SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter ended: September 30, 2000
Commission file number: 0-11882
TELECOMMUNICATION PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
Colorado 84-0916299
(state or other jurisdiction) (I.R.S. Employer
of incorporation or organization) Identification No.)
P.O. Box 17013, Golden, Colorado 80402
(address of principal executive offices)
Registrant's telephone number, including area code: (303)278-2725
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
the filing requirements for at least the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date: 22,492,800 as of
September 30, 2000.
- 1 -
ITEM 1 - FINANCIAL STATEMENTS
TELECOMMUNICATION PRODUCTS, INC.
Balance Sheets
ASSETS
Sept. 30, 2000 March 31, 2000
-------------- --------------
(unaudited) (unaudited)
Current assets:
Cash $45,062 $ 184
Inventories (Note 3) 92,109 92,109
Other -0- -0-
-------- --------
137,171 92,293
-------- --------
Property and equipment, at cost:
Equipment 46,446 46,446
Office furniture/equipment 13,776 13,776
-------- --------
60,222 60,222
Less accumulated depreciation (60,222) (60,222)
-------- --------
-0- -0-
-------- --------
$137,171 $ 92,293
======= ========
See accompanying notes to condensed
financial statements
-2-
TELECOMMUNICATION PRODUCTS, INC.
Balance Sheets
LIABILITIES AND STOCKHOLDERS' EQUITY
Sept. 30, 2000 March 31, 2000
-------------- --------------
(unaudited) (unaudited)
Current liabilities:
Accounts payable $ 0 $ 17,859
Accrued expenses
Officers 676,500 651,900
Other 15,779 28,757
-------- --------
Total current liabilities 692,279 698,516
Long Term Debt-
Officers/Stockholders 0 2,805
Stockholders' equity: (Note 5)
Common stock, no par value
Authorized - 100,000,000 shares
Issued and outstanding -
22,492,800 shares 733,768 733,768
Preferred stock, $1 par value,
non-voting
Authorized - 50,000,000 shares
Issued - none
Accumulated deficit (1,288,876) (1,342,796)
-------- --------
Total (555,108) (609,028)
------- -------
$ 137,171 $ 92,293
======= =======
See accompanying notes to condensed
financial statements
-3-
TELECOMMUNICATION PRODUCTS, INC.
Statement of Operations
(Unaudited)
three months ended three months ended
Sept. 30, 2000 Sept. 30, 1999
------------------ ------------------
Revenues:
Sales $ 0 $ 0
Other Income 81,578 0
------- -------
Expenses:
Cost of Sales 0 0
Selling, general and
administrative 15,326 13,087
------- -------
15,326 13,087
------- -------
Net income (loss) $ 66,252 $(13,087)
======== ========
Net Income (loss) per common share $ .0029 $ (.0006)
======== ========
Weighted average common
shares outstanding 2,492,800 22,492,800
========== ==========
See accompanying notes to condensed
financial statements
-4-
TELECOMMUNICATION PRODUCTS, INC.
Statement of Operations
(Unaudited)
Six months ended Six months ended
Sept. 30, 2000 Sept. 30, 1999
------------------ ------------------
Revenues:
Sales $ 0 $ 0
Other Income 81,578 0
------- -------
Expenses:
Cost of Sales 0 0
Selling, general and
administrative 27,658 25,747
------- -------
27,658 25,747
------- -------
Net income (loss) $ 53,920 $(25,747)
======== ========
Income (loss) per common share $ .0024 $ (.0011)
======== ========
Weighted average common
shares outstanding 22,492,800 22,492,800
========== ==========
See accompanying notes to condensed
financial statements
-5-
TELECOMMUNICATION PRODUCTS, INC.
Statement of Changes in Stockholder's Equity
(Unaudited)
Six months ended Sept. 30, 2000
Common stock
---------------------- Accumulated
Shares Amount Deficit
-------- -------- -----------
Balance at March 31, 2000 22,492,800 $733,768 ($1,342,796)
Net income (unaudited) 53,920
---------- -------- ----------
22,492,800 $733,768 ($1,288,876)
========== ======== ==========
See accompanying notes to condensed
financial statements
-6-
<PAGE>
TELECOMMUNICATION PRODUCTS, INC.
