<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED MARCH 31, 1996 COMMISSION FILE NO. 2-93124
SGI INTERNATIONAL
(Exact name of registrant as specified in its Charter)
UTAH 33-0119035
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
1200 PROSPECT STREET, SUITE 325, LA JOLLA, CALIFORNIA 92037
(Address of principal executive offices - Zip Code)
REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE: (619) 551-1090
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE
SECURITIES EXCHANGE ACT OF 1934: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE
SECURITIES EXCHANGE ACT OF 1934: COMMON STOCK (NO PAR VALUE)
Indicate by check mark whether the registrant (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.
[X] Yes [ ] No
THE NUMBER OF SHARES OF COMMON STOCK, NO PAR VALUE, OUTSTANDING AS OF MAY 10,
1996, WAS 5,252,000.
<PAGE> 2
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the period ended March 31, 1996
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 2-93124
SGI International
(Exact name of registrant as specified in its charter)
Utah 33-0119035
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1200 Prospect Street, Suite 325, La Jolla, California 92037
(Address of principal executive offices)
(619) 551-1090
Registrant's telephone number, including area code
Indicate by check mark whether the registrant (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.
[X] Yes [ ] No
The number of shares of Common Stock, no par value, outstanding as of May 10,
1996 was 5,252,000.
<PAGE> 3
- - --------------------------------------------------------------------------------
TABLE OF CONTENTS
FORM 10-Q
- - --------------------------------------------------------------------------------
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<S> <C>
Condensed Consolidated Balance Sheets 3 - 4
Condensed Consolidated Statements of Operations 5
Condensed Consolidated Statement of Stockholders' Deficit 6
Condensed Consolidated Statements of Cash Flows 7
Notes to Condensed Consolidated Financial Statements 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS 9 - 11
PART II. OTHER INFORMATION 12
SIGNATURES 13
</TABLE>
- 2 -
<PAGE> 4
SGI International
Consolidated Balance Sheets
<TABLE>
<CAPTION>
MARCH 31, December 31,
1996 1995
---------------------------
(UNAUDITED)
<S> <C> <C>
Assets
Current assets:
Cash $ 285,589 $ 74,154
Trade accounts receivable, less allowance for doubtful
accounts of $7,343 in 1996 and 1995 649,501 341,352
Costs and estimated earnings in excess of billings
on uncompleted contracts 86,074 271,448
Inventories 69,292 68,289
Prepaid expenses and other current assets 117,940 114,143
---------------------------
Total current assets 1,208,396 869,386
LFC Process related assets:
Notes receivable 1,067,932 1,123,948
Royalty rights 2,121,188 2,199,750
LFC cogeneration project 605,384 631,705
Investment in TEK-KOL partnership 672,379 596,276
Australia LFC project 166,515 173,754
Other technological assets 26,440 26,440
Process demonstration equipment, net
of accumulated depreciation of
$646,711 and $608,592 in 1996
and 1995, respectively 115,662 153,781
---------------------------
4,775,500 4,905,654
Property and equipment, net of accumulated
depreciation and amortization of $291,072
and $269,040 in 1996 and 1995, respectively 252,250 249,328
Other assets -- 12,876
Goodwill, net 467,335 479,318
---------------------------
$6,703,481 $6,516,562
========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE> 5
SGI International
Consolidated Balance Sheets
<TABLE>
<CAPTION>
MARCH 31, December 31,
1996 1995
--------------------------------
(UNAUDITED)
<S> <C> <C>
Liabilities and stockholders' deficit
Current liabilities:
Accounts payable $ 566,461 $ 683,583
Billings in excess of costs and estimated earnings
on uncompleted contracts 184,403 175,745
Current maturities of long-term obligations 511,625 909,016
Notes payable to Director -- 304,000
Accrued salaries, benefits and related taxes 176,870 139,103
Royalties payable to related party -- 141,790
Contributions payable to TEK-KOL Partnership 336,476 336,476
Interest payable 78,219 139,663
Other accrued expenses 477,241 409,089
--------------------------------
Total current liabilities 2,331,295 3,238,465
Interest payable 377,275 276,425
Long-term notes payable, less current maturities 4,524,246 4,631,250
Commitments and contingencies
Stockholders' deficit:
Convertible preferred stock, $.01 par value; 20,000,000 shares authorized
103,765 shares issued and outstanding (103,729 at December 31, 1995),
preference in liquidation of $2,960,000 1,037 1,037
Common stock, no par value; 75,000,000 shares
authorized, 4,826,770 shares issued and
outstanding (3,859,671 at December 31, 1995) 33,369,542 32,255,357
Paid-in capital 5,131,397 4,582,215
Accumulated deficit (38,722,888) (38,159,764)
Notes receivable from employees for common stock (308,423) (308,423)
--------------------------------
Total stockholders' deficit (529,335) (1,629,578)
--------------------------------
$ 6,703,481 $ 6,516,562
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE> 6
SGI International
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
1996 1995
------------------------------
<S> <C> <C>
Revenues:
Net sales $ 1,056,677 $ --
Income from Investment in TEK-KOL 76,103 --
Other 141,936 11,856
------------------------------
1,274,716 11,856
Expenses:
Cost of sales 794,066
Engineering, research and consulting 154,774 665,654
Selling, general and administrative 432,344 276,577
Legal and accounting 139,144 207,166
Depreciation and amortization 165,734 251,110
Interest 151,778 241,516
------------------------------
1,837,840 1,642,023
------------------------------
Net loss $ (563,124) $(1,630,167)
==============================
Net loss per share $ (.13) $ (.76)
==============================
Weighted average shares outstanding 4,270,607 2,138,618
==============================
</TABLE>
See notes to condensed consolidated financial statements.
