase warrants exercisable at a price of $0.55
for financial consulting services.
F - 12
<PAGE> 15
(d) During the fiscal year ended July 31, 1995 a corporation owned by
members of the immediate family of a shareholder, officer and director
was issued 500,000 shares of PMSI for making a $30,000 loan to PMSI. In
January 1996 these shares were exchanged for an equal number of shares
of the Company's common stock as discussed in Note 10.
(e) Effective January 1, 1996, the Company entered into an employment
agreement with Jerome O. Crawford ("1996 Agreement") pursuant to which
Mr. Crawford became Chairman and Chief Executive Officer of the Company
for the five-year period ending on December 31, 2000. The 1996 Agreement
replaced the employment agreement between the Company and Mr. Crawford
dated September 1, 1992, as amended on August 18, 1994 (the "1992
Agreement") pursuant to which Mr. Crawford served as President and Chief
Executive Officer of the Company.
The 1996 Agreement provides for annual compensation of $250,000 with
annual increases to be determined by the board of directors. The
increase in annual compensation from $105,000 in the 1992 Agreement will
not take effect until the board of directors determines that the Company
"has adequate cash flow" to pay the increased amount. The 1996 Agreement
also provides for an annual bonus to be determined by the Company's
board of directors based on profitability, a $2000 per month housing and
commuter allowance, and a $2,000,000 life insurance policy with the
beneficiary to be designated by Mr. Crawford.
The 1996 Agreement grants Mr. Crawford 1,000,000 shares of the Company's
Class A Common Stock, which will vest on March 31, 1996, and an award of
2,000,000 shares of the Company's Class B Common Stock, 1,500,000 shares
of which are subject to repurchase by the Company at nominal cost in
equal annual installments of 500,000 shares between December 31, 1996
and December 31, 1998 in the event the 1996 Agreement is wrongfully
terminated by Mr. Crawford or terminated for cause by the Company. In
addition 350,000 shares of Class B Common Stock awarded to Mr. Crawford
under the 1992 Agreement is subject to repurchase at a nominal cost on
the same basis as under the 1996 Agreement at the rate of 175,000 shares
per year between August 18, 1997 and August 18, 1998.
The 1996 Agreement provides that all shares of Class B Common Stock held
by Mr. Crawford shall not be sold, assigned, hypothecated, or otherwise
encumbered or transferred during the lifetime of Mr. Crawford except to
his spouse, children or grandchildren or to another registered holder of
Class B Common Stock and that the shares of Class B Common Stock held by
Mr. Crawford shall not be converted into shares of Class A Common Stock
except by Mr. Crawford or a permitted transferee. At January 31, 1996
the only holders of Class B Common Stock were Mr. Crawford and
Mr. Parks.
The 1996 Agreement grants to Mr. Crawford an option to purchase
2,500,000 shares of Class B Common Stock at a price of $0.25 per share
for a five year period. The option vests 1,000,000 shares immediately
with the balance vesting in equal annual installments of 375,000 from
January 1, 1997 to January 1, 2000.
Mr. Crawford has not received payment of $61,000 of the compensation
payable to him for the nine months ending April 30, 1996.
(f) Effective January 1, 1996, the Company entered into an employment
agreement with Victor L. Parks ("1996 Agreement") pursuant to which
Mr.Park's will serve as Senior Vice President for the five year period
ending on December 31, 2000. The 1996 Agreement replaced the employment
agreement between the Company and Mr. Parks dated August 18, 1994
(the"1994 Agreement") pursuant to which Mr. Parks served as Senior Vice
President.
The 1996 Agreement provides for annual compensation of $125,000 with
annual increases to be determined by the board of directors. The
increase in annual compensation from $75,000 in the 1994 Agreement will
not take effect until the board of directors determines that the Company
"has adequate cash flow" to pay the increased amount. The 1996 Agreement
also provides for a one-time signing bonus of $20,000 and an annual
bonus to be determined by the Company's board of directors based on
profitability.
F - 13
<PAGE> 16
The 1996 Agreement grants Mr. Parks 500,000 shares of the Company's
Class A Common Stock, which vests immediately and an award of 600,000
shares of the Company's Class B Common Stock, 450,000 shares of which
are subject to repurchase by the Company at nominal cost in equal annual
installments of 150,000 shares between December 31, 1996 and
December 31, 1998 in the event the 1996 Agreement is wrongfully
terminated by Mr. Parks or terminated for cause by the Company. In
addition 251,250 shares of Class B Common Stock awarded to Mr.Parks
under the 1994 Agreement is subject to repurchase at a nominal cost on
the same basis as under the 1996 Agreement at the rate of 83,750 shares
per year between August 18, 1996 and August 18, 1998.
The 1996 Agreement provides that all shares of Class B Common Stock held
by Mr. Parks shall not be sold, assigned, hypothecated, or otherwise
encumbered or transferred during the lifetime of Mr. Parks except to his
spouse, children or grandchildren or to another registered holder of
Class B Common Stock and that the shares of Class B Common Stock held by
Mr. Parks shall not be converted into shares of Class A Common Stock
except by Mr. Parks or a permitted transferee. At January 31, 1996 the
only holders of Class B Common Stock were Mr. Parks and Mr. Crawford.
The 1996 Agreement grants to Mr. Parks an option to purchase 1,000,000
shares of Class A Common Stock at a price of $0.25 per share for a five
year period. The option vests 200,000 shares immediately with the
balance vesting in equal annual installments of 200,000 shares from
January 1, 1997 to January 1, 2000.
Mr. Parks has not received payment of $38,000 and $25,000 of the
compensation payable to him for the fiscal year ended July 31, 1995 and
the nine months ending April 30, 1966, respectively.
