<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------------
FORM 8-K/A
Amendment No. 1
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) July 2, 1996
EASTERN ENVIRONMENTAL SERVICES, INC.
------------------------------------
(Exact name of issuer as specified in charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Delaware 0-16102 59-2840783
(State or Other Jurisdiction Commission (I.R.S. Employer
or Incorporation or file number Identification
Organization) Number)
</TABLE>
1000 Crawford Place, Mt. Laurel, New Jersey 08054
(Address of principal executive offices)
(609) 235-6009
(Registrant's telephone number, including area code)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
- ----------------------------------------------
Allied Waste Services, Inc., a Delaware corporation ("Allied"), is a wholly-
owned subsidiary of Eastern Environmental Services, Inc. (the "Registrant"). On
July 2, 1996, Allied acquired ("the Acquisition") substantially all of the
assets related to the operations of Allied Environmental Services, Inc., and
Allied Environmental Services West, Inc. (collectively referred to as the
"Companies") from Global Spill Management, Inc. ("the Shareholder") and Stuart
H. Berry and Alan Hershkowitz ("the Individuals"). The Shareholder, Companies
and the Individuals are collectively referred to as the "Sellers". The Sellers
are not affiliated with the Registrant nor with any of the Registrant's
subsidiaries.
The acquisition was made pursuant to the terms of an Agreement for the Sale
and Purchase of Assets (the "Purchase Agreement") dated June 27, 1996. The
Purchase Agreement is incorporated by reference as Exhibit 10.1. The description
of the acquired assets and the Acquisition transaction set forth herein is
qualified in its entirety by reference to the Purchase Agreement.
Allied paid consideration of $700,000 (the "Purchase Price") to the Sellers
for the acquired assets. The total consideration was paid in 116,667 shares of
restricted common stock of the Registrant. The total number of shares delivered
to the Companies was determined by valuing the Registrants stock at six ($6.00)
dollars per share. Purchaser is obligated to have the stock registered under
the Securities Act of 1933 within ninety (90) days of the date of closing
pursuant to a "shelf registration" of the Registrants stock.
Under the terms of the Purchase Agreement, Allied assumed no obligations or
liabilities of the Sellers except for the responsibility of paying certain
vendor liabilities and performing the unperformed obligations under certain
uncompleted customer contracts. The acquired assets were transferred to Allied
free and clear of all liens, encumbrances, security interests and claims, except
for the liabilities specifically assumed by Allied. The terms of the purchase
are more fully described in the Purchase Agreement.
The acquired assets include all office furniture, equipment, and supplies
used in the operations of the Companies, all rights and interests in the
customer accounts receivable of the Companies whether billed or unbilled as of
the closing date; customer contract rights; all rights, title and interest of
the Companies in leases for real property, trade secrets, property rights,
symbols, trademarks, trade names, logos, telephone directory listings used by
the Companies; all permits, licenses, franchises, consents and other approvals
for governmental agreements used in the operations of the business; and all
goodwill of the business conducted by the Companies. The acquired assets were
used by the Sellers in the business of arranging for the testing, disposal and
transportation of contaminated soil, asbestos, construction and demolition waste
and municipal waste. Allied intends to continue to use the acquired assets for
this purpose.
<PAGE>
Item 7. Combined Financial Statements, Pro Forma
Financial Information, and Exhibits
-----------------------------------
(a) Combined financial statements of businesses acquired.
The following financial statements of Allied Environmental Services,
Inc. and Affiliates are filed as a part of this report and are set
forth in the pages attached hereto.
Independent Auditors' Report.
Combined Balance Sheet as of June 30, 1995.
Combined Statements of Operations for the five months ended
November 30, 1994 and seven months ended June 30, 1995.
Combined Statements of Stockholders' (Deficiency) for the five
months ended November 30, 1994 and seven months ended June
30, 1995.
Combined Statements of Cash Flows for the five months ended
November 30, 1994 and seven months ended June 30, 1995.
Notes to Combined Financial Statements.
Independent Auditors' Report.
Combined Balance Sheet as of June 30, 1994.
Combined Statement of Income for the twelve months ended
June 30, 1994.
Combined Statement of Cash Flows for the twelve months ended
June 30, 1994.
Combined Retained Earnings Statement for the twelve months
ended June 30, 1994.
Notes to Combined Financial Statements.
Combined Balance Sheet as of June 30, 1996 (Unaudited)
Combined Statement of Operations for the year ended June 30, 1996
(Unaudited)
Note to Combined Financial Statements.
(b) Pro forma financial information.
The following pro forma financial information is filed as a part of
this report and is set forth in the pages attached hereto.
Eastern Environmental Services, Inc.
Pro Forma Combined Statement of Operations for the twelve months
ended June 30, 1996 (unaudited).
Pro Forma Combined Balance Sheet as of June 30, 1996 (unaudited).
<PAGE>
(c) Exhibits.
* 10.1 Agreement for the sale and Purchase of the assets dated June 27,
1996 between Allied Waste Services, Inc. and Global Spill
Management, Inc., Allied Environmental Services, Inc., Allied
Environmental Services West, Inc., Stuart H. Berry, and Alan
Hershkowitz.
23.1 Consent of BDO Seidman, LLP
23.2 Consent of B.J. Klinger & Co., P.C.
- -------------------------------
* Previously filed in the Current Report on Form 8K dated July 2,
1996
Signature
---------
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.
EASTERN ENVIRONMENTAL SERVICES, INC.
Date: September 16, 1996 By: /s/ Louis D. Paolino, Jr.
---------------------------------------
Louis D. Paolino, Jr.
