<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 June 30, 1998
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
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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 August 14, 1998 was 9,778,825.
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3CI COMPLETE COMPLIANCE CORPORATION
I N D E X
<TABLE>
<CAPTION>
PAGE
NUMBER
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<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of
June 30, 1998 (unaudited) and September 30, 1997........................ 3
Consolidated Statements of Operations for the three months and
nine months ended June 30, 1998 and 1997 (unaudited).................... 4
Consolidated Statements of Cash Flows for the
nine months ended June 30, 1998 and
1997 (unaudited)....................................................... 5
Notes to Consolidated Financial Statements (unaudited)..................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................................... 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ........................................................ 13
Item 2. Changes in Securities...................................................... 15
Item 3. Defaults Upon Senior Securities............................................ 15
Item 4. Submission of Matters to a Vote
Of Security Holders..................................................... 15
Item 5. Other Information ........................................................ 15
Item 6. Exhibits and Reports on Form 8-K........................................... 15
SIGNATURES ........................................................................... 20
</TABLE>
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ITEM 1. FINANCIAL STATEMENTS
3CI COMPLETE COMPLIANCE CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ -- $ --
Restricted cash -- --
Accounts receivable, net allowances of $597,861 and $875,144
at June 30, 1998 and September 30, 1997, respectively 2,812,893 3,559,091
Inventory 86,835 71,886
Other current assets 719,141 440,373
------------ ------------
Total current assets 3,618,869 4,071,350
------------ ------------
Property, plant and equipment, at cost 12,586,119 10,927,159
Accumulated depreciation (3,600,229) (2,477,411)
------------ ------------
Net property, plant and equipment 8,985,890 8,449,748
------------ ------------
Excess of cost over net assets acquired, net of accumulated amortization of
$93,738 and $74,988 at June 30, 1998 and September 30, 1997 respectively 343,493 362,243
Other intangible assets, net of accumulated amortization of $205,018 and
$149,104 at June 30, 1998 and September 30, 1997, respectively 225,918 274,264
------------ ------------
Total assets $ 13,174,170 $ 13,157,605
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Bank Overdrafts $ 355,602 $ 156,880
Notes payable 642,119 217,525
Current portion of long-term debt, unaffiliated lenders 1,018,281 1,373,617
Accounts payable 1,381,263 1,034,924
Accounts payable, affiliated companies 458,656 391,156
Accrued liabilities 842,495 2,188,697
Note payable majority shareholder 4,898,699 4,844,217
------------ ------------
Total current liabilities 9,597,115 10,207,016
------------ ------------
Long-term debt unaffiliated lenders, net of current portion 883,076 986,467
------------ ------------
Total liabilities 10,480,191 11,193,483
------------ ------------
Shareholders' Equity (deficit):
Preferred stock,$0 .01 par value, authorized 16,050,000 shares;
Issued and outstanding 7,750,000 at June 30, 1998, 77,500 --
Preferred stock, no par value, authorized 1,000,000 shares;
Issued and outstanding 1,000,000 at September 31, 1997, respectively 7,000,000
Additional Paid-in capital - preferred stock 7,672,500 --
Common stock, $0.01 par value, authorized 40,450,000 shares;
Issued and outstanding 9,232,825 at June 30, 1998 and
outstanding 9,154,811 at September 31, 1997, respectively 92,329 91,549
Less cost of treasury stock (20,500 shares) (35,105) --
Additional Paid-in capital - common stock 20,259,779 20,182,543
Accumulated deficit (25,373,024) (25,309,970)
------------ ------------
Total Shareholders' equity (deficit) 2,693,979 1,964,122
------------ ------------
Total liabilities and shareholders' equity (deficit) 13,174,170 $ 13,157,605
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
3
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3CI COMPLETE COMPLIANCE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE FOR THE FOR THE FOR THE
THREE MONTHS ENDED THREE MONTHS ENDED NINE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1998 1997 1998 1997
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
REVENUES $ 4,715,964 $ 4,668,898 $ 14,127,077 $ 13,978,170
EXPENSES:
Cost of Services 3,535,882 3,631,642 10,474,755 10,799,750
Depreciation and Amortization 326,249 323,816 929,651 1,021,961
Selling, general and administrative 610,133 625,131 2,151,511 2,221,290
---------------- ---------------- ---------------- ----------------
Net income (loss) from Operations $ 243,700 $ 88,309 $ 571,160 $ (64,831)
Other Income (expense):
Interest and other expense, (206,985) (277,720) (634,215) (902,504)
