UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
| [ X ] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2006
OR
| [ ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _____________ to _____________
Commission File Number 000-32311
Ameralink, Inc.
(Exact name of small business issuer as specified in charter)
Nevada | 86-1010347 |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| | |
1940 Zinfandel Drive, Suite R, Rancho Cordova, CA 95670
(Address of principal executive offices)
(916) 768-2160
(Issuer's Telephone number, including area code)
__________________________________________________________
(Former name, former address, and former fiscal
year, if changed since last report)
Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes x No o
State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: As of May 19, 2006, the Issuer had 7,000,000 shares of its common stock, par value $0.001 per share, issued and outstanding.
Transitional Small Business Disclosure Format (check one): Yes o No x
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Ameralink, Inc. has included its unaudited condensed balance sheets as of March 31, 2006 and December 31, 2005 (the end of our most recently completed fiscal year), and unaudited condensed statements of operations and cash flows for the three months ended March 31, 2006 and 2005, and for the period from December 31, 1998 (date of inception) through March 31, 2006, together with unaudited condensed notes thereto. In the opinion of management of Ameralink, Inc., the financial statements reflect all adjustments, all of which are normal recurring adjustments, necessary to fairly present the financial condition, results of operations, and cash flows of Ameralink, Inc. for the interim periods presented. The financial statements included in this report on Form 10-QSB should be read in conjunction with the audited financial statements of Ameralink, Inc. and the notes thereto for the year ended December 31, 2005 included in our annual report on Form 10-KSB.
(A Development Stage Company)
Condensed Balance Sheets
(Unaudited)
| | | March 31, | | December 31, | |
| | | 2006 | | 2005 | |
ASSETS |
| |
Current Assets | | | | | |
| Deferred acquisition costs | | $ | 18,940 | | $ | - | |
| | | | | | | | |
Total Assets | | $ | 18,940 | | $ | - | |
| | | | | | | | |
LIABILITIES AND SHAREHOLDERS' DEFICIT |
| |
Current Liabilities | | | | | | | |
| Accounts payable | | $ | 7,241 | | $ | 8,071 | |
| Payable to officer/shareholder | | | 13,389 | | | 8,834 | |
| Refundable acquisition costs | | | 19,940 | | | - | |
Total Current Liabilities | | | 40,570 | | | 16,905 | |
| | | | | | | | |
Shareholders' Deficit | | | | | | | |
| Common stock, $0.001 par value; 25,000,000 shares authorized; 7,000,000 shares issued and outstanding | | | 7,000 | | | 7,000 | |
| Additional paid in capital | | | 16,525 | | | 16,525 | |
| Deficit accumulated during the development stage | | | (45,155 | ) | | (40,430 | ) |
Total Shareholders' Deficit | | | (21,630 | ) | | (16,905 | ) |
| | | | | | | | |
Total Liabilities and Shareholders' Deficit | | $ | 18,940 | | $ | - | |
| | | | | | | | |
The accompanying notes are an integral part of these condensed financial statements.
(A Development Stage Company)
Statements of Operations
(Unaudited)
| | | For the Three Months Ended March 31, | | For the Period from December 31, 1998 (date of inception) through March 31, | |
| | | 2006 | | 2005 | | 2006 | |
| General and administrative expense | | $ | 4,725 | | $ | 1,099 | | $ | 45,155 | |
| | | | | | | | | | | |
Net Loss | | $ | (4,725 | ) | $ | (1,099 | ) | $ | (45,155 | ) |
| | | | | | | | | | | |
Loss Per Common Share | | $ | - | | $ | - | | | | |
| | | | | | | | | | | |
Weighted-Average Common Shares Outstanding | | | 7,000,000 | | | 7,000,000 | | | | |
The accompanying notes are an integral part of these condensed financial statements.
AMERALINK, INC.
