<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended July 31, 1997
[ ] Transition Report Under Section 13 or 15(d) of the Exchange Act; For
the transition period from to
Commission File #0-27832
COMPOST AMERICA HOLDING COMPANY, INC.
................................................................
(Exact name of small business issuer as specified in its charter)
New Jersey 22-2603175
____________________________ __________________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
320 Grand Avenue Englewood, New Jersey 07631
_____________________________________________ _______________
(Address of Principal Executive Offices) (Zip Code)
Issuers's telephone number, including area code: (201)541-9393
Check whether the issuer (1) 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), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X__ No_____
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
1. Common Stock - 19,578,777 shares outstanding as at August 31,
1997.
Transitional Small Business Disclosure Format (check one):
Yes_____ No _X_
PLEASE ADDRESS ALL CORRESPONDENCE TO: Mark Gasarch, Esq.
1285 Ave. of the Americas
3rd Floor
New York, New York 10019
<PAGE>
COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
THREE MONTHS ENDED JULY 31, 1997 AND 1996 AND
FOR THE PERIOD DECEMBER 17, 1993 (INCEPTION) TO JULY 31, 1997
CONTENTS
Page
Condensed consolidated financial statements:
Balance sheet F-2
Statement of income (loss) F-3
Statement of stockholders' equity F-4 - F-5
Statement of cash flows F-6
Statement of operating expenses F-7
Notes to condensed consolidated financial statements F-8 - F-45
F-1
<PAGE>
COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
(A Development Stage Company)
CONDENSED CONSOLIDATED BALANCE SHEET--JULY 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current assets:
Cash.......................................................... $ 22,892
Accounts receivable........................................... 36,421
Prepaid expenses.............................................. 144,605
-------------
Total current assets........................................ 203,918
-------------
Plant, property and equipment Land.............................. 8,466,441
Site improvements............................................. 174,519
Transportation equipment...................................... 160,046
Office equipment.............................................. 71,051
Machinery & equipment......................................... 609,247
Construction in progress, Compost projects.................... 7,328,200
-------------
16,809,504
Less accumulated depreciation............................... 180,468
-------------
16,629,036
-------------
Other assets:
Excess of cost over assets acquired, net of
amortization of $16,354..................................... 458,731
Town of Freehold lease acquisition cost, net of
amortization of $54,170..................................... 806,691
Intangible assets, net of amortization of $46,942............. 218,243
Option deposit................................................ 62,500
City of Miami contract performance fee........................ 1,000,000
-------------
2,546,165
-------------
$ 19,379,119
-------------
-------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Mortgages payable--Praxair Corp............................... $ 2,100,000
Current portion of long-term debt............................. 3,869,502
Notes payable, bank........................................... 100,000
Notes payable, others......................................... 623,550
Notes payable, shareholder.................................... 115,000
Due to related parties........................................ 4,513,574
Accounts payable, accrued expenses and payroll taxes payable.. 4,420,562
Reserve for land replacement.................................. 85,375
-------------
Total current liabilities................................... 15,827,563
-------------
Long-term debt, net of current portion.......................... 1,904,493
-------------
Contingencies and commitments
Minority interest in consolidated subsidiary.................... 0
-------------
Stockholders' equity:
Preferred stock, Series A, no par value, 25,000,000
shares authorized; none issued
Common stock, no par value, 50,000,000 shares
authorized; 18,707,277 shares issued and
outstanding................................................. 11,131,299
Convertible preferred stock, Series B, no par
value, 5,000,000 shares authorized; 400,000 shares
issued and outstanding (aggregate liquidation
preference $1,000,000)...................................... 1,000,000
Deficit accumulated during the development stage.............. (10,455,544)
Less:subscriptions receivable................................. (28,692)
-------------
1,647,063
-------------
$ 19,379,119
-------------
-------------
</TABLE>
See notes to condensed consolidated financial statements.
F-2
<PAGE>
COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENT OF INCOME (LOSS)
(UNAUDITED)
<TABLE>
<CAPTION>
CUMULATIVE
FROM
THREE MONTHS DEC. 17, 1993
ENDED (INCEPTION)
JULY 31, TO
-------------------------- JULY 31,
1997 1996 1997
----------- ------------- -------------
<S> <C> <C> <C>
Net sales............................................ $ 0 $ 0 $ 80,741
Other revenues....................................... 137,836 0 338,757
----------- ------------- -------------
Total............................................ 137,836 0 419,498
Cost of operations, transportation................... 14,784 0 42,930
----------- ------------- -------------
Gross income......................................... 123,052 0 376,568
General and administrative........................... 1,518,657 1,436,774 8,915,727
----------- ------------- -------------
Loss from operations................................. (1,395,605) (1,436,744) (8,539,159)
Other non-operating expense:
Interest........................................... 304,291 139,516 1,765,357
----------- ------------- -------------
Loss before income tax expense....................... (1,699,896) (1,576,290) (10,304,516)
Income tax expense................................... 0 0 0
----------- ------------- -------------
..................................................... (1,699,896) (1,576,290) (10,304,516)
Minority interest in (income) loss of
consolidated subsidiaries.......................... 0 42,552 209,827
----------- ------------- -------------
(1,699,896) (1,533,738) (10,094,689)
Loss in equity in joint venture...................... (13,603) (360,855)
----------- ------------- -------------
Net loss ($1,699,896) ($ 1,547,341) ($ 10,455,544)
----------- ------------- -------------
----------- ------------- -------------
Loss per common share:
Primary (.08) ($ 0.11)
----------- -------------
----------- -------------
Weighted average number of common shares outstanding:
Primary............................................ 22,831,565 18,522,574
----------- -------------
----------- -------------
</TABLE>
See notes to condensed consolidated financial statements.
F-3
<PAGE>
COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
(DEFICIT)
ACCUMULATED
COMMON STOCK DURING THE
-------------------------- DEVELOPMENT
SHARES AMOUNT STAGE
------------ ------------ -------------
<S> <C> <C> <C>
Balance, April 30, 1996................................................ 14,522,364 $ 5,841,684 ($ 2,834,045)
Issuance of common stock, May 1996 (3.00 per sh.).................... 41,534 124,602
Issuance of common stock settlement agreement with Select
Acquisitions, May 31, 1996 (2.50 per sh.).......................... 200,000 500,000
Issuance of common stock, June 1996 (3.00 per sh.)................... 24,930 74,790
Issuance of common stock for acquisition of assets, June 28, 1996
(2.50 per sh.)..................................................... 305,000 762,500
Issuance of common stock in payment to consultants for excess
services, June 30, 1996 (5.00 per sh.)............................. 3,138 15,690
Issuance of common stock, consulting agreement, June 30, 1996 (2.50
per sh.)........................................................... 583 1,458
Issuance of common stock, July 1996 (2.00 per sh.)................... 16,335 49,005
Issuance of common stock, consulting agreement services, July 1, 1996
(2.50 per sh.)..................................................... 75,000 187,500
Issuance of common stock for services July 24, 1996 (1.00 per sh.)... 400,000 400,000
Issuance of common stock, consulting agreement, July 31, 1996 (2.50
per sh.)........................................................... 583 1,457
Charge deferred offering cost to stock proceeds...................... (23,564)
Issuance of common stock, August 1996 (3.00 per sh.)................. 12,000 36,000
Issuance of common stock, September 9, 1996 (3.00 per sh.)........... 52,540 157,620
Issuance of common stock, September 1996 (1.00 per sh.).............. 83,000 83,000
Issuance of common stock, September 1996 (3.00 per sh.).............. 67,900 203,700
Issuance of common stock for payment of accounts payable October 11,
1996 (2.09 per sh.)................................................ 51,000 106,760
Issuance of common stock for services October 11, 1996 (1.49 per
sh.)............................................................... 414,000 608,500
Issuance of common stock for services October 23, 1996 (2.00 per
sh.)............................................................... 3,000 6,000
Issuance of common stock, October 1996 (1.00 per sh.)................ 8,000 8,000
Issuance of common stock, October 1996 (3.00 per sh.)................ 8,000 24,000
Issuance of common stock for services, December 1, 1996 (.09 per
sh.)............................................................... 100,000 9,000
Issuance of common stock for services, December 1, 1996 (1.00 per
sh.)............................................................... 1,000 1,000
Issuance of common stock for services, December 1, 1996 (2.50 per
sh.)............................................................... 5,500 13,750
Issuance of common stock, consulting agreement services, January 8,
1997 (2.65 per sh.)................................................ 150,000 397,500
</TABLE>
See notes to condensed consolidated financial statements
F-4
<PAGE>
COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
(DEFICIT)
ACCUMULATED
COMMON STOCK DURING THE
-------------------------- DEVELOPMENT
SHARES AMOUNT STAGE
----------- ------------- ------------
<S> <C> <C> <C>
Issuance of common stock for services, February 17, 1997 (.50 per
sh.)............................................................... 198,594 99,297
Issuance of common stock for services, February 27, 1997 (1.00 per
sh.)............................................................... 880,000 880,000
Issuance of common stock for services, February 27, 1997 (.50 per
sh.)............................................................... 5,000 2,500
Issuance of common stock for services, March 26, 1997 (.50 per sh.).. 78,840 39,420
Net loss, April 30, 1997........................................... (5,921,603)
----------- ------------- ------------
Balance, April 30, 1997................................................ 17,707,841 10,611,169 (8,755,648)
Issuance of common stock for services, May 7, 1997 (.50 per sh.)..... 180,800 90,400
Issuance of common stock for services, May 8, 1997 (.50 per sh.)..... 63,500 31,750
Issuance of common stock for services, May 2, 1997 (.50 per sh.)..... 300,000 150,000
Issuance of common stock, June 1, 1997 (.50 per sh.)................. 15,000 7,500
Issuance of common stock for services, June 2, 1997 (.50 per sh.).... 140,000 70,000
Issuance of common stock for services, June 9, 1997 (.50 per sh.).... 245,000 122,500
Issuance of common stock for services, June 11, 1997 (.50 per sh.)... 50,600 25,300
Issuance of common stock for payment of accounts payable, June 11,
1997 (5.00 per sh.)................................................ 4,536 22,680
Net loss, July 31, 1997............................................ 1,699,896
----------- ------------- -------------
Balance, July 31, 1997................................................. 18,707,277 $ 11,131,299 ($10,455,544)
----------- ------------- -------------
----------- ------------- -------------
</TABLE>
<TABLE>
<CAPTION>
PREFERRED STOCK
-----------------------
<S> <C> <C>
SHARES AMOUNT
--------- ------------
Issuance of preferred stock, Series B, July 3, 1997 (2.50 per sh.)... 400,000 1,000,000
--------- ------------
Balance, July 31, 1997................................................. 400,000 $ 1,000,000
--------- ------------
--------- ------------
</TABLE>
See notes to condensed consolidated financial statements.
