<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTERLY PERIOD ENDED MARCH 31, 1996
COMMISSION FILE NUMBER
0 - 25998
BIOSAFE INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
NEVADA 95-4203626
(State or Other Jurisdiction (I.R.S Employer
of Incorporation or Organization) Identification No.)
10 FAWCETT STREET, CAMBRIDGE, MASSACHUSETTS 02138
(Address of principal executive offices, including zip code)
(617) 497-4500
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days
Yes X No .
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.
CLASS OUTSTANDING AS OF MAY 30, 1996
----- ------------------------------
Common Stock, $.001 par value 11,759,254
2
<PAGE> 2
BIOSAFE INTERNATIONAL, INC.
---------------------------
Index to Contents Page No.
----------------- --------
Part I Financial Information
Item I. Financial Statements:
Consolidated Balance Sheets as of March 31, 1996
and December 31, 1995 1 - 2
Consolidated Statements of Operations for the
Three Months Ended March 31, 1996 and 1995,
and for the period from April 23,1990,
(inception) to March 31, 1996 3
Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1996 and 1995,
and for the period from April 23, 1990
(inception) to March 31, 1996 4
Notes to Consolidated Financial Statements 5 - 12
Item 2. Management's Discussion and Analysis of Consolidated
Financial Condition and Results of Operations 13 - 19
Part II Other Information
Item 1. Legal Proceedings 20
Item 2. Changes in Securities 20
Item 3. Defaults on Senior Securities 20
Item 4. Submission of Matters to a Vote of Security Holders 20
Item 5. Other Information 21
Item 6. Exhibits and Reports on Form 8-K 21
Signatures 22
3
<PAGE> 3
BIOSAFE INTERNATIONAL,INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
<TABLE>
Consolidated Balance Sheets
<CAPTION>
March 31, December 31,
Assets 1996 1995
------ ----------- -----------
(unaudited)
<S> <C> <C>
Current assets:
Cash $1,703,446 $ 5,237,064
Accounts and notes receivable, net 1,359,599 2,047,065
Prepaid expenses and other current assets 306,003 515,558
----------- -----------
Total current assets 3,369,048 7,799,687
Assets held for sale, net (Note 3) 456,516 505,980
Restricted cash 187,500 187,500
Due from former employees (Note 4) 507,193 385,425
Investment in affiliate 20,000 10,029
Property and equipment, net (Note 5) 13,565,021 12,503,091
Prepaid consulting fees 667,500 834,375
Deferred financing costs 1,180,662 1,182,251
Other assets 116,253 99,772
----------- -----------
Total assets $20,069,693 $23,508,110
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE> 4
BIOSAFE INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
<TABLE>
Consolidated Balance Sheets
<CAPTION>
March 31, December 31,
Liabilities and Stockholders' Equity 1996 1995
------------------------------------ ------------ ------------
(unaudited)
<S> <C> <C>
Current liabilities:
Current portion of long-term debt and notes payable $ 1,530,870 $ 1,526,188
Accounts payable 1,478,135 3,106,134
Accrued expenses 1,620,029 698,538
Restructuring and discontinued operations (Note 3) 900,000 -
Income and franchise taxes payable 25,000 75,535
------------ -----------
Total current liabilities 5,554,034 5,406,395
Long-term debt and notes payable 11,908,951 12,266,003
Landfill closure and post-closure costs (Note 6) 1,500,000 1,500,000
------------ -----------
Total Liabilities 18,962,985 19,172,398
------------ -----------
Contingencie (Note 7)
Minority interest 1,037,773 1,044,111
------------ -----------
Stockholders' equity (deficit): (Note 8)
Common stock, $.001 par value. Authorizcd
100,000,000 shares; 11,759,254 and
l1,706,338 shares issued and outstanding
at March 31, 1996 and December 31, 1995 11,759 11,706
Additional paid-in capital 12,727,010 12,607,210
Deficit accumulated during the development stage (12,669,834) (9,327,315)
------------ -----------
Total stockholders' equity (deficit) 68,935 3,291,601
------------ -----------
Total liabilities and stockholders' equity (deficit) $ 20,069,693 $23,508,110
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 5
BIOSAFE INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
<TABLE>
Consolidated Statements of Operations
(unaudited)
<CAPTION>
Period from
Three Months Ended April 23, 1990
--------------------------- (inception) to
March 31, March 31, March 31,
1996 1995 1996
----------- -------- -----------
<S> <C> <C> <C>
Landfill revenues $ 417,199 $ -- $ 1,761,596
----------- --------- ------------
Cost of landfill operations:
Operating expenses
Depreciation 228,421 -- 994,433
Total cost of landfill operations: 43,831 -- 115,480
----------- --------- ------------
272,252 -- 1,109,913
----------- --------- ------------
Gross profits 144,947 -- 651,683
Selling, general and administrative expenses 1,169,060 580,922 10,183,259
Amortization of prepaid consulting fees 166,875 -- 667,500
Restructuring 250,000 -- 250,000
----------- --------- ------------
Income (loss) from operations (1,440,988) (580,922) (10,449,076)
----------- --------- ------------
Other income (expense):
Royalty and other income 12,070 725,000 4,937,290
Interest income 73,160 16,476 457,090
Gain on sale of assets -- -- 222,728
Interest expense and financing costs (275,646) (40,176) (1,303,830)
Equity in loss of affiliate (30,000) -- (30,000)
Write-off of accounts and notes receivable -- -- (2,975,001)
Loss on investment in marketable securities -- (31,250) (100,000)
Write-off assets -- -- (241,546)
----------- --------- ------------
Total other income (expense) (220,416) 670,050 966,731
----------- --------- ------------
Income (loss) before income taxes, minority
interest and discontinued operations (1,661,404) (89,128) (9,482,345)
Federal and state income tax expense 25,000 15,000 (203,035)
----------- --------- ------------
Income (loss) before minority interest
and discontinued operations (1,686,404) 74,128 (9,685,380)
Minority interest 6,338 -- (6,678)
----------- --------- ------------
Income (loss) from continuing operations (1,680,066) 74,128 (9,692,058)
Discontinued operations (note 4) (1,662,453) (52,500) (2,977,776)
----------- --------- ------------
Net income (loss) (3,342,519) 21,628 $(12,669,834)
============
Preferred stock dividend -- 9,800
----------- ---------
Net income (loss) available for
common shareholders $(3,342,519) $ 11,828
=========== =========
Net income (loss) per share:
Income (loss) from continuing operations $ (0.14) $ 0.01
Discontinued operations (0.14) 0.00
----------- ---------
Net income (loss) per share $ (0.28) $ 0.01
=========== =========
Weighted average number of shares used in
computation of net income (loss) per share 11,745,765 5,625,365
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 6
BIOSAFE INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
<TABLE>
Consolidated Statements of Cash Flows
(unaudited)
<CAPTION>
Period from
