<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 5, 1998
MED/WASTE, INC.
(Exact Name of registrant as specified in charter)
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DELAWARE 0-22294 65-0297759
(State or other Jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification Number)
6195 NW 153RD STREET, MIAMI LAKES, FLORIDA 33014
(Address of principal executive offices and Zip Code)
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Registrant's telephone number, including area code: (305) 819-8877
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<PAGE> 2
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 15, 1998 By: /s/ DANIEL A. STAUBER
---------------------
Daniel A. Stauber
President and Chief
Executive Officer
2
<PAGE> 3
<TABLE>
<CAPTION>
Item 7. Financial Statements and Exhibits:
<S> <C> <C>
(a) The following financial statements of Sanford Motors, Inc.
and Subsidiary ("SMI," "the Company") are included herein:
Report of Independent Certified Public Accountants F-3
Balance Sheets as December 31, 1997 and June 30, 1998 (unaudited) F-4
Statements of Operations for the six months ended June 30,
1997 (unaudited) and 1998 (unaudited) and for the years ended
December 31, 1996 and 1997 F-5
Statements of Shareholders' Equity for the years ended December 31,
1996 and 1997 and for the six months ended June 30, 1998 (unaudited) F-6
Statements of Cash Flows for six months ended June 30, 1997
(unaudited) and 1998 (unaudited) and for the years ended
December 31, 1996 and 1997 F-7
Notes to Financial Statements F-8
(b)
Pro forma financial information F-15
Med/Waste, Inc.'s ("Med/Waste") pro forma condensed
consolidated balance sheet as of June 30, 1998 (unaudited) F-16
Med/Waste's pro forma condensed consolidated statement of
Operations for the six months ended June 30, 1998 (unaudited) F-17
Med/Waste's pro forma condensed consolidated statement of
Operations for the year ended December 31, 1997 (unaudited) F-18
Notes to pro forma condensed consolidated financial statements
(unaudited) F-19
</TABLE>
F-1
<PAGE> 4
Report of Independent Certified Public Accountants
Board of Directors
Sanford Motors, Inc. and Subsidiary
We have audited the accompanying consolidated balance sheet of Sanford Motors,
Inc. and Subsidiary, as of December 31, 1997, and the related statements of
operations, shareholders' equity, and cash flows for the years ended December
31, 1996 and 1997. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
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 consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Sanford Motors, Inc.
and Subsidiary at December 31, 1997, and the results of its operations and its
cash flows for the years ended December 31, 1996 and 1997 in conformity with
generally accepted accounting principles.
Miami, Florida BDO Seidman, LLP
July 25, 1998, except for Note 8,
which is as of October 5, 1998
F-2
<PAGE> 5
Sanford Motors, Inc. and Subsidiary
Consolidated Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998
(UNAUDITED)
- -------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT
Cash $ 750,043 $ 86,636
Accounts receivable, net of allowance for doubtful
accounts of $536,000 in 1997 and 1998 1,188,369 1,201,256
Prepaid expenses and other 161,748 95,991
Other 24,905 25,660
- -------------------------------------------------------------------------------------
Total current assets 2,125,065 1,409,543
OTHER ASSETS
Property and equipment, net (Note 2) 304,979 266,956
Investment in unconsolidated subsidiary (Note 7) -- 750,000
Cash held in escrow for capital expenditures (Note 7) 801,595 61,893
- -------------------------------------------------------------------------------------
Total other assets 1,106,574 1,078,849
- -------------------------------------------------------------------------------------
$3,231,639 $2,488,392
- -------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 29,694 $ 94,352
Line of credit (Note 3) 180,000 --
Note payable (Note 3) 21,511 24,030
Other 6,793 --
- -------------------------------------------------------------------------------------
Total current liabilities 237,998 118,382
Note payable, less current portion (Note 3) 11,206 --
- -------------------------------------------------------------------------------------
Total liabilities 249,204 118,382
- -------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (Note 5)
- -------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Common stock, no par; 20,000 shares authorized, 2,000
shares issued and outstanding 70,000 70,000
Retained earnings 2,912,435 2,300,010
- -------------------------------------------------------------------------------------
Total equity 2,982,435 2,370,010
- -------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $3,231,639 $2,488,392
- -------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-3
<PAGE> 6
Sanford Motors, Inc. and Subsidiary
Consolidated Statements of Operations
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
----------------------- -------------------------
1996 1997 1997 1998
(Unaudited)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES $4,941,231 $5,094,756 $2,184,112 $2,128,251
