<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K/A
AMENDMENT TO CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) - March 1, 1999
EARTHCARE COMPANY
Commission file number 000-24685
A Delaware Corporation IRS Employer No. 58-2335973
14901 Quorum Drive, Suite 200
Dallas, Texas 75240
Telephone Number (972) 858-6025
<PAGE> 2
Item 7. Financial Statements and Exhibits
(a) Historical Financial Statements of Business Acquired
Set forth below are the financial statements
appearing in this report:
<TABLE>
<CAPTION>
Page in
Reifsneider Transportation, Inc. This Report
-------------------------------- -----------
<S> <C>
Report of Independent Accountants F-1
Balance Sheet as of December 31, 1998 and 1997 F-2
Statement of Operations for the Years Ended
December 31, 1998 and 1997 F-3
Statement of Stockholder's Equity for the Years
Ended December 1998 and 1997 F-4
Statement of Cash Flows for the Years Ended
December 31, 1998 and 1997 F-5
Notes to Financial Statements F-6
</TABLE>
(b) Pro Forma Financial Information - EarthCare Company
Set forth below is the pro forma financial information
appearing in this report:
<TABLE>
<S> <C>
Unaudited Pro Forma Combined Balance Sheet
As of December 31, 1998 P-3
Unaudited Pro Forma Combined Statement of
Operations for the Year Ended December 31, 1998 P-4
Notes to Unaudited Pro Forma Combined
Financial Statements P-5
</TABLE>
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
EARTHCARE COMPANY
May 12, 1999 By: /s/ James E. Farrell
-------------------------------------
James E. Farrell
Chief Financial Officer
<PAGE> 4
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholder
Reifsneider Transportation, Inc.
In our opinion, the accompanying balance sheet and the related statements of
operations, stockholder's equity and cash flows present fairly, in all material
respects, the financial position of Reifsneider Transportation, Inc.
("Reifsneider") at December 31, 1998 and 1997, and the results of its
operations and its cash flows for the years then ended, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of Reifsneider's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which 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, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
April 8, 1999
F-1
<PAGE> 5
REIFSNEIDER TRANSPORTATION, INC.
BALANCE SHEET
December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
---------- ----------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 31,226 $ 30,418
Accounts receivable, net of allowance for doubtful accounts
of $46,468 in 1998 and $8,801 in 1997 836,151 1,332,098
Advances to stockholder 91,856 50,904
Advances to related parties 171,298 337,156
Prepaid expenses 587,563 136,035
---------- ----------
Total current assets 1,718,094 1,886,611
---------- ----------
Property and equipment, net 2,095,492 1,153,134
---------- ----------
Goodwill, net of amortization of $9,107 in 1998 and
$7,859 in 1997 40,893 42,141
Other assets -- 8,461
---------- ----------
Total other assets 40,893 50,602
---------- ----------
$3,854,479 $3,090,347
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Lines of credit $1,200,000 $ 520,000
Current portion of long-term debt 1,151,032 297,008
Accounts payable 123,679 331,397
Accrued expenses 217,050 173,261
Advances from related parties -- 402,692
---------- ----------
Total current liabilities 2,691,761 1,724,358
---------- ----------
Long-term debt, less current portion -- 374,709
---------- ----------
Stockholder's equity:
Common stock, $1 par value; authorized, 1,000 shares:
issued and outstanding, 100 shares 100 100
Additional paid-in capital 817,639 817,639
Retained earnings 344,979 173,541
---------- ----------
Total stockholder's equity 1,162,718 991,280
---------- ----------
Total liabilities and stockholder's equity $3,854,479 $3,090,347
========== ==========
</TABLE>
The accompanying notes are an integral part
of the financial statements.
F-2
<PAGE> 6
REIFSNEIDER TRANSPORTATION, INC.
STATEMENT OF OPERATIONS
For the Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Revenues $ 7,523,214 $ 6,496,906
----------- -----------
Expenses:
Cost of operations 5,019,264 4,400,549
General and administrative 1,899,820 1,609,768
Depreciation and amortization 323,092 306,782
----------- -----------
Total operating expenses 7,242,176 6,317,099
----------- -----------
281,038 179,807
Other expense (income):
Interest 93,928 91,510
Other 15,672 (49,134)
----------- -----------
Net income $ 171,438 $ 137,431
=========== ===========
</TABLE>
The accompanying notes are an integral part
of the financial statements.
