CET SERVICES, INC.
7032 South Revere Parkway
Englewood, Colorado 80112
(720) 875-9115
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 2, 2004
TO THE SHAREHOLDERS OF CET SERVICES, INC.:
NOTICE HEREBY IS GIVEN that the Annual Meeting of Shareholders of CET
Services, Inc., a California corporation (the "Company"), will be held at the
Denver Marriott Courtyard Tech Center, 6565 South Boston Street, Englewood,
Colorado, on Tuesday, June 2, 2004, at 9:00 a.m., Mountain Time, and at any
and all adjournments thereof, for the purpose of considering and acting upon
the following matters.
1. The election of four (4) Directors of the Company to serve until the
next Annual Meeting of Shareholders and until their successors have been duly
elected and qualified;
2. The ratification of the appointment of Gelfond Hochstadt Pangburn,
P.C., as the Company's independent auditors;
3. The transaction of such other business as may properly come before
the meeting or any adjournment thereof.
Only holders of the no par value common stock of the Company of record at
the close of business on April 16, 2004, will be entitled to notice of and to
vote at the Meeting or at any adjournment or adjournments thereof. The
proxies are being solicited by the Board of Directors of the Company.
All shareholders, whether or not they expect to attend the Annual Meeting
of Shareholders in person, are urged to sign and date the enclosed Proxy and
return it promptly in the enclosed postage-paid envelope which requires no
additional postage if mailed in the United States. The giving of a proxy will
not affect your right to vote in person if you attend the Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
STEVEN H. DAVIS, PRESIDENT
Englewood, Colorado
April 26, 2004
CET SERVICES, INC.
7032 South Revere Parkway
Englewood, Colorado 80112
(720) 875-9115
______________________________
PROXY STATEMENT
______________________________
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 2, 2004
GENERAL INFORMATION
The enclosed Proxy is solicited by and on behalf of the Board of
Directors of CET Services, Inc., a California corporation (the "Company"), for
use at the Company's Annual Meeting of Shareholders to be held at the Denver
Marriott Courtyard Tech Center, 6565 South Boston Street, Englewood, Colorado,
on Tuesday, June 2, 2004, at 9:00 a.m., Mountain Time, and at any adjournment
thereof. It is anticipated that this Proxy Statement and the accompanying
Proxy will be mailed to the Company's shareholders on or about May 3, 2004.
Any person signing and returning the enclosed Proxy may revoke it at any
time before it is voted by giving written notice of such revocation to the
Company, or by voting in person at the Meeting. The expense of soliciting
proxies, including the cost of preparing, assembling, and mailing this proxy
material to shareholders, will be borne by the Company. It is anticipated
that solicitations of proxies for the Meeting will be made only by use of the
mails; however, the Company may use the services of its Directors, Officers,
and employees to solicit proxies personally or by telephone, without
additional salary or compensation to them. Brokerage houses, custodians,
nominees, and fiduciaries will be requested to forward the proxy soliciting
materials to the beneficial owners of the Company's shares held of record by
such persons, and the Company will reimburse such persons for their reasonable
out-of-pocket expenses incurred by them in that connection.
All shares represented by valid proxies will be voted in accordance
therewith at the Meeting.
The Company's Annual Report for the year ended December 31, 2003, is
being simultaneously mailed to the Company's shareholders, but does not
constitute part of these proxy soliciting materials.
SHARES OUTSTANDING AND VOTING RIGHTS
All voting rights are vested exclusively in the holders of the Company's
no par value common stock, with each share entitled to one vote. Only
shareholders of record at the close of business on April 16, 2004, are
entitled to notice of and to vote at the Meeting or any adjournment thereof.
On April 16, 2004, the Company had 5,534,489 shares of its no par value common
stock outstanding, each share of which is entitled to one vote on all matters
to be voted upon at the Meeting. Under California law, shareholders are
permitted to cumulate votes for the election of directors whose names have
been placed in nomination. Therefore, in voting for directors, each
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outstanding share of common stock would be entitled to four votes which may be
cast for one candidate or distributed in any manner among the nominees for
director. However, the right to cumulate votes in favor of one or more
candidates may not be exercised until the candidate or candidates have been
nominated and any shareholder has given notice at the Annual Meeting of the
intention to cumulate votes.
The proxy holders will have full discretion and authority to vote
cumulatively and to allocate votes among any or all of the Board of Directors
nominees as they may determine or, if authority to vote for a specified
candidate or candidates has been withheld, among those candidates for whom
authority to vote has not been withheld.
A majority of the Company's outstanding common stock represented in
person or by proxy shall constitute a quorum at the Meeting.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number and percentage of shares of the
Company's no par value common stock owned beneficially, as of April 16, 2004,
by any person, who is known to the Company to be the beneficial owner of 5% or
more of such common stock, and, in addition, by each Director, Nominee for
Director, and Executive Officer of the Company, and by all Directors, Nominees
for Director, and Executive Officers of the Company as a group. Information
as to beneficial ownership is based upon statements furnished to the Company
by such persons.
