U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended September 30, 1997
Commission File Number
0 - 25998
WASTE SYSTEMS INTERNATIONAL, INC.
(formerly BioSafe International, Inc.)
(Exact name of registrant as specified in its charter)
Delaware 95-4203626
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
10 Fawcett Street, Cambridge, Massachusetts 02138
(Address of principal executive offices, including zip code)
(617) 497-4500
Fax (617) 497-6355
(Registrant's telephone and fax 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 November 10, 1997
- ----- -------------------------------------
Common Stock, $.001 par value 19,355,903
<PAGE>
WASTE SYSTEMS INTERNATIONAL, INC.
Index to Contents Page No.
-----------------
Part I Financial Information
Item I. Financial Statements:
Consolidated Balance Sheets as of September 30, 1997
and December 31, 1996 1 - 2
Consolidated Statements of Operations for the Three
Months Ended and Nine Months Ended September 30, 1997
and 1996, and for the period from April 23,1990,
(inception) to September 30, 1997. 3
Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 1997 and 1996, and for the period
from April 23,1990, (inception) to September 30, 1997. 4
Notes to Consolidated Financial Statements 5 - 14
Item 2. Management's Discussion and Analysis of
Consolidated Financial Condition and Results
of Operations 15- 25
Part II Other Information
Item 1. Legal Proceedings 26 - 27
Item 2. Changes in Securities 27
Item 3. Defaults on Senior Securities 28
Item 4. Submission of Matters to a Vote of Security Holders 28-29
Item 5. Other Information 30
Item 6. Exhibits and Reports on Form 8-K 30
Signatures 31
<PAGE>
WASTE SYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Balance Sheets
September 30, December 31,
Assets 1997 1996
------
--------------- ---------------
(unaudited)
Current assets:
Cash $ 2,667,246 $ 264,776
Accounts and notes receivable, net 1,234,683 1,158,677
Assets held for resale - 275,000
Prepaid expenses and other current assets 937,557 499,000
--------------- ---------------
Total current assets 4,839,486 2,197,453
Accounts and notes receivable 103,773 451,169
Restricted cash and securities 1,283,031 1,210,017
Property and equipment, net (Notes 4 and 10) 11,135,712 11,705,712
Deferred financing costs 581,218 664,105
Other assets (Note 7) 829,907 629,634
--------------- ---------------
Total assets $ 18,773,127 $ 16,858,090
=============== ===============
See accompanying notes to consolidated financial statements.
1
<PAGE>
WASTE SYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Balance Sheets
September 30, December 31,
Liabilities and Stockholders' Equity 1997 1996
------------------------------------
-------------- --------------
(unaudited)
Current liabilities:
Current portion of long-term
debt and notes payable (Note 6) $ 759,160 $ 2,165,378
Accounts payable 323,186 1,529,076
Accrued expenses (Note 4) 696,147 1,225,715
Restructuring and current liabilities
related to discontinued operations ( Note 3) 672,194 1,785,097
-------------- --------------
Total current liabilities 2,450,687 6,705,266
Long-term debt and notes payable (Note 6) 10,007,097 9,450,373
Landfill closure and post-closure costs (Note 5) 1,603,000 1,520,000
-------------- --------------
Total liabilities 14,060,784 17,675,639
-------------- --------------
Commitments and Contingencies (Note 7)
Minority interest (Note 9) - 1,031,456
-------------- --------------
Stockholders' equity (deficit): (Notes 8 and 9)
Common stock, $.001 par value. Authorized
150,000,000 shares; 18,289,237 and
16,802,569 shares issued and
outstanding at September 30, 1997
and December 31, 1996, respectively. 18,289 16,802
Preferred stock, $.001 par value. Authorized
200,000 shares of Series A Convertible
Preferred Stock; 95,878 and 0 shares
issued and outstanding at
September 30, 1997 and
December 31, 1996, respectively. 9,587,807 -
Additional paid-in capital 21,337,243 21,351,280
Deficit accumulated during
the development stage (26,230,996) (23,217,087)
-------------- --------------
Total stockholders' equity (deficit) 4,712,343 (1,849,005)
-------------- --------------
Total liabilities and stockholders'
equity (deficit) $ 18,773,127 $ 16,858,090
============== ==============
See accompanying notes to consolidated financial statements.
2
<PAGE>
<TABLE>
WASTE SYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Operations
(unaudited)
<CAPTION>
Period from
Three Months Ended Nine Months Ended April 23, 1990
-------------------------- --------------------------- (inception) to
September 30, September 30, September 30, September 30, September 30,
1997 1996 1997 1996 1997
------------ ------------ ----------- ------------ ----------------
<C> <C> <C> <C> <C>
Revenues $ 829,954 $ 312,407 $ 1,862,722 $ 1,049,019 $ 4,702,725
------------ ------------ ----------- ------------ ------------
Cost of operations:
Operating expenses 304,546 149,162 934,502 494,204 2,621,067
Depreciation and amortization 230,789 110,410 488,660 229,113 930,094
Write-off of project development costs (Note 4 ) - - 837,423 208,697 7,489,498
------------ ------------ ----------- ------------ ------------
Total cost of operations 535,335 259,572 2,260,585 932,014 11,040,659
------------ ------------ ----------- ------------ ------------
Gross profit (loss) 294,619 52,835 (397,863) 117,005 (6,337,934)
Selling, general and administrative
expenses 539,189 480,573 1,577,513 2,262,429 12,046,016
Amortization of prepaid consulting fees - 166,875 - 500,625 1,335,000
Restructuring (Note 3) - - - 250,000 1,741,729
------------ ------------ ----------- ------------ ------------
Loss from operations (244,571) (594,613) (1,975,376) (2,896,049) (21,460,679)
------------ ------------ ----------- ------------ ------------
Other income (expense):
Royalty and other (expense) income, net (40,081) 910,594 (53,403) 962,464 5,794,519
Interest income 63,732 40,596 122,993 122,779 685,147
Gain on sale of assets - - - - 222,728
Interest expense and financing costs (292,201) (189,358) (979,184) (817,246) (3,189,486)
Equity in loss of affiliate - (173) - (59,823) (96,144)
Write-off of accounts and notes receivable - - - - (2,975,001)
Loss on investment in marketable securities - - - - (100,000)
Write-off of assets - - - - (263,403)
------------ ------------ ----------- ------------ ------------
Total other income (expense) (268,550) 761,659 (909,594) 208,174 78,360
------------ ------------ ----------- ------------ ------------
(Loss) income before income taxes,
minority interest, discontinued
operations and extraordinary item (513,120) 167,046 (2,884,970) (2,687,875) (21,382,319)
Federal and state income tax expense (benefit) - (61,156) - (11,156) 154,579
------------ ------------ ----------- ------------ ------------
(Loss) income before minority interest,
discontinued operations and
extraordinary item (513,120) 228,202 (2,884,970) (2,676,719) (21,536,898)
Minority interest (Note 9) - (3,441) 4,971 901 4,607
------------ ------------ ----------- ------------ ------------
(Loss) income from continuing operations (513,120) 224,761 (2,879,999) (2,675,818) (21,532,291)
Discontinued operations - - - (1,662,453) (4,564,798)
------------ ------------ ----------- ------------ ------------
(Loss) income before extraordinary item (513,120) 224,761 (2,879,999) (4,338,271) (26,097,089)
Extraordinary item - Loss on extinguishment
of debt (Note 9) - - (133,907) - (133,907)
------------ ------------ ----------- ------------ ------------
Net (loss) income $ (513,120) $ 224,761 $ (3,013,906)$ (4,338,271) $ (26,230,996)
============ ============ =========== ============ ============
Net (loss) income per share:
(Loss) income from continuing operations $ (0.03) $ 0.01 $ (0.16) $ (0.20)
Discontinued operations - - - (0.12)
Extraordinary item - - (0.01) -
------------ ------------ ----------- ------------
Net (loss) income per share $ (0.03) $ 0.01 $ (0.17) $ (0.32)
============ ============ =========== ============
Weighted average number of shares used in
computation of net loss per share 17,932,166 16,043,285 17,686,368 13,334,119
See accompanying notes to consolidated financial statements.
</TABLE>
3
<PAGE>
<TABLE>
WASTE SYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Cash Flows
(unaudited)
<CAPTION>
Period from
April 23, 1990
(inception) to
Nine months ended September September 30,
30,
1997 1996 1997
---- ---- ----
<C> <C> <C>
Cash flows from operating activities:
Net Loss $ (3,013,906) $ (4,338,271) $ (26,230,996)
Adjustments to reconcile net loss to net cash
used by operating activities:
Discontinued operations - 1,662,453 4,564,801
Depreciation and amortization 585,196 865,029 2,954,969
Accrued Closure Costs 83,000 - 83,000
Extraordinary loss on extinguishment of debt 133,907 - 133,907
Loss on investment in marketable securities - - 100,000
Equity in loss in affiliate - 59,823 96,144
Minority interest (200) (901) 161
Allowance for doubtful accounts 4,000 - 246,145
Write-off of accounts and notes receivable - - 2,975,001
Issuance of stock for services 44,854 17,157 445,311
Write-off of project development costs 837,423 229,113 7,489,498
Write-off of assets - - 263,404
Changes in assets and liabilities:
Accounts receivable and notes receivable 267,930 (9,931) (2,960,762)
Prepaid expenses and other current assets (438,558) 120,982 (937,558)
Accounts payable (1,195,425) (942,542) 568,102
Accrued expenses (529,570) 214,020 692,199
Income and franchise taxes payable - (75,535) -
Deferred income - - (500,000)
-------------- -------------- ----------------
Net cash used by continuing operations (3,221,349) (2,198,603) (10,016,674)
Net cash used by discontinued operations (1,112,903) (1,408,861) (3,363,186)
-------------- -------------- ----------------
Net cash used by operating activities (4,334,252) (3,607,464) (13,379,860)
-------------- -------------- ----------------
Cash flows from investing activities:
Assets held for sale - (22,500) (159,719)
Restricted cash (73,014) (1,005,439) (1,283,031)
Receivable from One, Three, Six, Inc. - - (800,000)
Investment in affiliate - (55,219) (96,144)
Landfills - owned (31,842) (3,912,367) (14,641,240)
Landfill development projects (70,718) (392,204) (885,050)
Machinery and equipment (143,094) 162,763 (844,171)
Other property and equipment (260,457) (180,073) (1,480,168)
Patents (8,325) (6,577) (106,971)
Other assets (194,683) (18,654) (255,387)
Licenses and permits - - (78,807)
-------------- -------------- ----------------
Net cash provided (used) by investing activities (782,133) (5,430,270) (20,630,688)
-------------- -------------- ----------------
Cash flows from financing activities:
Deferred financing and registration costs (56,098) (23,676) (1,559,964)
Borrowings from notes payable and long-term debt 1,635,806 7,600 5,002,213
Repayment of notes payable and long-term debt (2,135,403) (3,756,701)
Net borrowings and advances
from stockholders and related parties - (261,956) 266,806
Issuance of subordinated notes payable - - 12,405,000
Repayments of subordinated notes payable - - (790,000)
Net proceeds from issuance of common stock 399,000 5,916,201 16,821,129
Net proceeds from issuance of preferred stock 7,675,350 - 7,675,350
Redemption of preferred stock - - (300,000)
Preferred stock dividends - - (117,334)
Minority interest 200 - 1,031,295
------------- -------------- ----------------
Net cash provided by financing
activities 7,518,855 5,638,169 36,677,794
-------------- -------------- ----------------
Increase (decrease) in cash 2,402,470 (3,399,565) 2,667,246
Cash, beginning of period 264,776 5,237,064 -
-------------- -------------- ----------------
Cash, end of period $ 2,667,246 $ 1,837,499 $ 2,667,246
============== ============== ================
See accompanying notes to consolidated financial statements.
</TABLE>
4
<PAGE>
(1) Basis of Presentation
The accompanying consolidated financial statements include the accounts of
Waste Systems International, Inc. and its subsidiaries ("WSI" or
"Company") after elimination of all significant intercompany accounts
and transactions. On October 27, 1997 the Company changed its name to
Waste Systems International, Inc. from BioSafe International, Inc. and
changed its state of incorporation to Delaware from Nevada.
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
September 30, 1997 and for all periods presented have been made. The
results of operations for the period ended September 30, 1997 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, 1996 audited financial
statements and notes thereto.
(2) Summary of Significant Accounting Policies
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.
The Company recognizes collection fees from its hauling operations as the
services are provided.
Cost of Operations
Cost of operations includes direct labor, fuel, equipment maintenance,
insurance, depreciation and amortization of equipment and project
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 and
hauling operations. Also included in the cost of landfill operations
are payments made to the 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 the Town. In such Towns, the Town is
responsible for the closure and post-closure costs related to the
landfill.
5
<PAGE>
Landfill Closure and Post-Closure Costs
The Company estimates and accrues 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, as necessary, as a component of the purchase price of
facilities acquired, in acquisitions accounted for under the purchase
method, when the acquisition is consummated.
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 the
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 approximately $9,500 and $24,500, and $186,000 and
$355,000 were capitalized during the three and nine months ended
September 30, 1997 and 1996, respectively.
Landfill project development costs are amortized 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
amortization calculation. The determination is performed by conducting
annual topography surveys 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 to ensure proper recording of the amortization
provision. The reevaluation process did not materially impact results
of operations for any periods presented.
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 benefits associated with these costs are
expected to be realized and therefore capitalization and amortization
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.
6
<PAGE>
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect reported amounts of assets and liabilities
and disclosures 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.
Restricted Cash and Securities
Restricted Cash and Securities consist principally of funds or securities
deposited in connection with landfill closure and post-closure
obligations. Amounts are principally invested in fixed income
securities of federal, state and local governmental entities and
financial institutions. The Company considers its landfill closure and
post-closure investments to be held to maturity. Substantially all of
these investments mature within one year. The market value of these
investments approximates their aggregate cost basis at September 30,
1997.
Deferred Financing Costs
Deferred financing costs are amortized on a straight-line basis over the
life of the related notes payable or debt.
Net loss Per Share
Net loss per common share is based on the weighted average number of
common shares and dilutive common stock equivalent shares outstanding
during each period. Fully diluted net loss per share has been omitted
since they are either the same as primary earnings per share or are
anti-dilutive.
Fair Value of Financial Instruments
The carrying amounts of cash, accounts receivable, accounts payable, and
accrued expenses approximates fair value because of the short maturity
of these items. The carrying amount of debt, notes and balances with
bank lines of credit with interest rates related to the prime rate
approximate fair value because the interest rates change with the
market interest rates. Other debt approximates fair value as the
interest rates charged approximate the Company's external borrowing
rate.
Reclassifications
Certain amounts in prior year financial statements have been reclassified
to conform to the 1997 presentation.
New Accounting Pronouncements
SFAS No. 128, Earnings Per Share, will become effective as of December 31,
1997. At that time, the Company will be required to exclude the effect
of dilutive common stock equivalents from its primary earnings per
share calculation and restate all prior periods on that basis. The
effect of implementation of this new standard is not expected to be
material.
