UNITED STATES
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, 2000
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
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Commission file number 0-23779
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TECHNICAL ENVIRONMENT SOLUTIONS, INC.
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(Exact name of small business issuer as specified in its charter)
Colorado 98-0149351
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
C/O TES Com GmbH, 25 Impler Strasse, 81371, Munich, Germany
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(Address of principal executive offices)
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)
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Class Outstanding at June 30, 2000
-------------------------- ----------------------------
Common Stock, no par value 18,009,875
<PAGE>
Technical Environment Solutions, Inc.
INDEX
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Page
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PART I. FINANCIAL INFORMATION 3
Item 1. Financial Statements 3
Consolidated Balance Sheets - 3
June 30, 2000
Consolidated Statements of Operations 4
for the three and six months ended
June 30, 1999 and 2000
Consolidated Statements of Cash Flow 5
for the three and six months ended
June 30, 1999 and 2000
Notes to Unaudited Financial Statements 6
Item 2. Management's Discussion and Analysis 6
or Plan of Operation
PART II. OTHER INFORMATION 9
Item 1. Legal Proceedings 9
Item 2. Changes in Securities 9
Item 3. Defaults Upon Senior Securities 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 10
2
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PART I. FINANCIAL INFORMATION
As a result of the merger in August 1999 between the Company and
Environmental Technologies and Software Solutions, Inc. ("ENTECS"), the
financial statement items for the period ended June 30, 1999 set forth below and
under Item 2, "Management's Discussion and Analysis or Plan of Operation" have
been restated to include the operations of ENTECS.
Item 1. Financial Statements.
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<TABLE>
<CAPTION>
Technical Environment Solutions, Inc.
Consolidated Balance Sheet
June 30, 2000
ASSETS
------
DM US $
---------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents 79,436 38,638
Accounts receivable, trade 90,454 43,997
Inventory 60,000 29,184
Prepaid expenses 228,863 111,320
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Total current assets 458,753 223,140
Property and equipment, at cost, net of
accumulated depreciation of DM 361,285 557,663 271,250
Investments 10,000 4,864
Note receivable - related party 50,000 24,320
Intangible assets, net of amortization 450,239 218,998
Other assets 314,926 153,182
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1,841,581 895,754
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Notes payable - others 150,000 72,962
Accounts payable 551,951 268,471
Accounts payable and accrued expenses - related parties 137,200 66,735
Accrued expenses 351,769 171,102
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Total current liabilities 1,190,920 579,269
Loans from shareholders 430,000 209,154
Stockholders' equity:
Common stock, no par value,
20,000,000 shares authorized,
18,009,875 shares issued and outstanding 8,287,000 4,030,838
Accumulated deficit (8,066,339) (3,923,508)
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220,661 107,330
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1,841,581 895,754
========== ==========
See accompanying notes to consolidated financial statements.
3
<PAGE>
Technical Environment Solutions, Inc.
Consolidated Statements of Operations
(Unaudited)
Three Months Ended June 30 Six Months Ended June 30,
---------------------------- ---------------------------------------------
1999 2000 1999 2000 2000
DM DM DM DM US $
----------- ----------- ----------- ----------- -----------
Sales 335,432 375,562 656,938 687,054 334,186
Cost of operations 234,567 205,493 490,939 336,511 163,681
----------- ----------- ----------- ----------- -----------
Gross profit 100,865 170,069 165,999 350,543 170,506
Other costs and expenses:
General and administrative 930,837 392,010 1,546,329 1,230,485 598,514
----------- ----------- ----------- ----------- -----------
(Loss) from operations (829,972) (221,941) (1,380,330) (879,942) (428,008)
Other income and (expense):
Interest income 24,404 551 27,981 1,127 548
Interest expense - related party (1,682) (534) -- (950) (462)
Interest expense (36,519) (7,688) (48,902) (10,144) (4,934)
----------- ----------- ----------- ----------- -----------
(13,797) (7,671) (20,921) (9,967) (4,848)
(Loss) before income taxes (843,769) (229,612) (1,401,251) (889,909) (432,856)
Provision for income taxes (1,333) (169) (1,590) (351) (171)
----------- ----------- ----------- ----------- -----------
Net (loss) (845,102) (229,781) (1,402,841) (890,260) (433,027)
=========== =========== =========== =========== ===========
Earnings (loss) per share:
Basic and diluted (loss) per share (0.05) (0.01) (0.09) (0.05) (0.03)
=========== =========== =========== =========== ===========
Weighted average shares outstanding 16,631,904 17,788,542 16,400,673 17,276,575 17,276,575
=========== =========== =========== =========== ===========
See accompanying notes to consolidated financial statements.
