U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-QSB
Mark One
( ) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
JUNE 30, 2002
OR
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
Commission file number 0 - 26013
MULTI-LINK TELECOMMUNICATIONS, INC.
(Exact name of small business issuer as specified in its charter)
Colorado 84-1334687
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
4704 Harlan St, Suite 420, Denver, Colorado 80212
(Address of principal executive offices)
(303) 380 1641
(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 [ ] No [ X ]
State the number of shares outstanding of each of the issuer's classes
of equity, as of the latest practicable date:
Class Outstanding September 30, 2004
Common Stock, No par value 19,886,935 shares
Transitional Small Business Disclosure format: Yes [ ] No [ X ]
INDEX
MULTI-LINK TELECOMMUNICATIONS, INC.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) PAGE
Consolidated Balance Sheet June 30, 2002 3
Consolidated Statements of Operations - Three Months 4
ended June 30, 2002 and 2001 and nine months
ended June 30, 2002 and 2001.
Consolidated Statement of Cash Flows - Nine Months 5
ended June 30, 2002 and 2001.
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial 10
Condition and Results of Operations
Item 3. Controls and Procedures 20
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 20
Item 2. Changes in Securities 20
Item 3. Defaults on Senior Securities 22
Item 4. Submission of Matters to a Vote of Security Holders 22
Item 5. Other Information 22
Item 6. Exhibits and Reports on Form 8-K. 23
3
Part I. FINANCIAL INFORMATION
Multi-Link Telecommunications, Inc.
Consolidated Balance Sheet
(Unaudited)
June 30,
2002
----------
ASSETS
Current Assets
Cash and Cash Equivalents $ 211,535
----------
Total Current Assets 211,535
----------
TOTAL ASSETS $ 211,535
==========
LIABILITIES & STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts Payable $ 84,864
Net Liabilities of Discontinued Operations 77,341
Capital Lease 111,533
----------
Total Current Liabilities 273,738
STOCKHOLDERS' DEFICIT
Preferred Stock, $0.01 par value: 5,000,000 shares
authorized: none issued -
Common Stock no par value: 20,000,000 shares
authorized, 5,886,935 shares issued and outstanding 12,567,188
Accumulated Deficit (12,629,391)
----------
Total Stockholders' Deficit (62,203)
----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 211,535
==========
See accompanying notes to Consolidated Financial Statements.
4
Multi-Link Telecommunications, Inc.
Consolidated Statement of Operations
(Unaudited)
Three Months Ended Nine Months Ended
June 30, June 30, June 30, June 30,
2002 2001 2002 2001
---------- ---------- ---------- ----------
<s> <c> <c> <c> <c>
General & Administrative Expenses $ 49,670 $ 128,880 $ 189,589 $ 288,719
Capitalized Offering Costs
Written Off - - - 472,839
Write-down of Intangible and Other
Assets due to Esimated Impairment
in Value 7,120 - 196,125 -
---------- ---------- ---------- ----------
Operating Loss (56,791) (128,880) (385,713) (761,558)
Interest and Related Income/
(Expenses) Net (3,387) 15,477 (47,504) 16,136
---------- ---------- ---------- ----------
Loss before Income Taxes and
Extraordinary Item (60,178) (113,403) (433,217) (745,422)
Provision for Income Taxes - - - -
---------- ---------- ---------- ----------
Loss from Continuing Operations
before Extraordinary Item (60,178) (113,403) (433,217) (745,422)
Extraordinary Item Net of Taxation - - 67,900 -
---------- ---------- ---------- ----------
Loss from Continuing Operations
after Extraordinary Item (60,178) (113,403) (365,317) (745,422)
Profit/(Loss) from Discontinued
Operations (414,193) (238,714) 88,454 (5,377,415)
---------- ---------- ---------- ----------
Net Loss $ (474,371) $ (352,117) $ (276,864) $(6,122,837)
========== ========== ========== ==========
NET PROFIT / (LOSS) PER COMMON SHARE
Continuing Operations before
Extraordinary Item $ (0.01) $ (0.03) $ (0.08) $ (0.18)
Extraordinary Item $ 0.00 $ 0.00 $ 0.01 $ 0.00
Discontinued Operations $ (0.08) $ (0.06) $ 0.02 $ (1.31)
---------- ---------- ---------- ----------
Net Loss Per Common Share $ (0.10) $ (0.08) $ (0.05) $ (1.49)
---------- ---------- ---------- ----------
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 4,952,869 4,167,955 4,613,336 4,112,887
========== ========== ========== ==========
See accompanying Notes to Consolidated Financial Statements.
5
Multi-Link Telecommunications, Inc.
Consolidated Statement of Cash Flows
(Unaudited)
Nine Months Ended
June 30, June, 30
2002 2001
---------- ----------
CASH FLOW FROM OPERATING ACTIVITIES
NET LOSS $ (276,864) $(6,122,837)
ADJUSTMENTS TO RECONCILE NET LOSS TO NETCASH
USED IN OPERATING ACTIVITIES
Write-down of Intangible and Other Assets
due to Estimated Impairment in Value 196,125 -
Issue of Stock for Services 21,000 357,023
Extraordinary Gain on Repayment of
Account Payable (67,900) -
CHANGES IN OPERATING ASSETS AND LIABILITIES
(Increase)/Decrease in Prepayments 8,914 6,163
Increase/(Decrease) in Liabilities of
Discontinued Operations 176,544 5,208,577
Increase/(Decrease) in Accounts Payable (153,415) (13,323)
Increase/(Decrease) in Accrued Expenses (45,000) 45,000
---------- ----------
Total Cash Flow used in Operating
Activities (140,596) (519,397)
CASH FLOW FROM INVESTING ACTIVITIES
Payment on Note Receivable 5,880 -
Sale of Marketable Securities - 795,765
Deferred Financing Costs - 230,315
---------- ----------
Total Cash Flow provided by Investing
Activities 5,880 1,026,080
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from Exercise of Stock Options 679 152
Proceeds from Issue of Common Stock 50,000 -
Payments of Notes Payable - (518,659)
---------- ----------
Total Cash Flow provided by/(used in)
Financing Activities 50,679 (518,507)
DECREASE IN CASH & CASH EQUIVALENTS $ (84,037) $ (11,824)
========== ==========
Cash and Cash Equivalents at the beginning
of the period $ 295,572 $ 12,369
========== ==========
Cash and Cash Equivalents at the end
of the period $ 211,535 $ 545
========== ==========
See accompanying Notes to Consolidated Financial Statements.
6
Multi-Link Telecommunications, Inc.
Consolidated Statement of Cash Flows
(Unaudited)
(CONTINUED)
Nine Months Ended
June 30, June, 30
2002 2001
---------- ----------
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION
Cash paid for interest $ 8,941 $ 25,350
---------- ----------
Unrealized loss on marketable securities $ - $ 669
---------- ----------
Software for subsidiary companies purchased
on lease $ 75,000 $ -
---------- ----------
Common stock issued for fixed assets $ - $ 251,250
---------- ----------
Common stock issued for subscriber accounts $ - $ 302,250
---------- ----------
Common stock issued for the business of
Telcom Sales Associates $ 16,000 $ -
---------- ----------
See accompanying Notes to Consolidated Financial Statements.
7
MULTI-LINK TELECOMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Note 1 Basis of Presentation
The accompanying unaudited financial statements of Multi-Link
Telecommunications, Inc. have been prepared in accordance with
generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Article 10 of
Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In our opinion the
financial statements include all adjustments (consisting of normal
recurring accruals) necessary in order to make the financial statements
not misleading. Operating results for the three and nine month periods
ended June 30, 2002 are not necessarily indicative of the results that
may be expected for the year ended September 30, 2002. These
statements should be read in conjunction with the financial statements
and related notes contained in our latest Form 10-KSB, which includes
audited financial statements for the years ended September 30, 2001 and
2000.
