form10q063008.htm



 

 
U.S. SECURITIES AND EXCHANGE COMMISSION
 
Washington, D.C. 20549
 
FORM 10-Q
 
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
 
EXCHANGE ACT OF 1934
 
For the quarterly period ended June 30, 2008
 
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
 
EXCHANGE ACT OF 1934
 
For the transition period from
 
Commission File No. 333-134073
 
NB TELECOM, INC.
 
(Exact name of small business issuer as specified in its charter)
Nevada
 
04-3836208
(State or other jurisdiction of incorporation or formation)
 
(I.R.S. employer identification number)
 

106 May Drive
Saxonburg, Pennsylvania  16056
(Address of principal executive offices)
 
Issuer's telephone number: (724) 352-7606
 
Issuer's facsimile number: (315) 453-7311
 
_______________________________________________
 
No change
 
(Former name, former address and former
 
fiscal year, if changed since last report)
 

 
Copies to:
 
Richard W. Jones
 
Jones, Haley & Mottern, P.C.
 
115 Perimeter Center Place, Suite 170
 
Atlanta, Georgia  30346
 
(770) 804-0500
 
www.corplaw.net
 
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 such filing requirements for the past 90 days. Yes [X] No [  ]

 
1

 

 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]
 
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS
 
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.  Yes [  ]       No [  ]
 
APPLICABLE ONLY TO CORPORATE ISSUERS
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:  49,632,222 shares of $.0001 par value common stock outstanding as of June 30, 2008.
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):
Large Accelerated Filer [  ]
Accelerated Filer [  ]
Non-Accelerated Filer [  ]
Smaller reporting company [X]
(Do not check if a smaller reporting company)
 

 
2

 

 
INTERIM AND UNAUDITED FINANCIAL STATEMENTS INDEX

PART I – FINANCIAL INFORMATION:
Page
   
Item 1.  Financial Statements
4
   
Balance Sheet – June 30, 2008 (unaudited) December 31, 2008
4
   
Statement of Operations for the three months ended June 30, 2008 (unaudited) and the six Months ending June30, 2008
5
   
Statement of Cash Flows for the six months ended June 30, 2008 (unaudited)
7
   
Notes to Unaudited Financial Statements
8-17
   
Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations
18
   
Item 3.  Quantitive and Qualitative Disclosure About Market Risks
21
   
Item 4.  Controls and Procedures
21
   
PART II – OTHER INFORMATION:
 
   
Item 1.  Legal Proceedings
22
   
Item 1A.  Risk Factors
22
   
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds
22
   
Item 3.  Defaults Upon Senior Securities
22
   
Item 4.  Submission of Matters to a Vote of Security Holders
22
   
Item 5.  Other Information
22
   
Item 6.  Exhibits
23
   
Signatures
 


 
3

 

NB TELECOM, INC.
 
BALANCE SHEETS
 
   
(Unaudited)
       
   
30-June
   
December 31,
 
   
2008
   
2007
 
CURRENT ASSETS
           
  Cash
  $ -     $ -  
  Commissions and Sales Receivable, Net
    8,531       6,820  
  Inventory
    324       324  
  Prepaid Expenses and Other Current Assets
    -       30  
TOTAL CURRENT ASSETS
    8,855       7,174  
FIXED ASSETS
               
  Telephone and Office Equipment
    202,652       202,652  
  Vehicle
    11,634       11,634  
                 
  Less: Accumulated Depreciation
    (214,286 )     (214,286 )
                 
               Net Fixed Assets
    -       -  
                 
TOTAL ASSETS
  $ 8,855     $ 7,174  
LIABILITIES AND STOCKHOLDERS' DEFICIT
               
Current Liabilities
               
  Accounts Payable
  $ 181,001     $ 183,763  
  Accrued Expenses
    -       1,186  
  Bank Overdraft
    2,392       1,433  
  Notes Payable Related Party
    109,434       74,080  
                 
TOTAL CURRENT LIABILITIES
    292,827       260,462  
                 
TOTAL LIABILITIES
    292,827       260,462  
                 
STOCKHOLDERS' DEFICIT
               
    Common Stock, .0001 par value 100,000,000 shares authorized,
    4,963       4,963  
49,632,222 shares issued and outstanding at June 30, 2008 and December 31, 2007
 
  Additional Paid in Capital
    501,474       501,474  
  Accumulated Deficit
    (790,409 )     (759,725 )
                 
TOTAL STOCKHOLDERS' DEFICIT
    (283,972 )     (253,288 )
                 
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
  $ 8,855     $ 7,174  
                 
                 
The accompanying notes are an integral part of these financial statements.
 

 
4

 

NB TELECOM, INC.
 
