<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 2, 1999
FILE NO.333-70329
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
AMENDMENT NO. 1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
ENVIRONMENTAL SAFEGUARDS, INC.
(Exact name of registrant as specified in its charter)
NEVADA 87-0429198
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
2600 SOUTH LOOP WEST, SUITE 645, HOUSTON, TEXAS 77054, (713) 641-3838/(713)
641-0756 -- FAX
(Address of principal executive offices, including zip code and Registrant's
telephone number, including area code)
JAMES S. PERCELL, 2600 SOUTH LOOP WEST, SUITE 645, HOUSTON, TEXAS 77054
(713) 641-3838
(Name and address of agent for service and agent's telephone number,
including area code)
With copies to: ROBERT D. AXELROD, AXELROD, SMITH & KIRSHBAUM,
5300 MEMORIAL DR., STE. 700, HOUSTON, TEXAS 77007, (713) 861-1996 /
(713) 552-0202 -- FAX
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement becomes effective.
If the only securities being registered on this form are being offered pursuant
to a dividend or interest reinvestment plans, please check the following box.
[ ]
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If the Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED
MAXIMUM PROPOSED
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE MAXIMUM AGGREGATE EXERCISE PRICE PROCEEDS TO AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER SHARE (1) OFFERING PRICE (1) PER SHARE THE COMPANY REGISTRATION FEE
<S> <C> <C> <C> <C> <C> <C>
Common stock, par value $0.001 500,000 $1.1875 $593,750 -- -0- $165.07
-------
Total $165.07
=======
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
Calculated pursuant to Rule 457 and based on the average high and low price
of the Company's Common Stock on January 5, 1999. Estimated legal,
accounting, printing fees are $23,165.07.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVENESS DATE UNTIL THE
REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND
EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
Subject to Completion, Dated February 2, 1999
ENVIRONMENTAL SAFEGUARDS, INC.
500,000 SHARES OF COMMON STOCK
This Prospectus relates to the resale of 500,000 shares of common
stock, par value $0.001 per share (the "Common Stock"), of Environmental
Safeguards, Inc. (the "Company") which may be offered and sold from time to time
(the"Stockholder Shares") by a certain security holder of the Company (the
"Selling Stockholder") on the American Stock Exchange (AMEX) or through other
types of transactions. See, "Plan of Distribution". The shares offered hereby
are currently outstanding shares of the Company's Common Stock purchased by a
certain security holder in a private placement on December 9, 1998. See,
"Selling Stockholder". The Company will not receive any of the proceeds from the
sale of the shares of Common Stock offered hereby. The Selling Stockholder may
from time to time sell all or any portion of the Common Stock on the American
Stock Exchange (AMEX), in the over-the-counter market, in negotiated
transactions or otherwise, at prices then prevailing or related to the then
current market price or at negotiated prices, or by any other legally available
means. A current Prospectus must be in effect at the time of the sale of the
shares of Common Stock to which this Prospectus relates. The Common Stock may be
offered and sold from time to time by the Selling Stockholder directly or
through broker dealers, or in a distribution by one or more underwriters on a
firm commitment or a best efforts basis. The Selling Stockholder and any
broker-dealer who participates in the distribution of the Common Stock may be
deemed to be Underwriters ("Underwriters") within the meaning of the Securities
Act of 1933, as amended (the "Act"). Any commission received by any
broker-dealer and any profit on resale of Common Stock purchased by them may be
deemed to be underwriting commission under the Act. The Company will incur
certain expenses in connection with this Offering. See, "Use of Proceeds" and
"Plan of Distribution". The Company's Common Stock is traded on the American
Stock Exchange under the symbol "EVV". On January 5, 1999, the last closing
sales price of the Company's Common Stock as reported on the American Stock
Exchange was $1.1875 per share.
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN
CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK, SEE THE "RISK FACTORS"
SECTION OF THIS PROSPECTUS BEGINNING ON PAGE 4.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
offense.
________________, 1999
<PAGE> 3
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, ANY SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OTHER
PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCE, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY OR ITS SUBSIDIARIES SINCE THE DATE HEREOF.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR AN OFFER TO
ANY PERSON IN ANY STATE WHERE SUCH OFFER WOULD BE UNLAWFUL.
TABLE OF CONTENTS
<TABLE>
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SECTION PAGE
<S> <C>
Available Information........................................................1
Documents Incorporated by Reference..........................................1
Information Regarding and Factors Affecting Forward-looking Statements.......2
The Company..................................................................2
Risk Factors.................................................................4
Recent Events...............................................................13
Use of Proceeds.............................................................14
Selling Stockholder.........................................................14
Plan of Distribution........................................................14
Description of Securities...................................................15
Limitations on Directors' Liability; Indemnification........................16
Legal Matters...............................................................17
Experts.....................................................................17
</TABLE>
<PAGE> 4
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and in
accordance therewith files reports, proxy statements and other information with
the Commission. The Company will provide without charge to each person who
receives a copy of this Prospectus, upon written or oral request, a copy of any
information that is incorporated by reference in this Prospectus (not including
exhibits to the information that is incorporated by reference unless the
exhibits are themselves specifically incorporated by reference). Such request
should be directed to Environmental Safeguards, Inc., Attention of James S.
Percell, 2600 South Loop West, Suite 645, Houston, Texas 77054, tel. (713)
641-3838. The Company has filed with the Commission a Registration Statement on
Form S-3 under the Act with respect to the securities offered by this
Prospectus. This Prospectus does not contain all of the information set forth in
the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. For further information with
respect to the Company and this offering, reference is made to the Registration
Statement, including the exhibits filed therewith, as well as such reports,
proxy statements and other information filed with the Commission, which may be
inspected without charge at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of such
material may also be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Company is an electronic filer. The Commission maintains a web site
on the Internet that contains reports, proxy, registration statements and
information statements and other information regarding issuers that file
electronically with the Commission. The address of the site is
http://www.sec.gov. Visitors to the site may access such information by
searching the EDGAR data base on the site. The public may obtain information on
the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
DOCUMENTS INCORPORATED BY REFERENCE
The Company exited the Regulation S-B disclosure system and began
reporting under Regulation S-K beginning with its Form 10-Q for the quarter
ended March 31, 1998. The Company hereby incorporates by reference in this
Prospectus: (i) the Company's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1997; (ii) Amendment No. 1 to the Company's Annual Report on
Form 10-KSB for the fiscal year ended December 31, 1997; (iii) the Company's
Quarterly Reports on Forms 10-Q for the quarters ended March 31, 1998, June 30,
1998 and September 30, 1998; (iv) the Company's Current Report on Form 8-K
Amendment No. 1 filed on March 2, 1998; and (v) the Company's Report on Form 8-K
Amendment No. 2 filed on June 19, 1998. All other reports filed by the Company
pursuant to Section 13(a) or 15(d) of the Exchange Act since December 31, 1997,
are hereby incorporated herein by reference. All documents subsequently filed by
the Company pursuant to Section 13(a),13(c), 14, or 15(d) of the Exchange Act,
prior to the termination of this offering, shall be deemed to be incorporated by
reference into this Prospectus. Any statement contained in a document
incorporated or deemed to be incorporated by reference in this Prospectus shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained in this Prospectus or any other subsequently
filed
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document which also is or is deemed to be incorporated by reference modifies or
replaces such statement.
