<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Fiscal Year Ended: December 31, 1995
Commission File No. 0-18571
RYAN-MURPHY INCORPORATED
------------------------
(Exact Name of Registrant as specified in its Charter)
COLORADO 84-0998860
- --------------------------------- ----------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
8774 Yates Drive
Suite 100
Westminster, Colorado 80030
- -------------------------------------------- -----------
(Address of Principal Executive Offices) (Zip Code)
(303) 427-4567
---------------
Registrant's Telephone Number, Including Area Code
Securities Registered Pursuant to Section 12(g) of the Act:
COMMON STOCK $.000067 PAR VALUE
-------------------------------
(Title of Class)
WARRANTS TO PURCHASE COMMON STOCK $.000067 PAR VALUE
-----------------------------------------------------
(Title of Class)
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. Yes X No
-------- --------
State the aggregate market value of the voting stock held by non-affiliates
of the Registrant: approximately $ 702,838.
----------
Indicate the number of shares outstanding of each of the Issuer's classes
of common stock, as of the latest practicable date: Outstanding at March 1,
1996, a total of 2,502,104 shares of common stock, $.000067 par value (including
1,291 shares of treasury stock), after giving effect to a one-for-thirty reverse
split of the issuer's common shares.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in the definitive proxy or information
statements incorporated by reference in Part III of this Form 10K or any
amendment to this Form 10K X .
---------
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Documents incorporated by reference are found in Item 14.
<PAGE>
PART I
Item 1. BUSINESS.
(a) GENERAL DEVELOPMENT OF BUSINESS
Ryan-Murphy Incorporated (the "Company"), is a Colorado corporation. The
principal business address is 8774 Yates Drive, Suite 100, Westminster, Colorado
80030.
The Company was incorporated under the laws of the State of Colorado on December
18, 1984 under the name Postmark Stores of America, Inc. for the purpose of
engaging in custom packaging and transportation of materials and in mass
marketing. The Company completed a public offering in 1987.
In February, 1989, the Company completed an acquisition of Ryan-Murphy, Inc., a
private Colorado corporation. The two companies were merged and the combined
company took the name Ryan-Murphy Incorporated.
In June, 1990, the Company completed a secondary offering of its Common Shares.
The Company raised a total of approximately $893,000 and received net proceeds
of approximately $676,000. In February, 1992, the Company completed an
additional public offering of its securities and raised $1,950,000, of which it
received net proceeds of approximately $1,800,000. A total of 3,200,000 Warrants
were issued in this Offering. The common stock purchase Warrants lapsed as of
February 28, 1996.
On December 12, 1995, the Company entered into an Agreement with Bruce T. Hissom
whereby the Company and Mr. Hissom agreed to have a Venezuelan subsidiary of the
Company, RMI Americas, C.A., acquire all permits, rights thereto, and associated
contract rights for a 50,000 ton per year hazardous waste incineration operation
in Venezuela which Mr. Hissom and Ambiente Americas, C.A., a company owned by
Mr. Hissom, currently possessed, and a hydro-carbon processing facility with
associated permits and a patent which is permitted to process asphalt and K
waste, which is also owned by Mr. Hissom. A total of 57,334,590 shares were
issued in the name of Mr. Hissom for these assets which gave him approximately
76% of the outstanding shares of the Company. Mr. Hissom is also entitled to
another 13,536,330 shares, prior to the one-for-thirty split, for arranging
$250,000 or more in financing for the Company.
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.
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The Company has not been subject to any bankruptcy, receivership or similar
proceeding.
(b) OPERATIONS.
GENERAL
The Company offers a total package of services for clients. These services
involve remediation, investigation, and construction management and consulting
services to assist clients with petroleum-contaminated properties which must be
restored to standards acceptable to regulatory agencies, owners, prospective
buyers, lenders, and the general public. The private company, which was merged
with the Company, had been involved in the underground storage tank business
since 1978. The servicing of underground storage tanks was the Company's primary
business until 1989. At that time, it expanded its business to include the
development, construction, and operation of Good Earth Machines.
In November, 1995, the Company restructured its operations. Currently, the
Company has four operating divisions which provide services to clients across
the entire United States and one wholly owned subsidiary which is scheduled to
begin operations during 1996 in Venezuela.
The Environmental Construction Management Division provides design,
installation, and decommissioning of fuel delivery systems, including
underground storage tanks. The following is a list of services provided by this
division:
- bio-remediation
- vapor extraction
- thermal soil remediation using the "Good Earth Machine",
- underground storage tank compliance programs,
- hazardous material release investigations,
- property transfer environmental assessments,
- corrective action planning and system construction, and
- fuel storage-delivery system installation and upgrading.
The Good Earth Machine Division markets the Good Earth Machines and associated
thermal desorption equipment as well as treating contaminated soil with the
thermal treatment method.
In November, 1995, the Company added the RMI Technologies Division, which is
undertaking the development of the RADFIX Harmonic Compaction process and the
marketing of the Electron Beam Treatment system and the Hyperbaric Filter.
Also in November, 1995, the Company created the RMI Land Division, which is
focused on acquiring and developing environmentally impaired properties, with a
particular focus on abandoned, idled, or under-used industrial and commercial
facilities, including service stations.
In December, 1995, the Company incorporated a wholly-owned Venezuelan subsidiary
called RMI Americas, C.A. which was formed to develop the first commercial
permit for a 50,000 ton per year thermal treatment facility to be located in
Puerto Ordaz, Venezuela.
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ENVIRONMENTAL CONSTRUCTION MANAGEMENT DIVISION
The Company has traditionally been involved in the Underground Storage Tank
(UST) market. The Company's initial focus was in the design, installation and
decommissioning of fuel delivery systems, including underground storage tanks.
In the last seven years, the Company has expanded its focus to include a variety
of environmental remediation services, while maintaining its original core
business. The Company's services are provided through the use of a combination
of the Company's own employees and technical resources and qualified
subcontractors who perform specialized tasks on a project specific basis. The
following is a list of the major areas in which the Company is involved:
UST Remediation Services
Historically, a majority of the Company's revenues have been generated from
the UST market. The revenue contribution of this market to the Company in
recent years has declined.
In 1988, the U.S. EPA promulgated underground storage regulations that
outlined requirements for upgrading UST systems, and eliminating certain
UST systems by 1998. The Company had traditionally been working with
national clients such as Goodyear, Ryder, Bridgestone/Firestone, and U-
Haul, which now have substantially complied with the federal regulations and
cleanup deadlines. The Company plans to focus in the coming fiscal year on
smaller clients and on states that have financial assistance programs for the
decontamination of leaking UST's. The Company estimates that the States of
Colorado and Wyoming still have approximately 10,000 available sites for
remediation and budgeted funds for decontamination. On an industry-wide basis,
the Company anticipates an increase in UST business as the I998 deadline for EPA
compliance approaches.
Environmental Audits, Assessments and Investigations
The Company performs environmental site analysis, environmental site
assessments, and environmental impact studies on the subject site. The
audits, site assessments and remedial investigations are generally used in
connection with real estate transactions and financing as well as in
monitoring by clients engaged in businesses involving the risk of
contaminant release. In some instances, site evaluation and monitoring are
conditions to obtaining permits, or are otherwise mandated by regulation.
Typical clients include banks, real estate companies and UST owners.
Environmental Regulatory Compliance Consulting
The Company assists its clients in recognizing, understanding the impact
of, and developing technical approaches for compliance with regulations and
permitting requirements. The Company has provided regulatory compliance
consulting services to a wide variety of industrial and commercial
operations, including Allied Signal, American Airlines, Amoco, ARCO,
Bridgestone-Firestone, Exxon, Goodyear, Hertz, National, Ryder, Southern
Pacific Railroad, U.S. Air Force, U.S. Army, and the U.S. Postal Service.
The
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Company most commonly consults with respect to the EPA's UST Rules, the
Clean Water Act, the Comprehensive Environmental Response Compensation and
Liability Act ("CERCLA"), as amended by the Superfund Amendments and
Reauthorization Act of 1986, and the Resource Conservation and Recovery Act
of 1976 ("RCRA"), as amended by the Hazardous and Solid Waste Amendments of
1984.
On-Site Remediation
The Company's On-Site remediation services include: (i) feasibility studies
to select the best available technologies given the specific conditions of
the site, extent of contamination, impact to groundwater, and types of
soils (ii) plan design to contain and remediate (ii) coordination of
reporting and permitting with the approximate regulatory authorities and
(iv) management and implementation of the remediation plan. In all cases,
the Company looks to incorporate its own technology, therefore providing
additional cost effective measures. Typical clients, which included GEM
Division services, have included American Airlines, DOW Environmental,
Exxon, Rathjens GMBH in Germany, PepBoys, and Shell Oil.
GOOD EARTH MACHINE DIVISION
Thermal Remediation & Equipment Fabrication
The Company designed, patented, and manufactured the first thermal
desorption machine with catalytic oxidizer in 1989. Since that time, the
Company's GEM Division has built fourteen mobile GEM remediation plants and
has processed over a quarter of a million tons of contaminated soil on over
70 projects in the United States, Canada, and Germany. The projects have
ranged in size from former service station projects of 500 tons of
contaminated soil to major oil and military project sites each of which
consisted of between 10,000 to more than 20,000 tons of contaminated soil.
The GEM Division has also managed and supervised projects on a turn-key
basis consisting of site evaluation and contaminant characterization,
permitting, development of project workplan, tank and piping removal,
excavation of contamination, thermal remediation, backfilling and
compaction of remediated soils, paving, and final project reports to
regulatory representatives.
New Markets
In the past two years, the Company has received indications of interest for
the purchase of thermal desorption equipment and services from Canada and
Europe. Two years ago, the Company permitted a unit in Canada, and sold a
used GEM low temperature thermal desorption (LTTD) plant to a Canadian
environmental company. During the past eighteen months, two used GEM LTTD's
have been permitted and sold to two separate German environmental
companies. This year, the Company is anticipating selling at least four new
soil processing plants to Canadian and German clients. As of the date of
this Form 10K, there have been no definitive further agreements made with
any additional international companies.
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The foreign market demand, particularly in the German market, for highly
mobile remediation equipment and services is just beginning and, the
Company believes, is similar to the U.S. market demand several years ago,
except that the foreign environmental concerns address a much broader
spectrum of contamination. For this market, the Company has developed a new
generation of GEM soil processing plants capable of high temperature
thermal desorption of soils contaminated with long chain hydrocarbons.
New Technology Development
During the last seven years, the Company has produced low temperature
thermal desorption equipment fabricated of common carbon steels. The
Company has now shifted its focus to produce high temperature thermal
remediation equipment for soils contaminated with solvents, poly aromatic
hydrocarbons, and refined and crude oils.
The development of high temperature desorption equipment capable of
processing these contaminants will be the focus of the Company's new
thermal technology development, utilizing temperature resistant materials
for the filtration of dust from the process exhaust, auxiliary catalytic
and scrubber exhaust treatment equipment for chlorinated solvent
desorption, and the extensive use of state-of-the-art metal alloys
developed by the aerospace industry that are capable of sustained operation
and wear resistance at high temperatures.
RMI TECHNOLOGIES DIVISION
The purpose of this Division is to develop and bring to market technologies
which reduce or enhance the remediation process. This Division has only been
recently formed and has generated no revenues as of the fiscal year end. At the
present time, the Company has focused on three technologies:
RADFIX Harmonic Compaction
The Company has acquired the exclusive management, operations, and
marketing rights of the RaDFIX Harmonic Compaction process and plans to
position the Company to take advantage of opportunities in the emerging
market for the clean-up and disposal of low level nuclear waste, hazardous
waste, mixed waste, and NORM material.
The RaDFIX process, which is a proprietary process whose patent is pending,
is designed to stabilize radioactive, hazardous, and mixed waste soils at
operating and capital equipment costs far below competing technologies.
With this process, contaminated soils can be packaged into a stabilized
final net shape suitable for safe temporary, long-term, or permanent
storage. Examples of such applications include high alumina pourpads (2
tons each), tap blocks (500 lbs), slide gates (40 lbs), pipes (6' diameter)
silica carbide heating elements, and walls (weirs and dams). The technology
has had a successful ten year sales history in industrial refractors and is
only now being applied to this new hazardous waste market.
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The Company has entered into a strategic alliance with Los Alamos, New
Mexico Technical Associates to market technology within DOE sites
throughout the country.
Electron Beam ("E-Beam")
The Company has received a marketing agreement for the Electron Beam
Treatment System, which treats hazardous and toxic organic compounds in
water, sludge, sediment and soil.
The process was developed with the support of the National Science
Foundation and the Environmental Protection Agency Superfund Innovative
Technology Evaluation program. Successful field treatment projects have
been conducted at the DOE Savannah River Site, at McClelland Air Force
Base, and at 15 sites in East Germany. The E-Beam generates hydroxyl and
other free radicals that destroy most hazardous and toxic organic compounds
including waste industrial solvents, pesticides, and fuels. Representative
client applications include DOW-Bona Chemical, McClelland Air Force Base
and EPA/DOE.
The Company is currently attempting to sell one unit in Germany and one
unit in Venezuela.
Hyperbaric Filter
The Company is the exclusive U.S. sales representative for the Andritz
Hyperbaric Filter (HBF), manufactured by Andritz Ruthner, Inc., a heavy
equipment manufacturer located in Austria.
