U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30, 1998
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from __________________ to ____________________
Commission file number 0-23779
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TECHNICAL ENVIRONMENT SOLUTIONS, INC.
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(Exact name of small business issuer as specified in its charter)
Colorado 98-0149351
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
C/O TES GmbH, 25 Impler Strasse, Munchen, 81371, Germany
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(Address of principal executive office)
011 49 89 720 15 100
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(Issuer's telephone number)
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(Former name, former address and former fiscal year,
if changed since last report)
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 No
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Number of shares outstanding of the issuer's Common Stock:
Class Outstanding at September 30, 1998
- -------------------------- ----------------------------------
Common Stock, no par value 1,741,610
<PAGE>
Technical Environment Solutions, Inc.
INDEX
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Page
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets -
September 30, 1998 3
Consolidated Statements of Operations
for the three months ended September 30, 1997 and 1998
and nine months ended September 30, 1997 and 1998 4
Consolidated Statements of Cash Flow
for the nine months ended September 30, 1997 and 1998 5
Notes to Unaudited Financial Statements 6
Item 2. Management's Discussion and Analysis or Plan of Operations 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURES 9
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<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
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Technical Environment Solutions, Inc.
Consolidated Balance Sheet
(Unaudited)
September 30, September 30,
1998 1998
ASSETS
(DM) (US$)
Current Assets:
Cash and equivalents 190,305 $ 113,955
Accounts receivable, trade 120,471 72,138
Note receivable - current portion 10,000 5,988
Prepaid expenses 10,311 6,175
----------- -----------
Total current assets 331,087 198,256
Property and equipment, at cost, net of
accumulated depreciation of DM 98,898 169,857 101,711
Investments 10,000 5,988
Note receivable - non-current 40,000 23,952
Other assets 435,127 260,555
----------- -----------
986,071 $ 590,462
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable - others 80,000 $ 47,905
Cash overdraft 30,156 18,057
Accounts payable 91,930 55,047
Accounts payable - related party 15,862 9,498
Accrued expenses 91,880 55,020
----------- -----------
Total current liabilities 309,828 185,527
Loans from shareholders 230,155 137,817
Loan from related party 150,000 89,820
Shareholders' Equity:
Common stock, no par value
20,000,000 shares authorized
1,741,610 shares issued and outstanding 2,260,155 1,353,386
Accumulated deficit (1,964,067) (1,176,088)
----------- -----------
296,088 177,298
----------- -----------
986,071 $ 590,462
=========== ===========
See accompanying notes to consolidated financial statements.
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<PAGE>
<TABLE>
<CAPTION>
Technical Environment Solutions, Inc.
Consolidated Statements of Operations
(Unaudited)
Three Months Ended September 30, Nine Months Ended September 30,
1997 1998 1997 1998 1998
---- ---- ---- ---- ----
DM DM DM DM US$
<S> <C> <C> <C> <C> <C>
Sales 61,376 169,030 256,226 534,102 $ 319,822
Sales to related party -- 32,995 -- 77,425 46,362
----------- ----------- ----------- ----------- -----------
61,376 202,025 256,226 611,527 366,184
Cost of operations 46,732 80,203 140,855 179,675 107,590
----------- ----------- ----------- ----------- -----------
Gross profit 14,644 121,822 115,371 431,852 258,594
Other costs and expenses:
General and administrative 258,851 342,990 448,939 998,366 597,824
----------- ----------- ----------- ----------- -----------
(Loss) from operations (244,207) (221,168) (333,568) (566,514) (339,230)
Other income and (expense):
Interest income 123 2,106 4,582 5,233 3,134
Losses of unconsolidated subsidiary -- (40,974) -- (49,000) (29,341)
Interest expense (5,032) (5,298) (24,337) (20,321) (12,169)
----------- ----------- ----------- ----------- -----------
(4,909) (44,166) (19,755) (64,088) (38,376)
(Loss) before income taxes (249,116) (265,334) (353,323) (630,602) (377,606)
Provision for income taxes (1,396) 95 -- 1,716 1,028
----------- ----------- ----------- ----------- -----------
Net (loss) (247,720) (265,429) (353,323) (632,318) (378,634)
=========== =========== =========== =========== ===========
Earnings (loss) per share:
Net income (loss) (0.14) (0.15) (0.21) (0.36) (0.22)
----------- ----------- ----------- ----------- -----------
Weight average shares outstanding 1,741,610 1,741,610 1,654,492 1,741,610 1,741,610
=========== =========== =========== =========== ===========
See accompanying notes to consolidated financial statements.
