<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10 - QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1998
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT
For the transition period from ____________ to _____________
COMMISSION FILE NUMBER: 0-22294
MED/WASTE, INC.
- -------------------------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in its Charter)
DELAWARE 65-0297759
- ------------------------------- --------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6175 NW 153 STREET, SUITE 324, MIAMI LAKES, FL 33014
- -------------------------------------------------------------------------------
(Address of principal executive offices)
(305) 819-8877
- -------------------------------------------------------------------------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports) and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
--- ---
The number of shares outstanding of the registrant's common stock $.001 par
value as of November 12, 1998 was 6,665,966.
<PAGE> 2
MED/WASTE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, 1998 December 31, 1997
----------------------- --------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents $ 455,285 $ 984,708
Accounts Receivable, Net of Allowances of $144,000 8,261,340
and $40,000 5,525,528
Net Assets of Discontinued Operations -- 2,632,909
Inventories 354,391 238,653
Prepaid Expenses and Other Current Assets 2,280,452 735,779
----------------------- --------------------
Total Current Assets $11,351,468 10,117,577
Property, Plant and Equipment, Net 14,228,913 10,636,803
Excess of Purchase Price over Net Assets Acquired,
Net of Accumulated Amortization 19,367,356 11,919,106
Other Assets 630,663 2,095,578
Notes Receivable 607,398 --
----------------------- --------------------
Total Assets $46,185,798 $34,769,064
======================= ====================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts Payable and Accrued Liabilities $ 3,392,938 $ 2,511,280
Current Portion of Notes Payables 391,243 4,094,861
Current Portion of Capital Lease Obligations 648,825 397,371
Income Tax Payable 116,000 116,000
Customer Deposits -- 23,640
----------------------- --------------------
Total Current Liabilities 4,549,006 7,143,152
Capital Lease Obligations, Less Current Portion 799,803 502,239
Notes Payable and Debentures Less Current Portion 16,252,280 8,496,605
Deferred Income Tax Liability and Other Liabilities 1,002,000 702,000
----------------------- --------------------
18,054,083 9,700,844
Shareholders' Equity:
Preferred Stock, $.10 par value; 4,000,000 and 1,000,000 -- --
Shares Authorized; None Outstanding
Preferred Stock, $.01 par value; 40,000 and No Shares
Authorized; 28,869 Outstanding 430
Common Stock,$.001 par value; 26,000,000 and 10,000,000 289
Shares Authorized; and 6,149,154 Shares Issued
and Outstanding 6,149 4,630
Additional Paid-in Capital 22,948,851 18,625,685
Warrant Subscriptions Receivable (208,003) (258,003)
Retained Earnings (deficit) 866,080 (417,017)
----------------------- --------------------
23,613,366 17,955,725
Less Cost of Treasury Stock: 11,824 Shares (30,657) (30,657)
----------------------- --------------------
Total Shareholders' Equity 23,582,709 17,925,068
----------------------- --------------------
Total Liabilities and Shareholders' Equity $46,185,798 $34,769,064
======================= ====================
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2
<PAGE> 3
MED/WASTE, INC. SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
--------------------------------- -----------------------------------
1998 1997 1998 1997
--------------------------------- -----------------------------------
<S> <C> <C> <C> <C>
Revenues $8,389,733 $ 2,391,126 $20,656,106 $ 7,380,276
Costs and expenses:
Operating costs 3,798,542 1,490,671 12,449,544 4,838,551
Administrative and selling expenses 2,996,007 580,917 4,908,905 1,891,803
Amortization of Intangibles 165,082 27,506 363,653 59,386
--------------------------------- -----------------------------------
Total 6,959,631 2,099,094 17,722,102 6,789,740
--------------------------------- -----------------------------------
Operating profit 1,430,102 292,032 2,934,004 590,536
Other, net (641,008) (118,810) (975,621) (245,682)
--------------------------------- -----------------------------------
Income before income taxes 789,094 173,222 1,958,383 344,854