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
| | | For the Three Months Ended March 31, | | For the period from December 31, 1998 (date of inception) through March 31, | |
| | | 2006 | | 2005 | | 2006 | |
| | | | | | | | |
Cash Flows From Operating Activities | | | | | | | |
| Net loss | | $ | (4,725 | ) | $ | (1,099 | ) | $ | (45,155 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities | | | | | | | | | | |
| Changes in assets and liabilities: | | | | | | | | | | |
| Increase (decrease) in accounts payable | | | 170 | | | (2,729 | ) | | 8,241 | |
| Increase in payable to officers/shareholders | | | 4,555 | | | 3,828 | | | 29,914 | |
Net Cash Used In Operating Activities | | | - | | | - | | | (7,000 | ) |
| | | | | | | | | | | |
Cash Flows From Investing Activities | | | - | | | - | | | - | |
| | | | | | | | | | | |
Cash Flows From Financing Activities | | | | | | | | | | |
| Proceeds from the sale of common stock | | | - | | | - | | | 7,000 | |
Net Cash Provided By Financing Activities | | | - | | | - | | | 7,000 | |
| | | | | | | | | | | |
Net Increase In Cash | | | - | | | - | | | - | |
| | | | | | | | | | | |
Cash At Beginning Of Period | | | - | | | - | | | - | |
| | | | | | | | | | | |
Cash At End Of Period | | $ | - | | $ | - | | $ | - | |
| | | | | | | | | | | |
| Supplemental disclosure of noncash investing and financing activities: | | | | | | | | | | |
| | | | | | | | | | | |
| Payment from 518 Media, Inc. for due diligence costs | | $ | 20,000 | | $ | - | | $ | 20,000 | |
| | | | | | | | | | | |
| Contribution of payable to officers/shareholders to additional paid-in capital | | $ | - | | $ | - | | $ | 16,525 | |
The accompanying notes are an integral part of these condensed financial statements.
AMERALINK, INC.
(A Development Stage Company)
Notes to Condensed Financial Statements
(A) Organization, Change in Control and Significant Accounting Policies
Organization, Nature of Operations and Change in Control— Ameralink, Inc. ("the Company") was incorporated in the State of Nevada on December 31, 1998, organized to engage in any lawful corporate business, including but not limited to, participating in mergers with, and the acquisitions of, other companies. The Company is in the development stage and has not yet commenced any formal business operations other than organizational matters. On March 31, 2004, two individuals acquired 99.6% of the stock of the Company from shareholders of the Company for $225,000. At that time, control of the Company was transferred to a new board of directors. The change of control does not constitute a business combination or reorganization, and consequently, the assets and liabilities of the Company continue to be recorded at historical cost.
Condensed Interim Financial Statements- The accompanying condensed financial statements of Ameralink, Inc. are unaudited. Accordingly, these financial statements do not include all of the information and disclosures required by generally accepted accounting principles for complete financial statements. These financial statements should be read in conjunction with the Company’s annual financial statements and the notes thereto for the year ended December 31, 2005 and for the period from December 31, 1998 (date of inception) through December 31, 2005, included in the Company’s annual report on Form 10-KSB. In the opinion of the Company’s management, the accompanying unaudited condensed financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to fairly present the Company’s financial position as of March 31, 2006, its results of operations and cash flows for the three months ended March 31, 2006 and 2005, and for the period from December 31, 1998 (date of inception), through March 31, 2006. The results of operations for the three months ended March 31, 2006, may not be indicative of the results that may be expected for the year ending December 31, 2006.
Business Condition - The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. However, the Company has incurred losses since its inception and has not yet been successful in establishing profitable operations. These factors raise substantial doubt about the ability of the Company to continue as a going concern. In this regard, management’s plans include seeking a merger or acquisition candidate, or raising additional funds to meet its ongoing expenses through shareholder loans or private placement of its equity securities. There is no assurance that the Company will be successful in finding a merger or acquisition candidate or raising additional capital or loans, and if so, on terms favorable to the Company. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.
Basic Loss Per Share - Basic loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding during each period. At March 31, 2006, there are no potentially dilutive common stock equivalents.
(B) Letter of Intent to Acquire 518 Media, Inc.
Effective February 22, 2006, the Company entered into a non-binding letter of intent to acquire all of the issued and outstanding shares of 518 Media, Inc., a California corporation, which owns small percentage interests in various films and certain film distribution rights. In connection with this potential transaction, 518 Media advanced $20,000 to the Company to assist in the payment of expenses in completing the acquisition. The advance was recorded as a current asset and a current liability designated as “deferred acquisition costs” and “refundable acquisition costs,” respectively. If the Company fails to complete the acquisition, the Company will issue 425,000 of its restricted common stock to 518 Media in lieu of repayment of the $20,000.
(C) Related Party Transactions
Since the inception of the Company through the date of the change of control described above, the operating expenses of the Company were paid by the former principal shareholder of the Company (with the exception of expenses paid by the initial proceeds from the sale of common stock). The total amount paid by the former principal shareholder was $16,525 through the date of the change of control. In connection with the change of control, the former principal shareholder contributed the amount owed to him by the Company totaling $16,525 back to the capital of the Company. Since March 31, 2004, a new officer and shareholder has advanced the Company $13,389 for the payment of expenses incurred since the change of control.
The Company neither owns nor leases any real or personal property. Office services are provided without charge by an officer and director of the Company. Such costs are not significant to the financial statements and accordingly, have not been reflected herein.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION
Forward Looking Statements
This discussion and analysis is designed to be read in conjunction with the Management’s Discussion and Analysis set forth in Ameralink, Inc.’s Form 10-KSB for the fiscal year ended December 31, 2005. As used herein, “we,” “our,” “us” and the like refer to Ameralink, Inc.
