-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, F9EzcHIuYLwrNMxLvT4iK5Uf2ZFJo2LegtyPgHA04xfyyuvBssSMRbXcaxPe9ydZ Lbz6jLZy1O9R+F95n/QbgA== 0000948830-00-000265.txt : 20000522 0000948830-00-000265.hdr.sgml : 20000522 ACCESSION NUMBER: 0000948830-00-000265 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000128 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20000519 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CET ENVIRONMENTAL SERVICES INC CENTRAL INDEX KEY: 0000944627 STANDARD INDUSTRIAL CLASSIFICATION: HAZARDOUS WASTE MANAGEMENT [4955] IRS NUMBER: 330285964 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 033-91602 FILM NUMBER: 640096 BUSINESS ADDRESS: STREET 1: 7670 SOUTH VAUGHN CT STREET 2: SUITE 130 CITY: ENGLEWOOD STATE: CO ZIP: 80112 BUSINESS PHONE: 3037081360 MAIL ADDRESS: STREET 1: 6900 E 47TH AVE STREET 2: STE 200 CITY: DENVER STATE: CO ZIP: 80216 8-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): May 8, 2000 CET ENVIRONMENTAL SERVICES, INC. (Exact Name of Registrant as Specified in its Charter) California 1-13852 33-0285964 (State or other jurisdiction (Commission file (IRS Employer of incorporation) number) identification No.) 7032 South Revere Parkway, Englewood, Colorado 80112 (Address of Principal Executive Offices, Including Zip Code) Registrant's telephone number, including area code: (720) 875-9115 Item 2. Acquisition or Disposition of Assets On March 8, 2000, the Company entered into an Asset Purchase Agreement with Cape Environmental Management, Inc. ("CEM") to sell certain assets and assign certain contracts and liabilities associated with its Tustin, California operations for $2.1 million. The transaction was closed on May 8, 2000, effective as of April 30, 2000, with final consideration consisting of approximately $1.775 million in cash, the assignment of $0.075 million of vacation accruals and related payroll taxes, and a holdback of $0.250 million due within 60 days subject to certain adjustments. The nature and dollar value attributed to the assets and liabilities transferred in the sale consisted of $0.9 million of field and office equipment, $1.05 million of project contracts consisting of non-EPA federal and commercial contracts, a $0.1 million non-compete covenant and $0.05 million of intangibles. The Company's net book value of the assets and liabilities of approximately $0.7 million and approximately $0.1 million of other related closing costs resulted in a recorded gain of $1.3 million on the date of sale. The Company will retain approximately $1.3 million of assets related to the Tustin operations consisting primarily of receivables recorded through the date of closing. 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 Unaudited Pro Forma Financial Statement............... F-1 Unaudited Pro Forma Balance Sheet as of December 31, 1999.............................................. F-2, F-3 Unaudited Pro Forma Statement of Operations for the Three Months Ended March 31, 2000. ............... F-4 Unaudited Pro Forma Statement of Operations for the Twelve Months Ended December 31, 1999............. F-5 Notes to Unaudited Pro Forma Financial Statements..... F-6 (c) Exhibits. The following exhibits are filed herewith: Exhibit Number Description Location 10.16 Asset Purchase Agreement by Incorporated by reference and between the Company and to exhibit 10.16 to Company's CAPE Environmental Management, Form 10-K for the year ended Inc. December 31, 1999. 10.18 First Amendment to Asset Filed herewith electronically. Purchase Agreement by and between the Company and CAPE Environmental Management, Inc. 10.19 Second Amendment to Asset Filed herewith electronically. Purchase Agreement by and between the Company and CAPE Environmental Management, Inc. 2 SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CET ENVIRONMENTAL SERVICES, INC. Dated: May 18, 2000 By:/s/ Steven H. Davis Steven H. Davis, President, and Chief Executive Officer 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 the Tustin, California Operations on May 8,2000 with an effective date of sale as of April 30, 2000. 