SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _________ TO _________
COMMISSION FILE NUMBER 0-9278
GEOWASTE INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 36-2751684
(STATE OR OTHER JURISDICTION OF INCORPORATION) (IRS EMPLOYMENT IDENTIFICATION
NO.)
SUITE 700, 100 WEST BAY STREET, JACKSONVILLE, FL 32202
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
Registrant's telephone number, including area code: (904) 353-5033
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.10 PAR VALUE
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [x] No [ ]
Indicate by a check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendments to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates
of the registrant was approximately $43,271,810 at March 17, 1997. Exclusion of
shares held by any person should not be construed to indicate that such person
possesses the power, direct or indirect, to direct or cause the direction of
management policies of the registrant, or that such person is controlled by or
under common control with the registrant.
At March 17, 1997 the registrant had issued and outstanding an
aggregate of 21,265,829 shares of its common stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive Proxy Statement relating to
the 1997 Annual Meeting of Stockholders to be filed with the Securities and
Exchange Commission are incorporated by reference into Part III, as set forth
herein.
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
GeoWaste Incorporated (the "Company" or "GeoWaste") is a holding
company which was incorporated in the State of Delaware under the name Utah
Shale Land & Minerals Corporation in 1971. The Company, through its
subsidiaries, is in the business of owning, operating and acquiring
non-hazardous, solid waste collection, transportation and transfer companies and
disposal facilities and related sanitation and infrastructure maintenance
businesses.
GeoWaste's solid waste services operations consist of a solid waste
collection and disposal company located in Valdosta, Georgia, a solid waste
collection, transfer, materials recovery facility and portable toilet company
based in Ocala, Florida, a solid waste transfer location in St. Augustine,
Florida, a solid waste collection and street sweeping business in Jacksonville,
Florida and street sweeping operations located in Miami, Tallahassee, Ft. Walton
Beach and Pensacola, Florida. Solid waste management and related services
accounted for 100% of the Company's total consolidated revenue in 1996. With the
exception of David Joseph Company which accounted for approximately 14% of the
Company's revenue in 1996, no customer accounted for more than 10% of GeoWaste's
revenue in 1996. Fees paid to GeoWaste by its solid waste collection customers
(including charges paid by such customers for disposal) accounted for
approximately 44% of GeoWaste's revenue during 1996. Transfer and disposal
services provided to municipalities, counties and other waste management
companies accounted for approximately 41% of such revenue and related sanitation
services accounted for approximately 15%.
On March 21, 1996, the Company acquired North Florida Sweeping, Inc.
("NFS"), a roll-off collection and street sweeping company based in
Jacksonville, Florida with annual revenues of approximately $1,700,000. On
August 12, 1996, the Company acquired Spectrum Group, Inc. d/b/a United
Sanitation ("United Sanitation"), a company based in Ocala, Florida which owns
and operates solid waste collection, transportation, recycling and transfer
facilities and related solid waste management operations with annual revenues of
approximately $6,000,000. On August 30, 1996, the Company purchased certain
equipment and accounts receivable of Standard Disposal Services of Florida, Inc.
("Standard") with annual revenues of approximately $1,200,000.
Unless the context indicates to the contrary, all statistical and
financial information under Item 1 of this report is given for the period ended
December 31, 1996.
COLLECTION
Through its wholly-owned subsidiaries, GeoWaste of GA, Inc.
("GEOW/GA"), GeoWaste of FL, Inc. ("GEOW/FL"), NFS and United Sanitation, the
Company provides solid waste collection services to residential, commercial and
industrial customers in South Georgia and Northern Florida.
Commercial and industrial collection services are generally performed
under one to three-year service agreements and fees are determined by such
considerations as market factors, collection frequency, type of equipment
furnished, the type and volume or weight of the waste collected, the distance to
the disposal facility and cost of disposal.
Most of the Company's residential solid waste collection services are
performed under contracts with municipalities giving the Company exclusive
rights to service all or a portion of the homes in their respective
jurisdictions. Such contracts or franchises usually range in duration from one
to five years. The fees received by GeoWaste are based primarily on market
factors, frequency and type of service, the distance to the disposal facility
and cost of disposal. Residential collection fees are paid by the residential
customers receiving the service.
TRANSFER
The Company, through United Sanitation, operates a solid waste
transfer facility in Ocala, Florida. The facility holds a permit from the
Florida Department of Environmental Protection to accept, process and transfer
up to 600 tons per day of solid waste and under its zoning approval from Marion
County, Florida, may accept solid waste generated from the Florida Counties of
Marion, Lake, Flagler, Levy, Alachua, Sumter, Volusia and Citrus.
GeoWaste also holds a ten year contract to provide solid waste
transfer and transportation services to the City of St. Augustine, Florida. The
contract requires the Company to design, permit, construct and operate a
transfer station for the loading, removal, and disposal at GeoWaste's Pecan Row
Landfill of approximately 45 tons per day of municipal solid waste from the
City. GeoWaste, through GEOW/GA, began operation of an interim, temporary
transfer station in October of 1994. The Company and the City of St. Augustine
are presently finalizing the location and ownership of the permanent facility.
RECYCLING
United Sanitation operates a materials recovery facility in Ocala,
Florida which accepts, processes, and sells corrugated cardboard ("OCC"),
newsprint ("ONP"), office paper ("OFP"), ferrous and non-ferrous metals. These
recyclable materials are brought to the facility either by recyclable collection
vehicles operated by United Sanitation or under contractual arrangements with
third parties. After delivery, all non-recyclable material is removed and the
remaining recyclables are baled and stored until shipped to end users, which are
under long term agreements with the Company.
STREET SWEEPING
The Company, through its wholly owned subsidiaries, NFS and GEOW/FL,
provides street sweeping services in Jacksonville, Ft. Walton Beach,
Tallahassee, Pensacola and Miami, Florida. Substantially all of the street
sweeping activities are performed under contracts with city, county or State
public works or transportation departments and range in duration from two to
five years.
DISPOSAL
GEOW/GA operates one solid waste disposal facility, the Pecan Row
Landfill, in Valdosta, Lowndes County, Georgia. The landfill commenced operation
on November 5, 1991. The landfill was constructed and is operated pursuant to a
solid waste handling permit issued by the Georgia Environmental Protection
Division. The original permit authorized the disposal of nonhazardous solid
waste on 46 acres of the site, with a total permitted volume of approximately
1.8 million tons. On February 2, 1996 the Company received a modified permit for
the Landfill which modified the base and height of the facility and which
increased the disposal capacity of the facility by 1,467,800 million tons,
resulting in a total available capacity of 2,642,268 tons. The Company estimates
that based on current volumes, the remaining life of the landfill as of December
31, 1996 is approximately ten years. The permit, as modified, has no termination
date, places no restriction on daily volumes, nor restricts the geographical
origin of the waste which may be disposed of at the Landfill.
The Company has applied for and is awaiting approval of another
modification to the permit of Pecan Row Landfill which, by increasing the
footprint of the landfill, will add 1,500,000 tons of capacity, resulting in
over 4,200,000 tons of remaining airspace for the disposal of solid waste. Upon
receipt of the permit modification from the Georgia Department of Natural
Resources, Environmental Protection Division ("GAEPD"), the Company believes
remaining life of the Pecan Row Landfill will be 23 years, based on 1996 average
daily tonnage of 868 tons.
On March 25, 1996, GeoWaste, through its wholly-owned subsidiary, Low
Brook Development, Inc. ("Low Brook"), entered into an option to purchase 420
acres of land near GEOW/GA's Pecan Row Landfill. The initial option term expires
on March 24, 1998 and may be extended for one additional term to March 24, 2000.
On March 11, 1997, Low Brook received confirmation from the local zoning
authority for Lowndes County, Georgia, that the development of the 420 acres as
municipal solid waste landfill is a permitted use and conforms to local zoning
ordinances. Low Brook is currently reviewing the costs and timing associated
with the permitting of this property, which, if obtained, would yield
substantial capacity for the disposal of solid waste.
Suitable sanitary landfill facilities have become increasingly
difficult to obtain because of land scarcity, local resident opposition and
expanding governmental regulation. As GeoWaste's Pecan Row Landfill or future
facilities become filled, the solid waste disposal operations of the Company are
and will continue to be materially dependent on its ability to purchase, lease
or obtain operating rights for additional sites and obtain the necessary permits
from regulatory authorities to operate them. There can be no assurance that
permit modifications to the Pecan Row Landfill or new permits for additional
sites, including the property under option by Low Brook, can be obtained.
PERMITTING AND CONSTRUCTION PROCESS
When appropriate, the Company pursues obtaining permits for expansion
and/or modification of the Pecan Row Landfill. Permit expansions and
modifications generally take the form of vertical expansions of existing
disposal capacity, lateral expansions of permitted disposal acreage or
modifications of operating restrictions to allow increased disposal volume or
additional waste streams.
Although the permitting process varies from state to state, the
following summary (which is based on Georgia law) sets forth the typical steps
in the permitting process.
LOCAL APPROVAL. In most instances, some form of local zoning or
planning approval, commonly referred to as siting approval, is required to
permit a site and may be required to expand or modify a landfill. This process
usually requires complying with city or county zoning regulations through a
separate application process to a zoning or planning board. An applicant
generally files various reports or drawings which describe the project and
public hearings are held. In most instances, significant, organized community
opposition will be present and many local zoning authorities will consider
community opposition in deciding whether to grant zoning approval. Following
hearings, a decision is made. Generally, both the applicant and any opposition
have the right to appeal such decision. Although not always required, the local
zoning approval process is usually completed prior to applying for a state
permit.
STATE APPROVAL. Upon receipt of local approval, an applicant must then
submit detailed construction and operating plans for state approval. Most states
require an applicant to evidence that a new, modified or expanded facility will
meet or exceed state regulations regarding disposal facility siting and design
specifications. States generally consider the technical merits of an
application, particularly such matters as geology, hydrogeology, ecology,
archaeology, soil characteristics, surface drainage, the presence of, or
location relative to, airports, wetlands and local water supply systems and the
adequacy of local road systems.
Engineering consultants design the project to meet state regulations
and standards. This design is reviewed by state officials, comments are issued
and, possibly after negotiations between the applicant and the state officials,
revisions are made by the applicant. Once the design is approved, public notice
is given and a hearing held. Depending on the issues presented at the hearing,
an applicant may wait nine months or more before receiving a decision. Both the
applicant and any opposition generally have the right to appeal the decision.
REGULATION
The Company and the waste services industry in general are subject to
extensive, expansive and evolving regulation by federal, state and local
authorities. In particular, the regulatory process requires firms in the
industry to obtain and retain numerous governmental permits to conduct various
aspects of their operations, any of which may be subject to revocation,
modification or denial. The continually shifting policies and attitudes of the
regulatory agencies relating to the industry may impact the Company's ability to
obtain applicable permits from governmental authorities on a timely basis and to
retain such permits. The Company is not in a position to assess the extent of
any such impact, but it could be significant.
State and local governments have also from time to time proposed or
adopted other types of laws, regulations or initiatives with respect to the
environmental services industry. Included among these are laws, regulations and
initiatives to ban or restrict the interstate or inter-county shipment of
wastes, impose higher taxes on out-of-state waste shipments than in-state
shipments and regulate disposal facilities as public utilities.
The Company makes a continuing effort to anticipate regulatory,
political and legal developments that might affect operations, but cannot
predict the extent to which any legislation or regulation that may be enacted or
enforced in the future may affect its operations.
Operating permits are generally required at the state and local level
for landfills and collection vehicles. Operating permits need to be renewed
periodically and may be subject to revocation, modification, denial or
non-renewal for various reasons, including failure of the Company to satisfy
regulatory concerns. In the solid waste collection phase, regulation takes such
forms as permitting of transfer stations, licensing of collection vehicles,
truck safety requirements, vehicular weight limitations and, in certain
localities, limitations on rates, area and time and frequency of collection. In
the solid waste disposal phase, regulation covers various matters, including
methane gas emission, liquid runoff and rodent, pest, litter and traffic
control. Zoning and land use requirements and limitations are encountered in the
solid waste collection and disposal phases of the Company's business. In
addition, the Company's operations may be subject to water pollution laws and
regulations; air and noise pollution laws and regulations; and safety standards
under the Occupational Safety and Health Act ("OSHA"). Governmental authorities
have the power to enforce compliance with these various laws and regulations and
violators are subject to injunctions, fines and revocation of permits. Private
individuals may also have the right to sue to enforce compliance.
Regulatory or technological developments relating to the environment
may require GeoWaste (as well as others in the solid waste management business)
to modify, supplement or replace equipment and facilities at costs which may be
substantial. Because GeoWaste is engaged in a business intrinsically connected
with the protection of the environment and the potential discharge of materials
into the environment, a material portion of the Company's capital expenditures
are, directly or indirectly, related to such items. The Company does not expect
such expenditures, which are incurred in the ordinary course of business, to
have a materially adverse impact on its earnings or competitive position in the
foreseeable future because GeoWaste's business is based upon compliance with
environmental laws and regulations and its services are priced accordingly.
Although the Company intends to conduct its operations in compliance
with applicable laws and regulations, the Company believes that heightened
political and citizen sensitivity causes companies in the solid waste management
industry to be faced, in the normal course of operating their businesses, with
the possibility of expending funds for fines, penalties and expenses incurred as
a result of changes to environmental compliance regulations. While the Company
has expended no such funds to date, the possibility remains that technological,
regulatory or enforcement developments, the results of environmental studies or
other factors could materially alter this expectation at any time. In any event,
such matters could have a material impact on earnings for a particular fiscal
quarter.
RESOURCE CONSERVATION AND RECOVERY ACT ("RCRA"). RCRA regulates the
generation, treatment, storage, handling, transportation and disposal of
hazardous and solid waste and requires states to develop programs to insure the
safe disposal of solid waste in sanitary landfills. RCRA divides solid waste
into two groups, hazardous and nonhazardous. Wastes are generally classified as
hazardous wastes if they: (i) either (a) are specifically included on a list of
hazardous wastes or (b) exhibit certain characteristics; and (ii) are not
specifically designated as nonhazardous. Wastes classified as hazardous under
RCRA are subject to much stricter regulation than wastes classified as
nonhazardous. Among the wastes that are specifically designated as nonhazardous
waste are household waste and various types of special waste. These wastes,
which will be accepted at the Company's landfills, may contain incidental
hazardous substances.