F-3
<PAGE> 7
REIFSNEIDER TRANSPORTATION, INC.
STATEMENT OF STOCKHOLDER'S EQUITY
For the Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
Additional
Common Paid In Retained
Stock Capital Earnings Total
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Balance, December 31, 1996 $ 100 $ 817,639 $ 36,110 $ 853,849
Net income -- -- 137,431 137,431
---------- ---------- ---------- ----------
Balance, December 31, 1997 100 817,639 173,541 991,280
Net income -- -- 171,438 171,438
---------- ---------- ---------- ----------
Balance, December 31, 1998 $ 100 $ 817,639 $ 344,979 $1,162,718
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part
of the financial statements.
F-4
<PAGE> 8
REIFSNEIDER TRANSPORTATION, INC.
STATEMENT OF CASH FLOWS
For the Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 171,438 $ 137,431
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 323,092 306,782
(Gain) loss on disposal of property 46,858 (30,860)
Change in assets and liabilities:
Accounts receivable 495,947 (235,943)
Prepaid expenses (451,528) 8,536
Other assets 8,461 (1,798)
Accounts payable (207,718) 224,282
Accrued liabilities 43,789 (24,029)
----------- -----------
Net cash provided by operating activities 430,339 384,401
----------- -----------
Cash flows from investing activities:
Cash payments for the purchase of property (1,526,754) (371,449)
Cash proceeds from the sale of property 117,760 63,691
(Advances to) payments received for advances to related
parties and stockholder 139,660 (343,771)
----------- -----------
Net cash used in investing activities (1,269,334) (651,529)
----------- -----------
Cash flows from financing activities:
Proceeds from related party advances 370,000 400,000
Payments on related party advances (772,692) (350,000)
Proceeds from lines of credit and long-term debt 2,800,047 1,418,460
Payments on lines of credit and long-term debt (1,557,552) (1,214,655)
----------- -----------
Net cash provided by financing activities 839,803 253,805
----------- -----------
Net increase (decrease) in cash and equivalents 808 (13,323)
Cash and equivalents, beginning of year 30,418 43,741
----------- -----------
Cash and equivalents, end of year $ 31,226 $ 30,418
=========== ===========
Supplemental data:
Cash paid for interest during the year $ 118,887 $ 79,139
=========== ===========
</TABLE>
The accompanying notes are an integral part
of the financial statements.
F-5
<PAGE> 9
REIFSNEIDER TRANSPORTATION, INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND NATURE OF OPERATIONS
Reifsneider Transportation, Inc. ("Reifsneider") a
Pennsylvania corporation, is a commercial and industrial non-hazardous
liquid waste transportation and disposal services company servicing
customers in eastern Pennsylvania, Delaware, Maryland, New Jersey and
New York.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies applied in
the preparation of the accompanying financial statements follows:
CASH AND CASH EQUIVALENTS - Reifsneider considers all highly liquid
investments with maturities of three months or less at the date of
purchase as cash equivalents.
PROPERTY AND EQUIPMENT - Property and equipment are recorded at cost and
are depreciated using the straight-line method over the estimated useful
lives of 5 to 8 years for machinery and equipment, 4 to 10 years for
furniture and fixtures, and 4 to 6 years for transportation equipment.
When depreciable property is retired or otherwise disposed of, the
related assets and accumulated depreciation are removed from the
accounts and any resultant gain or loss is included in operations.
OTHER ASSETS - Goodwill, which represents the excess of the cost of a
purchased company over the fair value of its net assets at the date of
acquisition, is being amortized using the straight-line method over 40
years.
INCOME TAX STATUS - Reifsneider, with the consent of its shareholder,
has elected under the Internal Revenue Code to be an S corporation. A
similar election has been made for state tax purposes. In lieu of
corporate income taxes, the shareholders of an S corporation are taxed
on their proportionate share of Reifsneider's taxable income.
Therefore, no provision for federal or state income tax has been
included in the financial statements.
F-6
<PAGE> 10
REIFSNEIDER TRANSPORTATION, INC.