-5-
<PAGE> 7
SGI International
Consolidated Statement of Stockholders' Deficit
(Unaudited)
<TABLE>
<CAPTION>
Convertible
preferred stock Common stock
------------------ -----------------
Shares Amount Shares Amount Paid-in capital
------ ------ ------ ------ ---------------
<S> <C> <C> <C> <C> <C>
Balances at December 31, 1995 103,729 $ 1,037 3,859,671 $32,255,357 $ 4,582,215
Issuance of common stock for cash 677,306 737,392
Exercise of warrants to purchase common stock for cash 6,593 1,654
Issuance of convertible preferred stock for notes
payable and interest 36 -- 407,579
Issuance of common stock for notes payable and interest 283,200 375,139
Warrants granted for accounts payable, notes
payable, interest and services 141,603
Net loss
-------------------------------------------------------------------
Balances at March 31, 1996 103,765 $ 1,037 4,826,770 $33,369,542 $ 5,131,397
===================================================================
</TABLE>
<TABLE>
<CAPTION>
Total
Accumulated Notes stockholders'
deficit receivable deficit
------- ---------- -------
<S> <C> <C> <C>
Balances at December 31, 1995 $ (38,159,764) $(308,423) $(1,629,578)
Issuance of common stock for cash 737,392
Exercise of warrants to purchase common stock for cash 1,654
Issuance of convertible preferred stock for notes
payable and interest 407,579
Issuance of common stock for notes payable and interest 375,139
Warrants granted for accounts payable, notes
payable, interest and services 141,603
Net loss (563,124) (563,124)
-----------------------------------------
Balances at March 31, 1996 $ (38,722,888) $(308,423) $ (529,335)
=========================================
</TABLE>
See accompanying notes to consolidated financial statements.
- 6 -
<PAGE> 8
SGI International
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
1996 1995
--------------------------------------
<S> <C> <C>
Operating activities
Net loss $ (563,124) $ (1,630,167)
Adjustments to reconcile net loss to net cash flows used for
operating activities:
Depreciation and amortization 184,256 251,110
Amortization of note discounts -- 46,610
Preferred stock issued for interest 23,170 --
Changes in assets and liabilities:
Receivable from joint venture partner -- 45,823
Trade accounts receivable (122,775) --
Inventories (1,003) --
Receivable from officers and directors -- (7,752)
Prepaid expenses and other current assets (3,797) 842
Accounts payable (117,122) 2,922
Billings in excess of costs and estimated earnings
uncompleted contracts 8,658 --
Accrued salaries, benefits and related taxes 37,767 (4,841)
Royalty payable to related party (141,790) 12,500
Interest payable 100,162 21,976
Other accrued expenses 68,152 --
--------------------------------------
Net cash flows used for operating activities (527,446) (1,260,977)
Investing activities
LFC process related assets:
Collection of notes receivable and related interest 56,016 --
Additions to other technological assets -- (20,876)
Additions to process demonstration equipment -- (23,268)
Investment in TEK-KOL (76,103) --
Purchase of property and equipment (24,954) --
Other assets 12,876 (406)
--------------------------------------
Net cash flows used for investing activities (32,165) (44,550)
Financing activities
Proceeds from issuance of notes payable 50,000 14,696
Payments of notes payable (18,000) (419,750)
Proceeds from issuance of preferred stock -- 1,113,943
Proceeds from issuance of common stock 739,046 280,125
--------------------------------------
Net cash flows provided by financing activities 771,046 989,014
--------------------------------------
Net increase (decrease) in cash 211,435 (316,513)
Cash at beginning of the period 74,154 551,299
--------------------------------------
Cash at end of the period $ 285,589 $ 234,786
=====================================
Supplemental disclosure of non-cash activities:
Series 96 convertible preferred stock issued for notes payable $ 360,000 --
=====================================
Warrants granted for accounts payable, notes
payable, interest and services $ 141,603 --
=====================================
</TABLE>
See accompanying notes to consolidated financial statements.
