As Filed with the Securities and Exchange Commission on April 9, 1998
Registration No. 333-46819
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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Amendment No. 1
to
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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Conversion Technologies International, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 13-28198
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
Conversion Technologies International, Inc.
3452 Lake Lynda Drive
Orlando, Florida 32817
(407) 207-5900
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
William L. Amt
President and Chief Executive Officer
Conversion Technologies International, Inc.
3452 Lake Lynda Drive
Orlando, Florida 32817
(407) 207-5900
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copy to:
Perry A. Pappas, Esq.
Richard K. Davis, Esq.
Buchanan Ingersoll
College Centre
500 College Road East
Princeton, New Jersey 08540
(609) 987-6800
Approximate date of commencement of proposed sale to the public: From time
to time after this Registration Statement becomes effective.
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If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |X|
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
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CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Amount Maximum Maximum Amount Of
Title of Shares To Be Aggregate Price Aggregate Registration
To Be Registered Registered Per Share(1) Offering Price Fee
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Common Stock,
$.00025 par value 782,873(2) $1.09 $ 853,331.57 $252.60
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) and is based upon the average of the high and low
price per share of the Registrant's Common Stock as reported by the Nasdaq
SmallCap Market on April 7, 1998.
(2) On February 24, 1998, the Registrant filed a Registration Statement
covering 6,208,037 shares of Common Stock and paid a fee of $1,886.31,
based on the then current proposed maximum aggregate price per share of
$1.03. By this pre-effective Amendment No. 1 to that Registration
Statement, the Company is registering 782,873 additional shares of Common
Stock. Accordingly, pursuant to Rule 457(a), the registration is paying an
additional registration fee of $252.60 to cover the additional shares,
based on the current proposed maximum aggregate price per share price of
1.09. In addition, pursuant to Rule 416, this registration statement covers
such additional indeterminate number of shares of Common Stock as may be
issuable by reason of the anti-dilution provisions contained in the
warrants.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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PROSPECTUS
6,990,910 Shares
CONVERSION TECHNOLOGIES INTERNATIONAL, INC.
Common Stock
This Prospectus relates to an aggregate of 6,990,910 shares (the "Shares")
of Common Stock, $.00025 par value ("Common Stock"), of Conversion Technologies
International, Inc. (the "Company"), which are being offered for sale, from time
to time, by or for the account of the securityholders named herein (the "Selling
Securityholders"), consisting of (i) 6,235,075 shares of Common Stock issuable
upon the conversion of outstanding shares of Series A Convertible Preferred
Stock (the "Preferred Stock"), (ii) 623,260 shares of Common Stock issuable upon
the conversion of shares of Preferred Stock underlying certain warrants issued
by the Company to the placement agent in connection with the private placement
of the Preferred Stock (the "Placement Agent Warrants") and (iii) 132,575 shares
of Common Stock issuable upon the exercise of certain warrants (the "Bridge
Warrants") issued by the Company in connection with a line of credit agreement
entered into in July 1997 (the Placement Agent Warrants and Bridge Warrants are
collectively referred to herein as the "Warrants"), and such additional shares
of Common Stock which may be issuable pursuant to certain anti-dilution
provisions contained in the Warrants. The Company will not receive any of the
proceeds from the sale of the Shares by the Selling Securityholders but will
receive up to an aggregate of approximately $739,551 in the event the Warrants
are exercised in full. See "Selling Securityholders."
The Selling Securityholders have not advised the Company of any specific
plan to sell the Shares offered hereby but it is anticipated that the Selling
Securityholders may from time to time sell all or a portion of the Shares
offered hereby in one or more transactions in the over-the-counter market, on
the Nasdaq SmallCap Market or any exchange on which the Common Stock may then be
listed, in negotiated transactions or otherwise, or a combination of such
methods of sale, at market prices prevailing at the time of sale or prices
related to such prevailing market prices or at negotiated prices. The Selling
Securityholders may effect such transactions by selling the Shares to or through
broker-dealers, and such broker-dealers may receive compensation in the form of
underwriting discounts, concessions or commissions from the Selling
Securityholders and/or purchasers of the Shares for whom they may act as agent
(which compensation may be in excess of customary commissions). The Selling
Securityholders and any participating broker-dealers may be deemed to be
"underwriters" as defined in the Securities Act of 1933, as amended (the
"Securities Act"). Neither the Company nor the Selling Securityholders can
estimate at the present time the amount of commissions or discounts, if any,
that will be paid by the Selling Securityholders on account of their sales of
the Shares from time to time. Other offering expenses, estimated at
approximately $25,000, will be borne by the Company. The Company has agreed to
indemnify certain of the Selling Securityholders against certain liabilities,
including certain liabilities under the Securities Act. See "Plan of
Distribution."
The Common Stock is quoted on the Nasdaq SmallCap Market under the symbol
"CTIX". The last reported sale price of the Common Stock on April 7, 1998 was
$1.06 per share.
-----------------------------
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A HIGH DEGREE
OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 4 HEREOF.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
April ____, 1998
<PAGE>
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"). Such reports, proxy
statements and other information filed by the Company may be inspected and
copied (at prescribed rates) at the public reference facilities of the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at
the Commission's regional offices located at Seven World Trade Center, Suite
1300, New York, NY 10048, and 500 West Madison Street, Suite 1400, Chicago, IL
60661, and may also be obtained from the Commission's Website located at
http://www.sec.gov. Quotations relating to the Company's Common Stock appear on
the Nasdaq SmallCap Market, and reports, proxy statements and other information
concerning the Company can also be inspected at the offices of the National
Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C.
20006.
The Company has filed with the Commission a Registration Statement on Form
S-3 (the "Registration Statement") under the Securities Act with respect to the
Shares. This Prospectus, which is a part of the Registration Statement, does not
contain all the information set forth in, or annexed as exhibits to, such
Registration Statement, certain portions of which have been omitted pursuant to
rules and regulations of the Commission. For further information with respect to
the Company and the Shares, reference is hereby made to such Registration
Statement, including the exhibits thereto. Copies of the Registration Statement,
including exhibits, may be obtained from the aforementioned public reference
facilities of the Commission upon payment of the fees prescribed by the
Commission, or may be examined without charge at such facilities. Statements
contained herein concerning any document filed as an exhibit are not necessarily
complete and, in each instance, reference is made to the copy of such document
filed as an exhibit to the Registration Statement. Each such statement is
qualified in its entirety by such reference.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES
DESCRIBED HEREIN OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents which previously have been filed by the Company
with the Commission pursuant to the Exchange Act are incorporated in and made a
part of this Prospectus by reference (unless otherwise indicated, the Commission
file number for each document is 0-28198):
1. The Company's Annual Report on Form 10-KSB for the fiscal year ended
June 30, 1997, as amended by Form 10-KSB/A, Form 10-KSB/A2 and Form
10-KSB/A3 filed by the Company with the Commission on October 28,
1997, December 29, 1997 and February 12, 1998, respectively;
2. The Company's Definitive Proxy Statement for its 1997 Annual Meeting
of Stockholders filed with the Commission on February 26, 1998;
3. The Company's Quarterly Report on Form 10-QSB for the quarter ended
September 30, 1997, as amended by Form 10-QSB/A1 filed by the Company
with the Commission on October 24, 1997 and December 19, 1997,
respectively;
4. The Company's Quarterly Report on Form 10-QSB for the quarter ended
December 31, 1997 filed by the Company with the Commission on February
17, 1998;
5. The Company's Current Report on Form 8-K dated September 8, 1997 filed
by the Company with the Commission on September 9, 1997; and
6. The description of the Company's Common Stock, $.00025 par value,
which is contained in the Company's Registration Statement on Form
SB-2 (file number 333-00756) pursuant to Section 12 of the Exchange
Act which was declared effective by the Commission on May 6, 1996.
All documents hereafter filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act prior to the termination of the offering
of the Shares offered hereby shall be deemed to be incorporated by reference
into this Prospectus and to be a part hereof from the date of filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document, which also is or is deemed to be
incorporated by reference herein, modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
This Prospectus incorporates documents by reference that are not presented
herein or delivered herewith. The Company hereby undertakes to provide, without
charge, to each person, including any beneficial owner, to whom a copy of this
Prospectus is delivered, on the written or oral request or such person, a copy
of any or all of the information incorporated herein by reference. Exhibits to
any of such documents, however, will not be provided unless such exhibits are
specifically incorporated by reference into such documents. Any request should
be addressed to the Company's principal executive offices: President, Conversion
Technologies International, Inc., 3452 Lake Lynda Drive, Orlando, Florida 32817,
telephone number (407) 207-5900.
