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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A-No. 1
(Mark One)
( X ) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1997
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
for the transition period________ To _________ .
Commission file No. 000-24470
NATIONAL ENVIRONMENTAL SERVICE CO.
(Name of small business issuer in its charter)
Oklahoma 73-1296420
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
12331 East 60th Street, Tulsa, OK 74146
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (918)250-2227
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of class: Common Stock, $.01 Par value
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports) and (2)
has been subject to such filing requirements for the past 90 days. Yes X
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No ______ .
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB X .
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State issuer's revenues for its most recent fiscal year $14,746,000.
The aggregate market value of the voting stock held by non-affiliates of
the registrant computed using the average of the high and low sales prices at
which the stock sold on February 27, 1998 was $11,489,812.
The number of shares outstanding of each of the issuer's classes of common stock
as of February 27, 1998 is shown below:
Number of shares
Title of Class Outstanding
-------------- -----------
Common Stock, $.01 Par Value 7,876,143
Documents Incorporated by Reference
-----------------------------------
None.
Transitional Small Business Disclosure Format (check one): Yes_____; No___X____.
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PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
With Section 16(a) of the Exchange Act.
DIRECTORS
The directors of the Company are as follows:
Name Age Position
- ---- --- --------
Eddy L. Patterson 56 Director, President and Chief Executive Officer
Albert A. McCutchan 57 Director and Executive Vice President
E. R. Foraker 59 Director
Jerry Danielson 56 Director
W. F. Simpson 53 Director
The business background of the Directors follows:
Eddy L. Patterson has served as President, Chief Executive Officer and a
Director of the Company since May 1989. Mr. Patterson also serves as Chairman
and a director of Lab One Analytical, Inc. ("Lab One") and as President and a
director of Fuel Recovery Systems, Inc.("FRS"), wholly owned subsidiaries of the
Company. Mr. Patterson was formerly the owner of an oil and gas production
company and a small manufacturing company.
Albert A. McCutchan has served as Executive Vice President and a Director
of the Company since May 1989. Mr. McCutchan also serves as a director of Lab
One, and as Vice President, Secretary and a director of FRS. Mr. McCutchan has
been employed in the underground tank service business for more than ten years.
Mr. Edward. R. Foraker has served as a Director of the Company since April
1994. Mr. Foraker is a graduate of Fresno State University and holds an MBA from
UCLA. After graduation, he taught finance at the university level and was
employed in the investment banking and brokerage industry. His entire business
experience has been in the investment and oil and gas industries. Since 1970,
Mr. Foraker has served as President and Chairman of the Board of Directors of
ECC Energy Corporation and its predecessor corporations. Mr. Foraker also served
as President and Director of Westamerica Investment Company until the sale of
that company in June, 1997. ECC Energy Corporation engages in natural gas
exploration, development and production, and oil field service contracting out
of its Dewey, Oklahoma office.
Mr. Jerry Danielson has served as a Director of the Company since April
1994. Since November 1975, Mr. Danielson has served as Chief Executive Officer
and Chairman of the Board of Directors of Danielson Oil Company, an independent
fuel wholesale and retail company located in Ada, Oklahoma. Since January 1990,
Mr. Danielson has also served as Chief Executive Officer and Chairman of the
Board of Directors of Danco Trucking, Ltd., a petroleum products carrier located
in Ada, Oklahoma.
Mr. W. F. Simpson has served as a director of the Company since January,
1997. Presently, Mr. Simpson manages personal investments. From 1985 until 1996,
Mr. Simpson was President of J P Emco, a manufacturer of plastic automotive
parts located in Ada, Oklahoma. Prior to 1985, Mr. Simpson served as plant
manager of the facility under the ownership of General Tire. Previous employment
included work for Goodyear Tire and Rubber
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and Merrill Lynch in Akron, Ohio.
EXECUTIVE OFFICERS
Executive Officers that are not Directors of the Company and their business
backgrounds are as follows:
Mr. Larry G. Johnson, Vice President, Secretary-Treasurer and Chief Financial
Officer, age 52, has served in these capacities since January 1, 1995.