NOTES TO FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
CONCENTRATION OF CREDIT RISK - Financial instruments which potentially
subject Reifsneider to concentrations of credit risk consist principally
of cash and receivables. However, at December 31, 1998 and 1997,
Reifsneider had deposits held in banking institutions in excess of
federally insured limits of approximately $585,000 and $230,000,
respectively. Concentration of credit risk with respect to trade
receivables are limited due to the Reifsneider's large number of
customers.
REVENUE RECOGNITION - Reifsneider recognizes revenues as services are
provided.
USE OF ESTIMATES - In preparing Reifsneider's financial statements in
conformity with generally accepted accounting principles, management is
required to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the 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 differ from those estimates.
3. RELATED PARTY TRANSACTIONS
For the years ended December 31, 1998 and 1997, Reifsneider
was owed $123,679 and $337,156, respectively, from related companies.
No interest is charged, and advances, are due on demand.
For the years ended December 31, 1998 and 1997, Reifsneider
was owed $91,856 and $170,515, respectively, from the sole
stockholder. No interest is charged, and advances are due on demand.
For the years ended December 31, 1997, Reifsneider owed a
former shareholder $402,692. Interest was being charged at 10%, and
advances are due on demand.
F-7
<PAGE> 11
REIFSNEIDER TRANSPORTATION, INC.
NOTES TO FINANCIAL STATEMENTS
4. PROPERTY AND EQUIPMENT
At December 31, 1998 and 1997, property and equipment
consisted of the following:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Leasehold improvements $ -- $ 65,487
Machinery and equipment 178,808 161,286
Furniture and fixtures 130,911 65,451
Transportation equipment 2,072,324 2,000,805
Construction-in-progress 1,085,344 119,611
---------- ----------
3,467,387 2,412,640
Less accumulated depreciation and amortization 1,371,895 1,259,506
---------- ----------
Property and equipment - net $2,095,492 $1,153,134
========== ==========
</TABLE>
Depreciation expense was $321,844 and $305,534 in 1998 and 1997,
respectively.
5. LINES OF CREDIT AND LONG-TERM DEBT
The first is a $400,000 line collateralized by all assets of
Reifsneider and is due to expire on May 31, 1999. The interest rate is
at the bank's prime rate plus 1/4% (8.00% and 8.75% at December 31,
1998 and 1997, respectively). Borrowings under the line were $200,000
and $400,000 at December 31, 1998 and 1997, respectively. The line of
credit is solely intended for working capital purposes.
The second line of credit is a $600,000 facility
collateralized by all assets of Reifsneider, and is due to expire on
May 31, 1999. The interest rate is at 3/4% over the bank's prime rate
which ranged from 9.25% to 9.50% on the dates of borrowings. Borrowings
are limited to purchases of trucks or equipment. Each draw from the
line is converted to a term loan. Borrowings under this line amounted
to $253,647 and $325,077 as of December 31, 1998 and 1997, respectively
and are included in the following table as notes payable.
The third line of credit is a $250,000 facility collateralized
by all assets of Reifsneider, and expired on March 31, 1998. The
interest rate was 1/4% over the bank's prime rate (8.75% at December
31, 1997). Borrowings under the line amounted to $120,000 at December
31, 1997.
The fourth line of credit is a $1,000,000 facility
collateralized by all assets of Reifsneider and is due to expire on May
31, 1999. The interest rate is 7.05% and borrowings amounted to
$1,000,000 at December 31, 1998.
F-8
<PAGE> 12
REIFSNEIDER TRANSPORTATION, INC.
NOTES TO FINANCIAL STATEMENTS
5. LINES OF CREDIT AND LONG-TERM DEBT, Continued
Long-term debt consisted of the following at December 31,
1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Note payable - bank. Monthly payment of $1,246 including interest at 10%. 56,359 --
Note matures in September 2003. Note is collateralized by transportation
equipment.