(g) Effective January 1, 1996, the Company entered into an
employment agreement with Sharon Snyder ("1996 Agreement") pursuant to
which Ms. Snyder will serve as Senior Vice President and Treasurer for
the five year period ending on December 31, 2000. The 1996 Agreement
replaced the employment agreement between the Company and Ms. Snyder
dated August 18, 1994 (the "1994 Agreement") pursuant to which
Ms. Snyder served as Senior Vice President and Chief Financial Officer.
The 1996 Agreement provides for annual compensation of $100,000 with
annual increases to be determined by the board of directors. The
increase in annual compensation from $85,000 in the 1992 Agreement will
not take effect until the board of directors determines that the Company
"has adequate cash flow" to pay the increased amount. The 1996 Agreement
also provides for a one-time signing bonus of $20,000 and an annual
bonus to be determined by the Company's board of directors based on
profitability.
The 1996 Agreement grants Ms. Snyder 200,000 shares of the Company's
Class A Common Stock, which vests immediately and an option to purchase
500,000 shares of Class A Common Stock at a price of $0.25 per share for
a five year period. The option vests 100,000 shares immediately with the
balance vesting in equal annual installments of 100,000 shares from
January 1, 1997 to January 1, 2000.
Ms. Snyder has not received payment of $59,000 of the compensation
payable to her for the nine months ending April 30, 1996.
(h) Effective January 1, 1996, the Company entered into an employment
agreement with Michael Nalu ("1996 Agreement") pursuant to which
Mr. Nalu will serve as a Vice President for the five year period ending
on December 31, 2000.
The 1996 Agreement provides for annual compensation of $100,000 with
annual increases to be determined by the board of directors.
The 1996 Agreement grants Mr. Nalu 150,000 shares of the Company's Class
A Common Stock, which vests immediately and an option to purchase
300,000 shares of Class A Common Stock at a price of $0.25 per share for
a five year period. The option vests 100,000 shares immediately with the
balance vesting in equal annual installments of 50,000 shares from
January 1, 1997 to January 1, 2000.
F - 14
<PAGE> 17
Mr. Nalu has not received payment of $7,900 and $28,000 of the
compensation payable to him for the fiscal year ended July 31, 1995 and
the nine months ending April 30, 1996, respectively.
(i) In June 1996 the Company renegotiated a loan with Conversion Industries
Inc., a shareholder. See Note 10 - Subsequent Events.
(j) The Company is obligated to indemnify certain of its officers for
payroll tax and other liabilities which they have incurred as a result
of the discontinuance of the Former Subsidiaries. See Note 2 -
Discontinued Operations; Note 3 - Liquidity and Note 7 - Commitments
and Contingencies.
NOTE 9 - CAPITAL STOCK
CAPITAL STOCK
The authorized capital stock of the Company consists of 105,000,000
shares, consisting of (i) 75,000,000 shares of Class A Common Stock,
$0.01 par value; (ii) 10,000,000 shares of Class B Common Stock, $0.01
par value; and (iii) 20,000,000 shares of Preferred Stock, $0.01 par
value.
CLASS A COMMON STOCK
The Class A Common Stock and Class B Common Stock are equal in all
respects except that the Class A Common Stock has 1/10 vote per share
(as compared to one vote per share for the Class B Common Stock) and the
Holders of the Class A Common Stock are entitled to elect 25% of the
members of the Company's Board of Directors and shall have exclusive
authority to remove such Class A Directors (as compared to the right of
the holders of Class B Common Stock to elect and remove 75% of the
Company's Board of Directors). Such holders are not entitled to vote
cumulatively for the election of directors. Holders of Class A Common
Stock have no redemption, conversion, preemptive or other subscription
rights. In the event of the liquidation, dissolution or winding up of
the Company, holders of Class A Common Stock are entitled to share
ratably in all of the assets of the Company remaining, if any, after
satisfaction of the debts and liabilities of the Company and the
preferential rights of the holders of the Series 1 and Series 2
Preferred Stock and any other series of Preferred Stock then
outstanding. The outstanding shares of Class A Common Stock are, validly
issued, fully paid and non-assessable.
Holders of Class A Common Stock are entitled to receive dividends when
and as declared by the Board of Directors of the Company out of funds
legally available therefore, only after payment of, or provision for,
full dividends (on a cumulative basis, if applicable) on all outstanding
shares of Series 1 Preferred Stock and any other series of Preferred
Stock. The Company has not paid any dividends since its inception and
does not anticipate paying such dividends in the foreseeable future.
CLASS B COMMON STOCK
Holders of Class B Common Stock have one vote for each share owned (as
compared to 1/10 of a vote for each share of Class A Common Stock).
Holders of the Class B Common Stock are entitled to elect 75% of the
members of the Company's Board of Directors and shall have exclusive
authority to remove such Class B Directors. Such holders are not
entitled to vote cumulatively for the election of directors. Holders of
Class B Common Stock have no redemption, preemptive or other
subscription rights. Holder of Class B Common Stock may convert their
shareholdings into an equal number of shares of Class A Common Stock. In
the event of the liquidation, dissolution or winding up of the Company,
holders of Class B Common Stock are entitled to share ratably with the
holders of the Class A Common Stock in all of the assets of the Company
remaining, if any, after satisfaction of the debts and liabilities of
the Company and the preferential rights of the holders of the Series 1
and Series 2 Preferred Stock and any other series of Preferred Stock
then outstanding. The outstanding shares of Class B Common Stock are
validly issued, fully paid and non-assessable.
Holders of Class B Common Stock are entitled to receive dividends when
and as declared by the Board of Directors of the Company out of funds
legally available therefore, only after payment of, or provision for,
full
F - 15
<PAGE> 18
dividends (on a cumulative basis, if applicable) on all outstanding
shares of Series 1 Preferred Stock and any other series of Preferred
Stock. The Company has not paid any dividends since its inception and
does not anticipate paying such dividends in the foreseeable future.
Shares of Class B Common Stock are convertible, at the option of the
holders, into shares of Class A Common Stock, on a one-for-one basis.
