U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL
BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
TECHNICAL ENVIRONMENT SOLUTIONS, INC.
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(Name of Small Business Issuer in its charter)
Colorado 98-0149351
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
C/O TES GmbH
Karl-Bohm-Str. 2
85598 Baldham b. Munchen
Germany
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(Address of principal executive offices) (Postal Code)
Copies to:
Henry F. Schlueter
Schlueter & Associates, P.C.
1050 Seventeenth Street, Suite 1700
Denver, Colorado 80265
(303) 292-3883
and
Paul Maricle
Rossi & Maricle P.C.
370 17th Street, Suite 4250
Denver, CO 80202-4004
(303) 534-9014
Issuer's telephone number : 011-49-8106-31061
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Securities to be registered under Section 12(b) of the Act:
(None)
Securities to be registered under Section 12(g) of the Act:
Common Stock
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(Title of class)
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PART I
The following discussion contains forward-looking statements relating to future
plans, expectations, events or performances that involve risks and
uncertainties. The Company's actual results of operations could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors. The following discussion should be read in
conjunction with the consolidated financial statements and notes thereto
included elsewhere in this report.
Item 1. Description of Business
General Information
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Technical Environment Solutions, Inc. (the "Company" and "TES") was
incorporated under the laws of Colorado in June 1994, and is a non-operating
holding company. The Company's operations are conducted entirely in Germany, and
the Company has two wholly-owned subsidiaries that have been established under
the laws of Germany. Operations are conducted through these subsidiaries:
namely, Technical Environment Solutions GmbH ("TES GmbH") and TES Oecon AG
("Oecon"). Unless the context otherwise requires, references to the "Company"
include its subsidiaries. Since 1994, the Company has been engaged in the
marketing of recycling services on a contract basis primarily for electronic
scrap and other valuable waste materials in cooperation with specialist waste
disposal companies. Recently, the Company commenced recycling activities at its
own facility in Landsberg a. Lech, Germany, which is southwest of Munich, and
intends to significantly expand this operation in the future. The Company also
intends to develop a job training school, the Oecon Institute, to provide
training and education for positions in the media and recycling industry. The
Company intends to focus its job training programs upon providing job education
and training for the long-term unemployed and disadvantaged.
Recycling
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The Company offers a single source solution for the disassembly, removal,
reutilization, reprocessing and marketing of recyclable materials. Its waste
disposal services also include archiving the recycled materials and documenting
of the movement of that material. This has the additional function of serving as
verification for government agencies and environmental protection groups. The
Company's strategies mainly emphasize the technologically feasible reutilization
of scrap electrical and electronic equipment in a manner that not only
demonstrates economic and ecological responsibility but also achieves maximum
conservation of resources through optimum recovery of recyclable materials. The
special equipment and expertise of TES's associates ensures that the materials,
once disposed of, will enter the reprocessing cycle and satisfy all legal
regulations.
Germany has strict laws relating to the disposal of all manufactured
products. Unlike the United States where land is plentiful, Germany is a small
country with a large population. Landfill space is extremely limited. Therefore,
the government requires that electronic scrap as well as an array of other
manufactured product waste be disposed of either by incineration or by
depositing it in abandoned underground coal or salt mines. Hence disposal of
most waste in Germany is more expensive than it is in the United States.
Even stricter laws regarding recycling of electronic products such as
televisions, computers, computer monitors, radios, telephones and virtually
every other type of electronic product are anticipated by the electronics
industry. These laws will require that the old products be broken down into
smaller components, and to the extent possible that these components be re-used
or recycled rather than simply being incinerated. In order to prepare for what
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the industry views as inevitable recycling requirements, many larger companies
have already begun to voluntarily comply with proposed recycling standards and
are shipping all used and obsolete electronic products to recycling centers such
as that operated by TES.
The Company also utilizes its manufacturing equipment to convert certain
types of glass from cathode ray tubes ("CRTs"), computer components, and certain
other manufacturing by-products and industrial wastes into manufacturing raw
materials that may be resold.
The Company employs a two-tier strategy:
decentralized disassembly
centralized processing and re-use.
The Company intends to use a wide variety of collection points as it grows in
the future in order to provide full geographic coverage of Germany's waste
disposal needs.
One important aspect of the Company's service strategy is that all
recycling and disposal paths are fully documented. Each customer who recycles
electronic scrap through TES then receives a printout documenting the disposal
pursuant to the recycling laws. To accomplish this, the Company and its
associates offer a fully comprehensive program to register and sort spent
electronic equipment using the Company's own "RNP" data processing system, a
software program that supports the exchange of data between the Company,
manufacturers and waste reprocessing companies.
The RNP database also contains:
-model and order number of electronic products
-size and weight of electronic products
-analysis of materials in electronic products
Another module in the RNP database is a logistics program likewise
developed by the Company. This program covers:
-collection and disposal
-transportation and warehousing
-disposal and recycling
-documentation of each piece of equipment
-for fixed assets bookkeeping
-for the tax authorities
-for environmental groups
According to figures from the German Federal Office of the Environment,
approximately two million tons of spent electronic equipment is generated each
year in Germany alone. Of these, some 50 to 60 percent comes from the field of
entertainment electronics and another 25 percent from household appliances. The
remainder comes from the area of data processing technologies or from other
technologies primarily used by industry, research facilities and the business
sector. Some 300,000 tons are made up of spent computers and television sets
alone, of which it is estimated that only 25 percent are disposed of in an
ecologically sound manner.
This electronic scrap contains not only valuable raw materials but also a
wide range of toxic substances harmful to the environment. TES collects and
disassembles this spent equipment and then reprocesses and markets the valuable
waste materials salvaged from it. TES also separates and properly disposes of
the toxic substances.
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The Company views the recycling of used television sets and computer
monitors including CRT glass as a growth area and has recently purchased
machinery designed to dismantle the CRTs. In the Company's CRT recycling
operation, used CRTs will be shipped to the Company by its customers. Under the
terms of the agreements with the clients, TES is paid a fee for recycling the
used CRTs. The CRTs include both funnel glass (the back of a television screen,
which is relatively thin and tubular in shape) and panel glass. After the funnel
glass has been cut from the front portion of the tube and cleaned, it can be
sold back to the original manufacturers and other companies to be "upcycled",
i.e. reincorporated into a CRT.
At this time the panel glass can not be recycled and must be incinerated.
TES must pay a small charge to dispose of the panel glass. Management expects,
however, to be able eventually to either sell the panel glass to companies that
recycle glass or, at a minimum, to have these companies haul the panel glass
away at no cost to TES. Even if TES must pay to have the panel glass taken away,
the CRT recycling is a profitable business for the company because of the fees
TES is paid by its customers to recycle the CRTs. The ability to sell the panel
glass will only increase TES's profits from this operation.
The Company believes that the recycling of CRT glass will provide a less
costly and more environmentally responsible means of disposing of waste CRT
glass compared to currently available alternative methods of CRT glass disposal.
Further, management believes that manufacturers will be able to repurchase
recycled CRT glass from the Company at a savings compared to virgin ingredients.
In addition, the Company believes that the electronics industry may be a source
of other waste streams that may be recycled. The Company believes that its CRT
glass recycling and materials reuse capability will position the Company to
process large volume end-of-life television and computer waste since current
regulations in Germany exclude them from landfills.
TES also recycles computer systems. The Company resells many of the used
computer parts that are generated from this recycling activity, including
plastic, gold, copper, aluminum, steel and other raw materials. Management
believes that this is possible because the most cost effective source for spare
parts is generally recycled parts, and for out-of-production parts, it is
frequently the only source. Conversely, the best use for recycled parts is to
resell them for use in the installed base as either spares or low-cost additions
to existing systems. Similarly, recycled parts are also often both less
expensive and more readily available than repaired parts.
Recycling Process
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The first step in the processing of recycled material involves the
inspection of the material received by the Company to assure that it complies
with requirements set forth in the Company's agreements. This process will be
conducted on a visual basis by Company personnel. Assuming that the material is
in compliance with the Company's agreements, the material will be sorted for
processing on the Company's recycling line. Nonconforming shipments will be
rejected and returned to the supplier. This process will be undertaken to
protect the Company from receiving materials that it is not equipped to handle
either on the basis of the economics or safety involved with handling of the
material.
After the material has been sorted, it will then be stored until it is
delivered to the recycling line. Material on the recycling line will be
disassembled, and spare computer parts, integrated circuit boards, and other
parts of the electronic products that can be resold will be sorted and cleaned.
Other material will be sorted for sale (if appropriate), cleaned and (if
appropriate) ground and crushed. As the final result of the process, all of the
residual materials are reused in an environmentally sound way. They are
recovered, sorted, and returned to the cycle of raw materials. To prevent the
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processing techniques from emitting toxic by-products, the Company employs
mechanical processes exclusively (i.e., no chemicals are used by TES in the
disassembly process).
The Company disassembles the following kinds of electronic scrap for
recycling:
-cathode ray tubes
-computers and peripherals of any kind
-PCs and monitors
-other office equipment
-household appliances of all sizes
-television sets, radios, VCRs etc.
-telecommunication equipment (e.g., telephones)
-electrical tools
-standby power generation units
-industrial control units
-measurement and control devices
-laboratory and medical equipment
-visual recording and reproduction equipment
-composite plastics and metals
-circuit boards
-magnetic and video tapes
To obtain fully sorted raw materials from worn-out electronic equipment,
the first thing that must be done is to disassemble the scrap by hand. During
this process components with toxic substances such as condensers or lithium
batteries are removed and sent to separate disposal plants.
At this preliminary disassembly stage the scrap is broken down into the
following categories:
-plastics
-ferrous metals
-nonferrous metals
-cathode ray tubes
-cables
-circuit boards
-toxic substances
If the preliminary disassembly stage fails to yield fully sorted materials,
further processing is required. In the next stages the material is further
broken down through non-chemical and non-thermal processes. The mixture of
materials thus obtained is completely sorted by means of magnets, eddy currents,
wind, sifting or similar techniques.
These processes yield, among other things, the following types of
materials:
-iron
-aluminum
-copper
-glass
-plastics
-ceramics
-composite metal granulates
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The fully separated metals and glass are sent to various smelting plants as
secondary raw materials. Similarly, those fully sorted plastics that have not
been treated with flame-proofing are sent away for reuse. Plastics which are not
fully separated or which contain bromine flame-proofing are disposed in
accordance with legal regulations, as are all other toxic substances. Precious
metal granulates are sent to separation plants for further processing.
All the methods TES employs represent state-of-the-art technologies and
have been streamlined for a smooth interaction of their ecological and economic
aspects. Further, TES's methods are designed to assure compliance with all legal
and government regulations, with the paths of reprocessing and disposal
completely documented.
CRTs are removed from the television sets, and then processed by the CRT
recycling line. The Company employs a specially designed saw to separate the
panel glass from the funnel glass. After the pieces of CRT glass are sorted by
type of glass and by size, the glass is cleaned and coatings on the glass are
removed prior to sale or other disposition of the glass.
Competition
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Management believes that the electronic recycling services industry is
fragmented with widespread competition from a variety of small independent
suppliers and several major suppliers in Germany. Management believes that
competition for recycling and waste disposal customers is based on price and the
ability to offer convenient locations for shipping of waste and recycling
products. Among TES's major competitors in Germany are RWE, VEBA, VIAG, Sero AG
and Waste Management.
Government Regulation
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Germany has adopted some of the strictest laws in the world relating to the
recycling and disposal of chemicals, waste, appliances, computers, television
sets, and other electronic products. The business of recycling and waste
disposal is subject to various governmental laws on both a federal and state
basis in Germany. Further, the regulations are becoming increasingly complex and
recycling and disposal more strictly regulated. These laws and regulations
include landfill disposal restrictions, hazardous waste management requirements
and air quality standards, as well as special permit and license conditions for
recycling and disposal of waste and outdated or used products.
The Company's recycling center is subject to various federal, state and
local laws and regulations and licensing requirements relating to the
collection, processing and recycling of chemicals, waste, appliances, computers,
television sets, and other electronic products. Requirements for registrations,
permits and licenses vary depending upon the locale in which the recycling
center is located. The Company's centers are registered with the German
Government as hazardous waste generators and are licensed, where required, by
appropriate state and local authorities. The Company has agreements with
approved and licensed hazardous waste companies for transportation and disposal
of PCBs from its recycling center.
Management believes that further government regulation of the recycling
industry could have a positive effect on the Company's business; however, there
can be no assurance what course future regulation may take. Under some
circumstances, further regulation could materially increase the costs of the
Company's operations and have an adverse effect on the Company's business. In
addition, as is the case with all companies handling hazardous materials, under
some circumstances, the Company may be subject to contingent liability.
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Job Training
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In Germany all trades are governed by strict educational standards. This
means that anyone who wants to work as a plumber, carpenter, baker, cook, etc.
must complete a training program for that trade and work for a number of years
under the supervision of a "Meister" in order to gain practical training.
Without this training and experience, one cannot be employed in a trade.
Germany currently has the highest unemployment rates it has had since the
end of World War II. The unification of the former East Germany with West
Germany has created especially high unemployment rates among young people in the
former East German states. The German federal and state governments are
therefore anxious to create job opportunities for these long-term unemployed
youths and is providing subsidies for companies that create jobs.
TES Oecon Institute is developing a job training center. The center is
intended to provide training for long-term unemployed youths and disadvantaged
people. It will offer various new technical job classifications in the new media
and environmental protection areas:
-Media designer
-Media operator
-Electronic recycling technician
With its job training program the Oecon Institute will support the creation
of new job possibilities in future-oriented industry areas and will provide the
opportunity for the long-term unemployed and other disadvantaged groups to find
an entrance into the work force. Through the training offered by TES, the newly
trained employees will be prepared for new challenges.
The job training offered by TES Oecon Institute will initially consist of
only the practical training component. Another organization with which TES has a
strong relationship will provide the theoretical training for the trainees and
will provide housing.
The job title "Electronic Recycling Technician" is timely for the new
market structures because the need for qualified personnel for proper disposal
technologies will significantly increase in the coming years. The practical
training for electronic recycling technician will take place in the Institute's
own workshop and in partner companies throughout Germany. TES has confirmation
from Sero AG that it will hire Electronic Recycling Technicians once TES has
trained them.
The new professions, Electronic Recycling Technician, Media Operator and
Media Designer, have been defined by the rules and regulations of the Federal
Ministry for Youth and Research and students who successfully complete the
training will receive certification from the responsible industry chambers of
commerce. The job training facility will receive daily subsidies for each
student as required by law.
Management anticipates that the Job Training Center will be very successful
because although the Electronic Recycling Technician job is "low-tech," there is
an increasing demand for qualified technicians. In addition, the government must
make even greater efforts to reduce Germany's high unemployment. There are a
number of state subsidies and job creation programs which offer job training
schools a sure and long-term financial basis. Potential sources for subsidies
include, among others, the Social Welfare Offices, Youth and Social Service
Agencies, and Unemployment Agencies. The Company expects it will be dependent to
some extent upon various government subsidies for the new job training program.
Further, along with the job training, the Institute will offer a number of
seminars and workshops covering special environmental issues, environmental law
issues, and the certification and auditing of environmental operations and
locations. A close working relationship with TUV-Suddeutschland will allow the
Company access to qualified teaching and training personnel.
