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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, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-11097
3CI COMPLETE COMPLIANCE CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 76-0351992
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
910 Pierremont, #312 Shreveport, LA. 71106
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(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 13, 1999 was 9,197,325.
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3CI COMPLETE COMPLIANCE CORPORATION
I N D E X
<TABLE>
<CAPTION>
PAGE
NUMBER
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<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of
June 30, 1999 (unaudited) and September 30, 1998........................ 3
Consolidated Statements of Operations for the three months and
nine months ended June 30, 1999 and 1998 (unaudited).................... 4
Consolidated Statements of Cash Flows for the
nine months ended June 30, 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>
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ITEM 1. FINANCIAL STATEMENTS
3CI COMPLETE COMPLIANCE CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
1999 1998
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<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 298,184 $ --
Restricted cash -- --
Accounts receivable, net allowances of $311,539 and $573,937
at June 30, 1999 and September 30, 1998, respectively 2,576,350 3,252,673
Inventory 67,875 96,771
Other current assets 605,875 737,372
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Total current assets 3,548,284 4,086,816
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Property, plant and equipment, at cost 14,113,812 13,780,158
Accumulated depreciation (4,925,802) (3,883,073)
------------ ------------
Net property, plant and equipment 9,188,010 9,897,085
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Excess of cost over net assets acquired, net of accumulated amortization of
$128,738 and $99,988 at June 30, 1999 and September 30, 1998, respectively 428,493 337,243
Other intangible assets, net of accumulated amortization of $279,571 and
$223,656 at June 30, 1999 and September 30, 1998, respectively 93,190 149,104
Other assets 94,270 148,092
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Total assets $ 13,352,247 $ 14,618,340
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Bank Overdrafts $ -- $ 666,834
Notes payable 305,942 352,388
Current portion of long-term debt, unaffiliated lenders 838,917 1,619,889
Accounts payable 970,617 1,646,751
Accounts payable, affiliated companies 1,275 483,406
Accrued liabilities 785,550 1,098,634
Note payable majority shareholder 6,082,843 5,004,403
------------ ------------
Total current liabilities 8,985,144 10,872,305
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Long-term debt unaffiliated lenders, net of current portion 1,247,583 986,524
------------ ------------
Total liabilities 10,232,727 11,858,829
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Shareholders' Equity:
Preferred stock,$0.01 par value, authorized 16,050,000 shares;
Issued and outstanding 7,750,000 at June 30, 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
June 30, 1999 and September 30, 1998, respectively 92,329 92,329
Less cost of treasury stock (35,500 shares) (55,777) (44,516)
Additional Paid-in capital - common stock 20,259,779 20,259,779
Accumulated deficit (24,926,811) (25,298,081)
------------ ------------
Total Shareholders' equity 3,119,520 2,759,511
------------ ------------
Total liabilities and shareholders' equity (deficit) $ 13,352,247 $ 14,618,340
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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3CI COMPLETE COMPLIANCE CORPORATION
PROFORMA CONSOLIDATED STATEMENTS OF OPERATION
(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,
1999 1998 1999 1998
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<S> <C> <C> <C> <C>
Revenues $ 4,457,973 $ 4,715,964 $ 13,568,396 $ 14,127,077
Expenses:
Cost of Services 3,183,389 3,535,882 9,628,364 10,474,755
Depreciation and Amortization 432,820 326,249 1,324,198 929,651
Selling, general and administrative 717,532 610,133 2,202,055 2,151,511
------------------ ------------------ ----------------- -----------------
Net income (loss) from Operations $ 124,232 $ 243,700 $ 413,779 $ 571,160
Other Income (expense):
Net interest expense, (225,940) (157,312) (681,986) (457,168)
Other income (expense) (43,422) (49,673) 639,477 (177,047)
------------------ ------------------ ----------------- -----------------
Total other income (expense) (269,362) (206,985) (42,509) (634,215)
------------------ ------------------ ----------------- -----------------
Net income (loss) $ (145,130) $ 36,715 $ 371,270 $ (63,055)
================== ================== ================= =================
Weighted average number of shares outstanding
common shares outstanding - basic 9,197,325 9,116,026 9,199,432 9,143,519
