SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
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CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NO.: 0-28887
Date of Report: October 27, 2004
TELCO-TECHNOLOGY, INC.
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(Exact name of registrant as specified in its charter)
Delaware 22-3328734
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(State of other jurisdiction of (IRS Employer
incorporation or organization Identification No.)
111 Howard Street, Suite 108, Mt. Arlington New Jersey 07856
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(Address of principal executive offices) (Zip Code)
(973) 398-8183
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(Registrant's telephone number including area code)
68 Skyview Terrace, Clifton New Jersey 07013
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(Former address, if changed since last report) (Zip Code)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of
the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 2.01 COMPLETION OF ACQUISITION OF ASSETS
Item 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
Item 5.02 DEPARTURE OF DIRECTORS; ELECTION OF DIRECTORS; APPOINTMENT OF
PRINCIPAL OFFICERS
On October 27, 2004, Telco-Technology, Inc. ("Telco") acquired from
GreenSpace Capital, L.L.C., and Acutus Capital, L.L.C. the outstanding
capital stock of GreenWorks Corporation ("GreenWorks"). In exchange for the
GreenWorks shares, Telco issued to each of the selling shareholders 500,000
shares of Series A Convertible Preferred Stock (the "Preferred Stock") and a
demand promissory note in the principal amount of $100,000. The Preferred
Stock is entitled to vote with the common stock on all matters. Each share
of Preferred Stock is convertible into 100 shares of common stock at any time
after December 31, 2005. The number of votes which may be cast by a holder
of shares of Preferred Stock will be equal to the number of shares of the
common stock into which the Preferred Stock could be converted (an aggregate
of 100,000,000 prior to any adjustment).
On October 27, 2004 Telco entered into a Consulting Agreement with Donalson
Capital Corporation. Donalson Capital Corporation is owned by Donald
McKelvey, who was the President and majority shareholder of Telco until
October 27, 2004, when he sold the majority of his shares to GreenSpace
Capital and Acutus Capital. The Consulting Agreement provides that Mr.
McKelvey will render financial and management advisory services to Telco
until October 27, 2005. In compensation for his services, Telco will issue
shares of common stock to Mr. McKelvey once each month for the first eight
months in the term of the contract. The number of shares issued each month
will equal the product of $24,375 divided by the average closing market price
of Telco common stock for the thirty trading days preceding the date of
issuance. The number of shares issued in the first monthly allotment will be
902,778.
On October 21, 2004 Telco sold to Cornell Capital Partners, LP a 5% Secured
Convertible Debenture in the principal amount of $500,000 (the "Debenture").
Telco obtained net proceeds of $425,000, after payment of a $60,000
commitment and structuring fee to Cornell Capital Partners as well as a
$15,000 fee relating to the Standby Equity Distribution Agreement discussed
below. Interest that accrues on the Debenture is payable at maturity. The
principal amount of the Debenture is payable on October 21, 2007. However
the principal amount of the Debenture will be automatically converted into
Telco common shares on October 21, 2006. Prior to that date, the holder of
the Debenture has the option to convert the accrued interest and principal
amount of the Debenture into Telco common shares at any time. Whenever the
principal amount of the Debenture is converted into common shares, whether
automatically or by the holder, the conversion price will equal the lesser of
(a) 120% of the closing bid price on the conversion date or (b) 80% of the
lowest closing bid price for the five trading days preceding the conversion
date.
On October 27, 2004 Telco utilized a portion of the proceeds of the
Debenture to satisfy its $200,000 in notes payable to GreenSpace Capital and
Acutus Capital, which were issued as partial consideration for Telco's
acquisition of GreenWorks.
On October 21, 2004 Telco entered into a Standby Equity Distribution
Agreement ("SEDA") with Cornell Capital Partners, LP. The SEDA will become
effective on the date on which the Securities and Exchange Commission
declares effective a registration statement containing a prospectus that will
permit Cornell Capital Partners to resell to the public any common shares
that it acquires from Telco. The SEDA provides that during the two years
commencing on the effective date of the SEDA Telco may demand that Cornell
Capital Partners purchase shares of common stock from Telco. Telco may make
a demand no more than once every eight trading days. The maximum purchase
price on each demand is $250,000. The aggregate maximum that Telco may
demand from Cornell Capital Partners is $5,000,000. The number of shares
that Cornell Capital Partners will purchase after a demand will be determined
by dividing the dollar amount demanded by a per share price. The per share
price used will be 95% of the lowest daily volume-weighted average price
during the five trading days that follow the date a demand is made by Telco.
