U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-QSB
(Mark One)
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2004.
OR
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
Commission file number 0 - 26013
MULTI-LINK TELECOMMUNICATIONS, INC.
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(Exact name of small business issuer as specified in its charter)
Colorado 84-1334687
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
4704 Harlan St, Suite 420, Denver, Colorado 80212
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(Address of principal executive offices)
(303) 380 1641
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(Issuer's telephone number)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [ X ] No [ ]
State the number of shares outstanding of each of the issuer's classes of
equity, as of the latest practicable date:
Class Outstanding February 11, 2005
----- -----------------------------
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 December 31, 2004. F-1
Consolidated Statements of Operations - Three
Months ended December 31, 2004 and 2003. F-2
Consolidated Statement of Cash Flows - Three
Months ended December 31, 2004 and 2003. F-3
Notes to Consolidated Financial Statements. F-4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 3
Item 3. Controls and Procedures 10
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Defaults on Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K. 11
2
Part I. FINANCIAL INFORMATION
Item I. Financial Statements
Multi-Link Telecommunications, Inc.
Consolidated Balance Sheet
(Unaudited)
Decmber 31
2004
ASSETS
Current Assets
Cash & Cash Equivalents $ 23
Prepaid Expenses 1,620
-------------------------
Total Current Assets 1,643
-------------------------
TOTAL ASSETS $ 1,643
=========================
LIABILITIES & STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts Payable $ 13,396
Accruals 9,033
Note Payable 63,128
-------------------------
Total Current Liabilities 85,557
TOTAL LIABILITIES 85,557
STOCKHOLDERS' DEFICIT
Preferred Stock, $0.01 par value: 5,000,000 shares authorized: none issued. 0
Common Stock no par value: 20,000,000 shares authorized, 19,886,935 12,585,500
shares issued and outstanding.
Accumulated Deficit (12,669,414)
Total Stockholders' Deficit (83,914)
-------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 1,643
=========================
See accompanying Notes to Consolidated Financial Statements.
F-1
Multi-Link Telecommunications, Inc.
Consolidated Statement of Operations
Three Months Ended
December 31 December 31
2003 2003
----------- -----------
Revenue $ - $ -
General & Administrative Expenses 16,557 12,958
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Operating Loss (16,557) (12,958)
Interest Expense (14) -
----------- -----------
Loss before income tax (16,571) (12,958)
Provision for income tax - -
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Net Loss $ (16,571) $ (12,958)
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NET (LOSS) PER COMMON SHARE $0.00 $0.00
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 19,886,935 15,169,557
=========== ===========
See accompanying Notes to Consolidated Financial Statements.
F-2
Multi-Link Telecommunications, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended
December 31, December 31,
2004 2003
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CASH FLOW FROM OPERATING ACTIVITIES
NET LOSS $ (16,571) $ (12,958)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET
CASH USED IN OPERATING ACTIVITIES
CHANGES IN OPERATING ASSETS & LIABILITIES
(Increase)/Decrease in Prepaid Expenses 471 0
Increase/(Decrease) in Accruals 3,342 0
Increase/(Decrease) in Liabilities of Discontinued Operations 0 (9,506)
Increase/(Decrease) in Accounts Payable 8,489 (8,736)
------------------ -----------------
Total Cash Flow used in Operating Activities (4,269) (31,200)
CASH FLOW FROM INVESTING ACTIVITIES 0 0
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Total Cash Flow provided by / (used in) Investing Activities 0 0
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from Issuance of Common Stock 0 18,312
Advances under Notes Payable 4,218 472
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Total Cash Flow provided by Financing Activities 4,218 18,784
DECREASE IN CASH & CASH EQUIVALENTS $ (51) $ (12,416)
================== =================
Cash and Cash Equivalents at the beginning of the period $ 74 $ 13,436
================== =================
Cash and Cash Equivalents at the end of the period $ 23 $ 1,020
================== =================
SUPPLEMENTARY INFORMATION
Cash paid for interest $ 14 $ 0
================== =================
Cash Paid for income taxes $ 0 $ 0
================== =================
See accompanying Notes to Consolidated Financial Statements.
F-3
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 month period ended December 31, 2004 are not
necessarily indicative of the results that may be expected for the year ended
September 30, 2005. 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,
2004 and 2003.
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
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. 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 November 20, 2002.
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, 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.
F-4
As part of the Chapter 11 reorganization of Multi-Link Communication, LLC,
the Company's Indianapolis trading operation, the Company entered into an
agreement with creditors that in consideration of a waiver of all claims against
the Company, it would waive all claims to equity and ownership in Multi-Link
Communications, LLC. The Company agreed to this because the scheduled claims and
expenses exceeded realizable value to the Company.
