UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended: June 30, 2005
Commission File Number: 0-26013
MULTI-LINK TELECOMMUNICATIONS, INC.
(Exact name of small business issuer as specified in its charter)
Colorado 84-1334687
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
936A Beachland Boulevard, Suite 13, Vero Beach, FL 32963
(Address of principal executive offices)
(772) 231-7544
(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
|_|.
As of July 13, 2005, 33,215,913 shares of the registrant's common stock
were outstanding.
Transitional Small Business Disclosure Format (Check One):
Yes |_| No |X|
TABLE OF CONTENTS
Page
PART I Financial Information
Item 1. Financial Statements
Report of Independent Registered Public Accounting Firm 1
Consolidated Balance Sheets 2
Consolidated Statements of Operations 3
Consolidated Statements of Cash Flows 4
Consolidated Statement of Stockholders' Equity 5
Notes to Consolidated Financial Statements 6-8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9-18
Item 3. Controls and Procedures 19
PART II Other Information
Item 1. Legal Proceedings 20
Item 2. Changes in Securities and Use of Proceeds 20
Item 3. Defaults upon Senior Securities 20
Item 4. Submission of Matters to a Vote of Security Holders 20
Item 5. Other information 20
Item 6. Exhibits and Reports on Form 8-K 21
Signatures 22
Certifications
PART I
ITEM 1. FINANCIAL STATEMENTS
MULTI-LINK TELECOMMUNICATIONS, INC.
CONSOLIDATED FINANCIAL STATEMENTS
NINE-MONTHS ENDED JUNE 30, 2005
(UNAUDITED)
JASPERS + HALL, PC
CERTIFIED PUBLIC ACCOUNTANTS
- -------------------------------------------------------------------------------
9175 E. Kenyon Avenue, Suite 100
Denver, CO 80237
303-796-0099
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors
Multi-Link Telecommunications, Inc.
Denver, CO
We have reviewed the accompanying consolidated balance sheet of Multi-Link
Telecommunications, Inc. as of June 30, 2005, and the related consolidated
statement of operations for the three-month and nine-month period ended June 30,
2005, and cash flows for the nine-months ended June 30, 2005. These financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards of the Public Company
Accounting Oversight Board (United States). The review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with standards of the Public Company Accounting Oversight Board (United States),
the objective of which is the expression of an opinion regarding the
consolidated financial statements taken as a whole. Accordingly, we do not
express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated financial statements for them to be in
conformity with accounting principles generally accepted in the United States.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 4, conditions
exist which raise substantial doubt about the Company's ability to continue as a
going concern unless it is able to generate sufficient cash flows to meet its
obligations and sustain its operation. Management's plans in regard to these
matters are described in Note 4. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
The financial statements for the year ended September 30, 2004 were audited by
other accountants, whose report dated January 5, 2005, expressed an unqualified
opinion on those statements. They have not performed any auditing procedures
since that date. In our opinion, the information set forth in the accompanying
balance sheet as of June 30, 2005 is fairly stated in all material respects in
relation to the consolidated balance sheet from which it has been derived.
Jaspers + Hall, PC
Denver, CO
July 21, 2005
1
Multi-Link Telecommunications, Inc.