Income taxes 361,538 -- 611,538 --
--------------------------------- -----------------------------------
Income from continuing operations 427,556 173,222 1,346,845 344,854
Discontinued operations, net of taxes -- 202,690 14,102 379,285
--------------------------------- -----------------------------------
Net Income 427,556 375,912 1,360,947 724,139
Preferred stock dividend 65,518 -- 208,864 --
--------------------------------- -----------------------------------
Net Income available to common shareholders $362,038 $375,912 $1,152,083 $724,139
================================= ===================================
Earnings per share - basic
From continuing operations $.06 $.05 $.21 $.08
Discontinued operations, net of taxes -- $.05 -- $.09
--------------------------------- -----------------------------------
$.06 $.10 $.21 $.17
======================================================================
Weighted average shares outstanding 6,130,548 4,654,849 5,477,568 4,496,137
Earnings per share - diluted
From continuing operations $0.05 $0.05 $0.17 $0.10
Discounted operations, net of taxes -- $0.04 -- $0.07
--------------------------------- -----------------------------------
$0.05 $ 0.09 $0.17 $0.17
================================= ===================================
Weighted shares outstanding 7,512,489 5,680,490 6,859,509 5,521,778
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3
<PAGE> 4
MED/WASTE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
-----------------------
1998 1997
-------- --------
<S> <C> <C>
CASH FLOWS USED IN OPERATING ACTIVITIES
Net Income $ 1,360,947 344,854
Adjustments to reconcile net income to net cash used in operating
activities
Depreciation and amortization 1,338,193 405,342
Provision for doubtful notes and accounts receivable 192,000 36,126
Issuance proceeds -- 3,258,600
Issuance of warrants for services -- 38,233
Dividends Paid (77,842) --
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (2,927,812) (1,259,823)
(Increase) in notes receivables 607,398 (662,000)
(Increase) in inventories (115,738) 11,962
(Increase) in prepaid expenses and other current assets (1,544,673) (517,002)
(Decrease) in assets held for sale 2,632,909 (82,441)
(Increase) in other assets and intangible assets (6,346,988) (2,029,417)
Increase (decrease) in accounts payable and accrued expenses 520,120 (945,397)
Increase in deferred income taxes and other liabilities 661,538 --
(Decrease) increase in customer deposits (23,640) 103,571
----------- ------------
Net cash used in operating activities $(4,938,384) $ (1,317,391)
CASH FLOWS (USED IN) PROVIDED BY INVESTING ACTIVITIES
Purchase of property plant and equipment, net $(4,566,650) (2,736,476)
Write off of equipment from fire damage 3,259,600
Payment for purchase of Environmental Waste Reduction ("EWR") (1,825,000)
Increase in net assets and liabilities of EWR (1,840,508)
----------- ------------
Net cash (used in) provided by investing activities $(4,566,650) (3,143,384)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in capital leases, net $ 549,018 495,349
Proceeds from 10% convertible redeemable debentures 2,692,709
Proceeds from assignment of Notes Receivable 251,000
Increase (Decrease) in line of credit and notes payable, net 4,052,057 898,013
Proceeds from stock subscription receivable 50,000 --
Issuance of common shares 4,324,536 2,183,651
----------- ------------
Net cash provided by financing activities $ 8,975,611 $ 6,520,722
----------- ------------
Decrease in cash and cash equivalents (529,423) 2,059,947
Cash and cash equivalents at beginning of year 984,708 81,820
----------- ------------
$ 455,285 2,141,767
=========== ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for interest $ 641,000 $ 266,000
=========== ============
Issuance of common stock for acquisition of Med Waste, Inc.
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE> 5
MED/WASTE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. INTERIM FINANCIAL STATEMENTS
Med/Waste, Inc. (the "Company") is a holding company which, through its
subsidiaries, is engaged in the provision of medical waste management services.
The accompanying unaudited consolidated financial statements have been prepared
in accordance with the instructions to Form 10-QSB and do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
considered necessary for a fair presentation have been included.