On October 9, 1991, the EPA promulgated new regulations pursuant to
Subtitle D of RCRA. These new regulations include location standards, facility
design standards, operating criteria, closure and post-closure requirements,
financial assurance standards and groundwater monitoring requirements as well as
corrective action standards, all of which have not previously been uniformly
applied at landfills within the fifty states. In addition, the new regulations
require new landfills which received municipal solid waste for disposal after
April 9, 1994 to have one or more liners (typically high-density polyethylene
liners) to keep leachate out of groundwater and have extensive systems to
collect leachate for handling and treatment. In addition, by October 9, 1996
groundwater wells must also be installed at virtually all landfills to monitor
groundwater quality and the leachate collection system operation. The
regulations also require (where threshold test levels are met) that methane gas
generated at landfills be controlled in a manner that will protect human health
and the environment. Because some states have already adopted regulations at
least as stringent as the new federal regulations, the new Subtitle D
regulations will cause greater changes in the landfill regulation of certain
states than of others.
The Company's Pecan Row Landfill was designed and constructed in
accordance with the requirements of Subtitle D.
THE FEDERAL WATER POLLUTION CONTROL ACT ("CLEAN WATER ACT"). The Clean
Water Act established rules regulating the discharge of pollutants from a
variety of sources, including solid waste disposal sites, into waters of the
United States. For any discharge, the Clean Water Act would require the Company
to apply for and obtain a discharge permit, conduct sampling and monitoring and,
under certain circumstances, reduce the quantity of pollutants in those
discharges. Also, virtually all landfills are required to comply with the new
federal storm water regulations, which are designed to prevent possibly
contaminated storm water from flowing into surface waters.
COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION AND LIABILITY ACT
("CERCLA"). CERCLA addresses problems created by the release of any hazardous
substance into the environment. CERCLA's primary mechanism for remedying such
problems is to impose strict joint and several liability for cleanup of
facilities among all past and current owners and operators of the site as well
as the generators and the transporters who arranged for disposal and
transportation of hazardous substances. The costs of CERCLA cleanup can be very
substantial. Liability under CERCLA does not depend upon the existence or
disposal of "hazardous waste" but can also be founded upon the existence of even
very small amounts of the more than 1,000 "hazardous substances" listed by the
EPA.
THE CLEAN AIR ACT, AS AMENDED ("CLEAN AIR ACT"). The Clean Air Act
provides for federal, state and local regulation of the emission of air
pollutants and is applicable to landfills. The EPA has proposed new source
performance standards regulating overall air emissions from solid waste
landfills. The EPA may also issue regulations controlling the emissions of
particular air pollutants from solid waste landfills. Moreover, landfills
located in areas with air pollution problems may be subject to even more
extensive air pollution controls.
STATE AND LOCAL REGULATIONS. The States of Georgia and Florida, as
well as those states in which the Company may operate in the future, have laws
and regulations governing the generation, handling, transfer, transportation and
disposal of solid waste, water and air pollution and, in most cases, the design,
operation, maintenance, closure and post-closure maintenance of landfills.
Georgia and Florida, like most other states, have tightened the
regulatory requirements on the permitting of new and expanded solid waste
facilities and on the continued operation of existing facilities. State
regulations are expected to become both more stringent and more uniform
nationwide as the dates for the implementation of additional requirements of
Subtitle D occur. The increased stringency of state regulations may be expected
to benefit the Company, as older landfills are forced to close, thereby further
reducing the available landfill capacity. However, the increasing state and
local scrutiny of landfills also makes it difficult for the Company to comply
with the continually evolving and expansive regulation applicable to the
disposal of solid waste.
Public opposition to the siting and operation of landfills has led
many states, including Georgia and Florida, to enact legislation at the state
and/or local level which attempts to prohibit or greatly restrict the interstate
and intrastate movement of solid waste. Recent decisions by the United States
Supreme Court recognize that the Commerce Clause of the United States
Constitution imposes substantial limits upon the ability of state and local
governments to restrict the movement of solid waste across state lines.
Legislation has been introduced in the United States Congress which attempts to
restrict interstate and intrastate waste transportation. For the foreseeable
future, the Company, like all others in the solid waste industry, faces
uncertainty regarding the circumstances under which it will be able to accept
out-of-state waste for disposal at its facility. A significant portion of the
solid waste volume disposed of at the Company's Pecan Row Landfill is generated
from outside the State of Georgia.
COMPETITION
GeoWaste encounters competition, primarily in the pricing and
rendering of services, from various sources in all phases of its operations. In
solid waste collection operations, competition is encountered, for the most
part, from national, regional and local collection companies, some of which have
substantially greater financial, marketing and other resources than the Company.
Additionally, solid waste collection competition is encountered from
municipalities and counties which, through use of tax revenues, may be able to
provide services at lower direct charges to the customer than those charged by
private sector companies. In the solid waste disposal operations, competition is
encountered primarily from municipalities, counties, local governmental
agencies, and other national or regional waste management companies, some of
which have substantially greater financial, marketing and other resources than
the Company. In the street sweeping business, competition is encountered
primarily from municipalities and local or regional street sweeping companies.
INSURANCE
The Company currently maintains liability insurance coverage for
occurrences under various environmental impairment, primary casualty and excess
liability insurance policies.
The Company has secured Environmental Impairment Liability Insurance
in amounts believed to be sufficient to offset an unforeseen occurrences. The
Company currently maintains $1,000,000 of loss coverage. However, in the event
an environmental impairment exceeds the loss coverage, the Company's financial
condition could be adversely affected.
In 1991, as required by law, the Company established a trust fund for
the benefit of the State of Georgia securing the closure and post-closure care
of the Pecan Row Landfill. As of December 31, 1995, this trust fund had a
balance of $685,535. In December 1995, the Company was successful in obtaining a
surety bond which can be used as an alternative to the continued maintenance of
the trust fund. The surety bond requirement of depositing $300,000 as collateral
was met in December 1995. At that time the trust fund was terminated and the
Company received the trust fund balance during the second quarter of 1996.
Operating expenses include the estimated costs of closure and
post-closure care for the Pecan Row Landfill. Such costs are based upon actual
landfill capacity utilized in each operating period.
From time to time, the Company may be required to post performance
bonds, financial assurances or bank letters of credit issued by surety companies
which act as a financial guarantee of the Company's performance.
EMPLOYEES
At December 31, 1996, GeoWaste and its subsidiaries employ a total of
193 persons in its operations. None of GeoWaste's employees are represented by
labor unions under collective bargaining agreements. The Company believes it
maintains good employee relations.
ITEM 2. PROPERTIES
The Company's principal real estate interest is its Pecan Row Landfill
in Valdosta, Georgia.
The Company leases 2,000 square feet of executive office space at
Suite 700, 100 West Bay Street, Jacksonville, Florida. The Company is also party
to a lease for approximately 155,000 square feet of land and buildings in Ocala,
Florida which is used for the operations of United Sanitation and various short
term leases for smaller parcels of property in Miami, Tallahassee, and
Pensacola, Florida which are used for the parking of street sweepers.
The principal fixed assets of the Company consist of land which is
owned, land improvements and heavy equipment at the Pecan Row Landfill, the
collection and transportation company in Valdosta, Georgia, and the collection
and street sweeping company in Jacksonville, Florida. The heavy equipment, which
is owned or leased, includes collection vehicles, refuse compactors, bulldozers,
scrapers, backhoes, loaders, transfer trailers, and miscellaneous other
equipment used in transfer and disposal operations.
The Company's interest in the Uinta Basin Limited Partnership which
held 19,200 acres of land in Uinta Basin, Uinta County, Utah was terminated in
October 1996 with the sale of the Company's interest in the land for $656,920.
As of December 31, 1996, aggregate annual rental payments on real
estate leased by the Company and its subsidiaries was $117,000.
ITEM 3. LEGAL PROCEEDINGS
On December 31, 1996, the Company filed suit in the Federal District
Court for the Eastern District of Florida against the former shareholders of NFS
alleging, among other things, fraud in the inducement to the acquisition of the
capital stock of NFS. The Company is seeking recission of the transaction. The
Company intends to vigorously pursue resolution of the matter and does not
believe the proceeding will have a material adverse effect on the financial
condition of the Company.
The business in which the Company is engaged is intrinsically
connected with the protection of the environment and the potential discharge of
materials into the environment. In the ordinary course of conducting its
business activities, the Company may become involved in judicial and
administrative proceedings involving governmental authorities at the federal,
state and local level including, in certain instances, proceedings instituted by
citizens or local governmental authorities seeking to overturn governmental
action where governmental officials or agencies are named as defendants together
with the Company or one or more of its subsidiaries, or both.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the name, age and position held by each
executive officer of the Company as of December 31, 1996.
NAME AGE POSITION WITH THE COMPANY
Amy C. MacF. Burbott 46 President, Chief Executive Officer and Director
Raymond F. Chase 41 Vice President, Chief Financial Officer,
Treasurer and Secretary
John A. Paglia 35 Vice President
Michael D. Paglia 33 Vice President and Director
AMY C. MACF. BURBOTT. Ms. Burbott has served as President and Chief
Executive Officer of GeoWaste since May 1996 and has served as Director since
July 1991 (including having served as Chairman of the Board from February 1995
to May 1996). Ms. Burbott also served as President and Chief Executive Officer
of the Company from July 1991 until February 1995. From January 1991 to July
1991, Ms. Burbott was engaged in the development of various solid waste projects
through a corporation she controlled. Prior to January 1991, Ms. Burbott served
as Eastern Region Vice President and General Counsel of Waste Management, Inc.,
an national waste services company.
RAYMOND F. CHASE. Mr. Chase joined the Company as Controller and
Treasurer in July 1991. He was named a Vice President of the Company in April
1994 and was named Secretary and Chief Financial Officer on February 1, 1995.
From January 1990 through June 1991 he served as the Controller of a national
solid waste equipment leasing company, Olympic Compactor Rentals. From 1987 to
1990 he was the Controller for Waste Management of North America, Inc.'s
collection and transportation subsidiary based in Southeastern Massachusetts.
JOHN A. PAGLIA. Mr. Paglia joined to the Company as a Vice President
in August 1996 upon the Company's acquisition of United Sanitation. From July
1993 to August 1996 Mr. Paglia had served as an officer and owner of United
Sanitation. From 1989 to July 1993, he was a general manager for Commercial
Metals Company.
MICHAEL D. PAGLIA. Mr. Paglia joined the Company as a Vice President
and Director in August 1996 upon the Company's acquisition of United Sanitation.
From July 1993 to August 1996 Mr. Paglia had served as an officer and owner of
United Sanitation. From 1989 to July 1993, he was the general manager for the
Northern Florida operations of Commercial Metals Company.
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Company's Common Stock is traded over-the-counter on The Nasdaq
Small-Cap Market under the symbol "GEOW". The following table set forth the
periods indicated the high and low bid prices on The Nasdaq Small-Cap Market.
LOW BID HIGH BID
1996 PRICES PRICES
--------- --------
First Quarter $1.00 $1.75
Second Quarter 1.56 4.69
Third Quarter 2.62 4.50
Fourth Quarter 1.75 3.37
1995
First Quarter $0.44 $0.63
Second Quarter 0.50 0.69
Third Quarter 0.66 2.00
Fourth Quarter 0.75 1.31
As of March 26, 1997, there were 4,821 stockholders of record of the
Company's Common Stock.
The Company did not pay any dividends in 1996, 1995 or 1994, nor does
the Company expect to pay any dividends in the foreseeable future.
Pursuant to the terms of a Purchase Agreement dated March 5, 1992, the
Company is prohibited (with certain limited exceptions), from paying dividends
on its common stock if the aggregate amount of all such payments from and after
March 5, 1992 exceeds (i) 50% of the net after tax income of the Company, plus
(ii) 100% of any amounts received by the Company from the issuance of its equity
securities or certain subordinated debt securities, less (iii) 100% of all
losses.
Due in part to the high level of public awareness of the business in
which the Company is engaged, regulatory enforcement proceedings or other
potentially unfavorable developments involving the Company's operations or
facilities, including those in the ordinary course of business, may be expected
to engender publicity which could from time to time have an adverse impact upon
the market price for the Company's common stock.
ITEM 6. SELECTED FINANCIAL DATA OF THE REGISTRANT
SELECTED FINANCIAL DATA OF THE REGISTRANT
The following selected consolidated financial data are derived from
the Company's audited consolidated financial statements and should be read in
conjunction with the consolidated financial statements and the notes thereto
included at Item 8 herein.
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------------------------------
1996 1995 1994 1993 1992
---------------------------------------------------------------------------------
(in thousands, except per share amounts)
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C> <C>
Total revenue $13,703 $ 8,933 $ 6,967 $ 4,806 $ 2,205
------- ------- ------- ------- -------
Net income (loss) 1,708 1,462 1,189 (218) (1,878)
========== ========= ========= ========= ========
Net income (loss) per common share $ .08 $ .07 $ .06 $ (.01) $ (.10)
=========== ========= ========= ========= ========
Weighted average number of common
shares outstanding 21,839 19,526 18,851 18,638 18,542
<CAPTION>
Year Ended December 31,
---------------------------------------------------------------------------------
1996 1995 1994 1993 1992
---------------------------------------------------------------------------------
(in thousands)
BALANCE SHEET DATA:
<S> <C> <C> <C> <C> <C>
Cash $ 3,058 $ 3,985 $ 1,633 $ 1,209 $ 898
Working capital (2,777) 3,959 1,335 1,244 816
Total assets 30,618 15,637 14,528 11,293 10,812
Long-term obligations 6,022 7,036 6,723 5,918 5,355
Shareholders' equity 15,983 7,386 5,848 4,667 4,712
</TABLE>
SELECTED FINANCIAL DATA OF THE REGISTRANT'S GEORGIA AND FLORIDA OPERATIONS
The table below sets forth certain financial data of the Company's
collection, transfer, recycling, disposal and sweeping operations in Georgia and
Florida. These operating results do not include the corporate administrative
expenses of the parent, which are associated with the operation of the Company
as a public entity and the pursuit of the Company's business strategy of
acquiring additional disposal, collection and related sanitation operations. The
Company believes that the operating information set forth below is an accurate
representation of the operating results of the Georgia and Florida operations on
a stand-alone basis.
