SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
/x/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended October 31, 2000
or
/ / TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from to
Commission File Number 33-19048-NY
MURRAY UNITED DEVELOPMENT CORP.
-------------------------------
(Exact Name of Small Business Issuer as specified in its charter)
Delaware 22-2856171
------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
P.O. Box 224, Landing, New Jersey 07850
--------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (908) 979-3025
No Change
--------------------------------------------------------------------------------
(Former Name, Former Address, if changed since last report)
Indicate by check mark whether the Issuer:
(1) Has filed all reports required to be filed by Section 13 or 15(d) of the
Exchange Act during the past 12 months (or for such shorter period that the
registrant was required to file such reports):
Yes x No________
(2) Has been subject to such filing requirements for the past 90 days.
Yes X No ____
63,453,434 shares of the registrant's Common Stock ,$.0001 per share, were
outstanding as of December 7, 2000.
<PAGE>
MURRAY UNITED DEVELOPMENT CORPORATION
TABLE OF CONTENTS
FORM 10-QSB
PART 1 FINANCIAL INFORMATION
Item Number Page
Item 1. Financial Statements
Balance Sheets 2
Statements of Operations 4
Statements of Stockholders' Deficiency 5
Statements of Cash Flow 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis
Or Plan of Operation 10
PART II OTHER INFORMATION
Items 1-6. 15
Signatures 16
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
MURRAY UNITED DEVELOPMENT CORPORATION
(A Company in the Development Stage)
BALANCE SHEETS
(UNAUDITED)
ASSETS
OCTOBER 31, 2000 JULY 31, 2000
---------------- -------------
Current assets
Cash & cash equivalents $ 4,785 $ 9,796
------- -------
Total current assets $ 4,785 $ 9,796
Furniture & equipment, at
cost, net of accumulated
depreciation 74,300 76,844
------- -------
Total Assets $79,085 $86,640
======= =======
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
MURRAY UNITED DEVELOPMENT CORPORATION
(A Company in the Development Stage)
BALANCE SHEETS
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
<TABLE>
<CAPTION>
OCTOBER 31, 2000 JULY 31, 2000
---------------- -------------
<S> <C> <C>
Current liabilities:
Accrued Interest Payable $ - $ -
Accounts payable and Accrued Expenses 43,971 46,342
Note Payable Stockholder - -
----------- -----------
Total current liabilities 43,971 46,342
Other liabilities:
Accrued Interest Payable 22,374 121,092
Notes payable-other stockholder 1,199,294 1,055,925
Accrued Compensation 148,128 148,128
----------- -----------
Total other liabilities 1,369,796 1,325,145
----------- -----------
Total liabilities 1,413,767 1,371,487
----------- -----------
Stockholders' deficiency:
Common Stock, par value $.0001:
Authorized 200,000,000 shares;
issued and outstanding
63,453,434 shares and 63,453,434 6,346 6,346
Additional paid-in capital 2,169,351 2,169,351
Deficit accumulated in the development stage (3,510,379) (3,460,544)
----------- -----------
Total stockholders' deficiency (1,334,682) (1,284,847)
----------- -----------
Total Liabilities and Stockholders' Deficiency $ 79,085 $ 86,640
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
MURRAY UNITED DEVELOPMENT CORPORATION
(A Company in the development Stage)
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED OCTOBER 31, 2000 AND 1999
AND CUMULATIVE AMOUNTS FROM OCTOBER 13, 1987
(DATE OF INCEPTION)
(UNAUDITED)
<TABLE>
<CAPTION>
CUMULATIVE
AMOUNTS
FROM
2000 1999 INCEPTION
------------ ------------ ---------------
<S> <C> <C> <C>
Income
Interest income $ - $ - $ 66,465
----------- ----------- -----------
Total Income - - 66,465
Expenses
Research and Development costs - - 854,653
Licensing fees-stockholder and affiliate - - 57,260
General and administrative expenses 27,461 16,704 2,273,791
Interest expense-stockholder and affiliate 22,374 17,233 391,140
----------- ----------- -----------
Total Expenses (49,835) (33,937) (3,576,844)
----------- ----------- -----------
Net loss $ (49,835) $ (33,937) $(3,510,379)
----------- ----------- -----------
Net loss per common share $ (nil) $ (nil) (0.055)
Weighted average number of
common shares outstanding 63,453,434 63,453,434 63,453,434
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
MURRAY UNITED DEVELOPMENT CORPORATION
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
THREE MONTHS ENDED OCTOBER 31, 2000 AND CUMULATIVE AMOUNTS FROM
OCTOBER 13, 1987 (DATE 0F INCEPTION)
(UNAUDITED)
<TABLE>
<CAPTION>
Deficit
Common Accumulated in
Stock Additional the
Number of Paid in Developmental
Shares Amounts Capital Stage Total
--------- ------- ---------- ------------- -----
<S> <C> <C> <C> <C> <C>
