<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 7, 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)
6195 NW 153RD STREET, MIAMI LAKES, FLORIDA 33014
(Address of principal executive offices and Zip Code)
- --------------------------------------------------------------------------------
Registrant's telephone number, including area code: (305) 819-8877
3890 NW 132ND STREET, SUITE K, OPA LOCKA, FLORIDA 33054
(Former Name or former address, if changed since last report)
- --------------------------------------------------------------------------------
<PAGE> 2
Item 7. Financial Statements and Exhibits:
(a) The following financial statements of Incendere, Inc. ("Incendere")
are included herein:
<TABLE>
<S> <C>
Report of Independent Certified Public Accountants......................................................F-3
Balance Sheets as of June 30, 1997 (unaudited) and December 31, 1996 and 1995...................... ....F-4
Statements of Operations for the six months ended June 30, 1997 and 1996 (unaudited) and for the years
ended December 31, 1996 and 1995........................................................................F-5
Statements of Shareholders' Equity for the six months ended June 30, 1997 (unaudited)
and for the years ended December 31, 1996 and 1995......................................................F-6
Statements of Cash Flows for the six months ended June 30, 1997 and 1996 (unaudited) and for the years
ended December 31, 1996 and 1995........................................................................F-7
Notes to Financial Statements...........................................................................F-9
</TABLE>
(b) The following financial statements of the Medical Waste Division of
York Waste Disposal, Inc. ("York") are included herein:
<TABLE>
<S> <C>
Report of Independent Certified Public Accountants.....................................................F-15
Statements of Net Assets to be Sold as of June 30, 1997 (unaudited) and December 31, 1996 and 1995.....F-16
Statements of Revenues for the six months ended June 30, 1997 and 1996 (unaudited and the years ended
December 31, 1996 and 1995.............................................................................F-17
Notes to Financial Statements..........................................................................F-18
</TABLE>
(c)
<TABLE>
<S> <C>
Pro forma financial information........................................................................F-21
Med/Waste, Inc.'s ("Med/Waste") pro forma condensed consolidated
balance sheet as of June 30, 1997 (unaudited)..........................................................F-22
Med/Waste's pro forma condensed consolidated statement of
operations for the six months ended June 30, 1997 (unaudited)..........................................F-23
Med/Waste's pro forma condensed consolidated statement of
operations for the year ended December 31, 1996 (unaudited)............................................F-24
Notes to pro forma condensed consolidated financial statements.........................................F-25
</TABLE>
F-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: January 13, 1998 By: /s/ DANIEL A. STAUBER
-----------------------
Daniel A. Stauber
President and Chief
Executive Officer
EXHIBIT INDEX
-------------
Exhibit Description Numbered Page
- ------- ----------- -------------
23.1 Consent of Arthur Andersen LLP F-27
F-2
<PAGE> 4
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of
Republic Industries, Inc.:
We have audited the accompanying balance sheets of Incendere, Inc. (the
"Company") as of December 31, 1996 and 1995, and the statements of operations,
stockholders' equity and cash flows for the years then ended. 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 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 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 Incendere, Inc. as of December
31, 1996 and 1995, and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
October 6, 1997 (except with respect to the matter discussed
in Note 10, as to which the date is November 7, 1997).
F-3
<PAGE> 5
INCENDERE, INC.
BALANCE SHEETS
AS OF JUNE 30, 1997 (UNAUDITED) AND DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
ASSETS
December 31,
June 30, ----------------------------------
1997 1996 1995
--------------- --------------- ---------------
(Unaudited)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash $ -- $ 188,344 $ 58,529
Trade accounts receivable, less allowance for
doubtful accounts of $181,425 in 1997, $159,191
in 1996, and $308,050 in 1995 1,371,631 1,291,713 1,174,972
Due from affiliates, net 844,553 -- 24,049
Inventories 99,368 104,155 98,546
Prepaid expenses 54,635 29,130 104,912
Note receivable 7,533 12,036 10,628
Other current assets 63,411 120,938 6,554
------------- ------------- -------------
Total current assets 2,441,131 1,746,316 1,478,190
NOTE RECEIVABLE, less current portion 45,009 45,009 56,208
PROPERTY, PLANT AND EQUIPMENT, net 2,171,924 2,313,440 1,915,818
INTANGIBLE ASSETS, net 66,252 93,597 150,611
OTHER ASSETS 4,438 4,438 4,438
------------- ------------- -------------
Total assets $ 4,728,754 $ 4,202,800 $ 3,605,265
============= ============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 156,403 $ 319,977 $ 495,919
Accrued liabilities 303,480 366,688 860,137
Current portion of capital lease obligation 27,655 37,509 37,509
Due to Parent, net 4,000,395 2,635,776 --
Due to affiliates, net -- 351,788 --
Notes payable to stockholders -- -- 324,841
Notes payable -- -- 434,000
Current portion of long-term debt -- -- 295,829
------------- ------------- -------------
Total current liabilities 4,487,933 3,711,738 2,448,235
LONG-TERM DEBT, net of current portion -- -- 324,840
CAPITAL LEASE OBLIGATION, net of current portion 44,626 57,852 92,126
------------- ------------- -------------
Total liabilities 4,532,559 3,769,590 2,865,201
------------- ------------- -------------
COMMITMENTS AND CONTINGENCIES (Note 7)
STOCKHOLDERS' EQUITY:
Common stock ($.01 par value, authorized 5,000
shares-voting; 50,000 - non-voting, issued and
outstanding 10 shares voting; 100 non-voting) 1 1 1
Capital in excess of par value 5,771 5,771 5,771
Retained earnings 190,423 427,438 734,292
------------- ------------- -------------
Total stockholders' equity 196,195 433,210 740,064
------------- ------------- -------------
Total liabilities and stockholders' equity $ 4,728,754 $ 4,202,800 $ 3,605,265
============= ============= =============
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
F-4
<PAGE> 6
INCENDERE, INC.
