-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NEUNyiLlshv8JIGE6S6aTlrAYp8Q0UhgHTenl0Ukyz14zCseLtVg2N/TMP3vMv6Q UPwkq1Tb53eydvvNW9Gshw== 0000899681-97-000135.txt : 19970401 0000899681-97-000135.hdr.sgml : 19970401 ACCESSION NUMBER: 0000899681-97-000135 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970331 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: GEOWASTE INC CENTRAL INDEX KEY: 0000102499 STANDARD INDUSTRIAL CLASSIFICATION: REFUSE SYSTEMS [4953] IRS NUMBER: 362751684 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-09278 FILM NUMBER: 97568934 BUSINESS ADDRESS: STREET 1: 24 CATHEDRAL PLACE SUITE 208 CITY: ST AUGUSTINE STATE: FL ZIP: 32084 BUSINESS PHONE: 9048240201 MAIL ADDRESS: STREET 1: 24 CATHEDRAL PL STREET 2: STE 208 CITY: ST AUGUSTINE STATE: FL ZIP: 32084 FORMER COMPANY: FORMER CONFORMED NAME: UTAH SHALE LAND & MINERALS CORP DATE OF NAME CHANGE: 19920113 10-K 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 OR [ ] 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 0-9278 GEOWASTE INCORPORATED (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 36-2751684 (STATE OR OTHER JURISDICTION OF INCORPORATION) (IRS EMPLOYMENT IDENTIFICATION NO.) SUITE 700, 100 WEST BAY STREET, JACKSONVILLE, FL 32202 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) Registrant's telephone number, including area code: (904) 353-5033 Securities registered pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, $.10 PAR VALUE 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 [ ] Indicate by a check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendments to this Form 10-K. [ ] The aggregate market value of the voting stock held by non-affiliates of the registrant was approximately $43,271,810 at March 17, 1997. Exclusion of shares held by any person should not be construed to indicate that such person possesses the power, direct or indirect, to direct or cause the direction of management policies of the registrant, or that such person is controlled by or under common control with the registrant. At March 17, 1997 the registrant had issued and outstanding an aggregate of 21,265,829 shares of its common stock. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's definitive Proxy Statement relating to the 1997 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission are incorporated by reference into Part III, as set forth herein. PART I ITEM 1. BUSINESS GENERAL GeoWaste Incorporated (the "Company" or "GeoWaste") is a holding company which was incorporated in the State of Delaware under the name Utah Shale Land & Minerals Corporation in 1971. The Company, through its subsidiaries, is in the business of owning, operating and acquiring non-hazardous, solid waste collection, transportation and transfer companies and disposal facilities and related sanitation and infrastructure maintenance businesses. GeoWaste's solid waste services operations consist of a solid waste collection and disposal company located in Valdosta, Georgia, a solid waste collection, transfer, materials recovery facility and portable toilet company based in Ocala, Florida, a solid waste transfer location in St. Augustine, Florida, a solid waste collection and street sweeping business in Jacksonville, Florida and street sweeping operations located in Miami, Tallahassee, Ft. Walton Beach and Pensacola, Florida. Solid waste management and related services accounted for 100% of the Company's total consolidated revenue in 1996. With the exception of David Joseph Company which accounted for approximately 14% of the Company's revenue in 1996, no customer accounted for more than 10% of GeoWaste's revenue in 1996. Fees paid to GeoWaste by its solid waste collection customers (including charges paid by such customers for disposal) accounted for approximately 44% of GeoWaste's revenue during 1996. Transfer and disposal services provided to municipalities, counties and other waste management companies accounted for approximately 41% of such revenue and related sanitation services accounted for approximately 15%. On March 21, 1996, the Company acquired North Florida Sweeping, Inc. ("NFS"), a roll-off collection and street sweeping company based in Jacksonville, Florida with annual revenues of approximately $1,700,000. On August 12, 1996, the Company acquired Spectrum Group, Inc. d/b/a United Sanitation ("United Sanitation"), a company based in Ocala, Florida which owns and operates solid waste collection, transportation, recycling and transfer facilities and related solid waste management operations with annual revenues of approximately $6,000,000. On August 30, 1996, the Company purchased certain equipment and accounts receivable of Standard Disposal Services of Florida, Inc. ("Standard") with annual revenues of approximately $1,200,000. Unless the context indicates to the contrary, all statistical and financial information under Item 1 of this report is given for the period ended December 31, 1996. COLLECTION Through its wholly-owned subsidiaries, GeoWaste of GA, Inc. ("GEOW/GA"), GeoWaste of FL, Inc. ("GEOW/FL"), NFS and United Sanitation, the Company provides solid waste collection services to residential, commercial and industrial customers in South Georgia and Northern Florida. Commercial and industrial collection services are generally performed under one to three-year service agreements and fees are determined by such considerations as market factors, collection frequency, type of equipment furnished, the type and volume or weight of the waste collected, the distance to the disposal facility and cost of disposal. Most of the Company's residential solid waste collection services are performed under contracts with municipalities giving the Company exclusive rights to service all or a portion of the homes in their respective jurisdictions. Such contracts or franchises usually range in duration from one to five years. The fees received by GeoWaste are based primarily on market factors, frequency and type of service, the distance to the disposal facility and cost of disposal. Residential collection fees are paid by the residential customers receiving the service. TRANSFER The Company, through United Sanitation, operates a solid waste transfer facility in Ocala, Florida. The facility holds a permit from the Florida Department of Environmental Protection to accept, process and transfer up to 600 tons per day of solid waste and under its zoning approval from Marion County, Florida, may accept solid waste generated from the Florida Counties of Marion, Lake, Flagler, Levy, Alachua, Sumter, Volusia and Citrus. GeoWaste also holds a ten year contract to provide solid waste transfer and transportation services to the City of St. Augustine, Florida. The contract requires the Company to design, permit, construct and operate a transfer station for the loading, removal, and disposal at GeoWaste's Pecan Row Landfill of approximately 45 tons per day of municipal solid waste from the City. GeoWaste, through GEOW/GA, began operation of an interim, temporary transfer station in October of 1994. The Company and the City of St. Augustine are presently finalizing the location and ownership of the permanent facility. RECYCLING United Sanitation operates a materials recovery facility in Ocala, Florida which accepts, processes, and sells corrugated cardboard ("OCC"), newsprint ("ONP"), office paper ("OFP"), ferrous and non-ferrous metals. These recyclable materials are brought to the facility either by recyclable collection vehicles operated by United Sanitation or under contractual arrangements with third parties. After delivery, all non-recyclable material is removed and the remaining recyclables are baled and stored until shipped to end users, which are under long term agreements with the Company. STREET SWEEPING The Company, through its wholly owned subsidiaries, NFS and GEOW/FL, provides street sweeping services in Jacksonville, Ft. Walton Beach, Tallahassee, Pensacola and Miami, Florida. Substantially all of the street sweeping activities are performed under contracts with city, county or State public works or transportation departments and range in duration from two to five years. DISPOSAL GEOW/GA operates one solid waste disposal facility, the Pecan Row Landfill, in Valdosta, Lowndes County, Georgia. The landfill commenced operation on November 5, 1991. The landfill was constructed and is operated pursuant to a solid waste handling permit issued by the Georgia Environmental Protection Division. The original permit authorized the disposal of nonhazardous solid waste on 46 acres of the site, with a total permitted volume of approximately 1.8 million tons. On February 2, 1996 the Company received a modified permit for the Landfill which modified the base and height of the facility and which increased the disposal capacity of the facility by 1,467,800 million tons, resulting in a total available capacity of 2,642,268 tons. The Company estimates that based on current volumes, the remaining life of the landfill as of December 31, 1996 is approximately ten years. The permit, as modified, has no termination date, places no restriction on daily volumes, nor restricts the geographical origin of the waste which may be disposed of at the Landfill. The Company has applied for and is awaiting approval of another modification to the permit of Pecan Row Landfill which, by increasing the footprint of the landfill, will add 1,500,000 tons of capacity, resulting in over 4,200,000 tons of remaining airspace for the disposal of solid waste. Upon receipt of the permit modification from the Georgia Department of Natural Resources, Environmental Protection Division ("GAEPD"), the Company believes remaining life of the Pecan Row Landfill will be 23 years, based on 1996 average daily tonnage of 868 tons. On March 25, 1996, GeoWaste, through its wholly-owned subsidiary, Low Brook Development, Inc. ("Low Brook"), entered into an option to purchase 420 acres of land near GEOW/GA's Pecan Row Landfill. The initial option term expires on March 24, 1998 and may be extended for one additional term to March 24, 2000. On March 11, 1997, Low Brook received confirmation from the local zoning authority for Lowndes County, Georgia, that the development of the 420 acres as municipal solid waste landfill is a permitted use and conforms to local zoning ordinances. Low Brook is currently reviewing the costs and timing associated with the permitting of this property, which, if obtained, would yield substantial capacity for the disposal of solid waste. Suitable sanitary landfill facilities have become increasingly difficult to obtain because of land scarcity, local resident opposition and expanding governmental regulation. As GeoWaste's Pecan Row Landfill or future facilities become filled, the solid waste disposal operations of the Company are and will continue to be materially dependent on its ability to purchase, lease or obtain operating rights for additional sites and obtain the necessary permits from regulatory authorities to operate them. There can be no assurance that permit modifications to the Pecan Row Landfill or new permits for additional sites, including the property under option by Low Brook, can be obtained. PERMITTING AND CONSTRUCTION PROCESS When appropriate, the Company pursues obtaining permits for expansion and/or modification of the Pecan Row Landfill. Permit expansions and modifications generally take the form of vertical expansions of existing disposal capacity, lateral expansions of permitted disposal acreage or modifications of operating restrictions to allow increased disposal volume or additional waste streams. Although the permitting process varies from state to state, the following summary (which is based on Georgia law) sets forth the typical steps in the permitting process. LOCAL APPROVAL. In most instances, some form of local zoning or planning approval, commonly referred to as siting approval, is required to permit a site and may be required to expand or modify a landfill. This process usually requires complying with city or county zoning regulations through a separate application process to a zoning or planning board. An applicant generally files various reports or drawings which describe the project and public hearings are held. In most instances, significant, organized community opposition will be present and many local zoning authorities will consider community opposition in deciding whether to grant zoning approval. Following hearings, a decision is made. Generally, both the applicant and any opposition have the right to appeal such decision. Although not always required, the local zoning approval process is usually completed prior to applying for a state permit. STATE APPROVAL. Upon receipt of local approval, an applicant must then submit detailed construction and operating plans for state approval. Most states require an applicant to evidence that a new, modified or expanded facility will meet or exceed state regulations regarding disposal facility siting and design specifications. States generally consider the technical merits of an application, particularly such matters as geology, hydrogeology, ecology, archaeology, soil characteristics, surface drainage, the presence of, or location relative to, airports, wetlands and local water supply systems and the adequacy of local road systems. Engineering consultants design the project to meet state regulations and standards. This design is reviewed by state officials, comments are issued and, possibly after negotiations between the applicant and the state officials, revisions are made by the applicant. Once the design is approved, public notice is given and a hearing held. Depending on the issues presented at the hearing, an applicant may wait nine months or more before receiving a decision. Both the applicant and any opposition generally have the right to appeal the decision. REGULATION The Company and the waste services industry in general are subject to extensive, expansive and evolving regulation by federal, state and local authorities. In particular, the regulatory process requires firms in the industry to obtain and retain numerous governmental permits to conduct various aspects of their operations, any of which may be subject to revocation, modification or denial. The continually shifting policies and attitudes of the regulatory agencies relating to the industry may impact the Company's ability to obtain applicable permits from governmental authorities on a timely basis and to retain such permits. The Company is not in a position to assess the extent of any such impact, but it could be significant. State and local governments have also from time to time proposed or adopted other types of laws, regulations or initiatives with respect to the environmental services industry. Included among these are laws, regulations and initiatives to ban or restrict the interstate or inter-county shipment of wastes, impose higher taxes on out-of-state waste shipments than in-state shipments and regulate disposal facilities as public utilities. The Company makes a continuing effort to anticipate regulatory, political and legal developments that might affect operations, but cannot predict the extent to which any legislation or regulation that may be enacted or enforced in the future may affect its operations. Operating permits are generally required at the state and local level for landfills and collection vehicles. Operating permits need to be renewed periodically and may be subject to revocation, modification, denial or non-renewal for various reasons, including failure of the Company to satisfy regulatory concerns. In the solid waste collection phase, regulation takes such forms as permitting of transfer stations, licensing of collection vehicles, truck safety requirements, vehicular weight limitations and, in certain localities, limitations on rates, area and time and frequency of collection. In the solid waste disposal phase, regulation covers various matters, including methane gas emission, liquid runoff and rodent, pest, litter and traffic control. Zoning and land use requirements and limitations are encountered in the solid waste collection and disposal phases of the Company's business. In addition, the Company's operations may be subject to water pollution laws and regulations; air and noise pollution laws and regulations; and safety standards under the Occupational Safety and Health Act ("OSHA"). Governmental authorities have the power to enforce compliance with these various laws and regulations and violators are subject to injunctions, fines and revocation of permits. Private individuals may also have the right to sue to enforce compliance. Regulatory or technological developments relating to the environment may require GeoWaste (as well as others in the solid waste management business) to modify, supplement or replace equipment and facilities at costs which may be substantial. Because GeoWaste is engaged in a business intrinsically connected with the protection of the environment and the potential discharge of materials into the environment, a material portion of the Company's capital expenditures are, directly or indirectly, related to such items. The Company does not expect such expenditures, which are incurred in the ordinary course of business, to have a materially adverse impact on its earnings or competitive position in the foreseeable future because GeoWaste's business is based upon compliance with environmental laws and regulations and its services are priced accordingly. Although the Company intends to conduct its operations in compliance with applicable laws and regulations, the Company believes that heightened political and citizen sensitivity causes companies in the solid waste management industry to be faced, in the normal course of operating their businesses, with the possibility of expending funds for fines, penalties and expenses incurred as a result of changes to environmental compliance regulations. While the Company has expended no such funds to date, the possibility remains that technological, regulatory or enforcement developments, the results of environmental studies or other factors could materially alter this expectation at any time. In any event, such matters