Effective May 20, 2002, the Board of Directors voted to sell all of
Multi-Link Telecommunications, Inc.'s operating businesses and assets
in order to repay its debts. Accordingly, effective May 20, 2002 the
financial results of the Denver ('Multi-Link Communications, Inc.'),
Indianapolis ('Multi-Link Communications, LLC.'), Raleigh ('One Touch
Communications, Inc.'), Atlanta ("VoiceLink, Inc.) and Florida
('VoiceLink of Florida, Inc.) operating businesses have been accounted
for as discontinued operations under the provisions of the Statements
of Financial Accounting Standards Nos. 144 and 146 and Emerging Issues
Task Force Issue No. 87-24 and the financial results of prior periods
restated accordingly.
Note 2 Liquidity
In the nine months ended June 30, 2002, the level of the Company's cash
balances and earnings before interest, tax, depreciation and
amortization ('EBITDA') were insufficient to make payments on its
scheduled indebtedness. Furthermore its EBITDA was continuing to
decline as customer attrition was exceeding the level of new sales.
The Company continued to reduce operating costs but was unable to
reduce expenses to a level that would permit the Company to adhere to
its existing debt repayment schedule.
Moreover, as a result of the difficult investment climate in the
telecommunications sector the Company was unable to raise additional
cash resources either through the issue of debt or equity securities.
As reported in the Form 8-K filed on March 26, 2002, in March 2002 the
Company restructured a $2,039,000 term loan with Westburg Media Capital
LLP on which it was a co-borrower with its subsidiary company, Multi-
Link Communication, Inc. Under the terms of the restructured
agreement, the maturity date of the loan was accelerated to July 31,
2002 and Westburg Media Capital LLP waived all covenant defaults
8
through July 31, 2002. It was the intention of the Company to repay
the loan through one or more asset sales.
The Company, as co-borrower or guarantor of various loans and leases of
its subsidiary companies, was also in default on its obligations to
these various other lenders and leasing companies.
Also as reported in the Form 8-K filed on March 26, 2002, in March 2002
the Company sold the live telephone answering business of its
Indianapolis operating business to Signius Corporation for $443,000 in
cash to provide liquidity and working capital.
On May 20, 2002 the Board of Directors decided to sell all of the
Company's operating businesses and assets in order to repay its
outstanding debts.
In June 2002, the Company issued 1,000,000 shares of common stock with
a market value of $50,000 to a private investor to raise working
capital to finance the ongoing operating costs of the Company.
Effective September 30, 2002 the Company sold the business and assets
of its Florida operating business ('VoiceLink of Florida, Inc.') for
$29,000. The sale proceeds left a shortfall on a liability guaranteed
by the Company that was subsequently settled by mutual agreement.
As at September 30, 2002 the Company was guarantor or co-borrower on
$1.6 million of operating leases and $4.7 million of debt of the
discontinued businesses of its subsidiary companies.
While initial indications from Santa Fe Capital Group, a broker hired
to sell the operating businesses, were that the sale of the operating
businesses should generate sufficient sale proceeds to repay all
outstanding debt, actual sales proceeds were substantially less than
anticipated and eventually resulted in a short fall in payment to
certain creditors guaranteed by the Company (Subsequent Events below).
As reported in the Form 8-K filed on October 18, 2002, the Company, as
co-borrower with its subsidiary company, Multi-Link Communications,
Inc., failed to repay the Westburg Media Capital LLP loan on the
revised maturity date of July 31, 2002 and on October 14, 2002 Westburg
Media Capital LLP notified the Company of its intention to exercise its
security interest in VoiceLink, Inc., One Touch Communications, Inc.
and Multi-Link Communications, Inc. through foreclosure and a public
auction sale.
As reported in the Form 8-K filed on November 6, 2002, Westburg Media
Capital LLP enforced its security interest by selling the assets of
VoiceLink, Inc., One Touch Communications, Inc. and Multi-Link
Communications, Inc. at a public auction under bank foreclosure on
October 30, 2002 for total consideration of $4.2 million - $2.4 million
in cash and $1.8 million in assumption of existing liabilities and
future contractual obligations - leaving shortfalls to certain
creditors guaranteed by the Company (Subsequent Events below). Nigel V
Alexander, the then Chief Executive Officer and a director of the
Company, purchased the business and assets of the Denver operating
business at the public auction.
As reported in the Form 8-K filed on November 27, 2002, the Company's
sole remaining operating business, Multi-Link Communications, LLC.,
filed a voluntary petition under Chapter 11 of the Bankruptcy Code on
9
November 20, 2002 (Subsequent Events below) after which the Company had
no further beneficial interest in the Indianapolis operating business.
Following the sale of the Company's Denver, Atlanta and Raleigh
operating businesses in bank foreclosure at public auction on October
30, 2002 and the filing of its Indianapolis operating business for
Chapter 11 protection on November 20, 2002 (Subsequent Events below),
the Company continued to be the guarantor or co-borrower on $1.3
million of operating leases and $1.7 million of debt of the
discontinued businesses of its subsidiary companies. As reported in
the Form 8-K filed on October 31, 2003, the Company issued 14,000,000
shares of common stock with a market value of approximately $18,000 to
David J Cutler, the sole director of the Company, to provide the
funding to negotiate settlement with the Company's creditors or to
finance the initiation of formal bankruptcy proceedings if it were not
possible to complete such settlements with our creditors. The Company
retained an independent third party consultant to value the shares of
common stock issued in this transaction (Subsequent Events below).
Without any remaining operating businesses or income, during fiscal
2003 and 2004 the Company has been able to negotiate settlement of all
of its shortfalls to creditors with its remaining resources but is now
dependent on raising additional equity or debt to fund its ongoing
operating expenses.
It is the Company's current intention to seek to acquire another entity
with experienced management and opportunities for growth in return for
shares of its common stock in an attempt to create value for our
shareholders. There is no assurance that such a transaction will be
completed.
Note 3 Basis of Consolidation
Effective May 20, 2002, the Board of Directors voted to sell all of
Multi-Link Telecommunications, Inc.'s operating businesses and assets.
Accordingly, effective May 20, 2002 the financial results of the Denver
('Multi-Link Communications, Inc.'), Indianapolis ('Multi-Link
Communications, LLC.'), Raleigh ('One Touch Communications, Inc.'),
Atlanta ("VoiceLink, Inc.) and Florida ('VoiceLink of Florida, Inc.)
operating businesses have been accounted for as discontinued operations
under the provisions of the Statements of Financial Accounting
Standards Nos. 144 and 146 and Emerging Issues Task Force Issue No. 87-
24 and the financial results of prior periods restated accordingly.
Note 4 Capital Lease
In November 2001 the Company entered into a $75,000, 60-month capital
lease with interest at 17 percent to finance the purchase of accounting
and CRM software for its subsidiary companies.
As of June 30, 2002, the Company, as co-borrower or guarantor of
various loans and leases of its subsidiary companies, was in default on
its obligations to various lenders and leasing companies.
As result, an additional accrual of $39,000 was made in respect of
costs related to the early repayment of the above mentioned lease in
respect of unearned interest and $97,000 was reclassified from long-
term liabilities to current liabilities.
