<PAGE> 1
As filed with the Securities and Exchange Commission on September 11, 1997.
Registration No. 333-32351
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------------------------
MED/WASTE, INC.
(Exact name of registrant as specified in its charter)
Delaware 65-0297759
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3890 N.W. 132nd Street, Suite K
Opa Locka, Florida 33054
(305) 688-3931
(Address including zip code, and telephone number, including area code, of
registrant's principal executive offices)
--------------------------------------------
MICHAEL D. ELKIN
Vice President/Chief Financial Officer
MED/WASTE, INC.
3890 N.W. 132nd Street, Suite K
Opa Locka, Florida 33054
(305) 688-3931
(Name and address, including zip code, and telephone number,
including area code, of agents for service)
With a Copy to:
BRYAN W. BAUMAN, ESQ.
Wallace, Bauman, Fodiman & Shannon, P.A.
2222 Ponce de Leon Boulevard, Sixth Floor
Coral Gables, Florida 33134
(305) 444-9991
--------------------------------------------
Approximate date of commencement of proposed sale to the public: As
soon as practicable after this Registration Statement has become effective.
--------------------------------------------
If the only securities being registered on this Form are being offered
pursuant to 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 this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please 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, please 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. / /
- i -
<PAGE> 2
<TABLE>
<CAPTION>
Proposed Proposed
Maximum Maximum Amount of
Title of each class of securities Amount to be Offering Price Aggregate Registration
to be registered Registered(1) Per Share(2) Offering Price(2) Fee
- --------------------------------- -------------- -------------- ----------------- -------------
<S> <C> <C> <C> <C>
Common Stock, par value $0.001
per share............................. 1,128,205 $4.50 $5,076,922.50 $1,539.00(3)
</TABLE>
(1) Pursuant to Rule 416 as promulgated under the Securities Act of 1933, as
amended, there is also being registered such additional shares of Common
Stock as may become issuable pursuant to the anti-dilution provisions of
the Debentures or Warrants.
(2) Pursuant to Rule 457(c), the fee is calculated on the basis of the average
of the bid and asked prices on July 27, 1997 on the NASDAQ SmallCap Market
for the Common Stock, the date the Registration Statement was originally
filed.
(3) The Registrant previously paid a registration fee of $1,385.00.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE 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 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
- ii -
<PAGE> 3
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 September 11, 1997
PROSPECTUS
1,128,205 Shares
MED/WASTE, INC.
Common Stock
This Prospectus relates to the public offering of up to 1,128,205
shares of common stock, $0.001 par value per share (the "Common Stock") of
Med/Waste, Inc. (the "Company"). All of the shares of Common Stock offered
hereby may be sold from time to time by the stockholders described herein (each
a "Selling Stockholder," collectively the "Selling Stockholders") in
transactions in which they and any broker-dealers through whom such Common Stock
are sold may be deemed to be underwriters within the meaning of the Securities
Act of 1933, as amended (the "Securities Act"), as more fully described herein.
The Selling Stockholders are not restricted in the price or prices at which they
may sell the Common Stock. Any commissions paid or concessions allowed to any
broker-dealer, and, if any broker-dealer purchases such Common Stock as
principal, any profits received on the resale of such shares, may be deemed to
be underwriting discounts and commissions under the Securities Act.
Of the Common Stock being registered hereby, 1,025,641 shares are
issuable upon conversion of presently outstanding 10% Convertible Redeemable
Debentures due July 1, 2000 (the "Debentures") and 102,564 shares are issuable
upon exercise of common stock purchase warrants (the "Warrants"). The Company
will not receive any of the proceeds from the sale of the Common Stock, but will
pay the expenses incurred in registering the Common Stock, including legal and
accounting fees. All selling and other expenses incurred by individual Selling
Stockholders will be borne by such Selling Stockholder. The Company would
receive an aggregate of $300,001 in gross proceeds from the exercise of the
Warrants. Selling Stockholders will bear all other expenses of this offering,
including brokerage fees, any underwriting discounts or commissions.
Each Debenture is convertible at any time at the option of the holders at
the current conversion price of $2.925 in principal for each share of Common
Stock through the maturity date of July 1, 2000, subject to adjustment. See
"Description of Securities - Debentures." Each Warrant entitles the holder to
purchase one (1) share of Common Stock at an exercise price of $2.925 per share
until February 12, 2001. On September 10, 1997, the Company had 2,336,166 shares
of Common Stock outstanding.
THE COMMON STOCK OFFERED HEREBY INVOLVES CERTAIN RISKS. PROSPECTIVE
PURCHASERS SHOULD CAREFULLY CONSIDER THE MATTERS SET FORTH UNDER THE CAPTION
"RISK FACTORS" LOCATED 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 SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Common Stock is included for quotation on the NASDAQ Small Cap Market
("NASDAQ") under the symbol "MWDS." The last reported sale price of the Common
Stock on NASDAQ on September 10, 1997 was $4.1875 per share.
The date of this Prospectus is _____________, 1997.
<PAGE> 4
AVAILABLE INFORMATION
A Registration Statement on Form S-3, relating to the Common Stock
offered hereby has been filed with the Securities and Exchange Commission,
Washington, D.C. 20549 (the "Commission"). This Prospectus does not contain all
of the information set forth in the Registration Statement and the exhibits and
schedules thereto. Statements contained in this Prospectus as to the contents of
any contract or any other document referred to are not necessarily complete and
in each instance reference is made to the copy of such contract or other
documents filed as an exhibit to the Registration Statement, each such statement
being qualified in all respects by such reference. For further information with
respect to the Company and the Common Stock being offered hereby, reference is
made to the Registration Statement and the exhibits and schedules thereto. A
copy of the Registration Statement may be inspected by anyone without charge at
the public reference facilities of the Commission, Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549; New York Regional Office, Public Reference Room,
Seven World Trade Center, 13th Floor, New York, New York 10048; and Chicago
Regional Office, Suite 1400, 500 West Madison Street, Chicago, Illinois 60661.
The Commission maintains a World Wide Website that contains filings and other
information filed electronically with the Commission. The address of the
Commission's World Wide Web is http://www.sec.gov.
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. These reports, proxy statements and other information can be
inspected and copied at the public reference facilities of the Commission, Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549; New York Regional Office,
Public Reference Room, Seven World Trade Center, 13th Floor, New York, New York
10048; and Chicago Regional Office, Suite 1400, 500 West Madison Street,
Chicago, Illinois 60661. Copies of this material can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. The reports, proxy and other information may also be
viewed through the Commission's World Wide Website.
The Common Stock is included for quotation on the NASDAQ Small Cap
Market and these reports, proxy statements and other information concerning the
Company may also inspected at the office of the National Association of
Securities Dealers, inc., 1735 K Street, N.W., Washington, D.C. 20006.
FORWARD-LOOKING STATEMENTS
Certain statements in this Prospectus and the documents incorporated by
reference herein may constitute "forward-looking statements" within the meaning
of the Private Securities Litigation Uniform Act of 1995 (the "Reform Act").
Such forward-looking statements involve known and unknown risks, uncertainties
and other factors which may cause the actual results, performance or
achievements of the Company or industry results, to be materially different from
any future results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among other things; the
Company's history of operations; the Company's highly competitive industry;
consummation of pending and future acquisitions; the business abilities and
judgment of the Company's personnel; the availability of qualified personnel;
changes in, or failure to comply with, governmental regulations; general and
business conditions; and other factors referenced in this Prospectus. See "Risk
Factors."
- 2 -
<PAGE> 5
DOCUMENTS INCORPORATED BY REFERENCE
The following documents heretofore filed by the Company with the
Commission under the Exchange Act are incorporated herein by reference: (i) the
Company's Annual Report on Form 10-KSB for the year ended December 31, 1996;
(ii) the Company's Quarterly Report on Form 10-QSB for the quarter ended March
31, 1997; (iii) the Company's Quarterly Report on Form 10-QSB/A for the quarter
ended June 30, 1997 and (iv) the Company's Proxy Statement dated April 22, 1997
for the Company's annual meeting of Shareholders held on June 10, 1997.
All documents filed by the Company pursuant to Sections 13(a),13(c), 14
or 15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering made by this Prospectus, shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing these documents. Any statements contained in a document
incorporated by reference herein shall be deemed to be modified or superseded
for purposes hereof to the extent that a statement contained herein (or in any
other subsequently filed document which also is incorporated by reference
herein) modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed to constitute a part hereof except as so modified
or superseded. All information appearing in this Prospectus is qualified in its
entirety by the information and financial statements (including notes thereto)
appearing in the documents incorporated herein by reference.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (OTHER THAN EXHIBITS
THERETO) ARE AVAILABLE WITHOUT CHARGE, UPON WRITTEN OR ORAL REQUEST BY ANY
PERSON TO WHOM THIS PROSPECTUS HAS BEEN DELIVERED, FROM THE COMPANY. REQUESTS
SHOULD BE DIRECTED TO MICHAEL D. ELKIN, VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER, 3890 N.W. 132ND STREET, SUITE K, OPA LOCKA, FLORIDA 33054 (TELEPHONE:
(305) 688-3931).
- 3 -
<PAGE> 6
THE COMPANY
Med/Waste, Inc. (the "Company") was incorporated in November 1991 under
the laws of the State of Delaware. The Company provides medical waste management
services through its wholly owned subsidiaries, Safety Disposal system, Inc.
("SDS"), Safety Disposal System of South Carolina, Inc. ("SDSSC") and Safety
Disposal System of Pennsylvania, Inc. ("SDSPA") and commercial cleaning services
through its wholly owned subsidiary, The Kover Group, Inc. ("Kover").
SDS provides collection, transportation, treating, tracking and related
services for the disposal of medical waste throughout Florida. SDS also sells or
leases turnkey autoclave treatment units for large quantity generators. SDSSC
operates an incineration facility in Hampton, South Carolina, which is permitted
to treat municipal, medical and special waste which the Company receives from
generators throughout the United States. SDSSC mainly focuses on the treatment
of medical waste and to a lesser degree special waste. SDSPA manages a medical
waste autoclave treatment facility located in Marcus Hook, Pennsylvania pending
the purchase of such facility by SDSPA, if at all. See "Material Events."
Medical waste is generally any waste which may cause an infectious
disease or can reasonably be suspected of harboring pathogenic organisms.
