As filed with the Securities and Exchange Commission on April 30, 1997
File No. 33-78956-A
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
________________
Aquagenix, Inc.
(Exact name of issuer as specified in its charter)
Delaware 65-0419263
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
6500 N.W. 15th Avenue
Fort Lauderdale, Florida 33309
(Address of principal executive offices) (Zip Code)
CONSULTING AGREEMENT WITH ADVISOR
(Full title of the plan)
Andrew P. Chesler, President
6500 N.W. 15th Avenue
Fort Lauderdale, Florida 33309
Telephone No.: (954) 975-7771
(Name and address of agent for service)
Copy to:
Roxanne K. Beilly, Esq.
Atlas, Pearlman, Trop & Borkson, P.A.
200 East Las Olas Boulevard, Suite 1900
Fort Lauderdale, FL 33301
(954) 763-1200
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CALCULATION OF REGISTRATION FEE
================================================================================
Proposed Proposed
maximum maximum
offering aggregate Amount of
Title of securities Amount to be price per offering registration
to be registered registered share(1) price(1) fee (1)
================================================================================
Common Stock
($.01 par value) 100,000 shares $5.00 $500,000 $151.52
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(1) Estimated solely for the purpose of computing the amount of the
registration fee in accordance with Rule 457 under the Securities Act of
1933, as amended (the "Securities Act").
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AQUAGENIX, INC.
CROSS REFERENCE SHEET REQUIRED BY ITEM 501(b) OF REGULATION S-K
Form S-8 Item Number
and Caption Caption in Prospectus
1. Forepart of Registration Facing Page of Registration Statement
Statement and Outside Front and Cover Page of Prospectus
Cover Page of Prospectus
2. Inside Front and Outside Back Inside Cover Page of Prospectus and
Cover Pages of Prospectus Outside Cover Page of Prospectus
3. Summary Information, Risk Not Applicable
Factors and Ratio of Earnings
to Fixed Charges
4. Use of Proceeds Not Applicable
5. Determination of Offering Price Not Applicable
6. Dilution Not Applicable
7. Selling Security Holder Sales by Selling Security Holder
8. Plan of Distribution Cover Page of Prospectus and Sales by
Selling Security Holder
9. Description of Securities to be Description of Securities;
Registered Consulting Agreements
10. Interests of Named Experts Legal Matters
and Counsel
11. Material Changes Not Applicable
12. Incorporation of Certain Incorporation of Certain Documents
Information by Reference by Reference
13. Disclosure of Commission Indemnification of Directors and
Position on Indemnification for Officers; Undertakings
Securities Act Liabilities
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PROSPECTUS
AQUAGENIX, INC.
100,000 Shares of Common Stock
($.01 par value)
Issued Pursuant to the Company's Agreement
with First Taconic Capital Corp.
This Prospectus is part of a Registration Statement which registers
100,000 shares of Common Stock, $.01 par value (such shares being referred to as
the "Shares"), of Aquagenix, Inc. (the "Company" or "Aquagenix") which may be
issued pursuant to the exercise of warrants, as set forth herein, to First
Taconic Capital Corp., a consultant to the Company ("First Taconic" or
"Consultant") pursuant to a written consulting agreement (the "First Taconic
Consulting Agreement" or "Agreement") providing for the issuance of warrants to
purchase 100,000 Shares. The Consultant, in its capacity as selling shareholder,
is sometimes hereafter referred to as the "Selling Security Holder." All of the
Shares are being issued to the Consultant pursuant to a written agreement. The
Company has been advised by the Selling Security Holder that it may sell all or
a portion of the Shares from time to time in the over-the-counter market, in
negotiated transactions, directly or through brokers or otherwise, and that such
Shares will be sold at market prices prevailing at the time of such sales or at
negotiated prices, and the Company will not receive any proceeds from such
sales.
No person has been authorized by the Company to give any information or to
make any representation other than as contained in this Prospectus, and if given
or made, such information or representation must not be relied upon as having
been authorized by the Company. Neither the delivery of this Prospectus nor any
distribution of the Shares issuable under the terms of the Agreement shall,
under any circumstances, create any implication that there has been no change in
the affairs of the Company since the date hereof.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED ON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SECURITIES IN ANY STATE TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH STATE.
The date of this Prospectus is April 30, 1997.
