UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
for
Three Months Ended March 31, 1996
Commission File Number 0-27210
TECH ELECTRO INDUSTRIES, INC.
_____________________________
TEXAS 75-2408297
_____________________________________________________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4300 Wiley Post Road, Dallas, Texas 75244-2131
______________________________________________________________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(214) 239-7151
Indicate by check mark whether the registrant (1) has
filed all reports to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 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 at least the past 90 days. Yes_X___No____
As of March 31, 1996 the registrant had 1,258,275
shares of common stock outstanding.
<PAGE>
TECH ELECTRO INDUSTRIES, INC.
INDEX
Page Number
Part I - Financial Information
Item 1 - Financial Statements (unaudited)
Consolidated Balance Sheet at
March 31, 1996 and 1995. 3
Consolidated Statement of Income for
the Periods Ended March 31, 1996 and
and 1995. 5
Consolidated Statements of Cash Flows
for the Periods Ended March 31, 1996
1996 6
Notes to Consolidated Financial
Statements. 7
Item 2 - Management's Discussions and
Analysis of Financial Condition and
Results of Operations. 12
Part II - Other Information
Item 1 - Legal Proceedings 13
Signatures 14
<PAGE>
Part 1
Financial Information
Item 1 - Financial Statement
Tech Electro Industries, Inc. and Subsidiary
Consolidated Balance Sheet
__________________________
( Prepared from the books without verification by audit )
Periods Ended: March 31, 1996 and 1995
<TABLE>
<CAPTION>
ASSETS
______
1996 1995
---- ----
CURRENT ASSETS
<S> <C> <C>
Cash 1,787,481 34,794
Certificate of Deposit 206,417 -0-
Accounts Receivable - Customers 439,689 380,330
Accounts Receivable - Other 15,622 10,588
Advance to Employee 102,000 -0-
Notes Receivable 61,023 34,421
Inventory, at Lower of Cost or Market 1,065,644 1,206,354
Deferred Federal Income Tax Asset 17,398 27,053
Prepaid Federal Income Tax 8,410 -0-
Prepaid Expenses 283,193 68,478
_________ __________
TOTAL CURRENT ASSETS 3,780,460 1,762,018
PLANT & EQUIPMENT, at cost
Lab and Computer Equipment 293,503 235,241
Furniture and Fixtures 154,255 122,568
Automobiles 21,943 21,943
_________ ________
469,701 379,752
Less Accumulated Depreciation 294,481 275,693
_________ ________
TOTAL PLANT AND EQUIPMENT 175,220 104,059
OTHER ASSETS
Deferred Federal Income Tax 22,070 25,676
Investment in Bonds 2,000 2,000
_________ ________
230,487 27,676
TOTAL ASSETS 4,186,167 1,893,753
========= ==========
</TABLE>
See notes to Consolidated Financial Statements
<PAGE>
Tech Electro Industries, Inc. and Subsidiary
Consolidated Balance Sheet
__________________________
( Prepared from the books without verification by audit )
Period Ended: March 31, 1996 and 1995
LIABILITIES & STOCKHOLDERS' EQUITY
__________________________________
<TABLE>
<CAPTION>
1996 1995
CURRENT LIABILITIES
<S> <C> <C>
Accounts Payable - Trade 153,875 181,397
Accounts Payable - Others -0- 376
Accrued Liabilities 39,408 27,871
Federal Income Tax Payable 1,046 -0-
Notes Payable - Banks 339,991 219,995
Notes Payable - Affiliates 245,000 -0-
Notes Payable - Others -0- 4,866
_________ __________
TOTAL CURRENT LIABILITIES 779,320 434,505
LONG-TERM DEBT
Notes Payable - Affiliates -0- 279,000
Deferred Compensation Payable 99,651 99,651
_________ __________
TOTAL LONG-TERM DEBT 99,651 378,651
STOCKHOLDERS' EQUITY
Preferred Stock, $1.00 par value;
1,000,000 shares authorized;
300,000 Class A issued and out-
standing, liquidation preference
of $1,575,000; 65,000 Class B
issued and outstanding, liquida-
tion preference of $341,250 365,000 -0-
Common Stock, $0.01 par value;
10,000,000 shares authorized,
1,258,275 shares issued and
outstanding 12,583 6,528
Additional Paid-in Capital 2,371,879 539,042
Retained Earnings 551,810 546,224
Current Income 5,924 -11,197
_________ __________
3,307,196 1,080,597
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY 4,186,167 1,893,753
========= =========
</TABLE>