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</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Technical Environment Solutions, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended September 30,
-------------------------------
1997 1998 1998
---- ---- ----
DM DM US$
<S> <C> <C> <C>
Net (loss) (353,322) (632,318) (378,634)
Adjustments to reconcile net income (loss) to
net cash (used in) operating activities:
Depreciation 4,000 40,476 24,237
Losses of unconsolidated subsidiary -- 49,000 29,341
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 62,369 310,434 185,889
(Increase) decrease in prepaid expenses -- 26,043 15,595
(Increase) decrease in other assets -- (94,783) (56,756)
Increase (decrease) in accounts payable,
cash overdraft and accrued expenses (52,612) (17,204) (10,302)
---------- ---------- ----------
Total adjustments 13,757 313,966 188,004
---------- ---------- ----------
Net cash (used in) operating activities (339,565) (318,352) (190,630)
---------- ---------- ----------
Cash flows from investing activities:
Investments in unconsolidated subsidiary -- (49,000) (29,341)
Increase in notes receivable (100,000) -- --
Deposit on building purchase (307,835) -- --
Purchase of fixed assets (150,003) (91,967) (55,070)
---------- ---------- ----------
Net cash provided by (used in) investing activities (557,838) (140,967) (84,411)
---------- ---------- ----------
Cash flows from financing activities:
Proceeds from sale of common stock 2,028,550 -- --
Proceeds of related party loan -- 150,000 89,820
Advances from stockholders 100,000 -- --
Repayment of stockholder loans (111,179) (4,145) (2,482)
Repayment of notes payable - bank (58,405) (197,798) (118,442)
Repayment of notes payable - other -- (10,000) (5,988)
---------- ---------- ----------
Net cash provided by
financing activities 1,958,966 (61,943) (37,092)
========== ========== ==========
Increase (decrease) in cash 1,061,563 (521,262) (312,133)
Cash and cash equivalents,
beginning of period 2,707 711,567 426,088
---------- ---------- ----------
Cash and cash equivalents, end of period 1,064,270 190,305 113,955
========== ========== ==========
See accompanying notes to consolidated financial statements.
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</TABLE>
<PAGE>
Technical Environment Solutions, Inc.
Notes to Unaudited Financing Statement
Basis of presentation
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions incorporated in Regulation 10-SB of the Securities and
Exchange Commission. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring adjustments and accruals) considered necessary for a fair
presentation have been included.
The results of operations for the periods presented are not necessarily
indicative of the results to be expected for the full year. The accompanying
financial statements should be read in conjunction with the Company's financial
statements for the year ended December 31, 1997, included elsewhere herein.
Basic loss per share was computed using the weighted average number of common
shares outstanding.
During 1995, the Company sold DM 210,000 of convertible debentures to thirteen
individual investors in Germany. The debentures bear interest at 10.75% per
annum and were due in March 1999. The debentures were to be convertible into
shares of the Company's common stock, however, none were converted. During 1996,
DM 100,000 plus accrued interest was repaid to certain of the investors. An
additional DM 10,000 of the debentures plus accrued interest was repaid during
the period ended September 30, 1998. Additionally, the Company paid DM 197,798
against bank debt prior to its maturity.
During February 1998, the Company acquired a 49% ownership interest in T-Cycle
Computer Service and Verwertungs GmbH, a German company engaged in dismantling
and disposing of surplus electronic equipment in Germany. The Company paid DM
49,000 for its investment in T-Cycle and will account for the investment using
the equity method of accounting. Accordingly, the Company has recognized its
share of losses of T-Cycle for the period ended September 30, 1998, which
amounted to DM 49,000, as a reduction of its investment in the Company.
During the quarter ended September 30, 1998, the Company borrowed DM 150,000
from a company controlled by the Company's principal shareholder. The loan is
due in DM 50,000 installments in 2006, 2007 and 2008, and bears interest at 6%
per annum.
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Result
of Operations
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Three Months Ended September 30, 1998, Compared to Three Months Ended
September 30, 1997
Sales for the three month period ended September 30, 1998, were DM 169,030,
an increase of DM 107,654, or 175.4%, as compared to the three month period
ended September 30, 1997. The principal reason for this increase was the opening
of the Landsberg facility. Cost of operations for the three month period ended
September 30, 1998 was DM 80,203, an increase of DM 33,471, or 71.6%, as
compared to the three month period ended September 30, 1997. This increase was
primarily due to increased operating activities. Gross Profit for the three
month period ended September 30, 1998, was DM 121,822, an increase of DM
107,178, or 731.9%, as compared to the three month period ended September 30,
1997.