Statement of Cash Flow
(Unaudited)
Six Six
months ended months ended
Sept. 30, 2000 Sept. 30, 1999
-------------- --------------
Cash was provided by:
Net income 53,920
Increase (Decrease) in
Accrued Expenses 11,622 24,600
Increase (Decrease) in
Accounts Payable (17,859) 720
Net Loans from Officers ( 2,805) 826
------- -------
Total Cash Provided 44,878 26,146
------- -------
Cash was used for:
Net loss 0 25,747
------- -------
Total Cash Used 0 25,747
------- -------
Beginning Cash Balance 184 -0-
------- -------
Ending Cash Balance $ 45,062 399
======= =======
See accompanying notes to condensed
financial statements
TELECOMMUNICATION PRODUCTS, INC.
Notes to Condensed Financial Statements
(Unaudited)
1. The accompanying unaudited condensed financial statements have been
prepared in accordance with the instructions for Form 10-Q and do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation have been included.
These statements should be read in conjunction with the financial statements
and notes thereto included in the Company's Form 10-K for the year ended
March 31, 2001.
2. Summary of Significant Accounting Policies
The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and satisfaction
of liabilities in the normal course of business. As shown in the financial
statements, during the quarter ended September 30, 2000, the Company incurred
a net gain of $53,920 and, as of that date, the Company has accumulated a
deficit of $1,288,876. This factor, among others, may indicate that the
Company will be unable to continue as a going concern. The financial
statements do not include any adjustments relating to the recoverability and
classification of recorded asset amounts or the amount and classification of
liabilities that might be necessary should the Company be unable to continue
as a going concern. The Company's continuation as a going concern is dependent
upon its ability to generate sufficient cash flow to meet its obligations on
a timely basis, to obtain additional financing as may be required, and
ultimately to attain successful operations. Management is of the opinion
that enhanced marketing efforts, or a reverse merger with a potentially
profitable company, may enable the Company to increase revenues sufficiently
to sustain operations.
Revenue is recognized when products are delivered and accepted by
customers. Other income includes payment made pursuant to an agreement
under which the Company is proceeding, as well as accrued expenses and
accounts payable which were not incurred or were forgiven by the creditor.
Depreciation for property and equipment is calculated using the straight-line
method over an estimated useful life of five years. The Company grants a
one-year warranty on parts and labor for all its products, but has
historically experienced minimal warranty claims.
Certain officers/stockholders of the Company elected to defer their
salaries beginning the first quarter of calendar year 1987 in order to help
the Company's cash flow. As of September 30, 2000, unpaid compensation
claimed by officers/stockholders totals $676,500.
Long-term debt included a note payable to officers/shareholders for
$2,805, and officers were also owed accrued interest of $12,909 for previous
monies loaned to the Company to sustain operations; both obligations were
paid this quarter.
3. Inventories
Inventories are recorded at the lower of cost (first-in first-out) or
market and consist of the following:
Sept. 30, 2000 March 31, 2000
Raw materials $ 55,176 $ 55,176
Work in process 36,933 36,933
Finished goods 0 0
Total inventory $ 92,109 $ 92,109
Due to damage and attrition associated with the move from the Company's
former laboratory and offices, as well as the age and obsolescence of certain
parts and components, it is the opinion of management that the value of the
inventory is significantly less than listed; however, until a formal,
independent appraisal or audit can be paid for and accomplished, actual
values are unknown.
4. Common stock and warrants
In connection with a March 1984 public offering, the Company sold to the
underwriter for $100 warrants to purchase up to 644,280 shares of the
Company's no par value common stock. The warrants expired unexercised on
January 11, 1989.
5. Stock option plan
On June 8, 1983, the Company's Board approved an incentive stock option
plan for all employees and reserved 3,000,000 shares of common stock for
issuance upon the exercise of options granted. The minimum exercise price
under the plan is generally 100% of the fair market value of the Company's
common stock at the date of grant, and the options are exercisable for a
period up to 10 years from the grant date. For 10% stockholders, the
minimum exercise price is 110% of the fair market value at the date of grant,
and the options are exercisable for a period up to 5 years from the date of
grant. As of September 30, 2000, no options had been granted.