PREFERRED STOCK
The Company is authorized to issue 20,000,000 shares of Preferred Stock,
$0.01 par value. The Board of Directors of the Company, without
obtaining stockholder approval, may issue shares of the Preferred Stock
with such preferences, voting rights or conversion rights which could
materially adversely affect the voting power of the holders of the Class
A and Class B Common Stock. The issuance of Preferred Stock could also
decrease the amount of earnings and assets available for distribution to
holders of Class A Common Stock and Class B Common Stock. In addition,
the issuance of Preferred Stock may have the effect of delaying,
deferring or preventing a change in control of the Company.
The Company has two series of Preferred Stock authorized and
outstanding: Series 1 Nonvoting Cumulative Convertible Preferred Stock
("Series 1 Preferred Stock") and Series 2 Nonvoting Cumulative
Convertible Preferred Stock ("Series 2 Preferred Stock").
SERIES 1 PREFERRED STOCK
At July 31, 1995 and July 31, 1994 the Company had outstanding 292,000
shares of Series 1 Preferred Stock. These shares were issued in
September 1992 in exchange for $1,750,000 of debt and are convertible at
the option of the holder at the rate of $6.00 per share into 292,000
shares of Myriad Class A Common Stock. In April 1996 8,333 shares of
Series 1 Preferred Stock were converted into 208,333 shares of Class A
Common Stock at an agreed value of $50,000 and the holders of the Series
1 Preferred Stock agreed that their right to receive a dividend would
terminate 10 days following notice that the closing price of Myriad's
Class A Common Stock has been at least $6.00 or more for 30 consecutive
trading days.The Series 1 Preferred Stock bears a coupon of 7% per annum
and has a liquidation preference over the Class A and Class B Common
Stock.
The Series 1 Preferred Stock is non-voting unless there is a default in
the payment of dividends or principal. In the event of such a default
(which exists at the present time) the holders of Series 1 Preferred
stock are entitled to 208,333 Class A votes.
SERIES 2 PREFERRED STOCK
The Company has outstanding 500,000 shares of Series 2 Preferred Stock.
These shares were issued in January 1993 in exchange for $500,000 of
debt. These shares are convertible at the option of the holder in
1,000,000 shares of Class A Common Stock and may be redeemed at the
option of the Company for $1.00 per share, plus any accrued but unpaid
dividends. The Series 2 Preferred Stock bears a coupon of 6% per annum
and has a liquidation preference over the Class A and Class B Common
Stock.
The Series 2 Preferred Stock is non-voting unless there is a default in
the payment of dividends or principal. In the event of such a default
(which exists at the present time) the holders of Series 2 Preferred
stock are entitled to 1,000,000 Class A votes.
F - 16
<PAGE> 19
QUALIFIED STOCK OPTIONS
Under the Company's 1992 Stock Option Plan (the "Plan"), an aggregate of
500,000 common shares is reserved for issuance to officers, directors
and consultants. On January 1, 1996 the Board of Directors increased the
shares reserved for issuance to 2,000,000, subject to shareholder
approval. Under the Plan, the option price is equal to the fair market
value at the date of grant. Unexercised options expire ten years from
the date of grant and become exercisable at such dates as are determined
by the Compensation Committee of the Board of Directors.
A summary of stock option activity is as follows:
<TABLE>
<CAPTION>
Number of Per
Options Share
------- -----
<S> <C> <C>
Outstanding July 31, 1993 110,000 $ 0.75
Granted 30,000 $ 1.00
Cancelled 0
-------
Outstanding July 31, 1994 140,000 $0.75-$1.00
Granted 590,000 $ 0.13
Cancelled 0
-------
Outstanding July 31, 1995 730,000 $0.13-$1.00
=======
</TABLE>
At July 31, 1995, 527,000 options were exercisable to purchase shares
at an price of $0.13 to $1.00 per share. As of July 31, 1996, 465,000
additional options were issued at a exercise prices of $0.25 to $0.50
per share; and 105,000 options had been exercised or cancelled.
NON QUALIFIED STOCK OPTIONS
Class A Common Stock
There are no non qualified Class A Common Stock options outstanding at
July 31, 1995.
On January 1, 1996, in conjunction with executive officer employment
agreements (see Note 8, Related Party Transactions) 1,800,000 non
qualified Class A Common Stock options were issued to three executives.
The options are exercisable at $0.25 per share and expire in five
years. 400,000 of the options are immediately vested with the balance
vesting in equal annual installments of 350,000 shares.
Class B Common Stock
There are no non qualified Class B Common Stock options outstanding at
July 31, 1995.
On January 1, 1996, in conjunction with executive officer employment
agreements (see Note 8, Related Party Transactions) 2,500,000 non
qualified Class B Common Stock options were issued to an executive. The
options are exercisable at $0.25 per share and expire in five years.
1,000,000 of the options are immediately vested with the balance
vesting in equal annual installments of 375,000 shares.
F - 17
<PAGE> 20
WARRANTS
The Company has issued warrants to purchase common stock in connection
with private placements of equity securities, loans and to certain
consultants of the Company. These warrants generally have terms ranging
from two to five years, and are fully vested. All warrants outstanding
at July 31, 1996 are exercisable between 1996 and 2001.