F-5
<PAGE>
COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS CUMULATIVE
ENDED FROM
JULY 31, DECEMBER 17, 1993
----------------------- (INCEPTION) TO
1997 1996 JULY 31, 1997
---------- ----------- -----------------
<S> <C> <C> <C>
Operating activities:
Net loss.......................................................... ($1,699,896) ($1,547,341) ($10,455,544)
Adjustments to reconcile net cash and equivalents provided by
operating activities:
Amortization...................................................... 10,376 4,567 115,788
Depreciation...................................................... 46,921 7,340 148,699
Loss in equity in joint venture................................... 0 16,455 360,855
Stock issued for professional services............................ 489,950 206,055 2,653,475
Shareholder settlement............................................ 0 500,000 500,000
Loss in equity of minority interest............................... 0 440,955 (129,209)
Changes in operating assets and liabilities:
(Increase) decrease in prepaid expenses........................... 28,513 44,851 (144,605)
Increase in accounts payable and accrued expenses................. 290,439 345,962 4,593,406
(Increase) decrease in accounts receivable........................ (10,332) 0 (36,421)
Changes in other assets and liabilities:
Increase (decrease) in cash from affiliated companies:
R.C. Land Company, Inc.......................................... 0 (26,784) 0
American Bio-AG Corp............................................ 0 185,000 0
American Soil Company, Inc...................................... 0 (173,566) 0
Due to affiliate................................................ 0 14,160 78,060
Deferred offering costs......................................... 0 20,564 0
---------- ----------- -----------------
Net cash provided from (used in) operating activities........... (844,029) 38,218 (2,315,496)
---------- ----------- -----------------
Investing activities:
Purchase of restrictive covenant.................................. 0 0 (250,000)
Purchase of construction in progress, Compost project............. (178,423) (267,405) (4,845,464)
Purchase of land, property and equipment.......................... 0 (416,221) (8,406,871)
Purchase of organizational costs.................................. 0 0 (5,925)
Reduction (purchase) of equity in American BIO-AG
Corporation....................................................... 0 0 624,636
City of Miami performance fee..................................... 0 0 (1,000,000)
Lease acquisition cost............................................ 0 0 (463,361)
Reserve for land replacement...................................... 0 0 85,375
(Increase) decrease in deposits receivable........................ 1,525 (61,036) (4,306)
Return (purchase) of option deposits.............................. (25,000) (12,500) (62,500)
Increase in cost in excess of assets acquired..................... 0 (331,606) (1,253,244)
---------- ----------- -----------------
Net cash used in investing activities........................... (201,898) (1,088,768) (15,581,660)
---------- ----------- -----------------
Financing activities:
Increase in advances from affiliated companies.................... 50,000 346,667 4,435,514
Increase in notes payable, shareholder............................ 25,000 0 115,000
Increase in notes payable, bank................................... 0 0 100,000
Increase (decrease) in notes payable, other....................... (50,000) 200,250 556,050
Increase in mortgage payable...................................... 0 0 2,100,000
Increase in other long-term debt.................................. 67,500 276,829 6,071,654
Payments on long-term debt........................................ (39,193) 0 (167,093)
Proceeds from issuance of preferred stock......................... 1,000,000 1,000,000
Proceeds from issuance of common stock............................ 7,500 224,833 3,708,923
---------- ----------- -----------------
Net cash provided by financing activities....................... 1,060,807 1,048,579 17,920,048
---------- ----------- -----------------
Net increase (decrease) in cash..................................... 14,880 (1,971) 22,892
Cash, beginning of period........................................... 8,012 3,498 0
---------- ----------- -----------------
Cash, end of period................................................. $ 22,892 $ 1,527 $ 22,892
---------- ----------- -----------------
---------- ----------- -----------------
Supplementary disclosure of cash flow information
Interest.......................................................... $ 46,820 $ 0 $ 581,108
Taxes............................................................. $ 0 $ 0 $ 0
Supplemental schedule of non-cash investing and financing activities
</TABLE>
See notes to condensed consolidated financial statements.
F-6
<PAGE>
COMPOST AMERICA HOLDING COMPANY, INC.
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENT OF OPERATING EXPENSES
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED CUMULATIVE FROM
JULY 31, DECEMBER 17, 1993
-------------------------- (INCEPTION) TO
1997 1996 JULY 31, 1997
------------ ------------ -----------------
<S> <C> <C> <C>
Operating expenses:
Salaries........................................................ $ 136,083 $ 100,110 $ 870,400
Payroll taxes................................................... 13,753 3,068 63,648
Advertising..................................................... 0 5,935 48,055
Amortization.................................................... 10,376 4,567 115,788
Automobile expense.............................................. 6,582 4,113 94,396
Bad debt charges................................................ 0 0 63,190
Bank charges.................................................... 2,360 801 7,849
Building rental................................................. 17,567 4,575 172,921
Carting expense................................................. 0 0 394
Computer expense................................................ 8,500 0 9,349
Consultants..................................................... 901,049 253,415 3,174,544
Depreciation.................................................... 46,921 7,340 148,699
Dues and subscriptions.......................................... 0 520 21,470
Employment Services............................................. 0 0 600
Equipment rental................................................ 240 1,579 18,671
Insurance....................................................... 21,690 14,867 209,214
Land lease expense.............................................. 3,543 0 14,714
Licenses and permits............................................ 0 0 10,426
Impairment loss in consolidated subsidiary...................... 0 440,955 440,955
Miscellaneous................................................... 0 2,396 28,462
Office expense.................................................. 2,464 0 55,550
Option expense.................................................. 0 0 84,975
Outside services................................................ 119 239 3,853
Penalties and fines............................................. 0 0 11,149
Postage and deliveries.......................................... 2,144 1,350 25,112
Printing........................................................ 0 705 86,819
Professional fees............................................... 303,491 19,077 1,431,614
Repairs and maintenance......................................... 5,961 250 24,249
Research and development........................................ 0 0 475,376
Settlement of shareholder dispute............................... 0 500,000 515,000
Stock expense................................................... (6,298) 0 8,831
Sitework........................................................ 0 0 2,731
Supplies........................................................ 0 0 14,500
Taxes, other.................................................... 32,373 29,902 211,333
Telephone....................................................... 4,858 16,405 154,637
Travel and entertainment........................................ 4,038 23,885 283,826
Utilities....................................................... 843 720 12,427
------------ ------------ -----------------
$ 1,518,657 $ 1,436,774 $ 8,915,727
------------ ------------ -----------------
------------ ------------ -----------------
</TABLE>
See notes to condensed consolidated financial statements.
F-7
<PAGE>
COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The unaudited condensed financial statements of Compost America Holding
Company, Inc. and its Subsidiaries have been prepared pursuant to the rules and
regulations of The Securities and Exchange Commission. Accordingly, certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted. These interim condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements and
notes included in the Company's April 30, 1997 annual report on Form 10KSB. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three month period ended July 31, 1997 are not
necessarily indicative of the results that may be expected for the year ended
April 30, 1998.
1. Nature of business:
The Company is in the process of developing the business of converting
and recycling organic waste into compost and other soil products, which
it sells to a multitude of users. The process which the Company will
employ is composting, or the controlled decomposition of organic matter
into humus (a component of soil). Like a landfill or an incinerator
operator, the Company will be paid "tipping fees" to accept waste from
generators of these materials. In selected markets like New Jersey,
where the disposal costs are high, the economic opportunity of taking in
and processing large volumes of waste is significant.
The Company will operate a vegetative and selected food waste compost
facility in New Jersey and will continue the development of the indoor
composting projects currently in progress, which will convert organic
materials ordinarily disposed of in landfills or incinerators into a
valuable end product which is beneficial to the environment.
2. Business organization:
Compost America Holding Co. Inc., formerly known as Alcor Energy and
Recycling Systems, Inc. (Alcor) was incorporated on August 20, 1981 in
the state of New Jersey, with 1,000,000 authorized shares at no par
value. On February 1, 1984 Alcor conducted an offering under Regulation
A, an exemption from registration under the Securities Act of 1933. On
that date, 300,000 shares of common stock were issued at $1.00 per
share.
On June 29, 1992, Alcor was authorized to amend its
Certificate of Incorporation to increase authorized common stock shares
from 1,000,000 to 7,500,000 shares.
On June 29, 1992, Alcor issued 3,000,000 shares of common stock to
Capital Pacific Management, Inc. for all the outstanding shares of the
Gilbert Spruance Company and 750,000 shares to Peter English and his
affiliates in return for all outstanding shares of the English Group,
Inc.
On December 10, 1992 and January 1993, Alcor disposed of three
subsidiaries due to the lack of sufficient capital needed to continue
the operations of each. Alcor sustained losses from both the disposition
of the Gilbert Spruance Company and The English Group, Inc.
F-8
<PAGE>
COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2. Business organization (continued):
On September 27, 1994, 650,000 shares issued to Peter English to acquire
the English Group, Inc. were returned pursuant to the disposal of the
English Group, Inc.
On September 29, 1994, Alcor issued 1,500,000 shares to two individuals for
cancelling $203,720 of loans due to these individuals.
On October 21, 1994, Alcor amended its Certificate of Incorporation to
increase its authorized common stock from 7,500,000 shares to 15,000,000
shares with 5,490,000 shares issued and outstanding. Alcor, now inactive,
pursued finding a business partner either through merger or acquisition.
On November 28, 1994 the majority of Alcor stockholders agreed to a one for
twenty reverse split which reduced total outstanding shares to 274,500.
On January 23, 1995, Alcor entered into an Acquisition Agreement and lan of
Reorganization with Compost America Company of New Jersey, Ltd.,
incorporated in the state of Delaware on December 17, 1993. Compost
America Company of New Jersey, Ltd. had 5,000,000 shares, .01 par value of
common stock authorized, of which 1,654,000 shares were issued and
outstanding. Alcor exchanged 9,924,000 shares of its common stock for all
of the outstanding common stock of Compost America Company of New Jersey,
Ltd.
On February 8, 1995, Alcor Energy and Recycling Systems, Inc., changed its
name to Compost America Holding Company, Inc. (Company).
On December 4, 1995, the directors of the Company approved an amendment to
the Certificate of Incorporation to increase the authorized shares to issue
75,000,000 shares of which 50,000,000 shares shall be common stock without
par and 25,000,000 shares shall be preferred stock with no par value.
On June 7, 1996, the Company became effective as to it's S-1 Registration
Statement which registered 1,353,100 shares of the Company's common stock
solely for selling shareholders.
On June 18, 1997, the Company amended its Certificate of Incorporation to
designate a class of preferred shares as Series B preferred stock. The
designation shall be $2.50 Series B convertible preferred stock, authorized
5,000,000 shares. The liquidation value shall be $2.50 per share. The
shares will be no par value. Each share of Series B preferred stock is
convertible into one share of common stock at any time after September 15,
1997.
F-9
<PAGE>
COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3. Nature of operations, risks and uncertainties:
The waste management industry in which the Company plans to operate as a
processor of municipal solid waste, sewage sludge and commercial organic
waste, is highly competitive and has been traditionally dominated by
several large and well recognized national and multi-national companies
with substantially greater financial resources in comparison to the
financial resources available to the Company.
There can be no assurance that the Company will be able to obtain the
required federal, state and local permits necessary to operate its
composting facilities presently under development.
The Company plans to contract for and to process, municipal solid waste
and sewage sludge that meets the Company specifications. It is possible
that some of the wastes accepted at a company facility may contain
contaminants which could cause environmental damage and result in
liabilities.
4. Principles of consolidation:
The accompanying consolidated financial statements include the accounts
of the Company and its wholly owned subsidiary, Compost America Company
of New Jersey, Ltd. and its subsidiaries, Newark Recycling and
Composting Co., Inc., Gloucester Recycling and Composting Company, Inc.,
Monmouth Recycling and Composting Co., Inc., Chicago Recycling and
Composting Company, Inc., Miami Recycling and Composting Company, Inc.,
Compost America Technologies, Inc., Bedminster Seacor Services Miami
Corporation, Garden Life Sales Company, Inc., American Soil, Inc. and
American BIO-AG Corporation. Inter-company transactions and balances
have been eliminated in consolidation.
