<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):
NOVEMBER 6, 1997
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)
- --------------------------------------------------------------------------------
<PAGE> 2
Item 7. Financial Statements and Exhibits:
(a) The following financial statements of Bonham Management Group, Inc.
("Bonham" or the "Company") are included herein:
<TABLE>
<S> <C>
Contents F-1
Report of Independent Certified Public Accountants F-2
Financial Statements:
Balance Sheets F-3
Statements of Operations F-4
Statements of Shareholder's Equity (Deficit) F-5
Statements of Cash Flows F-6
Notes to financial statements F-7
(b) Pro forma financial information. F-14
Med/Waste, Inc.'s ("Med/Waste") pro forma condensed consolidated
balance sheet as of June 30, 1997 (unaudited). F-15
Med/Waste's pro forma condensed consolidated statement of operations
for the six months ended June 30, 1997 (unaudited). F-16
Med/Waste's pro forma condensed consolidated statement of operations
for the year ended December 31, 1996 (unaudited). F-17
</TABLE>
-1-
<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)
Dated: December 3, 1997 By: /s/ DANIEL A. STAUBER
-----------------------
Daniel A. Stauber
President and Chief
Executive Officer
-2-
<PAGE> 4
BONHAM MANAGEMENT GROUP, INC.
FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Certified Public Accountants ................................................. F-2
Balance Sheets as of June 30, 1997 (unaudited) and December 31, 1996 ............................... F-3
Statements of Operations for the six months ended June 30, 1997 and 1996 (unaudited)
and the year ended December 31, 1996 and the period from October 26, 1995
(incorporation) to December 31, 1995 ............................................................... F-4
Statements of Shareholder's Equity (Deficit) for the six months ended June 30, 1997
(unaudited) and the year ended December 31, 1996 and the period from October 26, 1995
(incorporation) to December 31, 1995 ............................................................... F-5
Statements of Cash Flows for the six months ended June 30, 1997 and 1996
(unaudited) and the year ended December 31, 1996 and the period from
October 26, 1995 (incorporation) to December 31, 1995 .............................................. F-6
Notes to Financial Statements ...................................................................... F-7
</TABLE>
F-1
<PAGE> 5
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Bonham Management Group, Inc.
We have audited the accompanying balance sheet of Bonham Management Group, Inc.,
as of December 31, 1996, and the related statements of operations, shareholders
equity (deficit), and cash flows for the year ended December 31, 1996 and for
the period from October 26, 1995 (incorporation) to 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 audits 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 audits provide 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 Bonham Management Group, Inc.
at December 31, 1996, and the results of its operations and its cash flows for
the year ended December 31, 1996 and for the period from October 26, 1995
(incorporation) to December 31, 1995 in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has suffered losses from operations, has a net
capital deficiency and current liabilities exceed current assets. These
conditions raise substantial doubt about its ability to continue as a going
concern. Management's plans in regard to these matters are also described in
Note 2. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Miami, Florida
May 20, 1997, except
for Note 10 which is as
of August 22, 1997 and
Note 12 which is as
of November 10, 1997
F-2
<PAGE> 6
BONHAM MANAGEMENT GROUP, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
----------- -----------
(Unaudited)
<S> <C> <C>
Assets (Note 4)
Current
Cash and cash equivalents $ 95,379 $ 9,958
Trade accounts receivable (Note 11) 45,712 381,061
----------- -----------
Total current assets 141,091 391,019
----------- -----------
Property and equipment, net (Note 3) 48,996 51,789
Organizational costs, net 2,972 2,000
Deferred costs, net (Note 5) 215,403 234,917
Deposits (Note 8) -- 100,475
