As filed with the Securities and Exchange Commission on January 13, 2000.
Commission File No. ____________
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF
SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
TELCO-TECHNOLOGY, INC.
(Name of Small Business Issuer 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 (Zip Code)
executive offices)
Issuer's telephone number: (201) 768-2310
Securities to be registered pursuant to Section 12(b) of the Act: None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock ($.001 par value)
TELCO-TECHNOLOGY, INC.
FORM 10-SB REGISTRATION STATEMENT
TABLE OF CONTENTS
Page
PART I
Item 1. Description of Business 4
Item 2. Management's Discussion and Analysis
or Plan of Operation 15
Item 3. Description of Property 16
Item 4. Security Ownership of Certain
Beneficial Owners and Management. 17
Item 5. Directors and Executive Officers,
Promoters and Control Persons 18
Item 6. Executive Compensation 19
Item 7. Certain Relationships and Related Transactions 20
Item 8. Description of Securities 20
PART II
Item 1. Market Price of and Dividends on the
Registrant's Common Equity and
Related Stockholder Matters 21
Item 2. Legal Proceedings 22
Item 3. Changes in and Disagreements
with Accountants 23
Item 4. Recent Sales of Unregistered Securities 23
Item 5. Indemnification of Directors and Officers 24
PART F/S
PART III
Item 1. Index to Exhibits 25
Item 2. Description of Exhibits 25
AVAILABLE INFORMATION
GENERAL
Subsequent to the date of this Registration Statement the
Company will be subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")
and in accordance therewith will file reports and other information
with the Securities and Exchange Commission (the "Commission").
Reports and other information filed by the Company with the
Commission can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street,
N.W., Washington D.C. 20549, and at the Commission's regional
offices at 7 World Trade Center, 13th floor, New York, New York
10048; and 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of such material can also be obtained from the
Public Reference Branch of the Commission at 450 Fifth Street,
N.W., Washington, DC 20549 at prescribed rates.
This Registration Statement, as well as all amendments
thereto and subsequent reports, have been and will be filed
through the Electronic Data Gathering, Analysis and Retrieval
("EDGAR") system. Documents filed through EDGAR are publicly
available through the Commission's Web site at http://www.sec.gov.
The Company has filed with the Commission this Registration
Statement on Form 10-SB (together with all amendments and exhibits
filed or to be filed in connection herewith, the "Registration
Statement") under the Exchange Act, with respect to the Company's
common stock, $.001 par value per share (the "Common Stock").
Statements contained herein as to the contents of any document
are summaries of such documents and, in each instance, reference
is hereby made to the copy of such document filed as an exhibit to
the Registration Statement, and each such statement is qualified
in all respects by such reference. The Registration Statement
may be inspected and copied at the places set forth above.
The Company's principal executive offices are located at
60 Bowers Lane, Closter, New Jersey 07624, and its mailing address
is Box 68, Harrington Park, New Jersey 07640. The Company's
telephone number is (201) 768-2310.
FORWARD-LOOKING STATEMENTS
This Registration Statement 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.
PART I
Item 1. DESCRIPTION OF BUSINESS.
GENERAL DEVELOPMENT
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 ot its Common Stock pursuant to an exemption
provided by Rule 504 of Regulation D promulgated under the
Securities Act of 1933, as amended (the "Securities Act"). 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 integrated office productivity tools (e.g.
Computer networks) with 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. Because of the
Company's current status, in the event the Company does successfully
acquire or merge with an operating business opportunity, it is
likely that the Company's present shareholders will experience
substantial dilution and there will be a probable change in control
of the Company.
The Company is voluntarily filing this Registration Statement
on Form 10-SB in order to make information concerning itself more
readily available to the public. Management believes that being a
reporting company under the Exchange Act could provide a
prospective merger or acquisition candidate with additional
information concerning the Company. In addition, management
believes that this might make the Company more attractive to an
operating business opportunity as a potential business combination
candidate. As a result of filing this Registration Statement, the
Company is obligated to file with the Commission certain interim and
periodic reports including an annual report containing audited
financial statements.
Any target acquisition or merger candidate of the Company will
become subject to the same reporting requirements as the Company
upon consummation of any such business combination. Thus, in the
event that the Company successfully completes an acquisition or
merger with another operating business, the resulting combined
business must provide audited financial statements for at least the
two most recent fiscal years or, in the event that the combined
operating business has been in business less than two years, audited
financial statements will be required from the period of inception
of the target acquisition or merger candidate.
In addition to the foregoing reasons, the Company is
voluntarily filing this Registration Statement to maintain the
Company's quotations on the OTC Bulletin Board of the National
Association of Securities Dealers, Inc. (the "NASD"). The Company's
Common Stock is quoted on the OTC Bulletin Board under the symbol
"TTXI." For information concerning these stock quotations, see Item
9 "Market Price of and Dividends on the Company's Common Equity and
Other Stockholder Matters". Effective January 4, 1999, the NASD
adopted rules and regulations requiring that prior to any issuer
having its securities quoted on the OTC Bulletin Board of the NASD
that such issuer must be a "reporting issuer" which is required to
file reports under Section 13 or 15(d) of the Exchange Act. The
Company is not currently a "reporting issuer," and this Registration
Statement will bring the Company into compliance with these listing
provision of the OTC Bulletin Board and should prevent the NASD from
"delisting" quotations of the Company's Common Stock. Under the
"phase-in" schedule of the NASD, the Company has until May 3, 2000,
within which to become a "reporting issuer" and to satisfy all
comments of the Commission with respect to this Registration
Statement.
BUSINESS OF THE COMPANY
The Company has no current business operations and no
representation is made, nor is any intended, that the Company will
be able to carry on future business activities successfully.
Further, there can be no assurance that the Company will have the
ability to acquire or merge with an operating business, business
opportunity or property that will be of material value to the Company.
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 telecommunications and/or
internet industries.
The discussion of the business under this caption is
purposefully general and not meant to be restrictive of the
Company's virtually unlimited discretion to search for and enter
into potential business opportunities. No assurance can be given,
however, that any transaction will in fact be consummated.
Management anticipates that it may be able to participate in
only one potential business venture, due primarily to the Company's
limited financing. This lack of diversification should be
considered a substantial risk to the Company because it will not
permit the Company to offset potential losses from one venture
against gains from another.
The Company may seek a business opportunity in the form of
firms which have recently commenced operations, are developing
companies in need of additional funds for expansion into new
products or markets, are seeking to develop a new product or
service, or are established businesses which may be experiencing
financial or operating difficulties and are in need of additional
capital. In some instances, a business opportunity may involve the
acquisition or merger with a company which does not need substantial
additional cash but which desires to establish a public trading
market for its Common Stock. A company which seeks the Company's
participation in attempting to consolidate its operations through a
merger, reorganization, asset acquisition, or some other form of
combination may desire to do so to avoid what it may deem to be
adverse consequences of undertaking a public offering itself.
Factors considered may include time delays, significant expense,
loss of voting control and the inability or unwillingness to
comply with various federal and state laws enacted for the
protection of investors.
The Company anticipates that the selection of a business
opportunity in which to participate will be complex and extremely
risky. Because of general economic conditions, rapid technological
advances being made in some industries, and shortages of available
capital, management believes that there are numerous firms seeking
even the limited additional capital which the Company will have
and/or the benefits of a publicly traded corporation. Such
perceived benefits of a publicly traded corporation may include
facilities or improving the terms on which additional equity
financing may be sought, providing liquidity for the principals of a
business, creating a means for providing incentive stock options or
similar benefits to key employees, providing liquidity (subject to
restrictions of applicable statutes) for all shareholders, and other
factors. Potentially available business opportunities may occur in
many different industries and at various stages of development, all
of which will make the task of comparative investigation and
analysis of such business opportunities extremely difficult and
complex.
The Company has insufficient capital with which to provide
the owners of business opportunities with any significant cash or
other assets. However, management believes the Company will offer
owners of business opportunities the opportunity to acquire a
controlling ownership interest in a public company at substantially
less cost than is required to conduct an initial public offering.
The owners of the business opportunities will, however, incur
significant post-merger or acquisition registration costs in the
event they wish to register a portion of their shares for subsequent
sale. The Company will also incur significant legal and accounting
costs in connection with the acquisition of a business opportunity
including the costs of preparing Form 8-K's, agreements and related
reports and documents. Nevertheless, Management of the Company has
not conducted market research and is not aware of statistical data
which would support the perceived benefits of a merger or
acquisition transaction for the owners of a business opportunity.
EVALUATION OF OPPORTUNITIES
The analysis of new business opportunities will be undertaken
by or under the supervision of the Company's Chairman of the Board,
who is not a professional business analyst. Management intends to
concentrate on identifying preliminary prospective business
opportunities which may be brought to its attention through present
associations. In analyzing prospective business opportunities,
management will consider such matters as the available technical,
financial, and managerial resources; working capital and other
financial requirements; history or operation, if any; prospects for
the future; nature of present and expected competition; the quality
and experience of management services which may be available and the
depth of that management; the potential for further research,
development, or exploration; specific risk factors not now
foreseeable but which then may be anticipated to impact the proposed
activities of the Company; the potential for growth or expansion;
the potential for profit; the perceived public recognition or
acceptance of products, services, or trades; name identification;
and other relevant factors. Management of the Company will meet
personally with management and key personnel of the firm sponsoring
the business opportunity as part of its investigation. To the
extent possible, the Company intends to utilize written reports and
personal investigation to evaluate the above factors.
It may be anticipated that any opportunity in which the Company
participates will present certain risks. Many of these risks
cannot be adequately identified prior to selection of the specific
opportunity, and shareholders of the Company must, therefore,
depend on the ability of management to identify and evaluate such
risks. In the case of some of the opportunities available to the
Company, it may be anticipated that the promoters thereof have been
unable to develop a going concern or that such business is in its
development stage in that it has not generated significant revenues
from its principal business activity prior to the Company's
participation, and there is a risk, even after the Company's
participation in the activity and the related expenditure of the
Company's funds, that the combined enterprises will still be unable
to become a going concern or advance beyond the development stage.
Many of the opportunities may involve new and untested products,
processes, or market strategies which may not succeed. Such risks
will be assumed by the Company and, therefore, its shareholders.
ACQUISITION OF OPPORTUNITIES
In implementing a structure for a particular business
acquisition, the Company may become a party to a merger,
consolidation, reorganization, joint venture, or licensing agreement
with another corporation or entity. It may also purchase stock or
assets of an existing business. It should be noted that the
Company likely has insufficient capital with which to make any
acquisitions. Accordingly, in any of the transactions alluded to
herein, it is likely that the consideration utilized to make any
acquisitions will consist of equity securities.
In the event that an acquisition is made utilizing primarily
equity securities (as is expected to be the case), the percentage
ownership of present shareholders will be diluted, the extent of
dilution depending upon the amount so issued. Persons acquiring
shares in connection with any acquisition of a business may obtain
an amount of equity securities sufficient to control the Company.
In addition, the Company's Directors may, as part of the terms of
the acquisition transaction, resign and be replaced by new
directors without a vote of the Company's shareholders. Further,
if the Company were to issue substantial additional securities in
any acquisition, such issuance might have an adverse effect on the
trading market in the Company's securities in the future.
It is anticipated that any securities issued in any such
reorganization would be issued in reliance on exemptions from
registration under applicable federal and state securities laws. In
some circumstances, however, as a negotiated element of this
transaction, the Company may agree to register such securities
either at the time the transaction is consummated, under certain
conditions, or at specified times thereafter. The issuance of
substantial additional securities and their potential sale into any
trading market in the Company's securities may have a depressive
effect on such market.
The Company intends to structure a merger or acquisition in
such a manner as to minimize Federal and State tax consequences to
the Company and to any target company. Under Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code"), a statutory
merger or consolidation is an exempt transaction and may be tax-free
if effected in accordance with State law. A tax-free
reorganization may require the Company to issue a substantial
number of its securities in exchange for the securities or assets
of a target firm. Accordingly, the proportional interests of the
shareholders of the Company prior to such transaction or
reorganization may be substantially less than the proportional
interest of such shareholders in the reorganized entity. Even if a
merger or consolidation is undertaken in accordance with the Code,
there is no assurance that Federal and State tax regulations will
not change in the foreseeable future and result in the Company
incurring a significant tax liability.
As part of the Company's investigation, Management of the
Company intends to meet personally with management and key
personnel, may visit and inspect material facilities, obtain
independent analysis or verification of certain information
provided, check references of management and key personnel, and
take other reasonable investigative measures, to the extent of the
Company's limited financial resources and management expertise.
The manner in which the Company participates in an opportunity
will depend on the nature of the opportunity, the respective needs
and desires of the Company and other parties, the management of the
opportunity, and the relative negotiating strength of the Company
and such other management.
With respect to any mergers or acquisitions, negotiations with
target company management will be expected to focus on the
percentage of the Company which target company shareholders would
acquire in exchange for their shareholdings in the target company.
Depending upon, among other things, the target company's assets and
liabilities, the Company's shareholders will in all likelihood hold
a lesser percentage ownership interest in the Company following any
merger or acquisition. The percentage ownership may be subject to
significant reduction in the event the Company acquires a target
company with substantial assets. Any merger or acquisition effected
by the Company can be expected to have a significant dilutive effect
on the percentage of shares held by the Company's shareholders.
The Company will participate in a business opportunity only
after the negotiation and execution of appropriate written
agreements. Although the terms of such agreements cannot be
predicted, generally such agreements will require specific
representations and warranties by all of the parties thereto, will
specify certain events of default, will detail the terms of closing
and the conditions which must be satisfied by each of the parties
prior to such closing, will outline the manner of bearing costs if
the transaction is not closed, will set forth remedies on default,
and will include miscellaneous other terms.
It is anticipated that the investigation of specific business
opportunities and the negotiation, drafting and execution of
relevant agreements, disclosure documents, and other instruments
will require substantial management time and attention and
substantial costs for accountants, attorneys, and others. If a
decision is made not to participate in a specific business
opportunity, the costs theretofore incurred in the related
investigation would not be recoverable. Furthermore, even if an
agreement is reached for the participation in a specific business
opportunity, the failure to consummate that transaction may result
in the loss to the Company of the related costs incurred.
Further, companies subject to Section 13 or 15(d) of the
Exchange Act must furnish certain information about significant
acquisitions, including certified financial statements for the
company or companies acquired covering at least two years.
Consequently, if targeted acquisition prospects do not have, or are
unable to obtain, the requisite certified financial statements, such
acquisitions by the Company would appear to be inappropriate.
COMPETITION
The Company will remain an insignificant participant among the
firms which engage in the acquisition of business opportunities.
There are many established venture capital and financial concerns
which have significantly greater financial and personnel resources
and technical expertise than the Company. In view of the Company's
limited financial resources and personnel, the Company will continue
to be at a significant competitive disadvantage compared to the
Company's competitors.
In the event the Company acquires or merges with a business or
business opportunity in the telecommunications and/or internet
industries, the Company will face significant competition. The
telecommunications and internet industries are highly competitive.
It is anticipated that many of the Company's potential competitors
will have greater financial, technical, operational, marketing and
other resources and experience than the Company. In addition, the
telecommunications and internet industries are typified by well
established and better financed companies with a long established
and highly recognized market presence.
The markets in the telecommunications and internet industries
can be significantly influenced by the marketing and pricing
decisions of larger industry participants and there are limited
barriers to entry in many of the telecommunications and internet
markets. The Company expects competition in these markets to
intensify in the future.
The telecommunications and internet industries are also subject
to rapid and significant changes in technology, including frequent
new service and product introductions, evolving industry standards,
and rapid obsolescence of equipment. Competition from the effect of
technological changes on the Company's operations, in the event the
Company acquires or merges with a business or business opportunity
in the telecommunications or internet industries, cannot be
predicted and could have a material adverse effect on the Company's
future business, financial condition, and results of operations.
Technological advancements, telecommunications reform and the
continuing commercialization of the internet have all contributed to
transforming the once traditional telecommunications industry. Well
established long distance companies, regional Bell operating
companies, internet service providers and cable companies are
continuing to build, upgrade and enter many different markets in
the telecommunications and internet industries, which could
materially impact the Company's presence in any of the
telecommunications and/or internet industries. In addition, in the
future the Company's most significant competitors may be new
entrants to the communications and information services industry.
REGULATION
Although the Company will be subject to regulation under the
Exchange Act, management believes the Company will not be subject to
regulation under the Investment Company Act of 1940, insofar that
the Company will not be engaged in the business of investing or
trading in securities. Such Act defines an "investment company" as
an issuer which is or holds itself out as being engaged primarily in
the business of investing, reinvesting or trading of securities.
Although management believes that the Company will not be subject to
regulation under such Act insofar that the Company does not intend
to engage in such activities, the Company has obtained no formal
determination as to the status of the Company under such Act. The
Company could be expected to incur significant registration and
compliance costs if required to register under the Investment
Company Act of 1940. Accordingly, management will continue to
review the Company's activities from time to time with a view toward
reducing the likelihood the Company could be classified as an
"investment company".
In the event the Company acquires or merges with a business or
business opportunity in the telecommunications and/or internet
industries, the Company expects that its business will be subject to
various regulations. Generally, the telecommunications industry is
subject to the provisions of the Telecommunications Act of 1996 and
Federal Communication Commission ("FCC") regulations thereunder, as
well as applicable laws and regulations of the various states
administered by the relevant state authorities. Certain aspects of
the internet industry are also subject to the Telecommunications Act
of 1996 and regulations of the FCC. There can be no assurance that
the Company will be able to comply with any such regulations. In
addition, regulations may be enacted in the future which may have a
material adverse effect on the business of the Company.
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.
EMPLOYEES
As of the date hereof, and other than the services provided by
its Chairman and Donalson Capital Corporation, the Company does not
have any full or part time employees and has no plans for retaining
employees until such time as the Company's business warrants the
expense, or until the Company successfully acquires or merges with
an operating business. The Company may find it necessary to
periodically hire part-time clerical help on an as-needed basis.
UNCERTAINTIES AND RISK FACTORS
In addition to other information and financial data set forth
elsewhere in this Registration Statement, the following risk factors
should be considered carefully in evaluating the Company.
NO CURRENT BUSINESS OPERATIONS. In June 1999, the Company
sold its then current business 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 such 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 and 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. There is no
assurance the Company's intended merger or acquisition activities
will be successful or result in revenue or profit to the Company.
The likelihood of success of the Company must be considered in light
of the risks, expenses, difficulties and delays frequently
encountered in connection with the operation and development of a
new business. There is nothing at this time upon which to base an
assumption that any business or business opportunity the Company
acquires will prove successful, and there is no assurance that it
will be able to operate profitably.
EXTREMELY LIMITED CAPITALIZATION. The Company has insufficient
capital with which to make any significant asset acquisitions.
Accordingly, in any of the transactions alluded to herein, it is
likely that the consideration utilized to make any acquisitions
will consist of equity securities. In addition, inasmuch as the
Company's capitalization is limited and the issuance of additional
Common Stock will result in a dilution of interest for present
shareholders, it is unlikely the Company will be capable of
negotiating more than one merger or acquisition. Consequently, the
Company's lack of diversification may subject the Company to
economic fluctuation within a particular industry in which a target
company conducts business.
LACK OF PROFITABILITY; CONTINUING LOSSES; AND DOUBTFUL ABILITY
TO CONTINUE AS A GOING CONCERN. The Company has incurred net losses
from continuing operations of approximately $484,000 and $741,000
in 1998 and 1997, respectively. As a result of the Company's
recurring losses from operations, the Company's independent
auditor's report, dated November 2, 1999, for the year ended
December 31, 1998, states that these conditions raise substantial
doubt about the Company's ability to continue as a going concern.
With the sale of the Massachusetts Operations in June 1999, the
Company's only operating division, the Company has no current
operations. Management expects that this transaction will allow the
Company to focus on other business opportunities in its attempt to
locate and consummate a merger or acquisition with a private entity.
There can be no assurance, however, that the Company will be able
to acquire any business or business opportunity or that any business
or business opportunity the Company acquires will prove successful
or will be able to operate profitably.