Slurries containing large portions of ultra fine material such as
concentrates, raw slurries, and tailings from base metal or precious metal
concentrators or coal prep metal can effectively be dewatered on the HBF. A
single HBF unit can replace multiple vacuum filter/thermal dryer
combinations of several plate and frame filters. The HBF combines the
continuous operation of a rotary filter with moisture levels as low as
those achievable by plate and frame presses.
The Company is currently in negotiations with a potential customer to
provide process design, management, and technology for the treatment of
approximately 30 million tons of red mud, a by product of aluminum
production.
RMI LAND DIVISION
The Company has developed a strategy for the acquisition of environmentally
impaired properties ("Environmental Properties"), taking into consideration the
EPA Brownfields Economic Redevelopment initiative ("Brownfields"). The EPA
defines Brownfields as abandoned, idled, or under-used industrial and commercial
facilities where expansion or redevelopment is complicated by real or perceived
environmental contamination. The EPA Brownfield initiative is a government
commitment to help revitalize such properties both environmentally and
economically, reduce health risks and restore the economy to areas where
Brownfields exist.
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U.S. Government studies estimate that there are between 150,000 to 425,000
environmentally distressed properties with an estimated value is excess of $650
billion. This Division has only been recently formed and has generated no
revenues as of the fiscal year end.
RMI Land plans to acquire commercial and industrial environmental properties
from private owners of financial institutions, and government agencies. RMI Land
will negotiate the acquisition of the property in exchange for the environmental
remediation. The Company plans to utilize its in-house technical capabilities to
rapidly evaluate and provide cost effective remediation solutions.
RMI Land Acquisition Program
Once a property has been identified and the owner agrees to initial terms
and conditions, a binding memorandum contract will be signed enabling the
Company to perform a preliminary legal, financial, and environmental
evaluation.
The Company's staff engineers provide Phases I, II and III site assessments
and initiate discussions with regulatory agencies to define scope of work
and budget requirements. The property would be selected and the appropriate
plan for cleanup and for property utilization would be developed.
Upon completion of the cleanup, RMI Land would look to sell the property or
enter into a joint venture with a developer for long-term use.
The Company believes that a combination of the proper regulatory
agreements, remediation engineering design, and insurance policies could
effectively cap the potential liability of the seller, buyer and lender as
far as the property is concerned. While laws and regulations of
environmental liability continue to be a rapidly evolving area for federal
and state law, the Company believes they can develop a niche for the
acquisition of such properties. At the present time, the Company is
negotiating on several properties. However, no final agreements have been
reached at this time.
RMI AMERICAS, C.A.
The Company has reached a tentative agreement with OHM International, Inc. to
operate the Hazardous Waste Treatment Center in Venezuela. The operation is
planned to be run by a corporation that will be jointly owned by RMI Americas,
C.A., a wholly-owned subsidiary of the Company, and OHM. Draft documents are
now being prepared for the Venezuelan hazardous waste treatment operation. The
Company believes that operations will start during the third or fourth quarter
of 1996. The driving force for the project is the privatization of industries
and the Venezuelan environmental law.
The Company has also reached a tentative agreement with OHM International, Inc.
for the operation of an asphalt plant which RMI Americas, C.A. owns and is
permitted to process K waste and recycle and/or reuse refinery by products. The
operation will be run by a corporation that is planned to be jointly owned by
the RMI Americas, C.A. and OHM. Proposal documents
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will be prepared during the third quarter of 1996. It is anticipated that this
plant will restart operations during the first quarter of 1997.
LINE OF BUSINESS
During the past three fiscal periods, the following lines of business were
active. The contribution to the Company's package of services of each line of
business was as follows:
<TABLE>
<CAPTION>
Year ended Year ended Year ended
Line of Business Dec 31, 1995 Dec 31, 1994 Dec 31, 1993
- ---------------- ------------ ------------ ------------
<S> <C> <C> <C>
Environmental Construction
Management $ 2,871,712 $ 5,326,876 $ 7,617,772
Soil Remediation Services 1,273,834 1,335,973 3,310,414
Sales of Good Earth Machines 1,313,918 1,471,952 600,000
----------- ----------- ------------
Totals $ 5,459,464 $ 8,134,801 $ 10,928,186
----------- ----------- ------------
</TABLE>
In November, 1995, the Company reorganized its operations, adding two divisions
and a wholly-owned subsidiary. There were no material revenues in these new
divisions or subsidiary through the end of the fiscal year.
The Company has done and currently has projects with a number of national
companies. They are primarily either Fortune 500 companies or companies with
revenues in excess of $100 million dollars per year. The Company also has
contracts with private companies with revenues of less than $100 million dollars
per year and governmental entities, none of which are considered to be material
at this time.
During the last fiscal year the Company had two contracts that accounted for
more than ten (10%) of the Company's revenue. The Company's contract with
Bridgestone/Firestone accounted for approximately 31.82% of the total revenue.
This contract was substantially completed during the fiscal year. No material
additional revenues are expected from this relationship in the near future. The
Company had a soil remediation contract with ARCO that accounted for
approximately 23.04% of the total revenue during the fiscal year. Equipment
sales accounted for approximately 24.07% of the total revenue during the fiscal
year.
SUBSEQUENT EVENTS
The Company accepted a financing engagement from North American Securities
Company on March 21, 1996. As a part of this engagement, the Company received an
initial $250,000 bridge loan in April, 1996 from an unaffiliated third party.
The financing engagement provides
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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 financing engagement
states that North American Securities Company anticipates assisting the Company
in the scheduling and preparation of presentations to qualified institutional
investors in preparation for a $3mm to $6mm public offering of the Company's
securities. North American Securities Company anticipates managing, or engaging
a manager for, such an offering within twelve months to provide the Company with
long-term financing.
ITEM 2. PROPERTIES.
As of April 1, 1992, the Company's business office became located at 8774 Yates
Drive, Suite 100, Westminster, Colorado 80030. The Company currently pays
approximately $11,203 per month to an unaffiliated entity on the lease, which
was renewed, effective April 1, 1994, for a period of three (3) years. The
Company utilizes this office space for corporate management, accounting and
administrative needs.
The Company also leases two warehouse spaces in Westminster, Colorado, for which
it pays approximately $475.00 per month and approximately $217.00 per month on
month-to-month leases.
The Company also currently utilizes office space in Corona, California to
monitor its West Coast operations. This space is rented at approximately $1,400
per month under a month to month lease.
The Company's subsidiary, RMI-Americas C.A. owns an asphalt plant in Venezuela,
which it intends to utilize as part of its Venezuelan project. The subsidiary
also has a contract to purchase another parcel which is intended to be utilized
for the thermal treatment facility to be located in Puerto Ordaz, Venezuela.
The Company also owns office, automobile and field equipment which it utilizes
in its operations.
ITEM 3. 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. This 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 has asserted certain counterclaims as a
set-off to amounts which may be owed to the bank. The lawsuit is presently in
the discovery phase.
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
agreement. The Plaintiff renewed this original agreement with a note in the
amount of $320,000. The Company has paid the Plaintiff
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approximately $566,570 in payments against the lease purchase 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 Company is also a defendant in several legal proceedings in the ordinary
course of business. Otherwise, no legal proceedings to which the Company is a
party were pending during the reporting period, and the Company knows of no
legal proceedings pending or threatened or judgments entered against any
director or officer of the Company in his capacity as such.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company submitted three matters to a vote of shareholders through
solicitation of proxies in the fourth quarter of the last fiscal year. This
solicitation, which took place for the Company's shareholder meeting on October
5, 1996, was a vote on the election of Directors for the Company, approval of a
reverse split of the issued and outstanding common shares of the Company on the
basis of one new share for each thirty shares currently outstanding, and
approval of the Company's auditors for the current audit. All such matters were
approved by the shareholders.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
(a) PRINCIPAL MARKET OR MARKETS
The Company's securities initially traded as a Unit consisting of one share of
common stock and two warrants to purchase common stock. The Units and those
warrants have since expired. For a period of time, the Company's securities
traded only as common stock. In February, 1992, a new common stock purchase
warrant of the Company started trading and ceased trading in a public market in
1995. The common stock purchase warrants lapsed as of February 28, 1996.
Market makers and other dealers will provide bid and ask quotations of the
Company's securities. Such quotations were provided through the NASDQ Automated
Quotation System, or NASDAQ, under the symbol "RMII" for the common shares until
September 13, 1995, when the Company was delisted from NASDAQ for failure to
meet the minimum bid price and capital and surplus requirements. The National
Association of Securities Dealers has agreed to reconsider the Company for
relisting, pending the submission of this Form 10K. The Company has met the
minimum bid price and capital and surplus requirements with the filing of this
Form 10K. At the present time, the Company's common shares trade on the NASDQ
Bulletin Board under the symbol "NYMR."
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.
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The table below represents the range of high and low bid quotations of the
common shares of the Company as reported by the National Quotation Bureau and by
NASDAQ and the NASD Bulletin Board during the applicable reporting period
herein. The following bid price market quotations represent prices between
dealers and do not include retail markup, markdown, or commissions; hence, they
may not represent actual transactions. All quotes are prior to giving effect to
the one-for-thirty reverse split of the Company's common shares:
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
Fiscal Period
ended Dec. 31, 1995
First Quarter $ .1875 $ .0996
Second Quarter $ .1874 $ .0625
Third Quarter $ .15625 $ .0625
Fourth Quarter $ .0625 $ .0625
Fiscal Period
ended Dec. 31, 1994
First Quarter $ 0.53 $ 0.20
Second Quarter $ 0.53 $ 0.28
Third Quarter $ 0.47 $ 0.25
Fourth Quarter $ 0.34 $ 0.13
</TABLE>
(b) APPROXIMATE NUMBER OF HOLDERS OF COMMON STOCK
As of December 31, 1995, a total of 75,063,116 shares of the Company's common
stock were outstanding and the number of holders of record of the Company's
common stock at that date was approximately 750. The Company estimates that it
has a significantly greater number of shareholders because a substantial number
of the Company's shares are held in nominee names by the Company's market
makers.
(c) DIVIDENDS
Holders of common stock are entitled to receive such dividends as may be
declared by the Company's Board of Directors. No dividends on the common stock
were paid by the Company during the periods reported herein nor does the Company
anticipate paying dividends in the foreseeable future.
(d) PREFERRED SHARES
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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 the date hereof, no
Preferred Shares are issued or outstanding.
Item 6. SELECTED FINANCIAL DATA.
The complete financial statements are included at Item 14 herein.
Operating Data (000's omitted) for the period ends are as follows:
<TABLE>
<CAPTION>
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Jan. 31,
Period Ended 1995 1994 1993 1992 1992
- ------------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total revenue $ 5,459 $ 8,135 $ 10,928 $ 9,584 $ 11,909
Income (loss) from
operations (1,041) (1,148) 1 (235) 314
Net income (loss) (1,575) (1,782) (200) (392) 41
Income (loss) per
share (0.0523) (0.1062) (0.0125) (0.0319) -0-
The summary Balance Sheet Data (000's omitted) as of the period ends
reported herein is as follows:
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Jan. 31,
Period Ended 1995 1994 1993 1992 1992
- ------------ ---- ---- ---- ---- ----
Total assets $ 4,105 $ 4,740 $ 5,022 $ 5,262 $ 4,688
Current liabilities 2,089 3,096 2,118 1,893 2,860
Long term obligations 139 55 147 412 608
Commitments and
contingencies -0- 191 -0- -0- -0-
Shareholders' equity 1,877 1,397 2,758 2,957 1,220
</TABLE>
No cash dividends were paid during the five periods ended December 31, 1995.
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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
The Company's operations are seasonal in nature. The greatest volume of work is
completed during the last nine calendar months of any given year.
The Company's revenues for the last fiscal year were derived from two divisions:
the Environmental Construction Management Division and the Good Earth Machine
Division. The Environmental Construction Management Division includes removal
and installation of underground storage tanks, testing and removal of
contaminated soil, groundwater testing and compliance reporting. The Good Earth
Machine Division includes the thermal treatment of contaminated soil and the
sales of Good Earth Machines, for which the Company owns the patent rights.
On October 5, 1995, Mr. Bruce Hissom was elected President and Chief Executive
Officer of the Company. On October 5, 1995, the Company also entered into an
agreement which issued stock into an escrow account in exchange for rights to a
permit to process hazardous waste and other Venezuelan assets. On December 12,
1995, the Company entered into an agreement with Mr. Hissom whereby the Company
and Mr. Hissom agreed to have a Venezuelan subsidiary of the Company, RMI
Americas, C.A., acquire all permits, rights thereto, and associated contract
rights for hazardous waste incineration operation in Venezuela which Mr. Hissom
and Ambiente Americas, C.A., a company owned by Mr. Hissom, currently possessed,
and a hydro-carbon processing facility with associated permits and a patent
which is permitted to process asphalt and K waste, which is also owned by Mr.
Hissom. A total of 57,334,590 shares were issued in the name of Mr. Hissom
which gave him approximately 76% of the outstanding stock of the Company. Mr.
Hissom is also entitled to another 13,536,330 shares, prior to the one-for-
thirty split, for arranging $250,000 or more in financing for the Company.
The Venezuelan subsidiary, RMI Americas, C.A., is a wholly owned subsidiary of
the Company. The Company expects operations to begin during the second quarter
of 1996. Mr. Hissom also brought other technologies into the Company during the
last quarter of 1995. The Company expects to begin operations in its new
divisions, Technologies Division, Land Division and affiliated companies during
1996.
