<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10 - QSB
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
- - ---
ACT OF 1934
For the quarterly period ended March 31, 1996.
---------------
OR
TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
- - ---
OF 1934
For the transition period from to .
------- -------
COMMISSION FILE NUMBER: 0-22294
-------------
MED/WASTE, INC.
- - --------------------------------------------------------------------------------
(Exact Name of Small Business Issuer as
Specified in its Charter)
Delaware 65-0297759
- - --------------------------------------------------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
3890 N.W. 132nd Street, Suite K, Opa Locka, Florida 33054
- - --------------------------------------------------------------------------------
(Address of principal executive offices)
(305) - 688 - 3931
- - --------------------------------------------------------------------------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
--- ---
The number of shares outstanding of the registrant's common stock $.001 par
value as of May 8, 1996 was 1,892,826.
<PAGE> 2
MED/WASTE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<S> <C> <C>
March 31, December 31,
1996 1995
------- -------
ASSETS
Current assets:
Cash and cash equivalents $211,633 $120,917
Fixed income investments 761,518 750,238
Accounts receivable, net of allowances of $82,000
and $74,000 1,173,255 1,047,689
Current portion of notes receivable from franchisees 1,135,237 980,894
Inventories 205,202 192,595
Prepaid expenses 192,549 176,643
--------------------------------------
Total current assets 3,679,394 3,268,976
Notes receivable from franchisees, net of current
portion, less allowance of $51,000 and $51,000 917,428 792,697
Operating and office equipment, net 1,490,425 1,539,639
Intangible assets, net of accum. amortization 430,699 441,393
Other assets 154,658 133,818
--------------------------------------
Total assets $6,672,604 $6,176,523
======================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $1,354,363 $1,279,227
Current portion of capital lease obligations 142,705 144,390
Notes payable (note 4) 419,599 154,599
Deferred revenue on franchise sales 422,631 360,312
Customer deposits 50,032 33,267
--------------------------------------
Total current liabilities 2,389,330 1,971,795
--------------------------------------
Capital lease obligations, less current portion 426,982 435,702
--------------------------------------
Shareholders' equity:
Preferred stock, $.10 par value; 1,000,000 shares
authorized; none outstanding -- --
Common stock, $.001 par value; 10,000,000 shares
authorized; 1,904,650 and 1,903,588
shares issued and outstanding 1,904 1,904
Additional paid-in capital 5,882,837 5,882,837
Deficit (1,997,792) (2,085,058)
--------------------------------------
3,886,949 3,799,683
Less cost of treasury stock: 11,824 shares (30,657) (30,657)
--------------------------------------
Total shareholders' equity 3,856,292 3,769,026
--------------------------------------
Total liabilities and shareholders' equity $6,672,604 $6,176,523
======================================
</TABLE>
See accompanying summary of accounting policies and notes to financial
statements.
2
<PAGE> 3
MED/WASTE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<S> <C> <C>
Three Months ended March 31,
--------------------------------
1996 1995
--------------------------------
Revenues $4,414,071 $3,165,447
Costs and expenses:
Operating costs 3,199,018 2,346,899
Administrative and selling expenses 1,131,806 1,002,430
Amortization of intangibles 10,694 38,636
--------------------------------
Total 4,341,518 3,387,965
--------------------------------
Operating profit (loss) 72,553 (222,518)
Interest income, net 14,713 19,605
--------------------------------
Net Income (loss) $87,266 $(202,913)
================================
Net income (loss) per share $.05 $(.11)
================================
Weighted average shares outstanding 1,892,826 1,869,174
================================
</TABLE>
See accompanying summary of accounting policies and notes to financial
statements.