- ------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES:
Operating costs 3,621,883 3,602,772 1,555,584 1,558,917
General and administrative 404,183 345,522 149,804 152,780
Selling and marketing 12,091 12,809 5,588 5,894
Depreciation and amortization 194,585 163,295 49,972 60,023
- ------------------------------------------------------------------------------------------------------
4,232,742 4,124,398 1,760,948 1,777,614
- ------------------------------------------------------------------------------------------------------
Operating profit 708,489 970,358 423,164 350,637
- ------------------------------------------------------------------------------------------------------
Other (expense) income, net (14,012) 11,780 (1,650) 461
- ------------------------------------------------------------------------------------------------------
NET INCOME $ 694,477 $ 982,138 $ 421,514 $ 351,098
- ------------------------------------------------------------------------------------------------------
PRO FORMA AMOUNTS (UNAUDITED)
Historical income before income taxes $ 982,138 $ 351,098
Pro forma provision for income taxes (Note 4) 399,000 142,000
- ------------------------------------------------------------------------------------------------------
Pro forma net income $ 583,138 $ 209,098
- ------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-4
<PAGE> 7
Sanford Motors, Inc. and Subsidiary
Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
-------------------------------- RETAINED SHAREHOLDERS'
SHARES AMOUNT EARNINGS EQUITY
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at January 1, 1996 2,000 $ 70,000 $ 1,432,067 $ 1,502,067
Net income 694,477 694,477
Distributions to shareholder (10,961) (10,961)
- ---------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1996 2,000 70,000 2,115,583 2,185,583
Net income 982,138 982,138
Distributions to shareholder (185,286) (185,286)
- ---------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1997 2,000 70,000 2,912,435 2,982,435
Net income for the six months ended
June 30, 1998 (unaudited) 351,098 351,098
Distributions to shareholder
(unaudited) -- -- (963,523) (963,523)
- ---------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1998 (unaudited) 2,000 $ 70,000 $ 2,300,010 $ 2,370,010
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-5
<PAGE> 8
Sanford Motors, Inc. and Subsidiary
Consolidated of Cash Flows
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
----------------------------- (Unaudited)
------------------------------
1996 1997 1997 1998
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 694,477 $ 982,138 $ 421,514 $ 351,098
Adjustments to reconcile net income to net cash
provided by operating activities:
Bad debt expense 132,000 43,000 - -
Depreciation 194,585 163,295 49,972 60,023
Imputed rent 97,000 97,000 48,500 48,500
- -------------------------------------------------------------------------------------------------------------------------
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable 94,004 78,677 (155,705) (12,887)
Prepaid expenses (76,584) (84,248) (96,500) 65,757
Other (1,150) 1,247 (620) (755)
Increase (decrease) in:
Accounts payable (14,754) (3,403) 132,811 64,658
Other liabilities 1,592 1,506 3,058 (6,793)
- -------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 1,121,170 1,279,212 403,030 569,601
- -------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Purchases of property and equipment (214,548) -- -- --
Investment in unconsolidated subsidiary - -- -- (750,000)
- -------------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by investing activities (214,548) -- -- (750,000)
- -------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Net (repayments) borrowings under line-of-credit
agreement (60,000) 60,000 (120,000) (180,000)
Principal payments on note payable (153,572) (189,088) (58,187) (8,687)
Distributions to shareholder (107,961) (282,286) (113,090) (1,034,023)
- -------------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (321,533) (411,374) (291,277) (1,222,710)
- -------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash 585,089 867,838 111,753 (1,403,109)
Cash at beginning of year 98,711 683,800 683,800 1,551,638
- -------------------------------------------------------------------------------------------------------------------------
Cash at end of year $ 683,800 $ 1,551,638 $ 795,553 $ 148,529
- -------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the years for interest $ 17,941 $ 11,098 $ 7,884 $ 2,562
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-6
<PAGE> 9
Sanford Motors, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(Unaudited with respect to the six months ended June 30, 1997 and 1998)
1. SUMMARY OF ORGANIZATION AND DESCRIPTION OF BUSINESS
SIGNIFICANT
ACCOUNTING Sanford Motors, Inc. includes the operations
POLICIES of its wholly-owned subsidiary, East Coast
Medical Waste, Inc. and affiliate, Bucks
County Resource and Recovery, Inc.,
collectively, the "Company" or "SMI." The
Company's principal business is the
collection and handling of medical waste and
other materials in the Pennsylvania area. The
operations of the affiliate were not
material.