President
<PAGE>
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
JUNE 30, 1996
The following unaudited pro forma combined balance sheet as of June 30,
1996 gives effect to the acquisition of Allied Environmental Services, Inc. and
Affiliates ("Allied") for consideration of approximately $700,000 in Eastern
Environmental Services, Inc. common stock at an assumed fair market value of
$6.00 per share. The above transaction is presented as if it had occurred on
June 30, 1996.
The following unaudited pro forma financial data may not be indicative of
what the financial condition of EESI would have been, had the transaction to
which such data gives effect been completed on the date assumed, nor are such
data necessarily indicative of the financial condition of EESI that may exist in
the future. The following unaudited pro forma information should be read in
conjunction with the notes thereto, the other pro forma financial statements and
notes thereto, and the historical financial statements and notes thereto
appearing elsewhere in this filing.
<TABLE>
<CAPTION>
Allied
Eastern Environmental
Environmental Services, Inc. Pro Forma Pro Forma
Services, Inc. and affiliates Adjustments Combined
-------------- --------------- ------------ --------
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 617,398 $ (2,663) $ 2,663 (1) $ 617,398
Accounts receivable, net of allowance 1,272,138 2,058,642 (783,610) (1) 2,547,170
Deferred income taxes 372,445 0 0 372,445
Tax refund receivable 74,467 0 0 74,467
Prepaid expenses and other
current assets 634,548 16,552 (16,552) (1) 634,548
------- ------ ------- -------
Total current assets 2,970,996 2,072,531 (797,499) 4,246,028
Net property and equipment 10,918,566 5,484 (484) (1) 10,923,566
Assets held for resale 859,262 0 0 859,262
Intangible assets 311,014 127,116 417,884 (1) 856,014
Other assets 505,173 0 0 505,173
------- ------- ----- -------
Total assets $15,565,011 $ 2,205,131 $ (380,099) $17,390,043
=========== =========== =========== ===========
Liabilities and stockholders' equity
Current liabilities:
Short-term borrowings $ 237,500 $ 0 $ 0 $ 237,500
Accounts payable 1,945,343 1,524,541 (399,509) (1) 3,070,375
Accrued expenses 1,329,579 20,546 (20,546) (1) 1,329,579
Income taxes payable 57,739 0 0 57,739
Current portion of accrued
environmental costs 870,000 0 0 870,000
Current position of long-term debt 663,352 0 0 663,352
------- - - -------
Total current liabilities 5,103,513 1,545,087 (420,055) 6,228,545
Deferred income taxes 444,797 0 0 444,797
Long-term debt 1,681,816 0 0 1,681,816
Other Liabilities 0 0 0
Accrued environmental costs 2,088,457 0 0 2,088,457
Stockholders' equity:
Common stock 60,777 11,200 (10,033) (1) 61,944
Additional paid-in capital 9,020,714 3,071,396 (2,372,563) (1) 9,719,547
Retained earnings (2,758,804) (2,422,552) 2,422,552 (1) (2,758,804)
---------- ---------- ---------- --- ----------
6,322,687 660,044 39,956 7,022,687
Less treasury stock at cost - 39,100
common shares 76,259 0 0 76,259
------ - - ------
Total stockholders' equity 6,246,428 660,044 39,956 6,946,428
----------- ----------- ----------- -----------
Total liabilities and stockholders' equity $15,565,011 $ 2,205,131 $ (380,099) $17,390,043
=========== =========== =========== ===========
</TABLE>
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
June 30, 1996
(1) To record the purchase of Allied Environmental Services, Inc. and
affiliates for consideration of $700,000 in EESI stock at an assumed fair
market value of $6.00 per share. The excess of the cumulative purchase
price over the cumulative net book value of the assets acquired has been
assigned to goodwill. The assets not acquired and the liabilities not
assumed have been eliminated.
<PAGE>
UNAUDITED PRO FORMA COMBINED SUMMARY OF OPERATIONS
YEAR ENDED JUNE 30, 1996
The following unaudited pro forma combined summary of operations for the
year ended June 30, 1996 gives effect to the acquisition of Allied Environmental
Services, Inc. and Affiliates ("Allied") for consideration of $700,000 in
Eastern Environmental Services, Inc. common stock at an assumed fair market
value of $6.00 per share. The above transaction is presented as if it occurred
on July 1, 1995.
The following unaudited pro forma financial data may not be indicative of
what the results of operations of Eastern Environmental Services, Inc. would
have been, had the transaction to which such data gives effect been completed on
the date assumed, nor are such data necessarily indicative of the results of
operations of Eastern Environmental Services, Inc. that may exist in the future.
The following unaudited pro forma information should be read in conjunction with
the notes thereto, the other pro forma financial statements and notes thereto,
and the historical financial statements and notes thereto appearing elsewhere in
this filing.
<TABLE>
<CAPTION>
Allied
Eastern Environmental
Environmental Services, Inc. Pro Forma Pro Forma
Services, Inc. and affiliates Adjustments Combined
-------------- -------------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $7,632,503 $11,097,634 $ 0 $18,730,137
Cost of revenues 6,857,418 8,255,721 0 15,113,139
------------ ------------ ------------ ------------
Gross Profit 775,085 2,841,913 0 3,616,998
Selling, general and (137,032) (1)
administrative expenses 3,853,145 3,040,918 (785,723) (2) 5,971,308
------------ ------------ ------------ ------------
Operating loss (3,078,060) (199,005) (922,755) (2,354,310)
Interest expense (153,428) (109,386) (262,814)
Other expense (268,555) (2,621,380) (2,621,380) (3) (268,555)
------------ ------------ ------------ -----------
Loss before income taxes
(benefit) (3,500,043) (2,929,771) (3,544,135) (2,885,679)
Income taxes (benefit) - - - -
------------ ------------ ------------ ------------
Net Loss $(3,500,043) $(2,929,771) $(3,544,135) $(2,885,679)
============ ============ ============ ============
Loss per share $ (.51)
=========
Weighted average number of shares
outstanding (4) 5,688,620
==========
</TABLE>
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED SUMMARY OF OPERATIONS
YEAR ENDED JUNE 30, 1996
1.) To adjust amortization expenses for the change in the value of
goodwill, net of historical amortization of Allied Environmental
Services, Inc. and Affiliates ("Allied") which would have occurred
had the purchase of the assets of Allied been completed July 1, 1995.