STATEMENT OF OPERATIONS
 
                         
   
(Unaudited)
   
(Unaudited)
 
   
For the Three
   
For the Six
 
   
Months Ended
   
Months Ended
 
   
June 30,
   
June 30,
 
   
2008
   
2007
   
2008
   
2007
 
SALES
                       
  Commissions
  $ -     $ 267     $ -     $ 6,070  
  Coin Collections
    -       2,100       640       4,129  
  Dial Around
    3,595       6,743       7,695       6,743  
  Equipment Sales
    -       -       -       199  
  Service and Repair Sales
    8,383       9,125       18,243       18,180  
      Total Sales
    11,978       18,235       26,578       35,321  
                                 
COST OF SALES
                               
  Telecommunications Costs
    544       15,214       12,094       30,780  
  Depreciation
    -       2,522       -       9,342  
  Phone Parts & Small Tools
    155       -       155       -  
  Travel
    624       -       808       -  
      Total Cost of Sales
    1,323       17,736       13,057       40,122  
                                 
Gross Profit
    10,655       499       13,521       (4,801 )
                                 


The accompanying notes are an integral part of these financial statements.
 

 
5

 

NB TELECOM, INC.
 
STATEMENT OF OPERATIONS
 
(Continued)
 
                         
   
(Unaudited)
   
(Unaudited)
   
(Unaudited)
   
(Unaudited)
 
   
For the Three
   
For the Three
   
For the Six
   
For the Six
 
   
Months Ended
   
Months Ended
   
Months Ended
   
Months Ended
 
   
June 30,
   
June 30,
   
June 30,
   
June 30,
 
   
2008
   
2007
   
2008
   
2007
 
OPERATING EXPENSES
                       
  Payroll Wages and Taxes
  $ -     $ 7,157     $ 1,764     $ 15,154  
  Vehicle Expenses
    -       1,045       -       2,063  
  Rent
    -       500       30       593  
  Professional Fees
    23,830       10,635       27,765       27,835  
  Office Expense
    393       1,177       845       2,637  
      Total Operating Expenses
    24,223       20,514       30,404       48,282  
                                 
      Total Operating Loss
    (13,568 )     (20,015 )     (16,883 )     (53,083 )
                                 
OTHER INCOME (EXPENSE)
                               
  Gain on Sale of Equipment
    -       6,160       -       6,160  
  Interest Expense
    (6,930 )     (4,087 )     (13,801 )     (12,127 )
      Total Other Income (Expense)
    (6,930 )     2,073       (13,801 )     (5,967 )
                                 
NET LOSS BEFORE TAXES
    (20,498 )     (17,942 )     (30,684 )     (59,050 )
                                 
TAXES
    -       647       -       647  
                                 
NET LOSS
  $ (20,498 )   $ (18,589 )   $ (30,684 )   $ (59,697 )
                                 
Net Loss per Common Share
  $ (0.00 )   $ (0.00 )   $ (0.00 )   $ (0.00 )
                                 
Weighted Common Shares Outstanding
    49,632,222       49,632,222       49,632,222       49,632,222  
                                 
                                 
The accompanying notes are an integral part of these financial statements.
 

 
6

 

NB TELECOM, INC.
 
STATEMENT OF CASH FLOWS
 
   
(Unaudited)
 
   
For the Six
 
   
Months Ended
 
   
June 30,
 
   
2008
   
2007
 
             
Cash Flows From Operating Activities:
           
    Net Loss
  $ (30,684 )   $ (59,697 )
    Adjustments to reconcile net loss to net
               
        cash provided (used) by operating activities:
               
 
  Depreciation Expense
    -       9,342  
 
  (Gain) Loss on Sale of Equipment
    -       (6,160 )
 
  (Increase) Decrease in Commission Receivables
    (1,711 )     (8,023 )
 
  (Increase) Decrease in Prepaid and Other Current Assets
    30       275  
 
  (Increase) Decrease in Inventory
    -       (324 )
 
  Increase (Decrease) in Accounts Payable
    (2,762 )     37,951  
 
  Increase (Decrease) in Accrued Expenses
    (1,186 )     2,565  
 
  Increase (Decrease) in Related Party Payable
    -       12,002  
                   
            Net cash used in operating activities
    (36,313 )     (12,069 )
                   
Cash Flows From Investing Activities:
               
 
 Proceeds from Sale of Equipment
    -       6,160  
                   
            Net cash provided by investing activities
    -       6,160  
                   
Cash Flows From Financing Activities:
               
                   
 
 Proceeds from Bank Overdraft
    959       (850 )
 
 Proceeds from Related Party Notes
    38,254       6,759  
 
 Payments on Notes Payable
    (2,900 )     -  
                   
            Net cash provided by financing activities
    36,313       5,909  
                   
Net Increase (Decrease)  in cash
    -       -  
                   
Cash - Beginning of Period
    -       -  
                   
Cash - End of Period
  $ -     $ -  
                   
Supplemental Disclosures of Cash Flow Information:
               
  Cash Paid During The Period For:
               
    Interest
    $ (13,801 )   $ (12,127 )
    Income Taxes
  $ -     $ 647  


 
7

 

NB TELECOM, INC.
NOTES TO THE FINANCIAL STATEMENTS


Note 1.                       Nature of Business and Summary of Significant Accounting Policies
 
Organization
 
NB Telecom, Inc. (the “Company”) was originally incorporated as NB Payphones Ltd. under the laws of the state of Pennsylvania on November 16, 1999. On December 27, 2005 we migrated our state of organization to the state of Nevada and effective March 23, 2006, our name changed to NB Telecom, Inc.
 