INFORMATION REGARDING AND FACTORS
AFFECTING FORWARD-LOOKING STATEMENTS
The Company is including the following cautionary statement in this
Prospectus, and the Registration Statement on Form S-3 of which it is a part, to
make applicable and take advantage of the safe harbor provision of the Private
Securities Litigation Reform Act of 1995 for any forward-looking statements made
by, or on behalf of, the Company. Forward-looking statements include statements
concerning plans, objectives, goals, strategies, future events or performance
and underlying assumptions and other statements which are other than statements
of historical facts. Certain statements in this Prospectus are forward-looking
statements. Words such as "expects", "anticipates", "estimates" and similar
expressions are intended to identify forward-looking statements. Such statements
are subject to risks and uncertainties that could cause actual results to differ
materially from those projected. Such risks and uncertainties are set forth
below. The Company's expectations, beliefs and projections are expressed in good
faith and are believed by the Company to have a reasonable basis, including
without limitation, management's examination of historical operating trends,
data contained in the Company's records and other data available from third
parties, but there can be no assurance that management's expectation, beliefs or
projections will result, be achieved, or be accomplished. In addition to other
factors and matters discussed elsewhere herein, the following are important
factors that, in the view of the Company, could cause material adverse affects
on the Company's financial condition and results of operations: the ability of
the Company to attain widespread market acceptance of its technology; the
ability of the Company to obtain acceptable forms and amounts of financing to
fund planned expansion; the demand for, and price level of, the Company's
services; competitive factors; the actual useful life of the Company's indirect
thermal desorption units (the "ITD Units"); the evolving industry and technology
standards; the ability to protect proprietary technology; the dependence on key
personnel; the effect of business interruption due to political unrest; the
foreign exchange fluctuation risk; and the ability of the Company to maintain
acceptable utilization rates on its equipment. The Company disclaims any
obligation to update any forward-looking statements to reflect events or
circumstances after the date hereof.
THE COMPANY
The Company was incorporated under the laws of the State of Nevada in
December, 1985, under the name of Cape Cod Investment Company. In December,
1986, the name of the Company was changed to Cape Cod Ventures, Inc. In August,
1987, the Company completed an initial public offering of 4,148,000 shares of
Common Stock at a price of $0.001 per share pursuant to the exemption from the
registration requirements of the Securities Act of 1933 provided by Regulation
A. In May, 1993, the Company executed an Agreement and Plan of Reorganization
(the "Reorganization Agreement") with National Fuel & Energy, Inc. ("NFE"),
providing for the acquisition of NFE by the Company in exchange for shares of
the Company's Common Stock. In
2
<PAGE> 6
connection with the reorganization, the name of the Company was changed to
Environmental Safeguards, Inc., and NFE, a Wyoming corporation, became a
wholly-owned subsidiary of the Company. In December, 1997, the Company, through
NFE, acquired the remaining 50% interest in OnSite Technology, L.L.C., an
Oklahoma limited liability company, ("OnSite") which was previously owned by
Parker Drilling Company. As a result of this transaction, OnSite is now a wholly
owned subsidiary of NFE. Substantially all of the Company's activities are
conducted through OnSite which is engaged in the development, production and
sale of environmental remediation and recycling technologies and services.
OnSite owns the technologies included in the Company's ITD Units, and the
proprietary processes for on-site remediation and recycling of hydrocarbon
contaminated soil. To date, the environmental remediation and recycling services
provided by the Company using the ITD Units have involved the removal of
petroleum contaminants from soil, and the reclamation of drilling fluids and
hydrocarbons from contaminated soil. Each ITD Unit is an easily transportable
processing system which produces clean soil from contaminated soil while
reclaiming drilling fluids and hydrocarbons. ITD Units are transported from one
clean-up site to another. The Company's customers have been large corporations
in the oil and gas drilling industry that have anticipated the changing
regulatory climate with respect to soil and other environmental contamination
and have taken the initiative in removing contaminants from their properties,
and in reclaiming drilling fluids and hydrocarbons from contaminated soil. The
primary services offered by the Company involve remediation and recycling of
soil contaminated by oil-based drilling mud, fuel spills, leakage at storage
tanks and other sources of hydrocarbon contamination. To remediate and recycle
the contaminated soil, the Company utilizes ITD Units consisting of: (i) an
indirect thermal desorption unit wherein the hydrocarbon contaminated soil is
indirectly heated, thereby causing the hydrocarbon contamination to vaporize;
and (ii) a condensation process system, which causes the hydrocarbon vapor to
condense to a liquid, or an afterburner or thermal oxidizer which incinerates
the hydrocarbon vapor. The ITD Units are mobile. Thus, contaminated soil can be
remediated and recycled at the customer's location. The same process reclaims
drilling fluids and hydrocarbons from contaminated soil. The Company, through
OnSite, typically submits a bid for a project based on the costs of moving the
equipment to the location, the estimated charges for labor and fuel, the nature
and extent of the contamination, the type and moisture content of the soil, the
estimated processing time and the desired profit margin. Generally, once a
contract has been awarded, OnSite moves its equipment to the customer's
location. The Company does not haul away or dispose of soil or contaminants. The
Company owns seven ITD Units. In addition to the seven owned ITD Units, OnSite
Colombia, Inc. ("OnSite Colombia"), in which OnSite owns a 50% interest, leases
two additional ITD Units pursuant to sale-leaseback agreements with unrelated
third parties, and OnSite Arabia, Inc. ("OnSite Arabia"), in which OnSite owns a
50% interest, owns one ITD Unit. Unless otherwise indicated, references to the
Company include OnSite, OnSite Venezuela and NFE, the Company's wholly owned
subsidiaries. The offices of the Company are located at 2600 South Loop West,
Suite 645, Houston, Texas 77054 and its telephone number is (713) 641-3838. The
Company's Common Stock is traded on the American Stock Exchange under the symbol
"EVV".
3
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RISK FACTORS
The Common Stock offered hereby is speculative and involves certain
risks. In addition to the other information set forth in this Prospectus, each
prospective investor should carefully consider the following risk factors before
making an investment decision.
RECENT LOSSES
The Company incurred a net loss of $1,849,000 fiscal year ended
December 31, 1997, and a net loss of $647,000 for the fiscal year ended and
December 31, 1996. For the nine month period ended September 30, 1998, the
Company incurred a net loss of approximately $1,416,000. In order to become
profitable, the Company must secure contracts at acceptable processing prices
and control costs. There can be no assurance the Company will become profitable
and the failure of the Company to do so could ultimately result in the inability
of the Company to pay its financial obligations as they become due. At December
31, 1997 the Company reported working capital of approximately $5,277,000, and
at December 31, 1996 the Company reported working capital of approximately
$5,277,000. At September 30, 1998, the Company reported working capital of
approximately $4,743,000. The Company has historically funded its operations
through a combination of internally generated cash, short-term borrowing and
through debt and equity financing. Until such time as the operating results of
the Company improve sufficiently to fund the Company's operations, the Company
must obtain outside financing to fund the expansion of its business. Any
additional debt or equity financing may have a dilutive effect. The effect of
such a debt reduction would be to reduce the Company's interest costs and thus
reduce losses. There can be no assurance that the Company will be successful in
raising capital through the sale of equity or debt.