2.) To eliminate substantially all intercompany administrative expenses
and other intercompany charges that in the opinion of management,
would not have been necessary to operate Allied as a wholly owned
subsidiary of Eastern Environmental Services, Inc.
3.) To eliminate the loss on the write-off of certain intangible assets
of Allied for which in the opinion of Allied's management had no
further benefit.
4.) For purposes of determining pro forma loss per share, the issuance of
116,667 shares of common stock as consideration for the purchase of
the assets of Allied were considered to have been outstanding from
July 1, 1995.
<PAGE>
[LETTERHEAD OF B.J. KLINGER & CO., P.C. APPEARS HERE]
Independent Auditor's Report
To the Shareholders and Board of Directors of Allied Environmental Services,
Inc., Allied Environmental Services West, Inc., Allied Mid - Atlantic, Inc., and
Allied Waste Management, Inc.
We have audited the accompanying combined balance sheet of Allied Environmental
Services, Inc., Allied Environmental Services West, Inc., Allied Mid - Atlantic,
Inc., and Allied Waste Management, Inc. as of June 30, 1994, and the related
combined statements of income, cash flows, and retained earnings for the twelve
months beginning July 1, 1993 and ended June 30, 1994. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit 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 combined financial statements referred to above present
fairly, in all material respects, the financial position of Allied Environmental
Services, Inc., Allied Environmental Services West, Inc., Allied Mid - Atlantic,
Inc., and Allied Waste Management, Inc, and the results of their operations and
cash flows for the years then ended in conformity with generally accepted
accounting principles.
/s/ B.J. Klinger & Co., P.C.
B.J. Klinger & Co., P.C.
August 19, 1996
<PAGE>
Allied Environmental Services, Inc.
Allied Environmental Services West, Inc.
Allied Waste Management, Inc.
Allied Mid-Atlantic, Inc.
Combined Balance Sheet
June 30, 1994
Assets
Current Assets
Accounts Receivable $3,381,166
Allowance For Doubtful Accounts (40,000)
Prepaid Expenses 12,451
Employee Advances 3,250
Payroll Exchange 2,224
Due from Affiliate 86,215
Total Current Assets 3,445,307
Fixed Assets - Net of Depreciation & Amortization 7,073
-----
Total Fixed Assets 7,073
Other Assets
Security Deposits 3,900
-----
Total Other Assets 3,900
-----
Total Assets $3,456,280
----------
See accompanying summary of accounting policies & notes to financial statements
<PAGE>
Allied Environmental Services, Inc.
Allied Environmental Services West, Inc.
Allied Waste Management, Inc.
Allied Mid- Atlantic, Inc.
Combined Balance Sheet
June 30, 1994
Liabilities & Stockholders Equity
Current Liabilities
Overdraft In Bank $144,007
Accounts Payable 3,019,327
Accrued Expenses Payable 52,496
Accrued Payroll Taxes 4,036
N.Y.S. Sales Taxes Payable 2,772
-----
Total Current Liabilities 3,222,639
Non Current Liabilities
Total Non Current Liabilities 0
Stockholders Equity
Common Stock 11,200
Subscriptions Receivable (10,200)
Retained Earnings 232,641
-------
Total Stockholders Equity 233,641
Total Liabilities & Stockholders Equity $3,456,280
----------
See accompanying summary of accounting policies & notes to financial statements
<PAGE>
Allied Environmental Services, Inc.
Allied Environmental Services West, Inc.
Allied Waste Management, Inc.
Allied Mid-Atlantic, Inc.
Combined Statement of Income
For The Twelve Months Ended June 30, 1994
12 Months Ended
---------------
June 30, 1994 Pct.
------------- ----
Revenue
Sales $13,252,892 100.78
Sales Allowances (101,956) -0.78
---------
Total Revenue 13,150,936 100.00
Cost of Goods Sold (See Schedule) 11,142,750 84.73
---------- -----
Gross Profit 2,008,186 15.27
General, & Administrative Expenses - (See 1,897,003 14.42
Schedule) --------- -----
Operating Income 111,183 0.85
Other Income 330 0.00
Total Other Income 330 0.00
Net Income Before Taxes 111,513 0.85
------- ----
Provision for Income Taxes
Income Tax Expense 1,793 0.01
----- ----
Net Income $109,720 0.83
-------- ----
See accompanying summary of accounting policies & notes to financial statements
<PAGE>
Allied Environmental Services, Inc.
Allied Environmental Services West, Inc.
Allied Waste Management, Inc.
Allied Mid Atlantic, Inc.
Combined Schedule of Cost of Sales
For The Twelve Months Ended June 30, 1994
12 Months Ended
---------------
June 30, 1994 Pct.
------------- ---
Cost of Sales
Trucking & Disposal Costs $11,142,750 84.73
----------- -----
Total Cost of Sales $11,142,750 84.73
----------- -----
See accompanying summary of accounting policies & notes to financial statements
<PAGE>
Allied Environmental Services, Inc.
Allied Environmental Services West, Inc.
Allied Waste Management, Inc.
Allied Mid-Atlantic, Inc.