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Employees
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The Company has 11 full time employees, including Gerd Behrens, two
management/administrative persons, and eight line workers employed in its
recycling business. Further, the Company employs one person as a
secretary/administrative assistant on a part-time basis. In addition, the
Company has contracted with three independent contractors who are engaged in the
marketing of the Company's recycling services. See "Management - Resumes."
Factors That May Affect Future Results
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Limited Operating History; New Business, Limited Product Sales. Although
the Company has been in business since 1994, its operations during that time
consisted mainly of the marketing and sale of recycling services to larger
companies. Until recently, the Company did not have its own recycling facility
but contracted as a "middle-man" to deliver material from larger companies to
certain recyclers. The Company has a limited operating history and substantially
all of its revenues have been derived from the sale of recycling services.
Although the Company recently commenced operation of its own recycling facility,
there can be no assurance that the Company will be able to successfully market
and conduct its recycling services. Further, although the Company has developed
plans to open a job training program for the recycling industry, there can be no
assurance that the Company will be able to successfully open its job training
facility or that, if opened, the Company will be able to operate the facility on
a profitable basis. There can be no assurance that, even after the expenditure
of substantial funds and efforts, the Company will ever achieve or maintain an
adequate level of business or profitability. The failure to successfully market,
sell, and conduct recycling operations will have a material adverse effect on
the Company's financial condition and results of operations. It may also be
expected that the failure to successfully open its job training facility and
operate that facility on a profitable basis will also have a material adverse
effect on the Company's financial condition and results of operations.
Capital Intensive Business; Need for Additional Financing. The Company's
business is capital intensive. The Company believes that its current cash
reserves together with cash generated from operations, will enable it to fund
its operations until at least the end of 1998. If the Company is not profitable
prior to such time or if its activities do not generate sufficient cash-flow to
fund its operations and activities, the Company will require additional
financing. The Company has no commitments for any future financing and there can
be no assurance that the Company will be able to obtain additional financing in
the future from either debt or equity financings, bank loans or other sources on
acceptable terms or at all. If available, any additional equity financings may
be dilutive to the Company's stockholders and any debt financings may contain
restrictive covenants and additional debt service requirements, which could
adversely affect the Company's operating results. If the Company is unable to
obtain necessary financing, it will be required to significantly curtail its
activities or cease operations.
Dependence on Key Employees. The Company's success depends to a significant
extent upon a number of key management and technical personnel, the loss of one
or more of whom could have a material adverse effect on the Company's results of
operations. Further, the Company believes that its success will depend in large
part upon its ability to attract and retain highly skilled technical,
managerial, sales and marketing personnel. There can be no assurance that the
Company will be successful in attracting and retaining the personnel it requires
to develop and market its recycling business or its job training program in a
successful manner.
Concentration of Revenues. A significant portion of the Company's revenues
have been derived from one customer. In fiscal 1996, revenues from the Company's
largest customer amounted to 10% of the Company's total revenues, and in fiscal
1995, that same customer accounted for 40% of the Company's total revenues. The
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Company expects that it will continue to be dependent upon a limited number of
customers for significant portions of its revenues in future periods. There can
be no assurance that revenues from customers that accounted for significant
revenues in past periods, individually or as a group, will continue, or if
continued will reach or exceed historical levels in any future period. The
Company's operating results may in the future be subject to substantial
period-to-period fluctuations as a consequence of such customer concentration.
Dependence upon Environmental Regulation. Federal, state and local
environmental legislation and regulations mandate stringent waste management and
operations practices, which require substantial capital expenditures and often
impose strict liabilities for non-compliance. Environmental laws and regulations
are, and will continue to be, a principal factor affecting demand for the
technology and services being developed or offered by the Company. The level of
enforcement activities by federal, state and local environmental protection and
related agencies, and changes in regulations and waste generator compliance
activities, will also affect demand. To the extent that the burdens of complying
with such laws and regulations may be eased as a result of, among other things,
political factors, or that suppliers of manufacturing by-products and other
industrial wastes find alternative means to comply with applicable regulatory
requirements, the Company's ability to procure such by-products and wastes and
the demand for the Company's services could be adversely affected, which could
have a material adverse effect on the Company's business, financial condition
and results of operations. Any changes in these regulations which increase
compliance standards may require the Company to change or improve its processes.
Regulatory Status of Operations. The Company and its customers operate in a
highly regulated environment, and any future facilities may be required to have
various federal, state and/or local government permits and authorizations,
registrations and/or exemptions. Any of these permits or approvals may be
subject to denial, revocation or modification under various circumstances.
Failure to comply with the conditions of such permits, approvals, registrations,
authorizations or exemptions may adversely affect the operation of the Company's
business and may subject the Company to federal, state or locally-imposed
penalties. The Company's ability to satisfy the permitting requirements for a
particular facility does not assure that permitting requirements for other
facilities will be satisfied. In addition, if new environmental legislation is
enacted or current regulations are amended or are interpreted or enforced
differently, the Company or its customers may be required to obtain additional
operating permits, registrations, certifications, exemptions or approvals. There
can be no assurance that the Company or its customers will meet all of the
applicable regulatory requirements.
Potential Environmental Liability. The Company's business exposes it to the
risk that harmful substances may be released or escape into the environment from
its facilities, processes or equipment, resulting in potential liability for the
clean-up or remediation of the release and/or potential personal injury
associated with the release. Additionally, the Company is potentially subject to
regulatory liability for the generation, transportation, treatment, storage or
disposal of hazardous waste if it does not act in accordance with the
requirements of federal or state hazardous waste regulations or facility
specific regulatory determinations, authorizations or exemptions.
The Company may also be exposed to certain environmental risks resulting
from the actions of the suppliers of the products that it recycles and other
suppliers of industrial wastes. Although the Company maintains general liability
insurance, this insurance is subject to coverage limits and generally excludes
coverage for losses or liabilities related to environmental damage or pollution.
Although the Company conducts and plans to conduct its operations prudently with
respect to environmental regulations and plans to structure its relationships
with customers and contractors in a manner so as to minimize its exposure to
environmental liabilities, the Company's business, financial condition and
results of operations could be materially adversely affected by an environmental
claim that is not covered or only partially covered by insurance or other
available remedy.
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No Public Market for Securities; Possible Volatility of Market Price. There
has not been any market for any of the Company's securities, and there can be no
assurance that an active trading market will develop or be sustained in the
future. If a trading market for the Company's securities develops, it may be
expected that the market price of the Common Stock will be subject to
significant fluctuations in response to variations in government regulations
relating to the Company's operations, general trends in the industry and other
factors, including extreme price and volume fluctuations which have been
experienced by the securities markets from time to time.
Possible Inability to List Securities on NASDAQ and Potential Effect upon
Trading. The NASDAQ Stock Market, which administers NASDAQ, has recently made
changes in the criteria for NASDAQ eligibility. In order to be included in
NASDAQ's SmallCap Market, a company must satisfy the requirements described
below. A company must meet one or more of the following three requirements: (i)
net tangible assets of $4 million ($2 million for continued inclusion), (ii)
have a market capitalization of $50 million ($35 million for continued
inclusion), or (iii) have net income (in the latest fiscal year or 2 of the last
3 fiscal years) of $750,000 ($500,000 for continued inclusion). In addition, a
company must also satisfy the following requirements: (i) one million shares in
the public float (500,000 for continued inclusion), (ii) $5 million of market
value of the public float ($1 million for continued inclusion), (iii) a minimum
bid price of $4 ($1 for continued inclusion), (iv) three market makers (two for
continued inclusion), (v) 300 (round lot) shareholders, (vi) an operating
history of one year or market capitalization of $50 million, and (vii) certain
corporate governance standards. The Company does not presently meet the
requirements for inclusion in either the NASDAQ SmallCap Market or the NASDAQ
National Market, and may never meet the requirements for inclusion in either of
those two markets. It is anticipated that trading in the Company's securities
(if any) will be conducted in the over-the-counter market in the so-called "pink
sheets" or the NASD's "Electronic Bulletin Board" and it could be more difficult
to obtain quotations of the market price of the Company's securities.
Consequently, the liquidity of the Company's securities could be impaired, not
only in the number of securities which could be bought and sold, but also
through delays in the timing of transactions, reduction in security analysts
and the news media's coverage of the Company and lower prices for the Company's
securities than might otherwise be attained
Risks of Classification as a "Penny Stock." The Company's securities may
become subject to Rule 15g-9 under the Securities Exchange Act of 1934, which
imposes additional sales practice requirements on broker-dealers that sell such
securities to persons other than established customers and "accredited
investors" (generally, individuals with net worths in excess of $1,000,000 or
annual incomes exceeding $200,000 or $300,000 together with their spouses). For
transactions covered by such rule, a broker-dealer must make a special
suitability determination for the purchaser and have received the purchaser's
written consent to the transaction prior to sale. Consequently, such rule may
adversely affect the ability of broker-dealers to sell the Company's securities
and may adversely affect the ability of the Company's shareholders to sell any
of their securities in the secondary market.
Commission regulations define a "penny stock" to be any non-Nasdaq equity
security that has a market price (as therein defined) of less than $5.00 per
share or with an exercise price of less than $5.00 per share, subject to certain
exceptions. For any transaction involving a penny stock, unless exempt, the
rules require delivery, prior to any transaction in a penny stock, of a
disclosure schedule prepared by the Commission relating to the penny stock
market. Disclosure is also required to be made about commissions payable to both
the broker-dealer and the registered representative and current quotations for
the securities. Finally, monthly statements are required to be sent disclosing
recent price information for the penny stock held in the account and information
on the limited market in penny stocks.
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The foregoing required penny stock restrictions will not apply to the
Company's securities if such securities are listed on the Nasdaq SmallCap Market
or the Nasdaq National Market, and have certain price and volume information
provided on a current and continuing basis or meet certain minimum net tangible
assets or average revenue criteria. It is not presently anticipated that the
Company's securities will qualify for either the National Market or SmallCap
markets. There can be no assurance that the Company's securities will qualify
for exemption from these restrictions. In any event, even if the Company's
securities were exempt from such restrictions, it would remain subject to
Section 15(b)(6) of the Exchange Act, which gives the Commission the authority
to prohibit any person that is engaged in unlawful conduct while participating
in a distribution of a penny stock from associating with a broker-dealer or
participating in a distribution of a penny stock, if the Commission finds that
such a restriction would be in the public interest. If the Company's securities
were subject to the rules on penny stocks, the market liquidity for the
Company's securities could be severely adversely affected.
Ability to Respond to Technological Change. The Company's future success
will depend significantly on its ability to enhance its recycling capabilities
in a manner which keeps pace with technological developments and evolving
industry standards. There can be no assurance that the Company will be
successful in enhancing its recycling capabilities or meeting customer
requirements adequately. The Company's delay or failure to develop or acquire
technological improvements or to adapt to technological change would have a
material adverse effect on the Company's business, results of operations and
financial condition.
Competition. The market for the Company's services and recycled products is
competitive and subject to rapid change. There can be no assurance that
competitors will not develop alternative methodologies that: (i) are superior to
the Company's methodologies; or that (ii) achieve greater market acceptance.
Further, the market for recycled products and raw material is dependent to some
extent upon prices for new products and material, and perceptions as to the
quality of recycled products or material. To the extent that the prices of new
products or material are competitive with the prices offered by the Company,
sales of the Company's recycled products may be adversely affected. Accordingly,
there can be no assurance that the Company will be able to compete successfully
with its present or potential competition, or that competition will not have a
material adverse effect on the Company's results of operations and financial
condition.
Possible Volatility of Stock Price. The market price of the Company's
Common Stock could be subject to significant fluctuations in response to
variations in actual and anticipated quarterly operating results, changes in
earnings estimates by analysts, announcements of new products or technological
innovations by the Company or its competitors, and other events or factors. In
addition, the stocks of many companies have experienced extreme price and volume
fluctuations that have often been unrelated to the companies' operating
performance.
Dividends and Dividend Policy. The Company has not paid any cash dividends
on its Common Stock and does not expect to declare or pay any cash or other
dividends in the foreseeable future. As a holding company, the Company holds no
significant tangible assets other than its investments in and advances and loans
to its wholly-owned subsidiaries. The Company's ability to make cash dividend
payments to holders of the Common Stock is dependent upon the receipt of
sufficient funds from TES GmbH.
Control by Management. The officers and directors of the Company own
approximately 64.3% of the outstanding shares of the Company's Common Stock. Due
to their stock ownership, the officers and directors will be in a position to
elect the Board of Directors and, therefore, to control the business and affairs
of the Company, including certain significant corporate actions such as
acquisitions, the sale or purchase of assets and the issuance and sale of the
Company's securities.
-10-
<PAGE>
Shares Eligible for Future Sale. As of December 31, 1997, the Company had
not reserved any shares of Common Stock for issuance upon exercise of stock
options which may be granted pursuant to its stock option plan ("Plan Options").
Sales of Common Stock underlying the Plan Options may adversely affect the price
of the Common Stock. In addition, the existence of such options and warrants may
adversely affect the terms on which the Company may obtain additional equity
capital in the future. Further, all of the Company's Common Stock has been sold
in "off-shore" transactions, including 233,476 shares that were sold between
February and July of 1997, and which under certain circumstances will be
eligible for resale into the United States after those shares have been held for
one year. Shares held by the officers and directors of the Company may only be
sold in compliance with Rule 144 adopted under the Securities Act of 1933, as
amended. The sale or resale of these shares could have a depressive effect upon
the trading price of the Common Stock, if a market for the shares develops.
Important Factors related to Forward-Looking Statements and Associated
Risks. This Report contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, and the Company intends that such
forward-looking statements be subject to the safe harbors created thereby. These
forward-looking statements include the plans and objectives of management for
future operations, including plans and objectives relating to the development
and conduct of the recycling business and the job training business, and the
future economic performance of the Company. The forward-looking statements
included herein are based on current expectations that involve a number of risks
and uncertainties. These forward-looking statements are based on assumptions
that the Company will be able to develop its recycling business, develop and
establish its job training programs, that competitive conditions within the
recycling industry will not change materially or adversely, that demand for the
Company's recycling services and recycled materials and products will remain
strong, that the Company will retain key management personnel, that the
Company's forecasts will accurately anticipate market demand and that there will
be no material adverse change in the Company's operations or business.
Assumptions relating to the foregoing involve judgments with respect to, among
other things, future economic, competitive and market conditions and future
business decisions, all of which are difficult or impossible to predict
accurately and many of which are beyond the control of the Company. Although the
Company believes that the assumptions underlying the forward-looking statements
are reasonable, any of the assumptions could prove inaccurate and, therefore,
there can be no assurance that the results contemplated in forward-looking
information will be realized. In addition, as disclosed elsewhere under other
risk factors, the business and operation of the Company are subject to
substantial risks which increase the uncertainty inherent in such
forward-looking statements. In light of the significant uncertainties inherent
in the forward-looking information included herein, the inclusion of such
information should not be regarded as a representation by the Company or any
other person that the objectives or plans of the Company will be achieved.
-11-
<PAGE>
Item 2 Management's Discussion and Analysis or Plan of Operation
Selected Financial Data
The following selected financial data should be read in conjunction with
the financial statements and related notes thereto appearing elsewhere in this
Form 10-SB. The selected financial data as of December 31, 1995 and 1996 and for
each of the two years in the period ended December 31, 1996 have been derived
from the financial statements of the Company which have been audited by the
Company's independent auditors and are included elsewhere in this Form 10-SB.
