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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2002
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 1-11097
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3CI COMPLETE COMPLIANCE CORPORATION
-----------------------------------
(Exact name of registrant as specified in its charter)
Delaware 76-0351992
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1517 W North Carrier Parkway #104, Grand Prairie, Texas 75050
-------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(972) 375-0006
--------------
(Registrant's telephone number, including area code)
----------------------
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES [X] NO [ ]
------------------------
Indicate the number of shares outstanding of each of the issuer's
classes of Common Stock, as of the latest practicable date.
The number of shares of Common Stock outstanding as of the close of
business on February 13, 2003, was 9,739,611.
3CI COMPLETE COMPLIANCE CORPORATION
I N D E X
PAGE
NUMBER
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets as of
December 31, 2002 and September 30, 2002................................ 3
Statements of Operations for the three months
ended December 31, 2002 and 2001 ...................................... 4
Statements of Cash Flows for the
three months ended December 31, 2002 and
2001................................................................... 5
Notes to Financial Statements.............................................. 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................................... 9
Item 3. Quantitative and Qualitative Disclosures about Market Risk................. 11
Item 4. Controls and Procedures.................................................... 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ........................................................ 12
Item 2. Changes in Securities...................................................... 12
Item 3. Defaults Upon Senior Securities............................................ 12
Item 4. Submission of Matters to a Vote
Of Security Holders..................................................... 12
Item 5. Other Information ........................................................ 12
Item 6. Exhibits and Reports on Form 8-K........................................... 12
SIGNATURES.................................................................................. 14
2
Item 1. Financial Statements
3CI COMPLETE COMPLIANCE CORPORATION
BALANCE SHEETS
December 31, September 30,
2002 2002
(Unaudited)
---------------- -----------------
ASSETS
Current Assets:
Cash and cash equivalents $ 654,246 $ 898,720
Accounts receivable, net allowances of $644,493 and $622,668
at December 31, 2002 and September 30, 2001, respectively 3,939,746 3,324,529
Inventory 91,186 80,310
Prepaid expenses 178,041 326,711
Other current assets 20,994 43,363
---------------- -----------------
Total current assets 4,884,213 4,673,633
---------------- -----------------
Property, plant and equipment, at cost 8,395,643 8,375,654
Accumulated depreciation (5,595,437) (5,428,261)
---------------- -----------------
Net property, plant and equipment 2,800,206 2,947,393
---------------- -----------------
Goodwill, net of accumulated amortization of $174,988 262,243 262,243
Other assets 104,922 117,581
---------------- -----------------
Total Assets $ 8,051,584 $ 8,000,850
================ =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable $ - $ 51,394
Accounts payable 460,042 435,311
Accounts payable, affiliated companies 753,727 863,327
Accrued liabilities 494,180 470,372
Dividends payable 2,203,717 2,042,560
Note payable majority shareholder 3,645,392 1,002,433
---------------- -----------------
Total current liabilities 7,557,058 4,865,397
---------------- -----------------
Long-term debt majority shareholder, net of current portion - 2,888,202
---------------- -----------------
Total liabilities 7,557,058 7,753,599
---------------- -----------------
Shareholders' Equity:
Preferred stock,$0 .01 par value, authorized 16,050,000 shares;
Issued and outstanding 7,750,000 shares 77,500 77,500
Additional paid-in capital - preferred stock 7,672,500 7,672,500
Common stock, $0.01 par value, authorized 40,450,000 shares;
Issued and outstanding 9,739,611 shares 97,742 92,329
Less cost of treasury stock 34,500 shares (51,595) (51,595)
Additional paid-in capital - common stock 20,519,861 20,471,145
Accumulated deficit (27,821,482) (28,014,628)
---------------- -----------------
Total Shareholders' Equity 494,526 247,251
---------------- -----------------
Total Liabilities and Shareholders' Equity $ 8,051,584 $ 8,000,850
================ =================
The accompanying notes are an integral part of these financial statements.