Due from shareholder 128,037 --
----------- -----------
$ 536,499 $ 780,200
=========== ===========
Liabilities and Capital Deficiency
Current Liabilities
Bank overdraft $ -- $ 11,763
Accounts payable 175,185 265,045
Loan payable (Note 4) -- 282,501
Loans payable - other 218,716 --
Accrued expenses 628,079 519,802
Current portion of fines payable (Note 5) 70,000 54,000
Other liabilities 13,092 13,092
----------- -----------
Total current liabilities 1,105,072 1,146,203
----------- -----------
Fines payable, less current portion (Note 5) 109,500 108,000
----------- -----------
Commitments and Contingencies (Notes 7, 8, 10 and 12)
Capital deficiency
Common stock, $1.00 par value; 5,000 shares
authorized; 500 shares issued and outstanding 500 500
Additional paid-in capital 49,500 49,500
Deficit (728,073) (524,003)
----------- -----------
Total capital deficiency (678,073) (474,003)
----------- -----------
$ 536,499 $ 780,200
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
F-3
<PAGE> 7
BONHAM MANAGEMENT GROUP, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period from
October 26, 1995
Year ended (incorporation)
For the six months ended June 30, December 31, to December 31,
1997 1996 1996 1995
----------- ----------- ------------ ---------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues (Note 8) $ 1,348,422 $ 1,345,141 $ 2,925,561 $ 200,524
----------- ----------- ----------- -----------
Operating expenses:
Administrative and selling expenses 569,127 595,634 1,792,383 106,736
Operating costs (Note 9) 856,567 619,442 1,496,830 132,732
----------- ----------- ----------- -----------
Total 1,425,694 1,215,076 3,289,213 239,468
----------- ----------- ----------- -----------
Operating (loss) income (77,272) 130,065 (363,652) (38,944)
Other, net (126,798) (330) (49,455) 167
----------- ----------- ----------- -----------
Net Loss $ (204,070) $ 129,735 $ (413,107) $ (38,777)
=========== =========== =========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
F-4
<PAGE> 8
BONHAM MANAGEMENT GROUP, INC.
STATEMENTS OF SHAREHOLDER'S EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Additional Total
Common Paid-in Shareholder's
Shares Stock Capital Deficit Equity (Deficit)
-------- --------- --------- --------- ----------------
<S> <C> <C> <C> <C> <C>
Balance at October 26, 1995
(incorporation) -- $ -- $ -- $ -- $ --
Issuance of Common Stock 500 500 49,500 -- 50,000
Net loss -- -- -- (38,777) (38,777)
-------- --------- --------- --------- ---------
Balance at December 31, 1995 500 $ 500 $ 49,500 $ (38,777) $ 11,223
Net loss -- -- -- (413,107) (413,107)
Distribution to shareholder -- -- -- (72,119) (72,119)
-------- --------- --------- --------- ---------
Balance at December 31, 1996 500 $ 500 $ 49,500 $(524,003) $(474,003)
-------- ========= ========= ========= =========
Net loss for the six months ended
June 30, 1997 (unaudited) -- -- -- (204,070) (204,070)
Balance at June 30, 1997 (unaudited) 500 $ 500 $ 49,500 $(728,073) $(678,073)
======== ========= ========= ========= =========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
F-5
<PAGE> 9
BONHAM MANAGEMENT GROUP, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Period from
October 26, 1995
Year ended (incorporation)
For the six months ended June 30, December 31, to December 31,
1997 1996 1996 1995
------------- --------------- ------------ ----------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Operating Activities:
Net (loss) income $(204,070) $ 129,735 $(413,107) $ (38,777)
Adjustments to reconcile net income to net cash
(used in) provided by operating activities, net
of acquisitions:
Depreciation and amortization 22,704 23,560 49,337 80
Bad debt provision -- -- 70,000 --
Cash provided by (used for)
Accounts receivable 335,349 (220,037) (286,901) (94,160)
Deposits 100,475 (275) (160,275) (10,200)
Intangibles -- -- -- (67,400)
Accounts payable (89,860) (67,069) 167,387 97,658
Accrued expenses 108,277 255,881 509,577 10,225
Fines payable 40,000 -- -- --
Other liabilities -- 8,145 13,092 --
--------- --------- --------- ---------
Net cash provided by (used in) operating activities 312,875 129,940 (50,890) (102,574)
--------- --------- --------- ---------
Investing Activities:
