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,
2003.
[ ] 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.)
1004 Depot Hill Rd. #1E
Broomfield, Colorado 80020
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(Address of principal executive offices)(Zip Code)
303-404-9904
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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 June 30, 2003 is 49,099,400.
2
TABLE OF CONTENTS
PART I
ITEM 1. FINANCIAL STATEMENTS........................................ 3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION... 8
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..................................................10
3
telcoBlue, Inc.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
As of June 30, 2003
ASSETS
Current asset $ -
Distribution Agreement 926
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TOTAL ASSETS $ 926
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LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable $ 15,229
Accounts payable to related parties 34,835
Accrued expenses 758
Notes payable 3,918
Notes payable to related parties 65,404
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Total Current Liabilities 120,144
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STOCKHOLDERS' DEFICIT
Common stock, $.001 par value, 75,000,000 shares
authorized, 49,099,400 issued and outstanding 49,099
Additional paid in capital 2,973,928
Deferred compensation ( 225,000)
Accumulated other comprehensive income 9,133
Deficit accumulated during the development stage (2,926,378)
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Total Stockholders' Deficit ( 119,218)
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TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 926
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4
telcoBlue, Inc.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF EXPENSES AND COMPREHENSIVE LOSS
For the Three Months and Nine Months ended June 30, 2003 and
the Period from August 2, 2002 (Inception)
Through June 30, 2003
3 Months 9 Months Inception
Ended Ended Through
June 30, June 30, June 30,
2003 2003 2003
--------- --------- -----------
General and administrative $ 442,612 $ 736,192 $ 2,912,524
Interest expense - 617 13,854
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Net loss (442,612) (736,809) (2,926,378)
Other Comprehensive Income (Expense)
Income (loss) on foreign currency
Translation ( 23,026) 8,916 9,133
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Total Comprehensive Loss $(465,638) $(727,893) $(2,917,245)
========= ========= ===========
Basic and diluted net loss per
common share $(.01) $(.02)
Weighted average common shares
Outstanding 47,574,400 40,757,567
5
telcoBlue, Inc.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months ended June 30, 2003 and
the period from August 2, 2002 (Inception)
Through June 30, 2003
9 Months Inception
Ended Through
June 30, June 30,
2003 2003
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CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(736,809) $(2,926,378)
Adjustments to reconcile net loss to
net cash used in operating activities:
Stock issued for services 451,530 2,585,533
Stock option and warrant expense 10,543 10,543
Deferred compensation 75,000 75,000
Intrinsic value of beneficial conversion
feature of convertible notes payable 13,176
Changes in:
Accounts payable ( 18,887) 68,004
Accounts payable to related parties 92,618 34,835
Accrued expenses 697 758
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NET CASH USED IN OPERATING ACTIVITIES (125,308) ( 138,529)
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CASH FLOWS FROM FINANCING ACTIVITIES
Sale of stock 61,501 61,574
Proceeds from notes payable 3,346
Proceeds from notes payable to related parties 54,242 63,904
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NET CASH PROVIDED BY FINANCING ACTIVITIES 115,743 128,824
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Effect of exchange rate changes on cash 9,491 9,705
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NET CHANGE IN CASH ( 74) -
Cash balance, beginning 74
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Cash balance, ending $ - $ -
========= ===========
NONCASH ACTIVITIES:
Shares issued for notes payable $ 150,000
Shares issued for accounts payable 75,000
6
telcoBlue, Inc.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements of
telcoBlue, Inc. ("telcoBlue") have been prepared in accordance with
accounting principles generally accepted in the United States of
America and the rules of the Securities and Exchange Commission
("SEC"), and should be read in conjunction with the audited financial
statements and notes thereto contained in telcoBlue's latest annual
report filed with the SEC on Form 10KSB. In the opinion of management,
all adjustments, consisting of normal recurring adjustments, necessary
for a fair presentation of financial position and the results of
operations for the interim periods presented have been reflected
herein. The results of operations for interim periods are not
necessarily indicative of the results to be expected for the full year.