10
Note 5 Net Liabilities of Discontinued Operations
Effective June 30, 2002, an accrual of $77,000 had been made in respect
of future costs anticipated to be incurred by the Company in respect of
the disposal of its discontinued trading operations.
Note 6 Common Stock
Effective December 4, 2001 the Company issued 60,000 shares of common
stock, valued at $21,000, as partial payment for marketing services.
Effective January 8, 2002 the Company issued 39,925 shares of common
stock on the exercise of employee stock options with a total exercise
price of $679.
Effective April 30, 2002 the Company issued 400,000 shares of common
stock, valued at $16,000, to purchase the business and assets of Telcom
Sales Associates, Inc., a telecommunications sales agency business, for
its Denver operating subsidiary, Multi-Link Communications, Inc.
Effective June 12, 2002 the Company issued 1,000,000 shares of common
stock, valued at $50,000, in a private placement to an individual
investor to obtain working capital for the Company.
As a result of a decline in the Company's share price from $2.01 at
September 30, 2001 to $0.13 at March 31, 2002 and subsequently to $0.05
during the three months to June 30, 2002, the value of common stock
issued during fiscal 2001 as remuneration for the provision of sales
activities and the purchase of fixed assets was reduced by $10,000 and
$272,000 respectively for three months and nine months ended June 30,
2002.
As reported in the Form 8-K filed on October 31, 2003, the Company
issued 14,000,000 shares of common stock with a market value of
approximately $18,000 to David J Cutler, the sole director of the
Company, to provide the funding to negotiate settlement with the
Company's creditors or to finance the initiation of formal bankruptcy
proceedings if it were not possible to complete such settlements with
our creditors. The Company retained an independent third party
consultant to value the shares of common stock issued in this
transaction (Subsequent Events below).
Note 7 Discontinued Activities
Effective May 20, 2002, the Board of Directors voted to sell all of
Multi-Link Telecommunications, Inc.'s operating businesses and assets
in order to repay its debts. Accordingly, effective May 20, 2002 the
financial results of the Denver ('Multi-Link Communications, Inc.'),
Indianapolis ('Multi-Link Communications, LLC.'), Raleigh ('One Touch
Communications, Inc.'), Atlanta ("VoiceLink, Inc.) and Florida
('VoiceLink of Florida, Inc.) operating businesses have been accounted
for as discontinued operations under the provisions of the Statements
of Financial Accounting Standards Nos. 144 and 146 and Emerging Issues
Task Force Issue No. 87-24 and the financial results of prior periods
restated accordingly.
Revenue from discontinued activities in the three months ended June 30,
2002 was $1,945,746 compared to $3,031,847 in the three months ended
11
June 30, 2001, and $6,578,051 for the nine months ended June 30, 2002
compared to $8,845,898 for the nine months ended June 30, 2001.The
decline in the revenue from discontinued operations arose due to the
fact that customer attrition exceeded the level of new sales throughout
the period and also due to the sale of the live telephone answering
service in Indianapolis in March 2002.
Note 8 Subsequent Events
Effective September 30, 2002 the Company sold the business and assets
of its Florida operating business ('VoiceLink of Florida, Inc.') for
$29,000. The sale proceeds left a shortfall on a liability to a
certain creditor guaranteed by the Company that was subsequently
settled by mutual agreement.
As reported in the Form 8-K filed on October 18, 2002, effective July
31, 2002 the Company, as co-borrower with its subsidiary company,
Multi-Link Communications, Inc., failed to repay the Westburg Media
Capital LLP loan on the revised maturity date of July 31, 2002 and on
October 14, 2002 Westburg Media Capital LLP notified the Company of its
intention to exercise its security interest in VoiceLink, Inc., One
Touch Communications, Inc. and Multi-Link Communications, Inc. through
foreclosure and a public auction sale.
As reported in the Form 8-K filed on November 6, 2002, effective
October 30, 2002 the business and assets of the Company's Denver
('Multi-Link Communications, Inc.'), Atlanta ('VoiceLink, Inc.') and
Raleigh ('One Touch, Inc.') operations were sold at public auction
under bank foreclosure for total consideration of $4.2 million - $2.4
million in cash and $1.8 million in assumption of existing liabilities
and future contractual obligations. Nigel V Alexander, the then Chief
Executive Officer and a director of the Company, purchased the business
and assets of the Denver operations in the public auction. The sale
proceeds left shortfalls on liabilities to certain creditors guaranteed
by the Company that were subsequently settled by mutual agreement.
As also reported in the Form 8-K filed on November 6, 2002, effective
October 31, 2002 Nigel V Alexander resigned his position as a member of
the Board of Directors and Chief Executive Officer of the Company,
effective November 5, 2002 David J Cutler, the Company's Chief
Financial Officer, was appointed to the Board of Directors of the
Company and effective November 6, 2002 Shawn B Stickle resigned his
position as a member of the Board of Directors and President of the
Company.
As reported in the Form 8-K filed on November 27, 2002, effective
November 20, 2002 the Company's sole remaining operating business,
Multi-Link Communications, LLC., filed a voluntary petition under
Chapter 11 of the Bankruptcy Code and from that date the Company had no
further beneficial interest in the Indianapolis operating business.
As reported in the Form 8-K filed on October 31, 2003, the Company
issued 14,000,000 shares of common stock with a market value of
approximately $18,000 to David J Cutler, the sole director of the
Company, to provide the funding to negotiate settlement with the
Company's creditors or to finance the initiation of formal bankruptcy
proceedings if it were not possible to complete such settlements with
our creditors. The Company retained an independent third party
consultant to value the shares of common stock issued in this
transaction.
12
Without any remaining operating businesses or income, during fiscal
2003 and 2004 the Company has been able to negotiate a settlement of
all of its shortfalls to creditors with its remaining resources but is
now dependent on raising additional equity and debt to fund its ongoing
operating expenses.
As reported in the Form 8-K filed on September 14, 2004, effective
August 4, 2004 the Company appointed James E Scheifley & Associates PC
as auditors in succession to Hein & Associates LLP.
It is the Company's current intention to seek to acquire another entity
with experienced management and opportunities for growth in return for
shares of its common stock in an attempt to create value for our
shareholders. There is no assurance that such a transaction will be
completed.
13
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
The following discussion should be read in conjunction with the
consolidated financial statements included in this report. This
discussion contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those
anticipated in these forward looking statements as a result of any
number of factors, including but not limited to, our ability to raise
debt or equity finance to meet ongoing operating expenses and our
ability to acquire another entity with experienced management and
opportunities for growth in return for shares of its common stock in an
attempt to create value for our shareholders.
OVERVIEW
Prior to May 20, 2002, we provided basic voice mail, call routing and
advanced integrated voice and fax messaging to small businesses in
several major urban markets. These services enabled businesses to
improve the handling of incoming calls and facilitate more efficient
communication between employees, customers, suppliers and other key
relationships. We also provided basic voice mail and paging services
to consumers.
During fiscal 2002 we were unable to make the majority of scheduled
payments on our equipment leases and loans and effective May 20, 2002
our Board of Directors voted to sell all of our operating businesses
and assets to repay our debts and effective that date we accounted for
all of our operating businesses as discontinued operations.
Effective November 20, 2002 all our operating businesses had been sold
leaving shortfalls to certain creditors guaranteed by us or were being
operated under Chapter 11 protection and in which we had no future
beneficial interest.
Following the sale of our Denver, Atlanta and Raleigh operating
businesses in bank foreclosure at public auction on October 30, 2002
and the filing by our Indianapolis operating business for protection
under Chapter 11 on November 20, 2002 (Subsequent Events below), we
continued to be the guarantor or co-borrower on $1.3 of million
operating leases and $1.7 million of debt of the discontinued
businesses of our subsidiary companies.