5. Principles of reorganization:
The acquisition of the Company's subsidiary, Compost America Company of
New Jersey, Ltd., on January 23, 1995 has been accounted for as a
reverse purchase of the assets and liabilities of the Company by Compost
America Company Holding Company, Inc. Accordingly, the consolidated
financial statements represents assets, liabilities and operations of
only Compost America Company of New Jersey, Ltd. prior to January 23,
1995 and the combined assets, liabilities and operations for the ensuing
period. The financial statements reflect the purchase of the stock of
Alcor Energy and Recycling Systems, Inc., the former name of Compost
America Holding Company, Inc., by Compost America Company of New Jersey,
Ltd. for stock and the assumption of liabilities of $49,094, this amount
being the historical cost of the assets and liabilities acquired. All
significant inter-company profits and losses from transactions have been
eliminated.
F-10
<PAGE>
COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
6. Construction in progress, Compost projects:
Project development costs consist of costs incurred for the development
of the Company's composting facilities. These costs included the
architectural, legal, structural and consulting engineering, artist
rendering, planning board approvals and other construction costs. Upon
commencement of operations of a facility, the costs associated with such
project will be depreciated over the estimated useful life of the
facility.
7. Common stock:
A. May 17, 1996
The Company entered into a settlement agreement with Select Acquisitions,
Inc., Pasquale Dileo, an officer and shareholders of Select
Acquisitions, Inc. and a consultant and shareholder of the Company, and
Michael Papa, the former owner and major shareholder of Select
Acquisitions, Inc. as a result of various disputes and agreed to resolve
any and all disputes by certain terms and conditions. As a result of
services provided, Select Acquisitions, Inc. and Pasquale Dileo received
stock in the Company. In settlement of the disagreements of the
shareholders of Select Acquisitions, Inc., the Company issued 80,000
shares of its common stock to the original shareholders, 100,000 shares
to Michael Papa and 20,000 shares to Gordon N. Gemma, Esq. for
outstanding legal fees. In addition, Michael Papa is to receive from
the Company $60,000 for costs, expenses and other payments as a
representative of Select Acquisitions, Inc. and the Company. These
shares were valued at $2.50 per share.
B. June 28, 1996
The Company entered into an agreement to acquire all of the land
application business and assets of R.C. Land Company, Inc. and its 33
1/3% interest in American BIO-AG Corporation by the issuance of 305,000
shares of common stock and other payments. The price of the stock was
based on $2.50 per share.
C. June 30, 1996
The Company issued a total of 3,066 shares to Robert Tardy and 72 shares
to Robert C. Myers in exchange for overtime compensations per their
consulting agreements. The agreed upon value of the shares was $5.00
per share which was the value of the service provided.
F-11
<PAGE>
COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
7. Common stock (continued):
D. June and July 1996
The Company issued 583 shares of its common stock each month as part of a
consulting agreement dated May 31, 1996 with J.G.R. Associates.
E. July 1, 1996
The Company issued 75,000 shares of its common stock valued at $2.50 per
share to Ronald Bryce for consulting services as part of the asset
purchase agreement with R.C. Land Company, Inc.
F. July 24, 1996
The Company entered into a consultant agreement with Edward Rodriguez for
a term of 2 years. The consultant is to receive $400,000 by the
issuance of 400,000 shares of the Company's common stock and an option
to purchase 500,000 shares of the Company's common stock immediately
exercisable expiring December 31, 2001.
G. September 9, 1996
The Company issued 52,540 shares of its common stock valued at $3.00 per
share to Select Acquisitions, Inc. for consulting and contract expenses
paid on behalf of Compost America Holding Company, Inc.
H. October 11, 1996
The Company issued 51,000 shares at $2.09 per share to Ronald Bryce for
payment of accounts payable of American BIO-Ag Corporation in the amount
of $106,761.
I. October 11, 1996
The Company issued 55,500 shares of stock regarding the Newark Project to
various individuals. The agreed upon value of the stock was $102,250 or
$1.84 per share average price for the services provided.
J. October 11, 1996
The Company issued 165,000 shares to attorneys. The agreed upon value was
$180,000 or $1.09 per share average price for the services provided.
K. October 11, 1996
The Company issued 110,000 shares to consultants. The agreed upon value
was $199,500 or $1.81 per share average price for the services provided.
F-12
<PAGE>
COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
7. Common stock (continued):
L. October 11, 1996
The Company issued 83,500 shares to various engineers, etc. The agreed
upon value was $134,250 or $1.22 per share average price for the
services provided.
M. October 23, 1996
The Company issued 3,000 shares of stock to the law firm of Atkinson
Debartolo & Kalapos regarding an agreement which was terminated at a
value of $2.00 per share or $6,000.
N. December 1, 1996
The Company issued 100,000 shares to a former employee as compensation
for services provided. The shares were valued at $.09 per share for the
services provided.
O. December 1, 1996
The Company issued 6,500 shares of common stock, 1,000 shares at $1.00
per share and 5,500 at $2.50 per share for services.
P. January 8, 1997
As part of the acquisition agreement for American Soil, Inc., the Company
issued 150,000 shares of stock to Robert Young, the former owner of
American Soil, Inc. The fair value of the stock was valued at $2.65 per
share based on the asset value of American Soil, Inc.
Q. February 17, 1997
The Company issued 198,594 shares of its common stock for consulting
services by individuals. The estimated fair value was $.50 per share or
$99,297.
R. February 24, 1997
The Company issued 880,000 shares of its common stock for services. The
stock was registered in a S-8 Registration and offered for sale by the
consultants. The fair value was estimated at $1.00 per share or
$880,000.
F-13
<PAGE>
COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
7. Common stock (continued):
S. February 27, 1997
The Company issued 5,000 shares of its common stock for consulting
services to Berwyn Capital Corporation. The fair value is estimated to
be $.50 or $2,500.
T. March 26, 1997
The Company issued 78,840 shares of common stock to three individuals for
consulting service regarding the Miami Project. The fair value is
estimated to be $.50 or $39,420.
U. May 7, 1997
The Company issued 180,800 shares of common stock to three individuals
for financial consulting services. The fair value is estimated to be
$.50 per share or $90,400.
V. May 8, 1997
The Company issued 63,500 shares of common stock to West St. Front Trust
for financial consulting services. The fair value is estimated to be
$.50 per share or $31,750.
W. May 21, 1997
The Company issued 300,000 shares of common stock to an attorney. The
fair value is estimated to be $.50 per share or $150,000.
X. June 1, 1997
The Company entered into a subscription agreement with three individuals
entitling each individual to 5,000 shares of the Company's unregistered
common stock at a price of $.50 per share. These same individuals
loaned the Company $22,500 each in the form of a convertible note (see
note 19).
Y. June 2, 1997
The Company issued 140,000 shares of common stock for various
professional services. The fair value is estimated to be $.50 per share
or $70,000.
Z. June 9, 1997
The Company issued 245,000 of common stock to Ronald Bryce for consulting
services. The fair value is estimated to be $.50 per share or $122,500.
F-14
<PAGE>
COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
7. Common stock (continued):
AA. June 11, 1997
The Company issued 50,600 shares of common stock to Lancaster Consulting,
Inc. for consulting services. The fair value is estimated to be $.50
per share or $25,300.
BB. June 11, 1997
The Company issued 4,536 shares of common stock to Robert Tardy for
payment of accounts payable. The fair value is estimated to be $5.00 or
$22,680.
8. Investment in American BIO-AG Corporation:
The Company and two other entities formed a joint venture. The purpose
of the joint venture is to develop, own or lease, operate and farm
biosolids beneficial use land application sites. The joint venture
registered to do business in Arizona on June 27, 1995. In addition,
Professional Service Group desires to support the joint venture company
in its efforts to secure, develop and permit beneficial use land
application sites throughout the United States beginning first in the
South West where 365 day application prevail such as Texas, Arizona, New
Mexico and California. The initial land application sites to be
developed by the joint venture corporation are Arizona, Texas and New
Jersey. Compost America Holding Company, Inc. will arrange for a bridge
loan in the amount of $750,000 which will be repaid upon long-term
financing. The loan is anticipated to be funded by April 1, 1995 and
repaid by June 30, 1995. As of June 28, 1996 the bridge loan was not
arranged. Compost America Holding Company, Inc. has arranged for
short-term funds from February 15, 1995 to June 28, 1996. Compost
America Holding Company, Inc. will also receive a development fee of
$125,000 on positive distributable cash flow. The joint venture
corporation will sign a 15 year management contract with Mr. Bryce,
President of R.C. Land Company, Inc. for $150,000 salary per year to
manage the joint venture beginning February 15, 1995 plus standard
benefits in addition, upon the Company's generation of positive cash
flow. In April of 1996 the Company issued 83,333 shares of its common
stock as compensation for unpaid management fees and expenses to Mr.
Ronald Bryce. The Company has valued these shares at a fair value of
$2.50 per share or $208,332. This amount
F-15
<PAGE>
COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
8. Investment in American BIO-AG Corporation (continued):
has been capitalized as part of the cost of the investment in American
BIO-AG Corporation by the Company. A monthly director fee of $4,000 per
month will be paid to each of the directors after revenues commence.
The Board of Directors shall be Ronald R. Bryce, President, Robert Jones
III, Vice President and Roger E. Tuttle, Secretary. Roger Tuttle is also
an officer, director and shareholder of Compost America Holding Company,
Inc.
The Company accounted for its investment in the joint venture on the
equity method through the period ended June 30, 1996.
On June 28, 1996 the Company, through its majority owned subsidiary,
Newark Recycling and Composting Company, Inc., purchased all of the land
application business assets of R.C. Land Company and all the ownership
interests of Compost America Holding Company, Inc., Twin River Equities
and R.C. Land Company, Inc.'s in American BIO-AG Corporation. Newark
Recycling and Composting Company, Inc. became the 100% owner of the
entity American BIO-AG Corporation. Newark Recycling and Composting
Company, Inc. is owned 75% by Compost America Holding Company, Inc. and
25% owned by Potomac Technologies. For the period October 1, 1996 to
July 31, 1997 American BIO-AG Corporation has been included in the
consolidated financial statements of the Company.
9. Agreements:
1) On February 13, 1996, the Company entered into a master letter
agreement with Paine Webber Incorporated to act as a sole financial
advisor and senior managing underwriter for the Company and its
various subsidiaries in connection with the financing of certain
waste disposal facilities, certain ancillary equipment and certain
related development costs (the projects). As compensation, the
Company will pay a success fee, equity placement fee, underwriter
fee, discount fee and out of pocket expenses and in no event shall
Paine Webber be entitled to less than 10% of all fees and discounts
paid in connection with the underwriting of bonds for any project
financing. The term of the agreement is for twenty four months.
As of September 16, 1996 the term has been extended to September
16, 1998.
2) On June 7, 1996 the Company became effective as to it's S-1
Registration Statement which registered 1,353,100 shares of the
Company's common stock solely for selling shareholders.
F-16
<PAGE>
COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
9. Agreements (continued):
3) On September 15, 1996 the Company entered into a Lock-Up Agreement
with John B. Fetter, owner of 2,528,612 shares of the Company's
common stock, who agreed for a period of 12 months not to sell
2,300,000 shares of his stock and for an additional 12 months will
not sell 2,000,000 shares of his stock.
4) On October 1, 1996 the Company and individual shareholders agreed to
a modified Lock-Up Agreement for shares that they owned for 6
months (October 1, 1996 to March 31, 1997) not to sell their
shares. The shareholders and shares are as follows:
Registered
Shareholder Shares
----------- ------
William C. Hurtt, Trustee (A) 100,000
William Callari (B) 80,000
A) William C. Hurtt, Trustee will lock-up 37,500 unregistered
shares with a mutually agreed extension for 3 months for
12,500 unregistered shares. Additional extensions may be
available; during the extension term the shareholder agrees to
not sell more than 7 1/2% of the registered shares. As
consideration for the Lock-Up Agreement the Company will issue
26,000 unregistered shares of common stock.