During the next fiscal year, the Company plans to focus its operations in three
areas: the Venezuela project; the RADFIX technology; and ventures utilizing the
EPA Brownfields Economic Redevelopment initiative. The other divisions are
expected to remain operational and to generate revenue. However, the Company
expects that its predominate revenue will come from these three new operations
ENVIRONMENTAL CONSTRUCTION MANAGEMENT DIVISION:
The Environmental Construction Management (ECM) Division revenue decreased from
$7,617,772 for the year ended December 31, 1993 by 12.54% to $5,326,876 for the
year
14
<PAGE>
ended December 31, 1994, and by 46.09% to $2,871,712 for the year ended December
31, 1995. The decrease for the year ended December 31, 1994, was primarily due
to a decrease in a major customer's work. During the first quarter of 1994, the
Company's major customer extended the remaining portion of their contract from
being completed in 1997 to being completed in 1998., which accounted for the
drop in revenue for 1994. During the first quarter of 1995, the Company's major
customer changed its program and is in the process of phasing out the Company's
work. The Company was not able to replace the reduction in this major customer's
work with other work during the current year.
Costs of construction for the ECM Division include all direct costs incurred at
each job site and indirect job costs which are not allocated to specific jobs.
The major components of direct job costs are labor, waste disposal and
subcontractors. The major components of indirect job costs are labor which is
not on the job site, depreciation of production equipment, health insurance
costs and salesmen's costs.
Gross profit from operations was $2,025,199 or 26.59% of revenue for the year
ended December 31, 1993, $1,444,877 or 27.12% of revenue for the year ended
December 31, 1994, and $603,906 or 21.03% for the year ended December 31, 1995.
This Division did not maintain its gross profit margin due to the large decrease
in gross revenue.
The administrative and general expenses for the environmental construction
management division was $834,756 or 9.67% of revenue for the year ended December
31, 1993, $699,390 or 13.13% of revenue for the year ended December 31, 1994,
and $459,068 or 15.99% of revenue for the year ended December 31, 1995. The
Division's actual expenses decreased for the years ended December 31, 1994 and
December 31, 1995, while the percentage of expenses increased because of the
decrease in revenue as discussed above. While the Company did reduce a number of
variable expenses, the Company did not reduce the expenses to the same
percentage of gross revenue as the previous year. Some of the fixed expenses
could not be reduced.
The major components of administrative and general expenses for the ECM division
are office salaries and associated payroll costs, general and health insurance
costs, rent and telephone expenses.
GOOD EARTH MACHINE DIVISION
The Good Earth Machine (GEM) Division decreased its revenue from $3,310,414 for
the year ended December 31, 1993, by 18.72% to $2,690,673 for the year ended
December 31, 1994, and by 3.83% to $2,587,752 for the year ended December 31,
1995. The 1993 revenue included the sale of a new Good Earth Machine for
$600,000, and the 1994 revenue included the sales of one new and two used Good
Earth Machines for $1,458,569. During 1994, the Company sold one of the used
GEMs on a lease purchase contract. The note receivable was sold in 1995. During
1995, the Company sold one new and two used Good Earth Machines for $1,313,918.
The Company's revenue from soil remediation in the GEM Division has decreased
substantially from $2,708,268 for the year ended December 31, 1993, to
$1,335,973 for the year ended
15
<PAGE>
December 31, 1994, to $1,273,834 for the year ended December 31, 1995. This
reduction in soil remediation revenue resulted from two sources. The first was
increased competition. And the second was the Company's changed focus for the
division in the second quarter of 1994 from seeking small soil remediation jobs
to primarily selling thermal desorption equipment and accepting primarily, large
soil remediation jobs. The 1995 revenue was from one job.
Costs of construction for the GEM Division include all direct costs incurred at
each job site and indirect job costs which are not allocated to specific jobs.
The major components of direct costs are labor, fuel, travel expenses of
employees, rental of equipment and subcontracts. The major components of
indirect job costs are labor which is not on the job site, health insurance
costs, and salesmen's costs which are directly related to the production of job
revenue.
The gross profit (loss) from operations for this division (excluding the fixed
site operation which was abandoned in 1995), was $121,018 or 3.66% of revenue
for the year ended December 31, 1993, and $32,189 or 1.20% of revenue for the
year ended December 31, 1994, and $137,537 or 5.31% of revenue for the year
ended December 31, 1995. The change in focus from selling soil remediation
services to selling thermal desorption equipment was prompted by the losses on
small soil remediation projects. The Company had a number of signed contracts
for small soil remediation contracts which were completed during the year ended
December 31, 1994. The sales of thermal desorption equipment produce a much
better gross profit margin compared to the soil remediation services performed
on mobile jobs. The Company sold its last two used Good Earth Machines in 1995.
During fiscal year 1994, the Company entered into an agreement with Green Plan
Environmental Corporation (GPEC), a Canadian company, to do a demonstration test
near Kitchener, Ontario, Canada. The test was conducted for the Canadian Bureau
of Water Resources. The test met the applicable Canadian permitting
requirements, and GPEC entered into a lease-purchase agreement for a Good Earth
Machine. The note receivable was sold during 1995.
During 1994, the Company entered into an agreement with a large construction and
environmental company in Germany to process 20,000 tons of contaminated soil
with one of its good earth machines. During the remediation of the soil, the
Company obtained the first German Operating Permit to be issued. The Company
believes this is a market that will expand the thermal desorption equipment
sales revenues in 1996. The Company currently has two proposals issued to two
German companies and one proposal to a Canadian company for the purchase of the
Company's new "high temperature" units. The Company is also in discussions with
a German company for a large thermal remediation job which may lead to a joint
venture job and the sale of another unit.
The administrative and general expenses for the GEM Division, excluding the
fixed site operation, was $557,579 or 16.84% of revenue for the year ended
December 31, 1993, $752,648 or 27.97% of revenue for the year ended December 31,
1994, and $178,099 or 6.88% of revenue for the year ended December 31, 1995.
Prior to 1994, the Company had hired salesmen on a commission only basis and
made advances to the salesmen against commissions to be earned. The salesmen's
employment
16
<PAGE>
agreements required the salesmen to repay any advances that had not been earned
and repaid if and when they left the employment of the Company. During 1994, the
Company changed its salesmen's employment policy of paying a salary plus a
commission. The Company attempted to collect old receivables. Any receivable
that was not easily collected by the Company was turned over to attorneys for
collection. During the fourth quarter of 1994 and in the first quarter of 1995,
the Company entered into several settlement agreements. In spite of diligent
collection efforts, the Company added $306,000 to the Bad Debt Reserves for the
year ended December 31, 1994. Without the Bad Debt charges, the administrative
and general expenses would have been $446,648 or 16.60% of revenue for the year
ended December 31, 1994. The Company does not anticipate material bad debt write
offs in future periods.
The major components of administrative and general expenses for the Good Earth
Machine Division are office salaries and associated payroll costs, bad debt
charges, depreciation and amortization of office equipment and patents,
interest, general and health insurance costs, rent and telephone expense.
Officer Salaries were $27,462 during the year ended December 31, 1993. These
costs were the result of the Company hiring a vice president on salary in
January, 1992. The vice president resigned during 1993. Depreciation and
amortization of office equipment and patents was $106,126 or 4.10%, of the total
revenue for the current year.
The administrative and general expenses for the fixed site operations were
$50,236 for the year ended December 31, 1994. The fixed site operations were
abandoned in 1995 and the net loss was charged off as an "extra-ordinary loss"
on the financial statements.
CORPORATE OVERHEAD
Corporate administrative and general expenses were $1,043,946, $1,052,821 and
$1,203,354 for the years ended December 31, 1993, December 31, 1994 and December
31, 1995, respectively. The major components are officer salaries, office
salaries, interest and legal and professional expense. Officer salaries were
$205,778 or 3.77%, office salaries were $177,309 or 3.25%, consulting expense
was $90,510 or 1.66%, legal and professional expense was $299,408 or 5.48%, and
rent expense was $58,693 or 1.08% of the total revenue for the current year.
Legal and professional expense was exceptionally high due to several merger and
financing considerations during 1995. Due to the reduction in work, and
subsequent reduction in staff, the Company is not utilizing all the space it is
renting. The Company has subleased a portion of its space and will continue its
efforts to sublease more space during 1996.
Consolidated net income (loss) from continuing operations of the Company was
($199,526) for the year ended December 31, 1993, ($1,265,311) for the year ended
December 31, 1994, and ($1,041,151) for the year ended December 31, 1995.
DISCONTINUED BUSINESS SEGMENT:
The Company leased a site for a three year period in California and installed
the necessary leasehold improvements to operate a fixed site for thermal soil
remediation during 1994. The
17
<PAGE>
leasehold improvements cost $264,054, which was substantially more than
management had anticipated. The fixed site operations were abandoned in 1995.
The fixed site operation had a loss of $257,848 for the year ended December 31,
1994. The site started operations in September, 1994. The revenue did not
increase as fast as management had anticipated. The fixed site had large fixed
expenses from depreciation of equipment and amortization of leasehold
improvements and could not achieve a profitable operation.
The administrative and general expenses for the fixed site operations were
$50,236 for the year ended December 31, 1994. The fixed site operations were
abandoned in 1995. The loss from operations was $272,691 and the loss from final
write-offs was $290,084, for the current fiscal year. The total loss for the
two fiscal years totalled $820,623.
EXTRAORDINARY ITEM:
During the year ended December 31, 1994, the Company realized an extraordinary
loss from the abandonment of a proposed business acquisition. The Company
recorded a contingency in the amount of $151,115 as the result of a related
lawsuit. The Company settled the lawsuit during 1995 for $75,000. This resulted
in an extraordinary income item of $76,115 for the current year.
LIQUIDITY AND CAPITAL RESOURCES:
The operating activities of the Company used $366,429 cash for the year ended
December 31, 1995, compared to $286,240 cash for the year ended December 31,
1994.
The investing activities provided $504,192 cash for the year ended December 31,
1995, compared to using $364,045 cash for the year ended December 31, 1994.
The financing activities used $144,099 cash for the year ended December 31,
1995, compared to providing $581,541 cash for the year ended December 31, 1994.
The net cash decreased $6,336 for the year ended December 31, 1995, compared to
$68,744 for the year ended December 31, 1994.
Accounts receivable - trade decreased significantly due to a reduction in
revenue.
Inventories decreased significantly due to the sale of the new Good Earth
Machine that was being manufactured at the end of 1994 and the sale of used
equipment that was sold during 1995.
Prepaid Expenses decreased substantially due to decreased insurance premiums
which were reduced because of the reduction of revenue, equipment and personnel.
Accounts payable - other decreased significantly because of the decrease in year
end accruals.
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<PAGE>
Manufacturing deposits decreased substantially because the new Good Earth
Machine being manufactured at the end of 1994 was delivered in January, 1995.
The Company entered into various notes payable as settlement of accounts payable
during 1995. Some of these notes have payouts in excess of twelve months. These
notes represent the increase in long term debt.
The Environmental Construction Management Division has been profitable for
several years and is expected to continue to be profitable. Due to the addition
of other divisions, this division will probably have a smaller percentage of the
Company's gross revenue and profits.
The Good Earth Machine Division has not been profitable for the last two years.
The Company has taken steps to make this Division profitable. The Division has
disposed of all of its Good Earth Machines and associated equipment, and is
focusing on selling thermal desorption equipment. The Division will pursue
selected large soil remediation jobs, which are intended to be subcontracted to
a third party processor. This division lost ($40,562) for the year ended
December 31, 1995 compared to ($720,459) for the year ended December 31, 1994.
The Company has suffered recurring losses from operations in the Good Earth
Machine Division and extra-ordinary losses, and has a net capital deficiency at
December 31, 1995 that raises a substantial doubt about its ability to continue
as a going concern. Management has addressed this issue very aggressively as
described below.
As part of the plan to improve the Company's financial stability, Management
abandoned the fixed site in California during 1995, and intends to spin off or
close the California environmental construction management office in 1996.
The Company's efforts to raise capital during 1995 were unsuccessful prior to
Mr. Bruce Hissom's arrival in October, 1995. Mr. Hissom brought the Venezuelan
project into the Company through RMI Americas, C.A.. However, this acquisition
did not raise any capital during 1995. As a result of Mr. Hissom bringing in
the Venezuelan project and other technologies, 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 financing engagement states that North American Securities
Company, the company which provided the financing engagement, anticipates
assisting the Company in the scheduling and preparation of presentations to
qualified institutional investors in preparation for a $3mm to $6mm public
offering of the Company's securities. North American Securities 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 plans to
use the $250,000 bridge loan financing to pay past debts and for future working
capital. The Company anticipates needing additional bridge capital within 120
days, which it will look to North American Securities Company for help in
obtaining once the Company has secured at least a $1mm contract with a customer.
At the present time, the Company is in negotiation with several companies and
governmental entities, although no definitive agreement has been signed
19
<PAGE>
as of the date hereof. Finally, the Company plans to utilze an offering in the
$3mm to $6mm to take care of its long-term capital needs.
