Filed Pursuant to Rule 424(b)(3)
Registration No. 333-66841
PROSPECTUS
IDM ENVIRONMENTAL CORP.
20,522,624 Shares of Common Stock
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The shareholders listed in this Prospectus are offering IDM Environmental Corp. (the "Company") is a
and selling up to 20,522,624 shares of common stock global diversified services company offering a broad
of IDM Environmental Corp. The shares offered range of design, engineering, construction, project
to be sold by this Prospectus are shares that those development and management, and environmental
shareholders have a right to acquire through the exercise services and technologies. We offer services and
of warrants or the conversion of preferred stock. It is technologies in three principal areas: Energy
Project
possible that the total number of shares offered by the Development and Management, Environmental
selling shareholders will be less than 20,522,624. Remediation and Plant Relocation Services.
Our common stock is listed on the Nasdaq National
Our company will not receive any proceeds from the Market under the symbol "IDMC." The last
sale of shares of common stock offered by the selling reported sale price of our common stock on October
shareholders. 29, 1998 was $0.625.
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The selling shareholders may offer their shares of common stock through
public or private transactions in the over-the-counter markets, on or off the
United States exchanges, at prevailing market prices or at privately negotiated
prices. The selling shareholders may engage brokers or dealers who may receive
commissions or discounts from the selling shareholders.
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This investment involves a high degree of risk. See "Risk Factors" at page 5 of
this prospectus for a discussion of certain material factors which you should
consider before investing in the common stock offered by this prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
Prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
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The date of this Prospectus is November 13, 1998
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We will pay all expenses of this offering except for commissions, fees and
discounts of any underwriters, brokers, dealers or agents retained by the
Selling Stockholders. Estimated expenses payable by the Company in connection
with this offering are approximately $25,000. The aggregate proceeds to the
selling stockholders from the common stock will be the purchase price of the
common stock sold less the aggregate agents' commissions and underwriters'
discounts, if any. We have agreed to indemnify the selling stockholders and
certain other persons against certain liabilities, including liabilities under
the Securities Act of 1933.
You should rely only on the information contained in this document or that
we have referred you to. We have not authorized anyone to provide you with
information that is different.
It is possible that certain affairs of our Company, and certain matters
described in this Prospectus, may change after the date of this Prospectus.
The common stock may only be offered and sold to persons who live in states
in which we have previously qualified such offers and sales. You should talk to
your broker to confirm that you reside in a state in which the common stock can
be offered and sold. If you do not live in a state in which the offer and sale
of the common stock has been qualified, you cannot purchase shares of common
stock offered pursuant to this Prospectus.
TABLE OF CONTENTS
Available Information................................................ 3
Incorporation of Certain Documents by
Reference........................................................... 3
Disclosure Regarding Forward-Looking Statements...................... 4
The Company.......................................................... 4
Risk Factors......................................................... 5
Selling Stockholders................................................. 12
Plan of Distribution................................................. 17
Legal Matters........................................................ 18
Experts.............................................................. 18
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AVAILABLE INFORMATION
The Company is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files annual and quarterly reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements and other information may be inspected and copied at
the Commission's Regional Offices at 7 World Trade Center, 13th Floor, New York,
New York 10048; and 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such material can be obtained at prescribed rates from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Common Stock of the Company is quoted on the Nasdaq
National Market. Reports and other information concerning the Company may be
inspected at the National Association of Securities Dealers, Inc. at 1735 K
Street, N.W., Washington, D.C. 20006. The Commission also maintains a World Wide
Web site (http://www.sec.gov) that contains reports, proxy and information
statements and other information regarding registrants, including the Company,
that file electronically with the Commission.
A registration statement on Form S-3 with respect to the Common Stock
offered hereby (the "Registration Statement") has been filed with the Commission
under the Act. This Prospectus does not contain all of the information contained
in such Registration Statement and the exhibits and schedules thereto, certain
portions of which have been omitted pursuant to the rules and regulations of the
Commission. For further information with respect to the Company and the Common
Stock offered hereby, reference is made to the Registration Statement and the
exhibits and schedules thereto. Statements contained in this Prospectus
regarding the contents of any contract or any other document are not necessarily
complete and, in each instance, reference is hereby made to the copy of such
contract or document filed as an exhibit to the Registration Statement. The
Registration Statement, including the exhibits thereto, may be inspected without
charge at the Commissions' principal office in Washington, D.C., and copies of
all or any part thereof may be obtained from the Public Reference Section,
Securities and Exchange Commission, Washington, D.C. 20549, upon payment of the
prescribed fees.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, filed or to be filed with the Commission under the
Exchange Act are hereby incorporated by reference into this Prospectus:
(1) The Company's Annual Report on Form 10-K/A for the year ended December
31, 1997.
(2) The Company's Quarterly Report on Form 10-Q/A for the quarter ended
March 31, 1998 and the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998.
(3) All other reports filed pursuant to Section 13(a) or 15(d) of the
Exchange Act since the end of the fiscal year covered by the Annual
Report referred to in (1) above.
(4) The description of securities included in Form 8-A declared effective
by the Commission on April 26, 1994 (Commission File No. 0-23900).
All documents filed by the Company pursuant to Section 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 shall be deemed to be incorporated by reference
herein and to be a part hereof from the date of filing such documents. Any
statements contained in this Prospectus or in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any subsequently filed documents which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
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The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus has been delivered, upon written or
oral request of such person, a copy of any or all of the documents that have
been incorporated by reference herein (not including exhibits to such documents
unless such exhibits are specifically incorporated by reference herein or into
such documents). Such requests may be directed to Mr. Michael B. Killeen, Chief
Financial Officer, IDM Environmental Corp., 396 Whitehead Avenue, South River,
New Jersey 08882, Telephone Number (732) 390-9550.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus, the Company's Annual Report on Form 10-K/A for the fiscal
year ended December 31, 1997, the Company's Quarterly Reports on Form 10-Q/A for
the quarter ended March 31, 1998 and on Form 10-Q for the quarter ended June 30,
1998, and the Company's definitive Proxy Statement for its 1998 Annual Meeting
of Stockholders, which is incorporated by reference herein, include certain
statements that may be deemed to be "forward-looking statements" within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. All statements, other than statements of historical facts, included in this
Prospectus that address activities, events or developments that the Company
expects, believes or anticipates will or may occur in the future, including, but
not limited to, such matters as future business development, business
strategies, expansion and growth of the Company's operations and other such
matters are forward-looking statements. These statements are based on certain
assumptions and analyses made by the Company in light of its experience and
perception of historical trends, current conditions, expected future
developments and other factors it believes are appropriate in the circumstances.
Such statements are subject to a number of assumptions, risks and uncertainties,
including the risk factors discussed below, general economic and business
conditions, the business opportunities (or lack thereof) that may be presented
to and pursued by the Company, changes in law or regulations and other factors,
many of which are beyond the control of the Company. Prospective investors are
cautioned that any such statements are not guarantees of future performance and
that actual results or developments may differ materially from those projected
in the forward-looking statements.
THE COMPANY
IDM Environmental Corp. (the "Company") is a global diversified services
company offering a broad range of design, engineering, construction, project
development and management, and environmental services and technologies. The
Company, through its domestic and international affiliates and subsidiaries,
offers services and technologies in three principal areas: Energy Project
Development and Management, Environmental Remediation and Plant Relocation
Services.
The Company's energy project development and management services ("Energy
Services") are provided through IDM Energy Corporation and local project
subsidiaries. The Company actively entered the Energy Services market in 1997
and expects to begin construction of energy facilities during 1999 with
operating energy facilities expected to be connected to the local grid in El
Salvador by January 2000. The Company is aggressively pursuing additional energy
facility "build, own and operate" opportunities in Asia, Eastern Europe, Central
and South America and expects to bring additional energy facilities on-line
beginning in 1999. Energy Services offered by the Company include project design
and development, engineering, finance, ownership and, soon to be, operation for
conventional and other energy projects.