Balance July 31, 2000 63,453,434 $ 6,346 $ 2,169,351 $ (3,460,544) $(1,284,847)
Net loss for the three months
ended 10/31/2000 (49,835) (49,835)
----------- ------- ----------- ------------ -----------
$63,453,434 $ 6,346 $ 2,169,351 $ (3,510,379) $(1,334,682)
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
MURRAY UNITED DEVELOPMENT CORPORATION
(A Company in the Development Stage)
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED OCTOBER 31, 2000 AND 1999
CUMULATIVE AMOUNTS FROM OCTOBER 13, 1987
(DATE OF INCEPTION)
(UNAUDTIED)
<TABLE>
<CAPTION>
Cumulative
from
2000 1999 Inception
------------------------- -------------
<S> <C> <C> <C>
Operating activities:
Net Loss (49,835) (33,937) (3,510,379)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciaiton & Amortization 2,544 3,005 186,196
Expenses paid through issuance of common stock by:
Company - - 225,035
Principal Stockholder - - 220,900
Changes in operating assets and liabilities:
Accounts Payable Accrued Expenses 20,003 22,232 335,568
----------------------- -----------
Net cash used in operating activities (27,288) (8,700) (2,542,680)
----------------------- -----------
Investing Activities:
Purchase of furniture and equipment - - (260,497)
----------------------- -----------
Net cash provided by (used in) investing activities - - (260,497)
----------------------- -----------
Financing activities:
Note payable to stock holder: Proceeds $ 22,277 $ 8,000 $ 1,129,869
Principal payments - - (51,667)
Proceeds from the issuance of common stock(net) - - 1,729,760
----------------------- -----------
Net cash provided by financing activities 22,277 8,000 2,807,962
----------------------- -----------
Net increase (decrease) in cash and cash equivalents (5,011) (700) 4,785
Cash and cash equivalents, beginning of period 9,796 2,038 -
----------------------- -----------
Cash and cash equivalents, end of period $ 4,785 $ 1,338 $ 4,785
----------------------- -----------
Supplemental disclosure of cash flow data:
Interest Paid $ - $ - $ 32,420
----------------------- -----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 1 - Organization and business and basis of presentation:
In the opinion of management, the accompanying unaudited condensed financial
statements reflect all adjustments, consisting of normal recurring accruals,
necessary to present fairly the Company's financial position as of October 31,
2000 and its' results of operations and cash flows for the three months ended
October 31, 2000. These unaudited condensed financial statements should be read
in conjunction with the financial statements and other information in the July
31, 2000 Form 10-KSB.
The Company was incorporated on October 13, 1987 under the laws of the State of
Delaware. It was organized to further develop and exploit commercially certain
technology for a rotary internal combustion engine that would utilize
alternative fuels. The patent and related rights to the use of the technology
have been assigned to the Company.
The Company has been in the development stage since inception. Activities of the
Company have been limited to the acquisition of funds from the sale of its
common stock; the acquisition of the licensing rights for and, subsequently,
title to, the engine technology; research and development related to the
development of an initial fuel-driven prototype of the engine that was
successfully tested on a preliminary basis in January 1990; and the additional
testing and development of the engine prototype to obtain performance data for
the demonstration of the engine to potential licensees. The Company intends to
continue to conduct research and development activities with respect to the
manufacture of a rotary engine during the ensuing twelve month period
principally through Southwest Research Institute, assuming it is able to raise
the funds necessary to conduct such research, of which there can be no
assurances.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. However, as of October 31, 2000, the
Company had not been able to commercially utilize its engine technology to
generate revenues or cash flows from operating activities. As a result, it has
suffered recurring losses from operations from inception that have generated the
net stockholders' deficiency of $1,334,682 as of October 31, 2000 and have also
generated significant working capital deficiencies from time to time. Management
does not expect the Company to generate any significant revenues or positive
operating cash flows during the twelve-month period subsequent to October 31,
2000. The limited amount of liquid resources available at October 31, 2000 and
the inability to generate operating revenues and cash flows raise substantial
doubts about the Company's ability to continue as a going concern.