could have a material impact on earnings for a particular fiscal quarter. RESOURCE CONSERVATION AND RECOVERY ACT ("RCRA"). RCRA regulates the generation, treatment, storage, handling, transportation and disposal of hazardous and solid waste and requires states to develop programs to insure the safe disposal of solid waste in sanitary landfills. RCRA divides solid waste into two groups, hazardous and nonhazardous. Wastes are generally classified as hazardous wastes if they: (i) either (a) are specifically included on a list of hazardous wastes or (b) exhibit certain characteristics; and (ii) are not specifically designated as nonhazardous. Wastes classified as hazardous under RCRA are subject to much stricter regulation than wastes classified as nonhazardous. Among the wastes that are specifically designated as nonhazardous waste are household waste and various types of special waste. These wastes, which will be accepted at the Company's landfills, may contain incidental hazardous substances. On October 9, 1991, the EPA promulgated new regulations pursuant to Subtitle D of RCRA. These new regulations include location standards, facility design standards, operating criteria, closure and post-closure requirements, financial assurance standards and groundwater monitoring requirements as well as corrective action standards, all of which have not previously been uniformly applied at landfills within the fifty states. In addition, the new regulations require new landfills which received municipal solid waste for disposal after April 9, 1994 to have one or more liners (typically high-density polyethylene liners) to keep leachate out of groundwater and have extensive systems to collect leachate for handling and treatment. In addition, by October 9, 1996 groundwater wells must also be installed at virtually all landfills to monitor groundwater quality and the leachate collection system operation. The regulations also require (where threshold test levels are met) that methane gas generated at landfills be controlled in a manner that will protect human health and the environment. Because some states have already adopted regulations at least as stringent as the new federal regulations, the new Subtitle D regulations will cause greater changes in the landfill regulation of certain states than of others. The Company's Pecan Row Landfill was designed and constructed in accordance with the requirements of Subtitle D. THE FEDERAL WATER POLLUTION CONTROL ACT ("CLEAN WATER ACT"). The Clean Water Act established rules regulating the discharge of pollutants from a variety of sources, including solid waste disposal sites, into waters of the United States. For any discharge, the Clean Water Act would require the Company to apply for and obtain a discharge permit, conduct sampling and monitoring and, under certain circumstances, reduce the quantity of pollutants in those discharges. Also, virtually all landfills are required to comply with the new federal storm water regulations, which are designed to prevent possibly contaminated storm water from flowing into surface waters. COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION AND LIABILITY ACT ("CERCLA"). CERCLA addresses problems created by the release of any hazardous substance into the environment. CERCLA's primary mechanism for remedying such problems is to impose strict joint and several liability for cleanup of facilities among all past and current owners and operators of the site as well as the generators and the transporters who arranged for disposal and transportation of hazardous substances. The costs of CERCLA cleanup can be very substantial. Liability under CERCLA does not depend upon the existence or disposal of "hazardous waste" but can also be founded upon the existence of even very small amounts of the more than 1,000 "hazardous substances" listed by the EPA. THE CLEAN AIR ACT, AS AMENDED ("CLEAN AIR ACT"). The Clean Air Act provides for federal, state and local regulation of the emission of air pollutants and is applicable to landfills. The EPA has proposed new source performance standards regulating overall air emissions from solid waste landfills. The EPA may also issue regulations controlling the emissions of particular air pollutants from solid waste landfills. Moreover, landfills located in areas with air pollution problems may be subject to even more extensive air pollution controls. STATE AND LOCAL REGULATIONS. The States of Georgia and Florida, as well as those states in which the Company may operate in the future, have laws and regulations governing the generation, handling, transfer, transportation and disposal of solid waste, water and air pollution and, in most cases, the design, operation, maintenance, closure and post-closure maintenance of landfills. Georgia and Florida, like most other states, have tightened the regulatory requirements on the permitting of new and expanded solid waste facilities and on the continued operation of existing facilities. State regulations are expected to become both more stringent and more uniform nationwide as the dates for the implementation of additional requirements of Subtitle D occur. The increased stringency of state regulations may be expected to benefit the Company, as older landfills are forced to close, thereby further reducing the available landfill capacity. However, the increasing state and local scrutiny of landfills also makes it difficult for the Company to comply with the continually evolving and expansive regulation applicable to the disposal of solid waste. Public opposition to the siting and operation of landfills has led many states, including Georgia and Florida, to enact legislation at the state and/or local level which attempts to prohibit or greatly restrict the interstate and intrastate movement of solid waste. Recent decisions by the United States Supreme Court recognize that the Commerce Clause of the United States Constitution imposes substantial limits upon the ability of state and local governments to restrict the movement of solid waste across state lines. Legislation has been introduced in the United States Congress which attempts to restrict interstate and intrastate waste transportation. For the foreseeable future, the Company, like all others in the solid waste industry, faces uncertainty regarding the circumstances under which it will be able to accept out-of-state waste for disposal at its facility. A significant portion of the solid waste volume disposed of at the Company's Pecan Row Landfill is generated from outside the State of Georgia. COMPETITION GeoWaste encounters competition, primarily in the pricing and rendering of services, from various sources in all phases of its operations. In solid waste collection operations, competition is encountered, for the most part, from national, regional and local collection companies, some of which have substantially greater financial, marketing and other resources than the Company. Additionally, solid waste collection competition is encountered from municipalities and counties which, through use of tax revenues, may be able to provide services at lower direct charges to the customer than those charged by private sector companies. In the solid waste disposal operations, competition is encountered primarily from municipalities, counties, local governmental agencies, and other national or regional waste management companies, some of which have substantially greater financial, marketing and other resources than the Company. In the street sweeping business, competition is encountered primarily from municipalities and local or regional street sweeping companies. INSURANCE The Company currently maintains liability insurance coverage for occurrences under various environmental impairment, primary casualty and excess liability insurance policies. The Company has secured Environmental Impairment Liability Insurance in amounts believed to be sufficient to offset an unforeseen occurrences. The Company currently maintains $1,000,000 of loss coverage. However, in the event an environmental impairment exceeds the loss coverage, the Company's financial condition could be adversely affected. In 1991, as required by law, the Company established a trust fund for the benefit of the State of Georgia securing the closure and post-closure care of the Pecan Row Landfill. As of December 31, 1995, this trust fund had a balance of $685,535. In December 1995, the Company was successful in obtaining a surety bond which can be used as an alternative to the continued maintenance of the trust fund. The surety bond requirement of depositing $300,000 as collateral was met in December 1995. At that time the trust fund was terminated and the Company received the trust fund balance during the second quarter of 1996. Operating expenses include the estimated costs of closure and post-closure care for the Pecan Row Landfill. Such costs are based upon actual landfill capacity utilized in each operating period. From time to time, the Company may be required to post performance bonds, financial assurances or bank letters of credit issued by surety companies which act as a financial guarantee of the Company's performance. EMPLOYEES At December 31, 1996, GeoWaste and its subsidiaries employ a total of 193 persons in its operations. None of GeoWaste's employees are represented by labor unions under collective bargaining agreements. The Company believes it maintains good employee relations. ITEM 2. PROPERTIES The Company's principal real estate interest is its Pecan Row Landfill in Valdosta, Georgia. The Company leases 2,000 square feet of executive office space at Suite 700, 100 West Bay Street, Jacksonville, Florida. The Company is also party to a lease for approximately 155,000 square feet of land and buildings in Ocala, Florida which is used for the operations of United Sanitation and various short term leases for smaller parcels of property in Miami, Tallahassee, and Pensacola, Florida which are used for the parking of street sweepers. The principal fixed assets of the Company consist of land which is owned, land improvements and heavy equipment at the Pecan Row Landfill, the collection and transportation company in Valdosta, Georgia, and the collection and street sweeping company in Jacksonville, Florida. The heavy equipment, which is owned or leased, includes collection vehicles, refuse compactors, bulldozers, scrapers, backhoes, loaders, transfer trailers, and miscellaneous other equipment used in transfer and disposal operations. The Company's interest in the Uinta Basin Limited Partnership which held 19,200 acres of land in Uinta Basin, Uinta County, Utah was terminated in October 1996 with the sale of the Company's interest in the land for $656,920. As of December 31, 1996, aggregate annual rental payments on real estate leased by the Company and its subsidiaries was $117,000. ITEM 3. LEGAL PROCEEDINGS On December 31, 1996, the Company filed suit in the Federal District Court for the Eastern District of Florida against the former shareholders of NFS alleging, among other things, fraud in the inducement to the acquisition of the capital stock of NFS. The Company is seeking recission of the transaction. The Company intends to vigorously pursue resolution of the matter and does not believe the proceeding will have a material adverse effect on the financial condition of the Company. The business in which the Company is engaged is intrinsically connected with the protection of the environment and the potential discharge of materials into the environment. In the ordinary course of conducting its business activities, the Company may become involved in judicial and administrative proceedings involving governmental authorities at the federal, state and local level including, in certain instances, proceedings instituted by citizens or local governmental authorities seeking to overturn governmental action where governmental officials or agencies are named as defendants together with the Company or one or more of its subsidiaries, or both. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. EXECUTIVE OFFICERS OF THE REGISTRANT The following table sets forth the name, age and position held by each executive officer of the Company as of December 31, 1996. NAME AGE POSITION WITH THE COMPANY Amy C. MacF. Burbott 46 President, Chief Executive Officer and Director Raymond F. Chase 41 Vice President, Chief Financial Officer, Treasurer and Secretary John A. Paglia 35 Vice President Michael D. Paglia 33 Vice President and Director AMY C. MACF. BURBOTT. Ms. Burbott has served as President and Chief Executive Officer of GeoWaste since May 1996 and has served as Director since July 1991 (including having served as Chairman of the Board from February 1995 to May 1996). Ms. Burbott also served as President and Chief Executive Officer of the Company from July 1991 until February 1995. From January 1991 to July 1991, Ms. Burbott was engaged in the development of various solid waste projects through a corporation she controlled. Prior to January 1991, Ms. Burbott served as Eastern Region Vice President and General Counsel of Waste Management, Inc., an national waste services company. RAYMOND F. CHASE. Mr. Chase joined the Company as Controller and Treasurer in July 1991. He was named a Vice President of the Company in April 1994 and was named Secretary and Chief Financial Officer on February 1, 1995. From January 1990 through June 1991 he served as the Controller of a national solid waste equipment leasing company, Olympic Compactor Rentals. From 1987 to 1990 he was the Controller for Waste Management of North America, Inc.'s collection and transportation subsidiary based in Southeastern Massachusetts. JOHN A. PAGLIA. Mr. Paglia joined to the Company as a Vice President in August 1996 upon the Company's acquisition of United Sanitation. From July 1993 to August 1996 Mr. Paglia had served as an officer and owner of United Sanitation. From 1989 to July 1993, he was a general manager for Commercial Metals Company. MICHAEL D. PAGLIA. Mr. Paglia joined the Company as a Vice President and Director in August 1996 upon the Company's acquisition of United Sanitation. From July 1993 to August 1996 Mr. Paglia had served as an officer and owner of United Sanitation. From 1989 to July 1993, he was the general manager for the Northern Florida operations of Commercial Metals Company. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The Company's Common Stock is traded over-the-counter on The Nasdaq Small-Cap Market under the symbol "GEOW". The following table set forth the periods indicated the high and low bid prices on The Nasdaq Small-Cap Market. LOW BID HIGH BID 1996 PRICES PRICES --------- -------- First Quarter $1.00 $1.75 Second Quarter 1.56 4.69 Third Quarter 2.62 4.50 Fourth Quarter 1.75 3.37 1995 First Quarter $0.44 $0.63 Second Quarter 0.50 0.69 Third Quarter 0.66 2.00 Fourth Quarter 0.75 1.31 As of March 26, 1997, there were 4,821 stockholders of record of the Company's Common Stock. The Company did not pay any dividends in 1996, 1995 or 1994, nor does the Company expect to pay any dividends in the foreseeable future. Pursuant to the terms of a Purchase Agreement dated March 5, 1992, the Company is prohibited (with certain limited exceptions), from paying dividends on its common stock if the aggregate amount of all such payments from and after March 5, 1992 exceeds (i) 50% of the net after tax income of the Company, plus (ii) 100% of any amounts received by the Company from the issuance of its equity securities or certain subordinated debt securities, less (iii) 100% of all losses. Due in part to the high level of public awareness of the business in which the Company is engaged, regulatory enforcement proceedings or other potentially unfavorable developments involving the Company's operations or facilities, including those in the ordinary course of business, may be expected to engender publicity which could from time to time have an adverse impact upon the market price for the Company's common stock. ITEM 6. SELECTED FINANCIAL DATA OF THE REGISTRANT SELECTED FINANCIAL DATA OF THE REGISTRANT The following selected consolidated financial data are derived from the Company's audited consolidated financial statements and should be read in conjunction with the consolidated financial statements and the notes thereto included at Item 8 herein.
Year Ended December 31, --------------------------------------------------------------------------------- 1996 1995 1994 1993 1992 --------------------------------------------------------------------------------- (in thousands, except per share amounts) STATEMENT OF OPERATIONS DATA: Total revenue $13,703 $ 8,933 $ 6,967 $ 4,806 $ 2,205 ------- ------- ------- ------- ------- Net income (loss) 1,708 1,462 1,189 (218) (1,878) ========== ========= ========= ========= ======== Net income (loss) per common share $ .08 $ .07 $ .06 $ (.01) $ (.10) =========== ========= ========= ========= ======== Weighted average number of common shares outstanding 21,839 19,526 18,851 18,638 18,542 Year Ended December 31, --------------------------------------------------------------------------------- 1996 1995 1994 1993 1992 --------------------------------------------------------------------------------- (in thousands) BALANCE SHEET DATA: Cash $ 3,058 $ 3,985 $ 1,633 $ 1,209 $ 898 Working capital (2,777) 3,959 1,335 1,244 816 Total assets 30,618 15,637 14,528 11,293 10,812 Long-term obligations 6,022 7,036 6,723 5,918 5,355 Shareholders' equity 15,983 7,386 5,848 4,667 4,712
SELECTED FINANCIAL DATA OF THE REGISTRANT'S GEORGIA AND FLORIDA OPERATIONS The table below sets forth certain financial data of the Company's collection, transfer, recycling, disposal and sweeping operations in Georgia and Florida. These operating results do not include the corporate administrative expenses of the parent, which are associated with the operation of the Company as a public entity and the pursuit of the Company's business strategy of acquiring additional disposal, collection and related sanitation operations. The Company believes that the operating information set forth below is an accurate representation of the operating results of the Georgia and Florida operations on a stand-alone basis.
YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, 1996 1995 1994 -------------- -------------- ------------- Revenues: Disposal $ 4,761,891 $5,380,333 $4,222,257 Collection 6,048,760 2,743,446 2,542,868 Transfer 924,123 808,749 201,865 Recycling 529,489 - - Sweeping 1,438,445 - - ---------------- ------------- ------------- Total 13,702,708 8,932,528 6,966,990 Non-cash operating expenses (1) 5,558,113 2,169,150 1,854,410 ---------------- ------------- ------------- Gross Margin before non-cash items 8,144,595 6,763,378 5,112,580 Selling, General and Administrative (2) 1,546,727 590,733 496,377 ---------------- ------------ ------------- Earnings before interest, taxes, depreciation, and amortization for non-corporate operating companies $ 6,597,868 $6,172,645 $4,616,203 ================= ========== ==========
1. Excludes depreciation, amortization and non-cash closure costs of $2,670,736, $3,038,100, and $2,321,941 in 1996, 1995 and 1994, respectively. 2. Excludes amortization expenses of $155,671 in 1996, $71,192 in 1995 and $31,143 in 1994. No corporate overhead has been allocated. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS OF THE REGISTRANT 1996 COMPARED WITH 1995 Net revenues for the year ended December 31, 1996 consisted of collection revenues of $6,049,000, disposal revenues of $4,762,000, transfer station revenues of $924,000, recycling revenues of $529,000 and sweeping revenues of $1,438,000. Collection revenues increased 120%, disposal revenues decreased 12%, and transfer revenues increased 14%. There were no related recycling or sweeping revenues in 1995. Of the 120% increase in collection revenues, 82% was attributable to the operations of NFS, United and Standard which were acquired during 1996. Of the 14% increase in transfer station revenues, 9% was associated with the newly acquired companies. Lower disposal revenues reflect the decreased volumes at the Pecan Row Landfill combined with more competitive pricing. Daily tonnage at the landfill decreased 2% to 868. However, lower pricing for special waste customers accounted for 9% of the total 12% decrease. All intercompany activity has been eliminated. Operating expenses related to the collection, disposal, transfer, recycling and sweeping activities for 1996, consisted of collection expenses of $3,231,000, disposal expenses of $2,913,000, transfer station expenses of $421,000, recycling expenses of $542,000, and sweeping expenses of $1,122,000. Collection expenses increased 166% over 1995, disposal expenses decreased 20%, and transfer expenses increased 26%. There were no related recycling or sweeping expenses in 1995. Of the 166% increase in collection expenses, 137% was attributable to the acquisitions in 1996. Of the 26% increase in transfer station expenses, 21% was associated with the acquired companies. The decrease in disposal expenses resulted from a combination of decreased volumes and a reduction in cell related amortization rates due to the Company's obtaining a permit modification in the first quarter of 1996 to vertically expand the landfill. Selling, general, and administrative expenses for collection, disposal, transfer, recycling and sweeping activities (excluding corporate administrative expenses) for 1996, were $839,000, $369,000, $23,000, $51,000 and $265,000, respectively. Corporate administrative expenses were $1,078,000 for the year ended December 31, 1996. Net income for the year ended December 31, 1996 was $1,708,000 compared to $1,462,000 in 1995. This improvement was principally due to the sale of the Unita Partnership land in the fourth quarter of 1996. The Company's working capital was a negative $2,777,000 compared with a positive $3,959,000 at December 31, 1995. The decrease in working capital is a result of the Company's $3,884,265 of subordinated debentures being due in the current period and cash used for acquisitions in 1996. 1995 COMPARED WITH 1994 Net revenues for the year ended December 31, 1995 consisted of collection revenues of $2,743,000, disposal revenues of $5,380,000, and transfer station revenues of $809,000. Collection revenues increased 8% and disposal revenues increased 27% over 1994 results. The increase in collection revenues are primarily the result of increased sales associated with commercial and municipal services. Transfer station revenues for 1995 reflected a full year of operation versus approximately three months in 1994. Higher disposal revenues principally reflect the increased volumes at the Pecan Row Landfill. Daily tonnage per day at the landfill increased 31% from 680 in 1994 to 889 in 1995. All intercompany activity has been eliminated. Operating expenses related to the collection, disposal, and transfer station activities for 1995, consisted of collection expenses of $1,213,000, disposal expenses of $3,660,000, and transfer station expenses of $334,000. Costs and expenses for collection operations increased 14% over 1994 and there was a 21% increase in disposal operating costs. These increases were principally related to higher operating levels in 1995. Selling, general, and administrative expenses for collection, disposal, and transfer station activities (excluding corporate administrative expenses) for 1995, were $270,000, $316,000 and $5,000, respectively. Corporate administrative expenses were $862,000 for the year ended December 31, 1995. Net income for the year ended December 31, 1995 was $1,462,310 compared to $1,190,000 in 1994. This improvement was principally due to an increase in average daily volumes at the Pecan Row Landfill. The Company's working capital was $3,959,000 in 1995 compared to $1,335,000 in 1994. The increase in working capital resulted from the Company's improved operating performance. LIQUIDITY AND CAPITAL RESOURCES OF THE REGISTRANT The Company is in a service industry and has neither significant inventory nor seasonal variations in receivables. At December 31, 1996, the Company had negative working capital of $2,777,000 as compared with a positive working capital of $3,959,000 at December 31, 1995. The decrease in working capital is a result of the Company's $3,884,265 of subordinated debentures being due in the current period and cash used for acquisitions in 1996. The Company's operating performance was sufficient to support corporate overhead and other expenses during 1996. Management believes that current working capital and internally generated funds will be sufficient to meet the Company's working capital requirements for fiscal year 1997. Historically, the Company has relied primarily on the private placement of debt and equity securities and cash generated from operating activities in order to provide it with the cash required for capital expenditures, acquisitions, and operating activities. Set forth below is a discussion of the Company's primary ongoing cash requirements and the means by which it expects to meet these requirements in the future. The Company expects to make capital expenditures on an ongoing basis for improvements to, and expansion of, its landfill and for equipment purchases. The Company estimates that the capital expenditures required for its existing operations will amount to $4,425,000 almost half of which will be used for the construction of a new 4 acre disposal cell and construction costs associated with the expected receipt of a permit modification which will increase the footprint of the Pecan Row Landfill in 1997. The Company expects that it will fund such estimated capital expenditures from existing cash, cash generated from operations, equipment lease financing, and other financing. The Company's business strategy includes the acquisition, on financially attractive terms, of additional solid waste management companies as well as related sanitation and infrastructure maintenance businesses. Such acquisitions may be accomplished through the issuance of the Company's common stock, cash on hand, or may require cash in excess of the Company's current cash available. Although GeoWaste's operating results and financial performance are expected to provide access to any financing which may be necessary to acquire such businesses, there can be no assurance that such additional financing can be obtained on terms acceptable to the Company. The development and permitting of new disposal facilities requires significant capital expenditures over an extended period. Any growth of the Company through the permitting of new disposal facilities or the lateral expansion of its existing disposal facility would require substantial capital expenditures. The Company intends to pursue the further expansion of the Pecan Row Landfill. On March 21, 1996, the Company acquired NFS. The purchase price of approximately $1,732,000 was paid in a combination of the Company's common stock, assumption of debt, cash and warrants. On August 12, 1996, the Company acquired United Sanitation. The purchase price of approximately $11,592,000 consisted of 2,000,000 shares of the Company's common stock and $954,000 in cash. On August 30, 1996, the Company acquired certain equipment and accounts receivable of Standard for $1,296,000 consisting of cash and assumption of debt. In January 1997, the Company purchased the solid waste assets of Air-Sweep-a-Lot, Inc. for approximately $1,000,000 consisting of cash, a promissory note and assumption of debt. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements and supplementary data required by Part II, Item 8, are included in Part IV, as indexed at Item 14(a). ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT There is hereby incorporated by reference the information appearing under the caption "Nominees for Election as Directors" in the Company's Proxy Statement relating to its 1997 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission (the "Commission"). See also the information appearing under the caption "Executive Officers of the Registrant" appearing in Part I. ITEM 11. EXECUTIVE COMPENSATION There is hereby incorporated by reference the information appearing under the caption "Executive Compensation" in the Company's Proxy Statement relating to its 1997 Annual Meeting of Stockholders to be filed with the Commission. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT There is hereby incorporated by reference the information appearing under the caption "Security Ownership of Certain Beneficial Owners and Management" in the Company's Proxy Statement relating to its 1997 Annual Meeting of Stockholders to be filed with the Commission. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS There is hereby incorporated by reference the information appearing under the caption "Certain Relationships and Related Transactions" in the Company's Proxy Statement relating to its 1997 Annual Meeting of Stockholders to be filed with the Commission. PART IV ITEM 14. FINANCIAL STATEMENT, EXHIBITS AND REPORTS ON FORM 8-K (a) Financial Statements (i) Report of Independent Accountants. (ii) Consolidated Balance Sheets as of December 31, 1996 and 1995. (iii) Consolidated Statements of Operations for the years ended December 31, 1996, 1995 and 1994. (iv) Consolidated Statements of Stockholders' Equity for the years ended December 31, 1996, 1995 and 1994. (v) Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1995 and 1994. (vi) Notes to Consolidated Financial Statements. (b) Reports on Form 8-K None. (c) Exhibits. Each Exhibit is listed according to the number assigned to it in the Exhibit Table of Item 601 of Regulation S-K. EXHIBIT NUMBER DESCRIPTION 2.1 Agreement and Plan of Reorganization, dated August 2, 1991, by and between GeoWaste Incorporated, Utah Acquisition Subsidiary, Inc., Equivest Waste Solutions, Inc., Frederick J. Iseman and James Swistock (Incorporated by reference from Exhibit 2(A) to the Current Report on Form 8-K filed August 19, 1991 (File No. 0-9278)). 2.2 Agreement and Plan of Merger dated August 12, 1996, among GeoWaste Incorporated, Spectrum Acquisition Corp., Spectrum Group, Inc., d/b/a United Sanitation, Ocala Chemical, Mills Disposal and John A. Paglia and Michael D. Paglia (Incorporated by reference from Exhibit 2.2 to the Current Report on Form 8-K filed August 27, 1996 (File No. 0-9278)). 3.1 Certificate of Incorporation of GeoWaste Incorporated, as amended and restated (Incorporated by reference from Exhibit A to the Proxy filed November 25, 1991 (File No. 0-9278)). 3.2 Bylaws of GeoWaste Incorporated, as amended (Incorporated by reference from Exhibit 3(b) to the Annual Report on Form 10-K for the year ended December 31, 1987 (File No. 0-9278)). 3.3 Amendment to Amended and Restated Certificate of Incorporation of GeoWaste Incorporated (Incorporated by reference from Exhibit 3.4 to the Annual Report on Form 10-K for the year ended December 31, 1992 (File No. 0-9278)). 4.1 Purchase Agreement, dated March 5, 1992, between GeoWaste Incorporated, the Delaware State Employees' Retirement Fund and the Trust for Defined Benefit Plan of ICI American Holdings Inc. (Incorporated by reference from Exhibit 4.1 to the Current Report on Form 8-K filed March 13, 1992 (File No. 0-9278)). 4.2 Form of Debenture (Incorporated by reference from Exhibit 4.2 to the Current Report on Form 8-K filed March 13, 1992 (File No. 0-9278)). 4.3 Registration Rights Agreement, dated March 5, 1992, by and between GeoWaste Incorporated, the Delaware State Employees' Retirement Fund and the Trust for Defined Benefit Plan of ICI American Holdings Inc. (Incorporated by reference from Exhibit 4.3 to the Current Report on Form 8-K filed March 13, 1992 (File No. 0-9278)). 4.4 Registration Rights Agreement, dated August 2, 1991, by and between GeoWaste Incorporated and each of the entities listed on Exhibit A thereto (Incorporated by reference from Exhibit 4(D) to the Current Report on Form 8-K filed August 19, 1991 (File No. 0-9278)). 4.5 First Escrow Agreement, dated August 2, 1991, by and between GeoWaste Incorporated, Frederick J. Iseman, James Swistock, Matthew Fulton, Brian Russell, James R. Jones, Paul Thomas Cohen, William vanden Heuvel, Balis & Zorn, Inc. and IBJ Schroder Bank & Trust Company (Incorporated by reference from Exhibit 4(B) to the Current Report on Form 8-K filed August 19, 1991 (File No. 0-9278)). 4.6 Second Escrow Agreement, dated August 2, 1991, by and between GeoWaste Incorporated, the parties listed on Schedule A thereto, Kurt Wilkening and IBJ Schroder Bank & Trust Company (Incorporated by reference from Exhibit 4(C) to the Current Report on Form 8-K filed August 19, 1991 (File No. 0-9278)). 4.7 Equivest First Convertible Debt Exchange Agreement, dated August 2, 1991, by and between GeoWaste Incorporated the parties listed on Schedule A thereto (Incorporated by reference from Exhibit 2(B) to the Current Report on Form 8-K filed August 19, 1991 (File No. 0-9278)). 4.8 Equivest Second Convertible Debt Exchange Agreement, dated August 2, 1991, by and between GeoWaste Incorporated the parties listed on Schedule A thereto (Incorporated by reference from Exhibit 2(C) to the Current Report on Form 8-K filed August 19, 1991 (File No. 0-9278)). 4.9 Stockholders' Agreement, dated August 2, 1991, by and between GeoWaste Incorporated, Advance Ross Corporation, Allen & Company Incorporated, Frederick J. Iseman, Harve Ferrill, Gian Caterine, Kurt Wilkening, their persons or entities listed on Schedule A thereto and the persons or entities listed on Schedule B thereto (Incorporated by reference from Exhibit 4(A) to the Current Report on Form 8-K filed August 19, 1991 (File No. 0-9278)). 4.10 Voting Agreement, dated March 5 ,1992, by and between GeoWaste Incorporated, the Delaware State Employees' Retirement Fund and the Trust for Defined Benefit Plan of ICI American Holdings Inc., Frederick J. Iseman, Gian Caterine, Amy C. MacF. Burbott, Harve Ferrill, James Swistock, Advance Ross Corporation and Allen & Company Incorporated (Incorporated by reference from Exhibit 4.4 to the Current Report on Form 8-K filed March 13, 1992 (File No. 0-9278)). 