<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________
FORM 8-K/A
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)
Delaware 0-16102 59-2840783
(State or Other Jurisdiction Commission (I.R.S. Employer
or Incorporation or Organization) file number Identification Number)
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 5. OTHER EVENTS
Allied Waste Services, Inc., a Delaware corporation ("Allied") is a wholly
owned subsidiary of Eastern Environmental Services, Inc. On July 2, 1996, Allied
acquired substantially all of the assets related to the operations of Allied
Environmental Services Inc. and Allied Environmental Services West, Inc. from
Global Spill Management, Inc.
ALLIED ENVIRONMENTAL SERVICES, INC. AND AFFILIATES
Independent Auditor's Report
Combined Balance Sheets as of June 30, 1996 and 1995
Combined Statements of Operations for the Year Ended June 30, 1996 and the
periods seven month period ended June 30, 1995 (new company period) and
five month period ended November 30, 1994 (prior company period).
Combined Statements of Stockholders' (Deficit) for the Year Ended
June 30, 1996 and the seven month period ended June 30, 1995 (new company
period) and five month period ended November 30, 1994 (prior company
period).
Combined Statements of Cash Flows for the Year Ended June 30, 1996 and the
seven month period ended June 30, 1995 (new company period) and five
month period ended November 30, 1994 (prior company period).
Notes to combined financial statements
ITEM 7. EXHIBITS
23.1 Consent of BDO Seidman, LLP
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: May 12, 1997 By: /s/ Louis D. Paolino, Jr.
------------------------------
Louis D. Paolino, Jr.
President
<PAGE>
ALLIED ENVIRONMENTAL
SERVICES, INC.
AND AFFILIATES
REPORT ON COMBINED FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 1996, SEVEN
MONTHS ENDED JUNE 30, 1995 AND
FIVE MONTHS ENDED NOVEMBER 30, 1994
<PAGE>
ALLIED ENVIRONMENTAL SERVICES, INC. AND AFFILIATES
CONTENTS
================================================================================
INDEPENDENT AUDITORS' REPORT 3
COMBINED FINANCIAL STATEMENTS
Balance sheets 4
Statements of operations 5
Statements of stockholders' equity (deficit) 6
Statements of cash flows 7-8
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 9-11
NOTES TO COMBINED FINANCIAL STATEMENTS 12-14
2
<PAGE>
Independent Auditors' Report
Allied Environmental Services, Inc. and Affiliates
Merrick, New York
We have audited the accompanying combined balance sheets of Allied Environmental
Services, Inc. and affiliates as of June 30, 1996 and 1995, and the related
combined statements of operations, stockholders' equity (deficit), and cash
flows for the year ended June 30, 1996 and the periods seven month period ended
June 30, 1995 (new company period) and five month period ended November 30, 1994
(prior company period). 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 statements 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 presentation. We believe that our audits provide a
reasonable basis for our opinion.
As described in Note 1, on July 2, 1996, the Company sold all of its assets, net
of substantially all of its liabilities. The proceeds from the sale were used to
pay down the line of credit of the Company's parent, Global Spill Management,
Inc.
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, 1996 and 1995, and the results of
their operations and their cash flows for the year ended June 30, 1996 and for
the seven month period ended June 30, 1995 and the five month period ended
November 30, 1994, in conformity with generally accepted accounting principles.
/s/ BDO Seidman, LLP
November 12, 1996
3
<PAGE>
ALLIED ENVIRONMENTAL SERVICES, INC. AND AFFILIATES
COMBINED BALANCE SHEET
================================================================================
June 30, 1996 1995
================================================================================
ASSETS (Substantially Pledged)
CURRENT
Cash $ 1,685 $ 96,145
Accounts receivable, less allowance for
doubtful accounts of $425,000 and $150,000 1,299,992 2,357,785
Prepaid expenses and other current assets 16,552 30,566
Due from affiliated companies (Note 3) - 115,264
- --------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 1,318,229 2,599,760
- --------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT, less accumulated
depreciation (Note 2) 5,484 8,763
- --------------------------------------------------------------------------------
GOODWILL, net of accumulated amortization of
$211,223 and $87,500 (Note 1) 951,077 2,869,034
- --------------------------------------------------------------------------------
TOTAL ASSETS $ 2,274,790 $ 5,477,557
================================================================================
<PAGE>
ALLIED ENVIRONMENTAL SERVICES, INC. AND AFFILIATES
COMBINED BALANCE SHEET
================================================================================
June 30, 1996 1995
================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of notes payable,
former stockholders (Note 4) $ - $ 166,568
Accounts payable 1,484,991 2,114,719
Accrued expenses and other current liabilities 89,799 135,965
Due to parent (Note 3) - 623,605
Due to affiliated companies (Note 3) - 5,291
- --------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 1,574,790 3,046,148
- --------------------------------------------------------------------------------
NOTES PAYABLE, former stockholders (Note 4) 932,727 938,490
COMMITMENTS (Notes 5 and 7)
STOCKHOLDERS' (DEFICIT) EQUITY
Common stock, no par value 11,200 11,200
Additional paid-in capital (Notes 3 and 4) 3,077,160 1,982,748
(Deficit) (3,321,087) (501,029)
- --------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' (DEFICIT) EQUITY (232,727) 1,492,919
- --------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY AND LIABILITIES $ 2,274,790 $ 5,477,557
================================================================================
See accompanying summary of accounting policies and notes to combined financial
statements.
