UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 2009
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from: _____________ to _____________
MYRIAD ENTERTAINMENT & RESORTS, INC.
(Exact name of registrant as specified in its charter)
|
|
|
Delaware | 0-24640 | 64-0872630 |
(State or Other Jurisdiction | (Commission | (I.R.S. Employer |
of Incorporation) | File Number) | Identification No.) |
Post Office Box 100, Tunica, Mississippi 38676
(Address of Principal Executive Office) (Zip Code)
(800) 955-0762
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
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 þ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting Company.
Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company þ
Indicate by check mark whether the registrant is a shell Company (as defined in Rule 12b-2 of the Act). þ Yes ¨ No
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
The number of shares outstanding of the issuer's common stock as of June 19, 2009 was 49,184,321.
MYRIAD ENTERTAINMENT & RESORTS, INC.
INDEX
MYRIAD ENTERTAINMENT AND RESORTS, INC.
AND SUBSIDIARIES
March 31, 2009
PART 1: FINANCIAL INFORMATION
ITEM 1.
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
TABLE OF CONTENTS
FOR FINANCIAL STATEMENTS
1
MYRIAD ENTERTAINMENT AND RESORTS, INC.
AND SUBSIDIARIES
Consolidated Balance Sheet
(Unaudited)
March 31, 2009
Assets |
|
|
| |
Current assets |
|
|
| |
Cash |
| $ | 2,220 |
|
Total current assets |
|
| 2,220 |
|
|
|
|
|
|
Non-current assets |
|
|
|
|
Land deposits |
|
| 300,000 |
|
Property and equipment, net |
|
| 576 |
|
Due from shareholder |
|
| 39,771 |
|
Deposits and other assets |
|
| 18,663 |
|
Total non-current assets |
|
| 359,010 |
|
|
|
|
|
|
Total assets |
| $ | 361,230 |
|
|
|
|
|
|
Liabilities and Stockholders' Deficit |
|
|
|
|
|
|
|
|
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Current liabilities |
|
|
|
|
Accounts payable |
|
| 3,879,305 |
|
Accrued liabilities |
|
| 3,947,295 |
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Due to shareholder |
|
| 31,663 |
|
Short-term borrowings |
|
| 17,105 |
|
Accrued legal fees, including interest |
|
| 1,105,817 |
|
Convertible debentures |
|
| 1,545,095 |
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Total current liabilities |
|
| 10,526,280 |
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|
|
|
|
|
Stockholders' deficit |
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|
|
|
Common stock, par value $.001; authorized 300,000,000 |
|
|
|
|
shares; issued and outstanding 48,671,821 shares |
|
| 48,672 |
|
Additional paid-in capital |
|
| 8,251,240 |
|
Accumulated deficit |
|
| (18,464,962 | ) |
Total stockholders' deficit |
|
| (10,165,050 | ) |
|
|
|
|
|
Total liabilities and stockholders' deficit |
| $ | 361,230 |
|
See accompanying notes to unaudited consolidated financial statements.
2
MYRIAD ENTERTAINMENT AND RESORTS, INC.
AND SUBSIDIARIES
Consolidated Statement of Operations
(Unaudited)
For the Three Month Period Ended March 31, 2009 and 2008
|
| Three Months |
|
| Three Months |
| ||
|
| Ended |
|
| Ended |
| ||
|
| March 31, |
|
| March 31, |
| ||
|
| 2009 |
|
| 2008 |
| ||
Operating revenues |
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|
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| ||
Fees billed |
| $ | |
|
| $ | |
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
Salaries |
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| 216,031 |
|
|
| 313,814 |
|
Professional fees and contract services |
|
| 91,107 |
|
|
| 144,990 |
|
Other expenses |
|
| 22,525 |
|
|
| 78,114 |
|
Total operating expenses |
|
| 329,663 |
|
|
| 536,918 |
|
|
|
|
|
|
|
|
|
|
Net loss from operations |
|
| (329,663 | ) |
|
| (536,918 | ) |
|
|
|
|
|
|
|
|
|
Other income (expenses) |
|
|
|
|
|
|
|
|
Interest expense |
|
| (52,683 | ) |
|
| (41,052 | ) |
Total other expenses |
|
| (52,683 | ) |
|
| (41,052 | ) |
|
|
|
|
|
|
|
|
|
Net loss before income taxes |
|
| (382,346 | ) |
|
| (577,970 | ) |
|
|
|
|
|
|
|
|
|
Income tax benefit |
|
| |
|
|
| |
|
|
|
|
|
|
|
|
|
|
Net loss |
| $ | (382,346 | ) |
|
| (577,970 | ) |
|
|
|
|
|
|
|
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|
Net loss per common share: |
|
|
|
|
|
|
|
|
Basic |
| $ | (0.01 | ) |
| $ | (0.01 | ) |
Diluted |
| $ | (0.01 | ) |
| $ | (0.01 | ) |
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
| 48,684,321 |
|
|
| 45,521,821 |
|
Diluted |
|
| 48,684,321 |
|
|
| 45,521,821 |
|
See accompanying notes to unaudited consolidated financial statements.
3
MYRIAD ENTERTAINMENT AND RESORTS, INC.
AND SUBSIDIARIES
Consolidated Statement of Stockholders' Deficit
(Unaudited)
For the Three Month Period Ended March 31, 2009
|
|
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|
|
|
|
| Additional |
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|
|
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| Total |
| |||||
|
| Common Stock |
|
| Paid-in |
|
| Accumulated |
|
| Stockholders' |
| ||||||||
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| Deficit |
| |||||
|
|
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Balance - December 31, 2008 |
|
| 48,671,821 |
|
| $ | 48,672 |
|
| $ | 8,251,240 |
|
| $ | (18,082,616 | ) |
| $ | (9,782,704 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Net loss |
|
| |
|
|
| |
|
|
| |
|
|
| (382,346 | ) |
|
| (382,346 | ) |
|
|
|
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|
|
|
|
|
|
|
|
|
|
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Balance March 31, 2009 |
|
| 48,671,821 |
|
| $ | 48,672 |
|
| $ | 8,251,240 |
|
| $ | (18,464,962 | ) |
| $ | (10,165,050 | ) |
See accompanying notes to unaudited consolidated financial statements.
4
MYRIAD ENTERTAINMENT AND RESORTS, INC.