Operating results for the nine-month period ended September 30, 1998 are not
necessarily indicative of the results that may be expected for the full year
ending December 31, 1998. The significant accounting principles are the same as
those used to prepare the annual audited financial statements. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's annual report on Form 10-KSB for the year
ended December 31, 1997.
2. ACQUISITIONS.
On March 31, 1998, the Company purchased the capital stock of Med Waste, Inc, an
unrelated Pennsylvania corporation. The purchase price was $310,000 payable in
41,000 shares of the Company's common stock at closing. The stock issued for the
purchase is guaranteed by the Company to have a fair market value at the end of
two years for $7.50 per share.
In June 1998, the Company purchased from Biomade Plastics, Inc. a subsidiary of
ARK Industries, Inc. (formerly BioMedical Waste Systems, Inc.) molds for the
manufacture of reusable sharps containers, lids and accessories used in the
"Sharps Express" program, together will all proprietary knowledge, patents, 510k
approvals, trade secrets, referral lists, technical information, quality control
data, processes (whether secret or not), methods and other similar know how or
rights. Biomade Plastics, Inc. operated a reusable sharps container program
through licensing territories to third parties. The Company received an
assignment of all license agreements as well as all inventories of such
containers. The purchase price was $1,100,000 payable 50% in cash and 50% in the
Company's common stock.
In June 1998 the Company, acquired Target, Medical Waste Services, LLC
("Target") based in Mobile, Alabama. Target provides medical waste management
services to customers in Alabama, Florida, Louisiana and Mississippi. Target
also owns and operates a medical waste autoclave facility. The purchase price
for Target amounted to $1,087,912 payable in cash.
In June 1998, the Company acquired Med-Waste, Inc., an unrelated Alabama
corporation ("Decatur") based in Decatur, Alabama. Decatur provides medical
waste management services to medical waste generators located in the states of
Alabama, Georgia and Tennessee. Decatur also owns and operates a medical waste
autoclave facility. The purchase price for Decatur amounted to $500,000 in cash,
133,334 shares of the Company's common stock and $1.5 million in notes.
In July 1998, the Company entered into an agreement to acquire Health Care Waste
Services Corp., ("HCWS"). A medical waste hauling company based in New York
City. The Company anticipates the closing to occur in the fourth quarter of 1998
upon approval by the New York City Trade Waste Commission. HCWS provides medical
waste hauling and sharps reusable programs to in the greater Metropolitan New
York City medical community.
5
<PAGE> 6
3. DEBENTURES AND NOTES PAYABLE
Debentures and Notes payable consist of the following at September 30, 1998:
Term Loan $ 8,346,030
Line of Credit 4,609,381
Notes payable 3,688,112
------------
Total notes payable $ 16,643,523
Less: current portion (391,243)
------------
Total $ 16,252,280
============
During the nine months ended September 30, 1998 and 1997 interest expense was
approximately $641,000 and $266,000 respectively.
The Company has a line of credit with a bank for $5,000,000. The line of credit
is a demand note and bears interest at prime plus 1%. Interest is payable
monthly. At September 30, 1998, the Company had $4,609,381 in outstanding
borrowings under the line. Substantially all of the Company's assets are
collateral for the loan. In addition, the Company is a party to a $8,346,030
million term loan, with its bank. The term loan bears interest at a rate of
prime plus 1%, and is payable interest monthly with a balloon payment on April
30, 1999.