B) William Callari will lock-up 30,000 unregistered shares with a
mutually agreed extension for 3 months for 10,000 unregistered
shares. Additional extensions may be available; during the
extension term the shareholder agrees to not sell more than 7
1/2% of the registered shares. As consideration for this
Lock-Up Agreement the Company will issue 20,800 unregistered
shares of common stock.
5) On October 9, 1996 the Company and Bruce Boltuch entered into an
agreement for a convertible 10% note for $50,000 payable on April
9, 1997. The note, at the option of the holder, is convertible 30
days prior to the maturity date into unregistered common shares of
the Company at a conversion price of $3.00 per principal amount of
this note for one share. On October 9, 1996, the Company issued a
six month $50,000 convertible note at 10% to Charles Lanktree with
a maturity date of April 9, 1997. Interest to be paid monthly.
The note is non recourse on any shareholder or officer of the
Company and
F-17
<PAGE>
COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
9. Agreements (continued):
5) (continued):
is an obligation of the Company only. The note is convertible 30
days prior to maturity into common shares of the Company at a
conversion price of $3.00 per share. The note is collateralized by
20,000 registered shares of the Company's common stock held in
escrow. The collateral is transferred if the unpaid principal and
unpaid interest are not paid on the maturity date plus 15 days. As
of July 31, 1997, the note was unpaid. On May 19, 1997 an
agreement to extend the maturity to July 9, 1997 at 12% interest
was agreed to. On May 19, 1997, Bruce Boltuch received an option
to purchase 7,500 shares of registered tradeable stock at $2.00 per
share and 2,500 shares of registered common stock of the Company
for granting the extension for payment of the note.
6) On October 9, 1996 the Company entered into a Lock-Up of Insiders
Shares Agreement for a period of 16 months from the date of October
9, 1996. The following is a list of shareholders and their
respective shares as per this agreement.
Shareholder Shares
----------- ------
Andrea Wortmann 150,000
Robert E. Wortmann, Jr. 150,000
Victor D. Wortmann, Sr. 812,500
Roger E. Tuttle 2,433,509
Robert E. Wortmann 802,500
Victor D. Wortmann, Jr. 200,000
Elizabeth Tuttle 100,000
Erika Wortmann 150,000
Kristie Tuttle 100,000
Select Acquisitions 1,308,640
Susan Ann Curran 200,000
William Tuttle 100,000
Mary Wortmann 40,000
----------
6,547,149
----------
----------
7) On October 15, 1996 the Company and Brokerage Services Management,
Inc. entered into an agreement for a convertible 10% note for
$53,000 with a maturity of December 15, 1996, interest and
principal payable on maturity. The note, at the option of the
holder, is convertible 6 days prior to the maturity date into
unregistered common shares of the Company at a conversion price of
$3.00 per principal amount of this note for one share.
F-18
<PAGE>
COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
9. Agreements (continued):
8) On November 24, 1996 the Company and Berwyn Capital Investments,
Inc. entered into an agreement for Berwyn Capital Investments,
Inc., for a term of 180 days, to arrange corporate equity, project
debt, project mortgage debt and project subordinated debt on behalf
of the Company. The anticipated equity financing is to amount to
$3,000,000. As compensation for this service:
A) A cash payment equal to 6% of any equity funds raised and 3.6% of
the proceeds of any debt offering.
B) Option to purchase common stock of $3.50 per share exercisable
any time within 5 years from the date of issuance with a value
equal to 4% (2.4% in the case of debt) of the funds raised. Upon
execution the Company will issue as a retainer 5,000 shares of
common stock. In consideration of the amount due under A) the
amount due shall be reduced by $15,000.
9) On December 3, 1996 the Company and Ira Russack entered into an
agreement for a convertible 8% note for $100,000 due June 30, 1997,
and extended to August 15, 1997, interest and principals payable on
the maturity date. On January 16, 1997 the Company and Ira Russack
entered into an agreement for a convertible 10% note for $100,000
due December 15, 1997, interest and principals payable on the
maturity date. The notes are convertible at $3.00 per share based
on the remaining principal amount plus any accrued interest at the
maturity date.
10) In March 1997, the Company and M. H. Meyerson & Co., Inc. entered
into an agreement for Meyerson to perform investment banking
services on a non-exclusive basis for a period of three years.
Such services will be performed as requested by the Company on a
best efforts basis and will include assistance in mergers,
acquisitions and internal capital structuring and the placement of
new debt and equity issues. Consideration for the services is an
option to purchase 1,000,000 shares of unregistered common stock of
the Company. The option expires on March 31, 2002. The option
shall vest and become irrevocable as follows:
Option to purchase 250,000 common shares at $2.50 per share on
date of agreement.
Option to purchase 250,000 common shares at $3.00 per share on
October 1, 1997.
Option to purchase 250,000 common shares at $3.00 per share on
April 1, 1998.
Option to purchase 250,000 common shares at $3.00 per share on
October 1, 1998.
F-19
<PAGE>
COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
9. Agreements (continued):
10) (continued):
Upon signing of this agreement, the Company will pay Meyerson
$25,000 as a non-accountable and non-refundable expense allowance.
Meyerson shall be entitled to additional compensation to be agreed
upon in advance of any transaction proposed or executed by Meyerson.
11) On March 20, 1997, the Company issued a $8,500 note to an affiliated
company of Charles Lanktree at 10% interest due May 8, 1997.
Interest and principal payable at maturity. The note was not paid
on May 8, 1997 and is delinquent.
12) On April 30, 1997, the Company issued three $25,000 notes to Mark G.
Milask, Philip Wagner and Dr. Paul Smalheiser at 8% due September
30, 1998. The notes are convertible at $2.00 per common share at
any time prior to maturity. In addition, each payee was granted an
option to purchase 50,000 shares of the Company's unregistered
common stock at $2.00 per share, expiring March 31, 2002. Interest
payable at date of maturity.
13) On April 30, 1997, the Company issued a $50,000 note at 10% to
Donald A. Kaplan with a maturity of September 30, 1998. Interest
is payable at maturity. In addition, the Company granted an option
to purchase 100,000 shares of common stock at $2.00 per share
through March 31, 2002. The note is convertible into unregistered
common shares at $2.00 per share at any time prior to maturity.
The holder of the note is entitled to registration rights when
available and will be able to take advantage of any piggy-back
registration.
14) Lease Agreement, Gloucester City, New Jersey
On July 1, 1995 Gloucester City (lessor) and Gloucester Recycling
and Composting Company, Inc. (lessee) entered into a lease
agreement for certain real property located in Gloucester City, New
Jersey containing approximately 7.98 acres and also Parcel No. 2
(Block 120, Lot 1) if acquired by Gloucester City. Approximately
12 acres of Parcel No.2 shall be dedicated for the full scale,
permanent composting facility. The lease shall commence on March
7, 1996 for an initial term of 24 consecutive months. With the
lessor's consent the lessee shall have the right and option to
extend the term for an additional 30 years. The rent is based on a
rent formula.
F-20
<PAGE>
COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
9. Agreements (continued):
14) (continued):
For the first 24 months the rent shall be $100 per month plus all
site improvements to Parcel No. 1 to develop a "demonstration
composting facility" for the 30 year extended term.
1) Lessee's redemption of Parcel No. 1.
2) Lessee's payments to lessor in accordance with the "host
community benefit fee schedule" for the extended term.
The benefit fee payment schedule is as follows:
1) Payments in lieu of taxes
a) Taxes due Camden County and District School taxes to be
paid by lessee following receipt of the NJDEP full
scale, permanent composting facility permit.
b) Municipal purpose taxes beginning twelve months
following the date of commercial operation.
c) The initial payment following commercial start-up is
$82,745 with annual escalations of 4%.
2) Lease payments begin the end of the first full month of
commercial operations and shall be equal to the mortgage
expense resulting from the acquisition of Parcel No. 2.
3) Host Community Benefit
Payments are based on tons of all organic waste received at
the composting facility at the rate of $2.40 per ton which
shall be applied against "site clean-up" costs. Actual cash
payments shall begin after the amount is fully paid except a
rate of $.35 per ton shall be paid for the first calendar
year. Following the site clean-up application the rate
shall be $2.75 per ton through the tenth year. After the
ten years the payment shall be adjusted annually based on
the average tip fee. There is a maximum fee of $100,000
should tip fees fall below $65.00 per ton. In addition, a
rate of $1.25 per ton will be paid to lessor for organic
waste in excess of 100,000 tons.
F-21
<PAGE>
COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
9. Agreements (continued):
15) Stock Purchase Agreement:
On October 2, 1996 a second amendment to the Stock Purchase
Agreement was signed between Compost America Holding Company, Inc.,
Robert F. Young, Jr. and American Soil, Inc. The amendment
extended the closing date to October 2, 1996. The closing occurred
October 2, 1996. In addition, the following amendments were agreed
to:
a) Under the first amendment Robert F. Young, Jr. was to be issued
100,000 shares of unregistered common stock, however these
shares were never issued. As a result, no sooner than January
5, 1997 and no later than January 8, 1997 Robert F. Young, Jr.
shall be issued 150,000 shares of registered stock. To secure
the Company's obligation to issue the stock, Roger E. Tuttle
has agreed to deliver to the escrow agent 150,000 shares of
his stock in the Company. These shares are valued at $2.65 or
a total amount of $397,500.
b) At closing the Company will place $132,500 cash or 50,000
shares of unregistered common stock of the Company owned by
Roger and Elizabeth Tuttle into an escrow account to be held
by the escrow agent for 9 months for the payment of any
unknown liabilities more than 90 days prior to the closing
date that are more than $5,000 and any environmental clean-up
that may be required by law. This provision is in lieu of the
$150,000 in the second amendment.
c) At closing the Company paid Isdaner & Company $20,000 and
Richards & O'Neil LLP $21,457.
d) At the closing the Company paid $325,000 as amended for the first
amendment of $310,000.
e) At closing the Company assumed all assets and liabilities of
American Soil, Inc.
f) The combined investment and advances to American Soil, Inc. was
$1,019,248 which was allocated as follows:
Net assets of American Soil, Inc. $ 158,387
Value of lease with the Town of
Freehold which expires April 27, 2004 860,861
----------
$1,019,248
----------
----------
Financial statements of American Soil, Inc. have not been provided since
the acquisition does not meet with the test for a significant subsidiary
as required under Reg Section 210-02 (W). The combined investment in
and advances at the proposed acquisition date amounted to $1,019,248
which did not exceed 10% of consolidated assets at April 30, 1996.
F-22
<PAGE>
COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
9. Agreements (continued):
16) Meher & LaFrance Retainer Agreement:
On May 29, 1996 the Company entered into a Retainer Agreement with
the law firm of Meher & LaFrance to provide legal services
regarding the Township of Freehold, to provide appearances before
municipal and other governmental boards, committees and agencies,
compliance with the Monmouth County Solid Waste Management Plan and
required permitting procedures of the New Jersey Department of
Environmental Protection, through final site plan approvals. The
Company shall maintain a $1,500 retainer deposit and will be billed
monthly based on an hourly basis of time expended at standard
hourly rates.
17) On October 20, 1995, an Amendment to Option and Purchase Agreement
was signed whereby "Praxair" was substituted for the seller, Linde
Gases of the Mid-Atlantic, Inc. and Newark Recycling and Composting
Company, Inc. exercised the option and posted as security for the
closing a security bond. The purchase price was amended to
$3,285,866 less the $150,000 in option payments. At closing a
deposit of $1,035,866 plus closing costs was paid together with a
promissory note and purchase money mortgage of $2,100,000 at 8% per
annum, payable monthly, with a maturity on August 31, 1996.
