-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TS+HvHubTiLewvpYDKEWieYnnbEv038jJWYuw7qdhK9nMT5YIkrfbFWPJNffl2x0 7mtyoHgNflkteegOyFN6Pg== 0001231742-04-000471.txt : 20040719 0001231742-04-000471.hdr.sgml : 20040719 20040719145659 ACCESSION NUMBER: 0001231742-04-000471 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20040331 FILED AS OF DATE: 20040719 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TELECOMMUNICATION PRODUCTS INC CENTRAL INDEX KEY: 0000725929 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-VIDEO TAPE RENTAL [7841] IRS NUMBER: 840916299 STATE OF INCORPORATION: CO FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10KSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-11882 FILM NUMBER: 04919963 BUSINESS ADDRESS: STREET 1: PO BOX 17013 CITY: GOLDEN STATE: CO ZIP: 80402 BUSINESS PHONE: 3032782725 MAIL ADDRESS: STREET 1: PO BOX 17013 CITY: GOLDEN STATE: CO ZIP: 80402 10KSB 1 doc1.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-KSB ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE YEAR ENDED MARCH 31, 2004 Commission File Number 0-11882 TELECOMMUNICATION PRODUCTS, INC. (Name of Small Business Issuer in its Charter) COLORADO (State or Other Jurisdiction of Incorporation) 84-0916299 (I.R.S. Employer Identification No.) 1926 Hollywood Boulevard, Suite 208,Hollywood Florida, 33020 (Address of principal Executive Offices) ISSUER'S TELEPHONE NUMBER ISSUER'S FACSIMILE NUMBER Tel (954) 620-0208 Fax (954)620-0209 Securities registered under Section 12(b) of the Exchange Act: None ---- Securities registered under Section 12(g) of the Exchange Act: COMMON STOCK-NO PAR VALUE ------------------------- (Title of Class) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or for such shorter periods that the issuer was required to file such reports), and (2) had been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of Issuer's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10 KSB or any amendment to this Form 10-KSB. [X] The issuer's revenues for the year ended March 31, 2004 were $467,477. As of March 31, 2004 there were 74,706,704 shares of Common Stock issued and outstanding. As of March 31, 2004, there were 42,627,554 shares of Common Stock held by non- affiliates. The aggregate market value of the Issuer's common stock held by non-affiliates was $2,131,377 based on the closing price of the Issuer's common stock on March 31, 2004 of $.05. Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X] TELECOMMUNICATION PRODUCTS, INC TABLE OF CONTENTS PART I PAGE NO. ITEM 1 DESCRIPTION OF BUSINESS 2 ITEM 2 DESCRIPTION OF PROPERTY 6 ITEM 3 LEGAL PROCEEDINGS 6 ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 7 PART II ITEM 5 MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 7 ITEM 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION 7 ITEM 7 FINANCIAL STATEMENTS 13 ITEM 8 CHANGES IN DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 24 PART III ITEM 9 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 24 ITEM 10 EXECUTIVE COMPENSATION 26 ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS 26 ITEM 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 27 ITEM 13 EXHIBITS AND REPORTS ON FORM 8-K 30 ITEM 14 CONTROLS AND PROCEDURES 31 PART I ITEM I BUSINESS OVERVIEW The "Company" or "Telpro", is a provider of in-room, on-demand video entertainment and satellite services to the domestic lodging industry. Telpro has a base of approximately 8,000 installed rooms, which consist of contract rights of Hotel Movie Networks with Pay Per View and Cable/Satellite access, and associated Hardware and Peripherals. The purchase of Hotel Movie Network, enabled Telpro to provide in-room video entertainment and information services on several platforms. The Video On Call system allows hotel guests to select, at any time, movies through the television set in their hotel rooms. The PPV S-8 system is a reliable basic Pay Per View system that allow the Company to enter the Mid to Small hospitality market on a cost effective basis. In addition to movies, Telpro's platforms will provide for in-room viewing of select cable channels (such as HBO, Starz Encore, ESPN, CNN and the Disney Channel) and other interactive and information services, which include the capability for high-speed Internet access. Telpro primarily provides its services under long-term contracts to hotel chains, hotel management companies, and individually owned and franchised hotel properties. Telpro offers services predominantly in the smaller franchise hotel categories serving business travelers and other unaffiliated hotels. See "COMPETITION" below and "Management's Discussion and Analysis of Financial Condition and Results of Operations - Business Risks - Dependence on Significant Customers". All of the installed rooms of Hotel Movie Network are located in the United States and its territories. HISTORY Telecommunication Products, Inc. (referred to herein as "Telecommunication Products", the "Company", "Telpro" or "TCPD"), a technological development corporation, was incorporated in Colorado on June 8, 1983. It was administratively dissolved in 1997 and as a part of winding up of its affairs, the directors acting as trustees, entered into a Plan of Merger in 1999 with Telecommunication Products, Inc. a newly formed entity and merged into it and then purchased Interleisure S.A. a privately held Company Incorporated under the laws of the commonwealth of the Dominican Republic. The predecessor business was to act as a developer of data compression technology and video-conferencing software but ventured into other market opportunities. The Company failed in its business efforts prior to 2002. On September, 2002, the Registrant entered into an Letter of Intent with Coast Communications, Inc. for the acquisition of the assets of privately-held Hotel Movie Networks, Inc., a Nevada Corporation domiciled in Mesa, Arizona. Such assets consist of inventory, contracts and contract rights with certain production studios. In January 2003 Telpro purchased a complete inventory of guest entertainment systems from of Omega Funding, Inc. consisting of hardware and peripherals for $100,000 in cash and 1,900,000 shares of common stock. This inventory can supply the necessary hardware for deployment into over 100,000 guest rooms at a savings over the current industry average installation cost per room. In March 2003 the Company entered into an agreement to purchase the assets of Hotel Movie Networks, Inc. ("HMN") this made the Company a supplier of Video On Demand ("VOD") and Satellite Guest Entertainment systems to the mid-market hospitality industry. The purchase included a customer base of over 8,000 rooms through contract rights and gross revenues of approximately $75,000 per month. These contracts consist mainly of "Free-to-Guest" or "Pay-per-Stay" guest services. To satisfy the full value of the acquisition the Company paid $75,000 cash consideration, $75,000 is due and owing and the Company issued 2 million shares of the Company's common stock and agreed to issue 1 million shares of Preferred Series A shares at a par value of $1.00 convertible into common stock and to issue Series B Preferred Stock to fulfill the fair market value of the assets acquired. The transaction closed on August 1, 2003. The acquisition of the assets of Hotel Movie Network, Inc. provided revenue-generating operations and an infrastructure and a network of independent contractors throughout the United States to both service new and existing accounts with its products and services. On November 2003, The Company entered into an agreement with EchoStar and Dish Network which enables the Company to purchase programming at a favorable discount. .. We intend to bring consumers a quality experience through video on demand and through providing traditional cable, satellite and internet access to users of Hotel Movie Network Our web site is www.tellapro.com ---------------- INDUSTRY OVERVIEW The provision of in-room entertainment and information services to the lodging industry includes offering pay-per-view motion pictures, archived television content, games, music, internet connectivity, guest programming of select pay cable channels, and an increasing array of interactive programs and information services. Pay-per-view services were introduced in the early 1970's and have since become a standard amenity offered by many hotels to their guests. Historically, providers of programming to hotels delivered their content on a fixed time schedule that did not provide the hotel guest flexibility in choosing when to watch a movie. Typically, a guest would be offered a choice of four to eight movies, each of which would be shown once every two to four hours. The development of video switches enabled providers of pay-per-view services to offer scheduling flexibility to the viewer. Depending on the type of system installed and the size of the hotel, guests can choose up to 50 different movies with an on-demand system. Changes in technology have also led to the ability to provide a number of on-demand interactive services such as guest folio review, automatic checkout, survey completion, guest messaging, video games, and internet service. The market for in-room entertainment and information is characterized as a highly competitive environment among several industry-dedicated companies and a number of new entrants including cable companies, telecommunications companies, laptop connectivity companies and others. See additional discussion in "Competition" below. .. OUR BUSINESS Manual functions of the equipment and system are limited to changing videocassettes once per month and will be all handled by Telpro's service personnel, who also update the system's movie titles screens. Hotel Movie Network's information system is capable of generating regular reports of guests' entertainment selections, permitting to adjust its programming to respond to viewing patterns. The number of guests that can view a particular movie at the same time varies from hotel to hotel depending upon the popularity of the movie and by providing more copies of the most popular programming titles to the hotels. Increased deployment of high-speed, two-way digital communications capability may enable Telpro to provide more advanced interactive and information features, such as video games, in addition to basic guest services such as video checkout, room service ordering and guest satisfaction surveys. The system also enables hotel owners to broadcast informational and promotional messages and to monitor room availability. For example, in a typical hotel with 200 rooms, the central head-end video rack would consist of approximately 30 videocassette recorders containing up to four copies of the most popular movies and a total of up to 15 different titles. The system includes a computerized in-room on-screen menu that offers guests a list of only those movie selections available to the guest at that time. As a result, even though the on-screen menu may not include a list of all titles available in the particular hotel, the list includes all movies currently available to the guest, thus eliminating the possibility of a guest being disappointed when the guest's selection is not available. Telpro will undertake a significant investment when it installs its system in a hotel property, sometimes rewiring part of the hotel. Depending on the size of the hotel property, the quality of the cabling and antenna system at the hotel, and the configuration of the system installed, the installation cost of a new, on-demand system with movies, guest services, including the head-end equipment averages from approximately $80 to $120 per room. The installation cost of a system with digital content storage is approximately $45 per room higher than the system in the same size hotel. The system can be modified to enable On Call functionality for movies, games, Internet, and guest services at a cost of $280 per room. Video On Call will only be installed in association with videocassette players, rather than digital content storage, in certain markets due to constraints placed on Telpro by most movie studios that provide Telpro with movie content. The Video System will be the Company's primary platform. It consists of a microprocessor controlling the television in each room, and a central video rack and system computer located elsewhere in the hotel. Programming signals originate from videocassette players located within the head-end rack and are transmitted to individual rooms by way of video technology. The system computer controls movie starts automatically. The system computer also records the purchase by a guest of any title and reports billing data to the hotel's accounting system, which posts the charge to the guest's bill. SERVICES Pay-Per-View Movie Services Telpro provides on-demand and, in some cases, scheduled in-room television viewing of major motion pictures and independent non-rated motion pictures for mature audiences, for which a hotel guest pays on a per-view basis. Depending on the type of system installed and the size of the hotel, guests can choose up to 30 different movies with a Video On Call system, or from eight to twelve movies with a scheduled system. Telpro obtained a non-exclusive rights to show recently released motion pictures from major motion picture studios generally pursuant to a master agreement with each studio. The license period and fee for each motion picture are negotiated individually with each studio, which typically receives a percentage of that picture's gross revenues generated by the pay-per-view system. Typically, Telpro obtains rights to exhibit major motion pictures during the "Hotel/Motel Pay-Per-View Window," which is the time period after initial theatrical release and before release for home video distribution or cable television exhibition. Telpro attempts to license pictures as close as possible to the motion pictures' theatrical release date to benefit from the studios' advertising and promotional efforts. Telpro also obtains independent motion pictures, most of which are non-rated and are intended for mature audiences, for a one-time flat fee that is nominal in relation to the licensing fees paid for major motion pictures. Telpro provides service under contracts with hotels that generally provide for a term of five to seven years. Under these contracts, Telpro installs its system into the hotel at Telpro's cost and Telpro retains ownership of all its equipment used in providing the service. Telpro has required the hotels to provide televisions. Telpro's contracts with hotels generally provide that Telpro will be the exclusive provider of in-room, pay-per-view video entertainment services to the hotel and generally permit Telpro to set the movie price. Under certain