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994
-------------- -------------- -------------
Revenues:
<S> <C> <C> <C>
Disposal $ 4,761,891 $5,380,333 $4,222,257
Collection 6,048,760 2,743,446 2,542,868
Transfer 924,123 808,749 201,865
Recycling 529,489 - -
Sweeping 1,438,445 - -
---------------- ------------- -------------
Total 13,702,708 8,932,528 6,966,990
Non-cash operating expenses (1) 5,558,113 2,169,150 1,854,410
---------------- ------------- -------------
Gross Margin before
non-cash items 8,144,595 6,763,378 5,112,580
Selling, General and
Administrative (2) 1,546,727 590,733 496,377
---------------- ------------ -------------
Earnings before interest, taxes,
depreciation, and amortization
for non-corporate operating
companies $ 6,597,868 $6,172,645 $4,616,203
================= ========== ==========
</TABLE>
1. Excludes depreciation, amortization and non-cash closure costs of
$2,670,736, $3,038,100, and $2,321,941 in 1996, 1995 and 1994,
respectively.
2. Excludes amortization expenses of $155,671 in 1996, $71,192 in 1995 and
$31,143 in 1994. No corporate overhead has been allocated.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS OF THE REGISTRANT
1996 COMPARED WITH 1995
Net revenues for the year ended December 31, 1996 consisted of
collection revenues of $6,049,000, disposal revenues of $4,762,000, transfer
station revenues of $924,000, recycling revenues of $529,000 and sweeping
revenues of $1,438,000. Collection revenues increased 120%, disposal revenues
decreased 12%, and transfer revenues increased 14%. There were no related
recycling or sweeping revenues in 1995. Of the 120% increase in collection
revenues, 82% was attributable to the operations of NFS, United and Standard
which were acquired during 1996. Of the 14% increase in transfer station
revenues, 9% was associated with the newly acquired companies. Lower disposal
revenues reflect the decreased volumes at the Pecan Row Landfill combined with
more competitive pricing. Daily tonnage at the landfill decreased 2% to 868.
However, lower pricing for special waste customers accounted for 9% of the total
12% decrease. All intercompany activity has been eliminated.
Operating expenses related to the collection, disposal, transfer,
recycling and sweeping activities for 1996, consisted of collection expenses of
$3,231,000, disposal expenses of $2,913,000, transfer station expenses of
$421,000, recycling expenses of $542,000, and sweeping expenses of $1,122,000.
Collection expenses increased 166% over 1995, disposal expenses decreased 20%,
and transfer expenses increased 26%. There were no related recycling or sweeping
expenses in 1995. Of the 166% increase in collection expenses, 137% was
attributable to the acquisitions in 1996. Of the 26% increase in transfer
station expenses, 21% was associated with the acquired companies. The decrease
in disposal expenses resulted from a combination of decreased volumes and a
reduction in cell related amortization rates due to the Company's obtaining a
permit modification in the first quarter of 1996 to vertically expand the
landfill.
Selling, general, and administrative expenses for collection,
disposal, transfer, recycling and sweeping activities (excluding corporate
administrative expenses) for 1996, were $839,000, $369,000, $23,000, $51,000 and
$265,000, respectively. Corporate administrative expenses were $1,078,000 for
the year ended December 31, 1996.
Net income for the year ended December 31, 1996 was $1,708,000
compared to $1,462,000 in 1995. This improvement was principally due to the sale
of the Unita Partnership land in the fourth quarter of 1996. The Company's
working capital was a negative $2,777,000 compared with a positive $3,959,000 at
December 31, 1995. The decrease in working capital is a result of the Company's
$3,884,265 of subordinated debentures being due in the current period and cash
used for acquisitions in 1996.
1995 COMPARED WITH 1994
Net revenues for the year ended December 31, 1995 consisted of
collection revenues of $2,743,000, disposal revenues of $5,380,000, and transfer
station revenues of $809,000. Collection revenues increased 8% and disposal
revenues increased 27% over 1994 results. The increase in collection revenues
are primarily the result of increased sales associated with commercial and
municipal services. Transfer station revenues for 1995 reflected a full year of
operation versus approximately three months in 1994. Higher disposal revenues
principally reflect the increased volumes at the Pecan Row Landfill. Daily
tonnage per day at the landfill increased 31% from 680 in 1994 to 889 in 1995.
All intercompany activity has been eliminated.
Operating expenses related to the collection, disposal, and transfer
station activities for 1995, consisted of collection expenses of $1,213,000,
disposal expenses of $3,660,000, and transfer station expenses of $334,000.
Costs and expenses for collection operations increased 14% over 1994 and there
was a 21% increase in disposal operating costs. These increases were principally
related to higher operating levels in 1995.
Selling, general, and administrative expenses for collection,
disposal, and transfer station activities (excluding corporate administrative
expenses) for 1995, were $270,000, $316,000 and $5,000, respectively. Corporate
administrative expenses were $862,000 for the year ended December 31, 1995.
Net income for the year ended December 31, 1995 was $1,462,310
compared to $1,190,000 in 1994. This improvement was principally due to an
increase in average daily volumes at the Pecan Row Landfill. The Company's
working capital was $3,959,000 in 1995 compared to $1,335,000 in 1994. The
increase in working capital resulted from the Company's improved operating
performance.
LIQUIDITY AND CAPITAL RESOURCES OF THE REGISTRANT
The Company is in a service industry and has neither significant
inventory nor seasonal variations in receivables. At December 31, 1996, the
Company had negative working capital of $2,777,000 as compared with a positive
working capital of $3,959,000 at December 31, 1995. The decrease in working
capital is a result of the Company's $3,884,265 of subordinated debentures being
due in the current period and cash used for acquisitions in 1996.
The Company's operating performance was sufficient to support
corporate overhead and other expenses during 1996. Management believes that
current working capital and internally generated funds will be sufficient to
meet the Company's working capital requirements for fiscal year 1997.
Historically, the Company has relied primarily on the private
placement of debt and equity securities and cash generated from operating
activities in order to provide it with the cash required for capital
expenditures, acquisitions, and operating activities. Set forth below is a
discussion of the Company's primary ongoing cash requirements and the means by
which it expects to meet these requirements in the future.
The Company expects to make capital expenditures on an ongoing basis
for improvements to, and expansion of, its landfill and for equipment purchases.
The Company estimates that the capital expenditures required for its existing
operations will amount to $4,425,000 almost half of which will be used for the
construction of a new 4 acre disposal cell and construction costs associated
with the expected receipt of a permit modification which will increase the
footprint of the Pecan Row Landfill in 1997. The Company expects that it will
fund such estimated capital expenditures from existing cash, cash generated from
operations, equipment lease financing, and other financing.
The Company's business strategy includes the acquisition, on
financially attractive terms, of additional solid waste management companies as
well as related sanitation and infrastructure maintenance businesses. Such
acquisitions may be accomplished through the issuance of the Company's common
stock, cash on hand, or may require cash in excess of the Company's current cash
available. Although GeoWaste's operating results and financial performance are
expected to provide access to any financing which may be necessary to acquire
such businesses, there can be no assurance that such additional financing can be
obtained on terms acceptable to the Company.
The development and permitting of new disposal facilities requires
significant capital expenditures over an extended period. Any growth of the
Company through the permitting of new disposal facilities or the lateral
expansion of its existing disposal facility would require substantial capital
expenditures. The Company intends to pursue the further expansion of the Pecan
Row Landfill.
On March 21, 1996, the Company acquired NFS. The purchase price of
approximately $1,732,000 was paid in a combination of the Company's common
stock, assumption of debt, cash and warrants. On August 12, 1996, the Company
acquired United Sanitation. The purchase price of approximately $11,592,000
consisted of 2,000,000 shares of the Company's common stock and $954,000 in
cash. On August 30, 1996, the Company acquired certain equipment and accounts
receivable of Standard for $1,296,000 consisting of cash and assumption of debt.
In January 1997, the Company purchased the solid waste assets of
Air-Sweep-a-Lot, Inc. for approximately $1,000,000 consisting of cash, a
promissory note and assumption of debt.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data required by Part II,
Item 8, are included in Part IV, as indexed at Item 14(a).
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
There is hereby incorporated by reference the information appearing
under the caption "Nominees for Election as Directors" in the Company's Proxy
Statement relating to its 1997 Annual Meeting of Stockholders to be filed with
the Securities and Exchange Commission (the "Commission"). See also the
information appearing under the caption "Executive Officers of the Registrant"
appearing in Part I.
ITEM 11. EXECUTIVE COMPENSATION
There is hereby incorporated by reference the information appearing
under the caption "Executive Compensation" in the Company's Proxy Statement
relating to its 1997 Annual Meeting of Stockholders to be filed with the
Commission.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
There is hereby incorporated by reference the information appearing
under the caption "Security Ownership of Certain Beneficial Owners and
Management" in the Company's Proxy Statement relating to its 1997 Annual Meeting
of Stockholders to be filed with the Commission.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There is hereby incorporated by reference the information appearing
under the caption "Certain Relationships and Related Transactions" in the
Company's Proxy Statement relating to its 1997 Annual Meeting of Stockholders to
be filed with the Commission.
PART IV
ITEM 14. FINANCIAL STATEMENT, EXHIBITS AND REPORTS ON FORM 8-K
(a) Financial Statements
(i) Report of Independent Accountants.
(ii) Consolidated Balance Sheets as of December 31, 1996 and 1995.
(iii) Consolidated Statements of Operations for the years ended December
31, 1996, 1995 and 1994.
(iv) Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1996, 1995 and 1994.
(v) Consolidated Statements of Cash Flows for the years ended December
31, 1996, 1995 and 1994.
(vi) Notes to Consolidated Financial Statements.
(b) Reports on Form 8-K
None.
(c) Exhibits. Each Exhibit is listed according to the number assigned to it
in the Exhibit Table of Item 601 of Regulation S-K.
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
2.1 Agreement and Plan of Reorganization, dated August 2, 1991, by and
between GeoWaste Incorporated, Utah Acquisition Subsidiary, Inc.,
Equivest Waste Solutions, Inc., Frederick J. Iseman and James Swistock
(Incorporated by reference from Exhibit 2(A) to the Current Report on
Form 8-K filed August 19, 1991 (File No. 0-9278)).
2.2 Agreement and Plan of Merger dated August 12, 1996, among GeoWaste
Incorporated, Spectrum Acquisition Corp., Spectrum Group, Inc., d/b/a
United Sanitation, Ocala Chemical, Mills Disposal and John A. Paglia
and Michael D. Paglia (Incorporated by reference from Exhibit 2.2 to
the Current Report on Form 8-K filed August 27, 1996 (File No.
0-9278)).
3.1 Certificate of Incorporation of GeoWaste Incorporated, as amended and
restated (Incorporated by reference from Exhibit A to the Proxy filed
November 25, 1991 (File No. 0-9278)).
3.2 Bylaws of GeoWaste Incorporated, as amended (Incorporated by reference
from Exhibit 3(b) to the Annual Report on Form 10-K for the year ended
December 31, 1987 (File No. 0-9278)).
3.3 Amendment to Amended and Restated Certificate of Incorporation of
GeoWaste Incorporated (Incorporated by reference from Exhibit 3.4 to
the Annual Report on Form 10-K for the year ended December 31, 1992
(File No. 0-9278)).
4.1 Purchase Agreement, dated March 5, 1992, between GeoWaste
Incorporated, the Delaware State Employees' Retirement Fund and the
Trust for Defined Benefit Plan of ICI American Holdings Inc.
(Incorporated by reference from Exhibit 4.1 to the Current Report on
Form 8-K filed March 13, 1992 (File No. 0-9278)).
4.2 Form of Debenture (Incorporated by reference from Exhibit 4.2 to the
Current Report on Form 8-K filed March 13, 1992 (File No. 0-9278)).
4.3 Registration Rights Agreement, dated March 5, 1992, by and between
GeoWaste Incorporated, the Delaware State Employees' Retirement Fund
and the Trust for Defined Benefit Plan of ICI American Holdings Inc.
(Incorporated by reference from Exhibit 4.3 to the Current Report on
Form 8-K filed March 13, 1992 (File No. 0-9278)).
4.4 Registration Rights Agreement, dated August 2, 1991, by and between
GeoWaste Incorporated and each of the entities listed on Exhibit A
thereto (Incorporated by reference from Exhibit 4(D) to the Current
Report on Form 8-K filed August 19, 1991 (File No. 0-9278)).
4.5 First Escrow Agreement, dated August 2, 1991, by and between GeoWaste
Incorporated, Frederick J. Iseman, James Swistock, Matthew Fulton,
Brian Russell, James R. Jones, Paul Thomas Cohen, William vanden
Heuvel, Balis & Zorn, Inc. and IBJ Schroder Bank & Trust Company
(Incorporated by reference from Exhibit 4(B) to the Current Report on
Form 8-K filed August 19, 1991 (File No. 0-9278)).
4.6 Second Escrow Agreement, dated August 2, 1991, by and between GeoWaste
Incorporated, the parties listed on Schedule A thereto, Kurt Wilkening
and IBJ Schroder Bank & Trust Company (Incorporated by reference from
Exhibit 4(C) to the Current Report on Form 8-K filed August 19, 1991
(File No. 0-9278)).
4.7 Equivest First Convertible Debt Exchange Agreement, dated August 2,
1991, by and between GeoWaste Incorporated the parties listed on
Schedule A thereto (Incorporated by reference from Exhibit 2(B) to the
Current Report on Form 8-K filed August 19, 1991 (File No. 0-9278)).
4.8 Equivest Second Convertible Debt Exchange Agreement, dated August 2,
1991, by and between GeoWaste Incorporated the parties listed on
Schedule A thereto (Incorporated by reference from Exhibit 2(C) to the
Current Report on Form 8-K filed August 19, 1991 (File No. 0-9278)).
4.9 Stockholders' Agreement, dated August 2, 1991, by and between GeoWaste
Incorporated, Advance Ross Corporation, Allen & Company Incorporated,
Frederick J. Iseman, Harve Ferrill, Gian Caterine, Kurt Wilkening,
their persons or entities listed on Schedule A thereto and the persons
or entities listed on Schedule B thereto (Incorporated by reference
from Exhibit 4(A) to the Current Report on Form 8-K filed August 19,
1991 (File No. 0-9278)).
4.10 Voting Agreement, dated March 5 ,1992, by and between GeoWaste
Incorporated, the Delaware State Employees' Retirement Fund and the
Trust for Defined Benefit Plan of ICI American Holdings Inc.,
Frederick J. Iseman, Gian Caterine, Amy C. MacF. Burbott, Harve
Ferrill, James Swistock, Advance Ross Corporation and Allen & Company
Incorporated (Incorporated by reference from Exhibit 4.4 to the
Current Report on Form 8-K filed March 13, 1992 (File No. 0-9278)).
4.11 Voting Agreement dated as of August 12, 1996, among John A. Paglia,
Michael D. Paglia, Advance Ross Corporation, Allen & Company
Incorporated, Allen Value Partners L.P. and Allen Value Limited
Incorporated (Incorporated by reference from Exhibit 4.11 to the
Current Report on Form 8-K filed August 27, 1996 (File No. 0-9278)).
