ERD Waste Corp.
937 East Hazelwood Avenue
Rahway, New Jersey 07065
August 25, 1997
Securities and Exchange Commission
450 Fifth Strret, N.W.
Washington, D.C. 20549-1004
RE: Amended Report on Form 10-QSB of ERD Waste Corp.
Dear Sir/Madam:
On behalf of ERD Waste Corp. (the "Company") and in accordance with Section 13
(a) (2) of the Securities Exchange Act of 1934, as amended, enclosed herewith
for filing is the Company's amended Report on Form 10-QSB-A for the period
ending June 30, 1997.
The amendments involve the correction of the number of shares issued in
connection with the Company's private placement of common stock to remove
126,386 shares issuable pursuant to Unit Purchase Warrants inadvertantly
recorded as issued.
Sincerely,
N. James Triaca
Chief Financial Officer
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB-A
AMENDMENT # 1
(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, 1997
-------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 33-76200
ERD WASTE CORP.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 11-3121813
- ------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
Identification No.) Identification No.)
937 East Hazelwood Avenue, Bldg. 2, Rahway, NJ 07065
----------------------------------------------------
(Address of principal executive offices) Zip Code)
(908) 381-9229
--------------
(Registrant's telephone number, including area code)
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 was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Number of shares outstanding of the issuer's class of common stock, $.001
par value, as of August 12, 1997: 7,346,642
ERD WASTE CORP.
AND SUBSIDIARIES
Item 1 - Financial Statements.
- ------------------------------
ERD Waste Corp. and Subsidiaries Consolidated Financial Statements for
the nine month and three month periods ended June 30, 1997 (Unaudited).
INDEX TO FINANCIAL STATEMENTS
PAGE #
Index to Financial Statements F-1
Consolidated Balance Sheets - June 30, 1997
(Unaudited) and September 30, 1996 F-2
Consolidated Statements of Operations - for the
nine months ended June 30, 1997 and 1996 (Unaudited) F-3
Consolidated Statements of Operations - for the
three months ended June 30, 1997 and 1996 (Unaudited) F-4
Consolidated Statements of Stockholders' Equity -
June 30, 1997 (Unaudited) and September 30, 1996 F-5
Consolidated Statements of Cash Flows - for the
nine months ended June 30, 1997 and 1996 (Unaudited) F-6
Notes to Consolidated Financial Statements F-7
F-1
ERD WASTE CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, September 30,
1997 1996
----------- -------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 97,416 $ 61,725
Restricted certificates of deposit 937,747 1,655,363
Accounts receivable, less allowance
for doubtful accounts of $712,730
and $1,042,833 respectively 10,523,512 11,631,456
Prepaid expenses and other current assets 2,064,498 1,991,860
Inventory 257,608 335,595
Deferred income taxes - 750,000
---------- ----------
TOTAL CURRENT ASSETS 13,880,781 16,425,999
---------- ----------
PROPERTY, PLANT and EQUIPMENT, less accumulated
depreciation of $1,057,334 and $458,902
respectively 7,872,652 8,315,235
---------- ----------
OTHER ASSETS:
Goodwill, less accumulated amortization 9,564,484 9,800,045
Covenants not to compete,
less accumulated amortization 172,665 214,665
Deferred tax benefit, less current portion 8,903,309 7,052,069
---------- ----------
TOTAL OTHER ASSETS 18,640,458 17,066,779
---------- ----------
$ 40,393,891 $ 41,808,013
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 8,885,757 $ 8,863,276
Accrued expenses and taxes payable 5,211,384 5,197,162
Current portion- notes payable 8,817,390 2,046,885
---------- ----------
TOTAL CURRENT LIABILITIES 22,914,531 16,107,323
---------- ----------
LONG-TERM DEBT, less current portion 6,442,193 14,255,499
---------- ----------
OTHER LONG TERM PAYABLES 4,266,390 5,088,000
---------- ----------
STOCKHOLDERS' EQUITY:
Preferred stock, authorized 2,000,000
shares, $.001 par value; none issued
and outstanding - -
Common stock, authorized 15,000,000
shares, $.001 par value;
7,346,642 and 5,882,782 shares issued
and outstanding, respectively
7,347 5,883
Additional paid in capital
12,627,868 10,556,550
Retained earnings (deficit) (5,864,438) (4,205,242)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 6,770,777 6,357,191
---------- ----------
$ 40,393,891 $ 41,808,013
========== ==========
See notes to financial statements.