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT
OF BENEFICIAL OWNERS BENEFICIAL OWNERSHIP OF CLASS
Craig C. Barto 703,554 (1) 12.7%
2440 Bayshore Drive
Newport Beach, CA 92663
Steven H. Davis 1,187,907 (2) 21.5%
7032 S. Revere Parkway
Englewood, CO 80112
George Pratt 1,000 (3) 0.0%
2208 Argyle Circle
Plano, TX 75023
John D. Hendrick 11,100 (4) 0.2%
5030 West Maplewood Place
Littleton, CO 80123
Dale W. Bleck 27,500 (5) 0.5%
7032 S. Revere Parkway
Englewood, CO 80112
Ann J. Heckler 14,000 (5) 0.3%
7032 S. Revere Parkway
Englewood, CO 80112
2
All directors, nominees for 1,945,061 34.9%
director, and executive officers
as a group (6 persons)
Ross C. Gordon 367,000 6.6%
234 Michelle Lane
Alamo, CA 94507
__________________
(1) Includes 703,554 shares held directly.
(2) Includes 1,187,907 shares held directly.
(3) Includes 1,000 shares held directly.
(4) Includes 1,100 shares held directly and 10,000 shares underlying stock
options exercisable within 60 days held by Mr. Hendrick.
(5) Represents shares underlying stock options exercisable within 60 days
held by the named person.
The Company knows of no agreements the operation of which may at a
subsequent date result in a change in control of the Company.
ELECTION OF DIRECTORS
The number of Directors of the Company is currently set at four (4)
members. The Board of Directors recommends the election as Directors of the
four (4) nominees listed below, to hold office until the next Annual Meeting
of Shareholders and until their successors are elected and qualified or until
their earlier death, resignation or removal. Each of the current members of
the present Board of Directors has been nominated for reelection. The persons
named as "Proxies" in the enclosed form of Proxy will vote the shares
represented by all valid returned proxies in accordance with the
specifications of the shareholders returning such proxies. If at the time of
the Meeting any of the nominees named below should be unable to serve, which
event is not expected to occur, the discretionary authority provided in the
Proxy will be exercised to vote for such substitute nominee or nominees, if
any, as shall be designated by the Board of Directors.
The following table sets forth the name and age of each nominee for
Director, indicating all positions and offices with the Company presently
held, and the period during which each person has served as a Director:
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POSITIONS AND OFFICES
NAME AGE HELD AND TERM AS A DIRECTOR
Craig C. Barto 46 Director since 1991
Steven H. Davis 50 Chief Executive Officer, President,
and Director since 1991
George Pratt 71 Director since 1998
John D. Hendrick 60 Director since 2000
There is no family relationship between any Director, Nominee for
Director, or Executive Officer of the Company.
The Company has an Audit Committee and a Compensation Committee, but has
no nominating committee. The Board of Directors intends to establish either a
nominating committee or other nominating procedures in compliance with
American Stock Exchange rules which become effective for the Company on July
31, 2005. The Board of Directors is of the view that the establishment of
such a committee or procedures within the time frame permitted by the American
Stock Exchange will adequately serve the needs of the Company.
The Audit Committee presently consists of Craig C. Barto, George Pratt,
and John D. Hendrick. The Audit Committee reviews financial statements and
other data prior to release to the public. In addition, the Committee meets
with the Company's independent accountants in connection with the Company's
audit. During 2003, the Audit Committee met three (3) times. The Board of
Directors has determined that George Pratt is an audit committee financial
expert.
The Compensation Committee presently consists of Craig C. Barto, George
Pratt, and John D. Hendrick. The Compensation Committee reviews compensation
matters relating to the Executive Officers of the Company and makes
recommendations to the Board of Directors. The Compensation Committee met two
(2) times during 2003.
Set forth below are the names of all directors, nominees for director,
and executive officers of the Company, all positions and offices with the
Company held by each such person, the period during which he has served as
such, and the principal occupations and employment of such persons during at
least the last five years:
CRAIG C. BARTO has been a Director of the Company since 1991. He is also
the President and Chairman of the Board of Directors of Signal Hill Petroleum,
Inc., Barto/Signal Petroleum, Inc., Signal Hill Operating, Inc., and Signal
Oil and Refining, Inc., which operate businesses such as Paramount and
Fletcher oil refineries. A graduate of UCLA with a degree in Economics in
1979, Mr. Barto was instrumental in the growth of the Signal Hill Petroleum
companies in the oil business with the reclamation of a marginal operation in
the West Newport Oil Field in Orange County, California. In addition to the
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oil and gas operations, Mr. Barto is also responsible for the commercial and
residential development of over 100 acres of some of the last undeveloped
hilltop property in Southern California.
STEVEN H. DAVIS has served as the Company's Chief Executive Officer,
President, and a Director since 1991. Prior to that time he was operating
partner of Lincoln Property Company which developed over 3 million square feet
of buildings in California, Nevada, and Colorado. He has almost 20 years of
experience in construction, financing, and developing industrial real estate.
Mr. Davis graduated from Brown University with an emphasis in Economics in
1975 and obtained an MBA from the University of Southern California in 1977.
As President, Mr. Davis manages the Company's business affairs and has been
instrumental in securing financing, negotiating bonding agreements, projecting
and analyzing the feasibility of expansion, mergers and acquisitions, and
formulating business relationships with customers, financial entities, and the
legal community.