3
3CI COMPLETE COMPLIANCE CORPORATION
STATEMENTS OF OPERATIONS
(Unaudited)
For the three months ended December 31,
2002 2001
---------------------------------------
Revenues $ 3,594,386 $ 4,269,594
Expenses:
Cost of services 2,288,245 2,829,577
Depreciation and amortization 175,879 171,311
Selling, general and administrative 654,527 703,634
Interest expense 52,432 99,235
Other expense, net 69,000 72,191
---------------- --------------
Income before income taxes 354,303 393,646
Income taxes - -
---------------- --------------
Net income 354,303 393,646
Dividends on preferred stock (161,158) (161,158)
---------------- --------------
Net income applicable to common shareholders $ 193,145 $ 232,488
================ ==============
Basic earnings per share:
Basic net income per share $ 0.02 $ 0.03
================ ==============
Diluted earnings per share:
Diluted net income per share $ 0.02 $ 0.02
================ ==============
The accompanying notes are an integral part of these financial statements.
4
3CI COMPLETE COMPLIANCE CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
For the three months
ended December 31,
2002 2001
----------------------
Cash flows from operating activities:
Net income $ 354,303 $ 393,646
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain on disposal of fixed assets -- (2,500)
Depreciation and amortization 175,879 171,311
(Increase) decrease in accounts receivable, net (615,217) 579,009
Increase in inventory (10,876) (9,919)
Decrease in prepaid expenses 148,670 187,298
(Increase) decrease in other assets and other current assets 29,028 (43,863)
Increase (decrease) in accounts payable 24,731 (167,379)
Decrease in accounts payable, affiliated companies (109,600) (127,845)
Increase (decrease) in accrued liabilities 23,808 (116,197)
---------- ----------
Total adjustments to net income (333,577) 469,915
---------- ----------
Net cash provided by operating activities 20,726 863,561
---------- ----------
Cash flows from investing activities:
Proceeds from sale of property plant and equipment -- 2,500
Purchase of property, plant and equipment (22,692) (6,787)
---------- ----------
Net cash used in investing activities: (22,692) (4,287)
---------- ----------
Cash flows from financing activities:
Principal reduction of notes payable (51,394) (180,654)
Reduction of long-term debt, unaffiliated lenders -- (250,606)
Reduction of note payable to majority shareholders (245,243) (200,000)
Proceeds from issuance of common stock 54,129 --
---------- ----------
Net cash used in financing activities (242,508) (631,260)
---------- ----------
Net increase (decrease) in cash and cash equivalents (244,474) 228,014
---------- ----------
Cash and cash equivalents, beginning of period 898,720 709,563
---------- ----------
Cash and cash equivalents, end of period $ 654,246 $ 937,577
========== ==========
The accompanying notes are an integral part of these financial statements
5
3CI COMPLETE COMPLIANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002
(1) ORGANIZATION AND BASIS OF PRESENTATION
3CI Complete Compliance Corporation (the Company or 3CI), a Delaware
Corporation, is engaged in the business of medical waste management services in
the southern and southeastern United States.
Effective October 1, 1998, after approval by the then properly
constituted 3CI Board of Directors, Stericycle Inc., a Delaware corporation
("Stericycle") acquired 100% of the common stock of Waste Systems, Inc. ("WSI")
for $10 million. As a result of the transaction, WSI became a wholly owned
subsidiary of Stericycle. WSI owns 58.0% or 5,645,734 shares of the outstanding
common stock and 100% of the outstanding preferred stock of the Company. In
addition, Stericycle owns 932,770 shares of common stock directly. Through its
ownership of WSI and shares owned directly, Stericycle owns 67.5% of the
outstanding common stock.
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the three-month
period ended December 31, 2002 are not necessarily indicative of the results
that may be expected for the year ended September 30, 2003.
The balance sheet at September 30, 2002, has been derived from the
audited finacial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
For further information, refer to the consolidated financial
statements and footnotes thereto included in the Registrant Company's annual
report on Form 10-K for the year ended September 30, 2002.
Certain amounts in the financial statements for 2001 have been
reclassified to conform to the 2002 presentation.