F-2
ERD WASTE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Nine Months ended
June 30,
1997 1996
---- ----
(Unaudited)
REVENUES:
Net sales $ 23,404,269 $ 13,691,409
COST OF SALES 16,152,962 6,537,473
---------- ----------
GROSS PROFIT 7,251,307 7,153,936
---------- ----------
OPERATING EXPENSES:
Selling, general and
administrative expenses 8,336,348 4,092,356
Depreciation 620,049 528,905
Amortization 362,369 119,982
---------- ----------
TOTAL OTHER OPERATING EXPENSES 9,318,766 4,741,243
---------- ----------
INCOME (LOSS) FROM OPERATIONS (2,067,459) 2,412,693
---------- ----------
OTHER INCOME AND EXPENSES:
Interest and dividend income 53,866 87,891
Interest expense (889,063) (274,883)
Other, net 137,331 49,953
---------- ----------
TOTAL OTHER INCOME AND EXPENSES (697,866) (137,039)
---------- ----------
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES (2,765,325) 2,275,654
PROVISION FOR INCOME TAXES (1,106,129) 985,373
---------- ----------
INCOME (LOSS) FROM CONTINUING OPERATIONS (1,659,196) 1,290,281
---------- ----------
DISCONTINUED OPERATIONS:
Income from operations,
net of income taxes of
approximately $ -, and
$288,115 respectively - 432,172
---------- ----------
INCOME FROM
DISCONTINUED OPERATIONS - 432,172
---------- ----------
NET INCOME (LOSS) $ (1,659,196) $ 1,722,453
========== ==========
INCOME (LOSS) PER SHARE:
INCOME (LOSS) FROM
CONTINUING OPERATIONS $ ( 0.26) $ 0.22
========== =========
INCOME FROM
DISCONTINUED OPERATIONS $ - $ 0.07
========== =========
NET INCOME (LOSS)
PER COMMON SHARE $ ( 0.26) $ 0.29
========== =========
WEIGHTED AVERAGE
NUMBER OF SHARES
6,479,689 5,843,717
========= =========
See notes to financial statements.
F-3
ERD WASTE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months ended
June 30,
1997 1996
---- ----
(Unaudited)
REVENUES:
Net sales $ 6,733,013 $ 8,197,357
COST OF SALES 5,739,374 4,617,828
--------- ---------
GROSS PROFIT 993,639 3,579,529
--------- ---------
OPERATING EXPENSES:
Selling, general and
administrative expenses 2,557,083 1,920,498
Depreciation 217,456 308,045
Amortization 125,385 73,320
--------- ---------
TOTAL OTHER OPERATING EXPENSES 2,899,924 2,301,863
--------- ---------
INCOME (LOSS) FROM CONTINUING OPERATIONS (1,906,285) 1,277,666
--------- ---------
OTHER INCOME AND EXPENSES:
Interest and dividend income 21,122 17,772
Interest expense ( 315,018) ( 207,359)
Other, net 32,703 16,651
--------- ---------
TOTAL OTHER INCOME AND EXPENSES ( 261,193) ( 172,936)
--------- ---------
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES (2,167,478) 1,104,729
--------- ---------
PROVISION FOR INCOME TAXES ( 866,990) 435,295
--------- ---------
INCOME (LOSS) FROM CONTINUING OPERATIONS (1,300,488) 669,435
--------- ---------
DISCONTINUED OPERATIONS:
Income from operations,
net of income taxes of
approximately $ -, and
$112,674 respectively - 169,011
--------- ---------
INCOME FROM
DISCONTINUED OPERATIONS - 169,011
--------- ---------
NET INCOME (LOSS) $ (1,300,488) $ 838,446
========= =========
INCOME (LOSS) PER SHARE:
INCOME (LOSS) FROM
CONTINUING OPERATIONS
$ ( 0.19) $ 0.11
========= =========
INCOME FROM
DISCONTINUED OPERATIONS $ - $ 0.03
========= =========
NET (LOSS) INCOME
PER COMMON SHARE
$ ( 0.19) $ 0.14
========= =========
WEIGHTED AVERAGE
NUMBER OF SHARES
7,020,342 5,881,134
========= =========
See notes to financial statements.
