UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30, 2000
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from __________________ to ____________________
Commission file number 0-23779
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TECHNICAL ENVIRONMENT SOLUTIONS, INC.
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(Exact name of small business issuer as specified in its charter)
Colorado 98-0149351
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
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 September 30, 2000
------------------------------------------ ---------------------------------
Common Stock, no par value 19,782,791
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Technical Environment Solutions, Inc.
INDEX
Page
PART I. FINANCIAL INFORMATION ----
Item 1. Financial Statements 3
Consolidated Balance Sheets -
September 30, 2000 3
Consolidated Statements of Operations
for the three and nine months ended
September 30, 1999 and 2000 4
Consolidated Statements of Cash Flow
for the three and nine months ended
September 30, 1999 and 2000 5
Notes to Unaudited Financial Statements 6
Item 2. Management's Discussion and Analysis or
Plan of Operation 6
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Defaults Upon Senior Securities 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
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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 September 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.
Technical Environment Solutions, Inc.
Consolidated Balance Sheet
September 30, 2000
(Unaudited)
ASSETS
------
DM US $
Current assets:
Cash and cash equivalents 65,709 29,535
Accounts receivable, trade 104,978 47,186
Accounts receivable -related party -- --
Note receivable - current portion 10,000 4,495
Inventory 60,000 26,969
Prepaid expenses 84,872 38,148
---------- ----------
Total current assets 325,559 146,333
Property and equipment, at cost, net of
accumulated depreciation of DM 87,762 514,376 231,201
Investments 10,000 4,495
Note receivable - non-current 40,000 17,979
Intangible assets, net of amortization of
$357,500 433,335 194,775
Other assets 972,171 436,970
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Total Assets 2,295,441 1,031,753
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Notes payable - others 129,000 57,984
Accounts payable 548,649 246,605
Accounts payable - related party 15,862 7,130
Accrued expenses - related party -- --
Accrued expenses 969,147 435,611
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Total current liabilities 1,662,658 747,329
Loans from shareholders 230,000 103,380
Stockholders' equity:
Common stock, no par value,
20,000,000 shares authorized,
19,782,791 shares issued and outstanding 9,066,647 4,075,264
Accumulated deficit (8,663,864) (3,894,222)
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Total Stockholders' Equity 402,783 181,042
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Total Liabilities and Stockholders' Equity 2,295,441 1,031,752
========== ==========
See accompanying notes to consolidated financial statements.
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<CAPTION>
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Technical Environment Solutions, Inc.
Consolidated Statements of Operations
(Unaudited)
Three Months Ended September 30, Nine Months Ended September 30,
1999 2000 1999 2000 2000
DM DM DM DM US $
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Sales 360,488 437,095 850,872 1,124,149 505,281
Cost of operations 458,842 282,147 732,898 618,658 278,074
----------- ----------- ----------- ----------- -----------
Gross profit (98,354) 154,948 117,974 505,491 227,207
Other costs and expenses:
General and administrative 1,407,441 749,523 2,582,681 1,980,008 889,971
----------- ----------- ----------- ----------- -----------
(Loss) from operations (1,505,795) (594,575) (2,464,707) (1,474,517) (662,764)
Other income and (expense):
Interest income 40,870 448 40,870 1,575 708
Losses of unconsolidated subsidiary -- -- -- -- --
Interest expense (46,319) (3,273) (72,616) (14,367) (6,458)
----------- ----------- ----------- ----------- -----------
(5,449) (2,825) (31,746) (12,792) (5,750)
(Loss) before income taxes (1,511,244) (597,400) (2,496,453) (1,487,309) (668,514)
Provision for income taxes 1,347 125 2,292 476 214
----------- ----------- ----------- ----------- -----------
Net (loss) (1,512,591) (597,525) (2,498,745) (1,487,785) (668,728)
=========== =========== =========== =========== ===========
Basic earnings (loss) per share:
Net income (loss) (0.09) (0.03) (0.15) (0.08) (0.04)
=========== =========== =========== =========== ===========
Weighted average shares outstanding 16,692,804 18,630,495 16,497,465 17,727,882 17,727,882
=========== =========== =========== =========== ===========
See accompanying notes to consolidated financial statements.