Nature of Business
 
NB Telecom, Inc. is currently a provider of both privately owned and company owned payphones (COCOT’s) and stations in Pennsylvania. The Company receives revenues from the collection of the payphone coinage, a portion of usage of service from each payphone and a percentage of long distance calls placed from each payphone from the telecommunications service providers. In addition, the Company also receives revenues from the service and repair of privately owned payphones, sales of payphone units and the sales of prepaid phone cards.
 
Nature of Operations and Going Concern
 
The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States, which contemplates the Company as a going concern.  However, the Company has a retained deficit of approximately $790,000.  The company has a current ratio of .030 for the period ended June 30, 2008 and has a deficit in stockholders’ equity.   The Company’s ability to continue as a going concern is dependent upon obtaining the additional capital as well as additional revenue to be successful in its planned activity.  The Company is actively pursuing alternative financing and has had discussions with various third parties, although no firm commitments have been obtained.  In the interim, shareholders of the Company have committed to meeting its minimal operating expenses.  Management believes that actions presently being taken to revise the Company’s operating and financial requirements provide them with the opportunity to continue as a going concern.
 
These financial statements do not reflect adjustments that would be necessary if the Company were unable to continue as a “going concern”.  While management believes that the actions already taken or planned, will mitigate the adverse conditions and events which raise doubt about the validity of the “going concern” assumption used in preparing these financial statements, there can be no assurance that these actions will be successful.
 
If the Company were unable to continue as a “going concern”, then substantial adjustments would be necessary to the carrying values of assets, the reported amounts of its liabilities, the reported revenues and expenses, and the balance sheet classifications used.


 
8

 

NB TELECOM, INC.
NOTES TO THE FINANCIAL STATEMENTS

Note 1.                       Nature of Business and Summary of Significant Accounting Policies (Continued)
 
Interim Reporting
 
The unaudited financial statements as of June 30, 2008 and 2007 and for the three months then ended, reflect in the opinion of management, all adjustments (which include only nominal recurring adjustments) necessary to fairly state the financial position and results of operations for the three months ended. Operating results for interim periods are not necessarily indicative of the results which can be expected for full years.
 
Summary of Significant Accounting Policies
 
This summary of accounting policies for NB Telecom, Inc. is presented to assist in understanding the Company's financial statements.  The accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation of the financial statements.
 
Management Estimates
 
The preparation of financial statements in conformity with generally accepted accounting principals requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the 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.
 
Concentrations of Credit Risk
 
The Company’s payphones are located primarily in Pennsylvania and usage of those phones may be affected by economic conditions in those areas.  The company has experienced about a 30% drop in revenue’s, due to increased competition from other payphone providers and increase usage of wireless communications.
 
The Company maintains cash balances with a financial institution insured by the Federal Deposit Insurance Corporation up to $100,000. There are no uninsured balances at June 30, 2008 and December 31, 2007.
 
Cash and Cash Equivalents
 
The Company considers all highly liquid instruments with a maturity of three months or less when purchased to be cash equivalents for purposes of classification in the balance sheets and statement of cash flows. Cash and Cash equivalents consists of cash in bank (checking) accounts.


 
9

 

NB TELECOM, INC.
NOTES TO THE FINANCIAL STATEMENTS

Note 1.                       Nature of Business and Summary of Significant Accounting Policies (Continued)
 
Allowance for Doubtful Accounts
 
The Company considers accounts receivable to be fully collectible; accordingly, no allowance for doubtful accounts is required. If amounts become uncollectible, they will be charged to operations when the determination is made.
 
Fixed Assets and Depreciation
 
Fixed assets are stated at cost. Depreciation is calculated on a straight-line basis over the useful lives of the related assets, which range from five to seven years.
 
Financial Instruments
 
The Company’s financial assets and liabilities consist of cash, accounts receivable, inventory, and accounts payable. Except as otherwise noted, it is management’s opinion that the Company is not exposed to significant interest or credit risks arising from these financial instruments. The fair values of these financial instruments approximate their carrying values due to the sort-term maturities of these instruments.
 
Income Taxes
 
Income taxes are accounted for in accordance with Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes”. Under SFAS No. 109, deferred income taxes are recognized using the asset and liability method by applying tax rates to cumulative temporary differences based on when and how they are expected to affect the tax return. Deferred tax assets and liabilities are adjusted for income tax rate changes.
 