Cornell Capital Partners is required by the Agreement to pay each amount
demanded by Telco, unless (a) there is no prospectus available for Cornell
Capital Partners to use in reselling the shares, (b) the purchase would
result in Cornell Capital Partners owning over 9.9% of Telco's outstanding
shares, or (c) the representations made by Telco in the Agreement prove to be
untrue.
In consideration for the execution of the SEDA, Telco issued to Cornell
Capital Partners a non-interest-bearing Convertible Debenture in the
principal amount of $250,000. The principal amount of the Debenture is
payable on October 21, 2007. However the principal amount of the Debenture
will be automatically converted into Telco common shares on that date. Prior
to October 21, 2007, the holder of the Debenture has the option to convert
the principal amount of the Debenture into Telco common shares at any time.
Whenever the principal amount of the Debenture is converted into common
shares, whether automatically or by the holder, the conversion price will
equal the lowest volume weighted average price for the common stock during
the five trading days preceding the conversion date.
Security Ownership of Certain Beneficial Owners and Management
Upon the closing of the acquisition of GreenWorks by Telco, there were
28,974,944 shares of Telco common stock issued and outstanding as well as
1,000,000 shares of Series A Preferred Stock convertible into 100,000,000
common shares, or 128,974,944 common shares on a fully-diluted basis. The
following table sets forth the number of Telco shares beneficially owned by
each person who, as of the closing, will own beneficially more than 5% of
either class of Telco's voting stock, as well as the ownership of such shares
by each director of Telco and the shares beneficially owned by the new
directors as a group.
Amount of
Name and Beneficial Aggregate
Address of Ownership Percent of Class Percent of
Beneficial -------------------- ---------------- Voting
Owner Common Preferred Common Preferred Power
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James L. Grainer -- (1) -- 0%(1) 0% 0%
All directors as a group
(1 person) -- (1) -- 0%(1) 0% 0%
Greenspace Capital, LLC 7,033,938 500,000 24.3% 50% 44.2%
P.O. Box 284
Mt. Arlington, NJ 07856
Acutus Capital, LLC 7,033,938 500,000 24.3% 50% 44.2%
411 Hackensack Ave.
Hackensack, NJ 07601
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(1) Mr. Grainer has an understanding with GreenWorks that shortly after the
closing of the acquisition of GreenWorks by Telco, Telco will issue common
shares to Mr. Grainer to compensate him for services rendered in connection
with GreenWorks' acquisition of Enviro-Sciences, Inc. The number of shares
that will be issued has not yet been determined.
Directors and Executive Officers
On October 27, 2004 Donald McKelvey and Robert McKelvey resigned from their
positions as the officers and directors of Telco. Their resignations were a
condition for the acquisition of GreenWorks by Telco.
This table identifies the officers and the members of Telco's Board of
Directors after its acquisition of GreenWorks. Directors serve until the
next annual meeting of shareholders and until their successors are elected
and qualify. Officers serve at the pleasure of the Board of Directors.
Director
Name Age Position with the Company Since
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James L. Grainer 50 Director, Chief Executive 2004
Officer, Chief Financial Officer
James L. Grainer. Mr. Grainer has made his career in the fields of
investment banking and financial management and accounting. Since June 2004
Mr. Grainer has been a consultant to GreenWorks Corporation, assisting
GreenWorks in connection with its acquisition of Enviro-Sciences, Inc. From
2003 until June 2004 Mr. Grainer was the Chief Financial Officer of Polo
Linen, where he was responsible for that company's financial management and
was involved in all aspect of strategic management. From 2001until 2003 Mr.
Grainer was the Managing Director of Investment Banking and Head of the
Investment Banking Group at Zanett Securities, a merchant banking firm
located in New York City. From 1992 until 2001 Mr. Grainer was a Managing
Director in the Investment Banking Group at Prudential Securities, where he
served as a member of the Management Committee for the Prudential Securities
Private Equity Fund and held other financial management positions. Prior to
joining Prudential Securities, Mr. Grainer was employed by Deloitte & Touche,
Mr. Grainer is licensed as a certified public accountant in the State of New
York.
Nominating and Audit Committee
The Board of Directors does not have an audit committee or a nominating
committee, due to the small size of the Board. Mr. Grainer, however, is an
"audit committee financial expert" within the definition given by the
Regulations of the Securities and Exchange Commission, by reason of his
experience in public accounting and as a financial officer.
Code of Ethics
Telco does not have a written code of ethics applicable to its executive
officers. The Board of Directors has not adopted a written code of ethics
because there is only one member of management.
Shareholder Communications
The Board of Directors will not adopt a procedure for shareholders to send
communications to the Board of Directors until it has reviewed the merits of
several alternative procedures.
Executive Compensation
Mr. Grainer has not received compensation from either Telco, GreenWorks,
Enviro-Sciences, Inc. or any affiliate of any of them.