GEORGE PRATT has been a Director of the Company since July 1998. Since
June 1993, Mr. Pratt has been employed by Pratt Associates, Inc, which
provides professional services in the area of corporate finance, merger-
acquisition analysis for small high-technology companies, and providing
services to the legal profession such as valuations of securities and
privately-owned companies for estate purposes and research and testimony for
securities-related litigation. From April 1988 to January 1993, he was
Chairman and Chief Executive Officer of Computer Automation, Inc., a
manufacturer of computer systems and automatic test equipment. Mr. Pratt
received a B.B.A. Degree in Finance from Hofstra University in 1958.
JOHN D. HENDRICK has been a Director of the Company since November 2000.
Since March 2000, Mr. Hendrick has been General Manager of the Centennial
Water & Sanitation District in Highlands Ranch, Colorado. From 1996 to 2000,
he was owner of Hendrick Engineering, which provided consulting services for
water resources and water supply matters. Mr. Hendrick has over thirty years
experience in the water industry in various capacities including hydrologist,
engineer, manager, and consultant. Mr. Hendrick received a Bachelor's Degree
in Agricultural Engineering from Cornell University in 1965, a Master's Degree
in Agricultural Engineering from the University of Illinois in 1967, and a
Ph.D in Hydrology and Water Resources from Colorado State University in 1972.
DALE W. BLECK has been Chief Financial Officer since September 1999, and
he has been employed by the Company since March 1999. From May 1998 to March
1999, he was Chief Financial Officer of Spartan Steel Products, Inc., a
distributor of steel products in Evergreen, Colorado. From January 1987 to
May 1998, he was Controller (until April 1991) and then Corporate Analyst for
Western Dairymen Cooperative, Inc., a dairy cooperative in Thornton, Colorado.
Mr. Bleck received a B.S. Degree in Accounting from Illinois State University
in 1972 and a M.B.A. Degree from Colorado State University in 1998. Mr. Bleck
is 53 years old.
ANN J. HECKLER has been Secretary since June 2002, and has been employed
by the Company since April 1998. From January 1991 through April 1998, she
was a small business owner in the Denver metropolitan area. Ms. Heckler
graduated from the University of Oklahoma in 1971 with a degree in Business
Education. Ms. Heckler is 55 years old.
5
The Company's Board of Directors held four (4) meetings during the year
ended December 31, 2003. Each Director attended all of the meetings held by
the Board of Directors and its Committees during the time each such Director
was a member of the Board or of any Committee of the Board.
The Company's executive officers hold office until the next annual
meeting of directors of the Company, which currently is scheduled for June 2,
2004. There are no known arrangements or understandings between any director
or executive officer and any other person pursuant to which any of the above-
named executive officers or directors was selected as an officer or director
of the Company.
SECTION 16(A) BENEFICIAL REPORTING COMPLIANCE
Based solely on a review of Forms 3 and 4 and amendments thereto
furnished to the Company during its most recent fiscal year, and Forms 5 and
amendments thereto furnished to the Company with respect to its most recent
fiscal year and certain written representations, no persons who were officers
and directors or beneficial owner of 10% or more of the stock of the Company
failed to file on a timely basis reports required by Section 16(a) of the
Exchange Act during the most recent fiscal year, except that Steven H. Davis,
an officer, director and beneficial owner of more than 10% of the Company's
stock, filed a Form 4 reporting 13 transactions late.
CODE OF ETHICS
The Board of Directors has adopted a Code of Ethics which applies to all
of the Company's executive officers, directors and employees. A copy of the
Code of Ethics is available by writing to the Corporate Secretary, CET
Services, Inc., 7032 South Revere Parkway, Englewood, Colorado 80112.
COMMUNICATIONS WITH THE BOARD OF DIRECTORS
Shareholders wishing to contact the Board of Directors or a specified
member or committee of the Board should send correspondence to the Corporate
Secretary, CET Services, Inc., 7032 South Revere Parkway, Englewood, Colorado
80112. All communications so received from stockholders of the Company will
be forwarded to the members of the Board of Directors, or to a specific Board
member or committee if so designated by the stockholder. A stockholder who
wishes to communicate with a specific Board member or committee should send
instructions asking that the material be forwarded to the director or to the
appropriate committee chairman. All stockholders are also encouraged to
communicate directly with both officers and directors regarding issues
affecting the Company at the Annual Meeting of Shareholders.
COMPENSATION
The following table sets forth information concerning the compensation
received for services rendered in all capacities to the Company for the years
ended December 31, 2003, 2002, and 2001, by the Company's President and each
other executive officer whose compensation exceeded $100,000 during such
years.