F-4
ERD WASTE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Retained
Common Stock Paid in Earnings
Shares Amount Capital (Deficit) Total
------ ------ -------- --------- ---------
Balance-
January 31, 1995 3,837,500 $ 3,838 $ 169,266 $ 749,308 $ 922,412
Common shares
issued in
connection with
public offering 2,250,000 2,250 12,110,720 - 12,112,970
Reacquisition of
common shares (300,000) (300) (2,018,600) (131,100)(2,150,000)
Issuance of common
shares in connection
with the acquisition
of EATS, Inc. 45,282 45 226,365 - 226,410
Net income - - - 2,227,631 2,227,631
--------- ----- ---------- ---------- ----------
Balance-
January 31, 1996 5,832,782 5,833 10,487,751 12,845,839 13,339,423
Issuance of
common stock 50,000 50 68,799 - 68,849
Net loss - - - (7,051,081)(7,051,081)
--------- ----- ---------- --------- ---------
Balance-
September 30, 1996 5,882,782 5,883 10,556,550 (4,205,242) 6,357,191
Issuance of
common stock
1,463,860
1,464
2,071,318 - 2,072,782
Net loss - - - (1,659,196)(1,659,196)
--------- ----- ---------- --------- ---------
Balance-
June 30, 1997
(Unaudited)
7,346,642
$7,347
$12,627,868 $(5,864,438)$6,770,777
========= ===== ========== ========= =========
See notes to financial statements.
F-5
ERD WASTE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended
June 30,
1997 1996
---- ----
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (1,659,196) $1,722,453
--------- ---------
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation 620,049 528,905
Amortization 362,369 119,982
Gain on sale of assets ( 39,153) -
Provision for deferred
income tax (1,101,240) -
Changes in assets and liabilities
(net of effects from purchase of ENSA):
(Increase) decrease in
accounts receivable 1,107,944 (1,636,138)
Decrease in inventory 77,987 ( 193,787)
(Increase) decrease in
prepaid expenses and
other current assets ( 72,638) (1,134,940)
(Increase) decrease in other assets - (1,348,911)
Increase (decrease) in
accounts payable and
accrued expenses 36,703 763,054
Increase in income
taxes payable - -
--------- ---------
992,021 (2,901,835)
--------- ---------
NET CASH PROVIDED BY
(USED IN) OPERATING ACTIVITIES ( 667,175) (1,179,382)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of ENSA - (8,085,181)
Capital expenditures ( 352,647) (1,487,958)
Proceeds from sale of assets 129,526 -
--------- ---------
( 223,121) (9,573,139)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Notes payable (1,864,411) 9,800,699
Issuance of common stock 2,072,782 364,063
Decrease (increase) in
restricted certificates
of deposit 717,616 1,609,338
--------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 925,987 11,774,100
--------- ----------
NET INCREASE (DECREASE) IN CASH 35,691 (1,021,579)
CASH, at beginning of period 61,725 1,102,559
--------- ----------
CASH, at end of period $ 97,416 $ 80,980
========= ==========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 630,423 $ 361,200
========= =========
Income taxes paid $ - $ -
========= =========
See notes to financial statements.
