<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 1996.
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________________ to _____________________
Commission file number 0-1857
Ryan-Murphy Incorporated
(Exact name of registrant as specified in its charter)
Colorado 84-0998860
(State or other jurisdiction of (I.R.S. Employer
of incorporation or organization) Identification No.)
420 E. 120th Ave, unit B2-502, Northglenn, CO 80233
(Address of principal executive offices)
(303) 427-4567
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes /X/ No __
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Shares of common stock outstanding were 2,953,315 at September 30, 1996.
- ------------------------------------------------------------------------
This document is comprised of 15 pages.
<PAGE>
RYAN-MURPHY INCORPORATED
Index
-----
PART I Financial Information Page
- ----------------------------- ----
Item 1. Condensed consolidated balance sheets,
September 30, 1996 and December 31, 1995 3
Condensed consolidated statements of operations, the
three months & six months periods ended September 30, 1996
and September 30, 1995. 4
Condensed consolidated statements of cash flows,
nine months period ended September 30, 1996
and September 30, 1995. 5
Item 2. Management's discussion and analysis of
financial condition and results of operations
9
PART II Other Information 12
- -------------------------
Signatures 14
Exhibit 27 15
2
<PAGE>
RYAN-MURPHY INCORPORATED
CONSOLIDATED CONDENSED BALANCE SHEETS
September 30, December 31,
1996 1995
------------ -----------
ASSETS
Cash $ 70,938 $ 152,027
----------- -----------
Contracts and notes receivable 161,857 494,205
Less: Allowance for bad debts (20,144) (5,694)
----------- -----------
141,713 488,511
----------- -----------
Inventories 8,500 93,011
Prepaid expenses -0- 41,875
----------- -----------
Total current assets 221,151 775,424
----------- -----------
Investment in affiliated company 2,825 2,500
----------- -----------
Indebtedness of related parties, not current 31,500 31,500
----------- -----------
Property and equipment 2,942,030 3,033,336
Less: Accumulated depreciation (1,241,452) (1,357,087)
----------- -----------
1,700,578 1,676,249
----------- -----------
Intangible Assets 1,968,805 1,959,233
Less: Accumulated amortization (436,779) (388,886)
----------- -----------
1,532,026 1,570,347
----------- -----------
Other assets 8,695 49,296
----------- -----------
$ 3,469,778 $ 4,105,316
----------- -----------
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts and notes payable $ 1,900,086 $ 1,865,613
Indebtedness to related parties 21,000 21,000
Other current liabilities 306,423 202,767
----------- -----------
Total current liabilities 2,227,509 2,089,380
Long-term debt, net of current portion 407,670 139,306
Common stock 198 5,029
Other shareholders' equity 834,401 1,871,601
----------- -----------
$ 3,469,778 $ 4,105,316
----------- -----------
----------- -----------
See Accompanying notes to condensed consolidated financial statements.
3
<PAGE>
RYAN-MURPHY INCORPORATED
Condensed Consolidated Statements of Operations
<TABLE>
Three Months Ended September 30 Nine months ending Sept 30
1996 1995 1996 1995
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Contract and other revenue $11,015 $1,153,641 $ 182,555 $4,765,900
Costs of revenue earned 11,625 1,120,482 277,929 4,241,973
--------- ---------- ---------- ----------
Gross profit (610) 33,159 (95,374) 523,927
Costs and expenses:
General and administrative expense 17,422 472,358 775,064 1,390,889
Provision for bad debts -0- 6,750 14,750 21,500
--------- ---------- ----------- ----------
Income (loss) from operations (18,031) (445,948) (855,187) (888,462)
Non-operating income (expense -0- (14,988) (126,567) 14,634
Interest expense (8,324) (9,075) (31,448) (38,319)
--------- ---------- ----------- ----------
Income before income taxes (26,355) (421,886) (1,043,202) (912,147)
Income taxes -0- (2,899) (143) (4,484)
--------- ---------- ----------- ----------
Loss from discontinued operations
(net of income taxes) -0- (15,000)
--------- ---------- ----------- ----------
Net income (loss) (26,355) (424,785) $(1,058,345) (916,631)
--------- ---------- ----------- ----------
--------- ---------- ----------- ----------
Net income (loss) per common share (0.089) (0.024) (0.358) (0.052)
--------- ---------- ----------- ----------
--------- ---------- ----------- ----------
Weighted average common
shares outstanding 2,953,315 17,526,823 2,953,315 17,526,823
--------- ---------- ----------- ----------