Notes to the financial statements which would substantially duplicate
the disclosure contained in the audited financial statements for fiscal
year 2002, as reported in the 10KSB, have been omitted.
NOTE 2 - COMMON STOCK
In the quarter ended December 31, 2002, telcoBlue issued 734,000 shares
of common stock valued at $106,428 for services.
In the quarter ended December 31, 2002, telcoBlue issued 5,600,000
shares of common stock for $300,000 of deferred compensation. As of
June 30, 2003, $75,000 of compensation has been recognized.
In the quarter ended December 31, 2002, telcoBlue sold 615,000 shares
of common stock for $61,501.
In the quarter ended December 31, 2002, telcoBlue issued three-year
options to purchase 150,000 shares of telcoBlue common stock. $10,543
in expense has been recorded for the quarter ended December 31, 2002.
The exercise prices are as follows:
Exercise
Options Price
------- --------
50,000 $ .50
50,000 1.00
50,000 1.50
-------
150,000
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7
In the quarter ended March 31, 2003, telcoBlue issued 3,000,000 shares
of common stock to pay off a $150,000 note payable.
For a 12 month consulting agreement signed in April 2003, telcoBlue
agreed to issue four million shares of common stock, one million per
quarter with the first million due upon signing. As part of the
agreement, telcoBlue also agreed to issue two million 120 day warrants
to purchase telcoBlue common stock at $.05 per share. If the two
million warrants are exercised, the consultant will be granted four
million additional 120 day warrants to purchase telcoBlue common stock
at $.10 per share. If the four million warrants are exercised, the
consultant will be granted four million additional 120 day warrants to
purchase telcoBlue common stock at $.15 per share. The first one
million shares were issued and valued at $55,000. The first group of
warrants expired causing the subsequent warrants to not be granted.
In April 2003, telcoBlue issued 3,900,000 shares valued at $195,000 to
four consultants.
In June 2003, telcoBlue's board approved the issuance of 4,250,000
shares of telcoBlue to Vocalscape Networks, Inc. ("Vocalscape") for
payment of $75,000 owed under the management agreement, $30,868 of out
of pocket expenses paid on behalf of telcoBlue and $64,233 of lost
stock proceeds because of telcoBlue's failure to file an SB-2 within
two months of the reorganization as required by the plan of
reorganization.
NOTE 3 - NOTES PAYABLE TO RELATED PARTIES
Shareholders loaned telcoBlue $54,242 during the nine months ending
June 30, 2003. These loans are payable on demand, bear no interest and
have no collateral.
NOTE 4 - CONTINGENCIES
In August 2003, the board of directors terminated the CEO. The
outgoing CEO has been uncooperative in turning over all records of
telcoBlue to the new management. 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.
NOTE 5 - SUBSEQUENT EVENTS
On September 12, 2003 telcoBlue merged with Intercontinental
Communications, Inc. ("ICI") by acquiring all of the outstanding shares
of ICI for 60,000,000 shares of telcoBlue common stock in the form of
25,000,000 restricted shares and a note payable of $500,000 convertible
into 35,000,000 shares of telcoBlue common stock. In connection with
the merger, telcoBlue approved a 1:20 reverse stock split.
8
Part II
OVERVIEW
Nature of Business. telcoBlue, Inc. ("telcoBlue") 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
(VoIP). Its long distance services will be marketed mainly by third
parties to end users in the form of pre-paid phone cards or other
media, including direct personal computer (PC) access and Internet-
based long distance telephony network using state-of-the-art Voice over
Internet Protocol. The name was changed to telcoBlue, Inc. on August
29, 2002.
The Company is in its development stage and to date its activities have
been limited to capital formation and the development of its Voice over
Internet Protocol (VoIP) long distance business.
telcoBlue products and services will enable customers to make low-cost,
high quality phone calls over the Internet using their personal
computers or traditional telephones. telcoBlue's PC to Phone pre-paid
long distance service is targeted at specific markets throughout North
America and offers amongst the lowest long distance rates available
today.
