Filed On 4/11/07 11:11am ET · SEC File 333-132722 · Accession Number 1144204-7-18165
As Of Filer Filing As/For/On Docs:Pgs Issuer Agent
4/11/07 Aduromed Industries/Inc 424B2 1:160 Vintage Filings LLC/FA
Prospectus · Rule 424(b)(2)
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Filed
Pursuant to Rule 424(b)(2)
PROSPECTUS
ADUROMED
INDUSTRIES, INC.
This
Prospectus relates to the resale by selling stockholders listed elsewhere in
this Prospectus of 76,860,506 shares of the Common Stock (par value $0.0001
per
share) of Aduromed Industries, Inc. (‘‘AII’’ or the ‘‘Company’’). The selling
stockholders may sell their shares from time to time at the prevailing
market price or in negotiated transactions. Of these shares
offered:
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·
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15,488,333
shares are presently issued and outstanding (a total of 20,683,257
shares
being issued and outstanding);
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·
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3,802,619
shares are issuable upon exercise of warrants issued to certain former
investors in the Company’s subsidiary, Aduromed
Corporation;
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·
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10,477,774
shares are issuable upon exercise of options granted to employees
of the
Company’s subsidiary Aduromed
Corporation;
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|
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·
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44,087,721
shares are issuable consisting of: (i) 6,263,702 shares to be issued
upon
conversion of the Company’s outstanding Series A Preferred Stock, (ii)
15,780,160 shares to be issued upon conversion of the Series B Preferred
Stock, and (iii) 22,043,859 shares to be issued upon exercise of
Series A
and Series B warrants;
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·
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2,204,386
shares are issuable upon exercise of the Company’s Placement Agent's
Warrants.
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This
Prospectus also relates to the resale by selling holders listed elsewhere in
this Prospectus of the following additional securities of the
Company:
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|
·
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6,263,700.97 Series
A Preferred Warrants of the Company exercisable for the purchase
of
6,263,699 shares of its Common Stock;
and
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·
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15,780,160
Series B Preferred Warrants exercisable for the purchase of 15,780,160
shares of its Common Stock.
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For
information as to the terms of the Company’s Series A and Series B
Preferred Stock and its Series A and Series B Preferred Warrants see
‘‘DESCRIPTION OF SECURITIES’’ on page 26 below.
AN
INVESTMENT IN ANY OF THE SECURITIES TO WHICH THIS PROSPECTUS RELATES INCLUDES
A
HIGH DEGREE OF RISK. SEE ‘‘RISK FACTORS’’ BEGINNING ON PAGE 7. IN DECIDING TO
INVEST IN ANY OF THESE SECURITIES OR TO EXERCISE ANY OF THE COMPANY'S OPTIONS
OR
WARRANTS TO PURCHASE SHARES OF COMMON STOCK TO WHICH THIS REGISTRATION STATEMENT
RELATES, YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS.
THE COMPANY HAS NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT
IS
DIFFERENT FROM THIS INFORMATION.
The
Company will not receive any proceeds from the sale of the shares by the selling
security holders. However, it will receive proceeds in the amount of
$12,802,709.13 assuming the exercise of all of the warrants and options held
by
the selling holders, subject to certain of the warrants being exercised under
a
‘‘cashless exercise’’ right.
The
Company’s Common Stock is traded on the over-the-counter electronic bulletin
board. Its trading symbol is ADRM.OB. On March 30, 2007, the last bid price
as
reported was $0.20.
AII’s
‘‘promoters’’ or their ‘‘affiliates’’ and their transferees, within the meaning
of the Securities Act of 1933 (‘‘Act’’), both before and after the merger of AII
with Aduromed Corporation on January 23, 2006, are, and the other selling
security holders listed in this Prospectus and any participating broker-dealers
may be, deemed to be ‘‘underwriters’’ within the meaning of the Act. Any
commissions or discounts given to any such broker-dealer may be regarded as
underwriting commissions or discounts under the Act. Regardless of technical
compliance with Rule 144 under the Act, because AII was a ‘‘shell’’ prior to the
merger, Rule 144 will be unavailable to its promoters and affiliates. The
selling security holders have informed the Company that they do not have any
agreement or understanding, directly or indirectly, with any person to
distribute their securities.
Brokers
or dealers effecting transaction in the securities should confirm the
registration of these securities under the securities laws of the states in
which transactions occur or the existence of our exemption from
registration.
NEITHER
THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION
HAS
APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS
IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
ONLY RESIDENTS OF STATES IN WHICH WE HAVE QUALIFIED THE WARRANTS AND THE
UNDERLYING SHARES OF COMMON STOCK MAY EXERCISE THEIR WARRANTS OR PURCHASE OUR
COMMON STOCK OR WARRANTS UNDER THIS PROSPECTUS. WHEN YOU EXERCISE THE WARRANTS,
YOU WILL HAVE TO PROVIDE US INFORMATION AS TO YOUR STATE OF RESIDENCE. WE MAY
SEEK QUALIFICATION FROM TIME-TO TIME IN OTHER STATES. YOU MAY CALL THE COMPANY
AT 203-798-1080, TO DETERMINE WHETHER OR NOT YOUR STATE OR RESIDENCE HAS BEEN
INCLUDED.
TABLE
OF CONTENTS
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Page
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Prospectus
Summary
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1
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Risk
Factors
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7
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Information
in Prospectus
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11
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Forward
Looking Statements
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11
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Use
of Proceeds
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12
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Plan
of Distribution
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12
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Legal
Proceedings
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14
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Directors,
Executive Officers, Promoters and Control Persons
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14
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Security
Ownership of Certain Beneficial Owners and Management
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16
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Selling
Holders
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20
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Description
of Securities
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26
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Legal
Matters
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29
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Experts
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29
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Securities
and Exchange Commission Position on Indemnification for Securities
Act
Liabilities
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29
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Organization
Within Last Five Years
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30
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Description
of Business
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30
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Management’s
Discussion and Analysis
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39
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Market
for Common Equity and Related Stockholder Matters
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42
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Executive
Compensation
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44
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Changes
in and Disagreements With Accountants on Accounting and Financial
Disclosure
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47
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Financial
Statements
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F-1
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PROSPECTUS
SUMMARY
This
summary highlights selected information contained elsewhere in this Prospectus.
This summary does not contain all the information that a person should consider
before investing in the Company’s securities. A potential investor should
carefully read the entire Prospectus, including ‘‘Risk Factors’’ and the
Consolidated Financial Statements, before making an investment
decision.
Officers
of the Company are included as Selling Holders hereunder whose shares of Common
Stock are being sold pursuant to this Prospectus. (See "Selling
Holders",
below.)
The
Company
Background
AII
is
engaged in the business of providing solutions for managing the on-site disposal
of medical waste to owners and operators of hospitals that incorporate the
design, installation and servicing of systems to treat infectious, regulated
medical waste (‘‘RMW’’). These are ‘‘turnkey’’ systems, meaning that they have
been designed and installed complete and ready to operate by the customer.
The
business is carried on through AII’s wholly-owned subsidiary, Aduromed
Corporation (‘‘Aduromed’’)
The
principal business offices of both AII and Aduromed are located at 3 Trowbridge
Drive, Bethel, Connecticut 06801, and their telephone number at that address
is
(203) 798-1080. (See ‘‘Description of Properties’’ below.)
History
Effective
January 30, 2007, the Company changed its corporate name from General Devices,
Inc. to Aduromed Industries, Inc. Effective January 23, 2006, the Company merged
(the “Merger”) with Aduromed, whereby Aduromed became the wholly-owned
subsidiary of the Company and the former holders of the equity in Aduromed
became holders of equity in AII. Aduromed is the Company’s sole operating
entity.
During
the past three years, until the consummation of the Merger, AII had no material
assets.
Aduromed
was formed in 1997 as a Connecticut limited liability company by Mr. Damien
R.
Tanaka and two investors/members under the name ‘‘Automated Process LLC.’’ In
September, 2002, (i) the two investors/members withdrew as members, (ii)
Aduromed was reorganized as a Delaware corporation, changing its name to
‘‘Aduromed Corporation’’, and (iii) several third parties invested funds in
Aduromed to become minority shareholders, warrant holders and
creditors.
Aduromed’s
Business.
The
principal product of Aduromed is its on-site system (‘‘MedClean® System’’ or
‘‘System’’) to convert RMW into municipal solid waste (MSW). The disposal of
both RMW and MSW is generally regulated on the state and local levels. RMW
is
solid non-hazardous waste generated in connection with the diagnosis, treatment
or immunization of human beings or animals, in research pertaining thereto,
or
in the production of testing of biologicals, and includes bandages and other
materials containing potentially infectious bodily fluids, culture dishes and
other glassware, discarded surgical gloves and surgical instruments, ‘‘sharps’
(e.g. needles), cultures, stocks, swabs and lancets .
The
System is comprised of integrated equipment installed at the generator’s medical
facility (i.e. an ‘‘on-site’’ or ‘‘in-situ’’
installation),
and is comprised of (i) an autoclave vessel to sterilize the material, (ii)
a
shredding device to convert the material into unrecognizable confetti-like
material and (iii) its Auto-Touch™ proprietary control panel. Ancillary
equipment include Quiet Carts™ with disposable plastic liners used for
intramural collection of the RMW at points of generation within the medical
facility, the containerization of the waste during the autoclave sterilization
process and the mechanical dumping of the waste into the shredding device.
The
System is automated to minimize personnel contact with the material and to
assure regulatory compliance in the conversion process. (See
‘‘Business
of the Companies - Products’’
below.)
Aduromed’s
consumable supplies, sold periodically to customers, include the liners for
the
Quiet Carts™, cutting blades for the shredder and supplies such as deodorizers
and paper print rolls for use with the autoclaves and control panels. (See
‘‘Business
of the Companies - Products’’
below.)
The
Offering
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Total
Number of Shares of Common Stock (Par Value $0.0001 Per Share) Offered
by
selling stockholders
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76,860,506
shares, of which (i) 15,488,333 shares are issued and outstanding;
(ii)
22,043,862 shares are subject to issuance upon conversion of outstanding
voting Series A and Series B Preferred shares; (iii) 5,597,619 shares
are
subject to issuance upon exercise of warrants held by certain former
investors in Aduromed; (v) 10,447,774 are subject to issuance upon
exercise of options held by employees of Aduromed; (v) 22,043,859
shares
are subject to issuance upon exercise of Series A and Series B Warrants;
and (vi) 2,204,386 shares are subject to issuance upon exercise of
Placement Agent’s Warrants.
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Total
Number of Warrants, Each to purchase one share of common stock, Offered
by
Selling Security Holders
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22,043,
860.97 warrants of which 6,263,700.97 are Series A Warrants to purchase
6,263,699 shares of Common Stock; and 15,780,160 are Series B Warrants
to
purchase 15,780,160 shares of Common Stock.
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Use
of Proceeds
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We
will receive no proceeds from the sale of shares of Common Stock
or
Warrants offered hereunder. However, we would receive $11,803,714.03
if
all of the warrants and options for underlying shares included in
this
Prospectus were to be exercised. We will use these proceeds for general
corporate purposes.
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OTC
Electronic Bulletin
Board
Symbol
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‘‘ADRM.OB’’
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Summary
Financial and Operating Information
The
following selected financial information is derived from the Company's Financial
Statements appearing elsewhere in this Prospectus and should be read in
conjunction with such Financial Statements, including the notes thereto,
appearing elsewhere in this Prospectus.
Summary
of Operations
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2005
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Total
Revenue
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$
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4,594,347
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$
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1,989,285
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Loss
from operations
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$
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(3,311,429
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)
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$
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(1,961,145
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)
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Net
loss
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$
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(3,282,311
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)
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$
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(2,394,270
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)
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Loss
from operations per common share
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$
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(0.18
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)
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$
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(0.13
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)
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Net
loss per common share (basic and diluted)
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$
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(0.18
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)
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$
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(0.13
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)
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Weighted
average common shares outstanding
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20,643,910
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19,001,152
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Statement
of Financial Position
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2006
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Cash
and cash equivalents
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$
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1,892,336
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Total
assets
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$
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3,370,831
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Working
Capital
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$
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234,139
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Long
term debt
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$
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250,224
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Stockholders’
equity
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$
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437,624
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RISK
FACTORS
The
shares of our Common Stock and Preferred Warrants being offered for resale
by
the selling holders are highly speculative in nature, involve a high degree
of
risk and should be purchased only by persons who can afford to lose the entire
amount invested therein. Before purchasing any of these securities, you should
carefully consider the following factors relating to our business and prospects.
If any of the following risks actually occurs, our business, financial condition
or operating results could be materially adversely affected. In such case,
the
trading price of our Common Stock could decline, and you may lose all or part
of
your investment.
Business
Risks
We
have a history of losses
To
date,
we have been unable to generate revenue sufficient to be profitable. Aduromed
had a net loss of $(3,282,311), or $(0.18) per share, for the fiscal year ended
December 31, 2006, compared to a net loss of $(2,394,270), or $(0.13) per share,
for the fiscal year ended December 31, 2005. The Company might not achieve
the
level of revenues needed to be profitable in the future or, if profitability
is
achieved, that it will be sustained.
The
Company lacks an operating history making evaluation of its business
difficult.
While
Aduromed's revenues during the past eight years have been exclusively derived
from sales and servicing of its MedClean Systems, it's business is at an early
stage of commercialization, and there is no meaningful historical financial
or
other information available upon which to base an evaluation of the Company's
ability to increase its revenues in accordance with its projections or to
compete effectively with those persons with similar or alternate
systems.
In
addition, the Company's early stage of commercialization means that it has
less
insight into how market and technology trends may affect the Aduromed Business.
This includes the ability to attract and convince customers to switch from
their
current method of dealing with the disposal of their medical waste to Aduromed's
technology. As a consequence, the revenue and income potential of the Aduromed
Business is unproven.
Dependence
on third party component suppliers
The
Company is dependent on third party suppliers for the supply of components
of
its MedClean units. At present, the Company relies on a contract with Weima
to
supply parts for the shredder portion of the system. (See "Weima Agreement").
These parts are manufactured under the protection of a U.S. patent owned by
an
affiliate of Weima. The contract with Weima may be terminated on thirty (30)
days notice. The Company might not have adequate supplies of materials for
these
parts if the contract with Weima is terminated. Although the Company believes
that the required components are available and can be provided by other
suppliers, delays may be incurred in establishing relationships or in waiting
for quality control assurance with other manufacturers for substitute
components.
The
Company may not be able to effectively protect its proprietary technology,
which
could have a material adverse effect on its business and make it easier for
its
competitors to duplicate its products.
The
Company regards certain aspects of its products, processes, services and
technology as proprietary. With respect to two of its trademarks, Aduromed
and
MedClean the Company has applied to the United States Patent and Trademark
Office to register these marks. The Company does not intend to register any
other trademarks that it currently uses in the Aduromed Business but believes
that it has the rights to the AutoTouch and QuietCart marks. The Company does
not have nor does it intend to apply for patent protection with respect to
the
processes and technology encompassed by its present Systems (but see
"Development of MedClean 30 and MedClean 50 Systems" below) The Company requires
all of its employees to sign Confidentiality and Non-Disclosure Agreements
that
prohibit the dissemination or use the Company's know-how and technology other
than in the legitimate performance of the employee's duties. Our ability to
compete successfully will depend in part on our ability to protect our
proprietary rights and to operate without infringing on the proprietary right
of
others, both in the United States and abroad. The Company may apply in the
future for patent protection for uses, processes, products and systems that
it
develops. Any future patent for which the Company applies may not be issued;
any
existing contractual non-disclosures obligations may be challenged, invalidated
or circumvented; third parties might infringe or misappropriate our proprietary
rights; and third parties might independently develop similar products, services
and technology. The Company may incur substantial costs in asserting or
defending any breach of contract or infringement suits or in asserting any
license rights, including those granted by third parties, the expenditure of
which the Company might not be able to afford. An adverse determination could
subject the Company to significant liabilities to third parties, require it
to
seek licenses from or pay royalties to third parties or require it to develop
appropriate alternative technology. Such licenses might not be available on
acceptable terms or at all, and the Company might not develop alternate
technology at an acceptable price or at all. Any of these events could have
a
material adverse effect on the Company's business and
profitability.
The
Company may have to resort to litigation to enforce its intellectual property
rights, protect its trade secrets, determine the validity and scope of the
proprietary rights of others, or defend itself from claims of infringement,
invalidity or unenforceability. Litigation may be expensive and divert resources
even if the Company wins. This could adversely affect the Aduromed Business,
financial condition and operating results such that it could cause the Company
to reduce or cease operations.
The
Company may not be able to develop new products that achieve market
acceptance.
Our
future growth and profitability depend, in part, on our ability to respond
to
technological advances and to successfully develop and market new products
that
achieve market acceptance. This industry has been historically marked by very
rapid technological change and the frequent introduction of new products. While
we have been engaged in development of equipment suitable for on-site treatment
of RMW by small quantity generators (such as doctors' offices and clinics),
we
might not be able develop new products that will realize broad market
acceptance. (See "The Company; Development of Medclean 30 and 50 Systems"
below.)
The
Company's existing products may not be able in the future to meet changes in
environmental laws and regulations regarding regulated medical
waste.
The
future of our business will depend on our ability to respond to any future
changes in the federal, state and local regulatory environment. Since the
Company does not itself generate medical waste and is not itself in control
of,
nor does it handle, the medical waste but only sells its equipment to meet
its
contractual obligations to its customers, it is not itself currently subject
to
regulations with respect to the disposal of RMW; however, any change in this
regulatory regime in the future could have a material adverse effect on the
Company's operations.
The
nature of our business exposes us to professional and product liability claims,
which could materially adversely impact our business and
profitability.
The
malfunction or misuse of our MedClean Systems may result in damage or injury
to
property or persons, as well as violation of various health and safety
regulations, thereby subjecting us to possible liability. Although our insurance
coverage is in amounts and deductibles we believe prudent in our business,
and
we have not experienced any claims made or lawsuits instituted against us with
regard to any such damage or violations, such insurance might not be sufficient
to cover any potential liability. Further, in the event of either adverse claim
experience or insurance industry trends, we may in the future have difficulty
in
obtaining product liability insurance or be forced to pay very high premiums,
and our present coverage might not continue to be available on commercially
reasonable terms or at all. In addition, insurance might not adequately cover
any product liability claim against us. However, we do believe our insurance
coverage is adequate to cover any claims made, and we review our insurance
requirement with our insurance broker at least annually.