The Company's environmental remediation services, the historical core
business of the Company, encompass a broad array of environmental consulting,
engineering and remediation services with an emphasis on the "hands-on" phases
of remediation projects. The Company is a leading provider of full-service
turnkey environmental remediation and plant decommissioning services and has
established a track record of safety and excellence in the performance of
projects for a wide range of private sector, public utility and governmental
clients worldwide. Additionally, the Company has melded its core expertise in
engineering, decommissioning and dismantlement services in environmentally
sensitive settings to establish a position in the forefront of the nuclear power
plant decommissioning, site remediation and reindustrialization market.
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The Company's plant relocation services encompass a broad array of
non-traditional engineering projects, with an emphasis on plant dismantlement,
relocation and reerection. The Company has established itself as a world leader
in plant relocation services employing a proprietary, integrated matchmarking,
engineering, dismantling and documentation program that provide clients with
significant cost and schedule benefits when compared to traditional alternatives
for commencing plant operations.
The Company was incorporated under the laws of the State of New Jersey in
1978. The Company's executive offices are located at 396 Whitehead Avenue, South
River, New Jersey 08882, telephone number (732) 390-9550.
RISK FACTORS
The securities which are the subject of this Prospectus are subject to
certain risk factors, some of which are described below. The following risk
factors should not be considered to be all of the potential risks to which the
Company and the securities are subject. The risk factors set forth below should
be considered carefully with respect to any investment in the shares underlying
the Series C Preferred Shares, the Series RR Preferred Shares, the $2.40
Warrants, the $3.00 Warrants, the $3.75 Warrants, the $6.00 Warrants, the $6.75
Warrants and the Lock-Up Warrants.
Losses From Operations. We have experienced significant operating losses
during the past three years. We had net losses of $9.9 million during 1997, $9.1
million during 1996 and $3.9 million during 1995 and a net loss of $15.5 million
during the six months ended June 30, 1998. Our losses have resulted from a
combination of (1) reduced revenues resulting from more selective project
bidding, (2) large expenditures for infrastructure to support anticipated future
growth, (3) delays in the commencement of projects, (4) unusual expenses, and
(5) costs associated with our entry into the power production market and other
ventures with the potential of producing recurring revenues. Until we are able
to begin one or more large projects on which delays in commencement have been
experienced, or until such time as other projects are begun, if ever, we will
continue to experience losses. While we believe that multiple large projects
will be performed during 1998 and that one or more power production projects or
other recurring revenue projects will become operational during 1999, based on
past delays and past operating results, there can be no assurance that we will
be able to operate profitably during 1998 or in the future.
Intense Competition. Competition in the environmental services industry is
intense. The industry is dominated by large architectural engineering firms such
as Bechtel, Fluor, Westinghouse, Foster Wheeler and ICF Kaiser, among others.
Such firms are called upon to serve as primary contractors and consultants on a
large portion of the Superfund, federal and state government and Department of
Energy projects. Additionally, many smaller engineering firms, construction
firms, consulting firms and other specialty firms have entered the environmental
services industry in recent years and additional firms can be expected to enter
into the industry. Many of our competitors in the environmental services
industry have significantly greater financial resources and more established
market positions than do we. While we believe that our experience and expertise
in the specialty areas of decontamination and decommissioning will allow us to
compete successfully, there can be no assurance that other firms will not expand
into or develop expertise in the areas in which we specialize, thus decreasing
any competitive advantage which we may enjoy.
Maturation of Segments of the Environmental Industry. With the entry of
increasing competition, the market for certain labor intensive low technology
services, such as asbestos abatement, dismantling and demolition, has become
saturated resulting in lower margins in those segments. As a result of such
maturation and competitive pressures many participants in the environmental
services industry have incurred losses or significant declines in profitability
in recent years. While we have undertaken to focus on projects requiring highly
specialized services and/or technologies and to minimize our exposure to lower
margin highly competitive segments of the environmental services market, such
undertakings necessarily reduce the potential market for our environmental
services and potential revenues from such services. Further, there can be no
assurance that other segments of the environmental services market not
previously effected by competition and lower margins will not be adversely
effected in the future.
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Uncertainty Relating to Integration of Recent Acquisitions. As a result of
increasingly intense competition in the environmental services industry, we have
undertaken various strategic technology acquisitions and alliances in recent
years in order to improve our competitive position and increase our potential
revenues. Included in such acquisitions and alliances have been (1) the
acquisition of rights relating to the deployment of the proprietary "Kocee Gas
Generator" technology of Enviropower Industries, Inc. (fka Continental Waste
Conversion), (2) the acquisition of an exclusive license from, and equity
interest in, Life International Products pursuant to which we utilize Life's
patented superoxygenation technology for long term bioremediation of
contaminated groundwater and (3) the formation of an alliance with Solucorp
Industries pursuant to which we received the rights to utilize Solucorp's
Molecular Bonding System soil remediation technology. Each of such acquisitions
and alliances entailed various funding commitments on our part. While we believe
that each of the described acquisitions/alliances provides us with
state-of-the-art technologies, there can be no assurance that we will be
successful in integrating such new technologies with its existing service
offerings. Further, it is possible that certain state-of-the-art technologies,
including technologies which we have acquired, or may acquire in the future, may
not yet be commercially viable or may require ongoing funding beyond our
capabilities before those technologies can be successfully deployed on a
commercial basis. In the event that we are unable to successfully integrate our
technology acquisitions/alliances with our existing operations or we are unable
or unwilling to meet the funding requirements necessary to fully commercialize
such technologies, it is possible that we could loss some or all of its
investment in such technologies. Any such losses could materially adversely
impact our operating results and financial position.
While we are continually involved in the evaluation of new technologies to
supplement our existing services offerings and to enhance our operating results
and competitive position, we have no current plans, arrangements or
understandings with respect to future acquisitions or mergers.
Uncertainty Relating to Entry into Power Production Market. During 1997, we
began to actively pursue projects in the international power production market.
As a result of such efforts, we have entered into, and expect in the future to
enter into, agreements whereby we will design, construct, own and operate power
production facilities outside of the United States. We have devoted substantial
resources to its entry into the power production market and expect to devote
substantial additional resources to such efforts in the future. Our ability to
profit from its efforts in this regard is contingent upon our ability to
successfully negotiate agreements with governmental, industrial and other
entities whereby those entities agree to purchase all or a substantial portion
of the power produced by those facilities, our ability to finance and construct
power production facilities on terms deemed acceptable to us and our ability to
purchase feed stocks and operate facilities at sufficiently low cost to generate
operating profits and to recover the cost of constructing such facilities. We
intend to contract out the construction of facilities to qualified construction
companies and to retain employees and/or consultants with expertise in the
operation of power production facilities. There can be no assurance that we will
be successful in consummating arrangements to construct, operate and sell power
from such facilities. Even if we are successful in consummating such
transactions, there can be no assurance that the facilities can or will be
operated profitably or, given the nature of the anticipated purchasers of such
production, that the foreign entities which have contracted to purchase such
production will have the financial capability to purchase the power committed to
be purchased.
Additionally, a variety of independent power producers and private and
government owned entities may provide power in some of the markets in which we
expect to operate. Should those markets grow and undergo deregulation similar to
that experienced in the United States, it can be expected that new competitors
will enter those markets increasing pricing and competitive pressures.
Accordingly, while we believe the international power production market
offers substantial profit opportunities for us, there can be no assurance that
we will be successful in our efforts to enter that market, that we can operate
on a profitable basis in the markets which it may enter or that any profits
which may be generated will be sufficient to recover our cost of entering the
power production market.
Uncertainty Related to Operations in Foreign Markets. In recent months, a
substantial number of countries in Asia, South America and Eastern Europe have
experienced economic downturns which have been characterized by slowing or
negative growth rates, currency devaluation and flight of capital, among other
problems. Our entry into the Energy Services market has been focused in regions
which have experienced such economic problems. Additionally, we have targeted
those regions as potentially high growth markets for plant relocation services
and other services offered by us. While we continue to offer services and pursue
opportunities in those markets and takes steps deemed appropriate by management
to manage currency and other risks associated with operations in those markets,
a continuation of the economic problems in those regions, or any further
worsening of conditions, could materially adversely impact demand for our
services in such countries and the ability of potential customers to pay for the
our services.