Reclassification
 
Certain reclassifications have been made in the 2007 financials statements to conform to the June 30, 2008 presentation.
 
Net (Loss) per Common Share
 
Net loss per common share has been calculated by taking the net loss for the current period and dividing by the weighted average shares outstanding at the end of the period.  There were no common equivalent shares outstanding at June 30, 2008 and 2007.


 
10

 


NB TELECOM, INC.
NOTES TO THE FINANCIAL STATEMENTS


Note 1.                       Nature of Business and Summary of Significant Accounting Policies (Continued)
 
Revenue Recognition
 
The Company derives its primary revenue from the sources described below, which includes dial around revenues, coin collections, and telephone equipment repairs and sales. Other revenues generated by the company include, phone card sales, and commissions.
 
Dial around revenues are generated from calls to gain access to a different long distance carrier than is already programmed into the phone. Revenues from dial around calls are recorded based upon estimates until the coin collection revenues are generated when callers deposit coins into the phones to make calls. Coin revenues are recorded in an amount equal to the coins collected.  Revenues on commissions, phone card sales, and telephone equipment repairs and sales are realized when the services are provided.
 
Stock-Based Compensation
 
Effective January 1, 2006, the company adopted the provisions of SFAS No. 123 (R) requiring employee equity awards to be accounted for under the fair value method. Accordingly, share-based compensation is measured at grant date, based on the fair value of the award.  Prior to June 1, 2006, the company accounted for awards granted to employees under its equity incentive plans under the intrinsic value method prescribed by Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees” (APB 25), and related interpretations, and provided the required pro forma disclosures prescribed by SFAS No. 123, “Accounting for Stock-Based Compensation” (SFAS No. 123), as amended. No stock options were granted to employees during the years ended December 31, 2006, and 2005 and accordingly, no compensation expense was recognized under APB No. 25 for the years ended December 31, 2007, and 2006.  In addition, no compensation expense is recognized under provisions of SFAS No. 123 (R) with respect to employees as no stock options where granted to employees.
 
Under the modified prospective method of adoption for SFAS No. 123 (R), the compensation cost recognized by the company beginning on June 1, 2006 includes (a) compensation cost for all equity incentive awards granted prior to, but not vested as of June 1, 2006, based on the grant-dated fair value estimated in accordance with the original provisions of SFAS No. 123, and (b) compensation cost for all equity incentive awards granted subsequent to June 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS No, 123 (R). The company uses the straight-line attribution method to recognize share-based compensation costs over the service period of the award.  Upon exercise, cancellation, forfeiture, or expiration of stock options, or upon vesting or forfeiture of restricted stock units, deferred tax assets for options and restricted stock units with multiple vesting dates are eliminated for each vesting period on a first-in, first-out basis as if each vesting period was a separate award.

 
11

 

NB TELECOM, INC.
NOTES TO THE FINANCIAL STATEMENTS

Note 1.                       Nature of Business and Summary of Significant Accounting Policies (Continued)
 
To calculate the excess tax benefits available for use in offsetting future tax shortfalls as of the dated of implementation, the company followed the alternative transition method discussed in FASB Staff Position No. 123 (R)-3.  During the periods ended December 31, 2006 and 2005, no stock options were granted to non-employees. Accordingly, no stock-based compensation expense was recognized for new stock option grants in the Statement of Operations and Comprehensive Loss at June 30, 2008.
 
Recent Accounting Standards
 
In February 2007, the FASB issued SFAS no, 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”).  SFAS 159 provides companies with an option to report selected financials assets and liabilities at fair value.  The objective of SFAS 159 is to reduce both complexity in accounting for financial instruments and the volatility in earnings caused by measuring related assets and liabilities differently.  Generally accepted accounting principles have required different measurement attributes for different assets and liabilities that can create artificial volatility in earnings.  The FASB has indicated it believes that SFAS 159 helps to mitigate this type of accounting-induced volatility by enabling companies to report related assets and liabilities at fair value, which would likely reduce the need for companies to comply with detailed rules for hedge accounting.  SFAS 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities.  SFAS 159 does not eliminate disclosure requirements included in other accounting standards, including requirements for disclosures about fair value measurements included in SFAS 157 and SFA No. 107, “Disclosures about Fair Value of Financial Instruments.”  SFAS 159 is effective for the Company as of the beginning of fiscal year 2008.  The adoption of this pronouncement is not expected to have an impact on the Company’s financial position, results of operations or cash flows.
 
In December 2007, the FASB issued No. 160, “Noncontrolling Interests in Financial Statements, an amendment of ARB No. 51" (“SFAS 160").  SFAS 160 amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary.  It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements.  This Statement is effective for fiscal years beginning on or after December 15, 2008.  Early adoption is not permitted. Management is currently evaluating the effects of this statement, but it is not expected to have any impact on the Company’s financial statements.
 


