<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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, 1999
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
(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
----------------------------------------------------
(Registrant's telephone number, including area code)
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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 [ ]
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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 11, 1999 was 9,197,325.
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3CI COMPLETE COMPLIANCE CORPORATION
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, 1999 (unaudited) and September 30, 1998.................. 3
Consolidated Statements of Operations for the three months and
six months ended March 31, 1999 and 1998 (unaudited)............... 4
Consolidated Statements of Cash Flows for the
six months ended March 31, 1999 and
1998 (unaudited)................................................... 5
Notes to Consolidated Financial Statements (unaudited)............... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................................ 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings .................................................. 12
Item 2. Changes in Securities................................................ 12
Item 3. Defaults Upon Senior Securities...................................... 12
Item 4. Submission of Matters to a Vote
Of Security Holders................................................ 12
Item 5. Other Information .................................................. 12
Item 6. Exhibits and Reports on Form 8-K..................................... 12
SIGNATURES..................................................................... 15
</TABLE>
2
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3CI COMPLETE COMPLIANCE CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1999 1998
------------ -------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 345,074 $ --
Restricted cash -- --
Accounts receivable, net allowances of $333,144 and $573,937
at March 31, 1999 and September 30, 1998, respectively 2,703,956 3,252,673
Inventory 72,549 96,771
Other current assets 869,554 737,372
------------ ------------
Total current assets 3,991,133 4,086,816
------------ ------------
Property, plant and equipment, at cost 14,133,247 13,780,158
Accumulated depreciation (4,598,025) (3,883,073)
------------ ------------
Net property, plant and equipment 9,535,222 9,897,085
------------ ------------
Excess of cost over net assets acquired, net of accumulated amortization of
$116,488 and $99,988 at March 31, 1998 and September 30, 1998, respectively 440,743 337,243
Other intangible assets, net of accumulated amortization of $260,933 and
$223,656 at March 31, 1999 and September 30, 1998, respectively 111,828 149,104
Other assets 129,980 148,092
------------ ------------
Total assets $ 14,208,906 $ 14,618,340
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Bank Overdrafts $ -- $ 666,834
Notes payable 616,409 352,388
Current portion of long-term debt, unaffiliated lenders 1,473,102 1,619,889
Accounts payable 1,118,115 1,646,751
Accounts payable, affiliated companies 20,000 483,406
Accrued liabilities 990,489 1,098,634
Note payable majority shareholder 5,936,577 5,004,403
------------ ------------
Total current liabilities 10,154,692 10,872,305
------------ ------------
Long-term debt unaffiliated lenders, net of current portion 789,497 986,524
------------ ------------
Total liabilities 10,944,189 11,858,829
------------ ------------
Shareholders' Equity:
Preferred stock,$0 .01 par value, authorized 16,050,000 shares;
Issued and outstanding 7,750,000 at March 31, 1999
and September 30, 1998, respectively 77,500 77,500
Additional Paid-in capital - preferred stock 7,672,500 7,672,500
Common stock, $0.01 par value, authorized 40,450,000 shares;
Issued and outstanding 9,232,825 and 9,154,811 at
March 31, 1999 and September 30, 1998, respectively 92,329 92,329
Less cost of treasury stock (34,500 shares) (55,777) (44,516)
Additional Paid-in capital - common stock 20,259,779 20,259,779
Accumulated deficit (24,781,614) (25,298,081)
------------ ------------
Total Shareholders' equity 3,264,717 2,759,511
------------ ------------
Total liabilities and shareholders' equity (deficit) $ 14,208,906 $ 14,618,340
============ ============
</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 SIX MONTHS ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31, MARCH 31, MARCH 31,
1999 1998 1999 1998
------------------ ------------------ ---------------- ----------------
<S> <C> <C> <C> <C>
Revenues $ 4,384,323 $ 4,810,576 $ 9,110,494 $ 9,411,110
Expenses:
Cost of Services 3,090,635 3,500,905 6,444,973 6,938,936
Depreciation and Amortization 446,151 308,423 891,375 603,402
Selling, general and administrative 751,839 773,416 1,484,525 1,541,313
------------ ------------ ------------ ------------
Net income (loss) from Operations $ 95,698 $ 227,832 $ 289,621 $ 327,459
Other Income (expense):
Net interest expense, (227,846) (150,244) (456,053) (299,855)