Praxair has commenced a foreclosure action on the property owned by
Newark Recycling and Composting Company, Inc. in furtherance of
having their note paid as well as unpaid interest, expenses and
attorney fees.
18) On November 13, 1995 Bedminster Seacor Services Miami Corporation
restated the Compost Recycling Agreement between the City of Miami,
Florida and Bedminster Seacor Services Miami Corporation. The
restated agreement set forth for Bedminster Seacor Services Miami
Corporation to design, construct, operate and maintain the facility
on the site and to pay the cost of construction. The facility
shall have the capacity to process at least 150,000 tons of
acceptable waste. During start-up and prior to the commencement of
operations, the city shall pay Bedminster Seacor Services Miami
Corporation a service fee of $52.00 per ton for acceptable waste
delivered to the facility. On the commencement date of operations,
the city will pay Bedminster Seacor Services Miami Corporation a
service fee for the processing capacity equal to the unit billing
rate multiplied by the greater of (1) the number of tons of waste
accepted at the facility and disposed at Bedminster Seacor Services
Miami Corporation's cost pursuant to the terms or (2) 1/12th of the
guaranteed annual tonnage minus the bypass waste rejected at the
facility. The unit billing rate is equal to $52.00 per ton and
escalated yearly in accordance with an escalation factor.
F-23
<PAGE>
COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
9. Agreements (continued):
18) (continued):
In September 1996, in a first amendment to the restated Compost
ecycling Agreement, the amendment effective date was changed to
November 13, 1996 and the initial payment by Bedminster Seacor
Services Miami Corporation to the City of Miami to secure the
performance of the Company's obligations under the restated
agreement shall be one million three hundred and fifty thousand
dollars ($1,350,000), payable $100,000 in September 1996 and the
balance of $1,250,000 dollars, plus interest at 10% per annum,
payable at the earlier of the financial closing of the funding for
the Miami Compost Project or September 1, 1997. If payments are
not received, the City of Miami shall have the right to terminate
this agreement.
On November 21, 1996, Miami Recycling and Composting Company, Inc.
aid $1,000,000 to the City of Miami. This fulfills the 30 year
"put or pay" contract requirement between the Company and the City
of Miami.
The Company has classified this payment as an other asset under the
classification "Cost of Miami Contract performance fee" and is
being amortized over a term of 35 years from the contract date.
The fee is an initial payment for service performance of Bedminster
Seacor Services, Inc. under this agreement.
19) All the agreements with Bedminster Seacor Services Miami Corporation
have been assigned to Miami Recycling and Composting Company, Inc.
subsequent to the acquisition of Bedminster Seacor Services Miami
Corporation by Miami Recycling and Composting Company, Inc. and its
parent company Compost America Holding Company, Inc. on March 1,
1996.
10. Consulting contracts:
A) Ronald K. Bryce Consulting Agreement:
On July 1, 1996 the Company entered into a consulting agreement with
Ronald K. Bryce to provide consulting and advice in the development
of the Company's composting facilities. The Consultant shall
receive $4,000 per month from July 1996 to December 1996 and $6,500
per month from January 1997 to June 30, 1997. Additionally, the
Company shall issue 75,000 common shares of the Company to be
registered before September 1, 1996. Expenses are to be reimbursed
not to exceed $1,850 per month without prior approval of the
Company.
F-24
<PAGE>
COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
10. Consulting contacts (continued):
B) Peter Coker Consulting Agreement:
On June 24, 1996 the Company entered into an agreement with Peter
Coker to provide financial consulting services. The term is for a
period of 5 years from June 24, 1996 with compensation as follows:
1) 25,000 shares of unregistered common stock for previously
rendered services.
2) As compensation for current services the following options to
purchase:
100,000 shares at $2.00 per share
50,000 shares at $5.00 per share
50,000 shares at $9.00 per share
All options to expire on June 30, 2001. The Company shall also
reimburse consultant for out-of-project expenses.
C) Mark Gasarch Consulting Agreement:
On May 20, 1996 the Company entered into a consulting agreement with
Mark Gasarch, Esq. to provide legal services in the areas of
Corporate and Federal Securities Law for a term of one year and for
2 additional consecutive one year terms at the option of the
Company. The consultant will be paid a one time fee of $10,000 and
$8,000 per month commencing with the month of private funding by a
certain financial group or Newark Recycling and Composting Company,
Inc. upon financial closing. The consultant shall be reimbursed
for out-of-pocket expenses. In addition, for excess services over
basic service (60 hours per month) the consultant will be issued
500 shares of common stock for each 10 hours in excess of 60 hours
per month. In addition, the Company granted the consultant the
option to purchase 200,000 shares at $2.50 per share for a term of
five years.
D) Consulting Services:
On May 31, 1996 Miami Recycling and Composting Company, Inc. entered
into a consulting agreement with Jose Ferre to provide consulting
services regarding the tax free bond financing of the Miami
Project. Ferre shall receive as compensation a development fee
equal to 1% of the capital costs of the Miami Composting facility
with a minimum fee of $400,000. Additionally, Jose Ferre is
granted an option to purchase 15% of the Miami Recycling facility
for a two year period commencing with the start of commercial
operations. The purchase price of the option shall be commercially
reasonable and in accordance with industry standards and norms for
projects of this type at date of acquisition.
F-25
<PAGE>
COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
10. Consulting contracts (continued):
E) Consulting Service:
On May 31, 1996 Miami Recycling and Composting Company, Inc. entered
into an agreement with Dade County Bioconversion Corporation, which
superseded the December 28, 1994 agreement with South Florida
Bioconversion Corporation, to provide consulting services in the
construction and operation of the Miami Composting facility. Dade
County Bioconversion Corporation has selected Mr. Orlando Garcia,
Jr. as its representative. Mr. Garcia is to receive 8,000 shares
of Compost America Holding Company, Inc.'s common stock upon the
awarding of the contract and commencement of construction of the
Miami Composting facility certain individuals will be paid a
success fee equal to 1% of the capital costs of the Miami
Composting facility subject to a minimum of $400,000, payable
$100,000 at financial closing and $100,000 at the end of the next
three twelve month periods. In addition, 25,000 shares of
unrestricted common stock of Compost America Holding Company, Inc.
will be issued to the same individuals upon financial closing of
the Miami Composting facility. Upon commercial operation of the
Miami Composting facility Dade County Bioconversion Corporation
will be paid a consulting fee based upon the amount of the solid
waste processed at the compost plant and paid by the City of Miami
in the amount of a tipping fee of $1.30 per ton of solid waste
processed at the compost plant.
F) Consulting Services:
On May 31, 1996 Miami Recycling and Composting Company, Inc. entered
into a consulting agreement with Antonio Zamura, Ereleo Pena and
Pedro Roig to provide consulting services to Miami Recycling and
Composting Company, Inc. for the period beginning May 31, 1996 and
terminating on the commencement of commercial operations. The
consultants will consult with and advise the Company concerning
governmental relations, lobbying and public relations with various
sectors of the community . The consultants shall assist in the
financial closing and the commencement of commercial operations.
Compensation for the consultants will be $3,500 per month
commencing on January 1, 1997 through the month of commencement of
commercial operations. Thereafter the consultants shall receive
1,752 unregistered shares of the common stock of Compost America
Holding Company, Inc. on the last day of each month.
G) Consulting Services:
On May 31, 1996 Miami Recycling and Composting Company, Inc. entered
into an agreement with J.G.R. Associates to provided consulting
services in public relations and advertising. The term of this
agreement is May 31, 1996 and terminates on the commencement of
commercial operations. The Company will pay the consultant $3,500
per month which will be paid as follows: $1,750 in cash each month
plus 583 shares of common stock of Compost America Holding Company,
Inc. which will be issued each month. As of July 31, 1997 only
1,166 shares have been issued and no cash payments have been made.
F-26
<PAGE>
COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
10. Consulting contracts (continued):
H) On July 24, 1996 the Company entered into a consulting agreement
with Edward Rodriguez to provide financial consulting services.
The consultant will assist the Company in developing, studying and
evaluating financial, merger and acquisition proposals and assist
in negotiations. As compensation, the consultant will receive
$400,000 in the form of stock of the Company for a term of two
years.
The consultant will receive 100,000 shares of the Company's common
stock to be registered under an S-8 filing and 500,000 stock
options exercisable immediately as follows:
150,000 @ $4.00 Expiration December 31, 2001
150,000 @ 5.00 Expiration December 31, 2001
200,000 @ 6.00 Expiration December 31, 2001
After exercising the options the consultant must complete certain
mailing of investor packages before stock can be registered under
the Form S-8 filing. Registration of the stock will be in stages
starting immediately upon completion of mailing of 100,000 packages
to investors, 3 months after completion and 6 months after
completion.
I) On October 2, 1996 the Company and Robert F. Young, Jr. entered into
a consulting agreement. Robert F. Young, Jr. was the original
owner and developer of American Soil, Inc. which on October 2, 1996
was acquired by the Company. The consultant is to assist the
Company in the transition of management control of American Soil,
Inc. with the Company and to provide the following objectives:
1) Obtain a minimum of a 20 year lease from the Freehold
Township for a 350-500 ton per day invessel composting
facility.
2) Secure all acquired local approvals to develop the
"Brownfield" property, directly adjacent to the American
Soil, Inc. site, for compost storage and blending
operations.
3) Obtain approval from the Monmouth County Board of Chosen
Freeholders of an amendment to the Monmouth County district
solid waste management plan to authorize a 350-500 ton per
day in-vessel composting facility for source separated
organic material on the American Soil, Inc. property.
F-27
<PAGE>
COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
10. Consulting contracts (continued):
I) (continued):
For services rendered, the consultant shall receive $5,000 per month
for a term of 3 months through January 2, 1997. If objective (1)
is achieved within 2 months after the end of the term the
consultant shall receive a bonus of $15,000 and 10,000 shares of
registered common stock of the Company. If objective (2) and/or
(3) are achieved within 2 months after the end of the term of the
agreement, the consultant shall receive $15,000 and 10,000 shares
of restricted common stock of the Company for each objective
achieved.
The Company will also provide health coverage for a six month period
from October 2, 1996 to April 2, 1997.
After the term of this agreement the consultant can be engaged at
the rate of $100 per hour either in cash or common stock of the
Company by mutual agreement.
The consultant shall receive reimbursement for expenses not to
exceed $1,500 per month. In addition the consultant has requested
the Company to pay $15,000 per year for three years to Cornell
College of Art, Architecture and Planning for research.
If objective (1) is achieved within 4 months after the beginning of
the term, the consultant shall receive a bonus payment of $15,000
in cash and 8,333 shares of common stock of the Company.
Additionally if objective (2) and or (3) are achieved within 4
months after the beginning of the term of this agreement $15,000 in
cash and 8,333 shares of common stock of the Company will be paid
for each completed objective.
J) On June 10, 1996, the Company and John B. Fetter, a shareholder in
the Company, entered into a consulting agreement regarding Chicago
Recycling and Composting Company, Inc. to provide services in
developing lowest cost electric power contracts with power
providers. The consultant will provide, for a term of 5 years,
advice concerning the types of electrical equipment best suited to
operate the Company's composting facilities and negotiate the
lowest cost electrical power contracts. The consultant will
receive $5,000 per month commencing June 10, 1996 and shall accrue
and be deferred until payable from operating revenues of the
Chicago Composting and Recycling Company, Inc. facility. At this
time consultant shall also be reimbursed for accrued expenses
incurred.
K) On February 21, 1997, the Company entered into a 10 year consulting
agreement with Tomas Andres Mestre to provide expert consulting
service in the management of solid waste and sewer sludge and in
business development in Florida. As compensation, the Company will
pay the consultant as follows:
F-28
<PAGE>
COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
10. Consulting Contracts (continued):
K) (continued):
1) On or before February 28, 1997, the Company shall pay $300,000 by
delivering 200,000 shares of the Company's common stock. The
Company is to file a registration statement on Form S-8 covering
the shares within 30 days.