<TABLE>
<CAPTION>
SHARES EXERCISE
------ --------
PRICE
-----
<S> <C> <C>
Outstanding at 7/31/92 0
Granted 8/1/92 to 7/31/93 215,000 $0.50 -$1.00
Outstanding at 7/31/93 215,000 $0.50 -$1.00
Exercisable at 7/31/93 215,000 $0.50 -$1.00
Granted 8/1/93 to 7/31/94 780,000 $1.10
Exercised 5,000 $1.10
Cancelled 25,000 $1.10
Outstanding at 7/31/94 965,000 $0.50 -$1.10
Exercisable at 7/31/94 965,000 $0.50 -$1.10
Granted 8/1/94 to 7/31/95 2,468,000 $0.37 -$1.10
Exercised 514,243 $0.49
Cancelled 20,000 $0.50
Outstanding at 7/31/95 2,898,757 $0.37 -$1.10
Exercisable at 7/31/95 2,898,757 $0.37 -$1.10
Granted 8/1/95 to 7/31/96 17,904,206 $0.39 - $2.00
Cancelled 80,000 $0.50
Outstanding at 7/31/96 20,772,963 $0.37 -$2.00
Exercisable at 7/31/96 20,772,963 $0.37 -$2.00
</TABLE>
F - 18
<PAGE> 21
NOTE 10 - SUBSEQUENT EVENTS
Conversion Industries Inc. Loan
On June 26, 1996 the Company entered into an agreement with Conversion
regarding repayment of their loan of $6,295,000 and accrued interest of
$1,921,000. In consideration of (i) a cash payment of $750,000, and
(ii) the assignment of all rights, title and interest that Myriad and
ATS have in the A&E bankruptcy, Conversion has agreed to release Myriad
of all liability with respect to the loan agreement and all amounts
owing thereunder. Pursuant to an amendment to the agreement dated
August 14, 1996 the cash payment of $750,000 is payable in three
$250,000 installments due on or before September 3, 1996, October 1,
1996 and November 1, 1996. Conversion is required to submit the
agreement to Bankruptcy Court for approval as soon as reasonably
practical. The forgiveness of debt of $7,466,000 will be treated as
income for financial statement purposes and as additional paid-in
capital for tax purposes. As of September 20, 1996 the Company has not
made the initial payment of $250,000. The following pro forma
illustrates the effect of this agreement as if it were effective July
31, 1995:
<TABLE>
<CAPTION>
As Reported Pro Forma
----------- ---------
<S> <C> <C>
Total Assets $ 569,000 $ 569,000
Total Liabilities $ 12,469,000 $ 4,915,000
Shareholders' Deficiency $(11,901,000) $ (4,347,000)
</TABLE>
Pacific Marine and Steel, Inc
In September 1994 the Company formed Pacific Marine and Steel, Inc., a
Delaware corporation ("PMSI"). The Company was issued 5,000,000 shares of
PMSI common stock. From September 1994 to June 1995 an additional
1,874,302 shares of PMSI common stock were issued for cash and as
consideration for services rendered by affiliates of the Company,
including certain officers and directors. See Note 8 Related Party
Transactions.
From September 1994 to approximately January 1996 the Company, through
PMSI, attempted to start a small ship design and manufacturing business,
but decided to abandon this effort and focus the Company's resources and
efforts primarily on its construction division and Peruvian fish meal
joint venture.
Pacific Marine and Steel, Inc - Peru S.A. ("PMSI - Peru"), a wholly-owned
subsidiary of PMSI, is a Peru based construction company established in
September 1995 to initially construct steel framed buildings and single
family housing in Peru, and other international projects.
In December 1995 the Company acquired all the outstanding shares of PMSI
common stock through the issuance of 1,874,302 shares of its Class A
Common Stock pursuant to a one-for-one exchange offer. See
Note 8 - Related Party Transactions.
In August 1996 PMSI's wholly-owned subsidiary PMSI - Peru commenced a
project to construct 1000 houses in Piura, Peru. PMSI-Peru has completed
two model homes and a sales office and has started accepting applications
for mortgage financing from prospective buyers. The houses are in the
$35,000 to $45,000 price range. PMSI-Peru is presently negotiating
construction financing with several banks and expects to commence
construction of the initial 200 homes during the second quarter of fiscal
1997.
Amendment to Certificate of Incorporation
In December 1995, Myriad amended its Certificate of Incorporation to: (i)
change the name of the Company to "Myriad International, Inc.", (ii)
increase the authorized number of shares to 105,000,000, consisting of
75,000 shares of Class A Common Stock, 10,000,000 shares of Class B
Common Stock and 20,000,000 shares of Preferred Stock; and (iii) clarify
certain provisions relating to the voting rights of the Class B Common
Stock.
F - 19
<PAGE> 22
MYRIAD INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
APRIL 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS 1996 1995
-------- --------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 0 $ 1,000
Deposits and prepaid expenses 19,000 49,000
-------- --------
Total current assets 19,000 50,000
Construction in progress 238,000 0
Property, Plant and Equipment, net of
accumulated depreciation of $56,000
and $20,000 for April 30, 1996 and
April 30, 1995 respectively 66,000 98,000
Goodwill, net of accumulated amortization
of $33,000 for April 30, 1996 405,000 0
Organization costs, Net of accumulated
amortization of $1,000 for April 30, 1995 -- 18,000
Deferred compensation 614,000 212,000
Other assets 32,000 0
-------- --------
$1,374,000 $378,000
======== ========
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements
F-20
<PAGE> 23
MYRIAD INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
APRIL 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
LIABILITIES
Current Liabilities:
Accounts payable $ 554,000 $ 302,000
Dividends payable 388,000 237,000
Other accrued expenses 6,341,000 4,742,000
Notes payable 6,704,000 6,724,000
----------- -----------
Total current liabilities 13,987,000 12,005,000
Minority interest in subsidiary's net loss 0 102,000
----------- -----------
Total Liabilities 13,987,000 12,107,000
STOCKHOLDERS' DEFICIENCY:
Convertible Preferred Stock - $0.01 par value, 20,000,000
shares authorized:
7% Convertible Series 1 Preferred Stock, 284,000 and 292,000
shares issued and outstanding at April 30, 1996 and
April 30, 1995, respectively 3,000 3,000
6% Convertible Series 2 Preferred Stock, 500,000
shares issued and outstanding 5,000 5,000
Class A Common Stock - $0.01 par value; 75,000,000 shares authorized;
19,574,000 and 8,256,000 shares issued and outstanding on April 30,
1996 and 1995, respectively 196,000 82,000
Class B Common Stock - $0.01 par value; 10,000,000
shares authorized; 3,701,000 and 1,700,000 issued and
outstanding on April 30, 1996 and April 30, 1995, respectively 37,000 17,000
