<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 December 31, 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
------------------------------------------------------
(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)
----------------------
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 February 12, 1999, was 9,763,825.
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3CI COMPLETE COMPLIANCE CORPORATION
INDEX
<TABLE>
<CAPTION>
Page
Number
------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of
December 31, 1998 (unaudited) and September 30, 1998.............. 3
Consolidated Statements of Operations for the three months
ended December 31, 1998 and 1997 (unaudited)...................... 4
Consolidated Statements of Cash Flows for the
three ended December 31, 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................................................ 14
Item 3. Defaults Upon Senior Securities...................................... 14
Item 4. Submission of Matters to a Vote
Of Security Holders............................................... 14
Item 5. Other Information.................................................... 14
Item 6. Exhibits and Reports on Form 8-K..................................... 14
SIGNATURES...................................................................... 21
</TABLE>
2
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3CI COMPLETE COMPLIANCE CORPORATION
CONSOLIDATED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
December 31, September 30,
1998 1998
------------ ------------
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ -- $ --
Restricted cash -- --
Accounts receivable, net allowances of $540,599 and $573,937
at December 31, 1998 and September 30, 1998, respectively 3,393,978 3,252,673
Inventory 60,109 96,771
Other current assets 284,344 737,372
------------ ------------
Total current assets 3,738,431 4,086,816
------------ ------------
Property, plant and equipment, at cost 14,208,382 13,780,158
Accumulated depreciation (4,289,090) (3,883,073)
------------ ------------
Net property, plant and equipment 9,919,292 9,897,085
------------ ------------
Excess of cost over net assets acquired, net of accumulated amortization of
$106,238 and $99,988 at December 31, 1998 and September 30, 1998, respectively 330,993 337,243
Other intangible assets, net of accumulated amortization of $242,294 and
$223,656 at December 31, 1998 and September 30, 1998, respectively 130,466 149,104
Other assets 128,909 148,092
------------ ------------
Total assets $ 14,248,091 $ 14,618,340
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Bank Overdrafts $ 464,122 $ 666,834
Notes payable 61,867 352,388
Current portion of long-term debt, unaffiliated lenders 1,473,585 1,619,889
Accounts payable 1,291,391 1,646,751
Accounts payable, affiliated companies -- 483,406
Accrued liabilities 937,739 1,098,634
Note payable majority shareholder 6,381,809 5,004,403
------------ ------------
Total current liabilities 10,610,513 10,872,305
------------ ------------
Long-term debt unaffiliated lenders, net of current portion 989,097 986,524
------------ ------------
Total liabilities 11,599,610 11,858,829
------------ ------------
Shareholders' Equity:
Preferred stock,$0 .01 par value, authorized 16,050,000 shares;
Issued and outstanding 7,750,000 at December 31, 1998
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
December 31, 1998 and September 30, 1998, respectively 92,329 92,329
Less cost of treasury stock (34,500 shares) (49,356) (44,516)
Additional Paid-in capital - common stock 20,259,779 20,259,779
Accumulated deficit (25,404,271) (25,298,081)
------------ ------------
Total Shareholders' equity 2,648,481 2,759,511
------------ ------------
Total liabilities and shareholders' equity (deficit) $ 14,248,091 $ 14,618,340
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
3CI COMPLETE COMPLIANCE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATION
(unaudited)
<TABLE>
<CAPTION>
For the For the
Three Months Ended Three Months Ended
December 31, December 31,
1998 1997
------------------ ------------------
<S> <C> <C>
Revenues $ 4,726,168 $ 4,600,534
Expenses:
Cost of Services 3,354,343 3,437,167
Depreciation and Amortization 445,222 294,979
Selling, general and administrative 732,680 767,959
------------------ ------------------
Net income (loss) from Operations $ 193,923 $ 100,429
Other Income (expense):
Interest and other expense, (300,113) (223,131)
------------------ ------------------
Loss before income taxes and accretion of stock put (106,190) (122,702)
------------------ ------------------
Income taxes -- --
------------------ ------------------
Net loss $ (106,190) $ (122,702)
================== ==================
Weighted average shares outstanding 9,202,521 9,153,833
================== ==================
Net loss per common share $ (0.01) $ (0.01)
================== ==================
</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
Three Months Ended Three Months Ended
December 31, December 31,