Finally, the Company is also considering the addition by acquisition of one or
more business units to complement its ongoing business operations, although no
definitive agreement has been signed as of the date hereof.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
For financial information, please see the financial statements included at Item
14 and hereby incorporated by this reference and made a part hereof.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
The Company did not have any disagreements on accounting and financial
disclosures with its independent certified public accountants.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The Directors and Executive Officers of the Company, their ages and present
positions held in the Company are as follows:
NAME AGE POSITION
---- --- --------
Bruce T. Hissom 36 Chairman, President, Chief Executive
Officer, Treasurer, and Director
Patrick V. Ryan 47 Executive Vice President
and Director
Dennis C. Murphy 47 Executive Vice President
Secretary and Director
The Company's Directors will serve in such capacity until the next annual
meeting of the Company's shareholders, which is scheduled for May, 1996, and
until their successors have been elected and qualified. The Board of Directors
held a total of 13 meetings during the last fiscal year. The officers serve at
the discretion of the Company's Directors. There are no familial relationships
among the Company's officers and directors. There is no arrangement or
understanding between any of the directors or officers of the Company or any
other person pursuant to which any officer or director was or is to be selected
as an officer or director.
BRUCE T. HISSOM. Mr. Hissom became the Chairman of the Board, President, Chief
Executive Officer, Treasurer, and a Director in October, 1995. Beginning in
1981, Mr. Hissom was a
20
<PAGE>
principal in and developer of over 100 multi-family, commercial, and industrial
properties and was directly involved in all aspects of acquisition, management,
and construction. Mr. Hissom's activities included the establishment of real-
estate partnerships, funds, and syndications, specializing in distressed
properties, foreclosures, and work-outs. Mr. Hissom was also responsible for
all activities associated with the management and redevelopment of over 4,000
apartments in New York City where he oversaw construction activity, including
architectural planning, design, permitting, regulatory requirements, zoning, and
construction management. In 1988, Mr. Hissom expanded operations leading a $150
million bank syndication to provide debt-equity conversions in South America;
the specialization was industrial and hotel development. Mr. Hissom was
involved in the structuring of complex cross border financing and acquisition
projects dealing with foreign government agencies, financial institutions, and
multinational companies. In 1990, Mr. Hissom became a principal and managing
director of a small hydrocarbon refinery in Venezuela and was directly involved
in management and operations of the facility. Mr. Hissom's responsibilities
included production and exportation of petroleum products throughout out the
Caribbean, U.S., and Europe. He extended product lines to include recycled
refinery products; developed a patented process for the production, handling,
and shipping of "INTERPAVE", an asphalt and K waste product; and was involved in
the permitting and regulatory procedures to qualify the plant as a petroleum K
waste processing facility. Mr. Hissom expanded into the hazardous waste field
and obtained the first commercial permit to install a 50,000 ton per year
Thermal Treatment Facility in Puerto Ordaz, Venezuela, and, as a result, the
Company, through RMI Americas, C.A., is currently under an agreement with the
city of Valencia to provide a facility in the Valencia Industrial Zone. Through
his business career, Mr. Hissom has gained considerable management experience in
both domestic and international markets, providing a sound foundation for the
Company. Mr. Hissom attended Fordham University, majoring in Business
Administration.
PATRICK V. RYAN. Mr. Ryan is a co-founder of the Company and is an Executive
Vice President and a Director. Since opening the Company's first branch office
in California in 1987, he has directed all operative phases of fuel systems
construction for the underground storage tank program and environmental services
contracts for remediation projects. Mr. Ryan has over 24 years of experience in
all phases of fluid handling and environmental service. He was instrumental in
obtaining licenses to operate the Company's soil treatment units, the Good Earth
Machines. In April, 1994, he became the interim Chief Executive Officer and
President. From 1975 to 1981, he was co-owner of Petroleum Marketing, Inc.,
Arvada, Colorado. He sold the company in 1981. He attended San Diego State
University and has an Associate of Arts in Political Science from Colorado
Mountain College.
DENNIS C. MURPHY. Mr. Murphy is a co-founder of the Company and has been
Executive Vice President and a Director since 1989. From April, 1994 to
October, 1995, he was the Chairman of the Board, Chief Financial Officer, and
Treasurer of the Company. In April, 1994, he became the Secretary. From 1975 to
1981, he was co-owner of Petroleum Marketing, Inc., Arvada, Colorado. He sold
the company in 1981.
Mr. Murphy is responsible the Investor Relations Department; he keeps the
shareholders of the Company and financial brokerage community informed and up-
to-date on the Company's progress and future plans, as well as providing
financial reporting and news releases to the media.
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<PAGE>
Mr. Murphy attended Colorado State University and San Diego State University.
He was an Instructor of continuing education for the Underground Storage Tank
Workshops at the Colorado School of Mines. He is a member of the Denver
Oilmen's Association and the Petroleum Equipment Institute. He is also a member
of the Colorado Chapter of the Council of Growing Companies and a charter member
of the Colorado Environmental Business Alliance.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934.
Section 16(a) of the Securities Exchange Act of 1934 (the "34 Act")
requires the Company's officers and directors and persons owning more than ten
percent of the Company's Common Stock, to file initial reports of ownership and
changes in ownership with the Securities and Exchange Commission ("SEC").
Additionally, Item 405 of Regulation S-K under the 34 Act requires the Company
to identify in its Form 10K and proxy statement those individuals for whom one
of the above referenced reports was not filed on a timely basis during the most
recent fiscal year or prior fiscal years. With respect to this disclosure, the
Company has the following report: All officers and directors, except Mr. Hissom,
made timely filings during the most recent fiscal year. Mr. Hissom has filed all
reports required to be filed, although none were filed in a timely manner.
ITEM 11. EXECUTIVE COMPENSATION.
The following table sets forth the Summary Compensation Table for the Chief
Executive Officer and most highly compensated executive officer other than the
Chief Executive Officer who were serving as executive officers at the end of the
last completed fiscal year. No executive officer received more than $100,000 in
compensation during the last fiscal year. No other compensation not covered in
the following table was paid or distributed by the Company to such persons
during the period covered. Employee Directors receive no additional compensation
for service on the Board of Directors.
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
----------------------------------- ----------------------
Other Restricted
Annual Stock
Name Position Year Salary Bonus Compensation Awards
---- -------- ---- ------ ----- ------------ ------
(1) (2)
<S> <C> <C> <C> <C> <C> <C>
Bruce T. Hissom CEO, 1995 18,250 -0- -0- -0-
President, and 1994 -0- -0- -0- -0-
Treasurer 1993 -0- -0- -0- -0-
Patrick V. Ryan Executive 1995 92,302 -0- 12,011 -0-
Vice President 1994 48,853 -0- 56,504 -0-
1993 -0- (3) -0- 18,685 -0-
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<PAGE>
Dennis C. Murphy Executive 1995 87,749 -0- 8,548 -0-
Vice President 1994 74,854 -0- 8,800 -0-
and Secretary 1993 74,000 -0- 3,900 -0-
E. A. Barcell Former 1995 7,477 -0- -0- -0-
Officer 1994 71,054 -0- 975 -0-
1993 72,000 -0- 3,900 -0-
</TABLE>
(1) The above information is based on calendar years. The Company's financial
statements are for the years ended December 31, 1995, 1994 and 1993.
(2) Amounts shown are for (i) Company provided automobiles (ii) auto allowances
(iii) Mr. Patrick V. Ryan received $18,685 commissions in 1993, $51,732 in
1994, and $9,423 in 1995 (iv) Mr. Dennis C. Murphy received $4,933
additional compensation in 1993 and $5,748 additional compensation in 1994.
(3) Mr. Patrick V. Ryan had a net cash advances balance of $59,656 against
future commissions at December 31, 1995.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company has an Audit Committee and a Compensation Committee of the Board of
Directors. Both committees were activated in October, 1993. The Audit Committee
and the Compensation Committee held one meeting during the last fiscal year.
The principal duties of the Audit Committee are to nominate the firm of
independent auditors for appointment by the Board; to meet with the independent
auditors to review and approve the scope of their audit engagement and the fees
related to such work; to review matters relating to internal accounting
controls, the internal audit program, the Company's accounting practices and
procedures and other matters relating to the financial condition of the Company
and its subsidiaries; and to report to the Board periodically any conclusions or
recommendations which the Audit Committee may have with respect to such matters.
The members of the Audit Committee are Bruce T. Hissom, Patrick V. Ryan, and
Dennis C. Murphy.
The principal duties of the Compensation Committee are to review key employee
compensation policies, plans, and programs; to monitor performance and
compensation of employee-directors and officers of the Company and other key
employees; to prepare recommendations and periodic reports to the Board
concerning such matters; and to function as the Committee which administers the
long-range incentive programs which may be developed by the Company from time to
time. The members of the Compensation Committee are Bruce T. Hissom, Patrick V.
Ryan, and Dennis C. Murphy.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following sets forth the number of shares of the Company's $.000067 par
value common stock beneficially owned by (i) each person who, as of December 31,
1995, was known by the Company to own beneficially more than five percent (5%)
of its common stock, (ii) the
23
<PAGE>
individual Directors of the Company, and (iii) the Officers and Directors of the
Company as a group. The number of shares indicated below has been calculated
after taking into account the one-for-thirty reverse split of the Company's
common shares, which was effective on February 12, 1996.
Name and Address Amount and Nature Percent of
of Beneficial Owner of Beneficial Ownership (1) (2) Class
------------------- ------------------------------- ----------
Bruce T. Hissom 1,911,153 76.38%
Chairman, President and Director
8774 Yates Drive
Suite 100
Westminster, CO 80030
Patrick V. Ryan 37,868 1.5%
Vice President and Director
211 Granite Street
Suite E
Corona, CA 91719
Dennis C. Murphy 40,637 1.5%
Vice President and Director
8774 Yates Drive
Suite 100
Westminster, CO 80030
All Officers and Directors 1,989,658 79.5%
as a Group (three persons)
(1) All ownership is beneficial and of record except as specifically
indicated otherwise.
(2) Beneficial owners listed above have sole voting and investment power
with respect to the shares shown unless otherwise indicated.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
An Officer of the Company had outstanding loans, including accrued interest,
from the Company of approximately $31,500 as of December 31, 1995..
Two officers and a shareholder loaned the Company a total of $295,000 during
fiscal year 1994. As of December 31, 1995, approximately $23,082 in principal
and accrued interest remained outstanding.
24
<PAGE>
The Company negotiated a one year $500,000 line of credit with a local bank on
July 16, 1992 which bore interest at an initial rate of 10.5% per annum. The
note was declared in default in 1995 by the bank, who has brought suit against
the Company. See Legal Proceedings herein. The note required monthly interest
payments only and was due July 16, 1994. The Company had pledged its accounts
receivable and the Good Earth Machine patents, as well as obtained two $250,000
life insurance polices each on the lives of Mr. Robert W. Jennings, former
President and Mr. Robert B. Barcell, former Director.
The Company sold its previous office building, which at the time had a book
value of approximately $157,000, to Dennis C. Murphy, an Officer and Director of
the Company for approximately $145,000. The fair market value of the building at
that time was estimated to be approximately $152,000. Mr. Murphy assumed the
first mortgage of approximately $115,000 on the building and gave a promissory
note to the Company for $30,795 at ten percent per annum, due April, 1992. The
purchase price also contemplated that Mr. Murphy would be required to make a
minimum of $2,250 worth of repairs and enhancements to the building to make it
suitable for leasing. As of December 31, 1995, approximately $31,500 in
principal and accrued interest remained due and owing on the note.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K.
(a) The following financial information is filed as part of this
report:
(1) FINANCIAL STATEMENTS
(2) SCHEDULES
Schedule V - Property and Equipment
Schedule VI- Property and Equipment
Accumulated Depreciation
Schedule IX- Short-term Borrowings
(3) EXHIBITS. The following exhibits required by Item
601 to be filed herewith are incorporated by
reference to previously filed documents:
Exhibit number to
Item 601 Registration Statement
Exhibit No. Description on Form S-1 (No.33-30216)
- ----------- ------------ -------------------------
3-A Articles of 3-A
Incorporation
3-B Bylaws 3-B
25
<PAGE>
Item 601
Exhibit No. Description
- ----------- ------------
10.1 Agreement with Mr. Bruce Hissom
(b) REPORTS ON FORM 8-K. The Company filed no report on Form 8-K during
the last quarter of fiscal year ended December 31, 1995.
26
<PAGE>
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.
RYAN-MURPHY INCORPORATED
Dated: By: /s/ Bruce T. Hissom
----------------- ------------------------------------
Bruce T. Hissom
President
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.
TREASURER
Dated: By: /s/ Bruce T. Hissom
------------------- ------------------------------------
Bruce T. Hissom
SECRETARY
Dated: By: /s/ Dennis C. Murphy
------------------- ------------------------------------
Dennis C. Murphy
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10K
EXHIBITS
TO
RYAN-MURPHY INCORPORATED
<PAGE>
INDEX TO EXHIBITS
Exhibit Page or
Number Description Cross Reference
- ---------- --------------- ---------------
3-A Articles of
Incorporation +
3-B Bylaws +
Item 601
Exhibit No. Description
- ----------- ------------
10.1 Agreement with Mr. Bruce Hissom
- ----------------------------------
+ Incorporated by Reference to Registration Statement Form S-1, No. 33-30216 and
Amendments thereof.