Other
parties may assert that our technology infringes on their intellectual property
rights, which could divert management time and resources and possibly force
us
to redesign our products.
Developing
products based upon new technologies can result in litigation based on
allegations of patent and other intellectual property infringement. While no
infringement claims have been made or threatened against us, third parties
might
assert infringement claims against us in the future, and such assertions by
such
parties might result in costly litigation in which they might prevail. In
addition, we may not be able to license any valid and infringed patents from
third parties on commercially reasonable terms or, alternatively, be able to
redesign products on a cost-effective basis to avoid infringement. Any
infringement claim or other litigation against or by us could have a material
adverse effect on us and could cause us to reduce or cease operations, and
even
if we are successful in a litigation to defend such claim, there may be adverse
effects due to the significant expenses related to defending the
litigation.
The
loss of certain members of our management team could adversely affect our
business.
Our
success is highly dependent on the continued efforts of Damien R. Tanaka and
Kevin Dunphy, who are our key management persons. Should operations expand,
we
will need to hire persons with a variety of skills and competition for these
skilled individuals could be intense. Neither Mr. Tanaka nor Mr. Dunphy plan
to
retire or leave us in the near future. However, we may not be successful in
attracting and/or retaining key personnel in the future. Our failure to do
so
could adversely affect our business and financial condition. We have employment
agreements with all of our management personnel but we do not carry any
"key-man" insurance on the lives of any of our officers or
employees.
Dependence
on principal customer.
We
have
one principal customer, Aramark Management Services Partnership (see "Aramark
Agreement," below) Revenues for this customer amounted to approximately
$1,722,000 and $1,203,000 for the 2006 and 2005 fiscal year, respectively.
The
loss of our principal customer would have a significant adverse impact on our
business. We have no operations outside the United States and the Commonwealth
of Puerto Rico.
Competition.
There
are
numerous methods of handling and disposing of RMW, of which our technology
is
one of the available systems. We are not aware of any competitive product that
is similar to the MedClean Systems with respect to its design, compactness
and
customer-friendly use. We believe that our MedClean Systems, due to their
ability to be used on-site, competitive costing and ease of use, offer a
significant advantage over RMW systems offered by our competitors. Nevertheless,
a different or new technology may supplant us in the market. Further, we might
not be successful in the deployment of our systems in the marketplace, and
other
companies predominate in the waste removal business, with substantially greater
resources and market visibility than us, may try to develop similar
systems.
Control
by holders of Series A and B Preferred Stock.
The
Investors Group (see "Selling Holders") beneficially owns all of the Company's
Series A Preferred Stock and Series B Preferred Stock, all of which are
convertible into an equal number of shares of the Company's Common Stock. These
shares of Preferred Stock have the same voting rights as the Common Stock.
In
addition, the Investors Group also has warrants related to the two series of
Preferred Stock that can be converted into the Company's Common Stock. If all
of
these shares were converted and the related warrants exercised, the Investors
Group would collectively own approximately 53% of the Common Stock on a
fully-diluted basis. The holders of the Preferred Stock and Mr. Damien R. Tanaka
are parties to a Stockholders' Agreement (see "Stockholders Agreement" below)
by
which Mr. Tanaka is entitled to elect a majority of the board of directors;
however, in most other matters submitted to the stockholders of the Company,
the
holders of the Series A and B Preferred Stock, if such holders were to vote
in
the same manner, may determine the resolution of matters to be acted upon by
stockholders. The interests of the Investors Group may conflict with the
interests of the holders of the Company's Common Stock.
Market
Risks
There
is only a volatile limited market for our Common
Stock.
Recent
history relating to the market prices of public companies indicates that, from
time to time, there may be periods of extreme volatility in the market price
of
our securities because of factors unrelated to the operating performance of,
or
announcements concerning, the issuers of the affected stock, and especially
for
stock traded on the OTC Bulletin Board. Our Common Stock is not actively traded,
and the bid and asked prices for our Common Stock have fluctuated significantly.
Since January 1, 2005 (after giving effect to a 1:5 reverse split of the Common
Stock in November, 2005), the Common Stock traded on the OTC Bulletin Board
from
a high bid of $1.75 to a low of $0.30 per share. See "Market for our Common
Stock." General market price declines, market volatility, especially for low
priced securities, or factors related to the general economy or to us in the
future could adversely affect the price of the common stock. With the low price
of our Common Stock, any securities placement by us would be very dilutive
to
existing stockholders, thereby limiting the nature of future equity
placements.
We
have never paid dividends and we do not anticipate paying dividends in the
future.
We
do not
believe that we will pay any cash dividends on our Common Stock in the future.
We have never declared any cash dividends on our common stock, and if we were
to
become profitable, it would be expected that all of such earnings would be
retained to support our business. In addition, cumulative dividends are payable
on the Series A and Series B Preferred Stock before any dividends may be paid
on
the Common Stock. Since we have no plan to pay cash dividends, an investor
would
only realize income from his investment in our shares if there is a rise in
the
market price of our Common Stock, which is uncertain and
unpredictable.
We
are subject to penny stock regulations and
restrictions.
The
Securities and Exchange Commission (the "SEC") has adopted regulations which
generally define Penny Stocks to be an equity security that has a market price
less than $5.00 per share or an exercise price of less than $5.00 per share,
subject to certain exemptions. As of March 30, 2007, the closing bid and asked
prices for our Common Stock were $0.20 and $0.24 per share and therefore, it
is
designated a "Penny Stock." As a Penny Stock, our Common Stock may become
subject to Rule 15g-9 under the Securities Exchange Act of 1934, as amended
("Exchange Act"), or the Penny Stock Rule. This rule imposes additional sales
practice requirements on broker-dealers that sell such securities to persons
other than established customers and "accredited investors" (generally,
individuals with a net worth in excess of $1,000,000 or annual incomes exceeding
$200,000, or $300,000 together with their spouses). For transactions covered
by
Rule 15g-9, a broker-dealer must make a special suitability determination for
the purchaser and have received the purchaser's written consent to the
transaction prior to sale. As a result, this rule may affect the ability of
broker-dealers to sell our securities and may affect the ability of purchasers
to sell any of our securities in the secondary market.
For
any
transaction involving a penny stock, unless exempt, the rules require delivery,
prior to any transaction in a penny stock, of a disclosure schedule prepared
by
the SEC relating to the penny stock market. Disclosure is also required to
be
made about sales commissions payable to both the broker-dealer and the
registered representative and current quotations for the securities. Finally,
monthly statements are required to be sent disclosing recent price information
for the penny stock held in the account and information on the limited market
in
penny stock.
Our
Common Stock might not qualify for exemption from the penny stock restrictions.
In any event, even if our Common Stock were exempt from the Penny Stock
restrictions, we would remain subject to Section 15(b)(6) of the Exchange Act,
which gives the SEC the authority to restrict any person from participating
in a
distribution of penny stock, if the SEC finds that such a restriction would
be
in the
public interest.
Certain
provisions of our charter could discourage potential acquisition proposals
or
change in control.
Our
Board
of Directors, without further stockholder approval, may issue preferred stock
that would contain provisions that could have the effect of delaying or
preventing a change in control or which may prevent or frustrate any attempt
by
stockholders to replace or remove the current management. The issuance of
additional shares of preferred stock could also adversely affect the voting
power of the holders of Common Stock, including the loss of voting control
to
others.
INFORMATION
IN PROSPECTUS
AII
has
not authorized anyone to give any information or make any representation about
the offering that differs from, or adds to, the information in this Prospectus
or the documents that are publicly filed with the Securities and Exchange
Commission. Therefore, if anyone does give you different or additional
information, you should not rely on it. The delivery of this Prospectus does
not
mean that there have not been any changes in AII’s condition since the date of
this Prospectus. If you are in a jurisdiction where it is unlawful to offer
to
purchase or exercise the securities offered by this Prospectus, or if you are
a
person to whom it is unlawful to direct such activities, then the offer
presented by this Prospectus does not extend to you. This Prospectus speaks
only
as of its date except where it indicates that other dates apply. The information
in this Prospectus may not be complete and may be changed. The holders may
not
exercise these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This Prospectus is not an
offer
to purchase or exercise securities and it is not soliciting an offer to purchase
or exercise these securities in any state where the purchase or exercise is not
permitted.
Unless
otherwise specified or the context otherwise requires, references in this
Prospectus to ‘‘AII’’, ‘‘we,’’ ‘‘our’’ and ‘‘us’’ or the ‘‘Company’’ refer to
AII and its wholly-owned subsidiary, Aduromed Corporation, on a consolidated
basis. Aduromed Corporation is sometimes referred to separately in this
Prospectus as ‘‘Aduromed’’.
FORWARD
LOOKING STATEMENTS
Information
included or incorporated by reference in this Prospectus may contain
forward-looking statements. This information may involve known and unknown
risks, uncertainties and other factors which may cause our actual results,
performance or achievements to be materially different from the future results,
performance or achievements expressed or implied by any forward-looking
statements. Forward-looking statements, which involve assumptions and describe
our future plans, strategies and expectations, are generally identifiable by
use
of the words ‘‘may,’’ ‘‘should,’’ ‘‘expect,’’ ‘‘anticipate,’’ ‘‘estimate,’’
‘‘believe,’’ ‘‘intend’’ or ‘‘project’’ or the negative of these words or other
variations on these words or comparable terminology.
This
Prospectus contains forward-looking statements, including statements regarding,
among other things, (a) our projected sales and profitability, (b) our
technology, (c) our manufacturing, (d) the regulations to which we are subject,
(e) anticipated trends in our industry and (f) our needs for working capital.
These statements may be found under ‘‘Management's Discussion and Analysis or
Plan of Operations’’ and ‘‘Business,’’ as well as in this Prospectus generally.
Actual events or results may differ materially from those discussed in
forward-looking statements as a result of various factors, including, without
limitation, the risks outlined under ‘‘Risk Factors’’ and matters described in
this Prospectus generally. In light of these risks and uncertainties, there
can
be no assurance that the forward-looking statements contained in this Prospectus
will in fact occur.
USE
OF PROCEEDS
We
will
not receive any portion of the proceeds from the sale of Common Stock by the
selling stockholders. We would receive proceeds of up to $11,803,714.03 if
all
the existing warrants and options were to be exercised. Management currently
anticipates that any such proceeds will be utilized for working capital and
other general corporate purposes. We cannot estimate how many, if any, and
when
warrants and options may be exercised as a result of this offering or
otherwise.
We
are
obligated to bear the expenses of the registration of the shares. We anticipate
that these expenses will be approximately $268,500.
PLAN
OF DISTRIBUTION
The
Selling Holders (See ‘‘Selling Holders’’ below) may, from time to time, offer
and sell the shares of Common Stock and the Series A and Series B Preferred
Warrants included in this Prospectus on any stock exchange, market or trading
facility on which the securities are traded or in private transactions.
Alternatively, the Selling Holders may exercise these Warrants pursuant to
an
exemption from registration if one is available at the time, and offer and
sell
the underlying shares and any unexercised Warrants under this Prospectus. Once
exercised, the shares of Common Stock underlying the Common Stock warrants
may
be sold pursuant to the terms of this Prospectus. The term ‘‘Selling Holders’’
includes pledgees, donees, transferees or other successors in interest selling
shares that they acquired after the date of this Prospectus from the Selling
Holders as a pledge, gift or other non-sale related transfer. To the extent
required, we may amend and supplement this Prospectus from time to time to
describe a specific plan of distribution.
Each
Selling Holder may make these sales at prevailing market prices or at other
negotiated prices. The Selling Holders may use any one or more of the following
methods when selling securities covered by this Prospectus:
|
|
·
|
purchases
by a broker-dealer as principal and resale by such broker-dealer
for its
own account pursuant to this
Prospectus;
|
|
|
·
|
ordinary
brokerage transactions and transactions in which the broker solicits
purchasers;
|
|
|
·
|
block
trades in which the broker-dealer will attempt to sell the shares
as agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
|
|
|
·
|
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
|
|
·
|
in
privately negotiated transactions;
and
|
|
|
·
|
broker-dealers
may agree with the Selling Holders to sell a specified number of
such
shares at a stipulated price per
share;
|
|
|
·
|
a
combination of any such methods of sale;
and
|
|
|
·
|
any
other method permitted pursuant to applicable
law.
|
In
connection with distributions of the shares or otherwise, the Selling Holders
may:
|
|
·
|
enter
into hedging transactions with broker-dealers or other financial
institutions, which may in turn engage in short sales of the shares
in the
course of hedging the positions they
assume;
|
|
|
·
|
sell
the shares short and redeliver the shares to close out such short
positions;
|
|
|
·
|
enter
into option or other transactions with broker-dealers or other financial
institutions or the creation of one or more derivative securities
which
require the delivery to them of shares that this Prospectus offers,
which
the broker-dealer or financial institution may in turn resell pursuant
to
this Prospectus; and
|
|
|
·
|
pledge
shares to a broker-dealer or other financial institution, which,
upon a
default, the broker-dealer or financial institution may in turn resell
pursuant to this Prospectus.
|
In
addition, the Selling Holders may sell any shares that qualify for sale pursuant
to Rule 144, rather than pursuant to this Prospectus. However, AII's
"promoters" and their "affiliates" and their transferees, within the meaning
of
the Securities Act of 1933 (the "Act") both before and after the Merger are
"underwriters" within the meaning of the Act. Regardless of technical compliance
with Rule 144 under the Act, because AII was a "shell" prior to the Merger,
Rule
144 will be unavailable to its promoters and affiliates. Halter Capital, Inc.
and Kevin Halter, Jr. would be considered to be such "promoters" or
affiliates".
In
effecting sales, broker-dealers or agents that the Selling Holders engage may
arrange for other broker-dealers to participate. Broker-dealers or agents may
receive commissions, discounts or concessions from the Selling Holders, in
amounts that the parties may negotiate immediately prior to the sale. However,
under the NASD rules and regulations, such broker-dealers may not receive a
commission or discount in excess of 8% for the sale of any securities registered
hereunder.
In
offering securities that this Prospectus covers, the Selling Holders, and any
broker-dealers and any other participating broker-dealers who execute sales
for
the Selling Holders, may qualify as ‘‘underwriters’’ within the meaning of the
Securities Act in connection with these sales. Any profits that the Selling
Holders realize, and the compensation that they pay to any broker-dealer, may
qualify as underwriting discounts and commissions.
In
order
to comply with the securities laws of some states, the Selling Holders must
sell
the shares in those states only through registered or licensed brokers or
dealers. In addition, in some states the Selling Holders must sell the shares
only if we have registered or qualified those shares for sale in the applicable
state or an exemption from the registration or qualification requirement is
available and the Selling Holder complies with the exemption.
We
have
advised the Selling Holders that the anti-manipulation rules of
Regulation M under the Exchange Act may apply to sales of shares in the
market and to the activities of the Selling Holders and their affiliates. In
addition, we will make copies of this Prospectus available to the Selling
Holders for the purpose of satisfying the Prospectus delivery requirements
of
the Securities Act of 1933, as amended (the ‘‘Securities Act’’). The Selling
Holders may indemnify any broker-dealer that participates in transactions
involving the sale of the shares against liabilities, including liabilities
arising under the Securities Act.
Upon
the
Company being notified in writing by a Selling Holder that any material
arrangement has been entered into with a broker-dealer for the sale of Common
Stock through a block trade, special offering, exchange distribution or
secondary distribution or a purchase by a broker or dealer, a supplement to
this
Prospectus will be filed pursuant to Rule 424(b) under the Securities Act,
disclosing:
|
|
·
|
the
number of shares that the Selling Holder is
offering;
|
|
|
·
|
the
terms of the offering, including the name of the Selling Holder and
any
underwriter, dealer or agent;
|
|
|
·
|
the
purchase price paid by any participating broker-dealer or
underwriter;
|
|
|
·
|
any
discount, commission and other broker-dealer or underwriter
compensation;
|
|
|
·
|
any
discount, commission or concession allowed or reallowed or paid to
any
dealer;
|
|
|
·
|
the
proposed selling price to the
public;
|
|
|
·
|
that
such broker-dealer(s) did not conduct any investigation to verify
the
information set out or incorporated by reference in this Prospectus;
and
|
|
|
·
|
other
facts material to the transaction.
|
The
Selling Holders may from time to time pledge or grant a security interest in
some or all of the shares of Common Stock owned by them and, if they default
in
the performance of their secured obligations, the pledgees or secured parties
may offer and sell shares of Common Stock from time to time under this
Prospectus, or under an amendment to this Prospectus under Rule 424(b)(3) or
other applicable provision of the Securities Act amending the list of selling
stockholders to include the pledgee, transferee or other successors in interest
as selling stockholders under this Prospectus. In addition, upon the Company
being notified in writing by a Selling Holder that a donee or pledge intends
to
sell more than 500 shares of Common Stock, a supplement to this Prospectus
will
be filed if then required in accordance with applicable securities
law.
We
are
required to pay certain fees and expenses incurred by us incident to the
registration of the shares. We have agreed to indemnify the Selling Holders
against claims and losses due to material misstatements or omissions made by
us
(and not by the Selling Holders) in this Prospectus. Each of the Selling Holders
has agreed to indemnify us against claims and losses due to material
misstatements or omissions made by them.
LEGAL
PROCEEDINGS
The
Company has no pending legal proceedings. From time to time, it may be involved
in various claims, lawsuits or disputes with third parties, and actions
involving allegations of breach of contract incidental to the normal business
operations of the Aduromed Business.
DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
DIRECTORS
AND EXECUTIVE OFFICERS
As
of
March 30, 2007 the directors and executive officers both AII and Aduromed were
as follows:
|
Damien
R. Tanaka
|
|
63
|
|
Director,
President and CEO
|
|
Kevin
T. Dunphy
|
|
58
|
|
Director,
Chief Financial Officer and Treasurer
|
|
Jay
S. Bendis
|
|
60
|
|
Director
|
|
Elan
Gandsman
|
|
65
|
|
Director
|
|
Ronald
A. LaMorte
|
|
69
|
|
Director
|
|
Paul
Farrell
|
|
44
|
|
Director
|
Following
is a brief summary of the background and experience of each director and
executive officers of AII and Aduromed:
Damien
R.
Tanaka is the Chairman, President and CEO of AII, and Kevin T. Dunphy is the
Chief Financial Officer and Treasurer. Both men hold similar titles at Aduromed,
and are members of the Board of Directors of both companies.
Mr.
Tanaka is and has been the President and Chief Executive Officer of Aduromed
since its organization in 2002. He had comparable executive responsibilities
as
a member and manager of Aduromed's predecessor, a Connecticut limited liability
company formed in 1997 and reorganized in 2002 under the Delaware General
Corporation Law as the present Aduromed Corporation.