Other income (expense) 754,804 (53,860) 682,898 (127,376)
------------ ------------ ------------ ------------
Net other income (expense) 526,958 (204,104) 226,845 (427,231)
------------ ------------ ------------ ------------
Net income (loss) $ 622,656 $ 23,728 $ 516,466 $ (99,772)
============ ============ ============ ============
Weighted average number of shares outstanding
common shares outstanding - basic 9,197,658 9,160,147 9,200,138 9,106,659
============ ============ ============ ============
Weighted average number of shares outstanding
common shares outstanding - diluted 16,947,658 9,160,147 16,950,138 9,106,659
============ ============ ============ ============
Earnings per share - basic $ 0.07 $ 0.01 $ 0.06 $ (0.01)
============ ============ ============ ============
Earnings per share - diluted $ 0.04 $ 0.01 $ 0.03 $ (0.01)
============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
4
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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,
1999 1998
---------------- ----------------
<S> <C> <C>
Cash flow from operating activities:
Net income (loss) 516,466 (99,772)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
(Gain) loss on disposal of fixed and intangible assets (811,154) --
Depreciation and amortization 891,375 603,402
Unpaid Interest included in long-term debt
Change in assets and liabilities, net
(Increase) decrease in restricted cash -- (427,922)
(Increase) decrease in accounts receivable, net 548,717 550,518
(Increase) decrease in inventory 24,222 (27,377)
(Increase) decrease in prepaid expenses (132,182) (548,338)
(Increase) decrease in other assets 18,112 --
Increase (decrease) in accounts payable (528,636) 782,282
Increase (decrease) in accounts payable, affiliated companies (463,406) 42,750
Increase (decrease) in accrued liabilities (77,642) (935,888)
----------- -----------
Total adjustments to net loss (530,594) 39,427
----------- -----------
Net cash provided by (used in) operating activities (14,128) (60,345)
----------- -----------
Cash flow from investing activities:
Proceeds from sale of property, plant and equipment 672,250 59,389
Purchase of property, plant and equipment (487,332) (1,072,624)
----------- -----------
Net cash used in investing activities 184,918 (1,013,235)
----------- -----------
Cash flow from financing activities:
Increase (decrease) in bank overdrafts (666,834) (156,880)
Proceeds from issuance of notes payable 755,621 1,019,471
Principal reduction of notes payable (491,600) (321,501)
Proceeds from issuance of long-term debt 319,747 286,836
Reduction of long-term debt, unaffiliated lenders (663,563) (410,604)
Repurchase of treasury stock (11,261) (16,982)
Proceeds from issuance of note payable to majority shareholders 1,233,406 500,000
Interest added to note payable to majority shareholders 292,965 202,520
Reduction to note payable to majority shareholders (594,197) --
----------- -----------
174,284 1,102,860
----------- -----------
Net decrease in cash and cash equivalents 345,074 29,280
----------- -----------
Cash and cash equivalents, beginning of period -- --
----------- -----------
Cash and cash equivalents, end of period 345,074 $ 29,280
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
5
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3CI COMPLETE COMPLIANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
(UNAUDITED)
(1) BASIS OF PRESENTATION
The accompanying unaudited Consolidated Financial Statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and 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 annual
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. The Company believes that the
disclosures in the accompanying Consolidated Financial Statements are adequate
to make the information presented not misleading. In the opinion of management,
all adjustments necessary for a fair presentation for the periods presented have
been reflected 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
for the three years ended September 30, 1998, as filed with the Company's Annual
Report on Form 10-K. The results of operations for the six-month period ended
March 31, 1999 are not necessarily indicative of the results that may be
achieved for the entire year ending September 30, 1999.
(2) BUSINESS CONDITIONS
The Company has experienced an overall improvement in its cash flows from
operations during the first six months ended March 31, 1999. In recent years the
Company experienced significant cash short falls caused in large part by the
debt incurred in connection with acquisitions and the expenses related to
certain litigation arising from those acquisitions and a minority shareholder
suit settled in 1998.
Competition in the medical waste industry has been high for several years.
The Company competes against companies that have access to greater capital
resources. One of those competitors is Stericycle, Inc. which owns 100% of the
capital stock of Waste Systems, Inc. ("WSI"), the Company's majority
shareholder. The Company has historically been able to benefit from its
relationship with WSI. The Company has received financial and other assistance
which otherwise may not have been available.