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RISK FACTORS
Certain statements contained in this Prospectus are "forward-looking
statements" within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act and are intended to be covered by the safe harbors
created thereby. Forward-looking statements may be identified by the use of
words such as "believes," "anticipates" and "expects." The factors discussed
below, and expressed from time to time in the Company's filings with the
Commission, could cause actual results and developments to be materially
different from those expressed or implied by such forward-looking statements. In
light of the significant uncertainties inherent in the forward-looking
statements included herein and therein, the inclusion of such information should
not be regarded as a representation by the Company or any other person that the
objectives and plans of the Company will be achieved. In addition to the other
information contained in this Prospectus, the following factors should be
carefully considered by prospective investors in evaluating a purchase of the
Shares offered hereby.
Accumulated Deficit; History of Operating Losses; Going Concern
Qualification. The Company has experienced significant operating losses since
its inception. The Company had an accumulated deficit of approximately
$(25,793,000) at December 31, 1997. The Company incurred an operating loss of
approximately $(12,154,000) for the fiscal year ended June 30, 1997, and
approximately $(1,756,000) for the six months ended December 31, 1997. Such
losses and accumulated deficit have resulted principally from limited revenues
from operations and costs associated with the development of the Company's
technologies, general and administrative expenses as well as (i) a one-time,
non-cash charge to operations of approximately $6,200,000 relating to the
write-off of purchased research and development technologies in conjunction with
the acquisition of Dunkirk International Glass and Ceramics Corporation
("Dunkirk") in August 1994; (ii) approximately $2,528,000 expensed as process
development costs related to research and development of the Company's cathode
ray tube ("CRT") glass processing and ALUMAGLASS product lines; and (iii) a
non-cash charge to operations of approximately $5,712,000 relating to the
write-off of non-productive fixed assets during the quarter ended June 30, 1997.
The Company expects to continue to incur operating losses until such time, if
ever, as product sales generate sufficient revenue to fund the Company's
continuing operations. The Company's Report on Form 10-KSB for the fiscal year
ended June 30, 1997, as amended, contains an emphasis paragraph in the report of
its independent auditors indicating that there is substantial doubt as to the
ability of the Company to continue as a going concern. No assurance can be given
that the Company will ever achieve profitable operations or that it will
continue as a going concern.
Limited Revenues and Product Sales; Lack of Profitable Business; New
Business. The Company commenced recycling CRT glass used in the manufacture of
televisions in 1994 and production of industrial abrasives in 1995.
Substantially all of the Company's limited revenues to date have been derived
from recycling CRT glass; however, the Company lost a significant CRT customer
in March 1997 and believes that its CRT glass recycling operations will have
limited growth potential. Additionally, the Company has generated only minimal
revenues to date from sales of ALUMAGLASS, its initial industrial abrasive
product, which has received limited acceptance in the marketplace. Accordingly,
the Company presently lacks a profitable business initiative. The Company has
recently commenced production of certain other glass and fired ceramic
substrates; however, there can be no assurance that these products will generate
significant sales. While attempting to commercialize its products, the Company
is subject to risks inherent in a new business generally, such as marketing
problems, unanticipated problems relating to environmental regulatory
compliance, manufacturing and the competitive environment in which the Company
operates, and additional costs and expenses that may exceed estimates. There can
be no assurance that, even after the expenditure of substantial funds and
efforts, the Company will ever achieve or maintain a substantial level of sales
of its products.
Limited Sales of ALUMAGLASS; Shutdown of Melter; Uncertain Supply of
ALUMAGLASS Raw Materials; Uncertain Market Acceptance. To date, the Company has
had only minimal sales of
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<PAGE>
ALUMAGLASS. The Company has shut down the melter used to manufacture ALUMAGLASS
and does not currently intend to restart its melter. The Company is currently
satisfying limited orders for ALUMAGLASS through raw materials purchased from
third party sources which the Company processes into finished ALUMAGLASS
inventory for sale to its customers. There can be no assurance, however, that
the Company will continue to be able to purchase this material on terms
satisfactory to the Company, or at all, or that there will ever be significant
sales of ALUMAGLASS. There also can be no assurance that ALUMAGLASS will ever
obtain market acceptance. In addition, the Company has only recently commenced
production of its other glass and fired ceramic materials, and there can be no
assurance that these products will obtain market acceptance.
Limited Cash Resources; Potential Need for Additional Financing. The
Company is not yet profitable and therefor is currently dependent on its limited
cash resources from its financing activities to fund its operations. In
addition, the Company will remain dependent on its cash from financing
activities until such time, if ever, that it achieves cash flow break-even from
operations. There can be no assurance that the Company will ever achieve cash
flow break-even. In the event the Company has insufficient cash to satisfy its
accounts payable, debt service requirements or general working capital
requirements, the Company could be forced to discontinue its operations or seek
additional debt or equity financing. The Company has no commitment or
arrangements to obtain any such additional financing. Furthermore, the loan
documents to which the Company is a party restrict its ability to incur
additional debt. Any equity financings will be dilutive to the Company's
stockholders and any debt financings will likely contain restrictive covenants
and additional debt service requirements, which could adversely affect the
Company's operating results. If the Company becomes unable to meet its
obligations, the payees of past due accounts payable or the holders of the
Company's debt could commence suit to enforce their debts or could force the
Company into bankruptcy. In the event of a bankruptcy, unless there are assets
available after the satisfaction in full of the claims of creditors, there will
be no recovery by the holders of equity. Furthermore, failure to pay debts as
they become due, suspension of business, material adverse change in financial
condition and/or the entry of certain judgments constitute events of default
under certain of the Company's credit facilities, entitling the lenders to
accelerate their debt, liquidate their collateral and otherwise pursue the
rights and remedies available to them pursuant to applicable law and their loan
documents.
Cancellation of Indebtedness Income; Reduction in Net Operating Loss
Carry-Forwards; Other Possible Tax Effects. In 1995, the Company's wholly owned
subsidiary, Dunkirk, financed certain equipment purchases and manufacturing
improvements through the issuance of $8,000,000 principal amount Solid Waste
Disposal Facility Bonds, Series 1995 (the "IDA Bonds"), by County of Chatauqua
Industrial Development Agency (the "Agency") pursuant to a Trust Indenture dated
as of March 1, 1995 between the Agency and United States Trust Company of New
York, as trustee. In 1997, the beneficial holders of the IDA Bonds agreed that
in exchange for a cash payment of $1,620,000 and Dunkirk's forfeiture of its
interest in a related debt service reserve fund, the IDA Bonds would be
canceled. In August 1997, the Company loaned $1,620,000 to Dunkirk, to satisfy
all of Dunkirk's obligations with respect to the IDA Bonds. Approximately
$6,000,000, representing the difference between the $1,620,000 paid and the
outstanding balance of the IDA Bonds (reduced by approximately $422,000 in debt
service reserve funds which was delivered to the holders of the IDA Bonds), was
forgiven. In addition, in December 1997 the Empire State Development
Corporation/JDA ("ESDC"), which was the guarantor of approximately $1,800,000 of
debt owed by Dunkirk to Key Bank of New York ("Key Bank"), forgave $500,000 of
such indebtedness. If Dunkirk is deemed to be solvent immediately prior to the
time of either of these debt forgivenesses, the Company will recognize taxable
income in its tax year ending June 30, 1998. The amount of such income may be
offset by net operating loss carryforwards ("NOLs"), subject to the limitations
discussed below. Even if sufficient NOLs were available to offset such taxable
income after the limitations described below, the Company may still be subject
to alternative minimum tax. To the extent that Dunkirk is deemed to be insolvent
immediately prior to
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<PAGE>
either such debt forgiveness by an amount which equals or exceeds the respective
amount so forgiven, the Company will not recognize taxable income from such
repayment; however, certain of Dunkirk's tax attributes (such as NOLs) would be
subject to reduction and would not be available to offset future income from
operations, if any. For this purpose, the amount of insolvency is defined to be
the excess of Dunkirk's liabilities over the fair value of its assets. An
independent appraisal of the fair value of Dunkirk's assets has not been
completed at this time to determine Dunkirk's current solvency. In addition, the
Company's ability to offset any taxable income with NOLs may be significantly
limited due to various factors including potential ownership changes under
Section 382 of the Internal Revenue Code of 1986, as amended, arising out of the
Company's initial public offering of securities in May 1996 and/or its private
placement of Preferred Stock in August to December 1997.
The Company has removed certain of Dunkirk's non-productive assets from
service. The initial acquisition and/or construction of certain of these assets
provided a basis upon which Dunkirk was able to claim refundable tax credits of
approximately $500,000. The removal of these assets from service will likely
result in the required repayment of a substantial amount of these tax credits to
the related tax authorities.
If the Company does not have sufficient cash available to satisfy any tax
obligations, it will need to obtain additional financing. The Company has no
current commitments or arrangements with respect to such additional financing.
There can be no assurance that the Company will be able to obtain any such
necessary financing.