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996 (UNAUDITED)
AND FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
Six Months Ended Years Ended
June 30, December 31,
------------------------------- -------------------------------
1997 1996 1996 1995
------------- ------------- ------------- ------------
(Unaudited)
<S> <C> <C> <C> <C>
REVENUE $ 4,587,665 $ 4,765,170 $ 9,117,156 $ 9,528,402
COST OF OPERATIONS 3,376,353 3,268,307 6,571,688 6,861,129
------------- ------------- ------------- ------------
GROSS PROFIT 1,211,312 1,496,863 2,545,468 2,667,273
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 1,268,054 1,055,248 2,478,633 2,628,329
------------- ------------- ------------- ------------
(LOSS) INCOME FROM OPERATIONS (56,742) 441,615 66,835 38,944
INTEREST EXPENSE, net (192,096) (122,927) (267,222) (95,461)
OTHER INCOME (EXPENSE), net 11,823 (8,781) (3,467) (115,650)
------------- ------------- ------------- ------------
NET (LOSS) INCOME (Note 2 (g)) $ (237,015) $ 309,907 $ (203,854) $ (172,167)
============= ============= ============== ============
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
F-5
<PAGE> 7
INCENDERE, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
AND FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
Capital in Total
Common Excess of Retained Stockholders'
Stock Par Value Earnings Equity
------------ ------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1994 $ 2 $ 11,543 $ 3,021,271 $ 3,032,816
Net loss -- -- (172,167) (172,167)
Cash dividends paid -- -- (395,000) (395,000)
Spin-off of American Waste
Industries, Inc. ("AWI") (Note 9) (1) (5,772) (1,719,812) (1,725,585)
--- ---------- ------------ ------------
BALANCE, December 31, 1995 1 5,771 734,292 740,064
Net loss -- -- (203,854) (203,854)
Cash dividends paid -- -- (103,000) (103,000)
--- --------- ------------ ------------
BALANCE, December 31, 1996 1 5,771 427,438 433,210
Net loss (Unaudited) -- -- (237,015) (237,015)
--- --------- ------------ -------------
BALANCE, June 30, 1997 (Unaudited) $ 1 $ 5,771 $ 190,423 $ 196,195
=== ========= ============ ============
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
F-6
<PAGE> 8
INCENDERE, INC.
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996 (UNAUDITED)
AND FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
Six Months Ended Years Ended
June 30, December 31,
---------------------------- ---------------------------
1997 1996 1996 1995
------------ ----------- ------------ ----------
(Unaudited)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (237,015) $ 309,907 $ (203,854) $(172,167)
Adjustments to reconcile net (loss) income to net cash
(used in) provided by operating activities:
Depreciation and amortization 261,338 213,010 440,419 763,733
Provision (reduction) in allowance for doubtful accounts 22,234 (128,164) (148,859) (22,146)
(Gain) loss on disposal of assets, net (5,000) -- 8,106 117,301
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (102,152) (299,590) 32,118 (230,741)
Change in due from/to affiliates, net (1,196,341) (1,216,228) 375,837 (24,049)
Decrease (increase) in inventories 4,787 (63,814) (5,609) 59,354
(Increase) decrease in prepaid expenses (25,505) (56,471) 75,782 (133,878)
Decrease (increase) in other current assets 57,527 6,554 (114,384) (6,554)
Increase in other assets -- (1,128) -- --
(Decrease) increase in accounts payable (163,574) (55,452) (175,942) 173,886
(Decrease) increase in accrued liabilities (63,208) (479,700) (493,449) 445,968
------------ ------------ ------------ -----------
Net cash (used in) provided by operating activities (1,446,909) (1,771,076) (209,835) 970,707
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (56,696) (259,035) (801,133) (1,275,407)
Proceeds from sale of property, plant and equipment 5,000 -- 12,000 121,675
Acquisition of intangibles -- -- -- (120,843)
Increase in note receivable (2,170) (11,907) (11,907) (65,805)
Payments on note receivable 6,673 12,844 21,698 --
----------- ----------- ----------- -----------
Net cash used for investing activities (47,193) (258,098) (779,342) (1,340,380)
</TABLE>
(continued)
F-7
<PAGE> 9
INCENDERE, INC.
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996 (UNAUDITED)
AND FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
(CONTINUED)
<TABLE>
<CAPTION>
Six Months Ended Years Ended
June 30, December 31,
--------------------------- ---------------------------
1997 1996 1996 1995
----------- ----------- ------------ -----------
(Unaudited)
<S> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital lease payments $ (23,080) $ (18,400) $ (34,274) $ (34,778)
Increase in due to parent, net 1,328,838 3,649,659 2,635,776 --
Payment on notes payable to stockholders -- (324,841) (324,841) (150,000)
Borrowings on notes payable to stockholders -- -- -- 497,341
Payment on notes payable and long-term debt -- (1,054,669) (1,054,669) (496,080)
Borrowings from notes payable and long-term debt -- -- -- 898,138
Cash dividends paid -- (103,000) (103,000) (395,000)
----------- ----------- ----------- ----------
Net cash provided by financing activities 1,305,758 2,148,749 1,118,992 319,621
NET INCREASE (DECREASE) IN CASH (188,344) 119,575 129,815 (50,052)
CASH AT THE BEGINNING OF PERIOD 188,344 58,529 58,529 108,581
----------- ----------- ----------- ----------
CASH AT THE END OF PERIOD $ -- $ 178,104 $ 188,344 $ 58,529
=========== =========== =========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the year for interest $ 3,789 $ 43,767 $ 47,477 $ 95,461
=========== =========== =========== ===========
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Distribution to stockholder for partial settlement of
notes payable $ -- $ -- $ -- $ 22,500
=========== =========== =========== ===========
Net assets spun-off into American Waste Industries,
Inc. (Note 9) $ -- $ -- $ -- $1,725,585
=========== =========== =========== ===========
Net book value of property and equipment transferred
from (to) Parent $ 35,781 $ (34,462) $ -- $ --
=========== =========== =========== ==========
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
F-8
<PAGE> 10
INCENDERE, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996 (UNAUDITED) AND DECEMBER 31, 1996 AND 1995
(1) GENERAL:
Incendere, Inc., a Virginia corporation, ("Incendere" or the "Company") was
primarily engaged in the transportation and destruction of regulated medical
waste until October 31, 1995 at which time the Company reorganized its medical
waste destruction business into a separate company, as discussed in Note (9).
