SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) May 12, 1995
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COM-TEK RESOURCES, INC.
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(Exact name of registrant as specified in its charter)
Colorado 0-11546 84-0832977
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(State or other (Commission File (I.R.S. Employer
jurisdiction of Number) Identification No.)
incorporation)
1624 Market Street, Suite 303, Denver, Colorado 80202
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(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code: (303) 595-8555
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ITEM 5. OTHER EVENTS.
BACKGROUND:
In previous communications to shareholders and reports filed under the
Securities Exchange Act of 1934, the Company stressed its intentions to: (i)
seek capital funding; and (ii) pursue various opportunities to expand the
Company's business activities. The Board of Directors has succeeded in
accomplishing both goals.
SUMMARY OF RECENT FINANCING:
On February 15, 1995, English Trust Company Limited completed a placing in
the United Kingdom of 61,000,000 shares of the Company's Common Stock (at 4
pence per share) and 3,262,500 shares of its Preferred Stock (at 80 pence per
share) resulting in gross offering proceeds of L5,050,000 (about $8,080,000 U.S.
at then current exchange rates). All shares were qualified for dealing on the
Unlisted Securities Market ("USM"), a facility of the International Stock
Exchange of the United Kingdom and Republic of Ireland, Ltd. ("London Stock
Exchange").
Upon completion of the placing, the Company had approximately 140 million
of its authorized 150 million shares of Common Stock outstanding.
The Preferred Stock was issued with the attendant terms and conditions:
1) Each share of Preferred Stock is convertible into 22 shares of Common
Stock. Such conversion will automatically occur upon the passing of a
resolution increasing the number of shares of authorized Common Stock
at the Company's forthcoming Annual General Meeting of Shareholders.
2) If the shareholders fail to pass the resolution increasing the
authorized Common Stock or the Company fails to present the resolution
to the shareholders by June 30, 1995, the Company is obligated to file
a registration statement under the Securities Act of 1933 (the "Act")
in respect of the Preferred Stock by September 30, 1995. Such
registration will enable the Preferred Stock to be traded on NASDAQ,
subject to NASDAQ's acceptance thereof.
3) Each share of Preferred Stock is entitled, until converted, to 22
votes at any shareholders' meeting and to 22 times the dividend or
other distribution, in cash or kind, made to the Common Stock.
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4) Holders of Preferred Stock are entitled to receive reports and
quarterly statements delivered by the Company to holders of Common
Stock.
ACCESS POWER AGREEMENT
In November, 1994, the Company reached the agreement summarized below
("Agreement") subject to completion of the placing described immediately above.
This Agreement provided for the acquisition by the Company of the entire
issued share capital of Access Power, Ltd. ("Access Power") and hence of Access
Power's interests in the joint ventures detailed below, all such other prospects
for the development of or participation in certain types of power projects as
have been identified by two former principals of Access Power ("principals") and
for such future opportunities to be made available to Access Power.
Messrs. Malcolm Stone and Samuel Leung were the founders and owners of
Access Power prior to its acquisition by the Company and both have been
appointed Directors of the Company. Since 1993, the principals sought out power
generation opportunities in China. They identified the opportunity to construct
small power stations in China in joint ventures with local power bureaus and
local construction and operation of three power stations.
Access Power was incorporated in May 1994 and, except for entering into the
joint ventures and assisting in the establishment the joint venture contracts,
has had no income since incorporation. See Item 7 hereof.
MAN, a large German engineering group, was identified by Access Power as a
potential supplier of generating sets for the small power stations and Access
Power has entered into supply agreements with MAN and has preliminary agreements
as to equipment financing. Access Power has, in addition, identified certain
other power needs in China, including transformers and power distribution
systems which may be suitable for the Company. Access Power is also
establishing contacts in other Far East developing countries where similar
projects might be established.
