SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A-1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Act of 1934
Date of Report (earliest event reported) September 27, 1999
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TECHNICAL ENVIRONMENT SOLUTIONS, INC.
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(Exact name of registrant as specified in its charter)
Colorado 0-23779 98-0149351
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
25 Impler Strasse, Munich, 81371, Germany
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(Address of principal executive offices)
Registrant's telephone number, including area code 11-49-89-72015100
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(Former name or former address, if changed since last report.)
<PAGE>
Item. 2. ACQUISITION OR DISPOSITION OF ASSETS
At a special meeting of its shareholders duly called and held on July 30,
1999, the shareholders of Environmental Technologies and Software Solutions,
Inc., a Colorado corporation ("ENTECS"), approved (a) an agreement and plan of
merger between Technical Environment Solutions, Inc., a Colorado corporation
("TES"), TES Acquisition Corp., a Colorado corporation and a wholly owned
subsidiary of TES ("TES Acquisition"), and ENTECS, and (b) the merger of TES
Acquisition with and into ENTECS whereby, among other things, ENTECS would
become a wholly-owned subsidiary of TES and each outstanding share of ENTECS
common stock, no par value per share, would be converted, without any action on
the part of the shareholder, into the right to receive seven shares of TES
common stock. Based upon the number of shares of ENTECS common stock outstanding
immediately prior to the merger, the shareholders of ENTECS received an
aggregate of approximately 11,467,974 shares of TES common stock upon
consummation of the merger. As a result, ENTECS shareholders own approximately
68.7% of the TES common stock issued and outstanding after the merger. On August
10, 1999, the Articles of Merger by which the merger would be effected were
filed with the Colorado Secretary of State to evidence the consummation of the
merger.
Item. 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Businesses Acquired.
(i) The unaudited financial statements of Environmental
Technologies and Software Solutions, Inc. at June 30, 1999 and
for the six months ended June 30, 1999 and 1998 are set forth
in the pages attached hereto.
(ii) The audited financial statements of Environmental Technologies
and Software Solutions, Inc. at December 31, 1998 and for the
years ended December 31, 1998 and 1997 filed with the
Registration Statement on Form S-4/A dated June 23, 1999 and
incorporated herein by reference.
(b) Pro Forma Financial Information.
Unaudited pro forma combined condensed financial information giving effect
to the merger with Environmental Technologies and Software Solutions, Inc.
are set forth in the pages attached hereto.
(c) Exhibits
--------
Exhibit No. Description of Exhibits
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2.1 Agreement and Plan of Merger dated June 23, 1999 by and among
Environmental Technologies and Software Solutions, Inc., a
Colorado corporation, Technical Environment Solutions, Inc., a
Colorado corporation, and TES Acquisition Corp., a Colorado
corporation and a wholly-owned subsidiary of Technical
Environment Solutions, Inc. (filed with Registration Statement
on Form S-4 on June 23, 1999 and incorporated herein by
reference).
23.1 Consent of James E. Scheifley & Associates, P.C. (To be filed
by amendment)
2
<PAGE>
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 hereunto duly authorized.
TECHNICAL ENVIRONMENT SOLUTIONS, INC.
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(Registrant)
Date: September 27, 1999 /s/ Gerd Behrens
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(Signature)
Gerd Behrens, President
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(Printed name and Title)
3
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description of Exhibits
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2.1 Agreement and Plan of Merger dated June 23, 1999 by and among
Environmental Technologies and Software Solutions, Inc., a
Colorado corporation, Technical Environment Solutions, Inc., a
Colorado corporation, and TES Acquisition Corp., a Colorado
corporation and a wholly-owned subsidiary of Technical
Environment Solutions, Inc. (filed with Registration Statement on
Form S-4/A on June 23, 1999 and incorporated herein by
reference).
23.1 Consent of James E. Scheifley & Associates, P.C. (To be filed
by amendment)
<PAGE>
Enviornmental Technologies and Software Solutions, Inc.
