Filed Pursuant to Rule 424 (b)(3)
Registration No. 333-28485
IDM ENVIRONMENTAL CORP.
7,000,000 Shares of Common Stock
$.001 par value
All of the shares of Common Stock, par value $.001 per share ("Common
Stock"), of IDM Environmental Corp., a New Jersey corporation ("IDM" or the
"Company"), offered hereby are being offered for resale by certain stockholders
of the Company (the "Selling Stockholders") as described more fully herein. The
Company will not receive any proceeds from the sale of the shares offered
hereby. The Common Stock of the Company is quoted on the Nasdaq National Market
under the symbol "IDMC." The last reported sales price of the Company's Common
Stock on the Nasdaq National Market on November 18, 1997 was $6.25 per share.
The shares of Common Stock offered hereby by the Selling Stockholders
consist of a presently indeterminate number of shares issued or issuable upon
conversion or otherwise in respect of (i) 300 shares of Series B 7% Convertible
Preferred Stock (the "Series B Preferred Shares"); (ii) $3,025,000 of 7%
Convertible Notes due January 31, 1999 (the "Convertible Notes"); (iii)
2,675,000 Warrants issued in conjunction with the Convertible Notes (the "$3.00
Warrants"); (iv) 100,000 Warrants issued in conjunction with the Series B
Preferred Shares (the "$2.40 Warrants") and (v) 100,000 stock options (the
"Stock Options"). For the purpose of determining the number of shares of Common
Stock to be registered hereby, the number of shares of Common Stock calculated
to be issuable in connection with the conversion of the Series B Preferred
Shares and the Convertible Notes is based on an average closing bid price of the
Common Stock on the five trading days ended November 18, 1997 ($6.48125 per
share), and has been arbitrarily selected. The number of shares available for
resale is subject to adjustment and could be materially less or more than such
estimated amount depending on factors which cannot be predicted by IDM at this
time, including, among others, the timing of conversion of the Series B
Preferred Shares and Convertible Notes and the future market price of the Common
Stock at the time of conversion. This presentation is not intended, and should
in no way be construed, to constitute a prediction as to the future market price
of the Common Stock. See "Selling Stockholders" for a description of the rights
and conversion terms of the Series B Preferred Shares, Convertible Notes, $3.00
Warrants, $2.40 Warrants and Stock Options.
The Selling Stockholders, directly or through agents, broker-dealers or
underwriters, may sell the Common Stock offered hereby from time to time on
terms to be determined at the time of sale, in transactions on the Nasdaq
National Market, in privately negotiated transactions or otherwise. The Selling
Stockholders and any agents, broker-dealers or underwriters that participate in
the distribution of the Common Stock may be deemed to be "underwriters" within
the meaning of the Securities Act of 1933, as amended (the "Act"), and any
commission received by them and any profit on the resale of the Common Stock
purchased by them may be deemed to be underwriting discounts or commissions
under the Act. See "Plan of Distribution."
THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVE
A HIGH DEGREE OF RISK. SEE "RISK FACTORS" ON PAGE 4.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is January 9, 1998
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All expenses of this offering will be paid by the Company 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 $45,000. 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. The Company has agreed to indemnify the Selling
Stockholders and certain other persons against certain liabilities, including
liabilities under the Act.
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY, THE COMMON STOCK IN ANY JURISDICTION WHERE, OR
TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE
FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE
DATE HEREOF.
TABLE OF CONTENTS
Available Information............................................. 3
Incorporation of Certain Documents by Reference................... 3
The Company....................................................... 4
Risk Factors...................................................... 4
Selling Stockholders.............................................. 11
Plan of Distribution.............................................. 14
Legal Matters..................................................... 15
Experts........................................................... 15
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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, 1996.
(2) The Company's Quarterly Reports on Form 10-Q/A for the quarters ended
March 31, 1997, June 30, 1997 and September 30, 1997.
(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.