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Dependence on Ability to Secure Bonding. In order to bid on and
successfully secure contracts to perform environmental services of the nature
offered by us, we may, depending upon the bid specifications, be required to
provide surety bonds for each respective project. Thus, the number and size of
contracts which we can perform is directly dependent upon our ability to obtain
bonding which, in turn, is dependent upon our net worth, liquid working capital,
and the nature and projected profitability of projects undertaken, among other
factors. We may, from time to time, be unable to secure additional and larger
contracts as a result of such bonding requirements. While capital raising
efforts in recent years have allowed us to substantially increase our working
capital and net worth, thus increasing its bonding capacity, there can be no
assurance that we will have adequate bonding capacity to bid on all of the
projects which we would otherwise bid upon were we to have such bonding capacity
or that we will in fact be successful in obtaining additional jobs on which we
may bid.
Compliance with, and Potential Liability under, Applicable Environmental
Regulations. The scope and nature of environmental regulation, at the federal,
state and local levels, has expanded dramatically in recent years. Such
regulations impose stringent guidelines on companies which generate and handle
hazardous materials as well as other companies involved in various aspects of
the environmental services industry. Any future increases or changes in
regulation may result in our incurring additional costs for equipment,
retraining, development of new remediation or abatement plans, handling of
hazardous materials and other costs.
In addition to the burdens imposed on our operations by various
environmental regulations, federal law imposes strict joint and several
liability upon present and former owners and operators of facilities that
release hazardous substances into the environment and the generators and
transporters of such substances as well as persons arranging for the disposal of
such substances. All such persons may be liable for the costs and damages
(including penalties and fines) associated with environmental remediation
including investigation, clean up and natural resource damages. Such costs can
be very substantial. We may be liable for such costs and damages in connection
with the generation, transportation and disposal of hazardous materials.
Additionally, in light of the growing trend to impose and expand the
responsibility and scope of liability for environmental clean-up costs, there
can be no assurance that future regulations or court rulings will not result in
our being exposed to clean-up cost liability, or other liability, for activities
conducted by us which do not presently expose us to such liability.
While we have not incurred, or been notified that it may be treated as a
potentially responsible party with respect to, any liability as a generator or
transporter of hazardous materials, we have on occasion been named in
complaints, and may be named in future complaints, as violating various
regulations governing the removal of asbestos. We have settled certain
complaints in the past by agreeing to pay civil fines or penalties without
admitting liability. There can be no assurance, however, that any complaints
which may arise in the future can be settled on a favorable basis. In any event,
because of the nature of our operations and the industry in which we operate,
the potential for liability and the extent of such potential liability is very
substantial. Any such liability which is determined to exist could have a
material adverse impact on our business and financial condition.
Dependence on Continued Environmental Regulation. The growth of the
environmental services industry, as well as our growth, has been largely
attributable to, and tracks, the increase in environmental regulation since the
1970's. The demand for environmental services has been largely the result of
facility owners attempting to comply with, or avoid liability under, existing or
newly imposed environmental regulations at the federal, state and local levels.
Because of the burden imposed on industry in complying with such regulations,
efforts have been made by various groups to seek the relaxation or repeal of
certain forms of environmental regulation. While such efforts to relax
environmental regulation have been largely unsuccessful to date, there can be no
assurance that the scope or growth of such regulation will not be curtailed in
the future. Any relaxation of environmental regulation may result in a decline
in demand for environmental services and may adversely effect our operations.
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Dependence on Spending Levels of Governmental and Industrial Entities.
Because of the nature of sites requiring environmental services, the growing
public emphasis on environmental matters and the cost of environmental services,
a significant portion of all funds spent for such services has been spent by
governmental agencies and large industrial concerns. While third party
reimbursement may be sought in various clean-ups, most Superfund clean-ups as
well as weapons and other nuclear facility clean-ups involve significant
spending by governmental agencies. As budget constraints and emphasis on
employment, international competition and other considerations grow, certain
governmental agencies and industrial concerns may choose to delay or curtail
expenditures for environmental services. Any curtailment or delays in spending
for environmental services by governmental agencies or large industrial concerns
can be expected to have a material adverse effect on the environmental services
industry and on our operations and profitability.
Limited Insurance Coverage. While we maintain insurance coverage, including
environmental impairment liability insurance covering such areas as
environmental clean ups, corrective action or damages, our environmental
impairment insurance policy does not cover any liability arising from
radiological operations other than low level radioactive soil excavation and
facility cleaning. While we have evaluated such additional insurance coverage in
the past and may evaluate the same in the future, we do not anticipate that such
additional insurance will be available in the foreseeable future at prices
considered to be reasonable. If, in the absence of such insurance, we were to
incur liability for environmental impairment in connection with its excluded
radiological services, such liability could have a material adverse effect on
our financial condition and results of operations. Further, as the cost of
cleaning or correcting environmental hazards can be extremely high, even if we
are determined to be liable for costs which are covered by insurance, there is
no assurance that such coverage will be adequate to pay the entire cost thereof
and, therefor, we may incur losses in excess of its insurance coverage.
Dependence on Major Customer. A significant portion of our revenues in
recent years have come from, and a significant portion of our resources have
been devoted to, one or more large clients (e.g., Manafort, Allied-Signal and
FFC Jordan Fertilizer Company). Revenues from the Manafort project constituted
29% of our total revenues in 1997. Revenues from the FFC Jordan project
constituted 34% of our total revenues in 1995 and 44.7% of revenues in 1994.
Likewise, the Allied-Signal project accounted for 34.8% and 26.4% of our total
revenues in 1991 and 1992, respectively. In early 1993, we completed the
Allied-Signal project and the FFC Jordan project was completed during 1996. We
expect to complete the Manafort project during 1998. In order for us to replace
the revenues attributable to such large projects, we must secure one or more
large projects or a large number of smaller projects. While we believe that we
can successfully replace our past and ongoing large projects with other large
projects and with a large volume of smaller projects, there is no assurance that
we can adequately replace such projects with other projects which will produce
as much revenue. Further, there is no assurance that we will not continue to be
dependent upon a small number of major customers for a significant portion of
our revenues and earnings.
Dependence on Key Personnel. Our operations are dependent upon the
continued efforts of senior management. While we have entered into employment
agreements with Joel Freedman and Frank Falco, our principal executive officers,
we do not have employment agreements with any of our other officers or
employees. We have, however, entered into agreements with certain executive
personnel pursuant to which such persons have agreed to maintain the
confidentiality of certain information and to not enter into competition with us
for a period of three years after the termination of their employment with us
within 250 miles of our principal places of business. However, because of the
lack of accompanying employment agreements and the limited scope of such
agreements and the general difficulty of enforcing noncompetition agreements,
there is no assurance that such agreements can be enforced or that one or more
of our key employees may not leave us and enter into direct competition with us.
Should any of the members of our senior management be unable or unwilling to
continue in their present roles or should such persons determine to enter into
competition with us, our prospects could be adversely affected. We presently
carry key-man life insurance on our Chief Executive Officer, Joel Freedman, and
our Chairman of the Board and Chief Operating Officer, Frank Falco.
Dependence on Temporary Labor. As a result of the national and
international scope of our operations, we are typically required to staff jobs
at least partially with temporary workers hired on location. While all of our
jobs are performed under the supervision and direction of our supervisors and
foremen and we attempt to utilize as many of our full time laborers as possible
to staff jobs, the location and other factors effecting jobs performed away from
the immediate vicinity of our headquarters result in our regularly hiring
temporary workers on site. We carefully review the training and qualifications
of all temporary workers hired to assure that all such personnel are qualified
to perform the work in question. However, due to the temporary nature of such
employment, there is no assurance that all such temporary workers will perform
at levels acceptable to us and our customers. Accordingly, we may experience
difficulties in satisfactorily performing jobs and, in some cases, may be
exposed to certain liabilities as a result of the acts or performance of such
temporary workers. Additionally, in some locations, we may be required to hire
unionized temporary labor. The hiring of such unionized workers may give rise to
various other considerations affecting the performance of jobs, including
possible work stoppages and varying wage and benefit demands, among others.
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Seasonality of Business. While we provide services on a year-round basis,
certain aspects of our business display seasonal characteristics. In particular,
our services provided outdoors or outside of a sealed environment may be
adversely affected by inclement weather conditions, particularly in the
northeast. Accordingly, extended periods of rain, cold weather or other
inclement weather conditions may result in delays in commencing or completing
projects, in whole or in part. Any such delays may adversely effect our
operations and profitability and may adversely effect the performance of other
projects due to scheduling and staffing conflicts.