In 1996, the Company began hauling
prefabricated concrete block for a
construction company. Such revenues amounted
to approximately $554,000 (or 11%), for the
year ended December 31, 1996; for all other
periods presented such customer's revenues
aggregated less than 10% 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.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include
the accounts of Sanford Motors, Inc. and its
wholly-owned subsidiary, East Coast Medical
Waste, Inc. and its affiliate Bucks County
Resource Recovery, Inc. Intercompany
accounts, transactions and profits have been
eliminated in consolidation. Investments in
companies in which ownership is at least 20%,
but less than a majority of the voting stock,
is accounted for using the equity method; the
Company's share of earnings from its
unconsolidated subsidiary was not material
during 1998.
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 accelerated methods.
F-7
<PAGE> 10
Sanford Motors, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(Unaudited with respect to the six months ended June 30, 1997 and 1998)
INCOME TAXES
SMI, its subsidiary and affiliate, with the
consent of its shareholders, have each
elected to be taxed as an S Corporation. The
shareholder of an S Corporation is taxed on
its proportionate share of the Company's
taxable income. Accordingly, no provision for
federal or state income tax is required. The
pro forma provisions for income taxes and net
income assume that SMI was subject to income
tax.
For the purpose of the pro forma provision
for income taxes, SMI has adopted the
provisions of Statement of Financial
Accounting Standards (SFAS) 109, Accounting
for Income taxes for all periods presented.
Under the asset and liability method of SFAS
109, deferred taxes are recognized for
differences between financial statement and
income tax bases of assets and liabilities.
REVENUE RECOGNITION
The Company recognizes revenues as services
are provided.
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.
INTERIM FINANCIAL STATEMENTS
The financial statements for the six months
ended June 30, 1998 and 1997 are unaudited.
In the opinion of management, such financial
statements include all adjustments
(consisting only of normal recurring
accruals) necessary for a fair presentation
of financial position and the results of
operations. The results of operations for the
six months ended June 30, 1998 and 1997 are
F-8
<PAGE> 11
Sanford Motors, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(Unaudited with respect to the six months ended June 30, 1997 and 1998)
not necessarily indicative of the results to
be expected for the full year.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist
principally of cash, accounts receivable, and
debt. The carrying amounts of such financial
instruments as reflected in the balance
sheets approximate their estimated fair value
as of December 31, 1997 and June 30, 1998.
The estimated fair value is not necessarily
indicative of the amounts the Company could
realize in a current market exchange or of
future earnings or cash flows.
NEW PRONOUNCEMENT
Effective January 1, 1998, the Company
adopted Statement of Financial Accounting
Standards ("SFAS") 130, "Reporting
Comprehensive Income." Comprehensive income
is the change in equity from transactions and
other events from nonowner sources.
Comprehensive income includes net income and
other comprehensive income. The Company does
not have any items of other comprehensive
income for any periods presented in the
consolidated financial statements.
SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information," which
among other things, changes the way public
companies report information about operating
segments, also is effective for the Company
in 1998. The Company currently operates
solely in the medical waste collection and
hauling industry and therefore SFAS No. 131
has no effect on the Company's reporting.
SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities,"
establishes accounting and reporting
standards for derivative instruments and for
hedging activities. It requires that an
entity recognize all derivatives as either
assets or liabilities in the statement of
financial position and measure those
instruments at fair value. The statement
applies to all entities and is effective for
all fiscal quarters of fiscal years beginning
after June 15, 1999. The Company did not
engage in derivative instruments or hedging
activities in any periods presented in the
consolidated financial statements.