Purchases of property, plant and equipment, net (1,369) (31,283) (54,723) --
--------- --------- --------- ---------
Net cash used in investing activities (1,369) (31,283) (54,723) --
--------- --------- --------- ---------
Financing Activities:
Bank borrowing (282,501) -- 282,501 --
Proceeds from loans - other 218,716 -- -- --
Payment of fines (22,500) (27,000) (54,000) --
(Repayment) borrowing of loan from shareholder -- (45,500) (45,500) 45,500
Bank overdraft (11,763) 19,943 374 11,389
Distribution to shareholder -- -- (72,119) --
Proceeds from issuance of common stock -- -- -- 50,000
Advances to shareholder (128,037) (48,806) -- --
--------- --------- --------- ---------
Net cash (used in) provided by financing activities (226,085) (101,363) 111,256 106,889
--------- --------- --------- ---------
Increase in cash and cash equivalents 85,421 (2,706) 5,643 4,315
Cash and cash equivalents at beginning of year 9,958 4,315 4,315 --
--------- --------- --------- ---------
Cash and cash equivalents at end of year $ 95,379 $ 1,609 $ 9,958 $ 4,315
========= ========= ========= =========
Supplemental disclosure of cash flow information
Cash paid during the year for interest $ 9,517 $ 6,500 $ 13,994 $ --
Cash paid during the year for taxes $ -- $ -- $ -- $ --
Assumption of fine payable $ -- $ -- $ -- $ 216,000
========= ========= ========= =========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
F-6
<PAGE> 10
BONHAM MANAGEMENT GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
(FOR THE YEAR ENDED DECEMBER 31, 1996 AND THE PERIOD FROM OCTOBER 26, 1995
(INCORPORATION) TO DECEMBER 31, 1995 AND UNAUDITED
WITH RESPECT TO THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION, DESCRIPTION OF BUSINESS
Bonham Management Group, Inc. ("Bonham" or the "Company"), was
incorporated under the laws of the State of Georgia on October 26,
1995. As of November 1, 1996, the Company became a wholly-owned
subsidiary of Bonham Environmental Services, Inc., through the exchange
by the shareholder of all of the outstanding shares of the Company for
shares of a newly created holding company. This transaction was
accounted for using carryover basis since these are companies under
common control. The Company provides autoclave services for disposal of
medical waste at a leased facility in Marcus Hook, Pennsylvania.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost less accumulated
depreciation. Depreciation is computed over the estimated useful lives
of the assets using the straight-line method.
ORGANIZATIONAL COSTS
Organizational costs are carried at cost and are amortized on a
straight-line basis over a period of five years.
DEFERRED COSTS
Deferred costs relate to the assumption of an obligation in connection
with a management agreement entered into by the Company. These costs
are amortized over five years, the duration of the management agreement
(Note 5).
INCOME TAXES
Through October 31, 1996, the Company had elected S corporation status
under the provisions of the Internal Revenue Service Code with a
December 31 year end. On October 31, 1996, the Company terminated its S
corporation election and will file a consolidated tax return with
Bonham Environmental Services, Inc., its parent, for the tax year
ending June 30, 1997. As of December 31, 1996, the Company had no
Federal tax liability.
F-7
<PAGE> 11
BONHAM MANAGEMENT GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
(FOR THE YEAR ENDED DECEMBER 31, 1996 AND THE PERIOD FROM OCTOBER 26, 1995
(INCORPORATION) TO DECEMBER 31, 1995 AND UNAUDITED
WITH RESPECT TO THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996)
REVENUE RECOGNITION
The Company recognizes revenues as services are provided.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments," requires disclosure of fair value
information about financial instruments.
The respective carrying values of certain on-balance-sheet financial
instruments approximated their fair values. These financial instruments
include cash and equivalents, trade receivables, accounts payable and
accrued expenses. Fair values were assumed to approximate carrying
values for these financial instruments since they are short term in
nature and their carrying amounts approximate fair values or they are
receivable or payable on demand.
