SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8K12g3
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
Date of Report: April 19, 2002
THE LINK GROUP, INC.
---------------------------------------------
(Exact name of registrant as specified in its charter)
COLORADO 000-33031 84-1263981
- ----------------------------- ----------- -------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
#950 - 789 West Pender Street, Vancouver, B.C. Canada V6C 1H2
- -------------------------------------------------------------
(Address of principal executive offices) (Postal Code)
Registrant's telephone number, including area code: (604) 689-4407
--------------
Item 1. CHANGES IN CONTROL OF REGISTRANT
None
Item 2. ACQUISITION OR DISPOSITION OF ASSETS.
Pursuant to the contract, the company closed upon its acquisition of
ProtectServe Pacific Limited (PSP) by issuing 37,500,000 shares of common stock
for 100% of the issued and outtanding stock of PSP.
Protectserve Pacific Ltd (PSP) is a developer and provider of Surveillance
Monitoring Control Systems, Data Acquistion Systems, Internet Services and
Wireless Communication Systems.
Pursuant to the previous 8-K as filed with the SEC on March 26, 2002, the
Pro Forma Consolidated Financial Statements are attached hereto as an Exhibit,
pages F-1 to F-6. The financial statements of ProtectServe Pacific, LTD. are
also attached hereto as an exhibit, pages F-7 to F-F-16.
Item 3. BANKRUPTCY OR RECEIVERSHIP
None
Item 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
None
Item 5. Other Events
None
Item 6. RESIGNATION AND APPOINTMENT OF NEW DIRECTORS
None
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
Pro Forma Financial Statements of The Link Group, Inc.
Audited Financial Statements of ProtectServe Pacific, LTD.
(b) Exhibits:
None.
Item 8. CHANGE IN FISCAL YEAR
None
Item 9. REGULATION FD DISCLOSURE
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
THE LINK GROUP, INC.
(Registrant)
/s/ Justin Kwei
Date: April 19,2002 -----------------------------------
Justin Kwei, President
LINK GROUP, INC.
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
(Unaudited)
Basis of Presentation
The following pro forma consolidated financial statements are presented to
illustrate the effects of the acquisition of ProtectServe Pacific Limited
("PSP") by The Link Group, Inc. ("the Company"). The pro forma consolidated
financial statements have been derived from, and should be read in conjunction
with, the audited consolidated financial statements, including notes thereto, of
the Company for the ten-month period ended December 31, 2001 and the audited
financial statements, including notes thereto, of PSP for the eleven-month
period ended December 31, 2001 as contained elsewhere in this Form 8-K.
The following pro forma consolidated financial statements assume that the
Company has acquired PSP as of December 31, 2001. The pro forma consolidated
statement of operations will be the same if the acquisition of PSP has been
consummated at the beginning of the period or during the eleven-month period
ended December 31, 2001.
The pro forma financial information has been prepared in accordance with U.S.
GAAP.
The pro forma consolidated financial statements are presented for information
purpose only and is not necessarily indicative of the financial position or
results of operations of the Company that would have occurred had the
acquisition of PSP been consummated as of the dates indicated. In addition, the
pro forma consolidated financial statements are not necessarily indicative of
the future financial condition or operating results of the Company.
F-1
THE LINK GROUP, INC.
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
(Unaudited)
Acquisition of PSP
By an agreement dated January 21, 2002, the Company agreed to purchase all the
issued and outstanding shares of PSP from three individuals through issuance of
37,500,000 (post-reverse one for four split) common shares. The Company has the
right to buy back its shares at $0.0001 per share from these individuals if
PSP's after tax profit is less than Hong Kong $9 million dollars ("HKD") for the
twelve months ended December 31, 2002. The buy back formula is for every HKD
$333,333 that PSP falls short of the HKD $9 million after tax profit, the
Company can buy back one million (post-reverse one for four split) common shares
from these individuals.
The acquisition of PSP will be accounted for as a reverse takeover with PSP
being identified as the acquirer.
Private Placement
Pursuant to a Subscription Agreement dated January 18, 2002, the Company's
parent company, Xin Net Corp. ("Xin Net"), invested $600,300 in a private
placement of the Company for 14,500,000 (pre-reverse one for four split) common
shares at $0.0414 per share and 10,875,000 special warrants at $0.0414 per share
convertible into 10,875,000 post-reverse one for four split common shares on or
before Janaury 31, 2004 at no further consideration. The Company was also
granted an option to purchase an additional 7,500,000 post-reverse one for four
split common shares at $0.04 per share, or $300,000, until February 15, 2002.
Xin Net did not exercise the option.