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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. The
Company's Common Stock is traded on the NASDAQ SmallCap Market under the symbol
"AQUX." Electronic Reports and other information found through the Electronic
Data Gathering, Analysis & Retrieval System are probably available through the
Commission's website (http://www.sec.gov.).
The Company has filed with the Commission a Registration Statement on Form
S-8 (the "Registration Statement") under the Securities Act of 1933, as amended
(the "Act"), with respect to the resale of up to an aggregate of up to 100,000
shares of the Company's Common Stock, which may be issued to the Consultant of
the Company pursuant to the written Agreement which provides for the issuance of
Warrants to purchase 100,000 Shares at an exercise price of $5.00 per Share.
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 shares of the Common Stock 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.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Securities and
Exchange Commission are incorporated herein by reference and made a part hereof:
(a) The Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1996.
(b) The Company's Quarterly Reports on Form 10-QSB for the quarterly
period ended March 31, 1996, June 30, 1996 and September 30, 1996.
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(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. 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 Prospectus, other than exhibits to such documents. Written
requests for such copies should be directed to Corporate Secretary, Aquagenix,
Inc., 6500 N.W. 15th Avenue, Fort Lauderdale, Florida 33309.
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THE COMPANY
Description of Business
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(a) Background
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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, 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") now known as AmerAquatic, Inc. 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.
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(b) Business Overview
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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 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
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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.
(c) Business of Issuer
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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
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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 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
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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 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(TM) FOUNTAINS. The Company offers an extensive line of
decorative floating fountains, trademarked "Desert Rain(TM)", 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
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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.
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.
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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.
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.
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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 "Selling 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 Selling 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 a Stock Exchange
Agreement and Plan of Merger, dated as of December 7, 1996, by and among the
Company, Aquagenix Land- Water Technologies 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
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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.
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
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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 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.
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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 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 6.5% and 21.2%, 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.
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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 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.
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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, 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
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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
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.
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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.
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.
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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.
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.
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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.
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
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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.
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.
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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 collaterized by the pledge of 499 shares of the Buyer's Common
Stock pursuant to a Stock Pledge Agreement, (iii) 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 collectibility
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
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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 aquatic management
and environmental remediation 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:
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.
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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.
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.
SALES BY SELLING SECURITY HOLDER
The following table sets forth the name of the Selling Security Holder,
the amount of shares of Common Stock held directly or indirectly or to be issued
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<PAGE>
to the Selling Security Holder, the number of shares to be offered by the
Selling Security Holder, the amount of Common Stock to be owned by the Selling
Security Holder following sale of such shares of Common Stock and the percentage
of shares of Common Stock to be owned by the Selling Security Holder following
completion of such offering (based on 4,230,791 shares of Common Stock of the
Company outstanding at April 15, 1997).
Estimated Percentage
Shares to be to be Owned
Name of Selling Number of Shares to Owned After After
Security Holder Shares Owned be Offered Offering Offering
- --------------- ------------ ---------- ------------ -----------
First Taconic
Capital Corp. 100,000 100,000 -0- 0%
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 4,230,791 shares were
outstanding as of April 15, 1997. The Company is authorized to issue up to
1,000,000 shares of Preferred Stock, $.01 par value per share, none of which
were outstanding as of April 15, 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 13, 1994, the high
and low closing sales prices for the Common Stock and the Warrants as reported
by NASDAQ.
25
<PAGE>
Common Stock Warrants
High Low High Low
---- --- ---- ---
1994
Third Quarter
(beginning September 13, 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......................... 5-3/16 4-1/2 1 1/2
Fourth Quarter........................ 6-3/8 4-11/16 1-1/8 1/2
1997
First Quarter
(through April 15, 1997)........... 8-1/8 4-7/8 2-1/2 15/16
As of April 15, 1997, there were 48 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.
26
<PAGE>
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% (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
27
<PAGE>
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 $6.00 per share.
The Company also has outstanding Options and Warrants to purchase up to
an aggregate of 1,277,546 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
28
<PAGE>
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 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.
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
29
<PAGE>
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.
30
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference
The documents listed in (a) through (c) below are incorporated by
reference in the Registration Statement. All documents subsequently filed by the
Registrant pursuant to Section 13(a), 13(c), 14 and 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), prior to the filing of a
post-effective amendment which indicates that all securities offered have been
sold or which deregisters all securities then remaining unsold, shall be deemed
to be incorporated by reference in the Registration Statement and to be part
thereof from the date of filing of such documents.