--------- ---------- ----------- ----------
</TABLE>
See accompanying notes to condensed consolidated financial statements
4
<PAGE>
RYAN-MURPHY INCORPORATED
Condensed Consolidated Statements of Cash Flows
Nine months ended Sept.30,
1996 1995
---------- ---------
Net cash provided by (used in) operating activities $(359,757) $ 399,025
--------- ---------
Cash flows from investing activities:
Retirement of property and equipment 26,953 214,739
Cash proceeds from long term lease receivable
-0- 239,261
--------- ---------
26,953 454,000
--------- ---------
Cash flows from financing activities:
Cash proceeds from issuance common stock (1,172) 34,623
Cash proceeds from debt issuance 393,189 1,183,890
Debt service payments (139,019) 1,446,323)
Debt service payments to related parties -0- (218,395)
--------- ---------
252,998 (446,205)
--------- ---------
Net increase (decrease) in cash and cash equivalents (81,805) 406,820
Cash and cash equivalents, beginning 152,221 158,363
--------- ---------
Cash and cash equivalents, ending 70,938 565,183
--------- ---------
--------- ---------
See accompanying notes to condensed consolidated financial statements
5
<PAGE>
RYAN-MURPHY INCORPORATED
Notes to Condensed Consolidated Financial Statements
Sept. 30, 1996
Note A. CONDENSED FINANCIAL STATEMENTS
The condensed consolidated balance sheets as of September 30, 1996 and
December 31, 1995, the condensed consolidated statements of operations
for the three months and six months periods ended September 30, 1996
and September 30, 1995, and the condensed consolidated cash flows for
the three month periods ended September 30, 1996 and September 30,
1995 have been prepared by the Company without audit. The Condensed
Consolidated Financial Statements and Notes include the wholly owned
subsidiary RMI Americas, C.A. In the opinion of management, all
adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position as of September 30,
1996 and for all periods presented, have been made. The financial
statements for the prior years and/or periods have been reclassified
to conform with the current year's presentation.
Note B: RELATED PARTY TRANSACTIONS
As of September 30, 1996 the indebtedness from the related parties was
$31,500 and the indebtedness to related parties was $21,000.
Note C: RESTRICTED CASH
The Company had restricted cash totalling $70,704 as of September 30,
1996. This cash is collateral for payment and performance bonds.
Note D: INVENTORIES
Inventories consisted of the following at September 30, 1996:
Costs in excess of billings on uncompleted contracts $ -0-
Supplies 19,000
-------
Total $19,000
-------
-------
Note E: BILLINGS IN EXCESS OF COSTS ON UNCOMPLETED CONTRACTS
Included in other current liabilities in the accompanying financial
statements at September 30, 1996 are billings in excess of costs on
uncompleted contracts totalling $2,429.
Note F: PREFERRED STOCK
The Company's Articles of Incorporation authorize up to 5,000,000
Preferred Shares, to have such classes, par value, and preferences as
the Company's Board of Directors may determine from time to time. As
of September 30, 1996, no Preferred Shares are issued or outstanding.
6
<PAGE>
RYAN-MURPHY INCORPORATED
Notes to Condensed Consolidated Financial Statements
June 30, 1996
Note G: COMMON STOCK
There were 500,000,000 shares of $0.000067 par value common stock
authorized and 2,953,315 shares issued and outstanding at June 30,
1996. Effective February 12, 1996, the Company implemented a one-for-
thirty reverse split of the Company's common shares. This reverse
split had been approved and ratified by the Company's shareholders at
the shareholders' meeting on October 5, 1995, subject to Board
implementation.
Note H: STOCK OPTIONS & WARRANTS
The Company has issued incentive stock options two officers for 56,668
shares of stock at an exercise price $3.00 per share.
The Company has issued warrants to Abraham Pustilnik, as part of his
loan agreement, for 97,500 shares of common stock at $1.00 per share
which may be exercised from July 8, 1996 through October 8, 1998.
Note I: GOING CONCERN AND SUBSEQUENT EVENTS
Management has adopted an internal restructuring plan that entails
debt renegotiation, new business development, new management and new
Board of Directors. The Company believes that the debt must be
restructured in order to continue as a going concern. The company is
in ongoing negotiations with its creditors to restructure its debt.
The company has reached preliminary agreement with nine of its twenty
largest creditors.