AND SUBSIDIARIES
Consolidated Statement of Cash Flow
(Unaudited)
For the Three Month Period Ended March 31, 2009 and 2008
|
| Three Months |
|
| Three Months |
| ||
|
| Ended |
|
| Ended |
| ||
|
| March 31, |
|
| March 31, |
| ||
|
| 2009 |
|
| 2008 |
| ||
Cash flows from operating activities |
|
|
|
|
|
| ||
Net loss |
| $ | (382,346 | ) |
| $ | (577,970 | ) |
Adjustments to reconcile net loss to net cash |
|
|
|
|
|
|
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|
used by operating activities |
|
|
|
|
|
|
|
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Depreciation and amortization |
|
| 446 |
|
|
| 446 |
|
Beneficial conversion feature associated with debenture |
|
| 6,156 |
|
|
| 5,673 |
|
Vesting of stock options |
|
| |
|
|
| 2,876 |
|
Changes in operating assets and liabilities |
|
|
|
|
|
|
|
|
Deposits and other assets |
|
| |
|
|
| (168,025 | ) |
Accounts payable |
|
| 183,727 |
|
|
| 138,813 |
|
Accrued liabilities |
|
| 156,841 |
|
|
| 567,752 |
|
Accrued legal fees, including interest |
|
| 35,086 |
|
|
| 13,780 |
|
Net cash provided (used) by operating activities |
|
| (90 | ) |
|
| (16,655 | ) |
|
|
|
|
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Net cash used by investing activities |
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| |
|
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| |
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Net cash provided by financing activities |
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| |
|
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| |
|
|
|
|
|
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|
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Net increase (decrease) in cash |
|
| (90 | ) |
|
| (16,655 | ) |
|
|
|
|
|
|
|
|
|
Cash - beginning of period |
|
| 2,310 |
|
|
| 18,840 |
|
|
|
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|
|
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Cash - end of period |
| $ | 2,220 |
|
| $ | 2,185 |
|
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Supplementary disclosure of non-cash transactions |
|
|
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|
|
Payment of land deposit by officer of the Company |
| $ | 100,000 |
|
| $ | |
|
See accompanying notes to unaudited consolidated financial statements.
5
MYRIAD ENTERTAINMENT AND RESORTS, INC.
AND SUBSIDIARIES
March 31, 2009
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 1. Summary of Significant Accounting Policies
This summary of significant accounting policies of Myriad Entertainment and Resorts, Inc. and its subsidiaries (collectively, the "Company") is presented to assist in understanding the Company's unaudited consolidated financial statements. The unaudited consolidated financial statements and notes thereto are representations of the Company's management who are responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles in the United States, and industry practices, and have been consistently applied in the presentation of the unaudited consolidated financial statements. In the opinion of management, the accompanying unaudited consolidated financial statements contain only normal reoccurring adjustments necessary to present fairly the Company's financial position as of March 31, 2009 and the results of its operations for the three months ended March 31, 2009 and 2008 and cash flows for the three months ended March 31, 2009 and 2008. The results of operations for the three months ended March 31, 2009 and 2008 are unaudited and are not necessarily indicative of the results to be expected for the full year. The unaudited consolidated financial statements included herein should be read in conjunction with the audited consolidated financial statements and related footnotes thereto included in the Company's Form 10-K for the fiscal year ended December 31, 2008.
Nature of Business
Myriad Entertainment and Resorts, Inc. is a holding Company incorporated under the laws of the State of Delaware that, through its subsidiaries, is intended to own and operate destination experience resorts. The Company owns, through its wholly owned subsidiary, MER Resorts, Inc., a Delaware corporation, a ninety-nine percent (99%) interest in Myriad World Resorts of Tunica, LLC ("Myriad-Tunica"), a Mississippi limited liability Company. The Company is the sole manager of Myriad-Tunica and is responsible for the day-to-day operations of that entity; the other member of Myriad-Tunica does not have the authority to manage the operation of Myriad-Tunica.
The Company's immediate business objective is to implement the business plan of Myriad-Tunica. The implementation of the Myriad-Tunica business plan will consist of, among other things, securing financing for the project, coordinating design concepts and structures, retaining general contractors, marketing of the resort and hiring qualified individuals. Myriad-Tunica is currently engaged in the very early stages of development of a planned resort to be located in Tunica, Mississippi.
Principles of Consolidation
The unaudited consolidated financial statements include the accounts of the Company and its ninety-nine percent owned subsidiary Myriad-Tunica and its wholly owned subsidiary Club Concepts Consulting, LLC ("Club Consulting"). Myriad Golf Resorts, Inc. ("Myriad-Golf") is a one percent partner in Myriad-Tunica.
All intercompany balances have been eliminated in consolidation.
Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. At March 31, 2009, the Company had no cash equivalents.
Land Deposits
Land deposits consist of deposits made to secure certain land for the construction of the Companys first destination resort, pursuant to a land purchase agreement. If the land purchase agreement is not consummated, these deposits will be expensed.
6
MYRIAD ENTERTAINMENT AND RESORTS, INC.
AND SUBSIDIARIES
March 31, 2009
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 1. Continued
Depreciation and Asset Impairments
The Company's equipment is depreciated using the straight-line method over the estimated useful lives of property and equipment. The Company accounts for long-lived assets in accordance with Statement of Financial Accounting Standards ("SFAS") No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets.
Revenue Recognition
The Company did not earn any revenue for the periods ended March 31, 2009 or 2008.
Income Taxes
The Company provides for income taxes based on the liability method. No benefit for income taxes has been recorded for net operating loss carryforwards that may offset future taxable income because management has concluded that it is more-likely-than-not that those benefits will not be realized.
Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Accounting for Stock-Based Compensation
Effective January 1, 2006, the Company began accounting for its share-based payments in accordance with Share-Based Payment ("SFAS No. 123(R)"). SFAS No. 123(R) requires that share-based payments, including shares issued for services, stock option grants or other equity-based incentives or payments, be recognized for financial reporting purposes based on the fair value of the instrument issued or granted. Prior to January 1, 2006, the Company applied the provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees. At the date of adoption, there were no stock awards outstanding.
Stock compensation expense during the current period represents compensation expense for the share-based awards granted subsequent to January 1, 2006 based on the grant date fair value estimated in accordance with the provisions of SFAS No. 123(R). As stock compensation expense recognized in the statement of operations is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures (which are currently estimated to be minimal). SFAS No. 123(R) requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.