6
(2) NET INCOME PER COMMON SHARE
The following table sets forth the computation of net income per common share:
THREE MONTHS ENDED DECEMBER 31,
-------------------------------------
2002 2001
-------------- -----------------
Numerator:
Net income $ 354,303 $ 393,646
Less preferred dividends (161,158) (161,158)
-------------- -----------------
Net income applicable to common $ 193,145 $ 232,488
shareholders
Denominator:
Denominator for basic earnings per share
--weighted average shares 9,274,811 9,198,325
-------------- -----------------
Effect of dilutive securities:
Preferred shares and warrants 7,750,000 8,146,943
-------------- -----------------
Denominator for diluted earnings per share-adjusted
-weighted average shares and assumed conversions 17,024,811 17,345,268
-------------- -----------------
Basic earnings per share $0.02 $0.03
-------------- -----------------
Diluted earnings per share $0.02 $0.02
-------------- -----------------
Warrants to purchase common shares included in the calculation of
diluted earnings per share for 2001 had expired or were exercised prior to
December 31, 2002. Stock options were not included in the computation as they
were antidilutive since the exercise prices ranging from $0.33 to $1. 50 were
greater than the average price of the common stock.
(3) BUSINESS CONDITIONS
Over the last several quarters the Company has continued to experience
improved cash flow which has enabled it to reduce debt and to rely more on
internally generated funds to finance its working capital needs, capital
expenditures, and acquisitions and to rely less on its majority shareholder,
WSI. The Company's indebtedness currently consists of amounts owed to WSI
(which are described below) and insurance premiums that are financed over the
course of each fiscal year.
On October 1, 1998, WSI and the Company amended and restated a
revolving promissory note (the note) which was originally due September 30,
2000. Since that time the note has been extended either quarterly or
semi-annually under interest rate terms ranging from prime plus 1.0% to prime
plus 3.5% not to exceed 13%. In connection with the note extension on August 1,
2000, 3CI issued warrants to WSI for the purchase of up to 351,836 shares of
3CI common stock at an exercise price of $0.20 per share. These warrants
expired on September 20, 2002. When the Note was extended on October 1, 2000,
3CI issued warrants to WSI for the purchase of up to 541,286 shares of 3CI
common stock at an exercise price of $.10 per share which were exercised on
December 19, 2002. In each of these cases the values of the warrants were
included in the statement of operations for the respective periods as interest
expense.
The note was renegotiated pursuant to an agreement dated May 23, 2002
by which the maturity was extended to October 1, 2003. The terms of this
extension included an interest rate equal to the prime rate, currently 4.25%,
plus 1.0% and called for a principal payment of $700,000 at renewal and
additional monthly payments of $100,000 to be applied to accrued interest and
principal. The agreement also required the Company to achieve a minimum level
of EBITDA for each trailing six-month period thereafter until maturity. This
level was achieved for each of the six months ended June 30, 2002, September
30, 2002 and December 31, 2002.
In June 1999, the Company established a master lease agreement in the
amount of $3,000,000 with LaSalle National Leasing Corporation. Of the total,
$2,000,000 is to be utilized for the leasing of
7
transportation equipment of which $57,998 and $155,255 had been utilized at
December 31, 2002 and 2001 respectively, and $1,000,000 for the financing of
equipment, none of which had been utilized at December 31, 2002 and of which
$366,475 had been utilized at December 31, 2001. This agreement is guaranteed
by Stericycle, Inc. which owns 100% of WSI.
(4) PREFERRED STOCK
WSI, the company's majority shareholder owns 100% or 7,000,000 shares
of the Company's series B preferred Stock. WSI also owns 100% or 750,000 shares
of the Company's series C preferred stock.
On December 31, 2002 the Company declared a $0.0208 per share dividend
on the series A and B preferred stock which totaled $161,158 and represented
the undeclared dividends accrued through that date. The resolution called for
payment in cash from funds legally available for the payment of dividends, as
and when the Board of Directors may direct by further resolution.