Medical waste includes predominantly all material that comes in contact with
human and animal body fluids. SDS collects medical waste from medical waste
generators, including hospitals, clinics, medical and dental offices,
veterinarians, laboratories, funeral homes, home health agencies and others. In
addition to medical waste collection, SDS provides programs to assist customers
to promote safe handling of medical waste and comply with federal and state
requirements applicable to their operations. Special waste is generally all
non-residential waste which requires more stringent management than municipal
solid waste, but does not include medical or hazardous waste.
Nationally, most medical waste is disposed of by incineration. However,
more stringent government regulation and a generally negative public attitude
toward nearby incineration facilities have resulted in a declining number of
incineration disposal facilities. Relatively few newly permitted incineration
facilities have opened due to the significant cost of compliance with new
environmental legislation. The Company's incinerator is in compliance with all
federal and state regulations dealing with air pollution controls. The
incinerator is a waste to energy facility with a rated capacity for processing
up to 270 tons per day of special medical and municipal waste. The facility is
currently permitted under South Carolina law to incinerate up to 200 tons per
day of waste both, liquid and solid. Prior to July 1, 1997, the incinerator was
limited to processing 1,500 tons of medical waste per month. Effective, July 1,
1997, the South Carolina legislature removed the cap on medical waste permitted
to be burned at the facility. On June 1, 1997, the incinerator was temporarily
shut down as a result of fire damage. The incinerators were repaired and became
fully operational on June 30, 1997. See "Material Events."
The trend against incinerator facilities has encouraged the development
and commercial use of a variety of environmentally acceptable alternative
disposal techniques. The Company manages a 48 ton autoclave medical waste
treatment facility located in Marcus Hook, Pennsylvania, pending the closing of
the purchase of such facility by the Company. The closing is subject to numerous
conditions including, among other things, transfer of operating permits and
environmental condition of the property. See "Material Events--Pending
Acquisition." The autoclave facility is currently running at full capacity.
As part of its comprehensive medical waste services, SDS supplies,
installs and oversees the operations of on-site autoclaves at large quantity
generators, typically hospitals. The autoclaves treat the medical waste through
sterilization, allowing most of such waste to be handled and disposed of as
solid waste. Management believes that autoclaves can reduce each hospital's
medical waste by up to 90%, thus significantly reducing the expense of disposal
both due to decreased volume and the significant cost savings of disposing of
solid, versus medical waste. Hospitals either purchase or lease the autoclave
and related equipment. During the term of the lease the Company provides
maintenance and support of the autoclave on-site and collects the treated waste
and transports it for ultimate disposal at a local landfill.
Kover is engaged in the business of offering, selling and servicing
franchises for commercial building cleaning services through the trade name
"Coverall Cleaning Concepts". Kover is a service franchisor of Coverall North
America, Inc. ("CNA") in the metropolitan area of Cleveland, Ohio and South
Florida.
- 4 -
<PAGE> 7
Kover is a service franchisee of CNA. CNA operates a business engaged
in the offer and sale of three types of franchises, each of which is related to
commercial building cleaning services using the trade name "Coverall". The three
types of franchises are janitorial franchises, limited area franchises and
services franchises. Kover is a service franchisee of CNA in the metropolitan
areas of Cleveland, Ohio and South Florida. Kover has the exclusive right to
sell janitorial franchises using the Coverall Cleaning Concept in these
metropolitan areas. Kover is required to pay CNA royalty fees of three to four
and one-half percent of monthly revenues. Kover uses the Coverall name, design
and business plan to conduct and promote its independent business of offering,
selling and servicing janitorial franchises pursuant to written agreements
between Kover and its janitorial franchisees. Kover maintains a small staff to
perform emergency cleaning services and temporary cleaning services for accounts
being transferred from one franchisee to another. Most cleaning services are
provided to commercial customers through independent franchisees.
Kover sells franchises for janitorial services in the metropolitan
territories of South Florida and Cleveland, Ohio. As of June 30, 1997, Kover had
in operation approximately 245 janitorial franchises. As of that date, CNA and
its other service franchisees had an additional approximately 4250 janitorial
franchises in operation located in 15 states, as well as in Canada, United
Kingdom, South Africa, Spain and Thailand.
The Company is a Delaware corporation with its principal executive
offices located at 3890 N.W. 132nd Street, Suite K, Opa Locka, Florida 33054.
Its telephone number at such address is (305) 688-3931.
RISK FACTORS
An investment in the Common Stock offered hereby involves a certain
degree of risk. Prospective purchasers should carefully consider the following
risk factors, as well as all of the other information set forth elsewhere in
this Prospectus or incorporated by reference to the Prospectus, before
purchasing any shares of Common Stock offered hereby.
ACCUMULATED DEFICIT; NET LOSSES. The Company has incurred an
accumulated deficit of $1,521,507 as of June 30, 1997. For the years ended
December 31, 1994, 1995 and 1996 the Company had net income (losses) of
($422,061), ($1,748,926) and $215,326, respectively. The net loss for the year
ended December 31, 1995 was primarily a result of a non-recurring charge for an
impairment loss of goodwill of $1,622,872. For the six months ended June 30,
1997, the Company had consolidated net income of $348,222. There can be no
assurance that the Company's activities will generate sufficient cash flow to
sustain ongoing operations or that its operations will continue to be
profitable.
IMPACT OF GOVERNMENT REGULATION. The Company operates within the
medical waste disposal industry, which is subject to extensive and frequently
changing local, state and federal laws. This statutory and regulatory framework
imposes compliance burdens and risks on the Company, including requirements to
obtain and maintain government permits. The transport, treatment and disposal of
medical waste is subject to packaging, labeling, handling, notice and reporting
requirements, as well as requirements pertaining to transporter registration,
transportation handling procedures and the preparation of shipping papers. The
treatment and disposal of municipal and special waste are also subject to
extensive government regulation. State and local regulations vary from location
to location and constantly change. State and local regulations may pose
insurmountable barriers, financial or otherwise, to the opening and operation of
facilities in states where the Company intends to operate its business. The
Company believes that it is currently in compliance in all material respects
with all applicable laws and regulations governing its business and has all
appropriate government permits to operate its existing business, including those
required for the operation of its incineration facility and transfer stations.
However, the addition of new, or amendments to existing, statutes and
regulations could require the Company to continually modify its methods of
operations at costs that could be substantial. Further, since the Company
operates its own medical waste treatment facilities, it is subject to additional
permitting requirements at each such location. The permitting process is complex
and time consuming and is generally opposed by local residents. Even after
permits are issued, opposition groups may attempt to compel regulators through
court proceedings to modify permit conditions or reverse decisions with respect
to the initial granting of permits. There can be no assurance that the Company
will be able, for
- 5 -
<PAGE> 8
financial reasons or otherwise, to comply with future environmental and
permitting laws either in its present market or in those markets in which it
intends to expand. Delays in the permitting process could add significantly to
the cost of developing a medical waste treatment facility or transfer station
and could have a material adverse effect on the Company's business, financial
condition and results of operations.
IMPORTANCE OF GOVERNMENT ENFORCEMENT OF ENVIRONMENTAL REGULATIONS. The
Company believes that its business prospects in the medical waste disposal
industry are significantly enhanced by the stringent enforcement of handling,
transportation, environmental preservation and clean-up requirements by
regulatory agencies. These laws and regulations are, and will continue to be, a
principal factor affecting demand for the Company's medical waste management
services. The intensity and breadth of present and future regulation and
supervision of medical waste disposal procedures and the impact of technological
changes on government regulation cannot be predicted. The level of government
enforcement is subject to constantly changing political and budgetary pressures.
A significant relaxation or reduction in government enforcement could have a
material adverse effect on the Company's business, financial condition and
results of operations.
INTENSE COMPETITION WITHIN INDUSTRY. The Company operates within the
intensely competitive medical waste disposal industry. Competition in the
industry has resulted in substantial price reductions in virtually all
geographic areas in which the Company operates. There can be no assurance that
competitive pressures within the industry will not result in continued or
accelerated price reductions. Substantial continued or accelerated price
reductions would have a material adverse effect on the Company's business,
financial condition and results of operations. The Company faces competition
from several national waste disposal companies and numerous regional and local
entities in its present locations and will in the future be confronted with such
competition in each location where it intends to expand. The Company's business
strategy involves, among other things, selling its services to customers who may
have established relationships with other medical waste management companies and
who may be reluctant to use the Company's services. Several of the Company's
competitors are larger and have substantially greater financial and other
resources than the Company and are well entrenched in their respective markets.
Among these competitors are Browning-Ferris Industries, Inc. ("BFI"), WMX
Technologies, Inc., Laidlaw Waste Systems, Inc., and USA Waste Services, Inc.
The Company's primary competitor is BFI. There can be no assurance that the
Company will be able to profitably compete with such other entities.
GROWTH STRATEGY DEPENDENT UPON ACQUISITIONS. The Company's growth
strategy depends, in part, on its ability to acquire other medical waste
management businesses. There can be no assurance the Company will be able to
continue to identify suitable businesses to acquire, successfully negotiate
their acquisition, or integrate their operations into the Company. The recent
consolidation in the medical waste industry may increase competition for the
acquisition of existing businesses and result in fewer acquisition opportunities
and higher purchase prices. Some of the Company's competitors for acquisitions
are larger and have significantly greater financial resources. Even if the
Company is successful in identifying suitable acquisition candidates, there can
be no assurances that the terms to complete such acquisitions would be
acceptable, or if acceptable, that the Company would have the financial
resources to pay the purchase price. The Company anticipates that future
acquisitions of other medical waste businesses will be made through payment of
cash, issuance of debt or equity securities, or a combination of these methods.
There can be no assurances that the Company will have sufficient resources
available, or if available, on terms acceptable to the Company. The Company may
need to raise additional equity or debt financing to complete such acquisitions.
Any additional equity financings may be dilutive to the Company's existing
shareholders. Debt financings, if available, may not be on terms acceptable to
the Company, if at all. The Company's failure to continue its growth strategy
could have a material adverse effect on the Company's business, financial
condition and results of operations.