10.1 Warrant Purchase Agreement by and between GeoWaste Incorporated and
Allen & Company Incorporated (Incorporated by reference from Exhibit
10.1 to the Annual Report on Form 10-K for the year ended December 31,
1991 (File No. 0-9278)).
10.2 Form of Employment Agreement, dated as of August 1, 1991, by and
between GeoWaste Incorporated and Amy C. MacF. Burbott (Incorporated
by reference from Exhibit 10.1 to the Quarterly Report on Form 10-Q
for the period ended September 30, 1992 (File No. 0-9278)).
10.3 Form of Employment Agreement dated as of June 1, 1992, by and between
GeoWaste Incorporated and Richard J. Sherman (Incorporated by
reference from Exhibit 10.2 to the Quarterly Report on Form 10-Q for
the period ended September 20, 1992 (File No. 0-9278)).
10.4 Form of Employment Agreement, dated as of August 1, 1991, by and
between GeoWaste Incorporated and James W. Swistock (Incorporated by
reference from Exhibit 10.4 to the Annual Report on Form 10-K for the
year ended December 31, 1992 (File No. 0-9278)).
10.5 Form of Severance Agreement, dated as of December 21, 1995, by and
between GeoWaste Incorporated and Kevin R. Kohn (Incorporated by
reference from Exhibit 10.5 to the Annual Report on Form 10-K for the
year ended December 31, 1995 (File No. 0-9278)).
10.6 Form of Severance Agreement, dated as of December 21, 1995, by and
between GeoWaste Incorporated and Raymond F. Chase (Incorporated by
reference from Exhibit 10.6 to the Annual Report on Form 10-K for the
year ended December 31, 1995 (File No. 0-9278)).
10.7 Form of Consulting Agreement dated, August 31, 1995, by and between
GeoWaste Incorporated and Amy C. MacF. Burbott (Incorporated by
reference from Exhibit 10.7 to the Annual Report on Form 10-K for the
year ended December 31, 1995 (File No. 0-9278)).
10.8 Form of Amendment, dated as of January 9, 1995, to Form of Employment
Agreement, dated as of August 1, 1991, by and between GeoWaste
Incorporated and Amy C. MacF. Burbott (Incorporated by reference from
Exhibit 10.8 to the Annual Report on Form 10-K for the year ended
December 31, 1995 (File No. 0-9278)).
10.9 Form of Letter Agreement, dated as of April 23, 1996, by and between
GeoWaste Incorporated and Amy C. MacF. Burbott.
10.10 Form of Employment Agreement, dated as of August 12, 1996, by and
between GeoWaste Incorporated and John A. Paglia.
10.11 Form of Employment Agreement, dated as of August 12, 1996, by and
between GeoWaste Incorporated and Michael D. Paglia.
11.1 Computation of Net Income Per Share for the year ended December 31,
1996.
11.2 Computation of Net Income Per Share for the year ended December 31,
1995.
11.3 Computation of Net Income Per Share for the year ended December 31,
1994.
21 Subsidiaries of the Registrant.
27 Financial Data Schedule.
<PAGE>
(d) Financial Statement Schedule
DESCRIPTION
Schedule II. Valuation and Qualifying Accounts
All other schedules have been omitted since the information is not
applicable, is not required or is included in the Consolidated Financial
Statements listed under section (a) of this Item 14.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of GeoWaste Incorporated:
We have audited the consolidated financial statements and the
financial statement schedule of GeoWaste Incorporated and Subsidiaries listed in
Item 14(a) and 14(d) of this Form 10-K. These financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
GeoWaste Incorporated and Subsidiaries as of December 31, 1996 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles. In addition, in our opinion, the financial
statement schedule referred to above, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all material
respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
Jacksonville, Florida
March 27, 1997
<PAGE>
GEOWASTE INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of December 31, 1996 and 1995
<TABLE>
ASSETS
<CAPTION>
1996 1995
---- ----
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 3,058,067 $ 3,985,459
Accounts receivable, net of allowance of $124,000 in 1996
and $18,000 in 1995 2,214,061 871,968
Prepaid expenses 343,461 182,132
Deferred tax asset 221,000 134,000
------------------ ---------------
Total current assets 5,836,589 5,173,559
------------------ ---------------
Property and equipment:
Land, primarily disposal site 13,205,883 11,337,667
Buildings and improvements 433,025 150,793
Vehicles and equipment 8,830,438 3,105,178
------------------ ---------------
22,469,346 14,593,638
Less - accumulated depreciation 8,613,446 6,224,889
------------------ ---------------
Net property and equipment 13,855,900 8,368,749
------------------ ---------------
Other assets:
Cost in excess of net assets of acquired
businesses, net of accumulated amortization of
$315,747 in 1996 and $177,545 in 1995 10,505,129 1,067,701
Investments 318,000 985,535
Other 102,473 41,772
------------------ ---------------
Total other assets 10,925,602 2,095,008
------------------ ---------------
Total assets $ 30,618,091 $ 15,637,316
=================== ===============
<PAGE>
<CAPTION>
GEOWASTE INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of December 31, 1996 and 1995
LIABILITIES AND STOCKHOLDERS' EQUITY
1996 1995
---- ----
Current liabilities:
<S> <C> <C>
Current maturities of long-term debt $ 4,672,950 $ 151,019
Accounts payable 1,573,707 137,308
Accounts payable to related party 400,000 -
Accrued payroll 198,619 79,235
Accrued fees 145,008 143,582
Accrued income taxes 700,000 149,318
Accrued other 46,929 113,045
Deferred revenue 876,624 441,200
------------------ ---------------
Total current liabilities 8,613,837 1,214,707
Long-term debt, less current maturities 2,522,311 4,094,450
Accrued royalties 962,061 1,207,591
Closure and post closure obligations 1,787,136 1,511,647
Deferred tax liability 750,000 161,000
Minority interest - 61,564
------------------ ---------------
Total liabilities 14,635,345 8,250,959
------------------ ---------------
Commitments and contingencies (Notes 2, 8 and 15)
Stockholders' Equity:
Preferred stock, authorized 5,000,000 shares,
$.01 par value; none issued or outstanding - -
Common stock, authorized 50,000,000 shares,
$.10 par value; issued and outstanding 21,028,634 and
18,662,605 shares in 1996 and 1995, respectively 2,102,863 1,866,260
Additional paid-in capital 12,910,437 6,191,110
Net unrealized gains on investments - 67,046
Retained earnings (deficit) 969,446 (738,059)
------------------ ---------------
Total stockholders' equity 15,982,746 7,386,357
------------------ ---------------
Total liabilities and stockholders' equity $ 30,618,091 $ 15,637,316
================== ===============
<PAGE>
<CAPTION>
GEOWASTE INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 1996, 1995 and 1994
1996 1995 1994
----- ----- ----
<S> <C> <C> <C>
Net revenues $ 13,702,708 $ 8,932,528 $ 6,966,990
Costs and expenses:
Operating 8,228,849 5,207,250 4,176,351
Selling, general and administrative 2,625,237 1,459,197 1,507,355
Amortization of goodwill 138,202 71,180 31,130
-------------- --------------- --------------
Income from operations 2,710,420 2,194,901 1,252,154
Other income (expense):
Other income, primarily interest 200,461 182,747 112,720
Interest expense (443,912) (368,338) (381,051)
Gain on sale of limited partnership 432,623 - -
Gain on sale of investments 82,913 - -
----------- --------------- --------------
Income before income taxes 2,982,505 2,009,310 983,823
Income tax provision (benefit) 1,275,000 547,000 (206,000)
-------------- --------------- ---------------
Net income $ 1,707,505 $ 1,462,310 $ 1,189,823
============== =============== ==============
Primary earnings per Common Share $ .08 $ .07 $ .06
============== =============== ==============
Average number of common shares used in
primary calculation 21,839,344 19,526,415 18,851,170
============== =============== ==============
Fully-diluted earnings per Common Share $ .07 $ .07 $.06
======== ======= ====
Average number of common shares used
in fully-diluted calculation 24,749,722 19,704,724 18,885,218
============== =============== ===============
<PAGE>
<CAPTION>
GEOWASTE INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the years ended December 31, 1996, 1995 and 1994
COMMON STOCK NET UNREALIZED RETAINED TOTAL
NUMBER OF $.01 PAR ADDITIONAL GAINS (LOSSES) EARNINGS STOCKHOLDERS'
SHARES VALUE PAID IN CAPITAL ON INVESTMENTS (DEFICIT) EQUITY
---------- ----------- --------------- --------------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993 22,649,641 $2,264,964 $5,792,406 $ - $(3,390,192) $4,667,178
Shares returned from escrow (3,987,036) (398,704) 398,704 - - -
Change in net unrealized losses - - - (8,179) - (8,179)
Net income - - - - 1,189,823 1,189,823
---------------- ------------ ----------- ---------- ----------- ----------
Balance at December 31, 1994 18,662,605 1,866,260 6,191,110 (8,179) (2,200,369) 5,848,822
Change in net unrealized gains - - - 75,225 - 75,225
Net income - - - - 1,462,310 1,462,310
--------------- ------------ ---------- ---------- ---------- -----------
Balance at December 31, 1995 18,662,605 1,866,260 6,191,110 67,046 (738,059) 7,386,357
Issuance of stock for acquisitions 2,233,946 223,395 6,306,605 - - 6,530,000
Stock options exercised, including
tax benefit of $114,134 132,083 13,208 172,722 - - 185,930
Extension of warrants - - 240,000 - - 240,000
Change in unrealized gains - - - (67,046) - (67,046)
Net income - - - - 1,707,505 1,707,505
------------- ---------- ------------ -------------- ----------- -----------
Balance at December 31, 1996 21,028,634 $2,102,863 $ 12,910,437 $ - $ 969,446 $15,982,746
========== ========== ============ =============== =========== ===========
<PAGE>
<CAPTION>
GEOWASTE INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1996, 1995 and 1994
1996 1995 1994
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net Income $ 1,707,505 $ 1,462,310 $ 1,189,823
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 2,555,863 2,505,103 1,893,602
Deferred income taxes 36,000 323,000 (296,000)
Non cash interest expense - 80,823 306,821
Provision for closure and post closure costs 275,489 620,472 476,593
Gain on sale of investments (82,913) - -
Amortization of discount (18,000) - -
Gain on sale of equipment - (7,092) (2,246)
Gain from sale of limited partnership (432,623) - -
Changes in assets and liabilities:
Accounts receivable (523,405) 141,261 (346,932)
Prepaid expenses (93,437) (62,238) (43,323)
Other assets 54,919 - -
Accounts payable and accrued liabilities 968,541 (35,711) 357,388
Deferred revenue 192,090 (123,012) 357,752
------------- -------------- --------------
Net cash provided by operating activities 4,640,029 4,904,916 3,893,478
-------------- -------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale of limited partnership 656,920 - -
Proceeds from sale of investments 701,402 - -
Cash paid for business acquisitions (2,420,228) - -
Purchases of property and equipment (3,613,367) (1,820,033) (2,953,404)
Proceeds from the sale of equipment 57,000 19,670 90,484
Purchase of investments - (313,445) (208,180)
------------- -------------- --------------
Net cash used in investing activities (4,618,873) (2,113,808) (3,071,100)
---------------- ------------------ --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options 71,795 - -
Payment of debt, capital lease obligations,
and accrued royalties (1,020,343) (439,047) (398,239)
-------------- -------------- -------------
Net cash used in financing activities (948,548) (439,047) (398,239)
-------------- -------------- --------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (927,392) 2,352,061 424,139
Cash and cash equivalents, beginning of year 3,985,459 1,633,398 1,209,259
-------------- -------------- -------------
Cash and cash equivalents, end of year $ 3,058,067 $ 3,985,459 $ 1,633,398
=============== ============== =============
</TABLE>
<PAGE>
GEOWASTE INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company
GeoWaste Incorporated (the "Company") is in the business of owning,
operating and acquiring non-hazardous, solid waste collection, transportation
and transfer companies and disposal and related sanitation and infrastructure
maintenance businesses. The Company operates a landfill in southern Georgia,
collection companies in southern Georgia and northern Florida, transfer stations
in northern Florida and a sweeping company in northern Florida. The Company also
sells recyclable paper and rents and services portable toilets. The Company's
customers include governments, commercial entities and residences.
Revenue Recognition
Collection revenues are recognized as services are performed. Certain
commercial and residential customers are billed in advance, and these revenues
are deferred until recorded as income in the period in which the related service
is rendered. Disposal and transfer revenues are recognized with the performance
of the service. Sales of recyclable paper are recognized upon delivery of the
product. One customer accounted for approximately 14%, 21% and 20% of the
Company's revenue in 1996, 1995 and 1994.
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company, its wholly owned subsidiaries and Uinta Basin Limited Partnership
(Uinta), its majority-owned subsidiary. Uinta was sold during 1996 and the
Company recognized a gain of $432,623. All significant intercompany transactions
and balances have been eliminated.
Cash and Cash Equivalents
Cash equivalents consist of money market funds primarily invested in
short-term debt securities and other highly liquid investments with original
maturities of three months or less. These securities are stated at cost which
approximates market value.
Property and Equipment
Property and equipment are recorded at cost less accumulated
depreciation. Depreciation is provided over the estimated useful lives, ranging
from 5 to 10 years for buildings and improvements and 2 to 8 years for vehicles
and equipment using the straight-line method.
The disposal site is carried at cost. To the extent cost exceeds
estimated net realizable value upon closure of the disposal site, such excess is
amortized over the estimated life of the disposal site based on the ratio of
tons of solid waste placed in the landfill over the estimated total capacity of
the disposal site. Disposal site improvements are capitalized and charged to
operations based on the estimated remaining capacity of the site; operating
costs are expensed as incurred.
Depreciation expense for property and equipment was $2,411,000,
$2,418,000 and $1,862,000, for the years ended December 31, 1996, 1995 and 1994.
Cost in Excess of Net Assets of Acquired Businesses
The cost in excess of net assets of acquired businesses is being
amortized on a straight-line basis over forty years. The carrying value of
intangible assets is periodically reviewed by the Company based on the expected
future undiscounted cash flows of the related business unit.
Investments
The Company accounts for investments in accordance with Statement of
Financial Accounting Standards No. 115 "Accounting for Certain Investments in
Debt and Equity Securities" (SFAS 115). Investments are classified as
available-for-sale or held-to-maturity as applicable. Available-for-sale
securities are recorded at fair value and held-to-maturity investments are
recorded at amortized cost. Discounts are amortized on the effective interest
method over the life of the investment.