7
<PAGE>
(3) Restructuring and Discontinued Operations
During the three and nine months ended September 30, 1997 and 1996, the
Company recorded restructuring and discontinued operations charges of
$0 and $0, and $250,000 and $1,912,453 respectively. As of September
30, 1997, the Company has reserves and liabilities totaling $672,194
related to restructuring and discontinued operations. The Company
currently anticipates that the remaining reserves and liabilities will
be settled within the next six months.
(4) Property and Equipment
Property and equipment are stated at cost and consist of the following;
September 30, December 31,
1997 1996
(unaudited)
Landfills - owned $ 7,910,866 $ 7,937,307
Landfill development projects 498,075 427,357
Machinery and equipment 2,056,117 2,673,505
Buildings, facilities and improvements 649,901 792,255
Other property and equipment 384,046 330,746
--------------- -------------
11,499,005 12,161,170
Less accumulated depreciation and
amortization (363,293) (455,458)
---------------- --------------
$ 11,135,712 $ 11,705,712
=============== =============
Moretown, Vermont Landfill
The Company owns a landfill located in Moretown, Vermont. The current
estimated available capacity at this landfill, excluding remodeling, is
in excess of 1.0 million tons. On September 30, 1996, the Company
received its final permit from the Vermont Department of Natural
Resources to commence operations at the landfill at an average of 350
tons per day ("TPD"). On October 7, 1996, the Company began operations
at the landfill.
On April 2, 1997, the Company filed its permit application with the
Vermont Agency of Natural Resources for the next cell or cell 2 at its
Moretown landfill. On April 14, 1997 the permit application was
determined to be administratively complete by the Vermont Department of
Natural Resources. The Company anticipates that it will take
approximately 12 months from the date of filing to receive its final
permits to construct and operate cell 2.
8
<PAGE>
During the quarter ended September 30, 1997, the landfill operated at an
average of approximately 225 TPD. For the period from October 1, 1997
to October 31, 1997, the landfill operated at an average of
approximately 300-350 TPD. The increase reflects, among other things,
the effects of the acquisition of the Burlington, Vermont transfer
station which closed on October 6, 1997. See Note 10-Subsequent Events.
South Hadley, Massachusetts Landfill
The Company and the Town of South Hadley, Massachusetts have entered into
a contract that provides for WSI to operate and remodel an existing
30-acre landfill in South Hadley. On March 26, 1997, the Company
received a landfill disruption permit from the Massachusetts Department
of Environmental Protection which enabled the Company to commence
engineering and feasibility work at the landfill. As of September 30,
1997, the Company's investment in this project was approximately
$500,000. The Company anticipates that additional capital requirements
relating to the feasibility and permitting of the South Hadley landfill
project to be approximately $300,000. If the project is determined to
be feasible, the Company anticipates additional capital requirements
of approximately $2,000,000 for construction costs and equipment before
commencing operations and generating revenues at this site during the
third or fourth quarter of 1998.
Fairhaven, Massachusetts Landfill
On July 24, 1994, Waste Systems International entered into a contract with
the Town of Fairhaven, Massachusetts to remodel the Town's existing 26
acre landfill. On November 8, 1995, an action was brought against
various parties including the Company relating to the Fairhaven
landfill. On September 5, 1996, pursuant to the Massachusetts
Administrative Procedures Act, the action was heard by a Bristol County
Superior Court Judge. On June 2, 1997 the Massachusetts Superior Court
issued an Order denying the plaintiff's action. This order, which
represents a favorable outcome for the Company's position, is subject
to appeal to the Massachusetts Appeals Court after entry of a judgment
on the order. The Company has initiated discussions with the Town of
Fairhaven with regard to the future of the project, and has ceased all
operations of the project at this time. As previously disclosed, the
future economic viability of the project is doubtful because of the
extensive delays and additional operating costs resulting from the
litigation and other factors. As of September 30, 1997 the Company has
a reserve of approximately $500,000, which is included in accrued
expenses on the September 30, 1997 balance sheet, for additional
litigation and ongoing site construction costs.
(5) 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 life of the
landfill. When all cells are filled and the operating life of the
landfill is over, all cells 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.
9
<PAGE>
The Company has estimated as of September 30, 1997 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 $2.1 million. Based
upon the existing conditions of the landfill at acquisition and
cumulative usage since that date, approximately $1.6 million has been
accrued at September 30, 1997. 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 - Summary of Significant Accounting Policies.
(6) Long-term debt
Term Loan
On March 31, 1997, the Company's subsidiary, Waste Professionals of
Vermont, Inc. ("WPV") entered into a $1 million term loan with the
Howard Bank. The term of the loan is payable in 36 equal monthly
payments and bears interest at 12% per annum.
(7) Contingencies
Landfill related activities
In the normal course of its business, and as a result of the extensive
governmental regulation of the solid waste industry, the Company
periodically may become subject to various judicial and administrative
proceedings involving federal, state, or local agencies. In these
proceedings, the agency may seek to impose fines on the Company or to
revoke or deny renewal of an operating permit held by the Company. From
time to time, the Company also may be subjected to actions brought by
citizens' groups in connection with the permitting of its landfills or
transfer stations, or alleging violations of the permits pursuant to
which the Company operates. Certain federal and state environmental
laws impose strict liability on the Company for such matters as
contamination of water supplies or the improper disposal of hazardous
waste. The Company's operation of landfills subjects it to certain
operational, monitoring, site maintenance, closure and post-closure
obligations which could give rise to increased costs for monitoring and
corrective measures. See Note 5 - Landfill Closure and Post Closure
Costs.
The Company has obtained environmental impairment liability insurance
covering claims for sudden or gradual onset of environmental damage. If
the Company were to incur liability for environmental damage in excess
of its insurance limits, its financial condition could be adversely
affected. The Company carries a comprehensive general liability
insurance policy which management considers adequate at this time to
protect its assets and operations from other risks.
10
<PAGE>
None of the Company's landfills are currently connected with the Superfund
National Priorities List or potentially responsible party issues.
Legal Matters
The Company is party to 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, and are summarized as follows:
a) In July 1996, the Company commenced arbitration proceedings against Dr.
Richard Rosen (Rosen), former Chairman, Chief Executive Officer and
President of the Company, seeking to recover amounts, excluding
interest and litigation costs, which the Company believes it was owed
by Rosen. This action was undertaken at the direction of the Board of
Directors following its receipt of a report by a special committee
which had been appointed to investigate Rosen's financial dealings with
the Company. The Special Committee retained independent counsel in
connection with its investigation. Rosen resigned from all offices with
the Company on March 27, 1996. Amounts which the Company sought to
recover included unreimbursed advances and amounts which the Company
believed constituted improper expense reimbursements and payments of
Company funds for personal benefit.
An arbitration hearing was completed on October 25, 1996. On January 2,
1997, the arbitrator issued the Award of Arbitrator, directing Rosen to
pay $780,160, excluding interest and litigation costs, for breaches by
Rosen of his employment agreement with the Company "in failing to
discharge in good faith the duties of his positions and failing to act
under the direction of the Board of Directors of the Company. On
February 25, 1997 the Middlesex Superior Court in Cambridge,
Massachusetts confirmed the arbitration award and entered the judgment
against Rosen. Previously, the Company sought and obtained Injunctive
Relief in Massachusetts Superior Court prohibiting any sale or other
transfer by Rosen of his stock in the Company in order to provide
security for the Company's claims. The Company is currently pursuing
efforts to collect on this judgment against Rosen. No assurance can be
given that the Company will be able to collect any amounts awarded in
arbitration. The Company is carrying on its September 30, 1997 balance
sheet an amount of $500,000 in unreimbursed advances due from Rosen,
but the Company's other claims and additional advances have not been
reflected on the balance sheet at this time.
b) Susan Allua, et al. v. Massachusetts Department of Environmental
Protection, Town of Fairhaven and Waste Systems International, Inc. Two
cases involving the same parties were brought in Bristol Superior Court
by sixteen residents of Fairhaven, Massachusetts who reside in the
vicinity of the landfill owned by the Town of Fairhaven (the
"Landfill") which is being remodeled and operated by the Company. The
first case commenced on November 8, 1995. In that case, Plaintiffs
appealed a permit issued by the Massachusetts Department of
Environmental Protection (the "DEP") authorizing the construction of a
component of the remodeling project (the "Authorization to Construct"
or "ATC"). Plaintiffs also brought claims alleging that the DEP
violated the Massachusetts Environmental Policy Act in issuing the ATO
(the "MEPA Claim"). Further, Plaintiffs brought common law claims
against the Company for nuisance, trespass and strict liability based
principally on alleged dust and odor conditions resulting from the
Company's excavation activities at the Landfill. The Company has
contested all claims, and is receiving the cooperation of the Town of
Fairhaven and the DEP in opposing the claims in which those parties are
involved.
11
<PAGE>
On January 12, 1996, the Company filed a motion to dismiss the MEPA
Claims. The Town and DEP 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 Waste
Systems International and the Town, dismissing the MEPA claims in their
entirety.
Pursuant to the Massachusetts Administrative Procedures Act, the Court
held a hearing on the ATC appeal on September 5, 1996. On June 2, 1997
the Court issued an order denying the ATC appeal. This order will be
subject to possible appeal to the Massachusetts Appeals Court following
entry of the judgment on the order.
Plaintiffs' common law claims for nuisance, trespass and strict liability
remain outstanding. These claims are based principally on alleged dust
and odor conditions resulting from the Company's excavation activities
at the Fairhaven Landfill during the summer and early fall of 1995. The
Company is pursuing factual discovery with regards to these claims. If
the Plaintiffs pursue these claims after disposition of the ATC appeal,
a period of additional discovery and other pre-trial proceedings would
take place prior to trial on the merits.
The second case commenced on September 9, 1996. In that case, the same
Plaintiffs appealed a permit issued by the DEP authorizing the
operation of a component of the remodeled landfill (the "Authorization
to Operate" or "ATO"). The plaintiffs challenge to the ATO raises
issues similar, and in some instances identical, to those raised in the
ATC appeal. Accordingly, as a legal or practical matter, the decision
in the ATC appeal may resolve the ATO appeal, and this case has been
essentially on hold pending the outcome of the ATC appeal. As with the
ATC permit, the ATO permit remains in effect during the pendency of the
appeal.
(8) Common Stock
On January 21 1997, the Company closed a Regulation "D" private placement
of 860,000 shares of common stock at $.50 per share with gross proceeds
of $430,000. 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. See
Note 10 - Subsequent Events.
12
<PAGE>
On September 30, 1997, the Company purchased the minority interest in WPV
Disposal, Inc., the Company's Vermont collection operations for
$70,000, which was paid by the issuance of 93,333 shares of the
Company's common stock. See Note 10 - Subsequent Events.
(9) Preferred Stock
On June 30, 1997 the Company closed a Regulation "D" private placement of
Series "A" Convertible Preferred Stock which raised gross proceeds of
approximately $9.7M. As part of the private placement, the Company
converted approximately $570,000 in bank debt into preferred stock and
acquired the minority interest in Waste Professionals of Vermont, Inc.
for $850,000 of preferred stock.
The preferred stock was sold at a price of $100 per share, bears an 8%
annual cumulative dividend, and is convertible into common stock at a
conversion price of $0.28125 per share of common stock, which
conversion price may be reset to a lower conversion price upon the
occurrence of certain events. The dividend is payable in cash or in
additional shares of preferred stock at the Company's option and is
subject to adjustment after 3 years. The preferred stock is also
redeemable at the Company's option after 1 year, subject to certain
trading requirements. Cumulative dividends on the preferred stock since
June 30, 1997, which have not been declared or paid, are approximately
$193,000.
As a result of such transaction, the Company now has approximately
52,400,000 shares of common stock outstanding or reserved for issuance
upon conversion of the preferred stock.
In connection with such transaction, the Company also entered into a
Registration Rights Agreement with purchasers of such preferred stock
(the "Preferred Stock Registration Rights Agreement") pursuant to which
the Company is obligated to file a registration statement for the sale
under the Securities Act of 1933, as amended, of the common stock into
which such preferred stock is convertible. See Note 10-Subsequent
Events.
During the quarter ended September 30, 1997, holders of $150,000 in face
amount of Series "A" Convertible Preferred Stock converted their
preferred shares into 533,333 shares of common stock.
On October 7, 1997, holders of $300,000 in face amount of Series "A"
Convertible Preferred Stock converted their preferred shares into
1,066,666 shares of common stock.
(10) Subsequent Events
On October 6, 1997, the Company filed an S-3 Registration Statement with
the Securities and Exchange Commission to register approximately
35,500,000 shares of common stock primarily consisting of shares which
are reserved for issuance to holders of Series "A" Preferred Stock upon
conversion of their preferred shares to common stock and the shares
issued in the January 1997 private placement. See Notes 8 and 9. Such
registration will discharge certain of the Company's obligations under
the Preferred Stock Registration Rights Agreement.
13
<PAGE>
On October 7, 1997, the Company closed on an agreement with the Chittenden
Solid Waste District for the lease/purchase of the District's transfer
station in Burlington, Vermont. This will offer the Company greater
access to the Burlington, Vermont and surrounding area markets,
Vermont's most populated and industrialized community. The Company will
account for this transaction as a capital lease and accordingly, an
asset of approximately $1,300,000 will be recorded and will be
allocated to land and buildings. The lease is for a term of 10 years
with an option to purchase, for a minimal amount, at the end of the
lease term.
14
<PAGE>
Item II. Management's Discussion and Analysis of Financial Condition and
Results of Operations
This Quarterly Report on Form 10-Q 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 (See
"Certain Factors Affecting Future Operating Results").
On October 27, 1997 the Company changed its name to Waste Systems
International, Inc. from BioSafe International, Inc. and changed its state of
incorporation to Delaware from Nevada.
Waste Systems International, Inc. ("WSI" or the "Company") is a
regional fully integrated non-hazardous solid waste management company also
engaged in the business of rehabilitating landfills to permit their continued
operation with increased capacity in an environmentally sound manner, referred
to by WSI as "landfill remodeling". The Company has developed technologies for
handling of waste materials for use in landfill remodeling.
The Company, in January 1997, entered the waste collection business in
the State of Vermont as its initial step to develop fully integrated solid waste
management operations in markets where it believes it can maximize utilization
of Company owned or operated landfills through such integration. An integrated
solid waste management company offers disposal, collection, transfer and
recycling services. Accordingly, the Company is in the initial stages of
investigating potential acquisitions of waste collection, transfer and/or
disposal operations which would be integrated with current or future landfill
acquisitions or landfill remodeling projects.
On September 30, 1997, the Company purchased the minority interest in
WPV Disposal, Inc., the Company's Vermont collection operations for $70,000,
which was paid by the issuance of 93,333 shares of the Company's common stock.
See Note 10-Subsequent Events.