circumstances, certain hotels may have the right to prior approval of the price increases, which approval may not be unreasonably withheld. The hotels collect movie-viewing charges from their guests and retain a commission equal to a negotiated percentage of the total pay-per-view revenue, which varies in relationship with the size and profitability of the system. Some contracts also require Telpro to upgrade systems to the extent that new technologies and features are introduced during the term of the contract. At the scheduled expiration of a contract, Telpro generally seeks to extend the agreement on terms that are based upon the competitive situation in the market. The revenue which is generated from pay-per-view service is dependent on the occupancy rate at the property, the "buy rate" or percentage of occupied rooms that buy movies or other services at the property, and the price of the movie or service. Occupancy rates vary based on the property's location, its competitive position within the marketplace and, over time, based on seasonal factors and general economic conditions. For instance, occupancy rates and revenues per room typically are higher during the summer months and lower during the winter months due to seasonal travel patterns. Buy rates generally reflect the hotel's guest mix profile, the popularity of the motion pictures or services available at the hotel, and the guests' other entertainment alternatives. Buy rates also vary over time with general economic conditions and the business of Telpro is closely related to the performance of the business and Mid sized hotel segments of the lodging industry. Movie price levels are set based on the guest mix profile at each property and overall economic conditions. Currently, movie prices typically range from $8.95 to $9.95 for a purchase by the hotel guest. Guest Programming Services Telpro also markets guest-programming services pursuant to which a hotel may elect to receive one or more programming channels, such as HBO, CNN, ESPN, TBS, Disney Channel, Discovery Channel, and other cable networks, which the hotel provides to guests at no additional cost. Telpro provides hotels with guest programming services through a variety of arrangements, including having the hotel pay the company a monthly fee per room for each programming channel selected or including the cost or part of the cost of such programming within the Company's overall contractual arrangements with the hotel or hotels. Telpro has a unique contract with each network vendor (approximately 30 vendors, serving 50-60 channels). Payment to network vendors is based on subscriber/room count but also use variables such as the combination of channels received, occupancy, volume, and penetration. The term of the contracts with network vendors average three to five years. SUPPLIERS In some cases Telpro contracts directly with various electronics firms for the manufacture and assembly of its systems hardware. Historically, these suppliers have been dependable and able to meet delivery schedules on time. The Company believes that, in the event of a termination of any of its sources, alternate suppliers could be located without incurring significant costs or delays. However, certain electronic component parts used with the Company's products are available from a limited number of suppliers and can be subject to temporary shortages. In such event, the Company could experience a temporary reduction in the rate of new installations and/or an increase in the cost of such installations. If the Company were to experience a shortage of any given electronic part, the Company believes that alternative parts could be obtained or system design changes could be made. The head-end electronics for the Company's systems is assembled at the Company's facilities for testing prior to shipping. Following assembly and testing of equipment designed specifically for a particular hotel, the system is shipped to each location, where Telpro- employees trained technicians to install the system, typically assisted by independent contractors. Telpro, through its acquisition of Hotel Movie Network, maintains direct contractual relations with various suppliers of pay-per-view and guest programming services, including the motion picture studios and/or their domestic and international distributors and programming networks. Telpro believes its relationships with all suppliers are adequate. SALES AND MARKETING Substantially all revenue is derived from obtaining contracts with hotels in the United States not under contract with existing vendors or whose contracts with other vendors are expiring or have expired. Telpro believes that opportunities for additional growth in the markets in the United States are more limited than in the past. The Company strategy for new customers is target both smaller hotels lower cost hotels as well. Management anticipates that the lower costs and flexibility afforded by the Company's products will make marketing to smaller hotels and some lower cost hotels economically attractive than in the past. CUSTOMERS The Company typically negotiate and enter into a separate contract with each hotel for the services provided. However, for some of the large hotel management companies the Company will negotiate and enter into a single master contract for the provision of services for all of the corporate-managed hotels of such management company. In the case of franchised or independently owned hotels, the contracts are generally negotiated separately with each hotel. Existing contracts generally have a term of five to seven years from the date the system becomes operational. At expiration, Telpro typically seeks to extend the term of the contract on then current market terms. COMPETITION In the U.S., taking into account the various providers of cable television services, there are numerous providers of in-room video entertainment to the lodging industry, and at least two of our competitors, LodgeNet Entertainment Corporation, and Inn Room Video, Inc., provide on-demand pay-per-view, guest programming and guest services by means of in-room television. Internationally, there are more companies competing in the pay-per-view lodging industry than in the United States. Pay-per-view, the most profitable component of the services currently offered, competes for a guest's time and entertainment resources with broadcast television, guest programming, and cable television services. In addition, there are a number of competitors that are developing ways to use their existing infrastructure to provide in-room entertainment and/or information services to the lodging industry, including cable companies (including wireless cable) telecommunications companies, internet and high-speed connectivity companies, and direct-to-home and direct broadcast satellite companies. Some of these competitors have been providing guest programming services to hotels and are beginning to provide video-on-demand, Internet and high-speed connectivity to hotels. Telpro is a competitive provider of in-room video entertainment services to the United States lodging industry. Domestically, Telpro competes with smaller providers for the Mid to Small lodging market. Competition with respect to the provision of in-room video entertainment and information systems centers on a variety of factors, depending upon the circumstances important to a particular hotel. Among the more important factors are (i) the features and benefits of the entertainment and information systems, (ii) the quality of the vendor's technical support and maintenance services, and (iii) the financial terms and conditions of the proposed contract. With respect to hotel properties already receiving in-room entertainment services, the current provider may have certain informational and installation cost advantages compared to outside competitors. Furthermore, while the Company is addressing the likelihood of increased demand for Internet services in the hotel guestroom, Telpro may face additional competition in this area from traditional as well as new competitors. In addition, there are a number of potential competitors that could utilize their existing infrastructure to provide in-room entertainment to the lodging industry, including cable companies (including wireless cable), telecommunications companies, and direct-to-home and direct broadcast satellite companies. Some of these potential customers already are providing guest programming services to hotels and testing on-demand video. Some of these competitors may be better funded from public capital or private venture capitals markets and have access to additional capital resources that Telpro does not have. Telpro believes its competitive advantages include: (i) low price; and (ii) system reliability and high quality service. Telpro may compete with local cable television operators by customizing packages of programming to provide only those channels desired by the hotel subscriber, which typically reduces the overall cost of the service provided. Telpro anticipates substantial competition in obtaining new contracts with major hotel chains. The Company believes that hotels view the provision of in-room on-demand entertainment and information both as a revenue source and as a source of competitive advantage because sophisticated hotel guests are increasingly demanding a greater range of quality entertainment and information alternatives. At the same time, Telpro believes that certain major hotel chains have awarded contracts based primarily on the level and nature of financial and other incentives offered by the service provider. While the Company believes its competitive position could enable Telpro to continue to enter into contractual arrangements that are attractive to hotels, its competitors may attempt to maintain or gain market share at the expense of profitability. Telpro may not always be willing to match incentives provided by its competitors. The communications industry is subject to rapid technological change. New technological developments could adversely effect Telpro's operations unless the Company is able to provide equivalent services at competitive prices. INTERNATIONAL MARKETS In addition to its intended operations in the United States, Telpro may in the future offer its services in Canada, Latin America, Puerto Rico, the U.S. Virgin Islands, Hong Kong, Singapore, Thailand, Australia, the Bahamas, Europe, and elsewhere in the Asia-Pacific region. However, the Company generally would also incur greater capital expenditures and operating and servicing costs outside the United States. The competition to provide pay-per-view services to hotels is greater in international markets than in the United States. Expansion of Telpro's operations into foreign markets involves certain risks that are not associated with further expansion in the United States, including availability of programming, government regulation, currency fluctuations, language barriers, differences in signal transmission formats, local economic and political conditions, and restriction on foreign ownership and investment. Consequently, these risks may hinder Telpro's ability to create any base of hotel rooms in foreign markets. PRODUCTS AND PROJECTS UNDER DEVELOPMENT Telpro will be supplying a Point to Point Wireless Local Loop internet connectivity thorough a WAP (Wireless Access Point) technology which will connect the Hotel and MDU Properties to a new in room system for Lap Top & Computer users and will launch a new set top box and handheld remote control for the Televisions. These products will enable guests a large variety of in room Digital Services from making airline reservations, ordering pizza, transportation services along with delivery of Hollywood movies, Sports & Live Events, and distinct genres of Pay Per View content. ITEM 2. DESCRIPTION OF PROPERTY Our principal executive office address was 9171 Wilshire Boulevard, Suite B, Garden Level, Beverly Hills, California 90120. We lease our facilities month to month. Our rent expense was $12,000 for the year ended March 31, 2004. In April 2004 we relocated to Our principal office to 1926 Hollywood Boulevard, Suite 208, Hollywood Florida, 33020 The facilities are of adequate size to allow us to grow to approximately 4 people, after which time we will need to seek larger space. Our month-to-month agreement will allow us flexibility in moving as we employ more personnel. We took over a lease through the acquisition of Hotel Movie Network. The facilities are located at 1030 S. Mesa Drive, Mesa, Arizona 85210. These premises have 30,000 square feet of storage and 5,000 square feet of offices and work shops. We believe these facilities are adequate in size to handle all operations the United States and the Caribbean for the foreseeable future. ITEM 3. LEGAL PROCEEDINGS We settled the lawsuit filed by John M. Brazier against us, our transfer agent and Mr. Russell filed in May 2003 in the District Court of Denver in the state of Colorado. The settlement terms require us to issue Mr. Brazier 770,000 shares of our common stock and warrants to purchase an additional 2 million shares of our common stock at $0.15 per share. Additionally, we will pay Mr. Brazier $177,500 in cash. We have already issued the shares to Mr. Brazier. We are obligated to pay the cash from the Equity Line we have in place. In July 2003, we were served with a lawsuit from William B. Krusheski in United States District court for Southern District of California. The complaint seeks in excess of $75,000 on a note allegedly due and $135,000 in other compensatory damages. In April 2004 the Company entered into a settlement agreement with incremental cash payments totaling $100,000 payable over the course of 4 months beginning May 15, 2004. In March 2004 Mr. Dennis H. Johnston a former Director and General Counsel filed a lawsuit in the state of CaliforniaWe believe the law suit filed by Mr. Johnston is frivolous and we have to date responded with a motion to strike and a motion for demurrer. Other than the legal matters disclosed above, we are not aware of any litigation or potential litigation affecting us or our assets. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to a vote of security holders during the year ended March, 2004. PART II ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Our common stock began trading on the Over-The-Counter Bulletin Board under the symbol "TCPD" on November 10, 2001. Prior to November 10, 2001, our common stock was quoted under the symbol "TLCR." The following table sets forth the high and low bid prices for shares of our common stock for the periods noted, as reported by the National Daily Quotation Service and the Over-The-Counter Bulletin Board. Quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.
