SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10QSB
Quarterly Report under Section 13 or 15(d) of
the Securities Exchange Act of 1934
For Quarter Ended Commission File Number
- - ----------------- ----------------------
June 30, 2003 000-33031
THE LINK GROUP, INC.
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(Exact name of registrant as specified in its charter)
Colorado 84-1263981
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(State of incorporation) (I.R.S. Employer
Identification No.)
Suite 950 - 789 West Pender Street, Vancouver, B.C. Canada V6C 1H2
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (604) 689-4407
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to the filing
requirements for at least the past 90 days.
Yes X No
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
62,051,301 as of June 30, 2003
THE LINK GROUP, INC.
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2003
(Unaudited)
(Stated in US Dollars)
THE LINK GROUP, INC.
INTERIM BALANCE SHEETS
June 30, 2003 and December 31, 2002
(Unaudited)
(Stated in US Dollars)
(Unaudited) (Audited)
June 30 December 31,
ASSETS 2003 2002
------ ---- ----
Current
Cash $ 131,461 $ 11,717
Receivables - trade 112,388 26,405
- other 32,209 51,280
Inventory 196,200 227,240
Deposits and prepayment 20,644 22,868
Loan receivable - Note 4 128,200 -
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621,102 339,510
Deferred investment costs 480,000 480,000
Property and equipment 282,789 338,613
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$1,383,891 $1,158,123
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LIABILITIES
Current
Bank overdraft $ 128,196 $ -
Accounts payable and accrued liabilities 69,435 94,911
Due to a director 85,887 42,284
Deferred revenue 8,764 10,512
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292,282 147,707
Due to related parties - 980,000
Deferred tax 86,250 86,250
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378,532 1,213,957
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STOCKHOLDER'S EQUITY (DEFICIENCY)
Common stock,
Authorized:
200,000,000, $0.0001 par value
Issued:
62,051,301 shares (December 31, 2002: 45,051,301) 6,205 4,505
Paid-in capital 2,496,279 1,317,979
Deficit (1,497,125) (1,378,318)
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1,005,359 ( 55,834)
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$1,383,891 $1,158,123
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SEE ACCOMPANYING NOTES
THE LINK GROUP, INC.
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
for the three and six months ended June 30, 2003 and 2002
(Unaudited)
(Stated in US Dollars)
Three months ended June 30, Six months ended June 30,
2003 2002 2003 2002
---- ---- ---- ----
Sales $ 88,713 $ 257,485 $ 191,525 $ 659,645
Cost of sales 64,131 293,335 101,845 537,326
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Gross income (loss) 24,582 ( 35,850) 89,680 122,319
Other income - 9,324 51 39,427
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24,582 ( 26,526) 89,731 161,746
-------------- -------------- -------------- --------------
Expenses
Amortization 35,200 66,294 57,446 123,936
Selling, general and administrative expenses 64,224 199,840 151,092 385,289
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99,424 266,134 208,538 509,225
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Loss from operations before income taxes ( 74,842) ( 292,660) ( 118,807) ( 347,479)
Recovery of future income taxes - 83,557 - 67,046
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Net loss for the period $ ( 74,842) $ ( 209,103) $ ( 118,807) $ ( 280,433)
-------------- -------------- -------------- --------------
Basic loss per share $ ( 0.00) $ ( 0.00 $ ( 0.00) $ ( 0.01)
============== ============== ============== ==============
Weighted average number of common shares outstanding
62,051,301 53,351,301 53,551,301 47,835,328
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SEE ACCOMPANYING NOTES
THE LINK GROUP, INC.
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
for the six months ended June 30, 2003 and 2002
(Unaudited)
(Stated in US Dollars)
Six months ended June 30,
2003 2002
---- ----
Operating Activities
Net loss for the period $ ( 118,807) $ ( 280,433)
Adjustment for non-cash items
Amortization 57,446 123,936
Provision for future income taxes - ( 67,046)
Change in working capital items
Advances receivable - 95,872
Receivables ( 66,912) ( 333,653)
Inventory 31,040 ( 62,613)
Deposit and prepayment 2,224 3,555
Accounts payable and accrued liabilities ( 25,476) ( 3,594)
Deferred revenue ( 1,748) ( 34,693)
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Cash used in operating activities (122,233) ( 558,669)
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Investing Activities
Purchase of property and equipment ( 1,622) ( 131,785)
Loan receivable ( 128,200) -
Cash acquired on acquisition of subsidiary - 2,572
Other - ( 484)
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Cash used in investing activities ( 129,822) ( 129,697)
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Financing Activities
Bank Indebitness 128,196 -
Repayment of due to related parties - ( 134,977)
Advance from a director 43,603 -
Proceeds from issuance of common stock 200,000 600,300
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Cash from financing activities 371,799 465,323
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Increase (decrease) in cash during the period 119,744 ( 223,043)
Cash, beginning of the period 11,717 247,813
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Cash, end of the period $ 131,461 $ 24,770
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Supplementary disclosure of cash flow information Cash paid for:
Interest $ - $ -
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Income taxes $ - $ -
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Non-cash Transaction - Note 6
SEE ACCOMPANYING NOTES
THE LINK GROUP, INC.