Additional paid-in capital 9,724,000 6,009,000
Accumulated deficit (22,578,000) (17,845,000)
----------- -----------
Total stockholders' deficiency 12,613,000 11,729,000
----------- -----------
$ 1,374,000 $ 378,000
=========== ===========
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements
F-21
<PAGE> 24
MYRIAD INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED APRIL 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
APRIL 30,
-----------------------------
1996 1995
----------- -----------
<S> <C> <C>
Revenues $ 0 $ 0
Expenses:
Operating 0 0
General and administrative 2,644,000 1,090,000
Interest 734,000 776,000
----------- ------------
Net loss from continuing operations before
loss from discontinued operations, and
minority interest (3,378,000) (1,866,000)
Discontinued operations (Note 3) 0 0
----------- -----------
Net loss before minority interest $(3,378,000) $(1,866,000)
Minority interest in subsidiary's net loss 0 115,000
----------- -----------
$(3,378,000) $(1,751,000)
=========== ===========
Net loss per share:
Loss from continuing operations before
discontinued operations $ (0.19) $ (0.21)
Discontinued operations 0.00 0
----------- -----------
Net loss per share $ (0.19) $ (0.21)
=========== ===========
Weighted average number of
common shares outstanding 18,031,000 8,286,000
=========== ===========
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements
F-22
<PAGE> 25
MYRIAD INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED APRIL 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
APRIL 30,
------------------------------
1996 1995
----------- -----------
<S> <C> <C>
Net cash used in operating activities:
Net loss $(3,378,000) $(1,751,000)
Adjustments to reconcile net loss to cash (used in) operating activities:
Depreciation & Amortization 52,000 18,000
Provision for doubtful accounts 59,000 0
Issuance of common stock for services rendered 232,000 275,000
Deferred compensation vesting 222,000 83,000
Preferred stock cancellation (31,000) 0
Minority interest in subsidiary's net loss (Note 2) 0 (115,000)
Discontinued operations (Note 3) 0 0
Changes in net operating assets and liabilities:
Deposits and prepaid expenses 43,000 (48,000)
Other assets (9,000) 0
Accounts payable 257,000 109,000
Other accrued expenses 1,037,000 132,000
----------- -----------
Net cash provided by (used in) operating activities (1,516,000) 1,297,000
----------- -----------
Cash flows from investing activities:
Acquisition (disposition) of property and equipment (13,000) 0
Advances to affiliates (59,000) 0
Construction activity (238,000) 0
----------- -----------
Net cash provided by (used in) investing activities (310,000) 0
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of common stock 1,771,000 609,000
Short-term borrowings 106,000 717,000
Payment of short-term borrowings (55,000) (28,000)
----------- -----------
Net cash provided by (used in) financing activities 1,822,000 1,298,000
----------- -----------
Net increase (decrease) in cash and cash equivalents (4,000) 1,000
Cash and cash equivalents, beginning of year 4,000 0
----------- -----------
Cash and cash equivalents, end of period $ 0 $ 1,000
=========== ===========
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements
F-23
<PAGE> 26
MYRIAD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED APRIL 30, 1996 AND 1995
The accompanying unaudited consolidated financial statements have been prepared
by Myriad International, Inc ("Myriad") and include the accounts of Myriad and
Subsidiaries (the "Company"); and include all adjustments which are, in the
opinion of management, necessary for a fair presentation of financial results
for the nine months ended April 30, 1996 and 1995, pursuant to the rules and
regulations of the Securities and Exchange Commission ("SEC"). All adjustments
and provisions included in these statements are of a normal and recurring
nature. For further information regarding the Company's accounting policies,
refer to the Consolidated Financial Statements for the years ended July 31, 1995
and 1994 and related notes included in the Company's Form 10SB filed with the
SEC on or about September 30, 1996.
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Myriad
International, Inc.("Myriad") and Subsidiaries (the "Company"). In
August 1994, the Company discontinued all operations related to ship
repairs. See Note 3 - Discontinued Operations. All significant
intercompany accounts and transactions have been eliminated in
consolidation.
Basis of presentation
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 4,
the Company has incurred significant losses from operations, raising
substantial doubt about its ability to continue as a going concern. The
subsidiaries through which the Company conducted all of its operations
during 1994 are insolvent, have ceased operations and are reflected as
discontinued operations.
There is no assurance that the Company has or will be able to obtain
the working capital necessary to finance ongoing operations, or that
such operations will be profitable. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty. See Note 4 - Liquidity.
NOTE 2 - ACQUISITION OF MINORITY INTEREST IN PACIFIC MARINE AND STEEL, INC.
In September 1994 the Company formed Pacific Marine and Steel, Inc., a
Delaware corporation ("PMSI"). The Company was issued 5,000,000 shares
of PMSI common stock. From September 1994 to June 1995 an additional
1,874,302 shares of PMSI common stock were issued for cash and as
consideration for services rendered by affiliates of the Company,
including certain officers and directors.
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<PAGE> 27
In December 1995 the Company acquired all the outstanding shares of
PMSI common stock through the issuance of 1,749,302 shares of its Class
A Common Stock pursuant to a one-for-one exchange offer. The 1,749,302
shares of Class A Common Stock issued in this transaction were valued
at $0.25 per share, the estimated fair market value of such shares. The
aggregate consideration of $437,326 was booked as goodwill because it
exceeds the fair value of PMSI's assets and is being amortized over
five years, commencing January 1, 1996. Amortization for the nine
months ended April 30, 1996 was $32,799.
NOTE 3- DISCONTINUED OPERATIONS
For the year ended July 31, 1994 the Company conducted all operating
activities through its wholly-owned subsidiaries: A&E Industries, Inc.
