Electrolinks is a “Full Service BPL-based Telecommunications Integrator” offering utilities with “Smart Grid” BPL solutions. Electrolinks technologies allow monitoring and management of the distribution network from various places right down to the individual customer level. This is made possible through the use of Electrolinks technology providing real-time network management and broadband capabilities.
Among Electrolinks Broadband suite of services and solutions are: professional services, network integration and outsourcing, BPL business intelligence and network operations center (NOC) functions geared towards planning, design, implementation, and operations of Broadband over Power Line and hybrid networks.
Power lines have sufficient capacity to transmit data as well as power. In fact power lines have been used to carry data for many years using a rudimentary technology that allowed delivery of low-speed data over short distances. In recent years the technology has been refined to the point that it now supports the efficient transmission of high-speed data over very long distances.
BPL has distinct advantages over broadband technologies such as DSL and Cable in that it relies on the existing electrical infrastructure so deployment costs are low and it has greater bandwidth delivery potential. The industry appears to have reached a “tipping point” in that there is a clear momentum driving utilities, governments and the public to give the product a try.
In addition to the electrical utility applications, businesses, whether small or large, now require high speed Internet access. In response to the demand for this service, the major telephone and other associated companies have built large fiber optic networks that span North America and much of the world. Old buildings and existing residential subdivisions do not have modern fiber optic or other wiring which are able to give access to the high speed networks without the installation of new wiring, the cost of which is prohibitive. The distance between the end user located in the areas not now served by or able to access the high speed network is often called the “last mile” and until now there has been no effective technology for economically making this connection.
The ability to access the high speed network over electrical wiring would be a solution and for many years there has been ongoing research to use the electrical wiring for this purpose. This is called “broadband over powerlines” or BPL. A method for sending Internet and telephone data at high speeds over electrical lines and wiring over long and short distances has now been perfected.
Public utilities own and operate the power grid and can use electrical wiring for power line communications with minimal upgrade costs. Older buildings and facilities obtain the same benefits through the use of the electrical wiring already present in providing internal high speed Internet and telephone access.
Results of Operations
During the nine month period ended June 30, 2007 and the year ended September 30, 2006, our operations were focused on exploration of our precious mineral claims in British Columbia, satisfying continuous public disclosure requirements and entering into an agreement to acquire Electrolinks as a wholly owned subsidiary.
We do not expect to receive revenues within the next twelve months sufficient to fund our operations, even in the event that the acquisition of Electrolinks is approved. Electrolinks has only recently initiated the commercial application of its technology and has realized limited revenue to date. Rather, in the event that the acquisition of Electrolinks is approved, the Company is obligated to raise up to five million dollars ($5,000,000) on a best efforts basis to fund operations.
Net Loss
For the period from inception January 19, 1999 to June 30, 2007, the Company recorded an operating loss of $110,202. Net losses for the three month period ended June 30, 2007 were $40,582 as compared to $2 for the three months ended June 30, 2006. Net losses for the nine month period ended June 30, 2007 were $60,678 as compared to $34,006 for the nine months ended June 30, 2006. The Company’s operating losses in the current nine month period are attributable to general and administrative expenses including accounting costs and consulting fees. Expenses in prior periods have also included exploration costs directly related to our former precious metals exploration program. The Company has not generated any revenues since inception.
The Company expects to continue to operate at a loss through fiscal 2007 and due to the nature of our intended acquisition of Electrolinks or alternatively our search for another business opportunity cannot determine whether we will ever generate revenues from operations.
Income Tax Expense (Benefit)
The Company has a prospective income tax benefit resulting from a net operating loss carryforward and start up costs that might offset any future operating profit.
Impact of Inflation
The Company believes that inflation has had a negligible effect on operations over the past three years.
Capital Expenditures
The Company expended no amounts on capital expenditures for the period from inception to June 30, 2007.
Capital Resources and Liquidity
The Company had current assets of $153,690 and total assets of $153,690 as of the nine month period ended June 30, 2007, consisting of cash on hand of $13,955 and expected proceeds from a loan receivable of $139,735. Net stockholders' deficiency in the Company was $46,702 at June 30, 2007. The Company is in the development stage and, since inception, has experienced significant changes in liquidity, capital resources and shareholders’ equity.
13
Cash flow used in operating activities was $52,397 for the period from inception to June 30, 2007. Cash flow used in operating activities for the nine month period ended June 30, 2007 was $20,373 as compared to $17,008 in cash flow used in operating activities for the nine months ended June 30, 2006. Cash flow used in operating activities in the current nine month period can be attributed to accounting costs and consulting expenses.
Cash flow provided from financing activities was $211,087 for the period from inception to June 30, 2007. Cash flow provided by financing activities for the nine month period ended June 30, 2007 was $160,087 as compared to $40,000 for the nine months ended June 30, 2006. Cash flow provided by financing activities in the current nine month period can be entirely attributed to shareholder loans.