Under the terms of the Agreement, the principals, will exclusively
introduce to Access Power, generation business opportunities for the
construction and operation of small power stations (100 megawatts or less),
transmission lines and transformers, covering the supply and distribution, of
electric power principally in China but also elsewhere in the world (including
the United States and the United Kingdom). In particular the principals will
introduce to Access Power a further nine 4 megawatt power station projects in
Guangdong Province in
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China and the 10% interest in the western partner's 54% interest in a China
joint venture established to complete the construction of a 50 megawatt power
stations project in Kaoyeo City, Guangdong Province.
The consideration under the Agreement requires the payment of $50,000
(U.S.) and the issuance of 8,250,000 warrants to purchase the Company's Common
Stock at $0.075 (U.S.) per shares ("Warrants") in respect of each one of the
three generating projects in respect to which Access Power has already reached
agreement, amounting in aggregate to $150,000 (U.S.) and 24,750,000 Warrants.
The $50,000 (U.S.) of the consideration per project is to be satisfied by the
issue of Preferred Stock (or equivalent Common Stock if available) valued at a
Common Stock equivalent of $0.075 (U.S.) per share of Common Stock. The
Preferred Stock and Warrants will be issued as follows:
1) the first 1/3 of such Preferred Stock and Warrants in respect of a
particular project are to be issued upon execution of all appropriate
contracts and the business license in respect of the relevant joint
venture being issued by the relevant Government Department in the
Peoples Republic of China ("PRC") in a form acceptable to the Company;
this condition has been satisfied and the consideration issued in
respect of the first three projects;
2) the second 1/3 of such Preferred Stock and Warrants in respect of a
particular project are to be issued when the completion certificate is
issued by the relevant Government Department certifying that the power
station has passed the operation, reliability and efficiency tests;
3) the final 1/3 of such Preferred Stock and Warrants in respect of a
particular project are to be issued when the first month's revenues
are received by Access Power from power generation from that plant.
If and when the principals introduce up to nine further such 4 megawatt
projects to Access Power, with which the Company decides to proceed, additional
contingent consideration will be paid on the same per project basis.
The Agreement requires the Company to pay to the principals further
consideration of a sum equal to 10% of the estimated project cost of any other
projects introduced by the principals and participated in by Access Power. This
consideration is subject to reduction such that the internal rate of return to
the Company after allowing for the direct cost to the Company and confirmed
third party debt finance, shall not be less than 20%. Such
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contingent consideration may be satisfied in Common Stock (or Preferred Stock if
Common Stock is not available) or cash at the Company's discretion.
In respect of Access Power's 10% interest in the western joint venture
partner which has a 54% interest in a 50 megawatt project at Kaoyeo City, the
principals will also receive $50,000 (U.S.) (to be satisfied by the issue of
Preferred Stock of Common Stock equivalent price of $0.075 (U.S.) per share)
together with 8,250,000 Warrants exercisable at $0.075 (U.S.) per share as well
as the reimbursement of their expenses of $25,000 (U.S.).
Following the introduction of a specific class of business (e.g., power
stations under 10 megawatts), other than the twelve projects referred to above,
in a specific country in respect to three separate projects or five linked
projects, the principals will not thereafter be entitled to any further
contingent consideration in resect of subsequent introductions in such class in
such country.
The obligations of the parties will cease on the fifth anniversary of the
Agreement or may be terminated by either party giving not more than twelve
months' notice expiring on or after the third such anniversary, except that the
parties will continue to owe certain obligations to each other in respect of
participation on projects arising from the introductions by the principals
before such dates.
Under the terms of separate agreements, the principals are entitled to
specific commissions payable in resect of the arranging of a multi project
financing package of up to $20 million (U.S.) for the proposed PRC projects and
for their assistance in the placing. These commissions will amount to 1 1/2%
for each of the value of the financing package (such fee not to exceed $300,000
(U.S.) in any event) and the funds raised in the placing, and are payable in
convertible Preferred Stock.