SCARCITY OF AND COMPETITION FOR BUSINESS OPPORTUNITIES. The
Company is and will continue to be an insignificant participant
in the business of seeking business opportunities. A large
number of established and well-financed entities, including venture
capital firms, have in recent years increased their merger and
acquisition activities, especially among companies active in high
technology fields. Nearly all such entities have significantly
greater financial resources, technical expertise and managerial
capabilities than the Company and, consequently, the Company will be
at a competitive disadvantage in identifying suitable merger or
acquisition candidates and successfully concluding a proposed
merger or acquisition.
LACK OF MARKET RESEARCH OR IDENTIFICATION OF ACQUISITION OR
MERGER CANDIDATE. The Company has neither conducted nor have others
made available to it results of market research concerning the
availability of potential business opportunities. Therefore,
management has no assurance that market demand exists for a merger
or acquisition as contemplated by the Company. Although 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,
there is no assurance the Company will be able to acquire a
business opportunity on terms favorable to the Company.
CONFLICTS OF INTEREST - POSSIBLE NEGOTIATION OR OTHERWISE GRANT
OF CONSENT BY MANAGEMENT TO PURCHASE OF MANAGEMENT'S COMMON STOCK.
As a condition to or in connection with a proposed merger or
acquisition transaction, management may actively negotiate or
otherwise consent to the purchase of all or a portion of its shares
of Common Stock. In connection with any such stock purchase
transaction, it is possible that a premium may be paid for
management's shares of Common Stock and that the other shareholders
in the Company may not receive any portion thereof in the event
such premium may be paid. Any transaction structured in such manner
may present management with conflicts of interest and as a result of
such conflicts, may possibly compromise management's fiduciary
duties to the Company's shareholders, as the potential would
therefore exist for Management to consider its own personal
pecuniary benefit rather than the best interests of the Company's
other shareholders. Further, the Company's other shareholders may
not be afforded an opportunity to otherwise participate in any
particular stock buy-out transaction. Additionally, in any such
transaction, it is possible, although not presently intended, that
the Company may borrow funds to be used directly or indirectly to
purchase management's shares.
POSSIBLE CHANGE IN CONTROL AND MANAGEMENT. The successful
completion of a merger or acquisition may result in a change of
control of the Company. Any such change in control may also result
in the resignation or removal of the Company's present management.
REGULATION. Although the Company will be subject to
regulation under the Exchange Act, management believes the Company
will not be subject to regulation under the Investment Company Act
of 1940, insofar that the Company will not be engaged in the
business of investing or trading in securities. Such Act defines an
"investment company" as an issuer which is or holds itself out as
being engaged primarily in the business of investing, reinvesting or
trading of securities. Although management believes that the
Company will not be subject to regulation under such Act insofar
that the Company does not intend to engage in such activities, the
Company has obtained no formal determination as to the status of the
Company under such Act. The Company could be expected to incur
significant registration and compliance costs if required to
register under the Investment Company Act of 1940. Accordingly,
management will continue to review the Company's activities from
time to time with a view toward reducing the likelihood the Company
could be classified as an "investment company".
TAXATION. In the course of any acquisition or merger the
Company may undertake, a substantial amount of attention will be
focused upon federal and state tax consequences to both the Company
and the "target" company. Presently, under Section 368 of the
Internal Revenue Code of 1986, as amended, a statutory merger or
consolidation is an exempt transaction and may be tax-free if
effected in accordance with State law. While the Company expects to
undertake any merger or acquisition so as to minimize federal and
state tax consequences to both the Company and the "target" company,
there is no assurance that such business combination will meet the
statutory requirements of a reorganization or that the parties will
obtain the intended tax-free treatment upon a transfer of stock or
assets. A nonqualifying reorganization could result in the
imposition of both federal and state taxes which may have
substantial adverse effect on the Company.
LIMITATION ON LIABILITY OF DIRECTORS. The Company's
Certificate of Incorporation provides that a director of the Company
will not be personally liable to the Company or its shareholders for
monetary damages resulting from breaches of his fiduciary duty of
care as a director, including breaches which constitute gross
negligence. As a result, the rights of the Company and its
shareholders to obtain monetary damages for acts or omissions of
directors will be more limited than they would be in the absence of
such provision. The provision would not apply to a violation of a
director's responsibility under the Federal securities laws.
POSSIBLE USE OF DEBT FINANCING; DEBT OF AN ACQUIRED BUSINESS.
There are currently no limitations relating to the Company's ability
to borrow funds to increase the amount of capital available to the
Company to effect a business combination or otherwise finance the
operations of an acquired business. The amount and nature of any
borrowings by the Company will depend on numerous considerations,
including the Company's capital requirements, the Company's
perceived ability to meet debt service on such borrowings, and
then-prevailing conditions in the financial markets, as well as
general economic conditions. There can be no assurance that debt
financing, if required or otherwise sought, will be available on
terms deemed to be commercially acceptable and in the best interest
of the Company. The inability of the Company to borrow funds
required to effect or facilitate a business combination, or to
provide funds for an additional infusion of capital into an acquired
business, may have a material adverse effect on the Company's
financial condition and future prospects. Additionally, to the
extent that debt financing ultimately proves to be available, any
borrowings may subject the Company to various risks traditionally
associated with incurring of indebtedness, including the risks of
interest rate fluctuations and insufficiency of cash flow to pay
principal and interest. Furthermore, an acquired business may
already have previously-incurred debt financing and, therefore, the
risks inherent thereto, as discussed above.
COMPETITION IN THE TELECOMMUNICATIONS AND INTERNET INDUSTRIES.
In the event the Company acquires or merges with a business or
business opportunity in the telecommunications and/or internet
industries, the Company will face significant competition. The
telecommunications and internet industries are highly competitive.
It is anticipated that many of the Company's potential competitors
will have greater financial, technical, operational, marketing and
other resources and experience than the Company. In addition, the
telecommunications and internet industries are typified by well
established and better financed companies with a long established
and highly recognized market presence.
GOVERNMENT REGULATIONS IN THE TELECOMMUNICATIONS AND INTERNET
INDUSTRIES. In the event the Company acquires or merges with a
business or business opportunity in the telecommunications and/or
internet industries, the Company expects that its business will be
subject to various regulations. Generally, the telecommunications
industry is subject to the provisions of the Telecommunications Act
of 1996 and Federal Communication Commission ("FCC") regulations
thereunder, as well as applicable laws and regulations of the
various states administered by the relevant state authorities.
Certain aspects of the internet industry are also subject to the
Telecommunications Act of 1996 and regulations of the FCC. There
can be no assurance that the Company will be able to comply with any
such regulations. In addition, regulations may be enacted in the
future which may have a material adverse effect on the business of
the Company.
CUMULATIVE VOTING AND PRE-EMPTIVE RIGHTS. There are no
pre-emptive rights in connection with the Company's Common Stock.
Therefore, current shareholders of the Company will be in all
likelihood significantly diluted in their percentage ownership of
the Company in the event the Company issues shares of stock in
connection with an acquisition of a buisness or business
opportunity. Cumulative voting in the election of directors is not
allowed. Accordingly, the holders of a majority of the shares of
Common Stock, present in person or by proxy, will be able to elect
all of the Company's Board of Directors.
DIVIDENDS. At the present time the Company does not
anticipate paying dividends on its Common Stock in the foreseeable
future. Any future dividends will depend on earnings, if any, of
the Company, its financial requirements and other factors.
POTENTIAL FUTURE SALES PURSUANT TO RULE 144. Certain shares of
Common Stock presently held by management and others are "restricted
securities" as that term is defined in Rule 144, promulgated under
the Securities Act. Under Rule 144, a person (or persons whose
shares are aggregated) who has satisfied a one-year holding period,
may, under certain circumstances sell within any three-month period
a number of shares which does not exceed the greater of 1% of the
then outstanding shares of Common Stock, or the average weekly
trading volume during the four calendar weeks prior to such sale.
Rule 144 also permits, under certain circumstances, the sale of
shares without any quantity limitation by a person who is not an
affiliate of the Company and who has satisfied a two-year holding
period. Such holding periods have already been satisfied in many
instances. Therefore, actual sales or the prospect of sales of such
shares under Rule 144 in the future may depress the prices of the
Company's securities.
ISSUANCE OF SHARES IN MERGER OR ACQUISITION. Any acquisition
effected by the Company may result in the issuance of additional
Common Stock or Preferred Stock without shareholder approval and may
result in substantial dilution in the percentage of the Company's
securities held by the Company's then-shareholders. Moreover, the
Common Stock or Preferred Stock issued in any such merger or
acquisition transaction may be valued on an arbitrary or non
arm's-length basis by management of the Company, resulting in an
additional reduction in the percentage of securities held by the
Company's then-shareholders.
PENNY STOCK RULES. The Company's Common Stock is covered by a
Securities and Exchange Commission rule that imposes additional
sales practice requirements on broker/dealers who sell such
securities to persons other than established customers and
accredited investors (generally institutions with assets in excess
of $5,000,000 or individuals with net worth in excess of $1,000,000
or annual income exceeding $200,000 or $300,000 jointly with their
spouses). For transactions covered by the rule, the broker/dealer
must make a special suitability determination for the purchaser and
have received the purchaser's written agreement to the transaction
prior to the sale. Consequently, the rule may affect the ability of
shareholders in this offering to sell their shares in the secondary
market. In addition, Securities and Exchange Commission rules
impose additional sales practice requirements on broker/dealers who
sell penny securities. These rules require a summary of certain
essential items. The items include the risk of investing in penny
stocks in both public offerings and secondary marketing; terms
important to an understanding of the function of the penny stock
market, such as "bid" and "offer" quotes, a dealers "spread" and
broker/dealer compensation; the broker/dealer compensation, the
broker/dealers duties to its customers, including the disclosures
required by any other penny stock disclosure rules; the customers
rights and remedies in cases of fraud in penny stock transactions;
and, the NASD's toll free telephone number and the central number of
the North American Securities Administrators Association, for
information on the disciplinary history of broker/dealers and their
associated persons. The additional burdens imposed upon
broker/dealers by such requirements may discourage broker/dealers
from effecting transactions in the Common Stock, which could
severely limit the market of the Company's Common Stock.
RESTRICTIONS ON TRANSFERABILITY; LIMITED TRADING MARKET. Only
a limited trading market for the Common Stock currently exists. The
market price of the Common Stock, which currently is listed on the
OTC Bulletin Board under the symbol TTXI, has, in the past,
fluctuated substantially over time and may in the future be highly
volatile. In addition, the Company believes that relatively few
market makers make a market in the Company's Common Stock. The
actions of any of these market makers could substantially impact the
volatility of the Company's Common Stock.
SECURITIES AND EXCHANGE COMMISSION AND MARYLAND INVESTIGATION.
In May 1997, the Company was notified by the Securities and
Exchange Commission of a formal order of a private, non-public
investigation of certain issues related to the Company's stock
trading. In August 1997, the Company supplied copies of various
books and records, and the Commission deposed several of the
Company's officers. No further notification has been received since
then from the Commission. In addition, in June 1998, the Company
received notification from the Maryland Division of Securities (the
"Maryland Division") that the Company may have offered and sold
common stock in violation of Maryland regulations based upon an
advertisement. The Company cooperated with the requests by the
Maryland Division and furnished appropriate information and informed
the Maryland Division that the Company did not authorize its name to
be used in the advertisement. In addition, in October 1998, the
Company received notification from the Maryland Division that the
Company may have potentially violated regulations on which the
Company relied for a 1997 private placement. The Company denied
such violation and advised the Maryland Division that it did file
an appropriate notice with the State of Maryland. In December 1998,
the Company supplied information and other documents requested by
the Maryland Division. No further notification has been received
since then from the Maryland Division. While there can be no
assurance, in the event any further action is taken by either the
Commission or the Maryland Division, management does not expect such
will result in an unfavorable outcome to the Company or have a
material adverse effect.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
The following discussion should be read in conjunction with the
Financial Statements and Notes thereto (the "Financial Statements")
and is qualified in its entirety by the foregoing and by other more
detailed financial information appearing elsewhere in this
Registration Statement.
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 (the "Securities Act"). 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 integrated office productivity tools (e.g.
Computer networks) with 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.
The disposal of the Massachusetts Operations has been accounted
for as a discontinued operation and, accordingly, its net assets
(liabilities) have been segregated from continuing operations in the
balance sheet included in the Financial Statements, and its
operating results are segregated and reported as discontinued
operations in the statements of operations and cash flows included
in the Financial Statements.
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 telecommunications and/or
internet industries. See, also, Part I, Item 1 for a more detailed
discussion of the Company's plan of operation.
LIQUIDITY AND CAPITAL RESOURCES
On December 31, 1998, the Company had working capital of
approximately $304,000, an equity to debt ratio of approximately
39.8 to 1, and stockholders' equity of approximately $717,000. At
December 31, 1998, the Company had approximately $227,000 in cash,
total assets of approximately $735,000 and total liabilities of
approximately $18,000. On September 30, 1999, the Company had
working capital of approximately $32,000, an equity to debt ratio of
approximately 14.1 to 1, and stockholders' equity of approximately
$254,000. At September 30, 1999, the Company had approximately
$50,000 in cash, total assets of approximately $272,000 and total
liabilities of approximately $18,000.
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. There can be no assurance,
however, 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.
Item 3. DESCRIPTION OF PROPERTY.
The Company currently maintains its offices in the home of its
Chairman pursuant to an oral agreement on a rent-free,
month-to-month basis. It is contemplated that at such future time
as an acquisition or merger transaction may be completed, the
Company will secure commercial office space from which it will
conduct its business. Until such an acquisition or merger, the
Company lacks any basis for determining the kinds of office space or
other facilities necessary for its future business. The Company has
no current plans to secure such commercial office space. It is also
possible that a merger or acquisition candidate would have adequate
existing facilities upon completion of such a transaction, and the
Company's principal offices may be transferred to such existing
facilities.
Item 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth, as of the date hereof, (i)
the number of shares of Common Stock owned of record or
beneficially, or both, by each person who owned of record, or is
known by the Company to have beneficially owned, individually, or
with his associates, more than 5% of such shares then outstanding;
(ii) the number of shares owned beneficially by each Director of the
Company and each executive officer of the Company; and (iii) the
number of shares owned beneficially by all Directors and executive
officers as a group. Except as otherwise indicated below, each of
the persons listed below has sole voting and investment power with
respect to his or her shares.
AMOUNT AND NATURE PERCENT
NAME OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OF CLASS
Donald R. McKelvey 5,552,125(1) 62.6%
Joseph Jaoudi 500,000 5.6%
Ina McWey 500,000(2) 5.6%
Thomas N. Fischetti 62,000(3) 0.7%
Robert W. McKelvey - (4) -
All Executive Officers
and Directors as a Group 5,614,125 63.3%
(1) Includes 5,512,500 shares held by Donald R. McKelvey and 39,625
shares held by Donalson Capital Corporation ("Donalson"). Mr.
McKelvey is the sole shareholder of Donalson and, by virtue of
such ownership, Mr. McKelvey may be deemed the beneficial owner
of the shares held by Donalson. The address for Mr. McKelvey
is 60 Bowers Lane, Closter, New Jersey.
(2) According to the records of the Company's transfer agent, such
shares are still held of record by Robert Powell, Sr. In the
Acquisition and Stock Transfer Agreement entered into in June
1999 by and among the Company, Mr. Powell and Total Technology,
Inc. ("Total Technology") (pursuant to which the Massachusetts
Operations were transferred to Total Technology), Mr. Powell
represented and warranted that in or about April 1999 he
transferred such 500,000 shares to Ina McWey, and that he has
no direct or indirect beneficial ownership in such shares or
any other rights with respect thereto. Mr. Powell agreed that
in the event he acquired beneficial ownership of such shares at
any time, he would immediately return such shares or cause such
shares to be returned to the Company without any additional
consideration.
(3) Includes 52,000 held by Mr. Fischetti and 10,000 shares held by
Allmike Metal Technology, Inc. ("Allmike"). Mr. Fischetti is
the majority shareholder and President of Allmike and, by
virtue thereof, Mr. Fischetti may be deemed the beneficial
owner of the shares held by Allmike. The address for Mr.
Fischetti is 65 Anderson Avenue, Moonachie, New Jersey.
(4) The address for Mr. McKelvey is 126 Barley Road, Ivyland,
Pennsylvania.
Item 5. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS.
Set forth below are the present directors and executive
officers of the Company. Note that there are no other persons who
have been nominated or chosen to become directors nor are there any
other persons who have been chosen to become executive officers.
Directors are elected to serve until the next annual meeting of
shareholders and until their successors have been elected and have
qualified. Officers are appointed to serve until the meeting of the
Board of Directors following the next annual meeting of shareholders
and until their successors have been elected and qualified. None of
the directors and officers is related to any other director or
officer of the Company except as otherwise set forth below.
PRESENT POSITION HAS SERVED AS
NAME AGE AND OFFICES DIRECTOR SINCE
Donald R. McKelvey 53 Chairman of the Board, 1995
President, Treasurer
and Director
Robert W. McKelvey 42 Secretary and Director 1999
Thomas N. Fischetti 45 Director 1999
Set forth below are brief accounts of the business experience
during the past five years of each director and executive officer of
the Company and each significant employee of the Company.
DONALD R. McKELVEY has been a Director, Chairman of the Board
and Treasurer of the Company since January 1995 and also became its
President in March 1999. Mr. McKelvey has more than 20 years
experience in the telecommunications industry which has included
management positions with NCR Corporation and Northern Telecom
Limited, now known as Nortel Networks Corp. (Canada's largest
telecommunications company) where Mr. McKelvey was responsible for
its national accounts. Mr. McKelvey is also the sole officer,
director and stockholder of Donalson Capital Corp. which provides
certain consulting services to the Company. Donald R. McKelvey is
the brother of Robert W. McKelvey.
ROBERT W. McKELVEY has been a Director and Secretary of the
Company since March 1999. Since December 1994, he has been a
Regional Manager of Legaledge Software which provides computer
software products to primarily corporate law departments, law firms
and government agencies. From February 1987 to December 1994, he
was employed by Positek, Inc., a Philadelphia based software
publisher, initially in the position of a Regional Manager and then
as Mid-Atlantic District Manager. Robert W. McKelvey is the brother
of Donald R. McKelvey.
THOMAS N. FISCHETTI has been a Director of the Company since
March 1999. Mr. Fischetti is the President and majority
shareholder of Allmike Metal Technology, Inc., a New Jersey based
developer, designer and manufacturer of products targeted for the
wireless and fibre optic telecommunications markets. He has been
involved with such company for more than the past five years.
Item 6. EXECUTIVE COMPENSATION.
The following summary compensation table sets forth information
concerning the annual and long-term compensation for services in all
capacities to the Company for the years ended December 31, 1998,
1997 and 1996, of those persons who were, at December 31, 1998 (i)
the chief executive officer and (ii) the other most highly
compensated executive officers of the Company, whose annual base
salary and bonus compensation was in excess of $100,000 (the named
executive officers):
SUMMARY COMPENSATION TABLE
ANNUAL
COMPENSATION
NAME AND PRINCIPAL FISCAL
POSITION YEAR SALARY BONUS
Donald R. McKelvey(2) 1998 $0 $0
Chairman of the Board 1997 $0 $0
1996 $0 $0
Robert Powell, Sr.(4) 1998 $35,000 $0
President 1997 $40,500 $0
1996 $31,200 $0
LONG-TERM
COMPENSATION
RESTRICTED
NAME AND PRINCIPAL FISCAL STOCK ALL OTHER
POSITION YEAR VALUE(1) COMPENSATION
Donald R. McKelvey(2) 1998 $100,000 $120,000(3)
Chairman of the Board 1997 $625,000 $120,000(3)
1996 $218,750 $120,000(3)
Robert Powell, Sr.(4) 1998 $0 $0
President 1997 $625,000 $0
1996 $218,750 $0
_____________________
(1) On December 1, 1998, the Company issued 500,000 shares of
Common Stock to Mr. McKelvey for additional compensation. On
March 19, 1997, the Company issued 500,000 shares to each of
Mr. McKelvey and Mr. Powell for additional compensation, and on
October 1, 1996, the Company issued 500,000 shares to each of
Mr. McKelvey and Mr. Powell for additional compensation.