Substantial Working Capital and Additional Financing Requirements. We
require substantial working capital to support our ongoing operations. As is
common in the environmental services industry, payment for services rendered by
us are generally received pursuant to specific draw schedules after services are
rendered. Thus, pending the receipt of payments for services rendered, we must
typically fund substantial project costs, including significant labor and
bonding costs, from internal and outside financing sources.
We historically relied heavily on bank financing to fund our operations.
Since the consummation of our initial public offering, we have financed our
operations internally without utilizing any substantial new lines of credit.
Because of expenditures relating to the opening of new offices to serve
strategic growth markets and other infrastructure expenditures to support
growth, we have experienced periodic working capital shortages. As a result of
such working capital shortages, we were required to raise additional capital
through the sale of (1) $5 million of convertible notes in the third quarter of
1995, (2) $3 million of Series B Preferred Shares ("Series B Preferred Shares")
in the first quarter of 1997, (3) $3,025,000 of Convertible Notes ("Convertible
Notes") and $3.00 Warrants ("$3.00 Warrants") in the third quarter of 1997, (4)
$3,600,000 of Series C Preferred Shares ("Series C Preferred Shares") and $3.75
Warrants ("$3.75 Warrants") in the first quarter of 1998, and (5) $1,500,000 of
Series RR Preferred Stock in the third quarter of 1998. There is no assurance
that we will not require additional financing in the future and there is no
assurance that any such financing will be available on terms acceptable to us,
or at all, if needed.
Possible Liability in Connection with Legal and Administrative Proceedings.
We are periodically subject to lawsuits and administrative proceedings arising
in the ordinary course of its business. Included in such proceedings are
periodic administrative proceedings initiated by various environmental
regulatory agencies. We are presently a party to an ongoing administrative
proceeding in which the Occupational Safety and Health Administration has
assessed a penalty against us in the amount of $140,000 in connection with the
accidental death of an employee of a subcontractor. The matter presently on
appeal. In a related matter, on February 11, 1997, we were served with a lawsuit
naming us as a co-defendant in a wrongful death cause of action arising out of
the accidental death of an employee of a subcontractor. The suit, styled The
Estate of Percy L. Richard, and Percy D. Richard, a minor by next of friend
Patricia Cunningham v. American Wrecking Corp. and is successors, IDM
Environmental Corp. and its successors, SECO Corp. and its successors, all joint
and individually, and all unknown persons, Case No. 2:97CV filed in the Federal
District Court for the Northern District of Indiana is based on the same facts
that gave rise to the above referenced administrative proceeding instituted by
the Occupational Safety and Health Administration. We believe that the suit, as
it relates to us, is without merit, and intend to vigorously contest the cause
of action. We are being defended and indemnified by our insurance carrier.
In addition to potential liability arising from the performance of
services, we were named as a defendant in a shareholder action filed in November
of 1996 in New Jersey Superior Court styled Goldberg v. IDM Environmental Corp.,
Docket No. L-11783-96. The plaintiff in that cause of action alleged that we
made certain fraudulent misrepresentations to the detriment of the investing
public, and that certain of our officers were unjustly enriched as a result of
their sales of common stock during the period in question. Notwithstanding our
belief that the cause of action was without merit, as a business accommodation,
the matter was settled with a payment by our insurer of $1.125 million. The suit
has been dismissed with prejudice.
9
<PAGE>
In April of 1997, we and our Delaware subsidiary, Global Waste & Energy,
Inc., were named as co-defendants in a cause of action styled Enviropower
Industries, Inc. v. IDM Environmental Corp., Global Waste & Energy, Inc., et al,
filed in the Court of Queen's Bench of Alberta, Judicial District of Calgary
(Action No. 9701-04774). The plaintiff, Enviropower (formerly known as
Continental Waste Conversion International, Inc.), alleged that the license
granted to us to utilize and market Enviropower's proprietary gasification
technology was granted without proper corporate authority due to the lack of
shareholder approval. The plaintiff has asserted the subsequent employment by
Global Waste & Energy of two former officers of Enviropower as a basis for its
allegations. Enviropower sought to have the license and all other agreements
between Enviropower and us declared null and void in addition to seeking damages
for alleged lost profits and other unspecified damages. In June of 1997, we
filed a separate cause of action against Enviropower seeking injunctive relief
against Enviropower, seeking to enforce the agreements with Envirpower and to
collect amounts owed to us by Enviropower. On September 19, 1997, we were
awarded an interim injunction against Enviropower recognizing our exclusive
rights to the licensed technology throughout the pendency of the action and
until further order of the court. Enviropower has since filed for protection
under Canadian bankruptcy laws, staying all proceedings between us and
Enviropower. We are awaiting a determination by the Trustee for Enviropower as
to his intent with respect to liquidation of the bankruptcy estate. The
injunction order entered in our favor protecting our exclusive right to the
technology remains in full force and effect.
In July of 1998, we, our Delaware subsidiary, Global Waste & Energy and
certain affiliates and officers were named as co-defendants in a cause of action
styled Kasterka Vrtriebs GmbH v. IDM Environmental Corp., et al, filed in the
Court of Queen's Bench of Alberta, Judicial District of Calgary. The plaintiff,
Kasterka, has alleged that we and our affiliates breached a marketing agreement
that had been entered between Kasterka and Enviropower. The plaintiff has
alleged that the defendants failed to supply the required plans and
specifications relating to the gasification technology originally developed by
Enviropower and that, as a result, Kasterka was unable to manufacture and market
gasification units in the territories designated in the marketing agreement.
Kasterka has asserted a variety of claims for damages in the aggregate amount of
approximately $42 million. We believe the suit is without merit and intend to
vigorously contest the cause of action
In September of 1998, we were named as a defendant in a cause of action
styled Balerna Concrete Corporation, et al. v. IDM Environmental Corp., et al.,
filed in the United States District Court of Massachusetts (Case No.
98CV11883ML). The plaintiffs alleged that we, and others, engaged in a pattern
of illegal conduct to divert funds from the plaintiffs through the operation of
a concrete finishing business. The plaintiffs have asserted various claims under
RICO, common law fraud, conversion, breach of contract and others basis seeking
damages in an amount to be determined by the court. We believe the suit is
without merit and intend to vigorously contest the cause of action.
While we have been able to settle all prior legal and administrative
proceedings on terms believed to be acceptable to and in our best interests,
there is no assurance that we will not be subject to legal and administrative
proceedings in the future which may materially adversely effect us.
Ability to Collect Amounts Owed Pursuant to Changes in Scope of Services.
We have periodically been required to expand the scope of services on projects
due to undisclosed circumstances, delays or disruptions caused by clients or
other contractors and change orders requested by customers. In such situations,
we have routinely sought additional compensation for the additional services
rendered as a result of such undisclosed circumstances, delays or disruptions
and change orders. While we believe that we are entitled to compensation to
cover our additional costs, at a minimum, in all such circumstances, we have, on
a number of occasions, had disputes with our clients as to the amount of
additional compensation owed and delays in the payment of such amounts. Should
we be unable to collect reasonable compensation for additional services or
should we experience extended delays in paying such amounts, we may experience
substantial losses from projects or substantial negative cash flow from projects
until such time as payment is received. Delays in collecting compensation for
additional services, or the inability to collect for such services, could
materially adversely effect us.
Control by Management. Our officers and directors, principally, Messrs.
Freedman and Falco, own an aggregate of approximately 3.8% of the issued and
outstanding shares of common stock as of October 29, 1998. Our shareholders do
not have cumulative voting rights and, accordingly, each shareholder is entitled
to cast one vote per share held on all matters submitted to a vote of
shareholders, including the election of directors. Thus, shareholders holding a
majority of the outstanding shares will be able to elect all of the directors.
Further, Messrs. Freedman and Falco have entered into a Voting Agreement
pursuant to which each has agreed to vote for the other in all elections of
directors and, with respect to all other matters, they have agreed to vote as a
block.