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 March 31, 2000 ASSETS Pro Forma Actual Adjustments Pro Forma ----------- --------------- ------------ CURRENT ASSSETS Cash $ 416,441 $ 1,961,423 (a) $ 2,377,864 Accounts receivable 2,838,404 - 2,838,404 Contracts in process 2,134,117 - 2,134,117 Retention receivable 889,043 - 889,043 Income tax receivable - - - Due from related party 67,271 - 67,271 Other receivable 451,572 - 451,572 Inventories 65,379 (14,554) (b) 50,825 Prepaid expenses 444,886 (10,036) (b) 434,850 ----------- ----------- ------------ Total current assets 7,307,113 1,936,833 9,243,946 ----------- ----------- ------------ EQUIPMENT AND IMPROVEMENTS Field equipment 2,973,742 (1,368,696) (b) 1,605,046 Vehicles 885,456 (237,638) (b) 647,818 Furniture and fixtures 76,164 - 76,164 Office equipment 773,644 (13,782) (b) 759,862 Leasehold improvements 49,862 - 49,862 ----------- ----------- ------------ 4,758,868 (1,620,116) 3,138,752 Less allowance for deprecia- tion and amortization (2,387,177) 924,138 (b) (1,463,039) ----------- ----------- ------------ Equipment and improvements- net 2,371,691 (695,978) 1,675,713 DEPOSITS 31,455 - 31,455 ----------- ----------- ------------ $ 9,710,259 $ 1,240,855 $ 10,951,114 =========== =========== ============ F-2 CET Environmental Services, Inc. PRO FORMA BALANCE SHEET As of March 31, 2000 LIABILITIES AND SHAREHOLDERS' EQUITY Pro Forma Actual Adjustments Pro Forma ----------- --------------- ------------ CURRENT LIABILITIES Cash overdraft $ 36,709 $ - $ 36,709 Accounts payable 3,235,367 - 3,235,367 Accrued expenses 410,745 - 410,745 Accrued contract costs 83,396 - 83,396 Accrued payroll and benefits 291,282 (74,026) (b) 217,256 Current obligations under capital leases 89,402 (24,614) (b) 64,788 Current portion of long-term debt 210,534 - 210,534 Line of credit - - - ----------- ----------- ------------ Total current liabilities 4,357,435 (98,640) 4,258,795 OBLIGATIONS UNDER CAPITAL LEASES 13,496 (5,490) (b) 8,006 LONG-TERM DEBT 116,087 - 116,087 COMMITMENTS AND CONTINGENT LIABILITIES - - - STOCKHOLDERS' EQUITY Common stock 8,671,261 - 8,671,261 Paid-in capital 104,786 - 104,786 Accumulated deficit (3,552,806) 1,344,985 (c) (2,207,821) ----------- ----------- ------------ Total stockholders' equity 5,223,241 1,344,985 6,568,226 ----------- ----------- ------------ $ 9,710,259 $ 1,240,855 $ 10,951,114 =========== =========== ============ F-3 CET Environmental Services, Inc. STATEMENT OF OPERATIONS For the three months ended March 31, 2000 Pro Forma Actual Adjustments (d) Pro Forma ----------- --------------- ------------ PROJECT REVENUE $ 3,453,202 $(1,139,391) $ 2,313,811 PROJECT COSTS Direct 2,417,951 (796,866) 1,621,085 Indirect 732,333 (227,456) 504,877 ----------- ----------- ------------ 3,150,284 (1,024,322) 2,125,962 ----------- ----------- ------------ Gross profit 302,918 (115,069) 187,849 ----------- ----------- ------------ OTHER OPERATING EXPENSES Selling, general and administrative 1,024,591 (58,959) 965,632 ----------- ----------- ------------ Operating loss (721,673) (56,110) (777,783) ----------- ----------- ------------ OTHER INCOME (EXPENSE) Gain (loss) on sale of equipment (46,842) - (46,842) Interest expense, net (20,034) 920 (19,114) Other income (expense) 4,340 (6,080) (1,740) ----------- ----------- ------------ (62,536) (5,160) (67,696) ----------- ----------- ------------ Loss before taxes on income (784,209) (61,270) (845,479) (Benefit) taxes on income - - - ----------- ----------- ------------ NET LOSS $ (784,209) $ (61,270) $ (845,479) =========== =========== ============ Weighted average number of shares outstanding 6,284,288 6,284,288 6,284,288 Loss per common share $ (0.12) $ (0.01) $ (0.13) =========== =========== ============ Loss per common share-- assuming dilution $ (0.12) $ (0.01) $ (0.13) =========== =========== ============ F-4 CET Environmental Services, Inc. STATEMENT OF OPERATIONS For the twelve months ended December 31, 1999 Pro Forma Actual Adjustments (d) Pro Forma ----------- --------------- ------------ PROJECT REVENUE $43,189,319 $(4,240,241) $ 