Dollar values of awards are based on the average of the bid
and asked prices of the Company's Common Stock on the dates of
grant. All of such shares issued to Mr. Powell have either
been returned to the Company with the exception of 500,000
shares which were transferred to Ina McWey. (See, however,
Part I, Item 4).
(2) Since March 1999, Mr. McKelvey has also been President of the
Company.
(3) Consists of payments made to Donalson Capital Corporation
("Donalson") for consulting fees. Mr. McKelvey is the sole
officer, director and stockholder of Donalson.
(4) Mr. Powell, who is no longer employed by the Company, served as
President of the Company until March 1999 and managed the
Company's Massachusetts Operations until it was transferred to
a company controlled by Mr. Powell in June 1999.
COMPENSATION OF DIRECTORS
Since inception, no director has received any cash compensation
for his services as such. In the past, directors have been and will
continue to be reimbursed for reasonable expenses incurred on behalf
of the Company.
Item 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
During 1997, the Company issued 500,000 shares of Common Stock
to each of Donald R. McKelvey and Robert Powell, Sr. (who was then
an officer and Director of the Company) as additional compensation.
During 1998, the Company issued 500,000 shares of Common Stock
to Donald R. McKelvey for additional compensation and agreed to
issue an additional 3,000,000 shares of Common Stock to him for
additional compensation in 1999. Such additional 3,000,000 shares
were issued in January 1999.
In January 1996, the Company entered into a three year
consulting agreement with Donalson Capital Corporation, a company
owned by Donald R. McKelvey. Such agreement provides for a fee of
$120,000 per year payable at a rate of $10,000 per month. Such
agreement was renewed as of January 1999.
In June 1999, and pursuant to an Acquisition and Stock Transfer
Agreement among the Company, Robert Powell, Sr. and Total
Technology, Inc., an company affiliated with Mr. Powell ("Total
Technology"), the Company sold and transferred all of the
Massachusetts Operations to Total Technology. Pursuant to the
agreement, Mr. Powell returned 950,000 shares of the Company's
Common Stock to the Company and Total Technology assumed all
liabilities of the Massachusetts Operations. As part of the
agreement, the Company also agreed to forgive all officer loans due
from Mr. Powell (which amounted to approximately $118,000).
At December 31, 1998, 1997 and 1996, there were officer loans
outstanding to the Company in the amounts of $412,972, $451,820 and
$330,361, respectively. In June 1999, such officer loans due from
Mr. Powell (approximately $118,000) were forgiven as part of the
consideration in connection with the sale and transfer of the
Massachusetts Operations. The balance of the loans are due from Mr.
McKelvey. Such loans are unsecured, non-interest bearing with no
specific terms of repayment.
Item 8. DESCRIPTION OF SECURITIES.
GENERAL
The Company is authorized to issue 13,000,000 shares of Common
Stock, par value $.001, and 2,000,000 shares of preferred stock, par
value $.001. There are currently outstanding 8,869,944 shares of
Common Stock and no preferred stock.
COMMON STOCK
The holders of Common Stock have one vote per share for the
election of Directors, without provision for cumulative voting, and
on all other matters. Thus, holders of more than 50% of the shares
voting for the election of Directors can elect all the Directors,
if they choose to do so. The Common Stock is not redeemable and
has no conversion or preemptive rights. All outstanding shares of
Common Stock are fully paid and non-assessable. In the event of
liquidation of the Company, the holders of Common Stock will share
equally in any balance of the corporate assets available for
distribution to them after satisfaction of creditors and the holders
of the Company's senior securities such as holders of Preferred
Stock, and debenture holders, if any.
PREFERRED STOCK
The Preferred Stock may be divided into Series or Classes, with
special voting rights and preferences, to be established by the
management of the Company upon the approval of a majority vote of
the Directors of the Company. If the Board of Directors authorized
the issuance of shares of Preferred Stock with conversion rights,
the number of shares of Common Stock outstanding could potentially
be increased by up to the authorized amount. Issuance of Preferred
Stock could, under certain circumstances, have the effect of
delaying or preventing a change in control of the Company and may
adversely affect the rights of holders of other classes of Preferred
Stock or holders of Common Stock. Also, Preferred Stock could have
preferences over the Common Stock and other series of Preferred
Stock with respect to dividends and liquidation rights.
DIVIDENDS
The payment by the Company of cash dividends, if any, in the
future, rests within the discretion of its Board of Directors and,
among other things, will depend upon the Company's earnings, its
capital requirements and its financial condition, as well as other
relevant factors. The Company has not declared any cash dividends
since inception, and has no present intention of paying any cash
dividends in the foreseeable future, it being the intention of
management to use earnings, if any, to generate increased growth.
TRANSFER AGENT
The Transfer Agent of the Company's Common Stock is Olde
Monmouth Stock Transfer Co., Inc., 77 Memorial Parkway, Suite 101,
Atlantic Highlands, New Jersey 07716.
PART II
Item 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock is presently being traded in the
over-the-counter market under the symbol "TTXI" and is listed on the
OTC Bulletin Board. The following chart sets forth the range of the
high and low bid quotations for the Company's Common Stock for each
period indicated. The quotations represent prices between dealers
and do not include retail markups, markdowns, commissions or other
adjustments and may not represent actual transactions.
BID PRICES
PERIOD HIGH LOW
Year ended December 31, 1997:
Jan. 1, 1997 to March 31, 1997 $1.31 $0.50
April l, 1997 to June 30, 1997 $1.31 $0.37
July 1, 1997 to Sept. 30, 1997 $0.44 $0.30
Oct. 1, 1997 to Dec. 31, 1997 $0.69 $0.25
Year ended December 31, 1998:
Jan. 1, 1998 to March 31, 1998 $0.44 $0.19
April l, 1998 to June 30, 1998 $0.50 $0.19
July 1, 1998 to Sept. 30, 1998 $0.44 $0.20
Oct. 1, 1998 to Dec. 31, 1998 $0.21 $0.12
Year ending December 31, 1999:
Jan. 1, 1999 to March 31, 1999 $0.19 $0.12
April l, 1999 to June 30, 1999 $0.19 $0.10
July 1, 1999 to Sept. 30, 1999 $0.19 $0.08
As of December 31, 1999 there were approximately 225 record
holders of the Company's Common Stock.
The Company has never declared any cash dividends on its Common
Stock and does not anticipate declaring cash dividends in the
foreseeable future.
PENNY STOCK RULES
The Company's Common Stock is covered by a Securities and
Exchange Commission rule that imposes additional sales practice
requirements on broker/dealers who sell such securities to persons
other than established customers and accredited investors (generally
institutions with assets in excess of $5,000,000 or individuals with
net worth in excess of $1,000,000 or annual income exceeding
$200,000 or $300,000 jointly with their spouses). For transactions
covered by the rule, the broker/dealer must make a special
suitability determination for the purchaser and have received the
purchaser's written agreement to the transaction prior to the sale.
Consequently, the rule may affect the ability of shareholders in
this offering to sell their shares in the secondary market. In
addition, Securities and Exchange Commission rules impose additional
sales practice requirements on broker/dealers who sell penny
securities. These rules require a summary of certain essential
items. The items include the risk of investing in penny stocks in
both public offerings and secondary marketing; terms important to an
understanding of the function of the penny stock market, such as
"bid" and "offer" quotes, a dealers "spread" and broker/dealer
compensation; the broker/dealer compensation, the broker/dealers
duties to its customers, including the disclosures required by any
other penny stock disclosure rules; the customers rights and
remedies in cases of fraud in penny stock transactions; and, the
NASD's toll free telephone number and the central number of the
North American Securities Administrators Association, for
information on the disciplinary history of broker/dealers and their
associated persons. The additional burdens imposed upon
broker/dealers by such requirements may discourage broker/dealers
from effecting transactions in the Common Stock, which could
severely limit the market of the Company's Common Stock.
Item 2. LEGAL PROCEEDINGS.
There are no material pending legal proceedings to which the
Company is a party or to which any of its property is subject.
Item 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
The Company has not, during its two most recent fiscal years,
changed or has had any disagreement with is principal independent
accountant. The independent accountant did not rely on any other
accountant's work or report.
Item 4. RECENT SALES OF UNREGISTERED SECURITIES.
The following sets forth information relating to all securities
of the Company sold during the past three years without registration
under the Securities Act:
From January 1997 to July 1997, the Company sold 1,056,863
shares of Common Stock to subscribers for the aggregate
consideration of $753,295 in reliance upon the exemption from
registration contained in Regulation D promulgated under the
Securities Act. No underwriters were used and no underwriting
commissions were paid.
In January, March and October 1997, the Company issued an
aggregate of 240,500 shares of Common Stock to three unaffiliated
consultants for consulting services, 140,500 shares of which were
issued in reliance upon the exemption from registration contained in
Regulation D promulgated under the Securities Act and 100,000
shares of which were issued in reliance upon the exemption from
registration pursuant to Section 4(2) of the Securities Act.
In March 1997, the Company issued 500,000 shares of Common
Stock to each of Donald R. McKelvey and Robert Powell, Sr. for
compensation in reliance upon the exemption from registration
pursuant to Section 4(2) of the Securities Act.
In May 1997, the Company sold 625,000 shares of Common Stock to
Joseph Jaoudi, a non-U.S. person, for $250,000 in reliance upon the
exemption from registration contained in Regulation S promulgated
under the Securities Act. No underwriters were used and no
underwriting commissions were paid.
In April 1998, the Company sold 50,000 shares of Common Stock
to Wall Street Communications, Inc. for $8,450 and in April and May
1998, the Company issued an additional 250,000 shares of Common
Stock to Wall Street Communications, Inc. for consulting services in
reliance upon the exemption from registration contained in
Regulation D promulgated under the Securities Act. No underwriters
were used and no underwriting commissions were paid.
In December 1998, the Company issued 500,000 shares of Common
Stock to Donald R. McKelvey for compensation in reliance upon the
exemption from registration pursuant to Section 4(2) of the
Securities Act.
In January and February 1999, the Company issued an aggregate
of 3,000,000 shares of Common Stock to Donald R. McKelvey for
compensation in reliance upon the exemption from registration
pursuant to Section 4(2) of the Securities Act.
In January 1999, the Company issued 12,000 shares of Common
Stock to James Martin for consulting services in reliance upon the
exemption from registration pursuant to Section 4(2) of the
Securities Act.
In September 1999, the Company issued 20,000 shares of Common
Stock to Clarence Smith for professional services in reliance upon
the exemption from registration pursuant to Section 4(2) of the
Securities Act.
In December 1999, the Company issued 25,000 shares of Common
Stock to David M. Kaye, Esq. for professional services in reliance
upon the exemption from registration pursuant to Section 4(2) of the
Securities Act.
With respect to the issuances pursuant to Regulation D, the
Company, as a non-reporting entity, relied upon the exemption which
permits the sale of up to $1 million in securities during a 12 month
period under Rule 504 of Regulation D, and with respect to the
Section 4(2) transactions as indicated above, the Company relied
upon the exemption provided therein for "transactions by the issuer
not involving any public offering". With respect to the issuance
pursuant to Regulation S, the Company relied upon the exemption
provided therein for issuances made outside the United States to
persons other than "U.S. Persons".
Item 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law contains
various provisions entitling directors, officers, employees or
agents of the Company to indemnification from judgments, fines,
amounts paid in settlement and reasonable expenses, including
attorneys' fees, as the result of an action or proceeding (whether
civil, criminal, administrative or investigative) in which they may
be involved by reason of being or having been a director, officer,
employee or agent of the Company provided said persons acted in
good faith and in a manner reasonably believed to be in or not
opposed to the best interests of the Company (and, with respect to
any criminal action or proceedings, had no reasonable cause to
believe that the conduct complained of was unlawful). Also, the
Certificate of Incorporation of the Company states that the
indemnification provisions of Section 145 of the Delaware
Corporation Law shall be utilized to the fullest extent permitted.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, may be permitted to directors,
officers, or persons controlling the Company pursuant to the
foregoing provisions or otherwise, the Company has been informed
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the Company of expenses incurred or paid by a director, officer or
controlling person of the Company in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
PART F/S
See the Financial Statements annexed to this Registration
Statement.
PART III
Item 1. INDEX TO EXHIBITS.
The following exhibits are filed with this Registration Statement:
3.1 Certificate of Incorporation (Delaware)
3.2 Certificate of Amendment (Delaware) (filed October 19, 1994)
3.3 Certificate of Amendment (Delaware) (filed December 19,
1997)
3.4 Certificate of Merger (Delaware)
3.5 Articles of Merger (Nevada)
3.6 By-Laws
4.1 Specimen Certificate for shares of Common Stock
4.2 Agreement and Plan of Merger
10.1 Consulting Agreement with Donalson Capital Corporation
10.2 Acquisition and Stock Transfer Agreement by and among
the Company, Robert Powell, Sr. and Total Technology, Inc.
23.1 Consent of Kempisty and Company, Independent Certified
Public Accountants
27 Financial Data Schedule
Item 2. DESCRIPTION OF EXHIBITS.
See Item 1 above.
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
TELCO-TECHNOLOGY, INC.
(Registrant)
Date:January 12, 2000 By: /s/Donald R. McKelvey
Donald R. McKelvey,
Chairman of the Board and President
TELCO-TECHNOLOGY, INC.
FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
INDEX
PAGE
INDEPENDENT AUDITORS' REPORT F2
BALANCE SHEETS F3
STATEMENTS OF OPERATIONS F4
STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY F5
STATEMENTS OF CASH FLOWS F6-F7
NOTES TO FINANCIAL STATEMENTS F8-F15
INDEPENDENT AUDITORS' REPORT
To the Stockholders of
Telco-Technology, Inc.
We have audited the accompanying balance sheets of Telco-Technology,
Inc. as of December 31, 1998 and 1997 and the related statements of
operations, changes in stockholders' equity and cash flows for the
years then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
statement of financial condition is free of material misstatement.
An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of
Telco-Technology, Inc. as of December 31, 1998 and 1997 and the
results of its operations and cash flows for the years then ended in
conformity with generally accepted accounting principles.
As discussed in Note 3, in June, 1999, the Company disposed of its
Massachusetts operation (its only operating division). Management
expects that this transaction will allow the Company to focus on
other business opportunities.
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in
Note 9 to the financial statements, the Company has suffered
recurring losses from operations that raise substantial doubt about
the ability to continue as a going concern. Management's plans
regarding these matters are also described in Note 9. The financial
statements do not include any adjustments that might result from the
outcome of this uncertainty.
Kempisty & Company
Certified Public Accountants, P.C.
New York, New York
November 2, 1999
TELCO-TECHNOLOGY, INC.
BALANCE SHEETS
September 30, December 31,
1999 1998
(unaudited)
ASSETS
Current Assets
Cash and cash equivalents $ 49,740 $ 226,719
Net assets
(discontinued operations) - 94,826
Total Current Assets 49,740 321,545
Other Assets
Loans receivable from
officers (Note 8) 222,106 412,972
Total Other Assets 222,106 412,972
TOTAL ASSETS $ 271,846 $ 734,517
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and
accrued expenses $ 18,000 $ 18,000
Total Current Liabilities 18,000 18,000
Commitment and
Contingencies (Note 5)
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
value8,844,944 and
6,762,944 issued)
(Note 7) 8,845 6,763
Common stock to be
issued 3,012,000
shares for services - 180,720
Capital in excess
of par value 2,669,065 2,698,135
Deficit (2,424,064) (2,169,101)
Total Stockholders'
Equity 253,846 716,517
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 271,846 $ 734,517
See Notes to Financial Statements.
TELCO TECHNOLOGY, INC.
STATEMENTS OF OPERATIONS
For the nine months For the Year Ended
ended September 30, December 31,
1999 1998 1998 1997
(unaudited)
Sales revenues $ - $ - $ - $ -
Cost of sales - - - -
Gross profit 0 0 0 0
General &
administrative
expenses 188,547 306,231 531,413 769,421
Loss from
operations (188,547) (306,231) (531,413) (769,421)
Other income
& expenses
Interest income 3,471 7,541 7,541 17,751
Other income - 37,083 39,800 11,000
Income (loss)
from continuing
operations
before taxes (185,076) (261,607) (484,072) (740,670)
Provision for
income taxes - - - -
Net income
(loss) from
continuing
operations $(185,076) (261,607) (484,072) (740,670)
Income (loss)
from
discontinued
operations
(net of
income taxes) (69,887) 74,711 32,410 (102,491)
Net loss $(254,963) (186,896) (451,662) (843,161)
Basic and
diluted
earnings
(loss) per
common share:
Continuing
operations (0.02) (0.04) (0.08) (0.14)
Discontinued
operations (0.01) 0.01 0.01 (0.02)
Total (0.03) (0.03) (0.07) (0.16)
Basic and
diluted
average
shares
outstanding 8,983,093 6,095,911 6,179,108 5,161,622
See Notes to Financial Statements.
TELCO-TECHNOLOGY, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Common Stock Capital In
($.001) Par Value Stock To Excess Of
Shares Amount Be Issued Par Value
Balance
January 1, 1997 3,040,581 $3,041 $ - $1,481,612
Sale of
common stock 1,681,863 1,682 - 1,001,613
Shares issued
to officers
for compensation 1,000,000 1,000 - -
Shares issued
for services 240,500 240 - 105,260
Amortization
of unearned
compensation - - - -
Rent adjustment - - - 18,000
Loss for
year ended
December 31,
1997 - - - -
Balance
December 31,
1997 5,962,944 5,963 0 2,606,485
Sale of
common stock 50,000 50 - 8,400
Shares issued
for services 250,000 250 - 35,750
Loss for
year ended
December 31,
1998 - - - -
Shares to be
issued to
Chairman for
compensation
(3,000,000
shares) - - 180,000 -
Shares to
be issued to
outside third
party
for services
(12,000 shares) - - 720 -
Shares issued
to officers
for
compensation 500,000 500 - 29,500
Rent adjustment - - - 18,000
Amortization
of unearned
compensation - - - -
Balance
December 31,
1998 6,762,944 6,763 180,720 2,698,135
Shares issued
for services 12,000 12 (720) 708
Shares issued
to Chairman 3,000,000 3,000 (180,000) 177,000
Shares
received for
Massachusetts
operation (950,000) (950) - (222,258)
Shares issued
for services 20,000 20 - 1,980
Rent adjustment - - - 13,500
Loss for the
nine months
ended September
30, 1999 - - - -
Balance
September 30,
1999 8,844,944 $ 8,845 $ 0 $2,669,065
See Notes to Financial Statements.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Unearned
Compen-
sation Deficit Total
Balance
January 1, 1997 (268,612) (874,278) 341,763
Sale of
common stock - - 1,003,295
Shares issued
to officers
for compensation - - 1,000
Shares issued
for services - - 105,500
Amortization
of unearned
compensation 120,000 - 120,000
Rent adjustment - - 18,000
Loss for
year ended
December 31,
1997 - (843,161) (843,161)
Balance
December 31,
1997 (148,612) (1,717,439) 746,397
Sale of
common stock - - 8,450
Shares issued
for services - - 36,000
Loss for
year ended
December 31,
1998 - (451,662) (451,662)
Shares to be
issued to
Chairman for
compensation
(3,000,000
shares) - - 180,000
Shares to
be issued to
outside third
party for
services
(12,000
shares) - - 720
Shares issued
to officers
for
compensation - - 30,000
Rent adjustment - - 18,000
Amortization
of unearned
compensation 148,612 - 148,612
Balance
December 31,
1998 0 (2,169,101) 716,517
Shares issued
for services - - 0
Shares issued
to Chairman - - 0
Shares
received for
Massachusetts
operation - - (223,208)
Shares issued
for services - - 2,000
Rent adjustment - - 13,500
Loss for the
nine months
ended
September 30,
1999 - (254,963) (254,963)
Balance
September 30,
1999 0 (2,424,064) 253,846
See Notes to Financial Statements.
TELCO-TECHNOLOGY, INC.