Substantial Indebtedness; Debt Service Requirements. At December 31, 1997,
the Company had outstanding an aggregate of approximately $2,322,000 of total
indebtedness (excluding capital lease obligations). Accordingly, the Company is
subject to all of the risks associated with indebtedness, including the risk
that cash flow may not be sufficient to make required payments of principal and
interest on indebtedness. To the extent that the Company's assets continue to be
pledged, such assets will not be available to secure additional indebtedness,
which may adversely affect the Company's ability to borrow in the future. In
addition, a portion of the Company's indebtedness is subject to various
covenants. In the event of a default in payment of outstanding indebtedness, or
in the event of a default arising out of a violation of any covenants, the
Company and/or Dunkirk may lose all or a portion of its assets and the Company
and/or Dunkirk may be forced to materially reduce its business activities or
cease its operations. Certain of the instruments governing the Company's
indebtedness also contain default provisions relating to insolvency and the
inability to pay debts as they become due.
Interruption of Manufacturing Operations; Limited Manufacturing Experience.
The Company operates manufacturing facilities in Dunkirk, New York and St.
Augustine, Florida containing various manufacturing equipment. Such equipment
requires repairs and maintenance which from time to time interrupts the
Company's manufacturing operations. For example, during the period that the
Company's melter was in operation, the Company experienced, on two occasions,
technical difficulties which required extended repairs and a temporary shutdown
of the melter. The Company only recently commenced its manufacturing operations
in St. Augustine, Florida. The Company has no prior experience in the
color-coating operation being conducted at such facility and certain changes,
such as input volume, flow-through rates and curing temperatures, may be
required depending on the color being applied and the substrate being used.
There can be no assurance that the Company will not experience difficulties in
making any required adjustments in an efficient manner or that the Company will
not experience mechanical difficulties which will interrupt production.
New Management; Dependence on Key Personnel; Loss of Certain Executive
Officers. The Company is and will be dependent on its key management personnel,
including, among others, William L. Amt, President and Chief Executive Officer,
and Eckardt C. Beck, who served as Acting President and
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<PAGE>
Chief Executive Officer from June 1997 until August 1997, and who continues to
serve as Chairman of the Board and a consultant to the Company. In addition,
Jack D. Hays, Jr. and Richard H. Hughes, who joined the Company in June 1997 as
Executive Vice President - Operations and Marketing, and Vice President - Sales
and Marketing, respectively, ceased to be officers of the Company in January,
1998 and continue to provide marketing services as consultants on a commission
basis. There can be no assurance that the Company's remaining management will be
able to successfully implement the Company's strategies or that such individuals
will continue with the Company. The loss of one or more of these individuals
could have a material adverse effect on the business and operations of the
Company. In addition, the Company will need to attract and retain other
qualified individuals to satisfy its personnel needs. There can be no assurance
that the Company will be successful in retaining its key management personnel or
in attracting and retaining new employees.
Limited Number of CRT Customers; Loss of Significant CRT Customer; Limited
Growth Potential. To date, substantially all of the Company's limited revenues
have been derived from recycling CRT glass used in the manufacture of
televisions for a limited number of customers. For the fiscal year ended June
30, 1997, two of the Company's CRT glass recycling customers, Techneglas and
Thomson each accounted for more than 10% of the Company's revenues and, in the
aggregate, accounted for approximately 61.2% of the Company's revenues. Thomson
ceased shipping CRT glass to, and purchasing recycled CRT glass from, the
Company as of March 1997. Although the Company has a limited number of customers
for ALUMAGLASS and other materials, the Company is currently dependent on its
CRT customers for substantially all of its revenues.
The Company sells its recycled glass to Techneglas pursuant to a Clean
Cullet Sale Agreement (the "Cullet Agreement") and an open purchase order
arrangement. The Cullet Agreement had an initial term of three years expiring
August 1998 and automatically renews for additional one year terms unless either
party gives the other written notice of termination at least 120 days prior to
the end of any term. The Cullet Agreement includes provisions relating to
specifications, delivery and acceptance of processed CRT glass. The Cullet
Agreement also requires the Company to sell, and Techneglas to purchase, various
amounts of the CRT glass processed by the Company. The Cullet Agreement also
contains pricing and other customary terms. Techneglas has been purchasing
substantially all of the CRT glass processed by the Company since the loss of
Thomson as a customer. There can be no assurance that Techneglas will continue
as a customer.
The loss of any one of the Company's remaining CRT customers could have a
material adverse effect on the Company's financial condition and results of
operations. In addition, even assuming that the Company's existing customers
continue to utilize the Company's CRT glass recycling services, the Company
believes that its CRT glass recycling operations have limited growth potential.
The Company currently obtains only waste CRT glass generated from manufacturers
of televisions located in the United States, and there are a limited number of
such manufacturers. In addition, such manufacturers typically seek more than one
outlet for their CRT glass, in order to avoid dependence on any one source. In
some cases, manufacturers ship their waste CRT glass to smelters or landfills.
Further, transportation costs limit the sources from which the Company can
obtain CRT glass on a cost-effective basis. Accordingly, the Company believes
that its ability to generate revenues from CRT glass is limited and that the
Company will be dependent on its ability to attract computer CRT glass and to
obtain outlets for such glass and on revenues from its other products.
Limited Sales and Marketing Experience; Termination of VANGKOE Joint
Venture and Loss of Guaranteed Minimum Purchase Commitment. The Company has had
limited experience in selling and marketing its products and its recycling
services. Furthermore, the Company has assembled only a small sales and
marketing organization. There can be no assurance that the Company will be able
to recruit, train or retain qualified personnel to sell and market its products
or that it will develop a successful sales and
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<PAGE>
marketing strategy. In addition, for certain applications, the Company has
relied on distributors for primary marketing efforts, which has resulted in only
limited sales of ALUMAGLASS. In an effort to achieve market acceptance of its
products, the Company may seek to enter into joint ventures, licensing or other
collaborative arrangements to sell and market its products.
The Company previously entered into a joint venture with VANGKOE
Industries, Inc. ("VANGKOE") pursuant to which the parties formed Advanced
Particle Technologies, Inc. ("APT"), for the purpose of manufacturing color
coated particles in a proprietary process for sale as decorative aggregates.
Effective as of June 30, 1997, following delays in start-up and certain cost
overruns, the Company purchased VANGKOE's 50% interest in APT and the Company
and VANGKOE terminated the joint venture. In connection with such termination,
the parties entered into a Technology Purchase Agreement, pursuant to which APT
purchased the proprietary color coating process to be employed in the
manufacture of decorative particles. The parties also entered into a
Distribution Agreement, pursuant to which VANGKOE agreed to purchase the colored
particles from APT and sell the particles to distributors and others. The
Distribution Agreement provides that, subject to meeting certain targets,
VANGKOE will be APT's exclusive distributor of colored particles for the
swimming pool and other pool-related markets, and that VANGKOE will purchase
colored particles for such markets exclusively from APT, subject to APT's
ability to supply such particles. VANGKOE must meet certain sales targets to
maintain its exclusivity as a distributor although VANGKOE is under no
obligation to meet such sales targets. VANGKOE was released from its previous
minimum purchase commitment of approximately $1.2 million of ALUMAGLASS and
other materials. VANGKOE is a new company without significant assets or
experience in marketing aggregates and, therefore, there can be no assurance
that it will be successful in marketing the Company's products.
Any joint venture or other collaborative arrangements between the Company
and a third party may result in a lack of control by the Company over the sales
and marketing of its products. There can be no assurance that any sales and
marketing or other efforts undertaken by the Company, or on behalf of the
Company by others, will be successful.
Uncertain Industrial Waste Supply. The Company utilizes manufacturing
by-products and industrial wastes as raw materials for the production of its
products. In addition, the Company will seek to generate revenue in the future
from converting manufacturing by-products and industrial wastes into other
finished products or into raw materials to be sold to other manufacturers.
However, there can be no assurance that producers of such by-products and wastes
will view the Company's processes as a commercially and environmentally
acceptable means of disposing of such by-products and wastes or will not find a
less expensive means of disposing of such by-products and wastes. As a result,
the Company may be forced to incur higher costs to procure raw materials for its
manufacturing processes and may experience difficulty in obtaining wastes for
its conversion services.
Risks Inherent in International Operations. The Company intends to market
its products internationally and may seek opportunities overseas to construct
and operate additional manufacturing facilities, which may include CRT glass
recycling operations, either independently or through joint ventures or other
collaborative arrangements with strategic partners. To date, the Company has
made limited sales of its products to a limited number of distributors in
Europe, the Middle East and South Africa, but has not constructed any
manufacturing facilities overseas. To the extent that the Company operates its
business overseas and/or sells its products in foreign markets, it will be
subject to all of the risks inherent in international operations and
transactions, including the burdens of complying with a wide variety of foreign
laws and regulations, exposure to fluctuations in currency exchange rates and
tariff regulations, potential economic instability and export license
requirements. In addition, international environmental regulations and
enforcement of such regulations vary by country and are subject to changes which
may adversely affect the Company's operations.