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.
ACCOUNTING FOR IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO
BE DISPOSED OF
Statement of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of," issued by the Financial Accounting Standards Board
(FASB), is effective for financial statements for fiscal years
beginning after December 15, 1995. This standard establishes new
guidelines regarding when impairment losses on long-lived assets, which
include plant and equipment and certain identifiable intangible assets
and goodwill, should be recognized and how impairment losses should be
measured. The Company adopted this standard in 1996, and its adoption
did not have a material effect on its financial position or results of
operations.
UNAUDITED INTERIM FINANCIAL STATEMENTS
The financial statements as of June 30, 1997 and for the six months
ended June 30, 1997 and 1996 are unaudited, and have been prepared on
the same basis as the audited financial
F-8
<PAGE> 12
BONHAM MANAGEMENT GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
(FOR THE YEAR ENDED DECEMBER 31, 1996 AND THE PERIOD FROM OCTOBER 26, 1995
(INCORPORATION) TO DECEMBER 31, 1995 AND UNAUDITED
WITH RESPECT TO THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996)
statements included herein. In the opinion of the 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. GOING CONCERN
The Company's financial statements are presented on the going concern
basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. Bonham
has entered into an agreement with Med/Waste Inc., (Note 12) for the
sale of certain assets as part of its plan to meet its liquidity needs.
The Company believes that this sale, if consummated, should be adequate
to fund current obligations. However, there can be no assurance that
this transaction will be consummated.
The financial statements do not include any adjustments to reflect the
possible future effects on the recoverability and classification of
assets or the amounts and classification of liabilities that may result
from the possible inability of the Company to continue as a going
concern.
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
Year ended December 31, Useful Lives 1996
--------------------------- ------------------ ----------
<S> <C> <C>
Leasehold improvements 5 years $ 5,521
Boiler and auxiliary equipment 10 years 32,646
Light trucks and trailers 5 years 16,556
------------------ ----------
Total 54,723
Less accumulated depreciation 2,934
------------------ ----------
Property and equipment, net $ 51,789
================== ==========
</TABLE>
Depreciation of property and equipment was $2,934 for the year ended
December 31, 1996.
4. LOAN PAYABLE
In July 1996, the Company entered into an agreement with a finance
company, whereby the Company can borrow 80% of approved receivables up
to $400,000 under a revolving line
F-9
<PAGE> 13
BONHAM MANAGEMENT GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
(FOR THE YEAR ENDED DECEMBER 31, 1996 AND THE PERIOD FROM OCTOBER 26, 1995
(INCORPORATION) TO DECEMBER 31, 1995 AND UNAUDITED
WITH RESPECT TO THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996)
of credit. Principal and interest are payable as the approved
receivables are collected. The interest rate on the line is prime plus
3%. The loan is due on demand. Substantially all of the Company's
assets have been collateralized for the loan.
5. FINES PAYABLE
On October 30, 1995, Bonham entered into a management agreement to
operate the plant facility under a five year management agreement with
a five year renewal option. As part of the agreement, Bonham agreed to
pay the Pennsylvania Department of Environmental Protection (DEP) fines
totaling $216,000, previously assessed to the owner of the facility.
The penalty is payable in 16 quarterly payments of $13,500 commencing
January 15, 1996 and ending October 15, 1999. The amount payable at
December 31, 1996 was $162,000.
6. INCOME TAXES
At December 31, 1996, the Company had Federal net operating loss
carryforwards of approximately $259,000 that expire through 2011. This
loss occurred during the period the Company was a C Corporation. For
financial reporting purposes, a valuation allowance of $139,750 has
been recognized to offset the net deferred tax assets related to these
carryforwards and other deferred tax assets.
