<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K / A-1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED):
OCTOBER 15, 1996
MED/WASTE, INC.
---------------
(Exact Name of registrant as specified in charter)
DELAWARE 0-22294 65-0297759
-------- ------- ----------
(State or other (Commission (I.R.S. Employer
Jurisdiction of File Number) Identification
Incorporation) Number)
3890 NW 132ND STREET, SUITE K, OPA LOCKA, FLORIDA 33054
--------------------------------------------------------
(Address of principal executive offices and Zip Code)
Registrant's telephone number, including area code: (305) 688 - 3931
NOT APPLICABLE
-------------------------------------------------------------
(Former Name or former address, if changed since last report)
1
<PAGE> 2
Item 7. Financial Statements and Exhibits:
( a ) The following financial statements of Chambers Medical
Technologies of South Carolina, Inc. ("Chambers" or the
"Company") are included herein:
(i) Report of independent certified public accountants
(ii) Balance sheet as of June 30, 1996 (unaudited) and
December 31, 1995
(iii) Statement of operations for the six months ended June
30, 1996 and 1995 (unaudited) and for the years ended
December 31, 1995 and 1994
(iv) Statements of shareholders equity for the years ended
December 31, 1995 and 1994
(v) Statements of cash flows for the six months ended
June 30, 1996 and 1995 (unaudited) and for the years
ended December 31, 1995 and 1994
(vi) Notes to financial statements
Financial statements of Chambers as of December 31, 1995 and
for the years ended December 31, 1995 and 1994.
( b ) Pro forma financial information.
1. Med/Waste, Inc.'s ("Med/Waste") pro forma condensed
consolidated balance sheet as of June 30, 1996
(unaudited).
2. Med/Waste's pro forma condensed consolidated
statement of operations for the year ended December
31, 1995 (unaudited).
3. Med/Waste's pro forma condensed consolidated
statement of operations for the six months ended June
30, 1996 (unaudited).
( c ) Exhibit -- none.
2
<PAGE> 3
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.
Med/Waste, Inc.
(Registrant)
By: /s/ Daniel A. Stauber
------------------------
Dated: November 12, 1996 Daniel A. Stauber
President and Chief
Executive Officer
3
<PAGE> 4
CHAMBERS MEDICAL TECHNOLOGIES OF SOUTH CAROLINA, INC.
(A WHOLLY-OWNED SUBSIDIARY OF CHAMBERS DEVELOPMENT COMPANY, INC.)
FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Certified Public Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Financial Statements
Balance Sheet as of June 30, 1996 (unaudited) and December 31, 1995 . . . . . . . . . . . . . . . . . . . . 6
Statements of Operations for the six months ended June 30, 1996 and 1995 (unaudited)
and the years ended December 31, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Statements of Shareholder's Equity for the six months ended June 30, 1996 (unaudited) and
years ended December 31, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Statements of Cash Flows for the six months ended June 30, 1996 and 1995 (unaudited) and
the years ended December 31, 1995 and 1994 and . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
4
<PAGE> 5
Report of Independent Certified Public Accountants
Board of Directors
Med/Waste, Inc.
We have audited the accompanying balance sheet of Chambers Medical Technologies
of South Carolina, Inc., (a wholly-owned subsidiary of Chambers Development
Company, Inc.) as of December 31, 1995, and the related statements of
operations, shareholder's equity, and cash flows for each of the two years
ended in the period ended December 31, 1995. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Chambers Medical Technologies
of South Carolina, Inc. at December 31, 1995, and the results of its operations
and its cash flows for each of the two years ended in the period December 31,
1995 in conformity with generally accepted accounting principles.
BDO Seidman, LLP
Miami, Florida
November 7, 1996
5
<PAGE> 6
CHAMBERS MEDICAL TECHNOLOGIES OF SOUTH CAROLINA, INC.
(A WHOLLY-OWNED SUBSIDIARY OF CHAMBERS DEVELOPMENT COMPANY, INC.)