10
<PAGE>
Related Party Transactions and Possible Conflicts of Interest. We have been
controlled, and may continue to be controlled, by Joel Freedman and Frank Falco,
our principal shareholders, and have periodically engaged in transactions with
Messrs. Freedman and Falco and entities controlled by Messrs. Freedman and
Falco. During 1994, 1995, 1996 and 1997, we paid certain personal expenses on
behalf of Messrs. Freedman and Falco, which advances were originally made on an
unsecured non-interest bearing basis without definite repayment terms. Interest
on such loans began to accrue at 7% per annum commencing in June of 1995. Mr.
Freedman surrendered 36,621 shares of Common Stock as payment in full of
$192,260, representing all amounts owed by Mr. Freedman to us, including excess
draws under his employment agreement, in September of 1995. In April of 1996,
Mr. Falco surrendered 92,214 shares of Common Stock as payment in full of
$670,580 representing all amounts owed by Mr. Falco to us as at such date,
including excess draws under his employment agreement. At June 30, 1998, Mr.
Falco owed us a total of approximately $444,499. We presently lease our
principal facilities from a partnership controlled by Messrs. Freedman and Falco
and, in 1995, performed certain construction work to expand such facilities.
Additionally, we previously loaned funds to such partnership in order to
construct certain leasehold improvements on our premises and for various other
purposes. While the loan to the partnership had been repaid in full through
periodic offsets against the lease payments owed by us to the partnership, no
formal terms for repayment of such loan were ever established and no interest
was paid on such loan. Further, while we obtained an appraisal of the fair
rental value of the leased premises and management believes the terms of such
lease to be fair, there is no assurance that we could not obtain more favorable
terms if dealing with third parties. We have no present plans, proposals,
arrangements or understandings with respect to future related transactions.
While we have no formal policy relating to transactions with related parties,
our audit committee reviews all proposed transactions with related parties or
entities controlled by related parties to determine the fairness of such
transactions. Any current or future transactions between us and such affiliates
may involve possible conflicts of interest.
Possible Issuance of Substantial Amounts of Additional Shares Without
Shareholder Approval. At October 29, 1998, we had an aggregate of approximately
34,647,731 shares of Common Stock authorized but unissued and not reserved for
specific purposes and an additional 15,163,531 shares of Common Stock unissued
but reserved for issuance pursuant to (i) our 1993, 1995 and 1998 Incentive
Stock Option Plans, (ii) exercise of outstanding Class A Warrants issued in our
initial public offering, (iii) exercise of nonqualified options issued in
connection with consulting services and employment agreements, and (iv) exercise
of certain Lock-Up Warrants (the "Lock-Up Warrants") and warrants issued in
connection with the placement of the Series B Preferred Shares, Series C
Preferred Shares and Convertible Notes. Additionally, an indeterminate number of
shares of Common Stock will be issued if and when the Series C Preferred Shares
and Series RR Preferred Shares are converted. All of such shares may be issued
without any action or approval by our shareholders. Although we have no other
present plans, agreements, commitments or undertakings with respect to the
issuance of additional shares, or securities convertible into any such shares,
any shares issued would further dilute the percentage ownership held by the
public shareholders.
Possible Issuance of Preferred Stock and Superior Rights of Preferred
Stock. In addition to the above referenced shares of Common Stock which may be
issued without shareholder approval, we have 1,000,000 shares of authorized
preferred stock. At October 29, 1998, we had 300 Series C Preferred Shares and
982.801 Series RR Preferred Shares issued and outstanding and had reserved a
total of 200,000 shares for issuance pursuant to a Share Rights Plan adopted in
1996. Prior to the distributions of any amounts to the holders of Common Stock,
whether as dividends or on liquidation, the holders of outstanding preferred
stock must have received their cumulative dividend or liquidation preference, as
appropriate. While we have no present plans to issue any additional shares of
preferred stock, other than shares which may be issued in the event our Share
Rights Plan is triggered, our Board of Directors has the authority, without
shareholder approval, to create and issue one or more series of such preferred
stock and to determine the voting, dividend and other rights of holders of such
preferred stock. The issuance of any of such series of preferred stock could
have an adverse effect on the holders of Common Stock.
The ability of the board of directors to fix the terms of and issue shares
of Preferred Stock without shareholder approval, combined with the Share Rights
Plan and other anti-takeover provisions in our certificate of incorporation and
bylaws, could (1) result in our being less attractive to a potential acquiror
and (2) result in shareholders receiving less for their shares than otherwise
might be available in the event of a take over attempt.
11
<PAGE>
Shares Eligible for Future Sales. All of the shares of our Common Stock
owned by non-public shareholders are "restricted securities" as that term is
defined under Rule 144 promulgated under the Securities Act of 1933, as amended
(the "Act") and may only be sold pursuant to a registered offering or in
accordance with applicable exemptions from the registration requirements of the
Act. Rule 144 provides for the sale of limited quantities of restricted
securities without registration under the Act. In general, under Rule 144 a
person (or persons whose shares are aggregated) who has satisfied a one (1) year
holding period may, under certain circumstances, sell within any three (3) month
period, a number of shares which does not exceed the greater of one percent (1%)
of the then outstanding shares of common stock or the average weekly trading
volume during the four (4) calendar weeks prior to such sale. Rule 144(k) also
permits, under certain circumstances, the sale of shares without any quantity
limitation by a person who is not an affiliate of us and who has satisfied a two
(2) year holding period. We are unable to predict the effect that future sales
under Rule 144 may have on the then prevailing market price of Common Stock. It
can be expected, however, that the sale of any substantial number of shares of
Common Stock will have a depressive effect on the market price of the Common
Stock.
No Dividends. We have not declared or paid, and do not anticipate declaring
or paying in the foreseeable future, any cash dividends on our Common Stock. Our
ability to pay dividends is dependent upon, among other things, our future
earnings, our operating and financial condition, our capital requirements,
general business conditions and other pertinent factors, and is subject to the
discretion of our Board of Directors. Further, as noted above, no distributions
may be made with respect to our Common Stock unless all cumulative dividends
with respect to outstanding preferred stock, if any, have been paid.
Accordingly, there is no assurance that any dividends will ever be paid on our
Common Stock.
Amendment of Reports and Restatement of Financial Statements. As a result
of cost overruns and unapproved change orders on a series of projects during
1996 and the first quarter of 1997, we have implemented certain changes in the
manner in which we accounts for job costs and revenues. In conjunction with
those accounting changes, we restated our financial statements and amended our
reports on Forms 10-Q for the quarters ended March 31, 1996, June 30, 1996,
September 30, 1996, March 31, 1997, June 30, 1997 and September 30, 1997 and on
Form 10-K for the year ended December 31, 1996.
Stock Price Volatility; No Assurance of Continued Quotation on Nasdaq. The
stock markets recently have experienced extreme price and volume fluctuations.
The trading prices of our Common Stock has in the past been, and could in the
future be, subject to wide fluctuations in response to a variety of events or
factors, some of which may be beyond our control. These could include, without
limitation (i) quarterly variations in our operating results, (ii) the liquidity
of the market for the Common Stock, (iii) announcements of business developments
by our company or our competitors, (iv) public perception regarding our company
and our entry into new markets, and (v) general conditions in our company's
industry and the economy.
Our Common Stock is currently listed on Nasdaq. Nasdaq listing maintenance
rules provide that the minimum bid price of common stock must equal or exceed
$1. At October 7, 1998, the bid price of our Common Stock had been below $1 for
a period of 30 consecutive business days. We were notified by Nasdaq on that
date that we would have 90 calendar days from the date of such notice to achieve
compliance with the Nasdaq continued inclusion standards. Compliance requires
that our Common Stock have a minimum bid price of $1 for a minimum of 10
consecutive business days during the 90-day compliance period. Failure to be in
compliance with the requirements or to file a plan acceptable to Nasdaq for
meeting such requirements may result in the delisting of our Common Stock from
Nasdaq. There can be no assurance that the Common Stock will continue to be
listed on Nasdaq.