See notes to Consolidated Financial Statements
<PAGE>
Tech Electro Industries and Subsidiary
Consolidated Income Statement
_____________________________
( Prepared from the books without verification by audit )
Periods Ended: March 31, 1996 and 1995
<TABLE>
<CAPTION>
Quarter Year to Date
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
SALES 867,944 773,414 867,944 773,414
COST OF GOODS SOLD 617,396 573,067 617,396 573,067
_________ _________ _________ _________
GROSS PROFIT 250,548 200,347 250,548 200,347
GENERAL AND ADMINISTRATIVE 248,639 199,451 248,639 199,451
_________ _________ _________ _________
INCOME (LOSS) FROM OPERATIONS 1,909 896 1,909 896
OTHER INCOME (EXPENSE)
Interest Income 18,354 73 18,354 73
Interest Expense (13,293) (18,195) (13,293) (18,195)
_________ _________ _________ _________
INCOME (LOSS) BEFORE TAX 6,970 (17,226) 6,970 (17,226)
INCOME TAX EXPENSE
Current 1,046 -0- 1,046 -0-
Deferred -0- (6,029) -0- (6,029)
_________ _________ _________ _________
1,046 (6,029) 1,046 (6,029)
_________ _________ _________ _________
NET INCOME (LOSS) 5,924 (11,197) 5,924 (11,197)
========= ========= ========= =========
Income (Loss) Attributable
to Common Stockholders (15,976) (11,197) (15,976) (11,197)
========= ========= ========= =========
EARNINGS PER SHARE (.01) (.01) (.01) (.01)
========= ========= ========= =========
</TABLE>
See notes to Consolidated Financial Statements
<PAGE>
Tech Electro Industries, Inc. and Subsidiary
Consolidated Statements of Cash Flows
_____________________________________
( Prepared from the books without verificaton by audit )
Periods Ended: March 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income (loss) 5,924 (11,197)
Adjustments to reconcile net income to cash
Depreciation 5,591 4,041
Deferred taxes -0- (6,029)
Changes in operating assets and liabilities
(Increase) decrease in -
Accounts receivable (76,590) 19,269
Other receivable (6,040) 18,664
Advance to employee (102,000) -0-
Inventory 86,534 90,028
Deferred IPO costs 78,772 -0-
Prepaid expenses (242,462) (4,072)
Increase (decrease) in -
Accounts payable (117,612) (184,715)
Accrued liabilities 10,657 15,828
Federal income tax payable 1,046 -0-
_______ _______
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES (356,180) (58,183)
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment (43,900) (11,994)
Interest earned on certificate of deposit (2,574) -0-
Advances on Note Receivable (29,537) -0-
Repayments on Note Receivable 5,000 -0-
_______ _______
NET CASH USED BY INVESTING ACTIVITIES (71,011) (11,994)
_______ _______
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term debt -0- 4,866
Payments on short-term debt (20,001) (350,000)
Payments on related party borrowing -0- (57,341)
Proceeds from sale of preferred, common
and warrants 2,103,891 387,340
Dividends paid (9,000) -0-
_________ _______
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES 2,074,890 (15,135)
_________ _______
NET INCREASE (DECREASE) IN CASH 1,647,699 (85,312)
CASH AT BEGINNING OF PERIOD 139,782 120,106
_________ _______
CASH AT END OF PERIOD 1,787,481 34,794
========= =======
SUPPLEMENTAL INFORMATION - Interest paid 13,376 19,686
========= =======
INCOME TAXES PAID -0- -0-
========= =======
</TABLE>
See notes to Consolidated Financial Statements
<PAGE>
TECH ELECTRO INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
March 31, 1996
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and in accordance with the instructions per
Item 310(b) of Regulation S-B. 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 accruals) considered necessary for a fair presentation have
been included. Operating results for the three month period ended
March 31, 1996 are not necessarily indicative of the results that may
be expected for the year ending December 31, 1996.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of the Company include the
accounts of the Company and its wholly-owned subsidiary, Computer
Components Corporation. All significant intercompany transactions
and balances have been eliminated in consolidation.
