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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(MARK ONE)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JANUARY 31, 2001
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD
COMMISSION FILE NUMBER 0-19726
TELYNX, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 94-3022377
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
6006 NORTH MESA STREET, SUITE 600
EL PASO, TEXAS 79912
(Address of principal executive offices)
(915) 581-5828
(Issuer's telephone number)
Check whether the issuer (1) 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 [ ]
As of March 20, 2001, 131,624,792 shares of Class A Common Stock, no shares of
Class B Common Stock, and 500 shares of Series B Convertible Preferred Stock
which are convertible into 250,000 shares of Class A Common Stock, were
outstanding.
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TELYNX, INC.
FORM 10-QSB
INDEX
Page
Number
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Part I Financial Information
Item 1 Financial Statements
Condensed Consolidated Balance Sheets as of January
31, 2001 (unaudited) and October 31, 2000 (unaudited) 3
Condensed Consolidated Statements of Operations for
the three months ended January 31, 2001 and 2000
(unaudited) 4
Condensed Consolidated Statements of Cash Flows for
the three months ended January 31, 2001 and 2000
(unaudited) 5
Notes to Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Part II Other Information 10
Item 1 Legal Proceedings 10
Item 2 Changes in Securities 10
Item 3 Defaults upon Senior Securities 10
Item 4 Submission of Matters to a Vote of Security Holders 10
Item 5 Other Information 10
Item 6 Exhibits and Reports on Form 8-K 10
Signature 11
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TELYNX, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
January 31 October 31
2001 2000
------------ -----------
(Unaudited) (Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 31,000 $ 42,000
Accounts receivable 132,000 398,000
Prepaids and deposits 103,000 85,000
----------- ------------
Total current assets 266,000 525,000
Deferred finance cost - net 70,000 110,000
Property and equipment, net 60,000 70,000
----------- ------------
Total assets $ 396,000 $ 705,000
=========== ============
LIABILITIES AND CAPITAL DEFICIT
Current liabilities:
Accounts payable and accrued liabilities $ 3,009,000 $ 2,418,000
Deferred revenue 31,000 70,000
Note payable to stockholder 562,000 479,000
Convertible notes payable to investors 350,000 --
Liabilities of discontinued operations 678,000 678,000
----------- ------------
Total current liabilities 4,630,000 3,645,000
Convertible notes payable to investors 340,000 1,000,000
Capital deficit:
Common stock, $0.01 par value - 99,416,133 authorized shares issued and
outstanding at January 31, 2001; 49,736,953
shares issued and outstanding at October 31, 2000 994,000 497,000
Preferred stock, $0.01 par value - 500 shares issued and
outstanding at January 31, 2001 and October 31, 2000 -- --
Paid in capital 28,345,000 27,206,000
Accumulated deficit (33,913,000) (31,643,000)
----------- ------------
Total stockholders' deficit (4,574,000) (3,940,000)
----------- ------------
Total liabilities and stockholders' equity $ 396,000 $ 705,000
=========== ============
See Notes to Condensed Consolidated Financial Statements (unaudited).
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TELYNX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
January 31
----------
2001 2000
---- ----
Revenue $ 80,000 $ 370,000
Cost of revenue -- 134,000
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Gross margin 80,000 236,000
Operating expenses:
Sales and marketing 442,000 222,000
Services 184,000 116,000
Research and development 230,000 57,000
General and administrative expenses 1,051,000 533,000
----------- ---------
Total operating expenses 1,907,000 928,000
Loss from operations (1,827,000) (692,000)
Other income (expense):
Interest income -- 6,000
Interest expense (443,000) (22,000)
----------- ---------
Total other expense (443,000) (16,000)
----------- ---------
Net loss $(2,270,000) $(708,000)
----------- ---------
Basic and diluted net loss per common share $ (0.04) $ (0.13)
=========== =========
Weighted average shares outstanding 57,184,603 5,519,874
=========== =========
See Notes to Condensed Consolidated Financial Statements (unaudited).