4.11 Voting Agreement dated as of August 12, 1996, among John A. Paglia, Michael D. Paglia, Advance Ross Corporation, Allen & Company Incorporated, Allen Value Partners L.P. and Allen Value Limited Incorporated (Incorporated by reference from Exhibit 4.11 to the Current Report on Form 8-K filed August 27, 1996 (File No. 0-9278)). 10.1 Warrant Purchase Agreement by and between GeoWaste Incorporated and Allen & Company Incorporated (Incorporated by reference from Exhibit 10.1 to the Annual Report on Form 10-K for the year ended December 31, 1991 (File No. 0-9278)). 10.2 Form of Employment Agreement, dated as of August 1, 1991, by and between GeoWaste Incorporated and Amy C. MacF. Burbott (Incorporated by reference from Exhibit 10.1 to the Quarterly Report on Form 10-Q for the period ended September 30, 1992 (File No. 0-9278)). 10.3 Form of Employment Agreement dated as of June 1, 1992, by and between GeoWaste Incorporated and Richard J. Sherman (Incorporated by reference from Exhibit 10.2 to the Quarterly Report on Form 10-Q for the period ended September 20, 1992 (File No. 0-9278)). 10.4 Form of Employment Agreement, dated as of August 1, 1991, by and between GeoWaste Incorporated and James W. Swistock (Incorporated by reference from Exhibit 10.4 to the Annual Report on Form 10-K for the year ended December 31, 1992 (File No. 0-9278)). 10.5 Form of Severance Agreement, dated as of December 21, 1995, by and between GeoWaste Incorporated and Kevin R. Kohn (Incorporated by reference from Exhibit 10.5 to the Annual Report on Form 10-K for the year ended December 31, 1995 (File No. 0-9278)). 10.6 Form of Severance Agreement, dated as of December 21, 1995, by and between GeoWaste Incorporated and Raymond F. Chase (Incorporated by reference from Exhibit 10.6 to the Annual Report on Form 10-K for the year ended December 31, 1995 (File No. 0-9278)). 10.7 Form of Consulting Agreement dated, August 31, 1995, by and between GeoWaste Incorporated and Amy C. MacF. Burbott (Incorporated by reference from Exhibit 10.7 to the Annual Report on Form 10-K for the year ended December 31, 1995 (File No. 0-9278)). 10.8 Form of Amendment, dated as of January 9, 1995, to Form of Employment Agreement, dated as of August 1, 1991, by and between GeoWaste Incorporated and Amy C. MacF. Burbott (Incorporated by reference from Exhibit 10.8 to the Annual Report on Form 10-K for the year ended December 31, 1995 (File No. 0-9278)). 10.9 Form of Letter Agreement, dated as of April 23, 1996, by and between GeoWaste Incorporated and Amy C. MacF. Burbott. 10.10 Form of Employment Agreement, dated as of August 12, 1996, by and between GeoWaste Incorporated and John A. Paglia. 10.11 Form of Employment Agreement, dated as of August 12, 1996, by and between GeoWaste Incorporated and Michael D. Paglia. 11.1 Computation of Net Income Per Share for the year ended December 31, 1996. 11.2 Computation of Net Income Per Share for the year ended December 31, 1995. 11.3 Computation of Net Income Per Share for the year ended December 31, 1994. 21 Subsidiaries of the Registrant. 27 Financial Data Schedule. (d) Financial Statement Schedule DESCRIPTION Schedule II. Valuation and Qualifying Accounts All other schedules have been omitted since the information is not applicable, is not required or is included in the Consolidated Financial Statements listed under section (a) of this Item 14. REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors of GeoWaste Incorporated: We have audited the consolidated financial statements and the financial statement schedule of GeoWaste Incorporated and Subsidiaries listed in Item 14(a) and 14(d) of this Form 10-K. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of GeoWaste Incorporated and Subsidiaries as of December 31, 1996 and 1995, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. In addition, in our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein. COOPERS & LYBRAND L.L.P. Jacksonville, Florida March 27, 1997 GEOWASTE INCORPORATED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS As of December 31, 1996 and 1995 ASSETS
1996 1995 ---- ---- Current assets: Cash and cash equivalents $ 3,058,067 $ 3,985,459 Accounts receivable, net of allowance of $124,000 in 1996 and $18,000 in 1995 2,214,061 871,968 Prepaid expenses 343,461 182,132 Deferred tax asset 221,000 134,000 ------------------ --------------- Total current assets 5,836,589 5,173,559 ------------------ --------------- Property and equipment: Land, primarily disposal site 13,205,883 11,337,667 Buildings and improvements 433,025 150,793 Vehicles and equipment 8,830,438 3,105,178 ------------------ --------------- 22,469,346 14,593,638 Less - accumulated depreciation 8,613,446 6,224,889 ------------------ --------------- Net property and equipment 13,855,900 8,368,749 ------------------ --------------- Other assets: Cost in excess of net assets of acquired businesses, net of accumulated amortization of $315,747 in 1996 and $177,545 in 1995 10,505,129 1,067,701 Investments 318,000 985,535 Other 102,473 41,772 ------------------ --------------- Total other assets 10,925,602 2,095,008 ------------------ --------------- Total assets $ 30,618,091 $ 15,637,316 =================== =============== GEOWASTE INCORPORATED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS As of December 31, 1996 and 1995 LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995 ---- ---- Current liabilities: Current maturities of long-term debt $ 4,672,950 $ 151,019 Accounts payable 1,573,707 137,308 Accounts payable to related party 400,000 - Accrued payroll 198,619 79,235 Accrued fees 145,008 143,582 Accrued income taxes 700,000 149,318 Accrued other 46,929 113,045 Deferred revenue 876,624 441,200 ------------------ --------------- Total current liabilities 8,613,837 1,214,707 Long-term debt, less current maturities 2,522,311 4,094,450 Accrued royalties 962,061 1,207,591 Closure and post closure obligations 1,787,136 1,511,647 Deferred tax liability 750,000 161,000 Minority interest - 61,564 ------------------ --------------- Total liabilities 14,635,345 8,250,959 ------------------ --------------- Commitments and contingencies (Notes 2, 8 and 15) Stockholders' Equity: Preferred stock, authorized 5,000,000 shares, $.01 par value; none issued or outstanding - - Common stock, authorized 50,000,000 shares, $.10 par value; issued and outstanding 21,028,634 and 18,662,605 shares in 1996 and 1995, respectively 2,102,863 1,866,260 Additional paid-in capital 12,910,437 6,191,110 Net unrealized gains on investments - 67,046 Retained earnings (deficit) 969,446 (738,059) ------------------ --------------- Total stockholders' equity 15,982,746 7,386,357 ------------------ --------------- Total liabilities and stockholders' equity $ 30,618,091 $ 15,637,316 ================== =============== GEOWASTE INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS For the years ended December 31, 1996, 1995 and 1994 1996 1995 1994 ----- ----- ---- Net revenues $ 13,702,708 $ 8,932,528 $ 6,966,990 Costs and expenses: Operating 8,228,849 5,207,250 4,176,351 Selling, general and administrative 2,625,237 1,459,197 1,507,355 Amortization of goodwill 138,202 71,180 31,130 -------------- --------------- -------------- Income from operations 2,710,420 2,194,901 1,252,154 Other income (expense): Other income, primarily interest 200,461 182,747 112,720 Interest expense (443,912) (368,338) (381,051) Gain on sale of limited partnership 432,623 - - Gain on sale of investments 82,913 - - ----------- --------------- -------------- Income before income taxes 2,982,505 2,009,310 983,823 Income tax provision (benefit) 1,275,000 547,000 (206,000) -------------- --------------- --------------- Net income $ 1,707,505 $ 1,462,310 $ 1,189,823 ============== =============== ============== Primary earnings per Common Share $ .08 $ .07 $ .06 ============== =============== ============== Average number of common shares used in primary calculation 21,839,344 19,526,415 18,851,170 ============== =============== ============== Fully-diluted earnings per Common Share $ .07 $ .07 $.06 ======== ======= ==== Average number of common shares used in fully-diluted calculation 24,749,722 19,704,724 18,885,218 ============== =============== =============== GEOWASTE INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY For the years ended December 31, 1996, 1995 and 1994 COMMON STOCK NET UNREALIZED RETAINED TOTAL NUMBER OF $.01 PAR ADDITIONAL GAINS (LOSSES) EARNINGS STOCKHOLDERS' SHARES VALUE PAID IN CAPITAL ON INVESTMENTS (DEFICIT) EQUITY ---------- ----------- --------------- --------------- --------- --------------- Balance at December 31, 1993 22,649,641 $2,264,964 $5,792,406 $ - $(3,390,192) $4,667,178 Shares returned from escrow (3,987,036) (398,704) 398,704 - - - Change in net unrealized losses - - - (8,179) - (8,179) Net income - - - - 1,189,823 1,189,823 ---------------- ------------ ----------- ---------- ----------- ---------- Balance at December 31, 1994 18,662,605 1,866,260 6,191,110 (8,179) (2,200,369) 5,848,822 Change in net unrealized gains - - - 75,225 - 75,225 Net income - - - - 1,462,310 1,462,310 --------------- ------------ ---------- ---------- ---------- ----------- Balance at December 31, 1995 18,662,605 1,866,260 6,191,110 67,046 (738,059) 7,386,357 Issuance of stock for acquisitions 2,233,946 223,395 6,306,605 - - 6,530,000 Stock options exercised, including tax benefit of $114,134 132,083 13,208 172,722 - - 185,930 Extension of warrants - - 240,000 - - 240,000 Change in unrealized gains - - - (67,046) - (67,046) Net income - - - - 1,707,505 1,707,505 ------------- ---------- ------------ -------------- ----------- ----------- Balance at December 31, 1996 21,028,634 $2,102,863 $ 12,910,437 $ - $ 969,446 $15,982,746 ========== ========== ============ =============== =========== =========== GEOWASTE INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended December 31, 1996, 1995 and 1994 1996 1995 1994 ---- ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 1,707,505 $ 1,462,310 $ 1,189,823 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,555,863 2,505,103 1,893,602 Deferred income taxes 36,000 323,000 (296,000) Non cash interest expense - 80,823 306,821 Provision for closure and post closure costs 275,489 620,472 476,593 Gain on sale of investments (82,913) - - Amortization of discount (18,000) - - Gain on sale of equipment - (7,092) (2,246) Gain from sale of limited partnership (432,623) - - Changes in assets and liabilities: Accounts receivable (523,405) 141,261 (346,932) Prepaid expenses (93,437) (62,238) (43,323) Other assets 54,919 - - Accounts payable and accrued liabilities 968,541 (35,711) 357,388 Deferred revenue 192,090 (123,012) 357,752 ------------- -------------- -------------- Net cash provided by operating activities 4,640,029 4,904,916 3,893,478 -------------- -------------- ---------------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from the sale of limited partnership 656,920 - - Proceeds from sale of investments 701,402 - - Cash paid for business acquisitions (2,420,228) - - Purchases of property and equipment (3,613,367) (1,820,033) (2,953,404) Proceeds from the sale of equipment 57,000 19,670 90,484 Purchase of investments - (313,445) (208,180) ------------- -------------- -------------- Net cash used in investing activities (4,618,873) (2,113,808) (3,071,100) ---------------- ------------------ -------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from exercise of stock options 71,795 - - Payment of debt, capital lease obligations, and accrued royalties (1,020,343) (439,047) (398,239) -------------- -------------- ------------- Net cash used in financing activities (948,548) (439,047) (398,239) -------------- -------------- -------------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (927,392) 2,352,061 424,139 Cash and cash equivalents, beginning of year 3,985,459 1,633,398 1,209,259 -------------- -------------- ------------- Cash and cash equivalents, end of year $ 3,058,067 $ 3,985,459 $ 1,633,398 =============== ============== =============
GEOWASTE INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Company GeoWaste Incorporated (the "Company") is in the business of owning, operating and acquiring non-hazardous, solid waste collection, transportation and transfer companies and disposal and related sanitation and infrastructure maintenance businesses. The Company operates a landfill in southern Georgia, collection companies in southern Georgia and northern Florida, transfer stations in northern Florida and a sweeping company in northern Florida. The Company also sells recyclable paper and rents and services portable toilets. The Company's customers include governments, commercial entities and residences. Revenue Recognition Collection revenues are recognized as services are performed. Certain commercial and residential customers are billed in advance, and these revenues are deferred until recorded as income in the period in which the related service is rendered. Disposal and transfer revenues are recognized with the performance of the service. Sales of recyclable paper are recognized upon delivery of the product. One customer accounted for approximately 14%, 21% and 20% of the Company's revenue in 1996, 1995 and 1994. Principles of Consolidation The consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries and Uinta Basin Limited Partnership (Uinta), its majority-owned subsidiary. Uinta was sold during 1996 and the Company recognized a gain of $432,623. All significant intercompany transactions and balances have been eliminated. Cash and Cash Equivalents Cash equivalents consist of money market funds primarily invested in short-term debt securities and other highly liquid investments with original maturities of three months or less. These securities are stated at cost which approximates market value. Property and Equipment Property and equipment are recorded at cost less accumulated depreciation. Depreciation is provided over the estimated useful lives, ranging from 5 to 10 years for buildings and improvements and 2 to 8 years for vehicles and equipment using the straight-line method. The disposal site is carried at cost. To the extent cost exceeds estimated net realizable value upon closure of the disposal site, such excess is amortized over the estimated life of the disposal site based on the ratio of tons of solid waste placed in the landfill over the estimated total capacity of the disposal site. Disposal site improvements are capitalized and charged to operations based on the estimated remaining capacity of the site; operating costs are expensed as incurred. Depreciation expense for property and equipment was $2,411,000, $2,418,000 and $1,862,000, for the years ended December 31, 1996, 1995 and 1994. Cost in Excess of Net Assets of Acquired Businesses The cost in excess of net assets of acquired businesses is being amortized on a straight-line basis over forty years. The carrying value of intangible assets is periodically reviewed by the Company based on the expected future undiscounted cash flows of the related business unit. Investments The Company accounts for investments in accordance with Statement of Financial Accounting Standards No. 115 "Accounting for Certain Investments in Debt and Equity Securities" (SFAS 115). Investments are classified as available-for-sale or held-to-maturity as applicable. Available-for-sale securities are recorded at fair value and held-to-maturity investments are recorded at amortized cost. Discounts are amortized on the effective interest method over the life of the investment. Income Taxes Deferred income tax liabilities and assets are determined using currently enacted tax rates applicable to the period in which deferred tax liability or assets are expected to be settled or realized. The deferred tax liability or asset is determined based on the difference between the financial statement and tax bases of assets and liabilities. The tax benefits recognized must be reduced by a valuation allowance to the extent it is more likely than not the benefits may not be realized. Earnings Per Common Share Primary earnings per common share are computed by dividing net earnings by the weighted average number of common shares and, as appropriate, dilutive common stock equivalents outstanding for the period. Stock options are considered to be common stock equivalents. Fully diluted earnings per common share reflect the maximum dilution that would have resulted from the exercise of the convertible debentures (see Note 5). Fully diluted earnings per common share are computed by dividing net income, after adding back the after-tax interest on the convertible debentures, by the weighted average number of common shares and all dilutive securities. In February, 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings Per Share" (SFAS 128). SFAS 128 is effective for financial statements issued for periods ending after December 15, 1997. The Company has determined its earnings per share based on APB Opinion No. 15 and has not yet determined the impact of implementing SFAS 128. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities (such as allowance for doubtful accounts, depreciation lives, goodwill, and closure and post closure reserves) and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates. Long-Lived Assets In 1996, the Company adopted Statement of Financial Accounting Standards (SFAS) 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." SFAS 121 requires that long-lived assets and certain identifiable intangibles to be held and used or disposed of by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may be recoverable. The Company determined that no impairment loss needs to be recognized for applicable assets of continuing operations. Reclassification Certain items in prior years' financial statements have been reclassified to conform with the current year presentation. 2. CLOSURE AND POST-CLOSURE RESERVES The Company will have material financial obligations with respect to the closure and post closure of its landfill. Disposal site closure and post-closure costs, which includes final capping of the site, site inspections, ground-water monitoring, leachate management, methane gas control and recovery, and operation and maintenance costs to be incurred during the thirty year post-closure period, are accrued and charged to expense over the estimated useful life of the landfill. Requirements for closure and post-closure are established by Subtitle D of the EPA. While the precise amount of these future obligations cannot be determined, it is estimated that the total cost for final closure and post-closure will approximate $4,200,000 when the landfill reaches its capacity. These amounts are based on estimates obtained from an independent engineering firm. Amounts accrued for closure and post-closure costs are $1,787,136 and $1,511,647 as of December 31, 1996 and 1995, respectively, and are accrued based on capacity used. Actual, ultimate costs could differ from these estimates. In February 1996 the Company was granted a modification to its permit for the Company's landfill by the Georgia Environmental Protection Division which increases the total capacity of the landfill by 1,467,800 tons of solid waste. As a result of the capacity increase, the estimated amortization rate of the disposal site and the estimated accrual rate of closure and post closure reserves have been adjusted. The 1996 net income and earnings per share were $430,000 and $0.02 higher as a result of this change in estimate. 3. ACQUISITIONS During 1996, the Company acquired the entities described below, which were accounted for by the purchase method of accounting. (a) In March 1996, the Company acquired all of the outstanding shares of North Florida Sweeping, Inc. ("NFS"), a street sweeping and solid waste rolloff collection company located in Jacksonville, Florida. The consideration given of $1,732,000 consisted of $280,000 of common stock (233,946 shares of the Company's stock valued at $1.197 per share), cash of $350,000, assumption of NFS liabilities in the amount of $862,000 and 75,000 common stock warrants that are exercisable at $1.25 per share. The Company also extended the exercise date for warrants issued pursuant to that certain warrant agreement with a related party to February 2, 1998 as consideration for investment advisory services provided to the Company in connection with the purchase of NFS. The Company assigned a value of $240,000 to this modification in accordance with Statement of Financial Accounting Standards No. 123, "Accounting For Stock Based Compensation" (SFAS 123). The excess of the purchase price over the fair value of the assets acquired was approximately $597,000 and has been recorded as goodwill, which is being amortized on a straight-line basis over forty years. (b) In August 1996, the Company acquired all of the outstanding shares of Spectrum Group, Inc. (d/b/a United Sanitation), a collection recycling and transfer company located in Ocala, Florida. The purchase price of $11,592,000 was comprised of 2,000,000 shares of common stock valued at $3.125 per share, cash of $954,000, acquisition costs of $680,000 and assumption of liabilities of $3,708,000. The excess of the purchase price over the fair value of assets acquired was approximately $8,217,000,000 and has been recorded as goodwill, which is being amortized on a straight-line basis over forty years. (c) In August 1996, the Company acquired certain equipment and accounts receivable of Standard Disposal Service of Florida, Inc., a collection company located in Marion County, Florida, for $1,296,000. The purchase price consisted of $720,000 cash and assumption of $576,000 of debt. The excess of the purchase price over the fair value of assets acquired was $732,000, which is being amortized over 40 years. The Company also had other acquisitions during 1996 which were not significant. The purchase prices of all of the Company's acquisitions have been allocated to the assets purchased and the liabilities assumed based upon the fair values on the dates of acquisition, as follows:
Current assets $ 910,000 Property and equipment 4,143,000 Other assets 108,000 Goodwill 9,576,000 Current liabilities (1,217,000) Long-term liabilities (3,930,000) -------------------- $ 9,590,000 ====================
The operating results of these business acquisitions have been included in the consolidated statement of income from the dates of acquisition. The following unaudited pro forma information presents a summary of consolidated results of operations of the Company and the acquired businesses as if the acquisitions had occurred January 1, 1995.
1996 1995 ----- ---- Net sales $ 18,433,000 $ 16,272,000 Net income 1,752,000 1,388,000 Earnings per common share $ .08 $ .07
These unaudited pro forma results have been prepared for comparative purposes only and include certain adjustments, such as additional depreciation expense as a result of a step-up in the basis of fixed assets, additional amortization expense for goodwill, decrease in disposal charges for disposing waste at the Company's landfill and increase in officers' salaries of the acquired business that have become employees of the Company. These unaudited pro forma results are not necessarily indicative of what the actual consolidated results of operations might have been if the acquisitions had been effective at January 1, 1995. 4. STOCKHOLDERS' EQUITY The Company is prohibited, under the terms of subordinated debentures (see Note 5), until September 1997 (with certain limited exceptions), from paying dividends on its common stock if the aggregate amount of all such payments from and after March 5, 1992 exceeds (i) 50% of the net after tax income of the Company, plus (ii) 100% of any amounts received by the Company from the issuance of its equity securities or certain subordinated debt securities, less (iii) 100% of all losses. 5. LONG-TERM DEBT Long-term debt at December 31, 1996 and 1995 consists of the following:
1996 1995 ----- ---- 8.5% convertible subordinated debentures, due 1997 $ 3,884,265 $ 3,884,265 Notes payable to Banks at fixed interest rates from 7.5% to 10.2% and variable interest rates ranging from prime plus .5% to prime plus 2% (weighted average interest rate of 9.6% as of December 31, 1996) through 2010, collateralized by vehicle, equipment and other assets 1,905,011 249,470 Note payable to an individual due 2000, collateralized by mortgage on land 20,059 20,059 Uncollateralized notes payable to individuals at fixed interest rates ranging from 8% to 9% (weighted average interest rate of 8.5%) through 2005 1,209,394 - Notes payable to finance institutions at fixed interest rates ranging from 8% to 10% (weighted average interest rate of 8.2%) through 2000, collateralized by equipment 15,628 - Notes payable to third party, at a fixed interest rate of 10%, through 2000, collateralized by equipment 58,169 - Capitalized lease obligations at fixed interest rates ranging from 7.2% to 13.4% (weighted average interest rate of 9.9) through 2000, collateralized by equipment and vehicles 102,735 91,675 -------------- --------------- 7,195,261 4,245,469 Less current portion (4,672,950) (151,019) --------------- --------------- $ 2,522,311 $ 4,094,450 ============== ===============
Aggregate maturities of long-term debt including capital leases at December 31, 1996 were as follows:
YEAR ENDING DECEMBER 31, 1997 $ 4,672,950 1998 694,454 1999 436,512 2000 318,826 2001 203,698 Thereafter 868,821 ------------------- $ 7,195,261 ===================
On March 5, 1992, the Company completed a private placement of $3,000,000 in Convertible Subordinated Debentures. The Debentures have a term of five years and bear interest at the rate of 8.5% per annum. The interest is payable in either cash or may be added to the principal amount of the debentures at the Company's option. Through the first quarter of 1995 the Company added accrued interest to the principal. During the subsequent quarters of 1995 and all of 1996 the Company elected to pay interest currently. In March 1997, the Company and holder of the Debentures agreed to extend the due date of the Debentures to September, 1997. The Debentures are convertible into the Company's common stock at $1.40 per share. In connection with the issuance of the Debentures, the Company is obligated to subordinate certain subsequent issuances of debt to the rights of the holder of the Debentures, is prohibited from increasing the size of its Board of Directors, is subject to certain prepayment and conversion obligations under the terms of the Debentures, and is subject to certain restrictions with respect to the declaration and payment of dividends. 6. ACCRUED ROYALTIES Royalty obligations, payable to the former stockholder of an acquired company, amounting to $962,061 and $1,207,591 at December 31, 1996 and 1995, respectively, are included as long-term liabilities. The current portion of such obligations is not currently estimatable. The Company pays the former stockholder $1 per ton of waste disposed in the Company's landfill. 7. MANAGEMENT OPTIONS AND COMMON STOCK WARRANTS In 1991, the Company granted to certain key management personnel options to acquire an aggregate of 1,854,945 shares of common stock at a purchase prices ranging from $.50 to $1.37 per share. The Company has also adopted a Stock Option Plan, which provided for the granting of 803,000 shares to key employees. All options must be exercised on or prior to the tenth anniversary of the grant. The options vest to key management and employees over a three year period based upon length of service with the Company. A summary of the status of the Company's options outstanding as of December 31, 1996, 1995 and 1994 and changes during the periods ending on those dates are presented below:
1996 1995 1994 ------------------------- ------------------------- ------------------------ Weighted- Weighted- Weighted- Average Average Average Shares Exercise Shares Exercise Shares Exercise (in 000) Price (in 000) Price (in 000) Price -------- ------- -------- ------- -------- ------ Outstanding at beginning of period 1,597 $0.53 1,535 $0.50 2,335 $0.64 Granted 465 2.50 62 1.19 210 0.50 Exercised 132 0.54 - - - Cancelled 759 0.50 - - 1,010 0.83 --------- --------- ----- Outstanding at end of period 1,171 $ 1.32 1,597 $ 0.53 1,535 $ 0.50 ======== ======== ========= ======== ======== ======== Options exercisable at end of period 789 $ 0.73 753 $ 0.52 680 $ 0.50 ========= ======= ========= ======== ======== ========
The following table summarizes information about fixed stock options outstanding at December 31, 1996:
Options Outstanding Options Exercisable ------------------------------------------- ---------------------------- Weighted- Weighted Weighted Remaining Average Average Range of Shares Contractual Exercise Shares Exercise Exercise Price (in 000) Life Price (in 000) Price -------------- -------- ------ ------- -------- ------ $.50 656 5.0 years $ 0.50 656 $ 0.50 $1.19 to $1.75 57 9.0 years 1.26 33 1.23 $2.00 to $2.75 358 9.5 years 2.23 100 2.00 $3.50 100 9.0 years 3.50 - ------ ------------- ------- ----- -------- Total 1,171 7.0 years $ 1.32 789 $ 0.73 ===== ====
The Company applies APB Opinion 25 and related interpretations in accounting for the option plans. Accordingly, no compensation cost has been recognized for the two option plans. Had compensation cost been determined based on the estimated fair value at the grant rates for awards under those plans since January 1, 1995, consistent with the method of SFAS 123, the Company's net income and earnings per share for the years ended December 31, 1996 and 1995 would have been the pro forma amounts indicated below:
1996 1995 ----- ---- Net income: As reported $ 1,707,505 $ 1,462,310 Pro forma 1,465,472 1,449,431 Earnings per share: As reported .08 .07 Pro forma .07 .07
For purposes of computing the pro forma amounts above, the Black-Scholes option-pricing model was used with the following assumptions:
1996 1995 ---- ---- Estimated lives of plan options 2-5 years 3 years Risk-free interest rates 6.0% 5.38% Expected volatility 80% 80% Dividend yield None None
The weighted-average estimated fair value of options granted during 1996 and 1995 was $1.12 and $0.65, respectively. There are options granted to an executive pursuant to which the Company will make an interest free loan of $200,000 to the executive in the event options are exercised. In addition, the Company has issued warrants to acquire up to 2,000,000 shares of the Company's common stock at $.55 per share through February 1998 to a related party for investment advisory services rendered to the Company. The above warrants are subject to anti-dilution rights. The Company also issued warrants to acquire up to 75,000 shares of the Company's common stock at $1.25 per share through March 2001 to the sellers of North Florida Sweeping. All of the above warrants are adjustable for stock splits, stock dividends and similar events. 8. LEASES The Company leases its office facilities and certain equipment under various operating lease agreements some of which contain renewal options. Future minimum commitments at December 31, 1996 under various noncancelable operating leases are as follows:
YEAR ENDING DECEMBER 31, 1997 $ 537,088 1998 490,681 1999 351,723 2000 319,744 2001 311,810 Thereafter 3,153,500 -------------- Total minimum lease payments $ 5,164,546 ==============