Note payable. Monthly payment of $1,232 including
interest at 10% Note matures in June, 1999. Note is
collateralized by transportation equipment. 48,588 58,000
Note payable - bank. Construction loans of up to $1,000,000. Interest payments
only until the completion of the project. Interests rates varying from
7.05% to 8%. Note is collateralized by building and property. 650,392 --
Notes payable - bank. Various monthly principal plus interest payments,
interest rates ranging from 9 1/4% to 9 1/2%. These notes are collateralized
by transportation equipment. 253,647 325,077
Note payable - former shareholder. Monthly payment of
$12,324 including interest at 8 1/2%. Note was
unsecured and was repaid in December, 1998. -- 141,300
Note payable - former shareholder. Monthly payment
of $2,917 including interest at 10%. Note is
unsecured and is due in April, 2000. 43,520 72,571
Notes payable - various parties. Total monthly payments of approximately
$4,475, interest ranging from 8 1/2% to 10%. Notes mature from May 1999
to November 2001. Notes are collateralized by transportation equipment. 98,526 74,769
---------- ----------
1,151,032 671,717
Less current portion (A) (1,151,032) 297,008
---------- ----------
$ -- $ 374,709
========== ==========
</TABLE>
(A) In March 1999, all outstanding debt was paid in full in connection
with the sale of the business (see note 8).
F-9
<PAGE> 13
REIFSNEIDER TRANSPORTATION, INC.
NOTES TO FINANCIAL STATEMENTS
6. LEASE COMMITMENTS
Reifsneider leases its facilities and certain transportation
and office equipment under operating leases. Expiration dates vary
through September 2003. In the normal course of business, operating
leases are generally renewed or replaced by other leases.
Minimum future rental payments for each of the next five
years and in the aggregate are as follows:
<TABLE>
<S> <C>
1999 $ 38,320
2000 22,779
2001 19,207
2002 19,207
2003 10,300
-----------
$ 109,813
===========
</TABLE>
Rent expense under operating leases, including those with
terms on a month-to-month basis, was $112,511 and $98,413 for the years
ended December 31, 1998 and 1997, respectively.
7. RETIREMENT PLAN
Reifsneider has a 401(k) retirement savings plan for all
employees who have reached the age of 21 and have one year of service.
Employees may contribute a portion of their pay, and Reifsneider will
match 100% up to $500. Amounts charged to operations were approximately
$11,000 and $12,000 for the years ended December 31, 1998 and 1997,
respectively.
8. SUBSEQUENT EVENT
Effective March 1, 1999, EarthCare Company ("EarthCare")
acquired all of the outstanding capital stock of Reifsneider in
exchange for $5,050,000 in cash, 350,000 shares of EarthCare common
stock, the delivery of a $200,000 note payable to the former owner of
Reifsneider and a final working capital adjustment, as defined in the
Stock Purchase Agreement. This transaction was consummated pursuant to
a Stock Purchase Agreement, dated February 26, 1999. All advances to
Reifsneider's stockholder and related parties were collected and debt
of Reifsneider was repaid in connection with the acquisition.
F-10
<PAGE> 14
EARTHCARE COMPANY
UNAUDITED PRO FORMA FINANCIAL INFORMATION
Introduction to Unaudited Pro Forma Combined Financial Statements
Effective March 1, 1999, EarthCare Company, ("EarthCare") acquired all of the
outstanding capital stock of Reifsneider Transportation Inc. ("Reifsneider"), a
Pennsylvania corporation, in exchange for $5,050,000 in cash, 350,000 shares of
EarthCare common stock, the delivery of a $200,000 note payable to the former
owner of Reifsneider and a final working capital adjustment, as defined in the
Stock Purchase Agreement. This transaction was consummated pursuant to a Stock
Purchase Agreement, dated February 26, 1999. Reifsneider is a commercial and
industrial non-hazardous liquid waste transportation and disposal services
company servicing customers in eastern Pennsylvania, Delaware, Maryland, New
Jersey and New York. EarthCare currently intends to operate Reifsneider in
substantially the same manner as it was operated prior to this transaction.
EarthCare funded the cash portion of purchase price with borrowings under
EarthCare's revolving credit facility with Bank of America National Trust and
Savings Association. The total purchase price was determined based upon an
evaluation of the business of Reifsneider and the results of negotiations
between the parties. The Reifsneider acquisition and related financing is
referred to herein as the "Transaction."
The following unaudited pro forma combined balance sheet as of December 31,
1998, and the unaudited pro forma combined statement of operations for the year
then ended give effect to the Transaction using the purchase method of
accounting as well as other pro forma adjustments as outlined in the notes to
unaudited pro forma combined financial statements. These unaudited pro forma
combined financial statements present EarthCare and give effect to the
Transaction with EarthCare and other significant purchase business combinations
consummated since January 1, 1998, as if the transactions had been consummated
as of the beginning of 1998. The unaudited pro forma combined financial
statements also give effect to EarthCare's merger with Microlytics, Inc.