---------------- ---------------- ---------------- ----------------
Net income (loss) before income taxes 36,715 (189,411) (63,055) (967,335)
---------------- ---------------- ---------------- ----------------
Income taxes -- -- -- --
---------------- ---------------- ---------------- ----------------
Net income (loss) $ 36,715 $ (189,411) $ (63,055) $ (967,335)
================ ================ ================ ================
Weighted average shares outstanding 9,116,026 9,034,811 9,143,519 9,034,811
================ ================ ================ ================
Net loss per common share $ 0.01 $ (0.02) $(0.01) $ (0.11)
================ ================ ================ ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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3CI COMPLETE COMPLIANCE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE FOR THE
NINE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
1998 1997
--------------- ---------------
<S> <C> <C>
Cash flow from operating activities:
Net loss (63,055) (967,335)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
(Gain) loss on disposal of fixed assets 18,493
Interest expense of affiliated debt 593,045
Depreciation and amortization 929,651 1,021,961
Change in assets and liabilities, net
(Increase) decrease in accounts receivable, net 746,200 (337,934)
(Increase) decrease in inventory (14,949) (38,312)
(Increase) decrease in prepaid expenses (278,768) (473,714)
Increase (decrease) in accounts payable 346,339 (361,364)
Increase (decrease) in accounts payable, affiliated companies 67,500 54,000
Increase (decrease) in accrued liabilities (1,354,855) (575,287)
--------------- ---------------
Total adjustments to net loss 441,118 (99,112)
--------------- ---------------
Net cash provided by (used in) operating activities 378,063 (1,066,447)
--------------- ---------------
Cash flow from investing activities:
Proceeds from sale of property, plant and equipment 98,932 233,064
Purchase of property, plant and equipment (1,411,360) (371,576)
--------------- ---------------
Net cash used in investing activities (1,312,428) (138,512)
--------------- ---------------
Cash flow from financing activities:
Increase (decrease) in bank overdrafts 198,722 499,114
Proceeds from issuance of notes payable 1,088,116 942,320
Principal reduction of notes payable (663,522) (711,216)
Reduction of accrued stock put option -- (104,772)
Proceeds from issuance of long-term debt 632,948 --
Reduction of long-term debt, unaffiliated lenders (1,091,676) (1,186,487)
Repurchase of treasury stock (35,105) --
Proceeds from issuance of note payable to majority shareholders 500,000 1,766,000
Unpaid interest added to note payable to majority shareholders 304,882 --
--------------- ---------------
Net cash provided in financing activities 934,365 1,204,959
--------------- ---------------
Net decrease in cash and cash equivalents -- --
--------------- ---------------
Cash and cash equivalents, beginning of period -- --
--------------- ---------------
Cash and cash equivalents, end of period $ -- $ --
=============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
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3CI COMPLETE COMPLIANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
(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 incineration of
biomedical waste in the southeastern, south central and portions of the
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 and are of a normal recurring nature which
are necessary for a fair presentation of these financial statements. 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, 1997, as filed with the Securities and Exchange
Commission.
(2) NET INCOME (LOSS) PER COMMON SHARE
In 1997, the Financial Accounting Standards Board issued Statement 128, Earnings
per Share. Statement 128 replaced the calculation of primary and fully diluted
earnings per share with basic and diluted earnings per share. Unlike primary
earnings per share, basic earnings per share excludes any dilutive effects of
options, warrants and convertible securities. Diluted earnings per share, basic
earnings per share is very similar to the previously reported fully diluted
earnings per share. For the nine months ended June 30, 1998 and 1997, the
effects of dilutive potential common shares are not considered in calculating
earnings per share because their effects would be anti-dilutive to the net loss
reported for these time periods. All earnings per share for all periods
presented have been presented to conform to Statement 128 requirements.
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Basic income (loss) per common share has been computed by dividing net income
(loss) for each weighted common shares outstanding for each period presented. In
October 1994, the Company acquired substantially all the assets and assumed
certain liabilities of River Bay Corporation. As part of the River Bay
acquisition the Company issued 865,500 common shares with River Bay Corporation
having the option to put the shares back to the Company. As of June 30, 1998,
565,500 shares remain outstanding in connection with the acquisition and have
been excluded from weighted average shares outstanding.