April 23, 1990
Three months ended March 31, (inception) to
--------------------------- March 31,
1996 1995 1996
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $(3,342,519) $ 21,628 $(12,669,834)
Adjustments to reconcile net income (loss) to
net cash used by operating activities:
Discontinued operations 1,662,453 1,662,453
Depreciation and amortization 285,028 3,667 1,098,421
Deferred income taxes -- 15,000 --
Loss on investment in marketable securities -- 31,250 100,000
Minority interest (6,338) 6,678
Allowance for doubtful accounts -- 232,145
Write-off of accounts and notes receivable -- -- 2,975,001
Issuance of common stock for services -- 383,300
Write-off of assets -- -- 241,546
Changes in assets and liabilities:
Accounts receivable and notes receivable 635,766 (716,227) (2,968,445)
Prepaid expenses and other current assets 209,555 (131,567) (306,003)
Account payable (1,532,634) (14,233) 1,751,252
Accrued expenses 969,602 (127,312) 1,674,092
Income and franchise taxes payable (30,526) (98,005) 45,009
Deferred income -- -- (500,000)
----------- ---------- ------------
Net cash used by continuing operations (1,149,613) (1,015,799) (6,274,385)
Net cash used by discontinued operations (874,238) -- (874,238)
----------- ---------- ------------
Net cash used by activities (2,023,851) (1,015,799) (7,148,623)
----------- ---------- ------------
Cash flows from investing activities:
Assets held for sale 49,464 -- (341,235)
Restricted cash -- -- (187,500)
Receivable from One, Three, Six, Inc. -- -- (800,000)
Investment in affiliate (9,971) -- (20,000)
Construction in progress (912,710) (10,322,615)
Future landfill development projects (138,047) -- (407,428)
Other property and equipment (34,751) (992,409)
Landfill equipment (33,854) (65,668)
Patents -- (4,518) (63,385)
Other assets (16,408) -- (50,950)
Licenses and permits -- -- (78,807)
----------- ---------- ------------
Net cash provided (used) by investing activities (1,096,277) (4,518) (13,329,997)
----------- ---------- ------------
Cash flows from financing activities:
Borrowings from notes payable and long-term debt -- 295,698 2,266,114
Repayment of notes payable and long-term debt (352,370) (93,627) (1,546,934)
Net borrowings and advances
from stockholders and related parties (121,768) (402,221) 259,613
Issuance of subordinated notes payable -- -- 12,405,000
Repayments of subordinated notes payable -- (770,500) (790,000)
Net proceeds from issuance of common stock 119,853 4,709,392 10,451,509
Redemption of preferred stock -- -- (300,000)
Preferred stock dividends -- (9,800) (117,334)
Minority interest -- -- 1,031,095
Deferred financing and registration cost (59,205) (9,825) (1,476,997)
----------- ---------- ------------
Net cash provided by financing activities (413,490) 3,719,117 22,182,066
----------- ---------- ------------
Increase (decrease) in cash (3,533,618) 2,698,800 1,703,446
Cash, beginning of period 5,237,064 170,893 --
----------- ---------- ------------
Cash, end of period $ 1,703,446 $2,869,693 $ 1,703,446
=========== ========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 7
BIOSAFE INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
Notes to Consolidated Financial Statements
(1) BASIS OF PRESENTATION
These consolidated financial statements have been prepared by the Company
without audit. In the opinion of management, all adjustments (which include
only normal recurring adjustments) necessary to present fairly the
financial position, results of operations and cash flows at March 31, 1996
and for all periods presented have been made. The results of operations for
the period ended March 31, 1996 are not necessarily indicative of the
operating results for the full year.
Certain information and footnote disclosures normally included in
consolidated financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted. It is
suggested that these condensed financial statements be read in conjunction
with the Company's December 31, 1995 audited financial statements and notes
thereto.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Landfill Revenue Recognition
The Company's revenues from its landfill operations consist of disposal fees
(known as tipping fees) charged to customers. Tipping fees are recognized
as revenue based on the volume or weight of solid waste disposed of at the
Company's operated or owned landfill sites. The daily volume of waste
disposed at the Company's disposal facilities may vary according to market
and weather conditions.
Cost of Landfill Operations
Cost of operations includes direct labor, fuel, equipment maintenance,
insurance, depreciation and amortization, depletion of landfill development
costs, accruals for ongoing closure and post-closure regulatory compliance
(for landfills owned) and other routine maintenance and operating costs
directly related to landfill operations. Also included in cost of landfill
operations are payments made to certain Towns in which each landfill is
located in the form of "Host Town Fees" and "Closure Fees" (for landfills
operated under management contracts), which are negotiated on a rate per
ton basis as part of the contract with each Town. In such Towns, the Town
is responsible for the ultimate closure and post-closure costs related to
such landfills.
Landfill Closure and Post-Closure Costs
The Company estimates and accrues remaining closure and post-closure costs
for landfills owned or acquired on a unit-of-production basis over each
facility's estimated remaining airspace capacity. The Company records
reserves for estimated closure and post-closure costs, as necessary, as a
component of the purchase price for acquisitions using the purchase method
of accounting when the acquisition is consummated.
(Continued)
5
<PAGE> 8
BIOSAFE INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
Notes to Consolidated Financial Statements
Property and Equipment
Capitalization of landfill development costs begins with the signing of
landfill management contracts for facilities operated by the Company that
are not owned or upon determination by the Company of economic feasibility
or extended useful life of each landfill acquired as a result of
comprehensive engineering and profitability studies. Capital costs include
acquisition, engineering, legal and other direct costs associated with the
permitting and development of new landfills, expansions at existing
landfills, and cell development. These costs are capitalized pending
receipt of all necessary operating permits or commencement of operations.
Interest is capitalized on landfill costs related to permitting, site
preparation, and facility construction during the period that these assets
are undergoing activities necessary for their intended use. Interest costs
of $90,502 and $0 were capitalized during the three months ended March 31,
1996 and 1995, respectively.