POTENTIAL LIABILITY; INSURANCE. The medical waste disposal industry
involves potentially significant risks of statutory, contractual, tort and
common law liability. The failure of the Company to comply with applicable laws
or to manage medical waste in an environmentally sound manner could result in
environmental contamination, personal injury and property damage. The Company
maintains insurance which it considers sufficient to meet regulatory and
customer requirements and to protect the Company's operations. However, a
partially or completely uninsured claim against the Company of sufficient
magnitude could have
- 6 -
<PAGE> 9
a material adverse impact on the Company's operations. Certain federal and
statutory laws impose strict, joint and several liability on current and former
owners and operators of facilities regarding the release of hazardous substances
and on generators and transporters of the hazardous substances that are brought
to such facilities. Responsible parties may be liable for substantial waste site
investigation and clean up costs as a result of the occurrence of environmental
contamination. If the Company was found to be a responsible party for a
particular site, it could be required to pay the entire cost of waste site
investigation and clean up, even though other parties may also be liable. The
Company's ability to obtain contribution from other responsible parties may be
limited by the Company's inability to identify those parties and by their
financial inability to contribute to investigation and clean up costs. It is
possible that in the future the Company may experience difficulty in obtaining
appropriate insurance at reasonable prices with reasonable coverage, which could
place the Company at a competitive disadvantage. The inability to obtain
necessary insurance coverage, or a successful claim against the Company for
which it does not have adequate insurance, could have a material adverse impact
on the Company's operations and financial condition.
ALTERNATIVE TECHNOLOGIES; TECHNOLOGICAL OBSOLESCENCE. The medical waste
industry presents continuing opportunities for the development of alternate
treatment and disposal methods. Such methods may emphasize cost efficiencies,
reduction in the volume of waste generated, environmental factors or both. The
Company sells autoclave units to hospitals and other large generators. The
development and commercialization of alternative treatment or disposal
technologies that are more efficient or environmentally sound treatment and
disposal methods may have a material adverse effect on the Company's operations.
The Company is aware of certain new medical waste treatment and disposal
technologies including the production of reusable or degradable medical
products, which, if successfully developed and commercialized would have a
material adverse effect on the Company's business, financial condition and
results of operations.
SERVICE FRANCHISE AGREEMENTS. Kover operates as franchisee of Coverall
of North America, Inc. ("CNA") pursuant to Service Franchise Agreements in each
location. The Service Franchise Agreements contain a number of restrictions and
obligations on the part of Kover. The failure of Kover to strictly comply with
these requirements could result in the termination of such franchises and have a
material adverse effect on the Company's business, financial condition and
results of operations.
DEPENDENCE ON FRANCHISOR. CNA contributes to the development of Kover
and its operating systems, clinics, products and formulation of strategies. The
loss of the relationship with the CNA could have a material adverse effect on
Kover's operations and new product development efforts. Further, the long term
success of Kover is in part dependent upon the overall success of the CNA
janitorial system. Accordingly, to a certain extent, the success of Kover is
dependent on part upon the successful operations of CNA's other franchisees, as
well as upon the financial condition, management, marketing and innovative
abilities of CNA. Any event that creates adverse publicity involving CNA
operations may have an adverse impact on the Company, regardless of whether the
event involved Kover.
DEPENDENCE UPON PERSONNEL. The Company is dependent upon the services
of Daniel A. Stauber and Phillip W. Kubec. Mr. Stauber is president of the
Company and its wholly owned subsidiaries, SDS, SDSSC and SDSPA. Mr. Kubec is
the president of the Company's wholly owned subsidiary, Kover. SDS has an
employment agreement with Mr. Stauber which expires in December 2001. Kover has
an employment agreement with Mr. Kubec which expires in June 1999. However, if
either officer's services were to become unavailable to the Company for any
reason, it could have a material adverse effect on the Company's business,
financial results and results of operations. The Company does not carry key man
life insurance.
NO DIVIDENDS. The Company has never paid any cash dividends on its
Common Stock and does not anticipate paying cash in dividends in the foreseeable
future. The payment of dividends by the Company will depend on its earnings,
financial condition and other business and economic factors affecting the
Company at that time as the Board of Directors may consider relevant. The
Company currently intends to retain any earnings to provide for the development
and growth of the Company.
ANTI-TAKEOVER PROVISIONS OF CHARTER AND BYLAWS. Certain provisions of
the Company's charter and by-laws may have the effect of making more difficult
or could delay attempts by others to obtain control
- 7 -
<PAGE> 10
of the Company, even when these attempts may be beneficial to the interests of
stockholders. For example, the Company's charter and bylaws include advance
notice provisions, provisions that establish a classified Board of Directors,
and provisions that enable the Board of Directors without stockholder approval,
to issue up to 4,000,000 shares of preferred stock in one or more series having
terms fixed by the Board of Directors. In addition, the Delaware General
Corporation Law contains provisions that may have the effect of making it more
difficult or delaying attempts by others to obtain control of the Company.
"PENNY STOCK" RULES. The Company's Common Stock is presently traded on
the NASDAQ Small Cap Market. The NASDAQ stock market recently increased the
criteria for continued inclusion on the NASDAQ Small Cap Market. If the Company
fails to maintain such listing for its Common Stock, and no other exclusion from
the definition of "penny stock" under the Exchange Act is available, then any
broker engaging in a transaction in the Company's securities would be required
to provide any customer with a risk disclosure document and the compensation of
the broker/dealer in the transaction and monthly account statements showing the
market values of the Company's securities held in the customer's accounts. The
bid and offer quotations and compensation information must be provided prior to
effecting the transaction and must be contained on the customer's confirmation.
If brokers become subject to the "penny stock" rules when engaging in
transactions in the Company's securities, they would become less willing to
engage in such transactions, thereby making it more difficult for purchasers to
dispose of the shares of Common Stock.
NOTES RECEIVABLES FROM FRANCHISEES. Notes Receivables from Franchisees
aggregated $2,278,441 and $2,199,126 as at December 31, 1996 and June 30, 1997,
respectively. In connection therewith, $82,441 and $61,853 are reflected as
current liabilities (Deferred Revenue on Franchise Sales) as at December 31,
1996 and June 30, 1997, respectively. Although the Notes Receivables from
Franchisees are personally guaranteed by the individuals who are franchisees,
the ability of the franchisees to pay the notes may be dependent upon the
commercial cleaning services provided by the franchisees.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of Common Stock
by the Selling Stockholders. The Company would receive net proceeds aggregating
$300,001 upon exercise of the Warrants, if all such Warrants, are exercised.
Such proceeds will be added to the Company's working capital and used for
general corporate purposes.
- 8 -
<PAGE> 11
MATERIAL EVENTS
PENDING ACQUISITIONS.
The Company has entered into agreements to purchase a 2.9 acre
industrial site located in Marcus Hook, Pennsylvania, together with related
autoclave equipment used at such site, from K.S. Processing Company, Inc. (the
"KS Facility"). The KS Facility is a medical waste autoclave treatment center
operated by Bonham Management Group, Inc. ("BMG"), a Virginia corporation. The
Company has also entered into an asset purchase agreement with BMG to purchase
certain of the assets of BMG, including the right to manage the KS Facility. The
closing on the purchase of the KS Facility and BMG is subject to certain
contingencies described below. BMG operates the KS Facility under a ten (10)
year management agreement. Effective June 1, 1997, SDSPA has assumed operational
control of the KS Facility pending closing, pursuant to an agreement with BMG.
If the closing does not occur for any reason, SDSPA's agreement with BMG would
immediately terminate thereafter.
The KS Facility consists of two (2) 25 ton per day autoclaves, a
10,000 square foot processing center and a 2,400 square foot administrative
building. The KS Facility receives medical waste from generators located
throughout New York, New Jersey, Connecticut, Pennsylvania, Maryland and
Virginia. The KS Facility currently operates at full capacity. BMG has
approximately 50 operating and management personnel, most of whom will be
retained following the Closing. The KS Facility is currently the only medical
waste autoclave facility in Pennsylvania. The current permitting process for
medical waste treatment facilities in Pennsylvania is a costly, time consuming
and politically difficult procedure. The Company does not anticipate that any
additional autoclave or incinerator permits will be issued by the Pennsylvania
Department of Environmental Protection in the near future. The closing on the KS
Facility and BMG is subject to certain closing contingencies including, among
other things, satisfaction of due diligence, transfer of all operating permits
and completion of environmental studies to the satisfaction of the Company.
These can be no assurances that the operating permit will be transferred to the
Company, that the Company will be satisfied with the results of the
environmental studies or other due diligence material. In such event, the
Company would terminate the purchase agreements without liability. The closing
is not expected to close, if at all, until the fourth quarter of 1997.
FIRE DAMAGE.
On June 1, 1997, a fire occurred at the Company's incineration facility
in Hampton, South Carolina. Minor damage occurred in various parts of the
facility, causing the facility to shut down operations. During the shut down
period, the Company continued to accept medical waste, re-package such waste and
route the waste to other facilities for disposal, including the autoclave
facility managed by the Company in Marcus Hook, Pennsylvania. Repairs on the
facility were completed and the facility became fully operational on June 30,
1997. In August 1997, the Company reached a settlement with one of its
insurance companies for approximately $3.3 million.
LEGAL PROCEEDINGS.
Prior to July 1, 1997, the State of South Carolina restricted the
Company's incineration facility's permitted incineration capacity for medical
waste to the greater of (i) 50 tons per day or (ii) on a monthly basis, 1/12 of
the estimated amount of medical waste generated within the State of South
Carolina within one year. The prior owner of the facility instituted litigation
against the State of South Carolina contesting the state's imposition of the
limitation, as well as certain provisions of the South Carolina Infectious Waste
Management Act and the regulations promulgated thereunder. At the trial level,
the Company's prior owner was successful in its challenge to certain fee
requirements under the regulations. However, it was not successful in having the
volume limitation ruled unconstitutional. When the Company purchased the
facility, it continued the litigation on appeal. In June 1997, the Company and
the State of South Carolina entered into a settlement agreement, whereby the
State of South Carolina Legislature approved legislation removing the limitation
on medical waste and the Company dismissed all litigation related to the matter.
Effective July 1, 1997, the incineration is now permitted to incinerated up to
its full 100 ton permitted capacity of medical waste.