A Development Stage Company
Consolidated Balance Sheet
June 30, 1999
ASSETS
------
DM US $
Current assets:
Cash and cash equivalents 979,593 517,127
Accounts receivable 58,225 30,737
Inventory 120,000 63,348
Prepaid expenses 20,007 10,562
---------- ----------
Total current assets 1,177,825 621,773
Property and equipment, at cost, net of
accumulated depreciation of DM 49,366 498,522 263,170
Due from affiliated company 640,200 337,960
License rights 1,039,376 548,686
---------- ----------
3,355,923 1,771,589
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable 296,081 156,300
Due to related parties 50,000 26,396
Accrued expenses 143,694 75,855
Accrued expenses - related parties 85,811 45,300
---------- ----------
Total current liabilities 575,586 303,851
Stockholders' equity:
Common stock, no par value,
50,000,000 shares authorized,
4,604,550 shares issued and outstanding 5,403,294 2,852,396
Deficit accumulated during development stage (2,622,957) (1,384,658)
---------- ----------
2,780,337 1,467,738
---------- ----------
3,355,923 1,771,589
========== ==========
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
Enviornmental Technologies and Software Solutions, Inc.
A Development Stage Company
Consolidated Statements of Operations
Three Months and Six Ended June 30, 1999
(Unaudited)
Inception
to
Three Months Ended June 30, Six Months Ended June 30, June 30,
1998 1999 1998 1999 1999 1999
DM DM DM DM US $ DM
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Revenues -- 62,344 -- 289,137 152,635 358,506
Other costs and expenses:
Cost of goods and services -- 2,925 -- 395,745 208,914 409,749
General and administrative 254,706 275,799 479,710 585,380 309,022 2,072,853
General and administrative - related parties -- (102,756) 87,500 217,656 114,900 522,812
---------- ---------- ---------- ---------- ---------- ----------
(Loss) from operations (254,706) (113,624) (567,210) (909,644) (480,201) (2,646,908)
Other income and (expense):
Interest income 4,391 7,431 4,391 16,206 8,555 28,055
Interest income - related parties -- (3,548) -- 7,515 3,967 15,030
Interest expense - related parties -- 794 -- (1,682) (888) (3,364)
Interest expense 1,305 1,179 1,305 (10,653) (5,624) (12,931)
---------- ---------- ---------- ---------- ---------- ----------
5,696 5,857 5,696 11,386 6,011 26,790
(Loss) before income taxes (249,010) (107,767) (561,514) (898,258) (474,190) (2,620,118)
Provision for income taxes -- (465) -- (1,367) (722) (2,839)
---------- ---------- ---------- ---------- ---------- ----------
Net (loss) (249,010) (108,232) (561,514) (899,625) (474,912) (2,622,957)
========== ========== ========== ========== ========== ==========
Earnings (loss) per share:
Basic and diluted (loss) per share (0.18) (0.07) (0.43) (0.56) (0.30) (1.99)
========== ========== ========== ========== ========== ==========
Weighted average shares outstanding 1,358,640 1,629,582 1,309,086 1,596,549 1,596,549 1,315,876
========== ========== ========== ========== ========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Enviornmental Technologies and Software Solutions, Inc.