Reverse one for four split of issued and outstanding common shares
On February 18, 2002, the shareholders of the Company approved the reverse split
of the issued and outstanding common shares of the Company at the ratio of one
for four.
F-2
THE LINK GROUP, INC.
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
(Unaudited)
Pro Forma Assumptions
The pro forma consolidated financial statements incorporate the following pro
forma assumptions :
(a) The Company has received $150,075 from Xin Net through the private
placement and has issued 14,500,000 pre-reverse one for four split common
shares.
(b) The Company has completed the one for four reverse split of its issued and
outstanding common stock.
(c) The Company has received $450,225 from Xin Net upon the exercise of the
special warrants and has issued 10,875,000 post-reverse split common shares
to Xin Net.
(d) The Company has issued 37,500,000 post-reverse split common shares to three
individuals for exchange of 100% of the issued and outstanding common
shares of PSP.
F-3
THE LINK GROUP, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2001
(Unaudited)
ProtectServe The Link The Link
Pacific Limited Group, Inc. Pro forma Group, Inc.
historical (a) historical (b) adjustments pro forma
------------------- ---------------- ------------------ -------------------
ASSETS
Current Assets
Cash $ 247,813 $ -(e) 150,075 $ 848,113
(f) 450,225
Advances receivable 132,841 - 132,841
Accounts Receivables 162,833 - 162,833
Inventory 300,488 - 300,488
Deposit and prepayment 35,616 - 35,616
------------------- ---------------- ------------------ -------------------
879,591 - 600,300 1,479,891
Property and Equipment, Net 533,425 - 533,425
------------------- ---------------- ------------------ -------------------
Total Assets $ 1,413,016 $ - $ 600,300 $ 2,013,316
=================== ================ ================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable and Other Accrued Liabilities $ 160,792 $ - $ 160,792
Loan payable 300,000 - 300,000
Deferred revenue 44,100 - 44,100
------------------- ---------------- ------------------ -------------------
504,892 - - 504,892
Deferred income tax payable 36,860 - - 36,860
Stockholders' Equity
Common Stock 722,184 540(e) 1,450 6,828
(f) 1,088
(g) 3,750
(g) (722,184)
Additional Paid In Capital - 113,767(e) 148,625 1,315,656
(f) 449,137
(g) 604,127
Retained earnings (Deficit) 149,080 (114,307)(g) 114,307 149,080
------------------- ---------------- ------------------ -------------------
Total Stockholders' Equity 871,264 - 600,300 1,471,564
------------------- ---------------- ------------------ -------------------
Total Liabilities and Stockholders' Equity $ 1,413,016 $ - $ 600,300 $ 2,013,316
=================== ================ ================== ===================
F-4
THE LINK GROUP, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
ProtectServe The Link Group, The Link Group,
Pacific Limited Inc. Pro forma Inc.
historical (c) historical (d) adjustments pro forma
------------------- ------------------- ------------------- ---------------------
Sales $ 998,793 $ - $ 998,793
Cost of sales 342,425 - 342,425
------------------- ------------------- ------------------- ---------------------
Gross profit 656,368 - - 656,368
Expenses
Amortization 165,030 - 165,030
General and administrative 280,886 151(g) (151) 280,886
Selling and distribution 24,512 - 24,512
------------------- ------------------- ------------------- ---------------------
470,428 151 (151) 470,428
------------------- ------------------- ------------------- ---------------------
Income before other items and income
taxes 185,940 (151)(g) 151 185,940
Other item : gain on reorganization - 1,707(g) (1,707) -
------------------- ------------------- ------------------- ---------------------
Income before income taxes 185,940 1,556 (1,556) 185,940
Provision for deferred income taxes 36,860 - 36,860
------------------- ------------------- ------------------- ---------------------
Net income for the period $ 149,080 $ 1,556 $ (1,556) $ 149,080
=================== =================== =================== =====================
Basic and diluted earnings per share $ 0.026 $ 0.000 $ 0.003
=================== =================== =====================
Basic and Diluted weighted average
common shares outstanding 5,633,036 5,405,200 53,351,300
=================== =================== =====================
F-5
THE LINK GROUP, INC.
NOTES TO THE PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
(Unaudited)
(a) Reflects the historical financial position of PSP as at December 31, 2001.
(b) Reflects the historical financial position of the Company as at December
31, 2001.
(c) Reflects the historical operating results of PSP for the eleven-month
period from February 1, 2001 to December 31, 2001.
(d) Reflects the historical operating results of the Company for the ten-month
period from March 1, 2001 to December 31, 2001.