Without any remaining operating businesses or income, during fiscal
2003 and 2004 we have subsequently been able to negotiate settlement of
all of our shortfalls to creditors with our remaining resources but we
are now dependent on raising additional equity or debt to fund our
ongoing operating expenses.
We currently intend to seek to acquire another entity with experienced
management and opportunities for growth in return for shares of our
common stock in an attempt to create value for our shareholders. There
is no assurance that such a transaction will be completed.
LIQUIDITY AND CAPITAL RESOURCES
For the nine months ended June 30, 2002, we met our operating
requirements through cash provided from our discontinued operations,
but ceased to make the majority of scheduled payments on equipment
leases and loans. Furthermore our cash flow position continued to
decline as customer attrition exceeded the level of new sales. As of
June 30, 2002 we had $212,000 cash on hand and no additional borrowing
facilities.
14
As a result of the difficult investment climate in the
telecommunications sector we were unable to raise additional cash
resources through the issue of debt or equity securities.
As reported in the Form 8-K filed on March 26, 2002, in March 2002 we
sold the live telephone answering business of our Indianapolis
operating business to Signius Corporation for $443,000 in cash to
provide liquidity and working capital.
Also as reported in the Form 8-K filed on March 26, 2002, in March 2002
we restructured a $2,039,000 term loan with Westburg Media Capital LLP
on which we were a co-borrower with our subsidiary company, Multi-Link
Communication, Inc. Under the terms of the restructured agreement, the
maturity date of the loan was accelerated to July 31, 2002 and Westburg
Media Capital LLP waived all covenant defaults through July 31, 2002.
It was our intention to repay the loan through one or more asset sales.
We, as co-borrower or guarantor of various loans and leases of our
subsidiary companies, were also in default on our obligations to these
various other lenders and leasing companies.
We hired Santa Fe Capital Group to value each of our various operating
businesses and to advise the Board on strategic alternatives.
Effective May 20, 2002 our Board of Directors voted to sell all our
operating businesses and assets to repay our debts.
In June 2002, we issued 1,000,000 shares of common stock with a market
value of $50,000 to a private investor to raise working capital to
finance our ongoing operating costs.
Our working capital as at June 30, 2002 was negative $(62,203).
$(97,000) of this negative balance was the result of reclassifying the
long-term portion of a capital lease as a current liability due to the
acceleration clause contained within the lease. In addition, $39,000
has been accrued in respect of costs related to the anticipated early
repayment of the lease relating to unearned interest.
While initial indications from Santa Fe Capital Group, a broker hired
to sell the operating businesses, were that the sale of the operating
businesses should generate sufficient sale proceeds to repay all
outstanding debt, actual sales proceeds were substantially less than
anticipated and eventually resulted in shortfalls in payments to
certain creditors (Subsequent Events above).
As reported in the Form 8-K filed on October 18, 2002, we subsequently
failed to repay the Westburg Media Capital LLP loan on the revised
maturity date of July 31, 2002 and on October 14, 2002 Westburg Media
Capital LLP notified us of its intention to exercise its security
interest in VoiceLink, Inc., One Touch Communications, Inc. and Multi-
Link Communications, Inc. through foreclosure and a public auction sale
(Subsequent Events above).
As reported in the Form 8-K filed on November 6, 2002, Westburg Media
Capital LLP enforced its security interest by selling the assets of
VoiceLink, Inc., One Touch Communications, Inc. and Multi-Link
Communications, Inc. at a public auction under bank foreclosure on
October 30, 2002 leaving shortfalls to certain creditors guaranteed by
the us (Subsequent Events above). Nigel V Alexander, our then Chief
Executive Officer and a director, purchased the business and assets of
our Denver operations at the public auction.
15
As reported in the Form 8-K filed on November 27, 2002, our sole
remaining operating business, Multi-Link Communications, LLC., filed a
voluntary petition under Chapter 11 of the Bankruptcy Code on November
20, 2002 (Subsequent Events above) after which we had no further
beneficial interest in the Indianapolis operating business.
Following the sale of our Denver, Atlanta and Raleigh operating
businesses in bank foreclosure at public auction on October 30, 2002
and the filing of our Indianapolis operating business for Chapter 11
protection on November 20, 2002 (Subsequent Events above), we continued
to be the guarantor or co-borrower on $1.3 million of operating leases
and $1.7 million of debt of the discontinued businesses of our
subsidiary companies.
As reported in the Form 8-K filed on October 31, 2003, we issued
14,000,000 shares of common stock with a market value of approximately
$18,000 to David J Cutler, our sole director, to provide the funding to
negotiate settlement with our creditors or to finance the initiation of
formal bankruptcy proceedings if it were not possible to complete such
settlements with our creditors. We retained an independent third party
consultant to value the shares of common stock issued in this
transaction (Subsequent Events above).
Without any remaining operating businesses or income, during fiscal
2003 and 2004 we have been able to negotiate settlement of all of our
shortfalls to creditors with our remaining resources but we are now
dependent on raising additional equity or debt to fund our ongoing
operating expenses.
We currently intend to seek to acquire another entity with experienced
management and opportunities for growth in return for shares of our
common stock in an attempt to create value for our shareholders. There
is no assurance that such a transaction will be completed.
Dispositions
As reported in the Form 8-K filed on March 26, 2002, effective March
31, 2002, we sold our telephone answering service in Indianapolis to
Signius Corporation. Signius purchased the answering service
customers, accounts receivable, and equipment. We received $443,000 in
consideration, including $100,000 that was used to pay off a lease for
answering service equipment with Zions Credit Corporation.
Details of our subsequent disposition of all of our operating
businesses are set out in Subsequent Events above.
Delisting from NASDAQ SmallCap Market and the Over the Counter Bulletin
Board
On March 7, 2002 the Nasdaq Stock Market Staff advised us that we were
not in compliance with several Nasdaq marketplace requirements for
continued listing on the Nasdaq SmallCap Market, including failure to
comply with the audit committee requirements, a failure to maintain the
minimum $2,000,000 net tangible asset requirement or the alternative
minimum stockholders' equity requirement of $2,500,000.
We decided that we had no realistic grounds upon which to appeal
against this determination and accordingly our common stock and
warrants were de-listed from the Nasdaq SmallCap Market on March 15,
2002. Concurrently, our stock and warrants commenced trading on the
15
over the counter bulletin board market under the symbols MLNK.OB and
MLNKW.OB respectively. Our publicly traded warrants expired on May
15, 2002 and ceased to be traded as at that date.
In order to conserve our financial resources, during fiscal 2002 we
elected not to incur the costs involved in retaining our auditors to
review our financial results for the period ended June 30, 2002 and
subsequent periods. Accordingly effective August 15, 2002 we became
delinquent in our filing requirements and consequently in due course
ceased to be eligible to be listed on the over the counter bulletin
board. We now continue to be listed solely on the National Quotation
Bureau Pink Sheets under the symbol MLNK.PK.
It is our current intention to bring all required fillings up to date
and seek to be re-listed on the over the counter bulletin board.
However, there can be no guarantee of our success in our attempt to
return to the over the counter bulletin board.
Results of Operations
Quarter ended June 30, 2002 compared to quarter ended June 30, 2001.
The results for the quarter ended June 30, 2002 and June 30, 2001 have
been adjusted to reflect all operating businesses as discontinued
operations as described above.