3
<PAGE> 4
MED/WASTE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<S> <C> <C>
Three Months ended
March 31,
--------------------------------
1996 1995
--------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $87,266 $ (202,913)
Adjustments to reconcile net income (loss) to net cash used
in operating activities, net of effects of
acquisitions:
Depreciation and amortization 69,058 98,608
Provision for doubtful notes and accounts receivable 8,000 22,500
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (133,566) 29,841
Increase in notes receivable from franchisees (279,074) (67,686)
(Increase) decrease in inventories (12,607) 8,975
(Increase) decrease in prepaid expenses (15,906) 4,114
Increase in other assets (20,840) (667)
Increase in accounts payable and
accrued liabilities 75,136 111,833
Increase (decrease) in deferred revenues on
franchise sales 62,319 (92,095)
Increase in customer deposits 16,765 29,184
--------------------------------
Net cash used in operating activities (143,449) (58,306)
CASH FLOWS FROM INVESTING ACTIVITIES
(Purchase) sale of fixed income investments (11,280) 99,266
Purchases of operating and office equipment (9,150) (84,741)
Cash and expenses paid to acquire RCA operating
equipment and non competition agreements -- (35,000)
--------------------------------
Net cash used in investing activities (20,430) (20,475)
</TABLE>
4
<PAGE> 5
MED/WASTE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
<TABLE>
<S> <C> <C>
Three Months ended March 31,
-----------------------------------
1996 1995
-----------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from line of credit $265,000 --
Repayment of loan to director -- $250,000
Payments on installment notes and capital lease obligations (10,405) (19,703)
-----------------------------------
Net cash provided by financing activities 254,595 230,297
-----------------------------------
Increase in cash and cash equivalents 90,716 151,516
Cash and cash equivalents at beginning of year 120,917 145,023
-----------------------------------
Cash and cash equivalents at end of year $211,633 $296,539
===================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for interest $12,330 $5,517
===================================
Capital lease obligations incurred for trucks -- $196,150
===================================
</TABLE>
See accompanying summary of accounting policies and notes to financial
statements
5
<PAGE> 6
MED/WASTE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996
(Unaudited)
1. INTERIM FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements have been prepared
in accordance with the instructions to Form 10-QSB and do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments considered necessary for a fair presentation have been
included.
Med/Waste, Inc. (the "Company") provides medical waste management and
commercial cleaning services through its wholly owned subsidiaries, Safety
Disposal System, Inc. ("SDS") and The Kover Group, Inc. ("Kover").
Operating results for the three-month period ended March 31, 1996 are not
necessarily indicative of the results that may be expected for the full year
ending December 31, 1996. The significant accounting principles are the same
as those used to prepare the annual audited financial statements. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's annual report on Form 10-KSB for the year
ended December 31, 1995.
2. ACCOUNTING POLICIES
Fixed Income Investments. All of the Company's fixed income investments are
debt securities available for sale. Investments in debt securities are stated
at cost, which approximates fair value.
Notes Receivable from Franchisees. The notes from Kover's franchisees bear
interest at 1% per month, generally from the time Kover provides the franchisee
with commercial cleaning accounts for servicing. Principal and interest
payments are generally deducted from the monthly amounts Kover owes the
franchisee for providing cleaning services. Each franchise agreement is
subject to termination for nonpayment of the franchise note. The notes are
personally guaranteed by the individuals who own the franchise and have terms
of two years or less.
Deferred Revenue on Franchise Sales. Revenues from commercial cleaning are
recognized as services are performed and supplies are provided. Revenues from
the sale of franchises are recognized after the Company has completed the
requirements of the agreement. The portion of the franchise sale fees related
to providing new commercial cleaning accounts to the franchisees is included in
the balance sheet as deferred revenue until the requirements of the agreement
have been fulfilled.
6
<PAGE> 7
The gross amounts billed by Kover for commercial cleaning services are included
in revenues and the gross amounts due franchisees for providing the cleaning
services (100% of such revenues less royalties and management fees of 10% to
15%) are included in operating costs.
Revenue from On-Site Equipment Sales. Revenues from sales of on-site autoclave
equipment to large quantity generators are recognized upon installation for
those sales that qualify as sales-type capital leases as defined by Statement
of Financial Standards No. 13 "Accounting for Leases". Revenues from operating
leases are recognized over their lease term.
3. NOTES PAYABLE
Notes payable consist of the following at March 31:
1996
------------
Line of credit $349,599
Notes payable - Broward Floor 70,000
------------
Total $419,599
============
In September 1995, the Company entered into an agreement with a bank, whereby
the Company can borrow up to $400,000 under a revolving line of credit.