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SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
---------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------ ----------------- ---------------
SECURI-
TIES
OTHER UNDERLY-
ANNUAL RE- ING ALL
COMPEN- STRICTED OPTIONS/ OTHER
NAME AND PRINCIPAL SATION STOCK SARs LTIP COMPEN-
POSITION YEAR SALARY BONUS (1) AWARD(S) (NUMBER) PAYOUTS SATION
- ------------------ ---- ------ ----- ------ -------- -------- ------- -------
Steven H. Davis, 2003 $129,816 $ 2,404 $ 433 0 0 0 $0
President and 2002 $125,008 $15,000 $1,750 0 0 0 $0
Chief Executive 2001 $125,008 $12,023 $1,056 0 0 0 $0
Officer
Dale W. Bleck 2003 $ 99,693 $ 1,846 $ 775 0 0 0 $0
Chief Financial 2002 $ 96,000 $15,000 $2,942 0 0 0 $0
Officer 2001 $ 94,068 $12,023 $1,591 0 0 0 $0
_______________
(1) Includes 401(k) contributions by the Company.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
SECURITIES
UNDERLYING VALUE OF UNEXER-
SHARES UNEXERCISED CISED IN-THE
ACQUIRED OPTIONS MONEY OPTIONS/
ON SARs AT FY-END SARs AT FY-END
EXERCISE VALUE EXERCISABLE/ EXERCISABLE/
NAME (NUMBER) REALIZED UNEXERCISABLE UNEXERCISABLE
---- -------- -------- -------------- ---------------
Steven H. Davis 0 0 0 / 0 $ 0/$ 0
Dale W. Bleck 0 0 27,500 / 5,000 $ 1,650/$ 300
The Company has no formal employment agreements with any of its Executive
Officers.
COMPENSATION OF DIRECTORS
Members of the Board of Directors receive a fee of $1,000 per Board
meeting attended, including telephone meetings. They are also entitled to
reimbursement of reasonable travel expenses incurred by them in attending
board or committee meetings.
7
On September 17, 2003, the Board of Directors granted Craig Barto and
George Pratt, non-employee Directors of the Company, options to purchase
10,000 shares of common stock at $.32 per share. These options were not
granted under any plan. The options are exercisable commencing September 17,
2004, until September 17, 2008, except that they will expire three months
after the termination of serving as a Director of the Company, for reasons
other than death, and one year after termination as a result of death.
Effective November 14, 2000, the Board of Directors granted options to
purchase 10,000 shares of common stock at $0.50 per share to John D. Hendrick
in connection with his election to the Board. These options are exercisable
commencing November 14, 2001, until November 14, 2005, except that they will
expire three months after termination of serving as a Director of the Company,
for reasons other than death, and one year after termination as a result of
death.
401(k) AND SIMPLE IRA PLANS
The Company had a Non-Standardized Cash or Deferred Profit Sharing Plan
pursuant to which all eligible employees could contribute a portion of their
income. Company contributions to the Profit Sharing Plan were discretionary.
The Company did, however, make matching contributions for the first six
percent of all elective deferrals. Until 2002, the matching contribution was
25%. Beginning April 1, 2002, the matching contribution was increased to 50%.
Effective March 31, 2003, the Plan was dissolved by the Board of Directors.
Effective April 1, 2004, the Company established a Simple IRA plan for
its employees under which they may defer a portion of their salaries up to
allowable limits. The Company will match such deferrals on a dollar-for-
dollar basis not to exceed 3% of an employee's compensation or applicable
limits.
STOCK OPTION PLAN
On March 1, 1995, the Company adopted an Incentive Stock Option Plan (the
"Plan") for key personnel. A total of 550,000 shares of common stock are
reserved for issuance pursuant to the exercise of stock options (the
"Options") which may be granted to full-time employees of the Company. The
Plan is currently administered by the Board of Directors. In addition to
determining who will be granted Options, the Board of Directors has the
authority and discretion to determine when Options will be granted and the
number of Options to be granted. The Board of Directors may grant Options
intended to qualify for special treatment under the Internal Revenue Code of
1986, as amended ("Incentive Stock Options") and may determine when each
Option becomes exercisable, the duration of the exercise period for Options,
and the form of the instruments evidencing Options granted under the Plan. The
Board of Directors may adopt, amend, and rescind such rules and regulations as
in its opinion may be advisable for the administration of the Plan. The Board
of Directors may also construe the Plan and the provisions in the instruments
evidencing the Options granted under the Plan and make all other
determinations deemed necessary or advisable for the administration of the
Plan.
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The Board of Directors has broad discretion to determine the number of
shares with respect to which Options may be granted to participants. The
maximum aggregate fair market value (determined as of the date of grant) of
the shares as to which the Incentive Stock Options become exercisable for the
first time during any calendar year may not exceed $100,000. The Plan provides
that the purchase price per share for each Incentive Stock Option on the date
of grant may not be less than 100 percent of the fair market value of the
common stock on the date of grant. However, any Option granted under the Plan
to a person owning more than 10 percent of the common stock shall be at a
price of at least 110 percent of such fair market value.
If an optionee ceases to be employed by the Company for any reason other
than death or disability, the optionee may exercise all Options within three
months following such cessation to the extent exercisable on the date of
cessation. If an optionee dies while employed by the Company, or during the
three-month period following termination of the optionee's employment, or if
the optionee becomes disabled, the optionee's Options, unless previously
terminated, may be exercised, whether or not otherwise exercisable, by the
optionee or his legal representative or the person who acquires the Options by
bequest or inheritance at any time within one year following the date of death
or disability of the optionee.
An Option granted under the Plan is not transferable by the optionee
other than by will or by the laws of descent and distribution and, during the
lifetime of the optionee, may be exercised only by the optionee, his guardian,
or legal representative.
In August 1996, the Company filed a registration statement on Form S-8 to
register the 550,000 shares of the Company's common stock reserved for
issuance under the Company's Incentive Stock Option Plan.