The Company has substantial indebtedness owed to WSI. This indebtedness
currently consists of (i) an Amended and Restated 1995 Note (the "Restated 1995
Note") in the principal amount of $5,488,000, and (ii) a Loan Agreement and Note
Amendment dated December 31, 1998 in the principal amount of $750,000. Through a
series of transactions described below, certain additional debt that the Company
previously owed to WSI was converted into 7,000,000 shares of the Company's
Series B Convertible Preferred Stock, par value $.01 per share (the "Series B
Preferred Stock") and 750,000 shares of the Company's Series C Convertible
Preferred Stock, par value $.01 per share (the "Series C Preferred Stock"). The
Series B Preferred Stock and Series C Preferred Stock have substantially
identical terms.
In June 1997, WSI converted $7,000,000 of debt into 1,000,000 shares of the
Company's Series A preferred stock and canceled the 1996 Credit Facility and
reduced the outstanding indebtedness of the
6
<PAGE> 7
1995 Note by $4,300,000. During February 1998, the Company and WSI converted an
additional $750,000 of debt under the 1995 into Series C preferred stock. In
March 1998, the Company exchanged 1,000,000 shares of Series A preferred stock
for 7,000,000 shares of Series B preferred stock.
On October 1, 1998, WSI and the Company executed the Restated 1995 Note.
The principal amount of the Restated 1995 Note is approximately $5,488,000,
which includes the then outstanding balance under the 1995 Note and certain
accounts to WSI as of September 30, 1998. The Restated 1995 Note bears interest
at the prime plus 2.0%. Interest is payable in quarterly installments on the
last business day of each quarter, with the first installment being payable on
the last business day of January 1999. Accrued and unpaid interest outstanding
on December 31, 1998 was capitalized and added to the principal amount of this
Note effective at January 1, 1999. The outstanding principal of this Note and
accrued but unpaid interest is due and payable on September 30, 1999 (the
"Initial Maturity Date"). The Company may, at any time on or before the Initial
Maturity Date, extend the maturity to a date not later than March 31, 2000 (the
"Subsequent Maturity Date") upon payment to WSI a commitment fee equal to 1.0%
of the outstanding principal amount on the 1995 Restated Note. The Company may
at any time on or before the Subsequent Maturity Date extend the maturity to a
date not later than September 30, 2000 upon payment to WSI of a commitment fee
equal to 1.5% of the outstanding principal amount of the 1995 Restated Note.
Under the terms of the Restated 1995 Note, the Company is among other things, is
required to maintain minimum levels of net worth and profitability.
On December 18, 1998, WSI and the Company entered into a Loan Agreement and
Note Amendment (the "New Loan") under which WSI agreed to lend $750,000 to the
Company. Borrowings under the New Loan bear interest at the lesser of (i) Prime
Rate plus 3.0% or (ii) the Maximum Rate. In either case, accrued and unpaid
interest outstanding on June 30, 1999 shall be capitalized and added to the
principal amount of the New Loan effective as of July 1, 1999. Interest accruing
after June 30, 1999 shall be due and payable in monthly installments on the last
day of each month, with the first such installment being due and payable on the
last day of July 1999. The outstanding principal balance of the New Loan is due
and payable on September 30, 1999. The maturity date of the New Loan may not be
extended. Included in the New Loan is a Sale Event fee, whereby a fee shall be
due to WSI based on the occurrence of a Sale Event, the aggregate fee payable
that shall not exceed $50,000. Under the terms of the New Loan, the Company is
among other things, required to maintain minimum levels of net worth and
profitability, the same as the Restated 1995 Note.
In January 1999, the Company sold for $920,000 certain assets of its
medical waste collection business to American Medical Disposal, Inc., an
Oklahoma corporation. Simultaneously with this transaction the Company acquired
certain operating assets of American Medical Disposal, Inc., within the
Company's current operating geographical area.
During 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 34,500 shares at cost of $55,777 as of March 31,
1999. The company has ceased the repurchase of common stock.
(3) COMMITMENTS AND CONTINGENCIES
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 litigation and
claims will not have a materially adverse effect on the Company's financial
position or results of operations.