Related Party Transactions
Since June 2004 Mr. Grainer has been acting as a consultant to GreenWorks
Corporation. In that role, he has assisted in negotiating the acquisition by
GreenWorks of the business and certain assets of Enviro-Sciences, Inc., and
has performed due diligence for GreenWorks in connection with that
acquisition. The acquisition of Enviro-Sciences, Inc. by GreenWorks was
completed immediately prior to the acquisition of GreenWorks by Telco. In
compensation for his services, GreenWorks has agreed that after the
acquisition Telco will issue shares of common stock to Mr. Grainer. The
number of shares to be issued will be determined by agreement among Mr.
Grainer and the shareholders of GreenWorks.
Business of the Company
Telco today has one asset: the outstanding shares of GreenWorks.
GreenWorks was recently organized for the purpose of acquiring Enviro-Sciences,
Inc. ("ESI"). It acquired the business and assets of ESI immediately prior
to the acquisition of GreenWorks by Telco. As a result, the business of
Telco is now the business carried on prior to this date by ESI.
Since 1975 ESI has been engaged in the business of providing consulting,
technical, engineering and construction services to alleviate the
environmental problems of its clients. ESI's clients include Fortune 100 and
other industrial companies, commercial firms, engineering and construction
contractors, law firms, utilities, real estate developers and government
entities. Among the services currently provided by ESI are:
* Environmental Auditing. ESI's audits typically involve the
identification of areas of potential environmental problems that should be
addressed in connection with regulatory compliance, property transactions,
or business divestitures or acquisitions. ESI couples the results of its
audits with recommendations for a remedial program to resolve the outstanding
issues identified in the audit.
* Site Assessment Services. ESI provides assessment services to delineate
and model the location, extent and migration of contaminated media. These
services are often provided subsequent to an ESI site audit.
* Environmental Compliance Services. Among the environmental compliance
services provided by ESI are air quality permitting, monitoring and
modelling, preparation of compliance plans, stormwater and wastewater
permitting, and TSDF audits.
* Toxicology and Risk Assessment Services. These services are often
provided to satisfy regulatory requirements for product advocacy and
defence. ESI also offers epidemiological research to provide defensible
solutions to chemical exposures or releases.
* Engineering Services. ESI engineers have successfully designed,
permitted and implemented environmental remediation systems using a wide
array of technologies.
In addition, ESI has developed an active Brownfields program designed to
take properties through cleanup to redevelopment. In some cases, ESI purchases
the contaminated property for its own account, performs the remediation, and
redevelops the property. Telco intends to devote substantial efforts to
expanding this aspect of ESI's business plan.
ESI markets its services directly to prospective clients. A great portion
of ESI's business is generated by referrals from existing clients. ESI competes
in an industry populated by a multitude of large and small environmental
companies. ESI's strategy for achieving competitive advantage is to offer
complete turnkey solutions that it implements within a fixed budget and on
time.
ESI currently has 19 full time employees. Five are involved in
administration. The remainder perform technical functions in connection with
ESI's service projects.
Item 9.01 Financial Statements and Exhibits
Financial Statements
Telco-Technology, Inc. Pro Forma Combined Financial Statements - to be filed
by amendment.
Financial Statements of GreenWorks Corporation for the period ending June 30,
2004 (unaudited) - to be filed by amendment.
Audited Financial Statements of Enviro-Sciences, Inc. for the years ended
December 31, 2003 and 2002 - to be filed by amendment.
Financial Statements of Enviro-Sciences, Inc. for the six months ended June
30, 2004 and 2003 (unaudited) - to be filed by amendment.
Exhibits
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10.1 Share Purchase and Sale Agreement by and among GreenWorks Corporation,
GreenSpace Capital, L.L.C. , Acutus Capital, L.L.C. and the Company,
dated September 24, 2004 - filed as an exhibit to the Registrant's
Current Report on Form 8-K dated September 24, 2004.
10.2 Certificate of Designation of Series A Convertible Preferred Stock
10.3 Consulting Agreement dated October 21, 2004 between Telco-Technology,
Inc. and Donalson Capital Corporation.
10.4 5% Secured Convertible Debenture dated October 21, 2004 issued to
Cornell Capital Partners, LP
10.5 Standby Equity Distribution Agreement dated October 21, 2004 between
Telco-Technology, Inc. and Cornell Capital Partners, LP
10.6 Convertible Debenture dated October 21, 2004 issued to Cornell Capital
Partners, LP
99.1 Press Release dated October 28, 2004.
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.
TELCO TECHNOLOGY, INC.
Dated: October 27, 2004 By: /s/ James L. Grainer
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James L. Grainer, Chief
Executive Officer