LOW HIGH --- ---- 2003 - ---- First Quarter .14 .55 Second Quarter .02 .22 Third Quarter .23 .50 Fourth Quarter .26 .44 2004 - ---- First Quarter .15 .21 Second Quarter .04 .16 Third Quarter .04 .13 Fourth Quarter .04 .12
As of March 31, 2004, our common stock was held by approximately 326 stockholders of record. We believe that the number of beneficial owners is substantially greater than the number of record holders because a significant portion of our outstanding common stock is held of record in broker "street names" for the benefit of individual investors. The transfer agent of our common stock is Manhattan Transfer Registrar Company. Their phone number is (631) 585 7341 DIVIDEND POLICY Our Board of Directors determines any payment of dividends. We do not expect to authorize the payment of cash dividends on common stock in the foreseeable future. Any future decision with respect to dividends will depend on future earnings, operations, capital requirements and availability, restrictions in future financing agreements, and other business and financial considerations. The Preferred Stock when authorized with rights and privileges could require dividends. The Company has not paid any dividends in the past several years. RECENT SALES OF UNREGISTERED SECURITIES. (a) During the first and second quarter of the fiscal year the Registrant received monies from an individual totaling $120,000 the Registrant agreed to convert the Note to equity and issued 4,000,000 shares of common stock. (b) In April 2003 the Registrant issued 2,000,000 shares of common stock for the Acquisition of Hotel Movie Network. (c) In September 2003 the Registrant sold 2,400,000 shares of its common stock at $.04 a share for a total of $96,000. (d) In November 2003 the Registrant received a loan from an investor in the amount of $40,000 in February the Company agreed to convert the Note to equity and issued 2,000,000 shares of common stock. (e) In December 2003 the Registrant issued 770,000 shares of common stock for litigation settlement Brazier v Telecommunication Products, Inc./ Russell. (f) In March 2004 the Registrant Issued 8,300,000 shares of common stock for past consideration. (g)During the fiscal year the Registrant issued 8,812,087 shares of common stock for executive compensation. (h) During the fiscal year the Registrant issued 1,081,094 shares of common stock for employees' salary. (i) During the fiscal year the Registrant issued options exercised from stock equity plan totaling 1,000,000 shares of common stock (j) During the fiscal year the Registrant issued 11,962,188 shares of common stock for services rendered to 7 consultants. In addition there are warrants issued but not exercised 4,400,000 at 0.4cents and 4,400,000 at 0.8 cents 2,000,000 at 0.15 cents. Equity Compensation Plans The Company amended the "Telecommunication Products, Inc. Non-Employee Directors and Consultants Retainer Stock Plan" during our fiscal year ended March 31, 2003. The purpose of the plan is to enable Telecommunication Products to promote the interests of the Company and its shareholders by attracting and retaining non-employee directors and consultants capable of furthering the future success of the Company and by aligning their economic interests more closely with those of the Company's shareholders, by paying their retainer or fees in the form of shares of the Company's common stock. In the period ended March 31, 2004, pursuant to agreements for past and future services, we issued 4 individuals a total of 3,000,000 shares of common stock pursuant to this plan. We also created the Telecommunication Products, Inc. Stock Incentive Plan during the fiscal year ended March 31, 2002. This plan is intended to allow designated directors, officers, employees, and certain non-employees to receive certain options to purchase our common stock, and to receive grants of common stock subject to certain restrictions. The maximum number of shares of common stock that may be issued pursuant to the plan is 1,000,000 shares. The purpose of this Plan is to provide employees with equity-based compensation incentives to make significant and extraordinary contributions to the long-term performance and growth of the Company, and to attract and retain Employees of exceptional ability. We have issued 1,000,000 options pursuant to this plan.
Equity Compensation Plan Information ------------------------------------ Number of securities remaining available for future issuance under Number of securities to Weighted-average equity compensation be issued upon exercise exercise price of plans (excluding of outstanding options, outstanding options, securities reflected in warrants and rights warrants and rights column (a)) Plan category (a) (b) (c) --------------------------------------------------------------------------------------------------------- Equity compensation plans approved by security holders -- -- -- - ---------------------------------------------------------------------------------------------------------- Equity compensation plans not approved by security holders 7,950,000 1,000,000 50,000 - ---------------------------------------------------------------------------------------------------------- Total 7,950,000 1,000,000 50,000 - ----------------------------------------------------------------------------------------------------------
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION You should read this section together with our consolidated financial statements ---- and related notes thereto included elsewhere in this report. CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS This report contains forward-looking statements that involve risks and uncertainties. We generally use words such as "believe," "may," "could," "will," "intend," "expect," "anticipate," "plan," and similar expressions to identify forward-looking statements, including statements regarding our expansion plans. You should not place undue reliance on these forward-looking statements. Our actual results could differ materially from those anticipated in the forward-looking statements for many reasons, including the risks described in our "Risk Factor" section and elsewhere in this report. Although we believe the expectations reflected in the forward-looking statements are reasonable, they relate only to events as of the date on which the statements are made, and our ---- future results, levels of activity, performance or achievements may not meet these expectations. We do not intend to update any of the forward-looking ---- statements after the date of this document to conform these statements to actual ---- results or to changes in our expectations, except as required by law. CRITICAL ACCOUNTING POLICIES Accounts receivable - The Company follows the allowance method of recognizing uncollectible accounts receivable. The allowance method recognizes bad debt expense as a percentage of accounts receivable based on a review of accounts receivable outstanding and the Company's prior history of uncollectible accounts receivable. Fair value of financials instruments - The Company's financial instruments includes accounts receivable, accounts payable, notes payable and long-term debt. The fair market value of accounts receivable and accounts payable approximate their carrying values because their maturities are generally less than one year. Long-term notes receivable and debt obligations are estimated to approximate their carrying values based upon their stated interest rates. Inventories - Inventories are stated at the lower of cost (first-in, first-out) or market. Property and equipment - Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is provided primarily by the straight-line method over the estimated useful lives of the related assets generally of five to seven years. Income taxes -The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes", which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed annually for differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce the deferred tax assets to the amount expected to be realized. Income tax expense is payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities. Revenue recognition - The Company's revenues are derived principally from the sale of satellite systems and pay-per-view movies to hotels. Revenue from the sale of satellite systems is recognized after the system has been installed, and there are no longer any material commitments to the customer. The Company recognizes revenue from the pay-per-view movies on the accrual basis. The Company bills its customers for the month that services are performed. GOING CONCERN OPINION Our audited financial statements for the fiscal year ended March 31, 2004, reflect a net loss of $(2,221,318). Although these conditions raised substantial doubt about our ability to continue as a going concern we Have access the Equity Line of Credit provided by Dutchess Private Equities Fund. We believe proceeds from this offering should enable us to profitability. TWELVE MONTH PERIOD ENDED MARCH 31, 2004 AS COMPARED TO TWELVE MONTH PERIODS ENDED MARCH 31, 2003 NET REVENUES - ------------- Net revenues for the year ended March 31, 2004 were $467,477 compared to none for the year ended March 31, 2003 . Our revenues are higher than the same period a year ago due to the acquisition of Hotel Movie Network. COST OF REVENUES - ------------------ Cost of revenues for the year ended March 31, 2004 were $222,183 compared to none for the year ended March 31, 2003. Our Cost of Revenue increased due to the acquisition of Hotel Movie Network. OPERATING EXPENSES - ------------------ Operating Expenses for the year ended March 31, 2004 were $2,688,796 compared to $812,410 for the year ended March 31, 2003 due to the issuance of shares of common stock recorded as $1,177,000 for consulting fees and $632,000. for the issuance of common stock and executive compensation recorded as an expense. OTHER INCOME - ---------------------- Other Income for the year ended March 31, 2004 were none compared to $385,935 for the year ended March 31, 2003. The decrease on Other Income is due to write off of liabilities of prior operating activities in 2003 with no such write off in 2004. NET LOSS - --------- Net Loss for the year ended March 31, 2004 was ($2,221,318) compared to ($426,475) for the year ended March 31, 2003 due to increased operating expenses for the year ended March 31, 2004 compared to the year ended March 31, 2003. BASIC AND DILUTED LOSS PER SHARE - ------------------------------------- Our basic and diluted loss for the year ended March 31, 2004 was ($.048) compared to ($015.) for the year ended March 31, 2003 due to an increase of our Net Loss. LIQUIDITY AND CAPITAL RESOURCES - ---------------------------------- As of March 31, 2004, our Current Assets were $1,432,863 and Current Liabilities were $822,550 Cash and cash equivalents were $1,093. Our Stockholder's Deficit at March 31, 2004 was ($595,643). We had a net usage of cash due to operating activities in March 31, 2004 and 2003 of ($272,851) and ($549,995) respectively. We had net cash provided by financing activities of $342,719 and $549,995 for the twelve month period ended March 31, 2004 and 2003, respectively. We received the following cash loans from unrelated parties all of which were converted to equity: $120,000.00 June, 2003 $ 96,000.00 August, 2003 $ 40,000.00 November, 2003 We received a loan of $20,000.00 from Dutchess Private Equity Fund, L.P. with a face value of $25,000.00 which was repaid. Our obligations include: A Promissory note $1,000,000 payable based on the purchase agreement of our subsidiary; Hotel Movie Network which pays 7.5% per annum. We settled the lawsuit filed by John M. Brazier against us, our transfer agent and Mr. Russell filed in May 2003 in the District Court of Denver in the state of Colorado. We are obligated to pay $177,500. We defaulted on a note dated January, 2003 in the name of Mr. William Krusheski but payment was subject to the approval of an SB2 registration. We are in the process of making payments with funding from a financing institution. The amount outstanding on March 31, 2004, amounted to $100,000 We are obligated to repay Mr. Richard Valdez' initial investment in the Company of $25,000.00 plus $12,500.00 interest. For a total of $37,500.00 We are obligated to repay Mr. Brian Shanklin's investment in the company of $17,500.00 Investment Agreement We have entered into an Investment Agreement with Dutchess Private Equities Fund, L.P. also referred to as an Equity Line of Credit. This agreement provides that, following notice to Dutchess, we may put to Dutchess up to $5 million in shares of our common stock for a purchase price equal to 94% of the lowest closing bid price on the Over-the-Counter Bulletin Board of our common stock during the 5 day period following that notice. The number of shares that will be permitted to put pursuant to the Investment Agreement will be either: (A) 200% of the average daily volume in the U.S. market of the common stock for the 20 trading days prior to the notice of our put, multiplied by the average of the three daily closing bid prices immediately preceding the date of the put, or (B) $10,000. No single put can exceed $1,000,000. We believe our Investment Agreement with Dutchess will be sufficient to fund operations and capital requirements as presently planned over the next 12 months. We are also pursuing additional funds through either debt or equity instruments. We may also pursue a working capital line of credit to be secured by assets. However, such funds may not be available on favorable terms or at all. As of March 31, 2004 the Company has put 2,711,559 shares totaling $141,069. RISK FACTORS An investment in our common stock involves a high degree of risk. You should carefully consider the following risk factors, other information included in this prospectus and information in our periodic reports filed with the SEC. If any of the following risks actually occur, our business, financial condition or results of operations could be materially and adversely affected, and you may lose some or all of your investment. RISKS ABOUT OUR BUSINESS OUR INDEPENDENT ACCOUNTANTS HAVE ISSUED A GOING CONCERN OPINION. Our audited financial statements for the fiscal year ended March 31, 2004, reflect a net loss of ($2,221,318). These conditions raised substantial doubt about our ability to continue as a going concern. if we do not acquire sufficient additional funding or alternative sources of capital to meet our working capital, we may have to substantially curtail our operations and business plan. WE HAVE SUBSTANTIAL INDEBTEDNESS WHICH MAY AFFECT OUR ABILITY TO MAINTAIN OR GROW OUR OPERATIONS. We currently have $822,550 in current liabilities. As a result of our level of debt and the terms of our debt instruments: - - our vulnerability to adverse general economic conditions is heightened; - - we will be required to dedicate a substantial portion of our cash flow from operations to repayment of debt, limiting the availability of cash for other purposes; - - we are and will continue to be limited by financial and other restrictive covenants in our ability to borrow additional funds, consummate asset sales, enter into transactions with affiliates or conduct mergers and acquisitions; - - our flexibility in planning for, or reacting to, changes in its business and industry will be limited; and - - our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions, general corporate purposes or other purposes may be impaired. Our ability to pay principal and interest on our indebtedness and to satisfy our other debt obligations will partly depend upon our future operating performance, which will be affected by prevailing economic conditions and financial, business and other factors, some of which are beyond our control. If we are unable to service our indebtedness, we will be forced to take actions such as reducing or delaying capital expenditures, selling assets, restructuring or