STATEMENTS OF CASH FLOWS
For the nine months
ended September 30,
1999 1998
(unaudited)
Operating Activities
Net income or (loss)
from continuing operations $(185,076) $(261,607)
Adjustments to reconcile
net income or (loss)
to net cash used by
operating activities:
Amortization of
unearned compensation - 120,000
Common stock issued
for services 2,000 -
Common stock issued
or to be issued
for officers
compensation - -
Rent adjustment 13,500 13,500
Changes in operating
assets of continuing
operations:
Accounts payable - 500
Net cash used by
continuing operations (169,576) (127,607)
Net cash used by
discontinued operations (80,164) 110,539
Investing Activities
Loans made to officers - -
Repayment of officers'
loans 72,491 30,098
Net cash provided(used)
by investing activities 72,491 30,098
Financing Activities
Sale of common stock 8,450
Net cash provided by
financing activities 0 8,450
Increase (decrease)
in cash (177,249) 21,480
Cash at beginning
of period 226,719 264,484
Cash at end of period $49,470 $285,964
Supplemental Disclosures
of Cash Flow Information:
Cash paid during year for:
Interest $ - $ -
Income taxes $ - $ -
See Notes to Financial Statements.
TELCO-TECHNOLOGY, INC.
STATEMENTS OF CASH FLOWS
For the Year Ended
December 31,
1998 1997
Operating Activities
Net income or (loss)
from continuing operations (484,072) (740,670)
Adjustments to reconcile
net income or (loss)
to net cash used by
operating activities:
Amortization of
unearned compensation 148,612 120,000
Common stock issued
for services 36,720 105,500
Common stock issued
or to be issued
for officers
compensation 210,000 1,000
Rent adjustment 18,000 18,000
Changes in operating
assets of continuing
operations:
Accounts payable 500 17,500
Net cash used by
continuing operations (70,240) (478,670)
Net cash used by
discontinued operations (14,823) (164,212)
Investing Activities
Loans made to officers - (121,459)
Repayment of
officers' loans 38,848 -
Net cash provided
(used) by
investing activities 38,848 (121,459)
Financing Activities
Sale of common stock 8,450 1,003,295
Net cash provided
by financing
activities 8,450 1,003,295
Increase (decrease)
in cash (37,765) 238,954
Cash at beginning
of period 264,484 25,510
Cash at end
of period 226,719 264,464
Supplemental Disclosures
of Cash Flow Information:
Cash paid during year for:
Interest - -
Income taxes - -
See Notes to Financial Statements.
TELCO-TECHNOLOGY, INC.
STATEMENTS OF CASH FLOWS (continued)
For the nine months
ended September 30,
1999 1998
(unaudited)
Supplemental Disclosures
of Cash Flow Information
Non-cash investing
and financing activities:
Issuance of common stock for
officers compensation $ - $ -
Issuance of common
stock for services $ 2,000 $ -
Receipt of common stock
for forgiveness of
officer loan and net
assets of discontinued
operation $(223,208) $ -
See Notes to Financial Statements.
TELCO-TECHNOLOGY, INC.
STATEMENTS OF CASH FLOWS (continued)
For the Year Ended
December 31,
1998 1997
Supplemental Disclosures
of Cash Flow Information
Non-cash investing
and financing activities:
Issuance of
common stock for
officers compensation $210,000 $ 1,000
Issuance of
common stock for services $ 36,720 $105,500
Receipt of common stock
for forgiveness of
officer loan and net
assets of discontinued
operation $ - $ -
See Notes to Financial Statements.
TELCO-TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
(Amounts and Disclosures at and for the Nine Months
Ended September 30, 1998 and 1999 Are Unaudited)
Note 1- ORGANIZATION AND OPERATIONS
The Company was incorporated as Haycock Morrison Inc. in the state
of Nevada on November 23, 1993. On January 27, 1995 Haycock entered
into an acquisition agreement with Telco-Technology, Inc. ("Telco").
Pursuant to the acquisition terms, Haycock issued 5,000 shares of
stock, which represented 60% of the outstanding shares of Haycock's
common stock.
After giving effect to the above transaction, the Company ceased all
activities as Haycock and changed its name to Telco-Technology, Inc.
Telco continued its business operations of providing long distance
telephone services and integrated office productivity tools (e.g.
computer networks) with voice and data transmissions.
In 1998 the Company was reorganized as a Delaware Corporation.
On June 15, 1999, the Company sold its Massachusetts operation to a
company affiliated with a former officer and director of the Company
in exchange for the return of 950,000 shares of stock to the
Company, and the assumption of all liabilities of the
Massachusetts operation. The agreement also includes the
cancellation of the former officer's debt to the Company. As a
result of this sale the Company can now be defined as a "shell"
corporation, whose principal business is to locate and consumate a
merger or acquisition with an ongoing business.
Note 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers
all highly liquid investments with a maturity of three months or
less at acquisition to be cash equivalents.
Revenue Recognition
Revenues are recorded at the time of shipment of products or
performance of services.
Depreciation and Amortization
The cost of furniture and equipment is depreciated over the
estimated useful lives of the related assets. The cost of
leasehold improvements is amortized over the lesser of the length
of the related lease or the estimated useful life of the assets.
Depreciation is computed on a straight line basis for financial
reporting purposes and on an accelerated basis for income tax
purposes.
Inventories
Inventories are stated at the lower of cost determined by the FIFO
method, or market.
Note 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Income Taxes
The Company previously adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes", ("SFAS No.109")
which requires the asset and liability method of accounting for
income taxes. Enacted statutory tax rates are
applied to temporary differences arising from the differences in
financial statement carrying amounts and the tax basis of existing
assets and liabilities. Due to the uncertainty of the realization
of income tax benefits, (Note 6), the adoption of SFAS
No. 109 had no effect on the financial statements of the Company.
Customer Acquisition Costs
Customer acquisition costs for long distance telephone services are
capitalized. The costs are written off based upon the ratio of
actual revenues achieved to the anticipated revenues earned during
the term of the long distance telephone services.
Any costs in excess of revenues are expensed as incurred.
Earnings (Loss) Per Share
During 1998 the Company adopted SFAS No. 128, "Earnings Per Share",
which requires the reporting of both basic and diluted earnings
per share. Net income per share-basic is computed by dividing
income available to common shareholders by the weighted average
number of common shares outstanding for the period.
Concentration of Credit risk
Financial instruments which potentially subject the Company to
concentration of credit risk consist of cash deposits at commercial
banks and receivables from an officer and director of the Company.
Cash and cash equivalents are temporarily invested in interest
bearing accounts at one financial institution and may, at times,
exceed insurable amounts. The Company believes it mitigates its
risk by investing in or through major financial institutions.
Recoverability is dependent upon the performance of the institution.
Receivables from an officer of the Company (Note 8) are unsecured
and represent a concentration of credit risk due to the common
employment and financial dependency of this individual on the
Company.
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.
Interim Reporting
The accompanying financial information as of September 30, 1999 and
for the nine months ended September 30, 1998 and 1999 is unaudited
and, in the opinion of management, all adjustments, consisting only
of normal recurring adjustments considered necessary for a fair
presentation, have been included. Operating results
for any interim period are not necessarily indicative of the results
for any other interim period or for an entire year.
Comprehensive Income
Effective January 1, 1998 the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income"
("SFAS No. 130"). SFAS No. 130 requires an entity to report
comprehensive income and its components and increases financial
reporting disclosures. This standard has no impact on the Company's
financial position, cash flows or results of operations since the
Company's comprehensive income is the same as its reported net
income for 1998 and the nine months ended September 30, 1999.
Fair Value of Financial Instruments
Cash and cash equivalents, accounts receivable, accounts payable,
accrued liabilities and loans receivable from officers are reflected
in the financial statements at fair value because of the short-term
maturity of these instruments.
Note 3- DISCONTINUED OPERATIONS
In June, 1999 the Company sold its Massachussetts operations to a
former officer and director of the Company, and a new company he is
affiliated with, formed to acquire the Company's Massachusetts
operation. The sales agreement required the officer to return
950,000 shares of the Company's restricted common stock to the
Company and as part of this agreement approximately $118,000 in
monies due the Company was forgiven. The Company transferred
approximately $168,000 in assets and $63,000 in liabilities to the
new company, which also assumed all future liabilities
of the Massachusetts operation, as defined in the agreement.
Following this transaction, the officer no longer owns any of the
Company's common stock. The disposal of the Massachusetts
operation has been accounted for as a discontinued operation and,
accordingly, its net assets (liabilities) have been segregated from
continuing operations in the accompanying balance sheet, and its
operating results are segregated and reported as discontinued
operations in the accompanying statements of operations and cash
flows.
Information relating to the discontinued Massachusetts operations
for the nine months ended September 30, 1999 and year ended December
31, 1998 are as follows (dollars in thousands):
Nine months
ended Year ended
September 30, December 31,
1999 1998
Net sales $ 537 $1,067
Cost of sales (459) (726)
Gross profit 78 341
Operating costs (148) (309)
Income (loss)
before income taxes (70) 32
Less income
tax benefit (expense) - -
Net (loss) income $ (70) $ 32
The net assets and liabilities of the discontinued Massachusetts
operations included in the accompanying balance sheet as of December
31, 1998 are as follows (dollars in thousands):
Current assets:
Cash $ 9
Accounts receivable 110
Inventory 14
Total current assets 133
Current liabilities:
Accounts payable and accrued expenses 47
Total current liabilities 47
Net current assets (liabilities) 86
Net property, plant and equipment 9
Net assets from discontinued operations $95
Note 4- RELATED PARTY TRANSACTIONS
In January, 1996 the Company entered into a three year consulting
agreement with Donalson Capital Corporation, a company owned by the
Chairman of the Board of Directors of Telco-Technology, Inc. This
agreement, providing for a fee of $120,000 per year, has been
renewed by the Company.
In March of 1997 the two officers of the Company each received
500,000 shares of restricted common stock as additional
compensation. The Company valued this stock at $0.001 per share, or
$1,000.
In December of 1998, an officer of the Company received 500,000
shares of restricted common stock as additional compensation. The
Company valued this stock at $0.06 per share, or $30,000.
Additionally, the Company agreed to issue an additional 3,000,000
restricted shares valued at $0.06 per share or $180,000 for
services performed during 1998. These shares were issued in 1999.
Note 5- COMMITMENTS AND CONTINGENCIES
Securities and Exchange Commission Investigation
In May 1997, the Company was notified by the Securities and Exchange
Commission of a formal order of a private, non-public investigation
of certain issues related to the Company's stock trading. In August
1997, the Company supplied copies of various books and records to
the Commission who then deposed some of the Company's officers.
Since that time, the Company has received no further notification
from the Commission. Based upon its examination of this matter and
discussions with Counsel, management does not expect, in the event
any further action is taken by the Commission, that such action will
result in an unfavorable outcome to the Company or have a material
adverse effect.
Leases
The Company currently maintains its offices in the home of its
Chairman pursuant to an oral agreement on a rent free, month to
month basis. The Company has provided for rent of $1,500 per month
in its financial statements. Therefore, rent expense of $18,000 per
year is reflected for the years 1998 and 1997 and rent expense of
$13,500 is reflected in each period for the nine months ended September 30,
1999 and 1998.
Note 5- COMMITMENTS AND CONTINGENCIES (continued)
Leases
The Company and an unaffiliated third party have entered into an
operating lease agreement for office space in Massachusetts. The
lease expires in 001. Rental expense for the periods ended
December 31, 1998 and December 31, 1997 was $20,566 and $19,794
respectively. Remaining commitments under the lease mature as
follows:
Period ending
December 31, Amount
1999 $18,454
2000 19,377
2001 18,344
$56,175
While the Company's Massachussetts operations have been sold, the
Company has liability under the lease in the event of a default.
Note 6- INCOME TAXES
The provision (benefit) for income taxes consists of the following
(in thousands):
Nine months ended
September 30, Year ended December 31,
1999 1998 1998 1997
Current:
Federal tax expense $ (68) $(56) $(133) $(253)
State tax expense (20) (15) (39) (74)
Deferred:
Federal tax expense 68 56 133 253
State tax expense 20 15 39 74
$ - $ - $ - $ -
A reconciliation of differences between the statutory U.S. federal
income tax rate and the Company's effective tax rate follows:
Nine months ended
September 30, Year ended December 31,
1999 1998 1998 1997
Stautory federal
income tax 34% 34% 34% 34%
State income
tax-net of
federal benefit 5% 5% 5% 5%
Valuation allowance -39% -39% -39% -39%
0% 0% 0% 0%
Note 6- INCOME TAXES (continued)
The components of deferred tax assets and liabilities were as
follows (in thousands):
December 31,
1998 1997
Deferred tax assets:
Net operating loss
carryforward $792 $628
Total deferred
tax assets 792 628
Valuation
allowance (792) (628)
Net deferred
tax assets $ - $ -
SFAS No, 109 requires a valuation allowance to be recorded when it
is more likely than not that some or all of the deferred tax assets
will not be realized. At December 31, 1998, a valuation allowance
for the full amount of the net deferred tax asset was recorded
because of continuing losses and uncertainties regarding the amount of
taxable income that would be generated in future years.
The Company recognized losses for the years ended December 31, 1998
and 1997. The amount of available additional net operating loss
carry forwards are approximately $420,000 for 1998, $800,000 for
1997, $510,000 for 1996 and $300,000 for 1995. The net operating
loss carry forwards, if not utilized, will expire in the years 2005
through 2013. the use of these carryforwards is subject to
limitations imposed by the Internal Revenue Service in the event of
a change in control.
Note 7- COMMON STOCK
During 1999, 1998 and 1997 the Company issued 20,000, 250,000 and
240,500 shares of common stock to unrelated parties for consulting
fees, professional fees, public relations fees and finders fees.
The stock was valued at prices ranging from $0.10 to $0.1875 per
share. These values were based upon both current market prices at
the time the shares were issued, and whether the shares were
free-trading or restricted. The above share issuances resulted in expenses of
$2,000 in 1999, $36,000 in 1998 and $105,500 in 1997.
Reincorporation and Exchange of Stock
In January 1998, the Company changed its corporate domicile from
Nevada to Delaware in a tax-free statutory merger. The
reorganization changed the authorized shares of common stock
outstanding from 50,000,000 to 13,000,000 common stock shares (par
value per share remained unchanged) and authorized
2,000,000 shares of preferred stock.
Note 7- COMMON STOCK (continued)
During 1998 the Company issued 500,000 restricted shares of common
stock to an officer and director for additional compensation. The
Company also agreed to issue 3,000,000 additional restricted
shares of common stock to this person, in 1999 for
1998 services.
Preferred Stock
The Company has authorized 2,000,000 shares of preferred stock, but
none are issued or outstanding.
The Board of Directors of the Company is authorized to provide for
the issuance from time to time, in one or more series of any number
of shares of Preferred Stock, and to fix the designations, powers,
preferences, rights, qualifications, limitations
and restrictions of each such series.
Note 8- LOANS TO OFFICERS
September 30, December 31,
1999 1998
Loans to officer
(unsecured, non-interest
bearing, no specific
terms of repayment): $ 223,106 $ 412,972
Note 9- FINANCIAL RESULTS AND LIQUIDITY
The Company has incurred net losses from continuing operations of
$484,000 and $741,000 in 1998 and 1997, respectively.
With the sale of the Company's only operating division in June, 1999
(see Note 3)the Company has no operations.
Management expects that this transaction will allow the Company to
focus on other business opportunities.
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
TELCO TECHNOLOGY INC.
FIRST. The name of this corporation shall be:
TELCO TECHNOLOGY INC.
SECOND. Its registered office in the State of Delaware is to
be located at 1013 Centre Road, in the City of Wilmington, County of
New Castle, 19805, and its registered agent at such address is
CORPORATE AGENTS, INC.
THIRD. The purpose or purposes of the corporation shall be:
To engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of Delaware.
FOURTH. The total number of shares of stock which this
corporation is authorized to issue is:
One Thousand Five Hundred (1,500) shares with no par value.
FIFTH. The name and mailing address of the incorporator is as
follows:
Lisa G. Mulligan
Corporate Agents, Inc.
1013 Centre Road
Wilmington, DE 19805
SIXTH. The Board of Directors shall have the power to adopt,
amend or repeal the by-laws.
IN WITNESS WHEREOF, The undersigned, being the incorporator
hereinbefore named, has executed, signed and acknowledged this
certificate of incorporation this thirtieth day of June, A.D. 1994.
/s/ Lisa G. Mulligan
Lisa G. Mulligan
Incorporator
<PAGE>
EXHIBIT 3.2
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
TELCO TECHNOLOGY INC.
TELCO TECHNOLOGY INC., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said corporation at a
meeting duly convened and held, adopted the following resolution:
RESOLVED that the Board of Directors hereby declares it
advisable and in the best interest of the Company that Article
Fourth of the Certificate of Incorporation be amended to read as
follows:
FOURTH: The total number of shares of stock which this
corporation is authorized to issue is:
Fifty Million (50,000,000) with a par value of $.001 per share,
amounting to Fifty Thousand Dollars ($50,000.00).
SECOND: That the said amendment has been consented to and
authorized by the holders of a majority of the issued and
outstanding stock entitled to vote by written consent given in
accordance with the provisions of Section 228 of the General
Corporation Law of the State of Delaware.
THIRD: That the aforesaid amendment was duly adopted in
accordance with the applicable provisions of Sections 242 and 228 of
the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, said corporation has caused this
Certificate to be signed by Don McKelvey, Chairman this 19th day of
October, A.D. 1994.
/s/ Don McKelvey
Authorized Officer
<PAGE>
EXHIBIT 3.3
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
TELCO TECHNOLOGY INC.
The undersigned, Chairman of the Board of Telco Technology
Inc., a corporation organized and existing under and by virtue of
the General Corporation Law of the State of Delaware
DOES HEREBY CERTIFY:
1. That the FIRST paragraph of the Certificate of
Incorporation be and it hereby is amended to read in its entirety:
"FIRST: The name of the Corporation is
Telco-Technology, Inc."
2. The total number of shares of stock which the Corporation
shall be authorized to issue is Fifty Million (50,000,000) with a
par value of $.001 per share.
3. That the FOURTH paragraph of the Certificate of
Incorporation be and it hereby is amended to read in its entirety as
follows:
"FOURTH: The total number of shares of stock which the
Corporation shall have authority to issue is 15,000,000
of which 13,000,000 shares with a par value of $0.001
each shall be Common Stock and of which 2,000,000 shares
with a par value of $0.001 each shall be Preferred Stock.
The Board of Directors of the Corporation is authorized
to the full extent now or hereafter permitted by the laws
of the State of Delaware to provide for the issuance from
time to time in one or more series of any number of
shares of Preferred Stock, and, by filing a certificate
pursuant to the Delaware General Corporation Law, to
establish the number of shares to be included in each
such series, and to fix the designations, powers,
preferences, and rights, and the qualifications,
limitations and restrictions of each such series."
4. That a SEVENTH paragraph be added to the Certificate of
Incorporation to read in its entirety as follows:
"SEVENTH: The personal liability of the directors of the
Corporation is hereby eliminated to the fullest extent permitted by
paragraph (7) of subsection (b) of Section 102 of the Delaware
General Corporation Law, as the same may be amended and supplemented
from time to time."
5. That a EIGHTH paragraph be added to the Certificate of
Incorporation to read in its entirety as follows:
"EIGHTH: The Corporation shall, to the fullest extent
permitted by Section 145 of the Delaware General Corporation Law, as
the same may be amended and supplemented from time to time,
indemnify all persons whom it may indemnify pursuant thereto."
6. That the amendment was authorized by the unanimous
written consent of the Board of Directors followed by written
consent of the stockholders being given in accordance with Sections
228 and 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the undersigned hereunto signed this
certificate this 16th day of December, 1997, and the undersigned
affirms the statements contained herein as true under penalties of
perjury.
/s/Donald McKelvey
Donald McKelvey,
Chairman of the Board
<PAGE>
EXHIBIT 3.4
CERTIFICATE OF MERGER
(DELAWARE)
OF
TELCO-TECHNOLOGY, INC.
(A NEVADA CORPORATION)
INTO
TELCO-TECHNOLOGY, INC.