The pro forma consolidated financial statements include the following
adjustments :
(e) To record the receipt of $150,075 from Xin Net and the issuance of
14,500,000 pre-reverse split common shares through the private placement.
(f) To record the receipt of $450,225 from Xin Net and the issuance of
10,875,000 post-reverse split shares through the exercise of the special
warrants by Xin Net.
(g) To record the issuance of 37,500,000 common shares of the Company to
acquire 100% of the issued and outstanding shares of PSP.
F-6
PROTECTSERVE PACIFIC LIMITED
REPORT AND FINANCIAL STATEMENTS
December 31, 2001
(Stated in US Dollars)
TERRY AMISANO LTD. AMISANO HANSON
KEVIN HANSON, C.A. CHARTERED ACCOUNTANTS
INDEPENDENT AUDITORS' REPORT
To the Stockholders
Protectserve Pacific Limited
We have audited the accompanying balance sheet of Protectserve Pacific Limited
as of December 31, 2001 and the related statements of operations, cash flows and
stockholders' equity for the period then ended. These financial statements are
the responsibility of the Company's management. Our responsibility it to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amount and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Protectserve Pacific Limited as
of December 31, 2001 and the results of its operations and its cash flows for
the period then ended in conformity with accounting principles generally
accepted in the United States of America.
Vancouver, Canada /s/ AMISANO HANSON
February 8, 2002 Chartered Accountants
750 West Pender Street, Suite 604 Telephone: 604-689-0188
Vancouver Canada Facsimile: 604-689-9773
V6C 2T7 E-Mail: amishan@telus
F-7
PROTECTSERVE PACIFIC LIMITED
BALANCE SHEET
December 31, 2001
(Stated in US Dollars)
ASSETS
Current
Cash $ 247,813
Advances receivable - Note 3 132,841
Accounts receivable 162,833
Inventory of purchased materials 300,488
Deposit and prepayment 35,616
Deferred tax - Note 4 65,983
--------------
945,574
Property and equipment - Notes 5 and 8 518,231
--------------
$ 1,463,805
==============
LIABILITIES
Current
Accounts payable and accrued liabilities $ 160,792
Loan payable - Notes 6 and 10 300,000
Deferred revenue - Note 2 44,100
--------------
504,892
Deferred tax - Note 4 93,652
--------------
598,544
--------------
STOCKHOLDERS' EQUITY
Common stock,
Authorized:
6,000,000, par value $0.1282 each
Issued:
5,633,036 shares 722,184
Retained earnings 143,077
--------------
865,261
--------------
$ 1,463,805
==============
Nature of Operations - Note 1
Commitments - Note 7
Subsequent Events - Note 10
SEE ACCOMPANYING NOTES
F-8
PROTECTSERVE PACIFIC LIMITED
STATEMENT OF OPERATIONS
for the period from February 1, 2001 (Commencement of Operations)
to December 31, 2001
(Stated in US Dollars)
--------------------
Sales $ 998,793
Cost of sales - Note 8 342,425
------------
Gross 656,368
------------
Expenses
Amortization 180,224
Selling, general and administrative expenses - Note 8 305,398
------------
485,622
------------
Income from operations before income taxes 170,746
Provision for deferred income taxes 27,669
------------
Net income for the period $ 143,077
============
Basic earnings per share $ 0.025
============
Weighted average number of common shares outstanding 5,633,036
============
SEE ACCOMPANYING NOTES
F-9
PROTECTSERVE PACIFIC LIMITED
STATEMENT OF STOCKHOLDERS' EQUITY
For the period from September 25, 2000 to (Incorporation) December 31, 2001
(Stated in US Dollars)
Common Stock Retained
Shares Amount Earnings Totals
------ ------ -------- ------
Issuance of stock for cash 10,000 $ 1,282 $ - $ 1,282
Issuance of stock for services, inventory and
equipment- Note 8 5,623,036 720,902 - 720,902
Net income for the period - - 143,077 143,077
--------- -------------- -------------- --------------
Balance, December 31, 2001 5,633,036 $ 722,184 $ 143,077 $ 865,261
========= ============== ============== ==============
SEE ACCOMPANYING NOTES
F-10
PROTECTSERVE PACIFIC LIMITED
STATEMENT OF CASH FLOWS
for the period from February 1, 2001 (Commencement of Operations)
to December 31, 2001
(Stated in US Dollars)
--------------------
Operating Activities
Net income for the period $ 143,077
Adjustment for non-cash items
Amortization 180,224
Common stock issued for management fees - Note 8 128,205
Common stock issued for inventory - Note 8 115,875
Provision for deferred income taxes 27,669
Change in working capital items
Advances receivable ( 132,841)
Accounts receivable ( 162,833)
Inventory ( 300,488)
Deposit and prepayment ( 35,616)
Accounts payable and accrued liabilities 160,792
Deferred revenue 44,100
----------------
Cash provided by operating activities 168,164
----------------
Investing Activity
Purchase of property and equipment ( 221,633)
----------------
Financing Activities
Loan payable 300,000
Proceeds from issuance of common stock 1,282
----------------
Cash from financing activities 301,282
----------------
Net increase in cash and cash equivalents and balance end of
period $ 247,813
================
Supplementary disclosure of cash flow information Cash paid for:
Interest $ -
================
Income taxes $ -
================
Supplementary disclosure of non-cash investing and financing activities:
Capital stock issued for equipment - Note 8 $ 476,822
================
SEE ACCOMPANYING NOTES
F-11
PROTECTSERVE PACIFIC LIMITED
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2001
(Stated in US Dollars)
Note 1 Nature of Operations
--------------------
The Company is engaged in the business of developing and marketing
computer hardware and web-based surveillance monitoring and
control systems. The Company's product is based on proprietary
software, the use of which is subject to a license agreement (Note
7). All operations are carried on outside of the United States.