("A&E"), Advanced Test Systems, Inc ("ATS") and Remedquip International
Manufacturing, Inc. ("RIM), (collectively the "Former Subsidiaries").
A&E provided marine fabrication and repair services for both
governmental and commercial companies, usually as the prime contractor.
ATS provided marine electrical subcontractor services to A&E and other
ship repair prime contractors. Ship repair and marine electrical work
performed for the U.S. Navy were the dominant source of revenues for
A&E and ATS. RIM was a fabricator of environmental remediation
equipment.
Upon the completion of a major ship repair contract, A&E filed for
protection under Chapter 11 of the U.S. Bankruptcy Code on August 2,
1994 as result of a substantial loss at July 31, 1994, a deterioration
of working capital and pending or threatened vendor collection actions.
The United States Bankruptcy Court for the Southern District of
California, upon the request of A&E, converted the action to a
Chapter 7 liquidation on November 30, 1994 and appointed a trustee.
Although ATS and RIM have not filed for protection under the U.S.
Bankruptcy Code, they are insolvent and ceased all operations
concurrently with A&E. Accordingly, the financial position and results
of operations of the Former Subsidiaries have been reported as
discontinued operations as of and for the fiscal years ended July 31,
1995 and 1994 and the nine months ended April 30, 1995 and 1996.
At the time of the discontinuance of the operations of the Former
Subsidiaries, the liabilities of the Former Subsidiaries exceeded the
investment of Myriad in these companies. Included with discontinued
operations in 1994 is a gain of $3,454,000 arising from the exclusion
of liabilities in excess of Myriad's investment. This gain is net of an
accrual of $4,032,000 by Myriad to provide for anticipated expenses
related to the discontinued operations. These expenses related to
obligations of the Former Subsidiaries for which Myriad was legally
obligated, as well as obligations related to Former Subsidiary payroll
tax obligations. Upon the bankruptcy of A&E and the discontinuance of
ATS and RIM, the Former Subsidiaries had unpaid payroll taxes due to
the Internal Revenue Service ("IRS") and the State of California
Employment Development Department ("EDD") aggregating $ 1,136,000 and
$403,000, respectively. Although Myriad is not directly responsible for
the liabilities of the Former Subsidiaries, it is required to indemnify
officers of Myriad for expenses incurred during the performance of
their duties. As part of their Myriad corporate responsibilities,
officers of Myriad also served as officers of the Former Subsidiaries.
As officers of the Former Subsidiaries they have been personally
assessed for an amount equal to 100% of the unpaid taxes by the IRS and
the EDD. Myriad has accrued an amount equal to this assessment to
properly reflect its responsibility to indemnify the officers. To the
extent that these taxes are paid from the proceeds of the liquidation
of A&E, the assessment against the officers by the IRS and the EDD will
be reduced accordingly with a dollar-for-dollar reduction in Myriad's
indemnification obligations. At April 30, 1996 and April 30, 1995 there
were no revenues, working capital or assets of the Former Subsidiaries.
NOTE 4- LIQUIDITY
The Company recognized net losses of $3,378,000 for the nine months
ended April 30, 1996; $2,881,000 and $7,116,000 for the fiscal years
ended July 31, 1995 and 1994, respectively, and had a net stockholder's
deficit of $12,613,000 at April 30, 1996, As discussed in Note 3 -
Discontinued Operations, the Company recorded a provision of $4,032,000
at July 31, 1994 for the payment of certain obligations of the Former
Subsidiaries for which the Company is legally obligated, either
directly as a result of guarantees or indirectly as a result of its
F-25
<PAGE> 28
indemnification obligations to officers of the Company who served as
officers of one or more of the former subsidiaries. At April 30, 1996
this provision had been reduced to $3,451,335.
The loss on discontinued operations and the expenses of starting up
certain new businesses has resulted in the Company having cash
shortages and delayed payment of certain obligations when they became
due, including certain federal and state payroll tax obligations of
both the Company and the Former Subsidiaries. This cash shortage has in
turn resulted in several creditors having obtained judgments against
the Company and/or its officers for non-payment of trade payables or
loans made to the Company. The Company is in the process of
renegotiating the timing of certain payments. Management believes that
cash generated from its new businesses will be adequate to meet the
Company's debt and operating requirements commencing during the second
quarter of fiscal 1997; and that it will be current on all of its
obligations by the end of fiscal 1997. Until such time the Company
continues to rely on funds provided by the sale of equity securities
and short-term loans to meet its operating needs and to retire past due
obligations.
NOTE 5 - LOSS PER COMMON SHARE
Net loss per common share is computed using 18,031,000 and 8,286,000
weighted average shares of common stock for the nine months ended
April 30, 1996 and 1995, respectively. Common equivalent shares from
stock options and warrants are excluded from the computation as their
effect is anti-dilutive.
NOTE 6 - RELATED PARTY TRANSACTIONS
(a) Between August 1995 and July 1996 a shareholder made short-term loans
to the Company in the principal amount of $116,500. As of July 31, 1996
$109,000 had been repaid, leaving a balance of $7,500. Of this amount
$80,000 was repaid through proceeds made available by the conversion to
160,000 shares of Class A Common Stock at $0.50 per share. During this
period the shareholder extended the payment dates of these loans on
numerous occasions. In consideration of the making of the loans and the
granting of such extensions the shareholder received 57,147 shares of
Class A Common Stock valued at $30,182 and 472,147 warrants.
As additional consideration for the loans and loan extensions the
shareholder received profit participation of from 1/2% to 20% in
various projects and joint ventures of the Company. In January 1996 the
shareholder and the Company entered into an agreement whereby the
shareholder gave up or substantially reduced such profit participation
in return for 1,500,000 warrants, 500,000 exercisable at $1.00 for two
years, 500,000 exercisable at $1.50 for two years and 500,000
exercisable at $2.00 for two years. The shareholder retained a 5%
profit participation in each of the Company's South Africa and
Venezuela housing projects, neither of which are under active
development at this time, in addition to the 5% profit participation in
the Company's Peruvian finance subsidiary.