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.
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THE COMPANY
The Company is a national provider of specialized contract services with an
emphasis on plant decommissioning, dismantlement, deconstruction and
environmental remediation. The Company serves private industry, utilities and
governmental entities in the areas of plant dismantling, plant deconstruction
and relocation, asbestos abatement, radiological remediation and hazardous waste
remediation, among others. Services are generally provided by trained craftsmen
employed by the Company based on work plans, schedules and cost estimates
developed by the Company's management team and implemented under the supervision
of Company superintendents and foremen. In order to satisfy customer concerns
with respect to project scheduling, cost control, work responsibility and
overall performance, the Company's full time work force is cross trained in each
of the Company's specialty areas allowing the Company to perform "whole jobs" in
virtually all instances. In addition to offering environmental services, the
Company buys and sells equipment and entire plants and offers relocation and
reinstallation services with respect to such plants and equipment.
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 Common Stock
underlying the Preferred Shares, Convertible Notes, $3.00 Warrants, $2.40
Warrants or Stock Options.
Losses From Operations. The Company has experienced significant operating
losses during the past two years. The Company had net losses of $9.1 million
during the year ended December 31, 1996 and $3.9 million during the year ended
December 31, 1995 and a net loss of $6.0 million during the nine months ended
September 30, 1997. Such losses have been attributable to a combination of
substantial infrastructure expenditures to support future growth, delays in the
commencement of projects and unusual expenses. Until such time as the Company is
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, the
Company will continue to experience losses. While management believes that
multiple large projects will be performed during 1997, based on past delays and
past operating results, there can be no assurance that the Company will be able
to operate profitably during 1997 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 Haliburton, 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 the firms with which the Company competes in the
environmental services industry have significantly greater financial resources
and more established market positions than the Company. While management
believes that the Company's experience and expertise in the specialty areas of
decontamination and decommissioning will allow the Company to compete
successfully, there can be no assurance that other firms will not expand into or
develop expertise in the areas in which the Company specializes, thus decreasing
any competitive advantage which the Company may enjoy.
Uncertainty Relating to Integration of Recent Acquisitions. As a result of
increasingly intense competition in the environmental services industry, the
Company has undertaken various strategic technology acquisitions and alliances
in recent years in order to improve the Company's competitive position and
increase the Company's 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
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from, and equity interest in, Life International Products pursuant to which the
Company utilizes 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 the Company received the rights to
utilize Solucorp's Molecular Bonding System soil remediation technology. Each of
such acquisitions and alliances entailed various funding commitments on the part
of the Company. While management believes that each of the described
acquisitions/alliances provides the Company with state-of-the-art technologies,
there can be no assurance that the Company 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 have been or may in the future be acquired by the Company, may not yet be
commercially viable or may require ongoing funding beyond the capabilities of
the Company before those technologies can be successfully deployed on a
commercial basis. In the event the Company is unable to successfully integrate
its technology acquisitions/alliances with its existing operations or the
Company is unable or unwilling to meet the funding requirements necessary to
fully commercialize such technologies, it is possible that the Company could
loss some or all of its investment in such technologies. Any such losses could
materially adversely impact the Company's operating results and financial
position.
While the Company is continually involved in the evaluation of new
technologies to supplement the Company's existing services offerings and to
enhance the Company's operating results and competitive position, the Company
has no current plans, arrangements or understandings with respect to future
acquisitions or mergers.