F-6
ERD WASTE CORP.
and subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(UNAUDITED)
Note 1 - Basis of Presentation:
----------------------
In the opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial position, results of
operations, and cash flows for the periods presented. The results have been
determined on the basis of generally accepted accounting principles and
practices, applied consistently.
The condensed consolidated financial statements should be read in conjunction
with the Company's Annual Report on Form 10-KSB for the eight months ended
September 30, 1996, which is incorporated herein by reference.
Note 2 - Acquisition of Environmental Services of America, Inc. ("ENSA")
---------------------------------------------------------------
On May 5, 1996, ENSA Acquisition Corp. ("EAC"), a wholly owned subsidiary of the
Company, acquired approximately 93% of ENSA's outstanding common stock through a
tender offer (the "ENSA Acquisition") whereby the shareholders of ENSA received
$1.66 for each share owned. The Company intends to purchase the remaining
outstanding shares of ENSA in a subsequent "mop up". The total cost of the
acquisition is currently estimated at $10,000,000 which includes amounts paid to
shareholders of ENSA and related legal and other professional costs incurred in
completing the transaction. The transaction is accounted for as a purchase, and
the financial results of ENSA are reported prospectively beginning in May, 1996.
The net assets of ENSA at the time of acquisition, after adjustment for
environmental, accounts receivable, legal, and other reserves were $1,102,949.
The allocation of the purchase price and estimates of certain liabilities is
subject to revision.
Effective October 1, 1995, the Company acquired the assets and assumed certain
liabilities of Environmental Absorption Technologies, Inc., a manufacturer of
recyclable products used to absorb oil and petroleum spills. The acquisition
was recorded as a purchase. The initial purchase price of approximately
$592,000 was paid by the issuance of 45,282 shares of common stock of the
Company, cash of $343,000, and the assumption of specified liabilities.
Note 3 - Loan From Principals and Affiliates
-----------------------------------
During the nine months ended June 30, 1997, the Company's Chairman and Chief
Executive Officer loaned the Company $300,000. The advance is evidenced by a
short term note bearing interest at 2% above the prime lending rate of the
Company's commercial bank.
In February 1997, the Company borrowed $500,000 from an affiliate of its
Chairman and Chief Executive Officer. The loan is evidenced by a short term
note, payable October 5, 1997, bearing interest at 2% above the prime lending
rate of the Company's commercial bank.
Note 4 - Private Offering of Stock
-------------------------
In December 1996, the Company commenced a private offering (the "Offering") of
its common stock in the form of Units. The Offering called for the sale of up
to 150 Units (but not less than 20 Units) at a price of $25,000 per Unit. The
Units consisted of a number of common shares and an equal number of warrants to
purchase common shares. The number of shares (and warrants) was determined by
dividing the purchase price per Unit by 90% of the average closing bid price for
the Company's common stock for the ten trading days immediately preceding the
date of the relevant closing of the Offering. Through June 6, 1997, the date
of the final closing of the Offering, the Company has, at various closings,
issued an aggregate of
1,263,860 shares of its common stock and received
an aggregate of $1,756,155 in net proceeds from the Offering.
F-7
PART I - FINANCIAL INFORMATION
Item 2 - Management's Discussion and Analysis of Financial Condition
-----------------------------------------------------------
and Results of Operations
-------------------------
The Company is a diversified waste management company providing brokerage,
advisory, consulting and technical services to the waste management industry.
The Company also operates treatment, storage and disposal facilities,
manufactures absorbent products and recently commenced recycling oil filters.