(b) During the nine months ending April 30, 1996 a shareholder and his
related partnership were issued 65,672 shares of common stock, valued
at $32,836 and 300,000 common stock purchase warrants exercisable at a
price of $0.45, having a nominal value, for financial and investor
relations consulting services. This shareholder also received 150,000
shares of common stock through the PMSI exchange offer discussed in
Note 2.
(c) During the nine months ending April 30, 1996 a shareholder received
fees of approximately $75,000 plus 1,643,810 common stock purchase
warrants exercisable at a price of $0.55 for financial consulting
services.
(d) In January 1966 a corporation owned by members of the immediate family
of a shareholder, officer and director was issued 500,000 shares Class
A Common Stock pursuant to the terms of the PMSI exchange offer. These
shares were issued on the same terms as the other minority shareholders
of PMSI. See Note 2.
(e) Effective January 1, 1996, the Company entered into an employment
agreement with Jerome O. Crawford ("1996 Agreement") pursuant to which
Mr. Crawford became Chairman and Chief Executive Officer of the Company
for
F-26
<PAGE> 29
the five-year period ending on December 31, 2000. The 1996 Agreement
replaced the employment agreement between the Company and Mr. Crawford
dated September 1, 1992, as amended on August 18, 1994 (the "1992
Agreement") pursuant to which Mr. Crawford served as President and Chief
Executive Officer of the Company.
The 1996 Agreement provides for annual compensation of $250,000 with
annual increases to be determined by the board of directors. The
increase in annual compensation from $105,000 in the 1992 Agreement will
not take effect until the board of directors determines that the Company
"has adequate cash flow" to pay the increased amount. The 1996 Agreement
also provides for an annual bonus to be determined by the Company's
board of directors based on profitability, a $2000 per month housing and
commuter allowance, and a $2,000,000 life insurance policy with the
beneficiary to be designated by Mr. Crawford.
The 1996 Agreement grants Mr. Crawford 1,000,000 shares of the Company's
Class A Common Stock, which will vest on March 31, 1996, and an award of
2,000,000 shares of the Company's Class B Common Stock, 1,500,000 shares
of which are subject to repurchase by the Company at nominal cost in
equal annual installments of 500,000 shares between December 31, 1996
and December 31, 1998 in the event the 1996 Agreement is wrongfully
terminated by Mr. Crawford or terminated for cause by the Company. In
addition 350,000 shares of Class B Common Stock awarded to Mr. Crawford
under the 1992 Agreement is subject to repurchase at a nominal cost on
the same basis as under the 1996 Agreement at the rate of 175,000 shares
per year between August 18, 1997 and August 18, 1998.
The 1996 Agreement provides that all shares of Class B Common Stock held
by Mr. Crawford shall not be sold, assigned, hypothecated, or otherwise
encumbered or transferred during the lifetime of Mr. Crawford except to
his spouse, children or grandchildren or to another registered holder of
Class B Common Stock and that the shares of Class B Common Stock held by
Mr. Crawford shall not be converted into shares of Class A Common Stock
except by Mr. Crawford or a permitted transferee. At January 31, 1996
the only holders of Class B Common Stock were Mr. Crawford and Mr.
Parks.
The 1996 Agreement grants to Mr. Crawford an option to purchase
2,500,000 shares of Class B Common Stock at a price of $0.25 per share
for a five year period. The option vests 1,000,000 shares immediately
with the balance vesting in equal annual installments of 375,000 from
January 1, 1997 to January 1, 2000.
Mr. Crawford has not received payment of $61,000 of the compensation
payable to him for the nine months ending April 30, 1996.
(f) Effective January 1, 1996, the Company entered into an employment
agreement with Victor L. Parks ("1996 Agreement") pursuant to which
Mr. Park's will serve as Senior Vice President for the five year period
ending on December 31, 2000. The 1996 Agreement replaced the employment
agreement between the Company and Mr. Parks dated August 18, 1994
(the"1994 Agreement") pursuant to which Mr. Parks served as Senior Vice
President.
The 1996 Agreement provides for annual compensation of $125,000 with
annual increases to be determined by the board of directors. The
increase in annual compensation from $75,000 in the 1994 Agreement will
not take effect until the board of directors determines that the Company
"has adequate cash flow" to pay the increased amount. The 1996 Agreement
also provides for a one-time signing bonus of $20,000 and an annual
bonus to be determined by the Company's board of directors based on
profitability.
The 1996 Agreement grants Mr. Parks 500,000 shares of the Company's
Class A Common Stock, which vests immediately and an award of 600,000
shares of the Company's Class B Common Stock, 450,000 shares of which
are subject to repurchase by the Company at nominal cost in equal annual
installments of 150,000 shares between December 31, 1996 and December
31, 1998 in the event the 1996 Agreement is wrongfully terminated by Mr.
Parks or terminated for cause by the Company. In addition 251,250 shares
of Class B Common Stock awarded to Mr. Parks under the 1994 Agreement is
subject to repurchase at a nominal cost on the same basis as under the
1996 Agreement at the rate of 83,750 shares per year between August 18,
1996 and August 18, 1998.
The 1996 Agreement provides that all shares of Class B Common Stock held
by Mr. Parks shall not be sold, assigned, hypothecated, or otherwise
encumbered or transferred during the lifetime of Mr. Parks except to his
spouse, children or grandchildren or to another registered holder of
Class B Common Stock and that the shares of Class B Common Stock held by
Mr. Parks shall not be converted into shares of Class A Common Stock
except by Mr. Parks or a permitted transferee. At January 31, 1996 the
only holders of Class B Common Stock were Mr.
