SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 12(g) and Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 8, 1998
TECH ELECTRO INDUSTRIES, INC.
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(Exact name of registrant as specified in its charter)
Texas 0-27210 75-2408297
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(State or other (Commission File No.) (IRS Employer ID No.)
jurisdiction of incorporation)
477 Madison Avenue, 24th Floor, New York, New York 10022
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: 212-583-0900
<PAGE>
Item 2. Acquisition or Disposition of Assets.
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On December 8, 1998, Tech Electro Industries, Inc. ("TEI")
consummated the sale of 141,000 common shares of U.S. Computer Group, Inc.
("USCG"). Consideration received for the sale of these shares, representing
10.6% of USCG=s outstanding common shares, consisted of $211,500 to be received
in cash at closing. TEI had previously, on March 19, 1998, acquired a 51%
controlling interest in USCG for $1,000,000. The sale of the shares results in
TEI no longer maintaining a controlling interest in USCG as TEI is now the
second largest shareholder of record. As a result of the sale, TEI will no
longer include USCG in its consolidated financial statements, but will account
for the investment under the equity method of accounting.
Item 7. Financial Statements.
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(b) PRO FORMA FINANCIAL STATEMENTS
Introductory Paragraph
Unaudited Pro Forma Consolidated Balance Sheet as of September 30, 1998
Unaudited Pro Forma Statement of Operations for the Nine Months Ended
September 30, 1998
<PAGE>
TECH ELECTRO INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Introductory Paragraph
On December 8, 1998, Tech Electro Industries, Inc. ("TEI")
consummated the sale of 141,000 common shares of U.S. Computer Group, Inc.
("USCG"). Consideration received for the sale of these shares, representing
10.6% of USCG=s outstanding common shares, consisted of $211,500 to be received
in cash at closing. TEI had previously, on March 19, 1998, acquired a 51%
controlling interest in USCG for $1,000,000. The sale of the shares results in
TEI no longer maintaining a controlling interest in USCG as TEI is now the
second largest shareholder of record. As a result of the sale, TEI will no
longer include USCG in its consolidated financial statements, but will account
for the investment under the equity method of accounting.
The following unaudited pro forma consolidated balance sheet as of
September 30, 1998, gives effect to the sale of USCG shares as if the sale had
occurred on September 30, 1998. Pro forma financial information would typically
include TEI's statement of operations for the fiscal year ended December 31,
1997. However, since TEI first purchased shares in USCG on March 19, 1998, a
statement for the latest fiscal year is not presented. The pro forma statement
of operations presented for the interim period includes the results of
operations for TEI for the nine months ended September 30, 1998, and assumes the
sale of USCG shares occurred on March 19, 1998.
The unaudited pro forma consolidated financial information is not
necessarily indicative of the results of operations that would have been
reported had such events occurred on the date specified, nor is it necessarily
indicative of the future results of the consolidated entities. The unaudited
consolidated pro forma financial statements should be read in conjunction with
the historical financial statements of the companies.
<PAGE>
Tech Electro Industries, Inc. and Subsidiaries
Pro-forma Consolidated Balance Sheet (Unaudited)
As of September 30, 1998
<TABLE>
<S> <C> <C> <C> <C>
(C)
TEI USCG Adjustments Total
Assets
Current Assets
Cash and cash equivalents $ 1,445,584 $ (559,684) $ 885,900
Accounts and notes receivable
Accounts receivable 2,252,673 (1,584,726) 667,947
Notes 220,000 220,000
Other 147,062 (1,139) $ 211,500 (B) 357,423
Deferred sales costs 238,668 (238,668) -
Inventories 3,748,350 (2,027,140) 1,721,210
Prepaid expenses 667,005 (414,813) 252,192
----------- ----------- ----------
Total current assets 8,719,342 (4,826,170) 4,104,672
Net property and equipment 930,809 (602,639) 328,170
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Other assets
Contract rights 5,164,244 (5,164,244) -