Mr. Johnson also has served as the President of Lab One since March
1993. Mr. Johnson has been employed by the Company since 1993. From
April 1992 to January 1993, Mr. Johnson served as a consultant to the
Company. From 1971 to 1991, Mr. Johnson was employed by Broken Arrow
Federal Savings and Loan and served as President and Chief Executive
Officer for 16 of those years. Mr. Johnson holds an M.B.A. degree from
the University of Tulsa.
Mr. James Howell, Vice President-Marketing, age 44, received a B.S. degree from
Oklahoma State University in Agricultural Engineering. Mr. Howell has
held marketing and management positions with several national
companies including Network Security and Mosler, Inc. Mr. Howell
joined the Company in 1989 as Director of Marketing. Mr. Howell has
been the Vice President-Marketing since January 1, 1995.
Mr. Chuck Nance, Vice President-Operations, age 51, has over 20 years of
experience in service station construction and underground storage
tank installation. Mr. Nance joined the Company in 1991 as a project
manager and is licensed in several states to perform all aspects of
underground storage services. Mr. Nance was named Vice President-
Operations on January 1, 1995. Prior to joining the Company, Mr.
Nance was a construction manager for over nine years with Petroleum
Marketers Equipment Company, Inc.
Mr. Robert Watson, Controller, age 51, received his degree, with honors, from
the University of Arkansas in 1969. With over 20 years experience as a
CPA, including seven years with the international firm of Arthur Young
& Co. (now Ernst & Young LLP), he joined NESCO in 1996. Mr. Watson was
the Controller and Corporate Secretary-Treasurer for Lake Country
Beverage, Inc. from October 1986 to November 1995 and was a business
consultant from November 1995 to May 1996. Mr. Watson oversees all day
to day corporate accounting functions.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the
Company's directors, executive officers and shareholders who own more than 10%
of the Company's outstanding common stock to report to the Securities and
Exchange Commission their initial ownership of the Common Stock and any
subsequent changes in that ownership and to furnish the Company with a copy of
each report. The regulations of the Securities and Exchange Commission impose
specific due dates for such reports, and the Company is required to disclose in
this Proxy Statement any failure to file by these dates during and with respect
to fiscal year 1997.
To the Company's knowledge, based solely on review of the copies of the reports
furnished to the Company and written representations that no other reports were
required during and with respect to fiscal 1997, all Section 16(a) filing
requirements applicable to its officers, directors and holders of more than 10%
of its outstanding shares of Common Stock were complied with.
Item 10. Executive Compensation
Board Compensation
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The Company pays each member of its Board of Directors $500 for each quarterly
Board meeting which he attends. Directors are not currently reimbursed for their
expenses incurred in attending such meetings.
Executive Compensation
The following table sets forth certain information concerning the annual and
long-term compensation for the two principal executive officers of the Company.
Because no other executive officer of the Company received cash compensation
exceeding $100,000 during the year ended December 31, 1997, no disclosure
pertaining to other executives is required or provided.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation
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Name and Other Annual All Other
Principal Position Year Salary($) Bonus Compensation Compensation
- ------------------ ---- --------- ------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Eddy L. Patterson, 1997 105,042 20,484 - (1)
President & Chief 1996 61,958 7,100 - (1)
Executive Officer 1995 107,237 10,000 - (1)
Albert A. McCutchan 1997 98,286 18,435 - (1)
Executive Vice President 1996 50,981 6,400 - (1)
1995 96,921 9,000 - (1)
</TABLE>
(1) Other annual compensation did not exceed the lesser of $50,000 or 10% of
the executive's annual salary and bonus for any of the executive officers.