SELLING STOCKHOLDERS
The Selling Stockholders are the holders of (i) Series C Preferred Shares,
(ii) Series RR Preferred Shares, (iii) $2.40 Warrants, (iv) $3.00 Warrants, (v)
$3.75 Warrants, (vi) $6.00 Warrants, (vii) $6.75 Warrants, and (viii) Lock-Up
Warrants. The shares of Common Stock covered by this Prospectus are being
registered so that the Selling Stockholders may offer the shares of common stock
underlying the preferred stock and warrants for resale from time to time. See
"Plan of Distribution." Except as described below, none of the Selling
Stockholders has had a material relationship with the Company within the past
three years other than as a result of the ownership of the above referenced
securities and the Common Stock issuable pursuant to the conversion or exercise
of, or dividends on, convertible securities.
12
<PAGE>
The following table sets forth the names of the Selling Stockholders, the
number of shares of preferred stock and warrants owned by each of the Selling
Stockholders as of October 29, 1998 and the number of shares of Common Stock
owned beneficially and offered by each of the Selling Stockholders as of October
29, 1998. For the purposes of calculating the number of shares of Common Stock
beneficially owned by the Selling Stockholders, the number of shares of Common
Stock calculated to be issuable in connection with the conversion of the Series
C Preferred Shares and Series RR Preferred Shares is based on a conversion price
that is derived from the average closing bid price of the Common Stock on the
five trading days ended October 29, 1998 (which was $0.7125).
The information included below is based upon information provided by the
Selling Stockholders. Because the Selling Stockholders may offer all, some or
none of their Common Stock, no definitive estimate as to the number of shares
that will be held by the Selling Stockholders after such offering can be
provided and the following table has been prepared on the assumption that all
shares of Common Stock offered under this Prospectus will be sold.
<TABLE>
Shares of
Common
Stock
Shares of Warrants Beneficially Shares of
Convertible Owned Owned and Common Stock
Preferred Stock (4)(5)(6) Offered (10)(11) Owned After
Name (1) Owned (2)(3) (7)(8)(9) (12)(13)(14) Offering
---------------- ---------------- ----------- ----------------- ---------------
<S> <C> <C> <C> <C>
Murray Huberfeld/David
Bodner Partnership............ 150 2,205,250 2,485,952 0
The Isosceles Fund Limited....... 982.801 1,839,160 0
Profinsa Investments Ltd......... 150 975,250 1,255,952 0
Rita Folger...................... 281,000 281,000 0
Adar Equities L.L.C.............. 1,350,000 1,350,000 0
Jules Nordlicht.................. 420,000 280,000 0
Newark Sales Corp................ 315,000 315,000 0
Rochon Capital Group Ltd......... 200,000 200,000 0
Cong. Ahavas Tzdokah
V Chesed....................... 188,000 188,000 0
Shlomoh Kupetz Kahal
Tefico Lemoshe................. 70,500 70,500 0
M&A Management L.L.C............. 52,763 52,763 0
Elda Capital Corp................ 51,975 51,975 0
Seymour Huberfeld................ 26,250 17,500 0
Mirrer Yeshiva Central
Institute..................... 26,250 17,500 0
Seth J. Antine................... 26,250 17,500 0
Milwaukee Kollel Inc............. 26,250 17,500 0
Shor Yoshuv Institute Inc........ 26,250 17,500 0
Connie Lerner.................... 21,250 15,000 0
Shalom Torah Center.............. 17,500 17,500 0
Harry Adler...................... 13,125 8,750 0
Fred Rudy........................ 13,125 8,750 0
Jonathan Mayer................... 13,125 8,750 0
Moshe Mueller.................... 8,750 0 0
Clifton Management
& Trading..................... 4,375 4,375 0
</TABLE>
(1) Unless otherwise indicated in the footnotes to this table, the persons and
entities named in the table have sole voting and sole investment power with
respect to all shares beneficially owned, subject to community property
laws where applicable.
13
<PAGE>
(2) Includes 300 Series C Convertible Preferred Shares held by the following
shareholders as of October 29, 1998: Murray Huberfeld/David Bodner
Partnership - 150 shares; and Profinsa Investments Ltd. - 150 shares. A
total of 3,600 Series C Preferred Shares were originally issued by the
Company in a private placement in February 1998 for $1,000 per share. The
Series C Preferred Shares are convertible, in whole or in part, at the
option of the holder. The Series C Preferred Shares are convertible into
Common Stock at the lesser of (i) $3.25 per share, or (ii) 75% of the
average closing bid price of the Common Stock over the five trading-day
period preceding conversion. The conversion price will be adjusted to
reflect stock dividends, stock splits and certain other capital
reorganizations or reclassifications. Further, the company has the right,
upon notice to the holders, to redeem, for 125% of the amount proposed to
be converted, any Series C Preferred Shares submitted for conversion at a
conversion price of less than $2.75. The Series C Preferred Shares pay a 7%
annual dividend payable quarterly and at maturity or on conversion in cash
or Common Stock, at the Company's option. The Series C Preferred Shares
mature on August 15, 1999 at which time the Series C Preferred Shares
automatically convert to Common Stock, provided that the Company's Common
Stock continues to be listed on The Nasdaq Stock Market and provided that
the shares issuable upon conversion of the Series C Preferred Shares may,
at that time, be resold pursuant to an effective registration statement or
pursuant to Rule 144. In the event that the conditions for automatic
conversion of the Series C Preferred Shares are not satisfied at August 15,
1999, the Series C Preferred Shares shall be redeemed by the Company at
$1,000 per share plus accrued dividends. Conversion of the Series C
Preferred Shares is subject to the restrictions that the holders,
individually, will not beneficially own in excess of 4.99% of the Company's
Common Stock following any conversion. For a further description of the
rights of the holders of the Series C Preferred Shares, see the Amended and
Restated Certificate of Designation filed as an exhibit to the registration
statement filed with the Securities and Exchange Commission (No. 333-56705)
on June 12, 1998 and declared effective on June 22, 1998.
(3) Includes 982.801 Series RR Preferred Shares held by The Isosceles Fund
Limited at October 29, 1998. A total of 1,500 Series RR Preferred Shares
were originally issued by the Company in a private placement in August 1998
for $1,000 per share. Beginning on August 28, 1998, up to 50% of the Series
RR Preferred Shares may be converted, at the option of the holder.
Beginning thirty (30) days thereafter, all of the Series RR Preferred
Shares may be converted. The Series RR Preferred Shares are convertible
into Common Stock at the lesser of (i) $2.25 per share, or (ii) 75% of the
average closing bid price of the Common Stock over the five trading-day
period preceding conversion. The conversion price will be adjusted to
reflect stock dividends, stock splits and certain other capital
reorganizations or reclassifications. At any time after August 28, 2000,
the Company, at its option, shall have the right to cause the mandatory
conversion of the Series RR Preferred Shares. The Series RR Preferred
Shares pay a 6% annual dividend payable semi-annually and at maturity or on
conversion in cash or Common Stock, at the Company's option. Conversion of
the Series RR Preferred Shares is subject to the restrictions that the
holders, individually, will not beneficially own in excess of 9.9% of the
Company's Common Stock following any conversion. Conversion of the Series
RR Preferred Shares is further limited such that the total number of shares
of Common Stock issuable upon conversion shall not exceed 3,600,000 shares
(the "Share Cap") unless and until the shareholders of the Company have
approved issuances above that level. In the event that the Share Cap is
reached and shareholder approval has not been obtained for issuances beyond
that level, all remaining Series RR Preferred Shares outstanding are
subject to redemption, on demand of the holder, at $1,200 per share plus
accrued dividends. For a further description of the rights of the holders
of the Series RR Preferred Shares, see the Certificate of Designation filed
as an exhibit to the Quarterly Report on Form 10-Q for the period ended
June 30, 1998 filed with the Securities and Exchange Commission.
(4) Includes 100,000 $2.40 Warrants held by Rochon Capital Group Ltd. as of
October 29, 1998. The $2.40 Warrants were issued in conjunction with the
Company's private placement of Series B Preferred Stock in February of
1997. The $2.40 Warrants are exercisable for a period of five years to
purchase Common Stock at $2.40 per share.
14
<PAGE>
(5) Includes 2,078,488 $3.00 Warrants held by the following persons as of
October 29, 1998: Adar Equities L.L.C. - 750,000; Murray Huberfeld/David
Bodner Partnership - 630,000; Jules Nordlicht - 280,000; Rochon Capital
Group Ltd. - 100,000; Rita Folger - 70,000; M&A Management L.L.C. - 52,763;
Elda Capital Corp. - 51,975; Shalom Torah Center - 17,500; Seymour
Huberfeld - 17,500; Mirrer Yeshiva Central Institute - 17,500; Seth J.