On October 7, 1997, the Company closed on an agreement with the
Chittenden Solid Waste District for the lease/purchase of the District's
transfer station in Burlington, Vermont. This will offer the Company greater
access to the Burlington, Vermont and surrounding area markets, Vermont's most
populated and industrialized community. The Company will account for this
transaction as a capital lease and accordingly, an asset of approximately
$1,300,000 will be recorded and will be allocated to land and buildings. The
lease is for a term of 10 years with an option to purchase, for a minimal
amount, at the end of the lease term.
The Company is in preliminary discussions with various potential
acquisitions, including landfills, transfer stations and hauling operations, but
no binding agreements or understanding for any such acquisitions exist at this
time, and no assurance can be given that the Company will be able to complete
any such acquisitions.
15
<PAGE>
As discussed above, WSI is focusing its resources and activities on the
development of an integrated solid waste management business. With the
implementation of Subtitle D Regulations and a growing scarcity of urban-center
disposal sites, solid waste disposal continues to move further out from these
urban centers. The Company believes that through utilization of its landfill
remodeling process, it will be able to acquire and develop landfill capacity in
or near urban metropolitan areas. On an integrated basis, this will provide the
Company with a geographical and logistical competitive advantage because the
Company's operations will be more centrally located as compared to its
competitors whose operations will extend out longer distances from disposal
sites.
Prior to March 27, 1996, the Company had been actively developing other
technologies with potential application in a number of business areas, 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 (collectively, the "Ancillary
Technologies"), and Major Sports Fantasies, Inc. ("MSF"), a business unrelated
to the environmental industry. Since March 27, 1996 the Company has not
allocated its resources or activities to the development or commercial
exploitation of the Ancillary Technologies or MSF.
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 business.
Recapitalization
On June 30, 1997 the Company closed a Regulation "D" private placement
of Series "A" Convertible Preferred Stock which raised gross proceeds of
approximately $9.7M. As part of the private placement, the Company converted
approximately $570,000 in bank debt into preferred stock and acquired the
minority interest in Waste Professionals of Vermont, Inc. for $850,000 of
preferred stock.
The preferred stock was sold at a price of $100 per share, bears an 8%
annual cumulative dividend, and is convertible into common stock at a conversion
price of $0.28125 per share of common stock, which conversion price maybe reset
to a lower conversion price upon the occurrence of certain events. The dividend
is payable in cash or in additional shares of preferred stock at the Company's
option and is subject to adjustment after 3 years. The preferred stock is also
redeemable at the Company's option after 1 year, subject to certain trading
requirements.
16
<PAGE>
As a result of such transaction, the Company now has approximately
52,400,000 shares of common stock outstanding or reserved for issuance upon
conversion of the preferred stock.
During the quarter ended September 30, 1997, holders of $150,000 in
face amount of Series "A" Convertible Preferred Stock converted their preferred
shares into 533,333 shares of common stock.
In October, 1997, holders of $300,000 in face amount of Series "A"
Convertible Preferred Stock converted their preferred shares into 1,066,666
shares of common stock.
Financial Position at September 30, 1997
WSI had $2,667,000 in cash as of September 30, 1997. This represented
an increase of $2,402,000 from December 31, 1996. Working capital as of
September 30, 1997, was $2,389,000, an increase of $6,897,000 from December 31,
1996. This increase was primarily due to the proceeds from the January 1997
Regulation "D" private placement of common stock, the proceeds from the March
1997 term loan, the increased level of operations at the Company's Vermont
operations, and the proceeds from the June 1997 Regulation "D" private placement
of preferred stock. See Notes 6, 8, and 9 to the Consolidated Financial
Statements presented in Item I.
During the three months ended September 30, 1997, the Company devoted
its resources to various project development and related activities. Additions
to property and equipment of approximately $800,000, primarily related to
development of the Company's Vermont operations and the South Hadley landfill
project, were made during the three months ended September 30, 1997.
Results of Operations - Three months Ended September 30, 1997 Compared to
Three Months Ended September 30, 1996
Revenues for the quarter ended September 30, 1997 were $830,000
compared to $312,000 for the three months ended September 30, 1996. Revenues for
the quarter ended September 30, 1997 were generated from the Company's Vermont
operations while revenues for the prior year period were generated from the
Company's Fairhaven operations. At December 31, 1996, the Company wrote-off its
investment in the Fairhaven landfill project. At September 30, 1997, the Company
has a reserve of approximately $500,000 for additional litigation and ongoing
site construction costs at the Fairhaven landfill.
Selling, general and administrative expenses consist of project
development activities, marketing and sales costs, salaries and benefits, and
legal, accounting and other professional fees, and other administrative costs.
These costs totaled $539,000 for the quarter ended September 30, 1997, as
compared to $480,000 for the comparable quarter ended September 30, 1996. This
represented an increase of $59,000 which was primarily the result of the
Company's increased level of operations, public and financial relations related
costs, and acquisition related costs.
17
<PAGE>
Other income/(expense) for the three months ended September 30, 1997
was an expense of ($268,000) as compared to income of $762,000 for the quarter
ended September 30, 1996. The decrease was primarily the result of a decrease in
royalty income of approximately $900,000 due to the issuance of two licenses in
1996 and none in 1997 and an increase in interest expense of approximately
$100,000, due primarily to capitalization of interest in 1996.
For the quarter ended September 30, 1997, the net loss was ($513,000)
as compared to net income of $225,000 in the comparable prior year quarter due
primarily to the reduction in royalty income, offset by the increase in net
income from the Company's Vermont operations.
Results of Operations - Nine months Ended September 30, 1997 Compared
to Nine Months EndedSeptember 30, 1996
Revenues for the nine months ended September 30, 1997 were $1,863,000
compared to $1,049,000 for the nine months ended September 30, 1996. Revenues
for the nine months ended September 30, 1997 were generated from the Company's
Vermont operations. Revenues in 1996 were generated from the Fairhaven landfill.
At December 31, 1996, the Company wrote-off its investment in the Fairhaven
landfill project. At September 30, 1997, the Company has a reserve of
approximately $500,000 for additional litigation and ongoing site construction
costs at the Fairhaven landfill.
Selling, general and administrative expenses were $1,577,000 and
$2,260,000 for the nine month period ended September 30, 1997 and 1996,
respectively. The decrease of $683,000 was primarily the result of the Company's
restructuring which began on March 29, 1996.
Other income/(expense) for the nine months ended September 30, 1997
was an expense of ($910,000) as compared to income of $208,000 for the nine
months ended September 30, 1996. The decrease was primarily the result of a
decrease in royalty income and other consulting income of approximately $960,000
due to the issuance of two licenses in 1996 compared to none in 1997 and an
increase in interest expense of approximately $160,000, due to increased debt
related to the Company's Vermont operations and the capitalization of
interest in 1996 of $186,000 compared to $24,500 for the nine months ended
September 30, 1997, respectively.
For the nine months ended September 30, 1997, the loss from continuing
operations was ($2,880,000) as compared to ($2,676,000) for the comparable
period in 1996. The nine months ended September 30, 1997 included a
non-recurring non-cash charge of $800,000 to settle obligations relating to the
equipment used at the Fairhaven landfill project. Excluding this charge, the
loss from continuing operations was reduced by $596,000 which is primarily the
result of increased level of operations at the Company's Vermont operations,
which was profitable for the nine months ended September 30, 1997 and the
restructuring which commenced on March 27, 1996.
18
<PAGE>
Environmental and Regulatory Matters
The Company and its customers operate in a highly regulated
environment, and in general the Company's projects, such as the Moretown
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, WSI or
its customers may be required to obtain additional operating permits or
approvals. There can be no assurance that WSI 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 project financing,
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
Moretown landfill project, 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 is 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. See Note 5 to the Consolidated Financial Statements
presented in Item 1.
19
<PAGE>
Certain Factors Affecting Future Operating Results
Operating Losses and Accumulated Deficit; Uncertainty of Future
Profitability. WSI had an accumulated operating deficit at September 30, 1997,
of $26,231,000. Prospects for future profitability are heavily dependent on the
success of WSI's ability to build an integrated solid waste management company,
and its landfill remodeling projects. There can be no assurance that WSI will
generate sufficient revenue to be profitable or, if profitable, to maintain
profitability in future years.
Possible Delisting of Securities from NASDAQ System. The Company's
Common Stock is traded on the NASDAQ Small-Cap system. In order to continue to
qualify for quotation on the NASDAQ Small-Cap System, the Company must have,
among other things, at least $2,000,000 in total assets, $1,000,000 in capital
and surplus and a minimum bid price for its common shares of $1.00 per share.
Accordingly, if the Company is unable to satisfy the continued listing criteria
under the rules, any listed security will be subject to delisting. In such an
event, the Company's Common Stock would not be eligible for continued quotation
on the NASDAQ System. The loss of continued quotation on the NASDAQ System may,
among other effects, also cause a decline in share price, loss of news coverage
of the Company and difficulty in obtaining subsequent financing. The Company is
currently considering implementing a reverse stock split, which would have the
effect of increasing the per share price of its common stock. No assurances can
be given, however, that the Company will undertake or consummate a reverse stock
split or that the per share price of the Company's Common Stock will remain
above $1.00 per share for an extended period of time following a reverse stock
split.
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.
Future Capital will be Required. In addition to immediate capital
needs, WSI will require substantial funds to complete and bring to commercial
viability all of its currently planned projects. There can be no assurances that
WSI will be successful in obtaining such funding commensurate with its currently
planned projects.
20
<PAGE>
Initial Commercialization Stage; Limited Operating History. To date,
although WSI 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, WSI 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 WSI will be successful in developing and implementing commercial landfill
remodeling projects, or that any such development can be accomplished without
excessive cost or delay.
Potential Environmental Liability and Adverse Effect of Environmental
Regulation. WSI'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. See "Environmental and Regulatory
Matters".
Potential Adverse Community Relations. The potential exists for
unexpected delays, costs and litigation resulting from community resistance and
concerns relating to specific projects in various communities.
Unpredictability of Patent Protection and Proprietary Technology. WSI'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 WSI 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 WSI's
processes or design around any processes on which WSI has or may obtain patents.
In addition, it is possible that third parties may have or acquire licenses for
other technology that WSI may use or desire to use, so that WSI may need to
acquire licenses to, or to contest the validity of, such patents of third
parties relating to WSI's technology. There can be no assurance that any license
required under such patents would be made available to WSI on acceptable terms,
if at all, or that WSI would prevail in any such context. Moreover, WSI could
incur substantial costs in defending itself in suits brought against WSI or in
bringing suits against other parties related to patent matters.
Risks Attendant to Company Growth. The Company expects to experience
significant growth in its business. This growth will continue to make
significant demands on the Company's management, resources and operations. To
manage its growth effectively, the Company will be required to continue to
improve its operational, financial and management information systems and to
hire and train new employees and manage its current employees. The Company's
failure to manage growth effectively could have a material adverse affect on the
Company's business and financial performance.
21
<PAGE>
Competition. The markets in which WSI competes are characterized by
several large companies and numerous small companies. Any of these companies may
develop technologies superior to those of WSI. Many of WSI's potential
competitors are large companies with substantially greater financial resources
than WSI. To the extent these potential competitors offer comparable
technologies, WSI's ability to compete effectively could be adversely affected.
In addition to patent protection, WSI 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 WSI
will be effective to protect WSI's technology against unauthorized use by
others.
Dependence on Key Management and Qualified Personnel. WSI is highly
dependent upon the efforts of its senior officers, Philip Strauss, President and
Chief Executive Officer and Robert Rivkin, Vice-President and Chief Financial
Officer, and other senior management. The loss of the services of one or more of
these employees might have a material adverse effect on the Company. WSI does
not currently maintain key man insurance on any of its personnel. WSI's future
success will depend in large part upon its ability to attract and retain
additional highly skilled managerial and technical personnel. WSI faces
competition for hiring such personnel from other companies, research and
academic institutions, government entities and other organizations. There can be
no assurance that WSI will be successful in attracting and retaining qualified
personnel as required for its projected operations.
Liquidity and Capital Resources
To date, WSI has financed its activities primarily through the issuance
of equity securities and debt, including common and preferred stock, and
convertible notes.
On June 30, 1997 the Company closed a Regulation "D" private placement of
Series "A" Convertible Preferred Stock which raised gross proceeds of
approximately $9.7M. See Note 9 to the Consolidated Financial Statements
presented in Item 1. As part of the private placement, the Company converted
approximately $570,000 in bank debt into preferred stock and acquired the
minority interest in Waste Professionals of Vermont, Inc. for $850,000 of
preferred stock.
22
<PAGE>
The preferred stock was sold at a price of $100 per share, bears an 8%
annual cumulative dividend, and is convertible into common stock at a conversion
price of $0.28125 per share of common stock, which conversion price maybe reset
to a lower conversion price upon the occurrence of certain events. The dividend
is payable in cash or in additional shares of preferred stock at the Company's
option and is subject to adjustment after 3 years. The preferred stock is also
redeemable at the Company's option after 1 year, subject to certain trading
requirements. Cumulative dividends on the preferred stock since June 30, 1997,
which have not been declared or paid, are approximately $193,000.
The Company's net proceeds from the offering was approximately
$7,675,000. Of the net proceeds, $310,000 was used to pay down existing bank and
other long-term debt with the remainder used for working capital, including
settlements of the Company's existing liabilities related to the management
change in March 1996 and resulting restructuring, and to finance future
expansion.
The Company owns a landfill located in Moretown, Vermont. The current
estimated available capacity at this landfill, excluding remodeling, is in
excess of 1.0 million tons. On September 30, 1996, the Company received its
final permit from the Vermont Department of Natural Resources to commence
operations at the landfill at an average of 350 tons per day("TPD"). On October
7, 1996, the Company began operations at the landfill.
On April 2, 1997, the Company filed its permit application with the
Vermont Agency of Natural Resources for the next cell or cell 2 at its Moretown
landfill. On April 14, 1997 the permit application was determined to be
administratively complete by the Vermont Department of Natural Resources. The
Company anticipates that it will take approximately 12 months from the date of
filing to receive its final permits to construct and operate cell 2.
On October 7, 1997, the Company closed on an agreement with the
Chittenden Solid Waste District for the lease/purchase of the District's
transfer station in Burlington, Vermont. This will offer the Company greater
access to the Burlington, Vermont and surrounding area markets, Vermont's most
populated and industrialized community. The Company will account for this
transaction as a capital lease and accordingly, an asset of approximately
$1,300,000 will be recorded and will be allocated to land and buildings. The
lease is for a term of 10 years with an option to purchase, for a minimal
amount, at the end of the lease term.
During the quarter ended September 30, 1997, the landfill operated at
an average of approximately 225 TPD. For the period from October 1, 1997 to
October 31, 1997, the landfill has operated at an average of approximately
300-350 TPD. The increase reflects, among other things, the effects of the
acquisition of the Burlington transfer station on October 6, 1997. See Note 10
to the Consolidated Financial Statements presented in Item I.
23
<PAGE>
The Company's total capital investment in the Moretown landfill project
was approximately $9.7 million at September 30, 1997. The Company estimates that
the total capital cost to WPV of completing the Moretown landfill project as
planned, including amounts invested to date, will be approximately $16 million.