As of December 31, 2002, options for 78,600 shares were outstanding at
prices ranging from $0.20 to $3.50 per share under this plan.
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation", which requires entities to calculate the fair value of
stock awards granted to employees. This statement provides entities with the
option of either electing to expense the fair value of employee stock-based
compensation or continuing to recognize compensation expense under existing
accounting pronouncements and to provide proforma disclosures of net income
and, if presented, income per share, as if the above-mentioned fair market
value method of accounting was used in determining compensation expense.
Additionally, the statement requires that all equity awards granted to
nonemployees such as suppliers of goods and services be recognized based on
fair value.
The Company has elected the proforma method of disclosure. Under this
method, the fair value of each option grant is estimated on the date of grant
using the Black-Scholes options-pricing model with the following weighted-
average assumptions for grants used in 2003: no expected dividends; expected
volatility of 152%; risk free interest rate of 6.0%; and expected lives of ten
years.
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Using these assumptions, the Company's net income(loss) and
earnings(loss) per common share would have been:
December 31, December 31,
2003 2002
------------ ------------
Net loss available to common stockholders:
As reported $(113,719) $(2,432,938)
Stock compensation expense (6,865) (13,873)
----------- ------------
Pro forma $ (120,584) $(2,446,811)
=========== =============
Basic and diluted net loss available to
Common Stockholders per common share:
As reported $ (.02) $ (.42)
Pro forma $ (.02) $ (.42)
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information as of December 31, 2003, with
respect to shares of the Company's common stock that may be issued under
equity compensation plans:
Number of
securities
remaining
Number of available
securities Weighted- for future
to be issued average issuance under
upon exer- exercise equity compen-
cise of out- price of sation plans
standing outstanding (excluding
options, options, securities
warrants warrants reflected in
and rights and rights column (a))
Plan category (a) (b) (c)
- ------------- ---------- ---------- -------------
Equity compensation 78,600 $1.33 457,700
plans approved by
security holders
Equity compensation 30,000 $ .38 0
plans not approved ------- -------
by security holders
Total 108,000 $1.07 457,700
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company sells water it acquires under a water lease to the
Centennial Water & Sanitation District. John D. Hendrick, who became a
Director of the Company in November 2000, is the General Manager of the
Centennial Water & Sanitation District. The Centennial Water & Sanitation
District makes payments to an escrow agent who distributes the funds primarily
to the lessor and the remainder to the Company. During 2003 and 2002, the
Company invoiced the Centennial Water & Sanitation District $302,062 and
$265,487, respectively, and recorded a profit of $14,205 and $19,248,
respectively, under this arrangement.
On May 2, 2001, the Company entered into an agreement to purchase 631,514
shares of the Company's common stock from Douglas W. Cotton, a former Director
and Executive Vice President of the Company, for a maximum of $250,000 or
approximately $0.395 per share. Initially, the Company purchased 189,454
shares for $75,000. The remaining 442,060 shares are to be purchased for a
maximum of $175,000, the payment of which is contingent upon receipt of the
$5.3 million of past due receivables from Remediation Financial, Inc. ("RFI").
Under the terms of the agreement, 5% of the proceeds from RFI as collected, up
to the maximum of $175,00, will be applied to the purchase of the stock. In
February 2002, following the receipt of $2.1 million from RFI, the Company
purchased an additional 218,757 shares from Mr. Cotton for $86,600. In
November 2003, following the receipt of $2.9 million from RFI, the company
purchased the remaining 223,303 shares from Mr. Cotton for $88,400.
All of these transactions were approved by the Board of Directors and
were made on terms as fair and reasonable to the Company as those that could
be obtained from non-affiliated third parties. Any future transactions between
the Company and its officers, directors, employees and affiliates that are
outside the scope of the Company's employment relationship with such persons
will be subject to the approval of a majority of the disinterested members of
the Board of Directors based upon a determination that the terms are at least
as favorable to the Company as those that could be obtained from unrelated
parties.
REPORT OF THE AUDIT COMMITTEE
The Company has a standing Audit Committee (the "Audit Committee") of the
Board of Directors. The Audit Committee presently consists of Craig C. Barto
and George Pratt who are independent as defined in Section 121(A) of the
American Stock Exchange's listing standards currently in effect for the
Company, and John D. Hendrick who is not independent under those listing
standards. The Audit Committee operates pursuant to a charter (the "Audit
Committee Charter") approved and adopted by the Board. A copy of the current
Audit Committee Charter is attached hereto as Exhibit A. The Audit Committee,
on behalf of the Board, oversees the Company's financial reporting process.
In fulfilling its oversight responsibilities, the Audit Committee reviewed
with Management the audited financial statements and the footnotes thereto in
the Company's Annual Report on Form 10-KSB for the year ended December 31,
2003, and discussed with management the quality, not just the acceptability,
of the accounting principles, the reasonableness of significant judgments, and
the clarity of the disclosures in the financial statements. The Audit
Committee held three (3) meetings in 2003.