-8-
<PAGE>
Competition. The Company's products and services are subject to substantial
competition. The Company's abrasives compete with product offerings of other
companies, principally aluminum oxide, glass beads, plastic abrasives, garnet,
steel grit, coal slag and, with respect to certain applications, sand or water
blasting techniques. Many of the companies offering such products are large
corporations with substantially greater financial resources than the Company.
Large international competitors of manufactured metallic abrasives include:
Exolon-ESK, General Abrasives Triebacher, Inc., Washington Mills Electro
Minerals Corp., Irvin Industries, Inc., Norton/St. Gobain and others. Various
other manufacturers produce mined, plastic, glass bead and mineral abrasives, as
well as high speed water jet spray abrasive systems. The Company's ability to
effectively compete against these companies could be adversely affected by the
ability of these competitors to offer their products at lower prices than the
Company's products and to devote greater resources to the marketing and
promotion of their products than are available to the Company.
The Company's decorative particles and performance aggregates will also
face substantial competitive pressures. The Company believes that 3M has a
significant share of the market for decorative particles. 3M has available to it
financial, technical and other resources far superior to those of the Company.
In addition, certain customers of other products may be unwilling to switch to
the Company's particles due to factors such as personal preferences for a
competitor's color selections, consistency with colors previously sold,
performance concerns or satisfaction with its current products. The Company's
performance aggregates will face similar competitive pressures from producers of
mined minerals, aluminum oxide and others. These producers include 3M and
Norton/St. Gobain, each with resources superior to those of the Company.
With respect to its industrial CRT glass recycling operations, the Company
competes with several other companies who accept waste CRT glass for recycling
or other purposes, each of which may deal with customers of the Company and
satisfy their recycling, beneficial reuse or disposal needs. In addition, under
certain conditions, CRT glass might also be disposed of by melting it to
recapture the residuals. The Company has recently experienced increased
competition from companies offering to take CRT glass from sources free of
charge. In general, the Company has received revenue both when it receives and
when it sells recycled CRT glass. There can be no assurance that the Company
will be able to recycle CRT glass on a profitable basis if it is required to
eliminate the fee it receives upon receipt of such glass from customers in order
to maintain or attract additional sources of CRT glass. In addition, Thomson, a
significant CRT recycling customer, ceased doing business with the Company in
March 1997.
Dependence on Patents and Proprietary Technology; Risk of Infringement of
Third-Party Patents. The Company's success will depend, in part, on its ability
to maintain protection for its products and manufacturing processes under United
States and foreign patent laws, to preserve its trade secrets and to operate
without infringing the proprietary rights of third parties. The Company has two
issued U.S. patents. There can be no assurance that any issued patents will
afford adequate protection to the Company or not be challenged, invalidated,
infringed or circumvented or that any rights thereunder will afford competitive
advantages to the Company. Furthermore, there can be no assurance that others
have not independently developed, or will not independently develop, similar
products and technologies or otherwise duplicate any of the Company's products
and technologies.
There can be no assurance that the validity of any patent issued to the
Company would be upheld if challenged by others in litigation or that the
Company's activities would not infringe patents owned by others. The Company
could incur substantial costs in defending itself in suits brought against it,
or in suits in which the Company seeks to enforce its patent rights against
others. Should the Company's products or technologies be found to infringe
patents issued to third parties, the Company would be required to cease the
manufacture, use and sale of the Company's products and the Company could be
required to pay substantial damages. In addition, the Company may be required to
obtain licenses to patents or other proprietary rights of third parties in
connection with the development and use of its products and
-9-
<PAGE>
technologies. No assurance can be given that any such licenses required would be
made available on terms acceptable to the Company, or at all.
The Company also relies on trade secrets and proprietary know-how, which it
seeks to protect, in part, by confidentiality agreements with its university
research partners, employees, consultants, advisors and others. There can be no
assurance that such parties will maintain the confidentiality of such trade
secrets or proprietary information, or that the trade secret or proprietary
information of the Company will not otherwise become known or be independently
developed by competitors in a manner that would have a material adverse effect
on the Company's business, financial condition and results of operations.
Dependence on Environmental Regulation. Federal, state and local
environmental legislation and regulations mandate stringent waste management and
operations practices, which require substantial capital expenditures and often
impose strict liabilities for non-compliance. Environmental laws and regulations
are, and will continue to be, a principal factor affecting demand for the
technology and services being developed or offered by the Company. The level of
enforcement activities by Federal, state and local environmental protection and
related agencies, and changes in regulations and waste generator compliance
activities, will also affect demand. To the extent that the burdens of complying
with such laws and regulations may be eased as a result of, among other things,
political factors, or that suppliers of manufacturing by-products and other
industrial wastes find alternative means to comply with applicable regulatory
requirements, the Company's ability to procure such by-products and wastes and
the demand for the Company's services could be adversely affected, which could
have a material adverse effect on the Company's business, financial condition
and results of operations. Any changes in these regulations which increase
compliance standards may require the Company to change or improve its
manufacturing process. To the extent the Company conducts its business overseas,
international environmental regulations will be applicable. Such regulations
vary by country and are subject to changes which may adversely affect the
Company's operations.
Regulatory Status of Operations. The Company and its customers operate in a
highly regulated environment, and the Dunkirk facility is and any future
facilities may be required to have various Federal, state and/or local
government permits and authorizations, registrations and/or exemptions. Any of
these permits or approvals may be subject to denial, revocation or modification
under various circumstances. Failure to comply with the conditions of such
permits, approvals, registrations, authorizations or exemptions may adversely
affect the installation or operation of the Company's manufacturing facilities
and may subject the Company to Federal, state or locally-imposed penalties. The
Company's ability to satisfy the permitting requirements for a particular
facility does not assure that permitting requirements for other facilities will
be satisfied. In addition, if new environmental legislation is enacted or
current regulations are amended or are interpreted or enforced differently, the
Company or its customers may be required to obtain additional operating permits,
registrations, certifications, exemptions or approvals. There can be no
assurance that the Company or its customers will meet all of the applicable
regulatory requirements.
Potential Environmental Liability. The Company's business exposes it to the
risk that harmful substances may be released or escape into the environment from
its facilities, processes or equipment, resulting in potential liability for the
resultant exposures, clean-up or remediation of the release, and/or potential
personal injury associated with the release. Liability for investigation and/or
clean-up and corrective action costs exists under CERCLA, RCRA, and the New York
State Environmental Conservation Law. Additionally, the Company is potentially
subject to regulatory liability for the generation, transportation, treatment,
storage or disposal of hazardous waste if it does not act in accordance with the
requirements of Federal or state hazardous waste regulations or facility
specific regulatory determinations, authorizations or exemptions. The Company is
also potentially subject to regulatory liability for releases into the air or
water under the Clean Air Act, the Clean Water Act and analogous state laws and
regulations, and various other applicable Federal or state laws and regulations.
-10-
<PAGE>
The Company may also be exposed to certain environmental risks resulting
from the actions of its CRT glass suppliers and other suppliers of industrial
wastes. Although the Company maintains general liability insurance, this
insurance is subject to coverage limits and generally excludes coverage for
losses or liability related to environmental damage or pollution. Although the
Company conducts and plans to conduct its operations prudently with respect to
environmental regulations and plans to structure its relationships with
customers and contractors in a manner so as to minimize its exposure to
environmental liabilities, the Company's business, financial condition and
results of operations could be materially adversely affected by an environmental
claim that is not covered or only partially covered by insurance or other
available remedy.
In addition, although the Company does not utilize any underground storage
tanks, there are several empty tanks at the Dunkirk facility that were used by
the former owner of the property to store various materials. An investigation by
an environmental engineering firm has disclosed modest soil contamination
confined to the immediate vicinity of two tank locations. Remediation of this
contamination may be required. Based on estimates from qualified environmental
services and engineering firms, total remediation and tank closure costs are
expected to range from approximately $28,000, if no remediation is required, to
approximately $64,000 if soil and groundwater remediation is required.
Generally, CRT glass fragments received by the Company of approximately one
inch or less in diameter have not been recycled by the Company due to
limitations of its processing equipment. Although the Company has recently
initiated a process to recycle this material, there can be no assurance the
Company will in fact sell such material on a profitable basis. In the event the
Company is unable to sell such glass, it believes it can dispose of such glass
by smelting at prevailing rates. The Company maintains a reserve for the
potential cost of disposing of CRT glass it is unable to recycle or use in its
manufacturing process. Such reserve is adjusted periodically for the amount of
such material on-hand, landfill or other disposal charges and management's
determination of the need of any such reserves based upon the proven salability
or disposition options for such materials. RCRA regulatory requirements may be
applicable to these materials depending on the length of time they remain at the
Company's facilities and the Company's efforts to process and sell or otherwise
beneficially reuse them.