General and Administrative Expenses
General and administrative expenses for the three months ended June 30,
2002, were $50,000 compared to $129,000 for the three months ended June
30, 2001, a decrease of $79,000 or 61 percent. Of this decrease,
$62,000 related to a decrease in professional fees relating to audit
and taxation and the balance of the decrease related to printing fees
relating to the production of annual reports.
Write down of intangible and other assets due to estimated impairment
in value
In the quarter ended June 30, 2002 we wrote off $7,000 related to a
note receivable from a former owner of a business purchased by us.
The carrying value of this note was written down to the estimated
market value of the underlying security for the loan - 150,000 shares
of our common stock. No such write down was required in the quarter
ended June 30, 2001.
Loss from Operations
Loss from operations was $(57,000) for the three months ended June 30,
2002, compared to a loss from operations of $(129,000) for the three
months ended June 30, 2001, a reduction in losses of $72,000 due to the
factors described above.
Interest and Related Income/(Expense)
Net interest expense for the three months ended June 30, 2002, was
$(3,000) compared to net interest income of $15,000 for the three
months ended June 30, 2001, a decrease of $18,000 or 120 percent. The
variance arose due to the need to provide for all the interest earned
on the note receivable from a former owner of a business purchased by
us in the three months ended June 30, 2002 as compared to the three
months ended June 30, 2001 when no such provision was required.
Loss from Discontinued Operations
The loss from discontinued operations for the three months ended June
30, 2002 was $414,000 compared to $239,000 for the three months ended
17
June 30, 2001, an increase of $175,000 or 73 percent. The increase in
losses arose as customer attrition continued to exceed the level of new
sales.
Revenue from discontinued activities in the three months ended June 30,
2002 was $1,945,746 compared to $3,031,847 in the three months ended
June 30, 2001. The decline in the revenue from discontinued operations
arose due to the fact that customer attrition exceeded the level of new
sales throughout the period and also due to the sale of the live
telephone answering service in Indianapolis in March 2002.
Nine Months ended June 30, 2002 compared to Nine Months ended June 30,
2001.
The results for the nine months ended June 30, 2002 and June 30, 2001
have been adjusted to reflect all operating businesses as discontinued
operations as described above.
General and Administrative Expenses
General and administrative expenses for the nine months ended June 30,
2002, were $190,000 compared to $289,000 for the nine months ended June
30, 2001, a decrease of $101,000 or 35 percent. Professional fees
relating to audit and taxation were $115,000 less in the nine months
ended June 30, 2002 compared to the nine months ended June 30, 2001.
These savings were partially offset by an increase in print costs
relating to the production of annual returns which were $14,000 higher
in the nine months ended June 30, 2002 than in the comparable period in
the prior year.
Capitalized Offering Costs Written Off
No capitalized offering costs were written off in the nine months ended
June 30, 2002 compared to $473,000 of capitalized offering costs
written off in the nine months ended June 30, 2001, a decrease of
$473,000, or 100 percent. In the nine months ended June 30, 2001 we
wrote off $473,000 of deferred offering costs because we were unable to
complete a successful stock offering.
Write down of intangible and other assets due to estimated impairment
in value
In the nine months ended June 30, 2002 we wrote-down the carrying value
of certain of our intangible and other assets by $196,000. There was
no write down in the carrying value of certain of our intangible and
other assets in the nine months to June 30, 2001. The write off in the
nine months ended June 30, 2002 related to a note receivable from a
former owner of a business purchased by us. The carrying value of this
note was written down to the estimated market value of the underlying
security for the loan - 150,000 shares of our common stock.
Loss from Operations
Loss from operations was $(386,000) for the nine months ended June 30,
2002, compared to a loss from operations of $(762,000) for the nine
months ended June 30, 2001, a decrease of $376,000, or 49 percent, due
to the factors described above.
Interest and Related Income/(Expense)
Net interest expense for the nine months ended June 30, 2002, was
$(48,000) compared to net interest income of $16,000 for the nine
months ended June 30, 2001, a decrease of $64,000 or 400 percent.
$50,000 of the difference related interest on a lease taken out in
November 2001, $39,000 of which related an additional accrual for costs
related to the anticipated early repayment of the above mentioned lease
18
in respect of unearned interest. The remaining $14,000 variance arose
from the fact that $39,000 of income interest was recognized in the
nine months ended June 30, 2001 in respect of a note receivable from a
former owner of a business purchased by us while no such interest
income was recognized in the nine months ended June 30, 2002, offset by
interest expense of $25,000 recognized on a margin facility in the nine
months ended June 30, 2001 that was repaid in full before the
commencement of fiscal 2002.
Extraordinary Item
In the nine months ended June 30, 2002 we recorded a $68,000
extraordinary gain relating a negotiated settlement reached with one of
our creditors for less than the originally contracted amount. No such
extraordinary gain was recorded in the comparable period in the prior
year.
Loss from Discontinued Operations
In the nine months ended June 30, 2002 we recorded an $88,000 profit on
discontinued activities compared to a loss of $5,377,000 for the nine
months ended June 30, 2001, a variance of $5,465,000. $1,761,000 of
the variance related to a write off recognized in the nine months ended
June 30, 2001 in respect of a permanent impairment in the value of the
discontinued operations and $443,000 to the impact of the sale of the
live telephone answering service in March 2002. The balance of the
variance related to the impact of an aggressive program of cost cutting
program including closure of the residential telesales center in March
2001.
Revenue from discontinued activities in the nine months ended June 30,
2002 was $6,578,051 compared to $8,845,898 for the nine months ended
June 30, 2001. The decline in the revenue from discontinued operations
arose due to the fact that customer attrition exceeded the level of new
sales throughout the period and also due to the sale of the live
telephone answering service in Indianapolis in March 2002.
Cash Flow Information
For nine months ended June 30, 2002 net cash used in operations was
$(141,000) compared to $(519,000) for the nine months ended June 30,
2001. This variance of $378,000 arose due to a decrease in the net
loss, adjusted for non-cash items, of $5,638,000 from $(6,479,000) in
the nine months to June 30, 2001 to $(127,000) in the nine months ended
June 30, 2002, offset by a $5,259,000 reduction in the funds generated
from the movement in funds arising from changes in operating assts and
liabilities which changed from a positive contribution of $5,246,000
in the nine months ended June 30, 2001 to a negative consumption of
$(13,000) in the nine months ended June 30, 2002. Both these
variances were largely due to the movement in profit / (loss) arising
from, and movement in the liabilities of, discontinued operations.
Net cash generated from investing activities was $6,000 for the nine
months ended June 30, 2002 compared to $1,026,000 generated in the
comparable period in the prior year, a decrease of $1,020,000. During
the nine months ended June 30, 2002, we received $796,000 in cash from
the sale of marketable securities and wrote off $230,000 of deferred
finance costs while in the nine months ended June 30, 2002 we only
received $6,000 as proceeds of the sale of the underlying security for
a note receivable from a former owner of a business purchased by us.
19
Cash flow from financing activities was $51,000 for the nine months
ended June 30, 2002 compared to $(519,000) used in finance activities
for the same period in the prior year, a variance of $570,000 or 110
percent. A margin facility with Paine Weber of $519,000 was repaid in
the nine months ended June 30, 2001 while $51,000 of equity was raised
in the nine months ended June 30, 2002.
PLANNED OPERATIONS
Our plan of operation is to acquire a company that will have
experienced management and opportunities for growth in an exchange for
our shares of common stock. There is no assurance that any such
business will be identified or that any stockholder will realize any
return on their shares after such a transaction has been completed.
Any merger or acquisition completed by us can be expected to have a
significant dilutive effect on the percentage of shares held by our
current stockholders.