INCOME TAXES
The Company utilizes the asset and liability approach to financial
accounting and reporting for income taxes. Deferred income tax assets
and liabilities are computed annually for differences between the
financial statement and tax bases of assets and liabilities that will
result in taxable or deductible amounts in the future based on enacted
tax laws and rates applicable to the periods in which the differences
are expected to affect taxable income. Valuation allowances are es-
tablished when necessary to reduce deferred tax assets to the amount
expected to be realized. Income tax expense is the tax payable or re-
fundable for the period plus or minus the change during the period in
deferred tax assets and liabilites.
<TABLE>
<CAPTION>
Qtr. YTD
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Federal current tax expense 1,046 -0- 1,046 -0-
Federal deferred tax expense -0- (6,029) -0- (6,029)
_______ _______ ______ _______
1,046 (6,029) 1,046 (6,029)
======= ======= ====== =======
</TABLE>
<PAGE>
TECH ELECTRO INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
March 31, 1996
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME PER SHARE
Income per share has been computed by dividing net income less
preferred stock dividends of $21,900 and $0.00 for the quarters
ended March 31, 1996 and 1995 by the weighted average number of
shares of common shares and common stock equivalents outstanding.
Common stock equivalents include the dilutive effect of all warrants
outstanding as though they had been outstanding for all periods
presented. Fully diluted loss per share for both periods is the
same as primary loss per share since the assumed conversion of com-
mon stock warrants and preferred stock would be anti-dilutive.
DIVIDENDS
Dividends are accrued monthly on 300,000 shares of Class A Preferred
Stock and 65,000 shares of Class B Preferred Stock, $0.030625 per
share. Dividends paid during the quarter ended March 31, 1996 were
$9,000 and dividends payable at March 31, 1996 were $12,900. There
was no Class A Preferred declared during 1995 and the Class B Prefer-
red ( issued November, 1995 ) shareholders waived accrual or payment
of dividends until such time as the Class A Preferred shares were
issued.
NOTE C - ACCOUNTS RECEIVABLE
The Company recognizes revenue upon shipment of goods and billing to
a customer and does not maintain any set policy regarding the cus-
tomer's right of return. Customer requests to return products for
refund or credit are handled on an individual basis at the discretion
of management. The refunds or credits in any given year are not sign-
ificant to the overall operations of the Company
In the normal course of business, the Company extends unsecured credit
to virtually all of its customers doing business in the manufacture
of various consumer and industrial electronic goods. The Company's
customers are located throughout the United States.
Because of the credit risk involved, management has provided an allow-
ance for doubtful accounts which reflects its opinion of amounts
which will eventually become uncollectible. In the event of complete
non-performance by the Company's customers, the maximum exposure to
the Company is the outstanding accounts receivable balance at the
date of non-performance.
<PAGE>
TECH ELECTRO INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
March 31, 1996
NOTE D - INVENTORIES
A small portion of the inventory consists of materials which are
used in the assembly of batteries into packs. Inventory as of
March 31, 1996 and 1995, consisted of the following:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Electronic Components $1,051,924 $1,168,524
Pack materials 61,420 54,909
Reserve for obsolescence (47,700) (17,079)
__________ __________
$1,065,644 $1,206,354
</TABLE>
NOTE E - PREPAID EXPENSES
Prepaid expenses at March 31, 1996 and 1995, consisted of the fol-
lowing:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Advance payments on overseas
inventory orders $181,501 $26,645
Prepaid two year consulting fees,
net of amortization 55,000 -0-
Prepaid insurance 10,344 3,234
Other prepaid expenses 36,348 38,599
________ _______
$283,193 $68,478
</TABLE>
NOTE F - Advance to Employee
During February, 1996 the Company advanced $105,000 to an employee.
The advance earns interest at 6%. In accordance with an employment
agreement the advance amount will be reduced and expensed as earned
compensation evenly over a two year period. During the first quarter
the Company expensed $3,000 as of March 31, 1996.