- 9 -
<PAGE> 12
SELLING STOCKHOLDERS
An aggregate of up to 1,128,205 shares may be offered by certain
Selling Stockholders. The following table sets forth as of August 31, 1997,
certain information with respect to the Selling Stockholders, based on
information provided by the Selling Stockholders. No Selling Stockholder owns
one percent (1%) or more of the Company's outstanding Common Stock prior to this
Offering, except as indicated below. Beneficial ownership after the Offering
will depend on the number of shares sold by each Selling Stockholder, but
assumes all shares being offered are sold. The Company will not receive any of
the proceeds from the sale of these shares.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES TO BE BENEFICIALLY
OWNED PRIOR TO OFFERING SHARES OWNED AFTER OFFERING
-------------------------- BEING -------------------------
NAME AND ADDRESS OF SELLING STOCKHOLDER SHARES PERCENT OFFERED(2) NUMBER PERCENT(2)
- ------------------------------------------ -------------- ---------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C>
Yong S. Ahn -- --
219 Hidden Pond Path
Franklin Lakes, NJ 07417 17,094 * 17,094
Gary l. Alderman
6205 Johnson Road
Indianapolis, IN 46220 8,547 * 8,547 -- --
Robert W. Allen
2400 Bally Bunion Road
Center Valley, PA 18034 17,094 * 17,094 -- --
Kent Au and Connie Au
8 Marie Lane
Edison, NJ 08817 10,256 * 10,256 -- --
Savilla A Bare Trustee, Savilla A Bare Trust
DTD 2/5/75
4021 Hardwoods Drive
West Bloomfield, MI 48323 5,128 * 5,128 -- --
Robert and Mildred Beatty, JTWROS
5053 Janet Lane
Birmingham, AL 35210 10,256 * 10,256 -- --
Russell Bernier
100 Wall Street, 10th Floor
New York, NY 10005 555(3) * 555(3) -- --
Ronald A. Bero
14550 Ridgemoor Drive
Elm Grove, WI 53122 6,837 * 6,837 -- --
Archer L. Bolton, Jr.
33 Spear Street
P.O. Box 806
Rockport, ME 04856 1,709 * 1,709 -- --
Alvin R. Bonnette, Trustee
181 East Dunstable Road
Nashua, NH 03062 8,547 * 8,547 -- --
Michael Brunone
100 Wall Street, 10th Floor
New York, NY 10005 222(4) * 222(4) -- --
Peter M. Burns
100 Wall Street, 10th Floor
New York, NY 10005 10,256(5) * 10,256(5) -- --
Howard A. Caplan
3900 Atlantic Boulevard
Jacksonville, FL 32207 8,547 * 8,547 -- --
Phillip E. Casey
3435 Bayshore Boulevard, #601
Tampa, FL 33629-8874 8,547 * 8,547 -- --
</TABLE>
- 10 -
<PAGE> 13
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES TO BE BENEFICIALLY
OWNED PRIOR TO OFFERING SHARES OWNED AFTER OFFERING
-------------------------- BEING -------------------------
NAME AND ADDRESS OF SELLING STOCKHOLDER SHARES PERCENT OFFERED(2) NUMBER PERCENT(2)
- ------------------------------------------ -------------- ---------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C>
William E. Chaney
111 East Main Street
Barnesville, OH 43713 3,418 * 3,418 -- --
Ching-Chang Chang and Debra Chang
202 Tinton Place
East Northport, NY 11731 11,965 * 11,965 -- --
C.C. Partners, Ltd.
Box 832
Shelter Island Heights, NY 11965 2,564 * 2,564 -- --
Joan K. Dass
100 Wall Street, 10th Floor
New York, NY 10005 2,051(6) * 2,051(6) -- --
Joseph D'Amadeo
100 Wall Street, 10th Floor
New York, NY 10005 5,094(7) * 5,094(7) -- --
Guerino De Luca and Frances DeLuca
5953 Belmont Street
Dearbon Heights, MI 48127 10,256 * 10,256 -- --
Dolphin Offshore Partners, L.P.
P.O. Box 438, Tropic Isle Building
Road Town, Tortola
British Virgin Islands 118,803 4.78 118,803 -- --
John W. Egan and Mary Sue Egan
214 South Euclid Avenue
Oak Park, IL 60302 3,418 * 3,418 -- --
Robert D. Farrell and
Patricia M. Farrell, JTWROS
151 Sylvan Avenue
Leonia, NJ 07605 8,547 * 8,547 -- --
Elsa V. Finnel
14422 Industry Avenue, Suite 7-1
I.T.C. Park
Laredo, TX 78041 8,547 * 8,547 -- --
Denis Fortin
26 Brookside Drive
Easton, CT 06612 17,094 * 17,094 -- --
James E. Foy
5 Tall Oaks Court
Mendham, NJ 07945 11,965 * 11,965 -- --
James D. Fralin
P.O. Box 5037
Roanoke, VA 24102 1,709 * 1,709 -- --
B. Ken Garlinghouse
3601 West 29th Street
Topeka, KS 66614 8,547 * 8,547 -- --
James R. Gerchow
64177 Rommel
Sturgis, MI 49091 8,547 * 8,547 -- --
Gerrity Family Co.
P.O. Box 9111
Newton Upper Falls, MA 02164 8,547 * 8,547 -- --
Anthony Girellini
100 Wall Street, 10th Floor
New York, NY 10005 1,111(8) * 1,111(8) -- --
E. D. Grindstaff
3212 West End Avenue, Suite 400
Nashville, TN 37203 5,128 * 5,128 -- --
</TABLE>
- 11 -
<PAGE> 14
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES TO BE BENEFICIALLY
OWNED PRIOR TO OFFERING SHARES OWNED AFTER OFFERING
-------------------------- BEING -------------------------
NAME AND ADDRESS OF SELLING STOCKHOLDER SHARES PERCENT OFFERED(2) NUMBER PERCENT(2)
- ------------------------------------------ -------------- ---------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C>
Douglas Hailey
100 Wall Street, 10th Floor
New York, NY 10005 10,256(7) * 10,256(9) -- --
J. B. Hargroder and Iris M. Hargroder,
Trustees, The Hargroder Living Trust of
1995
2102 Highway 90 East
P.O. Box 1049
Jennings, LA 70546 3,418 * 3,418 -- --
Richard J. Hess
3114 S.W. Ridge Drive
Portland, OR 97219 3,418 * 3,418 -- --
Frank R. Jazzo
2700 P. Street, N.W.
Washington, D.C. 20007 8,547 * 8,547 -- --
Richard Kraemer
730 Oak Lane
Franklin Lakes, NJ 07417 8,547 * 8,547 -- --
William E. Kuntz
3734 Ligon Road
Ellicott City, MD 21042 6,837 * 6,837 -- --
Lancer Offshore, Inc.
c/o CITCO Fund Services
(Curacao) N.V.
Kaya Flamboyan 9
P.O. Box 812
Curacao, Netherlands Antilles 344,443(10) 12.85 344,443(10) -- --
Lancer Partners, L.P.
200 Park Avenue, Suite 3900
New York, NY 10166 344,443(11) 12.85 344,443(11) -- --
Brian Scott Larson and Debra Lynn Larson,
JTWROS
1030 De Gamma Drive
Santa Maria, CA 93454 8,547 * 8,547 -- --
Miles B. Larson and Joan M. Larson,
Trustees, The Larson Family Trust U/A/D
2/2/90
115 44th Street
Newport, CA 92663-2510 17,094 * 17,094 -- --
Michael Lauer
c/o Lancer Partners, L.P.
200 Park Avenue, Suite 3900
New York, NY 10166 344,443(12) 12.85 344,443(12) -- --
Howard A. LeVaux
626 Huron Avenue
Cambridge, MA 02138 8,547 * 8,547 -- --
Harvey Lyon, IRA
158 North Seville Circle
Cedar Park, IL 60302-2462 6,837 * 6,837 -- --
Michael Madie, DVM
277 West End Avenue, #1D
New York, NY 10022 3,418 * 3,418 -- --
Joseph A. Martha
3672 Sanctuary Drive
Bath, OH 44333 3,418 * 3,418 -- --
Robert A. Maurin, III
19354 Highway 190
Hammond, LA 70401 8,547 * 8,547 -- --
</TABLE>
- 12 -
<PAGE> 15
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES TO BE BENEFICIALLY
OWNED PRIOR TO OFFERING SHARES OWNED AFTER OFFERING
-------------------------- BEING -------------------------
NAME AND ADDRESS OF SELLING STOCKHOLDER SHARES PERCENT OFFERED(2) NUMBER PERCENT(2)
- ------------------------------------------ -------------- ---------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C>
David F. McCartney
200 Pleaseant Place
Springville, TN 38256 3,418 * 3,418 -- --
William McClatchy
510 Northern Avenue
Mill Valley, CA 94941 8,547 * 8,547 -- --
Donald B. McCulloch and
Jacqueline M. McColloch
820 Oakmere Place
North Muskegon, MI 49445 5,128 * 5,128 -- --
Donald Moline
720 Old Howard Mill Road
Duluth, MN 55807 3,418 * 3,418 -- --
John V. Moynes
P.O. Box 117
Jacksonville, NY 14854 1,709 * 1,709 -- --
Steven Mucciolo
100 Wall Street, 10th Floor
New York, NY 10005 472(13) * 472(13) -- --
Ronald H. Muhlenkamp
511 Buttermilk Lane
Bradford Woods, PA 15015 10,256 * 10,256 -- --
Richard Oh
100 Wall Street, 10th Floor
New York, NY 10005 2,222(14) * 2,222(14) -- --
Vincent Palmieri
100 Wall Street, 10th Floor
New York, NY 10005 2,777(15) * 2,777(15) -- --
Richard P. Nettina
4900 Van Buren Street
Hollywood, FL 33021 3,418 * 3,418 -- --
S.R. Penn, Jr.
c/o Reelcraft Industries, Inc.
P.O. Box 248
Columbia City, IN 46725 17,094 * 17,094 -- --
Lloyd Pillsbury and
Joelyn Pillsbury, JTWROS
413 Briksbury Drive
Franklin, TN 37067 3,418 * 3,418 -- --
Michael E. Recca
100 Wall Street, 10th Floor
New York, NY 10005 16,410(16) * 16,410(16) -- --
Karl Reeves
100 Wall Street, 10th Floor
New York, NY 10005 472(17) * 472(17) -- --
Jeffrey L. Sadar and Barbara A. Sadar
6640 Ridgebury Boulevard
Mayfield Heights, OH 44124 6,837 * 6,837 -- --
Peter and Irene Santulli, JTWROS
9 Barnes Lane
Garden City, NY 11530 5,961(18) * 5,961(18) -- --
Christopher C. Schreiber
175 East 74th Street, Apt. 7A
New York, NY 10021 4,918(19) * 4,918(19) -- --
Robert Schroeder
100 Wall Street, 10th Floor
New York, NY 10005 5,555(20) * 5,555(20) -- --
</TABLE>
- 13 -
<PAGE> 16
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES TO BE BENEFICIALLY
OWNED PRIOR TO OFFERING SHARES OWNED AFTER OFFERING
-------------------------- BEING -------------------------
NAME AND ADDRESS OF SELLING STOCKHOLDER SHARES PERCENT OFFERED(2) NUMBER PERCENT(2)
- ------------------------------------------ -------------- ---------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C>
Benjamin D. Schulman
7529 Gibraltor
Carlsbad, CA 92009 3,418 * 3,418 -- --
Deana M. Scuola
100 Wall Street, 10th Floor
New York, NY 10005 2,051(21) * 2,051(21) -- --
Shaw Family Living Trust
3701 International Drive, #746
Silver Springs, MD 20906 8,547 * 8,547 -- --
Valdemar A. Skov
1241 Old Rte 1
Waldoboro, ME 04572 3,418 * 3,418 -- --
Dale W. Sobek
6000 S Corporation
42080 Osgood Road
Fremont, CA 94539 8,547 * 8,547 -- --
Sharon Stauber
4080 North 41st Street
Hollywood, FL 33021 8,547 * 8,547 -- --
Michael Stern
100 Wall Street, 10th Floor
New York, NY 10005 111(22) * 111(22) -- --
Garland S. Sydnor, Jr.
