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 MARCH 31, 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 May 1, 2000
<PAGE>
PART I - FINANCIAL INFORMATION
TELCO-TECHNOLOGY, INC.
Index to Financial Information
Period Ended March 31, 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 7
<PAGE>
TELCO-TECHNOLOGY, INC.
CONDENSED BALANCE SHEETS
March 31, December 31,
2000 1999
(unaudited)
ASSETS
Current Assets
Cash and cash equivalents $ 24,146 $ 26,965
Total Current Assets 24,146 26,965
Other Assets
Loan receivable from officer 198,006 218,006
Total Other Assets 198,006 218,006
TOTAL ASSETS $ 222,152 $ 244,971
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable
and accrued expenses $ - $ 18,000
Due to related party
(Note 4) 38,042 $ 8,042
Total Current Liabilities 38,042 26,042
Stockholders' Equity
Preferred stock
(2,000,000 shs
authorized .001 par value,
none issued and/or outstanding) - -
Common stock
(13,000,000 shs
authorized .001 par value
8,869,944 shares
issued and outstanding 8,870 8,870
Capital in excess
of par value 2,979,869 2,975,369
Deficit (2,804,629) (2,765,310)
Total Stockholders' Equity 184,110 218,929
TOTAL LIABILITIES
AND STOCKHOLDERS' EQUITY $ 222,152 $ 244,971
See Notes to Financial Statements.
<PAGE>
TELCO TECHNOLOGY, INC.
CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
For the Three Months
Ended March 31,
2000 1999
Sales revenues $ 0 $ 0
Cost of sales 0 0
Gross profit 0 0
General and administrative
expenses 39,319 123,643
Loss from operations (39,319) (123,643)
Other income and expenses
Interest income - 1,855
Income (loss) from
continuing operations
before taxes (39,319) (121,788)
Provision for income taxes - -
Net income (loss) from
continuing operations (39,319) (121,788)
Income (loss) from
discontinued operations
(net of income taxes) 0 (63,498)
Net loss $ (39,319) $ (185,286)
Basic and diluted
earnings (loss)
per common share:
Continuing operations (0.00) (0.01)
Discontinued operations 0.00 (0.01)
Total (0.00) (0.02)
Basic and diluted
average shares outstanding 8,869,944 8,137,611
See Notes to Financial Statements.
<PAGE>
TELCO-TECHNOLOGY, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
For the Three Months
Ended March 31,
2000 1999
Operating Activities
Net income or (loss)
from continuing operations $(9,319) $ (121,788)
Adjustments to reconcile
net income or (loss)
to net cash used
by operating activities:
Rent adjustment 4,500 4,500
Changes in operating
assets of continuing
operations:
Accounts payable (18,000) 18,000
Net cash used
by continuing operations (22,819) (99,288)
Net cash provided (used)
by discontinued operations 0 8,427
Investing Activities
Repayment of officers' loans 20,000 6,040
Net cash provided(used)
by investing activities 20,000 6,040
Increase (decrease) in cash (2,819) (84,821)
Cash at beginning of period 26,965 226,719
Cash at end of period $ 24,146 $ 141,898
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 March 31, 2000, its operating
results for the three months ended March 31, 2000 and 1999 and
cash flows for the three months ended March 31, 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 months ended March 31,
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 March
31, 2000 and December 31, 1999 balances of $38,042 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 March 31, 2000, the Company had a working capital deficit
of approximately $(14,000), an equity to debt ratio of
approximately 4.8 to 1, and stockholders' equity of approximately
$184,000. At March 31, 2000, the Company had approximately
$24,000 in cash, total assets of approximately $222,000 and total
liabilities of approximately $38,000. 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.
Year 2000 Issue
The year 2000 issue is the result of computer programs being
written using two digits, rather than four, to define the
applicable year. Software programs and hardware that have
date-sensitive software or embedded chips may recognize a date
using "00" as the year 1900 rather than the year 2000. This could
result in a major system failure or miscalculations causing
disruptions of operations, including a temporary inability to
engage in normal business activities. As a result, many companies
have been required to undertake major projects to address the year
2000 issue.
Year 2000 issues are not currently material to the Company's
business, operations or financial condition in view of the
Company's current lack of business operations. However, year 2000
issues may become material to the Company in the event the Company
acquires or participates in another business opportunity.
Management intends to address this potential problem with any
prospective merger, acquisition candidate or other participant
and adopt a plan and a budget for addressing such issues, if
necessary.
<PAGE>
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 March 31, 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: May 10, 2000 By: /s/Donald R. McKelvey,
Donald R. McKelvey,
Chairman of the Board and
President
Dated: May 10, 2000 By: /s/Donald R. McKelvey,
Donald R. McKelvey,
Principal Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM TELCO-TECHNOLOGY, INC.'S QUARTERLY REPORT FOR
THE QUARTER ENDED MARCH 31, 2000 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 24,146
<SECURITIES> 0
<RECEIVABLES> 198,006
<ALLOWANCES> 0
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<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 222,152
<CURRENT-LIABILITIES> 38,042
<BONDS> 0
<COMMON> 8,870
0
0
<OTHER-SE> 175,240
<TOTAL-LIABILITY-AND-EQUITY> 222,152
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 39,319
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (39,319)
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<EPS-DILUTED> .000
</TABLE>
