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 March 31, 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)
Delaware 43-1798970
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(State of Incorporation) (I.R.S. Employer
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 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 March 31, 2005 is 37,661,075.
1
TABLE OF CONTENTS
PART I
Page
----
ITEM 1. FINANCIAL STATEMENTS............................................ 3-7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION............................................ 8-9
PART II
ITEM 1. LEGAL PROCEEDINGS............................................... 10
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
2
TELCO BLUE, INC.
BALANCE SHEET
MARCH 31, 2005
(UNAUDITED)
ASSETS
Current assets
Cash $ --
------------
Total current assets --
Fixed assets, net 256,090
------------
Total assets $ 256,090
============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Bank overdraft $ 23,279
Accounts payable and accrued liabilities 894,013
Loans payable - current portion 1,225
Due to related parties 289,737
Other liabilities 472,500
------------
Total current liabilities 1,680,754
Long-term liabilities
Loans payable - long-term portion 427,060
------------
Total liabilities 2,107,814
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 (2,511,464)
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Total stockholders' deficit (1,851,724)
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Total liabilities and stockholders deficit $ 256,090
============
See Accompanying Notes to Condensed Financial Statements
3
TELCO BLUE, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
For the three months For the three months
ended ended
March 31, 2005 March 31, 2004
------------------ ------------------
Revenues $ -- $ 158,455
Cost of revenues -- 48,177
------------------ ------------------
Gross profit -- 110,278
Operating expenses
Selling, general and administrative 56,830 405,163
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Total operating expenses 56,830 405,163
------------------ ------------------
Loss from operations (56,830) (294,885)
Other expenses
Interest expense -- (10,348)
Other expense -- (542)
------------------ ------------------
Total other expenses -- (10,890)
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Net loss $ (56,830) $ (305,775)
================== ==================
Basic and diluted loss per common share $ (0.00) $ (0.01)
================== ==================
Basic and diluted weighted average common
shares outstanding 37,661,075 27,420,785
================== ==================
See Accompanying Notes to Condensed Financial Statements
4
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 -- -- (56,830) (56,830)
-------------- -------------- -------------- -------------- --------------
Balance, March 31, 2005 37,661,075 $ 37,661 $ 622,079 $ (2,511,464) $ (1,851,724)
============== ============== ============== ============== ==============
See Accompanying Notes to Condensed Financial Statements
5
TELCO BLUE, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the three months For the three months
ended ended
March 31, 2005 March 31, 2004
------------------ ------------------
Cash flows from operating activities:
Net loss $ (56,830) $ (305,775)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation 11,813 16,783
Changes in operating assets and liabilities:
Change in accounts receivable, net 3,995 49,455
Change in inventory -- 41,041
Change in bank overdraft 13,945 6,688
Change in accounts payable and accrued liabilities 27,077 4,835
Change in other liabilities -- 130,800
------------------ ------------------
Net cash used by operating activities -- (56,173)
Cash flows from investing activities:
Change in due from related parties -- 56,173
------------------ ------------------
Net cash used by investing activities -- 56,173
Net change in cash -- --
Cash, beginning of period -- --
------------------ ------------------
Cash, end of period $ -- $ --
================== ==================
Supplemental disclosure of cash flow information:
Cash paid for interest $ -- $ --
================== ==================
See Accompanying Notes to Condensed Financial Statements
6
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 March 31, 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 $2,511,464 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.
7
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.
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. There, they
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.
8
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., age 59, 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, corporate counsel, age 72, has practiced law and
accounting for nearly 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 March 31,2005 there were no issuances of the
Company's common stock.
Results of Operations
For the three month period ended March 31, 2005, the Company sustained a
loss of ($56,830) or ($0.00) per share (basic and diluted) on no revenues. The
loss in the first 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 March 31, 2005 was $256,090.
9
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., in Cause 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. The next hearing on the
post-judgment enforcement is set for July 1st, 2004 before the same 120th
Judicial District Court. 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. as a party defendant. Telco Blue has filed
a special appearance challenging the jurisdiction of the court. A hearing on the
special appearance is set for July 7th, 2004. Should the special appearance be
denied then Telco Blue anticipates aggressively defending the suit. Moseman had
originally been hired by the two predecessor Mid-America employers and claims
that his employment agreement with Mid-America had carried over with 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
case is still pending,
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
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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,
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 10th day of June, 2005.
telcoBlue, Inc.
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/s/James N. Turek, Sr., President,
CEO & CFO
11