As Filed with the Securities and Exchange Commission on April 2, 1997
Registration No. 33-78956-A
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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POST-EFFECTIVE AMENDMENT NO. 1
TO FORM SB-2
REGISTRATION STATEMENT
ON FORM S-3 REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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AQUAGENIX, INC.
(Exact name of registrant as specified in its charter)
Delaware 65-0419263
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6500 N.W. 15th Avenue
Fort Lauderdale, Florida 33309
(954) 975-7771
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(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Andrew P. Chesler
Chief Executive Officer
6500 N.W. 15th Avenue
Fort Lauderdale, Florida 33309
(954) 975-7771
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(Name, address, including zip code, and telephone number, including
area code, of agent for service)
Copies to:
Roxanne K. Beilly, Esq.
Atlas, Pearlman, Trop & Borkson, P.A.
200 East Las Olas Boulevard, Suite 1900
Fort Lauderdale, Florida 33301
(954) 763-1200
---------------------------------------------
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
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Approximate date of commencement of proposed sale to the public: From time to
time after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, other than securities offered only in connection with dividend
or interest reinvestment plans, check the following box. [X]
If this Form is filed to register to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration number of the earlier
effective registration statement for the offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] __________.
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ] ____________.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until this Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
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Subject to Completion, dated April 2, 1997
PROSPECTUS
1,437,500 Shares
1,437,500 Warrants
AQUAGENIX, INC.
On September 12, 1994 an offering of 1,437,500 shares of Common Stock
par value $.01 per share (the "Common Stock") and one redeemable Common Stock
Purchase Warrant ("Warrants") of Aquagenix, Inc. (the "Company") was
underwritten on a firm commitment basis by Whale Securities, Inc. (the
"Underwriter") at an offering price of $5.00 per share of Common Stock and $.10
per Warrant. Each Warrant currently entitles the holder thereof to purchase one
share of Common Stock at an exercise price of $6.00 per share of Common Stock
(subject to further adjustment in certain events) until September 12, 1997. The
shares of Common Stock and the Warrants are transferrable separately. The
Warrants are redeemable by the Company, with the consent of the Whale Securities
Co., L.P., the Underwriter for the Company's initial public offering, at any
time, upon notice of not less than 30 days, at a price of $.10 per Warrant,
provided that the closing bid price of the Common Stock on all 20 of the trading
days ending on the third day prior to the day on which the Company gives notice
has been at least 130% (currently $7.80, subject to adjustment) of the then
effective exercise price of the Warrants. This Prospectus also relates to the
Underwriters' Warrants and shares of Common Stock underlying the Underwriters'
Warrants as hereinafter described.
The Common Stock and the Warrants are quoted on the National
Association of Securities Dealers Automated Quotation System ("NASDAQ") under
the symbols "AQUX" and "AQUXW". On March 12, 1997 the closing price on NASDAQ
for the Common Stock was $7.06 and the closing price for the Warrants was $1.88.
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THESE SECURITIES ARE SPECULATIVE AND
INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" AT PAGES 5 THROUGH 15.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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The original date of this Prospectus is September 12, 1994
This Prospectus is amended pursuant to a Post-Effective
Amendment dated April 1, 1997
[Front Cover Page Continues]
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The securities registered hereby may be sold from time to time in one
or more transactions that may take place on the over-the-counter market,
including ordinary brokerage transactions, privately negotiated transactions or
through sales to one or more dealers for resale of such securities as
principals, at market prices prevailing at the time of sale, at prices related
to such prevailing market prices or at negotiated prices. Usual and customary or
specifically negotiated brokerage fees or commissions may be paid by the selling
stockholders. The Company will not receive any of the proceeds from the sale of
the Shares offered hereby. Expenses of this offering, other than fees and
expenses of counsel to the selling securityholders and selling commissions, will
be paid by the Company. The Company will pay all offering expenses for the
offering, estimated at approximately $17,000 including (i) legal fees and
expenses ($5,500.00); (ii) accounting fees and expenses ($7,500.00); (iii)
printing expenses ($3,000.00); and (iv) miscellaneous expenses ($1,000.00), but
will not pay any discounts or commissions incurred by selling stockholders in
connection with the sale of their shares of Common Stock.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Reports, proxy
statements and other information filed with the Commission can be inspected and
copied at the public reference facilities of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549. Copies of this material can also be obtained at
prescribed rates from the Public Reference Section of the Commission at its
principal office at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The Commission also maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission at http//www.sec.gov.
The Company has filed with the Commission a Registration Statement (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the resale of the securities described
herein. This Prospectus, which is Part I of the Registration Statement, omits
certain information contained in the Registration Statement. For further
information with respect to the Company and the securities offered by this
Prospectus, reference is made to the Registration Statement, including the
exhibits thereto. Statements in this Prospectus as to any document are not
necessarily complete, and where any such document is an exhibit to the
Registration Statement or is incorporated by reference herein, each such
statement is qualified in all respects by the provisions of such exhibit or
other document, to which reference is hereby made, for a full statement of the
provisions thereof. A copy of the Registration Statement, with exhibits, may be
obtained from the Commission's office in Washington, D.C. (at the above address)
upon payment of the fees prescribed by the rules and regulations of the
Commission, or examined there without charge.
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TABLE OF CONTENTS
PAGE
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AVAILABLE INFORMATION................................................ 2
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE.................... 4
RISK FACTORS......................................................... 5
USE OF PROCEEDS...................................................... 15
THE COMPANY.......................................................... 15
SELLING STOCKHOLDERS ................................................ 36
PLAN OF DISTRIBUTION................................................. 36
DESCRIPTION OF SECURITIES............................................ 37
LEGAL MATTERS........................................................ 42
EXPERTS.............................................................. 42
INDEMNIFICATION...................................................... 42
The Common Stock and Warrants are traded on the NASDAQ National Market
System ("NMS") under the symbols "AQUX" and "AQUXW," respectively. The low and
high prices of the Common Stock as reported on the NMS on March 12, 1997 were
$7.44 and $7.00, per share, respectively. The low and high prices of the
Warrants as reported on the NMS on March 12, 1997 were $2.00 and $1.88 per
warrant, respectively.
No person has been authorized to give any information or to make any
representations not contained in this Prospectus in connection with the offer
contained in this Prospectus, and if given or made, such information or
representations must not be relied upon as having been authorized by the Company
or the selling stockholders.
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THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER
THAN THOSE TO WHICH IT RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE
SUCH AN OFFER IN SUCH JURISDICTION. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME
DOES NOT IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO ITS DATE.
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The Company is subject to the informational requirements of the
Exchange Act and, in accordance therewith, files reports and other information
with the Securities and Exchange Commission.
The Company has previously and intends to furnish its stockholders with
annual reports containing audited financial statements and distributes quarterly
reports containing unaudited summary financial information for each of the first
three quarters of each fiscal year.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed with the Commission are incorporated
herein by reference:
(a) Annual Report of the Company on Form 10-KSB for the fiscal
year ended December 31, 1996.
(b) Quarterly Reports of the Company on Form 10-QSB for the
quarters ended March 31, 1996, June 30, 1996 and September 30,
1996.
(c) The Company's current reports on Form 8-K dated March 8, 1996,
April 25, 1996, June 7, 1996, June 12, 1996, December 7, 1996
and December 31, 1996.
(d) All reports and documents filed by the Company pursuant to
Section 13, 14 or 15(d) of the Exchange Act, prior to the
filing of a post-effective amendment which indicates that all
securities offered hereby have been sold or which deregisters
all securities then remaining unsold, shall be deemed to be
incorporated by reference herein and to be a part hereof from
the respective date of filing of such documents, specifically
the Current Reports of the Company on Form 8-K, date of
Reports April 25, 1996, June 7, 1996, June 12, 1996, December
7, 1996 and December 31, 1996. Any statement 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 other subsequently filed document,
which also is or is deemed to be incorporated by reference
herein, modifies or supersedes such statement. Any statement
modified or superseded shall not be deemed, except as so
modified or superseded, to constitute part of this Prospectus.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of the Prospectus has been
delivered, on the written or oral request of any such person, a copy of any or
all of the documents referred to above which have been or may be incorporated by
reference in this
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Prospectus, other than exhibits to such documents. Written requests for such
copies should be directed to Corporate Secretary, Aquagenix, Inc. at the
Company's principal executive office, 6500 N.W. 15th Avenue, Fort Lauderdale,
Florida 33309, Telephone (954) 975-7771.
RISK FACTORS
AN INVESTMENT IN THE SHARES OFFERED HEREBY INVOLVES A HIGH DEGREE OF
RISK. PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE FOLLOWING RISK
FACTORS, AS WELL AS THE OTHER INFORMATION SET FORTH IN THE PROSPECTUS, IN
CONNECTION WITH AN INVESTMENT IN THE SHARES OFFERED HEREBY.
LIMITED OPERATING HISTORY; NEWLY ACQUIRED BUSINESSES. The Company was
organized in May 1993 and has a limited operating history upon which an
evaluation of the Company's performance and prospects can be made. The Company's
prospects must be considered in light of the numerous risks, expenses, delays,
problems and difficulties frequently encountered in the establishment of a new
business in industries characterized by emerging markets, intense competition
and stringent government regulation. In that regard, the Company, after
sustaining significant losses from its remediation business, made a
determination to discontinue that business. Accordingly, there can be no
assurance that the Company will be able to successfully manage its aquatic and
industrial vegetation management operations or that failure to do so will not
exacerbate the risks inherent in the establishment of a new business.
ABSENCE OF SUBSTANTIAL PROFITABILITY; ACCUMULATED DEFICIT; PRIOR LOSS;
FUTURE OPERATING RESULTS. Although the Company has achieved increased levels of
revenues for the years ended December 31, 1994, 1995 and 1996, the Company has
only achieved limited profitability. For the year ended December 31, 1996, the
Company earned $243,698 from continuing operations and incurred additional phase
out losses of $758,332 from discontinued operations. The Company's operating
expenses have increased and can be expected to increase significantly in
connection with the Company's proposed expansion and, accordingly, the Company's
future profitability may depend on corresponding increases in revenues from
operations. Future events, including unanticipated expenses, increased
competition or changes in government regulation, resulting in decreased demand
for aquatic and industrial vegetation management services, could have an adverse
affect on the Company's operating margins and results of operations. There can
be no assurance that the Company's rate of revenue growth will continue in the
future or that the Company's future operations will be profitable.
PROPOSED EXPANSION; ABILITY TO MANAGE GROWTH. Although the Company
intends to pursue a strategy of growth and will seek to expand the range of its
services and
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penetrate new geographic markets, the Company has achieved limited growth to
date and has limited experience in effectuating rapid expansion or in managing
operations which are geographically dispersed. The Company's proposed expansion
will be dependent on, among other things, the Company's ability to obtain
additional contracts (through the competitive bidding process or otherwise),
purchase or lease necessary equipment, obtain necessary construction and/or
operating permits and performance bonds, hire and retain skilled management,
financial, marketing, technical and other personnel and successfully manage
growth (including monitoring operations, controlling costs and maintaining
effective regulatory compliance procedures). To date, the Company's operations
have been limited to the States of Arizona, Florida, Georgia, North and South
Carolina. The Company's growth prospects will be largely dependent upon the
Company's ability to achieve greater penetration in existing markets as well as
to achieve significant penetration in new geographic markets. The Company's
prospects could be adversely affected by unfavorable general economic
conditions, including any future downturns in the economy, or a decline in the
economic prospects of particular governmental or commercial customers or
segments of targeted markets, which could result in reduction or deferral of
expenditures by prospective customers. The Company's future growth will also be
dependent upon continued favorable regulatory environments and the Company's
ability to adapt its operations to satisfy evolving industry, customer and
regulatory requirements, standards and trends. The Company is also seeking to
expand its operations through the possible acquisition of existing companies in
businesses which the Company believes are compatible with its business. The
Company is presently engaged in identifying candidates for acquisition but has
no plans, agreements, understandings or arrangements with respect to any
acquisition. The Company has not established any minimum criteria for any
acquisition and management will have complete discretion in determining the
terms of any such acquisition. There can be no assurance that the Company will
be able to successfully expand its operations or ultimately effect any
acquisition, or that the Company will be able to successfully integrate into its
operations any business which it may acquire. Any inability to integrate into
its operations an acquired business, particularly in instances in which the
Company has made significant capital investments, would have a material adverse
effect on the Company. In addition, in the event the Company expands its
operations and/or effectuates additional acquisitions, there can be no assurance
that the Company will be able to successfully manage its expanded operations or
that failure to do so will not exacerbate the risks inherent in the
establishment of a new business. See "Use of Proceeds" and "Business - Proposed
Expansion."
RISKS OF NEW PHASE OF OPERATIONS. Subsequent to the Company's initial
public offering, the Company expanded both its aquatic and vegetation management
and environmental remediation businesses by internal growth as well as by
acquisitions. However, in November of 1995, the Company's Board of Directors
approved a plan to dispose of the environmental remediation business segment in
view of the continued losses of the environmental remediation services division
and the operational problems associated with it. The Company is now
concentrating its future resources on the
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expansion of its aquatic and industrial vegetation management business.
Accordingly, results of operations in the future will be influenced by numerous
factors including the ability of the Company to successfully acquire and
integrate recently acquired companies or companies to be acquired in the future
within its operations, increases in expenses associated with growth, competition
and the ability of the Company to control costs. There can be no assurance that
revenue growth will be sustained or that profitability will occur. Additionally,
the Company will be subject to all the risks incident to a rapidly developing
business and the risks associated with expanding operations. Accordingly, there
can be no assurance that the Company will be able to implement its business
plan, expand its operations and develop and sustain profitable operations in the
future. See "Business - Proposed Expansion."
GOVERNMENT REGULATION. The aquatic and industrial vegetation management
business is subject to extensive and frequently changing federal, state and
local laws and substantial regulation under these laws by governmental agencies,
including the United States Environmental Protection Agency (the "EPA") and the
United States Occupational Safety and Health Administration ("OSHA"). Among
other things, these regulatory authorities impose requirements which regulate
the handling, transportation and disposal of hazardous and nonhazardous
materials and the health and safety of workers, and require the Company and, in
certain instances, its employees, to obtain and maintain licenses and permits in
connection with its operations. This extensive regulatory framework imposes
significant compliance burdens and risks on the Company. The Company believes
that it is in substantial compliance with all material federal, state and local
laws and regulations governing its operations and has obtained all material
licenses and permits necessary for the operation of its business. Amendments to
existing statutes and regulations, adoption of new statutes and regulations and
the Company's expansion into new jurisdictions and aquatic management services
could require the Company to continually alter methods of operations at costs
that could be substantial. Almost all states have commenced regulating the
handling of hazardous substances and wastes, and the Company could be subject to
substantial liability under government regulations to private parties and
governmental entities, in some instances without any fault, if the Company is
responsible for the improper disposal or release or threatened release of any
hazardous substance. There can be no assurance that the Company will be able,
for financial or other reasons, to comply with applicable laws, regulations and
permitting requirements, particularly as it seeks to enter into new geographic
markets. Failure to comply with applicable laws, rules or regulations or
permitting requirements could subject the Company to civil remedies, including
fines and injunctions, as well as possible criminal sanctions, which would have
a material adverse effect on the Company. Notwithstanding the burdens of
compliance, the Company believes that its business prospects are significantly
enhanced by the continuing stringent enforcement of the comprehensive regulatory
framework by government agencies. Any significant relaxation of the regulatory
requirements governing the aquatic and industrial vegetation management industry
could also adversely affect the Company.