Landfill development costs will be depleted using the unit-of-production
method, which is calculated using the total units of airspace filled
during the year in relation to total estimated permitted airspace
capacity. The determination of airspace usage and remaining airspace
capacity is an essential component in the calculation of landfill asset
depletion. The determination is performed by conducting topography
surveys, generally using aerial survey techniques, of the Company's
landfill facilities to determine remaining airspace capacity in each
landfill. The surveys are reviewed by the Company's consulting engineers,
the Company's internal operating and engineering staff, and its financial
and accounting staff. Current year-end remaining airspace capacity is
compared with prior year-end remaining airspace capacity to determine the
amount of airspace used during the current year. The result is compared
against the airspace consumption figures used during the current year for
accounting purposes (primarily tipping volume) to ensure proper recording
of the provision for depletion. The process of reevaluating airspace
consumption did not impact results of operations for any periods presented
in these consolidated financial statements.
The Company performs assessments for each landfill of the recoverability of
capitalized costs which requires considerable judgment by management with
respect to certain external factors, including, but not limited to,
anticipated future revenues, estimated economic life and changes in
environmental regulation. It is the Company's policy to periodically
review and evaluate that the benefit associated with these costs are
expected to be realized and therefore capitalization and depletion is
justified. Capitalized costs related to landfill development for which no
future economic benefit is determined by the Company are expensed in the
period in which such determination is made. There were no previously
capitalized costs expensed based on such determination during the three
months ended March 31, 1996 and 1995.
(Continued)
6
<PAGE> 9
BIOSAFE INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
Notes to Consolidated Financial Statements
All other property and equipment are stated at cost. Depreciation and
amortization are provided using the straight-line method over the
estimated useful lives of the respective assets as follows:
Buildings, facilities and improvements 10 to 30 years
Vehicles and equipment 5 to 10 years
Earnings Per Share
Primary earnings per common share are based on the weighted average number
of common shares and dilutive common stock equivalent shares outstanding
during each period. Fully diluted earnings per share have been omitted
since they are either the same as primary earnings per share or are
anti-dilutive.
Reclassifications
Certain amounts in prior year financial statements have been reclassified to
conform to the 1996 presentation.
(3) RESTRUCTURING OF OPERATIONS AND ASSETS HELD FOR SALE
On March 27, 1996, the Company announced its intention to take meaningful
action to conserve cash and working capital, including the restructuring
of the Company's operations to focus its resources and activities on its
core business of landfill remodeling and operation.
Restructuring Charge
During the first quarter of 1996, the Company recorded a restructuring
charge of $250,000 ($0.02 per share) for estimated restructuring costs
associated with management's plan to focus on the core business of
landfill remodeling and operation as announced on March 27, 1996. These
costs included accruals for employee severance, non-cancelable lease
commitments and professional fees. Cash flow expenditures will be funded
by the Company's cash flow from operating and financing activities. The
restructuring plan, when fully implemented, is expected to result in
annual savings in excess of $1.0 million. The reserve is expected to be
utilized by the end of 1996.
(Continued)
7
<PAGE> 10
BIOSAFE INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
Notes to Consolidated Financial Statements
Assets Held for Sale and Discontinued Operations
During the fourth quarter of 1995, the Company recorded a non recurring
charge to 1995 earnings of approximately $1.3 million primarily related to
the write-down of assets to their estimated net realizable value. The
aggregate carrying values of such property considered no longer necessary
for the operation of the Company will be reviewed periodically and stated
at the estimated net realizable value. During the first quarter of 1996,
the Company recorded an additional charge of $49,464 to reduce the
carrying value as of March 31, 1996. Net assets of the discontinued
operations consists primarily of land of $402,500 and other property and
equipment of $54,016, and are stated at their approximate net realizable
value at March 31, 1996. As a result of discontinuance of these
operations, the Company expects annual savings in excess of $2.0 million.
The Company expects to dispose of these assets during 1996.
On March 27, 1996, the Company ceased operations at its technology center in
Woburn, Massachusetts and discharged all employees and consultants
previously engaged in developing technologies with potential application
in activities including the manufacture of useful materials from tires and
other recycled materials, contaminated soil cleanup and recycling,
industrial sludge disposal, size reduction equipment design and
manufacture (the "Ancillary Technologies"), and Major Sports Fantasies,
Inc. ("MSF"), a business unrelated to the environmental industry. In
addition, the Company discharged certain employees involved in the
Company's core landfill remodeling and operation business, including
administrative, marketing and sales, and operations. No substantial
revenues have been received from the technology center operations or MSF
activities.
The expenses associated with operating the Ancillary Technologies for all
periods presented are reported in the accompanying reclassified
consolidated financial statements of operations and cash flows under
discontinued operations. In the first quarter of 1996, the Company
provided a reserve of $650,000 for estimated costs directly associated
with disposing of the Ancillary Technologies and MSF. In addition,
included in accounts payable, accrued expenses and notes payable at March
31, 1996 are $475,466 related to liabilities of these discontinued
operations. No income tax expense or benefit was recognized due to the
Company's net operating loss carryforwards.
The Company is currently maintaining ownership of its infectious medical
waste disposal technology (which is fully developed and requires no
further development costs), which is outside the Company's core landfill
remodeling and operations business, subject to the non-exclusive purchase
option described in the following paragraph.
(Continued)
BIOSAFE INTERNATIONAL, INC. AND SUBSIDIARIES
8
<PAGE> 11
(A DEVELOPMENT STAGE COMPANY)
Notes to Consolidated Financial Statements
On March 27, 1996, Dr. Richard H. Rosen resigned from the offices of
Chairman of the Board of Directors, President, Chief Executive Officer and
Treasurer of the Company and all of its subsidiaries and affiliates (see
Due From Former Employees). The Board of Directors named Philip Strauss,
Chief Operating Officer, to additional positions of Chief Executive
Officer, President and Treasurer of the Company and named Jay Matulich as
interim Chairman of the Board of Directors. In connection with Dr. Rosen's
resignation, the Company granted Dr. Rosen a non-exclusive option to
purchase the Company's medical waste technology, and the technology center
operations described above, which are not used in the Company's core
landfill remodeling and operation business, at a price to be determined by
independent appraisal. The Company retains a right to accept a competing
offer deemed preferable by the Company, subject to a right of first
refusal by Dr. Rosen. The assets of these subsidiaries that are expected
to be sold have been included in assets held for sale on the consolidated
balance sheets.