38,949,078 PROJECT COSTS Direct 33,909,701 (2,433,889) 31,475,812 Indirect 6,219,975 (1,114,430) 5,105,545 ----------- ----------- ------------ 40,129,676 (3,548,319) 36,581,357 ----------- ----------- ------------ Gross profit 3,059,643 (691,922) 2,367,721 ----------- ----------- ------------ OTHER OPERATING EXPENSES Selling, general and administrative 4,932,824 (101,377) 4,831,447 Restructuring expense 857,469 - 857,469 ----------- ----------- ------------ 5,790,293 (101,377) 5,688,916 ----------- ----------- ------------ Operating loss (2,730,650) (590,545) (3,321,195) ----------- ----------- ------------ OTHER INCOME (EXPENSE) Gain (loss) on sale of equipment (89,167) (547) (89,714) Gain (loss) on sale of subsidiary - - - Interest expense, net (475,504) 5,750 (469,754) Other income (expense) 118,564 145 118,709 ----------- ----------- ------------ (446,107) 5,348 (440,759) ----------- ----------- ------------ Loss before taxes on income (3,176,757) (585,197) (3,761,954) (Benefit) taxes on income - - - ----------- ----------- ------------ NET LOSS $(3,176,757) $ (585,197) $ (3,761,954) =========== =========== ============ Weighted average number of shares outstanding 6,282,346 6,282,346 6,282,346 Loss per common share $ (0.51) $ (0.09) $ (0.60) =========== =========== ============ Loss per common share-- assuming dilution $ (0.51) $ (0.09) $ (0.60) =========== =========== ============ F-5 CET Environmental Services, Inc. NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS NOTE A - BASIS OF PRESENTATION On May 8, 2000 CET Environmental Services, Inc. ("CET") sold the Tustin, California Operations ("Tustin") for the sum of $2.1 million effective as of April 30, 2000. The consideration consisted of approximately $2.025 million in cash including a holdback provision of $0.25 million due within 60 days subject to certain adjustments and $0.075 million in liabilities. The accompanying pro forma balance sheet has been presented as if the sale occurred on March 31, 2000, for a base price of $2.1 million without regard to potential adjustment to the holdback provision. The accompanying pro forma statements of operations for December 31, 1999 and the three months ended March 31, 2000 have been prepared as if the sale was consummated on December 31, 1998, thus excluding the results of Tustin's operations for 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 Tustin. (b) To reflect the removal of assets, liabilities, and operating results of Tustin. (c) To reflect the gain on sale of Tustin. (d) To reflect the results of operations of Tustin for the entire period. F-6 EX-10.18 2 FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT THIS FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT (the "First Amendment") is dated effective as of the 24th day of March, 2000, and is to be and become part of that certain Asset Purchase Agreement (the "Agreement") between Cape Environmental Management, Inc., a Georgia corporation, as Buyer therein, and CET Environmental Services, Inc., a California corporation, as Seller therein, dated as of March 8, 2000, for the purchase and sale of certain Agreements and related assets of Seller comprising its hazardous, toxic and radiological waste remediation business. WITNESSETH WHEREAS, the Agreement contemplated a Closing Date not later than March 24, 2000, subject to extension by mutual agreement of the parties; and WHEREAS, the parties desire to extend the Closing Date until no later than May 31, 2000; NOW THEREFORE, for and in consideration of the mutual covenants contained herein, One and No/100ths Dollar ($1.00) in hand paid and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the undersigned hereby agree as follows: 1. All terms used herein with an initial capital letter and not otherwise defined herein shall have the meaning ascribed thereto in the Agreement. 2. The first sentence of Section 4.3 of the Agreement is hereby deleted in its entirety and replaced with the following: "Subject to the conditions to Closing and the rights to terminate this Agreement, the closing of the Asset purchase (the "Closing") shall take place as soon as possible following the execution of this Agreement at a mutually agreeable date and time between May 1, 2000, and May 31, 2000, subject to extension by mutual agreement of the parties." 