<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended March 31, 1997
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from __________________ to _________________
Commission file number 1-11097
3CI COMPLETE COMPLIANCE CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 76-0351992
------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
910 Pierremont, #312 Shreveport, LA. 71106
------------------------------------------
(Address of principal executive offices)
(Zip Code)
(318)869-0440
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(Registrant's telephone number, including area code)
----------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES [X] NO [ ]
------------------------
Indicate the number of shares outstanding of each of the issuer's classes
of Common Stock, as of the latest practicable date.
The number of shares of Common Stock outstanding as of the close of
business on May 14, 1996, was 9,900,311.
3CI COMPLETE COMPLIANCE CORPORATION
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I N D E X
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of
March 31, 1997 (unaudited) and September 30, 1996....................... 2
Consolidated Statements of Operations for the three months and
six months ended March 31, 1997 and 1996 (unaudited).................... 3
Consolidated Statements of Cash Flows for the
six months ended March 31, 1997 and
1996 (unaudited)....................................................... 4
Notes to Consolidated Financial Statements (unaudited)..................... 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................................... 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ........................................................ 12
Item 2. Changes in Securities...................................................... 13
Item 3. Defaults Upon Senior Securities............................................ 13
Item 4. Submission of Matters to a Vote
Of Security Holders..................................................... 13
Item 5. Other Information ........................................................ 13
Item 6. Exhibits and Reports on Form 8-K........................................... 13
SIGNATURES ................................................................................ 18
</TABLE>
1
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Item 1. Financial Statements
3CI COMPLETE COMPLIANCE CORPORATION
CONSOLIDATED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
March 31, September 30,
1997 1996
============ ============
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ -- $ --
Restricted cash 130,000 130,000
Accounts receivable, less allowances of $997,926 and $990,994
at March 31, 1997 and September 30, 1996, respectively 5,056,561 3,753,421
Inventory 73,369 59,045
Other current assets 839,182 232,989
------------ ------------
Total current assets 6,099,112 4,175,455
------------ ------------
Property, plant and equipment, at cost 11,329,426 11,396,144
Accumulated depreciation (2,918,199) (2,933,525)
------------ ------------
Net property, plant and equipment 8,411,227 8,462,619
------------ ------------
Excess of cost over net assets acquired, net of accumulated amortization
of $62,488 and $49,988 at March 31, 1997 and September 30, 1996, respectively 374,743 387,243
Other intangible assets, net of accumulated amortization of $111,828 and
$74,552 at March 31, 1997 and September 30, 1996, respectively 312,249 349,502
------------ ------------
Total assets $ 15,197,331 $ 13,374,819
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Bank overdraft $ 363,794 $ 34,382
Notes payable 734,187 211,928
Current portion of long-term debt, unaffiliated lenders 885,670 1,314,290
Accounts payable 2,103,519 1,866,223
Accounts payable, affiliated companies 355,156 319,156
Accrued liabilities 2,022,244 2,361,006
Note payable majority shareholder 11,018,758 8,842,969
------------ ------------
Total current liabilities 17,483,328 14,949,954
------------ ------------
Long-term debt unaffliated lenders, net of current portion 809,462 742,400
------------ ------------
Total liabilities 18,292,790 15,692,354
------------ ------------
Accrued stock put option 1,696,500 1,696,500
Shareholders' Equity:
Preferred stock, no par value, authorized 1,000,000 shares; none issued
Common stock, $.01 par value, authorized 15,000,000 shares;
issued and outstanding 9,900,311 and 9,900,311 shares at
March 31, 1997 and September 30, 1996, respectively 99,004 99,004
Additional Paid-in capital 20,108,743 20,108,743
Accumulated deficit (24,999,706) (24,221,782)
------------ ------------
Total Shareholders' equity (4,791,959) (4,014,035)
------------ ------------
Total liabilities and shareholders' equity $ 15,197,331 $ 13,374,819
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
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3CI COMPLETE COMPLIANCE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the For the For the For the
Three Months Ended Three Months Ended Six Months Ended Six Months Ended
March 31, March 31, March 31, March 31,
1997 1996 1997 1996
=========== =========== =========== ===========
<S> <C> <C> <C> <C>
Revenues $ 4,635,613 $ 4,408,871 $ 9,309,272 $ 9,151,924
Expenses:
Cost of services 3,636,821 3,506,168 7,168,109 7,336,680
Depreciation and amortization 340,354 540,433 698,146 981,226
Selling, general and administrative 790,384 945,078 1,596,157 1,907,494
----------- ----------- ----------- -----------
Loss from operations (131,946) (582,808) (153,140) (1,073,476)
Other income (expense):
Interest and other expense, net (300,403) (204,970) (624,785) (373,928)
Loss before income taxes and accretion
of stock put (432,349) (787,778) (777,925) (1,447,404)
----------- ----------- ----------- -----------
Income taxes -- -- -- --
Accretion of stock put -- -- (26,052)
=========== =========== =========== ===========
Net loss $ (432,349) $ (787,778) $ (777,925) $(1,473,456)
=========== =========== =========== ===========
Weighted average shares outstanding 9,034,811 8,783,258 9,034,811 8,710,906
=========== =========== =========== ===========
Net loss per common share $ (0.05) $ (0.09) $ (0.09) $ (0.17)
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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3CI COMPLETE COMPLIANCE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
For the For the
Six Months Ended Six Months Ended
March 31, March 31,
1997 1996
----------- -----------
<S> <C> <C>
Cash flow from operating activities:
Net loss $ (777,925) $(1,473,456)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
(Gain) loss on disposal of fixed and intangible assets -- --
Interest expense of affiliated debt 401,885
Depreciation and amortization 698,146 981,226
Accretion of stock put 26,052
Change in assets and liabilities:
(Increase) decrease in restricted cash -- (30,000)
(Increase) decrease in accounts receivable, net (1,303,140) (529,858)
(Increase) decrease in inventory (14,324) 31,748
(Increase) decrease in prepaid expenses (606,193) (196,688)
Increase (decrease) in bank overdrafts 329,412 556,126
Increase (decrease) in accounts payable 237,296 556,126
Increase (decrease) in accounts payable, affiliated companies 36,000 (17,890)
Increase (decrease) in accrued liabilities (338,762) (923,487)
----------- -----------
Total adjustments to net loss (961,565) 855,240
----------- -----------