2) On or before February 28, 1997, the Company shall deliver to the
consultant options to purchase 500,000 shares at $2.00 per share
through December 31, 2007.
3) On or before February 28, 1997, but in no event later than
issuance of the registered shares in 1) above the Company shall
pay a fee of $250,000.
4) Upon financial closing (sale of bonds, public offerings or such
other financial arrangements of any composting facility in the
state of Florida) of the North Dade Composting facility the
consultant shall be paid a development fee of $500,000 and 50% of
the total of any and all development fees in excess of $1,000,000
paid pursuant to financial closing.
5) Upon financial closing of the North Dade Composting Facility and
each and every additional composting facility in Florida, the
Company shall grant the consultant an option for 100,000 shares
of common stock at $2.00 per share for a period of 10 years.
6) Upon the commencement of commercial operations of the North Dade
Composting Facility and the commencement of commercial operations
of each and every additional facility in Florida, the Company
shall grant to the consultant options to purchase an additional
75,000 shares of common stock at $2.00 per share for 10 years.
7) Upon each additional closing (other than North Dade) the
consultant will be paid a development fee of $250,000 and 50% of
any and all development fees in excess of $500,000.
8) The Company shall exclusively contract with the consultant for
trucking services in the State of Florida at competitive
rates. In addition, the Company shall enter into an exclusive
contract for agriculture land applications in Florida.
F-29
<PAGE>
COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
10. Consulting Contracts (continued):
K) (continued):
In addition to the above, the Company shall convey to the consultant
a 19.9% equity ownership interest in Miami Recycling and Composting
Company, Inc., a subsidiary of the Company. The consultant will
also receive a management fee equal to 30% of distributable net
income of Miami Recycling Composting Company and any other business
enterprises in the State of Florida.
L) On January 23, 1997, the Company entered into an agreement with
Quirk Carson Peppet to act on a non-exclusive basis to provide
financial advisory service and be the placement agent for certain
financial advisory and investment banking services. As
compensation, the consultant shall receive the following:
a) Upon acceptance, the Company will issue warrants for 100,000
shares at $2.50 per share for 5 years.
b) Upon closing of a private placement of any equity securities,the
Company will pay the consultant 6% of the aggregate gross
proceeds. In addition, the consultant shall receive warrants
equal to 4% of the common shares or equivalent issued in the
private placement at the price of the shares issued in the
private placement for 5 years.
c) Upon closing of a private placement of any equity security by
investors introduced by the Company, the consultant will get 3%
of the aggregate gross proceeds and 2% in warrants.
11. Development stage company:
The Company's operations have been centered around its organizing,
evaluating and developing the business of converting organic waste into
compost and other soil products and the start-up financing of its
operations, including the construction of the waste management and compost
facility in Newark, New Jersey and other compost facilities throughout the
country. From December 17, 1993 through the period ending July 31, 1997
the Company has secured required financing through a public offering,
various private placement offerings and from the related companies, Compost
Management, Inc., Select Acquisitions, Inc. and VRH Construction Corp. The
Company has incurred losses in connection with its operations during this
same period of $10,455,544.
F-30
<PAGE>
COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
12. Minority interest in consolidated subsidiary:
Newark Recycling and Composting Company, Inc. was incorporated in the State
of Delaware on May 10, 1994 with Compost America Company of New Jersey,
Ltd. 75% and Potomac Technologies 25%. The purpose of the Corporation is
to continue development activities which were the development, construction
and operation of a sewer sludge composting facility in Newark, New Jersey.
VRH Construction Corp. is a shareholder in Compost America Holding Company,
Inc. and is the exclusive construction manager for the Newark composting
facility. Management of the corporation will be by consensus of the Board
of Directors. The Company has consolidated the financial statements of
Newark Recycling and Composting Company, Inc. with Compost America Company
of New Jersey, Ltd. at July 31, 1997. The Company reflects minority
interest as another liability in the balance sheet and as a reduction of
net income or net loss in the income statements. The minority shareholder
account has been reduced to zero at July 31, 1997 as a result of loss
allocations. The Company has increased its portion of losses from
subsidiary in excess of capital investment of the minority interest.
Compost America Florida Holding Company (Miami Recycling and Composting
Company, Inc.) was incorporated in the State of Florida on November 17,
1995 with Compost America Holding Company at 80.1% and Tomas Andres Mestre,
a consultant located in Miami, Florida owning 19.9% for services rendered.
The purpose of the corporation is to develop a composting facility and
other projects and business enterprises in Florida. Mestre shall be paid a
management fee equal to 30% of the distributable net income from all
Florida facilities.
13. Contingencies and Commitments:
A) The Company leased office facilities under an operating lease in
Doylestown, PA. The lease was assumed by Compost America Company
of New Jersey, Ltd. on December 17, 1993 for 6,122 sq. ft. of
office space. The lease expired on June 14, 1994 but was continued
on a month to month basis until December 1, 1994. The total
rental, including a percentage of maintenance, real estate taxes
and insurance, amounted to $59,049 for the period May 1, 1994 to
December 1, 1994. The lease has been extended to December 31,
1997. As of July 28, 1997 the lease was abandoned and the Company
is contingently liable on the lease until to December 31, 1997.
B) On May 1, 1996 the Company entered into a five year lease agreement
for office facilities located at 320 Grand Avenue, Englewood, New
Jersey. The Company will pay a rental of $4,000 per month plus
electricity and real estate taxes over the base year.
F-31
<PAGE>
COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
13. Contingencies and Commitments (continued):
B) (continued):
The minimum annual rentals are as follows:
April 30, 1998 $48,000
April 30, 1999 48,000
April 30, 2000 48,000
April 30, 2001 48,000
C) The Company leases an automobile under a operating lease. The lease
is payable at $593.00 per month for 36 months. The lease commenced
on June 19, 1997. The minimum annual lease payments during the
next year amount to $7,116.
D) As part of the "Asset Purchase Replacement Agreement" dated March 1,
1995, the Company is contingently obligated to pay an additional
$407,500 toward the acquisition of 50% interest in the Monmouth
Recycling and Composting Company from Bio Services, Inc. The
obligation to pay this amount is based on the "Option Purchase
Agreement" with Brownfield Environmental, Inc. to purchase the
Township of Freehold property and upon receipt by Compost America
Company of New Jersey, Ltd. The purchase is contingent upon local
approval from the Township of Freehold and County approval from
Monmouth County and the N.J. Department of Environmental Protection
for "Inclusion of the project in the Monmouth County Solid Waste
Management Plan". The approval would allow Compost America
Holding Company, Inc. to build an indoor compost facility. Further
contingencies require that any remaining governmental,
environmental and building permits related to the construction of
the "indoor composting facility" be obtained in addition to the
closing on the property and the project.
As of July 31, 1997 the Company has advanced $25,000 towards this
balance as an indication of good faith with Bio-Services, Inc.
E) On October 2, 1996 the Company was assigned a lease commitment with
the Township of Freehold, New Jersey for two parcels of land
located in the Township of Freehold, County of Monmouth, State of
New Jersey. One parcel is 10.462 acres and the second parcel 8.296
acres. The lease is for 5 years with a 5 year option. The cost of
the lease is 5% of the audited profits net of either state or
federal income taxes conducted on the above described premises or a
minimum of $4,000 per year, payable quarterly. The property shall
be used for receiving, processing and composting organic materials,
and wholesale and retail sale of finished horticultural products.
Organic materials shall include yard wastes, processing wastes,
paper products and wood chips. The Company must maintain $2,000,000
of insurance on the premises.
F-32
<PAGE>
COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
14. Common Stock Purchase Warrants and Options:
As part of the employment agreement dated May 1, 1997, the following
options were granted:
<TABLE>
<S> <C>
Roger Tuttle 1,000,000 @ $2.50 per share
Expiration 11/14/00
</TABLE>
Summary of Warrants and Options Outstanding:
<TABLE>
<CAPTION>
EXERCISE
WARRANTS: 07/31/97 PRICE EXPIRATION
- ----------------------------------------------------------------------------- ---------- ---------- -----------
<S> <C> <C> <C>
Bedminster Bioconversion Corp................................................ 300,000 $ 6.00 03/01/01
300,000 .83 02/15/00
60,460 3.00 06/01/99
David Egarian................................................................ 150,000 1.00/1.17 02/15/00
Robert W. Jones III.......................................................... 75,000 1.00/1.17 02/15/00
B. Michael Pisani............................................................ 45,200 .92 06/01/99
Robert D. Long............................................................... 5,800 .92 06/01/99
----------
936,460
----------
----------
OPTIONS:
- ----------------------------------------------------------------------------
Robert E. Wortmann........................................................... 300,000 2.00 04/23/01
Victor D. Wortmann........................................................... 300,000 2.00 04/23/01
Roger Tuttle................................................................. 1,000,000 2.50 11/14/00
Peter Coker.................................................................. 100,000 2.00
50,000 5.00
50,000 9.00 06/30/01
Mark Gasarch, Esq............................................................ 200,000 2.50 05/20/01
Edward Rodriguez............................................................. 150,000 4.00
150,000 5.00
200,000 6.00 12/31/01
M.H. Meyerson & Co........................................................... 1,000,000 3.00 03/31/02
Mark G. Milask............................................................... 25,000 2.00 03/31/02
Philip Wagner................................................................ 25,000 2.00 03/31/02
Dr. Paul Smalheiser.......................................................... 25,000 2.00 03/31/02
Donald Kaplan................................................................ 50,000 2.00 03/31/02
----------
3,625,000
----------
----------
</TABLE>
F-33
<PAGE>
COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
14. Common Stock Purchase Warrants and Options (continued):
The Company has elected to continue use of the methods of accounting
described by APB-25 "Accounting for Stock Issued to Employees" which is
based on the intrinsic value of equity instruments and has not adopted the
principles of SFAS-123 "Accounting for Stock Based Compensation" effective
for fiscal year beginning after December 15, 1995, which is based on fair
value. There is no significant difference between compensation cost
recognized by APB-25 and the fair value method of SFAS-123. The Company
has not recognized compensation on the granting of options or warrants to
employees and consultants since the fair value of warrants or options is
the same as or less than the exercise price.
15. Related Party Transactions:
The Company has various transactions with related stockholders and
affiliates of the Company.
The shareholders of VRH Construction Corp. are also shareholders in Compost
America Holding Company, Inc. as well as VRH Construction Corp. VRH
Construction Corp. as of April 30, 1996 has advanced $640,072 to the
Company. The amount due is included in a note payable with interest at 10%
and was due January 31, 1997. The note has been extended from the original
due date to October 1, 1997. In addition, VRH Construction Corp. has
advanced additional funds amounting to $3,474,283 at July 31, 1997, of
which $1,543,866 is payable at 10% due October 1, 1997 and $1,930,417 is
interest bearing at 10% per annum and payable on demand. The total loans
and notes outstanding at July 31, 1997 amounted to $4,114,355. As of July
31, 1997 the notes and loans were consolidated into two mortgage notes,
$2,998,688 for Newark Recycling & Composting Company, Inc. plus accrued
interest of $640,072 and $1,128,000 for Compost America Holding Company,
Inc. plus accrued interest of $164,254. The mortgages are collateralized
by all inventory, accounts receivable, equipment and all the assets of the
Company. The due date of the two mortgages is October 1, 1997. In
addition VRH has advances additional funds through July 31, 1997 for a
total due of $4,114,555. All advances are anticipated to be paid back upon
completion of the Economic Development Bond Funding.
