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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 June 30, 1999
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OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
AC
For the transition period from ____________ to _____________
COMMISSION FILE NUMBER: 0-22294
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MED/WASTE, INC.
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(Exact Name of Small Business Issuer as Specified in its Charter)
DELAWARE 65-0297759
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6175 NW 153 STREET, SUITE 324, MIAMI LAKES, FL 33014
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(Address of principal executive offices)
(305) 819 - 8877
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(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 [ ] No [X]
The number of shares outstanding of the registrant's common stock $.001 par
value as of August 19, 1999 was 6,733,980.
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MED/WASTE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31, 1998
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
---------------- -----------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents $ 155,992 $ 113,146
Accounts Receivable, Net of Allowances of
$573,000 and $740,000 in 1999 and 1998
respectively 5,463,427 5,713,044
Inventories 271,502 352,941
Prepaid Expenses and Other Current Assets 888,377 1,359,436
------------ ------------
Total Current Assets $ 6,779,298 7,538,567
Property, Plant and Equipment, Net 13,564,605 14,172,260
Goodwill 19,614,925 19,906,832
Other Intangibles, net 6,555,055 6,955,707
Other Assets 979,521 715,279
Investment in unconsolidated subsidiary 801,339 717,399
Notes Receivable 150,000 150,000
------------ ------------
Total Assets $ 48,444,743 $ 50,156,044
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts Payable and Accrued Liabilities $ 7,146,303 $ 6,679,770
Current Portion of Notes Payables 23,214,777 20,120,645
Current Portion of Capital Lease Obligations 592,148 679,935
Customer Deposits -- 19,566
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Total Current Liabilities 30,953,228 27,449,916
Capital Lease Obligations, Less Current Portion 727,444 901,634
Notes Payable and Less Current Portion 404,819 1,957,023
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32,085,491 30,358,573
Shareholders' Equity:
Series A Preferred Stock, .01 par value; 60,000 298 289
shares Authorized; 29,662 and 28,869 Shares
Outstanding in 1999 and 1998 respectively
Common Stock, $.001 par value; 10,000,000
Shares Authorized; 6,654,813 and 6,651,647
Shares Issued and Outstanding in 1999 and
1998 respectively 6,655 6,651
Additional Paid-in Capital 30,388,935 30,289,507
Warrant Subscriptions Receivable (346,054) (387,466)
Retained Earnings (deficit) (13,659,925) (10,080,853)
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16,389,909 19,828,128
Less Cost of Treasury Stock: 11,824 Shares (30,657) (30,657)
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Total Shareholders' Equity 16,359,252 19,797,471
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Total Liabilities and Shareholders' Equity $ 48,444,743 $ 50,156,044
============ ============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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MED/WASTE, INC. SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 6,892,875 $ 5,598,304 $ 13,956,313 $ 11,681,090
Costs and expenses:
Operating costs 5,548,743 5,042,549 11,406,835 10,744,796
Administrative and selling expenses 1,918,609 2,085,513 4,098,717 3,379,730
Amortization of Intangibles 343,249 22,364 686,504 170,802
------------ ------------ ------------ ------------
Total 7,810,601 7,150,426 16,192,056 14,295,328
------------ ------------ ------------ ------------
Operating loss (917,726) (1,552,122) (2,235,743) (2,614,238)
Other, net (476,045) 24,890 (1,212,295) (320,511)
------------ ------------ ------------ ------------
Loss before income taxes (1,393,771) (1,527,232) (3,448,038) (2,934,749)
Income taxes (benefit) -- (102,280) (580,835)
------------ ------------ ------------ ------------
Net loss (1,393,771) (1,424,952) (3,448,038) 2,353,914
Preferred stock dividend (65,517) (65,504) (131,034) (143,346)
------------ ------------ ------------ ------------
Net loss available to common
shareholders $ (1,459,288) $ (1,490,456) $ (3,579,072) $ (2,497,260)
============ ============ ============ ============
Loss per share - basic and diluted $ (0.22) $ (.28) $ (0.54) $ (.49)
Weighted average shares outstanding 6,652,828 5,334,780 6,652,575 5,146,130
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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CONSOLIDATED FINANCIAL STATEMENTS
Med/Waste, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
----------------
JUNE 30
