Registration No. 333-23087
As filed with the Securities and Exchange Commission on May 30, 1997
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
CONSOLIDATED ECO-SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Idaho 82-0474589
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
6807 West 12th Street
Little Rock, Arkansas 72204
(501) 664-7745
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
JAMES J. CONNORS, JR.
Consolidated Eco-Systems, Inc.
6807 West 12th Street
Little Rock, Arkansas 72204
(501) 664-7745
(501) 664-6135
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
with a copy to:
KENNETH S. ROSE, ESQ.
Morse, Zelnick, Rose & Lander, LLP
450 Park Avenue
New York, New York 10022
(212) 838-5030
(212) 838-9190 (FAX)
Approximate date commencement of proposed sale to the public:
As soon as practicable after the Registration Statement becomes effective.
Approximate date of commencement of proposed sale to the public: From time to
time after this Registration Statement becomes effective.
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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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
=====================================================================================================================
Proposed Maximum
Title of Shares Amount Proposed Maximum Aggregate Amount of
to be Registered to be Aggregate Offering Registration
Registered Price Per Share(2) Price(2) Fee
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.001 par value 2,022,313 shares $0.56 $1,132,495 $ 343.18
- ---------------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par 12,332,525 shares $0.56 $6,906,214 $2,092.60
value, issuable upon
conversion of outstanding
Convertible Equity
Debentures and exercise
of outstanding common
stock purchase warrants(1)
- ---------------------------------------------------------------------------------------------------------------------
Totals 14,354,838 shares $0.56 $8,038,709 $2,435.98(3)
=====================================================================================================================
</TABLE>
(1) Pursuant to Rule 416 promulgated under the Securities Act of 1933, as
amended (the "Securities Act"), there are also being registered such
additional indeterminable number of shares of Common Stock as may become
issuable upon exercise or otherwise in respect of the Convertible Equity
Debentures of the Registrant.
(2) Estimated solely for the purpose of computing the amount of the
registration fee in accordance with Rule 457(c) on the basis of the average
of the high and low sales prices of the common stock on the NASDAQ SmallCap
Market on May 28, 1997.
(3) $2,858.74 was paid with the initial filing of this Registration Statement.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with section 8(a) of the
Securities Act of 1933, as amended, or until the registration statement shall
become effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
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SUBJECT TO COMPLETION - DATED MAY 30, 1997
PROSPECTUS
14,354,838 Shares
Consolidated Eco-Systems, Inc.
Common Stock
(Par Value $.001 Per Share)
This Prospectus relates to 14,354,838 shares (the "Offered Shares") of
common stock, par value $.001 per share (the "Common Stock"), of Consolidated
Eco-Systems, Inc., formerly named Exsorbet Industries, Inc., an Idaho
corporation (the "Company"), which Offered Shares may be offered from time to
time by and for the account of certain shareholders and Kenneth and Carolyn
McDonald, Larry and Marilyn Woodcock and Western Continental, Inc.(collectively,
the "Selling Shareholders"). See "Selling Shareholders." The Company will not
receive any of the proceeds from the sale of the Offered Shares. Expenses
incurred in connection with the registration under the Securities Act of 1933,
as amended (the "Securities Act"), of the offering described herein, not
including certain expenses such as commissions and discounts of underwriters,
dealers and agents, will be paid by the Company. See "Selling Shareholders,"
"Use of Proceeds" and "Plan of Distribution."
The Offered Shares may be sold from time to time by the Selling
Shareholders, provided a current registration statement with respect to such
securities is then in effect. Of the 14,354,838 Shares being offered hereby by
the Selling Shareholders, 2,022,313 of the Offered Shares are currently
outstanding, and 12,132,525 of the Offered Shares are issuable upon conversion
of the Convertible Equity Debentures assuming the conversion rate on the date of
this Prospectus and 200,000 of the Offered Shares are issuable upon exercise of
outstanding Common Stock Purchase Warrants at an exercise price of $0.625 per
share. Such number of shares issuable upon conversion of the Convertible Equity
Debentures is presently indeterminable and is being estimated for the purposes
of this Prospectus. The Registration Statement of which this Prospectus is a
part covers such indeterminable number of shares which may be issuable upon
exercise or otherwise in respect of the Convertible Equity Debentures. The
Convertible Equity Debentures bear interest at a rate of 8% per annum and are
due two years from original the date of issuance (the "Convertible Debentures").
See "Plan of Distribution."
The Common Stock is listed on the NASDAQ SmallCap Market ("Nasdaq
SmallCap") under the symbol "EXSO." On May 28, 1997, the closing sale price of
the Common Stock was $0.56 per share.
The Offered Shares may be offered for sale from time to time by the Selling
Shareholders to or through brokers, dealers or underwriters acting as principals
or agents or directly to other purchasers or through agents in one or more
transactions on the Nasdaq SmallCap or any other stock exchange on which the
Common Stock is listed, in the over-the-counter market, in one or more private
transactions, or in a combination of such methods of sale, at prices and on
terms then prevailing, at prices related to such prices, or at negotiated
prices. The Selling Shareholders and any brokers and dealers through whom sales
of the Offered Shares are made may be deemed to be "underwriters" within the
meaning of the Securities Act, and the commissions or discounts and other
compensation paid to such persons may be regarded as underwriters' compensation.
See "Plan of Distribution."
See "Risk Factors" commencing on page 11 for information that should be
considered regarding the securities offered hereby.
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.
The date of this Prospectus is June, 1997.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements (if required) and other information
with the Securities and Exchange Commission (the "Commission"). The reports,
proxy statements and other information filed by the Company with the Commission
may be inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and should be available at the Commission's Regional Offices at 7
World Trade Center, 13th Floor, New York, New York 10048, and Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material can also be obtained at prescribed rates from the Public
Reference Section of the Commission at 450 Fifth Street, NW, Washington, D.C.
20549. The Commission also maintains a Web site (http://www.sec.gov) that
contains reports, proxy and information statements and other information
regarding the Company.
The Company has filed with the Commission a Registration Statement on Form
S-3 (together with any amendments or supplements thereto, the "Registration
Statement") under the Securities Act, with respect to the Offered Shares. This
Prospectus does not contain all the information set forth in the Registration
Statement and the Appendices thereto, certain parts of which were omitted as
permitted by the rules and regulations of the Commission. Such additional
information may be obtained from the Commission's principal office in
Washington, D.C. Statements contained in this Prospectus or in any document
incorporated in this Prospectus by reference as to the content of any contractor
other document referred to herein or therein are not necessarily complete, and
in each instance reference is made to the copy of such contract or other
document filed as an Appendix to the Registration Statement or such other
document, each such statement being qualified in all respects by such reference.
TABLE OF CONTENTS
Page
Available Information 2
Incorporation of Certain Documents by Reference 3
The Company 4
Recent Developments 4
Risk Factors 5
Use of Proceeds 9
Selling Shareholders 9
Plan of Distribution 11
Legal Matters 12
Experts 12
Transfer Agent 12
Reports to Shareholders 12
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus or in the
documents incorporated herein by reference in connection with the offering made
hereby and, if given or made, such information or representations should not be
relied upon as having been authorized by the Company, the Selling Shareholders
or any other person. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any securities other than the securities to
which it relates or any offer to or 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 or any sale made under this Prospectus
shall, under any circumstances, create any implication that there has been no
change in the affairs of the Company since the date of this Prospectus.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by the Company (File No.
0-25970) are incorporated by reference in this Prospectus:
1. Annual Report on Form 10-K for the year ended December 31, 1996, as
amended on Form 10-K/A (the "Company's 1996 Form 10-K");
2. Quarterly Report on Form 10-Q for the Quarter ended March 31, 1997.
3. The description of Common Stock contained in its Registration
Statement on Form 10, filed with the Commission on May 2, 1995, as
amended by Form 10, filed with the Commission on September 8, 1995;
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus shall be
deemed to be incorporated by reference herein from the date of filing such
documents. Any statement contained herein or in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein (or in any subsequently filed document which also is or is
deemed to be incorporated by reference herein) modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will furnish without charge, upon written or oral request, to
each person, including any beneficial owner, to whom this Prospectus is
delivered, a copy of any or all of the documents incorporated by reference
herein other than exhibits to such documents (unless such exhibits are
specifically incorporated by reference into such documents). Such requests
should be directed to the Company, Corporate Secretary, 6807 West 12th Street,
Little Rock, Arkansas 72204, (501) 664-7745.