At September 30, 1997 the Company had made additional investments of
approximately $1 million in its Vermont collection and transfer station
operations. See Note 10 to the Consolidated Financial Statements presented in
Part I. In addition, the Company currently anticipates an increase in capital
requirements for the Company's rapidly expanding operations throughout the
State of Vermont.
The Company and the Town of South Hadley, Massachusetts have entered into
a contract that provides for WSI to operate and remodel an existing 30-acre
landfill in South Hadley. On March 26, 1997, the Company received a landfill
disruption permit from the Massachusetts Department of Environmental Protection
which enabled the Company to commence engineering and feasibility work at the
landfill. As of September 30, 1997, the Company's investment in this project was
approximately $500,000. The Company anticipates that additional capital
requirements relating to the feasibility and permitting of the South Hadley
landfill project to be approximately $300,000. If the project is determined to
be feasible, the Company anticipates additional capital requirements of
approximately $2 million for construction costs and equipment before commencing
operations and generating revenues at the site during the third or fourth
quarter of 1998.
On July 24, 1994, WSI entered into a contract with the Town of Fairhaven,
Massachusetts to remodel the Town's existing 26 acre landfill. On November 8,
1995, an action was brought against various parties including the Company
relating to the Fairhaven landfill. On September 5, 1996, pursuant to the
Massachusetts Administrative Procedures Act, the action was heard by a Bristol
County Superior Court Judge. On June 2, 1997 the Massachusetts Superior Court
issued an Order denying the plaintiff's action. This order, which represents a
favorable outcome for the Company's position, is subject to appeal to the
Massachusetts Appeals Court after entry of a judgment on the order. The Company
has initiated discussions with the Town of Fairhaven with regard to the future
of the project, and has ceased all operations of the project at this time. As
previously disclosed, the future economic viability of the project is doubtful
because of the extensive delays and additional operating costs resulting from
the litigation and other factors. As of September 30, 1997 the Company has a
reserve of approximately $500,000, which is included in accrued expenses on the
September 30, 1997 balance sheet, for additional litigation and ongoing site
construction costs.
24
<PAGE>
The Company intends to pursue its strategy of becoming a fully
integrated solid waste management company and increase its landfill remodeling
business, therefore dramatically increasing its capital requirements during the
next few years. The Company expects to be required to incur substantial capital
costs in connection with acquisition due diligence, feasibility studies,
contracting, permitting and initial development, and other costs for any
acquisition or 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 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 prior to being able to
obtain outside financing or to derive material operating revenues from the
acquisition or project.
In summary, the Company's total investment required to complete its
Moretown, Vermont landfill project, will be approximately $6.3 million dollars,
additional investments will be required to fund the CSWD transfer station
acquisition, and the continued rapid growth of its Vermont hauling
operations, in addition to amounts already invested as of
September 30, 1997. Furthermore, approximately $300,000 will be
required to fund additional feasibility studies required under the Company's
contracts with the Town of South Hadley in addition to what has already
been invested in this project. If this project is determined to be feasible,
the company anticipates additional capital requirements of approximately $2
million for construction costs and equipment. The Company also has under
discussion and negotiation a number of acquisitions or additional landfill
remodeling projects, 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 including the development of an integrated solid waste
management company. Although the Company has recently begun generating cash
from its Vermont operations, the Company will require additional financing
in order to satisfy its existing and pending commitments.
Inflation
WSI does not believe its operations have been materially affected by inflation.
25
<PAGE>
WASTE SYSTEMS INTERNATIONAL, INC.
Part II Other Information
Item 1. Legal Proceedings.
a) In July 1996, the Company commenced arbitration proceedings against
Dr. Richard Rosen (Rosen), former Chairman, Chief Executive Officer and
President of the Company, seeking to recover amounts, excluding interest and
litigation costs, which the Company believes it was owed by Rosen. This action
was undertaken at the direction of the Board of Directors following its receipt
of a report by a special committee which had been appointed to investigate
Rosen's financial dealings with the Company. The Special Committee retained
independent counsel in connection with its investigation. Rosen resigned from
all offices with the Company on March 27, 1996. Amounts which the Company sought
to recover included unreimbursed advances and amounts which the Company believed
constituted improper expense reimbursements and payments of Company funds for
personal benefit.
An arbitration hearing was completed on October 25, 1996. On January 2,
1997, the arbitrator issued the Award of Arbitrator, directing Rosen to pay
$780,160, excluding interest and litigation costs, for breaches by Rosen of his
employment agreement with the Company "in failing to discharge in good faith the
duties of his positions and failing to act under the direction of the Board of
Directors of the Company. On February 25, 1997 the Middlesex Superior Court in
Cambridge, Massachusetts confirmed the arbitration award and entered the
judgment against Rosen. Previously, the Company sought and obtained Injunctive
Relief in Massachusetts Superior Court prohibiting any sale or other transfer by
Rosen of his stock in the Company in order to provide security for the Company's
claims. The Company is currently pursuing efforts to collect on this judgment
against Rosen. No assurance can be given that the Company will be able to
collect any amounts awarded in arbitration. The Company is carrying on its
September 30, 1997 balance sheet an amount of $500,000 in unreimbursed advances
due from Rosen, but the Company's other claims and additional advances have not
been reflected on the balance sheet at this time.
b) Susan Allua, et al. v. Massachusetts Department of Environmental
Protection, Town of Fairhaven and Waste Systems International, Inc. Two cases
involving the same parties were brought in Bristol Superior Court by sixteen
residents of Fairhaven, Massachusetts who reside in the vicinity of the landfill
owned by the Town of Fairhaven (the "Landfill") which is being remodeled and
operated by the Company. The first case commenced on November 8, 1995. In that
case, Plaintiffs appealed a permit issued by the Massachusetts Department of
Environmental Protection (the "DEP") authorizing the construction of a component
of the remodeling project (the "Authorization to Construct" or "ATC").
Plaintiffs also brought claims alleging that the DEP violated the Massachusetts
Environmental Policy Act in issuing the ATO (the "MEPA Claim"). Further,
Plaintiffs brought common law claims against the Company for nuisance, trespass
and strict liability based principally on alleged dust and odor conditions
resulting from the Company's excavation activities at the Landfill. The Company
has contested all claims, and is receiving the cooperation of the Town of
Fairhaven and the DEP in opposing the claims in which those parties are
involved.
26
<PAGE>
On January 12, 1996, the Company filed a motion to dismiss the MEPA Claims. The
Town and DEP 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 Waste Systems International and the Town,
dismissing the MEPA claims in their entirety.
Pursuant to the Massachusetts Administrative Procedures Act, the Court held a
hearing on the ATC appeal on September 5, 1996. On June 2, 1997 the Court issued
an order denying the ATC appeal. This order will be subject to possible appeal
to the Massachusetts Appeals Court following entry of the judgment on the order.
Plaintiffs' common law claims for nuisance, trespass and strict liability remain
outstanding. These claims are based principally on alleged dust and odor
conditions resulting from the Company's excavation activities at the Fairhaven
Landfill during the summer and early fall of 1995. The Company is pursuing
factual discovery with regards to these claims. If the Plaintiffs pursue these
claims after disposition of the ATC appeal, a period of additional discovery and
other pre-trial proceedings would take place prior to trial on the merits.
The second case commenced on September 9, 1996. In that case, the same
Plaintiffs appealed a permit issued by the DEP authorizing the operation of a
component of the remodeled landfill (the "Authorization to Operate" or "ATO").
The plaintiffs challenge to the ATO raises issues similar, and in some instances
identical, to those raised in the ATC appeal. Accordingly, as a legal or
practical matter, the decision in the ATC appeal may resolve the ATO appeal, and
this case has been essentially on hold pending the outcome of the ATC appeal. As
with the ATC permit, the ATO permit remains in effect during the pendency of the
appeal.
Item 2. Changes in Securities
During the quarter ended September 30, 1997, holders of $150,000 in
face amount of Series "A" Convertible Preferred Stock converted their preferred
shares into 533,333 shares of common stock.
27
<PAGE>
On October 6, 1997, the Company filed an S-3 Registration Statement
with the Securities and Exchange Commission to register approximately 35,500,000
shares of common stock primarily consisting of shares which are reserved for
issuance to holders of Series "A" Preferred Stock upon conversion of their
preferred shares to common stock and the shares issued in the January 1997
private placement, see Notes 8 and 9. Such registration will discharge certain
of the Company's obligations under the Preferred Stock Registration Rights
Agreement.
On October 7, 1997, holders of $300,000 in face amount of Series "A"
Convertible Preferred Stock converted their preferred shares into 1,066,666
shares of common stock.
See Notes 9 and 10 to the Consolidated Financial Statements
presented in Part I.
Item 3. Defaults on Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its annual meeting of stockholders on October 24,
1997. The Board of Directors nominated seven individuals to serve as Directors
of the Company, including four who are to be elected by class vote of the
Preferred Stock. The stockholders voted to elect Jay Matulich, Robert Rivkin and
Philip Strauss to serve as directors of the Company. There were 38,629,202 votes
cast for, 35,125 votes against and 213,660 abstaining from the election of Jay
Matulich. There were 38,627,944 votes cast for, 36,383 votes cast against and
213,660 abstaining from the election of Robert Rivkin. There were 38,625,802
votes cast for, 38,525 votes cast against and 213,660 abstaining from the
election of Philip Strauss. David J. Breazzano, Charles Johnston, Judy K.
Mencher and William B. Philipbar were elected by class vote of the Preferred
Stock to serve as Directors of the Company.
A vote was held to change the Company's name to Waste Systems
International, Inc. from BioSafe International, Inc. and to change the Company's
state of incorporation to Delaware from Nevada. There were 31,237,007 votes cast
for, 195,855 votes cast against, 215,510 abstaining and 7,229,615 not voted.
A vote was held to approve an amendment to the Company's 1995 Stock
Option and Incentive Plan to increase the number of shares of the Company's
Common Stock reserved for issuance thereunder from 1,500,000 shares to
8,500,000. There were 37,574,419 shares for, 441,633 shares against, 634,918
abstaining and 227,017 not voted.
28
<PAGE>
A vote was held to approve an amendment to the Company's 1995 Stock
Option Plan for Non-Employee Directors to provide for the grant to each
newly-elected non-employee director of an option to purchase 20,000 shares of
the Company's Common Stock upon such election. There were 37,691,958 shares for,
348,209 shares against, 696,608 abstaining and 141,212 not voted.
The stockholders also voted to ratify the Directors selection of KPMG
Peat Marwick, LLP as the Company's independent auditors for the fiscal year
ended December 31, 1997. There were 38,666,557 shares for, 26,100 shares
against, 99,525 abstaining and 85,805 not voted.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 2.1 - Articles of Merger of Biosafe
International, Inc., a Nevada corpporation, with and into
Waste Systems International, Inc., a Delaware Corporation,
filed October 24, 1997 and effective October 27, 1997.
Exhibit 2.1 - Certificate of Merger of Biosafe
International, Inc., a Nevada corporation, with and into
Waste Systems International, Inc., a Delaware Corporation,
filed October 24, 1997 and effective October 27, 1997.
Exhibit 2.3 - Agreement and Plan of Merger dated
October 17, 1997 by and between Biosafe International, Inc.,
a Nevada corporation, and Waste Systems International, Inc.,
a Delaware corporation.
Exhibit 4.1 - Certificate of Designation of Series A
Convertible Preferred Stock of Waste Systems International,
Inc. filed October 20, 1997.
Exhibit 4.2 - Amended and Restated Subscription Agreement
dated as of June 30, 1997 by and among Waste Systems
International, Inc., a Delaware Corporation, and certain
subscribers to the issuance shares of Series A Convertible
Preferred Stock.
Exhibit 11 - Statement re Computation of Earnings per Share.
(b) Reports on form 8-K
None.
29
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant as duly caused this Report to be signed on its behalf the
undersigned, thereunto duly authorized.
WASTE SYSTEMS INTERNATIONAL, INC.
Date: November 14, 1997 /s/ Philip Strauss
-------------------------------------
Philip Strauss
Chairman of the Board, Chief Executive
Officer and President
(Principal Executive Officer)
Date: November 14, 1997 /s/ Robert Rivkin
-------------------------------------
Robert Rivkin
Vice President, Chief Financial
Officer, Secretary and Treasurer
(Principal Financial and Accounting Officer)
<PAGE>
EXHIBIT 2.1
ARTICLES OF MERGER
OF
BIOSAFE INTERNATIONAL, INC.
a Nevada Corporation
INTO
WASTE SYSTEMS INTERNATIONAL, INC.
a Delaware Corporation
FIRST: BioSafe International, Inc. ("BioSafe"), an entity of the
jurisdiction of Nevada, owns all of the outstanding shares of each class of
Waste Systems International, Inc. ("Waste Systems"), an entity of the
jurisdiction of Delaware, the laws of which permit this merger.
SECOND: On October 17, 1997, each of BioSafe and Waste Systems adopted
an Agreement and Plan of Merger whereby BioSafe is to be merged into Waste
Systems.
THIRD: The plan of merger was submitted to the stockholders of BioSafe
pursuant to Chapter 92A of the Nevada Revised Statutes.
Number of Votes Number of Votes Number of Votes
Class Entitled to be Cast For Against
- --------------------------------------------------------------------------------
Common Stock 52,286,542 31,237,007 195,895
Preferred Stock 34,090,638 28,572,080 5,518,558
The votes cast by the holders of BioSafe's Common Stock and Preferred Stock are
sufficient for approval of the merger.
FOURTH: That the First Amended and Restated Certificate of
Incorporation of Waste Systems shall be the Certificate of Incorporation of the
surviving corporation.
FIFTH: That these Articles of Merger shall be effective under the
Nevada General Corporation Law on Monday, October 27, 1997 provided that they
have been filed with the Secretary of the State of Nevada on or before that
date.
SIXTH: The complete executed plan of merger is on file at the place of
business of BioSafe located at 10 Fawcett Street, Cambridge, MA 02138, and a
copy of the plan will be furnished by BioSafe, on request and without cost, to
any owners of any entity which is a party to this merger.
<PAGE>
SEVENTH: BioSafe designates the following address as the address to
which the Secretary of State of the State of Nevada is to mail any process
served on him or her against the entity: 10 Fawcett Street, Cambridge, MA 02138.
BIOSAFE INTERNATIONAL, INC.
By: /s/ Philip Strauss
_______________________________
Philip Strauss
President
By: /s/ Robert Rivkin
_______________________________
Robert Rivkin
Secretary
WASTE SYSTEMS INTERNATIONAL, INC.