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<PAGE> 30
Parks and Mr. Crawford.
The 1996 Agreement grants to Mr. Parks an option to purchase 1,000,000
shares of Class A Common Stock at a price of $0.25 per share for a five
year period. The option vests 200,000 shares immediately with the
balance vesting in equal annual installments of 200,000 shares from
January 1, 1997 to January 1, 2000.
Mr. Parks has not received payment of $38,000 and $25,000 of the
compensation payable to him for the fiscal year ended July 31, 1995 and
the nine months ending April 30, 1966, respectively.
(g) Effective January 1, 1996, the Company entered into an employment
agreement with Sharon Snyder ("1996 Agreement") pursuant to which Ms.
Snyder will serve as Senior Vice President and Treasurer for the five
year period ending on December 31, 2000. The 1996 Agreement replaced the
employment agreement between the Company and Ms. Snyder dated August 18,
1994 (the "1994 Agreement") pursuant to which Ms. Snyder served as
Senior Vice President and Chief Financial Officer.
The 1996 Agreement provides for annual compensation of $100,000 with
annual increases to be determined by the board of directors. The
increase in annual compensation from $85,000 in the 1992 Agreement will
not take effect until the board of directors determines that the Company
"has adequate cash flow" to pay the increased amount. The 1996 Agreement
also provides for a one-time signing bonus of $20,000 and an annual
bonus to be determined by the Company's board of directors based on
profitability.
The 1996 Agreement grants Ms. Snyder 200,000 shares of the Company's
Class A Common Stock, which vests immediately and an option to purchase
500,000 shares of Class A Common Stock at a price of $0.25 per share for
a five year period. The option vests 100,000 shares immediately with the
balance vesting in equal annual installments of 100,000 shares from
January 1, 1997 to January 1, 2000.
Ms. Snyder has not received payment of $59,000 of the compensation
payable to her for the nine months ending April 30, 1996.
(h) Effective January 1, 1996, the Company entered into an employment
agreement with Michael Nalu ("1996 Agreement") pursuant to which Mr.
Nalu will serve as a Vice President for the five year period ending on
December 31, 2000.
The 1996 Agreement provides for annual compensation of $100,000 with
annual increases to be determined by the board of directors.
The 1996 Agreement grants Mr. Nalu 150,000 shares of the Company's Class
A Common Stock, which vests immediately and an option to purchase
300,000 shares of Class A Common Stock at a price of $0.25 per share for
a five year period. The option vests 100,000 shares immediately with the
balance vesting in equal annual installments of 50,000 shares from
January 1, 1997 to January 1, 2000.
Mr. Nalu has not received payment of $7,900 and $28,000 of the
compensation payable to him for the fiscal year ended July 31, 1995 and
the nine months ending April 30, 1996, respectively.
(i) In June 1996 the Company renegotiated a loan with Conversion Industries
Inc., a shareholder. See Note 8 - Subsequent Events.
(j) The Company is obligated to indemnify certain of its officers for
payroll tax and other liabilities which they have incurred as a result
of the discontinuance of the Former Subsidiaries. See Note 3 -
Discontinued Operations; Note and Note 4 - Liquidity.
F-28
<PAGE> 31
NOTE 7 - WARRANTS
The Company has issued warrants to purchase common stock in connection
with private placements of equity securities, loans and to certain
consultants of the Company. These warrants generally have terms ranging
from two to five years, and are fully vested. All warrants outstanding
at July 31, 1996 are exercisable between 1996 and 2001.
<TABLE>
<CAPTION>
EXERCISE
SHARES PRICE
------ --------
<S> <C> <C>
Outstanding at 7/31/95 2,898,757 $ 0.37 -$1.10
Exercisable at 7/31/95 2,898,757 $ 0.37 -$1.10
Granted 8/1/95 to 7/31/96 17,904,206 $ 0.39 -$2.00
Cancelled 80,000 $ 0.50
Outstanding at 7/31/96 20,772,963 $ 0.37 -$2.00
Exercisable at 7/31/96 20,772,963 $ 0.37 -$2.00
</TABLE>
NOTE 8 - SUBSEQUENT EVENTS
Conversion Industries Inc. Loan
On June 26, 1996 the Company entered into an agreement with Conversion
regarding repayment of their loan of $6,295,000 and accrued interest of
$1,921,000. In consideration of (i) a cash payment of $750,000, and
(ii) the assignment of all rights, title and interest that Myriad and
ATS have in the A&E bankruptcy, Conversion has agreed to release Myriad
of all liability with respect to the loan agreement and all amounts
owing thereunder. Pursuant to an amendment to the agreement dated
August 14, 1996 the cash payment of $750,000 is payable in three
$250,000 installments due on or before September 3, 1996, October 1,
1996 and November 1, 1996. Conversion is required to submit the
agreement to Bankruptcy Court for approval as soon as reasonably
practical. The forgiveness of debt of $7,466,000 will be treated as
income for financial statement purposes and as additional paid-in
capital for tax purposes. As of September 20, 1996 the Company has not
made the initial payment of $250,000. The following pro forma
illustrates the effect of this agreement as if it were effective APRIL
30, 1996:
<TABLE>
<CAPTION>
As Reported Pro Forma
----------- ---------
<S> <C> <C>
Total Assets $ 1,374,000 $ 1,374,000
Total Liabilities $ 13,987,000 $ 6,529,000
Shareholders' Deficiency $(12,613,000) $ (5,155,000)
</TABLE>
Amendment to Certificate of Incorporation
In December 1995, Myriad amended its Certificate of Incorporation to: (i)
change the name of the Company to "Myriad International, Inc.", (ii)
increase the authorized number of shares to 105,000,000, consisting of
75,000 shares of Class A Common Stock, 10,000,000 shares of Class B
Common Stock and 20,000,000 shares of Preferred Stock; and (iii) clarify
certain provisions relating to the voting rights of the Class B Common
Stock.
F-29