The selected financial data provided below is not necessarily indicative of the
future results of operations or financial performance of the Company.
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended December 31, September 30,
---------------------------------- ---------------------------------
Statement of Operations Data: 1995 1996 1996 1996 1997 1997
---- ---- ---- ---- ---- ----
(in thousands except per share data) (in thousands except per share data)
DM DM US $ DM DM US $
<S> <C> <C> <C> <C> <C> <C>
Sales 577,564 293,814 190,950 209,052 256,226 145,613
Cost of Operations 351,364 177,343 115,255 141,693 140,855 80,048
------- ------- ------- ------- ------- --------
Gross Profit 226,200 116,471 75,694 67,359 115,371 65,565
Other Costs and Expenses
General and Administrative 323,972 271,344 176,346 227,134 448,939 255,132
------- ------- ------- ------- ------- --------
Income (loss) from operations (97,772) (154,873) (100,652) (159,775) (333,568) (189,567)
Other Income and (expense)
Gain (loss) from sale of assets - (10,270) (6,674) 16,637 - -
Interest Income 4,780 1,240 806 461 4,582 2,604
Interest Expense (28,595) (43,517) (28,282) (29,063) (24,337) (13,831)
-------- -------- -------- -------- -------- --------
(23,815) (52,547) (34,150) (11,965) (19,755) (11,227)
Income (loss) before income taxes (121,587) (207,420) (134,802) 171,740 (353,323) (200,793)
Provision for income taxes - - - - - -
-------- -------- -------- -------- -------- --------
Net income (loss) (121,587) (207,420) (134,802) (171,740) (353,323) (200,793)
-------- -------- -------- -------- -------- --------
Earnings (loss) per share:
Net income (loss) (0.08) (0.14) (0.09) (0.11) (0.21) (0.12)
-------- -------- -------- -------- -------- --------
Weighted average common and
common equivalent shares
outstanding 1,507,176 1,508,134 1,508,134 1,507,176 1,654,492 1,654,492
December 31. 1996 September 30. 1997
----------------- ------------------
DM US $ DM US $
Balance Sheet Data:
Working capital (194,224) (126,227) 785,937 446,648
Current assets 104,549 67,946 1,153,744 655,673
Current liabilities 298,773 194,173 367,807 209,025
Total assets 157,366 102,272 1,691,254 961,140
Total liabilities 727,752 472,965 605,557 344,138
Shareholders' equity (570,386) (370,693) 1,085,697 617,002
- --------------------
-12-
</TABLE>
<PAGE>
Results of Operations
The following table sets forth, for the periods indicated, the percentage
of net sales represented by certain items included in the Company's Statements
of Operations:
<TABLE>
<CAPTION>
Fiscal year ended Nine Months Ended
December 31 September 30
1995 1996 1996 1997
---- ---- ---- ----
DM DM DM DM
<S> <C> <C> <C> <C>
Sales 100.0% 100.0% 100.0% 100.0%
Cost of Operations 60.8 60.4 67.8 55.0
Gross Profit 39.2 39.6 32.2 45.0
General and administrative 56.1 92.4 108.6 175.2
Income (loss) from operations (16.9) (52.8) (76.4) (130.2)
Gain(loss) from sale of assets 0 (3.5) 7.9 0
Interest income .8 .4 0.2 1.8
Interest expense (5.0) (14.8) (13.9) (9.5)
---- ---- ---- ----
Net income (21.1) (70.7) (82.2) (137.9)
</TABLE>
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Sales for the year ended December 31, 1996, were 293,814 DM, a decrease of
283,750 DM, or 49%, as compared to the year ended December 31, 1995. Cost of
operations for the year ended December 31, 1996, was 177,343 DM, a decrease of
174,021 DM, or 49%, as compared to the year ended December 31, 1995. Gross
Profit for the year ended December 31, 1996, was 116,471 DM, a decrease of
109,729 DM, or 48%, as compared to the year ended December 31, 1995. These
decreases were primarily due to a significant decrease in the amount of business
done with the Company's largest customer and a decline in the prices paid for
recycling of electronic materials.
General and administrative expenses for the year ended December 31, 1996,
were 271,344 DM, a decrease of 52,628 DM, or 16%, as compared to the year ended
December 31, 1995. This decrease was principally due to the decline in the
Company's recycling business and the corresponding decrease in personnel and
general and administrative expenses.
As a result of these factors the operating loss for the year ended December
31, 1996, was (154,873) DM, an increase in the loss of 57,101 DM, or 58%, as
compared to the year ended December 31, 1995. In addition, these factors
resulted in an increase in the loss for the year ended December 31, 1996, of
(207,420 DM) compared to a loss of (121,587 DM) for the year ended December 31,
1995, an increase in the loss of (85,833 DM).
Nine Month Period Ended September 30, 1997 Compared to Nine Month Period Ended
September 30, 1996
Sales for the nine month period ended September 30, 1997, were 256,226 DM,
an increase of 47,174 DM, or 23%, as compared to the nine month period ended
September 30, 1996. The principal reason for this increase was that the Company
was able to add new customers for its recycling business to replace customers
lost in the prior year. Cost of operations for the nine month period ended
September 30, 1997, was 140,855 DM, a decrease of 838 DM, or (.06%), as compared
to the nine month period ended September 30, 1996. These decreases were
primarily due to a decline in the number of operating personnel employed by the
Company and a decline in expenses associated with the Company's recycling
business. Gross Profit for the nine month period ended September 30, 1997, was
115,371 DM, an increase of 48,012 DM, or 71%, as compared to the nine month
-13-
<PAGE>
period ended September 30, 1996. This increase was primarily due to the addition
of new customers in the recycling business.
General and administrative expenses for the nine month period ended
September 30, 1997, were 448,939 DM, an increase of 221,805 DM, or 97%, as
compared to the nine month period ended September 30, 1996. This increase was
principally due to the write-off of uncollectible receivables and a shift in the
focus of Company resources and personnel from the sale of contract recycling
services to development of its own recycling capacity and its job training
center.
As a result of these factors, the operating loss for the nine month period
ended September 30, 1997, was (333,568) DM, an increase in the loss of 173,793
DM, or 108%, as compared to the nine month period ended September 30, 1996.
Further, for the reasons noted above, the net loss for the nine month period
ended September 30, 1997, was (353,323) DM, an increase in the loss of 181,583
DM, or 105%, as compared to the nine month period ended September 30, 1996.
Liquidity and Capital Resources
Although the Company traditionally has relied principally upon internally
generated funds and loans from its principal shareholder and his wife to finance
its operations and growth, during the nine months ended September 30, 1997, the
Company derived 2,208,550 DM from an offering of its Common Stock conducted
solely in Germany to German citizens. At September 30, 1997, the Company had
working capital of 785,937 DM and cash of 1,064,270 DM. Management believes that
it has sufficient working capital to finance its operations through at least the
end of 1998. Major capital expenditures to be undertaken during 1998 are
estimated to include: (i) approximately 30,000 DM for new and updated computer
hardware and software; (ii) 250,000 DM for machinery, equipment, furniture and
fixtures; and (iii) approximately 10,000 DM for the costs of relocating the
Company's executive offices.
Item 3 - Description of Property
- --------------------------------
The Company currently leases office space for the Company's main corporate
offices at Karl-Bohm Strasse 2, Baldham b. Munich, Germany at a monthly rental
of approximately 4,695 DM. The lease expires on February 28, 1998. Thereafter
the Company will relocate its main corporate office to 25 Impler Strasse, 81371,
Munich at a monthly rental of approximately 5,552.75 DM. The lease expires on
December 31, 2004. Management of the Company believes that the existing
facilities are adequate at this time for the Company's operations. In addition,
the Company leases two buildings for its recycling operations at Landsberg a.
Lech, Germany at a monthly rental of approximately 18,700 DM. The leases on
these buildings expire on December 31, 2001. Under the terms of this lease, the
Company also has an option to purchase the buildings for 2,200,000 DM if the
option is exercised prior to December 31, 2000. Thereafter the price shall
increase by 77,000 DM per year. The facility in Landsberg is sufficiently large
that the Company expects that it will also be able to conduct its job training
at that same facility.
-14-
<PAGE>
Item 4. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth information with respect to the ownership of
the Company's Common Stock by all officers and directors, individually, all
officers and directors as a group, all beneficial owners of more than ten
percent of the Common Stock as of September 30, 1997, and by one of the
Company's consultants. Except as otherwise indicated, the following shareholders
have sole voting and investment power with respect to the shares.
Percent
Name and address Number of of
of owner shares Class
- ---------------- ---------- -------
Gerd Behrens 500,000(1) 28.7%
C/O TES GmbH
Karl-Bohm-Str. 2
Baldham b. Munich 85598
Germany
Frank Behrens 200,000(2) 11.5%
C/O TES GmbH
Karl-Bohm-Str. 2
Baldham b. Munich 85598
Germany
Jutta Behrens 420,000(1) 24.1%
C/O TES GmbH
Karl-Bohm-Str. 2
Baldham b. Munich 85598
Germany
Karsten Behrens 300,000(2) 17.2%
C/O TES GmbH
Karl-Bohm-Str. 2
Baldham b. Munich 85598
Germany
Yvonne Marquard 80,000(3) 4.2%
C/O TES GmbH
Karl-Bohm-Str. 2
Baldham b. Munich 85598
Germany
All officers and directors 1,120,000 64.3%
as a group (3 persons)(4)
- -----------------------
(1) Gerd and Jutta Behrens are husband and wife, and own these shares
separately. As husband and wife each of them may be considered the
beneficial owner of the shares held by the other.
(2) Frank Behrens and Karsten Behrens are brothers and are the sons of Gerd and
Jutta Behrens. Gerd and Jutta Behrens disclaim beneficial ownership of the
shares held by their sons.
footnotes continued on the following page
-15-
<PAGE>
(3) Yvonne Marquard has served as a consultant to the Company and has been paid
consulting or finder's fees for her efforts in assisting the Company with
its financing efforts. Ms. Marquard is the wife of Michael Marquard, who is
an employee of the Company. Michael Marquard may be deemed to be the
beneficial owner of these shares.
(4) Does not include 300,000 shares held by Karsten Behrens, because he is
neither an officer or director of the Company.
There are no outstanding options, warrants, or rights to purchase
securities from the Company.
Item 5. Directors, Executive Officers, Promoters and Control Persons.
Officers and Directors and Key Consultants
- ------------------------------------------
The officers and directors of the Company and key consultants to the
Company are as follows:
<TABLE>
<CAPTION>
Officers and Directors
- ----------------------
Tenure as Officer
Name Age Position(s) or Director
---- --- ----------- -----------
<S> <C> <C> <C>
Gerd Behrens 60 Chairman of the June 21, 1994
Board and President to Present
Frank Behrens 31 Secretary March 3, 1995
and a Director to Present
Jutta Behrens 59 Treasurer March 3, 1995
and a Director to Present
Key Consultants
- ---------------
Karsten Behrens 30 Consultant October 1, 1996
to Present
Yvonne Marquard 28 Consultant February 1, 1997
to Present
</TABLE>
Gerd Behrens, Jutta Behrens, Frank Behrens, Karsten Behrens and Yvonne
Marquard may be deemed to be "promoters" and "parents" of the Company within the
meaning of the Rules and Regulations promulgated under the Securities Act.
The directors of the Company are elected to hold office until the next
annual meeting of shareholders and until their respective successors have been
elected and qualified. Officers of the Company are elected annually by the Board
of Directors and hold office until their successors are duly elected and
qualified. Gerd Behrens and Jutta Behrens are married to each other, and they
are the parents of Frank Behrens and Karsten Behrens. Frank Behrens and Karsten
Behrens are brothers. There are no other family relationships between any
director or executive officer and any other director or executive officer. Set
forth below is biographical information with respect to the Company's founders
and promoters and each officer and director.
-16-
<PAGE>
Gerd Behrens, founder and promoter, has been Chairman of the Board and
President of the Company since inception. Mr. Behrens holds a Diploma as a
Businessman (Dipl. Kaufmann), which is roughly equivalent to a Bachelors Degree
in Business Administration in the United States. Mr. Behrens has over 35 years
of experience in business with a variety of firms and has served in a number of
positions, including senior management positions, since 1989. From 1989 until
the founding of the Company, Mr. Behrens was the managing director of Data
Consult, a firm located in Munich, Germany, that purchased and sold used
computers. Since the founding of the Company, Mr. Behrens has devoted
substantially all of his time to the business and affairs of the Company.
Frank Behrens has been Secretary and a director of the Company since March
3, 1995. Mr. Behrens is a graduate of Ludwig-Maximillians University in Munich
in Geography and Economics. Mr. Behrens has served as a consultant to various
firms, including the Company, since graduating from the University of Munich in
1995. Mr. Behrens' consulting services have related primarily to urban planning
and development and the development of environmental management systems and
organization structures and certain software tools for these systems. Mr.
Behrens provided the Company with assistance in the writing and drafting of its
business plan and offering materials that were used to raise funds from German
investors and with the development of environmental management systems and
organization structures and certain software tools for these systems.
Jutta Behrens has been Treasurer and a director of the Company since March
3, 1995. Mrs. Behrens is a qualified industrial accountant and has since 1970
owned and operated her own firm which provides accounting services to businesses
and individuals in Germany.
Karsten Behrens has been a consultant to the Company and has acted as its
legal counsel since October 1, 1996. Mr. Behrens is a graduate of
Ludwig-Maximillians University in Munich in law. Mr. Behrens has completed the
necessary post-graduate employment requirements and passed the necessary
examinations to be licensed as a lawyer in Germany. He has provided the Company
with legal services and with other management and consulting services. His
principal consulting activities were focused upon providing the Company with
assistance in the writing and drafting of its business plan and offering
materials that were used to raise funds from German investors and in assisting
the Company with various legal matters.
Yvonne Marquard has been a consultant to the Company since February 1,
1997. Ms. Marquard assisted the Company with the placement of its Common Stock
in Germany, and she is employed by a firm in Munich that provides financial
consulting services to various businesses.
Item 6. Executive Compensation
The following table summarizes all compensation paid to the officers and
directors of the Company, and to Karsten Behrens as a consultant, for services
rendered to the Company during the last three fiscal years.
-17-
<PAGE>
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
------------------------------- ------------
Other Number of
Name and Fiscal Salary/ Annual Options
Principal Position Year Consulting Fees Compensation Awarded
- ------------------ ---- --------------- ------------ -------
<S> <C> <C> <C> <C>
Gerd Behrens, 1997 57,600 DM -0- -0- (1)
President 1996 10,000 DM -0- -0-
and Director 1995 24,000 DM -0- -0-
Jutta Behrens, 1997 -0- -0- -0- (1)
Treasurer 1996 -0- -0- -0-
and Director 1995 -0- -0- -0-
Frank Behrens, 1997 40,250 DM -0- -0- (1)
Secretary 1996 -0- -0- -0-
and Director 1995 -0- -0- -0-
Karsten Behrens, 1997 98,650 DM -0- -0- (1)
Consultant 1996 3,150 DM -0- -0-
1995 2,930 DM -0- -0-
</TABLE>
- -------------
(1) No advances have been made or are contemplated by the Company to any of its
officers or directors.