- 7 -
<PAGE> 9
SGI International
Notes to Condensed Consolidated Financial Statements
March 31, 1996
(Unaudited)
(1) BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements of SGI
International (the Company) for the three months ended March 31, 1996
and 1995 are unaudited. These financial statements reflect all
adjustments, consisting of only normal recurring adjustments which, in
the opinion of management, are necessary for a fair statement of the
consolidated financial position as of March 31, 1996, and the
consolidated results of operations for the three months ended March 31,
1996 and 1995. The results of operations for the three months ended
March 31, 1996 are not necessarily indicative of the results to be
expected for the year ending December 31, 1996. For more complete
financial information, these financial statements, and the notes
thereto, should be read in conjunction with the consolidated audited
financial statements for the year ended December 31, 1995 included in
the Company's Form 10-K filed with the Securities and Exchange
Commission.
(2) ORGANIZATION AND BUSINESS
The principal businesses of the Company are developing,
commercializing, and licensing new energy technologies; and
manufacturing automated assembly equipment.
The Company's principal assets are related to the LFC (Liquid From
Coal) Process. The recovery of these assets is dependent upon future
events, including the Company's ability to attract sufficient
additional equity and/or financing needed to fund its portion of the
TEK-KOL Partnership, that is responsible for completion and
commercialization of the LFC Process. The Company is engaged in
continuing negotiations to secure additional capital and financing, and
while management believes it will be successful, there is no assurance
that these efforts will be successful.
- 8 -
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
PROJECTIONS AND ESTIMATES
The projections, estimates and opinions of management contained herein
relative to the LFC and OCET Processes and to the business of Company set forth
herein are forward looking statements and statements of management's belief:
thus, there can be no assurance that these projections, estimates, or opinions
of management will ultimately be correct or that actual results or events will
not differ materially from those discussed herein. Further, until agreements are
actually executed, LFC plants actually begin construction, the OCET Process is
actually commercialized and operating revenues are actually earned, there can be
no assurance that such events will occur. The Company undertakes no obligation
to publicly release the results of any revisions to these forward-looking
statements, which are made herein to reflect events or circumstances after the
date hereof or to reflect the occurrence of unanticipated events.
OVERVIEW
The Company's stockholders' deficit has decreased from $1.63 million at
December 31, 1995 to $529,000 at March 31, 1996. The improvement results from
the continuing conversion of debt into equity and significantly reduced
expenditure of the Company's funds. Management believes the financial condition
of the Company has improved and will continue to improve in the coming months.
Many challenges are ahead as the Company and TEK-KOL commercialize the LFC
process. Expenditures for OCET process development are continuing and are
expected to increase.
During the first quarter, TEK-KOL entered into an agreement with
Mitsubishi pursuant to which MHI will pay a royalty to TEK-KOL based on the
revenue received by MHI from its sale of equipment and services to LFC plants,
if and when constructed. MHI will also assist in completing engineering for a
potential Powder River LFC plant and adapt that engineering to specific
international projects. Further, MHI has an option to obtain a four year
scope-of-supply exclusive in the Pacific Rim. If the option is exercised, MHI
will pay TEK- KOL $1 million per year during the exclusivity period, which is
subject to termination on written notice by either party. TEK-KOL
representatives are negotiating an agreement with Mitsui, which, if executed,
will provide for a LFC product marketing study by Mitsui, an analysis of the
opportunity for development of LFC plants at several Mitsui mines, and
assistance by Mitsui in developing and optimizing an upgrading process for CDL.
The OCET process is designed to convert refinery Resid into higher
value petroleum distillate products and a synthetic coal. OCET Corporation, a
wholly-owned SGI subsidiary, entered into an agreement in 1995 to test a series
of crude oil and Resid oil samples provided by Maraven, a Venezuelan state-owned
oil company. Laboratory data is currently being extrapolated to a larger bench
scale continuous process design in order to complete this testing. Favorable
results could lead to licensing and royalty agreements with Maraven and its
affiliates. The Company also continued discussions in the first quarter of 1996
with the Department of Energy regarding a cooperative agreement and funding for
OCET's research and development efforts. The Company is drafting a written
program plan to submit to the DOE, which management expects will form the basis
for a cooperative research and development agreement.
The continuing need to fund Company operations with equity based
financing is causing significant dilution. Management is committed to
accelerating commercialization of the LFC and OCET technologies and increasing
cash flows from AMS's operations, rather than obtaining funds through the sale
of equity. However, equity sales will be required in the short-term.
- 9 -
<PAGE> 11
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THREE MONTHS ENDED MARCH 31, 1995.
The Company acquired AMS effective October 30, 1995. AMS recorded net
sales, cost of sales, and selling, general and administrative expense of $1.1
million, $794,000, and $208,000 for the three months ended March 31, 1996. The
following discussion does not include AMS's results of operations for that
period.