Cash flows used in investing activities was $144,735 for the period from inception to June 30, 2007. Cash flows used in investing activities for the nine month period ended June 30, 2007 was $139,735 as compared to $5,000 for the nine months ended June 30, 2006. Cash flow used in investing activities in the current nine month period is attributed to a loan made to Electrolinks.
The Company’s current assets may not be sufficient to conduct its plan of operation over the next twelve (12) months and it will have to realize debt or equity financing to fund operations. The Company has no current commitments or arrangements with respect to, or immediate sources of funding. Further, no assurances can be given that funding, if needed, would be available or available to the Company on acceptable terms. Therefore, the Company’s stockholders would be the most likely source of new funding in the form of loans or equity placements though none have made any commitment for future investment and we have no agreement formal or otherwise. The Company’s inability to obtain funding would have a material adverse affect on its plan of operation.
The Company had no formal long term lines or credit or other bank financing arrangements as of June 30, 2007.
Since earnings, if any, will be reinvested in operations, the Company does not expect to pay cash dividends in the foreseeable future.
The Company has no defined benefit plan or contractual commitment with any of its officers or directors.
The Company has no current plans for any significant purchase or sale of any plant or equipment.
Off Balance Sheet Arrangements
As of June 30, 2007, the Company has no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to stockholders.
Critical Accounting Policies
In the notes to the audited financial statements for the year ended September 30, 2006 included in the Company’s Form 10-KSB, the Company discusses those accounting policies that are considered to be significant in determining the results of operations and its financial position. The Company believes that the accounting principles utilized by us conform to accounting principles generally accepted in the United States of America.
14
The preparation of financial statements requires Company management to make significant estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. By their nature, these judgments are subject to an inherent degree of uncertainty. The Company bases its estimates on historical experience and other facts and circumstances that are believed to be reasonable, and the results form the basis for making judgments about the carrying value of assets and liabilities. The actual results may differ from these estimates under different assumptions or conditions.
Forward Looking Statements and Factors That May Affect Future Results and Financial Condition
The statements contained in the section titled “Plan of Operation,” with the exception of historical facts, are forward looking statements within the meaning of Section 27A of the Securities Act. A safe-harbor provision may not be applicable to the forward looking statements made in this Form 10-QSB because of certain exclusions under Section 27A (b). Forward looking statements reflect our current expectations and beliefs regarding our future results of operations, performance, and achievements. These statements are subject to risks and uncertainties and are based upon assumptions and beliefs that may or may not materialize. These statements include, but are not limited to, statements concerning:
| - | our anticipated financial performance and business plan; |
| - | the sufficiency of existing capital resources; |
| - | our ability to raise additional capital to fund cash requirements for future operations; |
| - | uncertainties related to the Company’s future business prospects; |
| - | the ability of the Company to generate revenues to fund future operations; |
| - | the volatility of the stock market and; |
| - | general economic conditions. |
We wish to caution readers that the Company’s operating results are subject to various risks and uncertainties that could cause our actual results to differ materially from those discussed or anticipated including the factors set forth in the section entitled “Risk Factors” below. We also wish to advise readers not to place any undue reliance on the forward looking statements contained in this report, which reflect our beliefs and expectations only as of the date of this report. We assume no obligation to update or revise these forward looking statements to reflect new events or circumstances or any changes in our beliefs or expectations, other than is required by law.
Risks Factors
Our future operating results are highly uncertain. Before deciding to invest in us or to maintain or increase your investment, you should carefully consider the risks described below, in addition to the other information contained in our annual report. If any of these risks actually occur, our business, financial condition or results of operations could be seriously harmed. In that event, the market price for our common stock could decline and you may lose all or part of your investment.
We have a history of significant operating losses and such losses may continue in the future.
Since our inception in 1999, our expenses have substantially exceeded our income, resulting in continuing losses and an accumulated deficit of $110,202 at September 30, 2006. During the nine months ended June 30, 2007, we recorded a net loss of $60,678. The Company has never realized revenue from operations. We will continue to incur operating losses as we pursue our intention to acquire Electrolinks and satisfy our ongoing disclosure requirements with the Securities and Exchange Commission ("Commission"). Our only expectation of future profitability is dependent upon our ability to acquire Electrolinks and develop Electrolink’s business to a point that will produce revenue, which objectives can in no way be assured.
15
The Company’s limited financial resources cast severe doubt on our ability to successfully fund the business development of Electrolinks.
One of the conditions of the agreement to acquire Electrolinks is the representation that the Company will use its best efforts to fund the business development of Electrolinks up to five million dollars ($5,000,000) within twelve months of closing. Since our business plan is currently dependent on the acquisition of Electrolinks the prospect of satisfying this funding commitment is immediate and doubtful. We currently have insufficient capital to meet this condition and will have to rely on debt or equity offerings to meet this funding obligation. Should we be unable to realize this funding within one year of closing the transaction the successful development of the Electrolinks business plan may be called into doubt due to financial constraints which may ultimately force the Company to curtail or abandon operations.
We are dependent upon a key person, who would be difficult to replace.