1998 1997
------------------ ------------------
<S> <C> <C>
Cash flow from operating activities:
Net loss (106,190) (122,702)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
(Gain) loss on disposal of fixed and intangible assets -- 34,888
Depreciation and amortization 445,222 294,979
Change in assets and liabilities, net
(Increase) decrease in accounts receivable, net (141,305) 567,713
(Increase) decrease in inventory 36,662 13,734
(Increase) decrease in prepaid expenses 472,043 263,386
Increase (decrease) in accounts payable (355,360) 500,602
Increase (decrease) in accounts payable, affiliated companies -- 18,000
Increase (decrease) in accrued liabilities (160,895) (772,579)
------------------ ------------------
Total adjustments to net loss 296,367 920,723
------------------ ------------------
Net cash provided by (used in) operating activities 190,177 798,021
------------------ ------------------
Cash flow from investing activities:
Proceeds from sale of property, plant and equipment -- 22,325
Purchase of property, plant and equipment (442,373) (261,690)
------------------ ------------------
Net cash used in investing activities (442,373) (239,365)
------------------ ------------------
Cash flow from financing activities:
Increase (decrease) in bank overdrafts (202,712) (132,704)
Proceeds from issuance of notes payable -- --
Principal reduction of notes payable (290,521) (178,731)
Proceeds from issuance of long-term debt, unaffiliated lenders 236,446
Reduction of long-term debt, unaffiliated lenders (380,177) (344,685)
Repurchase of treasury stock (4,840) (7,065)
Proceeds from issuance of note payable to majority shareholders 750,000 --
Unpaid interest added to note payable to majority shareholders 144,000 104,529
------------------ ------------------
252,196 (558,656)
------------------ ------------------
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
<PAGE> 6
3CI COMPLETE COMPLIANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 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 and southwestern United States. In February
1994, subsidiaries of 3CI acquired all the assets and business operations of
American Medical Transports Corporation (AMTC), an Oklahoma corporation, and
A/MED, Inc. (A/MED), a Delaware corporation. Both AMTC and A/MED were engaged in
businesses similar to that of 3CI. Waste Systems, Inc. (WSI), a Delaware
corporation, was the majority shareholder of both AMTC and A/MED (the
Companies). Additionally, in February 1994, WSI purchased 1,255,182 shares of
3CI common stock from American Medical Technologies (AMOT).
As a result of the transactions described above, WSI became the
majority shareholder of 3CI immediately following the acquisition of AMTC and
A/MED. For accounting purposes, AMTC and A/MED were considered the acquirer in a
reverse acquisition. The combined financial statements of AMTC and A/MED are the
historical financial statements of the Company for periods prior to the date of
the business acquisition. Historical combined shareholders' equity of AMTC and
A/MED has been retroactively restated for the equivalent number of 3CI shares
received for the assets and business operations of AMTC and A/MED, and the
combined accumulated deficit of AMTC and A/MED has been carried forward.
The accompanying consolidated financial statements have been prepared,
without audit, by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission. As applicable under such regulations,
certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. The Company believes that the presentation and
disclosures herein are adequate to make the information not misleading and the
financial statements reflect all adjustments 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, 1998, as filed with the Securities
and Exchange Commission.
6
<PAGE> 7
(2) Net Income (Loss) Per Common Share
The following table sets forth the computation of net income (loss) per common
share:
<TABLE>
<CAPTION>
December 31, December 31,
1998 1997
------------- -------------
<S> <C> <C>
Numerator:
Net income (loss) $ (106,190) $ (122,702)
------------- -------------
Denominator:
Denominator for basic earnings per share--weighted average shares 9,202,521 9,153,833
------------- -------------
Effect of dilutive securities:
Employee stock options -- --
Warrants -- --
Preferred shares -- --
------------- -------------
Dilutive potential common shares -- --
------------- -------------
Denominator for diluted earnings per share adjusted weighted average
shares and assumed conversions 9,202,521 9,153,833
------------- -------------
Basics earnings per share $ (0.01) $ (0.01)
------------- -------------
Diluted earnings per common share $ (0.01) $ (0.01)
------------- -------------
</TABLE>
Preferred stock, stock options and warrants, to purchase shares of
common stock outstanding during the three months ended December 31, 1998, were
not included in the computation of diluted earnings per common share in these
years because the Company had net losses and the effect would be antidilutive.