Combined Schedule of General & Administrative Expenses
For The Twelve Months Ended June 30, 1994
12 Months Ended
---------------
June 30, 1994 Pct.
------------- ---
General & Administrative Expenses
Salaries Officers $463,385 3.52
Salaries Other 562,100 4.27
F.I.C.A. Expense 48,336 0.37
Freight Out 2,720 0.02
Automobile Expenses 34,621 0.26
Rent 37,356 0.28
Insurance Expense 86,604 0.66
Professional Fees 49,004 0.37
Maintenance & Repairs 337 0.00
Office Expense 28,113 0.21
Advertising 10,967 0.08
License & Permits 5,042 0.04
Bid & Bonding Expense 91,531 0.70
Commission Expense 199,597 1.52
Telephone Expense 66,702 0.51
Selling Expenses 11,801 0.09
Gifts 3,773 0.03
Travel Expense 16,217 0.12
Meals & Entertainment 15,116 0.11
Utilities 577 0.00
Dues & Subscriptions 12,169 0.09
Stationary & Postage 14,561 0.11
Bank Charges 4,132 0.03
Miscellaneous Expenses 671 0.01
Security 253 0.00
Depreciation 1,043 0.01
Amortization 72 0.00
State Unemployment Insurance 7,007 0.05
Federal Unemployment Insurance 1,822 0.01
Reimbursed Employee Expenses 66,970 0.51
Outside Labor 4,985 0.04
Contributions 240 0.00
Payroll Services 2,517 0.02
Penalties & Fines 641 0.00
Computer Expense 3,634 0.03
Printing Expenses 2,343 0.02
Bad Debt Expense 40,047 0.30
------ ----
Total General & Administrative Expenses $1,897,003 14.42
---------- -----
See accompanying summary of accounting policies & notes to financial statements
<PAGE>
Allied Environmental Services, Inc.
Allied Environmental Services West, Inc.
Allied Waste Management, Inc.
Allied Mid - Atlantic, Inc.
Combined Statement of Cash Flows
For The Twelve Months Ended June 30, 1994
<TABLE>
<S> <C> <C>
Net Income $109,720
Adjustments to reconcile Net Income to Net -
Cash provided by Operating Activities:
Depreciation & Amortization 1,115
Increase in Payroll Exchange (151)
Increase in Accounts Receivable (1,489,015)
Increase in Allowance for Bad Debts 40,000
Increase in Prepaid Expenses (3,103)
Increase in Due From Officer (2,100)
Decrease in Due From Employee's 1,350
Increase in Due From Affiliate (28,785)
Increase in Security Deposits (1,500)
Increase in Accounts Payable 1,304,420
Increase in Payroll Taxes Payable 1,867
Increase in State Sales Tax Payable 953
Increase in Garnishee Payable 45
Decrease in Salaries Payable (942)
Decrease in Accrued Expenses Payable (1,500)
Decrease in Accrued Payroll Payable (8,891)
Increase in Accrued Commissions 45,020
------
Total Cash Used in Operating Activities (31,498)
------
Net Cash Used By Investing Activities
Purchases of Office Equipment (1,022)
------
Total Cash Used in Investing Activities (1,022)
------
Net Cash Used or Provided by Financing -
Activities:
Capital Stock 100
---
Total Cash Provided by Financing Activities 100
---
Net Decrease in Cash (32,420)
------
Cash Balance at Beginning of Period (111,587)
-------
Cash Balance at End of Period ($144,007)
--------
</TABLE>
See accompanying summary of accounting policies & notes to financial statements
[LETTERHEAD OF B. J. KLINGER & CO., P. C. APPEARS HERE]
<PAGE>
Allied Environmental Services, Inc.
Allied Environmental Services West, Inc.
Allied Waste Management, Inc.
Allied Mid-Atlantic, Inc.
Combined Retained Earnings Statement
For the Twelve Month Period Ended June 30, 1994
Retained Earnings
December 31, 1993 $143,020
Less: Net Profit Six Months Beginning July 1, -
1993 to December 31, 1993 (20,099)
------
Beginning Retained Earnings June 30, 1993 122,921
Add: Net Profit Twelve Months Beginning -
July 1, 1993 to June 30, 1994 109,720
Ending Retained Earnings June 30, 1994 $232,641
--------
See accompanying summary of accounting policies & notes to financial statements
<PAGE>
Allied Environmental Services, Inc.
Allied Environmental Services West, Inc.
Allied Mid - Atlantic, Inc.
Allied Waste Management, Inc.
Summary of Significant Accounting Policies
------------------------------------------
Principals of Combination
- -------------------------
The combined financial statements include the accounts of the following
companies, all of which have common ownership and or activity as follows.
Throughout this report, these companies will be referred to as the "Company" or
"Allied". The combined financial statements being reported on represent a twelve
month period other than the Company's year end, which is December.
Allied Environmental Services, Inc., 200 Authorized, 100 Issued and Outstanding,
$10,000.00
Allied Environmental Services West, Inc., 200 Authorized, 100 Issued and
Outstanding, $1,000.00.
Allied Waste Management, Inc., 200 Authorized, 100 Issued and Outstanding,
$100.00.
Allied Mid - Atlantic, Inc., 200 Authorized, 100 Issued and Outstanding,
$100.00.
Combined, 800 Authorized, 400 Issued and Outstanding, $11,200.00.
Business Operations
- -------------------
The Company is engaged in arranging for the transportation and disposal of
contaminated soil to various waste disposal facilities throughout the United
States. The Company's customer base is comprised of companies primarily located
in the States of New York, New Jersey, Pennsylvania, and California.