The Company recorded $76,000 as its share of income from TEK-KOL for
the three months ended March 31, 1996. TEK-KOL recorded no activity during the
three months ended March 31, 1995 as the partners were bearing the expenses
directly. Other income for the three months ended March 31, 1996 includes
$142,000 from the forgiveness of certain royalty obligations by a related party.
Engineering, research and development expenses for the three months
ended March 31, 1996 decreased 77% ($511,000) from the same prior year period.
SGI previously incurred LFC process marketing and candidate coal testing
expenditures which are now TEK-KOL's responsibility.
General and administrative expense for the three months ended March 31,
1996 decreased 19% ($52,000) from the same prior year period. Personnel and
overhead reductions, instituted during the last two quarters of 1995, have
caused on-going general and administrative expenses to decrease.
Legal and accounting expense for the three months ended March 31, 1996
decreased 33% ($68,000) from the same prior year period. The prior year period
included legal expense related to implementing the one-for-twenty share
reduction.
Depreciation and amortization expense for the three months ended March
31, 1996 decreased 34% ($85,000) from the same prior year period. Certain LFC
process related assets were written down in 1995 based on management's net
realizable value estimates. The 1995 write-downs cause depreciation and
amortization to be lower future periods.
Interest expense deceased 37% ($90,000) from the same prior year
period. The conversion of debt into equity during 1995 and 1996 has caused
interest expense to decrease.
LIQUIDITY AND CAPITAL RESOURCES
The Company acquired AMS effective October 30, 1995. The discussion on
Liquidity and Capital Resources includes the effect of this transaction unless
otherwise indicated.
The Company had short-term liquidity deficiencies at March 31, 1996 and
1995 of $1.1 million and $3.4 million, respectively. The net improvement was
achieved primarily through the conversion of notes payable and accrued interest
into equity. Current notes payable and accrued interest of $590,000 contribute
to the Company's short-term deficiency at March 31, 1996. Based on continuing
interaction with the noteholders, management believes that the Company should
procure subscriptions to convert the remaining current notes payable to
preferred stock or secure agreements to extend the note due dates to September
30, 1997. Dr. Esztergar has agreed to forego any and all royalties owed him for
the transfer of the LFC process patent to the Company. The Company raised
approximately $1.58 million through the issuance of 1,084,000 common shares
through May 10, 1996. These funds have been used to fund current operations and
to satisfy a portion of the Company's short-term liquidity deficiency. The
Company plans to satisfy the remaining short-term liquidity deficiency through
the sale of equity securities and the collection of receivables.
The Company had a long-term liquidity deficiency at March 31, 1996. The
Company expects this long-term liquidity deficiency to be satisfied by equity
sales, and increased positive cash flows from AMS's operations until such
- 10 -
<PAGE> 12
time as the commercialization of the LFC and OCET Processes results in positive
cash flows.
The Company's first quarter 1996 cash flows used for operating
activities decreased 59% ($746,000) from 1995. This decrease is primarily
attributable to TEK-KOL's assuming candidate coal testing and LFC plant
marketing activities, and the personnel and overhead reductions made in 1995.
The Company's financing activities raised approximately $789,000 and
$1,409,000 during the first quarter of 1996 and 1995, respectively. These funds
were raised primarily through the private placement of debt and equity
securities. The amount of money raised during a given period is dependent upon
financial market conditions, technological progress, and the Company's projected
funding requirements. The Company anticipates that future financing activities
will be influenced by the aforementioned factors. Significant future financing
activities will be required to fund future operating and investing activities
and to maintain debt service. At present, the Company has no commitments for
future purchases of its securities.
The Company's investing activities were minimal in the first quarter of
1996 and 1995.
Additional capital contributions to the TEK-KOL Partnership are
expected to be required from time to time prior to profitable operations. The
Company is required to contribute one-half of any such required capital
contributions. The Company has recorded contributions payable to TEK-KOL of
$412,000 at March 31, 1996. Management believes substantially all of the 1996
funding requirements for TEK-KOL will be paid by third parties with whom TEK-KOL
has or expects to have agreements. The Company will be required to contribute
approximately $750,000 towards the 1996 TEK-KOL operating budget if none of
these agreements are consummated.
The Company does not have material commitments for capital expenditures
as of March 31, 1996.
- 11 -
<PAGE> 13
- - --------------------------------------------------------------------------------
PART II. OTHER INFORMATION
- - --------------------------------------------------------------------------------
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 5. EXHIBITS AND REPORTS ON FORM 8-K
1. EXHIBITS
4.44 Form of Series 96-A Convertible Preferred Stock
10.3.3 Second Amendment to Assignment Agreement and Release
dated as of 3/29/96 with Ernest P. Esztergar
27 Financial Data Schedule
28.9 Acquisition Agreement dated as of 3/4/96 with Kerr
Foundation
28.9.1 Settlement & General Release dated as of 3/4/96 with
Kerr Foundation
2. REPORTS ON FORM 8-K
None
- 12 -
<PAGE> 14
- - --------------------------------------------------------------------------------
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.
