SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
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Date of Report (Date of Earliest Event Reported): February 2, 1998
ETS INTERNATIONAL, INC.
(Exact name of Registrant as specified in its charter)
Virginia 00019678 54-1414643
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
1401 Municipal Road, NW
Roanoke, Virginia 24012
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (540) 265-0004
Not Applicable
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(Former name or former address, if changed since last report)
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Item 5. Other Events
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Roanoke, VA - February 4, 1998 - ETS International, Inc. (ASE: ETS.EC)
today announced that on February 2, 1998 it signed a nonbinding Letter of
Intent for the sale of substantially all of the assets of its wholly-owned
subsidiary, ETS, Inc., including ETS's limestone emission control ("LEC") and
other environmental-related patented technologies and licenses, to John D.
McKenna, Arthur B. Nunn, III and John C. Mycock, each of whom current is a
management employee of ETS International, Inc. (collectively, the "Buyers").
The purchase price is calculated based on the value of the net assets
of ETS, Inc., assumed to be approximately $1,000,000, plus $500,000 and 50%
of all royalties received from the Buyers in connection with LEC licensing
arrangements. The Buyers will enter into a management contract with ETS
International to oversee the completion and start-up of the three LEC systems
to be installed by ETS International pursuant to ETS International's contract
with China Steel Corporation. The total purchase price, which is subject to
adjustment based on final determination of the value of ETS's net assets, is
expected to be approximately $1,500,000, to be paid by the Buyers as follows:
$500,000 cash and the assumption of $1,000,000 of outstanding indebtness of
ETS International, Inc. If the purchase price is adjusted upward as a result
of the final determination of the value of ETS's net assets, the Buyers will
issue a ten-year note bearing 8 1/2% annual interest for the excess. In
addition, the Buyers will have a five-year option to repurchase from ETS
International 25% of the LEC royalties at a price of $500,000 cash. The
proposed sale is subject to a number of conditions, including negotiation of
a definitive agreement containing terms mutually agreeable to the parties.
The target date for closing of the sale is February 16, 1998, at which time
the Buyers will resign as employees of ETS International. The transaction is
expected to result in a net gain of $500,000. In connection with the
execution of the Letter of Intent, the Buyers resigned from the Board of
Directors of ETS International, effective February 2, 1998. The Buyers'
resignations were not the result of a disagreement on any matter relating to
ETS International's operations, policies or practices. Jim Quarles has
subsequently become Chairman of the Board in addition to his position as
President and Chief Executive Officer.
Management believes that the sale of the assets of ETS will have a
positive impact on ETS International. Based on fiscal 1997 year-end results,
although ETS International would be losing approximately $3,000,000 in
revenues as a result of the sale, it also would be shedding the approximately
$3,000,000 cost of such revenues, as well as annual corporate overhead of
approximately $500,000 related to attempts to commercialize the LEC system.
In a separate transaction completed October 31, 1997, ETS International
sold the assets of ETS Analytical Services, Inc. ("ETSAS") subject to a final
post-closure adjustment relative to book value. As a result of this
adjustment, primarily related to accounts receivable and inventoried
equipment, the original sale price of ETSAS's assets was reduced by $380,000
effective February 2, 1998. This adjustment will be reflected as a write-
down of assets in the current quarter.
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ETS International's Chairman and President, Jim Quarles, stated, "the
environmental services aspect of ETS International has historically been a
break-even business, providing little value to outside shareholders, while
attempts to commercialize the environmental technologies aspect of the
Company have been a drain on the Company's limited cash resources.
Management believes that this transaction will position ETS International
favorably to take advantage of perceived growth opportunities available
within the infrastructure trenchless technologies segment of the construction
industry. ETS International derived approximately 80% of its revenues from
this industry segment in fiscal 1997. At the same time, the retained
percentage of any royalties realized from the LEC technology going forward
will benefit shareholders to the extent that these technologies are
profitable in the short-term. ETS International's Board of Directors and new
management team believes that the sale of ETS and the refocusing of ETS
International are in the best interests of the Company and its shareholders.
We anticipate changing ETS International's name, with shareholder approval,
and are evaluating other organizational changes to reflect the Company's new
emphasis on infrastructure trenchless technologies."
ETS International, Inc. is a technology based company providing
construction and environmental products and services. The Company
specializes in the trenchless rehabilitation of water and sewer lines as part
of its infrastructure design and construction capabilities.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ETS INTERNATIONAL, INC.
By s/James B. Quarles
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James B. Quarles
President and Chief Executive
Officer
Date: February 4, 1998
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