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THE COMPANY
Consolidated Eco-Systems, Inc. (the "Company") provides a broad range of
environmental, industrial and technical services which include environmental
remediation, industrial clean-up, emergency response, recycling and various
specialized environmental services. These services are provided through a
network of subsidiaries (the "Subsidiaries"), each of which tends to specialize
in providing specific types of environmental, industrial and technical services
to clients, individually or in combination with related services of the other
Subsidiaries.
The Company presently conducts substantially all of its business through
seven of its Subsidiaries whose operations are primarily based in the states of
Arkansas, Texas, Mississippi, Alabama, Florida, Louisiana, Ohio and
Pennsylvania. These Subsidiaries are Consolidated Environmental Services, Inc.
("CESI"), Cierra, Inc., Exsorbet Technical Services, Inc. d/b/a SpilTech
Services, Inc. ("SpilTech"), Eco-Acquisition, Inc. d/b/a Eco-Systems, Inc.
("Eco-Systems"), Larco Environmental Services, Inc. ("Larco"), K.R. Industrial
Service of Alabama, Inc. ("KRISA"), and 7-7, Inc. ("7-7"). CESI, Cierra,
SpilTech and Eco-Systems were formed or acquired by the Company in 1995. Larco,
KRISA and 7-7 were acquired by the Company in 1996. The Company's principal
office is located at 6807 West 12th Street, Little Rock, Arkansas 72204 and its
telephone number is (501) 664-7745.
The Company, originally incorporated in Idaho in 1930 as Sentinel Mines
Corporation, commenced its environmental business operations in late November
1993 when it acquired, and assumed the name of, Exsorbet Industries, Inc. whose
principal business was the manufacture and sale of a product used in the clean
up of hydrocarbon spills. On January 23, 1997, the Company changed its name to
Consolidated Eco-Systems, Inc.
On April 20, 1995, the Company formed Exsorbet Technical Services, Inc.
which is in the business of providing emergency spill response and industrial
services. After the Company acquired CESI on September 27, 1995, Exsorbet
Technical Services, Inc. began conducting its operations under the name
SpilTech. Its offices are located in Euless, Texas and Little Rock, Arkansas.
On September 27, 1995, the Company acquired CESI, an environmental services
company, specializing in site remediation, dewatering and pond solidification
and hazardous waste clean-up, with offices in Dallas, Texas and Little Rock,
Arkansas. CESI was an 80% stockholder of Cierra, an environmental consulting
firm, at the time of the acquisition; it has since acquired the remaining 20%
and, accordingly, is now the sole stockholder of Cierra.
On December 28, 1995, the Company acquired Eco-Systems, an environmental
consulting/engineering firm, comprised of scientists and engineers specializing
in remedial investigations, remediation engineering, air quality, waste water,
regulatory compliance, solid waste engineering, litigation support/expert
testimony, environmental resources and industrial hygiene and safety.
Eco-Systems offices are located in Jackson, Mississippi and Houston, Texas.
On June 26, 1996, the Company acquired Larco, a company which provides
industrial services to petrochemical, manufacturing and transportation
industries along the Texas and Louisiana industrial belt and northward along the
Mississippi River and connected inland waterways. Larco had also been active in
the clean-up and mitigation of oil and other spills, but divested itself of that
portion of its business on February 27, 1997 due to reduced demand for emergency
response service. (See "Business - Recent Developments: Sale of Larco Emergency
Response Equipment"). Larco's offices are in Sulphur and Baton Rouge, Louisiana.
On June 27, 1996, the Company acquired KRISA, an industrial service company
which provides boiler clean-out and rehabilitation for utility companies and
other clients using specialized techniques. KRISA has offices in Mobile,
Birmingham, Decatur and Double Springs, Alabama and Panama City, Florida.
On September 30, 1996, the Company acquired 7-7, a company which offers a
wide range of environmental services, including environmental remediation, barge
cleaning, industrial maintenance and hazardous waste recycling. 7-7 licenses a
liquification process (the "Liquification Process") which recycles coal tar and
petroleum tar sludges into a commercially usable product and which has
applications for the steel industry, petroleum and chemical refineries, utility
power plants, wood treatment facilities and Superfund sites. 7-7 is based in
Wooster, Ohio.
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Products and Services
The Company offers substantially all of its products and services through
its Subsidiaries, each of which tends to specialize in serving different phases
of a client's environmental, industrial and technical needs. In addition, the
Company offers the product Exsorbet, through an exclusive manufacturer and
distributor (see "Manufacturing and Marketing of Exsorbet" below). The Company
also maintains ongoing contact with state and federal environmental regulators
in order to obtain insight into the interpretation of constantly evolving
regulations and regulatory developments. The Company's services and product and
the Subsidiaries or distributor, as the case may be, through which they are
offered are as follows:
Environmental Remediation and Management Services. The Company's
environmental services, which it offers through CESI, include hazardous waste
management, sludge management and dewatering, composting, tank cleaning and
dismantlement, underground storage tank closure, landfill and impoundment
capping, contaminated soil and water treatment, civil construction, groundwater
system installation, slurry walls, demolition and decontamination.
Environmental Consulting. The Company provides diversified environmental
consulting and engineering services, primarily through Eco-Systems, which
specializes in remedial investigations, remediation engineering, air quality,
waste water, regulatory compliance, solid waste engineering, litigation
support/expert testimony, environmental resources and industrial hygiene/safety.
Eco-Systems also performs preliminary project evaluation and environmental and
technical services prior to the performance by CESI of contracting and waste
management services on the same project. Because of the wide range of expertise
of its consultants, Eco-Systems is able to, and does, serve clients in a broad
base of industries, including: petrochemicals; agricultural chemicals; oil
exploration, refining and marketing; gas pipelines; pulp and paper/forest
products; manufacturing; waste disposal and management; state and local
government; and law firms. Its consultants and engineers have expertise in
environmental engineering, materials engineering, chemical engineering,
hydrogeology, computer-aided drafting and design, civil engineering, geology,
archaeology and physics.
Emergency Spill Response. The Company provides emergency spill response and
industrial services primarily through SpilTech. These services are intended to
minimize the adverse impacts of a toxic substance release to the surrounding
population, minimize the extent of surrounding property destruction and minimize
clean-up costs.
Environmental Consulting and Compliance Audits. Cierra is an environmental
consulting firm based in Little Rock, Arkansas which provides an integrated
system of environmental services, including: phase I audits for real estate
transactions; underground storage tank closure investigations; and compliance
audits. Cierra's employees have diverse backgrounds applicable to the
environmental field with expertise in the areas of agriculture, biology,
chemistry, geology, hydrology, toxicological evaluations and wetlands
evaluations.
Manufacture and Marketing of Exsorbet. The Company's only product is
Exsorbet which is an organic, peat moss-based absorbent material used primarily
to clean up oil and other hydrocarbon based materials. It is distinguished from
other peat moss absorbents in that the proprietary drying process by which it is
manufactured results in its being capable of absorbing hydrocarbons at a greater
capacity than many competing sorbent products. In addition, the Company believes
that it is produced at a lesser cost than most other peat moss absorbents. Its
largest target markets consist of companies in need of environmental remediation
resulting from petroleum contaminated waste and companies in need of industrial
absorbents.
The Company itself manufactured and marketed Exsorbet until June 26, 1995.
On that date, it entered into an agreement with Waste Solutions Corporation
("WSC"), an Illinois corporation with its principal place of business located in
Brookfield, Illinois, pursuant to which WSC became the exclusive distributor of
Exsorbet in the continental United States. On July 11, 1996, the Company and WSC
entered into a new agreement which also provides for WSC to lease the Company's
manufacturing facility at Mulberry, Arkansas and to assume the exclusive
manufacturing, in addition to the distribution, responsibilities for this
product. The lease arrangement runs until June 30, 1999 and is subject to
earlier termination if certain events occur.
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Industrial Cleaning Services. The Company provides on-site industrial
environmental cleaning services through different techniques selected to best
meet the needs of its clients. Through Larco, the Company utilizes wet and dry
vacuum trucks to perform tank cleaning, sludge removal, industrial hydroblasting
and dewatering, as well as waste transportation and roll-off box transportation
services, mainly to clients in petroleum transportation, refining and
production; paper manufacturing; chemical manufacturing; and storage and
municipal utilities. In addition, through utilization of KRISA's specialized
hydroblasting techniques, the Company is able to provide on-site industrial
environmental cleaning services on an "on-line" basis which enables its clients,
principally electrical utility companies and other boiler dependent operations,
to continue their operations without a total shutdown of their boilers.