(3) BUSINESS CONDITIONS
The Company has historically funded its operations, acquisitions and debt
service through cash advances from its majority shareholder WSI. As a result of
the Company's 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 (the "1995 Note"),
increasing the total available to $8,000,000 including interest, with the
principal not to exceed $7,400,000. The 1995 Note bears interest at the prime
rate and provides for the payment of interest in quarterly installments which is
automatically added to the outstanding principal balance, if not paid. The 1995
Note was due and payable on December 31, 1996, but to date, the Company has
requested and received monthly extensions of the maturity date. The 1995 Note is
presently due and payable in full on June 30, 1998. As of September 30, 1997,
1996, and 1995, the Company had borrowed $4,844,217, $8,843,000 and $4,100,000
respectively under the 1995 Note. During February 1998, the Company and WSI
converted an additional $750,000 of debt under the 1995 Note, into Series C
preferred stock.
During fiscal year 1996, the Company received cash advances from WSI in excess
of the 1995 Note. As a result, in December 1996, the Company entered into a
Revolving Credit Facility of $2.7 million including deferred interest (the "1996
Credit Facility"), with a maturity date of February 28, 1997. The maturity date
was subsequently extended to June 30, 1997. In February 1997, the Company
received a letter from the NASDAQ Stock Market, Inc. ("NASDAQ") regarding the
Company's failure to meet listing requirements. These requirements included
maintaining a minimum capital and surplus of at least $1,000,000 and a minimum
bid price of $1.00. The NASDAQ agreed to allow the Company to remain listed,
with an exception added to its trading symbol, until June 25, 1997, at which
time the Company would be required to meet the listing requirement. In June
1997, WSI converted $7,000,000 of debt into 1,000,000 shares of 3CI preferred
stock and canceled the 1996 Credit Facility. This conversion allowed the Company
to meet the listing requirement of the NASDAQ. On June 26, 1997, the NASDAQ
confirmed that the Company was in compliance with all requirements necessary for
continued listing on the exchange and the exception to its trading symbol was
removed. The conversion also resulted in the reduction of the outstanding
indebtedness of the 1995 Note.
During the fiscal years ended September 30, 1997, 1996 and 1995 WSI has made
cash advances to the Company of $2,303,000, $4,000,000 and $4,100,000. During
fiscal year 1998, the Company received a cash advance from WSI in the amount of
$500,000. This advance was utilized for settlement costs and expenses incurred
in the Rash litigation. WSI is under no obligation to provide additional
advances under the 1995 Note and could demand payment of all outstanding
indebtedness under the 1995 Note at any time after September 30, 1998. During
fiscal year 1997 and continuing into fiscal 1998, the Company has
7
<PAGE> 8
continued to have discussions with third party lenders to obtain an alternative
source of financing apart from WSI. In the event the Company and WSI do not come
to a resolution on the restructuring of the 1995 Note 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.
During February 1998, the Company and WSI converted an additional $750,000 of
debt under the 1995 Note, into Series C preferred stock. Also, during March
1998, the Company exchanged 1,000,000 shares of Series A preferred stock for
7,000,000 shares of Series B preferred stock.
During fiscal 1998, the Company repaid approximately $663,522 of its notes
payable and approximately $1,091,676 of its long-term debt that became due.
During the first quarter of the fiscal year 1998, the Board of Directors of the
Company authorized the repurchase of up to 150,000 shares of 3CI common stock
from time to time in the open market. Since the authorization by the board of
Directors, the Company has repurchased 20,500 shares at cost of $32,105 as of
June 30, 1998, and an additional 2,000 shares for $3,322 as of August 11, 1998.
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 pressures on profit margins. The Company competes against
companies which have access to greater capital resources. In order to
effectively compete in the 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 majority shareholder and if available,
from outside sources. There is 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
James T. Rash, et al. v. Waste Systems, Inc. et al. 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 against
the Company, WSI and various Directors of the Company in the federal District
Court of Harris County, Texas. The plaintiffs alleged minority stockholder
oppression, breach of fiduciary duty and breach of contract and "thwarting of
reasonable expectations" and 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 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
alleged that such removal was wrongful and ineffective. The Company's insurer
has denied coverage in the lawsuit. The Company denied all material allegations
of the lawsuit. The Company and Mr. Grafton reached a settlement of Mr.