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The Company has entered into indemnification agreements with each of
its executive officers and directors pursuant to which the Company has agreed to
indemnify each such person for all expenses and liabilities, including criminal
monetary judgments, penalties and fines, incurred by such person in connection
with any criminal or civil action brought or threatened against such person by
reason of such person being or having been an officer, director or employee of
the Company or its subsidiaries. See "The Company - Government Regulation" and
"- Legal Proceedings."
COMPETITIVE BIDDING; FIXED PRICE CONTRACTS. The Company has obtained
and expects to continue to obtain a significant portion of its contracts for its
services through the process of competitive bidding. There can be no assurance
that the Company will continue to be successful in having its bids accepted or,
if accepted, that awarded contracts will generate sufficient revenues to result
in profitable operations. The competitive bidding process is typically lengthy
and often results in the expenditure of significant sums and allocation of
resources in connection with bids that may not be accepted. Additionally,
inherent in the competitive bidding process is the risk that actual performance
costs may exceed the projected costs upon which submitted bids or contract
prices are based. Moreover, certain of the Company's contracts are negotiated on
a fixed price basis and involve the risk of cost overruns due to inaccurate
pricing, inefficient project management or cost estimates and disputes arising
in connection with the performance of services. To the extent that actual costs
exceed projected costs on which bids or contract prices are based, the Company
could incur losses, which would adversely affect the Company's operating margins
and results of operations. See "The Company - Marketing."
DEPENDENCE ON SIGNIFICANT CONTRACTS AND CUSTOMERS. The Company has been
dependent on a limited number of recurring annual contracts for a significant
portion of its revenues. For the years ended December 31, 1994, 1995 and 1996
the Company's five largest customers accounted for approximately 37%, 21% and
19%, respectively, of the Company's revenues. The Company through its
wholly-owned subsidiaries has a broad base of customers. No one customer
accounts for more than 5% of the Company's total revenue for the year ended
December 31, 1996. There can be no assurance that the Company will obtain
additional contracts for projects similar in scope to those previously obtained,
that the Company will obtain additional contracts for projects similar in scope
to those previously obtained, that the Company will be able to retain existing
customers or attract and retain new customers, or that the Company will not
remain largely dependent on non-recurring contracts with a limited customer
base, which will constitute a significant portion of the Company's revenues. See
"The Company - Customers."
DEPENDENCE ON GOVERNMENT CONTRACTS. For each of the years ended
December 31, 1994, 1995 and 1996, approximately 40%, 34% and 19%, respectively,
of the Company's revenues were derived from services provided to governmental
customers. It is anticipated that a substantial portion of the Company's future
revenues
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will continue to be derived from governmental customers. Government contracts
are subject to special risks, including delays in funding; lengthy review
processes for awarding contracts; non-renewal; delay, termination, reduction or
modification of contracts in the event of changes in the governmental's policies
or as a result of budgetary constraints; and increased or unexpected costs
resulting in losses, all of which could have a material adverse effect on the
Company. See "The Company - Customers."
RISKS ASSOCIATED WITH MANAGEMENT OF GROWTH; INTERNAL CONTROL
DEFICIENCIES The Company has recently experienced and may continue to experience
substantial growth in the number of employees and the scope of its operations,
resulting in increased responsibilities for management. To manage growth
effectively, the Company will need to continue to improve its operational,
financial and management information systems and to develop and maintain sound
internal controls. There can be no assurance that the Company will be able to
effectively achieve or manage any future growth, or develop and maintain strong
internal controls. Such failure could result in a material adverse effect on the
Company's financial condition and results of operations and could result in a
misstatement of operating results.
COMPETITION. The aquatic and industrial vegetation management industry
is highly competitive. The Company faces competition from several large,
financially strong companies which offer integrated services in the industry and
numerous smaller companies which provide the same or similar services as those
of the Company. Certain of the Company's competitors are well established and
may have stronger financial, marketing, technical, personnel and other resources
than the Company, have significant bonding capabilities, and have established
reputations for success in the aquatic and industrial vegetation management
industry. In addition, certain of these competitors offer services or products
not currently offered by the Company and have capabilities not currently
possessed by the Company. Although it has been the Company's experience that
there are available subcontractors which possess capabilities which can be
integrated with those offered by the Company, competitors which possess these
capabilities internally may be able to provide such services more cost
effectively or otherwise have a competitive advantage over the Company. There
can be no assurance that the Company will be able to compete successfully. See
"The Company Competition."
SIGNIFICANT BONDING REQUIREMENTS. The Company is required, in most
instances, to post bid and/or performance bonds in connection with contracts or
projects with government entities and, to a lesser extent, private sector
customers. A significant portion of the Company's revenue is derived from
contracts or projects which require the Company to post bid and/or performance
bonds. To date, the Company has been able to obtain bonds in amounts up to
approximately $4,000,000 per bond. The Company anticipates that in the future it
will continue to be required to post bid and/or performance bonds in connection
with contracts or projects with government entities and, to an
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increasing extent, private sector customers. In addition, new or proposed
legislation in various jurisdictions require or will require the posting of
substantial bonds or require other financial assurances with respect to
particular projects. There can be no assurance that security necessary to obtain
bonding coverage will be available in the future or that the Company will be
able to obtain bonds in the amounts required or have the ability to increase its
bonding capacity to bid on and obtain larger contracts. Any inability to obtain
bonding coverage would have a material adverse effect on the Company. See "The
Company - Insurance and Bonding."
POTENTIAL LIABILITY AND INSURANCE. The aquatic and industrial
vegetation management industry involves potentially significant risks of
statutory, contractual and common law liability for environmental damage and
personal injury. The Company, and in certain instances, its officers, directors
and employees, may be subject to claims arising from the Company on-site or
off-site services, including spillage, misuse or mishandling of hazardous or
non-hazardous waste materials, or chemicals used in its operations, and
environmental contamination by the Company, its contracted transporters or
disposal site operators. All such persons may be liable for waste site
investigation, waste site cleanup costs and natural resource damages, which
costs could be substantial, regardless of whether they exercised due care and
complied with all relevant laws and regulations. There can be no assurance that
the Company will not face claims resulting in substantial liability for which
the Company is uninsured, that hazardous substances or materials are not or will
not be present at the Company's facilities or that the Company will not incur
liability for environmental impairment. The Company carries insurance coverage
which the Company considers sufficient to meet regulatory and customer
requirements and to protect the Company's assets and operations. The Company
also obtains additional insurance as required on a project-by-project basis. The
Company attempts to operate in a professional and prudent manner and to reduce
its liability risks through specific risk management efforts. Nevertheless, a
partially or completely uninsured claim against the Company, if successful and
of sufficient magnitude, could have a material adverse effect on the Company. In
addition, the inability to obtain insurance of the type and in the amounts
required could impair the Company's ability to obtain new contracts, which are,
in certain instances, conditioned upon the availability of adequate insurance
coverage. See "The Company - Insurance and Bonding."
OUTSTANDING INDEBTEDNESS; LOAN COVENANTS AND SECURITY INTERESTS;
PERSONAL GUARANTEES. In order to finance the Company's operations and
acquisitions, the Company has incurred significant indebtedness. Of the
Company's total indebtedness of $6,097,352 outstanding at December 31, 1996, an
aggregate of approximately $512,000 in relation to the continuing operations was
outstanding under loan agreements with SunTrust Bank, Miami, N.A. (the "Bank").
In order to finance the AmerAquatic acquisition in October 1995, the Company
issued to the Equitable Life Assurance Society of the United States "Equitable",
a 12.50% Senior Secured Note due October 31, 2003 in the principal amount of
$5,000,000. Substantially all of the Company's assets are
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pledged to the Bank and Equitable as collateral, and the Company is prohibited
from incurring senior indebtedness above $9.5 million, which could, under
certain circumstances, limit the Company's ability to implement its proposed
expansion. In addition to covenants requiring the Company to maintain certain
levels of net worth and financial ratios, the Company's loan agreements with the
Bank and Equitable limit or prohibit the Company, subject to certain exceptions,
from declaring or paying dividends, making capital distributions or other
payments to stockholders, merging or consolidating with another corporation or
selling all or substantially all of its assets. The Company is in compliance
with all of the covenants contained in the loan agreements with its lenders. In
the event of a violation by the Company of any of its loan covenants or other
default by the Company on its obligations, the Bank could declare the Company's
indebtedness to be immediately due and payable and foreclose on the Company's
assets.
POSSIBLE FLUCTUATIONS IN OPERATING RESULTS; OUTSTANDING ACCOUNTS
RECEIVABLE; CREDIT AND COLLECTION RISKS. The Company's operating results may
vary from period to period as a result of the length of the Company's sales
cycle, as well as from the purchasing patterns of potential customers and
variations in sales by industry segment. The Company's sales cycle, which
generally commences at the time a prospective customer issues a request for
proposal or otherwise demonstrates to the Company an interest in utilizing the
Company's services and ends upon execution of a contract with that customer,
typically ranges from one to four months. Accordingly, revenues may be
recognized by the Company even though associated cash payments have not been
received. In addition, trade accounts receivable outstanding averaged
approximately 39 days and 32 days for services performed on account in 1995 and
1996, respectively. However, because of funding schedules imposed by the State
of Florida, certain receivables may be extended for up to 36 months. The
Company's accounts receivable, less allowances for doubtful accounts, at
December 31, 1995 were $999,817 as compared to $1,064,151 at December 31, 1996.
At December 31, 1996, the Company's allowance for doubtful accounts was $88,541
which the Company believes is currently adequate for the size and nature of its
receivables. Nevertheless, delays in collection or uncollectibility of accounts
receivable could have an adverse effect on the Company's liquidity and working
capital position and could require the Company to increase its allowance for
doubtful accounts. See "The Company - Marketing."
UNCERTAINTY OF DEMAND FOR COMPANY SERVICES. Although the Company
believes that there is significant demand for aquatic and industrial vegetation
management services, the aquatic and industrial vegetation management industry
is an emerging industry with relatively limited operating histories. As is
typically the case in emerging industries, demand and market acceptance for the
Company's services are subject to a high level of uncertainty. Demand for the
Company's services could be adversely affected by numerous factors beyond its
control, including changes in governmental regulations affecting the industries
in which it operates, the introduction of new technologies and increased
competition. In light of the evolving nature of the aquatic and industrial
vegetation management services industry, there can be no assurance as
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to the ultimate level of demand and market acceptance for the Company's
services. See "The Company."
DEPENDENCE ON THIRD-PARTY SUPPLIERS AND SUBCONTRACTORS. The Company is
dependent upon third-party suppliers and manufacturers for all of its
requirements of algicides, herbicides, fish, fountains and aeration systems used
in its operations. Although the Company believes that alternative sources of
supply are available, failure by such suppliers or manufacturers to continue to
supply the Company with products on commercially reasonable terms, or at all, in
the absence of readily available alternative sources, would adversely affect the
Company's ability to deliver products and provide services on a timely and
competitive basis. In addition, the Company currently does not own or lease
certain specialized equipment, including mechanical harvesting or certain
planting equipment, or treatment, transportation or storage and is dependent
upon third party subcontractors to provide necessary equipment, know-how,
transportation and other facilities for its aquatic and industrial vegetation
management business on a project basis. In the event such subcontractors were to
become unavailable to the Company at acceptable cost levels, or at all, the
Company's business would be materially adversely affected. See "The Company -
Suppliers and Subcontractors."
NASDAQ SYSTEM LISTING. The Company's Common Stock and Warrants are
included on the NASDAQ system. The continued listing criteria include (a) that a
company has net tangible assets of at least: (i) $1,000,000; or (ii) $2,000,000
if the issuer has sustained losses from continuing operations and/or net losses
in two of its three most recent fiscal years; or (iii) $4,000,000 if the company
sustained losses from continuing operations and/or net losses in three of its
four most recent fiscal years; (b) a market value of the publicly held shares of
$1,000,000, and (c) a minimum bid price of $1.00 per share of Common Stock. If
an issuer does not meet the $1.00 minimum bid price standard, it may, however,
remain in the NASDAQ system if the market value of its public float is at least
$3,000,000 and the issuer has $4,000,000 of total assets. If the Company became
unable to meet the continued listing criteria of the NASDAQ system and became
delisted therefrom, trading, if any, in the Common Stock and the Warrants would
thereafter be conducted in the NASDAQ SmallCap Market, if the Company qualified,
Over the Counter Market in the s-called "pink sheets" or, if the available, the
electronic bulletin board administered by the National Association of Securities
Dealers, Inc. (the "NASD"). As a result, an investor would likely find it more
difficult to dispose of, or to obtain accurate quotations as to the value of,
the Company's securities. If the Company's securities were delisted from the
NASDAQ system, they may become subject to Rule 15c2-6 under the Securities
Exchange Act of 1934, as amended (the "1934 Act"), which imposes additional
sales practice requirements on broker/dealers which sell such securities to
persons other than established customers and "accredited investors" (generally,
individuals with net worth in excess of $1,000,000 or annual income exceeding
$200,000, or $300,000 together with their spouse). For transactions covered by
this Rule, a broker/dealer must make a special suitability determination for the
purchaser and have received the purchaser's written consent to the
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transaction prior to the sale. Consequently, the Rule may effect the ability of
broker/dealers to sell the Company's securities and may effect the ability of
purchasers in this offering to sell any of the securities acquired hereby in the
secondary market.
The Securities and Exchange Commission (the "Commission") has also
adopted regulations which define a "penny stock" to be any equity security that
has a market price (as therein defined) of less than $5.00 per share or with an
exercise price of less than $5.00 per share, subject to certain exceptions. For
any transaction involving a penny stock, unless exempt, the regulations require
the delivery, prior to any transaction in a penny stock, of a disclosure
schedule mandated by the Commission relating to the penny stock market.
Disclosure is also required to be made about compensation payable to both the
broker/dealer and the registered representative in current quotations for the
securities. Finally, monthly statements are required to be sent disclosing
recent price information for the penny stock held in the account and information
on the limited market in penny stocks.
The foregoing penny stock restrictions will not apply to the Company's
securities if such securities are listed on the NASDAQ system and have certain
price and volume information provided on a current and continuing basis, or meet
certain minimum net tangible assets for average revenue criteria. There can be
no assurance that the Company's securities will qualify for exemption from these
restrictions. In any event, even if the Company's securities were exempt from
such restrictions, it would remain subject to Section 15(b)(6) of the 1934 Act,
which gives the Commission the authority to prohibit any person that is engaged
in unlawful conduct while participating in a distribution of a penny stock from
associating with a broker/dealer or participating in a distribution of penny
stock if the Commission finds that such a restriction would be in the public
interest.
CONTROL BY CURRENT STOCKHOLDERS. As of the date hereof, Andrew P.