(A DELAWARE CORPORATION)
*******
The undersigned corporation DOES HEREBY CERTIFY:
FIRST: That the name and state of incorporation of each of the
constituent corporations of the merger is as follows:
NAME STATE OF INCORPORATION
Telco-Technology, Inc. Nevada
Telco-Technology, Inc. Delaware
SECOND: That an Agreement of Merger between the parties to the
merger has been approved, adopted, certified, executed
and acknowledged by each of the constituent corporations
in accordance with the requirements of section 252 of the
General Corporation Law of Delaware.
THIRD: That the name of the surviving corporation of the merger
is Telco-Technology, Inc., a Delaware corporation.
FOURTH: That the Certificate of Incorporation of
Telco-Technology, Inc., a Delaware corporation which is
surviving the merger, shall be the Certificates of
Incorporation of the surviving corporation.
FIFTH: That the executed Agreement of Merger is on file at the
principal place of business of the surviving corporation,
the address of which is 60 Bowers Lane, Closter, New
Jersey 07624.
SIXTH: That a copy of the Agreement of Merger will be furnished
on request and without cost, to any stockholder of any
constituent corporation.
SEVENTH: The authorized capital stock of each foreign corporation
which is a party to the merger is as follows:
PAR VALUE PER SHARE
OR STATEMENT THAT
SHARES ARE WITHOUT
CORPORATION CLASS NUMBER OF SHARES PAR VALUE
Telco-Technology, Inc. Common 50,000,000 $.001
a Nevada corporation
EIGHTH: That this Certificate of Merger shall be effective on its
filing date.
Dated: December 23, 1997
Telco-Technology, Inc.
By:/s/Donald McKelvey
Donald McKelvey,
Chairman of the Board
ATTEST:
By:/s/Robert Powell
Robert Powell, Secretary
<PAGE>
EXHIBIT 3.5
ARTICLES OF MERGER
OF
TELCO-TECHNOLOGY, INC.
(A NEVADA CORPORATION)
INTO
TELCO-TECHNOLOGY, INC.
(A DELAWARE CORPORATION)
FIRST: The name of the surviving entity is Telco-Technology,
Inc., and the place of its organization is the
jurisdiction of Delaware, the laws of which permit this
merger. The name and place of organization of the entity
being merged into the surviving entity is:
Telco-Technology, Inc., organized in the jurisdiction of
Nevada.
SECOND: A plan of merger was adopted by each entity that is a
party to this merger.
THIRD: The plan of merger or exchange was adopted by
Telco-Technology, Inc. (a Delaware corporation)
by unanimous consent.
FOURTH: The plan of merger was submitted to the owners
Telco-Technology, Inc. (a Nevada corporation) by the
entity of directors thereof pursuant to Chapter 92A of
the Nevada Revised Statutes.
FIFTH: The designation, percentage of total vote or number of
votes entitled to be cast and the total number of
undisputed votes or undisputed total percentage of
owner's interests cast for the plan by each class of
owner's interests of Telco-Technology, Inc. (a Nevada
corporation) entitled to vote separately on the plan is
as follows:
TOTAL NO. OF UNDISPUTED
VOTES OR UNDISPUTED TOTAL
PERCENTAGE OF OWNER'S
DESIGNATION INTERESTS FOR THE PLAN VOTES ENTITLED
TO BE CAST
Common 3,014,525 5,970,944
SIXTH: The number of votes or percentage of owner's interests
cast for the plan by the owners of each class of
interests of each of Telco-Technology, Inc., a Nevada
corporation, and Telco-Technology, Inc., a Delaware
corporation, was sufficient for approval by the owners of
that class.
SEVENTH: The complete executed plan of merger is on file at the
place of business of Telco-Technology, Inc., a Delaware
corporation, located at 60 Bowers Lane, Closter, New
Jersey 07624, and a copy of the plan will be furnished by
Telco-Technology, Inc., a Delaware corporation, on
request and without cost to any owner of any entity which
is a party to this merger.
EIGHTH: All entities party to this merger have complied with laws
of their respective jurisdiction of organization
concerning this merger.
NINTH: Telco-Technology, Inc. (a Nevada corporation) designates
the following address as the address to which the Nevada
Secretary of State is to mail any process served on him
or her against the entity: 60 Bowers Lane, Closter, New
Jersey 07624.
TENTH: This merger shall be effective on the filing of these
Articles.
Telco-Technology, Inc.
/s/Robert Powell
Robert Powell, President
/s/Robert Powell
Robert Powell, Secretary
State of Massachusetts )
) ss.
County of Worcester )
On December 31, 1997, personally appeared before me, a Notary
Public, Robert Powell who acknowledged that he executed the above
instrument.
s/
Signature of Notary Public
<PAGE>
EXHIBIT 3.6
TELCO-TECHNOLOGY, INC.
BY-LAWS
TABLE OF CONTENTS
Article and Section Designation Page
Article I: Offices.......................................... 1
Article II: Meeting of Shareholders.......................... 1
Section 1: Annual Meetings.......................... 1
Section 2: Special Meetings......................... 1
Section 3: Place of Meetings........................ 1
Section 4: Notice of Meetings....................... 1
Section 5: Chairman................................. 2
Section 6: Quorum................................... 2
Section 7: Voting................................... 3
Section 8: Written Consent in Lieu of Meeting....... 3
Article III: Board of Directors............................. 4
Section 1: Number, Election and Term of Office...... 4
Section 2: Duties and Powers........................ 4
Section 3: Annual and Regular Meetings; Notice...... 4
Section 4: Special Meetings; Notice................. 5
Section 5: Chairman................................. 5
Section 6: Quorum and Adjournments.................. 5
Section 7: Manner of Acting......................... 6
Section 8: Meetings by Means of Conference Telephone 6
Section 9: Written Consent in Lieu of Meeting....... 6
Section 10: Vacancies................................ 6
Section 11: Resignation.............................. 7
Section 12: Removal.................................. 7
Section 13: Compensation............................. 7
Section 14: Contracts................................ 7
Section 15: Committees............................... 8
Article IV: Officers......................................... 8
Section 1: Officers................................. 8
Section 2: Resignation.............................. 9
Section 3: Removal.................................. 9
Section 4: Vacancies................................ 9
Section 5: Compensation............................. 9
Section 6: Chairman................................. 9
Section 7: President................................ 9
Section 8: Vice Presidents.......................... 10
Section 9: Secretary................................ 10
Section 10: Treasurer................................ 11
Section 11: Assistant Secretaries and Assistant
Treasurers............................... 11
Section 12: Sureties and Bonds....................... 11
Section 13: Shares of Other Corporations............. 11
Article V: Shares of Stock.................................. 12
Section 1: Certificate of Stock..................... 12
Section 2: Lost or Destroyed Certificates........... 12
Section 3: Transfers of Shares...................... 13
Section 4: Record Date.............................. 13
Article VI: Dividends....................................... 14
Article VII: Fiscal Year.................................... 14
Article VIII: Corporate Seal................................ 14
Article IX: Books and Records............................... 14
Article X: Amendments....................................... 14
Section 1: By Shareholders.......................... 14
Section 2: By Directors............................. 15
Article XI: Indemnity....................................... 15
BY-LAWS
OF
TELCO-TECHNOLOGY, INC.
ARTICLE I - OFFICES
The office of the Corporation shall be located in the City and
State designated in the Certificate of Incorporation. The
Corporation may also maintain offices at such other places within or
without the United States as the Board of Directors may, from time
to time, determine.
ARTICLE II - MEETING OF SHAREHOLDERS
Section 1 - Annual Meetings:
The annual meetings of the shareholders of the Corporation
shall be held on such date and at such time as shall be designated
from time to time by the Board of Directors, for the purpose of
electing directors, and transacting such other business as may
properly come before the meetings.
Section 2 - Special Meetings:
Special meetings of the shareholders may be called at any time
by the Board of Directors or by the President, and shall be called
by the President or the Secretary at the written request of the
holders of ten per cent (10%) of the shares then outstanding and
entitled to vote thereat, or as otherwise required under the General
Corporation Law of the State of Delaware, or any successor thereto
(the "Statute").
Section 3 - Place of Meetings:
All meetings of shareholders shall be held at the principal
office of the Corporation, or at such other places as shall be
designated in the notices or waivers of notice of such meetings.
Section 4 - Notice of Meetings:
(a) Except as otherwise provided by Statute, written notice of
each meeting of shareholders, whether annual or special, stating the
time when and place where it is to be held, shall be served either
personally or by mail, not less than ten or more than sixty days
before the meeting, upon each shareholder of record entitled to vote
at such meeting, and to any other shareholder to whom the giving of
notice may be required by law. Notice of a special meeting shall
also state the purpose or purposes for which the meeting is called,
and shall indicate that it is being issued by, or at the direction
of, the person or persons calling the meeting. If, at any meeting,
action is proposed to be taken that would, if taken, entitle
shareholders to receive payment for their shares pursuant to
Statute, the notice of such meeting shall include a statement of
that purpose and to that effect. If mailed, such notice shall be
directed to each such shareholder at his address, as it appears on
the records of the shareholders of the Corporation, unless he shall
have previously filed with the Secretary of the Corporation a
written request that notice intended for him be mailed to some other
address, in which case, it shall be mailed to the address designated
in such request.
(b) Notice of any meeting need not be given to any person who
may become a shareholder of record after the mailing of such notice
and prior to the meeting, or to any shareholder who attends such
meeting, in person or by proxy, or to any shareholder who, in person
or by proxy, submits a signed waiver of notice either before or
after such meeting. Notice of any adjourned meeting of shareholders
need not be given, unless otherwise required by Statute.
Section 5 - Chairman:
At all meetings of the shareholders, the Chairman of the Board,
if any and if present, shall preside. If there shall be no
Chairman, or he shall be absent, then the President shall preside,
and in his absence, a Chairman as may be designated by the Board of
Directors shall preside or, in the absence of such person or if
there shall be no such designation, a Chairman chosen at the meeting
shall preside.
Section 6 - Quorum:
(a) Except as otherwise provided herein, or by Statute, or in
the Certificate of Incorporation (such Certificate and any
amendments thereof being hereinafter collectively referred to as the
"Certificate of Incorporation"), at all meetings of shareholders of
the Corporation, the presence at the commencement of such meetings
in person or by proxy of shareholders holding of record a majority
of the total number of shares of the Corporation then issued and
outstanding and entitled to vote, shall be necessary and sufficient
to constitute a quorum for the transaction of any business. The
withdrawal of any shareholder after the commencement of a meeting
shall have no effect on the existence of a quorum, after a quorum
has been established at such meeting.
(b) Despite the absence of a quorum at any annual or special
meeting of shareholders, the shareholders, by a majority of the
votes cast by the holders of shares entitled to vote thereon may
adjourn the meeting. At any such adjourned meeting at which a
quorum is present, any business may be transacted at the meeting as
originally called if a quorum had been present.
Section 7 - Voting:
(a) Except as otherwise provided by Statute or by the
Certificate of Incorporation, any corporate action, other than the
election of directors, to be taken by vote of the shareholders,
shall be authorized by a majority of votes cast at a meeting of
shareholders by the holders of shares entitled to vote thereon.
(b) Except as otherwise provided by Statute or by the
Certificate of Incorporation, at each meeting of shareholders, each
holder of record of stock of the Corporation entitled to vote
thereat, shall be entitled to one vote for each share of stock
registered in his name on the books of the Corporation.
(c) Each shareholder entitled to vote or to express consent or
dissent without a meeting, may do so by proxy; provided, however,
that the instrument authorizing such proxy to act shall have been
executed in writing by the shareholder himself, or by his
attorney-in-fact thereunto duly authorized in writing. No proxy
shall be valid after the expiration of eleven months from the date
of its execution, unless the person executing it shall have
specified therein the length of time it is to continue in force.
Such instrument shall be exhibited to the Secretary at the meeting
and shall be filed with the records of the Corporation.
Section 8 - Written Consent in Lieu of Meeting:
Except as otherwise provided by Statute, or by the Certificate
of Incorporation, or by these By-Laws, any action required or
permitted to be taken at any meeting of shareholders, may be taken
without a meeting, without prior notice and without a vote, if a
consent in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote
thereon were present and voted.
ARTICLE III - BOARD OF DIRECTORS
Section 1 - Number, Election and Term of Office:
(a) The number of the directors of the Corporation shall be
two(2), unless and until otherwise determined by a majority of the
entire Board of Directors.
(b) Except as may otherwise be provided herein or in the
Certificate of Incorporation, the members of the Board of Directors
of the Corporation, who need not be shareholders, shall be elected
by a majority of the votes cast at a meeting of shareholders, by the
holders of shares, present in person or by proxy, entitled to vote
in the election.
(c) Each director shall hold office until the annual meeting of
the shareholders next succeeding his election, and until his
successor is elected and qualified, or until his prior death,
resignation or removal.
Section 2 - Duties and Powers:
The Board of Directors shall be responsible for the control and
management of the affairs, property and interests of the
Corporation, and may exercise all powers of the Corporation, except
as are in the Certificate of Incorporation or by Statute expressly
conferred upon or reserved to the shareholders.
Section 3 - Annual and Regular Meetings; Notice:
(a) A regular annual meeting of the Board of Directors shall be
held immediately following the annual meeting of shareholders.
(b) The Board of Directors, from time to time, may provide by
resolution for the holding of other regular meetings of the Board of
Directors, and may fix the time and place thereof.
(c) Notice of any regular meeting of the Board of Directors
shall not be required to be given and, if given, need not specify
the purpose of the meeting; provided, however, that in case the
Board of Directors shall fix or change the time or place of any
regular meeting, notice of such action shall be given to each
director who shall not have been present at the meeting at which
such action was taken within the time limited, and in the manner set
forth in paragraph (b) Section 4 of this Article III, with respect
to special meetings, unless such notice shall be waived in the
manner set forth in paragraph (c) of such Section 4.
Section 4 - Special Meetings; Notice:
(a) Special meetings of the Board of Directors shall be held
whenever called by the Chairman of the Board, if any, by the
President or by one of the directors, at such time and place as may
be specified in the respective notices or waivers of notice thereof.
(b) Except as otherwise required by Statute, notice of special
meetings shall be given at least two days before the meeting if
given orally (either by telephone or in person), at least three days
before the meeting if given by cable, telegram, telecopier, or
overnight delivery service, and at least five days before the
meeting if given by mail (postage prepaid), or in any other manner.
Any notice given by cable, telegram, telecopier, overnight delivery
service or by mail shall be sent to the director's last known
residence or business address. A notice, or waiver of notice,
except as required by Section 10 of this Article III need not
specify the purpose of the meeting.
(c) Notice of any special meeting shall not be required to be
given to any director who shall attend such meeting without
protesting prior thereto or at its commencement, the lack of notice
to him, or who submits a signed waiver of notice, whether before or
after the meeting. Notice of any adjourned meeting shall not be
required to be given.
Section 5 - Chairman:
At all meetings of the Board of Directors, the Chairman of the
Board, if any and if present, shall preside. If there shall be no
Chairman, or he shall be absent, then the President shall preside,
and in his absence, a Chairman chosen by the directors shall preside.
Section 6- Quorum and Adjournments:
(a) At all meetings of the Board of Directors, the presence of
a majority of the entire Board shall be necessary and sufficient to
constitute a quorum for the transaction of business, except as
otherwise provided by law, by the Certificate of Incorporation, or
by these By-Laws.
(b) A majority of the directors present at the time and place
of any regular or special meeting, although less than a quorum, may
adjourn the same from time to time without notice, until a quorum
shall be present.
Section 7 - Manner of Acting:
(a) At all meetings of the Board of Directors, each director
present shall have one vote, irrespective of the number of shares of
stock, if any, which he may hold.
(b) Except as otherwise provided by Statute, by the
Certificate of Incorporation, or by these By-Laws, the action of a
majority of the directors present at any meeting at which a quorum
is present shall be the act of the Board of Directors.
Section 8 - Meetings by Means of Conference Telephone:
Except as otherwise provided by Statute, by the Certificate of
Incorporation, or by these By-Laws, members of the Board of
Directors of the Corporation, or any committee designated by the
Board of Directors, may participate in a meeting of the Board of
Directors or such committee by means of a conference telephone or
similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation
in a meeting pursuant to this Section 8 shall constitute presence in
person at such meeting.
Section 9 - Written Consent in Lieu of Meeting:
Except as otherwise provided by Statute, or by the Certificate
of Incorporation, or by the By-Laws, any action required or
permitted to be taken at any meeting of the Board of Directors or of
any committee thereof may be taken without a meeting, if all the
members of the Board of Directors or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board of Directors or committee.
Section 10 - Vacancies:
Unless otherwise provided in the Certificate of Incorporation,
any vacancy in the Board of Directors occurring by reason of an
increase in the number of directors, or by reason of the death,
resignation, disqualification, removal (unless a vacancy created by
the removal of a director by the shareholders shall be filled by the
shareholders at the meeting at which the removal was effected) or
inability to act of any director, or otherwise, shall be filled for
the unexpired portion of the term by a majority vote of the
remaining directors, though less than a quorum, at any regular
meeting or special meeting of the Board of Directors called for that
purpose.
Section 11 - Resignation:
Any director may resign at any time by giving written notice to
the Board of Directors, the President or the Secretary of the
Corporation. Unless otherwise specified in such written notice,
such resignation shall take effect upon receipt thereof by the Board
of Directors or such officer, and the acceptance of such resignation
shall not be necessary to make it effective.
Section 12 - Removal:
Any director may be removed with or without cause at any time
by the affirmative vote of shareholders holding of record in the
aggregate at least a majority of the outstanding shares of the
Corporation at a special meeting of the shareholders called for that
purpose, and may be removed for cause by action of the Board.
Section 13 - Compensation:
Each director, in consideration of his service as such, shall
be entitled to receive from the Corporation such amount per annum or
such fees for attendance at meetings of the Board, or both, as the
Board of Directors may from time to time determine, together with
reimbursement for the reasonable expenses incurred by him in
connection with the performance of his duties. Each director who
shall serve as a member of any committee of directors in
consideration of his serving as such shall be entitled to such
additional amount per annum or such fees for attendance at committee
meetings, or both, as the Board of Directors may from time to time
determine, together with reimbursement for the reasonable expenses
incurred by him in the performance of his duties. Nothing contained
in this section shall preclude any director from serving the
Corporation in any other capacity and receiving proper compensation
therefor.
Section 14 - Contracts:
(a) Unless otherwise provided by Statute, no contract or other
transaction between this Corporation and any other corporation shall
be impaired, affected or invalidated, nor shall any director be
liable in any way by reason of the fact that any one or more of the
directors of this Corporation is or are interested in, or is a
director or officer, or are directors or officers of such other
corporation, provided that such facts are disclosed or made known to
the Board of Directors.
(b) Unless otherwise provided by Statute, any director,
personally and individually, may be a party to or may be interested
in any contract or transaction of this Corporation, and no director
shall be liable in any way by reason of such interest, provided that
the fact of such interest be disclosed or made known to the Board of
Directors, and provided that the Board of Directors shall authorize,
approve or ratify such contract or transaction by the vote (not
counting the vote of any such director) of a majority of a quorum,
notwithstanding the presence of any such director at the meeting at
which such action is taken. Such director or directors may be
counted in determining the presence of a quorum at such meeting.
This Section shall not be construed to impair or invalidate or in
any way affect any contract or other transaction which would
otherwise be valid under the law (common, statutory or otherwise)
applicable thereto.
Section 15 - Committees:
The Board of Directors, by resolution adopted by a majority of
the entire Board, may from time to time designate from among its
members an executive committee and such other committees, and
alternate members thereof, as they may deem desirable, each
consisting of one or more members, with such powers and authority
(to the extent permitted by law) as may be provided in such
resolution. Each such committee shall serve at the pleasure of the
Board.
