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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
of the
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1998 Commission File Number 0-21054
SYNAGRO TECHNOLOGIES, INC.
- -------------------------------------------------------------------------------
(Exact name of Registrant as specified in its Charter)
Delaware 76-0511324
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
5850 San Felipe, Suite 500 Houston, Texas 77057
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(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (713) 706-6180
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant is
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the latest practicable date.
Class Outstanding at May 12, 1998
- -------------------------------- -------------------------------
Common stock, par value $.002 7,617,470
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SYNAGRO TECHNOLOGIES, INC.
INDEX
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
<S> <C>
Condensed Consolidated Balance Sheets as of
March 31, 1998 (Unaudited) and December 31, 1997 3
Condensed Consolidated Statements of Operations
for the Three Months Ended March 31, 1998 and 1997
(Unaudited) 4
Condensed Consolidated Statements of Cash Flows
for the Three Months Ended March 31, 1998 and 1997
(Unaudited) 5
Notes to Condensed Consolidated Financial Statements 6
Management's Discussion and Analysis of Results
of Operations and Financial Condition 9
PART II - OTHER INFORMATION 12
</TABLE>
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SYNAGRO TECHNOLOGIES, INC.
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
-------------- --------------
ASSETS (Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 3,625,772 $ 166,994
Short-term investments 64,504 64,504
Restricted cash, current portion 170,926 172,925
Accounts receivable, net 3,194,727 3,942,355
Note receivable 467,139 500,133
Prepaid expenses and other current assets 1,720,579 1,330,018
-------------- --------------
Total current assets 9,243,647 6,176,929
Property, machinery & equipment, net 8,558,674 8,914,588
Other Assets:
Goodwill, net 4,397,304 4,430,277
Restricted cash, long-term portion 173,387 173,387
Other assets 590,109 249,938
-------------- --------------
Total assets $ 22,963,121 $ 19,945,119
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 3,642,327 $ 4,021,610
Current portion of long-term debt 3,200,303 2,951,291
-------------- --------------
Total current liabilities 6,842,630 6,972,901
Long term debt, net 5,011,235 5,494,549
Redeemable Preferred Stock 3,500,004 --
Stockholders' Equity
Common Stock, $.002 par value, 100,000,000 shares authorized, 15,221 15,221
7,610,305, and 7,610,305 issued and outstanding
Additional paid in capital 28,838,502 25,323,915
Accumulated deficit (21,244,471) (17,861,467)
-------------- --------------
Total stockholders' equity 7,609,252 7,477,669
-------------- --------------
Total liabilities and stockholders' equity $ 22,963,121 $ 19,945,119
============== ==============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS.
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SYNAGRO TECHNOLOGIES, INC.
Condensed Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended March 31,
------------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
Net sales $ 5,621,635 $ 6,737,306
Cost of operations 4,945,920 5,513,327
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Gross profit 675,715 1,223,979
Selling, general and administrative expenses 588,284 927,207
Special charges (credits) (112,999) --
--------------- ---------------
Income from operations 200,430 296,772
Other income (expense)
Other income 173,681 82,231
Interest expense (242,529) (255,252)
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Income before provision for income taxes 131,582 123,751
--------------- ---------------
Provision for income taxes -- --
Net income before redeemable preferred stock dividends 131,582 123,751
--------------- ---------------
Redeemable preferred stock dividends 3,514,587 --
Net earnings (loss) on common stock $ (3,383,005) $ 123,751
=============== ===============
Income (loss) per common share equivalent:
Net income (loss), basic $ (0.44) $ 0.02
Net Income (loss), diluted $ (0.44) $ 0.02
Weighted average shares outstanding, basic 7,610,305 7,111,306
Weighted average shares outstanding, diluted 7,610,305 7,206,855
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
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SYNAGRO TECHNOLOGIES, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
--------------------------------
1998 1997
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<S> <C> <C>
Cash flows from operating activities:
Net income before redeemable preferred stock dividend $ 131,582 $ 123,751
Adjustments to reconcile net income to net cash
provided by (used in) operating activities
Depreciation and amortization 399,319 553,843
Gain on sale of equipment (110,326) (7,091)
Special charges (credits) (112,999) --
(Increase) decrease in the following:
Accounts receivable 747,628 (433,940)
Prepaid expenses and other (394,364) (525,142)
Other assets (303,376) (34,480)
Decrease in accounts payable and accrued expenses (266,292) (407,527)
------------- -------------
Net cash provided by (used in) operating activities 91,172 (730,586)
Cash flows from investing activities:
Additions to property, machinery & equipment (140,803) (337,480)
Proceeds from sale of equipment 240,698 87,575
Sales of short-term investments -- 500,000
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Net cash provided by investing activities 99,895 250,095
Cash flows from financing activities:
Proceeds from debt 249,022 1,682,134
Payments on debt (483,314) (3,806,673)
Decrease in restricted cash 1,999 --
Sale of redeemable preferred stock 3,500,004 --
Sale of common stock, net of offering costs -- 2,851,694
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Net cash provided by financing activities 3,267,711 727,155
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Net increase in cash and cash equivalents 3,458,778 246,664
Cash and cash equivalents, beginning of period 166,994 643,109
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Cash and cash equivalents, end of period $ 3,625,772 $ 889,773
============= =============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
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SYNAGRO TECHNOLOGIES, INC.