BALANCE SHEET
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
---------------- ------------------
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash $ 6,686 $ 271,130
Accounts receivable, less allowance of $196,000
and $256,000 1,180,915 1,032,871
Inventories 2,150 1,838
Prepaid expenses 17,610 2,169
-------------- ---------------
Total current assets 1,207,361 1,308,008
Property and equipment, net (Notes 1 and 2) 2,412,937 2,376,718
Other assets 33,838 39,179
-------------- --------------
$ 3,654,136 $ 3,723,905
============== ==============
Liabilities and Shareholder's Equity
Current Liabilities:
Accounts payable - trade $ 344,288 $ 434,112
Current portion of note payable 86,271 71,360
Due to parent and affiliates (Note 7) 25,803,061 24,859,224
Other accrued liabilities 99,719 13,205
-------------- --------------
Total current liabilities 26,333,339 25,377,901
-------------- --------------
Note payable, less current portion - (Note 3) 13,103 67,763
-------------- --------------
Commitment and Contingency (Notes 4 and 8)
Shareholder's equity:
Common stock, $1 par value, 5,000 shares
authorized and 1,000 shares issued and outstanding 1,000 1,000
(22,693,306) (21,722,759)
-------------- --------------
Deficit
Total shareholder's equity (22,692,306) (21,721,759)
-------------- --------------
$ 3,654,136 $ 3,723,905
============== ==============
</TABLE>
See accompanying notes to financial statements.
6
<PAGE> 7
CHAMBERS MEDICAL TECHNOLOGIES OF SOUTH CAROLINA, INC.
(A WHOLLY-OWNED SUBSIDIARY OF CHAMBERS DEVELOPMENT COMPANY, INC.)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the six months ended For the years ended
June 30, December 31,
1996 1995 1995 1994
------------- ------------- ------------- -------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues $ 3,487,467 $ 4,383,765 $ 8,497,678 $8,617,269
------------- ------------- ------------- -------------
Costs and expenses:
Operating costs (Note 7) 2,673,858 3,720,130 7,042,203 7,408,968
Administrative and selling expenses (Note 7) 506,714 902,397 1,449,536 1,863,528
Impaired asset write-down (Note 6) - - - 6,978,004
Depreciation and amortization (Note 1) 106,185 89,592 191,978 1,261,647
------------- ------------- ------------- -------------
3,286,757 4,712,119 8,683,717 17,512,147
------------- ------------- ------------- -------------
Operating income (loss) 200,710 (328,354) (186,039) (8,894,878)
------------- ------------- ------------- -------------
Other expenses:
Interest expense (Note 7) 1,077,975 1,089,181 2,159,945 703,013
Other, net 93,282 118,117 180,028 310,334
------------- ------------- ------------- -------------
Net loss $ (970,547) $(1,535,652) $(2,526,012) $(9,908,225)
============= ============= ============= =============
</TABLE>
See accompanying notes to financial statements.
7
<PAGE> 8
CHAMBERS MEDICAL TECHNOLOGIES OF SOUTH CAROLINA, INC.
(A WHOLLY-OWNED SUBSIDIARY OF CHAMBERS DEVELOPMENT COMPANY, INC.)
STATEMENTS OF SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
Common Total Shareholder's
Shares Stock Deficit Equity
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Balance at December 31, 1993 1,000 $ 1,000 $ (9,288,522) $ (9,287,522)
Net loss for the year - - (9,908,225) (9,908,225)
------------- ------------- ------------- -------------
Balance at December 31, 1994 1,000 $ 1,000 $(19,196,747) $(19,195,747)
Net loss for the year - - (2,526,012) (2,526,012)
------------- ------------- ------------- -------------
Balance at December 31, 1995 1,000 $ 1,000 $(21,722,759) $(21,721,759)
Net loss for the six months (unaudited) - - (970,547) (970,547)
------------- ------------- ------------- -------------
Balance at June 30, 1996 (unaudited) 1,000 $ 1,000 $(22,693,306) $(22,692,306)
============= ============= ============= =============
</TABLE>
See accompanying notes to financial statements.
8
<PAGE> 9
CHAMBERS MEDICAL TECHNOLOGIES OF SOUTH CAROLINA, INC.