On February 14, 1996, Republic Industries, Inc. ("Republic") entered into a
Reorganization Agreement with Incendere, Area Container Services, Inc., a
Virginia corporation, and Smithton Sanitation Service, Inc., a North Carolina
corporation, (collectively the, "Schaubach Companies") whereby Republic acquired
all the issued and outstanding shares of capital stock of the Schaubach
Companies.
In management's opinion, the accompanying unaudited interim financial statements
of the Company contain all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly the financial position of the Company
as of June 30, 1997 and the results of its operations for the six months ended
June 30, 1997 and 1996 and the disclosures herein are adequate to make the
information not misleading. The results of operations and cash flows for the six
months ended June 30, 1997 and 1996 are not necessarily indicative of the
results that can be expected for a full year.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(a) REVENUE RECOGNITION-
The Company recognizes income from medical waste collection services once the
medical waste has been collected and destroyed.
(b) RECLASSIFICATIONS-
Certain prior period financial statement amounts have been reclassified to
conform with the current year presentation.
(c) 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.
(d) FAIR VALUE OF FINANCIAL INSTRUMENTS-
The carrying amounts of cash, accounts receivable, note receivable, accounts
payable, accrued liabilities, notes payable, long-term debt and capital lease
obligation approximate fair value due to the short maturity of the instruments
or interest rates that approximate market.
F-9
<PAGE> 11
(e) INVENTORIES-
Inventories are stated at the lower of cost (first-in, first-out method) or
market. Inventories consist of boxes, containers and packaging supplies used in
connection with medical waste collection and disposal.
(f) INTANGIBLE ASSETS-
Intangible assets consist of the cost of certain contracts and royalty
agreements obtained as part of businesses acquired, and non-compete and
consulting agreements obtained from former owners and management of businesses
acquired. Intangible assets are amortized utilizing the straight-line method
over the period estimated to be benefited ranging from 2-10 years. The Company
continually evaluates whether events and circumstances have occurred that
indicate the remaining useful life of the intangible assets may warrant revision
or that the remaining goodwill may not be recoverable. Amortization expense for
intangible assets for the six month period ended June 30, 1997 and 1996 was
approximately $27,345 and $36,936, respectively and $57,014 and $45,073 for the
years ended December 31, 1996 and 1995, respectively, and is included in
selling, general and administrative expenses in the accompanying statements of
operations.
During 1996, the Company adopted Statement of Financial Accounting Standard No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" ("SFAS 121"). Adoption did not have a material impact
on the financial statements.
(g) INCOME TAXES-
The Company's tax return is included in Republic's consolidated tax return. The
effect on income had the Company not been eligible to be included in a
consolidated tax return is presented on a pro forma basis for the six months
ended June 30, 1997 and for the year ended December 31, 1996:
June 30, December 31,
1997 1996
-------------- --------------
Net loss before income taxes $ (237,015) $ (203,854)
Benefit for income taxes on a pro forma
basis (unaudited) 95,212 74,529
------------- -------------
Net loss $ (141,803) $ (129,325)
============== ==============
(h) SELLING, GENERAL AND ADMINISTRATIVE EXPENSES-
In accordance with Staff Accounting Bulletin No. 55, "Allocation of Expenses and
Related Disclosure in Financial Statements of Subsidiaries, Divisions or Lesser
Business Components of Another Entity" ("SAB 55") certain expenses incurred by
Republic on the Company's behalf have been allocated to the Company. Such
allocated expenses include corporate overhead, interest expense on intercompany
debt, intercompany trademark fees and other selling, general and administrative
expenses. These expenses are allocated to the Company using the proportional
cost allocation method based on the Company's revenue as a percentage of
Republic revenue, which the Company's management believes is reasonable.
Expenses clearly applicable to the Company are allocated based on the specific
identification method. For the six months ended June 30, 1997 and June 30, 1996,
approximately $573,000 and $480,000 was allocated from Republic to the Company,
of which approximately $381,000 and $394,000, respectively is included in
selling, general and administrative expenses and approximately $192,000 and
$86,000, respectively is included in interest expense, net in the accompanying
statements of operations. For the year ended December 31, 1996, approximately
$1,161,000 was allocated from Republic to the Company, of which approximately
$930,000 is included in selling, general and administrative expenses and
approximately $231,000 is included in interest expense, net in the accompanying
statements of operations. For the year ended December 31, 1995, no amounts were
allocated from Republic, as the Company was not acquired until February 14,
1996.
F-10
<PAGE> 12
(3) PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment are carried at cost less accumulated depreciation
and consists of the following:
<TABLE>
<CAPTION>
December 31,
June 30, ----------------------------
1997 1996 1995
------------ ---------- ------------
(Unaudited)
<S> <C> <C> <C>
Vehicles $ 2,998,545 $ 3,062,091 $ 2,768,147
Machinery and equipment 1,135,710 1,076,272 703,205
Furniture and fixtures 254,985 252,143 214,157
Leasehold improvements 103,340 102,145 102,145
Containers 76,145 35,987 --
------------ ------------ ------------
Total cost 4,568,725 4,528,638 3,787,654
Less: accumulated depreciation and amortization 2,396,801 2,215,198 1,871,836
------------ ------------ ------------
$ 2,171,924 $ 2,313,440 $ 1,915,818
============ ============ ============
</TABLE>
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets as follows: vehicles (6-10 years), machinery and
equipment (3-10 years), furniture and fixtures (5-10 years) and containers (15
years). Leasehold improvements are amortized on a straight-line basis over the
shorter of the term of the lease or their estimated useful lives. Cost of major
additions and improvements are capitalized and expenditures for maintenance and
repairs, which do not extend the useful life of the asset, are expensed. Upon
the sale or disposition of property, plant and equipment, the cost and related
accumulated depreciation or amortization is eliminated from the accounts and the
resultant gain or loss is credited or charged to operations.