Income Taxes
Deferred income tax liabilities and assets are determined using
currently enacted tax rates applicable to the period in which deferred tax
liability or assets are expected to be settled or realized. The deferred tax
liability or asset is determined based on the difference between the financial
statement and tax bases of assets and liabilities. The tax benefits recognized
must be reduced by a valuation allowance to the extent it is more likely than
not the benefits may not be realized.
Earnings Per Common Share
Primary earnings per common share are computed by dividing net
earnings by the weighted average number of common shares and, as appropriate,
dilutive common stock equivalents outstanding for the period. Stock options are
considered to be common stock equivalents.
Fully diluted earnings per common share reflect the maximum dilution
that would have resulted from the exercise of the convertible debentures (see
Note 5). Fully diluted earnings per common share are computed by dividing net
income, after adding back the after-tax interest on the convertible debentures,
by the weighted average number of common shares and all dilutive securities.
In February, 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share" (SFAS
128). SFAS 128 is effective for financial statements issued for periods ending
after December 15, 1997. The Company has determined its earnings per share based
on APB Opinion No. 15 and has not yet determined the impact of implementing SFAS
128.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities (such as
allowance for doubtful accounts, depreciation lives, goodwill, and closure and
post closure reserves) and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could materially differ
from those estimates.
Long-Lived Assets
In 1996, the Company adopted Statement of Financial Accounting
Standards (SFAS) 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of." SFAS 121 requires that long-lived
assets and certain identifiable intangibles to be held and used or disposed of
by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may be recoverable.
The Company determined that no impairment loss needs to be recognized for
applicable assets of continuing operations.
Reclassification
Certain items in prior years' financial statements have been
reclassified to conform with the current year presentation.
2. CLOSURE AND POST-CLOSURE RESERVES
The Company will have material financial obligations with respect to
the closure and post closure of its landfill. Disposal site closure and
post-closure costs, which includes final capping of the site, site inspections,
ground-water monitoring, leachate management, methane gas control and recovery,
and operation and maintenance costs to be incurred during the thirty year
post-closure period, are accrued and charged to expense over the estimated
useful life of the landfill. Requirements for closure and post-closure are
established by Subtitle D of the EPA.
While the precise amount of these future obligations cannot be
determined, it is estimated that the total cost for final closure and
post-closure will approximate $4,200,000 when the landfill reaches its capacity.
These amounts are based on estimates obtained from an independent engineering
firm. Amounts accrued for closure and post-closure costs are $1,787,136 and
$1,511,647 as of December 31, 1996 and 1995, respectively, and are accrued based
on capacity used. Actual, ultimate costs could differ from these estimates.
In February 1996 the Company was granted a modification to its permit
for the Company's landfill by the Georgia Environmental Protection Division
which increases the total capacity of the landfill by 1,467,800 tons of solid
waste. As a result of the capacity increase, the estimated amortization rate of
the disposal site and the estimated accrual rate of closure and post closure
reserves have been adjusted. The 1996 net income and earnings per share were
$430,000 and $0.02 higher as a result of this change in estimate.
3. ACQUISITIONS
During 1996, the Company acquired the entities described below, which
were accounted for by the purchase method of accounting.
(a) In March 1996, the Company acquired all of the outstanding shares of North
Florida Sweeping, Inc. ("NFS"), a street sweeping and solid waste rolloff
collection company located in Jacksonville, Florida. The consideration given of
$1,732,000 consisted of $280,000 of common stock (233,946 shares of the
Company's stock valued at $1.197 per share), cash of $350,000, assumption of NFS
liabilities in the amount of $862,000 and 75,000 common stock warrants that are
exercisable at $1.25 per share. The Company also extended the exercise date for
warrants issued pursuant to that certain warrant agreement with a related party
to February 2, 1998 as consideration for investment advisory services provided
to the Company in connection with the purchase of NFS. The Company assigned a
value of $240,000 to this modification in accordance with Statement of Financial
Accounting Standards No. 123, "Accounting For Stock Based Compensation" (SFAS
123). The excess of the purchase price over the fair value of the assets
acquired was approximately $597,000 and has been recorded as goodwill, which is
being amortized on a straight-line basis over forty years.
(b) In August 1996, the Company acquired all of the outstanding shares of
Spectrum Group, Inc. (d/b/a United Sanitation), a collection recycling and
transfer company located in Ocala, Florida. The purchase price of $11,592,000
was comprised of 2,000,000 shares of common stock valued at $3.125 per share,
cash of $954,000, acquisition costs of $680,000 and assumption of liabilities of
$3,708,000. The excess of the purchase price over the fair value of assets
acquired was approximately $8,217,000,000 and has been recorded as goodwill,
which is being amortized on a straight-line basis over forty years.
(c) In August 1996, the Company acquired certain equipment and accounts
receivable of Standard Disposal Service of Florida, Inc., a collection company
located in Marion County, Florida, for $1,296,000. The purchase price consisted
of $720,000 cash and assumption of $576,000 of debt. The excess of the purchase
price over the fair value of assets acquired was $732,000, which is being
amortized over 40 years.
The Company also had other acquisitions during 1996 which were not
significant.
The purchase prices of all of the Company's acquisitions have been
allocated to the assets purchased and the liabilities assumed based upon the
fair values on the dates of acquisition, as follows:
<TABLE>
<CAPTION>
<S> <C>
Current assets $ 910,000
Property and equipment 4,143,000
Other assets 108,000
Goodwill 9,576,000
Current liabilities (1,217,000)
Long-term liabilities (3,930,000)
--------------------
$ 9,590,000
====================
</TABLE>
The operating results of these business acquisitions have been
included in the consolidated statement of income from the dates of acquisition.
The following unaudited pro forma information presents a summary of
consolidated results of operations of the Company and the acquired businesses as
if the acquisitions had occurred January 1, 1995.
<TABLE>
<CAPTION>
1996 1995
----- ----
<S> <C> <C>
Net sales $ 18,433,000 $ 16,272,000
Net income 1,752,000 1,388,000
Earnings per common share $ .08 $ .07
</TABLE>
These unaudited pro forma results have been prepared for comparative
purposes only and include certain adjustments, such as additional depreciation
expense as a result of a step-up in the basis of fixed assets, additional
amortization expense for goodwill, decrease in disposal charges for disposing
waste at the Company's landfill and increase in officers' salaries of the
acquired business that have become employees of the Company. These unaudited pro
forma results are not necessarily indicative of what the actual consolidated
results of operations might have been if the acquisitions had been effective at
January 1, 1995.
4. STOCKHOLDERS' EQUITY
The Company is prohibited, under the terms of subordinated debentures
(see Note 5), until September 1997 (with certain limited exceptions), from
paying dividends on its common stock if the aggregate amount of all such
payments from and after March 5, 1992 exceeds (i) 50% of the net after tax
income of the Company, plus (ii) 100% of any amounts received by the Company
from the issuance of its equity securities or certain subordinated debt
securities, less (iii) 100% of all losses.
5. LONG-TERM DEBT
Long-term debt at December 31, 1996 and 1995 consists of the
following:
<TABLE>
<CAPTION>
1996 1995
----- ----
<S> <C> <C> <C>
8.5% convertible subordinated debentures, due 1997 $ 3,884,265 $ 3,884,265
Notes payable to Banks at fixed interest rates from 7.5% to 10.2% and
variable interest rates ranging from prime plus .5% to prime plus 2%
(weighted average interest rate of 9.6% as of December 31, 1996)
through 2010, collateralized by vehicle,
equipment and other assets 1,905,011 249,470
Note payable to an individual due 2000,
collateralized by mortgage on land 20,059 20,059
Uncollateralized notes payable to individuals at fixed interest rates
ranging from 8% to 9% (weighted
average interest rate of 8.5%) through 2005 1,209,394 -
Notes payable to finance institutions at fixed interest rates ranging
from 8% to 10% (weighted average interest rate of 8.2%) through 2000,
collateralized
by equipment 15,628 -
Notes payable to third party, at a fixed interest rate
of 10%, through 2000, collateralized by equipment 58,169 -
Capitalized lease obligations at fixed interest rates ranging from 7.2%
to 13.4% (weighted average interest rate of 9.9) through 2000,
collateralized by equipment and vehicles 102,735 91,675
-------------- ---------------
7,195,261 4,245,469
Less current portion (4,672,950) (151,019)
--------------- ---------------
$ 2,522,311 $ 4,094,450
============== ===============
</TABLE>
Aggregate maturities of long-term debt including capital leases at
December 31, 1996 were as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
<S> <C> <C>
1997 $ 4,672,950
1998 694,454
1999 436,512
2000 318,826
2001 203,698
Thereafter 868,821
-------------------
$ 7,195,261
===================
</TABLE>
On March 5, 1992, the Company completed a private placement of
$3,000,000 in Convertible Subordinated Debentures. The Debentures have a term of
five years and bear interest at the rate of 8.5% per annum. The interest is
payable in either cash or may be added to the principal amount of the debentures
at the Company's option. Through the first quarter of 1995 the Company added
accrued interest to the principal. During the subsequent quarters of 1995 and
all of 1996 the Company elected to pay interest currently. In March 1997, the
Company and holder of the Debentures agreed to extend the due date of the
Debentures to September, 1997. The Debentures are convertible into the Company's
common stock at $1.40 per share. In connection with the issuance of the
Debentures, the Company is obligated to subordinate certain subsequent issuances
of debt to the rights of the holder of the Debentures, is prohibited from
increasing the size of its Board of Directors, is subject to certain prepayment
and conversion obligations under the terms of the Debentures, and is subject to
certain restrictions with respect to the declaration and payment of dividends.
6. ACCRUED ROYALTIES
Royalty obligations, payable to the former stockholder of an acquired
company, amounting to $962,061 and $1,207,591 at December 31, 1996 and 1995,
respectively, are included as long-term liabilities. The current portion of such
obligations is not currently estimatable. The Company pays the former
stockholder $1 per ton of waste disposed in the Company's landfill.
7. MANAGEMENT OPTIONS AND COMMON STOCK WARRANTS
In 1991, the Company granted to certain key management personnel
options to acquire an aggregate of 1,854,945 shares of common stock at a
purchase prices ranging from $.50 to $1.37 per share. The Company has also
adopted a Stock Option Plan, which provided for the granting of 803,000 shares
to key employees. All options must be exercised on or prior to the tenth
anniversary of the grant. The options vest to key management and employees over
a three year period based upon length of service with the Company.
A summary of the status of the Company's options outstanding as of
December 31, 1996, 1995 and 1994 and changes during the periods ending on those
dates are presented below:
<TABLE>
<CAPTION>
1996 1995 1994
------------------------- ------------------------- ------------------------
Weighted- Weighted- Weighted-
Average Average Average
Shares Exercise Shares Exercise Shares Exercise
(in 000) Price (in 000) Price (in 000) Price
-------- ------- -------- ------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of period 1,597 $0.53 1,535 $0.50 2,335 $0.64
Granted 465 2.50 62 1.19 210 0.50
Exercised 132 0.54 - - -
Cancelled 759 0.50 - - 1,010 0.83
--------- --------- -----
Outstanding at
end of period 1,171 $ 1.32 1,597 $ 0.53 1,535 $ 0.50
======== ======== ========= ======== ======== ========
Options exercisable
at end of period 789 $ 0.73 753 $ 0.52 680 $ 0.50
========= ======= ========= ======== ======== ========
</TABLE>
The following table summarizes information about fixed stock options
outstanding at December 31, 1996:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------- ----------------------------
Weighted- Weighted Weighted
Remaining Average Average
Range of Shares Contractual Exercise Shares Exercise
Exercise Price (in 000) Life Price (in 000) Price
-------------- -------- ------ ------- -------- ------
<C> <C> <C> <C> <C> <C>
$.50 656 5.0 years $ 0.50 656 $ 0.50
$1.19 to $1.75 57 9.0 years 1.26 33 1.23
$2.00 to $2.75 358 9.5 years 2.23 100 2.00
$3.50 100 9.0 years 3.50 -
------ ------------- ------- ----- --------
Total 1,171 7.0 years $ 1.32 789 $ 0.73
===== ====
</TABLE>
The Company applies APB Opinion 25 and related interpretations in
accounting for the option plans. Accordingly, no compensation cost has been
recognized for the two option plans. Had compensation cost been determined based
on the estimated fair value at the grant rates for awards under those plans
since January 1, 1995, consistent with the method of SFAS 123, the Company's net
income and earnings per share for the years ended December 31, 1996 and 1995
would have been the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1996 1995
----- ----
Net income:
<S> <C> <C>
As reported $ 1,707,505 $ 1,462,310
Pro forma 1,465,472 1,449,431
Earnings per share:
As reported .08 .07
Pro forma .07 .07
</TABLE>
For purposes of computing the pro forma amounts above, the
Black-Scholes option-pricing model was used with the following assumptions:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Estimated lives of plan options 2-5 years 3 years
Risk-free interest rates 6.0% 5.38%
Expected volatility 80% 80%
Dividend yield None None
</TABLE>
The weighted-average estimated fair value of options granted during
1996 and 1995 was $1.12 and $0.65, respectively.
There are options granted to an executive pursuant to which the
Company will make an interest free loan of $200,000 to the executive in the
event options are exercised.
In addition, the Company has issued warrants to acquire up to
2,000,000 shares of the Company's common stock at $.55 per share through
February 1998 to a related party for investment advisory services rendered to
the Company. The above warrants are subject to anti-dilution rights. The Company
also issued warrants to acquire up to 75,000 shares of the Company's common
stock at $1.25 per share through March 2001 to the sellers of North Florida
Sweeping. All of the above warrants are adjustable for stock splits, stock
dividends and similar events.
8. LEASES
The Company leases its office facilities and certain equipment under
various operating lease agreements some of which contain renewal options. Future
minimum commitments at December 31, 1996 under various noncancelable operating
leases are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
<S> <C> <C>
1997 $ 537,088
1998 490,681
1999 351,723
2000 319,744
2001 311,810
Thereafter 3,153,500
--------------
Total minimum lease payments $ 5,164,546
==============
</TABLE>
Rental expense for all operating leases amounted to $148,447, $243,359
and $459,594 for the years ended December 31, 1996, 1995, and 1994,
respectively.
9. INVESTMENTS
Investments at December 31, 1995 were maintained in a trust fund to
pay for closure and post closure care costs associated with its landfill
pursuant to the laws of the State of Georgia. During 1995, the Company obtained
a surety bond for the closure/post closure care costs which required a
collateral deposit of $300,000. The Company terminated the trust fund in 1996.
