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
- - ----------------- ----------------------
September 30, 2003 000-33031
THE LINK GROUP, INC.
--------------------------
(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.
39,851,301 as of September 30, 2003
PART 1. FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements
The Link Group, Inc.
Notes to the Interim Consolidated Financial Statements September 30, 2003 and
December 31, 2002 (Stated in US Dollars) - Page 10
THE LINK GROUP, INC.
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2003
(Unaudited)
(Stated in US Dollars)
THE LINK GROUP, INC.
INTERIM CONSOLDIATED BALANCE SHEETS
September 30, 2003 and December 31, 2002
(Unaudited)
(Stated in US Dollars)
(Unaudited) (Audited)
September 30 December 31,
ASSETS 2003 2002
------ ---- ----
Current
Cash $ 133,328 $ 11,717
Receivables - trade 102,222 26,405
- other 32,209 51,280
Inventory 179,873 227,240
Deposits and prepayment 21,723 22,868
Loan receivable - Note 4 128,200 -
--------- ---------
597,555 339,510
Deferred investment costs 480,000 480,000
Property and equipment 227,739 338,613
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$ 1,305,294 $ 1,158,123
========= =========
LIABILITIES
Current
Bank indebtedness $ 128,203 $ -
Accounts payable and accrued liabilities 43,161 94,911
Due to related parties 150,522 42,284
Deferred revenue 6,873 10,512
--------- ---------
328,759 147,707
Due to related parties - 980,000
Deferred tax 86,250 86,250
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415,009 1,213,957
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STOCKHOLDER'S EQUITY (DEFICIENCY)
Common stock - Note 7 Authorized:
200,000,000, $0.0001 par value
Issued:
39,851,301 shares (December 31, 2002: 45,051,301) 3,985 4,505
Paid-in capital 2,476,299 1,317,979
Deficit ( 1,589,999) ( 1,378,318)
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890,285 ( 55,834)
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$ 1,305,294 $ 1,158,123
========= =========
THE LINK GROUP, INC.
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
for the three and nine months ended September 30, 2003 and 2002
(Unaudited)
(Stated in US Dollars)
Three months ended Nine months ended
September 30, September 30,
2003 2002 2003 2002
---- ---- ---- ----
Sales $ 74,149 $ 90,530 $ 265,674 $ 387,051
Cost of sales 29,146 51,217 130,991 200,138
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Gross income 45,003 39,313 134,683 186,913
Other income - 318 51 318
---------- ---------- ---------- ----------
45,003 39,631 134,734 187,231
---------- ---------- ---------- ----------
Expenses
Amortization 55,143 60,099 112,589 174,273
Selling, general and administrative expenses 82,734 96,211 233,826 346,794
---------- ---------- ---------- ----------
137,877 156,310 346,415 521,067
---------- ---------- ---------- ----------
Loss before income taxes ( 92,874) ( 116,679) ( 211,681) ( 333,836)
Recovery of future income taxes - - - 133,178
---------- ---------- ---------- ----------
Loss from continuing operations ( 92,874) ( 116,679) ( 211,681) ( 200,658)
Loss from discontinued operations - ( 260,829) - ( 391,151)
---------- ---------- ---------- ----------
Net loss for the period $ ( 92,874) $ ( 377,508) $ ( 211,681) $ ( 591,809)
========== ========== ========== ==========
Basic loss per share from continuing operations
$ ( 0.00) $ ( 0.00) $ ( 0.00) $ ( 0.007)
Basic loss per share from discontinued operations ========== ========== ========== ==========
$ - $ ( 0.01) $ - $ ( 0.008)
========== ========== ========== ==========
Basic and diluted loss per share $ ( 0.00) $ ( 0.01) $ ( 0.00) $ ( 0.015)
========== ========== ========== ==========
Weighted average number of common shares outstanding
48,296,953 51,351,301 51,998,553 49,714,395
========== ========== ========== ==========
THE LINK GROUP, INC.
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
for the nine months ended September 30, 2003 and 2002
(Unaudited)
(Stated in US Dollars)
Nine months ended
September 30,
2003 2002
---- ----
Operating Activities
Net loss for the period from continuing operations $ ( 211,681) $ ( 200,658)
Adjustment for non-cash items
Amortization 112,589 174,273
Provision for future income taxes - ( 133,178)
Change in working capital items
Receivables ( 56,746) 127,170
Inventory 47,367 137,917
Deposit and prepayment 1,145 16,538
Accounts payable and accrued liabilities ( 51,750) ( 62,083)
Deferred revenue ( 3,639) ( 44,100)
-------- --------
Cash from (used in) operating activities ( 162,715) 15,879
-------- --------
Investing Activities
Purchase of property and equipment ( 1,715) ( 131,704)
Loans receivable ( 128,200)
Other - ( 484)
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Cash used in investing activities ( 129,915) ( 132,188)
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Financing Activities
Bank indebtedness 128,203 -
Related party loans (repayments) - ( 300,000)
Advances from related parties 108,238 -
Repurchase of shares for cancellation ( 22,220) -
Proceeds from issuance of common stock 200,000 600,300
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Cash from financing activities 414,241 300,300
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Increase in cash and cash equivalents from continuing operations 121,611 183,991
Cash flow used in discontinued operations - ( 391,151)
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Increase (decrease) in cash and cash equivalents during the period 121,611 ( 207,160)
Cash, beginning of the period 11,717 247,813
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Cash, end of the period $ 133,328 $ 40,653
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.../Cont'd.
