<PAGE>
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 quarterly period ended: June 30, 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 0-1857
------
RYAN-MURPHY INCORPORATED
(Exact name of registrant as specified in its charter)
COLORADO 84-0998860
(State or other jurisdiction of (I.R.S. Employer
of incorporation or organization) Identification No.)
8774 Yates Drive, Suite 100, Denver, Colorado 80030
(Address of principal executive offices)
(303) 427-4567
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Shares of common stock outstanding were 2,953,315 at June 30, 1996.
- ------------------------------------------------------------------
This document is comprised of 15 pages.
<PAGE>
RYAN-MURPHY INCORPORATED
INDEX
PART I FINANCIAL INFORMATION Page
----
Item 1. Condensed consolidated balance sheets,
June 30, 1996 and December 31, 1995 3
Condensed consolidated statements of operations, the
three months & six months periods ended June 30, 1996
and June 30, 1995. 4
Condensed consolidated statements of cash flows,
six months period ended June 30, 1996
and June 30, 1995. 5
Item 2. Management's discussion and analysis of
financial condition and results of operations 9
PART II OTHER INFORMATION 12
Signatures 14
Exhibit 27 15
<PAGE>
RYAN-MURPHY INCORPORATED
CONSOLIDATED CONDENSED BALANCE SHEETS
June 30, December 31,
1996 1995
----------- -----------
ASSETS
Cash $ 72,221 $ 152,027
----------- -----------
Contracts and notes receivable 185,638 494,205
Less: Allowance for bad debts (20,144) (5,694)
----------- -----------
165,495 488,511
----------- -----------
Inventories 19,000 93,011
Prepaid expenses -0- 41,875
----------- -----------
Total current assets 256,715 775,424
----------- -----------
Investment in affiliated company 2,825 2,500
----------- -----------
Indebtedness of related parties, not current 31,500 31,500
----------- -----------
Property and equipment 2,942,030 3,033,336
Less: Accumulated depreciation (1,305,931) (1,357,087)
----------- -----------
1,636,099 1,676,249
----------- -----------
Intangible Assets 1,968,805 1,959,233
Less: Accumulated amortization (438,811) (388,886)
----------- -----------
1,529,993 1,570,347
----------- -----------
Other assets 8,695 49,296
----------- -----------
$ 3,465,828 $ 4,105,316
----------- -----------
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts and notes payable $ 1,920,541 $ 1,865,613
Indebtedness to related parties 21,000 21,000
Other current liabilities 269,036 202,767
----------- -----------
Total current liabilities 2,210,577 2,089,380
Long-term debt, net of current portion 411,785 139,306
Common stock 198 5,029
Other shareholders' equity 843,269 1,871,601
----------- -----------
$ 3,465,828 $ 4,105,316
----------- -----------
----------- -----------
See Accompanying notes to condensed consolidated financial statements.
3
<PAGE>
RYAN-MURPHY INCORPORATED
Condensed Consolidated Statements of Operations
<TABLE>
Three Months Ended June 30 Six months ended June 30,
-------------------------- -------------------------
1996 1995 1996 1995
---------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
Contract and other revenue $ 7,759 $ 1,553,248 $ 171,540 $ 1,925,358
Costs of revenue earned 57,112 1,291,418 266,304 1,508,842
---------- ------------ ------------ -----------
Gross profit (49,354) 261,830 (94,764) 416,516
Costs and expenses:
General and administrative expense 417,298 444,230 757,642 443,307
Provision for bad debts 8,000 7,250 14,750 7,500
---------- ------------ ------------ -----------
Income (loss) from operations (474,651) (189,650) (867,156) (34,291)
Non-operating income (expense) (128,908) (23,161) (126,567) 22,807
Interest expense (22,276) (28,295) (23,124) (19,098)
---------- ------------ ------------ -----------
Income before income taxes (625,836) (241,106) (1,016,848) (30,582)
Income taxes (250) 0 (143) (1,585)
Loss from discontinued operations
(net of income taxes) (15,000) (97,189) (15,000) (121,385)
---------- ------------ ------------ -----------
Net income (loss) (641,086) (338,295) $ (1,031,990) $ (153,552)
---------- ------------ ------------ -----------
---------- ------------ ------------ -----------
Net income (loss) per common share (0.217) (0.019) (0.349) (0.009)
---------- ------------ ------------ -----------
---------- ------------ ------------ -----------
Weighted average common
shares outstanding 2,953,315 17,424,299 2,953,315 17,424,299
---------- ------------ ------------ -----------