Investments at December 31, 1996 and 1995 consists of the following:
<TABLE>
<CAPTION>
1996 1995
------------------------- -----------------------
Cost Fair Value Cost Fair Value
----------- ------------ ------- ------------
Available-for-sale investments
<S> <C> <C> <C> <C>
U.S. Government securities $ - $ - $ 40,038 $ 40,688
Corporate bonds - - 123,170 124,800
Equity funds - - 138,396 204,533
Cash equivalents - - 316,885 315,514
----------- ----------- ----------- -----------
Total Available-for-sale investments $ - $ - $618,489 $685,535
============ =========== =========== ========
Held-to-maturity investments
U.S. Government securities $ 318,000 $271,560 $300,000 $300,000
=========== =========== =========== ===========
</TABLE>
The U.S. Government securities held at December 31, 1996 mature in
2016.
Gross unrealized holding gains and losses at December 31, 1996 and
1995, were $0 and $67,046, respectively. Gross realized gains from the sale of
securities classified as available for sale for the years ended December 31,
1996, 1995 and 1994, were $82,913, $12,149 and $9,802, respectively. For the
purpose of determining gross realized gains and losses, the cost of securities
sold is based upon specific identification. During 1996 the Company liquidated
its available-for-sale portfolio for $701,000.
10. INCOME TAXES
The provision (benefit) for income taxes for 1996, 1995 and 1994
consists of the following:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
Current:
<S> <C> <C> <C>
Federal $ 972,000 $ 130,000 $ -
State 267,000 94,000 90,000
-------------- -------------- ---------------
1,239,000 224,000 90,000
-------------- -------------- ---------------
Deferred:
Federal 32,000 293,000 (266,000)
State 4,000 30,000 (30,000)
-------------- -------------- ---------------
36,000 323,000 (296,000)
-------------- -------------- ---------------
Income tax provision (benefit) $ 1,275,000 $ 547,000 $ (206,000)
============== ============== ================
</TABLE>
The difference between the actual income tax provision and the tax
provision computed by applying the statutory federal income tax rate to income
before taxes is attributable to the following:
<TABLE>
<CAPTION>
1996 1995 1994
-------------------------- ----------------------- ------------------------
AMOUNT PERCENTAGE AMOUNT PERCENTAGE AMOUNT PERCENTAGE
<S> <C> <C> <C> <C> <C>
Tax computed using federal
statutory rate $ 1,015,000 34 $703,000 35 $ 344,000 35
Utilization of operating
loss carryforward - - (195,000) (10) (640,000) (65)
State income taxes, net of
federal income tax effect 128,000 4 80,000 4 90,000 9
Other 132,000 5 (41,000) (2) - -
------------ -------- ---------- ------- ---------- -------
$ 1,275,000 43 $ 547,000 27 $ (206,000) (21)
============ ======== ========== ======= =========== =======
</TABLE>
The components of deferred tax assets and liabilities, as of December
31, 1996 and 1995, were as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
Current deferred tax assets:
<S> <C> <C>
Alternative minimum tax credit $ - $ 128,000
Reserve for bad debts 64,000 6,000
Deferred revenue 157,000 -
------------- ----------------
Total current deferred tax assets 221,000 134,000
============== ===============
Long-term net deferred tax (liabilities) assets:
Depreciation (912,000) (161,000)
Amortization of intangible assets (283,000) -
Net operating loss carryforward 84,000 -
Closure reserves 361,000 -
-------------- ---------------
Total long-term net deferred tax liabilities $ (750,000) $ (161,000)
================ ================
</TABLE>
The Company has recorded a current deferred tax asset of $221,000 for
which realization is dependent on generating sufficient taxable income. Although
realization is not assured, management believes it is more likely than not that
all of the deferred tax asset will be realized.
During the third quarter of 1995 the Company elected to adopt Section
468 of the Internal Revenue Code which allows current deductions for future
closure costs with respect to the Company's landfill (subject to limitations).
These deductions were previously deferred for income tax purposes while being
expensed currently for financial statement purposes.
12. FINANCIAL INSTRUMENTS
Financial instruments which potentially subject the Company to
concentrations of credit risk are cash, investments and accounts receivable. The
Company places its cash investments with what management believes to be
high-credit-quality financial institutions and currently invests primarily in
U.S. Treasury mutual funds. Accounts receivable represents amounts from
commercial and residential customers in southern Georgia and northern Florida.
At December 31, 1996, in management's opinion, the Company had no
significant concentration of credit risk.
Fair values of financial instruments is as follows at December 31,
1996 and 1995:
<TABLE>
<CAPTION>
Carrying Value Fair Value
----------------------------- ------------------------------
1996 1995 1996 1995
------------- -------------- ------------- ---------------
<S> <C> <C> <C> <C>
Cash and cash equivalents $3,058,067 $ 3,985,459 $ 3,058,067 $3,985,459
Convertible debentures $3,884,265 $ 3,884,265 $ 5,910,000 $3,580,000
Other long-term debt $3,310,996 $ 361,204 $ 2,469,000 $ 296,000
Accrued royalties $1,207,591 $ 962,061 $ 771,000 $ 952,000
</TABLE>
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is practicable to
estimate that value:
Cash and cash equivalents. The carrying amount approximates fair value
because of the short maturity of those instruments.
Convertible debentures. The fair value is estimated based on the
market value of the stock if converted. If the stock price is less than the
conversion price, then the fair value of the instrument is estimated as the
present value of the debt instrument.
Other long-term debt. The fair value is estimated as the net present
value of the future cash flows over the term of the loans.
Accrued royalties. The fair value is estimated at the net present
value of expected royalty payments.
13. RELATED PARTY TRANSACTIONS
During 1996 the Company became party to an operating lease of office
and warehouse space with a Company controlled by a director and an officer of
the Company. The non-cancelable lease expires in 2016 and is adjusted for
inflation on an annual basis. Management believes the rent paid for the office
and warehouse space reasonably approximates fair market cost. The Company
incurred rent expense of approximately $86,000 under this lease during 1996.
14. SUPPLEMENTAL CASH FLOW INFORMATION:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash paid for interest $ 434,000 $ 202,000 $ 48,000
Cash paid for taxes 557,000 62,000 -
Significant non-cash transactions:
- Stock issued for acquired companies 6,530,000 - -
- Debt assumed from acquired companies 3,504,686 - -
- Extension of warrants to related party 400,000 - -
- Deferred taxes established on
acquired companies 466,000 - -
- Purchase of equipment financed by
capital lease - 104,000 -
- Purchase of vehicles and equipment
financed by notes payable 265,000 - 140,000
- Purchased land in exchange for a
note payable - - 24,000
- Capital expenditures included in
year-end accounts payable but not
yet paid 285,000 - 566,000
- Retirement of common stock held in
escrow - 399,000
</TABLE>
15. COMMITMENTS
The Company has entered into employment agreements with certain of its
executive officers and directors. The agreements contain non-compete clauses
ranging from two to five years after commencement of the executive's employment.
In consideration for these clauses, the Company has agreed to pay severance pay
based on various formulas and to pay premiums for the continuation of health
insurance coverage for six months following termination.
16. SUBSEQUENT EVENTS
In January 1997, the Company executed an agreement to purchase the
solid waste collection assets of Air-Sweep-A-Lot (ASAL) for approximately
$1,000,000, consisting of cash, a promissory note, and assumption of debt. ASAL
is a solid waste collection and parking lot sweeping company based in Valdosta,
Georgia. The acquisition will be accounted for as a purchase. The excess of the
purchase price over the net assets acquired, which is expected to be
approximately $350,000, will be amortized over a period not exceeding 40 years.
The operations of ASAL are not material to the Company's consolidated
operations.
17. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31 SEPTEMBER 30 JUNE 30 MARCH 31
----------- ------------ ------- --------
1996
<S> <C> <C> <C> <C>
Net revenues $ 4,687,918 $ 3,776,099 $ 2,981,818 $ 2,256,873
Income from operations 342,284 771,021 842,390 754,725
Net income 230,117 477,063 573,284 427,041
Net income per share $0.01 $0.02 $0.03 $0.02
1995
Net revenues $ 2,086,794 $ 2,176,717 $ 2,334,093 $ 2,334,924
Income from operations 485,498 482,637 582,339 644,427
Net income 403,620 475,822 281,670 301,198
Net income per share $0.02 $0.02 $0.01 $0.02
</TABLE>
As described in Note 3, the Company had several acquisitions during 1996 causing
net revenues, income from operations and net income to increase.
<PAGE>
<TABLE>
GEOWASTE INCORPORATED AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<CAPTION>
Additions
Balance at Charged To
Beginning of Costs and Deductions Other Balance At
Description Year Expenses (1) (2) End of Year
----------- ---- -------- ----- ----- -----------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1996:
Allowance for doubtful
accounts deducted from
asset account $17,897 $105,096 $(22,993) $24,000 $124,000
======= ======== ========= ======= ========
Year ended December 31, 1995:
Allowance for doubtful
accounts deducted from
asset account $16,356 $28,400 $(26,859) $ 0 $17,897
======= ======= ========= =========== =======
Year ended December 31, 1994:
Allowance for doubtful
accounts deducted from
asset account $17,064 $5,500 $(6,208) $ 0 $16,356
======= ======= ========= =========== ========
</TABLE>
- ---------------------
(1) Uncollectible accounts written off, net of recoveries.
(2) Acquired from United Sanitation in acquisition.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf of the undersigned, thereunto duly authorized in Jacksonville,
Florida on the 28th day of March, 1997.
GEOWASTE INCORPORATED
By: /s/ Amy C. MacF. Burbott
--------------------------
Amy C. MacF. Burbott
President, Chief Executive Officer & Director
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
Signature Title Date
/s/ Amy C. MacF. Burbott
- ---------------------------- President, Chief Executive March 28, 1997
Amy C.MacF. Burbott Officer & Director
(Principal Executive Officer)
/s/ Harve A. Ferrill Chairman of the Board & Director March 26, 1997
- ----------------------------
Harve A. Ferrill
/s/ Raymond F. Chase
- ---------------------------- Vice President, March 28, 1997
Raymond F. Chase Chief Financial Officer,
Treasurer, & Secretary
(Principal Financial Officer)
/s/ Robert J. Cresci Director March 26, 1997
- ----------------------------
Robert J. Cresci
/s/ Steven M. Engel Director March 27, 1997
- ----------------------------
Steven M. Engel
/s/ Michael D. Paglia Vice President & Director March 26, 1997
- ----------------------------
Michael D. Paglia
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
2.1 Agreement and Plan of Reorganization, dated August 2, 1991, by and
between GeoWaste Incorporated, Utah Acquisition Subsidiary, Inc.,
Equivest Waste Solutions, Inc., Frederick J. Iseman and James Swistock
(Incorporated by reference from Exhibit 2(A) to the Current Report on
Form 8-K filed August 19, 1991 (File No. 0-9278)).
2.2 Agreement and Plan of Merger dated August 12, 1996, among GeoWaste
Incorporated, Spectrum Acquisition Corp., Spectrum Group, Inc., d/b/a
United Sanitation, Ocala Chemical, Mills Disposal and John A. Paglia
and Michael D. Paglia (Incorporated by reference from Exhibit 2.2 to
the Current Report on Form 8-K filed August 27, 1996 (File No.
0-9278)).
3.1 Certificate of Incorporation of GeoWaste Incorporated, as amended and
restated (Incorporated by reference from Exhibit A to the Proxy filed
November 25, 1991 (File No. 0-9278)).
3.2 Bylaws of GeoWaste Incorporated, as amended (Incorporated by reference
from Exhibit 3(b) to the Annual Report on Form 10-K for the year ended
December 31, 1987 (File No. 0-9278)).
3.3 Amendment to Amended and Restated Certificate of Incorporation of
GeoWaste Incorporated (Incorporated by reference from Exhibit 3.4 to
the Annual Report on Form 10-K for the year ended December 31, 1992
(File No. 0-9278)).
4.1 Purchase Agreement, dated March 5, 1992, between GeoWaste
Incorporated, the Delaware State Employees' Retirement Fund and the
Trust for Defined Benefit Plan of ICI American Holdings Inc.
(Incorporated by reference from Exhibit 4.1 to the Current Report on
Form 8-K filed March 13, 1992 (File No. 0-9278)).
4.2 Form of Debenture (Incorporated by reference from Exhibit 4.2 to the
Current Report on Form 8-K filed March 13, 1992 (File No. 0-9278)).
4.3 Registration Rights Agreement, dated March 5, 1992, by and between
GeoWaste Incorporated, the Delaware State Employees' Retirement Fund
and the Trust for Defined Benefit Plan of ICI American Holdings Inc.
(Incorporated by reference from Exhibit 4.3 to the Current Report on
Form 8-K filed March 13, 1992 (File No. 0-9278)).
4.4 Registration Rights Agreement, dated August 2, 1991, by and between
GeoWaste Incorporated and each of the entities listed on Exhibit A
thereto (Incorporated by reference from Exhibit 4(D) to the Current
Report on Form 8-K filed August 19, 1991 (File No. 0-9278)).
4.5 First Escrow Agreement, dated August 2, 1991, by and between GeoWaste
Incorporated, Frederick J. Iseman, James Swistock, Matthew Fulton,
Brian Russell, James R. Jones, Paul Thomas Cohen, William vanden
Heuvel, Balis & Zorn, Inc. and IBJ Schroder Bank & Trust Company
(Incorporated by reference from Exhibit 4(B) to the Current Report on
Form 8-K filed August 19, 1991 (File No. 0-9278)).
4.6 Second Escrow Agreement, dated August 2, 1991, by and between GeoWaste
Incorporated, the parties listed on Schedule A thereto, Kurt Wilkening
and IBJ Schroder Bank & Trust Company (Incorporated by reference from
Exhibit 4(C) to the Current Report on Form 8-K filed August 19, 1991
(File No. 0-9278)).
4.7 Equivest First Convertible Debt Exchange Agreement, dated August 2,
1991, by and between GeoWaste Incorporated the parties listed on
Schedule A thereto (Incorporated by reference from Exhibit 2(B) to the
Current Report on Form 8-K filed August 19, 1991 (File No. 0-9278)).
4.8 Equivest Second Convertible Debt Exchange Agreement, dated August 2,
1991, by and between GeoWaste Incorporated the parties listed on
Schedule A thereto (Incorporated by reference from Exhibit 2(C) to the
Current Report on Form 8-K filed August 19, 1991 (File No. 0-9278)).