LIQUIDITY AND CAPITAL RESOURCES
The Company has experienced prior losses from operations. This
circumstance and the commitment by the Company to expand its ITD Unit fleet may
cause liquidity problems for the Company. In December, 1997, the Company raised
$14,000,000 in a debt and equity financing from a group of investors, of which
$8,000,000 consisted of $4,000,000 of Series B Convertible Preferred Stock and
$4,000,000 of Series C Preferred Stock, and $6,000,000 consisted of debt
(the"Debt") as evidenced by term notes issued pursuant to a Loan and Security
Agreement with the investor group (the "Loan Agreement"). The Company used a
portion of this financing to acquire the remaining 50% interest in OnSite and to
retire $3,000,000 in then existing debt. In June, 1998, the Company borrowed an
additional $5,000,000 pursuant to the terms of the Loan Agreement. In December,
1998, the Company sold 500,000 shares of common stock of the Company in a
private placement to an investor at a purchase price of $1.50 per share for
total cash consideration of $750,000.
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ONGOING CAPITAL REQUIREMENTS OF ONSITE
The Company's ability to expand and increase its revenues, assets and
income is directly related to its ability to pay for construction of new ITD
Units as demand dictates. Further capital could be needed to meet such demand
and would be required to be provided from the Company's operations, from the
sale of equity securities, borrowing, or other sources of third party financing.
There is no assurance that capital will be available from any of these sources.
Further, the sale of equity securities could dilute the Company's existing
stockholders' interest, and borrowings from third parties could result in
restrictive loan terms which would increase the Company's debt service
requirements and could restrict the Company's operations.
GROWTH STRATEGY
The Company's growth strategy is to seek customers who require
remediation and reclamation/recycling services primarily for hydrocarbon
contaminated sites where the Company's ITD Unit technology can be used on a
regular basis with little downtime other than transporting the ITD Units from
time to time. Further, firms conducting drilling activity in certain countries
other than the United States are required to carry out drilling site remediation
activity, which makes such foreign markets candidates for the Company's
remediation and recycling services. Therefore, the Company's service revenues
may be concentrated outside of the United States. Moreover, during the period
that the Company has a limited number of ITD Units, the Company's service
revenues may be concentrated in a small number of customers. See, Risk Factors
- -- Foreign Political Climate.
FOREIGN POLITICAL CLIMATE
The Company, through OnSite Colombia, OnSite Venezuela and OnSite
Arabia, enters into contracts with major global oil and gas industry
participants for the Company's remediation and recycling services. Three ITD
Units are operating in the Republic of Colombia, one ITD Unit is operating in
the Republic of Venezuela, and one ITD unit is being made ready for shipment to
the Persian Gulf region. The remaining ITD Units are in Houston, Texas. Any
changes in the political climate of the Republics of Colombia or Venezuela, or
an unsettling in the current political climate, could have a negative impact on
the Company, up to and including the complete loss of revenues from ITD Units
operating in such places. While the Company maintains hazard insurance to
address these risks, including insurance against the risk of terrorism,
sabotage, nationalization and expropriation, the loss of potential income due to
the interruption of the Company's services could have an adverse effect on the
financial condition of the Company. The Company has not experienced any set
backs in connection with the foreign political climate. The Company anticipates
that the scope of its operations may include activity in nations where similar
risks could exist. During 1997, 96% of the Company's service revenues were
generated outside of the United States from one customer. During 1998 ,
approximately 85% of the Company's services revenues were generated outside of
the United States from three customers. Accordingly, there is a likelihood that
the Company's percent of service revenues generated outside of the United States
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will remain high and the Company believes such service revenues will be less
concentrated in a few customers as additional ITD Units come into the fleet.
See, Risk Factors -- Operating Risks and Possible Insufficiency of Insurance.
INTERNATIONAL TRANSACTIONS
The Company's international business transactions could create
exposure: (i) to potential financial concerns in the areas of foreign currency
exchange, if the Company is paid in whole or in part in a foreign currency; (ii)
to routine or extraordinary foreign government control of the transfer of funds
across international borders; and (iii), to foreign taxes, tariffs and duties.
Any of the foregoing could adversely impact the Company. The functional currency
of the Company is the U.S. dollar because customer invoicing, customer
receivables, imported equipment and many of the operating cost factors are
denominated in U.S. dollars. The Company plans to continue to implement the same
approach as other foreign operations come on stream in the course of conducting
business abroad in an effort to minimize risks associated with foreign exchange
fluctuation and its affect on Company profitability.
FABRICATION OF ITD UNITS
The Company uses outside fabricators to construct the ITD Units. The
Company negotiates bids and awards contracts for fabrication. The Company has
proprietary designs and engineering techniques which it uses for custom
fabrication. The fabrication process may subject the Company to several risks.
Deficient fabrication or financial instability of a fabricator could upset the
Company's ability to manufacture ITD Units on a timely basis which could result
in delays in fulfilling contracts for soil remediation and recycling. Failure to
fulfill contracts for remediation and recycling could result in the loss of such
contracts or could subject the Company to liability for nonperformance of the
contracts. The Company has identified at least five fabricators currently
capable of fabricating ITD Units at a competitive price.
ECONOMIC CONDITIONS AND RELATED UNCERTAINTIES
Environmental service companies are affected by economic conditions as
well as government policies. Economic downturns could result in decreased demand
for the Company's services. Potential customers could seek to delay their
environmental remediation and recycling programs during such economic downturns.
The Company's operations are dependent upon the Company's ability to market its
services. While the Company would aggressively pursue its marketing efforts, in
a time of general or industry specific decline, such as a decline in oil and gas
drilling activity or a decline in the demand for remediation and recycling
services, the Company's business activities could be adversely affected.
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PRODUCT DEVELOPMENT RISKS, AND USEFUL LIFE OF ITD UNITS
The ITD Units used by the Company are continually being refined,
adjusted and improved. There is no assurance that the Company's ITD Units will
perform in accordance with the Company's expectations over a long period of time
or that there will be continued demand for the Company's products and services
in commercially justifiable quantities. The Company estimates that the useful
life of an ITD Unit is 5 years. However, the actual useful life of an ITD Unit
is unknown and could be greater or less than 5 years.
PROPRIETARY TECHNOLOGY
The U.S. Patent and Trademark Office has allowed certain claims to
methods and apparatuses for removing and treating hydrocarbon contaminated drill
cuttings and a patent has been issued to the Company. Other inventions of the
Company are patent-pending. The Company has also filed for patent protection
through the Patent Cooperation Treaty, and directly in certain foreign
countries. The Company has also filed additional U.S. patent applications for
treating hydrocarbon contaminated soil; for the process and apparatus of
separating and recovering hydrocarbons and water from the ITD Units; and on
several innovative ITD Unit mechanical features. The Company cannot state that
others will not independently develop alternative proprietary information for
similar types of processes and apparatus. The Company has not received notice
that any of its apparatus or processes used in regard to the ITD Units infringe
upon any U.S. patent.