The Company's determination of estimated fair value of share-based awards utilizes the Black-Scholes option-pricing model. The Black-Scholes model is affected by the Company's stock price and includes assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, expected stock price volatility over the term of the awards, and the actual and projected employee stock option exercise behaviors.
Fair Value Measurements
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, (SFAS No. 157), which is effective for fiscal years beginning after November 15, 2007 and for interim periods within those years. This statement defines fair value, establishes a framework for measuring fair value and expands the related disclosure requirements. The statement indicates, that a fair value measurement assumes that the transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability based upon an exit price model.
7
MYRIAD ENTERTAINMENT AND RESORTS, INC.
AND SUBSIDIARIES
March 31, 2009
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 1. Continued
Financial assets and liabilities recorded on the consolidated balance sheets are categorized based on the inputs to the valuation techniques as follows:
Level 1. Quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities include debt and equity securities and derivative contracts that are traded in an active exchange market.
Level 2. Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets and liabilities include debt securities with quoted prices that are traded less frequently than exchange-traded instruments and derivative contracts whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. This category generally includes certain corporate debt securities and derivative contracts.
Level 3. Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. This category generally includes long-term derivative contracts and real estate.
In accordance with SFAS No. 157, the following table represents the Companys fair value hierarchy for its financial asset (cash) measured at fair value on a recurring basis as of March 31, 2009:
| Quoted Prices in Active Markets for Identical Assets (Level 1) |
| Significant Other Observable Inputs (Level 2) |
| Significant Unobservable Inputs (Level 3) |
| Total at March 31, 2009 |
Cash | $ 2,220 |
| $ 0 |
| $ 0 |
| $ 2,220 |
Total | $ 2,220 |
| $ 0 |
| $ 0 |
| $ 2,220 |
Recently Issued Accounting Pronouncements
In December 2007, the FASB issued Statement No. 141(R), Business Combinations (Statement 141R), which replaces Statement No. 141, Business Combinations (Statement 141). Statement 141R retains the fundamental requirements in Statement 141 that the acquisition method of accounting (formerly referred to as purchase method) be used for all business combinations and that an acquirer be identified for each business combination. Statement 141R defines the acquirer as the entity that obtains control of one or more businesses in the business combination and establishes the acquisition date as of the date that the acquirer achieves control. Statement 141R requires an acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values. Statement 141R requires the acquirer to account for acquisition related costs and restructuring costs separately from the business combination as period expense. Statement 141R is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The adoption of Statement 141R did not have a material impact on the financial position or results of operations of the Company.
In December 2007, the FASB issued Statement No. 160, Noncontrolling Interest in Consolidated Financial Statements an Amendment to ARB No 51 (Statement 160). Statement 160 establishes new accounting and reporting standards that require the ownership interests in the subsidiaries held by parties other than the parent be clearly identified, labeled and presented in the consolidated statement of financial position within equity, but separate from the parents equity. Statement 160 requires the amount of consolidated net income attributable to the parent and to the noncontrolling interest be clearly identified and presented on the face of the consolidated statement of income.
8
MYRIAD ENTERTAINMENT AND RESORTS, INC.
AND SUBSIDIARIES
March 31, 2009
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 1. Continued
In addition, when a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary shall be initially measured at fair value, with the gain or loss on the deconsolidation of the subsidiary measured using the fair value of any noncontrolling equity investment rather than the carrying amount of that retained investment. Statement 160 clarifies that changes in a parents ownership in a subsidiary that do not result in deconsolidation are equity transactions if the parent retains its controlling financial interest. Statement 160 includes expanded disclosure requirements regarding the interests of the parent and it noncontrolling interest. Statement 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Early adoption is prohibited. The adoption of Statement 160 did not have a material impact on the financial position or results of operations of the Company.
In May 2008, the FASB issued SFAS 162, The Hierarchy of Generally Accepted Accounting Principles. SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States. SFAS 162 was approved in November 2008. The Company does not expect the implementation of SFAS 162 to have a material impact on its consolidated financial statements.
In April 2009, the FASB issued three FASB Staff Positions (FSP):
·
FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments amends the other-than-temporary impairment guidance under U.S. GAAP for debt securities to make the guidance more operational and improve the presentation and disclosure in the financial statement. The FSP specifies that if a company does not have the intent to sell a debt security prior to recovery and it is more likely than not that it will not have to sell the debt security prior to recovery, the security would not be considered other-than-temporary impaired unless there is a credit loss. The credit loss component of an other-than-temporary impaired debt security must be determined based on the companys best estimate of cash flows expected to be collected.
·
FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That are Not Orderly provides additional guidance for estimating fair value in accordance with SFAS No. 157, Fair Value Measurements, when the volume and level of activity for the asset and liability have significantly decreased and for identifying circumstances that indicate a transaction is not orderly. SFAS 157 does not prescribe a methodology for making significant adjustments to transactions or quoted prices when estimating fair value in these situations but this FSP states that a change in valuation technique or the use of multiple valuation techniques may be appropriate.
·
FAS 107-1 and APB 28-1, Interim Disclosure about Fair Value of Financial Instruments - requires companies to provide the same fair value of financial instruments disclosures presently required on an annual basis on a quarterly interim basis.
These three FSPs will be effective for the interim and annual periods ending after June 15, 2009 and are not expected to have a significant impact on the Companys financial position, results of operations or cash flows other than additional disclosures.
9
MYRIAD ENTERTAINMENT AND RESORTS, INC.
AND SUBSIDIARIES
March 31, 2009
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 2. Convertible Debentures
During the year ended December 31, 2006, the former project manager of the Myriad-Tunica project, who is also a shareholder, advanced funds to the Company which were used to fund planning and development costs on behalf of Myriad-Tunica, to pay other operating expenses of the Company and for expenses incurred by this individual. On October 12, 2006, the Company converted a portion of the amounts owed to this individual into an 8 percent convertible debenture in the amount of $1,050,000. The maturity date of the debenture was September 12, 2007 with interest at 8 percent; however, management continues its evaluation of the amount of the Company's obligation as permitted under the terms of the debenture. The debenture is unsecured. Assuming the full balance is paid, a total of $210,000 of interest was accrued pursuant to this agreement.
The debenture is convertible into common stock of the Company at the option of the holder anytime prior to the maturity date subject to certain conditions. This conversion feature resulted in a deemed beneficial conversion feature to the holder of the debenture of $1,050,000 computed as the closing price for the Company's stock on October 12, 2006 ($.25), less the conversion price for each share ($.10), multiplied by the number of shares that would be obtained if the debenture is converted (10,500,000). This beneficial conversion feature was recorded as a component of interest expense in accordance with Emerging Issues Task Force No. 98-5.