Dependence on Ability to Secure Bonding. In order to bid on and
successfully secure contracts to perform environmental services of the nature
offered by the Company, the Company may, depending upon the bid specifications,
be required to provide surety bonds for each respective project. Thus, the
number and size of contracts which the Company can perform is directly dependent
upon the Company's ability to obtain bonding which, in turn, is dependent upon
the Company's net worth, liquid working capital, and the nature and projected
profitability of projects undertaken, among other factors. The Company, prior to
completion of its initial public offering, was unable to secure additional and
larger contracts as a result of such bonding requirements and may incur similar
difficulties in the future. While capital raising efforts in recent years have
allowed the Company to substantially increase its working capital and net worth,
thus increasing its bonding capacity, there can be no assurance that the Company
will have adequate bonding capacity to bid on all of the projects which it would
otherwise bid upon were it to have such bonding capacity or that it will in fact
be successful in obtaining additional jobs on which it 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 the Company 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 Company 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. The Company 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
the Company being exposed to clean-up cost liability, or other liability, for
activities conducted by the Company which do not presently expose the Company to
such liability.
The Company's surplus equipment and scrap sales operations may also expose
the Company to liability under environmental laws in the event of the sale of
contaminated equipment or scrap. While the Company inspects all such equipment
and scrap before purchasing or selling such items, there is no assurance that
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such inspection will identify all possible contamination and the Company may be
found to have certain liability should such items be bought or sold by the
Company. The Company has not experienced any claims with respect to the purchase
or sale of contaminated equipment or scrap.
While the Company has 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, the Company on occasion has been named in
complaints, and may be named in future complaints, as violating various
regulations governing the removal of asbestos. The Company has 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 the Company's operations and the industry in which it
operates, 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 the Company's business and financial condition.
Dependence on Continued Environmental Regulation. The growth of the
environmental services industry, as well as the growth of the Company, 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 the operations of
the Company.
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 the operations and profitability of the Company.
Limited Insurance Coverage. While the Company maintains insurance coverage,
including environmental impairment liability insurance covering such areas as
environmental clean ups, corrective action or damages, the Company's
environmental impairment insurance policy does not cover any liability arising
from radiological operations other than low level radioactive soil excavation
and facility cleaning. While the Company has evaluated such additional insurance
coverage in the past and may evaluate the same in the future, the Company does
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, the Company were to incur liability for environmental impairment
in connection with its excluded radiological services, such liability could have
a material adverse effect on the financial condition and results of operations
of the Company. Further, as the cost of cleaning or correcting environmental
hazards can be extremely high, even if the Company is 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, the
Company may incur losses in excess of its insurance coverage.
Dependence on Major Customer. A significant portion of the Company's
revenues in recent years have come from, and a significant portion of the
Company's resources have been devoted to, one or more large clients (e.g.,
Allied-Signal and FFC Jordan Fertilizer Company). Revenues from the FFC Jordan
project constituted 34% of the Company's total revenues in 1995 and 44.7% of
revenues in 1994. Likewise, the Allied-Signal project accounted for 34.8% and
26.4% of the Company's total revenues in 1991 and 1992, respectively. In early
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1993, the Company completed the Allied-Signal project and the FFC Jordan project
was completed during 1996. In order for the Company to replace the revenues
attributable to such large projects, the Company must secure one or more large
projects or a large number of smaller projects. While the Company believes that
it can successfully replace its past and ongoing large projects with other large
projects and with a large volume of smaller projects, there is no assurance that
the Company can adequately replace such projects with other projects which will
produce as much revenue. Further, there is no assurance that the Company will
not continue to be dependent upon a small number of major customers for a
significant portion of its revenues and earnings.
Dependence on Key Personnel. The Company's operations are dependent upon
the continued efforts of senior management. While the Company has entered into
employment agreements with Joel Freedman and Frank Falco, the Company's
principal executive officers, the Company does not have employment agreements
with any of its other officers or employees. The Company has, 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 the Company for a period of three years after the
termination of their employment with the Company within 250 miles of the
Company's 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 the
Company's key employees may not leave the Company and enter into direct
competition with the Company. Should any of the members of the Company's senior
management be unable or unwilling to continue in their present roles or should
such persons determine to enter into competition with the Company, the Company's
prospects could be adversely affected. The Company presently carries key-man
life insurance on its Chief Executive Officer, Joel Freedman, and its Chairman
of the Board and Chief Operating Officer, Frank Falco.