(4) DUE FROM FORMER EMPLOYEES
This represents outstanding cash advances to former employees for
anticipated business-related expenses. The Company is also evaluating the
potential to recover additional amounts from former employees. Certain of
these amounts may be disputed and, therefore, the Company is not able to
ascertain the ultimate amount of potential recoveries at this time. See
note 3.
(5) PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
---- ----
(unaudited)
<S> <C> <C>
Construction in progress - landfills owned $ 5,306,693 5,152,750
Construction in progress - landfills operated 5,665,922 4,907,155
Future landfill development projects 407,428 269,381
Equipment used in landfills 1,186,500 1,152,646
Deposit on equipment purchase 400,000 400,000
Buildings, facilities and improvements 563,918 552,060
Other property and equipment 325,714 302,821
----------- ----------
13,856,175 12,736,813
Less accumulated depreciation and amortization (291,154) (233,722)
----------- ----------
$13,565,021 12,503,091
=========== ==========
</TABLE>
(Continued)
9
<PAGE> 12
BIOSAFE INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
Notes to Consolidated Financial Statements
Town of Fairhaven
The Company entered into a management contract with the Town of Fairhaven,
Massachusetts on July 24, 1994 to remodel the Town of Fairhaven landfill.
On June 22, 1995, the Company commenced operations and began accepting
waste at the landfill utilizing existing capacity. In addition, the Company
has remodeled and constructed an initial cell and is awaiting final
authorization from the Massachusetts Department of Environmental Protection
("MDEP"). Upon receipt of final authorization from MDEP, and if there is
not an adverse result in the litigation referred to below, the Company will
be permitted to increase daily capacity from 150 to approximately 400 tons
per day ("TPD"). The contract requires the Company to pay a "Host Town Fee"
of $2.00 per ton or 5% of the tipping fees for solid waste and $3.00 per
ton to contribute to the Town's closure and post-closure costs, excluding
waste from the Town and waste for "beneficial reuse."
On November 8, 1995 an action was brought against various parties including
the Company relating to the Fairhaven landfill. Plaintiffs are 16 residents
of Fairhaven, Massachusetts who reside in the vicinity of the Fairhaven
landfill. In the litigation, the plaintiffs seek an order annulling the
major modification permit issued by the MDEP (the "Permit"), which
authorized one phase of the landfill remodeling project claiming the MDEP
violated the Massachusetts Environmental Policy Act ("MEPA") in issuing the
Permit (the "MEPA Claims"). Further, the plaintiffs have brought certain
common law claims against the Company for nuisance, trespass and strict
liability based principally on alleged odor and dust conditions resulting
from The Company's work at the Fairhaven landfill. The common law claims
seek compensatory damages and injunctive relief.
Pursuant to the Massachusetts Administrative Procedures Act, the Permit
Appeal will be heard by a Bristol County Superior Court Judge. Plaintiffs,
the MDEP, the Town and BioSafe each have submitted briefs to the Court. The
Court has scheduled a hearing on the Permit Appeal for June 19, 1996. The
Company has challenged all of the alleged procedural and substantive
grounds asserted by the Plaintiffs for the appeal.
OnJanuary 12, 1996, the Company filed a motion to dismiss the MEPA Claims.
The Town filed a similar motion. The Court heard oral argument on the
motions to dismiss on April 9, 1996. On May 1, 1996, the Court issued a
decision on the motions to dismiss in favor of BioSafe and the Town,
dismissing the MEPA Claims in their entirety.
Plaintiffs' common law claims for nuisance, trespass and strict liability are
based principally on alleged odor and dust conditions resulting from
BioSafe's excavation activities at the landfill during the summer and early
fall of 1995. The Company is pursuing factual discovery with regard to
these claims. If the Plaintiffs pursue these claims after disposition of
the Permit Appeal, a period of additional discovery and other pre-trial
proceedings would take place prior to trial on the merits.
(Continued)
BIOSAFE INTERNATIONAL, INC. AND SUBSIDIARIES
10
<PAGE> 13
(A DEVELOPMENT STAGE COMPANY)
Notes to Consolidated Financial Statements
Acquisition of Landfill in Moretown, Vermont
In May 1995, the Company submitted a successful bid, through the Company's
80%-owned subsidiary, Waste Professionals of Vermont, Inc. ("WPV"), to
purchase a landfill located in Moretown, Vermont, and certain related
assets at an auction conducted by the United States Bankruptcy Court for
the District of Vermont. On June 2, 1995, the Bankruptcy Court entered its
order authorizing and directing the sale of this landfill and certain
related assets to WPV, which transaction closed on July 5, 1995.
The Company has filed a permit application with Vermont Department of
Natural Resources (VDNR) to commence operations at the landfill. Upon
receipt of its permit, the Company will commence operations at
approximately 400 TPD. In order for VDNR to issue a permit to the Company,
the Company must provide financial assurance for estimated closure and
post-closure costs of approximately $2.0 million.
The Company's ownership of the landfill through its subsidiary, WPV,
involves a greater degree of exposure to potential environmental
liabilities than is involved with landfills operated under a management
contract. In conjunction with the acquisition, the Company recorded $1.5
million for estimated closure and post-closure costs based on engineering
estimates of the current condition of the landfill. See Note 6.
(6) LANDFILL CLOSURE AND POST-CLOSURE COSTS
Landfills are typically developed in a series of cells, each of which is
constructed, filled, and capped in sequence over the operating life of the
landfill. When all cells are filled and the operating life of the landfill
is over, the final cell must be capped, the entire site must be closed and
post-closure care and monitoring activities begin. The Company will have
material financial obligations relating to the final closure and
post-closure costs of each landfill the Company owns.
The Company has estimated as of March 31, 1996 that the total costs for
final closure and post-closure of Cell I at the Moretown, Vermont
landfill, including capping costs, cap maintenance, groundwater
monitoring, methane gas monitoring, and leachate treatment and disposal
for up to 30 years after closure, is approximately $2.0 million. Based
upon the capacity of Cell I under the current applied permit and existing
conditions of the landfill at acquisition, $1.5 million has been accrued
at March 31, 1996. See Note 5.