Results of Operations:
The following table sets forth the operating data of the company as a percentage
of revenues for the periods indicated:
Nine Months Ended
June 30,
---------------
1997 1996
---- ----
Revenues 100.0% 100.0%
Cost of sales 69.0 47.7
----- -----
Gross margin 31.0 52.3
----- -----
Selling, general and administrative
expenses 35.6 29.9
Depreciation and amortization 4.2 4.7
----- -----
39.8 34.6
----- -----
Income from operations ( 8.8) 17.6
Other, net ( 3.0) ( 1.0)
----- -----
Income before income taxes (11.8) 16.6
Provision for income taxes ( 4.7) 7.2
----- -----
Net income from continuing operations ( 7.1) 9.4
Discontinued operations - 3.2
----- -----
Net income ( 7.1)% 12.6%
===== =====
Revenues:
- ---------
For the first nine months of fiscal 1997, revenues were $23,404,269, an increase
of $9,712,860 over revenues from the same period of the previous year. The
increase in sales was primarily due to the ENSA Acquisition. The Company
typically reports reduced revenues during the winter months. Revenues during
the current fiscal year were further reduced primarily as a result of adverse
industry reaction to the discontinuance of the Company's Long Beach Facility
as well as the strain on the Company's resources, both in terms of the expenses
incurred and the management time required, in addressing the issues related to
the Long Beach Facility.
A summary of consolidated revenues by business segment is as follows:
Nine Months Ended Nine Months Ended
June 30,1997 June 30, 1996
----------------- -----------------
$ % $ %
---------- ----- --------- -----
TSD Facilities $ 8,407,290 35.9% $ 2,834,122 20.7%
Consulting 11,415,804 48.8% 7,037,384 51.4%
Remediation 3,581,175 15.3% 3,819,903 27.9%
---------- ----- ---------- -----
$23,404,269 100.0% $13,691,409 100.0%
========== ===== ========== =====
2
On a proforma basis, sales for the nine months ended June 30, 1997 declined
approximately $8,500,000 from the comparable period the prior year. Management
believes the decline in sales is due, in part, to the negative publicity
generated from the closure of the Long Beach Facility, as well as other factors
discussed below.
The following summarized proforma financial information from continuing
operations assumes the acquisitions occurred at October 1, 1995, and does not
purport to be indicative of what would have occurred had the acquisitions been
made as of that date:
Nine Months Ended Nine Months Ended
June 30, 1997 June 30, 1996
----------------- -----------------
Net sales $23,404,269 $31,945,534
========== ==========
Net loss $(1,659,196) $( 701,879)
========== ==========
Loss per common share $ (.26) $ (.12)
========== ==========
Cost of Sales:
- ---------------
For the nine months ended June 30, 1997, cost of sales rose
$9,615,489 over the comparable period for the prior year. The increase is
primarily due to the increased sales. In addition, the businesses started and
acquired by the Company over the last year operate with higher direct costs as a
percentage of sales compared to the Company's other businesses. The Company
also encountered higher than expected costs during the winter months of 1997 and
as a result of adverse industry reaction to the discontinuance of operations at
the Long Beach Facility. The Company does not expect this trend to continue.
Gross Profit:
- --------------
Compared to the same period of the prior year, gross profit on sales increased
$97,371 to $7,251,307 in the first nine months of fiscal 1997, as a result of
the increase in sales. Gross profit margins declined, however, from 52.3
percent of sales to 31.0 percent of sales. The decline in the margin percentage
was primarily due to the Company's new acquisitions which operate at lower
profit margins and unanticipated increases in cost of sales.
Selling, general, and administrative expenses:
- ----------------------------------------------
Selling, general, and administrative expenses were $8,336,348 in the first nine
months of fiscal 1997, compared to $4,092,356 in the same period of the previous
fiscal year. As a percentage of sales, selling, general and administrative
expenses increased from 29.9 percent in the first nine months of fiscal 1996
to 35.6 percent in the first nine months of fiscal 1997. Included in selling,
general and administrative costs for the current quarter are approximately
$400,000 of legal costs incurred by the Company in defense of certain lawsuits.
The Company has implemented a plan to reduce operating expenses by means of
staff reductions, consolidation of duplicative administrative/accounting
departments, and the implementation of strict fiscal controls at the acquired
entities. These efforts may have a negative impact on sales, but management
believes they will produce a positive impact on the Company's profitability.