Deferred financing costs 226,934 (226,934) -
Goodwill 3,826,484 (3,826,484) -
Investment in USCG 707,646 61,337 (A) 560,983
(208,000)(B)
Notes receivable 66,755 66,755
Other assets 288,587 (270,599) 17,988
----------- ----------- ----------
Total other assets 9,573,004 (8,780,615) 645,726
----------- ----------- --------- ----------
TOTAL ASSETS $ 19,223,155 $(14,209,424) $ 64,837 $ 5,078,568
=========== =========== ========= ==========
</TABLE>
<PAGE>
Tech Electro Industries, Inc. and Subsidiaries
Pro-forma Consolidated Balance Sheet - Continued (Unaudited)
As of September 30, 1998
<TABLE>
<S> <C> <C> <C> <C>
(C)
TEI USCG Adjustments Total
Liabilities and Stockholders' Equity
Current Liabilities
Current portion of credit
facility obligations $ 334,668 $ (334,668) $ -
Current portion of notes payable 274,678 (64,349) 210,329
Current portion of long term debt 182,041 (182,041) -
Accounts payable-trade 3,142,355 (2,631,084) 511,271
Accrued liabilities 1,091,535 (978,791) 112,744
Deferred service liability 1,605,395 (1,605,395) -
----------- ----------- ----------
Total current liabilities 6,630,672 (5,796,328) 834,344
Long Term Liabilities
Credit facility obligations 7,089,888 (7,089,888) -
Deferred lease incentive 22,731 (22,731) -
Long term debt 78,529 (78,529) -
----------- ----------- ----------
Total liabilities 13,821,820 (12,987,476) 834,344
Minority interest in subsidiary 2,030,631 (2,030,631) -
Stockholder's Equity
Preferred stock 186,338 186,338
Common stock 43,982 43,982
Additional paid-in capital 7,002,903 7,002,903
Subscriptions receivable (107,500) (107,500)
Retained earnings (3,755,019) 808,683 $ 61,337 (A) (2,881,499)
3,500 (B)
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Total stockholders' equity 3,370,704 808,683 4,244,224
----------- ----------- --------- ----------
Total liabilities and
stockholders' equity $ 19,223,155 $(14,209,424) $ 64,837 $ 5,078,568
=========== =========== ========= ==========
</TABLE>
(A) To reflect the effect of reducing ownership interest from 51% to 40.3%
under the equity method of accounting
(B) To reflect sale of 141,000 USCG shares for $211,500
(C) To reflect the effects of deconsolidating USCG assuming a
51% equity ownership
<PAGE>
Tech Electro Industries, Inc. and Subsidiaries
Pro-Forma Consolidated Statement of Operations (Unaudited)
For the Nine Months Ended September 30, 1998
<TABLE>
<S> <C> <C> <C> <C>
(E)
TEI USCG Adjustments Total
Sales and service Revenues $ 17,012,622 $(11,229,225) $ 5,783,397
Cost of sales and revenue and
direct service expense 13,443,753 (9,092,734) 4,351,019
----------- ----------- --------- ----------
Gross profit 3,568,869 (2,136,491) - 1,432,378
Selling, general and administrative
expenses 5,467,518 (2,291,194) $ (388,546)(D) 2,787,778
----------- ----------- --------- ----------
Loss from operations (1,898,649) 154,703 388,546 (1,355,400)
Other income (expense):
Gain on sale of investment 3,500 (B) 3,500
Loss from investment (231,017)(A) (231,017)
Interest income 69,188 69,188
Interest expense (398,311) 372,688 (25,623)
Other (151,663) 45,852 (105,811)
----------- ----------- --------- ----------
Total other income (expense) (480,786) 418,540 (289,763)
Minority share of subsidiary loss 29,201 - 29,201
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Loss before provision for taxes (2,350,234) 573,243 (1,615,962)
Income tax expense:
Current 7,320 - 7,320
----------- ----------- ----------
Total income tax expense 7,320 - 7,320
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Net loss $ (2,357,554) $ 573,243 $ (227,517) $ (1,623,282)
=========== =========== ========= ==========
Loss attributable to common
stockholders $ (2,423,117) $ (1,688,845)
=========== ==========
Loss per share ($0.60) ($0.42)
=========== ==========
Number of weighted average shares
of common shares outstanding 4,063,940 4,063,940
=========== ==========
</TABLE>
(A) To reflect the effect of reducing ownership interest from 51% to 40.3%
under the equity method of accounting
(B) To reflect sale of 141,000 USCG shares for $211,500
(D) To reflect consolidated reduction of goodwill and contract rights
amortization
(E) To reflect effects of deconsolidating USCG
<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.
TECH ELECTRO INDUSTRIES, INC.
Date: December 22, 1998 /s/ Donna L. Gilbert
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Donna L. Gilbert
Chief Accounting Officer
