UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
|X| Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the quarterly period ended June 30, 2005.
|_| Transition report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 (No fee required) for the transition period from _____________ to
_______________.
Commission file number: 011-16099
---------------
telcoBlue, Inc.
---------------
(Name of Small Business Issuer in its Charter)
Delaware 43-1798970
----------- -----------------
(State of Incorporation) (I. R. S. Employer
Identification No.)
3166 Custer Drive, Suite 101
Lexington, KY 40517
----------------------------
(Address of principal executive offices)(Zip Code)
(859) 245-5252
------------------
(Issuer's telephone number)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 the past 90 days.
Yes |X| No |_|
The number of shares outstanding of Registrant's common stock ($0.001 par value)
as of the quarter ended June 30, 2005 is 37,661,075.
TABLE OF CONTENTS
Page
----
PART I
ITEM 1. FINANCIAL STATEMENTS............................................... 1
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION............................................... 6
PART II
ITEM 1. LEGAL PROCEEDINGS.................................................. 9
ITEM 2. CHANGES IN SECURITIES.............................................. 10
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.................................... 10
ITEM 4. SUBMISSION TO A VOTE OF SECURITY HOLDERS........................... 10
ITEM 5. OTHER.............................................................. 10
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................................... 10
SIGNATURES.................................................................. 11
TELCO BLUE, INC.
BALANCE SHEET
JUNE 30, 2005
(UNAUDITED)
ASSETS
Current assets
Cash $ --
-----------
Total current assets --
Fixed assets, net 244,278
-----------
Total assets $ 244,278
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Bank overdraft $ 113,946
Accounts payable and accrued liabilities 761,579
Loans payable - current portion 1,225
Due to related parties 426,295
Other liabilities 472,500
-----------
Total current liabilities 1,775,545
Long-term liabilities
Loans payable - long-term portion 427,060
-----------
Total liabilities 2,202,605
Stockholders' deficit
Common stock; $0.001 par value; 75,000,000 shares
authorized 37,661,075 shares issued and outstanding 37,661
Additional paid-in capital 622,079
Accumulated deficit (2,618,067)
-----------
Total stockholders' deficit (1,958,327)
-----------
Total liabilities and stockholders deficit $ 244,278
===========
See Accompanying Notes to Condensed Financial Statements
1
TELCO BLUE, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
For the For the For the For the
three months three months six months six months
ended ended ended ended
June 30, 2005 June 30, 2004 June 30, 2005 June 30, 2004
-------------- -------------- -------------- --------------
Revenues $ -- $ 158,455 $ -- $ 195,176
Cost of revenues -- 48,177 -- 59,193
-------------- -------------- -------------- --------------
Gross profit -- 110,278 -- 135,983
Operating expenses
Selling, general and administrative 56,830 405,163 163,433 599,660
-------------- -------------- -------------- --------------
Total operating expenses 56,830 405,163 163,433 599,660
-------------- -------------- -------------- --------------
Loss from operations (56,830) (294,885) (163,433) (463,677)
Other expenses
Interest expense -- (10,348) -- (10,991)
Other expense -- (542) -- (552)
-------------- -------------- -------------- --------------
Total other expenses -- (10,890) -- (11,543)
-------------- -------------- -------------- --------------
Net loss $ (56,830) $ (305,775) $ (163,433) $ (475,220)
============== ============== ============== ==============
Basic and diluted loss per common share $ (0.00) $ (0.01) $ (0.01) $ (0.01)
============== ============== ============== ==============
Basic and diluted weighted average common
shares outstanding 37,661,075 27,420,785 37,661,075 34,237,682
============== ============== ============== ==============
See Accompanying Notes to Condensed Financial Statements
2
TELCO BLUE, INC.
STATEMENT OF STOCKHOLDERS' DEFICIT
(UNAUDITED)
Common Stock Total
------------------------------- Additional Accumulated Stockholders'
Shares Amount Paid-in Capital Deficit Deficit
--------------- --------------- --------------- --------------- ---------------
Balance, December 31, 2004 37,661,075 $ 37,661 $ 622,079 $ (2,454,634) $ (1,794,894)
Net loss -- -- -- (163,433) (163,433)
--------------- --------------- --------------- --------------- ---------------
Balance, June 30, 2005 37,661,075 $ 37,661 $ 622,079 $ (2,618,067) $ (1,958,327)
=============== =============== =============== =============== ===============
See Accompanying Notes to Condensed Financial Statements
3
TELCO BLUE, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the For the
six months six months
ended ended
June 30, 2005 June 30, 2004
------------- -------------
Cash flows from operating activities:
Net loss $ (163,433) $ (475,220)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation 23,625 29,028
Changes in operating assets and liabilities:
Change in accounts receivable, net 3,995 98,933
Change in inventory -- 53,574
Change in bank overdraft 104,603 (6,169)
Change in accounts payable and accrued liabilities (105,348) 62,952
Change in other liabilities -- 133,163
------------- -------------
Net cash used by operating activities (136,558) (103,739)
Cash flows from investing activities:
Purchase of fixed assets -- (207)
Change in due from related parties 136,558 5,772
------------- -------------
Net cash used by investing activities 136,558 5,565
Cash flows from financing activities:
Change in due to related parties -- 98,174
Proceeds from issuance of common stock -- --
Change in additional paid in capital -- --
Proceeds from borrowings on notes payable -- --
------------- -------------
Net cash provided by financing activities -- 98,174
------------- -------------
Net change in cash -- --
Cash, beginning of period -- --
------------- -------------
Cash, end of period $ -- $ --
============= =============
See Accompanying Notes to Condensed Financial Statements
4
TELCOBLUE, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with Securities and Exchange Commission requirements for interim
financial statements. Therefore, they do not include all of the information
and footnotes required by accounting principles generally accepted in the
United States for complete financial statements.