(A WHOLLY-OWNED SUBSIDIARY OF CHAMBERS DEVELOPMENT COMPANY, INC.)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the six months ended For the years ended
June 30, December 31,
1996 1995 1995 1994
------------ ------------ ------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) $(970,547 $(1,535,652) $(2,526,012) $(9,908,225)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Write-down of fixed assets - - - 6,978,004
Depreciation and amortization 106,185 89,592 191,978 1,261,647
Provision for doubtful accounts receivable 6,676 75,243 245,116 20,778
Loss on disposal of fixed assets - - 45,020 155,889
Changes in operation assets and liabilities:
(Increase) decrease in accounts receivable (154,720) 132,689 121,777 (326,149)
(Increase) decrease in inventories (312) 549 141 91
(Increase) decrease in prepaid expenses (15,441) (14,001) 2,222 4,660
Decrease (increase) in other assets 5,341 (24,658) (30,179) 490,415
(Decrease) increase in accounts payable/accrued liabilities (3,310) 92,472 (87,776) (224,863)
Increase in due to parent company and affiliates (net) 943,837 1,718,353 2,682,797 3,842,220
--------- --------- ----------- ----------
Net cash (used in) provided by operating activities (82,291) 534,587 645,084 2,294,467
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of fixed assets - - - 42,053
Purchases of fixed assets (142,404) (317,299) (369,736) (118,517)
--------- ---------- ---------- -----------
Net cash used in investing activities (142,404) (317,299) (369,736) (76,464)
yCASH FLOWS FROM FINANCING ACTIVITIES
Payments of note payable (39,749) (39,749) (79,500) (2,259,499)
---------- ---------- ---------- ----------
Net cash used in financing activities (39,749) (39,749) (79,500) (2,259,499)
---------- ---------- ---------- ----------
(Decrease) increase in cash (264,444) 177,539 195,848 (41,496)
Cash at beginning of year 271,130 75,282 75,282 116,778
--------- ---------- ---------- ----------
Cash at end of year $ 6,686 $ 252,821 $ 271,130 $ 75,282
========= ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
9
<PAGE> 10
CHAMBERS MEDICAL TECHNOLOGIES OF SOUTH CAROLINA, INC.
NOTES TO FINANCIAL STATEMENTS
(FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
AND UNAUDITED WITH RESPECT TO THE SIX MONTHS ENDED
JUNE 30, 1996 AND 1995)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION, DESCRIPTION OF BUSINESS
Chambers Medical Technologies of South Carolina, Inc. ("Chambers" or the
"Company") is a wholly-owned subsidiary of Chambers Development Company, Inc.
("CDC"). On June 30, 1995, Chambers Development Company, Inc. merged into and
became a wholly-owned subsidiary of USA Waste Services, Inc., ("USA Waste").
On October 15, 1996, Med/Waste, Inc. ("Med/Waste"), a Delaware corporation,
through its wholly-owned subsidiary Safety Disposal System of South Carolina,
Inc., a South Carolina corporation ("SDS"), purchased certain assets of the
Company. The assets purchased consisted primarily of real estate and
improvements comprising a waste incineration facility, together with all of the
equipment, vehicles, machinery, supplies and inventory associated with such
incinerator facility (the "Facility"). The Company operated the Facility as a
waste disposal incinerator facility for solid, medical and special waste prior
to the closing. SDS intends to operate the Facility in a similar manner. The
purchase price for the Facility amounted to $3.8 million, payable $1.18 million
in cash of which SDS received credits aggregating $620,074 against the cash
portion of the purchase price for roof renovations, repairs and taxes and the
issuance of a $2.62 million four (4) year non-interest bearing promissory note.
The consideration paid by Med/Waste for the Facility was determined in
arms-length negotiations between representatives of the USA Waste and
Med/Waste. The cash portion of the purchase price was paid out of cash on hand
and available borrowings under Med/Waste's working capital line of credit.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
REVENUE RECOGNITION
The Company recognizes revenues as services are provided.
PROPERTY AND EQUIPMENT
Property and equipment is carried at cost. Depreciation is computed using the
straight-line method over the following estimated useful lives:
<TABLE>
<CAPTION>
Years
-----
<S> <C>
Building and improvements 7-30
Machinery and equipment 3-12
Containers 3-12
Furniture and fixtures 3-10
</TABLE>
10
<PAGE> 11
CHAMBERS MEDICAL TECHNOLOGIES OF SOUTH CAROLINA, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
AND UNAUDITED WITH RESPECT TO THE SIX MONTHS ENDED
JUNE 30, 1996 AND 1995)
Depreciation and amortization of property and equipment was $191,978 and
$1,261,647 for the years ended December 31, 1995 and 1994 (audited),
respectively and $106,185 and $89,592 for the six months ended June 30, 1996
and 1995 (unaudited), respectively
INVENTORIES
Inventories, consisting of parts and supplies, are stated at the lower of cost
or market. Cost is determined using the first-in, first-out method.