4
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ALLIED ENVIRONMENTAL SERVICES, INC. AND AFFILIATES
COMBINED STATEMENTS OF OPERATIONS
================================================================================
New Company Prior Company
---------------------- -------------
Year Seven months Five months
ended ended ended
June 30, June 30, November 30,
1996 1995 1994
================================================================================
SALES $ 10,549,739 $ 7,886,110 $ 5,833,545
- --------------------------------------------------------------------------------
COST OF SALES 8,211,825 6,275,853 4,774,168
- --------------------------------------------------------------------------------
GROSS PROFIT 2,337,914 1,610,257 1,059,377
- --------------------------------------------------------------------------------
OPERATING EXPENSES
Selling, general and administrative
expenses 2,345,635 1,218,154 1,092,617
Impairment loss, goodwill (Note 1) 1,817,733 - -
Allocation of overhead from parent
(Note 3) 885,723 782,961 -
- --------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES 5,049,091 2,001,115 1,092,917
- --------------------------------------------------------------------------------
(LOSS) FROM OPERATIONS (2,711,177) (390,858) (33,240)
- --------------------------------------------------------------------------------
OTHER (EXPENSE) INCOME
Interest expense (Note 5) (108,881) (110,171) -
Other income - - 30,770
- --------------------------------------------------------------------------------
TOTAL OTHER (EXPENSE) INCOME (108,881) (110,171) 30,770
- --------------------------------------------------------------------------------
NET (LOSS) $ (2,820,058) $ (501,029) $ (2,470)
================================================================================
See accompanying summary of accounting policies and notes to combined financial
statements.
5
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ALLIED ENVIRONMENTAL SERVICES, INC. AND AFFILIATES
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
================================================================================
Additional Retained
Common Paid-In Earnings
Stock Capital (Deficit)
================================================================================
BALANCE, June 30, 1994 $ 11,200 $ - $ 149,601
Net (loss) for the five months ended
November 30, 1994 - - (2,470)
- --------------------------------------------------------------------------------
BALANCE, December 1, 1994 11,200 - 147,131
Adjustments to record the acquisition of
Allied Environmental Services, Inc. - 48,924 (147,131)
Payments made by parent of amounts due to
former stockholders (Note 4)
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)
Payments made by parent of amounts
due to former stockholders (Note 4)
Short-term notes - 172,331 -
Interest - 139,726 -
Forgiveness of amounts due to affiliates,
net (Note 3) - 782,355 -
Net (loss) - - (2,820,058)
- --------------------------------------------------------------------------------
BALANCE, June 30, 1996 $ 11,200 $3,077,160 $(3,321,087)
================================================================================
See accompanying summary of accounting policies and notes to combined financial
statements.
6
<PAGE>
ALLIED ENVIRONMENTAL SERVICES, INC. AND AFFILIATES
COMBINED STATEMENTS OF CASH FLOWS
================================================================================
New Company Prior Company
---------------------- -------------
Year Seven months Five months
ended ended ended
June 30, June 30, November 30,
1996 1995 1994
================================================================================
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) $(2,820,058) $(501,029) $ (2,470)
Adjustments to reconcile net (loss)
to net cash (used) provided by
operating activities
Impairment loss, goodwill 1,817,733 - -
Interest paid by parent reflected
as a contribution of capital 139,726 10,072 -
Depreciation and amortization 127,554 88,318 318
Provision for (recovery of) losses
on accounts receivable 275,000 (55,076) 205,076
Decrease (increase) in assets
Accounts receivable 782,793 115,958 599,113
Prepaid expenses and other
current assets 14,014 (13,053) 22,388
Due from affiliated companies - 67,882 (96,931)
Increase (decrease) in liabilities
Accounts payable (629,728) (26,611) (824,128)
Accrued expenses and other current
liabilities (46,166) 48,450 21,736
Due to parent - 623,605 -
Due to affiliated companies 268,723 5,291 -
- --------------------------------------------------------------------------------
NET CASH (USED IN) PROVIDED BY
OPERATING ACTIVITIES (70,409) 363,807 (74,898)
- --------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (552) (2,326) (500)
Services rendered reflected as costs
associated with the acquisition of
the Company (23,499) (25,931) -
- --------------------------------------------------------------------------------
NET CASH (USED) IN INVESTING ACTIVITIES (24,051) (28,257) (500)
- --------------------------------------------------------------------------------
7
<PAGE>
ALLIED ENVIRONMENTAL SERVICES, INC. AND AFFILIATES
COMBINED STATEMENTS OF CASH FLOWS
================================================================================
New Company Prior Company
---------------------- -------------
Year Seven months Five months
ended ended ended
June 30, June 30, November 30,
1996 1995 1994
================================================================================
NET (DECREASE) INCREASE IN CASH $ (94,460) $ 35,550 $ (75,398)
CASH, beginning of year/periods 96,145 (239,405) (164,007)
- --------------------------------------------------------------------------------
CASH, end of year/periods $ 1,685 $ 96,145 $ (239,405)
================================================================================
SUPPLEMENTAL DISCLOSURES 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 $ 172,331 $ 1,923,752 $ -
================================================================================
Forgiveness of amounts due to
affiliates, net $ 782,355 $ - $ -
================================================================================
See accompanying summary of accounting policies and notes to combined financial
statements.