4
<PAGE>
Technical Environment Solutions, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended June 30,
1999 2000 2000
DM DM US $
--------- -------- --------
Net (loss) (1,402,841) (890,260) (433,027)
Adjustments to reconcile net income (loss) to net
cash (used in) operating activities:
Depreciation 135,582 121,978 59,331
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 23,889 4,718 2,295
(Increase) decrease in prepaid expenses 54,949 (211,255) (102,755)
(Increase) decrease in other assets (226,500) 86,250 41,952
Increase (decrease) in accounts payable and
accrued expenses including related parties 179,012 61,875 30,096
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Total adjustments 166,932 63,566 30,919
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Net cash (used in) operating activities (1,235,909) (826,694) (402,108)
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Cash flows from investing activities:
Sale of fixed assets 21,312 -- --
Purchase of fixed assets (30,632) (19,848) (9,654)
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Net cash provided by (used in) investing activities (9,320) (19,848) (9,654)
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Cash flows from financing activities:
Proceeds from sale of common stock 1,865,147 586,848 285,446
Proceeds from bank loan 19,854 (39,198) (19,066)
Repayment of convertible notes (55,000) (50,000) (24,320)
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Net cash provided by
financing activities 1,830,001 497,650 242,059
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Increase (decrease) in cash 584,772 (348,892) (169,703)
Cash and cash equivalents,
beginning of period 560,050 428,328 208,341
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Cash and cash equivalents,
end of period 1,144,822 79,436 38,638
========== ========== ==========
See accompanying notes to consolidated financial statements.
5
</TABLE>
<PAGE>
Technical Environment Solutions, Inc.
Notes to Unaudited Financial Statements
June 30, 2000
(Unaudited)
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, 1999.
Basic loss per share was computed using the weighted average number of common
shares outstanding.
During the six months ended June 30, 2000 Company sold common stock in a private
offering to a limited group of investors in Germany. The Company sold 1,371,800
shares of its common stock for gross proceeds of DM 742,763 and incurred direct
expenses of the offering amounting to DM 155,915.
Item 2. Management's Discussion and Analysis or Plan of Operation.
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The following information should be read in conjunction with the financial
statements and the notes thereto and in conjunction with Management's Discussion
and Analysis of Financial Condition and Results of Operations in the Company's
Annual Report on Form 10-KSB for the year ended December 31, 1999.
General
Technical Environment Solutions, Inc. (the "Company" or "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. The
Company has three wholly-owned subsidiaries through which it conducts operations
- TES Oecon AG ("TES Oecon"), TES Com GmbH ("TES Com") and Environmental
Technologies and Software Solutions, Inc. ("ENTECS"). ENTECS is a non-operating
holding company and its operations are conducted entirely in Germany by its
wholly owned German subsidiary, ENTECS Umwelttechnik GmbH ("ENTECS GmbH").
TES Oecon was formed in July 1997 under the laws of Germany and commenced
operations in October 1997. TES Com was formed under the laws of Germany in May
1992 under the name Technical Environment Solutions GmbH and changed its name to
TES Com GmbH in August 1999 as a result of its merger with ENTECS Software und
Umweltmanagement GmbH, a subsidiary of ENTECS, in which TES Com was the
surviving corporation. ENTECS was formed under the laws of Colorado in May 1997
and became a wholly-owned subsidiary of the Company pursuant to a merger
effected in August 1999. ENTECS GmbH was formed in July 1997 under the laws of
Germany. Unless the context otherwise requires, references to the "Company"
include its direct and indirect subsidiaries.