Employment and Consulting Agreements
The Company has entered into an employment agreement with Gerd Behrens
under which Mr. Behrens will be paid approximately 6,500 DM per month. Further,
the Company has a consulting agreement with Jutta Behrens' accounting firm under
which Mrs. Behrens' firm is paid 500 DM per month in exchange for providing the
services of Jutta Behrens to the Company. Also, the Company has a consulting
agreement with Frank Behrens' personal consulting firm, under which the firm
will be paid 30 DM per hour for providing the services of Frank Behrens to the
Company. Karsten Behrens serves on the board of directors of TES Oecon AG, and
as such there is a consulting agreement with Karsten Behrens' personal
consulting firm under which his firm is paid an hourly fee of 50 DM per hour for
services as needed. Gerd Behrens devotes his full time and attention to the
business and affairs of the Company. Frank Behrens is expected to devote
approximately 30 hours per month on average to the business and affairs of the
Company, with the expectation that as the Company requires more of Mr. Behrens'
time and efforts he will devote more time to the Company with an appropriate
increase in his compensation arrangements. Jutta Behrens is expected to devote
such time as is necessary to maintain the Company's accounting records on a
current basis. It is not anticipated that Mrs. Behrens will devote additional
time to the Company, and as the Company's needs for accounting and bookkeeping
increase, management believes that the Company will hire accounting and
bookkeeping personnel directly to meet those needs. It is also anticipated that
Mrs. Behrens will remain as the Treasurer until such time as the Company's
business requires a full-time person, at which time it is expected that the
Company will replace Mrs. Behrens with a qualified person. Karsten Behrens is
expected to devote approximately 10 hours per month on average to the business
and affairs of the Company, with the expectation that as the Company requires
more of Mr. Behrens' time and efforts he will devote more time to the Company
with an appropriate increase in his compensation arrangements.
-18-
<PAGE>
The employment and consulting agreements between the Company and Gerd
Behrens, Jutta Behrens, Frank Behrens and Karsten Behrens also contain an
agreement to maintain confidentiality of trade secrets and other materials.
Directors
Other than pursuant to their employment or consulting arrangements, the
members of the Board of Directors are not compensated for their services as
directors; however, they are reimbursed for all reasonable expenses incurred in
connection therewith.
Option Plans
Except as described below, the Company has no retirement, pension, profit
sharing, stock option or insurance or medical reimbursement plans or programs
covering its officers and directors, and does not contemplate implementing any
such plans at this time.
The Board of Directors of the Company has adopted a Stock Option Plan (the
"Plan") which provides for the grant of options to purchase an aggregate of not
more than 500,000 shares of the Company's Common Stock. The purpose of the Plan
is to make options available to directors, management, key employees,
consultants, and technical advisers of the Company in order to provide them with
a more direct stake in the future of the Company and to provide them with
additional rewards and incentives for contributing to the success of the
Company.
The Plan will be administered by a committee (the "Committee") appointed by
the Board of Directors which determines the persons to be granted options under
the Plan, the number of shares subject to each option, the term of the option,
the manner in which the option may be exercised and the exercise price of each
option, subject to the requirement that no option may be exercisable more than
10 years after the date of grant. The Committee will have the power to establish
such other terms and conditions for options granted under the Plan as they
determine are necessary and appropriate. No option granted under the Plan shall
be transferable otherwise than by will or the laws of descent and distribution.
The exercise price of stock options granted under the Plan will be established
by the Board of Directors in their sole discretion and may be less than the fair
market value of the underlying shares on the date of grant as determined by the
Committee. The exercise price may be paid in cash or in Common Stock or a
combination of cash and Common Stock.
As of the date of this Prospectus, no options have been granted under the
Plan.
Except as described below under "Certain Relationships and Related
Transactions," the Company paid no cash or non-cash compensation to any officer
or director during the fiscal years ended December 31, 1995 and 1996.
Item 7. Certain Relationships and Related Transactions.
In connection with the founding of the Company, Gerd Behrens acquired
1,500,000 of the Company's shares of Common Stock. Subsequent to the founding
and prior to the time that the Company raised any funds from outside directors,
Mr. Behrens sold his wife, Jutta Behrens, and his sons, Karsten and Frank
Behrens, 920,000 of these shares and sold Yvonne Marquard 80,000 of these
shares. Mr. Behrens paid approximately 90,870 DM for his original 1,500,000
shares.
In addition, Jutta Behrens has loaned the Company approximately 141,250 DM.
The initial loan was made on March 20, 1996 in the amount of 80,000 DM for a
five-year term and bears interest at 9.25% per year. The second loan was made on
September 10, 1996 in the amount of approximately 50,000 DM for a four year term
and bears interest at 8% per year. The third loan was made on December 31, 1996
in the amount of approximately 11,200 DM for a four year term and bears interest
-19-
<PAGE>
at 8% per year. Further, Gerd Behrens loaned the Company approximately 100,000
DM in connection with the capitalization of TES Oecon AG, which was interest
free until January 1, 1998. Subsequent to January 1, 1998, the loan bears
interest at a rate of 6% per annum. The loan is due on December 31, 2001,
subject to a right for the Company to extend the loan for an additional 5 years
if necessary for economic reasons.
In connection with the Company's financing efforts in Germany, the Company
entered into an agreement with Yvonne Marquard under which Mrs. Marquard was
paid a consulting or finder's fee based upon the difference between 20% of the
gross proceeds raised and the amount of commission or fees actually paid to
brokers or finders for the sale of the Company's securities. Ms. Marquard was
paid approximately 86,533 DM under the terms of this agreement. Ms. Marquard is
the wife of Michael Marquard, who is an employee of the Company.
The Company also paid Frank Behrens consulting fees equal to 40,250 DM in
connection with the writing and drafting of the Company's business plan and
offering materials that were used to raise funds from German investors and with
the development of environmental management systems and organization structures
and certain software tools for these systems.
The Company paid Karsten Behrens consulting fees equal to approximately
98,650 DM in connection with his performance of legal services for the Company
and the writing and drafting of the Company's business plan and offering
materials that were used to raise funds from German investors.
Except as otherwise disclosed herein, there have been no related party
transactions or any other transactions or relationships required to be disclosed
pursuant to Item 404 of Regulation S-B.
Item 8. Description of Securities
Common Stock
- ------------
The Company's authorized capital consists of 20,000,000 shares of no par
value Common Stock, and the Company currently has 1,741,610 shares of the Common
Stock issued and outstanding.
Holders of Common Stock are entitled to one vote for each whole share on
all matters to be voted upon by shareholders, including the election of
directors. Holders of Common Stock do not have cumulative voting rights in the
election of directors. This means that holders of more than 50% of the shares
voting for the election of directors can elect all of the directors if they
choose to do so, and in such event, the holders of the remaining less than 50%
of the shares voting for the election of directors will not be able to elect any
person or persons to the Board of Directors. All shares of Common Stock are
equal to each other with respect to liquidation and dividend rights. No holder
of any shares of Common Stock has any preemptive rights to subscribe for or
purchase any additional, unissued shares of the Company's Common Stock. Upon
liquidation, dissolution, or winding up of the Company, each share of the Common
Stock is entitled to share ratably in the amount available for distribution to
holders of Common Stock. All shares of Common Stock outstanding are fully paid
and nonassessable, and the Common Stock is not subject to conversion or
redemption.
Transfer Agent
- --------------
Corporate Stock Transfer, Inc., 370 17th Street, Suite 2360, Denver,
Colorado 80202, has been retained to serve as the transfer agent and registrar
for the Company's Common Stock.
-20-
<PAGE>
Reports to Shareholders
- -----------------------
The Company intends to furnish annual reports to shareholders which include
audited financial statements reported on by its independent accountants.
PART II
Item 1. Market price of and Dividends on the Registrant's Common Equity and
Other Shareholder Matters
a. Market Price. There is no trading market for the Company's Common Stock
at present and there has been no trading market to date. Management has not
undertaken any discussions, preliminary or otherwise, with any prospective
market maker concerning their involvement in making a market in the Company's
securities. There is no assurance that a trading market will ever develop or, if
such a market does develop, that it will continue.
Effective August 11, 1993, the Securities and Exchange Commission adopted
Rule 15g-9, which established the definition of a "penny stock," for purposes
relevant to the Company, as any equity security that has a market price of less
than $5.00 per share or with an exercise price of less than $5.00 per share,
subject to certain exceptions. For any transaction involving a penny stock,
unless exempt, the rules require: (i) that a broker or dealer approve a person's
account for transactions in penny stocks; and (ii) the broker or dealer receive
from the investor a written agreement to the transaction, setting forth the
identity and quantity of the penny stock to be purchased. In order to approve a
person's account for transactions in penny stocks, the broker or dealer must (i)
obtain financial information and investment experience and objectives of the
person; and (ii) make a reasonable determination that the transactions in penny
stocks are suitable for that person and that person has sufficient knowledge and
experience in financial matters to be capable of evaluating the risks of
transactions in penny stocks. The broker or dealer must also deliver, prior to
any transaction in a penny stock, a disclosure schedule prepared by the
Concession relating to the penny stock market, which, in highlight form, (i)
sets forth the basis on which the broker or dealer made to suitability
determination; and (ii) that the broker or dealer received a signed, written
agreement from the investor prior to the transaction. Disclosure also has to be
made about the risks of investing in penny stock in both public offering and in
secondary trading, and about commissions payable to both the broker-dealer and
the registered representative, current quotations for the securities and the
rights and remedies available to an investor in cases of fraud in penny stock
transactions. Finally, monthly statements have to be sent disclosing recent
price information for the penny stock held in the account and information on the
limited market in penny stocks.
The NASDAQ Stock Market, which administers NASDAQ, has recently made
changes in the criteria for NASDAQ eligibility. In order to be included in
NASDAQ's SmallCap Market, a company must satisfy the requirements described
below. A company must meet one or more of the following three requirements: (i)
net tangible assets of $4 million ($2 million for continued inclusion), (ii)
have a market capitalization of $50 million ($35 million for continued
inclusion), or (iii) have net income (in the latest fiscal year or two of the
last three fiscal years) of $750,000 ($500,000 for continued inclusion). In
addition, a company must also satisfy the following requirements: (i) one
million shares in the public float (500,000 for continued inclusion), (ii) $5
million of market value of the public float ($1 million for continued
inclusion), (iii) a minimum bid price of $4 ($1 for continued inclusion), (iv)
three market makers (two for continued inclusion), (v) 300 (round lot)
shareholders, (vi) an operating history of 1 year or market capitalization of
$50 million, and (vii) certain corporate governance standards.
Management intends to seek to qualify its securities for trading on the
NASDAQ or on a significant securities exchange. However, there can be no
assurances that the Company will qualify its securities for listing on NASDAQ as
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<PAGE>
some other significant exchange, or be able to maintain the maintenance criteria
necessary to insure continued listing. The failure of the Company to qualify its
securities or to meet the relevant maintenance criteria after such qualification
in the future may result in the discontinuance of the inclusion of the Company's
securities on a national exchange. In such events, trading, if any, in the
Company's securities may then continue in the non-NASDAQ over-the-counter
market. As a result, a shareholder may find it more difficult to dispose of, or
to obtain accurate quotations as to the market value of, the Company's
securities.
b. Holders. There are approximately 156 holders of the Company's Common
Stock. All of the issued and outstanding shares of the Company's Common Stock
were issued in off-shore transactions to German citizens, who are resident in
Germany.
As of December 31, 1997, approximately 300,000 shares of the Company's
issued and outstanding Common Stock was available for resale into the U.S.
markets under the provisions of Regulation S adopted under the Securities Act of
1933, as amended. In addition, all of the Company's Common Stock has been sold
in "off-shore" transactions, including 233,476 shares that were sold between
March and July of 1997, and which under certain circumstances will be eligible
for resale into the United States after those shares have been held for one
year. Officers and Directors of the Company hold approximately 1,120,000 shares
of the Company's issued and outstanding Common Stock, which is eligible for sale
under Rule 144 promulgated under the Securities Act, subject to certain
limitations included in said Rule. In general, under Rule 144, a person (or
persons whose shares are aggregated), who has satisfied a one year holding
period, under certain circumstances, may sell within any three month period a
number of shares which does not exceed the greater of one percent of the then
outstanding Common Stock or the average weekly trading volume during the four
calendar weeks prior to such sale. Rule 144 also permits, under certain
circumstances, the sale of shares without any quantity limitation by a person
who has satisfied a two year holding period and who is not, and has not been for
the preceding three months an affiliate of the Company. The officers and
directors of the Company are affiliates of the Company and as such will be
required to resell their securities under Rule 144 unless those resales occur
pursuant to a Registration Statement that has been filed with the United States
Securities and Exchange Commission ("SEC") under the Securities Act of 1933, as
amended, and which has been declared effective by the SEC. The sale or resale of
these shares could have a depressive effect upon the trading price of the Common
Stock, if a market for the shares develops.
c. Dividends. Each share of Common Stock is entitled to share pro rata in
dividends and distributions, if any, with respect to the Common Stock when, as
and if declared by the Board of Directors from funds legally available therefor.
The Company has not paid any dividends on its Common Stock and intends to retain
earnings, if any, to finance the development and expansion of its business.
Future dividend policy is subject to the discretion of the Board of Directors
and will depend upon a number of factors, including future earnings, capital
requirements and the financial condition of the Company.
Item 2. Legal Proceedings
The Company is currently not a party to any pending legal proceedings, and
none of its property is the subject of a pending legal proceeding.
Item 3. Changes in and Disagreements with Accountants
The Company has never had any disagreements with Accountants.
Item 4. Recent Sales of Unregistered Securities
Between December 31, 1996, and December 31, 1997, the Company sold 233,476
shares of its Common Stock in transactions in Germany with German citizens, who
-22-
<PAGE>
are resident in Germany. The Company believes that none of these transactions
were subject to U.S. securities laws and that all such transactions were
conducted in accordance with the provisions of Regulation S adopted under the
Securities Act of 1933, as amended. Further, the Company believes that all such
offers and sales were made in compliance with applicable laws in Germany. The
Company utilized the services of various individuals and companies (all of whom
were either German companies or German citizens) in connection with sales of its
securities and paid sales commissions and finders fees in connection with those
sales. For further information concerning payments made to Yvonne Marquard, for
her assistance with these sales, please see Item 7. "Certain Relationships and
Related Transactions" above.
Item 5. Indemnification of Officers and Directors
Article 10 of the Company's Articles of Incorporation, included herewith as
Exhibit 3(i) provides for the indemnification of the Company's officers and
directors. Further, the officers and directors are indemnified under various
provisions of the Colorado Business Act, which provides for the indemnification
of officers and directors and other persons against expenses, judgments, fines
and amounts paid in settlement in connection with threatened, pending or
completed suits or proceedings against such persons by reason of serving or
having served as officers, directors or in other capacities, except in relation
to matters with respect to which such persons shall be determined not to have
acted in good faith and in the best interests of the Company. With respect to
matters as to which the Company's officers and directors and others are
determined to be liable for misconduct or negligence, including gross negligence
in the performance of their duties to the Company, Colorado law provides for
indemnification only to the extent that the court in which the action or suit is
brought determines that such person is fairly and reasonably entitled to
indemnification for which the court deems proper.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to officers, directors or persons controlling the Company
pursuant to the foregoing, the Company has been informed that in the opinion of
the U.S. Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act, and is therefore
unenforceable.