3. This First Amendment may be executed in any number of counterparts, all of which taken together shall constitute one and the same agreement. Furthermore, a facsimile signature of any of the parties hereto on any counterpart may be relied upon as an original signature. EXCEPT AS MODIFIED HEREIN, all other terms, covenants, conditions and obligations of the Agreement shall remain in full force and effect, and are hereby ratified and confirmed by the parties. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date set forth above. BUYER: SELLER: Cape Environmental Management, CET Environmental Services, Inc., a Inc., a Georgia corporation California corporation By:/s/ Fernando J. Rios By:/s/ Steven H. Davis Name: Fernando J. Rios Name: Steven H. Davis Title: President Title: President EX-10.19 3 SECOND AMENDMENT TO ASSET PURCHASE AGREEMENT THIS SECOND AMENDMENT TO ASSET PURCHASE AGREEMENT (the "Second Amendment") is dated effective as of the 8th day of May, 2000, and is to be and become part of that certain Asset Purchase Agreement (the "Agreement") between Cape Environmental Management, Inc., a Georgia corporation, as Buyer therein, and CET Environmental Services, Inc., a California corporation, as Seller therein, dated as of March 8, 2000, as previously amended, for the purchase and sale of certain Agreements and related assets of Seller comprising its hazardous, toxic and radiological waste remediation business.. WITNESSETH WHEREAS, the parties wish to amend the Agreement as more fully hereinafter set forth; NOW THEREFORE, for and in consideration of the mutual covenants contained herein, One and No/100ths Dollar ($1.00) in hand paid and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the undersigned hereby agree as follows: 1. All terms used herein with an initial capital letter and not otherwise defined herein shall have the meaning ascribed thereto in the Agreement. 2. The definition of "Equipment" appearing in Section 1.20 and Exhibit A to the Agreement are hereby amended to delete any reference to Xerox copiers which are subject to lease agreements, such copiers not being part of the purchased Assets. Notwithstanding the foregoing, Seller agrees to leave the Xerox copiers located at the Tustin, California office in place, at Seller's sole cost and expense, until June 30, 2000, and agrees that Buyer shall have the use of such copiers at no expense until they are removed from the premises. 3. Notwithstanding the failure of Seller to assign to Buyer all Commercial Contracts, Buyer agrees to pay the Purchase Price allocable to such contracts to Seller at Closing, provided that Seller subcontracts those projects to Buyer in form and substance satisfactory to Buyer and provided that Seller also maintains in place all its payment, performance and surety bonds relating to projects 2306 (CH2M Hill), 2404 (Pacific Refining) and 9P04 (Hoe Creek). 4. This Second Amendment may be executed in any number of counterparts, all of which taken together shall constitute one and the same agreement. Furthermore, a facsimile signature of any of the parties hereto on any counterpart may be relied upon as an original signature. 5. The parties agree that May 1, 2000 shall be deemed the effective date of closing for purposes of all prorations, accounting adjustments and economic allocations. EXCEPT AS MODIFIED HEREIN, all other terms, covenants, conditions and obligations of the Agreement shall remain in full force and effect, and are hereby ratified and confirmed by the parties. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date set forth above. BUYER: SELLER: Cape Environmental Management, CET Environmental Services, Inc., a Inc., a Georgia corporation California corporation By:/s/ Fernando J. Rios By:/s/ Steven H. Davis Name: Fernando J. Rios Name: Steven H. Davis Title: President Title: President -----END PRIVACY-ENHANCED MESSAGE-----