11
The Company's outside independent public accountants are responsible for
expressing an opinion on the conformity of the Company's audited financial
statements in all material respects, to accounting principles generally
accepted in the United States. The Audit Committee reviewed and discussed
with the independent public accountants their judgments as to the quality, not
just the acceptability, of the Company's accounting principles and such other
matters as are required to be discussed by the Audit Committee with the
Company's independent public accountants under Statement on Auditing Standards
61, as amended by SAS 90. The Company's independent public accountants have
expressed the opinion that the Company's audited financial statements conform,
in all material respects, to accounting principles generally accepted in the
United States. The independent public accountants have full and free access
to the Audit Committee.
The Audit Committee discussed with the Company's independent public
accountants their independence from management and the Company, and received
from them the written disclosures and the letter concerning the independent
accountants' independence required by the Independence Standard Board Standard
No. 1.
The Audit Committee discussed with the Company's independent public
accountants the overall scope and plans of the audit. The Audit Committee
discussed with the independent public accountants the results of their audit,
their evaluations of the Company's internal controls, and the overall quality
of the Company's financial reporting.
In reliance on the review and discussions referred to above, the Audit
Committee recommended to the Board that the audited financial statements be
included in the Annual Report on Form 10-KSB for the year ended December 31,
2003, for filing with the Securities and Exchange Commission.
The Audit Committee also recommended to the Board of Directors the
selection of Gelfond Hochstadt Pangburn, P.C. to serve as the Company's
independent public accountants for the fiscal year ending December 31, 2004.
MEMBERS OF THE AUDIT COMMITTEE
Craig C. Barto
George Pratt
John D. Hendrick
APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The independent accounting firm of Grant Thornton LLP audited the
financial statements of the Company for the year ended December 31, 2003, but
has not been selected in such capacity for the year ended December 31, 2004.
The independent accounting firm of Gelfond Hochstadt Pangburn, P.C.has
been selected to serve as the Company's independent auditors for the year
ended December 31, 2004. At the direction of the Board of Directors, this
appointment is being presented to the shareholders for ratification or
12
rejection at the Annual Meeting of Shareholders. If the shareholders do not
ratify the appointment of Gelfond Hochstadt Pangburn, P.C., the appointment of
auditors will be reconsidered by the Board of Directors.
Representatives of Grant Thornton LLP and Gelfond Hochstadt Pangburn,
P.C. are not expected to be present at the meeting. However if
representatives of either of these firms are present at the meeting, they will
be given an opportunity to make a statement if they desire to do so and to
respond to appropriate questions from shareholders.
On April 21, 2004, the Company engaged Gelfond Hochstadt Pangburn, P.C.
to serve as the Company's independent accountants, replacing Grant Thornton
LLP. The change was made in order to reduce the expense of auditing fees. The
decision to engage Gelfond Hochstadt Pangburn, P.C. was recommended by the
Audit Committee.
The report of Grant Thornton LLP on the Company's consolidated financial
statements for the years ended December 31, 2003 and 2002 did not contain an
adverse opinion or disclaimer of opinion, nor was it qualified or modified as
to uncertainty, audit scope, or accounting principles or other reportable
event (of the type described in Item 304 (a) (1) (B) of Regulation S-B).
During the years ended December 31, 2003 and 2002 and the subsequent periods
preceding the decision to change independent accountants, there were no
disagreements with Grant Thornton LLP on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure,
which disagreement(s), if not resolved to the satisfaction of Grant Thornton
LLP, would have caused it to make reference to the subject matter of the
disagreement(s) in connection with its report.
During the fiscal years ended December 31, 2003 and 2002 and the
subsequent periods prior to engaging, neither the Company nor anyone on its
behalf consulted Gelfond Hochstadt Pangburn, P.C. regarding either the
application of accounting principles to a specified transaction, either
completed or proposed, or the type of audit opinion that might be rendered on
the Company's consolidated financial statements, and neither a written report
nor oral advice was provided to the Company by Gelfond Hochstadt Pangburn,
P.C.
INDEPENDENT AUDITOR FEES
The following table presents aggregate fees for professional services
rendered by Grant Thornton LLP for the audit of the Company's annual financial
statements for the years ended December 31, 2003 and 2002, and fees billed for
other services rendered by Grant Thornton LLP during those periods:
2003 2002
Audit Fees (1) $ 45,378 $ 48,354
Audit-Related Fees (2) 7,743 9,543
Tax Fees (3) 15,793 15,753
All Other Fees 0 0
-------- --------
Total $ 68,914 $ 73,623
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__________________
(1) These are fees for professional services performed by Grant Thornton LLP
for the audit of the Company's annual financial statements and review of
financial statements included in the Company's 10-QSB filings, and services
that are normally provided in connection with statutory and regulatory filings
or engagements.
(2) These are fees for the audit of the Company's 401(k) plan.
(3) These are fees for the preparation of the Company's federal and state tax
returns.
AUDIT COMMITTEE PRE-APPROVAL POLICY
The Company's independent accountants may not be engaged to provide non-
audit services that are prohibited by law or regulation to be provided by it,
nor may the Company's principal accountant be engaged to provide any other
non-audit service unless it is determined that the engagement of the principal
accountant provides a business benefit resulting from its inherent knowledge
of the Company while not impairing its independence. The Audit Committee must
pre-approve the engagement of the Company's principal accountant to provide
permissible non-audit services. All non-audit services provided by the
independent accountant in 2003 were pre-approved by the Audit Committee.