Grafton's individual claims relating to his removal as an officer and Director
of the Company. The terms of the settlement reached between the Company and Mr.
Grafton are confidential to both parties. The Company also entered into a
settlement agreement with the plaintiffs to settle this action, which has been
approved by the court. Pursuant to the settlement, the Company has agreed to (i)
issue 78,014 shares of Common Stock to the plaintiffs, (ii) issue Warrants for
1,002,964 shares of Common Stock to the plaintiffs on the basis one Warrant for
every three shares of common stock owned and (iii) paid $425,000 into escrow for
payment of plaintiff's attorneys' fees.
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River Bay. As previously reported, 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. The Company was
seeking damages and/or to set aside the Purchase Agreement (the "Purchase
Agreement") and ancillary agreements, including a Put Option Agreement (the "Put
Option Agreement") entered into in connection with the acquisition of the River
Bay Assets. If otherwise enforceable, the Put Option Agreement would have
required the payment by the Company of approximately $1,700,000 for 565,500
shares of 3CI common stock.
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 a
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
Bank of Raleigh and Smith County Bank prayed declaratory judgment declaring the
arbitration provision in the Purchase Agreement to be not binding upon the said
banks, declaratory judgment declaring the claims of 3CI against River Bay to be
subordinate to the claims of the banks, unspecified compensatory damages and for
punitive damages for least $1,000,000. The District Court stayed this action as
well, pending arbitration. In this action the Bank of Raleigh and Smith County
Bank proceeded to collect the Company's accounts receivable in the River Bay
division as it was used as collateral in the Purchase Agreement, they collected
approximately $463,000, through October 14, 1997. 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 and Marlan
Baucum as defendants therein. This lawsuit sought an injunction and stay of all
judicial and extra-judicial proceedings pursuant to the Put Option Agreement
until such time as the arbitration was 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 parties agreed to settle
the suit in consideration for the Company to repurchase the remaining 565,500
shares of Common Stock related to the Put Option Agreement for $816,364. The
outcome of this lawsuit did not have a material adverse effect on the Company's
financial position, results of operations and net cash flows.
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 assessments
will not have a materially adverse effect on the Company's financial position,
result of operations or net cash flows except where noted above.
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 Nine Months Ended
June 30, June 30,
-------------------------- --------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues $ 4,716 $ 4,669 $ 14,127 $ 13,978
Costs of Services 3,536 3,632 10,475 10,800
Selling, General and
Administrative Expense 610 625 2,152 2,346
Net income (loss) from operations 244 88 571 (190)
Other Expenses, Net (533) (278) (634) (903)
Net income (loss) 37 (189) (63) (967)
</TABLE>
9
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THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED JUNE 30, 1997:
REVENUES:
Revenues for the three month period ended June 30, 1998, increased by $4,715,964
from revenues for the three month period ended June 30, 1997 of $4,668,898. The
increase in revenue of 1.1% is primarily due to an increase in the Companys
direct collection revenue.
COSTS OF SERVICES:
Cost of services decreased by $95,760, or 2.6%, to $3,535,882 for the three
months ended June 30, 1998, as compared to $3,631,642 for the three month period
ended June 30, 1997. The decrease in costs of services resulted from the
continued cost reductions achieved from lower transportation costs
and the reduction of operating costs at the Company's treatment facilities.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ("SG&A"):
Selling, General and Administrative expense for the three month period ended
June 30, 1998, decreased to $610,133 compared to $625,131 for the three month
period ended June 30, 1997. As a percentage of revenue, the expense for the 1998
period decreased to 12.9% compared to 13.4% for the 1997 period. The decrease
was primarily due to the reduction in the bad debt reserve and labor related
costs.
DEPRECIATION AND AMORTIZATION EXPENSE for the three months ended June 30, 1998
increased to $326,249 compared to $323,816 for the months ended June 30, 1997.
INTEREST EXPENSE decreased to $158,557 for the quarter ended June 30, 1998 from
$241,061 for the three months ended June 30, 1997. This decrease is a result of
WSI converting $7,750,000 of outstanding indebtedness owed by the Company to WSI
into preferred stock of the Company.