 
12

 

NB TELECOM, INC.
NOTES TO THE FINANCIAL STATEMENTS

Note 1.                       Nature of Business and Summary of Significant Accounting Policies (Continued)
 
In December 2007, the FASB issued No. 141(R), “Business Combinations” (“SFAS 141(R)”.  SFAS 141(R) provides companies with principles and requirements on how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, liabilities assumed, and any noncontrolling interest in the acquiree as well as the recognition and measurement of goodwill acquired in a business combination. SFAS 141(R) also requires certain disclosures to enable users of the financial statements to evaluate the nature and financial effects of the business combination. Acquisition costs associated with the business combination will generally be expensed as incurred. SFAS 141(R) is effective for business combinations occurring in fiscal years beginning after December 15, 2008, which will require the Company to adopt these provisions for business combinations occurring in fiscal 2009 and thereafter. Early adoption of SFAS 141(R) is not permitted.  Management is currently evaluating the effects of this statement, but it is not expected to have any impact on the Company’s financial statements.
 
In March 2008, the FASB issued No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133.  (“SFAS 161").  SFAS 161 requires enhanced disclosures about an entity's derivative and hedging activities and thereby improves the transparency of financial reporting.  This Statement is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. This Statement encourages, but does not require, comparative disclosures for earlier periods at initial adoption.  Management is currently evaluating the effects of this statement, but it is not expected to have any impact on the Company’s financial statements.

 
13

 

NB TELECOM, INC.
NOTES TO THE FINANCIAL STATEMENTS


Note 2.                       Inventory
 
Inventory is valued at the lower of cost, determined on the first-in, first-out basis (FIFO), or market value. Inventory consists of the following:

   
June 30, 2008
   
December 31, 2007
 
Parts and Accessories
  $ 324     $ 324  
 
Note 3.       Uncertain Tax Provisions
 
Effective January 1, 2007, the Company adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The adoption of the provisions of FIN 48 did not have a material impact on the company’s financial position and results of operations. At January 1, 2007, the company had no liability for unrecognized tax benefits and no accrual for the payment of related interest.
 
Interest costs related to unrecognized tax benefits are classified as “Interest expense, net” in the accompanying statements of operations. Penalties, if any, would be recognized as a component of “Selling, general and administrative expenses”. The Company recognized $0 of interest expense related to unrecognized tax benefits during 2007.  In many cases the company’s uncertain tax positions are related to tax years that remain subject to examination by relevant tax authorities.
 
With few exceptions, the company is generally no longer subject to U.S. federal, state, local or non-U.S. income tax examinations by tax authorities for years before 2004. The following describes the open tax years, by major tax jurisdiction, as of January 1, 2007:

United States (a)
 
2004– Present
 
(a) Includes federal as well as state or similar local jurisdictions, as applicable.

 
14

 

NB TELECOM, INC.
NOTES TO THE FINANCIAL STATEMENTS

Note 4.                       Commissions and Sales Receivable
 
Commissions and Sales Receivable consists of the following:

   
June 30, 2008
   
December 31, 2007
 
Commissions Receivable
  $ 6,026     $ 5,607  
Sales Receivable
    2,505       1,213  
    $ 8,531     $ 6,820  
 
Note 5. Related Party Note

The Company has a note payable to Craig Burton, Secretary of the Company.  This note has a due date of November 21, 2007 and carries an interest of 10%.  The outstanding principal on the note was $5,000 as of June 30, 2008 and December 31, 2007.  The accrued interest was $1,467 and $1,153 as of June 30, 2008 and December 31, 2007, respectively.

The Company has a note payable with Joseph Passalaqua.  This note has a due date of November 21, 2007 and carries an interest of 10%. The outstanding principal on the note was $5,000 as of June 30, 2008 and December 31, 2007.  The accrued interest was $1,467 and $1,153 as of June 30, 2008 and December 31, 2007, respectively.

The Company has note payables with Joseph Passalaqua.  These notes carry a principal balance of approximately $89,465 at June 30, 2008 and are due on demand carrying interest ranging from 10% to 18%.  The accrued interest was $7,035 and $4,574 as of June 30, 2008 and December 31, 2007, respectively.




 
15

 

NB TELECOM, INC.
NOTES TO THE FINANCIAL STATEMENTS


Note 6.        Commitments
 
As of June 30, 2008, all activities of the Company have been conducted by corporate officers from either Companies Parents business offices.  Currently, there are no outstanding debts owed by the company for the use of these facilities and there are no commitments for future use of the facilities.
 
Note 7.        Major Dial Around Compensation Providers (Commissions)
 
During 2008, the Company received approximately 95% of total dial around from two providers.  The loss of these providers would adversely impact the business of the Company.
 