ARTICLE IV - OFFICERS
Section 1 - Officers:
The Board of Directors shall elect a President, a Secretary and
a Treasurer, and may elect or appoint one or more Vice Presidents
and such other officers as it may determine. In addition, the Board
of Directors may elect a Chairman of the Board of Directors. The
Board of Directors may designate one or more Vice Presidents as
Executive Vice Presidents, and may use descriptive words or phrases
to designate the standing, seniority or area of special competence
of the Vice Presidents elected or appointed by it. Each officer
shall hold his office until the annual meeting of the Board of
Directors next succeeding his election, and until his successor
shall have been elected and qualified or until his death,
resignation or removal. Any two or more offices may be held by the
same person, except that the same person may not serve as both
President and Secretary. All officers as between themselves and the
Corporation shall have such authority and perform such duties in the
management of the Corporation as may be provided in the By-Laws or
as the Board of Directors may from time to time determine.
Section 2 - Resignation:
Any officer may resign at any time by giving written notice of
such resignation to the Board of Directors, or to the President or
the Secretary of the Corporation. Unless otherwise specified in
such written notice, such resignation shall take effect upon receipt
thereof by the Board of Directors or by such officer, and the
acceptance of such resignation shall not be necessary to make it
effective.
Section 3 - Removal:
Any officer may be removed, either with or without cause, and a
successor elected by a majority vote of the Board of Directors at
any time.
Section 4 - Vacancies:
A vacancy in any office by reason of death, resignation,
inability to act, disqualification, or any other cause, may at any
time be filled for the unexpired portion of the term by a majority
vote of the Board of Directors.
Section 5 - Compensation:
Salaries or other compensation of the officers may be fixed
from time to time by the Board of Directors. No officer shall be
prevented from receiving a salary or other compensation by reason of
the fact that he is also a director.
Section 6 - Chairman:
The Chairman of the Board of Directors, if one be elected,
shall, if present, preside at all meetings of the Board of Directors
and all meetings of the shareholders. While the directors are not
in session, he shall, in consultation with the President, have
general management and control of the business and affairs of the
Corporation. The Board of Directors may, but need not, designate
the Chairman as the Chief Executive Officer of the Corporation, in
which event he shall exercise all those general supervisory
functions described in Section 7 of this Article IV, and the
President will thereupon act as Chief Operating Officer of the
Corporation, subject to the direction of the Chairman and the Board
of Directors.
Section 7 - President:
Unless the Board of Directors shall have designated the
Chairman as the Chief Executive Officer of the Corporation, the
President shall be the chief executive officer of the Corporation
and shall have general supervision over the business of the
Corporation, subject, however, to the control of the Board of
Directors and the Chairman, if any, and of any duly authorized
committee of directors. If there shall be no Chairman, or he shall
be absent, then the President shall, if present, preside at all
meetings of the shareholders and at all meetings of the Board of
Directors. He may sign and execute in the name of the Corporation
deeds, mortgages, bonds, contracts and other instruments, except in
cases where the signing and execution thereof shall be expressly
delegated by the Board of Directors or by the By-Laws to some other
officer or agent of the Corporation, or shall be required by law
otherwise to be signed or executed; and, in general, he shall
perform all duties incident to the office of the President and such
other duties as from time to time may be assigned to him by the
Board of Directors or the Chairman, if any.
Section 8 - Vice Presidents:
At the request of the President, or, in his absence, at the
request of the Board of Directors, the Vice Presidents if any be
elected, shall (in such order as may be designated by the Board of
Directors or, in the absence of any designation, in order of
seniority based on age) perform all of the duties of the President
and so acting shall have all the powers of and be subject to all
restrictions upon the President. Any Vice President may sign and
execute in the name of the Corporation deeds, mortgages, bonds,
contracts or other instruments authorized by the Board of Directors,
except in cases where the signing and execution thereof shall be
expressly delegated by the Board of Directors or by the By-Laws to
some other officer or agent of the Corporation, or shall be
required by law otherwise to be signed or executed, and shall
perform such other duties as from time to time may be assigned to
him by the Board of Directors or by the President.
Section 9 - Secretary:
The Secretary, if present, shall act as secretary of all
meetings of the shareholders and of the Board of Directors, and
shall keep the minutes thereof in the proper book or books to be
provided for that purpose. The Secretary shall see that all notices
required to be given by the Corporation are duly given and served.
The Secretary shall be custodian of the seal of the Corporation and
shall have the authority to affix the same to any instrument
requiring it. The Secretary shall have charge of the stock ledger
and also of the other books, records and papers of the Corporation
relating to its organization and management as the Corporation, and
shall see that the reports, statements and other documents required
by law are properly kept and filed; and shall, in general, perform
all the duties incident to the office of Secretary and such other
duties as from time to time may be assigned to him by the Board of
Directors or by the President.
Section 10 - Treasurer:
The Treasurer shall have the custody of the corporate funds and
securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall
deposit all monies and other valuable effects in the name and to the
credit of Corporation in such depositories as may be designated by
the Board of Directors. The Treasurer shall disburse the funds of
the Corporation as may be ordered by the Board of Directors, taking
proper vouchers for such disbursements, and shall render to the
President and the Board of Directors, at its regular meetings, or
when the Board of Directors so requires, an account of all his
transactions as Treasurer and of the financial condition of the
Corporation; and, in general, perform all the duties incident to the
office of Treasurer and such other duties as from time to time may
be assigned to him by the Board of Directors or by the President.
Section 11 - Assistant Secretaries and Assistant Treasurers:
Assistant Secretaries and Assistant Treasurers shall perform
such duties as shall be assigned to them by the Secretary or by the
Treasurer, respectively, or by the Board of Directors or by the
President.
Section 12 - Sureties and Bonds:
In case of the Board of Directors shall so require, any
officer, employee or agent of the Corporation shall execute to the
Corporation a bond in such sum, and with such surety or sureties as
the Board of Directors may direct, conditioned upon the faithful
performance of his duties to the Corporation, including
responsibility for negligence and for the accounting for all
property, funds or securities of the Corporation which may come into
his hands.
Section 13 - Shares of Other Corporations:
Whenever the Corporation is the holder of shares of any other
corporation, any right or power of the Corporation as such
shareholder (including the attendance, acting and voting at
shareholders' meetings and execution of waivers, consents, proxies
or other instruments) may be exercised on behalf of the Corporation
by the President, any Vice President, or such other person as the
Board of Directors may authorize.
ARTICLE V - SHARES OF STOCK
Section 1 - Certificate of Stock:
(a) The certificates representing shares of the Corporation
shall be in such form as shall be adopted by the Board of Directors,
and shall be numbered and registered in the order issued. They
shall bear the holder's name and the number of shares, and shall be
signed by (i) the Chairman of the Board or the President or a Vice
President, and (ii) the Secretary or Treasurer, or any Assistant
Secretary or Assistant Treasurer, and shall bear the corporate seal.
(b) No certificate representing shares shall be issued until
the full amount of consideration therefor has been paid, except as
otherwise permitted by law.
(c) To the extent permitted by law, the Board of Directors may
authorize the issuance of certificates for fractions of a share
which shall entitle the holder to exercise voting rights, receive
dividends and participate in liquidating distributions, in
proportion to the fractional holdings; or it may authorize the
payment in cash of the fair value of fractions of a share as of the
time when those entitled to receive such fractions are determined;
or it may authorize the issuance, subject to such conditions as may
be permitted by law, of scrip in registered or bearer form over the
signature of an officer or agent of the Corporation, exchangeable as
therein provided for full shares, but such scrip shall not entitle
the holder to any rights of a shareholder, except as therein provided.
Section 2 - Lost or Destroyed Certificates:
The holder of any certificate representing shares of the
Corporation shall immediately notify the Corporation of any loss or
destruction of the certificate representing the same. The
Corporation may issue a new certificate in the place of any
certificate theretofore issued by it, alleged to have been lost or
destroyed. On production of such evidence of loss or destruction as
the Board of Directors in its discretion may require, the Board of
Directors may, in its discretion, require the owner of the lost or
destroyed certificate, or his legal representatives, to give the
Corporation a bond in such sum as the Board may direct, and with
such surety or sureties as may be satisfactory to Board, to
indemnify the Corporation against any claims, loss, liability or
damage it may suffer on account of the issuance of the new
certificate. A new certificate may be issued without requiring any
such evidence or bond when, in the judgment of the Board of
Directors, it is proper so to do.
Section 3 - Transfers of Shares:
(a) Transfers of shares of the Corporation shall be made on the
share records of the Corporation only by the holder of record
thereof, in person or by his duly authorized attorney, upon
surrender for cancellation of the certificate or certificates
representing such shares, with an assignment or power of transfer
endorsed thereon or delivered therewith, duly executed, with such
proof of the authenticity of the signature and of authority to
transfer and of payment of transfer taxes as the Corporation or its
agents may require.
(b) The Corporation shall be entitled to treat the holder of
record of any share or shares as the absolute owner thereof for all
purposes and, accordingly, shall not be bound to recognize any
legal, equitable or other claim to, or interest in, such share or
shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise expressly
provided by law.
Section 4 - Record Date:
In lieu of closing the share records of the Corporation, the
Board of Directors may fix, in advance, a date not exceeding sixty
days, nor less than ten days, as the record date for the
determination of shareholders entitled to receive notice of, or to
vote at, any meeting of shareholders, or to consent to any proposal
without a meeting, or for the purpose of determining shareholders
entitled to receive payment of any dividends, or allotment of any
rights, or for the purpose of any other action. If no record date
is fixed, the record date for the determination of shareholders
entitled to notice of or to vote at a meeting of shareholders shall
be at the close of business on the day next preceding the day on
which notice is given, or, if no notice is given, the day on which
the meeting is held; the record date for determining shareholders
for any other purpose shall be at the close of business on the day
on which the resolution of the directors relating thereto is
adopted. When a determination of shareholders of record entitled to
notice of or to vote at any meeting of shareholders has been made as
provided for herein, such determination shall apply to any
adjournment thereof, unless the directors fix a new record date for
the adjourned meeting.
ARTICLE VI - DIVIDENDS
Subject to applicable law, and except as may otherwise be
provided in the Certificate of Incorporation, dividends may be
declared and paid out of any funds available therefor, as often, in
such amounts, and at such time or times as the Board of Directors
may determine.
ARTICLE VII - FISCAL YEAR
The fiscal year of the Corporation shall be fixed by the Board
of Directors from time to time, subject to applicable law.
ARTICLE VIII - CORPORATE SEAL
The corporate seal shall be in such form as shall be approved
from time to time by the Board of Directors.
ARTICLE IX - BOOKS AND RECORDS
The Corporation shall maintain books and records of account and
minutes of the meetings of its shareholders and directors, including
meetings of committees of the Board of Directors. These documents
shall be maintained at one or more locations within or outside the
State of Delaware, the location or locations to be designated by the
Board of Directors. Each of these documents shall be in written
form or in any other form capable of being converted into written
form within a reasonable time.
ARTICLE X - AMENDMENTS
Section 1 - By Shareholders:
All by-laws of the Corporation shall be subject to alteration
or repeal, and new by-laws may be made, by the affirmative vote of
shareholders holding of record in the aggregate at least a majority
of the outstanding shares entitled to vote in the election of
directors at any annual or special meeting of shareholders, provided
that the notice or waiver of notice of such meeting shall have
summarized or set forth in full therein, the proposed amendment.
The shareholders may prescribe that any by-law made by them may not
be altered or repealed by the Board of Directors.
Section 2 - By Directors:
Except as otherwise provided in the Certificate of
Incorporation, the Board of Directors shall have power to make,
adopt, alter, amend and repeal, from time to time, by-laws of the
Corporation; provided, however, that the shareholders entitled to
vote with respect thereto as in this Article X above-provided may
alter, amend or repeal by-laws made by the Board of Directors,
except that the Board of Directors shall have no power to change the
quorum for meetings of shareholders or of the Board of Directors, or
to change any provisions of the by-laws with respect to the removal
of directors or the filling of vacancies in the Board resulting from
the removal by the shareholders. If any by-law regulating an
impending election of directors is adopted, amended or repealed by
the Board of Directors, there shall be set forth in the notice of
the next meeting of shareholders for the election of directors, the
by-law so adopted, amended or repealed, together with a concise
statement of the changes made.
ARTICLE XI - INDEMNITY
(a) The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he is or
was a director or an officer of the Corporation, against expenses
(including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding to the fullest extent permitted
by law. Such right of indemnification shall not be deemed exclusive
of any other rights to which such director or officer may be
entitled apart from the foregoing provisions, and shall continue as
to a person who has ceased to be a director or officer and shall
inure to the benefit of the heirs, executors and administrators of
any such person.
(b) The Corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative by reason of the fact that he is or
was an employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or
proceeding to the fullest extent permitted by law. Such right of
indemnification shall not be deemed exclusive of any other rights to
which any such person may be entitled apart from the foregoing
provisions, and shall inure to the benefit of the heirs, executors,
and administrators of any such person.
(c) Expenses incurred in defending an action, suit or
proceeding referred to in this Article XI may be paid by the
Corporation in advance of the final disposition of such action, suit
or proceeding as authorized by the Board of Directors, by the
shareholders or by a court of competent jurisdiction, upon receipt
of an undertaking by or on behalf of the director, officer, or other
person, as the case may be, to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified
by the Corporation in accordance with applicable law.
(d) The Corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent
of any other corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred
by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power to indemnify him
against such liability under the provisions of this Article or under
any other provision of law.
<PAGE>
EXHIBIT 4.1
- --------------------- ---------------------
No.
- --------------------- ---------------------
TELCO-TECHNOLOGY, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
- ------------------------------------------------------------
This
CERTIFIES
that
is the owner of
-----------------------------------------------------------
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK OF $.001 PAR
VALUE EACH OF
TELCO-TECHNOLOGY, INC.
transferable on the books of the Corporation in person or by
attorney upon surrender of this certificate duly endorsed or
assigned. This certificate and the shares represented hereby are
subject to the Articles of Incorporation and By-Laws of the
Corporation as now or hereafter amended. This certificate is not
valid until countersigned by the Transfer Agent.
WITNESS the facsimile seal of the Corporation and the
facsimile signatures of its duly authorized officers.
Dated:
By By
- ------------------------------- -----------------------------------
Treasurer President
The following abbreviations, when used in the inscription on
the face of this certificate, shall be construed as though they were
written out in full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF Gift Min
TEN ENT - as tenants by the entireties ACT -___ Custodian_____
JT TEN - as joint tenants with right of (Cust) (Minor)
survivorship and not as tenants under Uniform
in common Gifts to
Minor Acts
Additional abbreviations may also be used though not in the
above list.
For VALUE RECEIVED, ___________________ hereby sell, assign and
transfer unto
PLEASE INSERT SOCIAL
SECURITY OR OTHER
IDENTIFICATION NUMBER OF ASSIGNEE
- --------------------------------------------------
- --------------------------------------------------
- --------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS,
INCLUDING POSTAL ZIP CODE, OF ASSIGNEE)
- --------------------------------------------------
- --------------------------------------------------
Shares of the common stock represented by the within Certificate and
do hereby irrevocably constitute and appoint
- --------------------------------------------------
Attorney to transfer the said stock on the books of the within-named
Corporation with full power of substitution in the premises.
Dated:
---------------------------
------------------------
NOTICE: The signature to the assignment
must correspond with the name as written
upon the face of the Certificate
in every particular, without alteration
or enlargement or any change
whatever.
<PAGE>
EXHIBIT 4.2
AGREEMENT AND PLAN OF MERGER
OF TELCO-TECHNOLOGY, INC.,
A DELAWARE CORPORATION,
AND
TELCO-TECHNOLOGY, INC.,
A NEVADA CORPORATION
THIS AGREEMENT AND PLAN OF MERGER dated as of December 23, 1997
(the Agreement") is between Telco-Technology, Inc., a Delaware
corporation ("Telco Delaware"), and Telco-Technology, Inc., a Nevada
corporation ("Telco Nevada"). Telco Delaware and Telco Nevada are
sometimes referred to herein as the "Constituent Corporations".
RECITALS
A. Telco Delaware is a corporation duly organized and
existing under the laws of the State of Delaware. The total number
of shares of stock which Telco Delaware has authority to issue is
15,000,000 of which 13,000,000 shares with a par value of $.001 each
is Common Stock and of which 2,000,000 shares with a par value of
$.001 each is Preferred Stock. As of the date herein, 5,000,000
shares of Common Stock were issued and outstanding, all of which are
held by Telco Nevada.
B. Telco Nevada is a corporation duty organized and
existing under the laws of the State of Nevada and has an authorized
capital of 50,000,000 shares, $.001 par value, all of which are
designated as Common Stock. As of the date hereof, 5,970,944 shares
of Common Stock were issued and outstanding.
C. The Board of Directors of Telco Nevada has determined
that, for the purpose of effecting the reincorporation of Telco
Nevada in the State of Delaware, it is advisable and in the best
interests of Telco Nevada and its shareholders that Telco Nevada
merge with and into Telco Delaware upon the terms and conditions
herein provided.
D. The respective Boards of Directors of Telco Delaware and
Telco Nevada have approved this Agreement and have directed that
this Agreement be executed by the undersigned officers.
NOW, THEREFORE, in consideration of the mutual agreements and
covenants set forth herein, Telco Delaware and Telco Nevada hereby
agree, subject to the terms and conditions hereinafter set forth, as
follows:
ARTICLE I
MERGER
1.1 MERGER. In accordance with the provisions of this
Agreement, the Delaware General Corporation Law and the Nevada
Business Corporation Act, Telco Nevada shall be merged with and into
Telco Delaware (the "Merger"), the separate existence of Telco
Nevada shall cease and Telco Delaware shall survive the Merger and
shall continue to be governed by the laws of the State of Delaware,
and Telco Delaware shall be, and is herein sometimes referred to as,
the "Surviving Corporation", and the name of the Surviving
Corporation shall be Telco-Technology, Inc.
1.2 FILING AND EFFECTIVENESS. The Merger shall become
effective when the following actions shall have been completed:
(a) This Agreement and the Merger shall have been adopted
and approved by the shareholders of each Constituent Corporation in
accordance with the requirements of the Delaware General Corporation
Law and the Nevada Business Corporation Act;
(b) All of the conditions precedent to the consummation
of the Merger specified in this Agreement shall have been satisfied
or duly waived by the party entitled to satisfaction thereof;
(c) A Certificate of Merger and an executed and
acknowledged counterpart of this Agreement, if necessary, each
meeting the requirements of the Delaware General Corporation Law
shall have been filed with the Secretary of State of the State of
Delaware; and
(d) Articles of Merger and an executed and acknowledged
counterpart of this Agreement, if necessary, meeting the
requirements of the Nevada Business Corporation Act shall have been
filed with the Secretary of State of the State of Nevada, if necessary.
The date and time when the Merger shall become effective, as
aforesaid, is herein called the "Effective Date of the Merger".
1.3 EFFECT OF THE MERGER. Upon the Effective Date of the
Merger, the separate existence of Telco Nevada shall cease and Telco
Delaware, as the Surviving Corporation, (i) shall continue to
possess all of its assets, rights, powers and property as
constituted immediately prior to the Effective Date of the Merger,
(ii) shall be subject to all actions previously taken by its and
Telco Nevada's Boards of Directors, (iii) shall succeed, without
other transfer, to all of the assets, rights, powers and property of
Telco Nevada in the manner as more fully set forth in Section 259 of
the Delaware General Corporation Law, (iv) shall continue to be
subject to all of its debts, liabilities and obligations as
constituted immediately prior to the Effective Date of the Merger,
and (v) shall succeed, without other transfer, to all of the debts,
liabilities and obligations of Telco Nevada in the same manner as if
Telco Delaware had itself incurred them, all as more fully provided
under the applicable provisions of the Delaware General Corporation
Law and the Nevada Business Corporation Act.
ARTICLE II
CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
2.1 CERTIFICATE OF INCORPORATION. The Certificate of
Incorporation of Telco Delaware as in effect immediately prior to
the Effective Date of the Merger shall continue in full force and
effect as the Certificate of Incorporation of the Surviving
Corporation until duly amended in accordance with the provisions
thereof and applicable law.
2.2 BYLAWS. The Bylaws of Telco Delaware as in effect
immediately prior to the Effective Date of the Merger shall continue
in full force and effect as the Bylaws of the Surviving Corporation
until duly amended in accordance with the provisions thereof and
applicable law.