(Continued)
11
<PAGE> 14
BIOSAFE INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
Notes to Consolidated Financial Statements
The Company bases its estimates for these accruals on respective State
regulatory requirements, including input from its internal and external
consulting engineers and interpretations of current requirements and
proposed regulatory changes. The closure and post-closure requirements are
established under the standards of the U.S. Environmental Protection
Agency's Subtitle D regulations as implemented and applied on a
state-by-state basis.
The determination of airspace usage and remaining airspace capacity is an
essential component in the calculation of closure and post-closure
accruals. See Note 2.
None of the Company's landfills are currently connected with Superfund
National Priority Lists or potentially responsible party issues.
(7) CONTINGENCIES
Legal Matters
The Company is party to certain pending legal proceedings and claims.
Although the outcome of such proceedings and claims cannot be determined
with certainty, the Company's management, after consultation with outside
legal counsel, is of the opinion that the expected final outcome should
not have a material adverse effect on the Company's financial position,
results of operations or liquidity with the exception of certain
litigation brought against the Company related to the Fairhaven Landfill.
See note 5.
(8) SUBSEQUENT EVENT
On May 31, 1996 the Company began an offering of such a number of shares of
common stock under "Regulation S" of the Securities Act, as will provide
the Company gross proceeds of $5.0 million. The shares are being offered
and will be issued and sold at a price equal to the seventy-five percent
(75%) of the average closing price of a share on the NASDAQ SmallCap
Market on the first five of six trading days preceding, but not including,
the date on which the shares are issued and sold in the offering.
These shares have not been registered under the Securities Act and may not
be sold in the United States without such registration or an applicable
exemption from the requirement of registration
On May 31, 1996 the Company closed gross proceeds of $1.0 million under the
offering at $2.50 per share.
12
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
This 10Q contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. The Company's actual results could differ materially from those set
forth in the forward-looking statements. Certain factors that might cause such a
difference are discussed herein.
The Company is engaged in the business of rehabilitating landfills to
permit their continued operation with increased capacity in an environmentally
sound manner (referred to by the Company as "landfill remodeling"). The Company
has developed technologies for size reduction and handling of waste materials
for use in landfill remodeling. Prior to March 27, 1996, The Company had been
actively developing other technologies with potential application in a number of
business areas, including the Ancillary Technologies and Major Sports Fantasies,
Inc., a business unrelated to the environmental industry. The Company is not
currently allocating its resources or activities to the development or
commercial exploitation of the Ancillary Technologies or Major Sports Fantasies,
Inc. See Note 3 to the consolidated financial statements.
THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THREE MONTHS ENDED MARCH 31, 1995
FINANCIAL POSITION
- ------------------
BioSafe had $1,703,000 in cash as of March 31, 1996. This represented a
decrease of $3,534,000 from December 31, 1995. Working capital deficiency as of
March 31, 1996 was $(2,185,000) a decrease of $4,567,000 from December 31, 1995.
This decrease was primarily due to the use of cash to fund the net loss for the
three months ended March 31, 1996, additional property and equipment costs, and
the restructuring and discontinued operations reserve which the Company expects
to utilize by the end of 1996. See Note 3 to the Consolidated Financial
Statements.
During the three months ended March 31, 1996, the Company allocated
resources to various project development and related activities. See Note 5 to
the Consolidated Financial Statements. Additions to property and equipment,
primarily related to landfill remodeling, of $1,119,000 were made during the
three months ended March 31, 1996, including equipment purchase costs of
$69,000.
In February 1996 the Company entered into a licensing and services
agreement with ScotSafe Limited, a Glasgow, Scotland company for the exclusive
rights to use the Company's continuous feed autoclave medical waste processing
technology in the British Isles. The Company anticipates generating revenues
from this agreement beginning in the second quarter of 1996. See Note 3 to the
Consolidated Financial Statements.
RESULTS OF OPERATIONS
- ---------------------
Through the first quarter of 1995, substantially all of the Company's
revenue had been attributable to the sale and licensing of it's medical waste
treatment technology to BioMedical Waste Systems, Inc. ("Biomed"). On August 31,
1995 the Company terminated it's agreement with Biomed in most territories as a
result of Biomed's failure to make required payments. Revenues for the three
months ended March 31, 1996 consisted of $417,000 received from operation of the
Fairhaven landfill project which commenced on June 22, 1995.
For the three months ended March 31, 1996, the net loss was ($3,343,000),
as compared to net income of $22,000 during the three months ended March 31,
1995. This decrease was primarily due to
13
<PAGE> 16
the increased level of the Company's selling, general and administrative
expenses, the restructuring and discontinued operations charges (See Note 3 to
the Consolidated Financial Statements), and an increase of $235,000 in interest
expense and financing costs, primarily related to the Fairhaven landfill and the
convertible debenture issued in the fourth quarter of 1995, partially offset by
net operating income from the Fairhaven landfill project.
In addition, on March 29, 1995, the Company entered into a two-year
agreement with Liviakis Financial Communications, Inc. ("Liviakis"), whereby
Liviakis assists and consults with the Company on matters concerning mergers and
acquisitions, corporate finance, investor relations and financial public
relations. As compensation for services to be rendered by Liviakis, the Company
issued 890,000 unregistered, restricted shares of Common Stock. As a result, on
March 29, 1995, the Company recorded a prepaid asset of $1,335,000. The Company
is amortizing this expense over the two years of the Agreement, at a rate of
$167,000 per quarter
Selling, general and administrative expenses consist of project
development activities, marketing costs, salaries and benefits, and legal,
accounting and other professional fees, and other administrative costs. These
costs totaled $1,169,000 for the three months ended March 31, 1996. This
represented an increase of 85% compared to the $633,000 incurred during the
three months ended March 31, 1995. The increase was primarily associated with
the development and marketing of the Company's landfill remodeling technology,
the Ancillary Technologies, Major Sports Fantasies, Inc., and financing
activities.
On March 27, 1996, the Company announced its intention to take meaningful
action to conserve cash and working capital, including the restructuring of the
Company's operations to focus its resources and activities on its core business
of landfill remodeling and operation. See Note 3 to the Consolidated Financial
Statements.
THREE MONTHS ENDED MARCH 31, 1995 COMPARED TO THREE MONTHS ENDED MARCH 31, 1994
FINANCIAL POSITION
- ------------------
BioSafe had approximately $577,000 in cash as of March 31, 1995. This
represented an increase of $406,000 over the fiscal year end December 31, 1994.