6. Loss or gain per common share and shares outstanding
Loss or gain per common share is computed by dividing net loss/gain by
the weighted average shares outstanding during the period. The weighted
shares outstanding included 9,800,000 shares issued to certain persons at a
price substantially less than the public offering price. Outstanding
warrants are not included in the computation as their effect would be
antidilutive.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management provides the following forward looking information to the best of
its information and belief as of the time of signing, with no assurance as to
eventual outcome.
Financial Condition and Changes in Financial Condition
The Company had significant other income this quarter. These monies
included payment of $75,000 made pursuant to a letter of intent agreement
entered into with a merger candidate, which requires shareholder approval by
proxy vote prior to consummation of the transaction, and which transaction
also provides for a reverse split of present shareholders' stock and
divestiture of present operations, inter alia. The merger candidate raised
an entity status issue, disclosed prior to siging of the letter of intent,
which the Company has hired outside counsel to resolve. The Company is
moving forward to accomplish its obligations under the agreement, and intends
to hold the merger candidate to its responsibilities thereunder as well.
Although there was a net gain this quarter due to the other income
received, overall there is a significant accumulated deficit which has eroded
stockholders' equity, and as no sales are presently pending, such attrition
may continue through fiscal 2001. The Company had significant sales to
customers in Malaysia and Korea during fiscal 1995, and there appears to be
continued interest in these countries, which could, without assurance, result
in future sales. In addition, the Company had talks with EchoStar during the
present quarter about a potential sale to that entity of one Model 9100
system; however, EchoStar's needs changed so that a sale is not now
presently contemplated.
Since its liquidity was enhanced in fiscal 1984 by a limited offering of
the Company's securities in August, 1983 for net proceeds of $218,055, and an
initial public offering of its common stock for net proceeds of $493,394 on
March 20, 1984, the Company's liquidity has declined due to the initial
expenditures required for research and development, and the time involved in
securing a market for the Company's products. There are no present or
planned commitments for material capital expenditures, and the Company
presently has no material unused sources of liquid assets.
There are continuing inquiries from potential customers regarding the
Company's products, and management believes that marketing efforts by Mr.
Ranniger and by its outside commissioned sales dealer and/or sales
representatives may continue to increase revenues, thus enabling the Company
to sustain operations. Due to the losses sustained by the Company during its
development stage and over the intervening years, the Company's ability to
remain a going concern depends upon its ability to generate sufficient cash
flow to meet its obligations, to obtain additional financing as may be
required, and to continue to increase its product sales. Even though the
Company has previously been unable to obtain outside conventional financing,
it has been able to continue as a going concern due to loans it has received
from officers, in addition to those officers deferring their respective
salaries since January 1987.
Results of Operations
The Company had no sales revenues again this quarter. However, the
Company has seen such highs and lows over the past years that the future is
difficult to project. For instance, although fiscal 1995 revenues were the
second highest annual revenues in the previous five-year period, fiscal 1994
total revenues were among the lowest in the Company's history. The total
revenues for fiscal 1993 were almost nine times as great as those generated
in fiscal 1992, where sales were the lowest in its preceding five year period,
and fiscal 1991 revenues were the highest in the Company's history. As a
result, it is impossible to speculate as to what will happen in fiscal 2001.
Ninety-eight percent of fiscal 1995 revenues, and 100% of fiscal 1994 and
1993 revenues, were generated via sales of the Company's Model 9100 and
related equipment.
The Company has been working to upgrade its Model 9100 system with a new
diode which will increase the transmission power of the system from 1 watt
power input to 1.2 and 2.4 optical power output, thereby increasing the
transmission range to over two miles in normal atmospheric conditions.
In addition, the Company is upgrading the data rate transmission
capabilities of the Model 9100. Presently, the Model 9100-2 is capable of
transmitting communication formats of DS-0 (64 kbps), DS-1 (1.544 mbps), and
the European standard CEPT HDB-3 (2.048 mbps). Upgrades would allow
transmission of additional data rates of OC-1 (51.84 mbps) and OC-2 (155.520
mbps). The present plans to accomplish these upgrades would utilize the same
castings, optics, mounts, and most other hardware, therefore reducing the
cost of the new design while greatly enhancing system features.