<TABLE>
<CAPTION>
Quarter Ended March 31,
-----------------------
Supplemental Cash Flow Information - (Unaudited) 1998 1997
---- ----
<S> <C> <C>
Interest paid during the period $249,703 $188,933
Taxes paid during the period -- --
</TABLE>
Non-Cash Investing and Financing Activities
On March 31, 1998, the Company issued 1,458,335 shares of Series B Preferred
Stock with a beneficial conversion feature. The Company recognized the value of
the beneficial conversion feature of $3,514,587 as a preferred dividend. See
Note (3) to the Notes to Condensed Consolidated Financial Statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
General
The accompanying unaudited condensed consolidated financial statements
have been prepared by the Registrant ("Synagro Technologies, Inc." or the
"Company") pursuant to the rules and regulations of the Securities and Exchange
Commission. These condensed consolidated financial statements reflect all normal
recurring adjustments which are, in the opinion of management, necessary for the
fair presentation of such financial statements for the periods indicated.
Certain information relating to the Company's organization and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles has been condensed or omitted in
this Form 10-Q pursuant to Rule 10-01 of Regulation S-X for interim financial
statements required to be filed with the Securities and Exchange Commission.
However, the Company believes that the disclosures herein are adequate to make
the information presented not misleading. The results for the three months ended
March 31, 1998 are not necessarily indicative of future operating results. It is
suggested that these financial statements be read in conjunction with the
financial statements and notes thereto included in the Company's Annual Report
on Form 10-K, as amended, for the year ended December 31, 1997.
The accounting policies followed by the Company in preparing interim
consolidated financial statements are described in the "Notes to Consolidated
Financial Statements" in the Company's Form 10-K, as amended, for the year ended
December 31, 1997.
Synagro Technologies, Inc. (the Company), is engaged in the biosolids
management business. The Company does this through beneficial reuse of organic
materials, transportation and monitoring of biosolids, and the marketing of end
products from the treatment of such materials. The Company's primary
concentration of customers is in the states of Arkansas, Arizona, California,
Georgia, Maryland, Ohio, Pennsylvania, Texas, Virginia and the District of
Columbia.
Recently Issued Accounting Standard
In March 1998, the AICPA issued Statement of Position (SOP) 98-1, "Accounting
for the Costs of Computer Software Developed or Obtained for Internal Use." The
SOP provides guidance with respect to accounting for the various types of costs
incurred for computer software developed or obtained for the
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Company's use. The Company is required to and will adopt SOP 98-1 in the first
quarter of Fiscal 1999 and believes that adoption will not have a significant
effect on its consolidated financial statements.
In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of Start-Up
Activities." At adoption, SOP 98-5 requires the Company to write-off any
unamortized start-up costs as a cumulative change in accounting principle and,
going forward, expense all start-up activity costs as they are incurred. The
Company is required and will adopt SOP 98-5 in the first quarter of Fiscal 1999
and believes that adoption will not have a significant effect on its
consolidated financial statements.
(2) ACQUISITIONS AND DISPOSITIONS
BFI Organics Division
On August 1, 1997, the Company purchased certain assets and revenue contracts of
the Organics Division of Browning Ferris Industries, Inc. ("BFI") in the
District of Columbia, Georgia, Maryland, Ohio, Pennsylvania and Virginia for
approximately $946,000. The acquisition was financed through the issuance of
third party debt, with all working capital requirements funded under the
existing credit facility.
Sale of Organi-Gro, Inc.
In March 1997, the Company sold the operations of Organi-Gro, a wholly owned
subsidiary, to its former owners. Consideration included subordinated notes of
approximately $1.4 million and the assumption of certain debt and liabilities.