Net cash provided by (used in) operating activities (1,739,490) (618,216)
----------- -----------
Cash flow from investing activities:
Proceeds from sale of property, plant and equipment -- --
Purchase of property, plant and equipment (101,686) (774,871)
Increase in Intangible assets -- (322,761)
----------- -----------
Net cash used in investing activities (101,686) (1,097,632)
----------- -----------
Cash flow from financing activities:
Proceeds from issuance of notes payable -- --
Principal reduction of notes payable (404,133) (226,501)
Proceeds from issuance of long-term debt, unaffiliated lenders -- 166,338
Reduction of long-term debt, unaffiliated lenders (872,800) (393,381)
Proceeds from issuance of note payable to majority shareholder 1,766,000 3,200,000
-----------
-----------
Net cash provided by financing activities 489,067 2,746,456
----------- -----------
Net (decrease) increase in cash and cash equivalents (1,352,109) 1,030,608
----------- -----------
Cash and cash equivalents, beginning of period -- 78,556
----------- -----------
Cash and cash equivalents, end of period $(1,352,109) $ 1,109,164
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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3CI COMPLETE COMPLIANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997
(unaudited)
(1) Organization and Basis of Presentation
3CI Complete Compliance Corporation (the Company or 3CI), a Delaware
Corporation, is engaged in the collection, transportation and treatment of
biomedical waste in the southeastern and southwestern United States. In February
1994, subsidiaries of 3CI acquired all the assets and business operations of
American Medical Transports Corporation (AMTC), an Oklahoma corporation, and
A/MED, Inc. (A/MED), a Delaware corporation. Both AMTC and A/MED were engaged in
businesses similar to that of 3CI. Waste Systems, Inc. (WSI), a Delaware
corporation, was the majority shareholder of both AMTC and A/MED (the
Companies). Additionally, in February 1994, WSI purchased 1,255,182 shares of
3CI common stock from American Medical Technologies (AMOT).
As a result of the transactions described above, WSI became the majority
shareholder of 3CI immediately following the acquisition of AMTC and A/MED. For
accounting purposes, AMTC and A/MED were considered the acquirer in a reverse
acquisition. The combined financial statements of AMTC and A/MED are the
historical financial statements of the Company for periods prior to the date of
the business acquisition. Historical combined shareholders' equity of AMTC and
A/MED has been retroactively restated for the equivalent number of 3CI shares
received for the assets and business operations of AMTC and A/MED, and the
combined accumulated deficit of AMTC and A/MED has been carried forward.
The accompanying consolidated financial statements have been prepared, without
audit, by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission. As applicable under such regulations, certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted. The Company believes that the presentation and disclosures
herein are adequate to make the information not misleading and the financial
statements reflect all adjustments which are necessary for a fair presentation
of these financial statements. Certain reclasses have been made to prior year
accounts to conform to current year presentations. These financial statements
should be read in conjunction with the financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year ended
September 30, 1996, as filed with the Securities and Exchange Commission.
(2) Net Income (Loss) Per Common Share
Net income (loss) per common share was computed by dividing net income (loss)
for each quarterly period by the weighted average number of common shares
outstanding for each period. In October 1994, the Company acquired substantially
all the assets and assumed certain liabilities of River Bay Corporation. The
865,500 shares issued in connection with the acquisition of River Bay have been
excluded from weighted average shares outstanding. The accretion of a Stock Put
Option related to the purchase of the River Bay division is reflected as a
reduction of net income in determining net income to common shareholders. In
conjunction with the business acquisition with respect to AMTC and A/MED the
weighted average shares outstanding have been retroactively restated for reverse
acquisition accounting to reflect the equivalent shares based on the conversion
ratio established in the merger transaction. The effect of stock options and
warrants is antidilutive and is therefore not considered in the calculation of
net loss per common share.
5
<PAGE> 7
(3) Business Conditions
The Company has consistently incurred losses for the past several fiscal years
and losses have continued into fiscal 1997. The Company has historically relied
on WSI for funding, and such support has once again been necessary into the
second quarter of fiscal 1997 and will continue to be necessary for the
remaining fiscal year of 1997.
In October 1994, WSI made a non-interest bearing cash advance of $1,000,000 to
the Company, which was converted into 416,667 shares of Common Stock in April
1995. In the first half of 1995, WSI made non-interest bearing cash advances
totaling $4,100,000 to the Company. In June 1995, the Company executed a
$6,000,000 revolving promissory note, which was utilized in part to repay the
advances. This note was renegotiated in September 1995, increasing the total
available to $8,000,000 including interest, with principal not to exceed
$7,400,000. Interest is payable in quarterly installments which are
automatically added to the outstanding principal balance, if not paid. The note
bears interest at the prime rate and became due on December 31, 1996. As of
March 31, 1997 and September 30,1996, the Company has borrowed $11,018,758 and
$8,842,969 respectively under the note. As a significant amount of the advances
from WSI have historically been non interest bearing, some of which was
ultimately converted to equity, interest expense in 1997 has increased
significantly as a result of the of the advances made pursuant to the interest
bearing note.
Since September 30, 1996, WSI has made additional cash advances to the Company
totaling $2,175,789 including interest expense. Due to the additional cash
advances that have been made in excess of the principal in the original
promissory note, the Company entered into a second Revolving Credit Facility of
$2.7 million including deferred interest dated December 20, 1996 with a maturity
date of February 28, 1997. It is the intent of WSI and 3CI that this Revolving
Promissory Note shall evidence all sums owing by 3CI to WSI to the extent that
such sums represents advances of funds by 3CI in excess of the maximum limits
fixed under that certain $8,000,000 Revolving Promissory Note dated September
30, 1995. The Promissory Note dated September 30, 1995 has a due date of
December 31, 1996 of which the Company has requested from and received an
monthly extension of the Promissory Note dated September 30, 1995 to discuss
with WSI on the possibility of restructuring the terms of the Revolving
Promissory Note. This note has been further extended until June 30, 1997. The
second Revolving Credit Facility of $2.7 million dated December 20, 1996, with a
maturity date of February 28, 1997, has also been extended until June 30, 1997.