Working capital as of March 31, 1995 also increased by approximately $2,580,000
as compared to the fiscal year ended December 31, 1994. This increase was
largely due to the increased level of royalties from the Companies technology
agreement and the raising of gross proceeds of $5,250,000 in equity. The net
proceeds after placement fees and related costs was approximately $4,729,000.
RESULTS OF OPERATIONS
- ---------------------
For the three months ended March 31, 1995 net income was $22,000 as
compared to net income of $38,000 in the comparable prior year quarter, or a
decrease of $16,000. The decrease is primarily due to the unrealized loss on
investment in marketable securities.
Net revenue for the three months ended March 31, 1995 were $725,000, an
increase of $262,000, or approximately 57% as compared to $462,000 for the
comparable prior year quarter. The increase is due to the increased level of
royalties from the Company's technology agreement.
14
<PAGE> 17
Income from operations in the current quarter was approximately 13% of
revenue as compared to approximately 19% for the comparable prior year quarter.
The lower income from operations is primarily due to the increased level of the
companies selling, general and administrative expenses.
Selling, general and administrative expenses for the quarter ended March
31, 1995 was approximately 87% of revenue as compared to 81% for the comparable
prior year quarter. The increase was primarily due to the Company's increased
level of marketing its' proprietary `Landfill Remodeling' technology.
ENVIRONMENTAL AND REGULATORY MATTERS
The Company and its customers operate in a highly regulated environment,
and in general the Company's landfill remodeling projects, such as the Fairhaven
landfill, will be required to have federal, state and/or local government
permits and approvals. Any of these permits or approvals may be subject to
denial, revocation or modification under various circumstances. In addition, if
new environmental legislation or regulations are enacted or existing legislation
or regulations are amended or are interpreted or enforced differently, The
Company or its customers may be required to obtain additional operating permits
or approvals. There can be no assurance that the Company will meet all of the
applicable regulatory requirements. Any delay in obtaining required permits or
approvals will tend to cause delays in the Company's ability to obtain bond or
other project, resulting in increases in the Company's needs to invest capital
in projects prior to obtaining financing, and will also tend to reduce project
returns by deferring the receipt of project revenues. In the event that the
Company is required to cancel any planned project as a result of the inability
to obtain required permits or other regulatory impediments, the Company may lose
any investment it has made in the project up to that point, and in the case of
the Fairhaven and Moretown landfill projects, have a material adverse effect on
the Company's financial condition and results of operations.
To the extent possible, the Company intends to conduct its operations in
such a manner as to minimize the impact of environmental issues on operating
results. As a general matter, the Company will seek to avoid projects in which
it would be required to handle or dispose of hazardous waste, although it is
prepared to consider projects that may involve some cleanup of previously
existing hazardous waste, subject to controls designed to minimize exposure to
risk of liability and to assure an economic return from the activity. The
Company's landfill projects will involve the installation and operation of
extensive environmental monitoring systems to enable the Company to identify and
deal with any potential environmental problems, which systems have already been
implemented at the Fairhaven and Moretown landfill projects. The cost of
installing these systems will be included in the Company's total investment in
the project. The Company's contract for the Fairhaven landfill project requires
the Town, as owner of the landfill, to pay for the ultimate cost of closing the
landfill, and provides for a set-aside of a part of the Town's share of project
revenues to establish a sinking fund for payment of closure costs, so that the
Company will not be required to establish any reserves for this purpose. The
Company intends to implement similar arrangements for closure costs in its
agreements for other landfill projects which it may enter into in the future.
The Company's ownership of the Moretown landfill through its subsidiary, Waste
Professionals of Vermont, Inc., involves a greater degree of exposure to
potential environmental liabilities than is involved with landfills operated
under a management contract. In conjunction with the acquisition of the Moretown
project, the Company recorded $1.5 million in estimated closure and post-closure
costs based on engineering estimates of the current condition of the landfill.
See Note 6 to the Consolidated Financial Statements.
15
<PAGE> 18
CERTAIN FACTORS AFFECTING FUTURE OPERATING RESULTS
Initial Commercialization Stage; Limited Operating History. To date,
although the Company has conducted significant testing of methods and processes
based on its size reduction and materials handling technology, and has gained
substantial experience in connection with the development and operation of the
Fairhaven landfill project to date, the Company has not yet carried through a
landfill remodeling project to completion. Final development and operation may
be subject to engineering and construction problems such as cost overruns and
start-up delays resulting from technical or mechanical problems, unfavorable
conditions in the equipment or labor market, or environmental permitting and
other regulatory problems, as well as other possible adverse factors. There can
be no assurance that the Company will be successful in developing and
implementing commercial landfill remodeling projects, or that any such
development can be accomplished without excessive cost or delay.
Operating Losses and Accumulated Deficit; Uncertainty of Future
Profitability. The Company had an accumulated operating deficit at March 31,
1996 of $12,670,000. Prospects for future profitability are heavily dependent on
the success of the Company's landfill remodeling projects. There can be no
assurance that the Company will generate sufficient revenue to be profitable or,
if profitable, to maintain profitability in future years.
Risks of Limited Liquidity. The Company has limited liquidity in relation
to its short-term capital commitments and operating cash requirements. The
Company's ability to satisfy its commitments and operating requirements is
dependent on a number of pending financing activities which are not assured of
successful completion. Any failure of the Company to obtain sufficient financing
in the short run would have a materially adverse effect on the Company's
financial condition and operations.
Potential Environmental Liability and Adverse Effect of Environmental
Regulation. The Company's business exposes it to the risk that it will be held
liable if harmful substances escape into the environment as a result of its
operations and cause damages or injuries. Moreover, federal, state and local
environmental legislation and regulations require substantial expenditures and
impose significant liabilities for noncompliance.
Future Capital will be Required. The Company will require substantial
funds to complete and bring to commercial viability all of its currently planned
projects.
Unpredictability of Patent Protection and Proprietary Technology. The
Company's success depends, in part, on its ability to obtain and enforce
patents, maintain trade secret protection and operate without infringing on the
proprietary rights of third parties. While the Company has been issued a U.S.
patent and certain related foreign patents on certain of its size reduction and
materials handling technology, with particular reference to landfill remodeling
and on its CFA medical waste treatment system, there can be no assurance that
others will not independently develop similar or superior technologies,
duplicate any of the Company's processes or design around any processes on which
the Company has or may obtain patents. In addition, it is possible that third
parties may have or acquire licenses for other technology that the Company may
use or desire to use, so that it may need to acquire licenses to, or to contest
the validity of, such patents of third parties relating to the Company's
technology. There can be no assurance that any license required under such
patents would be made available to the Company on acceptable terms, if at all,
or that it would prevail in any such context. Moreover, the Company could incur
substantial costs in defending itself in suits brought against it or in bringing
suits against other parties related to patent matters.
