KRYS BOYLE, P.C.
Attorneys at Law
Telephone Suite 2700 South Tower Facsimile
(303) 893-2300 600 Seventeenth Street (303) 893-2882
Denver, Colorado 80202-5427
July 9, 2008
Jennifer Hardy
Branch Chief
United States Securities and Exchange Commission
Division of Corporation Finance
100 F Street, N.W.
Washington, DC 20549
Re: CET Services, Inc.
Preliminary Proxy Statement on Schedule 14A
Filed June 2, 2008
File No. 001-13852
Dear Ms. Hardy:
This letter will serve as a response and/or explanation with respect to
the comments in your letter dated June 25, 2008 (the "Comment Letter")
regarding CET Services, Inc. ("CET" or the "Company"). The entire text of
the comments contained in your comment letter has been reproduced in this
letter for ease of reference. A response to each comment is set forth
immediately below the text of the comment.
General
1. As your proxy statement contains actions that are covered by Items
11 and 12 of Schedule 14A, pursuant to Item 13(a) of Schedule 14A please
provide supplementary financial information meeting the requirements of Item
302 of Regulation S-K, as well as a statement as to whether or not
representatives of your principal accountants for the current year and for
the most recently completed fiscal year:
* Are expected to be present at the meeting;
* Will have the opportunity to make a statement if they desire to do
so; and
* Are expected to be available to respond to appropriate questions.
CET is a "smaller reporting company" as defined in Rule 10(f)(1) of
Regulation S-K. Item 302(c) of Regulation S-K provides that smaller
reporting companies are not required to provide the Supplementary Financial
Information required by that item. As a result, we have not added that
information in the revised preliminary proxy statement that we filed on July
9, 2008. We have added the other information requested by this comment on
page 17 of the revised preliminary proxy statement.
Page 2
2. Please add a table to the proxy statement disclosing the number of
shares of common stock after the merger that will be:
* issued and outstanding;
* authorized and reserved for issuance; and
* authorized but unreserved.
When preparing the table, please assume the approval of proposals 1, 3, 4,
and 6.
We have added the requested table on page 8 of the revised preliminary proxy
statement.
For the purposes of this table, we have used an assumed reverse stock ratio
of one for three since we believe that ratio is the most likely to be used.
3. We note that you filed a Form 10-QSB on May 15, 2008. Please note
that due to the elimination of Regulation S-B effective February 4, 2008,
Forms 10-QSB and 10-KSB are unavailable for reporting periods after December
31, 2007. Please file on a Form 10-Q for the period ended June 30, 2008 and
follow the instructions therein. Please see SEC Release No. 33-8876 for more
information.
CET will file a Form 10-Q for the period ended June 30, 2008.
Notice of Special Meeting of Shareholders, page 1
4. On the first page of the proxy statement, as delivered to security
holders, please state the approximate date on which the proxy statement and
form of proxy are first to be sent or given to security holders. Please see
Item 1(b) of Schedule 14A.
The date on which the proxy statement is expected to be first sent or given
to security holders has been added on the Notice page as requested.
Summary of the Merger, page 6
5. You currently repeat information in your summary section and your
Q&A section. The Q&A should not repeat any information that appears in the
summary, and the summary should not repeat information in the Q&A. For
purposes of eliminating redundancies and grouping like information together,
please view your Q&A and summary as one section. When revising these
sections, please consider disclosing procedural information about the merger
in the Q&A (i.e. voting procedures and appraisal rights) and substantive
information about the terms of the merger in the summary.
We have revised the Summary of the Merger and Q&A sections on pages 6 through
11 to eliminate duplications and to reorganize the disclosures as suggested.
6. Please address the $250,000 break-up fee in the summary section of
the proxy statement and provide a cross-reference to a fuller discussion of
the break-up fee in the merger agreement section of the proxy statement.
Page 3
We have added a discussion of the break-up fee on page 8, as requested.
Parties to the Merger, page 6
7. Please indicate that you have received a going concern opinion from
your auditor.
We have added a disclosure concerning the going concern opinion from CET's
auditors on page 6, as requested.
Reasons for the Merger, page 6
8. Please provide a summary of the reason or reasons why your board
believes that the value to be received by your shareholders in the merger
would be greater than that available to you if you continue your current
operations. In addition, please add a brief description of the nature of the
value or benefit you believe current shareholders of CET will receive as a
result of the merger.