SGI INTERNATIONAL
By: /s/ JOSEPH A. SAVOCA May 10 , 1996
----------------------------
Joseph A. Savoca,
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
Chief Executive Officer May 10, 1996
/s/JOSEPH A. SAVOCA and Chairman of the Board
- - --------------------------
Joseph A. Savoca
</TABLE>
- 13 -
<PAGE> 1
EXHIBIT 4.44
[SGI INTERNATIONAL LETTERHEAD]
NUMBER SHARES
96A-00 * *
THIS CERTIFIES THAT:
is the registered Holder of ** **
FULLY PAID AND NON-ASSESSABLE SERIES 96-A PREFERRED SHARE(S),
$.01 PAR VALUE,
OF
SGI INTERNATIONAL
1. Each Series 96-A Preferred Share evidenced by this Certificate is
transferrable on the books of the Corporation by the Holder hereof, in
person or by duly authorized attorney, upon surrender of this
Certificate properly endorsed.
2. On or after April 30, 1998, each Series 96-A Convertible Preferred
Share shall be convertible into 13,500 SGI Common Shares.
3. Series 96-A Preferred Shares have no voting rights.
4. Series 96-A Preferred Shares and the Common Stock into which they are
convertible will, upon issuance, be fully paid and non-assessable.
5. In the event that the Corporation shall at any time after issuance of a
Series 96-A Preferred Share: (i) declare or pay to the holders of the
Common Stock a dividend payable in any kind of shares of stock of the
Corporation; or (ii) split, reverse split or otherwise reclassify its
Common Stock into the same or a different number of shares with or
without par value or into shares of any class or classes; or (iii)
consolidate or merge with or transfer its property as an entirety or
substantially as an entirety to any other corporation; or (iv) make any
distribution of its assets to holders of its Common Stock as a
liquidation or partial liquidation dividend or by way of return of
capital; then, upon subsequent conversion of a Series 96-A Preferred
Share, a shareholder shall receive in exchange for a Series 96-A
Preferred Share, in addition to, in reduction of, or in substitution
for, the shares of Common Stock to which he would otherwise be entitled
upon such exercise, such additional shares of Common Stock, or lesser
number shares
<PAGE> 2
of Common Stock, as the case may be, or stock or script of the
Corporation, or such reclassified shares of stock of the Corporation,
or such shares of securities or property of the Corporation resulting
from such consolidation or merger or transfer, or such assets of the
Corporation, so that the value so received by the shareholder is
equivalent to the value which would have been received (and the total
consideration exchangeable by the shareholder is equivalent to the
total consideration which would otherwise have been exchangeable) had
the shareholder converted a Series 96-A Preferred Share into shares of
Common Stock immediately prior to the happening of any of the foregoing
events.
1. THE SERIES 96-A PREFERRED SHARE(S) REPRESENTED BY THIS CERTIFICATE AND
THE COMMON STOCK INTO WHICH THEY ARE CONVERTIBLE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SHARE(S) HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SHARES UNDER THE SECURITIES ACT OF 1933, OR A PRIOR OPINION OF
COUNSEL SATISFACTORY TO THE ISSUER, THAT REGISTRATION IS NOT REQUIRED
UNDER THAT ACT.
2. In the event of the voluntary liquidation, dissolution or other
termination of the Corporation, the holders of the Series 96-A
Preferred Shares shall be entitled to recover only a cash payment of
Ten Thousand Dollars ($10,000.00) per Series 96-A Preferred Share. Such
payment shall be made before any payment or distribution is made to the
holders of the Common Stock, or any other series of Preferred Stock of
the Corporation, other than previously issued Series of Preferred
Shares.
In witness whereof the said Corporation has caused this Certificate to be signed
by its duly authorized officers and its Corporate Seal to be affixed hereto this
____ day of ____________, 1996.
CHAIRMAN OF THE BOARD SECRETARY
- - ------------------------------ ------------------
2
<PAGE> 3
The following abbreviations, when used in the inscription on the fact
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not
as tenants in common
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, ______________hereby sell, assign and transfer unto
Please insert Social Security or other
identifying number of assignee
______________________________________
(Please print or typewrite name and address, including zip code, of assignee)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
_________________________Shares
of capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
______________________________________________________________________Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
DATED:______________________________
NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the certificate in every particular, without
alteration or enlargement or any change whatever.
3
<PAGE> 1
SECOND AMENDMENT TO ASSIGNMENT AGREEMENT AND RELEASE
This Second Amendment to Assignment Agreement and Release ("Agreement") is
entered into effective as of March 29, 1996 (the "Effective Date") by and
between SGI International ("SGI") and Ernest P. Esztergar ("Esztergar").
RECITALS
A. SGI and Esztergar entered into an Assignment Agreement dated November
13, 1994 (the "Assignment"), by and between Esztergar and Synfuel
Genesis, Inc., a predecessor to SGI by merger.