The interim financial statements present the condensed balance sheet,
statements of operations, member' deficit and cash flows of TelcoBlue, Inc.
The financial statements have been prepared in accordance with accounting
principles generally accepted in the United States.
The interim financial information is unaudited. In the opinion of
management, all adjustments necessary to present fairly the financial
position as of June 30, 2005 and the results of operations presented herein
have been included in the financial statements. Interim results are not
necessarily indicative of results of operations for the full year.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to
make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
2. SIGNIFICANT ACCOUNTING POLICIES
Use of estimates - The preparation of unaudited financial statements in
conformity with accounting principles generally accepted in the United
States requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the unaudited financial statements
and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
3. GOING CONCERN
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The Company has incurred
cumulative net losses of approximately $2,618,067 since its inception and
requires capital for its contemplated operational and marketing activities
to take place. The company's ability to raise additional capital through
the future issuances of the common stock is unknown. The obtainment of
additional financing, the successful development of the Company's
contemplated plan of operations, and its transition, ultimately, to the
attainment of profitable operations are necessary for the Company to
continue operations. The ability to successfully resolve these factors
raise substantial doubt the Company's ability to continue as a going
concern. The financial statements of the Company do not include any
adjustments that may result from the outcome of these aforementioned
uncertainties.
5
Item 2. Management's Discussion and Analysis or Plan of Operation
The following discussion and analysis should be read in conjunction with
telcoBlue's financial statements and notes thereto included elsewhere in this
Form 10-QSB.
Except for the historical information contained herein, the discussion in this
Form 10-QSB as amended contains certain forward looking statements that involve
risks and uncertainties, such as statements of telcoBlue's plans, objectives,
expectations and intentions. The cautionary statements made in this Form 10-QSB
should be read as being applicable to all related forward statements wherever
they appear in this Form 10-QSB. telcoBlue's actual results could differ
materially from those discussed here.
Nature of Business. telcoBlue, Inc., formerly Better Call Home, Inc. ("BCH"), a
development stage company, was formed in Nevada on August 2, 2002, to operate an
Internet based long distance telephony network using state of the art Voice over
Internet Protocol.
6
On August 29, 2002, BCH entered into a reorganization with Wave Power.net, Inc.,
an inactive public company, whereby Wave Power acquired all of the issued and
outstanding shares of BCH's common stock by issuing to BCH's shareholders, pro
rata, 16,000,000 shares of Wave Power common stock. At that time, Wave Power had
14,000,000 shares outstanding. The combined entity changed its name to
telcoBlue, Inc. on August 29, 2002.
On January 22, 2004, telcoblue, Inc. acquired all the issued and outstanding
stock of Promotional Containers Manufacturing, Inc. ("PCM"), a private Nevada
company in exchange for 28,700,000 shares of telcoBlue, Inc. ("TELCO") common
stock through a tax-free stock exchange, the terms and conditions set forth in
an Agreement and Plan of Reorganization ("Agreement and Reorganization"). The
company presently trades on the Over the Counter Bulletin Board stock exchange
under the symbol, "TBLU".
The 28,700,000 shares were issued to James N. Turek, II, the son of James N.
Turek, Sr., the President of telcoBlue, Inc.
GMB since its beginning in 1906 has expanded its product offerings from
photomounts and other related paper packaging items to padded folios, wedding
albums, baby albums, and today offers more than 2,000 products to its current
clients.
The company's founder, Mr. Oliver Gross, was born in Takay, Hungary, in 1875 and
came to the United States in 1889. In 1898 he was joined by two brothers in a
company called, "The Western Photo and View Company". Touring the West and
South, they would arrive into town, pitch a tent, and begin to photograph (with
flash powder) the people, stores, and plants of the community. One of their
stops was Toledo, Ohio, where they decided to stay. They eventually formed the
basis of Gross Manufacturing Corporation. The original business was photographic
supply items. One item, which they purchased, from an eastern film, was card
mounts, which were used to serve as a support for photographers' pictures.
Because the supply became irregular, Mr. Gross bought some presses and started
to make his own card mounts. This card mount business developed into more
elaborate presentations now used by professional photographers worldwide.
In 1930, his son, Mr. Robert Gross, joined the company and through the years,
ran the Photomount Manufacturing, as well as a large retail and supply business
from 1948 to 1970.
In 1973 the "Nova" frame was introduced, which put the company into the plastic
frame business.