4. NET INCOME PER COMMON SHARE
A reconciliation of the numerator and denominator of earnings per share for the
quarters ended September 30th follows:
<TABLE>
<CAPTION>
1998 1997
Income Shares Pre-Share Income Shares Pre-Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- --------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Income (loss) before
discontinued operations $ 1,346,845 $ 344,854
Less: Preferred stock dividends 208,864
Basic EPS Income available to
common shareholders $ 1,137,981 5,477,568 .21 $ 344,854 4,496,137 .08
----- -----
Effect of Dilutive Securities
Warrants and Options 696,810 1,337,731
Reduction of Interest $ 42,753 685,131 $ 205,679 1,025,641
----------- ---------- --------- ---------
Diluted EPS
Income (loss) available to
common shareholders $ 1,180,734 6,859,509 .17 $ 550,533 6,859,509 .10
----------- ---------- ----- --------- --------- -----
</TABLE>
Options to purchase 946,500 and 641,000 shares of common stock from $2.75 to
$8.50 per share were outstanding during 1998 and 1997, respectively, but were
not included in the computation of diluted EPS because the options exercise
price was greater than the average market price of the common shares for those
years. The options, which expire from 1999 to 2002, were still outstanding at
the end of September 1998. Warrants to purchase 141,000 and 116,000 shares of
common stock from $4.25 to $8.70 per share were outstanding during 1998 and
1997, respectively, but were not included in the computation of diluted EPS
because the warrant exercise price was greater than the average market price of
the common shares for those years. The warrants, which expire from 1998 to 2002,
were still outstanding as of September 30, 1998.
6
<PAGE> 7
5. SALE OF KOVER
On January 30, 1998, the Company sold 100% of the common stock of a wholly owned
subsidiary, the Kover Group, Inc. ("Kover") to MPK holdings, LP ("MPK"), MPK is
owned by Phillip W. Kubec. Mr. Kubec was the president and chief executive
officer of Kover and a director of the Company. The selling price approximated
the book value of Kover. Accordingly, no material gain or loss is expected in
1998. The Company received aggregate consideration for the sale of Kover of $2.7
million, payable $1.2 million in cash at closing and the balance of $1.5 million
in promissory notes. The Company received two promissory notes, one for $960,000
from MPK (the "MPK Note") and one for $540,000 from Kover (the "Kover Note"). In
July 1998, MPK prepaid the MPK Note and Kover Note plus accrued interest. The
Company received $1,350,000 in cash and a new $150,000 promissory note from MPK
("the New Note"). The New Note is payable interest only monthly at the rate of
8.25% per annum, with the principal balance due at the end of eleven years.
For the nine months ended September 30, 1998, the net loss from Kover was
($2,948) with the sale of Kover creating a gain of $17,050; both are reported as
discontinued operations.
6. SUBSEQUENT EVENT
In October 1998, the Company acquired Sanford Motors, Inc. and its related
companies ("SMI"). SMI operates a medical waste hauling operation in the
Pennsylvania, New Jersey, Delaware, and Maryland region and owns a 49% interest
in an incineration facility in Matthews, North Carolina. The purchase price for
SMI was payable $4,000,000 in cash and 500,000 shares of the Company's common
stock. The Company has guaranteed that the common stock will have a fair market
value of $14 at the end of three years following the closing.
In October 1998, the Company purchased BMW Medtec of West Virginia, Inc.
("BMW"), a medical waste transportation company operating in West Virginia,
Eastern Ohio and Western Pennsylvania. The purchase price for BMW was payable
$175,000 in cash and 16,000 shares of the Company's common stock.
On November 5, 1998, the Board of Directors of the Company declared a dividend
distribution of one preferred stock purchase right (the "Rights") for each
outstanding share of common stock, $.001 per value (the "Common Stock"), of the
Company to share-holders of record at the close of business on November 6, 1998
(the "Record Date") and authorized the issuance of one Right with respect to
each share of Common Stock that becomes outstanding between the Record Date and
November 6, 2008 or such earlier time as the Rights are redeemed. Each Right,
when exercisable, entitles the registered holder to purchase from the company
one one-hundreth of a share of Series B Junior Participating Preferred Stock,
$.001 par value (the "Preferred Stock"), at a price of $25 per one one-hundredth
of a share (the "Purchase Price"), subject to adjustment. Under certain
circumstances, when a person acquires 20%, or more, of the Company's common
stock, each right would entitle the holder to purchase, at $25, a number of
shares of common stock, having a market value at the time equal to twice the
Rights exercise price. The terms of the Rights are set forth in a Rights
Agreement (the "Rights Plan") between the Company and Continental Stock Transfer
and Trust Company, as Rights Agent, a copy of which is attached as an exhibit to
the Company's current report on Form 8-K filed with the SEC on November 6, 1998.