Chesler will have beneficial ownership of approximately 17.8% of the Company's
outstanding Common Stock (assuming exercise of his options) or approximately
13.2% in the event the aggregate amount of Warrants are exercised. Accordingly,
Andrew P. Chesler will be able to control the Company, elect all of the
Company's directors, increase the authorized capital, dissolve, merge, sell the
assets of the Company and generally direct the affairs of the Company.
AUTHORIZATION OF PREFERRED STOCK. The Company's Certificate of
Incorporation authorizes the issuance of 1,000,000 shares of "blank check"
preferred stock with such designation, rights and preferences as may be
determined from time to time by the Board of Directors. Accordingly, the Board
of Directors is empowered, without stockholder approval, to issue preferred
stock with dividend, liquidation, conversion, voting or other rights that could
adversely affect the voting power or other rights of the holders of the Common
Stock. In the event of issuance, the preferred stock could be utilized, under
certain circumstances, as a method of discouraging, delaying or
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preventing a change in control of the Company. Although the Company has no
present intention to issue any shares of its preferred stock, there can be no
assurance that the Company will not do so in the future. See "Description of
Securities."
DEPENDENCE ON KEY PERSONNEL. The success of the Company will be highly
dependent upon the performance of its senior management and, in particular,
Andrew P. Chesler, the Chairman of the Board, Chief Executive Officer and
President of the Company. Mr. Chesler has a five-year employment agreement with
the Company whereby he has agreed to devote substantially all of his business
time to the affairs of the Company. The Company does not have employment
agreements with any other executive officers or senior managers. The Company has
obtained "keyman" life insurance in the amount of $5,000,000 on the life of
Andrew P. Chesler. The success of the Company is also dependent upon its ability
to hire and retain additional qualified personnel. The loss of Andrew P. Chesler
or other key personnel or an inability to attract and retain additional key
personnel could have a material adverse effect on the Company's business.
UNCERTAINTY OF FUTURE DIVIDENDS ON COMMON STOCK. The Company has not
paid any cash dividends on its Common Stock to its stockholders, and does not
expect to declare or pay any cash dividends in the foreseeable future. See
"Description of Securities - Dividends." See "Description of Securities - Common
Stock."
EXPENSES OF OFFERING. The Company will pay all offering expenses for
the offering, estimated at approximately $17,000 including (i) legal fees and
expenses ($5,500.00); (ii) accounting fees and expenses ($7,500.00); (iii)
printing expenses ($3,000.00); and (iv) miscellaneous expenses ($1,000.00), but
will not pay any discounts or commissions incurred by selling stockholders in
connection with the sale of their shares of Common Stock.
SHARES ELIGIBLE FOR FUTURE SALES. Sales of substantial numbers of
additional shares of Common Stock of the Company, or the perception that such
sales could occur, could adversely affect prevailing market prices for the
Common Stock. As of the date hereof 4,164,591 shares of Common Stock are
outstanding. As of February 24, 1997, of the outstanding shares, 2,807,332
shares are tradeable in the public market without restriction under the
Securities Act of 1933, as amended (the "Securities Act"), except for any shares
of Common Stock purchased by an "affiliate" of the Company (as that term is
defined under the rules and regulations of the Securities Act), which will be
subject to the resale limitations of Rule 144 under the Securities Act.
USE OF PROCEEDS
In the event all of the Warrants were to be exercised, the Company
would receive net proceeds of approximately $8,608,000, after payment of
offering expenses estimated
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to be approximately $17,000. No proceeds will be obtained by the Company from
the Warrants except upon the exercise of the Warrants. It is anticipated that
the net proceeds, if any, will be used by the Company for acquisitions, capital
expenditures, building of infrastructure, repayment of indebtedness and for
working capital associated with continuing operations. The actual allocation of
proceeds realized from the exercise of the Warrants will depend upon the amount
and timing of such exercises, the Company's operating revenues and cash position
at such time and its working capital requirements during the course of such
exercise period. There can be no assurances that any of the Warrants or the
Underwriters' Warrants will be exercised.
While the intended use of proceeds is consistent with the Company's
current business plan objectives, the Company reserves the right to change the
use of proceeds depending on working capital requirements and opportunities
afforded to the Company. Pending utilization of the proceeds as described above,
the net proceeds of the offering will be deposited in interest bearing accounts
or invested in money market instruments, government obligations, certificates of
deposits or similar short-term investment grade interest bearing investments.
The net proceeds of approximately $5,522,000 realized by the Company
from the initial public offering of the Common Stock and Warrants consummated in
September 1994 were utilized by the Company for acquisitions, equipment,
repayment of indebtedness and for working capital purposes primarily associated
with discontinued operations.
THE COMPANY
DESCRIPTION OF BUSINESS
(A) BACKGROUND
Aquagenix, Inc., a Delaware corporation (the "Company"), through its
wholly-owned subsidiaries, provides aquatic and industrial vegetation management
services to governmental and commercial customers. The Company provides aquatic
and industrial vegetation management services in the States of Florida, Georgia,
North and South Carolina, Arizona, Alabama and Tennessee. The Company offers a
variety of aquatic and industrial vegetation management and maintenance
services, consisting primarily of the control of aquatic weeds, algae and exotic
plants, brush and noxious tree control, wetland planting and restoration,
installation of fountains and aeration systems and the stocking of fish for game
and plant and insect control.
The Company was incorporated under the laws of the State of Delaware in
May 1993 to acquire all of the issued and outstanding capital stock of Aquagenix
Land-Water Technologies, Inc. ("ALWT"), formerly known as Environmental Waterway
Management,
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Inc. and Florida Underground Petroleum Tank Contractors, Inc. ("FUPTC"). Prior
to their acquisition by the Company, ALWT had been engaged in the aquatic
management business, primarily aquatic weed, algae and plant control, since its
formation in October 1990. In February 1995, the Company acquired Haas
Environmental Services ("HES"). Both FUPTC and HES had been engaged in the
environmental remediation business, primarily remediation of petroleum
contaminated soil and ground water. The operations of FUPTC and HES have been
discontinued since November 1995. Unless the context requires otherwise, the
"Company" refers to Aquagenix, Inc. and its consolidated subsidiaries, ALWT,
Aquagenix Land-Water Technologies of Arizona, Inc. ("ALWTA") and Right of Way
Control, Inc. ("ARC"), Aquatic Dynamics, Inc. ("ADI"), Aquagenix Land- Water
Technologies of Georgia, Inc. (formerly known as Good Shepherd, Inc. d/b/a Green
Pastures, Inc., "GPI"), FUPTC and HES.
In order to raise capital, in September 1994, the Company consummated
an underwritten initial public offering (the "IPO") of 1,250,000 shares of its
common stock, $.01 par value (the "Common Stock"), and 1,437,500 redeemable
warrants (the "Warrants"), for aggregate net proceeds of approximately
$5,541,000 (after deduction of the underwriting discounts and before deduction
of other expenses of the IPO). In October 1994, the Company realized additional
net proceeds of approximately $815,000 from the sale of an additional 187,500
shares of Common Stock upon the exercise by the underwriter of its
over-allotment option.
(B) BUSINESS OVERVIEW
The Company offers a variety of aquatic and industrial vegetation
management services, consisting primarily of the control of aquatic weeds, algae
and exotic plants, industrial vegetation management, wetland planting and
restoration, installation of fountains and aeration systems and the stocking of
fish for game and pest and plant control. The Company's services are intended to
assist in flood control, maintain the health, beauty, quality and natural
balance of life in aquatic and terrestrial environments and in some instances,
to maintain reasonable access to critical utility and other right of way areas.
They are designed to suit individual customer requirements, many of whom
maintain waterways and lands in compliance with federal, state and local
environmental laws and regulations.
Lakes, canals, ponds, rivers and wetlands have become increasingly
popular forms of aesthetic and recreational components in cities, golf courses,
country clubs, commercial and residential developments, apartment complexes and
parks in and throughout the United States. Waterways provide facilities for
recreational use, such as fishing and water sports, and are important for flood
control, drainage, wildlife preservation and as a source of water for industrial
and residential use. As a result of natural and other factors, including
overgrowth of noxious weeds, algae and exotic plants, which deplete oxygen and
restrict the flow of water, waterways and wetlands
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require ongoing management to preserve and maintain their functional use,
biological health and aesthetic value.
In the Sunbelt states of Florida, Georgia, South Carolina, North
Carolina, Tennessee, Mississippi, Missouri, Louisiana, Texas, New Mexico,
Arizona, Nevada and California, there are over 5,500 golf courses and country
clubs, most of which require aquatic management services; and as a result of the
climate and topography within the Sunbelt states, the majority of real estate
developers have water features which require maintenance. The market for aquatic
management services on private land in Florida alone is estimated to exceed $100
million.
There is also a growing trend toward privatization of aquatic and
industrial vegetation management services carried out on public lands by public
works personnel of governmental agencies as they come under increasing fiscal
pressures to reduce costs. The South Florida Water Management District, one of
the Company's customers, had performed its own vegetation management work years
ago and had subsequently awarded work to the Company. The potential market for
such services on public land in Florida is estimated to exceed $500 million.
Additionally, because extensive land development in the Sunbelt
states and other coastal states has depleted natural wetlands, federal and state
legislation has been enacted to preserve wetlands by requiring property owners
and developers to restore portions of developed properties to their natural
state, in what is known as a "no net loss" policy. In May 1994, a $700 million
restoration project for Florida's Everglades was adopted by the State of
Florida, which contemplates that the federal government, the State of Florida
and a group of landowners will jointly fund restoration of portions of Florida's
Everglades. The Company will seek to capitalize on perceived demand for aquatic
management services, particularly wetlands planting and restoration services.
With annual revenues of approximately $11,500,000 for 1996, the Company
is currently the largest provider of aquatic and industrial management services
in the United States. In 1996, with the acquisition of two businesses engaged in
industrial vegetation management services (see below - "Recent Acquisitions"),
the Company has increased its revenues from such services which accounted for
17% of total revenues as compared to only 3% for 1995. In 1996, the Company has
begun creating a niche for itself in the industrial vegetation management
business, with the acquisitions providing the springboard from which marketing
efforts are targeted at electric and power utilities, telephone and railroad
companies, transportation departments and industrial sites throughout Florida,
Georgia and Alabama. In 1997, the Company anticipates securing more industrial
vegetation contracts which are generally larger in value as compared to the
aquatic vegetation contracts.
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(C) BUSINESS OF ISSUER
COMPANY SERVICES
AQUATIC WEED, ALGAE AND EXOTIC PLANT CONTROL. The term "aquatic weed"
encompasses a large, diverse group of plant types, consisting of four basic
groups which pose a problem to waterways: floating aquatics, submersed aquatics,
emergent and ditchbank weeds and grasses. Algae, a fifth classification, is a
lower form of submersed plant life and is the cause of "scum" on the water's
surface. Left unattended, aquatic weeds, algae and plants appear and propagate
in excessive amounts and interfere with the aquatic environment's natural
balance. Thick masses of aquatic weeds can disrupt boat traffic, fishing and
other water sports, lower the oxygen levels of water resulting in fish kills and
create water flow problems. Noxious weeds generate foul odors, visual eyesores
and create breeding grounds for mosquitos and other pests. Most noxious aquatic
weeds, exotic plants and trees have been imported into the Sunbelt States
without natural enemies and have proceeded to displace natural and native plant
life. While beneficial plants are essential to creating a properly balanced
aquatic ecosystem and provide food and shelter for various species of fish,
birds and animals, dense infestations of aquatic weeds and algae prevent
sunlight from entering the water, potentially endangering all living inhabitants
of aquatic environments.
The Company's aquatic management services consist primarily of the
control of aquatic weeds, algae and exotic plants. The Company establishes
treatment programs for lakes, canals, ponds, reservoirs, rivers, estuaries,
marine areas and wetlands by assessing ambient water quality and vegetation and
the specific needs of individual customers. The Company maintains a data base of
computerized water analysis information and property management control and
service records designed to provide customers with a comprehensive aquatic
treatment plan. Company-trained and licensed applicators utilize approved
algicides and herbicides and special spraying equipment to disperse algicides
and herbicides in water and on adjacent land to control the growth of aquatic
weeds, algae and exotic plants. The Company typically uses small boats equipped
with tanks to hold liquid formulations and spray arms for spraying from the
water. Similarly equipped four-wheel drive all-terrain vehicles are utilized for
spraying from the shoreline. Significant reduction in the growth of aquatic
weeds, algae and exotic plants is usually achieved within three to four weeks.
The customers for these services typically agree to annual contracts which
provide for monthly service and payment.
In addition to the regular application of algicides and herbicides, the
Company utilizes harvesting methods to control aquatic weeds. Harvesting is
performed either manually or mechanically, depending upon the nature and extent
of the growth of undesirable aquatic weeds and plants. Mechanical harvesting is
typically expensive but achieves immediate results. The Company engages
third-party contractors which utilize
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barges equipped with special attachments to cut, gather and crop aquatic weeds.
Harvesting is done on a project-by-project basis.
The Company also controls submersed aquatic weeds, algae and insects by
introducing several species of fish, the Triploid Grass Carp, a
genetically-engineered weed-eating fish which may consume as much as three times
its body weight each day, and the Gambusia, or Mosquitofish, which may consume
up to its weight in mosquito larvae and pupae each day. Additionally, the
Company stocks different types of Tilapia in the Western United States for the
control of toxic algae formations. The Company, when required, obtains necessary
permits from state governmental authorities to use biological control methods on
a project basis.
For the years ended December 31, 1995 and 1996, aquatic weed, algae and
exotic plant control services accounted for approximately 93% and 77%,
respectively, of the Company's revenues from continuing operations.
INDUSTRIAL VEGETATION MANAGEMENT. The Company provides professional
right of way weed control along utility lines, pipelines, transmission lines,
distribution lines, railroads, power substations, canals, ditches, bridges and
other industrial sites for private and public sector customers.
The Company inspects target areas to determine environmental factors,
safety factors, geographic criteria surrounding plant life and combines this
information with input from the customers. The Company subsequently provides
precision low volume application weed, brush and tree control to the designated
system(s). The Company's services are varied and may be "bundled" to meet
specific customer needs. It maintains a large inventory of application equipment
at peak performance condition and has the most complete array of equipment
available for each job.
Distribution power lines are serviced by ground application techniques.
Equipment in service for these applications includes: four-wheel drive, one-ton
spray trucks, track equipment and ATVs. In addition, vegetation control is
achieved with personnel using backpack sprayers. Transmission power lines are
managed from the air by helicopters and aerial TVB spray equipment. Safety guard
rails and transportation right of ways are serviced by highly specialized
vehicles, equipped with computer injection systems designed specifically for
these functions.
For the years ended December 31, 1995 and 1996, industrial vegetation
management services accounted for approximately 3% and 17%, respectively, of the
Company's total revenues from continuing operations.
WETLAND PLANTING AND RESTORATION. The preservation and propagation of
wetland areas has become recognized as an important part of maintaining the
ecosystem. Aquatic and wetland plants are critical components of healthy ponds,
lakes or
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waterways, inasmuch as these plants form a base for an important link between
the beginnings of the food-chain and higher forms of plant and animal life. The
Company believes that the quality of water is directly attributable to the
balance of the water's and shoreline's vegetation.