In accordance with the laws of the State of Colorado, the Company's Bylaws
authorize indemnification of a director, officer, employee, or agent of the
Company for expenses incurred in connection with any action, suit, or proceeding
to which he or she is named a party by reason of his or her having acted or
served in such capacity, except for liabilities arising from his or her own
misconduct or negligence in performance of his or her duty. In addition, even a
director officer, employee, or agent of the Company who was found liable for
misconduct or negligence in the performance of his or her duty may obtain such
indemnification if, in view of all the circumstances in the case, a court of
competent jurisdiction determines such person is fairly and reasonably entitled
to indemnification. Insofar as indemnification for liabilities arising under the
Securities Act, may be permitted to directors, officers, or persons controlling
the issuing Company pursuant to the foregoing provisions, the Company has been
informed that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
PART F/S
The audited financial statements of the Company, and related notes thereto,
as of December 31, 1996, and for the years ended December 31, 1996 and 1995, are
accompanied by the independent auditors' report and are included herewith.
-23-
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Stockholders
Technical Environment Solutions, Inc.
We have audited the consolidated balance sheet of Technical Environment
Solutions, Inc. as of December 31, 1996 and the related consolidated statements
of operations, changes in stockholders' equity, and cash flows for each of the
two years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above, present
fairly, in all material respects, the financial position of Technical
Environment Solutions, Inc. as of December 31, 1996, and the results of its
operations and cash flows for each of the two years then ended, in conformity
with generally accepted accounting principles.
James E. Scheifley & Associates, P.C.
Certified Public Accountants
Denver, Colorado
November 25, 1997
<PAGE>
Technical Environment Solutions, Inc.
Consolidated Balance Sheet
December 31, 1996
ASSETS
------
DM US $
Current assets:
Cash 2,707 1,759
Accounts receivable, trade 97,757 63,532
Accounts receivable -other -- --
Prepaid expenses 4,085 2,655
-------- --------
Total current assets 104,549 67,946
Property and equipment, at cost, net of
accumulated depreciation of DM 45,901 21,263 13,819
Investments 10,000 6,499
Deferred financing costs 19,145 12,442
Deposits 2,409 1,566
-------- --------
157,366 102,272
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Note payable - bank 32,316 21,003
Notes payable - others 110,000 71,489
Current portion of long-term debt 8,198 5,328
Accounts payable 103,688 67,387
Accrued expenses 44,571 28,967
-------- --------
Total current liabilities 298,773 194,173
Long term debt 180,050 117,013
Loans from shareholders 248,929 161,779
Stockholders' equity:
Common stock, no par value,
20,000,000 shares authorized,
1,508,134 shares issued and outstanding 121,360 78,872
Accumulated deficit (691,746) (449,565)
-------- --------
(570,386) (370,693)
-------- --------
157,366 102,272
======== ========
See accompanying notes to consolidated financial statements.
<PAGE>
Technical Environment Solutions, Inc.
Consolidated Statements of Operations
Years Ended December 31,
1995 1996 1996
DM DM US $
---------- ---------- ----------
Sales 577,564 293,814 190,950
Cost of operations 351,364 177,343 115,255
---------- ---------- ----------
Gross profit 226,200 116,471 75,694
Other costs and expenses:
General and administrative 323,972 271,344 176,346
---------- ---------- ----------
(Loss) from operations (97,772) (154,873) (100,652)
Other income and (expense):
(Loss) from sale of assets -- (10,270) (6,674)
Interest income 4,780 1,240 806
Interest expense (28,595) (43,517) (28,282)
---------- ---------- ----------
(23,815) (52,547) (34,150)
(Loss) before income taxes (121,587) (207,420) (134,802)
Provision for income taxes -- -- --
---------- ---------- ----------
Net (loss) (121,587) (207,420) (134,802)
========== ========== ==========
Per share information:
Net (loss) per share (0.08) (0.14) (0.09)
========== ========== ==========
Weighted average shares outstanding 1,507,176 1,508,134 1,508,134
========== ========== ==========
See accompanying notes to consolidated financial statements.
<PAGE>
Technical Environment Solutions, Inc.
Consolidated Statement of Stockholders' Equity
Years Ended December 31, 1996 and 1995
Common Stock Accumulated
Shares Amount Deficit Total
DM DM DM
--------- --------- --------- ---------
Balance, December 31, 1994 1,505,134 90,870 (362,739) (271,869)
Common shares issued for cash 3,000 30,490 30,490
Net loss for the year -- -- (121,587) (121,587)
--------- --------- --------- ---------
Balance, December 31, 1995 1,508,134 121,360 (484,326) (362,966)
Net loss for the year -- -- (207,420) (207,420)
--------- --------- --------- ---------
Balance, December 31, 1996 1,508,134 121,360 (691,746) (570,386)
========= ========= ========= =========
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
Technical Environment Solutions, Inc.
Consolidated Statements of Cash Flows
Years Ended December 31,
1995 1996 1996
DM DM US $
-------- -------- --------
<S> <C> <C> <C>
Net (loss) (121,576) (207,420) (134,802)
Adjustments to reconcile net (loss) to net
cash (used in) operating activities:
Loss on sale of fixed assets -- 10,270 6,674
Depreciation 36,794 22,902 14,884
Interest added to shareholder loans 3,781 3,948 2,566
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (7,729) (14,231) (9,249)
(Increase) decrease in prepaid expenses 214 411 267
(Increase) decrease in other assets (38,177) 45,624 29,651
Increase (decrease) in accounts payable and
accrued expenses (28,597) 10,847 7,049
-------- -------- --------
Total adjustments (33,714) 79,771 51,843
-------- -------- --------
Net cash (used in) operating activities (155,290) (127,649) (82,959)
-------- -------- --------
Cash flows from investing activities:
Proceeds from sale of assets -- 16,500 10,723
Increase in investments (10,000) -- --
Purchase of fixed assets (3,748) -- --
-------- -------- --------
Net cash provided by (used in) investing activities (13,748) 16,500 10,723
-------- -------- --------
Cash flows from financing activities:
Advances from stockholders -- 230,000 149,477
Proceeds from sale of common stock 30,490 -- --
Repayment of notes payable - bank (34,213) (34,448) (22,388)
Repayment of stockholder advances (6,900) (6,900) (4,484)
Proceeds from notes payable - other 168,410 -- --
Repayment of notes payable - other -- (100,000) (64,990)
-------- -------- --------
Net cash provided by
financing activities 157,787 88,652 57,615
-------- -------- --------
Increase (decrease) in cash (11,251) (22,497) (14,621)
Cash and cash equivalents,
beginning of period 36,455 25,204 16,380
-------- -------- --------
Cash and cash equivalents,
end of period 25,204 2,707 1,759
======== ======== ========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
Technical Environment Solutions, Inc.
Notes to Consolidated Financial Statements
December 31, 1996
Note 1. Summary of significant accounting policies.
Technical Environment Solutions, Inc. and subsidiary (the "Company) is in the
business of recycling surplus and obsolete electronic equipment. The Company's
operations to date have been carried out solely within Germany by its wholly
owned subsidiary Technical Environment Solutions GmbH, (TES GmbH). These
operations consist of dismantling and disposing of electronic equipment secured
from customers. The Company has used independent recycling companies to complete
the disposal process, however, during 1997, the Company has secured plant
facilities necessary to begin certain processing functions on its own.
Additionally, during 1997, the Company formed TES Oecon AG, a wholly owned
subsidiary which plans to establish a technical school for training electronic
recycling workers for itself and others.
The Company was incorporated in Colorado on June 21, 1994.
The accompanying financial statements have been prepared in accordance with
United States generally accepted accounting principles ("U.S. GAAP"). The
Company maintains its financial records in accordance with the German Commercial
Code, which represents generally accepted accounting principles in Germany
("German GAAP"). Generally, accepted accounting principles in Germany vary in
certain significant respects from U.S. GAAP. Accordingly, the Company has
recorded certain adjustments in order that these financial statements be in
accordance with U.S. GAAP.
Solely for the convenience of the reader, the accompanying consolidated
financial statements as of and for the year ended December 31, 1996, have been
translated into United States dollars. ("U.S. $") at the rate of DM1.5387 per
U.S. $1.00 the Noon Buying Rate of the Federal Reserve Bank of New York on
December 31, 1996. The translations should not be construed as a representation
that the amounts shown could have been, or could be, converted into U.S. dollars
at that or any other rate.
Principles of consolidation
The consolidated statements include the accounts of the Company and its
wholly-owned subsidiaries. All significant inter-company accounts and
transactions have been eliminated in consolidation.
<PAGE>
Cash and cash equivalents
The Company considers all highly-liquid investments purchased with a maturity of
three months or less to be cash equivalents.
Fair value of financial instruments
The Company's financial instruments consist of cash and cash equivalents and
accounts receivable and payable. The carrying amounts of such financial
instruments approximate fair value because of the short maturity of these
instruments.
Property and equipment
Property and equipment are stated at cost. Depreciation is provided for using
the straight line method over estimated useful lives of five to seven years for
equipment and the remaining lease term for leasehold improvements. Depreciation
expense amounted to DM22,122 and DM31,981 for the years ended December 31, 1996
and 1995, respectively.
Revenue recognition
Revenue is recorded when services are performed. Sales amounts included in the
foregoing Consolidated Statement of Operations consist of gross contract amounts
paid to the Company by its customers for the removal of recyclable materials.
Advertising
Advertising expenses are charged to expense upon first showing. The Company did
not incur significant amounts of advertising during the periods presented.
Net loss per share
Net loss per share of common stock is computed based on the weighted average
number of common shares outstanding during the year. Common stock equivalents
were anti-dilutive and were excluded from the computation.
Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the reported amounts
of revenue and expenses during the periods presented. Actual results could
differ from those estimates making it reasonably possible that a change in these
estimates could occur in the near term.
Stock-based Compensation
The Company adopted Statement of Financial Accounting Standard No. 123 (FAS
123), Accounting for Stock-Based Compensation beginning with the Company's first
quarter of 1996.
<PAGE>
Upon adoption of FAS 123, the Company when required will continue to measure
compensation expense for any stock-based employee compensation plans using the
intrinsic value method prescribed by APB No. 25, Accounting for Stock Issued to
Employees, and will provide pro forma disclosures of the effect on net income
and earnings per share as if the fair value-based method prescribed by FAS 123
had been applied in measuring compensation expense.
Recent Pronouncements
In 1996 Financial Accounting Standards No. 125 (FAS 125) Accounting for Transfer
and Servicing of Financial Assets and Extinguishments of Liabilities was issued.
FAS 125 is effective for transfers and servicing of financial assets and
extinguishments of liabilities occurring after December 31, 1996. The Company
will adopt FAS 125 in 1997. Adoption of FAS 125 is not expected to have a
material effect on the Company's consolidated financial position or operating
results.
Note 2. Investments
During July 1995, the Company invested DM10,000 in Okologik Ag, a German company
engaged in the production and conservation of energy by alternative means. The
Company's 1,334 shares represent less than 2% of total shares outstanding. As
yet, no market exists for the stock and the Company has accounted for its
investment at cost.
Note 3. Notes payable and long-term debt
Notes payable - banks at December 31, 1996 consists of a bank line of credit
having a balance at December 31, 1996 of DM32,316. The line of credit bears
interest at 7.75% per annum and had DM17,684 additional credit available at that
date. The Company also has a term loan with the bank having a remaining
principal balance due at December 31, 1996 of DM188,248. The loan bears interest
at 7.75% per annum and is due in installments of DM1,875 monthly through July
2010 and is collateralized by the personal residence of the Company's president
and major shareholder. Amounts due on the term loan are as follows: 1997 -
DM8,197, 1998 - DM8,856, 1999 - DM9,568, 2000 - DM10,336, 2001 - DM11,166 and
thereafter - DM140,124.
During 1995, the Company sold DM210,000 of convertible debentures to thirteen
individual investors in Germany. The debentures bear interest at 10.75% per
annum and are due in March 1999. The debentures are convertible into shares of
the Company's common stock, however none were converted. During 1996, DM100,000
plus accrued interest was repaid to certain of the investors. The balance of the
debentures plus accrued interest were repaid subsequent to December 31, 1996.
<PAGE>
Note 4. Income taxes.
At December 31, 1996 the Company had approximately DM690,000 of unused net
operating loss deductions in Germany that may be carried forward indefinitely.
A valuation allowance of DM345,000 was provided at December 31, 1996 for net
operating loss carryforwards which more likely than not will not be utilized
prior to their expiration.
Note 5. Commitments and contingencies
The Company is obligated for non-cancelable operating lease payments with
initial terms exceeding one year relating to office space and warehouse space.
The lease agreements require future minimum lease payments as follows:
Year Ending December 31, Amount
1997 81,873
1998 194,522
1999 196,233
2000 196,233
2001 196,233
Thereafter 199,899
--------
1,064,993
Rent expense in 1996 and 1995 was DM48,239 and DM49,020, respectively.
The Company has entered into employment contract with its president which
provides for an annual salary of DM96,000 per year through June 1999.
<PAGE>
Note 6. Related party transactions
A shareholder of the Company who is also wife of the Company's president made
loans aggregating DM130,000 to the Company during the year ended December 31,
1996. The loans bear interest at between 8% and 9.25% per annum and are due
DM50,000 in 2000 and DM50,000 in 2001 plus accrued interest. Additionally,
during 1993, the shareholder advanced DM25,000 to the Company of which DM6,900
was repaid in each of the years 1995 and 1996. The advance bears interest at 8%
per annum. Interest included in the loan balance at December 31, 1996 amounted
to DM7,729. Additionally, during 1996, the Company's president and major
shareholder advanced DM100,000 to the Company's German subsidiary. The amount
bears interest at 6% per annum beginning January 1, 1998 and the interest is due
in at the end of each calendar year. The loan principal is due in full on
December 31, 2001.
Note 7. Stockholders' equity
During the periods covered by these financial statements the Company issued
securities in reliance upon an exemption from registration with the Securities
and Exchange Commission. Although the Company believes that the sales did not
involve a public offering and that it did comply with the exemptions from
registration, it could be liable for rescission of said sales if such exemption
was found not to apply. The Company has not received a request for rescission of
shares nor does it believe that it is probable that its shareholders would
pursue rescission nor prevail if such action were undertaken
During the year ended December 31, 1995, the Company issued 3,000 shares of its
no par value common stock for cash aggregating DM30,490.
The Company has established a stock option plan for directors, management, key
employees, consultants and technical advisers whereby an aggregate of 500,000
options to purchase common stock of the Company may be granted. The grant price
of the options will be equal to the market price for the Company's common stock
at the date the options are granted. No options have been granted under the plan
through the date of these financial statements.
<PAGE>
Note. 8. Concentrations and information about major customers
During 1996 and 1995, all of the Company's revenue from recycling operations was
derived from sales within Germany. The Company has one major customer, Seimens
Nixdorf AG which accounted for 10% and 40% of its sales during 1996 and 1995
respectfully.
The Company has to date functioned as an intermediary in carrying out its
recycling operations. The Company has used the services of Fuchs AG to complete
the disposal of all recycled materials.
