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 December 31,
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.)
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 December 31, 2003 is 5,481,445.
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
December 31, 2003
ASSETS $ -
==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable $ 15,500
Accounts payable to related parties 34,937
Accrued expenses 789
Notes payable 4,076
Notes payable to related parties 11,784
----------
Total Current Liabilities 67,086
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Commitments and Contingencies
STOCKHOLDERS' DEFICIT
Common stock, $.001 par value, 75,000,000 shares
authorized, 5,481,445 issued and outstanding 5,481
Additional paid in capital 4,548,947
Accumulated other comprehensive income 8,149
Deficit accumulated during the development stage (4,629,663)
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Total Stockholders' Deficit (67,086)
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TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ -
==========
4
telcoBlue, Inc.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF EXPENSES AND COMPREHENSIVE LOSS
Three Months Ended December 31, 2003 and 2002 and the Period
from August 2, 2002(Inception)through December 31, 2003
Three Inception
Months Ended Through
December 31, Dec. 31,
2003 2002 2003
---------- ---------- ----------
General and administrative $ 44,429 $ 213,220 $4,594,559
Interest expense 3,161 421 35,104
---------- ---------- ----------
Net loss (47,590) (213,641) (4,629,663)
Other Comprehensive Income
Gain on foreign currency
translation ( 1,143) (7,457) 8,149
---------- ---------- ----------
Total Comprehensive Loss $ (48,733) $ (221,098) $(4,621,514)
========== ========== ==========
Basic and diluted net loss
per share $ (0.01) $ (.12)
Weighted average shares
outstanding 3,847,470 1,773,145
5
telcoBlue, Inc.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended December 31, 2003 and 2002 and the Period
from August 2, 2002(Inception)Through December 31, 2003
Three Inception
Months Ended Through
December 31, Dec. 31,
2003 2002 2003
---------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (47,590) $ (213,641) $(4,629,663)
Adjustments to reconcile net loss to net
cash used in operating activities:
Stock issued for services 25,000 106,428 4,035,533
Stock option and warrant expense - 10,543 75,556
Imputed interest 3,161 - 21,867
Intrinsic value of beneficial conversion
feature of convertible notes payable - - 13,176
Changes in:
Accounts payable 305 21,492 (5,799)
Accounts payable to related parties 114 21,114 109,937
Accrued expenses 34 197 789
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NET CASH USED IN OPERATING ACTIVITIES (18,976) ( 53,867) (378,604)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of stock - 61,500 61,574
Proceeds from notes payable - - 3,343
Proceeds from notes payable to related
parties 19,941 - 304,804
---------- ---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 19,941 61,500 369,721
---------- ---------- ----------
Effect of exchange rate changes on cash (965) (7,442) 8,883
---------- ---------- ----------
NET CHANGE IN CASH - 191 -
Cash balance, beginning - 74 -
---------- ---------- ----------
Cash balance, ending $ - $ 265 $ -
========== ========== ==========
Non-Cash Disclosures:
Stock issued for notes payable to
related parties $ 294,521 $ - $ 444,521
Stock issued for accounts payable to
related parties - - 75,000
6
Stock issued to related party for
distribution agreement - - 926
Accounts payable of WavePower assumed
in merger - - 22,225
Note payable of WavePower assumed in
merger - - 151,500
7
telcoBlue, Inc.
(A Development Stage Company)
CONSOLIDATED NOTES TO 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 2003, as reported in the 10KSB, have been omitted.
NOTE 2. RELATED PARTIES
In the quarter ended December 31, 2003, telcoBlue issued 1,521,475
shares of common stock for repayment of $294,521 of notes payable to
related parties. During the same time period, telcoBlue also issued
255,000 shares of common stock for the president's salary of $25,000.
NOTE 3. SUBSEQUENT EVENT
Effective January 15, 2004, telcoBlue completed a reverse merger with
Promotional Containers Manufacturing ("PCM") whereby telcoBlue issued
28,700,000 shares to PCM for all of the outstanding shares of PCM. In
connection with the merger, telcoBlue agreed to issue an additional
12,150,000 shares to various individuals for work on the merger.
8
Item 2. Management's Discussion and Analysis or Plan of Operation.
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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., 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.
Since August 29, 2002, telcoBlue's only activities have been
organizational ones, directed at developing its business plan and
seeking a merger candidate. We have not generated any revenues.
telcoBlue has not commenced any commercial operations.
telcoBlue has no employees and owns no real estate. As of September
30, 2003, telcoBlue could be defined as a "shell" company whose sole
purpose is to locate and consummate a merger or acquisition with a
private entity.