8
<PAGE>
ALLIED ENVIRONMENTAL SERVICES, INC. AND AFFILIATES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
================================================================================
PRINCIPLES OF The combined financial statements include the accounts of the
COMBINATION 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":
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.
BASIS OF From the period July 1, 1994 to November 30, 1994, the Company
PRESENTATION 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 adopted a new basis of accounting, for which all of
the combining entries which were made by the parent to record
the acquisition of the Company have been "pushed down" to the
Company, where they were reflected as having occurred on the
date of the acquisition. Also, the Company is presenting
statements of operations, stockholders' equity (deficit) and
cash flows to reflect the change in ownership.
9
<PAGE>
ALLIED ENVIRONMENTAL SERVICES, INC. AND AFFILIATES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
================================================================================
BUSINESS The Company was, from December 1, 1994 to July 2, 1996 (see
OPERATIONS Note 1), a wholly-owned operating subsidiary of Global Spill
Management, Inc. The primary business of the Com pany 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 is
EQUIPMENT AND provided using accelerated methods over the estimated useful
DEPRECIATION 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 price
AMORTIZATION 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. The Company evaluates the recoverability
of the goodwill regularly and considers whether the goodwill
should be completely or partially written off or the
amortization period accelerated.
IMPAIRMENT OF In accordance with the provisions of Statement of Financial
LONG LIVED Accounting Standards No. 121 ("SFAS 121"), writedowns for
ASSETS AND impairment are recorded as the facts and circumstances warrant.
FOR LONG-LIVED Because of the sale of the net assets of the Company on
ASSETS TO BE July 2, 1996 (see Note 1 for the details), it has been
DISPOSED OF determined that the previously recorded goodwill was impaired.
REVENUE Revenues are recognized as services are performed.
RECOGNITION
10
<PAGE>
ALLIED ENVIRONMENTAL SERVICES, INC. AND AFFILIATES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
================================================================================
CONCENTRATIONS Trade receivables are financial instruments which potentially
OF CREDIT RISK 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 year ended June 30, 1996, the seven months ended June 30,
1995 or the five months ended November 30, 1994. There were no
significant accounts receivable from a single customer at
June 30, 1996 and 1995.
USE OF The preparation of financial statements in conformity with
ESTIMATES 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 sheet for
OF FINANCIAL accounts receivable, accounts payable, and accrued expenses and
INSTRUMENTS 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."
11
<PAGE>
ALLIED ENVIRONMENTAL SERVICES, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
================================================================================
1. SALE OF On June 28, 1996, the Company's parent, Global Spill
ASSETS Management, Inc. ("GSMI") signed an agreement to sell all of
the assets, net of substantially all of the liabilities, of the
Company to Eastern Environmental Services, Inc. ("EESI") for
common stock of EESI valued at $700,000. The agreement was
contingent upon the proceeds from the sale of the EESI stock
being deposited with GSMI's lender and applied against the line
of credit of GSMI, which occurred on July 2, 1996.
As a result of the proposed sale, the Company has reflected its
net assets at the lower of cost or market. Market value is
based on the estimated value of the stock received as a result
of the sale. At June 30, 1996, a charge to operations amounting
to $1,817,733 has been reflected as an impairment loss on the
goodwill previously recorded.