The financial statements have been prepared on the assumption that the
Company will continue as a going concern. The Company has not been
profitable since the year ended January 31, 1992. Its current
liabilities exceed its current assets by $1,953,862 at June 30, 1996
and $1,313,956 at December 31, 1995. Management has addressed the
viability of the Company very aggressively.
As part of resolving the viability of the Company, Management brought
in Mr. Bruce Hissom as President, CEO and Treasurer during the last
quarter of 1995. Mr. Hissom brought in his Venezuelan project and
assets and new technologies. As the result of the new assets,
technology and management, the Company accepted a financing engagement
on March 21, 1996, which provided an initial $250,000 bridge loan.
The financing engagement provides for advising and assisting the
Company with short-term financing, engaging market makers, seeking
additional investment houses, and other financing options which may
include additional public offerings. The investment advisor is
prepared to assist the Company in raising $3,000,000 or more. The
financing engagement states the financing company anticipates
assisting the Company in the scheduling and preparation of
presentations to qualified
7
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RYAN-MURPHY INCORPORATED
Notes to Condensed Consolidated Financial Statements
June 30, 1996
institutional investors in preparation for a $3,000,000 to $6,000,000
public offering of the Company's securities. The financing company
also anticipates managing, or engaging a manager for such an offering
within twelve months to provide the Company with long-term financing.
The Company used the $250,000 bridge loan financing to pay some past
due debts, and for current working capital. The Company needs
additional bridge capital to remain in business. The finance company
has asked the Company to acquire one or more contracts for additional
financing. The Company is in negotiation with several companies and
governmental entities, although no definitive agreement has been
signed as of the date hereof, until the debt can be restructured.
On April 10, 1996, the Company's wholly owned subsidiary, RMI
Americas, C.A. received a Certificate of Occupancy permit from the
Municipality of Caroni, Venezuela to commence treatability studies and
present design parameters for a thermal treatment facility at the new
location. In addition, the Company received a Certificate of
Occupancy to present design parameters for a 3,100 acre security
landfill to be located on the outskirts of the Municipality of Caroni,
Venezuela. The Company currently has an option to purchase the land
subject to the permits.
On July 16, 1996, the Company's wholly owned subsidiary, RMI Americas,
C.A. entered into an agreement to acquire the rights to an existing
contract, approximately $4,000,000, to process waste oil in Venezuela.
The contract requires front end funding of approximately $100,000 with
additional funding of approximately $1,500,000 for additional
equipment. The Company has received a preliminary commitment,
contingent upon the Company restructuring its debt.
The company is currently negotiating with creditors to restructure its
debt; either into long term debt or preferred stock. The company has
reached preliminary agreements with nine of its twenty largest
creditors.
8
<PAGE>
RYAN-MURPHY INCORPORATED
Part I. Item II.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The Environmental Construction Management division had revenue of $155,724
and gross profit (loss) from operations of ($61,181) for the six months ended
June 30, 1996 compared to revenue of $2,125,719 and gross profit from
operations of $574,114 for the six months ended June 30, 1995. The decrease
in revenues and gross profit was due to decreased volume from the Company's
core customer, decreased volume and profits in the California office and an
overall change in operations of the entire Company. The California office
was officially closed as of March 31, 1996.
The Good Earth Machine division had revenue of $15,817 and gross profit
(loss) from operations of ($33,583) for the six months ended June 30, 1996
compared to revenue of $1,352,888 and gross profit from operations of
$104,233 for the six months ended June 30, 1995. The only revenue for the
current six months period was the sale of parts. The Company currently does
not have substantial work scheduled.
The new Technologies division, which was organized after Mr. Bruce Hissom
became President of the Company, has not entered into any contracts. The
Company has entered into a Memorandum of Understanding with a major
international company to jointly pursue work for this division on Department
of Energy sites and with other large private corporations. The Company
currently is negotiating several contracts which could utilize the RadFix
Technology, however, none have been signed as of this date.
The new Land division, which was organized after Mr. Bruce Hissom became
President of the Company, has submitted several proposals, and is in the
investigative stage for several projects.
The Company had a net profit (loss) after taxes of ($1,031,990) for the six
months ended June 30, 1996 compared to ($491,846) for the six months ended
June 30, 1995. The June 30, 1996 loss included $130,196 in write-downs and
abandonment of a business site, and the June 30, 1995 loss included $218,574
in write-downs and abandonment of a business site. The balance of the
increase in net loss was caused by the closing down of the California office
and the change in emphasis from underground storage tank removals to new
remediation technologies in the new Technologies division and the
acquisition, remediation and subsequent disposal of environmentally impaired
properties in the new Land division. The Company currently does not have any
work and will reinstate its liability insurance policies after financing is
arranged, a debt restructure plan is in place, and work is started again.
