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 September 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
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telcoBlue, Inc.
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(Name of Small Business Issuer in its Charter)
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Delaware |
43-1798970 |
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(State of Incorporation) |
(I.R.S. Employer |
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Identification No.) | ||||||
3166 Custer Drive, Suite 101
Lexington, KY 40517
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(Address of principal executive offices) (Zip Code)
(859) 245-5252
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(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 small business issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
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Yes x No [ ] |
Indicate by check mark whether the small business issuer is a shell company (as defined in Rule 12b-2 of the Exchange Act).
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YES [ ] |
No x |
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of September 30, 2005, the number of the Company's shares of par value $.001 common stock outstanding was 37,661,075.
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Transitional Small Business Disclosure format (check one): Yes [ ] |
No x |
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TABLE OF CONTENTS |
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Page |
PART I
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ITEM 1. |
CONDENSED FINANCIAL STATEMENTS |
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telcoBlue, Inc. Condensed Consolidated |
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Balance Sheets |
F-1 | ||
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telcoBlue, Inc. Condensed Consolidated |
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Statements of Operations (Unaudited) |
F-2 | |
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telcoBlue, Inc. Condensed Consolidated |
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Statements of Cash Flows (Unaudited) |
F-3 | |
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
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OR PLAN OF OPERATION |
3 |
PART II
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ITEM 1. LEGAL PROCEEDINGS |
7 |
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ITEM 2. CHANGES IN SECURITIES |
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES |
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ITEM 4. SUBMISSION TO A VOTE OF SECURITY HOLDERS |
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ITEM 5. OTHER |
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K |
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SIGNATURES |
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TELCOBLUE, INC.
BALANCE SHEET
SEPTEMBER 30, 2005
(UNAUDITED)
As of As of
September 30, 2005 December 31, 2004
ASSETS
Current assets
$ $
Accounts receivable, net -- 3,995
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Total current assets -- 3,995
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Fixed assets, net 232,465 267,903
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$ $
Total assets 232,465 271,898
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LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
$ $
Bank overdraft 17,923 9,343
Accounts payable and accrued liabilities 757,836 866,927
Loans payable - current portion 1,225 1,225
Due to related parties 508,984 289,737
Other liabilities 472,500 472,500
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Total current liabilities 1,758,468 1,639,732
Long-term liabilities
Loans payable - long-term portion 427,060 427,060
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Total liabilities 2,185,528 2,066,792
Stockholders' deficit
Common stock; $0.001 par value; 75,000,000 shares authorized
37,661,075 shares issued and outstanding 37,661 37,661
Additional paid-in capital 622,079 622,079
Accumulated deficit (2,612,803) (2,454,634)
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Total stockholders' deficit (1,953,063) (1,794,894)
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Total liabilities and stockholders deficit $ 232,465 $271,898
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See Accompanying Notes to Condensed Financial Statements
F - 1
TELCOBLUE, INC
STATEMENTS OF OPERATIONS
(UNAUDITED)
For the nine months For the nine months For the three months For the three months
Ended Ended Ended Ended
September 30, 2005 September 30, 2004 September 30, 2005 September 30, 2004
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Revenues $ -- $ 195,725 $ -- $ 548
Cost of revenues -- 59,193 -- --
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Gross profit -- 136,532 -- 548
Operating expenses
Selling, general and
administrative 272,759 734,770 109,326 135,112
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Total operating expenses 272,759 734,770 109,326 135,112
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Loss from operations (272,759) (598,238) (109,326) (134,564)
Other income (expense)
Other income 140,507 -- 140,507 --
Interest expense (25,917) (20,406) (25,917) (9,414)
Other expense -- (552) -- --
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Total other income
(expense) 114,590 (20,958) 114,590 (9,414)
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Net Income (Loss) Before Income
Taxes (158,169) (619,196) 5,264 (143,978)
Provision for Income Taxes -- -- -- --
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Net Income (Loss) $ (158,169) $ (619,196) $ 5,264 $ (143,978)
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Basic and diluted loss per
common share $ (0.00) $ (0.02) $ 0.00 $ (0.00)
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Basic and diluted weighted average common
shares outstanding 37,661,075 34,237,682 37,661,075 35,558,383
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See Accompanying Notes to Condensed Financial Statements
F - 2
TELCOBLUE, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the nine months For the nine months
Ended Ended
September 30, 2005 September 30, 2004
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Cash flows from operating activities:
Net loss $ (158,169) $ (619,196)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation 35,438 37,419
Changes in operating assets and liabilities:
Change in accounts receivable, net 3,995 100,338
Change in inventory -- 53,574
Change in bank overdraft 8,580 (14,867)
Change in accounts payable and accrued
liabilities (109,091) 78,898
Change in other liabilities -- 64,542
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Net cash (used) by operating activities (219,247) (299,292)
Cash flows from investing activities:
Purchase of fixed assets -- (207)
Change in due from related parties 219,247 -
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Net cash provided (used) by investing
activities 219,247 (207)
Cash flows from financing activities:
Change in due to related parties -- 90,759
Proceeds from issuance of common stock -- 36,661
Change in additional paid in capital -- 172,079
Proceeds from borrowings on notes payable -- --
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Net cash provided by financing
activities -- 299,499
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Net change in cash -- --
Cash, beginning of period -- --
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Cash, end of period $ -- $ --
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Supplemental disclosure of cash flow information:
Cash paid for interest $ 220 $ 20,405
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See Accompanying Notes to Condensed Financial Statements
F - 3
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 September 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 $2,612,803 since its inception and requires capital for its
contemplated
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operational and marketing activities to take place. As of September 30, 2005, the Company's liabilities exceed its
assets by approximately $1,900,000. The company's ability to raise additional capital through the future issuances
of the common stock is unknown. In addition, the Company historically has
relied on closely-held related parties for capital. 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.