By: /s/ Philip Strauss
_______________________________
Philip Strauss
President
By: /s/ Robert Rivkin
_______________________________
Robert Rivkin
Secretary
<PAGE>
EXHIBIT 2.2
CERTIFICATE OF MERGER
OF
BIOSAFE INTERNATIONAL, INC.
a Nevada corporation
INTO
WASTE SYSTEMS INTERNATIONAL, INC.
a Delaware corporation
The undersigned corporations DO HEREBY CERTIFY:
FIRST: That the name and state of incorporation of each of the
constituent corporations of the merger (the "Merger") is as follows:
Name State of Incorporation
________________________________________________________________________________
BioSafe International, Inc. Nevada
("BioSafe")
Waste Systems International, Inc. Delaware
("Waste Systems")
SECOND: That an Agreement and Plan of Merger dated as of October 17,
1997 (the "Merger Agreement") has been approved, adopted, certified, executed
and acknowledged by each of the constituent corporations in accordance with the
requirements of Section 252 of the Delaware General Corporation Law and Chapter
92A of the Nevada Revised Statutes.
THIRD: That the name of the surviving corporation of the Merger is
Waste Systems International, Inc., a corporation
organized under the laws of the State of Delaware.
FOURTH: (a) That the total number of shares of stock which BioSafe
has authority to issue is as follows:
Class Number of Shares Par Value Per Share
_______________________________________________________________________________
Common Stock 100,000,000 $.001
Preferred Stock 1,000,000 $.001
(b) That the total number of shares of stock which Waste Systems has
authority to issue is as follows:
Class Number of Shares Par Value Per Share
_______________________________________________________________________________
Common Stock 150,000,000 $.001
Preferred Stock 1,000,000 $.001
<PAGE>
FIFTH: That the First Amended and Restated Certificate of
Incorporation of Waste Systems shall be the Amended and Restated Certificate of
Incorporation of the surviving corporation.
SIXTH: That the executed Plan of Merger is on file at an office of
the surviving corporation located at 10 Fawcett Street, Cambridge, MA 02138.
SEVENTH: That a copy of the Plan of Merger will be furnished by the
surviving corporation, on request and without cost, to any stockholder of any
constituent corporation.
EIGHTH: That this Certificate of Merger shall be effective under the
Delaware General Corporation Law on Monday, October 27, 1997 provided that it
has been filed with the Secretary of State of the State of Delaware on or before
that date.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, this Certificate has been executed on behalf of the
constituent corporations by their authorized officers, as of this 20th day of
October, 1997.
BIOSAFE INTERNATIONAL, INC.
By: /s/ Philip Strauss
__________________________________
Philip Strauss
President
ATTEST:
By: /s/ Robert Rivkin
_____________________________
Robert Rivkin
Secretary
WASTE SYSTEMS INTERNATIONAL, INC.
By: /s/ Philip Strauss
______________________________
Philip Strauss
President
ATTEST:
By: /s/ Robert Rivkin
_____________________________
Robert Rivkin
Secretary
<PAGE>
EXHIBIT 2.3
AGREEMENT AND PLAN OF MERGER
OF BIOSAFE INTERNATIONAL, INC.
INTO WASTE SYSTEMS INTERNATIONAL, INC.
AGREEMENT AND PLAN OF MERGER made this 17th day of October, 1997, by
and between BioSafe International, Inc., a corporation organized in and governed
by the laws of the State of Nevada (the "Nevada Company") and Waste Systems
International, Inc. (the "Delaware Company"), a corporation organized in and
governed by the laws of the State of Delaware, each with principal executive
offices at 10 Fawcett Street, Cambridge, MA 02138.
WHEREAS, the Board of Directors of the Nevada Company and the Delaware
Company, respectively, deem it advisable and generally to the advantage and
welfare of the two corporate parties and the shareholders of each of the parties
that the Nevada Company merge with the Delaware Company under and pursuant to
the provisions of the Business Corporation Law of State of Nevada and of the
General Corporation Law of the State of Delaware.
NOW, THEREFORE, in consideration of the promises and of the mutual
agreements herein contained and of the mutual benefits hereby provided, it is
agreed by and between the parties hereto as follows:
A. MERGER. The Nevada Company shall be and it hereby is merged into the
Delaware Company.
A. EFFECTIVE DATE. This Agreement and Plan of Merger shall become
effective immediately upon compliance with the laws of the States of Nevada and
Delaware, the time of such effectiveness being hereinafter called the Effective
Date.
A. SURVIVING CORPORATION. The Delaware Company shall survive the merger
herein contemplated and shall continue to be governed by the laws of the State
of Delaware and the separate corporate existence of the Nevada Company shall
cease forthwith upon the Effective Date.
A. CERTIFICATE OF INCORPORATION. The First Amended and Restated
Certificate of Incorporation of the Delaware Company as it exists on the
Effective Date shall be the First Amended and Restated Certificate of
Incorporation of the surviving Delaware Company following the Effective Date
(the "Certificate") unless and until the same shall be amended or repealed in
accordance with the provisions thereof. Such First Amended and Restated
Certificate shall constitute the Certificate of Incorporation of the
Delaware Company separate and apart from this Agreement of Merger and may be
separately certified as the First Amended and Restated Certificate of
Incorporation of the Delaware Company.
<PAGE>
A. BYLAWS. The Bylaws of the Delaware Company as they exist on the
Effective Date shall be the Bylaws of the Delaware Company following the
Effective Date unless and until the same shall be amended or repealed in
accordance with the provisions thereof.
A. BOARD OF DIRECTORS AND OFFICERS. The members of the Board of
Directors and the officers of the Delaware Company immediately after the
Effective Date shall be those persons who were the members of the Board of
Directors and the officers, respectively, of the Delaware Company on the
Effective Date, and such persons shall serve in such offices, respectively,
for the terms provided by law, in the Bylaws, in the Certificate or until their
respective successors are elected and qualified.
A. CANCELLATION OF SECURITIES. The securities of the Delaware Company in
existence on the Effective Date all of which are held beneficially and of record
by the Nevada Company, shall be canceled and shall cease to be issued and
outstanding shares on and after the Effective Date.
A. CONVERSION OF OUTSTANDING SECURITIES OF THE NEVADA COMPANY. Upon the
Effective Date, each outstanding share of common stock, $.001 par value, of the
Nevada Company ("Nevada Common Stock"), shall automatically convert, into one
share of the Nevada Company common stock, $.001 par value, of the Delaware
Company ("Delaware Common Stock"); each outstanding share of Series A Preferred
Stock, $.001 par value per share, of the Nevada Company shall automatically
convert into one share of the Delaware Company Series A Preferred Stock, $.001
par value per share; each outstanding convertible debenture of the Nevada
Company shall automatically convert into a convertible debenture of the Delaware
Company, having the same face amount and identical terms and convertible into
the same number of shares of Delaware Common Stock as the number of shares of
Nevada Common Stock into which it was formerly convertible; and each outstanding
warrant or option of the Nevada Company to purchase a number of shares of Nevada
Common Stock shall automatically convert into a warrant or option of the
Delaware Company to purchase the same number of shares of Delaware Common Stock.
The conversion of each of the Nevada Company securities into its corresponding
Delaware Company security shall occur automatically upon the Effective Date
without necessity of further action on the part of any person. Each stock
certificate representing theretofore issued and outstanding shares of Nevada
Common Stock shall represent the same number of shares of Delaware Common Stock
and shall be exchangeable for a stock certificate of the Delaware Company
representing such number of shares of Delaware Common Stock in accordance with
such procedures as may be established by the Delaware Company.
<PAGE>
A. RIGHTS AND LIABILITIES OF DELAWARE COMPANY. At and after the Effective
Date, the Delaware Company shall succeed to and possess, without further act or
deed, all of the estate, rights, privileges, powers, and franchises, both
public and private, and all of the property, real, personal, and mixed, of
each of the parties hereto; all debts due to the Nevada Company shall be
vested in the Delaware Company; all claims, demands, property, rights,
privileges, powers and franchises and every other interest of either of the
parties hereto shall be as effectively the property of the Delaware Company as
they were of the respective parties hereto; the title to any real estate vested
by deed or otherwise in the Nevada Company shall not revert or be in any way
impaired by reason of the merger, but shall be vested in the Nevada Company;
all rights of creditors and all liens upon any property of either of the parties
hereto shall be preserved unimpaired, limited in lien to the property
affected by such lien at the Effective Date; all debts, liabilities, and
duties of the respective parties hereto shall thenceforth attach to the
Delaware Company and may be enforced against it to the same extent as if such
debts, liabilities, and duties had been incurred or contracted by it; and the
Delaware Company shall indemnify and hold harmless the officers and directors
of each of the parties hereto against all such debts, liabilities and duties
and against all claims and demands arising out of the merger.
10. AMENDMENT AND ABANDONMENT. Subject to applicable law, at any
time prior to the Effective Date, the directors of the Nevada Company and the
directors of the Delaware Company may amend or abandon this Agreement; provided
however, that the principal terms may not be amended without stockholder
approval.
IN WITNESS WHEREOF, each of the corporate parties hereto has caused
this Agreement and Plan of Merger to be executed.
WASTE SYSTEMS INTERNATIONAL, INC.
By: /s/ Philip Strauss
__________________________________
Philip Strauss
Chairman, President and
Chief Executive Officer
BIOSAFE INTERNATIONAL, INC.
By: /s/ Philip Strauss
__________________________________
Philip Strauss
Chairman, President and
Chief Executive Officer
EXHIBIT 4.1
WASTE SYSTEMS INTERNATIONAL, INC.
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF A SERIES OF PREFERRED STOCK
By Resolution of the Board of Directors
We, Philip Strauss, President, and Robert Rivkin, Secretary, of Waste
Systems International, Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation"), in
accordance with Section 151 of the Delaware General Corporation Act, do hereby
certify:
That, pursuant to authority conferred upon the Board of Directors of
the Corporation by the Articles of Incorporation of said Corporation, as
amended, and pursuant to the provisions of Section 151 of the Delaware General
Business Corporation Act, said Board of Directors on October 17, 1997
unanimously adopted a resolution providing for the designations, preferences and
relative, participating, optional or other rights, and the qualifications,
limitations or restrictions thereof, including, without limiting the generality
of the foregoing, such provisions as may be desired concerning voting,
redemption, dividends, dissolution or the distribution of assets, and conversion
or exchange, of a series of preferred stock, which resolution is as follows:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Corporation in accordance with the provisions of the Articles
of Incorporation of the Corporation, as amended, a series of preferred stock of
the Corporation known as Series A Convertible Preferred Stock (the "Preferred
Stock") be, and it hereby is, created, classified, and authorized, and the
issuance thereof is provided for, and that the designation and number of shares,
and relative rights, preferences and limitations thereof, shall be as set forth
in the form appended hereto as Exhibit A.
<PAGE>
A. Designation. The shares of the series of Preferred Stock shall be
esignated as "Series A Convertible Preferred Stock," and the number of shares
constituting such series shall be 200,000. The par value of the Series A
Convertible Preferred Stock shall be $.001 per share.
A. Dividends. The holders of outstanding shares of the Preferred Stock
shall be entitled to receive,when, as and if declared by the Board of Directors,
out of funds legally available for the payment of dividends, dividends at the
annual rate of $8.00 per share for each of the three years following June 26,
1997, and at the annual rate of $14.00 per share thereafter. All dividends
shall be cumulative and shall be payable annually in arrears on June 26th of
each year, commencing on June 26, 1998, in preference to and with priority over
dividends on the common stock of the Corporation, par value $.001 per share
(the "Common Stock"). Such dividends shall be cumulative and shall accrue
(whether or not earned or declared, and whether or not there are funds
legally available therefor) without interest from the first day of the annual
period in which such dividend may be payable as herein provided or from the date
of first issuance of the Preferred Stock, if later. Any dividends that accrue
may be paid, at the option and in the sole discretion of the Board of Directors,
in cash or, in whole or in part, by issuing fully paid and non-assessable shares
of Preferred Stock, valued for such purpose at $100 per share. All dividends
paid with respect to shares of the Preferred Stock pursuant to this Section 2
hereof shall be paid pro rata to the holders entitled thereto. Declaration
and payment of such dividends shall be made each year unless otherwise
determined by the Board of Directors with respect to a particular year.
A. Liquidation, Dissolution or Winding Up.
1. In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, holders of each share of
Preferred Stock outstanding shall be entitled to be paid out of the assets of
the Corporation available for distribution to stockholders, whether such assets
are capital, surplus, or earnings, an amount equal to $100 per share of
Preferred Stock held plus any accrued and unpaid dividends with respect thereto
to which holders of the Preferred Stock have become entitled (the "Liquidation
Preference"), before any payment shall be made to the holders of any class of
Common Stock or of any stock ranking on liquidation junior to the Preferred
Stock. If upon any liquidation, dissolution, or winding up of the Corporation,
the assets to be distributed to the holders of the Preferred Stock under the
foregoing sentence shall be insufficient to permit payment to such shareholders
of the full preferential amounts aforesaid, then all of the assets of the
Corporation available for distribution to such holders under such sentence shall
be distributed to such holders pro rata, so that each holder receives that
portion of the assets available for distribution as the number of shares of
Preferred Stock held by such holder bears to the total number of shares of
Preferred Stock then outstanding. After the payment of all preferential amounts
required to be paid to the holders of the Series A Preferred Stock upon the
dissolution, liquidation or winding up of the Corporation, the holders of shares
of Preferred Stock and shares of Common Stock then outstanding shall share
ratably in the distribution of the remaining assets and funds of the Corporation
in proportion to the number of shares of Common Stock held by them or issuable
upon conversion of shares of Preferred Stock held by them.
<PAGE>
1. The amount per share set forth in Section 3(a) shall be appropriately
adjusted for any stock split, stock combinations, stock dividends or similar
recapitalizations with respect to the Preferred Stock.
A. Voting Power.
1. Except as otherwise expressly provided herein or as required by law, the
holder of each share of Preferred Stock shall be entitled to vote on all
matters. Each share of Preferred Stock shall entitle the holder thereof to such
number of votes per share as shall equal the number of shares of Common Stock
into which each share of Preferred Stock is then convertible. Except as
otherwise expressly provided herein in Section 4(b) below, or as required by
law, the holders of shares of the Preferred Stock and the Common Stock shall
vote together as a single class on all matters.
1. The holders of the Preferred Stock shall have the right to vote together as a
single class to elect four (4) directors to the Board of Directors of the
Corporation, two of which shall be designated by B III Capital Partners, L.P.
("B III"), so long as B III holds 30,000 or more shares of the Preferred Stock;
provided that in the event that B III shall own fewer than 30,000 shares
(subject to adjustment as provided herein) of Preferred Stock, B III shall be
entitled to designate one director; and provided further that in the event that
B III shall own fewer than 15,000 shares (subject to adjustment as provided
herein) of the Preferred Stock, B III shall not be entitled to designate a
director. Such directors shall be elected annually for one-year terms by the
holders of the Preferred Stock at the Corporation's annual meeting of
stockholders, notwithstanding any contrary provision in the Corporation's
charter or bylaws, or, if necessary, to replace one of such directors at a
special meeting of the Preferred Stockholders.