Such efforts are expected to continue.
Depreciation and amortization:
- ------------------------------
Depreciation and amortization rose from $648,887 in the first nine months of
fiscal 1996 to $982,418 in fiscal 1997.
Interest expense:
- -----------------
Interest expense rose $614,180 in the first nine months of fiscal 1997 as
compared to the same period of fiscal 1996. The increase in interest expense
is primarily due to additional bank borrowings of $11,900,000 and indebtedness
of ENSA of approximately $1,039,000 which the Company assumed upon acquisition.
Net Income from Continuing Operations:
- --------------------------------------
For the nine months ended June 30, 1997, net loss was $1,659,196 ($.26 per
share) as compared to net income of $1,290,281 ($.22 per share) for the nine
months ended June 30, 1996, a 229 percent decrease. The decrease is primarily
attributable to the increase in the Company's cost of sales from 47.7% of sales
to 69.0% of sales and the increase in the Company's interest expense.
Discontinued Operations:
- ------------------------
For the nine months ended June 30, 1997, net loss from discontinued operations
amounted to $212,660, net of income taxes of approximately $141,774 on revenues
of $2,374,110. At September 30, 1996, the Company had recorded a loss on dis-
posal of its Long Beach Facility amounting to $7,500,000 which included an est-
imate of operating income through the termination date. As a result of this
accrual at September 30, 1996, the net loss from discontinued operations for
the nine months ended June 30, 1997 has been reflected as a decrease in accrued
expenses payable.
3
LIQUIDITY AND CAPITAL RESOURCES:
On June 30, 1997, the Company had a working capital deficiency of $9,033,750 as
compared to working capital of $318,676 at September 30, 1996. The deficiency
is primarily the result of the reclassification of the $7,500,000 bank loan as a
current liability due to its maturity date of April 1, 1998 and the $2,765,325
pretax loss, the tax benefit of which is classified as a noncurrent asset. At
June 30, 1997, the Company did not meet some of its covenants under the loan
agreement. The Company has had discussions with the bank to obtain waivers, but
at this time has not received them. The bank has not issued a default notice.
In the event the bank does not issue the waivers, the bank will have the right
to require payment of the $7,500,000 loan on demand.
During the nine months ended June 30, 1997, the Company utilized approximately
$667,000 of cash in its operating activities. As the Company's working capital
declined, it was slow to pay its vendors, which caused them to restrict credit,
further exacerbating the problem. This cash utilization was partially funded by
equity funds raised in the Offering, loans from principals and affiliates and
collection of accounts receivable. While the Company recently closed a private
placement yielding net proceeds of $1,756,155, these proceeds were inadequate to
solve the Company's working capital and cash flow problems. The Company plans to
seek additional private placement financing in the immediate future but unless
and until meaningful additional funds become available, the Company's cash flow
and working capital problems are expected to continue.
The Company is also currently seeking to refinance its long term credit facility
and provide the Company with additional working capital. The Company needs
additional financing to support its operations and continue to obtain
performance bonds, which are critical to the continuance of its consulting
operations, through its existing surety. The Company is presently
seeking other sources of funds needed to complete the purchase of the remaining
ENSA Common Stock, as well as to provide necessary working capital for the
Company to continue operating its businesses. Among the sources of funds being
pursued by the Company are:
1) private placement of Company securities;
2) additional funding from commercial banks;
3) replacement of restricted certificates of deposits with payment
bonds;
4) conversion of current liabilities into equity; and
5) subordinated and/or convertible debt financing.
4
PART II - OTHER INFORMATION
Item 1 Legal Proceedings.