("Microlytics") on May 13, 1998, which has been accounted for as a capital
transaction accompanied by a recapitalization of EarthCare ("Recapitalization").
EarthCare, the other 1998 purchase business combinations and Microlytics are
hereafter referred to as the "Company." The other 1998 purchase business
combinations are as follows:
<TABLE>
<CAPTION>
Business Date Acquired
- -------------------------------------------------------------- -----------------
<S> <C>
Ferrero Wastewater Management, Inc. ("Ferrero") January 22, 1998
A Rapid Rooter Sewer & Drain Service, Inc. ("A Rapid") February 13, 1998
Quality Plumbing and Septic ("Quality") February 17, 1998
Seagraves, Inc. (d.b.a. Brownie Environmental Services, Inc.)
and Grease-Tec, Inc. ("Seagraves") March 6, 1998
RGM Liquid Waste Removal Corporation and Affiliates ("RGM") May 1, 1998
Eldredge Wastewater Management, Inc. ("Eldredge") May 8, 1998
</TABLE>
P-1
<PAGE> 15
EarthCare has preliminarily analyzed the savings that it expects to be realized
from reductions in salaries and certain benefits to the owners. To the extent
the owners of the acquired businesses have agreed prospectively to reductions
in salary, bonuses and benefits, these reductions have been reflected in the
pro forma combined statement of operations. With respect to other potential
cost savings, EarthCare cannot fully quantify these savings at this time. It is
anticipated that these savings will be partially offset by costs related to
EarthCare's corporate management and by the costs associated with being a
public company. These costs cannot be quantified accurately. Accordingly, only
those anticipated savings and costs that are factually supportable have been
included in the accompanying pro forma financial information of the Company.
The pro forma adjustments are based on estimates, available information and
certain assumptions and may be revised as additional information becomes
available. The pro forma financial data do not purport to represent what
EarthCare's results of operations would actually have been if such transactions
in fact had occurred on those dates and are not necessarily representative of
the EarthCare results of operations for any future period. Since neither the
1998 businesses acquired nor Reifsneider were under common control or
management, historical combined results may not be comparable to, or indicative
of, future performance. The unaudited pro forma combined financial statements
should be read in conjunction with the historical Reifsneider financial
statements and notes thereto included elsewhere herein.
P-2
<PAGE> 16
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
DECEMBER 31, 1998
<TABLE>
<CAPTION>
Acquisition Related Adjustments (Note 3)
-------------------------------------------------------
Historical Pro Forma Pro Forma
EarthCare Reifsneider(a) Adjustments Combined
------------ -------------- ------------ -----------
<S> <C> <C> <C> <C>
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 1,039,594 $ 31,226 $ 5,050,000(b) $ 1,070,820
(5,050,000)(b)
Accounts receivable, net 3,960,520 836,151 -- 4,796,671
Prepaid expenses 557,669 587,563 -- 1,145,232
Advances to related parties -- 263,154 (263,154)(c) --
Note receivable 67,959 -- -- 67,959
Deferred income taxes 377,147 -- -- 377,147
------------ ------------ ------------ ------------
Total current assets 6,002,889 1,718,094 (263,154) 7,457,829
------------ ------------ ------------ ------------
Property and equipment, net 4,910,004 2,095,492 1,460,011(d) 8,465,507
Intangibles, net 20,166,445 40,893 6,894,348(e) 27,450,511
Deferred income taxes 246,913 -- -- 246,913
Other assets 1,964,028 -- -- 1,964,028
------------ ------------ ------------ ------------
Total assets $ 33,290,279 $ 3,854,479 $ 8,091,205 $ 45,235,963
============ ============ ============ ============
LIABILITIES AND STOCKHOLDER'S EQUITY
- ------------------------------------
Current liabilities:
Accounts payable $ 2,761,451 $ 123,679 $ 765,386(f) $ 650,516
Accrued expenses 2,184,818 217,050 514,534(g) 2,916,402
Lines of credit -- 1,200,000 (1,200,000)(c) --
Current portion of long-term debt 118,500 1,151,032 (1,151,032)(c) 318,500
200,000(h)
------------ ------------ ------------ ------------
Total current liabilities 5,064,769 2,691,761 (871,112) 6,885,418
------------ ------------ ------------ ------------
Long-term debt, net of current portion 9,209,440 -- 5,050,000(b) 14,259,440
Stockholder's equity:
Preferred stock -- -- -- --
Common stock 957 100 (65)(i) 992
Additional paid-in capital 20,702,555 817,639 4,257,361(i) 25,777,555
Accumulated deficit (1,687,442) 344,979 (344,979)(i) (1,687,442)
------------ ------------ ------------ ------------
Total stockholder's equity 19,016,070 1,162,718 3,912,317 24,091,105
------------ ------------ ------------ ------------
Total liabilities and stockholder's equity $ 33,290,279 $ 3,854,479 $ 8,091,205 $ 45,235,963
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of
these pro forma financial statements.