The agreement also included a detachable stock warrant for the purchase of 5,000,000 shares of common stock of the Company based upon the following schedule: (i) $.30 per share from the date of issuance until October 12, 2007; (ii) $1.00 per share from October 13, 2007 until October 13, 2008; (iii) $2.00 per share from October 14, 2008 until October 14, 2009; and (iv) $3.00 per share thereafter until exercise or expiration of the warrant. The warrant vests over a four-year period at 1,250,000 shares per year.
The Company calculated the value of this warrant to be $96,023 and has accounted for this as a discount to the convertible debenture with the related warrant recognized as additional paid-in capital in the statement of stockholders deficit. At March 31, 2009, the balance outstanding pursuant to the warrant agreement is as follows:
Face value of convertible debenture at March 31, 2009 |
|
| $ | 1,050,000 |
|
Less remaining discount associated with detachable |
|
|
|
| |
Warrant |
|
| (39,562 | ) | |
Convertible debenture, net of discount |
|
| $ | 1,010,438 |
|
During 2007 and 2008, the Chairman of the Board and Interim Chief Executive Officer of Myriad Entertainment and Resorts, Inc., who is also a stockholder, advanced funds to the Company which were used to pay operating expenses of the Company. On August 7, 2008, the Company converted a portion of the amounts owed to this individual into a 2.5 percent convertible debenture in the amount of $534,657. The maturity date of the debenture is November 1, 2009. A total of $10,026 of interest has been accrued pursuant to this agreement. The debenture is convertible into common stock of the Company at the option of the holder anytime prior to the maturity date subject to certain conditions.
Note 3. Accrued Legal Fees, Including Interest
The Company had an aggregate of $1,105,817 due at March 31, 2009 for unpaid legal fees. Included in this amount is $326,673 of interest. The interest is calculated based on the terms of a fee arrangement agreed to by both parties.
Note 4. Short-Term Borrowings
At March 31, 2009, the Company had $17,105 outstanding under a short-term credit agreement with a financial corporation. The maximum borrowings under this agreement are $40,000, which are payable on demand. The credit agreement is unsecured and bears interest at 13.99 percent. As of March 31, 2009, accrued interest related to this agreement totaled $6,588.
10
MYRIAD ENTERTAINMENT AND RESORTS, INC.
AND SUBSIDIARIES
March 31, 2009
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 5. Income Taxes
FASB Interpretation 48, Accounting for Income Tax Uncertainties ("FIN 48") was issued in June 2006 and defines the threshold for recognizing the benefits of tax return positions in the financial statements as "more-likely-than-not" to be sustained by the taxing authority. FIN 48 also provides guidance on the derecognition, measurement and classification of income tax uncertainties, along with any related interest and penalties and includes guidance concerning accounting for income tax uncertainties in interim periods. The Company adopted the provisions of FIN 48 on January 1, 2007, and determined at that time that no adjustments to the financial statements were necessary as a result of the adoption of FIN 48.
As of March 31, 2009, the Company has not accrued any interest or penalties related to income tax matters in income tax expense. Such items would be reported as an adjustment to income tax expense.
The Company and its subsidiaries filed a consolidated U. S. Federal income tax return. The Company and its subsidiaries' state income tax returns are open to audit under the statute of limitations for the years ended December 31, 2003 through 2006.
| March 31, 2009 |
| March 31, 2008 | ||
Current | $ | |
| $ | |
Deferred |
| |
|
| |
| $ | |
| $ | |
The income tax provision (benefit) differs from that which would result from applying statutory rates to the net loss before taxes as follows:
| March 31, 2009 |
| March 31, 2008 | ||
Income tax benefit computed at the statutory |
|
|
|
|
|
Federal and state income tax rates | $ | (4,726,734) |
| $ | (3,706,958) |
|
|
|
|
|
|
Valuation allowance for net operating loss income tax benefits not recognized |
| 4,726,734 |
|
| 3,706,958 |
| $ | |
| $ | |
The use of the liability method of accounting for income taxes requires that deferred tax assets be reduced by a valuation allowance if it is more-likely-than-not, that some portion or all of the deferred tax assets will not be realized. Whether a deferred tax asset will be realized depends upon the Company generating sufficient future taxable income and consideration of limitations on the ability to utilize net operating loss carryforwards and other tax attributes.
At March 31, 2009, the Company has net operating loss carryforwards estimated to be approximately $13,411,000, which are set to expire from 2019 through 2024. A valuation allowance has been established for the entire net deferred tax asset balance until such time as it is more-likely-than-not that the deferred tax assets will be realized.
No income taxes were paid for the quarter ended March 31, 2009 and 2008. The effective tax rate for these periods is different than the statutory federal tax rate of 34 percent due to the establishment of a valuation allowance relating to the deferred tax assets.
11
MYRIAD ENTERTAINMENT AND RESORTS, INC.
AND SUBSIDIARIES
March 31, 2009
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 6. Commitments and Contingencies
During 2006, the Company had entered into employment agreements with certain key executives, which provide for an annual salary. The payment of these salaries is contingent upon and deferred until such time that the Company receives $5 million in financing. Accrued but unpaid salary and related taxes pursuant to these contracts totaled $3,049,219 as of March 31, 2009.
Mr. Nicholas Lopardo became chairman of the Company on August 9, 2006. Pursuant to Mr. Lopardo's agreement, he is to receive a base salary of $400,000 upon the Company receiving $5 million in financing. At March 31, 2009, a total of $1,000,000 was accrued pursuant to this agreement. On June 23, 2008, the Board of Directors of the Company approved an amendment to the 2006 agreement. Pursuant to the amended agreement, Mr. Lopardo was granted four million shares of restricted common stock, subsequently amended to three million shares, and will receive an additional one million shares of restricted common stock on each of the first three amendment anniversaries.
