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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, 1998
( ) 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 $18,304,000.
------------
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 26, 1999 was $6,882,208
The number of shares outstanding of each of the issuer's classes of common stock
as of February 26, 1999 is shown below:
Number of shares
Title of Class Outstanding
-------------- -----------
Common Stock, $.01 Par Value 7,888,643
Documents Incorporated by Reference
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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.
Information required by this item is in reference to the sections entitled
"Election of Directors," "Executive Officers" and "Section 16(a) Beneficial
Ownership Compliance" of the Company's Proxy Statement to be filed with the
Securities and Exchange Commission in connection with the Company's 1999 annual
meeting.
ELECTION OF DIRECTORS
Proxy holders named on the proxy card will vote FOR the election of the nominees
listed below, unless otherwise instructed on the proxy cards that have been
signed and returned. If you do not wish your shares to be voted for particular
nominees, please identify the exceptions on the proxy card. If any of these
nominees should be unable to serve, the proxies will be voted by the proxy
holders for the election of such other person as they shall determine, in
accordance with their judgment. Directors are elected for one-year terms.
Name Age Position
- ---- --- --------
Eddy L. Patterson 57 Director, Chairman and Chief Executive Officer
Albert A. McCutchan 58 Director and Executive Vice President
E. R. Foraker 60 Director
W. R. Simpson 54 Director
Dallin Bagley 60 Director
The business background of the Directors follows:
Eddy L. Patterson has served as Chairman, 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. 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 of WestAmerica Investment Group, Inc. until its
sale in 1997. ECC Energy Corporation engages in coalbed methane gas
exploration, development and production and oil field service contracting.
ECC's headquarters is located in Dewey, Oklahoma.
Mr. W. F. Simpson has served as a director of the Company since January,
1997. He has been President and co-owner of J P Emco from 1985 until 1997. J P
Emco is 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
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General Tire. Previous employment included work for Goodyear Tire and Rubber and
Merrill Lynch in Akron, Ohio. Mr. Simpson is currently retired.
Mr. Dallin Bagley has served as a director of the company since February,
1999. Mr. Bagley was elected to complete the term of Mr. Jerry Danielson who
resigned in November 1998 to devote himself to other business matters. Mr.
Bagley began practicing law in 1996. During the past six years Mr. Bagley has
served as Vice President of National Financial Services, Inc., a computer back-
up accounting firm for health and fitness clubs. Mr. Bagley is also currently a
director of Tunex International, a chain of automotive engine performance and
service centers, and Gentner Communications Corporation, a corporation that
provides technology, service, and educational solutions for U.S. and
international communications markets. Mr. Bagley received a Juris Doctorate in
1965 from the University of Utah College of Law.
EXECUTIVE OFFICERS
Executive Officers that are not Directors of the Company and their business
backgrounds are as follows:
Mr. James Howell, President, age 45, 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 Corporation 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 and was elected as President in June, 1998.
Mr. Larry G. Johnson, Vice President, Secretary-Treasurer and Chief Financial
Officer, age 53, 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. Chuck Nance, Vice President-Operations, age 52, 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 52, 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 1998.
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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 1998, 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
Information required by this item is in reference to the sections entitled
"Board Compensation and Committees" and "Executive Officers-Executive
Compensation" of the Company's Proxy Statement to be filed with the Securities
and Exchange Commission in connection with the Company's 1999 annual meeting.
Board Compensation
The Company pays each member of its Board of Directors $500 for each quarterly
Board meeting which he attends. Directors are not compensated for special
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 $100,000 during the year ended December 31, 1998, no disclosure
pertaining to other executives is required or provided.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation
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Name and Other Annual All Other
Principal Position Year Salary($) Bonus Compensation Compensation
- ------------------ ---- --------- ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
Eddy L. Patterson, 1998 148,077 $25,000 - (1)
Chairman & Chief 1997 105,042 20,484 - (1)
Executive Officer 1996 61,958 7,100 - (1)
Albert A. McCutchan 1998 129,151 $20,000 - (1)
Executive vice President 1997 98,286 18,435 - (1)
1996 50,981 6,400 - (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
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information as of March 31, 1999,
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.
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<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE
OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP PERCENT OF CLASS
- ------------------- ----------------------- ----------------
<S> <C> <C>
Eddy L. Patterson 1,556,758 shares 19.7%
12331 E. 60th St.
Tulsa, Oklahoma 74146
Albert A. McCutchan 1,737,068 shares(1) 22.0%
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
W. F. Simpson 13,806 shares .2%
201 West Kings Road
Ada, Oklahoma 74820
Dallin Bagley 1,350,000 shares 17.1%
2350 Oakhill Drive
Salt Lake City, Utah 84121
All directors and executive office as
a group of seventeen persons 5,018,752 shares 63.6%
</TABLE>
(1) Mr. McCutchan's beneficial shares of 1,777,068 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") $819,000 in 1998 and
$217,000 in 1997, for analytical laboratory testing services rendered. In 1998
and 1997, the Company purchased certain insurance coverage and office supplies
on behalf of Lab One for $10,000 and $10,000, respectively. Mr. Patterson and
Mr. McCutchan, the Company's two principal shareholders, each owned 50% of the
capital stock and are directors and executive officers 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. Mr. Johnson, an executive officer of the Company, serves as the
President of Lab One.
The Company leased 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
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$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 for which it received $23,000 in 1998 and
$86,000 in 1997. Danielson Oil is principally owned by Jerry Danielson, a
Director of the Company until his resignation in November, 1998.
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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