The Company offers wetland planting, restoration and maintenance
services, which involve the movement of soil and the planting of beneficial
native plant life to create or recreate wetlands in the form in which they
naturally occur. The Company currently engages in wetland planting utilizing its
personnel and equipment and, to the extent necessary, third-party equipment.
Revenues from such services comprised 4% of total revenues from aquatic
management business for 1995 and 1996. With the "no net loss" governmental
policy and the State of Florida's Everglades restoration project, the Company
anticipates that wetland planting and restoration services will account for an
increasing portion of the Company's revenues in the future.
DESERT RAIN/Trademark/ FOUNTAINS. The Company offers an extensive line
of decorative floating fountains, trademarked "Desert Rain/Trademark/", to
enhance the visual appeal and beauty of waterways, while providing ecological
benefits, including increased circulation, reduced stagnation and the reduction
of odors caused by algae. The Company's fountains feature a unique,
interchangeable nozzle which allows the customer to select from several
different spray patterns. Fountains are fabricated using quality waterproof
materials which are treated to resist corrosion. Nozzle assemblies are
manufactured using high-density polyurethane, epoxy, brass and stainless steel
for durability.
AERATION SYSTEMS. The Company also offers aeration systems designed to
permit waterways to digest organic sediments which deplete oxygen, trap gasses
and result in general degradation of water quality. The Company's aeration
systems are custom designed systems consisting of a pattern of porous stones
which are laid on the bottom of a lake and a relatively silent air compressor
mounted on the shore. When air is injected from the compressor through pipes to
the stones, air rises through the water oxygenating and cleansing it. The
Company's aeration systems are designed to minimize fish kills and foul odors
and to facilitate lake management and the operations of wastewater and
aquaculture industries. To date, revenues derived from fountain and aeration
system installation services have not been material.
FISH STOCKING. The Company offers a variety of species of fish for
stocking lakes and ponds for recreational and biological purposes, including
Triploid Grass Carp (Amur), Tilapia, Gambusia (Mosquitofish), Smallmouth Bass,
Largemouth Bass, Bluegill, Black Crappie, Warmouth Perch and Channel Catfish.
The Company's personnel perform salinity, Ph and oxygen tests, conduct surveys
of existing fish population and create aquatic sanctuaries for successful fish
habitation. The Company obtains its requirements of fish from a number of
suppliers. To date, revenues derived from fish stocking services have not been
material. However, the Company is presently expanding this line of business in
the Western United States through its subsidiary, ALWTA, in Arizona.
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OPERATIONS
Headquartered in Fort Lauderdale, Florida, the operations of the
Company are decentralized with eleven customer service offices, one in each of
Fort Lauderdale, West Palm Beach, Orlando, Sarasota, Tampa, Jacksonville, Fort
Myers, Daytona Beach (all in Florida), Myrtle Beach (South Carolina), Tempe
(Arizona) and Athens (Georgia). Each customer service office is headed by a
branch manager and supported by sales representatives. As a result of
maintaining decentralized operations, the Company is able to reduce transit time
and per diem expenses while providing better services to a larger customer base.
The branch offices can also be utilized to integrate acquisitions within its
geographic region of operations and are easily expandable to handle increased
levels of business without a meaningful increase in administrative expenses.
This was the case with the Jacksonville, Tampa and Fort Lauderdale operations
acquired from Aquatic and Right of Way Control, Inc and AmerAquatic, Inc. (see
below - "Recent Acquisitions"). Each office has the same basic set-up, systems
and general operations which is a key aspect in the implementation of the
Company's expansion strategy in that branch offices can be quickly established
in multiple geographical areas in a proven company format. Offices are fully
computerized with established customer service protocol. This enables the
Company's services to be efficient, professional and responsive to the client
base.
EXPANSION STRATEGY
The Company believes that continuing initiatives of governmental
authorities relating to environmental problems as well as the gradual
privatization of in-house governmental and utility based aquatic and industrial
vegetation management contracts have resulted in significant opportunities for
its business, through internal growth and acquisitions. Management estimates
that only 30% of the aquatic and vegetation management industry is served by
commercial companies. The Company's expansion strategy is: (I) to acquire
similar businesses and integrate their operations into the existing business so
as to create economies of scale; (ii) to intensify marketing efforts and open
additional decentralized branch offices that allow the Company to expand its
geographic markets while maintaining quality service and minimizing operating
expenses; and (iii) to achieve critical mass and increase operating leverage and
efficiency so that the Company can pursue larger contracts from the 70% of the
industry that traditionally sources contracts in-house. The proceeds of the IPO
have enabled the Company to finance increased levels of accounts receivable and
satisfy significant bonding requirements in connection with its operations. It
has also enabled the Company to establish substantial bonding and insurance
capabilities, thereby permitting the Company to bid on and secure larger
contracts, especially government and utility work. In addition, over the past
three years, the Company has made significant investment in building middle
management in order to provide the appropriate infrastructure to integrate the
acquisitions planned for under its growth strategy.
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The Company intends to aggressively apply its growth strategy in
several stages in the following geographic markets which it perceives to have
significant growth potential: (i) Georgia, South Carolina and North Carolina;
(ii) California, Arizona and Nevada; and (iii) Texas, Louisiana and the
remainder of the Southern United States.
The GPI, ADI, ARC, AmerAquatic, and L&L Acquisitions (see below -
"Recent Acquisitions") were consummated as part of the Company's goal of
expanding its operations. Consistent with its strategy of growth, the Company
will seek to expand its operations through further acquisitions. The Company
believes that the aquatic and industrial vegetation management industry is
highly fragmented, consisting principally of small privately-owned companies
with limited capital resources, bonding capabilities and documentation systems.
The Company believes that with further additions to its existing infrastructure,
including improvements to its information and documentation systems, coupled
with increased bonding capabilities, this will enable the Company to out-bid its
smaller competitors and position the Company to acquire smaller service
providers in new geographic markets. However, there can be no assurance that the
Company will be able to obtain the required financing to fund the costs of
purchasing capital equipment and to build its infrastructure or to make the
acquisitions to expand its operations or that the Company will be able to
successfully integrate into its operations any acquired business.
RECENT ACQUISITIONS
On December 31, 1996, the Company acquired 100% of the common stock of
Good Shepherd, Inc. d/b/a Green Pastures, Inc. ("GPI Acquisition"), now known as
Aquagenix Land-Water Technologies of Georgia, Inc., pursuant to a Stock Exchange
Agreement, dated as of December 31, 1996, by and among the Company, GPI and
Garry Seitz and Jan Seitz (the "GPI Shareholders"), the shareholders of GPI. The
aggregate purchase price was $600,000 which was paid by the issuance of 96,000
shares of the Company's common stock to the GPI Shareholders. The assets
acquired from GPI comprised mainly of high-tech roadside application equipment
and recurring service contracts.
GPI, a Georgia-based private company founded in 1988, is a provider of
roadside vegetation management services throughout the state of Georgia using
high-tech computer controlled application systems along roadsides and has annual
revenues of approximately $960,000. This acquisition has been accounted for as a
pooling of interests and the Company intends to continue and further develop the
existing business of GPI as part of ALWT.
On December 7, 1996, the Company, through its wholly owned subsidiary,
merged with Aquatic Dynamics, Inc. (the "ADI Acquisition") with the Company
becoming the surviving entity, pursuant to the terms of an Agreement and Plan of
Merger, dated as of December 7, 1996, by and among the Company, Aquagenix
Land-Water Technologies
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of Arizona, Inc., ADI and Pat Church and Stephen Church, the shareholders of
ADI. The aggregate purchase price was $1,000,000, of which (i) $750,000 was paid
by the issuance of 133,333 shares of the Company's common stock to the former
shareholders of ADI; (ii) $200,000 was paid by the issuance of an installment
note due on January 15, 1997, bearing interest at 7% and (iii) $50,000 was paid
in cash. The installment note of $200,000 has since been paid in full. The cash
portion was funded out of the proceeds of certain private equity placements
which took place in June 1996. The assets acquired from ADI comprised mainly of
vehicles and equipment, accounts receivable, marketable securities and recurring
service contracts.
In connection with the ADI Acquisition, the Company has entered into
two-year employment agreements with the former shareholders of ADI who are
participating in the management of the Company's western operations.
ADI, an Arizona-based private company founded in 1974, was a
full-service aquatic vegetation management firm whose experience and services
span the gamut of surface water management needs, including residential,
commercial, industrial and governmental projects, irrigation and effluent reuse
water systems, lake and pond management and ongoing waterway maintenance. ADI
has been a leading provider of aquatic vegetation management services throughout
Arizona and the southwestern United States with annual revenues of approximately
$1,600,000. The ADI Acquisition has established the Company's market presence in
the southwestern United States with ADI serving as the hub of operations in that
region. The Company intends to continue and further develop the existing
business of ADI under its new name, namely, Aquagenix Land-Water Technologies of
Arizona, Inc.
On June 7, 1996, the Company acquired 100% of the voting common stock
of Aquatic and Right of Way Control, Inc. ("ARC Acquisition") pursuant to the
terms of a Stock Exchange Agreement, dated as of June 7, 1996, by and among the
Company, ARC and Ray A. Spirnock and Shirley J. Spirnock, the shareholders of
ARC. The aggregate purchase price was $1,500,000, of which $1,350,000 was paid
by the issuance of 270,000 shares of the common stock of the Company to the
former shareholders of ARC and $150,000 was paid in cash. The cash portion was
funded out of cash flows from operations. The assets acquired from ARC consisted
mainly of recurring service contracts, accounts receivable and industrial
vegetation application equipment. In connection with the ARC Acquisition, the
Company entered into a two-year employment agreement with Ray A. Spirnock.
With annual revenues of approximately $1,350,000, ARC was a leading
provider of industrial vegetation and utility right of way management services
in Florida, Georgia and Alabama. These services include the control of noxious
weeds in the right of way areas adjacent to distribution and transmission power
lines. The Company intends to operate the existing business as part of ALWT and
is further developing the industrial vegetation and utility right of way
management business previously conducted by ARC.
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On November 17, 1995, ALWT acquired (the "L&L Acquisition") certain of
the equipment and customer contracts of L&L Mosquito & Pest Control, Inc., a
South Carolina corporation ("L&L"), used in its aquatic weed and algae control
business, pursuant to the terms of an Asset Purchase Agreement, dated as of
November 17, 1995, by and among ALWT, L&L and the sole shareholder of L&L. The
aggregate purchase price paid by ALWT for the assets of L&L was $150,000 in
cash. The Company is continuing to operate the aquatic weed and algae control
business previously conducted by L&L. The L&L Acquisition has provided an
established foothold for the Company in Hilton Head, South Carolina.
On October 31, 1995, ALWT acquired ("the AmerAquatic Acquisition")
substantially all of the assets and assumed certain of the liabilities, of
AmerAquatic, Inc., a Florida corporation ("AmerAquatic"), pursuant to the terms
of an Asset Purchase Agreement, dated as of October 19, 1995, by and among ALWT,
the Company, AmerAquatic and Thomas Latta and C. Elroy Timer, the principal
shareholders of AmerAquatic. The aggregate purchase price paid by ALWT for the
assets of AmerAquatic was $4,291,084, subject to adjustment under certain
circumstances, of which (i) $3,791,084 was paid in cash and (ii) $500,000 was
paid through the issuance by ALWT of a seven-month promissory note bearing
interest at a rate of 9.75% per annum, which note was guaranteed by the Company
and subsequently paid in full. AmerAquatic was engaged in the business of
providing lake management services, including aquatic and terrestrial weed and
algae control, melaleuca and other exotic plant control, wetland and upland
restoration and other related services. They were the Company's largest
competitor in this business in Florida with over 1,000 customers. The
AmerAquatic Acquisition expanded the Company's geographic reach into northern
Georgia, North Carolina and South Carolina and initiated the Company's
penetration into its second strategic market, the South Atlantic states. The
Company is continuing to operate the lake and wetland management business
previously conducted by AmerAquatic as part of ALWT.
In connection with the AmerAquatic Acquisition, the Company, ALWT and
AmerAquatic entered into a Private Label Agreement, pursuant to which ALWT
agreed to purchase sixty specialized vehicles known as "Spra-Buggies", used
among other things, to provide lake management services, over a period of three
years commencing on October 31, 1995, for a purchase price of approximately
$25,000 each. ALWT has the exclusive right to purchase, use and sell these
highly-efficient and durable Spra-Buggies within the aquatics industry.
In connection with the AmerAquatic Acquisition, the Company, ALWT and
C. Elroy Timmer entered into a one-year employment agreement.
The Company funded the cash portion of the purchase price for the
assets of AmerAquatic from the proceeds of the issuance and sale of (I) the
Company's 12.50% Senior Secured Note due February 28, 1996 (the "Bridge Note")
in the principal amount
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of $5,000,000, and (ii) warrants (the "Bridge Warrants") to purchase an
aggregate of 168,166 shares of the Company's Common Stock, pursuant to a Senior
Secured Note and Warrant Purchase Agreement, dated as of October 31, 1995 (the
"Bridge Note Purchase Agreement"), between the Company and The Equitable Life
Assurance Society of the United States ("Equitable"). In December 1995, the
Company issued to Equitable the Company's 12.50% Senior Secured Note due October
31, 2003 (the "Senior Secured Note") in the principal amount of $5,000,000 and
warrants (the "Warrants") to purchase an aggregate of 351,197 shares of the
Company's Common Stock, subject to adjustment under certain circumstances, in
substitution for the Bridge Note and the Bridge Warrants, respectively, pursuant
to an Amended and Restated Senior Secured Note and Warrant Purchase Agreement,
dated as of December 15, 1995 (the "Note Purchase Agreement"), between the
Company and Equitable. The Senior Secured Note is subordinated to all
indebtedness of the Company to its bank lender and is secured by substantially
all of the Company's assets. The Warrants are exercisable at any time until
December 31, 2000 at an exercise price of $7.38 per share, subject to adjustment
under certain circumstances.
CUSTOMERS
The Company provides surface water management and industrial vegetation
management services to utilities, golf courses, country clubs, real estate
owners and developers, homeowners and condominium associations, apartment
complexes and various municipal, state and federal governmental authorities and
taxing districts, many of which maintain waterways and lands in compliance with
local environmental laws and regulations. The Company currently provides aquatic
and industrial vegetation management services to approximately 48 customers in
the public sector and approximately 2,299 customers with whom the Company has
annual aquatic and industrial vegetation management contracts. Substantially all
of the Company's contracts for aquatic and industrial vegetation management
services are recurring in nature and for the year ended December 31, 1996, this
comprised 73% of total revenues (1995: 77%). These recurring annual contracts
provide for monthly payments and are automatically renewable. The annual
contracts for industrial vegetation management services are usually renewable
for a term of up to three years and provide for payments based on a cost per
acre or mile of land under management.
For the year ended December 31, 1996, 19% of its revenues were derived
from governmental customers as compared to 34% for 1995. Governmental customers
which formerly provided aquatic or vegetation management services through
government employees have accounted for a significant portion of the Company's
revenues. It is anticipated that a substantial portion of the Company's future
revenues will be derived from governmental and quasi-governmental customers.