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<CAPTION>
Technical Environment Solutions, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended September 30,
1999 2000 2000
DM DM US $
---------- ---------- ----------
<S> <C> <C> <C>
Net (loss) (2,498,745) (1,487,785) (668,728)
Adjustments to reconcile net income (loss) to net
cash (used in) operating activities:
Depreciation and amortization 251,938 122,739 55,169
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 42,123 (9,806) (4,408)
(Increase) decrease in inventory 60,000 -- --
(Increase) decrease in prepaid expenses (34,908) (67,264) (30,234)
(Increase) decrease in other assets (261,296) (521,591) (234,444)
Increase (decrease) in accounts payable and
accrued expenses 652,789 554,613 249,287
---------- ---------- ----------
Total adjustments 710,646 78,691 35,370
---------- ---------- ----------
Net cash (used in) operating activities (1,788,099) (1,409,094) (633,358)
---------- ---------- ----------
Cash flows from investing activities:
Purchase of fixed assets (77,014) (9,822) (4,415)
---------- ---------- ----------
Net cash provided by (used in) investing activities (77,014) (9,822) (4,415)
---------- ---------- ----------
Cash flows from financing activities:
Proceeds from sale of common stock 1,835,109 1,366,495 614,210
Repayment of stockholder loans (24,100) (200,000) (89,896)
Repayment of notes payable - bank (29,541) -- --
Proceeds from notes payable 100,000 89,802 40,364
Repayment of notes payable - other (80,000) (200,000) (89,896)
--------- --------- ----------
Net cash provided by
financing activities 1,801,468 1,056,297 474,783
--------- --------- ----------
Increase (decrease) in cash (63,645) (362,619) (162,989)
Cash and cash equivalents,
beginning of period 560,050 428,328 192,524
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Cash and cash equivalents,
end of period 496,405 65,709 29,535
========== ========== ==========
See accompanying notes to consolidated financial statements.
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Technical Environment Solutions, Inc.
Notes to Unaudited Financial Statements
September 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 nine months ended September 30, 2000 Company sold common stock in a
private offering to a limited group of investors in Germany. The Company sold
3,144,716 shares of its common stock for gross proceeds of DM 1,593,683 and
incurred direct expenses of the offering amounting to DM 227,188.
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 September 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
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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.
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 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 September 30, 2000 Compared to Three-months Ended September
30, 1999
Sales for the three-month period ended September 30, 2000 were DM 437,095,
an increase of DM 76,607, or 21.25%, as compared to the three-month period ended
September 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 September 30, 2000 was
DM 282,147, a decrease of DM 176,695, or 38.51%, as compared to the three-month
period ended September 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 September 30, 2000, was DM 154,948, an increase of DM 253,302, or
257.54%, as compared to the three-month period ended September 30, 1999.
General and administrative expenses for the three-month period ended
September 30, 2000, were DM 749,523, a decrease of DM 657,918, or 46.75%, as
compared to the three-month period ended September 30, 1999. This decrease was
principally due to efficiencies that resulted from the merger between TES and
ENTECS.
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As a result of these factors, the operating loss for the three-month period
ended September 30, 2000, was DM 594,574, a decrease in the operating loss of DM
911,220, or 60.51%, as compared to the three-month period ended September 30,
1999.
Other income and expenses for the three-month period ended September 30,
2000 was an expense of DM 2,825, a decrease of DM 2,624, or 48.16%, as compared
to the three-month period ended September 30, 1999. The decrease in other
expenses was primarily due to a decrease in interest expense for the three-month
period ended September 30, 2000, of DM 43,046, or 92.93%, as compared to the
three-month period ended September 30, 1999.
For the reasons noted above, the net loss for the three-month period ended
September 30, 2000, was DM 597,525, a decrease in the net loss of DM 915,066, or
60.50%, as compared to the three-month period ended September 30, 1999.
Nine-months Ended September 30, 2000 Compared to Nine-months Ended September 30,
1999
Sales for the nine-month period ended September 30, 2000 were DM 1,124,149,
an increase of DM 273,277, or 32.12%, as compared to the nine-month period ended
September 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 nine-month period ended September 30, 2000 was
DM 618,658, a decrease of DM 114,240, or 15.59%, as compared to the nine-month
period ended September 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 nine-month
period ended September 30, 2000, was DM 505,491, an increase of DM 387,517, or
328.48%, as compared to the nine-month period ended September 30, 1999.