A. Conversion. The holders of the Preferred Stock shall have the
following conversion rights:
1. Subject to and in compliance with the provisions of this Section 5, any
shares of the Preferred Stock may, at the option of the holder, be converted at
any time or from time to time into fully-paid and non-assessable shares of
Common Stock. The number of shares of Common Stock to which a holder of the
Preferred Stock shall be entitled upon conversion shall be the product obtained
by multiplying the Applicable Conversion Rate (determined as provided in Section
5(c)) by the number of shares of Preferred Stock being converted. For purposes
of this Section 5, the number of shares of Preferred Stock being converted shall
include shares of Preferred Stock that would be issuable in payment of any
accrued and unpaid dividends at the time of conversion.
<PAGE>
a) In the event that after June 26, 1998 the average closing price of the
Corporation's Common Stock on the Nasdaq Stock Market (or, in the event that
such security is not traded on the Nasdaq Stock Market, such other national or
regional securities exchange or automated quotation system upon which such
security is listed and principally traded or, if no such price is available, the
per share market value of the Common Stock as determined by a nationally
recognized investment banking firm or other nationally recognized financial
adviser retained by the Corporation for such purpose) is equal to or greater
than 200% of the Applicable Conversion Value over a period of any twenty (20)
successive trading days, the Corporation may, at its option, effect the
automatic conversion of shares of Preferred Stock, in whole or in part, at the
Applicable Conversion Rate; provided that the Company's option to effect the
automatic conversion under this Section 5(b) shall be available only if the
Corporation Common Stock does in fact trade on each day in the twenty days prior
to the election to effect the automatic conversion. With respect to any
automatic conversion of fewer than all the outstanding shares of preferred
stock, the number of shares to be converted shall be determined by the Board of
Directors and the shares to be converted shall be selected pro rata. If the
foregoing condition has been satisfied and the Corporation has elected to effect
the automatic conversion of shares of Preferred Stock, it shall deliver a notice
to that effect by overnight delivery service to each holder of shares of
Preferred Stock. The conversion will be effective five (5) days after the
delivery of such notice in accordance with the provisions of Section 5(b)(ii)
below.
a) Upon the occurrence of the events specified in Section (5)(b)(i), the
outstanding shares of Preferred Stock shall be converted automatically without
any further action by the holders of such shares and whether or not the
certificates representing such shares are surrendered to the Corporation or its
transfer agent, provided, however, that the Corporation shall not be obligated
to issue certificates evidencing the shares of Common Stock issuable upon such
conversion unless certificates evidencing such shares of the Preferred Stock
being converted are either delivered to the Corporation or any transfer agent,
as hereinafter provided, or the holder notifies the Corporation or any transfer
agent as hereinafter provided, that such certificates have been lost, stolen or
destroyed and executes an agreement satisfactory to the Corporation to indemnify
the Corporation from any loss incurred by it in connection therewith.
Upon the occurrence of the automatic conversion of all of the
outstanding Preferred Stock, the holders of the Preferred Stock shall surrender
the certificates representing such shares at the office of the Corporation or of
any transfer agent for the Common Stock. Thereupon, there shall be issued and
delivered to each such holder, promptly at such office and in his name as shown
on such surrendered certificate or certificates, a certificate or certificates
for the number of shares of Common Stock into which the shares of the Preferred
Stock surrendered were convertible on the date on which such automatic
conversion occurred.
<PAGE>
1. The conversion rate in effect at any time (the "Applicable Conversion Rate")
shall equal the quotient obtained by dividing $100 by the Applicable Conversion
Value, calculated as hereinafter provided. 2. The Applicable Conversion Value in
effect initially, and until first adjusted in accordance with Section 5(f) shall
be $.28125.
1. Upon the happening of an Extraordinary Common Stock Event (as hereinafter
defined), the Applicable Conversion Value shall, simultaneously with the
happening of such Extraordinary Common Stock Event, be adjusted by dividing the
then effective Applicable Conversion Value by a fraction, the numerator of which
shall be the number of shares of Common Stock of all classes outstanding
immediately after such Extraordinary Common Stock Event and the denominator of
which shall be the number of shares of Common Stock of all classes outstanding
immediately prior to such Extraordinary Common Stock Event, and the quotient so
obtained shall thereafter be the Applicable Conversion Value. The Applicable
Conversion Value, as so adjusted, shall be readjusted in the same manner upon
the happening of any successive Extraordinary Common Stock Event or Events.
"Extraordinary Common Stock Event" shall mean (i) the issue of additional shares
of the Common Stock of any class as a dividend or other distribution on
outstanding Common Stock, (ii) subdivision of outstanding shares of Common Stock
of any class into a greater number of shares of the Common Stock, or (iii)
combination of outstanding shares of the Common Stock of any class into a
smaller number of shares of the Common Stock.
(f) If the average closing price of the Corporation's Common
Stock on the NASDAQ Stock Market (or, in the event that such security is not
traded on the NASDAQ Stock Market, such other national or regional securities
exchange or automated quotation system upon which such security is listed and
principally traded or, if no such price is available, the per share market value
of the Common Stock as determined by a nationally recognized investment banking
firm or other nationally recognized financial advisor retained by the
Corporation for such purpose) over the final twenty trading days of the 120 day
period commencing on the effective date of the proposed reverse stock split is
less than $.28125 (subject to adjustment as provided herein) then the Applicable
Conversion Value shall be such average closing price.
(g) In the event the Corporation shall make or issue, or fix a
record date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in securities of the
Corporation other than shares of Common Stock, then and in each such event
lawful and adequate provision shall be made so that the holders of Preferred
Stock shall receive upon conversion thereof in addition to the number of shares
of Common Stock receivable thereupon, the number of securities of the
Corporation which they would have received had their Preferred Stock been
converted into Common Stock on the date of such event and had they thereafter,
during the period from the date of such event to and including the Conversion
Date (as hereinafter defined), retained such securities receivable by them as
aforesaid during such period, giving application to all adjustments called for
during such period under this Section 5 with respect to the rights of the
holders of the Preferred Stock.
<PAGE>
(h) If the Common Stock issuable upon the conversion of the
Preferred Stock shall be changed into the same or different number of shares of
any class or classes of stock, whether by reclassification or otherwise, then
and in each such event the holder of each share of Preferred Stock shall have
the right thereafter to convert such share into the kind and amount of shares of
stock and other securities and property receivable upon such reorganization,
reclassification or other change, by holders of the number of shares of Common
Stock into which such shares of Preferred Stock might have been converted
immediately prior to such reorganization, reclassification or change, all
subject to further adjustment as provided herein.
(i) If at any time or from time to time there shall be a
capital reorganization of the Common Stock or a merger or consolidation of the
Corporation with or into another Corporation or the sale of all or substantially
all of the Corporation's properties and assets to any other person, then, as a
part of and as a condition to the effectiveness of such reorganization, merger,
consolidation or sale, lawful and adequate provision shall be made so that the
holders of the Preferred Stock shall thereafter be entitled to receive upon
conversion of the Preferred Stock the number of shares of stock or other
securities or property of the Corporation or of the successor Corporation
resulting from such merger or consolidation or sale, to which a holder of Common
Stock deliverable upon conversion would have been entitled on such capital
reorganization, merger, consolidation, or sale. In any such case, appropriate
provisions shall be made with respect to the rights of the holders of the
Preferred Stock after the reorganization, merger, consolidation or sale to the
end that the provisions of this Section 5 (including without limitation
provisions for adjustment of the Applicable Conversion Value and the number of
shares purchasable upon conversion of the Preferred Stock) shall thereafter be
applicable, as nearly as may be, with respect to any shares of stock, securities
or assets to be deliverable thereafter upon the conversion of the Preferred
Stock.
Each holder of Preferred Stock upon the occurrence of a capital
reorganization, merger or consolidation of the Corporation or the sale of all or
substantially all its assets and properties as such events are more fully set
forth in the first paragraph of this Section 5(h), shall have the option of (i)
receiving the Liquidation Preference or (ii) electing treatment of its shares of
Preferred Stock under the preceding paragraph of this Section 5(h), notice of
which election shall be submitted in writing to the Corporation at its principal
offices no later than ten (10) days before the effective date of such event,
provided that any such notice shall be effective if given not later than fifteen
(15) days after the date of the Corporation's notice, pursuant to Section 8,
with respect to such event.
(j) In each case of an adjustment or readjustment of the
Applicable Conversion Rate, the Corporation will furnish each holder of
Preferred Stock with a certificate, prepared by the chief financial officer of
the Corporation, showing such adjustment or readjustment, and stating in detail
the facts upon which such adjustment or readjustment is based.
<PAGE>
(k) To exercise its conversion privilege as provided in
Section 5(a) above, a holder of Preferred Stock shall surrender the certificate
or certificates representing the shares being converted to the Corporation at
its principal office, and shall give written notice to the Corporation at that
office that such holder elects to convert such shares. Such notice shall also
state the name or names (with address or addresses) in which the certificate or
certificates for shares of Common Stock issuable upon such conversion shall be
issued. The certificate or certificates for shares of Preferred Stock
surrendered for conversion shall be accompanied by proper assignment thereof to
the Corporation or in blank. The date when such written notice is received by
the Corporation together with the certificate or certificates representing the
shares of Preferred Stock being converted, shall be the "Conversion Date." As
promptly as practicable after the Conversion Date, the Corporation shall issue
and shall deliver to the holder of the shares of Preferred Stock being
converted, or on its written order, a certificate or certificates as it may
request for the number of full shares of Common Stock issuable upon the
conversion of such shares of Preferred Stock in accordance with the provisions
of this Section 5 and cash as provided in Section 5(k), in respect of any
fraction of a share of Common Stock issuable upon such conversion. Such
conversion shall be deemed to have been effected immediately prior to the close
of business on the Conversion Date, and at such time the rights of the holder as
holder of the converted shares of Preferred Stock shall cease and the person or
persons in whose name or names any certificate or certificates for shares of
Common Stock shall be issuable upon such conversion shall be deemed to have
become the holder or holders of record of shares of Common Stock represented
thereby.
(l) No fractional shares of Common Stock or scrip representing
fractional shares shall be issued upon conversion of Preferred Stock. Instead of
any fractional shares of Common Stock which would otherwise be issuable upon
conversion of Preferred Stock, the Corporation shall pay to the holder of the
shares of Preferred Stock which were converted a cash adjustment in respect of
such fraction in an amount equal to the same fraction of the market price per
share of the Common Stock (as determined in a manner prescribed by the Board of
Directors) at the close of business on the Conversion Date.
(m) In the event some but not all of the shares of Preferred
Stock represented by a certificate or certificates surrendered by a holder are
converted, the Corporation shall execute and deliver to or on the order of the
holder, at the expense of the Corporation, a new certificate representing the
number of shares of Preferred Stock which were not converted.
(n) The Corporation shall at all times reserve and keep
available out of its authorized but unissued shares of Common Stock, solely for
the purpose of effecting the conversion of the shares of the Preferred Stock,
such number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of the Preferred
Stock, and if at any time the number of authorized but unissued shares of Common
Stock shall not be sufficient to effect the conversion of all then outstanding
shares of the Preferred Stock, the Corporation shall take such corporate action
as may, in the opinion of its counsel, be necessary to increase its authorized
but unissued shares of Common Stock to such number of shares as shall be
sufficient for such purpose.
<PAGE>
A. Redemption.
1. Call Redemption. If any shares of Preferred Stock shall be outstanding on
June 26, 2002, the Corporation may redeem, at the option of the Corporation in
its sole discretion, to the extent it has funds legally available therefor, at
any time or from time to time, in whole or in part, shares of Preferred Stock (a
"Call Redemption") at a price per share equal to the Liquidation Preference plus
any accrued and unpaid dividends with respect to such shares to which the
holders of the Preferred Stock have become entitled (the "Redemption Price").
With respect to any Call Redemption of fewer than all of the outstanding shares
of Preferred Stock, the number of shares to be redeemed shall be determined by
the Board of Directors and the shares to be redeemed shall be selected pro rata.
1. Notice of Call Redemption. Notice of any Call Redemption of shares of
Preferred Stock, specifying the time and place of redemption and the Redemption
Price (a "Redemption Notice"), shall be sent by overnight delivery service to
each holder of Preferred Stock to be redeemed, at the address for such holder
shown on the Corporation's record not more than sixty (60) nor less than thirty
(30) days prior to the Redemption Date (as hereinafter defined). If less than
all the shares of Preferred Stock owned by such holder are then to be redeemed,
the Redemption Notice shall also specify the number of shares which are to be
redeemed; provided, however, that no failure to given such Redemption Notice nor
any defect therein shall affect the validity of the procedure for the redemption
of any shares of Preferred Stock to be redeemed except as to the holder to whom
the Corporation has failed to give said Redemption Notice or except as to the
holder whose Redemption Notice was defective. Each such Redemption Notice shall
state: (i) the Redemption Date (as hereinafter defined); (ii) the Redemption
Price (as hereinafter defined); (iii) the number of shares of Preferred Stock to
be redeemed and, if fewer than all the shares of Preferred Stock held by a
holder are to be redeemed, the number of shares thereof to be redeemed from such
holder; (iv) the manner and place or places at which payment for the shares of
Preferred Stock offered for redemption will be made, presentation and surrender
to the Corporation of the certificates evidencing the shares being redeemed; (v)
that dividends on the shares of Preferred Stock being redeemed shall cease to
accrue on the Redemption Date unless the Corporation defaults in the payment of
the Redemption Price; and (vi) that the rights of holders of Preferred Stock as
stockholder of the Corporation with respect to shares being redeemed shall
terminate as of the Redemption Date unless the Corporation defaults in the
payment of the Redemption Price. Upon mailing any such Redemption Notice, the
Corporation shall become obligated to redeem at the Redemption Price on the
applicable Redemption Date all shares of Preferred Stock therein specified.
<PAGE>
1. Remption Date. The Corporation shall fix the date for a Call Redemption (the
"Redemption Date")no earlier than thirty (30) but not more than sixty (60) days
after the Redemption Notice is sent as set forth in Section 6(b) hereof.
1. Payment and Surrender. On any Redemption Date, the full Redemption Price
shall become payable in cash for the shares of Preferred Stock being redeemed on
such Redemption Date. As a condition of payment of the Redemption Price, each
holder of Preferred Stock must surrender the certificate or certificates
representing the shares of Preferred Stock being redeemed to the Corporation in
the manner and at the place designated in the Redemption Notice or in the event
such certificate or certificates have been lost, stolen or destroyed, must
execute an agreement satisfactory to the Corporation to indemnify the
Corporation from any loss incurred by it in connection therewith. Each
surrendered certificate shall be canceled and retired. All redemption payments
will be made to the holders of the shares being redeemed.
1. Termination. On any Redemption Date, unless the Corporation defaults in the
payment in full of the Redemption Price, dividends on the Preferred Stock
redeemed shall cease to accumulate, and all rights of holders of such redeemed
shares shall terminate, except for the right to receive the Redemption Price.
