As filed with the Securities and Exchange Commission
on December 23, 1997
Registration No. 333-
================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________________
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
_________________________________
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
(Exact name of registrant as specified in charter)
DELAWARE 58-1954497
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
1940 Northwest 67th Place
Gainesville, Florida 32653
(352) 373-4200
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive office)
________________________________
DR. LOUIS F. CENTOFANTI
Chairman of the Board
Perma-Fix Environmental Services, Inc.
1940 Northwest 67th Place
Gainesville, Florida 32653
(352) 373-4200
(Address, including zip code, and telephone number, including
area code, of agent for service)
Copy to:
IRWIN H. STEINHORN, ESQUIRE
Conner & Winters, A Professional Corporation
One Leadership Square, Suite 1700
211 North Robinson
Oklahoma City, Oklahoma 73102
(405) 272-5711
Approximate date of commencement of proposed sale to the
public: As soon as practicable after this Registration Statement
becomes effective.
If the only securities being registered on this form are being
offered pursuant to a 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, 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, check the following box: [ ]
The registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that
this registration statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until this
registration statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.
CALCULATION OF REGISTRATION FEE
=====================================================================
=======
Proposed Proposed
Title of Each Maximum Maximum
Class of Number of Offering Aggregate Amount of
Securities to Shares to be Price Offering Registration
be Registered Registered Per Share Price Fee
______________ ____________ ____________ __________ ___________
Common Stock,
$.001 par value 3,302,074(1) $2.4688(2) $8,152,160 $2,404.89
Common Stock,
$.001 par value 375,000(3) $2.00-$3.625(4) $1,165,625 $ 343.86
=====================================================================
=======
(1) Includes (a) 1,379,311 shares to be issued upon conversion of the
Company's Series 6 Class F Convertible Preferred Stock, par value $.001
per share (''Series 6 Preferred''); (b) 250,000 shares which may be issued
by the Company in payment of dividends accrued on the Series 6 Preferred;
(c) 200,000 shares to be issued upon conversion of the Company's Series 7
Class G Convertible Preferred Stock, par value $.001 per share (''Series
7 Preferred''); (d) 36,000 shares which may be issued by the Company in
payment of dividends accrued on the Series 7 Preferred; (e) 100,000 shares
to be issued upon exercise of one warrant at an exercise price of $1.50
per share; (f) 100,000 shares to be issued upon exercise of one warrant at
an exercise price of $1.70 per share; (g) 375,000 shares to be issued upon
exercise of two warrants at an exercise price of $1.8125; (h) 35,000
shares to be issued upon exercise of two warrants at an exercise price of
$1.8125; (i) 200,000 shares to be issued upon exercise of one warrant at
an exercise price of $2.00 per share; (j) 175,000 shares to be issued upon
exercise of one warrant at an exercise price of $2.00 per share; (k)
75,000 shares to be issued upon exercise of one warrant at an exercise
price of $2.00 per share; (l) 281,250 shares to be issued upon the
exercise of one warrant at an exercise price of $2.125 per share; (m)
75,000 shares to be issued upon the exercise of five warrants at an
exercise price of $2.375 per share; and (n) 20,513 shares to be issued
upon exercise of one warrant at an exercise price of $2.4375 per share.
(2) Estimated solely for the purposes of calculating the registration fee in
accordance with Rule 457(c) on the basis of the average of the high and
low price as quoted on the NASDAQ Small Cap Market on December 19, 1997.
(3) Includes (a) 75,000 shares to be issued upon exercise of one warrant at
an exercise price of $2.50 per share; (b) 175,000 shares to be issued upon
exercise of one warrant at an exercise price of $3.00 per share; and (c)
125,000 shares to be issued upon exercise of one warrant at an exercise
price of $3.625 per share.
(4) Estimated in accordance with Rule 457(g) for the purpose of calculating
the registration fee.
Subject to Completion: Dated December 23, 1997
PROSPECTUS
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
3,677,074 Shares of Common Stock, par value $.001
This prospectus (''Prospectus'') covers 3,677,074 shares (the
''Shares'') of the common stock, par value $.001 per share
(''Common Stock''), of Perma-Fix Environmental Services, Inc., a
Delaware corporation (the ''Company'') for reoffer or resale from
time to time by the Selling Shareholders (as defined on page 32).
The Shares are comprised of the following: (a) 1,379,311 shares of
Common Stock issuable by the Company upon the conversion of 2,500
shares of Series 6 Class E Convertible Preferred Stock, par value
$.001 per share (''Series 6 Preferred''), issued by the Company in
connection with an Exchange Agreement, dated November 6, 1997, but
effective as of September 16, 1997 (the ''RBB Exchange
Agreement''), entered into between the Company and RBB Bank
Aktiengesellschaft (''RBB Bank''), located in Graz, Austria; (b)
250,000 shares of Common Stock which may be issued by the Company
to RBB Bank in payment of accrued dividends on the Series 6
Preferred; (c) 656,250 shares of Common Stock issuable upon the
exercise of three warrants, each dated as of September 16, 1997,
issued by the Company to RBB Bank in connection with the RBB
Exchange Agreement, with two warrants each being for 187,500 shares
and exercisable for three years at $1.8125 per share, and the third
warrant being for 281,250 shares and exercisable for three years at
$2.125 per share (collectively, the ''Series 6 Warrants''); (d)
300,000 shares of Common Stock issuable by the Company upon the
exercise of two warrants, each dated June 9, 1997, issued by the
Company to JW Charles Financial Services, Inc. (''JW Charles''),
with one warrant being for 100,000 shares and exercisable for three
years at $1.50 per share and the other warrant being for 200,000
shares and exercisable for five years at $2.00 per share
(collectively, the ''Charles Warrants''); (e) 200,000 shares of
Common Stock issuable by the Company upon the conversion of 350
shares of Series 7 Class G Convertible Preferred Stock, par value
$.001 per share (''Series 7 Preferred''), issued by the Company in
connection with an Exchange Agreement, dated October 31, 1997, but
effective as of September 16, 1997 (the ''Infinity Exchange
Agreement''), entered into between the Company and The Infinity
Fund, L.P. (''Infinity''); (f) 36,000 shares of Common Stock which
may be issued by the Company to Infinity in payment of dividends
accrued on the Series 7 Preferred; (g) 35,000 shares of Common
Stock issuable upon the exercise of two warrants, each dated as of
September 16, 1997, issued by the Company to Infinity in connection
with the Infinity Exchange Agreement, and exercisable for three
years at $1.8125 (the ''Infinity Warrants''); (h) 125,000 shares of
Common Stock issuable by the Company upon the exercise of a
warrant, dated June 17, 1994, issued by the Company to Sun Bank,
National Association (''Sun Bank'') in connection with the
extension of certain financial credits by Sun Bank to the Company
(''Sun Bank Warrant''), exercisable until June 16, 1999, at an
exercise price of $3.625 per share; (i) 7,000 shares of Common
Stock issuable by the Company upon exercise of one warrant (''Blair
Remainder Warrant''), exercisable until December 31, 1999, at an
exercise price of $2.375 per share, issued to D.H. Blair Investment
Banking Corporation (''Blair'') to reflect the unassigned portion
of a warrant for 75,000 shares of Common Stock which was previously
issued by the Company to Blair in connection with the extension of
a promissory note (''Blair Warrant'') and which was partially
assigned by Blair to the following officers and directors of Blair:
(w) 28,000 shares of Common Stock issuable by the Company upon
exercise of one warrant issued to J. Morton Davis (''Davis'') as a
result of the assignment by Blair of a portion of the Blair
Warrant, exercisable until December 31, 1999, at an exercise price
of $2.375 per share (''Davis Warrant''); (x) 28,000 shares of
Common Stock issuable by the Company upon exercise of one warrant
issued to Esther Stahler (''Stahler'') as a result of the
assignment by Blair of a portion of the Blair Warrant, exercisable
until December 31, 1999, at an exercise price of $2.375 per share
(''Stahler Warrant''); (y) 7,000 shares of Common Stock issuable by
the Company upon exercise of one warrant issued to Ruki Renov
(''Renov'') as a result of the assignment by Blair of a portion of
the Blair Warrant, exercisable until December 31, 1999, at an
exercise price of $2.375 per share (''Renov Warrant''); and (z)
5,000 shares of Common Stock issuable by the Company upon exercise
of one warrant issued to Martin A. Bell (''Bell'') as a result of
the assignment by Blair of a portion of the Blair Warrant,
exercisable until December 31, 1999, at an exercise price of $2.375
per share (''Bell Warrant''); (j) 20,513 shares of Common Stock
issuable by the Company upon exercise of a warrant issued to Ally
Capital Management (''Ally'') in connection with a loan to the
Company, which warrant is exercisable until September 11, 2000, at
an exercise price of $2.4375 per share; (k) 100,000 shares of
Common Stock issuable by the Company upon exercise of one warrant,
dated as of September 16, 1997, issued by the Company to Dionysus
Limited (''Dionysus''), an Isle of Man corporation, for services
rendered to the Company in connection with the Private Placement
(as defined) and exercisable for three years at $1.70 per share
(''Dionysus Warrant''); and (l) 500,000 shares of Common Stock
issuable upon the exercise of four warrants, each dated July 25,
1997, issued to the following individuals for services rendered to
the Company: (x) Karl H. Ehlert, a five year warrant to purchase up
to 175,000 shares at an exercise price of $2.00 per share and a
five year warrant to purchase up to 175,000 shares at an exercise
price of $3.00 per share (collectively, the ''Ehlert Warrants'')
and (y) R. Keith Fetter, a three year warrant to purchase up to
75,000 shares at an exercise price of $2.00 per share and a three
year warrant to purchase up to 75,000 shares at an exercise price
of $2.50 per share (collectively, the ''Fetter Warrants'') (the
Ehlert Warrants and Fetter Warrants are collectively referred to as
the ''Service Warrants''). See ''Summary of Securities Being
Offered'' and ''Private Placements and Exchange Agreements.''
The shares of Series 6 Preferred and the shares of Series 7
Preferred may be converted into shares of Common Stock at a
conversion price (''Conversion Price'') equal to $1.8125 per share
of Common Stock, except that, in the event the average closing bid
price of the Common Stock as reported in the over-the-counter
market, or the closing sale price if listed on a national
securities exchange, for 20 of any 30 consecutive trading days
after March 1, 1998, shall be less than $2.50 per share, the
Conversion Price shall be adjusted thereafter (''Conversion Price
Adjustment'') to be the lesser of (i) the average closing bid
quotation of the Common Stock as reported on the over-the-counter
market, or the closing sale price if listed on a national
securities exchange, for the five trading days immediately
preceding the date of the conversion notice provided to the
Company, multiplied by eighty percent (80%) or (ii) $1.8125;
provided, however, that the Conversion Price Adjustment applies to
the Series 7 Preferred only if the holders of such Series 7
Preferred have engaged in no sales of Common Stock during and for
30 trading days prior to the 30 consecutive trading day period used
to activate the Conversion Price Adjustment. If the Conversion
Price Adjustment becomes effective, then the minimum conversion
price shall be $0.75 per share of Common Stock, which minimum will
be eliminated from and after September 6, 1998. If the Conversion
Price Adjustment does not become effective, the conversion of all
of the Series 6 Preferred could result in the issuance of up to
approximately 1,379,311 shares of Common Stock, and the conversion
of all of the Series 7 Preferred could result in the issuance of up
to approximately 200,000 shares of Common Stock. If the Conversion
Price Adjustment is in effect and the conversion occurs prior to
September 6, 1998, the number of shares of Common Stock issuable
upon the conversion of the Series 6 Preferred could result in the
issuance of between approximately 1,379,311 to 3,333,333 shares of
Common Stock, and the conversion of the Series 7 Preferred could
result in the issuance of between approximately 200,000 to 467,000
shares of Common Stock with the actual number depending upon the
closing bid price of the Common Stock over the five trading days
immediately preceding the conversion date or dates. The number of
shares of Common Stock issuable upon conversion of the Series 6
Preferred and the Series 7 Preferred could exceed the foregoing
estimates if converted after the minimum conversion price is
eliminated on September 6, 1998, or under certain other limited
circumstances. See ''Summary of Securities Being Offered.''
However, the Company is required to use reasonable efforts to
register only 1,379,311 shares to be issued upon the conversion of
the Series 6 Preferred under the terms of the RBB Exchange
Agreement and 200,000 shares to be issued upon the conversion of
the Series 7 Preferred under the terms of the Infinity Exchange
Agreement. The 1,379,311 shares and 200,000 shares required to be
registered under the terms of the RBB Exchange Agreement and the
Infinity Exchange Agreement, respectively, approximates the number
of shares of Common Stock issuable by the Company upon such
conversion at a conversion price of $1.8125 per share. See
''Private Placements and Exchange Agreements.''
The Company's Common Stock is traded under the symbol ''PES''
on the Boston Stock Exchange (''BSE'') and under the symbol
''PESI'' on the National Association of Securities Dealers
Automated Quotation System SmallCap Market (''NASDAQ''). The
-2-
Shares may be offered for sale from time to time in one or more
transactions, including block trades, in the over the counter
market, on the BSE and the NASDAQ, in privately negotiated
transactions, or in a combination of any such methods of sale. On
December 19, 1997, the closing bid price of the Company's Common
Stock as quoted by the NASDAQ was $2.4375 per share.
The Company will not receive any of the proceeds from the
sale of Shares by the Selling Shareholders. However, the Company
will receive the exercise price upon the exercise of the various
warrants described herein. See ''Use of Proceeds.''
The Company has agreed to pay all the costs and fees relating
to the registration of the Shares covered by this Prospectus.
However, the Company will not pay any discounts, concessions or
commissions payable to underwriters, dealers or agents incident to
the offering of the Shares or fees and expenses incurred by counsel
for the Selling Shareholders.
The mailing address, including zip code, and the telephone
number of the principal executive office of the Company is: 1940
Northwest 67th Place, Gainesville, Florida 32653, and the telephone
number is (352) 373-4200.
___________________________________
INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF
RISK. SEE ''RISK FACTORS'' OF THIS PROSPECTUS FOR A
DISCUSSION OF CERTAIN FACTORS THAT PROSPECTIVE INVESTORS
SHOULD CONSIDER PRIOR TO AN INVESTMENT IN THESE
SECURITIES.
___________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE 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 December ____, 1997.
-3-
SPECIAL NOTE REGARDING
FORWARD-LOOKING STATEMENTS
Certain statements contained within this Prospectus may be
deemed ''forward-looking statements'' within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of
the Securities Exchange Act of 1934, as amended (collectively, the
''Private Securities Litigation Reform Act of 1995''). All
statements in this Prospectus other than statements of historical
fact are forward-looking statements that are subject to known and
unknown risks, uncertainties and other factors which could cause
actual results and performance of the Company to differ materially
from such statements. The words ''believe,'' ''expect,''
''anticipate,'' ''intend,'' ''will,'' and similar expressions
identify forward-looking statements. Forward-looking statements
contained herein relate to, among other things, (i) ability or
inability to improve operations and become profitable on an
annualized basis and continue its operations, (ii) completion of
the Congress Loan (as defined below), (iii) resolution of the
defaults under the Heller Agreement (as defined below) and the Ally
Agreement (as defined below), (iv) the Company's ability to develop
or adopt new and existing technologies in the conduct of its
operations, (v) anticipated financial performance, (vi) ability to
comply with the Company's general working capital requirements,
(vii) ability to recover under certain insurance policies, (viii)
ability to retain or receive certain permits, (ix) the successful
resolution of certain actions instituted by the Tennessee
Department of Environment and Conservation (''TDEC'') against the
Memphis, Tennessee facility of the Company, (x) ability to be able
to continue to borrow under the Company's revolving line of credit,
(xi) ability to generate sufficient cash flow from operations to
fund all costs of operations and remediation of certain formerly
leased property in Dayton, Ohio and the Company's facility in
Memphis, Tennessee, (xii) ability to remediate certain contaminated
sites for projected amounts, (xiii) determination whether the
Company is a potentially responsible party at the Drum site (as
defined below), and, if determined to be a potentially responsible
party, the potential cost to the Company in connection with
remediating the Drum site, (xiv) determination that the Company is
a potentially responsible party at the Drum site (as defined below)
and, as a result, potential cost to the Company in connection with
remediating the Drum site, and all other statements which are not
statements of historical fact. While the Company believes the
expectations reflected in such forward-looking statements are
reasonable, it can give no assurance such expectations will prove
to have been correct. There are a variety of factors which could
cause future outcomes to differ materially from those described in
this Prospectus, including, but not limited to, (i) general
economic conditions, (ii) material reduction in revenues, (iii)
inability to collect in a timely manner a material amount of
receivables, (iv) increased competitive pressures, (v) the ability
to maintain and obtain required permits and approvals to conduct
operations, (vi) the ability to develop new and existing
technologies in the conduct of operations, (vii) overcapacity in
the environmental industry, (viii) ability to receive or retain
certain required permits, (ix) ability to satisfactorily resolve
certain pending orders or issues or to reopen a certain facility,
(x) discovery of additional contamination or expanded contamination
at a certain Dayton, Ohio property formerly leased by the Company
or the Company's facility at Memphis, Tennessee which would result
in a material increase in remediation expenditures, (xi)
determination that PFM is the source of chlorinated compounds at
the Allen Well Field, (xii) changes in federal, state and local
laws and regulations, especially environmental regulations, or in
interpretation of such, (xiii) potential increases in equipment,
maintenance, operating or labor costs, (xiv) management retention
and development, (xv) the requirement to use internally generated
funds for purposes not presently anticipated, (xvi) Congress' (as
defined below) decision regarding the completion of the Congress
Loan, (xvii) Congress' providing terms in the Congress Loan which
are unacceptable to the Company, (xviii) the ability to obtain
waivers regarding existing defaults under certain covenants
contained in loan agreements that the Company is a party to or the
ability of the Company to successfully negotiate a payoff under
such loan agreements should alternative financing become available,
(xix) a determination by the insurance carrier that coverage is not
available or is available in limited amounts regarding pending or
-4-
future claims, a determination that PFM or the Company is a
potentially responsible party regarding the Drum site, and, as a
result is determined to be liable for a substantial portion of the
remediation cost at the Drum site, or (xx) the ability of the
Company to become profitable or, if unable to become profitable,
the ability to secure additional liquidity in the form of
additional equity or debt. The Company undertakes no obligation to
update publicly any forward-looking statement, whether as a result
of new information, future events or otherwise.