CONSOLIDATED BALANCE SHEETS
As of June 30, 2005 and September 30, 2004
(Unaudited) (Audited)
June 30, September 30,
2005 2004
------------ ------------
ASSETS
CURRENT ASSETS
Cash $ 28,055 $ 74
Prepaid expense -- 2,091
------------ ------------
Total current assets 28,055 2,165
------------ ------------
TOTAL ASSETS $ 28,055 $ 2,165
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ -- $ 4,907
Accrued expenses -- 5,691
Note payable - stockholder -- 58,910
------------ ------------
Total current liabilities -- 69,508
STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value, 5,000,000 shares
authorized; no shares issued or outstanding as of
June 30, 2005 and September 30, 2004, respectively -- --
Common stock, no par value, 150,000,000 shares
authorized, 33,215,913 issued and outstanding at
June 30, 2005; no par value, 20,000,000 shares authorized,
19,886,935 issued and outstanding at September 30, 2004 12,799,653 12,585,500
Accumulated deficit (12,771,598) (12,652,843)
------------ ------------
Total stockholders' equity (deficit) 28,055 (67,343)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 28,055 $ 2,165
============ ============
See Accountants' Review Report
2
Multi-Link Telecommunications, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Nine Months Ended June 30, 2005 and 2004
(Unaudited)
Three months ended Nine months ended
June 30, June 30,
2005 2004 2005 2004
------------ ------------ ------------ ------------
Revenue $ -- $ -- $ -- $ --
General and Administrative Expenses 42,607 3,585 116,462 21,180
------------ ------------ ------------ ------------
Operating Loss (42,607) (3,585) (116,462) (21,180)
Interest expense -- -- 2,293 --
------------ ------------ ------------ ------------
Loss before income taxes and
extraordinary item (42,607) (3,585) (118,755) (21,180)
Provision for income taxes -- -- -- --
------------ ------------ ------------ ------------
Loss before extraordinary item (42,607) (3,585) (118,755) (21,180)
Extraordinary item, net of tax -- 8,917 -- 14,459
------------ ------------ ------------ ------------
Net income (loss) $ (42,607) $ 5,332 $ (118,755) $ (6,721)
============ ============ ============ ============
Net income (loss) per common share
Loss before extraordinary item $ -- $ -- $ (0.01) $ --
Extraordinary item, net of tax -- -- -- --
------------ ------------ ------------ ------------
Net income (loss) $ -- $ -- (0.01) --
============ ============ ============ ============
Weighted average number of common
shares outstanding 25,159,938 19,886,935 21,201,575 18,297,209
============ ============ ============ ============
See Accountants' Review Report
3
Multi-Link Telecommunications, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended June 30, 2005 and 2004
(Unaudited)
Nine months ended June 30,
2005 2004
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (118,755) $ (6,721)
Stock issued for services 17,000 --
Adjustments to reconcile net loss to net
cash provided (used) by operating
activities:
Decrease in prepaid expenses 2,091 --
Decrease in accounts payable (4,907) (7,646)
Decrease in accrued expenses (5,691) --
Decrease in liabilities from discontinued operations -- (9,945)
Extraordinary gain on repayment of account payable -- (14,459)
------------ ------------
NET CASH FLOWS USED BY
OPERATING ACTIVITIES (110,262) (38,771)
CASH FLOWS FROM INVESTING ACTIVITIES
------------ ------------
NET CASH FLOWS USED BY INVESTING
ACTIVITIES -- --
CASH FLOWS FROM FINANCING ACTIVITIES
Note payable - shareholder 88,243 --
Advances under notes payable -- 8,039
Proceeds from issuance of capital stock 50,000 18,312
------------ ------------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 138,243 26,351
------------ ------------
NET INCREASE (DECREASE) IN CASH 27,981 (12,420)
CASH, BEGINNING OF PERIOD 74 13,436
------------ ------------
CASH, END OF PERIOD $ 28,055 $ 1,016
============ ============
Supplemental disclosures:
Interest paid $ 2,294 $ --
============ ============
Taxes paid $ -- $ --
============ ============
Non-cash transactions:
Issuance of stock for services $ 17,000 $ --
============ ============
Issuance of stock for note conversion $ 147,153 $ --
============ ============
See Accountants' Review Report
4
Multi-Link Telecommunications, Inc.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
June 30, 2005
(Unaudited)
Accumulated
Common Stock During the Total
--------------------------- Development Stockholders'
# of Shares Amount Stage Equity
------------ ------------ ------------ ------------
