U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1998
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ____________ to ______________
Commission file number 0-23779
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TECHNICAL ENVIRONMENT SOLUTIONS, INC.
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(Exact name of small business issuer as specified in its charter)
Colorado 98-0149351
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
C/O TES GmbH, 25 Impler Strasse, Munchen, 81371, Germany
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(Address of principal executive office)
011 49 89 720 15 100
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(Issuer's telephone number)
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
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Number of shares outstanding of the issuer's Common Stock:
Class Outstanding at June 30, 1998
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Common Stock, $0.01 par value 1,741,610
<PAGE>
Technical Environment Solutions, Inc.
INDEX
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Page
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
June 30, 1998 3
Consolidated Statements of Operations
for the three months ended June 30, 1997 and 1998
and six months ended June 30, 1997 and 1998 4
Consolidated Statements of Cash Flow
and six months ended June 30, 1997 and 1998 5
Notes to Unaudited Financial Statements 6
Item 2. Management's Discussion and Analysis or
Plan of Operations 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 8
SIGNATURES 8
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<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
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Technical Environment Solutions, Inc.
Consolidated Balance Sheet
(Unaudited)
June 30, June 30,
1998 1998
ASSETS
(DM) (US$)
Current Assets
Cash and equivalents 251,794 $ 139,630
Accounts receivable, trade 79,706 44,200
Accounts receivable - related party -- --
Note receivable - current portion 10,000 5,545
Prepaid expenses 23,400 12,976
----------- -----------
Total current assets 364,900 202,351
Property and equipment, at cost, net of
accumulated depreciation of DM 87,762 178,872 99,191
Investments 50,974 28,267
Note receivable - non-current 40,000 22,182
Other assets 440,055 244,028
----------- -----------
1,074,801 $ 596,019
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes payable - others 80,000 $ 44,364
Accounts Payable 88,818 49,252
Accounts payable - related party 15,862 8,796
Accrued expenses 97,704 54,181
----------- -----------
Total current liabilities 282,384 156,593
Loans from shareholders 230,900 128,043
Shareholders' Equity:
Common stock, no par value
20,000,000 shares authorized
1,741,610 shares issued and outstanding 2,260,155 1,253,344
Accumulated deficit (1,698,638) (941,961)
----------- -----------
561,517 311,383
----------- -----------
1,074,801 596,019
=========== ===========
See accompanying notes to consolidated financial statements.
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<TABLE>
<CAPTION>
Technical Environment Solutions, Inc.
Consolidated Statements of Operations
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
1997 1998 1997 1998 1998
----------- ----------- ----------- ----------- -----------
DM DM DM DM US$
<S> <C> <C> <C> <C> <C>
Sales 81,000 220,306 194,850 365,072 $ 202,447
Sales to related party -- 13,821 -- 44,430 24,638
----------- ----------- ----------- ----------- -----------
81,000 234,127 194,850 409,502 227,085
Cost of operations 34,591 54,506 94,123 99,472 55,161
----------- ----------- ----------- ----------- -----------
Gross profit 46,409 179,621 100,727 310,030 171,924
Other costs and expenses:
General and administrative 72,758 374,056 190,088 655,376 363,431
----------- ----------- ----------- ----------- -----------
(Loss) from operations (26,349) (194,435) (89,361) (345,346) (191,508)
Other income and (expense):
Interest income 4,459 2,889 4,459 3,127 1,734
Losses of unconsolidated subsidiary -- 7,504 -- (8,026) (4,451)
Interest expense (13,521 (9,413) (19,305) (15,023) (8,331)
----------- ----------- ----------- ----------- -----------
(9,062) 980 (14,846) (19,922) (11,048)
(Loss) before income taxes (35,411) (193,455) (104,207) (365,268) (202,555)
Provision for income taxes (1,229) 946 1,396 1,621 899
----------- ----------- ----------- ----------- -----------
Net (loss) (34,182) (194,401) (105,603) (366,889) (203,454)
=========== =========== =========== =========== ===========
Earnings (loss) per share:
Net income (loss) (0.02) (0.11) (0.07) (0.21) (0.12)
----------- ----------- ----------- ----------- -----------
Weight average shares outstanding 1,691,426 1,741,610 1,610,933 1,741,610 1,741,610
=========== =========== =========== =========== ===========
See accompanying notes to consolidated financial statements.