The business and profits from the two new divisions is expected to start in
the third or fourth quarter of 1996.
Net cash flows from (used in) operations was ($348,742) for the six months
ended June 30, 1996 compared to $61,286 for the six months ended June 30,
1995. Major sources of operating cash were Accounts Receivable, Accounts
Payable, Deferred Payrolls, and non cash charges of depreciation and
amortization and the write down of inventory. Major use of operating cash
was an increase in Billings In Excess Of Costs. Financing activities
provided $252,998 compared to (used) of
9
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RYAN-MURPHY INCORPORATED
($443,183) during the first six months of last year. Debt issuance accounts
for the provision and debt service accounts for the usage in both periods.
Additional consolidation and restructuring of Administrative and General
expenses are being considered which should decrease losses and increase cash
flow.
The Company has not been profitable since the year ended January 31, 1992,
and has a net capital deficiency at June 30, 1996 that raises a substantial
doubt about its ability to continue as a going concern. Management has
addressed this issue very aggressively. The Company's twenty (20) largest
creditors were given a skeleton restructuring proposal on July 22, 1996. The
Company received a positive response to this skeleton proposal and issued a
formal restructuring proposal to the same twenty (20) creditors on August 6,
1996, and asked for a response by August 14, 1996. The formal proposal
included the choices of converting debt to preferred stock, converting debt
to a long term note payable, a combination of the above, a moratorium on all
payments through December 31, 1996, and then revert to the original payment
schedule. All judgments and liens are required to be removed as part of the
proposal. As of this writing, seven (7) of the twenty (20) creditors have
accepted the proposal in writing, several others have called and asked for
additional clarification. These twenty (20) creditors represent
approximately 80% of the debt of the Company. Management believes it is
mandatory to restructure the debt in order to acquire financing.
As part of resolving the viability of the Company, Management brought in Mr.
Bruce Hissom as President, CEO and Treasurer during the last quarter of 1995.
Mr. Hissom brought in his Venezuelan project and assets and new technologies.
As the result of the new assets, technology and management, the Company
accepted a financing engagement on March 21, 1996, which provided an initial
$250,000 bridge loan. The financing engagement provides for advising and
assisting the Company with short-term financing, engaging market makers,
seeking additional investment houses, and other financing options which may
include additional public offerings. The investment advisor is prepared to
assist the Company in raising $3,000,000 or more. The financing engagement
states the financing company anticipates assisting the Company in the
scheduling and preparation of presentations to qualified institutional
investors in preparation for a $3,000,000 to $6,000,000 public offering of
the Company's securities. The financing company also anticipates managing,
or engaging a manager for such an offering within twelve months to provide
the Company with long-term financing. The Company used the $250,000 bridge
loan financing to pay some past due debts, and for current working capital.
The Company needs additional bridge capital to remain in business. The
finance company has asked the Company to acquire one or more contracts for
additional financing. The Company is in negotiation with several companies
and governmental entities, although no definitive agreement has been signed
as of the date hereof.
The Company has been a defendant in numerous creditor suits because of
non-payment of debt. In many cases the Company entered into note payable
agreements with payment schedules, and in some cases the settlement agreement
included a provision for a stipulated judgment in the event of default. The
Company has defaulted on all notes payable payment schedules. In cases that
provided for a stipulated judgment, some, but not all, creditors have filed
the stipulated judgment with the court. The company is currently negotiation
with the creditors to restructure debt; either in to long term debt or
preferred stock. The company has reached preliminary agreement with nine of
its twenty largest creditors.
10
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RYAN-MURPHY INCORPORATED
On April 10, 1996, the Company's wholly owned subsidiary, RMI Americas, C.A.
received a Certificate of Occupancy permit from the Municipality of Caroni,
Venezuela to commence treatability studies and present design parameters for
a thermal treatment facility at the new location. In addition, the Company
received a Certificate of Occupancy to present design parameters for a 3,100
acre security landfill to be located on the outskirts of the Municipality of
Caroni, Venezuela. The Company currently has an option to purchase the land
subject to the permits.