Dependence on Temporary Labor. As a result of the national and
international scope of the Company's operations, the Company is typically
required to staff jobs at least partially with temporary workers hired on
location. While all of the Company's jobs are performed under the supervision
and direction of the Company's supervisors and foremen and the Company attempts
to utilize as many of the Company's full time laborers as possible to staff
jobs, the location and other factors effecting jobs performed away from the
immediate vicinity of the Company's headquarters result in the Company regularly
hiring temporary workers on site. The Company carefully reviews 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 the Company and its customers. Accordingly,
the Company 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, the
Company 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.
Seasonality of Business. While the Company provides its services on a
year-round basis, certain aspects of the Company's business display seasonal
characteristics. In particular, Company 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 the Company's 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. The
Company requires substantial working capital to support its ongoing operations.
As is common in the environmental services industry, payment for services
rendered by the Company are generally received pursuant to specific draw
schedules after services are rendered. Thus, pending the receipt of payments for
services rendered, the Company must typically fund substantial project costs,
including significant labor and bonding costs, from financing sources within and
outside of the Company.
The Company historically relied heavily on bank financing to fund its
operations. With the consummation of the Company's initial public offering, the
Company has financed its operations internally without utilizing any substantial
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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, the Company experienced working capital shortages during the
third quarter of 1995, the first quarter of 1997 and the third quarter of 1997.
As a result of such working capital shortages, the Company was required to raise
additional capital through the sale of $5 million of convertible notes in
September of 1995, through the sale of $3 million of Series B Preferred Shares
in February of 1997 and through the sale of $3,025,000 of Convertible Notes and
$3.00 Warrants in August of 1997. There is no assurance that the Company will
not require additional financing in the future. While the Company intends to
seek any bank or other financing which may be required in the future, no such
source of potential financing has been identified and there is no assurance that
any such financing will available on terms acceptable to the Company, or at all,
if needed.
Susceptibility to Inventory Related Losses. As a part of the Company's
surplus equipment operations, the Company regularly purchases surplus equipment
from its customers in connection with the performance of services, as well as
from third parties. Because of the nature of most of the equipment purchased,
most of such equipment is not covered by documents of title. While the Company
receives invoices from the sellers of such equipment, there is no assurance that
creditors and other third parties may not assert claims to ownership or other
rights in some of such equipment from time to time. Management, however, is not
aware of any instances where such claims have arisen in the past and believes
that the Company has good title to all of its inventory of surplus equipment.
In addition to the risk of possible third party claims to the Company's
inventory of surplus equipment, because of the nature of such equipment and the
cost of acquiring, transporting and storing such equipment, the Company often
enters into joint venture arrangements whereby the Company will acquire a fifty
percent interest in surplus equipment with the equipment being held at the joint
venture partner's site pending the sale of such equipment. Such joint venture
arrangements often involve limited, or no, documentation. Accordingly, the
Company may have surplus equipment inventory in many locations throughout the
United States and, in some instances, foreign countries and much of such
inventory may not be under the Company's direct control. While management is not
aware of any material inventory losses to date, because of the above inventory
practices, the Company's inventory does not lend itself to typical inventory
control procedures, thus increasing the possibility of inventory loss, theft or
fraud.
While the Company has substantially reduced its ongoing exposure and
activities in the surplus equipment market with its entry into a joint marketing
relationship with, and sale of substantially all of its surplus equipment
inventory to, Universal Process Equipment Company ("UPE"), the Company may
continue to be exposed to certain inventory risks should claims arise in the
future with respect to equipment previously sold by the Company.
Possible Liability in Connection with Legal and Administrative Proceedings.