___________________________________
AVAILABLE INFORMATION
The Company is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (''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 can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D. C. 20549, as well as
at its Regional Offices located at 7 World Trade Center, Suite
1300, New York, New York 10048, and 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511. Copies of such material can be
obtained from the Public Reference Section of the Commission, 450
Fifth Street, N.W., Washington, D. C. 20549, at prescribed rates.
Such materials can also be accessed through the World Wide Web site
of the Commission, which contains reports, proxy and information
statements and other information regarding registrants that file
electronically with the Commission (http://www.sec.gov). The
Company's Common Stock is listed on the BSE and with NASDAQ, and
reports, proxy statements and other information concerning the
Company may also be inspected at (a) the offices of the BSE at One
Boston Place, Boston, Massachusetts 02108, and (b) the offices of
NASDAQ at 1735 K Street, N.W., Washington, D. C. 20006-1506.
The Company has filed a registration statement on Form S-3
(together with any amendments thereto, the ''Registration
Statement'') under the Securities Act of 1933, as amended (the
''Securities Act''), with respect to the Shares offered by this
Prospectus. This Prospectus constitutes a part of the Registration
Statement and omits certain information contained in the
Registration Statement in accordance with the rules and regulations
of the Commission. Reference is made to the Registration Statement
and exhibits thereto for further information with respect to the
Company and the Shares of Common Stock offered hereby. Copies of
the Registration Statement and the exhibits thereto may be obtained
at prescribed rates upon request to the Commission in Washington,
D. C. Any statements contained herein concerning the provisions of
any documents are not necessarily complete, and, in each instance,
such statements are qualified in their entirety by reference to
such document filed as an exhibit to the Registration Statement or
otherwise filed with the Commission.
INCORPORATION BY REFERENCE
The following documents filed by the Company with the
Commission under the Exchange Act are incorporated by reference in
this Prospectus and will be deemed part of this Prospectus:
(1) Annual Report on Form 10-K for the year ended
December 31, 1996, as amended by Amendment No. 1 on
Form 10-K/A filed October 16, 1997;
(2) Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997;
-5-
(3) Quarterly Report on Form 10-Q for the quarter ended
June 30, 1997;
(4) Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997;
(5) Current Report on Form 8-K dated June 11, 1997, as
amended by Current Report on Form 8-K/A dated
June 25, 1997;
(6) Current Report on Form 8-K dated July 7, 1997.
All documents filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of the offering under this
Prospectus will be deemed to be incorporated by reference into this
Prospectus from the respective dates those documents are filed. If
any statement in this Prospectus, in a subsequent supplement to
this Prospectus or any document incorporated by reference in this
Prospectus is modified or superseded by a statement in this
Prospectus, in subsequent supplement to this Prospectus, or in any
document incorporated by reference in this Prospectus, the earlier
statement will be deemed, for the purposes of this Prospectus to
have been modified or superseded by the subsequent statement and
the earlier statement is incorporated by reference only as modified
or to the extent it is not superseded
The Company will provide to each person to whom this
Prospectus is delivered a copy of any or all of the documents which
have been or may be incorporated by reference in this Prospectus
(other than certain exhibits to those documents). Such copies will
be provided upon written or oral request and without charge.
Requests should be directed to Richard T. Kelecy, Perma-Fix
Environmental Services, Inc., 1940 Northwest 67th Place,
Gainesville, Florida 32653, telephone (352) 373-4200.
RISK FACTORS
In evaluating an investment in the Shares, prospective
purchasers of the Shares pursuant to this Prospectus should
consider carefully the factors set forth below, as well as the
other information contained in this Prospectus and incorporated
herein by reference.
Accumulated Deficits; Net Losses; Future Losses
The Company has reported consolidated net losses in all annual
periods since it began operations in 1991. The Company's historical
consolidated balance sheet at December 31, 1996, reflected an
accumulated deficit of approximately $14,290,000, and the Company's
consolidated statement of operations for the year ended
December 31, 1996, reflected a net loss applicable to Common Stock
of approximately $405,000, or a net loss of approximately $.05 per
share, as compared to a net loss applicable to Common Stock of
approximately $9,052,000, or a net loss of approximately $1.15 per
share, for the year ended December 31, 1995. For the three months
ended September 30, 1997, the Company had an unaudited consolidated
net income of approximately $157,000 on unaudited consolidated net
revenues of approximately $7,246,000, as compared to an unaudited
consolidated net income of approximately $155,000 on unaudited
consolidated net revenues of approximately $7,734,000 for the three
months ended September 30, 1996. However, for the nine month period
ended September 30, 1997, the Company had an unaudited consolidated
net loss of approximately $1,202,000 on unaudited consolidated net
revenues of approximately $20,882,000, as compared to an unaudited
consolidated net loss of approximately $244,000 on unaudited
consolidated net revenues of approximately $23,484,000 for the nine
months ended September 30, 1996. If the Company is unable to
improve its operations and become profitable on an annualized basis
in the foreseeable future, such inability would have a material
adverse effect on the Company and the Company's ability to operate.
-6-
Defaults on Senior Debt
The Company and its subsidiaries are parties to a Loan and
Security Agreement (''Heller Agreement''), with Heller Financial,
Inc. (''Heller''), which provides a term loan and a revolving
credit facility to the Company. In addition, the Company has an
equipment financing agreement (''Ally Agreement'') with Ally
Capital Corporation (''Ally''). As of September 30, 1997, the
Company owed Heller under the term loan approximately $993,000 and
under the revolving credit facility approximately $2,173,000, and
owed Ally under the Ally Agreement approximately $796,000. As of
September 30, 1997, the Company was, and as of the date of this
Prospectus the Company is, in default of certain financial and
other covenants under the Heller Agreement and the Ally Agreement,
including certain covenants in the Heller Agreement prohibiting the
issuance by the Company of shares of stock other than shares which
Heller has specifically authorized. The Company has not received
consent from Heller to issue various shares of stock, including,
but not limited to (i) the Series 4 Preferred, Series 5 Preferred,
Series 6 Preferred and Series 7 Preferred; (ii) the Series 4
Warrants, Series 6 Warrants, Infinity Warrants, Dionysus Warrant,
and Service Warrants; (iii) Common Stock to be issued in payment of
dividends accrued on, or upon conversion of, the Series 4
Preferred, Series 5 Preferred, Series 6 Preferred and Series 7
Preferred and (iv) Common Stock to be issued upon exercise of the
Series 4 Warrants, Series 6 Warrants, Infinity Warrants, Sun Bank
Warrant, Dionysus Warrant, and Service Warrants. See ''Private
Placements and Exchange Agreements.''
Although Heller and Ally may, under the terms of their
respective agreements with the Company, declare a default and
demand immediate repayment of all amounts due under their
respective agreements, neither has done so and neither has
indicated that it intends to take such action despite being in
default of certain covenants. In addition, Heller has continued
to provide loans to the Company under the revolving credit facility
of the Heller Agreement. If, however, Heller or Ally, or both of
them, were to declare a default and demand immediate repayment
under one or both of their respective agreements, the Company does
not have sufficient liquidity to enable it to make such repayment.
If the Company were unable to negotiate a settlement with Heller
and/or Ally, or obtain alternative financing from Congress or other
external sources, such could have a material adverse effect on the
Company and its ability to continue as a viable entity.
During November, 1997, the Company signed a letter of intent
with Congress Financial Corporation (''Congress'') regarding a
proposed $7,000,000 credit facility (''Congress Loan'') which, as
proposed, would consist of a revolving line of credit of
approximately $4,500,000 and a term loan of approximately
$2,500,000. The Congress Loan, if completed, would be used to
replace the Company's current term loan and revolving loan facility
with Heller, as well as the Company's current equipment financing
arrangements with Ally. Completion of the Congress Loan, however,
is subject to completion by Congress of its due diligence,
completion of loan documentation, and credit approval by Congress.
No assurance can be made that the Congress Loan will close in the
near future or at all.
Potential Environmental Liability
The Company's business involves rendering services in
connection with management of waste, including certain types of
hazardous waste and low level radioactive waste. The nature of
this business is such that the Company cannot avoid exposure to
significant risk of liability for damages. Such liability could
involve, without limitation, (a) claims for clean-up costs,
personal injury or damage to the environment in cases in which the
Company is held responsible for the release of hazardous or
radioactive materials; (b) claims of employees, customers or third
parties for personal injury or property damage occurring in the
course of the Company's operations; and (c) claims alleging
negligence or professional errors or omissions in the planning or
performance of its services or in the providing of its products.
In addition, the Company could be deemed a responsible party for
the cost of clean-up of any property which may be contaminated by
hazardous substances generated by the Company and disposed of at
-7-
such property or transported by the Company to a site selected by
the Company, including properties owned or leased by the Company.
The Company could also be subject to fines and civil penalties in
connection with violations of regulatory requirements. See ''The
Company -- Facility Disruption,'' ''--Potential Environmental
Liability and Certain Environmental Expenditures,'' and ''--
Governmental Regulation.''
Loss Carryovers
Certain of the Company's losses have resulted in net operating
loss carryovers which the Company anticipates may be used to reduce
the federal income tax payments which the Company would otherwise
be required to make with respect to income generated in future
years. The Company had available net operating loss carryovers of
approximately $9,200,000 based on its federal income tax returns as
filed with the Internal Revenue Service (''IRS'') for taxable years
through 1996. The use of the net operating loss carryovers is,
however, subject to certain limitations and will expire to the
extent not utilized by the years 2006 through 2011. See ''The
Company--Availability of Company's Loss Carryovers.'' In addition,
the amount of these carryovers has not been audited or approved by
the IRS, and, accordingly, no assurance can be given that such
carryovers will not be reduced as a result of audits in the future.
Governmental Regulation
The Company's business is subject to extensive, evolving and
increasingly stringent federal, state and local environmental laws
and regulations. Such federal, state and local environmental laws
and regulations govern the Company's activities regarding the
treatment, storage, recycling, disposal and transportation of
hazardous and non-hazardous waste and low level radioactive waste.
The Company must obtain and maintain permits, licenses and/or
approvals in order to conduct such activities in compliance with
such laws and regulations. Failure to obtain and maintain such
permits, licenses and/or approvals would have a material adverse
effect on the Company, its operations and financial condition.
There can be no assurance that the Company will be able to maintain
its currently held permits, licenses and/or approvals or obtain any
additional permits, licenses and/or approvals which may be required
as the Company expands its operations. See ''The Company -- Facility
Disruption,'' ''--Governmental Regulation,'' and ''--Permits and
Licenses.''
Because the environmental industry continues to develop
rapidly, the Company cannot predict the extent to which its
operations may be affected by future enforcement policies as
applied to existing laws, by changes to current environmental laws
and regulations or by the enactment of new environmental laws and
regulations. Any predictions regarding possible liability under
such laws are complicated further by current environmental laws
which provide that the Company could be liable jointly and
severally for certain activities of third parties over whom the
Company has limited or no control. See ''--Potential Environmental
Liability.'' The nature of the standards imposed by federal,
state, and local permitting laws require the Company to incur
certain levels of capital expenditures to maintain compliance with
such standards. See ''The Company -- Facility Disruption,''
'' Potential Environmental Liability and Certain Environmental
Expenditures,'' and ''--Governmental Regulation.''
A lack of liquidity on the part of the Company could have a
negative impact on the Company's ability to remain in compliance
with various federal, state and local environmental regulations.
Violation of such federal, state and local regulations could result
in the loss of one or more of the Company's permits or subject the
Company to substantial fines, penalties or other liabilities that
could have a material adverse impact on the Company's business.
-8-
Facility Disruption
On January 27, 1997, an explosion and resulting fire at the
Memphis, Tennessee facility of PFM resulted in damage to certain
hazardous storage tanks located on the facility and caused certain
limited contamination at the facility. The fire and resulting
explosion were caused by the welding activity of employees of an
independent contractor at or near a hazardous waste tank farm
located on the facility contrary to instructions of PFM. The fire
and explosion at PFM have resulted in the Company incurring
additional losses as a result of being able to carry on only
limited operations at this facility since the fire and explosion
and further resulting in the Tennessee Department of Environment
and Conservation (''TDEC'') taking certain actions against PFM
which could have a material adverse effect on the Company. See
''The Company--Facility Disruption.''
Potential Increase in Litigation
The Company's operations are regulated by numerous laws
regarding procedures for waste treatment, storage, recycling,
transportation and disposal activities. See ''The Company--
Governmental Regulation.'' In recent years, the waste treatment
industry has experienced a significant increase in so-called
''toxic-tort'' litigation as those injured by contamination seek to
recover for personal injuries or property damage. The Company
believes that as the Company's operations and activities expand,
there will be a similar increase in the potential for litigation
alleging that the Company is responsible for contamination or
pollution caused by its normal operations, negligence or other
misconduct or for accidents which occur in the course of the
Company's business activities. Such litigation, if significant and
not adequately insured against, could have a material adverse
effect upon the Company's operations and financial condition. In
addition, involvement in protracted litigation would likely result
in expenditure of significant amounts of the Company's time, effort
and money, and could prevent the management of the Company from
focusing on the operation and expansion of the Company and thereby
result in a material adverse effect upon the Company. See ''--
Potential Environmental Liability.''
Insurance
The business of the Company exposes it to various risks,
including claims for causing damage to property and injuries to
persons which may involve allegations of negligence or professional
errors or omissions in the performance of its services. Such
claims could be substantial. See ''--Potential Environmental
Liability'' and ''--Potential Increase in Litigation.'' The
Company believes that its insurance coverage is presently adequate
and similar to or greater than the coverage maintained by other
companies of its size in the industry. There can be no assurance
that the Company will be able to obtain adequate or required
insurance coverage in the future or, if obtainable, that such
insurance be available at affordable rates. If the Company cannot
obtain or maintain such coverage, it would be a violation of its
permit conditions and other requirements of the environmental laws,
rules and regulations under which the Company operates and the
Company would be unable to continue certain of its operations.
Such events would have a material adverse effect on the Company's
operations and financial condition. See ''The Company--Insurance''
and ''--Facility Disruption.''
Reliance on Key Employees; Attraction and Retention of Qualified
Professionals
The Company is substantially dependent upon the services of
Dr. Louis F. Centofanti, its Chairman, President and Chief
Executive Officer. The loss of Dr. Centofanti could have a
material adverse effect on the Company. The Company's future
success depends on its ability to retain and expand its staff of
qualified personnel, including environmental specialists and
technicians, sales personnel and engineers. There can be no
assurance that the Company will be successful in its efforts to
attract and retain such personnel as their availability is limited
-9-
due to the rapid increase in the demand for hazardous waste
management services and the highly competitive nature of the
hazardous waste management industry.
Dependence on Environmental Regulation and Future Legislation
Demand for the Company's services is substantially dependent
upon the public's concern with, and the continuation and
proliferation of the laws and regulations governing, the treatment,
storage, recycling and disposal of hazardous, non-hazardous and low
level radioactive waste. A decrease in the level of public
concern, the repeal or modification of such laws, or any
significant relaxation of regulations relating to the treatment,
storage, recycling and disposal of hazardous waste and low level
radioactive waste, would significantly reduce the demand for the
services offered by the Company and could have a material adverse
effect on the Company, its operations and financial condition.
Competition
The Company competes with numerous companies which are able to
provide one or more of the environmental services offered by the
Company. Many of the Company's competitors have greater financial,
human and other resources than the Company. The increased
competition in the waste management industry has resulted in
reduced gross margin levels, which are likely to become further
reduced due to several factors: (a) more companies entering the
market as the industry continues to mature; (b) the likely
expansion of the range of services offered by current and future
competitors of the Company; (c) the current efforts of companies
and governmental authorities to encourage waste minimization; and
(d) the existence of fewer unserved markets available for Company
expansion as the Company and its competitors move into new
geographic markets. The increased competition and reduced gross
margin levels could have a material adverse effect on the business
and financial condition of the Company. See ''The Company--
Competitive Conditions.''