Upon becoming Directors of the Company and employees of Access Power,
Messrs. Stone and Leung (the principals) became entitled to participate in the
Company's stock option plans. They each were granted options to acquire
22,500,000 shares of Common Stock at $0.075 (U.S.) per share upon completion of
the Agreement. Of these, options on 2,500,000 shares of Common Stock vest upon
Access Power entering into a joint venture in China for each of nine 4 megawatt
power stations constructed and operated by such joint venture. The options will
be exercisable as to 1/3 on the grant and acceptance by the Company of the
business license in respect of the project, 1/3 on the completion of the turnkey
construction contract and the final 1/3 upon the receipt by the joint venture of
the first revenues from the operation of the power station.
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ITEM 7. FINANCIAL STATEMENT AND EXHIBITS
(a) EXHIBITS INCORPORATED BY REFERENCE TO FORM 8-K DATED MARCH 1, 1995:
95.10 (a) Access Power Agreement
95.10 (b) Placing and Underwriting Agreement
95.10 (c) (i) A joint venture contract dated September 25, 1994
between Guangdong Fenshun County's Fenglian Power Co.,
Limited ("Fengshun Fenglian") and Access Power ("the
Fengshun Joint Venture Contract") under which Fengshun
Fenglian and Access Power agreed to establish a co-
operative joint venture company in the name of
Guangdong Fengshun Fenggang Power Company Limited ("the
Fengshun Joint Venture Company") in Fengshun County of
Guangdong Province, PRC for the purposes of designing,
constructing and operating a power station at Fengshun
County, Guangdong with a 3,960 KW diesel fuel
generating unit ("Fengshun Power Station").
95.10 (c) (ii) A joint venture contract dated September 24, 1994
between Guangdong Huilai County's Penghui Power Co.,
Limited ("Huilai Penghui") and Access Power ("the
Kuicheng Joint Venture Contract") under which Huilai
Pengjui and Access Power agreed to establish a co-
operative joint venture company in the name of
Guangdong ("the Kuicheng Joint Venture Company") in
Huilai-County of Guangdong Province, PRC for the
purposes of designing, constructing and operating two
power stations at Huilai County, Guangdong each with a
3,960 KW diesel fuel generating unit ("Kuicheng Power
Station").
95.10 (d) Employment Agreements
(i) Malcolm Stone Agreement
(ii) Dennis C. Dowd Agreement
(iii) Hunter S. Swanson Agreement
(iv) Samuel Leung Agreement
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ITEM 7. (CONT.)
(b) FINANCIAL STATEMENTS:
Pro forma financial information is filed herewith (see pages F-1 through F-
6 attached hereto). The Registrant, however, believes the acquisition of Access
Power, Ltd., the subject of the attached pro forma financial information, is not
considered material within the meaning of Rule 310 (c) of Regulation S-B.
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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.
COM-TEK RESOURCES, INC.
By:
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Dennis C. Dowd, President
Date: May 18, 1995
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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.
COM-TEK RESOURCES, INC.
By: /s/ Dennis C. Dowd
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Dennis C. Dowd, President
Date: May 18, 1995
9
COM-TEK Resources, Inc. and Subsidiaries
CONDENSED PRO FORMA COMBINED BALANCE SHEET
On February 14, 1995, English Trust Company Limited completed a placing and
underwriting in the United Kingdom of 61,000,000 shares of the Company's Common
Stock (at 4 pence per share) and an open offer and placing of 3,262,500 shares
of its Preferred Stock (at 80 pence per share) resulting in gross proceeds of
L5,050,000 (about $8,080,000 U.S. at the then prevailing exchange rates).
Commissions and offering costs were approximately $1,169,000. All shares were
qualified for dealing on the Unlisted Securities Market ("USM"), a facility of
the International Stock Exchange of the United Kingdom and Republic of Ireland,
Ltd. ("London Stock Exchange").