Depreciation and amortization expense for property, plant and equipment for the
six month period ended June 30, 1997 and 1996 was approximately $233,993 and
$176,074, respectively and $383,405 and $718,660 for the years ended December
31, 1996 and 1995, respectively and is included in selling, general and
administrative expenses in the accompanying statements of operations.
(4) NOTES PAYABLE AND LONG-TERM DEBT:
<TABLE>
<CAPTION>
December 31,
1995
------------
<S> <C> <C>
Notes payable to stockholders with interest rates of 10% $ 324,841
===========
Notes payable to banks, due on demand, interest rates at the bank's prime rate
(8.75% at December 31, 1995) on one note and at the bank's prime rate plus
.25% on the other, $800,000 was still available to the Company at
December 31, 1995, collateralized by various property and equipment $ 434,000
===========
Long-term debt consists of the following:
Notes payable to banks, variable and fixed interest rates, variable interest
rates adjusted based on fluctuations in the banks' prime lending rate (8.75%
at December 31, 1995), plus .5% fixed interest rates ranging from 7.75% to
8.85% due 1996-1999, collateralized substantially by
property and equipment and other assets $ 620,669
Less: current portion of long-term debt 295,829
-----------
$ 324,840
===========
</TABLE>
During 1996, Republic paid the outstanding balance of the Company's long-term
debt and notes payable in connection with its acquisition of the Company. The
write-off of the deferred financing costs did not have a material impact on the
financial statements.
F-11
<PAGE> 13
(5) RELATED PARTY TRANSACTIONS:
The Company leases various office and warehouse space from a company
wholly-owned by a former stockholder's brother. Total rent paid for these
related party leases for the six month period ended June 30, 1997 and 1996 was
approximately $51,900 and $36,000, respectively and $81,000 and $72,000 for the
years ended December 31, 1996 and 1995, respectively.
The Company provides and utilizes services and personnel resources to and from
Area Container Services, Inc., Consolidated Waste Solutions, Inc. Smithton
Sanitation Service, Inc. and Robert A. Moor Company, affiliated companies. The
use of these companies' services and personnel resources results in amounts due
to and from these companies at each period end and are included in the
accompanying balance sheets. The amount of such net expenses charged by
affiliated companies to the Company totaled approximately $35,000 and $41,000
for the six months ended June 30, 1997 and 1996, respectively, and $78,000 for
the year ended December 31, 1996. The amount of net expenses charged by the
Company to affiliated companies totaled $94,000 for the year ended December 31,
1995.
Additionally, Republic allocates certain expenses to the Company and provides
certain resources. Such activities result in amounts due to parent reflected in
the accompanying balance sheets. See Note 2(h) for the expenses allocated from
Republic to the Company for the six months ended June 30, 1997 and 1996,
respectively and for the year ended December 31, 1996.
(6) LEASE COMMITMENTS:
In addition to the related party leases discussed above, the Company leases
corporate office space and various plant facilities at approximately $4,700 per
month. The approximate future minimum lease payments (including related party
leases and the lease renewals described above) are as follows at December 31,
1996:
1997 $128,300
1998 114,520
1999 72,000
2000 72,000
2001 72,000
Thereafter 6,000
-----------
$464,820
===========
Rent expense related to these leases, including the related party lease, totaled
$138,444 and $123,960 in 1996 and 1995, respectively.
The Company leases refrigerated trailers under a capital lease. The lease
obligation is payable in monthly installments, including interest, maturing
March 1998. Payments made under the lease aggregated $46,056 and $42,128,
respectively, for the years ended December 31, 1996 and 1995, of which $11,278
and $7,944, respectively represented interest. The total obligation under the
capital lease at December 31 ,1996 is as follows:
1997 $ 49,894
1998 52,584
----------
Total payments remaining under capital lease 102,478
Less: amount representing interest 7,117
----------
Total capital lease obligation 95,361
Less: Current portion 37,509
----------
Capital lease obligation, net of current portion $ 57,852
==========
F-12
<PAGE> 14
(7) COMMITMENTS AND CONTINGENCIES:
In conjunction with the reorganization of the Company in July 1995 (see Note 9),
the Company entered into a medical waste incineration agreement dated November
8, 1995 with American Waste Industries, Inc. ("AWI") whereby minimum weekly
payments of $25,315, $20,712 and $13,808 are required for contract years ending
through 2005, 2006 and 2007, respectively. Incineration expense incurred under
the medical waste incineration for the six month period ended June 30, 1997 and
1996 agreement totaled $1,120,207 and $1,090,267, respectively and $3,443,728
and $382,000 for the years ended December 31, 1996 and 1995, respectively. The
Company also entered into an agreement with the former chief operating officer
for prior and future consulting services which requires payments of $5,000 per
month for 60 months. The total $300,000 payable under the agreement was recorded
as an expense in 1995 as the value of future services to be provided under this
agreement are not expected to be significant. The Company also entered into a
ten-year non-compete agreement.
The Company is involved in certain legal actions and claims arising in the
ordinary course of business. Based on advice of legal counsel, it is the opinion
of management that such litigation and claims will be resolved without material
effect on the Company's financial position.
(8) 401(k) SAVINGS PLAN:
Employees of the Company may participate in a 401(k) savings plan (the "Plan"),
whereby the employees may elect to make contributions pursuant to a salary
reduction agreement upon meeting certain age and length-of-service requirements.