GOVERNMENT REGULATION
The Company renders services in connection with the remediation,
recycling and disposal of various wastes. Federal, state and local laws and
regulations have been enacted regulating the handling and disposal of wastes and
creating liability for certain environmental contamination caused by such waste.
Accordingly, the Company is subject to potential liability for environmental
damage that its ITD Units or its operations may cause, particularly as a result
of contamination of water or soil. Environmental laws regulate, among other
things, the transportation, storage, handling and disposal of waste. Moreover,
so-called "toxic tort" litigation has increased markedly in recent years as
persons allegedly injured by chemical contamination seek recovery for personal
injuries or property damage. These legal developments present a risk of
liability should the Company be deemed to be responsible for contamination or
pollution caused or increased by any remediation, recycling or cleanup effort
conducted by the Company, or for an accident which occurs in the course of such
remediation, recycling or cleanup effort. There can be no assurance that the
Company's policy of establishing and implementing proper procedures for
complying with environmental regulations will be effective at preventing the
Company from incurring a substantial environmental liability. If the Company
were to incur a substantial uninsured liability for environmental damage, its
financial condition could be materially adversely affected. See, Risk
Factors--Operating Risks and Possible Insufficiency of Insurance.
Furthermore, the Company may from time to time become subject to
governmental enforcement proceedings and resulting fines or other sanctions and
may incur penalties. Such expenditures could be substantial and accordingly
could have a material
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adverse effect on the Company's financial condition. The Company presently has
the ability to perform soil remediation and recycling services that meet
applicable federal and state standards for the delivery of such services, and
the standards for the level of contaminant removal. The government can, however,
impose new standards. If new regulations were to be imposed, the Company may not
be able to comply in either the delivery services, or in the level of
contaminant removed from the soil.
COSTS OF COMPLIANCE WITH GOVERNMENTAL REGULATIONS
Governmental regulations govern matters such as the disposal of
residual chemical wastes, operating procedures, waste water discharges, fire
protection, worker and community right-to-know, and emergency response plans.
Governmental authorities have the power, under various circumstances, to enforce
compliance, and violators may be subject to civil or criminal penalties. Private
individuals may also have the right to sue to enforce compliance with certain of
the governmental requirements.
Operating permits are generally required by federal and state
environmental agencies for the operation of the Company's ITD Units. Most of
these permits must be renewed periodically and the governmental authorities
involved have the power, under various circumstances, to revoke, modify, or deny
issuance or renewal of these permits. However, it is generally the Company's
customers who must obtain such permits, if applicable, and not the Company. As a
result of the stringent regulations governing the operation of the Company's ITD
Units, operating the ITD Units and conducting business in compliance with the
various applicable regulations requires the Company to commit significant human
and capital resources which could result in increased operating costs. The
Company may from time to time become subject to governmental enforcement
proceedings and resulting fines or other sanctions, and the Company may incur
penalties. Such expenditures can be substantial and accordingly could have a
material adverse effect on the Company's financial condition.
COMPETITION
There are many companies which currently dispose of hazardous and
industrial wastes and remediate, recycle or clean up sites which have been
contaminated. Such companies are continually attempting to develop new and
improved products and services. Other companies utilize competing technologies
and techniques in an attempt to provide more economical or superior remediation
and recycling services. Many of the Company's competitors are well established
companies with substantially greater capital resources, larger research and
development staffs and facilities, and substantially greater marketing
capabilities than the Company. The Company differentiates itself from its
competitors primarily on what the Company believes to be a significantly higher
operational service level and a significantly higher value-added result for its
clients for the remediation of hydrocarbons from soils and the subsequent
reclaiming of the hydrocarbons into liquids for customer recycling or resale.
For example, some of the features of the Company's ITD Unit design, which the
Company believes provide service-level advantages, include:
8
<PAGE> 12
REMEDIATION: The Company's ITD Units remove 99% of hydrocarbon
contaminants from the waste-stream soil (e.g., drill cuttings),
effectively eliminating the latent liability of the client. Conversely,
some competitive technologies such as incineration, solidification and
bio-remediation result in continuing latent liability.
RECYCLING: The Company's ITD Units transform waste streams
into value for its clients by reclaiming valuable drilling fluids and
hydrocarbons for client recycling or resale. For example, the Company's
equipment has reclaimed approximately 6.7 million gallons of diesel oil
while processing drill cuttings for a major O&G participant in
Colombia.
TONNAGE: The Company's ITD Units have proven processing
capability of 5-10 tons per hour with up to 30% hydrocarbon-saturation
in the soil. Some competitors are capable of similar processing speeds,
but at lower hydrocarbon-saturation levels, resulting in throughput
advantages for the Company.
PORTABILITY: The Company's ITD Units are built on two 44 foot
trailer beds for portability to the clients location, avoiding costly
hauling expenses of contaminated materials to a central location. In
addition, the ITD Unit design permits rig-down and/or rig-up in less
than a day. Some competitive units are much less transportable, or not
portable at all.
WIDE RANGE OF HYDROCARBONS TREATED: The Company's ITD Units
operate at low temperatures (200 degrees Fahrenheit), high temperatures
(1,000-1,200 degrees Fahrenheit), and anywhere in between, thereby
enabling the remediation of wide ranges of hydrocarbon contaminants
encountered at a client's site, including halogenated volatiles,
halogenated semivolatiles, non-halogenated volatiles, non-halogenated
semivolatiles, fuel hydrocarbons and pesticides. The Company believes
that competition in the industry is concentrated in remediation
services, whereas the Company's ITD technology not only provides
remediation services, but also is capable of reclaiming and recycling
valuable drilling fluids and hydrocarbons. The Company further believes
that its pricing policies are competitive. No assurance, however, can
be given that the Company will be able to successfully compete with
other companies or alternative technologies.
TECHNOLOGICAL OBSOLESCENCE
The Company uses patented technology and equipment to remediate and
recycle hydrocarbons from soil. While the Company believes that this technology
has a long market life, there is no assurance that the Company's technology will
be marketable in the future. Existing or future technologies of competitors
could make the Company's services obsolete and the Company could suffer a loss
of customers and revenue as a result. The Company's research and development
activities are focused primarily on making incremental improvements in operating
efficiencies, design, and fabrication.