In February 1997, the Company received a letter from the NASDAQ Stock Market,
Inc. regarding the Company's failure to meet listing requirements. These
requirements include maintaining a minimum capital and surplus of at least
$1,000,000 and a minimum bid price of $1.00. To achieve these requirements the
Company has negoitated with WSI to convert $7,000,000 of both WSI credit
facilities into equity. This conversion will be accomplished by June 25, 1997.
The Company has also begun discussions with WSI regarding the restructuring of
the Promissory Note dated September 30, 1995. If a resolution can not be
accomplished and the Company is unable to obtain alternative financing, there
can be no assurance that the Company will be able to meet its obligations as
they become due or realize the recorded value of its assets and would likely be
forced to seek bankruptcy protection.
The nature and level of competition in the medical waste industry has remained
high for several years. This condition has produced aggressive price competition
and results in pressure on profit margins. The Company competes against
companies which have access to greater capital resources. In order to compete in
this industry on a long-term basis and fully realize its business strategy, the
Company will require additional and continued financing and other assistance
from its current stockholders and if available, from outside sources. There is
6
<PAGE> 8
no assurance that adequate funds for these purposes will be available when
needed or, if available, on terms acceptable to the Company.
(4) Commitments and Contingencies
In May 1995, a group of minority stockholders of the Company, including Patrick
Grafton, former Chief Executive Officer of the Company, acting individually and
purportedly on behalf of all minority stockholders, and on behalf of the
Company, filed suit in James T. Rash, et al v. Waste Systems, Inc., et al, No.
95-024912 in the District Court of Harris County, Texas, 129th Judicial
District, against the Company, WSI and various directors of the Company. The
plaintiffs have alleged minority stockholder oppression, breach of fiduciary
duty and breach of contract and "thwarting of reasonable expectations" and have
demanded an accounting, appointment of a receiver for the sale of the Company,
unspecified actual damages and punitive damages of $10 million, plus attorney's
fees. In addition, Mr. Grafton has alleged unspecified damages as a result of
his removal as an officer and director of the Company and the Company's failure
to renew his employment agreement in March 1995 and has alleged that such
removal was wrongful and ineffective. The Company's insurer has denied coverage
in the lawsuit. The Company has denied all material allegations of the lawsuit
and believes that the resolution of this matter, including attorneys fees
incurred in the Company's defense, could have a material adverse effect on the
Company's financial condition. However, the outcome of this cannot be predicted,
and an adverse decision in the lawsuit would likely have a material adverse
effect on the Company's financial condition and results of operations.
In June 1995, the former stockholders of Med-Waste filed suit in James H.
Shepherd, et al v. 3CI Complete Compliance Corporation, et al, No.
C.V.-95-1441-1 in the Circuit Court of Hot Spring County, Arkansas, against the
Company and various current and former officers and directors of the Company.
Plaintiffs have alleged violations of federal and state securities laws, breach
of contract, common law fraud and negligence in connection with the acquisition
of Med-Waste by the Company and have demanded rescission, restitution,
unspecified actual damages and punitive damages of $10 million, plus attorney's
fees. The case was transferred to the United States District Court of the
Western District of Arkansas, Hot Springs Division and in November 1996 was
subsequently transferred to the United States District Court for the Western
District of Louisiana. The parties, other than Patrick Grafton, former Chief
Executive Officer of the Company, have agreed to settle the suit in
consideration for the issuance by the Company to the plaintiffs of 250,000
shares of Common Stock and the payment by the Company to the plaintiffs of 20%
to 55% of the pre-tax profits, as defined, attributable to the assets previously
acquired from Med-Waste until such time as the shares of Common Stock held by
the plaintiffs become freely tradable and the market price of the Common Stock
averages at least $2.50 over a period of 42 consecutive days. In addition, the
Company and WSI have agreed to repurchase the shares of Common Stock held by the
plaintiffs for $2.50 per share in certain events, including the bankruptcy of
the Company or in the event WSI ceases to be the largest beneficial holder of
the Common Stock. The obligations of the Company to the plaintiffs are secured
by a security interest in most of the assets of the Company, and WSI has agreed
to subordinate its loans to the Company, and all related security interests, to
the obligations, and the related security interests, of the Company to the
plaintiffs.
In connection with an auto accident in July 1996, two suits have been filed
against the Company. Ryan O'Neil Youmans & Anita Youmans v. American 3CI, et al,
No. CV9604899, was filed in the Circuit Court of Jefferson County, Alabama, in
August 1996. Jimmy R. Whitfield & Rhonda Whitfield v. Paul Bronger, American
3CI, et al. No. CV-96-847, was filed in the Circuit Court of Shelby County,
Alabama in November of 1996. These proceedings have just been initiated and
little or no discovery has been conducted. Although the Company's insurer has
acknowledged that it provides coverage for this accident, the outcome of this
cannot be predicted. An adverse decision in the lawsuit is not likely to have a
material effect on the Company's financial condition and results of operations.
7
<PAGE> 9
On or about March 10, 1997 the Company commenced arbitration proceedings before
the American Arbitration Association in Houston, Texas against River Bay
Corporation and Marlan Baucum seeking to set aside a Purchase Agreement entered
into between those parties on or about October 10, 1994, together with ancillary
agreements pertaining thereto. The Company is seeking damages and/or to set
aside the Purchase Agreement and collateral agreements, including a Put Option
Agreement which, if otherwise enforceable, would require the payment by the
Company of approximately $1,700,000.00 for 565,500 shares of 3CI stock. On or
about May 10, 1997 the Company filed a Petition of Arbitration in Suit No.
422,107 of the First Judicial District Court, Caddo Parish, Louisiana, naming
River Bay Corporation and Marlan Baucum as defendants therein. This lawsuit
seeks an injunction and stay of all judicial and extra-judicial proceedings
pursuant to the Put Agreement until such time as the arbitration is completed.