Through May 1997, the Company provided an employer matching contribution as
defined by the Plan. As of June 1997, the Company no longer provides an employer
matching contribution. Contributions by the Company and Plan expenses for the
six month period ended June 30, 1997 and 1996 totaled $5,262 and $12,149 and
$30,552 and $69,974 for the years ended December 31, 1996 and 1995,
respectively.
(9) REORGANIZATION:
In July 1995, the shareholders of the Company agreed to reorganize the Company
into two separate companies: A medical and infectious waste destruction company,
to be operated by AWI, and a medical and infectious waste collection and
transport company, to be operated by the Company. In accordance with the
Agreement and Plan of Reorganization and Corporate Separation dated September
26, 1995 (the "Reorganization Plan") effective October 31, 1995, the Company
contributed certain assets and liabilities specified in the Reorganization Plan
to AWI, a newly formed subsidiary, in exchange for the capital stock of AWI.
Simultaneously, the Company redeemed 10 shares of voting Common Stock and 100
shares of non-voting Common Stock owned by a former stockholder of the Company
in exchange for the capital stock of AWI.
(10) SUBSEQUENT EVENT:
On October 22, 1997 Republic and Incendere entered into a Stock Purchase
Agreement (the "Agreement") with Safety Disposal System of Virginia, Inc. and
Med/Waste, Inc. (collectively, "Med/Waste") whereby Republic sold to Med/Waste
ten (10) shares of the Company's Common Stock and one hundred (100) shares of
non-voting Common Stock for $12,000,000. The sale was exclusive of any cash of
the Company as of the closing date November 7, 1997, (the "Closing Date"), due
to/from affiliates, due to/from parent, certain property and equipment with a
carrying value of approximately $206,969 as of June 30, 1997 and $211,957 and
$191,327 as of December 31, 1996 and 1995, respectively, and certain other
assets and liabilities, as defined in the Agreement. Depreciation and
amortization expense related to such equipment for the six months ended June 30,
1997 and 1996 was $9,067 and $6,874, respectively, and $15,577 and $7,924 for
the years ended December 31, 1996 and 1995, respectively and is included in
selling, general and administrative expenses in the accompanying statements of
operations. Additionally, 50% of the trade accounts receivable outstanding as of
the Closing Date was retained by Republic ("Republic Receivables"). Pursuant to
the agreement, Med/Waste will use its best efforts to collect the Republic
Receivables. Such collections will be remitted to Republic, less 60% to be
retained by Med/Waste, representing a collection fee.
F-13
<PAGE> 15
On November 3, 1997, Republic transferred net assets of $429,089 utilized by the
medical waste division of York Waste Disposal, Inc. (a wholly-owned Republic
subsidiary) in its medical waste collection and disposal service division to the
Company for the sum of $100, pursuant to the Agreement.
The accounts of the Company include certain revenues and cost of operations that
are unrelated to the medical waste collection and disposal services business
(the "Business"). For the six months ended June 30, 1997 and for the year ended
December 31, 1996, these amounts resulted in a loss from operations of $40,678
and $2,306, respectively, and are included in the accompanying statements of
operations. There were no revenues or cost of operations unrelated to the
Business for the six months ended June 30, 1996 and for the year ended December
31, 1995.
F-14
<PAGE> 16
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of
Republic Industries, Inc.
We have audited the accompanying statements of net assets to be sold of the
Medical Waste Division of York Waste Disposal, Inc. (the "Division") as of
December 31, 1996 and 1995, and the statements of revenues and expenses
excluding income taxes for the years then ended. These financial statements are
the responsibility of the Division's management. Our responsibility is to
express an opinion on these 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 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.
These statements have been prepared for the purpose of complying with the rules
and regulations of the Securities and Exchange Commission as described in Note 1
(for inclusion in the Med/Waste, Inc. Form 8-K), and are not intended to be a
complete presentation of the Division's assets, liabilities, revenues, and
expenses.
In our opinion, the statements referred to above present fairly, in all material
respects, the net assets of the Division as of December 31, 1996 and 1995, to be
transferred to Incendere, Inc. ("Incendere") pursuant to the Stock Purchase
Agreement referred to in Note 1, and revenues and expenses excluding income
taxes for the years then ended in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
October 6, 1997 (except with respect to the matter discussed
in Note 4, as to which the date is November 3, 1997).
F-15
<PAGE> 17
THE MEDICAL WASTE DIVISION OF YORK WASTE DISPOSAL, INC.
STATEMENTS OF NET ASSETS TO BE SOLD
AS OF JUNE 30, 1997 (UNAUDITED) AND DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
December 31,
June 30, --------------------------
1997 1996 1995
------------- ------------ -----------
(Unaudited)
<S> <C> <C> <C>
ASSETS
Accounts receivable $ 81,349 $ 40,011 $ 39,237
Vehicles, net 16,068 32,396 42,197
Intangible assets, net of accumulated
amortization of $8,750 in 1997 341,250 -- --
----------- ------------ ---------
Total assets $ 438,667 $ 72,407 $ 81,434
=========== ============ =========
LIABILITIES:
Accounts payable $ 9,578 $ 5,386 $ 11,284
Accrued expenses -- 1,090 1,128
----------- ------------ ---------
Total liabilities 9,578 6,476 12,412
----------- ------------ ---------
NET ASSETS TO BE SOLD $ 429,089 $ 65,931 $ 69,022
=========== ============ =========
</TABLE>
The accompanying notes to financial statements are an integral
part of these statements.
F-16
<PAGE> 18
THE MEDICAL WASTE DIVISION OF YORK WASTE DISPOSAL, INC.