The notes are payable in equal monthly installments of approximately $15,000 for
48 months following the first anniversary date of the note and bears interest at
a rate of 6 percent. In addition, proceeds received from the sale of products by
the purchaser are to be remitted on a monthly basis with a total amount of
$603,930 due no later than September 16, 1998. The balance of the notes are due
in March 2002. The notes were reserved at the date of sale due to considerable
doubt relative to realization. During 1997, approximately $300,000 was realized
on the notes through cash collections or other consideration. During the fourth
quarter of 1997, management assessed realization of the notes based on
collection history to date and current financial condition of the purchasers and
recognized approximately $500,000 of the notes. An additional $112,999 was
recognized during the three month period ended March 31, 1998 and is reflected
in Special charges (credits). As a result of the sale, the Company recorded a
charge to operations in the fourth quarter of 1996 amounting to approximately
$2.5 million to adjust the carrying value of Organi-Gro's net assets to its
estimated fair market value. These charges (credits) are included in "losses on
assets held for sale and other special charges (credits)" in the consolidated
statements of operations in the Company's Form 10-K, as amended, for the year
ended December 31, 1997.
(3) PREFERRED STOCK
The Company is authorized to issue up to 10,000,000 shares of preferred stock,
par value of $.002 per share. Shares of preferred stock may be issued in one or
more series of classes, each of which series or class shall have such
distinctive designation or title as shall be fixed by the Board of Directors of
the Company prior to issuance of any shares. Each such series or class shall
have such voting powers, full or limited, or no voting powers, and such
preferences and relative, participating, optional or other special rights and
such qualifications, limitations or restrictions thereof, as shall be stated in
such resolution or resolutions providing for the issuance of such series or
class of preferred stock as may be adopted by the Board of Directors prior to
the issuance of any shares thereof. Series A Junior Participating Preferred
Stock will be issued upon exercise of the Stockholder Rights described below.
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Redeemable Preferred Stock
On March 31, 1998, the Company issued 1,458,335 shares of Series B Preferred
Stock ("Preferred Stock"), par value $.002 per share for total consideration of
$3,500,004. The Preferred Stock is convertible by the holders to Common Stock at
a rate of 1:1, with a beneficial conversion feature permitting the shareholders
to convert their holdings to common shares at $2.40. The market price of the
Company's common stock at date of issuance was $4.81. The Company recognized the
value of the beneficial conversion feature of approximately $3.5 million as a
preferred dividend. The value of such preferred dividend has no impact on the
Company's cash flows, but reduced basic and diluted earnings available to common
stockholders. The Company is required to effect one registration statement to
register such securities. If any holder elects not to include its securities in
such registration, they will have no other rights to have such securities
registered except as discussed below. At any time the Company proposes to
register for sale any of its equity securities (excluding registrations on Form
S-8 or Form S-4, or any comparable successor forms), the holders shall have the
rights to be included.
Each share of Preferred Stock is entitled to vote with the Common Stock with one
vote per share. The vote of a majority of the Preferred Stock is required to
validate certain specified actions by the Company. Holders of the Preferred
Stock are entitled to a liquidation preference equal to the face value and
accrued and unpaid dividends, if any, plus a special redemption premium in the
event of a dissolution, liquidation or winding up of the affairs of the Company
or if a change of control occurs, as defined. The special redemption premium
begins at 112% of the liquidation preference in 1998 and increases to 172% in
2003 or thereafter.
Unless restricted from doing so by law or covenant of a loan or financing
agreement, as defined therein, the Preferred Stock is redeemable by the Company
on April 1, 2003, at the greater of the sum of $2.40 per share, and accrued but
unpaid dividends, if any, or fair market value, as defined. The Preferred Stock
will automatically convert to Common Stock in certain circumstances related to
an underwritten public offering generating proceeds in excess of a defined
amount or within four years if the Company achieves a certain level of trailing
twelve-month diluted earnings per share. The Preferred Stock contains certain
anti-dilution conversion features.
No dividends accrue on the Preferred Stock through its fifth anniversary date.
Thereafter, if not redeemed, dividends accrue at a quarterly rate of $.108 per
share, decreasing at a rate of $.0048 per quarter thereafter. Dividends are
payable in additionally issued Preferred Stock.
(4) STOCKHOLDERS' RIGHTS PLAN
In December 1996, the Company adopted a stockholders' rights plan (the Rights
Plan). The Rights Plan provides for a dividend distribution of one preferred
stock purchase right (Right) for each outstanding share of the Company's common
stock, to stockholders of record at the close of business on January 10, 1997.
The Rights Plan is designed to deter coercive takeover tactics and to prevent an
acquirer from gaining control of the Company without offering a fair price to
all of the Company's stockholders. The Rights will expire on December 31, 2006.