On September 10, 2003, telcoBlue declared a 1:20 reverse stock split
whereby each shareholder would receive one share for every twenty
shares held.
In December 2003, telcoBlue issued 255,000 shares to the president for
services valued at $25,000 and 1,521,475 to payoff notes payable to
shareholders of $275,092.
Capital Resources and Liquidity
-------------------------------
For the three months ended December 31, 2003 and 2003, telcoBlue did
not pursue any investing activities.
For the year ended September 30, 2003 and the period from inception to
September 30, 2002, telcoBlue did not pursue any investing activities.
9
For the three months ended December 31, 2003, telcoBlue received
proceeds from notes payable to related parties of $19,941. As a
result, telcoBlue had net cash of $19,941 provided by financing
activities for the three months ended December 31, 2003.
For the three months ended December 31, 2002, telcoBlue received
proceeds of $61,500 from the sale of stock resulting in net chase
provided by financing activities of $61,500.
For the year ended September 30, 2003, telcoBlue received $61,500 from
the sale of stock and received the proceeds from notes payable to
related parties of $275,201 resulting in net cash provided by financing
activities of $336,701.
For the period from inception through September 30, 2002, telcoBlue
received $74 from the sale of stock, received proceeds from notes
payable of $3,343 and proceeds from notes payable to related parties of
$9,662. As a result, telcoBlue had net cash provided by financing
activities of $13,079 for the period from inception to September 30,
2002.
Results of Operations
------------------------
For the three months ended December 31, 2003, telcoBlue had no
revenues. Net loss for the three months ended December 31, 2003 was
$47,590. telcoBlue had interest expense of $3,161 and general and
administrative expenses of $44,429. These general and administrative
expenses consisted primarily from stock issued for services valued at
$25,000.
For the three months ended December 31, 2002, telcoBlue had no
revenues. Net loss for the three months ended December 31, 2003 was
$213,220. telcoBlue had interest expense of $421 and general and
administrative expenses of $213,220. These general and administrative
expenses consisted primarily from stock issued for services valued at
$106,428 and stock option and warrant expense of $10,543.
For the year ended September 30, 2003, telcoBlue had no revenues. Net
loss for the year ended September 30, 2003 was $2,392,504. telcoBlue
had interest expense of $18,706, impairment of $926 and had general and
administrative expenses of $2,172,872. These general and
administrative expenses consisted primarily from stock issued for
services valued at $1,876,530 and stock option and warrant expense of
$75,556.
For the period from inception to September 30, 2002, telcoBlue had not
received any revenues. Net loss for the period from inception to
September 30, 2002 was $2,189,569. telcoBlue ad interest expense of
$13,237 and had general and administrative expenses of $2,134,003.
These general and administrative expenses consisted primarily of stock
issues for services of $2,134,003.
10
telcoBlue believes that our existing capital will not be sufficient to
meet our cash needs, including the costs of compliance with the
continuing reporting requirements of the Securities Exchange Act of
1934, as amended. Even with the subsequence acquisition of PCM, we
anticipate that our existing capital will not be sufficient to allow us
to expand the PCM operations. Any required cash flows will be
supplied by officers.
We do not expect to purchase or sell any significant equipment, engage
in product research or development and do not expect any significant
changes in the number of employees.
Events Subsequent to December 31, 2003
--------------------------------------------
Effective January 15, 2004, telcoBlue completed a reverse merger with
Promotional Containers Manufacturing whereby telcoBlue issued
28,700,000 shares to PCM for all of the outstanding shares of PCM. In
connection with the merger, telcoBlue agreed to issue an additional
12,150,000 shares to various individuals for work on the merger. For
further information on the acquisition, see the Form 8-K filed February
9, 2004.
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.
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.
11
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.
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
12
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: February 20, 2004 /s/James Turek
----------------------
James Turek, CEO
13
CERTIFICATIONS
I, James Turek, 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 officer 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 officer 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
14
(6) The other certifying officer 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 my most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: February 23, 2004
/s/James Turek
--------------------------
James Turek, CEO
15
CERTIFICATIONS
I, Edward J. Garstka, 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 officer 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 officer 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
16
(6) The other certifying officer 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 my most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
/s/Edward J. Garstka
--------------------------
Edward J. Garstka, CFO