Note 9. Subsequent events
During the period from February 1997 to June 1997, the Company sold an aggregate
of 233,476 shares of its common stock to a group of German individuals for gross
cash proceeds of DM2,541,206. Costs associated with the offering amounted to
DM512,656.
During October 1997, the Company entered into a long term lease agreement for an
office and warehouse facility in Germany that it plans to use for recycling
operations. The lease provides for monthly rental payments of DM10,800 through
December 31, 2001. The annual lease cost is included in disclosure provided in
Note 5. The lease contract includes a purchase option whereby the Company may
acquire the property for DM2,200,000 if the option is exercised before December
31, 2000.
<PAGE>
Technical Environment Solutions, Inc.
Consolidated Balance Sheet
September 30, 1997
(Unaudited)
ASSETS
------
DM US $
---------- ----------
Current assets:
Cash 1,064,270 604,825
Accounts receivable, trade 35,388 20,111
Loan receivable 50,000 28,415
Prepaid expenses 4,085 2,322
---------- ----------
Total current assets 1,153,744 655,673
Property and equipment, at cost, net of
accumulated depreciation of DM 49,901 167,266 95,057
Investment 10,000 5,683
Note receivable 50,000 28,415
Deposits 310,244 176,312
---------- ----------
1,691,254 961,140
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Notes payable - banks 182,159 103,521
Notes payable - others 90,000 51,147
Accounts payable 61,787 35,114
Accrued expenses 33,861 19,243
---------- ----------
Total current liabilities 367,807 209,025
Loans from shareholders 237,750 135,113
Stockholders' equity:
Common stock, no par value,
20,000,000 shares authorized,
1,741,610 shares issued and outstanding 2,130,765 1,210,914
Additional paid-in capital -- --
Accumulated deficit (1,045,068) (593,912)
---------- ----------
1,085,697 617,002
---------- ----------
1,691,254 961,140
========== ==========
See accompanying notes to consolidated financial statements.
<PAGE>
Technical Environment Solutions, Inc.
Consolidated Statements of Operations
(Unaudited)
Nine Months Ended September 30,
1996 1997 1997
DM DM US $
---------- ---------- ----------
Sales 209,052 256,226 145,613
Cost of operations 141,693 140,855 80,048
---------- ---------- ----------
Gross profit 67,359 115,371 65,565
Other costs and expenses:
General and administrative 227,134 448,939 255,132
---------- ---------- ----------
(Loss) from operations (159,775) (333,568) (189,567)
Other income and (expense):
Gain (loss) from sale of assets 16,637 -- --
Interest income 461 4,582 2,604
Interest expense (29,063) (24,337) (13,831)
---------- ---------- ----------
(11,965) (19,755) (11,227)
(Loss) before income taxes (171,740) (353,323) (200,793)
Provision for income taxes -- -- --
---------- ---------- ----------
Net (loss) (171,740) (353,323) (200,793)
========== ========== ==========
Earnings (loss) per share:
Net income (loss) (0.11) (0.21) (0.12)
========== ========== ==========
Weighted average shares outstanding 1,507,176 1,654,492 1,654,492
========== ========== ==========
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
Technical Environment Solutions, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended September 30,
1996 1997 1997
DM DM US $
---------- ---------- ----------
<S> <C> <C> <C>
Net cash (used in)
operating activities (128,460) (303,757) (172,624)
---------- ---------- ----------
Cash flows from investing activities:
Acquisition of property and equipment -- (150,003) (85,247)
Proceeds from sale of assets 16,500 -- --
Deposit on building purchase -- (307,835) (174,943)
Increase in notes receivable -- (100,000) (56,830)
---------- ---------- ----------
Net cash provided by (used in) investing activities 16,500 (557,838) (317,019)
---------- ---------- ----------
Cash flows from financing activities:
Repayment of stockholder advances -- (111,179) (63,183)
Proceeds from sale of stock -- 2,028,550 1,152,825
Increase in deferred offering costs -- (35,808) (20,350)
Capital contribution by shareholder -- -- --
Increase in stockholder advances 232,219 100,000 56,830
Repayment of notes payable (143,098) (58,405) (33,192)
---------- ---------- ----------
Net cash provided by
financing activities 89,121 1,923,158 1,092,931
---------- ---------- ----------
Increase (decrease) in cash (22,839) 1,061,563 603,287
Cash and cash equivalents,
beginning of period 25,204 2,707 1,538
---------- ---------- ----------
Cash and cash equivalents,
end of period 2,365 1,064,270 604,825
========== ========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
Technical Environment Solutions, Inc.
Notes to Unaudited Financial Statements
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, 1996, included elsewhere herein.
Loss per share was computed using the weighted average number of common shares
outstanding.
During the period from February 1997 to June 1997, the Company sold an aggregate
of 233,476 shares of its common stock to a group of German individuals for gross
cash proceeds of DM2,541,206. Costs associated with the offering amounted to
DM512,656.
During October 1997, the Company entered into a long term lease agreement for an
office and warehouse facility in Germany that it plans to use for recycling
operations. The lease provides for monthly rental payments of DM10,800 through
December 31, 2001. The lease contract includes a purchase option whereby the
Company may acquire the property for DM2,200,000 if the option is exercised
before December 31, 2000.
During 1995, the Company sold DM210,000 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, DM100,000 plus accrued interest was repaid to certain of the investors.
The balance of the debentures plus accrued interest were repaid subsequent to
December 31, 1996.
<PAGE>
PART III--Complete Exhibits List
Item 1. Index to Exhibits
Exhibit Number Description of Exhibit
-------------- ----------------------
3(i) Articles of Incorporation
3(ii) Bylaws
4(i) Form of Stock Certificate*
4(ii) Form of Convertible Debenture*
4(iii) Stock Option Plan*
10(i) Employment Contract of Gerd Behrens dated May 19, 1992*
10(ii) Lease for Impler Strasse office*
10(iii) Lease for building in Landsberg am Lech*
10(iv) Lease for building #2 (Halle) at Landsberg am Lech*
23 Consent of James E. Scheifley & Associates, P.C.
- -------------------
* To be filed by amendment
-24-
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
TECHNICAL ENVIRONMENT SOLUTIONS, INC.
(Registrant)
Date: February 6, 1998 By: /s/ Gerd Behrens
-----------------
Gerd Behrens, President and a Director
Date: February 6, 1998 By: /s/ Frank Behrens
-----------------
Frank Behrens, Secretary and a Director
Date: February 6, 1998 By: /s/ Jutta Behrens
-----------------
Jutta Behrens, Treasurer and a Director
ARTICLES OF INCORPORATION
OF
TECHNICAL ENVIRONMENT SOLUTIONS, INC.
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned incorporator, being a natural person of the age of
eighteen (18) years or more, and desiring to form a corporation under the laws
of the State of Colorado, does hereby sign, verify and deliver in duplicate to
the Secretary of State of Colorado these ARTICLES OF INCORPORATION.
ARTICLE I.
NAME
The name of the corporation shall be Technical Environment Solutions, Inc..
ARTICLE II.
PERIOD OF DURATION
This corporation shall exist perpetually unless dissolved according to law.
ARTICLE III.
PURPOSE
The purpose for which this corporation is organized is to conduct a
brokerage of used electronic equipment as well as the recycling and marketing
thereof as well as to transact any lawful business or businesses for which
corporations may be incorporated pursuant to the Colorado Corporation Code.
ARTICLE IV.
CAPITAL
The aggregate number of shares which this corporation shall have the
authority to issue is 20,000,000 shares, each without par value, which shares
shall be designated common stock. No share shall be issued until it has been
paid for, and it shall thereafter be nonassessable.
<PAGE>
ARTICLE V.
PREEMPTIVE RIGHTS
A shareholder of the corporation shall not be entitled to a preemptive
right to purchase, subscribe for, or otherwise acquire any unissued or treasury
shares of stock of the corporation, or any options or warrants to purchase,
subscribe for or otherwise acquire any such unissued or treasury shares, or any
shares, bonds, notes, debentures, or other securities convertible into or
carrying options or warrants to purchase, subscribe for or otherwise acquire any
such unissued or treasury shares.
ARTICLE VI.
CUMULATIVE VOTING
The shareholders shall not be entitled to cumulative voting.
ARTICLE 7.
STOCK RESTRICTIONS
The board of directors may cause any shares issued by the corporation to be
issued subject to such lawful restrictions, qualifications, limitations or
special rights as it determines, which may be created by provision in the Bylaws
of the corporation or in minutes of proceedings by the Board, provided, however,
notice of such restrictions, qualifications, limitations or special rights must
be stated on the share certificates, and provided further, that no shares sold
outside the United States to persons who are not "U.S. person" under United
States Securities and Exchange Commission Regulation S ("Regulation S") under
the United States Securities Act of 1933 ("1933 Act"), shall be sold to a U.S.
person or to or for the account of a U.S. Person, for a period of one year after
purchase unless such sale is registered under the Act, and that otherwise all
sales of such shares shall only be effected in accordance with Regulation S,
registration under the 1933 Act, or pursuant to an exemption from such
registration, and provided further, that certificates for all shares sold
outside the United States to persons who are not U.S. persons shall bear the
restrictive legend required by Regulation S.
-2-
<PAGE>
ARTICLE 8.
REGISTERED OFFICE AND AGENT
The initial registered office of the corporation shall be c/o Rossi &
Maricle, a professional Corporation, 4250 Republic Plaza, 370 17th Street,
Denver, Colorado 80202 and the name of the initial registered agent at such
address is Paul T. Maricle, Esq. Either the registered office or the registered
agent may be changed in the manner provided by law.
ARTICLE 9.
INITIAL BOARD OF DIRECTORS
The initial Board of Directors of the corporation shall consist of three
(3) directors, and the names and addresses of the persons who shall serve as
directors until the first annual meeting of the shareholders or until their
successors are elected and shall qualify are as follows:
Name Address
---- -------
Gerd Behrens Karl-Bohm-Stra(beta)e 2, 855 98 Baldham, Germany
Inga Haake Adler Stra(beta)e 27, 81827 Munich, Germany
Thomas Pilz Hans-Pinsel-Stra(beta)e 9A, 85540 Haar (bei Munich), Germany
ARTICLE 10.
INDEMNIFICATION
A. The corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative (other than an action by or in the
right of the corporation), by reason of the fact that he is or was a
director, officer, employee, fiduciary or agent of the corporation or
is or was serving at the request of the corporation as a director,
officer, employee, fiduciary or agent of another corporation,
partnership, joint venture, trust, or other enterprise, against
expenses (including attorneys fees), judgments, fines, and amounts
paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding, if he acted in good
faith and in a manner he reasonably believed to be in the best
interests of the corporation and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit, or proceeding by
judgment, order, settlement, or conviction or upon a plea of nolo
contendere or its equivalent shall not of itself create a presumption
that the person did not act in good faith and in a manner which he
reasonably believed to be in the best interests of the corporation
and, with respect to any criminal action or proceeding, had reasonable
cause to believe his conduct was unlawful.
B. The corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending, or
completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that he is or
was a director, officer, employee, fiduciary or agent of another
corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorney fees) actually and reasonably
incurred by him in connection with the defense or settlement of such
action or suit if he acted in good faith and in a manner he reasonably
believed to be in the best interests of the corporation; but no
indemnification shall be made in respect of any claim, issue, or
matter as to which such person has been adjudged to be liable for
negligence or misconduct in the performance of his duty to the
corporation unless and only to the extent that the court in which such
action or suit was brought determines upon application that, despite
the adjudication of liability, but in view of all circumstances of the
case, such person is fairly and reasonably entitled to indemnification
for such expenses which such court deems proper.
-3-
<PAGE>
C. To the extent that a director, officer, employee, fiduciary or
agent of a corporation has been successful on the merits in defense of
any action, suit, or proceeding referred to in A or B of this Article
10. or in defense of any claim, issue, or matter therein, he shall be
indemni fied against expense (including attorney fees) actually and
reasonably incurred by him in connection therewith.
D. Any indemnification under A or B of this Article 10. (unless
ordered by a court) and as distinguished from C of this Article shall
be made by the corporation only as authorized in the specific case
upon a determination that indemnification of the director, officer,
employee, fiduc iary or agent is proper in the circumstances because
he has met the applicable standard of conduct set forth in A or B
above. Such determination shall be made by the Board of Directors by a
majority vote of a quorum consisting of directors who were not parties
to such action, suit, or proceeding, or, if such a quorum is not
obtainable or, even if obtainable, if a quorum of disinterested
directors so directs, by independent legal counsel in a written
opinion, or by the shareholders.
E. Expenses (including attorney fees) incurred in defending a civil
or criminal action, suit, or proceeding may be paid by the corporation
in advance of the final disposition of such action, suit, or
proceeding as authorized in C or D of this Article 10. upon receipt of
an undertakin g by or on behalf of the director, officer, employee,
fiduciary or agent to repay such amount unless it is ultimately
determined that he is entitled to be indemnified by the corporation as
authorized in this Article 10.
ARTICLE 11.
TRANSACTIONS WITH INTERESTED DIRECTORS
No contract or other transaction between the corporation and one (1) or
more of its directors or any other corporation, firm, association, or entity in
which one (1) or more of its directors are directors or officers or are
financially interested shall be either void or voidable solely because of such
relationship or interest, or solely because such directors are present at the
meeting of the Board of Directors or a committee thereof which authorizes,
approves, or ratifies such contract or transaction, or solely because their
votes are counted for such purpose if:
a. The fact of such relationship or interest is disclosed or known to the
Board of Directors or committee which authorizes, approves, or
ratifies the contract or transaction by a vote or consent sufficient
for the purpose without counting the votes or consents of such
interested directors;
-4-
<PAGE>
b. The fact of such relationship or interest is disclosed or known to the
shareholders entitled to vote and they authorize, approve, or ratify
such contract or transaction by vote or written consent; or
c. The contract or transaction is fair and reasonable to the corporation.
Common or interested directors may be counted in determining the presence
of a quorum at a meeting of the Board of Directors or a committee thereof which
authorizes, approves, or ratifies such contract or transaction.
ARTICLE 12.
INCORPORATOR
The name and address of the incorporator is as follows:
Ronald G. Rossi, Esq. 4250 Republic Plaza, 370 17th Street,
Denver, Colorado 80202
IN WITNESS WHEREOF, the above-named incorporator signed these ARTICLES OF
INCORPORATION on June 21, 1994.
/s/ Ronald G. Rossi
---------------------------------
Ronald G. Rossi, Esq
STATE OF COLORADO )
) ss.
COUNTY OF DENVER )
Subscribed and sworn to before me this 21st day of June, 1994, by
Ronald G. Rossi, Esq.
WITNESS my hand and official seal.
/s/ Paul Maricle
--------------------------------
Notary Public
Notary's address: 4250 Republic Plaza, 370 17th Street,
Denver, Colorado 80202
My commission expires: June 29, 1997.
-5-
BYLAWS
OF
TECHNICAL ENVIRONMENT SOLUTIONS, INC.
ARTICLE I
OFFICES
Section 1.1 Principal Office. The principal office of the corporation in
the State of Colorado shall be located at 370 17th Street, Suite 4250, Denver,
Colorado 80202 c/o Rossi & Maricle, P.C. The corporation may have such other
offices, either within or outside of the State of Colorado as the Board of
Directors may designate, or as the business of the corporation may require from
time to time.