Concurrent with the placing, the Company completed the acquisition of Access
Power, Ltd. in exchange for shares of preferred stock of the Company and
reimbursement of certain expenses of the seller totaling $25,000. As part of
this agreement, the two principals of Access Power are entitled to additional
consideration for introducing power plant projects to the Company, as well as
commissions (in shares of preferred or common stock) for arranging additional
project financing and for their assistance in the offer and placing.
The following unaudited condensed pro forma combined balance sheet assumes that
the offer and placing and the Access Power acquisition occurred on December 31,
1994 and reflects the December 31, 1994 historical consolidated balance sheet of
COM-TEK giving pro forma effect to the offer and placing and the Access Power
acquisition. At the time of the acquisition Access Power had no assets or
liabilities. Also, prior to the acquisition, Access Power had no revenue or
expenses, and as a result, a pro forma statement of operations has not been
included herein. The unaudited condensed pro forma combined balance sheet
should be read in conjunction with the historical financial statements and
related notes of the Company.
F-1
COM-TEK Resources, Inc. and Subsidiaries
CONDENSED PRO FORMA COMBINED BALANCE SHEET
December 31, 1994
(unaudited)
Pro Forma Adjustments
(See Note B) Pro Forma
COM-TEK --------------------------------- Adjusted
Historical Debit Credit COM-TEK
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ASSETS
Current Assets:
Cash $ 25,028 8,080,000 (1) 970,520 (2) $ 7,134,508
Receivables - Oil and Gas 30,874 - - 30,874
Note Receivable 50,000 - - 50,000
Other Current Assets 12,022 - - 12,022
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Total Current Assets 117,924 8,080,000 970,520 7,227,404
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Property, Plant and Equipment:
Oil and Gas Properties (Full cost method) 8,955,992 - - 8,955,992
Less Accumulated Depletion, Amortization and Impairment 2,822,156 - - 2,822,156
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6,133,836 - - 6,133,836
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Gas Gathering System 170,652 - - 170,652
Building, Equipment and Land 124,498 - - 124,498
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295,150 - - 295,150
Less Accumulated Depreciation - - - -
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295,150 - - 295,150
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Furniture and Fixtures 111,120 - - 111,120
Less Accumulated Depreciation 107,673 - - 107,673
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3,447 - - 3,447
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Restricted Cash 25,000 - - 25,000
Power Plant Licenses - 170,667 (5) - 170,667
Deferred Offering Costs 77,760 - 77,760 (4) -
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Total Assets $ 6,653,117 $ 8,250,667 $ 1,048,280 $ 13,855,504
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable, Trade $ 576,066 $ - $ - $ 576,066
Accrued Expenses 110,123 - - 110,123
Payable to Related Parties 198,587 - - 198,587
Notes Payable 345,349 - - 345,349
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Total Current Liabilities 1,230,125 - - 1,230,125
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Note Payable - Long-term 44,045 - - 44,045
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Stockholders' Equity:
Preferred Stock - - 3,262,500 (1) 3,262,500
Preferred Stock to be Issued in Connection with Access
Power Acquisition - - 121,200 (3) 291,867
- 170,667 (5)
Common Stock 797,687 - 610,000 (1) 1,407,687
Additional Paid-in Capital 13,694,659 970,520 (2) 4,207,500 (1) 16,732,679
121,200 (3) -
77,760 (4) -
Accumulated Deficit (9,177,514) - - (9,177,514)
Foreign Currency Translation Adjustment 64,115 - - 64,115
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Total Stockholders' Equity 5,378,947 1,169,480 8,371,867 12,581,334
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Total Liabilities and Stockholders' Equity $ 6,653,117 $ 1,169,480 $ 8,371,867 $ 13,855,504
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F-2
COM-TEK RESOURCES, INC. AND SUBSIDIARIES
Notes to Condensed Pro Forma Combined Balance Sheet
December 31, 1994
(unaudited)
A. BASIS OF PRESENTATION
On February 14, 1995, English Trust Company Limited completed a placing and
underwriting in the United Kingdom of 61,000,000 shares of the Company's Common
Stock (at 4 pence per share) and an open offer and placing of 3,262,500 shares
of its Preferred Stock (at 80 pence per share) resulting in gross offering
proceeds of L5,050,000 (about $8,080,000 U.S. at then prevailing exchange
rates). Commissions and offering costs incurred were approximately $1,169,000.