Deferred income taxes reflect the net effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax liabilities and
assets are as follows:
December 31, 1996
---------------------------------------- ---------
Deferred tax liabilities:
Depreciation and Amortization $ 6,900
---------
Total deferred tax liabilities $ 6,900
---------
Deferred tax assets:
Net operating loss carryforwards $ 88,000
Accrued shareholder wages 34,850
Bad debt 23,800
---------
Total deferred tax assets $ 146,650
---------
Valuation allowance for deferred tax assets $(139,750)
---------
$ --
=========
F-10
<PAGE> 14
BONHAM MANAGEMENT GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
(FOR THE YEAR ENDED DECEMBER 31, 1996 AND THE PERIOD FROM OCTOBER 26, 1995
(INCORPORATION) TO DECEMBER 31, 1995 AND UNAUDITED
WITH RESPECT TO THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996)
The reconciliation between the provision for income taxes and the
amount which results from applying the federal statutory tax rate of
34% to loss before income taxes as a C Corporation, is as follows:
<TABLE>
<CAPTION>
December 31, 1996
----------------------------------------------------- ---------
<S> <C>
Income tax expense (credit) at statutory federal rate $(118,600)
Non-deductible expenses 30,600
Limitation on recognition of deferred tax
asset due to valuation allowance 88,000
---------
$ --
=========
</TABLE>
7. COMMITMENTS AND CONTINGENCIES
Due to the nature of the Company's industry, the Company may be subject
to a number of investigations, lawsuits and claims arising from the
conduct of its business, including those relating to environmental
matters. The Company is not aware of any ongoing investigations,
lawsuits or claims relating to environmental matters. Environmental
expenditures that relate to current operations will be expensed or
capitalized as appropriate. Expenditures that relate to an existing
condition caused by past operations and that do not contribute to
current or future revenue generation will be expensed.
Bonham entered into an asset purchase agreement on June 28, 1996 with
an Ohio corporation, for $1,100,000. Bonham made an initial payment of
$150,000 on June 28, 1996, the date of the first closing.
Pursuant to the contract, Bonham is to make monthly payments to the
owner of the facility until the second and final closing. During 1996,
Bonham was obligated to pay $100,000, of which $10,000 was paid by
December 31, 1996.
Bonham is currently negotiating with the Ohio corporation to terminate
this purchase agreement. The Ohio corporation is proposing to return
approximately $60,000 of the $150,000 initial deposit to Bonham. The
difference of $90,000 has been expensed as rent expense and the $60,000
has been fully reserved.
8. MANAGEMENT AGREEMENTS
Bonham operates the plant facilities under a five year management
agreement with a five year renewal option. The management agreement
calls for the payment by Bonham of a
F-11
<PAGE> 15
BONHAM MANAGEMENT GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
(FOR THE YEAR ENDED DECEMBER 31, 1996 AND THE PERIOD FROM OCTOBER 26, 1995
(INCORPORATION) TO DECEMBER 31, 1995 AND UNAUDITED
WITH RESPECT TO THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996)
monthly fee of $15,000 and a quarterly consulting fee of 50% of
adjusted net profits (as defined). The payment of these fees allows the
Company to generate and collect revenues from its autoclave services.
In connection with this agreement, fees paid in 1996 and 1995 were
approximately $99,900 and $30,000, respectively. The first lease term
ends October 31, 2000. Minimum annual payments are $180,000 for years
1997 through 1999 and $150,000 for year 2000.
Bonham entered into a management agreement with a Kentucky corporation,
in August 1996 to operate a facility in Prestonsburg, Kentucky to treat
and incinerate medical waste with a view to purchase the facility. The
initial term of the management agreement was for the period of August
21, 1996 to December 16, 1996 with a renewal option which is mutually
agreed upon at that time. There was no profit or loss resulting from
this agreement.
On March 27, 1997, Bonham and the owner of the Kentucky facility
reached a written agreement, whereby substantially all amounts
deposited will be returned to Bonham (approximately $90,000 of the
$100,000 deposit). The remaining $10,000 deposit will be returned
subject to the sale of the Kentucky facility. This amount has been
fully reserved as of December 31, 1996. Bonham operated the facility
until March 31, 1997.