Mr.
Dunphy joined Aduromed in 2005 as its Chief Financial Officer, and was appointed
the company's corporate Treasurer and a member of its board of directors. From
1999 through 2004 he held various accounting and finance positions at FuelCell
Energy, Inc. in Danbury, Connecticut, a company engaged in development and
manufacture of high temperature fuel cell products. From July to December 2004
he served as FuelCell’s Director of Finance Technology Group; previous to that
he was its Corporate Controller. During the period from January to May 2005
he
was an independent consultant. Mr. Dunphy holds a BS degree in accounting from
Mercy College and an MBA from Long Island University.
By
the
terms of their individual employment agreements, Mr. Tanaka and Mr. Dunphy
will
each serve for a term continuing until September 28, 2010. Both agreements
contain automatic one-year renewals thereafter. The employment agreements with
both men contain covenants of confidentiality, and assignments of proprietary
intellectual property rights.
Mr.
Tanaka owns, beneficially and of record, 8,257,000
shares, or approximately 40%
of the
issued and outstanding Common Stock,
with
options and warrants to purchase an additional 6,313,166 shares of Common Stock.
Mr.
Bendis has, during the past five years, been president of Transfer Technology
Consultants in Akron, Ohio, specializing in transferring new product concepts
from design to commercialization. In 2005 he became president and CEO of
Clinical Analysis Corp., which has developed a hand-held diagnostic system
for
patient point care testing. He is presently a partner in the Crystal Corridor
Group which works with Kent State University's Liquid Crystal Institute in
facilitating liquid crystal technology. Since 2003 he has served as chairman
of
the board of Imaging Diagnostic Systems in Plantation, Florida, a company that
has developed an imaging device to aid in detection and management of breast
cancer. He holds a BA degree in marketing from Kent State University. Mr. Bendis
owns 269,250 shares of the Company’s Common Stock.
Dr.
Gandsman has since 1993 been Director of Environmental Health and Safety at
Yale
University in New Haven, Connecticut. He holds a BS degree in physics and math
from the University of Buenos Aires, and MSc and PhD degrees in physics from
Tel
Aviv University.
Mr.
LaMorte is a Certified Public Accountant. During the period from 1999 through
2003, and for several years prior thereto, he had been a Managing Principal
of
Dworken, Hillman, LaMorte & Sterczala, a public accounting firm in Shelton,
Connecticut. He retired from the firm in December 2003. Mr. LaMorte holds a
BS
degree from the University of Connecticut.
Mr.
Farrell is a Managing Director of Pequot Capital Management, Inc. responsible
for covering a diversified number of sectors for the small/mid cap strategy
with
a primary focus on the financial services, industrial and consumer industries.
Mr. Farrell joined Pequot Capital Management in 2001. Previously, he was a
Partner at WR Capital Partners, LLC. Prior to that, he held several positions
at
Goldman Sachs Asset Management, including Managing Director and Chief Investment
Officer of the U.S. value investment team. Before Goldman, he was a Managing
Director and portfolio manager at Plaza Investments. Mr. Farrell received a
BA
and MA in economics from Yale University.
SIGNIFICANT
EMPLOYEES
|
Stephen
Birch
|
|
35
|
|
Vice
President of Business Development of Aduromed
Corporation
|
|
Robert
C. Meyer
|
|
51
|
|
Vice
President of Operation and Marketing of Aduromed
Corporation
|
|
Timothy
R. Hertweck
|
|
52
|
|
Vice
president of Sales of Aduromed
Corporation
|
Mr.
Birch
is Vice President Business Development of Aduromed. From 2000 to August, 2002
he
had served as Manager, Quality Assurance, and Assistant Vice President, Internet
Technology at Martha Stewart Living Omnimedia, Inc. in New York City.
Thereafter, he was an independent consult to Aduromed until October 1, 2005
when
he joined the company as an employee. Since then he has been engaged in
Aduromed's business development. He executed a five (5) year employment contract
with Aduromed, dated as of September 30, 2005, to act as Aduromed's Vice
President for business development. Mr. Birch owns 269,250 shares of Common
Stock of the Company, plus presently exercisable options to purchase 1,525,750
shares of the Company's Common Stock. Mr. Birch holds a BS degree from Oklahoma
State University.
Mr.
Meyer
joined Aduromed as its Vice President Operations and Marketing on January 1,
2006. With his background from 1996 to 1999 in developing market strategies
for
innovative consumer products as a vice president of the Pepsi-Cola Company,
in
Purchase, New York, he then became associated, during the period 2000-2003,
with
the consulting firm Advanced Materials Partners, Inc. in New Canaan,
Connecticut, as Vice President, assisting clients in development of innovative
products. In 2004 he was Executive Vice President of CCM Marketing
Communications, Inc., New York City advertising and promotion firm with clients
in the consumer products area. He left CCM later in 2004 and throughout 2005
has
been Managing Partner of Insight to Innovation, LLC, in Wilton Connecticut,
a
consulting firm devoted to developing growth strategies and product innovations
for its clients. It was in that capacity as a consultant in 2005 that he
commenced his association with Aduromed. Mr. Meyer owns 179,500 of the Company's
Common Stock. Mr. Meyer holds a BS degree in mechanical engineering from Trinity
College, an MME in mechanical engineering from Rensselaer Polytechnic Institute
and an MBA from the Columbia Graduate School of Business.
Mr.
Hertweck joined Aduromed on January 1, 2006, as its Vice President Sales. During
the past five years he has been President of Portfolio Management Associates,
Inc., a consulting firm in Exeter, Connecticut founded by him dealing in merger,
acquisition and turnaround situations for companies that had included Aduromed.
Mr. Hertweck owns 626,500 shares of the Company's Common Stock. Mr. Hertweck
holds a BA degree in political science from Wagner College.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
Company has no equity compensation plans, and therefore no securities reserved
for such purposes.
The
following table and footnotes set forth as of March 30, 2007, the number and
percentage of the outstanding shares of Common Stock and Series A and Series
B
Preferred Stock which, according to the information supplied to the Company,
were beneficially owned by (i) each person who is currently a director of AII,
(ii) each executive officer, (iii) all current directors and executive officers
of AII as a group, and (iv) each person who, to the knowledge of the Company,
is
the beneficial owner of more than 5% of the outstanding (i) Common Stock, and
(ii) the Series A and Series B Preferred Stock.
Except
as
otherwise noted, the persons named in the table have sole voting and dispositive
power with respect to all shares beneficially owned, subject to community
property laws where applicable.
Security
Ownership of Beneficial Owners of More than 5% of Each Class of AII’s Voting
Securities
|
Title
of Security
|
|
Name
and Address of Beneficial Owner
|
|
Amount
and Nature of of Beneficial Ownership
|
|
Percentage
of Class*
|
| |
|
|
|
|
|
|
|
Common
|
|
|
|
|
|
|
|
Stock
|
|
Damien
R. Tanaka(1)(5)
|
|
14,570,166
|
|
34.10%
|
|
|
|
3
Trowbridge Drive
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
Common
|
|
|
|
|
|
|
|
Stock
|
|
Paul
T. Chan(2)
|
|
1,903,697
|
|
4.46%
|
|
|
|
300
Linden Street
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
Common
|
|
|
|
|
|
|
|
Stock
|
|
Norman
C. Kristoff(3)
|
|
2,545,410
|
|
5.96%
|
| |
|
194
Upper Troy Road
|
|
|
|
|
| |
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
Common
|
|
|
|
|
|
|
|
Stock
|
|
Delphinian
Quest Advisors
|
|
1,024,147
|
|
2.40%
|
| |
|
LLC(2)(3)
|
|
|
|
|
| |
|
194
Upper Troy Road
|
|
|
|
|
| |
|
|
|
|
|
|
|
Common
|
|
|
|
|
|
|
|
Stock
|
|
Crown
Capital Pty Ltd.
|
|
1,795,000
|
|
4.14%
|
| |
|
45
View Street
|
|
|
|
|
| |
|
Peppermint
Grove
|
|
|
|
|
| |
|
Western
Australia 6011
|
|
|
|
|
| |
|
Australia
|
|
|
|
|
| |
|
|
|
|
|
|
|
Common
|
|
|
|
|
|
|
|
Stock
|
|
Christopher
J. and Jill L.
|
|
1,767,357
|
|
4.14%
|
| |
|
Winners
(JTWROS)(4)
|
|
|
|
|
| |
|
2100
Yacht Mischief
|
|
|
|
|
| |
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
Series
A and
|
|
Pequot
Capital Management, Inc.(5)(7)
|
|
27,840,108
|
|
65.16%
|
|
Series
B
|
|
500
Nyala Farm Road
|
|
|
|
|
|
Preferred
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series
A and
|
|
Sherleigh
Associates Inc.
|
|
16,247,762
|
|
38.03%
|
|
Series
B
|
|
Defined
Benefit Pension Plan(6)(7)
|
|
|
|
|
|
Preferred
|
|
920
Fifth Avenue #3B
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
153
E. 53rd Street, 55th Floor
|
|
|
|
|
|
|
|
|
|
|
|
|
*
The
Series A and B Preferred shares have equal voting rights with the outstanding
shares of common stock, therefore Percentage of Class has been determined based
upon the total outstanding shares of common stock plus the total outstanding
shares of Preferred Stock, and, in the case of each person or group, the
securities such person or group has the right to acquire within 60 days. Holders
who would own 5% or more of the common stock based solely upon the outstanding
number of shares of common stock have also been included in the
table.
(1)
Consists
of (i) 8,257,000 shares owned of record, (ii) 897,500 shares issuable upon
exercise of warrants at an exercise price of $0.0557 per share, and (iii)
5,415,665.78 shares issuable upon exercise of options at an exercise price
of
$0.0557 per share.
Brothers
and sisters of Mr. Tanaka own 179,500 shares of Common Stock of record with
respect to which Mr. Tanaka disclaims beneficial ownership.
(2)
Consists
of
(i)
704,538 shares owned of record, (ii) warrants immediately exercisable to
purchase 175,012 shares at $0.5571 per share, and (iii) Mr. Chan’s indirect
interest in (A) 269,250 shares of record and (B) warrants immediately
exercisable to purchase 754,897 shares held by Delphinian Quest Advisors, LLC.
Messrs.
Chan and Kristoff each owns a 50% voting membership interest in Delphinian
Quest
Advisors, LLC.
(3)
Consists
of (i)
1,346,250 shares owned of record, (ii) warrants immediately exercisable to
purchase 175,012 shares at $0.5571 per share, and (iii) Mr. Kristoff’s indirect
interest in (A) 269,250 shares of record and (B) warrants immediately
exercisable to purchase 754,897 shares held by Delphinian Quest Advisors, LLC.
Messrs.
Chan and Kristoff each owns a 50% voting membership interest in Delphinian
Quest
Advisors, LLC. Mr. Kristoff’s mother, Stelle Kristoff, owns of record 364,385
shares of Common Stock with respect to which Mr. Kristoff disclaims beneficial
ownership.
(4)
Consists of (i) 1,049,357 shares owned of record and (ii) 718,000 shares
issuable upon exercise of warrants at an exercise price of $0.5571 per share.
All of these outstanding shares and warrants are owned by Christopher J. Winners
and Jill L. Winners jointly as joint tenants with rights of survivorship.
(5)
Consists of (i) 14,171,054 shares of preferred stock owned of record and
immediately convertible into an equal number of common shares, and (ii)
13,669,054 shares issuable
upon exercise of Series A and Series B warrants at an exercise price of $0.37883
per share
Pequot
Capital Management, Inc. is the investment manager for Pequot Scout Fund L.P.,
Pequot Mariner Master Fund, L.P., Pequot Navigator Offshore Fund, Inc., Premium
Series PCC Limited--Cell 33 and Pequot Diversified Master Fund, Ltd.
(collectively the "Funds") and holds all voting (except for those shares held
by
Premium Series PCC Limited--Cell 33) and dispositive power for all shares held
of record by the Funds and may be deemed the beneficial owner of such shares.
Pequot Capital Management, Inc. disclaims beneficial ownership of all shares
held therein. The sole director and controlling stockholder of Pequot Capital
Management, Inc. is Arthur J. Samberg.
(6)
Consists of (i) 7,872,808 shares of preferred stock owned of record and
immediately convertible into an equal number of common shares, and (ii)
8,374,807 shares issuable
upon exercise of Series A and Series B warrants at an exercise price of $0.37883
per share.
(7)
In
accordance with the Stockholders Agreement, Pequot Capital Management, Inc.
and
Sherleigh Associates Inc. Defined Benefit Plan have the right to two (2)
nominees to be elected members of the Company’s seven (7) member board of
directors, and at least one (1) of their designees to be appointed to each
committee of the board; and for so long as Mr. Tanaka remains the president
and
chief executive officer of the Company, the parties will cause five (5) of
his
nominees to be elected to the Company's board of directors.
Security
Ownership of Management (Directors and Executive Officers)
|
Title
of Security
|
|
Name
and Address of Beneficial Owner
|
|
Amount
and Nature of of Beneficial Ownership
|
|
Percentage
of Class*
|
| |
|
|
|
|
|
|
|
Common
|
|
|
|
|
|
|
|
Stock
|
|
Damien
R. Tanaka(1)
|
|
14,570,166
|
|
34.10%
|
| |
|
3
Trowbridge Drive
|
|
|
|
|
| |
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
Common
|
|
|
|
|
|
|
|
Stock
|
|
Kevin
P. Dunphy(2)
|
|
329,083.33
|
|
<1%
|
|
|
|
3
Trowbridge Drive
|
|
|
|
|
| |
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
Common
|
|
|
|
|
|
|
|
Stock
|
|
Jay
S. Bendis (3)
|
|
319,250
|
|
<1%
|
| |
|
71
Springcrest Drive
|
|
|
|
|
| |
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
Common
|
|
|
|
|
|
|
|
Stock
|
|
Paul
D. Farrell (4)
|
|
—
|
|
—
|
| |
|
Pequot
Capital Management, Inc.
|
|
|
|
|
| |
|
500
Nyala Farm Road
|
|
|
|
|
| |
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
Common
|
|
|
|
|
|
|
|
Stock
|
|
Ronald
A. LaMorte (5)
|
|
50,000
|
|
<1%
|
|
|
|
36
Haystack Hill Road
|
|
|
|
|
| |
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
Common
|
|
|
|
|
|
|
|
Stock
|
|
Elan
Gandsman (5)
|
|
50,000
|
|
<1%
|
| |
|
135
College Street
|
|
|
|
|
| |
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
Common
|
|
|
|
|
|
|
|
Stock
|
|
All
Directors and
|
|
15,318,499.33
|
|
35.85%
|
| |
|
Executive
Officers
|
|
|
|
|
| |
|
As
a Group
|
|
|
|
|
| |
|
|
|
|
|
|
|
Preferred
|
|
|
|
|
|
|
|
Stock
|
|
All
Directors and
|
|
-0-
|
|
|
| |
|
Executive
Officers
|
|
|
|
|
| |
|
As
a Group
|
|
|
|
|
*
The Series A and B Preferred shares have equal voting rights with the
outstanding shares of common stock, therefore Percentage of Class has been
determined based upon the total outstanding shares of common stock plus the
total outstanding shares of Preferred Stock, and, in the case of each person
or
group, the securities such person or group has the right to acquire within
60
days.
(1)
Consists
of (i) 8,257,000 shares owned of record, (ii) 897,500 shares issuable upon
exercise of warrants at an exercise price of $0.0557 per share, and (iii)
5,415,665.78 shares issuable upon exercise of options at an exercise price
of
$0.0557 per share.
Brothers
and sisters of Mr. Tanaka own 179,500 shares of Common Stock of record with
respect to which Mr. Tanaka disclaims beneficial ownership.
(2)
Consists
of 329,083.33 shares issuable upon exercise of options at an exercise price
of
$0.1393 per share.
(3)
Consists of (i) 269,250 shares owned of record, and (ii) 50,000 shares issuable
upon exercise of an option at an exercise price of $0.55 per share.
(4)
Mr.
Farrell has been appointed as a director of the Company by the Preferred Holders
in accordance with the Stockholders Agreement. Mr. Farrell (Managing Director)
is an
employee
of Pequot Capital Management, Inc., which holds voting (except for Premium
Series PCC Limited--Cell 33) and dispositive power for all shares held of record
by the Funds.
(5)
Represents 50,000
shares issuable upon exercise of an option at an exercise price of $0.55 per
share.
SELLING
HOLDERS
The
selling securities holders (the ‘‘Selling Holders’’) are comprised of: (i)
individuals and entities who beneficially own shares of Common Stock, options
or
warrants received upon the Merger in exchange for their shares of common stock,
options or warrants of Aduromed, (ii) members of the Preferred Holders that
beneficially own Series A and B Preferred shares that are convertible into
Common Stock; (iii) members of the Preferred Holders who beneficially own
Investor Warrants, and (iv) individuals and entities that beneficially own
Placement Agent’s Warrants.
The
following table sets forth, as of March 30, 2007 information with regard to
the
ownership of our Common Stock, options, warrants, Series A and B Preferred
Stock, Investor Warrants, and Placement Agent Warrants, of each of the Selling
Holders. The term ‘‘Selling Holders’’ includes the holders listed below and
their respective transferees, assignees, pledges, donees and other
successors.
There
are
no compensation fees payable under financing agreements with selling holders,
including future transactions.