This action was removed by the defendants to the U.S. District Court for the
Western District of Louisiana, Shreveport Division in Civil Action No. 97-0578.
The Company's motion for a preliminary injunction has been set for May 21, 1997.
In response, on April 9, 1997 Bank of Raleigh and Smith County Bank, assignees
of certain rights under the Purchase agreement, commenced a complaint for
declaratory and monetary relief in the U.S. District Court for the Southern
District of Mississippi, Jackson Division in Civil Action No. 3:97cv249BN. The
Smith County Bank and Bank of Raleigh have prayed declaratory judgment declaring
the arbitration provision in the Purchase Agreement to be not binding upon said
banks, declaratory judgement declaring the claims of 3CI against River Bay to be
subordinate to the claims of the banks, for unspecified compensatory damages and
for punitive damages of at least $1,000,000.00.
The Company is subject to certain other litigation and claims arising in the
ordinary course of business. In the opinion of management of the Company, the
amounts ultimately payable, if any, as a result of such claims and assessment
will not have a materially adverse effect on the Company's financial position or
results of operations except where noted above.
8
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
The following summarizes (in thousands) the Company's operations:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
--------------------------- ---------------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues $ 4,636 $ 4,409 $ 9,309 $ 9,152
Costs of Services 3,639 3,506 7,168 7,337
Selling, General and
Administrative Expense 790 945 1,596 1,907
Loss from operations (132) (583) ( 153) (1,073)
Other Expense and Stock Accretion, Net (300) (205) (625) (400)
Net loss (432) (788) (778) (1,473)
</TABLE>
Three months ended March 31, 1997 compared to three months ended March 31, 1996:
Revenues:
Revenues for the three month period ended March 31, 1997, increased to
$4,635,613 from revenues for the three month period ended March 31, 1996 of
$4,408,871. The increase in revenue is primarily due to an increase in an
overall increase in volume. The industry continued to experience a downward
pressure in pricing caused by competitors attempting to gain market share
through deep discount pricing.
Costs of Services:
Cost of services increased to $3,636,821 for the three months ended March 31,
1997, compared to $3,506,168 for the three month period ended March 31, 1996.
The increased cost of services resulted from the increased volume of waste the
Company is processing.
Selling, General and Administrative Expenses ("SG&A"):
Selling, General and Administrative expense for the three month period ended
March 31, 1997, decreased to $790,384 compared to $945,078 for the three month
period ended March 31, 1996. As a percentage of revenue, the expense for the
1996 period decreased to 17.1% compared to 21.4% for the 1996 period.
Depreciation and amortization expense for the three months ended March 31, 1997
decreased to $340,354 compared $540,433 for the months ended March 31, 1996.
This reduction is primarily related to the Impairment of Intangible assets
writedown taken at September 30, 1996.
Interest Expense increased to $250,620 for the quarter ended March 31, 1997 from
$204,970 for the three months ended March 31, 1996. This increase was due to
interest expense related to the WSI promissory note.
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<PAGE> 11
Six months ended March 31, 1997 compared to six months ended March 31, 1996:
Revenues:
Revenues for the six month period ended March 31, 1997, increased to $9,309,272
from revenues for the six month period ended March 31, 1996 of $9,151,924. This
increase in revenue is primarily due to an overall increases in volume. The
industry continued to experience a downward pressure in pricing caused by
competitors attempting to gain market share through deep discount pricing.
Costs of Services:
Cost of services decreased to $7,168,109 for the six months ended March 31,
1997, compared to $7,336,680 for the six month period ended March 31, 1996. The
decrease in cost of services is a result of the Company reducing transportation
costs, incineration costs paid to third parties, and the effect of implementing
a program to shift to reusable containers from cardboard boxes.
Selling, General and Administrative Expenses ("SG&A"):
Selling, General and Administrative expense for the six month period ended March
31, 1997 decreased to $1,596,157 compared to $1,907,494 for the six month period
ended March 31, 1996. As a percentage of revenue, expenses for the 1997 period
decreased to 17.1% compared to 20.8% for the 1996 period.
Depreciation and amortization expense for the six months ended March 31, 1997
decreased to $698,146 compared $981,226. This reduction is primarily related to
the Impairment of Intangible assets writedown taken at September 30, 1996.
Interest Expense increased to $508,412 for the six months month ended March 31,
1997 from $373,928 for the six months ended March 31, 1996. This increase in
interest expense was due to the WSI promissory note.
LIQUIDITY AND CAPITAL RESOURCES
Operating Activities
The Company has continued to experience a cash loss from operations during the
six months ended March 31, 1997. The Company anticipates a cash deficit from
operations for the remainder of fiscal year 1997 and will be dependent upon WSI
to fund its continued operations. However, no assurance can be given that WSI
will continue to advance funds to the Company and to forego demand for payment
of the current indebtedness of the Company to WSI. In the event that WSI fails
to advance required funds to the Company or demands paytment of current
indebtedness, the Company would have limited financing sources and would likely
be forced to seek bankruptcy protection.
Investing Activities
During the first two quarters ending in March 31, 1997, the Company invested
$440,000 for transportation, machinery and equipment, computer equipment and
software.
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<PAGE> 12
Financing Activities
The Company has historically funded its operations, acquisitions and debt
service through cash advances from WSI. As a result of its prior expansion and
program of acquisitions, the Company has experienced liquidity deficiencies.
In October 1994, WSI made a non-interest bearing cash advance of $1,000,000 to
the Company, which was converted into 416,667 shares of Common Stock in April
1995. In the first half of 1995, WSI made non-interest bearing cash advances
totaling $4,100,000 to the Company. In June 1995, the Company executed a
$6,000,000 revolving promissory note, which was utilized in part to repay the
advances. This note was renegotiated in September 1995, increasing the total
available to $8,000,000 including interest, with principal not to exceed
$7,400,000. Interest is payable in quarterly installments which are
automatically added to the outstanding principal balance, if not paid. The note
bears interest at the prime rate and became due on December 31, 1996. As of
March 31, 1997 and September 30,1996, the Company has borrowed $11,018,758 and
$8,842,969 respectively under the note. As a significant amount of the advances
from WSI have historically been non interest bearing, some of which was
ultimately converted to equity, interest expense in 1997 has increased
significantly as a result of the of the advances made pursuant to the interest
bearing note.