7. Restrictions and Limitations.
(a) Corporate Action. Except as expressly provided herein or
as required by law, so long as any shares of Preferred Stock remain outstanding,
the Corporation shall not without the approval by vote or written consent (which
written consent need not be unanimous) by the holders of at least fifty-one
percent (51%) of the then outstanding shares of Preferred Stock, voting as a
separate class:
(i) authorize or issue, or obligate itself to authorize or issue,
any equity security senior to or on parity with the Preferred Stock as to
liquidation preferences, dividend rights, redemption rights or voting rights
(except for common stock as to voting rights);
(ii) merge or consolidate with any other corporation, or sell,
assign, lease or otherwise dispose of or voluntarily part with the control of
(whether in one transaction or in a series of transactions)all, or substantially
all, of its assets (whether now owned or hereinafter acquired), or consent to
any liquidation, dissolution, winding up,reorganization or recapitalization of
the Corporation, or permit any subsidiary to do any of the foregoing, except for
(1) any wholly-owned subsidiary may merge into or consolidate with or
transfer assets to any other wholly-owned subsidiary, and (2) any wholly-owned
subsidiary may merge into or transfer assets to the Corporation; or
(iii) amend, restate, modify or alter the by-laws of the Corporation
in any way which adversely affects the rights of the holders of the Preferred
Stock;
<PAGE>
(b) Amendments to Charter. The Corporation shall not amend its
Articles of Incorporation without the approval, by vote or written consent
(which written consent need not be unanimous), by the holders of at least sixty
percent (60%) of the then outstanding shares of Preferred Stock, if such
amendment would adversely affect any of the rights, preferences, privileges of
or limitations provided for herein for the benefit of any shares of Preferred
Stock. Without limiting the generality of the preceding sentence, the
Corporation will not amend its Articles of Incorporation without the approval by
the holders of at least sixty percent (60%) of the then outstanding shares of
Preferred Stock if such amendment would:
(i) change the relative seniority rights of the holders of Preferred
Stock as to the payment of dividends in relation to the holders of any
other capital stock of the Corporation, or create any other class or series
of capital stock entitled to seniority as to the payment of dividends in
relation to the holders of Preferred Stock;
(ii) reduce the amount payable to the holders of Preferred Stock upon
the voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, or change the relative seniority of the liquidation preferences
of the holders of Preferred Stock to the rights upon liquidation of the holders
of other capital stock of the Corporation, or change the dividend rights of
the holders of Preferred Stock;
(iii) cancel or modify the rights of the holders of the Preferred
Stock provided for in this Section 7.
8. Preemptive Rights
8.1 Right of Purchase. The Company grants to each holder of Preferred
Stock, so long as such holder shall own, of record or beneficially, or have the
right to acquire from the Corporation, any Preferred Stock, the right to
purchase all or part of his or its Pro Rata Share of New Securities offered by
the Corporation, which right shall expire before and shall not apply in
connection with any registered underwritten public offering by the Corporation
of the Corporation's securities. For purposes of this preemptive right, the term
"Pro Rata Share" shall mean the ratio of the number of shares of the
Corporation's Common Stock into which such holder's Preferred Stock is
convertible to the total number of shares of Common Stock then outstanding
(including Common Stock issuable upon the conversion of all the outstanding
Preferred Stock).
<PAGE>
8.2 Definition of New Securities. "New Securities" shall mean any equity
securities of the Corporation, whether now authorized or not, and rights,
options, or warrants to purchase said equity securities, and securities of any
type whatsoever that are, or may become, convertible into said equity
securities; provided, however, that "New Securities" does not include (i)
securities offered to the public pursuant to an effective registration statement
filed under the Securities Act of 1933, as amended ("Securities Act"); (ii)
securities issued pursuant to the acquisition of another corporation by the
Corporation by merger, purchase of substantially all of the assets, or other
reorganization whereby the Corporation acquires not less than 51% of the voting
power of such corporation; (iii) securities issued or issuable upon conversion
of any convertible securities or warrants issued by the Corporation and
outstanding as of June 26, 1997; (iv) any stock options issued to officers,
directors, employees or consultants of the Corporation and securities issuable
upon exercise thereof, provided that the aggregate amount of stock reserved for
issuance of such stock options shall not exceed fifteen percent (15%) of the
issued and outstanding Common Stock of the Corporation; or (v) Preferred Stock
issued after the date hereof and on or before June 30, 1997, provided that the
aggregate amount of such Preferred Stock does not exceed $5,000,000.
8.3 Notice from the Corporation. In the event the Corporation proposes
to undertake an issuance of New Securities, it shall give each holder of
Preferred Stock written notice of its intention, describing the type of New
Securities and the price and the terms upon which the Corporation proposes to
issue the same. Each holder of Preferred Stock shall have ten (10) business days
from the date of receipt of any such notice to agree to purchase up to their Pro
Rata Share of such New Securities for the price and upon the terms specified in
the notice by giving written notice to the Corporation and stating therein the
quantity of New Securities to be purchased.
8.4 Sale by the Corporation. In the event any holder of Preferred Stock
fails to exercise in full his or its preemptive right, the Corporation shall
have 60 days thereafter to sell the New Securities with respect to which such
holder's option was not exercised, at a price and upon terms no more favorable
to the purchasers thereof than specified in the Corporation's notice. To the
extent the Corporation does not sell all the New Securities offered within said
60 day period, the Corporation shall not thereafter issue or sell such New
Securities without first again offering such securities to the holders of
Preferred Stock in the manner provided above.
9. No Reissuance of Preferred Stock. No share or shares of the Preferred
Stock acquired by the Corporation by reason of redemption, purchase, conversion
or otherwise shall be reissued, and all such shares shall be canceled, retired,
and eliminated from the shares which the Corporation shall be authorized to
issue. The Corporation may from time to time take such appropriate corporate
action as may be necessary to reduce the authorized number of shares of the
Preferred Stock accordingly.
<PAGE>
10. Notices of Record Date. In the event (i) the Corporation establishes
a record date to determine the holders of any class of securities who are
entitled to receive any dividend or other distribution, or (ii) there occurs any
capital reorganization of the Corporation, any reclassification or
recapitalization of the capital stock of the Corporation, any merger or
consolidation of the Corporation, and any transfer of all or substantially all
of the assets of the Corporation to any other Corporation, or any other entity
or person, or any voluntary or involuntary dissolution, liquidation or winding
up of the Corporation, the Corporation shall mail to each holder of Preferred
Stock at least twenty (20) days prior to the record date specified therein, a
notice specifying (a) the date of such record date for the purpose of such
dividend or distribution and a description of such dividend or distribution, (b)
the date on which any such reorganization, reclassification, transfer,
consolidation, merger, dissolution, liquidation or winding up is expected to
become effective, and (c) the time, if any, that is to be fixed, as to when the
holders of record of Common Stock (or other securities) shall be entitled to
exchange their shares of Common Stock (or other securities) for securities or
other property deliverable upon such reorganization, reclassification, transfer,
consolidation, merger, dissolution, liquidation or winding up.
11. Other Rights. Except as otherwise provided in this resolution or as
otherwise may be required by law, each share of Preferred Stock and each share
of Common Stock shall be identical in all respects, shall have the same powers,
preferences and rights, without preference of any such class or share over any
other such class or share, and shall be treated as a single class of stock for
all purposes.
<PAGE>
IN WITNESS WHEREOF, Waste Systems International, Inc. has caused this
certificate to be executed under seal by Philip Strauss, its President, and
Robert Rivkin, its Secretary, this _____ day of _______, 1997.
By: /s/ Philip Strauss
___________________
Philip Strauss
President
By: /s/ Robert Rivkin
__________________
Robert Rivkin
Secretary
State of )
) ss:
County of )
)
On ___________________ personally appeared before me, a Notary Public,
Philip Strauss and Robert Rivkin, who acknowledges that they executed the above
instrument.
Notary Public
My commission expires:
(SEAL)
<PAGE>
EXHIBIT 4.2
BIOSAFE INTERNATIONAL, INC.
AMENDED AND RESTATED
SUBSCRIPTION AGREEMENT
To: BioSafe International, Inc.
10 Fawcett Street
Cambridge, MA 02138
You have advised the undersigned that BioSafe International, Inc., a
Nevada corporation (the "Company"), is offering to certain accredited investors
a maximum of 200,000 Shares of convertible preferred stock, $.001 par value per
share (the "Shares") on substantially the terms and conditions set forth herein
and in the Private Placement Memorandum (the "Offering Memorandum") dated May 6,
1997, as amended or supplemented from time to time (the "Offering"). You also
have been advised that the Company has the right in its sole discretion to
increase or decrease the number of Shares it is offering under the Offering
Memorandum at any time prior to the closing of the Offering, and any such
increase or decrease shall not affect the rights of any subscribers hereunder.
Based on the foregoing and subject to the terms and conditions of this
Subscription Agreement (the "Subscription"), the undersigned agrees with you as
follows:
A. Subscription.
The undersigned hereby tenders this Subscription for the purchase of
the number of Shares set forth on the signature page hereof at a price of $100
per Share and agrees to pay therefor the aggregate purchase price set forth on
the signature page hereof.
A. Acceptance of Subscription.
It is understood and agreed that this Subscription is made subject to
the following terms and conditions:
1. The Company shall have the right to accept or reject this Subscription, in
whole or in part, for any reason, including the inability of the undersigned to
meet the standards imposed by Regulation D promulgated by the Securities and
Exchange Commission under the Securities Act of 1933, as amended (the
"Securities Act"), the ineligibility of the undersigned to meet the standards
imposed by applicable state or foreign securities laws, or for any other reason,
or for no reason. If this Subscription is rejected, the funds previously
deposited hereunder will be returned to the undersigned together with interest,
if any, accrued thereon.
1. Two copies of this Agreement are being executed by the undersigned. If
accepted, one copy of this Agreement will be retained by the Company and one
copy of this Agreement, after execution by the Company, shall be delivered to
the undersigned.
<PAGE>
A. Closing of Offering; Withdrawal of Offering or Subscription.
1. The Company has the discretion at any time to close the Offering
either in whole or in part.
1. The Offering hereunder may be withdrawn by the Company for any reason or for
no reason. If the Offering is withdrawn by the Company, the undersigned may
receive a full refund of the subscription price previously deposited hereunder
plus interest thereon, by submitting a written request to the Company requesting
such refund, and will have no further liability to the Company other than to
return to the Company the Offering Memorandum and other documents, if any,
furnished to the undersigned by or on behalf of the Company in connection with
the Offering, and the Company will have no further liability to the undersigned.
A. Representations and Warranties of the Undersigned.
The Company hereby represents and warrants to the undersigned and the
undersigned confirms that all documents, records, and books pertaining to the
investment in the Company and requested by the undersigned have been made
available or delivered to the undersigned.
The undersigned hereby represents and warrants to the Company as
follows:
1. all information provided and representations made by the undersigned in the
Prospective Investor Questionnaire (the "Questionnaire") of the Company, which
Questionnaire is attached hereto as Exhibit A, are true and correct in all
respects as of the date hereof.
1. The address set forth at the foot of this Subscription is the address of the
undersigned's principal residence or place of business, and the undersigned has
no present intention of becoming a resident of any other country, state or
jurisdiction.
1. Unless the undersigned shall have notified the Company to the contrary in
writing prior to or together with the tendering of this Subscription, the
undersigned acknowledges that the undersigned has not relied upon the advice of
a "Purchaser Representative" (as defined in the aforementioned Regulation D) in
evaluating the risks and merits of this investment.
<PAGE>
1. The undersigned has received and read or reviewed and is familiar with the
Offering Memorandum and its Exhibits.
1. The undersigned has had an opportunity to ask questions of and receive
answers from the Company, or a person or persons acting on the Company's behalf,
concerning the terms and conditions of this investment.
1. The undersigned understands and acknowledges the following:
a) the securities for which the undersigned hereby subscribes (including any
securities into which such securities may be converted) have not been registered
under the Securities Act or under the securities laws of any state or other
jurisdiction in reliance upon exemptions for private offerings; and that this
Offering has not been passed upon or the merits thereof endorsed or approved by
any state or federal authorities.
<PAGE>
a) while the Company may in the future register such securities (or any
securities into which such securities may be converted), it is under no
obligation to do so, except as otherwise provided herein or in a Registration
Rights Agreement between the Company and the undersigned;
a) such securities (including any securities into which such securities may be
converted) cannot be resold unless registered under the Securities Act and any
applicable securities law of any state or other jurisdiction, or an exemption
from registration is available;
a) there is no public market for the Shares;
a) the undersigned is purchasing such securities without being furnished any
offering literature or prospectus other than the Offering Memorandum (and the
exhibits thereto), and is relying only on the information contained therein and
on discussions with Robert Rivkin and Philip Strauss in evaluating the risks and
merits of this investment; and
a) no person or entity, other than Robert Rivkin and Philip Strauss, has been
authorized to give any information or make any representations in connection
with this investment other than that contained in the Offering Memorandum (and
the exhibits thereto).
1. The securities for which the undersigned hereby subscribes are being acquired
solely for the undersigned's own account, for investment and not with a view to
any transaction which would constitute a distribution within the meaning of the
Securities Act; the undersigned has no present plans to enter into any contract,
undertaking, agreement, or arrangement relating thereto.
<PAGE>
1. The undersigned has such knowledge and experience that the undersigned is
capable of evaluating the matters set forth in the Offering Memorandum (and the
exhibits thereto) and the risks and merits relating thereto.
1. The undersigned acknowledges and is aware of the following:
a) the securities offered hereby are a speculative investment which involves a
high degree of risk of loss by the undersigned of the undersigned's entire
investment in the Company; and
a) no assurances have been given that the undersigned will realize any gain from
the undersigned's investment in the Company and the undersigned may lose the
undersigned's entire investment.
1. The undersigned, if it is a corporation or other entity, acknowledges that
it, through the officer(s) and/or director(s) and/or other employees responsible
for making an investment decision with regard to this Subscription, has such
knowledge and experience in financial and business matters that it is capable of
evaluating the relative risks and merits of this investment, and further
acknowledges that the representations and warranties contained in this Section
(d) are true and accurate with respect to it.
(xi) The undersigned warrants that it will not, during the one
hundred twenty (120) day period following the effective date of the reverse
stock split referred to in Section (i) herein, sell, trade or otherwise dispose
of its Shares or the Common Stock into which the Shares are convertible.
The foregoing representations and warranties are true and accurate as
of the date hereof and shall be true and accurate as of the date of tender of
this Subscription.
<PAGE>
Rescission Right for Florida Subscribers
The undersigned acknowledges that he is aware that the securities
represented hereby have not been registered under the Florida Securities and
Investor Protection Act by reason of an exemption pursuant to Section
5l7.061(11) thereof. Unless the securities are registered, they may not be
re-offered for sale or resold in the State of Florida except as a security, or
in a transaction, exempt under said Act.
The undersigned has been advised that sales made pursuant to Section
517.061(11) of the Florida Securities and Investor Protection Act are voidable
by the subscriber either within three days after the first tender of
consideration is made by the subscriber or within three days after the
availability of that privilege is communicated to the subscriber, whichever
occurs later.
e) Representations of the Company.