Each Right entitles stockholders to buy one one-thousandth of a newly issued
share of Series A Junior Participating Preferred Stock of the Company at an
exercise price of $10. The Rights are exercisable only if a person or group
acquires beneficial ownership of 15 percent or more of the Company's common
stock or commences a tender or exchange offer which, if consummated, would
result in that person or group owning 15 percent or more of the common stock of
the Company. However, the Rights will not become exercisable if common stock is
acquired pursuant to an offer for all shares which a majority of the board of
directors determines to be fair to and otherwise in the best interests of the
Company and its stockholders. If, following an acquisition of 15 percent or more
of the Company's common stock, the Company is acquired by that person or group
in a merger or other business combination transaction, each Right would
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then entitle its holder to purchase common stock of the acquiring company having
a value of twice the exercise price. The effect will be to entitle the Company
stockholder to buy stock in the acquiring company at 50 percent of its market
price.
The Company may redeem the Rights at $.001 per Right at any time on or prior to
the tenth business day following the acquisition of 15 percent or more of its
common stock by a person or group or commencement of a tender offer for such 15
percent ownership.
(5) EARNINGS (LOSS) PER COMMON SHARE
The FASB issued SFAS No. 128, "Earnings Per Share" in February 1997.
Implementation of SFAS No. 128 is required for periods ending after December 15,
1997. SFAS No. 128 required dual presentation of earnings per share (EPS); basic
EPS and diluted EPS. Basic EPS excludes dilution and is computed by dividing net
income by the weighted average number of common shares outstanding for the
period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock. For purposes of the calculation, outstanding stock options,
warrants and redeemable preferred stock are considered common stock
equivalents. Diluted per common share amounts are not applicable for loss
periods. For the three months ended March 31, 1997, the difference in weighted
average number of Common Shares between basic and diluted earnings per share of
95,549 represents the impact of stock options. The following table summarizes
the basic EPS and diluted EPS computations for the quarter ended March 31, 1998
and 1997:
<TABLE>
<CAPTION>
Quarter Ended March 31,
------------------------------------
1998 1997
--------------- ---------------
(unaudited)
<S> <C> <C>
Net income before redeemable preferred stock dividend $ 131,582 $ 123,751
Redeemable preferred stock dividend 3,514,587
--------------- ---------------
Net earnings (loss) on common stock (3,383,005) 123,751
=============== ===============
Basic earnings (loss) per share:
Earnings per share prior to preferred dividend $ 0.02 $ 0.02
Preferred stock dividend $ (0.46) $ --
--------------- ---------------
Basic earnings (loss) per common share (0.44) $ 0.02
Weighted average number of common shares 7,610,305 7,111,306
Diluted earning (loss) per share:
Earnings per share prior to preferred dividend $ 0.02 $ 0.02
Preferred stock dividend (0.46) --
--------------- ---------------
Diluted earnings (loss) per common share $ (0.44) $ 0.02
Weighted average number of common shares 7,610,305 7,206,855
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following discussion should be read in conjunction with the
accompanying condensed consolidated financial statements and notes thereto, and
the Company's audited financial statements and notes thereto for the fiscal year
ended December 31, 1997.
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RESULTS OF OPERATIONS. For the quarter ended March 31, 1998, net sales
were $5,621,635 compared to $6,737,306 for the first quarter of 1997, or a
decrease of $1,115,671. This decrease in net sales is directly attributable to
the divestiture of Organi-Gro, partially offset by increased sales due to the
purchase of certain revenue contracts of the Organics Division of BFI.
Cost of operations and gross profit for the first quarter of 1998 were
$4,945,920 and $675,715, respectively, compared with $5,513,327 and $1,223,979,
respectively for the first quarter of 1997, resulting in gross profit as a
percentage of sales of 12.0% in 1998 and 18.2% in 1997. The decrease in gross
profit in the current quarter, is the result of favorable gross margin
contributions from the non-core operations of Organi-Gro (divested in April
1997), offset by lower gross margin contributions from operations in the Mid
Atlantic Region, California and Texas due to winter conditions and unseasonably
heavy rainfall in other areas which caused additional expenses associated with
transportation and landfill disposal costs in lieu of the land application
process which is less costly.
Selling, general and administrative expenses decreased to $588,284 from
$927,207 in 1997. This decrease in selling, general and administrative expense
is primarily the result of cost reduction efforts begun in the second quarter of
1996 and the divestiture of Organi-Gro.