6
<PAGE>
From 1994 to 1997, the Company was 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. In
1997, the Company commenced recycling activities at its own facility in
Landsberg a. Lech, Germany, which is southwest of Munich. Recently, the Company
expanded its electronics business by adding electronic services and used
equipment sales, both direct and over the Internet, to its business. In
addition, as a result of the Company's merger with ENTECS, the Company now
engages in the distribution of software programs for managing environmental
protection obligations, the production of wood fiber products as an alternative
to conventional peat, the briquetting of dust, metal refuses and fibers and the
composting of sewage and organic refuse.
The Company continues to use cash and operate at a loss (See "Liquidity and
Capital Resources").
Three-months Ended June 30, 2000 Compared to Three-months Ended June 30, 1999
Sales for the three-month period ended June 30, 2000 were DM 375,562, an
increase of DM 40,130, or 11.96%, as compared to the three-month period ended
June 30, 1999. The principal reason for this increase in sales resulted from an
increase in sales at the Company's wholly-owned subsidiary TES Oecon AG, which
is focused upon development of the electronic services and the sales of second
hand computers and peripherals.
Cost of operations for the three-month period ended June 30, 2000 was DM
205,493, a decrease of DM 29,074, or 12.39%, as compared to the three-month
period ended June 30, 1999. This decrease was due primarily to the fact that
cost of operations for 1999 was unusually high due to construction and repair
costs for the BRS-System due to design defects, which did not continue into the
2000 fiscal year.
As a result of the changes noted above, gross profit for the three-month
period ended June 30, 2000, was DM 170,069, an increase of DM 69,204, or 68.61%,
as compared to the three-month period ended June 30, 1999.
General and administrative expenses for the three-month period ended June
30, 2000, were DM 392,010, a decrease of DM 538,827, or 57.89%, as compared to
the three-month period ended June 30, 1999. This decrease was principally due to
efficiencies that resulted from the merger between TES and ENTECS.
As a result of these factors, the operating loss for the three-month period
ended June 30, 2000, was DM 221,941, a decrease in the operating loss of DM
608,031, or 73.26%, as compared to the three-month period ended June 30, 1999.
Other income and expenses for the three-month period ended June 30, 2000
was an expense of DM 7,671, a decrease of DM 6,126, or 44.40%, as compared to
the three-month period ended June 30, 1999. The decrease in other expenses was
primarily due to a decrease in interest expense for the three-month period ended
June 30, 2000, of DM 29,979, or 78.47%, as compared to the three-month period
ended June 30, 1999.
For the reasons noted above, the net loss for the three-month period ended
June 30, 2000, was DM 229,781, a decrease in the net loss of DM 615,321, or
72.81%, as compared to the three-month period ended June 30, 1999.
Six-months Ended June 30, 2000 Compared to Six-months Ended June 30, 1999
Sales for the six-month period ended June 30, 2000 were DM 687,054, an
increase of DM 30,116, or 4.58%, as compared to the six-month period ended June
30, 1999. The principal reason for this increase in sales resulted from an
increase in sales at the Company's wholly-owned subsidiary TES Oecon AG, which
is focused upon development of the electronic services and the sales of second
hand computers and peripherals.
7
<PAGE>
Cost of operations for the six-month period ended June 30, 2000 was DM
336,511, a decrease of DM 154,428, or 31.46%, as compared to the six-month
period ended June 30, 1999. This decrease was due primarily to the fact that
cost of operations for 1999 was unusually high due to construction and repair
costs for the BRS-System due to design defects, which did not continue into the
2000 fiscal year.
As a result of the changes noted above, gross profit for the six-month
period ended June 30, 2000, was DM 350,543, an increase of DM 184,544, or
111.17%, as compared to the six-month period ended June 30, 1999.
General and administrative expenses for the six-month period ended June 30,
2000, were DM 1,230,485, a decrease of DM 315,844, or 20.43%, as compared to the
six-month period ended June 30, 1999. This decrease was principally due to
efficiencies that resulted from the merger between TES and ENTECS.
As a result of these factors, the operating loss for the six-month period
ended June 30, 2000, was DM 879,942, a decrease in the operating loss of DM
500,388, or 36.25%, as compared to the six-month period ended June 30, 1999.