Rental expense for all operating leases amounted to $148,447, $243,359 and $459,594 for the years ended December 31, 1996, 1995, and 1994, respectively. 9. INVESTMENTS Investments at December 31, 1995 were maintained in a trust fund to pay for closure and post closure care costs associated with its landfill pursuant to the laws of the State of Georgia. During 1995, the Company obtained a surety bond for the closure/post closure care costs which required a collateral deposit of $300,000. The Company terminated the trust fund in 1996. Investments at December 31, 1996 and 1995 consists of the following:
1996 1995 ------------------------- ----------------------- Cost Fair Value Cost Fair Value ----------- ------------ ------- ------------ Available-for-sale investments U.S. Government securities $ - $ - $ 40,038 $ 40,688 Corporate bonds - - 123,170 124,800 Equity funds - - 138,396 204,533 Cash equivalents - - 316,885 315,514 ----------- ----------- ----------- ----------- Total Available-for-sale investments $ - $ - $618,489 $685,535 ============ =========== =========== ======== Held-to-maturity investments U.S. Government securities $ 318,000 $271,560 $300,000 $300,000 =========== =========== =========== ===========
The U.S. Government securities held at December 31, 1996 mature in 2016. Gross unrealized holding gains and losses at December 31, 1996 and 1995, were $0 and $67,046, respectively. Gross realized gains from the sale of securities classified as available for sale for the years ended December 31, 1996, 1995 and 1994, were $82,913, $12,149 and $9,802, respectively. For the purpose of determining gross realized gains and losses, the cost of securities sold is based upon specific identification. During 1996 the Company liquidated its available-for-sale portfolio for $701,000. 10. INCOME TAXES The provision (benefit) for income taxes for 1996, 1995 and 1994 consists of the following:
1996 1995 1994 ---- ---- ---- Current: Federal $ 972,000 $ 130,000 $ - State 267,000 94,000 90,000 -------------- -------------- --------------- 1,239,000 224,000 90,000 -------------- -------------- --------------- Deferred: Federal 32,000 293,000 (266,000) State 4,000 30,000 (30,000) -------------- -------------- --------------- 36,000 323,000 (296,000) -------------- -------------- --------------- Income tax provision (benefit) $ 1,275,000 $ 547,000 $ (206,000) ============== ============== ================
The difference between the actual income tax provision and the tax provision computed by applying the statutory federal income tax rate to income before taxes is attributable to the following:
1996 1995 1994 -------------------------- ----------------------- ------------------------ AMOUNT PERCENTAGE AMOUNT PERCENTAGE AMOUNT PERCENTAGE Tax computed using federal statutory rate $ 1,015,000 34 $703,000 35 $ 344,000 35 Utilization of operating loss carryforward - - (195,000) (10) (640,000) (65) State income taxes, net of federal income tax effect 128,000 4 80,000 4 90,000 9 Other 132,000 5 (41,000) (2) - - ------------ -------- ---------- ------- ---------- ------- $ 1,275,000 43 $ 547,000 27 $ (206,000) (21) ============ ======== ========== ======= =========== =======
The components of deferred tax assets and liabilities, as of December 31, 1996 and 1995, were as follows:
1996 1995 ---- ---- Current deferred tax assets: Alternative minimum tax credit $ - $ 128,000 Reserve for bad debts 64,000 6,000 Deferred revenue 157,000 - ------------- ---------------- Total current deferred tax assets 221,000 134,000 ============== =============== Long-term net deferred tax (liabilities) assets: Depreciation (912,000) (161,000) Amortization of intangible assets (283,000) - Net operating loss carryforward 84,000 - Closure reserves 361,000 - -------------- --------------- Total long-term net deferred tax liabilities $ (750,000) $ (161,000) ================ ================
The Company has recorded a current deferred tax asset of $221,000 for which realization is dependent on generating sufficient taxable income. Although realization is not assured, management believes it is more likely than not that all of the deferred tax asset will be realized. During the third quarter of 1995 the Company elected to adopt Section 468 of the Internal Revenue Code which allows current deductions for future closure costs with respect to the Company's landfill (subject to limitations). These deductions were previously deferred for income tax purposes while being expensed currently for financial statement purposes. 12. FINANCIAL INSTRUMENTS Financial instruments which potentially subject the Company to concentrations of credit risk are cash, investments and accounts receivable. The Company places its cash investments with what management believes to be high-credit-quality financial institutions and currently invests primarily in U.S. Treasury mutual funds. Accounts receivable represents amounts from commercial and residential customers in southern Georgia and northern Florida. At December 31, 1996, in management's opinion, the Company had no significant concentration of credit risk. Fair values of financial instruments is as follows at December 31, 1996 and 1995:
Carrying Value Fair Value ----------------------------- ------------------------------ 1996 1995 1996 1995 ------------- -------------- ------------- --------------- Cash and cash equivalents $3,058,067 $ 3,985,459 $ 3,058,067 $3,985,459 Convertible debentures $3,884,265 $ 3,884,265 $ 5,910,000 $3,580,000 Other long-term debt $3,310,996 $ 361,204 $ 2,469,000 $ 296,000 Accrued royalties $1,207,591 $ 962,061 $ 771,000 $ 952,000
The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value: Cash and cash equivalents. The carrying amount approximates fair value because of the short maturity of those instruments. Convertible debentures. The fair value is estimated based on the market value of the stock if converted. If the stock price is less than the conversion price, then the fair value of the instrument is estimated as the present value of the debt instrument. Other long-term debt. The fair value is estimated as the net present value of the future cash flows over the term of the loans. Accrued royalties. The fair value is estimated at the net present value of expected royalty payments. 13. RELATED PARTY TRANSACTIONS During 1996 the Company became party to an operating lease of office and warehouse space with a Company controlled by a director and an officer of the Company. The non-cancelable lease expires in 2016 and is adjusted for inflation on an annual basis. Management believes the rent paid for the office and warehouse space reasonably approximates fair market cost. The Company incurred rent expense of approximately $86,000 under this lease during 1996. 14. SUPPLEMENTAL CASH FLOW INFORMATION:
1996 1995 1994 ---- ---- ---- Cash paid for interest $ 434,000 $ 202,000 $ 48,000 Cash paid for taxes 557,000 62,000 - Significant non-cash transactions: - Stock issued for acquired companies 6,530,000 - - - Debt assumed from acquired companies 3,504,686 - - - Extension of warrants to related party 400,000 - - - Deferred taxes established on acquired companies 466,000 - - - Purchase of equipment financed by capital lease - 104,000 - - Purchase of vehicles and equipment financed by notes payable 265,000 - 140,000 - Purchased land in exchange for a note payable - - 24,000 - Capital expenditures included in year-end accounts payable but not yet paid 285,000 - 566,000 - Retirement of common stock held in escrow - 399,000
15. COMMITMENTS The Company has entered into employment agreements with certain of its executive officers and directors. The agreements contain non-compete clauses ranging from two to five years after commencement of the executive's employment. In consideration for these clauses, the Company has agreed to pay severance pay based on various formulas and to pay premiums for the continuation of health insurance coverage for six months following termination. 16. SUBSEQUENT EVENTS In January 1997, the Company executed an agreement to purchase the solid waste collection assets of Air-Sweep-A-Lot (ASAL) for approximately $1,000,000, consisting of cash, a promissory note, and assumption of debt. ASAL is a solid waste collection and parking lot sweeping company based in Valdosta, Georgia. The acquisition will be accounted for as a purchase. The excess of the purchase price over the net assets acquired, which is expected to be approximately $350,000, will be amortized over a period not exceeding 40 years. The operations of ASAL are not material to the Company's consolidated operations. 17. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
DECEMBER 31 SEPTEMBER 30 JUNE 30 MARCH 31 ----------- ------------ ------- -------- 1996 Net revenues $ 4,687,918 $ 3,776,099 $ 2,981,818 $ 2,256,873 Income from operations 342,284 771,021 842,390 754,725 Net income 230,117 477,063 573,284 427,041 Net income per share $0.01 $0.02 $0.03 $0.02 1995 Net revenues $ 2,086,794 $ 2,176,717 $ 2,334,093 $ 2,334,924 Income from operations 485,498 482,637 582,339 644,427 Net income 403,620 475,822 281,670 301,198 Net income per share $0.02 $0.02 $0.01 $0.02
As described in Note 3, the Company had several acquisitions during 1996 causing net revenues, income from operations and net income to increase. GEOWASTE INCORPORATED AND SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
Additions Balance at Charged To Beginning of Costs and Deductions Other Balance At Description Year Expenses (1) (2) End of Year ----------- ---- -------- ----- ----- ----------- Year ended December 31, 1996: Allowance for doubtful accounts deducted from asset account $17,897 $105,096 $(22,993) $24,000 $124,000 ======= ======== ========= ======= ======== Year ended December 31, 1995: Allowance for doubtful accounts deducted from asset account $16,356 $28,400 $(26,859) $ 0 $17,897 ======= ======= ========= =========== ======= Year ended December 31, 1994: Allowance for doubtful accounts deducted from asset account $17,064 $5,500 $(6,208) $ 0 $16,356 ======= ======= ========= =========== ========
- --------------------- (1) Uncollectible accounts written off, net of recoveries. (2) Acquired from United Sanitation in acquisition. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf of the undersigned, thereunto duly authorized in Jacksonville, Florida on the 28th day of March, 1997. GEOWASTE INCORPORATED By: /s/ Amy C. MacF. Burbott -------------------------- Amy C. MacF. Burbott President, Chief Executive Officer & Director Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated. Signature Title Date /s/ Amy C. MacF. Burbott - ---------------------------- President, Chief Executive March 28, 1997 Amy C.MacF. Burbott Officer & Director (Principal Executive Officer) /s/ Harve A. Ferrill Chairman of the Board & Director March 26, 1997 - ---------------------------- Harve A. Ferrill /s/ Raymond F. Chase - ---------------------------- Vice President, March 28, 1997 Raymond F. Chase Chief Financial Officer, Treasurer, & Secretary (Principal Financial Officer) /s/ Robert J. Cresci Director March 26, 1997 - ---------------------------- Robert J. Cresci /s/ Steven M. Engel Director March 27, 1997 - ---------------------------- Steven M. Engel /s/ Michael D. Paglia Vice President & Director March 26, 1997 - ---------------------------- Michael D. Paglia EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION 2.1 Agreement and Plan of Reorganization, dated August 2, 1991, by and between GeoWaste Incorporated, Utah Acquisition Subsidiary, Inc., Equivest Waste Solutions, Inc., Frederick J. Iseman and James Swistock (Incorporated by reference from Exhibit 2(A) to the Current Report on Form 8-K filed August 19, 1991 (File No. 0-9278)). 2.2 Agreement and Plan of Merger dated August 12, 1996, among GeoWaste Incorporated, Spectrum Acquisition Corp., Spectrum Group, Inc., d/b/a United Sanitation, Ocala Chemical, Mills Disposal and John A. Paglia and Michael D. Paglia (Incorporated by reference from Exhibit 2.2 to the Current Report on Form 8-K filed August 27, 1996 (File No. 0-9278)). 3.1 Certificate of Incorporation of GeoWaste Incorporated, as amended and restated (Incorporated by reference from Exhibit A to the Proxy filed November 25, 1991 (File No. 0-9278)). 3.2 Bylaws of GeoWaste Incorporated, as amended (Incorporated by reference from Exhibit 3(b) to the Annual Report on Form 10-K for the year ended December 31, 1987 (File No. 0-9278)). 3.3 Amendment to Amended and Restated Certificate of Incorporation of GeoWaste Incorporated (Incorporated by reference from Exhibit 3.4 to the Annual Report on Form 10-K for the year ended December 31, 1992 (File No. 0-9278)). 4.1 Purchase Agreement, dated March 5, 1992, between GeoWaste Incorporated, the Delaware State Employees' Retirement Fund and the Trust for Defined Benefit Plan of ICI American Holdings Inc. (Incorporated by reference from Exhibit 4.1 to the Current Report on Form 8-K filed March 13, 1992 (File No. 0-9278)). 4.2 Form of Debenture (Incorporated by reference from Exhibit 4.2 to the Current Report on Form 8-K filed March 13, 1992 (File No. 0-9278)). 4.3 Registration Rights Agreement, dated March 5, 1992, by and between GeoWaste Incorporated, the Delaware State Employees' Retirement Fund and the Trust for Defined Benefit Plan of ICI American Holdings Inc. (Incorporated by reference from Exhibit 4.3 to the Current Report on Form 8-K filed March 13, 1992 (File No. 0-9278)). 4.4 Registration Rights Agreement, dated August 2, 1991, by and between GeoWaste Incorporated and each of the entities listed on Exhibit A thereto (Incorporated by reference from Exhibit 4(D) to the Current Report on Form 8-K filed August 19, 1991 (File No. 0-9278)). 4.5 First Escrow Agreement, dated August 2, 1991, by and between GeoWaste Incorporated, Frederick J. Iseman, James Swistock, Matthew Fulton, Brian Russell, James R. Jones, Paul Thomas Cohen, William vanden Heuvel, Balis & Zorn, Inc. and IBJ Schroder Bank & Trust Company (Incorporated by reference from Exhibit 4(B) to the Current Report on Form 8-K filed August 19, 1991 (File No. 0-9278)). 4.6 Second Escrow Agreement, dated August 2, 1991, by and between GeoWaste Incorporated, the parties listed on Schedule A thereto, Kurt Wilkening and IBJ Schroder Bank & Trust Company (Incorporated by reference from Exhibit 4(C) to the Current Report on Form 8-K filed August 19, 1991 (File No. 0-9278)). 4.7 Equivest First Convertible Debt Exchange Agreement, dated August 2, 1991, by and between GeoWaste Incorporated the parties listed on Schedule A thereto (Incorporated by reference from Exhibit 2(B) to the Current Report on Form 8-K filed August 19, 1991 (File No. 0-9278)). 4.8 Equivest Second Convertible Debt Exchange Agreement, dated August 2, 1991, by and between GeoWaste Incorporated the parties listed on Schedule A thereto (Incorporated by reference from Exhibit 2(C) to the Current Report on Form 8-K filed August 19, 1991 (File No. 0-9278)). 4.9 Stockholders' Agreement, dated August 2, 1991, by and between GeoWaste Incorporated, Advance Ross Corporation, Allen & Company Incorporated, Frederick J. Iseman, Harve Ferrill, Gian Caterine, Kurt Wilkening, their persons or entities listed on Schedule A thereto and the persons or entities listed on Schedule B thereto (Incorporated by reference from Exhibit 4(A) to the Current Report on Form 8-K filed August 19, 1991 (File No. 0-9278)). 4.10 Voting Agreement, dated March 5 ,1992, by and between GeoWaste Incorporated, the Delaware State Employees' Retirement Fund and the Trust for Defined Benefit Plan of ICI American Holdings Inc., Frederick J. Iseman, Gian Caterine, Amy C. MacF. Burbott, Harve Ferrill, James Swistock, Advance Ross Corporation and Allen & Company Incorporated (Incorporated by reference from Exhibit 4.4 to the Current Report on Form 8-K filed March 13, 1992 (File No. 0-9278)). 4.11 Voting Agreement dated as of August 12, 1996, among John A. Paglia, Michael D. Paglia, Advance Ross Corporation, Allen & Company Incorporated, Allen Value Partners L.P. and Allen Value Limited Incorporated (Incorporated by reference from Exhibit 4.11 to the Current Report on Form 8-K filed August 27, 1996 (File No. 0-9278)). 