Special charges (credits) of $112,999 relates to the recognition of an
additional portion of notes receivable related to the sale of Organi-Gro
previously reserved. See Note (2) to the Notes to Condensed Consolidated
Financial Statements for further discussion.
Interest expense for the quarter ended March 31, 1998 was $242,529 or a
decrease of $12,723 from the quarter ended March 31, 1997.
Other income of $173,681 compares with $82,231 for the period ended
March 31, 1997. The increase relates primarily to gains on sale of assets and
investments.
As a result of the foregoing, the first quarter of 1998 reflects net
income before redeemable preferred dividends of $131,582 compared to $123,751 in
the first quarter of 1997.
During the first quarter of 1998 the Company recognized a Preferred
Stock dividend of $3,514,587, relating to redeemable preferred stock issued with
a beneficial conversion feature. See Note (3) to the Notes to Condensed
Consolidated Financial Statements for further discussion.
As a result of the Company's cumulative operating losses, the Company
has not paid federal income tax since inception. As of December 31, 1997, the
Company had net operating loss carry forwards totaling approximately
$11,047,000. Utilization of the Company's net operating losses may be subject to
limitation under certain circumstances.
LIQUIDITY AND CAPITAL RESOURCES. The Company has historically financed
its operations principally through the sale of equity and debt securities and
through funds provided by operating activities.
On March 31, 1998, the Company issued a Series B Preferred Stock, with
shares outstanding of 1,458,335, for total cash consideration of $3,500,004.
This Series B Preferred Stock is convertible into common stock on a 1:1 ratio at
a conversion price of $2.40. See Note (3) to the Notes to Condensed Consolidated
Financial Statements for further discussion.
During the period ended March 31, 1998, the Company purchased
additional capital assets in the amount of $140,803.
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The Company has a credit facility with LaSalle National Bank
("LaSalle") in the amount of $10,000,000 ($5 million term and $5 million line of
credit). At March 31, 1998, the Company had borrowings under the term loan in
the amount of $3,750,000 and $1,138,253 under the line of credit. Amounts under
the line of credit are subject to a borrowing base consisting of 85% of accounts
receivable, as defined in the credit facility. The LaSalle credit facility
requires the Company to meet certain loan covenants, and the Company was in
compliance with those covenants as of March 31, 1998. This credit facility
expires in September 1999 and management anticipates that it will re-negotiate
and/or refinance this credit facility prior to that time.
As of March 31, 1998, the Company had long-term borrowings in the
aggregate amount of $8,211,538, the current portion of which was $3,200,303. The
Company's revolving line of credit has a lock box requirement and subjective
acceleration clause. As a result, in order to comply with Emerging Issues Task
Force pronouncement 95-22, the Company has classified the revolving line as a
current liability. However, management believes the bank will continue to
provide credit to the Company through the expiration date of September 30, 1999.
The Company believes that its cash requirements for the remainder of 1998 can be
met with its existing cash and short-term investments at March 31, 1998, cash
flow from operations and its borrowing availability under its credit facility.
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PART II - OTHER INFORMATION
ITEM 1.
The Company is currently involved in certain routine litigation.
Management believes that all such litigation arose in the ordinary course of
business and that costs of settlements or judgments arising from such suits will
not have a material adverse effect on the Company's consolidated financial
position or results of operations.
ITEM 5. OTHER INFORMATION
On April 23, 1998, the Company announced it had entered into an agreement to
acquire A&J Cartage Inc., a multi-state full service biosolids management
company. The acquisition is expected to add approximately $11 million to the
Company's current annualized revenues. The acquisition may be subject to the
Company's shareholder approval and is subject to standard closing conditions.
On May 5, 1998, the Company announced it had entered into an agreement to
acquire Recyc, Inc., a biosolids composting company. The acquisition is expected
to add approximately $7 million to the Company's annualized revenues. The
acquisition may be subject to the Company's shareholder approval and is subject
to standard closing conditions.
ITEM 6. FINANCIAL STATEMENTS, EXHIBITS AND REPORTS ON FORM 8-K.
a. Exhibit Index
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF EXHIBIT
<S> <C>
3.1 Restated Certificate of Incorporation of Synagro
Technologies, Inc. (the "Company") dated August 16, 1996
(Exhibit 3.1 to the Company's Post-Effective Amendment No. 1
to Registration Statement No. 33-95028, dated October 25,
1996, is incorporated herein by reference).
3.2 Bylaws of the Company dated August 5, 1996. (Exhibit 3.2 to
the Company's Post-Effective Amendment No. 1 to Registration
Statement No. 33-95028, dated October 25, 1996, is
incorporated herein by reference).