================== ================== ================= =================
Weighted average number of shares outstanding
common shares outstanding - diluted 9,197,325 9,116,026 16,949,432 9,143,519
================== ================== ================= =================
Earnings per share - basic $ (0.02) $ 0.01 $ 0.04 $ (0.01)
================== ================== ================= =================
Earnings per share - diluted $ (0.02) $ 0.01 $ 0.02 $ (0.01)
================== ================== ================= =================
</TABLE>
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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,
1999 1998
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<S> <C> <C>
Cash flow from operating activities:
Net income (loss) 371,270 (63,055)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
(Gain) loss on disposal of fixed and intangible assets (819,976) --
Depreciation and amortization 1,324,198 929,651
Unpaid Interest included in long-term debt
Change in assets and liabilities, net
(Increase) decrease in restricted cash -- --
(Increase) decrease in accounts receivable, net 676,323 746,200
(Increase) decrease in inventory 28,896 (14,949)
(Increase) decrease in prepaid expenses 131,497 (278,768)
(Increase) decrease in other assets 53,822 --
Increase (decrease) in accounts payable (676,134) 346,339
Increase (decrease) in accounts payable, affiliated companies 1,275 67,500
Increase (decrease) in accrued liabilities (313,084) (1,354,855)
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Total adjustments to net loss 406,817 441,118
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Net cash provided by (used in) operating activities 778,087 378,063
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Cash flow from investing activities:
Proceeds from sale of property, plant and equipment 681,099 98,932
Purchase of property, plant and equipment (511,581) (1,411,360)
----------------- -----------------
Net cash used in investing activities 169,518 (1,312,428)
----------------- -----------------
Cash flow from financing activities:
Increase (decrease) in bank overdrafts (666,834) 198,722
Proceeds from issuance of notes payable 918,533 1,088,116
Principal reduction of notes payable (964,979) (663,522)
Proceeds from issuance of long-term debt 342,572 632,948
Reduction of long-term debt, unaffiliated lenders (862,486) (1,091,676)
Repurchase of treasury stock (11,261) (35,105)
Proceeds from issuance of note payable to majority shareholders 1,732,579 500,000
Interest added to note payable to majority shareholders 141,570 304,882
Reduction to note payable to majority shareholders (1,279,115) --
----------------- -----------------
Net cash provided (used) in financing activities (649,421) 934,365
----------------- -----------------
Net decrease in cash and cash equivalents 298,184 --
----------------- -----------------
Cash and cash equivalents, beginning of period -- --
----------------- -----------------
Cash and cash equivalents, end of period 298,184 $ --
================= =================
</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, 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 nine-month period ended
June 30, 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 nine months ended June 30, 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
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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 was approximately
$5,488,000, which includes the then outstanding balance under the 1995 Note and
certain amounts owed 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, which at June 30, 1999 these levels have been met. As
of June 30, 1999, the outstanding balance of this promissory note is
approximately $5,788,000.
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 was 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. As of June 30, 1999, the
outstanding balance of this promissory note is approximately $295,000.
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 June 30,
1999. The company has ceased the repurchase of common stock.
On March 15, 1999, the Company received notification from NASDAQ Stock
Market, Inc. of failure to meet the minimum bid price requirement for continued
listing of its common stock for trading on the NASDAQ SmallCap Market. A hearing
took place on July 29, 1999, before a Nasdaq panel, which will determine whether
3CI's common stock will be delisted. Based upon recent communications from
Nasdaq, 3CI's believes that a substantial likelihood exists that 3CI's common
stock will be delisted. In the event of delisting, 3CI has been advised by
Nasdaq that if a delisting were
7
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to occur the Company will automatically have its common stock listed for trading
on the Nasdaq Bulletin Board.
(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.
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.