(a) The Company's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1996.
(b) The Company's Quarterly Reports on Form 10-QSB for the
quarterly period 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 other reports filed pursuant to Section 13(a) or 15(d) of
the Exchange Act since the end of the fiscal year covered by the Registrant's
document referred to in (a) above.
(e) The description of the Common Stock of the Company which is
contained in a Registration Statement filed under the Exchange Act, including
any amendment or report filed for the purpose of updating such description.
Item 4. Description of Securities
A description of the Company's securities is set forth in the Prospectus
incorporated as a part of this Registration Statement.
Item 5. Interests of Named Experts and Counsel
Not Applicable.
II-i
<PAGE>
Item 6. 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 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.
Item 7. Exemption from Registration Claimed
Inasmuch as the Consultant who received the Shares of the Company was
knowledgeable, sophisticated and had access to comprehensive information
relevant to the Company, such transaction was undertaken in reliance on the
exemption from registration provided by Section 4(2) of the Act. As a condition
precedent to such grant, the Consultant was required to express an investment
intent and consent to the imprinting of a restrictive legend on each stock
II-ii
<PAGE>
certificate to be received from the Company except upon sale of the underlying
Shares of Common Stock pursuant to a registration statement.
Item 8. Exhibits
- ------- --------
Exhibit Description
- ------- -----------
(5) Opinion of Atlas, Pearlman, Trop & Borkson, P.A. relating to the
issuance of shares of securities pursuant to the above Consulting
Agreement
(10.1) Consulting Agreement dated October 5, 1996 between the Company and
First Taconic
(23.1) Consent of Atlas, Pearlman, Trop & Borkson, P.A. included in the
opinion filed as exhibit (5) hereto
(23.2) Consents of independent certified public accountants
__________________________
Item 9. Undertakings
(1) The undersigned Registrant hereby undertakes:
(a) To file, during any period in which offerings or sales are
being made, a post-effective amendment to this Registration Statement to include
any material information with respect to the plan of distribution not previously
disclosed in the Registration Statement or any material change to such
information in the Registration Statement;
(b) That, for the purposes of determining any liability under the
Act, each such post-effective amendment shall be deemed to be a new Registration
Statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof; and
(c) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(2) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Act, each filing of the Registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and,
II-iii
<PAGE>
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference
in the Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(3) 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 or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
Director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-iv
<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-8 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
29th day of April, 1997.
AQUAGENIX, INC.
By:/s/Andrew P. Chesler
--------------------------------------
Andrew P. Chesler
Chairman of the Board 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 April 29, 1997
- ----------------------------
Andrew P. Chesler
Chief Financial Officer
/s/Helen Chia (Principal Accounting
- ---------------------------- Officer) April 29, 1997
Helen Chia
/s/Abraham S. Fischler Director April 29, 1997
- ----------------------------
Abraham S. Fischler
/s/Fred S. Katz Director April 29, 1997
- ----------------------------
Fred S. Katz
/s/Allen H. Stern Director April 29, 1997
- ----------------------------
Allen H. Stern
/s/Jeffrey T. Katz Director April 29, 1997
- ----------------------------
Jeffrey T. Katz
II-v
<PAGE>
INDEX TO EXHIBITS
Exhibit Number Description
- -------------- -----------
(5) Opinion of Atlas, Pearlman, Trop & Borkson, P.A. relating
to the issuance of shares of securities pursuant ot the
above Consulting Agreement
(10.1) Consulting Agreement dated October 5, 1997 between the
Company and First Taconic
(23.2) Consents of independent certified public accountants
II-vi
- --------------------------------------------------------------------------------
Opinion of Atlas, Pearlman, Trop & Borkson, P.A.
relating to the issuance of shares of securities
pursuant to the Consulting Agreement
- --------------------------------------------------------------------------------
ATLAS, PEARLMAN, TROP & BORKSON, P.A.
200 East Las Olas Boulevard, Suite 1900
Fort Lauderdale, Florida 33301
April 28, 1997
Aquagenix, Inc.