refinancing our indebtedness, or seeking additional equity capital. We may not be able to affect any of these remedies on satisfactory terms, or at all. OUR OPERATING RESULTS WILL FLUCTUATE SIGNIFICANTLY FOR THE FORESEEABLE FUTURE, WHICH MAY AFFECT OUR STOCK PRICE. Our quarterly results of operations have varied in the past and are likely to continue to vary significantly from quarter to quarter. Our operating expenses are based on expected future revenues and are relatively fixed in the short term. If our revenues are lower than expected, our results of operations could be adversely affected. Additionally, we are unable to forecast our future revenues with certainty because our business plan contemplates the acquisition of new enterprises. Many factors can cause our financial results to fluctuate, some of which are outside of our control. Quarter-to-quarter comparisons of our operating results may not be meaningful and you should not rely upon them as an indication of our future performance. In addition, during certain future periods our operating results likely will fall below the expectations of public market analysts and investors. In this event, the market price of our common stock likely would decline. WE NEED ADDITIONAL CAPITAL TO GROW OUR BUSINESS AND WE MAY NOT BE ABLE TO FIND SUCH CAPITAL ON ACCEPTABLE TERMS. Our business plan contemplates the acquisition of new enterprises and the proceeds from our existing financing arrangements may not be sufficient to fully implement our business plan. Additionally, we may not be able to generate sufficient revenues from our existing operations to fund our capital requirements. Accordingly, we may require additional funds to enable us to operate profitably. Such financing may not be available on terms acceptable to us. We currently have no bank borrowings or credit facilities, and we may not be able to arrange any such debt financing. Additionally, we may not be able to successfully consummate additional offerings of stock or other securities in order to meet our future capital requirements. If we cannot raise additional capital through issuing stock or bank borrowings, we may not be able to grow our business. OUR BUSINESS STRATEGY INCLUDES IDENTIFYING NEW BUSINESSES TO ACQUIRE, AND IF WE CAN NOT INTEGRATE ACQUISITIONS INTO OUR COMPANY SUCCESSFULLY, WE MAY NOT BECOME PROFITABLE. Our success partially depends upon our ability to identify and acquire undervalued businesses. Although we believe that there are companies available for potential acquisition that are undervalued and might offer attractive business opportunities, we may not be able to make any acquisitions, and if we do make acquisitions, they may not be profitable. WE DEPEND ON OUR KEY PERSONNEL AND IF THOSE PERSONNEL LEAVE THE COMPANY, OUR BUSINESS MAY BE HARMED. At this time, we are almost totally dependent upon our directors and officers of Telecommunication Products Inc. our only business asset that is producing significant revenues. While we have an employment agreement with Mr. Russell, it does not obligate him to remain as our Chief Executive Officer. We do not maintain insurance on the lives of our officers, directors or key employees. The loss of their services would have a material adverse effect on our business. We elect our directors each year and while we expect to reelect our directors currently on the Board, our directors are not obligated to continue in their positions. SOME OF OUR POTENTIAL FUTURE GROWTH DEPENDS ON INCREASING CUSTOMER ACCEPTANCE OF THE METHOD IN THE DELIVERY OF PROGRAMMING, AND TO THE EXTENT THAT SUCH ACCEPTANCE FAILS TO INCREASE, WE MAY NOT GROW OUR BUSINESS. While the majority of our revenues are currently derived from the delivery of programming and Pay Per View services, we believe that the introduction of new technology and digital delivery will attract new potential customers. We have begun to enter the Pay Per View marketplace and believe this Industry could lead to future growth for our company. The Pay Per View industry has historically experienced a dramatic rate of growth both in the United States and internationally. If the rate demand should slow down we may not be able to expand our business. OUR INDUSTRY HAS RAPIDLY CHANGING TECHNOLOGY AND, IF WE DO NOT STAY CURRENT, WE MAY LOSE CUSTOMERS AND OUR BUSINESS WILL BE HARMED. The Pay Per View industry and related technology business involve a broad range of rapidly changing technologies. Our technologies may not remain competitive over time, and others may develop technologies that are superior to ours which may render our products non-competitive. Our business may depend on trade secrets, know-how, continuing innovations and licensing opportunities to develop and maintain our competitive position. Others may independently develop equivalent proprietary information or otherwise gain access to or disclose our information. Our confidentiality agreements on which we rely may not provide meaningful protection of any trade secrets on which we may depend for success, or provide adequate remedies in the event of unauthorized use or disclosure of confidential information or prevent our trade secrets from otherwise becoming known to or independently discovered by our competitors. ITEM 7. FINANCIAL STATEMENTS Telecommunication Products, Inc. Financial Statements March 31, 2004 Contents Page Independent Auditor's Report F-1 Financial Statements Balance Sheets F-2 Statements of Operations F-3 Statements of Stockholders' Equity F-4 Statements of Cash Flows F-5 Notes to Financial Statement F-6 to F-10 Larry O'Donnell, CPA, P.C. Telephone (303) 745-4545 2228 South Fraser Street Unit 1 Aurora, Colorado 80014 Board of Directors Telecommunication Products, Inc. Beverly Hills, California I have audited the accompanying balance sheet of Telecommunication Products, Inc. as of March 31, 2004 and the related statements of operations, stockholders' equity and cash flows for the two years then ended This financial statement is the responsibility of the Company's management. My responsibility is to express an opinion on this financial statement based on my audits. I conducted my audit in accordance with generally accepted auditing standards in the United States of America. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are 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. I believe that my audits provide a reasonable basis for my opinion. In my opinion, based on my audits and the report of other auditors, the financial statements referred to above fairly present in all material respects, the financial position of Telecommunication Products, Inc as of March 31, 2004 the results of its operations and cash flows for the two years then ended and in conformity with generally accepted accounting principles in the United States of America. As discussed in Note 11 to the financial statements, the value off common stock issued for inventory was overstated resulting in overstatement of previously reported inventories as of March 31, 2003, which were restated during the current year. 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's significant operating losses raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ Larry O'Donnell, CPA, P.C. - ----------------------------- Larry O'Donnell, CPA, P.C. July 1, 2004 F-1
Telecommunication Products, Inc. Balance Sheets March 31, March 31, 2004 2003 ----------- ---------- Assets Current Assets Cash $ 1,093 Accounts receivable 60,404 Inventories 1,371,366 $100,000 ----------- -------- Total current assets 1,432,863 100,000 ----------- -------- Property and equipment Hotel equipment 622,805 Office furniture and equipment 448,698 36,974 Leasehold improvements 28,300 ----------- -------- 1,099,803 36,974 Less accumulated depreciation 867,080 17,868 ----------- -------- 232,723 19,106 ----------- -------- $1,665,586 $119,106 ========== ========= Liabilities and Stockholders' Equity Current Liabilities Accounts payable and accrued expenses $532,550 $145,137 Related party loans payable 215,000 162,500 Loans payable 42,000 Bond payable 75,000 75,000 ----------- -------- Total current liabilities 822,550 424,637 ----------- -------- Convertible notes payable 1,438,678 ----------- -------- Commitments and contingency Stockholders' Equity Preferred stock, no par value, 50,000,000 shares authorized, 800,000 shares issued and outstanding 800,000 800,000 Common stock, no par value, 100,000,000 shares authorized, 74,706,704 and 30,723,805 respectively shares issued and outstanding 3,638,451 1,707,244 Accumulated deficit (5,034,093) (2,812,775) ----------- ---------- (595,642) (305,531) ----------- ---------- $1,665,586 $119,106 ========== ========= See Notes to Financial Statements F-2
Telecommunication Products, Inc. Statements of Operations Year ended March 31, --------------------- 2004 2003 Revenues $ 467,477 ---------- Expenses Cost of sales 222,183 General and Administrative Expenses 2,385,648 $ 787,910 Research and Development 24,500 Interest 80,965 ---------- --------- Operating Expenses 2,688,796 812,410 Other income - Writeoff of Liabilities 385,935 ---------- ----------- Net Income (Loss) $(2,221,319) $ (426,475) ============ ========== Basis and Diluted Earnings (Loss) Per Share $(.048) $(.015) ======= ====== Weighted average shares out- standing 46,485,000 27,062,000 See Notes to Financial Statements F-3
Telecommunication Products, Inc. Statement of Stockholders' Equity Years Ended March 31, 2004 and 2003 Common Stock Preferred Stock Accumulated Total Shares Amount Shares Amount Deficit Balance, March 31, 2002 25,873,800 $1,234,744 $(2,386,300) $(1,151,556) Issuance of common stock for services at $.15 per sharebased on value of services performed . . . . . . 1,950,000 292,500 292,500 Common stock issued for inventory at no value per share . . . . . . .. . 1,900,000 Conversion of debt . . . 1,000,000 180,000 800,000 800,000 980,000 Net loss for the year. . . . (426,475) (426,475) Balance, March 31, 2003. .30,723,800 $1,707,244 800,000 $800,000 $(2,812,775) $305,531 Issuance of common stock for Hotel Movie Network 2,000,000 Issuance of common stock for services based on value of services performed . .21,855,369 1,384,738 1,384,738 Issuance of common stock As collateral for debt . 2,000,000 Common stock issued for cash . . . . . . . . . . . 3,711,559 259,669 259,669 Issuance of common stock for debt . 8,400,000 256,000 256,000 Issuance of common stock for past considerations 8,300,000 Issance of common stock for Litigation settlement 770,000 30,800 30,800 Common stock returned (3,054,029) Net loss for the period. . (2,221,319) (2,221,319) Balance, March 31, 2004. 74,706,704 $3,638,451 800,000 $800,000 $(5,034,093) $(595,642) See Notes to Financial Statements
F-4
Telecommunication Products, Inc. Statements of Cash Flows ------------------------------- Years ended March March 31, 2004 2003 Cash Flows from Operating Activities Net income (loss). . . . . . . . . . . . $(2,221,318) $(426,475) Adjustments to reconcile net income to net cash from operating activities Depreciation . . . . . . . . . . . . . 99,565 6,924 Stock issued for Services. . . . . . . . . . . . . . . . 1,415,538 292,500 Write off of Liabilities . . . . . . . . . . . . . (385,935) Decrease (increase) in: Accounts receivable . . . . . . . . . . 36,643 112,305 Inventory . . . . . . . . . . . . . . . 11,794 (100,000) Other assets. . . . . . . . . . . . . . 60,812 Increase (decrease) in: Accounts payable and accrued expenses. . . . . . . . . . . . . . . . 384,927 (110,126) ----------- ----------- Net cash provided (used) By operating. . . . . . . . . . . . . (272,851) (549,995) ------------ ---------- Cash Flows From Investing Activities Acquisition of property And equipment . . . . . . . . . . . . . (2,059) Acquisition Home Movie Network, Inc. net of cash acquired . . . . . . . (66,716) ----------- ---------- Net cash provided (used) in investing activities. . . . . . . . . . . . . . . (68,775) (36,974) ----------- ---------- Cash Flows From Financing Activities Increase in bond payable. . . . . . . . . . . . . . 75,000 Increase in loans payable . . . . . . . . . . . . . 83,050 294,995 Proceeds from sale of stock . . . . . . . . . . . . 259,669 180,000 Contribution of Capital . . . . . . . . . . . . . . . . --------- --------- Net cash used by financing Activities. . . . . . . . . . . . . . . 342,719 549,995 --------- --------- Net increase (decrease) in cash 1,093 Cash, beginning ------- ------- Cash, ending $1,093 ======= ======= Schedule of noncash investing and financing transactions Common stock issued for inventory $ - $ - Amounts Payable Converted To preferred Stock $800,000 Common stock issued For debt 256,000 See Notes to Financial Statements
F-5 Telecommunication Products, Inc. Notes to Financial Statements 1. Summary of significant accounting policies Nature of operations - Telecommunication Products, Inc. (referred to herein as "Telecommunication Products," the "Company" or "Telpro"), a technological development corporation, was incorporated in Colorado on June 8, 1983, The company was established as a developer of data compression technology. With the acquisition of Hotel Movie Networks Inc. provided a revenue-positive operations infrastructure and an extensive network of contractors throughout the United States to both deploy new technology and expand product lines. Operations consist of on going pay-per-view movie rentals from hotel establishments and related services with these hotel establishments. The company previously was a development stage enterprise. Cash and cash equivalents - For purposes of the statement of cash flows, the Company considers all highly liquid debt with original maturities of ninety days or less, to be cash equivalents. Accounts receivable - The Company follows the allowance method of recognizing uncollectible accounts receivable. The allowance method recognizes bad debt expense as a percentage of accounts receivable based on a review of accounts receivable outstanding and the Company's prior history of uncollectible accounts receivable. Fair value of financials instruments - The Company's financial instruments includes accounts receivable, accounts payable, notes payable and long-term debt. The fair market value of accounts receivable and accounts payable approximate their carrying values because their maturities are generally less than one year. Long-term notes receivable and debt obligations are estimated to approximate their carrying values based upon their stated interest rates. Inventories - Inventories are stated at the lower of cost (first-in, first-out) or market. Property and equipment - Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is provided primarily by the straight-line method over the estimated useful lives of the related assets generally of five to seven years. Income taxes -The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes", which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed annually for differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce the deferred tax assets to the amount expected to be realized. Income tax expense is payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities. Use of estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect 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 revenues and expenses during the reporting period. Actual results could differ from those estimates. F-6 Revenue recognition - The Company's revenues are derived principally from the sale of satellite systems and pay-per-view movies to hotels. Revenue from the sale of satellite systems is recognized after the system has been installed, and there are no longer any material commitments to the customer. The Company recognizes revenue from the pay-per-view movies on the accrual basis. The Company bills its customers for the month that services are performed. Stock options - The Company accounts for stock options issued to employees in accordance with APB No.25. The Company has elected to adopt the disclosure requirements of SFAS No.123 "Accounting for Stock-based Compensation". This statement requires that the Company provide proforma information regarding net income (loss) and income (loss) per share as if compensation cost for the Company's stock options granted had been determined in accordance with the fair value based method prescribed in SFAS No. 123. Additionally, SFAS No. 123 generally requires that the Company record options issued to non-employees, based on the fair value of the options. Income (Loss) per share - Basic earnings per share includes no dilution and is computed by dividing net earnings (loss) available to stockholders by the weighted number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the Company's earnings. During the years ended March 31, 2002 and 2001, there were no dilutive securities. Recent accounting pronouncements SFAS No. 149 - In April 2003, the FASB issued Statement of Financial Accounting Standards No. 149 ("SFAS 149"), "Amendment of Statement 133 on Derivative Instruments and Hedging Activities", to provide clarification on the meaning of an underlying, the characteristics of a derivative that contains financing components and the meaning of an initial net investment that is smaller than would be required for other types of contracts that would be expected to have a similar response to changes in market factors. This statement will be applied prospectively and is effective for contracts entered into or modified after June 30, 2003. The statement will be applicable to existing contracts and new contracts relate to forward purchases or sales of when-issued securities or other securities that do not yet exist. The Company does not expect that the adoption of SFAS 149 will have a material effect on the Company's financial statements. SFAS No. 150 - In May 2003, the FASB issued Statement of Financial Accounting Standards No 159 ("SFAS 150"), Accounting for certain financial instruments with characteristics of both liabilities and equity. This statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. This statement will be effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. It is to be implemented by reporting the cumulative effect of a change in an accounting principal for financial instruments created before the issuance date of the statement and existing at the beginning of the interim period of adoption. The Company does not expect that the adoption of SFAS 150 will have material effect on the Company's financial statements. F-7 2. Purchase of assets of Hotel Movie Network, Inc. On March 31, 2003 the Company agreed to purchased of Hotel Movie Network, Inc. The transaction wsas completed August 1, 2003. The acquisition was recorded as a purchase. The Company paid $150,000 and issued the securities. The securities were two million shares of common stock, a promissory note convertible into one million shares of Series A Preferred Stock, and a promissory note convertible for $1,276,809 convertible into an amount of preferred stock which has net to be determined (approximately 1,276,809 shares). The promissory note can be converted into preferred stock at $1per share. The transaction was recorded as follows: Assets purchased from Hotel Movie Network, Inc.:
Cash $ 8,284 Accounts receivable 97,047 Inventory 1,283,160 Property and equipment 161,123 Total assets acquired 1,549,614 Liabilities assumed from Hotel Movie Network, Inc.: Accounts payable and accruals 110,936 Total liabilities assumed 110,936 Net purchase price $1,438,678
The following unaudited pro forma summary presents the results of operations for the year ended March 31, 2004 of the Company as if the business combination had occurred on April 1, 2003.
Revenues $ 720,519 Net income (loss) $2,331,943) Earnings (loss) per share $(.050)
The above amounts are based upon certain assumptions and estimates which the Company believes are reasonable. The pro forma results do not necessarily represent results which would have occurred if the business combination had taken place at the date and on the basis assumed above. In July 2002 two officers of the Hotel Movie Network, Inc. contributed a note receivable valued at $1,898,072 in exchange for the issuance of 25,000,000 shares of common stock. The note consisted of funds due from an entity, which had acquired the pay-per-view operations from the officers. That entity was an unrelated party. The note contributed was valued at its predecessor cost. The note has a collateral clause securing all of the assets of the pay-per-view operations. The note was in default and the Hotel Movie Network, Inc. immediately foreclosed on the note and acquired all of the pay-per-view assets and related liabilities. The assets and liabilities were recorded at the carrying value of the note. F-8 3. Inventories Inventories consist of finished goods. On January 20, 2003 the Company acquired inventory for $100,000 ($95,000 is included in accounts payable) in cash and 1.9 million shares of common stock. 4. Note payable The Company has a promissory note which bears interest at six percent and is unsecured. The note is due September, 2003. If the note is not paid at maturity, the unpaid balance and accrued interest shall bear interest at twelve percent. 5. Bond payable The Company has a bond payable which bears interest at ten percent and is unsecured. The bond is due July, 2003. The Company has the right to extend the bond for another year under the same terms. 6. Preferred stock The Company has 50,000,000 authorized shares of no par value preferred stock with rights and preferences as designated by the board of directors at the time of issuance. The board has designate one million shares as Series A $1 par value of which 800,000 shares have been issued and are outstanding. In order to comply with its requirement to acquire Hotel Movie Network, Inc. the board is planning to designate increase the authorization of its Series A preferred stock and to create a Series B preferred stock. These series shall be entitled to dividends proportionate to common shares that the preferred shares are convertible into common shares. In the event of liquidation, the preferred shares have a preference over the common shares. Series B Preferred Stock may be convertible into restricted shares of Company's common stock commencing two years from the date of issuance at the rate of fifty percent of the total Preferred Shares (50%) per annum at a agreed to value of $2.00 per share for the first year and $3.00 per share for the second year subsequent to the Closing Date. The Company shall have the right to redeem the Series B Preferred Stock at anytime prior to conversion into common stock upon an agreement by all Parties as to the value of said stock. 7. Income taxes There is no provision for income taxes since the Company has incurred net operating losses. Income taxes at the federal statutory rate is reconciled to the Company's actual income taxes as follows:
2004 Federal income tax benefit at statutory rate (34%) $(827,000) $(120,000) State income tax benefit net of federal tax effect (62,000) (11,000) Deferred income tax valuation allowance 889,000 131,000 --------- --------- $ -- The Company's deferred tax assets are as follows: Net operating loss carryforward $1,258,000 $442,000 Valuation allowance (1,258,000) (442,000) ---------- --------- $ -- At March 31, 2004, the Company has net operating loss carryforwards of $3.7 million which may be available to offset future taxable
F-9 8. Litigation In July 2003, we were served with a lawsuit from William B. Krusheski in United States District court for Southern District of California. The complaint seeks in excess of $75,000 on a note allegedly due and $135,000 in other compensatory damages. In April 2004 the Company entered into a settlement agreement with incremental cash payments totaling $100,000 payable over the course of 4 months beginning May 15, 2004. In March 2004 Mr. Dennis H. Johnston a former Director and General Counsel filed a lawsuit in the state of California seeking back salaries and stock for his 2 years of service to the Company. We believe the law suit filed by Mr. Johnston is frivolous and we have to date responded with a motion to strike and a motion for demurrer. 9. Going Concern The Company's financial statements are prepared using generally accepted accounting principles applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has incurred losses from operations which have resulted in an accumulated deficit of $5,034,093 at March 31, 2004, which together raises substantial doubt about the Company's ability to continue as a going concern. The accompanying financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result from the outcome of this uncertainty. Management believes that the Company will generate sufficient revenue and commissions through its licensing agreements and hotel pay-per-view to cover operating expenses in the future, although no assurance of this can be given. The Company also has access the Equity Line of Credit provided by Dutchess Private Equities Fund which management believes will provide the necessary proceeds to continue operations. 10. Restatement of value of common stock to acquire inventory On October 15, 2003 management revalued 1.9 million shares of common stock which had been issued to acquire inventory from $1 per share to no value per share. (See note 3). The result was to reduce the value of the inventory to the cash paid . Inventory was reduced b $1.9 million and common stock was also reduced by $1.9 million. 11. Equity line of credit The Company has entered into an Investment Agreement with Dutchess Private Equities Fund L.P., also referred to as an Equity Line of Credit. This agreement provides that, following notice to Dutchess, The Company may put to Dutchess up to $5 million in shares of our common stock for a purchase price equal to 94% of the lowest closing bid price on the Over-the-Counter Bulletin Board of our common stock during the five day period following that notice. The dollar value that we will be permitted to put pursuant to the Investment Agreement will be either: (A) 200% of the average daily volume in the U.S. market of the common stock for the 20 trading days prior to the notice of our put, multiplied by the average of the three daily closing bid prices immediately preceding the date of the put, or (B) $10,000. No single put can exceed $1,000,000. In turn, Dutchess has indicated that it will resell those shares in the open market, resell our shares to other investors through negotiated transactions or hold our shares in its portfolio. This prospectus covers the sale of our stock by Dutchess either in the open market or to other investors through negotiated transactions. The agreement is subject to several conditions including successful registration of the securities. As of March 31, 2004 the Company has put 2,711,559 shares totaling $141,069. F-10 ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
NAME AGE POSITION - ---- --- -------- Robert C. Russell 38 CEO and Director Igor Loginov 44 Chief Technical Officer, Director Marcia A, Pearlstein 45 Interim Chief Financial Officer Corporate Secretary, Director
Robert C. Russell has been our Chief Executive Officer and director since January 2002 and is responsible for managing our overall business affairs. Prior to this, Mr. Russell was President and Chief Executive Officer of Interleisure S.A. from January 1999 to January 2002 when InterLeisure was purchased by Telecommunication Products Inc. Interleisure S.A. was a technology company developing data compression software and systems for the internet market. He is a native of Northern Ireland who attended Damelin College in South Africa, where he obtained a National diploma in financial management. Igor Loginov, PhD has been our Chief Technological Officer since May 2002 and is responsible for the design, development, and deployment of our technology. Prior to this, Mr. Loginov was a Senior Project Manager for Interleisure S.A. from July 2000 until July 2002 when InterLeisure was purchased by Telecommunication Products, Inc. From 1998 to 2000 Mr. Loginov held a role as a Senior Software Engineer for Semantica, Ltd, where he led development of accounting and business software applications. Mr. Loginov has over fifteen years of experience in computer and Internet-related technologies and holds a Doctorate degree in physics obtained from Belarussian State University. Marcia A. Pearlstein has been the Corporate Secretary and Interim Chief Financial Officer since December 21, 2003. Ms. Pearlstein joined Telpro in 2002. A native of the United States she obtained her B.S. and M.B.A. in Business Administration with a concentration in Finance from theUniversity of Pennsylvania graduating Summa Cum Laude. Prior to joining Telpro Ms. Pearlstein worked at an executive placement service in which she was General Manager and Controller over a seven-year period. We terminated Dennis Johnstons employment agreement and removed him from the Board of Directors. That was effective October 1, 2003. SECTION 16(A) REPORTING Section 16(a) of the Securities Exchange Act of 1934 requires the Corporation's executive officers and directors and holders of greater than 10% of our outstanding common stock to file initial reports of their ownership of our equity securities and reports of changes in ownership with the Securities and Exchange Commission. Based solely on a review of the copies of such reports furnished to us and written representations from our executive officers and directors, we believes that all Section 16(a) filing requirements were complied with in the fiscal year ended March 31, 2004. ITEM 10. EXECUTIVE COMPENSATION The following table sets forth certain information regarding our Executive Officers for fiscal years ending March 31, 2004, 2003 and 2002:
SUMMARY COMPENSATION TABLE ANNUAL COMPENSATION Other Annual Restricted Options LTIP Name & Principal Salary Bonus Compen- Stock SARs Payouts All Other Position Year ($) ($) sation ($) awards (#)(1) ($) Compensation - --------------------- --------- ------------ ----------- ------------ -------------- ----------- ------------ -------------- Robert C. Russell, 2003 30,000 300,000 0 0 0 0 0 President 2002 0 0 0 0 0 0 0 2001 0 0 0 0 0 0 0 Marcia, A Pearlstein 2003 0 0 0 0 0 0 0 Secretary, Interim, CFO 2002 0 0 0 0 0 0 0 2001 0 0 0 0 0 0 0 Igor Loginov 2003 0 0 0 0 0 0 0 Chief Technology 2002 0 0 0 0 0 0 0 Officer 2001 0 0 0 0 0 0 0
EMPLOYMENT AGREEMENTS The Company previously entered into formal written employment agreements with Robert Russell, Chief Executive Officer, and Dennis H. Johnston, Legal Counsel and Secretary effective as of January 25, 2002, which provide payments aggregating $125,000 per year. The agreements, were suspended and did not accrue due to lack of revenues and were reinstated on the July 1. 2003. On April 1, 2003 the company entered into formal written employment agreements with Paul la Barre and Ernest Mc Kay related to Hotel Movie Network but such persons are not officers or directors. OPTIONS For our fiscal year ending March 31, 2004, we did not issue options to our executive officers or directors and they did not exercise any options. COMPENSATION OF DIRECTORS We do not currently compensate our directors although the Company intends to do so in accordance with industry standards when cash flow resulting so dictates. There are no stock options, stock grants, plans, LTIPS or Stock Appreciation Rights in which any directors, have participated in the past fiscal year. ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The following table sets forth certain information regarding beneficial ownership of our common stock as of March 31, 2004 (i) by each person who is known by us to beneficially own more than 5% of our common stock; (ii) by each of our officers and directors; and (iii) by all of our officers and directors as a group. Each person's address is c/o Telecommunication Products, 1926 Hollywood Boulevard, Suite 208, Hollywood Fla. 33020.