(3) Business Conditions
The Company has experienced significant cash short falls in recent
years 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. Although the Company's cash
flow from operations is positive for the quarter ending December 31, 1998, the
Company continues to experience cash shortages primarily as a result of using
current working capital to purchase capital assets and repay it's obligations as
they become due. The Company anticipates continued improvement in its cash flow
from operations, but will continue to experience limited liquidity due to the
Company's debt service requirements.
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, which owns 100% of
the capital stock of WSI, the Company's majority shareholder. To compete in the
medical waste disposal industry on a long-term basis and fully realize its
business strategy, the Company will require additional and continued financing
and other assistance from WSI, 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. If WSI fails to
advance funds to the Company or demands payment of its current indebtedness when
due, the Company would have limited financing sources and would likely be forced
to seek bankruptcy.
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
7
<PAGE> 8
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 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 as 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, is required to maintain minimum levels of net
worth and profitability, the same as the Restated 1995 Note.
In January 1999, the Company sold 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 32,500 shares at cost of $49,356 as of December 31,
1998, and an additional 2,000 shares for $3,421 as of February 11, 1999.
8
<PAGE> 9
(4) 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.
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.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The Company is engaged in the business of medical waste management
services in the southwestern and southeastern United States. The Company's
customers include regional medical centers, major hospitals, clinics, medical
and dental offices, veterinarians, pharmaceutical companies, retirement homes,
medical testing laboratories and other medical waste generators. Services
include collection, transportation, bar code identification and destruction by
controlled, high temperature incineration and alternative treatment
technologies.
RESULTS OF OPERATIONS
The following summarizes (in thousands) the Company's operations:
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
December 31, December 31,
1998 1997
<S> <C> <C>
Revenues $ 4,726 $ 4,600
Cost of Services 3,354 3,437
Depreciation and Amortization 445 295
Selling, General and Administrative Expense 733 768
------------ ------------
Net Income from Operations 194 100
------------ ------------
Interest Expense 229 150
Other Income (Expense) net (71) (73)
------------ ------------
Net Income (Loss) $ (106) $ (123)
============ ============
</TABLE>
9
<PAGE> 10
Three months ended December 31, 1998 compared to three months ended December 31,
1997:
Revenues increased by $125,634, or 2.7%, to $4,726,168 during the three months
period ended December 31, 1998, from $4,600,534 for the three month period ended
December 31, 1997. This increase is primarily attributable to the Company
focusing on higher margin generators of medical waste, offset by lower service
fees that resulted from increasing price competition in the industry.
Cost of services decreased $82,824, or 2.4%, to $3,354,343 during the three
months ended December 31, 1998, compared to $3,437,167 for three month period
ended December 31, 1997. The principal reasons for the decrease were due to
lower operating costs at the Company's treatment facilities and from lowered
transportation costs. Cost of revenues as a percentage of revenues decreased to
71.0% during the three months ended December 31, 1998 as compared to 74.7%
during the three months ended December 31, 1997.
Depreciation and amortization expense increased to $445,222 for the three months
ended December 31, 1998, from $294,979 from three months ended December 31,
1997. The increase is due to management decision to revise the useful lives of
certain incinerators and bag houses to reflect shorter estimated useful lives.
Selling, general and administrative expenses decreased to $732,680 during the
three months ended December 31, 1998, from $767,959 during the three months
ended December 31, 1997. The decrease was primarily attributable to the
reduction in professional and legal fees. Selling, general and administrative
expenses decreased as a percentage of revenue to 15.5% in the three months ended
December 31, 1998, as compared to 16.7% for the three months ended December 31,
1997.