Since September 30, 1996, WSI has made additional cash advances to the Company
totaling $2,175,789 including interest expense. Due to the additional cash
advances that have been made in excess of the principal in the original
promissory note, the Company entered into a second Revolving Credit Facility of
$2.7 million including deferred interest dated December 20, 1996 with a maturity
date of February 28, 1997. It is the intent of WSI and 3CI that this Revolving
Promissory Note shall evidence all sums owing by 3CI to WSI to the extent that
such sums represents advances of funds by 3CI in excess of the maximum limits
fixed under that certain $8,000,000 Revolving Promissory Note dated September
30, 1995. The Promissory Note dated September 30, 1995 has a due date of
December 31, 1996 of which the Company has requested from and recieved an
monthly extension of the Promissory Note dated September 30, 1995 to discuss
with WSI on the possibility of restructuring the terms of the Revolving
Promissory Note. This note has been further extended until May 31, 1997. The
second Revolving Credit Facility of $2.7 million dated December 20, 1996, with a
maturity date of February 28, 1997, has also been extended until June 30, 1997.
In February 1997, the Company received a letter from the NASDAQ Stock Market,
Inc. regarding the Company's failure to meet minimum listing requirements. These
requirements include maintaining a minimum capital and surplus of at least
$1,000,000 and a minimum bid price of $1.00. During an oral hearing with the
NASDAQ Stock Market, Inc. the Company outlined a plan with a time frame to meet
the listing requirements as established by the NASDAQ. This plan entailed the
conversion of $7,000,000.00 of WSI debt to preferred stock. It is anticipated
that this conversion of debt to equity will be completed by June 25, 1997. While
the Company is completing the debt to equity conversion the trading symbol for
the Company will be TCCCC. The Company is continuing discussions with WSI
regarding the restructuring of the Promissory Note dated September 30, 1995
regarding extension of it's due date. If a resolution can not be accomplished
and the Company is unable to obtain alternative financing, there can be no
assurance that the Company will be able to meet its obligations as they become
due or realize the recorded value of its assets and would likley be forced to
seek bankruptcy protection.
11
<PAGE> 13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings -
In May 1995, a group of minority stockholders of the Company, including Patrick
Grafton, former Chief Executive Officer of the Company, acting individually and
purportedly on behalf of all minority stockholders, and on behalf of the
Company, filed suit in James T. Rash, et al v. Waste Systems, Inc., et al, No.
95-024912 in the District Court of Harris County, Texas, 129th Judicial
District, against the Company, WSI and various directors of the Company. The
plaintiffs have alleged minority stockholder oppression, breach of fiduciary
duty and breach of contract and "thwarting of reasonable expectations" and have
demanded an accounting, appointment of a receiver for the sale of the Company,
unspecified actual damages and punitive damages of $10 million, plus attorney's
fees. In addition, Mr. Grafton has alleged unspecified damages as a result of
his removal as an officer and director of the Company and the Company's failure
to renew his employment agreement in March 1995 and has alleged that such
removal was wrongful and ineffective. The Company's insurer has denied coverage
in the lawsuit. The Company has denied all material allegations of the lawsuit
and believes that the resolution of this matter, including attorneys fees
incurred in the Company's defense, could have a material adverse effect on the
Company's financial condition. However, the outcome of this cannot be predicted,
and an adverse decision in the lawsuit would likely have a material adverse
effect on the Company's financial condition and results of operations.
In June 1995, the former stockholders of Med-Waste filed suit in James H.
Shepherd, et al v. 3CI Complete Compliance Corporation, et al, No.
C.V.-95-1441-1 in the Circuit Court of Hot Spring County, Arkansas, against the
Company and various current and former officers and directors of the Company.
Plaintiffs have alleged violations of federal and state securities laws, breach
of contract, common law fraud and negligence in connection with the acquisition
of Med-Waste by the Company and have demanded rescission, restitution,
unspecified actual damages and punitive damages of $10 million, plus attorney's
fees. The case was transferred to the United States District Court of the
Western District of Arkansas, Hot Springs Division and in November 1996 was
subsequently transferred to the United States District Court for the Western
District of Louisiana. The parties, other than Patrick Grafton, former Chief
Executive Officer of the Company, have agreed to settle the suit in
consideration for the issuance by the Company to the plaintiffs of 250,000
shares of Common Stock and the payment by the Company to the plaintiffs of 20%
to 55% of the pre-tax profits, as defined, attributable to the assets previously
acquired from Med-Waste until such time as the shares of Common Stock held by
the plaintiffs become freely tradable and the market price of the Common Stock
averages at least $2.50 over a period of 42 consecutive days. In addition, the
Company and WSI have agreed to repurchase the shares of Common Stock held by the
plaintiffs for $2.50 per share in certain events, including the bankruptcy of
the Company or in the event WSI ceases to be the largest beneficial holder of
the Common Stock. The obligations of the Company to the plaintiffs are secured
by a security interest in most of the assets of the Company, and WSI has agreed
to subordinate its loans to the Company, and all related security interests, to
the obligations, and the related security interests, of the Company to the
plaintiffs.