4.9 Stockholders' Agreement, dated August 2, 1991, by and between GeoWaste
Incorporated, Advance Ross Corporation, Allen & Company Incorporated,
Frederick J. Iseman, Harve Ferrill, Gian Caterine, Kurt Wilkening,
their persons or entities listed on Schedule A thereto and the persons
or entities listed on Schedule B thereto (Incorporated by reference
from Exhibit 4(A) to the Current Report on Form 8-K filed August 19,
1991 (File No. 0-9278)).
4.10 Voting Agreement, dated March 5 ,1992, by and between GeoWaste
Incorporated, the Delaware State Employees' Retirement Fund and the
Trust for Defined Benefit Plan of ICI American Holdings Inc.,
Frederick J. Iseman, Gian Caterine, Amy C. MacF. Burbott, Harve
Ferrill, James Swistock, Advance Ross Corporation and Allen & Company
Incorporated (Incorporated by reference from Exhibit 4.4 to the
Current Report on Form 8-K filed March 13, 1992 (File No. 0-9278)).
4.11 Voting Agreement dated as of August 12, 1996, among John A. Paglia,
Michael D. Paglia, Advance Ross Corporation, Allen & Company
Incorporated, Allen Value Partners L.P. and Allen Value Limited
Incorporated (Incorporated by reference from Exhibit 4.11 to the
Current Report on Form 8-K filed August 27, 1996 (File No. 0-9278)).
10.1 Warrant Purchase Agreement by and between GeoWaste Incorporated and
Allen & Company Incorporated (Incorporated by reference from Exhibit
10.1 to the Annual Report on Form 10-K for the year ended December 31,
1991 (File No. 0-9278)).
10.2 Form of Employment Agreement, dated as of August 1, 1991, by and
between GeoWaste Incorporated and Amy C. MacF. Burbott (Incorporated
by reference from Exhibit 10.1 to the Quarterly Report on Form 10-Q
for the period ended September 30, 1992 (File No. 0-9278)).
10.3 Form of Employment Agreement dated as of June 1, 1992, by and between
GeoWaste Incorporated and Richard J. Sherman (Incorporated by
reference from Exhibit 10.2 to the Quarterly Report on Form 10-Q for
the period ended September 20, 1992 (File No. 0-9278)).
10.4 Form of Employment Agreement, dated as of August 1, 1991, by and
between GeoWaste Incorporated and James W. Swistock (Incorporated by
reference from Exhibit 10.4 to the Annual Report on Form 10-K for the
year ended December 31, 1992 (File No. 0-9278)).
10.5 Form of Severance Agreement, dated as of December 21, 1995, by and
between GeoWaste Incorporated and Kevin R. Kohn (Incorporated by
reference from Exhibit 10.5 to the Annual Report on Form 10-K for the
year ended December 31, 1995 (File No. 0-9278)).
10.6 Form of Severance Agreement, dated as of December 21, 1995, by and
between GeoWaste Incorporated and Raymond F. Chase (Incorporated by
reference from Exhibit 10.6 to the Annual Report on Form 10-K for the
year ended December 31, 1995 (File No. 0-9278)).
10.7 Form of Consulting Agreement dated, August 31, 1995, by and between
GeoWaste Incorporated and Amy C. MacF. Burbott (Incorporated by
reference from Exhibit 10.7 to the Annual Report on Form 10-K for the
year ended December 31, 1995 (File No. 0-9278)).
10.8 Form of Amendment, dated as of January 9, 1995, to Form of Employment
Agreement, dated as of August 1, 1991, by and between GeoWaste
Incorporated and Amy C. MacF. Burbott (Incorporated by reference from
Exhibit 10.8 to the Annual Report on Form 10-K for the year ended
December 31, 1995 (File No. 0-9278)).
10.9 Form of Letter Agreement, dated as of April 23, 1996, by and between
GeoWaste Incorporated and Amy C. MacF. Burbott.
10.10 Form of Employment Agreement, dated as of August 12, 1996, by and
between GeoWaste Incorporated and John A. Paglia.
10.11 Form of Employment Agreement, dated as of August 12, 1996, by and
between GeoWaste Incorporated and Michael D. Paglia.
11.1 Computation of Net Income Per Share for the year ended December 31,
1996.
11.2 Computation of Net Income Per Share for the year ended December 31,
1995.
11.3 Computation of Net Income Per Share for the year ended December 31,
1994.
21 Subsidiaries of the Registrant.
27 Financial Data Schedule.
EXHIBIT 10.9
April 23, 1996
Amy C. MacF. Burbott
5 Woodholm Road
Manchester-by-the-Sea, MA 01944-1041
Re: Employment
Amy:
This letter is to confirm our understanding and agreement regarding your
employment by GeoWaste Incorporated ("Company"). Upon the basis of terms and
conditions to be set forth in a written severance agreement between you and the
Company, we are pleased to confirm the following:
Position: President and Chief Executive Officer
Salary: $150,000 per year, increasing to $175,000 per year upon the
closing of acquisitions adding not less than $8 million of
additional annualized revenue to the Company
Bonus: To be established
Options: 400,000 shares, granted pursuant to the Company's 1992 Stock
Option Plan, with a 10 year term, as follows:
SHARES VESTING DATE EXERCISE PRICE
100,000 4-23-96 $2.00 (avg. of today's bid & asked)
100,000 4-23-97 $2.00
100,000 4-23-98 $2.75
100,000 4-23-99 $3.50
Severance: One-half of your annual salary rate then in effect and payment
of the premium for any continuation of health and life
insurance coverage during the six (6) month period following
your termination.
Sincerely,
GEOWASTE INCORPORATED
/s/ Harve A. Ferril
- ---------------------
Chairman of the Board
/s/ Robert J. Cresci
- --------------------
Director and Member, Stock Option Committee
/s/ Frederick J. Iseman
- -----------------------
Director and Member, Stock Option Committee
EXHIBIT 10.10
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as of the
12th day of August, 1996 between GeoWaste Incorporated , a Delaware corporation
("GeoWaste"), and John A. Paglia ("you"). On the terms and conditions
hereinafter set forth, GeoWaste desires to employ Employee and Employee desires
to accept such employment.
1. Term. The term of your employment hereunder shall be for a period beginning
on the date hereof and ending forty-eight (48) months thereafter ("Term of
Employment").
2. Duties. The general scope of your employment shall be to serve as a Vice
President of GeoWaste and manage GeoWaste's collection in the State of
Florida and to perform such duties in accordance therewith as GeoWaste may
request.
3. Good Faith. During the Term of Employment, you shall devote your full time
and use your best efforts to advance the business and welfare of GeoWaste,
its subsidiaries and affiliates, and to discharge any other duties assigned
to you hereafter. You shall not intentionally take any action against the
best interests of GeoWaste or of any subsidiary or affiliate of GeoWaste.
4. Compensation, Benefits & Expenses. GeoWaste agrees:
(a) to pay or cause to be paid to you for your services hereunder a salary
at the annual rates set forth below, so long as you continue in the
employment of GeoWaste hereunder, payable in installments at least as
frequently as monthly and subject to all applicable taxes and payroll
deductions.
Payroll Period Annual Salary
-------------- -------------
August 1, 1996 - July 31, 1997 $100,000
August 1, 1997 - July 31, 1998 $104,000
August 1, 1998 - July 31, 1999 $108,250
August 1, 1999 - July 31, 2000 $112,500
(b) to provide you with a monthly car allowance of $600;
(c) to allow you to participate in all bonus, employee benefit, pension,
life insurance, medical reimbursement, vacation and disability income
plans and/or programs sponsored by GeoWaste and available to other
similarly situated management employees of GeoWaste in the
Southeastern United States; and
(d) to reimburse reasonable travel and other business expenses incurred by
you in the performance of your duties under this Agreement.
5. Relocation. During the Term of Employment GeoWaste agrees not to require
the you to relocate from the Ocala, Florida metropolitan area, provided,
however, that you recognize that in order to fulfill your duties hereunder,
business travel will be required on behalf of GeoWaste.
6. Termination. During the Term of Employment the Company may terminate your
Term of Employment at any time, with or without cause, as follows:
(a) immediately upon your death;
(b) if you, for any reason, become unable to carry out all or
substantially all of your duties and remain so incapacitated for a
period of three months or more; or
(c) for Cause. The term "Cause" shall mean that:
(i) you use for personal gain or disclose to an unauthorized person
any confidential or proprietary information or trade secrets of
GeoWaste or its subsidiaries;
(ii) you act in a manner which materially and detrimentally affects
the Company or its subsidiaries;
(iiii) your conduct violates any applicable civil or criminal law or
violates any rules of ethical corporate conduct of or fiduciary
obligation to the Company or its subsidiaries; or
(iv) you fail to comply with the terms of this Agreement.
7. Severance Pay. In the event that the Company terminates your employment
without Cause during the Term of Employment:
(a) the Company (at its election) will pay you in either a lump sum or in
monthly installments an amount equal to the lesser of:
(i) 18 times $8,350; or
(ii) 48 times the number of months worked prior to termination times
$8,350;
(b) for the commensurate period following your termination date, during
which monthly severance payments are being made under (a), (b) or (c)
above, as the case may be, the Company will pay the premium for any
continuation health insurance coverage during said period, however,
this is without regard to the employee's election for COBRA benefits
after the payout of the monthly severance and monthly health coverage
hereinabove provided for.
8. Assignment. GeoWaste may direct your duties hereunder be performed for and
your compensation be paid by, and GeoWaste may assign this Agreement in its
entirety to, one or more of GeoWaste's wholly-owned subsidiaries. If
GeoWaste is consolidated with or merged into, or if all or a part of its
assets are transferred to, another corporation carrying on all or a
substantial part of the business of GeoWaste, this Agreement may be
assigned to such a successor corporation unless terminated by you pursuant
to Section 6 above, however no such assignment shall relieve GeoWaste from
any obligations hereunder.
9. Non-Competition and Non-Solicitation Covenants. You hereby agree that for
the five (5) year period commencing the date hereof, you will not, without
the prior written consent of GeoWaste's Board of Directors:
(a) own, manage, operate, join, be employed in an executive or managerial
capacity by, control or otherwise render, directly or indirectly, any
executive or managerial Services to any person or organization which
is engaged in the solid waste management business in competition with
GeoWaste within a 75-mile territorial radius from any facility owned
or operated by GeoWaste.
For purposes of this Section 9(a), the term "Services" shall mean any services
of a business, commercial or professional nature and shall include, without
limitation, the following: engaging in, working with, having an interest in,
acting as an officer or director or consultant to, advising, lending money to,
guaranteeing the debts or obligations of, or permitting one's name or any part
thereof to be used in connection with an enterprise or endeavor that conducts a
business of the type and in the area referred to above, either individually, in
partnership, or in conjunction with any person or persons, firm, association,
company or corporation, whether as principal, agent, five percent or more
shareholder, executive, or in any other similar manner whatsoever; provided,
however, that you may own less than five percent (5%) of the outstanding capital
stock of any publicly-held corporation; and
(b) render any services or advice to, solicit, service the account of, or
otherwise engage in any business relationship (as an employee or
otherwise) with any Customer (as defined below) of GeoWaste in
connection with the solid waste management business, or solicit or
hire any person in connection with the solid waste management business
who was an employee of GeoWaste at any time within the five (5) year
period commencing the date hereof.
For purposes of this Section 9(b), a "Customer" means any corporation,
association, partnership, organization, business, individual or governmental
agency (a "Person") within a 75-mile territorial radius from any facility owned
or operated by GeoWaste that is subject to a contract with GeoWaste whereby
GeoWaste provides solid waste management services to such Customer, or is
otherwise actively involved in a business relationship with GeoWaste in
connection with such solid waste management services, including, without
limitation, any person that GeoWaste is actively soliciting at any time within
the one (1) year period ending on the date your employment terminates.
You acknowledge that:
(i) GeoWaste will suffer substantial damages not readily ascertainable or
compensable in terms of money in the event of the breach of any of his
obligations under this Section 9. You therefore agree that GeoWaste
will be entitled (without limitation or any other rights or remedies
otherwise available to GeoWaste) to obtain an injunction from any
court of competent jurisdiction prohibiting the continuance or
recurrence of any such breach of this Section 9. In the event that at
the time of the enforcement of any provision of Section 9, the stated
period, scope or area is held to be unreasonable, the parties agree
that the maximum period, scope or area reasonable under the
circumstances will be substituted for the stated period, scope or
area; and
(ii) the running of each of the covenants in this Section 9 will be tolled
and suspended for such period of time as you are in violation of the
particular covenant, but none of the covenants will be so tolled and
suspended for longer than one hundred eighty (180) days in the
aggregate as to that covenant.
10. Confidential Information. You understand and acknowledge that:
(a) in order to enable you to properly perform your duties, the Company
has entrusted and will continue to entrust you with trade secrets and
confidential information, including, without limitation, trade secrets
and confidential information relating to merchandising methods,
engineering and processing methods, accounting or financial methods,
processes, strategies and technique, know-how, pricing policies,
inventory, market studies and strategy, customer lists, special needs
and characteristics of the Company's customers, debt and equity
financing sources, scientific, technical and management information
and other aspects of the Company's business ("Confidential
Information"); and
(b) the development or acquisition of this Confidential Information is
critical to the success and survival of the Company and the disclosure
or use of this Confidential Information would cause the Company
irreparable harm and that you are fully aware of the Company's need to
protect this Confidential Information.
Accordingly, you hereby agree that, during the Term of Employment and thereafter
as to trade secrets, and during the Term of Employment and thereafter until the
end of the one (1) year period following your termination of employment, as to
other Confidential Information, you will not disclose to third persons any
Confidential Information of the Company, its officers, directors, agents or
representatives, except to the extent that such Confidential Information:
(i) is authorized in writing by the Company to be disclosed;
(ii) was in or has become part of the public domain (otherwise than through
your breach hereof);
(iii) was known to the recipient prior to the disclosure;
(iv) was known to you prior to performing services for the Company or any
predecessor company; or
(v) is required to be disclosed by a court or governmental agency and, in
this regard, you will execute such additional documents as the Company
may reasonably require to protect the confidentiality of the
Confidential Information required to be disclosed.
11. Survival. The provisions of paragraphs 9 and 10 hereof shall survive the
termination of your Term of Employment.
12. Severability. The provisions of this Agreement shall be deemed severable
and the invalidity or unenforceability of any provision shall not affect
the validity and enforceability of the other provisions hereof.
13. Governing Law and Venue. This Agreement shall be governed by and construed
in accordance with the laws of the State of Florida applicable to contracts
made and to be performed therein. The venue of any proceeding regarding
this Agreement shall be Marion County, Florida.