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TELYNX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
January 31
-----------
2001 2000
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (2,270,000) $ (708,000)
Adjustments to reconcile net loss to cash used in operations:
Depreciation and amortization 23,000 27,000
Interest expense on beneficial conversion of debt 397,000 --
Expenses and settlements paid with equity 226,000 --
Changes in assets and liabilities:
Receivables 266,000 99,000
Prepaid expenses (18,000) (1,000)
Accounts payable and accrued liabilities 591,000 270,000
Deferred revenue (40,000) --
Other (34,000) --
------------ -----------
Net cash used in operating activities (859,000) (313,000)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (13,000) (2,000)
------------ -----------
Net cash used in investing activities (13,000) (2,000)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of convertible debt 650,000 --
Proceeds from issuance of common stock 145,000 55,000
Proceeds from note payable to stockholder 67,000 --
Other (1,000) --
------------ -----------
Net cash provided by financing activities 861,000 55,000
------------ -----------
Net change in cash and cash equivalents (11,000) (260,000)
Cash and cash equivalents at beginning of the period 42,000 381,000
------------ -----------
Cash and cash equivalents at end of the period $ 31,000 $ 121,000
============ ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ -- $ --
Income taxes -- --
Non-cash financing activity:
Redemption of convertible debt for common shares 688,000 --
See Notes to Condensed Consolidated Financial Statements (unaudited).
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TELYNX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. ACCOUNTING POLICIES
The accompanying unaudited condensed consolidated financial statements of the
Company for the three months ended January 31, 2001 and 2000 have been prepared
on the same basis as the audited financial statements. In the opinion of
management, such unaudited information includes all adjustments (consisting only
of normal recurring accruals) necessary for a fair presentation of this interim
information. Operating results and cash flows for interim periods are not
necessarily indicative of results for the entire year. Certain prior period
amounts have been reclassified to conform to the current period presentation.
Additionally, certain information and footnote disclosures normally included in
a full set of financial statements have been condensed or omitted pursuant to
the Securities and Exchange Commission rules and regulations. The information
included in this report should be read in conjunction with the Company's audited
financial statements and notes thereto included in the Company's Annual Report
on Form 10-KSB for the year ended June 30, 2000 previously filed with the
Securities and Exchange Commission.
NOTE 2. NATURE OF BUSINESS
The Company currently provides professional services and supplies software
products for operations support systems of telecommunications networks. The
Company's primary product is Telynx Version 2. The Company closed its corporate
headquarters in Dallas, Texas and moved those administrative activities to its
main office located in El Paso, Texas. The Company also has sales executives
located in Los Angeles, California, Washington, DC, the United Kingdom and the
Middle East.
NOTE 3. DISCONTINUED OPERATIONS
On February 2, 1999, Telynx transferred all of the issued and outstanding stock
of the discontinued healthcare subsidiaries (the "Subsidiaries") to Imperial
Loan Management Corporation ("Imperial"), an affiliate of the Company's former
Chairman and CEO, Harvey Wm. Glasser, M.D. Dr. Glasser, who in February 1999
resigned his position as CEO and in March 1999 resigned from the Board of
Directors, is overseeing the liquidation of the Subsidiaries on behalf of
Imperial. The Company received no proceeds from the transfer. Prior to the
transfer, Imperial loaned $900,000 to the Subsidiaries and Telynx, represented
by 10% notes payable. Imperial will use its best efforts to liquidate each of
the Subsidiaries, settle outstanding obligations and collect all amounts
receivable. Telynx remains a guarantor of the Imperial loans, amounting to
$678,000 as of January 31, 2001. Upon liquidation of the Subsidiaries and
settlement of the outstanding indebtedness, Telynx is entitled to receive
one-half of the proceeds remaining after payment of Imperial's expenses. At
January 31, 2001, the assets and liabilities of the discontinued businesses
consist primarily of the accounts receivable and the Imperial loans. The Company
considers the realization of the remaining assets to be unlikely and the assets
have been fully provided for. All other material obligations of the Subsidiaries
have been settled except for the Imperial loans.