Other income and expenses for the six-month period ended June 30, 2000 was
an expense of DM 9,967, a decrease of DM 10,954, or 52.36%, as compared to the
six-month period ended June 30, 1999. The decrease in other expenses was
primarily due to a decrease in interest expense for the six-month period ended
June 30, 2000, of DM 37,808, or 77.31%, as compared to the six-month period
ended June 30, 1999.
For the reasons noted above, the net loss for the six-month period
ended June 30, 2000, was DM 890,260, a decrease in the net loss of DM 512,581,
or 36.54%, as compared to the six-month period ended June 30, 1999.
Liquidity and Capital Resources
The Company is currently experiencing a liquidity crisis and must raise
additional funds. Further, the Company has not generated sufficient cash flow to
fund its operations and activities. The Company historically relied upon funds
from the sale of its securities, internally generated funds and loans from its
principal shareholder and his wife to finance its operations and growth.
During the first six months of 2000, the Company sold 1,371,800 shares of
its common stock in Germany to a limited group of German citizens for gross
proceeds to the Company of DM 742,763, and incurred direct expenses of the
offering amounting to DM 155,915. At June 30, 2000 the Company had negative
working capital of DM 732,167 and cash and cash equivalents of DM 79,436.
Further, the Company's accumulated deficit had increased to DM 8,066,339 at June
30, 2000 from an accumulated deficit of DM 7,176,079.25 at December 31, 1999.
Management intends to raise additional funds as necessary through further
private or public offerings of its stock and through loans from private
investors or banks, if necessary, although there can be no assurance that the
Company will be able to obtain such financing. During the six months ended June
30, 2000, the Company repaid DM 50,000 to Yvonne Marquard, a former director of
the Company. The balance owed to Ms. Marquard will be paid back in monthly
installments of at least DM 7,000 that began in July 2000.
Management has no plans at this time to materially reduce the number of its
employees or dispose of any of the Company's assets.
8
<PAGE>
Year 2000 Compliance
The Year 2000 Problem referred to existing computer programs' ability to
appropriately distinguish the year 2000 from the year 1900 when processing
transactions. Prior to January 1, 2000, management of the Company had been
advised that all software programs that the Company was using had been
programmed for Year 2000. As of this date, the Company has not experienced any
difficulties in year 2000 compliance. No contingency plans have had to be
initiated and no additional costs have been incurred.
In addition, the Company's software is programmed to accept the New
European currency - the EURO.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
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Mr. Juergen Bozenhardt, the licensor of the BRS-Compact concrete recycling
system, has filed a lawsuit against the Company based on the alleged breach of a
consulting contract between him and the Company. Mr. Bozenhardt alleges that the
Company owes him approximately DM 280,000 under the agreement. Management of the
Company maintains that, as a result of the design defects in the BRS-Compact
concrete recycling system and Mr. Bozenhardt's failure to obtain the two patents
required under the BRS-Compact license, Mr. Bozenhardt owes the Company
approximately DM 575,000 and has counterclaimed for that amount. Management
intends to vigorously defend the lawsuit.
Item 2. Changes in Securities.
During the first six months of 2000, the Company sold 1,371,800 shares of
its common stock in Germany to a limited group of German citizens for gross
proceeds to the Company of DM 742,763, and incurred direct expenses of the
offering amounting to DM 155,915. These shares were sold in reliance upon
Regulation S.
Item 3. Defaults Upon Senior Securities.
----------------------------------------
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders.
-------------------------------------------------------------
No matters were submitted by the Company to a vote of its shareholders
through the solicitation of proxies or otherwise, during the period covered by
this report.
Item 5. Other Information.
--------------------------
Not Applicable
9
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
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(a) Exhibits: No exhibits are filed with this Quarterly Report on Form
10-QSB for the quarter ended June 30, 2000.
(b) Reports on Form 8-K: There were no reports on Form 8-K filed during
the three months ended June 30, 2000.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Date: August 13, 2000
TECHNICAL ENVIRONMENT SOLUTIONS, INC.
/s/ Gerd Behrens
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Gerd Behrens, President and director
(Principal Executive Officer)
/s/ Frank Behrens
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Frank Behrens, Secretary-Treasurer and director
(Principal Financial Officer)
10