F-9
<PAGE> 12
Sanford Motors, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(Unaudited with respect to the six months ended June 30, 1997 and 1998)
2. PROPERTY AND Property and equipment consists of the
EQUIPMENT following:
<TABLE>
<CAPTION>
JUNE 30, USEFUL
1997 1998 LIVES
------------------------------------------------
<S> <C> <C> <C>
Vehicles $ 982,115 $ 1,004,115 5
Furniture 49,517 49,517 5
----------------------------------------
Total 1,031,632 1,053,632
----------------------------------------
Less accumulated
depreciation (726,653) (786,676)
----------------------------------------
Property and equipment, net $ 304,979 $ 266,956
========================================
</TABLE>
3. BORROWINGS Note payable consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998
-------------------------------------------
<S> <C> <C>
Vehicles note $ 32,717 $ 24,030
-------------------------------------------
Less: current portion 21,511 24,030
-------------------------------------------
$ 11,206 $ --
===========================================
</TABLE>
Scheduled maturities on the Company's note
payable is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1997
-------------------------
<S> <C>
1998 $ 21,511
1999 11,206
-------------------------
$ 32,717
=========================
</TABLE>
The Company's vehicles note bears interest at
8.25% and is due May 1999. The note is
collateralized by the vehicles.
The Company has a $200,000 line of credit
with a bank that expires on December 23,
1998. Borrowings under the line of credit
bear interest at the New York Prime Rate
(8.5% at December 31, 1997) and are
collateralized by real estate owned by the
shareholder.
F-10
<PAGE> 13
Sanford Motors, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(Unaudited with respect to the six months ended June 30, 1997 and 1998)
4. INCOME TAXES The following are the components of pro forma
income tax provision (benefit):
<TABLE>
<CAPTION>
Six months
Year ended ended
December 31, June 30,
1997 1998
----------------------------------------------------------------------------
<S> <C> <C>
Current
Federal $ 157,000 $ 122,000
State 51,000 40,000
----------------------------------------
208,000 162,000
----------------------------------------
Deferred
Federal 144,000 (15,000)
State 47,000 (5,000)
----------------------------------------
191,000 (20,000)
----------------------------------------
Total $ 399,000 $ 142,000
========================================
</TABLE>
The pro forma provision for income taxes
represents the estimated income taxes that
would have been reported had SMI not been an
S Corporation and had been subject to Federal
and state income taxes.
The reconciliation of pro forma income tax
computed at the United States federal
statutory tax rate of 34% to the proforma
provision for income taxes is as follows:
<TABLE>
<CAPTION>
Six months
Year ended ended
December 31, June 30,
1997 1998
----------------------------------------------------------------------------
<S> <C> <C>
Tax at the United States
statutory rate $ 334,000 $ 119,000
----------------------------------------
State income taxes, net of
federal benefit 65,000 23,000
----------------------------------------
Total $ 399,000 $ 142,000
========================================
</TABLE>
F-11
<PAGE> 14
Sanford Motors, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(Unaudited with respect to the six months ended June 30, 1997 and 1998)
5. COMMITMENTS Due to the nature of the Company's industry,
AND the Company may be subject to a number of
CONTINGENCIES 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.
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.
6. RELATED PARTY The Company's facilities and offices are
TRANSACTIONS owned by its sole shareholder. For the years
ended December 31, 1996 and 1997, no rent was
charged by the shareholder for the use of the
facilities and offices. In this connection,
the Company imputed a rent charge of
approximately $97,000 for the years ended
December 31, 1996 and 1997 and $43,500 for
the six months ended June 30, 1997 and 1998.
The imputed rent charge was recorded as an
increase to shareholders' equity in the
consolidated balance sheets.
7. INVESTMENT IN During 1998, the Company entered into an
UNCONSOLIDATED agreement to purchase a 49% interest for
SUBSIDIARY $750,000 in an entity, Matthews Acquisition
Corporation (MAC) that acquired all of the
capital stock of BMWNC, Inc. (BMWNC) and
Biomedical Services, Inc. ("BMS"). Both BMWNC
and BMS were debtors in possession pursuant
to Chapter 11 of the Bankruptcy Code. This
transaction was approved by the bankruptcy
court on April 3, 1998. In connection
therewith, MAC acquired BMWNC and BMS for
approximately $1 million in cash and the
issuance of $2.1 million, 8% notes payable,
due in 2004. The notes are collateralized by
the assets and stock of BMWNC and BMS.
F-12
<PAGE> 15
Sanford Motors, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(Unaudited with respect to the six months ended June 30, 1997 and 1998)
Unaudited summarized financial information of
MAC is as follows:
<TABLE>
<CAPTION>
JUNE 30, 1998
--------------------------------------------------------------------------------
<S> <C>
Assets:
Current assets $ 380,000
Property, plant and equipment 3,709,000
--------------------------------------------------------------------------------
$ 4,089,000
================================================================================
Liabilities and stockholders equity:
Current liabilities $ 46,000
Long term debt 2,158,000
Stockholders equity 1,885,000
--------------------------------------------------------------------------------
$ 4,089,000
================================================================================
Revenue $ 633,000
Gross profit $ 230,000
Income from continuing operations $ -
Net income $ 79,000
================================================================================
</TABLE>
8. SUBSEQUENT EVENTS On August 11, 1998, the Company entered into
a sale agreement with Med/Waste, Inc.
