SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-28887
TELCO-TECHNOLOGY, INC.
(Exact name of Small Business Issuer as Specified in its Charter)
Delaware 22-3328734
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Identification
Organization) Number)
60 Bowers Lane
Closter, New Jersey 07624
(Address of Principal Executive Offices)
(201) 768-2310
(Issuer's Telephone Number, Including Area Code)
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
State the number of shares outstanding of each of the Issuer's classes of
common equity, as of the latest practicable date:
Common, $.001 par value per share: 8,869,944
outstanding as of November 1, 2000
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PART I - FINANCIAL INFORMATION
TELCO-TECHNOLOGY, INC.
Index to Financial Information
Period Ended September 30, 2000
Item Page Herein
Item 1 - Financial Statements:
Condensed Balance Sheets 3
Condensed Statements of Operations 4
Condensed Statements of Cash Flows 5
Notes to Condensed Financial Statements 6
Item 2 - Management's Discussion and
Analysis or Plan of Operation 8
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TELCO-TECHNOLOGY, INC.
CONDENSED BALANCE SHEETS
September 30, December 31,
2000 1999
(unaudited)
ASSETS
Current Assets
Cash and cash equivalents $6,613 $ 26,965
Total Current Assets 6,613 26,965
Other Assets
Loan receivable
from officer 198,006 218,006
Total Other Assets 198,006 218,006
TOTAL ASSETS $ 204,619 $ 244,971
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable
and accrued expenses $ 5,000 $ 18,000
Due to related party
(Note 3) 88,042 $ 8,042
Total Current Liabilities 93,042 26,042
Stockholders' Equity
Preferred stock (2,000,000
shares authorized .001 par value,
none issued and/or outstanding) - -
Common stock (13,000,000 shares
authorized .001 par value
8,869,944 shares issued
and outstanding 8,870 8,870
Capital in excess of
par value 2,988,869 2,975,369
Deficit (2,886,162) (2,765,310)
Total Stockholders' Equity 111,577 218,929
TOTAL LIABILITIES
AND STOCKHOLDERS' EQUITY $ 204,619 $ 244,971
See Notes to Financial Statements.
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TELCO TECHNOLOGY, INC.
CONDENSED STATEMENTS OF OPERATIONS
For the three months For the nine months
Ended September 30, Ended September 30,
2000 1999 2000 1999
(unaudited) (unaudited)
Sales revenues $ - $ - $ - $ -
Cost of sales - - - -
Gross profit 0 0 0 0
General & administrative
expenses 40,513 114,395 120,852 268,442
Loss from operations (40,513) (114,395) (120,852) (268,442)
Other income & expenses
Interest income - 263 - 3,472
Income (loss) from
continuing operations
before taxes (40,513) (114,132) (120,852) (264,970)
Provision for
income taxes - - - -
Net income (loss)
from continuing
operations $(40,513) (114,132) (120,852) (264,970)
Income (loss)
from discontinued
operations
(net of income taxes) - 4,817 - (65,070)
Net loss (40,513) (109,315) (120,852) (330,040)
Basic (loss) per common share:
Continuing operations (0.00) (0.01) (0.01) (0.03)
Discontinued operations 0.00 0.00 0.00 (0.01)
Total (0.00) (0.01) (0.01) (0.04)
Basic average shares
outstanding 8,869,944 8,869,944 8,869,944 8,620,832
See Notes to Financial Statements.
<PAGE>
TELCO-TECHNOLOGY, INC.
CONDENSED STATEMENTS OF CASH FLOWS
For the three months For the nine months
Ended September 30, Ended September 30,
2000 1999 2000 1999
(unaudited)
Operating Activities
Net income or
(loss) from
continuing operations $(40,513) $ (114,132) $ (120,852) $(264,970)
Adjustments to
reconcile net income
or (loss)
to net cash
used by operating
activities:
Rent adjustment 4,500 4,500 13,500 13,500
Changes in operating
assets of continuing
operations:
Accounts payable 5,000 28,250 (13,000) 46,250
Due to related party 30,000 8,042 80,000 8,042
Net cash used by
continuing operations (1,013) (73,340) (40,352) (197,178)
Net cash provided (used) by
discontinued operations - 14,473 - (36,580)
Investing Activities
Repayment of officers' loans - - 20,000 56,779
Net cash provided by
investing activities 0 0 20,000 56,779
Increase (decrease)
in cash (1,013) (58,867) (20,352) (176,979)
Cash at beginning
of period 7,626 108,607 26,965 226,719
Cash at end
of period $6,613 49,740 6,613 $ 49,740
Supplemental Disclosures of Cash Flow Information:
Cash paid during
year for:
Interest $ - $ - $ - $ -
Income taxes $ - $ - $ - $ -
See Notes to Financial Statements.