---------- ------------ ------------ -----------
</TABLE>
See accompanying notes to condensed consolidated financial statements
4
<PAGE>
RYAN-MURPHY INCORPORATED
Condensed Consolidated Statements of Cash Flows
<TABLE>
Six months ended June 30,
-------------------------
1996 1995
----------- ----------
<S> <C> <C>
Net cash provided by (used in) operating activities $ (348,742) $ 61,286
----------- ----------
Cash flows from investing activities:
Retirement of property and equipment 15,938 214,739
Cash proceeds from long term lease receivable -0- 239,659
----------- ----------
15,938 454,398
----------- ----------
Cash flows from financing activities:
Cash proceeds from issuance common stock (1,172) 34,623
Cash proceeds from debt issuance 393,189 1,103,420
Debt service payments (139,019) (1,362,831)
Debt service payments to related parties -0- (218,395)
----------- ----------
252,998 (443,183)
----------- ----------
Net increase (decrease) in cash and cash equivalents (79,806) 72,501
Cash and cash equivalents, beginning 152,027 158,363
----------- ----------
Cash and cash equivalents, ending 72,221 230,864
----------- ----------
----------- ----------
</TABLE>
See accompanying notes to condensed consolidated financial statements
5
<PAGE>
RYAN-MURPHY INCORPORATED
Notes to Condensed Consolidated Financial Statements
June 30, 1996
Note A. CONDENSED FINANCIAL STATEMENTS
The condensed consolidated balance sheets as of June 30, 1996 and
December 31, 1995, the condensed consolidated statements of operations
for the three months and six months periods ended June 30, 1996 and
June 30, 1995, and the condensed consolidated cash flows for the three
month periods ended June 30, 1996 and June 30, 1995 have been prepared
by the Company without audit. The Condensed Consolidated Financial
Statements and Notes include the wholly owned subsidiary RMI Americas,
C.A. In the opinion of management, all adjustments (which include
only normal recurring adjustments) necessary to present fairly the
financial position as of June 30, 1996 and for all periods presented,
have been made. The financial statements for the prior years and/or
periods have been reclassified to conform with the current year's
presentation.
Note B: RELATED PARTY TRANSACTIONS
As of June 30, 1996 the indebtedness from the related parties was
$31,500 and the indebtedness to related parties was $21,000.
Note C: RESTRICTED CASH
The Company had restricted cash totalling $70,704 as of June 30, 1996.
This cash is collateral for payment and performance bonds.
Note D: INVENTORIES
Inventories consisted of the following at June 30, 1996:
Costs in excess of billings on uncompleted contracts $ -0-
Supplies 19,000
----------
Total $ 19,000
----------
----------
Note E: BILLINGS IN EXCESS OF COSTS ON UNCOMPLETED CONTRACTS
Included in other current liabilities in the accompanying financial
statements at June 30, 1996 are billings in excess of costs on
uncompleted contracts totalling $2,429.
Note F: PREFERRED STOCK
The Company's Articles of Incorporation authorize up to 5,000,000
Preferred Shares, to have such classes, par value, and preferences as
the Company's Board of Directors may determine from time to time. As
of June 30, 1996, no Preferred Shares are issued or outstanding.
6
<PAGE>
RYAN-MURPHY INCORPORATED
Notes to Condensed Consolidated Financial Statements
June 30, 1996
Note G: COMMON STOCK
There were 500,000,000 shares of $0.000067 par value common stock
authorized and 2,953,315 shares issued and outstanding at June 30,
1996. Effective February 12, 1996, the Company implemented a one-for-
thirty reverse split of the Company's common shares. This reverse
split had been approved and ratified by the Company's shareholders at
the shareholders' meeting on October 5, 1995, subject to Board
implementation.
Note H: STOCK OPTIONS & WARRANTS
The Company has issued incentive stock options two officers for 56,668
shares of stock at an exercise price $3.00 per share.
The Company has issued Warrants to Abraham Pustilnik, as part of his
loan agreement, for 97,500 shares of common stock at $1.00 per share
which may be exercised from July 8, 1996 through October 8, 1998.
Note I: GOING CONCERN AND SUBSEQUENT EVENTS
Management has adopted, an internal restructuring plan that entails
debt renegotiation, new business development, new management and a
new Board of Directors. The Company believes that the debt must be
restructured in order to formalize the Venezuelan contract.