Waste Recycling. The Company offers a wide range of environmental services
through 7-7, including site remediation, barge cleaning, industrial maintenance
and waste recycling, utilizing, among other things, its Liquification Process
which it has developed to recycle (either on site or off site) tar sludges into
commercially usable products, namely viable feedstocks, such as high-BTU fuel
stock. Currently, 7-7 has three liquification units, one of which is a permanent
facility located in Cleveland, Ohio with a capacity of up to 300 tons per day
and two of which are mobile units, available for specific projects, with
capacities of 100 to 150 tons each per day. The Liquidation Process has
applications for the steel industry, petroleum and chemical refineries, utility
power plants, wood treatment facilities and Superfund sites.
Patents
The Company has a license for the use of three patents utilized in
recycling coal tar into a commercially usable product. There can be no assurance
that similar processes will not be developed that would allow competitors to
better compete with the Company in this area. The Company does not believe that
any such events would have a material adverse effect on it.
Regulation
Substantially all of the Company's business operations are subject to
extensive laws and regulations promulgated by the Federal, state and local
governments and regulatory authorities dealing with the discharge of materials
into the environment or otherwise relating to the protection of the environment.
The Company believes that it is in compliance in all material respects with all
such laws and regulations.
Marketing and Distribution
The Company promotes its services and product through direct personal
contact, direct mailings and telephone solicitations. In 1996, the Company hired
a National Sales Manager whose principal current responsibilities involve the
active promotion of the liquification/recycling services of 7-7 and more
effective cross-selling among its various Subsidiaries. The Company also has
four additional persons whose primary responsibilities involve sales and
marketing.
The Company distributes Exsorbet through an exclusive
manufacturing/distribution agreement with WSC. (See "Business - Products and
Services: Manufacture and Marketing of Exsorbet" above).
Backlog
The Company, through its Subsidiaries, had approximately $12.6 million in
backlog projects at March 31, 1997, comprised of approximately: $1.1 million for
CESI; $2.8 million for Eco-Systems; $0.2 million for SpilTech; and $8.5 million
for 7-7.
The reduction of approximately $8 million in backlog from that reported in
the Company's fourth quarter of 1996 is primarily attributable to the Company's
decision to exclude from backlog any agreements primarily based on labor and
materials because of the inherent difficulty in estimating future revenues from
that type of agreement. Such agreements are the primary sources of revenues of
KRISA and Larco, neither of whose revenues have decreased.
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Competition
The environmental services industry is heavily regulated on the state and
federal levels and is characterized by intense competition. Many companies of
all sizes are engaged in activities similar to those of the Company (including
the Subsidiaries), and many of the Company's competitors have substantially
greater assets and capital resources than the Company. The Company operates
primarily in the region of Alabama, Arkansas, Louisiana, Mississippi, Ohio,
Pennsylvania and Texas. The Company seeks to distinguish its services by (i)
providing timely, high quality and cost-effective solutions to the various
environmental issues facing its clients, (ii) maintaining long-term
relationships with its clients, and (iii) utilizing technology to provide state
of the art services in accordance with applicable regulatory standards. In
addition, the Company believes that certain of its services, such as the
recycling Liquification Process and its specialized hydroblasting technique, are
unique enough to give it a competitive edge when appropriately marketed. (See
"Business - Marketing and Distribution" above). There can be no assurance,
however, that the Company will compete successfully against its competitors,
given the size, resources and marketing capabilities of many of such companies.
Litigation
On October 28, 1994, certain former employees of the Company filed suit
against the Company in the Circuit Court of Crawford County, Arkansas seeking
$50,000 in actual damages and $2,500,000 in punitive damages for violations of
the Arkansas Civil Rights Act and for the common law tort of outrage. The
plaintiffs claim that they were sexually harassed by a supervisor formerly
employed by the Company. Management believes that the suit is without merit and
that any adverse judgment will not have a material adverse effect on the
Company.
Effective December 10, 1996, the Company placed Charles E. Chunn, Jr., its
then chief financial officer, on paid administrative leave. Subsequent thereto,
on March 10, 1997, the Company commenced an action against Mr. Chunn in the
Chancery Court of Sebastian County, Arkansas seeking rescission of employment
and deferred compensation agreements, restitution of all amounts paid to Mr.
Chunn under such agreements, a declaratory judgment to the effect that the
Company has no further obligation to Mr. Chunn under any of such agreements and
an accounting. Mr. Chunn has filed counterclaims seeking an unspecified amount
of damages, additional shares of the Company's Common Stock and attorneys' fees.
The Company believes that it has meritorious defenses to Mr. Chunn's
counterclaims. If, however, Mr. Chunn were to prevail in the assertion of all of
his counterclaims, the ultimate outcome of this action would have a material
adverse effect on the Company. The Company intends to aggressively assert and
prosecute its claims and defend against all of Mr. Chunn's counterclaims.
On February 10, 1997, Alabama Insurance Exchange ("AIE"), filed an action
against the Company, Consolidated Environmental Services, Inc., Eco-Systems,
Larco, 7-7, and Robert Vick, a director and officer of the Company, in the
Circuit Court of Jefferson County, Alabama. AIE contends that it was engaged as
the exclusive insurance broker of record for the Company and its subsidiaries
and that the Company breached this agreement by rescinding the broker of record
engagement. AIE seeks actual and punitive damages for breach of contract,
quantum meruit, conversion, intentional interference with a business contract,
promissory misrepresentation, and conspiracy to defraud. Although this matter is
in its very early stages, the Company believes that it has valid defenses to the
claim and that its outcome will not have a material adverse effect on the
Company. The defendants, including the Company, have removed this action to the
United States District Court in Birmingham, Alabama. No trial date has been set.
On or about February 18, 1997, Perma Fix-Environmental Services, Inc. and
Perma-Fix, Inc., (collectively "Perma-Fix") filed an action against the Company
in the United States District Court for the Northern District of Texas, Wichita
Falls Division. Perma-Fix contends that the Company has misappropriated a secret
procedure that Perma-Fix contends is proprietary to it. Perma-Fix also contends
that employees of SpilTech who were formerly employed by Perma-Fix have
disparaged the services and business of Perma-Fix by the use of false or
misleading misrepresentations. Perma-Fix also contends that the Company breached
an agreement with Perma-Fix to refrain from soliciting or inducing any customer
of Perma-Fix to use the services of the Company. Perma-Fix further alleges that
the Company has received benefits by virtue of misappropriation of its
confidential information and that the Company should be required to provide
these benefits to Perma-Fix. The
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suit seeks actual damages in excess of $50,000, injunctive relief, unspecified
punitive damages, court costs, and attorney's fees. The Company believes that it
has valid defenses to the claim and that its outcome will not have a material
adverse effect on the Company.
A civil action was brought in the District Court of Harris County, Texas in
1996 against Larco, as well as several other emergency response and/or other
environmental companies, by certain law enforcement officers who contend that
they were injured by fumes emitted from burning oil. The plaintiffs are seeking
unspecified damages for failure by such companies to warn the law enforcement
officers about dangers from the burning fumes after an explosion on or near the
San Jacinto River in southern Texas. The Company believes that it has valid
defenses to the claim and that its outcome will not have a material adverse
effect on the Company.
A patent infringement action was brought against Larco seeking damages and
injunctive relief. The Company's insurance carrier has assumed the defense of
this action. The Company believes that any recovery will be covered by
insurance.
The Company is also party to certain litigation in the ordinary course of
its business. The Company does not believe that any such proceedings will have a
material adverse impact on its operations.
RECENT DEVELOPMENTS
In May 1997, the Company entered into modification agreements with the 19
holders of $5 million of 8% convertible debentures of the Company issued during
December 1996 and January 1997. Pursuant to the modification agreements, the
Company issued new debentures to 14 of such holders in the approximate principal
amount of $3,339,000 in exchange for the surrender of $2,637,500 of outstanding
debentures and the waiver by the debenture holders of liquidated damages in the
approximate amount of $225,000 and the release by such debenture holders of
certain potential claims against the Company. Further, the Company issued
104,954 shares of its Common Stock to the remaining five holders in payment of
contractual liquidated damages in connection with the late registration of the
shares of common Stock issuable upon conversion of such holders debentures.
RISK FACTORS
An investment in the Common Stock offered hereby is speculative and
involves a high degree of risk. In addition to the other information contained
in this Prospectus and incorporated herein by reference, the following risk
factors should be considered carefully in evaluating the Company and its
business before purchasing the Common Stock offered hereby. Prospective
investors should be in a position to risk the loss of their entire investment.
This Prospectus contains forward-looking information as a result of various
factors, including those set forth in the following risk factors and elsewhere
in this Prospectus.
Operating Losses
The Company experienced $718,000 of operating losses during 1996. No
assurance can be given that the Company will not continue to incur operating
losses.