The description of the Rights set forth below does not purport to be complete
and is qualified in its entirety by reference to the Rights Plan.
7
<PAGE> 8
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED WITH SEPTEMBER 30, 1997
REVENUES. For the three months ended September 30, 1998, the Company
had revenues of $8,389,733 an increase of 251% from the comparable period in
1997. The higher revenues for the three month period ended September 30, 1998
was primarily due to the inclusion of revenues from Incendere, Inc., (acquired
in November 1997), Safety Disposal System of Georgia, Inc. ("SDSGA") (acquired
in September 1997), Safety Disposal System of Pennsylvania, Inc., ("SDSPA")
(acquired in November 1997), Med-Waste of Alabama (acquired in June 1998),
Target Medical Waste Services (acquired in June 1998) and a management agreement
with SMI which ended on September 30, 1998.
OPERATING COSTS. Consolidated operating costs amounted to $3,798,542 in
the three months ended September 30, 1998 period as compared to $1,490,671 for
the same period in 1997. The increase is primarily attributable to the inclusion
of the operations of Incendere, SDSGA, SDSPA, Med-Waste of Alabama and Target
Medical Waste Services; and costs associated with the continued renovation of
the Company's incinerator in Hampton, South Carolina. Management believes that
the upgrade of the South Carolina incinerator should be completed by the latter
part of the second quarter of 1999.
ADMINISTRATIVE AND SELLING EXPENSES. Administrative and selling
expenses increased to $2,996,007 in the three months ended September 30, 1998
from $580,917 for the same period for 1997. The increase is primarily
attributable the inclusion of expenses associated with Incendere, SDSGA, SDSPA,
Med-Waste of Alabama and Target Medical Waste Services.
OPERATING PROFIT. The Company recorded an operating profit of
$1,430,102 for the three months ended September 30, 1998 as compared to $292,032
in the comparable 1997 period. The increase was primarily attributable to the
inclusion of Incendere, SDSGA, SDSPA, Med-Waste of Alabama and Target Medical
Waste Services; partially offset by costs associated with the continued
renovation of the Company's incinerator. Management believes that the upgrade of
the South Carolina incinerator should be completed by the latter part of the
second quarter of 1999.
OTHER, NET. Other, net increased to an expense of $641,008 in the three
months ended September 30, 1998 as compared to expense of $118,810 for the same
period in 1997 primarily due to the interest expense on the term loan used in
the purchase of acquisitions.
NET INCOME FROM CONTINUING OPERATIONS. Net income from continuing
operations for the third quarter of 1998 rose to $427,556 compared to a net
income of $173,222 from continuing operations for the same period in 1997. The
increase was primarily attributable the inclusion of net revenue from Incendere,
SDSGA, SDSPA, Med-Waste of Alabama and Target Medical Waste Services; and costs
associated with the continued renovation of the incinerator. Management believes
that the upgrade of the South Carolina incinerator should be completed by the
latter part of the second quarter of 1999.
8
<PAGE> 9
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED WITH SEPTEMBER 30, 1997
REVENUES. For the nine months ended September 30, 1998, the Company had
revenues of $20,656,106 up 180% from the comparable period in 1997. The higher
revenues for the current nine month period were primarily due to the inclusion
of revenues from Incendere, SDSGA, and SDSPA, Med-Waste of Alabama and Target
Medical Waste Services.
OPERATING COSTS. Consolidated operating costs amounted to $12,449,544
in the nine months ended September 30, 1998 period as compared to $4,838,551 for
the same period in 1997. The increase is primarily attributable to the inclusion
of Incendere, Inc., SDSGA, and SDSPA, Med-Waste of Alabama and Target Medical
Waste Services; and costs associated with the continued renovation of Hampton.