NINE MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997:
REVENUES:
Revenues for the six month period ended June 30, 1998, increased by $14,127,077
from revenues for the nine month period ended June 30, 1997 of $13,978,170. The
increase in revenue of 1.1% is primarily due to an increase in the Companys
direct collection revenue.
COSTS OF SERVICES:
Cost of services decreased by $10,474,755 for the nine months ended June 30,
1998, compared to $10,799,750 for the nine month period ended June 30, 1997. The
decrease in cost of services resulted
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from lower transportation costs and the reduction of operating costs at the
Company's treatment facilities.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ("SG&A"):
Selling, General and Administrative expense for the nine month period ended June
30, 1998 decreased to $2,151,511 compared to $2,221,290 for the nine month
period ended June 30, 1997. As a percentage of revenue, expenses for the 1998
period decreased to 15.2% compared to 16.4% for the 1997 period. The decrease
was due primarily to the reduction in legal fees, bad debt reserves and labor
related costs.
DEPRECIATION AND AMORTIZATION EXPENSE for the nine months ended June 30, 1998
decreased to $929,651 compared to $1,021,961.
INTEREST EXPENSE decreased to $459,848 for the nine months month ended June 30,
1998 from $749,473 for the six months ended March 31, 1997. This decrease is a
result of WSI converting $7,750,000 of outstanding indebtedness owed by the
Company to WSI into preferred stock of the Company.
LIQUIDITY AND CAPITAL RESOURCES
OPERATING ACTIVITIES:
While the Company's cash flow from operations has continued to improve, it still
experienced a cash loss from operations during the nine months ended June 30,
1998. This operating cash flow loss for the first six months was primarily due
to the payment of settlement costs associated with the Company's minority
shareholder litigation, which was settled in February 1998. The Company
anticipates that its working cash flow from operations for the remainder of
fiscal year 1998 will continue to improve.
INVESTING ACTIVITIES:
During the nine months ended June 30, 1998, the Company invested approximately
$1,411,360 for transportation, machinery and equipment, computer equipment and
software, and other fixed assets.
FINANCING ACTIVITIES:
The Company has historically funded its operations, acquisitions and debt
service through cash advances from its majority shareholder WSI. As a result of
the Company's 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 (the "1995 Note"),
increasing the total available to $8,000,000 including interest, with the
principal not to exceed $7,400,000. The 1995 Note bears interest at the prime
rate and provides for the payment of interest in quarterly installments which is
automatically added to the outstanding principal balance, if not paid. The 1995
Note was due and payable on December 31, 1996,
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but to date, the Company has requested and received monthly extensions of the
maturity date. The 1995 Note is presently due and payable in full on September
30, 1998. As of September 30, 1997, 1996, and 1995, the Company had borrowed
$4,844,217, $8,843,000 and $4,100,000 respectively under the 1995 Note. During
February 1998, the Company and WSI converted an additional $750,000 of debt
under the 1995 Note, into Series C preferred stock.
During fiscal year 1996, the Company received cash advances from WSI in excess
of the 1995 Note. As a result, in December 1996, the Company entered into a
Revolving Credit Facility of $2.7 million including deferred interest (the "1996
Credit Facility"), with a maturity date of February 28, 1997. The maturity date
was subsequently extended to June 30, 1997. In February 1997, the Company
received a letter from the NASDAQ Stock Market, Inc. ("NASDAQ") regarding the
Company's failure to meet listing requirements. These requirements included
maintaining a minimum capital and surplus of at least $1,000,000 and a minimum
bid price of $1.00. The NASDAQ agreed to allow the Company to remain listed,
with an exception added to its trading symbol, until June 25, 1997, at which
time the Company would be required to meet the listing requirement. In June
1997, WSI converted $7,000,000 of debt into 1,000,000 shares of 3CI preferred
stock and canceled the 1996 Credit Facility. This conversion allowed the Company
to meet the listing requirement of the NASDAQ. On June 26, 1997, the NASDAQ
confirmed that the Company was in compliance with all requirements necessary for
continued listing on the exchange and the exception to its trading symbol was
removed. The conversion also resulted in the reduction of the outstanding
indebtedness of the 1995 Note.