STATEMENT OF STOCKHOLDERS' EQUITY for the period from
December 31, 2002 to June 30, 2003
(Unaudited)
(Stated in US Dollars)
Common Stock Paid-in
---------------------------------
Shares Amount Capital (Deficit) Totals
------ ------ ------- --------- ------
Balance, December 31, 2002 45,051,301 $ 4,505 $ 1,317,979 $ ( 1,378,318) $ ( 55,834)
Issuance of common stock for cash
- at $0.07 3,000,000 300 209,700 - 210,000
Less: commission - - ( 10,000) - ( 10,000)
Issuance of common stock pursuant
to agreements to settle debt
- at $0.07 14,000,000 1,400 978,600 - 980,000
Net loss for the period - - - ( 118,807) ( 118,807)
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Balance, June 30, 2003 62,051,301 $ 6,205 $ 2,496,279 $ ( 1,497,125) $ 1,005,359
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SEE ACCOMPANYING NOTES
The Link Group, Inc.
Notes to the Interim Consolidated Financial Statements June 30, 2003 and
December 31, 2002 (Stated in US Dollars) - Page 2
THE LINK GROUP, INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2003
(Unaudited)
(Stated in US Dollars)
Note 1 Interim Reporting
The accompanying unaudited interim financial statements have been
prepared by The Link Group, Inc. (the "Company") pursuant to the
rules and regulations of the United States Securities and Exchange
Commission. Certain information and disclosures normally included
in annual financial statements prepared in accordance with
accounting principles generally accepted in the United States of
America have been condensed or omitted pursuant to such rules and
regulations. In the opinion of management, all adjustments and
disclosures necessary for a fair presentation of these financial
statements have been included. Such adjustments consist of normal
recurring adjustments. These interim financial statements should
be read in conjunction with the annual audited financial
statements for the Company for the fiscal year ended December 31,
2002, as filed with the United States Securities and Exchange
Commission.
The results of operations for the period ended June 30, 2003 are
not indicative of the results that may be expected for the full
year.
Note 2 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. All
operations are carried on outside of the United States of America.
Note 3 Consolidation
These interim consolidated financial statement include the
accounts of the Company and its wholly-owned subsidiary,
ProtectServe Pacific Limited ("PSP"), a Hong Kong company. All
inter-company transactions and balances have been eliminated.
Note 4 Loan Receivable
The loan receivable is due March 11, 2004 and bears interest at 3%
per annum.
Note 5 Commitments
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. As at June 30, 2003, the Company has purchased 3,350
units.
On March 21, 2003, the Company entered into an agreement to
acquire an interest in Wise Media Investments Ltd., ("Wise Media")
a company incorporated in Samoa, for consideration consisting of
$1,000,000 and 37,000,000 common shares, subject to various
conditions precedent. Wise Media, is engaged in the design and
printing work in the publication business. As at June 30, 2003,
none of the consideration had been paid in respect of this
acquisition.
Pursuant to an agreement dated February 20, 2003, the Company is
committed to paying consulting fees in the amount of $32,050
(HK$250,000) in respect of an information memorandum on web based
surveillance software and video and audio monitoring systems as
follows:
- - $8,012 (HK$62,500) on the date of the acceptance of the agreement (paid);
- - $8,012 (HK$62,500) on the date of the delivery of the information
memorandum to the Company; and
- - $16,025 (HK$125,000) within 7 days of closing a private placement
of not less than $5,000,000.