Management believes that the upgrade of the South Carolina incinerator should
be completed by the latter part of the second quarter of 1999.
ADMINISTRATIVE AND SELLING EXPENSES. Administrative and selling
expenses increased to $4,908,905 in the nine months ended September 30, 1998
from $1,891,803 for the same period in 1997. The increase was primarily
attributable the inclusion of net revenue from Incendere, SDSGA, SDSPA,
Med-Waste of Alabama and Target Medical Waste Services.
OPERATING PROFIT. The Company recorded an operating profit of
$2,934,004 for the nine months ended September 30, 1998 as compared to $590,536
in the comparable 1997 period. The increase was primarily attributable to the
inclusion of net revenue from Incendere, Inc., SDSGA, and SDSPA, Med-Waste of
Alabama and Target Medical Waste Services; and costs associated with the
continued renovation of Hampton. Management believes that the upgrade of the
South Carolina incinerator should be completed by the latter part of the second
quarter of 1999.
OTHER, NET. Other, net increased to an expense of $975,621 in the nine
months ended September 30, 1998 as compared to expense of $245,682 for the same
period in 1997 primarily due to the interest expense on the term loans used in
the purchase of acquisitions.
NET INCOME FROM CONTINUING OPERATIONS. Net income for nine months
ended September of 1998 rose to $1,346,845, compared to a net income of $344,854
from continuing operations for the same period in 1997. The increase was
primarily attributable to the inclusion of net revenue from Incendere, SDSGA,
and SDSPA, Med-Waste of Alabama and Target Medical Waste Services; and costs
associated with the continued renovation of Hampton. Management believes that
the upgrade of the South Carolina incinerator should be completed by the latter
part of the second quarter of 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital at September 30, 1998 amounted to
$6,802,462 compared to $2,974,425 at December 31, 1997. During the nine months
ended September 30, 1998 cash decreased by $529,423 to $455,285. Operating
activities used $4,938,384 of cash, principally due to the increase in accounts
receivable, other assets and prepaid expenses. Investing activities used
$4,566,650 in cash principally due to the purchase of equipment; and Financing
activities provided $8,975,611 of cash.
On January 30, 1998, the Company sold 100% of the common stock of Kover
to MPK holdings, LP ("MPK") MPK is owned by Phillip W. Kubec. The selling price
approximated the book value of Kover, accordingly no material gain or loss is
expected in 1998. The Company received aggregate consideration for the sale of
Kover of $2.7 million, payable $1.2 million in cash at closing and the balance
of $1.5 million in promissory notes. In July 1998 MPK prepaid the MPK Note and
Kover Note plus accrued interest. The Company received $1,350,000 cash and a new
$150,000 promissory Note from MPK ("New Notes"). The Company received two
promissory notes, one for $960,000 from MPK (the "MPK Note") and one for
$540,000 from Kover (the "Kover Note").
On March 31, 1998, the Company purchased the capital stock of Med
Waste, Inc., an unrelated Pennsylvania corporation. The purchase price was
$310,000 payable in 41,000 shares of the Company's common stock at closing. The
stock issued in connection with the purchase is guaranteed, by the Company to be
at the end of two years for $7.50 per share.
9
<PAGE> 10
In June 1998, the Company purchased from Biomade Plastics, Inc. a
subsidiary of ARK Industries, Inc. (formerly BioMedical Waste Systems, Inc.)
molds for the manufacture of reusable sharps containers, lids and accessories
used in the "Sharps Express" program, together will all proprietary knowledge,
patents, 510k approvals, trade secrets, referral lists, technical information,
quality control data, processes (whether secret or not), methods and other
similar know how or rights. Biomade Plastics, Inc. operated a reusable sharps
container program through licensing territories to third parties. The Company
received an assignment of all license agreements as well as all inventories of
such containers.
In June 1998 the Company, acquired Target, Medical Waste Services, LLC
("Target") based in Mobile, Alabama. Target provides the medical waste
management services to customers in Alabama, Florida, Louisiana and Mississippi.