The financial statements have been prepared on the assumption that the
Company will continue as a going concern. The Company has not been
profitable since the year ended January 31, 1992. Its current
liabilities exceed its current assets by $1,953,862 at June 30, 1996
and $1,313,956 at December 31, 1995. Management has addressed the
viability of the Company very aggressively.
As part of resolving the viability of the Company, Management brought
in Mr. Bruce Hissom as President, CEO and Treasurer during the last
quarter of 1995. Mr. Hissom brought in his Venezuelan project and
assets and new technologies. As the result of the new assets,
technology and management, the Company accepted a financing engagement
on March 21, 1996, which provided an initial $250,000 bridge loan.
The financing engagement provides for advising and assisting the
Company with short-term financing, engaging market makers, seeking
additional investment houses, and other financing options which may
include additional public offerings. The investment advisor is
prepared to assist the Company in raising $3,000,000 or more. The
financing engagement states the financing company anticipates
assisting the Company in the scheduling and preparation of
presentations to qualified institutional investors in preparation for
a $3,000,000 to $6,000,000 public offering of the Company's
securities. The financing company also anticipates managing, or
engaging a manager for such an offering within twelve months to
provide the Company with long-term financing. The Company used the
$250,000 bridge loan financing to pay some past due debts, and for
current working capital. The Company needs additional bridge capital
to remain in business. The finance company has asked the Company to
acquire one or more contracts for additional financing. The Company
is in negotiation with several companies and governmental entities,
although no definitive agreement has been signed as of the date
hereof.
7
<PAGE>
RYAN-MURPHY INCORPORATED
Notes to Condensed Consolidated Financial Statements
June 30, 1996
On April 10, 1996, the Company's wholly owned subsidiary, RMI
Americas, C.A. received a Certificate of Occupancy permit from the
Municipality of Caroni, Venezuela to commence treatability studies and
present design parameters for a thermal treatment facility at the new
location. In addition, the Company received a Certificate of
Occupancy to present design parameters for a 3,100 acre security
landfill to be located on the outskirts of the Municipality of Caroni,
Venezuela. The Company currently has an option to purchase the land
subject to the permits.
On July 16, 1996, the Company's wholly owned subsidiary, RMI Americas,
C.A. entered into an agreement to acquire the rights to an existing
contract, approximately $4,000,000, to process waste oil in Venezuela.
The contract requires front end funding of approximately $100,000 with
additional funding of approximately $1,500,000 for additional
equipment. The Company has received a preliminary commitment,
contingent upon the Company restructuring its debt.
8
<PAGE>
RYAN-MURPHY INCORPORATED
Part I. Item II.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The Environmental Construction Management division had revenue of $155,724 and
gross profit (loss) from operations of ($61,181) for the six months ended June
30, 1996 compared to revenue of $2,125,719 and gross profit from operations of
$574,114 for the six months ended June 30, 1995. The decrease in revenues and
gross profit was due to decreased volume from the Company's core customer,
decreased volume and profits in the California office and an overall change in
operations of the entire Company. The California office was officially closed
as of March 31, 1996.
The Good Earth Machine division had revenue of $15,817 and gross profit (loss)
from operations of ($33,583) for the six months ended June 30, 1996 compared to
revenue of $1,352,888 and gross profit from operations of $104,233 for the six
months ended June 30, 1995. The only revenue for the current six months period
was the sale of parts. The Company currently does not have substantial work
scheduled.
The new Technologies division, which was organized after Mr. Bruce Hissom became
President of the Company, has not entered into any contracts. The Company has
entered into a Memorandum of Understanding with a major international company to
jointly pursue work for this division on Department of Energy sites and with
other large private corporations. The Company currently is negotiating several
contracts which could utilize the RadFix Technology, however, none have been
signed as of this date.
The new Land division, which was organized after Mr. Bruce Hissom became
President of the Company, has submitted several proposals, and is in the
investigative stage for several projects.
The Company had a net profit (loss) after taxes of ($1,031,990) for the six
months ended June 30, 1996 compared to ($491,846) for the six months ended June
30, 1995. The June 30, 1996 loss included $130,196 in write-downs and
abandonment of a business site, and the June 30, 1995 loss included $218,574 in
write-downs and abandonment of a business site. The balance of the increase in
net loss was caused by the closing down of the California office and the change
in emphasis from underground storage tank removals to new remediation
technologies in the new Technologies division and the acquisition, remediation
and subsequent disposal of environmentally impaired properties in the new Land
division. The Company currently does not have any work and will reinstate its
liability insurance policies after financing is arranged, a debt restructure
plan is in place, and work is started again. The business and profits from the
two new divisions is expected to start in the third or fourth quarter of 1996.