4.1 Specimen Common Stock Certificate of the Company. (Exhibit
4.1 to the Company's Registration Statement on Form 10, dated
December 29, 1992, is incorporated herein by reference).
4.2 Specimen Warrant Certificate of the Company. (Exhibit 4.2 to
the Company's Registration Statement on Form S-1 (No.
33-95028), dated July 27, 1995, and as amended, is
incorporated herein by reference).
4.3 Rights Agreement, dated as of December 20, 1996, between the
Company and Intercontinental Registrar & Transfer Agency,
Inc., as Rights Agent, which includes as Exhibit A thereto
the Synagro Technologies, Inc. Statement of Designations,
Preferences, Limitations and Relative Rights of its Series A
Junior Participating Preferred Stock, and as Exhibit C
thereto the Form of Rights Certificate (Incorporated by
reference to Exhibit No. 4.1 to Registrant's Registration
Statement on Form 8-A dated December 27, 1996).
4.4 Certificate of Designation, Preferences, Rights and
Limitations of Series B Preferred Stock of Synagro
Technologies, Inc. (Exhibit 4.4 to the Company's Amended and
Restated Annual Report on Form 10-K, as amended, for the year
ended December 31, 1997, is incorporated herein by reference)
</TABLE>
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<TABLE>
<S> <C>
4.5 Registration Rights Agreement, dated as of March 31, 1998,
among the Company, Environmental Opportunities Fund, L.P.,
Environmental Fund (Cayman), L.P. and other purchasers of the
Company's Series B Preferred Stock as listed on Exhibit A
thereto. (Exhibit 4.5 to the Company's Amended and Restated
Annual Report on Form 10-K, as amended, for the year ended
December 31, 1997, is incorporated herein by reference)
4.6 Specimen Series B Preferred Stock Certificate. (Exhibit 4.6
to the Company's Amended and Restated Annual Report on Form
10-K, as amended, for the year ended December 31, 1997, is
incorporated herein by reference)
10.1 Synagro Technologies, Inc. Subscription Agreement, dated as
of March 31, 1998 among the Company, Environmental
Opportunities Fund, L.P., Environment Opportunities Fund
(Cayman), L.P. and other purchasers of the Company's Series B
Preferred Stock as listed on Exhibit A thereto. (Exhibit 10.1
to the Company's Amended and Restated Annual Report on Form
10-K, as amended, for the year ended December 31, 1997, is
incorporated herein by reference)
10.2 Form of Indemnification Agreement. (Appendix F to the
Company's Proxy Statement on Schedule 14A for Annual Meeting
of Stockholders, dated May 9, 1996, is incorporated herein by
reference).
10.3 Amended and Restated 1993 Stock Option Plan dated August 5,
1996. (Exhibit 4.1 to the Company's Registration Statement on
Form S-8 (No. 333-18029), dated December 17, 1996, is
incorporated herein by reference).
10.4 Lease Agreement between the Company and Green Coast
Enterprises, Inc. dated February 1, 1996. (Exhibit 10.2 to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1995, is incorporated herein by reference).
10.5 Employment Agreement between Pima Gro Systems, Inc. and
Wilson Nolan, dated July 18, 1996. (Exhibit 10.1 to the
Company's Current Report on Form 8-K, dated July 31, 1996, is
incorporated herein by reference).
10.6 Agreement for the Purchase of Stock by and among Synagro
Technologies, Inc., CDR Environmental, Inc., Pima Gro, Pima
Gro Systems 2, Inc., Wilson Nolan, Herbert Kai and John Kai,
Jr., dated July 18, 1996. (Exhibit 2.1 to the Company's
Current Report on Form 8-K, dated July 31, 1996, is
incorporated herein by reference).
10.7 6% Promissory Note made by Custom Poultry to Organi-Gro and
the Company in the principal amount of $1,152,381, dated
April 1, 1997 (Exhibit 10.8 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1996, is
incorporated herein by reference).
10.8 Guaranty of Tony D. Childers ("Childers") for 6% Promissory
Note made by Custom Poultry to Organi-Gro, dated April 1,
1997 (Exhibit 10.9 to the Company's Annual Report on Form
10-K for the year ended December 31, 1996, is incorporated
herein by reference).
10.9 6% Promissory Note made by Hodges to Organi-Gro and the
Company in the principal amount of $308,203, dated April 1,
1997. (Exhibit 10.10 to the Company's Annual Report on Form
10-K for the year ended December 31, 1996, is incorporated
herein by reference).
10.10 Guaranty of Childers and Jack Hodges for 6% Promissory Note
made by Hodges to Organi-Gro, dated April 1, 1997 (Exhibit
10.11 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1996, is incorporated herein by
reference).