Subject to certain conversion terms, all of the series B and C
preferred shares outstanding on April 6, 2003 will be converted to shares of
common stock on that date.
(5) INTANGIBLE ASSETS
Effective October 1, 2001, the Company adopted Statement of Financial
Accounting Standards 142 "Goodwill and Other Intangible Assets" (SFAS 142),
which resulted in the discontinuance of the amortization of goodwill. Under
SFAS 142, goodwill and intangible assets deemed to have indefinite lives will
no longer be amortized, but will be subject to at least annual impairment
tests.
Other intangible assets will continue to be amortized over their
useful lives. The Company has completed its transitional and goodwill
impairment evaluation and determined that its goodwill was not impaired. There
was no amortization expense for goodwill for the quarters ended December 31,
2002 or 2001. The Company's goodwill was $262,243 at December 31, 2002 and
2001.
The Company's other intangible assets, which are included in "Other
assets" in the accompanying balance sheet, at December 31, 2002 and September
30, 2002 were $26,000 and $32,000, respectively. Amortization expense for other
intangible assets was $6,000 for each of the quarters ended December 31, 2002
and 2001. The remaining $26,000 of other intangible assets will be amortized as
follows:
PERIOD: AMORTIZATION
--------- ------------
Nine months ended September 30, 2003 $18,000
Year ended September 30, 2004 8,000
(6) COMMITMENTS AND CONTINGENCIES
On July 16, 2002 a suit was filed in the First Judicial District Court
in Shreveport, Louisiana against Stericycle, Inc. and certain of 3CI' s
directors which alleged minority shareholder oppression, breach of fiduciary
duty and unjust enrichment. While the Company is not party to the lawsuit, it
has contacted its insurance carrier and hired counsel to assist the Company in
this litigation. The defendants in the case have denied the allegations and
intend to defend the case vigorously.
The Company is subject to certain other litigation and claims arising
in the ordinary course of business. In the opinion of management of the
Company, the amounts ultimately payable, if any, as a
8
result of such litigation and claims will not have a material adverse effect on
the Company's financial position, results of operations, or net cash flows.
The Company operates within the regulated medical waste industry which
is subject to intense governmental regulation at the federal, state and local
levels. The Company believes it is currently in compliance in all material
respects with all applicable laws and regulations governing the medical waste
disposal business. However, continuing expenditures may be required in order
for the Company to remain in compliance with existing and changing regulations.
Furthermore, because the medical waste disposal industry is predicated upon the
existence of strict governmental regulation, any material relaxation of
regulatory requirements governing medical waste disposal or of their
enforcement could result in a reduced demand for the Company's services and
have a material adverse effect on the Company's revenues and financial
condition. The scope and duration of existing and future regulations affecting
the medical waste disposal industry cannot be anticipated and are subject to
changing political and economic pressures.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
The Company is engaged in the business of medical waste management
services in the southwestern and southeastern United States. The Company's
customers include regional medical centers, major hospitals, clinics, medical
and dental offices, veterinarians, pharmaceutical companies, retirement homes,
medical testing laboratories and other medical waste generators.
RESULTS OF OPERATIONS
- ---------------------
The following summarizes (in thousands) the Company's operations:
THREE MONTHS THREE MONTHS
ENDED DECEMBER ENDED DECEMBER
31, 2002 31, 2001
Revenues $3,594 $4,270
Cost of services 2,288 2,830
Depreciation and amortization 176 171
Selling, general and administrative 655 704
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Net income from operations 475 565
----------- -----------
Interest expense 52 99
Other expense net 69 72
----------- -----------
Net income (loss) $ 354 $ 394
=========== ===========
Earnings before interest, taxes, depreciation $ 583 $ 664
and amortization ("EBITDA") (1)
(1) EBITDA is calculated as the sum of net income, plus interest expense,
income tax expense, depreciation expense, and amortization expense. We consider
EBITDA to be a widely accepted financial indicator of a company's ability to
service debt, fund capital expenditures and expand its business. EBITDA is not
calculated in the same way by all companies, is not a measurement required by
generally accepted accounting principles and does not represent cash flow from
operations as defined
9
by generally accepted accounting principles. EBITDA should not be considered as
an alternative to net income, as an indicator of operating performance or as an
alternative to cash flow as a measure of liquidity.