The Company has acquired all composting projects and technology from
Bedminster Bioconversion, Inc. through Select Acquisitions, Inc., a
shareholder in Compost America Company of New Jersey, Ltd. Select
Acquisitions Inc. has advanced $78,060 at July 31, 1997. Bedminster
Bioconversion, Inc., an unrelated corporation, received stock purchase
warrants as indicated in the notes to consolidated financial statements.
There are numerous agreements and intercompany transactions between
Compost America Holding Company, Inc. and its subsidiary, Compost America
Company of New Jersey, Ltd. and with its related subsidiaries, Newark
Recycling and Composting Co., Inc., Gloucester Recycling and Composting
Company, Inc. and Monmouth Recycling and Composting Co., Inc. Chicago
Recycling and Composting Company, Inc. and American BIO-AG Corporation. At
July 31, 1997 all intercompany transactions have been eliminated.
F-34
<PAGE>
COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
15. Related Party Transactions (continued):
The Company, at July 31, 1997, has received a loan from Roger Tuttle,
the President of Compost America Holding Company, Inc., in the amount
of $115,000.
The Company is obligated on a note payable to John Fetter also known as
Foundation Systems, in the amount of $90,000 plus miscellaneous
expenses and advances of $231,159 on behalf of the Chicago Project.
16. Employment Contracts:
As of May 1, 1997 Roger Tuttle and the Company executed an amended
employment agreement, the terms of which supersede all previous agreements.
The term is for seven years effective May 1, 1997. The compensation shall
be $350,000 per annum of which $125,000 shall not be paid or accrued until
the Company has sufficient cash resources to make payments. There will be
annual increases during the term of the agreement based on growth of the
Company but not less than the increase in the consumer price index. In
addition, Roger Tuttle shall receive an annual bonus based on 5% of the
Company's net income up to $25,000,000 and 2% of the remainder. Roger
Tuttle shall also receive the following:
1) Reimbursement of all business related expenses
2) A Company provided automobile.
3) A one-time signing bonus of $500,000 at such time the Company's
common shares have been listed on the "NASDAQ Small Cap Market".
4) Medical, health and dental insurance
5) Employer grants employee a 1,000,000 shares option to purchase
1,000,000 shares of common stock at $2.50 per share for five years
As of July 31, 1997 unpaid accrued wages amounted to $744,750 for all
contract employees. Roger Tuttle has the right to convert any amounts due
him into unregistered shares of the Company's common stock at $2.00 per
share.
F-35
<PAGE>
COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
17. Income taxes:
The Company adopted FASB Statement No. 109, "Accounting for Income Taxes"
as of inception, December 17, 1993. FASB Statement No. 109 is required for
all fiscal years beginning after December 15, 1992. This statement
requires that deferred taxes be established for all temporary differences
between book and tax basis of assets and liabilities. There was no
cumulative effect of adoption or current effect on continuing operations
mainly because the Company has been in a development stage since inception,
December 17, 1993, and has sustained net operating losses during this
period. The Company has made no provision for a deferred tax asset due to
the net operating loss carryforward because a valuation allowance has been
provided which is equal to the deferred tax asset. It cannot be determined
at this time that a deferred tax asset is more likely than not to be
realized.
The Company has a loss carryforward of $10,455,544 that may be offset
against future taxable income. The carryforward losses expire at the end
of the years 2009 and 2013.
18. Intangible assets:
Restrictive covenant $250,000
Trademark costs 3,287
Organization costs 7,081
Deposits 4,817
--------
265,185
Less accumulated amortization 46,942
--------
$218,243
--------
--------
19. Note payable, bank:
The note payable is due to Summit Bank in the amount of $100,000 at 9 1/2%
interest payable on demand.
20. Notes payable, other:
Carl Jones, American BIO-AG Corp., loan payable,
unsecured on demand $ 75,000
Ron Bryce, American BIO-AG Corp., loan payable,
unsecured on demand 35,250
Charles Lanktree, Compost America Holding Company,
Inc., convertible note due July 9, 1997 at 10%.
The note has been extended through August 1997 50,000
F-36
<PAGE>
COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
20. Notes payable, other (continued):
Bruce Boltuch, Compost America Holding Company,
Inc., convertible note due July 9, 1997 at 10%.
The note has been extended through August 1997 50,000
Brokerage Service Management, Inc., Compost America
Holding Company, Inc., note payable due on demand
and unsecured at 10% 27,000
Ira Russack, Compost America Holding Company, Inc.,
convertible note due June 30, 1997 at 8% and is
unsecured. The note has been extended through
August 1997 200,000
Charles Lanktree, Compost America Holding Company,
Inc., notes payable, unsecured payable on demand
at 10% 8,500
Lancaster Consultants, Compost America Holding
Company, Inc., loans payable, unsecured on demand
at 10% effective rate 110,300
Helen S. Janklow Trust, Compost America Holding
Company, Inc., 9% convertible note due June 1,
1998 or the first closing of the municipal bond
financing for any of the corporations composting
facilities 22,500
Richard J. Verge, Compost America Holding Company,
Inc., 9% convertible note due June 1, 1998 or the
first closing of the municipal bond financing for
any of the corporations composting facilities 22,500
Walter W. Peine, Compost America Holding Company,
Inc., 9% convertible note due June 1, 1998 or the
first closing of the municipal bond financing for
any of the corporations composting facilities 22,500
--------
$623,550
--------
--------
21. Mortgage payable - Praxair Corp.
The $2,100,000 mortgage is payable at 8% interest payable monthly. The
mortgage was due September 1996 and extended to December 1996. Interest
has been accrued to July 31, 1997 but payments have not been made. Praxair
has commenced a foreclosure action on the property owned by Newark
Recycling and Composting Company, Inc. in furtherance of having their note
paid as well as unpaid interest, expenses and attorney fees.
F-37
<PAGE>
COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
22. NOTES PAYABLE, SHAREHOLDER:
The Company is obligated on a note payable to Roger Tuttle, president of the
Company, for $115,000 which is non-interest bearing, unsecured and payable on
demand.
23. PAYROLL TAXES PAYABLE:
The Company is in arrears for filing and payment of prior and current years
payroll taxes to federal and state taxing authorities in the amount of $231,134.
Interest and penalties have been accrued on these amounts. The Company is at
risk, including the officers, for responsibility for tax payment under the trust
fund recovery systems. The Internal Revenue Service can cause liens to be
recorded and judgements to be filed.
24. LONG-TERM DEBT:
<TABLE>
<CAPTION>
RATE CURRENT LONG-TERM MATURITY
------------ --------------- ---------- -----------
<S> <C> <C> <C> <C>
Teepak, Inc............................................. Prime & 2% $ 264,871 Indefinite
Rinker Materials Corp................................... 7% $ 3,730,871 04/01/98
Jerry L. Montierth...................................... 7% 7,817 261,606 02/01/15
Equipment notes:
Center Capital Corp................................... 12.34% 14,244 49,854 02/05/02
Concord Commercial.................................... 8.95% 77,406 135,459 04/09/00
AT&T Capital Corp..................................... 12.53% 29,868 52,269 06/10/00
General Electric Capital.............................. 10.75% 18,497 10,790 02/23/99
Orix Credit Alliance, Inc............................. 9.50% 29,502 29,503 07/20/99
Notes payable, others:
Mark G. Milask........................................ 8% 25,000 09/30/98
Philip Wanger......................................... 8% 25,000 09/30/98
Dr. Paul Smalheiser................................... 8% 25,000 09/30/98
Donald M. Kaplan...................................... 10% 50,000 09/30/99
Lionhart Global Appreciation
Fund, convertible debenture............................ 10% 1,000,000 11/26/99
--------------- ---------- -----------
3,908,205 1,929,352
Less, unamortized discount.............................. 38,703 24,859
--------------- ----------
$3,869,502 $1,904,493
--------------- ----------
--------------- ----------
</TABLE>
A) The loan payable to Teepak, Inc. is for advances to Compost Management,
Inc. prior to its merger with Compost America Company of New Jersey, Ltd. on
December 1, 1994 which was subsequently assumed by Compost Holding Company, Inc.
for the purpose of obtaining necessary permits for a compost facility in
Riverdale, Illinois.
F-38
<PAGE>
COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
24. LONG-TERM DEBT: (CONTINUED)
The loans commenced on January 11, 1993 with repayment terms as follows:
1) After permits are issued Compost America Holding Company, Inc. shall
repay the loan in quarterly installments commencing three months after the
start up of the facility to the extent of 50% of available cash flow from
the facility.
2) If the facility does not receive the necessary permits by September
15, 1996, the entire amount of the loans will be repaid in 24 equal
installments. Any overdue payments shall bear interest at a rate equal to
the prime rate plus 2%. As of September 15, 1996 the loan has been extended.
B) The mortgage payable to Rinker Materials Corporation is secured by land
which costs $4,095,838 and is payable on April 1, 1998 with all principal and
accrued interest at 7%.
C) The mortgage payable to Jerry L. Montierth is payable in annual
installments of $26,784 including interest at 7% over 19 years. The mortgage is
secured by land located in Meridian, Cochise County, Arizona.
D) Equipment which cost $53,500 is pledged as collateral for the note which
is payable in monthly installments of $1,187.
E) Equipment which cost $202,995 is pledged as collateral for the note which
is payable in monthly installments of $6,450.
F) Equipment which cost $110,563 is pledged as collateral for the note which
is payable in monthly installments of $2,489.
G) Equipment which cost $59,920 is pledged as collateral for the note which
is payable in monthly installments of $1,541.
H) Equipment which cost $93,104 is pledged as collateral for the note which
is payable in monthly installments of $2,459.
I) Notes payable to the following are due September 30, 1998 and are
unsecured:
1) Mark G. Milask
2) Philip Wanger
3) Dr. Paul Smalheiser
4) Donald Kaplan
F-39
<PAGE>
COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
24. LONG-TERM DEBT: (CONTINUED)
J) On November 25, 1996 the Company issued a convertible debenture for
$1,000,000 to Lionhart Global Appreciation Fund under a Regulation D offering.
The total offering proceeds amounted to $1,030,000 of which $30,000 is a fee to
the agent, Kaplan Gottbetter & Levenson, LLP. The debentures are in 10 units of
$100,000 each at 10% with a maturity of November 26, 1999. The interest is
payable monthly commencing 30 days from the agreement and the notes are
redeemable after 90 days at option of the Company. As security, the Company will
escrow between 300,000 and 325,000 shares of common stock, pursuant to a
registration statement declared effective by the commission, to secure the
payments and shall be held by the escrow agent. The stock pledged shall be
without restrictive legend.
The debenture holder, upon default, has the right to sell, assign or deliver
shares without notice to or demand upon the Company. The holder is entitled to
receive dividends and other distribution but no right to vote or subscribe.
The debenture holder has the right of conversion 150 days following date of
closing of note. The debenture is convertible (principal and interest) into
common stock based on the principal and interest outstanding divided by the
conversion price, the conversion price being 65% of the average closing bid
price for the 5 days preceding the closing or 65% of the average closing bid
price for the 5 days immediately preceding the date of conversion.