Limited Operating History and Risks of Development
The Company re-organized its activities and acquired or formed all of its
Subsidiaries in 1995 or 1996. Prior to that time, the Company had engaged
primarily in the production of its peat moss based product for the clean-up of
oil and hydrocarbon spills, marketed under the name "Exsorbet." Except for this
experience, the Company had little or no experience in environmental pollution,
reclamation, and remediation prior to such time. While these recent acquisitions
are seen as favorable for the Company, the acquisitions have increased operating
expenses significantly for the Company. There can be no assurance that the
Company will be able to conduct profitable operations in the future. Results of
operations in the future will be influenced by numerous factors, including,
without limitation, technological developments, increases in expenses associated
with sales growth, market acceptance of the Company's services, the capacity of
the Company to expand and maintain the quality of its products and services,
competition, governmental regulation, and the ability of the Company to control
costs. There can be no assurance that revenue growth or profitability on a
quarterly or annual basis will be sustained.
10
<PAGE>
Additionally, the Company will be subject to all the risks incident to a rapidly
developing business with only a limited history of operations. Prospective
investors should consider the frequency with which relatively newly developed
and/or expanding businesses encounter unforeseen expenses, difficulties,
complications and delays, as well as such other factors such as the possibility
of competition with larger companies.
Limited Liquidity; Need for Additional Financings
The Company's continued operations will depend upon revenues, if any, from
operations and the availability of equity or debt financing. The Company has no
commitments for additional financing. Further, there can be no assurance that
the Company will be able to generate levels of revenues and cash flows
sufficient to fund operations or that the Company will be able to obtain
additional financing on satisfactory terms, if at all, to meet its financial
obligations as they become due.
Future Sales of Common Stock
The Company is unable to predict the effect that sales of restricted Common
Stock of the Company made under Rule 144, or otherwise, may have on the then
prevailing market price of the Common Stock although any substantial sale of
restricted securities pursuant to Rule 144 may have an adverse effect. In March
1996, Floyd Leland Ogle, a former President of the Company, gifted 1,458,100
shares of the Company's Common Stock and an immediately exercisable option for
50,000 shares of the Company's Common Stock to a trust (the "Trust") for the
benefit of his wife. The trustee, First Commercial Trust Co., N.A. (the
"Trustee"), as provided in the trust agreement must liquidate the Trust's
holdings by March of 1998 or as soon as practicable as permitted by applicable
law. The trust agreement provides that the Trustee will attempt to sell
approximately 3,000 shares of the Common Stock each day until the shares held by
the Trust are sold. The average trading volume for the Common Stock since
January 1, 1996 has been approximately 91,000 shares per day. Accordingly, the
sale of the substantial number of shares of Common Stock in the public market
could adversely affect the market price of the Common Stock. As of April 30,
1997, the Trust beneficially held 774,600 shares of Common Stock.
New Industry
The Pollution/Reclamation/Remediation/Industrial Service industry is an
emerging business characterized by an increasing number of market entrants. As
is typically the case in an emerging industry, demand and market acceptance for
services are subject to high levels of uncertainty. In light of the continually
evolving nature of this industry, there can be no assurance as to the ultimate
level of demand or market acceptance for the Company's products and services. In
addition, there can be no assurance that the Company will successfully implement
its business strategies, expand its training capacity, maintain the cost
competitiveness of its services, meet its current marketing objectives or
succeed in positioning its services as the desired means of delivery of
Pollution/Reclamation/Remediation services.
Technological Changes
The Pollution/Reclamation/Remediation/Industrial Service industry is
subject to rapid technological changes and service obsolescence. The advent and
development of other technology, in particular, could materially affect the
manner in which products and services in the Pollution/Reclamation/Remediation
field compete effectively. The Company must offer technologically oriented
products and services that receive client acceptance and fulfill client needs.
To the extent that the Company fails to keep up with technological advancements
and enhancements comparable to and competitive with those made by others in the
industry, the marketing of the Company's products and services may prove
unsuccessful. There can be no assurances that the Company's products and
services will not be rendered obsolete by changing technology or that the
Company will be able to respond to advances in technology in a manner that will
be commercially feasible.
11
<PAGE>
Competition
At the present time, the Pollution/Reclamation/Remediation/Industrial
Service and related services industry in general is highly competitive and is
expected to continue to be so in the future. The Company will be competing
directly or indirectly with a large number of companies, certain of which may be
larger, better capitalized and more established and may have greater access to
resources necessary to build a competitive advantage. Although the Company
believes that its products and services presently and prospectively can occupy a
competitive market position, there can be no assurance that the Company will
ever be able to effectively compete in this market.
Training and Difficulty of Maintaining Quality Control
The Company will be required to continue to undertake extensive training of
personnel upon expanding its operations so that Pollution/Reclamation/
Remediation/Industrial Service services may be provided in a professionally
acceptable and consistent manner. The Company will also need to further develop
its system of administration as well as personnel management in order to
maintain the quality of products and services on a consistent basis. There can
be no assurances that the Company will be able to achieve a level of consistency
of its service personnel on a broad scale basis, or that the organization
required to administer such initial and ongoing training will not involve
substantial costs that will affect the ability of the Company to provide its
products and services on a cost-effective basis.
Risks Associated with Expansion and Acquisitions
The Company has made, and may make in the future, acquisitions of firms
providing comparable services. Any acquisitions or expansion of operations the
Company may undertake will entail substantial risks because they will involve
specific operations that may be unfamiliar to the Company's management. At the
present time, the Company has only limited management personnel, and its
management has had limited experience in making acquisitions. Consequently,
shareholders must assume the risk that the Company (i) may acquire or develop
operations for which the Company does not possess sufficient managerial
background to administer effectively, (ii) such acquisitions and expansion may
ultimately involve expenditure of funds beyond the resources that will be
available to the Company at that time and (iii) management of such new or
expanded operations may divert management's attention and resources away from
its existing operations, each of which factors may have a material adverse
effect on the Company's present and prospective business activities.
Consolidation
The Company intends to consolidate its operations to control costs and
expenses. The extent of the consolidation requirements is not presently known.
Management personnel have limited experience in consolidation of diversified
companies. There can be no assurance that the consolidation will be cost
effective or will reduce operating costs.
Dependence upon Key Personnel
The success of the Company is highly dependent upon the continued services
of each of Dr. Edward Schrader, Mr. Robert D. Vick, Mr. James J. Connors, Jr.,
Mr. Caleb Dana, Mr. Larry Woodcock, Mr. Cal Lowe, II, and Mr. Ken McDonald, each
an executive officer of the Company. Although the Company has entered into
employment agreements with each of these individuals, and has entered into
employment agreements with various other skilled executives and employees, the
loss of any of their services would have a material adverse effect on the
business of the Company. The Company does not presently maintain "key man"
insurance on the lives of any of such executives. There can be no assurances
that the Company will be able to replace any of these key executives in the
event that their services become unavailable.
12
<PAGE>
Competition for Key Personnel
The competition for recruitment of personnel in the Pollution/Reclamation/
Remediation/Industrial Service industry is continuous and highly intense. The
Company's success will depend in part on its ability to recruit, train and
retain highly skilled executive, technical and marketing personnel. There can be
no assurances that the Company will, in fact, be in a position to secure and
retain the services of such highly skilled personnel to support the Company's
contemplated operating and products expansion program.
Possible Volatility of Stock Price
The historical fluctuations in the market price of the Company's Common
Stock indicate that the market price of the Company's Common Stock may be highly
volatile. Factors such as fluctuations in the Company's operating results,
relationships with present and potential distributors, announcements of
technological innovations or new products introduced by the Company or its
competitors, and changes in market conditions and in the economy generally, may
have a significant impact on the market price of the Company's Common Stock.
Effect of Outstanding Options
As of April 15, 1997, the Company had granted stock options to purchase an
aggregate of 3,527,469 shares of Common Stock, which have exercise prices
ranging from $0.25 to $8.00 per share and a weighted average exercise price of
$2.28. The Company has been advised that of such options, up to 600,000 options
may have been issued in violation of Idaho law and, accordingly, may be null and
void. In such event, there would be outstanding options to purchase an aggregate
of 2,927,469 shares of Common Stock with a weighted average exercise price of
$1.64 per share. To the extent that these outstanding securities are exercised
or converted, dilution of the percentage ownership of the Company's shareholders
will occur. Sales in the public market of Common Stock underlying the options
and warrants may adversely affect prevailing market prices for the Common Stock.
Moreover, the terms upon which the Company may be able to obtain additional
equity capital or debt financing may be adversely affected because the holders
of such outstanding securities can be expected to exercise them at a time when
the Company would, in all likelihood, be able to obtain any needed capital on
terms more favorable to the Company than those provided in the outstanding
securities.