STATEMENTS OF REVENUES AND EXPENSES EXCLUDING INCOME TAXES
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996 (UNAUDITED)
AND THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
Six Months Ended Years Ended
June 30, December 31,
---------------------------- -------------------------------
1997 1996 1996 1995
----------- ----------- ----------- ------------
(Unaudited)
<S> <C> <C> <C> <C>
NET REVENUE $ 242,211 $ 193,046 $ 391,308 $ 373,688
COST OF REVENUE 101,570 85,218 169,931 156,023
----------- ----------- ----------- -----------
Gross profit 140,641 107,828 221,377 217,665
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 20,325 7,642 25,156 26,403
----------- ----------- ----------- -----------
REVENUES IN EXCESS OF EXPENSES
EXCLUDING INCOME TAXES
(Note 2 (e)) $ 120,316 $ 100,186 $ 196,221 $ 191,262
=========== =========== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral
part of these statements.
F-17
<PAGE> 19
THE MEDICAL WASTE DIVISION OF YORK WASTE DISPOSAL, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996 (UNAUDITED) AND DECEMBER 31, 1996 AND 1995
(1) GENERAL:
The Medical Waste Division of York Waste Disposal, Inc. (the "Division" or the
"Company") is engaged in the collection and transportation of medical and
infectious waste.
On February 28, 1997, Republic Industries, Inc. ("Republic") acquired all of the
outstanding shares of capital stock of York Waste Disposal, Inc.
The statements of net assets to be sold are presented for purposes of complying
with Section 228-310 of Regulation S-B which requires audited balance sheets of
the Division as of the two most recent fiscal year ends. Statements of net
assets to be sold are presented in lieu of balance sheets as they are more
representative of the net assets to be transferred to Incendere, Inc.
("Incendere"). Pursuant to the Stock Purchase Agreement dated October 22, 1997
(the "Agreement") among Republic Industries, Inc. ("Republic"), Incendere, Inc.
("Incendere", a wholly-owned subsidiary of Republic), Safety Disposal System of
Virginia, Inc. and Med/Waste, Inc., (together with Safety Disposal System of
Virginia Inc., "Med/Waste"), the net assets of the Division were transferred to
Incendere for the sum of $100.
In management's opinion, the accompanying unaudited interim financial statements
of the Company contain all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly the financial position of the Company
as of June 30, 1997 and the revenues and expenses for the six months ended June
30, 1997 and 1996 and the disclosures herein are adequate to make the
information not misleading. The revenues and expenses for the six months ended
June 30, 1997 and 1996 are not necessarily indicative of the results that can be
expected for a full year.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(a) REVENUE RECOGNITION-
The Division recognizes income from medical waste collection services once the
medical waste has been collected and destroyed.
(b) 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.
(c) FAIR VALUE OF FINANCIAL INSTRUMENTS-
The carrying amounts of accounts receivable, accounts payable and accrued
liabilities approximate fair value due to the short maturity of the instruments.
F-18
<PAGE> 20
(d) INTANGIBLE ASSETS-
Intangible assets consist of the rights, title and interest in medical waste
accounts, agreements, contract rights and customer lists acquired from a
competitor in May 1997. Intangible assets are amortized utilizing the
straight-line method over 5 years, the period estimated to be benefited. The
Division continually evaluates whether events and circumstances have occurred
that indicate the remaining useful life of the intangible assets may warrant
revision or that the remaining goodwill may not be recoverable. Amortization
expense for intangible assets included in the statements of income was
approximately $8,750 for the period ended June 30, 1997.
During 1996 the Division adopted Statement of Financial Accounting Standard No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" ("SFAS 121"). Adoption did not have a material impact
on the financial statements.
(e) INCOME TAXES-
The Company's tax return is included in Republic's consolidated tax return. The
effect on income had the Company not been eligible to be included in a
consolidated tax return, on a pro forma basis, is presented for the period ended
June 30, 1997 and for the year ended December 31, 1996 as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---------- ------------
<S> <C> <C>
Revenues in excess of expenses excluding
income taxes $ 120,316 $ 196,221
Provision for income taxes on a pro forma
basis (unaudited) 54,744 89,281
---------- ---------
Revenues in excess of expenses including
income taxes $ 65,572 $ 106,940
========== =========
</TABLE>
(f) SELLING, GENERAL AND ADMINISTRATIVE EXPENSES-
In accordance with Staff Accounting Bulletin No. 55, "Allocation of Expenses and
Related Disclosure in Financial Statements of Subsidiaries, Divisions or Lesser
Business Components of Another Entity" ("SAB 55"), certain expenses incurred by
York Waste Disposal, Inc. on the Division's behalf have been allocated to the
Division. For the six months ended June 30, 1997 and June 30, 1996,
approximately $8,905 and $2,742 was allocated from York Waste Disposal, Inc. to
the Division and is included in selling, general and administrative expenses in
the accompanying combined statements of revenues and expenses excluding income
taxes. For the year ended December 31, 1996 and 1995 approximately $15,355 and
$18,509 was allocated from York Waste Disposal, Inc. to the Division, and is
also included in selling, general and administrative expenses in the
accompanying statements of income. Such allocated expenses include direct
salaries, rent and other selling, general and administrative expenses. These
expenses are allocated to the Division using the specific identification method,
which the Division's management believes is reasonable.
F-19
<PAGE> 21
(3) VEHICLES:
Vehicles are carried at cost less accumulated depreciation and consists of the
following:
<TABLE>
<CAPTION>
December 31,
June 30, --------------------------
1997 1996 1995
---------- --------- ----------
(Unaudited)
<S> <C> <C> <C>
Vehicles $ 17,104 $ 98,315 $ 98,315
Less: accumulated depreciation (1,036) (65,919) (56,118)
---------- --------- ----------
$ 16,068 $ 32,396 $ 42,197
========== ========= ==========
</TABLE>
Depreciation is computed using the straight-line method over the estimated
useful lives of the vehicles (6-10 years). Depreciation expense for vehicles for
the six months ended June 30, 1997 and 1996 was $2,670 and $4,900, respectively
and $9,801 and $6,373 for the years ended December 31, 1996 and 1995,
respectively.
