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): March 4, 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
(Former name or former address, if changed since last report)
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Item 5. Other Events
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ETS International, Inc. today announced that it has consented to the
removal of the Company's common stock from listing and registration on the
Emerging Company Marketplace ("EMC") of the American Stock Exchange ("AMEX").
This action became necessary because the Company has been unable to achieve
compliance with the financial guidelines of the EMC for continued listing.
The AMEX has advised that the last day for trading of the Company's common
stock on the EMC will be Friday, March 6, 1998. A market for the Company's
common stock is expected to develop over-the-counter, but there can be no
assurance that this will be the case.
The Company also announced that the nonbinding Letter of Intent dated
February 2, 1998, to purchase substantially all of the assets of its wholly-
owned subsidiary, ETS, Inc., including the Company's limestone emission
control ("LEC") system and other environmental-related patented technologies
and licenses, expired without a definitive agreement being reached with the
proposed purchasing group, comprised of John D. McKenna, Arthur B. Nunn, III
and John C. Mycock, all of whom are former directors, officers and employees
of the Company. The Board of Directors determined that the offer received
from the proposed purchasing group was not in the best interests of the
Company and its shareholders because, among other things, the offer did not
include provisions indemnifying the Company for losses or liabilities in
connection with the completion and start-up of the three LEC systems being
designed pursuant to the Company's contract with China Steel Corporation.
The Board of Directors of the Company is conducting an independent
review of financial and other aspects of the LEC technology that is being
developed for the China Steel contract. This review has been undertaken with
the assistance of special counsel after potential issues were brought to
current management's attention regarding the budget to meet certain of the
performance specifications of the contract. If the LEC technology does not
meet these specifications, China Steel may seek to impose financial penalties
or attempt to recover damages or obtain other relief under the contract,
including drawing down on the $600,000 performance bond posted by the
Company.
Because of cash flow difficulties, the Company has failed to make six
interest payments ($150,000 total) under its $2,500,000 note due March 17,
1999 to Thomas W. Marmon, a director and large shareholder of the Company.
The note provides for fixed monthly interest payments of $25,000 and is
subject to call at any time by the holder upon sixty days notice. The note
is secured by the assets of the Company and its subsidiaries. If the note is
called by Mr. Marmon, the Company does not have the funds to make final
payment. Mr. Marmon has advised management that he has no current intention
of calling the note and that he will work with the Company toward resolution
of this matter. Such resolution could result in material changes in the
Company's business and operations.
The Company also has indicated that it is continuing to undertake cost
cutting measures, including the elimination of certain positions. The
Company likewise intends to continue to seek additional capital. There can
be no assurance of the extent to which these efforts will be successful, if
at all, or that such efforts will be sufficient to support the Company's on-
going operations. The Company anticipates incurring a loss of up to
$1,000,000 in the third quarter ended February 28, 1998, primarily as a
result of the effect of wet winter weather on its outdoor construction
projects.
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The Company's new Chairman and President, Jim Quarles, stated:
"During these first six weeks of my employment as CEO, I have become aware of
the many difficult challenges faced by the Company. My near-term task is to
return the Company to basic business fundamentals, and I feel that I am
making progress. Unfortunately, that process requires taking certain actions
which are in some ways painful, but necessary for a healthy company. The
long-term strategies for the Company will be re-evaluated given the failure
to reach an agreement on the sale of the environmental components represented
by ETS, Inc. The immediate concern, of course, is obtaining working capital
to support the Company's on-going operations. Preliminary discussions have
been initiated with parties interested in completing a transaction with the
Company which could result in a solution of its cash flow difficulties."
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 capability.
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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
-----------------------------------
James B. Quarles
President and Chief Executive
Officer
Date: March 4, 1998
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