INCOME TAXES
The Company has filed consolidated Federal and state income tax returns with
its parent and does not have a tax sharing agreement. Accordingly, no tax
(benefit) has been allocated to the Company. Taxes are computed on a separate
return basis.
INTERCOMPANY ALLOCATIONS
Through December 31, 1995, CDC's policy was to allocate 100% of corporate
overhead expenses based on a weighted average of third party revenues at the
subsidiary level. After June 30, 1995, USA Waste decentralized its corporate
activities and discontinued the corporate overhead allocation, since it was no
longer necessary. In addition, imputed interest on intercompany balances was
based on a rate of 9.0% and 6.6% in 1995 and 1994 (audited), respectively, and
9.0% for the six months ended June 30, 1996 (unaudited).
NEW ACCOUNTING PRONOUNCEMENTS
The Company adopted the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 121 "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of" ("SFAS 121") during the year ended
December 31, 1995 which was issued in March 1995. SFAS 121 establishes
accounting standards for the impairment of long-lived assets, certain
identifiable intangibles, and goodwill related to those assets to be held and
used and for long-lived assets, and certain identifiable intangibles to be
disposed of.
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation
("SFAS 123"). SFAS 123 prescribes a fair value based method of determining
compensation expense related to stock-based awards granted to employees or
associates. The recognition provisions of SFAS 123 are optional; however,
entities electing not to adopt SFAS 123 are required to make disclosures of pro
forma net income and earnings per share as if SFAS 123 had been applied. The
Company does not plan to adopt the recognition provisions of SFAS 123.
11
<PAGE> 12
CHAMBERS MEDICAL TECHNOLOGIES OF SOUTH CAROLINA, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
AND UNAUDITED WITH RESPECT TO THE SIX MONTHS ENDED
JUNE 30, 1996 AND 1995)
UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
The financial statements as of June 30, 1996 and for the six months ended June
30, 1996 and 1995 are unaudited, and have been prepared on the same basis as
the audited financial statements included herein. In the opinion of
management, such unaudited financial statements include all adjustments
consisting of normal recurring accruals, necessary to present fairly the
information set forth therein. Results for interim periods are not indicative
of results to be expected for an entire year.
2. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------ ------------
<S> <C> <C>
Incinerators $3,864,422 $3,801,496
Equipment 795,176 811,573
Building 183,625 183,625
Land 73,576 73,576
Furniture and fixtures 100,554 100,554
------------ ------------
Total 5,017,353 4,970,824
Less accumulated depreciation 2,604,416 2,594,106
----------- ------------
Property and equipment, net $ 2,412,937 $ 2,376,718
=========== ===========
</TABLE>
3. NOTE PAYABLE
Note payable consists of one unsecured non-interest bearing note. The note was
issued in connection with the Company's purchase of a waste transfer station in
Philadelphia, Pennsylvania. The note, which calls for sixty equal installments
of $6,625, matures on August 15, 1997. The Company is imputing interest at 9%
per year.
4. COMMITMENTS AND CONTINGENCIES
ENVIRONMENTAL MATTERS
The Company is subject to extensive and evolving federal, state, and local
environmental laws and regulations that have been enacted in response to
technological advances and the public's increased concern over environmental
issues. As a result of changing governmental attitudes in this area,
management anticipates that the Company will continually modify or replace
facilities and alter methods of operation. The majority of the expenditures
necessary to comply with the environmental laws and regulations are made in the
normal course of business. Although the Company, to the best of its knowledge,
is in compliance in all material respects with the laws and regulations
affecting its operations, there is no assurance that the Company will not have
to expend substantial amounts for compliance in the future.