2.3 DIRECTORS AND OFFICERS. The directors and officers of
Telco Nevada immediately prior to the Effective Date of the Merger
shall be the directors and officers of the Surviving Corporation
until their respective successors shall have been duly elected and
qualified or until as otherwise provided by law, or the Certificate
of Incorporation of the Surviving Corporation or the Bylaws of the
Surviving Corporation.
ARTICLE III
MANNER OF CONVERSION OF STOCK
3.1 TELCO NEVADA COMMON STOCK. Upon the Effective Date of
the Merger, each share of Telco Nevada Common Stock, par value
$.001, issued and outstanding immediately prior thereto shall, by
virtue of the Merger and without any action by the Constituent
Corporations, the holder of such shares or any other person, be
changed and converted into and exchanged for one fully paid and
nonassessable share of Common Stock, $.001 par value, of the
Surviving Corporation.
3.2 TELCO NEVADA OPTIONS, STOCK PURCHASE RIGHTS AND
CONVERTIBLE SECURITIES. Upon the Effective Date of the Merger, the
Surviving Corporation shall assume and continue any stock option
plans and all other employee benefit plans of Telco Nevada. Each
outstanding and unexercised option or other right to purchase Telco
Nevada Common Stock or security convertible into Telco Nevada Common
Stock shall become an outstanding and unexercised option or right to
purchase the Surviving Corporation's Common Stock or a security
convertible into the Surviving Corporation's Common Stock on the
basis of one share of the Surviving Corporation's Common Stock for
each share of Telco Nevada Common Stock issuable pursuant to any
such option, stock purchase right or convertible security, on the
same terms and conditions and at an exercise price per share equal
to the exercise price applicable to any such Telco Nevada option,
stock purchase right or convertible security at the Effective Date
of the Merger. A number of shares of the Surviving Corporation's
Common Stock shall be reserved for issuance upon the exercise of
options, stock purchase rights or convertible securities equal to
the number of shares of Telco Nevada Common Stock so reserved
immediately prior to the Effective Date of the Merger.
3.3 TELCO DELAWARE COMMON STOCK. Upon the Effective Date of
the Merger, each share of Common Stock, $0.001 par value, of Telco
Delaware issued and outstanding immediately prior thereto shall, by
virtue of the Merger and without any action by Telco Delaware, the
holder of such shares or any other person, be canceled and returned
to the status of authorized but unissued shares.
3.4 CERTIFICATES. After the Effective Date of the Merger,
each outstanding certificate theretofore representing shares of
Telco Nevada Common Stock shall be deemed for all purposes to
represent the same number of whole shares of the Surviving
Corporation's Common Stock.
ARTICLE IV
GENERAL
4.1 COVENANTS OF TELCO DELAWARE. Telco Delaware covenants
and agrees that it will, on or before the Effective Date of the
Merger, take such other actions as may be required by the Nevada
Business Corporation Act.
4.2 FURTHER ASSURANCES. From time to time, as and when
required by Telco Delaware or by its successors or assigns, there
shall be executed and delivered on behalf of Telco Nevada such deeds
and other instruments, and there shall be taken or caused to be
taken by Telco Delaware and Telco Nevada such further and other
actions, as shall be appropriate or necessary in order to vest or
perfect in or conform of record or otherwise by Telco Delaware the
title to and possession of all the property, interests, assets,
rights, privileges, immunities, powers, franchises and authority of
Telco Nevada and otherwise to carry out the purposes of this
Agreement, and the officers and directors of Telco Delaware are
fully authorized in the name and on behalf of Telco Nevada or
otherwise to take any and all such action and to execute and deliver
any and all such deeds and other instruments.
4.3 ABANDONMENT. At any time before the filing of a
Certificate of Merger with the Secretary of State of the State of
Delaware, this Agreement may be terminated and the Merger may be
abandoned for any reason whatsoever by the Board of Directors of
either Telco Nevada or Telco Delaware or both, notwithstanding the
approval of this Agreement by the shareholders of Telco Nevada or by
the sole shareholder of Telco Delaware, or by both.
4.4 AMENDMENT. The Boards of Directors of the Constituent
Corporations may amend this Agreement at any time prior to the
filings set forth in Section 1.2 hereof with the Secretaries of
State of the States of Nevada and Delaware, provided that an
amendment made subsequent to the adoption of this Agreement by the
shareholders of either Constituent Corporation shall not: (i) alter
or change the amount or kind of shares, securities, cash, property
and/or rights to be received in exchange for or on conversion of all
or any of the shares of any class or series thereof of such
Constituent Corporation, (ii) alter or change any term of the
Certificate of Incorporation of the Surviving Corporation to be
effected by the Merger, (iii) alter or change any of the terms and
conditions of this Agreement if such alteration or change would
adversely affect the holders of any class of shares or series
thereof of such Constituent Corporation, or (iv) alter or change any
of the principal terms of this Agreement.
4.5 REGISTERED OFFICE. The registered office of the
Surviving Corporation in the State of Delaware is located at 1013
Centre Road, in the City of Wilmington, County of New Castle, 19805
and Corporate Agents, Inc. is the registered agent of the Surviving
Corporation at such address.
4.6 EXPENSES. Each party to the transactions contemplated
by this Agreement shall pay its own expenses, if any, incurred in
connection with such transactions.
4.7 AGREEMENT. Executed copies of this Agreement will be on
file at the principal place of business of the Surviving Corporation
at 60 Bowers Lane, Closter, New Jersey 07624 and copies thereof will
be furnished to any shareholder of either Constituent Corporation,
upon request and without cost.
4.8 GOVERNING LAW. This Agreement shall in all respects be
construed, interpreted and enforced in accordance with and governed
by the laws of the State of Delaware and, so far as applicable, the
merger provisions of the Nevada Business Corporation Act.
4.9 COUNTERPARTS. In order to facilitate the filing and
recording of this Agreement, the same may be executed in any number
of counterparts, each of which shall be deemed to be an original and
all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement, having first been approved
by resolutions of the Boards of Directors of Telco Delaware and
Telco Nevada, is hereby executed on behalf of each of such two
corporations and attested by their respective officers thereunto
duly authorized.
TELCO-TECHNOLOGY, INC.,
a Delaware corporation
By: /s/Donald McKelvey
Name: Donald McKelvey
Title: Chairman of the Board
ATTEST:
/s/Robert Powell
Robert Powell, Secretary
TELCO-TECHNOLOGY, INC.,
a Nevada corporation
By: /s/Donald McKelvey
Name: Donald McKelvey
Title: Chairman of the Board
ATTEST:
/s/Robert Powell
Robert Powell, Secretary
<PAGE>
EXHIBIT 10.1
FINANCIAL AND MANAGEMENT CONSULTING AGREEMENT
AGREEMENT made this 1st day of January, 1999 by and between Donalson
Capital Corporation, a New Jersey corporation, maintaining its
principal offices at 60 Bowers Lane, Closter, New Jersey
(hereinafter referred to as the "Company") and Telco Technology,
Inc., a Delaware corporation, maintaining its principal offices at
P.O. Box 68, Harrington Park, NJ 07640 (hereinafter referred to as
the "Client").
WITNESSETH:
WHEREAS, the Company is engaged in the business of providing and
rendering financial and management advisory services; and
WHEREAS, Client is desirous of retaining Company for the purpose of
obtaining financial and management advisory services.
NOW AND THEREFORE, in consideration of the mutual covenants and
agreements contained herein, it is agreed as follows:
(2) Client hereby engages Company and Company agrees to render
financial and management advisory services. Such services
shall include, but are not limited to: the development,
implementation and maintenance of new and existing
Telecommunication based products and services, capital
formation and deployment and related industry research.
(3) Client acknowledges that Company is an independent contractor
and will devote such time as is reasonably necessary to perform
services for Client, having due regard for the Company's
commitments and obligations to other businesses for which it
performs consulting services.
(4) Client shall pay to Company, as compensation for its services
to be provided pursuant to this Agreement, the sum of
$10,000.00 per month payable upon receipt of invoice.
Providing that both Client and Company agree, such fees may be
withheld or partially paid to accommodate Client's cash flow
needs. In addition, Client also agrees to reimburse Company
for expenses incurred by Company on Client's behalf.
(5) This Agreement shall be for a period of 3 years commencing as
of the aforementioned date. Either party shall have the right
to terminate this Agreement upon 30 days prior written notice
to the other party.
(6) Client agrees to indemnify and hold harmless the Company and
any of its officers, directors and agents, employees and
controlling persons to the fullest extent permitted by law,
from any and all losses, claims, damages, expenses, actions,
proceeding, or investigations, or threats thereof, based upon,
relating to or arising in connection with the dissemination of
the information about the Company or the Company's business.
(7) This Agreement shall not be assigned by either party without
the written consent of the other party.
(8) All notices required or permitted to be given hereunder shall
be in writing and may be delivered personally or by Certified
Mail - Return Receipt Requested.
(9) This Agreement may not be altered or modified, except by
writing signed by each of the respective parties hereof. No
breach or violation of the Agreement shall be waived except in
writing by the party granting waiver.
(10) It is agreed between the parties that there are no other
agreements or understandings between them relating to the
subject matter of this Agreement.
(11) This Agreement shall be governed by the laws of the State
of New Jersey, without giving effect to the principal of
conflict of laws.
INTENDING TO BE LEGALLY BOUND AND IN WITNESS WHEREOF, the
parties have executed this Agreement as of the date
first above written.
DONALSON CAPITAL CORPORATION
By:/s/Donald R. McKelvey
Donald R. McKelvey, President
TELCO TECHNOLOGY, INC.
By:/s/Donald R. McKelvey
<PAGE>
EXHIBIT 10.2
ACQUISITION AND STOCK TRANSFER AGREEMENT
THIS ACQUISITION AND STOCK TRANSFER AGREEMENT dated as of the
15th day of June 1999, by and among TELCO-TECHNOLOGY, INC., a
Delaware corporation ("Telco Delaware"), ROBERT POWELL, SR.
("Powell") and TOTAL TECHNOLOGY, INC., a Massachusetts corporation
( "Newco").
W I T N E S S E T H:
WHEREAS, Telco Delaware conducts certain business in the
State of Massachusetts as hereinafter described (the "Telco
Massachusetts Operations");
WHEREAS, the Telco Massachusetts Operations has been and is
currently conducted by and/or under the supervision of Powell;
WHEREAS, Powell owns an equity interest in Telco Delaware;
WHEREAS, Powell desires to acquire, on the terms and subject
to the conditions reflected below, the assets owned or used by
Telco Delaware constituting all of the assets of the Telco
Massachusetts Operations and transfer all of the shares of Common
Stock of Telco Delaware owned by Powell to Telco Delaware;
WHEREAS, Telco Delaware believes that it is in the best
interests of Telco Delaware that it sell such assets to Powell or
his nominee and acquire the shares as set forth herein; and
WHEREAS, immediately prior hereto, Powell formed Newco in
order to acquire the Telco Massachusetts Operations;
NOW, THEREFORE, for and in consideration of the mutual
representations, warranties, covenants and undertakings herein
contained, and on the terms and subject to the conditions set
forth herein, the parties hereto agree as follows:
ARTICLE I
OWNERSHIP AND TRANSFER OF STOCK
1.01 OWNERSHIP OF STOCK. Powell hereby represents and
warrants that he is the legal record and beneficial owner of
450,000 shares of Telco Delaware Common Stock (represented by
certificate no. TTI 01110), that being all of the debt or equity
interest owned or controlled, beneficially or of record, by Powell
in Telco Delaware (collectively referred to as the "Stock").
Powell represents and warrants that he owns the Stock free and
clear of all liens, claims or encumbrances, and that he has full
right, power and authority to transfer the Stock hereunder and to
make the representations, warranties and agreements regarding the
Stock contained herein.
1.02 TRANSFER OF STOCK. Subject to and upon the terms and
conditions of this Agreement, at Closing (as hereinafter defined),
Powell shall assign, transfer and convey to the Telco Delaware and
Telco Delaware shall accept from Powell all right, title and
interest in and to all 450,000 shares of Powell's Stock. Powell
also acknowledges that he previously delivered 500,000 shares of
Telco Delaware Common Stock (represented by certificate no. TTI
01320) to Telco Delaware which shares were cancelled and returned
to the treasury of Telco Delaware. Powell hereby accepts and
agrees to the foregoing cancellation and return to the treasury.
In addition, Powell represents and warrants that in or about April
1999 he transferred 500,000 shares of Telco Delaware Common Stock
(represented by certificate no. TTI 01127) to Ina McWey, and that
he has no direct or indirect beneficial ownership in such shares
or any other rights with respect thereto. In the event that
Powell acquires beneficial ownership of such shares at any time,
he agrees to immediately return such shares, or cause such shares
to be returned, to Telco Delaware without any additional
consideration. All of the shares which are referred to in this
Section 1.02 (including the 500,000 shares transferred in Ina
McWey, provided Powell is required to return such shares to Telco
Delaware pursuant hereto) are sometimes collectively referred to
herein as the "Transfer Stock".
ARTICLE II
CONSIDERATION FOR STOCK; SALE AND PURCHASE OF ASSETS
2.01 CONSIDERATION FOR TRANSFER STOCK; TRANSFER OF ASSETS;
CANCELLATION OF LOANS. Subject to and upon the terms and
conditions contained herein, at the Closing, (i) Telco Delaware
shall sell, assign, transfer, convey and deliver to Newco, and
Newco shall purchase, acquire and accept from Telco Delaware, the
specific assets of Telco Delaware which constitute the Telco
Massachusetts Operations (the "Purchased Assets"), and (ii) Telco
Delaware shall cancel all amounts owing by Powell to Telco
Delaware for officer loans as reflected on the balance sheets of
Telco Delaware.
2.02 LIABILITIES ASSIGNED AND ASSUMED BY NEWCO. Effective as
of the Closing Date, Buyer shall assume and be liable and
responsible for any and all debts, obligations, contracts and
liabilities with respect to the Purchased Assets or the Telco
Massachusetts Operations, of any kind, character or description,
whether fixed, absolute, contingent, disputed or undisputed,
secured or unsecured, known or unknown, now in existence or
hereafter arising (and regardless of whether reflected or reserved
against on Telco Delaware's balance sheets, books of account and
records) (collectively the "Liabilities"), and Telco Delaware
shall not in any way be liable or responsible for, and each of
Newco and Powell, jointly and severally, shall and do indemnify,
defend and hold harmless Telco Delaware against the Liabilities.
ARTICLE III
CLOSING
3.01 THE CLOSING. The "Closing" or "Closing Date" means
the time at which the Powell effects the transfer of the 450,000
shares of Stock referred to in Section 1.02 by delivery to Telco
Delaware of certificates for the Stock, duly endorsed, or
accompanied by appropriate stock powers duly endorsed in blank,
and the parties execute and deliver such certificates, agreements
and instruments as shall be reasonably required by the parties
hereto in order to satisfy the terms and conditions of this
Agreement including, without limitation, each of the conditions
specified in Article VII hereof (unless such condition is waived
by the party entitled to waive that condition). The Closing shall
take place on a mutually acceptable date on or before June 30,
1999 at the offices of Danzig Garubo & Kaye, LLP, 30A Vreeland
Road, Florham Park, New Jersey 07932, or at such other place as
the parties may agree and designate in writing. It is understood
that the parties may agree to close via telecopier transmission
and courier service, if necessary.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF POWELL
Powell represents and warrants to Telco Delaware that:
4.01 BINDING OBLIGATION. This Agreement is the valid and
binding legal obligation of Powell enforceable in accordance with
the terms hereof and does not violate any provisions of law, or
any agreement or arrangement to which Powell is a party or by
which Powell may be bound.
4.02 FAMILIARITY WITH TELCO DELAWARE AND ACCESS TO
DOCUMENTS. Powell is fully familiar with the financial condition
and prospects of Telco Delaware, and Powell acknowledges and
agrees that Powell has been furnished with any materials relating
to Telco Delaware, its business and financial condition which
Powell has requested, and Powell has been afforded the opportunity
to ask questions and receive answers concerning Telco Delaware,
its business and financial condition, and its prospects, which
questions have been answered to Powell's satisfaction. Powell
acknowledges that he is voluntarily transferring the Transfer
Stock to Telco Delaware and that the consideration therefor as
reflected herein is fair. Powell further represents that in
negotiating for and in arriving at the amount of consideration to
be paid for the Transfer Stock, Powell has recognized the
possibility that at any time after the date hereof, the business
and financial position of Telco Delaware may substantially improve
(which may include an acquisition of, merger or consolidation
with, a material business opportunity, or Telco Delaware may enter
into other material transactions as soon as practicable), which
would be to the added or further benefit of Telco Delaware and its
stockholders and that in such event, Powell understands that he
has no claim for any increased value with respect to the Transfer
Stock.
4.03 ADDITIONAL REPRESENTATIONS. Powell has such knowledge
and experience in financial, tax and business matters so as to
enable him to utilize the information made available to him in
connection with the transfer of the Transfer Stock hereby, to
evaluate the merits and risks of a disposition of the Transfer
Stock and to make an informed decision with respect thereto;
Powell is not relying on Telco Delaware with respect to the tax
and other economic considerations of the transfer of the Transfer
Stock and the other transactions to be consummated hereunder, and
he has relied on the advice of and consulted with his own
advisors with respect thereto; and Telco Delaware is relying on
these representations and warranties of Powell in its decision to
enter into this Agreement and to accept transfer of the Transfer
Stock from Powell hereby, and that Telco Delaware would not accept
the transfer of the Transfer Stock from Powell but for the
representations and warranties of Powell made herein.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF POWELL AND NEWCO
Each of Powell and Newco, jointly and severally, represents
and warrants to Telco Delaware that:
5.01 ORGANIZATION. Newco is a corporation duly organized,
validly existing and in good standing under the laws of the State
of Massachusetts, and has the corporate power and lawful authority
to own, lease and operate its assets, properties and business and
to carry on its business as now and intended to be conducted.
5.02 AUTHORITY. This Agreement and the transactions contemplated
herein have been duly approved by all necessary action on the part
of Newco. This Agreement constitutes the valid, legal, and
binding agreement of Newco enforceable in accordance with its
terms. Neither the execution and delivery nor the consummation of
the transactions contemplated in this Agreement, nor compliance
with nor fulfillment of the terms and provisions hereof will (i)
conflict with or result in a breach of the terms, conditions, or
provisions of or constitute a default under the Certificate or
Articles of Incorporation or By-Laws of Newco, any instrument,
agreement, mortgage, judgment, order, award, decree, or other
restrictions to which Newco, or to the best knowledge of Powell
and Newco, Telco Delaware is a party or by which it is bound, or
any statute or regulatory provisions affecting Newco or, the best
knowledge of Powell and Newco, affecting Telco Delaware; (ii) give
any party to or with rights under any such instrument, agreement,
mortgage, judgment, order, award, decree, or other restrictions
the right to terminate, modify, or otherwise change the rights or
obligations of either Newco or Telco Delaware under such
instrument, agreement, mortgage, judgment, order, award, decree,
or other restrictions, or (iii) require the approval, consent, or
authorization of or any filing with or notification to any
federal, state, or local court, governmental authority or
regulatory body, or any other person.
5.03 TITLE TO ASSETS. Telco Delaware holds good and
marketable title, free and clear of all liens and encumbrances, to
the Purchased Assets, and none of such Purchased Assets is subject
to any mortgage, pledge, lien, security interest, conditional
sale, agreement, encumbrance, or charge of any kind.
5.04 LITIGATION. There is no litigation, legal or
administrative proceeding, investigation or other action or
proceeding of any nature pending or, to the knowledge of Powell
and Newco, threatened against or affecting Telco Delaware directly
or indirectly in any way, with respect to the Purchased Assets or
the Telco Massachusetts Operations.