Interest expense increased by $79,297, or 53.0%, to $228,921 during the three
months ended December 31, 1998 as compared to 149,624 for the months period
ended December 31, 1997. This increase resulted from increased borrowings to
purchase capital equipment and from cash advances from WSI.
LIQUIDITY AND CAPITAL RESOURCES
Operating Activities:
Cash flows provided by operating activities decreased to $190,177
during the three months ended December 31, 1998, as compared to $798,021 during
the same period ended December 31, 1997. This decrease in cash from operations
is primarily due to the decrease in accounts payables and accrued liabilities.
The Company's net working capital deficit was ($6,872,082), compared to a
deficit of ($6,785,489) at September 30, 1998. Net cash provided by operating
activities decreased to $190,177 during the three months ended December 31,
1998, as compared to $798,021 the three months ended December 31, 1997. This
decrease in cash from operations is primarily due to the decrease in accounts
payables and accrued liabilities.
Investing Activities:
During the first fiscal quarter ending December 31, 1998, the Company
invested $442,373 for transportation, machinery and equipment, computer
equipment and software, and other fixed assets.
During the fiscal year ended September 30, 1998, the Company purchased
a Chem-Clav unit for its Springhill, Louisiana, facility during the fiscal year
1998. The financing was completed through a lease purchase agreement.
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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-Clav unit, and the indebtedness
incurred in connection with the purchase of rolling 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 month, 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 as 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.
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 shall not exceed $50,000.
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 in the range of $100,000 to $200,000. The Company has an established
plan to address all hardware and software issues related to its business. The
year 2000 plan comprises both a plan for existing hardware and software, and a
larger project to upgrade the Company's overall business information systems.
The Company is conducting an extensive search for other potential year 2000
issues that could affect its business. Software used in accounting is not at
risk as the Company has upgraded to new software, which is already year 2000
compliant. The Company's business is not materially impacted by interfaces with
either customers or vendors. The Company does not believe that the year 2000
presents an exposure as it relates to the Company's key products and services.
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The Company has not yet completed all phases of its year 2000 program. As of
today, and if the Company does not complete any additional phases, the Company
would be unable to invoice a portion of its customers.
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 intends to 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.
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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 -
INDEX TO EXHIBITS
(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).
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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).
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, Juergen 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).
14
<PAGE> 15
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.
* Filed herewith
(b) Reports on Form 8-K - The Company filed a Form 8-K in October 1998 to
report the acquisition of WSI, by Stericycle.
15
<PAGE> 16
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: February 15, 1999
By: /s/ CHARLES D. CROCHET
------------------------------------------
Charles D. Crochet
President
(Principal Executive Officer)
Dated: February 15, 1999
By: /s/ CURTIS W. CRANE
------------------------------------------
Curtis W. Crane, CPA
Chief Financial Officer,
Secretary and Treasurer
(Principal Financial Officer, Principal
Accounting Officer )
16
<PAGE> 17
INDEX TO EXHIBITS
<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).
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, Juergen 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.
</TABLE>
* Filed herewith
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1999
<PERIOD-END> DEC-31-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 3,934,577
<ALLOWANCES> 540,599
<INVENTORY> 60,109
<CURRENT-ASSETS> 3,738,431
<PP&E> 14,208,382
<DEPRECIATION> 4,289,090
<TOTAL-ASSETS> 14,248,091
<CURRENT-LIABILITIES> 10,610,513
<BONDS> 0
0
77,500
<COMMON> 92,329
<OTHER-SE> 2,478,652
<TOTAL-LIABILITY-AND-EQUITY> 14,248,091
<SALES> 4,726,168
<TOTAL-REVENUES> 4,726,168
<CGS> 3,354,343
<TOTAL-COSTS> 3,354,343
<OTHER-EXPENSES> 1,249,044
<LOSS-PROVISION> 50
<INTEREST-EXPENSE> 228,921
<INCOME-PRETAX> (106,190)
<INCOME-TAX> 0
<INCOME-CONTINUING> (106,190)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (106,190)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>