Potential Conflicts of Interest Arising from Certain Related-Party
Transactions. As disclosed in the Company's filings with the Commission, the
Company has entered into consulting agreements with Mr. Beck, and with certain
principal stockholders and affiliates of certain directors and principal
stockholders of the Company, pursuant to which, among other things, certain of
such persons received warrants and pursuant to which certain of such persons
will be entitled to receive success fees upon the completion of certain project
development activities. Such agreements may result in conflicts of interest for
the directors and principal stockholders who are, or whose affiliates are,
parties to such consulting agreements. The Company, however, does not believe
that the existence of such agreements will interfere with the ability of the
Company's directors to discharge their fiduciary duties to the Company's
stockholders.
Charge to Earnings in the Event of Release of Escrow Securities. 740,559
shares (the "Escrow Shares") of Common Stock and options to purchase 71,923
shares of Common Stock (the "Escrow Options" and, together with the Escrow
Shares, the "Escrow Securities") have been deposited into escrow by the holders
thereof. The Escrow Securities are subject to cancellation and will be
contributed to the capital of the Company if the Company does not attain certain
earnings levels over the next one to three years or the market price of the
Common Stock does not achieve certain levels over the next two years. The
position of the Commission with respect to such escrow arrangements provides
that in the event any shares or options are released from escrow to the
stockholders of the Company who are officers, directors, employees or
consultants of the Company, a compensation expense will be recorded for
financial reporting purposes. Accordingly, the Company will, in the event of the
release of any Escrow Securities to the Company's officers, directors, employees
or consultants, recognize during the period in which the earnings thresholds
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<PAGE>
are met or such stock levels achieved, a noncash charge to earnings equal to the
fair value of such shares on the date of their release, which would have the
effect of increasing the Company's loss or reducing or eliminating earnings, if
any, at such time. The recognition of such compensation expense may have a
depressive effect on the market price of the Company's Common Stock.
Notwithstanding the foregoing discussion, there can be no assurance that the
Escrow Securities will be released from escrow.
Potential Adverse Effects of Preferred Stock. The Company's Restated
Certificate of Incorporation authorizes the issuance of shares of "blank check"
preferred stock, which will have such designations, rights and preferences as
may be determined from time to time by the Board of Directors of the Company.
Accordingly, the Board of Directors of the Company is empowered, without
stockholder approval, to issue preferred stock with dividend, liquidation,
conversion, voting or other rights which could adversely affect the voting power
or other rights of the holders of the Common Stock. The preferred stock could be
utilized to discourage, delay or prevent a change in control of the Company.
Although the Company has no present intention to issue any additional shares of
preferred stock, there can be no assurance that the Company will not do so in
the future.
Limited Market for Common Stock; Possible Volatility of Market Price. Since
the Company's initial public offering of its securities in May 1996, there has
not been active trading volume in the Company's securities. There can be no
assurance that an active trading market will develop or be sustained. The market
price of the Common Stock could be subject to significant fluctuations in
response to variations in government regulations relating to the Company's
operations, general trends in the industry and other factors, including extreme
price and volume fluctuations which have been experienced by the securities
markets from time to time as well as other factors discussed in this Prospectus.
Outstanding Warrants and Options; Exercise of Registration Rights. As of
the date of this Prospectus, the Company had outstanding (i) Redeemable Class A
Warrants to purchase at an exercise price of $4.40 per share an aggregate of
6,168,492 shares of Common Stock and Redeemable Class B Warrants to purchase
6,168,492 shares of Common Stock (all of the Company's outstanding Redeemable
Class A Warrants and Redeemable Class B Warrants are referred to herein as the
"Redeemable Warrants"); (ii) Redeemable Class B Warrants to purchase an
aggregate of 4,683,209 shares of Common Stock at an exercise price of $5.87 per
share; (iii) options (the "Underwriters' Option") held by D. H. Blair Investment
Banking Corp. ("Blair") to purchase up to 306,700 shares of Common Stock and/or
407,773 Class A Warrants and/or 407,306 Class B Warrants at an option exercise
price of $6.16 per share of Common Stock, $0.07 per Class A Warrant and $0.07
per Class B Warrant; (iv) options to purchase an aggregate of 593,207 shares of
Common Stock granted under the Company's stock option plans at a weighted
average exercise price of approximately $1.68 per share; (v) non-qualified
options to purchase 15,000 shares of Common Stock at an exercise price of $0.78
issued outside of the Company's stock option plans; (vi) non-qualified options
to purchase 610,000 shares of Common Stock issued pursuant to the Company's
Long-Term Employee Incentive Plan with an exercise price of $0.78 (including
options to purchase 300,000 shares of Common Stock issued to each of Mr. Beck
and Mr. Amt); (vii) warrants to purchase an aggregate of 319,204 shares of
Common Stock at a weighted average exercise price of approximately $4.90 per
share issued prior to the Company's initial public offering; and (viii) warrants
to purchase an aggregate of 132,575 shares of Common Stock at a per share
exercise price of $0.99. The Company has reserved an aggregate of 690,000 shares
of Common Stock for issuance under the Company's stock option plans and 800,000
shares of Common Stock under its Long-Term Employee Incentive Plan as of the
date of this Prospectus. Holders of such warrants and options are likely to
exercise them when, in all likelihood, the Company could obtain additional
capital on terms more favorable than those provided by such warrants and
options. In addition, the exercise of such warrants and options could have a
material adverse effect on the market price of, and liquidity in the market for,
shares of Common Stock. Further, while these warrants and options are
outstanding, the Company's ability to obtain additional financing on favorable
terms may be adversely affected.
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<PAGE>
Certain of the holders of these options and warrants have registration
rights with respect to such securities. The holders of Blair's options, the
holders of 1,326,166 shares of "restricted" Common Stock outstanding and the
holders of warrants to purchase 319,204 shares of Common Stock have certain
demand and "piggy-back" registration rights with respect to their securities.
The exercise of such rights could involve substantial expense to the Company as
well as have a material adverse effect on the market price of shares of the
Company's Common Stock. In addition, the holders of the approximate 1,326,166
shares of "restricted" shares of Common Stock may be able to resell such stock
under Rule 144(k) under the Securities Act without registration. Such resales
under Rule 144(k) may have a material adverse effect on the market price of
shares of the Company's Common Stock.
Potential Adverse Effect of Redemption of Warrants. The Redeemable Warrants
may be redeemed by the Company at a redemption price of $.05 per Warrant upon
not less than 30 days' prior written notice if, with respect to the Redeemable
Class A Warrants, the closing bid price of the Common Stock shall have averaged
in excess of $8.20 per share and, with respect to the Redeemable Class B
Warrants, $10.95 per share, in each instance for 30 consecutive trading days
ending within 15 days of the notice. Redemption of the Redeemable Warrants could
force the holders (i) to exercise the Redeemable Warrants and pay the exercise
price therefor at a time when it may be disadvantageous for the holders to do
so, (ii) to sell the Redeemable Warrants at the then current market price when
they might otherwise wish to hold the Redeemable Warrants or (iii) to accept the
nominal redemption price which, at the time the Redeemable Warrants are called
for redemption, is likely to be substantially less than the market value of the
Redeemable Warrants.
Issues Relating to Principal Market Maker. D.H. Blair & Co., Inc. ("Blair &
Co.") is a principal market maker in the Company's securities. In light of
ongoing federal and state investigations into business practices at Blair & Co.,
such firm's recent settlement with the NASD and the proposed sale of certain of
its assets, Blair & Co. will likely be unable to continue to make a market in
the Company's securities. Accordingly, the liquidity and price of the Company's
securities may be adversely impacted.