- ------------------------
THREE MONTHS ENDED DECEMBER 31, 2002 COMPARED TO THREE MONTHS ENDED DECEMBER
31, 2001:
REVENUES decreased by $675,208, or 15.8%, to $3,594,386 during the three months
period ended December 31, 2002, from $4,269,594 for the three month period
ended December 31, 2001. This decrease is primarily related to a reduction in
the volume of waste handled. The reduction in volume was attributable to the
Company's efforts to focus on small quantity generators which provide higher
margins at lower volumes while reducing the focus on less profitable larger
quantity generators.
COST OF SERVICES decreased $541,332, or 19.1%, to $2,288,245 during the three
months ended December 31, 2002, compared to $2,829,577 for the three month
period ended December 31, 2001. The reasons for the decrease were primarily
attributable to a decrease in processing costs and transportation costs. Cost
of services as a percentage of revenues decreased to 63.7% compared to 66.3%
during the three months ended December 31, 2001.
DEPRECIATION AND AMORTIZATION expense for the three months ended December 31,
2002 increased $4,568 or 2.7% to $175,879 compared to $171,311 for the three
months ended December 31, 2001.
SELLING, GENERAL AND ADMINISTRATIVE expenses for the period decreased 7.0% or
$49,107 to $654,527 from $703,634 during the three months ended December 31,
2001. The decrease was due to decreased selling expenses as the Company had a
smaller sales staff during the 2002 period compared to the similar quarter in
2001. Sales, general and administrative expenses increased as a percentage of
revenue to 18.2% for the three months ended December 31, 2002, as compared to
16.5% for the three months ended December 31, 2001 due primarily to decreased
revenue.
INTEREST EXPENSE for the quarter decreased by $46,803 or 47.2%, to $52,432 from
$99,235 during the three months ended December 31, 2001. This decrease was
reflective of the reduced debt. During the twelve months ended December 31,
2002 the Company reduced debt payable to its majority shareholder by $1,383,987
and unaffiliated notes payable and long-term debt by $224,243. In addition the
Company was charged a lower rate of interest for the WSI promissory note which
is variable and tied to the prime rate.
EARNINGS BEFORE INTEREST TAXES DEPRECIATION AND AMORTIZATION ("EBITDA")
Earnings before interest taxes depreciation and amortization totaled $582,614
or 16.2% of revenue compared to $664,192 or 15.6% of revenue for the quarter
ended December 31, 2001. The difference was primarily reflective of the
decrease in revenue.
10
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Over the past several quarters the Company has continued to experience
improved cash flow which has enabled it to reduce debt and to rely more on
internally generated funds to finance its working capital needs, capital
expenditures, and acquisitions and to rely less on its majority shareholder,
WSI. The Company's indebtedness currently consists of amounts owed to WSI (which
are described below) and insurance premiums that are financed over the course of
each fiscal year.
On October 1, 1998, WSI and the Company amended and restated a
revolving promissory note (the note) which was originally due September 30,
2000. Since that time the note has been extended either quarterly or
semi-annually under interest rate terms ranging from prime plus 1.0% to prime
plus 3.5% not to exceed 13%. In connection with the note extension on August 1,
2000, 3CI issued warrants to WSI for the purchase of up to 351,836 shares of
3CI common stock at an exercise price of $0.20 per share. These warrants
expired on September 20, 2002. When the Note was extended on October 1, 2000,
3CI issued warrants to WSI for the purchase of up to 541,286 shares of 3CI
common stock at an exercise price of $.10 per share which were exercised by WSI
on December 19, 2002. In each of these cases, the values of the warrants were
included in the statement of operations for the respective periods as interest
expense.