The Company is 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. In 1992, the Company was notified by the EPA of alleged
violations relating to the handling of asbestos containing materials. During
1994, the Company paid a $195,000 fine in settlement of such allegations without
any final determination or admission of liability. Similarly, in 1995, the
Company agreed to settle a complaint filed by the EPA in another asbestos
related proceeding. The Company and the EPA agreed to settle such matter without
any finding or admission of liability with the Company agreeing to pay $18,500.
The Company is presently a party to an ongoing administrative proceeding in
which the Occupational Safety and Health Administration has proposed to assess a
penalty against the Company in the amount of $147,000 as a result of the
accidental death of an employee of a subcontractor. On February 11, 1997, the
Company was served with a lawsuit naming the Company 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 Percey L. Richard,
and Percey D. Richard, a minor by next of friend Patricia Cunningham v. American
Wrecking Corp. and its 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 as gave rise to the above
referenced administrative proceeding instituted by the Occupational Safety and
Health Administration. Management believes that the suit, as it relates to the
Company, is without merit, and intends to vigorously contest the cause of
action.
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In addition to potential liability in connection with the Company's
performance of services, the Company is presently 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 has alleged that the Company made certain fraudulent misrepresentations
to the detriment of the investing public and that certain officers of the
Company were unjustly enriched as a result of their sales of common stock during
the period in question. Management believes the cause of action is without merit
and intends to vigorously contest such cause of action. Any liability which may
arise from the cause of action, including costs of defending such cause of
action are covered under the Company's general liability insurance policy
subject to a $200,000 deductible. Notwithstanding management's belief that the
cause of action is without merit and the existence of insurance coverage, the
Company will be liable for costs of defending said cause of action to the extent
of the deductible and any damages awarded, in the event an adverse judgment is
rendered, in excess of the Company's liability insurance coverage. There can be
no assurance that this litigation will not have a material adverse effect on the
Company.
In April of 1997, the Company and its subsidiary, Global Waste & Energy,
Inc., were named as co-defendants in a cause of action styled Continental Waste
Conversion 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, Continental Waste ("CWC"), has alleged
that the license granted to the Company to utilize and market CWC'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 CWC as a basis for
its allegations. CWC is seeking to have the license and all other agreements
between CWC and the Company declared null and void in addition to seeking
damages for alleged lost profits and other amounts. In September, 1997, the
Company was awarded interim judgment on all claims of CWC.
While the Company has been able to settle all prior legal and
administrative proceedings on terms believed to be acceptable to and in the best
interests of the Company, there is no assurance that the Company will not be
subject to legal and administrative proceedings in the future which may
materially adversely effect the Company.
Control by Management. Officers and directors of the Company, principally,
Messrs. Freedman and Falco, own an aggregate of approximately 6.9% of the issued
and outstanding shares of common stock as of November 18, 1997. Shareholders of
the Company 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.
Related Party Transactions and Possible Conflicts of Interest. The Company
has been controlled, and may continue to be controlled, by Joel Freedman and
Frank Falco, its principal shareholders, and has periodically engaged in
transactions with Messrs. Freedman and Falco and entities controlled by Messrs.
Freedman and Falco. During 1994, 1995 and 1996, the Company 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 the Company,
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 the Company as at
such date, including excess draws under his employment agreement. At December
31, 1996, Mr. Falco owed a total of approximately $201,000 to the Company. The
Company presently leases its principal facilities from a partnership controlled
by Messrs. Freedman and Falco and, in 1995, performed certain construction work
to expand such facilities. Additionally, the Company previously loaned funds to
such partnership in order to construct certain leasehold improvements on the
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Company's 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 the Company to the partnership, no formal terms for repayment
of such loan were ever established and no interest was paid on such loan.
Further, while the Company 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 the Company could not obtain more favorable terms if
dealing with third parties. The Company has no present plans, proposals,
arrangements or understandings with respect to future related transactions.
While the Company has no formal policy relating to transactions with related
parties, the Company's 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 the
Company and such affiliates may involve possible conflicts of interest.