On November 1, 2006, the Company and Robert M. Leahy entered into an Employment Agreement ("2006 Leahy Agreement"), providing for the terms and conditions of Mr. Leahy's employment. On June 23, 2008, the Board of Director of the Company approved an amendment to the 2006 Leahy Agreement effective July 1, 2008 ("Amended Leahy Agreement"). Pursuant to the Amended Leahy Agreement, Mr. Leahy shall continue to serve as Myriad's Executive Vice President of Finance. The term of the Amended Leahy Agreement is three years. Mr. Leahy shall earn a base salary of $225,000 per year, payable upon the Company securing adequate financing. Mr. Leahy is entitled to receive an annual incentive bonus. Upon execution of the Amended Leahy Agreement, the Company granted Mr. Leahy an option to purchase from the Company 1,750,000 shares of the Company's common stock, at an exercise price of $.15 per share. The option terminates on June 30, 2018.
During the fourth quarter of 2006, an agreement was reached with the former project manager of the Company whereby he would provide consulting services related to the planned development in Myriad-Tunica. This agreement called for annual compensation of $150,000 with payment subject to future funding and approval by the Board of Directors. As of January 1, 2007, the Company terminated this consulting agreement. At March 31, 2009, the Company had accrued $37,500 under this agreement.
The Company is contingently liable to satisfy an obligation to a shareholder and former employee in the amount of approximately $125,000 as of March 31, 2009, in the event that a third-party does not satisfy this obligation in accordance with an agreement reached between the two parties.
The Company entered into a consulting agreement with IMG Consulting ("IMG") for the period of May 1, 2006 through April 30, 2008. IMG will provide strategic consulting related to the recreational facilities at the proposed resort to be developed by Myriad-Tunica. The agreement includes consulting in the marketing of the facilities and assistance securing a highly recognized golf professional to assist with the design and promotion of the golf course and related golf academy. The agreement required a nonrefundable retainer to be paid as follows:
September 14, 2006 |
|
| $ | 1,000,000 |
September 14, 2007 |
|
|
| 500,000 |
September 14, 2008 |
|
|
| 500,000 |
|
|
| $ | 2,000,000 |
Through March 31, 2009, due to a lack of funding, no services had been received and no payments made.
As of March 31, 2009, Myriad-Tunica has previously made a number of significant commitments in conjunction with its efforts to develop a casino and recreational resort destination in Tunica, Mississippi, as follows:
On April 25, 2007, the Company and Myriad-Tunica entered into a contract for the sale and purchase of land (the "Contract"). The Contract was subsequently amended on August 1, 2007. The Contract, as amended, expired in February 2008. As a result, land deposits totaling $180,879 were recorded as an impairment charge for the year ended December 31, 2007.
12
MYRIAD ENTERTAINMENT AND RESORTS, INC.
AND SUBSIDIARIES
March 31, 2009
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 6. Continued
A new contract for the sale and purchase of land was entered into on July 15, 2008. The purchase price of the land pursuant to the contract is $36 million plus certain amounts based on percentage payments or minimum annual payment as set forth in the Contract. The purchase price for the land shall be paid $100,000 per month for five months with $35,500,000 payable upon closing. Further, the Company has agreed to pay the sellers an amount equal to two percent of the Gross Gaming Revenue as provided in the Contract. Deposits totaling $300,000 related to this contract have been paid through March 31, 2009.
On November 1, 2006, the Company began to lease office space in Memphis, Tennessee under an operating lease with a term of 39 months. Lease expense pursuant to this agreement was $14,175 for the quarter ended March 31, 2009. The following is a schedule of future minimum lease payments at March 31, 2009:
Year Ending |
|
|
|
|
December 31, |
|
| Amount | |
2009 |
|
|
| 56,700 |
2010 |
|
|
| 4,725 |
|
|
| $ | 61,425 |
Through March 31, 2009, the Company has not occupied this office space and has made no payments on the related lease. Lease payments totaling $249,484 have been accrued in the accompanying balance sheet. In February 2008, the lessor for the Company's Memphis office space filed suit for failure to pay rent. Management is currently evaluating the merits of the suit and believes the amounts owed under the agreement have been properly accrued.
The Chairman and Interim Chief Executive Officer of the Company has paid on behalf of the Company $168,525 to the potential lender as a commitment fee. The term sheet was subsequently canceled. Consequently, the commitment fee has been recorded as a component of interest expense.
Note 7. Stockholders' Equity
There are 300,000,000 shares of $.001 par value common stock authorized of which 48,671,821 were outstanding at March 31, 2009. At March 31, 2009, the Company had 5,000,000 common shares reserved for issuance in connection with the 2000 Stock Incentive Plan. In December 2000, the Company implemented a stock incentive plan for non-employee directors and consultants, officers and key employees, which provides for the issuance of qualified and nonqualified options, as determined by the administrator at the time of grant. The Board of Directors determines the option price at the date of grant. The options generally expire ten years from the date of grant and are exercisable over the period stated in each option.
In conjunction with the July 6, 2004 transaction noted above, all previously issued stock options were cancelled and the Board of Directors approved increasing the shares reserved under the Stock Incentive Plan to 5,000,000 shares.
During the three-month period ended June 30, 2008, four million shares were issued to an officer and director of the Company. One million of these shares were cancelled subsequent to June 30, 2008. Compensation expense relating to this grant totaled $210,000, as determined based upon the fair value of the shares based upon the date of the grant.
13
MYRIAD ENTERTAINMENT AND RESORTS, INC.
AND SUBSIDIARIES
March 31, 2009
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 8. Stock Options
In November 2006, the Company granted the right to purchase 250,000 shares of common stock with an exercise price of $0.21 to the Executive Vice-President of Finance in connection with an employment agreement. One-third of the rights vested immediately with the remainder vesting on an annual basis over the next two years. The Company calculated the value of the stock award using the Black-Scholes model, which resulted in an estimated fair value of $34,512, which is being recognized as compensation expense over the term of the agreement. Compensation expense related to the grant totaled $2,876 for the quarter ended March 31, 2009. On June 23, 2008, the Company amended the 2006 agreement granting the right to purchase an additional 1,750,000 shares of common stock with an exercise price of $0.15. All of rights granted under the amended agreement vested immediately. The Company calculated the value of the stock award using the Black-Scholes model, which resulted in an estimated fair value of $66,468. The fair value of the option grant was recognized as compensation expense during the quarter ended June 30, 2008. The key assumptions utilized to determine the fair value of these awards includes the following: Expected volatility 100 percent, risk free interest rate 5 percent, expected dividends zero percent, expected remaining contractual life of the awards of 3.5 years. At March 31, 2009, a total of 1,979,167 of stock options were exercisable. These awards have been excluded from the calculation of EPS since they are anti-dilutive.