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information as of March 31, 1998,
regarding the ownership of the Company's common stock by (a) all persons known
by the Company to be beneficial owners of more than 5% of such stock, (b) each
director and nominee for director of the Company, (c) each of the executive
officers of the Company named in the Summary Compensation Table, and (d) all
executive officers and directors of the Company as a group. There is no other
class of securities of the Company entitled to vote at the Annual Meeting.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE
OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP PERCENT OF CLASS
- ------------------- ----------------------- ------------------
<S> <C> <C>
Eddy L. Patterson 1,793,758 shares 22.8%
12331 E. 60th St.
Tulsa, Oklahoma 74146
Albert A. McCutchan 2,052,068 shares(1) 26.1%
12331 E. 60th St.
Tulsa, Oklahoma 74146
E.R. Foraker 269,838 shares(2) 3.4%
4141 North Scottsdale Road
Suite 100
Scottsdale, Arizona 85251
</TABLE>
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<TABLE>
<S> <C> <C>
Jerry Danielson 11,276 shares .1%
P. O. Box 1962
Ada, Oklahoma 74820
W. F. Simpson 13,806 shares .2%
201 West Kings Road
Ada, Oklahoma 74820
Dallin Bagley 1,350,000 shares 17.1%
8 Shadow Wood Lane
Salt Lake City, Utah 84103
All directors and executive officers as
a group of ten persons 4,217,103 shares 53.5%
</TABLE>
(1) Mr. McCutchan's beneficial shares of 2,052,068 shares include 207,818
shares owned by Beverly Ann McCutchan, his wife. Mr. McCutchan
disclaims beneficial ownership of such shares.
(2) Mr. Foraker's beneficial shares of 269,838 shares include 6,806 shares
owned by Sandra D. Foraker, his wife and 5,000 shares owned by his
children. Mr. Foraker disclaims beneficial ownership of such shares.
Except as otherwise indicated, all of the persons named above have sole voting
and investment power with respect to the shares beneficially owned by them.
Item 12. Certain Relationships and Related Transactions
The Company paid Lab One Analytical, Inc. ("Lab One") $217,000 in 1997 and
$412,000 in 1996, for analytical laboratory testing services rendered. In 1997
and 1996, the Company purchased certain insurance coverage and office supplies
on behalf of Lab One for $10,000 and $5,000, respectively. Mr. Patterson and Mr.
McCutchan, the Company's two principal shareholders, own 50% each of the capital
stock and are directors and executive officers of Lab One. Mr. Johnson, an
executive officer of the Company, is also the President of Lab One. Lab One was
acquired by the Company on January 30, 1998, for $75,000 cash and 225,000 shares
of the Company's common stock following the completion of an independent
appraisal of Lab One and the review and unanimous consent of the outside
directors of the company as to the transaction and the terms and conditions
thereof.
During 1996, the Company borrowed funds from McCutchan Patterson Partnership, a
partnership wholly-owned by Messrs Patterson and McCutchan. On June 28, 1996,
the partnership loaned $200,085 to the Company at 9.5% per annum. During 1997,
the company paid $58,637 on the principal of the loan. The balance owing on that
loan on December 31, 1997 was $31,238. On November 15, 1996, the partnership
loaned $200,000 to the Company at 11.0% per annum. The loan was paid off on May
27, 1997. The Company paid the partnership interest on these loans totaling
$16,213 in 1997 and $6,883 in 1996.
The Company leases its Tulsa office and warehouse space from McCutchan-Patterson
Partnership, a partnership wholly-owned by Messrs. Patterson and McCutchan. The
lease ran from July 1, 1995 through December 31, 1997 and called for monthly
lease payments by the Company of $5,500. On February 28, 1998, the Company
acquired the office building, warehouse, and lot on which the Company's
corporate office is located. The purchase price of $600,000 was established by
an independent appraisal of the property. The acquisition was approved by
unanimous consent of the outside directors of the Company after a review of the
appraisal and the terms and conditions of the purchase.
The Company performed various environmental services related to underground
storage tanks for Danielson Oil
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for which it received $86,000 in 1997 and $87,000 in 1996. Danielson Oil is
principally owned by Jerry Danielson, a Director of the Company.
Signatures
In accordance with Section 13 or 15(d) of the Exchange Act, Registrant
caused this amendment to the report to be signed on its behalf by the
undersigned, thereunto duly authorized, October 4, 1999.
NATIONAL ENVIRONMENTAL SERVICE CO.
By: /s/ Larry G. Johnson
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Larry G. Johnson, Vice President & Secretary-Treasurer
and Chief Financial Officer
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