Because
the Selling Holders may offer all, some or none of their Common Stock, no
definitive estimate as to the number of shares thereof that will be held by
the
Selling Holders after such offering can be provided and the following table
has
been prepared on the assumption that all securities offered under this
Prospectus will be sold.
|
Name(1)
|
|
Shares
Beneficially
Owned
Prior to
Offering(2)
|
|
Percent
Beneficially
Owned
Before
Offering
|
|
Shares
To
be
Offered
|
|
Amount
Beneficially
Owned
After
Offering(3)
|
|
Percent
Beneficially
Owned
After
Offering
|
|
|
Damien
Tanaka(4)
|
|
|
14,570,166
|
|
|
18.96
|
%
|
|
14,570,166
|
|
|
—
|
|
|
*
|
|
|
Paul
Tanaka(47)
|
|
|
35,900
|
|
|
*
|
|
|
35,900
|
|
|
—
|
|
|
*
|
|
|
Laura
Mohammed(47)
|
|
|
35,900
|
|
|
*
|
|
|
35,900
|
|
|
—
|
|
|
*
|
|
|
Peter
Tanaka(47)
|
|
|
35,900
|
|
|
*
|
|
|
35,900
|
|
|
—
|
|
|
*
|
|
|
Francis
Tanaka(47)
|
|
|
35,900
|
|
|
*
|
|
|
35,900
|
|
|
—
|
|
|
*
|
|
|
Dorothy
Englehart(47)
|
|
|
17,950
|
|
|
*
|
|
|
17,950
|
|
|
—
|
|
|
*
|
|
|
Clare
Folvik(47)
|
|
|
17,950
|
|
|
*
|
|
|
17,950
|
|
|
—
|
|
|
*
|
|
|
Kevin
Dunphy(5)
|
|
|
1,529,284
|
|
|
1.99
|
%
|
|
1,529,284
|
|
|
—
|
|
|
*
|
|
|
Stephen
Birch(6)
|
|
|
2,818,843
|
|
|
3.67
|
%
|
|
2,818,843
|
|
|
—
|
|
|
*
|
|
|
Ralph
Toro(7)
|
|
|
1,162,731
|
|
|
1.51
|
%
|
|
1,162,731
|
|
|
—
|
|
|
*
|
|
|
Anton
Ciotta(8)
|
|
|
44,875
|
|
|
*
|
|
|
44,875
|
|
|
—
|
|
|
*
|
|
|
Christopher
Warren(9)
|
|
|
44,875
|
|
|
*
|
|
|
44,875
|
|
|
—
|
|
|
*
|
|
|
Timothy
Hertweck(36)
|
|
|
628,250
|
|
|
*
|
|
|
628,250
|
|
|
—
|
|
|
*
|
|
|
Jay
Bendis(37)
|
|
|
269,250
|
|
|
*
|
|
|
269,250
|
|
|
—
|
|
|
*
|
|
|
Paul
T. Chan(10)(38)
|
|
|
879,550
|
|
|
1.14
|
%
|
|
879,550
|
|
|
—
|
|
|
*
|
|
|
Norman
C. Kristoff(11)(38)(39)
|
|
|
1,521,263
|
|
|
1.98
|
%
|
|
1,521,263
|
|
|
—
|
|
|
*
|
|
|
Delphinian
Quest Advisors, L.L.C(12)(35)(38)
|
|
|
1,024,147
|
|
|
1.33
|
%
|
|
1,024,147
|
|
|
—
|
|
|
*
|
|
|
James
Rae (41)
|
|
|
134,625
|
|
|
*
|
|
|
134,625
|
|
|
—
|
|
|
*
|
|
|
United
Link Asset Holdings
Limited
(43)
|
|
|
538,500
|
|
|
*
|
|
|
538,500
|
|
|
—
|
|
|
*
|
|
|
Raco
C. Ho.(13)
|
|
|
224,375
|
|
|
*
|
|
|
224,375
|
|
|
—
|
|
|
*
|
|
|
Richard
D. Eggemeyer(14)
|
|
|
184,885
|
|
|
*
|
|
|
184,885
|
|
|
—
|
|
|
*
|
|
|
Stelle
B. Kristoff(15)(39)
|
|
|
364,385
|
|
|
*
|
|
|
364,385
|
|
|
—
|
|
|
*
|
|
|
Bjoem
Reinke(48)
|
|
|
125,650
|
|
|
*
|
|
|
125,650
|
|
|
—
|
|
|
*
|
|
|
Klaus
Huebner(48)(50)
|
|
|
66,415
|
|
|
*
|
|
|
66,415
|
|
|
—
|
|
|
*
|
|
|
Arno
Rieck(48)
|
|
|
44,875
|
|
|
*
|
|
|
44,875
|
|
|
—
|
|
|
*
|
|
|
Name(1)
|
|
Shares
Beneficially
Owned
Prior to
Offering(2)
|
|
Percent
Beneficially
Owned
Before
Offering
|
|
Shares
To
be
Offered
|
|
Amount
Beneficially
Owned
After
Offering(3)
|
|
Percent
Beneficially
Owned
After
Offering
|
|
|
Joerg
Luehring(48)
|
|
|
21,540
|
|
|
*
|
|
|
21,540
|
|
|
—
|
|
|
*
|
|
|
Heiko
Storz(48)
|
|
|
17,950
|
|
|
*
|
|
|
17,950
|
|
|
—
|
|
|
*
|
|
|
Franz
Peter Gruber(48)
|
|
|
5,385
|
|
|
*
|
|
|
5,385
|
|
|
—
|
|
|
*
|
|
|
Richard
Sarkisian(17)
|
|
|
188,475
|
|
|
*
|
|
|
188,475
|
|
|
—
|
|
|
*
|
|
|
Ursel
Jarschel(48)
|
|
|
44,875
|
|
|
*
|
|
|
44,875
|
|
|
—
|
|
|
*
|
|
|
Rainer
Seifert and Christel Seifert JT TEN)(49)
|
|
|
44,875
|
|
|
*
|
|
|
44,875
|
|
|
—
|
|
|
*
|
|
|
Berward
Talleur(49)
|
|
|
26,925
|
|
|
*
|
|
|
26,925
|
|
|
—
|
|
|
*
|
|
|
Hans
Juergen Herbst(49)
|
|
|
35,900
|
|
|
*
|
|
|
35,900
|
|
|
—
|
|
|
*
|
|
|
Klaus
Dieter Paul(49)
|
|
|
62,825
|
|
|
*
|
|
|
62,825
|
|
|
—
|
|
|
*
|
|
|
Greenhouse
Capital Inc. (40)
|
|
|
628,250
|
|
|
*
|
|
|
628,250
|
|
|
—
|
|
|
*
|
|
|
Rob
Meyer(18)
|
|
|
538,500
|
|
|
*
|
|
|
538,500
|
|
|
—
|
|
|
*
|
|
|
Blackmont
Capital in Trust for William Griffis(51)
|
|
|
224,375
|
|
|
*
|
|
|
224,375
|
|
|
—
|
|
|
*
|
|
|
John
Meyer(19)
|
|
|
538,500
|
|
|
*
|
|
|
538,500
|
|
|
—
|
|
|
*
|
|
|
Peter
M. Conetta(51)
|
|
|
170,525
|
|
|
*
|
|
|
170,525
|
|
|
—
|
|
|
*
|
|
|
Rick
L. Ackerman(51)
|
|
|
80,763
|
|
|
*
|
|
|
80,763
|
|
|
—
|
|
|
*
|
|
|
T
Krawiecki Jr. & Sharon M. Krawiecki JTWROS(51)
|
|
|
85,263
|
|
|
*
|
|
|
85,263
|
|
|
—
|
|
|
*
|
|
|
Christopher
J. & Jill L. Winners (JTWROS)(20)
|
|
|
1,662,357
|
|
|
2.16
|
%
|
|
1,662,357
|
|
|
—
|
|
|
*
|
|
|
Pequot
Scout Fund, L.P.(21)
|
|
|
13,905,552
|
|
|
18.09
|
%
|
|
13,905,552
|
|
|
—
|
|
|
*
|
|
|
Pequot
Mariner Master Fund, L.P.(22)
|
|
|
7,620,429
|
|
|
9.91
|
%
|
|
7,620,429
|
|
|
—
|
|
|
*
|
|
|
Pequot
Navigator Offshore Fund, Inc.(23)
|
|
|
5,877,224
|
|
|
7.65
|
%
|
|
5,877,224
|
|
|
—
|
|
|
*
|
|
|
Pequot
Diversified Master Fund, Ltd.(24)
|
|
|
367,818
|
|
|
*
|
|
|
367,818
|
|
|
—
|
|
|
*
|
|
|
Premium
Series PCC Limited Cell 33(25)
|
|
|
571,083
|
|
|
*
|
|
|
571,083
|
|
|
—
|
|
|
*
|
|
|
Sherleigh
Associates, Inc., Defined Benefit Plan(26)
|
|
|
15,745,615
|
|
|
20.49
|
%
|
|
15,745,615
|
|
|
—
|
|
|
*
|
|
|
Kuhns
Brothers, Inc(27)
|
|
|
436,468
|
|
|
*
|
|
|
436,468
|
|
|
—
|
|
|
*
|
|
|
John
Starr(28)
|
|
|
872,937
|
|
|
1.14
|
%
|
|
872,937
|
|
|
—
|
|
|
*
|
|
|
John
Kuhns(29)
|
|
|
219,777
|
|
|
*
|
|
|
219,777
|
|
|
—
|
|
|
*
|
|
|
Paul
Kuhns(30)
|
|
|
39,679
|
|
|
*
|
|
|
39,679
|
|
|
—
|
|
|
*
|
|
|
Mary
Fellows(31)
|
|
|
108,235
|
|
|
*
|
|
|
108,235
|
|
|
—
|
|
|
*
|
|
|
Jay
Gutterman(32)
|
|
|
72,304
|
|
|
*
|
|
|
72,304
|
|
|
—
|
|
|
*
|
|
|
Sam
Schoen(33)
|
|
|
198,395
|
|
|
*
|
|
|
198,395
|
|
|
—
|
|
|
*
|
|
|
Robert
Drak(34)
|
|
|
36,152
|
|
|
*
|
|
|
36,152
|
|
|
—
|
|
|
*
|
|
|
Vernon
Oberholtzer(35)
|
|
|
55,110
|
|
|
*
|
|
|
55,110
|
|
|
—
|
|
|
*
|
|
|
Total
Shares
|
|
|
76,860,506
|
|
|
100
|
%
|
|
76,860,506
|
|
|
|
|
|
|
|
|
*
|
Indicates
less than 1%.
|
|
1.
|
Unless
otherwise indicated in the footnotes to this table, the persons and
entities named in the table have sole voting and sole investment
power
with respect to all shares beneficially owned, subject to community
property laws where applicable. Beneficial ownership includes shares
of
Common Stock underlying warrants, options and convertible Series
A and B
Preferred Stock, regardless of when exercisable. Unless the context
expressly provides otherwise, all references in these footnotes to
‘‘shares’’ will be to post- Merger shares of AII Common Stock, even if the
referenced securities had been issued by Aduromed prior to the Merger
and
thereupon converted to shares of AII Common Stock pursuant to its
terms.
|
|
2.
|
Beneficial
ownership includes all shares a holder owns directly or may acquire
through exercisable or non-exercisable options, warrants and
conversions.
|
|
3.
|
Assumes
the sale of all shares offered
hereby.
|
|
4.
|
Consists
of (i) 2,000,000 shares of Aduromed common stock issued to Mr. Tanaka
upon
the merger of Aduromed LLC into Aduromed Corporation on October 11,
2002
which converted into 3,590,000 shares of AII Common Stock upon Merger,
(ii) 2,300,000 shares of Aduromed common stock issued to him as inducement
to enter employment arrangement with Aduromed on January 30, 2003
which
converted into 4,128,500 shares AII Common Stock upon the Merger,
(iii)
300,000 shares of Aduromed issued September 29, 2005 in connection
with
his employment agreement with Aduromed of that date that converted
into
538,500 shares AII Common Stock upon the Merger, plus (iv) 897,500
shares
issuable upon exercise of warrants at an exercise price of $0.0557
per
share, and (v) 5,415,665.78 shares issuable upon exercise of options
at an
exercise price of $0.0557 per share. Mr. Tanaka has been a director
and
the President and CEO of AII since the Merger and is and has been
a
director and the President and CEO of Aduromed for the past three
years.
Brothers and sisters of Mr. Tanaka own 179,500 shares of Common Stock
of
record with respect to which Mr. Tanaka disclaims beneficial
ownership.
|
|
5.
|
Consists
of 1,529,284 shares issuable upon exercise of options at an exercise
price
of $0.1393 per share. Mr. Dunphy has been a director and the CFO
and
Treasurer of AII since the Merger and is and has been a director
and the
CFO and Treasurer of Aduromed since
2005.
|
|
6.
|
Includes
(i) 269,250 shares as part of consulting fee paid on January 30,
2003, and
(ii) 2,549,593 shares issuable upon exercise of options at an exercise
price of $0.1393 per share. Mr. Birch has been Vice President Business
Development of Aduromed since October 1, 2005. Prior to that date
he was
an independent consultant to
Aduromed.
|
|
7.
|
Includes
(i) 269,250 paid as employment incentive compensation on Jamaury
30, 2003,
and (ii) 893,481 shares issuable upon exercise of options at an exercise
price of $0.1393 per share. Mr. Toro is Director of Technical Services
of
Aduromed.
|
|
8.
|
Consists
of 44,875 shares issuable upon exercise of options at an exercise
price of
$0.1393 per share. Mr. Ciotta is Director of Sales (Tri-State Region)
of
Aduromed.
|
|
9.
|
Consists
of 44,875 shares issuable upon exercise of options at an exercise
price of
$0.1393 per share. Mr. Warren is Director of Sales (Central Regions)
of
Aduromed.
|
|
10.
|
Consists
of (i) 704,538 shares plus (ii) warrants for 175,012 shares at an
exercise
price of $0.55713 per share, paid as an investment advisor’s fee by
Aduromed on October 16, 2002. Mr. Chan was a director and
Secretary-Treasurer of Aduromed from September 13, 2002 until his
resignation on December 13, 2002.
|
|
11.
|
Consists
of (i) 1,346,250 shares, plus (ii) warrants for 175,012 shares at
an
exercise price of $0.5571 per share, paid as an investment advisor’s fee
by Aduromed on October 16, 2002. Mr. Kristoff was a director of Aduromed
from the date of its organization in 2002 until his resignation on
November 15, 2005.
|
|
12.
|
Consists
of (i) 269,250 shares of AII Common Stock (post-Merger) originally
issued
by Aduromed as an investor advisor’s fee on October 16, 2002, with (ii)
warrants covering an additional 589,568 shares of AII Common Stock
issuable upon exercise of warrants at an exercise price of $0.5571
per
share, and (iii) 165,329 shares issuable upon conversion of Placement
Agent Warrants, issued in January, 2006, at an exercise price of
$0.37883
per share.
|
|
13.
|
Consists
of (i) shares of Aduromed common stock issued on March 4, 2004 in
consideration for waiver of a put option relating to a private placement
transaction which were converted into 62,825 shares of AII Common
Stock
upon the merger of Aduromed with AII, plus (ii) 161,550 shares issuable
upon exercise of warrants at an exercise price of $0.5571 per
share.
|
|
14.
|
Consists
of (i) shares of Aduromed common stock issued in a private placement
financing transaction on September 10, 2002 plus the issue additional
shares upon conversion of debt on March 12, 2003 which upon the Merger
were converted into 95,135 shares of AII Common Stock, plus (ii)
44,875
shares issuable upon exercise of warrants at an exercise price of
$0.5571
per share.
|
|
15.
|
Consists
of (i) 44,875 shares AII Common Stock (post Merger) originally issued
as
Aduromed common shares in a private placement financing transaction
on
September 31, 2002, with (ii) warrants presently covering an additional
44,875 AII Common Stock, plus (iii) 95,135 shares AII Common Stock
(post
Merger) upon conversion of debt on March 12, 2003, (iv) 44,875 shares
AII
Common Stock (post Merger) for a revolver loan on March 24, 2003,
with (v)
warrants covering an additional 89,750 shares AII Common Stock, and
(vi)
44,875 shares of AII Common Stock for an extension of the revolver
loan on
September 17, 2003.
|
|
16.
|
[Intentionally
left blank]
|
|
17.
|
Consists
of 188,475 shares issuable upon exercise of warrants at an exercise
price
of $0.5571 per share. The warrants had been issued as compensation
in
connection with a financing transaction with Aduromed in the year
2000.
|
|
18.
|
Consists
of (i) 179,500 shares acquired in a private placement financing
transaction with Aduromed on August 1, 2005, plus (ii) 359,000 shares
issuable upon exercise of warrants at an exercise price of $0.5571
per
share. Mr. Rob Meyer has been the Vice President Operations and Marketing
of Aduromed since January 1, 2006. He is the brother of John Meyer.
Each
of them disclaims any beneficial ownership in the shares of the
other
|
|
19.
|
Consists
of (i) 179,500 shares acquired in a private placement financing
transaction with Aduromed on August 2, 2005, plus (ii) 359,000 shares
issuable upon exercise of warrants at an exercise price of $0.5571
per
share.
|
|
20.
|
Acquired
in a private placement financing transaction with Aduromed on August
2,
2005, and consists of (i) 359,000 post Merger AII shares acquired
on date
of financing, (ii) 690,357 post Merger AII Common Stock upon conversion
of
the promissory note on September 14, 2005,plus (iii) 718,000 shares
issuable upon exercise of warrants at an exercise price of $0.5571
per
share.
|
|
21.
|
Consists
of (i) 2,031,701 shares issuable upon conversion of Series A Preferred
Stock, (ii) 4,921,075 shares issuable upon conversion of Series B
Preferred Stock, (iii) 2,031,701 shares upon exercise of Series A
Warrants
at an exercise price of $0.37883 per share, and (iv) 4,921,075 shares
upon
exercise of Series B Warrant at an exercise price of $0.37883 per
share.
|
|
22.
|
Consists
of (i) 1,025,484 shares issuable upon conversion of Series A Preferred
Stock, (ii) 2,784,731 shares issuable upon conversion of Series B
Preferred Stock, (iii) 1,025,483 shares upon exercise of Series A
Warrants
at an exercise price of $0.37883 per share, and (iv) 2,784,731 shares
upon
exercise of Series B Warrant at an exercise price of $0.37883 per
share.
|
|
23.
|
Consists
of (i) 837,547 shares issuable upon conversion of Series A Preferred
Stock, (ii) 2,101,065 shares issuable upon conversion of Series B
Preferred Stock, (iii) 837,547 shares upon exercise of Series A Warrants
at an exercise price of $0.37883 per share, and (iv) 2,101,065 shares
upon
exercise of Series B Warrant at an exercise price of $0.37883 per
share.
|
|
24.
|
Consists
of (i) 50,260 shares issuable upon conversion of Series A Preferred
Stock,
(ii) 133,649 shares issuable upon conversion of Series B Preferred
Stock,
(iii) 50,260 shares upon exercise of Series A Warrants at an exercise
price of $0.37883 per share, and (iv) 133,649 shares upon exercise
of
Series B Warrant at an exercise price of $0.37883 per
share.
|
|
25.
|
Consists
of (i) 81,673 shares issuable upon conversion of Series A Preferred
Stock,
(ii) 203,869 shares issuable upon conversion of Series B Preferred
Stock,
(iii) 81,672 shares upon exercise of Series A Warrants at an exercise
price of $0.37883 per share, and (iv) 203,869 shares upon exercise
of
Series B Warrant at an exercise price of $0.37883 per
share.
|
|
26.
|
Consists
of (i) 2,237,037 shares issuable upon conversion of Series A Preferred
Stock, (ii) 5,635,771 shares issuable upon conversion of Series B
Preferred Stock, (iii) 2,237,036 shares upon exercise of Series A
Warrants
at an exercise price of $0.37883 per share, and (iv) 5,635,771 shares
upon
exercise of Series B Warrants at an exercise price of $0.37883 per
share.
|
|
27.
|
Consists
of 436,468 shares issuable upon conversion of Placement Agent Warrants
at
an exercise price of $0.37883 per
share.
|
|
28.
|
Consists
of 872,937 shares issuable upon conversion of Placement Agent Warrants
at
an exercise price of $0.37883 per
share.
|
|
29.
|
Consists
of 219,777 shares issuable upon conversion of Placement Agent Warrants
at
an exercise price of $0.37883 per
share.
|
|
30.
|
Consists
of 39,679 shares issuable upon conversion of Placement Agent Warrants
at
an exercise price of $0.37883 per
share.
|
|
31.
|
Consists
of 108,235 shares issuable upon conversion of Placement Agent Warrants
at
an exercise price of $0.37883 per
share.
|
|
32.
|
Consists
of 72,304 shares issuable upon conversion of Placement Agent Warrants
at
an exercise price of $0.37883 per
share.
|
|
33.
|
Consists
of 198,395 shares issuable upon conversion of Placement Agent Warrants
at
an exercise price of $0.37883 per
share.
|
|
34.
|
Consists
of 36,152 shares issuable upon conversion of Placement Agent Warrants
at
an exercise price of $0.37883 per
share.
|
|
35.
|
Includes
55,110 shares issuable upon conversion of Placement Agent Warrants
at an
exercise price of $0.37883 per
share.
|
|
36.
|
Consists
of the shares issued to Mr. Hertweck upon the merger of Aduromed
LLC into
Aduromed Corporation on October 11, 2002, which were converted into
shares
of AII Common Stock upon the merger of Aduromed with AII on January
23,
2006. Mr. Hertweck has been the Vice President Sales of Aduromed
since
January 1, 2006.
|
|
37.
|
Consists
of the shares issued by Aduromed to Mr. Bendis as a consulting fee
on
October 16, 2002 which were converted into shares of AII Common Stock
upon
the merger of Aduromed with AII on January 23, 2006. Mr. Bendis has
been a
director of AII since the Merger, nominated by Mr. Tanaka. (See
‘‘Stockholders Agreement’’).
|
|
38.
|
Messrs.