Note 8.        Income Taxes
 
As of December 31, 2007, the Company had a net operating loss carry forward for income tax reporting purposes of approximately $397,997 that may be offset against future taxable income through 2025.  Current tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership occurs.  Therefore, the amount available to offset future taxable income may be limited.  No tax benefit has been reported in the financial statements, because the Company believes there is a 50% or greater chance the carry-forwards will expire unused.  Accordingly, the potential tax benefits of the loss carry-forwards are offset by a valuation allowance of the same amount.

   
2007
   
2006
 
Net Operating Loss
    135,319       183,124  
Valuation Allowance
    (135,319 )     (183,124 )
      -       -  
 
The provision for income taxes differs from the amount computed using the federal US statutory income tax rate as follows:

   
2007
   
2006
 
Provision (Benefit) at US Statutory Rate
    (37,509 )     (62,262 )
Other Differences
    (10,296 )     (246 )
Increase (Decrease) in Valuation Allowance
    47,805       62,508  
      -       -  
 
The Company evaluates its valuation allowance requirements based on projected future operations. When circumstances change and causes a change in management's judgment about the recoverability of deferred tax assets, the impact of the change on the valuation is reflected in current income.

 
16

 

NB TELECOM, INC.
NOTES TO THE FINANCIAL STATEMENTS

 
Note 9.                      Merger and Spinoff
 
On December 27, 2005 the Company signed an Agreement and Plan of Merger ("Agreement") with NB Telecom, Inc., ("Telecom") a newly formed Nevada corporation.  Under the terms of the proposed Merger the Company shall be merged into Telecom, with Telecom continuing as the surviving corporation.  The Merger became effective as of March 23, 2006. The SEC granted effectiveness for NB Telecom August 24, 2007.
 
The financial statements present only the accounts of NB Telecom, Inc. which was a wholly owned subsidiary of USIP.COM, Inc. until the spin off effective date of August 24. The spin-off is accounted for as a recapitalization of the Company, accordingly the financial statements are restated to reflect the 49,632,222 shares outstanding after the spin-off in all periods presented
 
Note 10.       Common Stock Transactions
 
The spin off from USIP was effective August 24, 2007 which resulted in 49,632,222 shares being issued at $.0001 per share.  This change has been accounted for retro actively.

 
17

 


 
Item 2.  Management Discussion and Analysis of Financial Conditions and Results of Operations
 
Forward Looking Statements
 
Some of the information in this section contains forward-looking statements that involve substantial risks and uncertainties. You can identify these statements by forward-looking words such as "may," "will," "expect," "anticipate," "believe," "estimate" and "continue," or similar words. You should read statements that contain these words carefully because they:

discuss our future expectations;

contain projections of our future results of operations or of our financial condition; and

state other "forward-looking" information.
 
We believe it is important to communicate our expectations. However, there may be events in the future that we are not able to accurately predict or over which we have no control. Our actual results and the timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under "Risk Factors," "Business" and elsewhere in this prospectus. See "Risk Factors."
 
Organization and Basis of Presentation
 
NB Telecom, Inc. is currently a provider of both privately owned and company owned payphones (COCOT’s) and stations in New York. The Company receives revenues from the collection of the payphone coinage, a portion of usage of service from each payphone and a percentage of long distance calls placed from each payphone from the telecommunications service providers. In addition, the Company also receives revenues from the service and repair of privately owned payphones, sales of payphone units and the sales of prepaid phone cards.
 
Critical Accounting Policies
 
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make judgments, assumptions and estimates that affect the amounts reported in our consolidated financial statements and accompanying notes. We base our estimates and judgments on historical experience and on various other assumptions that we believe are reasonable under the circumstances. However, future events are subject to change, and the best estimates and judgments routinely require adjustment. The amounts of assets and liabilities reported in our consolidated balance sheet, and the amounts of revenues and expenses reported for each of our fiscal periods, are affected by estimates and assumptions which are used for, but not limited to, the accounting for allowance for doubtful accounts, goodwill and intangible asset impairments, restructurings, inventory and income taxes. Actual results could differ from these estimates. The following critical accounting policies are significantly affected by judgments, assumptions and estimates used in the preparation of our consolidated financial statements.
 
Revenue Recognition Policies
 
The Company derives its primary revenue from the sources described below, which includes dial around revenues, coin collections, and telephone equipment repairs and sales. Other revenues generated by the company include, phone card sales, and commissions.
 
Dial around revenues are generated from calls to gain access to a different long distance carrier than is already programmed into the phone. Revenues from dial around calls are recorded based upon estimates until the coin collection revenues are generated when callers deposit coins into the phones to make calls. Coin revenues are recorded in an amount equal to the coins collected.  Revenues on commissions, phone card sales, and telephone equipment repairs and sales are realized when the services are provided.