10.1 Warrant Purchase Agreement by and between GeoWaste Incorporated and Allen & Company Incorporated (Incorporated by reference from Exhibit 10.1 to the Annual Report on Form 10-K for the year ended December 31, 1991 (File No. 0-9278)). 10.2 Form of Employment Agreement, dated as of August 1, 1991, by and between GeoWaste Incorporated and Amy C. MacF. Burbott (Incorporated by reference from Exhibit 10.1 to the Quarterly Report on Form 10-Q for the period ended September 30, 1992 (File No. 0-9278)). 10.3 Form of Employment Agreement dated as of June 1, 1992, by and between GeoWaste Incorporated and Richard J. Sherman (Incorporated by reference from Exhibit 10.2 to the Quarterly Report on Form 10-Q for the period ended September 20, 1992 (File No. 0-9278)). 10.4 Form of Employment Agreement, dated as of August 1, 1991, by and between GeoWaste Incorporated and James W. Swistock (Incorporated by reference from Exhibit 10.4 to the Annual Report on Form 10-K for the year ended December 31, 1992 (File No. 0-9278)). 10.5 Form of Severance Agreement, dated as of December 21, 1995, by and between GeoWaste Incorporated and Kevin R. Kohn (Incorporated by reference from Exhibit 10.5 to the Annual Report on Form 10-K for the year ended December 31, 1995 (File No. 0-9278)). 10.6 Form of Severance Agreement, dated as of December 21, 1995, by and between GeoWaste Incorporated and Raymond F. Chase (Incorporated by reference from Exhibit 10.6 to the Annual Report on Form 10-K for the year ended December 31, 1995 (File No. 0-9278)). 10.7 Form of Consulting Agreement dated, August 31, 1995, by and between GeoWaste Incorporated and Amy C. MacF. Burbott (Incorporated by reference from Exhibit 10.7 to the Annual Report on Form 10-K for the year ended December 31, 1995 (File No. 0-9278)). 10.8 Form of Amendment, dated as of January 9, 1995, to Form of Employment Agreement, dated as of August 1, 1991, by and between GeoWaste Incorporated and Amy C. MacF. Burbott (Incorporated by reference from Exhibit 10.8 to the Annual Report on Form 10-K for the year ended December 31, 1995 (File No. 0-9278)). 10.9 Form of Letter Agreement, dated as of April 23, 1996, by and between GeoWaste Incorporated and Amy C. MacF. Burbott. 10.10 Form of Employment Agreement, dated as of August 12, 1996, by and between GeoWaste Incorporated and John A. Paglia. 10.11 Form of Employment Agreement, dated as of August 12, 1996, by and between GeoWaste Incorporated and Michael D. Paglia. 11.1 Computation of Net Income Per Share for the year ended December 31, 1996. 11.2 Computation of Net Income Per Share for the year ended December 31, 1995. 11.3 Computation of Net Income Per Share for the year ended December 31, 1994. 21 Subsidiaries of the Registrant. 27 Financial Data Schedule. EX-10 2 EXHIBIT 10.9 EXHIBIT 10.9 April 23, 1996 Amy C. MacF. Burbott 5 Woodholm Road Manchester-by-the-Sea, MA 01944-1041 Re: Employment Amy: This letter is to confirm our understanding and agreement regarding your employment by GeoWaste Incorporated ("Company"). Upon the basis of terms and conditions to be set forth in a written severance agreement between you and the Company, we are pleased to confirm the following: Position: President and Chief Executive Officer Salary: $150,000 per year, increasing to $175,000 per year upon the closing of acquisitions adding not less than $8 million of additional annualized revenue to the Company Bonus: To be established Options: 400,000 shares, granted pursuant to the Company's 1992 Stock Option Plan, with a 10 year term, as follows: SHARES VESTING DATE EXERCISE PRICE 100,000 4-23-96 $2.00 (avg. of today's bid & asked) 100,000 4-23-97 $2.00 100,000 4-23-98 $2.75 100,000 4-23-99 $3.50 Severance: One-half of your annual salary rate then in effect and payment of the premium for any continuation of health and life insurance coverage during the six (6) month period following your termination. Sincerely, GEOWASTE INCORPORATED /s/ Harve A. Ferril - --------------------- Chairman of the Board /s/ Robert J. Cresci - -------------------- Director and Member, Stock Option Committee /s/ Frederick J. Iseman - ----------------------- Director and Member, Stock Option Committee EX-10 3 EXHIBIT 10.10 EXHIBIT 10.10 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as of the 12th day of August, 1996 between GeoWaste Incorporated , a Delaware corporation ("GeoWaste"), and John A. Paglia ("you"). On the terms and conditions hereinafter set forth, GeoWaste desires to employ Employee and Employee desires to accept such employment. 1. Term. The term of your employment hereunder shall be for a period beginning on the date hereof and ending forty-eight (48) months thereafter ("Term of Employment"). 2. Duties. The general scope of your employment shall be to serve as a Vice President of GeoWaste and manage GeoWaste's collection in the State of Florida and to perform such duties in accordance therewith as GeoWaste may request. 3. Good Faith. During the Term of Employment, you shall devote your full time and use your best efforts to advance the business and welfare of GeoWaste, its subsidiaries and affiliates, and to discharge any other duties assigned to you hereafter. You shall not intentionally take any action against the best interests of GeoWaste or of any subsidiary or affiliate of GeoWaste. 4. Compensation, Benefits & Expenses. GeoWaste agrees: (a) to pay or cause to be paid to you for your services hereunder a salary at the annual rates set forth below, so long as you continue in the employment of GeoWaste hereunder, payable in installments at least as frequently as monthly and subject to all applicable taxes and payroll deductions. Payroll Period Annual Salary -------------- ------------- August 1, 1996 - July 31, 1997 $100,000 August 1, 1997 - July 31, 1998 $104,000 August 1, 1998 - July 31, 1999 $108,250 August 1, 1999 - July 31, 2000 $112,500 (b) to provide you with a monthly car allowance of $600; (c) to allow you to participate in all bonus, employee benefit, pension, life insurance, medical reimbursement, vacation and disability income plans and/or programs sponsored by GeoWaste and available to other similarly situated management employees of GeoWaste in the Southeastern United States; and (d) to reimburse reasonable travel and other business expenses incurred by you in the performance of your duties under this Agreement. 5. Relocation. During the Term of Employment GeoWaste agrees not to require the you to relocate from the Ocala, Florida metropolitan area, provided, however, that you recognize that in order to fulfill your duties hereunder, business travel will be required on behalf of GeoWaste. 6. Termination. During the Term of Employment the Company may terminate your Term of Employment at any time, with or without cause, as follows: (a) immediately upon your death; (b) if you, for any reason, become unable to carry out all or substantially all of your duties and remain so incapacitated for a period of three months or more; or (c) for Cause. The term "Cause" shall mean that: (i) you use for personal gain or disclose to an unauthorized person any confidential or proprietary information or trade secrets of GeoWaste or its subsidiaries; (ii) you act in a manner which materially and detrimentally affects the Company or its subsidiaries; (iiii) your conduct violates any applicable civil or criminal law or violates any rules of ethical corporate conduct of or fiduciary obligation to the Company or its subsidiaries; or (iv) you fail to comply with the terms of this Agreement. 7. Severance Pay. In the event that the Company terminates your employment without Cause during the Term of Employment: (a) the Company (at its election) will pay you in either a lump sum or in monthly installments an amount equal to the lesser of: (i) 18 times $8,350; or (ii) 48 times the number of months worked prior to termination times $8,350; (b) for the commensurate period following your termination date, during which monthly severance payments are being made under (a), (b) or (c) above, as the case may be, the Company will pay the premium for any continuation health insurance coverage during said period, however, this is without regard to the employee's election for COBRA benefits after the payout of the monthly severance and monthly health coverage hereinabove provided for. 8. Assignment. GeoWaste may direct your duties hereunder be performed for and your compensation be paid by, and GeoWaste may assign this Agreement in its entirety to, one or more of GeoWaste's wholly-owned subsidiaries. If GeoWaste is consolidated with or merged into, or if all or a part of its assets are transferred to, another corporation carrying on all or a substantial part of the business of GeoWaste, this Agreement may be assigned to such a successor corporation unless terminated by you pursuant to Section 6 above, however no such assignment shall relieve GeoWaste from any obligations hereunder. 9. Non-Competition and Non-Solicitation Covenants. You hereby agree that for the five (5) year period commencing the date hereof, you will not, without the prior written consent of GeoWaste's Board of Directors: (a) own, manage, operate, join, be employed in an executive or managerial capacity by, control or otherwise render, directly or indirectly, any executive or managerial Services to any person or organization which is engaged in the solid waste management business in competition with GeoWaste within a 75-mile territorial radius from any facility owned or operated by GeoWaste. For purposes of this Section 9(a), the term "Services" shall mean any services of a business, commercial or professional nature and shall include, without limitation, the following: engaging in, working with, having an interest in, acting as an officer or director or consultant to, advising, lending money to, guaranteeing the debts or obligations of, or permitting one's name or any part thereof to be used in connection with an enterprise or endeavor that conducts a business of the type and in the area referred to above, either individually, in partnership, or in conjunction with any person or persons, firm, association, company or corporation, whether as principal, agent, five percent or more shareholder, executive, or in any other similar manner whatsoever; provided, however, that you may own less than five percent (5%) of the outstanding capital stock of any publicly-held corporation; and (b) render any services or advice to, solicit, service the account of, or otherwise engage in any business relationship (as an employee or otherwise) with any Customer (as defined below) of GeoWaste in connection with the solid waste management business, or solicit or hire any person in connection with the solid waste management business who was an employee of GeoWaste at any time within the five (5) year period commencing the date hereof. For purposes of this Section 9(b), a "Customer" means any corporation, association, partnership, organization, business, individual or governmental agency (a "Person") within a 75-mile territorial radius from any facility owned or operated by GeoWaste that is subject to a contract with GeoWaste whereby GeoWaste provides solid waste management services to such Customer, or is otherwise actively involved in a business relationship with GeoWaste in connection with such solid waste management services, including, without limitation, any person that GeoWaste is actively soliciting at any time within the one (1) year period ending on the date your employment terminates. You acknowledge that: (i) GeoWaste will suffer substantial damages not readily ascertainable or compensable in terms of money in the event of the breach of any of his obligations under this Section 9. You therefore agree that GeoWaste will be entitled (without limitation or any other rights or remedies otherwise available to GeoWaste) to obtain an injunction from any court of competent jurisdiction prohibiting the continuance or recurrence of any such breach of this Section 9. In the event that at the time of the enforcement of any provision of Section 9, the stated period, scope or area is held to be unreasonable, the parties agree that the maximum period, scope or area reasonable under the circumstances will be substituted for the stated period, scope or area; and (ii) the running of each of the covenants in this Section 9 will be tolled and suspended for such period of time as you are in violation of the particular covenant, but none of the covenants will be so tolled and suspended for longer than one hundred eighty (180) days in the aggregate as to that covenant. 10. Confidential Information. You understand and acknowledge that: (a) in order to enable you to properly perform your duties, the Company has entrusted and will continue to entrust you with trade secrets and confidential information, including, without limitation, trade secrets and confidential information relating to merchandising methods, engineering and processing methods, accounting or financial methods, processes, strategies and technique, know-how, pricing policies, inventory, market studies and strategy, customer lists, special needs and characteristics of the Company's customers, debt and equity financing sources, scientific, technical and management information and other aspects of the Company's business ("Confidential Information"); and (b) the development or acquisition of this Confidential Information is critical to the success and survival of the Company and the disclosure or use of this Confidential Information would cause the Company irreparable harm and that you are fully aware of the Company's need to protect this Confidential Information. Accordingly, you hereby agree that, during the Term of Employment and thereafter as to trade secrets, and during the Term of Employment and thereafter until the end of the one (1) year period following your termination of employment, as to other Confidential Information, you will not disclose to third persons any Confidential Information of the Company, its officers, directors, agents or representatives, except to the extent that such Confidential Information: (i) is authorized in writing by the Company to be disclosed; (ii) was in or has become part of the public domain (otherwise than through your breach hereof); (iii) was known to the recipient prior to the disclosure; (iv) was known to you prior to performing services for the Company or any predecessor company; or (v) is required to be disclosed by a court or governmental agency and, in this regard, you will execute such additional documents as the Company may reasonably require to protect the confidentiality of the Confidential Information required to be disclosed. 11. Survival. The provisions of paragraphs 9 and 10 hereof shall survive the termination of your Term of Employment. 12. Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity and enforceability of the other provisions hereof. 13. Governing Law and Venue. This Agreement shall be governed by and construed in accordance with the laws of the State of Florida applicable to contracts made and to be performed therein. The venue of any proceeding regarding this Agreement shall be Marion County, Florida. 14. Notices. Any notice, request, information or other document to be given hereunder to either of the parties by the other party shall be in writing and hand delivered or sent by certified mail, postage prepaid, as follows: (a) if to you: John A. Paglia 2272 Laurel Run Drive Ocala, FL 34471 (b) if to the GeoWaste: GeoWaste Incorporated Suite 208 24 Cathedral Place St. Augustine, FL 32084 Any party may change the address to which notices hereunder are to be sent to it by giving written notice of such change of address as herein provided. Any notice or communication shall be deemed to have been given as of the date so delivered or mailed. 15. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original. 16. Modification. The parties hereto may amend, modify and supplement this Agreement in such manner as may be agreed upon by them in writing. 17. Entire Agreement. This Agreement contains the entire agreement of the parties hereto with respect to the matters contemplated herein, and supersedes all prior understandings and agreements of the parties with respect to the subject matter hereof. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. EMPLOYEE GEOWASTE INCORPORATED /s/ John A. Paglia /s/ Amy C. MacF. Burbott ------------------------ ---------------------------- John A. Paglia Amy C. MacF. Burbott Chief Executive Officer EX-10 4 EXHIBIT 10.11 EXHIBIT 10.11 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as of the 12th day of August, 1996 between GeoWaste Incorporated , a Delaware corporation ("GeoWaste"), and Michael D. Paglia ("you"). On the terms and conditions hereinafter set forth, GeoWaste desires to employ Employee and Employee desires to accept such employment. 1. Term. The term of your employment hereunder shall be for a period beginning on the date hereof and ending forty-eight (48) months thereafter ("Term of Employment"). 2. Duties. The general scope of your employment shall be to serve as a Vice President of GeoWaste and manage GeoWaste's collection in the State of Florida and to perform such duties in accordance therewith as GeoWaste may request. 3. Good Faith. During the Term of Employment, you shall devote your full time and use your best efforts to advance the business and welfare of GeoWaste, its subsidiaries and affiliates, and to discharge any other duties assigned to you hereafter. You shall not intentionally take any action against the best interests of GeoWaste or of any subsidiary or affiliate of GeoWaste. 4. Compensation, Benefits & Expenses. GeoWaste agrees: (a) to pay or cause to be paid to you for your services hereunder a salary at the annual rates set forth below, so long as you continue in the employment of GeoWaste hereunder, payable in installments at least as frequently as monthly and subject to all applicable taxes and payroll deductions. Payroll Period Annual Salary -------------- ------------- August 1, 1996 - July 31, 1997 $100,000 August 1, 1997 - July 31, 1998 $104,000 August 1, 1998 - July 31, 1999 $108,250 August 1, 1999 - July 31, 2000 $112,500 (b) to provide you with a monthly car allowance of $600; (c) to allow you to participate in all bonus, employee benefit, pension, life insurance, medical reimbursement, vacation and disability income plans and/or programs sponsored by GeoWaste and available to other similarly situated management employees of GeoWaste in the Southeastern United States; and (d) to reimburse reasonable travel and other business expenses incurred by you in the performance of your duties under this Agreement. 5. Relocation. During the Term of Employment GeoWaste agrees not to require the you to relocate from the Ocala, Florida metropolitan area, provided, however, that you recognize that in order to fulfill your duties hereunder, business travel will be required on behalf of GeoWaste. 6. Termination. During the Term of Employment the Company may terminate your Term of Employment at any time, with or without cause, as follows: (a) immediately upon your death; (b) if you, for any reason, become unable to carry out all or substantially all of your duties and remain so incapacitated for a period of three months or more; or (c) for Cause. The term "Cause" shall mean that: (i) you use for personal gain or disclose to an unauthorized person any confidential or proprietary information or trade secrets of GeoWaste or its subsidiaries; (ii) you act in a manner which materially and detrimentally affects the Company or its subsidiaries; (iiii) your conduct violates any applicable civil or criminal law or violates any rules of ethical corporate conduct of or fiduciary obligation to the Company or its subsidiaries; or (iv) you fail to comply with the terms of this Agreement. 7. Severance Pay. In the event that the Company terminates your employment without Cause during the Term of Employment: (a) the Company (at its election) will pay you in either a lump sum or in monthly installments an amount equal to the lesser of: (i) 18 times $8,350; or (ii) 48 times the number of months worked prior to termination times $8,350; (b) for the commensurate period following your termination date, during which monthly severance payments are being made under (a), (b) or (c) above, as the case may be, the Company will pay the premium for any continuation health insurance coverage during said period, however, this is without regard to the employee's election for COBRA benefits after the payout of the monthly severance and monthly health coverage hereinabove provided for. 8. Assignment. GeoWaste may direct your duties hereunder be performed for and your compensation be paid by, and GeoWaste may assign this Agreement in its entirety to, one or more of GeoWaste's wholly-owned subsidiaries. If GeoWaste is consolidated with or merged into, or if all or a part of its assets are transferred to, another corporation carrying on all or a substantial part of the business of GeoWaste, this Agreement may be assigned to such a successor corporation unless terminated by you pursuant to Section 6 above, however no such assignment shall relieve GeoWaste from any obligations hereunder. 9. Non-Competition and Non-Solicitation Covenants. You hereby agree that for the five (5) year period commencing the date hereof, you will not, without the prior written consent of GeoWaste's Board of Directors: (a) own, manage, operate, join, be employed in an executive or managerial capacity by, control or otherwise render, directly or indirectly, any executive or managerial Services to any person or organization which is engaged in the solid waste management business in competition with GeoWaste within a 75-mile territorial radius from any facility owned or operated by GeoWaste. For purposes of this Section 9(a), the term "Services" shall mean any services of a business, commercial or professional nature and shall include, without limitation, the following: engaging in, working with, having an interest in, acting as an officer or director or consultant to, advising, lending money to, guaranteeing the debts or obligations of, or permitting one's name or any part thereof to be used in connection with an enterprise or endeavor that conducts a business of the type and in the area referred to above, either individually, in partnership, or in conjunction with any person or persons, firm, association, company or corporation, whether as principal, agent, five percent or more shareholder, executive, or in any other similar manner whatsoever; provided, however, that you may own less than five percent (5%) of the outstanding capital stock of any publicly-held corporation; and (b) render any services or advice to, solicit, service the account of, or otherwise engage in any business relationship (as an employee or otherwise) with any Customer (as defined below) of GeoWaste in connection with the solid waste management business, or solicit or hire any person in connection with the solid waste management business who was an employee of GeoWaste at any time within the five (5) year period commencing the date hereof. For purposes of this Section 9(b), a "Customer" means any corporation, association, partnership, organization, business, individual or governmental agency (a "Person") within a 75-mile territorial radius from any facility owned or operated by GeoWaste that is subject to a contract with GeoWaste whereby GeoWaste provides solid waste management services to such Customer, or is otherwise actively involved in a business relationship with GeoWaste in connection with such solid waste management services, including, without limitation, any person that GeoWaste is actively soliciting at any time within the one (1) year period ending on the date your employment terminates. You acknowledge that: (i) GeoWaste will suffer substantial damages not readily ascertainable or compensable in terms of money in the event of the breach of any of his obligations under this Section 9. You therefore agree that GeoWaste will be entitled (without limitation or any other rights or remedies otherwise available to GeoWaste) to obtain an injunction from any court of competent jurisdiction prohibiting the continuance or recurrence of any such breach of this Section 9. In the event that at the time of the enforcement of any provision of Section 9, the stated period, scope or area is held to be unreasonable, the parties agree that the maximum period, scope or area reasonable under the circumstances will be substituted for the stated period, scope or area; and (ii) the running of each of the covenants in this Section 9 will be tolled and suspended for such period of time as you are in violation of the particular covenant, but none of the covenants will be so tolled and suspended for longer than one hundred eighty (180) days in the aggregate as to that covenant. 10. Confidential Information. You understand and acknowledge that: (a) in order to enable you to properly perform your duties, the Company has entrusted and will continue to entrust you with trade secrets and confidential information, including, without limitation, trade secrets and confidential information relating to merchandising methods, engineering and processing methods, accounting or financial methods, processes, strategies and technique, know-how, pricing policies, inventory, market studies and strategy, customer lists, special needs and characteristics of the Company's customers, debt and equity financing sources, scientific, technical and management information and other aspects of the Company's business ("Confidential Information"); and (b) the development or acquisition of this Confidential Information is critical to the success and survival of the Company and the disclosure or use of this Confidential Information would cause the Company irreparable harm and that you are fully aware of the Company's need to protect this Confidential Information. Accordingly, you hereby agree that, during the Term of Employment and thereafter as to trade secrets, and during the Term of Employment and thereafter until the end of the one (1) year period following your termination of employment, as to other Confidential Information, you will not disclose to third persons any Confidential Information of the Company, its officers, directors, agents or representatives, except to the extent that such Confidential Information: (i) is authorized in writing by the Company to be disclosed; (ii) was in or has become part of the public domain (otherwise than through your breach hereof); (iii) was known to the recipient prior to the disclosure; (iv) was known to you prior to performing services for the Company or any predecessor company; or (v) is required to be disclosed by a court or governmental agency and, in this regard, you will execute such additional documents as the Company may reasonably require to protect the confidentiality of the Confidential Information required to be disclosed. 11. Survival. The provisions of paragraphs 9 and 10 hereof shall survive the termination of your Term of Employment. 12. Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity and enforceability of the other provisions hereof. 13. Governing Law and Venue. This Agreement shall be governed by and construed in accordance with the laws of the State of Florida applicable to contracts made and to be performed therein. The venue of any proceeding regarding this Agreement shall be Marion County, Florida. 14. Notices. Any notice, request, information or other document to be given hereunder to either of the parties by the other party shall be in writing and hand delivered or sent by certified mail, postage prepaid, as follows: (a) if to you: Michael Paglia 1122 SE 24th Terrace Ocala, FL 34470 (b) if to the GeoWaste: GeoWaste Incorporated Suite 208 24 Cathedral Place St. Augustine, FL 32084 Any party may change the address to which notices hereunder are to be sent to it by giving written notice of such change of address as herein provided. Any notice or communication shall be deemed to have been given as of the date so delivered or mailed. 15. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original. 16. Modification. The parties hereto may amend, modify and supplement this Agreement in such manner as may be agreed upon by them in writing. 17. Entire Agreement. This Agreement contains the entire agreement of the parties hereto with respect to the matters contemplated herein, and supersedes all prior understandings and agreements of the parties with respect to the subject matter hereof. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. EMPLOYEE GEOWASTE INCORPORATED /s/ Michael D. Paglia /s/ Amy C. MacF. Burbott -------------------------- --------------------------- Michael D. Paglia Amy C. MacF. Burbott Chief Executive Officer EX-11 5 EXHIBIT 11.1 EXHIBIT 11.1 GEOWASTE INCORPORATED AND SUBSIDIARIES COMPUTATION OF NET INCOME PER SHARE FOR THE YEAR ENDED DECEMBER 31, 1996
PRIMARY FULLY DILUTED Weighted average common shares outstanding ................................................ 19,659,059 19,659,059 Stock options and warrants outstanding........................ 2,180,285 5,090,633 ---------- ----------- Weighted average shares of common stock outstanding................................................. 21,839,344 24,749,722 ========== ========== Net Income ................................................... $1,707,505 $1,707,505 ========== ========== Income per share.............................................. $ .08 $ .07 ========== ==========
EX-11 6 EXHIBIT 11.2 EXHIBIT 11.2 GEOWASTE INCORPORATED AND SUBSIDIARIES COMPUTATION OF NET INCOME PER SHARE FOR THE YEAR ENDED DECEMBER 31, 1995
PRIMARY FULLY DILUTED Weighted average common shares outstanding ................................................ 18,662,605 18,662,605 Stock options and warrants outstanding........................ 863,810 1,042,119 Weighted average shares of common stock outstanding................................................. 19,526,415 19,704,724 =========== ========== Net Income ................................................... $ 1,462,310 $1,462,310 =========== ========== Income per share.............................................. $ .07 $ .07 =========== ==========
EX-11 7 EXHIBIT 11-3 EXHIBIT 11.3 GEOWASTE INCORPORATED AND SUBSIDIARIES COMPUTATION OF NET INCOME PER SHARE FOR THE YEAR ENDED DECEMBER 31, 1994
PRIMARY FULLY DILUTED Weighted average common shares outstanding (1)............................................. 18,662,605 18,662,605 Stock options and warrants outstanding........................ 188,565 222,613 ---------- ---------- Weighted average shares of common stock outstanding................................................. 18,851,170 18,885,218 ========== ========== Net Income.................................................... $ 1,189,823 $ 1,189,823 ========== ========== Income per share.............................................. $ .06 $ .06 ========== ==========
EX-21 8 EXHIBIT 21 EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT GeoWaste Acquisition Corp. (Delaware) GeoWaste of FL, Inc. (Delaware) GeoWaste of GA, Inc. (Georgia) Low Brook Development, Inc. (Delaware) North Florida Sweeping, Inc. (Delaware) Spectrum Group, Inc. (Florida) EX-27 9 ART 5 FDS FOR 1996 10-K
5 0000102499 GEOWASTE INCORPORATED 12-MOS DEC-31-1996 DEC-31-1996 3,058,067 0 2,214,061 124,000 0 5,836,589 22,469,346 8,613,446 30,618,091 8,613,837 0 0 0 2,102,863 13,879,883 30,618,091 13,702,708 13,702,708 8,228,849 8,228,849 0 0 443,912 2,982,505 1,275,000 1,707,505 0 0 0 1,707,505 0.08 0.07
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