Prohibition Against Further Indebtedness
As part of the financing of the acquisition of 7-7, the Company entered
into an Assignment and Security Agreement with APS pursuant to which the Company
granted a security interest in all the assets and the issued and outstanding
stock of 7-7 to APS (the "Collateral"). Pursuant to such agreement, the Company
also agreed not to create, incur, assume or become liable in any manner for any
indebtedness (for borrowed money, deferred payment for the purchase of assets,
lease payments, as surety or guarantor of the debt of another, or otherwise)
other than to APS without APS's prior written consent, except for trade debts
incurred in the ordinary course of business. APS has consented to the issuance
of the Convertible Debentures. However, there can be no assurance that APS will
consent to any future incurrence of indebtedness.
Debt to Certain Officers, Insiders, and Others.
The Company is indebted to certain officers, insiders, or others pursuant
to notes or agreements which remain presently due but unpaid. Such debts include
obligations to Larry Woodcock, Calvin F. Lowe, Sr., Calvin F. Lowe, II, James
Hodgson, Gary Platek, Edward Kurzenberger, G. Howard Colingwood, and Waste
Solutions Corp. Each of these individuals or entities has temporarily withheld
efforts to collect on indebtedness of the Company. There can be no guarantee or
assurance that further collection efforts will continue to be withheld.
No Dividends Anticipated to Be Paid
The Company has not paid its shareholders any cash dividends since its
inception and does not anticipate paying cash dividends to its shareholders in
the foreseeable future. The future payment of dividends is directly dependent
upon future earnings of the Company, its financial requirements and other
factors to be determined by the Company's Board of Directors. For the
foreseeable future, it is anticipated that any earnings that may be
13
<PAGE>
generated from the Company's operations will be used to finance the growth of
the Company and that cash dividends will not be paid to shareholders.
Limited Market for the Company's Securities
There is currently only a limited trading market for the Common Stock. The
Common Stock trades on the Nasdaq SmallCap Market System under the symbol
"EXSO," and is subject to substantial restrictions and limitations. There can be
no assurance that more than a limited market will ever develop for the Common
Stock.
Governmental Regulation
The Pollution/Reclamation/Remediation industry is subject to stringent
oversight and regulation by local, state, and federal regulatory agencies. The
Company cannot be assured that the regulations currently in force will not be
changed or altered. A change in any regulations, or more stringent regulations
or governmental oversight, could substantially increase the operating costs of
the Company.
"Penny Stock" Regulations May Impose Certain Restrictions on Marketability of
Securities.
The Securities and Exchange Commission has adopted regulations which generally
define "penny stock" to be any equity security that has a market price (as
defined) of less than $5.00 per share, subject to certain exceptions. If the
Securities offered hereby are removed from listing on NASDAQ at any time
following the Effective Date, the Securities may become subject to rules that
impose additional sales practice requirements on broker-dealers who sell such
Securities to persons other than established customers and accredited investors
(generally, those persons with assets in excess of $1,000,000 or annual income
exceeding $200,000, or $300,000 together with their spouse). For transactions
covered by these rules, the broker-dealer must make a special suitability
determination for the purchase of the Securities and have received the
purchaser's written consent to the transaction prior to the purchase.
Additionally, for any transaction involving a penny stock, unless exempt, the
rules require the delivery, prior to the transaction, of a risk disclosure
document mandated by the Commission relating to the penny stock market. The
broker-dealer also must disclose the commissions payable to both the
broker-dealer and the registered representative, current quotations for the
securities and, if the broker-dealer is the sole market-maker, the broker-dealer
must disclose this fact and the broker-dealer's presumed control over the
market. Finally, monthly statements must be sent disclosing recent price
information for the penny stock held in the account and information on the
limited market in penny stocks. Consequently, the "penny stock" rules may
restrict the ability of broker-dealers to sell the Securities and may affect the
ability of purchasers in this offering to sell the Securities in the secondary
market.
Risks Associated with Forward-Looking Statements Included in this Prospectus.
This Prospectus contains certain forward-looking statements regarding the
plans and objectives of management for future operations. The forward-looking
statements included herein are based on current expectations that involve
numerous risks and uncertainties. The Company's plans and objectives are based,
in part, on assumptions involving the continued expansion of business.
Assumptions relating to the foregoing involve judgments with respect to, among
other things, future economic, competitive and market conditions and future
business decisions, all of which are difficult or impossible to predict
accurately and many of which are beyond the control of the Company. Although the
Company believes that its assumptions underlying the forward-looking statements
are reasonable, any of the assumptions could prove inaccurate and, therefore,
there can be no assurance that the forward-looking statements included in this
Prospectus will prove to be accurate. In light of the significant uncertainties
inherent in the forward-looking statements included herein particularly in view
of the Company's early stage operations, 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.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
Offered Shares.
14
<PAGE>
SELLING SHAREHOLDERS
The following table shows the names of the Selling Shareholders, the
Offered Shares owned beneficially by each of them as of May 15, 1997, the number
of Offered Shares that may be offered by each of them pursuant to this
Prospectus and the number of Offered Shares and percentage of outstanding shares
of Common Stock to be owned by each of them after the completion of this
Offering, assuming all of the Offered Shares being offered are sold. Of the
Selling Shareholders, Kenneth McDonald, Larry Woodcock and his wife, Marilyn
Woodcock have material relationships with the Company. Mr. McDonald is an
officer of the Company, Mr. Woodcock is an officer and director of the Company,
and Ms. Woodcock is an officer of the Company. Except for Mr. McDonald and Mr.
and Mrs. Woodcock, none of the Selling Shareholders were an officer or director
of the Company or, to the knowledge of the Company, had any material
relationship with the Company within the past three years.
<TABLE>
<CAPTION>
Selling Shareholders Number Number of
of Number of Shares Percentage Percentage
Shares Shares that Beneficially Beneficially Beneficially
Beneficially May be Owned after the Owned Before Owned After
Owned Sold** Offering the Offering the Offering
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
The Shaar Fund, Ltd., acting in its 0 3,241,276 0 16.9% *
capacity as agent for certain non-U.S
persons (1)
Julius Baer Securities, Inc., acting 0 2,022,134 0 11.3% *
in its capacity as agent for certain
non-U.S. persons (2)
Duane K. Boyd, Jr. Trust (3) 0 302,916 0 1.9* *
Kenneth Shifrin (4) 0 242,333 0 1.5% *
MPW Partners(5) 0 242,333 0 1.5% *
Coutts & CO AG. Zurich (6) 17,728 480,974 0 2.9% *
Sovereign Partners L.P. (7) 0 1,315,544 0 7.6% *
CEFEO Investments (8) 27,894 675,116 0 4.1% *
IHAG Industrie and Handelsbank (9) 45,614 1,124,085 0 6.6% *
COOK & CIE S.A. (10) 5,473 134,890 0 * *
Stanley Dickson (11) 0 592,509 0 3.6% *
Brasidas Management Unlimited 0 254,937 0 1.6% *
Trust (12)
J&B Associates Profit Sharing Plan & 8,245 233,709 0 1.3% *
Trust (13)
Windward Island Ltd. (14) 0 916,117 0 5.7% *
S.H. Developments LTD. (15) 0 617,606 0 3.7% *
Kenneth and Carolyn McDonald 545,338 545,338 0 3.4% *
Western Continental, Inc. 20,000 20,000 0 * *
Larry and Marilyn Woodcock 1,352,021 1,352,021 0 8.5% *
</TABLE>
- ----------
15
<PAGE>
* Less than 1%.
** Also includes such presently indeterminable number of shares of Common Stock
as may be issuable upon conversion or otherwise in respect of the Convertible
Equity Debentures and Common Stock Purchase Warrants held by certain Selling
Shareholders.
1 Includes 3,041,276 shares issuable upon conversion of outstanding
Convertible Debentures, assuming the conversion rate as of the date of
this Prospectus and 200,000 shares issuable upon conversion of
outstanding Common Stock Purchase Warrant exercisable at $0.625 per
share.
2 Includes 2,022,134 shares issuable upon conversion of outstanding
Convertible Debentures, assuming the conversion rate as of the date of
this Prospectus.
3 Includes 302,916 shares issuable upon conversion of outstanding
Convertible Debentures, assuming the conversion rate as of the date of
this Prospectus.
4 Includes 242,333 shares issuable upon conversion of outstanding
Convertible Debentures, assuming the conversion rate as of the date of
this Prospectus.
5 Includes 242,333 shares issuable upon conversion of outstanding
Convertible Debentures, assuming the conversion rate as of the date of
this Prospectus.