During the fiscal years ended September 30, 1997, 1996 and 1995 WSI has made
cash advances to the Company of $2,303,000, $4,000,000 and $4,100,000. During
fiscal year 1998, the Company received a cash advance from WSI in the amount of
$500,000. This advance was utilized for settlement costs and expenses incurred
in the Rash litigation. WSI is under no obligation to provide additional
advances under the 1995 Note and could demand payment of all outstanding
indebtedness under the 1995 Note at any time after September 30, 1998. During
fiscal year 1997 and continuing into fiscal 1998, the Company has continued to
have discussions with third party lenders to obtain an alternative source of
financing apart from WSI. In the event the Company and WSI do not come to a
resolution on the restructuring of the 1995 Note 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.
During February 1998, the Company and WSI converted an additional $750,000 of
debt under the 1995 Note, into Series C preferred stock. Also, during March
1998, the Company exchanged 1,000,000 shares of Series A preferred stock for
7,000,000 shares of Series B preferred stock.
During fiscal 1998, the Company repaid approximately $663,502 of its notes
payable and approximately $1,091,676 of its long-term debt that became due.
During the first quarter of the fiscal year 1998, the Board of Directors of the
Company authorized the repurchase of up to 150,000 shares of 3CI common stock
from time to time in the open market. Since the authorization by the board of
Directors, the Company has repurchased 11,000 shares at cost of $32,105 as of
March 31, 1998, and an additional 2,000 shares for $3,332 as of August 11, 1998.
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 pressures on profit margins. The Company competes against
companies which have access to greater capital resources. In order to
effectively compete in the 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 majority shareholder and if available,
from outside sources. There is no assurance that adequate funds for these
purposes will be available when needed or, if available, on terms acceptable to
the Company.
12
<PAGE> 13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings -
James T. Rash, et al. v. Waste Systems, Inc. et al. 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 against
the Company, WSI and various Directors of the Company in the federal District
Court of Harris County, Texas. The plaintiffs alleged minority stockholder
oppression, breach of fiduciary duty and breach of contract and "thwarting of
reasonable expectations" and 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 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
alleged that such removal was wrongful and ineffective. The Company's insurer
has denied coverage in the lawsuit. The Company denied all material allegations
of the lawsuit. The Company and Mr. Grafton reached a settlement of Mr.
Grafton's individual claims relating to his removal as an officer and Director
of the Company. The terms of the settlement reached between the Company and Mr.
Grafton are confidential to both parties. The Company also entered into a
settlement agreement with the plaintiffs to settle this action, which has been
approved by the court. Pursuant to the settlement, the Company has agreed to (i)
issue 78,014 shares of Common Stock to the plaintiffs, (ii) issue Warrants for
1,002,964 shares of Common Stock to the plaintiffs on the basis one Warrant for
every three shares of common stock owned and (iii) paid $425,000 into escrow for
payment of plaintiff's attorneys' fees.
River Bay. As previously reported, 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. The Company was
seeking damages and/or to set aside the Purchase Agreement (the "Purchase
Agreement") and ancillary agreements, including a Put Option Agreement (the "Put
Option Agreement") entered into in connection with the acquisition of the River
Bay Assets. If otherwise enforceable, the Put Option Agreement would have
required the payment by the Company of approximately $1,700,000 for 565,500
shares of 3CI common stock.
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 a
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
Bank of Raleigh and Smith County Bank prayed declaratory judgment declaring the
arbitration provision in the Purchase Agreement to be not binding upon the said
banks, declaratory judgment declaring the claims of 3CI against River Bay to be
subordinate to the claims of the banks, unspecified compensatory damages and for
punitive damages for least $1,000,000. The District Court stayed this action as
well, pending arbitration. In this action the Bank of Raleigh and Smith County
Bank proceeded to collect the Company's accounts receivable in the River Bay
division as it was used as collateral in the Purchase Agreement, they collected
approximately $463,000, through October 14, 1997. 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 and Marlan
Baucum as defendants therein. This lawsuit sought an injunction and stay of all
judicial and extra-judicial proceedings pursuant to the Put Option Agreement
until such time as the arbitration was completed. This action was removed by the
defendants to the U.S. District Court for the Western district of Louisiana,
Shreveport division in
13
<PAGE> 14
Civil Action No. 97-0578. The parties agreed to settle the suit in consideration
for the Company to repurchase the remaining 565,500 shares of Common Stock
related to the Put Option Agreement for $816,364. The outcome of this lawsuit
did not have a material adverse effect on the Company's financial position,
results of operations and net cash flows.