Target also owns and operates a medical waste autoclave facility. The purchase
price for Target amounted to $1,087,912 payable in cash.
In June 1998, the Company acquired Med-Waste, Inc., an unrelated
Alabama corporation ("Decatur") based in Alabama. Decatur provides medical waste
management services to medical waste generators located in the states of
Alabama, Georgia and Tennessee. Decatur also owns and operates a medical Waste
autoclave facility. The purchase price for Decatur amounted to $500,000 in cash,
133,334 shares of the Company's common stock and $1.5 million in notes).
In July 1998, the Company entered into an agreement to acquire Health
Care Waste Services Corp., ("HCWS"). A medical waste hauling company based in
New York City. The Company anticipates the closing to occur in the fourth
quarter of 1988 upon approval by the New York City Trade Waste Commission
In October 1998, the Company acquired Sanford Motors, Inc. and its
related companies ("SMI"). SMI operates a medical waste hauling operation in the
Pennsylvania, New Jersey, Delaware, and Maryland region and owns a 49% interest
in an incineration facility in Matthews, North Carolina. The purchase price for
SMI was payable $4,000,000 in cash and 500,000 shares of the Company's common
stock. The Company guaranteed that the common stock would have a fair market
value of $14 per share at the end of the three years following the transfer.
In October 1998, the Company purchased BMW Medtec of West Virginia,
Inc. ("BMW"), a medical waste transportation company operating in West Virginia,
Eastern Ohio and Western Pennsylvania. The purchase price for BMW was payable
$175,000 in cash and 16,000 shares of the Company's common stock.
The Company has started the renovation of its SDSSC incinerator which
Management believes will be completed by the latter part of the second quarter
of 1999. The Company has financed the work completed to date through internally
generated working capital and is seeking long-term financing.
IMPORTANT FACTORS RELATING TO FORWARD LOOKING STATEMENTS
This Form 10-QSB contains certain forward looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995 with respect to
the financial condition, results of operations and business of Med/Waste, Inc.,
and its subsidiaries, including statements made under Management's Discussion
and Analysis of Financial Condition and Results of Operations. These forward
looking statements involve certain risks and uncertainties. No assurance can be
given that any of such matters will be realized. Factors that may cause actual
results to differ materially from those contemplated by such forward looking
statements include, among others, the following: the competitive pressure in the
industry; general economic and business conditions; the ability to implement and
the effectiveness of business strategy and development plans; quality of
management; business abilities and judgment of personnel; and availability of
qualified personnel; labor and employee benefit costs.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
NONE
10
<PAGE> 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibit 27 - Financial Statement
(b) The Company's reports on Form 8-K for the three months ended
September 30, 1998.
None
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, hereunto duly
authorized.
Med/Waste, Inc.
Date: NOVEMBER 12, 1998 /s/ DANIEL A. STAUBER
------------------- ------------------------------
Daniel A. Stauber,
President and Chief
Executive Officer
Date: NOVEMBER 12, 1998 /s/ MICHAEL D. ELKIN
------------------- --------------------------------
Michael D. Elkin,
Vice President and Chief
Financial Officer
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 455,285
<SECURITIES> 0
<RECEIVABLES> 8,261,340
<ALLOWANCES> (146,000)
<INVENTORY> 354,391
<CURRENT-ASSETS> 11,351,468
<PP&E> 14,228,913
<DEPRECIATION> 0
<TOTAL-ASSETS> 46,185,798
<CURRENT-LIABILITIES> 4,549,006
<BONDS> 18,054,083
0
289
<COMMON> 6,149
<OTHER-SE> 23,576,271
<TOTAL-LIABILITY-AND-EQUITY> 46,185,798
<SALES> 0
<TOTAL-REVENUES> 20,656,106
<CGS> 12,449,554
<TOTAL-COSTS> 4,908,905
<OTHER-EXPENSES> 975,621
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,360,947
<EPS-PRIMARY> .21
<EPS-DILUTED> .17
</TABLE>