</TABLE>
13
<PAGE> 14
<TABLE>
<S> <C>
10.11 Employment Agreement between the Company and Donald L. Thone,
dated April 16, 1998. (Exhibit 10.11 to the Company's Amended
and Restated Annual Report on Form 10-K, as amended, for the
year ended December 31, 1997, is incorporated herein by
reference)
10.12 Employment Agreement between the Company and Daniel L. Shook,
dated April 16, 1998. (Exhibit 10.12 to the Company's Amended
and Restated Annual Report on Form 10-K, as amended, for the
year ended December 31, 1997, is incorporated herein by
reference)
10.13 Employment Agreement between the Company and Ross M. Patten,
dated April 16, 1998. (Exhibit 10.13 to the Company's Amended
and Restated Annual Report on Form 10-K, as amended, for the
year ended December 31, 1997, is incorporated herein by
reference)
21.1 Subsidiaries of Synagro Technologies, Inc. (Exhibit 21.1 to
the Company's Amended and Restated Annual Report on Form
10-K, as amended, for the year ended December 31, 1997, is
incorporated herein by reference)
*27.1 Financial Data Schedule.
</TABLE>
---------------------
*Filed herewith
b. Form 8-K
No reports on Form 8-K were filed during the quarter
ended March 31, 1998.
14
<PAGE> 15
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 thereunto duly authorized.
SYNAGRO TECHNOLOGIES, INC.
Date: May 14, 1998 By: Daniel L. Shook /S/
-------------------
Chief Financial Officer
Date: May 14, 1998 By: Thomas J. Bintz /S/
-------------------
Corporate Controller
15
<PAGE> 16
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF EXHIBIT
<S> <C>
3.1 Restated Certificate of Incorporation of Synagro
Technologies, Inc. (the "Company") dated August 16, 1996
(Exhibit 3.1 to the Company's Post-Effective Amendment No. 1
to Registration Statement No. 33-95028, dated October 25,
1996, is incorporated herein by reference).
3.2 Bylaws of the Company dated August 5, 1996. (Exhibit 3.2 to
the Company's Post-Effective Amendment No. 1 to Registration
Statement No. 33-95028, dated October 25, 1996, is
incorporated herein by reference).
4.1 Specimen Common Stock Certificate of the Company. (Exhibit
4.1 to the Company's Registration Statement on Form 10, dated
December 29, 1992, is incorporated herein by reference).
4.2 Specimen Warrant Certificate of the Company. (Exhibit 4.2 to
the Company's Registration Statement on Form S-1 (No.
33-95028), dated July 27, 1995, and as amended, is
incorporated herein by reference).
4.3 Rights Agreement, dated as of December 20, 1996, between the
Company and Intercontinental Registrar & Transfer Agency,
Inc., as Rights Agent, which includes as Exhibit A thereto
the Synagro Technologies, Inc. Statement of Designations,
Preferences, Limitations and Relative Rights of its Series A
Junior Participating Preferred Stock, and as Exhibit C
thereto the Form of Rights Certificate (Incorporated by
reference to Exhibit No. 4.1 to Registrant's Registration
Statement on Form 8-A dated December 27, 1996).
4.4 Certificate of Designation, Preferences, Rights and
Limitations of Series B Preferred Stock of Synagro
Technologies, Inc. (Exhibit 4.4 to the Company's Amended and
Restated Annual Report on Form 10-K, as amended, for the year
ended December 31, 1997, is incorporated herein by reference)
</TABLE>
<PAGE> 17
<TABLE>
<S> <C>
4.5 Registration Rights Agreement, dated as of March 31, 1998,
among the Company, Environmental Opportunities Fund, L.P.,
Environmental Fund (Cayman), L.P. and other purchasers of the
Company's Series B Preferred Stock as listed on Exhibit A
thereto. (Exhibit 4.5 to the Company's Amended and Restated
Annual Report on Form 10-K, as amended, for the year ended
December 31, 1997, is incorporated herein by reference)
4.6 Specimen Series B Preferred Stock Certificate. (Exhibit 4.6
to the Company's Amended and Restated Annual Report on Form
10-K, as amended, for the year ended December 31, 1997, is
incorporated herein by reference)
10.1 Synagro Technologies, Inc. Subscription Agreement, dated as
of March 31, 1998 among the Company, Environmental
Opportunities Fund, L.P., Environment Opportunities Fund
(Cayman), L.P. and other purchasers of the Company's Series B
Preferred Stock as listed on Exhibit A thereto. (Exhibit 10.1
to the Company's Amended and Restated Annual Report on Form
10-K, as amended, for the year ended December 31, 1997, is
incorporated herein by reference)
10.2 Form of Indemnification Agreement. (Appendix F to the
Company's Proxy Statement on Schedule 14A for Annual Meeting
of Stockholders, dated May 9, 1996, is incorporated herein by
reference).