Section 1.2 Registered Office. The registered office of the corporation,
required by the Colorado Corporation Code to be maintained in the State of
Colorado, may be, but need not be, identical with the principal office in the
State of Colorado, and the address of the registered office ma y be changed from
time to time by the Board of Directors.
ARTICLE II
SHAREHOLDERS
Section 2.1 Annual Meeting. The annual meeting of the shareholders shall be
held June 1 or at such time on such day as shall be fixed by the Board of
Directors, commencing with the year 1995 for the purpose of electing directors
and for the transaction of such other business as may come before the meeting.
If the day fixed for the annual meeting shall be a legal holiday in the State of
Colorado, such meeting shall be held on the next succeeding business day. If the
election of directors shall not be held on the day designated herein for any
annual meeting of the shareholders, or at any adjournment thereof, the Board of
Directors shall cause the election to be held at a special meeting of the
shareholders as soon thereafter as may be convenient.
Section 2.2 Special Meetings. Special meetings of the shareholders, for any
purposes, unless otherwise prescribed by statute, may be called by the President
or by the Board of Directors, and shall be called by the President or by the
Board of Directors, and shall be called by the Preside nt at the request of the
holders of not less than one-tenth of all outstanding shares of the corporation
entitled to vote at the meeting.
Section 2.3 Place of Meeting. The Board of Directors may designate any
place, either within or outside of the State of Colorado, as the place of
meeting for any annual meeting or for any special meeting called by the Board of
Directors. If no designation is made, or if a special meeting is otherwise
called, the place of meeting shall be the principal office of the corporation in
the State of Colorado.
Section 2.4 Notice of Meeting. Written notice stating the place, day, and
hour of the meeting of shareholders and, in case of a special meeting, the
purpose or purposes for which the meeting is called, shall, unless otherwise
prescribed by statute, be delivered not less than ten nor more than fifty days
before the date of the meeting, either personally or by mail, by or at the
direction of the President, or the Secretary, or the officer or other persons
calling the meeting, to each shareholder of record entitled to vote at such
meeting provided, however, that if the authorized shares of the corporation are
to be increased, at least thirty days' notice shall be given, and if sale of all
or substantially all assets is to be voted upon, at least twenty days' notice
shall be given. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail, addressed to the shareholder at his address
as it appears of the stock transfer books of the corporation, with postage
thereon prepaid.
<PAGE>
Section 2.5 Meeting of All Shareholders. If all the shareholders shall meet
at any time and place, either within or outside of the State of Colorado, and
consent to the holding of a meeting at such time and place, such meeting shall
be valid without call or notice, and at such meeting an y corporate action may
be taken.
Section 2.6 Closing of Transfer Books or Fixing of Record Date. For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or shareholders entitled to
receive payment of any dividend, or in order to make a determination of
shareholders for any other proper purpose, the Board of Directors of the
corporation may provide that the share transfer books shall be closed for a
stated period but not to exceed, in any case, fifty days. If the share transfer
books shall be closed for the purpose of determining shareholders entitled to
notice of or to vote at a meeting of shareholders, such books shall be closed
for at least ten days immediately preceding such meeting. In lieu of closing the
share transfer books, the Board of Directors may fix in advance a date as the
record date for any such determination of shareholders, such date in any case to
be not more than fifty days and, in case of a meeting of shareholders, not less
than ten days prior to the date on which the particular action, requiring such
determination of shareholders, is to be taken. If the share transfer books are
not closed and no record date is fixed for the determination of shareholders
entitled to notice of or to vote at a meeting of shareholders, or shareholders
entitled to receive payment of a dividend, the date on which notice of the
meeting is mailed or the date on which the resolution of the Board of Directors
declaring such dividend is adopted, as the case may be, shall be the record date
for such determination of shareholders. When a determination of shareholders
entitled to vote at any meeting of shareholders has been made as provided in
this section, such determination shall apply to any adjournment thereof.
Section 2.7 Voting Record. The officer or agent having charge of the stock
transfer books for shares of the corporation shall make, at least ten days
before such meeting of shareholders, a complete record of the shareholders
entitled to vote at each meeting of shareholders or any adjournment thereof,
arranged in alphabetical order, with the address of and the number of shares
held by each. The record, for a period of ten days prior to such meeting, shall
be kept on file at the principal office of the corporation, whether within or
outside of the State of Colorado, and shall be subject to inspection by any
shareholder for any purpose germane to the meeting at any time during usual
business hours. Such record shall be produced and kept open at the time and
place of the meeting and shall be subject to the inspection of any shareholder
during the whole time of the meeting for the purposes thereof.
The original stock transfer books shall be the prima facie evidence as to
who are the shareholders entitled to examine the record or transfer books or to
vote at any meeting of shareholders.
Section 2.8 Quorum. A majority of the outstanding shares of the corporation
entitled to vote, represented in person or by proxy, shall constitute a quorum
at any meeting of shareholders, except as otherwise provided by the Colorado
Corporation Code and the Articles of Incorporation. In the absence of a quorum
at any such meeting, a majority of the shares so represented may adjourn the
meeting from time to time for a period not to exceed sixty days without further
notice. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally noticed. The shareholders present at a duly organized
meeting may continue to transact business until adjournment, notwithstanding the
withdrawal during such meeting of that number of shareholders whose absence
would cause there to be less than a quorum.
-2-
<PAGE>
Section 2.9 Manner of Acting. If a quorum is present, the affirmative vote
of the majority of the shares represented at the meeting and entitled to vote on
the subject matter shall be the act of the shareholders, unless the vote of a
greater proportion or number or voting by classes is o therwise required by
statute or by the Articles of Incorporation or these Bylaws.
Section 2.10 Proxies. At all meetings of shareholders, a shareholder may
vote in person or by proxy executed in writing by shareholder or by his duly
authorized attorney-in-fact. Such proxy shall be filed with the Secretary of the
corporation before or at the time of the meeting. No pr oxy shall be valid after
eleven months from the date of its execution, unless otherwise provided in the
proxy.
Section 2.11 Voting of Shares. Unless otherwise provided by these Bylaws or
the Articles of Incorporation, each outstanding share entitled to vote shall be
entitled to one vote upon each matter submitted to a vote at a meeting of
shareholders, and each fractional share shall be entitled to a corresponding
fractional vote on each such matter.
Section 2.12 Voting of Shares by Certain Shareholders. Shares standing in
the name of another corporation may be voted by such officer, agent or proxy as
the Bylaws of such corporation may prescribe, or, in the absence of such
provision, as the Board of Directors of such corporation may determine.
Shares standing in the name of a deceased person, a minor ward or an
incompetent person, may be voted by an administrator, executor, court appointed
guardian or conservator, either in person or by proxy without a transfer of such
shares into the name of such administrator, executor, court appointed guardian
or conservator. Shares standing in the name of a trustee may be voted by him,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him without a transfer of such shares into his name.
Shares standing in the name of a receiver may be voted by such receiver,
and shares held by or under the control of a receiver may be voted by such
receiver without the transfer thereof into the trustee name if authority so to
do be contained in an appropriate order of the court by which such receiver was
appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Shares of its own stock belonging to this corporation, nor shares of its
own stock held by it in a fiduciary capacity, nor shares of its own stock held
by another corporation if the majority of shares entitled to vote for the
election of directors of such corporation is held by this corporation may be
voted, directly or indirectly, at any meeting, and shall not be counted in
determining the total number of outstanding shares at any given time.
Redeemable shares which have been called for redemption shall not be
entitled to vote on any matter and shall not be deemed outstanding shares on and
after the date on which written notice of redemption has been mailed to
shareholders and a sum sufficient to redeem such shares has been deposited with
a bank or trust company with irrevocable instruction and authority to pay the
redemption price to the holders of the shares upon surrender of certificates
therefor.
Section 2.13 Informal Action by Shareholders. Any action required or
permitted to be taken at a meeting of the shareholders may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the shareholders entitled to vote with respect to the subject
matter thereof.
-3-
<PAGE>
Section 2.14 Voting by Ballot. Voting on any question or in any election
may be by voice vote unless the presiding officer shall order or any shareholder
shall demand that voting be by ballot.
ARTICLE III
BOARD OF DIRECTORS
Section 3.1 General Powers. The business and affairs of the corporation
shall be managed by its Board of Directors.
Section 3.2 Performance of Duties. A director of the corporation shall
perform his duties as a director, including his duties as a member of any
committee of the board upon which he may serve, in good faith, in a manner he
reasonably believes to be in the best interests of the corporation, and with
such case as an ordinarily prudent person in a like position would use under
similar circumstances. In performing his duties, a director shall be entitled to
rely on the information, opinions, reports, or statements, including financial
statements and other financial data, in each case prepared or presented by
persons and groups listed in paragraphs (a), (b), and (c) of this Section 3.2;
but he shall not be considered to be acting in good faith if he has knowledge
concerning the matter in question that would cause such reliance to be
unwarranted. A person who so performs his duties shall not have any liability by
reason of being or having been director of the corporation. Those persons and
groups on whose information, opinions, reports, and statements a director is
entitled to rely upon are:
(a) One or more officers or employees of the corporation whom the
director reasonably believes to be reliable and competent in the matters
presented;
(b) Counsel, public accountants, or other persons as to matters which
the director reasonably believes to be within such persons' professional or
expert competence; or
(c) A committee of the board upon which he does not serve, duly
designated in accordance with the provision of the Articles of
Incorporation or the Bylaws, as to the matters within its designated
authority, which committee the director reasonably believes to merit
confidence .
Section 3.3 Number, Tenure and Qualifications. The number of directors of
the corporation shall be three (3). The number of directors may be changed by
the Board from time to time. Each director shall hold office until the next
annual meeting of shareholders and until his successor sha ll have been elected
and qualified. Directors need not be residents of the State of Colorado or
shareholders of the corporation.
When all outstanding shares of the corporation shall become owned
beneficially or of record by one shareholder, the corporation shall elect at
least one director. When the shares of the corporation shall become owned
beneficially or of record by two shareholders, the corporation shall ele ct at
least two directors. When the shares of the corporation shall become owned
beneficially or of record by three or more shareholders, the corporation shall
elect at least three directors.
There shall be a Chairman of the Board, who has been elected from among the
directors. He shall preside at all meetings of the shareholders and of the Board
of Directors. He shall have such other powers and duties as may be prescribed by
the Board of Directors.
-4-
<PAGE>
Section 3.4 Regular Meetings. A regular meeting of the Board of Directors
shall be held without other notice than this bylaw immediately after, and at the
same place as, the annual meeting of shareholders. The Board of Directors may
provide, by resolution, the time and place, either wit hin or without the State
of Colorado, for the holding of additional regular meetings without other notice
than such resolution.
Section 3.5 Special Meetings. Special meetings of the Board of Directors
may be called by or at the request of the President or any two directors. The
person or persons authorized to call special meetings of the Board of Directors
may fix any place, either within or without the State o f Colorado, as the place
for holding any special meeting of the Board of Directors called by them.
Section 3.6 Notice. Notice of any special meeting of directors shall be
given as follows:
By mail to each director at his business address at least three days prior
to the meeting; or
By personal delivery or telegram at least twenty-four hours prior to the
meeting to the business address of each director, or in the event such notice is
given on a Saturday, Sunday or holiday, to the residence address of each
director. If mailed, such notice shall be deemed to be delivered when deposited
in the United States mail, so addressed, with postage thereon prepaid. If notice
be given by telegram, such notice shall be deemed to be delivered when the
telegram is delivered to the telegraph company. Any director may waive notice of
any meeting. The attendance of a director at any meeting shall constitute a
waiver of notice of such meeting, except where a director attends a meeting for
the express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the Board
of Directors need be specified in the notice or waiver of notice of such
meeting.
Section 3.7 Quorum. A majority of the number of directors fixed by or
pursuant to Section 3.3 of this Article III shall constitute a quorum for the
transaction of business at any meeting of the Board of Directors, but if less
than such majority is present at a meeting, a majority of the directors present
may adjourn the meeting from time to time without further notice.
Section 3.8 Manner of Acting. Except as otherwise required by law or by the
Articles of Incorporation, the act of the majority of the directors present at a
meeting at which a quorum is present shall be the act of the Board of Directors.
Section 3.9 Informal Action by Directors. Any action required or permitted
to be taken by the Board of Directors or by a committee thereof at a meeting may
be taken without a meeting if a consent in writing, setting forth the action so
taken, shall be signed by all of the directors or al l of the committee members
entitled to vote with respect to the subject matter thereof.
Section 3.10 Participation by Electronic Means. Any members of the Board of
Directors or any committee designated by such Board may participate in a meeting
of the Board of Directors or committee by means of telephone conference or
similar communications equipment by which all persons p articipating in the
meeting can hear each other at the same time. Such participation shall
constitute presence in person at the meeting.
Section 3.11 Vacancies. Any vacancy occurring in the Board of Directors may
be filled by the affirmative vote of a majority of the remaining directors
though less than a quorum of the Board of Directors. A director elected to fill
a vacancy shall be elected for the unexpired term of his predecessor in office.
Any directorship to be filled by reason of an increase in the number of
directors may be filled by election by the Board of Directors for a term of
office continuing only until the next election of directors by the shareholders.
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Section 3.12 Resignation. Any director of the corporation may resign at any
time by giving written notice to the president or the secretary of the
corporation. The resignation of any director shall take effect upon receipt of
notice thereof or at such later time as shall be specified in such notice; and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective. When one or more directors shall resign from
the board, effective at a future date, a majority of the directors then in
office, including those who have so resigned, shall have power to fill such
vacancy or vacancies, the vote thereon to take effect when such resignation or
resignations shall become effective.
Section 3.13 Removal. Any director or directors of the corporation may be
removed at any time, with or without cause, in the manner provided in the
Colorado Corporation Code.
Section 3.14 Committees. By resolution adopted by a majority of the Board
of Directors, the directors may designate two or more directors to constitute a
committee, any of which shall have such authority in the management of the
corporation as the Board of Directors shall designate and a s shall be
prescribed by the Colorado Corporation Code.
Section 3.15 Compensation. By resolution of the Board of Directors and
irrespective of any personal interest of any of the members, each director may
be paid his expenses, if any, of attendance at each meeting of the Board of
Directors, and may be paid a stated salary as director or a fi xed sum for
attendance at each meeting of the Board of Directors or both. No such payment
shall preclude any director from serving the corporation in any other capacity
and receiving compensation therefor.
Section 3.16 Presumption of Assent. A director of the corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
his dissent shall be entered in the minutes of the meeti ng or unless he shall
file his written dissent to such action with the person acting as the Secretary
of the meeting before the adjournment thereof or shall forward such dissent by
registered mail to the Secretary of the corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a director
who voted in favor of such action.
ARTICLE IV
OFFICERS
Section 4.1 Number. The officers of the corporation shall be a President, a
Vice President, a Secretary, and a Treasurer, each of whom shall be elected by
the Board of Directors. Such other officers and assistant officers as may be
deemed necessary may be elected or appointed by the Boa rd of Directors. Any two
or more offices may be held by the same person, except the offices of President
and Secretary.
Section 4.2 Election and Term of Office. The officers of the corporation to
be elected by the Board of Directors shall be elected annually by the Board of
Directors at the first meeting of the Board of Directors held after the annual
meeting of the shareholders. If the election of offic ers shall not be held at
such meeting, such election shall be held as soon thereafter as practicable.