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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 June 30, Nine Months Ended June 30,
--------------------------- --------------------------
------------------ --------------------- --------------------- --------------------
1999 1998 1999 1998
------------------ --------------------- --------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
% % % %
Revenue $ 4,458 100 $ 4,716 100 $13,568 100 $14,127 100
Cost of Services (3,183) (71.4) (3,536) (75.0) (9,628) (70.9) (10,475) (74.1)
Depreciation and amortization (433) (9.7) (326) (6.9) (1,324) (9.8) (930) (6.6)
Selling Gen. & Admin. (718) (16.1) (610) (12.9) (2,202) (16.2) (2,151) (15.2)
Net income (loss) from operations 124 2.8 244 5.2 414 3.1 571 4.1
Other Exp. & Net interest exp. (269) (6.0) (207) (4.4) (43) (.004) (634) (4.5)
Net income (loss) (145) (3.2) 37 .008 371 2.7 (63) (.04)
</TABLE>
THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THREE MONTHS ENDED JUNE 30, 1998:
REVENUES decreased by $257,991, or 5.5%, to $4,457,973 during the three month
period ended June 30, 1999, from $4,715,964 for the three months period ended
June 30, 1998. This decrease was primarily a result of the Company selling off
certain routes in its Oklahoma territory.
COST OF SERVICES decreased by $352,493 or approximately 10.0%, to $3,183,389 for
the three months ended June 30, 1999, as compared to $3,535,882 for the three
month period ended June 30, 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 71.4% during the three months ended June 30, 1999, as
compared to 75.0% during the three months ended June 30, 1998.
DEPRECIATION AND AMORTIZATION expense increased to $432,820 for the three months
ended June 30, 1999, from $326,249 from the three months ended June 30, 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 increased to $717,532 during the
three months ended June 30, 1999, from $610,133 during the three months ended
June 30, 1998. The increase was primarily attributable to a one time adjustment
to bad debt reserve for $130,000 included in the three month ended June 30,
1998. Selling, general and administrative expenses increased as a percentage of
revenue to 16.1% in the three months ended June 30, 1999, as compared to 12.9%
for the three months ended June 30, 1998 due to the decrease in revenue
described above.
INTEREST EXPENSE increased by $69,488 or 43.8%, to $228,045 during the three
months ended June 30, 1999, as compared to $158,557 for the three months ended
June 30, 1998. This increase resulted from increased borrowings to purchase
capital equipment and an increase in its borrowing rate from WSI.
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NINE MONTHS ENDED JUNE 30, 1999 COMPARED TO NINE MONTHS ENDED JUNE 30, 1998:
REVENUES decreased by $558,617, or 4.0%, to $13,568,396 during the nine month
period ended June 30, 1999, from $14,127,077 for the nine month period ended
June 30, 1998. This decrease is primarily a result of the Company selling off
certain routes in its Oklahoma territory.
COST OF SERVICES decreased by $846,391 or approximately 8.1%, to $9,628,364 for
the nine months ended June 30, 1999, as compared to $10,474,755 for the nine
month period ended June 30, 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 71.0% during the nine months ended June 30, 1999, as
compared to 74.1% during the nine months ended June 30, 1998.
DEPRECIATION AND AMORTIZATION expense increased to $1,324,198 for the nine
months ended June 30, 1999, from $929,651 from the nine months ended June 30,
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 increased to $50,544, to $2,202,055
for the nine months ended June 30, 1999, as compared to $2,151,511 for the nine
months ended June 30, 1998. This increase was primarily attributable an increase
in sales and marketing, and a one time adjustment to bad debt reserve for
$130,000, included in the three month ended June 30, 1998. Selling, general and
administrative expenses increased as a percentage of revenue to 16.2% in the
nine months ended June 30, 1999, as compared to 15.2% for the nine months ended
June 30, 1998.
INTEREST EXPENSE increased by $225,797 or 49.1%, to $685,645 during the nine
months ended June 30, 1999, as compared to $459,848 for the nine months ended
June 30, 1998. This increase resulted from increased borrowings to purchase
capital equipment and an increase in its borrowing rate from WSI.