The debentures are automatically converted to each issued and outstanding
debenture on the date which is 3 years after closing. Upon 90 days after
closing, at the option of the Company, the debentures may be redeemed based on
the following schedule:
NUMBER OF DAYS
FROM CLOSING SHARES OF
DATE PRINCIPAL COMMON STOCK
---------------- ------------ -------------
90--120 $ 1,000,000 80,000
121--150 1,000,000 100,000
150 or more 1,000,000 120,000
F-40
<PAGE>
COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
24. LONG-TERM DEBT: (CONTINUED)
J) (continued):
The maturities of the long-term debt summarized as follows:
YEAR ENDED APRIL 30,
1998 $ 3,869,502
1999 276,233
2000 1,099,755
2001 21,914
2002 17,457
Thereafter 489,134
------------
$ 5,773,995
------------
------------
25. IMPAIRMENT OF INVESTMENT IN SUBSIDIARY:
The Company has adopted the provision of SFAS-121 effective for fiscal years
beginning after December 15, 1995. As required by the Financial Accounting
Standards Board which requires recognition of impairment of asset when events
and circumstances indicate the carrying amount of those assets will not be
recovered in the future. The pronouncement further states that goodwill
identified with assets that are subject to impairment loss should be eliminated
before the carrying amount of any other assets is reduced.
<TABLE>
<S> <C> <C>
Basis of acquisition of American BIO-AG Corporation.................. $1,770,730
Net book value of the assets acquired (American BIO-AG
Corporation)....................................................... 854,700
----------
Goodwill (excess of cost over the value of the assets acquired)...... 916,030
----------
Base of acquisition.................................................. $1,770,730
Fair value of investment in American BIO-AG Corporation.............. 1,329,775
----------
Impairment loss...................................................... 440,955 440,955
---------- ---------
Goodwill, net excess value over the assets acquired.................. $ 475,075
----------
----------
</TABLE>
F-41
<PAGE>
COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
26. SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
<TABLE>
<CAPTION>
QUARTER
ENDED
JULY 31, 1997
------------
<S> <C>
May and June 1997, the Company issued 984,436 shares of common stock................................ $(512,630)
Consulting services................................................................................. 489,950
Payment of accounts payable......................................................................... 22,680
</TABLE>
<TABLE>
<CAPTION>
YEAR
ENDED
APRIL 30, 1997
-------------
<S> <C>
Officers compensation
May 31, 1996 issued 200,000 shares of common stock in settlement with Select Acquisitions, Inc..... $(500,000)
Legal and professional fees........................................................................ 50,000
Consulting......................................................................................... 250,000
Liquidation of former Select Acquisitions, Inc. shareholder disputes for stock of the Company...... 200,000
June 28, 1996 issuance of 305,000 shares of common stock in purchase of land application assets of
R.C. Land Company, Inc. by the Company........................................................... (762,500)
Property, plant and equipment...................................................................... 762,500
June 30, 1996 and July 30, 1996 issued 479,304 shares of common stock for consulting services...... (606,105)
Consulting services expense...................................................................... 606,105
October 11, 1996 issued 3,000 shares for legal services............................................ (6,000)
Legal and professional fees...................................................................... 6,000
October 11, 1996 issued 465,000 shares of common stock for services and outstanding accounts
payable.......................................................................................... (715,260)
</TABLE>
F-42
<PAGE>
<TABLE>
<CAPTION>
COMPOST AMERICA HOLDING COMPANY, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
26. SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES (CONTINUED):
YEAR
ENDED
APRIL 30, 1997
-----------
<S> <C>
Consulting, legal and professional fees.............................................................. 210,500
Payment of accounts payable.......................................................................... 106,760
Construction in progress, compost projects........................................................... 398,000
December 1, 1996, issued 256,500 shares of common stock for services rendered and consulting
agreement (........................................................................................ 421,250)
Consulting services.................................................................................. 10,000
Investment in acquisition of American Soil, Inc...................................................... 397,500
Newark Project cost.................................................................................. 13,750
February and March 1997, the Company issued 1,012,934 shares of common stock......................... (1,021,217)
Consulting service and legal......................................................................... 1,007,920
Construction in progress............................................................................. 13,297
</TABLE>
<TABLE>
<CAPTION>
YEAR
ENDED
APRIL 30, 1996
-------------
<S> <C>
Issuance of capital stock for management services.................................................. $ (1,000)
Professional fees.................................................................................. 1,000
Issuance of capital stock in acquisition of
Bedminster Seacor Services Miami Corporation....................................................... (500,000)
Assets acquired.................................................................................... 500,000
Issuance of capital stock in settlement of debt to Jonathan Frank.................................. (150,000)
Note due to Jonathan Frank......................................................................... 150,000
Issuance of capital stock for legal, accounting and consulting services............................ (717,214)
Legal--accounts payable............................................................................ 43,404
Accounting......................................................................................... 50,000
Consulting......................................................................................... 623,810
Issuance of capital stock for investment in American BIO-AG Corporation............................ (208,332)
Investment--American BIO-AG Corporation............................................................ 208,332
</TABLE>
F-43
<PAGE>
27. EARNINGS PER SHARE:
Primary earnings per share amounts are computed based on the weighted
average number of shares actually outstanding plus the shares that would be
outstanding assuming conversion of the convertible debentures, convertible
preferred stock and convertible notes, which are considered to be common stock
equivalents. The number of shares used in the computations were 22,831,565.
Following is a recalculation of the weighted average number of shares
actually outstanding with the number of shares used in the computations of
primary and fully diluted earnings per share:
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Primary and fully diluted:
Computed above for primary earnings per share......................................... 17,919,772 14,852,781
Stock options......................................................................... 936,460 1,036,460
Stock warrants........................................................................ 3,625,000 2,633,333
Convertible debentures................................................................ 250,000
Convertible preferred stock........................................................... 83,333
Convertible notes..................................................................... 17,000
------------ ------------
22,831,565 18,522,574
------------ ------------
------------ ------------
</TABLE>
F-44
<PAGE>
Item 2. Plan of Operation
Introduction
The Company is a "development stage" company and has not generated
significant operating revenues from its inception to date. The Company does
not expect to generate any significant operating revenues until the Company
has successfully financed, constructed and begun commercial operations of one
or more of its compost project facilities currently in development. Since a
merger between a "public shell" and a "private operating company" is
considered to be a recapitalization of the operating company, with no
recognition of intangibles as a result of the merger, the acquisition of the
Company's subsidiary, Compost America Company of New Jersey, Ltd. (the
"private operating company"), on January 23, 1995, has been accounted for as
a reverse purchase of the assets and liabilities of the Company by Compost
America Company of New Jersey, Ltd. Accordingly, the consolidated financial
statements represent assets, liabilities and operations of only Compost
America Company of New Jersey, Ltd. prior to January 23, 1995 and the
combined assets, liabilities and operations of both companies for the ensuing
period. The financial statements reflect the purchase of the stock of Alcor
Energy and Recycling Systems, Inc. (the "public shell"), the former name of
Compost America Holding Company, Inc., by Compost America Company of New
Jersey, Ltd. for stock and the assumption of liabilities of $49,094, this
amount being the historical cost of the assets and liabilities acquired. All
significant inter-company profits and losses from transactions have been
eliminated.
Since its inception, the Company has met its liquidity needs from the
proceeds of the sale of its common stock and from loans made by directors of
the Company, by VRH Construction Corporation, a principal shareholder of the
Company whose owners are directors of the Company, and by other individuals
and institutions not affiliated with the Company. The Company received
$737,154 from private sales of its common stock during the fiscal year ended
April 30, 1997, $1,365,860 from private sales of its common stock during the
fiscal year ended April 30, 1996, $906,409 from private sales of its common
stock during the fiscal year ended April 30, 1995 and $692,000 during the
period December 1993 through April 30, 1994. Since April 30, 1997 through
July 31, 1997, the Company has raised an additional $7,500 through private
sales of its common stock. In addition, during the fiscal quarter ended July
31, 1997, the Company received $1,000,000 from the issuance of its Series B
Preferred Stock.
In addition, VRH Construction Corporation made loans to the Company
totalling $555,167 during the fiscal year ended April 30, 1997, $2,869,116
during the fiscal year ended April 30, 1996 and $640,072 during the fiscal
year ended April 30, 1995. Since April 30, 1997 through July 31, 1997, VRH
Construction Corporation has loaned an additional $50,000 to the Company,
while other loans to the Company during that same period have totalled
$92,500.
<PAGE>
Total funds raised from the sale of common shares and loans from
shareholders from December 1993 through April 30, 1997 are $9,651,578, plus
an additional $1,150,000 (including $1,000,000 from the sale of Preferred
Shares) since April 30, 1997 through July 31, 1997.
Significant revenues from operations are not anticipated until 1999, when
the Company's initial projects will be fully constructed and operational.
Until that time, the Company anticipates that it will need an additional
$3,000,000 to meet current debt obligations, provide additional development
capital for its various projects and fund ongoing corporate overhead
expenses. The Company anticipates that it will be able to secure these funds
from the sale of additional common shares and/or the issuance of additional
debt. In addition, the Company expects to have completed project financing
for the construction of the Company's facilities in Miami, Florida and
Newark, New Jersey prior to the end of the current fiscal year and the
Company may receive development fees and management fees in connection with
this project financing.
The Company does not expect to perform any significant product research
and development and does not expect any significant changes in the number of
employees in the current fiscal year. The Company does expect to commence
construction of its Miami, Florida and Newark, New Jersey composting
facilities during the current fiscal year, and, financing and weather
permitting, may also commence construction of its Chicago facility.
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to
Form 10-QSB and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included.
Operating results for the first quarter ended July 31, 1997 are not
necessarily indicative of the results that may be expected for the year ended
April 30, 1998. For further information, refer to the consolidated statements
and footnotes thereto included in the Company's annual report on Form 10-KSB
for the year ended April 30, 1997.
<PAGE>
PART II - OTHER INFORMATION
Item 1. - Legal Proceedings None not Previously
Reported
Item 2. - Changes in Securities
(a) None
(b) None
(c) During the fiscal quarter ended July 31, 1997, the Company
sold 15,000 shares of its common stock to three individuals for $0.50 per
share, or a total of $7,500, and issued 984,436 shares of its common stock to
11 individuals for services rendered valued at $0.50 per share, or a total of
$492,218, without registering the securities under the Securities Act of
1933, as amended. There were no underwriters involved in the transaction, and
no underwriting discounts or commissions In light of the small number of
recipients and that all securities issued were restricted against subsequent
transfer, the Company believes that this issuance of securities was effected
under an exemption provided by Section 4(2) of the Securities Act of 1933, as
amended, being sales by an issuer not involving a public offering.
Item 3. - Defaults Upon Senior Securities None
Item 4. - Submission of Matters to a Vote of None
Security Holders
Item 5. - Other Information None
Item 6. - (a) Exhibits None
(b) Reports on Form 8-K None
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Date: COMPOST AMERICA HOLDING COMPANY, INC.
September 19, 1997 (Registrant)
By /s/ Roger E. Tuttle
----------------------------------------------
Roger E. Tuttle, President and Principal
Executive Officer, Principal
Financial Officer and
Principal Accounting Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE UNAUDITED FINANCIAL
STATEMENTS OF COMPOST AMERICA HOLDING COMPANY, INC. FOR THE FISCAL QUARTER ENDED
JULY 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINACIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-END> JUL-31-1997
<CASH> 22,892
<SECURITIES> 0
<RECEIVABLES> 36,421
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 203,918
<PP&E> 16,809,504
<DEPRECIATION> 180,468
<TOTAL-ASSETS> 19,379,119
<CURRENT-LIABILITIES> 15,827,563
<BONDS> 1,904,493
0
1,000,000
<COMMON> 11,131,299
<OTHER-SE> (10,484,236)
<TOTAL-LIABILITY-AND-EQUITY> 19,379,119
<SALES> 0
<TOTAL-REVENUES> 137,836
<CGS> 0
<TOTAL-COSTS> 14,784
<OTHER-EXPENSES> 1,518,657
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 304,291
<INCOME-PRETAX> (1,699,896)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,699,896)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,699,896)
<EPS-PRIMARY> (0.08)
<EPS-DILUTED> 0
</TABLE>