Voting Control; Ability to Direct Management
Prior to the conversion of the outstanding shares of the
Company's Series 3 Class C Convertible Preferred Stock, par value
$.001 per share (the ''Series 3 Preferred''), Series 6 Preferred
and Series 7 Preferred or the exercise of any outstanding warrants
and options, approximately 11.8% of the outstanding shares of
Common Stock is held by the Company's executive officers and
directors as of the date of this Prospectus. In addition, such
persons have options or similar other rights to acquire
approximately 2.7% of additional shares of the Company's Common
Stock. Assuming the options and warrants held by the Company's
executive officers and directors which are exercisable within 60
days of the date hereof have been exercised and the Company's
outstanding shares of preferred stock are not converted and no
other outstanding options or warrants are exercised, the Company's
executive officers and directors would beneficially own, as a
group, approximately 14.4% of the outstanding shares of Common
Stock.
As of the date of this Prospectus, RBB Bank holds 931,567
shares of Common Stock, or approximately 8.0% of the outstanding
shares of Common Stock. RBB is also the owner of (i) 4,000 shares
of the Company's Series 3 Preferred, which are convertible into
approximately 2,672,024 shares of Common Stock, assuming the
average closing bid quotation for the Common Stock for the five
trading days immediately preceding each conversion date equals or
exceeds $2.00 per share, and (ii) 2,500 shares of Series 6
Preferred, which are convertible into approximately 1,379,311
shares of Common Stock, assuming the Conversion Price Adjustment is
not in effect, or if in effect, assuming the average closing bid
quotation for the Common Stock for the five trading days
immediately preceding each conversion date equals or exceeds $2.27
per share.
-10-
RBB Bank holds the 1996 RBB Warrants (as defined
under ''Private Placements and Exchange Agreements'') and the
Series 6 Warrants, which together may be exercised for the purchase
of up to 2,656,250 shares of Common Stock. If RBB Bank acquires
(i) an aggregate of an additional 4,051,335 shares of Common Stock
on conversion of the Series 3 Preferred and Series 6 Preferred,
(ii) 2,656,250 shares of Common Stock upon the exercise of the
1996 RBB Warrants and Series 6 Warrants, and (iii) 401,221 shares
of Common Stock which have previously been or herein are being
registered to be issuable for payment of dividends on the Series 3
Preferred and Series 6 Preferred, RBB Bank will own approximately
8,040,373 shares of Common Stock (which includes the 931,567 shares
of Common Stock directly held by RBB Bank as of the date of this
Prospectus), representing approximately 42.9% of the Company's then
outstanding Common Stock, assuming no other options or warrants are
exercised, the Series 7 Preferred is not converted, and the Company
does not issue any additional shares of Common Stock after the date
of this Prospectus other than in connection with the conversion of
the outstanding shares of Series 3 Preferred and Series 6 Preferred
and exercise of the 1996 RBB Warrants and Series 6 Warrants. In
such event, RBB Bank would be the largest shareholder of the
Company, and the Company may not have sufficient remedies to be
able to avoid an actual change in control of the Company if RBB
Bank seeks such a change in control. See ''The Company --Private
Placements and Exchange Agreements'' and ''Selling Shareholders.''
Potential Adverse Effect to Company and Possible Adverse Impact on
Earnings Per Share Upon Exercise of Outstanding Warrants and
Options and Conversion of Outstanding Preferred Stock
The Company has outstanding warrants to purchase up to
approximately 9 ,640,238 shares of Common Stock, including, without
limitation, the 1996 RBB Warrants and Series 6 Warrants, and
outstanding options to purchase up to approximately 1,273,409
shares of Common Stock. The Company is also obligated to issue to
(a) RBB Bank up to approximately 2,672,024 shares of Common Stock
upon conversion of the Series 3 Preferred assuming that the average
closing bid quotation for the Common Stock for five trading days
immediately preceding each of the conversion date or dates of the
Series 3 Preferred equals or exceeds $2.00, and up to approximately
1,379,311 shares upon the conversion of the Series 6 Preferred,
assuming the Conversion Price Adjustment is not in effect, or, if
in effect assuming the average closing bid quotation for the Common
Stock for the five trading days immediately preceding each
conversion date or dates of the Series 6 Preferred equals or
exceeds $2.27, and (b) Infinity up to approximately 200,000 shares
of Common Stock upon conversion of the Series 7 Preferred assuming
the Conversion Price Adjustment is not in effect, or, if in effect,
assuming the average closing bid quotation for Common Stock for the
five trading days immediately preceding each conversion date or
dates of the Series 7 Preferred equals or exceeds $2.27 per share.
Depending on the price of the Common Stock as of the date of
conversion and under certain conditions, the number of shares
issuable upon conversion of the Series 3 Preferred, Series 6
Preferred and Series 7 Preferred may exceed the amounts indicated
above. In addition, the Company intends to pay dividends accruing
on the outstanding shares of Series 3 Preferred, Series 6 Preferred
Stock and Series 7 Preferred in shares of Common Stock rather than
cash if and when declared by the Board of Directors. The terms
of the Heller Agreement provide that all dividends paid on the
Series 3 Preferred must be paid in shares of Common Stock rather
than cash. The Company has not, however, received Heller's consent
to issue the Series 6 Preferred Stock, Series 7 Preferred Stock or
shares of Common Stock to be issued upon conversion thereof or as
dividends thereon. The Company is currently seeking to replace
the loan with Heller and has signed a letter of intent with
Congress regarding such potential replacement financing. See
'' -- Defaults on Senior Debt.''
The issuance of Common Stock pursuant to such warrants,
options, convertible preferred stock, or in payment of dividends on
the Series 3 Preferred, Series 6 Preferred and Series 7 Preferred
could adversely affect the ability of the Company to, and the terms
on which it can, raise additional equity capital. If all or a
substantial portion of such warrants and options are exercised and
all or a substantial portion of the Series 3 Preferred, Series 6
Preferred and Series 7 Preferred are converted into Common Stock,
the issuance of the additional shares of Common Stock will have a
substantial and material adverse impact on an existing
stockholder's ownership percentage of the outstanding shares of
-11-
Common Stock and may result in a ''change of control'' of the
Company. Moreover, in the event the Company generates net income,
there could be a substantial material adverse impact on earnings
per share if such additional shares are issued and to the extent
the options and warrants are required to be included in the
weighted average shares outstanding calculation. See ''--Voting
Control; Ability to Direct Management,'' ''--Barriers to Takeover''
and ''Private Placements and Exchange Agreements.''
No Dividends Paid
Since its inception, the Company has not paid cash dividends
on its Common Stock. The Company intends to retain future
earnings, if any, to provide funds for the operation and/or
expansion of its business. Accordingly, the Company does not
anticipate paying cash dividends on its Common Stock in the
reasonably foreseeable future. Moreover, the terms of the Heller
Agreement provide that no dividends may be paid on the Common Stock
without Heller's approval.
The terms of the Series 3 Preferred Stock, Series 6 Preferred
Stock, and the Series 7 Preferred Stock allow the Company to pay
dividends on the shares of such preferred stock in cash or Common
Stock. The terms of the Heller Agreement require the Company to
pay the dividends accruing on the shares of Series 3 Preferred
Stock in shares of Common Stock if and when declared and paid by
the Board of Directors of the Company. The Company currently
intends to pay the dividends accruing on the shares of Series 3
Preferred, Series 6 Preferred Stock and the Series 7 Preferred
Stock in shares of Common Stock if and when declared and paid by
the Board of Directors of the Company. The Company has not,
however, received Heller's consent to issue the Series 6 Preferred
Stock, Series 7 Preferred Stock or shares of Common Stock to be
issued upon conversion thereof or as dividends thereon. The
Company is currently seeking to replace the loan with Heller and
has signed a letter of intent with Congress regarding such
potential replacement financing. See ''--Defaults on Senior
Debt,'' ''--Potential Adverse Effect to the Company and
Possible Adverse Impact on Earnings Per Share Upon Exercise of
Outstanding Warrants and Options'' and ''Private Placements and
Exchange Agreements.''
Barriers to Takeover
The Company is a Delaware corporation and is governed, in
part, by the provisions of Section 203 of the General Corporation
Law of Delaware, an anti-takeover law enacted in 1988. In general,
Section 203 prohibits a Delaware public corporation from engaging
in a ''business combination'' with an ''interested stockholder''
for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless the
business contribution is approved in a prescribed manner. As a
result of Section 203, potential acquirers of the Company may be
discouraged from attempting to effect acquisition transactions with
the Company, thereby possibly depriving holders of the Company's
securities of certain opportunities to sell or otherwise dispose of
such securities at above-market prices pursuant to such
transactions. Further, the Company's 1991 Performance Equity Plan,
1992 Outside Directors Stock Option Plan and 1993 Nonqualified
Stock Option Plan provide for the immediate acceleration of, and
removal of restrictions from, options and other awards under such
plans upon a ''change of control'' (as defined in the respective
plans). Such provisions may also have the result of discouraging
acquisitions of the Company. See ''--Voting Control'' and ''--
Ability to Direct Management.''
RBB Bank has the right to acquire an aggregate of
approximately 6,707,585 shares of Common Stock, consisting of (i)
2,672,024 shares upon conversion of the issued and outstanding
Series 3 Preferred assuming the average closing bid quotation for
the Common Stock for five trading days immediately preceding each
of the conversion date or dates equals or exceeds $2.00 per share
and (ii) 1,379,311 shares upon conversion of the issued and
outstanding Series 6 Preferred assuming the Conversion Price
Adjustment is not in effect, or, if in effect, assuming the average
closing bid quotation for the Common Stock for five trading days
-12-
immediately preceding each of the conversion date or dates equals
or exceeds $2.27 per share and (iii) 2,656,250 shares upon the
exercise of the 1996 RBB Warrants and Series 6 Warrants. Upon such
conversion and exercise, RBB Bank will own approximately 41.7% of
the outstanding shares of Common Stock of the Company, which
includes the 931,567 shares of Common Stock directly held by RBB
Bank as of the date of this Prospectus but does not include the
401,221 shares of Common Stock which have previously been or herein
are being registered to be issuable for payment of dividends on the
Series 3 Preferred and Series 6 Preferred. This estimate assumes
that the Series 7 Preferred is not converted and that no shares of
Common Stock are issued by the Company after the date of this
Prospectus, other than in connection with the conversion of the
outstanding shares of Series 3 Preferred and Series 6 Preferred and
exercise of the 1996 RBB Warrants and Series 6 Warrants. In such
event, RBB Bank will be the largest single stockholder of the
Company and will have such a significant number of shares of Common
Stock within its control that the Company may have insufficient
remedies to avoid an actual change in control of the Company in
favor of RBB Bank. If RBB Bank obtains ownership of an additional
substantial percentage of Common Stock of the Company, it could
prevent or discourage other persons from attempting to acquire the
Company even if RBB Bank does not obtain control of the Company.
See ''--Voting Control; Ability to Direct Management'' and
''Private Placements and Exchange Agreements.''
THE COMPANY
Company Overview
The Company is a Delaware corporation organized in 1990. The
Company is engaged, through its subsidiaries, in the (a) waste
management services, consisting of treatment, storage, recycling,
and disposal of hazardous and non-hazardous industrial and
commercial wastes, and the storage, treatment and disposal of
certain low-level radioactive waste; and (b) consulting and
engineering services to industry and government for broad-scope
environmental problems. In recent years, the Company has grown
through acquisitions and internal development. The Company's
primary subsidiaries in the waste management services are:
* Perma-Fix Treatment Services, Inc. (''PFTS'') located in
Tulsa, Oklahoma;
* Perma-Fix of Florida, Inc. (''PFF'') located in Gainesville,
Florida;
* Perma-Fix of Dayton, Inc. (''PFD'') located in Dayton, Ohio;
* Perma-Fix, Inc. (''PFI'') located in Tulsa, Oklahoma;
* Perma-Fix of Ft. Lauderdale, Inc. (''PFFL'') located in
Davie, Florida;
* Perma-Fix of Memphis, Inc. (''PFM'') located in Memphis,
Tennessee.
The Company's primary subsidiaries in the consulting and
engineering services are:
* Mintech, Inc., located in Tulsa, Oklahoma, and
* Schreiber, Grana & Yonley, Inc., located in St. Louis,
Missouri.
The Company's executive offices are located at 1940 N.W. 67th
Place, Gainesville, Florida 32653.
Principal Products and Services
The Company is engaged in two lines of business: (a) waste
management, including off-site and on-site services for the
treatment, storage, recycling, and disposal of hazardous, non-
hazardous and mixed low-level radioactive and hazardous wastes; and
(b) environmental engineering and consulting services specializing
in environmental management programs, agency communications,
regulatory permitting, compliance and auditing, landfill design,
field testing and characterization. The Company presently services
-13-
institutions, commercial companies, and governmental agencies
nationwide. Distribution channels for services are through direct
sales to customers by the Company's sales force or via
intermediaries.
New Process
The Company has developed a new process (''New Process'')
designed to remove certain types of organic hazardous constituents
from soils or other substrates (''Soils''). This New Process will
be used at PFF's facility and is designed to remove the organic
hazardous constituents from the Soils through a water based system.
The Company has filed a patent application with the U. S. Patent
and Trademark Office covering the New Process. As of the date of
this Prospectus, the Company has not received a patent for the New
Process, and there are no assurances that such a patent will be
issued to the Company.
Until development by the Company of this New Process, the
Company was not aware of a relatively simple and inexpensive
process that would remove the organic hazardous constituents from
Soils without elaborate and expensive equipment or expensive
treating agents. Due to the organic hazardous constituents
involved, the disposal options for such materials are extremely
limited, resulting in high disposal cost when there is a disposal
option available. By removing the organic hazardous waste
constituents from the Soils to a level where the Soils may be
returned to the ground, the generator's disposal options for such
waste are substantially increased, allowing the generator to
dispose of such waste at substantially less cost.
As of the date of this Prospectus, the Company has only
performed limited testing on the New Process and has not developed
the New Process for commercial use. As a result, there are no
assurances that the New Process will perform as presently expected,
once such is developed for commercial use. It is anticipated that
the Company will have developed the New Process and such will be
ready for commercial use on or before the end of 1998. Further,
changes to current environmental laws and regulations could limit
the use of the New Process or the disposal options available to the
generator. See ''-- Permits and Licenses.''
Facility Disruption
On January 27, 1997, a fire and explosion occurred at the PFM
facility in Memphis, Tennessee, which resulted in damage to
certain hazardous waste storage tanks located on the facility and
caused certain limited contamination at the facility. The facility
was not operational from the date of the fire until limited
operations resumed during May, 1997. Since May 1997, PFM has
operated this facility on a limited basis and has (a) accepted
waste for processing and disposal, but has arranged for other
facilities owned by the Company or subsidiaries of the Company or
others not affiliated with the Company to process such waste, and
(b) ceased all fuel blending at the facility. The Company is
currently evaluating the extent of PFM's activities at this
facility and various options available to the Company in connection
therewith, including the move of all or a portion of PFM's Memphis,
Tennessee operations to a new facility on a short or long-term
basis is, subject to, among other things, PFM being able to receive
necessary permits for such a move and PFM having sufficient
liquidity to make such a move.
During the period of limited operations of PFM's Memphis,
Tennessee facility, the utilization of other facilities to process
waste has resulted in higher costs to PFM than if PFM were able to
process waste at its Memphis, Tennessee facility, along with the
additional handling and transportation costs associated with these
activities. The net revenues for PFM were approximately $1,514,000
for the nine months ended September 30, 1997, reflecting a decrease
of approximately $1,386,000 or approximately 48% from PFM net
-14-
revenues from the nine months ended September 30, 1996, of
approximately $2,900,000. The Company and PFM have property and
business interruption insurance. The Company has settled its
property and contents claim for $522,000, less a retention of
$25,000. The Company is in the process of negotiating with its
insurance carrier regarding the amount of business interruption
insurance that may be recoverable by PFM as a result thereof, if
any. The inability to recover PFM's losses under such insurance
may have a material adverse effect on the Company. See ''--
Potential Environmental Liability.''
As a result of the explosion and resulting tank fire at the
PFM facility, the TDEC issued an order dated April 23, 1997 (the
''TDEC Order''), which alleges that the facility violated certain
hazardous waste rules and regulations promulgated by the TDEC. The
TDEC Order assessed a penalty of approximately $144,000 and
ordered, among other things, that (a) the facility cease blending
operations, (b) the facility's permit to construct a new hazardous
waste tank storage area, which has not yet been constructed, be
revoked, and (c) PFM implement certain other actions. PFM has
responded to the TDEC Order and asserted that the TDEC Order was
issued against the wrong party, that PFM did not violate any rules
and regulations promulgated by the TDEC, that the actions taken by
the TDEC were contrary to applicable rules and regulations and that
the TDEC is not entitled to such penalties. The Company intends
for PFM to vigorously defend itself in connection with this matter.
As a result of the TDEC Order, the EPA has made a determination
(''EPA Determination'') that PFM's Memphis, Tennessee facility is
unacceptable for the receipt of waste generated under the
Comprehensive Environmental Response Compensation and Liability Act
of 1980 (''CERCLA''). PFM's Memphis, Tennessee facility, however,
has not accepted a material amount of CERCLA waste in the past and,
therefore, the Company believes the EPA Determination will not have
a material adverse effect on the Company. If the Company is not
successful in its defense of the TDEC Order, and the current terms
of the TDEC Order are enforced, such could have a material adverse
effect on the Company. See ''Risk Factors--Facility Disruption.''
Potential Environmental Liability and Certain Environmental
Expenditures
In May 1995, PFM, a subsidiary of the Company which was
purchased in December 1993 and was formerly known as American
Resource Recovery Corporation (''ARR''), became aware that the U.S.