9
<PAGE> 13
OPERATING RISKS AND POSSIBLE INSUFFICIENCY OF INSURANCE
The business of the Company exposes it to various risks, including
claims for damage to property, injuries to persons, negligence and professional
errors or omissions in the planning or performing of services, which such claims
could be substantial. OnSite, the entity through which operations are conducted,
maintains $1,000,000 each of general liability insurance, automobile liability
insurance, employee liability insurance and pollution/professional liability
insurance and at least $15,000,000 of excess umbrella liability coverage on all
of its domestic and foreign operations. In addition, OnSite maintains all-risk
property insurance for its ITD Units. There can be no assurances that such
insurance will continue to be adequate, or that the Company will be able to
continue to maintain or obtain adequate or required insurance coverage as its
business grows or, if such insurance is obtainable, that it can be purchase at a
reasonable price. If the Company has difficulty in maintaining or obtaining such
insurance coverage, it could be at a competitive disadvantage with other
companies, it may become exposed to significant uninsured risks and losses,
and/or may be unable to continue certain of its operations. Under the Company's
insurance policies, there are various exclusions that are customary in the
industry. Accordingly, there can be no assurance that liabilities that may be
incurred by the Company will be covered by its insurance or that the dollar
amount of such liabilities which are covered by its insurance will not exceed
the Company's policy limits. A partially or completely uninsured claim, if
successful, could have a material adverse effect on the Company's financial
condition and results of operations.
LACK OF DIVERSIFICATION; RISKS OF INVESTING IN THE INDUSTRY
The Company operates primarily in the environmental services industry.
The current plan of operation calls for expansion within, but does not
anticipate diversification beyond, this industry. The plan of operation,
therefore, subjects the Company to the economic fluctuations within this
industry and increases the risk associated with its operations. An investment in
any aspect of the environmental services industry is speculative and
historically has involved a high degree of risk. The continued success of the
Company will depend on various factors over which the Company has little or no
control.
DEPENDENCE ON MANAGEMENT
The Company is dependent upon the time, talent and experience of James
S. Percell, its President and Chief Executive Officer, with whom the Company has
an employment agreement. The loss of the services of Mr. Percell, for any
reason, could have a material adverse effect on the Company. The Company,
however, has obtained key-man life insurance on Mr. Percell in the amount of
$5,000,000.
FUTURE NEED FOR ADDITIONAL PERSONNEL
The Company's employees perform functions important to the long-term
development of the Company, including operations, accounting, finance and
quality control functions. The Company
10
<PAGE> 14
may hire additional staff with the special skills and education necessary for
important Company functions. Competition for such personnel is intense, and
there can be no assurance that the Company will be successful in attracting and
retaining such personnel.
ANTI-TAKEOVER EFFECTS OF ISSUANCE OF PREFERRED STOCK
The Company has authorized 10,000,000 shares of preferred stock, par
value $0.001 per share ("Preferred Stock"), of which the Company has issued and
outstanding 2,733,686 shares of Series B Convertible Preferred Stock and 400,000
shares of Series C Preferred Stock. Thus, the Company could issue up to
6,866,314 additional shares of Preferred Stock. Preferred Stock is entitled to
certain preferences over the Common Stock. The Company's board of directors has
authority, without action or consent by the shareholders, to issue the
authorized but unissued shares of Preferred Stock in one or more series and to
determine the voting rights, preferences as to dividends and liquidation rights,
conversion rights, and other rights of any such series. All Preferred Stock,
when and if issued, could adversely affect the rights of the holders of Common
Stock. For example, such issuances could result in a class of securities
outstanding that would have preferences with respect to voting rights and
dividends and in liquidation over the Common Stock, and could, upon conversion
or otherwise, enjoy all of the rights of holders of Common Stock. The Board's
authority to issue Preferred Stock could discourage potential takeover attempts
and could delay or prevent a change in control of the Company through merger,
tender offer, proxy contest or otherwise by making such attempts more difficult
to achieve or more costly. Further, pursuant to the Loan Agreement, the Company
may not merge or consolidate with any person, or sell, lease, transfer or
otherwise dispose of any substantial part of its assets, whether in one or more
transactions.
SHARES ELIGIBLE FOR FUTURE SALE
There is currently a limited market for the common stock of the
Company. Possible or actual sales of a substantial number of shares of Common
Stock by the Selling Stockholder in this Offering could have a negative impact
on the market price of the Common Stock of the Company. Further, the Company
does not anticipate engaging an Underwriter to assist in a distribution of
shares of Common Stock on behalf of the Selling Stockholder. Accordingly, there
is no assurance that the Selling Stockholder will be able to sell the shares of
Common Stock for any particular price. In addition, of the 10,092,444 shares of
the Company's Common Stock outstanding as of January 1, 1999, approximately
2,386,002 shares are restricted securities as that term is defined in Rule 144
adopted under the Act ("Restricted Securities"). Rule 144 governs resales of
Restricted Securities for the account of any person, other than an issuer, and
restricted and unrestricted securities for the account of an "affiliate" of the
issuer. Restricted securities generally include any securities acquired directly
or indirectly from an issuer or its affiliates which were not issued or sold in
connection with a public offering registered under the Securities Act. An
affiliate of the issuer is any person who directly or indirectly controls, is
controlled by, or is under common control with, the issuer. Affiliates of the
Company may include its directors, executive officers, and persons directly or
indirectly owning 10% or more of the outstanding Common Stock. Under Rule 144,
unregistered
11
<PAGE> 15
resales of restricted Common Stock cannot be made until it has been held for one
year from the later of its acquisition from the Company or an affiliate of the
Company. Thereafter, shares of Common Stock may be resold without registration
subject to Rule 144's volume limitation, aggregation, broker transaction, notice
filing requirements, and requirements concerning publicly available information
about the Company ("Applicable Requirements"). Resales by the Company's
affiliates of restricted and unrestricted Common Stock are also subject to the
Applicable Requirements. The volume limitations provide that a person, or
persons who must aggregate their sales, cannot, within any three-month period,
sell more than the greater of (i) one percent of the then outstanding shares, or
(ii) the average weekly reported trading volume during the four calendar weeks
preceding each such sale. A person who is not deemed an "affiliate" of the
Company and who has beneficially owned shares for at least two years would be
entitled to sell such shares under Rule 144 without regard to the Applicable
Requirements. The Company believes that approximately 659,658 restricted shares
of Common Stock have been held for more than two years, and therefore may be
sold by nonaffiliates without limitation. No prediction can be made as to the
effect, if any, that sales of shares of Common Stock or the availability of such
shares for sale will have on the market prices prevailing from time to time.
Nevertheless, the possibility that substantial amounts of Common Stock may be
sold in the public market would likely have a material adverse effect on
prevailing market prices for the Common Stock and could impair the Company's
ability to raise capital through equity financing.
DILUTION DUE TO OUTSTANDING OPTIONS AND WARRANTS
In addition to the 2,733,686 shares of Common Stock issuable upon
conversion of the Series B Convertible Preferred Stock and the 707,142 shares of
Common Stock issuable upon the exercise of the Warrants, the Company presently
has outstanding options to purchase (i) 2,490,000 shares of its Common Stock
which are exercisable at $0.60 per share and expire in November, 2005, (ii)
602,500 shares of its Common Stock which are exercisable at $2.50 per share and
expire in March, 2007, (iii) 25,000 shares of its Common Stock which are
exercisable at $3.75 per share and expire in November, 2007, (iv) 970,644 shares
its Common Stock which are exercisable at $3.00 per share and expire in
December, 2007, (v) 169,470 shares of its Common Stock which are exercisable at
$5.00 per share and expire in April, 2008; (vi) 3,248 shares of its Common Stock
which are exercisable in approximately equal amounts at prices ranging from
$2.38 to $4.00 per share and expire in January, 2008; and (vii) 610,000 shares
of its Common Stock which are exercisable at $1.68 per share and expire in
December, 2008.