Property Equipment and Depreciation
- -----------------------------------
Property and equipment are stated at their historical cost. Depreciation is
provided using the straight line method of depreciation over the estimated
useful lives of the assets, which range from five to seven years. Upon sale or
retirement of the assets, the cost and accumulated depreciation are eliminated
from the accounts and the related gain or loss is included as income.
Expenditures for repairs and maintenance are charged to income as incurred.
<PAGE>
Revenue Recognition
- -------------------
Revenues are recognized as services are performed.
Concentrations of Credit Risk
- -----------------------------
Trade receivables are financial instruments which potentially subject the
Company to credit risk. The Company reviews a customers credit history before
extending credit. The Company establishes an allowance for doubtful accounts
based upon the credit risk of specific customers, historical trends, and other
information. The Company does not require collateral or other security from its
customers.
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 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 differ from those estimates.
Fair Value of Financial Instruments
- -----------------------------------
The carrying amounts reported in the combined balance sheet for accounts
receivable, accounts payable, and accrued expenses and other current liabilities
approximate fair value because of the immediate or short term maturity of these
financial instruments.
Income Taxes
- ------------
The Company filed its income taxes on a cash basis for the calendar year ended
December 31, 1994, and the eleven month period ended November 30, 1995. The
resulting tax liability for the period reported on was immaterial.
<PAGE>
Allied Environmental Services, Inc.
Allied Environmental Services West, Inc.
Allied Mid - Atlantic, Inc.
Allied Waste Management, Inc.
Notes to Combined Financial Statements
--------------------------------------
Property and Equipment
Major classes of property and equipment consist of the following:
Furniture & Fixtures 6,756.00
Accumulated Amortization Furniture & Fixtures (1,920.00)
Office Equipment 2,139.00
Accumulated Depreciation Office Equipment (324.00)
Leasehold Improvements 2,790.00
Accumulated Amortization Leasehold Improvements (2,368.00)
-----------
Net Property & Equipment 7,073.00
Transactions with Affiliated Companies
- --------------------------------------
Balances with affiliated companies, which are non- interest bearing and provide
for no specific repayment terms, consist of:
June 30, 1994
Due from Allied Lead Services, Inc. $86,215.00
The amounts presented above have been reflected in the financial statements as
current.
Lease Obligations
- -----------------
The Company leases its premises in Merrick, N.Y. from Drayman Family
Partnership. The lease term is five years beginning in 1991. The lease calls for
annualized rent of $24600.00, to be paid in 1994, and $25,830.00 to be paid in
1995. The Company leases additional office space in San Rafael California. This
lease agreement is with Garco Investments, Inc.. The lease term is three years
beginning in June of 1992. The lease calls for annual rent totaling $4,208.76 to
be paid through June of 1995.
<PAGE>
Subsequent Events
- -----------------
On December 1, 1994, the Company agreed to sell to Global Spill Management,
Inc., a public company, all of the issued and outstanding stock of the Company
for $3,072,560.00 payable in cash in the amount of $43,750.00, short term notes
in the amount of $1,956,250.00, bearing interest at 8.5% and an eight year note
in the amount of $1,072,560.00, bearing interest at 2% above the Wall Street
Journal published prime rate. The notes are collateralized by the common stock
of Allied and its affiliates purchased by Global Spill Management, Inc. The
eight year note is due in annual installments of $134,070.00 on December 1 of
each year starting in 1996.
In May of 1996, the Company entered into an agreement under the terms of which
its parent, (Global Spill Management, Inc.) has agreed to sell all of the assets
of the Company to Eastern Environmental Services, Inc. for stock estimated to be
worth $700,000.00.
<PAGE>
Allied Environmental Services, Inc. and Affiliates
Contents
==============================================================================
<TABLE>
<S> <C>
Independent Auditors' Report 3
Combined financial statements
Balance sheet 4
Statements of operations 5
Statements of stockholders' equity 6
Statements of cash flows 7
Summary of significant accounting policies 8-9
Notes to combined financial statements 10-13
</TABLE>
<PAGE>
[BDO LETTERHEAD APPEARS HERE]
Independent Auditors' Report
Allied Environmental Services, Inc. and Affiliates
Merrick, New York
We have audited the accompanying combined balance sheet of Allied
Environmental Services, Inc. and affiliates as of June 30, 1995, and the
related combined statements of operations, stockholders' equity, and cash
flows for the seven months ended June 30, 1995 and the five months ended
November 30, 1994. These combined financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these combined financial statements 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 combined financial state-
ments are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
combined financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management,
as well as evaluating the overall combined financial statement presen-
tation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the combined financial statements referred to above
present fairly, in all material respects, the financial position of
Allied Environmental Services, Inc. and affiliates as of June 30, 1995,
and the results of their operations and their cash flows for the seven
months ended June 30, 1995 and the five months ended November 30, 1994,
in conformity with generally accepted accounting principles.
/s/ BDO Seidman, LLP
October 12, 1995,
except for Notes 1 and 7
which are June 25, 1996
<PAGE>
==========================================================================
<TABLE>
<CAPTION>
June 30, 1995
--------------------------------------------------------------------
<S> <C>
Assets (Substantially Pledged)
Current
Cash $ 96,145
Accounts receivable, less allowance for
doubtful accounts of $150,000 2,357,785
Prepaid expenses and other current assets 30,566
Due from affiliated companies (Note 3) 115,264
--------------------------------------------------------------------
Total current assets 2,599,760
--------------------------------------------------------------------
Property and equipment, less accumulated
depreciation (Note 2) 8,763
--------------------------------------------------------------------
Goodwill, net of accumulated amortization
of $87,500 2,869,034
--------------------------------------------------------------------
$5,477,557
====================================================================
</TABLE>
<PAGE>
=======================================================================
<TABLE>
<CAPTION>
June 30, 1995
--------------------------------------------------------------------
<S> <C>
Liabilities and Stockholders' Equity
Current liabilities
Current maturities of notes payable,
former stockholders (Note 5) $ 166,568
Accounts payable 2,114,719
Accrued expenses and other current liabilities 135,965
Due to parent (Note 4) 623,605
Due to affiliated companies (Note 3) 5,291
--------------------------------------------------------------------
Total current liabilities 3,046,148
--------------------------------------------------------------------
Notes payable, former stockholders (Note 5) 938,490
Commitments (Notes 6, 8 and 9)
Stockholders' equity
Common stock, no par value 11,200
Additional paid-in capital (Note 5) 1,982,748
(Deficit) (501,029)
--------------------------------------------------------------------
Total stockholders' equity 1,492,919
--------------------------------------------------------------------
$5,477,557
====================================================================
</TABLE>
See accompanying summary of accounting policies and notes
to combined financial statements.