4. RELATED PARTY TRANSACTIONS
On September 20, 2005, Plasticon International, Inc., a Wyoming corporation, (formally Wicklund Holding Company
(WHC)), forgave a debt of $140,507 owed to WHC by telco Blue, Inc. James N. Turek, the President and CFO of
telcoBlue, Inc. is also the President of Plasticon International, Inc. and WHC. The result is an addition to other
income in the amount of $140,507 for the period.
F - 5
Item 2. MANAGEMENT’S DISCUSSION FOR ANALAYSIS 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.
Other than what has been disclosed herein and in the year end report for year 2005, filed on June 9, 2005, the Company is not aware of any immediate circumstances or trends which would have a negative impact upon future sales or earnings. There have been no material fluctuations in the standard seasonal variations of the Company business. The accompanying financial statements include all adjustments, which in the opinion of management are necessary in order to make the financial statements not misleading.
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.
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 Mr. Gross was joined by two brothers in a company called, "The
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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.
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.
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I. |
CAPITAL RESOURCES AND LIQUIDITY |
During the quarter ended September 30, 2005, there were no issuances of the Company's common stock.
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II. |
RESULTS OF OPERATIONS |
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. However, the Company has incurred operating losses of $135,243 after subtracting the cancellation of indebtedness of $140,507, for the three month period ended September 30, 2005, or, ($0.00) per share (basic and diluted) on no revenues compared to a loss of ($143,978) for the third quarter ended September 30, 2004. The loss in the third quarter of 2005 can be contributed to the fact the Company had no revenues yet still had administrative expenses. The Company incurred a net loss for the nine month period ended September 30, 2005 of $158,169 on no revenues, as opposed to a net loss of $619,196 for the same period ended 2004 on revenues of $195,275. The disparity in the losses between 2004 and 2005 may be attributed to in part, because of the lack of business activity in the year 2005 to date. As a result of Plasticon International, Inc., a Wyoming corporation, (formally Wicklund Holding Company (“WHC”)), forgiving a debt of $140,507. owed to WHC by telco Blue, Inc., the Company had a net income of $5,264 for the third quarter 2005. In addition, during the period ended September 30, 2005, the Company has used cash in the amount of $219,247 in its operating activities. The total liabilities and stockholder's deficit for the quarter ended September, 2005 was $232,465. These conditions raise substantial doubt about the Company's ability to continue as a going concern.
The Company has devoted no efforts in the further development and marketing of products since the first of this year. The Company's ability to continue as a going concern is dependent upon (i) raising additional capital to fund operations (ii) the further development of its products and, (iii) ultimately the achievement of profitable operations. Management is currently contemplating several additional financing sources to fund operations until profitability can be achieved. However, there can be no assurance that additional financing can be obtained on conditions considered by management to be reasonable and appropriate, if at all. The financial statements do not include any adjustments that might arise as a result of this uncertainty.
The Company is uncertain whether current financing commitments will provide enough working capital to fund operations until profitability is achieved, and may have to pursue additional financing sources during the current year. The financial statements do not include any adjustments that might arise as a result of this uncertainty.
During the third quarter ended September 30, 2005, the Company’s common stock was thinly traded and often under $.01. One may construe this as a cautionary indication of the Company’s ability to continue as a going concern. During the third quarter ended September 30, 2005, and
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since, the Company has sought viable merger and/or acquisition candidates.
Subsequent to September 30, 2005, the Company has been in on-going discussions regarding the acquisition of ATG Sports Industries, Inc. No formal letter of intent has been executed to date, and the discussions are on-going.
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RELATED PARTY TRANSACTIONS |
As of September 30, 2005, telcoBlue, Inc.’s liabilities exceeded its assets by approximately $1,900,000. On September 20, 2005, Plasticon International, Inc., a Wyoming corporation, (formally Wicklund Holding Company (“WHC”)), forgave a debt of $140,507 owed to WHC by telco Blue, Inc. James N. Turek, the President and CFO of telcoBlue, Inc. is also the President of Plasticon International, Inc. and WHC. During the period ended September 30, 2005, the Company has used cash in the amount of $219,247 in its operating activities. These monies were lent to the Company by LexReal, LLC, a Kentucky formed LLC, of which James N. Turek is the Operating Manager.
ITEM 3. CONTROLS AND PROCEDURES.
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company's Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to the Company's management, including its Chief Executive Officer who is James N. Turek, and Chief Financial Officer, who is also, James N. Turek, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of "disclosure controls and procedures" in Rule 13a-14(c). In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
An evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-14(c) under the Securities Exchange Act of 1934) as of September 30, 2005. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective. No significant changes were made in our internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation.
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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, plus attorneys fees in the amount of $1,500. 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.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
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None. |
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
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None. |
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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None. |
ITEM 5. OTHER
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None. |
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Number Description
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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, | ||
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promulgated pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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32.1 |
Certification by Chief Executive Officer and Chief Financial Officer, |
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required by Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act and |
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Section 1350 of Chapter 63 of Title 18 of the United States Code, |
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promulgated pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||||
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SIGNATURES |
Pursuant to the requirements of the Securities Exchange Act of 1934, the small business issuer has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized this 20th day of December, 2005.
telcoBlue, Inc.
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/s/ James N. Turek, Sr., President,
CEO & CFO
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