Shares Eligible for Future Sale; Registration Rights. Sales of substantial
amounts of Common Stock in the public market after this Offering, or the
possibility of such sales occurring, could adversely affect prevailing market
prices for the Common Stock or the future ability of the Company to raise
capital through an offering of equity securities. As of the date of this
Prospectus, the Company had outstanding (i) 623,507.5 shares of Preferred Stock
convertible into 6,235,075 shares of Common Stock, (ii) Placement Agent Warrants
exercisable for 62,326 shares of Preferred Stock convertible into 623,260 shares
of Common Stock and (iii) Bridge Warrants to purchase 132,575 shares of Common
Stock, all of which shares of underlying Common Stock are being registered for
sale hereby. In addition, the Company has outstanding 5,539,745 shares of Common
Stock and Class A Warrants and Class B Warrants exercisable for an aggregate of
17,020,193 shares of Common Stock, all of which are freely tradable in the
public market without restriction unless such securities are held by
"affiliates" of the Company, as that term is defined in Rule 144 under the
Securities Act. In addition, as of the date of this Prospectus, the Company had
outstanding options to purchase a total of 1,218,207 shares of Common Stock, of
which 333,610 are currently exercisable. As of the date of this Prospectus, an
additional 196,185 shares were available for future options grants under the
Company's stock option plans. All of the shares issued, issuable or reserved for
issuance under the Company's stock option plans are covered or will be covered
by an effective registration statement. Shares issued upon exercise of such
options generally will be freely tradable in the public market after the
effective date of a registration statement covering such shares without
restriction or further registration under the Securities Act, subject, in the
case of certain holders, to the Rule 144 limitations applicable to affiliates
and vesting restrictions imposed by the Company.
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The holders of 3,174,922 shares of Common Stock (including securities
convertible into or exercisable for Common Stock) are entitled to certain rights
with respect to registration of such shares for resale under the Securities Act.
To the extent that these rights are exercised and the registered shares sold,
the exercise of such rights and the resale of the underlying shares could have
an adverse effect on the market price of the Company's Common Stock.
No Dividends on Common Stock. The Company has not paid any cash dividends
on its Common Stock and does not expect to declare or pay any cash or other
dividends in the foreseeable future. As a holding company, the Company holds no
significant tangible assets other than its investments in and advances and loans
to Dunkirk and APT. The Company's ability to make cash dividend payments to
holders of the Common Stock will be dependent upon the receipt of sufficient
funds from Dunkirk and APT.
Certain Tax Consequences of Dividends on Preferred Stock to be Paid in
Shares of Preferred Stock. In December 1997, the Company conducted the final
closing of the private placement of the Preferred Stock. Commencing in December
1998, dividends will be paid on the Preferred Stock at the rate of 10% per annum
payable in cash or Preferred Stock, at the option of the Company. For federal
income tax purposes, distributions of Preferred Stock as dividends upon
Preferred Stock will be treated as taxable distributions of property.
Accordingly, the fair market value of the shares of Preferred Stock of the
Company when accrued and/or distributed may be taxable as ordinary income (to
the extent of the Company's current or accumulated earnings and profits) or as
capital gain income (if and to the extent that the excess of the fair market
value of such shares over the Company's current or accumulated earnings and
profits per share exceeds the stockholder's tax basis in his Preferred Stock).
Additionally, payment of dividends on the Preferred Stock in shares of Preferred
Stock will result in dilution to the holders of Common Stock. Such dilution will
reduce the net tangible book value per share and earnings per share attributable
to the then outstanding shares of Common Stock.
Possible Delisting of Securities from Nasdaq. While the Company's Common
Stock is included on the Nasdaq SmallCap Market, there can be no assurance that
the Company will meet the criteria for continued listing. Nasdaq has recently
adopted more stringent financial requirements for listing on Nasdaq. With
respect to continued listing, such new requirements are (i) either at least
$2,000,000 in net tangible assets, a $35,000,000 market capitalization or net
income of at least $500,000 in two of the three prior years; (ii) at least
500,000 shares in the public float valued at $1,000,000 or more; (iii) a minimum
Common Stock bid price of $1.00; (iv) at least two active market makers in the
Common Stock; and (v) at least 300 holders of the Common Stock. In addition,
Nasdaq has added certain corporate governance requirements which did not
previously exist. The Company will now be required to meet and maintain such new
requirements for continued inclusion on Nasdaq. If the Company is unable to
satisfy Nasdaq's maintenance requirements, its securities may be delisted from
Nasdaq. In such event, trading, if any, in the Common Stock would thereafter be
conducted in the over-the-counter market in the so-called "pink sheets" or the
NASD's "Electronic Bulletin Board" and it could be more difficult to obtain
quotations of the market price of the Company's securities. Consequently, the
liquidity of the Company's securities could be impaired, not only in the number
of securities which could be bought and sold, but also through delays in the
timing of transactions, reduction in security analysts' and the news media's
coverage of the Company and lower prices for the Company's securities than might
otherwise be attained.
Risks of Penny Stock. If the Company's securities were deleted from Nasdaq
(see "Possible Delisting of Securities from Nasdaq"), they could become subject
to Rule 15g-9 under the Exchange Act, which imposes additional sales practice
requirements on broker-dealers that sell such securities to persons other than
established customers and "accredited investors" (generally, individuals with
net worths in excess of $1,000,000 or annual incomes exceeding $200,000 or
$300,000 together with their spouses). For transactions covered by such rule, a
broker-dealer must make a special suitability determination for the purchaser
and have received the purchaser's written consent to the transaction prior to
sale. Consequently,
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<PAGE>
such rule may adversely affect the ability of broker-dealers to sell the
Company's securities and may adversely affect the ability of the holders of the
Company's securities to sell in the secondary market any of such securities.
The Commission's regulations define a "penny stock" to be any non-Nasdaq
equity security that has a market price (as therein defined) of less than $5.00
per share or with an exercise price of less than $5.00 per share, subject to
certain exceptions. For any transaction involving a penny stock, unless exempt,
the rules require delivery, prior to any transaction in a penny stock, of a
disclosure schedule prepared by the Commission relating to the penny stock
market. Disclosure is also required to be made about commissions payable to both
the broker-dealer and the registered representative and current quotations for
the securities. Finally, monthly statements are required to be sent disclosing
recent price information for the penny stock held in the account and information
on the limited market in penny stocks.
The foregoing required penny stock restrictions will not apply to the
Company's securities if such securities are listed on Nasdaq and have certain
price and volume information provided on a current and continuing basis or meet
certain minimum net tangible assets or average revenue criteria. There can be no
assurance that the Company's securities will qualify for exemption from these
restrictions. In any event, even if the Company's securities were exempt from
such restrictions, it would remain subject to Section 15(b)(6) of the Exchange
Act, which gives the Commission the authority to prohibit any person that is
engaged in unlawful conduct while participating in a distribution of a penny
stock from associating with a broker-dealer or participating in a distribution
of a penny stock, if the Commission finds that such a restriction would be in
the public interest. If the Company's securities were subject to the rules on
penny stocks, the market liquidity for the Company's securities could be
severely adversely affected.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
Shares offered hereby because the Shares, once issued, will be held by the
Selling Securityholders. Of the 6,990,910 shares of Common Stock covered by this
Prospectus, 6,235,075 shares of Common Stock will be issued to Selling
Securityholders upon the conversion of outstanding shares of Preferred Stock,
623,260 shares of Common Stock will be issued to the Selling Securityholders
upon conversion of shares of Preferred Stock underlying the Placement Agent
Warrants, and 132,575 shares of Common Stock will be issued to the Selling
Securityholders upon the exercise of the Bridge Warrants. In the event that all
Warrants are exercised in full, the Company will receive an aggregate of
approximately $739,551. The Company currently has no plans for the application
of these funds other than for general corporate purposes.
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SELLING SECURITYHOLDERS
The Shares being registered hereby consist of 6,235,075 shares of Common
Stock issuable upon the conversion of Preferred Stock; 623,260 shares of Common
Stock issuable upon the conversion of Preferred Stock underlying the Placement
Agent Warrants; and 132,575 shares of Common Stock underlying the Bridge
Warrants. The Company will not receive any of the proceeds from any sales of the
Shares by the Selling Securityholders. The Company will receive approximately
$739,551 if the Warrants are exercised in full. The Shares may not be sold or
otherwise transferred by the Selling Securityholders unless and until the
applicable shares of Preferred Stock are converted or the applicable Warrants
are exercised in accordance with their respective terms. The following table
sets forth, as of the date of this Prospectus, certain information with respect
to the Selling Securityholders.