<PAGE>
RYAN-MURPHY INCORPORATED
INDEX TO FINANCIAL STATEMENTS
Independent auditors' report F-2
Consolidated Balance Sheets, December 31, 1995 and 1994 F-3
Consolidated Statements of Operations, years ended December 31,
1995, 1994 and 1993 F-5
Consolidated Statements of cash flows, years ended December 31, 1995,
1994 and 1993 F-6
Consolidated Statement of shareholders' equity, January 1, 1993
through December 31, 1995 F-8
Summary of significant accounting policies F-9
Notes to consolidated financial statements F-11
F-1
<PAGE>
Board of Directors
Ryan-Murphy Incorporated
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying consolidated balance sheets of Ryan-Murphy
Incorporated (the Company) as of December 31, 1995 and 1994, and the related
consolidated statements of operations, shareholders' equity and cash flows
for the years ended December 31, 1995, 1994 and 1993. These 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 audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatements. 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 statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Ryan-Murphy Incorporated as of December 31, 1995 and 1994, and the results of
its operations and its cash flows for the years ended December 31, 1995, 1994
and 1993, in conformity with generally accepted accounting principles.
The accompany financial statements have been prepared assuming the Company will
continue as a going concern. As discussed in Note U to the financial statements
the Company has suffered recurring losses and has a deficiency in working
capital as of December 31, 1995 which raises substantial doubt about its ability
to continue as a going concern. Management's plans concerning these matters are
also described in Note U. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Cordovano and Company, P.C.
Denver, Colorado
March 26, 1996
F-2
<PAGE>
RYAN-MURPHY INCORPORATED
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
December 31
--------------
Description 1995 1994
----------- ---- ----
<S> <C> <C>
Current Assets:
Cash, including interest bearing restricted
funds of $42,507 and $155,437 (Note D) $ 152,027 $ 158,363
Accounts and notes receivable (Notes C, E and L)
Trade receivables 414,954 1,036,346
Current maturities of long term note receivable -0- 175,000
Due from related parties 31,500 35,748
Other 79,251 306,013
Less allowances for possible losses (5,694) (155,588)
Costs and estimated earnings in excess of billings
on uncompleted contracts (Note F) 13,919 16,185
Inventories
Materials and supplies 79,092 88,195
Thermal desorption equipment held for sale -0- 406,253
Thermal desorption equipment being manufactured -0- 438,017
Prepaid expenses (Note H) 41,875 210,957
---------- ----------
Total current assets 806,925 2,715,489
Investment in affiliated company 2,500 -0-
Property and equipment, at cost,
less accumulated depreciation (Note J) 93,268 693,589
Buildings-idle 1,582,981 -0-
Intangible assets less accumulated amortization
(Notes C & K) 1,570,347 1,189,133
Long term note receivable, net of current
portion (Note L) -0- 64,961
Other assets 49,296 77,235
---------- ----------
$4,105,317 $4,739,707
---------- ----------
---------- ----------
</TABLE>
See accompanying summary of significant accounting policies and notes to
financial statements.
F-3
<PAGE>
RYAN-MURPHY INCORPORATED
CONSOLIDATED BALANCE SHEETS (CONCLUDED)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 31,
---------------
Description 1995 1994
----------- ---- ----
<S> <C> <C>
Current Liabilities:
Accounts and notes payable Notes C, M & N)
Notes payable:
Note payable to bank $ 155,272 $ 275,000
Notes payable, related parties 21,000 240,500
Other notes payable 167,846 253,542
Accounts payable
Trade 946,672 986,679
Overdraft of bank account -0- 55,887
Commissions payable 11,996 22,417
Deposits on purchase contracts & overpayments 488 429,976
Current maturities of long term debt (Note O) 274,490 30,113
Current maturities of capital lease payables (Note O) 309,337 391,404
Billings in excess of costs and estimated
earnings on uncompleted contracts (Note F) 39,793 89,925
Other current and accrued liabilities 162,486 320,997
----------- -----------
Total current and accrued liabilities 2,089,381 3,096,440
----------- -----------
Long Term Debt, net of current maturities (Note O):
Notes payable 133,984 42,154
Capital lease obligations 5,322 13,262
----------- -----------
Total long term debt 139,306 55,416
----------- -----------
Commitments & Contingencies (Note P):
Contingent & settlement liabilities -0- 191,115
----------- -----------
Shareholders' Equity (Note Q):
Preferred stock, 5,000,000 authorized, classes, par value,
and preferences to be determined, -0- issued -0- -0-
Common stock, $.000067 par value, 500,000,000
shares authorized; 17,123,526 and 15,962,400
issued and outstanding 5,029 1,147
Additional paid-in capital 6,191,004 4,096,219
Less: Treasury shares, at cost, 38,729 and
38,729 shares (22,862) (22,862)
Retained earnings (deficit) (4,296,541) (2,677,769)
----------- -----------
Total shareholders' equity 1,876,630 1,396,735
----------- -----------
$ 4,105,317 $ 4,739,707
----------- -----------
----------- -----------
</TABLE>
See accompanying summary of significant accounting policies and notes to
financial statements.
F-4
<PAGE>
RYAN-MURPHY INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
Description 1995 1994 1993
----------- ---- ---- ----
<S> <C> <C> <C>
Net sales and revenues:
Contract revenues $ 4,145,546 $ 6,545,597 $10,328,186
Equipment sales 1,313,918 1,471,952 600,000
------------ ------------ -------------
5,459,464 8,017,549 10,928,186
------------ ------------ -------------
Costs and expenses:
Costs of contracts 3,577,504 5,498,657 8,427,977
Costs of machine sales 1,163,054 1,041,827 353,992
------------ ------------ -------------
4,740,558 6,540,484 8,781,969
------------ ------------ -------------
Gross profit 718,905 1,477,065 2,146,217
------------ ------------ -------------
Other operating costs and expenses:
General and administrative 1,738,592 2,051,728 2,082,714
Provision for doubtful accounts 27,000 315,000 60,000
Research and development -0- -0- 2,381
------------ ------------ -------------
Income (loss) from operations 1,765,592 2,366,728 2,145,095
------------ ------------ -------------
(1,046,687) (889,663) 1,122
Non-operating income and (expense), net:
Other 36,973 20,390 (7,336)
Interest expense, related parties (8,903) (8,903) (37,435
Interest expense, other (43,488) (129,287) (155,877)
Abandoned asset (70,008) -0- -0-
------------ ------------ -------------
Income (loss) from continuing operations (1,132,112) (1,007,463) (199,526)
Provision for income taxes (Note R) -0- -0- -0-
------------ ------------ -------------
Income (loss) from continuing operations after
income taxes (1,132,112) (1,007,463) (199,526)
Discontinued Operations (net of income taxes): (Note W)
Loss from operations (272,691) (257,848) -0-
Loss on disposal of discontinued operations (290,084) -0- -0-
Extraordinary items (net of income taxes):
Abandon business acquisition (Note V) 76,115 (516,975) -0-
Utilization of net operating loss carryforward -0- -0- -0-
------------ ------------ -------------
$(1,618,772) $(1,782,286) $ (199,526)
------------ ------------ -------------
------------ ------------ -------------
Weighted average shares 30,144,148 16,777,243 15,962,400
------------ ------------ -------------
------------ ------------ -------------
Income (loss) from continuing operations $ (0.0376) $ (0.0600) $ (0.0125)
Income (loss) from discontinued operations &
extraordinary items (0.0161) (0.0462) 0.00000
------------ ------------ -------------
Earnings (loss) per common share $ (0.0537) $ (0.1062) $ (0.0125)
------------ ------------ -------------
------------ ------------ -------------
</TABLE>
See accompanying summary of significant accounting policies and notes to
financial statements.
F-5
<PAGE>
RYAN-MURPHY INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For years ended December 31,
----------------------------
Description 1995 1994 1993
----------- ---- ---- ----
<S> <C> <C> <C>
Cash flows from operation activities:
Net income (loss) $(1,618,772) $(1,782,285) $ (199,526)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 424,953 372,731 432,527
Bad debts 28,250 315,000 12,662
Provision for litigation & settlement (191,115) 191,115 -0-
(Gain) loss on disposition of property 4,287 5,152 17,098
Abandoned asset 70,008 -0- -0-
(Increase) decrease in:
Receivables 672,751 240,473 (558,349)
Receivables, related parties (Note C) 1,507 5,351 -0-
Inventory-Materials and supplies 345,348 3,005 10,706
Inventory-Manufacturing costs in process 438,017 (438,017) -0-
Costs and estimated earnings in excess of billings
(Note F) 2,266 22,116 130,753
Prepaid expenses (Note H) 169,082 48,574 40,482
Investments -0- -0- (31)
Other assets 31,439 3,580 (35,669)
Increase (decrease) in:
Accounts payable (40,009) 260,801 308,558
Overdraft of bank account (Note M) (55,887) 55,887 -0-
Accounts payable, related parties (Note C) -0- -0- (16,390)
Other current liabilities (168,932) (79,977) 69,806
Deposits on purchase contracts & overpayments
(Note M) (429,489) 427,411 -0-
Billings in excess of costs and estimated earnings (50,132) 62,843 8,625
------------ ------------ -------------
Total Adjustments 1,252,343 1,496,045 420,778
------------ ------------ -------------
Net cash provided by (used in) operating activities (366,429) (286,240) 221,252
------------ ------------ -------------
Cash flows from investing activities:
Sale of Note Receivable 239,261 -0- -0-
Proceeds on disposal of fixed assets 274,778 147,576 376,319
Capital expenditures (3,847) (511,621) (61,690)
Investment in affiliated companies (6,000) -0- -0-
------------ ------------ -------------
Net cash provided by (used in) investing activities 504,192 (364,045) 314,629
------------ ------------ -------------
Cash flows from financing activities:
Proceeds from issuance of stock, net 34,623 421,063 -0-
Proceeds from loans 1,675,622 4,797,610 702,854
Debt service payments (1,834,844) (4,677,632) (943,074)
Proceeds from related party loans (Note C) -0- 295,000 700,000
Debt payments to shareholders (Note C) (19,500) (254,500) (900,000)
------------ ------------ -------------
Net cash provided by (used in) financing activities (144,099) 581,541 (440,220)
------------ ------------ -------------
</TABLE>
See accompanying summary of significant accounting policies and notes to
financial statements.
F-6
<PAGE>
RYAN-MURPHY INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONCLUDED)
<TABLE>
<CAPTION>
For years ended December 31,
----------------------------
Description 1995 1994 1993
----------- ---- ---- ----
<S> <C> <C> <C>
Net increase (decrease) in cash and cash equivalents $ (6,336) $ (68,744) $ 95,661
Cash and equivalents at beginning of period 158,363 227,107 131,446
------------ ------------- -------------
Cash and equivalents at end of period $ 152,027 $ 158,363 $ 227,107
------------ ------------- -------------
------------ ------------- -------------
Cash paid during the year for:
Interest $ 52,391 $ 138,190 $ 193,312
Income taxes -0- -0- -0-
------------ ------------- -------------
$ 52,391 $ 138,190 $ 193,312
------------ ------------- -------------
------------ ------------- -------------
Non-cash transactions:
Capitalized leases were incurred for:
Furniture and fixtures $ -0- $ -0- $ 14,389
------------ ------------- -------------
------------ ------------- -------------
Common stock was issued for:
Services rendered $ 10,000 $ -0- $ -0-
Investment in subsidiary 2,064,044 -0- -0-
------------ ------------- -------------
$ 2,074,044 $ -0- $ -0-
------------ ------------- -------------
------------ ------------- -------------
Notes were incurred for the following:
Transportation equipment $ -0- $ -0- $ 15,517
Field Equipment -0- 66,351 -0-
------------ ------------- -------------
$ -0- $ 66,351 $ 15,517
------------ ------------- -------------
------------ ------------- -------------
</TABLE>
See accompanying summary of significant accounting policies and notes to
financial statements.
F-7
<PAGE>
RYAN-MURPHY INCORPORATED
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
JANUARY 1, 1993 THROUGH DECEMBER 31, 1995
<TABLE>
<CAPTION>
Common Additional Treasury Retained Total
Stock Par Paid-in Treasury Shares Earnings Shareholders'
Description Shares Value Capital Shares Costs (Deficit) Equity
----------- ------ ----- ------- ------ ----- --------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1993 15,962,400 $1,069 $3,675,234 (38,729) $(22,862) $ (695,958) $2,957,483
Net income (loss) -0- -0- -0- -0- -0- (199,526) (199,526)
---------- ------ ---------- -------- --------- ----------- -----------
Balance, December 31, 1993 15,962,400 1,069 3,675,234 (38,729) (22,862) (895,484) 2,757,957
Shares issued in
settlement of debt 206,126 14 74,924 -0- -0- -0- 74,938
Shares issued for cash
in private offerings 955,000 64 346,064 -0- -0- -0- 346,125
Net income (loss) -0- -0- -0- -0- -0- (1,782,285) (1,782,285)
---------- ------ ---------- -------- --------- ----------- -----------
Balance, December 31, 1994 17,123,526 1,147 4,096,219 (38,729) (22,862) (2,677,769) 1,396,735
Shares issued for cash
in private offerings 525,000 35 24,587 -0- -0- -0- 24,623
Shares issued for
services rendered 80,000 5 9,995 -0- -0- -0- 10,000
Shares issued in exchange
for rights to
Venezuelan project
(Note 6) 57,334,590 3,841 2,060,203 -0- -0- -0- 2,064,044
Net income (loss) -0- -0- -0- -0- -0- (1,618,772) (1,618,772)
---------- ------ ---------- -------- --------- ----------- -----------
Balance, December 31, 1995 75,063,116 $5,029 $6,191,004 (38,729) $(22,862) $(4296,541) $1,876,630
---------- ------ ---------- -------- --------- ----------- -----------
---------- ------ ---------- -------- --------- ----------- -----------
</TABLE>
See accompanying summary of significant accounting policies and notes to
financial statements.