Interest is payable monthly with principal payable upon demand. The interest
rate on the line of credit is prime plus 1%. Substantially all of the
Company's assets have been collateralized for the loan.
The notes payable - Broward Floor consist of two unsecured notes of $35,000
each which bear interest at 11 percent per annum and mature on July 1, 1996
and January 1, 1997, respectively.
4. NET INCOME (LOSS) PER COMMON SHARE
Net income (loss) per common share is computed based on the weighted average
number of common and dilutive common equivalent shares outstanding during the
periods presented. The effect of dilutive stock options and warrants (common
stock equivalents) has been included in the computation for the periods
presented.
5. SUBSEQUENT EVENT - SALE OF KOVER'S PITTSBURGH FRANCHISE
On April 1, 1996, the Company assigned Kover's Pittsburgh master franchise and
sold certain notes receivables from franchises, accounts receivable, inventory,
and operating and office equipment related to Kover's Pittsburgh franchise for
$270,000. The $270,000 sales price was receivable $135,000 in cash at closing
and the receipt of a $135,000 promissory note. The note earns interest at a
rate of 7.415 percent per annum. Interest and principal payments of $1,710 is
receivable monthly from May 1, 1997 to April 30, 2001, with a final payment of
$94,872 due on May 1, 2001. Interest in the amount of $4,050 was prepaid at
closing. Due to Kover's 1995 impairment loss, no gain or loss will be recorded
on the sale of Kover's Pittsburgh franchise during 1996.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 COMPARED WITH MARCH 31, 1995
REVENUES. Revenues for the three months ended March 31, 1996 amounted to
$4,414,071 as compared to $3,165,447 for the comparable period in 1995.
Kover's revenues were $3,397,240 in 1996, as compared to only $2,494,010 in
1995, for a 36% increase. Kover's increase in revenues was due to higher sales
volume. Revenues for SDS totaled $1,016,831 in 1996, a 51% increase over 1995
revenues of $671,437. The higher SDS revenues are attributable to on-site
equipment sales, as well as significant volume increases in other medical waste
disposal categories.
OPERATING COSTS. Consolidated operating costs as a percent of revenue
decreased to 72.5% in the three months ended March 31, 1996 from 74.1% in 1995.
Operating costs for SDS decreased to 65.1% as a percent of revenue in 1996
from 70.2% in 1995 due to higher margins on on-site equipment sales and overall
cost reduction efforts taken by the Company during 1996. Kover operating costs
decreased to 74.7% in 1996 from 75.1% in 1995 due to cost reductions taken in
1996.
ADMINISTRATIVE AND SELLING EXPENSES. Administrative and selling expenses as a
percentage of revenue decreased to 25.5% in 1996 from 31.7% in 1995. For SDS,
including corporate expenses, the expense percentage decreased to 38.7% of
revenue in 1996 from 68.4% of revenue in 1995 as a result of cost reduction
efforts taken in 1996. Kover's expense percentage remained unchanged.
AMORTIZATION OF INTANGIBLES. Amortization of intangibles decreased $27,942 to
$10,694 in 1996 from $38,636 in 1995 primarily due to the impairment loss
recorded in 1995.
OPERATING PROFIT (LOSS). The Company recorded an operating profit of $72,553
in 1996 as compared to an operating loss of $(222,518) in 1995. The
significant improvement in operating earnings was primarily due to the on-site
equipment sales of SDS which have higher margins and the increased sales volume
of Kover.
NET INTEREST INCOME. Interest income, net of interest expense decreased $4,892
to $14,713 in 1996 from $19,605 in 1995. The decrease was due to the use of
cash for the funding of operations, as well as increased interest expense on
additional borrowings made by the Company.