P-3
<PAGE> 17
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
EarthCare Ferrero A Rapid Quality
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 25,690,672 $ 257,982 $ 680,870 $ 194,786
Expenses:
Cost of operations 17,907,036 175,443 338,971 118,620
Selling, general and administrative expense 7,509,375 73,399 255,847 61,894
Depreciation and amortization 1,348,357 23,334 41,476 5,179
------------ ------------ ------------ ------------
Income (loss) from operations (1,074,096) (14,194) 44,576 9,093
Other expense (income):
Interest 657,455 5,913 11,148 1,684
Other 2,101 (33) (476) 60
------------ ------------ ------------ ------------
Income (loss) before taxes (1,733,652) (20,074) 33,904 7,349
Provision (benefit) for taxes (304,562) -- -- --
------------ ------------ ------------ ------------
Net income (loss) $ (1,429,090) $ (20,074) $ 33,904 $ 7,349
============ ============ ============ ============
Pro forma net loss per share:
Basic and diluted $ (0.17)
============
Pro forma weighted average shares outstanding:
Basic and diluted 8,427,407
============
<CAPTION>
Seagraves RGM Eldredge Reifsneider
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 1,342,431 $ 2,710,061 $ 1,514,756 $ 7,523,214
Expenses:
Cost of operations 930,687 1,751,561 1,108,708 5,019,264
Selling, general and administrative expense 350,137 810,638 385,582 1,899,820
Depreciation and amortization 32,886 146,762 68,311 323,092
------------ ------------ ------------ ------------
Income (loss) from operations 28,721 1,100 (47,845) 281,038
Other expense (income):
Interest 8,659 28,103 11,959 93,928
Other (105,984) (22,099) (1,562) 15,672
------------ ------------ ------------ ------------
Income (loss) before taxes 126,046 (4,904) (58,242) 171,438
Provision (benefit) for taxes -- 82,869 (13,686) --
------------ ------------ ------------ ------------
Net income (loss) $ 126,046 $ (87,773) $ (44,556) $ 171,438
============ ============ ============ ============
Pro forma net loss per share:
Basic and diluted
Pro forma weighted average shares outstanding:
Basic and diluted
<CAPTION>
Pro Forma
Adjustments Pro Forma
(Note 4) Combined
------------ ------------
<S> <C> <C>
Revenues $ -- $ 39,914,772
Expenses:
Cost of operations -- 27,350,290
Selling, general and administrative expense (102,500)(a) 10,526,192
(718,000)(b)
Depreciation and amortization 240,079(c) 2,501,476
272,000(d)
------------ ------------
Income (loss) from operations 308,421 (463,186)
Other expense (income):
Interest 60,000(e) 1,330,797
300,000(f)
151,948(g)
Other -- (112,321)
------------ ------------
Income (loss) before taxes (203,527) (1,681,662)
Provision (benefit) for taxes 44,903 (h) (190,476)
------------ ------------
Net income (loss) $ (248,430) $ (1,491,186)
============ ============
Pro forma net loss per share:
Basic and diluted $ (0.17)
===========
Pro forma weighted average shares outstanding:
Basic and diluted 475,824(i) 8,903,231
============ ===========
</TABLE>
The accompanying notes are an integral part of these pro forma financial
statements.
P-4
<PAGE> 18
EARTHCARE COMPANY AND ACQUIRED BUSINESSES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. BACKGROUND
EarthCare Company ("EarthCare") was formed to act as a consolidator of
nonhazardous liquid waste businesses. From its inception on March 19, 1997
through March 1, 1999, EarthCare has acquired ten businesses involved in the
nonhazardous liquid waste business.
