B2Digital, Inc. - Quarter Report: 2001 June (Form 10-Q)

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

For the quarter ended June 30, 2001

Commission file number: 0-11882

TELECOMMUNICATION PRODUCTS, INC.

(Exact name of registrant as specified in its charter)

Colorado

(State or other jurisdiction of incorporation or organization)

84-0916299

(I.R.S. Employer Identification No.)

P. O. Box l7013, Golden, Colorado 80402

(address of principal executive offices)

Registrant's telephone number, including area code: (303)278-2725

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for at least the past 90 days. Yes X No ___

Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date: 22,492,800 as of June 30, 2001.

ITEM 1 - FINANCIAL STATEMENTS

TELECOMMUNICATION PRODUCTS, INC.

BALANCE SHEETS (Unaudited)

PROPERTY AND EQUIPMENT (Note 1)

See notes to financial statements

TELECOMMUNICATION PRODUCTS, INC.

STATEMENT OF OPERATIONS (Unaudited)

See notes to financial statements

TELECOMMUNICATION PRODUCTS, INC.

STATEMENTS OF STOCKHOLDERS DEFICIENCY (Unaudited)

See notes to financial statements

TELECOMMUNICATION PRODUCTS, INC.

STATEMENT OF CASH FLOWS (Unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES:

See notes to financial statements

TELECOMMUNICATION PRODUCTS, INC.

NOTES TO FINANCIAL STATEMENTS (Unaudited)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization - Telecommunication Products, Inc. (Company) was incorporated in the State of Colorado on June 8, 1983, to design, manufacture and market specialized communication equipment.

Going-Concern Basis - The accompanying financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the financial statements, as of June 20, 2001, the Company has an accumulated deficit of $1,454,183 and a net stockholders' deficiency of $720,415. These factors, among others, may indicate that the Company will be unable to continue as a going concern. The financial statements do not include any adjustments that may be necessary should the Company be unable to continue as a going concern. The Company's continuation as a going concern is dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis, to obtain additional financing as may be required, and ultimately to attain successful operations. Management is of the opinion that enhanced marketing efforts will enable the Company to increase revenues sufficiently to sustain operations.

Revenue Recognition - Revenue is recognized when products are delivered and accepted by customers.

Warranty Reserve - The Company grants a one-year warranty on parts and labor for all of its products. The Company has historically experienced minimal warranty claims.

Net Loss Per Common Share - Net loss per common share is computed by dividing net loss by the weighted average common shares outstanding during the period. The weighted shares outstanding include 9,800,000 shares issued to certain persons at a price substantially less than the public offering price.

2. RELATED PARTY TRANSACTIONS

Certain officers/stockholders of the Company elected to defer their salaries beginning the first quarter of calendar year 1987 in order to help the Company's cash flow. Unpaid compensation expenses of $49,200 annually were incurred in each of the subsequent years, including the three years in the periods ending March 31, 2001, and as of June 30, 2001 and March 31, 2001, unpaid compensation to officers/ stockholders totaled $701,100 and $701,100, respectively.

3. INVENTORY

Due to damage and attrition associated with the move from the Company' former laboratory and offices, as well as the age and obsolescence of certain parts and components, a determination was made in recent audit of the Company that all inventory would be most appropriately valued at zero. This and the resulting impact is more fully reflected and explained in the Company's amended 10-K filing for the last fiscal year.

4. COMMON STOCK

On June 8, 1983, the Company's Board approved an incentive stock option plan for all employees and reserved 3,000,000 shares of common stock for issuance upon the exercise of options granted. The minimum exercise price under the plan is generally 100% of the fair market value of the Company's common stock at the date of the grant, and the options are exercisable for a period up to 10 years from the date of the grant. For 10% stockholders, the minimum exercise price is 110% of the fair market value at the date of grant, and the options are exercisable for a period up to 5 years from the date of grant. As of March 31, 2001, no options have been granted.

5. SUBSEQUENT EVENT - ACQUISITION OF INTERLEISURE

On June 25, 2001, the Company ("Telpro"), and Interleisure, S.A., a privately held Dominican Republic corporation ("Interleisure"), entered into an Agreement and Plan of Merger (the "Merger Agreement") providing for a business combination between Telpro and Interleisure. An 8-K was filed on June 27, 2001, apprising shareholders that the directors had approved a merger agreement subject to shareholder approval. This 8-K summarizes further aspects of the agreement as well.

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management provides the following forward-looking information to the best of its information and belief as of the time of signing, with no assurance as to eventual outcome.