District Attorney for the Western District of Tennessee and the
Department of Justice (the ''DOJ'') were investigating certain
prior activities of W. R. Drum Company (''Drum''), its successor,
First Southern Container Company, and any other facility owned or
operated, in whole or in part, by Johnnie Williams. In May and
September 1995, PFM received a Grand Jury Subpoena which demanded
the production of any documents in the possession of PFM pertaining
to Drum, First Southern Container Company, or any other facility
owned or operated, and held in part, by Johnnie Williams. PFM
complied with each Grand Jury Subpoena. In December 1995,
representatives of the DOJ advised PFM that it was also currently
a subject of the investigation involving Drum, First Southern
Container Company, and/or Johnnie Williams. Since December 1995,
PFM has not heard from, or been in contact with, the DOJ regarding
this investigation. In accordance with certain provisions of the
Agreement and the Plan of Merger relating to the prior acquisition
of PFM, on or about January 2, 1996, PFM notified Ms. Billie K.
Dowdy, the sole shareholder of PFM prior to its acquisition by the
Company, of the foregoing, and advised her that the Company and PFM
would look to Ms. Dowdy to indemnify, defend and hold the Company
and PFM harmless from any liability, loss, damage or expense
incurred or suffered as a result of, or in connection with, this
matter.
Recently, PFM was notified by the United States Environmental
Protection Agency (''EPA'') that the EPA had conducted remediation
operations at a site owned and operated by Drum in Memphis,
Tennessee (the ''Drum site'') at the approximate cost of
$1,500,000, and that the EPA was now seeking information regarding,
among other things, details regarding transportation of materials
by others (such as ARR and PFM) to the Drum site and parties that
may be a ''potentially responsible party'' (''PRP'') as defined
under CERCLA, regarding the Drum site as a result of delivering
hazardous waste containers to Drum during the time of its
operation. The EPA has orally informed PFM that PFM may be a PRP
regarding the remediation of the Drum site. If the EPA believes
-15-
PFM, as a result of acts by ARR prior to the time ARR was acquired
by the Company, is a PRP regarding the Drum site, the EPA may seek
to require PFM to pay the cost of part or all of the remediation
which has been performed at the Drum site. Although the Company
does not believe that it is a PRP regarding the Drum site, no
assurance can be made that the Company will not be deemed a PRP for
the Drum site and will not have to pay for part or all of the cost
of remediation of such site. If PFM is determined to be a PRP
regarding the Drum site and were determined to be liable for all or
a substantial portion of the remediation cost of the Drum site,
such could have a material adverse effect on the Company. See ''--
Governmental Regulations.''
For 1997, the Company budgeted capital expenditures of
$1,250,000 for improving operations and maintaining permit
compliance at its various TSD facilities (excluding capital
expenditures due to the January, 1997, fire and explosion at the
PFM facility) and $350,000 to comply with federal, state, and local
regulations in connection with remediation activities by PFD at the
Leased Property (as defined below), and the PFM facility, of which
$165,000 has been spent as of September 30, 1997. The Company
believes that these expenditures are necessary to remain
competitive or to maintain compliance with federal, state or local
environmental requirements. As of September 30, 1997, the
Company's net purchases of new capital equipment totaled
approximately $1,185,167. The Company anticipates financing the
remainder of these expenditures by, without limitation, a
combination of lease financing and/or utilization of the equity
raised in the RBB Private Placement and the Infinity Private
Placement.
PFD is required to remediate a parcel of formerly leased
property (''Leased Property'') which was formerly operated as a
RCRA storage and solvent recycling facility by a company that was
merged with PFD prior to the Company's acquisition of PFD. The
Leased Property contains certain contaminated waste in the soils
and groundwater. The Company was indemnified by the seller of PFD
for costs associated with remediating the Leased Property, which
entails remediation of soil and/or groundwater restoration.
However, the seller filed for bankruptcy in 1995. Prior to the
acquisition of PFD by the Company, the seller had established a
trust fund (''Trust Fund'') to support the remedial activity on the
Leased Property pursuant to an agreement with the Ohio
Environmental Protection Agency (''Ohio EPA''). The Trust Fund was
funded with the seller's stock. The value of the seller's stock
subsequently declined and the stock was sold by the Trustee of
Trust Fund after the Company's acquisition of PFD and prior to the
seller's bankruptcy filing. The decline in the value of the
seller's stock resulted in a shortfall in the value of the Trust
Fund, and the Company was required to deposit $250,000 into the
Trust Fund. The current balance in the Trust Fund is approximately
$342,000. The Company has accrued approximately $925,000 for the
estimated costs of remediating the Leased Property, which is in
excess of the current estimate for completion and is estimated to
extend over a period of three to five years. While the Company
believes that its expenditures towards remediation of the Leased
Property will not have a material adverse effect upon the Company,
no assurance can be made that the remediation process will not
prove to be more difficult or costly than anticipated or that the
Company's remediation expenditures will not have a material adverse
effect on the Company's operations and financial condition.
Prior to the Company's acquisition of PFM, gasoline had been
detected in the groundwater at the PFM facility. In the
acquisition process, the Company assumed certain liabilities to
remediate gasoline contaminated groundwater and to investigate
potential areas of soil contamination at the PFM facility. The
previous owners of PFM installed monitoring and treatment equipment
to restore the groundwater to acceptable standards in accordance
with federal, state and local authorities. The Company is
continuing this restoration process and anticipates expenditures of
approximately $1,050,000 over the next five to ten years to
remediate the prior contamination.
The PFM facility is situated in the vicinity of the Memphis
Defense Depot (the ''Defense Facility''). The Defense Facility is
listed as a Superfund site. The Defense Facility is adjacent to
the Allen Well Field utilized by Memphis Light, Gas & Water to
provide public water to Memphis, Tennessee. Chlorinated compounds
have been detected in the groundwater beneath the Defense Facility,
as well as in a limited number of certain production wells in the
Allen Well Field. Very low concentrations of certain chlorinated
-16-
compounds also have been detected in the groundwater beneath the
PFM facility. The Company is currently investigating the possible
presence of these compounds. Based upon a study performed by the
Company's environmental engineering group, the Company does not
believe the PFM facility is the source of the chlorinated compounds
in the Allen Well Field. Accordingly, the Company does not believe
that the presence of the low concentrations of chlorinated
compounds at the PFM facility will have a material adverse effect
upon the Company. If the Company is determined to be the source of
such contamination, any liabilities, obligations to remediate, or
penalties associated with such contamination, could have a material
adverse effect upon the Company.
The explosion and fire at the PFM facility in January, 1997,
caused limited contamination at the facility. The Company is in
the process of repairing and/or replacing the damaged storage tanks
and any contamination resulting from the occurrence. The Company
and PFM have provided notice to their property and business
interruption insurance carriers of such loss and have settled the
property and contents claim for $522,000, less a retention of
$25,000, which the Company anticipates, but there is no assurance,
will cover substantially all of the costs to repair or remove tanks
damaged at PFM's facility. See ''Risk Factors--Facility
Disruption''; ''--Potential Environmental Liability,'' The Company
is in the process of negotiating with its insurance carrier
regarding the amount of business interruption insurance that may be
recoverable by PFM, if any.
Insurance
The Company currently maintains general liability insurance
coverage of $1 million per occurrence, with $2 million in the
aggregate plus an additional $6 million excess umbrella coverage.
In addition, the Company carries contractors' operations and
professional liability coverage of $1 million per occurrence and $2
million in the aggregate subject to a $50,000 deductible. The
Company is required by EPA regulations to carry environmental
impairment liability insurance providing coverage for off-site
damages on a ''claims made'' basis in amounts of at least $1
million per occurrence and $2 million per year in the aggregate.
To meet the requirements of customers, the Company has doubled
these coverage amounts to $2 million per occurrence and $4 million
per year in the aggregate. In addition, the deep well operated by
PFTS located in Tulsa, Oklahoma, carries environmental impairment
liability insurance of $4 million per occurrence and $8 million per
year in the aggregate. The cost of the Company's insurance is
substantial and is expected to increase. See ''Risk Factors--
Insurance.''
Governmental Regulation
Various federal, state and local laws and regulations have
been enacted regarding the handling and management of waste. These
laws create liability for environmental contamination caused by
such handling and management. The Company will likely be subject
to extensive compliance review by federal, state and local
environmental regulatory authorities. The Company has implemented
or intends to implement procedures at each of its facilities
designed to help assure compliance with applicable environmental
laws and regulations. Noncompliance with environmental laws and
regulations, including failure to implement required procedures
regarding such laws and regulations, could result in civil or
criminal enforcement actions or private actions, mandatory cleanup
requirements, revocation of required permits or licenses, denial of
applications for future permits, or significant fines, penalties or
damages, any of which could have a material adverse effect on the
Company, its operations and financial condition.
In connection with the Company's waste management services,
the Company may generate from time to time both hazardous and non-
hazardous waste which it transports to other facilities for
destruction or disposal. The Company also acts as a broker for
customers in connection with the transportation, treatment and/or
disposal of hazardous and non-hazardous waste. As a generator or
broker of hazardous substances delivered to a disposal facility,
the Company could be a PRP notwithstanding any absence of fault on
the part of the Company. If the Company were deemed a responsible
party, it could be subject to substantial clean-up costs, fines and
-17-
penalties. Specifically, liability is joint and several under
CERCLA, which authorizes the EPA or a private party to require
companies to remediate contaminated or polluted sites.
Accordingly, the Company could be held responsible under CERCLA for
clean-up costs at a site as to which it is deemed a responsible
party regardless of its proportionate responsibility for the site
pollution. While the Company believes that, as a practical matter,
the EPA and the courts attempt to allocate clean-up costs for a
site among the various potentially responsible parties, no
assurance can be made that such allocation would occur if the
Company is deemed a responsible party for a clean-up site. If the
Company is deemed a responsible party regarding one or more sites,
the resulting liability could have a material adverse effect on the
Company's operations and financial condition. Further, the Company
will be liable to remediate sites on which it operates its
hazardous waste treatment, storage and disposal (''TSD'')
facilities under the Resource Conservation and Recovery Act of
1976, as amended (''RCRA''), if such sites become contaminated.
The Company is, as of the date of this Prospectus, remediating one
site on which it operates a RCRA permitted treatment and storage
facility that became contaminated prior to being acquired by the
Company in 1993, one site that was leased by a company subsequently
acquired by the Company in 1994 and has been advised by the EPA
that it is investigating whether PFM is a PRP as to the Drum site.
See ''Risk Factors Potential Environmental Liability'' and
'' Potential Environmental Liability and Certain Environmental
Expenditures.''
Permits and Licenses
The Company's business is subject to extensive, evolving and
increasingly stringent federal, state and local environmental laws
and regulations. Such federal, state and local environmental laws
and regulations govern the Company's activities regarding the
treatment, storage, recycling, blending, disposal and
transportation of hazardous, non-hazardous and low level
radioactive waste. These laws and regulations require the Company
to obtain and maintain permits, licenses and/or approvals in order
to conduct its hazardous, non-hazardous and low-level radioactive
waste activities. Failure to obtain and maintain such permits or
approvals would have a material adverse effect on the Company, its
operations and financial condition. There can be no assurance that
the Company will be able to maintain its currently held permits and
approvals, and as the Company continues to expand its operations
there can be no assurance that the Company will be able to obtain
any additional approvals or permits which may be required. See ''-
- -Governmental Regulations,'' ''--Facility Disruption'' and ''Risk
Factors--Governmental Regulation.''
PFTS provides transportation, treatment, storage and disposal
of liquid hazardous and non-hazardous wastes, stabilization of
liquid and solid drum residues, and deepwell injection services to
manufacturing companies located generally in the southwestern
portion of the United States. Prior to disposal of the liquid
waste in the deepwell, all hazardous liquids are processed in a
manner designed to destroy or eliminate the hazardous
characteristics of the liquids. These liquids, along with non-
hazardous liquids, can be injected into the deep well that has been
specifically designed and constructed for this purpose. PFTS has
a final RCRA Part B permit to store and treat hazardous waste at
its facility. PFTS operates its non-hazardous waste deepwell under
a permit issued by the State of Oklahoma.
PFM is a permitted facility that provides transportation,
storage and treatment services to hazardous and non-hazardous waste
generators throughout the United States. PFM operates a hazardous
waste storage facility that accepts hazardous and non-hazardous
waste liquids, solids and sludges. Until the fire and explosion at
PFM's facility in January, 1997, PFM blended and processed such
hazardous and non-hazardous waste into substitute fuel to be burned
in cement kilns that have been specially permitted for the
processing of hazardous and non-hazardous wastes as fuels.
As a result of the explosion and resulting tank fire at PFM's
facility, the TDEC issued the TDEC Order which alleges that the
facility violated certain hazardous waste rules and regulations
promulgated by the TDEC. The TDEC Order assessed a penalty of
approximately $144,000 and ordered, among other things, that (a)
the facility cease blending operations, (b) the facility's permit
to construct a new hazardous waste tank storage area, which has not
-18-
yet been constructed, be revoked, and (c) PFM implement certain
other actions. PFM has responded to the TDEC Order and asserted
that the TDEC Order was issued against the wrong party, that PFM
did not violate any rules and regulations promulgated by the TDEC,
that the actions taken by the TDEC were contrary to applicable
rules and regulations and the TDEC is not entitled to such
penalties. The Company intends for PFM to vigorously defend itself
in connection with this matter. If the Company is not successful
in its defense and the current terms of the TDEC Order are
enforced, the TDEC Order could have a material adverse effect on
the Company. See ''Risk Factors--Potential Environmental
Liability,'' ''Risk Factors--Facility Disruption,'' and ''--
Facility Disruption.''
PFF handles hazardous waste and treatment of waste liquid
scintillation vials, a mixed low-level radioactive/hazardous
(flammable) waste used primarily by the medical research and
treatment industry. PFF operates under a final RCRA permit and a
low level radioactive license issued by the appropriate authorities
of the State of Florida. PFF's low-level radioactive license was
issued on August 18, 1995, and amended on March 13, 1996 to allow
expanded low-level radioactive waste management activities. It is
intended that the New Process will operate under existing permits
granted to PFF, and, as a result, the operations of the New Process
will be limited. The Company is currently exploring expanded uses
of the New Process, which expanded uses may require additional or
modified permits. There is no assurance that PFF can obtain the
additional or modified permits to expand the uses of the New
Process.
PFD operates a permitted hazardous waste treatment and storage
facility to collect and treat oily waste waters and used oil from
both small and large quantity generators. PFD also provides
hazardous waste treatment services for collecting and processing
organic solvents, sludges, and solids for use as secondary fuels in
cement kilns. PFD operates under a RCRA Part B permit which was
granted January 3, 1996.
Subject to the Company and satisfactorily resolving the TDEC
Order, the Company believes that its TSD facilities have, as of the
date of this Prospectus, obtained all approvals, licenses and
permits necessary to enable it to conduct its business as presently
conducted. The failure of the Company's TSD facilities to renew
any of their present approvals, licenses and permits, or the
termination of any such approvals, licenses or permits, could have
a material adverse effect on the Company, its operations and
financial condition. See ''Risk Factors--Governmental Regulation''
and ''The Company--Facility Disruption.''
As an alternative to off-site waste treatment and disposal
methods, PFI conducts waste treatment services at the site of the
waste generator. PFI's services include converting certain types
of characteristic hazardous wastes into non-hazardous waste and
treating non-hazardous waste. The Company believes that PFI's on-
site waste treatment services do not require federal environmental
permits provided certain conditions are satisfied. PFI has
received written verification from each state in which it is
presently operating that no such permit is required provided
certain conditions are satisfied. Neither PFI nor the Company has,
however, received any such verification from the federal
government. There can be no assurance that states in which PFI
presently does business or the federal government will not enact
policies or regulations requiring PFI to obtain permits to conduct
its on-site activities.
The Company believes that the licensing requirements for the
New Process may be accomplished through modification of licenses
currently held by the Company, however, no assurance can be made
that the New Process will be approved for use or that it will not
require separate license applications in the future which may
involve the expenditure of certain of the Company's resources to
accomplish.
Competitive Conditions
The Company competes with numerous companies which are able to
provide one or more of the environmental services offered by the
-19-
Company. Many of the Company's competitors have greater financial,
human and other resources than the Company. The increased
competition in the waste management industry has resulted in
reduced gross margin levels which are likely to reduce further due
to several factors: (a) more companies entering the market as the
industry matures; (b) the likely expansion of the range of services
offered by current and future competitors of the Company; (c) the
current efforts of companies and governmental authorities to
encourage waste minimization policies, and (d) fewer underserved
markets available for Company expansion as the Company and its
competitors move into new geographic markets. The increased
competition and reduced gross margin levels could have a material
adverse effect on the business and financial condition of the
Company. See ''Risk Factors -Competition.''
The Company believes that it is a significant participant in
the delivery of off-site waste treatment services in the Southeast,
Midwest and Southwest. The Company competes with TSD facilities
operated by national, regional and independent environmental
services firms located within a several hundred mile radius of the
Company's facilities.
The Company's competitors for remediation services include
national and regional environmental services firms that may have
larger environmental remediation staffs and greater resources than
the Company. The Company recognizes its lack of technical and
financial resources necessary to compete for larger remediation
contracts. Accordingly, the Company presently concentrates on
remediation services projects within its existing customer base or
projects in its service area which are too small for companies
without a physical presence in the market to perform competitively.