8 Tapoan Road
Richmond, VA 23226 17,094 * 17,094 -- --
Eugene Szczepanski
35 Highland Avenue
Worthington, OH 43085 8,547 * 8,547 -- --
Michael N. Taglich
100 Wall Street, 10th Floor
New York, NY 10005 32,766(23) 1.38 32,766(23) -- --
Robert F. Taglich
100 Wall Street, 10th Floor
New York, NY 10005
SS# ###-##-#### 32,766(24) 1.38 32,766(24) -- --
Tha An Thai
100 Wall Street, 10th Floor
New York, NY 10005 1,555(25) * 1,555(25) -- --
Morton L. Topfer
1415 Wooldridge Drive
Austin, TX 78703 17,094 * 17,094 -- --
Thomas Wagner
100 Wall Street, 10th Floor
New York, NY 10005 873(26) * 873(26) -- --
William C. Weick and Elizabeth A. Weick
610 West Idaho Street
Boise, ID 83702 5,128 * 5,128 -- --
Xiaoman Wu
9305 Fifth Avenue
Forest Hills, NY 11375 8,547 * 8,547 -- --
Wynnefield Partners Small Cap Value, L.P.
One Pennsylvania Plaza, Suite 4720
New York, NY 10119 51,283 2.12 51,283 -- --
</TABLE>
- ----------------------------------------
* Less than one percent.
- 14 -
<PAGE> 17
(1) Except as otherwise indicated, the shares of Common Stock being offered
hereby are issuable upon conversion of Debentures at the conversion
rate of $2.925 of principal for each share of Common Stock and are
included in the beneficial ownership tables.
(2) Based upon 2,336,166 shares of Common Stock outstanding. Each
beneficial owner's percentage is determined by assuming that Debentures
and warrants that are held by such person (but not those held by any
other person) have been converted or exercised, respectively.
(3) Includes 555 shares of Common Stock issuable upon exercise of Warrants.
(4) Includes 222 shares of Common Stock issuable upon exercise of Warrants.
(5) Includes 10,256 shares of Common Stock issuable upon exercise of
Warrants.
(6) Includes 2,051 shares of Common Stock issuable upon exercise of
Warrants.
(7) Includes 5,094 shares of Common Stock issuable upon exercise of
Warrants.
(8) Includes 1,111 shares of Common Stock issuable upon exercise of
Warrants.
(9) Includes 10,256 shares of Common Stock issuable upon exercise of
Warrants.
(10) Such shares include (i) 166,666 shares issuable upon conversion of
Debentures; (ii) 116,666 shares issuable upon conversion of Debentures
owned by Lancer Partners, L.P; and (iii) 61,111 shares issuable upon
conversion of Debentures owned by Michael Lauer, a principal of Lancer
Offshore, Inc and Lancer Partners, L.P.
(11) Such shares include (i) 116,666 shares issuable upon conversion of
Debentures; (ii) 166,666 shares issuable upon conversion of Debentures
owned by Lancer Offshore, Inc.; and (iii) 61,111 shares issuable upon
conversion of Debentures owned by Michael Lauer.
(12) Such shares include (i) 61,111 shares issuable upon conversion of
Debentures; (ii) 166,666 shares issuable upon conversion of Debentures
owned by Lancer Offshore, Inc.; and (iii) 116,666 shares issuable upon
conversion of Debentures owned by Lancer Partners, LP.
(13) Includes 472 shares of Common Stock issuable upon exercise of Warrants.
(14) Includes 2,222 shares of Common Stock issuable upon exercise of
Warrants.
(15) Includes 2,777 shares of Common Stock issuable upon exercise of
Warrants.
(16) Includes 16,410 shares of Common Stock issuable upon exercise of
Warrants.
(17) Includes 472 shares of Common Stock issuable upon exercise of Warrants.
(18) Includes 833 shares of Common Stock issuable upon exercise of Warrants
and 5,128 shares of Common Stock issuable upon conversion of
Debentures.
(19) Includes 1,500 shares of Common Stock issuable upon exercise of
Warrants and 3,418 shares of Common Stock issuable upon conversion of
Debentures.
(20) Includes 5,555 shares of Common Stock issuable upon exercise of
Warrants.
(21) Includes 2,051 shares of Common Stock issuable upon exercise of
Warrants.
(22) Includes 111 shares of Common Stock issuable upon exercise of Warrants.
(23) Includes 19,091 shares of Common Stock issuable upon exercise of
Warrants and 13,675 shares of Common Stock issuable upon conversion of
Debentures.
(24) Includes 19,091 shares of Common Stock issuable upon exercise of
Warrants and 13,675 shares of Common Stock issuable upon conversion of
Debentures.
(25) Includes 1,555 shares of Common Stock issuable upon exercise of
Warrants.
(26) Includes 873 shares of Common Stock issuable upon exercise of Warrants.
The number of shares of Common Stock which may actually be sold by the
Selling Stockholders will be determined from time to time by them and will
depend upon a number of factors, including the price of the shares from time to
time. Because the Selling Stockholders may offer all or none of the shares that
they hold and because the offering contemplated by this Prospectus is not being
underwritten, no estimate can be given as to the number of shares that will be
held by the Selling Stockholders.
- 15 -
<PAGE> 18
There are no material relationships between any of the Selling
Stockholders and the Company or any of its predecessors or affiliates, nor have
any such material relationships existed within the past three (3) years, except
as indicated in the footnotes above.
DESCRIPTION OF SECURITIES
The Company has 26,000,000 shares of authorized Common Stock, par value
$0.001 per share, of which 2,336,166 shares of Common Stock are issued and
outstanding, and 4,000,000 shares of preferred stock, none of which are
outstanding. Assuming the conversion of all Debentures and exercise of the
Warrants, the Company would have 3,346,261 shares of Common Stock outstanding.
COMMON STOCK. Each share of Common Stock is entitled to one vote either
in person or by proxy in all matters that can be voted upon by the holders
thereof at any and all meetings of the stockholders. The holders of Common Stock
(i) have equal ratable rights to dividends from funds legally available
therefore when, as and if declared by the Board of Directors of the Company;
(ii) are entitled to share ratably in all of the assets of the Company available
for distribution to holders of Common Stock upon liquidation, dissolution or
winding up of the affairs of the Company, after the satisfaction of all
liabilities of the Company any liquidation preference granted to the holders of
any class of Preferred Stock then outstanding, if any; (iii) do not have any
preemptive, subscriptive or conversion rights; and (iv) do not have any
redemption or sinking fund provisions applicable thereto.
The Certificate of Incorporation does not provide for cumulative
voting. Therefore, stockholders do not have the right to aggregate their votes
for the election of directors and, accordingly, stockholders holding more than
50% of the shares of Common Stock outstanding can elect all of the directors.
PREFERRED STOCK. The Company is authorized to issue 4,000,000 shares of
preferred stock, without designation, par value $.01 per share. The certificate
of incorporation grants the board of directors the right to cause the Company to
issue, from time to time, all or part of the preferred shares remaining
undesignated in one or more series, and to fix the number of shares of preferred
stock and determine or alter for each series, the voting powers, full, limited,
or none, and other designations, preferences, or relative, participating,
optional or other special rights and such qualifications, limitations, or
restrictions thereof. As of the date of this Prospectus, there were no preferred
stock outstanding.
DEBENTURES
GENERAL. In February 1997, the Company completed a private placement of
$3,000,000 in principal of Debentures. The following summary of certain
provisions of the Debentures do not purport to be complete and are subject to,
and qualified in their entirety by reference to, all of the provisions of the
Debentures.
PAYMENT OF PRINCIPAL AND INTEREST. The Debentures mature on July 1,
2000. The principal balance is payable on the maturity date, unless sooner
redeemed by the Company as hereinafter described or converted by the holders
thereof prior to the maturity date. The Debentures bear interest at the rate of
ten (10%) percent per annum payable semi-annually on July 1 and January 1 of
each year, commencing on July 1, 1997, to holders of record as of June 15 and
December 15, respectively. Principal, premium, if any, and interest on, the
Debentures are payable to the registered holder of the Debentures by check
mailed to the addresses of the holders thereto as such appear on the register
for the Debentures.
RANKING. The Debentures are subordinated unsecured obligations of the
Company and rank pari passu in right of payment with all existing and future
unsecured indebtedness of the Company. The Debentures are subordinated to all
secured indebtedness of the Company to the extent of the assets securing such
indebtedness, including indebtedness of: (i) up to $5 million pursuant to bank
lending, of which the Company has a $2 million line of credit, secured by a
first lien on all of the Company's assets, inventory and accounts receivable,
other than the incineration facility; (ii) $1.95 million in favor of Chambers
Medical Technologies of South Carolina, Inc., secured by a first lien on all of
the assets of the incineration facility; and (iii) additional secured
indebtedness the Company may incur as the result of acquisitions or leases of
autoclave units .
- 16 -
<PAGE> 19
OPTIONAL REDEMPTION. The Company can redeem all of the outstanding
Debentures at the Redemption Price at any time after December 31, 1997, provided
that on the date notice of redemption is given and on the Redemption Date, the
following conditions are satisfied: (i) the Conversion Shares have been
registered pursuant to the Act and such registration is then currently
effective; and (ii) the average of the closing bid price of the Common Stock as
listed on the NASDAQ, NYSE; ASE or wherever the Company's Common Stock then
trades, is at least 200% of the Conversion Price for twenty (20) trading days
within a thirty (30) consecutive trading day period. Any Notice to redeem must
be given to all holders no less than thirty (30) days nor more than forty-five
(45) days prior to the Redemption Date. The Redemption Price shall equal the sum
of: (a) the face amount of the Debentures; (b) all accrued and unpaid interest
through and including the Redemption Date; and (c) a redemption fee equal to (I)
10% of the face amount of the Debentures if redeemed prior to January 1, 1999;
or (II) 5% of the face amount of the Debentures, if redeemed after January 1,
1999. The holders may only convert principal of the Debentures into Common
Stock. Any accrued interest will be paid in cash through the date of conversion.
