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: December 31, 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
December 31, 2000.
Page 1 of 14 pages
ITEM 1 - FINANCIAL STATEMENTS
TELECOMMUNICATION PRODUCTS, INC.
Balance Sheets
ASSETS
Dec. 31, 2000 March 31, 2000
------------- --------------
(unaudited) (unaudited)
Current assets:
Cash $36,453 $ 184
Inventories (Note 3) 55,176 92,109
Other 0 0
-------- --------
91,629 92,293
-------- --------
Property and equipment, at cost
(Note 7):
Equipment 0 46,446
Office furniture/equipment 0 13,776
-------- --------
0 60,222
Less accumulated depreciation 0 (60,222)
-------- --------
0 0
-------- --------
$ 91,629 $ 92,293
======= ========
See accompanying notes to condensed
financial statements
-2-
TELECOMMUNICATION PRODUCTS, INC.
Balance Sheets
LIABILITIES AND STOCKHOLDERS' EQUITY
Dec. 31, 2000 March 31, 2000
------------- --------------
(unaudited) (unaudited)
Current liabilities:
Accounts payable $ 0 $ 17,859
Accrued expenses
Officers 688,800 651,900
Other 15,779 28,757
-------- --------
Total current liabilities 704,579 698,516
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 (1,346,718) (1,342,796)
-------- --------
Total (612,950) (609,028)
------- -------
$ 91,629 $ 92,293
======= =======
See accompanying notes to condensed
financial statements
-3-
TELECOMMUNICATION PRODUCTS, INC.
Statement of Operations
(Unaudited)
Three months ended Three months ended
Dec. 31, 2000 Dec. 31, 1999
------------------ ------------------
Revenues:
Sales $ 0 $ 0
Other Income (Note 8) (69)
------- -------
(69)
Expenses:
Cost of Sales 0 66
Selling, general and
administrative 4,345 12,540
Write off obsolete inventory
(Note 3) 36,933
------- -------
41,278 12,606
------- -------
Net income (loss) $(41,347) $(12,606)
======== ========
Net Income (loss) per common share $ (.0017) $ (.0005)
======== ========
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)
Nine months ended Nine months ended
Dec. 31, 2000 Dec. 31, 1999
------------------ ------------------
Revenues:
Sales $ 0 $ 0
Other Income (Notes 2 and 8) 81,509 0
------- -------
Expenses:
Cost of Sales 0 66
Selling, general and
administrative 48,498 38,287
Write off obsolete inventory
(Note 3) 36,933
------- -------
85,431 38,353
------- -------
Net income (loss) $ (3,922) $(38,353)
======== ========
Income (loss) per common share $ (.0002) $ (.0017)
======== ========
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)
Nine months ended Dec. 31, 2000
Common stock
---------------------- Accumulated
Shares Amount Deficit
-------- -------- -----------
Balance at March 31, 2000 22,492,800 $733,768 ($1,342,796)
Net income (unaudited) (3,922)
---------- -------- ----------
22,492,800 $733,768 ($1,346,718)
========== ======== ==========
See accompanying notes to condensed
financial statements
-6-
TELECOMMUNICATION PRODUCTS, INC.
Statement of Cash Flow
(Unaudited)
Nine Nine
months ended months ended
Dec. 31, 2000 Dec. 31, 1999
------------- -------------
Cash was provided by:
Increase in Accrued Expenses 21,117 36,900
Increase (Decrease) in
Accounts Payable (17,859) 960
Net Loans from Officers 826
Decrease in Inventory 36,933
------- -------
Total Cash Provided 40,191 38,686
------- -------
Cash was used for:
Net loss 3,922 38,353
------- -------
Total Cash Used 36,269 38,353
------- -------
Beginning Cash Balance 184 0
------- -------
Ending Cash Balance $ 36,453 333
======= =======
See accompanying notes to condensed
financial statements
-7-
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, 2000.
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 the
satisfaction of liabilities in the normal course of business. As shown in
the financial statements, during the quarter ended December 31, 2000, the
Company incurred a net loss of 41,278 and, as of that date, the Company has
accumulated a deficit of $1,346,718. 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, will 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. As all property and
equipment has been completely depreciated at this point, an adjustment has
been made to reflect this in the financial statements this quarter; the net
-8-
TELECOMMUNICATION PRODUCTS, INC.
Notes to Condensed Financial Statements
(Unaudited)
(Continued)
effect of this adjustment is -0-. The Company grants a one-year warranty on
parts and labor for all its products, but has historically experienced
minimal warranty claims. Adjustments in the valuation of inventory are
discussed in Note 3, below.
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 December 31, 2000,unpaid compensation claimed
by officers/stockholders totals 688,800.
Long-term debt included a note payable to officers/stockholders 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 last quarter.
3. Inventories
Inventories are recorded at the lower of cost (first-in first-out) or
market and consist of the following:
Dec. 31, 2000 March 31, 2000
------------- --------------
Raw materials $ 55,176 $ 55,176
Work in process -0-* 36,933
Finished goods -0- -0-
-------- --------
$ 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
raw materials component 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.
*The work in process component of the inventory has been written down to -0-
this quarter. It is the opinion of management that the work in process,
which has been in this stage for a number of years, is now obsolete. Any new
systems built will need to reflect the changes in technology necessary for
current market demands, which technology has been substantially developed by
the Company but which the Company has not had the funds to implement in a new
system as of this date.
-9-
TELECOMMUNICATION PRODUCTS, INC.
Notes to Condensed Financial Statements
(Unaudited)
(Continued)
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 December 31, 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.
7. Property and equipment
Depreciation for property and equipment is calculated using the
straight-line method over an estimated useful life of five years. As all
property and equipment has been completely depreciated at this point, and is
in fact so old and/or outdated as to have no current market value in the
opinion of management, an adjustment has been made to reflect this in the
financial statements this quarter; the net effect of this adjustment is -0-.
8. Gross income last quarter was overstated by $69. The correction has been
reflected this quarter.
-10-
TELECOMMUNICATION PRODUCTS, INC.
Notes to Condensed Financial Statements
(Unaudited)
(Continued)
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 in the previous 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 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 the merger candidate to its responsibilities thereunder as
well. The Company has incurred expenses in following through on its
obligations under the letter of intent, which expenses are reflected in this
quarter's financial statements.
There was a net loss this quarter, and overall there is a significant
accumulated deficit which has eroded stockholders' equity. 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 previous 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.
-11-
TELECOMMUNICATION PRODUCTS, INC.
Notes to Condensed Financial Statements
(Unaudited)
(Continued)
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.
However, the new technology has made the present work in process inventory
obsolete, and no monies have been available to start constructing the
upgraded systems at this point.
In addition, the Company is working to upgrade 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
-12-
TELECOMMUNICATION PRODUCTS, INC.
Notes to Condensed Financial Statements
(Unaudited)
(Continued)
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.
Again, no work in process has been started to accommodate these upgrades;
however, raw materials are listed in inventory which could be used for these
new systems.
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.
-13-
TELECOMMUNICATION PRODUCTS, INC.
Notes to Condensed Financial Statements
(Unaudited)
(Continued)
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
381,000 shares 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, disclosed 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.
February 7, 2001 by ______________/s/______________
Donald E. Ranniger, President
(principal financial officer and
chief executive officer)
-14-
TELECOMMUNICATION PRODUCTS, INC.
Notes to Condensed Financial Statements
(Unaudited)
(Continued)