12
<PAGE> 13
CHAMBERS MEDICAL TECHNOLOGIES OF SOUTH CAROLINA, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
AND UNAUDITED WITH RESPECT TO THE SIX MONTHS ENDED
JUNE 30, 1996 AND 1995)
INSURANCE
The Company self-insures certain of its comprehensive general liability and
environmental risks, while maintaining third-party coverage to protect against
catastrophic loss. The Company has not incurred significant fines, penalties,
or liabilities for pollution or environmental liabilities at any of its
facilities; however, the Company's operating results could be adversely
affected in the future in the event of uninsured losses.
5. RETIREMENT PLAN
The Company sponsors a defined contribution 401(k) plan covering substantially
all of its employees. Employer contributions are discretionary. There were no
employer contributions in 1995 and 1994.
6. IMPAIRED ASSET WRITE-DOWN
The Company recorded net charges of $6,978,004 for asset impairments in 1994.
The charge made in the fourth quarter was to reduce the carrying value of the
Company's medical, special, and municipal waste incinerator facility to its
estimated net realizable value. The amount of the charge was measured as the
difference between the carrying value of long-term assets, principally property
and equipment and intangible assets, and the estimated fair value of the assets
based on the present value of future cash flows discounted at 12%. The
adjustment was based on a review conducted in the fourth quarter which
determined that there had been a permanent decline in the value of the facility
based on the conclusion that the Company could not recover its investment
through future operations, given current and forecasted pricing, waste mix, and
capacity trends as well as recently proposed regulations with respect to
medical waste incinerator facilities and general declines in the value of waste
incinerator businesses.
7. RELATED PARTY TRANSACTIONS
The following reflects the Company's transaction with related parties:
<TABLE>
<CAPTION>
June 30, December 31,
----------------------------------------------------
1996 1995 1995 1994
--------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
Sales to affiliates $ 16,787 $ 14,239 $ 28,834 $ 11,460
Interest to parent 1,077,975 1,089,181 2,159,945 703,017
Corporate overhead allocation to parent 28,880 349,213 349,213 850,867
Landfill fees to affiliates 193,843 489,639 865,949 984,897
Royalties to affiliates 79,021 98,621 170,000 172,345
</TABLE>
The amounts due to parent and affiliates arise from expenses paid by the parent
and charges for services by the affiliates on behalf of the Company.
On August 7, 1996, the Company renewed a contract for two years with an
affiliate of USA Waste (the former parent) to provide disposal services for ash
and plastic checks for a base rate of $23 and $35 per ton, respectively.
13
<PAGE> 14
CHAMBERS MEDICAL TECHNOLOGIES OF SOUTH CAROLINA, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
AND UNAUDITED WITH RESPECT TO THE SIX MONTHS ENDED
JUNE 30, 1996 AND 1995)
8. LITIGATION
The Company owns and operates a medical, special and municipal waste
incineration facility in Hampton, South Carolina. The facility is permitted to
incinerate 200 tons of waste per day. The Company is implementing a plan to
maximize utilization of the facility in response to changing market conditions.
The Company is currently focusing its marketing on higher priced, higher fuel
value special wastes such as pharmaceuticals, petrochemicals and scrap tires.
State legislation restricts the facility's permitted incineration capacity to
the greater of (i) 50 tons per day of medical waste or (ii) on a monthly basis,
1/12 of the estimated amount of medical waste generated within the State of
South Carolina within one year. The Company has undertaken a constitutional
challenge to the state's imposition of the limitation, as well as to certain
provisions of the South Carolina Infectious Waste Management Act and the
regulations promulgated thereunder. At the trial level the Company was
successful in its challenge to certain fee requirements under the regulations;
however, the Company was not successful in having the volume limitation ruled
unconstitutional. The Company believes that this legislative restriction will
not materially affect operations, since the Company anticipates offsetting this
reduction in medical waste incineration by increasing its special waste
incineration activities.
The Company filed a motion for a stay pending appeal of the implementation of
the volume limitation, which stay pending appeal was granted. However, such
stay was later lifted by the Court and on October 1, 1996, the 50 tons per day
of medical waste cap went into effect. The Company is pursuing the appeal of
the volume limitation.
The Company is subject to various legal proceedings, claims and liabilities
which arise in the ordinary course of its business. In the opinion of
management, the amount of ultimate liability with respect to these matters will
not materially affect the financial position of the Company.