General and administrative expenses for the three month period ended
September 30, 1998, were DM 342,990, an increase of DM 84,139, or 32.5%, as
compared to the three month period ended September 30, 1997. This increase was
principally due to increased expenses associated with the opening of the
Landsberg facility and an increase in general and administrative expenses
associated with the higher level of activity as well as increased accounting and
legal expenses resulting from the Company's registration under the Securities
Exchange Act of 1934.
As a result of these factors, the operating loss for the three month period
ended September 30, 1998, was DM 221,168, a decrease in the operating loss of DM
23,039, or 9.4%, as compared to the three month period ended September 30, 1997.
Other income and expenses for the three month period ended September 30, 1998,
was an expense of DM 44, 166, an increase of DM 39,257, or 800%, as compared to
the three month period ended September 30, 1997. The increase in other expenses
was primarily due to an increase in losses of DM 40,974 of its unconsolidated
subsidiary. Further, for the reasons noted above, the net loss for the three
month period ended September 30, 1998, was DM 265,429, an increase in the net
loss of DM 17,709, or 7.2%, as compared to the three month period ended
September 30, 1997.
Nine Months Ended September 30, 1998, Compared to Nine Months Ended
September 30, 1997
Sales for the nine month period ended September 30, 1998, were DM 534,102,
an increase of DM 277,876, or 108.5%, as compared to the nine month period ended
September 30, 1997. The principal reasons for this increase were that the
Company was able to add new customers for its recycling business to replace
customers lost in the prior year and the opening of the Landsberg facility. Cost
of operations for the nine month period ended September 30, 1998, was DM
179,675, an increase of DM 38,820, or 27.6%, as compared to the nine month
period ended September 30, 1997. This increase was primarily due to increased
operating activities. Gross Profit for the nine month period ended September 30,
1998, was DM 431,852, an increase of DM 316,481, or 274.3%, as compared to the
nine month period ended September 30, 1997.
General and administrative expenses for the nine month period ended
September 30, 1998, were DM 998,366, an increase of DM 549,427, or 122.4%, as
compared to the nine month period ended September 30, 1997. This increase was
principally due to increased expenses associated with the opening of the
Landsberg facility and an increase in general and administrative expenses
associated with the higher level of activity as well as increased accounting and
legal expenses resulting from the Company's registration under the Securities
Exchange Act of 1934.
As a result of these factors, the operating loss for the nine month period
ended September 30, 1998, was DM 566,514, an increase in the operating loss of
DM 232,946, or 69.8%, as compared to the nine month period ended September 30,
1997. Other income and expenses for the nine month period ended September 30,
1998, was an expense of DM 64,088, an increase of DM 44,333, or 224.4%, as
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<PAGE>
compared to the nine month period ended September 30, 1997. The increase in
other expenses was primarily due to an increase in losses of DM 49,000 of its
unconsolidated subsidiary. Further, for the reasons noted above, the net loss
for the nine month period ended September 30, 1998, was DM 632,318, an increase
in the net loss of DM 278,995, or 79.0%, as compared to the nine month period
ended September 30, 1997.
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<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits: No exhibits are filed with this Quarterly Report on Form 10-QSB
for the quarter ended September 30, 1998.
b) Reports on Form 8-K: There were no reports on Form 8-K filed during the
nine months ended September 30, 1998.
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 thereunto duly authorized.
Date: November 19, 1998
TECHNICAL ENVIRONMENT SOLUTIONS, INC.
/s/ Gerd Behrens
---------------------------------------------
Gerd Behrens
President and Chief Operating Officer
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS AT AND FOR THE PERIOD ENDED SEPTEMBER 30, 1998 OR
TECHNICAL ENVIRONMENT SOLUTIONS, INC. AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 113,955
<SECURITIES> 0
<RECEIVABLES> 78,126
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 198,255
<PP&E> 101,711
<DEPRECIATION> 98,898
<TOTAL-ASSETS> 590,461
<CURRENT-LIABILITIES> 185,527
<BONDS> 0
0
0
<COMMON> 1,353,386
<OTHER-SE> (1,176,088)
<TOTAL-LIABILITY-AND-EQUITY> 590,461
<SALES> 319,822
<TOTAL-REVENUES> 366,184
<CGS> 107,590
<TOTAL-COSTS> 107,590
<OTHER-EXPENSES> 597,824
<LOSS-PROVISION> 29,341
<INTEREST-EXPENSE> 9,034
<INCOME-PRETAX> (377,606)
<INCOME-TAX> 1,028
<INCOME-CONTINUING> (378,634)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (378,634)
<EPS-PRIMARY> (0.22)
<EPS-DILUTED> 0
</TABLE>