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1999 1998
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<S> <C> <C>
OPERATING ACTIVITIES:
Net (loss) earnings $ (3,448,038) $ (2,353,914)
Adjustments to reconcile net earnings to net cash (used) in operating
activities,
Depreciation and amortization 1,649,009 746,044
Provision for doubtful notes and accounts receivable 84,422 157,500
Issuance of stock, options, and warrants for services 36,002 (67,091)
Equity in net income of unconsolidated subsidiary (83,940) --
Other 351,639
Changes in operating assets and liabilities net of effects of
acquisitions:
Decrease (increase) in accounts receivable 165,195 (1,030,187)
Increase in notes receivables (195,021)
Increase in inventories 81,439 204,430
Decrease in prepaid expenses and other assets 471,059 513,874
Increase in accounts payable and accrued expenses 466,533 1,315,030
Increase in other assets (258,187)
(Decrease) increase in customer deposits (19,566) 18,087
Increase in deferred income tax liability -- (580,835)
------------ ------------
Net cash provided by (used in) operating activities (856,072) (920,444)
INVESTING ACTIVITIES:
Proceeds on sale of Kover -- 1,200,000
Purchase of operating equipment (354,850) (1,464,106)
Acquisition of businesses net of cash acquired -- (2,504,549)
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Net cash provided by investing activities (354,850) (2,768,655)
FINANCING ACTIVITIES:
Increase (decrease) in line of credit and notes payable-net 1,541,928 3,068,306
(Decrease) in capital leases, net (261,977) (422,276)
Issuance of common stock -- 287,742
Payment of stock subscription receivable 41,412 50,000
Preferred stock dividend (67,595) (143,346)
------------ ------------
Net cash (used) provided by financing activities 1,253,798 2,840,426
------------ ------------
Increase (decrease) in cash and cash equivalents 42,846 (848,673)
Cash and cash equivalents at beginning of period 113,146 984,708
------------ ------------
Cash and cash equivalents at end of period $ 155,992 $ 136,035
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Notes received for sale of Kover $ -- (1,500,000)
Notes issued for acquisition of Decatur -- 1,500,000
Fixed Assets acquired through capital leases -- 1,141,000
Common stock issued for the acquisition of Decatur -- 992,511
Common stock issued for the acquisition of Med-Waste, Inc -- 310,000
Common stock issued for the acquisition of Biomade assets -- 550,000
Common stock issued for the acquisition of Biotech -- 196,662
Notes received for exercising stock options -- 179,463
Conversion of debentures to common stock -- 839,000
Conversion of preferred to common stock -- 1,410,000
Preferred stock issued as payment of dividend 63,439 --
Cash paid during the period for interest 991,000 431,000
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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MED/WASTE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. OPERATIONS AND BASIS OF PRESENTATION
ORGANIZATION
Med/Waste, Inc. (the "Company") is a holding company incorporated in November
1991 under the laws of the State of Delaware. The Company and through its
subsidiaries, is engaged in the businesses of medical waste management.
The medical waste management operations are conducted primarily through the
following subsidiaries, collectively referred to as the "Waste Companies":
Safety Disposal System, Inc. ("SDS")
Safety Disposal System of South Carolina, Inc. ("SDSSC")
Safety Disposal System of Pennsylvania, Inc. ("SDSPA")
Safety Disposal System of Georgia, Inc. ("SDSGA")
Safety Disposal System of Virginia, Inc. ("SDSVA)
Incendere, Inc. ("Incendere")
Target Medical Waste Services, LLC ("Target")
Med-Waste, Inc. ("Decatur")
Sanford Motors, Inc. ("SMI")
BMW Medtec of West Virginia ("BMW")
BASIS OF PRESENTATION
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.
These statements should be read in conjunction with the consolidated financial
statements and related notes contained in the Company's Annual Report on Form
10-KSB for 1998. These interim results of operations are not necessarily
indicative of results for the entire year.
RESTATEMENT
On March 8, 1999, the Company announced that it may be required to restate the
earnings reported during 1998. After a further investigation and the
recommendation of new management, the Audit Committee of the Board of Directors
appointed an independent counsel to review its accounting and reporting
practices. The Company restated its previously issued financial statements for
three quarters ended in March 31, June 30 and September 30, 1998. These
statements should be read in conjunction with the consolidated financial
statements and related notes contained in the Company's Annual Report on Form
10-KSB for 1998. The financial statements presented for the June 30,1998
periods are the restated financial statements.