LIQUIDITY AND CAPITAL RESOURCES
OPERATING ACTIVITIES:
At June 30, 1999, the Company's net working capital was a negative
$(5,436,860) compared to a negative net working capital of $(6,785,489) at
September 30, 1998. This increase in net working capital of $1,348,629 is due to
increased billing efficiency, which improved accounts receivable turnover and
collections. As a result of this improvement net cash provided by operating
activities increased to $778,087 during the nine months ended June 30, 1999, as
compared to $378,063 during the same period ended June 30, 1998. This increase
in cash flow from operations is primarily due to the decrease accounts
receivable and a decrease in accounts payables and accrued liabilities.
Earnings before interest, taxes, depreciation and amortization increased
$1,053,690, or approximately 79.6% for the nine months ended June 30, 1999 to
$2,377,545, as compared to $1,323,764 for the same period ended June 30, 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.
INVESTING ACTIVITIES:
During the nine months ended June 30, 1999, the Company invested
$511,581 as compared to $1,411,360 for the same time period ended 1998. This
decrease is primarily related to the Company constructing new treatment
technology in the nine months month ended 1998.
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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, 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.
Net cash used by financing activities was $(649,421) during the nine months
ended June 30, 1999, as compared to net cash provided in financing activities of
$934,365 for the same period ended June 30, 1998. The difference between the
period's results primarily in the repayment of bank overdrafts, notes payable,
long-term debt, and the interest of 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 October
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.
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.
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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
12
<PAGE> 13
(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):
<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).
</TABLE>
13
<PAGE> 14
<TABLE>
<S> <C>
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
(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: August 13, 1999
By: /s/ CHARLES D. CROCHET
--------------------------------
Charles D. Crochet
President
(Principal Executive Officer)
Dated: August 13, 1999
By: /s/ CURTIS W. CRANE
--------------------------------
Curtis W. Crane, CPA
Chief Financial Officer,
Secretary and Treasurer
(Principal Financial Officer, and
Principal Accounting Officer)
15
<PAGE> 16
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).
</TABLE>
<PAGE> 17
<TABLE>
<S> <C>
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 THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1999 1998 1999 1998
------------------ ------------------ ------------------ -----------------
<S> <C> <C> <C> <C>
Weighted average common shares outstanding
- basic earnings per share 9,197,325 9,116,026 9,199,432 9,143,519
Common stock issuable upon assumed conversion
- of stock options and warrant -- -- 7,750,000 --
------------------ ------------------ ------------------ -----------------
Adjusted weighted average common shares
outstanding - diluted earnings per shares 9,197,325 9,116,026 16,949,432 9,143,519
================== ================== ================== =================
Net income (145,130) 36,715 371,270 (63,055)
================== ================== ================== =================
Net income per share - basic (0.02) 0.01 0.04 (0.01)
================== ================== ================== =================
Net income per - share diluted (0.02) 0.01 0.02 (0.01)
================== ================== ================== =================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 298,184
<SECURITIES> 0
<RECEIVABLES> 2,887,888
<ALLOWANCES> 311,538
<INVENTORY> 67,875
<CURRENT-ASSETS> 3,548,284
<PP&E> 14,113,812
<DEPRECIATION> 4,925,804
<TOTAL-ASSETS> 13,352,247
<CURRENT-LIABILITIES> 8,985,144
<BONDS> 0
0
77,500
<COMMON> 92,329
<OTHER-SE> 2,949,691
<TOTAL-LIABILITY-AND-EQUITY> 13,352,247
<SALES> 13,568,396
<TOTAL-REVENUES> 13,568,396
<CGS> (10,836,288)
<TOTAL-COSTS> (2,233,615)
<OTHER-EXPENSES> 558,472
<LOSS-PROVISION> 50
<INTEREST-EXPENSE> (685,645)
<INCOME-PRETAX> 371,270
<INCOME-TAX> 0
<INCOME-CONTINUING> 371,270
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 371,270
<EPS-BASIC> .04
<EPS-DILUTED> .02
</TABLE>