The exercise of the outstanding options by the holders thereof may
result in the dilution in the interests of the other stockholders of The
Company. Pursuant to the Loan and Security Agreement, the Company has agreed to
issue a further 707,142 warrants exercisable beginning February 17, 2000 and
expiring on February 16, 2010. Further pursuant to the Loan Agreement, the
Company is required to issue additional warrants if certain conditions exist in
the future. If the Debt is not repaid in full by February 17, 2001, then the
Company must authorize, issue and deliver warrants to acquire up to 188,571
shares of common stock.
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<PAGE> 16
POSSIBLE VOLATILITY OF COMMON STOCK PRICE
The market price of the Common Stock of the Company may be highly
volatile, as has been the case with the securities of many other small
capitalization companies. Additionally, in recent years, the securities markets
have experienced a high level of price and volume volatility and the market
prices of securities for many companies, particularly small capitalization
companies, have experienced wide fluctuations which have not necessarily been
related to the operating performances or underlying asset values of such
companies. Securities of issuers having relatively limited capitalization or
securities recently issued in a public offering are particularly susceptible to
change based on short-term trading strategies of certain investors and
speculators. Further, the resale of Common Stock in this Offering by Selling
Stockholder could affect the market price of the Common Stock.
NO CASH DIVIDENDS
The Company has never paid cash dividends on its Common Stock and the
Board of Directors does not anticipate paying cash dividends in the foreseeable
future. The Company currently intends to retain future earnings to finance the
growth of its business. Further, pursuant to the terms of the Loan Agreement,
the Company is precluded from paying any dividends while the loan underlying the
Loan Agreement is outstanding.
RECENT EVENTS
In December, 1998, the Company and an investor formed OnSite Arabia,
Inc. ("OnSite Arabia"), a Cayman Island company for the purpose of providing
environmental remediation, reclamation and recycling services in Saudi Arabia,
Qatar, Yemen, the United Arab Emirates, Bahrain, Kuwait and Oman. The Company
owns 50% of OnSite Arabia.
Concurrent with the formation of OnSite Arabia, the Company sold
500,000 shares of common stock of the Company in a private placement to an
investor at a purchase price of $1.50 per share for total cash consideration of
$750,000. The Company presently intends to use the proceeds of this private
placement for additional working capital. This Prospectus relates to the
registration of these shares.
In December 1998, the Company redeemed 1,037,736 shares of its Series B
convertible preferred stock from a related party, Newpark Resources, Inc.
("Newpark"), a New York Stock Exchange listed company, in consideration for
certain receivables due to the Company from Newpark. This transaction had the
combined effect of reducing the Company's working capital and shareholders'
equity by approximately $1,100,000, and a reduction in common stock equivalents
of 1,037,736 shares on a fully diluted basis. After the 1,037,736 share
redemption, Newpark continues to hold 847,975 shares of the Company's Series B
convertible preferred stock.
13
<PAGE> 17
USE OF PROCEEDS
The Company will not receive any proceeds upon the resale of the Common
Stock by the Selling Stockholder. The Selling Stockholder will not pay any of
the costs of this Registration.
SELLING STOCKHOLDER
The following table sets forth the name of the Selling Stockholder, the
number of shares of Common Stock offered by the Selling Stockholder, the number
of shares of Common Stock to be owned by the Selling Stockholder if all shares
were to be sold in the Offering and the percentage of the Company's outstanding
Common Stock that will be owned by the Selling Stockholder if all shares are
sold in the offering. The shares of Common Stock being offered hereby are being
registered to permit public secondary trading and the Selling Stockholder may
offer all or a portion of the shares for resale from time to time.
<TABLE>
<CAPTION>
SHARES SHARES SHARES OWNED PERCENTAGE
OWNED OFFERED AFTER OFFERING OWNED AFTER
SELLING BEFORE FOR IF ALL OFFERED OFFERING IF ALL
STOCKHOLDER (1) OFFERING SALE SHARES ARE SOLD (3) SHARES SOLD
- --------------- -------- ---- ------------------- -----------
<S> <C> <C> <C> <C>
Nadia, L.L.C. 593,500 500,000 93,500 1%
</TABLE>
- ---------------------
(1) Assumes no sales are effected by the Selling Stockholder during the
offering period other than pursuant hereto. An affiliate of Nadia,
L.L.C. and the Company each own 50% of OnSite Arabia.
PLAN OF DISTRIBUTION
The Selling Stockholder has advised the Company that the Stockholder
Shares may be sold or distributed from time to time by the Selling Stockholder,
its distributees or assignees, or by pledgees, donees or transferees of, or
other successors in interest to, the Selling Stockholder, directly to one or
more purchasers (including pledgees) or through brokers, dealers or underwriters
who may act solely as agents or may acquire Stockholder Shares as principals, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices, at negotiated prices, or at fixed prices, which may be
changed. The distribution of the Stockholder Shares may be effected by one or
more of the following methods: (i) ordinary brokers' transactions, which may
include long or short sales; (ii) transactions involving cross or block trades
or otherwise, on the American Stock Exchange; (iii) purchases by brokers,
dealers or underwriters as principals and resale by such purchasers for their
own accounts pursuant to this Prospectus; (iv) "at the market" to or through
market makers or into an existing market for the Common Stock; (v) in other ways
not involving market makers or established trading markets, including direct
sales to purchasers or sales effected through agents; (vi) through transactions
in options, swaps or other derivatives (whether exchange-listed or otherwise);
or, (vii) any combination of the foregoing, or by any other legally available
means. In addition, the Selling Stockholder, its distributees or assignees, or
its successors
14
<PAGE> 18
in interest may enter into hedging transactions with broker-dealers who may
engage in short sales of Common Stock in the course of hedging the positions
they assume with the Selling Stockholder. The Selling Stockholder, its
distributees or assignees, or its successors in interest may also enter into
option or other transactions with broker-dealers that require the delivery to
such broker-dealers of the Stockholder Shares, which Stockholder Shares may be
resold thereafter pursuant to this Prospectus. Brokers, dealers, underwriters or
agents participating in the distribution of the Stockholder Shares as agent may
receive compensation in the form of discounts, concessions or commissions from
the Selling Stockholder (and, if they act as agent for the purchaser of such
Stockholder Shares, from such purchaser). Such discounts, concessions or
commissions as to a particular broker, dealer, underwriter or agent might be
greater or less than those customary in the type of transaction involved. The
Selling Stockholder and any brokers, dealers, underwriters or agents that
participate in the distribution of the Stockholder Shares may be deemed to be
"underwriters" within the meaning of the Securities Act, and any discounts,
commissions or concessions received by any such persons might be deemed to be
underwriting discounts and commissions under the Securities Act. Neither the
Company nor the Selling Stockholder can presently estimate the amount of such
compensation. The Company knows of no existing arrangements between any Selling
Stockholder and any other Selling Stockholder, broker, dealer, underwriter or
agent relating to the sale or distribution of the Stockholder Shares. To the
extent required, the Company will file, during any period in which offers or
sales are being made, a supplement to this Prospectus which sets forth, with
respect to a particular offering, the specific number of Stockholder Shares to
be sold, the name of the Selling Stockholder, the sales price, the name of any
participating broker, dealer, underwriter or agent, any applicable commission or
discount and any other material information with respect to the plan of
distribution not previously disclosed. The Company will not receive any of the
proceeds from the sale of the Stockholder Shares offered hereby. The Company
will pay substantially all of the expenses incident to this Registration of the
Stockholder Shares by the Selling Stockholder, other than commissions and
discounts of brokers, dealers, underwriters or agents. The Company has agreed to
indemnify the Selling Stockholder against certain liabilities, including certain
liabilities under the Securities Act.