9. CONCENTRATIONS OF CREDIT RISK
The Company sells its services principally to customers on the east coast of
the United States. The Company performs ongoing credit evaluations of its
customers and generally does not require collateral for outstanding accounts
receivable. Allowances are estimated for potential credit losses.
14
<PAGE> 15
MED/WASTE, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The accompanying condensed consolidated pro forma financial statements
illustrate the effect of the acquisition of certain assets of Chambers Medical
Technologies of South Carolina, Inc., ("Chambers" or the "Company") on
Med/Waste, Inc.'s and subsidiaries' ("Med/Waste") consolidated financial
position and results of operations. On October 15, 1996, Med/Waste purchased
certain assets of the Company. The assets purchased consisted primarily of
real estate and improvements comprising a waste incineration facility, together
with all of the equipment, vehicles, machinery, supplies and inventory
associated with such incinerator facility (the "Facility"). The Company
operated the Facility as a waste disposal incinerator facility for solid,
medical and special waste prior to the closing. Med/Waste intends to operate
the Facility in a similar manner. The purchase price for the Facility amounted
to $3.8 million, payable $1.18 million in cash of which Med/Waste received
credits aggregating $620,074 against the cash portion of the purchase for roof
renovations, repairs and taxes and the issuance of a $2.62 million four (4)
year non-interest bearing promissory note. The cash portion of the purchase
price was paid out of cash on hand and available borrowings under Med/Waste's
working capital line of credit.
The condensed consolidated balance sheet as of June 30, 1996 is based on the
historical balance sheets of the Company and Med/Waste as of that date and
assumes the acquisition took place on that date. The condensed consolidated
statements of operations for the six months ended June 30, 1996 and for the
year ended December 31, 1995 are based on the historical statements of
operations of the Company and Med/Waste for those periods. The pro forma
condensed consolidated statements of operations assumes the acquisition took
place on January 1, 1995.
The pro forma condensed consolidated financial statements may not be indicative
of the actual results of the acquisition. In particular, the pro forma
condensed consolidated financial statements are based on management's current
estimate of the allocation of the purchase price, the actual allocation of
which may differ.
The accompanying condensed consolidated pro forma financial statements should
be read in connection with the historical financial statements of Med/Waste,
Inc., and Subsidiaries and Chambers Medical Technologies of South Carolina,
Inc.
15
<PAGE> 16
MED/WASTE, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
MED/WASTE CHAMBERS ADJUSTMENTS PRO FORMA
--------- -------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 94,233 $ 94,233
Fixed income investments 511,833 511,833
Accounts receivable, net 1,518,861 1,518,861
Notes receivables from franchisees - current portion 1,135,237 1,135,237
Inventories 227,053 $2,150 229,203
Prepaid expenses 266,731 266,731
--------- ---------- ----------
Total current assets 3,753,948 2,150 3,756,098
Notes receivable from franchisees - less current 827,828 827,828
Operating and office equipment, net of
accumulated depreciation 1,491,535 2,412,937 622,371 (1) 4,526,843
Intangible assets - net of accumulated amortization 420,004 420,004
Other assets 161,486 161,486
Cost in excess of net assets acquired 99,792 (1) 99,792
------------ ------------ ------------
Total assets $ 6,654,801 $ 2,415,087 $ 9,792,051
============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $1,366,899 620,074 (1) $1,986,973
Line of credit 559,926 (1) 559,926
Current portion of long term debt 191,000 (1) 191,000
Current portion of capital lease obligations 162,754 162,754
Notes payable 464,599 464,599
Deferred revenue 213,050 213,050
Customer deposits 37,501 37,501
------------ ------------
Total current liabilities 2,244,803 3,615,803
Notes payable and long-term debt 441,892 1,766,250 (1) 2,208,142
Shareholders' equity 3,968,106 2,415,087 (2,415,087) (1) 3,968,106
------------ ------------ ------------
Total liabilities and shareholders' equity $6,564,801 $2,415,087 $9,792,051
============ ============ ============
</TABLE>
See Notes to Pro Forma Consolidated Financial Statements (Unaudited).