SHARES BENEFICIALLY OWNED(1) ------------------------- Name and Address of Beneficial Owner Number Percent - ------------------------------------------------------------------- -------------- -------------- Robert C. Russell, President & Chief Executive Officer common 27,339,150 39.0% Preferred 800,000 100.0% Marcia, A, Pearlstein Secretary, Legal Counsel Director common 200,000 .28% Igor Loginou Chief Technology Officer Director common 240,000 .34% Total shares held by officers and directors as a group (3 people): 27,789,150 39.6%
(1) Beneficial Ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Shares of common stock subject to options or warrants currently exercisable or convertible, or exercisable or convertible within 60 days of March 31, 2004 are deemed outstanding for computing the percentage of the person holding such option or warrant but are not deemed outstanding for computing the percentage of any other person. Percentages are based on a total of 74,706,704 shares of common stock outstanding on March 31, 2004. ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS In 2002 we issued 800,000 shares of Preferred Stock to Robert Russell President, CEO and Director in conversion of cash advances he had made to the company. For the year ending March 31 2004 we issued Robert Russell our CEO and president 8,108,238 shares of common stock as Compensation the transaction was expensed at $330,000. For the year ending March 31 2004 we issued Marcia A.Pearlstein our CFO and Secretary 200,000 shares of common stock as Compensation the transaction was expensed at $9,000 For the year ending March 31 2004 we issued Igor Loginau 200,000 shares of common stock as Compensation the transaction was expensed at $9,000 The Company cancelled and returned to treasury 1,054,029 belonging to a former Officer and Director. ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K The following exhibits are included as part of this Form 10-KSB. Reference to "the Company" in this Exhibit List means Telecommunication Products, Inc., a Colorado corporation. ITEM 14. CONTROLS AND PROCEDURES - ------------------------------------ The management of the company has evaluated the effectiveness of the issuer's disclosure controls and procedures as of a date within 90 days prior to the filing date of the report (evaluation date) and have concluded that the disclosure controls and procedures are adequate and effective based upon their evaluation as of the evaluation date. There were no significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of the most recent evaluation of such, including any corrective actions with regard to significant deficiencies and material weaknesses. EXHIBIT NO. DESCRIPTION ----------------------- Number Exhibit Description 1 Agreement between the Registrant and Benchmark securities, Inc., dated January 16, 2003 (including the following exhibits: Exhibit B: Form of Warrant) (the following exhibits have been omitted: Exhibit A: Term Sheet) (see below). 2.1 Asset Purchase Agreement between the Registrant and Omega Funding, Inc., dated January 20, 2003 (incorporated by reference to Exhibit 1 of the Form 8-K filed on January 31, 2003). 2.2 Asset Purchase Agreement between the Registrant and Hotel Movie Network, Inc., dated March 31, 2003 (incorporated by reference to Exhibit 10 of the Form 8-K filed on April 18, 2003). 3.1 Restated Articles of Incorporation (filed as an exhibit to the Company's Form 8-K filed on October 19, 2001 and incorporated by reference herein) 3.2 Bylaws (incorporated by reference to Exhibit 3.2 of the Company's Registration Statement on Form S-18, Registration No. 2-86781-D) 4.1 Non-Employee Directors and Consultants Retainer Stock Plan, dated January 22, 2002 (filed as an exhibit to the Company's Registration Statement on Form S-8 on January 29, 2002 and incorporated by reference herein). 4.2 Employee Stock Incentive Plan, dated January 22, 2002 (filed as an exhibit to the Company's Registration Statement on Form S-8 on January 29, 2002 and incorporated by reference herein) 10.1 Employment Agreement dated January 25, 2002, with Robert C. Russell Incorporated by reference from 10K in dated March 31, 2002, filed July 1, 2002 10.2 Employment Agreement dated January 25, 2002, with Dennis H. Johnston Incorporated by reference from 10K in dated March 31, 2002, filed July 1, 2002 10.3 Consulting Agreement between the Registrant and Herbert Cannon, dated May 27, 2002 10.4 Consulting Agreement between the Registrant and Stephen Boylan, dated September 18, 2002 (incorporated by reference to Exhibit 10.5 Consulting Agreement between the Registrant and Benchmark Securities Group, Inc., dated January 16, 2003 10.6 Consulting Agreement between the Registrant and CSI Partners Ltd. 10.7 Acquisition Agreement between the Registrant and Coast Communications, Inc. dated March 31, 2003 "Incorporated by reference to 8-K filed April 18, 2003" 10.8 Schedule 1 Employment Agreements with Paul La Barre and Ernest McKay; (Incorporated by reference to 8-K filed April 18, 2003) 10.9 and Schedule 2, Promissory notes (Incorporated by reference to 8-K filed April 18, 2003) 10.10 Schedule 3 Security Agreement (Incorporated by reference to 8-K filed April 18, 2003) 10.11 Investment agreement with Dutchess Private Equities Fund, LP dated September 5, 2003. (Incorporated by reference to an 8-K filed September 9, 2003) 10.12 Consulting agreement with Stephen J. Boylan (Incorporated by reference to an S-8 filed on September 19, 2003 10.13 Agreement with EchoStar Satellite Corp. dated November 11, 2003 (Incorporated by reference to a 10-QSB filed on February 23, 2004) 10.14 Consulting agreement with Theodore Smith dated December 16, 2003 (Incorporated by reference to an S-8 plan dated January 16, 2004) 10.15 Consulting agreement with Blaine Group dated December 16, 2003 (Incorporated by reference to an S-8 plan dated January 16, 2004) 10.16 Consulting agreement with Geoffrey Eiten dated January 9, 2004 (Incorporated by reference to an S-8 plan dated January 16, 2004) 10.17 Asset Purchase agreement between the Registrant and Eagle west Communications, Inc. dated April 3, 2004 "Incorporated by reference to 8-K filed April 5, 2004 10.18 Marketing and Services Agreement between the Registrant and InnNovations Multimedia Systems Inc dated April 12, 2004 "Incorporated by reference to 8-K filed April 12, 2004. 10.19 Member interest Purchase agreement between the Registrant and B2Networks, Inc. dated April 23, 2004 "Incorporated by reference to 8-K filed April 23, 2004. 10.20 Consulting agreement with Roger Green dated February 4, 2004 (Incorporated by reference to an S-8 plan dated May 4, 2004 14.1 Code of Ethics 31.1 Section 302 Certification of the Chief Executive Officer. 31.1 Section 302 Certification of the Interim Chief Financial Officer. 32.2 Section 906 Certification of the Chief Executive Officer and Interim Chief Financial Officer REPORTS FILED ON FORM 8-K: Form 8-K filed April 18, 2003 Form 8-K12G3 filed July 7, 2003 Form 8-K filed September 9, 2003 Form 8-K/A filed October 10, 2003 Form 8-K filed April 5, 2004 Form 8-K filed April 16, 2004 Form 8-K filed April 30, 2004 SIGNATURES Pursuant to the requirements of Section 13 and 15 (d) 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. Date: July 16, 2004 By: /S/ Robert C. Russell ----------------------- Robert C. Russell, Chief Executive Officer In accordance with the requirements of the Securities Act of 1933, this registration statement was signed by the following persons in the capacities and on the dates stated. SIGNATURE TITLE DATE - ---------------------- /s/ Robert C. Russell President, Chief Executive Officer July 16, 2004 /s/Marcia A. Pearlstein, Interim Chief Financial officer July 16, 2004 /s/ Igor Loginov, Chief Technical Officer July 16, 2004 34 EX-14.1 2 doc2.txt EXHIBIT 14.1 TELECOMMUNICATION PRODUCTS, INC CORPORATE CODE OF CONDUCT AND ETHICS FOREWORD This Corporate Code of Conduct and Ethics, referred to as the "Code," is intended to provide our associates, as defined below, with an understanding of the principles of business conduct and ethics that are expected of them. The standards set forth in the Code apply to us all. Every associate of Telecommunication Products, Inc. is expected to comply with the Code as a condition of his or her relationship with the company. The term "associate" means every full and part-time employee of the company and its subsidiaries, all members of the company's senior management, including the company's Chief Executive Officer and Chief Financial Officer, and every member of the company's Board of Directors, even if such member is not employed by the company. The Code does not replace the company's existing Employee Handbook. The Code, the Handbook and the other company policies referenced herein set forth our mutual expectations regarding ethical standards and company procedures. The company has made the Code publicly available both on its web site and as an exhibit to its Annual Report on Form 10-K. If any breach of the Code is known to you, you should report violations to the Corporate Compliance Officer (who is our General Counsel) or to any member of the Compliance Committee, as described in more detail below. Reports may be made anonymously and we have adopted a specific non-retaliation policy described herein to protect associates who make reports of potential violations. While it is impossible for this Code to describe every situation that may arise, the standards explained in this Code are guidelines that should govern our conduct. If you have questions regarding the matters that are addressed in the Code, you are urged to consult with the Corporate Compliance Officer, a member of the Compliance Committee, or another member of management. The provisions of the Code regarding the actions the company will take are guidelines which the company intends to follow. There may be circumstances, however, that in the company's judgment require different measures or actions and in such cases it may act accordingly while still attempting to fulfill the principles underlying this Code. I. IMPLEMENTATION OF THE CODE The following questions and answers address the company's implementation of the Code. The company has attempted to design procedures that ensure maximum confidentiality, anonymity, and, most importantly, freedom from the fear of retaliation for complying with and reporting violations under the Code. Q: Who is responsible for administering, updating and enforcing the Code? A: The company's Board of Directors and our a Corporate Compliance Officer will administer, update and enforce the Code. Ultimately, the Board of Directors of the company must ensure that the Corporate Compliance Officer fulfill their responsibilities. The Corporate Compliance Officer has overall responsibility for overseeing the implementation of the Code. The Compliance Committee is comprised of the Corporate Compliance Officer (who is the General Counsel), and the Chairman of the Board of Directors. Q: How can I contact the Corporate Compliance Officer and the Compliance Committee? A: The names and phone numbers of the Corporate Compliance Officer our Chairman of the Board are listed below. Any one of these individuals can assist you in answering questions or reporting violations or suspected violations under the Code. - -------------------------------------------------------------------------------- Robert C. Russell (954) 620-0208 Chief Executive Officer and Corporate Compliance Officer rrussell@tellapro.com - -------------------------------------------------------------------------------- Marcia A. Pearlstein (954) 620-0208 Interim Chief Financial Officer and Corporate Secretary Compliance Committee Member mpearlstein@tellapro.com - -------------------------------------------------------------------------------- II. GENERAL REQUIREMENTS Each associate of the company is expected to be honest in all business dealings and obligations, and to try to ensure: o the ethical handling of conflicts of interest between personal and professional relationships; o accurate, timely and understandable disclosure in the reports required to be filed by the company with the Securities and Exchange Commission and in other public communications made by the company; and o compliance with applicable governmental laws, rules and regulations. III. CONFLICTS OF INTEREST Associates should be cautious in any situation that may involve, or even appear to involve, a conflict between their personal interests and the interests of the company. An actual or potential conflict of interest arises when an associate is in a position to influence a decision that may result in personal gain for that associate or for a relative of that associate as a result of the company's business dealings. For the purposes of this policy, a relative is any person who is related by blood or marriage. In dealings with current or potential customers, suppliers, contractors, and competitors, each associate should act in the best interests of the company to the exclusion of personal advantage. In addition, business dealings with outside firms should not result in highly unusual gains for those firms, such as bribes, unusual price breaks, and other windfalls. Associates are prohibited from any of the following activities which could represent an actual or perceived conflict of interest: o No associate or relative of an associate shall have a significant financial interest in, or obligation to, any outside enterprise which is an actual or potential competitor of the company, without prior approval of the Compliance Committee, or in the case of executive officers or members of the Board of Directors, the full Board of Directors or a committee thereof. o No executive officer or employee, or a relative of an executive officer or an employee, shall serve as a director, officer or in any other management or consulting capacity of any actual competitor of the company. o No director, or a relative of a director, shall serve as a director, officer or in any other management or consulting capacity of any actual competitor of the company, without the prior approval of the full Board of Directors or a committee thereof. o No associate shall engage in activities that are directly competitive with those in which the company is engaged. o No associate shall divert a business opportunity from the company to such individual's own benefit. If an associate becomes aware of an opportunity to acquire or profit from a business opportunity or investment in which the company is or may become involved or in which the company may have an existing interest, the associate should disclose