Note 9. Warrants
A summary of warrant activity for 2009 is as follows:
|
|
| Weighted- |
|
|
| Weighted- |
|
|
| Average |
|
|
| Average |
| Number of |
| Exercise |
| Warrants |
| Exercise |
| Warrants |
| Price |
| Exercisable |
| Price |
Outstanding, December 31, 2008 | 6,562,500 |
| $1.38 |
| 5,312,500 |
| $0.81 |
|
|
|
|
|
|
|
|
Granted | |
| |
| |
| |
|
|
|
|
|
|
|
|
Outstanding, March 31, 2009 | 6,562,500 |
| $1.38 |
| 5,312,500 |
| $0.81 |
At March 31, 2009, all warrants outstanding expire on October 12, 2011.
Note 10. Related Party Transactions
During the year ended December 31, 2006, the former general manager of the Myriad-Tunica project advanced funds to the Company, which were used to fund planning and development costs on behalf of Myriad-Tunica, and to pay other operating expenses. These advances were subsequently converted into a debenture in the principal amount of $1,050,000 and such amount is currently being confirmed. The remainder due of $31,663 is reflected as due to related party in the accompanying unaudited consolidated financial statements. The amounts owed are subject to final review and approval by the Board of Directors.
During 2007 and 2008, the Chairman of the Board and Interim Chief Executive Officer of Myriad Entertainment and Resorts, Inc., who is also a shareholder, advanced funds to the Company which were used to pay operating expenses of the Company. On August 7, 2008, the Company converted a portion of the amounts owed to this individual into a 2.5 percent convertible debenture in the amount of $534,657. A total of $10,026 of interest has been accrued pursuant to this agreement.
Due from shareholder of $39,771 at March 31, 2009, represents amounts due from the former CEO of the Company. There is no formal agreement related to the amounts owed.
Certain officers and executives of the Company, including the Chairman and Interim Chief Executive Officer, have made payments on the Company's behalf. Such amounts, totaling $602,945, are recorded as accounts payable and accrued expenses.
14
MYRIAD ENTERTAINMENT AND RESORTS, INC.
AND SUBSIDIARIES
March 31, 2009
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 11. Capital Resources
The accompanying unaudited consolidated financial statements have been presented in conformity with accounting principles generally accepted in the United States, which contemplates continuation of the Company as a going concern. However, the Company has a significant working capital deficiency and has incurred significant operating losses since its formation. Management believes that actions presently being taken will provide for the Company to continue as a going concern.
Management's immediate business objective is to implement the business plan of Myriad-Tunica. Myriad-Tunica presently does not have any operating revenues and none are projected until completion of project construction and inception of operations. Management anticipates that new credit facilities, coupled with cash to be raised from private placements and public offerings, assuming they will be successful, will be sufficient to satisfy our operating expenses and capital until such time as revenues are sufficient to meet operating requirements.
Although the Company feels that its efforts to secure adequate funding for its operations and development plans will be successful and that the investment in Myriad-Tunica may bring the Company to profitability, there can be no assurance of the success of any of the above referenced plans.
Note 12. Loss Per Share
The following table sets forth the computation of basic and diluted loss per share ("EPS"):
| Three Months Ended March 31, 2009 |
| Three Months Ended March 31, 2008 | ||
Numerator |
|
|
|
|
|
Net loss | $ | (382,346) |
| $ | (577,970) |
|
|
|
|
|
|
Denominator |
|
|
|
|
|
Weighted-average shares outstanding |
| 48,684,321 |
|
| 45,521,821 |
|
|
|
|
|
|
Basic loss per share | $ | (0.01) |
| $ | (0.01) |
Diluted loss per share | $ | (0.01) |
| $ | (0.01) |
Note 13. Subsequent Event
On June 2, 2009, the Companys Contract for the Sale and Purchase of Real Estate, entered into with Picture Window, LLC, expired. However, the Company continues to discuss potential land acquisitions with Picture Window, LLC as well as other Tunica landholders.
15
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS FORWARD-LOOKING STATEMENTS
You should read the following discussion and analysis in conjunction with the Consolidated Financial Statements in Form 10-K, Form 10-Q and Notes thereto, and the other financial data appearing elsewhere in this Quarterly Report on Form 10-Q.
The information set forth in Management's Discussion and Analysis or Plan of Operations ("MD&A") contains certain "forward-looking statements," including, among others (i) expected changes in the Company's revenues and profitability, (ii) prospective business opportunities and (iii) the Company's strategy for financing its business. Forward-looking statements are statements other than historical information or statements of current condition. Some forward-looking statements may be identified by use of terms such as "believes", "anticipates", "intends" or "expects". These forward-looking statements relate to the plans, objectives and expectations of the Company for future operations. Although the Company believes that its expectations with respect to the forward-looking statements are based upon reasonable assumptions within the bounds of its knowledge of its business and operations, in light of the risks and uncertainties inherent in all future projections, the inclusion of forward-looking statements in this report should not be regarded as a representation by the Company or any other person that the objectives or plans of the Company will be achieved.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity or performance. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
GENERAL
We are a holding company incorporated under the laws of the State of Delaware that, through our subsidiaries, intends to own, operate and/or manage destination resort properties. Our primary operations are intended to be focused on destination experience resorts such as the anticipated Myriad-Tunica project to be located in Tunica, Mississippi. We may seek opportunities in other areas including country clubs, casinos, resort amenities and facilities, real estate operations and corporate services; however, we have no current plans to begin implementing these operations and do not have adequate financing available at this time. Further, we do not anticipate investing in other companies.
Our Company has completed its feasibility studies and appraisals with favorable results and we are now focused on raising $1.4 Billion to implement phase 1 of the Myriad Resort. Although no assurances can be given regarding the Companys ability to secure the phase 1 funding, if secured, the Company anticipates utilizing these funds for the following:
·
Building out site Infrastructure
·
Construction of the first of our six planned casinos;
·
Construction of the first 1,000 rooms casino and convention hotel of our planned 3,000 rooms;
·
Construction of the first phase of our Convention Center (400,000 sq. ft.);
·
Construction of the 18-hole championship Golf Course;
·
Construction of the Water Park/Snow Park;5
·
Construction of a 5,000 seat covered multi-purpose venue;
·
Construction of the Mississippi Eye (observatory);
·
Construction of our 25,000 square foot Health and Wellness Luxury Spa; and
·
Construction of our private label restaurant.