 
18

 

 
SIX MONTHS ENDED JUNE 30, 2008 COMPARED TO SIX MONTHS ENDED JUNE 30, 2007
 
REVENUES
 
Our total revenue decreased by $8,743 or approximately 24.8%, from $35,321in the six months ended June 30, 2007 to $26,578 in the six months ended June 30, 2008.  This decrease was primarily attributable to removal of unprofitable phone locations and lower call volumes on our payphones resulting from the growth in wireless communications.
 
Our commissions decreased by $6,070 or approximately 100%, from $6,070 in the six months ended June 30, 2007 to $0 in the six months ended June 30, 2008.  This decrease was primarily due to lower call volumes resulting in less commissions.
 
Our coin call revenues decreased by $3,489 or approximately 84.5%, from $4,129 in the six months ended June 30, 2007 to $640 in the six months ended June 30, 2008.  The decrease in coin call revenue was primarily attributable to the reduced number of payphones we operated coupled with the increased competition from wireless communication services.
 
Our non-coin call revenue, which is comprised primarily of dial-around revenue, increased $952 or approximately 14.1% from $6,743 in the six months ended June 30, 2007 to $7,695 in the six months ended June 30, 2008.  This increase was primarily attributable to an increase in toll free calling in this quarter.
 
Service & Repair Sales increased by $63, when compared to the same period in 2007. Equipment Sales decreased $199, when compared to the same period in 2007.
 
COSTS OF SALES
 
Our overall cost of sales decreased for the six months ending June 30, 2008 by $27,065 or approximately 67.5% when compared to the six months ended June 30, 2007.
 
Our telecommunication costs decreased by $18,686, or approximately 60.7% when compared to the same period in 2007.  This decrease is primarily attributable to fewer payphones to support.
 
Depreciation expense decreased by $9,342 when compared to the same period in 2007.  This decrease is due to certain assets being fully depreciated and our on going strategy of identifying unprofitable payphones, and selling them to the site owners.  Because an asset such as telephone equipment or motor vehicle is expected to provide service for many years, it is recorded as an asset, rather than an expense, in the year acquired.  A portion of the cost of the long-lived asset is reported as an expense during each year over the life of the asset in a rational and systematic manner.
 
Our cost for travel increased $808 when compared to the same period in 2007. Our supplies increased $155 when compared to the same period in 2007.
 
OPERATION AND ADMINISTRATIVE EXPENSES
 
Operating expenses decreased by $17,878 or approximately 37.03% over the same period in 2007.  Approximately 74.9% of this decrease is related to decrease in salary expense.  Salaries and related payroll taxes decreased by $13,390 when compared to the same period for 2007.  This decrease is attributable to reducing a full time employee to part time.  Rent decreased by $563 when compared to 2007.  Professional fees decreased by $70 over 2007.  These are fees we pay to accountants and attorneys throughout the period for performing various tasks.  Our office and vehicle expenses, together account for a decrease of $3,855 when compared to the same period ending June 30, 2007.

 
19

 

 
Interest Expense
 
Interest expense, net, increased for the period ended June 30, 2008 to $13,801 from $12,127 for the period ended June 30, 2007. This increase was due to increased interest-rate debt.
 
Net Loss from Operations
 
We had net loss of $30,684 for the period ended June 30, 2008 as compared to a net loss after taxes of $59,697 for the period ended June 30, 2007. This decrease was due to a decrease in operating expenses for the period ended June 30, 2008.
 
Liquidity and Capital Resources
 
Our primary liquidity and capital resource needs are to finance the costs of our operations.
 
As of June 30, 2008, we had $0 cash on hand, compared to $0 as of June 30, 2007.
 
We believe that we will continue to need investing and financing activities to fund operations.
 
Net cash used in operating activities was $36,313 during the six-month period ended June 30, 2008, mainly representative of the net loss incurred during 2008. This compares to net cash used in operating activities of $12,069 for the six-month period ended June 30, 2007.
 
Net cash provided by financial activities was $36,313 during six-month period ended June 30, 2008, mainly representing the proceeds from related party notes.  This compares to net cash provided by financing activities of $5,909 for the six-month period ended June 30, 2007 mainly due to proceeds from related party notes of $6,759 and proceeds from sale of equipment of $6,160.
 
Our expenses to date are largely due to professional fees and the cost of sales for telephone communication costs.
 
We believe that our operations will provide us with the necessary funds to satisfy our liquidity needs for the next 6 months. To the extent they are not, however, our principal stockholders have agreed to fund our operations for the next twelve-month period and beyond.
 
Working Capital
 
As of June 30, 2008, we had total assets of $8,855 and total liabilities of $292,827 which results in working deficit of $(283,972) as compared to total assets of $7,174 and total liabilities of $260,462 resulting in a working deficit of $(253,288) as of June 30, 2007.
 