6500 N.W. 15th Avenue
Fort Lauderdale, FL 33309
Re: Registration Statement on Form S-8 - Aquagenix, Inc. - Common Stock
issued pursuant to Agreement with Advisor
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 an aggregate of 100,000
shares of Common Stock, par value $.01 per share (the "Common Stock"), issued
pursuant to an Agreement with First Taconic Capital Corp. (the "Agreement").
In our capacity as special counsel to the Company, we have examined the
original, certified, conformed, photostat or other copies of the Agreement, 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 when issued in accordance with the terms of the
Agreement, will be validly issued, fully paid and non-assessable.
We hereby consent to the use of this opinion in the Registration Statement
on Form S-8 to be filed with the Commission.
Very truly yours,
ATLAS, PEARLMAN, TROP & BORKSON, P.A.
/s/ Atlas, Pearlman, Trop & Borkson, P.A.
- --------------------------------------------------------------------------------
Consulting Agreement dated October 5, 1997
between the Company and First Taconic
- --------------------------------------------------------------------------------
FIRST TACONIC CAPITAL CORPORATION
654 Madison Avenue, Suite 901
New York, New York 10021
Facsimile (212) 348-0117
October 5, 1996
PERSONAL AND CONFIDENTIAL
Mr. Andrew Chesler
Chairman and CEO
AQUAGENIX, INC.
6500 Northwestr 15th Avenue
Fort Lauderdale, FL 33309
Dear Mr. Chesler:
This letter confirms our agreement regarding your engagement and retention
of First Taconic Capital Corporation, a New York Corporation or its assigns
("FTC") to provide, on a non-exclusive basis, financial advisory services in
connection with the general corporate and operational development of Aquagenix,
Inc. (the "Company").
The Company agrees that in the course of our engagement hereunder, we will
rely entirely upon information supplied by the Company, which information the
Company hereby warrants shall be complete and accurate in all material respects
and not misleading. Accordingly, we assume no responsibility and the Company
agrees that it shall be solely responsible for the accuracy or completeness of
such information and we will not conduct any independent valuation or due
diligence review of the Company. All material non-public information concerning
the Company which is given to us will be used solely in the course of the
performance of our services hereunder and will be treated confidentially by us
for so long as it remains non-public. Except as otherwise required by law or in
the performance of our services hereunder, we will not disclose such information
to any third party.
We understand that the Company is considering the following items:
o securing up to $5 Million of senior debt;
o securing up to $5 Million of an equity investment;
o refinancing its subordinated debt on more favorable terms;
o selling a block of 250,000 shares;
o effecting the exercise of the Company's warrants;
o attracting active market makers and institutional investors;
o growing through acquisitions and internal business development;
<PAGE>
Mr. Andrew Chelser
October 5, 1996
Page 2
o attracting quality-management and, if appropriate, board members;
and
o divesting non-core assets.
Accordingly, FTC's initial financial advisory services will be focused on
the above items.
1. FEES: The Company shall pay to us, or cause us or our designee, to be
paid, for the financial advisory services rendered under this Agreement, the
following:
(a) A non-refundable $1,500 monthly retainer, beginning January 1, 1997.
(b) In addition, the Company shall issue 100,000 warrants to FTC,
subject to board approval of Aquagenix, Inc.
(c) In addition, FTC shall receive standard success fees associated with
the transactions being effected. The terms of such fees shall be
mutually agreed upon at the appropriate time.
2. EXPENSES: In addition to the fees that are payable to us hereunder and
regardless of whether a Sale Transaction is proposed or consummated, the Company
hereby agrees, from time to time upon request, to reimburse us for our
reasonable out-of-pocket expenses incurred in connection with our engagement
hereunder. All individual expenses over $500.00 shall be pre-approved by the
Company's Chairman.
3. TERM OF ENGAGEMENT: The term of this Agreement is for 180 days and will
automatically extend each month thereafter unless terminated. This Agreement may
be cancelled by the Company or by us at any time with or without cause upon
thirty (30) days prior written notice to the other party. Regardless of the date
of termination, FTC shall be entitled to its full fees described in Section 1 in
the event a Transaction is completed by the Company within one year of
termination. Sections 2, 4, 5 and 6 (entitled Expenses, Public References,
Indemnification and Jurisdiction, respectively) of this Agreement shall survive
termination indefinitely.