Chan and Kristoff each own a 50% voting membership interest in Delphinian
Quest Advisors, LLC.
|
|
39.
|
Mr.
Kristoff’s mother, Stelle Kristoff owns of record 364,385 shares of Common
Stock with respect to which Mr. Kristoff disclaims beneficial
ownership.
|
|
40.
|
Acquired
as part of a private placement financing with Aduromed on April 8,
2005.
The last known person with voting and investment control of this
entity is
Khai Wain Ng.
|
| 42. |
[Intentionally
left blank]
|
|
43.
|
Consists
of shares issued by Aduromed in a private placement financing transaction
on June 17, 2003. The last known person with voting and investment
control
of this entity is Peter Li u.
|
|
44.
|
[Intentionally
left blank]
|
|
45.
|
[Intentionally
left blank]
|
| 46. |
[Intentionally
left blank]
|
|
48.
|
The
following selling holders acquired shares, in the amounts and on
the dates
indicated, of AII’s Common Stock from Mr. Vernon Oberholtzer, each in a
privately-negotiated transaction. Mr. Oberholtzer had acquired the
shares
as an original issue from Aduromed Corporation as a finder’s fee in
October, 2002. Mr. Oberholtzer has never been an officer, director,
employee or affiliate of either AII or
Aduromed
|
|
Selling
Holder
|
|
Date
of Acquisition
|
|
No.
of Shares of
AII
Common Stock
Post
Merger
|
|
|
Bjoern
Reinke
|
|
|
2/26/04
|
|
|
98,725
|
|
|
Klaus
Huebner
|
|
|
3/5/04
|
|
|
44,875
|
|
|
Arno
Rieck
|
|
|
3/1/04
|
|
|
35,900
|
|
|
Joerg
Luehring
|
|
|
5/27/04
|
|
|
21,540
|
|
|
Heiko
Storz
|
|
|
5/27/04
|
|
|
17,950
|
|
|
Franz
Peter Gruber
|
|
|
5/27/04
|
|
|
5,385
|
|
|
Ursel
Jarschal
|
|
|
6/8/04
|
|
|
44,875
|
|
|
49.
|
The
following selling holders acquired shares, in the amounts and on
the dates
indicated, of AII’s Common Stock from Paul T. Chan, each in a
privately-negotiated transaction. Mr. Chan had acquired the original
shares from Aduromed Corporation as an investment adviser’s fee in
October, 2002. From September 13, 2002 until his resignation on December
13, 2002, Mr. Chan was a director and Secretary-Treasurer of Aduromed.
Since then he has not been an officer. Director, employee or affiliate
of
either AII or Aduromed.
|
|
Selling
Holder
|
|
Date
of Acquisition
|
|
No.
of Shares of
AII
Common Stock
Post
Merger
|
|
|
Rainer
Seifert and Christel Siefert JTEN
|
|
|
6/8/04
|
|
|
44,875
|
|
|
Bjoern
Reinke
|
|
|
10/28/04
|
|
|
8,975
|
|
|
Berward
Taileur
|
|
|
10/28/04
|
|
|
26,925
|
|
|
Arno
Rieck
|
|
|
10/28/04
|
|
|
8,975
|
|
|
Bjoern
Reinke
|
|
|
1/26/05
|
|
|
17,950
|
|
|
Hans
Juergen Herbst
|
|
|
2/23/05
|
|
|
35,900
|
|
|
UWE
Struck
|
|
|
8/24/05
|
|
|
13,463
|
|
|
50.
|
The
following selling holders acquired shares, in the amounts and on
the dates
indicated, of AII’s Common Stock from Mr. William Lawlor, each in a
privately-negotiated transaction. Mr. Lawlor had served as a vice
president of Aduromred from October, 2002 until his resignation on
June
21, 2005 and acquired the shares as part of his compensation on October
16, 2002.
|
|
Selling
Holder
|
|
Date
of Acquisition
|
|
No.
of Shares of
AII
Common Stock
Post
Merger
|
|
|
Klaus
Dieter Paul
|
|
|
11/11/05
|
|
|
62,825
|
|
|
Klaus
Huebner
|
|
|
11/11/05
|
|
|
21,540
|
|
|
51.
|
The
following selling holders acquired shares, in the amounts and on
the dates
indicated, upon exercise of conversion rights under bridge loan promissory
notes made by Aduromed in August,
2005:
|
|
Selling
Holder
|
|
Date
of Acquisition
|
|
No.
of Shares of
AII
Common Stock
Post
Merger
|
|
|
Blackmont
Capital in Trust for Wm. Griffis
|
|
|
1/13/06
|
|
|
116,675
|
|
|
Peter
M. Conetta
|
|
|
1/31/06
|
|
|
170,525
|
|
|
Rick
L. Ackerman
|
|
|
1/31/06
|
|
|
85,263
|
|
|
T.
Krawiecki Jr. & Sharon M. Krawiecki JTWROS
|
|
|
1/31/06
|
|
|
85,263
|
|
The
persons listed in footnotes (28)-(35) above acquired their securities (i.e.
Placement Agents Warrants) as affiliates of Kuhns Brothers, Inc. which had
received them as part of the consideration paid to it for assisting in obtaining
the financing from the Investors Group. By agreement with the Company these
were
‘‘restricted’’ securities within the meaning of Rule 144 of the Securities Act,
and were not acquired to the knowledge of the Company under any agreements
or
understandings, directly or indirectly, with any person to distribute the
securities at the time of their acquisition.
Except
for Kuhns Brothers, Inc. and its affiliates none of the foregoing Selling
Holders is known by the Company to be a broker-dealer or a broker-dealer
affiliate.
The
selling holders that are affiliates of Kuhns Brothers, Inc. within the meaning
of the Securities Act of 1933, are ‘‘underwriters’’ within the meaning of the
Act.
Except
for (i) the relationships between AII and Aduromed with its officers, directors
and employees arising from their serving in those capacities, and (ii) the
Company’s agreements with the Investors Group discussed below under this section
(‘‘SELLING HOLDERS’’) there are no continuing relationships between the Company
and the selling holders.
There
are
no compensation fees payable under financing agreements with selling holders,
including those payable as to future transactions.
Amended
and Restated Stockholders Agreement
The
Company, Aduromed, the Investors Group and persons holding a majority of the
Common Stock of the Company (‘‘Stockholders’’) entered into an Amended and
Restated Stockholders Agreement (‘‘Stockholders Agreement’’) dated as of January
23, 2006 by the terms of which the Stockholders and the Preferred Holders have
agreed to a provision that, of the seven members on the Board of Directors
of
the Company, the Preferred Holders and the Stockholders will cause five to
be
nominees of Damien R. Tanaka, and two will be the nominees of the Preferred
Holders.
On
January 20, 2006, the Company and Aduromed entered into a registration rights
agreement with those entities comprising Investors Group (the ‘‘Purchasers’’),
amending and restating a previous agreement between Aduromed and those entities
(the ‘‘Registration Rights Agreement’’).
Piggyback
Registration Rights
Should
the Company propose to register any of its securities under the Securities
Act
using a registration statement form that may be used for registration of the
Registrable Securities to registration statements, each Purchaser would be
also
entitled under the Registration Rights Agreement, for a period continuing until
the earlier of January 19, 2011, and the date upon which such Purchaser shall
have sold all its Registrable Securities, to require the Company to include
all
Registrable Securities the Purchaser may have requested for inclusion in the
registration statement (a ‘‘Piggyback Registration’’).
The
Piggyback Registration rights are subject to limitation upon that number of
Registrable Securities that each Purchaser may be include in the Piggyback
Registration in the case of registration of a primary offering by the Company
through underwriters to the extent the managing underwriter believes a secondary
offering of Registrable Securities might materially and adversely effect the
underwritten offering. In the event a managing underwriter should request a
cutback in the requested inclusion of Registrable Securities such cutback will
be imposed upon the requesting Purchasers on a prorated basis, with the right
in
any requesting Purchaser to withdraw its securities from the Piggyback
Registration.
DESCRIPTION
OF SECURITIES
General
The
following summary includes a description of material provisions of the Company’s
capital stock.
Authorized
and Outstanding Securities
The
Company is authorized to issue 100,000,000 shares of Common Stock par value
$0.0001 per share (the ‘‘Common Stock’’), and 40,000,000 shares of preferred
stock par value $0.0001 per share. As of March 30, 2007, there were issued
and
outstanding:
|
|
● |
20,942,857
shares of Common Stock, of which 259,600 shares are held by Aduromed.
For
accounting purposes these 259,600 shares have been treated as ‘‘treasury
shares’’, and the balance of 20,683,239 are issued and
outstanding.
|
|
|
● |
6,263,702
shares of Series A Preferred Stock, par value $0.0001 per share
which are
immediately convertible into 6,263,702 shares of Common Stock (the
‘‘Series A Preferred’’).
|
|
|
● |
Warrants
issued in connection with the issuance of the Series A Preferred
entitling
the holder(s) to purchase 6,263,699 shares of the Common Stock
at a price
of $0.37883 per share of Common Stock through September 29, 2010
(the
‘‘Series A Preferred
Warrants’’).
|
|
|
● |
15,780,160
shares of Series B Preferred stock, par value $0.0001 per share
which are
immediately convertible into 15,780,160 shares of Common Stock
(the
‘‘Series B Preferred’’).
|
|
|
● |
Warrants
issued in connection with the issuance of the Series B Preferred
entitling
the holder(s) to purchase 15,780,160 shares of Common Stock at
a price of
$0.37883 per share of Common Stock through January 23, 2013 (the
‘‘Series
B Preferred Warrants’’).
|
|
|
● |
Warrants
issued to the placement agent for the purchase of 2,204,386 shares
of
Common Stock at a price of $0.37883 per share of Common Stock through
January 24, 2011 (the ‘‘Placement Agent
Warrants’’).
|
|
|
● |
Warrants
issued originally by Aduromed which were converted to warrants
of the
Company issued to various parties for the purchase of 5,597,619
shares of
Common Stock at prices varying from $0.05571 to $0.55710 per share
of
Common Stock through various dates, the latest of which is September
22,
2012 (the ‘‘Aduromed
Warrants’’).
|
|
|
● |
Options
issued originally by Aduromed which were converted to options of
the
Company issued to various employees for the purchase of 10,477,774
shares
of common stock varying from $0.05572 to $0.55710 per share of
common
stock through various dates the latest of which is September 22,
2012 (the
‘‘Aduromed Options’’)
|
Common
Stock
Holders
of the Company’s Common Stock are entitled to receive ratably, from funds
legally available for the payment thereof, dividends when and as declared by
resolution of the board of directors, subject to any preferential dividend
rights which may be granted to holders of any preferred stock authorized and
issued by the board of directors. No dividends have ever been declared by the
Board of Directors on the Common Stock. Holders of the Company’s Common Stock do
not have cumulative voting rights and are entitled to one vote per share on
all
matters to be voted upon by stockholders with the result that if the holders
of
more than 50% of the shares of Common Stock and the Series A and Series B
Preferred Stock, they could elect all of the directors. See, however, ‘‘Amended
and Restated Stockholders Agreement” above. The Common Stock is not entitled to
preemptive rights and is not subject to redemption, including sinking fund
provisions, or conversion. Upon the liquidation, dissolution or winding up
of
the Company, the assets, if any, legally available for distribution to
stockholders, are distributable ratably among the holders of the Common Stock
after payment of all classes or series of the Company’s preferred stock. All
outstanding shares of the Common Stock are validly issued, fully-paid and
nonassessable. The rights, preferences and privileges of holders of the Common
Stock are subject to the preferential rights of all classes or series of
preferred stock currently outstanding or issued in the future.
Aduromed,
the Investors Group and persons holding a majority of the Common Stock have
agreed that of the seven members on the Board of Directors of AII such parties
will cause five to be nominees of Damien R. Tanaka, and two to be nominees
of
the Preferred Holders. (See ‘‘Stockholders Agreement’’ below).
Preferred
Stock
The
board
of directors of the Company has the authority, without further action by the
stockholders, to issue from time to time, the preferred stock in one or more
series and to fix the number of shares, designations, preferences, powers,
and
relative, participating, optional or other special rights and the qualifications
or restrictions thereof. The preferences, powers, rights and restrictions of
different series of preferred stock may differ with respect to dividend rates,
amounts payable on liquidation, voting rights, conversion rights, redemption
provisions, sinking fund provisions and other matters. The issuance of preferred
stock could decrease the amount of earnings and assets available for
distribution to holders of the Common Stock or affect adversely the rights
and
powers, including voting rights, of the holders of Common Stock. Additionally,
as discussed below, the issuance of preferred stock with voting and/or
conversion rights may adversely affect the voting power of the holders of the
Common Stock, including the loss of voting control to others.
Series
A Preferred Stock and Series B Preferred Stock
Dividends. Holders
of the Series A Preferred Stock and the Series B Preferred Stock are entitled
to
receive dividends out of funds legally available therefore at the annual rate
of
six percent (6%) of the price paid for each share of Series A Preferred Stock
and Series B Preferred Stock ($0.31755) payable on each March 15 and September
15. Dividends are cumulative on a daily basis and unpaid dividends will be
compounded on each payment date.
Voting.
Each
share of Series A Preferred Stock and Series B Preferred Stock is entitled
to
one vote equally with a share of Common Stock on all matters on which holders
of
Common Stock are entitled to vote as if all three classes of stock are voting
as
one class.
The
Company may not, without the approval of the holders of more than fifty percent
(50%) of each of the outstanding shares of the Series A Preferred Stock and
Series B Preferred Stock, voting as separate classes:
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● |
adversely
alter the rights, preferences or privileges of the Series A Preferred
Stock or Series B Preferred Stock, as the case may
be;
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● |
increase
the authorized number of shares of Series A Preferred Stock or
Series B
Preferred Stock, as the case may be; authorize or issue any new
class or
series of the Company's capital stock or debt convertible into,
exchangeable for or having option rights to purchase shares of
such new
class or series or reclassify any class or series of the Company's
capital
stock;
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increase
the authorized number of members of the Company’s board of directors;
amend or repeal any provision of, or add any provision to, the Company's
certificate of incorporation, certificates of designations or bylaws
in a
manner that adversely affects the rights of the holders of Series
A
Preferred Stock or the Series B Preferred
Stock;
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pay
or set aside funds for the payment of any dividends or make any
distributions on any of the Company's capital stock (other than
the Series
A Preferred Stock or the Series B Preferred
Stock);
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make,
or permit any of its subsidiaries to make, any material change, directly
or indirectly, in the nature of the Company's or such subsidiary's
business;
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incur
or become liable for, or permit any of its subsidiaries to incur
or become
liable for, through guarantees or otherwise, directly or indirectly,
any
indebtedness in excess of $5 million in the aggregate at any one
time
outstanding (calculated on a consolidated basis for the Company
and its
subsidiaries);
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for
so long as the outstanding shares of Series A Preferred Stock and
Series B
Preferred Stock shall collectively represent 5% of the outstanding
shares
of capital stock of the Company or any successor entity thereto
(calculated on a fully diluted basis), engage, or permit any of
its
subsidiaries to engage, in any merger, consolidation, acquisition,
recapitalization, joint venture or
partnership;
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directly
or indirectly dispose of all of the equity interests in any of
its direct
or indirect subsidiaries or directly or indirectly dispose of all
or
substantially all of the assets of the Company or any of its direct
or
indirect subsidiaries;
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authorize,
approve or implement any employee option plan or similar employee
equity
program;
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permit
any of its subsidiaries to issue any of its capital stock or other
equity
securities to any person or entity other than the Company or any
of the
Company's wholly-owned subsidiaries or otherwise engage in any
transaction, or permit any of its subsidiaries to engage in any
transaction, which results in the Company ceasing to directly or
indirectly own 100% of the issued and outstanding capital stock
and other
equity securities of direct or indirect subsidiary of the
Company;
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enter
into, or permit any of its subsidiaries to enter into, any contract
or
other agreement to consummate any of the
foregoing.