9. RELATED PARTY TRANSACTIONS
Included in the Company's operating expenses for 1996 are $315,381 of
expenses paid on behalf of affiliated companies. The expenses are not
deemed recoverable from the affiliated companies and are therefore
charged to operations in 1996.
10. LITIGATION
On August 22, 1997, the Company received notice of a claim aggregating
approximately $600,000 filed against the Company, Bonham Environmental
Services, Inc. and Fred Bonham pertaining to violations of certain
provisions of two agreements, dated August 1996. Among other things,
the claim alleges that the Company exposed the Kentucky corporation
referred to in Note 8, to federal withholding tax liens, claims for
loss of health benefits, missing equipment, etc. The Company disagrees
with the claim and believes that its predecessor legal counsel
obtained a release from the plaintiff. Accordingly, this matter will
not materially affect the financial statements of the Company.
Additionally, 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 statements of the Company.
11. CONCENTRATION ON CREDIT RISK
The Company sells its services principally to eight to ten customers on
the east coast of the United States. In 1996 five customers provided
the Company with sales ranging from approximately 11% to 31% of total
revenues. 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.
F-12
<PAGE> 16
BONHAM MANAGEMENT GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
(FOR THE YEAR ENDED DECEMBER 31, 1996 AND THE PERIOD FROM OCTOBER 26, 1995
(INCORPORATION) TO DECEMBER 31, 1995 AND UNAUDITED
WITH RESPECT TO THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996)
12. SUBSEQUENT EVENTS
In May 1997, Med/Waste, Inc. ("Med/Waste"), a Delaware corporation,
entered into a purchase agreement to acquire certain assets of Bonham
for $1,966,000. Med/Waste has agreed to pay $850,000, including the
assumption of certain liabilities and contingencies, assumed a $116,000
penalty and issue 200,000 shares of previously unregistered and
unissued Med/Waste common stock with a guaranteed market value of $5
per share on the first anniversary of the closing. Bonham closed on the
acquisition on November 10, 1997.
Effective June 1, 1997, the Company entered into a management agreement
with Med/Waste, whereby Med/Waste will receive all of the net profits
or losses of Bonham through the closing.
On November 6, 1997, the real property and certain assets of the
autoclave facility operated by Bonham under a management agreement were
purchased by Med/Waste.
The property acquired by Med/Waste is part of an industrial park which
has been named by the Environmental Protection Agency ("EPA") as a
proposed "Super Fund Site."
F-13
<PAGE> 17
MED/WASTE, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The accompanying condensed consolidated pro forma financial statements
illustrate the effect of the acquisition of certain net assets of Bonham
Management Group, Inc., ("Bonham" or the "Company") on Med/Waste, Inc.'s and
subsidiaries' ("Med/Waste") consolidated financial position and results of
operations. On November 10, 1997, Med/Waste purchased certain net assets of the
Company. The net assets purchased consisted primarily of the right to manage a
waste incineration facility, (the "Facility"). The Company operated the Facility
as a waste disposal incinerator facility for waste through May 31, 1997.
Effective June 1, 1997, Med/Waste managed the facility under a management
contract with the Company, whereby Med/Waste will receive all of the net profits
or losses of operating the facility as its management fee. As such, the Company
had no revenues or operating expenses in the month of June 1997 from the
management of the facility. Med/Waste recorded net profits derived from managing
the facility for the month of June 1997 as management fees. The purchase price
for Bonham amounted to $1,966,000 payable, $850,000 in cash, for which,
Med/Waste received (a) a credit of $213,212 for liabilities assumed, accounts
payable to a consolidated subsidiary of Med/Waste and a loan payable to
Med/Waste; (b) $228,864 for amounts previously advanced to the Company and (c)
$250,000 of preacquisition contingencies for repairs and necessary upgrades and
the assumption of $116,000 of penalties previously assessed and 200,000 shares
of restricted Med/Waste common stock with a guaranteed market value of
$1 million on the first anniversary of the closing date. 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.