All shares were qualified for dealing on the Unlisted Securities Market ("USM"),
a facility of the International Stock Exchange of the United Kingdom and
Republic of Ireland, Ltd. ("London Stock Exchange").
Each share of Preferred Stock is convertible into 22 shares of Common Stock. A
resolution to increase the number of shares of authorized Common Stock is set
for a vote at the Annual General Meeting of the Company. Upon approval of the
resolution by the shareholders, the 3,262,500 shares of Preferred Stock will be
automatically converted into 71,775,000 shares of Common Stock, and all
preferences will be extinguished. If no approval to increase authorized common
stock is obtained, the Company is obligated to register the preferred shares in
the U.S.
In November, 1994, the Company reached an agreement in principle, which was
subsequently executed in definitive form on January 17, 1995, to acquire the
entire issued share capital of Access Power, Ltd., along with Access Power's
interests in certain joint ventures. Access Power is currently in the
development stage, seeking to develop, or participate in the development of,
small scale power projects, principally in the Peoples Republic of China and
elsewhere in the Far East. The Company acquired Access Power concurrent with
the closing of the offer and placing described above on February 14, 1995.
Under the terms of the Access Power agreement the Company is required to issue
30,303 shares of Preferred Stock, and 8,250,000 Warrants to purchase the
Company's Common Stock (at $0.075 per share), for each one of three power plant
projects which Access Power has presently entered into joint venture agreements
for and for which the joint ventures have received licenses to construct the
power plants. The Preferred Stock and Warrants are to be issued in three
installments as certain benchmarks are achieved related to the development of
each project. The first 1/3 of such Preferred Stock and Warrants are to be
issued upon execution of all appropriate contracts and receipt of the business
license for each project. The second 1/3 of such Preferred Stock and Warrants
are to be issued upon issuance of the completion certificate for each project.
The last 1/3 of such
F-3
COM-TEK RESOURCES, INC. AND SUBSIDIARIES
Notes to Condensed Pro Forma Combined Balance Sheet
December 31, 1994
(unaudited)
A. BASIS OF PRESENTATION (CONTINUED)
Preferred Stock and Warrants are to be issued upon receipt of revenue from each
project. A total of 90,909 shares of Preferred Stock (convertable into
approximately 2,000,000 shares of Common Stock) and 24,750,000 Warrants are to
be issued in connection with the initial three power plant projects.
Also under the terms of the Access Power agreement, the Company has agreed to
issue an additional 30,303 shares of Preferred Stock and an additional 8,250,000
Warrants to purchase Common Stock at $0.075 per share, for each of up to nine
additional projects in Guangdong Province, China, that the principals may
introduce to the Company. A total of 272,727 shares of Preferred Stock
(convertable into approximately 6,000,000 shares of Common Stock) and 74,250,000
Warrants may be issued in connection with up to nine subsequent power plant
projects in China.
The principals have also been issued a total of 30,303 shares of Preferred Stock
and 8,250,000 Warrants to purchase the Company's Common Stock (at $0.075 per
share) and have received reimbursement of expenses of $25,000 in consideration
for Access Power's 10% interest in the western joint venture partner which has a
54% interest in a 50 megawatt power plant project in China.