(4) SUBSEQUENT EVENTS:
On November 3, 1997, pursuant to Section 7.7 of the Agreement, Republic
transferred the net assets of York Waste Disposal, Inc. used in the medical
waste collection and disposal service to Incendere for the sum of $100.
F-20
<PAGE> 22
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
Incendere, Inc., ("Incendere") on Med/Waste, Inc.'s and subsidiaries'
("Med/Waste") consolidated financial position and results of operations. On
November 7, 1997, Med/Waste purchased 100% of the capital stock of Incendere. At
the time of the acquisition, Incendere was a wholly owned indirect subsidiary of
Republic Industries, Inc. ("Republic"). As part of the purchase agreement
("Agreement"), Med/Waste assigned 50% of the accounts receivables to Republic
and Republic agreed to assume and satisfy all liabilities of Incendere incurred
prior to the closing other than accounts payables and certain designated
obligations.
On November 3, 1997, Republic transferred net assets of $429,089 utilized by the
medical waste division of York Waste Disposal, Inc. ("York") (a wholly-owned
Republic subsidiary) in its medical waste collection and disposal service
division to Incendere for the sum of $100, 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, 1997 is based on the historical balance sheet of Incendere and
Med/Waste and the Statement of Net Assets to be Sold of York 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
Incendere and Med/Waste and Statement of Revenues and Expenses excluding Income
Taxes of York for those periods. The pro forma condensed consolidated statements
of operations assume 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 the assets of
Environmental Waste Reductions, Inc. on September 25, 1997 and Bonham Management
Group, Inc. on November 10, 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.,
Incendere, Inc., and The Medical Division of York Waste Disposal, Inc.
F-21
<PAGE> 23
MED/WASTE, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Combined
Med/Waste, York Net
EWR and Assets
Bonham Incendere, Inc. Acquired Adjustments Pro Forma
------------ --------------- ---------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Assets
Cash and cash equivalents $ 179,195 $ -- -- $ 179,195
-- --
Accounts receivable, net 2,257,670 1,371,631 81,349 (726,490)(2) 2,984,160
Notes receivable from autoclaves-current 152,306 152,306
Notes receivable from franchisees-current portion 1,096,604 1,096,604
Notes receivable, current 7,533 7,533
Inventories 324,685 99,368 424,053
Prepaid expenses 421,898 54,635 476,533
Due from affiliates, net -- 844,553 (844,553)(2) --
Other current assets 214,309 63,411 277,720
----------- ---------- -------- -----------
Total current assets 4,646,667 2,441,131 81,349 5,598,104
----------- ---------- -------- -----------
Notes receivable from franchisees - less current 1,181,837 1,181,837
Notes receivable from autoclaves - less current 693,837 693,837
Notes receivables - less current 45,009 45,009
Land 700,000 700,000
Operating and office equipment, net of
accumulated depreciation 6,433,172 2,171,924 16,068 (206,969)(2) 8,414,195
Intangible assets - net of accumulated amortization 706,774 66,252 341,250 9,152,333 (1) 10,266,609
Other assets 749,945 4,438 754,383
Non-compete agreement - K.S. Shareholders 392,000 392,000
Non-compete agreement - F. Bonham 300,000 300,000
Cost in excess of net assets acquired 3,085,612 3,085,612
----------- ---------- -------- -----------
Total assets $18,889,844 $4,728,754 $438,667 $31,431,586
=========== ========== ======== ===========
Liabilities and Capital Deficiency
Current Liabilities
Bank loan $ 2,725,000 $4,000,000 (1) $ 6,725,000
Current portion of long-term bank debt 1,000,000 (1) 1,000,000
Accounts payable and accrued expenses 3,000,598 459,883 9,578 3,470,059
Current portion of capital lease obligations 191,989 27,655 -- 219,644
Notes payable - current 624,454 -- 624,454
Deferred revenue 61,853 -- 61,853
Customer deposits 59,815 -- 59,815
Current portion of fines payable 143,000 -- 143,000
Due to Parent, net 4,000,395 (4,000,395)(2) --
----------- ---------- -------- -----------
Total current liabilities 6,806,709 4,487,933 9,578 12,303,825
Notes payable, long-term debt and long-term capital
lease obligation 2,963,312 44,626 -- 4,000,000 (1) 7,007,938
10% convertible redeemable debentures due July 1, 2000 3,000,000 3,000,000
----------- ---------- -------- -----------
5,963,312 44,626 9,578 22,311,763
----------- ---------- -------- -----------
Stockholders' equity (844,553)(2)
4,000,395 (2)
(206,969)(2)
(726,490)(2)
(2,847,667)(1)
Total equity 6,119,823 $ 196,195 $429,089 3,000,000 (1) 9,119,823
----------- ---------- -------- -----------
Total liabilities and shareholders' equity 6,119,823 196,195 429,089 9,119,823
----------- ---------- -------- -----------
$18,889,844 $4,728,754 $438,667 $31,431,586
=========== ========== ======== ===========
</TABLE>
See notes to pro forma condensed consolidated financial statements (unaudited)
F-22
<PAGE> 24
MED/WASTE, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Combined York Net
Med/Waste Assets
and EWR Incendere, Inc. Acquired Adjustments Pro Forma
------------ --------------- ---------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Revenues $14,015,308 $4,587,665 $ 242,211 (111,364)(4) $18,733,820
----------- ---------- ---------- -------- -----------
Operating costs and expenses:
Operating costs 9,853,981 3,376,353 101,570 (96,000)(4) 13,235,904
Selling and administrative 3,853,514 1,006,716 8,905 (48,360)(4) 4,820,775
Amortization of intangibles 178,220 228,808 (3) 407,028
Depreciation and amortization 147,836 261,338 11,420 (7,682)(4) 412,912
----------- ---------- ---------- -------- ----------
Total expenses 14,033,551 4,644,407 121,895 76,766 18,876,619
----------- ---------- ---------- -------- ----------
Operating income (loss) (18,243) (56,742) 120,316 (188,130) (142,799)