7
<PAGE> 8
The Company operates within the regulated medical waste disposal industry
which is subject to intense governmental regulation at the federal, state and
local levels. The Company believes it is currently in compliance in all material
respects with all applicable laws and regulations governing the medical waste
disposal business. However, continuing expenditures may be required in order for
the Company to remain in compliance with existing and changing regulations.
Furthermore, because the medical waste disposal industry is predicated upon the
existence of strict governmental regulation, any material relaxation of
regulatory requirements governing medical waste disposal or of their enforcement
could result in a reduced demand for the Company's services and have a material
adverse effect on the Company's revenues and financial condition. The scope and
duration of existing and future regulations affecting the medical waste disposal
industry cannot be anticipated and are subject to changing political and
economic pressures.
8
<PAGE> 9
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table summarizes (in thousands) the Company's operations:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH, 31 SIX MONTHS ENDED MARCH, 31
---------------------------------------- ----------------------------------------
1999 1998 1999 1998
------------------ ------------------ ------------------ ------------------
% % % %
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue $ 4,384 100 $ 4,810 100 $ 9,110 100 $ 9,411 100
Cost of Services (3,091) (70.5) (3,500) (72.7) (6,445) (70.7) (6,939) (73.7)
Depreciation and amortization (446) (10.2) (309) (6.4) (891) (9.8) (604) (6.4)
Selling Gen. & Admin (751) (17.1) (773) (16.1) (1,485) (16.3) (1,541) (16.4)
Net income (loss) from operations 96 2.2 778 4.8 289 3.2 327 3.5
Net other income (exp.) and
net interest exp 526 12.0 (206) (4.3) 227 2.5 (427) (4.5)
Net income (loss) 622 14.2 24 .005 516 5.7 (100) (1.1)
</TABLE>
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31, 1998:
REVENUES decreased by $426,253, or 8.9%, to $4,384,323 during the three month
period ended March 31, 1999, from $4,810,576 for the three months period ended
March 31, 1998. This decrease was primarily a result of the Company selling off
certain routes in its Oklahoma territory.
COST OF SERVICES decreased by $410,270 or approximately 11.7%, to $3,090,635 for
the three months ended March 31, 1999, as compared to $3,500,905 for the three
month period ended March 31, 1998. The decrease is attributable to lower costs
at the Company's treatment facilities and a reduction in transportation cost, as
well as the sale of certain routes. Costs of services as a percentage of
revenues decreased to 70.5% during the three months ended March 31, 1999, as
compared to 72.8% during the three months ended March 31, 1999.
DEPRECIATION AND AMORTIZATION expense increased to $446,151 for the three months
ended March 31, 1999, from $308,423 from the three months ended March 31, 1998.
This increase is primarily due to management's decision to revise the useful
lives of certain incinerators, bag houses and other treatment technology to
reflect a more accurate estimated life, and due to increased purchases of
transportation and property, plant and equipment assets.
SELLING, GENERAL AND ADMINISTRATIVE expense decreased to $751,839 during the
three months ended March 31, 1999, from $773,416 during the three months ended
March 31, 1998. The decrease was primarily attributable to a reduction in bad
debt reserves, professional and legal fees. Selling, general and administrative
expenses increased as a percentage of revenue to 17.1% in the three months ended
March 31, 1999, as compared to 16.1% for the three months ended March 31, 1998
due to the decrease in revenue described above.
INTEREST EXPENSE increased by $77,008 or 50.8%, to $228,678 during the three
months ended March 31, 1999, as compared to $151,670 for the three months ended
March 31, 1998. This increase resulted from increased borrowings to purchase
capital equipment and cash advances from WSI.
9
<PAGE> 10
SIX MONTHS ENDED MARCH 31, 1999 COMPARED TO SIX MONTHS ENDED MARCH 31, 1998:
REVENUES decreased by $300,616, or 3.2%, to $9,110,494 during the six month
period ended March 31, 1999, from $9,411,110 for the six months period ended
March 31, 1998. This decrease is primarily a result of the Company selling off
certain routes in its Oklahoma territory.
COST OF SERVICES decreased by $493,905 or approximately 7.1%, to $6,444,973 for
the six months ended March 31, 1999, as compared to $6,938,878 for the six month
period ended March 31, 1998. The decrease is attributable to lower costs at the
Company's treatment facilities and a reduction in transportation cost, as well
as the sale of certain routes. Costs of services as a percentage of revenues
decreased to 70.7% during the three months ended March 31, 1999, as compared to
73.7% during the six months ended March 31, 1998.