On July 16, 1996, the Company's wholly owned subsidiary, RMI Americas, C.A.
entered into an agreement to acquire the rights to an existing contract,
approximately $4,000,000, to process waste oil in Venezuela. The contract
requires front end funding of approximately $100,000 with additional funding
of approximately $1,500,000 for additional equipment. The Company has
received a preliminary commitment, contingent upon the Company restructuring
its debt.
11
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RYAN-MURPHY INCORPORATED
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The Company is a defendant in a lawsuit brought by Key Bank of
Colorado in the Colorado State District Court for the City and County
of Denver. The bank alleges the Company owes the bank approximately
$155,571 on a revolving line of credit negotiated with the bank in
1992. The bank did not renew the line of credit in 1995 and declared
the note in default. The Company was current on all payments at
renewal date. The Company asserted certain counterclaims as a set-off
to amounts which may be owed to the bank. The Court granted the
Plaintiff's Motion for Summary Judgment on the issue of the Company's
default of the note and the right to foreclose on the Company's
security agreement. The Court also granted a Motion for Summary
Judgment regarding certain defenses and one claim of relief which the
Company raised, but denied a Motion for Summary Judgment and let stand
the remaining affirmative defenses and claims for relief and the
Company's remaining counterclaims. The Company has negotiated a final
settlement with the bank, however it defaulted on the payment
schedule.
The Company is a defendant in a lawsuit brought by Price Property and
Investments LLC in Colorado State District Court, Adams County,
Colorado. The Company borrowed $315,000 from the Plaintiff in 1990 on
a lease purchase/finance agreement. The Plaintiff renewed this
original agreement with a note in the amount of $320,000. The Company
has paid the Plaintiff approximately $566,570 in payments against the
original agreement and subsequent note. The Plaintiff alleges a
default of the note for an approximate amount of $298,752. The
Company has asserted, as a defense against the Plaintiff, that the
note has been paid in full. The Court granted the Plaintiff's Motion
for Summary Judgment on April 18, 1996 regarding the replevin and the
foreclosure upon the security interest in the property at issue. The
Company has been in contact with the Plaintiff and believes a
satisfactory payment schedule can be arranged, however, there can be
no guarantee of a satisfactory payment schedule.
The Company is a defendant in a lawsuit brought by Joseph C. Vittone
in Superior Court of the State of California for the County of
Riverside. The second amended complaint was filed July 9, 1996. The
amended complaint lists ten causes of actions with "amounts to be
proven at the time of trial". The defense of this lawsuit is being
handled by the Company's insurance carrier. There may be portions of
the complaint that will not be defended by the insurance carrier.
The Company was and is the defendant in a number of other legal
proceedings. Some of the cases were settled out of court, and the
Company has defaulted on the payment terms. Some of the settlement
agreements included a provision for a stipulated judgment in the event
of default. Some of the parties have filed judgments, others have
not. There are approximately twenty four (24) legal actions that have
been settled and in default or are still in process. Some of these
actions are in small claims courts. The Company, however, is
currently negotiation with these creditors to convert debt into long
term debt
12
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RYAN-MURPHY INCORPORATED
or preferred stock. The company has reached prolininary agreements
with nine of the twenty largest creditors.
Item 2. CHANGES IN SECURITIES
not applicable
Item 3. DEFAULTS UPON SENIOR SECURITIES
not applicable
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
not applicable
Item 5. OTHER INFORMATION
not applicable
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
none
Item 7. FORM S-3
none
13
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RYAN-MURPHY INCORPORATED
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
COMPANY HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
RYAN-MURPHY INCORPORATED
(REGISTRANT)
DATE: 12/23/96
/s/ BRUCE T. HISSOM
---------------------------------
BRUCE T. HISSOM
PRESIDENT
<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 3 - 5 of the Company's Form 10Q for the quarter ended June 30, 1996,
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> OCT-31-1996
<CASH> 72
<SECURITIES> 0
<RECEIVABLES> 186
<ALLOWANCES> 20
<INVENTORY> 19
<CURRENT-ASSETS> 257
<PP&E> 1636
<DEPRECIATION> 24
<TOTAL-ASSETS> 3466
<CURRENT-LIABILITIES> 2211
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 3466
<SALES> 171
<TOTAL-REVENUES> 171
<CGS> 266
<TOTAL-COSTS> 266
<OTHER-EXPENSES> 758
<LOSS-PROVISION> 15
<INTEREST-EXPENSE> 23
<INCOME-PRETAX> (1017)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1017)
<DISCONTINUED> 15
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1032)
<EPS-PRIMARY> (0.349)
<EPS-DILUTED> (0.349)
</TABLE>