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2. ACQUISITIONS
No acquisitions were made by the Company during the three months ended June 30,
1999. In January 1999, the Company terminated its Agreement to acquire Health
Care Waste Services Corp. of New York City. All capitalized costs related to
this activity were expensed in 1998.
3. NOTES PAYABLE
Notes payable consist of the following at June 30, 1999:
<TABLE>
<S> <C>
Term Loan $16,200,000
Line of Credit 3,500,000
Notes payable 3,919,596
-----------
Total notes payable 23,619,596
Less: current portion 23,214,777
-----------
Long Term Portion $ 404,819
===========
</TABLE>
During the six months ended June 30, 1999 and 1998 interest expense was
approximately $1,053,000 and $494,000 respectively.
In January 1999, the Company refinanced the line of credit and term loans with
its existing bank through a new Credit Agreement. The Credit Agreement includes
a revolving credit loan for $10,000,000 and a convertible credit loan of
$25,000,000. Generally, borrowings under the revolving credit loan may not
exceed 80% of the Company's eligible accounts receivable, as defined. Provided
that no default or event of default, as defined, has occurred, the total
principal balance of the convertible credit loan would be converted to a term
loan on July 31, 2000 and is payable monthly in an amount equal to one
eighty-fourth (1/84th) of the aggregate principal balance of the converted
loan. Final payment plus accrued interest due on July 31, 2004. The revolving
credit loan was due July 31, 1999. Interest on the revolving credit loan and
convertible credit loan is payable monthly at a rate equal to the Prime Rate or
the LIBOR Rate plus or minus an applicable margin as defined in the Credit
Agreement. The Credit Agreement requires the Company to maintain minimum levels
of liquidity, profitability and net worth. The Company is currently in
violation of all of the financial covenants pertaining to the Credit Agreement.
The Company has not obtained waivers from the bank and as such, has classified
the line of credit and term loans outstanding at June 30, 1999 and December 31,
1998 as current liabilities. Because of the violations, the Company is not
currently eligible to convert the term loan as described above. The Company has
been negotiating with its lenders for the purposes of restructuring the
Company's debt and these lenders have not called the outstanding balances.
4. NET INCOME PER COMMON SHARE
A reconciliation of the numerator and denominator of earnings per share for the
quarters ended June 30 follows:
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<TABLE>
<CAPTION>
1999 1998
Income Shares Income Shares
(Numerator) (Denominator) Per-Share Amount (Numerator) (Denominator) Per-Share Amount
----------- ------------- ---------------- ----------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Net loss (3,448,038) $(2,368,015)
Less: Preferred stock
dividends (131,034) (143,346)
Basic and diluted EPS
and loss available to
common shareholders (3,579,072) 6,652,575 $(.54) (2,511,361) 5,146,130 $(.49)
</TABLE>
Options to purchase 963,650 shares of common stock from $2.125 to $6.063 per
share were outstanding as of June 30, 1999. The options expire at various dates
through 2003. Stock warrants to purchase 626,150 shares of common stock from
$2.75 to $8.00 were outstanding as of June 30, 1999. The warrants expire at
various dates through 2004. In both 1999 and 1998, no options or warrants were
included in the computation of earnings per share because their inclusion would
have an anti-dilutive effect.
5. RESTATEMENT
In July 1999, after an investigation by new management and special counsel
appointed by the Audit Committee of the Board of Directors, the Company
determined that in the 1998 financial statements included in Form 10-QSB for
each of the quarters of 1998, certain revenues were improperly recognized,
certain costs and allowances were not accrued or were improperly recorded and
certain costs were improperly deferred. As a result, the accompanying
consolidated financial statements as of June 30, 1998 and for the three months
then ended, present restated results as previously filed.
6. SUBSEQUENT EVENTS
SEC INQUIRY
By letter dated July 19, 1999, the Securities and Exchange Commission ("SEC")
advised the Company that it is conducting an informal inquiry into the
accounting procedures utilized by the Company. The SEC has requested that the
Company voluntarily provide certain records and other information. The Company
is complying fully with such request and will continue to cooperate with the
SEC in its inquiry.