DEPRECIATION AND AMORTIZATION expense increased to $891,375 for the six months
ended March 31, 1999, from $603,503 from the six months ended March 31, 1998.
This increase is primarily due to management's decision to revise the useful
lives of certain incinerators, bag houses and other treatment technology to
reflect a more accurate estimated life, and increased purchases of
transportation and property, plant and equipment assets.
SELLING, GENERAL AND ADMINISTRATIVE expense decreased to $1,484,525 during the
six months ended March 31, 1999, from $1,541,313 during the six months ended
March 31, 1998. The decrease was primarily attributable to a reduction in bad
debt reserves, and professional and legal fees. Selling, general and
administrative expenses decreased as a percentage of revenue to 16.3% in the six
months ended March 31, 1999, as compared to 16.4% for the six months ended March
31, 1998.
INTEREST EXPENSE increased by $156,309 or 51.9%, to $457,599 during the six
months ended March 31, 1999, as compared to $301,290 for the six months ended
March 31, 1998. This resulted from increased borrowings to purchase capital
equipment and cash advances from WSI.
LIQUIDITY AND CAPITAL RESOURCES
OPERATING ACTIVITIES:
At March 31, 1999, the Company's net working capital was a negative
$(6,163,559) compared to a negative net working capital of $(6,785,489) at
September 30, 1998. This increase in net working capital of $621,930 is due to
increased billing efficiency, which improved accounts receivable turnover and
collections. Net cash provided by operating activities increased to $(14,128)
during the six months ended March 31, 1999, as compared to $(60,345) during the
same period ended March 31, 1998. This increase in cash flow from operations is
primarily due to the decrease accounts receivable net of a decrease in accounts
payables and accrued liabilities.
Earnings before interest, taxes, depreciation and amortization, increased 132%
from the three months ended March 31, 1998 to $1,054,286 comparable to $804,920
to the similar period ended March 31, 1998. This increase consisted of the sale
of certain routes described above totaling approximately $800,000 and an overall
improvement in the operations of the Company.
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INVESTING ACTIVITIES:
During the six months ended March 31, 1999, the Company invested $487,332
as compared to $1,072,624 for the same time period ended 1998. This decrease is
primarily related to the Company constructing a new treatment technology in the
six months month ended 1998.
FINANCING ACTIVITIES:
The Company has historically funded its operations, acquisitions, and debt
service through cash advances from WSI. The Company's indebtedness currently
consists of amounts owed to WSI described below, insurance premiums that are
financed over the course of each fiscal year, debt incurred in connection with
the construction of the Chem-Clave unit, and the indebtedness incurred in
connection with the purchase of rolling stock.
Net cash provided by financing activities was $174,284 during the six months
ended March 31, 1999, as compared to net cash used in financing activities of
$1,102,860 for the same period ended March 31, 1998. The difference between the
periods results primarily in the repayment of bank overdrafts, notes payable,
long-term debt, and affiliated debt.
YEAR 2000 ISSUES
The Company has developed a plan to modify its information technology for
the year 2000 and has begun converting critical data processing systems. The
Company currently expects the project to be substantially completed by July 1999
at a cost not to exceed $50,000. The Company has an established plan in place to
address all hardware and software issues related to its business. Furthermore,
the business is not materially impacted by the interfaces with either customers
or vendors, nor do any individual customers comprise a large portion of the
company's total revenue. Software used in accounting is not at risk as the
Company has upgraded to new software, which is already year 2000 compliant. The
Company does not believe that the year 2000 presents an exposure as it relates
to the Company's key products and services.
The year 2000 plan comprises both a remediation plan for existing hardware
and software, while the backup plan is part of a larger project to upgrade the
Company's overall business information systems. The Company has conducted an
extensive search for potential issues, which could affect the business and
potentially has included in it issues relating to the year 2000. An assessment
of our production equipment resulted in no exposure to potentially not being
able to treat medical waste. Software used in accounting is not at risk as the
Company has upgraded to new software, which is already year 2000 compliant.