------------------
On April 10, 1997, the Company entered into a Consent Order with the Attorney
General of the State of New York and the New York State Department of
Environmental Conservation ("NYSDEC"). The Consent Order provided that the
Company would permanently cease operation of its Long Beach, New York
facility both as an incinerator and as a solid waste transfer station,
effective April 10, 1997. The Consent Order also defined the obligations of
the Company with respect to the closure of the site pursuant to its permit.
Upon completion and approval of the implementation of the closure plan provided
for in the Consent Order, the Company will receive a Release and Covenant Not
to Sue by the NYSDEC for any investigation or remediation of site conditions
addressed by the closure plan. There can be no assurance that the Company will
be able to comply with the closure plan and receive the Release and Covenant Not
to Sue from the NYSDEC.
In March and April, 1997, a trial was held in connection with the 5200
Enterprises, Ltd. lawsuit, as more fully described in the Company's Form 10-KSB
for the eight months ended September 30, 1996, in which 5200 Enterprises, as
owner of a building, sued the prior owner and all persons and companies
hired by the prior owner to clean up contaminated spills existing on the proper-
ty prior to the sale and, in connection therewith, to conduct certian tests.
A ruling has not been handed down as yet in this case.
In July, 1997, the Company reached a settlement with Mr. Jon Colin, a former
officer of ENSA, regarding Mr. Colin's Demand for Arbitration. Pursuant to the
settlement, Mr. Colin will receive $625,000 on July 31, 1999 with interest only
payments made for the intervening two years. The settlement also provides for
certain acceleration of payments if certain events, including additional
financings and/or equity fundings, occur. The Company has the right to prepay
the loan at a 10% discount prior to December 31, 1997. The liability for this
settlement was recorded on the Company's financial statements for the eight
months ended September 30, 1996 and reported on the Company's Form 10-KSB
for that period.
Item 2 Changes in Securities.
----------------------
During the three months ended June 30, 1997, the Company sold 449,899 shares
of its Common Stock and warrants to purchase an additional
449,899 shares of
its Common Stock. Net proceeds from the sale amounted to $502,000.
Item 3 Defaults Upon Senior Securities.
--------------------------------
None.
Item 4 Submission of Matters to a Vote of Security Holders.
----------------------------------------------------
None.
Item 5 Other Information.
------------------
Effective May 9, 1997, the listing of the Company's shares was switched to the
NASDAQ Small Cap Market from the NASDAQ National Market.
On July 2, 1997, Robert M. Rubin resigned as Chief Executive Officer of the
Company and Joseph Wisneski was appointed Chief Executive Officer in his place.
Mr. Rubin continues to hold the position of Chairman of the Board and Mr.
Wisneski continues to hold the position of President.
Item 6 Exhibits and Reports on Form 8-K.
---------------------------------
a) Exhibits - None
b) Reports on Form 8-K - None
5
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.
ERD WASTE CORP.
(Registrant)
August 22, 1997 s/s Joseph Wisneski
Date Joseph Wisneski
President
August 22, 1997 s/s N. James Triaca
Date N. James Triaca
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 97,416
<SECURITIES> 0
<RECEIVABLES> 10,523,512
<ALLOWANCES> 712,730
<INVENTORY> 257,608
<CURRENT-ASSETS> 13,880,781
<PP&E> 8,929,986
<DEPRECIATION> 1,057,334
<TOTAL-ASSETS> 40,393,891
<CURRENT-LIABILITIES> 22,914,531
<BONDS> 0
0
0
<COMMON> 7,473
<OTHER-SE> 12,627,742
<TOTAL-LIABILITY-AND-EQUITY> 40,393,891
<SALES> 23,404,269
<TOTAL-REVENUES> 23,404,269
<CGS> 16,152,962
<TOTAL-COSTS> 25,471,728
<OTHER-EXPENSES> 697,866
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 889,063
<INCOME-PRETAX> (2,765,325)
<INCOME-TAX> (1,106,129)
<INCOME-CONTINUING> (1,659,196)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,659,196)
<EPS-PRIMARY> (.26)
<EPS-DILUTED> (.26)
</TABLE>