Each officer shall hold office until his successor shall have been duly elected
and shall have qualified or until his death or until he shall resign or shall
have been removed in the manner hereinafter provided.
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Section 4.3 Removal. Any officer or agent may be removed by the Board of
Directors whenever in its judgment, the best interests of the corporation will
be served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Election or ap pointment of an officer
or agent shall not of itself create contract rights.
Section 4.4 Vacancies. Any vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the Board
of Directors for the unexpired portion of the term.
Section 4.5 President. The President shall be the chief executive officer
of the corporation and, subject to the control of the Board of Directors, shall
in general supervise and control all of the business and affairs of the
corporation. He shall, when present, and in the absence of the Chairman of the
Board, preside at all meetings of the shareholders and of the Board of
Directors. He may sign, with the Secretary or any other proper officer of the
corporation thereunto authorized by the Board of Directors, certificates for
shares of the corporation and deeds, mortgages, bonds, contracts, or other
instruments which the Board of Directors has authorized to be executed, except
in cases where the signing and execution thereof shall be expressly delegated by
the Board of Directors or by these Bylaws to some other officer or agent of the
corporation, or shall be required by law to be otherwise signed or executed; and
in general shall perform all duties incident to the office of President and such
other duties as may be prescribed by the Board of Directors from time to time.
Section 4.6 Vice President. If elected or appointed by the Board of
Directors, the Vice President (or in the event there be more than one vice
president, the vice presidents in the order designated at the time of their
election, or in the absence of any designation, then in the order of their
election) shall in the absence of the President or in the event of his death,
inability or refusal to act, perform all duties of the President, and when so
acting, shall have all the powers of and be subject to all the restrictions upon
the President. Any Vice President may sign, with the Treasurer or an Assistant
Treasurer or the Secretary or an Assistant Secretary, certificates for shares of
the corporation; and shall perform such other duties as from time to time may be
assigned to him by the President or by the Board of Directors.
Section 4.7 Secretary. The Secretary shall: (a) keep the minutes of the
proceedings of the shareholders and of the Board of Directors in one or more
books provided for that purpose; (b) see that all notices are duly given in
accordance with the provisions of these Bylaws or as required by law; (c) be
custodian of the corporate records and of the seal of the corporation and see
that the seal of the corporation is affixed to all documents the execution of
which on behalf of the corporation under its seal is duly authorized; (d) keep a
register of the post office address of each shareholder which shall be furnished
to the Secretary by such shareholder; (e) sign with the Chairman or Vice
Chairman of the Board of Directors, or the President or Vice President,
certificates for shares of the corporation, the issuance of which shall have
been authorized by resolution of the Board of Directors; (f) have general charge
of the stock transfer books of the corporation; and (g) in general perform all
duties incident to the office of Secretary and such other duties as from time to
time may be assigned to him by the President or by the Board of Directors.
Section 4.8 Treasurer. The Treasurer shall: (a) have charge and custody of
and be responsible for all funds and securities of the corporation; (b) receive
and give receipts for moneys due and payable to the corporation from any source
whatsoever, and deposit all such moneys in the name of the corporation in such
banks, trust companies or other depositories as shall be selected in accordance
with the provisions of Article V of these Bylaws; and (c) in general perform all
of the duties incident to the office of Treasurer and such other duties as from
time to time may be assigned to him by the President or by the Board of
Directors.
Section 4.9 Assistant Secretaries and Assistant Treasurers. The Assistant
Secretaries, when authorized by the Board of Directors, may sign with the
Chairman or Vice Chairman of the Board of Directors or the President or a Vice
President certificates for shares of the corporation the issuance of which shall
have been authorized by a resolution of the Board of Directors. The Assistant
Secretaries and Assistant Treasurers, in general, shall perform such duties as
shall be assigned to them by the Secretary or the Treasurer, respectively, or by
the President or the Board of Directors.
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Section 4.10 Bonds. If the Board of Directors by resolution shall so
require, any officer or agent of the corporation shall give bond to the
corporation in such amount and with such surety as the Board of Directors may
deem sufficient, conditioned upon the faithful performance of their r espective
duties and offices.
Section 4.11 Salaries. The salaries of the officers shall be fixed from
time to time by the Board of Directors and no officer shall be prevented from
receiving such salary by reason of the fact that he or she is also a director of
the corporation.
ARTICLE V
CONTRACTS, LOANS, CHECKS, AND DEPOSITS
Section 5.1 Contracts. The Board of Directors may authorize an officer or
officers, agent or agents, to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the corporation, and such authority
may be general or confined to specific instances.
Section 5.2 Loans. No loans shall be contracted on behalf of the
corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the Board of Directors. Such authority may be
general or confined to specific instances.
Section 5.3 Checks, Drafts, etc. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the corporation, shall be signed by such officer or officers, agent or agents of
the corporation and in such manner as shall from t ime to time be determined by
resolution of the Board of Directors.
Section 5.4 Deposits. All funds of the corporation not otherwise employed
shall be deposited from time to time to the credit of the corporation in such
banks, trust companies or other depositories as the Board of Directors may
select.
ARTICLE VI
SHARES, CERTIFICATES FOR SHARES AND TRANSFER OF SHARES
Section 6.1 Regulation. The Board of Directors may make such rules and
regulations as it may deem appropriate concerning the issuance, transfer and
registration of certificates for shares of the corporation, including the
appointment of transfer agents and registrars.
Section 6.2 Certificates for Shares. Certificates representing shares of
the corporation shall be respectively numbered serially for each class of shares
or series thereof, as they are issued, shall be impressed with the corporate
seal or a facsimile thereof, and shall be signed by the Chairman or Vice
Chairman of the Board of Directors or by the President or a Vice President and
by the Treasurer or an Assistant Treasurer or by the Secretary or an Assistant
Secretary; provided that such signatures may be facsimile if the certificate is
countersigned by a transfer agent, or registered by a registrar other than the
corporation itself or its employee. Each certificate shall state the name of the
corporation, the fact that the corporation is organized or incorporated under
the laws of the State of Colorado, the name of the person to whom issued, the
date of issue, the class (or series of any class), the number of shares
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represented thereby and the par value of the shares represented thereby or a
statement that such shares are without par value. A statement of the
designations, preferences, qualifications, limitations, restrictions and special
or relative rights of the shares of each class shall be set forth in full or
summarized on the face or back of the certificates which the corporation shall
issue, or in lieu thereof, the certificate may set forth that such a statement
or summary will be furnished to any shareholder upon request without charge.
Each certificate shall be otherwise in such form as may be prescribed by the
Board of Directors and as shall conform to the rules of any stock exchange on
which the shares may be listed.
The corporation shall not issue certificates representing fractional shares
and shall not be obligated to make any transfers creating a fractional interest
in a share of stock. The corporation may, but shall not be obligated to, issue a
scrip in lieu of any fractional shares, such scrip to have terms and conditions
specified by the Board of Directors.
Section 6.3 Cancellation of Certificates. All certificates surrendered to
the corporation for transfer shall be cancelled and no new certificates shall be
issued in lieu thereof until the former certificate for a like number of shares
shall have been surrendered and cancelled, except as herein provided with
respect to lost, stolen or destroyed certificates.
Section 6.4 Lost, Stolen or Destroyed Certificates. Any shareholder
claiming that his certificate for shares is lost, stolen or destroyed may make
an affidavit or affirmation of that fact and lodge the same with the Secretary
of the corporation, accompanied by a signed application for a new certificate.
Thereupon, and upon the giving of a satisfactory bond of indemnity to the
corporation not exceeding an amount double the value of the shares as
represented by such certificate (the necessity for such bond and the amount
required to be determined by the President and Treasurer of the corporation), a
new certificate may be issued of the same tenor and representing the same
number, class and series of shares as were represented by the certificate
alleged to be lost, stolen or destroyed.
Section 6.5 Transfer of Shares. Subject to the terms of any shareholder
agreement relating to the transfer of shares or other transfer restrictions
contained in the Articles of Incorporation or authorized therein, shares of the
corporation shall be transferable on the books of the corporation by the holder
thereof in person or by his duly authorized attorney, upon the surrender and
cancellation of a certificate or certificates for a like number of shares. Upon
presentation and surrender of a certificate for shares properly endorsed and
payment of all taxes therefor, the transferee shall be entitled to a new
certificate or certificates in lieu thereof. As against the corporation, a
transfer of shares can be made only on the books of the corporation and in the
manner hereinabove provided, and the corporation shall be entitled to treat the
holder of record of any share as the owner thereof and shall not be bound to
recognize any equitable or other claim to or interest in such share on the part
of any other person, whether or not it shall have express or other notice
thereof, save as expressly provided by the statutes of the State of Colorado.
ARTICLE VII
FISCAL YEAR
The fiscal year of the corporation shall end on the last day of December in
each calendar year.
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ARTICLE VIII
DIVIDENDS
The Board of Directors may from time to time declare, and the corporation
may pay, dividends on its outstanding shares in the manner and upon the terms
and conditions provided by law and its Articles of Incorporation.
ARTICLE IX
CORPORATE SEAL
The Board of Directors shall provide a corporate seal which shall be
circular in form and shall have inscribed thereon the name of the corporation
and the state of incorporation and the words "Corporate Seal."
ARTICLE X
WAIVER OF NOTICE
Whenever any notice is required to be given to under the provisions of
these Bylaws or under the provisions of the Articles of Incorporation or under
the provisions of the Colorado Corporation Code, or otherwise, a waiver thereof
in writing, signed by the person or persons entitled to such notice, whether
before or after the event or other circumstance requiring such notice, shall be
deemed equivalent to the giving of such notice.
ARTICLE XI
AMENDMENTS
These Bylaws may be altered, amended or repealed and new Bylaws may be
adopted by a majority of the directors present at any meeting of the Board of
Directors of the corporation at which a quorum is present.
ARTICLE XII
EXECUTIVE COMMITTEE
Section 12.1 Appointment. The Board of Directors by resolution adopted by a
majority of the full Board, may designate two or more of its members to
constitute an Executive Committee. The designation of such Committee and the
delegation thereto of authority shall not operate to relieve t he Board of
Directors, or any member thereof, of any responsibility imposed by law.
Section 12.2. Authority. The Executive Committee, when the Board of
Directors is not in session shall have and may exercise all of the authority of
the Board of Directors except to the extent, if any, that such authority shall
be limited by the resolution appointing the Executive Committee and except also
that the Executive Committee shall not have the authority of the Board of
Directors in reference to amending the Articles of Incorporation, adopting a
plan of merger or consolidation, recommending to the shareholders the sale,
lease or other disposition of all or substantially all of the property and
assets of the corporation otherwise than in the usual and regular course of its
business, recommending to the shareholders a voluntary dissolution of the
corporation or a revocation thereof, or amending the Bylaws of the corporation.
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Section 12.3 Tenure and Qualifications. Each member of the Executive
Committee shall hold office until the next regular annual meeting of the Board
of Directors following his designation and until his successor is designated as
a member of the Executive Committee and is elected and quali fied.
Section 12.4 Meetings. Regular meetings of the Executive Committee may be
held without notice at such time and places as the Executive Committee may fix
from time to time by resolution. Special meetings of the Executive Committee may
be called by any member thereof upon not less than one day's notice stating the
place, date and hour of the meeting, which notice may be written or oral, and if
mailed, shall be deemed to be delivered when deposited in the United States mail
addressed to the member of the Executive Committee at his business address. Any
member of the Executive Committee may waive notice of any meeting and no notice
of any meeting need be given to any member thereof who attends in person. The
notice of a meeting of the Executive Committee need not state the business
proposed to be transacted at the meeting.
Section 12.5 Quorum. A majority of the members of the Executive Committee
shall constitute a quorum for the transaction of business at any meeting
thereof, and action of the Executive Committee must be authorized by the
affirmative vote of a majority of the members present at a meeting a t which a
quorum is present.
Section 12.6 Informal Action by Executive Committee. Any action required or
permitted to be taken by the Executive Committee at a meeting may be taken
without a meeting if a consent in writing, setting forth the action so taken,
shall be signed by all of the directors entitled to vote wi th respect to the
subject matter thereof.
Section 12.7 Vacancies. Any vacancy in the Executive Committee may be
filled by a resolution adopted by a majority of the full Board of Directors.
Section 12.8 Resignations and Removal. Any member of the Executive
Committee may be removed at any time with or without cause by resolution adopted
by a majority of the full Board of Directors. Any member of the Executive
Committee may resign from the Executive Committee at any time by giving written
notice to the President or Secretary of the corporation, and unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
Section 12.9 Procedure. The Executive Committee shall elect a presiding
officer from its members and may fix its own rules of procedure which shall not
be inconsistent with these Bylaws. It shall keep regular minutes of its
proceedings and report the same to the Board of Directors for i ts information
at the meeting thereof held next after the proceedings shall have been taken.
ARTICLE XIII
EMERGENCY BYLAWS
The Emergency Bylaws provided in this Article XIII shall be operative
during any emergency in the conduct of the business of the corporation resulting
from an attack on the United States or any nuclear or atomic disaster,
notwithstanding any different provision in the preceding articles of the Bylaws
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or in the Articles of Incorporation of the corporation or in the Colorado
Corporation Code. To the extent not inconsistent with the provisions of this
Article, the Bylaws provided in the preceding articles shall remain in effect
during such emergency and upon its termination the Emergency Bylaws shall cease
to be operative.
During any such emergency:
(a) A meeting of the Board of Directors may be called by any officer
or director of the corporation. Notice of the time and place of the meeting
shall be given by the person calling the meeting to such of the directors
as it may be feasible to reach by any available means of communication.
Such notice shall be given at such time in advance of the meeting as
circumstances permit in the judgment of the person calling the meeting.
(b) At any such meeting of the Board of Directors, a quorum shall
consist of a majority of the board of directors in attendance at such
meeting.
(c) The Board of Directors, either before or during any such
emergency, may, effective in the emergency, change the principal office or
designate several alternative principal offices or regional offices, or
authorize the officers so to do.
(d) The Board of Directors, either before or during any such
emergency, may provide, from time to time to modify, lines of succession in
the event that during such an emergency any or all officers or agents of
the corporation shall for any reason be rendered incapable of disc harging
their duties.
(e) No officer, director or employee acting in accordance with these
Emergency Bylaws shall be liable except for willful misconduct.
(f) These Emergency Bylaws shall be subject to repeal or change by
further action of the Board of Directors or by action of the shareholders,
but no such repeal or change shall modify the provisions of the next
preceding paragraph with regard to action taken prior to the time of such
repeal or change. Any amendment of these Emergency Bylaws may make any
further or different provision that may be practical and necessary for the
circumstances of the emergency.
CERTIFICATE
I hereby certify the foregoing Bylaws, consisting of pages, including this
page, constitute the Bylaws of Technical Environment Solutions, Inc., adopted by
the Board of Directors of the Corporation as of this 30th day of June, 1994.
/s/ Inga Haake
-----------------------------------
Inga Haake, Secretary
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CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form 10SB of our
report dated November 25, 1997, relating to the financial statements of
Technical Environment Solutions, Inc. as of December 31, 1996.
James E. Scheifley & Associates, P.C.
Certified Public Accountants
February 9, 1998
Englewood, Colorado