General and administrative expenses for the nine-month period ended
September 30, 2000, were DM 1,980,008, a decrease of DM 602,673, or 23.34%, as
compared to the nine-month period ended September 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 nine-month period
ended September 30, 2000, was DM 1,474,517, a decrease in the operating loss of
DM 990,190, or 40.17%, as compared to the nine-month period ended September 30,
1999.
Other income and expenses for the nine-month period ended September 30,
2000 was an expense of DM 12,792, a decrease of DM 18,954, or 59.71%, as
compared to the nine-month period ended September 30, 1999. The decrease in
other expenses was primarily due to a decrease in interest expense for the
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nine-month period ended September 30, 2000, of DM 58,249, or 80.22%, as compared
to the nine-month period ended September 30, 1999.
For the reasons noted above, the net loss for the nine-month period ended
September 30, 2000, was DM 1,487,785, a decrease in the net loss of DM
1,010,960, or 40.46%, as compared to the nine-month period ended September 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 nine months of 2000, the Company sold 3,144,716 shares of
its common stock in Germany to a limited group of German citizens for gross
proceeds to the Company of DM 1,593,683, and incurred direct expenses of the
offering amounting to DM 227,188. At September 30, 2000 the Company had negative
working capital of DM 1,337,099 and cash and cash equivalents of DM 65,709.
Further, the Company's accumulated deficit had increased to DM 8,663,864 at
September 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 nine months ended
September 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 DM 7,000 that began in June 2000.
Although management has no plans at this time to materially reduce the
number of its employees or to dispose of any of the Company's assets, the
Company anticipates reducing the number of employees at TES Oecon AG by two
persons by the end of December, 2000.
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.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
---------------------------
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 nine months ended September 30, 2000 Company sold common stock
in a private offering to a limited group of investors in Germany. The Company
sold 3,144,716 shares of its common stock for gross proceeds of DM 1,593,683 and
incurred direct expenses of the offering amounting to DM 227,188. 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.
-------------------------------------------------------------
On August 21, 2000, the Company held its Annual Meeting of Stockholders for
the fiscal year ended December 31, 2000. The matters considered and the results
of the shareholders vote at that meeting were as follows:
1. Gerd Behrens, Frank Behrens, and Wolfgang Kleen were elected to serve as
directors of the Company until the next Annual Meeting of Shareholders and
thereafter until their successors shall have been elected and qualified.
2. The Stockholders approved an amendment ("Amendment") to the Company's
Articles of Incorporation, as amended, (the "Articles"), to effect an increase
in the number of authorized shares of Common Stock from 20,000,000 shares to
80,000,000 shares, without having any effect upon the authorized, issued and
outstanding shares of Common Stock, and to create a new class of the securities
of the Company, consisting of 40,000,000 authorized shares of blank check
Preferred Stock to be issued by the Company's Board of Directors from time to
time in series.
3. The Stockholders ratified the selection of Levine Hughes & Mithuen Inc.
as the Company's independent auditors for the fiscal year ending December 31,
2000.
4. The Stockholders approved and adopted an Incentive Stock Option Plan
pursuant to which options to purchase Common Stock may be granted to certain
personnel of the Company.
5. The Stockholders approve and adopted a Nonqualified Stock Option Plan
pursuant to Which options to purchase Common Stock may be granted to certain
personnel of the Company and others who are not employed by the Company.
Item 5. Other Information.
---------------------------
Not Applicable
Item 6. Exhibits and Reports on Form 8-K.
------------------------------------------
(a) Exhibits: No exhibits are filed with this Quarterly Report on
Form 10-QSB for the quarter ended September 30, 2000.
(b) Reports on Form 8-K: There were no reports on Form 8-K filed
during the three months ended September 30, 2000.
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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: November 20, 2000
TECHNICAL ENVIRONMENT SOLUTIONS, INC.
By: /s/ Gerd Behrens
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Gerd Behrens, President and
director (Principal Executive
Officer)
By: /s/ Frank Behrens
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Frank Behrens, Secretary-
Treasurer and director
(Principal Financial Officer)
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