NOTE 4. NOTES PAYABLE
In July 2000, the Company issued $1 million in principal amount of convertible
notes bearing interest at 6% per annum. The conversion feature was contingent on
the filing of the Company's Registration Statement on Form SB-2 that became
effective December 2000. In connection with this financing, the Company issued
warrants to purchase 1,250,000 shares of common stock. In December 2000 and
January 2001, the Company issued additional convertible debt of $150,000 each
month in principal amount of convertible notes bearing interest at 6% per annum.
In connection with these additional financings, the Company issued warrants to
purchase common stock of 187,500 shares each month of PUT exercise. During the
three months ended January 31, 2001, the note holders exercised their option to
convert approximately $687,000 of notes payable, including related interest into
the Company's Class A Common Stock at an average price of approximately $0.019.
The subscribers in this financing have agreed to purchase from the Company
convertible notes up to the principal amount of $17 million. This right is
exercisable at the Company's option. In connection with this right, the Company
is obligated to issue additional warrants to the subscribers. For the three
months ended January 31, 2001, the Company took a charge against earnings of
approximately $397,000 with an offset to additional paid in capital related to
the beneficial conversion features of these notes.
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NOTE 5. BACKLOG
For the three months ended January 31, 2001, the Company received no orders from
customers. At January 31, 2001, the Company's backlog of future shipments was
approximately $178,000.
NOTE 6. YEAR END CHANGE
The Company filed a Current Report on Form 8-K on November 22, 2000 announcing a
change in its fiscal year end from June 30 to October 31. Subsequently, a
transition report was filed for the period from July 1, 2000 to October 31,
2000.
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This document contains forward-looking statements that involve risks
and uncertainties that could cause the results of Telynx to differ materially
from those expressed or implied by such forward-looking statements. These risks
include the timely development, production and acceptance of new products and
services and their feature sets; the challenge of managing asset levels; the
flow of products into third-party distribution channels; the difficulty of
keeping expense growth at modest levels while increasing revenues; risks
associated with the settlement of accounts payable claims; and other risks
detailed from time to time in Telynx' Securities and Exchange Commission
filings.
The words "anticipate," "believe," "estimate," "expect," "intend,"
"will," and similar expressions, as they relate to Telynx or its management
team, may identify forward-looking statements. Such statements reflect the
current views of Telynx with respect to future events and are subject to certain
risks, uncertainties and assumptions. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those described herein as anticipated,
believed, estimated or expected. Telynx does not intend to update these
forward-looking statements.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JANUARY 31, 2001 AS COMPARED TO THREE MONTHS ENDED
JANUARY 31, 2000
In fiscal year 2000, the Company fashioned a business plan whereby the
Company's product was available for production, delivery and sale. The business
model was based on funding to the Company, the proceeds of which would provide
for the increased cash flow required to cover additional expenses of human
resource and operating capital in the future. The increases in expenses for the
three months ended January 31, 2001 versus the three months ended January 31,
2000 is a direct correlation to the funding model of growing the business that
had been planned for the past year.
Revenues. Revenues from operations decreased 78% from $370,000 for the
three months ended January 31, 2000 to $80,000 for the three months ended
January 31, 2001. The decrease is due to revenue recognition of a large contract
during the period ending January 31, 2000 compared to revenue recognition during
the current period.
Sales and Marketing. Sales and marketing expenses increased 99% from
$222,000 for the three months ended January 31, 2000 to $442,000 for the three
months ended January 31, 2001 related to increased human resource cost of
additional sales and marketing people and travel related to sales.
Services. Services expenses increased 58% from $116,000 for the three
months ended January 31, 2000 to $184,000 for the three months ended January 31,
2001. This increase was attributable to increased manpower costs related to
servicing new order installations this period versus the comparable period of
last year. Revenue recognition for these services is done as rendered and based
on milestones. Offsetting revenue for these costs will be recognized in
subsequent quarters.
Research and Development. Research and development expenses increased
300%, from $57,000 for the three months ended January 31, 2000 to $230,000 for
the three months ended January 31, 2001. The increase was attributable to
increased personnel costs in development and engineering the Company's new
recently released product "Telynx version 2".