4. PUBLIC REFERENCES: The Company acknowledges that all opinions and advice
(written or oral) provided by us to the Company pursuant to this engagement are
intended solely for the benefit and use of the Company (including its
management, directors and advisers) and the Company agrees that no such opinion
or advice shall be used, reproduced, disseminated, quoted or referred to any
time, in any manner or for any purpose, nor shall any public references to us or
our affiliates be made by the Company, without our prior written consent.
<PAGE>
Mr. Andrew Chelser
October 5, 1996
Page 3
5. INDEMNIFICATION: The Company agrees to indemnify and hold harmless First
Taconic Capital Corporation and its affiliates, the respective directors,
officers, agents and employees of FTC and its affiliates and each other person,
if any, controlling FTC or its affiliates from and against any and all losses,
claims, damages, or liabilities (or actions in respect thereof) related to or
arising out of any transaction contemplated by this Agreement, our engagement
pursuant to this Agreement or the services to be performed by us in connection
therewith, and will reimburse FTC and any other party entitled to be indemnified
hereunder for all expenses (including fees and expenses of counsel) as they are
incurred by us or any such other indemnified party in connection with pending or
threatened litigation, and whether or not FTC is a party to such action, claim
or pending or threatened litigation.
The Company will not, however, be responsible for any claims, liabilities,
losses, damages or expenses that result directly from any indemnified party's
gross negligence in performing the services which are the subject of this
Agreement. The Company also agrees that neither FTC, nor any of its affiliates
nor any director, officer, employee, member, or agent of FTC or any of its
affiliates shall have liability (whether direct or indirect, in contract or tort
or otherwise) to the Company in connection with any transaction, our engagement
pursuant to this Agreement, or the services performed by us in connection
therewith except for any liability for such losses, claims, damages, or expenses
incurred by the Company that result directly from our gross negligence in
performing the services which are the subject of this Agreement.
If for any reason indemnification is unavailable to us or is insufficient
to hold us harmless, then the Company shall contribute to the amount paid or
payable by FTC as a result of such loss, claim, damage or liability in
proportions as is appropriate to reflect not only the relative benefits received
by the Company on the one hand and us on the other hand but also the relative
fault of the Company and us, as well as any other relevant equitable
consideration. Notwithstanding the foregoing, under no circumstances shall our
aggregate contribution to any losses, claims, liabilities, damages and expense
with respect to which contribution is available hereunder exceed the amount of
fees actually received by us hereunder.
6. JURISDICTION: This Agreement is being executed by us in the State of
Florida and it is understood that we will perform substantially all of the
required services hereunder in that state. Accordingly, the Agreement and all
questions relating to its validity, interpretation, performance and enforcement
shall be governed by, and construed, interpreted and enforced in accordance with
the internal laws, ad not the law of conflicts of law, of the State of Florida.
The Company hereby irrevocably and unconditionally consents to submit to the
jurisdiction of the courts of the State of Florida for any actions, suits or
proceedings arising out of or relating to this Agreement or the transactions
contemplated hereby (and the Company agrees not to commence any action, suit or
proceeding relating thereto except in such courts).
<PAGE>
Mr. Andrew Chelser
October 5, 1996
Page 4
This Agreement sets forth the entire understanding of the parties relating
to the subject matter hereof, and supersedes and cancels any prior
communication, understandings and agreements between parties hereto. This
Agreement cannot be modified or changes, nor can any of its provisions be
waived, except by written agreement signed by both parties. The benefits of the
Agreement shall inure to the respective successors and assigns of the parties
hereto and of the indemnified parties hereunder and their successors and assigns
and representatives, and the obligations and liabilities assumed in this
Agreement by the parties hereto shall be binding upon their respective
successors and assigns.
Please confirm that the foregoing is in accordance with your understanding
by signing and returning the duplicate of this letter to the undersigned. We
look forward to working with you on this assignment.
Yours sincerely,
First Taconic Capital Corporation
/s/ Michael Elinsky
--------------------------------------------
Michael Elinsky, Principal
ACCEPTED AND AGREED TO:
Aquagenix, Inc.
/s/ Andrew P. Chesler
- ----------------------------------
Andrew P. Chesler, Chairman
Date: October 5, 1996
----------------------------
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Consents of Independent Certified Public Accountants
- --------------------------------------------------------------------------------
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement on
Form S-8 (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.
COOPERS & LYBRAND L.L.P.
Miami, Florida
May 1, 1997