7. LITIGATION
On June 16, 1999, a complaint was filed against the Company, and certain former
officers and directors. The Plaintiff seeks to certify a class action against
the Defendants for the purported securities violations. Specifically, the
complaint seeks relief for violations of Section 10(b) of the Securities
Exchange Act of 1934 (the "Exchange Act") and Rule 10(b)-5, promulgated
thereunder, as well a purported violations violation of Section 20(a) of the
Exchange Act. The complaint alleges that the Defendants purportedly issued
false and misleading statements as to the Company's results of operations and
that, specifically, earnings and earnings per share of the Company for each of
the quarterly reports issued for the first, second and third quarters of the
1998 fiscal year were fraudulently misstated. Plaintiff seeks to recover
damages on behalf of himself and the putative class he represents purportedly
sustained as a result of the violations of the securities law alleged in the
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Complaint. Plaintiff also seeks to recover attorney's fees and costs incurred
in the litigation. No discovery has commenced and the size of the plaintiff
class is not yet determined. Accordingly, the Company and counsel are unable to
predict the outcome of this case.
In January 1999 the former stockholders of Med-Waste, Inc., an Alabama
corporation, filed a lawsuit against the Company. The lawsuit alleges fraud,
misrepresentations, breach of contract and failure to pay on a promissory note
given as part of the purchase price. In June 1999, the Company terminated the
employment of the former stockholders for "cause". The Company intends to
vigorously defend the lawsuit and believes it has meritorious defenses to the
claims. In addition, the Company expects to file a counterclaim for breach of
contract, fraud and misrepresentation in connection with the purchase of the
corporation. Plaintiff's counsel recently withdrew from the case and new
counsel was engaged. In view of these circumstances and the early stage of
discovery, the Company and counsel are unable to predict the outcome of this
case at this time.
On January 7, 1999, the Company terminated Mr. W. Fred Bonham's employment for
"cause". On April 9, 1999, Mr. Bonham filed a complaint against the Company.
Mr. Bonham alleges in his complaint that the Company violated his Employment
Agreement by failing to pay Bonham certain compensation after his discharge from
the Company. In his complaint, Bonham seeks compensatory damages, pre-judgement
interest, costs and reasonable attorney's fees. Specifically, Bonham seeks his
base salary ($175,000) due for the remaining term of his Employment Agreement,
as well as various stock options. This case is in the early stages of discovery.
Accordingly, the Company and counsel are unable to predict the outcome of this
case at this time.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999 COMPARED WITH JUNE 30, 1998
REVENUES. For the six months ended June 30, 1999, the Company had revenues of
$13,956,313, an increase of 19% from $11,681,090 for the same period in 1998.
This increase is substantially less from what would be expected after the
acquisitions of Target, Decatur, SMI and BMW in 1998. Prior management's
inability to consolidate the acquisitions into its existing operational
structure contributed to the limited growth gained from these acquisitions.
Operational problems throughout the organization resulted in negative internal
growth, which negated the already limited growth brought about from the
acquisitions. Revenues, excluding the 1998 acquisitions, were $10,284,778 a 12%
decline from 1998. During the six months ended June 30, 1999, management made
significant changes in the marketing and customer service areas that should
result in reversing the negative internal growth rate. During this period,
several large customers were added and customer service was improved
dramatically especially in the Florida area which has been a poor performer
throughout 1998 and early 1999.
OPERATING COSTS. Consolidated operating costs amounted to $11,406,835, or 82% of
revenues, in the six months ended June 30, 1999, as compared to $10,744,796, or
91% of revenues, for the same period in 1998. Although the costs as a percent of
revenues improved by 10% the reduction is not considered sufficient to what
should be expected from synergies to be obtained from the acquisitions made
during 1998. During the six-months ended June 30, 1999, various changes were
made by management to reduce costs. Included in these changes were the
re-negotiation of the American Waste Industries Disposal Contract announced in
May of 1999, beginning of establishing a national service center concept, which
consolidates all support operations in one central location, consolidation of
routes, closing of several transfer stations, a reduction of personnel of
approximately 25%, reduction of leased equipment, and many others. Some of these
changes were made late in the period and their effects are not fully reflected
on the results of operations for the period. In the future, these changes will
continue to help reduce operating costs.
ADMINISTRATIVE AND SELLING EXPENSES. Administrative and selling expenses
increased to $4,098,717 in the six months ended June 30, 1999 from $3,379,730
for the same period for 1998. The increase is due to the acquisitions made in
1998. These costs represent 29% of revenues in both 1999 and 1998. This lack of
improvement was due to prior management inability to obtain cost synergies from
acquisitions. New management has made many changes in administrative policies
and procedures to reduce these costs. As these changes take effect, these
administrative costs will be reduced significantly in the future.