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</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Technical Environment Solutions, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended June 30,
-------------------------
1997 1998 1998
--------- --------- ---------
DM DM US$
<S> <C> <C> <C>
Net (loss) (105,603) (366,889) (203,454)
Adjustments to reconcile net income (loss) to
net cash (used in) operating activities:
Depreciation 14,568 29,340 16,270
Losses of unconsolidated subsidiary -- 8,026 4,451
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 41,532 351,199 194,754
(Increase) decrease in prepaid expenses (2,313) 12,954 7,183
(Increase) decrease in other assets (28,062) (99,711) (55,294)
Increase (decrease) in accounts payable and
accrued expenses (37,251) (44,648) (24,759)
---------- ---------- ----------
Total adjustments (11,526) 257,160 142,605
---------- ---------- ----------
Net cash (used in) operating activities (117,129) (109,729) (60,849)
---------- ---------- ----------
Cash flows from investing activities:
Advance to affiliate -- (49,000) (27,172)
Deposit on building purchase (300,591) -- --
Purchase of fixed assets (12,522) (89,846) (49,823)
---------- ---------- ----------
Net cash provided by (used in) investing activities (313,113) (138,846) (76,996)
---------- ---------- ----------
Cash flows from investing activities:
Proceeds from sale of common stock 1,992,742 -- --
Advances from stockholders 46,267 -- --
Repayment of stockholder loans -- (3,400) (1,885)
Repayment of notes payable - bank (1,175) (197,798) (109,687)
Repayment of notes payable - other (10,000) (10,000) (5,545)
---------- ---------- ----------
Net cash provided by
financing activities 2,027,834 (211,198) (117,118)
========== ========== ==========
Increase (decrease) in cash 1,597,592 (459,773) (254,962)
Cash and cash equivalents,
beginning of period 2,707 711,567 394,592
---------- ---------- ----------
Cash and cash equivalents, end of period 1,600,299 251,794 139,630
========== ========== ==========
See accompanying notes to consolidated financial statements.
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</TABLE>
<PAGE>
Technical Environment Solutions, Inc.
Notes to Unaudited Financing Statement
Basis of presentation
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions incorporated in Regulation 10-SB of the Securities and
Exchange commission. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring adjustments and accruals) considered necessary for a fair
presentation have been included.
The results of operations for the periods presented are not necessarily
indicative of the results to be expected for the full year. The accompanying
financial statements should be read in conjunction with the Company's financial
statements for the year ended December 31, 1997, included elsewhere herein.
Basic loss per share was computed using the weighted average number of common
shares outstanding.
During 1995, the company sold 210,000 DM 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,
100,000 DM plus accrued interest was repaid to certain of the investors. An
additional 10,000 DM of the debentures plus accrued interest was repaid during
the period ended June 30, 1998. Additionally, the Company paid 197,798DM against
bank debt prior to its maturity.
During February 1998, the company acquired a 49% ownership interest in
T-Cycle Computer Service and Verwertungs GmbH, a German company engaged in
dismantling and disposing of surplus electronic equipment in Germany. The
Company paid 49,000 DM for its investment in T-Cycle and will account for the
investment using the equity method of accounting. Accordingly, the company has
recognized its share of losses of T-Cycle for the period ended June 30, 1998,
which amounted to 8,025 DM, as a reduction of its investment in the Company.
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Result
of Operations
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Three Months Ended June 30, 1998, Compared to Three Months Ended June 30, 1997
Sales for the three month period ended June 30, 1998, were 220,306 DM, an
increase of 139,306 DM, or 172.0%, as compared to the three month period ended
June 30, 1997. The principal reason for this increase was that the Company was
the opening of the Landsberg facility. Cost of operations for the three month
period ended June 30, 1998, was 54,506 DM, an increase of 19,915 DM, or 57.6%,
as compared to the three month period ended June 30, 1997. This increase was
primarily due to increased operating activities. Gross profit for the three
month period ended June 30, 1998, was 179,621 DM, an increase of 133,212 DM, or
287.0%, as compared to the three month period ended June 30, 1997.