THE LINK GROUP, INC. Continued
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
for the nine months ended September 30, 2003 and 2002
(Unaudited)
(Stated in US Dollars)
Nine months ended
September 30,
2003 2002
---- ----
Supplementary disclosure of cash flow information Cash paid for:
Interest $ - $ -
========= ========
Income taxes $ - $ -
========= ========
THE LINK GROUP, INC.
INTERIM CONSOLIDATED STATEMENT OF
STOCKHOLDERS' EQUITY (DEFICIENCY) for the
period from December 31, 2002 to September 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
Cancellation of common stock pursuant to a repurchase
agreement - at $0.001 (22,200,000) (2,220) ( 19,980) - ( 22,200)
Net loss for the period - - - ( 211,681) ( 118,807)
---------- ------ ---------- ---------- --------
Balance, September 30, 2003 39,851,301 $ 3,985 $ 2,476,299 $ ( 1,589,999) $ 890,285
========== ====== ========== ========== ========
THE LINK GROUP, INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
September 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 September 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 - Note 7
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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 September 30, 2003, the Company has purchased
4,550 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 36,000,000 common shares, subject to various
conditions precedent. Wise Media, is engaged in the design and
printing work in the publication business. As at September 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 nine months ended September 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 September 30, 2003, the Company issued 36,000,000
common shares to acquire 48% of Wise Media (Note 5). The remaining
52% may be purchased by the Company by the payment of $1,000,000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information presented here should be read in conjunction with The Link
Group, Inc.'s consolidated financial statements and related notes. In addition
to historical information, the following discussion and other parts of this
document contain certain forward-looking information. When used in this
discussion, the words "believes," "anticipates," "expects," and similar
expressions are intended to identify forward-looking statements. Such statements
are subject to certain risks and uncertainties, which could cause actual results
to differ materially from those projected due to a number of factors beyond the
Company's control. The Company does not undertake to publicly update or revise
any of its forward-looking statements even if experience or future changes show
that the indicated results or events will not be realized. Readers are cautioned
not to place undue reliance on these forward-looking statements, which speak
only as of the date hereof. Readers are also urged to carefully review and
consider the Company's discussions regarding the various factors, which affect
its business, included in this section and elsewhere in this report.
RESULTS OF OPERATIONS FOR THE THREE MONTH PERIOD ENDED SEPTEMBER 30, 2003
COMPARED TO THE SAME PERIOD IN 2002.
For the quarter in 2003, sales of the company's products were $74,149 compared
to $90,530 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 $29,146 in
the quarter in 2003. In the same period in 2002, cost of sales were $51,217. The
selling, general and administrative expenses for the company were $82,734 in the
three month period ended September 30, 2003 compared to $96,211 in 2002.
Amortization was $55,143 in the period in 2003 compared to $60,099 in 2002. The
net loss from the period in 2003 was $92,874 and for the same period of 2002 the
net loss was $377,508.
The net loss per share was nominal in the period in 2003 and in 2002. 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 NINE MONTHS ENDED SEPTEMBER 30, 2003, COMPARED TO
SAME PERIOD IN 2002
- --------------------------------------------------------------------------------
The company had reduced revenues from sales of products of $265,674 in the
period in 2003 compared to $387,051 in the same period in 2002. The cost of
sales was $130,991 and $200,138 in the period in 2003 and 2002 respectively.
Gross income in the period was $134,683 in 2003 and $186,913 in 2002. The
company incurred $346,415 in expenses in the period in 2003 compared to $521,067
in the period in 2002. There were amortization expenses of $112,589 and $174,273
in the periods in 2003 and 2002
respectively. The net loss from operations was $211,681 in 2003 and $591,809 in
2002 in the nine month period. The net loss per share was nominal in the period
in 2003 compared to a net loss of ($.015) 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 $133,328 cash on hand at September 30, 2003 and $134,431
receivables, $179,873 in inventory and deposits and prepayments of $21,723 for
$469,355 in current assets not including a loan receivable of $128,200 due on
March 11, 2004. These amounts are deemed sufficient by us for continued
operations at the current level this year.
ITEM 3. CONTROLS AND PROCEDURES
a. Evaluation of Disclosure Controls and Procedures:
Disclosure controls and procedures are designed to ensure that information
required to be disclosed in the reports filed or submitted under the Exchange
Act is recorded, processed, summarized and reported, within the time period
specified in the SEC's rules and forms. Disclosure controls and procedures
include, without limitation, controls and procedures designed to ensure that
information required to be disclosed in the reports filed under the Exchange Act
is accumulated and communicated to management, including the Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow timely decisions
regarding required disclosure. As of the end of the period covered by this
report, the Company carried out an evaluation, under the supervision and with
the participation of the Company's management, including the Company's Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of the Company's disclosure controls and procedures. Based
upon and as of the date of that 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 in
the reports the Company files and submits under the Exchange Act is recorded,
processed, summarized and reported as and when required.
b. Changes in Internal Control over Financial Reporting:
There were no changes in the Company's internal control over financial reporting
identified in connection with the Company evaluation of these controls as of the
end of the period covered by this report that could have significantly affected
those controls subsequent to the date of the evaluation referred to in the
previous paragraph, including any correction action with regard to significant
deficiencies and material weakness.
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) Reports on Form 8-K filed during the three months
ended September 30, 2003. (incorporated by reference)
8-K filed 10-28-03
(b) Exhibits - Pursuant to Regulation S-K Exhibits - 31.1 - Section 302
Certification of Ernest CFO
31.2 - Section 302 Certification of Thomsen Lee CEO
Exhibits - 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: November 19, 2003 /s/ Thomsen Lee
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Thomsen Lee, President & CEO