OPERATING LOSS. The Company reported an operating loss of $2,235,743 for the
six-month period ended June 30, 1999 compared to a loss of $2,614,538 in 1998.
The synergies which were expected from the acquisitions made in 1997 and 1998
and never materialized, is the primary reason for the poor performance. These
synergies are expected to materialize once the Company is properly reorganized
and the national service center concept fully operational.
OTHER, NET. Other, net increased to an expense of $1,212,295 in the six months
ended June 30, 1999 as compared to an expense of $320,511 for the same period
in 1998. The increase can be attributed to an increase of interest expense of
$559,000 due to higher debt and the $280,000 in loans fees and expenses
normally amortized over the life of the loan which were expensed due to the
bank loans being in default. Also, in 1998 this category of expense was offset
with a gain from the sale of property.
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NET LOSS. The net loss of $3,448,038 for the six-month period ended June 30,
1999 compares to a net loss of $2,353,914 for the same period in 1998. The loss
for the 1998 period was reduced by the effect of an income tax benefit of
$580,835 resulting from the reversal of certain deferred tax liabilities. The
loss for 1999 can be attributed to the Company's inability in the past to
consolidate acquisitions and obtain the synergy's expected from such
acquisitions. The many operational changes made by new management during the
latter part of the six month period ended June 30, 1999 will not have a full
impact on the financial statements until future periods.
THREE MONTHS ENDED JUNE 30, 1999 COMPARED WITH JUNE 30, 1998
REVENUES. For the three months ended June 30, 1999, the Company had revenues of
$6,892,875, an increase of 23% from the $5,598,304 for the same period in 1998.
This increase is substantially less than what would be expected after the
acquisitions of Target, Decatur, SMI and BMW. Prior management's inability to
consolidate the acquisitions into its existing operational structure
contributed to the limited growth gained from these acquisitions. Operational
problems throughout the organization have resulted in negative internal growth,
which negated the already limited growth brought about from the acquisitions.
This trend is expected to be reversed by the actions taken by new management
during the period.
OPERATING COSTS. Consolidated operating costs amounted to $5,548,743, or 80% of
revenues, in the three months ended June 30, 1999, as compared to $5,042,549,
or 90% of revenues, for the same period in 1998. Although the costs as a
percent of revenues improved by 11%, the reduction is not considered sufficient
to what should be expected if more synergies could be obtained form the
acquisitions made during 1998. The costs reduction efforts of the Company's new
management have helped reduced these costs as compared to 1998. This trend is
expected to continue and improve as these changes and others to come take full
effect and operations are improved.
ADMINISTRATIVE AND SELLING EXPENSES. Administrative and selling expenses
decreased to $1,918,609 in the three months ended June 30, 1999 from $2,085,513
for the same period in 1998. These costs represent 28% of revenues in 1999
compared to 37% in 1998. The many changes implemented by new management during
the six month period ended June 30, 1999 have helped reduce these costs as
compared to 1998. The full effect of these changes and others to come should
help continue this positive trend in future periods.
OPERATING LOSS. The Company reported an operating loss of $917,726 for the
three-month period ended June 30, 1999 compared to a loss of $1,552,122 in
1998. The changes in operations implemented by new management caused the
improvement over the result of 1998. These changes are expected to continue to
improve the results of operations in future periods.
OTHER, NET. Other, net increased to an expense of $476,045 in the three months
ended June 30, 1999 as compared to a profit of $24,890 for the same period in
1998. The increase can be attributed to an increase of interest expense of
$440,000 due to the increase in debt. Also, the 1998 costs were offset by a
gain on the sale of property recorded in this category.
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NET LOSS. The net loss of $1,393,771 for the three-month period ended June 30,
1999 compares to a net loss of $1,424,952 for the same period in 1998. The loss
for the 1998 period was reduced by the effect of an income tax benefit of
$102,280 resulting from the reversal of certain deferred tax liabilities and the
profit on the sale of property. Considering these two one time positive
adjustments the loss for the six month period ended June 30, 1999 is
significantly reduced from the loss over the same period in 1998 due to the many
changes implemented by new management in 1999 which began to have an effect on
the performance of the Company during the period.