Possible Issuance of Substantial Amounts of Additional Shares Without
Shareholder Approval. At November 18, 1997, the Company had an aggregate of
approximately 8,439,324 shares of Common Stock authorized but unissued and not
reserved for specific purposes and an additional 7,239,403 shares of Common
Stock unissued but reserved for issuance pursuant to (i) the Company's 1993 and
1995 Incentive Stock Option Plans, (ii) exercise of outstanding Class A Warrants
issued in the Company's initial public offering, (iii) exercise of nonqualified
options issued in connection with consulting services, and (iv) exercise of
warrants issued in connection with the placement of the Series B Preferred
Shares and Convertible Notes. Additionally, an as yet undetermined number of
shares of Common Stock equal to up to fifteen percent (15%) of the then
outstanding shares of Common Stock will be issued to Messrs. Freedman and Falco
if certain earnings criteria are satisfied and an indeterminate number of shares
of Common Stock will be issued if and when the Series B Preferred Stock and
Convertible Notes are converted. All of such shares may be issued without any
action or approval by the Company's shareholders. Although there are no other
present plans, agreements, commitments or undertakings with respect to the
issuance of additional shares, or securities convertible into any such shares by
the Company, any shares issued would further dilute the percentage ownership of
the Company 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, the Company has 1,000,000 shares of
authorized preferred stock. The Company, at November 18, 1997, had 270 shares of
Series B Preferred Stock issued and outstanding and has reserved a total of
200,000 shares for issuance pursuant to a Share Rights Plan adopted by the
Company 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 the Company has no present plans to issue any
additional shares of preferred stock, other than shares which may be issued in
the event the Company's Share Rights Plan is triggered, the 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 the Company's certificate of
incorporation and bylaws, could (1) result in the Company 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.
Shares Eligible for Future Sales. All of the shares of the Company's 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
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<PAGE>
permits, under certain circumstances, the sale of shares without any quantity
limitation by a person who is not an affiliate of the Company and who has
satisfied a two (2) year holding period. The Company is 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. The Company has not declared or paid, and does not anticipate
declaring or paying in the foreseeable future, any cash dividends on its Common
Stock. The Company's ability to pay dividends is dependent upon, among other
things, future earnings, the operating and financial condition of the Company,
its capital requirements, general business conditions and other pertinent
factors, and is subject to the discretion of the Board of Directors. Further, as
noted above, no distributions may be made with respect to the Company's 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 the Company's 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, the Company has implemented certain changes
in the manner in which it accounts for job costs and revenues to assure proper
revenue and cost recognition going forward. In conjunction with those accounting
changes, the Company restated its financial statemetns and amended its reports
on Forms 10-Q for the quarter 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.
SELLING STOCKHOLDERS
The Selling Stockholders are the holders of (i) shares of Series B
Preferred Stock and common stock issued on the conversion of Series B Preferred
Stock; (ii) Convertible Notes; (iii) $3.00 Warrants; (iv) $2.40 Warrants and (v)
Stock Options. The shares of Common Stock covered by this Prospectus are being
registered so that the Selling Stockholders may offer the shares 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 Series B
Preferred Shares, Convertible Notes, $3.00 Warrants, $2.40 Warrants or Stock
Options or the Common Stock issuable pursuant to the conversion or exercise of,
or dividends or interest on, the Series B Preferred Shares, Convertible Notes,
$3.00 Warrants, $2.40 Warrants or Stock Options.
The following table sets forth the names of the Selling Stockholders, the
number of shares of Common Stock owned beneficially by each of the Selling
Stockholders as of November 18, 1997, and the number of shares which may be
offered for resale pursuant to this Prospectus. 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 B Preferred Shares or Convertible
Notes 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 November 18, 1997
(which was $6.48125).
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.