THREE MONTHS ENDED JUNE 30, 2008 COMPARED TO THREE MONTHS ENDED JUNE 30, 2007
 
REVENUES
 
Our total revenue decreased by $6,257 or approximately 34.3%, from $18,235 in the three months ended June 30, 2007 to $11,978 in the three months ended June 30, 2008.  This decrease was primarily attributable to removal of unprofitable phone locations and lower call volumes on our payphones resulting from the growth in wireless communications.
 
Our commissions decreased by $267 or approximately 100%, from $267 in the three months ended June 30, 2007 to $0 in the three months ended June 30, 2008.  This decrease was primarily due to lower call volumes on our payphones.

 
20

 

 
Our coin call revenues decreased by $2,100 or approximately 100%, from $2,100 in the three months ended June 30, 2007 to $0 in the three months ended June 30, 2008.  The decrease in coin call revenue was primarily attributable to the reduced number of payphones we operated coupled with the increased competition from wireless communication services.
 
Our non-coin call revenue, which is comprised primarily of dial-around revenue, decreased $3,148 or approximately 46.7% from $6,743 in the three months ended June 30, 2007 to $3,595 in the three months ended June 30, 2008.  This decrease was primarily attributable to lower call volumes on our network of payphones.
 
Service & Repair Sales decreased by $742, when compared to the same period in 2007.
 
COSTS OF SALES
 
Our overall cost of sales decreased for the three months ending June 30, 2008 by $16,413 or approximately 92.5% when compared to the three months ended June 30, 2007.
 
Our telecommunication costs decreased by $14,670, or approximately 96.4% when compared to the same period in 2007. This decrease is primarily attributable to fewer payphones to support.
 
Depreciation expense decreased by $2,522 when compared to the same period in 2007.  This decrease is due to certain assets being fully depreciated and our on going strategy of identifying unprofitable payphones, and selling them to the site owners.
 
Our cost for travel increased $624 when compared to the same period in 2007. Our supplies increased $155 when compared to the same period in 2007.
 
OPERATION AND ADMINISTRATIVE EXPENSES
 
Operating expenses increased by $3,709 or approximately 18.08% over the same period in 2007.  Salaries and related payroll taxes decreased by $7,157 when compared to the same period for 2007.  This decrease is attributable to a full time employee becoming part time.  Rent decreased by $500 when compared to 2007.  Professional fees increased by $13,195 over 2007.  These are fees we pay to accountants and attorneys throughout the period for performing various tasks.  Our office and vehicle expenses, together account for a decrease of $1,829 when compared to the same period ending June 30, 2007.
 
Interest Expense
 
Interest expense, net, increased for the period ended June 30, 2008 to $6,930 from $4,087 for the period ended June 30, 2007. This increase was due to increased interest-rate debt.
 
Item 3.  Quantitive and Qualitative Disclosure About Market Risks.
 
Not Applicable.
 
Item 4.  Controls and Procedures
 
(a)           Evaluation of disclosure controls and procedures.
 
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed pursuant to the Securities Exchange Act of 1934, as amended the ("Exchange Act"), is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules, regulations and related forms, and that such information is accumulated and communicated to our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

 
21

 

 
We have carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective.
 
(b)           Changes in internal controls.
 
There have been no significant changes in our internal controls or other factors that could significantly affect such controls and procedures subsequent to the date we completed our evaluation. Therefore, no corrective actions were taken.
 
PART II - OTHER INFORMATION
 
Item 1.  Legal Proceedings.
 
To the best knowledge of the Company's officers and directors, the Company is currently not a party to any pending legal proceedings.
 
Item 1A.  Risk Factors.
 
There have been no material changes to the risk factors previously disclosed under item 1 of the Company’s Registration Statement on Form SB-2 as initially filed with the United States Securities and Exchange Commission on May 12, 2006.
 
Item 2.  Unregistered sales of Equity Securities and Use of Proceeds.
 
None.
 
Item 3.  Defaults Upon Senior Securities.
 
None.
 
Item 4.  Submission of Matters to a Vote of Security Holders.
 
None.
 
Item 5.  Other Information.
 
None.

 
22

 

 
Item 6.  Exhibits.
 
(a)
Exhibits:
*3.1
Certificate of Incorporation.
*3.2
By-Laws.
31.1
Certification pursuant to Section 302 of Sarbanes Oxley Act of 2002.
31.2
Certification pursuant to Section 302 of Sarbanes Oxley Act of 2002.
32.1
Certification pursuant to Section 906 of Sarbanes Oxley Act of 2002.
32.2
Certification pursuant to Section 906 of Sarbanes Oxley Act of 2002.
 
* Filed as an exhibit to the Company's Registration Statement on Form SB-2, as initially filed with the Securities and Exchange Commission on May 12, 2006, and incorporated herein by this reference.
 

 
SIGNATURES
 
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, there unto duly authorized.
 
 
 
Dated:  August 14, 2008
NB TELECOM, INC.
 
By:
/s/ Paul Kelly
   
Paul Kelly
   
President, Principal Financial Officer
 
 
 
 

 
23