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 assessments
will not have a materially adverse effect on the Company's financial position,
result of operations or net cash flows except where noted above.
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 -
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. 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).
2.2. 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).
2.3. 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).
2.4. 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).
2.5. 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).
14
<PAGE> 15
2.6. 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).
2.7 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).
3.1 Certificate of Incorporation as amended (incorporated by
reference to Exhibit 3(a) of 3CI's registration statement on
Form S-1 (No. 33-45632) effective April 14, 1992).
3.2 Amendment to Certificate of Incorporation effective June 13,
1995 (incorporated by reference to Exhibit 3.1 of 3CI's
quarterly period ended June 30, 1995).
3.3 Amendment to Certificate of Incorporation effective March
23, 1998 (incorporated by reference to Exhibit 3.3 of 3CI's
registration Form S-1 filed March 23, 1998).
3.4 Bylaws as amended (incorporated by reference to Exhibit 3(a)
of 3CI's registration statement on Form S-1 (No. 33-45632)
effective April 14, 1992).
3.5 Bylaws effective May 14, 1995 (incorporated by reference to
Exhibit 3.1 of 3CI's quarterly period ended June 30, 1995).
3.6 Certificate of Designations of the Company's Series A
Preferred Stock without par value (incorporated by reference
to Exhibit 3.6 of 3CI's registration Form S-1 filed
March 23, 1998).
3.7 Certificate of Designations of the Company's Series B
Preferred Stock without par value (incorporated by reference
to Exhibit 3.7 of 3CI's registration Form S-1 filed
March 23, 1998).
3.8 Certificate of Designations of the Company's Series C
Preferred Stock without par value (incorporated by reference
to Exhibit 3.8 of 3CI's registration Form S-1 filed
March 23, 1998).
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 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).
4.3 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).
4.4 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).
4.5 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).
4.6 Warrant dated March 18,1998 issued to Klein Bank as escrow
agent with respect to 1,002,964 shares of Common Stock
(incorporated by reference to Exhibit 4.6 of 3CI's
registration Form S-1 filed March 23, 1998).
4.7 Escrow agreement dated March 6, 1998 between the Company and
Klein Bank as escrow agent (incorporated by reference to
Exhibit 4.7 of 3CI's registration Form S-1 filed March 23,
1998).
15
<PAGE> 16
5.1 Opinion of Porter & Hedges, L.L.P. with respect to legality
of securities (incorporated by reference to Exhibit 5.1 of
3CI's registration Form S-1 filed March 23, 1998).
10.1 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 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 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 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).
10.5 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).
10.6 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).
10.7 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).
10.8 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).
10.9 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).
10.10 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).
10.11 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).
10.12 Exchange agreement between 3CI Complete Compliance
Corporation and Waste Systems, Inc. dated as of June 24,
1997 (incorporated by reference to Exhibit 10.12 of 3CI's
registration Form S-1 filed March 23, 1998).
10.13 Stock Purchase and Note Modification agreement between 3CI
Complete compliance Corporation and Waste Systems, Inc.
dated as of February 19, 1998 (incorporated by reference to
Exhibit 10.13 of 3CI's registration Form S-1 filed March 23,
1998).
23.1 Consent of Porter & Hedges, L.L.P. included in exhibit 5.1
(incorporated by reference to Exhibit 23.1 of 3CI's
registration Form S-1 filed March 23, 1998).
23.2 Consent of Heard, McElroy & Vestal, L.L.P. (incorporated by
reference to Exhibit 23.2 of 3CI's registration Form S-1
filed March 23, 1998).
16
<PAGE> 17
23.3 Consent of Arthur Andersen, L.L.P. (incorporated by
reference to Exhibit 23.3 of 3CI's registration Form S-1
filed March 23, 1998).
27 Financial Data Schedule
(b) Reports on Form 8-K - None
17
<PAGE> 18
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)
August 14, 1998 /s/ Charles D. Crochet
---------------------------------------
Charles D. Crochet
President (Principal Executive Officer)
August 14, 1998 /s/ Curtis W. Crane
---------------------------------------
Curtis W. Crane
Chief Financial Officer, Secretary and Treasurer
(Principal Financial Officer
and Principal Accounting Officer)
18
<PAGE> 19
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
2.1. 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).
2.2. 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).
2.3. 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).
2.4. 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).
2.5. 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).