In connection with an auto accident in July 1996, two suits have been filed
against the Company. Ryan O'Neil Youmans & Anita Youmans v. American 3CI, et al,
No. CV9604899, was filed in the Circuit Court of Jefferson County, Alabama, in
August 1996. Jimmy R. Whitfield & Rhonda Whitfield v. Paul Bronger, American
3CI, et al. No. CV-96-847, was filed in the Circuit Court of Shelby County,
Alabama in November of 1996. These proceedings have just been initiated and
little or no discovery has been conducted. Although the Company's insurer has
acknowledged that it provides coverage for this accident, the outcome of this
cannot be predicted. An adverse decision in the lawsuit is not likely to have a
material effect on the Company's financial condition and results of operations
On or about March 10, 1997 the Company commenced arbitration proceedings before
the American Arbitration Association in Houston, Texas against River Bay
Corporation and Marlan Baucum seeking to set aside a Purchase Agreement entered
into between those parties on or about October 10, 1994, together with ancillary
agreements pertaining thereto. The Company is seeking damages and/or to set
aside the Purchase Agreement and collateral agreements, including a Put Option
Agreement which, if otherwise enforceable, would require the payment by the
Company of approximately $1,700,000.00 for 565,500 shares of 3CI stock. On or
12
<PAGE> 14
about May 10, 1997 the Company filed a Petition of Arbitration in Suit No.
422,107 of the First Judicial District Court, Caddo Parish, Louisiana, naming
River Bay Corporation and Marlan Baucum as defendants therein. This lawsuit
seeks an injunction and stay of all judicial and extra-judicial proceedings
pursuant to the Put Agreement until such time as the arbitration is completed.
This action was removed by the defendants to the U.S. District Court for the
Western District of Louisiana, Shreveport Division in Civil Action No. 97-0578.
The Company's motion for a preliminary injunction has been set for May 21, 1997.
In response, on April 9, 1997 Bank of Raleigh and Smith County Bank, assignees
of certain rights under the Purchase agreement, commenced a complaint for
declaratory and monetary relief in the U.S. District Court for the Southern
District of Mississippi, Jackson Division in Civil Action No. 3:97cv249BN. The
Smith County Bank and Bank of Raleigh have prayed declaratory judgment declaring
the arbitration provision in the Purchase Agreement to be not binding upon said
banks, declaratory judgement declaring the claims of 3CI against River Bay to be
subordinate to the claims of the banks, for unspecified compensatory damages and
for punitive damages of at least $1,000,000.00.
Item 2. Changes in Securities - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits -
13
<PAGE> 15
(b) INDEX TO EXHIBITS
Exhibits
Except as otherwise indicated, the following documents are incorporated
by reference as Exhibits to this Report (as used in the following
listing, "3CI" refers to the Company):
Exhibit
Number Description
2.1. Copy of Agreement of Purchase and Sale dated as of June 27, 1991 by,
between and among American Medical Technologies, Inc., Harry Argovitz,
et ux, Complete Compliance Corporation and 3CI Transportation Systems
Corporation, as amended by the First Amendment thereto dated as of
September 3, 1991 and the Second Amendment thereto dated as of October
7, 1991 (incorporated by reference to Exhibit 10(a) of 3CI's
registration statement on Form S-1 (No. 33-45632) effective April 14,
1992).
2.2. Copy of Blanket Conveyance, Bill of Sale and Assignment dated as of
September 6, 1991 executed and delivered by American Medical
Technologies, Inc., in favor of 3CI (incorporated by reference to
Exhibit 10(o) of 3CI's registration statement on Form S-1 (No.
33-45632) effective April 14, 1992).
2.3. Copy of Asset Purchase Agreement dated as of December 10, 1991 between
3CI, MedCon, Inc., and Harry S. Allen, individually and as sole
shareholder of MedCon, Inc. (incorporated by reference to Exhibit
10(d) of 3CI's registration statement on Form S-1 (No. 33-45632)
effective April 14, 1992).
2.4. Copy of First Amendment dated March 26, 1992 to Asset Purchase
Agreement by, and between and among, MedCon, Inc., Harry S. Allen, as
sole shareholder of MedCon, Inc., and 3CI (incorporated by reference
to Exhibit 10(n) of 3CI's registration statement on Form S-1 (No.
33-45632) effective April 14, 1992).
2.5. Copy of Second Amendment dated May 22, 1992 to Asset Purchase
Agreement by, between and among MedCon, Inc., Harry S. Allen, as the
sole shareholder of MedCon, Inc. and 3CI (incorporated by reference to
Exhibit 2.6 of 3CI's Annual Report on Form 10-K for the fiscal year
ended September 30, 1992).
2.6. Copy of Third Amendment dated October, 1992 to Asset Purchase
Agreement by, between and among MedCon, Inc., Harry S. Allen, as sole
shareholder of MedCon, Inc. and 3CI (incorporated by reference to
Exhibit 2.7 of 3CI's Annual Report on Form 10-K for the fiscal year
ended September 30, 1992).
2.7. Purchase Agreement and Plan of Reorganization dated February 4, 1994,
among A/MED, Inc., 3CI Complete Compliance Corporation and 3CI
Acquisition Corp./A/MED (incorporated by reference to Exhibit 1.1 of
3CI's report on Form 8-K filed February 7, 1994).
2.8. Purchase Agreement and Plan of Reorganization dated February 4, 1994,
among A/Med, Inc., 3CI Complete Compliance Corporation and 3CI
Acquisition Corp./A/MED (incorporated by reference to Exhibit 1.2 of
3CI's report on Form 8-K filed February 7, 1994).
2.9. Stock Purchase Agreement dated February 4, 1995, between Waste
Systems, Inc. and 3CI Complete Compliance Corporation (incorporated by
reference to Exhibit 1.3 of 3CI's report on Form 8-K filed February 7,
1994).
14
<PAGE> 16
2.10. Purchase Agreement dated October 10, 1994, among 3CI Complete
Compliance Corporation, River Bay Corporation and Marlan Baucum
(incorporated by reference to Exhibit 1.1 of 3CI's report on Form 8-K
filed October 27, 1994).
2.11. Addendum to Purchase Agreement dated October 12, 1994, among 3CI
Complete Compliance Corporation, River Bay Corporation and Marlan
Baucum. (incorporated by reference to Exhibit 1.2 of 3CI's report on
Form 8-K filed October 27, 1994).
2.12. Assumption of Liabilities dated October 10, 1994, among 3CI Complete
Compliance Corporation, 3CI Acquisition Corp./A/MED, Marlan Baucum and
River Bay Corporation. (incorporated by reference to Exhibit 1.11 of
3CI's report on Form 8-k filed October 27, 1994).