5.05 COMPLIANCE WITH OTHER INSTRUMENTS, ETC. Telco Delaware
is not in violation of any term of any mortgage, indenture, loan
agreement, credit instrument, judgment, decree, order, statute,
rule or regulation to which it is subject or by which it is bound
as same relates to the Purchased Assets or the Telco Massachusetts
Operations; and the execution, delivery and performance of and
compliance with this Agreement by Telco Delaware will not result
in any such violation, or be in conflict with or constitute a
default under any such term, or result in the creation of any
mortgage, lien, encumbrance or charge upon any of the properties
or assets of Telco Delaware pursuant to any such term.
5.06 FINANCIAL STATEMENTS. SCHEDULE A attached hereto includes
the unaudited financial statements of Telco Delaware for the year
ended December 31, 1998 and the unaudited financial statements of
Telco Delaware for the three month period ended March 31, 1999
(together, the "Financial Statements"). With respect to the Telco
Massachusetts Operations, the Financial Statements are true,
complete and correct, and accurately present the financial
position of the Telco Massachusetts Operations as at their
respective dates and the results of its operations for the periods
then ending in accordance with generally accepted accounting
principles consistently applied. As of the date of the Statements
of Assets and Liabilities included in the Financial Statements,
the Telco Massachusetts Operations did not have any material debt,
liability, or obligation of any nature, whether accrued, absolute,
contingent or otherwise, and whether due or to become due, that is
not reflected in such Statements of Assets and Liabilities. Each
of Powell and Newco acknowledge and agree that all of the
liabilities reflected in the Statements of Assets and Liabilities
included in the Financial Statements are liabilities of the Telco
Massachusetts Operations, and that all of the assets reflected in
such Statements of Assets and Liabilities, except the Cash in Bank
- PNC, Cash in Bank - PNC CD, Inter Co - Telco Science and Other
Assets, are assets of the Telco Massachusetts Operations. Each of
Powell and Newco covenant and agree that at the earliest possible
time, whether prior to or after Closing, each of Powell and Newco
shall cooperate to the extent necessary to allow Telco Delaware to
have the Telco Massachusetts Operations audited through December
31, 1998, and through March 31, 1999, if deemed necessary.
5.07 NO ADVERSE CHANGE. Since March 31, 1999, there has
been no change in the assets, liabilities, condition, affairs or
prospects of the Telco Massachusetts Operations from that
reflected in the Financial Statements.
5.08 TAX RETURNS AND PAYMENTS. Except with respect to the
filing of Delaware franchise tax reports and any corresponding
payments for which Powell and Newco disclaim any knowledge, all
tax returns and reports of Telco Delaware, as required by law to
be filed have been duly filed, and all taxes, assessments, fees
and other governmental charges (collectively "taxes") upon Telco
Delaware or upon any of their respective properties, assets,
income or franchises which are due and payable as set forth in
such returns and all amounts payable and respective withholding
from wages and salaries have been paid, and there are no present
disputes as to taxes of any nature payable by Telco Delaware,
except that extensions have been filed for 1998 tax returns but
all taxes thereunder have been paid.
5.09 CERTAIN AGREEMENTS. Telco Delaware is not in default
of any contract, agreement, undertaking or arrangement as same
relates to the Purchased Assets or the Telco Massachusetts
Operations.
5.10 DISCLOSURE. This Agreement and the representations and
warranties contained herein and in any document delivered or to be
delivered hereunder describe all material aspects of the Telco
Massachusetts Operations, contain no untrue or misleading
statement of a material fact and do not omit to state a fact
material to the Telco Massachusetts Operations or necessary to
make the statements contained therein not misleading.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF TELCO DELAWARE
Telco Delaware represents and warrants to each of Powell and
Newco that:
6.01 ORGANIZATION. Telco Delaware is a corporation duly
organized, validly existing and in good standing under the laws of
the State of Delaware, and has the corporate power and lawful
authority to own, lease and operate its assets, properties and
business.
6.02 AUTHORITY. This Agreement and the transactions contemplated
herein have been duly approved by all necessary action on the part
of Telco Delaware, subject to Telco Delaware obtaining stockholder
approval. This Agreement constitutes the valid, legal, and
binding agreement of Telco Delaware enforceable in accordance with
its terms.
ARTICLE VII
COVENANTS AND FURTHER AGREEMENTS
7.01 ACCESS TO INFORMATION. Prior to the Closing, and after
Closing with respect to the obligations of Powell and Newco set
forth in Section 5.06 in connection with obtaining audited
financial statements, each of the parties shall give to each other
and its respective counsel, accountants and other representatives
reasonable access during normal business hours to the property,
books, agreements, records, files relating to the Purchased Assets
and the Telco Massachusetts Operations, and each of the parties
shall furnish to each other during that period all copies of
documents and information concerning the Purchased Assets and the
Telco Massachusetts Operations as each party may reasonably
request and which have not been previously delivered to such party
or its representatives.
7.02 CONDUCT OF BUSINESS. Powell shall operate the Telco
Massachusetts Operations in the ordinary course prior to the
Closing Date and promptly notify Telco Delaware of any material
actions or proceedings known to Powell which are threatened or
commenced against any of the Purchased Assets or the Telco
Massachusetts Operations. Prior to the Closing Date, Powell shall
not, and shall cause Telco Delaware to not, enter into any
agreements respecting the Purchased Assets or the Telco
Massachusetts Operations without the prior written consent of
Donald McKelvey, Chairman of Telco Delaware. Until Closing,
Powell shall maintain in full force and effect all insurance
policies applicable to the Telco Massachusetts Operations.
7.03 CONFIDENTIALITY. Each of the parties agrees not to
disclose, nor to permit the disclosure by any of its principals or
affiliates, to any third party of the terms and conditions of the
transactions contemplated hereby or any document delivered or
information supplied in connection therewith. The foregoing
restriction shall not apply to disclosures (i) with the prior
consent of the other parties hereto, (ii) required by law or
judicial process, after notice to the other party hereto, or (iii)
pursuant to Section 10.11.
7.04 TAXES. Prior to and after the Closing, Telco Delaware
shall, with the reasonable cooperation of Powell, prepare and
arrange for the filing of any and all tax returns for Telco
Delaware that cover periods through the Closing Date, including
tax returns for 1998 for which extensions have been filed and 1999
tax returns which will be due after the Closing Date, and Newco
shall be responsible for and will pay all taxes, if any, due with
respect to the Telco Massachusetts Operations.
7.05 MUTUAL RELEASES. Effective at Closing, Telco Delaware
and Powell shall release and forever discharge each other, their
respective successors, representatives, assigns, agents,
employees, attorneys, accountants, and with respect to Telco
Delaware, its officers and directors, of and from any and all
claims, debts, liabilities, demands, obligations, costs, expenses,
actions and causes of action of every nature, character and
description, known or unknown, which either party now owns or
holds, or has at any time heretofore owned or held or may at any
time hereafter own or hold, by reason of any matter, cause or
thing whatsoever occurred, done, omitted or suffered to be done
prior to the date of this Agreement. However, this release does
not cover or apply to any of the obligations of the parties set
forth in or contemplated by this Agreement.
ARTICLE VIII
CONDITIONS TO CLOSING
8.01 CONDITIONS PRECEDENT TO OBLIGATIONS OF TELCO DELAWARE.
The obligation of Telco Delaware to consummate the transactions
contemplated by this Agreement is subject to the fulfillment,
prior to or at the Closing, of each of the following conditions
(any or all of which may be waived by Telco Delaware):
(a) all representations and warranties of each of Powell
and Newco contained in this Agreement shall be true and correct in
all material respects as of the time of the Closing with the same
effect as though made again at and as of that time;
(b) each of Powell and Newco shall have performed and
complied in all material respects with all obligations, covenants,
agreements and conditions required by this Agreement to be
performed or complied with by either of them prior to or at the
Closing;
(c) No action, suit or proceeding before any court or any
governmental body or authority, pertaining to the transaction
contemplated by this Agreement or to its consummation, shall have
been instituted or threatened against any of the parties hereto on
or before the Closing Date related to the Telco Massachusetts
Operations or Purchased Assets; and
(d) Powell and Newco shall have delivered to Telco Delaware
a certificate dated the Closing Date, and signed by Powell and an
authorized officer of Newco, certifying that each of the
conditions specified in Sections 8.01(a) through 8.01(c) hereof
have been fulfilled.
8.02 CONDITIONS PRECEDENT TO OBLIGATIONS OF POWELL AND
NEWCO. The obligation of Powell and Newco to consummate the
transactions contemplated by this Agreement is subject to the
fulfillment, prior to or at the Closing, of each of the following
conditions (any or all of which may be waived by Powell and Newco):
(a) all representations and warranties of Telco Delaware
contained in this Agreement shall be true and correct in all
material respects at and as of the time of the Closing with the
same effect as though those representations and warranties had
been made again at and as of that time;
(b) Telco Delaware shall have performed and complied in all
material respects with all obligations, covenants, agreements and
conditions required by this Agreement to be performed or complied
with by it prior to or at the Closing;
(c) No action, suit or proceeding before any court or any
governmental body or authority, pertaining to the transaction
contemplated by this Agreement or to its consummation, shall have
been instituted or threatened against any of the parties hereto on
or before the Closing Date; and
(d) Telco Delaware shall have delivered to the Seller a
certificate dated the Closing Date, and signed by an authorized
officer of Telco Delaware, certifying (i) that each of the
conditions specified in Sections 8.02(a) through 8.02(c) hereof
have been fulfilled.
ARTICLE IX
SURVIVAL OF OBLIGATIONS, INDEMNIFICATION
9.01 SURVIVAL OF OBLIGATIONS. The respective
representations, warranties, covenants and agreements of the
parties contained in this Agreement, or in any document delivered
by either of the parties to the other in connection with the
transactions contemplated by this Agreement, shall survive the
Closing Date hereunder.
9.02 INDEMNIFICATION.
(a) OBLIGATION OF POWELL AND NEWCO TO INDEMNIFY. From and
after the Closing Date, each of Powell and Newco, jointly and
severally, shall indemnify, defend and hold harmless Telco
Delaware, and its directors, officers, employees, affiliates,
agents and assigns, from and against any losses, liabilities,
damages, deficiencies, costs or expenses (including interest,
penalties and reasonable attorneys' and experts' fees and
disbursements) ("Losses") that may be asserted against, imposed
upon or incurred by any of them, which (i) arise out of, result
from or relate to any inaccuracy in or any breach of, or failure
by either Powell or Newco to perform any of its representations,
warranties and obligations in this Agreement or in any schedule or
other instrument furnished or to be furnished by either Powell or
Newco under this Agreement, (ii) arise out of or in any way are
connected to or result from the Purchased Assets or the Telco
Massachusetts Operations, including without limitation, any claims
arising under or with respect to the business, operations and
assets of each the Telco Massachusetts Business, and (iii) any
liability or obligation to which any of them may become subject
as a result of the applicability of the provisions of any bulk
sales acts or similar statutes in any jurisdiction.
(b) OBLIGATION OF TELCO DELAWARE TO INDEMNIFY. Telco
Delaware shall indemnify, defend and hold harmless each of Powell
and Newco from and against any Losses based upon, arising out of
or otherwise due to any inaccuracy in or any breach of any
representation, warranty, covenant or agreement of Telco Delaware
contained in this Agreement or in any document or other writing
delivered pursuant thereto.
(c) NOTICE TO INDEMNIFYING PARTY. If any party (the
"Indemnitee") receives written notice of any actual or possible
claim or commencement of any action or is allegedly obligated to
provide Indemnification (the "Indemnifying Party") pursuant to
Section 9.02(a) or 9.02(b), the Indemnitee shall give the
Indemnifying Party written notice thereof. Such notice shall be a
condition precedent to any liability of the Indemnifying Party
under the provisions for indemnification contained in this
Agreement, and shall describe the claim in reasonable detail and
shall indicate the amount (estimated if necessary) of the Loss
that has been or may be sustained by the Indemnitee. The
Indemnifying Party may elect to compromise or defend, at such
Indemnifying Party's own expense, and by such Indemnifying Party's
own counsel, any such matter involving the asserted liability of
the Indemnitee. If the Indemnifying Party elects to compromise or
defend such asserted liability, it shall within 30 days (or
sooner, if the nature of the asserted liability so requires)
notify the Indemnitee of its intent to do so, and the Indemnitee
shall cooperate, at the expense of the Indemnifying Party, in the
compromise of, or defense against, any such asserted liability, so
long as such compromise or defense does not adversely affect the
past, present or future interests of the Indemnitee. If the
Indemnifying Party elects not to compromise or defend against the
asserted liability, or fails to notify the Indemnitee of its
election as herein provided, the Indemnitee may pay, compromise or
defend such asserted liability after 15 days written notice of its
intention to the Indemnifying Party.
ARTICLE X
MISCELLANEOUS
10.01 ENTIRE AGREEMENT. This Agreement (including any
Schedules hereto) and the various agreements and documents
executed in connection with the consummation of the transactions
contemplated hereby, contain the entire agreement among the
parties with respect to the transactions contemplated hereby, and
supersede all prior agreements, written or oral, with respect
thereto, among the parties hereto.
10.02 WAIVERS AND AMENDMENTS. This Agreement may be amended,
modified, superseded, canceled, renewed or extended, and the terms
and conditions hereof may be waived, only by a written instrument
signed by the parties or, in the case of a waiver, the party
waiving compliance. No delay on the part of any party in
exercising any right, power or privilege hereunder shall operate
as a waiver thereof, nor shall any waiver on the part of any party
of any right, power or privilege hereunder.
10.03 GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the laws of the State of New Jersey
applicable to agreements made and to be performed entirely within
such State.
10.04 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. Any
legal action, suit or proceeding arising out of or relating to
this Agreement, or the transactions contemplated hereby, shall be
instituted in any state or federal court in the State of New
Jersey, and all parties agree not to assert, by way of motion, as
a defense, or otherwise, in any such action, suit or proceeding,
any claim that it is not subject personally to the jurisdiction of
such court, that the action, suit or proceeding is brought in an
inconvenient forum, that the venue of the action, suit or
proceeding is improper or that the injured party is without a
remedy under this Agreement or the subject matter hereof. All
parties further irrevocably submit to the jurisdiction of any such
court in any such action, suit or proceeding. Any and all service
of process, and any other notice in any such action, suit or
proceeding, shall be effective against any party if served by
registered or certified mail, return receipt requested, or by any
other means of mail which requires a signed receipt postage
prepaid, mailed to such party as herein provided, or by hand
delivery. If for any reason such service of process in
ineffective, then all parties shall be subject to service of
process in accordance with applicable law or rule of court.
Nothing herein contained shall be deemed to limit or restrict the
right of any party to serve process in any manner permitted by law.
10.05 BINDING EFFECT; ASSIGNMENT. This Agreement shall be
binding upon and inure to the benefit of the parties and their
respective successors and permitted assigns. This Agreement is
not assignable by any of the parties without the prior written
consent of the other parties.
10.06 COUNTERPARTS; EFFECTIVENESS. This Agreement may be
executed in counterparts, each of which shall be deemed an
original but all of which together shall constitute one and the
same instrument. This Agreement shall be binding and become
effective when each party hereto shall have received by telecopier
a counterpart hereof signed by the other parties hereto.
10.07 NOTICE. All notices or other communications given or
made pursuant hereto shall be in writing and shall be deemed to
have been duly given or made if and when delivered personally or
by overnight courier to the parties at the following addresses or
sent by electronic transmission, with confirmation of receipt, to
the telecopy numbers specified below (or at such other address or
telecopy number for the party as shall be specified by like notice):
If to Telco Delaware:
Telco-Technology, Inc.
Box 68
Harrington Park, New Jersey 07640
Attn: Donald McKelvey
Telecopier No.: (201) 767-3912
Telephone No.: (201) 768-2310
With a copy to:
Danzig Garubo & Kaye, LLP
30A Vreeland Road
Florham Park, New Jersey 07
Attn: David M. Kaye, Esq.
Telecopier No.: (973) 443-0609
Telephone No.: (973) 443-0600
If to Powell and Newco:
Robert Powell, Sr.
41 Brigham Street
Unit 18
Marlboro, Massachusetts 01752
Telecopier No.: (508) 229-2448
Telephone No.: (508) 229-7717
10.08 SEVERABILITY. If any provision of this Agreement is
held to be illegal, invalid or unenforceable under present or
future laws effective during the term hereof, such provision shall
be fully severable and this Agreement shall be construed and
enforced as if such illegal, invalid or unenforceable provision
never comprised a part hereof; and the remaining provisions hereof
shall remain in full force and effect and shall not be affected by
the illegal, invalid or unenforceable provision or by its
severance hereof. Furthermore, in lieu of such illegal, invalid
or unenforceable provision, there shall be added automatically as
part of this Agreement, a provision as similar in its terms to
such illegal, invalid or unenforceable provision as may be
possible and still be legal, valid and enforceable.
10.09 TERMINATION OF AGREEMENT. This Agreement may be
terminated at any time before the Closing,
(a) by written mutual consent of the parties hereto;
(b) Upon five (5) business days written notice by Telco
Delaware (provided it is not in breach hereunder) if any of the
conditions precedent set forth in this Agreement to be performed
by each of Powell and Newco have not been met or waived in writing
by Telco Delaware on or before the Closing Date and such condition
or conditions are not fulfilled within such five (5) business days
after notice thereof;
(c) Upon five (5) business days written notice by either
Powell or Newco (provided either is not in breach hereunder) if
any of the conditions precedent set forth in this Agreement to be
performed by Telco Delaware have not been met or waived in writing
by Powell and Newco on or before the Closing Date and such
condition or conditions are not fulfilled within such five (5)
business days after notice thereof.
In the event this Agreement is terminated pursuant to the
terms hereof, then Telco Delaware shall have no further obligation
or liability to Powell and Newco under this Agreement and Powell
and Newco shall have no further obligation or liability to Telco
Delaware under this Agreement, unless the termination has been
caused by the willful failure of any of the parties, as the case
may be, to perform or satisfy any agreement, undertaking or
condition to be performed or satisfied hereunder.
10.11 ANNOUNCEMENTS. The parties will consult and cooperate
with each other as to the timing and content of any announcements
of the transactions contemplated hereby to stockholders, the
general public, or to employees, customers or suppliers.
10.12 WAIVER. No waiver of any term or provision hereof
shall be effective unless in writing, signed by the parties to be
charged.
10.13 CHOICE OF COUNSEL. The parties recognize that members
of the law firm of Danzig Garubo & Kaye, LLP (the "Law Firm")
currently render and have rendered advice and counsel in the past
to Telco Delaware, including such period of time when Powell was
an officer and director of Telco Delaware. Each of Powell and
Newco acknowledge that the law firm of Danzig Garubo & Kaye, LLP
has only represented Telco Delaware in connection with the
negotiation and consummation of the transactions hereunder and
that each of Powell and Newco has been advised and has had the
opportunity to retain counsel of their own choosing and has done
so the extent each has deemed necessary. Each of the parties
hereby releases and relinquishes any claim against the Law Firm or
any of its members from any conflict of interest arising or
purportedly arising from this Agreement or the transactions
contemplated herein.
IN WITNESS WHEREOF, the parties have executed this Agreement
effective as of the date first written above.
TELCO-TECHNOLOGY, INC.
By: /s/Donald McKelvey
Name: Donald McKelvey
Title: Chairman of the Board
/s/Robert Powell, Sr.
ROBERT POWELL, SR.
TOTAL TECHNOLOGY, INC.
By: /s/ Robert Powell, Sr.
Name: Robert Powell, Sr.
Title: Vice President
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
We consent to the use in this Registration Statement on Form 10-SB
of our report included herein dated November 2, 1999, relating to
the financial statements of Telco-Technology, Inc.
/s/Kempisty & Company
New York, New York Kempisty & Company
January 11, 2000 Certified Public
Accountants, P.C.
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> SEP-30-1999
<CASH> 49,740
<SECURITIES> 0
<RECEIVABLES> 222,106
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 49,740
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 271,846
<CURRENT-LIABILITIES> 18,000
<BONDS> 0
<COMMON> 8,845
0
0
<OTHER-SE> 245,001
<TOTAL-LIABILITY-AND-EQUITY> 271,846
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 188,547
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (185,076)
<INCOME-TAX> 0
<INCOME-CONTINUING> (185,076)
<DISCONTINUED> (69,887)
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<NET-INCOME> (254,963)
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