In order to comply with certain states' securities laws, if applicable,
the Stockholder Shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
Common Stock may not be sold unless the Common Stock has been registered or
qualified for sale in such state or an exemption from registration or
qualification is available and is satisfied. There is no assurance that the
Selling Stockholder will sell any or all of the Stockholder Shares.
DESCRIPTION OF SECURITIES
The authorized capital stock of the Company consists of 50,000,000
shares of common stock, $0.001 par value, and 10,000,000 shares of preferred
stock, $0.001 par value. The following summary description of the securities of
the Company is qualified in its entirety by reference to the Company's Articles
of Incorporation, Bylaws, Certificate of Designation, Preferences, Rights and
Limitations of Series B Convertible Preferred Stock and the Certificate of
Designation, Preferences,
15
<PAGE> 19
Rights and Limitations of Series C Preferred Stock, which are filed as exhibits
to the Registration Statement of which this Prospectus is a part. See,
"Additional Information".
COMMON STOCK. The Company's Common Stock is traded on the American
Stock Exchange under the symbol "EVV". The holders of Common Stock are entitled
to one vote per share with respect to all matters required by law to be
submitted to stockholders of the Company. The holders of Common Stock have the
sole right to vote, except as otherwise provided by law, by the Articles of
Incorporation, or by provisions governing any Preferred Stock. The Common Stock
does not have any cumulative voting, preemptive, subscription or conversion
rights. Election of directors and other general stockholder action requires the
affirmative vote of a majority of shares represented at a meeting in which a
quorum is represented. The outstanding shares of Common Stock are, and the
shares of Common Stock offered hereby will be, upon payment therefor as
contemplated herein, validly issued, fully paid and non-assessable.
Subject to the rights of any outstanding shares of Preferred Stock, the
holders of Common Stock are entitled to receive dividends when, as and if
declared by the Board of Directors out of funds legally available therefor. In
the event of liquidation, dissolution or winding up of the affairs of the
Company, the holders of Common Stock are entitled to share ratably in all assets
remaining available for distribution to them after payment or provision for all
liabilities and any preferential liquidation rights of any Preferred Stock then
outstanding.
The Company may not, except for dividends payable in connection with
the Company's Series C Preferred Stock, authorize or pay any dividends at any
time if any amount is unpaid with respect to the Loan Agreement.
LIMITATION ON DIRECTOR'S LIABILITY; INDEMNIFICATION
The Articles of Incorporation of the Company (the "Articles") provide,
as permitted by governing Nevada law, that a director of the Company shall not
be personally liable to the Company or its stockholders for monetary damages for
breach of fiduciary duty as a director, with certain exceptions. These
provisions may discourage stockholders from bringing suit against a director for
breach of fiduciary duty and may reduce the likelihood of derivative litigation
brought by stockholders on behalf of the Company against a director. The
Articles provide that the Company will indemnify its directors and officers
against expenses and liabilities they incur to defend, settle, or satisfy any
civil litigation or criminal action brought against them on account of their
being or having been Company directors or officers unless, in such action, they
are adjudged to have acted with gross negligence or willful misconduct. The
inclusion of this provision in the Articles may have the effect of reducing the
likelihood of derivative litigation against directors, and may discourage or
deter stockholders or management from bringing a lawsuit against directors for
breach of their duty of care, even though such an action, if successful, might
otherwise have benefitted the Company and its stockholders. The Articles provide
for the indemnification of its executive officers and directors, and the
advancement to them of expenses in connection with any proceedings and claims,
to the fullest extent permitted by the Nevada law. The Articles include related
provisions
16
<PAGE> 20
meant to facilitate the indemnities' receipt of such benefits. These provisions
cover, among other things: (i) specification of the method of determining
entitlement to indemnification and the selection of independent counsel that
will in some cases make such determination, (ii) specification of certain time
periods by which certain payments or determinations must be made and by which
actions must be taken, and (iii) the establishment of certain presumptions in
favor of an indemnitee.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers, and controlling persons of the Company
pursuant to the forgoing provisions, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed on for
the Company by Axelrod, Smith & Kirshbaum of Houston, Texas. Mr. Robert D.
Axelrod presently owns 24,579 shares of Common Stock of the Company.
EXPERTS
The consolidated balance sheets at December 31, 1996 and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for the year then ended of Environmental Safeguards, Inc. incorporated by
reference into this Prospectus and Registration Statement have been audited by
Ham, Langston & Brezina, L.L.P. , independent auditors, as set forth in their
report, and are incorporated by reference in reliance upon such report, given
upon the authority of such firm as experts in accounting and auditing.
The consolidated financial statements of Environmental Safeguards, Inc.
appearing in Environmental Safeguards, Inc.'s Annual Report (Form 10-KSB) and
Amendment No. 1 to the Company's Annual Report (Form 10-KSB) for the year ended
December 31, 1997 and the consolidated financial statements of OnSite
Technology, L.L.C. for the period from January 1, 1997 through December 17, 1997
appearing in Environmental Safeguards, Inc.'s Current Reports on Form 8-K
Amendment No. 1 and Amendment No. 2 have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such reports given upon the
authority of such firm as experts in accounting and auditing.
17
<PAGE> 21
PART II
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses to be incurred in
connection with the distribution of the securities being registered. The
expenses shall be paid by the Company.