Company hardware is presently being tested, and adjustments are being made to it
as required. Testing plans have been designed and are being implemented on a
continuous basis for both hardware and software. The Company is in the process
of developing a compliance status from its significant vendors.
Management of the Company believes it has an effective program in place to
resolve the year 2000 issue in a timely manner. As noted above, the Company has
not yet completed all phases of the year 2000 program. As of today, and in event
that the company does not complete any additional phases, the company would be
unable to invoice a portion of its customers.
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Disruption in the economy generally resulting from year 2000 issues could
adversely also affect the Company. The Company could be subject to litigation or
fines for equipment shutdown or failure to properly date business records.
The Company will develop contingency plans for certain critical
applications. The contingency plans involve, among other actions, manual
workarounds, increasing parts and supplies inventories, conversion to the new
business information systems, and adjusting staffing strategies.
FROM TIME TO TIME THE COMPANY ISSUES FORWARD-LOOKING STATEMENTS RELATING TO
SUCH THINGS AS ANTICIPATED FINANCIAL PERFORMANCE, BUSINESS PROSPECTS,
ACQUISITION ACTIVITIES AND SIMILAR MATTERS.
A VARIETY OF FACTORS COULD CAUSE THE COMPANY'S ACTUAL RESULTS AND
EXPERIENCE TO DIFFER MATERIALLY FROM THE ANTICIPATED RESULTS OR OTHER EXCEPTIONS
EXPRESSED IN THE COMPANY'S FORWARD-LOOKING STATEMENTS. THE RISKS AND
UNCERTAINTIES THAT MAY AFFECT THE COMPANY'S BUSINESS, FINANCIAL CONDITION AND
RESULTS OF OPERATION INCLUDE DIFFICULTIES AND DELAYS IN COMPLETING AND
INTEGRATING BUSINESS ACQUISITIONS; DELAYS AND DIVERSION OF ATTENTION RELATING TO
PERMITTING AND OTHER REGULATORY COMPLIANCE; DIFFICULTIES AND DELAYS RELATING TO
MARKETING AND SALES ACTIVITIES; AND GENERAL UNCERTAINTIES ACCOMPANYING THE
EXPANSION INTO NEW GEOGRAPHIC SERVICE AREAS.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings -
The Company is subject to certain other litigation and claims arising in
the ordinary course of business. Management believes 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, results of
operations or net cash flows.
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
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(a) 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. 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).
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 3CI's Certificate of Incorporation as amended effective
June 13, 1995 (incorporated by reference to Exhibit 3.1 of 3CI's
Quarterly Report on Form 10-Q for the quarterly period ended June 30,
1995).
3.3. Amendment to 3CI's Certificate of Incorporation as amended effective
March 23, 1998 (incorporated by reference to Exhibit 3.3 of 3CI's
registration statement on Form S-1 (No. 333-48499), filed March 24,
1998).
3.4 Bylaws, effective May 14, 1995 (incorporated by reference to Exhibit
3.2 of 3CI's Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 1995).
3.5 Amendment of Bylaws effective October 1, 1998.
3.6. Certificate of Designations of 3CI's Series A Preferred Stock without
par value (incorporated by reference to Exhibit 3.6 of 3CI's
registration statement on Form S-1 (No. 333-48499), filed March 24,
1998).
3.7. Certificate of Designations of 3CI's Series B Preferred Stock without
par value (incorporated by reference to Exhibit 3.7 of 3CI's
registration statement on Form S-1 (No. 333-48499), filed March 24,
1998).
3.8. Certificate of Designations of 3CI's Series C Preferred Stock without
par value (incorporated by reference to Exhibit 3.8 of 3CI's
registration statement on Form S-1 (No. 333-48499), filed March 24,
1998).
4.1. Warrant dated September 11, 1998, issued to Klein Bank as escrow agent
with respect to 11,061 shares of Common Stock.
4.2. Escrow Agreement dated March 6, 1998 between 3CI and Klein Bank as
escrow agent (incorporated by reference to Exhibit 4.7 of 3CI's
registration statement on Form S-1 (No. 333-48499), filed March 24,
1998).
4.3. First Amendment to Escrow Agreement dated as of April 22, 1998,
between 3CI and Klein Bank.
4.4. Amended and Restated Secured Promissory Note dated October 1, 1998, in
the principal amount of $5,487,307.13 between 3CI and Waste Systems,
Inc.