We have added the requested disclosures on page 6.
Recommendations to Shareholders, page 7
9. We note that Mr. Davis will receive benefits as a result of the
merger that are different from those to be received by your other
shareholders. Where you include the board's recommendation, please disclose
with equal prominence that Mr. Davis will directly benefit from the merger in
additional ways. Please make conforming disclosures throughout the proxy
statement and, if applicable, please provide similar disclosure with respect
to any other special benefits that management may receive as a result of the
merger.
We have revised the disclosures in the revised preliminary proxy statement as
requested by this comment on pages 7, 13 and 26.
10. Please disclose that your board neither sought nor received a
fairness opinion from an unaffiliated party as to whether the merger is fair
to your non-management shareholders.
We have added the requested disclosure on page 7.
The Merger, page 6
11. Please clarify that this transaction is a reverse merger and a
change of control (both in beneficial ownership and management) and that
after the merger, the operations will be conducted primarily through BMTS.
Please also make it clear that CET expects to liquidate its real estate
holdings.
We have revised the disclosures on page 7 to make the requested changes.
Page 4
Questions and Answers about the Merger, page 8
Q. What Will BMTS security holders receive in the proposed merger?, page 9
12. Please confirm that the reference to 78,994,826 shares of CET
common stock refers only to the number of shares of CET common stock that you
estimate will be issued in the merger in exchange for outstanding shares of
BMTS common stock and does not also include shares that would be issueable
upon, the example, the exercise of assumed BMTS options. This disclosure
appears to be inconsistent with your disclosure on page 51.
We have made revisions to the disclosures on page 7 in response to this
comment. The revised disclosures are now consistent with other disclosures
in the preliminary proxy statement.
Q. How much of CET will existing CET shareholders own after the merger?,
page 9
13. To clarify how much dilution your current shareholders will
experience as a result of the merger, please quantify the percentage of
outstanding shares currently held by the current CET shareholders and compare
that to what they will own after the merger.
We have added the requested disclosure on page 10.
Q. What happens if the merger is not consummated?, page 10
14. Please address the applicability of the break-up fee if the merger
is not consummated.
The requested disclosure has been added on page 10.
Risk Factors, page 12.
Our current directors and executive officers own shares of common stock and
have other interests in the merger that are different from yours, page 13.
15. Please describe with specificity all of the different interests in
the merger and related transactions possessed by your officers and directors,
being sure to identify by name each officer and director.
We have added additional disclosures on page 13 in response to this comment.
Cautionary Statement Regarding Forward-Looking Statements, page 16
16. Please note that the safe harbor for forward looking statements
provided Sections 27A of the Securities Act and 21E of the Exchange Act are
not available to issuers of penny stock. Please revise this disclosure to
remove references to these sections and any other references you may have in
your filing to them or to the Private Securities Litigation Reform Act.
Page 5
Please also comply with this comment in the MD&A discussion on page 42.
We have made revisions on pages 16 and 44 of the revised preliminary proxy
statement in response to this comment.
The Merger (Proposal No. 1), page 18
Background of the Merger, page 19
17. Please disclose the background of the negotiations for the terms of
the merger agreement, including how the parties arrived at the level of
merger consideration (approximately 94% of the combined company) that would
be paid to BMTS shareholders. In this regard, please address what aspects of
the companies' financial condition the parties considered. We note, for
example, that CET had approximately $2.1 million in revenue in 2007 and
approximately $3.9 million of assets at ear end, while BMTS had only $326,935
in revenue in 2007 and $821,049 of assets at year end. Please address this
as well in your discussion of the board's conclusion that the transaction is
fair to CET shareholders.
We have added additional disclosures on page 22 to provide the information
requested.
18. Please address "the financial and business" framework that BMTS
possessed but the four other possible reverse acquisitions you abandoned in
2007 did not.
We have added disclosures on page 21 in response to this comment.
19. Please address the background to and reasons for the sale of real
property to Mr. Davis in connection with the consummation of the merger.
We have included additional disclosures on page 22 in response to this
comment.