<TABLE>
<S> <C>
SEC Registration Fee............................................ $ 165.07
Printing and Engraving Expenses................................. 2,500.00
Legal Fees and Expenses......................................... 10,000.00
Accounting Fees and Expenses.................................... 10,000.00
Blue Sky Fees and Expenses...................................... 0.00
Transfer Agent Fees and Miscellaneous........................... 500.00
----------
Total $23,165.07
==========
</TABLE>
ITEM 15. LIMITATION ON DIRECTOR'S LIABILITY; INDEMNIFICATION
The Articles of Incorporation of the Company ("Articles") provide, as
permitted by governing Nevada law, that a director of the Company shall not be
personally liable to the Company or its stockholders for monetary damages for
breach of fiduciary duty as a director, with certain exceptions. These
provisions may discourage stockholders from bringing suit against a director for
breach of fiduciary duty and may reduce the likelihood of derivative litigation
brought by stockholders on behalf of the Company against a director. The
Articles provide that the Company will indemnify its directors and officers
against expenses and liabilities they incur to defend, settle, or satisfy any
civil litigation or criminal action brought against them on account of their
being or having been Company directors or officers unless, in such action, they
are adjudged to have acted with gross negligence or willful misconduct. The
inclusion of this provision in the Articles may have the effect of reducing the
likelihood of derivative litigation against directors, and may discourage or
deter stockholders or management from bringing a lawsuit against directors for
breach of their duty of care, even though such an action, if successful, might
otherwise have benefitted the Company and its stockholders. The Articles provide
for the indemnification of its executive officers and directors, and the
advancement to them of expenses in connection with any proceedings and claims,
to the fullest extent permitted by the Nevada law. The Articles include related
provisions meant to facilitate the indemnitees' receipt of such benefits. These
provisions cover, among other things: (i) specification of the method of
determining entitlement to indemnification and the selection of independent
counsel that will in some cases make such determination, (ii) specification of
certain time periods by which certain payments or determinations must be made
and actions must be taken, and (iii) the establishment of certain presumptions
in favor of an indemnitee.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers, and controlling persons of the Company
pursuant to the forgoing provisions, or otherwise,
Part II -- 1
<PAGE> 22
the Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable.
ITEM 16.
EXHIBIT NO. IDENTIFICATION OF EXHIBIT
3.1 * Certificate of Incorporation of the Registrant, as amended.
3.2 * Bylaws of the Registrant.
4.1 * See Exhibits 3.1 and 3.2. for provisions of the Articles of
Incorporation and Bylaws of the Registrant defining rights of
holders of common stock of the Registrant.
4.2 * Common Stock specimen.
4.3 ** Certificate of Designation, Preferences, Rights and
Limitations of Series B Convertible Preferred Stock.
4.4 * Form of Warrant Certificate dated December 17, 1997 (Included
in Exhibit 4.8).
4.5 * Form of Registration Rights Agreement pursuant to Private
Placement Memorandum dated September 18, 1996.
4.6 * Form of Registration Rights Agreement dated December 17, 1997,
between the Company and Cahill, Warnock Strategic Partners
Fund, L.P., Strategic Associates, L.P., Newpark Resources,
Inc. and James H. Stone.
4.7 * Form of Warrant Agreement dated December 17, 1997, between the
Company and Cahill, Warnock Strategic Partners Fund, L.P.,
Strategic Associates, L.P., Newpark Resources, Inc. and James
H. Stone.
4.8 *** Form of Registration Rights Agreement dated December 7, 1998.
5.1 *** Opinion of Axelrod, Smith & Kirshbaum.
23.1 *** Consent of Axelrod, Smith & Kirshbaum (Included in Exhibit
5.1).
23.2 *** Consent of Ham, Langston & Brezina, L.L.P.
23.3 *** Consent of Ernst & Young LLP.
Part II -- 2
<PAGE> 23
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* Previously filed as an exhibit to the Company's Annual Report on Form
10-KSB for the fiscal year ended December 31, 1997, and incorporated by
reference thereto.
** Previously filed as an exhibit to the Company's Current Report on Form
8-K dated December 17, 1997 and filed December 30, 1997, and
incorporated herein by reference thereto.
*** Previously filed.
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offer or sales are being made,
a post-effective amendment to this registration statement:
i. To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
ii. To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the
total dollar value of securities offered would not
exceed that which was registered) and any deviation
from the low or high end of the estimated maximum
offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the
effective registration statement; and
iii. To include any additional or changed material
information with respect to the plan of distribution.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
Part II -- 3
<PAGE> 24
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(4) (i) That, for the purpose of determining liability
under the Securities Act of 1933, the information
omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule
430A and contained in a form of prospectus filed by
the registrant pursuant to Rule 424(b)(1) or (4), or
497(h) under the Securities Act of 1933 shall be
deemed to be part of this registration statement as
of the time it was declared effective,
(ii) That, for the purpose of determining liability under
the Securities Act of 1933, each post-effective
amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to
the securities offered therein, and the offering of
such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(c) The undersigned registrant hereby undertakes that, for the purposes of
determining any liability under the Securities Act of 1933, each filing
of the registrant's annual report pursuant to Section 13(a) or 15(d) of
the Securities Exchange Act of 1934 that is incorporated by reference
in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
Part II -- 4
<PAGE> 25
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form S-3 Amendment No. 1 and has duly caused
this registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Houston, State of Texas on February
1, 1999.
ENVIRONMENTAL SAFEGUARDS, INC.
By: /s/ JAMES S. PERCELL
JAMES S. PERCELL,
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ JAMES S. PERCELL Chairman of the Board,
JAMES S. PERCELL Chief Executive Officer
and Director February 1, 1999
/s/ BRYAN SHARP Director February 1, 1999
BRYAN SHARP
/s/ ALBERT WOLFORD Director/Secretary February 1, 1999
ALBERT WOLFORD
/s/ DAVID L. WARNOCK Director February 1, 1999
DAVID L. WARNOCK
/s/ RONALD BIANCO Chief Financial Officer February 1, 1999
RONALD BIANCO and Vice-Secretary
</TABLE>
Part II -- 5
<PAGE> 26
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO.
<S> <C> <C>
3.1 * Certificate of Incorporation of the Registrant, as amended.
3.2 * Bylaws of the Registrant.
4.1 * See Exhibits 3.1 and 3.2. for provisions of the Articles of
Incorporation and Bylaws of the Registrant defining rights of
holders of common stock of the Registrant.
4.2 * Common Stock specimen.
4.3 ** Certificate of Designation, Preferences, Rights and
Limitations of Series B Convertible Preferred Stock.
4.4 * Form of Warrant Certificate dated December 17, 1997 (Included
in Exhibit 4.8).
4.5 * Form of Registration Rights Agreement pursuant to Private
Placement Memorandum dated September 18, 1996.
4.6 * Form of Registration Rights Agreement dated December 17, 1997,
between the Company and Cahill, Warnock Strategic Partners
Fund, L.P., Strategic Associates, L.P., Newpark Resources,
Inc. and James H. Stone.
4.7 * Form of Warrant Agreement dated December 17, 1997, between the
Company and Cahill, Warnock Strategic Partners Fund, L.P.,
Strategic Associates, L.P., Newpark Resources, Inc. and James
H. Stone.
4.8 *** Form of Registration Rights Agreement dated December 7, 1998.
5.1 *** Opinion of Axelrod, Smith & Kirshbaum.
23.1 *** Consent of Axelrod, Smith & Kirshbaum (Included in Exhibit
5.1).
23.2 *** Consent of Ham, Langston & Brezina, L.L.P.
23.3 *** Consent of Ernst & Young LLP.
</TABLE>
<PAGE> 27
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* Previously filed as an exhibit to the Company's Annual Report on Form
10-KSB for the fiscal year ended December 31, 1997, and incorporated by
reference thereto.
** Previously filed as an exhibit to the Company's Current Report on Form
8-K dated December 17, 1997 and filed December 30, 1997, and
incorporated herein by reference thereto.
*** Previously filed.