Net cash flows from (used in) operations was ($348,742) for the six months ended
June 30, 1996 compared to $61,286 for the six months ended June 30, 1995. Major
sources of operating cash were Accounts Receivable, Accounts Payable, Deferred
Payrolls, and non cash charges of depreciation and
9
<PAGE>
amortization and the write down of inventory. Major use of operating cash
was an increase in Billings In Excess Of Costs. Financing activities
provided $252,998 compared to (used) of ($443,183) during the first six
months of last year. Debt issuance accounts for the provision and debt
service accounts for the usage in both periods.
Additional consolidation and restructuring of Administrative and General
expenses are being considered which should decrease losses and increase cash
flow.
The Company has not been profitable since the year ended January 31, 1992, and
has a net capital deficiency at June 30, 1996 that raises a substantial doubt
about its ability to continue as a going concern. Management has addressed this
issue very aggressively. The Company's twenty (20) largest creditors were given
a skeleton restructuring proposal on July 22, 1996. The Company received a
positive response to this skeleton proposal and issued a formal restructuring
proposal to the same twenty (20) creditors on August 6, 1996, and asked for a
response by August 14, 1996. The formal proposal included the choices of
converting debt to preferred stock, converting debt to a long term note payable,
a combination of the above, a moratorium on all payments through December 31,
1996, and then revert to the original payment schedule. All judgments and liens
are required to be removed as part of the proposal. As of this writing, seven
(7) of the twenty (20) creditors have accepted the proposal in writing, several
others have called and asked for additional clarification. These twenty (20)
creditors represent approximately 80% of the debt of the Company. Management
believes it is mandatory to restructure the debt in order to acquire financing.
As part of resolving the viability of the Company, Management brought in Mr.
Bruce Hissom as President, CEO and Treasurer during the last quarter of 1995.
Mr. Hissom brought in his Venezuelan project and assets and new technologies.
As the result of the new assets, technology and management, the Company accepted
a financing engagement on March 21, 1996, which provided an initial $250,000
bridge loan. The financing engagement provides for advising and assisting the
Company with short-term financing, engaging market makers, seeking additional
investment houses, and other financing options which may include additional
public offerings. The investment advisor is prepared to assist the Company in
raising $3,000,000 or more. The financing engagement states the financing
company anticipates assisting the Company in the scheduling and preparation of
presentations to qualified institutional investors in preparation for a
$3,000,000 to $6,000,000 public offering of the Company's securities. The
financing company also anticipates managing, or engaging a manager for such an
offering within twelve months to provide the Company with long-term financing.
The Company used the $250,000 bridge loan financing to pay some past due debts,
and for current working capital. The Company needs additional bridge capital to
remain in business. The finance company has asked the Company to acquire one or
more contracts for additional financing. The Company is in negotiation with
several companies and governmental entities, although no definitive agreement
has been signed as of the date hereof.
The Company has been a defendant in numerous creditor suits because of non-
payment of debt. In many cases the Company entered into note payable agreements
with payment schedules, and in some cases the settlement agreement included a
provision for a stipulated judgment in the event of default. The Company has
defaulted on all notes payable payment schedules. In cases that provided for a
stipulated judgment, some, but not all, creditors have filed the stipulated
judgment with the court.
On April 10, 1996, the Company's wholly owned subsidiary, RMI Americas, C.A.
received a Certificate of Occupancy permit from the Municipality of Caroni,
Venezuela to commence treatability studies and present design parameters for
a thermal treatment facility at the new location. In addition,
10
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RYAN-MURPHY INCORPORATED
Notes to Condensed Consolidated Financial Statements
June 30, 1996
the Company received a Certificate of Occupancy to present design parameters
for a 3,100 acre security landfill to be located on the outskirts of the
Municipality of Caroni, Venezuela. The Company currently has an option to
purchase the land subject to the permits.