<PAGE>
Allied Environmental Services, Inc. and Affiliates
Combined Statements of Operations
========================================================================
<TABLE> <CAPTION>
Seven months Five months
ended ended
June 30, November 30,
1995 1994
===================================================================
<S> <C> <C>
Sales (Note 3) $7,886,110 $5,833,545
-------------------------------------------------------------------
Cost of sales (Note 3) 6,275,853 4,774,168
-------------------------------------------------------------------
Gross Profit 1,610,257 1,059,377
Selling, general and administrative
expenses 1,218,154 1,092,617
Allocation of overhead from parent
(Note 4) 782,961 -
-------------------------------------------------------------------
Total selling, general and
administrative expenses 2,001,115 1,092,917
-------------------------------------------------------------------
(Loss) from operations (390,858) (33,240)
-------------------------------------------------------------------
Other (expense) income
Interest expense (Note 5) 110,171 -
Other income - 30,770
-------------------------------------------------------------------
Total other (expense) income 110,171 30,770
-------------------------------------------------------------------
Net (loss) $ (501,029) $ (2,470)
===================================================================
</TABLE>
See accompanying summary of accounting policies and notes
to combined financial statements.
<PAGE>
Allied Environmental Services, Inc. and Affiliates
Combined Statements of Stockholders' (Deficiency)
==========================================================================
<TABLE>
<CAPTION>
Additional
Common Paid-In
Stock Capital (Deficit)
------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, June 30, 1994 $11,200 $ - $ 149,601
Net (loss) for the five
months ended November 30, 1994 - - (2,470)
------------------------------------------------------------------------
11,200 - 147,131
Adjustments to record the
acquisition of Allied - 48,924 (147,131)
Payments made by parent of amounts
due to former stockholders:
Short term notes - 1,923,752 -
Interest - 10,072 -
Net (loss) for the seven months
ended June 30, 1995 - - (501,029)
------------------------------------------------------------------------
Balance, June 30, 1995 $11,200 $1,982,748 $(501,029)
========================================================================
</TABLE>
See accompanying summary of accounting policies and notes
to combined financial statements.
<PAGE>
Allied Environmental Services, Inc. and Affiliates
Combined Statements of Cash Flows
========================================================================
<TABLE>
<CAPTION>
Seven months Five months
ended ended
June 30, November 30,
1995 1994
====================================================================
<S> <C> <C>
Cash flows from operating activities
Net (loss) $ (501,029) $ (2,470)
Adjustments to reconcile net (loss)
to net cash provided (used) by
operating activities
Interest paid by parent reflected
as a contribution of capital 10,072 -
Depreciation and amortization 88,318 318
Provision for (recovery of) losses
on accounts receivable (55,076) 205,076
Decrease (increase) in assets
Accounts receivable 115,958 599,113
Prepaid expenses and other current
assets (13,053) 22,388
Due from affiliated companies 67,882 (96,931)
Increase (decrease) in liabilities
Accounts payable (26,611) (824,128)
Accrued expenses and other current
liabilities 48,450 21,736
Due to parent 623,605 -
Due to affiliated companies 5,291 -
----------------------------------------------------------------------
Net cash provided (used) by operating
activities 363,807 (74,898)
----------------------------------------------------------------------
Cash flows from investing activities
Purchases of property and equipment (2,326) (500)
Services rendered reflected as costs
associated with the acquisition of
the Company (25,931) -
----------------------------------------------------------------------
Net cash (used) in investing activities (28,257) (500)
----------------------------------------------------------------------
Net increase (decrease) in cash 335,550 (75,398)
Cash, beginning of period (239,405) (164,007)
----------------------------------------------------------------------
Cash, end of period $96,145 $(239,405)
======================================================================
Supplemental disclosure of non-cash
activities
Acquisition of Allied Environmental
Services, Inc.
Fair value of non-cash assets $2,387,177 $ -
======================================================================
Liabilities assumed $2,202,915 $ -
======================================================================
Payments made by parent of amounts due
to former stockholders reflected as
contributions of capital $1,933,824 $ -
======================================================================
</TABLE>
See accompanying summary of accounting policies and notes
to combined financial statements.
7
<PAGE>
Allied Environmental Services, Inc. and Affiliates
Summary of Significant Accounting Policies
================================================================================
Principles of The combined financial statements include the
Combination accounts of the following companies, all of
which have common ownership and/or activity
as follows. Throughout this report, these com-
panies will be referred to as the "Company"
or "Allied":
Common Stock
Issued and
Authorized Outstanding Amount
-------------------------------------------------------
Allied Environmental
Services, Inc. 200 100 $10,000
Allied Environmental
Services West, Inc. 200 100 1,000
Allied Waste
Management, Inc. 200 100 100
Allied Environmental
Mid-Atlantic, Inc. 200 100 100
-------------------------------------------------------
800 400 $11,200
=======================================================
All significant intercompany transactions and balances
have been eliminated.