2.6. 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).
2.7 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).
3.1 Certificate of Incorporation as amended (incorporated by
reference to Exhibit 3(a) of 3CI's registration statement on
Form S-1 (No. 33-45632) effective April 14, 1992).
3.2 Amendment to Certificate of Incorporation effective June 13,
1995 (incorporated by reference to Exhibit 3.1 of 3CI's
quarterly period ended June 30, 1995).
3.3 Amendment to Certificate of Incorporation effective March
23, 1998 (incorporated by reference to Exhibit 3.3 of 3CI's
registration Form S-1 filed March 23, 1998).
3.4 Bylaws as amended (incorporated by reference to Exhibit 3(a)
of 3CI's registration statement on Form S-1 (No. 33-45632)
effective April 14, 1992).
3.5 Bylaws effective May 14, 1995 (incorporated by reference to
Exhibit 3.1 of 3CI's quarterly period ended June 30, 1995).
3.6 Certificate of Designations of the Company's Series A
Preferred Stock without par value (incorporated by reference
to Exhibit 3.6 of 3CI's registration Form S-1 filed March
23, 1998).
</TABLE>
<PAGE> 20
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
3.7 Certificate of Designations of the Company's Series B
Preferred Stock without par value (incorporated by reference
to Exhibit 3.7 of 3CI's registration Form S-1 filed
March 23, 1998).
3.8 Certificate of Designations of the Company's Series C
Preferred Stock without par value (incorporated by reference
to Exhibit 3.8 of 3CI's registration Form S-1 filed
March 23, 1998).
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 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).
4.3 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).
4.4 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).
4.5 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).
4.6 Warrant dated March 18,1998 issued to Klein Bank as escrow
agent with respect to 1,002,964 shares of Common Stock
(incorporated by reference to Exhibit 4.6 of 3CI's
registration Form S-1 filed March 23, 1998).
4.7 Escrow agreement dated March 6, 1998 between the Company and
Klein Bank as escrow agent (incorporated by reference to
Exhibit 4.7 of 3CI's registration Form S-1 filed March 23,
1998).
5.1 Opinion of Porter & Hedges, L.L.P. with respect to legality
of securities (incorporated by reference to Exhibit 5.1 of
3CI's registration Form S-1 filed March 23, 1998).
10.1 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 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 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 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).
10.5 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).
10.6 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).
10.7 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).
</TABLE>
<PAGE> 21
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
10.8 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).
10.9 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).
10.10 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).
10.11 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).
10.12 Exchange agreement between 3CI Complete Compliance
Corporation and Waste Systems, Inc. dated as of June 24,
1997 (incorporated by reference to Exhibit 10.12 of 3CI's
registration Form S-1 filed March 23, 1998).
10.13 Stock Purchase and Note Modification agreement between 3CI
Complete compliance Corporation and Waste Systems, Inc.
dated as of February 19, 1998 (incorporated by reference to
Exhibit 10.13 of 3CI's registration Form S-1 filed March 23,
1998).
23.1 Consent of Porter & Hedges, L.L.P. included in exhibit 5.1
(incorporated by reference to Exhibit 23.1 of 3CI's
registration Form S-1 filed March 23, 1998).
23.2 Consent of Heard, McElroy & Vestal, L.L.P. (incorporated by
reference to Exhibit 23.2 of 3CI's registration Form S-1
filed March 23, 1998).
23.3 Consent of Arthur Andersen, L.L.P. (incorporated by
reference to Exhibit 23.3 of 3CI's registration Form S-1
filed March 23, 1998).
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> SEP-30-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 3,410,754
<ALLOWANCES> 597,861
<INVENTORY> 88,835
<CURRENT-ASSETS> 3,618,869
<PP&E> 12,586,119
<DEPRECIATION> 3,600,229
<TOTAL-ASSETS> 13,174,170
<CURRENT-LIABILITIES> 9,597,115
<BONDS> 0
0
77,500
<COMMON> 92,329
<OTHER-SE> 2,524,150
<TOTAL-LIABILITY-AND-EQUITY> 13,174,170
<SALES> 14,127,077
<TOTAL-REVENUES> 14,127,077
<CGS> 10,474,755
<TOTAL-COSTS> 10,474,755
<OTHER-EXPENSES> 3,715,377
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 459,848
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (63,055)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (63,055)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