7
<PAGE>
MURRAY UNITED DEVELOPMENT CORPORATION
(a Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
Note 1 - Organization and business and basis of presentation (concluded):
The Company plans to continue research and development activities principally
through Southwest Research Institute on at least a limited basis through the
twelve-month period subsequent to October 31, 2000. However, management believes
that the net liquid assets available at October 31, 2000 will not be sufficient
to enable the Company to meet its obligations and to continue as a going concern
during the ensuing twelve-month period even on this limited basis without
limiting research and development and other operating activities more severely
unless it obtains additional debt or equity financing and/or government
sponsored research grants.
Management also believes that continuation of the Company as a going concern
during the twelve-month period subsequent to October 31, 2000 and thereafter
will depend upon the Company's ability to obtain sufficient additional working
capital to fund the building of a second prototype of its engine and such other
research and development activities as are necessary to accumulate sufficient
data for the marketing and licensing of the engine technology and the general
and administrative expenses to be incurred during the remaining development
period. Potential sources of such working capital include: the private or public
sale of common stock (the Company has historically depended primarily on the
sale of equity securities to finance its operations); the exercise of a
substantial portion of the 15,398,000 outstanding Class B warrants prior to
their proposed expiration on March 11, 2001, 14,898,000 of which are exercisable
at $0.15 per share and 500,000 of which are exercisable at $.225 per share; and
borrowing additional amounts from related parties or other sources. However,
there can be no assurances that such financing will be available The
accompanying financial statements do not include any adjustments that might
result from the uncertainties related to the ability of the Company to continue
as a going concern.
8
<PAGE>
Note 2 - Summary of other significant accounting policies:
Depreciation:
Depreciation of furniture and equipment is provided over the estimated
useful lives of the related assets using declining balance methods.
Research and development:
Costs and expenses related to research and development are expensed as
incurred.
Net loss per common share:
Net loss per common share was computed on the basis of the weighted
average number of shares of common stock outstanding during each
period. The effect of assuming the exercise of outstanding warrants was
antidilutive and, accordingly, not included in the computation of net
loss per share.
Note 3 - Related party transactions:
Information as to agreements with, and notes payable to, related
parties is set forth in the financial statements in the July 31, 2000
Form 10-KSB
Note 4 - Stockholder's Equity:
Information as to stockholders' equity is set forth in the financial
statements in the July 31, 2000 Form 10-KSB.
9
<PAGE>
Item 2. Management's Discussion And Analysis Of Financial Condition Or Plan
Of Operation.
The following discussion and analysis provides information which we believe is
relevant to an assessment and understanding of our results of operations and
financial condition. This discussion should be read in conjunction with the
financial statements and notes thereto appearing elsewhere herein.
Statements in this Form 10-QSB that are not statements of historical or current
fact constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements
involve known and unknown risks, uncertainties and other unknown factors that
could cause our actual results to be materially different from the historical
results or from any future results expressed or implied by such forward-looking
statements. In addition to statements that explicitly describe such risks and
uncertainties, readers are urged to consider statements labeled with the terms
"believes," "belief," "intends," "anticipates" or "plans" to be uncertain and
forward-looking. The forward-looking statements contained herein are also
subject generally to other risks and uncertainties that are described from time
to time in our reports filed with the Securities and Exchange Commission.
We are a developmental stage enterprise that commenced operations on
October 13, 1987 and is attempting to exploit commercially certain technology we
are in the process of developing, the Rotorcam Engine, a rotary internal
combustion engine. We intend to generate revenues primarily through the
licensing of the engine technology and secondarily through the manufacture and
sale of engines or related components or services.
We have not derived any revenues from the license or sale of our
technology and have incurred cumulative losses from our inception on October 13,
1987 through October 31, 2000 of $3,510,379.
Results Of Operations
Our revenues from our inception on October 13, 1987 through October 31, 2000
aggregating $66,465 were derived from interest earned. Interest income was zero
in the periods ended October 31, 2000 and October 1999 as a result of a decrease
in the amount of funds available for investment.
The cumulative loss from inception includes research and development costs of
$854,653. Research and development costs were $0 in the quarters ended October
31, 2000 and October 31,1999. We have had to reduce substantially our research
and development activities due to liquidity problems.
10
<PAGE>
Our cumulative loss from inception includes general and administrative expenses
of $2,273,791. General and administrative expenses increased to $27,461 in the
quarter ending October 31,2000 from $16,704 in the quarter ending October
31,1999, or a 64% increase. Increased general and administrative expenses can be
attributed to increased legal and other professional expenses.
Our cumulative loss from inception also includes past licensing fees of $0
during the period, and cumulatively $57,260 since inception. The elimination of
licensing fees is the result of the legal settlement reached in fiscal 1994.