Balance - September 30, 2001 4,387,010 $ 12,751,493 $(12,352,527) $ 398,966
------------ ------------ ------------ ------------
Issuance of stock for services 60,000 21,000 -- 21,000
Exercise of options 39,925 679 -- 679
Issuance of stock for acquisition 400,000 16,000 -- 16,000
Issuance of stock for cash 1,000,000 50,000 -- 50,000
Write-down of software -- (271,984) -- (271,984)
Net Loss for Year -- -- (352,241) (352,241)
------------ ------------ ------------ ------------
Balance - September 30, 2002 5,886,935 12,567,188 (12,704,768) (137,580)
------------ ------------ ------------ ------------
Net Profit for Year -- -- 71,005 71,005
------------ ------------ ------------ ------------
Balance - September 30, 2003 5,886,935 12,567,188 (12,633,763) (66,575)
------------ ------------ ------------ ------------
Issuance of stock for cash 14,000,000 18,312 -- 18,312
Net Loss for Year -- -- (19,080) (19,080)
------------ ------------ ------------ ------------
Balance - September 30, 2004 19,886,935 12,585,500 (12,652,843) (67,343)
------------ ------------ ------------ ------------
Issuance of stock for cash 5,000,000 50,000 -- 50,000
Issuance of stock for services 1,700,000 17,000 -- 17,000
Issuance of stock for Note Conversion 6,628,978 147,153 147,153
Net Loss for Period -- -- (118,755) (118,755)
------------ ------------ ------------ ------------
Balance - June 30, 2005 33,215,913 $ 12,799,653 $(12,771,598) $ 28,055
============ ============ ============ ============
See Accountants' Review Report
5
MULTI-LINK TELECOMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2005 AND 2004
1. BASIS OF PRESENTATION
The financial statements as of June 30, 2005 included herein have been prepared
without audit pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with United States
generally accepted accounting principles have been condensed or omitted pursuant
to such rules and regulations. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. It is suggested that these financial statements
be read in conjunction with the September 30, 2004 audited financial statements
and notes thereto.
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.
On March 16, 2005, the majority shareholder, David J. Cutler, ("Cutler") entered
into a Securities Purchase Agreement (the "Purchase Agreement") with KI Equity
Partners I, LLC ("KI Equity") under which KI Equity agreed to purchase and
Cutler agreed to sell an aggregate of 13,074,204 shares ("Shares") of common
stock of Multi-Link Telecommunications, Inc. ("Company"), representing
approximately 65.7% of the Company's outstanding shares of common stock, at a
price of $252,846.75. KI Equity also agreed to acquire from Cutler a convertible
promissory note issued by the Company in the principal amount of $147,153.25
("Note").
On March 17, 2005, the Company and Cutler entered an Assumption Agreement (the
"Assumption Agreement"). Under the Assumption Agreement, the Company transferred
all of its rights in any capital stock or membership interests of any of its
current subsidiaries to Cutler. Each of these subsidiaries was inactive and had
no assets at the time of transfer. In exchange, Cutler agreed to assume all of
the Company's obligations of any kind (other than the Note) and indemnify the
Company against any of these liabilities existing as of the Closing. Cutler also
agreed to release the Company from any and all obligations and claims (other
than the Note).
The transactions under the Purchase Agreement were closed and completed on March
18, 2005 ("Closing.").
2. CONVERTIBLE PROMISSORY NOTE
A convertible promissory note ("the Note") in the principal amount of $147,153
was issued by the Company to Cutler on March 15, 2005. The Note was issued to
evidence obligations owed to him by the Company for prior unpaid compensation,
advances, and expense reimbursements totaling $65,061 and prior accrued interest
of $6,972. Further, in connection with the Closing, Cutler advanced the Company
an additional $72,120 to pay off all outstanding accounts payable and $3,000 for
working capital, which advances were included in the principal amount of the
Note. The Note was sold by Cutler to KI Equity in connection with the closing of
the transactions under the Purchase Agreement.
On May 25, 2005, the Company issued 6,628,978 shares of its common stock to KI
Equity in connection with its conversion of the note according to its terms,
which equates to a conversion price of approximately $0.022 per share. The Note
had been acquired by KI Equity from Cutler as part of the change of control
transactions completed on March 18, 2005.