Government contracts are subject to special risks, including delays in funding;
lengthy review processes for awarding contracts; non-renewal; delay,
termination, reduction or modification of
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contracts in the event of changes in the government's policies or as a result of
budgetary constraints; and increased or unexpected costs resulting in losses.
Historically, the Company has been dependent on a limited number of
contracts for a significant portion of its revenues. For the years ended
December 31, 1996 and 1995, the Company's five largest customers with whom it
has annual contracts accounted for approximately 19% and 21%, respectively, of
the Company's revenues. In 1995, Northern Palm Beach County Water Control
District, the customer with which the Company has the largest annual contract,
accounted for approximately 14.0% of the Company's revenues while in 1996, it
only accounted for 2.2% of the total revenues for 1996. For the year ended
December 31, 1996, the Company has broadened its customer base and no one
customer accounts for more than 5% of the Company's total revenues.
There can be no assurance that the Company will obtain additional
contracts for projects similar in scope to those previously obtained or retain
existing customers or attract and retain new customers or that the Company will
not remain largely dependent on non-recurring contracts with a limited customer
base, which will constitute a significant portion of the Company's revenues.
INSURANCE AND BONDING
The Company carries insurance coverage which the Company considers
sufficient to meet applicable regulatory and customer requirements and to
protect the Company's assets and operations. The Company's insurance coverage
currently includes $2 million of comprehensive general liability insurance, up
to $1 million of pollution liability insurance and $8 million of excess
liability insurance. The Company attempts to operate in a professional and
prudent manner and to reduce its liability risks through specific risk
management efforts, including employee training. Nevertheless, a partially or
completely uninsured claim against the Company, if successful and of sufficient
magnitude, could have a material adverse effect on the Company and its financial
condition. In addition, the inability to obtain insurance of the type and in the
amounts required could impair the Company's ability to obtain new contracts,
which are, in certain instances, conditioned upon the availability of adequate
insurance coverage.
The aquatic and industrial vegetation management business involves
potentially significant risks of statutory, contractual and common law liability
for environmental damage and personal injury. The Company, and in certain
instances, its officers, directors and employees, may be subject to claims
arising from the Company's on-site or off-site services, including chemicals
used in its operations, and environmental contamination by the Company, its
contracted transporters or disposal site operators. All such persons may be
liable for site investigation, site cleanup costs and natural resource damages,
which costs could be substantial, regardless of whether they exercised due care
and complied with all relevant laws and regulations. There can be
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no assurance that the Company will not face claims resulting in substantial
liability for which the Company is uninsured, that hazardous substances or
materials are not or will not be present at the Company's facilities or that the
Company will not incur liability for environmental impairment.
The Company is required, in most instances, to post bid and/or
performance bonds in connection with contracts or projects with government
entities and, to a lesser extent, private sector customers. To date, the Company
has been able to obtain bonds in amounts of up to approximately $4 million per
bond. However, there is no assurance that this will continue. The Company
anticipates that in the future it will continue to be required to post bid
and/or performance bonds in connection with contracts or projects with
government entities and, to an increasing extent, private sector customers. In
addition, new or proposed legislation in various jurisdictions require or will
require the posting of substantial bonds or require other financial assurances
with respect to particular projects. There can be no assurance that the Company
will be able to obtain bonds in the amounts required.
MARKETING
To date, marketing has principally been conducted through the efforts
of the Company's management and sales personnel. The Company uses various
marketing methods, including direct mailings, in-person solicitation, print
advertising and participation in trade shows and conventions, and periodically
mails attractive, full-color sales brochures and advertises in trade journals.
The Company's sales force consist of approximately sixteen people, who are
responsible for soliciting potential customers in their respective geographic
markets, receive salaries plus a percentage of gross profits derived from
Company services. The Company also obtains customers through recommendations and
referrals from existing customers and environmental engineers and consultants.
The Company's executive officers devote significant time and effort to maintain
continuing customer relationships.
The Company typically obtains private and public contracts for its
services through the process of competitive bidding. The Company's marketing
efforts include subscribing to several bid reporting services and monitoring
trade journals and other industry sources for bid solicitations by various
entities, including government authorities and related instrumentalities, and
responding to such bid solicitations, which include requests for proposals and
requests for qualifications. In response to a request for proposal or
qualification, the soliciting entity generally requires a written response
within a set period of time. Generally, in the case of a request for a proposal,
a bidder submits a proposal detailing its qualifications, the services to be
provided and the cost of the services to the soliciting entity which then, based
on its evaluation of the proposals submitted, awards the contract to the
successful bidder. Generally, in the case of a request for qualification, a
bidder submits a response describing its experience and qualifications,
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the soliciting entity then selects the bidder believed to be the most qualified,
and then negotiates all the terms of the contract, including the cost of the
services.
The Company believes that accurate bidding is important to the
Company's business. Accordingly, the Company utilizes a computerized bidding
system and engages personnel at potential sites to determine cost factors used
in submitting bids. Public contracts are usually longer-term (two to three
years) and may periodically be put up for bid even though the Company has
provided quality services and has formed a strong relationship with the
customer. While a bid price is an important factor in obtaining contracts, the
Company believes that potential customers also consider reputation, experience,
safety record and the financial condition of bidders in awarding contracts.
Because of its familiarity with the nature of the contracts and the basis on
which they are awarded, the Company is often able to retain contracts that are
put up for bid. In the past, the Company has been able to retain approximately
85% of contracts which fall into this category. However, there can be no
assurance that the Company will continue to be successful in having its bids
accepted. The competitive bidding process is typically lengthy and often results
in the expenditure of significant sums and allocation of resources in connection
with bids that may be rejected. Additionally, inherent in this process is the
risk that actual performance costs may exceed the projected costs, especially in
relation to disputes on the performance of services, upon which the submitted
bids or contract prices are based.
COMPETITION
The aquatic and vegetation management industry is highly competitive.
The Company faces competition from several hundred companies throughout the
Sunbelt States. In recent years, government authorities have implemented an
extensive regulatory framework directed toward alleviating various environmental
problems. The complex nature of government regulation has resulted in
significantly increased sophistication and costs of aquatic and industrial
vegetation management, handling and disposal methods, facilities and equipment.
Consequently, the industry has become increasingly capital intensive and
competitive.
The Company believes that the principal competitive factors in the
aquatic and industrial vegetation management industry are reputation, technical
proficiency, managerial expertise, financial assurance capability (particularly
as it relates to bonding), price and breadth of services offered, including
documentation capabilities. With its internal growth and its recent
acquisitions, the Company is currently the largest commercial provider of
aquatic and vegetation management services in the United States. With its highly
credible track record, substantial bonding and insurance capabilities, its
investment in managerial expertise, equipment and computerized operations,
management believes that the Company does have a competitive edge in the
business. The Company has developed a customized software package which provides
individual job budgets, branch work schedules, integrated customer service and
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sales activity tracking and collaborative communications. All these allows the
Company to provide quality service, improve efficiency and costs control and
provide competitive yet profitable bids. In addition, the Company is also
committed to purchasing highly specialized proprietary equipment to remain in
the forefront of technology. This equipment is intended to be used for weed and
algae control both in water and on land ('amphibian' in nature). They may result
in high efficiency and accuracy including the reduction of the cost of labor per
acre of weed control, allowing the Company to use the finest treatment products
for its customers and projects.
Competition in the aquatic and industrial vegetation management
industry is, however, expected to increase in the foreseeable future. A
significant number of aquatic management projects continue to be performed "in
house" by the major water management districts, many of which may have
substantially greater financial and other resources than the Company. The
Company also expects that a significant number of new market entrants will seek
to bid on new aquatic management projects for the Everglades. There can be no
assurance that the Company will be able to compete successfully in its markets.
SUPPLIERS AND SUBCONTRACTORS
The Company is dependent on third-party suppliers and manufacturers for
all of its requirements of algicides and herbicides, fish and aeration systems
used in its aquatic management business. Although the Company purchases all of
these supplies from numerous suppliers and believes that alternative sources of
supply are available, failure by such suppliers and manufacturers to continue to
supply the Company with products on commercially reasonable terms, or at all, in
the absence of readily available alternate sources, would adversely affect the
Company's ability to deliver products and provide services on a timely and
competitive basis. The Company is dependent on the ability of its suppliers and
manufacturers, among other things, to satisfy performance, quality and
regulatory specifications and dedicate sufficient production capacity for
supplies within scheduled delivery times. The Company does not maintain
contracts with any of its suppliers or manufacturers and purchases supplies
pursuant to purchase orders placed from time to time in the ordinary course of
business. In addition, the Company currently does not own or lease certain
specialized equipment, including mechanical harvesting or certain planting
equipment and is dependent upon third-party subcontractors to provide necessary
equipment, know-how, transportation and other facilities on a project basis. In
the event such subcontractors were to become unavailable to the Company at
acceptable cost levels, or at all, the Company's business could be materially
adversely affected.
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GOVERNMENT REGULATION
The aquatic and industrial vegetation management services business is
subject to extensive and frequently changing federal, state and local laws and
substantial regulation under these laws by governmental agencies, including the
United States Environmental Protection Agency (the "EPA") and the United States
Occupational Safety and Health Administration ("OSHA"). Among other things,
these regulatory authorities impose requirements which regulate the handling,
transportation and disposal of hazardous and non-hazardous materials and the
health and safety of workers, and require the Company and, in certain instances,
its employees, to obtain and maintain licenses and permits in connection with
its operations. This extensive regulatory framework imposes significant
compliance burdens and risks on the Company. The Company is currently subject to
the requirements of the Resource Conservation and Recovery Act of 1976, as
amended, the Federal Water Pollution Control Act, as amended, the Federal
Insecticide, Fungicide, and Rodenticide Act, the Florida Weed Control Act and
the Occupational Safety and Health Act of 1970. The following is a summary of
these regulations and other material governmental regulations which may be
applicable to the Company.
The Federal Water Pollution Control Act, as amended by the Federal
Water Pollution Control Act Amendments of 1979 and the Clear Water Act of 1977
(collectively "CWA"), create the federal statutory scheme for water pollution
control and management. The principal objective of the CWA is to restore and
maintain the integrity of the nation's waters. In addition, the CWA provides
for: (I) the development of pollutant discharge standards and limitations; (ii)
a permit and licensing system to enforce these discharge standards; (iii)
federal funding to assist in the construction of publicly owned and privately
owned treatment works; and (iv) research and development of pollution control
technologies and strategies.
Congress also created the federal Safe Drinking Water Act ("SDWA") to
ensure the quality and safety of drinking water supplies. To protect underground
sources of drinking water from contamination, SDWA regulates underground
injection wells used for waste disposal and establishes a permit program for
such practices. The SDWA also establishes procedures for the development and
implementation of programs for aquifer protection areas located within areas
designated as source aquifers for drinking water.
Even though the EPA has nationwide authority to implement CWA,
authorized states may implement various aspects of the National Pollutant
Discharge Elimination System ("NPDES") and pretreatment programs, among other
areas of responsibility. In addition to the option of administering the CWA
under authority delegated by the EPA, states may develop their own regulations
for water pollution control, which generally parallel federal CWA requirements.
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As a complement to the regular NPDES program, the United States Army
Corps of Engineers must issue a special permit (commonly referred to as a
Section 404 permit) prior to the discharge of dredge-and-fill material into
navigable waters of the United States, including "wetlands" as defined under the
CWA. As a condition of obtaining such dredge-and-fill permits, the permittee is
required to mitigate the impacts of such dredge-and-fill activities (often times
by creating new wetlands), resulting in "no net loss" of wetlands or an increase
in wetlands areas. As is the case in Florida, many states implement the
dredge-and-fill permit criteria under a consolidated federal and state program.
The Company from time to time may be engaged in wetlands mitigation projects,
which may subject the Company to the provisions of the CWA and its permitting
programs.
Originally adopted in 1947, the Federal Insecticide, Fungicide, and
Rodenticide Act ("FIFRA") constitutes the federal regulatory framework governing
pesticides, including algicides and herbicides. FIFRA imposes a variety of
licensing, permitting, classification, and registration requirements, along with
various constraints imposed upon the application, use, and handling of
pesticides. FIFRA mandates that all restricted use of pesticides be applied by
or under the direct supervision of an applicator certified only under FIFRA.
Although FIFRA dictates certification for applications of restricted use of
pesticides, many states, including Florida, require the certification and/or
registration of commercial applicators for applications of both general and
restricted use pesticides.
FIFRA expressly authorizes states to regulate the sale or use of a
federally registered pesticide or device under certain circumstances, but defers
to state regulations employing stricter standards. A state may also require the
registration of federally registered pesticides for additional uses consistent
with special local needs. As a general rule, state laws regulating pesticides
parallel the federal scheme. Many states supplement the federal requirements
with their own regulations.
The Toxic Substance Control Act of 1975 ("TSCA") gives the EPA broad
authority to regulate the manufacture, processing, distribution in commerce, use
and disposal of chemical substances and mixtures. The EPA may require testing of
chemical substances that may present an unreasonable risk to health or the
environment. If testing reveals an unreasonable risk, the EPA must take steps to
reduce the risk. Options available to the EPA range from labeling requirements
prohibiting manufacture of the harmful chemical to mandating the manner in which
it must be disposed. The Company from time to time may be engaged in the future
to remediate certain contaminated sites, which may involve the use or disposal
of chemical substances and mixtures. To the extent that the Company handles in
the future those chemical substances and mixtures regulated by TSCA, the Company
could be subject to liability under TSCA. The Company does not anticipate that a
material portion of its environmental remediation activities in the future will
consist of the remediation of sites requiring the use or disposal of chemical
substances or materials regulated by TSCA.
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The Florida Aquatic Weed Control Act ("FAWCA") creates a state
regulatory framework for the preservation and maintenance of the state's
waterways. Under FAWCA, no person or public agency shall eradicate, remove or
otherwise alter any aquatic weeds or plants in waters of the state unless the
Department of Environmental Protection ("DEP") or its designee issues a permit
or the activity is exempted. The Florida Legislature also established the
Florida Nonindigenous Aquatic Control Act, which is designed to control
nonindigenous aquatic plants primarily by means of maintenance programs. In
connection with its aquatic management activities, the Company is subject to the
permitting criteria of FAWCA and the Florida Nonindigenous Aquatic Control Act,
which the Company does not anticipate will have a material impact on its aquatic
management business.
The Company may also be subject to a variety of environment-related
worker and community safety laws. The Occupational Safety and Health Act of 1970
("OSHA") mandates general requirements for safe work places for all employees.
In particular, OSHA calls for special procedures and measures for the handling
of certain hazardous and toxic substances. In addition, specific safety
standards have been promulgated for workplaces engaged in the treatment,
disposal or storage of hazardous waste. Moreover, under the Federal Emergency
Planning and Right-to-Know Act of 1986, facilities handling specified extremely
hazardous materials must notify local emergency planning committees of their
activities and comply with the provisions of local emergency plans. Requirements
under state law, in some circumstances, may mandate additional measures for
facilities handling specified extremely dangerous materials.