Environmental engineering and consulting services provided by
the Company through its engineering companies involve competition
with larger engineering and consulting firms. The Company believes
that it is able to compete with these firms based on its
established reputation in its market areas and its expertise in
several specific elements of environmental engineering and
consulting such as cement kiln waste recycling programs.
The Company believes that the barriers of entry for companies
seeking to compete with the Company in the waste management
industry are dependent upon the specific service to be offered.
Consequently, the Company believes that its operations which
provide certain services are more likely to encounter increased
competition in the future. The Company believes that there are no
formidable barriers to entry into the on-site treatment business
within which the Company operates. Similarly, certain of the
Company's non-hazardous waste operations engage in businesses which
do not present any formidable barriers of entry. However, the
Company believes that the permitting requirements and the cost to
obtain such permits may be barriers of entry into the business of
providing hazardous and low-level radioactive waste TSD facilities
as presently operated by the Company. The Company's business of
providing low level radioactive and hazardous waste recycling of
liquid scintillation vials requires both a radioactive permit and
a hazardous waste permit, and the Company believes that this dual
permitting requirement is a substantial barrier of entry. The
Company believes that only one other facility in the United States
currently provides low level radioactive and hazardous waste
recycling of liquid scintillation vials. If the permit
requirements for hazardous waste TSD activities and/or the handling
of low level radioactive materials are eliminated or if such
permits become easier to obtain, the Company believes that more
companies will enter these markets and provide greater competition
to the Company, which could have a material adverse effect on the
Company, its operations and financial condition.
The Company believes that consumers of waste management
services currently focus primarily on the quality and timeliness of
service. However, the Company anticipates that price will become
an increasingly important competitive factor as the industry
matures. Accordingly, the revenues generated from, and the
profitability of, certain of the Company's services may be reduced
as price competition intensifies. This reduction could have a
material adverse effect on the business and financial condition of
the Company. Many of the Company's competitors are larger and more
established, with greater marketing, financial, human and other
resources than the Company. These competitors will provide
significant long-term competition. The Company also expects
-20-
competition to intensify as technological and other advances are
made in the waste treatment fields and as public awareness of the
hazardous waste disposal problem increases.
Availability of Company's Loss Carryovers
The Company anticipates that its cash flow in future years
will benefit from its ability to utilize net operating loss
(''NOL'') carryovers from prior periods. The NOL carryovers should
reduce the federal income tax payments which the Company will
otherwise be required to make with respect to income generated in
future years. Based upon its federal income tax returns as filed
with the IRS for taxable years through 1996, the Company estimates
that it had on a consolidated basis available NOL carryovers of
approximately $9,200,000 for federal income tax purposes. These
NOL carryovers will expire to the extent not utilized by the years
2006 through 2011. See ''Risk Factors--Loss Carryovers.''
The amount of NOL carryovers has not been audited or approved
by the Internal Revenue Service (''IRS'') and no assurance can be
given that such carryovers will not be reduced as a result of
future audits. In addition, the ability of the Company to utilize
these carryovers in the future will be subject to a variety of
limitations applicable to corporate taxpayers generally under both
the Internal Revenue Code of 1986, as amended (the ''Code''), and
the Treasury Regulations. These include, in particular,
limitations imposed by Code Section 382 (''382 Limitations'').
The 382 Limitations provide certain limitations on the
utilization of NOL carryovers following a more than 50% change (by
value) in the stock ownership of company. In general, the 382
limitations apply when, within a three year ''testing period'',
there is a more than 50 percentage point increase in the stock of
a company that has an NOL held by one or more persons who own
(directly or constructively) at least 5% of such Company's stock
(with persons who separately are less than 5% shareholders
generally being treated in the aggregate as a single shareholder)
over the lowest percentage of stock of such company owned by such
person(s) at any time during the testing period. The amount of the
percentage point increase in stock ownership is calculated for each
5% shareholder, and the increase of each 5% shareholder is
aggregated with the increases of other 5% shareholders to determine
the total percentage point increase in stock ownership. For
purposes of these tests, stock issuable upon the exercise of
certain options and warrants or upon the conversion of preferred
stock may be treated as outstanding.
The use of approximately $7,800,000 of the approximate
$9,200,000 in NOL carryovers as of the taxable year ending
December 31, 1996, is limited to a certain extent in future years
by reason of certain acquisitions and the issuance of various
series of preferred stock of the Company, including, but not
limited to, the Series 3 Preferred and Series 6 Preferred. See
''Private Placements and Exchange Agreements -- RBB Private Placement
and -- RBB Exchange Agreement.'' Each taxable year after 1996,
approximately $1,500,000 of the approximate $7,800,000 in 382
Limitations is no longer limited, and after six years, all of the
approximate $9,200,000 in NOL carryovers will be available for use
by the Company for federal income tax purposes, except to the
extent such has been previously used to reduce the Company's
federal income tax payments or such has been reduced by the IRS in
connection with audits conducted by the IRS.
PRIVATE PLACEMENTS AND EXCHANGE AGREEMENTS
RBB Private Placement
On or about June 11, 1997, the Company issued to RBB Bank
2,500 shares of newly-created Series 4 Class D Convertible
Preferred Stock, par value $.001 per share (the ''Series 4
Preferred'') at a price of $1,000 per share, for an aggregate sales
price of $2,500,000 (''RBB Private Placement''). The sale to RBB
Bank was made in a private placement under Rule 506 of Regulation
D under the Securities Act, pursuant to the terms of a Subscription
-21-
and Purchase Agreement, dated June 9, 1997, between the Company and
RBB Bank (''RBB Subscription''). As part of the sale of the Series
4 Preferred, the Company also issued to RBB Bank certain warrants
(''Series 4 Warrants'') entitling RBB Bank to purchase, after
December 31, 1997 and until June 9, 2000, an aggregate of up to
375,000 shares of Common Stock, subject to certain antidilution
provisions, with 187,500 shares exercisable at a price equal to
$2.10 per share and 187,500 shares exercisable at a price equal to
$2.50 per share. The Company received net proceeds of
approximately $2,287,500 under the RBB Private Placement after the
payment of placement fees and legal fees. The Company has used the
net proceeds from the RBB Private Placement to reduce the
outstanding balance under its revolving credit facility under the
Heller Agreement, but has continued to borrow under such revolving
credit facility after such reduction.
The Company paid fees (excluding legal and accounting) of
$200,000 in connection with the RBB Private Placement and issued to
JW Charles, the investment banking firm that handled the RBB
Private Placement, the Charles Warrants, entitling JW Charles to
purchase (a) until June 9, 2000, up to 200,000 shares of Common
Stock at an exercise price of $2.00 per share, subject to certain
antidilution provisions; and (b) until June 9, 2002, up to 100,000
shares of Common Stock, at an exercise price of $1.50 per share,
subject to certain antidilution provisions. Under the terms of the
Charles Warrants, JW Charles is entitled to certain registration
rights with respect to the shares of Common Stock issuable on the
exercise of each warrant.
In connection with the RBB Private Placement, the Company
issued (i) two warrants to Karl H. Ehlert, each to purchase 175,000
shares of Common Stock for five years, with the first having an
exercise price of $2.00 per share and the second having an exercise
price of $3.00 per share; (ii) two warrants to R. Keith Fetter,
each allowing the purchase of up to 75,000 shares of Common Stock
for three years, with the first having an exercise price of $2.00
per share and the second having an exercise price of $2.50 per
share and (iii) one warrant to Dionysus Limited allowing the
purchase of up to an aggregate of 100,000 shares of Common Stock
for three years at an exercise price of $1.70 per share. These
warrants were issued for various consulting services rendered to
the Company. Heller has not consented to issuance of the Series
4 Preferred, the Series 4 Warrants, warrants issued to JW Charles,
Karl H. Ehlert, R. Keith Fetter, or Dionysus Limited or to the
issuance of shares of Common Stock to be issued upon exercise of
such warrants. See ''Risk Factors -- Defaults on Senior Debt.''
RBB Exchange Agreement
Pursuant to the RBB Exchange Agreement, the Company and RBB
Bank exchanged the 2,500 shares of Series 4 Preferred and the
Series 4 Warrants for (i) 2,500 shares of Series 6 Preferred, (ii)
two warrants each allowing the purchase of up to 187,500 shares of
Common Stock at an exercise price of $1.8125 per share, and (iii)
one warrant to purchase 281,250 shares of Common Stock at an
exercise price of $2.125 per share (collectively, the ''Series 6
Warrants''). The Series 6 Warrants may be exercised at any time
after December 31, 1997, and until June 9, 2000. Heller has not
consented to issuance of the Series 6 Warrants or shares of Common
Stock to be issued upon exercise thereof, or to the issuance of
Series 6 Preferred or shares of Common Stock to be issued upon
conversion thereof or in payment of dividends thereon. See ''Risk
Factors -- Defaults on Senior Debt.''
The rights of the Series 6 Preferred are substantially the
same as the rights under the Series 4 Preferred, except for certain
conversion rights. The Series 6 Preferred is not entitled to any
voting rights, except as required by law. The Series 6 Preferred
has a liquidation preference over the Common Stock equal to $1,000
consideration per outstanding share of Series 6 Preferred (the
''Series 6 Liquidation Value''), plus an amount equal to all unpaid
dividends accrued thereon. The Series 6 Preferred accrues
dividends on a cumulative basis at a rate of 4% per annum of the
Liquidation Value (''Series 6 Dividend Rate''), and is payable
semi-annually when and as declared by the Board of Directors. No
dividends or other distributions may be paid or declared or set
aside for payment on the Common Stock until all accrued and unpaid
dividends on all outstanding shares of Series 6 Preferred have been
-22-
paid or set aside for payment. Dividends may be paid, at the
option of the Company, in the form of cash or Common Stock of the
Company if and when declared by the Board of Directors. If the
Company pays dividends in Common Stock, such is payable in the
number of shares of Common Stock equal to the product of (a) the
quotient of (i) the Series 6 Dividend Rate divided by (ii) the
average of the closing bid quotation of the Common Stock as
reported on the NASDAQ for the five trading days immediately prior
to the date the dividend is declared, multiplied by (b) a
fraction, the numerator of which is the number of days elapsed
during the period for which the dividend is to be paid and the
denominator of which is 365.
The holder of the Series 6 Preferred may convert into Common
Stock up to 1,250 shares of the Series 6 Preferred on and after
October 5, 1997, and the remaining 1,250 shares of the Series 6
Preferred on and after November 5, 1997. The conversion price per
share is $1.8125, except that, in the event the average closing bid
price of the Common Stock as reported in the over-the-counter
market, or the closing sale price if listed on a national
securities exchange, for 20 of any 30 consecutive trading days
after March 1, 1998, shall be less than $2.50, the conversion price
shall thereafter be the lesser of (i) the average closing bid
quotation of the Common Stock as reported on the over-the-counter
market, or the closing sale price if listed on a national
securities exchange for the five trading days immediately preceding
the date of the conversion notice provided by the holder to the
Company multiplied by 80% or (ii) $1.8125. Notwithstanding the
foregoing, the conversion price shall not be less than a minimum of
$.75 per share, which minimum shall be eliminated from and after
September 6, 1998.
The Company will have the option to redeem the shares of
Series 6 Preferred (a) between June 11, 1998, and June 11, 2001, at
a redemption price of $1,300 per share if at any time the average
closing bid price of the Common Stock for ten consecutive trading
days is in excess of $4.00, and (b) after June 11, 2001, at a
redemption price of $1,000 per share. The holder of the Series 6
Preferred Stock will have the option to convert the Series 6
Preferred prior to redemption by the Company. See ''Summary of
Securities Being Offered''; ''Risk Factors--Voting Control; Ability
to Direct Management.''
Pursuant to the RBB Exchange Agreement, the Company agreed to
prepare and file with the Commission by October 27, 1997, a
Registration Statement covering up to 1,379,311 shares of Common
Stock issuable upon conversion of the Series 6 Preferred, plus up
to 250,000 shares of Common Stock issuable in payment of dividends
on the Series 6 Preferred pursuant to the terms of the Series 6
Preferred, and up to 656,250 shares of Common Stock issuable upon
exercise of the Series 6 Warrants. Such Registration was filed on
December 23, 1997. The Company has agreed to use its reasonable
efforts to cause the Registration Statement to become effective at
the earliest possible date after filing. If the Registration
Statement is not declared effective by December 31, 1997, the
Company agreed to pay to RBB Bank a penalty of one-tenth of one
percent (0.1%) of $2,500,000 for each business day thereafter which
ends without the Registration Statement becoming effective. If the
Registration Statement is not effective by January 31, 1998, the
Company agreed to pay RBB Bank an additional one-time penalty of
two percent (2.0%) of $2,500,000 payable in cash or Common Stock.
Once the Registration Statement becomes effective, if it
subsequently becomes ineffective before September 16, 2000, the
Company shall pay to RBB Bank a penalty of $1.00 for each
outstanding share of Series 6 Preferred for each business day that
the Registration Statement is not effective. If such
ineffectiveness extends for thirty days, the Company shall pay to
RBB Bank a one-time penalty of $20.00 for each share of Series 6
Preferred outstanding on the thirtieth day.
If the Company at any time or from time to time while shares
of Series 6 Preferred are issued and outstanding declares or pays,
without consideration, any dividend on the Common Stock payable in
Common Stock, or effects a subdivision of the outstanding shares of
Common Stock into a greater number of shares of Common Stock (by
stock split, reclassification or otherwise than by payment of a
-23-
dividend in Common Stock or in any right to acquire Common Stock),
or if the outstanding shares of Common Stock are combined or
consolidated, by reclassification or otherwise, into a lesser
number of shares of Common Stock, then the conversion price in
effect immediately before such event will, concurrently with the
effectiveness of such event, be proportionately decreased or
increased, as appropriate. If the Company declares or pays,
without consideration, any dividend on the Common Stock payable in
any right to acquire Common Stock for no consideration, then the
Company will be deemed to have made a dividend payable in Common
Stock in an amount of shares equal to the maximum number of shares
issuable upon exercise of such rights to acquire Common Stock.
Under the terms of the Series 6 Warrants, if the Company
declares or pays, without consideration, any dividend on the Common
Stock payable in Common Stock, or effects a subdivision of the
outstanding shares of Common Stock into a greater number of shares
of Common Stock (by stock split, reclassification or otherwise than
by payment of a dividend in Common Stock or in any right to acquire
Common Stock), or if the outstanding shares of Common Stock are
combined or consolidated, by reclassification or otherwise, into a
lesser number of shares of Common Stock, then the number of shares
of Common Stock issuable upon the exercise of such warrant or the
exercise price of such warrant will be adjusted appropriately. As
a result of such adjustment, the proportionate number of shares of
Common Stock issuable immediately prior to the happening of such
event will be the number of shares of Common Stock issuable
subsequent to the happening of such event. If at any time the
shares of Common Stock covered by the Series 6 Warrants are covered
by an effective registration statement and the average closing bid
price of the Common Stock for ten consecutive trading days is in
excess of $3.50 with respect to half of the Series 6 Warrants or in
excess of $4.00 with respect to the other half of the Series 6
Warrants, then the Company will have the option to redeem the
respective Series 6 Warrants for $0.01 per share of Common Stock
covered by the Series 6 Warrants. The holder of the Series 6
Warrants will have the option to exercise the Series 6 Warrants
prior to redemption by the Company. Under the terms of the Series
6 Warrants, the Common Stock issuable upon conversion of the Series
6 Warrants is subject to certain registration rights.
The Series 6 Warrants are entitled to certain rights upon any
consolidation or merger of the Company in which the Company is not
the surviving entity, or in case of any sale or conveyance by the
Company to another entity of all or substantially all of the
property of the Company as an entirety or substantially as an
entirety. Upon any such event, the holder of the Series 6 Warrants
will have the right, upon exercise of such warrants, to receive the
kind and amount of securities, cash or other property which the
holder of the Series 6 Warrants would have owned or been entitled
to receive immediately after such consolidation, merger, sale or
conveyance had such warrants been exercised in full immediately
prior to the effective date of such consolidation, merger, sale or
conveyance.
RBB Bank has the right to acquire an aggregate of
approximately 6,707,585 shares of Common Stock, consisting of (i)
2,672,024 shares upon conversion of the issued and outstanding
Series 3 Preferred assuming the average closing bid quotation for
the Common Stock for five trading days immediately preceding each
of the conversion date or dates equals or exceeds $2.00 per share
and (ii) 1,379,311 shares upon conversion of the issued and
outstanding Series 6 Preferred assuming the Conversion Price
Adjustment is not in effect, or, if in effect, assuming the average
closing bid quotation for the Common Stock for five trading days
immediately preceding each of the conversion date or dates equals
or exceeds $2.27 per share and (iii) 2,656,250 shares upon the
exercise of the 1996 RBB Warrants and Series 6 Warrants. Upon such
conversion and exercise, RBB Bank will own approximately 41.7% of
the outstanding shares of Common Stock of the Company, which
includes the 931,567 shares of Common Stock directly held by RBB
Bank as of the date of this Prospectus but does not include the
401,221 shares of Common Stock which have previously been or herein
are being registered to be issuable for payment of dividends on the
Series 3 Preferred and Series 6 Preferred.