Our continued operation will be largely dependent upon the efforts of Nadir Walji, our sole officer and director. We do not maintain key-person insurance on Mr. Walji. Our future success also will depend in large part upon the Company’s ability to identify, attract and retain other highly qualified managerial, technical and sales and marketing personnel. Competition for these individuals is intense. The loss of the services of Mr. Walji, the inability to identify, attract or retain qualified personnel in the future or delays in hiring qualified personnel could make it more difficult for us to maintain our operations and meet key objectives such as the acquisition of a suitable business opportunity.
The market for our stock is limited and our stock price may be volatile.
The market for our common stock has been limited due to low trading volume and the small number of brokerage firms acting as market makers. Because of the limitations of our market and volatility of the market price of our stock, investors may face difficulties in selling shares at attractive prices when they want to. The average daily trading volume for our stock has varied significantly from week to week and from month to month, and the trading volume often varies widely from day to day.
We may incur significant expenses as a result of being quoted on the Over the Counter Bulletin Board, which may negatively impact our financial performance.
We may incur significant legal, accounting and other expenses as a result of being listed on the Over the Counter Bulletin Board. The Sarbanes-Oxley Act of 2002, as well as related rules implemented by the Commission has required changes in corporate governance practices of public companies. We expect that compliance with these laws, rules and regulations, including compliance with Section 404 of the Sarbanes-Oxley Act of 2002 as discussed in the following risk factor, may substantially increase our expenses, including our legal and accounting costs, and make some activities more time-consuming and costly. As a result, there may be a substantial increase in legal, accounting and certain other expenses in the future, which would negatively impact our financial performance and could have a material adverse effect on our results of operations and financial condition.
16
Our internal controls over financial reporting may not be considered effective, which could result in a loss of investor confidence in our financial reports and in turn have an adverse effect on our stock price.
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, beginning with our annual report for the year ending December 31, 2008, we may be required to furnish a report by our management on our internal controls over financial reporting. Such report will contain, among other matters, an assessment of the effectiveness of our internal controls over financial reporting as of the end of the year, including a statement as to whether or not our internal controls over financial reporting are effective. This assessment must include disclosure of any material weaknesses in our internal controls over financial reporting identified by management. If we are unable to assert that our internal controls are effective as of December 31, 2008, investors could lose confidence in the accuracy and completeness of our financial reports, which in turn could cause our stock price to decline.
Going Concern
The Company’s auditors have noted substantial doubt as to the Company’s ability to continue as a going concern as a result of an accumulated deficit of $40,582 as of September 30, 2006 which increased to $110,202 as of June 30, 2007. The Company’s ability to continue as a going concern is subject to the ability of the Company to realize a profit and /or obtain funding from outside sources. Management’s plan to address the Company’s ability to continue as a going concern includes: (1) obtaining funding from private placement sources; (2) obtaining additional funding from the sale of the Company’s securities; (3) establishing revenues from developing Electrolinks’ business plan; (4) obtaining loans and grants from various financial institutions where possible. Although management believes that it will be able to obtain the necessary funding to allow the Company to remain a going concern through the methods discussed above, there can be no assurances that such methods will prove successful.
ITEM 3. | CONTROLS AND PROCEDURES |
The Company’s president acts both as the Company’s chief executive officer and chief financial officer and is responsible for establishing and maintaining disclosure controls and procedures for the Company.
(a) Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of June 30, 2007. Based on this evaluation, our principal executive officer and our principal financial officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective and adequately designed to ensure that the information required to be disclosed by us in the reports we submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms and that such information was accumulated and communicated to our chief executive officer and chief financial officer, in a manner that allowed for timely decisions regarding disclosure.
(b) Changes in Internal Controls
During the period ended June 30, 2007, there has been no change in internal control over financial reporting that has materially affected, or is reasonably likely to materially affect our internal control over financial reporting.
17
PART II
None.
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES |
None.
ITEM 3. | DEFAULTS ON SENIOR SECURITIES |
None.
ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS |
None.
None.
Exhibits required to be attached by Item 601 of Regulation S-B are listed in the Index to Exhibits on page 20 of this Form 10-QSB, and are incorporated herein by this reference.
18
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, hereunto duly authorized, this 7th day of August, 2007.
High End Ventures, Inc.
Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer, and Director
19
INDEX TO EXHIBITS
3(i) | * Articles of Incorporation of the Company (incorporated herein by reference from Exhibit No. 3(i) of the Company’s Form SB-2 filed with the Commission on May 9, 2006). |
3(ii) | * By-laws of the Company (incorporated herein by reference from Exhibit No. 3(ii) of the Company's Form SB-2 as filed with the Commission on May 9, 2006). |
10(i) | * Mineral Property Purchase Agreement (incorporated herein by reference from Exhibit No. 10(i) of the Company’s Form SB-2 filed with the Commission on May 9, 2006). |
10(ii) * | * Securities Exchange Agreement and Plan of Exchange (incorporated herein by reference from Exhibit No. 10 of the Company’s Form 8-K filed with the Commission on October 27, 2006). |
* | Incorporated by reference from previous filings of the Company. |
20