("Med/Waste"), a Delaware corporation, to
sell 100% of the outstanding capital stock of
the Company. The transaction was finalized on
October 5, 1998.
F-13
<PAGE> 16
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 100% of the capital stock of Sanford
Motors, Inc., including its wholly-owned subsidiary East Coast Medical Waste,
Inc. and affiliate, Bucks County Resource Recovery, Inc. collectively, "SMI," on
Med/Waste, Inc.'s and subsidiaries' ("Med/Waste") consolidated financial
position and results of operations. The transaction closed on October 5, 1998.
At the time of the acquisition, SMI, a sub-chapter S corporation, was wholly
owned by Mr. and Mrs. Craig Sanford. The purchase price aggregated approximately
$12.7 million, of which $4.5 million is payable in cash and the balance in
stock, warrants and assumed liabilities. The warrants are valued at $.25 each
using the Shelton Valuation Model. The stock portion, of the purchase price is
guaranteed by Med/Waste at $14.00 per share. The cash portion of the purchase
price was paid out of Med/Waste's available bank borrowings. In this connection,
Mr. Sanford agreed to transfer real property owned by him of approximately
$750,000 to SMI, pursuant to the Agreement.
The accompanying condensed consolidated pro forma financial statements
illustrate the effect of the acquisition ("Pro forma") on Med/Waste's financial
position and results of operations. The condensed consolidated balance sheet as
of June 30, 1998 is based on the historical balance sheets of SMI and Med/Waste
and assumes that the acquisition took place on that date. The condensed
consolidated statements of operations for the six months ended June 30, 1998 and
for the year ended December 31, 1997 are based on the historical statements of
operations of SMI and Med/Waste for those periods. The pro forma condensed
consolidated statements of operations assume the acquisition took place on
January 1, 1997.
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 and period benefited of intangible assets,
both of which may differ.
The pro forma condensed consolidated financial statements should be read in
connection with the historical financial statements of Med/Waste, Inc. and
Subsidiaries and Sanford Motors, Inc. and Subsidiary.
F-14
<PAGE> 17
MED/WASTE, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1998
<TABLE>
<CAPTION>
MED/WASTE SMI ADJUSTMENTS PRO FORMA
--------- --- ----------- ---------
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 136,035 $ 148,529 4,500,000 (1) $ 284,564
(4,500,000)(1)
Accounts receivable, net 8,339,809 1,201,256 9,541,065
Short term investments 25,660 25,660
Inventories 459,099 459,099
Prepaid expenses 1,787,264 95,991 1,883,255
-------------------------------------------------------------------
Total current assets 10,722,207 1,471,436 12,193,643
-------------------------------------------------------------------
Notes receivable 702,892 702,892
Land 100,000 (2) 100,000
Building and improvements 650,000 (2) 641,875
(8,125)(3)
Operating and office equipment, net of
accumulated depreciation 14,853,084 266,956 549,361 (2) 15,614,465
(54,936)(3)
(186,103)(3)
Intangible assets - net of accumulated amortization 16,458,550 8,938,503 (1) 25,210,950
Other assets 1,674,720 750,000 52,000 (4) 2,476,720
-------------------------------------------------------------------
Total assets $44,411,453 $2,488,392 $56,940,545
===================================================================
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable and accrued expenses $ 2,600,487 $ 94,352 (94,352)(2) 2,879,637
279,150 (3)
Current portion of capital lease obligations 785,259 785,259
Notes payable - current 391,243 24,030 (24,030)(2) 391,243
Customer deposits 23,640 23,640
Income tax payable 116,000 116,000
-------------------------------------------------------------------
Total current liabilities 3,916,629 118,382 4,195,779
Notes payable and debentures, less current portion 16,187,961 4,500,000 (1) 20,687,961
Capital lease obligations, less current portion 853,060 853,060
Deferred income tax liability and other liabilities 1,141,477 1,141,477
-------------------------------------------------------------------
22,099,127 118,382 26,878,277
-------------------------------------------------------------------
Stockholders' equity 22,312,326 $2,370,010 4,438,503 (1)
1,417,743 (2)
(528,314)(3)
52,000 (4) 30,062,268
-------------------------------------------------------------------
Total equity 22,312,326 2,370,010 30,062,268
-------------------------------------------------------------------
Total liabilities and shareholders' equity $44,411,453 $2,488,392 $56,940,545
===================================================================
</TABLE>
SEE NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
F-15
<PAGE> 18
MED/WASTE, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
Med/Waste SMI Adjustments Pro Forma