General and administrative expenses for the three month period ended June
30, 1998, were 374,056 DM, an increase of 301,298 DM, or 414.1%, as compared to
the three month period ended June 30, 1997. This increase was principally due to
increased expenses associated with the opening of the Landsberg facility and an
increase in general and administrative expenses associated with the higher level
of activity as well as increased accounting and legal expenses resulting from
the Company's registration under the Securities Exchange Act of 1934.
As a result of these factors, the operating loss for the three month period
ended June 30, 1998, was (194,435 DM), an increase in the loss of 168,086 DM, or
637.9%, as compared to the three month period ended June 30, 1997. Further, for
the reasons noted above, the net loss for the three month period ended June 30,
1998, was (194,401 DM), an increase in the loss of 160,219 DM, or 468.7%, as
compared to the three month period ended June 30, 1997.
Six Months Ended June 30, 1998, Compared to Six Months Ended June 30, 1997
Sales for the six month period ended June 30, 1998, were 365,072 DM, an
increase of 170,222 DM, or 87.4%, as compared to the six month period ended June
30, 1997. The principal reasons for this increase were that the Company was able
to add new customers for its recycling business to replace customers lost in the
prior year and the opening of the Landsberg facility. Cost of operations for the
six month period ended June 30, 1998, was 99,472 DM, an increase of 5,349 DM, or
5.7%, as compared to the six month period ended June 30, 1997. This increase was
primarily due to increased operating activities. Gross profit for the six month
period ended June 30, 1998, was 310,030 DM, an increase of 209,303 DM, or
207.8%, as compared to the six month period ended June 30, 1997.
General and administrative expenses for the six month period ended June 30,
1998, were 655,376 DM, an increase of 465,288 DM, or 244.8%, as compared to the
six month period ended June 30, 1997. This increase was principally due to
increased expenses associated with the opening of the Landsberg facility and an
increase in general and administrative expenses associated with the higher level
of activity as well as increased accounting and legal expenses resulting from
the Company's registration under the Securities Exchange Act of 1934.
As a result of these factors, the operating loss for the six month period
ended June 30, 1998, was (345,346) DM, an increase in the loss of 255,985 DM, or
286.5%, as compared to the six month period ended June 30, 1997. Further, for
the reasons noted above, the net loss for the six month period ended June 30,
1998, was (366,889 DM), an increase in the loss of 261,286 DM, or 247.4%, as
compared to the six month period ended June 30, 1997.
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<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
a) Exhibits: No exhibits are filed with this Quarterly Report on
Form 10-QSB for the quarter ended June 30, 1998.
b) Reports on Form 8-K: There were no reports on Form 8-K filed during
the six months ended June 30, 1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: August 19, 1998
TECHNICAL ENVIRONMENT SOLUTIONS, INC.
/s/ Gerd Behrens
----------------------------------
Gerd Behrens
President and
Chief Operating Officer
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS AT AND FOR THE PERIOD ENDED JUNE 30, 1998 OF
TECHNICAL ENVIRONMENT SOLUTIONS, INC. AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1998
<CASH> 139,630
<SECURITIES> 0
<RECEIVABLES> 49,745
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 202,351
<PP&E> 99,191
<DEPRECIATION> 48,668
<TOTAL-ASSETS> 596,019
<CURRENT-LIABILITIES> 156,593
<BONDS> 0
0
0
<COMMON> 1,253,344
<OTHER-SE> (941,961)
<TOTAL-LIABILITY-AND-EQUITY> 596,019
<SALES> 202,447
<TOTAL-REVENUES> 227,085
<CGS> 55,161
<TOTAL-COSTS> 55,161
<OTHER-EXPENSES> 363,431
<LOSS-PROVISION> 4,451
<INTEREST-EXPENSE> 8,331
<INCOME-PRETAX> (202,555)
<INCOME-TAX> 899
<INCOME-CONTINUING> (203,454)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (203,454)
<EPS-PRIMARY> (0.12)
<EPS-DILUTED> 0
</TABLE>