<PAGE>
TECH ELECTRO INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
March 31, 1996
NOTE G - BANK DEBT
Bank debt as of March 31, 1996 and 1995, consisted of the following:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
$200,000 term note to Nations Bank Texas NA,
dated December 29, 1995 and due March 31,
1997, with interest due monthly at 7.5% per
annum, secured by a $203,843 certificate of
deposit and personally guaranteed by the ma-
jority shareholder. $200,000 $ -0-
$139,991 term note to Bank One, Texas with
$6,666 principal due monthly plus interest
at base rate plus 1% maturing December 30,
1997 Secured by accounts receivable, inven-
tory, automotive equipment and personally
guaranteed by the major shareholder. 139,991 219,995
________ ________
$339,991 $219,995
======== ========
</TABLE>
NOTE H - NOTES PAYABLE TO AFFILIATES
Notes payable to related parties at March 31, 1996 and 1995, con-
sisted of the following.
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Unsecured note payable to Jacqueline G.
La Taste, a majority shareholder, interest
payable at 9.5% in monthly installments of
$792, with principal due March 31, 1997. $100,000 $ -0-
Unsecured note payable to Jacqueline G.
La Taste a majority shareholder, interest
payable at 10.25% in monthly installments
of $1,239.00, with princpal due
March 31, 1997. 145,000 245,000
Unsecured note payable to La Taste Enter-
prises, an entity affiliated thru common
ownership, paid June 3, 1995. -0- 34,000
________ ________
$245,000 $279,000
Less current portion 245,000 -0-
________ ________
Long term portion $ -0- $279,000
</TABLE>
<PAGE>
TECH ELECTRO INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
March 31, 1996
NOTE I - ORGANIZATION
On January 10, 1992, Electric & Gas Technology, Inc. (E>) formed a
Texas corporation, Tech Electro Industries, Inc. (TEI). E>
acquired 1,550,000 shares of common stock of TEI for $50,000. On
January 31, 1992, pursuant to an Agreement and Plan of Reorganiza-
tion, TEI issued to the shareholders of Computer Components Corp-
oration ( CCC ) ( a Texas corporation ) an aggregate of 4,198,192
shares of its common stock in exchange for 100% of the outstanding
shares of CCC. As a result of the issuance of said shares of TEI as
described above, the former shareholders of CCC became, as a group
(5 persons), the holders of 73% of the issued and outstanding shares
of TEI and the holdings of E> were reduced to 27%.
On February 3, 1992, E> declared a dividend consisting of approxi-
mately 1,200,000 of its TEI shares to be distributed to E> share-
holders of record as of March 10, 1992. After the distribution of
of the dividend shares, the holdings of E> were reduced to approxi-
mately 6.08% of the total issued and outstanding shares.
The Company closed on a Form SB-2 Registration Statement on February
1, 1996, to issue 300,000 units, of which each unit comprised 1
common share and 1 class A preferred share. The offering price was
$8.25 per unit resulting in an aggregate offering price of $2,475,000
before underwriting fees and other costs ( excluding underwriters'
over-allotment option of 45,000 units). In connection with the offer-
ing, 300,000 warrants (excluding underwriters' over-allotment option)
were also separately offered at $0.10 per warrant exercisable at
$3.50 per share. A net offering price of $2,178,315 was received for
the units and the warrants at closing and the Company incurred addi-
tional offering costs of $138,338 which were netted against the
proceeds. In addition, the Company sold at $0.10 per warrant an
additional 1,600,000 warrants to purchase 1,600,000 common shares at
an exercise price of $3.50 per share. In March of 1996, the under-
writer purchased the 45,000 over-allotment warrants for a net price
of $3,915 after a 10% discount and the 3% expense allowance, to make
a total of 1,945,000 warrants outstanding.
<PAGE>
Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
For the three month ending March 31, 1996, the Company had
sales of $867,944, a 12.2% increase from sales of $773,414 for
the period ending March 31, 1995. The increase in sales was
attributable to the following factors:
Import Product sales increased the first quarter of 1996
to a level of $532,509, 15.2% over the same period last fiscal
year period sales of $462,088.
Battery Assembly Sales increased in sales 10.9% from
$197,052 in the first quarter of Fiscal 1995, to $218,726 in
the first quarter of Fiscal 1996.