Antine - 17,500; Milwaukee Kollel Inc. - 17,500; Shor Yoshuv Institute Inc.
- 17,500; Connie Lerner - 12,500; Harry Adler - 8,750; Fred Rudy - 8,750;
and, Jonathan Mayer - 8,750. A total of 2,775,000 $3.00 Warrants were
originally issued in conjunction with the Company's private placement of
Convertible Notes in August of 1997. The $3.00 Warrants are exercisable for
a period of three years to purchase Common Stock at $3.00 per share or, if
less, the lowest conversion price of the Convertible Notes occurring prior
to each exercise. As of October 29, 1998, all of the Convertible Notes had
been exercised thereby fixing the exercise price of the $3.00 Warrants at
$2.75 per share. Subsequently, on November 13, 1998, the Company amended
the $3.00 Warrants of each of the holders, other than Adar Equities, to
reduce the exercise thereof to $0.33 per share for conversions occurring on
or before December 31, 1998 and to $1.00 per share for conversions after
that date. Pursuant to that amendment, the Company was granted the right to
redeem all of those warrants at $.01 per warrant if the Common Stock trades
at or above $2.50 per share for ten consecutive trading days. Exercise of
the $3.00 Warrants is limited so that no exercise will be permitted where
the holder will beneficially own in excess of 4.99% of the Company's Common
Stock following such exercise. For a further description of the rights of
the holders of the Warrants, see the form of Warrant filed as an exhibit to
the Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1997.
(6) Includes 2,350,000 $3.75 Warrants held by the following persons as of
October 29, 1998: Murray Huberfeld/David Partnership - 975,250; Profinsa
Investments Ltd. - 975,250; Cong. Ahavas Tzdokah V Chesed - 188,000; Rita
Folger - 141,000; and, Shlomoh Kupetz Kahal Tefico Lemoshe - 70,500. The
$3.75 Warrants were issued in conjunction with the Company's private
placement of Series C Preferred Shares in February of 1998. The $3.75
Warrants are exercisable for a period of four years to purchase Common
Stock at $3.75 per share or, if less, the lowest conversion price of the
Series C Preferred Shares occurring prior to each exercise. As of October
29, 1998, the lowest exercise price of the Series C Preferred Shares, and
the applicable conversion price of the $3.75 Warrants, was $0.271875.
Exercise of the $3.75 Warrants is limited so that no exercise will be
permitted where the holder will beneficially own in excess of 4.99% of the
Company's Common Stock following such exercise. For a further description
of the rights of the holders of the $3.75 Warrants, see the form of Amended
and Restated $3.75 Warrant filed as an exhibit to the registration
statement filed with the Securities and Exchange Commission (No. 333-56705)
on June 12, 1998 and declared effective on June 22, 1998.
(7) Includes 266,875 $6.00 Warrants held by the following persons as of October
29, 1998: Newark Sales Corp. - 157,500; Jules Nordlicht - 70,000; Seymour
Huberfeld - 4,375; Mirrer Yeshiva Central Institute - 4,375; Seth J. Antine
- 4,375; Connie Lerner - 4,375; Milwaukee Kollel Inc. - 4,375; Shor Yoshuv
Institute Inc. 4,375; Moshe Mueller - 4,375; Harry Adler - 2,187.5; Fred
Rudy - 2,187.5; Clifton Management & Trading - 2,187.5; and, Jonathan Mayer
- 2,187.5. The $6.00 Warrants were issued as an inducement for early
exercise by the holders of certain $3.00 Warrants and are exercisable to
the extent of one $6.00 Warrant for each $3.00 Warrant previously
exercised. The $6.00 Warrants are exercisable for a period of one year
commencing June 8, 1998 to purchase Common Stock at $6.00 per share.
Subsequently, on November 13, 1998, the Company amended the $6.00 Warrants
of Newark Sales Corp. to reduce the exercise thereof to $0.33 per share for
conversions occurring on or before December 31, 1998 and to $1.00 per share
for conversions after that date. Pursuant to that amendment, the Company
was granted the right to redeem all of those warrants at $.01 per warrant
if the Common Stock trades at or above $2.50 per share for ten consecutive
trading days. Exercise of the $6.00 Warrants is subject to the restrictions
that the holders, individually, will not beneficially own in excess of
4.99% of the Company's Common Stock following any exercise. For a further
description of the rights of the holders of the $6.00 Warrants, see the
form of $6.00 Warrant filed as an exhibit to the registration statement
filed with the Securities and Exchange Commission (No. 333-56705) on June
12, 1998 and declared effective on June 22, 1998.
15
<PAGE>
(8) Includes 266,875 $6.75 Warrants held by the following persons as of October
29, 1998: Newark Sales Corp. - 157,500; Jules Nordlicht - 70,000; Seymour
Huberfeld - 4,375; Mirrer Yeshiva Central Institute - 4,375; Seth J. Antine
- 4,375; Connie Lerner - 4,375; Milwaukee Kollel Inc. - 4,375; Shor Yoshuv
Institute Inc. 4,375; Moshe Mueller - 4,375; Harry Adler - 2,187.5; Fred
Rudy - 2,187.5; Clifton Management & Trading - 2,187.5; and, Jonathan Mayer
- 2,187.5. The $6.75 Warrants were issued as an inducement for early
exercise by the holders of certain $3.00 Warrants and are exercisable to
the extent of one $6.75 Warrant for each $3.00 Warrant previously
exercised. The $6.75 Warrants are exercisable for a period of one year
commencing June 8, 1998 to purchase Common Stock at $6.75 per share.
Subsequently, on November 13, 1998, the Company amended the $6.75 Warrants
of Newark Sales Corp. to reduce the exercise thereof to $0.33 per share for
conversions occurring on or before December 31, 1998 and to $1.00 per share
for conversions after that date. Pursuant to that amendment, the Company
was granted the right to redeem all of those warrants at $.01 per warrant
if the Common Stock trades at or above $2.50 per share for ten consecutive
trading days. Exercise of the $6.75 Warrants is subject to the restrictions
that the holders, individually, will not beneficially own in excess of
4.99% of the Company's Common Stock following any exercise. For a further
description of the rights of the holders of the $6.75 Warrants, see the
form of $6.75 Warrant filed as an exhibit to the registration statement
filed with the Securities and Exchange Commission (No. 333-56705) on June
12, 1998 and declared effective on June 22, 1998.
(9) Includes 1,270,000 Lock-Up Warrants held by the following persons as of
October 29, 1998: Murray Huberfeld/David Bodner Partnership - 600,000; Adar
Equities L.L.C. - 600,000; and, Rita Folger - 70,000. The Lock-Up Warrants
were issued pursuant to the terms of certain Lock-Up Agreements whereby the
Lock-Up Warrants were issued in consideration of the holders' agreement not
to sell shares of Common Stock underlying 1,450,000 $3.00 Warrants before
July 30, 1998. The Lock-Up Warrants are exercisable commencing July 6, 1998
and ending February 11, 2001 to purchase Common Stock at $4.50 per share.
Subsequently, on November 13, 1998, the Company amended the Lock-Up
Warrants of each of the holders, other than Adar Equities, to reduce the
exercise thereof to $0.33 per share for conversions occurring on or before
December 31, 1998 and to $1.00 per share for conversions after that date.
Pursuant to that amendment, the Company was granted the right to redeem all
of those warrants at $.01 per warrant if the Common Stock trades at or
above $2.50 per share for ten consecutive trading days. Exercise of the
Lock-Up Warrants is subject to the restrictions that the holders,
individually, will not beneficially own in excess of 4.99% of the Company's
Common Stock following any exercise. For a further description of the
rights of the holders of the Lock-Up Warrants, see the form of Lock-Up
Warrant filed as an exhibit to the Company's Annual Report on Form 10-K/A
for the year ended December 31, 1997.