2.13. Plan of Reorganization and Acquisition Agreement dated August 9,
1994, among the 3CI, Med-Waste Disposal Service, Inc., Jim Shepherd,
Mike Shepherd and Richard McElhannon (incorporated by reference to
Exhibit 2.14 of 3CI's Annual Report on Form 10-K for the fiscal year
ended September 30, 1992).
4.1. Copy of Representative Warrant Agreement dated as of April 14, 1992
(incorporated by reference to Exhibit 4(b) of 3CI's registration
statement on Form S-1 (No. 33-45632) effective April 14, 1992).
4.2. Copy of Promissory Note of the Company dated January 13, 1993, in the
principal amount of $200,000, bearing interest payable quarterly at
payee's prime rate plus 1% payable on or before January 15, 1995, to
the order of Midlantic National Bank with payment of principal subject
to the conditions specified in Paragraph 14 of said promissory note
(incorporated by reference to Exhibit 4.2. of 3CI's Annual Report on
Form 10-K for the fiscal year ended September 30, 1992).
4.3. Copy of Deed of Trust, Assignment, Security Agreement and Financing
Statement dated January 13, 1993, granted and delivered by the Company
in favor of Midlantic National Bank to secure the Company's promissory
note of even date referred to in Exhibit 4.2. immediately above
(incorporated by reference to Exhibit 4.3. of 3CI's Annual Report on
Form 10-K for the fiscal year ended September 30, 1992).
4.4. Copy of Warrant No. 3CI-01 issued to James T. Rash providing for the
purchase on or before December 31, 1996 of 50,000 warrants of the
common stock of 3CI at a purchase price of $3.00 per share, subject to
adjustment as therein provided (incorporated by reference to Exhibit
4.4 of 3CI's Annual Report on Form 10-K for the fiscal year ended
September 30, 1993).
4.5. Copy of Warrant No. 3CI-02 issued to Leonard A. Bedell providing for
the purchase on or before December 31, 1996 of 50,000 warrants of the
common stock of 3CI at a purchase price of $3.00 per share, subject to
adjustment as therein provided. (incorporated by reference to Exhibit
4.5 of 3CI's Annual Report on Form 10-K for the fiscal year ended
September 30, 1993).
4.6. Put Option Agreement dated October 10, 1994, among 3CI Complete
Compliance Corporation, River Bay Corporation and Marlan Baucum
(incorporated by reference to Exhibit 1.3 of 3CI's report on Form 8-K
filed October 27, 1994).
4.7. Stock Pledge Agreement dated October 10, 1994, between 3CI Complete
Compliance Corporation and River Bay Corporation (incorporated by
reference to Exhibit 1.4 of 3CI's report on Form 8-K filed October 27,
1994).
4.8. Stock Escrow and Pledge Agreement dated July 1994, among 3CI,
Med-Waste Disposal Service, Inc., Jim Shepherd, Mike Shepherd and
Richard McElhannon (incorporated by reference to Exhibit 4.11 of 3CI's
Annual Report on Form 10-K for the fiscal year ended September 30,
1992).
15
<PAGE> 17
4.9. Copy of Revolving Promissory Note dated June 1, 1995, in the principal
amount of $6,000,000 between 3CI and WSI, its majority stockholder
(incorporated by reference to Exhibit 4.1 of 3CI's Quarterly Report on
Form 10-Q for the quarterly period ended June 30, 1995).
4.10. Copy of Revolving Promissory Note dated September 1, 1995 in the
principal amount of $6,000,000 between 3CI and WSI, its majority
stockholder (incorporated by reference to Exhibit 4.2 of 3CI's
Quarterly Report on Form 10-Q for the quarterly period ended June 30,
1995).
4.11. Copy of Revolving Promissory Note dated September 30, 1995 in the
principal amount of $8,000,000 between 3CI and WSI, its majority
stockholder (incorporated by reference to Exhibit 4.11 of 3CI's Annual
Report on Form 10K for the fiscal year ended September 30, 1995).
10.1. Copy of Contract dated August 22, 1989 between 3CI and the City of
Carthage, Texas, related to the incineration of medical waste
(incorporated by reference to Exhibit 10 of 3CI's registration
statement on Form S-1 (No. 33-45632) effective April 14, 1992).
10.2. Copy of Addendum dated March 30, 1992 to Contract between 3CI and the
City of Carthage, Texas (incorporated by reference to Exhibit 10 (p)
of 3CI's registration statement on Form S-1 (No. 33-45632) effective
April 14, 1992).
10.3. Copy of First Amendment dated July, 1993 to Contract between 3CI and
City of Carthage, Texas (incorporated by reference to Exhibit 10.3 of
3CI's Annual Report on Form 10-K for the fiscal year ended September
30, 1993).
10.4. Copy of Contract dated August, 1989, between 3CI and the City of
Center, Texas, related to the incineration of medical waste
(incorporated by reference to Exhibit 10 (b) of 3CI's registration
statement on Form S-1 (No. 33-45632) effective April 14, 1992).
10.5. Copy of form of Amendment No. 1 dated October 12, 1992 to the
contract dated August, 1989, between 3CI and the City of Center,
Texas, related to the incineration of medical waste (incorporated by
reference to Exhibit 10.5. of 3CI's Annual Report on Form 10-K for the
fiscal year ended September 30, 1993).
10.6. Copy of form of Amendment No. 2 dated December 29, 1992 to the
contract dated August, 1989, between 3CI and the City of Center,
Texas, related to the incineration of medical waste (incorporated by
reference to Exhibit 10.6. of 3CI's Annual Report on Form 10-K for the
fiscal year ended September 30, 1993).
10.7. Copy of form of Amendment No. 3 dated December, 1993 to the contract
dated August, 1989, between 3CI and the City of Center, Texas, related
to the incineration of medical waste (incorporated by reference to
Exhibit 10.7. of 3CI's Annual Report on Form 10-K for the fiscal year
ended September 30, 1993).