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Conversion. Each
share of Series A Preferred Stock and Series B Preferred Stock shall be
convertible, at the option of the holder thereof upon exercise, without the
payment of additional consideration, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing the price
paid
for each share of Series A Preferred Stock and Series B Preferred Stock
($0.31755) by the conversion price (the original purchase price, subject to
adjustment, among other things, for the issuance of any shares of Common Stock
at a price below the price paid for the Series A Preferred Stock or Series
B
Preferred Stock). Under certain circumstances the Company may cause the
conversion of all, but not less than all, of the Series A Preferred Stock and/or
the Series B Preferred Stock into Common Stock provided that the closing price
of the Common Stock has exceeded the conversion price of the Series A Preferred
or the Series B Preferred Stock, as the case may be, by four times for at least
twenty (20) trading days in a period of thirty (30) consecutive trading
days.
Liquidation
Rights. Upon
the
liquidation or dissolution of the Company the holders of Series A Preferred
Stock and Series B Preferred Stock shall be entitled to receive out of the
Company's assets, pari
passu,
for
each share of Series A Preferred Stock and Series B Stock outstanding at the
time thereof, distributions in the amount of $0.31755 (subject to adjustment
from time to time as a result of a stock split, stock combination or any other
similar event) plus an amount equal to all accumulated but unpaid dividends
thereon, whether or not declared.
There
are
no redemption rights or sinking fund provisions with respect to the Series
A
Preferred Stock or the Series B Preferred Stock.
Series
A Preferred Warrants and Series B Preferred Warrants
Holders
of Series A Preferred Warrants, all of which are immediately exercisable, are
entitled to purchase up to the number of shares of Common Stock that equal
the
number of shares of Series A Preferred Stock and Series B Preferred Stock
originally issued. The exercise price is $0.37883 per share. Both the exercise
price and the number of shares of Common Stock may be adjusted for certain
events such as stock splits and the issuance of shares of Common Stock for
a
price less than the exercise price. The Series A Preferred Warrants are
exercisable until September 30, 2012. The Series B Preferred Warrants are
exercisable until January 24, 2013.
Placement
Agent Warrants. Holders
of the Placement Agent Warrants, which are immediately exercisable, are entitled
to purchase up to 2,204,386 shares of Common Stock at a an exercise price of
$0.37883 per share. The Placement Agent Warrants are exercisable until January
24, 2011.
Aduromed
Warrants. Prior
to
the Merger, Aduromed had issued a number of warrants, all of which are
immediately exercisable, at various exercise prices and with various exercise
periods as follows:
|
Common
Shares
|
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Exercise
Price
Per
Warrant
($
Per Share)
|
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Termination
Date
|
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897,500
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0.05571
|
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9/22/2012
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89,750
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0.33426
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3/23/2008
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1,567,844
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0.55710
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9/22/2007
|
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161,550
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0.55710
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5/27/2008
|
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89,750
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0.55710
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10/30/2007
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314,125
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0.55710
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3/19/2008
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852,625
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0.55710
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6/08/2008
|
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188,475
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0.55710
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12/14/2007
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359,000
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0.55710
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7/31/2010
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1,077,000
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0.55710
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8/01/2010
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5,579,619
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All
the
Aduromed Warrants were converted to Company warrants at the time of the Merger.
With the exception of termination dates, exercise rights, and amounts of Common
Shares that may be acquired thereunder, all the Aduromed Warrants have the
same
terms and conditions.
LEGAL
MATTERS
Macpherson
Counsel LLP, New York, New York will pass upon the validity of the Common Stock
being offered hereby.
EXPERTS
The
financial statements for the Company for the fiscal years ended 2006 and have
been audited by Child, Van Wagoner & Bradshaw, PLLC, an independent
registered public accounting firm, to the extent and for the periods set forth
in their respective reports appearing elsewhere herein, and are included in
reliance upon such reports given upon the authority of such firm as experts
in
accounting and auditing.
SECURITIES
AND EXCHANGE COMMISSION POSITION ON
INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
The
Certificate of Incorporation of the Company requires it to indemnify its
officers, directors, employees and agents against certain liabilities incurred
by them in those capacities if they acted in good faith and reasonably believed
their conduct was in the best interests of the Company or not opposed to it.
The
Company is also required to indemnify a person who is or was a director,
officer, employee or agent of the Company and who was successful, on the merits
or otherwise, in defense of any proceeding to which he was a party, against
reasonable expenses, which include attorneys' fees, incurred by him or her
in
connection with the proceeding.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933
may
be permitted to directors, officers and controlling persons of the Company
under
the provisions discussed in the previous paragraph, or otherwise, the Company
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in that Act and
is,
therefore, unenforceable.
ORGANIZATION
WITHIN LAST FIVE YEARS
Except
as
provided in ‘‘Prior Transactions with Officers of the Company and Aduromed’’
below, no transactions occurred in the last two years and through the date
of
this filing, directly or indirectly, between the Company and any director or
executive officer that exceeded $60,000.
DESCRIPTION
OF BUSINESS
General.
AII
conducts its business primarily through its wholly-owned subsidiary, Aduromed.
Aduromed is in the business of providing solutions for managing medical waste
on
site including designing, selling, installing and servicing on site (i.e.
"in-situ")
turnkey systems to treat regulated medical waste. Aduromed provides these
systems to hospitals and other medical facilities as efficient, safe, cost
effective and legally compliant solutions to incineration, off site hauling
of
untreated waste and other alternative treatment technologies and
methodologies.
Products.
Aduromed’s
principal products are the Aduromed MedClean® series systems. The Aduromed
MedClean® system employs the following equipment and machinery:
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an
autoclave vessel to sterilize the medical
waste;
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a
shredding device, the MedClean® Shredder, to convert sterilized waste
material into a harmless, non-recognizable confetti-like material
qualifying the end product as safe municipal solid
waste;
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a
unique AutoTouchÔ
control station with software and hardware components that integrate
and
bundle all operating and data recording functions into a system complying
with regulatory requirements for conversion and disposal of medical
waste,
including real time centralized monitoring of the system's
functions;
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| · |
a
material transporter to mechanically transport the processed waste
from
shredder to the municipal solid waste compacting dumpster,
and;
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a
QuietCartÔ
transport cart system to facilitate a single source containerization
of
the infectious waste from generation, sterilization, processing and
return
for refill without need for human interaction for ultimate operator
safety.
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The
control panel of the AutoTouchÔ
Control
Station assures regulatory compliance by means of proprietary software. The
software prevents any deviation from the step-by-step processing of the waste,
requires insertion of codes by operators to access the system and monitors
and
records on a real time basis. It governs the various aspects of the system's
processes, including the load weight during each cycle and the calculation
and
employment of the proper sterilization parameters of weight, pressure,
temperature and time. The ability to shortcut or over-ride any of the steps
in
the waste conversion process is circumscribed by the features of the control
panel and its software.
Operation
of the system through the control panel is simple, since it dictates each
step
to be taken, once the operator enters the appropriate codes to open up the
control screen, and prohibits the ability of an operator to short cut the
required steps and procedures. Relatively little instruction is required
of the
operator. A tutorial is offered by the software through the control panel,
and
an operator can be fully trained within a few hours. The AutoTouchÔ
control
system can communicate in multiple languages, including English and
Spanish.
The
AutoTouchÔ
software
permits real time centralized monitoring of all the functions and uses of each
system by Aduromed. Additionally, the centralized monitors track proper
operation of a particular system. They also alert Aduromed to the need to
provide clients with supplies and preventative maintenance visits.
The
AutoTouchÔ
control
panel and software are proprietary properties of Aduromed and unique within
the
industry.
Consumable
supplies, which Aduromed sells periodically to its customers, include liners
for
Aduromed's proprietary QuietCartÔ,
deodorizing pellets and liquids for use in the autoclave, paper print rolls
for
recording data emanating from the control panel and high temperature lubricants
for the systems' machinery and equipment. The cutting blades and other parts
for
the shredders must be replaced from time to time and are purchased through
Aduromed as the exclusive distributor to hospital and medical facilities for
Weima America Incorporated.
The
series of MedClean® systems offered by Aduromed includes:
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MC4
Series: Capacity - 300 to 600 pounds per cycle, up to 1,100 tons
per year
typically used in hospital facilities with up to 500
beds.
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MC5
Series: Capacity - 450 to 900 pounds per cycle, up to 1,750 tons
per year
to be used in hospital facilities with up to 1,500
beds.
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MC7
Series: Capacity - 2,500 to 5,000 pounds per cycle, with up to 9,500
tons
per year, suited for very large or co-located hospital campus settings
or
off-site treatment facilities.
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The
designed capacities of the respective systems may be increased or reduced to
allow for the needs of the particular medical facility by extending or
contracting the overall length of the autoclave. Each processing cycle is
approximately 45 to 60 minutes in duration.
The
sales
price for design and installation of a MedClean® system has averaged
approximately $450,000.
The
Medical Waste Treatment Market
The
market for medical waste treatment is segmented by customer size: Large Quantity
Generators (“LQGs”), those who generate 2,000 lbs. or more of waste a month, and
Small Quantity Generators (“SQGs”), those who generate less. LQGs generally
consist of hospitals, nursing homes, clinics, medical groups, county or city
health departments and laboratories. SQGs are represented by physicians,
dentists and veterinarians in private practice, of which physicians generate
the
highest percentage of waste.
On-Site
Medical Waste Treatment Equipment Market
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Small
Quantity Generators
|
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Large
Quantity Generators
|
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#
of Sites
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370,500
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11,500
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%
Using Haulers
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100
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%
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85
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%
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#
specifically suited for MedClean Systems
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185,000
|
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3,000
|
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Aduromed
currently addresses the LQGs with its MedClean® 4, 5 and 7 Series Systems.
Aduromed’s MedClean® Systems are marketed directly by its sales and marketing
group. As of March_23, 2007, the Company had a backlog of orders for MedClean®
Systems in the amount of $1,805,422.
For
SQGs
there has been no realistic alternative to hauling, and any on-site solution
have been too expensive. Because of this, the SQG market represents an
opportunity for our MedClean® 30 or MedClean® 50 Series Systems, which are
currently in development. These two systems are currently pending patents for
their proprietary process. Initially, they will be targeted at Medical
Laboratories and large clinics.
The
current US medical waste market is estimated to be $1.7 billion and is expected
to grow to $2.3 billion by 2010. Source: U.S.
Waste Management and Disposal,
Frost
& Sullivan, 2003.
Aduromed
currently has 31 systems installed in 28 hospitals throughout the United States
and Puerto Rico.
Governmental
Regulations-Federal
Prior
to
2002, the principal method of disposing of most regulated medical waste (“RMW”)
was through on-site incineration. Because of the promulgation of regulations
by
the Environmental Protection Agency (“EPA”) that came into effect on September
15, 2002, setting minimum emission limits for RMW incinerators for such
pollutants as dioxins, nitrogen oxides, lead, cadmium and mercury, the use
of
on-site incinerators in the U.S. has drastically diminished. As a consequence,
the methods of on-site disposal of RMW have been limited to steam sterilization,
chemical treatment and microwave.
Federal
agencies which regulate RMW are the EPA, the Occupational Safety and Health
Administration ("OSHA"), the U.S. Department of Transportation (the "U.S. DOT")
and the U.S. Postal Service. These agencies regulate RMW under a variety of
statutes and regulations, including the following:
| · |
MEDICAL
WASTE TRACKING ACT OF 1988 ("MWTA”). The
primary objective of the MWTA was to ensure that RMW generated in
a
covered state which posed environmental problems, including an unsightly
appearance, was delivered to disposal or treatment facilities with
minimum
exposure to waste management workers and the public. The MWTA's tracking
requirements included accounting for all waste transported and imposed
civil and criminal sanctions for violations. The MWTA demonstration
program expired in 1991, but the MWTA established a model followed
by many
states in developing their specific medical waste regulatory
frameworks.
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CLEAN
AIR ACT REGULATIONS.
In August 1997, the EPA adopted regulations under the Clean Air Act
Amendments of 1990 that limit the discharge into the atmosphere of
pollutants released by medical waste incineration. These regulations
required every state to submit to the EPA for approval a plan to
meet
minimum emission standards for these pollutants.
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OCCUPATIONAL
SAFETY AND HEALTH ACT OF 1970.
The Occupational Safety and Health Act of 1970 authorizes OSHA to
issue
occupational safety and health standards. OSHA regulations are designed
to
minimize the exposure of employees to hazardous work environments,
including RMW.
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RESOURCE
CONSERVATION AND RECOVERY ACT OF 1976 ("RCRA").
RCRA required the EPA to promulgate regulations identifying hazardous
wastes. RCRA also created standards for the generation, transportation,
treatment, storage and disposal of solid and hazardous wastes. These
standards included a documentation program for the transportation
of
hazardous wastes and a permit system for solid and hazardous waste
disposal facilities. RMW is currently considered non-hazardous solid
wastes under RCRA. However, some substances collected by some of
Aduromed's customers, including photographic fixer developer solutions,
lead foils and dental amalgam, are considered hazardous
wastes.
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DOT
REGULATIONS.
The U.S. DOT has put regulations into effect under the Hazardous
Materials
Transportation Authorization Act of 1994 which requires customers
to
package and label RMW in compliance with designated standards, and
which
incorporate blood-borne pathogens standards issued by OSHA. Under
these
standards, customers must, among other things, identify packaging
with a
"biohazard" marking on the outer packaging, and medical waste containers
must be sufficiently rigid and strong to prevent tearing or bursting
and
must be puncture-resistant, leak-resistant, properly sealed and impervious
to moisture. DOT regulations also require that a transporter be capable
of
responding on a 24-hour-a-day basis in the event of an accident,
spill, or
release to the environment of a hazardous
material.
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COMPREHENSIVE
ENVIRONMENTAL RESPONSE, COMPENSATION AND LIABILITY ACT OF 1980
("CERCLA").
CERCLA, established a regulatory and remedial program to provide
for the
investigation and cleanup of facilities that have released or threaten
to
release hazardous substances into the environment. CERCLA and state
laws
similar to it may impose strict, joint and several liability on the
current and former owners and operators of facilities from which
releases
of hazardous substances have occurred and on the generators and
transporters of the hazardous substances that come to be located
at these
facilities. Responsible parties may be liable for substantial site
investigation and cleanup costs and natural resource damages, regardless
of whether they exercised due care and complied with applicable laws
and
regulations. If a customer were found to be a responsible party for
a
particular site, it could be required to pay the entire cost of the
site
investigation and cleanup, even though other parties also may be
liable.
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UNITED
STATES POSTAL SERVICE.
Customers must obtain permits from the U.S. Postal Service to conduct
programs, pursuant to which they mail approved "sharps" (needles,
knives,
broken glass and the like) containers directly to treatment
facilities.
|
Governmental
Regulations-State and Local
Each
state has its own regulations related to the handling, treatment and storage
of
medical waste. Although there are many differences among the various state
laws
and regulations, many states have followed the medical waste model under the
MWTA and have implemented programs under RCRA. State agencies involved in
regulating the medical waste industry are frequently the departments of health
and environmental protection agencies. In addition, many local governments
have
ordinances, local laws and regulations, such as zoning and health regulations,
including ordinances relating to the disposition of sterilized effluents into
sewage systems and municipal disposal sites which affect our customers'
operations.
Most
states require segregation of different types of medical waste at the hospital
or other location where they were created. A majority of states require that
the
universal biohazard symbol or a label appear on medical waste containers.
Storage regulations may apply to the party generating the waste, the treatment
facility, the transport vehicle, or all three. Storage rules seek to identify
and secure the storage area for public safety as well as set standards for
the
manner and length of storage. Many states require employee training for safe
environmental cleanup through emergency spill and decontamination plans. Many
states also require that transporters carry spill equipment in their vehicles.
Those states whose regulatory framework relies on the MWTA model have tracking
document systems in place.
Pursuant
to medical waste incinerator regulations adopted by the EPA in 1997, every
state
was required by September 1998 to adopt a plan to comply with federal guidelines
which, among other things, limit the release of some airborne pollutants from
medical waste incinerators to levels prescribed by the EPA. Each state's
implementation plan must be at least as restrictive as the federal emissions
standards.
Effect
of Regulations on the Companies’ Business
Aduromed
manufactures and sells its MedClean® systems that sterilize RMW by sterilization
in an autoclave chamber and subsequent shredding of the material enabling the
customer to dispose of the residue as municipal solid waste. The operation
of
the MedClean® system and the disposal of the waste are the responsibility of the
customer. As a result, Aduromed is not subject to the multitude of governmental
regulations that typify the handling and disposition of solid waste. Virtually
all of Aduromed's competitors are subject to one or more of the various
regulatory regimes associated with the medical waste disposal business as the
systems and services offered by these competitors involve incineration, chemical
treatment or transportation of medical waste.
Aduromed's
customers use landfills operated by parties unrelated to Aduromed to dispose
of
treated medical waste from medical facilities. Aduromed does not own or operate
any landfills. Waste is not regulated as hazardous under RCRA unless it contains
hazardous substances exceeding certain quantities or concentration levels,
meets
specified descriptions, or exhibits specific hazardous characteristics.
Following treatment, waste from Aduromed's MedClean® systems is disposed of as
non-hazardous waste.
Competition
RMW
has
historically been disposed of mainly through the use of off-site hauling
contractors and by incineration. Presently, in the U.S. many different types
of
technologies have been introduced to meet the new regulatory requirements for
disposal of RMW. Some of these technologies include:
| · |
DISINFECTANT.
This process involves the simultaneous shredding and disinfecting
of the
infectious medical waste. The process can only handle small batches
in
each cycle and has a capacity of approximately 70 to 400 pounds a
day,
which is not sufficient to handle the overall requirements of most
hospitals ranging from 500 to 9,000 pounds per
day.
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| · |
CHEMICAL
REAGENTS.
The use of chemical reagents is subject to federal laws and regulations
of
the EPA that classify the chemicals involved as "pesticides". Also,
there
is considerable limitation on the volumes that can be treated by
this
method. It is not suitable for disposal of infectious medical waste
generated by hospitals and other large medical facilities since it
does
not have the capacity to handle such
volumes.
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| · |
MICROWAVE
TECHNOLOGY.
Microwave technology is a process of disinfection that exposes material
to
moist heat generated by microwave energy. Use of this technology
requires
that proper precautions be taken to exclude the treatment of hazardous
material so that toxic emissions do not occur. The complete unit
must also
be operated under negative pressure as infectious waste is normally
shredded prior to disinfection and may create conditions where infection
can be transformed into an aerosol prior to treatment. Also, offensive
odors may be generated around the unit. The capital cost and space
requirement for this type of system is relatively
high.