CET's Reasons for the Merger; Recommendation of CET's Board of Directors,
page 21
20. We note your statement on page 21 that the "board of directors
believes that the merger consideration is fair to the shareholders." Please
revise this statement, as it implies that the current shareholders of CET
will receive consideration as a result of the merger. In this regard, we
note from the merger agreement that the current shareholders of CET will not
receive any consideration directly as a result of the merger, and we further
note that any indirect economic benefit conferred on the current shareholders
of CET as a result of the merger would likely be due only to the future
success of BMTS's business.
We have revised the statements on page 21 in response to this comment.
Page 6
21. Please address the extent to which BMTS's technology and business
prospects were considered by your board in their decision to approve the
merger agreement. In this regard, we note the public statements made by Mr.
Davis to Biotech Business Week on June 2, 2008 concerning the Demolizer(R) II
technology and noting that the technology was "a significant factor in [your]
decision to enter into the merger agreement.
We have added disclosures on pages 22 and 23 concerning the factors
considered by CET. Please be advised that the statements included in the
article that appeared in Biotech Business Week were taken directly from a
press release issued by CET on May 19, 2008 and filed as an exhibit to the
Company's Form 8-K filed on May 20, 2008. Mr. Davis did not talk directly
with anyone at Biotech Business Week.
22. We note your statement on page 22, in the strategic alternatives
paragraph, that none of the proposals received by the board "provided the
financial or business framework necessary for CET to seriously consider a
reverse acquisition or merger." Please clarify what this statement means and
address the characteristics your board was seeking in an acquisition of
merger partner.
The disclosures on page 21 have been revised in response to this comment.
23. Please identify by name the legal and financial advisors referred
to on page 22.
The names of the legal and financial advisors have been added on page 22, as
requested.
Financial Interests of CET's Directors and Officers in the Merger, page 24
24. Please expand your description of Mr. Davis's interest in the
merger transaction. In doing so, among other points, please address the
following points:
* Mr. Davis will purchase three of your five parcels of real property;
* Identify the properties Mr. Davis will purchase;
* The real property constitutes your primary asset;
* How the real property was valued for purposes of its sale to Mr. Davis;
* Whether an appraisal was performed to determine the real
property's fair market value;
* Who negotiated and approved the sale of the real property to Mr. Davis;
and
* The key terms of the indemnity agreement.
Please see Item 5(a) of Schedule 14A.
Additional disclosures have been added on page 26 in response to this
comment. Due to the recent sale of one of the properties by CET, the merger
agreement has been amended to provide that Mr. Davis will only purchase two
of the remaining four properties.
Page 7
25. We note that Dale W. Bleck served as your chief financial officer
during the beginning of your current fiscal year. We further note from pate
21 that Mr. Bleck introduced the president of BMTS to Mr. Davis for the
purpose of initiating prospective acquisition discussions. If Mr. Bleck
received anything of value in consideration for facilitating the merger
transaction, please describe this interest. Please see Item 5(a)(1) of
Schedule 14A.
Additional disclosures have been added on page 22 in response to this
comment.
Board of Directors and Management of CET Following the Merger, page 26.
26. Please clearly identify the identity of the corporation of which
Messrs. Cox, Scheifley and Richardson will serve as directors and officers at
the effective time of the merger. You currently indicate that they will
serve in such capacities for BMTS; however, in the existing disclosure it is
unclear whether BMTS is a reference to the corporation that will survive the
merger and change its name in connection therewith or the corporation that is
currently known as CET.
The disclosures on page 28 have been revised to make it clear that the
officers and directors of both corporations will consist of these persons
after the merger.
27. If there are any arrangements or understandings among members of
both the former and new control groups and their associates with respect to
election of directors or other matters, please describe them in the proxy
statement. Please see Instruction 2 to Item 6 of Schedule 14A.
Please be advised that there are no arrangements or understandings among
members of both the former and new control groups and their associates with
respect to election of directors or other matters.
Operations Following the Merger, page 26
28. Identify which properties will be transferred to a newly formed
subsidiary and discuss BMTS's plans for the subsidiary in connection with its
business operations.
We have added disclosures on page 28 in response to this comment.
Information about CET Services, Inc., page 27
29. Please provide the complete mailing addresses and telephone number
of the principal executive offices for CET. Please see Item 14(b)(2) of
Schedule 14A.
The complete mailing address and phone number of CET has been added on page
30 as requested.