16
<PAGE> 19
In addition to patent protection, the Company also relies on trade
secrets, proprietary know-how and technology which it seeks to protect, and
confidentiality agreements with its collaborators, employees and consultants.
There can be no assurance that these agreements and other steps taken by the
Company will be effective to protect it's technology against unauthorized use by
others.
LIQUIDITY AND CAPITAL RESOURCES
To date, the Company has financed its activities primarily through the
issuance of equity securities and debt, including convertible notes and common
stock warrants. During the year ended December 31, 1995 the Company raised net
proceeds of $19,038,000 through private placements of equity securities and the
issuance of long-term debt. The Company used $1,459,000 of such proceeds to
repay existing indebtedness
At present, the Company is focusing its resources and efforts on the
development of its landfill remodeling business. The Company is currently
engaged in a project with the Town of Fairhaven, Massachusetts to remodel its
existing 28-acre landfill. Total investments in the Fairhaven landfill project
through March 31, 1996 were approximately $7.0 million. The Company estimates
that the total cost of development of the Fairhaven landfill project, including
amounts invested to date, will be approximately $20 million. Since assuming
responsibility for operation of the landfill in June 1995, the Company is
receiving revenue from such operation. On October 11, 1995, the Company received
a Major Modification Permit including an Authorization to Construct and remodel
phase 1 of the first of three "cells" of the landfill. This permit has been
challenged in state court by certain residents of the Town of Fairhaven. See
"Legal Proceedings" in Item 1 and Note 5 to the Consolidated Financial
Statements. Construction of phase 1 of the first cell of the Fairhaven landfill
has been completed, and the Company is awaiting an Authorization to Operate from
the DEP to operate the cell as planned. Additional ATCs, ATOs and other minor
permits will also be required for the second phase of the first cell and for the
second and third cells. The Company believes that the issuance of a permit to
remodel phase 1 of the first cell reflects substantial acceptance of its
remodeling approach as applied at the Fairhaven landfill by the Massachusetts
environmental authorities, but no assurance can be given that further required
ATCs, ATOs and other permits will be obtained on a timely basis. Pending
completion of remodeling of phase one of the first cell and issuance of the ATO
for this phase, the Company is operating the landfill under prior permits.
Revenue received during the period of completing the remodeling is expected to
cover a portion of capital requirements for project completion, although the
contribution will be small in proportion to total requirements. The Company may
finance the Fairhaven landfill project in large part through a sale of
approximately $15.0 million in tax-exempt industrial revenue bonds, and has
received initial approval from the Massachusetts Industrial Finance Authority
("MIFA") for such financing. The Company has engaged Oppenheimer & Co., Inc. as
placement agent to manage and sell the bonds, and Oppenheimer has identified a
potential purchaser of the bonds, although no assurance can be given that such a
purchase will be consummated.
A second landfill project involves the Moretown landfill, located in
Moretown, Vermont. On July 5, 1995, WPV, a corporation 80% owned by the Company,
acquired the property of the Moretown landfill, together with certain related
assets. The remaining 20% of WPV is held by an individual not affiliated with
the Company. The Moretown landfill was acquired from an entity in bankruptcy
which had owned the real estate on which the landfill had operated pursuant to a
lease. The Company's total investment in the Moretown landfill project was
approximately $6.0 million at March 31, 1996. The Company estimates that the
total cost to WPV of completing the Moretown landfill project as planned,
including the cost of completing the landfill and its remodeling, including
amounts invested to date, will be approximately $15.0 million. The Company is
currently seeking to obtain project financing for acquisition, development and
working capital costs of the Moretown landfill project from a local bank,
17
<PAGE> 20
and is also in the preliminary stages of investigating the availability of
industrial development bond financing similar to the financing in connection
with the Fairhaven landfill project. No assurance can be given that such
financing can be obtained on terms satisfactory to the Company. The Company's
ability to sell industrial revenue bonds for the Moretown landfill project is
subject to normal uncertainties involved with project debt financing, including
review of eligibility of project costs for bond financing, credit evaluation by
prospective bond buyers and negotiation of mutually agreeable financing terms.
In the event that such sale of industrial revenue bonds is not feasible, the
Company believes that it would be able to carry out the remaining investments
required to commence operation of the landfill, without additional remodeling to
expand present capacity, with bank financing and use of general funds from
corporate financing, and that remodeling could be completed by re-investment of
cash flows from such operations.
A third landfill project involves a landfill located on a 26-acre parcel
in the Town of South Hadley, Massachusetts, for which the Company and the Town
recently entered into an agreement under which the Company will operate and
remodel the landfill. Thirteen of the 26 acres may contain hazardous waste and
will not be included in the first phase of the remodeling, subject to a
feasibility study. Upon completion of landfill remodeling activities in the
first 13-acre phase at this site by Company, the remodeled landfill is expected
to have additional capacity of approximately 900,000 tons of waste. In addition,
the Company's proposal to remodel and operate the 10-acre landfill of the Town
of Buckland, Massachusetts has been approved by the Town, and a contract for
this project has been negotiated.
The Company has also been chosen to remodel additional landfills in
Massachusetts and has acquired an option to purchase a landfill in Pennsylvania.
If the Company is successful in raising additional capital to meet
existing commitments and to support additional capital investments, the Company
intends to pursue and increase its landfill remodeling business, and therefore
its capital requirements during the next few years. Typically, the Company
expects to be required to incur substantial capital costs in connection with
feasibility studies, contracting, permitting and initial development, ranging
from $500,000 up to $2.0 million, for any such landfill remodeling project in
the initial phases of the project.
After completion of these initial phases, the Company will generally seek
to obtain project-level financing from the issuance of industrial revenue bonds
or similar means, and to recapture a part of its initial investment from such
project financing. The Company will therefore be required to commit substantial
capital resources from internal sources in the case of any landfill remodeling
project prior to being able to obtain outside financing or to derive material
operating revenues from the project.
To the extent practicable, the Company seeks in its projects to retain the
flexibility to defer scheduled capital investments. For example, the total
investments required for the Fairhaven and Moretown landfill projects as
described above assume completion of landfill remodeling over the entire site.