10.8. Copy of Termination Agreement, dated as of May 20, 1993, between 3CI,
Micro-Waste Corporation and the shareholders of Micro-Waste
Corporation (incorporated by reference to Exhibit 10.17. of 3CI's
Annual Report on Form 10-K for the fiscal year ended September 30,
1993).
10.9. Copy of 1992 Stock Option Plan of 3CI (incorporated by reference to
Exhibit 10(m) of 3CI's registration statement on Form S-1 (No.
33-45632) effective April 14, 1992).
10.10. Promissory Note dated October 10, 1994, among 3CI Complete
Compliance Corporation, 3CI Acquisition Corp./A/MED and River Bay
Corporation (incorporated by reference to Exhibit 1.5 of 3CI's report
on Form 8-K filed October 27, 1994).
10.11. Promissory Note dated October 10, 1994, between 3CI Complete
Compliance Corporation and River Bay (incorporated by reference to
Exhibit 1.6 of 3CI's report on Form 8-K filed October 27, 1994).
10.12. Security Agreement dated October 10, 1994, among 3CI Complete
Compliance Corporation, 3CI Acquisition Corp./A/MED and River Bay
(incorporated by reference to Exhibit 1.7 of 3CI's report on Form 8-K
filed October 27, 1994).
10.13. Security Agreement dated October 10, 1994, between 3CI Complete
Compliance Corporation and River Bay Corporation (incorporated by
reference to Exhibit 1.8 of 3CI's report on Form 8-K filed October 27,
1994).
16
<PAGE> 18
10.14. Mortgage, Security Agreement, Assignment of Leases and Financing
Statement dated October 10, 1994, among 3CI Complete Compliance
Corporation, 3CI Acquisition Corp., A/A/MED and River Bay Corporation
(incorporated by reference to Exhibit 1.9 of 3CI's report on Form 8-K
filed October 27, 1994).
10.15. Debt Subordination Agreement dated October 10, 1994, among 3CI
Complete Compliance Corporation, 3CI Acquisition Corp./A/MED, River
Bay Corporation, Marlan Baucum, Zeb Baucum, III, Diedra Baucum, The
Smith County Bank and the Bank of Raleigh (incorporated by reference
to Exhibit 1.10 of 3CI's report on Form 8-K filed October 27, 1994).
10.16. Non-Competition Agreement dated October 10, 1994, between 3CI
Complete Compliance Corporation and Marlan Baucum (incorporated by
reference to Exhibit 1.12 of 3CI's report on Form 8-K filed October
27, 1994).
10.17. Employment Agreement dated October 10, 1994, between 3CI Complete
Compliance Corporation and Zeb Baucum (incorporated by reference to
Exhibit 1.13 of 3CI's report on Form 8-K filed October 27, 1994).
10.18. Consultant Agreement dated October 10, 1994, between 3CI Complete
Compliance Corporation and Marlan Baucum (incorporated by reference to
Exhibit 1.14 of 3CI's report on Form 8-K filed October 27, 1994).
10.19. Employment Agreement dated May 20, 1994, between 3CI and Patrick
Grafton (incorporated by reference to Exhibit 10.19 of 3CI's Annual
Report on Form 10-K for the fiscal year ended September 30, 1992).
10.20. Employment Agreement dated May 20, 1994, between 3CI and Charles
Crochet (incorporated by reference to Exhibit 10.20 of 3CI's Annual
Report on Form 10-K for the fiscal year ended September 30, 1992).
10.21 Employment Agreement dated August 31, 1995, between 3CI and Charles
D. Crochet incorporated by reference to Exhibit 10.21 of 3CI's Annual
Report on Form 10-K for the fiscal year ended September 30, 1995).
10.22. Modification of Purchase Transaction dated January 25, 1995, among
3CI, 3CI Acquisition Corp./A/MED, River Bay Corporation and Marlan
Baucum (incorporated by reference to Exhibit 10.22 of 3CI's Annual
Report on Form 10-K for the fiscal year ended September 30, 1995).
10.23 Settlement Agreement dated January 1996 among James H. Shepherd,
James Michael Shepherd and Richard T. McElhannon, as Releassors, and
the Company, Georg Rethmann, Dr. Herrmann Niehues, Jurgen Thomas,
Charles Crochet and Waste Systems, Inc., as Releasees (incorporated by
reference to Exhibit 10.23 of 3CI's Annual Report on Form 10-K for the
fiscal year ended September 30, 1995).
16.1 Letter Re: Change in Certifying Accountant (incorporated by reference
to Exhibit 16.2 of 3CI's report on Form 8-K/A filed December 28,
1994).
(b) Reports on Form 8-K - None
17
<PAGE> 19
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereto duly authorized.
3CI COMPLETE COMPLIANCE CORPORATION
(Company)
May 15, 1997 /s/ Charles D. Crochet
-----------------------
Charles D. Crochet
President (Principal Executive Officer)
May 15, 1997 /s/ Curtis W. Crane
------------------------
Curtis W. Crane
Chief Financial Officer, Secretary
and Treasurer
(Principal Financial Officer
and Principal Accounting Officer)
18
<PAGE> 20
INDEX TO EXHIBITS FILED HEREWITH
27 -- Financial Data Schedule
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> SEP-30-1997
<CASH> 130,000
<SECURITIES> 0
<RECEIVABLES> 6,054,487
<ALLOWANCES> 997,926
<INVENTORY> 73,369
<CURRENT-ASSETS> 6,099,112
<PP&E> 11,329,426
<DEPRECIATION> 2,918,199
<TOTAL-ASSETS> 15,197,331
<CURRENT-LIABILITIES> 17,483,328
<BONDS> 0
<COMMON> 99,004
0
0
<OTHER-SE> (4,890,963)
<TOTAL-LIABILITY-AND-EQUITY> 15,197,331
<SALES> 9,309,272
<TOTAL-REVENUES> 9,309,272
<CGS> 7,168,109
<TOTAL-COSTS> 7,168,109
<OTHER-EXPENSES> (2,350,777)
<LOSS-PROVISION> 60,000
<INTEREST-EXPENSE> 508,411
<INCOME-PRETAX> (777,925)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (777,925)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> (.09)
</TABLE>