6 Includes 463,246 shares issuable upon conversion of outstanding
Convertible Debentures, assuming the conversion rate as of the date of
this Prospectus.
7 Includes 1,315,544 shares issuable upon conversion of outstanding
Convertible Debentures, assuming the conversion rate as of the date of
this Prospectus.
8 Includes 647,222 shares issuable upon conversion of outstanding
Convertible Debentures, assuming the conversion rate as of the date of
this Prospectus.
9 Includes 1,078,471 shares issuable upon conversion of outstanding
Convertible Debentures, assuming the conversion rate as of the date of
this Prospectus.
10 Includes 129,417 shares issuable upon conversion of outstanding
Convertible Debentures, assuming the conversion rate as of the date of
this Prospectus.
11 Includes 592,509 shares issuable upon conversion of outstanding
Convertible Debentures, assuming the conversion rate as of the date of
this Prospectus.
12 Includes 254,937 shares issuable upon conversion of outstanding
Convertible Debentures, assuming the conversion rate as of the date of
this Prospectus.
13 Includes 215,464 shares issuable upon conversion of outstanding
Convertible Debentures, assuming the conversion rate as of the date of
this Prospectus.
14 Includes 967,117 shares issuable upon conversion of outstanding
Convertible Debentures, assuming the conversion rate as of the date of
this Prospectus.
15 Includes 617,606 shares issuable upon conversion of outstanding
Convertible Debentures, assuming the conversion rate as of the date of
this Prospectus.
PLAN OF DISTRIBUTION
The Company will not receive any proceeds from the sale of the Offered
Shares. It is anticipated that the Selling Shareholders will offer the
securities described herein in the manner set forth on the cover page of this
Prospectus from time to time to or through brokers, dealers, or underwriters
acting as either principals or agents or directly to other purchasers or through
agents in one or more transactions on the Nasdaq SmallCap or any other stock
exchange on which the Common Stock is listed, in the over-the-counter market, in
one or more private transactions, or in a combination of such methods of sale,
at prices and on terms then prevailing, at prices related to such prices, or at
negotiated prices. The Selling Shareholders will bear the expenses of any
distribution or resale, including the payment of any commission, discount, or
transfer tax in connection with any resale. In addition, such distributions and
resales may occur electronically, rather than through the issuance of
certificates. The Selling Shareholders and any brokers and dealers through whom
sales of the Offered Shares are made may be deemed to be "underwriters" within
the meaning of the Securities Act, and the commissions or discounts and other
compensation paid to such persons may be regarded as underwriters' compensation.
The net proceeds to the Selling Shareholders from the sale of Common Stock
so offered will be the purchase price of the Common Stock sold less the
aggregate agents' commissions and underwriters' discounts, if any, and other
expenses of issuance and distribution borne by the Selling Shareholder.
16
<PAGE>
At any time a particular offer of Common Stock is made, to the extent
required, the specific shares of Common Stock to be sold, the name of the
Selling Shareholder, purchase price, public offering price, the names of any
agent, dealer or underwriter and any applicable commission or discount with
respect to a particular offering will be set forth in an accompanying Prospectus
Supplement. Such Prospectus Supplement may, if necessary, be in the form of a
post-effective amendment to the Registration Statement of which this Prospectus
is a part, and will be filed with the Commission to reflect the disclosure of
additional information with respect to the distribution of such securities.
To comply with the securities laws of certain jurisdictions, the securities
offered hereby will be offered or sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain jurisdictions
the securities offered hereby may not be offered or sold unless they have been
registered or qualified for sale in such jurisdictions or an exemption from
registration or qualification is available and is complied with.
The Selling Shareholders and any other person participating in such
distribution will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including, without limitation, Rules
10b-2, 10b-6 and 10b-7, which provisions may limit the timing of purchases and
sales by the Selling Shareholders and any other such person. Furthermore, under
Rule 10b-6 of the Exchange Act, any person engaged in a distribution of Common
Stock may not simultaneously engage in market making activities with respect to
such securities for a period of two business days prior to the commencement of
such distribution. All of the foregoing may affect the marketability of the
securities offered hereby.
LEGAL MATTERS
The legality of the shares of the Common Stock being offered hereby will be
passed upon for the Company by Sam Sexton III, general counsel of the Company.
EXPERTS
The consolidated financial statements incorporated by reference in this
Prospectus from the Company's 1996 Form 10-K have been so incorporated in
reliance on the report of Moore, Stephens & Frost, independent auditors, given
on the authority of said firm as experts in auditing and accounting, as set
forth in their report thereon included therein and incorporated herein by
reference.
TRANSFER AGENT
The Transfer Agent and Registrar for the Shares is Interwest Transfer
Company, Salt Lake City, Utah.
REPORTS TO SHAREHOLDERS
The Company distributes annual reports to its shareholders, including
financial statements examined and reported on by independent auditors, and will
provide such other reports as management may deem necessary or appropriate to
keep shareholders informed of the Company's operations.
17
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. Other Expenses of Issuance and Distribution
The table below sets forth the estimated expenses of the Company in
connection with the issuance and distribution of the Common Stock covered by
this Registration Statement.
SEC Registration Fee..................................... $ 2,859
Printing and Engraving Expenses.......................... 5,000
Legal Fees and Expenses (other than Blue Sky)............ 35,000
"Blue Sky" Fees and Expenses............................. 3,000
Accounting Fees and Expenses............................. 5,000
Miscellaneous............................................ 9,141
--------
Total.................................................. $ 60,000
ITEM 15. Indemnification of Directors and Officers
Article 8.01 of the Company's Bylaws as adopted on June 25, 1996, entitled
"Directors and Officers Indemnification" provides for indemnification of
directors and officers under certain circumstances. Section 8.01 provides as
follows:
"8.01 DIRECTORS AND OFFICERS INDEMNIFICATION. Every person who was or
is a party or is threatened to be made a party or is involved in any
action, suit, or proceeding, whether civil, criminal, administrative, or
investigative, by reason of the fact that he is or was a director or
officer of the Corporation or is or was serving at the request of the
Corporation as a director or officer of another corporation, or as its
representative in partnership, joint venture, trust or other enterprise,
shall be indemnified and held harmless to the fullest extent legally
permissible against all expenses, liabilities and losses (including
attorney's fees, judgments, fines and amounts paid or to be paid in
settlement) reasonably incurred or suffered by him in connection therewith.
Such right of indemnification shall be a contract right that may be
enforced in any lawful manner by such person. Such right of indemnification
shall not be exclusive of any other right which such director or officer
may have or hereafter acquire and, without limiting the generality of such
statement, he shall be entitled to his rights of indemnification under any
agreement, vote of stockholders, provision of law, or otherwise, as well as
his rights under this paragraph. The board of directors may cause the
Corporation to purchase and maintain insurance on behalf of any person who
is or was a director or officer of the Corporation, or is or was serving at
the request of the Corporation as a director or officer of another
corporation, or as its representative in a partnership, joint venture,
trust or other enterprise against any liability asserted against such
person and incurred in any such capacity or arising out of such status,
whether or not the Corporation would have power to indemnify such person.
The provisions of this paragraph shall, however, be inapplicable to provide
any indemnification to any officer or director for any liability resulting
from theft or embezzlement of corporate funds, property, or assets or
otherwise inapplicable if indemnification is otherwise restricted by
applicable statute."
18
<PAGE>
Item 16. Exhibits
Exhibit
Number Description
- ------ -----------
**5.1 Opinion of Sam Sexton III
*10.1 Promissory Note, in the stated principal amount of $3,300,000, dated
November 26, 1996 by Exsorbet Industries, Inc., an Idaho corporation
in favor of American Physicians Service Group, Inc., a Texas
corporation.
*10.2 Form of Convertible Equity Debenture
*10.3 Form of Securities Purchase Agreement
*10.4 Form of Registration Rights Agreement
**10.5 Form of Modification Agreement
**23.1 Consent of Cooper, Shuffield & Company
**23.2 Consent of Moore, Stephens & Frost
**23.3 Consent of Sam Sexton III (included in Exhibit 5.1)
*24 Power of Attorney
- ----------
* Previously filed.
** Filed herewith.
Item 17. Undertakings
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective Registration Statement;
(iii) To include any material information with respect to the Plan of
Distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement;
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
19
<PAGE>
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) 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.
20
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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 duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Little Rock, State of Arkansas, on May 29, 1997.
CONSOLIDATED ECO-SYSTEMS, INC.
By: /s/ James J. Connors, Jr.
-------------------------------------
JAMES J. CONNORS, JR.