The Company moved from Toledo, Ohio in 1980 to the City of El Paso, Texas,
located at 6001 Threadgill Ave. This allowed the Company to remain cost
competitive through reduced labor costs. In the late 1980's, Gross purchased
Medick-Barrow's, one of its competitors.
In the spring of 2003, PCM acquired GMB's assets and began to update its systems
and manufacturing. These changes allows us to provide digital as well as
standard products while maintaining our quality.
7
BIOGRAPHIES
James N. (Jim) Turek, Sr., 60, is President and CEO. Jim is also President and
CEO of Plasticon International, Inc, a Wyoming corporation, which presently
trades on the Pink Sheet Stock Exchange under the symbol, "PLNI". Jim was
previously President of International Plastics Group. Before International
Plastics Group, he served as President of three major convention and travel
destinations. Jim began his career as a Corporate Financial Advisor working
directly for the controller of McDonnell Douglas, Corporation. Upon the
successful completion of his responsibilities, he was made Director of
Convention, Print, Media, Travel, and Cinema Photography for McDonnell Douglas
Corp. with responsibilities for all US and International Component companies.
The scope of responsibility included commercial and military aircraft, weapon
systems, space (NASA), MAC electronics, holography, voice synthesizing, MAC DAC
(the largest computer facility in the US for McDonnell Douglas Corp.)
scheduling, grading, interactive graphics, and school systems product,
positioning, marketing, and representation.
James B. (Jim) Bonn, in-house counsel, age 73, has practiced law and accounting
for over 40 years. As a lawyer and CPA, Mr. Bonn was responsible for the
contracts division of the United States Navy. He spent several years in
accounting and as an auditor for Peat, Marwick, Mitchell & Co. During the past
ten years, Mr. Bonn has been in private practice specializing in corporate tax
and related legal matters.
Capital Resources and Liquidity
During the quarter ended June 30, 2005 there were no issuances of the Company's
common stock.
Results of Operations
For the three month period ended June 30, 2005, the Company sustained a loss of
($59,830) or ($0.00) per share (basic and diluted) on no revenues compared to a
loss of $163,433 for the second quarter ended 2004 on revenues of $36,721. The
loss in the second quarter of 2005 can be contributed to the fact the Company
had no revenues yet still had administrative expenses. The total liabilities and
stockholder's deficit for the quarter ended June, 2005 was $1,958,327.
8
Item 3. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, under the supervision and with the participation of our chief
executive officer and chief financial officer, conducted an evaluation of our
"disclosure controls and procedures" (as defined in Securities Exchange Act of
1934 (the "Exchange Act") Rules 13a-14(c)) within 90 days of the filing date of
this quarterly report on Form 10QSB (the "Evaluation Date"). Due to the lack of
cooperation by old management, certain transactions and agreements may exist
that current management is not aware of. These transactions and agreements could
have potential liability for telcoBlue. New management is seeking a court
injunction to seize and recover all records of telcoBlue. Based on their
evaluation, our chief executive officer and chief financial officer have
concluded that, other than described above, as of the Evaluation Date, our
current disclosure controls and procedures are effective to ensure that all
material information required to be filed in this quarterly report on Form
10-QSB has been made known to them in a timely fashion.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On February 11th, 2004, Creative Containers filed suit against "Telco Blue,
Inc." (sic), in Case No. 2004-631, in the 120th Judicial District Court in and
for El Paso County, Texas on sworn pleadings for unpaid invoices for goods
delivered. Telco Blue did not appear and wholly defaulted. Creative Containers
was awarded a judgment against Telco Blue on April 30th, 2004, in the amount of
$8,158.45, plus attorneys fees in the amount of $1,500.00. The judgment accrues
interest at the rate of 10% per annum. Creative Contains is currently seeking
post-judgment enforcement, to include a hearing for turnover relief. On January
31, 2005, a settlement regarding the debt was reached between the parties in the
amount of $3,000, relieving the corporation from any and all indebtedness to
Creative Containers
On December 23rd, 2003, Philip Moseman filed suit against Mid-America, GMB,
Ltd., and Mid-America Photographics of Kansas, Inc., in the 327th Judicial
District Court, in and for El Paso County, Texas, seeking damages from alleged
breaches of employment agreements. Moseman later amended his suit to include
"Telco Blue, Inc." (sic) as a party defendant. Moseman had originally been hired
by the two predecessor Mid-America employers and claims that his employment
agreement with Mid-America had carried over to his new employer, Promotional
Containers Manufacturing, Inc. (PCM). He claims that Telco Blue, Inc., by
merger, has stepped into the shoes of PCM and is thus liable. The matter is
still pending.
9
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit
Number Description
------ -----------
31.1 Certification by Chief Executive Officer and Chief Financial Officer,
required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act,
promulgated pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification by Chief Executive Officer and Chief Financial Officer,
required by Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act and
Section 1350 of Chapter 63 of Title 18 of the United States Code,
promulgated pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
10
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 this 12 day of August, 2005.
telcoBlue, Inc.
-----------------------------------
/s/ James N. Turek, Sr., President,
CEO & CFO
11