B. Pursuant to the Assignment, Esztergar was to be paid a royalty or
certain income in accordance with the terms of the Assignment.
C. Esztergar and SGI desire to amend the Assignment and the First
Amendment dated November 13, 1994 to provide for a waiver and release
of the royalty in return for other good and valuable consideration to
be paid to Esztergar.
AGREEMENT
NOW THEREFORE, in consideration of the matters set forth in the
Recitals and for other good and valuable consideration the parties hereto agree
as follows:
1. WAIVER AND RELEASE. Esztergar agrees to waive and release all of his
past, present, and future rights (hereafter "Claims" as further
defined) to any income of any kind or any other payment to be made in
accordance with the Assignment and any amendments or modifications
thereto.
2. WARRANTY. Each of the parties hereto represent and warrant to the other
that to the extent of his or their knowledge, the recitals set forth
herein are true, correct, and accurate.
3. CLAIMS. As used herein, "Claims" shall mean any and all claims,
demands, agreements, contracts, covenants, representations, warranties,
promises, undertakings, actions, suits, causes of action, obligations,
debts, fees, costs, expenses, accounts, damages, judgments, losses,
injuries and liabilities of whatsoever kind or nature in law related to
the Assignment and only to the Assignment, whether in equity or
otherwise, present or future, known or unknown, suspected or
unsuspected, asserted or unasserted, whether against any party hereto
or not, and whether or not concealed or hidden, based upon any facts,
acts, or omissions occurring prior to the date hereof in any way
involved in or related to any of the matters which are or were the
subject of, or directly or indirectly involved with the facts relating
or comprising this Agreement.
EXHIBIT 10.3.3
<PAGE> 2
4. RELEASE. Esztergar, on behalf of himself, including assignees,
representatives, agents, or successors (collectively the "Releasors")
do hereby and forever remise, release and discharge SGI and any of its
agents or representatives, and any successors of and from any and all
Claims, and in particular any claims relating to the Assignment and
only the Assignment, which any of said Releasors have, have had, may
have had, or now have or hereafter, can shall or may have against SGI
or any of its officers, directors, representatives or successors.
5. WAIVERS. IT IS EXPRESSLY UNDERSTOOD THAT Section 1542 of the Civil Code
of California provides as follows:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR
DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF
EXECUTING THE RELEASE WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY
AFFECTED HIS SETTLEMENT WITH THE DEBTOR."
The provisions of Section 1542 of the Civil Code of California, if
in any way applicable to this Release, as well as any similar
provisions of the law of California or any other jurisdiction, ARE
HEREBY KNOWINGLY AND VOLUNTARILY WAIVED AND RELINQUISHED by all
parties hereto, and each of them. Each of the parties acknowledges
that he, she, or it, or his, her, or its representatives, may
hereafter discover facts in addition to or different from those
which he, she, or it now believes concerning the subject matter of
this Agreement, and that notwithstanding any such new or different
facts, this General Release shall remain in full force and effect
and shall not be challenged in any way or sought to be voided or
avoided. Such parties acknowledge and agree that this waiver is an
essential and material term of this Release without which
consideration agreed to have been given by each of the parties
would not have been delivered or agreed to by the parties. All of
the parties have been advised of their respective rights by legal
counsel regarding this Agreement and this waiver and understand and
acknowledge its significance and the consequence of the release and
waiver of Section 1542.
6. NO ADMISSIONS. The parties hereby acknowledge and agree that this is a
compromise settlement, which is not in any respect nor for any purpose
to be deemed or construed to be, or in any way to be used as evidence
of any admission or concession of any liability whatsoever on the part
of any of them or any other person, firm or corporation whatsoever.
7. FURTHER REPRESENTATIONS AND WARRANTY. Each of the parties hereto
warrants and represents that such party has not assigned or in any way
conveyed, transferred or encumbered all or any portion of the Claims or
other rights covered by this Agreement and that this Agreement has been
duly authorized, executed and delivered on behalf of each party and is
valid and enforceable against such party in accordance with its terms
and each party further acknowledges and agrees that these warranties
and representations are an essential and material term of this
Agreement without which consideration would not have been given and
delivered.
2
<PAGE> 3
8. ATTORNEYS FEES. Each party agrees to bear all of its own costs and
attorneys' fees and all other costs with respect to the matters
described in this Agreement.
9. GOVERNING LAW. This Agreement is made and entered into in the State of
California and is to be governed by and interpreted in accordance with
the laws of the State of California.
10. INTERPRETATION. If there is any dispute with respect to this Agreement
the interpretation of the words herein shall be made with respect to
the fair meaning of the words and not for or against any party because
one party drafted the document.
11. COUNTERPARTS. This Agreement may be executed in several counterparts,
each of which shall be deemed an original, but all of which together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have this day and year
executed and delivered this instrument.