OTHER BUSINESS
As of the date of this Proxy Statement, management of the Company was not
aware of any other matter to be presented at the Meeting other than as set
forth herein. However, if any other matters are properly brought before the
Meeting, the shares represented by valid proxies will be voted with respect to
such matters in accordance with the judgment of the persons voting them. A
majority vote of the shares represented at the meeting is necessary to approve
any such matters.
ANNUAL REPORT
The Company's Annual Report for the year ending December 31, 2003,
accompanies this Proxy Statement. The Annual Report is not incorporated into
this Proxy Statement and is not to be considered part of the solicitation
material.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
FOR THE ANNUAL MEETING TO BE HELD IN JUNE 2005
Any proposal by a shareholder intended to be presented at the Company's
Annual Meeting of Shareholders to be held in June 2005 must be received at the
offices of the Company, 7032 South Revere Parkway, Englewood, Colorado 80112,
no later than December 21, 2004, in order to be included in the Company's
proxy statement and proxy relating to that meeting.
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Shareholders intending to bring any business before the Annual Meeting of
Shareholders to be held in June 2005 that is not to be included in the
Company's proxy statement and proxy related to that meeting must notify the
Company, in writing, prior to March 12, 2005, of the business to be presented.
Any such notices received after said date will be considered untimely under
Rule 14a-4(c)(1) under the Securities Exchange Act of 1934, as amended.
STEVEN H. DAVIS, PRESIDENT
Englewood, Colorado
April 26, 2004
15
EXHIBIT A
CET SERVICES, INC.
AUDIT COMMITTEE CHARTER
The Audit Committee ("the Committee"), of the Board of Directors ("the Board")
of CET Services, Inc. ("the Company"), will have the oversight responsibility,
authority and specific duties as described below.
COMPOSITION
The Committee will be comprised of three or more directors as determined by
the Board, however, until June 14, 2001, the Committee may be comprised of
only two independent directors. The members of the Committee will meet the
independence and experience requirements of the American Stock Exchange (AMEX)
then in effect. The members of the Committee will be elected annually at the
annual meeting of the full Board and will be listed in the annual report to
shareholders. One of the members of the Committee will be elected Committee
Chair by the Board.
RESPONSIBILITY
The Committee is a part of the Board. It's primary function is to assist the
Board in fulfilling its oversight responsibilities with respect to (i) the
annual financial information to be provided to shareholders and the Securities
and Exchange Commission (SEC); (ii) the system of internal controls that
management has established; and (iii) the internal and external audit process.
In addition, the Committee provides an avenue for communication between the
independent accountants, financial management and the Board. The Committee
should have a clear understanding with the independent accountants that they
must maintain an open and transparent relationship with the Committee, and
that the ultimate accountability of the independent accountants is to the
Board and the Committee. The Committee will make regular reports to the Board
concerning its activities.
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements are complete
and accurate and are in accordance with generally accepted accounting
principles. This is the responsibility of management. Nor is it the duty of
the Audit Committee to conduct investigations, to resolve disagreements, if
any, between management and the independent auditor or to assure compliance
with laws and regulations and the Company's business conduct guidelines.
AUTHORITY
Subject to the prior approval of the Board, the Committee is granted the
authority to investigate any matter or activity involving financial accounting
and financial reporting, as well as the internal controls of the Company. In
that regard, the Committee will have the authority to approve the retention of
external professionals to render advice and counsel in such matters. All
employees will be directed to cooperate with respect thereto as requested by
members of the Committee.
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MEETINGS
The Committee is to meet at least once annually and as many additional times
as the Committee deems necessary. Content of the agenda for each meeting
should be cleared by the Committee Chair. The Committee is to meet in
separate executive sessions with the chief financial officer, independent
accountants at least once each year and at other times when considered
appropriate.
ATTENDANCE
Committee members will strive to be present at all meetings. As necessary or
desirable, the Committee Chair may request that members of management and
representatives of the independent accountants be present at Committee
meetings.
SPECIFIC DUTIES
In carrying out its oversight responsibilities, the Committee will:
1. Review and reassess the adequacy of this charter annually and recommend
any proposed changes to the Board for approval. This should be done in
compliance with applicable AMEX Audit Committee Requirements.
2. Review with the Company's management and independent accountants the
Company's accounting and financial reporting controls. Obtain annually in
writing from the independent accountants their letter as to the adequacy of
such controls.
3. Review with the Company's management and independent accountants
significant accounting and reporting principles, practices and procedures
applied by the Company in preparing its financial statements. Discuss with
the independent accountants their judgements about the quality, not just the
acceptability, of the Company's accounting principles used in financial
reporting.
4. Review the scope and general extent of the independent accountants'
annual audit. The Committee's review should include an explanation from the
independent accountants of the factors considered by the accountants in
determining the audit scope, including the major risk factors. The independent
accountants should confirm to the Committee that no limitations have been
placed on the scope or nature of their audit procedures. The Committee will
review annually with management the fee arrangement with the independent
accountants.
5. Inquire as to the independence of the independent accountants and
obtain from the independent accountants, at least annually, a formal written
statement delineating all relationships between the independent accountants
and the Company as contemplated by Independence Standards Board Standard No.
1, Independence Discussions with Audit Committees.