11
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<TABLE>
<CAPTION>
Shares of Shares of
Common Stock Shares of Common Stock
Beneficially Common Stock Owned After
Name Owned (1)(2) Offered Offering (1)
---- ------------ ---------------- ------------
<S> <C> <C> <C> >
Euro Factors International, Inc. (3)(8)........ 507,531 507,531 -0-
FTS Worldwide Corporation (3).................. 449,438 449,438 -0-
Beauchamp Finance Ltd. (3)..................... 224,719 224,719 -0-
Mitreco International, Inc. (3)................ 224,719 224,719 -0-
Murray Huberfeld/David Bodner
Partnership (4)(5)............................ 990,000 990,000 -0-
Newark Sales Corp. (4)(5)...................... 890,000 890,000 -0-
Jules Nordlicht (4)(5)......................... 440,000 440,000 -0-
Congregation Ahavas Tzedokah
V Chesed (4).................................. 90,000 90,000 -0-
Rita Folger (4)(5)............................. 110,000 110,000 -0-
Shor Yoshuv Institute, Inc. (4)(5)............. 27,500 27,500 -0-
Moshe Mueller (4)(5)........................... 27,500 27,500 -0-
Milwaukee Kollel, Inc. (4)(5).................. 27,500 27,500 -0-
Connie Lerner (4)(5)........................... 27,500 27,500 -0-
Seth J. Antine (4)(5).......................... 27,500 27,500 -0-
Mirrer Yeshiva Centrel Institute (4)(5)........ 27,500 27,500 -0-
Seymour Huberfeld (4)(5)....................... 27,500 27,500 -0-
Harry Adler (4)(5)............................. 13,750 13,750 -0-
Clifton Management & Trading (4)(5)............ 13,750 13,750 -0-
Fred Rudy (4)(5)............................... 13,750 13,750 -0-
Jonathan Mayer (4)(5).......................... 13,750 13,750 -0-
Adar Equities L.L.C. (5)....................... 750,000 750,000 -0-
M&A Management L.L.C. (5)...................... 105,525 105,525 -0-
Elda Capital Corp. (5)......................... 51,975 51,975 -0-
Rochon Capital Group, Ltd. (5)(6).............. 200,000 200,000 -0-
Alexander Charles Lentes (7)................... 50,000 50,000 -0-
Bernd Muller (7)............................... 50,000 50,000 -0-
----------- ----------- ----------
5,381,407 5,381,407 -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.
(2) 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 November 18, 1997. 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 B Preferred Shares or Convertible Notes, and
whether or to what extent dividends and penalty payments to the holders of
the Series B Preferred Shares and interest to the holders of Convertible
Notes are paid in Common Stock.
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<PAGE>
(3) The listed Selling Stockholders hold an aggregate of 270 Series B 7%
Convertible Preferred Shares (out of 300 shares originally issued) which
are convertible into shares of Common Stock. The Series B Preferred Shares
were issued by the Company in a private placement in February 1997 for
$10,000 per share. The Series B Preferred Shares are convertible commencing
May 14, 1997, in whole or in part, at the option of the holder. Each Series
B Preferred Share is convertible at a rate of $10,000 divided by the lesser
of (i) $2.67 or 82% of the average closing bid price of the Common Stock
over the five trading-day period preceding conversion for conversions
occurring between May 14, 1997 and June 12, 1997, (ii) $2.4475 or 79% of
the average closing bid price of the Common Stock over the five trading-day
period preceding conversion for conversions occurring between the June 13,
1997 and July 12, 1997, (iii) $2.225 or 76% of the average closing bid
price of the Common Stock over the five trading-day period preceding
conversion for conversions occurring between July 13, 1997 and August 11,
1997, and (iv) $2.225 or 73% of the average closing bid price of the Common
Stock over the five trading-day period preceding conversion for conversions
occurring on or after August 12, 1997. The conversion price is adjusted,
and the number of shares beneficially owned by the Selling Stockholders
will vary accordingly, to reflect stock dividends, stock splits and certain
other circumstances. Further, the Company has the right, upon notice to the
holders, to redeem for $12,200 per share any Series B Preferred Shares
submitted for conversion at a price of $1.80 or less. The number of shares
shown as being offered in the table is based on the assumed conversion of
the 270 Series B Preferred Shares at a hypothetical conversion price of
$2.225 per share (which is the conversion price based on the average