SGI International Ernest P. Esztergar
By: /s/Joseph A. Savoca By:/s/Ernest P. Esztergar
- - ------------------------------ ------------------------------
Joseph A. Savoca, President Ernest P. Esztergar
3
<PAGE> 1
ACQUISITION AGREEMENT
This Acquisition Agreement ("Acquisition Agreement") is entered into effective
as of March 4, 1996 (the "Effective Date") by and between SGI International
("SGI" or "Seller") and the A. H. Kerr Foundation ("Foundation" or "Buyer").
RECITALS
A. Foundation loaned SGI at various times during 1995 and early 1996 an
amount of money, which as of March 1996, including principal and
interest, approximates three hundred and fifty four thousand dollars
($354,000) (the "Loan"). Each of the loans was memorialized by the
issuance by SGI of Promissory Notes (the "Notes"), with an interest
rate of ten percent (10%) , payable on December 31, 1996.
B. The Foundation is interested in converting the Loan into the common
stock of SGI International by using the Loan to purchase common stock.
C. SGI is interesting in selling common stock in the amount of 283,200
shares valued as of March 4, 1996. The closing bid price for SGI common
stock on the Effective Date was $1.71875.
AGREEMENT
1. ACQUISITION. In return for the cancellation and delivery of the Notes,
which constitute good and valuable consideration, receipt of which is
hereby acknowledged, SGI International, an Utah corporation ("COMPANY")
whose address is 1200 Prospect, Suite 325, La Jolla, Ca., 92037, hereby
agrees to and does sell and tender to the Foundation, two hundred
eighty three thousand and two hundred (283,200) shares of its common
stock.
2. PURCHASE PRICE. The purchase price for the two hundred eighty three
thousand and two hundred (283,200) shares shall be the sum of three
hundred and fifty four thousand dollars ($354,000), which amount is
evidenced by the Notes. Copies of the Notes, which shall be tendered to
SGI by the Foundation and canceled upon issuance of the Shares are
attached hereto as Exhibits A.
3. DELIVERY. SGI agrees that upon receipt of the Notes it shall
immediately issue in the name of the Foundation a certificate for
283,200 shares of 144 stock, which shall immediately be transmitted to
Foundation by registered U. S. mail. A copy of the form of that
certificate is attached as Exhibit B.
EXHIBIT 28.9
<PAGE> 2
4. TIME AND PLACE OF SALE. For the purposes of this Agreement the parties
agree that the date of the transfer and sale shall be as of March 4,
1996.
5. APPLICABLE LAW. The provisions of this Agreement shall be construed and
enforced in accordance with the laws of the State of California.
6. ENTIRE AGREEMENT AND AMENDMENTS. This Agreement constitutes the entire
understanding and agreement between the parties relating to the subject
matter hereof and supersedes any prior written or oral understanding or
agreement between the parties relating to the subject matter hereof.
This Agreement shall not be amended, altered, or supplemented in any
way except by an instrument in writing, signed by the duly authorized
representative of the parties, that expressly references this
Agreement.
7. WAIVERS. The failure or delay of either party to exercise or enforce at
any time any of the provisions of this Agreement shall not constitute
or be deemed a waiver of that party's right thereafter to enforce each
and every provision of the Agreement and shall not otherwise affect the
validity of this Agreement.
8. SEVERABILITY. If any provision of this Agreement is finally determined
to be contrary to, prohibited by, or invalid under applicable laws or
regulations, such provision shall become inapplicable and shall be
deemed omitted from this Agreement. Such determination shall not,
however, in any way invalidate the remaining provisions of this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and in the year first above written.
A. H. Kerr Foundation SGI International , a Utah
corporation
/s/William Kerr /s/Joseph A. Savoca
- - ------------------- -----------------------
By: William Kerr By: Joseph A. Savoca
President
2
<PAGE> 1
2
SETTLEMENT AND GENERAL RELEASE
This Settlement and General Release ("Agreement") is entered into effective as
of March 4, 1996 (the "Effective Date") by and between SGI International ("SGI")
and the A. H. Kerr Foundation ("Foundation").
RECITALS
A. Foundation loaned SGI at various times during 1995 and during early
1996 an amount of money, the principal amount of which as of March
1996, approximated three hundred and fifty four thousand dollars
($354,000) (the "Loan"). Each of the loans was memorialized by the
issuance by SGI of Promissory Notes (the "Notes"), with an interest
rate of ten percent (10%) , payable on December 31, 1996.
B. The Foundation agreed to convert the Loan into the common stock of SGI
International by using the Loan to purchase common stock. As part of
that conversion the Foundation entered into an Acquisition Agreement
dated March 4, 1996, and agreed to surrender all Notes.
C. One of the Notes was lost and the parties desire to consummate the
Acquisition Agreement by entering into this Agreement to provide for a
surrender, cancellation of the one lost note for $50,000, as well as
the cancellation and release of all obligations under the other notes
that were surrendered.