If RBB Bank acquires 8,000,000 shares of Common Stock upon
conversion of the Series 3 Preferred and 3,333,333 shares upon
conversion of the Series 6 Preferred at their respective minimum
-24-
conversion prices as of the date of this Prospectus, and exercises
all of the 1996 RBB Warrants and Series 6 Warrants, RBB Bank will
own 15,322,371 shares of Common Stock, representing approximately
58.9% of the then outstanding shares of Common Stock of the
Company. In either case, RBB Bank will be the largest single
shareholder of the Company, and the Company may not be able to
avoid an actual change in control of the Company if RBB Bank seeks
such a change in control. Moreover, if such conversion and
exercise results in RBB Bank acquiring more than 50% of the then
outstanding Common Stock of the Company, the Company would not be
able to avoid a change in control. The foregoing estimates assume
that the Series 7 Preferred is not converted, no other shares of
Common Stock are issued by the Company, no other warrants or
options are exercised, the Company does not acquire additional
shares of Common Stock as treasury stock, and RBB Bank does not
dispose of any shares of Common Stock. See ''--Private Placements
and Exchange Agreements.'' See ''Risk Factors--Voting Potential;
Ability to Direct Management.''
As of the date of this Prospectus, RBB Bank holds 931,567
shares of Common Stock, or approximately 8.0% of the outstanding
shares of Common Stock. In July, 1996, RBB acquired from the
Company 5,500 shares of Series 3 Preferred, and prior to the date
of this Prospectus converted 1,500 shares of such Series 3
Preferred into Common Stock pursuant to the terms thereto. As of
the date of this Prospectus, RBB Bank owns 4,000 shares of the
Company's Series 3 Preferred, which are convertible into
approximately 2,672,024 shares of Common Stock assuming an average
bid quotation of the Common Stock five trading days immediately
preceding each conversion date equals or exceeds $2.00 per share,
which numbers could increase under certain limited circumstances.
The conversion price of the Series 3 Preferred is based on the
product of the average of the closing bid quotation of the Common
Stock for the five trading days immediately preceding the
conversion date multiplied by 75%. The initial conversion price
had a minimum of $0.75 per share and a maximum of $1.50 per share.
The minimum conversion price is reduced by $0.25 per share each
time the Company sustains a net loss, on a consolidated basis, in
each of two consecutive quarters; provided, however, that for the
purposes of determining whether the Company has sustained a net
loss in each of two consecutive quarters under the Series 3
Preferred, at no time will a quarter that has already been
considered in such determination be considered in any subsequent
determination. As a result of the net losses sustained by the
Company for the first and second quarters of 1997, the minimum
conversion price relating to the Series 3 Preferred has been
reduced to $0.50 per share. The Common Stock issuable upon
conversion of the Series 3 Preferred is covered by an effective
registration statement. See ''Selling Shareholders.''
In July, 1996, RBB Bank was granted two warrants to purchase
up to an aggregate 2,000,000 shares of Common Stock in connection
with the acquisition of the Series 3 Preferred, with 1,000,000
shares of Common Stock exercisable at $2.00 per share and 1,000,000
shares of Common Stock exercisable at $3.50 per share (the ''1996
RBB Warrants''). The 1996 RBB Warrants are for a term of five
years.
Under the Heller Agreement, the ownership of more than 50% of
a class of voting securities of the Company entitled to elect the
Board of Directors by any one party or a group acting in concert is
a ''change of control'' and is an ''event of default.'' Upon such
an ''event of default,'' Heller has the right to exercise certain
remedies described in the Heller Agreement, including the right to
declare a default and immediately accelerate the debt incurred
pursuant to the Heller Agreement. RBB Bank's ownership of more
than 50% of the Common Stock as a result of RBB Bank's conversion
or exercise of the Series 3 Preferred, Series 6 Preferred, 1996 RBB
Warrants and Series 6 Warrants, or any combination thereof, would
be an ''event of default'' under the Heller Agreement. See ''Risk
Factors Defaults on Senior Debt.'' If the debt which the Company
has incurred pursuant to the Heller Agreement is accelerated, the
Company may not be able to repay such debt on an accelerated basis
or replace such debt with alternative financing.
Additionally, Heller has not specifically consented to the
ownership by RBB Bank of more than 50% of the Company's Common
Stock. See ''Risk Factors--Potential Adverse Effect to Company and
-25-
Possible Adverse Impact on Earnings Per Share Upon Exercise of
Outstanding Warrants and Options'' and ''--Barriers to Takeover.''
Infinity Private Placement
On July 14, 1997, the Company issued to Infinity 350 shares of
newly-created Series 5 Class E Convertible Preferred Stock, par
value $.001 per share (the ''Series 5 Preferred'') at a price of
$1,000 per share, for an aggregate sales price of $350,000. The
sale to Infinity was made in a private placement (the ''Infinity
Private Placement'') under Rule 506 of Regulation D under the
Securities Act, pursuant to the terms of a Subscription and
Purchase Agreement, dated July 7, 1997, between the Company and
Infinity (''Infinity Subscription''). The Company received
proceeds of $350,000 under the Infinity Private Placement,
excluding the payment of legal fees and miscellaneous costs. The
Company has used the net proceeds from the Infinity Private
Placement to reduce the outstanding balance under its revolving
credit facility under the Heller Agreement, but has continued to
borrow under such revolving credit facility after such reduction.
Heller has not consented to issuance of the Series 5 Preferred or
shares of Common Stock to be issued upon conversion thereof or in
payment of dividends thereon. See ''Risk Factors Defaults on
Senior Debt.''
Infinity Exchange Agreement
Effective September 16, 1997, the Company entered into an
Exchange Agreement with Infinity (''Infinity Exchange Agreement'')
pursuant to which the 350 shares of Series 5 Preferred were
tendered to the Company in exchange for (i) 350 shares of Series 7
Preferred and (ii) two warrants to purchase up to an aggregate of
35,000 shares of Common Stock at an exercise price of $1.8125 per
share (the ''Infinity Warrants''). The Infinity Warrants may be
exercised at any time after December 31, 1997, and until July 7,
2000. Heller has not consented to issuance of the Infinity
Warrants or shares of Common Stock to be issued upon exercise
thereof, or to the issuance of Series 7 Preferred or shares of
Common Stock to be issued upon conversion thereof or in payment of
dividends thereon. See ''Risk Factors Defaults on Senior Debt.''
The rights of the Series 7 Preferred are substantially the
same as the rights under the Series 5 Preferred, except for certain
conversion rights. The Series 7 Preferred is not entitled to any
voting rights, except as required by law. The Series 7 Preferred
has a liquidation preference over the Common Stock equal to $1,000
consideration per outstanding share of Series 7 Preferred (the
''Series 7 Liquidation Value''), plus an amount equal to all unpaid
dividends accrued thereon. The Series 7 Preferred accrues
dividends on a cumulative basis at a rate of 4% per annum of the
Liquidation Value (''Series 7 Dividend Rate''), and is payable
semi-annually when and as declared by the Board of Directors. No
dividends or other distributions may be paid or declared or set
aside for payment on the Common Stock until all accrued and unpaid
dividends on all outstanding shares of Series 7 Preferred have been
paid or set aside for payment. Dividends may be paid, at the
option of the Company, in the form of cash or Common Stock of the
Company. If the Company pays dividends in Common Stock, such is
payable in the number of shares of Common Stock equal to the
product of (a) the quotient of (i) the Series 7 Dividend Rate
divided by (ii) the average of the closing bid quotation of the
Common Stock as reported on the NASDAQ for the five trading days
immediate prior to the date the dividend is declared, multiplied
by (b) a fraction, the numerator of which is the number of days
elapsed during the period for which the dividend is to be paid and
the denominator of which is 365.
The holder of the Series 7 Preferred may convert into Common
Stock up to 175 shares of the Series 7 Preferred on or after
November 3, 1997, and the remaining 175 shares of the Series 7
Preferred on or after December 3, 1997. The conversion price of
the Series 7 Preferred is $1.8125 per share of Common Stock, except
that, in the event the average closing bid price of the Common
Stock for 20 of any 30 consecutive trading days (a ''30 Day
Period'') after March 1, 1998, shall be less than $2.50 as reported
on the over-the-counter market, or the closing sale price if listed
on a national securities exchange and if the holders of the Series
7 Preferred have engaged in no sales of Common Stock of the Company
during, and for 30 trading days prior to, the applicable 30 Day
-26-
Period, the conversion price shall thereafter be the lesser of (i)
the average closing bid quotation of the Common Stock as reported
on the over-the-counter market, or the closing sale price if listed
on a national securities exchange, for the five trading days
immediately preceding the date of the conversion notice, provided
by the holder to the Company multiplied by 80% or (ii) $1.8125.
Notwithstanding the foregoing, the conversion price shall not be
less than a minimum of $.75 per share, which minimum shall be
eliminated from and after September 6, 1998. Subject to the
closing bid price of the Company's Common Stock at the time of
conversion and the other conditions which could increase the number
of shares to be issued upon conversion, the Series 7 Preferred, if
all were converted, could be converted into between approximately
200,000 and 467,000 shares of Common Stock, or more after the
minimum conversion price is eliminated, or under certain other
limited circumstances.
The Company will have the option to redeem the shares of
Series 7 Preferred (a) between July 7, 1998, and July 7, 2001, at
a redemption price of $1,300 per share if at any time the average
closing bid price of the Common Stock for ten consecutive trading
days is in excess of $4.00, and (b) after July 7, 2001, at a
redemption price of $1,000 per share. The holder of the Series 7
Preferred will have the option to convert the Series 7 Preferred
prior to redemption by the Company. The Common Stock issuable on
the conversion of the Series 7 Preferred is subject to certain
registration rights pursuant to the Infinity Exchange Agreement.
See ''Summary of Securities Being Offered.''
If the Company at any time or from time to time while shares
of Series 7 Preferred are issued and outstanding declares or pays,
without consideration, any dividend on the Common Stock payable in
Common Stock, or effects a subdivision of the outstanding shares of
Common Stock into a greater number of shares of Common Stock (by
stock split, reclassification or otherwise than by payment of a
dividend in Common Stock or in any right to acquire Common Stock),
or if the outstanding shares of Common Stock are combined or
consolidated, by reclassification or otherwise, into a lesser
number of shares of Common Stock, then the conversion price in
effect immediately before such event will, concurrently with the
effectiveness of such event, be proportionately decreased or
increased, as appropriate. If the Company declares or pays,
without consideration, any dividend on the Common Stock payable in
any right to acquire Common Stock for no consideration, then the
Company will be deemed to have made a dividend payable in Common
Stock in an amount of shares equal to the maximum number of shares
issuable upon exercise of such rights to acquire Common Stock.
Under the terms of the Infinity Warrants, if the Company
declares or pays, without consideration, any dividend on the Common
Stock payable in Common Stock, or effects a subdivision of the
outstanding shares of Common Stock into a greater number of shares
of Common Stock (by stock split, reclassification or otherwise than
by payment of a dividend in Common Stock or in any right to acquire
Common Stock), or if the outstanding shares of Common Stock are
combined or consolidated, by reclassification or otherwise, into a
lesser number of shares of Common Stock, then the number of shares
of Common Stock issuable upon the exercise of such warrant or the
exercise price of such warrant will be adjusted appropriately. As
a result of such adjustment, the proportionate number of shares of
Common Stock issuable immediately prior to the happening of such
event will be the number of shares of Common Stock issuable
subsequent to the happening of such event. If at any time the
shares of Common Stock covered by the Infinity Warrants are covered
by an effective registration statement and the average closing bid
price of the Common Stock for ten consecutive trading days is in
excess of $7.00, then the Company will have the option to redeem
the Infinity Warrants for $0.01 per share of Common Stock covered
by the Infinity Warrants. The holder of the Infinity Warrants will
have the option to exercise the Infinity Warrants prior to
redemption by the Company. Under the terms of the Infinity
Warrants, the Common Stock issuable upon exercise of the Infinity
Warrants is subject to certain registration rights.
The Infinity Warrants are entitled to certain rights upon any
consolidation or merger of the Company in which the Company is not
the surviving entity, or in case of any sale or conveyance by the
-27-
Company to another entity of all or substantially all of the
property of the Company as an entirety or substantially as an
entirety. Upon any such event, the holder of the Infinity Warrants
will have the right, upon exercise of such warrant, to receive the
kind and amount of securities, cash or other property which the
holder of the Infinity Warrants would have owned or been entitled
to receive immediately after such consolidation, merger, sale or
conveyance had such warrant been exercised in full immediately
prior to the effective date of such consolidation, merger, sale or
conveyance.
RECENT DEVELOPMENTS
The following are all material changes in the Company's
affairs which have occurred since the end of December 31, 1996, and
which have not been described in a report on Form 10-Q or Form 8-K
filed under the Exchange Act or otherwise discussed in other
sections of this Prospectus:
Congress Letter of Intent
In November, 1997, the Company signed a letter of intent with
Congress Financial Corporation regarding a proposed $7,000,000
credit facility (''Congress Loan'') which, as proposed, would
consist of a revolving line of credit of approximately $4,500,000
and a term loan of approximately $2,500,000. The Congress Loan
would be used to replace the Company's current term loan and
revolving loan facility with Heller, as well as the Company's
current equipment financing arrangements with Ally. Completion of
the Congress Loan, however, is subject to credit approval by
Congress which will entail, among other things, completion of
Congress' due diligence to its satisfaction and finalization of
loan documents satisfactory to the parties. There are no
assurances that the Congress Loan will be completed. No assurance
can be made that the Congress Loan will close in the near future or
at all.
Steve Gorlin Stock Purchase Agreement
On July 30, 1997, the Company entered into a Stock Purchase
Agreement (''Gorlin Agreement'') with Mr. Steve Gorlin, a Director
of the Company, whereby the Company agreed to sell and, and Mr.
Gorlin agreed to purchase, 200,000 shares of the Company's Common
Stock. The purchase price was $2.125 per share representing the
closing bid price of the Common Stock as quoted on the NASDAQ on
July 30, 1997. Pursuant to the terms of the Gorlin Agreement, Mr.
Gorlin agreed to pay the Company the aggregate purchase price of
$425,000 for the 200,000 shares of Common Stock. In order to
induce Mr. Gorlin to enter into the amendment to the Gorlin
Agreement, and to purchase the Common Stock on the terms and
subject to the conditions thereof, PESI agreed to issue to Mr.
Gorlin upon payment for the 200,000 shares, a three (3) year
warrant to Mr. Gorlin for the purchase of 100,000 shares of Common
Stock at $2.40 per share. Under the Gorlin Agreement, Mr. Gorlin
agreed to tender $425,000 during August, 1997, however, pursuant to
an amendment to the Gorlin Agreement, which was entered into on
October 7, 1997, the payment schedule was modified such that Mr.
Gorlin agreed to tender the $425,000 on or before November 30,
1997. As of December 23, 1997, and as of the date of this
Prospectus, Mr. Gorlin has not tendered the $425,000 to the Company
and has not indicated when, or if, he will do so.
USE OF PROCEEDS
The Company will not receive any part of the proceeds of the
sale of Shares. The Company will receive approximately $3,954,531
if the Selling Shareholders exercise all of each warrant covering
Shares included in this Prospectus. See ''Plan Of Distribution.''
Any proceeds received by the Company from the exercise of such
warrants, less the Company's share of the estimated expenses of the
cost of this offering, will be used by the Company for general
corporate purposes.
-28-
The Company has agreed to pay all costs and fees relating to
the registration of the Common Stock covered by this Prospectus,
except for any discounts, concessions or commissions payable to
underwriters, dealers or agents incident to the offering of the
Shares covered by this Prospectus or any legal fees incurred by any
Selling Shareholders relating to this offering.