<PAGE>
TELCO-TECHNOLOGY, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited)
Note 1- THE COMPANY AND BASIS OF PRESENTATION
Telco-Technology, Inc, ("Telco" or the "Company") was incorporated in the
state of Nevada on November 23, 1993 and was reorganized as a Delaware
corporation in 1998.
On June 15, 1999 the Company sold its business operations and became a
shell corporation, whose principal business is to locate and consumate a
merger or acquisition with an ongoing business.
The accompanying unaudited financial statements have been prepared by Telco
in accordance with the rules and regulations of the Securities and Exchange
Commission for interim financial statements. Accordingly, certain
information and footnote disclosures, normally included in financial
statements prepared in accordance with generally accepted accounting
principles, have been condensed or omitted pursuant to such rules and
regulations. In the opinion of management of the Company, the unaudited
financial statements reflect all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the Company's
financial position at September 30, 2000, its operating results for the three
and nine months ended September 30, 2000 and 1999 and cash flows for the three
and nine months ended September 30, 2000 and 1999. The balance sheet at
December 31, 1999 has been derived from the Company's audited consolidated
financial statements as of that date. These financial statements and the notes
should be read in conjunction with the Company's audited consolidated
financial statements and notes thereto contained in the Company's Form 10-
SB/A filed with the Securities and Exchange Commission on March 15, 2000.
The results of operations for the three and nine months ended September 30, 2000
are not necessarily indicative of the results that may be expected for
future quarters or the year ending December 31, 2000.
Note 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Concentration of Credit risk
Financial instruments which potentially subject the Company to
concentration of credit risk consist of receivables from an officer and
director of the Company.
Receivables from an officer of the Company are unsecured and represent a
concentration of credit risk due to the common employment and financial
dependency of this individual on the Company.
<PAGE>
TELCO-TECHNOLOGY, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited)
Note 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Company's 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 revenue and
expenses during the reporting period. Actual results could differ from
those estimates.
Net Income (Loss) Per Share
In accordance with SFAS No. 128, basic net income (loss) per share has been
computed using the weighted-average number of shares of common stock
outstanding during the period, except that pursuant to Securities and
Exchange Commission Staff Accounting Bulletin No. 98, if applicable, common
shares issued in each of the periods presented for nominal consideration
have been included in the calculation as if they were outstanding for all
periods presented.
Basic net income (loss) per share is computed by dividing net income (loss)
by the weighted average number of common shares outstanding during the
period. Diluted net income (loss) per share is computed by dividing net
income (loss) by the weighted average number of common and dilutive common
stock equivalent shares outstanding during the period. The Company had no
dilutive common stock equivalent shares outstanding during the periods
presented.
Note 3- RELATED PARTY TRANSACTIONS
In January 1999, the Company entered into a new three year consulting
agreement with Donalson Capital Corporation, a company owned by the
Chairman of the Board of Directors of Telco-Technology, Inc. expiring in
December 2001, providing for a $10,000 monthly fee during the term of the
agreement. At September 30, 2000 and December 31, 1999 balances of $88,042 and
$8,042 respectively, were owed under the agreement.
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation.
The following discussion should be read in conjunction with the
Financial Information and Notes thereto included in this report and is
qualified in its entirety by the foregoing.
Overview
Telco-Technology, Inc. (the "Company") was organized under the laws
of the State of Nevada on November 23, 1993 under the name Haycock Morrison
Inc. ("Haycock"). In 1994, Haycock completed the sale of certain shares of
its Common Stock pursuant to an exemption provided by Rule 504 of
Regulation D promulgated under the Securities Act of 1933, as amended. On
January 27, 1995, Haycock entered into an acquisition agreement with Telco
Technology, Inc., a Delaware corporation ("Telco"). Pursuant to the terms
of the acquisition, Haycock issued 5,000 shares of its Common Stock which
represented 60% of the then outstanding Common Stock of Haycock.
After giving effect to the above transaction, the Company ceased all
activities as Haycock and changed its name to Telco-Technology, Inc. The
Company continued the business operations then conducted by Telco of
providing long distance telephone services and computer networks for voice
and data transmissions which operations were primarily conducted in the
State of Massachusetts (the "Massachusetts Operations"). In 1998, the
Company was reorganized as a Delaware corporation. The Company continued
such operations until June 1999.
In June 1999, the Company sold the Massachusetts Operations to a
company affiliated with a former officer and director of the Company in
exchange for the return of 950,000 shares of Common Stock to the Company,
and the assumption of all liabilities of the Massachusetts Operations. As
part of the agreement, the Company also agreed to forgive all officer loans
due from such individual (which amounted to approximately $118,000). As a
result of the foregoing, the Company has no current business operations.