THE TUNICA DESTINATION
The Tunica area has recently added Interstate Highway 69, which cuts the drive time from the Memphis International Airport to Tunica down to 30 minutes. This fact, coupled with the upgrading of the Tunica regional
16
airport for charters and daily flights and by increasing the length of the runway, building a new airport terminal, and seeking funding for additional improvements will be very beneficial to us.
Tunica has nine casino properties, it is one of the top five gaming environments and has several of the nationally famous and successful Casino companies such as Harrah's, MGM, Boyd, and Penn National. These properties are upwards of 10 to 12 years old. Our expectations are that this will prompt these companies to invest additional funds into the Tunica properties making the overall Tunica destination even better.
STRATEGIC PLANS
We are in the process of implementing a Sports Branding plan that is expected to further increase the market appeal of our overall Resort both for overnight stays and day visits. The objective of maximizing the market appeal, blending conventions, social guests, sports enthusiasts and casino player appeals to cross selling opportunities and greater potential gross sales per occupied room. This strategy is part of our business plan.
We are seeking the help of several signature golf course architects and builders to implement our golf course. We anticipate working with an Attraction Mall Company to tie Retail, Attractions, Restaurants, Casinos, Conventions and Hotels into a smooth synergistic model using Paul Ma's design protocol.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The process of preparing financial statements in conformity with accounting principles generally accepted in the United States of America requires us to use estimates and assumptions to determine certain of our assets, liabilities, revenues and expenses. We base these estimates and assumptions upon the best information available to us at the time the estimates or assumptions are made. Our estimates and assumptions could change materially as conditions both within and beyond our control change. Accordingly, our actual results could differ materially from our estimates. A full description of all of our significant accounting policies is included in Note 1 to our Consolidated Financial Statements.
GOING CONCERN
The unaudited consolidated financial statements included in this filing have been prepared in conformity with accounting principles generally accepted in the United States of America that contemplate the continuance of the Company as a going concern. The Company's cash position is inadequate to pay all of the costs associated with the implementation of our business plan. Management intends to use borrowings and security sales to mitigate the effects of its cash position, however no assurance can be given that debt or equity financing, if and when required will be available. The unaudited consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets and classification of liabilities that might be necessary should the Company be unable to continue existence.
Recently Issued Accounting Pronouncements
In December 2007, the FASB issued Statement No. 141(R), Business Combinations (Statement 141R), which replaces Statement No. 141, Business Combinations (Statement 141). Statement 141R retains the fundamental requirements in Statement 141 that the acquisition method of accounting (formerly referred to as purchase method) be used for all business combinations and that an acquirer be identified for each business combination. Statement 141R defines the acquirer as the entity that obtains control of one or more businesses in the business combination and establishes the acquisition date as of the date that the acquirer achieves control. Statement 141R requires an acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values. Statement 141R requires the acquirer to account for acquisition related costs and restructuring costs separately from the business combination as period expense. Statement 141R is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The adoption of Statement 141R did not have a material impact on the financial position or results of operations of the Company.
In December 2007, the FASB issued Statement No. 160, Noncontrolling Interest in Consolidated Financial Statements an Amendment to ARB No 51 (Statement 160). Statement 160 establishes new accounting and reporting standards that require the ownership interests in the subsidiaries held by parties other than the parent be clearly identified, labeled and presented in the consolidated statement of financial position within equity, but separate from the parents equity. Statement 160 requires the amount of consolidated net income attributable to the
17
parent and to the noncontrolling interest be clearly identified and presented on the face of the consolidated statement of income. In addition, when a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary shall be initially measured at fair value, with the gain or loss on the deconsolidation of the subsidiary measured using the fair value of any noncontrolling equity investment rather than the carrying amount of that retained investment. Statement 160 clarifies that changes in a parents ownership in a subsidiary that do not result in deconsolidation are equity transactions if the parent retains its controlling financial interest. Statement 160 includes expanded disclosure requirements regarding the interests of the parent and it noncontrolling interest. Statement 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Early adoption is prohibited. The adoption of Statement 160 did not have a material impact on the financial position or results of operations of the Company.
In May 2008, the FASB issued SFAS 162, The Hierarchy of Generally Accepted Accounting Principles. SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States. SFAS 162 was approved in November 2008. The Company does not expect the implementation of SFAS 162 to have a material impact on its consolidated financial statements.
In April 2009, the FASB issued three FASB Staff Positions (FSP):
·
FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments amends the other-than-temporary impairment guidance under U.S. GAAP for debt securities to make the guidance more operational and improve the presentation and disclosure in the financial statement. The FSP specifies that if a company does not have the intent to sell a debt security prior to recovery and it is more likely than not that it will not have to sell the debt security prior to recovery, the security would not be considered other-than-temporary impaired unless there is a credit loss. The credit loss component of an other-than-temporary impaired debt security must be determined based on the companys best estimate of cash flows expected to be collected.
·
FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That are Not Orderly provides additional guidance for estimating fair value in accordance with SFAS No. 157, Fair Value Measurements, when the volume and level of activity for the asset and liability have significantly decreased and for identifying circumstances that indicate a transaction is not orderly. SFAS 157 does not prescribe a methodology for making significant adjustments to transactions or quoted prices when estimating fair value in these situations but this FSP states that a change in valuation technique or the use of multiple valuation techniques may be appropriate.
·
FAS 107-1 and APB 28-1, Interim Disclosure about Fair Value of Financial Instruments - requires companies to provide the same fair value of financial instruments disclosures presently required on an annual basis on a quarterly interim basis.
These three FSPs will be effective for the interim and annual periods ending after June 15, 2009 and are not expected to have a significant impact on the Companys financial position, results of operations or cash flows other than additional disclosures.
OFF-BALANCE SHEET ARRANGEMENTS
We are not aware of any off-balance sheet arrangements that have or are reasonable likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
RESULTS OF OPERATIONS
STATEMENT OF OPERATIONS FOR THE NINE MONTH, THREE MONTH PERIODS ENDED MARCH 31, 2009 AND MARCH 31, 2008
The Company generated no revenues during the quarters ended March 31, 2009 and March 31, 2008. During the first three months of 2009, we focused our attention on implementing our future plan of operations as described in this quarterly report.