<TABLE>
Number of Beneficial
Shares Beneficially Shares Ownership of
Name of Owned Prior to Offered Shares After
Selling Securityholder Offering(1) Hereby Offering(2)
- --------------------------------------------------------------------------------
Number Percent Number Percent
------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Leonard Adams 56,375 * 56,375 0 --
The Aries Fund, a
Cayman Islands Trust(3) 930,040 14.4 830,324 99,716 1.8
Aries Domestic Fund,
L.P.(4) 595,945 9.7 429,751 166,194 2.9
Balmore Funds S.A. 225,500 3.9 225,500 0 --
Eckardt and Barbara Beck,
JTWROS(5) 197,921 3.4 112,750 85,171 1.5
Bridgewater Partners, L.P. 112,750 2.0 112,750 0 --
Dr. Adolp Bushel 56,375 * 56,375 0 --
Margaret L. Carspecken 39,463 * 39,463 0 --
Robert J. Conrads 22,550 * 22,550 0 --
CSL Associates, L.P. 112,750 2.0 112,750 0 --
EDJ Limited 112,750 2.0 112,750 0 --
Environments LLC 39,463 * 39,463 0 --
Stephen Fish(6) 235,500 4.1 225,500 10,000 *
T. Cartter Evans 56,375 * 56,375 0 --
Todd Evans 56,375 * 56,375 0 --
Everett Investment Co. LP 56,375 * 56,375 0 --
Michael J. Gordon 11,275 * 11,275 0 --
Himot Family Limited
Partnership 45,100 * 45,100 0 --
Irvine Capital Partners 56,375 * 56,375 0 --
J.F. Shea Co., Inc. 338,250 5.8 338,250 0 --
JMS Inc. Cust FBO Herbert
M. Gardner Keogh 28,187 * 28,187 0 --
Karen Shepherd McNatt
Revocable Trust U/A Dtd
06/01/94 56,375 * 56,375 0 --
-16-
<PAGE>
Number of Beneficial
Shares Beneficially Shares Ownership of
Name of Owned Prior to Offered Shares After
Selling Securityholder Offering(1) Hereby Offering(2)
- --------------------------------------------------------------------------------
Number Percent Number Percent
------ ------- ------ -------
Keys Foundation, Curacao,
Netherlands Antilles 112,750 2.0 112,750 0 --
David and Elizabeth
Kolasky JTWROS 11,275 * 11,275 0 --
Neil Kramer 28,187 * 28,187 0 --
Lancaster Investment
Partners, LP 281,875 4.8 281,875 0 --
John P. McNiff 281,875 4.8 281,875 0 --
Albert Milstein 28,187 * 28,187 0 --
Arthur J. Nagle 28,187 * 28,187 0 --
Mechie Nebenzahl 39,463 * 39,463 0 --
Oretexga LTD Partnership 56,375 * 56,375 0 --
Steven Overby 39,463 * 39,463 0 --
Paramount Capital, Inc. (7) 623,260 10.1 623,260 0 --
Bruce Paul 56,375 * 56,375 0 --
P.A.W. Offshore Fund, Ltd. 563,750 9.2 563,750 0 --
Pequot Scout Fund, LP 253,688 4.4 253,688 0 --
Porter Partners, L.P. 451,000 7.5 451,000 0 --
Wayne Saker 56,375 * 56,375 0 --
Austost Anstalt Schaan 225,500 3.9 225,500 0 --
Scottenfeld Associates, LP 56,375 * 56,375 0 --
Lori Shapero 56,375 * 56,375 0 --
Michael J. Smeriglio 22,550 * 22,550 0 --
Technology Funding Venture
Partners V, an
Aggressive Growth Fund,
L.P.(8) 1,044,791 16.5 355,163 689,628 11.6
Vinson Community Property
Trust 28,187 * 28,187 0 --
Gerald and Edna Weintraub,
JTWRS 28,187 * 28,187 0 --
Kal Zeff 225,500 3.9 225,500 0 --
</TABLE>
- ------------------
* Less than 1%
(1) Applicable percentage of ownership is based on 5,539,745 shares of Common
Stock outstanding as of the date of this Prospectus. Shares of Common Stock
issuable upon the exercise or conversion of outstanding securities which
are currently exercisable or convertible, or exercisable or convertible
within 60 days of the date of this Prospectus, are deemed to be
beneficially owned by the person holding such securities and are included
as outstanding for the
-17-
<PAGE>
purpose of computing the percentage of ownership of such person but are not
treated as outstanding for the purpose of computing the percentage of any
other person.
(2) Assumes that all Shares are sold pursuant to this offering and that no
other shares of Common Stock are acquired or disposed of by the Selling
Securityholders prior to the termination of this offering. Because the
Selling Securityholders may sell all, some or none of their Shares or may
acquire or dispose of other shares of Common Stock, no reliable estimate
can be made of the aggregate number of Shares that will be sold pursuant to
this offering or the number or percentage of shares of Common Stock that
each Selling Securityholder will own upon completion of this offering.
(3) Paramount Capital Asset Management, Inc. ("PCAM") is the Investment
Manager to The Aries Fund, a Cayman Island Trust (the "Aries Trust").
Lindsay A. Rosenwald, M.D. is President and sole shareholder of PCAM. Dr.
Rosenwald is also the President, Chairman and sole stockholder of
Paramount Capital, Inc. ("Paramount"). Paramount acted as the placement
agent for the private placement of the Preferred Stock. PCAM and Dr.
Rosenwald may be considered to beneficially own the securities owned by
the Aries Trust by virtue of their authority to vote and/or dispose of the
securities. PCAM and Dr. Rosenwald disclaim beneficial ownership of all
securities of the Company held by the Aries Trust. Securities held by the
Aries Trust consist of 49,858 Class A Warrants which entitle the holder to
acquire one share of Common Stock and one Class B Warrant to acquire one
share of Common Stock; warrants to purchase an additional 86,174 shares of
Common Stock; and 74,415 shares of Convertible Preferred Stock convertible
into 744,150 shares of Common Stock. In addition, Dr. Rosenwald
beneficially owns warrants to purchase 44,719 shares of the Company's
Common Stock.
(4) PCAM is the General Partner of the Aries Domestic Fund, L.P. Dr. Rosenwald
is the President and sole shareholder of PCAM. PCAM and Dr. Rosenwald may
be considered to beneficially own the securities owned by the Aries
Domestic Fund, L.P. by virtue of their authority to vote and/or dispose of
the securities. PCAM and Dr. Rosenwald disclaim beneficial ownership of all
securities of the Company held by the Aries Domestic Fund, L.P. Securities
held by Aries Domestic Fund, L.P. consist of 83,097 Class A Warrants which
entitle the holder to acquire one share of Common Stock and one Class B
Warrant to acquire one share of Common Stock; warrants to purchase an
additional 46,401 shares of Common Stock; and 38,335 shares of Convertible
Preferred Stock convertible into 383,350 shares of Common Stock. In
addition, Dr. Rosenwald beneficially owns warrants to purchase 44,719
shares of the Company's Common Stock.
(5) Eckardt C. Beck is the Company's Chairman. Mr. Beck has been a director of
the Company since February 1995, and served as Acting President and Chief
Executive Officer from June to August 1997. The number of shares owned
includes currently exercisable options to purchase 71,338 shares of Common
Stock, and excludes options to purchase 240,000 shares of Common Stock not
exercisable within 60 days of the date of this Prospectus.
(6) Stephen D. Fish currently serves on the Company's Board of Directors.
Includes options to purchase 10,000 shares of Common Stock, and excludes
options to purchase 15,000 shares of Common Stock not exercisable within 60
days of the date of this Prospectus.
(7) David R. Walner, a director of the Company, is a Associate Director of
Paramount.
-18-
<PAGE>
(8) Includes securities beneficially owned by Technology Funding Partners III,
L.P. ("TFP III") and Technology Funding Partners V, An Aggressive Growth
Fund, L.P. ("TFVP V"). Mr. Gardner, a director of the Company, is a former
Investment Officer of Technology Funding, Inc. ("TFI"), the Managing
General Partner of TFP III and TFVP V. The number of shares held includes
(A) securities held by TFVP V consisting of (i) 207,547 shares of Common
Stock, (ii) 8,879 shares of Convertible Preferred Stock, (iii) warrants,
exercisable within 60 days, to purchase 93,432 shares of Common Stock, (B)
securities held by TFP III consisting of (i) 69,180 shares of Common Stock,
(ii) 26,637 shares of Convertible Preferred Stock and (iii) warrants,
exercisable within 60 days, to purchase 141,938 shares of Common Stock and
(C) currently exercisable options issued to Peter Gardner to purchase
11,338 shares of Common Stock, and excludes options to purchase 20,000
shares of Common Stock not exercisable within 60 days of the date of this
Prospectus.
Under agreements with the Selling Securityholders, all offering expenses
are borne by the Company except the fees and expenses of any counsel and other
advisors that the Selling Securityholders may employ to represent them in
connection with the offering and all brokerage or underwriting discounts or
commissions paid to broker-dealers in connection with the sale of the Shares.
The Company and certain of the Selling Securityholders have agreed to
indemnify each other against certain liabilities in connection with the offering
of the Shares, including certain liabilities under the Securities Act.