2. PROPERTY Major classes of property and equipment consist of the
AND following:
EQUIPMENT
June 30, 1996 1995
---------------------------------------------------------------
Building improvements $ 2,784 $ 2,784
Office equipment and furniture 12,279 11,727
---------------------------------------------------------------
15,063 14,511
Less accumulated depreciation (9,579) (5,748)
---------------------------------------------------------------
Net property and equipment $ 5,484 $ 8,763
===============================================================
Depreciation expense amounted to $3,831, $818 and $318 for the
year ended June 30, 1996, the seven months ended June 30, 1995
and the five months ended November 30, 1994, respectively.
12
<PAGE>
ALLIED ENVIRONMENTAL SERVICES, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
================================================================================
3. TRANSACTIONS The Company used various services provided by its then
WITH parent, Global Spill Management, Inc. For the year ended June
AFFILIATED 30, 1996 and for the seven months ended June 30, 1995, the
COMPANIES cost for those services amounted to $885,723 and $782,961,
respectively. 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.
Concurrent with the agreement to sell the Company, the board
of directors of GSMI and all of its subsidiaries agreed to
treat all intercompany accounts receivable from and accounts
payable to each member of the consolidated group as if they
were due from or to the parent, GSMI. GSMI agreed to forgive
all such net indebtedness. As a result, the Company treated
the net amounts due to GSMI, in the amount of $782,355, as a
contribution of capital.
4. NOTES PAYABLE, On December 1, 1994, the parent acquired all of the issued
FORMER and outstanding stock of the Company for $3,072,560, payable
STOCKHOLDERS 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 $1,072,560, bearing interest at 2%
above the Wall Street Journal published prime rate. The notes
were collateralized by the common stock of Allied and its
affiliates purchased by the parent.
During the year ended June 30, 1996 and the seven months
ended June 30, 1995, the parent made payments on the notes
totaling $172,331 and $1,923,752, respectively, which have
been reflected by the Company as a contribution to capital.
Interest expense for the year ended June 30, 1996 and the
seven months ended June 30, 1995 amounted to $108,881 and
$110,171, respectively, of which $139,726 and $10,072 was
paid by the parent and has also been reflected as a
contribution of capital for the respective periods.
As disclosed in Note 1, the Company sold its assets to
Eastern Environmental Services, Inc. Concurrent with the
closing, the Company and the former stockholders released
each other from any and all obligations to or from each
other. As a result, the principal and interest due to the
former stockholders,
13
<PAGE>
ALLIED ENVIRONMENTAL SERVICES, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
================================================================================
in the amount of $932,727, was forgiv en as of the date of
sale, July 2, 1996. This forgiveness will be recorded in
fiscal 1997.
5. COMMITMENTS The Company has an operating lease agreement for the rental
of office space, which expires in February 1997 and provides
for a future minimum lease commitment of $22,600.
Rent expense for the year ended June 30, 1996, the seven
months ended June 30, 1995 and the five months ended November
30, 1994 was $36,318, $20,835 and $15,100, respectively.
6. 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, 1996, the components of the deferred tax assets
were as follows:
June 30, 1996 1995
=============================================================
Reserves, allowances and adjustments $ 144,000 $ 51,000
Net operating loss carryforwards 354,000 140,600
Valuation allowances (498,000) (191,600)
-------------------------------------------------------------
DEFERRED INCOME TAX ASSET $ - $ -
=============================================================
The Company's net operating losses, which amount to
$1,041,000 at June 30, 1996, expire in 2010 and 2011.
7. BORROWINGS The Company's parent, Global Spill Management, Inc., had a
revolving line of credit with a bank. The line of credit was
collateralized by a secured interest in substantially all of
the Company's assets. As stated in Note 1, the proceeds from
the sale of the Company's net assets was used to pay down
this line of credit, and as a result, the Company has been
released from any obligations under the collateral agreement.
14
<PAGE>
Consent of Independent Auditors
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (Registration No. 33-25155, filed on October 24,
1988), the Registration Statement on Form S-8 (Post-Effective Amendment
No. 2 to Registration No. 33-21251, filed on May 4, 1990), the Registration
Statement on Form S-8 (Registration No. 33-37374, filed on October 18,
1990), the Registration Statement on Form S-8 (Registration No. 33-45250,
filed on January 27, 1992), the Registration Statement on Form S-3
(Registration No. 333-00283, filed on February 14, 1996) of our reports
relating to the combined financial statements of Allied Environmental
Services, Inc. and Affiliates dated October 12, 1995 (except for Notes 1
and 7 which are June 25, 1996) for the five month period ended November 30,
1994 and seven month period ended June 30, 1995 and November 12, 1996 for
the year ended June 30, 1996, in Eastern Environmental Services, Inc.'s Form
8-K dated July 2, 1996 (as amended on Forms 8-K/A dated September 16, 1996,
and May 12, 1997).
/s/ BDO Seidman, LLP
Philadelphia, Pennsylvania
May 12, 1997