Business The Company is a wholly-owned subsidiary of Global Spill
Operations Management, Inc. The primary business of the Company is
the arranging for the transportation and disposal of
contaminated soil and other contaminated waste products.
The Company's customer base is primarily comprised of
companies located in the States of New York, New Jersey,
Pennsylvania and California.
Property and Property and equipment are stated at cost. Depreciation
Equipment and is provided using accelerated methods over the estimated
Depreciation useful lives of the assets which range from five to
seven years. Upon sale or retirement of assets, the cost
and accumulated depreciation are eliminated from the
accounts and the related gain or loss is included in
income. Expenditures for repairs and maintenance are
charged to income as incurred.
Goodwill and Goodwill, which represents the excess of the purchase
Amortization price paid by the parent over the fair value of the net
assets of the Company as of the date of the acquisition is
being amortized using the straight line method over the
estimated useful life which is twenty years.
8
<PAGE>
Allied Environmental Services, Inc. and Affiliates
Summary of Significant Accounting Policies
================================================================================
Revenue Revenues are recognized as services are preformed.
Recognition
Concentrations Trade receivables are financial instruments which
of Credit Risk potentially subject the Company to credit risk. The
Company reviews a customer's credit history before
extending credit. The Company establishes an
allowance for doubtful accounts based upon the
credit risk of specific customers, historical trends
and other information. The Company generally does
not require collateral or other security from its
customers. No single customer accounted for a significant
amount of the Company's sales for the seven months ended
June 30, 1995 or the five months ended November 30, 1994
and there were no significant accounts receivable from a
single customer at June 30, 1995.
Use of The preparation of financial statements in conformity
Estimates with generally accepted accounting principles requires
management to make estimates and assumptions that
affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported
amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Fair Value The carrying amounts reported in the combined balance
of Financial sheet for accounts receivable, accounts payable, and
Instruments accrued expenses and other current liabilities approximate
fair value because of the immediate or short-term maturity
of these financial instruments.
Income Taxes Income taxes are calculated using the liability method
specified by Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes."
For the year ended December 31, 1994 (previous tax year)
and for the six months ended June 30, 1995, Allied
Environmental Services, Inc. and its affiliates (combined
herein) will be filing individual company Federal
income tax returns (unconsolidated).
<PAGE>
Allied Environmental Services, Inc. and Affiliates
Notes to Combined Financial Statements
================================================================================
1. Basis of From the period July 1, 1994 to November 30, 1994,
Presentation the Company was a closely held private company. On
December 1, 1994, all of the outstanding stock of
the company was acquired by Global Spill Management, Inc.,
a publicly owned company. As a result, the Company has
adopted a new basis of accounting, for which all of the
consolidating entries which were made by the parent to
record the acquisition of the Company have been "pushed
down" to the Company, where they will now be reflected as
having occurred on the date of the acquisition. Also, the
Company is presenting statements of operations and cash
flows to reflect the change in ownership.
2. Property and Major classes of property and equipment consist of the
Equipment following:
June 30, 1995
--------------------------------------------------------
Building improvements $ 2,784
Office equipment and furniture 11,727
--------------------------------------------------------
14,511
Less accumulated depreciation (5,748)
--------------------------------------------------------
Net property and equipment $ 8,763
========================================================
Depreciation expense amounted to $818 and $318 for the
seven months ended June 30, 1995 and the five months ended
November 30, 1994, respectively.
3. Transactions Sales to and purchases from affiliated companies amounted
with Affiliated to $133,105 and $13,610 for the seven months ended June
Companies 30, 1995. There were no sales or purchases from affiliated
companies during the five months ended November 30, 1994.
During the five months ended November 30, 1994, the
Company advanced $97,000 to Allied Lead Services, Inc.,
an affiliated company through common ownership, for
working capital purposes. During the seven months ended
June 30, 1995, the Company was repaid $96,610.
10
<PAGE>
Allied Environmental Services, Inc. and Affiliates
Notes to Combined Financial Statements
===============================================================================
Balances with affiliated companies, which are non-
interest bearing and provide for no specific repayment
terms, consist of:
June 30, 1995
-------------------------------------------------------
Due from affiliated companies
GSM Environmental, Inc. $104,371
Land N Sea Environmental Services, Inc. 10,503
Allied Lead Services, Inc. 390
-------------------------------------------------------
$115,264
=======================================================
June 30, 1995
-------------------------------------------------------
Due to affiliated companies
Environmental Disposal Options Corporation $ 5,291
-------------------------------------------------------
$ 5,291
=======================================================
4. Due to The Company uses various services provided by its parent,
Parent Global Spill Management, Inc. For the seven months ended
June 30, 1995, the cost for these services amounted to
$782,961. The parent allocated the Company's portion of
these costs on a basis consistent with the method of
allocation to all other subsidiaries. In the opinion of
Company management, the costs so allocated represent a
fair measure of the services provided, similar to that
which would have been incurred otherwise. As of June 30,
1995, the Company owed its parent $623,605 for these
services.
5. Notes Payable, On December 1, 1994, the parent acquired all of the issued
Former and outstanding stock of the Company for $3,072,560,
Stockholders payable in cash in the amount of $43,750, short term
notes in the amount of $1,956,250, bearing interest at
8.5%, and an eight year note in the amount of $1,072,561
bearing interest at 2% above the Wall Street Journal
published prime rate. The notes are collateralized by the
common stock of Allied and its affiliates purchased by
<PAGE>
Allied Environmental Services, Inc. and Affiliates
Notes to Combined Financial Statements
================================================================================
the parent. The eight year note is due in annual
installments of $134,070 on December 1 of each year
starting in 1996.