----------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C>
Revenues $12,266,373 $2,128,251 $14,394,624
------------------------------------------------------------------
Operating costs and expenses:
Operating costs 8,651,002 1,618,940 8,125 (3) 10,333,003
54,936 (3)
Selling and administrative 1,804,375 158,674 16,900 (3) 1,979,949
Amortization of intangibles 198,571 186,103 (3) 384,674
------------------------------------------------------------------
Total expenses 10,653,948 1,777,614 12,697,626
------------------------------------------------------------------
Operating income 1,612,425 350,637 1,696,998
Other (expense) income, net (334,613) 461 (213,750)(3) (547,902)
------------------------------------------------------------------
Income from continuing operations before income taxes 1,277,812 351,098 1,149,096
Provision for income taxes 498,000 (52,000)(4) 446,000
------------------------------------------------------------------
Net income from continuing operations 779,812 351,098 703,096
Discontinued operations, net of taxes 14,102 14,102
------------------------------------------------------------------
Net income 793,914 351,098 717,198
Preferred stock dividend 143,346 143,346
------------------------------------------------------------------
Net income available to common shareholders $ 650,568 351,098 $ 573,852
==================================================================
Earnings per share - basic
From continuing operations $ 0.12 $ 0.10
Discontinued operations, net of taxes 0.00 0.00
------------------------------------------------------------------
$ 0.12 $ 0.10
==================================================================
Weighted average shares outstanding 5,146,130 5,821,444
==================================================================
Earnings per share - diluted
From continuing operations $ 0.10 $ 0.08
Discontinued operations, net of taxes 0.00 0.00
------------------------------------------------------------------
$ 0.10 $ 0.08
==================================================================
Weighted average shares outstanding 7,059,734 7,735,048
==================================================================
</TABLE>
SEE NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
F-16
<PAGE> 19
MED/WASTE, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Med/Waste SMI Adjustments Pro Forma
---------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Revenues $ 13,547,960 $ 5,094,756 $ 18,642,716
---------------- --------------- -------------- ---------------
Operating costs and expenses:
Operating costs 8,914,359 3,766,067 16,250 (3) 12,806,548
109,872 (3)
Selling and administrative 3,378,939 358,331 35,500 (3) 3,772,770
Amortization of intangibles 187,924 -- 372,207 (3) 560,131
---------------- --------------- -------------- ---------------
Total expenses 12,481,222 4,124,398 17,139,449
---------------- --------------- -------------- ---------------
Operating income 1,066,738 970,358 1,503,267
Gain from insurance settlement 1,357,376 1,357,376
Other (expense) income, net (378,622) 11,780 (427,500)(3) (794,342)
---------------- --------------- -------------- ---------------
Income from continuing operations before
income taxes 2,045,492 982,138 2,066,301
Provision for income tax 627,768 -- 8,500 (4) 636,268
---------------- --------------- -------------- ---------------
Net income from continuing operations 1,417,724 982,138 1,430,033
Discontinued operations, net of taxes 131,671 -- 131,671
---------------- --------------- -------------- ---------------
Net income 1,549,395 982,138 1,561,704
Preferred stock dividend 96,680 96,680
---------------- --------------- -------------- ---------------
Net income available to common shareholders $1,452,715 982,138 $1,465,024
================ =============== ============== ===============
Earnings per share - basic
From continuing operations $ 0.52 $ 0.41
Discontinued operations, net of taxes 0.05 0.04
---------------- --------------- -------------- ---------------
$ 0.57 $ 0.45
================ =============== ============== ===============
Weighted average shares outstanding 2,559,905 3,235,219
================ =============== ============== ===============
Earnings per share - diluted
From continuing operations $ 0.38 $ 0.33
Discontinued operations, net of taxes 0.03 0.03
---------------- --------------- -------------- ---------------
$ 0.41 $ 0.36
================ =============== ============== ===============
Weighted average shares outstanding 3,922,848 4,598,162
================ =============== ============== ===============
</TABLE>
SEE NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
F-17
<PAGE> 20
MED/WASTE, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
(UNAUDITED)
Note 1
The pro forma adjustments to the condensed consolidated balance sheet are as
follows:
To reflect the acquisition of certain assets of Sanford Motors, Inc.