On November 6, 1997, Med/Waste acquired the land, facilities and equipment
managed by Bonham from K.S. Processing and its shareholders. The purchase price
for the facility amounted to $1.4 million, payable $200,000 in cash for
equipment, $700,000 in cash for land and building and $500,000, for a
non-compete agreement, in the form of a non-interest bearing note payable,
payable in 60 equal payments.
The condensed consolidated pro forma balance sheet as of June 30, 1997 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, 1997 and for the year
ended December 31, 1996 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, 1996. The condensed consolidated pro forma financial statements
reflect the pro forma adjustments of Med/Waste's acquisition of substantially
all of the assets of Environmental Waste Reductions, Inc. ("EWR") which closed
on September 25, 1997.
The condensed consolidated pro forma 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 Bonham Management Group, Inc.
F-14
<PAGE> 18
MED/WASTE, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Combined
Med/Waste and
EWR Bonham Adjustments Pro Forma
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 565,983 $ (386,788)(1) $ 179,195
Accounts receivable, net 2,312,632 (54,962)(1) 2,257,670
Notes receivable from autoclaves-current 152,306 152,306
Notes receivable from franchisees-current portion 1,096,604 1,096,604
Inventories 324,685 324,685
Prepaid expenses 421,898 421,898
Other current assets 214,309 214,309
------------ ------------
Total current assets 5,088,417 -- 4,646,667
------------
Notes receivable from franchisees - less current 1,181,837 1,181,837
Notes receivable from autoclaves - less current 693,837 693,837
Land -- 700,000(2) 700,000
Operating and office equipment, net of
accumulated depreciation 6,184,176 48,996 200,000(2) 6,433,172
Intangible assets - net of accumulated amortization 706,774 215,403 (215,403)(3) 706,774
Other assets 881,195 (131,250)(1) 749,945
Non-compete agreement - K.S. Shareholders -- 392,000(2) 392,000
Non-compete agreement - F. Bonham -- 300,000(1) 300,000
Cost in excess of net assets acquired 1,419,612 1,666,000(1) 3,085,612
------------ ------------ ------------
Total assets $ 16,155,848 264,399 $ 18,889,844
============ ============ ============
Liabilities and Capital Deficiency
Current Liabilities
Bank loan $ 1,825,000 $ 900,000(2) $ 2,725,000
Accounts payable and accrued expenses 2,750,598 250,000(1) 3,000,598
Current portion of capital lease obligations 191,989 191,989
Notes payable - current 561,454 63,000(2) 624,454
Deferred revenue 61,853 61,853
Customer deposits 59,815 59,815
Current portion of fines payable -- 143,000(1) 143,000
------------ ------------
Total current liabilities 5,450,709 6,806,709
Notes payable and long-term debt 2,634,312 329,000(2) 2,963,312
10% convertible redeemable debentures due July 1, 2000 3,000,000 3,000,000
------------ ------------
11,085,021 12,770,021
------------ ------------ ------------
Shareholders' equity 5,070,827 $ 264,399 1,000,000(1)
(215,403)(3) 6,119,823
------------ ------------ ------------
Total equity 5,070,827 264,399 6,119,823
------------ ------------ ------------
Total liabilities and shareholders' equity $ 16,155,848 $ 264,399 $ 18,889,844
============ ============ ============
</TABLE>
SEE NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
F-15
<PAGE> 19
MED/WASTE, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
Combined
Med/Waste
and EWR Bonham Adjustments Pro Forma
----------- ---------- -------------- ------------
<S> <C> <C> <C> <C>
Revenues $12,666,886 $1,348,422 $14,015,308
----------- ---------- ------------
Operating costs and expenses:
Operating costs 9,284,854 569,127 9,853,981
Selling and administrative 2,996,947 856,567 3,853,514
Amortization of intangibles 67,370 110,850(4) 178,220
Depreciation and amortization 127,836 -- 20,000(4) 147,836
----------- ---------- ------------
Total expenses 12,477,007 1,425,694 14,033,551