The acquisition of Access Power has been accounted for as a purchase. The
Preferred Stock to be issued attributable to the first three power plants and
the Preferred Stock to be issued attributable to the interest in the 50 megawatt
power plant project, has been recorded at its aggregate market value, determined
by reference to the price of the Preferred Stock issued in the offer and placing
that closed concurrent with the Access Power agreement. No value has been
attributed to the Warrants that are to be issued along with the Preferred Stock.
The Company believes that the value of such Warrants is nominal, since the
exercise price of the Warrants was more than 20% above the then market price of
the Common Stock. Access Power had no assets or liabilities at the time of the
acquisition; accordingly, the entire amount of the consideration for the
Acquisition has been recorded as an intangible asset (Power Plant Licenses), to
be amortized over the 15 year term of the associated power purchase agreements.
Under the terms of separate agreements, the principals received 73,454 shares of
Preferred Stock in connection with services provided by them relating to the
offer and placing. The value of the shares issued was recorded as a cost of the
offering and placing. The principals are also entitled to a commission of 1
1/2% (payable in Preferred Stock) for arranging multi-project financing packages
of up to $20 million for the proposed power plant projects.
F-4
COM-TEK RESOURCES, INC. AND SUBSIDIARIES
Notes to Condensed Pro Forma Combined Balance Sheet
December 31, 1994
(unaudited)
A. BASIS OF PRESENTATION (CONTINUED)
Additionally, the agreement requires the Company to pay to the principals
consideration of up to 10% of the gross projected project cost of other projects
introduced, with certain limitations. The consideration is payable in Preferred
or Common Stock of the Company.
Upon becoming directors of the Company, each of the principals became entitled
to participate in the Company's stock option plan. Each principal can receive
options to purchase up to 22,500,000 shares of Common Stock at $0.075 per share.
Options for 2,500,000 shares of Common Stock are to be issued to each of the
principals upon Access Power entering into a joint venture agreement for the
construction and operation of each of up to nine power plants in China. All
options will become exercisable in equal installments as the benchmarks
described above for the Warrants are achieved. Options for a total of
15,000,000 shares of Common Stock have been issued in connection with the three
initial power plant projects. The options expire three years from date of
issue.
Additional shares, if any, of Preferred Stock (or equivalent shares of Common
Stock) that are issued to the principals of Access Power in connection with
future power plant projects will be recorded at then market value of the shares
issued. Any additional Warrants and Options that are issued in connection with
such power plant projects will be accounted for in accordance with the
provisions of Accounting Principles Board Opinion No. 25, and compensation
expense will be recorded as the Warrants and Options are issued and become
exercisable, to the extent that the then market price of the Common Stock
exceeds the exercise price of the Warrants and Options.
The accompanying condensed pro forma balance sheet includes pro forma
adjustments to give effect to the offer and placing and acquisition as of
December 31, 1994.
B. PRO FORMA ADJUSTMENTS
The following pro forma adjustments have been made to the Consolidated Balance
Sheet of the Company at December 31, 1994:
1. To reflect the placing of 61,000,000 shares of the Company's Common Stock
($0.01 par), and 3,262,500 shares of the Company's Preferred Stock ($1.00
par), resulting in gross proceeds of approximately $8,080,000.
F-5
COM-TEK RESOURCES, INC. AND SUBSIDIARIES
Notes to Condensed Pro Forma Combined Balance Sheet
December 31, 1994
(unaudited)
B. PRO FORMA ADJUSTMENTS (CONTINUED)
2. To reflect as an adjustment to paid in capital offering costs incurred
subsequent to December 31, 1994.
3. To reflect the obligation, payable in shares of convertible Preferred
Stock, of the 1 1/2% commission on the funds raised in the offer and
placing.
4. To reflect as an adjustment to paid in capital the deferred offering costs
at December 31, 1994.
5. To record the issuance of 30,303 preferred shares of stock for each of the
three 4 megawatt power plant projects for which Access Power had previously
entered into joint venture agreements for, along with the issuance of
30,303 preferred shares of stock in consideration for the interest in the
50 megawatt project.
F-6