F-8
<PAGE>
RYAN-MURPHY INCORPORATED
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
DECEMBER 31, 1995
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements and notes include all of the assets of
Ryan-Murphy Incorporated and it wholly owned subsidiary, RMI Americas, C.A. The
assets of the subsidiary have been included at predecessors costs. All material
intercompany accounts and transactions have been eliminated in consolidation.
The business combination was accounted for under the pooling of interests method
of accounting.
REVENUE AND COST RECOGNITION
Revenues from contracts are recognized on the cost plus and percentage-of-
completion method for individual contracts. Revenues are recognized in the
ratio that costs incurred bear to total estimated costs. Changes in job
performance, estimated profitability and final contract settlements may result
in revisions to costs and income which are recognized in the period in which the
revisions are determined to be necessary. Contract costs include all direct
materials, subcontracts, labor costs and those indirect costs related to
contract performance. At the time a loss on a contract become known, the entire
amount of the estimated ultimate loss is accrued. The aggregate of costs
incurred and income recognized on uncompleted contracts in excess of related
billings in shown as a current asset, and the aggregate of billings on
uncompleted contracts in excess of related costs incurred and income recognized,
is shown as a current liability. Revenues from the sale of equipment is
recognized at the time the equipment is accepted by the buyer, or in the case of
a capital lease sale, at the date of the capital lease. If the equipment is
manufactured by the Company, the Company may require deposits to be made by the
buyer. The Company carries the cost of manufacturing as a current asset and the
deposits to be made by the buyer. The company carries the cost of manufacturing
as a current asset and the deposits on purchase contracts as a current
liability. General and administrative costs are charged to expenses as
incurred.
INTANGIBLES AND OTHER ASSETS
Costs of deferred liabilities are being amortized over seven years. Costs
incurred in connection with certain patent rights and permits are amortized from
five to fifteen years.
EARNINGS (LOSS) PER COMMON SHARE
The net income (loss) per common share for the periods presented has been
computed on the basis of the weighted average number of common shares
outstanding during the period, according to the rules of the Securities and
Exchange Commission.
DEPRECIATION
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets ranging from three to forty years.
F-9
<PAGE>
RYAN-MURPHY INCORPORATED
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
DECEMBER 31, 1995
MATERIALS AND SUPPLIES
These inventories are stated at the lower of cost (determined by the first-in,
first-out method) or market.
INVENTORY - EQUIPMENT HELD FOR SALE
There was one Good Earth Machine and a Dust Burner in inventory at December 31,
1994 which are carried at the lower of cost (determined by the specific
identification method) or market.
INVENTORY - EQUIPMENT BEING MANUFACTURED
There were no machines being manufactured at December 31, 1995.
CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all highly
liquid debt instruments with an original maturity of three months or less to be
cash equivalents.
PRIOR YEARS' RECLASSIFICATION
The financial statements for the prior years have been reclassified to conform
with the current year's presentation.
F-10
<PAGE>
RYAN-MURPHY INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
Note A: Assets pledged
Approximately 37 percent of all assets are pledged as security for notes payable
to bank and capital leases.
Note B: Nature of organization
Ryan-Murphy Incorporated (the Company) was founded in 1976 as a Colorado
corporation. Effective January 31, 1989, the Company merged with Postmark
Stores of America, Inc. (PSA), which was incorporated under the laws of Colorado
on December 18, 1994. The Company's operations consist of environmental
construction management; soil remediation; cleanup and disposal of low lever
nuclear waste, hazardous waste and mixed wastes; and Good Earth Machine (GEM)
sales.
Note C: Related party transactions
One officer was indebted to the Company in the amount of $2,101, for cash
received, at December 31, 1994, and two officers were indebted to the Company in
the amount of $6,166, for cash received, at December 31, 1993. In addition, the
Company sold land and a building to a vice-president for $145,000. The book
value of the land and building at the time of the sale was $156,998. A note
receivable of $30,000 remained owing at December 31, 1995 and December 31, 1994,
and $30,748 was owing at December 31, 1993. Accrued interest on the
indebtedness totalled $1,500 at December 31, 1995, $3,647 at December 31, 1994
and $4,155 at December 31, 1993.
The Company issued notes totaling $295,000 to two officers and a shareholder
during 1994 and $700,000 to an officer and a shareholder during 1993. Of these
notes $21,000 remained outstanding at December 31, 1995, and $240,500 at
December 31, 1994. Accrued interest on the indebtedness was $2,082 at December
31, 1995 and $317 at December 31, 1994.
Mr. Bruce T. Hissom was elected President, Chief Executive Officer and Treasurer
on October 5, 1995. The Company entered into an agreement on the same date
which put 57,334,590 shares of the Company's common stock in an escrow account
in exchange for rights to a permit to process hazardous waste and other
Venezuelan assets. On December 12, 1995 the Company entered into an agreement
with Mr. Hissom whereby the Company and Mr. Hissom agreed to have a Venezuelan
subsidiary of the Company, RMI Americas, C.A., acquire all permits, rights
thereto, and associated contract rights for hazardous waste incineration
operations in Venezuela which Mr. Hissom and Ambiente Americas, C.A., a company
owned by Mr. Hissom, currently possessed, and a hydro-carbon processing facility
which is permitted to process asphalt and K-waste, which is also owned by Mr.
Hissom. A total of 57,334,590 common shares were issued in the name of Mr.
Hissom. RMI Americas, C.A. is a wholly owned subsidiary of the Company. The
assets are valued at net book value of predecessor costs and consisted of an
asphalt plant at $1,582,981, and InterPave patent at $35,336, a Waste permit at
$213,719, and a Hazardous Waste Permit at $232,008, a total book value of
$2,064,044.
F-11
<PAGE>
Note D: Restricted cash
The Company treats certificates of deposits and their associated interest as
restricted cash. The restricted cash is pledged as collateral for payment and
performance bonds, with a balance of $42,507 and December 31, 1995 and $155,437
at December 31, 1994.
Note E: Accounts and notes receivable
Other receivables consisted of the following:
<TABLE>
<CAPTION>
December 31,
-------------
1995 1994
---- ----
<S> <C> <C>
Other receivables - employees $ 1,245 $ 12,580
Other receivables - officers 2,816 -0-
Commission advances - salesmen - officers 59,656 220,797
Commission advances - salesmen - other 10,534 67,391
Other 5,000 5,245
---------- ----------
$ 79,251 $ 306,013
---------- ----------
---------- ----------
</TABLE>
Note F: Costs and estimated earnings on uncompleted contracts
Costs and estimated earnings on uncompleted contracts
consisted of the following:
<TABLE>
<CAPTION>
December 31,
-------------
1995 1994
---- ----
<S> <C> <C>
Costs incurred on uncompleted contracts $ 3,529,768 $ 6,170,410
Estimated earnings 3,086,475 3,022,969
------------ ------------
6,616,243 9,193,379
Billings to date (6,642,117) (9,267,119)
------------ ------------
$ (25,874) $ (73,740)
------------ ------------
------------ ------------
Included in the accompanying balance sheets and
under the following captions are:
Costs and estimated earnings in excess of
billings on uncompleted contracts $ 13,919 $ 16,185
Billings in excess of costs and estimated
earnings on uncompleted contracts (39,793) (89,925)
------------ ------------
$ (25,874) $ (73,740)
------------ ------------
------------ ------------
</TABLE>
Note G: Backlog
The following schedule summarizes changes in backlog on contracts during the
year ended December 31, 1995 and December 31, 1994. Backlog represents the
amount of billings the
F-12
<PAGE>
Company expects from environmental and soil remediation contracts in progress at
year end and from contractual agreements on which work has not yet begun:
<TABLE>
<CAPTION>
December 31,
-------------
1995 1994
---- ----
<S> <C> <C>
Beginning balance $ 1,387,998 $ 471,691
New contracts during the year 5,405,809 10,109,686
------------ ------------
Less contract revenue earned during the
year 6,793,807 10,581,377
(6,616,243) (9,193,379)
------------ ------------
Backlog at end of year $ 177,564 $ 1,387,998
------------ ------------
------------ ------------
</TABLE>
Note H: Prepaid Expenses
This item includes prepaid insurance in the amount of $$41,875 for the year
ended December 31, 1995 and $210,957 for the year ended December 31, 1994.
Note I: Investments in affiliated companies
The Company has the following items included in its consolidated balance sheet
for the year ended December 31, 1995.
<TABLE>
<CAPTION>
Consolidating
Description Registrant Subsidiary Adjustments Consolidated
- ----------- ---------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Current assets 806,925 -0- -0- 806,925
Investment in affiliated
companies:
100% owned subsidiary 2,067,544 -0- (2,067,544) -0-
50% owned subsidiary 2,500 -0- -0- 2,500
Property and equipment, at cost
less accumulated depreciation 93,268 -0- -0- 93,268
Plant-idle less accumulated depr -0- 1,582,981 -0- 1,582,981
Intangible assets less accum.
amort.
Patents 1,089,284 35,336 -0- 1,124,620
Permits:
Hazardous Waste -0- 232,008 -0- 232,008
K-Waste -0- 213,719 -0- 213,719
Other assets 45,796 3,500 -0- 49,296
--------- --------- ----------- ---------
4,105,317 2,067,544 (2,067,544) 4,105,317
--------- --------- ----------- ---------
--------- --------- ----------- ---------
F-13
<PAGE>
Current liabilities 2,089,381 -0- -0- 2,089,381
Long term debt 139,306 -0- -0- 139,306
Shareholders' equity:
Common stock 5,029 2,067,544 (2,067,544) 5,029
Additional paid-in capital 6,191,004 -0- -0- 6,191,004
Less: Treasury shares (22,862) -0- -0- (22,862)
Retained earnings (4,296,541) -0- -0- (4,296,541)
----------- --------- ----------- -----------
4,105,317 2,067,544 (2,067,544) 4,105,317
----------- --------- ----------- -----------
----------- --------- ----------- -----------
</TABLE>
Note J: Property and equipment
Major classes of property and equipment consisted
of the following, at cost:
<TABLE>
<CAPTION>
December 31,
-------------
Description 1995 1994
----------- ---- ----
<S> <C> <C>
Leasehold Improvements $ -0- $ 264,054
Furniture and equipment 245,688 306,248
Field equipment 58,120 131,804
Transportation equipment 35,094 95,621
Good Earth Machines -0- 466,080
----------- -----------
Less accumulated depreciation 338,902 1,263,807
(245,634) (570,218)
----------- -----------
Net property and equipment $ 93,268 $ 693,589
----------- -----------
----------- -----------
Building-idle $ 2,694,435 $ -0-
Less accumulated depreciation (1,111,454) -0-
----------- -----------
Net Building-idle $ 1,582,981 $ -0-
----------- -----------
</TABLE>
Depreciation expense was $395,111, which included $233,876 abandoned leasehold
depreciation, for the year ended December 31, 1995, $272,882 for the year ended
December 31, 1994 and $333,461 for the year ended December 31, 1993.
The idle building is owned by the wholly owned subsidiary.
Note K: Intangible assets
Intangible assets consist of the following:
<TABLE>
<CAPTION>
December 31,
-------------
Description 1995 1994
----------- ---- ----
<S> <C> <C>
Patent rights acquired from
related party (Note C) $ 1,454,088 $ 1,454,088
Patents & Permits for Venezuelan
project 481,063 -0-
Other 24,082 24,082
------------ ------------
1,959,233 1,478,170
Less accumulated amortization (388,886) ( 289,037)
------------ ------------
Net intangible assets $ 1,570,347 $ 1,189,133
------------ ------------
------------ ------------
</TABLE>
F-14
<PAGE>
Amortization expense was $99,849 for the year ended December 31, 1995, $99,869
for the year ended December 31, 1994 and $99,066 for the year ended December 31,
1993. The permit is owned by the wholly owned subsidiary.
The Company reviewed the value of the patent for the Good Earth Machines as of
December 31, 1995 and determined that the patent had substantial value based on
the current proposals for the sale of new thermal desorption equipment which
utilizes the patents. The Company sold one new machine and two used machines
during 1995, and anticipates the sale of two new machines during 1996.
The Patents and Permits for the Venezuelan project are stated at predecessor
book value and will be written off over five year periods.
Note L: Long term note receivable
The Company entered into a lease purchase contract for the sale of a used Good
Earth Machine on May 18, 1994. The lease qualifies as a sale under Generally
Accepted Accounting Principles. The Company recorded the transaction as a sale
and recorded a note receivable with imputed interest at 5% per annum. The
contract was scheduled to mature May 18, 1996. The note receivable was sold at
a discount by the Company in 1995. The Good Earth Machine that is subject to
this transaction was the security for a capital lease, which was paid off at the
time the note receivable was sold. The capital lease payable was not assumed by
the buyer of the Good Earth Machine.
Note M: Accounts payable
The overdraft of the bank account at December 31, 1994 was caused by checks
being released on December 29, 1994 and not covered with a draw against our
line of credit until January, 1995. The unused line of credit at that time was
$175,000.