the relevant facts to the Corporate Compliance Officer or a member of the Compliance Committee. The associate may proceed to take advantage of such opportunity only if the company is unwilling or unable to take advantage of such opportunity as notified in writing by the Compliance Committee. o No associate or relative of an associate shall receive any loan or advance from the company, or be the beneficiary of a guarantee by the company of a loan or advance from a third party, other than customary advances or corporate credit in the ordinary course of business or otherwise approved by the Compliance Committee. Please see Section IV.E. below, "Corporate Advances", for more information on permitted corporate advances. In addition, the Audit Committee of the Board of Directors will review and approve, in advance, all related-party transactions, as required by the Securities and Exchange Commission, The Over-the-counter Bulletin Board Market or any other regulatory body to which the company is subject. Each associate should make prompt and full disclosure in writing to the Corporate Compliance Officer or a member of the Compliance Committee of any situation that may involve a conflict of interest. Failure to disclose any actual or perceived conflict of interest is a violation of the Code. IV. PROTECTION AND PROPER USE OF COMPANY ASSETS Proper protection and use of company assets and assets entrusted to it by others, including proprietary information, is a fundamental responsibility of each associate of the company. Associates should comply with security programs to safeguard such assets against unauthorized use or removal, as well as against loss by criminal act or breach of trust. The provisions hereof relating to protection of the company's property also apply to property of others entrusted to it (including proprietary and confidential information). A. Proper Use of Company Property The removal from the company's facilities of the company's property is prohibited, unless authorized by the company. This applies to furnishings, equipment, and supplies, as well as property created or obtained by the company for its exclusive use - such as client lists, files, personnel information, reference materials and reports, computer software, data processing programs and data bases. Neither originals nor copies of these materials may be permanently removed from the company's premises or used for purposes other than the company's business without prior written authorization from the Compliance Committee. The company's products and services are its property; contributions made by any associate to their development and implementation are the company's property and remain the company's property even if the individual's employment or directorship terminates. Each associate has an obligation to use the time for which he or she receives compensation from the company productively. Work hours should be devoted to activities directly related to the company's business. B. Confidential Information The company provides its associates with confidential information relating to the company and its business with the understanding that such information is to be held in confidence and not communicated to anyone who is not authorized to see it, except as may be required by law. The types of information that each associate should safeguard include (but are not limited to): o account balances, o customer finances and credit, o anticipated changes in management, o patents, o new products under development, o compensation data, o customer lists, o customer preferences, o company financial information, o marketing strategies, o new materials research, o pending projects and proposals, and o all other sensitive information regarding company affairs. These are costly, valuable resources developed for the exclusive benefit of the company. Each associate is reminded to review the terms of his or her "Confidentiality, Inventions and Non-Solicitation Agreement" which each associate of the company was required to sign as a condition of his or her employment or engagement by the company. C. Accurate Records and Reporting Under law, the company is required to keep books, records and accounts that accurately reflect all transactions, dispositions of assets and other events that are the subject of specific regulatory record keeping requirements, including generally accepted accounting principles and other applicable rules, regulations and criteria for preparing financial statements and for preparing periodic reports filed with the Securities and Exchange Commission. All company reports, accounting records, sales reports, expense accounts, invoices, purchase orders, and other documents should accurately and clearly represent the relevant facts and the true nature of transactions. Reports and other documents should state all material facts of a transaction and not omit any information that would be relevant in interpreting such report or document. No payment on behalf of the company may be approved or made with the intention, understanding or awareness that any part of the payment is to be used for any purpose other than that described by the documentation supporting the payment. In addition, intentional accounting misclassifications (e.g., expense versus capital) and improper acceleration or deferral of expenses or revenues are unacceptable reporting practices that are expressly prohibited. The company has developed and maintains a set of disclosure controls and procedures to ensure that all of the information required to be disclosed by the company in the reports that it files or submits under the Securities Exchange Act is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission's rules and forms. Associates are expected to be familiar with, and to adhere to, these internal controls and disclosure controls and procedures. Responsibility for compliance with these internal controls and disclosure controls and procedures rests not solely with the company's accounting personnel, but with all associates involved in approving transactions, supplying documentation for transactions, and recording, processing, summarizing and reporting of transactions and other information required by periodic reports filed with the Securities and Exchange Commission. Any associate who believes the company's books and records are not in accord with these requirements should immediately report the matter to the Corporate Compliance Officer or a member of the Compliance Committee. The company has adopted explicit non-retaliation policies with respect to these matters, as described in Section VIII below. D. Document Retention Numerous federal and state statutes require the proper retention of many categories of records and documents that are commonly maintained by companies. In consideration of those legal requirements and the company's business needs, all associates must maintain records in accordance with applicable law and policies adopted by the company from time to time. In addition, any record, in paper or electronic format, relevant to a threatened, anticipated or actual internal or external inquiry, investigation, matter or lawsuit may not be discarded, concealed, falsified, altered, or otherwise made unavailable, once an associate has become aware of the existence of such threatened, anticipated or actual internal or external inquiry, investigation, matter or lawsuit. When in doubt regarding retention of any record, an associate must not discard or alter the record in question and should seek guidance from the Corporate Compliance Officer or a member of the Compliance Committee. Associates should also direct all questions regarding issues of document retention and related procedures to the Corporate Compliance Officer or a member of the Compliance Committee. E. Corporate Advances Under law, the company may not loan money to associates except in limited circumstances. It shall be a violation of the Code for any associate to advance company funds to any other associate or to himself or herself except for advances in connection with the company's tuition reimbursement plan or other usual and customary business advances for legitimate corporate purposes which are approved by a supervisor or pursuant to a corporate credit card for usual and customary, legitimate business purposes. It is the company's policy that any advance to an associate over $1,000, other than in connection with the company's tuition reimbursement plan, be approved in advance by the Compliance Committee. Company credit cards are to be used only for authorized, legitimate business purposes. An associate will be responsible for any unauthorized charges to a company credit card. V. FAIR DEALING WITH CUSTOMERS, SUPPLIERS, COMPETITORS, AND ASSOCIATES The company does not seek to gain any advantage through the improper use of favors or other inducements. Offering, giving, soliciting or receiving any form of bribe to or from an employee of a customer or supplier to influence that employee's conduct is strictly prohibited. A. Improper Influence The company expects all of its associates to refrain from any illegal conduct to achieve improper influence. Among other types of improper influence which are prohibited are the following: 1. No associate of the company shall make illegal contributions, bribes, kick-backs, or any type of illegal payment to anyone in connection with the obtaining of orders or favored treatment. 2. The accepting of gifts, entertainment, or any other personal favor or preferment from anyone with whom the company is likely to have any business dealings in the future, other than a Holiday gift, is forbidden, when for the benefit of the Company. If a situation should arise in which you are unable to discern whether a course of conduct would violate these rules, please contact a member of the Compliance Committee to discuss the situation in advance of any course of action. B. Unfair Practices in International Business Under the Foreign Corrupt Practices Act ("FCPA"), associates of the company are prohibited from making certain gifts to foreign officials. "Foreign officials" include not only persons acting in an official capacity on behalf of a foreign government, agency, department or instrumentality, but also representatives of international organizations, foreign political parties and candidates for foreign public office. The gift is "corrupt" under the FCPA if it is made for the purpose of: o Influencing any act or decision of a foreign official in his official capacity; o Inducing a foreign official to do or omit to do any act in violation of his lawful duty; o Inducing a foreign official to use his position to affect any decision of the government; or o Inducing a foreign official to secure any "improper advantage." A gift is still "corrupt" even when paid through an intermediary. Any associate who has any questions whatsoever as to whether a particular gift might be "corrupt" under the FCPA, please contact the Corporate Compliance Officer or any member of the Compliance Committee. VI. COMPLIANCE WITH LAWS, RULES AND REGULATIONS A. Insider Trading Policy The company expressly forbids any associate from trading on material nonpublic information as outlined in the company's insider trading policy or communicating material nonpublic information to others in violation of the law. This conduct is frequently referred to as "insider trading." This policy applies to every associate of the company and extends to activities both within and outside their duties to the company, including trading for a personal account. Trading on inside information is not a basis for liability unless the information is material. This is information that a reasonable investor would consider important in making his or her investment decisions, or information that is likely to have a significant effect on the price of a company's securities. Information is nonpublic until it has been effectively communicated to the Marketplace through a news release. Tangible evidence of such dissemination is the best indication that the information is public. For example, information found in a report filed with the Securities and Exchange Commission, dissemination through a press release, or appearing in a national newspaper would be considered public. Each associate should be familiar with and abide by the company's Insider Trading Policy. A copy of this policy is given to all new associates of the company and is available from the Human Resources Department, the Corporate Compliance Officer or any member of the Compliance Committee. B. Regulation FD The company is subject to the securities laws of the United States and the regulations adopted by the Securities and Exchange Commission, including Regulation FD, with respect to the disclosure of material information to the public. The company is committed to fair disclosure to investors in compliance with the law. The company's policy, which reflects these legal requirements, is that no one associated with the company may make any disclosure of material nonpublic information about the company to anyone outside of the company who trades in or may be expected to trade in our securities, unless we disclose such information to the public at the same time. Only the Chief Executive Officer, the Chief Financial Officer, the General Counsel, or other individuals expressly authorized by the Chief Executive Officer, the Chief Financial Officer or the General Counsel may discuss material information with analysts, financial professionals, stockholders and other members of the public. No other company personnel are authorized to discuss material information relating to the company with analysts, financial professionals, stockholders and other members of the public. Any requests for such information regarding the company must be forwarded to one of the officers listed above. C. Equal Employment Opportunity The company is committed to a policy of nondiscrimination and equal opportunity in employment decisions for all employees and qualified applicants without regard to race, color, creed, religion, sex, age, ancestry, national origin, sexual orientation, marital status, veteran's status, physical or mental handicap or disability or any other characteristic protected by law. "Employment decisions" generally mean decisions relating to hiring, recruiting, training, promotions and compensation, but the term may encompass other employment actions as well. Each associate should be familiar with and abide by the company's Equal Employment Opportunity policy, as described in the Employee Handbook. A copy of the Handbook is made available to all new associates of the company