CONVERSION. The Debentures are convertible, at each holder's option,
into shares of the Company's Common Stock at any time prior to maturity or the
date fixed for redemption, at the initial conversion price of $3.25 per share
(based on the outstanding principal amount of the Debentures). The conversion
price is subject to adjustment as described below. The holders may only convert
principal of the Debentures into Common Stock. Upon receipt of the notice of
conversion, the holder shall be entitled to receive accrued and unpaid interest
from the previous interest payment date through the date of conversion.
FORCED CONVERSION. The entire principal amount of the Debentures are
convertible at the option of the Company, into shares of Common Stock at the
Conversion Price, provided that on the day that notice is given and on the
Forced Conversion Date, the following conditions are satisfied: (i) the
Conversion Shares have been registered pursuant to the Act and such registration
is then currently effective; and (ii) the average of the closing bid price of
the Common Stock as listed on NASDAQ, NYSE; ASE or wherever the Company's Common
Stock then trades, is at least 200% of the Conversion Price for twenty (20)
trading days within a thirty (30) consecutive trading day period. Any notice of
forced conversion must be given to all holders no less than thirty (30) days nor
more than forty-five (45) days prior to the Forced Conversion Date. On the
Forced Conversion Date, the Company shall pay to all registered holders of
Debentures, all accrued and unpaid interest on the Debentures through and
including the Forced Conversion Date.
ANTI-DILUTION PROVISIONS. For so long as the Debentures are
outstanding, the holder thereof have anti-dilution protection and adjustment
rights covering the underlying shares of Common Stock. An equitable adjustment
to the number of shares of Common Stock issuable upon conversion of the
Debentures will be made with respect to: (i) any subdivision or reverse split of
the outstanding shares of Common Stock of the Company into a greater or lesser
number of shares of Common Stock; (ii) any declaration of a dividend or other
distribution by the Company upon its Common Stock payable in shares of Common
Stock of the Company; (iii) any capital reorganization or reclassification of
the capital stock of the Company; (iv) any consolidation or merger of the
Company with another entity or (v) the issuance, sale or distribution of shares
of Common Stock by the Company for a consideration per share in cash or property
less than the lesser of (b) the fair market value of the Common Stock on the
date of such issuance, sale or distribution, or (b) the Conversion Price.
EVENTS OF DEFAULT. The Debentures define an Event of Default, among
other things, as : (i) a failure to pay interest on the Debentures for ten (10)
days after the date due; (ii) a failure to pay principal on the Debentures at
maturity; (iii) a failure to comply with any material covenants or agreements
contained in the Debenture or the Debenture Purchase Agreement, if a party
thereto, for a period of thirty (30) days after notice; and (iv) a default by
the Company or any of its subsidiaries under any bond, debenture, note or other
evidence of indebtedness for money borrowed in excess of $500,000 in the
aggregate. The Debenture further provides that an Event of Default with respect
to the Debentures may only be declared by a registered holder or holders of
Debentures owning fifteen (15%) or more of the outstanding principal amount of
Debentures.
- 17 -
<PAGE> 20
MODIFICATIONS AND WAIVER. Modifications to the Debentures may be made
by the Company and the holders thereof, but only with the consent of the holders
of at least two-thirds (2/3) in the aggregate principal amount of the
outstanding Debentures. Any modification to the principal amount of the
Debentures, the maturity date, the interest rate or the redemption terms would
require the approval of the holders of at least 80% of the outstanding principal
amount of the Debentures. Upon such modification and consent, such modification
shall be binding on all outstanding Debentures, regardless of whether any
individual holder may have consented thereto.
CERTAIN LIMITATIONS IMPOSED ON THE COMPANY BY THE DEBENTURES. The
Debentures provide for certain limitations regarding the Company including,
without limitation, the following: (i) the Company cannot declare or pay any
cash dividends on its Common Stock; (ii) the Company is limited to the grant of
stock options to purchase no more than 500,000 shares of Common Stock; (iii) the
Company and its subsidiaries cannot incur indebtedness senior in ranking to the
Debentures in excess of $5,000,000 other than indebtedness related to
acquisitions or the lease of autoclaves to customers; (iv) the Company may not
make any additional loans to officers, directors or 5% Holder in excess of
$250,000 in the aggregate; and (v) the Company cannot sell its Common Stock to
an officer, director or a 5% Holder other than (a) pursuant to a Stock Option;
(b) for cash at a purchase price at least equal to the closing bid price of the
Common Stock on the day prior to issuance; or (c) for services rendered.
SINKING FUND. There is no mandatory sinking fund payments required on
the Debentures.
WARRANTS. In connection with the private placement of the Debentures,
the Company issued Warrants to purchase 92,308 shares of Common Stock
exercisable until February 12, 2001 at the initial exercise price of $3.25 per
share to the placement agent of the private placement conducted in February
1997. The Warrant exercise price is subject to certain adjustment provisions as
discussed below. The placement agent distributed the Warrants to various
employees and agents of the placement agent.
The Company is not required to issue fractional shares upon exercise of
any Warrants, but may make cash payments thereof, based on the then market price
of the Common Stock. No holder of any Warrants will be entitled to vote, receive
dividends, or be deemed the holder of the Common Stock until such time as the
Warrants shall have been duly exercised and payment of the purchase price shall
have been made. Shares of Common Stock issued upon the exercise of the warrants
and on payment of the purchase price will be legally issued, fully paid and
non-assessable.
The Warrants are subject to equitable adjustment upon certain events,
which include (i) the issuance of Common Stock as a dividend on the outstanding
Common Stock; (ii) subdivisions, combinations, and reclassifications of Common
Stock; (iii) mergers, consolidations and similar events; (iv) the issuance of
Common Stock for a price less than the lesser of the market price of the Common
Stock or the exercise price of the Warrants. The holders of the Warrants has
certain demand and piggy-back registration rights as described below.
REGISTRATION RIGHTS. The Company agreed to register the shares of
Common Stock issued or issuable upon conversion of the Debentures, as well as
the shares of Common Stock issuable upon the exercise of the Warrants pursuant
to the Securities Act of 1933, as amended within six months following the
closing of the Debenture offering. If such Registration Statement was not
declared effective by July 27, 1997, the conversion price of the Debentures
shall be reduced (and concomitantly the number of shares of Common Stock
issuable upon conversion of the Debentures shall increase) by five (5%) percent
for each month, or any part thereof, beyond the six (6) month period until the
initial registration statement is declared effective. Holders of Debentures also
have certain "piggy-back" registration rights regarding the underlying Common
Stock, subject to certain restrictions. The company agreed to pay all costs of
registration.
CERTAIN ANTI-TAKEOVER PROVISION
Certain provisions of the Company's charter and by-laws, as well as
certain provisions of Delaware law, could have the effect of deterring
takeovers. The Board of Directors believes that the provisions of the Company's
charter and by-laws described below are prudent and in the best interests of the
Company and its stockholders. Although these provisions may discourage a future
takeover attempt in which stockholders might
- 18 -
<PAGE> 21
receive a premium for their shares over the then current market price and may
make removal of incumbent management more difficult, the Board of Directors
believes that the benefits of these provisions outweigh their possible
disadvantages. Management is not aware of any current effort to effect a change
in control of the Company.
Section 203 of the Delaware General Corporation Law ("Section 203")
restricts certain transactions between a corporation organized under Delaware
law (or its majority-owned subsidiaries) and any person holding fifteen percent
(15%) or more of the corporation's outstanding voting stock, together with the
affiliates or associates of such person (an "Interested Stockholder"). Section
203 prevents, for a period of three (3) years following the date that a person
becomes an Interested Stockholder, the following types of transaction ("Business
Combinations") between the corporation and the Interested Stockholder (unless
certain conditions, described below, are met): (a) mergers or consolidations,
(b) sales, leases, exchanges or other transfers of ten percent (10%) or more of
the aggregate assets of the corporation, (c) issuance or transfers by the
corporation of any stock of the corporation which would have the effect of
increasing the Interested Stockholder's proportionate share of the stock of any
class or series of the corporation, (d) any other transaction which has the
effect of increasing the proportionate share of the stock of any class or series
of the corporation which is owned by the Interested Stockholder, and (e) receipt
by the Interested Stockholder of the benefit (except proportionately as a
stockholder) of loans, advances, guarantees, pledges or other financial benefits
provided by the corporation.
The three-year ban does not apply if either the proposed transaction or
the transaction by which the Interested Stockholder became an Interested
Stockholder is approved by the Board of Directors of the corporation prior to
the date such stockholder became an Interested Stockholder. Additionally, an
Interested Stockholder may avoid the statutory restriction if, upon the
consummation of the transaction whereby such stockholder became an Interested
Stockholder, the stockholder owns at least 855 of the outstanding voting stock
of the corporation without regard to those shares owned by the corporation's
officers and directors or certain employee stock plans. In addition, any
transaction is exempt from the statutory ban if it is proposed at a time when
the corporation has proposed, and a majority of certain continuing directors of
the corporation have approved, a transaction with a party who is not an
Interested Stockholder of the corporation (or who becomes such with board
approval) if the proposed transaction involves (a) certain merger or
consolidations involving the corporation, (b) a sale or other transfer of over
fifty percent (50%) of the aggregate assets of the corporation, or (c) a tender
or exchange offer for fifty percent (50%) or more of the outstanding voting
stock of the corporation.
A corporation may, at its option, exclude itself from the coverage of
Section 203 by amending its charter or by-laws by action of its stockholders to
exempt itself from coverage, provided that such by-law or charter amendment
shall not become effective until twelve (12) months after the date it is
adopted. The Company has not adopted such a charter or by-law amendment.
Included in the rights of any series of preferred stock which may be
set by the Board of Directors may be voting rights, if any. It is possible that
the Board of Directors could authorized and issue to persons, including existing
management, a series of preferred stock with class voting rights which might
have the effect of discouraging a takeover attempt or a tender offer. Any such
issuance would have to be made for a valid business purpose and for adequate
consideration from the recipient of the preferred stock.