AGREEMENT
NOW THEREFORE, in consideration of the matters set forth in the
Recitals and for other good and valuable consideration the parties hereto agree
as follows:
1. ACQUISITION. The parties agree that the Foundation has tendered all of
the Notes, except for one for $50,000, which is apparently misplaced.
Since the Acquisition Agreement requires the surrender of all of the
Notes as a precondition to the issuance of SGI's stock to the
Foundation the obligations of SGI under the Acquisition Agreement have
not been performed. The parties intend to substitute this Release in
place of requiring that the last of the Notes be surrendered to SGI for
cancellation and SGI shall then perform its obligations under the
Acquisition Agreement.
2. WARRANTY. Each of the parties hereto represent and warrant to the other
that to the extent of his or its knowledge, the recitals set forth
herein are true, correct, and accurate.
EXHIBIT 28.9.1
<PAGE> 2
3. CLAIMS. As used herein, "Claims" shall mean any and all claims,
demands, agreements, contracts, covenants, representations, warranties,
promises, undertakings, actions, suits, causes of action, obligations,
debts, fees, costs, expenses, accounts, damages, judgments, losses,
injuries and liabilities of whatsoever kind or nature in law, equity or
otherwise, present or future, known or unknown, suspected or
unsuspected, asserted or unasserted, whether against any party hereto
or not, and whether or not concealed or hidden, based upon any facts,
acts, or omissions occurring prior to the date hereof in any way
involved in or related to any of the matters which are or were the
subject of, or directly or indirectly involved with the facts relating
or comprising this Agreement.
4. RELEASE. Foundation, on behalf of itself, including assignees,
representatives, agents, or successors (collectively the "Releasors")
do hereby and forever remise, release and discharge SGI and any of its
agents or representatives, and any successors of and from any and all
Claims, and in particular any claims relating to the Notes, which any
of said Releasors have, have had, may have had, or now have or
hereafter, can shall or may have against SGI or any of its officers,
directors, representatives or successors.
5. WAIVERS. IT IS EXPRESSLY UNDERSTOOD THAT Section 1542 of the Civil Code
of California provides as follows:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR
DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF
EXECUTING THE RELEASE WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY
AFFECTED HIS SETTLEMENT WITH THE DEBTOR."
The provisions of Section 1542 of the Civil Code of California, if
in any way applicable to this Release, as well as any similar
provisions of the law of California or any other jurisdiction, ARE
HEREBY KNOWINGLY AND VOLUNTARILY WAIVED AND RELINQUISHED by all
parties hereto, and each of them. Each of the parties acknowledges
that he, she, or it, or his, her, or its representatives, may
hereafter discover facts in addition to or different from those
which he, she, or it now believes concerning the subject matter of
this General Release, and that notwithstanding any such new or
different facts, this General Release shall remain in full force
and effect and shall not be challenged in any way or sought to be
voided or avoided. Such parties acknowledge and agree that this
waiver is an essential and material term of this Release without
which consideration agreed to have been given by each of the
parties would not have been delivered or agreed to by the parties.
All of the parties have been advised of their respective rights by
legal counsel regarding this General Release and this waiver and
understand and acknowledge its significance and the consequence of
the release and waiver of Section 1542.
6. NO ADMISSIONS. The parties hereby acknowledge and agree that this is a
compromise settlement, which is not in any respect nor for any purpose
to be deemed or construed to be, or in any way to be used as evidence
of any admission or concession of any liability whatsoever on the part
of any of them or any other person,
<PAGE> 3
firm or corporation whatsoever.
7. FURTHER REPRESENTATIONS AND WARRANTY. Each of the parties hereto
warrants and represents that such party has not assigned or in any way
conveyed, transferred or encumbered all or any portion of the Claims or
other rights covered by this General Release and that this General
Release has been duly authorized, executed and delivered on behalf of
each party and is valid and enforceable against such party in
accordance with its terms and each party further acknowledges and
agrees that these warranties and representations are an essential and
material term of this General Release without which consideration would
not have been given and delivered.
8. ATTORNEYS FEES. Each party agrees to bear all of its own costs and
attorneys' fees and all other costs with respect to the matters
described in this General Release.
9. GOVERNING LAW. This General Release is made and entered into in the
State of California and is to be governed by and interpreted in
accordance with the laws of the State of California.
10. INTERPRETATION. If there is any dispute with respect to this General
Release the interpretation of the words herein shall be made with
respect to the fair meaning of the words and not for or against any
party because one party drafted the document.
11. COUNTERPARTS. This General Release may be executed in several
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have this day and year
executed and delivered this instrument.
SGI International A. H. Kerr Foundation
By:/s/ Joseph A. Savoca By: /s/William A. Kerr
- - ---------------------------------- -------------------------------
Joseph A. Savoca, President William A. Kerr, Vice President
3