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 its creditors. The Company retained an independent third party
consultant to value the shares of common stock issued in this transaction.
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.
The Company does not have capital sufficient to meet its cash needs,
including the costs of compliance with the continuing reporting requirements of
the Securities Exchange Act of 1934. The Company will have to seek loans or
equity placements to cover such cash needs. In the event the Company is unable
to complete a business combination during this period, lack of existing capital
may be a sufficient impediment to prevent it from accomplishing the goal of
completing a business combination. There is no assurance, however, that with
sufficient funds it will ultimately allow the Company to complete a business
combination. Once a business combination is completed, the Company's need for
additional financing is likely to increase substantially. The Company will need
to raise additional funds to conduct any business activities in the next twelve
months.
No commitments to provide additional funds have been made by management or
other stockholders. Accordingly, there can be no assurance that any additional
funds will be available to the Company to allow it to cover its expenses as they
may be incurred.
Irrespective of whether its cash assets prove to be adequate to meet its
operational needs, the Company might seek to compensate providers of services by
issuances of stock in lieu of cash.
The Company has no plans for any research and development in the next
twelve months. The Company has no plans at this time for purchases or sales of
fixed assets which would occur in the next twelve months.
The Company has no expectation or anticipation of significant changes in
number of employees in the next twelve months, however, if the Company achieved
a business acquisition, the Company may acquire or add employees of an unknown
number in the next twelve months.
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.)
F-5
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 Note Payable
As at December 31, 2004, a loan of $63,000 was owed to the sole director of
the Company. Interest is accrued on the loan at an annual rate of 8%.
Note 5 Going Concern
The Company's financial statements have been presented on the basis
that it is a going concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business.
The Company has suffered significant losses, has a working capital deficit
as of December 31, 2004 and no ongoing source of income. The Company hopes to
seek a business which might be acquired, at which time there may be a necessity
to seek and obtain funding, via loans or private placements of stock to pay off
debt and provide working capital. Management has no current plan to seek capital
in the form of loans or stock private placements at this time because it has no
business upon which to base any capital raising plan.
The Company's ability to continue as a going concern is dependent upon its
ability to develop additional sources of capital or locate a merger candidate
and ultimately, achieve profitable operations. The accompanying financial
statements do not include any adjustments that might result from the outcome of
these uncertainties. Management is seeking new capital and opportunities to
revitalize the Company.
Note 6 Subsequent Events
In January 2005, Pennalunna & Company filed a form 211 application on
behalf of the Company to NASD seeking to have the Company's shares of common
stock re-listed on the over the counter bulletin board. This application
was approved on February 15, 2005. The symbol is (MLNK.OB).
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.
F-6
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.
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, 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.
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. As part of the reorganization of our Indianapolis
business operating under Chapter 11 protection, we entered into an agreement
with creditors that in consideration of a waiver of all claims against us, we
would waive all claims to equity and ownership in Indianapolis business. We
agreed to this because the scheduled claims and expenses exceeded realizable
value to us.
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.
3
LIQUIDITY AND CAPITAL RESOURCES
As reported in the Form 8-K filed on October 18, 2002, we 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.
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 us. Nigel V Alexander, our then Chief Executive
Officer and a director, purchased the business and assets of our Denver
operations at the public auction.
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.
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,
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.
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.
4
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 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 in fiscal 2002, we elected not
to incur the costs involved to retain 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 for trading on the over the
counter bulletin board and are not quoted on the National Quotation Bureau Pink
Sheets.
In January 2005, Pennalunna & Company filed a form 211 application on
behalf of the Company to NASD seeking to have the Company's shares of common
stock re-listed on the over the counter bulletin board. There can be no
certainty that this application will be successful and that the Company will be
successful in its attempt to have its shares of common stock re-listed on the
over the counter bulletin board.
Failure to be re-listed on the over the counter bulletin board or the pink
sheets will adversely effective our ability 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.
Results of Operations
Quarter ended December 31, 2004 compared to quarter ended December 31, 2003.
The results for the quarter ended December 31, 2004 and December 31, 2003
have been adjusted to reflect all operating businesses and assets as
discontinued operations as described above.
General and Administrative Expenses. General and administrative expenses
for the three months ended December 31, 2004, were $17,000 compared to $13,000
for the three months ended December 31, 2003, an increase of $4,000 or 31%,
largely due to an increase in professional fees arising from the decision to
bring our SEC filings up to date.
