SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
Pursuant to Section 13 of 15(d) of the
Securities Exchange Act of 1934
December 17, 1998
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Date of Report (date of earliest event reported)
CET ENVIRONMENTAL SERVICES, INC.
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Exact name of Registrant as Specified in its Charter
California 1-13852 33-0285964
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State or Other Jurisdiction Commission File IRS Employer Identification
of Incorporation Number Number
7670 South Vaughn Court, Englewood, Colorado 80112
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Address of Principal Executive Offices, Including Zip Code
(303) 708-1360
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Registrant's Telephone Number, Including Area Code
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On December 17, 1998, CET Environmental Services, Inc. (the "Company")
sold all of the stock of Water Quality Management Corporation ("WQM"), a
wholly-owned subsidiary, to AquaSource Services and Technologies, Inc., a
subsidiary of AquaSource, Inc., pursuant to the terms of a Stock Purchase
Agreement (the "Agreement"). The Company sold this subsidiary for $12,500,000
of which $11,250,000 was paid in cash at the time of closing. The Company
will receive, within 90 days after the closing date, the remaining $1,250,000
which amount shall be adjusted by the net working capital or working capital
deficit as of December 1, 1998, as determined under the terms of the
Agreement.
WQM is engaged in the operation and maintenance of municipal and
industrial water and wastewater treatment facilities. The Company acquired
this subsidiary in August 1997. H20 Construction and Maintenance, Inc.
("H20") is a wholly-owned subsidiary of WQM acquired in January 1998. H20 is
engaged in the construction, operation and maintennace of water and wastewater
treatment, collection and distribution facilities. H20 provides services to
both public and private sector clients.
As a result of the sale of its WQM subsidiary, the Company is no longer
engaged in water and wastewater treatment operations. The Company will
continue its environmental remediation, industrial services and government
programs business.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(b) PRO FORMA FINANCIAL INFORMATION. The following pro forma financial
information is filed herewith:
PAGE
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Unaudited Pro Forma Financial Statements ......... F-1
Unaudited Pro Forma Balance Sheet as of
September 30, 1998 ............................... F-2
Unaudited Pro Forma Statement of Operations
for the Nine Months Ended September 30,
1998 ............................................. F-3
Unaudited Pro Forma Statement of Operations
for the Twelve Months Ended December 31,
1997 ............................................. F-4
Notes to Unaudited Pro Forma Financial
Statements ....................................... F-5
(c) EXHIBITS. The following exhibits are filed herewith:
EXHIBIT
NUMBER DESCRIPTION LOCATION
- ------- ----------- --------
10.1 Stock Purchase Agreement Previously filed.
with AquaSource Services
and Technologies, Inc.
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Amended Report to be signed on its behalf by
the undersigned, hereunto duly authorized.
CET ENVIRONMENTAL SERVICES, INC.
Dated: January 28, 1999 By:/s/ Steven H. Davis
Steven H. Davis, President
3
CET ENVIRONMENTAL SERVICES, INC.
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The following unaudited pro forma financial statements are derived from the
historical financial statements of CET Environmental Services, Inc., and give
pro forma effect to the sale of Water Quality Management Corporation, a
wholly-owned subsidiary, on December 17, 1998. These pro forma statements
should be read in conjunction with those historical financial statements and
related notes.
F-1
CET ENVIRONMENTAL SERVICES, INC.
PRO FORMA BALANCE SHEET
AS OF SEPTEMBER 30, 1998
PRO FORMA
ACTUAL ADJUSTMENTS(a) PRO FORMA
----------- -------------- ----------
CURRENT ASSETS
CASH $ 215,374 12,288,000 (a) 12,435,289
(68,085)(b)
CASH IN TRUST ACCOUNT 4,623,823 (3,526,593)(b) 1,097,230
ACCOUNTS RECEIVABLE (NET) 14,237,629 (2,003,598)(b) 12,234,031
CONTRACTS IN PROCESS 8,734,814 (1,667,872)(b) 7,066,942
PREPAID EXPENSES AND OTHER
CURRENT ASSETS 1,131,193 (23,970)(b) 1,107,223
----------- ----------- -----------
TOTAL CURRENT ASSETS 28,942,833 4,997,882 33,940,715
----------- ----------- -----------
EQUIPMENT AND IMPROVEMENTS (NET) 4,015,547 (857,553)(b) 3,157,994
OTHER ASSETS 2,467,524 (2,307,288)(b) 160,236
----------- ----------- -----------
$35,425,904 $ 1,833,042 $37,258,945
=========== =========== ===========
CURRENT LIABILITIES
NOTE PAYABLE-LINE OF CREDIT 6,967,087 - 6,967,087
OTHER NOTES PAYABLE 4,067,411 (3,356,868)(b) 710,543
ACCOUNTS PAYABLE 10,728,635 (777,094)(b) 9,951,541
ACCRUED EXPENSES 1,985,111 (279,996)(b) 1,705,115
SHAREHOLDERS' NOTES PAYABLE 671,800 - 671,800
CURRENT PORTION OF DEBT/LEASE 403,039 - 403,039
----------- ----------- -----------
TOTAL CURRENT LIABILITIES 24,823,083 (4,413,958) 20,409,125
DEFERRED INCOME TAXES - - -
LONG-TERM DEBT/LEASE 3,859,536 (2,710,000)(b) 1,149,536
STOCKHOLDERS' EQUITY:
COMMON STOCK 8,249,589 (6,668)(b) 8,242,921
PREFERRED STOCK 1,890,000 - 1,890,000
PAID-IN CAPITAL 563,858 - 563,858
RETAINED EARNINGS (3,960,162) 9,444,408 (c) 5,003,505
(480,741)(b)
----------- ----------- -----------
TOTAL STOCKHOLDERS' EQUITY 6,743,285 8,956,999 15,700,284
----------- ----------- -----------
$35,425,904 $ 1,833,041 $37,258,945
=========== =========== ===========
F-2
CET ENVIRONMENTAL SERVICES, INC.
STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
PRO FORMA
ACTUAL ADJUSTMENTS(d) PRO FORMA
----------- -------------- ----------
PROJECT REVENUE $44,585,226 (7,080,058) 37,505,168
PROJECT COSTS
DIRECT 39,138,183 (6,703,223) 32,434,960
INDIRECT 5,532,324 (596,082) 4,936,242
----------- ---------- ----------
44,670,507 (7,299,305) 37,371,202
GROSS PROFIT (85,281) 219,246 133,965
----------- ---------- ----------
OTHER OPERATING EXPENSES
SELLING 1,437,184 (212,373) 1,224,811
GENERAL AND ADMINISTRATIVE 1,544,770 (111,754) 1,433,016
----------- ---------- ----------
2,981,954 (324,127) 2,657,827
----------- ---------- ----------
OPERATING INCOME (LOSS) (3,067,235) 543,373 (2,523,862)
----------- ---------- ----------
OTHER INCOME (EXPENSE), NET (798,102) 59,942 (738,160)
----------- ---------- ----------
INCOME (LOSS) BEFORE
INCOME TAXES (3,865,337) 603,315 (3,262,022)
PROVISION (CREDIT) FOR
INCOME TAXES - - -
----------- ---------- ----------
NET INCOME (LOSS) $(3,865,337) 603,315 (3,262,022)
=========== ========== ==========
WEIGHTED AVERAGE SHARES
OUTSTANDING 5,809,485 5,809,485 5,809,485
=========== ========== ==========
NET INCOME (LOSS) PER SHARE $ (0.67) 0.10 (0.56)
=========== ========== ==========
F-3
CET ENVIRONMENTAL SERVICES, INC.
STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997
PRO FORMA
ACTUAL ADJUSTMENTS(a) PRO FORMA
----------- -------------- ----------
PROJECT REVENUE $54,169,753 (948,332) 53,221,421
PROJECT COSTS
DIRECT 43,286,506 (645,504) 42,641,002
INDIRECT 5,752,064 (160,665) 5,591,399
----------- ---------- ----------
49,038,570 (806,169) 48,232,401
----------- ---------- ----------
GROSS PROFIT 5,131,183 (142,163) 4,989,020
----------- ---------- ----------
OTHER OPERATING EXPENSES
SELLING 2,070,130 (36,484) 2,033,646
GENERAL AND ADMINISTRATIVE 2,937,762 (51,272) 2,886,490
----------- ---------- ----------
5,007,892 (87,756) 4,920,136
----------- ---------- ----------
OPERATING INCOME 123,291 (54,406) 68,885
----------- ---------- ----------
OTHER INCOME (EXPENSE)
INTEREST EXPENSE, NET (704,575) 287 (704,288)
OTHER INCOME (EXPENSE) 120,446 219 120,665
----------- ---------- ----------
(584,129) 506 (583,623)
----------- ---------- ----------
INCOME (LOSS) BEFORE TAX (460,838) (53,901) (514,739)
(BENEFIT) TAX ON INCOME (113,547) - (113,547)
----------- ---------- ----------
NET INCOME (LOSS) $ (347,291) (53,901) (401,192)
=========== ========== ==========
WEIGHTED AVERAGE SHARES
OUTSTANDING 5,785,264 - 5,785,264
=========== ========== ==========
NET INCOME (LOSS) PER SHARE $ (0.06) (0.01) (0.07)
=========== ========== ==========
F-4
CET ENVIRONMENTAL SERVICES, INC.
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
NOTE A -- BASIS OF PRESENTATION
On December 17, 1998, CET Environmental Services, Inc. ("CET") sold 100% of
the stock in its wholly-owned subsidiary, Water Quality Management Corporation
("WQM"). CET sold the stock for the sum of $12.5 million plus the amount of
any working capital on WQM's balance sheet as of November 30, 1998. The
accompanying pro forma balance sheet has been presented as if the sale
occurred on September 30, 1998, for the base price of $12.5 million without
regard to WQM's working capital. The accompanying pro forma statements of
operations for December 31, 1997 and the nine months ended September 30, 1998,
have been prepared as if the sale was consummated on December 31, 1996, thus
excluding the results of WQM's operations from both periods.
NOTE B -- PRO FORMA ADJUSTMENTS
The accompanying pro forma balance sheet and statements of operations reflect
the following adjustments:
(a) To reflect the cash proceeds from the sale of WQM.
(b) To reflect the removal of assets, liabilities, and operating results
of WQM.
(c) To reflect the gain on the sale of WQM.
(d) To eliminate the results of operations of WQM for the entire period.