Note N: Short term debt
<TABLE>
<CAPTION>
December 31,
-------------
Description 1995 1994
----------- ---- ----
<S> <C> <C>
Notes payable to banks consist of the
following:
Note payable, due May 5, 1995 and
May 5, 1994, variable interest,
collateralized by receivables and
GEM patent rights. The note that
was due May 5, 1995 is currently
under litigation. $ 155,272 $ 275,000
----------- -----------
----------- -----------
Notes payable, related parties consist of the
following:
Note payable - interest at 24 percent, due to a
shareholder collateralized by receivables,
matures January 6, 1995, guaranteed by two
officers $ -0- $ 200,000
Note payable - interest at 8 percent, due to
shareholder and officer, unsecured, matured
December 31, 1994, extended as demand note 21,000 36,000
Note payable - interest at 12.5 percent, due to
shareholder and officer, unsecured, due on demand -0- 4,500
----------- -----------
$ 21,000 $ 240,500
----------- -----------
----------- -----------
Other notes payable consist of the following:
Insurance premium finance contract, payable in
monthly installments of $6,071, including
interest at 7.18% $ -0- $ 35,675
Insurance premium finance contract, payable in
monthly installments $10,663, including
interest at 6.175% -0- 92,179
Insurance premium finance contract, payable in
monthly installments of $4,356, including interest
at 10.75% 33,480 -0-
<PAGE>
Accounts payable converted into a note, payable in
monthly installments of $20,000, with interest
at 8.00% -0- 80,000
Accounts payable converted into a note, payable in
monthly installments of $3,000, including interest
at 12.00% 19,473 -0-
Accounts payable converted into a note, payable in
monthly installments of $1,350 plus interest at 6.00% 10,800 -0-
Accounts payable converted into a note, payable in
full at maturity, with interest at 8.00% -0- 45,688
Accounts payable converted into a note, payable in
variable monthly installments, $2,500 - $5,000,
including interest at 8.00% 36,746 -0-
Accounts payable converted into a note, payable in
variable monthly installments, $1,000 - $3,000,
including no interest 34,000 -0-
Accounts payable converted into a note, payable in
variable monthly installments, $1,250 - $2,500,
including interest at 9.00% 20,300 -0-
Accounts payable converted into a note, payable in
monthly installments of $879, including interest
at 10.00% 10,000 -0-
Accounts payable converted into a note, payable in
monthly installments of $1,800, principal included
service charges 3,048 -0-
----------- -----------
$ 167,847 $ 253,542
----------- -----------
----------- -----------
Note O: Long term debt
December 31,
-------------
Description 1995 1994
----------- ---- ----
Notes payables consisted of the following:
Accounts payable converted into a note, payable
in variable monthly installments, $3,500 -
$5,045, including interest at 10.00% $ 75,000 $ -0-
Accounts payable converted into a note, payable
in variable monthly installments, $4,000 -
$7,500, principal includes service charges 100,000 -0-
Accounts payable converted into a note, payable
in variable monthly installments, $4,500 -
$6,500, including interest at 8.00% 70,634 -0-
Accounts payable converted into a note, payable
in monthly installments of $2,995, including
interest at 12.00% 31,840 -0-
Accounts payable converted into a note, payable
in variable monthly installments, $3,000 -
$5,000, including interest at 10.00% 131,000 -0-
Note payable, payable in monthly installments of
$1,771, including interest at 7.66% collateralized
by a front end loader, matures November 1, 1997,
the loader was sold and note paid off in 1995 -0- 61,774
Note payable, payable in monthly installments of
$281, including interest at 9.60% collateralized
by a vehicle, mature April 22, 1995 -0- 1,405
Note payable, payable in monthly installments of
$361, including interest at 9.60% collateralized
by a vehicle, mature May 15, 1995 -0- 1,820
Note payable, payable in monthly installments of
$470, including interest at 12.91% collateralized
by a vehicle, matures May 24, 1996, the vehicle was
sold during 1995 -0- 7,267
------------ ------------
Less: Current maturities 408,474 72,266
(274,490) (30,112)
------------ ------------
$ 133,984 $ 42,154
------------ ------------
------------ ------------
</TABLE>
F-15
<PAGE>
The maturities of long-term debt at December 31, 1995 are as follows:
Year ending December 31, 1996 $ 274,490
Year ending December 31, 1997 110,429
Year ending December 31, 1998 23,555
-----------
$408,474
-----------
-----------
The following is a summary of capital lease obligations:
<TABLE>
<CAPTION>
December 31,
-------------
Monthly Interest
Leased Property Payment Rate Collateral 1995 1994
- --------------- ------- ---- ---------- ---- ----
<S> <C> <C> <C> <C> <C>
Equipment $ 210 14.456% Equipment $ 2,148 $ 3,706
Software & Equipment 664 11.970% Software/Equip -0- 3,849
Equipment 456 18.492% Equipment -0- 3,406
Equipment 289 15.357% Equipment 3,409 5,940
Equipment 461 19.810% Equipment -0- 1,343
Equipment 341 20.125% Equipment -0- 2,824
Equipment - Guaranteed
by officers 6,870 12.550% Equipment -0- 58,722
Equipment 893 18,830% Equipment 3,460 11,852
Equipment 818 12.250% Equipment -0- 3,195
Equipment 6,800 10.000% 294,677 294,677
Equipment 214 10.280% Equipment -0- 1,045
Equipment 379 8.131% Equipment 8,694 11,175
Equipment 91 3.980% Equipment 2,271 2,932
---------- ----------
Less: Current Maturities $ 314,659 $ 404,666
(309,337) (391,404)
---------- ----------
Long-term obligations $ 5,322 $ 13,262
---------- ----------
---------- ----------
</TABLE>
Future minimum payments under capital lease obligations as of December 31, 1995
are as follows:
Year ending December 31, 1996 $ 309,337
Year ending December 31, 1997 7,534
----------
Less: Imputed interest $ 316,871
(2,212)
----------
Net present value of future minimum
capital leases payable $ 314,659
----------
----------
Assets under capital leases totalled $59,977 and $1,580,221, and accumulated
depreciation & amortization totalled $33,300 and $713,989 as of December 31,
1995 and 1994. Depreciation & amortization of equipment under capital leases is
included in depreciation and amortization expense for all periods. The 1995
amounts include a capital lease on a Good Earth Machine that has matured, but
not been released, cost of $520,441 and accumulated depreciation of $184,197.
The 1994 amounts include a capital lease on a Good Earth Machine that has
matured, but not been released, cost of $466,080 and accumulated depreciation of
$248,671.
F-16
<PAGE>
Note P: Commitments & Contingencies
Operating leases:
At December 31, 1995, the Company was obligated under non-cancelable, operating
leases as follows:
Office rent - year ending December 31, 1996 $ 137,264
Office rent - year ending December 31, 1997 37,862
---------
Total $ 175,126
---------
---------
The $175,126 is not reflected in the accompany financial statements. Rent
expense charged to operations, including month to month leases, was $177,940,
$166,190 and $161,882 for the years ended December 31, 1995, 1994 and 1993,
respectively. The Company also incurred $138,537 rent expense during 1995 as
part of the abandoned business expense, charged off as an extraordinary charge.
GEM
The Company entered into a sale and a ten years and three months lease back
agreement on April 25, 1990 for the purchase of a GEM machine for $315,000. The
Company capitalized the $315,000 amount as a capital lease, the balance
remaining due at December 31, 1994, under the lease document, as amended on May
20, 1994, is carried at $294,678. The original lease terms provide for
operational rent of 50% of the gross profits from the machine with a minimum of
$6,800 per month, limited to $2,000,000 over the life of the lease. Minimum
lease payments and operational rent paid during the year ended December 31,
1995, December 31, 1994 and December 31, 1993 was $-0-, $68,000, and $81,600,
respectively.
The lease back agreement was amended and re-negotiated May 20, 1994 to a fixed
amount due of $320,000, payments of $6,800 per month, 10% interest per annum,
with the remaining balance due June 1, 1995. The Company is disputing the final
amount due.
Note Q: Common stock
The Company issued 206,126 shares of stock in settlement of a debt and 955,000
shares of stock for cash in a private offering during the year ended December
31, 1994.
The Company issued 525,000 shares of stock for cash in a private offering,
80,000 shares of stock in exchange for services, and 57,334,590 in exchange for
assets, as described below, during the year ended December 31, 1995.
The Company entered into an agreement on October 5, 1995, which put 57,334,590
shares of the Company's common stock in an escrow account in exchange for rights
to a permit to process hazardous waste and other Venezuelan assets. On December
12, 1995 the Company entered into an agreement with Mr. Hissom whereby the
Company and Mr. Hissom agreed to have a Venezuelan subsidiary of the Company,
RMI Americas, C.A., acquire all permits, rights thereto, and associated contract
rights for hazardous waste incineration operations in Venezuela which Mr. Hissom
and Ambiente Americas, C.A., a company owned by Mr. Hissom, currently possessed,
and a hydro-carbon processing facility with associated permits and a patent
which is permitted to process asphalt and K waste, which is also owned by Mr.
Hissom. RMI Americas, C.A. is a wholly owned subsidiary of the Company.
Stock option plans
As of December 31, 1995, 75,000 shares of common stock were reserved for
issuance under a qualified stock plan adopted in 1991, and 1,700,000 shares of
common stock were reserved for issuance to two officers, All of the outstanding
options under the qualified plan are exercisable one third six (6) months after
date of grant and one third on each of next two anniversary dates and terminate
five years from the date of grant.
F-17
<PAGE>
The outstanding options granted to the two officers are exercisable immediately
upon issuance and expire three years after issuance.
The following table summarizes all outstanding options during the years ended
December 31, 1993, 1994 and 1995.
<TABLE>
<CAPTION>
Options Granted Options Outstanding
--------------- -------------------
Number Option Option Number
of Number Price Price of Shares
Description Options of Shares Per Share Totals Exercisable
----------- ------- --------- --------- ------ -----------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1993 11 585,000 $ .53-.63 $ 341,050 190,000
Granted 3 190,000 .43-.53 87,700 141,668
Became exercisable 0 0 0 0 0
Terminated (3) (350,000) .45-.63 (194,500) (33,334)
Expired 0 0 0 0 0
Exercised 0 0 0 0 0
--- ----------- --------- ----------- -----------
Balance, December 31, 1993 11 425,000 .44-.63 234,250 298,334
Granted 1 400,000 .45 180,000 0
Became exercisable 0 0 0 0 63,333
Terminated (2) (450,000) .43-.45 (201,500) 0
Expired 0 0 0 0 0
Exercised 0 0 0 0 0
--- ----------- --------- ----------- -----------
Balance, December 31, 1994 10 375,000 .44-.63 212,750 361,667
Granted 4 3,400,000 .10-.34 748,000 3,413,333
Became exercisable 0 0 0 0 0
Terminated (8) (1,925,000) .44-.63 (703,750) (1,925,000)
Expired (2) (75,000) .63 (47,250) (75,000)
Exercised 0 0 0 0 0
--- ----------- --------- ----------- -----------
Balance, December 31, 1995 4 1,775,000 $ .10-53 $ 209,750 1,775,000
--- ----------- --------- ----------- -----------
--- ----------- --------- ----------- -----------
</TABLE>
Common stock warrants
Warrants to purchase 3,200,000 shares of common stock (issued in connection with
the public stock offering which closed February 27, 1992) remain outstanding as
of December 31, 1995 and were exercisable prior to February 21, 1996 at a price
of $.85 per share. The warrants expired February 21, 1996.
Note R: Income taxes
Deferred income taxes consisted of the following:
<TABLE>
<CAPTION>
Description 1995 1994 1993
----------- ---- ---- ----
<S> <C> <C> <C>
Deferred tax assets, net operating loss carryforward $ 2,453,081 $1,211,785 $1,136,038
Allowance for doubtful accounts -0- 132,359 7,820
----------- ----------- -----------
Total deferred tax asset 2,453,081 1,344,144 1,143,858
Allowance For doubtful accounts (149,894) -0- -0-
Accelerated tax depreciation (145,111) (61,920) (170,076
Valuation allowance (2,158,076) (1,282,224) (249,751)
----------- ----------- -----------
Net deferred taxes $ -0- $ -0- $ -0-
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
F-18
<PAGE>
The valuation allowance offsets the net deferred tax asset for which there is no
assurance of recovery.
The Company has available, as of December 31, 1995, unused Federal and State
operating loss carryforwards of approximately $3,571,853 and $3,571,853,
respectively which expire through the years 2010 and 2010 respectively.
Note S: Segment information
The Company conducted its 1995 business in two industry segments; environmental
construction management and soil remediation services. The environmental
construction management segment includes site contamination evaluation, removal
and installation of underground storage tanks, testing and removal of
contaminated soil and compliance reporting. The soil remediation segment
includes revenues derived from the sale and service of Good Earth Machines
(GEMs) and the cleaning of contaminated soil using company equipment or
subcontracted equipment. The Company sold one new and two used GEMs during the
current year for a total of $1,294,960, less direct costs of $1,085,431. The
Company earned the following environmental construction from one customer;
$1,737,159 during 1995; $4,229,178 during 1994 and $6,397,028 during 1993; the
Company earned $1,258,099 from one customer for soil remediation during 1995.