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| · |
THERMAL
PROCESSES.
Thermal processes are dry heat processes and do not use water or
steam,
but forced convection, circulating heated air around the waste or
using
radiant heaters. Companies have developed both large and small dry-heat
systems, operating at temperatures between 350°F-700°F.
Use of dry heat requires longer treatment times with precautions
required
to prevent potential combustion of the waste material during each
cycle.
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| · |
HIGH
HEAT THERMAL PROCESSES (PYROLYSIS).
A
pyrolysis system would involve chemical decomposition of organic
medical
waste by intense heat (at least 800 degrees F) in an anaerobic atmosphere
that produces combustible gases, including carbon monoxide, hydrogen
and
methane. These gases must be flared off or treated in a secondary
combustion chamber. Particulate removal equipment such as fabric
filters
or wet scrubbers would also be required. The use of a pyrolysis system
has
not been commercialized as a method for converting infectious medical
waste.
|
| · |
RADIATION.
Electron beam technology creates ionized radiation, damaging cells
of
microorganisms. Workers must be protected with shields and remain
in areas
secured from the radiation.
|
| · |
CHEMICAL
TECHNOLOGIES.
Disinfecting chemical agents that integrate shredding and mixing
to ensure
adequate exposure are used by a variety of competitors. Chlorine
based
chemicals, using sodium hypochlorite and chlorine dioxide, are somewhat
controversial as to their environmental effects and their impact
on
wastewater. Non-chloride technologies are varied and include parasitic
acid, ozone gas, lime based dry powder, acid and metal catalysts
as well
as alkaline hydrolysis technology used for tissue and animal
waste.
|
Among
Aduromed's competitors are Caprius, Inc. Stericycle, Inc., Steris Corporation,
Sanitec, Inc., San-I-Pak, and Tempico Inc.
Sources
and Availability of Raw Materials and Names of Principal
Suppliers
Generally,
access to raw materials and third party fabricators for the MedClean® Systems is
available from multiple sources that allow Aduromed flexibility of
choice.
The
various equipment components of the systems are supplied by the following
principal suppliers:
· Autoclave
tank: SteelCraft
Industries Limited
· Shredder: Weima
America Corporation
· Aluminum
QuietCartsÔ: Specialty
Metal Products, Inc.
· Plastic
Cart Liners: MPF,
Inc.
The
hardware for the control panel are stock items that may be purchased from any
number of distributors for such manufacturers as Schneider Electric SA (Square
DÔ),
Siemens Corporation and Eaton Electric Corporation (Cutler HammerÔ).
The
software for the control panel is a proprietary property of
Aduromed.
Dependence
on a few Major Customers
It
is
anticipated that between 30% and 40% of the prospective business of Aduromed
during the ensuing six years will be derived from Aramark clients pursuant
to
the Aramark Agreement. See “Aramark Agreement”. Aramark manages approximately
1,300 hospitals throughout the United States. While there is no assurance of
the
actual number of Aramark clients that will purchase Aduromed's
MedCleanÔ
systems
and services, it is estimated that approximately 400 hospitals could be
purchasers in the next six years.
Prior
to
its arrangement with Aramark, the Company's business had been with independent
hospital and other medical facilities principally in the Northeast and
California.
The
Aramark Agreement
Aduromed
entered into an agreement dated as of September 1, 2004 with Aramark Management
Services Partnership, a Delaware limited partnership ("Aramark") and an
affiliate of Aramark Corporation, located in Philadelphia, Pennsylvania (the
"Aramark Agreement"). Until January 2007 when a group of Aramark’s management
took the company private, Aramark Corporation was a New York Stock Exchange
listed company that is in the health care facilities management business, among
other sectors. During 2006 Aramark managed 1,300 hospitals on four continents
and had $11.6 billion in revenue.
The
Aramark Agreement has a term of ten years (plus extensions as agreed between
the
parties; provided, however, that the Aramark Agreement can be terminated for
material breach on thirty (30) days notice). It also provides that Aduromed
will
sell its products and services on a preferred basis to health care facilities
managed by Aramark, as requested by Aramark. These products include the
equipment comprising the MedClean® systems, namely, the autoclave, shredder,
tipper, conveyor and carts, plus related supplies and replacement parts. The
services include quarterly preventive maintenance of the MedCleanÔ
systems
and corrective maintenance for any non-functioning components. Aramark's clients
will order Aduromed's products and services through Aramark who will be
responsible to Aduromed for payment.
Under
the
agreement Aramark will pay Aduromed 45 days after invoice dates and, as to
the
MedCleanÔ
system
equipment, will pay in installments of 25% on receipt of a purchase order,
50%
on delivery of the equipment and 25% upon commissioning the system.
Aduromed
has agreed to provide ‘most favored nation’ treatment to Aramark. Aduromed and
Aramark entered into an amendment to the Aramark Agreement on March 28, 2007
which, among other things, eliminated an existing exclusivity provision
restricting which hospitals Aduromed could solicit for sales if certain revenue
thresholds were reached. As amended, Aduromed may solicit business through
hospital management companies that are competitors of Aramark but cannot enter
into exclusive arrangements with such competitors, and Aduromed will continue
to
have the right to solicit such business directly from hospitals that are managed
by such competitors and from independent hospitals that Aramark has elected
not
to solicit as clients.
The
Weima Agreement
Aduromed
is party to an agreement with Weima America, Inc., dated as of April 8, 2004,
pursuant to which Aduromed has the exclusive distribution rights in the United
States to Weima's four shafted "ZMK" and other shredder machines for use in
medical waste markets (the “Weima Agreement”).
This
is
the type of shredder used by Aduromed in its MedClean® systems. The Weima
Agreement may be terminated by either party on thirty (30) days
notice.
Employees
Description
of Properties
The
Companies presently lease approximately 11,856 square feet of combined office
and warehouse space on the upper level of a building at 3 Trowbridge Drive,
Bethel, CT 06801 (the “Premises”) for a term of ten (10) years under a lease
agreement, dated February 3, 2006. At our option, the term of lease may be
renewed for an additional five (5) years. Base rent is set at the rate of
$8,151.00 per month with annual increases of 3% commencing after the second
year. Additional rent would be charged on a “triple net” basis for taxes,
insurance and utilities. The Premises houses all the Companies’ executive,
administrative, engineering, product development and project management
personnel, along with space for warehousing supplies.
Certain
Relationships and Related Transactions
Stockholders
Agreement
On
January 23, 2006, the Company, Aduromed, and certain stockholders of the
Company, consisting of all holders of the Company’s Series and Series B
Preferred Stock and persons owning a majority of the issued and outstanding
Common Stock of the Company, (the ‘‘Stockholder Parties’’), entered into an
Amended and Restated Stockholders Agreement (the ‘‘Stockholders Agreement’’)
pursuant to which each of the Stockholder Parties agreed to vote all securities
of the Company owned by it or him then or acquired thereafter at any regular
or
special meeting of the stockholders of the Company or in any written consent
in
lieu of a meeting so that (i) the number of directors of the Company would
be
seven; (ii) for so long as the holders of the Series A Preferred Stock and
the
Series B Preferred Stock owned at least 10% of the outstanding shares of the
Company’s Common Stock (calculated as if the Series A Preferred Stock and Series
B Preferred Stock converted into Common Stock and warrants to purchase Common
Stock of the Company had been exercised) the election to the Board of Directors
of the Company of at least two members designated by the holders of at least
a
majority of the outstanding shares of the Series A Preferred Stock and the
Series B Preferred Stock and the appointment to each committee of the Board
of
at least one such director designated by the holders of the Series A and Series
B Preferred Stock; (iii) for so long as Damien Tanaka is employed as the Chief
Executive Officer of the Company, the election to the Board of five members
designated by Damien Tanaka; and (iv) the boards of directors of each subsidiary
of the Company would be comprised of the same persons that shall be from time
to
time members of the Board. The Stockholder Parties agreed to vote their shares
at each regular or special meeting or in any written consent in lieu of a
meeting of stockholders of the Company to ensure that the Company charter
documents would not, at any time, conflict with the provisions of the
Stockholders Agreement.
The
Stockholder Parties include (i) the entities comprising the Preferred Holders
as
holders of the Series A and Series B Preferred Stock; and (ii) Damien R. Tanaka,
the CEO and President of both the Company and Aduromed, as owner of the
Company’s Common Stock.
In
accordance with the Stockholders Agreement on January 24, 2006, the holders
of
shares of the Series A and Series B Preferred Stock designated Paul Farrell,
Managing Director of Pequot Capital Management, and Philip Anderson, portfolio
manager of Sherleigh Associates, Inc., and Mr. Tanaka designated himself and
Messrs. Kevin T. Dunphy, Jay S. Bendis, Elan Gandsman and Ronald A. LaMorte
as
directors of the Company and Aduromed; and those designees were duly appointed
as directors. Mr. Anderson resigned as a director of the Company effective
December 8, 2006 and a replacement has not been named to date.
Subject
to certain exceptions, under the Stockholders Agreement if the Company should
propose to issue any securities, each holder of the Series A and Series B
Preferred Stock would have 30 days from the date the Company notifies such
holder to elect to purchase all of such holder’s pro rata share of the
securities proposed to be issued at the price and upon the terms proposed to
be
offered to the third party. Any such securities that remain unsubscribed by
another holder of the Series A or Series B Preferred Stock may be purchased
on a
pro rata basis by any other such holder that has elected to subscribe for its
pro rata share of such securities. Subject to certain exceptions, the preemptive
rights would terminate on the date on which the Company shall have consummated
an underwritten public offering of its Common Stock, with an aggregate price
to
the public of not less than $50 million, and such Common Stock shall have been
listed on a national securities exchange or the National Association of
Securities Dealers National Market System.
Each
of
the Stockholder Parties agreed not to transfer its or his securities of the
Company unless the transferee of such securities shall have agreed in writing
to
be bound by the terms of the Stockholders Agreement. The Stockholders Agreement
provides that it may be amended upon the written consent of the Company and
the
holders of a majority of the shares held by the Stockholder
Parties.
Prior
Transactions with Officers of the Company and Aduromed
On
December 7, 2005, Halter Capital Corporation, a company controlled by Kevin
Halter, Jr. the then president and a director of AII, entered into agreement
negotiated with Aduromed, and to which AII was a party, to sell 259,600 shares
of AII’s Common Stock to Aduromed for a purchase price of $600,000. The sale was
conditioned upon the Merger, and was consummated on January 23, 2006. The
transaction was valued at the quoted closing price of $1.75 per share of AII
Common Stock on December 12, 2005 plus a negotiated price amounting to $145,700
for the control position in AII.
On
December 12, 2005, AII issued 539,780 shares of its Common Stock (post split)
to
Kevin Halter, Jr., then its president and a director for his services in
reorganizing and restructuring the Company. The shares were valued at the quoted
closing price of $1.75 per share on the issue date.
On
September 29, 2005, Aduromed issued 300,000 shares of its common stock to Mr.
Tanaka in connection with his employment agreement with the Aduromed. These
shares were converted into 538,500 shares of the Company’s Common Stock upon the
Merger with AII. The shares had a value of $.53 each when issued or a total
value of $158,280.00, based upon their perceived value then being negotiated
with potential third-party investors in Aduromed.
Mr.
Timothy Hertweck, who was appointed Vice President Sales of Aduromed effective
January 1, 2006, had previously been the president and owner of Portfolio
Management Associates, Inc., an Essex, Connecticut consulting firm, involved
in
merger, acquisition and turn-around situations. In 2005 Portfolio Management
was
engaged by Aduromed to investigate its sales program including staffing and
methodologies, for which Aduromed paid $22,500.
Mr.
Robert Meyer was Managing Partner of Insight to Innovation, LLC in Wilton,
Connecticut before joining Aduromed, effective January 1, 2006, as its Vice
President Marketing. In the year 2005 Insight to Innovation, LLC, a consulting
firm, had been retained by Aduromed to create a marketing plan that would
comprise recommendations for project management, procurement, inventory control
and after-market servicing. For such services Aduromed paid Insight to
Innovation, LLC $82,327.00 in 2005.
In
August, 2005 Mr. Meyer and his brother, John Meyer, each loaned $100,000 to
Aduromed for which they each received a promissory note in the face amount
of
$100,000 (each repaid in 2006) plus 100,000 shares of Aduromed’s common stock
(since converted into 179,500 shares of the Company’s common stock pursuant to
the Merger) and warrants to purchase 200,000 shares of Aduromed’s common stock
at $1.00 per share (since converted into warrants to purchase 179,500 shares
of
the Company’s Common Stock at $.5571 per share). As consideration for his
effecting the placement of these loans in August, 2005, Mr. Meyer also received
a placement fee of $20,000. The proceeds of these loans were used by Aduromed
to
continue expansion of its regulated medical waste disposal
business.
Mr.
Birch
was appointed Vice President Business Development in September, 2005. Prior
thereto Sky King Enterprises, Inc., a Texas corporation owned by Mr. Birch
had
been retained initially to create a web site and to undertake other IT-related
services for Aduromed, and later to consult with Aduromed’s CEO, Damien Tanaka,
in connection with the negotiation and consummation of the Aramark Agreement.
(See ARAMARK AGREEMENT above). In years 2004 and 2005 Sky King Enterprises
was
paid $97,666.89 and $67,636.17, respectively, for these services.
MANAGEMENT’S
DISCUSSION AND ANALYSIS
Forward
Looking Statements
The
Company is including the following cautionary statement in this Post-Effective
Amendment for any forward-looking statements made by, or on behalf of, the
Company including its wholly-owned subsidiary Aduromed Corporation.
Forward-looking statements include statements concerning plans, objectives,
goals, strategies, future events or performance and underlying assumptions
and
other statements which are other than statements of historical facts. Certain
statements contained herein are forward-looking statements and accordingly
involve risks and uncertainties which could cause actual results or outcomes
to
differ materially from those expressed in the forward-looking statements. Our
expectations, beliefs and projections are expressed in good faith and are
believed by us to have a reasonable basis, including without limitation,
management’s examination of historical operating trends, data contained in our
records and other data available from third parties, but there can be no
assurance that management’s expectation, beliefs or projections will result or
be achieved or accomplished. In addition to other factors and matters discussed
elsewhere herein, the following are important factors that, in our view, could
cause actual results to differ materially from those discussed in the
forward-looking statements: technological advances by our competitors, changes
in health care reform, including reimbursement programs, changes to regulatory
requirements relating to environmental approvals for the treatment of infectious
medical waste, capital needs to fund any delays or extensions of development
programs, delays in the manufacture of new and existing products by us or third
party contractors, market acceptance of our products, the loss of any key
employees, delays in obtaining federal, state or local regulatory clearance
for
new installations and operations, changes in governmental regulations,
availability of capital on terms satisfactory to us and continuing good
relations with Aramark Corporation. We are also subject to numerous Risk Factors
relating to manufacturing, regulatory, financial resources and personnel as
described in this Post-Effective Amendment. We disclaim any obligation to update
any forward-looking statements to reflect events or circumstances after the
date
hereof.
Results
of Operations
Net
Revenue
Total
revenue for 2006 more than doubled to $4,594,347 compared with $1,989,285 for
2005. Of the revenue increase, $2,544,097 was attributable to an increase of
revenues derived from sales of our MedClean system and a $60,965 increase for
the sale of consumables, component parts and service contracts. Contract backlog
as of December 31, 2006 was $788,217.
Revenues
from our MedClean product for 2006 were $4,138,720 and $1,594,623 in 2005.
The
increased revenue was attributable to activities on new contracts awarded in
2006.
Revenues
derived from the sale of consumables, component parts and service contracts
increased by $60,965 or 15.4% to $455,627 from $394,662 in 2005. The revenue
was
attributable to increased orders for consumable products and service contracts
from hospitals that have previously purchased our MedClean system compared
to
last year.
Orders
for the MedClean system are contracted by purchase order and are billed in
3
increments. Typically, we bill our customers for 25% of the contact value at
signing, 50% when the equipment is shipped to the customer and 25% upon
completion of installation and start-up. Consumables and component parts are
billed when shipped and service contracts are invoiced at the start of the
service period and revenue is pro-rated over the life of the contract.
Gross
Profit
The
gross
profit for 2006 was $1,301,689 (28.3% of total revenue) compared with a gross
profit of $164,223 (8.2% of total revenue) for 2005, an increase of $1,137,466.
Gross profit was favorably impacted by an increase in the activity level in
addition to improved operating and procurement efficiencies in 2006 as compared
to 2005.
The
components of costs of revenues for products include direct materials, shipping
and rigging costs and contract labor primarily used to install, repair and
maintain our equipment.
Operating
Expenses
Total
operating expenses for 2006 was $4,613,118 compared with $2,125,368 for 2005,
an
increase of $2,487,750. The operating expenses for 2006 was primarily
the result of increasing the Company’s support from professional service
providers and increasing its staffing to satisfy anticipated growth and
compliance with reporting requirements as a public company as a result of the
reverse merger in January 2006. The increases included salaries and wages for
additional personnel of $850,456, depreciation on increased capital spending
of
$48,010, travel and entertainment of $179,493 health and business insurances
of
$236,808, investor relations, audit and legal expenses of $337,634 and increased
ongoing costs of rent, IT and office supplies amounted to $183,016. All other
operating expenses increased $50,333 net. Pursuant to the terms of the Merger,
the Company accrued $602,000 in liquated damages from May 25, through November
15, 2006 as which time the Company’s registration statement was declared
effective. Liquated damages accrued at 1 ½% per month on the $7 million
invested.
Interest
(Income) Expense
Interest
income for 2006 was $77,608 compared with $2,726 of interest income in 2005.
The
Company invests its excess cash in a money market account. As of December 31,
2006 the interest rate was 3.73%.
Interest
expense for 2006 was $48,490 compared with $435,851 in 2005. In 2005, we
recognized one time non-cash financing costs associated with the issuance of
common stock and amortization expense for warrants issued amounting to $377,441.
Net
loss
Net
loss for 2006 was $(3,282,311) compared to a net loss for 2005 of $(2,394,270).
Net
Loss Attributable to Common Stockholders
Net
loss attributable to common stockholders for 2006 was $(3,686,543) or $(0.18)
cents per share (basic and diluted), compared to a net loss of $(2,434,051)
or
$(0.13) cents per share (basic and diluted) for 2005.
During
2006, the Company accrued $404,232 in dividends with an interest rate of 8%
through January 22, 2006 on $1,989,030, the value received for the series A
preferred stock and an interest rate of 6% on $7,000,000 thereafter, the total
value received for both series A and B preferred stock.