Interest expense, net (192,096) (410,000)(3) (602,096)
Other, net (273,486) 11,823 (261,663)
----------- ---------- ---------- -------- -----------
Net income (loss) (291,729) (237,015) 120,316 (598,130) (1,006,558)
=========== ========== ========== ======== ===========
Net income per share $ (0.12) $ (0.33)
=========== ===========
Weighted average shares outstanding 2,517,674 3,069,399
=========== ===========
</TABLE>
See notes to pro forma condensed consolidated financial statements (unaudited)
F-23
<PAGE> 25
MED/WASTE, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Combined York Net
Med/Waste Assets
and EWR Incendere, Inc. Acquired Adjustments Pro Forma
------------ --------------- ---------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Revenues $23,869,718 $9,117,156 $ 391,308 (15,540)(4) $33,362,642
----------- ---------- ---------- ----------- -----------
Operating costs and expenses
Operating costs 17,827,600 6,571,688 169,931 (6,115)(4) 24,563,104
Selling and administrative 7,948,056 2,038,214 15,355 (8,822)(4) 9,992,803
Amortization of intangibles 336,499 457,617 (3) 794,116
Depreciation and amortization 221,823 440,419 9,801 (2,909)(4) 669,134
----------- ---------- ---------- ----------- -----------
Total expenses 26,333,978 9,050,321 195,087 439,771 36,019,157
----------- ---------- ---------- ----------- -----------
Operating income (loss) (2,464,260) 66,835 196,221 (455,311) (2,656,515)
Interest expense, net (267,222) (820,000)(3) (1,087,222)
Other, net (438,834) (3,467) (442,301)
----------- ---------- ---------- ----------- -----------
Net income (loss) (2,903,094) (203,854) 196,221 (1,275,311) (4,186,038)
=========== ========== ========== =========== ===========
Net income per share $ (1.29) $ (1.50)
=========== ===========
Weighted average shares outstanding 2,243,065 2,794,790
=========== ===========
</TABLE>
See notes to pro forma condensed consolidated financial statements (unaudited)
F-24
<PAGE> 26
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 as
follows:
To reflect the acquisition of certain assets of Incendere, Inc.
("Incendere" or the "Company") and the allocation of the purchase
price on the basis of the fair values of the assets acquired. Not
reflected is the effect, if any, resulting from adjustments to the
purchase price pending determination of revenues of Incendere for the
four month period prior to the closing. 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 $ 5,000,000
Cash from line of credit 4,000,000
Cash from sale of common stock in private
placement 2,000,000
Cash from sale of preferred stock 1,000,000
------------------
Purchase price $ 12,000,000
Allocation of purchase price:
Net assets acquired as adjusted 2,847,667
------------------
Intangible assets - permits, customer lists, tradename $ 9,152,333
==================
</TABLE>
Note 2
<TABLE>
<CAPTION>
<S> <C>
Summary of net assets acquired:
Incendere and York net assets at June 30, 1997 $ 625,284
Less:
Excluded Assets:
50% of net accounts receivables assigned to Republic
according to Section 3.2 of Purchase
Agreement 726,490
Excluded furniture and equipment as stated
in Section 2.4 of Purchase Agreement 206,969
Due from affiliates, net 844,553
</TABLE>
F-25
<PAGE> 27
MED/WASTE, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Add:
<S> <C>
Excluded Liabilities:
Due to parent, net 4,000,395
--------------------
Incendere and York net assets acquired at
June 30, 1997 $ 2,847,667
====================
</TABLE>
Note 3
The pro forma adjustments to the condensed consolidated statements of operations
are as follows:
<TABLE>
<CAPTION>
Six months Year Ended
Ended June December
30, 1997 31, 1996
--------------- -----------------
<S> <C> <C>
Adjustments to operating costs and expenses:
Amortization of intangibles assets acquired over
twenty years $ 228,808 $ 457,617
--------------- -----------------
</TABLE>
<TABLE>
<CAPTION>
Six months Year Ended
Ended June December
30, 1997 31, 1996
--------------- -----------------
<S> <C> <C>
Adjustment to interest expense:
Interest expense on $5,000,000 long term credit
facility, prime rate plus 1% (9.5%) maturing April
30, 1999. Monthly principal payments due amount
to $83,333 $ 220,000 $ 440,000
Interest expense on $4,000,000 line of credit, prime
rate plus 1% (9.5%) maturing April 30, 1999 $ 190,000 $ 380,000
--------------- -----------------
$ 410,000 $ 820,000
=============== ================
</TABLE>
Note 4
The accounts of Incendere included certain revenues and cost of operations that
are unrelated to the medical waste collection and disposal services business
that Med/Waste purchased. For the six months ended June 30, 1997 and for the
year ended December 31, 1996 these amounts resulted in a loss from operations
of ($40,678) and ($2,306), respectively.
Note 5
No pro forma adjustment has been made with respect to income tax expense
for Incendere or York since Med/Waste has sufficient net operating loss
carryforwards available to offset any income tax expense.
F-26
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
---------------------------------------------------
As independent certified public accountants, we hereby consent to the
incorporation of our report dated October 6, 1997 (except with respect to the
matter discussed in Note 10, as to which the date is November 7, 1997) on the
financial statements of Incendere, Inc., and our report dated October 6, 1997
(except with respect to the matter discussed in Note 4, as to which the date is
November 3, 1997) on the statements of net assets to be sold and the statements
of revenues and expenses excluding income taxes of the Medical Waste Division
of York Waste Disposal, Inc., both included in this Form 8-K/A-1, into the
previously filed registration statement of Med/Waste, Inc. on Form S-3 dated
December 19, 1997 (Registration No. 333-42761).
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
January 12, 1998.
F-27