Chief Executive Officer and President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ *
- ------------------------------------
EDWARD M. PENICK, JR. Chief Financial Officer (Principal Financial May 29, 1997
and Accounting Officer)
/s/ *
- ------------------------------------
JAMES J. CONNORS, JR. Chief Executive Officer, President and Director May 29, 1997
(Principal Executive Officer)
/s/ *
- ------------------------------------
ROBERT D. VICK Director May 29, 1997
/s/ *
- ------------------------------------
DR. EDWARD L. SCHRADER Director and Chairman of the Board May 29, 1997
/s/ SAM SEXTON III
- ------------------------------------
SAM SEXTON III Director May 29, 1997
/s/ *
- ------------------------------------
LARRY J. WOODCOCK Director May 29,1997
*By: /s/ Sam Sexton III
------------------------------
SAM SEXTON III,
Attorney-in-fact
</TABLE>
Exhibit 5.1
SAM SEXTON III, ESQ.
May 30, 1997
Consolidated Eco-Systems, Inc.
6807 West 12th Street
Little Rock, Arkansas 72204
Re: Registration Statement on Form S-3
Dear Sirs:
I have acted as counsel to Consolidated Eco-Systems, Inc., an Idaho
corporation (the "Company") in connection with the preparation of a Registration
Statement on Form S-3 (the "Registration Statement") filed with the Securities
and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
(the "Act"), to register the offering by certain selling stockholders of
14,354,838 shares of Common Stock.
In this regard,I have reviewed the Certificate of Incorporation of the
Company, as amended, resolutions adopted by the Company's Board of Directors,
the Registration Statement and such other reports, documents, statutes and
decisions as I have deemed relevant in rendering this opinion. Based upon the
foregoing,I am of the opinion that:
Each share of Common Stock included in the Registration Statement has
been, or will be when issued as contemplated by the Convertible Equity
Debentures or Common Stock Purchase Warants (including payment as provided for
therein), duly and validly authorized for issuance, fully paid and
non-assessable.
I hereby consent to the use of this opinion as Exhibit 5.1 to the
Registration Statement. In giving this opinion, I do not hereby admit that I am
acting within the category of persons whose consent is required under Section 7
of the Act or the rules and regulations of the SEC thereunder.
Very truly yours,
/s/ Sam Sexton III, Esq.
------------------------------------
Sam Sexton III, Esq.
EXHIBIT 10.5
This Modification Agreement (the "Modification Agreement"), dated as of
May 28, 1997, is entered into by and between ________________ ("Purchaser") and
Consolidated Eco-Systems, Inc. (formerly known as Exsorbet Industries, Inc.), an
Idaho corporation (the "Company").
WHEREAS, the parties hereto have heretofore entered into a Securities
Purchase Agreement, dated as of _____________ (the "Purchase Agreement")
pursuant to which the Purchaser acquired ______________, principal amount, of
convertible debentures (the "Original Debentures") from the Company; and
WHEREAS, simultaneously with the execution of the Purchase Agreement, the
parties hereto entered into a Registration Rights Agreement (the "Registration
Rights Agreement") which, inter alia, contains a liquidated damages provision
applicable in the event that a Registration Statement covering the shares of
Common Stock of the Company into which the Original Debentures are convertible
(the "Underlying Shares") shall not have been declared effective by the
Securities and Exchange Commission within sixty (60) days after the closing date
of the Original Debentures (the "Liquidated Damages Event"); and
WHEREAS, notwithstanding the occurrence of the Liquidated Damages Event,
the Purchaser has agreed, in lieu of seeking such Liquidated Damages and in full
satisfaction of any such claim, to enter into this Modification Agreement.
NOW, THEREFORE, in consideration of the agreements and mutual covenants
hereinafter set forth and other good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Exchange of Original Debentures. Simultaneously with the execution and
delivery of this Modification Agreement, and subject to the terms and
conditions, set forth herein, the Purchaser is herewith delivering the Original
Debentures acquired by it pursuant to the Original Purchase Agreement (the
"Purchaser's Original Debentures") and the Company is herewith delivering to the
Purchaser in exchange therefor: (a) a Debenture in the form of Exhibit A hereto
in the principal amount of $__________ (the "New Debenture A"); and (b) a
Debenture in the form of Exhibit B hereto in the principal amount of
$___________ (the "New Debenture B").
2. Closing. The closing of the transaction described in Section 1 hereof
is taking place simultaneously with the execution of this Modification Agreement
at the
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<PAGE>
offices of Morse, Zelnick, Rose & Lander LLP, 450 Park Avenue, Suite 902, New
York, New York 10022 or at such other date, time and place as the Purchaser and
the Company may agree upon in writing (such the actual time and date on which
the closing takes place, the "Closing Date"). The duly executed New Debenture A
and New Debenture B, in the amounts described in Section 1 hereof, to be
delivered to the Purchaser shall be delivered by, or on behalf of, the Company
at the closing, against delivery of the Purchaser's Original Debentures.
3. Covenants of the Company.
(a) Price Guarantee. The Purchaser shall have the right, upon
written demand made on or before January 15, 1998, to receive from the Company
with respect to the Underlying Shares sold by it on or before December 31, 1997,
the amount, if any, derived by subtracting: (a) the aggregate gross amounts
actually realized, or which would, if Purchaser had used commercially reasonable
efforts in the making of such dispositions have been realized, by the Purchaser
from the disposition in ordinary market transactions, on or before December 31,
1997, of the Underlying Shares from (b) 125% of the amounts actually advanced by
the Purchaser to the Company in payment for the Original Debentures. Such amount
shall be paid to the Purchaser in immediately available funds, provided,
however, that the making of such payment shall be conditioned upon the
Purchaser's furnishing to the Company, on or before January 15, 1998,
documentation evidencing, with respect to each transaction effecting a
disposition of any of the Underlying Shares, the amounts received by the
Purchaser, the manner of disposition and any reasonable collateral information
which Purchaser believes relevant to demonstrating the use by him of
commercially reasonable efforts in the making of such disposition. Payment shall
be conditioned upon receipt by the Company of any: (x) debentures not previously
converted by the Purchaser and (y) Underlying Shares not previously sold by the
Purchaser. Purchaser's rights pursuant to this Section 3(a) shall be deemed
waived if the Company does not receive, on a timely basis, the written demand,
documentation or securities provided for in this Section 3(a). Any issues
regarding whether or not commercially reasonable efforts had been used by the
Purchaser in making any such dispositions shall be determined by H.J. Meyers &
Co., Inc. ("HJM") whose determination in such regard shall be final and
non-appealable to any tribunal. The failure by HJM to make such determination,
for any reason whatsoever other than the failure by the Purchaser to submit its
documentation on a timely basis, on or before January 15, 1998 shall be deemed
to be a determination that commercially reasonable efforts had been used by the
Purchaser in the making of all dispositions of its Underlying Shares.
(b) Registration Restrictions. In consideration of the release given
by the Purchaser in Section 4 hereof, the Company agrees that it will not: (i)
file a registration statement covering shares of its Common Stock, other than
the Shares of
-2-
<PAGE>
Common Stock of the Company owned or issuable to all purchasers of the Original
Debentures and the other shares of Common Stock of the Company currently covered
by the Registration Statement on Form S-3 heretofore filed with the Securities
and Exchange Commission (File No. 333-23087) (the "Other Shares"), prior to the
one hundred and first (101st) day from the date hereof, or (ii) permit a
registration statement covering such Other Shares to become effective prior to
the one hundred and thirty-first (131st) day from the date hereof; provided,
however, that the foregoing shall not be construed to limit the Company from
fulfilling any obligation which is outstanding on the date hereof to register
its securities.
(c) Right of First Refusal. The Purchaser, together with all other
purchasers of the Original Debentures (the "Optionees"), shall have a
three-business day right of first refusal, on a pro rata basis with all other
electing Optionees, to participate in all, but not less than all, of any private
placement consummated by the Company on or before the first anniversary of this
Modification Agreement. In order to implement the provisions of this paragraph,
the Company agrees to give written notice to the Optionees of its desire to
raise capital through the issuance of its debt or equity securities in a private
placement (the "Offer Notice"). Such Notice shall set forth the amount which the
Company desires to obtain through such financing, the type of security (debt or
equity) and if debt, the date of maturity, the interest rate and other material
terms then under consideration by the Company (such as redemption, conversion
and registration rights, if applicable). Each of the Optionees may elect, by
giving written notice (the "Election Notice") to the Company, no more than three
(3) business days following its receipt of the Offer Notice, to participate in
such financing, it being understood that the giving of an Election Notice shall
constitute an irrevocable agreement by each such electing Optionee to finance
the entire private placement in the event that there are no other electing
Optionees. If more than one Optionee elects to so participate, then all electing
Optionees shall have the right to participate on a pro rata basis, determined by
applying a fraction to the amount of the proposed private placement, the
numerator of which is the principal amount of Original Debentures owned by each
such Optionee and the denominator of which is the aggregate amount of Original
Debentures originally purchased by all such electing Optionees. The Company
shall promptly advise each electing Optionee of the identity of any other
electing Optionees. The closing of any such financing shall take place within
five (5) days following timely receipt by the Company of the Election Notice(s).