SUMMARY OF SECURITIES BEING OFFERED
The 3,677,074 Shares covered by this Prospectus are comprised
of the following: (a) 1,379,311 shares of Common Stock issuable by
the Company upon the conversion of 2,500 shares of Series 6
Preferred issued by the Company to RBB Bank in connection with the
RBB Exchange Agreement; (b) 250,000 shares of Common Stock which
may be issued by the Company to RBB Bank in payment of dividends
accrued on the Series 6 Preferred; (c) 656,250 shares of Common
Stock issuable upon the exercise of the Series 6 Warrants issued by
the Company to RBB Bank in connection with the RBB Exchange
Agreement, exercisable for three years at an exercise price of
$1.8125 per share as to 375,000 shares of Common Stock and $2.125
per share as to 281,250 shares of Common Stock; (d) 300,000 shares
of Common Stock issuable by the Company upon the exercise of the
Charles Warrants issued by the Company to JW Charles in connection
with the RBB Private Placement, 100,000 of which are exercisable
for three years at $1.50 per share and 200,000 of which are
exercisable for five years at $2.00 per share; (e) 200,000 shares
of Common Stock issuable by the Company upon the conversion of 350
shares of Series 7 Preferred issued by the Company in connection
with the Infinity Exchange Agreement; (f) 36,000 shares of Common
Stock which may be issued by the Company to Infinity in payment of
dividends accrued on the Series 7 Preferred; (g) 35,000 shares of
Common Stock issuable upon the exercise of the Infinity Warrants
issued by the Company to Infinity in connection with the Infinity
Exchange Agreement, exercisable for three years at an exercise
price of $1.8125 per share; (h) 125,000 shares of Common Stock
issuable by the Company upon the exercise of the Sun Bank Warrant
issued by the Company to Sun Bank in connection with the extension
of certain financial credits by Sun Bank to the Company,
exercisable until June 16, 1999, at an exercise price of $3.625 per
share; (i) 7,000 shares of Common Stock issuable by the Company
upon exercise of the Blair Remainder Warrant, exercisable until
December 31, 1999, at an exercise price of $2.375 per share, issued
to Blair to reflect the unassigned portion of the Blair Warrant for
75,000 shares of Common Stock which was previously issued by the
Company to Blair in connection with the extension of a promissory
note and which was partially assigned by Blair to the following
officers and directors of Blair: (w) 28,000 shares of Common Stock
issuable by the Company upon exercise of the Davis Warrant issued
to Davis as a result of the assignment by Blair of a portion of the
Blair Warrant, exercisable until December 31, 1999, at an exercise
price of $2.375 per share; (x) 28,000 shares of Common Stock
issuable by the Company upon exercise of the Stahler Warrant issued
to Stahler as a result of the assignment by Blair of a portion of
the Blair Warrant, exercisable until December 31, 1999, at an
exercise price of $2.375 per share; (y) 7,000 shares of Common
Stock issuable by the Company upon exercise of the Renov Warrant
issued to Renov as a result of the assignment by Blair of a portion
of the Blair Warrant, exercisable until December 31, 1999, at an
exercise price of $2.375 per share; (z) 5,000 shares of Common
Stock issuable by the Company upon exercise of the Bell Warrant
issued to Bell as a result of the assignment by Blair of a portion
of the Blair Warrant, exercisable until December 31, 1999, at an
exercise price of $2.375 per share; (j) 20,513 shares of Common
Stock issuable by the Company upon exercise of the Ally Warrant
issued by the Company to Ally in connection with a loan to the
Company, which warrant is exercisable until September 11, 2000, at
an exercise price of $2.4375 per share; (k) 100,000 shares of
Common Stock issuable by the Company upon the exercise of the
Dionysus Warrant issued by the Company to Dionysus in connection
with the Private Placement and exercisable for three years at an
exercise price of $1.70 per share; and (l) 500,000 shares of Common
Stock issuable upon the exercise of the following Service Warrants,
each dated July 23, 1997: (x) 175,000 shares of Common Stock
issuable at an exercise price of $2.00 per share and 175,000 shares
of Common Stock issuable at an exercise price of $3.00 per share
under the Ehlert Warrants and (y) 75,000 shares of Common Stock
issuable at an exercise price of $2.00 per share and 75,000 shares
of Common Stock issuable at an exercise price of $2.50 per share
-29-
under the Fetter Warrants. See ''Private Placements and Exchange
Agreements'' for further description of the Series 6 Preferred, the
Series 6 Warrants, the Series 7 Preferred, the Infinity Warrants,
the Charles Warrants, and the Dionysus Warrants.
The Sun Bank Warrant was issued to Sun Bank under the terms of
a Loan Agreement, dated June 17, 1994, between the Company and Sun
Bank (the ''Loan Agreement''). The Loan Agreement provided for the
extension of approximately $3.4 million of financial credits by Sun
Bank to the Company. Under the terms of the Sun Bank Warrant, if
the Company declares or pays, without consideration, any dividend
on the Common Stock payable in Common Stock, or effects a
subdivision of the outstanding shares of Common Stock into a
greater number of shares of Common Stock (by subdivision or
reclassification) or if the outstanding shares of Common Stock are
combined or consolidated, by reclassification or otherwise, into a
lesser number of shares of Common Stock, then the number of shares
of Common Stock issuable upon the exercise of the Sun Bank Warrant
or the exercise price of such warrant will be adjusted
appropriately. The initial exercise price of the Sun Bank Warrant
was $3.625 per share.
The Sun Bank Warrant is entitled to certain rights upon any
consolidation or merger of the Company in which the Company is not
the surviving entity, or in case of any sale or conveyance by the
Company to another entity of all or substantially all of the
property of the Company as an entirety or substantially as an
entirety. Upon such event, the holder of the Sun Bank Warrant will
have the right, upon exercise of such warrants, to receive the kind
and amount of securities, cash or other property which the holder
of the Sun Bank Warrant would have owned or been entitled to
receive immediately after such consolidation, merger, sale or
conveyance had such warrants been exercised in full immediately
prior to the effective date of such consolidation, merger, sale or
conveyance. Under the terms of the Sun Bank Warrant, the shares of
Common Stock issuable upon exercise of the Sun Bank Warrant are
entitled to certain registration rights.
Under the terms of the Service Warrants, the Dionysus Warrant,
the Blair Remainder Warrant, the Davis Warrant, the Stahler
Warrant, the Renov Warrant, the Bell Warrant, and the Ally Warrant,
(collectively, the ''Affected Warrants'') if at any time or from
time to time after the date of each Affected Warrant, the Company
(a) pays a dividend on its Common Stock in shares of Common Stock,
(b) subdivides its outstanding shares of Common Stock into a
greater number of shares, (c) combines its outstanding shares of
Common Stock into a smaller number of shares, or (d) issues by
reclassification of its Common Stock any shares of any other class
of capital stock of the Company, then the number of shares issuable
upon exercise of the Affected Warrant and the exercise price of the
Affected Warrant in effect immediately prior to such event will be
adjusted so that the holder will be entitled upon exercise of such
Affected Warrant to purchase, without additional consideration, the
number of shares of Common Stock or other capital stock of the
Company which the holder would have owned or been entitled to
purchase immediately following the happening of any of the events
described in (a), (b) or (c) above had such Affected Warrant been
exercised and the holder become the holder of record of the shares
purchased pursuant to the Affected Warrant immediately prior to the
record date fixed for the determination of stockholders entitled to
receive such dividend or distribution or the effective date of such
subdivision, combination or reclassification. In such event the
exercise price will be equal to the aggregate consideration which
the holder would have had to pay for such shares issued pursuant to
the Affected Warrant immediately prior to such event divided by the
number of shares issued pursuant to the Affected Warrant the holder
is entitled to receive immediately after such event. If as a
result of an adjustment made as described in this paragraph the
holder of such Affected Warrant thereafter surrendered for exercise
becomes entitled to receive shares of two or more classes of
capital stock or shares of Common Stock and any other class of
capital stock of the Company, the Board of Directors (whose
determination shall be conclusive and shall be described in a
written notice to all holders of the Affected Warrants promptly
after such adjustment) will determine the allocation of the
adjusted exercise price of the Affected Warrant between or among
shares of such classes of capital stock or shares of Common Stock
and such other class of capital stock.
-30-
The terms of the Affected Warrants provide that upon any
consolidation or merger to which the Company is a party, other than
a merger or consolidation in which the Company is the continuing or
surviving corporation, or in case of any sale or conveyance to
another entity of all or substantially all of the property of the
Company as an entirety or substantially as an entirety, the holder
of the Affected Warrant will have the right thereafter, upon
exercise of such warrant, to receive the kind and amount of
securities, cash or other property which the holder would have
owned or been entitled to receive immediately after such
consolidation, merger, sale or conveyance had such Affected Warrant
been exercised immediately prior to the effective date of such
consolidation, merger, sale or conveyance and in any such case, if
necessary, appropriate adjustment will be made in the application
thereafter with respect to the rights and interests of the holder
of such Affected Warrant to the end that the provisions of this
paragraph and the preceding paragraph thereafter will be
correspondingly applicable, as nearly as may reasonably be, to such
securities and other property.
If the Company distributes pro rata to all of the holders of
its then outstanding shares of Common Stock (a) securities, other
than shares of Common Stock or stock options, or (b) property,
other than cash, without payment therefor, then, and in each such
case, the holder of a Affected Warrant, upon its exercise, will be
entitled to receive the securities and property which such holder
would hold on the date of such exercise if, on the date of such
Affected Warrant, the holder had been the holder of record of the
number of shares of the Common Stock subscribed for upon such
exercise and, during the period from the date of such warrant to
and including the date of such exercise, had retained such shares
and the securities and properties receivable by the holder during
such period.
-31-
SELLING SHAREHOLDERS
The following table sets forth, (a) the name of each Selling
Shareholder, (b) the amount of shares beneficially owned by each
Selling Shareholder as of the date of this Prospectus, (c) the
number of shares of Common Stock under this Prospectus, (d) the
number of shares beneficially owned after the offering, assuming
that all shares of Common Stock being offered hereby are sold and
that such are outstanding, and (e) the percentage of Common Stock
beneficially owned after completion of the offering, assuming that
all shares of Common Stock being offered hereby are sold and that
such are outstanding.
Percentage
of
Common
Common Common Stock
Stock Stock Beneficially
Beneficially Common Beneficially Owned After
Owned Stock Owned After Completion
Prior to Being Completion of of
Selling Shareholder Offering(1) Offered Offering(2) Offering(3)
___________________ ___________ _________ _____________ ___________
RBB Bank
Aktiengesellschaft 8,040,373(3) 2,285,561 5,754,812 35.0%
JW Charles
Financial Services,
Inc.(4) 412,500(4) 300,000 112,500 (16)
Sun Bank, National
Association(5) 125,000(5) 125,000 0 -
The Infinity Fund,
L.P.(6) 308,800(6) 271,000 37,800 (16)
Karl H. Ehlert(7) 350,000(7) 350,000 0 -
R. Keith Fetter(8) 240,000(8) 150,000 90,000 (16)
Dionysus Limited(9) 315,000(9) 100,000 215,000 1.8%
Ally Capital
Management(10) 53,846(10) 20,513 33,000 (16)
D.H. Blair Investment
Banking Corp.(11) 434,476(11) 7,000 427,476 3.6%
J. Morton Davis(12) 626,251(12) 28,000 598,251 5.3%
Esther Stahler(13) 67,100(13) 28,000 39,100 (16)
Ruki Renov(14) 46,100(14) 7,000 39,100 (16)
Martin A. Bell(15) 13,000(15) 5,000 8,000 (16)
__________________________
<FN>
(1) Includes shares of Common Stock which may be acquired upon (a)
the exercise of outstanding warrants, whether or not such are
-32-
currently exercisable and/or (b) conversion of outstanding
shares of preferred stock.
(2) Assumes (a) all shares of Common Stock covered by this
Prospectus are sold, (b) the Selling Stockholder does not
acquire beneficial ownership of additional shares of Common
Stock after the date of this Prospectus, and (c) the Company
does not issue any additional shares of Common Stock after the
date of this Prospectus, except the shares of Common Stock
which a person has the right to acquire upon the exercise and
conversion of preferred stock outstanding as of the date of
this Prospectus, but are not determined to be outstanding for
the purpose of computing the percentage ownership of any other
person. The amounts indicated are based on outstanding Common
Stock of 11,612,787 shares as of December 12, 1997.
(3) Includes (a) 2,656,250 shares that RBB Bank is entitled to
receive upon exercise of all of the 1996 RBB Warrants and
Series 6 Warrants; (b) 2,672,024 shares that RBB Bank is
entitled to receive upon conversion of the 4,000 shares of
Series 3 Preferred held by RBB Bank (assuming the average
closing bid quotation for the Common Stock for the five
trading days immediately preceding each conversion date equals
or exceeds $2.00 per share); (c) 1,379,311 shares that RBB
Bank is entitled to receive upon conversion of the 2,500
shares of Series 6 Preferred (assuming the Conversion Price
Adjustment is not in effect, or if in effect, assuming the
average closing bid quotation for the Common Stock for the
five trading days immediately preceding each conversion date
equals or exceeds $2.27 per share); (d) 151,221 shares of
Common Stock that RBB Bank may receive in payment of the
accrued dividends on the Series 3 Preferred; (e) 250,000
shares that RBB Bank may receive in payment of the accrued
dividends on the Series 6 Preferred, and (f) 931,567 shares
held directly by RBB Bank. The Company's Registration
Statement on Form S-3, No. 333-14513, effective October 21,
1996 (the ''1996 Registration Statement'') currently covers
the reoffer and resale of up to 6,030,000 of the 8,040,373
shares noted as beneficially owned by RBB Bank. The shares of
Common Stock covered by the 1996 Registration Statement
consist of 3,700,000 shares issuable upon conversion of the
Series 3 Preferred held by RBB Bank, 2,000,000 shares issuable
upon exercise of the 1996 RBB Warrants, and 330,000 shares
issuable in payment of dividends accrued on the Series 3
Preferred.
(4) Includes (a) 112,000 shares that JW Charles's wholly-owned
subsidiary, JW Charles Securities, Inc. (''Charles
Securities'') is entitled to receive upon exercise of a
warrant dated September 16, 1996 (the ''JWCS Warrant''); and
(b) 300,000 shares that JW Charles is entitled to receive upon
exercise of the Charles Warrants. The 1996 Registration
Statement (defined in footnote (3) to this table) covers the
reoffer and resale of the 112,000 shares issuable upon
exercise of the JWCS Warrant.
(5) Includes 125,000 shares that Sun Bank is entitled to receive
upon exercise of the Sun Bank Warrant. Sun Bank currently
provides the Company with certain banking services and
financial credits.
(6) Includes (a) 200,000 shares that Infinity is entitled to
receive upon conversion of all of the Series 7 Preferred held
by Infinity (assuming a conversion price of $1.8125 per
share), (b) 36,000 shares of Common Stock that Infinity may
receive in payment of the accrued dividends on the Series 7
Preferred, and (c) 35,000 shares that are issuable upon
exercise of the Infinity Warrants.
(7) Includes 350,000 shares that Mr. Ehlert is entitled to receive
upon exercise of the Ehlert Warrants. Mr. Ehlert currently
provides investor relations, marketing, and consulting
services to the Company.
(8) Includes 150,000 shares that Mr. Fetter is entitled to receive
upon exercise of the Fetter Warrants. Mr. Fetter currently
provides investor relations, marketing, and consulting
services to the Company under a certain two year Consulting
Agreement, dated May 1, 1996, between Mr. Fetter and the
Company.
(9) Includes 100,000 shares that Dionysus is entitled to receive
upon exercise of the Dionysus Warrant.
-33-
(10) Includes 20,513 shares that Ally is entitled to receive upon
exercise of the Ally Warrant.
(11) Includes 7,000 shares that Blair is entitled to receive upon
exercise of the Blair Remainder Warrant issued to Blair to
reflect the unassigned portion of the Blair Warrant for 75,000
shares of Common Stock which was previously issued by the
Company to Blair in connection with the extension of a
promissory note. Effective March 23, 1995, the Blair Warrant
was partially assigned by Blair to the following officers and
directors of Blair: Davis, Stahler, Renov and Bell to purchase
28,000, 28,000, 7,000 and 5,000 shares thereunder,
respectively. See ''Summary of Securities Being Offered.''
Includes (i) 217,701 shares held by Blair, (ii) 200,000 shares
issuable upon exercise of one warrant, and (iii) 9,775 shares
issuable upon exercise of one warrant. The 1996 Registration
Statement currently covers the reoffer and resale of up to
200,000 shares issuable upon exercise of the warrant for
200,000 shares issued to Blair. All of the Common Stock held
by Blair may be considered to be beneficially owned by Davis,
the sole shareholder of Blair. See footnote 12 to this Table
(12) Mr. Davis is an investment banker and sole shareholder of
Blair, a broker-dealer registered under the Exchange Act.
Includes (i) 28,000 shares that Davis is entitled to receive
upon exercise of the Davis Warrant; (ii) 154,000 shares owned
by Davis' spouse; (iii) 9,775 shares that Davis is entitled to
receive upon exercise of a warrant; and (iv) 434,476 shares
held by Blair and described in footnote 11 to this Table. Mr.
Davis disclaims beneficial ownership over the shares held by
his spouse. The number of shares indicated does not include
570,494 shares which are beneficially owned by Steve Gorlin,
a director of the Company, and which are pledged to Davis and
Blair pursuant to a Pledge Agreement dated June, 1992.
Davis and Blair have filed a joint Schedule 13G, as amended
from time to time, regarding the Common Stock, which states
that Davis has sole voting and dispositive control over the
shares of Common Stock held by Blair. Davis is, therefore,
considered to be the beneficial owner of the Common Stock held
by Blair.
(13) Includes 28,000 shares that Stohler is entitled to receive
upon exercise of the Stohler Warrant.
(14) Includes 7,000 shares that Renov is entitled to receive upon
exercise of the Renov Warrant.
(15) Includes 5,000 shares that Bell is entitled to receive upon
exercise of the Bell Warrant.
(16) Less than 1.0%.
</FN>
PLAN OF DISTRIBUTION
The Shares may be offered and sold from time to time by the
Selling Shareholders, or by pledges, donees, transferees or other
successors in interest. The Selling Shareholders will act
independently of the Company in making decisions with respect to
the timing, market, or otherwise at prices related to the then
current market price or in negotiated transactions. The Shares may
be sold by the Selling Shareholders in one or more transactions on
the NASDAQ and the BSE or otherwise at market prices then
prevailing or in privately negotiated transactions. The Shares may
be sold by one or more of the following: (i) ordinary brokerage
transactions and transactions in which the broker solicits
purchasers; (ii) purchases and resale by a broker-dealer for its
account pursuant to this Prospectus, and (iii) a block trade in
which the broker-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. The Company has not been
advised by the Selling Shareholders that they have, as of the date
hereof, made any arrangements relating to the distribution of the
Shares covered by this Prospectus, except that certain of the
Selling Shareholders are broker-dealers. See ''Selling
Shareholders.'' In effecting sales, broker-dealers engaged by the
Selling Shareholders may arrange for other broker-dealers to
-34-
participate, and, in such case, broker-dealers will receive
commissions or discounts from the Selling Shareholders in amounts
to be negotiated immediately prior to sale.