The Company believes that it is in substantial compliance with all
material federal, state and local laws and regulations governing its operations
and has obtained all material licenses and permits necessary for the operation
of its business. However, amendments to existing statutes and regulations,
adoption of new statutes and regulations and the Company's expansion into new
jurisdictions and aquatic and vegetation management services could require the
Company to continually alter methods of operations at costs that could be
substantial. There can be no assurance that the Company will be able, for
financial or other reasons, to comply with applicable laws, regulations and
permitting requirements, particularly as it seeks to enter into new markets.
Failure to comply with applicable laws, rules or regulations or permitting
requirements could subject the Company to civil remedies, including fines and
injunctions, as well as possible criminal sanctions, which would have a material
adverse effect on the Company.
Notwithstanding the burdens of compliance, the Company believes that
its business prospects are significantly enhanced by the continuing stringent
enforcement of the comprehensive regulatory framework by government agencies.
Any significant relaxation of the regulatory requirements governing the aquatic
and vegetation management services industry could also adversely affect the
Company.
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PERMITS AND LICENSES
The Company and, in certain instances, its employees are required to
obtain and maintain licenses and permits in connection with its operations. The
Company's employees currently hold the necessary permits for application of the
algicides and herbicides utilized by the Company in its aquatic management
business. The Company is required to obtain permits from state and local
governments for the harvesting and planting of aquatic plants in connection with
its wetlands planting activities on a project basis. The Company may also be
required to obtain surface water permits in connection with its aquatic
management activities on a project basis depending on the nature of the body of
water.
The Company anticipates that it will be required to obtain and maintain
additional licenses in geographic areas in which it intends to expand its
operations. The Company believes, based upon the level of training of its
employees and past experience, that it will be able to obtain all such required
licenses, although there is no assurance that it will be able to do so.
EMPLOYEES
As of March 12, 1997, the Company had approximately 150 employees other
than executives, all of whom are full-time employees, which includes 30
administrative staff, 12 branch managers, 13 sales personnel, 75 applicators and
20 laborers. The Company is not currently a party to any collective bargaining
agreement. The Company believes that its employee relations are satisfactory.
DISCONTINUED OPERATIONS
The Company's Board of Directors in November 1995 approved a plan to
dispose of the environmental remediation business segment in view of the
continued losses of the environmental remediation services division and
operational problems associated with it. In 1996, management has implemented
various cost-cutting measures including the reduction of officers and other
personnel, the sale of under-utilized equipment and the consolidation of
accounting and administrative functions. The Company's remediation services
which are being discontinued include remediation of petroleum contaminated soil
and ground water and the removal, disposal and installation of underground
petroleum storage tanks and fuel dispensing systems.
On April 25, 1996, the Company sold substantially all of the assets and
liabilities of HES to Heart Environmental Services, Inc. (the "Buyer"), a New
Jersey corporation for a total consideration of $1,907,021. The total
consideration comprises (I) $681,000 in cash, (ii) a three-year promissory note
of $600,000 (the " Promissory Note") issued by the Buyer, bearing interest at 9%
per annum and collateralized by the pledge of 499 shares of the Buyer's Common
Stock pursuant to a Stock Pledge Agreement, (iii)
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the cancellation of total obligations due to H&H Investments Corporation, Mr.
Eugene M. Haas and Mr. Robert E. Haas (collectively known as the "Haas
Shareholders") which amounted to $626,021. The Company originally incurred these
obligations in connection with the HES acquisition in February 1995. As a result
of the HES sale, the Company has agreed not to pursue any claims against the
Haas Shareholders in connection with the Haas acquisition in February 1995. All
of the above items have been satisfied with the exception of (ii) pertaining to
the Promissory Note. As of December 31, 1996, the Company determined that there
may be a collectability problem in relation to the Promissory Note and as a
result, a full valuation allowance has been made.
In relation to FUPTC, the Company has not been successful in finding a
buyer for it and the net book values of the remaining assets of FUPTC have been
written down to its net realizable values. As at December 31, 1996, FUPTC has
fulfilled all of its remaining contractual obligations. All equipment have been
sold on a piece-meal basis and the net liabilities of the discontinued
environmental remediation entities consist mainly of accounts receivable,
accounts payable and amounts payable to Robert A. Radler, the former President
of the Company, under a settlement agreement entered into in 1996 with the
Company. The Company is continuing its collection efforts for the remaining
accounts receivables in relation to its discontinued operations so as to settle
the remaining accounts payable.
DESCRIPTION OF PROPERTY
The Company maintains a corporate headquarters for its surface water
management and industrial vegetation management businesses, consisting of
approximately 17,350 square feet, located in Fort Lauderdale, Florida, under a
five-year four-month lease which commenced on January 1, 1994. The Company has
the option to extend the term of the lease for an additional five years. The
Company's annual lease payments for the remaining two years of the lease will be
approximately $89,790 and $93,370. Thereafter, the Company's annual lease
payments will increase by 5% each year. In addition to its lease payments, the
Company is required to pay a proportionate share of the operating expenses, as
defined in the lease to include, among other things, property taxes, hazard
insurance and all public utility services aside from electric, incurred by the
lessor in connection with its management and maintenance of the property subject
to the lease. Under the terms of the lease, the Company's operating expenses may
not increase by more than 5% each year.
In addition to its corporate headquarters, the Company conducts its
aquatic and industrial vegetation management business out of the following
branch offices:
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The Company's office in West Palm Beach, Florida consists of
approximately 3,450 square feet, under a two-year lease which commenced on
September 23, 1992. The Company has extended the lease for an additional
three-year term, including the rental of additional space of approximately 1,150
square feet. The Company has the option to renew the lease for an additional
year. Annual lease payment is approximately $35,200, which amounts include the
cost of property taxes, hazard insurance, and public utility services but
exclude the cost of maintaining exterior walls, roof areas and the structural
integrity of the leased building, a portion of which costs the Company may be
assessed to pay.
The Company rents an approximately 3,200 square foot office in Orlando,
Florida under a three-year one-month lease which commenced on June 1, 1994. The
Company has the option to extend the term of the lease for an additional two
years. The Company's annual lease payments for the three years of the lease
(excluding the first month) are approximately $17,440, $17,965 and $18,500,
excluding taxes, insurance and utilities.
The Company's office in Sarasota, Florida consists of approximately
4,000 square feet. The Company leases this office under a one-year lease which
commenced on January 1, 1997. The Company has the option to renew the lease for
four additional one-year terms. The annual lease payment is $24,000 which
excludes taxes, insurance and utilities.
The Company rents an approximately 4,500 square foot office in Tampa,
Florida under a five-year lease effective May 1, 1995. The Company has the
option to extend the term of the lease for an additional two years. The
Company's annual lease payment is $24,000 except for the first year where the
rent is specifically waived for a period of five months which amount includes
water services, but excludes the cost of all other public utility services,
insurance, taxes and maintenance.
The Company's office in Fort Myers, Florida is approximately 4,200
square foot in size and is under a two-year lease which commenced on December 1,
1995. The annual lease payment is $19,200 excluding taxes, insurance and
utilities. The Company has the option to renew the lease for three additional
one-year terms.
On March 1996, the Company entered into a lease for approximately 2,625
square feet of space in Jacksonville, Florida, with a term of one year effective
April 1, 1996. The Company has the option to renew the lease for three
additional one-year terms. The Company's annual lease payment is $13,200,
excluding taxes, insurance and utilities.
The Company's office in Myrtle Beach, South Carolina consists of
approximately 2,000 square feet and is leased on a month to month basis for
approximately $600 per month.
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The Company's office in Tempe, Arizona, is approximately 5,900 square
feet in size and is under a month to month lease which commenced December 7,
1996. The monthly lease payment is $2,000 in addition to all expenses borne by
triple net lease terms, including, but not limited to, real estate taxes. The
Company intends to enter into a two year lease agreement including yearly
renewal options, with a monthly lease payment of approximately $3,250 for this
office.
In connection with the GPI Acquisition, the Company entered into a
month to month lease for approximately 2,800 square feet of space in Athens,
Georgia at a monthly lease payment of $1,000.
SELLING STOCKHOLDERS
Pursuant to the Company's initial public offering, the Company issued
1,437,500 shares of Common Stock and 1,437,500 Warrants to purchase 1,437,500
shares of Common Stock. The Company has agreed to maintain an effective
registration statement and current prospectus covering the issuance and public
sale of shares of Common Stock issuable upon exercise of the Warrants during
their term. The Warrants are exercisable at $6.00 per share, and the Company
will receive an aggregate of $8,625,000 if all of the Warrants are exercised.
Such shares have been included in the Registration Statement of which this
Prospectus forms a part.
The Company has agreed to pay for all costs and expenses incident to
the issuance, offer, sale and delivery of the shares underlying the Warrants,
including, but not limited to, all expenses and fees of preparing, filing and
printing the Registration Statement and Prospectus and related exhibits,
amendments and supplements thereto and mailing of such items. The Company will
not pay selling commissions and expenses associated with any such sales by the
selling stockholders. Sales of the shares of common stock underlying the
Warrants may be made from time to time by or for the account of the selling
stockholders in one or more transactions in the over-the-counter market, in
negotiated transactions or otherwise, at prices related to the prevailing market
prices or at negotiated prices.
PLAN OF DISTRIBUTION
The Company will not receive any of the proceeds from the sale of any
of the Shares by the selling stockholders. The sale of the securities registered
hereby may be effected by the selling stockholders from time to time in
transactions in the over-the-counter market, on the NASDAQ National Market
System, in negotiated transactions, or a combination of such methods of sale, at
fixed prices which may be changed, at market prices prevailing at the time of
sale, at prices related to prevailing market prices or at negotiated prices. The
securities registered hereby may be sold by one or more of the
36
<PAGE>
following methods: (i) a block trade in which the broker or dealer so engaged
will attempt to sell the Shares as agent for the selling stockholders; (ii)
ordinary brokerage transactions; (iii) transactions in which the broker solicits
purchasers and (iv) privately negotiated transactions. In effecting sales,
brokers or dealers engaged by the selling stockholders may arrange for other
brokers or dealers to participate. Brokers or dealers may receive commissions
from the selling stockholders in amounts to be negotiated immediately prior to
the sale. Such brokers or dealers and any other participating brokers or dealers
may be deemed to be "underwriters" within the meaning of the Securities Act in
connection with such sales.
In order to comply with the securities laws of certain states, if
applicable, the Shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
Shares may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available and is complied with by the Company and the selling
stockholders.
The selling stockholders and any broker-dealers, agents or underwriters
that participate with the selling stockholders in the distribution of the
securities registered hereby may be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act, and any securities registered
hereby purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act.
Under applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the securities registered hereby may not
simultaneously engage in market-making activities with respect to the Common
Stock for a period of two business days prior to the commencement of such
distribution. In addition and without limiting the foregoing, each Selling
Stockholder will be subject to applicable provisions of the Exchange Act and the
rules and regulations thereunder, including without limitation, Rules 10b-6,
10b-6A and 10b-7, which provisions may limit the timing of the purchases and
sales of shares by the selling stockholders.
The Company has agreed to pay all fees and expenses incident to the
registration of the securities registered hereby except selling commissions and
fees and expenses of counsel or any other professionals or other advisors, if
any, to the selling stockholders.
DESCRIPTION OF SECURITIES
The Company is currently authorized to issue up to 10,000,000 shares of
Common Stock, $.01 par value per share, of which 4,227,091 shares were
outstanding as of March 12, 1997. The Company is authorized to issue up to
1,000,000 shares of
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Preferred Stock, $.01 par value per share, none of which were outstanding as of
March 12, 1997.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share
held of record on all matters to be voted on by stockholders. There is no
cumulative voting with respect to the election of directors, with the result
that the holders of more than 50% of the shares voted for the election of
directors can elect all of the directors. The holders of Common Stock are
entitled to receive dividends when, as and if declared by the Board of Directors
out of funds legally available therefor. In the event of liquidation,
dissolution or winding up of the Company, the holders of Common Stock are
entitled to share ratably in all assets remaining available for distribution to
them after payment of liabilities and after provision has been made for each
class of stock, if any, having preference over the Common Stock. Holders of
shares of Common Stock, as such, have no conversion, preemptive or other
subscription rights, and there are no redemption provisions applicable to the
Common Stock. All of the outstanding shares of Common Stock are, and the shares
of Common Stock offered hereby, will be duly authorized, validly issued, fully
paid and nonassessable.
The Company's Common Stock and Warrants are quoted on the NASDAQ
National Market System under the symbols "AQUX" and "AQUXW", respectively. The
following table sets forth, for the period since September 12, 1994, the high
and low closing sales prices for the Common Stock and the Warrants as reported
by NASDAQ.
COMMON STOCK WARRANTS
------------ --------
HIGH LOW HIGH LOW
---- --- ---- ---
1994
Third Quarter
(beginning September 12, 1994)..... $6-1/2 $5-3/8 $2-1/4 $1-1/8
Fourth Quarter.......................... 6-7/8 5-5/8 2-1/4 1-1/2
1995
First Quarter........................... 7-1/4 6-1/2 2-1/8 1-15/32
Second Quarter.......................... 7-3/8 5-1/2 2-1/4 1
Third Quarter........................... 8-1/8 6-1/2 2-1/2 1-5/8
Fourth Quarter.......................... 8-1/16 6-5/8 2-1/2 1-3/4
1996
First Quarter........................... 6-7/8 3-1/4 2 11/16
Second Quarter ......................... 5-1/4 4-1/4 1-1/8 11/16
Third Quarter........................... 5-13/16 4-1/2 1 1/2
Fourth Quarter.......................... 6-3/8 4-11/16 1-1/8 1/2
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1997
First Quarter
(through March 12, 1997)........... 8 5-15/16 2-1/2 15/16
As of March 12, 1997, there were 42 record holders of the Company's
Common Stock. There are in excess of 1,009 beneficial owners of the Company's
Common Stock.
The Company has not paid any cash dividends on its Common Stock other
than S corporation dividends prior to its initial public offering and does not
currently intend to declare or pay cash dividends in the foreseeable future. The
Company intends to retain any earnings that may be generated to provide funds
for the operation and expansion of its business. In addition, certain of the
Company's loan agreements with its lenders prohibit the Company from paying
dividends.
PREFERRED STOCK
The Company is authorized to issue 1,000,000 shares of Preferred Stock
with such designation, rights and preferences as may be determined from time to
time by the Board of Directors none of which were outstanding as of the date
hereof. Accordingly, the Board of Directors is empowered, without stockholder
approval, to issue Preferred Stock with dividend, liquidation, conversion,
voting or other rights that could adversely affect the voting power or other
rights of the holders of the Common Stock. In the event of issuance, the
Preferred Stock could be utilized, under certain circumstances, as a method of
discouraging, delaying or preventing a change in control of the Company.
WARRANTS
As of the date hereof, the Company has 1,437,500 Warrants issued and
outstanding. The Warrants were issued in registered form pursuant to an
agreement (the "Warrant Agreement") between the Company and American Stock
Transfer & Trust Company, as Warrant Agent. Reference is made to said Warrant
Agreement for a complete description of the terms and conditions therein (the
description herein contained being qualified in its entirety by reference
thereto).