General Business Plan
We intend to seek, investigate and, if such investigation warrants,
acquire an interest in business opportunities presented to us by
persons or firms which desire to seek the advantages of an issuer who
has complied with the Securities Act of 1934 (the "1934 Act"). We will
not restrict our search to any specific business, industry or
geographical location, and we may participate in business ventures of
virtually any nature. This discussion of our proposed business is
purposefully general and is not meant to be restrictive of our
virtually unlimited discretion to search for and enter into potential
business opportunities. We anticipate that we may be able to
participate in only one potential business venture because of our lack
of financial resources.
We may seek a business opportunity with entities which have recently
commenced operations, or that desire to utilize the public marketplace
in order to raise additional capital in order to expand into new
products or markets, to develop a new product or service, or for other
corporate purposes. We may acquire assets and establish wholly owned
subsidiaries in various businesses or acquire existing businesses as
subsidiaries.
We expect that the selection of a business opportunity will be complex
and risky. Due to general economic conditions, rapid technological
advances being made in some industries and shortages of available
capital, we believe that there are numerous firms seeking the benefits
of an issuer who has complied with the 1934 Act. Such benefits may
include facilitating or improving the terms on which additional equity
financing may be sought, providing liquidity for incentive stock
options or similar benefits to key employees, providing liquidity
(subject to restrictions of applicable statutes) for all stockholders
and other factors. Potentially, available business opportunities may
occur in many different industries and at various stages of
development, all of which will make the task of comparative
investigation and analysis of such business opportunities extremely
difficult and complex. We have, and will continue to have, essentially
no assets to provide the owners of business opportunities. However, we
will be able to offer owners of acquisition candidates the opportunity
to acquire a controlling ownership interest in an issuer who has
complied with the 1934 Act without incurring the cost and time required
to conduct an initial public offering.
20
The analysis of new business opportunities will be undertaken by, or
under the supervision of, our sole director. We intend to concentrate
on identifying preliminary prospective business opportunities which may
be brought to our attention through present associations of our
director, professional advisors or by our stockholders. In analyzing
prospective business opportunities, we will consider such matters as
(i) available technical, financial and managerial resources; (ii)
working capital and other financial requirements; (iii) history of
operations, if any and prospects for the future; (iv) nature of present
and expected competition; (v) quality, experience and depth of
management services; (vi) potential for further research, development
or exploration; (vii) specific risk factors not now foreseeable but
that may be anticipated to impact the proposed activities of the
company; (viii) potential for growth or expansion; (ix) potential for
profit; (x) public recognition and acceptance of products, services or
trades; (xi) name identification; and (xii) other factors that we
consider relevant. As part of our investigation of the business
opportunity, we expect to meet personally with management and key
personnel. To the extent possible, we intend to utilize written
reports and personal investigation to evaluate the above factors.
We will not acquire or merge with any company for which audited
financial statements cannot be obtained within a reasonable period of
time after closing of the proposed transaction.
Acquisition Opportunities
In implementing a structure for a particular business acquisition, we
may become a party to a merger, consolidation, reorganization, joint
venture, or licensing agreement with another company or entity. We may
also acquire stock or assets of an existing business. Upon
consummation of a transaction, it is probable that our present
management and stockholders will no longer be in control of us. In
addition, our sole director may, as part of the terms of the
acquisition transaction, resign and be replaced by new directors
without a vote of our stockholders, or sell his stock in us. Any such
sale will only be made in compliance with the securities laws of the
United States and any applicable state.
It is anticipated that any securities issued in any such reorganization
would be issued in reliance upon exemption from registration under
application federal and state securities laws. In some circumstances,
as a negotiated element of the transaction, we may agree to register
all or a part of such securities immediately after the transaction is
consummated or at specified times thereafter. If such registration
occurs, it will be undertaken by the surviving entity after it has
successfully consummated a merger or acquisition and is no longer
considered an inactive company. The issuance of substantial additional
securities and their potential sale into any trading market which may
develop in our securities may have a depressive effect on the value of
our securities in the future. There is no assurance that such a
trading market will develop.
While the actual terms of a transaction cannot be predicted, it is
expected that the parties to any business transaction will find it
desirable to avoid the creation of a taxable event and thereby
structure the business transaction in a so-called "tax-free"
reorganization under Sections 368(a)(1) or 351 of the Internal Revenue
Code (the "Code"). In order to obtain tax-free treatment under the
Code, it may be necessary for the owner of the acquired business to own
80 percent or more of the voting stock of the surviving entity. In
21
such event, our stockholders would retain less than 20 percent of the
issued and outstanding shares of the surviving entity. This would
result in significant dilution in the equity of stockholders.
As part of our investigation, we expect to meet personally with
management and key personnel, visit and inspect material facilities,
obtain independent analysis of verification of certain information
provided, check references of management and key personnel, and take
other reasonable investigative measures, to the extent of our limited
financial resources and management expertise. The manner in which we
participate in an opportunity will depend on the nature of the
opportunity, the respective needs and desires of both parties, and the
management of the opportunity.
With respect to any merger or acquisition, and depending upon, among
other things, the target company's assets and liabilities, our
stockholders will in all likelihood hold a substantially lesser
percentage ownership interest in us following any merger or
acquisition. The percentage ownership may be subject to significant
reduction in the event we acquire a target company with assets and
expectations of growth. Any merger or acquisition can be expected to
have a significant dilutive effect on the percentage of shares held by
our stockholders.
We will participate in a business opportunity only after the
negotiation and execution of appropriate written business agreements.
Although the terms of such agreements cannot be predicted, generally we
anticipate that such agreements will (i) require specific
representations and warranties by all of the parties; (ii) specify
certain events of default; (iii) detail the terms of closing and the
conditions which must be satisfied by each of the parties prior to and
after such closing; (iv) outline the manner of bearing costs, including
costs associated with the Company's attorneys and accountants; (v) set
forth remedies on defaults; and (vi) include miscellaneous other terms.
As stated above, we will not acquire or merge with any entity which
cannot provide independent audited financial statements within a
reasonable period of time after closing of the proposed transaction.
We are subject to all of the reporting requirements included in the
1934 Act. Included in these requirements as part of a Current Report
on Form 8-K, required to be filed with the SEC upon consummation of a
merger or acquisition, as well as audited financial statements included
in an Annual Report on Form 10-K (or Form 10-KSB as applicable). If
such audited financial statements are not available at closing, or
within time parameters necessary to insure our compliance within the
requirements of the 1934 Act, or if the audited financial statements
provided do not conform to the representations made by that business to
be acquired, the definitive closing documents will provide that the
proposed transaction will be voidable, at the discretion of our present
management. If such transaction is voided, the definitive closing
documents will also contain a provision providing for reimbursement for
our costs associated with the proposed transaction.
Competition
We believe we are an insignificant participant among the firms which
engage in the acquisition of business opportunities. There are many
established venture capital and financial concerns that have
significantly greater financial and personnel resources and technical
22
expertise than we have. In view of our limited financial resources and
limited management availability, we will continue to be at a
significant competitive disadvantage compared to our competitors
Accounting Pronouncements
On June 30, 2001, the FASB approved the issuance of SFAS No. 141,
Business Combinations and SFAS No. 142, Goodwill and Other Intangible
Assets. SFAS No. 141 states that all business combinations should be
accounted for using the purchase method of accounting; use of pooling-
of-interest method is prohibited. Accounting for the excess of the
fair value of net assets over cost (negative goodwill), will be
allocated to certain assets first with any remaining excess recognized
as an extraordinary gain. SFAS No. 141 is effective for business
combinations completed after June 30, 2001. SFAS No. 142 addresses the
accounting for all purchased intangible assets but not the accounting
for internally developed intangible assets. Goodwill will no longer be
amortized and will be reviewed for impairment in accordance with SFAS
No. 142. Goodwill will be tested annually and on an interim basis if
an event or circumstance occurs between the annual tests that might
reduce the fair value of the reporting unit below its carrying value.