NET INCOME (LOSS). The Company had net income of $87,266 in 1996 as compared
to a net (loss) of $(202,913) in 1995. The significant improvement in net
income was primarily due to the on-site equipment sales of SDS which have
higher margins, increased sales volume of Kover and SDS' reduced administrative
expenses as a percentage of revenues. The 1996 net income was a 143%
improvement over 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital at March 31, 1996 amounted to $1,290,064. The
Company's sources of cash during 1996 has been the assignment of equipment
leases and borrowings under the Company's line of credit. During the three
months ended March 31, 1996, cash increased by $90,716 to $211,633. Operating
activities used $143,449 of cash, principally due to Kover's increased notes
receivables from franchisees and accounts receivables, offset partially by net
income of $87,266, net of depreciation and provision for doubtful accounts.
The cash generated by net income was primarily due to the sale by SDS of
on-site equipment and
8
<PAGE> 9
related assignment of notes to a leasing company. Financing activities
provided $254,595 of cash, principally due to borrowings under the line of
credit.
In September 1995, the Company entered into an agreement with a bank, whereby
the Company can borrow up to $400,000 under a revolving line of credit. At
March 31, 1996, the Company had $349,599 in borrowing under the line.
Substantially all of the Company's assets have been collateralized by the loan.
During the first quarter of 1996, the Company entered into an agreement with a
leasing company, whereby the Company will assign with recourse two of the four
on-site equipment leases it obtained. The terms of the agreement call for a
rate of prime plus two percent and the collateralizing of certain on-site
equipment. The Company received $290,483, under this arrangement.
On April 1, 1996, the Company assigned Kover's Pittsburgh master franchise and
sold certain notes receivables from franchises, accounts receivable, inventory,
and operating and office equipment related to Kover's Pittsburgh franchise for
$270,000. The $270,000 sales price was receivable $135,000 in cash at closing
and the receipt of a $135,000 promissory note. The note earns interest at a
rate of 7.415 percent per annum. Interest and principal payments of $1,710 is
receivable monthly from May 1, 1997 to April 30, 2001, with a final payment of
$94,872 due on May 1, 2001. Interest in the amount of $4,050 was prepaid at
closing.
NEW FASB PRONOUNCEMENTS. The Company does not presently intend to adopt in
1996 the fair value based method as encouraged by Statement of Financial
Accounting Standards (FAS) No. 123, Accounting for Stock Based Compensation.
Accordingly, there will be no effect to the financial statements.
9
<PAGE> 10
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is not involved in any litigation that would give rise to material
liability against the Company or its subsidiaries.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS. None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit 11 - Statement re: computation of per share
loss
Exhibit 27 - Financial Statement Schedule (for SEC use only).
(b) Reports on Form 8-K. None.
10
<PAGE> 11
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Med/Waste, Inc.
Date: May 8, 1996 /s/ Daniel A. Stauber
----------- ---------------------
Daniel A. Stauber, President
and Chief Executive Officer
Date: May 8, 1996 /s/ Michael D. Elkin
------------ ---------------------
Michael D. Elkin, Vice President
and Chief Financial Officer
11
<PAGE> 1
Med/Waste Inc. and Subsidiaries
Exhibit 11 - Computation of Earnings (Loss) Per Share
Three Months Ended March 31, 1996 and 1995
(Unaudited)
1996 1995
--------- ----------
Net income (loss) $87,266 $(202,913)
========= ==========
Weighted average shares outstanding 1,892,826 1,869,174
========= ==========
Net earnings (loss) per share $.05 $(.11)
========= ==========
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANICAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF MED/WASTE, INC., FOR THE THREE MONTHS ENDED MARCH 31,
1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 211,633
<SECURITIES> 761,518
<RECEIVABLES> 1,255,255
<ALLOWANCES> 82,000
<INVENTORY> 205,202
<CURRENT-ASSETS> 3,679,394
<PP&E> 1,490,425
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,672,604
<CURRENT-LIABILITIES> 2,389,330
<BONDS> 0
0
0
<COMMON> 1,904
<OTHER-SE> 5,882,837
<TOTAL-LIABILITY-AND-EQUITY> 6,672,604
<SALES> 4,414,071
<TOTAL-REVENUES> 4,414,071
<CGS> 3,199,018
<TOTAL-COSTS> 3,199,018
<OTHER-EXPENSES> 1,142,500
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 87,266
<INCOME-TAX> 0
<INCOME-CONTINUING> 87,266
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 87,266
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