Each Warrant entitles the registered holder thereof to purchase one
share of Common Stock, at a price of $6.00, subject to adjustment in certain
circumstances, at any time until September 12, 1999 after the expiration date,
the Warrantholders shall have no further rights.
The Warrants are redeemable by the Company, with the consent of the
Whale Securities Co., L.P., the Underwriter for the Company's initial public
offering, at any time, upon notice of not less than 30 days, at a price of $.10
per Warrant, provided that the closing bid price of the Common Stock on all 20
of the trading days ending on the third day prior to the day on which the
Company gives notice has been at least 130%
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(currently $7.80, subject to adjustment) of the then effective exercise price of
the Warrants. Any redemption shall be for all outstanding Warrants. All
warrantholders have exercise rights until the close of business on the date
fixed for redemption.
The exercise price and number of shares of Common Stock or other
securities issuable on exercise of the Warrants are subject to adjustment in
certain circumstances, including in the event of a stock dividend,
recapitalization, reorganization, merger or consolidation of the Company.
However, such warrants are not subject to adjustment for issuances of Common
Stock at a price below the exercise price of the Warrants, including the
issuance of shares of Common Stock pursuant to the Company's stock option plans.
The Warrants may be exercised upon surrender of the Warrant certificate
on or prior to the expiration date (September 12, 1999) at the offices of the
Warrant Agent, with the exercise form on the reverse side of the certificate
completed and executed as indicated, accompanied by full payment of the exercise
price and transfer tax (by certified check payable to the Company) to the
Warrant Agent for the number of Warrants being exercised. The warrantholders do
not have the rights or privileges of holders of Common Stock.
No Warrant will be exercisable unless at the time of exercise the
Company has an effective Registration Statement on file with the Commission
covering the shares of Common Stock issuable upon exercise of such Warrant and
such shares have been registered or qualified or deemed to be exempt under the
securities laws of the state of residence of the holder of such Warrant. The
Company will use its best efforts to have all such shares so registered or
qualified on or before the exercise date and to maintain a current prospectus
relating thereto until the expiration of the Warrants, subject to the terms of
the Warrant Agreement. While it is the Company's intention to do so, there is no
assurance that it will be able to do so.
No fractional shares will be issued upon exercise of the Warrants.
However, if a warrantholder exercises all Warrants then owned of record by him,
the Company will pay to such warrantholder, in lieu of the issuance of any
fractional share which is otherwise issuable, an amount in cash based on the
market value of the Common Stock on the last trading day prior to the exercise
date.
Additionally, pursuant to the terms of the Underwriting Agreement, the
Company sold the Underwriter, for an aggregate of $125, warrants (the
"Underwriter's Warrants") to purchase up to 125,000 shares of Common Stock
and/or 125,000 Warrants at an exercise price of $8.25 per share and $.165 per
Warrant. The Underwriter's Warrants are exercisable until September 14, 1999
(the "Warrant Exercise Term"). The Warrants issuable upon exercise of the
Underwriter's Warrants are exercisable to purchase one share of Common Stock at
a price equal to the exercise price equal to the exercise price of the Warrants
as set forth on the cover page of this Prospectus (subject to adjustment).
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The Company also has outstanding Options and Warrants to purchase up to
an aggregate of 1,177,546 shares of Common Stock at exercise prices ranging from
$5.00 to $7.50, substantially all of which are presently exercisable until
expiration dates ranging from October 1997 to October 2002.
DIVIDEND POLICY
Holders of Common Stock are entitled to receive such dividends as may
be declared and paid from time to time by the Board of Directors out of funds
legally available therefor. The Company intends to retain any earnings for the
operation and expansion of its business and does not anticipate paying cash
dividends in the foreseeable future. Any future determination as to the payment
of cash dividends will depend upon future earnings, results of operations,
capital requirements, the Company's financial condition and such other factors
as the Board of Directors may consider.
CERTAIN PROVISIONS OF THE COMPANY'S CERTIFICATE OF INCORPORATION
Section 102 of the Delaware General Corporation Law ("DGCL") authorizes
a Delaware corporation to include a provision in its Certificate of
Incorporation limiting or eliminating the personal liability of its directors to
the corporation and its stockholders for monetary damages for breach of
directors' fiduciary duty of care. The duty of care requires that, when acting
on behalf of the corporation, directors exercise an informed business judgment
based on all material information reasonably available to them. Absent the
limitations authorized by such provision, directors are accountable to
corporations and their stockholders for monetary damages for conduct
constituting gross negligence in the exercise of their duty of care. Although
Section 102 of the DGCL does not change a director's duty of care, it enables
corporations to limit available relief to equitable remedies such as injunction
or rescission. Pursuant to such provision, the Company Certificate of
Incorporation limits the personal liability of the Company directors (in their
capacity as directors but not in their capacity as officers) to the Company or
its stockholders to the fullest extent permitted by the DGCL. Specifically, a
director of the Company will not be personally liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for (i) any breach of the director's duty of loyalty to the Company or
its stockholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) unlawful payments of
dividends or unlawful stock repurchases, redemptions or other distributions, and
(iv) any transaction from which the director derived an improper personal
benefit.
The inclusion of this provision may have the effect of reducing the
likelihood of derivative litigation against directors and may discourage or
deter stockholders or management from bringing a lawsuit against directors for
breach of their duty of care, even though such an action, if successful, might
otherwise have benefitted the Company and its stockholders. However, the
inclusion of this provision together with a provision
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which requires the Company to indemnify its officers and directors against
certain liabilities, is intended to enable the Company to attract qualified
persons to serve as directors who might otherwise be reluctant to do so.
DELAWARE ANTI-TAKEOVER LAW
The Company is governed by the provisions of Section 203 of the DGCL.
In general, the law prohibits a public Delaware corporation from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
"Business combination" includes mergers, asset sales and other transactions
resulting in a financial benefit to the stockholder. An "interested stockholder"
is a person who, together with affiliates and associates, own (or within three
years, did own) 15% or more of the corporation's voting stock.
OVER-THE-COUNTER MARKET
The Company's Common Stock is traded on the NASDAQ National Market
System under the symbols "AQUX" and "AQUXW," respectively.
TRANSFER AGENT
The Transfer Agent for the Company's shares of Common Stock is American
Stock Transfer & Trust Company, 40 Wall Street, New York, New York 10005.
LEGAL MATTERS
Certain legal matters in connection with the securities being offered
hereby will be passed upon for the Company by Atlas, Pearlman, Trop & Borkson,
P.A., Counsel for the Company, Fort Lauderdale, Florida.
EXPERTS
The consolidated balance sheets as of December 31, 1996 and 1995, and
the consolidated statements of operations, stockholders' equity, and cash flows
for the years then ended, incorporated by reference in this prospectus, have
been incorporated herein in reliance on the reports of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
42
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INDEMNIFICATION
Section 145 of the General Corporation Law of Delaware, under which
jurisdiction the Company is incorporated. empowers a corporation to indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative by reason of the fact that he or she
is or was a director, officer, employee or agent of the corporation or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation or enterprise. A corporation may indemnify against
expenses (including attorneys' fees) and, other than in respect of an action by
or in the right of the corporation, against judgments, fines and amounts paid in
settlement actually and reasonably incurred in connection with such action, suit
or proceeding if the person indemnified acted in good faith and in a manner he
or she reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. In the case of an
action by or in the right of the corporation, no indemnification of expenses may
be made in respect to any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the extent
that the Court of Chancery or the court in which such action was brought shall
determine that, despite the adjudication of liability, such person is fairly and
reasonably entitled to indemnity for such expenses which the court shall deem
proper. Section 145 of the General Corporation Law of Delaware further provides
that to the extent a director, officer, employee or agent of the corporation has
been successful in the defense of any action, suit or proceeding referred to
above or in the defense of any claim, issue or matter therein, he or she shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him or her in connection therewith.
The Restated Certificate of Incorporation and By-Laws of the Company
require the Company to indemnify its Directors and officers to the fullest
extent permitted by the General Corporation Law of the State of Delaware.
The Company maintains directors and officers liability insurance, which
covers the Company's subsidiaries and the respective directors and officers.
43
<PAGE>
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations not contained in this Prospectus in
connection with this offer made hereby. If given or made, such information or
representations must not be relied upon as having been authorized by the Company
or any Underwriter. This Prospectus does not constitute an offer to sell or a
solicitation of any offer to buy any of the securities offered hereby in any
circumstance in which such offer or solicitation would be unlawful. Neither the
delivery of this Prospectus nor any sale made hereunder shall under any
circumstances create an implication that information herein is correct at any
time subsequent to the date of this Prospectus.
--------------
TABLE OF CONTENTS
PAGE
----
AVAILABLE INFORMATION....................... 2
INCORPORATION OF CERTAIN
INFORMATION BY REFERENCE.................. 4
RISK FACTORS................................ 5
USE OF PROCEEDS............................. 15
THE COMPANY................................. 15
SELLING STOCKHOLDERS........................ 36
PLAN OF DISTRIBUTION........................ 36
DESCRIPTION OF SECURITIES................... 37
LEGAL MATTERS............................... 42
EXPERTS..................................... 42
INDEMNIFICATION............................. 42
1,437,500 UNITS
AQUAGENIX, INC.
-----------
PROSPECTUS
-----------
April 2, 1997
44
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14...................OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
..........................The following table sets forth the estimated expenses,
all of which are being paid by the Company, in connection with this offering.
Legal fees and expenses............................ $5,500.00*
Accounting fees and expenses....................... 7,500.00*
Printing expenses.................................. 3,000.00*
Miscellaneous...................................... 1,000
Total $17,000
- ----------------
*Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of Delaware, under which
jurisdiction the Company is incorporated, empowers a corporation to indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative by reason of the fact that he or she
is or was a director, officer, employee or agent of the corporation or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation or enterprise. A corporation may indemnify against
expenses (including attorneys' fees) and, other than in respect of an action by
or in the right of the corporation, against judgments, fines and amounts paid in
settlement actually and reasonably incurred in connection with such action, suit
or proceeding if the person indemnified acted in good faith and in a manner he
or she reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. In the case of an
action by or in the right of the corporation, no indemnification of expenses may
be made in respect to any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the extent
that the Court of Chancery or the court in which such action was brought shall
determine that, despite the adjudication of liability, such person is fairly and
reasonably entitled to indemnity for such expenses which the court shall deem
proper. Section 145 of the General Corporation Law of Delaware further provides
that to the extent a director, officer, employee or agent of the corporation has
been successful in the defense of any action, suit or proceeding referred to
above or in
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the defense of any claim, issue or matter therein, he or she shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him or her in connection therewith.
The Company's Bylaws provide that the Company has the power to
indemnify its directors and executive officers and may indemnify its other
officers, employees and other agents to the fullest extent permitted by Delaware
law.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended maybe permitted to directors, officers and controlling
persons of the Company pursuant to the foregoing provisions or otherwise, the
Company has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Company
of expenses incurred or paid by a director, officer or controlling person of the
Company in the successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection with the
securities being registered, the Company will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
ITEM 16. EXHIBITS.
EXHIBIT DESCRIPTION
- ------- -----------
3.1 Amended and Restated Certificate of Incorporation of the Company(1)
3.2 Bylaws of the Company(1)
4.1 Form of Common Stock Certificate(1)
4.2 Revised Form of Warrant Agreement between the Company and American
Stock Transfer & Trust Company(1)
4.3 Revised Form of Warrant Agreement between the Company and the
Underwriter (including the form of Underwriters Warrant
Certificate)(1)
5.1 Opinion of Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel(1)
5.1(a) Opinion of Atlas, Pearlman, Trop & Borkson, P.A.(14)
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10.1 Stock Option Plan of the Company(1)(2)
10.2 Directors Stock Option Plan of the Company(1)(2)
10.3 Employment Agreement, dated June 1, 1993, between the Company and
Alan H. Chesler, and form of amendment thereto(1)(2)
10.4 Employment Agreement, dated June 1, 1993, between the Company and
Robert A. Radler, and form of amendment thereto(1)(2)
10.5 Employment Agreement, dated June 1, 1993, between the Company and
Andrew P. Chesler, and form of amendment thereto(1)(2)
10.6 Non-competition agreement, dated November 19, 1991, between the
Company and David Green(1)
10.7 Form of Indemnification Agreement between the Company and each of the
Company's Directors and Executive Officers(1)(2)
10.9 Credit Agreement, dated October 30, 1992, between SunTrust Bank,
Miami, N.A. and Florida Underground Petroleum Tank Contractors, Inc.
("FUPTC")(1)
10.10 First Amendment to Credit Agreement, dated August 5, 1993, between
SunTrust Bank, Miami, N.A. and FUPTC(1)
10.11 Second Amendment to Credit Agreement, dated as of March 14, 1994,
between SunTrust Bank, Miami, N.A. and FUPTC(1)
10.12 Guaranty Agreements, dated August 5, 1993, between SunTrust Bank,
Miami, N.A. and each of Alan H. Chesler, Robert A. Radler and Donald
H. Shaffer, Jr.(1)
10.13 Security Agreement, dated October 30, 1992, from FUPTC to SunTrust
Bank, Miami, N.A.(1)
10.14 Negative Pledge, dated October 29, 1993, from Alan H. Chesler to
SunTrust Bank, Miami, N.A.(1)
10.20 Lease, dated October 2, 1992, between Palm Beach Commerce Center
Associates, Ltd. and ALWT(1)
10.22 Lease, dated November 14, 1991, between John Hancock Mutual Life
Insurance Co. and ALWT(1)
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10.23 Lease, dated March 9, 1992, between Lawrence Danielle and FUPTC(1)
10.24 Lease, dated November 30, 1993, between Franklin S. Davis and the
Company(1)
10.25 Assignment of Mortgage Note and Security Agreement, dated October 19,
1990, between Alan H. Chesler and ALWT(1)
10.26 Bill of Sale, dated October 19, 1990, between Florida Waterway
Management, Inc. ("FWM") and ALWT(1)
10.27 Assumption Agreement, dated October 19, 1990, between ALWT and FWM(1)
10.28 Asset Purchase Agreement, dated June 14, 1991, between FUPTC, Don
& Sons Equipment Rental, Inc. ("Don & Sons") and South Florida Tank
Disposal, Inc. ("South Florida Tank")(1)
10.29 Form of Consultation/Non-Competition Agreement, dated June 1991,
between Donald H. Shaffer, Betty Shaffer and FUPTC(1)
10.30 Form of Escrow Agreement, dated June 1991, between Don & Sons, South
Florida Tank, FUPTC, Donald H. Shaffer, Jr., Robert Radler and Alan H.