Note 6 Non-cash Transaction
Investing and financing activities that do not have a direct
impact on current cash flows are excluded from the cash flow
statement. During the six months ended June 30, 2003, the Company
issued 14,000,000 common shares at $0.07 per share to settle
$980,000 owing to related parties as at December 31, 2002. This
transaction has been excluded from the statement of cash flow.
Note 7 Subsequent Event
Subsequent to June 30, 2003, in accordance with its agreement to
purchase 100% of ProtectServe Pacific dated January 21, 2002, the
Company repurchased 22,200,000 of the 29,200,000 common shares at
$0.001 per share on the purchase of PSP and returned them to
treasury for cancellation.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
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OF OPERATIONS
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RESULTS OF OPERATIONS FOR THE THREE MONTH PERIOD ENDED JUNE 30, 2003 COMPARED TO
THE SAME PERIOD IN 2002.
The Link Group Inc. quarterly consolidated financial statements should he read
in conjunction with consolidated financial statements and related notes in the
10KSB annual report for 2002. The company completed the acquisition of
Protectserve Pacific, Ltd. in the first quarter of 2002. For the quarter in
2003, sales of the company's products were $88,713 compared to $257,485 in the
same three months in 2002. Revenue was generated from clients based both out of
Hong Kong and mainland China. Cost of sales were $64,131 in the quarter in 2003.
In the same period in 2002, cost of sales were $293,335. The selling, general
and administrative expenses for the company were $64,224 in the quarter in 2003
compared to $199,840 in 2002. Amortization was $35,200 in the period in 2003
compared to $66,294 in 2002. The net loss from the period in 2003 was ($74,842)
and for 2002 the net loss was ($209,103) .
The net loss per share was nominal in the period in 2003 and in 2002 in the
period. The trend of operating losses may continue in the forseeable future,
until the company is able to generate revenues sufficient to cover operation
expenses.
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2003, COMPARED TO SAME
PERIOD IN 2002
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The company had reduced revenues from sales of products of $191,525 in the
period in 2003 compared to $659,645 in sales in the same period in 2002. The
cost of sales was $101,845 and $537,326 in the period in 2003 and 2002
respectively. Gross income in the period was $89,680 in 2003 and $122,319 in
2002. The company had "other income" of $39,427 in the 2002 period and $51 other
income in the 2003 period. The company incurred $208,538 in expenses in the
period in 2003 compared to $509,225 in the period in 2003. There were
amortization expenses of $57,446 and $123,936 in the periods in 2003 and 2002
respectively. The net loss from operations was ($118,807) in 2003 and ($347,479)
in 2002 in the six month period. The company recorded $67,046 in 2002 as
"Recovery of future income taxes" which reduced its net loss in 2002 to
($280,433). No such item existed in 2003 so its operating loss and net loss were
($118,807). The net loss per share was nominal in the period in 2003 compared to
a net loss of ($.01) in the period in 2002.
Trends: The company expects that the trend of no income and ongoing losses will
continue in the future until a business combination has been made which may
afford revenues and potential cash flows. No assurance can be made that any such
combination will ever occur.
LIQUIDITY AND CAPITAL RESOURCES
The Company had $131,461 cash on hand at June 30, 2003 and $144,597 in
receivables, $196,200 in inventory and deposits and prepayments of $20,644 for
$492,305 in current assets not including a loan receivable. The company had
payables of $292,282 due within one year. These amounts are deemed sufficient
for continued operations at the current level this year.
Evaluation of Internal and Disclosure Controls
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The management of the company has evaluated the effectiveness of the
issuer's disclosure controls and procedures as of a date within 90 days prior to
the filing date of the report (evaluation date) and have concluded that the
disclosure controls and procedures are adequate and effective based upon their
evaluation as of the evaluation date.
There were no significant changes in internal controls or in other factors
that could significantly affect internal controls subsequent to the date of the
most recent evaluation of such, including any corrective actions with regard to
significant deficiencies and material weaknesses.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULT UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following reports on Form 8-K were made for the period for which this
report is filed.
None
(b) Exhibits - Pursuant to Regulation S-K Exhibits
31.1 - Section 302
Certification of Ernest Cheung CFO
31.2 - Section 302
Certification of Thomsen Lee CEO
32.1 - Section 906
Certification of Thomsen Lee CEO
32.2 - Section
906 Certification of Ernest Cheung CFO
THE LINK GROUP, INC.
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 thereunto duly authorized.
THE LINK GROUP, INC.
Date: September __, 2003 /s/ Thomsen Lee
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Thomsen Lee, President & CEO