(10) As required by regulations of the Commission, the number of shares shown as
beneficially owned includes shares which can be purchased within 60 days
after October 29, 1998. The actual number of shares of Common Stock
beneficially owned is subject to adjustment and could be materially less or
more than the estimated amount indicated depending upon factors which
cannot be predicted by the Company at this time, including, among others,
the market price of the Common Stock prevailing at the actual date of
conversion of the Series C Preferred Shares or Series RR Preferred Shares,
and whether or to what extent dividend payments to the holders of the
Series C Preferred Shares and Series RR Preferred Shares are paid in Common
Stock.
(11) The number of shares shown as being beneficially owned and offered in the
table includes the following shares issuable upon the exercise of $6.00
Warrants outstanding and exercisable at October 29, 1998: Newark Sales
Corp. - 157,500; Clifton Management & Trading - 2,187.5; and, Connie Lerner
- 1,250. Excludes all other shares of common stock issuable upon exercise
of the $6.00 Warrants as such warrants are not exercisable until on or
after the exercise of $3.00 Warrants.
(12) The number of shares shown as being beneficially owned and offered in the
table includes the following shares issuable upon the exercise of $6.75
Warrants outstanding and exercisable at October 29, 1998: Newark Sales
Corp. - 157,500; Clifton Management & Trading - 2,187.5; and, Connie Lerner
- 1,250. Excludes all other shares of common stock issuable upon exercise
of the $6.75 Warrants as such warrants are not exercisable until on or
after the exercise of $3.00 Warrants.
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(13) The number of shares shown as being beneficially owned and offered in the
table is based on the assumed conversion of all outstanding Series C
Preferred Shares at a hypothetical conversion price of $0.534375 per share
(which is the conversion price based on the average closing bid price of
$0.7125 on the five trading-days ended October 29, 1998) and assumes
payment of dividends on the Series C Preferred Shares in cash, resulting in
the holding of the following shares of common stock: Murray Huberfeld/David
Bodner Partnership - 280,702; and, Profinsa Investments Ltd. - 280,702.
(14) The number of shares shown as being beneficially owned and offered in the
table is based on the assumed conversion of all outstanding Series RR
Preferred Shares at a hypothetical conversion price of $0.534375 per share
(which is the conversion price based on the average closing bid price of
$0.7125 on the five trading-days ended October 29, 1998) and assumes
payment of dividends on the Series RR Preferred Shares in cash, resulting
in the holding of the following shares of common: The Isosceles Fund
Limited - 1,839,160.
PLAN OF DISTRIBUTION
The Company is registering the shares of Common Stock on behalf of the
Selling Stockholders pursuant to contractual registration rights. As used
herein, "Selling Stockholders" includes donees and pledgees selling shares
received from a named Selling Stockholder after the date of this prospectus. All
costs, expenses and fees in connection with the registration of the shares of
Common Stock offered hereby will be borne by the Company. Brokerage commissions
and similar selling expense, if any, attributable to the sale of shares of
Common Stock will be borne by the Selling Stockholders. Sales of shares of
Common Stock may be effected by Selling Stockholders from time to time in one or
more types of transactions (which may include block transactions) on Nasdaq, in
the over-the-counter market, in negotiated transactions, through put or call
options transactions relating to the shares of Common Stock, through short sales
of shares of Common Stock, or a combination of such methods of sale, at market
prices prevailing at the time of sale, or at negotiated prices. Such
transactions may or may not involve brokers or dealers. The Selling Stockholders
have advised the Company that they have not entered into any agreements,
understandings or arrangements with any underwriters or broker-dealers regarding
the sale of their securities, nor is there an underwriter or coordinating broker
acting in connection with the proposed sale of shares of Common Stock by the
Selling Stockholders.
Selling Stockholders may effect such transactions by selling shares
directly to purchasers or to or through broker-dealers, which may act as agents
or principals. Such broker-dealers may receive compensation in the form of
discounts, concessions, or commissions from the Selling Stockholders and/or the
purchasers of shares for whom such broker-dealers may act as agents or to whom
they sell as principal, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions).
The Selling Stockholders and any broker-dealers that act in connection with
the sale of shares might be deemed to be "underwriters" within the meaning of
Section 2(11) of the Securities Act, and any commissions received by such
broker-dealers and any profit on the resale of the shares of Common Stock sold
by them while acting as principals might be deemed to be underwriting discounts
or commissions under the Securities Act. The Company has agreed to indemnify
each Selling Stockholder against certain liabilities, including liabilities
arising under the Securities Act. The Selling Stockholders may agree to
indemnify any agent, dealer or broker-dealer that participates in transactions
involving sales of the shares against certain liabilities, including liabilities
under the Securities Act.
Because Selling Stockholders may be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act, the Selling Stockholders will be
subject to the prospectus delivery requirements of the Securities Act, which may
include delivery through the facilities of a national securities exchange
pursuant to Rule 153 under the Securities Act. The Company has informed the
Selling Stockholders that the anti-manipulative provisions of Regulation M
promulgated under the Exchange Act may apply to their sales in the market.
Selling Stockholders also may resell all or a portion of the shares of
Common Stock in open market transactions in reliance upon Rule 144 under the
Securities Act, provided they meet the criteria and conform to the requirements
of such Rule.
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Upon the Company being notified by a Selling Stockholder that any material
arrangement has been entered into with a broker-dealer for the sale of shares of
Common Stock through a block trade, special offering, exchange distribution or
secondary distribution or a purchase by a broker or dealer, a supplement to this
prospectus will be filed, if required, pursuant to Rule 424(b) under the
Securities Act, disclosing (i) the name of each such selling shareholder and of
the participating broker-dealer(s), (ii) the number of shares involved, (iii)
the price at which such shares were sold, (iv) the commissions paid or discounts
or concessions allowed to such broker-dealer(s), where applicable, (v) that such
broker-dealer(s) did not conduct any investigation to verify the information set
out or incorporated by reference in this prospectus and (vi) other facts
material to the transaction. In addition, upon the Company being notified by a
Selling Stockholder that a donee or pledgee intends to sell more than 500
shares, a supplement to this prospectus will be filed.
The Company is registering the shares of Common Stock offered by the
Selling Stockholders hereunder pursuant to contractual registration rights.
The shares of Common Stock offered hereunder may be sold from time to time
by the Selling Stockholders, or by pledgees, donees, transferees or other
successors in interest. Such sales may be made on the Nasdaq National Market or
in the over-the-counter market or otherwise at prices and on terms then
prevailing or related to the then current market price, or in negotiated
transactions. The shares of Common Stock may be sold to or through one or more
broker-dealers, acting as agent or principal in underwritten offerings, block
trades, agency placements, exchange distributions, brokerage transactions or
otherwise, or in any combination of transactions.
In connection with any transaction involving the Common Stock,
broker-dealers or others may receive from the Selling Stockholders, and may in
turn pay to other broker-dealers or others, compensation in the form of
commissions, discounts or concessions in amounts to be negotiated at the time.
Broker-dealers and any other person participating in a distribution of the
Common Stock may be deemed to be "underwriters" within the meaning of the Act in
connection with such distribution, and any such commissions, discounts or
concessions may be deemed to be underwriting discounts or commissions under the
Act.
Any or all of the sales or other transactions involving the Common Stock
described above, whether effected by the Selling Stockholders, any broker-dealer
or others, may be made pursuant to this Prospectus. In addition, any shares of
Common Stock that qualify for sale pursuant to Rule 144 under the Act may be
sold under Rule 144 rather than pursuant to this Prospectus.
To comply with the securities laws of certain states, if applicable, the
Common Stock may be sold in such jurisdictions only through registered or
licensed brokers or dealers. In addition, shares of Common Stock may not be sold
unless they have been registered or qualified for sale or an exemption from
registration or qualification requirements is available and is complied with
under applicable state securities laws.
The Company and the Selling Stockholders have agreed, and hereafter may
further agree, to indemnify each other and certain persons, including
broker-dealers or others, against certain liabilities in connection with any
offering of the Common Stock, including liabilities arising under the Act.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Vanderkam &
Sanders, of Houston, Texas.
EXPERTS
The consolidated financial statements of IDM appearing in the IDM
Environmental Corp. Annual Report on Form 10-K/A for the fiscal year ended
December 31, 1997, have been audited by Samuel Klein and Company, independent
certified public accountants, as set forth in their report thereon included
therein and incorporated herein by reference. Such consolidated financial
statements are incorporated herein by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