6
MULTI-LINK TELECOMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2005 AND 2004
3. SHARE ISSUANCES
On May 25, 2005, the Company issued 5,000,000 shares of its common stock to KI
Equity at a purchase price of $0.01 per share, for an aggregate purchase price
of $50,000. The funds were to provide working capital to the Company for
operating expenses.
On May 25, 2005, the Company also issued 850,000 shares of its common stock to
Kevin R. Keating, the sole officer and director of the Company, for services to
the Company with a fair value of $8,500, or $0.01 per share.
On May 25, 2005, the Company also issued 850,000 shares of its common stock to
Garisch Financial, Inc. ("GFI") for financial consulting services to the Company
with a fair value of $8,500, or $0.01 per share.
See Note 2 above for shares of common stock issued on May 25, 2005 in connection
with the conversion of a convertible promissory note.
4. 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 sustained significant operating losses, has minimal working
capital as of June 30, 2005, 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, to 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.
5. INCREASE IN AUTHORIZED SHARES
In a special meeting of shareholders held May 23, 2005, the Company's
shareholders authorized an increase in authorized shares of common stock from
20,000,000 to 150,000,000.
7
MULTI-LINK TELECOMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2005 AND 2004
6. RELATED PARTY TRANSACTIONS
The sole officer and director of the Company, Kevin R. Keating, is the father of
Timothy J. Keating. Timothy J. Keating is the managing member of KI Equity
Partners I, LLC, which is the majority shareholder of the Company. Timothy J.
Keating is also the principal member of Keating Investments, LLC, which is a 90%
owner of Keating Securities, LLC, a registered broker-dealer. KI Equity Partners
I, LLC owns approximately 74.4% of the outstanding shares of the Company's
common stock as of June 30, 2005. Kevin R. Keating is not affiliated with and
has no equity interest in KI Equity Partners I, LLC, Keating Investments, LLC or
Keating Securities, LLC and disclaims any beneficial interest in the shares of
the Company's stock owned by KI Equity Partners I, LLC. Similarly, Keating
Investments, LLC, Keating Securities, LLC and KI Equity Partners I, LLC disclaim
any beneficial interest in the shares of the Company's common stock currently
owned by Kevin R. Keating.
In May 2005, the Company entered into a contract with Vero Management, L.L.C.
("Vero") for managerial and administrative services. Vero has not been engaged
to provide, and Vero does not render, legal, accounting, auditing, investment
banking or capital formation services. Kevin R. Keating, the sole director of
the Company, is the manager of Vero. In consideration of the services provided,
Vero will be paid $1,000 for each month in which services are rendered.
7. RECLASSIFICATION OF FINANCIAL STATEMENT LINE ITEM
Interest expense previously reported in general and administrative expense has
been reclassified to conform to the current period presentation. The
reclassification has no effect on reported net loss.
8
PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS STATEMENTS
Forward-Looking Statements
Statements made in this Form 10-QSB (the "Quarterly Report") that are
not historical or current facts are "forward-looking statements" made pursuant
to the safe harbor provisions of Section 27A of the Securities Act of 1933, as
amended (the "Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). The Company intends that such forward-looking
statements be subject to the safe harbors for such statements. The Company
wishes to caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made. Any
forward-looking statements represent management's best judgment as to what may
occur in the future. These forward-looking statements include the plans and
objectives of management for future growth of the Company, including plans and
objectives related to the consummation of acquisitions and future private and
public issuances of the Company's equity and debt securities. The
forward-looking statements included herein are based on current expectations
that involve numerous risks and uncertainties. Assumptions relating to the
foregoing involve judgments with respect to, among other things, future
economic, competitive and market conditions and future business decisions, all
of which are difficult or impossible to predict accurately and many of which are
beyond the control of the Company. Although the Company believes that the
assumptions underlying the forward-looking statements are reasonable, any of the
assumptions could be inaccurate and, therefore, there can be no assurance that
the forward-looking statements included in this Form 10-QSB will prove to be
accurate. In light of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such information
should not be regarded as a representation by the Company or any other person
that the objectives and plans of the Company will be achieved. The Company
disclaims any obligation subsequently to revise any forward-looking statements
to reflect events or circumstances after the date of such statement or to
reflect the occurrence of anticipated or unanticipated events.