This report and other information made publicly available by Ameralink, Inc. from time to time may contain certain forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other information relating to Ameralink, Inc. and its business that are based on the beliefs of our management and assumptions made concerning information then currently available to management. Such statements reflect the views of our management at the time they are made and may not be accurate descriptions of the future. The discussion of future events, including the business prospects of Ameralink, Inc., is subject to the material risks listed below and based on assumptions made by management. These risks include our ability to identify and negotiate transactions that provide the potential for future shareholder value, our ability to attract the necessary additional capital to permit us to take advantage of opportunities with which we are presented, and our ability to generate sufficient revenue such that we can support our current cost structure and planned future operations, as well as to pay prior liabilities incurred. Should one or more of these or other risks materialize or if the underlying assumptions of management prove incorrect, actual results of Ameralink, Inc. may vary materially from those described in the forward looking statements. We do not intend to update these forward-looking statements, except as may occur in the regular course of our periodic reporting obligations.
Risk factors
The material risks that we believe are faced by the Company as of the date of this report are set forth below. This discussion of risks is not intended to be exhaustive. The risks set forth below and other risks not currently anticipated or fully appreciated by the management could adversely affect the business and prospects of the Company. These risks include:
Development Stage Company - The Company has no current operations or revenues. The Company faces all of the risks inherent in the start-up of a new business and does not have a historical basis on which to evaluate whether or not its proposed business can be successful, including whether it can: implement a business model and pricing strategy that will permit it to operate profitably; hire and retain management and employees with the necessary skills to successfully implement its business strategy; and successfully develop and implement administrative and support systems such as personnel management, accounting records and controls, service and support, record keeping and office administration. 518 Media, which we wish to acquire, is also a newly-formed entity with only a small amount of revenue to date. Thus, the development stage risk factor will remain even upon the completion of the merger.
Dependence on Management - The Company is heavily dependent upon the skill, talents, and abilities of its president, Robert Freiheit. Mr. Freiheit will be primarily responsible for the decisions concerning the implementation of a business model. Mr. Freiheit will not devote his fully business time to the Company and will continue to be engaged in outside business activities. The Company will be dependent upon the business acumen and expertise of management and the applicability of their backgrounds to the business decisions required to be made on behalf of the Company. The proposed acquisition will also be heavily dependent upon its management.
No Trading Market for the Common Stock - There is no existing trading market for the Common Stock and it is unlikely that one will develop in the foreseeable future. The shares of Common Stock may be subject to the Penny Market Reform Act of 1990 (the “Reform Act”). In October 1990, Congress enacted the Reform Act to counter fraudulent practices common in penny stock transactions. If the shares are determined to be subject to the Reform Act, this may also adversely affect the ability to sell shares in the future.
Lack of Dividends - It is anticipated that the Company will invest any profits generated from its operations, and therefore, it is unlikely that the Company will pay dividends on its Common Stock in the foreseeable future.
Control of the Company by Management- The two directors of the Company currently hold voting and dispositive power over an aggregate of 6,973,600 shares of Common Stock, which represents 99.6% of the currently issued and outstanding Common Stock. Since action by the stockholders on most matters, including the election of directors, only requires approval by a vote of the majority of shares voted on the mater, the current directors and executive officers of the company will be able to significantly influence if not control the election of directors of the Company and the outcome of other matters submitted to the stockholders for consideration. Upon the successful acquisition of 518 Media, its management shall take control of the Company and succeed to the powers associated with such control.
No Assurance of Completion of Acquisition - We are currently conducting our due diligence and investigation of 518 Media and its business, and there is no assurance that the transaction will be completed. If the transaction fails, we will be required to issue an additional 425,000 shares of common stock, and be forced to resume searching for another business opportunity, incurring both the cost and time associated therewith.
Unforeseen Risks - In addition to the above risks, the future business of the Company will be subject to risks not currently foreseen or fully appreciated by management of the Company.
Should one or more of these or other risks materialize, or if the underlying assumptions of management prove incorrect, actual results may vary materially from those described in the forward-looking statements. We do not intend to update these forward-looking statements, except as may occur in the regular course of our periodic reporting obligations.
Overview
Ameralink, Inc. was incorporated in the State of Nevada on December 31, 1998, organized to engage in any lawful corporate business, including but not limited to, participating in mergers with, and the acquisitions of, other companies. We are in the development stage and have not yet commenced any formal business operations. All activities since December 31, 1998 relate to our formation and the seeking of investment or merger opportunities. On March 31, 2004, control of Ameralink, Inc. was transferred to a new board of directors.