10.3 Amended and Restated 1993 Stock Option Plan dated August 5,
1996. (Exhibit 4.1 to the Company's Registration Statement on
Form S-8 (No. 333-18029), dated December 17, 1996, is
incorporated herein by reference).
10.4 Lease Agreement between the Company and Green Coast
Enterprises, Inc. dated February 1, 1996. (Exhibit 10.2 to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1995, is incorporated herein by reference).
10.5 Employment Agreement between Pima Gro Systems, Inc. and
Wilson Nolan, dated July 18, 1996. (Exhibit 10.1 to the
Company's Current Report on Form 8-K, dated July 31, 1996, is
incorporated herein by reference).
10.6 Agreement for the Purchase of Stock by and among Synagro
Technologies, Inc., CDR Environmental, Inc., Pima Gro, Pima
Gro Systems 2, Inc., Wilson Nolan, Herbert Kai and John Kai,
Jr., dated July 18, 1996. (Exhibit 2.1 to the Company's
Current Report on Form 8-K, dated July 31, 1996, is
incorporated herein by reference).
10.7 6% Promissory Note made by Custom Poultry to Organi-Gro and
the Company in the principal amount of $1,152,381, dated
April 1, 1997 (Exhibit 10.8 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1996, is
incorporated herein by reference).
10.8 Guaranty of Tony D. Childers ("Childers") for 6% Promissory
Note made by Custom Poultry to Organi-Gro, dated April 1,
1997 (Exhibit 10.9 to the Company's Annual Report on Form
10-K for the year ended December 31, 1996, is incorporated
herein by reference).
10.9 6% Promissory Note made by Hodges to Organi-Gro and the
Company in the principal amount of $308,203, dated April 1,
1997. (Exhibit 10.10 to the Company's Annual Report on Form
10-K for the year ended December 31, 1996, is incorporated
herein by reference).
10.10 Guaranty of Childers and Jack Hodges for 6% Promissory Note
made by Hodges to Organi-Gro, dated April 1, 1997 (Exhibit
10.11 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1996, is incorporated herein by
reference).
</TABLE>
<PAGE> 18
<TABLE>
<S> <C>
10.11 Employment Agreement between the Company and Donald L. Thone,
dated April 16, 1998. (Exhibit 10.11 to the Company's Amended
and Restated Annual Report on Form 10-K, as amended, for the
year ended December 31, 1997, is incorporated herein by
reference)
10.12 Employment Agreement between the Company and Daniel L. Shook,
dated April 16, 1998. (Exhibit 10.12 to the Company's Amended
and Restated Annual Report on Form 10-K, as amended, for the
year ended December 31, 1997, is incorporated herein by
reference)
10.13 Employment Agreement between the Company and Ross M. Patten,
dated April 16, 1998. (Exhibit 10.13 to the Company's Amended
and Restated Annual Report on Form 10-K, as amended, for the
year ended December 31, 1997, is incorporated herein by
reference)
21.1 Subsidiaries of Synagro Technologies, Inc. (Exhibit 21.1 to
the Company's Amended and Restated Annual Report on Form
10-K, as amended, for the year ended December 31, 1997, is
incorporated herein by reference)
*27.1 Financial Data Schedule.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 36,253,772
<SECURITIES> 64,504
<RECEIVABLES> 3,380,802
<ALLOWANCES> 185,575
<INVENTORY> 0
<CURRENT-ASSETS> 9,243,647
<PP&E> 13,801,947
<DEPRECIATION> 5,243,273
<TOTAL-ASSETS> 22,963,121
<CURRENT-LIABILITIES> 6,842,630
<BONDS> 5,011,235
0
3,500,004
<COMMON> 15,221
<OTHER-SE> 7,594,031
<TOTAL-LIABILITY-AND-EQUITY> 22,963,121
<SALES> 5,621,635
<TOTAL-REVENUES> 5,621,635
<CGS> 4,945,920
<TOTAL-COSTS> 4,945,920
<OTHER-EXPENSES> (112,999)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 242,529
<INCOME-PRETAX> 131,582
<INCOME-TAX> 0
<INCOME-CONTINUING> 131,582
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 131,582
<EPS-PRIMARY> (.44)
<EPS-DILUTED> (.44)
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