Chesler(1)
10.31 Form of Note from FUPTC to Don & Sons and South Florida Tank(1)
10.32 Form of Security Agreement, dated June 1991, between FUPTC,
Donald H. Shaffer, Jr., Robert A. Radler, Alan H. Chesler and Donald
H. Shaffer, Betty Shaffer, Don & Sons, and South Florida Tank(1)
10.33 Form of Agreement for Set Off, dated June 1991, between Don & Sons,
South Florida Tank and FUPTC(1)
10.34 Agreement regarding substitution of Common Stock of the Company for
Common Stock of FUPTC as collateral for certain obligations of the
former shareholders of FUPTC, dated May 25, 1993, between the Company,
Alan H. Chesler, FUPTC, Robert Radler, Donald Shaffer, Jr., Betty
Shaffer, Don & Sons, and Donald Shaffer, Sr.(1)
10.35 Stock Acquisition Agreement, dated June 2, 1993, between the Company
and the shareholders of ALWT(1)
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10.36 Stock Acquisition Agreement, dated June 2, 1993, between the Company
and the shareholders of FUPTC(1)
10.37 Subscription Agreement, dated June 2, 1993, between the Company and
Gary Krulik, M.D. and Stephanie Krulik(1)
10.38 Waterway restoration contract, dated July 13, 1992, between Greater
Orlando Aviation Authority and ALWT(1)
10.39 Waterway/wetlands maintenance contract, dated August 1992, between
Northern Palm Beach County Water Control District and ALWT(1)
10.40 Fueling Facility Demolition Subcontract Agreement, dated February 11,
1993, between Blasland, Bouck & Lee of Florida, Inc. and FUPTC(1)
10.41 Rehabilitation Subcontract Agreement, dated December 15, 1992, between
Gurr & Associates, Inc. and FUPTC(1)
10.42 Credit Agreement, dated as of June 10, 1994, between SunTrust Bank,
Miami, N.A. and ALWT(1)
10.43 Security Agreement, dated as of June 10, 1994, from ALWT to SunTrust
Bank, Miami, N.A.(1)
10.44 Guaranty Agreement, dated as of June 10, 1994, between SunTrust Bank,
Miami, N.A. and Alan Chesler, Andrew Chesler, Robert Radler and the
Company(1)
10.45 Third Amendment to Credit Agreement, dated as of October 5, 1994,
between SunTrust Bank, Miami, N.A. and FUPTC (4)
10.46 Loan Agreement, dated as of February 10, 1995, between SunTrust Bank,
Miami, N.A. and FUPTC (4)
10.47 Security Agreement, dated as of February 10, 1995, between SunTrust
Bank, Miami, N.A. and FUPTC (4)
10.48 Guaranty Agreement, dated as of February 10, 1995, between SunTrust
Bank, Miami, N.A. and the Company (4)
10.49 Guaranty Agreements, dated February 10, 1995 by Alan H. Chesler,
Robert A. Radler and Andrew P. Chesler, in favor of SunTrust Bank,
Miami, N.A. (4)
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10.50 Revolving Loan and Security Agreement dated February 28, 1995 between
Midlantic Bank, N.A. and Haas Environmental Services, Inc. (4)
10.51 Continuing Guaranty dated February 28, 1995 by the Company in favor of
Midlantic Bank, N.A. (4)
10.52 Asset Purchase Agreement, dated as of February 28, 1995, by and among
the Company, HES Acquisition Corp., Haas Environmental Services, Inc.,
Eugene M. Haas and Robert E. Haas(3)
10.53 Asset Purchase Agreement, dated as of November 23, 1994, by and
between ALWT and Mitigation Services, Inc. (4)
10.54 Promissory Note, dated February 27, 1995, of HES Acquisition Corp. in
the principal amount of $1,975,000 payable to the order of SunTrust
Bank, Miami, N.A. (4)
10.55 Business Lease, dated November 29, 1994, between ALWT and Phillips
Highway Land Trust (4)
10.56 Revolving Loan and Security Agreement, dated as of April 5, 1995
between Midlantic Bank, N.A. and HES (5)
10.57 Promissory Note and Security Agreement, dated as of February 13, 1995
between SunTrust Bank, Miami, N.A. and ALWT (5)
10.58 Credit Agreement, Security Agreement and Revolving Credit Note dated
as of August 11, 1995, between SunTrust Bank, Miami, N.A. and the
Company (7)
10.59 Senior Secured Note and Warrant Purchase Agreement dated as of
October 31, 1995, between The Equitable Life Assurance Society of the
United States (the "Purchaser") and the Company (7)
10.60 Warrant Agreement dated as of October 31, 1995, between the Purchaser
and the Company (7)
10.61 Subordination Agreement dated as of October 31, 1995, by the Purchaser
and the Company in favor of SunTrust, Miami, N.A. re: Exhibit 10.3 (7)
10.62 Letter Agreement, dated as of August 18, 1995, among H&H Investments,
Inc., Robert E. Haas, Inc., Eugene M. Haas, Robert E. Haas, the
Company and HES re: Exhibit 10.4 (7)
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10.63 Compliance Agreement, dated as of September 12, 1995, between the
U.S. Environmental Protection Agency, ALWT, Alan H. Chesler and Andrew
P. Chesler re: Exhibit 10.5 (7)
10.64 Asset Purchase Agreement, dated as of October 19, 1995, among the
Company, ALWT, AmerAquatic, Inc., Thomas Latta and C. Elroy Timmer
re: Exhibit 10.6(7)
10.65 Lake and canal aquatic weed control and marsh maintenance
contract, dated April 1995, between Northern Palm Beach County
Water Control District and ALWT/AmerAquatic, Inc.(8)
10.66 Lease, dated April 10, 1995, between Tampa Industrial Developers, Ltd.
and the Company d/b/a ALWT and FUPTC(8)
10.67 Lease, dated November 1, 1995, between Manny Schwartz, Steve
Schwartz and ALWT(8)
10.68 Lease, dated December 1, 1995, between Charles C. Souders, Shirley A.
Souders and ALWT(8)
10.69 Asset Purchase Agreement, dated as of November 17, 1995, by and
between ALWT and L&L Mosquito & Pest Control, Inc.(8)
10.70 Amended and Restated Senior Secured Note and Warrant Purchase
Agreement dated as of December 15, 1995 between the Purchaser and
the Company(8)
10.71 Warrant Agreement dated as of December 15, 1995, between the
Purchaser and the Company(8)
10.72 Security Agreement dated as of December 15, 1995, between the
Purchaser and the Company(8)
10.73 Subordination Agreement dated as of December 15, 1995, by the
Purchaser and the Company in favor of SunTrust Bank, Miami, N.A.(8)
10.74 Security Agreement dated as of December 28, 1995, between USL Capital
Corporation and the Company, FUPTC and HES(8)
10.75 Commitment Letter dated as of March 13, 1996, between SunTrust Bank,
Miami, N.A. and the Company(8)
II-7
<PAGE>
10.76 Asset Purchase Agreement, dated as of April 25, 1996, by and between
Heart Environmental Services, Inc., H&H Investment Corporation, Eugene
M. Haas, Robert E. Haas, Haas Sand and Gravel, Inc., HES and the
Company(9)
10.77 First Amendment to Credit Agreement, Revolving Credit Note and Re-
affirmation and Ratification of Guaranty Agreements, dated March 29,
1996 between SunTrust Bank, Miami, N.A. and the Company(9)
10.78 Amendment to Loan Agreement, Amended Promissory Note and
Re-affirmation and Ratification of Guaranty Agreements, dated as of
March 29, 1996 between SunTrust Bank, Miami, N.A. and FUPTC(9)
10.79 Contract between the South Florida Water Management District and ALWT,
dated as of February 6, 1996(9)
10.80 Amendment to Senior Secured Note and Warrant Purchase Agreement
between the Company and The Equitable Life Assurance Society of the
United States, dated as of December 15, 1995(9)
10.81 Stock Exchange Agreement, dated as of June 7, 1996, by and among the
Company, ARC and Ray Spirnock and Shirley Spirnock, the shareholder
of ARC(10)
10.82 Subscription Agreement dated June 12, 1996, between the Company and
Mr. Jeffrey T. Katz.(11)
10.83 Subscription Agreement dated June 27, 1996, between the Company and
Tarragona Fund, Inc.(11)
10.84 Subscription Agreement dated June 27, 1996, between the Company and
Alpha Atlas Fund, Ltd.(11)
10.85 Agreement and Plan of Merger, dated as of December 7, 1996, by and
among the Company, Aquagenix Governmental Services, Inc., ADI and Pat
Church and Stephen Church, the shareholders of ADI. (12)
10.86 Stock Exchange Agreement, dated as of December 31, 1996, by and
among the Company, GPI and Garry Seitz and Jan P. Seitz, the Selling
Shareholders.(13)
10.87 Option Agreement, dated as of November 1, 1996, between the Company
and Mr. Jon Kilik(15)
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<PAGE>
10.88 Option Agreement, dated as of November 1, 1996, between the Company
and Mr. Perry Trebatch(15)
10.89 Option Agreement, dated as of November 1, 1996, between the Company
and First Taconic Capital Corporation(15)
10.90 Option Agreement, dated as of November 1, 1996, between the Company
and Pat Guadagno(15)
10.91 Warrant Agreement, dated as of October 15, 1996, between the Company,
Dabney Resnick, Inc. and Aquagenix Warrant Holdings II(15)
10.92 Consulting and Acquisition Management Agreement, dated as of
January 7, 1997, between the Company and Shulman & Associates,
Inc.(15)
16.1 Letter from Bernstein, Patchen, Gold & Wolfson, P.A. regarding change
in independent auditors(1)
21.1 Subsidiaries of the Company(14)
23.01 Consent of Coopers & Lybrand L.L.P. (14)
23.02 Consent of Atlas, Pearlman, Trop & Borkson, P.A. (included in the
opinion filed as Exhibit 5.1 hereto.) (14)
- --------------------
(1) Incorporated by reference to the exhibit of the same number filed with the
Company's Registration Statement on Form SB-2 (No. 33-78956-A).
(2) Management contract or compensation plan.
(3) Incorporated by reference to Exhibit 2 filed with the Company's Report on
Form 8-K dated February 28, 1995.
(4) Incorporated by reference to the exhibit of the same number filed with
the Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1994.
(5) Incorporated by reference to the exhibit of the same number filed with
the Company's Quarterly Report on Form 10-QSB for the quarterly period
ended March 31, 1995.
(6) Incorporated by reference to the exhibit as indicated which was filed
with the Company's Quarterly Report on Form 10-QSB for the quarterly
period ended June 30, 1995.
(7) Incorporated by reference to the exhibit as indicated which was filed
with the Company's Quarterly Report on Form 10-QSB for the quarterly
period ended September 30, 1995.
II-9
<PAGE>
(8) Incorporated by reference to the exhibit of the same number filed with
the Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1995.
(9) Incorporated by reference to the exhibit of the same number filed with
the Company's Quarterly Report on Form 10-QSB for the quarterly period
ended March 31, 1996.
(10) Incorporated by reference to the exhibit of the same number filed with
the Company's Report on Form 8-K dated June 7, 1996.
(11) Incorporated by reference to the exhibit of the same number filed with
the Company's Report on Form 8-K dated June 12, 1996.
(12) Incorporated by reference to exhibit 2 filed with the Company's Report on
Form 8-K dated December 7, 1996.
(13) Incorporated by reference to exhibit 2 filed with the Company's Report on
Form 8-K dated December 31, 1996.
(14) Filed herewith.
(15) Incorporated by reference to the exhibit of the same number filed with
the Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1996.
- --------------------
ITEM 17. UNDERTAKINGS.
(1) The undersigned Registrant hereby undertakes:
(a) to file, during any period in which it offers or sells
securities, a post-effective amendment to this Registration Statement to include
any additional or changed material information on the plan of distribution;
(b) that, for determining any liability under the Securities
Act, treat each such post-effective amendment as a new Registration Statement of
the securities offered at that time shall be deemed to be the initial bona fide
offering thereof; and
(c) to file a post-effective amendment to remove from
registration any of the securities that remain unsold at the end of the
offering.
(2) Insofar as indemnification for liabilities arising under the Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a Director, officer of controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
Director, officer or controlling person in connection with the securities being
registered, the
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<PAGE>
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Fort Lauderdale and the State of Florida, on the
31 day of March, 1997
AQUAGENIX, INC.
/s/ ANDREW P. CHESLER
By: --------------------------------------
Andrew P. Chesler
Chairman of the Board,
Chief Executive Officer and President
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
Chairman of the Board,
Chief Executive Officer
and President (Principal
/s/ ANDREW P. CHESLER Executive Officer) March 31, 1997
- ---------------------------
Andrew P. Chesler
Chief Financial Officer
/s/ HELEN CHIA (Principal Accounting
- --------------------------- Officer) March 31, 1997
Helen Chia
/s/ ABRAHAM S. FISCHLER Director March 31, 1997
- ---------------------------
Abraham S. Fischler
/s/ FRED S. KATZ Director March 6, 1997
- ---------------------------
Fred S. Katz
/s/ ALLEN H. STERN Director March 7, 1997
- ---------------------------
Allen H. Stern
/s/ JEFFREY T. KATZ Director March 7, 1997
- ---------------------------
Jeffrey T. Katz
II-12
<PAGE>
EXHIBIT INDEX
5.1 Opinion of Atlas, Pearlman, Trop & Borkson P.A.
21.1 Subsidiaries of the Company
23.01 Consent of Coopers & Lybrand L.L.P.
ATLAS, PEARLMAN, TROP & BORKSON, P.A.
200 East Las Olas Boulevard, Suite 1900
Fort Lauderdale, Florida 33301
March 31, 1997
Aquagenix, Inc.
6500 N.W. 15th Avenue
Fort Lauderdale, FL 33309
RE: REGISTRATION STATEMENT ON FORM S-3 - AQUAGENIX, INC.
Gentlemen:
This opinion is submitted pursuant to the applicable rules of the
Securities and Exchange Commission (the "Commission") with respect to the
registration by Aquagenix, Inc. (the "Company") of the resale of an aggregate of
1,437,500 shares of Common Stock, par value $.01 per share (the "Common Stock"),
and 1,437,500 redeemable Common Stock Purchase Warrants to be sold by the
Selling Shareholders designated in the Registration Statement. The shares of
Common Stock and Warrants to be sold were issued upon the closing of the
Company's Initial Public Offering pursuant to the Company's Registration
Statement dated September 12, 1994.
In our capacity as special counsel to the Company, we have examined the
original, certified, conformed, photostat or other copies of the Company's
Certificate of Incorporation (as amended), By-Laws and corporate minutes
provided to us by the Company. In all such examinations, we have assumed the
genuineness of all signatures on original documents, and the conformity to
originals or certified documents of all copies submitted to us as conformed,
photostat or other copies. In passing upon certain corporate records and
documents of the Company, we have necessarily assumed the correctness and
completeness of the statements made or included therein by the Company and we
express no opinion thereon.
Based upon and in reliance of the foregoing, we are of the opinion that
the shares of Common Stock and Warrants have been validly issued, fully paid and
non-assessable.
We hereby consent to the use of this opinion in the Registration
Statement on Form S-3 to be filed with the Commission.
Very truly yours,
ATLAS, PEARLMAN, TROP & BORKSON, P.A.
/s/ Atlas, Pearlman, Trop & Borkson, P.A.
[COPY TO COME]
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement on
Form S-3 (File No. 33-78956-A) of our report dated March 15, 1997, on our audits
of the financial statements of Aquagenix, Inc. appearing in the Registrant's
Annual Report on Form 10-KSB for the year ended December 31, 1996.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Miami, Florida
March 31, 1997