Although the Company has had no sales revenues in the past five years, it received income of $75,000 from a letter of intent entered into in the last fiscal year. Due to problems and concerns on both sides, the letter of intent was fully released, and the Company retained the $75,000 pursuant to agreement of the parties. These monies were used to bring current most of the outstanding and current obligations of the Company, including but not limited to accounts payable, loans outstanding, deferred directors' fees, legal and accounting fees, and wages due in this quarter. The Company still owes significant outstanding wages to its officers who, except for this past quarter, had agreed to defer their salaries due them since January, 1987 in order to enable the Company to continue as a going concern. The present outstanding balance of this wage claim is $701,100.

Since its liquidity was enhanced in fiscal 1984 by a limited offering of the Company's securities in August, 1983 for net proceeds of $218,055, and an initial public offering of its common stock for net proceeds of $493,394 on March 20, 1984, the Company's liquidity has declined due to the initial expenditures required for research and development, and the time involved in securing a market for the Company's products. There are no present or planned commitments for material capital expenditures, and the Company presently has no material unused sources of liquid assets.

There was a net loss this quarter, and overall there is a significant accumulated deficit which has eroded stockholders' equity. As no sales are presently pending, such attrition was projected to continue through fiscal 2002. Due to the losses sustained by the Company during its development stage and over the intervening years, the Company's ability to remain a going concern depends upon its ability to generate sufficient cash flow to meet its obligations, to obtain additional financing as may be required, and to continue to increase its product sales, or alternatively to pursue a merger arrangement with an appropriate candidate. In light of the fact that the Company has been unable to obtain additional financing and has not had any sales revenues for the past five years, management believes that the Company's best prospects are in pursuing a merger with another company. As a result, the Company has continued to concentrate operations on finding a merger candidate with products or services which might generate revenue for continuing operations; a merger agreement has been signed by the directors effective June 25, 2001, subject to shareholder approval, as more fully described in the 8-K filed on June 27, 2001.

The Company had no sales revenues again this year. As the Company has had no sales of its products in the past five years, it has recently concentrated operations on finding a merger candidate with products or services which might generate revenue for continuing operations; a merger agreement has been signed by the directors, subject to shareholder approval, on June 25, 2001, as more fully described in the 8-K filed on June 27, 2001.

The Company was previously working to upgrade its Model 9100 system with a new diode which would increase the transmission power of the system from 1 watt power input to 1.2 and 2.4 optical power output, thereby increasing the transmission range to over two miles in normal atmospheric conditions. However, the new technology has made the present work in process inventory obsolete, and no monies have been available to start constructing the upgraded systems at this point.

In addition, the Company was working to upgrade the data rate transmission capabilities of the Model 9100. Presently, the Model 9100-2 is capable of transmitting communication formats of DS-0 (64 kbps), DS-1 (1.544 mbps), and the European standard CEPT HDB-3 (2.048 mbps). Upgrades would allow transmission of additional data rates of OC-1 (51.84 mbps) and OC-2 (155.520 mbps). The present plans to accomplish these upgrades would utilize the same castings, optics, mounts, and most other hardware, therefore reducing the cost of the new design while greatly enhancing system features. Again, the Company has not had appropriate funding to pursue these enhancements, and so no work in process has been started to accomplish these upgrades.

Other than the above, the Company does not expect any material changes in the mix and relative cost of resources. Raw materials were previously augmented in the anticipation of potential future demand in Asia. As of year end and the date of this report, there were no finished goods in inventory. Inflation has had no material effect on the Company's operations over the last three fiscal years.

The Company's only full time employees, Don and Clara Ranniger, had elected to defer their salaries since January of 1987 through the date of the last 10-K in order to help the Company's cash flow; a resolution of that wage claim is presently addressed in the proposed merger agreement.

Besides pursuing a merger with a potentially profitable candidate, fiscal 2002 operations will continue to concentrate efforts on increasing sales and production of the Model 9100. However, due to varying economic conditions in the domestic and world-wide markets for this product, and based on the fact that the Company has had no sales revenues in the past five years, it is unlikely that the Company will have any significant sales in 2001, thereby increasing the loss and financial risk factors.

Part II - OTHER INFORMATION

Item 1. Legal Proceedings. None.

Item 2. Changes in Securities. Not applicable.

Item 3. Defaults upon Senior Securities. Not applicable.

Item 4. Submission of Mattters to a Vote of Security Holders. Not applicable.

Item 5. Other Information.

Item 6. Exhibits and Reports on Form 8-K.

1. Exhibits. None.

SIGNATURES

Pursuant to the requirements of Section 13 or 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.

By:_____________/s/_____________

Don E. Ranniger, President

August 5, 2001

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549