The Company's by-laws contain provisions relating to notice of
stockholder meetings which would prohibit a stockholder from nominating a person
for the Board of Directors or proposing certain actions relating to the
Company's business without advance written notice to the Company. Such written
notice must be a minimum of thirty (30) days prior to a stockholders' meeting
and must contain specific information about the nominee and the stockholder who
makes such nomination or proposal.
DIVIDEND POLICY. The Company has never paid any cash dividends on its
Common Stock and does not anticipate paying cash dividends in the foreseeable
future. The payment of dividends by the Company will depend on its earnings,
financial condition, and other business and economic factors affecting the
Company at that time as the Board of Directors may consider relevant. The
Company currently intends to retain any earnings to provide for the development
and growth of the Company.
- 19 -
<PAGE> 22
TRANSFER AND WARRANT AGENT. The Transfer and Warrant Agent for the
Common Stock and Class A Warrants is Continental Stock Transfer and Trust
Company, 2 Broadway, New York, New York.
INDEMNIFICATION
DELAWARE GENERAL CORPORATION LAW. Section 145 of the Delaware General
Corporation Law ("GCL") empowers a corporation to indemnify a director, officer,
employee, or agent who is, or is threatened to be, made a party to any
threatened, pending, or completed action, suit or proceeding, whether civil,
criminal, administrative, or investigative by reason of the fact that he is or
was a director, officer, employee, or agent of the corporation or is, or was,
serving at the request of the corporation as a director, officer, employee, or
agent of another corporation, partnership, joint venture, trust, or other
enterprise (including an employee benefit plan), against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlements actually and
reasonably incurred by him in connection with such action, suit, or proceeding
if he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, and with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful.
No indemnification may be made in respect to any claim, issue, or
matter brought by or in the right of the corporation as to which such person
shall have been adjudged to be liable for negligence or misconduct in the
performance of his duty to the corporation unless and only to the extent that
the Court of Chancery of the State of Delaware or the court in which such action
or suit was brought shall determine that, despite the adjudication of liability
but in view of all of the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the court shall deem
proper.
The indemnification provided in Section 145 is not exclusive of any
other right of indemnification. A corporation is empowered to purchase and
maintain insurance on behalf of such persons against any liability asserted
against them in such capacities, whether or not the corporation would have the
right to indemnification against such liabilities under Section 145.
Subsection (b)(7) of Section 102 of the GCL empowers a corporation to
eliminate or limit the personal liability of a director to such corporation or
its stockholders for monetary damages for breach of fiduciary duty as a director
other than (i) for any breach of a director's duty of loyalty to the corporation
or its stockholders; (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law;(iii) under Section
174 of the GCL (which provides that under certain circumstances directors shall
be jointly and severally liable for willful or negligent violations of
provisions regarding the unlawful payment of dividends or unlawful stock
repurchases or redemptions; or (iv) for any transaction from which the director
derived an improper personal benefit.
CHARTER. Article NINTH of the Company's Charter has adopted the
provisions of GCL Section 102(b)(7). Article TENTH of the Company's Charter
provides that the Company shall indemnify all persons entitled to be indemnified
by GCL 145, including officers and directors, to the fullest extent permitted by
such statute.
SECURITIES AND EXCHANGE COMMISSION POLICY. Insofar as indemnification
for liabilities arising under the Securities Act of 1933, as amended, may be
permitted to directors, officers and controlling persons of the Company, the
Company has been informed 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 Company of expenses
incurred or paid by a director, officer or controlling person of the Company 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 Company 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 Securities Act and will be governed by the final
adjudication of such issue.
- 20 -
<PAGE> 23
PLAN OF DISTRIBUTION
This Prospectus, as appropriately amended or supplemented from time to
time may be used from time to time by the Selling Stockholders, or their
transferees, to offer and sell the Common Stock in transactions in which the
Selling Stockholders and any broker-dealer through whom any of the shares of
Common Stock are sold may be deemed to be underwriters within the meaning of the
Securities Act. The Company will receive none of the proceeds from any such
sales. The Company would receive an aggregate of $300,001 in gross proceeds if
all Warrants are exercised. There presently are no arrangements or
understandings, formal or informal, pertaining to the distribution of the Common
Stock.
The Company anticipates that resales of the Common Stock by the Selling
Stockholders will be effected from time to time on the open market in ordinary
brokerage transactions on the NASDAQ-Small Cap Market ("NASDAQ"), on which the
Common Stock is included for quotation, in the over-the-counter market, or in
private transactions (which may involve block transactions). The Common Stock
will be offered for sale at market prices prevailing at the time of sale or at
negotiated prices and on terms to be determined when the agreement to sell is
made or at the time of sale, as the case may be. The Common Stock may be offered
directly, through agents designated from time to time, or through brokers or
dealers. A member firm of the NASD may be engaged to act as a Selling
Stockholder's agent in the sale of the Common Stock by a Selling Stockholder
and/or may acquire Common Stock as principal. Member firms participating in such
transactions as agent may receive commissions from Selling Stockholders (and, if
they act as agent for the purchaser of such Common Stock, from such purchaser),
such commissions computed in appropriate cases in accordance with the applicable
rates of the NASDAQ, which commissions may be at negotiated rates where
permissible. Sales of the Common Stock by the member firm may be made on the
NASDAQ from time to time at prices related to prices then prevailing. Any such
sales may be by block trade.
Participating broker-dealers may agree with Selling Stockholders to
sell a specified number of shares at a stipulated price per share and, to the
extent such broker dealer is unable to do so acting as agent for the Selling
Stockholder to purchase as principal any unsold shares at the price required to
fulfill the broker-dealer's commitment to the Selling Stockholder. In addition
or alternatively, Common Stock may be sold by the Selling Stockholders, and/or
by or through the broker-dealers in special offerings, exchange distributions,
or secondary distributions pursuant to and in compliance with the governing
rules of the NASDAQ, and in connection therewith commissions in excess of the
customary commission prescribed by the rules of such securities exchange may be
paid to participating broker-dealers, or, in the case of certain secondary
distributions, a discount or concession from the offering price may be allowed
to participating broker-dealers in excess of such customary commission.
Broker-dealers who acquire Common Stock as principal may thereafter resell such
Common Stock from time to time in transactions (which may involve cross and
block transactions and which may involve sales to and through other
broker-dealers, including transactions of the nature described in the preceding
two sentences) on the NASDAQ, in negotiated transactions, or otherwise, at
market prices prevailing at the time of sale or at negotiated prices, and in
connection with such resales may pay to or receive commissions from the
purchasers of such shares. Upon the Company's being notified by a Selling
Stockholder that a particular offer to sell the Common Stock is made, a material
arrangement has been entered into with a broker-dealer for the sale of shares
through a block trade, special offering, exchange distribution, or secondary
distribution, or any block trade has taken place, to the extent required, a
supplement to this Prospectus will be delivered together with this Prospectus
and filed pursuant to Rule 424(b) under the Securities Act setting forth with
respect to such offer or trade the terms of the offer or trade; including (i)
the number of Common Stock involved, (ii) the price at which the Common Stock
were sold, (iii) any participating brokers, dealers, agents or member firm
involved, (iv) any discounts, commissions and other items paid as compensation
from, and the resulting net proceeds to, the Selling Stockholder, (v) that such
broker-dealers did not conduct any investigation to verify the information set
out in this Prospectus, and (vi) other facts material to the transaction.
Shares of Common Stock may be sold directly by the Selling Stockholders
or through agents designated by the Selling Stockholders from time to time.
Unless otherwise indicated in the supplement to this Prospectus, any such agent
will be acting on a best efforts basis for the period of its appointment.
- 21 -
<PAGE> 24
The Selling Stockholders and any brokers, dealers, agents, member firm
or others that participate with the Selling Stockholders in the distribution of
the Common Stock may be deemed to be "underwriters" within the meaning of the
Securities Act, and any commissions or fees received by such persons and any
profit on the resale of the Common Stock purchased by such person may be deemed
to be underwriting commissions or discounts under the Securities Act.
The Selling Stockholders will be subject to the applicable provisions
of the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder, including without limitation Regulation M, which
provisions may limit the timing of purchases and sales of any of the Common
Stock by the Selling Stockholders. All of the foregoing may affect the
marketability of the Common Stock.
The Company will pay substantially all the expenses incident to this
offering of the Common Stock by the Selling Stockholder to the public other than
brokerage fees, commissions and discounts of underwriters, dealers or agents.
In order to comply with certain states' securities laws, if applicable,
the Common Stock 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
the Company or Selling Stockholders comply with the applicable requirements.
LEGAL MATTERS
The validity of the Common Stock offered by this Prospectus has been
passed upon by Wallace, Bauman, Fodiman & Shannon, P.A., Coral Gables, Florida.
Milton J. Wallace a shareholder of the law firm, beneficially owns 412,125
shares of the Company's Common Stock. Other shareholders of such law firm
beneficially own an aggregate of 22,816 shares of Common Stock.
EXPERTS
The consolidated financial statements included in the Company's Annual
Report on Form 10-KSB for the Year ended December 31, 1996 incorporated by
reference in this Prospectus have been audited by BDO Seidman, LLP, independent
certified public accountants to the extent and for the periods set forth in
their report incorporated herein by reference, and are incorporated herein in
reliance upon such report given upon the authority of said firm as experts in
auditing and accounting.
- 22 -
<PAGE> 25
- -------------------------------------------------------------------------------
No dealer, salesman or other person has been authorized to give any information
or to make any representations other than those contained or incorporated by
reference in this Prospectus, and if given or made, such information or
representations must not be relied upon as having been authorized by the
Company. Neither the delivery of this Prospectus nor any sale made hereunder
shall under any circumstances create any implication that there has been no
change in the affairs of the Company since the date hereof. This Prospectus does
not constitute an offer or solicitation by anyone in any jurisdiction in which
the person making such offer or solicitation is not qualified to do so or to
anyone whom it is unlawful to make such offer or solicitation.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
AVAILABLE INFORMATION.........................................................2
DOCUMENTS INCORPORATED BY REFERENCE...........................................3
THE COMPANY...................................................................4
RISK FACTORS..................................................................5
USE OF PROCEEDS...............................................................8
MATERIAL EVENTS...............................................................9
SELLING STOCKHOLDERS.........................................................10
DESCRIPTION OF SECURITIES....................................................16
INDEMNIFICATION..............................................................20
PLAN OF DISTRIBUTION.........................................................21
LEGAL MATTERS................................................................22
EXPERTS......................................................................22
</TABLE>
MED/WASTE, INC.