Plan of Operation
We were formed to engage in a merger with or acquisition of an unidentified foreign or domestic company which desires to become a reporting ("public") company whose securities are qualified for trading in the United States secondary market. We currently meet the definition of a "blank check" company contained in Section (7)(b)(3) of the Securities Act of 1933, as amended. We have been in the developmental stage since inception and have no operations to date.
Effective February 22, 2006, we entered into a non-binding letter of intent to acquire all of the issued and outstanding shares of 518 Media, Inc., a California corporation, which owns small percentage interests in various films and certain film distribution rights. If the proposed transaction is consummated, we would be the parent corporation and 518 Media would be our wholly-owned subsidiary. Currently, we have 7,000,000 common shares issued and outstanding. The proposed transaction calls for our reorganization so that at the close of the transaction, there will be a total of 8,534,000 common shares outstanding, without taking into account the shares issued in connection with the private placement described in the following paragraph. The shareholders of 518 Media will own 5,300,000 shares and will occupy four of the five seats on the board of directors.
The consummation of the transactions contemplated by the letter of intent is conditioned on the parties negotiating and entering into a definitive agreement and obtaining the required shareholder approvals. The letter of intent further states that as a condition precedent to the closing of the merger with 518 Media the parties complete a private placement offering of our common shares at the offering price of $0.40 per share with a minimum of $400,000 and a maximum of $600,000 gross proceeds under the terms set forth in the letter of intent. Pursuant to the letter of intent, 518 Media has agreed not to solicit, engage in or encourage discussions concerning an acquisition with another party until April 30, 2006. On April 25, 2006, this deadline was extended to June 30, 2006.
Our audit reflects the fact that we have no current source of income. Further, that without realization of additional capital, it would be unlikely for the Company to continue as a going concern.
518 Media has advanced $20,000 to us to assist in the payment of expenses in completing the acquisition. If we fail to complete the acquisition, we will issue 425,000 of our restricted common stock to 518 Media in lieu of repayment. Our majority stockholder has agreed that he will advance any additional funds which are needed for operating capital and for costs in connection with completing the transaction.
Recent Accounting Pronouncements
In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 123 (Revised 2004), Share-Based Payment (SFAS 123R), which addresses the accounting for share-based payment transactions in which a company receives employee services in exchange for either equity instruments of that company or liabilities that are based on the fair value of that company’s equity instruments, or that may be settled by issuance of such equity instruments. SFAS 123R eliminates the ability to account for share-based compensation transactions using the intrinsic value method as prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and requires that such transactions be accounted for using a fair value-based method and recognized as expense in the statement of operations. SFAS 123R was effective beginning January 1, 2006. The adoption of SFAS 123R did have any immediate effect on the Company as the Company does not currently have stock options or any other share-based payment arrangement outstanding. The future impact of adoption will be dependent on several factors, including but not limited to, our future stock-based compensation strategy and our stock price volatility.
In June 2005, the FASB issued Statement of Financial Accounting Standards No. 154, Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20 and FASB Statement No. 3 (SFAS 154). SFAS 154 is effective for accounting changes and corrections of errors made in fiscal year 2006 and beyond. The effect of this statement on the Company’s financial statements will depend on the nature and significance of future accounting changes subject to this statement.
ITEM 3. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
In accordance with Section 302 of the Sarbanes-Oxley Act of 2002 and the Securities Exchange Act of 1934 Rules Section 13a-15(e) and 15d-15(e), we maintain disclosure controls and procedures pursuant to which management under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, carried out, as of the end of the quarter ended March 31, 2006, a review and evaluation of the effectiveness of our disclosure controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer has concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by Chapeau in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported with the time periods specified by the SEC’s rules and forms.
Changes in Internal Controls
There were no significant changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2006 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
On April 25, 2006, Ameralink, Inc. and 518 Media, Inc. amended their non-binding letter of intent such that it would remain effective until June 30, 2006.
ITEM 6. EXHIBITS
Exhibits
Exhibit Number | | SEC Reference Number | | Title of Document | | Location |
| | | | | | | |
| 1 | | (10) | | Amendment to Letter of Intent | | This filing |
| | | | | | | |
| 2 | | (31) | | Rule 13(a) - 14(a)/15(d) - 14(a) Certification | | This filing |
| | | | | | | |
| 3 | | (32) | | Section 1350 Certification | | This filing |
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | AMERALINK, INC. |
| | | |
| | | |
| | | |
| Dated: May 22, 2006 | By | /s/ Robert Freiheit |
| | | Robert Freiheit, President and Chief Executive Officer |
| | | (Principal Executive Officer) |
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