SFAS No 142 is effective for fiscal years beginning after December 31,
2001, with early adoption permitted under certain circumstances.
Goodwill and intangible assets acquired in a transaction completed
after June 30, 2001 but before SFAS No. 142 is initially applied will
be accounted for in accordance with SFAS No. 142. The Company does not
believe that the adoption of the statement will have a material effect
on its financial position, results of operations, or cash flows.
In June 2001, the FASB approved for issuance SFAS 143 Asset Retirement
Obligations. SFAS 143 establishes accounting requirements for
retirement obligations associated with tangible long-lived assets,
including (1) the timing of the liability recognition, (2) initial
measurement of the liability, (3) allocation of asset retirement cost
to expense, (4) subsequent measurement of the liability and (5)
financial statement disclosures. SFAS 143 requires that an asset
retirement cost should be capitalized as part of the cost of the
related long-lived asset and subsequently allocated to expense using a
systematic and rational method. The statement is effective for
financial statements issued for fiscal years beginning after June 15,
2002. The Company does not believe that the adoption of the statement
will have a material effect on its financial position, results of
operations, or cash flows.
In October 2001, the FASB also approved SFAS 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. SFAS 144 replaces SFAS
121, Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed Of. The new accounting model for long-
lived assets to be disposed of by sale applies to all long-lived
assets, including discontinued operations, and replaces the provisions
of APB Opinion No. 30, Reporting Results of Operations-Reporting the
Effects of Disposal of a Segment of a Business, for the disposal of
segments of a business. Statement 144 requires that those long-lived
assets be measured at the lower of carrying amount or fair value less
cost to sell, whether reported in continuing operations or in
discontinued operations. Therefore, discontinued operations will no
longer be measured at net realizable value or include amounts for
operating losses that have not yet occurred. Statement 144 also
broadens the reporting of discontinued operations to include all
components of an entity with operations that can be distinguished from
the rest of the entity and that will be eliminated from the ongoing
23
operations of the entity in a disposal transaction. The provisions of
Statement 144 are effective for financial statements issued for fiscal
years beginning after December 15, 2001 and, generally, are to be
applied prospectively. At this time, the Company cannot estimate the
effect of this statement on its financial position, results of
operations, or cash flows.
In April 2002, the FASB issued SFAS 145, "Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections." Among other things, this statement rescinds FASB
Statement No. 4, "Reporting Gains and Losses from Extinguishment of
Debt" which required all gains and losses from extinguishment of debt
to be aggregated and, if material, classified as an extraordinary item,
net of related income tax effect. As a result, the criteria in APB
Opinion No. 30, "Reporting the Results of Operations -- Reporting the
Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and Transactions," will now
be used to classify those gains and losses. The provisions of SFAS 145
related to the classification of debt extinguishment are effective for
years beginning after May 15, 2002. The adoption of SFAS 145 by the
Company is not expected to have a material impact on the Company's
financial position, results of operations, or cash flows.
In July 2002, the FASB issued SFAS 146, "Accounting for Costs
Associated with Exit or Disposal Activities." SFAS 146 provides new
guidance on the recognition of costs associated with exit or disposal
activities. The standard requires companies to recognize costs
associated with exit or disposal activities when they are incurred
rather than at the date of commitment to an exit or disposal plan.
SFAS 146 supercedes previous accounting guidance provided by the EITF
Issue No. 94-3 "Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity (including Certain Costs
Incurred in a Restructuring)." EITF Issue No. 94-3 required
recognition of costs at the date of commitment to an exit or disposal
plan. SFAS 146 is to be applied prospectively to exit or disposal
activities initiated after December 31, 2002. Early application is
permitted. The adoption of SFAS 146 by the Company is not expected to
have a material impact on the Company's financial position, results of
operations, or cash flows.
In December 2002, the Financial Accounting Standards Board ("FASB")
issued SFAS 148 "Accounting for Stock-Based Compensation--Transition
and Disclosure--an amendment of SFAS 123." SFAS 148 provides
alternative methods of transition for a voluntary change to the fair
value based method of accounting for stock-based employee compensation
from the intrinsic value-based method of accounting prescribed by APB
25. As allowed by SFAS 123, the Company has elected to continue to
apply the intrinsic value-based method of accounting, and has adopted
the disclosure requirements of SFAS 123. The Company currently does
not anticipate adopting the provisions of SFAS 148.
In January 2003, the FASB issued FASB Interpretation ("FIN") No. 46,
Consolidation of Variable Interest Entities, which requires variable
interest entities (commonly referred to as SPEs) to be consolidated by
the primary beneficiary of the entity if certain criteria are met. FIN
No. 46 is effective immediately for all new variable interest entities
created or acquired after January 31, 2003. The adoption of this
statement does not impact the Company's historical or present financial
statements, as the Company has not created or acquired any variable
interest entities, nor does it expect to in the future.
24
In April 2003, the FASB issued Statement of Financial Accounting
Standard No. 149, "Amendment of Statement 133 on Derivative Instruments
and Hedging Activities" (SFAS 149). SFAS 149 amends and clarifies
financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities
under FASB Statement No. 133, "Accounting for Derivative Instruments
and Hedging Activities". SFAS 149 is generally effective for contracts
entered into or modified after June 30, 2003 or hedging relationships
designated after June 30, 2003. The Company does not expect the
adoption of SFAS 149 to have an impact on its financial position or
operating results.
In May 2003, the FASB issued Financial Accounting Standard No. 150,
"Accounting for Certain Financial Instruments with Characteristics of
Both Liabilities and Equity" (SFAS 150). SFAS 150 establishes
standards for how a company classifies and measures certain financial
instruments with characteristics of both liabilities and equity. It
requires that a company classify a financial instrument that is within
the scope as a liability (or an asset in some circumstances). SFAS 150
is effective for financial instruments entered into or modified after
May 31, 2003, and otherwise is effective at the beginning of the first
interim period beginning after June 15, 2003. The Company does not
expect the adoption of SFAS 150 to have an impact on its financial
position or operating results.
Effects of Inflation
Although we cannot accurately anticipate the effect of inflation on our
operations, we do not believe that inflation has had, or is likely in
the future to have, a material effect on our operating results or
financial condition.
ITEM 3. Controls and Procedures
As of the end of the period covered by this report, the Company
conducted an evaluation, under the supervision and with the
participation of David J. Cutler, the Chief Executive Officer and Chief
Financial Officer, of the Company's disclosure controls and procedures
(as defined in Rules 13a-15(e) and 15d-15(e) under the 1934 Act. Based
on this evaluation, the Chief Executive Officer and Chief Financial
Officer concluded that the Company's disclosure controls and procedures
are effective to ensure that information required to be disclosed by
the Company in reports that it files or submits under the 1934 Act is
recorded, processed, summarized and reported within the time periods
specified in Securities and Exchange Commission rules and forms. There
was no change in the Company's internal control over financial
reporting during the Company's most recently completed fiscal quarter
that has materially affected, or is reasonably likely to materially
affect, the Company's internal control over financial reporting.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
As reported in the Form 8-K filed on November 27, 2002, effective
November 20, 2002 our sole remaining operating business, Multi-Link
25
Communications, LLC., filed a voluntary petition under Chapter 11 of
the Bankruptcy Code and from that date we had no further beneficial
interest in respect of the Indianapolis operating business.