The words "we," "us," "our," the "Company," and "Multi-Link" refer to
Multi-Link Telecommunications, Inc. The words or phrases "may," "will,"
"expect," "believe," "anticipate," "estimate," "approximate," or "continue,"
"would be," "will allow," "intends to," "will likely result," "are expected to,"
"will continue," "is anticipated," "estimate," "project," or similar
expressions, or the negative thereof, are intended to identify "forward-looking
statements." Actual results could differ materially from those projected in the
forward looking statements as a result of a number of risks and uncertainties,
including but not limited to: (a) limited amount of resources devoted to
achieving our business plan; (b) our failure to implement our business plan
within the time period we originally planned to accomplish; (c) because we are
seeking to merge with an operating business which has not yet been identified,
you will be unable to determine whether we will ever become profitable; and (d)
other risks that are discussed in this Form 10-QSB or included in our previous
filings with the Securities and Exchange Commission ("SEC").
Summary and Recent Developments
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
million of operating leases and $1.7 million of debt of the discontinued
businesses of our subsidiary companies.
9
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.
On March 16, 2005, our majority shareholder, David J. Cutler,
("Cutler") entered into a Securities Purchase Agreement (the "Purchase
Agreement") with KI Equity Partners I, LLC ("KI Equity") under which KI Equity
agreed to purchase and Cutler agreed to sell an aggregate of 13,074,204 shares
("Shares") of common stock of Multi-Link Telecommunications, Inc. ("Company",
"we", "us", or "our"), representing approximately 65.7% of our outstanding
shares of common stock, at a price of $252,846.75. KI Equity also agreed to
acquire from Cutler a convertible promissory note issued by the Company in the
principal amount of $147,153.25 ("Note").
On March 17, 2005, the Company and Cutler entered an Assumption
Agreement (the "Assumption Agreement"). Under the Assumption Agreement, the
Company transferred all of its rights in any capital stock or membership
interests of any of its current subsidiaries to Cutler. Each of these
subsidiaries is currently inactive and has no assets. In exchange, Cutler has
agreed to assume all of our obligations of any kind (other than the Note) and
indemnify the Company against any of these liabilities existing as of the
Closing. Cutler also agreed to release the Company from any and all obligations
and claims (other than the Note).
The transactions under the Purchase Agreement were closed and completed
on March 18, 2005 ("Closing."). In May 2005, we have entered into a contract
with Vero Management, LLC ("Vero") for managerial and administrative services.
Vero has not been engaged to provide, and Vero does not render, legal,
accounting, auditing, investment banking or capital formation services. Vero is
owned and managed by Kevin R. Keating, the Company's sole officer and director.
The Company pays Vero $1,000 per month for services provided to it.
Kevin R. Keating is the father of Timothy J. Keating. Timothy J.
Keating is the managing member of KI Equity Partners I, LLC, which is the
majority shareholder of the Company. Timothy J. Keating is also the principal
member of Keating Investments, LLC, which is a 90% owner of Keating Securities,
LLC, a registered broker-dealer. KI Equity Partners I, LLC owns approximately
74.4% of the outstanding shares of the Company's common stock as of June 30,
2005. Kevin R. Keating is not affiliated with and has no equity interest in KI
Equity Partners I, LLC, Keating Investments, LLC or Keating Securities, LLC and
disclaims any beneficial interest in the shares of the Company's stock owned by
KI Equity Partners I, LLC. Similarly, Keating Investments, LLC, Keating
Securities, LLC and KI Equity Partners I, LLC disclaim any beneficial interest
in the shares of the Company's common stock currently owned by Kevin R. Keating.
In a special meeting of shareholders held May 23, 2005, the Company's
shareholders authorized an increase in authorized shares of common stock from
20,000,000 to 150,000,000.
