TELCO TECH INC. (fka TTXI)

[ToshacH]

TTXI convertible preferreds........

On October 27, 2004, Telco-Technology, Inc. ("Telco") acquired from GreenSpace Capital, L.L.C., and Acutus Capital, L.L.C. the outstanding capital stock of GreenWorks Corporation ("GreenWorks"). In exchange for the GreenWorks shares, Telco issued to each of the selling shareholders 500,000 shares of Series A Convertible Preferred Stock (the "Preferred Stock") and a demand promissory note in the principal amount of $100,000. The Preferred Stock is entitled to vote with the common stock on all matters. Each share of Preferred Stock is convertible into 100 shares of common stock at any time after December 31, 2005. The number of votes which may be cast by a holder of shares of Preferred Stock will be equal to the number of shares of the common stock into which the Preferred Stock could be converted (an aggregate of 100,000,000 prior to any adjustmentOn October 27, 2004, Telco-Technology, Inc. ("Telco") acquired from GreenSpace Capital, L.L.C., and Acutus Capital, L.L.C. the outstanding capital stock of GreenWorks Corporation ("GreenWorks"). In exchange for the GreenWorks shares, Telco issued to each of the selling shareholders 500,000 shares of Series A Convertible Preferred Stock (the "Preferred Stock") and a demand promissory note in the principal amount of $100,000. The Preferred Stock is entitled to vote with the common stock on all matters. Each share of Preferred Stock is convertible into 100 shares of common stock at any time after December 31, 2005. The number of votes which may be cast by a holder of shares of Preferred Stock will be equal to the number of shares of the common stock into which the Preferred Stock could be converted (an aggregate of 100,000,000 prior to any adjustment

EVEN WORSE

On October 21, 2004 Telco sold to Cornell Capital Partners, LP a 5% Secured Convertible Debenture in the principal amount of $500,000 (the "Debenture"). Telco obtained net proceeds of $425,000, after payment of a $60,000 commitment and structuring fee to Cornell Capital Partners as well as a $15,000 fee relating to the Standby Equity Distribution Agreement discussed below. Interest that accrues on the Debenture is payable at maturity. The principal amount of the Debenture is payable on October 21, 2007. However the principal amount of the Debenture will be automatically converted into Telco common shares on October 21, 2006. Prior to that date, the holder of the Debenture has the option to convert the accrued interest and principal amount of the Debenture into Telco common shares at any time. Whenever the principal amount of the Debenture is converted into common shares, whether automatically or by the holder, the conversion price will equal the lesser of
(a) 120% of the closing bid price on the conversion date or (b) 80% of the lowest closing bid price for the five trading days preceding the conversion date.