Protectserve Pacific Limited (the "Company") was incorporated in
Hong Kong on September 25, 2000 with the name Global Surveillance
Communications Limited. On January 15, 2001, the Company changed
its name to Protectserve Pacific Limited and commenced operations
effective February 1, 2001.
Note 2 Summary of Significant Accounting Policies
------------------------------------------
The financial statements of the Company have been prepared in
accordance with accounting principles generally accepted in the
United States of America. Because a precise determination of many
assets and liabilities is dependent upon future events, the
preparation of financial statements for a period necessarily
involves the use of estimates, which have been made using careful
judgement. Actual results may vary from these estimates.
The financial statements have, in management's opinion, been
properly prepared within reasonable limits of materiality and
within the framework of the significant accounting policies
summarized below:
Cash and Cash Equivalents
-------------------------
The Company considers all cash and other highly liquid investments
with initial maturities of three months or less to be cash
equivalents.
Basic Earnings Per Share
------------------------
The Company reports basic loss per share in accordance with
Statement of Financial Accounting Standards No. 128, "Earnings per
Share". Basic earnings per share is computed by dividing net
income by the weighted average number of shares of common stock
outstanding for the period less shares subject to repurchase.
F-12
Protectserve Pacific Limited
Notes to the Financial Statements
December 31, 2001
(Stated in US Dollars) - Page 2
--------------------
Note 2 Summary of Significant Accounting Policies - (cont'd)
------------------------------------------
Revenue Recognition
-------------------
Revenue is recognized when it is probable that the economic
benefits will flow to the Company and when the revenue can be
measured reliably, on the following basis:
(i) revenue from the sale of product is recognized using the
completed contract method. Completion generally coincides
with the time of shipment. Amounts invoiced at year end for
contracts which have not yet been completed are not
recognized in revenue but are recorded as deferred revenue.
ii) commission income is recognized when the relevant services
are rendered; and
iii) interest income is recognized on an accrual basis.
Impairment of Long-lived Assets
-------------------------------
The Company reports the impairment of long-lived assets and
certain identifiable intangibles in accordance with Statement of
Financial Accounting Standards No. 121. "Accounting for the
Impairment of Long-lived Assets for Long-lived Assets to be
Disposed Of". Certain long-lived assets and identifiable
intangibles held by the Company are reviewed for impairment
whenever assets or changes in circumstances indicate the carrying
amount of an assets my not be recoverable. Accordingly, an
impairment loss is recognized in the period it is determined.
Property and Equipment
----------------------
Property and equipment are stated at cost less accumulated
amortization. Cost represents the purchase price of the asset and
other costs incurred to bring the asset into its existing use.
Amortization is provided to write-off the cost of property and
equipment on the straight-line basis over their estimated useful
lives as follows:
Computer and office equipment Five years
Computer software Three years
Motor vehicles Five years
Leasehold improvements are written off on a straight-line basis
over the term of the lease.
Inventories
-----------
Inventories are stated at the lower of cost and net realizable
value. Cost is calculated using the first-in, first-out method.
Net realizable value is the price at which inventories can be sold
in the normal course of business after allowing for the costs of
realization.