On May 25, 2005, the Company issued 6,628,978 shares of its common
stock to KI Equity in connection with the conversion of a promissory note in the
amount of $147,153 ("Note"), or a conversion price of approximately $0.022 per
share. The Note was acquired by KI Equity from Cutler as part of the change of
control transactions completed on March 18, 2005.
On May 25, 2005, the Company issued 5,000,000 shares of its common
stock to KI Equity at a purchase price of $0.01 per share, for an aggregate
purchase price of $50,000. The funds were to provide working capital to the
Company for operating expenses.
On May 25, 2005, the Company also issued 850,000 shares of its common
stock to Kevin R. Keating , the sole officer and director of the Company, for
services to the Company with a fair value of $8,500, or $0.01 per share.
10
On May 25, 2005, the Company also issued 850,000 shares of its common
stock to Garisch Financial, Inc. ("GFI") for financial consulting services to
the Company with a fair value of $8,500, or $0.01 per share.
Results of Operations
For the three months ended June 30, 2005, the Company had no activities
that produced revenues from operations. For the three months ending June 30,
2005, the Company had a net loss of $(42,607), as compared with net income of
$5,332 for the corresponding period of 2004. In the three month period ended
June 30, 2004, the Company renegotiated certain liabilities resulting in an
extraordinary gain from debt settlement. Accordingly, our respective loss from
continuing operations, extraordinary item, and net income (loss) for the three
months ended June 30, 2005 and 2004 are as follows:
3 Months Ended 3 Months Ended
June 30, 2005 June 30, 2004
------------- -------------
Loss before extraordinary item $ (42,607) $ (3,585)
Extraordinary item, net of tax - 8,917
Net Income (Loss) $ (42,607) $ 5,332
Liquidity and Capital Resources
The Company's total assets as June 30, 2005 are $28,055, which is
comprised of cash. The Company has no liabilities as of June 30, 2005. Total
stockholders' equity as of June 30, 2005 is $28,055.
In a special meeting of shareholders held May 23, 2005, the Company's
shareholders authorized an increase in authorized shares of common stock from
20,000,000 to 150,000,000. On May 25, 2005, the Company issued 6,628,978 shares
of its common stock to KI Equity in connection with the conversion of a
promissory note in the amount of $147,153. On May 25, 2005, the Company also
issued 5,000,000 shares of its common stock to KI Equity for an aggregate
purchase price of $50,000 to provide working capital to the Company for
operating expenses.
On May 25, 2005, the Company also issued a total of 1,700,000 shares of
its common stock to its sole officer and director of the Company and a financial
consultant for services to the Company with a fair value of $17,000.
The following is a summary of the Company's cash flows from operating,
investing, and financing activities:
9 Months Ended 9 Months Ended
June 30, 2005 June 30, 2004
-------------- --------------
Cash Flows from Operating Activities $ (110,262) $ (38,771)
Cash Flows from Investing Activities -- --
Cash Flows from Financing Activities 138,243 26,351
-------------- --------------
Net Change in Cash $ 27,981 $ (12,420)
============== ==============
Management considers it possible that additional funds may need to be
raised, either through loans or via private placements of common stock, to
sustain the Company's liquidity in the near term.
11
Going Concern
The Company has sustained recurring operating losses, currently has no
source of operating revenue, and has only limited working capital with which to
pursue its business plan, which contemplates the completion of a business
combination with an operating company. The amount of capital required to sustain
operations until the successful completion of a business combination is subject
to future events and uncertainties. It may be necessary for the Company to
secure additional working capital through loans or sales of common stock, and
there can be no assurance that such funding will be available in the future.
These conditions raise substantial doubt about the Company's ability to continue
as a going concern.