A Development Stage Company
Consolidated Statement of Cash Flows
Six Months Ended June 30, 1999
(Unaudited)
Inception
to
June 30,
1998 1999 1999 1999
DM DM US $ DM
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net (loss) (561,514) (899,625) (474,912) (2,622,957)
Adjustments to reconcile net income (loss) to net
cash (used in) operating activities:
Depreciation and amortization 31,875 108,358 57,202 364,990
Interest added to affiliate loan -- -- -- 83,213
Loss on transfer of machinery -- -- -- 16,556
Expenses incurred by affiliate -- -- -- 53,763
Expenses added to related party loans -- -- -- 87,500
Common stock issued for services -- -- -- 116,581
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (4,442) (55,995) (29,560) (58,225)
(Increase) decrease in prepaid expenses (13,490) 36,145 19,081 (20,007)
(Increase) decrease in deposits 5,400 -- -- --
Increase (decrease) in accounts payable and
accrued expenses 373,304 100,381 52,991 525,586
---------- ---------- ---------- ----------
Total adjustments 392,647 188,889 99,714 1,169,957
---------- ---------- ---------- ----------
Net cash (used in) operating activities (168,867) (710,736) (375,197) (1,453,000)
---------- ---------- ---------- ----------
Cash flows from investing activities:
Purchase of license rights -- -- -- (593,750)
Advance to affiliated company (255,339) (351,531) (185,573) (721,731)
Purchase of fixed assets (357,624) 21,312 11,251 (684,444)
---------- ---------- ---------- ----------
Net cash provided by (used in) investing activities (612,963) (330,219) (174,322) (1,999,925)
---------- ---------- ---------- ----------
Cash flows from financing activities:
Proceeds from loan from affiliate -- -- -- 27,000
Repayments to affiliated companies (418,695) -- -- (418,695)
Repayments to related parties (512,500) (175,000) (92,382) (462,500)
Proceeds from sale of common stock 2,593,152 1,802,468 951,522 5,286,713
---------- ---------- ---------- ----------
Net cash provided by
financing activities 1,661,957 1,627,468 859,140 4,432,518
---------- ---------- ---------- ----------
Increase (decrease) in cash 880,127 586,513 309,620 979,593
Cash and cash equivalents,
beginning of period 226,220 393,080 207,507 --
---------- ---------- ---------- ----------
Cash and cash equivalents,
end of period 1,106,347 979,593 517,127 979,593
========== ========== ========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
Environmental Technologies and Software Solutions, Inc.
Notes to Unaudited Financial Statements
June 30, 1999
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, 1998.
Basic loss per share was computed using the weighted average number of common
shares outstanding.
During the period ended June 30, 1999, the Company loaned DM 351,531 to a
company controlled by the Company's principal shareholder. The loans are due in
2009 and bear interest at 6% per annum.
During the period ended June 30, 1999 the Company continued the private offering
of its common stock to a limited group of investors in Germany. The Company sold
174,100 shares of its common stock for gross proceeds of DM 1,759,452 and
incurred direct expenses of the offering amounting to DM 443,404. The shares
were offered at a price of $7.00 US per share, however, 145,300 of the shares
were purchased at $5.00 to $5.81 per share or a discount of approximately 17% by
a German investment firm and an individual. The discount has been included as a
direct cost of the offering. Additionally, the Company repurchased 1,250 shares
at a price of DM 15,596 from an investor during the quarter ended June 30, 1999.
The shares will be cancelled by the Company.
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
The following unaudited pro forma condensed combined statement of
operations of Technical Environment Solutions, Inc. gives effect to the proposed
merger of TES and ENTECS as if such transaction occurred at the beginning of the
period presented. The unaudited pro forma condensed combined statement of
operations for the six months ended June 30,1999 is derived from the unaudited
audited statements of operations of TES and ENTECS. .
The unaudited pro forma condensed combined balance sheet at June 30, 1999
gives effect to the proposed Merger of TES and ENTECS as if such transaction
occurred on June 30, 1999. The unaudited pro forma condensed combined balance
sheet is derived from the historical balance sheet of TES and ENTECS as of June
30, 1999.
The unaudited pro forma condensed combined financial data do not reflect
the effects of any anticipated changes to be made by TES in its operations from
the historical operations, are presented for informational purposes only and
should not be construed to be indicating (i) the results of operations or the
financial position of TES that actually would have occurred had the proposed
merger been consummated as of the dates indicated or (ii) the results of
operation or the financial position of TES in the future.
The following pro forma condensed combined financial data and notes are
qualified in their entirety by reference to, and should be read in conjunction
with, "Management's Discussion and Analysis of Financial Condition and Results
of Operation," the consolidated financial statements and notes thereto of TES
and ENTECS and other historical information included elsewhere in this filing.
<PAGE>
<TABLE>
<CAPTION>
Technical Environment Solutions, Inc./
Environmental Technologies and Software Solutions, Inc.