The note was renegotiated pursuant to an agreement dated May 23, 2002
by which the maturity was extended to October 1, 2003. The terms of this
extension included an interest rate equal to the prime rate, currently 4.25%,
plus 1.0% and called for a principal payment of $700,000 at renewal and
additional monthly payments of $100,000 to be applied to accrued interest and
principal. The agreement also required the Company to achieve a minimum level
of EBITDA for each trailing six-month period thereafter until maturity. This
level was achieved for the each of the six month periods ended June 30, 2002,
September 30, 2002 and December 31, 2002.
At December 31, 2002, the Company had net working capital, exclusive
of the note payable to its majority shareholder, of $972,547 compared to a net
working capital exclusive of the note payable to its majority shareholder of
$810,669 at September 30, 2002. This increase in net working capital of
$161,878 was due primarily to the increase in accounts receivable.
Net cash provided by operating activities was $20,726 during the three
month period ended December 31, 2002, compared to $863,561 for the three month
period ended December 31, 2001. The difference is due to reduced revenue and
the increase in accounts receivable. The Company relocated its corporate office
operations from Shreveport, Louisiana to Grand Prairie, Texas in June of 2002.
Turnover in billing and accounting personnel created the lag in billing
creating the increased accounts receivable and reduced cash flow from
operations during the quarter. The Company has subsequently reduced the billing
lag and collections and cash flows have shown improvement in the second fiscal
quarter to date.
Net cash used in investing activities for the three months ended
December 31, 2002, was $22,692 compared to $4,287 for the same period in 2001.
The $18,405 decrease reflected increased investment in capital equipment. The
Company utilized these funds in the purchases of computer equipment.
Net cash used in financing activities was $242,508 for the three month
period ended December 31, 2002, compared to $631,260 during the three month
period ended December 31, 2001. The $388,752 decrease is reflective of lower
payments required for long term debt, and notes payable.
Item 3. QUALITATIVE DISCLOSURE ABOUT MARKET RISK
----------------------------------------
The Company's exposure to market risk includes the possibility of
rising interest rates in connection with the Company's credit facility with
WSI, its majority shareholder, thereby increasing its
11
debt service obligation, which could adversely effect the Company's cash flows.
The interest rate for the note is variable and tied to the prime rate not to
exceed 13%. An increase in the prime rate of 1% would have the effect of
increasing interest expense by approximately $32,744 over 12 months.
Item 4. CONTROLS AND PROCEDURES
-----------------------
We maintain disclosure controls and procedures that are designed to
ensure that information required to be disclosed in our filings under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the periods specified in the rules and forms of the Securities and
Exchange Commission. This information is accumulated and communicated to our
management including our principal executive officer and principal financial
officer, as appropriate, to allow timely decisions regarding required
disclosures. Our management including our principal executive officer and our
principal financial officer, recognizes that any set of controls and
procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives.
Under the supervision and with the participation of our management,
including our principal executive officer and principal financial officer, we
conducted an evaluation of our disclosure controls and procedures within 90
days of the filing date of this report. Based on this evaluation, our principal
executive officer and principal financial officer concluded that our
disclosures controls and procedures are effective in alerting them on a timely
basis to material information required to be disclosed in our periodic filings.
There were no significant changes in our internal controls or in other
factors that could significantly affect these controls subsequent to the date
of the evaluation referenced in the foregoing paragraph.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings -
On July 16, 2002 a suit was filed in the First Judicial District Court
in Shreveport, Louisiana against Stericycle, Inc. and certain of 3CI' s
directors which alleged minority shareholder oppression, breach of fiduciary
duty and unjust enrichment. While the Company is not party to the lawsuit, it
has contacted its insurance carrier and hired counsel to assist the Company in
this litigation. The defendants in the case have denied the allegations and
intend to defend the case vigorously.
The Company is subject to certain other litigation and claims arising
in the ordinary course of business. Management believes the amounts ultimately
payable, if any, as a result of such claims and assessments will not have a
materially adverse effect on the Company's financial position, results of
operations or net cash flows.
Item 2. Changes in Securities - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K -
12
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
3.1. Certificate of Incorporation as amended (incorporated by reference to
Exhibit 3(a) of 3CI's registration statement on Form S-1 (No.