14. Notices. Any notice, request, information or other document to be given
hereunder to either of the parties by the other party shall be in writing
and hand delivered or sent by certified mail, postage prepaid, as follows:
(a) if to you: John A. Paglia
2272 Laurel Run Drive
Ocala, FL 34471
(b) if to the GeoWaste: GeoWaste Incorporated
Suite 208
24 Cathedral Place
St. Augustine, FL 32084
Any party may change the address to which notices hereunder are to be sent to it
by giving written notice of such change of address as herein provided. Any
notice or communication shall be deemed to have been given as of the date so
delivered or mailed.
15. Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original.
16. Modification. The parties hereto may amend, modify and supplement this
Agreement in such manner as may be agreed upon by them in writing.
17. Entire Agreement. This Agreement contains the entire agreement of the
parties hereto with respect to the matters contemplated herein, and
supersedes all prior understandings and agreements of the parties with
respect to the subject matter hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
EMPLOYEE GEOWASTE INCORPORATED
/s/ John A. Paglia /s/ Amy C. MacF. Burbott
------------------------ ----------------------------
John A. Paglia Amy C. MacF. Burbott
Chief Executive Officer
EXHIBIT 10.11
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as of the
12th day of August, 1996 between GeoWaste Incorporated , a Delaware corporation
("GeoWaste"), and Michael D. Paglia ("you"). On the terms and conditions
hereinafter set forth, GeoWaste desires to employ Employee and Employee desires
to accept such employment.
1. Term. The term of your employment hereunder shall be for a period beginning
on the date hereof and ending forty-eight (48) months thereafter ("Term of
Employment").
2. Duties. The general scope of your employment shall be to serve as a Vice
President of GeoWaste and manage GeoWaste's collection in the State of Florida
and to perform such duties in accordance therewith as GeoWaste may request.
3. Good Faith. During the Term of Employment, you shall devote your full time
and use your best efforts to advance the business and welfare of GeoWaste, its
subsidiaries and affiliates, and to discharge any other duties assigned to you
hereafter. You shall not intentionally take any action against the best
interests of GeoWaste or of any subsidiary or affiliate of GeoWaste.
4. Compensation, Benefits & Expenses. GeoWaste agrees:
(a) to pay or cause to be paid to you for your services hereunder a salary
at the annual rates set forth below, so long as you continue in the
employment of GeoWaste hereunder, payable in installments at least as
frequently as monthly and subject to all applicable taxes and payroll
deductions.
Payroll Period Annual Salary
-------------- -------------
August 1, 1996 - July 31, 1997 $100,000
August 1, 1997 - July 31, 1998 $104,000
August 1, 1998 - July 31, 1999 $108,250
August 1, 1999 - July 31, 2000 $112,500
(b) to provide you with a monthly car allowance of $600;
(c) to allow you to participate in all bonus, employee benefit, pension,
life insurance, medical reimbursement, vacation and disability income
plans and/or programs sponsored by GeoWaste and available to other
similarly situated management employees of GeoWaste in the
Southeastern United States; and
(d) to reimburse reasonable travel and other business expenses incurred by
you in the performance of your duties under this Agreement.
5. Relocation. During the Term of Employment GeoWaste agrees not to require the
you to relocate from the Ocala, Florida metropolitan area, provided, however,
that you recognize that in order to fulfill your duties hereunder, business
travel will be required on behalf of GeoWaste.
6. Termination. During the Term of Employment the Company may terminate your
Term of Employment at any time, with or without cause, as follows:
(a) immediately upon your death;
(b) if you, for any reason, become unable to carry out all or
substantially all of your duties and remain so incapacitated for a
period of three months or more; or
(c) for Cause. The term "Cause" shall mean that:
(i) you use for personal gain or disclose to an unauthorized person
any confidential or proprietary information or trade secrets of
GeoWaste or its subsidiaries;
(ii) you act in a manner which materially and detrimentally affects
the Company or its subsidiaries;
(iiii) your conduct violates any applicable civil or criminal law or
violates any rules of ethical corporate conduct of or fiduciary
obligation to the Company or its subsidiaries; or
(iv) you fail to comply with the terms of this Agreement.
7. Severance Pay. In the event that the Company terminates your employment
without Cause during the Term of Employment:
(a) the Company (at its election) will pay you in either a lump sum or in
monthly installments an amount equal to the lesser of:
(i) 18 times $8,350; or
(ii) 48 times the number of months worked prior to termination times
$8,350;
(b) for the commensurate period following your termination date, during
which monthly severance payments are being made under (a), (b) or (c)
above, as the case may be, the Company will pay the premium for any
continuation health insurance coverage during said period, however,
this is without regard to the employee's election for COBRA benefits
after the payout of the monthly severance and monthly health coverage
hereinabove provided for.
8. Assignment. GeoWaste may direct your duties hereunder be performed for and
your compensation be paid by, and GeoWaste may assign this Agreement in its
entirety to, one or more of GeoWaste's wholly-owned subsidiaries. If GeoWaste is
consolidated with or merged into, or if all or a part of its assets are
transferred to, another corporation carrying on all or a substantial part of the
business of GeoWaste, this Agreement may be assigned to such a successor
corporation unless terminated by you pursuant to Section 6 above, however no
such assignment shall relieve GeoWaste from any obligations hereunder.
9. Non-Competition and Non-Solicitation Covenants. You hereby agree that for the
five (5) year period commencing the date hereof, you will not, without the prior
written consent of GeoWaste's Board of Directors:
(a) own, manage, operate, join, be employed in an executive or managerial
capacity by, control or otherwise render, directly or indirectly, any
executive or managerial Services to any person or organization which
is engaged in the solid waste management business in competition with
GeoWaste within a 75-mile territorial radius from any facility owned
or operated by GeoWaste.
For purposes of this Section 9(a), the term "Services" shall mean any services
of a business, commercial or professional nature and shall include, without
limitation, the following: engaging in, working with, having an interest in,
acting as an officer or director or consultant to, advising, lending money to,
guaranteeing the debts or obligations of, or permitting one's name or any part
thereof to be used in connection with an enterprise or endeavor that conducts a
business of the type and in the area referred to above, either individually, in
partnership, or in conjunction with any person or persons, firm, association,
company or corporation, whether as principal, agent, five percent or more
shareholder, executive, or in any other similar manner whatsoever; provided,
however, that you may own less than five percent (5%) of the outstanding capital
stock of any publicly-held corporation; and
(b) render any services or advice to, solicit, service the account of, or
otherwise engage in any business relationship (as an employee or
otherwise) with any Customer (as defined below) of GeoWaste in
connection with the solid waste management business, or solicit or
hire any person in connection with the solid waste management business
who was an employee of GeoWaste at any time within the five (5) year
period commencing the date hereof.
For purposes of this Section 9(b), a "Customer" means any corporation,
association, partnership, organization, business, individual or governmental
agency (a "Person") within a 75-mile territorial radius from any facility owned
or operated by GeoWaste that is subject to a contract with GeoWaste whereby
GeoWaste provides solid waste management services to such Customer, or is
otherwise actively involved in a business relationship with GeoWaste in
connection with such solid waste management services, including, without
limitation, any person that GeoWaste is actively soliciting at any time within
the one (1) year period ending on the date your employment terminates.
You acknowledge that:
(i) GeoWaste will suffer substantial damages not readily ascertainable or
compensable in terms of money in the event of the breach of any of his
obligations under this Section 9. You therefore agree that GeoWaste
will be entitled (without limitation or any other rights or remedies
otherwise available to GeoWaste) to obtain an injunction from any
court of competent jurisdiction prohibiting the continuance or
recurrence of any such breach of this Section 9. In the event that at
the time of the enforcement of any provision of Section 9, the stated
period, scope or area is held to be unreasonable, the parties agree
that the maximum period, scope or area reasonable under the
circumstances will be substituted for the stated period, scope or
area; and
(ii) the running of each of the covenants in this Section 9 will be tolled
and suspended for such period of time as you are in violation of the
particular covenant, but none of the covenants will be so tolled and
suspended for longer than one hundred eighty (180) days in the
aggregate as to that covenant.
10. Confidential Information. You understand and acknowledge that:
(a) in order to enable you to properly perform your duties, the Company
has entrusted and will continue to entrust you with trade secrets and
confidential information, including, without limitation, trade secrets
and confidential information relating to merchandising methods,
engineering and processing methods, accounting or financial methods,
processes, strategies and technique, know-how, pricing policies,
inventory, market studies and strategy, customer lists, special needs
and characteristics of the Company's customers, debt and equity
financing sources, scientific, technical and management information
and other aspects of the Company's business ("Confidential
Information"); and
(b) the development or acquisition of this Confidential Information is
critical to the success and survival of the Company and the disclosure
or use of this Confidential Information would cause the Company
irreparable harm and that you are fully aware of the Company's need to
protect this Confidential Information.
Accordingly, you hereby agree that, during the Term of Employment and thereafter
as to trade secrets, and during the Term of Employment and thereafter until the
end of the one (1) year period following your termination of employment, as to
other Confidential Information, you will not disclose to third persons any
Confidential Information of the Company, its officers, directors, agents or
representatives, except to the extent that such Confidential Information:
(i) is authorized in writing by the Company to be disclosed;
(ii) was in or has become part of the public domain (otherwise than through
your breach hereof);
(iii) was known to the recipient prior to the disclosure;
(iv) was known to you prior to performing services for the Company or any
predecessor company; or
(v) is required to be disclosed by a court or governmental agency and, in
this regard, you will execute such additional documents as the Company
may reasonably require to protect the confidentiality of the
Confidential Information required to be disclosed.
11. Survival. The provisions of paragraphs 9 and 10 hereof shall survive the
termination of your Term of Employment.
12. Severability. The provisions of this Agreement shall be deemed severable and
the invalidity or unenforceability of any provision shall not affect the
validity and enforceability of the other provisions hereof.
13. Governing Law and Venue. This Agreement shall be governed by and construed
in accordance with the laws of the State of Florida applicable to contracts made
and to be performed therein. The venue of any proceeding regarding this
Agreement shall be Marion County, Florida.
14. Notices. Any notice, request, information or other document to be given
hereunder to either of the parties by the other party shall be in writing and
hand delivered or sent by certified mail, postage prepaid, as follows:
(a) if to you: Michael Paglia
1122 SE 24th Terrace
Ocala, FL 34470
(b) if to the GeoWaste: GeoWaste Incorporated
Suite 208
24 Cathedral Place
St. Augustine, FL 32084
Any party may change the address to which notices hereunder are to be sent to it
by giving written notice of such change of address as herein provided. Any
notice or communication shall be deemed to have been given as of the date so
delivered or mailed.
15. Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original.
16. Modification. The parties hereto may amend, modify and supplement this
Agreement in such manner as may be agreed upon by them in writing.
17. Entire Agreement. This Agreement contains the entire agreement of the
parties hereto with respect to the matters contemplated herein, and supersedes
all prior understandings and agreements of the parties with respect to the
subject matter hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
EMPLOYEE GEOWASTE INCORPORATED
/s/ Michael D. Paglia /s/ Amy C. MacF. Burbott
-------------------------- ---------------------------
Michael D. Paglia Amy C. MacF. Burbott
Chief Executive Officer
EXHIBIT 11.1
<TABLE>
GEOWASTE INCORPORATED AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER SHARE
FOR THE YEAR ENDED DECEMBER 31, 1996
<CAPTION>
PRIMARY FULLY DILUTED
<S> <C> <C>
Weighted average common shares
outstanding ................................................ 19,659,059 19,659,059
Stock options and warrants outstanding........................ 2,180,285 5,090,633
---------- -----------
Weighted average shares of common stock
outstanding................................................. 21,839,344 24,749,722
========== ==========
Net Income ................................................... $1,707,505 $1,707,505
========== ==========
Income per share.............................................. $ .08 $ .07
========== ==========
</TABLE>
EXHIBIT 11.2
<TABLE>
GEOWASTE INCORPORATED AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER SHARE
FOR THE YEAR ENDED DECEMBER 31, 1995
<CAPTION>
PRIMARY FULLY DILUTED
<S> <C> <C>
Weighted average common shares
outstanding ................................................ 18,662,605 18,662,605
Stock options and warrants outstanding........................ 863,810 1,042,119
Weighted average shares of common stock
outstanding................................................. 19,526,415 19,704,724
=========== ==========
Net Income ................................................... $ 1,462,310 $1,462,310
=========== ==========
Income per share.............................................. $ .07 $ .07
=========== ==========
</TABLE>
EXHIBIT 11.3
<TABLE>
GEOWASTE INCORPORATED AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER SHARE
FOR THE YEAR ENDED DECEMBER 31, 1994
<CAPTION>
PRIMARY FULLY DILUTED
<S> <C> <C> <C>
Weighted average common shares
outstanding (1)............................................. 18,662,605 18,662,605
Stock options and warrants outstanding........................ 188,565 222,613
---------- ----------
Weighted average shares of common stock
outstanding................................................. 18,851,170 18,885,218
========== ==========
Net Income.................................................... $ 1,189,823 $ 1,189,823
========== ==========
Income per share.............................................. $ .06 $ .06
========== ==========
</TABLE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
GeoWaste Acquisition Corp. (Delaware)
GeoWaste of FL, Inc. (Delaware)
GeoWaste of GA, Inc. (Georgia)
Low Brook Development, Inc. (Delaware)
North Florida Sweeping, Inc. (Delaware)
Spectrum Group, Inc. (Florida)
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000102499
<NAME> GEOWASTE INCORPORATED
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 3,058,067
<SECURITIES> 0
<RECEIVABLES> 2,214,061
<ALLOWANCES> 124,000
<INVENTORY> 0
<CURRENT-ASSETS> 5,836,589
<PP&E> 22,469,346
<DEPRECIATION> 8,613,446
<TOTAL-ASSETS> 30,618,091
<CURRENT-LIABILITIES> 8,613,837
<BONDS> 0
0
0
<COMMON> 2,102,863
<OTHER-SE> 13,879,883
<TOTAL-LIABILITY-AND-EQUITY> 30,618,091
<SALES> 13,702,708
<TOTAL-REVENUES> 13,702,708
<CGS> 8,228,849
<TOTAL-COSTS> 8,228,849
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 443,912
<INCOME-PRETAX> 2,982,505
<INCOME-TAX> 1,275,000
<INCOME-CONTINUING> 1,707,505
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,707,505
<EPS-PRIMARY> 0.08
<EPS-DILUTED> 0.07
</TABLE>