Loss from Operation and Net Loss. Loss from operations was $(17,000) for
the three months ended December 31, 2004, compared to a loss from operations of
$(13,000) for the three months ended December 30, 2003, an increase in losses of
$4,000 due to the factors described above.
5
Cash Flow Information
For three months ended December 31, 2004 net cash used in operations was
$(4,000) compared to $(31,000) for the three months ended December 31, 2003, a
variance of $27,000 or 87% The variance is largely due to a $17,000 variance
from the $(9,000) absorbed in the payment of accounts payable in the three
months ended December 31, 2003 to the $8,000 generated from an increase in
accounts payable in the three months ended December 31, 2004 and to from the
decrease in funds absorbed by discontinued operations from $10,000 in the three
months to December 31, 2003 to $0 in the three months ended December 31, 2004.
No net cash was generated from or (used in) investing activities in either
the three months to December 31, 2004 or 2003.
Cash flow from financing activities was $5,000 for the three months ended
December 31, 2004 compared to $19,000 for the same period in the prior year, a
variance of $14,000. In the three months ended December 31, 2003 we received
$18,000 from the proceeds of the issue of shares of our common stock issued to
our sole director as described above, while in the three months ended December
31, 2003 we received $5,000 on an advance under a note payable from our sole
director.
Need For Additional Financing
We do not have capital sufficient to meet our cash needs, including the
costs of compliance with the continuing reporting requirements of the Securities
Exchange Act of 1934. We will have to seek loans or equity placements to cover
such cash needs. In the event we are unable to complete a business combination
during this period, lack of its existing capital may be a sufficient impediment
to prevent it from accomplishing the goal of completing a business combination.
There is no assurance, however, that with sufficient funds it will ultimately
allow us to complete a business combination. Once a business combination is
completed, our need for additional financing is likely to increase
substantially. We will need to raise additional funds to conduct any business
activities in the next twelve months.
No commitments to provide additional funds have been made by management or
other stockholders. Accordingly, there can be no assurance that any additional
funds will be available to us to allow us to cover our expenses as they may be
incurred.
Irrespective of whether our cash assets prove to be adequate to meet our
operational needs, we might seek to compensate providers of services by
issuances of stock in lieu of cash.
We have no plans for any research and development in the next twelve
months. We have no plans at this time for purchases or sales of fixed assets
which would occur in the next twelve months.
We have no expectation or anticipation of significant changes in number of
employees in the next twelve months, however, if we achieve a business
acquisition, we may acquire or add employees of an unknown number in the next
twelve months.
6
GOING CONCERN
Our auditor has issued a "going concern" qualification as part of his
opinion in the Audit Report.
There is substantial doubt about our ability to continue as a "going
concern." We have no business, no capital, liabilities in excess of $85,000, all
of which is current, no cash, no assets, and no capital commitments. The effects
of such conditions could easily be to cause our bankruptcy, except there are no
assets to liquidate in bankruptcy.
Management hopes to seek a business which might be acquired, at which time
there may be a necessity to seek and obtain funding, via loans or private
placements of stock to pay off debt and provide working capital. Management has
no current plan to seek capital in the form of loans or stock private placements
at this time because it has no business upon which to base any capital raising
plan.
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.
7
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%
or more of the voting stock of the surviving entity. In such event, our
stockholders would retain less than 20% 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.
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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
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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 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
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.
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.
9
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 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 Communications, LLC.,
filed a voluntary petition under Chapter 11 of the Bankruptcy Code. As part of
the reorganization of Multi-Link Communications, LLC operating under Chapter 11
protection, we entered into an agreement with creditors that in consideration of
a waiver of all claims against us, we would waive all claims to equity and
ownership in Multi-Link Communications, LLC. We agreed to this because the
scheduled claims and expenses exceeded realizable value to us.
Item 2. Changes in Securities.
Recent Sales of Unregistered Securities
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. 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.
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 2004 we have been able to negotiate settlement of all of our
shortfalls to creditors in respect of these defaults upon senior securities.
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Item 4. Submission of Matters to Vote of Security Holders
None
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits.
None
b. Reports on Form 8-K.
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. .
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.
On December 7, 2004, we filed a Form 8-K announcing that effective November
30, 2004 we appointed Michael Johnson & Co LLC as auditors in succession to
James E. Scheifley & Associates PC.
.
11
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: February 15, 2005 /s/ David J. Cutler
-----------------------------
David J. Cutler,
Chief Executive Officer
Chief Financial Officer.
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