33-45632) effective April 14, 1992).
3.2. Amendment to 3CI's Certificate of Incorporation, as amended effective
June 13, 1995 (incorporated by reference to Exhibit 3.1 of 3CI's
Quarterly Report on Form10-Q for the quarterly period ended June 30,
1995).
3.3. Amendment to 3CI's Certificate of Incorporation, as amended effective
March 23, 1998 (incorporated by reference to Exhibit 3.3 of 3CI's
registration statement on Form S-1 (No. 333-48499), filed March 24,
1998).
3.4 Bylaws, effective May 14, 1995 (incorporated by reference to Exhibit
3.2 of 3CI's Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 1995).
3.5 Amendment of Bylaws effective October 1, 1998.(incorporated by
reference to Exhibit 3.5 of 3CI's report on Form 10-K filed January
12, 1999)
3.6. Certificate of Designations of 3CI's Series A Preferred Stock without
par value (incorporated by reference to Exhibit 3.6 of 3CI's
registration statement on Form S-1 (No. 333-48499), filed March 24,
1998).
3.7. Certificate of Designations of 3CI's Series B Preferred Stock without
par value (incorporated by reference to Exhibit 3.7 of 3CI's
registration statement on Form S-1 (No. 333-48499), filed March 24,
1998).
3.8. Certificate of Designations of 3CI's Series C Preferred Stock without
par value (incorporated by reference to Exhibit 3.8 of 3CI's
registration statement on Form S-1 (No. 333-48499), filed March 24,
1998).
4.1 Amended and Restated Secured Promissory Note dated October 1, 1998,
in the principal amount of $5,487,307.13 between 3CI and Waste
Systems, Inc. (incorporated by reference to Exhibit 4.4 of 3CI's
report on Form 10-K filed January 12, 1999).
4.2 Loan Agreement and Note Amendment dated December 18, 1998, by 3CI and
Waste Systems, Inc. (incorporated by reference to Exhibit 4.5 of
3CI's report on Form 10-K filed January 12, 1999).
4.3 Letter Agreement and Note Amendment dated August 10, 2000 by 3CI and
Waste Systems, Inc. (incorporated by reference to Exhibit 4.3 of
3CI's report on Form 10-K filed December 29, 2000).
4.4 Letter Agreement and Note Amendment dated December 20, 2000 by 3CI
and Waste Systems, Inc. (incorporated by reference to Exhibit 4.4 of
3CI's report on Form 10-K filed December 29, 2000).
4.5 Letter Agreement and Note Amendment dated March 5, 2001 by 3CI and
Waste Systems, Inc. (incorporated by reference to Exhibit 4.5 of
3CI's report on Form 10K filed January 15, 2001)
4.6 Letter Agreement and Note Amendment dated June 26, 2001 by 3CI and
Waste Systems, Inc. (incorporated by reference to Exhibit 4.6 of
3CI's report on Form 10K filed January 15, 2002)
4.7 Letter Agreement and Note Amendment dated December 20, 2001 by 3CI
and Waste Systems, Inc. (incorporated by reference to Exhibit 4.7 of
3CI's report on Form 10K filed January 15, 2002)
4.8 Letter Agreement and Note Amendment dated May 23, 2002 by 3CI and
Waste Systems, Inc. (incorporated by reference to Exhibit 4.8 of
3CI's report on Form 10K filed January 14, 2003)
10.1 1992 Stock Option Plan of 3CI (incorporated by reference to Exhibit
10(m) of 3CI's registration statement on Form S-1 (No. 33-45632)
effective April 14, 1992).
13
10.2 Settlement Agreement dated January 1996 between James Shepherd,
Michael Shepherd and Richard T. McElhannon as Releassors, and the
Company, Georg Rethmann, Dr. Herrmann Niehues, Jurgen Thomas, Charles
Crochet and Waste Systems, Inc., as Releasees (incorporated by
reference to Exhibit 10.23 of 3CI's report on Form 10-K filed January
14, 1997).