The cumulative loss from inception also includes interest expense of $391,140 on
promissory notes payable to our principal stockholder and chairman. Interest
expense increased to $22,374 in the quarter ending October 31, 2000 from $17,233
in the quarter ending October 31, 1999, primarily as a result of increased loans
to us by our chairman and principal stockholder.
Our net loss of $49,835 in the quarter ended October 31, 2000 increased by
$15,898, or 47%, over the net loss of $33,937 in 1999. Increases in general and
administrative costs and interest expense caused the overall increase in net
loss.
Liquidity And Capital Resources
At October 31, 2000, we had cash and short-term investments totaling
$4,785(compared to liquid assets of $9,796 at July 31, 2000), a working capital
decrease of $5,011 (compared with a working capital increase of $7,758 at July
31, 2000) and a total stockholders' deficiency of $1,334,682(compared to a
deficiency of $1,284,847 at July 31, 2000). The stockholders' deficiency
increased due to the net loss of $49,835 incurred in the first quarter ended
October 31, 2000.
At October 31, 2000, we had current liabilities in excess of current assets of
$39,186. We have not been able to commercially utilize our engine technology to
generate any revenue through that date, and as a result, we have suffered
recurring losses from operations from inception that have generated the net
capital deficiencies at October 31, 2000 as well as July 31, 2000 and
significant working capital deficiencies from time to time. We do not expect to
generate any significant revenues or positive operating cash flows during the
twelve-month period subsequent to October 31, 2000. Cash flows used by operating
activities were $27,288 and $8,700 in the quarters ended October 31,2000 and
October 1999 respectively. The limited amount of liquid resources available at
October 31, 2000 ,and our inability to generate operating revenues and cash
flows ,raise substantial doubts about our ability to continue as a going
concern.
11
<PAGE>
PLAN OF OPERATION
As previously discussed, in July 1998 we entered into an agreement with
SRI. Under our agreement with SRI, SRI agreed to provide an engineering study of
the Rotorcam Engine at a cost of $9,750. SRI's study included an evaluation of
existing Rotorcam Engine hardware and data, including test data on the current
prototype, and design and analytical data that we had obtained to date. In
addition, SRI agreed to prepare an evaluation report summarizing its findings
and a technical and cost proposal for the next phase of work.
In December 1998, SRI issued its Report in which SRI concluded that
there were three (3) significant advantages of the Rotorcam Engine over
conventional reciprocating engines: higher torque at a specified rpm, a
potential of improved cycle efficiency and energy savings, and the improvement
of overall efficiency and packaging resulting from the ability to eliminate a
gear box.
In response to the Report, assuming funding becomes available, which we
cannot provide you any assurances will occur, we have determined to redesign and
rebuild a Second Prototype to address the issues raised by SRI in its Report. We
estimate that the cost of such Second Prototype will be approximately $350,000
to $375,000 and that it will take approximately 15 to 18 months from the time
such funding becomes available to complete.
If the Second Prototype shows clear advantages of the Rotorcam Engine
over conventional reciprocating engines in a specific market, and if the
necessary funds are then available, we plan to commission the development of a
Third Prototype, which would be designed to address the performance, cost,
reliability and producibility issues associated with the chosen market.
We estimate that the cost to develop such a Third Prototype would be
between $2 million and $3 million and that it would take between 18 to 24 months
from the time the Second Prototype is completed and such funding becomes
available to complete. During this phase of development we plan to commission
the production of several variations of the Third Prototype that would be used
for different purposes, including performance development, durability
assessment, and demonstrators to be used in field testing.
We are attempting to locate a funding source for the $350,000 to
$375,000 amount required to complete the Second Prototype. Possible sources for
funding include, exercise of our 15,398,000 outstanding Class B Warrants, an
offering our equity securities, and/or borrowing from private sources. We intend
to attempt to raise the funds necessary to complete the Second Prototype from
such sources but we cannot give you any assurances that we will be able to do
so. If we are unable to raise such funds, we may never be able to further
develop the Rotorcam Engine.
12
<PAGE>
On April 20, 2000, we filed a Registration Statement with the United
States Securities and Exchange Commission ("SEC"), which became effective on May
3, 2000. The Registration Statement, together with the qualification or
exemptions from qualification obtained in several states where holders of our
Class B Warrants reside, permit such holders to exercise their Class B Warrants
under the laws of the United States and those states where we have either
qualified or obtained an exemption from qualifying the shares of our Common
Stock for which the Warrants are exercisable. To date, none of such Class B
Warrant holders have exercised their Class B Warrants due principally to the
fact that the market price of our Common Stock has been lower than the exercise
price of the Class B Warrants since the effective date of the Registration
Statement. Unless the market price of our Common Stock shall exceed the exercise
price of the Class B Warrants in the future, it is unlikely that any of the
holders of such Warrants will exercise them and we may not be able to raise the
funds needed to develop the Second Prototype from such source.