PLAN OF DISTRIBUTION
The Selling Securityholders have not advised the Company of any specific
plan for distribution of the Shares offered hereby, but it is anticipated that
the Shares will be sold from time to time by the Selling Securityholders or by
pledgees, donees, transferees or other successors in interest. Such sales may be
made over-the-counter on the Nasdaq SmallCap Market at prices and at terms then
prevailing or at prices related to the then current market price, or in
negotiated transactions. The Shares may be sold by one or more of the following:
(i) a block trade in which the broker or dealer so engaged will attempt to sell
the Shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction; (ii) purchases by a broker or dealer
for its account pursuant to this Prospectus; or (iii) ordinary brokerage
transactions and transactions in which the broker solicits purchases. In
effecting sales, brokers or dealers engaged by the Selling Securityholders may
arrange for other brokers or dealers to participate. Brokers or dealers will
receive commissions or discounts from Selling Securityholders in amounts to be
negotiated immediately prior to the sale. Such brokers or dealers and any other
participating brokers or dealers may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales, and any commissions
received by them and any profit realized by them on the resale of the Shares as
principals may be deemed underwriting compensation under the Securities Act. The
expenses of preparing this Prospectus and the related Registration Statement
with the Commission will be paid by the Company. Shares of Common Stock covered
by this Prospectus also may qualify to be sold pursuant to Rule 144 under the
Securities Act, rather than pursuant to this Prospectus. The Selling
Securityholders have been advised that they are subject to the applicable
provisions of the Exchange Act including, without limitation, Regulation M
thereunder.
Neither the Company nor the Selling Securityholders can estimate at the
present time the amount of commissions or discounts, if any, that will be paid
by the Selling Securityholders on account of their sales of the Shares from time
to time.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's by-laws provide that each director and officer shall be
indemnified by the Company against expenses, liability and loss in connection
with any legal proceeding to which such
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<PAGE>
officer or director may become a party by reason of being, or having been, an
officer or director of the Company, or, is or was serving at the request of the
Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, provided however, that
such officer or director acted in good faith and in a manner reasonably believed
to be in or not opposed to the best interests of the Company, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe such
conduct was unlawful. In addition, the Company's restated certificate of
incorporation, eliminates liability of the Company's directors for monetary
damages resulting from the breach of their fiduciary duty to the Company and its
stockholders, except with respect to breach of the director's duty of loyalty to
the Company or its stockholders, acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, or involve an
improper personal benefit, or willful or negligent violations of Section 174 of
the Delaware General Corporation Law ("DGCL"). The intent of these provisions is
to eliminate, to the fullest extent permitted under the DGCL, liability of the
Company's directors to the Company and its stockholders. The Company believes
that the provisions contained in its restated certificate of incorporation, as
amended, and by-laws will assist it in attracting and retaining qualified
individuals to serve as officers and directors.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the Commission such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.
At present, there is no pending litigation or proceeding involving a
director or officer of the registrant as to which indemnification is being
sought nor is the Company aware of any threatened litigation that may result in
claims for indemnification by any director or officer.
LEGAL MATTERS
The validity of the issuance of the Shares of Common Stock offered hereby
will be passed upon for the Company by Buchanan Ingersoll, 500 College Road
East, Princeton, New Jersey 08540.
EXPERTS
The consolidated financial statements of Conversion Technologies
International, Inc. appearing in the Company's Annual Report on Form 10-KSB for
the year ended June 30, 1997, as amended, have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon, included
therein and incorporated herein by reference. Such consolidated financial
statements are incorporated herein by reference in reliance upon such report
given on the authority of such firm as experts in accounting and auditing.
-20-
<PAGE>
PART II
Item 14. Other Expenses of Issuance and Distribution.
-------------------------------------------
SEC registration fee............................ $ 2,139
Counsel fees and expenses....................... 15,000
Accounting fees and expenses.................... 5,000
Miscellaneous expenses.......................... 2,861
---------
Total* $ 25,000
=========
------------------
*Estimated
All expenses of issuance and distribution listed above will be borne by the
Company. The costs of fees and expenses of legal counsel and other advisors, if
any, that the Selling Securityholders employ in connection with the offering
will be borne by the Selling Securityholders.
Item 15. Indemnification of Directors and Officers.
-----------------------------------------
The Company's by-laws provide that each director and officer shall be
indemnified by the Company against expenses, liability and loss in connection
with any legal proceeding to which such officer or director may become a party
by reason of being, or having been, an officer or director of the Company, or,
is or was serving at the request of the Company as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, provided however, that such officer or director acted in good faith
and in a manner reasonably believed to be in or not opposed to the best
interests of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe such conduct was unlawful. In
addition, the Company's restated certificate of incorporation, eliminates
liability of the Company's directors for monetary damages resulting from the
breach of their fiduciary duty to the Company and its stockholders, except with
respect to breach of the director's duty of loyalty to the Company or its
stockholders, acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, or involve an improper personal
benefit, or willful or negligent violations of Section 174 of the DGCL. The
intent of these provisions is to eliminate, to the fullest extent permitted
under the DGCL, liability of the Company's directors to the Company and its
stockholders. The Company believes that the provisions contained in its restated
certificate of incorporation, as amended, and by-laws will assist it in
attracting and retaining qualified individuals to serve as officers and
directors.
At present, there is no pending litigation or proceeding involving a
director or officer of the registrant as to which indemnification is being
sought nor is the Company aware of any threatened litigation that may result in
claims for indemnification by any director or officer.
II-1
<PAGE>
Item 16. Exhibits.
--------
Exhibit No. Description of Exhibit
----------- ----------------------
5 Opinion of Buchanan Ingersoll as to legality of
Common Stock
23.1 Consent of Ernst & Young LLP
23.2 Consent of Buchanan Ingersoll
II-2
<PAGE>
Item 17. Undertakings.
------------
(a) The undersigned Registrant hereby undertakes that it will:
(1) file, during any period in which it offers or sells
securities, a post-effective amendment to the Registration Statement to include
any additional or changed material information on the plan of distribution.
(2) for determining liability under the Securities Act, treat
each post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) file a post-effective amendment to remove from
registration any of the securities that remain unsold at the end of the
offering.
(b) Insofar as indemnification for liabilities arising under the Securities
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 Commission such indemnification is
against public policy as expressed in the Securities 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 Securities Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Orlando, State of Florida, on the 9th day of April, 1998.
CONVERSION TECHNOLOGIES
INTERNATIONAL, INC.
By: /s/ William L. Amt
------------------------------------
William L. Amt
Presidentand Chief Executive Officer
II-4
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of Exhibit
----------- ----------------------
5 Opinion of Buchanan Ingersoll as to legality of
Common Stock
23.1 Consent of Ernst & Young LLP
23.2 Consent of Buchanan Ingersoll
II-5
BUCHANAN INGERSOLL
Attorneys
500 College Road East
Princeton, New Jersey 08540
April 9, 1998
Conversion Technologies International, Inc.
3452 Lake Lynda Drive
Orlando, Florida 32817
Gentlemen:
We have acted as counsel to Conversion Technologies International, Inc., a
Delaware corporation (the "Company"), in connection with the filing by the
Company of a registration statement on Form S-3 (the "Registration Statement"),
under the Securities Act of 1933, as amended, relating to the registration of an
aggregate of 6,990,910 shares (the "Shares") of the Company's common stock,
$.00025 par value, all of which are to be offered by certain Selling
Securityholders as set forth therein.
In connection with the Registration Statement, we have examined such
corporate records and documents, other documents, and such questions of law as
we have deemed necessary or appropriate for purposes of this opinion. On the
basis of such examination, it is our opinion that:
1. The issuance of the Shares, upon proper conversion of the Preferred
Stock and exercise of the Warrants (as such capitalized terms are
defined in the Registration Statement), as applicable, has been duly
and validly authorized; and
2. The Shares underlying the Preferred Stock and Warrants, when issued,
delivered and sold in accordance with the terms of such securities,
will be legally issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as Exhibit 5 to the
Registration Statement and to the reference to this firm under the heading
"Legal Matters" in the Registration Statement.
Very truly yours,
/s/ Buchanan Ingersoll
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in Amendment
No. 1 to the Registration Statement (Form S-3 No. 333-46819) and related
Prospectus of Conversion Technologies International, Inc. for the registration
of 6,990,910 shares of its common stock and to the incorporation by reference
therein of our report dated September 18, 1997 with respect to the consolidated
financial statements of Conversion Technologies International, Inc. and
subsidiaries included in its Annual Report on Form 10-KSB, as amended, for the
year ended June 30, 1997, filed with the Securities and Exchange Commission on
February 12, 1998.
/s/ ERNST & YOUNG LLP
Metro Park, New Jersey
April 9, 1998
BUCHANAN INGERSOLL
Attorneys
500 College Road East
Princeton, New Jersey 08540
April 9, 1998
Conversion Technologies International, Inc.
3452 Lake Lynda Drive
Orlando, Florida 32817
Gentlemen:
We hereby consent to the reference to this firm under the heading "Legal
Matters" in the filing of Amendment No. 1 to the registration statement on Form
S-3 relating to an aggregate of 6,990,910 shares of the Common Stock of
Conversion Technologies International, Inc.
Very truly yours,
/s/ BUCHANAN INGERSOLL