and can also be obtained from the Human Resources Department, the Corporate Compliance Officer or any member of the Compliance Committee. The company encourages its associates to bring any problem, complaint or concern regarding any alleged employment discrimination to the attention of the Human Resources Department. Associates who have concerns regarding conduct they believe is discriminatory should also feel free to make any such reports to the Corporate Compliance Officer or a member of the Compliance Committee. D. Sexual and Other Unlawful Harassment Policy The company is committed to maintaining a working environment that is free of unlawful discrimination. In keeping with this commitment, we will not tolerate harassment of our employees, directors and officers by anyone, including any coach, co-worker, vendor, client or customer. Harassment consists of unwelcome conduct, whether verbal, physical or visual, that is based upon a person's protected status, such as race, color, creed, religion, sex, age, ancestry, national origin, sexual orientation, marital status, veteran's status, physical or mental handicap or disability or any other characteristic protected by law. Each associate should be familiar with and abide by the company's Sexual and Other Unlawful Harassment Policy, as included in the Employee Handbook. The policy sets forth specific examples of harassment that our associates must avoid and provides guidelines for the reporting of violations. A copy of the Handbook is made available to all associates of the company and can also be obtained from the Human Resources Department, the Corporate Compliance Officer or any member of the Compliance Committee. E. Health, Safety & Environment Laws Health, safety, and environmental responsibilities are fundamental to the company's values. Associates are responsible for ensuring that the company complies with all provisions of the health, safety, and environmental laws of the United States and of other countries where the company does business. The penalties that can be imposed against the company and its associates for failure to comply with health, safety, and environmental laws can be substantial, and include imprisonment and fines. VII. REPORTING CONCERNS UNDER THE CODE: NON-RETALIATION POLICY Reporting Concerns/Receiving Advice Communication Channels Be Proactive. Every employee is encouraged to act proactively by asking questions, seeking guidance and reporting suspected violations of the Code and other policies and procedures of the Company, as well as any violation or suspected violation of applicable law, rule or regulation arising in the conduct of the Company's business or occurring on the Company's property. If any employee believes that actions have taken place, may be taking place, or may be about to take place that violate or would violate the Code, he or she should bring the matter to the attention of the Company. Seeking Guidance. The best starting point for an officer or employee seeking advice on ethics-related issues or reporting potential violations of the Code will usually be his or her supervisor. However, if the conduct in question involves his or her supervisor, if the employee has reported the conduct in question to his or her supervisor and does not believe that he or she has dealt with it properly, or if the officer or employee does not feel that he or she can discuss the matter with his or her supervisor, the employee may raise the matter with the Compliance Officer or any Compliance Committee Member. Communication Alternatives. Any officer or employee may communicate with the Compliance Officer or any Compliance Committee Member by any of the following methods: o In writing (which may be done anonymously as set forth below under "Reporting; Anonymity; Retaliation"), addressed to the Compliance Officer. o By e-mail addressed to the Compliance Officer at their e-mail address noted above on page 3 (anonymity cannot be maintained) Reporting Accounting and Similar Concerns. Any concerns or questions regarding potential violations of the Code, any other company policy or procedure or applicable law, rules or regulations involving accounting, internal accounting controls or auditing matters should be directed to the Audit Committee or a designee of the Audit Committee. Officers and employees may communicate with the Audit Committee or its designee: o in writing to: Telecommunication Products, Inc. 1926 Hollywood Blvd., Ste. 208, Hollywood, Fla. 33020 Officers and employees may use the above method[s] to communicate anonymously with the Audit Committee. Misuse of Reporting Channels. Employees must not use these reporting channels in bad faith or in a false or frivolous manner. Reporting; Anonymity; Retaliation When reporting suspected violations of the Code, the Company prefers that officers and employees identify themselves in order to facilitate the Company's ability to take appropriate steps to address the report, including conducting any appropriate investigation. However, the Company also recognizes that some people may feel more comfortable reporting a suspected violation anonymously. If an officer or employee wishes to remain anonymous, he or she may do so, and the Company will use reasonable efforts to protect the confidentiality of the reporting person subject to applicable law, rule or regulation or to any applicable legal proceedings. In the event the report is made anonymously, however, the Company may not have sufficient information to look into or otherwise investigate or evaluate the allegations. Accordingly, persons who make reports anonymously should provide as much detail as is reasonably necessary to permit the Company to evaluate the matter(s) set forth in the anonymous report and, if appropriate, commence and conduct an appropriate investigation. No Retaliation The Company expressly forbids any retaliation against any officer or employee who, acting in good faith, reports suspected misconduct. Any person who participates in any such retaliation is subject to disciplinary action, including termination. VIII. QUESTIONS UNDER THE CODE AND WAIVER PROCEDURES Associates are encouraged to consult with the Corporate Compliance Officer about any uncertainty or questions they may have under the Code. Waiver Procedures for Executive Officers and Directors. Waiver requests by an executive officer or member of the Board of Directors shall be referred by the Compliance Officer, with the recommendation, to the Board of Directors thereof for consideration. If either (i) a majority of the independent directors on the Board of Directors, or (ii) a committee comprised solely of independent directors agrees that the waiver should be granted, it will be granted. The company will disclose the nature and reasons for the waiver on a Form 8-K to be filed with the Securities and Exchange Commission within five days. If the Board denies the request for a waiver, the waiver will not be granted and the associate may not pursue the intended course of action. It is the company's policy only to grant waivers from the Code in limited and compelling circumstances. IX. FREQUENTLY ASKED QUESTIONS AND ANSWERS The following questions and answers address each associate's obligation to comply with the Code. The company has attempted to design procedures that ensure maximum confidentiality and, most importantly, freedom from the fear of retaliation for complying with and reporting violations under the Code. Q: Do I have a duty to report violations under the Code? A: Yes, participation in the Code and its compliance program is mandatory. You must immediately report any suspected or actual violation of the Code to the Corporate Compliance Officer or a member of the Compliance Committee. The company will keep reports confidential to the fullest extent required by applicable law. Failure to report suspected or actual violations is itself a violation of the Code and may subject you to disciplinary action, up to and including termination of employment or legal action. Q: I'm afraid of being fired for raising questions or reporting violations under the Code. Will I be risking my job if I do? A: The Code contains a clear non-retaliation policy, meaning that if you in good faith report a violation of the Code by the company, or its agents acting on behalf of the company, to the Corporate Compliance Officer or another member of the Compliance Committee, the company will undertake to protect you from being fired, demoted, reprimanded or otherwise harmed for reporting the violation, even if the violation involves you, your supervisor, or senior management of the company. You are entitled to make the report on a confidential and anonymous basis. To the extent an investigation must be initiated, the company will keep confidential any report you make to the Corporate Compliance Officer or another member of the Compliance Committee to the extent required by applicable law. In addition, if you report a suspected violation under the Code which you reasonably believe constitutes a violation of a federal statute by the company, or its agents acting on behalf of the company, to a federal regulatory or law enforcement agency, you may not be reprimanded, discharged, demoted, suspended, threatened, harassed or in any manner discriminated against in the terms and conditions of your employment for reporting the suspected violation, regardless of whether the suspected violation involves you, your supervisor or senior management of the company. Q: How are suspected violations investigated under the Code? A: When a suspected violation is reported to the Corporate Compliance Officer or a member of the Compliance Committee, the Compliance Committee will gather information about the allegation by interviewing the associate reporting the suspected violation (if permissible, in the case of a non-anonymous report), the associate who is accused of the violation and/or any co- workers or associates of the accused associates to determine if a factual basis for the allegation exists. The reporting associate's immediate supervisor will not be involved in the investigation if the reported violation involved that supervisor. The company will keep the identity of the reporting associate confidential to the fullest extent required by applicable law. If the report is not substantiated, the reporting associate will be informed and at that time will be asked for any additional information not previously communicated. If there is no additional information, the Corporate Compliance Officer will close the matter as unsubstantiated. If the allegation is substantiated, the Compliance Committee will make a judgment as to the degree of severity of the violation and the appropriate disciplinary response. In more severe cases, the Compliance Committee will make a recommendation to the Board of Directors of the company for its approval. The Board's decision as to disciplinary and corrective action will be final. In the case of less severe violations, the Corporate Compliance Officer may refer the violation to the Human Resources Department for appropriate disciplinary action. The Compliance Committee shall provide a summary of all matters considered under the Code to the Board of Directors or a committee thereof at each regular meeting thereof, or sooner if warranted by the severity of the matter. Q: Do I have to participate in any investigation under the Code? A: Your full cooperation with any pending investigation under the Code is a condition of your continued relationship with the company. The refusal to cooperate fully with any investigation is a violation of the Code and grounds for discipline, up to and including termination. Q: What are the consequences of violating the Code? A: As explained above, associates who violate the Code may be subject to discipline, up to and including termination of employment. Associates who violate the Code may simultaneously violate federal, state, local or foreign laws, regulations or policies. Such associates may be subject to prosecution, imprisonment and fines, and may be required to make reimbursement to the company, the government or any other person for losses resulting from the violation. They may be subject to punitive or treble damages depending on the severity of the violation and applicable law. Q: What if I have questions under the Code or want to obtain a waiver under any provision of the Code? A: The Corporate Compliance Officer a can help answer questions you may have under the Code. Particularly difficult questions will be answered with input from the Compliance Officer. In addition, Section IX of the Code provides information on how you may obtain a waiver from the Code; waivers will be granted only in very limited circumstances. You should never pursue a course of action that is unclear under the Code without first consulting the Corporate Compliance Officer, and if necessary, obtaining a waiver from the Code. EX-31.1 3 doc3.txt CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES OXLEY ACT I, Robert C. Russell certify that: 1. I have reviewed this annual report on Form 10-KSB of TELECOMMUNICATION PRODUCTS, INC., 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: July 19, 2004 By: /s/ Robert C Russell - ------------------------------------ CEO, President EX-31.2 4 doc4.txt CERTIFICATION UNDER SECTION 302 I, Marcia A. Pearlstein, certify that: 1. I have reviewed this annual report of Telecommunication Products, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material aspects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15e for the registrant and have: a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c. disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and 5. The registrant's other certifying officer (s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: July 19, 2004 /s/ Marcia A. Pearlstein ____________________ Marcia A. Pearlstein Interim Chief Financial Officer EX-32.1 5 doc5.txt CERTIFICATIONS UNDER SECTION 906 Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), each of the undersigned officers of Telecommunication Products, Inc., a Colorado corporation (the "Company"), does hereby certify, to such officer's knowledge, that: The Annual Report for the year ended March 31, 2004 (the "Form 10-KSB") of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Form 10-KSB fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: July 19, 2004 /s/ Robert C. Russell ------------------------ Robert C. Russell, Chief Executive Officer Dated: July 19, 2004 /s/ Marcia A. Pearlstein ---------------------------- Marcia A. Pearlstein, Interim Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----