Financial
Condition
Liquidity
and Capital Resources
The
Company’s cash on hand and working capital are as follows:
| |
|
|
|
|
|
|
|
|
2005
|
|
|
Cash
on hand
|
|
$
|
1,892,336
|
|
$
|
407,058
|
|
|
Working
Capital
|
|
$
|
234,139
|
|
$
|
71,653
|
|
On
January 23, 2006, Aduromed purchased controlling interest in AII, a shell
company for $600,000, followed on the same date by a reverse merger transaction
in which Aduromed Corporation became a wholly owned subsidiary of AII.
On
January 23, 2006, the Company issued 15,780,160
shares of its Series B Preferred stock and warrants covering 15,780,160 shares
of its common stock for $5,010,970 in cash less $568,629 in costs related to
the
issuance of the stock.
On
January 31, 2006, the Company issued 682,100 shares of common stock at the
conversion price of $0.29 per share in conjunction with the issuance of 6 month
convertible notes to 2 individuals. The value was amortized to interest expense
over the term of the notes.
To
date,
the Company purchased $415,625 in fixed assets. The Company anticipates
purchasing approximately $250,000 in additional fixed assets in 2007.
Net
cash
used in operating activities totaled $2,445,689 and $1,804,294 for the years
ended December 31, 2006 and 2005, respectively.
Our
accounts receivable balance may have dramatic swings from one period to
another depending upon the timing and the amount of milestone billings
included in the balance at the end of any accounting period. There are
three milestone billings representing a percentage of the contract value
for each installment and our payment terms are ``upon receipt''. Receivable
balances are typically paid within 15 days of the invoice date. Billings
for maintenance contracts and consumables are due within 45 days and are
more numerous but much smaller in value than milestone billings. We review
our outstanding receivable balances on a regular basis to ensure that the
allowance for bad debt is adequate. Due to the varying nature in the
timing and amounts of the receivable balances as noted above, the change in
the allowance for doubtful account will not necessarily correlate with the
increase or decrease in the accounts receivable balance.
Our
inventory balance may have dramatic swings from one period to another
depending upon the expected installation date of our MedClean systems and
our
accounts payable balances can have similar swings depending on payment
terms and any volume purchases or discounts we may take advantage of from
time to time. For 2006, the Company increased its inventory on hand by
$593,765 to $639,806 in anticipation of new business expected in 2007. The
accounts payable balance as of December 31, 2006 and 2005 was $1,061,203
and
$224,958, respectively.
Cash
expected to be generated from operating activities, together with funds
available resulting from the proceeds of the private placement, are expected,
under current conditions, to be sufficient to finance the Company’s planned
operations over the next twelve months. As we start to increase our penetration
in the United States market, we will need to expand our customer service and
technical support capabilities to meet the needs of our clients. We may require
additional working capital or other funds in the future should we modify our
current business plan or undertake any acquisitions.
To
supplement its cash resources, the Company has been pursuing a number of
alternative financing arrangements with various investment entities. These
initiatives have resulted in a signed term sheet with one such investment
entity. Under the terms of the arrangement, this investment entity would invest
$5 million in the Company and receive 12,500,000 shares of Series C Preferred
Stock, which is parri passu in rank with the existing preferred stock of the
Company. This investment entity would also receive 6,250,000 warrants to
purchase shares of Common Stock of the Company at $0.40 per share. This
arrangement is subject to typical closing conditions and the parties are
currently involved in due diligence regarding the Company. The terms of this
arrangement calls for a closing on or before April 23, 2007. There can be
no assurance that this or other such funding initiatives will be successful.
Further, any equity placement could result in substantial dilution to current
stockholders.
AII
has
an obligation to pay liquidated damages from May 24, 2006 through November
16,
2006, the date on which the Company’s registration statement became effective,
at a rate of 1 ½% per month on the $ 7 million invested in the Company. To date
we have accrued $602,000.
AII
has
an obligation to pay dividends on the value of its preferred stock at a rate
of
6%. To date we have accrued $444,013 in dividends payable.
Controls
and Procedures
As
of
December 31, 2006, the Company carried out, under the supervision and with
the
participation of the Company's management, including its Chief Executive Officer
and Chief Financial Officer, an evaluation of the effectiveness of the design
and operation of the Company's disclosure controls and procedures (as defined
in
Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based
upon and as of the date of that evaluation, the Chief Executive Officer and
Chief Financial Officer concluded that the design and operation of these
disclosure controls and procedures are effective.
MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS
(a)
PRINCIPAL MARKET: LISTED ON THE NASDAQ OTC BULLETIN BOARD SYMBOL
"ADRM.OB"
(b)
STOCK
PRICE INFORMATION
The
following table sets forth the range of the high and low bid quotations of
the
Common Stock for the past two years in the over-the-counter market, as reported
by the OTC Bulletin Board and in the Pink Sheets. The quotations reflect
inter-dealer prices without retail mark-up, mark-down or commission, and may
not
represent actual transactions, and reflect the 1:5 reverse split in November
2005.
Calendar
Quarter Ended:
| |
|
High
|
|
Low
|
|
| |
|
|
|
|
|
|
|
|
2007
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
| March
31 |
|
$
|
1.01
|
|
$
|
0.22
|
|
| |
|
|
|
|
|
|
|
|
2006
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
March
31
|
|
$
|
0.71
|
|
$
|
0.71
|
|
|
June
30
|
|
|
1.04
|
|
|
0.62
|
|
|
September
30
|
|
|
1.02
|
|
|
1.02
|
|
|
December
31
|
|
|
1.00
|
|
|
0.30
|
|
| |
|
|
|
|
|
|
|
|
2005
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
March
31
|
|
$
|
1.30
|
|
$
|
1.15
|
|
|
June
30
|
|
|
1.75
|
|
|
1.75
|
|
|
|
|
|
1.50
|
|
|
1.10
|
|
|
December
31
|
|
|
1.10
|
|
|
1.10
|
|
AII
had
not declared or paid any dividends on its common stock in 2006 or 2005 and
does
not foresee doing so in the immediate future. It has never paid any cash or
stock dividends, and presently intends to reinvest earnings, if any, to fund
the
development and expansion of the business of Aduromed. Therefore, it does not
anticipate paying dividends on Common Stock in the foreseeable future. The
declaration of dividends will be at the discretion of the Board of Directors
and
will depend upon AII’s earnings, financial position, general economic conditions
and other pertinent factors.
Under
their respective Certificates of Designations filed with the Delaware Secretary
of State the Series A Preferred Stock and the Series B Preferred Stock issued
by
AII have dividend rights ranking senior to any dividend rights of the shares
of
Common Stock. The holders of both the Series A Preferred Stock and the Series
B
Preferred Stock issued by AII are entitled to receive dividends out of funds
legally available therefor at the annual rate of six percent (6%) of the price
paid for each share of Series A Preferred Stock and Series B Preferred Stock
($0.31755) payable on each March 15 and September 15. Dividends are cumulative
on a daily basis and unpaid dividends will be compounded on each payment date.
The
Company did not purchase any shares of its securities in 2006.
EXECUTIVE
COMPENSATION
The
following table sets forth the aggregate cash compensation paid by the Company
to (i) its Chief Executive Officer and (ii) its two most highly compensated
officers whose cash compensation exceeded $100,000 for services performed during
the year ended December 31, 2006.
|
Annual
Compensation
|
|
Long
Term Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards
|
|
|
|
Payouts
|
|
|
|
|
Name
and Principal Position
|
|
Year
|
|
Salary
($)
|
|
Bonus
($)
|
|
Other
Annual Compensation
($)
|
|
Restricted
Stock Award(s)
($)
|
|
Securities
Underlying Options SARs
(#)
|
|
LTIP
Payouts
($)
|
|
All
Other Compensation
($)
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Damien
Tanaka
Chairman,
President/CEO
|
|
|
2006
2005
|
|
|
247,209
151,442
|
|
|
-0-
-0-
|
|
|
-0-
-0-
|
|
|
-0-
-0-
|
|
|
-0-
-0-
|
|
|
-0-
-0-
|
|
|
42,930
(1
|
)
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kevin
Dunphy
CFO
|
|
|
2006
2005
|
|
|
137,161
77,000
|
|
|
-0-
-0-
|
|
|
-0-
-0-
|
|
|
-0-
-0-
|
|
|
-0-
-0-
|
|
|
-0-
-0-
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen
Birch
VP
Business Development (Aduromed Corporation)
|
|
|
2006
2005
|
|
|
158,945
40,000
|
|
|
-0-
-0-
|
|
|
-0-
-0-
|
|
|
-0-
-0-
|
|
|
-0-
-0-
|
|
|
-0-
-0-
|
|
|
13,593
(3
|
)
|
(1)
Includes perquisites covering supplemental term life insurance ($10,907), use
of
a motor vehicle ($7,921), disability benefits ($18,812) and club membership
($5,290). Mr. Tanaka does not receive any separate compensation for acting
as a
director of the Company or Aduromed.
(2)
Includes perquisites covering supplemental term life insurance ($2,858), use
of
a motor vehicle ($6,107), disability benefits ($8,751) and club membership
($3,302).Mr. Dunphy does not receive any separate compensation for acting as
a
director of the Company or Aduromed.
(3)
Includes perquisites covering supplemental term life insurance ($814), use
of a
motor vehicle ($7,096), disability benefits ($1,981) and club membership
($3,702).
The
Company has a five-year employment agreement with Mr. Tanaka, dated September
30, 2005, providing that he will act as President and Chief Executive Officer
of
the Company and Aduromed at a minimum annual base salary of $250,000.00, to
be
reviewed each year by the board of directors, plus a cash bonus based upon
the
Company’s attaining financial objectives determined annually by the board, not
to exceed 100% of his base salary.
The
Company has a five-year employment agreement with Mr. Dunphy, dated September
30, 2005, providing that he will act as Chief Financial Officer of the Company
and Aduromed at a minimum annual base salary of $130,000.00, to be reviewed
each
year by the board of directors, plus a cash bonus based upon the Company’s
attaining financial objectives determined annually by the board, not to exceed
100% of his base salary.
The
employment agreement with Mr. Birch provides that he will act as Vice President
Business Development of Aduromed at a minimum annual base salary of $160,000,
to
be reviewed each year by the board of directors, plus a cash bonus based upon
Aduromed's attaining financial objectives determined annually by the board,
not
to exceed 100% of his base salary. The commencement date of his employment
was
October 1, 2005 and the agreement is for a five year term.
We
do not
have any annuity, retirement, pension or deferred compensation plan or other
arrangements under which any executive officers are entitled to participate
without similar participation by other employees. No options were granted to
any
of the named executives in 2006.
|
|
|
|
|
Individual
Grants
|
|
|
|
|
|
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
|
Name
|
|
Number
of Securities Underlying
Options/
SARs
Granted
(#)
|
|
%
of
Total
Options/
SARS
Granted
to
Employee(s)
in
Fiscal
Year
|
|
Exercise
on
Base
Price
($/Sh)
|
|
Expiration
Date
|
|
|
Damien
Tanaka
|
|
|
-0-
|
|
|
-0-
|
|
|
-0-
|
|
|
-0-
|
|
|
Kevin
Dunphy
|
|
|
-0-
|
|
|
-0-
|
|
|
-0-
|
|
|
-0-
|
|
|
Stephen
Birch
|
|
|
-0-
|
|
|
-0-
|
|
|
-0-
|
|
|
-0-
|
|
|
Fiscal
Year End Option Value
|
|
|
Name
|
|
Number
of Securities
Underlying
Unexercised
Options
at
Exercisable/Unexercisable
|
|
Value
of Unexercised
In-the-Money
Options At
Exercisable
($)
|
|
|
Damien
Tanaka
|
|
|
3,006,625/12,409,041
|
|
$
|
734,518
|
|
|
Kevin
Dunphy
|
|
|
329,050/1,200,234
|
|
$
|
52,878
|
|
|
Stephen
Birch
|
|
|
1,525,750/1,023,843
|
|
$
|
245,188
|
|
The
following table sets forth the aggregate cash and other compensation paid by
the
Company to its independent directors for the year ended December 31, 2006.
|
Name
|
|
Fees
earned or paid in cash
($)
|
|
Stock
Awards
($)
|
|
Option
Awards
($)
|
|
|
Jay
Bendis
|
|
|
11,000
|
|
|
-0-
|
|
|
6,801
|
|
|
Elan
Gandsman
|
|
|
12,000
|
|
|
-0-
|
|
|
6,801
|
|
|
Ronald
LaMorte
|
|
|
12,000
|
|
|
-0-
|
|
|
6,801
|
|
|
Paul
Farrell
|
|
|
-0-
|
|
|
-0-
|
|
|
-0-
|
|
|
Philip
Anderson
|
|
|
-0-
|
|
|
-0-
|
|
|
-0-
|
|
Combined
meetings of the boards of directors of AII and Aduromed are considered a single
meeting for purposes of the foregoing compensation schedule, while the same
schedule will apply to any separate meetings of Aduromed's board of
directors.
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON
ACCOUNTING AND FINANCIAL DISCLOSURE
On
January 24, 2006, Amper, Politziner & Mattia, P.C., Certified Public
Accountants, ceased to act as the independent registered public accountant
of
the Company, and their client-auditor relationship thereupon ended.
Pursuant
to action by the Company's Board of Directors, the Company accepted the
resignation of Amper, Politziner & Mattia, P.C. in contemplation of its
retaining Child, Van Wagoner & Bradshaw, PLLC, Certified Public Accountants,
as its certifying accountants for the fiscal year ended December 31,
2005.
On
February 9. 2006, pursuant to action taken by its Board of Directors, the
Company so retained Child, Van Wagoner & Bradshaw, PLLC as its certifying
accountants for the fiscal year ended December 31, 2005, replacing Amper,
Politziner & Mattia, P.C.
No
report
on the financial statements of the Company issued by Amper Politziner &
Mattia, P.C. during the last two fiscal years contained an adverse opinion
or
disclaimer of opinion, or was qualified or modified as to uncertainty, audit
scope or accounting principles, nor were there any disagreements during the
last
two fiscal years and through January 24, 2006, between Amper, Politziner &
Mattia, P.C. and the Company concerning any matter of accounting principles
or
practices, financial statement, disclosure or auditing scope or procedure,
which
disagreements if not resolved would have required Amper, Politziner &
Mattia, P.C. to make reference to the subject matter thereof in connection
with
its report. During the last two fiscal years and
through January 24, 2006, none of the events listed in Items (1) through (3)
of
Item 304(b) of Regulation S-B has occurred; and during such period the Company
has not consulted with Child, Van Wagoner & Bradshaw PLLC concerning any
matter referred to under paragraph (i) or (ii) of Item 304(a)(2) of Regulation
S-B.
FINANCIAL
STATEMENTS
ADUROMED
INDUSTRIES, INC.
CONSOLIDATED
FINANCIAL STATEMENTS
|
INDEX
|
|
Page
|
| |
|
|
|
Report
of Independent Registered Public Accounting Firm
|
|
F1
|
| |
|
|
|
|
|
F2
|
| |
|
|
|
Consolidated
Statements of Operations for the years ended
|
|
|
|
|
|
F3
|
| |
|
|
|
Consolidated
Statements of Stockholders’ Equity (Deficit) for
|
|
|
|
|
|
F4
|
| |
|
|
|
Consolidated
Statements of Cash Flows for the years ended
|
|
|
|
|
|
F5
|
| |
|
|
|
Notes
to the Consolidated Financial Statements
|
|
F6
|
Child,
Van Wagoner & Bradshaw, PLLC
A
Professional Limited Liability Company of CERTIFIED PUBLIC
ACCOUNTANTS
REPORT
OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
The
Board of Directors
ADUROMED
INDUSTRIES, INC.
Bethel,
Connecticut
We
have
audited the consolidated balance sheet of AUDROMED INDUSTRIES, INC.
(the
Company) as of December 31, 2006, and the related consolidated statements
of
operations, stockholders’ deficit and cash flows for the periods ended December
31, 2006 and 2005. These consolidated financial statements are the
responsibility of the Company’s management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audit.
We
conducted our audits in accordance with the standards of the Public
Company
Accounting Oversight Board (United States). Those standards require
that we plan
and perform the audit to obtain reasonable assurance about whether
the
consolidated financial statements are free of material misstatement.
The company
is not required to have, nor were we engaged to perform, an audit of
its
internal control over financial reporting. Our audit included consideration
of
internal control over financial reporting as a basis for designing
audit
procedures that are appropriate in the circumstances, but not for the
purpose of
expressing an opinion on the effectiveness of the company’s internal control
over financial reporting. Accordingly, we express no such opinion.
An audit also
includes examining, on a test basis, evidence supporting the amounts
and
disclosures in the consolidated financial statements, assessing the
accounting
principles used and significant estimates made by management, as well
as
evaluating the overall consolidated financial statement presentation.
We believe
that our audits provide a reasonable basis for our opinion.
In
our
opinion, the consolidated financial statements referred to above present
fairly,
in all material respects, the financial position of ADUROMED INDUSTRIES,
INC. as
of December 31, 2006, and the results of its consolidated operations
and its
consolidated cash flows for the periods ended December 31, 2006 and
2005, in
conformity with accounting principles generally accepted in the United
States of
America.
The
accompanying consolidated financial statements have been prepared assuming
that
the Company will continue as a going concern. As discussed in Note
1 to the
consolidated financial statements, the Company has incurred substantial
recurring losses. This raises substantial doubt about the Company’s ability to
meet its obligations and to continue as a going concern. Management’s plans in
regard to this matter are described in Note 1. The consolidated financial
statements do not include any adjustments that might result from the
outcome of
this uncertainty.
Child,
Van Wagoner & Bradshaw, PLLC
Salt
Lake
City, Utah
ADUROMED
INDUSTRIES, INC.
CONSOLIDATED
BALANCE SHEET
| |
|
December
31,
|
|
|
ASSETS
|
|
2006
|
|
|
Current
assets
|
|
|
|
|
Cash
|
|
$
|
1,892,336
|
|
|
Accounts
receivable (net
of $16,100 allowance)
|
|
|
175,237
|
|
|
Revenues
in excess of billings
|
|
|
158,215
|
|
|
Inventory
|
|
|
639,806
|
|
|
Prepaid
expenses
|
|
|
51,528
|
|
|
Total
current assets
|
|
|
2,917,122
|
|
| |
|
|
|
|
|
Property,
plant and equipment, net
|
|
|
435,221
|
|
| |