We believe that if the Second Prototype is successfully completed, we will be
able to raise sufficient funds to complete the Third Prototype from research
grants, licensing fees and/or equity financing. However, since a decision to
proceed with a Third Prototype will depend on the results obtained from the
Second Prototype, we cannot give you any assurances that we will decide to build
a Third Prototype or that we will, in fact, be able to obtain sufficient funds
to complete such Third Prototype. Since a Third Prototype is essential to our
ability to market the Rotorcam Engine, any determination by us that it is not
advisable to produce the Third Prototype, or our financial inability to do so,
will have a materially adverse effect on our ability to successfully market the
engine.
In view of the projected extended period of time that we estimate it
will take to complete the Second and Third Prototypes, assuming that we are able
to obtain the funds to do, of which we cannot provide you with any assurances,
we are presently seeking opportunities that will permit us to diversify into
businesses in addition to the Rotorcam Engine. Our current diversification
efforts are focused on two recently formed businesses owned jointly by Mr.
Anthony Campo, the Chairman of the Company, and Mr. Dwight Foster, the President
of the Company.
One of the Campo-Foster businesses manufactures and distributes a line
commercial degreasers that are environmentally safe and are not harmful to
contact surfaces or users. Products will be marketed to the automotive,
restaurant, marine, airline and other industries. Although this company has
begun sales, it has not achieved significant revenues to date. The second
Campo-Foster business is presently engaged in researching and developing an
emissions neutralizer control system that would counteract the pollutants
generated by fuel burning devices and equipment.
13
<PAGE>
If one or both of the Campo-Foster businesses achieves sufficient
profitability, Messrs. Campo and Foster plan to make an offer to us to merge
such business(es) into the Company. Any such transaction would need to be
approved by the disinterested member(s) of our Board of Directors.
Each of the Campo-Foster businesses is an early stage Company, and we
cannot provide you with any assurances that either of them will achieve a level
of profitability that would make it mutually advantageous to merge the
Campo-Foster businesses with the Company. Therefore, shareholders should not
assume that we will merge with one or both of these businesses at any time.
Moreover, we have not entered into a binding agreement with Messrs. Campo and
Foster, and therefore they are not legally obligated to proceed with a merger.
We also cannot provide shareholders with assurances that we will be able to
agree with Mr. Campo and Mr. Foster on the terms of any such merger.
14
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities and Use of Proceeds- None
Item 3. Defaults upon Senior Securities
We issued a promissory note to Mr. Campo, dated August 1, 2000, in the amount of
$1,193,294, which consolidated amounts we owed to Mr. Campo under our prior
notes . The August 1, 2000 note bears interest at 7.5% per annum, which is
payable quarterly on each November 1, February 1, May 1 and August 1, and
matures on August 1,2001.
We have defaulted on our quarterly interest payment due on November 1,2000. As
of October 31, 2000, a total of $22,374 in unpaid interest was owed to Mr. Campo
under the August 1, 2000 note. Since we do not have any revenues, it is doubtful
that we will be able to pay any interest or principal amounts due under the
August 1, 2000 note until such time as we have operating revenues, or we raise
funds from an independent source, both of which events may not occur at any
time. Mr. Campo has the right to convert unpaid amounts due under the August 1,
2000 Note into one share of our common stock for each $.0075 due under such note
so converted. In addition, Mr. Campo has the right at any time to declare
amounts due under such note immediately due and payable.
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information-None
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits
Exhibit No. Description
----------- -----------
27 October 31, 2000 Financial Data Schedule
(B) Reports on Form 8-K
There were no reports on Form 8-K during the quarter ended October 31, 2000.
15
<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.
MURRAY UNITED DEVELOPMENT CORPORATION
-------------------------------------
(Registrant)
By: /S/ Dwight Foster
-----------------
President and Chief Executive Officer
Dated: December 11, 2000
By: /S/ Anthony S. Campo
--------------------
Anthony S. Campo, Execuive Vice President
Secretary and Treasurer
Chief Financial Officer
Dated: December 11, 2000
Pursuant to the requirements of 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.
/S/ Anthony S. Campo
--------------------
Anthony S. Campo,
Chairman of the Board
/S/ Dwight Foster
-----------------
Dwight Foster, Director
/S/ Frank Pecorella
---------------------
Frank Pecorella, Director
Dated: December 11, 2000
16