Pro Forma Combined Condensed Balance Sheet
As of June 30, 1999
(Unaudited)
Pro Forma Pro Forma
TES ENTECS Adjustments Combined
DM DM DM DM
Assets ---------- ----------- ---------- ----------
Current Assets:
<S> <C> <C> <C>
Cash 165,229 979,593 -- 1,144,822
Accounts receivable 23,477 58,225 -- 81,702
Note receivable - current 10,000 -- 10,000
Inventory -- 120,000 120,000
Prepaid expenses 3,200 20,007 23,207
---------- ---------- ---------- ----------
Total current assets 201,906 1,177,825 -- 1,379,731
Property and equipment, net 158,024 498,522 -- 656,546
Investments 10,000 -- -- 10,000
Note receivable - non current 40,000 -- -- 40,000
Intangible assets -- 1,039,376 1,039,376
Due from affiliated company -- 640,200 (640,200) (1)
Other assets 526,500 -- -- 526,500
---------- ---------- ---------- ----------
936,430 3,355,923 (640,200) 3,652,153
========== ========== ========== ==========
Liabilities and stockholders' equity
Current liabilities:
Notes payable - banks 49,395 -- -- 49,395
Notes payable - others 25,000 -- -- 25,000
Accounts payable 73,752 296,081 -- 369,833
Accounts payable - related party 15,862 135,811 -- 151,673
Other current liabilities 314,378 143,694 -- 458,072
---------- ---------- ---------- ----------
Total current liabilities 478,387 575,586 -- 1,053,973
Loans from shareholders 430,900 -- -- 430,900
Loans from affiliated companies 640,200 -- (640,200) (1)
Common stock 2,322,834 5,403,294 -- 7,726,128
Accumulated deficit (2,935,891) (2,622,957) -- (5,558,848)
---------- ---------- ---------- ----------
Total stockholders' equity (613,057) 2,780,337 -- 2,167,280
---------- ---------- ---------- ----------
936,430 3,355,923 (640,200) 3,652,153
========== ========== ========== ==========
<PAGE>
Technical Environment Solutions, Inc. /
Environmental Technologies and Software Solutions, Inc.
Pro Forma Combined Condensed Statement of Operations
Six Months Ended June 30, 1999
(Unaudited)
Pro Forma Pro Forma
TES ENTECS Adjustments Combined
DM DM DM DM
Net sales 337,749 152,635 - 490,384
Cost of sales 65,142 208,914 274,056
---------- ----------- ---------- ----------
Gross profit 272,607 (56,279) 216,328
General and administrative 751,319 423,921 - 1,175,240
Interest income (4,260) (12,522) 17,085 (3) 303
Interest expense 36,567 6,512 (17,085) (3) 25,994
---------- ----------- ---------- ----------
Net income before taxes (511,019) (474,190) - (985,209)
Taxes on income 223 722 - 945
---------- ----------- ---------- ----------
Net income (loss) (511,242) (474,912) - (986,154)
========== ========== ========== ==========
Basic income per share (0.10) (0.30) (0.06)
========== ========== ========== ==========
Weighted average shares 5,224,830 1,596,549 9,579,294 (4) 16,400,673
========== ========== ========== ==========
</TABLE>
<PAGE>
(1) On June 23, 1999 TES and ENTECS entered into a definitive agreement and
plan of merger (the "Agreement") providing for the merger of ENTECS with
and into TES. Under the terms of the Agreement, which was approved by the
Board of Directors of both TES and ENTECS, the holder of ENTECS Common
Stock will receive 7 shares of TES Common Stock for each of its outstanding
shares. Accordingly, the pro forma condensed combined financial statements
as of June 30, 1999 give effect to the issuance of 11,288,774 TES common
shares and assumes the Merger with ENTECS will be accounted for as a
reorganization of companies under common control. The accounting for the
merger is expected to be similar to that of a pooling of interests.
(2) The pro forma condensed combined statements of operations gives effect to
the Merger of TES with ENTECS as if the merger occurred at the beginning of
the periods presented.
(3) Inter-company advances, accrued interest thereon and amounts of interest
income and expense have been eliminated.
(4) The pro forma weighted average shares outstanding for basic earnings (loss)
per share gives effect to the issuance of 7 shares of TES stock in exchange
for each share of ENTECS stock outstanding for the period presented,
weighted for the period such shares were actually outstanding.