Page 8
Information about BMTS, page 30
30. Please provide the complete mailing address and telephone number of
the principal executive offices for BMTS. Please see Item 14(b)(2) of
Schedule 14A. In addition, please indicate that BMTS is a privately-held
company.
The complete mailing address and phone number of BMTS has been added on page
32 as requested.
The Merger Agreement, page 51
Terms of the Merger, page 51
31. Please disclose the following information:
* The number of shares of CET common stock that you estimate will be
issued in the merger in exchange for outstanding shares of BMTS common
stock; and
* The number of shares of CET common stock that you estimate would be
issuable following the merger upon the exercise of all of the options,
warrants and convertible notes to acquire BMTS common stock that you
will assume in connection with the merger.
In your disclosure, please be sure to note the underlying assumptions you
make in order to provide these numbers. These numbers should also be
disclosed in the summary section of the proxy statement.
The requested information has been added on page 54 of the revised
preliminary proxy statement.
Effect of Termination, page 55
32. Please note and address the significance of the $250,000 break-up
fee, including the circumstances under which you might become liable to BMTS
for the break-up fee.
We have revised the disclosures on page 58, as requested.
Amendment to Articles of Incorporation to Increase the Number of Authorized
Shares of Common Stock (Proposal No. 3), page 65
33. Please indicate, if true, that the board will determine the terms
of the preferred stock. Please see Item 11(b) of Schedule 14A.
The requested disclosure has been added on page 68.
Approval of A Reverse Stock Split (Proposal No. 4), Page 65
34. Please indicate the number of outstanding shares that would be
affected by the proposed reverse stock split. Please see Item 12(a) of
Schedule 14A.
Page 9
The information requested has been added on page 68.
35. If known, please indicate the estimated price per share at which
the board believes the expected benefits of the reverse stock split, as
summarized on pages 65 and 66, might accrue.
The requested disclosure has been added on page 69 of the revised preliminary
proxy statement.
Approval of 208 Equity Incentive Plan (Proposal No. 6), page 68
36. Please indicate the approximate number of persons in each class of
persons who will be eligible to participate in the plan, and state the basis
of such participation. Please see Item 10(a)(1) of Schedule 14A.
The requested information has been added on page 72.
37. Please provide the new plan benefits table disclosure required by
Item 10(a)(2) of Schedule 14A and the additional information required by Item
10(b)(2) of Schedule 14A.
Since the grants provided for in the 2008 Equity Incentive Plan are
discretionary; there are currently no grants outstanding under the plan; and
there are no plans or understandings with respect to future grants, there is
no information that would be included in a new plan benefits table. As a
result, we have not added a new plan benefits table.
38. Please tell us when the securities available for issuance under the
plan will be registered under the Securities Act of 1933, as amended, or, if
such registration is not contemplated, the section of the Securities Act or
rule of the Commission under which exemption from such registration is
claimed and the facts relied upon to make the exemption available. You do
not need to include this information in the proxy statement. Please see
instruction 5 to Item 10 of Schedule 14A.
A disclosure has been added on page 72 concerning the Company's plan to file
a registration statement on Form S-8 to register the shares included in the
plan under the Securities Act of 1933, as amended.
The "Tandy" statement from the Company is attached to this letter.
Please contact the undersigned if we can be of any additional assistance
in connection with your review of this matter.
Very truly yours,
KRYS BOYLE, P.C.
By /s/ James P. Beck
James P. Beck
JPB/jn
Attachment
cc: CET Services, Inc.
CET Services, Inc.
12503 E. Euclid Dr., #30
Centennial, Colorado 80111
(720) 875-9115
July 9, 2008
Division of Corporation Finance
Securities and Exchange Commission
Washington, D.C. 20549
Re: Preliminary Proxy Statement
SEC File No. 1-13852
Dear Sir/Madam:
On behalf of CET Services, Inc. (the "Company"), please be advised that in
connection with the Company's responses to the staff's comments the Company
acknowledges that:
* the Company is responsible for the adequacy and accuracy of the
disclosure in the filing;
* staff comments or changes to disclosure in response to staff comments
do not foreclose the Commission from taking any action with respect to the
filing; and
* the Company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the federal
securities laws of the United States.
Very truly yours,
CET SERVICES, INC
By: /s/ Steven H. Davis
Steven H. Davis, President and CEO