The Company may stage remodeling investments over an extended period of time
while still collecting projected project revenues from the utilization of
existing space, although industrial revenue bond financing requirements
applicable to projects such as the Fairhaven landfill project require full use
of proceeds as planned within three years at the longest.
In summary, the Company's total investment required to complete its
Fairhaven and Moretown landfill projects, in addition to amounts already
invested as of March 31, 1996, will be approximately $22.0 million, subject to
possible cost overruns which cannot be predicted. The Company estimates that, of
the $22.0 million estimated required investment, approximately $13.0 million
will be invested
18
<PAGE> 21
in the Fairhaven landfill project, and approximately $9.0 million will be
invested in the Moretown landfill. Furthermore, feasibility studies required
under the Company's contracts with the Towns of South Hadley and Buckland,
Massachusetts, are expected to cost approximately $1 million, and if either of
these projects is determined to be feasible, substantial investments, comparable
to those required for the Company's other landfill remodeling projects, would be
required to complete the projects. The Company has under discussion and
negotiation a number of additional landfill remodeling projects or acquisitions,
and any contracts resulting from these discussions and negotiations would
increase the Company's capital requirements accordingly. In addition, the
Company requires cash to fund its corporate staff and other overhead expenses,
which may grow significantly as the Company expands the scope of its operations.
Although the Company has recently begun receiving cash revenues from operation
of the Fairhaven landfill, such revenues are at this time small in relation to
ultimate projections. The Company anticipates that it will be at least three
months before the Company will begin realizing cash revenues from its
investments in the Moretown landfill project and other pending projects.
The Company will require additional financing in order to satisfy its
existing and pending commitments. On May 31, 1996 the Company began an offering
of such a number of shares of common stock under "Regulation S" of the
Securities Act, as will provide the Company gross proceeds of $5.0 million. The
shares are being offered and will be issued and sold at a price equal to
seventy-five percent (75%) of the average closing price of a share on the NASDAQ
SmallCap Market on the first five of six trading days preceding, but not
including, the date on which the shares are issued and sold in the offering.
These shares have not been registered under the Securities Act and may not be
sold in the United States without such registration or an applicable exemption
from the requirement of registration. On May 31, 1996 the Company closed gross
proceeds of $1.0 million under the offering at $2.50 per share.
The Company's additional alternatives under consideration in this regard
include: (a) the raising of additional equity or long-term debt financing; (b)
exercising its call rights with respect to certain outstanding warrants when and
if the applicable market price conditions are satisfied, with the expectation
that proceeds of approximately $16.3 million may be realized from exercise of
these warrants; (c) certain prospects for bank financing or other industrial
revenue bond financing in relation to specific projects; and (d) the proposed
MIFA financing of the Fairhaven landfill project. There can be no assurance that
all or any of these financing plans and expectations will be realized. Failure
of the Company to obtain required financing in the short term could have a
materially adverse effect on the Company's financial condition and operations.
INFLATION
The Company does not believe its operations have been materially affected
by inflation.
19
<PAGE> 22
BIOSAFE INTERNATIONAL, INC.
---------------------------
PART II OTHER INFORMATION
ITEM 1.LEGAL PROCEEDINGS.
BioSafe, Inc. is a party to litigation pending in Superior Court in
Bristol County, Massachusetts, captioned SUSAN ALLUA, ET AL. v. MASSACHUSETTS
DEPARTMENT OF ENVIRONMENTAL PROTECTION, TOWN OF FAIRHAVEN AND BIOSAFE, INC.
(Civil Litigation No. A95-01717) (the "Litigation"). Plaintiffs are 16 residents
of Fairhaven, Massachusetts, who reside in the vicinity of the Bridge Street
Sanitary Landfill (the "Landfill"). Plaintiffs commenced the litigation on
November 8, 1995. In the litigation, plaintiffs seek an order annulling the
permit issued by the Massachusetts Department of Environmental protection (the
"MDEP") on October 11, 1995, authorizing one phase of the reclamation project
undertaken by the Town of Fairhaven and BioSafe at the Landfill (the "Permit").
Plaintiffs also have brought claims alleging that the MDEP violated the
Massachusetts Environmental Policy Act ("MEPA") in issuing the Permit (the "MEPA
Claims"). Further, plaintiffs have brought certain common law claims against the
Company for nuisance, trespass and strict liability based principally on alleged
odor and dust conditions resulting from the Company's work at the Fairhaven
landfill. The common law claims seek compensatory damages and injunctive relief.
Pursuant to the Massachusetts Administrative Procedures Act, the Permit
Appeal will be heard by a Bristol County Superior Court Judge. Plaintiffs, the
MDEP, the Town and BioSafe each have submitted briefs to the Court. The Court
has scheduled a hearing on the Permit Appeal for June 19, 1996. The Company has
challenged all of the alleged procedural and substantive grounds asserted by the
Plaintiffs for the appeal.
On January 12, 1996, the Company filed a motion to dismiss the MEPA
Claims. The Town filed a similar motion. The Court heard oral argument on the
motions to dismiss on April 9, 1996. On May 1, 1996, the Court issued a decision
on the motions to dismiss in favor of BioSafe and the Town, dismissing the MEPA
Claims in their entirety.
Plaintiffs' common law claims for nuisance, trespass and strict
liability are based principally on alleged odor and dust conditions resulting
from BioSafe's excavation activities at the landfill during the summer and early
fall of 1995. The Company is pursuing factual discovery with regard to these
claims. If the Plaintiffs pursue these claims after disposition of the Permit
Appeal, a period of additional discovery and other pre-trial proceedings would
take place prior to trial on the merits.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS ON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
20
<PAGE> 23
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
The Company filed a current Report on Form 8-K on March 27,
1996 regarding the Company's corporate restructuring and the resignation of
DR. Richard H. Rosen, as Chairman, CEO and President.
21
<PAGE> 24
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 the
undersigned, thereunto duly authorized.
BIOSAFE INTERNATIONAL, INC.
Date: June 3, 1996 By: /s/ Philip Strauss
----------------------------------------------------
Philip Strauss
Chief Executive Officer,
President, and Treasurer
(Principal Executive Officer)
Date: June 3, 1996 /s/ Robert Rivkin
----------------------------------------------------
Robert Rivkin
Vice President, Chief Financial Officer and Secretary
(Principal Financial and Accounting Officer)
22
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