In offering the Shares, the Selling Shareholders and any
broker-dealers and any other participating broker-dealers who
execute sales for the Selling Shareholders may be deemed to be
''underwriters'' within the meaning of the Securities Act in
connection with such sales. Accordingly, any profits realized by
the Selling Shareholders and the compensation of such broker-dealer
may be deemed to be underwriting discounts and commissions. Any
Shares covered by this Prospectus which qualify for sale pursuant
to Rule 144 may be sold under Rule 144 rather than pursuant to this
Prospectus.
LEGAL OPINION
Certain legal matters in connection with the Common Stock
offered hereby will be passed upon for the Company by Conner &
Winters, A Professional Corporation, Oklahoma City, Oklahoma.
EXPERTS
The financial statements and schedules incorporated by
reference in this Prospectus and elsewhere in the Registration
Statement, to the extent and for the periods indicated in their
reports, have been audited by BDO Seidman LLP, independent public
accountants, and are included herein in reliance upon the authority
of said firms as experts in giving such reports.
-35-
No dealer, salesman or other person
has been authorized to give any
information not contained in this
Prospectus and, if given or
made, such information or repre-
sentations must not be relied upon
as having been authorized by the
Company or the Standby Purchasers.
This Prospectus does not 3,677,074 Shares
constitute an offer to sell or a
solicitation of an offer to buy Perma-Fix Environmental
any of the securities offered Services, Inc.
hereby in any jurisdiction to any
person to whom it is unlawful
to make such offer in such
jurisdiction. Neither the delivery
of this Prospectus nor any sale
hereunder shall under any
circumstances create any implication
that there has been no change in the
affairs of the Company since the
date hereof.
_______________________
Table of Contents Common Stock
Page
____
Available Information. . . 5
Incorporation by
Reference. . . . . . . . 5
Risk Factors . . . . . . . 6 _____________
The Company. . . . . . . . 13 Prospectus
_____________
Recent Developments. . . . 28
Use of Proceeds. . . . . . 28
Summary of Securities
Being Offered. . . . . . 29
Selling Shareholders . . . 32
Plan of Distribution . . . 34
Legal Opinion. . . . . . . 35 December ___, 1997
Experts. . . . . . . . . . 35
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
Nature of Expense
___________________
SEC Registration Fee . . . . . . . . . . . $ 2,748.75
Legal Fees (Including Blue Sky). . . . . . $ 25,000.00
Accounting Fees and Expenses . . . . . . . $ 2,500.00
Printing . . . . . . . . . . . . . . . . . $ 2,500.00
Miscellaneous. . . . . . . . . . . . . . . $ 2,500.00
______________
Total $ 35,248.75
==============
The foregoing expenses, except for the registration fee, are
estimated pursuant to Item 511 of Regulation S-K.
Item 15. Indemnification of Officers and Directors
Section 145 of the Delaware Corporation Law provides that a
corporation has the power to indemnify a director, officer,
employee or agent of the corporation and certain other persons
serving at the request of the corporation in related capacities
against amounts paid and expenses incurred in connection with an
action or proceeding to which he is or is threatened to be made a
party by reason of such position, if such person shall have acted
in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation, and, in any
criminal proceeding, if such person had no reasonable cause to
believe his conduct was unlawful; provided that, no indemnification
shall be made with respect to any matter as to which such person
shall have been adjudged to be liable to the corporation unless and
only to the extent that the adjudicating court determines that,
despite the adjudication of liability but in view of all the
circumstance of the case, such person is fairly and reasonably
entitled to indemnification.
Article EIGHTH of the Company's Restated Certificate of
Incorporation provides as follows with respect to the
indemnification of officers and directors of the Company:
All persons who the Corporation is empowered to indemnify
pursuant to the provisions of Section 145 of the General
Corporation Law of the State of Delaware (or any similar
provision or provisions of applicable law at the time in
effect), shall be indemnified by the Corporation to the
full extent permitted thereby. The foregoing right of
indemnification shall not be deemed to be exclusive of
any other rights to which those seeking indemnification
may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors, or otherwise.
No repeal or amendment of this Article EIGHTH shall
adversely affect any rights of any person pursuant to
this Article EIGHTH which existed at the time of such
repeal or amendment with respect to acts or omissions
occurring prior to such repeal or amendment.
The Company's Restated Certificate of Incorporation provides
that no director of the Company shall be personally liable to the
Company or its stockholders for any monetary damages for breaches
of fiduciary duty as a director, provided that this provision shall
not eliminate or limit the liability of a director (i) for any
breach of the director's duty of loyalty to the Company or its
stockholders; (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law; (iii)
under Section 174 of the General Corporation Law of the State of
Delaware; or (iv) for any transaction from which the director
derived an improper personal benefit.
Item 16. Exhibits
Exhibit
No. Description
______ ___________
4.1 Subscription and Purchase Agreement, dated June 9, 1997,
between the Company and RBB Bank Aktiengesellschaft as
incorporated by reference from Exhibit 4.1 to the Company's
Form 8-K, dated June 11, 1997.
4.2 Subscription and Purchase Agreement, dated July 7, 1997,
between the Company and the Infinity Fund, L.P. as
incorporated by reference from Exhibit 4.1 to the Company's
Form 8-K, dated July 7, 1997.
4.3 Exchange Agreement, dated November 6, 1997, to be
considered effective as of September 16, 1997, between the
Company and RBB Bank, as incorporated by reference from
Exhibit 4.11 from the Company's Report on Form 10-Q for the
period ended September 30, 1997.
4.4 Certificate of Designations of Series 6 Class F Convertible
Preferred Stock, dated November 6, 1997, incorporated by
reference from Exhibit 4.7 to the Company's Report on Form
10-Q for the period ended September 30, 1997.
4.5 Specimen copy of Series 6 Class F Convertible Preferred
Stock Certificate, as incorporated by reference from
Exhibit 4.8 to the Company's Report on Form 10-Q for the
quarter ended September 30, 1997.
4.6 Exchange Agreement dated as of October 31, 1997, to be
considered effective as of September 16, 1997, between the
Company and the Infinity Fund, L.P., as incorporated by
reference from Exhibit 4.12 to the Company's Report on Form
10-Q for the period ended September 30, 1997.
4.7 Certificate of Designations of Series 7 Class G Convertible
Preferred Stock, dated October 30, 1997, incorporated by
reference from Exhibit 4.9 to the Company's Report on Form
10-Q for the period ended September 30, 1997.
4.8 Specimen copy of Series 7 Convertible Preferred Stock
Certificate, as incorporated by reference from Exhibit 4.10
to the Company's Report on Form 10-Q for the quarter ended
September 30, 1997.
4.9 Common Stock Purchase Warrant ($1.8125) No. RBB 9-97-1,
dated September 16, 1997, between the Company and RBB Bank
Aktiengellschaft.
4.10 Common Stock Purchase Warrant ($1.8125) No. RBB 9-97-2,
dated September 16, 1997, between the Company and RBB Bank
Aktiengellschaft.
4.11 Common Stock Purchase Warrant ($2.125) No. RBB 9-97-3,
dated September 16, 1997, between the Company and RBB Bank
Aktiengellschaft.
4.12 Common Stock Purchase Warrant No. INF 9-97-1, dated
September 16, 1997, between the Company and The Infinity
Fund, L.P.
4.13 Common Stock Purchase Warrant No. INF 9-97-2, dated
September 16, 1997, between the Company and The Infinity
Fund, L.P.
II-2
4.14 Common Stock Purchase Warrant ($1.50), dated June 9, 1997,
between the Company and JW Charles Financial Services,
Inc., as incorporated by reference from Exhibit 4.6 to the
Company's Form 8-K, dated June 11, 1997.
4.15 Common Stock Purchase Warrant ($2.00), dated June 9, 1997,
between the Company and JW Charles Financial Services, Inc.
as incorporated by reference from Exhibit 4.7 to the
Company's Form 8-K, dated June 11, 1997.
4.16 Warrant Agreement, dated June 17, 1994, between the Company
and Sun Bank, National Association as incorporated by
reference from Exhibit 4.2 to the Company's Form 8-K, dated
June 17, 1994.
4.17 Common Stock Purchase Warrant ($2.00), dated July 25, 1997,
between the Company and Karl Ehlert.
4.18 Common Stock Purchase Warrant ($3.00), dated July 25, 1997,
between the Company and Karl Ehlert.
4.19 Common Stock Purchase Warrant ($2.00), dated July 25, 1997,
between the Company and Keith Fetter.
4.20 Common Stock Purchase Warrant ($2.50), dated July 25, 1997,
between the Company and Keith Fetter.
4.21 Common Stock Purchase Warrant, dated effective as of
September 16, 1997, between the Company and Dionysus
Limited.
4.22 Common Stock Purchase Warrant dated January, 1995, between
the Company and D. H. Blair Investment Banking Corp.
4.23 Common Stock Purchase Warrant dated effective as of March
23, 1995, between the Company and D. H. Blair Investment
Banking Corp.
4.24 Common Stock Purchase Warrant dated effective as of
March 23, 1995, between the Company and J. Morton Davis.
4.25 Common Stock Purchase Warrant dated effective as of
March 23, 1995, between the Company and Esther Stahler.
4.26 Common Stock Purchase Warrant dated effective as of
March 23, 1995, between the Company and Martin Bell.
4.27 Common Stock Purchase Warrant dated effective as of
March 23, 1995, between the Company and Ruki Renov.
4.28 Common Stock Purchase Warrant dated September 11, 1995
between the Company and Ally Capital Management, Inc.
5.1 Opinion of Conner & Winters, a Professional Corporation.
23.1 Consent of BDO Seidman, LLP.
23.2 Consent of Conner & Winters, as contained in Exhibit 5.1
hereto and incorporated herein by reference.
24.1 Power of Attorney (included on signature page).
II-3
Item 17. Undertakings
The Company hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to the Registration
Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933, as amended (the
''Securities Act'');
(ii) To reflect in the prospectus any facts or
events arising after the effective date of this
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;
(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;
Provided, however, that paragraphs (1)(i) and (1)(ii) do not
apply if the information required to be included in a post-
effective amendment by those paragraphs is contained in
periodic reports filed with or furnished to the Commission by
the Company pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended (the ''Exchange Act''), that
are incorporated by reference in this Registration Statement.
(2) That, for the purpose of determining any liability under
the Securities Act, each 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 the 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.
The Company hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of
the Company's annual report pursuant to Section 13(a) or 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 the time shall be deemed to be the initial bona
fide offering thereof.
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 indemnification
provisions described herein, 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. In the event that a claim for
indemnification against such liabilities (other than the payment by
the Company of expenses incurred or paid by a director, officer or
controlling person of the Company in the successful defense of any
action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of
such issue.
II-4
SIGNATURES FOR FORM S-3
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 Gainesville, State of Florida, on the 22nd day of December,
1997.
PERMA-FIX ENVIRONMENTAL
SERVICES, INC.
By: /s/ Louis Centofanti
___________________________
Dr. Louis F. Centofanti
Chairman, President and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that each person whose
signature appears below hereby constitutes and appoints Dr. Louis
F. Centofanti as his true and lawful attorney-in-fact and agent,
with full power of substitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every
act and thing requisite and necessary to be done in connection
therewith, as fully to all intents and purposes as he might or
could do them in person, hereby ratifying and confirming all that
said attorney-in-fact and agent or any of them, or their or his
substitute or substitutes, shall do or cause to be done by virtue
hereof.
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.
/s/ Louis Centofanti
_______________________ Chairman of the December 22, 1997
Dr. Louis F. Centofanti Board of Director,
President and
Chief Executive
Officer
(Principal Executive
Officer)
/s/ Richard T. Kelecy
_______________________ Chief Financial December 22, 1997
Richard T. Kelecy Officer
(Principal Financial
And Accounting Officer)
/s/ Mark A. Zwecker
_______________________ Director December 22, 1997
Mark A. Zwecker
/s/ Steve Gorlin
_______________________ Director December 22, 1997
Steve Gorlin
/s/ Jon Colin
_______________________ Director December 22, 1997
Jon Colin
EXHIBIT INDEX
Exhibit Page
No. Description No.
________ ___________ _____
4.1 Subscription and Purchase Agreement,
dated June 9, 1997, between the Company
and RBB Bank Aktiengesellschaft as
incorporated by reference from Exhibit
4.1 to the Company's Form 8-K, dated
June 11, 1997. *
4.2 Subscription and Purchase Agreement,
dated July 7, 1997, between the Company
and the Infinity Fund, L.P. as incorporated
by reference from Exhibit 4.1 to the
Company's Form 8-K, dated July 7, 1997. *
4.3 Exchange Agreement, dated November 6, 1997,
to be considered effective as of September 16,
1997, between the Company and RBB Bank, as
incorporated by reference from Exhibit 4.11
from the Company's Report on Form 10-Q for
the period ended September 30, 1997. *
4.4 Certificate of Designations of Series 6
Class F Convertible Preferred Stock, dated
November 6, 1997, incorporated by reference
from Exhibit 4.7 to the Company's Report on
Form 10-Q for the period ended September 30,
1997. *
4.5 Specimen copy of Series 6 Class F Convertible
Preferred Stock Certificate, as incorporated
by reference from Exhibit 4.8 to the Company's
Report on Form 10-Q for the quarter ended
September 30, 1997. *
4.6 Exchange Agreement dated as of October 31, 1997,
to be considered effective as of September 16,
1997, between the Company and the Infinity Fund,
L.P., as incorporated by reference from Exhibit
4.12 to the Company's Report on Form 10-Q for
the period ended September 30, 1997. *
4.7 Certificate of Designations of Series 7 Class G
Convertible Preferred Stock, dated October 30,
1997, incorporated by reference from Exhibit
4.9 to the Company's Report on Form 10-Q for
the period ended September 30, 1997. *
4.8 Specimen copy of Series 7 Convertible Preferred
Stock Certificate, as incorporated by reference
from Exhibit 4.10 to the Company's Report on
Form 10-Q for the quarter ended September 30,
1997. *
4.9 Common Stock Purchase Warrant ($1.8125) No. RBB
9-97-1, dated September 16, 1997, between the
Company and RBB Bank Aktiengellschaft. 45
4.10 Common Stock Purchase Warrant ($1.8125) No. RBB
9-97-2, dated September 16, 1997, between the
Company and RBB Bank Aktiengellschaft. 54
4.11 Common Stock Purchase Warrant ($2.125) No. RBB
9-97-3, dated September 16, 1997, between the
Company and RBB Bank Aktiengellschaft. 61
4.12 Common Stock Purchase Warrant No. INF 9-97-1,
dated September 16, 1997, between the Company
and The Infinity Fund, L.P. 70
4.13 Common Stock Purchase Warrant No. INF 9-97-2,
dated September 16, 1997, between the Company
and The Infinity Fund, L.P. 80
4.14 Common Stock Purchase Warrant ($1.50), dated
June 9, 1997, between the Company and
JW Charles Financial Services, Inc., as
incorporated by reference from Exhibit 4.6
to the Company's Form 8-K, dated June 11, 1997. *
4.15 Common Stock Purchase Warrant ($2.00), dated
June 9, 1997, between the Company and
JW Charles Financial Services, Inc. as
incorporated by reference from Exhibit 4.7
to the Company's Form 8-K, dated June 11,
1997. *
4.16 Warrant Agreement, dated June 17, 1994, between
the Company and Sun Bank, National Association
as incorporated by reference from Exhibit 4.2
to the Company's Form 8-K, dated June 17, 1994. *
4.17 Common Stock Purchase Warrant ($2.00), dated
July 25, 1997, between the Company and Karl
Ehlert. 90
4.18 Common Stock Purchase Warrant ($3.00), dated
July 25, 1997, between the Company and Karl
Ehlert. 104
4.19 Common Stock Purchase Warrant ($2.00), dated
July 25, 1997, between the Company and Keith
Fetter. 118
4.20 Common Stock Purchase Warrant ($2.50), dated
July 25, 1997, between the Company and Keith
Fetter. 132
4.21 Common Stock Purchase Warrant, dated effective
as of September 16, 1997, between the Company
and Dionysus Limited. 140
4.22 Common Stock Purchase Warrant dated January,
1995, between the Company and D. H. Blair
Investment Banking Corp. 149
4.23 Common Stock Purchase Warrant dated effective
as of March 23, 1995, between the Company and
D. H. Blair Investment Banking Corp. 170
4.24 Common Stock Purchase Warrant dated effective
as of March 23, 1995, between the Company and
J. Morton Davis. 182
4.25 Common Stock Purchase Warrant dated effective
as of March 23, 1995, between the Company and
Esther Stahler. 195
4.26 Common Stock Purchase Warrant dated effective
as of March 23, 1995, between the Company and
Martin Bell. 208
4.27 Common Stock Purchase Warrant dated effective
as of March 23, 1995, between the Company and
Ruki Renov. 221
4.28 Common Stock Purchase Warrant dated September 11,
1995, between the Company and Ally Capital
Management, Inc. 234
5.1 Opinion of Conner & Winters, a Professional
Corporation. 250
23.1 Consent of BDO Seidman, LLP. 256
23.2 Consent of Conner & Winters, as contained in
Exhibit 5.1 hereto and incorporated herein by
reference. 257
24.1 Power of Attorney (included on signature
page). *
*incorporated by reference
BALL:\N-P\PESI\S-3\1997\RegSt\S3.13