18
The Company's operating expenses for the three months ended March 31, 2009 was $329,663 compared to $536,918 during the comparable period for 2008. This decrease in operating expenses was primarily attributable to decreased professional fees and stock issued for services to consultants. In addition, the Company had salary expense of $216,031 in 2009 and $313,814 in 2008. The Company also incurred interest expense of $52,683 in 2009, compared to interest expense of $41,052 in 2008. The Company had a net loss of $382,346 or $0.01 per share for the three months ended March 31, 2009, as compared to a net loss of $577,970 or $0.01 per share for the quarter period ended March 31, 2008.
The Company's revenues during 2009, if any, and beyond are dependent upon its ability to implement its business plan and to secure the requisite financings in connection therewith. Except as otherwise set forth in this discussion, we are not aware of any trend that will adversely affect our Company's prospects in 2009.
Liquidity and Capital Resources
March 31, 2009
Our primary goal as it relates to liquidity and capital resources is to attain and retain the right level of debt and cash to implement our business plan. We will require additional capital financing to implement our business plan, but there can be no assurance that the requisite financings can be secured and on terms reasonably satisfactory to management. We anticipate that new credit facilities, coupled with cash to be raised from private placements or other financings, assuming they will be successful, will be sufficient to satisfy our operating expenses and capital until such time as revenues are sufficient to meet operating requirements.
The Company's working capital was $(10,524,060) as of March 31, 2009 compared to $(8,028,667) as of March 31, 2008. This deficit was attributable to an increase in accrued liabilities and accrued legal fees, including interest. At March 31, 2009, the Company had cash of $2,220.
The Company has historically derived its cash from the sale of shares. In December 2002, we obtained a $40,000 unsecured line of credit originally from Textron Financial Corporation, payable on demand, to be used as needed for operating purposes. As of March 31, 2009, the Company had $17,105 outstanding on this credit facility, bearing interest at a rate of 13.99 percent.
Net cash use by operating activities was $90 for the three months ended March 31, 2009, as compared to net cash used of $16,655 for the comparable period during 2008.
We will require significant additional capital to implement the Tunica-Myriad business plan and to finance the implementation of our plan of operations as described in this report. We expect to fund our contemplated operations through a series of equity and debt financings raised from private placements and/or public offerings. We assume that such financing activities, if successful, will be sufficient to satisfy our operating expenses and capital requirements until such time as revenues are sufficient to meet operating requirements. Our working capital and the estimated range of funding needed for the implementation of the Myriad-Tunica business plan and to service our debt obligations for the next twelve months is $150,000,000.
LEGAL FEES, INCLUDING ACCRUED INTEREST
We had approximately $1,105,817 due at March 31, 2009 for legal fees, including related interest. The amount owed accrues interest at 10 percent per year, or approximately $326,673 through March 31, 2009.
INCOME TAXES
At March 31, 2009, the Company has net operating loss carryforwards estimated to be approximately $13,411,000 for income tax purposes, which are set to expire from 2019 to 2024. Upon completion of the Company's income tax returns for the year ended December 31, 2006 there may be adjustments to this estimate of the carryforwards. Under limitations imposed by the Internal Revenue Code Section 382, certain potential changes in ownership of the Company may restrict future utilization of net operating loss carryforwards. Management is evaluating whether the change in ownership, which would trigger the Section 382 limitations, has occurred. However, a valuation allowance has been established for the entire net deferred tax asset balance until such time as it is more-likely-than-not that the deferred tax assets will be realized.
19
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required.
ITEM 4T.
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We conducted an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer (who is also the principal accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures. The term disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended (Exchange Act), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures also include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, Chief Executive Officer (who is also the principal accounting officer) concluded as of March 31, 2009 that there were no matters which would result in more than a remote likelihood that a material misstatement of the quarterly financial statements would not have been prevented or detected.
Changes in Internal Control Over Financial Reporting
No change in the Companys internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended March 31, 2009 that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.
20
PART II: OTHER INFORMATION
ITEM 1.
LEGAL PROCEEDINGS
On or about August 4, 2008, the Company's statutory agent, Corporation Services Company, received a summons and complaint filed by Jeffrey D. Segal, a California Professional Corporation ("Segal") against the Company in the Superior Court of the State of California, for the County of Los Angeles (Case No. SC099177). The action alleges breach of contract and common counts relating to legal services rendered on behalf of the Company beginning in May 2000 until September 2006 for which full payment has not been received. The outstanding legal fees, including related interest, have been accrued in the accompanying financial statements. In November 2008, a default judgment was entered against the Company for the total amount owed of $836,786, including general damages, pre-judgment interest, and attorney fees.
On or about February 11, 2008, the Secretary of State of Delaware received a summons and complaint filed by MM Industrial Memphis, LLC against the Company relating to that certain lease entered into between MM Industrial and the Company for office space located at 2565 Horizon Lake Drive, Suite 110, Memphis, TN 38133. MM Industrial is claiming that the Company breached the lease by abandoning the property and failing to pay rent. MM Industrial seeks judgment of no less than $223,000, plus costs. On or about April 2008, MM Industrial Memphis, LLC was granted a Judgment by Default against the Company in the amount of $223,960.68, plus costs.
Except as set forth above, we are not aware of any legal proceedings in which any director, officer or any owner of record or beneficial owner of more than five percent of any class of voting securities of the Company, or any affiliate of any such director, officer, affiliate of the Company, or security holder, is a party adverse to the Company or has a material interest adverse to the Company.
ITEM 1A.
RISK FACTORS
ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During the three months ended March 31, 2009, there were no unregistered sales of equity securities.
ITEM 3.
DEFAULTS UPON SENIOR SECURITIES
There have been no matters during this reporting period that require disclosure under this item.
ITEM 4.
SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
There have been no matters during this reporting period that require disclosure under this item.
ITEM 5.
OTHER INFORMATION
There were no matters required to be disclosed in a Current Report on Form 8-K during the period covered by this report that were not disclosed.
There were no changes to the procedures by which security holders may recommend nominees to the Company's Board of Directors since the Company last disclosed these procedures.
ITEM 6.
EXHIBITS AND REPORTS ON FORM 8-K
(a)
Exhibits
Exhibit Number |
| Description |
31.1 |
| Certification Pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a) |
32.1 |
| Certification Pursuant to 18 U.S.C. Section 1350 |
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SIGNATURES
Pursuant to the requirements 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.
| MYRIAD ENTERTAINMENT & RESORTS, INC. | |
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| By: | /s/ NICHOLAS LOPARDO |
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| Nicholas Lopardo, |
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| Chairman of the Board, Interim Chief Executive Officer and Principal Accounting Officer |
Date: July 2, 2009
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