On July 16, 1996, the Company's wholly owned subsidiary, RMI Americas, C.A.
entered into an agreement to acquire the rights to an existing contract,
approximately $4,000,000, to process waste oil in Venezuela. The contract
requires front end funding of approximately $100,000 with additional funding
of approximately $1,500,000 for additional equipment. The Company has
received a preliminary commitment, contingent upon the Company restructuring
its debt.
11
<PAGE>
RYAN-MURPHY INCORPORATED
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The Company is a defendant in a lawsuit brought by Key Bank of
Colorado in the Colorado State District Court for the City and County
of Denver. The bank alleges the Company owes the bank approximately
$155,571 on a revolving line of credit negotiated with the bank in
1992. The bank did not renew the line of credit in 1995 and declared
the note in default. The Company was current on all payments at
renewal date. The Company asserted certain counterclaims as a set-off
to amounts which may be owed to the bank. The Court granted the
Plaintiff's Motion for Summary Judgment on the issue of the Company's
default of the note and the right to foreclose on the Company's
security agreement. The Court also granted a Motion for Summary
Judgment regarding certain defenses and one claim of relief which the
Company raised, but denied a Motion for Summary Judgment and let stand
the remaining affirmative defenses and claims for relief and the
Company's remaining counterclaims. The Company has negotiated a final
settlement with the bank, however it defaulted on the payment
schedule.
The Company is a defendant in a lawsuit brought by Price Property and
Investments LLC in Colorado State District Court, Adams County,
Colorado. The Company borrowed $315,000 from the Plaintiff in 1990 on
a lease purchase/finance agreement. The Plaintiff renewed this
original agreement with a note in the amount of $320,000. The Company
has paid the Plaintiff approximately $566,570 in payments against the
original agreement and subsequent note. The Plaintiff alleges a
default of the note for an approximate amount of $298,752. The
Company has asserted, as a defense against the Plaintiff, that the
note has been paid in full. The Court granted the Plaintiff's Motion
for Summary Judgment on April 18, 1996 regarding the replevin and the
foreclosure upon the security interest in the property at issue. The
Company has been in contact with the Plaintiff and believes a
satisfactory payment schedule can be arranged, however, there can be
no guarantee of a satisfactory payment schedule.
The Company is a defendant in a lawsuit brought by Joseph C. Vittone
in Superior Court of the State of California for the County of
Riverside. The second amended complaint was filed July 9, 1996. The
amended complaint lists ten causes of actions with "amounts to be
proven at the time of trial". The defense of this lawsuit is being
handled by the Company's insurance carrier. There may be portions of
the complaint that will not be defended by the insurance carrier.
The Company was and is the defendant in a number of other legal
proceedings. Some of the cases were settled out of court, and the
Company has defaulted on the payment terms. Some of the settlement
agreements included a provision for a stipulated judgment in the event
of default. Some of the parties have filed judgments, others have
not. There are approximately twenty four (24) legal actions that have
been settled and in default or are still in process. Some of these
actions are in small claims
12
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courts. The Company is currently without legal representation in all
formal court cases, except the Joseph C. Vittone lawsuit, because it
does not have the funds to pay the attorneys.
Item 2. CHANGES IN SECURITIES
not applicable
Item 3. DEFAULTS UPON SENIOR SECURITIES
not applicable
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
not applicable
Item 5. OTHER INFORMATION
not applicable
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
none
Item 7. FORM S-3
none
13
<PAGE>
RYAN-MURPHY INCORPORATED
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Ryan-Murphy Incorporated
--------------------------------------
Registrant)
Date:
-------------------- --------------------------------------
Bruce T. Hissom
President
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheets and consolidated balance sheets and consolidated
statements of operation found on pages 3 - 5 of the Company's Form 10Q for the
quarter ended June 30, 1996, and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 72
<SECURITIES> 0
<RECEIVABLES> 186
<ALLOWANCES> 20
<INVENTORY> 19
<CURRENT-ASSETS> 257
<PP&E> 1636
<DEPRECIATION> 24
<TOTAL-ASSETS> 3466
<CURRENT-LIABILITIES> 2211
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 3466
<SALES> 171
<TOTAL-REVENUES> 171
<CGS> 266
<TOTAL-COSTS> 266
<OTHER-EXPENSES> 758
<LOSS-PROVISION> 15
<INTEREST-EXPENSE> 23
<INCOME-PRETAX> (1017)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1017)
<DISCONTINUED> 15
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1032)
<EPS-PRIMARY> (0.349)
<EPS-DILUTED> (0.349)
</TABLE>