The Company hereby represents and warrants to the undersigned as
follows:
(i) the Company is in good standing under the laws of the
State of Nevada and is duly licensed or qualified to transact business as a
foreign corporation and is in good standing in each other jurisdiction in which
the nature of the business transacted by it or the character for the properties
owned or leased by it requires such licensing or qualification.
(ii) the execution and delivery by the Company of this
Agreement, the performance by the Company of its obligations hereunder
and the issuance, sale and delivery of the Shares have been duly
authorized by all requisite corporate action and will not violate any
provision of any applicable law, any order of any court or other agency
of government, the Articles of Incorporation of the Company, as amended
to date or the Bylaws of the Company, as amended to date.
(iii) the Bylaws of the Company and the Articles of
Incorporation of the Company provided to the undersigned are true and
correct copies of the same.
(iv) the Company's filings with the Securities and Exchange
Commission made pursuant to the Securities Exchange Act of 1934, as
amended, have been timely filed, comply with all applicable regulations
and there have not been any material changes with respect to
information contained in such filings since the Company's most recent
filing on Form 10-Q, except as otherwise disclosed to the undersigned..
f) Transferability.
This Subscription, or any of the undersigned's interest herein, may not
be transferred or assigned, and any sale, assignment or transfer of the
securities purchased hereunder shall be made only in accordance with applicable
securities laws.
g) Revocation.
The undersigned agrees that the undersigned shall not cancel, terminate
or revoke this Subscription or any agreement of the undersigned made hereunder
except as may be required by applicable law, and that this Subscription shall
survive the death or disability of the undersigned.
<PAGE>
h) Registration Rights.
The Company shall cause to be filed a registration statement under the
Securities Act of 1933, as amended, relating to the shares of common stock
received by the holder upon conversion of its Shares, as soon as practicable
upon the conversion of a stockholders preferred stock and upon receipt of a
written request thereof. The Company will negotiate in good faith to enter into
a registration rights agreement containing the following material terms: (i) the
Company will, within ninety (90) days after the closing of the Offering, file
with the Securities and Exchange Commission a registration statement sufficient
to register all Common Stock (as defined below) of the Company necessary to
cover the exercise of the conversion option by holders of Shares; (ii) the
Company will use best efforts to cause such registration statement to become
effective within one hundred eighty (180) days after the filing of the
registration statement; and (iii) if the registration statement is not effective
within the one hundred eighty (180) day period, then holders of Shares will be
entitled to liquidated damages equal to 1% (on a fully diluted basis) warrant
coverage on outstanding Common Stock at its closing price on the last day of the
one hundred eighty (180) day period.
i) Voting Agreement.
The undersigned hereby agrees that, as a condition to purchasing and
receiving Shares in the Offering, and in consideration therefor, the undersigned
hereby agrees to vote its Shares in favor of a reverse stock split with respect
to the shares of common stock of the Company (the "Common Stock"), on such terms
and at such time as the Board of Directors determines and recommends to the
stockholders. It is contemplated that such reverse stock split shall be
presented to the stockholders of the Company at the 1997 Annual Meeting of
Stockholders of the Company or at a special meeting to be held as promptly as
practical thereafter, and shall provide for the conversion of each share of
Common Stock into a lesser amount of shares of Common Stock with fractional
shares eliminated.
<PAGE>
j) Miscellaneous.
(i) No Waiver; Cumulative Remedies. No failure or delay on the
part of any party to this Subscription, in exercising any right, power or remedy
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy hereunder.
The remedies herein provided are cumulative and not exclusive of any remedies
provided by law.
(ii) Addresses for Notices, etc. All notices requests, demands
and other communications provided for hereunder shall be in writing and mailed,
telecommunicated or delivered:
If to the Company, to the address set forth above, Telecopier: (617)
497-6355, Attention: Mr. Robert Rivkin, or at such other address as shall be
designated by the Company in a written notice to the undersigned complying as to
delivery with the terms of this Section (j). A copy of all notices, demands and
other communications to the Company shall be sent to the offices of Goodwin,
Procter & Hoar LLP, Exchange Place, Boston, Massachusetts 02109, Attention:
Thomas P. Storer, P.C.
If to the undersigned, at its address as set forth on the signature
page hereof or at such other address as shall be designated by the undersigned
in a written notice to the Company complying as to delivery with the terms of
this Section (j).
All such notices, requests, demands and other communications shall,
when mailed, registered or certified mail, return receipt requested, postage
prepaid, telecommunicated, telegraphed or telexed, respectively, be effective
when deposited in the mails, confirmed received by telecommunication or
delivered to the telegraph or telex company, respectively, addressed as
aforesaid.
(iii) Severability. The invalidity or unenforceability of
any provision hereof shall in no way affect the validity or enforceability of
any other provision.
(iv) Governing Law. This Subscription shall be governed
by, and construed in accordance with, the laws of The Commonwealth of
Massachusetts, without regard to the choice of law principles thereunder.
(v) Entire Agreement; Amendments. This Subscription Agreement
together with all Exhibits and amendments hereto constitutes the entire
agreement among the parties hereto with respect to the subject matter hereof and
may only be amended by a writing executed by all parties.
(vi) Certification. The undersigned certifies that he has read
the entire Subscription Agreement and every statement on his part and set forth
herein is true and complete.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed and sworn to this
Subscription this ______ day of _____________________, 1997
- --------------------------------------------------------------------------------
_______________________________ ________________________
Name of Investor (Please print) Signature of Investor
and Capacity in Which
Subscription is Made
_______________________________
Address of Investor:
________________________________ _______________________________
Number Street Signature of Co-Investor, if Any
_______________________________________________________________________________
City State Zip Code Tel. No. ( )
_______________________________________________________________________________
Social Security Number for Individual or other Taxpayer Identification Number
Shares:
Number of Shares Subscribed For: Per Share Price:
Aggregate Purchase Price: $
ACCEPTED BY:
BIOSAFE INTERNATIONAL, INC.
By:
NUMBER OF SHARES:
Date: ________________, 1997
<PAGE>
EXHIBIT A
NAME OF INVESTOR:
PROSPECTIVE INVESTOR QUESTIONNAIRE
BioSafe International, Inc.
10 Fawcett Street
Cambridge, MA 02138
The securities of BioSafe International, Inc. (the "Company") are being
offered in reliance on Regulation D under the Securities Act of 1933, as amended
("Regulation D"), and similar provisions of state law. To satisfy the
requirements of Regulation D and applicable state law, the Company must
determine whether a prospective investor (the "Investor") meets Regulation D and
the state law definitions of "accredited investor" before selling (or, in some
states, offering) securities to such person. This Questionnaire is designed to
assist the Company in making this determination.
Please complete, execute and date this Prospective Investor
Questionnaire and deliver it along with an executed Subscription Agreement to
the Company at the address set forth above. Your answers will, at all times, be
kept confidential except as necessary to establish that the offer and sale of
the securities will not result in a violation of applicable law.
I. To establish the basis of the Investor's status as an accredited
investor, please answer the questions set forth below.
A. Is the Investor an individual with a net worth (or net worth with his
or her spouse) in excess of $1 million:
Yes ________ No ________
A. If the Investor is an individual, will his or her acquisition of
securities of the Company in the offering exceed 25% of the Investor's net
worth (or net worth with his or her spouse). For purposes of this Section l(b),
"net worth" excludes the value of the Investor's principal residence and
Yes ________ No ________
A. Is the Investor an individual with net income (without including any net
income of the Investor's spouse) in excess of $200,000, or joint income with the
Investor's spouse in excess of $300,000, in each of the two most recent years,
and does the Investor reasonably expect to reach the same income level in the
current year?
<PAGE>
Yes ________ No ________
A. Is the Investor an employee benefit plan within the meaning of the Employee
Retirement Income Security Act of 1974 (hereinafter "ERISA") whose decision to
invest in the Company is being made by a plan fiduciary which is either a bank,
savings and loan association, insurance company or registered investment adviser
or, alternatively, does the employee benefit plan have total assets in excess of
$5,000,000 or is the employee benefit plan "self-directed" with investment
decisions made solely by person(s) who are accredited investors(s)?
Yes ________ No ________
A. Is the Investor a plan established and maintained by a state, its political
subdivisions, or any agency or instrumentality of a state or its political
subdivisions for the benefit of its employees with total assets in excess of
$5,000,000?
Yes ________ No ________
A. Is the Investor a trust (including an individual retirement arrangement
formed as a trust or a tax-qualified pension and profit sharing plan (e.g., a
Keogh Plan) formed as a trust but not subject to ERISA) with total assets in
excess of $5,000,000 that was not formed for the specific purpose of acquiring
securities of the Company and whose purchase is directed by a person with such
knowledge and experience in financial and business matters that such person is
capable of evaluating the merits and risks of the prospective investment?
Yes ________ No ________
A. Is the Investor a corporation, partnership, Massachusetts or similar business
trust or an organization described in Section 501(c)(3) of the Internal Revenue
Code that was not formed for the specific purpose of acquiring securities of the
Company and whose total assets exceed $5,000,000?
Yes ________ No ________
A. Is the Investor one of the following entities:
1. A "bank" as defined in Section 3(a)(2) of the Securities Act or any "savings
and loan association" or other institution as defined in Section 3(a)(5)(A) of
the Securities Act whether acting in an individual or fiduciary capacity;
1. A "broker/dealer" registered pursuant to Section 15 of the Securities
Exchange Act of 1934;
1. An "insurance company," as defined in Section 2(13) of the Securities Act;
1. An "investment company" registered under the Investment Company Act of 1940
or a "business development company" as defined in Section 2(a)(48) of the
Investment Company Act of 1940;
1. A "Small Business Investment Company" licensed by the U.S. Small Business
Administration under Section 301(c) or (d) of the Small Business Investment Act
of 1958; or
1. A "Private Business Development Company" as defined in Section 202(a)(22) of
the Investment Advisers Act of 1940?
Yes ________ No ________
If yes, then which entity (i.e., (h)(i) through (vi)above)? -----------------
<PAGE>
A. Is the Investor an entity (other than a trust but including a grantor trust
and including an investment retirement account, the investment of which is
directed by the beneficiary) in which all of the equity owners or the
beneficiary, as the case may be, can answer "Yes" to any one question set forth
in Sections l(a) through 1(h) immediately above?
Yes ________ No ________
I. Is the Investor acquiring securities of the Company as a principal for the
purpose of investment and not with a view to resale or distribution?
Yes ________ No ________
I. By signing this Questionnaire, the Investor hereby confirms the following
statements:
A. The Investor shall immediately provide the Company with corrected
information in the event any information given herein was untrue.
A. The Investor acknowledges that any delivery to the Investor of a Confidential
Private Placement Memorandum and other information relating to the Company,
prior to the determination by the Company of the suitability of the Investor as
an investor in the Company, shall not constitute an offer of securities of the
Company until such determination of suitability shall be made.
A. The answers of the Investor to the foregoing questions are true and complete
to the best of the information and belief of the undersigned, and the Company
shall be notified promptly to any changes in the foregoing answers.
[Remainder of Page Intentionally Left Blank]
<PAGE>
_____________________________ _______________________________
Signature of Investor Signature of Investor
(or duly authorized agent) (or duly authorized agent)
______________________________ ______________________________
Title: Title:
______________________________ ______________________________
Print Name Signed Above Print Name Signed Above
__________________ ____________________
Date Signed Date Signed
<PAGE>
<TABLE>
Exhibit 11
WASTE SYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
(A Development Stage Company)
Computation of Net Income Per Common Share
(unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
--------------------------- ----------------------------
September September September September
30, 30, 30, 30,
1997 1996 1997 1996
------------- ------------- ------------ -------------
<C> <C> <C> <C>
Primary
Average shares outstanding 17,932,166 16,043,285 17,686,368 13,334,119
Net effect of dilutive stock options
based on the treasury stock method
usin average market price - 2,194,907 - -
------------- ------------- ------------ -------------
Total
17,932,166 18,238,192 17,686,368 13,334,119
============= ============= ============ =============
(Loss) income from continuing
operations (513,120) 224,761 (2,879,999) (2,675,818)
Preferred dividend requirement (183,000) - (183,000) -
Loss from discontinued operations - - - (1,662,453)
Loss on extinguishment of debt - - (133,907) -
------------- ------------- ------------ -------------
Net (loss) income to common
stockholders (696,120) 224,761 (3,196,906) (4,338,271)
============= ============= ============ =============
(Loss) income per common share: (0.03) 0.01 (0.16) (0.20)
Preferred dividend requirement (0.01) - (0.01) -
Discontinued operations - - - (0.12)
Extinguishment of debt - - (0.01) -
------------- ------------- ------------ -------------
Net (loss) income per common share (0.04) 0.01 (0.18) (0.32)
============= ============= ============ =============
Fully Diluted
Average shares outstanding
17,932,166 16,043,285 17,686,368 13,334,119
Net effect of dilutive stock
options based on the treasury
stock method using
average quarter-end market price,
if higher than average market price - 2,194,907 - -
------------- ------------- ------------ -------------
Total
17,932,166 18,238,192 17,686,368 13,334,119
============= ============= ============ =============
(Loss) income from continuing
operations (513,120) 224,761 (2,879,999) (2,675,818)
Preferred dividend requirement (183,000) - (183,000) -
Loss from discontinued operations - - - (1,662,453)
Loss on extinguishment of debt - - (133,907) -
------------- ------------- ------------ -------------
Net (loss) income per common
stockholder (696,120) 224,761 (3,196,906) (4,338,271)
(Loss) income per common share: (0.03) 0.01 (0.16) (0.20)
Preferred dividend requirement (0.01) - (0.01) -
Discontinued operations - - - (0.12)
Extinguishment of debt - - (0.01) -
------------- ------------- ------------ -------------
Net (loss) income per common share (0.04) 0.01 (0.18) (0.32)
============= ============= ============ =============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
</LEGEND>
<CIK> 0000847468
<NAME> WASTE SYSTEMS INTERNATIONAL, INC.
<MULTIPLIER> 1
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 2,667,246
<SECURITIES> 0
<RECEIVABLES> 1,234,683
<ALLOWANCES> 24,500
<INVENTORY> 0
<CURRENT-ASSETS> 4,839,486
<PP&E> 11,135,712
<DEPRECIATION> 292,928
<TOTAL-ASSETS> 18,773,127
<CURRENT-LIABILITIES> 2,450,687
<BONDS> 0
0
9,587,807
<COMMON> 18,289
<OTHER-SE> 21,337,243
<TOTAL-LIABILITY-AND-EQUITY> 18,773,127
<SALES> 1,862,722
<TOTAL-REVENUES> 1,862,722
<CGS> 2,260,585
<TOTAL-COSTS> 2,260,585
<OTHER-EXPENSES> 909,594
<LOSS-PROVISION> 4,000
<INTEREST-EXPENSE> 979,184
<INCOME-PRETAX> (2,884,970)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,879,999)
<DISCONTINUED> 0
<EXTRAORDINARY> (133,907)
<CHANGES> 0
<NET-INCOME> (3,013,906)
<EPS-PRIMARY> (0.17)
<EPS-DILUTED> (0.17)
</TABLE>