The Purchaser agrees that this paragraph shall be interpreted so as not to
create any obstructions to the Company's ability to obtain financing. Without
limiting the generality of the foregoing, the Purchaser agrees that, prior to
the closing of any private placement to which this paragraph relates, the giving
of Notice is the Company's only obligation under this paragraph and,
accordingly, the Company shall have no obligation to advise the Optionees of any
change in terms of the financing or the security to be issued thereunder.
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<PAGE>
4. Release of Claims by Purchaser. In consideration of the exchange of
debentures provided for in Section 1 hereof, the price guaranty provided for in
Section 3(a) hereof and other good and valuable consideration the receipt and
sufficiency whereof is hereby acknowledged by the Purchaser, and provided that
the Company complies with its obligations set forth in Section 3(a) and (b)
hereof, the Purchaser, on behalf of himself and any partners, known or unknown,
and his heirs, executors, administrators, successors and assigns (collectively,
the "Releasor"), hereby unconditionally, irrevocably and forever releases and
discharges the Company and its officers, directors, employees, agents and
representatives and their respective, as applicable, heirs, executors,
administrators, successors and assigns (collectively, the "Releasees") from any
and all actions, causes of action, claims, suits, liability, indebtedness,
covenant, contracts, controversies, agreements, promises, damages and demands
whatsoever, in law or equity, which the Releasor ever had, now has or hereafter
can, shall or may, have against the Releasees for, upon or by reason of any
matter, cause or thing whatsoever through the date hereof (the "Release
Period"). Without in any way limiting the generality of the foregoing release,
the Releasor unconditionally, irrevocably and forever releases all claims which
it might otherwise have had or which, through the Release Period, it might
otherwise have had for liquidated damages pursuant to the Registration Rights
Agreement.
5. Fees and Expenses. Each of the Purchaser and the Company agrees to pay
its own expenses incident to the performance of its obligations hereunder,
including, but not limited to, the fees, expenses and disbursements of such
party's counsel.
6. Current Company Information. The Purchaser acknowledges receipt of a
copy of the Company's Form 10-K and Form 10-K/A for its fiscal year ended
December 31, 1996 and a copy of the Company's Form 10-Q for the quarter ended
March 31, 1997. The Purchaser covenants that it has reviewed the same.
7. Survival of Purchase Agreement. The respective agreements,
representations, warranties, indemnities and other statements made by or on
behalf of the Company and the Purchaser, respectively, pursuant to the Purchase
Agreement which are not inconsistent or in conflict with any of the terms and
provisions of this Modification Agreement shall remain in full force and effect.
Without limiting the generality of the foregoing, the parties agree (a) with
respect to the representations and warranties of the Purchaser set forth in
Section 3, and the representations and warranties of the Company set forth in
Section 4: (i) all such representations and warranties shall be deemed to have
been made on and as of the date hereof rather than on and as of the date of said
Purchase Agreement; (ii) the year "1995" set forth in paragraph (n) of Section 4
is hereby amended to read "1996"; and (iii) the year "1995"
-4-
<PAGE>
set forth in paragraph (o) of Section 4 is hereby amended to read "1997"; and
(b) Sections 6 and 7 (providing for conditions precedent) are deleted.
8. Survival of Registration Rights Agreement. The respective agreements,
representations, warranties, indemnities and other statements made by or on
behalf of the Company and the Purchaser, respectively, pursuant to the
Registration Rights Agreement which are not inconsistent or in conflict with any
of the terms and provisions of this Modification Agreement shall remain in full
force and effect except that: (a) the sixty (60) day period provided for in
Section 2(b) of said agreement is hereby amended to provide, in its place and
stead, for a ten (10) business day period; (b) the portion of Section 3(a) which
precedes "(i)" is hereby amended to read as follows: "The Company shall use its
best efforts to cause the Registration Statement heretofore filed by the Company
on Form S-3 (File No. 333-23087) to be declared effective by the Securities and
Exchange Commission within ten (10) business days from the date of the
Modification Agreement and to keep such Registration Statement effective
pursuant to Rule 415 at all times until such date as is the earlier of..."and
(c) references in the Registration Rights Agreement to the Securities Purchase
Agreement, to the extent warranted by the context thereof and the intent hereof,
shall be deemed changed to Modification Agreement.
9. Notices. All notices, requests and other communications hereunder must
be in writing and will be deemed to have been duly given if delivered personally
or by facsimile transmission, and confirmed, or mailed postage prepaid to the
parties at the address or facsimile number set forth in Section 8 of the
Purchase Agreement with an additional copy thereof to Morse, Zelnick, Rose &
Lander LLP, 450 Park Avenue, Suite 902, New York, N.Y. 10022, Attn: Kenneth S.
Rose, Esq. All such notices, requests and other communications shall be deemed
given at the time set forth in such section.
10. Third Party Beneficiary. The provisions of Section 3(a) of this
Modification Agreement shall not be deemed to confer any rights upon anyone
other than the parties hereto.
11. Miscellaneous.
(a) This Modification Agreement may be executed in one or more
counterparts and it is not necessary that signatures of all parties appear on
the same counterpart, but such counterparts together shall constitute but one
and the same agreement.
-5-
<PAGE>
(b) This Modification Agreement shall inure to the benefit of and be
binding upon the parties hereto, their respective successors and permitted
assigns other than as provided in Section 8 hereof.
(c) This Modification Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York (without giving effect to
conflicts of laws principles). With respect to any suit, action or proceedings
relating to this Agreement, each of the Company and the Purchaser irrevocably
submits to the exclusive jurisdiction of the courts of the State of New York and
the United States District Court located in the Borough of Manhattan in the City
of New York and hereby waives to the fullest extent permitted by applicable law
any claim that any such suit, action or proceeding has been brought in an
inconvenient forum. Subject to applicable law, the Company agrees that final
judgment against it in any legal action or proceeding arising out of or relating
to this Agreement or the Original or Exchanged Debentures shall be conclusive
and may be enforced in any other jurisdiction within or outside the United
States by suit on the judgment, a certified copy of which judgment shall be
conclusive evidence thereof and the amount of its indebtedness, or by such other
means provided by law.
(d) The headings of the sections of this document have been inserted
for convenience of reference only and shall not be deemed to be a part of this
Modification Agreement.
(e) The provisions of this Modification Agreement are severable, and
if any clause or provision shall be held invalid, illegal or unenforceable in
whole or in part in any jurisdiction, then such invalidity or unenforceability
shall affect in that jurisdiction only such clause or provision, or part
thereof, and shall not in any manner affect such clause or provision in any
other jurisdiction or any other clause or provision of this Agreement in any
jurisdiction.
[balance of this page intentionally left blank]
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<PAGE>
(f) This Modification Agreement, including the exhibits hereto,
constitutes the sole and entire agreement of the parties with respect to the
subject matter hereof except for provisions of the Purchase Agreement and
Registration Rights Agreement which are not inconsistent or in conflict with the
provisions hereof.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officer(s) of each party hereto as of the date first above
written.
PURCHASER
By:
--------------------------------------
Title:
-----------------------------------
CONSOLIDATED ECO-SYSTEMS, INC.
By:
--------------------------------------
Title: President, Chief Executive Officer
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<PAGE>
EXHIBIT A
NEW DEBENTURE A
[Exhibit intentionally omitted]
-8-
<PAGE>
EXHIBIT B
NEW DEBENTURE B
[Exhibit intentionally omitted]
-9-
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report included in Consolidated
Eco-Systems, Inc.(formerly Exsorbet Industries, Inc.) Form 10-K, as amended, for
each of the two years in the period ended December 31, 1995 and to all
references to our Firm included in this registration statement (File No.
333-23087).
COOPER, SHUFFIELD & COMPANY
By: /s/
-------------------------------
DENNIS COOPER
MAY 29, 1997
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report included in Consolidated
Eco-Systems, Inc.(formerly Exsorbet Industries, Inc.) Form 10-K, as amended, for
the year ended December 31, 1996 and to all references to our Firm included in
this registration statement (File No. 333-23087).
MOORE STEPHENS FROST
By: /s/
---------------------------------
DENNIS COOPER
MAY 29, 1997