2. HISTORICAL FINANCIAL STATEMENTS
The historical financial statements of the businesses acquired were derived
from the respective acquired businesses' financial statements. All acquired
businesses have a December 31 year-end, or their financial results have been
recast to a December 31 year-end, with the exception of RGM which has an
October 31 year-end. The audited historical financial statements of Reifsneider
are included elsewhere herein and the other acquired businesses have been
audited, as required, and included in previous filings with the Securities and
Exchange Commission.
3. PRO FORMA BALANCE SHEET ADJUSTMENTS
(a) Represents the December 31, 1998, balance sheet of Reifsneider, which was
purchased by EarthCare effective March 1, 1999.
(b) Reflects the cash borrowed from Bank of America to fund the cash portion
of the consideration due to the stockholder of Reifsneider in connection
with the acquisition and the distribution of the cash to the stockholders
in connection with the acquisition.
(c) Reflects the elimination of advances that Reifsneider had made to its
shareholders and related parties and existing notes payable of Reifsneider
that were not assumed by EarthCare in connection with the acquisition.
(d) Adjusts the allocation of the purchase price of Reifsneider to the
estimated fair value of equipment purchased.
(e) Reflects the goodwill recorded by EarthCare in conjunction with its
acquisition of Reifsneider.
(f) Reflects a purchase price adjustment of estimated net working capital that
will be distributed to the previous owners of Reifsneider related to the
acquisition.
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(g) Reflects the estimated liability for costs to be incurred to bring the
equipment acquired from Reifsneider up to EarthCare's corporate standards.
(h) Reflects the delivery of a $200,000 note payable to the previous owners of
Reifsneider, payable over the ensuing twelve months.
(i) Adjustment to record the issuance of 350,000 shares of restricted
EarthCare Common Stock, par value $.0001, to the stockholder of
Reifsneider in connection with the acquisition and the adjustment to
eliminate the equity of Reifsneider.
4. PRO FORMA STATEMENT OF OPERATIONS ADJUSTMENTS
(a) Adjusts compensation to the level that the owners of the businesses
acquired in 1998 have contractually agreed to receive subsequent to the
acquisitions. The employment agreements have terms of one to three years
and include certain severance provisions in the event of termination
without cause.
(b) Reflects a decrease of $648,000 in salaries and other expenses of the
previous owners of Reifsneider that will not be incurred subsequent to the
acquisition of Reifsneider and a $70,000 decrease in rent expense that
will not be incurred going forward due to the acquisition of a building in
the Reifsneider Acquisition.
(c) Reflects additional amortization of noncompete agreements related to the
businesses acquired in 1998 using a weighted average life of 2.2 years and
goodwill using a 40-year life. Also includes additional depreciation of
property and equipment related to the businesses acquired in 1998 using a
weighted average remaining life of 5 years.
(d) Reflects additional goodwill amortization of $181,000 related to the
Reifsneider acquisition using a 40-year life and $91,000 in additional
depreciation of equipment related to changes in estimated fair values
and useful lives assigned to equipment acquired from Reifsneider.
(e) Reflects additional interest expense on the $2,300,000 in seller notes
related to the businesses acquired in 1998 at a weighted average annual
rate of 6.2%.
(f) Reflects additional interest expense on the $5,050,000 in bank debt and the
$200,000 note payable related to the Reifsneider acquisition at an annual
rate of 7.5%, net of eliminated interest expense related to Reifsneider's
historical debt.
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(g) Reflects additional interest expense on $3,900,000 in line of credit
borrowings at 8.21%, net of the elimination of interest expense on
historical debt of the businesses acquired in 1998. The elimination of
interest expense of the acquired businesses is required as the Company
assumed no debt in the purchase transactions. Additional borrowings under
the Company's line of credit of $3,900,000 were required to supplement
equity proceeds from the sale of common stock to pay the cash portion of
the purchase prices.
(h) Reflects additional income tax provision (benefit) for state and federal
taxes at a combined statutory tax rate of 39% for those acquired businesses
previously reported as Subchapter S Corporations, and (benefit) for income
taxes using the Company's combined statutory tax rate of 39% for the tax
effect of the pro forma adjustments.
(i) Reflects 125,824 additional weighted average shares issued in connection
with the businesses acquired in 1998 and 350,000 shares issued in
connection with the Reifsneider acquisition.
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