Critical Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities as of
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Deferred Taxes
We recognize deferred tax assets and liabilities based on the
differences between the financial statement carrying amounts and the tax bases
of assets and liabilities. Management regularly reviews the Company's deferred
tax assets for recoverability and establishes a valuation allowance based on
historical taxable income, projected future taxable income, and the expected
timing of the reversals of existing temporary differences. Management has
recorded a valuation allowance to reduce deferred tax assets including those
associated with net operating losses. The assessment realization of deferred tax
provisions is dependent upon future taxable income, and based on historical
evidence, it is more likely than not that such provision will not be utilized.
Further, in the case of an acquisition of a new business by the Company, the
ability of the post-acquisition business to utilize the Company's net operating
losses may be significantly impaired or eliminated. As of June 30, 2005, the
Company has established a valuation allowance equal to the net deferred tax
asset, since management is unable to determine that the Company will generate
sufficient future taxable income to allow it to realize the deferred tax asset.
Risk Factors
Since the sale of our operating subsidiaries in 2002, we have no
material assets, liabilities or ongoing operations. Nevertheless, we believe
that we may be able to recover some value for our shareholders by the adoption
and implementation of a plan to seek, investigate and, if the results of the
investigation warrant, effectuate a business combination with a suitable
privately-held company that has both business history and operating assets. Our
potential success will be primarily dependent on the efforts and abilities of
our new management team, who will have virtually unlimited discretion in
searching for, negotiating and entering into a business combination transaction.
Accordingly, an investment in our common stock involves investment
risks and the possibility of the loss of an investor's entire investment. A
prospective investor should evaluate all information about us and the risk
factors discussed below in relation to his financial circumstances before
investing in us.
1. No Current Operating Business. We currently have no relevant
operating business, revenues from operations or assets. Our business plan is to
seek a merger or business combination with an operating business. We face all of
the risks inherent in the investigation, acquisition, or involvement in a new
business opportunity. An investor's purchase of any of our securities must be
regarded as placing funds at a high risk in a new or "start-up" venture with all
of the unforeseen costs, expenses, problems, and difficulties to which such
ventures are subject.
12
2. No Assurance of Success or Profitability. There is no assurance that
we will acquire a suitable and favorable business opportunity in a reverse
merger transaction. In addition, even if we become involved in a business
opportunity, there is no assurance that the business we acquire will generate
revenues or profits, or that the value of our common stock will increase as a
result of the acquired business opportunity.
3. Possible Business - Not Identified and Highly Risky. We have not
identified and have no commitments to enter into or acquire a specific business
opportunity and therefore we can disclose the risks and hazards of a business or
opportunity that we acquire only in a general manner, and cannot disclose the
risks and hazards of any specific business or other opportunity that we may
enter into. An investor can expect a potential business opportunity to be quite
risky. Our acquisition of or participation in a business opportunity could
result in a total loss to our investors and stockholders if the target business
is unsuccessful. Further, any investment in us may continue to be highly
illiquid.
4. Type of Business Acquired. The type of business that may be acquired
is not identified. Therefore, our investors and stockholders have to rely on our
management to determine which target business to pursue. There are no
controlling parameters of the business to be acquired. Thus, ultimately an
investment will depend on the target business and therefore investors in us will
be subject to all the risks that would be associated with that selected
business. Our management may have the right to approve and authorize a reverse
merger transaction with a target company without obtaining the vote of the
majority of our stockholders.
5. Impracticability of Exhaustive Investigation. We have limited funds
and lack full-time management which will likely make it impracticable to conduct
a complete and exhaustive investigation and analysis of a business opportunity
before we commit our limited capital and other resources to acquire a target
business. Management decisions, therefore, likely will be made without detailed
feasibility studies, independent analysis, market surveys, and the like which,
if we had more funds available to us, would be desirable. We will be
particularly dependent in making decisions upon information provided by the
promoter, owner, sponsor, or others associated with the business opportunity
seeking to be acquired by us.
6. Lack of Diversification. Because of our limited financial resources,
it is unlikely that we will be able to diversify our acquisitions or operations.
The inability to diversify our activities into more than one area will subject
our investors and stockholders to economic fluctuations within a particular
business or industry and therefore increase the risks associated with the
investment. We only intend to acquire a single business opportunity and thus
your investment will lack diversification.