10.3 Exchange Agreement between 3CI and Waste Systems, Inc. dated as of
June 24, 1997 (incorporated by reference to Exhibit 10.12 of 3CI's
registration statement on Form S-1 (No. 333-48499), filed March 24,
1998).
10.4 Stock Purchase and Note Modification Agreement between 3CI and Waste
Systems, Inc. dated as of February 19, 1998 (incorporated by
reference to Exhibit 10.13 of 3CI's registration statement on Form
S-1 (No. 333-48499), filed March 24, 1998).
10.5 Employment Agreement dated May 30, 1998, between 3CI and Charles D.
Crochet (incorporated by reference to Exhibit 10.9 of 3CI's
registration statement on Form S-1 (No. 333-48499), filed March 24,
1998).
10.6 Agreement dated September 30, 1998 among 3CI, Waste Systems, Inc. and
Stericycle, Inc. regarding Section 203 of the Delaware General
Corporation Law (incorporated by reference to Exhibit 10.14 of 3CI's
report on Form 10-K filed January 12, 1999).
10.7 Form of Indemnification Agreement dated June 3, 1999 entered into
between 3CI and Robert Waller (incorporated by reference to Exhibit
10.11 of 3CI's report on Form 10-K filed January 12, 2000).
10.8 LaSalle National Leasing master lease agreement dated June 18, 1999
between LaSalle National Leasing as lessor and the Company as lessee
(incorporated by reference to Exhibit 10.12 of 3CI's report on Form
10-K filed January 12, 2000).
99.1 Certification pursuant to 18 U.S.C. section 1350, as adopted pursuant
to section 906 of the Sarbanes-Oxley act of 2002.
- -------------------
REPORTS ON FORM 8-K - NONE
14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
3CI COMPLETE COMPLIANCE
CORPORATION
(Registrant)
Dated: February 14, 2003
By: /s/James A. Cole
------------------------------------
James A. Cole
Chief Financial Officer,
(Principal Financial Officer and
Principal Accounting Officer)
15
CERTIFICATIONS
I, Otley L. Smith III, the President of 3CI Complete Compliance Corporation
(the "Company"), certify that:
1 I have reviewed this quarterly report on Form 10-Q of the Company;
2 Based on my knowledge, this quarterly report does not contain any untrue
statement of material fact or omit to state a material fact necessary to
make the statement made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3 Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the Company as of, and for, the periods presented in this quarterly
report;
4 The Company's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Company and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the Company, including its
consolidated subsidiaries, is made known to us by others within these
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the Company's disclosure controls and
procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5 The Company's other certifying officer and I have disclosed, based on our
most recent evaluation, to the Company's auditors and the audit committee
of the Company's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the Company's ability to
record, process, summarize and report financial data and have
identified for the Company's auditors any material weakness in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Company's internal
controls; and
6 The Company's other certifying officer and I have indicated in this annual
report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: February 14, 2003 /s/ Otley L. Smith III
----------------------
Otely L. Smith III
16
I, James A. Cole, the Chief Financial Officer of 3CI Complete Compliance
Corporation (the "Company"), certify that:
1 I have reviewed this quarterly report on Form 10-Q of the Company;
2 Based on my knowledge, this quarterly report does not contain any untrue
statement of material fact or omit to state a material fact necessary to
make the statement made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3 Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the Company as of, and for, the periods presented in this quarterly
report;
4 The Company's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Company and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the Company, including its
consolidated subsidiaries, is made known to us by others within these
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the Company's disclosure controls and
procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5 The Company's other certifying officer and I have disclosed, based on our
most recent evaluation, to the Company's auditors and the audit committee
of the Company's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the Company's ability to
record, process, summarize and report financial data and have
identified for the Company's auditors any material weakness in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Company's internal
controls; and
6 The Company's other certifying officer and I have indicated in this annual
report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: February 14, 2003 /s/ James A. Cole
-----------------
James A. Cole
17
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
99.1 Certification pursuant to 18 U.S.C. section 1350, as adopted pursuant
to section 906 of the Sarbanes-Oxley act of 2002.