4.5. Loan Agreement and Note Amendment dated December 18, 1998, by 3CI and
Waste Systems, Inc.
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(c) 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).
13
<PAGE> 14
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. 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 Note dated October 10, 1994, among 3CI Complete
Compliance Corporation, 3CI Acquisition Corp./A/MED and River Bay
Corporation (incorporated by reference to Exhibit 1.7 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/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. 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 10.21 of 3CI's Annual
Report on Form 10-K for the fiscal year ended September 30, 1995).
10.10. Settlement Agreement dated January 1996 between James Shepherd,
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 report on Form 10-K filed January
14, 1997).
10.11. Exchange Agreement between 3CI and Waste Systems, Inc. dated as of
June 24, 1997 (incorporated by reference to Exhibit 10.12 of 3CI's
registration statement on Form S-1 (No. 333-48499) filed March 24,
1998.
10.12. Stock Purchase and Note Modification Agreement between 3CI and Waste
Systems, Inc. dated as of February 19, 1998 (incorporated by reference
to Exhibit 10.13 of 3CI's registration statement on Form S-1 (No.
333-48499), filed March 24, 1998).
10.13. Employment Agreement dated May 30, 1998, between 3CI and Charles D.
Crochet (incorporated by reference to Exhibit 10.9 of 3CI's
registration statement on Form S-1 (No. 333-48499), filed March 24,
1998).
10.14. Agreement dated September 30, 1998 among 3CI, Waste Systems, Inc.
and Stericycle, Inc. regarding Section 203 of the Delaware General
Corporation Law.
10.15. Form of Indemnification Agreement dated August 26, 1998 entered into
between 3CI and Valerie Banner, David Schoonmaker, Charles Crochet,
Juergen Thomas, Dr. Werner Kook and Dr. Clemens Pues.
*11 Statement Re: Computation of Per Share Earnings (unaudited)
*27 Financial Data Schedule
* Filed herewith
(b) REPORTS ON FORM 8-K - None
14
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
3CI COMPLETE COMPLIANCE
CORPORATION
(Registrant)
Dated: May __, 1999
By:
---------------------------------------
Charles D. Crochet
President
(Principal Executive Officer)
Dated: May __, 1999
By:
---------------------------------------
Curtis W. Crane, CPA
Chief Financial Officer,
Secretary and Treasurer
(Principal Financial Officer, Principal
Accounting Officer)
15
<PAGE> 16
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
2.1. 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).
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 3CI's Certificate of Incorporation as amended effective
June 13, 1995 (incorporated by reference to Exhibit 3.1 of 3CI's
Quarterly Report on Form 10-Q for the quarterly period ended June 30,
1995).
3.3. Amendment to 3CI's Certificate of Incorporation as amended effective
March 23, 1998 (incorporated by reference to Exhibit 3.3 of 3CI's
registration statement on Form S-1 (No. 333-48499), filed March 24,
1998).
3.4 Bylaws, effective May 14, 1995 (incorporated by reference to Exhibit
3.2 of 3CI's Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 1995).
3.5 Amendment of Bylaws effective October 1, 1998.
3.6. Certificate of Designations of 3CI's Series A Preferred Stock without
par value (incorporated by reference to Exhibit 3.6 of 3CI's
registration statement on Form S-1 (No. 333-48499), filed March 24,
1998).
3.7. Certificate of Designations of 3CI's Series B Preferred Stock without
par value (incorporated by reference to Exhibit 3.7 of 3CI's
registration statement on Form S-1 (No. 333-48499), filed March 24,
1998).
3.8. Certificate of Designations of 3CI's Series C Preferred Stock without
par value (incorporated by reference to Exhibit 3.8 of 3CI's
registration statement on Form S-1 (No. 333-48499), filed March 24,
1998).
4.1. Warrant dated September 11, 1998, issued to Klein Bank as escrow agent
with respect to 11,061 shares of Common Stock.
4.2. Escrow Agreement dated March 6, 1998 between 3CI and Klein Bank as
escrow agent (incorporated by reference to Exhibit 4.7 of 3CI's
registration statement on Form S-1 (No. 333-48499), filed March 24,
1998).
4.3. First Amendment to Escrow Agreement dated as of April 22, 1998,
between 3CI and Klein Bank.