F-13
Protectserve Pacific Limited
Notes to the Financial Statements
December 31, 2001
(Stated in US Dollars) - Page 3
--------------------
Note 2 Summary of Significant Accounting Policies - (cont'd)
------------------------------------------
Foreign Currency Translation
----------------------------
The functional currency of the Company is Hong Kong dollars, which
has been translated into US dollars, the reporting currency, in
accordance with Statement of Financial Accounting Standards No. 52
"Foreign Currency Translation". Assets and liabilities are
translated at the exchange rate at the balance sheet date and
revenue and expenses are translated at the exchange rate at the
date those elements are recognized. Any translation adjustments
resulting are not included in determining net income but are
included in other comprehensive income. The exchange rate in
effect at the balance sheet date, and the average for the year was
7.8HK$ for 1US$ and accordingly no translation adjustments
resulted.
Income Taxes
------------
The company uses the liability method of accounting for income
taxes pursuant to Statement of Financial Accounting Standards No.
109 "Accounting for Income Taxes".
Note 3 Advances Receivable
-------------------
Advances receivable outstanding at December 31, 2001 were advances
paid by the Company to an independent agent to be used for future
operations in China.
Note 4 Deferred Tax
------------
The Financial Accounting Standards Board issued Statement Number
109 in Accounting for Income Taxes ("FAS 109") which is effective
for fiscal years beginning after December 15, 1992. FAS 109
requires the use of the asset and liability method of accounting
of income taxes. Under the assets and liability method of FAS 109,
deferred tax assets and liabilities are recognized for the future
tax consequences attributable to temporary differences between the
financial statements carrying amounts of existing assets and
liabilities and loss carryforwards and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or
settled.
F-14
Protectserve Pacific Limited
Notes to the Financial Statements
December 31, 2001
(Stated in US Dollars) - Page 4
--------------------
Note 4 Deferred Tax - (cont'd)
------------
Deferred tax assets
Net operating loss carry forward $ 58,927
Deferred revenue 7,056
------------
65,983
Deferred tax liability
Property and equipment costs deducted for tax
purposes in excess of amortization provided ( 93,652)
------------
Net deferred tax liability $ ( 27,669)
============
Realization of deferred tax assets is dependent upon future
earnings, if any, the timing and amount of which are uncertain. As
at December 31, 2001, management believes it is more likely than
not that the net deferred tax asset will be realized in the
subsequent year and accordingly no valuation allowance is
required.
Note 5 Property and Equipment
Accumulated Net Book
Cost Amortization Value
---- ------------ --------
Computer and office
equipment $ 140,221 $ 25,707 $ 114,514
Computer software 475,864 145,403 330,461
Motor vehicles 22,493 4,124 18,369
Leasehold improvements 59,877 4,990 54,887
------------- ------------- -------------
$ 698,455 $ 180,224 $ 518,231
============= ============= =============
Note 6 Loan Payable
-------------
The loan is unsecured, non-interest bearing and has no fixed
repayment terms.
F-15
Protectserve Pacific Limited
Notes to the Financial Statements
December 31, 2001
(Stated in US Dollars) - Page 5
--------------------
Note 7 Commitments
-----------
The Company has entered into an operating lease for its premises
for three years, expiring December 31, 2004. The annual lease
payments required are $86,900 (HK$677,732) plus operating costs
for an aggregate amount payable of $260,700 (HK$2,033,460) plus
operating costs.
The Company has entered into a licensing agreement for exclusive
use in Pacific Asia of certain proprietary software related to its
products. A license fee of $100 per copy is payable, with a
minimum commitment to purchase 5000 copies over three years ending
December 31, 2003. The Company can obtain unlimited use of the
software by purchasing more than 5000 units before the three-year
period or by paying $500,000 less license fees paid to date. Upon
the purchase of 5,000 units, the Company will own the proprietary
software.
Note 8 Related Party Transactions
--------------------------
During the period ended December 31, 2001, capital stock was
issued to stockholders as follows:
For management fees $ 128,205
For inventory 115,875
For equipment 476,822
---------------
$ 720,902
===============
Inventory and equipment were measured at their original cost as
incurred by the shareholders. Management fees were measured by the
exchange amount, which is the amount agreed upon by the
transacting parties and on terms and conditions similar to
non-related entities.
Note 9 Segmented Information
---------------------
During the period ended December 31, 2001, three customers
accounted for 60% of the Company's revenues with totals of 16%,
20% and 24%, respectively.
Note 10 Subsequent Events
-----------------
Subsequent to December 31, 2001, control of the Company was
changed as the shareholders of the Company exchanged all of their
shares for shares of a US public company. A significant
shareholder of the US public company loaned the Company $300,000,
pursuant to a loan outstanding at December 31, 2001, which was
repaid subsequent to December 31, 2001.
F-16