and Subsidiary ("SMI" 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>
Components of purchase price:
Cash from long term credit facility $ 4,500,000
Issuance of 500,000 shares of restricted
Med/Waste common stock (guaranteed at $14
per share) 7,000,000
Issuance of warrants to purchase 100,000 shares of
restricted Med/Waste common stock
(valued at $.25 per warrant) 25,000
Cash payment of $500,000 to seller for collection of
accounts receivable and issuance of 175,314 shares of
stock for the accounts receivable collected in excess
of $500,000 prior to December 31, 1998 1,201,256
--------------
Purchase price 12,726,256
Allocation of purchase price:
Net assets acquired as adjusted 3,787,753
--------------
Intangible assets, permits, customer lists, tradename,
non-compete $ 8,938,503
==============
</TABLE>
The credit to stockholders' equity on the accompanying pro forma
consolidated balance sheet is comprised of the intangible assets
acquired ($8,938,503) net of related bank borrowings ($4,500,000)
resulting from this transaction.
Note 2 Summary of net assets acquired
<TABLE>
<CAPTION>
<S> <C>
SMI net assets at June 30, 1998 $2,370,010
Add: Real property contributed by stockholder:
Land 100,000
Buildings and improvements 650,000
Difference between fair value of operating
equipment and historical cost basis 549,361
SMI liabilities not assumed by Med/Waste:
Accounts payable and accrued expenses $ 94,352
Notes payable 24,030
---------------
Subtotal 1,417,743
---------------
Fair value of SMI tangible net assets
acquired at June 30, 1998 $3,787,753
===============
</TABLE>
F-18
<PAGE> 21
Note 3
The pro forma adjustments to the condensed consolidated statements of operations
are as follows:
<TABLE>
<CAPTION>
Six Months Year
Ended Ended
June 30, December 31,
1998 1997
------------------------------------
<S> <C> <C>
Adjustments to operating costs and expenses:
Amortization of excess cost over fair value of
net assets acquired, permits, customer lists
and tradename over 25 years ($8,888,503 basis) $ 177,770 $ 355,540
Amortization of non-compete agreement over
three years ($50,000 basis) 8,333 16,667
------------------------------------
Total amortization 186,103 372,207
------------------------------------
Depreciation of building and improvements over
40 years 8,125 16,250
------------------------------------
Depreciation of basis increase in operating
equipment over 5 years 54,936 109,872
------------------------------------
Interest expense on $4,500,000 long term credit
Facility, prime rate plus 1% (9.5%) 213,750 427,500
Officers' salaries 65,400* 132,500*
------------------------------------
Total expenses adjusted to accounts payable and
accrued expenses 279,150 560,000
------------------------------------
Total pro forma adjustment to stockholders' equity $ 528,314 $1,058,329
====================================
</TABLE>
* The pro forma adjustment to selling and administrative expenses in
the accompanying pro forma condensed statements of operations of
$42,500 and $85,000 for the six months ended June 30, 1998 and for
the year ended December 31, 1997, respectively, consists of the
following:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------------------------------------
<S> <C> <C>
Officers' salaries $ 65,400 $132,500
Imputed rent previously reflected
through distributions (48,500) (97,000)
-------------------------------------
Net pro forma adjustment to selling and
administrative expenses $ 16,900 $ 35,500
=====================================
</TABLE>
F-19
<PAGE> 22
Note 4
Pro forma adjustments to the condensed consolidated balance sheet and statement
of operations as of and for the six months ended June 30, 1998 and for the year
ended December 31, 1997, to reflect income taxes as if SMI had been subject to
federal and state income taxes, based on an estimated effective tax rate of
40.6%.
Note 5
Options and warrants to purchase 518,534 and 1,353,500 shares of common stock
were outstanding during 1997 and 1998, respectively, but were not included in
the computation of diluted earnings per share because the exercise price was
greater than the average market price of the common shares for those periods.
F-20