Other than the above, the Company does not expect any material changes
in the mix and relative cost of resources. Raw materials were previously
augmented in the anticipation of potential future demand in Asia. As of year
end, there were no finished goods in inventory. Inflation has had no
material effect on the Company's operations over the last three fiscal years.
The Company's current cash requirement for payroll is down to zero, due
to the fact that the Company's only full time employees, Don and Clara
Ranniger, have elected to defer their salaries since January of 1987 in order
to help the Company's cash flow. The Company's former engineering technician
and another technician/consultant are presently available to work as
independent contractors for the Company on an as'needed basis.
Besides pursuing a merger with a potentially profitable candidate, fiscal
2001 operations will continue to concentrate efforts on increasing sales and
production of the Model 9100. However, due to varying economic conditions in
the domestic and world-wide market for this product, sales projections are
difficult to estimate.
Part II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
Not applicable.
Item 3. Defaults upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 5. Other Information.
The Company signed a letter of intent with eSelectives, Inc., a
Delaware corporation, in September, 2000. The consummation of the
transaction contemplated by the letter of intent is subject to approval by
the Company's shareholders. Generally, the letter of intent provides for a
20:1 reverse split of present shareholder stock in connection with a share
for share exchange to acquire eSelectives. eSelectives will pay at least
$50,000 toward expenses and will also satisfy wage claims by payment of
$200,000 plus 381,000 of 10 million shares issued through an SB2 application
and spinout of the present Company operations. The letter of intent includes
an anti-dilution provision for any reverse-splits, mergers, stock for stock
exchanges or other similar transactions for 365 days subsequent to closing
(except for the 20:1 reverse split and the SB2 application for the additional
10 million shares already referenced). $75,000 has already been paid by
eSelectives as required in the letter of intent. Shareholders will receive a
more complete disclosure of all terms and conditions in the proxy mailing,
which has not yet been finalized.
eSelectives has raised an entity status issue, which was disclosed to
them prior to signing of the letter of intent, which the Company has hired
outside counsel to resolve. The Company is moving forward to accomplish
its obligations under the agreement, and intends to hold eSelectives to its
responsibilities thereunder as well.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits. None.
(b) Reports on Form 8-K. An 8-K was filed on 11/2/2000, apprising
shareholders and the public of the entity status issue raised by the merger
candidate. When the resolution is documented and filed, another 8-K will
be filed so advising.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TELECOMMUNICATION PRODUCTS, INC.
by_____________/s/_______________
Donald E. Ranniger, President
[PERIOD-TYPE] 3 MOS
[FISCAL-YEAR-END] MAR-31-2000
[PERIOD-START]
[PERIOD-END] SEP-30-2000
[EXCHANGE-RATE]
[CASH] 45,062
[SECURITIES]
[RECEIVABLES]
[ALLOWANCES]
[INVENTORY] 92,109
[CURRENT-ASSETS] 131,171
<PP & E> 60,222
[DEPRECIATION] 60,222
[TOTAL-ASSETS] 137,171
[CURRENT-LIABILITIES] 692,279
[BONDS] [BLANK]
[PREFERRED-MANDATORY] [BLANK]
[PREFERRED] [BLANK]
[COMMON] 733,768
[OTHER-SE] (1,288,876)
[TOTAL-LIABILITY-AND-EQUITY] (555,108)
[SALES] 0
[TOTAL-REVENUES] 81,578
[CGS] 0
[TOTAL-COSTS] 15,326
[OTHER-EXPENSES] [BLANK]
[LOSS-PROVISION] [BLANK]
[INTEREST-EXPENSE] [BLANK]
[INCOME-PRETAX] 66,252
[INCOME-TAX] [BLANK]
[INCOME-CONTINUING] [BLANK]
[DISCONTINUED] [BLANK]
[EXTRAORDINARY] [BLANK]
[CHANGES] [BLANK]
[NET-INCOME] [BLANK]
[EPS-BASIC] .002
[EPS-DILUTED] [BLANK]
[/TABLE]