--------------------------------
PROSPECTUS
---------------------------------
1,128,205
Shares of
COMMON STOCK
($.001 par value)
_________________, 1997
- --------------------------------------------------------------------------------
<PAGE> 26
Part II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF INSURANCE AND DISTRIBUTION
The following sets forth the estimated expenses and costs in connection
with the issuance and distribution of securities being registered hereby. All
such expenses will be borne by the Company.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee..........$1,539.00
Accounting Fees and Expenses................................. 2,000.00*
Legal Fees and Expenses..................................... 10,000.00*
Printing expenses.............................................2,000.00
Miscellaneous................................................ 1,461.00*
----------
Total.......................................................$17,000.00
==========
- ------------
</TABLE>
* Estimated
ITEM 15.INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article TENTH of the Company's Certificate of Incorporation provides
for indemnification of the Company's officers and directors to the fullest
extent permitted by Section 145 of the Delaware General Corporation Law (the
"DGCL"). Section 145 of the DGCL provides for indemnification of directors and
officers from and against expenses (including attorney's fees), judgments, fines
and amounts paid in settlement reasonably incurred by them in connection with
any civil, criminal, administrative or investigative claim or proceeding
(including civil actions brought as derivative actions by or in the right of the
corporation but only to the extent of expenses reasonably incurred in defending
or settling such action) in which they may become involved by reason of being a
director or officer of the corporation if the director or officer acted in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interest of the corporation and, in addition, in criminal actions, if
he had no reasonable cause to believe his conduct to be unlawful. If, in an
action brought by or in the right of the corporation, the director or officer is
adjudged to be liable for negligence or misconduct in the performance of his
duty, he will only be entitled to this indemnity as the court finds to be
proper. Persons who are successful in defense of any claim against them are
entitled to indemnification as of right against expenses actually and reasonably
incurred in connection therewith. In all other cases, indemnification shall be
made (unless otherwise ordered by a court) only if the board of directors,
acting by a majority vote of a quorum of disinterested directors, independent
legal counsel or holders of a majority of the shares entitled to vote,
determines that the applicable standard of conduct has been met. Section 145
also provides this indemnity for directors and officers of a corporation who, at
the request of the corporation, act as directors, officers, employees or agents
of other corporations, partnerships or other enterprises.
Article NINTH of the Company's Certificate of Incorporation limits the
liability of the Company's directors to the Company or its stockholders to the
fullest extent permitted by the DGCL. Section 102(b)(7) of the DGCL provides
that personal monetary liabilities of a director for breaches of his fiduciary
duties as a director may not be eliminated with regard to any breach of the duty
of loyalty, failing to act in good faith, intentional misconduct or knowing
violation of law, payment of an unlawful dividend, approval of an illegal stock
repurchase, or obtainment of an improper personal benefit. Such a provision has
no affect on the availability of equitable remedies, such as an injunction or
recision, for breach of fiduciary duty.
The employment agreements of certain officers contain a provision
requiring indemnification of such officer to the fullest extent permitted by
law.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted for directors, officers and controlling persons of the
Company pursuant to the foregoing, or otherwise, the Company has been advised
that in the opinion of the Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for
II - 1
<PAGE> 27
indemnification against such liabilities (other than the payment by the Company
of expenses incurred or paid by a director, officer or controlling person of the
Company 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 Company 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 Securities Act and will be governed by
the final adjudication of such issue.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
Certain of the following exhibits are filed herein and certain others,
designated by an asterisk (*) were previously filed in the registration
statement.
EXHIBIT NO. DESCRIPTION
*4.1 Form of 10% Convertible Redeemable Debentures
*4.2 Form of Warrant
5 Opinion of Wallace, Bauman, Fodiman & Shannon, P.A., regarding
the legality of the Common Stock.
23.1 Consent of BDO Seidman, LLP
*23.2 Consent of Wallace, Bauman, Fodiman & Shannon, P.A.(included in
Exhibit 5 above).
*24 Power of attorney.
ITEM 17. UNDERTAKINGS.
(a) The Registrant hereby undertakes:
(1) To file, during any period in which offers 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 Act;
(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; and
(iii) To include any material information
with respect to the plan of
distribution not previously disclosed
in the registration statement or any
material change to such information in
the registration statement;
Provided, however, that Paragraphs (a)(1)(i) and (a)(1)(ii) above do not apply
if the information required to the included in a post-effective amendment by
those Paragraphs is contained in periodic reports filed by the registrant
pursuant to Section 13 or Section 15(d) of the Securities and Exchange Act of
1934, as amended (the "Exchange Act'), that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any
liability under the Act, 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.
(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.
II - 2
<PAGE> 28
(b) The undersigned registrant hereby undertakes that,
for purposes of determining any liability under the
Act, each filing of the registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of
an employee benefit plan's annual report pursuant to
Section 15(d) of the Exchange Act) 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.
(c) Insofar as indemnification for liabilities arising
under the Act may be permitted to directors, officers
and controlling persons of 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.
II - 3
<PAGE> 29
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Opa Locka, State of Florida, on the 10th day of
September, 1997.
MED/WASTE, INC., a Delaware corporation
By: /s/ Daniel A. Stauber
---------------------------------------
DANIEL A. STAUBER
President/Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933,
this registration statement was signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ---------- ----- ----
<S> <C> <C>
/s/ Milton J. Wallace* Chairman September 10, 1997
- --------------------------------------------
Milton J. Wallace
/s/ Daniel A. Stauber Director, President and Chief Executive September 10, 1997
- -------------------------------------------- Officer
Daniel A. Stauber
/s/ Michael D. Elkin Vice President and Chief Financial Officer September 10, 1997
- --------------------------------------------
Michael D. Elkin
/s/ Richard R. Green* Director September 10, 1997
- --------------------------------------------
Richard R. Green
/s/ Phillip W. Kubec* Director September 10, 1997
- --------------------------------------------
Phillip W. Kubec
Director ____________, 1997
- --------------------------------------------
Kendrick Meek
/s/ Arthur G. Shapiro, M.D.* Director September 10, 1997
- --------------------------------------------
Arthur G. Shapiro, M.D.
/s/ William Dolan, D.D.S.* Director September 10, 1997
- --------------------------------------------
William Dolan, D.D.S.
</TABLE>
*By: /s/ Michael D. Elkin
---------------------------------------
Michael D. Elkin
Attorney-in-Fact
II - 4
<PAGE> 1
Exhibit 5
[LETTERHEAD OF WALLACE, BAUMAN, FODIMAN & SHANNON, P.A.]
September 11, 1997
Med/Waste, Inc.
3890 N.W. 132nd Street, Suite K
Opa Locka, Florida 33053
Re: MED/WASTE, INC.
REGISTRATION STATEMENT ON FORM S-3
Ladies and Gentlemen:
We have acted as counsel to Med/Waste, Inc., a Delaware corporation
(the "Company"), in connection with the preparation and filing of the
registration statement on Form S-3 (the "Registration Statement"), with the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Act") and the prospectus contained therein with
respect to the public offering of up to 1,128,205 shares of the Company's common
stock, par value $0.001 (the "Shares"). All of the Shares are being offered on
behalf of certain selling stockholders (the "Selling Stockholders"). In
connection with the registration of the Shares, you have requested our opinion
with respect to the matters set forth below.
For purposes of this opinion, we have reviewed the Registration
Statement. In addition, we have examined the originals or copies certified or
otherwise identified to our satisfaction of: (i) the Company's Certificate of
Incorporation, as amended to date; (ii) the By-laws of the Company, as amended
to date; (iii) records of the corporate proceedings of the Company as we deemed
necessary or appropriate as a basis for the opinions set forth herein; and (iv)
those matters of law as we have deemed necessary or appropriate as a basis for
the opinions set forth herein. We have not made any independent review or
investigation of the organization, existence, good standing, assets, business or
affairs of the Company, or of any other matters. In rendering our opinion, we
have assumed without inquiry the legal capacity of all natural persons, the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals, the conformity to original documents of all documents submitted to
us as certified or photostatic copies and the authenticity of the originals of
these documents submitted to us as copies.
We have not undertaken any independent investigation to determine facts
bearing on this opinion, and no inference as to the best of our knowledge of
facts based on an independent investigation should be drawn from this
representation. Further, our opinions, as hereinafter expressed, are subject to
the following exceptions, limitations and qualifications: (i) the effect of
bankruptcy, insolvency, fraudulent conveyance, reorganization, arrangement,
moratorium or other similar laws now or hereafter in effect relating to or
affecting the rights and remedies of creditors; and (ii) the effect of general
principles of equity, whether enforcement is considered in a proceeding in
equity or at law and the discretion of the court before which any proceeding
therefore may be brought.
We are admitted to the practice of law only in the State of Florida
and, accordingly, we do not purport to be experts on the laws of any other
jurisdiction nor do we express an opinion as
<PAGE> 2
Med/Waste, Inc.
September 11, 1997
Page 2
to the laws of jurisdictions other than the laws of the State of Florida and the
General Corporation Law of the State of Delaware, as currently in effect.
On the basis of, and in reliance upon, the foregoing, and subject to
the qualifications contained herein, we are of the opinion that the shares of
common stock being sold by the selling shareholders upon exercise of the
warrants or conversion of Debentures, as more fully described in the
Registration Statement will be duly authorized, legally issued, fully paid and
none assessable when the Warrants, stock options or other warrants are exercised
and are paid to the Company.
We hereby consent to your filing this opinion as an exhibit to the
Registration Statement and to the reference to our firm contained under the
heading "Legal Matters."
This opinion is rendered only to you and is solely for your benefit in
connection with the transactions covered hereby. This opinion may not be relied
upon by you for any other purpose or furnished, or quoted to, or relied upon by
any other person, firm or corporation for any purpose without our prior express
written consent.
Respectfully submitted,
WALLACE, BAUMAN,
FODIMAN & SHANNON, P.A.
BRYAN W. BAUMAN
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTS
Med/Waste, Inc. and Subsidiaries
Miami, Florida
We hereby consent to the incorporation by reference in the Prospectus
constituting of part of this Registration Statement (Amendment No. 1) of our
report dated March 7, 1997, relating to the consolidated financial statements
of Med/Waste, Inc. and Subsidiaries appearing in the Company's Annual Report
on Form 10-KSB for the year ended December 31, 1996.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
Miami, Florida BDO Seidman, LLP
September 10, 1997