Item 2. Changes in Securities.
Recent Sales of Unregistered Securities
In December 2001, we issued 60,000 shares of our restricted common
stock with a market value of $21,000 to Leopard Communications, Inc. in
exchange for marketing advisory services. We issued the shares in
reliance upon the exemption from registration provided by Section 4(2)
of the 1933 Act. No underwriters were engaged in connection with such
issuances.
In January 2002, we issued 39,925 shares of common stock under the
terms of our stock option plan. The stock options were exercised at
1.7 cents per share.
In April 2002, we issued 400,000 shares of common stock with a market
value $16,000 as consideration for the purchase from Telcom Sales
Associates, Inc. of the assets of its Sales Agency Business in Denver,
Colorado. We issued the shares in reliance upon the exemption from
registration provided by Section 4(2) of the 1933 Act. No underwriters
were engaged in connection with such issuances.
In June 2002, we issued 1,000,000 shares of common stock with a market
value of $50,000 to a private investor to raise working capital to
finance the ongoing operating costs of the Company. We issued the
shares in reliance upon the exemption from registration provided by
Section 4(2) of the 1933 Act. No underwriters were engaged in
connection with such issuances.
In October 31, 2003, we issued 14,000,000 shares of common stock with a
market value of approximately $18,000 to David J Cutler, our sole
director, to provide the funding to negotiate settlement with our
creditors or to finance the initiation of formal bankruptcy proceedings
if it were not possible to complete such settlements with our
creditors. We retained an independent third party consultant to value
the shares of common stock issued in this transaction. We issued the
shares in reliance upon the exemption from registration provided by
Section 4(2) of the 1933 Act. No underwriters were engaged in
connection with such issuances.
Expiration of Series A Warrants
In November 1998 we issued 114,720 Series A warrants to purchase shares
of common stock at an exercise price of $4.17 per share in connection
with a private placement. The original expiration date of 111,000 of
the Warrants was May 14, 2001, but was subsequently extended to
December 31, 2001. Effective December 31, 2001 all 111,000 Series A
warrants expired without exercise.
The remaining 3,720 Series 'A' warrants expired without exercise in
November 2003.
Expiration of Series B Warrants
In November 1998 we issued 7,560 Series B warrants to purchase shares
of common stock at an exercise price of $5.00 per share in connection
with a private placement. The expiration date for the Series B
warrants was November 2003 at which time all 7,560 Series B warrants
expired without exercise.
26
Expiration of Series C Warrants
In connection with the initial public offering in May 1999, we issued
1,380,000 Series C warrants. Two C warrants were exercisable to
purchase one share of common stock for an exercise price of $9.00 per
share during the three years ended May 14, 2002, subject to the
Company's redemption rights. Effective May 14, 2001 all 1,380,000
Series C warrants expired without exercise.
Expiration of Westburg Media Capital Warrants
We issued a warrant for the purchase of 150,000 shares of common stock
to the lender in consideration for advancing the Westburg Loan on which
we were a co-borrower with a subsidiary company. The expiration date
of the warrant was the earlier of (i) the date all amounts were to be
repaid under the Westburg Loan, (ii) the date of which we were sold or
we sold substantially all of our assets, (iii) the effective date of a
registration statement filed under the Securities Act in connection
with a $5,000,000 or greater firm commitment underwriting for our
common stock at a price greater than $8.17 per share, or (iv) October
21, 2003. The warrant were exercisable at $4.17 per share. The
warrants expired without exercise on October 30, 2002 with the sale of
substantially all of our assets and the repayment of the Westburg loan.
Expiration of Underwriter Warrants
In May 1999, the underwriter to the initial public offering was issued
warrants to subscribe for 120,000 units at $7.68 per unit. Each unit
comprised one common share and one warrant. Two of the warrants within
the units were exercisable to purchase one share of common stock for an
exercise price of $11.52. Warrants within the units only became issued
when the unit warrants were exercised. These warrants were exercisable
through May 2004 and expired without exercise at that date.
Item 3. Defaults upon Senior Securities
We, as co-borrower or guarantor of various loans and leases of our
subsidiary companies, were in default on our obligations to various
lenders and leasing companies.
During fiscal 2003 and 2004 we have been able to negotiate settlement
of all of our shortfalls to creditors in respect of these defaults upon
senior securities.
Item 4. Submission of Matters to Vote of Security Holders
On April 27, 2002 we held our Annual Meeting of Shareholders. Our
shareholders (i) elected Shawn B. Stickle to serve as a director until
2005, and (ii) ratified the appointment of Hein and Associates LLP as
our independent auditors. R. Brad Stillahn and Nigel V. Alexander were
not up for election.
R. Brad Stillahn resigned from the board as of May 1, 2002.
Nigel V Alexander resigned from the board as of October 31, 2002.
David J Cutler was appointed to the board as of November 5, 2002.
Shawn B Stickle resigned from the board as of November 6, 2002.
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1. Election of Shawn B. Stickle as a director.
VOTES FOR VOTES AGAINST ABSTENTIONS
- ------------------- ---------------------- --------------------
3,793,926 - 33,082
2. Ratification of Appointment of Hein and Associates LLP
VOTES FOR VOTES AGAINST ABSTENTIONS
- ------------------- ---------------------- --------------------
3,797,992 4,623 24,393
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
Exhibits.
Exhibit 31 - 302 Certification
Exhibit 32 - 906 Certification
Reports on Form 8-K.
On March 26, 2002, we filed a Form 8-K to report the restructuring our
loan facility with Westburg Media Capital LLP and the disposal of our
live telephone answering service in Indianapolis to Signius
Corporation.
On October 18, 2002 we filed a Form 8-K to report the progress on
selling our operating businesses and that as we had breached the terms
of the restructured agreement with Westburg Media Capital LLP.,
Westburg Media Capital LLP had notified the us of its intent to enforce
its security interest in the assets of VoiceLink, Inc., One Touch
Communications, Inc. and Multi-Link Communications, Inc. through
foreclosure and a public auction for sale scheduled for October 30,
2002.
On November 6, 2002, we filed a Form 8-K reporting the sale of the
business and assets VoiceLink, Inc., One Touch Communications, Inc.
and Multi-Link Communications, Inc by Westburg Media Capital LLP
through foreclosure and a public auction held on October 30, 2002. The
8-K also announced the resignation of Nigel V Alexander and Shawn B
Stickle as directors and the appointment of David J Cutler as the sole
director of the Company.
On November 27, 2002 we filed a Form 8-K announcing that on November
20, 2002, Multi-Link Communications, LLC had filed a voluntary petition
under Chapter 11 of the Bankruptcy Code.
On October 31, 2003 we filed a Form 8-K announcing that we had issued
14,000,000 shares of Common Stock for consideration of $18,000 to David
J Cutler, sole director of the Company. We issued the shares, valued
by a third party consultant, to provide the funding to negotiate
settlement with our creditors or to finance the initiation of formal
bankruptcy proceedings if were not possible to complete such
settlements with our creditors.
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On September 14, 2004 we filed a Form 8-K announcing that effective
August 4, 2004 we had appointed James E Scheifley & Associates PC as
our new auditors in succession to Hein & Associates LLP.
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.
MULTI-LINK TELECOMMUNICATIONS, INC,
(Registrant)
Date: September 30, 2002 /s/ David J. Cutler
David J.Cutler,
Chief Executive Officer
Chief Financial Officer.
4
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