closing bid price of $6.48125 on the five trading days ended November 18,
1997) and assumes payment of dividends and penalties on the Series B
Preferred Shares in cash. The Series B Preferred Shares pay a 7% dividend
payable on conversion or at redemption in cash or Common Stock, at the
Company's option. Pursuant to the terms of a Registration Rights Agreement,
the holders of the Series B Preferred Shares are also entitled to receive
$200 per share per month, payable in cash or Common Stock, commencing May
14, 1997 and ending on the effective date of the Company's registration
statement covering the resale of the shares underlying the Series B
Preferred Shares. All Series B Preferred Shares remaining outstanding on
February 12, 2000 shall be automatically converted into Common Stock. For a
further description of the rights of holders of the Series B Preferred
Shares, see the Certificate of Designations, Preferences and Rights filed
as an exhibit to the Company's Annual Report on Form 10-K for the year
ended December 31, 1996.
(4) The listed Selling Stockholders hold an aggregate of $3,025,000 of
Convertible Notes. The Convertible Notes were issued by the Company in a
private placement in August 1997. The Convertible Notes are convertible, in
whole or in part, at the option of the holder. The Convertible Notes are
convertible into Common Stock at the lesser of (i) $2.75 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 Convertible Notes submitted for conversion at a
conversion price of less than $2.75. The number of shares shown as being
offered in the table is based on the assumed conversion of all $3,025,000
of Convertible Notes at a hypothetical conversion price of $2.75 per share
(which is the conversion price based on the average closing bid price of
$6.48125 on the five trading-days ended November 18, 1997) and assumes
payment of interest on the Convertible Notes in cash. The Convertible Notes
pay interest at 7% per annum payable quarterly and at maturity or on
conversion in cash or Common Stock, at the Company's option. The interest
rate on the Convertible Notes is subject to increase in the event a
registration statement covering the resale of shares underlying the
Convertible Notes is not effective within 90 days after the initial
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<PAGE>
sale of the Convertible Notes. The Convertible Notes mature on January 31,
1999. Conversion of the Convertible Notes are subject to the restrictions
that (i) the holders, individually, will not beneficially own in excess of
4.99% of the Company's Common Stock following any conversion, and (ii) the
issuance of shares upon conversion of the Convertible Notes and exercise of
the Warrants will not, in the aggregate, exceed 1,997,130 shares unless and
until the Company's shareholders have approved issuances above that level.
Shareholder approval of issuances in excess of 1,997,130 was received on
November 4, 1997. For a further description of the rights of the holders of
the Convertible Notes, see the form of Convertible Note filed as an exhibit
to the Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1997.
(5) The listed Selling Shareholders hold an aggregate of 2,675,000 $3.00
Warrants. The $3.00 Warrants were 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. Exercise of the $3.00
Warrants is limited to the same extent as the Convertible Notes (i.e., no
exercise permitted where the holder will beneficially own in excess of
4.99% of the Company's Common Stock). 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 100,000 $2.40 Warrants. The $2.40 Warrants were issued in
conjunction with the Company's private placement of the 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.
(7) The listed Selling Stockholders hold Stock Option, expiring May 9, 1999, to
acquire 50,000 shares of Common Stock each for $1.25 per share. The Stock
Options were granted in conjunction with consulting and marketing services
provided by the holders.
(8) Includes 192,925 shares of Common Stock currently held which were acquired
pursuant to the conversion of 30 shares of Series B Preferred Stock on the
terms set forth in note 3 above.
PLAN OF DISTRIBUTION
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.
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<PAGE>
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, 1996, 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.
15