The Company income from operations of $1,909 ( unaudited )
for the three month period ending March 31, 1996 was an increase
of $1,013, a 113%, from the income of $896 in the like period
of the prior Fiscal year. This increase can be attributed ex-
clusively to the previously outlined sales increase.
The Company purchase order backlog increased from
$1,088,000 at the end of the first quarter of Fiscal 1995 to
$1,247,460 at the end of the first quarter of Fiscal 1996, or
a backlog increase of 14.7%.
The United States dollar exchange rate against the cur-
rencies of other major nations of the world, Japan in particular,
continues to ease, from ratios of the Japanese yen versus the
United States dollar as low as 80:1, during Fiscal 1995, this
ratio has risen to as high as 105.4 as of the date this report
is being prepared ( April 1996 ). This higher ratio is favor-
able to the Company, allowing an advantage in its dealings
where these declining foreign currencies' rates of exchange are
involved.
In February, 1996 the Company completed a public offering
of its securities and received in excess of Two Million
($2,000,000) Dollars which sum will adequately take care of the
Company's cash requirements for the present and foreseeable
future.
In the first quarter of Fiscal 1995, interest expense was
$18,195 as compared to $13,293 in the first quarter of Fiscal
1996. Interest income increased to $18,354 for the first quar-
ter of Fiscal 1996 as compared to $73 for the same period of
Fiscal 1995. The bulk of this income was from temporary invest-
ments utilizing the proceeds of the public offering completed
February 1, 1996.
<PAGE>
Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
- continued -
The Company is expanding and improving in several areas
of its electronic component products sales base;
The Company's relay program commenced shipments in the
first quarter of 1996 and continues to show growth. Customer
orders, exceeding $149,600 have been received. This initial
order, for a specific new customer, is forecast by the customer
to increase to over $1,000,000 in Fiscal 1997. With the initia-
tion and projected expansion of this program, Management anti-
cipates a growth to relay sales levels exceeding $1,500,000
annually by the end of the 1997 Fiscal year. These expanding
sales activities are a direct result of Management's trip to
mainland China, April of 1995. Management will in April, 1996,
duplicate its earlier visit to mainland China, Hong Kong and
Taiwan not only to seek new electronic products to add to it's
line, but also to meet with electronic engineers to establish a
Company Far East office in either Hong Kong or Mainland China
for quality control, production scheduling and local business
affairs.
The latest addition to the Company's line of electronic
components is a 120 volt AC wall transformer, as used by many
household products for the generation of low voltage AC power.
Inventories of this product has already been received by the
Company. The immediate potential sales for the Company relate
to the "home security" systems used in businesses, homes and
apartments. Unshipped purchase orders for this product as at
the end of the first quarter of Fiscal 1996 was $161,400. The
Company has been advised by "UL" in Hong Kong that the Company's
transformer units which are being manufactured in mainland China
have passed all requirements for and received "UL" and "CSA"
( Underwriter's Labs. and Canadian Standards ) approvals. This
line of transformers now introduces a new product line that will
produce anticipated sales to a new customer base.
Part II
Other Information
Item 1 - Legal Proceedings
None.
<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, thereunto duly authorized.
TECH ELECTRO INDUSTRIES, INC.
May 13, 1996 /s/ Craig D. La Taste
__________________ _____________________________
Date Craig D. La Taste
Chairman of the Board and
President
May 13, 1996 /s/ Julie Sansom-Reese
__________________ ______________________________
Date Julie Sansom-Reese
Chief Financial Officer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,993,898
<SECURITIES> 0
<RECEIVABLES> 618,334
<ALLOWANCES> 0
<INVENTORY> 1,065,644
<CURRENT-ASSETS> 3,780,460
<PP&E> 469,701
<DEPRECIATION> 294,481
<TOTAL-ASSETS> 4,186,167
<CURRENT-LIABILITIES> 779,320
<BONDS> 2,000
0
0
<COMMON> 1,258,275
<OTHER-SE> 365,000
<TOTAL-LIABILITY-AND-EQUITY> 4,186,167
<SALES> 867,944
<TOTAL-REVENUES> 886,298
<CGS> 617,396
<TOTAL-COSTS> 248,639
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,293
<INCOME-PRETAX> 6,970
<INCOME-TAX> 1,046
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,924
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