<TABLE>
<CAPTION>
Environmental Soil
Year ended December 31, 1995 Construction Remediation Consolidated
- ---------------------------- ------------ ----------- ------------
<S> <C> <C> <C>
Revenue $ 2,871,712 $ 2,587,752 $ 5,459,464
----------- ----------- ------------
Income (loss) from divisions 144,839 (19,608) 125,231
----------- ----------- ------------
General corporate expenses (1,171,918)
------------
Income (loss) before non-operating losses (1,046,687)
Non-operating losses (85,425)
Discontinued operations (562,775)
Extraordinary gain 76,115
------------
Net income (loss) (1,618,772)
------------
Identifiable assets at December 31, 1995 58,120 -0- 58,120
----------- -----------
Corporate assets 4,047,197
------------
Total assets at December 31, 1995 4,105,317
------------
Capital expenditures -0- -0- -0-
----------- ----------- ------------
Depreciation & amortization 39,419 109,513 148,932
----------- -----------
Corporate depreciation 83,680
Extraordinary loss depreciation &
amortization 262,349
------------
Total depreciation & amortization 494,961
------------
Environmental Soil
Year ended December 31, 1994 Construction Remediation Consolidated
- ---------------------------- ------------ ----------- ------------
Revenue $ 5,326,876 $2,807,925 $8,134,801
----------- ----------- ------------
Income (loss) from divisions 745,488 (978,307) (232,819)
----------- -----------
General corporate expenses (1,032,491)
------------
Income (loss) before extraordinary loss (1,265,310)
------------
Extraordinary loss (516,975)
------------
Identifiable assets at December 31, 1994 56,483 2,432,926 2,489,409
----------- -----------
<PAGE>
Corporate assets 2,194,410
------------
Total assets at December 31, 1994 4,683,819
------------
Capital expenditures 18,184 492,437 511,621
----------- ----------- ------------
Depreciation & amortization 46,658 318,965 365,623
----------- -----------
Corporate depreciation & amortization 7,108
------------
Total depreciation & amortization 372,731
------------
Environmental Soil
Year ended December 31, 1993 Construction Remediation Consolidated
- ---------------------------- ------------ ----------- ------------
Revenue $ 7,617,772 $ 3,310,414 $ 10,928,186
----------- ----------- ------------
Income (loss) from divisions 1,288,317 (436,561) 851,756
----------- -----------
General corporate expenses (1,051,282)
------------
Income (loss) before taxes (199,526)
------------
Identifiable assets at December 31, 1993 182,305 3,306,331 3,488,636
Corporate assets 1,533,736
Total assets at December 31, 1993 5,022,372
------------
Capital expenditures 49,604 12,086 61,690
----------- ----------- ------------
Depreciation & amortization 35,206 387,872 423,078
----------- -----------
Corporate depreciation & amortization 9,449
------------
Total depreciation & amortization 432,527
------------
</TABLE>
Note T: Major customer
One customer accounted for approximately 32% of 1995 revenue, 52% of 1994
revenue and 58% of 1993 revenue. All of this customer's revenue was part of the
environmental construction management division's revenue. Another customer
accounted for approximately 23% of 1995 revenue, a single soil remediation
contract.
Note U: Going concern and subsequent events
The financial statements have been prepared on the assumption that the Company
will continue as a going concern. The Company not been profitable since the
year ended January 31, 1992. Its current liabilities exceed its current assets
by $1,282,456 as of 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. Mr. Hissom brought in the
Venezuelan project 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 that North American Securities Company,
the company which provided the financing engagement, anticipates assisting the
Company in the scheduling and preparation of presentations to qualified
institutional investors in preparation for a $3mm to $6mm public offering of the
Company's securities.
F-20
<PAGE>
North American Securities 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 plans to use the $250,000 bridge loan
financing to pay past debts and for future working capital. The Company
anticipates needing additional bridge capital within 120 days, which it will
look to North American Securities Company for help in obtaining once the Company
has secured at least a $1mm contract with a customer. At the present time, the
Company is in negotiation with several companies and governmental entities,
although no definitive agreement has been signed as of the date hereof. Finally,
the Company plans to utilze an offering in the $3mm to $6mm to take care of its
long-term capital needs.
Note V: Extraordinary item
During the year ended December 31, 1994, the Company realized an extraordinary
loss from the abandonment of a proposed business acquisition. The Company
entered into a Letter of Intent in August, 1993, to acquire a business engaged
in reclaiming waste oil from oil wells and selling the crude oil to refineries.
The Company ran into difficulties completing the acquisition after a test
operation was completed, and the Company had paid certain liabilities of the
business to be acquired. The negotiations continued into the fourth quarter of
1994. The Company sold control and ownership of its position to another party
for $20,000 plus the assumption of certain liabilities that the Company was
liable for. The transaction was completed in January, 1995. The Company invested
a net amount of $365,860 in the abandoned business acquisition.
As part of the test operation which was completed in January, 1994, the Company
rented equipment from a supplier which represented itself as an expert in the
oil processing business. A dispute has arisen over these representations. The
Company refused to pay the rentals which were billed by the rental company
because the Company claimed the equipment did not process the waste oil as
represented verbally and in writing. Because an agreement could not be reached
with the equipment rental company, they filed a lawsuit against the Company for
100% of what they could possibly bill, $151,115. The Company is vigorously
defending the lawsuit. As a result of subsequent findings, the Company feels
that it has an excellent defense to the lawsuit, and a strong basis for the
counter suit which has been filed.
The Company's write off in 1994 for the abandoned business acquisition was their
net investment of $365,860, plus a reserve of $151,115 for the lawsuit with the
rental company, for a total of $516,975. The Company settled the lawsuit with
the rental company in 1995 for $75,000 and recognized an extra-ordinary gain of
$76,115 during 1995 as the result of the settlement.
Note W: Discontinued business
The Company leased a site for a three year period in California and installed
the necessary leasehold improvements to operate a fixed site for thermal soil
remediation during 1994. The lease hold improvements cost $264,054, which was
substantially more than management anticipated. The fixed site operations were
abandoned in 1995.
The fixed site operation had operating losses of $272,691 and $257,848 for the
years ended December 31, 1995 and December 31, 1994, respectively.. The site
started operations in September, 1994. The revenue did not increase as fast as
management had anticipated. The fixed site had large fixed expenses from
depreciation of equipment and amortization of leasehold improvements and could
not achieve a profitable operation.
The fixed site operations were discontinued in 1995. The total losses written
off in 1995 were $272,691 from operations and $290,084 from abandonment of
operations. The total loss from this business for 1995 and 1994 totalled
$820,623.
In 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121 "Accounting for the Impairment of
Long-Lived Assets and For Long-Lived Assets to be Disposed of" (SFAS No.
121). SFAS No. 121 established accounting standards for the impairment of
long-lived assets, certain identifiable intangibles, and goodwill related to
those assets to be held and used and for long-lived assets and certain
identifiable intangibles to be disposed of. SFAS No. 121 imposes a
requirement on entities to estimate the future cash flows from the use of an
applicable asset and its eventual disposition, whenever events or changes in
circumstances indicate that the carrying value of an applicable asset may not
be recoverable, and to recognize an impairment loss if the carrying amount of
the applicable asset exceeds its future cash flows. The amount of the
impairment loss is measured by the amount the fair value of the asset exceeds
its carrying amount.
The Company plans to adopt the standard in 1996. Management has determined
that adoption of the standard may not have a material effect on its financial
statements.
F-21
<PAGE>
RYAN-MURPHY INCORPORATED
Independent auditors report
Schedules:
V Property, plant and equipment
VI Accumulated depreciation of property, plant and equipment
<PAGE>
Board of Directors
Ryan-Murphy Incorporated
INDEPENDENT AUDITORS' REPORT
The audits referred to in our report dated March 26, 1996, relating to the
financial statements of Ryan-Murphy Incorporated, which is contained in Item 8
of this Form 10-K, included the audit of the financial statement schedules
listed in the accompanying index.
In our opinion, such financial statement schedules present fairly, in all
material respects, the information set forth therein.
Cordovano and Company, P.C.
Denver, Colorado
March 26, 1996
<PAGE>
RYAN-MURPHY INCORPORATED
PROPERTY AND EQUIPMENT
SCHEDULE V
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F
Other
Balance changes Balance
at beginning Additions additions, at end
Classification of period at Cost Retirements (deductions) of period
-------------- --------- ------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Period ended December 31, 1995:
Leasehold improvements $ 264,054 $ -0- $ (264,054) $ -0- $ -0-
Buildings -0- 2,694,435 -0- -0- 2,694,435
Furniture & fixtures 306,248 -0- (60,560) -0- 245,688
Field equipment 131,804 -0- (73,684) -0- 58,120
Transportation equipment 95,621 3,847 (64,375) -0- 35,093
Good Earth Machines 466,080 -0- (466,080) -0- -0-
------------ ----------- ----------- --------- -----------
Totals $ 1,263,807 $ 2,698,282 $ 928,753) $ -0- $ 3,033,336
------------ ----------- ----------- --------- -----------
------------ ----------- ----------- --------- -----------
Period ended December 31, 1994:
Leasehold improvements $ -0- $ 264,054 $ -0- $ -0- $ 264,054
Buildings 303,051 26,292 23,095 -0- 306,248
Furniture & fixtures 58,420 73,684 300 -0- 131,804
Field equipment 95,621 -0- -0- -0- 95,621
Transportation equipment 1,665,051 147,591 1,346,562 -0- 466,080
------------ ----------- ----------- --------- -----------
Good Earth Machines
Totals $ 2,122,143 $ 511,621 $ 1,369,957 $ -0- $ 1,263,807
------------ ----------- ----------- --------- -----------
------------ ----------- ----------- --------- -----------
Period ended December 31, 1993:
Furniture & fixtures $ 369,079 $ 33,221 $ 99,253 $ 4 $ 303,051
Field equipment 71,872 -0- 13,452 -0- 58,420
98,516 15,356 18,251 -0- 95,621
1,982,725 12,085 329,759 -0- 1,665,051
------------ ----------- ----------- --------- -----------
Totals $ 2,522,192 $ 60,662 $ 460,715 $ 4 $ 2,122,143
------------ ----------- ----------- --------- -----------
------------ ----------- ----------- --------- -----------
</TABLE>
<PAGE>
RYAN-MURPHY INCORPORATED
ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY AND EQUIPMENT
SCHEDULE VI
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F
Additions Other
Balance Charged Changes, Balance
at beginning cost and Additions, at end
Classification of period expense Retirements (deductions) of period
-------------- --------- ------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Period ended December 31, 1995:
Leasehold improvements $ 30,178 $ 233,876 $ (264,054) $ -0- $ -0-
Buildings -0- 1,111,454 -0- -0- 1,111,454
Furniture & fixtures 180,737 51,009 (58,514) -0- 173,232
Field equipment 38,533 16,254 (11,404) -0- 43,383
Transportation equipment 72,098 7,319 (50,399) -0- 29,018
Good Earth Machines 248,672 16,646 (265,318) -0- -0-
----------- ----------- ----------- -------- -----------
Totals $ 570,218 $ 1,436,558 $ (649,689) $ -0- $ 1,357,087
----------- ----------- ----------- -------- -----------
----------- ----------- ----------- -------- -----------
Period ended December 31, 1994:
Leasehold improvements $ -0- $ 30,178 $ -0- $ -0- $ 30,178
Furniture & fixtures 142,531 56,284 18,078 -0- 180,737
Field equipment 25,803 12,895 165 -0- 38,533
Transportation equipment 64,658 7,440 -0- -0- 72,098
Good Earth Machines 636,059 166,085 553,472 -0- 248,672
----------- ----------- ----------- -------- -----------
Totals $ 869,051 $ 272,882 $ 571,715 $ -0- $ 570,218
----------- ----------- ----------- -------- -----------
----------- ----------- ----------- -------- -----------
Period ended December 31, 1993:
Furniture & fixtures $ 160,665 $ 66,766 $ 84,900 $ -0- $ 142,531
Field equipment 26,560 11,441 12,198 -0- 25,803
Transportation equipment 60,640 17,245 13,227 -0- 64,658
Good Earth Machines 403,050 238,009 5,000 -0- 636,059
----------- ----------- ----------- -------- -----------
Totals $ 650,915 $ 333,461 $ 115,325 $ -0- $ 869,051
----------- ----------- ----------- -------- -----------
----------- ----------- ----------- -------- -----------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATION FOUND
ON PAGES F-3 THROUGH F-5 OF THE COMPANY'S FORM 10K FOR THE YEAR ENDED
DECEMBER 31, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 152
<SECURITIES> 0
<RECEIVABLES> 526
<ALLOWANCES> 6
<INVENTORY> 79
<CURRENT-ASSETS> 807
<PP&E> 93
<DEPRECIATION> 395
<TOTAL-ASSETS> 4,105
<CURRENT-LIABILITIES> 2,089
<BONDS> 0
0
0
<COMMON> 5
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 4,105
<SALES> 5,459
<TOTAL-REVENUES> 5,459
<CGS> 4,741
<TOTAL-COSTS> 4,741
<OTHER-EXPENSES> 1,766
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 52
<INCOME-PRETAX> (1,132)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,132)
<DISCONTINUED> (562)
<EXTRAORDINARY> 76
<CHANGES> 0
<NET-INCOME> (1,619)
<EPS-PRIMARY> (.054)
<EPS-DILUTED> (.054)
</TABLE>