During the seven months ended June 30, 1995, the parent
made payments on the short term notes totaling $1,923,752,
which amounts have been reflected by the Company as a
contribution to capital.
The annual maturities for the next five years are as
follows:
1996 $ 166,568
1997 134,070
1998 134,070
1999 134,070
2000 134,070
Thereafter 402,210
--------------------------------------------------------
$ 1,105,058
========================================================
Interest expense for the seven months ended June
30, 1995 amounted to $110,171, of which $10,072
was paid by the parent and has also been reflected
as a contribution of capital.
6. Commitments The Company has an operating lease agreement for
the rental of office space, which expires in
February 1997 and provides for a minimum annual
base rent of $33,000.
The aggregate future minimum lease commitments
relating to the noncancellable operating lease as
of June 30, 1995 were as follows:
1996 $ 33,100
1997 22,600
-------------------------------------------------------
$ 55,700
=======================================================
Rent expense for the seven months ended June 30,
1995 and the five months ended November 30, 1994
was $20,835 and $15,100, respectively.
12
<PAGE>
Allied Environmental Services, Inc. and Affiliates
Notes to Combined Financial Statements
================================================================================
7. Income Taxes Deferred income taxes reflect the net tax effects
of temporary differences between the carrying
amounts of assets and liabilities for financial
reporting purposes and the amounts used for income
tax purposes.
At June 30, 1995, the components of the deferred
tax assets were as follows:
June 30, 1995
--------------------------------------------------------
Reserves, allowances and adjustments $ 60,000
Net operating loss carryforwards 135,700
Valuation allowances (195,700)
-------------------------------------------------------
Deferred income taxes $ -
=======================================================
At June 30, 1995, the net operating loss carryforward for
Federal income tax purposes amounted to $399,000 which
expires in 2010.
8. Borrowings The Company's parent, Global Spill Management, Inc., has a
revolving line of credit with a bank. The line of credit
is collateralized by a secured interest in substantially
all of the Company's assets.
9. Subsequent In May 1996, the Company entered into an agreement, under
Event the terms of which its parent has agreed to sell all of
the assets of the Company to Eastern Environmental
Services, Inc. for stock estimated to be worth $700,000.
13
<PAGE>
Allied Environmental Services, Inc. and Affiliates
Combined Balance Sheet
- ------------------------------------------------------------------------------
<TABLE>
June 30, 1996
(Unaudited)
-----------
<S> <C>
Assets
Current
Cash ($2,663)
Accounts receivable, less allowance for
possible losses of $150,000 2,058,642
Prepaid expenses and other current assets 16,552
----------
Total current assets 2,072,531
Property and equipment, net 5,484
Goodwill, net 127,116
----------
$2,205,131
==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
June 30, 1996
(Unaudited)
-------------
<S> <C>
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $1,524,541
Accured expenses and other current liabilities 20,546
----------
Total current liabilities 1,545,087
Stockholders' Equity
Common stock, no par value 11,200
Additional paid-in capital 3,071,396
(Deficit) (2,422,522)
-----------
Total stockholders' equity 660,044
$ 2,205,131
=========
See accompanying note to combined financial statements.
</TABLE>
<PAGE>
Allied Environmental Services, Inc. and Affiliates
Combined Statement of Operations
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended
June 30, 1996
(Unaudited)
-------------
<S> <C>
Sales $11,097,634
Cost of sales 8,255,721
-----------
Gross profit 2,841,913
Selling, general and administrative expenses 2,155,195
Impairment loss, goodwill 2,621,380
Allocation of overhead from parent 885,723
-----------
Loss from operations (2,820,385)
Extinguishment of shareholder debt 1,008,248
Interest expense 109,386
-----------
Net loss ($1,921,523)
===========
</TABLE>
See accompanying note to combined financial statements.
<PAGE>
ALLIED ENVIRONMENTAL SERVICES, INC. AND AFFILIATES
Note to Combined Financial Statements
(Unaudited)
1. Basis of Presentation and Principles of Combination
The accompanying unaudited combined financial statements include the combination
accounts of Allied Environmental Services, Inc. and Affiliates, (the "Company")
and its subsidiaries, all of which are wholly-owned. All significant
intercompany accounts and transactions have been eliminated in combination.
These financial statements reflect all adjustments which, in the opinion of
management, are necessary for a fair statement of results of operations for the
period presented. Certain information and footnote disclosures normally
included in financial statement prepared in accordance with generally accepted
accounting principles have been omitted. These unaudited financial statements
should be read in conjunction with the historical financial statements and notes
thereto appearing elsewhere in this filing.
<PAGE>
Exhibit 23.1
Allied Environmental Services, Inc.
and Affiliates
Merrick, New York
We hereby consent to the use of our report dated October 12, 1995 (except for
Notes 1 and 7 which are June 25, 1996) relating to the combined financial
statements of Allied Environmental Services, Inc. and Affiliates, which is
contained in the current report on Form 8-K/A of Eastern Environmental Services,
Inc. dated July 2, 1996.
BDO SEIDMAN, LLP
Philadelphia, Pennsylvania
September 16, 1996
<PAGE>
EXHIBIT 23.2
Consent of Independent Auditors
-------------------------------
We consent to the use of our report dated August 19, 1996, with respect to the
combined financial statements of Allied Environmental Services, Inc., Allied Mid
Atlantic Inc., Allied Waste Management, Inc., & Allied Environmental Services
West, Inc.. Included in the Current Report on Form 8-K/A of Eastern
Environmental Services, Inc. dated July 2, 1996.
Great Neck, N.Y.
September 16, 1996
B.J. Klinger & Co., P.C.