LIQUIDITY AND CAPITAL RESOURCES
Due to the classification of the bank loan as a current liability to reflect the
Company's non compliance with existing loan covenants, working capital was
negative at June 30, 1999 and at December 31, 1998. Cash balances remained
relatively unchanged from December 31 1998 to June 30, 1999 as the Company
operated without a line of credit and under severe operational constraints
resulting from its announcement in March 1999 that it would be required to
restate its results for the first three quarters of 1998. During the period, the
Company met its obligations only through extreme cash management measures that
included delaying payments to certain vendors and re-negotiating payment terms.
Prior to uncovering the erroneous accounting and reporting that transpired
during 1998 the Company borrowed $600,000 from its acquisition line of credit
negotiated in January 1999. Substantially all proceeds were used to pay for
capital expenditures and related expenses incurred in 1998. After the
determination was made that a restatement would be required the Company
immediately notified its banks and was allowed to draw $500,000 from its line of
credit. These proceeds were used to meet pressing accounts payable requirements.
Since that time, the line of credit has been frozen and the Company has met its
obligations from cash provided by operations.
MANAGEMENT CHANGES AND OTHER MATTERS
On January 5, 1999, the Company announced the appointment of George Mas as Vice
President of Finance and Chief Financial Officer.
On January 7, 1999, the Company terminated the employment of W. Fred Bonham as
Vice President and Chief Operating Officer.
On January 11, 1999, the Company announced the appointment of Carlos Campos as
Executive Vice President and Chief Operating Officer. Mr. Campos was appointed
Acting CEO on March 17, 1999 and appointed President and CEO and appointed to
the Board of Directors on July 15, 1999.
On January 26, 1999, Ross Johnston was appointed Vice President Legal Affairs.
On March 17, 1999, Daniel Stauber took a leave of absence as President and
Chief Executive Officer of the Company. Effective June 10, 1999, Mr. Stauber
resigned as President and CEO and also as a member of the Board of Directors of
the Company.
During the period ended June 30, 1999, new management spent a significant part
of its time dealing with the investigation of the events of 1998. Most of the
cost reduction and operational efficiency measures taken to reverse the
negative trends established in 1998 did not occur until late March 1999 or
thereafter. It is expected that these measures will have a substantial positive
effect on results of operations in future periods.
In June of 1999 the Company announced it was voluntarily removing its stock
from trading on the Nasdaq Stock Market in anticipation of not meeting the
Stock Market listing criteria. Since June 10, 1999 the Company stock has traded
on the Pink Sheets.
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GOING CONCERN
The Company's consolidated financial statements are presented on the going
concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. During 1997 and
1998, the Company purchased several companies in the medical waste business in
contemplation of integrating the acquisitions into the Company's core business.
Unfortunately, the Company was unable to successfully integrate and achieve
profitability from these acquisitions. In addition, internal growth was limited
due to the Company's inability to formulate an effective marketing plan,
integrate its acquisitions and manage the Company's growth. During the six
months ended June 30,1999 and thereafter, new management replaced prior
management, and the Company began its plan to aggressively control costs,
control expansion efforts and focus on the Company's core business. The Company
is currently seeking additional working capital for operations and capital of
approximately $6 million for required improvement components to the SDSSC
incinerator during 1999 to 2000 to meet new emission standards. In addition,
the Company is seeking another $1 million for other company-wide improvements.
The Company is also in discussion with several lenders for additional funds, as
well as obtaining a waiver to cure its financial covenant violations.
Discussions are also being held with private investors to raise equity capital.
The Company believes the additional loan and equity proceeds, if obtained, will
be adequate to fund its on-going operations.
The Company's continued existence is dependent upon its ability to resolve its
liquidity problems principally by implementing cost reduction strategies and
obtaining positive results from increased marketing efforts.
The financial statements do not include any adjustments to reflect the possible
future effective on the recoverability and classification of assets for the
amount of classification of liabilities that may result from the possible
inability of the Company to continue as a going concern. There is no assurance
that the Company will be able to achieve its recovery plan as described above.
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 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 judgement of personnel; and
availability of qualified personnel; labor and employee benefit costs.
12
<PAGE> 13
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
SEE NOTE 7 TO THE FINANCIAL STATEMENTS
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Form 8K filed on June 3, 1999.
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: September 2, 1999 /s/ Carlos Campos
------------------- ----------------------------------------
President and Chief Executive Officer
Date: September 2, 1999 /s/ George Mas
------------------- ----------------------------------------
George Mas,
Vice President and Chief
Financial Officer
13
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