The following discussion should be read in conjunction with the
condensed consolidated financial statements and segment data and in
conjunction with the Company's 10KSB/A filed March 21, 2003. Results
for interim periods may not be indicative of the results for the full
year.
RESULTS OF OPERATIONS
telcoBlue had a total comprehensive loss of $727,893 for the nine
months ended June 30, 2003. General and Administrative expenses for
the nine months ended June 30, 2003 were $736,192. General and
Administrative expenses for the nine months consist of stock for
services of $451,530, deferred compensation of $75,000, stock warrant
expense of $10,543 and approximately $200,000 of management and general
office expenses.
Interest expenses for the nine months ended June 30, 2003 were $617.
Basic Net Loss per Share amounted to $.02 for the nine months ended
June 30, 2003.
LIQUIDITY AND CAPITAL RESOURCES
In April 2003, telcoBlue issued 3,900,000 shares valued at $195,000 to
four consultants.
9
In June 2003, telcoBlue's board approved the issuance of 4,250,000
shares of telcoBlue to Vocalscape Networks, Inc. for payment of $75,000
owed under the management agreement, $30,868 of out of pocket expenses
paid on behalf of telcoBlue and $64,233 of lost stock proceeds because
of telcoBlue's failure to file an SB-2 within two months of the
reorganization as required by the plan of reorganization.
For the nine months ended June 30, 2003, telcoBlue did not pursue any
investing activities.
For the nine months ended June 30, 2003, telcoBlue sold stock of
$61,501 and received proceeds from notes payable to related parties of
$54,242. As a result, net cash provided by financing activities for
the nine months ended June 30, 2003 was $115,743.
In August 2003, the board of directors terminated Robert McIntyre, its
then Chief Executive Officer. The outgoing CEO has been uncooperative
in turning over all records of telcoBlue to the new management. 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.
telcoBlue anticipates that its current cash and cash equivalents and
cash generated from operations, if any, will not be sufficient to
satisfy its liquidity requirements for at least the next 12 months.
telcoBlue will require additional funds prior to such time and will
seek to sell additional equity or debt securities or seek alternative
sources of financing. If telcoBlue is unable to obtain this additional
financing, it may be required to reduce the scope of its planned sales
and marketing and product development efforts, which could harm its
business, financial condition and operating results. In addition,
telcoBlue may require additional funds in order to fund more rapid
expansion, to develop new or enhanced services or products or to invest
in complementary businesses, technologies, services or products.
Additional funding may not be available on favorable terms, if at all.
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
10
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.
Changes in Internal Controls
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. There have been no other
significant changes (including corrective actions with regard to
significant deficiencies or material weaknesses) in our internal
controls or in other factors that could significantly affect these
controls subsequent to the Evaluation Date set forth above.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
10
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None
11
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.
telcoBlue, Inc.
Dated: September 21, 2003 /s/Daymon Bodard
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Daymon Bodard, CEO
12
CERTIFICATIONS
I, Daymon Bodard, certify that:
1. I have reviewed this quarterly report on Form 10QSB of telcoBlue,
Inc.
2. Based on my knowledge, the quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present, in all material respects, the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods
presented in this quarterly report;
4. The other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing
the equivalent function):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability
to record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
13
(6) The other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: September 21, 2003
/s/Daymon Bodard
--------------------------
Daymon Bodard, CEO
14
CERTIFICATIONS
I, Dominic Martinez, certify that:
1. I have reviewed this quarterly report on Form 10QSB of telcoBlue,
Inc.
2. Based on my knowledge, the quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present, in all material respects, the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods
presented in this quarterly report;
4. The other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing
the equivalent function):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability
to record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
15
(6) The other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: September 21, 2003
/s/Dominic Martinez
--------------------------
Dominic Martinez, Chief Financial Officer