----------- ---------- ------------
Operating income (loss) 189,879 (77,272) (18,243)
Other, net (146,688) (126,798) (273,486)
----------- ---------- ------------
Net income (loss) 43,191 (204,070) (291,729)
=========== ========== ============
Net income (loss) per share $ 0.02 $ (0.12)
=========== ============
Weighted average shares outstanding 2,317,674 2,517,674
=========== ============
</TABLE>
SEE NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
F-16
<PAGE> 20
MED/WASTE, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Combined
Med/Waste
and EWR Bonham Adjustments Pro Forma
----------- ---------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues $20,944,157 $2,925,561 $23,869,718
----------- ---------- -------------
Operating costs and expenses:
Operating costs 16,035,217 1,792,383 17,827,600
Selling and administrative 6,451,226 1,496,830 7,948,056
Amortization of intangibles 114,799 221,700(4) 336,499
Depreciation and amortization 181,823 40,000(4) 221,823
----------- ---------- ------------
Total Expenses 22,783,065 3,289,213 26,333,978
----------- ---------- ------------
Operating (loss) (1,838,908) (363,652) (2,464,260)
Other, net (389,379) (49,455) (438,834)
----------- ---------- ------------
Net loss (2,228,287) (413,107) (2,903,094)
=========== ========== ============
Net loss per share $ (1.09) $ (1.29)
=========== ============
Weighted average shares outstanding 2,043,065 2,243,065
=========== ============
</TABLE>
SEE NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
F-17
<PAGE> 21
MED/WASTE, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
Note 1
The pro forma adjustments to the condensed consolidated balance sheet are
follows:
To reflect the acquisition of certain assets of Bonham Management, Inc.
("Bonham" 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:
<TABLE>
<CAPTION>
<S> <C> <C>
Components of purchase price:
Cash - due from buyer at closing $ 157,924
Cash previously advanced 228,864
Issuance of 200,000 shares of restricted
Med/Waste common stock 1,000,000
Accounts payable and accrued expenses:
Pre-acquisition contingencies (necessary repairs,
maintenance and upgrades) $ 250,000
Loan payable - Med/Waste plus accrued interest 131,250
Accounts payable - Safety Disposal System of
South Carolina, Inc. (a consolidated
subsidiary of Med/Waste) 54,962
Other penalties assumed 27,000
Department of Environmental Protection penalty 116,000
------------
579,212
-----------
Purchase price 1,966,000
Allocation of purchase price:
Non Compete Agreement (300,000)
-----------
Cost in excess of net assets acquired $ 1,666,000
-----------
</TABLE>
<TABLE>
<CAPTION>
Note 2
<S> <C>
Components of purchase of the facilty:
Cash $ 900,000
Non-interest bearing note for non-compete
agreement 500,000
------------
Purchase price 1,400,000
Less discount imputed at 10% (108,000)
------------
Purchase price $ 1,292,000
============
</TABLE>
F-18
<PAGE> 22
MED/WASTE, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
Allocation of purchase price:
Land $ 700,000
Equipment 200,000
Non-compete agreement 392,000
-----------
Total $ 1,292,000
===========
Note 3
To reflect the write down of Bonham's intangible assets immediately after the
acquisition.
Intangible assets, net of accumulated amortization $ 215,403
===========
Note 4
The pro forma adjustments to the condensed consolidated statements of
operations are as follows:
Six months Year Ended
Ended June December
30, 1997 31, 1996
----------------------------
Adjustments to operating costs and expenses:
Amortization of intangibles
Amortization of excess cost over fair value
of net assets acquired over twenty years $ 41,650 $ 83,300
Amortization of non-compete agreement
with Fred Bonham over five years 30,000 60,000
Amortization of non-compete agreement
with K.S. stockholders over five years 39,200 78,400
----------- -----------
$ 110,850 $ 221,700
----------- -----------
Depreciation of equipment over five years $ 20,000 $ 40,000
=========== ===========
F-19