4.4. Amended and Restated Secured Promissory Note dated October 1, 1998, in
the principal amount of $5,487,307.13 between 3CI and Waste Systems,
Inc.
4.5. Loan Agreement and Note Amendment dated December 18, 1998, by 3CI and
Waste Systems, Inc.
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(c) 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).
</TABLE>
<PAGE> 17
<TABLE>
<S> <C>
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. 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 Note dated October 10, 1994, among 3CI Complete
Compliance Corporation, 3CI Acquisition Corp./A/MED and River Bay
Corporation (incorporated by reference to Exhibit 1.7 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/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. 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 10.21 of 3CI's Annual
Report on Form 10-K for the fiscal year ended September 30, 1995).
10.10. Settlement Agreement dated January 1996 between James Shepherd,
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 report on Form 10-K filed January
14, 1997).
10.11. Exchange Agreement between 3CI and Waste Systems, Inc. dated as of
June 24, 1997 (incorporated by reference to Exhibit 10.12 of 3CI's
registration statement on Form S-1 (No. 333-48499) filed March 24,
1998.
10.12. Stock Purchase and Note Modification Agreement between 3CI and Waste
Systems, Inc. dated as of February 19, 1998 (incorporated by reference
to Exhibit 10.13 of 3CI's registration statement on Form S-1 (No.
333-48499), filed March 24, 1998).
10.13. Employment Agreement dated May 30, 1998, between 3CI and Charles D.
Crochet (incorporated by reference to Exhibit 10.9 of 3CI's
registration statement on Form S-1 (No. 333-48499), filed March 24,
1998).
10.14. Agreement dated September 30, 1998 among 3CI, Waste Systems, Inc.
and Stericycle, Inc. regarding Section 203 of the Delaware General
Corporation Law.
10.15. Form of Indemnification Agreement dated August 26, 1998 entered into
between 3CI and Valerie Banner, David Schoonmaker, Charles Crochet,
Juergen Thomas, Dr. Werner Kook and Dr. Clemens Pues.
*11 Statement Re: Computation of Per Share Earnings (unaudited)
*27 Financial Data Schedule
</TABLE>
* Filed herewith
<PAGE> 1
EXHIBIT 11
3CI COMPLETE COMPLIANCE CORPORATION
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(UNAUDITED)
<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,
1999 1998 1999 1998
------------------ ------------------ ---------------- ----------------
<S> <C> <C> <C> <C>
Weighted average common shares outstanding
- basic earnings per share 9,197,658 9,160,147 9,200,138 9,106,659
Common stock issuable upon assumed conversion
- of stock options and warrant 7,750,000 -- 7,750,000 --
---------- ---------- ---------- ----------
Adjusted weighted average common shares
outstanding - diluted earnings per shares 16,947,658 9,160,147 16,950,138 9,106,659
========== ========== ========== ==========
Net income 662,656 23,728 516,466 (99,772)
========== ========== ========== ==========
Net income per share - basic 0.07 0.01 0.06 (0.01)
========== ========== ========== ==========
Net income per -share diluted 0.04 0.01 0.03 (0.01)
========== ========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-1-1998
<PERIOD-END> MAR-31-1999
<CASH> 345,074
<SECURITIES> 0
<RECEIVABLES> 3,037,100
<ALLOWANCES> 333,144
<INVENTORY> 72,547
<CURRENT-ASSETS> 3,991,133
<PP&E> 14,133,247
<DEPRECIATION> (4,598,025)
<TOTAL-ASSETS> 14,208,906
<CURRENT-LIABILITIES> 10,154,692
<BONDS> 0
0
77,500
<COMMON> 92,329
<OTHER-SE> 3,094,888
<TOTAL-LIABILITY-AND-EQUITY> 14,208,906
<SALES> 9,110,494
<TOTAL-REVENUES> 9,110,494
<CGS> (6,444,973)
<TOTAL-COSTS> (2,375,850)
<OTHER-EXPENSES> 684,444
<LOSS-PROVISION> (50)
<INTEREST-EXPENSE> (457,599)
<INCOME-PRETAX> 516,466
<INCOME-TAX> 0
<INCOME-CONTINUING> 516,466
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 516,466
<EPS-PRIMARY> 0.06
<EPS-DILUTED> 0.03
</TABLE>