As such, the Company can now be defined as a "shell" corporation, whose
principal business purpose at this time is to locate and consummate a
merger or acquisition with a private entity.
Plan of Operation
In 1999, management decided that it would be in the best interests
of the Company and its stockholders to seek additional business
opportunities and sell the Massachusetts Operations, its then sole business
operations. As a result of the sale of the Massachusetts Operations which
occurred in June 1999, the Company has no current business operations.
Management plans to investigate, research and, if justified,
potentially acquire or merge with one or more businesses or business
opportunities. The Company currently has no commitment or arrangement,
written or oral, to participate in any business opportunity and management
cannot predict the nature of any potential business opportunity it may
ultimately consider. Management will have broad discretion in its search
for and negotiations with any potential business or business opportunity.
The Company has determined to initially limit its search for a
potential business or business opportunity to firms involved or intending
to be involved in the telecommunications and/or internet industries. In
this regard, the Company will not restrict its search to any specific
geographical location, and the Company may participate in a business
venture of virtually any kind or nature. In addition, the Company may
determine at a future date to seek a potential business or business
opportunity in another industry in the event the Company does not
consummate a transaction with a business or business opportunity in the
<PAGE>
telecommunications and/or internet industries.
Liquidity and Capital Resources
On September 30, 2000, the Company had a working capital deficit of
approximately $(86,000), an equity to debt ratio of approximately 1.20 to 1,
and stockholders' equity of approximately $112,000. At September 30, 2000, the
Company had approximately $7,000 in cash, total assets of approximately
$205,000 and total liabilities of approximately $93,000. On December 31,
1999, the Company had working capital of approximately $1,000, an equity to
debt ratio of approximately 8.4 to 1, and stockholders' equity of
approximately $219,000. At December 31, 1999, the Company had
approximately $27,000 in cash, total assets of approximately $245,000 and
total liabilities of approximately $26,000.
As a result of the sale of the Massachusetts Operations, the Company
has no current business operations. As such, the Company can now be
defined as a "shell" corporation, whose principal business purpose at this
time is to locate and consummate a merger or acquisition with a private
entity. Management expects that the sale of the Massachusetts Operations
will allow the Company to focus on other business opportunities in its
attempt to locate and consummate such a merger or acquisition. In view of
the Company's current limited cash position, the Company intends to
complete such a transaction in the next twelve months. It should be noted
that the Company likely has insufficient capital with which to make any
acquisitions. Accordingly, in any of the transactions to merge with or
acquire a private entity, it is likely that the consideration utilized to
make any acquisitions will consist of equity securities. However, in order
to meet certain working capital needs and operating expenses in the next
twelve months in the Company's attempt to locate and effect a business
combination, and insofar that no cash was received in connection with sale
of the Massachusetts Operations, it may be necessary for the Company to
attempt to raise additional funds. As of the date hereof, the Company has
not made any arrangements to raise any capital. In the event the Company
does attempt to raise capital most likely the only method available to the
Company would be a private sale of its securities. Because of the current
status of the Company as a "shell" corporation, it is unlikely that it
would be able to obtain additional funding from either a bank or other
commercial lender. There can be no assurance that the Company will be
able to obtain additional funding when needed, or that such funding, if
available, can be obtained on terms acceptable to the Company. In
addition, there can be no assurance that the Company will be able to
acquire any business or business opportunity within such period of time or
at any time at all, or that any business or business opportunity the
Company acquires will prove successful or will be able to operate
profitably.
Forward-Looking Statements
This report contains certain forward-looking statements that are
based upon the beliefs and assumptions of, and information available to,
the management of the Company at the time such statements are made. Words
such as "expects", "anticipates", "intends", "plans", "believes", "seeks",
"estimates", or variations of such words and similar expressions are
intended to identify such forward-looking statements. The statements are
not guarantees of future performance and involve certain risks,
uncertainties and assumptions which are difficult to predict. Therefore,
actual outcomes and results may differ materially from what is expressed or
forecasted in such forward-looking statements. The Company undertakes no
obligation to update publicly any forward-looking statements, whether as a
result of new information, future events or otherwise.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
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.
(a) Exhibits.
There are no exhibits applicable to this Form 10-QSB.
(b) Reports on Form 8-K.
Listed below are reports on Form 8-K filed during the
fiscal quarter ended September 30, 2000.
None.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the
Registrant caused this Report to be signed on its behalf by the undersigned
thereunto duly authorized.
TELCO-TECHNOLOGY, INC.
(Registrant)
Dated: November 3, 2000 By: /s/Donald R. McKelvey
Donald R. McKelvey,
Chairman of the Board and
President
Dated: November 3, 2000 By: /s/Donald R. McKelvey
Donald R. McKelvey,
Principal Financial Officer