General and Administrative. General and administrative expenses increased
97%, from $533,000 for the three months ended January 31, 2000 to $1,051,000 for
the three months ended January 31, 2001. The increase represents additional
costs for added personnel in this period versus the comparable period of last
year and additional costs for consulting and costs related to personnel
recruiting in this period versus the comparable period last year.
Interest. Interest expense increased $421,000 from the three months ended
January 31, 2000 of $22,000 to $443,000 for the three months ended January 31,
2001. Of this increase, $397,000 is attributable to a beneficial
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conversion feature of the convertible notes issued on July 27, 2000 and
effective December 2000, in accordance with EITF's 00-27 and 98-5. The charge is
the amortization expense related to the discount recorded on the conversion
feature versus the fair market price.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operating activities used cash of $859,000 during the
three months ended January 31, 2001 compared to a use of $313,000 for the three
months ended January 31, 2000. The primary reason for the increase in the use of
cash is the increase of hired personnel in staffing up this year versus the
prior period of last year.
During the three months ended January 31, 2001, consistent with the
three months ended January 31, 2000, the Company's investing activities were
$13,000 and $2,000, respectively, consisting of software and computer/network
equipment purchases.
The financing activities during the three months ended January 31, 2001
consisted of proceeds from the issuance of common stock of approximately
$145,000, proceeds of convertible debt debentures of $650,000, the redemption of
$673,000 of convertible debt and related interest of $15,000 which was converted
to stock issuances of $688,000, and proceeds from notes payable to stockholder
of $67,000, versus proceeds from issuance of common stock of approximately
$55,000 during the three months ended January 31, 2000.
On July 27, 2000, the Company issued $1,000,000 in principal amount of
convertible notes bearing interest at 6% which are convertible into common stock
at the option of the holders. On December 19, 2000, a Registration Statement on
Form SB-2 was declared effective by the SEC allowing the conversion feature to
be effective and additional funding to proceed. On December 29, 2000 and January
12, 2001, the Company issued additional $150,000 convertible notes each month at
6% interest under this financing. During December 2000 and January 2001, the
holders of these convertible debentures exercised their rights and converted
approximately $687,000, including related interest, into the Company's Class A
Common Stock at an average price of approximately $0.019. The Company
anticipates drawing down on the credit line, to the extent permitted, as the
funds become necessary.
On January 19, 2001, the Company issued $350,000 in principal amount of
convertible notes bearing interest at 8% which are convertible into common stock
at the option of the holder.
The Company believes that its current negative operational cash flow is
temporal and will be alleviated by increased sales. However, there can be no
assurance that sales will increase or additional capital other than provided in
the paragraph above will be available on terms favorable to the Company. If
adequate funds are not available, the Company's liquidity could be impaired,
which would have a negative impact on the Company's ability to grow its
business. As a result of the above conditions, the Company's most recent audited
financial statements contained a going concern opinion.
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PART II. OTHER INFORMATION
Item 1.Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
On January 10, 2001, the Company's Board of Directors appointed
and unanimously approved the appointment of Dr. Ziad El-Dukair
as a full member of the Board of Directors of Telynx, Inc.
effective immediately.
On January 18, 2001, the Board of Directors received and
accepted the resignation of Philip Chapman as Chairman and
Director of Telynx, Inc. Also on January 18, 2001, the Board of
Directors appointed Ali Al-Dahwi as Chairman of the Board of
Directors of Telynx, Inc.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(b) Reports on Form 8-K
Current report on Form 8-K filed November 22, 2000 - Company
changed year-end from June 30 to October 31.
Current report on Form 8-K filed December 1, 2000 - Company
changed name from Cambio, Inc. to Telynx, Inc.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
Dated: March 26, 2001
Telynx, Inc.
/s/ Kent J. Van Houten
- ----------------------
Kent J. Van Houten
Executive Vice President of Finance and Chief Financial Officer
(Principal Financial Officer)
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