2
6. Have a predetermined arrangement with the independent accountants that
they will advise the Committee through its Chair and management of the Company
of any matters identified through procedures followed for interim quarterly
financial statements, and that such notification is to be made prior to the
related press release or, if not practicable, prior to filing, or soon
thereafter, Forms 10-Q. Also receive a written confirmation provided by the
independent accountants at the end of each of the first three quarters of the
year that they have nothing to report to the Committee, if that is the case,
or the written enumeration of required reporting issues.
7. At the completion of the annual audit, review with management and the
independent accountants the following:
$ The annual financial statements and related footnotes and financial
information to be included in the Company's annual report to shareholders and
on Form 10-K.
$ Results of the audit of the financial statements and the related report
thereon and, if applicable, a report on changes during the year in accounting
principles and their application.
$ Significant changes to the audit plan, if any, and any serious disputes
or difficulties with management encountered during the audit. Inquire about
the cooperation received by the independent accountants during their audit,
including access to all requested records, data and information. Inquire of
the independent accountants whether there have been any disagreements with
management which, if not satisfactorily resolved, would have caused them to
issue a nonstandard report on the Company's financial statements.
$ Other communications as required to be communicated by the independent
accountants by Statement of Auditing Standards (SAS) 61 as amended by SAS 90
relating to the conduct of the audit. Further, receive a written communication
provided by the independent accountants concerning their judgment about the
quality of the Company's accounting principles, as outlined in SAS 61 as
amended by SAS 90, and that they concur with management's representation
concerning audit adjustments.
If deemed appropriate after such review and discussion, recommend to the Board
that the financial statements be included in the Company's annual report on
Form 10-K.
8. After preparation by management and review by independent accountants,
approve the report required under SEC rules to be included in the Company's
annual proxy statement. The charter is to be published as an appendix to the
proxy statement every three years.
9. Discuss with the independent accountants the quality of the Company's
financial and accounting personnel. Also, elicit the comments of management
regarding the responsiveness of the independent accountants to the Company's
needs.
3
10. Meet with management and the independent accountants to discuss any
relevant significant recommendations that the independent accountants may
have, particularly those characterized as "material" or "serious." Typically,
such recommendations will be presented by the independent accountants in the
form of a Letter of Comments and Recommendations to the Committee. The
Committee should review responses of management to the Letter of Comments and
Recommendations from the independent accountants and receive follow-up reports
on action taken concerning the aforementioned recommendations.
11. Recommend to the Board the selection, retention or termination of the
Company's independent accountants.
12. Review with management and the independent accountants the methods
used to establish and monitor the Company's policies with respect to unethical
or illegal activities by Company employees that may have a material impact on
the financial statements.
13. Generally as part of the review of the annual financial statements,
receive an oral report(s), at least annually, from the Company's counsel
concerning legal and regulatory matters that may have a material impact on the
financial statements.
14. As the Committee may deem appropriate, obtain, weigh and consider
expert advice as to Audit Committee related rules of the AMEX, Statements on
Auditing Standards and other accounting, legal and regulatory provisions.
4
P R O X Y
CET SERVICES, INC.
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Steven H. Davis with the power to appoint
his substitute, and hereby authorizes him to represent and to vote as
designated below, all the shares of common stock of CET Services, Inc. held of
record by the undersigned on April 16, 2004, at the Annual Meeting of
Shareholders to be held on June 2, 2004, or any adjournment thereof.
1. The election of four (4) Directors of the Company to serve until the
next Annual Meeting of Shareholders and until their successors have been duly
elected and qualified:
___ FOR all nominees listed below (except as marked to the
contrary).
___ WITHHOLD authority to vote for all the nominees listed
below:
Craig C. Barto John D. Hendrick
George Pratt Steven H. Davis
[INSTRUCTION: To withhold authority to vote for any individual nominee,
cross out that nominee's name above.]
2. The ratification of the appointment of Gelfond Hochstadt Pangburn,
P.C. as the Company's independent accountants for the fiscal year ending
December 31, 2004:
___ FOR ___ AGAINST ___ ABSTAIN
3. The transaction of such other business as may properly come before
the meeting or any adjournment thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF CET
SERVICES, INC. PLEASE SIGN AND RETURN THIS PROXY IN THE ENCLOSED
PRE-ADDRESSED ENVELOPE. THE GIVING OF A PROXY WILL NOT AFFECT YOUR RIGHT TO
VOTE IN PERSON IF YOU ATTEND THE MEETING.
(To be signed on the other side)
CET SERVICES, INC.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1 AND 2.
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AT THE MEETING IN ACCORDANCE
WITH THE SHAREHOLDER'S SPECIFICATIONS ABOVE. THIS PROXY CONFERS DISCRETIONARY
AUTHORITY IN RESPECT TO MATTERS NOT KNOWN OR DETERMINED AT THE TIME OF THE
MAILING OF THE NOTICE OF THE ANNUAL MEETING OF SHAREHOLDERS TO THE
UNDERSIGNED.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting of
Shareholders and Proxy Statement.
Dated: ______________, 2004 _______________________________________
Signature(s) of Shareholder(s)
_______________________________________
Signature(s) of Shareholder(s)
Signature(s) should agree with the name(s) stenciled hereon. Executors,
administrators, trustees, guardians, and attorneys should indicate when
signing. Attorneys should submit powers of attorney.