16
<PAGE> 17
MED/WASTE, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
MED/WASTE CHAMBERS ADJUSTMENTS PRO FORMA
------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues $8,667,305 $3,487,467 $12,154,772
------------- ------------- -------------
Operating costs and expenses:
Operating costs 6,339,419 2,780,043 (100,391) (2) 9,019,071
Selling and administrative 2,203,205 506,714 1,996 (3) 2,711,915
------------- ------------- -------------
Total operating costs and expenses 8,542,624 3,286,757 11,730,986
------------- ------------- -------------
Operating income 124,681 200,710 423,786
Other, net 59,694 (1,171,257) 961,666 (4) (149,897)
------------- ------------- -------------
Net income (loss) $184,375 ($970,547) $273,889
============= ============= =============
Net income (loss) per share $0.10 $0.14
============= =============
Weighted average shares outstanding 1,895,420 1,895,420
============= =============
</TABLE>
See Notes to Pro Forma Consolidated Financial Statements (Unaudited).
17
<PAGE> 18
MED/WASTE, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
MED/WASTE CHAMBERS ADJUSTMENTS PRO FORMA
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues $14,078,986 $8,497,678 $22,576,664
------------- ------------- -------------
Operating costs and expenses:
Operating costs 10,443,851 7,234,181 (579,994) (2) 17,098,038
Selling and administrative 3,712,603 1,449,536 5,162,139
Nonrecurring loss 1,622,872 1,622,872
Amortization of intangibles 117,119 3,992 (3) 121,111
------------- ------------- -------------
Total operating costs and expenses 15,896,445 8,683,717 24,004,160
------------- ------------- -------------
Operating income (1,817,459) (186,039) (1,427,496)
Other, net 68,533 (2,339,973) 1,927,327 (4) (344,113)
------------- ------------- -------------
Net (loss) (1,748,926) (2,526,012) (1,771,609)
============= ============= =============
Net (loss) per share ($0.93) ($0.94)
============= =============
Weighted average shares outstanding 1,878,337 1,878,337
============= =============
</TABLE>
18
<PAGE> 19
MED/WASTE, INC. AND SUBSIDIARIES
Notes to Pro Forma Condensed Consolidated Financial Statements
June 30, 1996
(Unaudited)
Note A - Pro forma Adjustments
The pro forma adjustments to the condensed consolidated balance sheet are as
follows:
<TABLE>
<S> <C> <C>
(1) To reflect the acquisition of certain assets of Chambers
Medical Technologies of South Carolina, Inc. ("Chambers" or the "Company")
and the allocation of the purchase price on the basis of the fair
values of the assets acquired. The components of the purchase
price and its allocation to the assets of the Company
are as follows:
Components of purchase price:
Cash from borrowings under Med/Waste's credit facility $559,926
Note payable 2,620,000
Accounts payable and accrued expenses:
Pre-acquisition contingencies (substantially roof renovations) $551,000
Taxes and fees payable 69,074 620,074
------- ---------
Purchase price 3,800,000
Less discount imputed at 10% (662,750)
---------
3,137,250
Allocation of purchase price:
Increase in property and equipment (622,371)
Parent's equity in Company (2,415,087)
----------
Cost in excess of net assets acquired $99,792
==========
</TABLE>
19
<PAGE> 20
MED/WASTE, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
Note B - The pro forma adjustments to the condensed consolidated statements
of operations are as follows:
<TABLE>
<CAPTION>
Year Ended Six
December 31, Months Ended
1995 June 30, 1996
----------- --------------
<S> <C> <C>
(2) Adjustments to operating costs:
Elimination of royalty expense allocation to affiliates ($170,000) ($70,000)
Elimination of management fee to parent (349,213) -
Decrease in casual labor (84,000) (42,000)
Increase in depreciation 23,219 11,609
----------- -----------
($579,994)
===========
The decrease in casual labor results from reducing the number of
shifts for which casual labor is used.
The increase in depreciation results from the increase in equipment.
(3) Adjustment to amortization of intangibles:
Amortization of excess cost over fair value of net assets acquired
over 25 years $3,992 $1,996
----------- -----------
(4) Adjustments to other (net):
Elimination of Parent intercompany interest allocation ($2,159,945) ($1,077,975)
Interest expense on line of credit (at an average rate of 10%) 55,993 27,996
Interest expense on note payable (at an average rate of 10%) 176,625 88,313
----------- -----------
($1,927,327) ($ 961,666)
=========== ===========
</TABLE>
20