7. Possible Reliance upon Unaudited Financial Statements. We will
require audited financial statements from target companies that we propose to
acquire. No assurance can be given, however, that audited financials will be
available at the closing of the reverse merger transaction. In cases where
audited financials are unavailable, we will have to rely upon unaudited
information received from target companies' management that has not been
verified by outside auditors. We, at the time of acquisition, will be subject to
the reporting provisions of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and thus will be required to furnish certain information about
significant acquisitions, including audited financial statements for any
business that the shell company acquires. Consequently, acquisition prospects
that do not have or are unable to obtain the required audited statements may not
be appropriate for acquisition so long as the reporting requirements of the
Exchange Act are applicable. But, in cases where we have completed a reverse
merger transaction in reliance on unaudited financial statements and audited
statements cannot subsequently be obtained, the continued ability of the
post-transaction company to remain a reporting company and publicly trading will
be in jeopardy and may significantly reduce the value of your investment.
13
8. Investment Company Regulation. We do not intend to become classified
as an "investment company" under the Investment Company Act of 1940 (the
"Investment Act"). We believe that we will not become subject to regulation
under the Investment Act because (i) we will not be engaged in the business of
investing or trading in securities, and (ii) any acquisition undertaken will
result in the target company obtaining a majority interest in us. Should there
be a requirement to register as an investment company, it would cause
significant registration and compliance costs. Any violation of the Investment
Act will subject us to materially adverse consequences. Should the SEC find that
we are subject to the Investment Act, and order registration under the
Investment Act, we would resist such finding and take steps to avoid such
registration. Irrespective of whether the SEC or we were to prevail in such
dispute about whether or not we are an investment company, however, the damages
and delays would be costly.
9. Other Regulation. Any acquisition made by us may be of a business
that is subject to regulation or licensing by federal, state, or local
authorities. Foreign companies may also be considered, and be subject to similar
business regulations as are applicable in the United States and also may be
subject to limitations on ownership by foreign persons and entities. Compliance
with such regulations and licensing can be expected to be a time-consuming,
expensive process and may limit our other investment opportunities. We intend to
pursue potential business opportunities in foreign countries, including China,
and as such, such opportunities will be subject to foreign country laws and
regulations affecting foreign investment, business operations, currency
exchange, repatriation of profits, and taxation, which will increase the risk of
your investment.
10. Dependence upon Management. We will be heavily dependent upon the
skills, talents, and abilities of our management to implement our business plan.
Our management may devote limited time to our affairs, which may be inadequate
for our business, and may delay the acquisition of any business opportunity
considered. Furthermore, management has little experience in seeking,
investigating, and acquiring businesses and will depend upon its limited
business knowledge in making decisions regarding our acquisition of a business
opportunity. Because investors will not be able to evaluate the merits of
possible business acquisitions by us, they should critically assess the
information concerning the management.
11. Dependence upon Outside Advisors. To supplement the business
experience of management, we may be required to employ accountants, technical
experts, appraisers, attorneys, or other consultants or advisors. Some of these
outside advisors may be our affiliates or their affiliated entities. The
selection of any such advisors will be made by our management without any input
from stockholders.
12. Conflicts of Interest. Our management has other business interests
to which they will devote primary attention. As a result, conflicts of interest
may arise that can be resolved only through the exercise by them of their
judgment as may be consistent with their fiduciary duties. Our management will
try to resolve conflicts to the best advantage of all concerned, but there may
be times when an acquisition opportunity is given to another entity to the
disadvantage of our stockholders and for which there will be no recourse. It is
also expected that we will engage Keating Securities, LLC, an affiliate of
Keating Investments, LLC, the managing member of our controlling stockholder, to
act as a financial advisor in connection with the reverse merger transaction for
which it may earn a cash and/or equity fee.
13. Need for Additional Financing. In all likelihood we will need
additional funds to take advantage of any available acquisition business
opportunity. Even if we were to obtain sufficient funds to acquire an interest
in a business opportunity, we may not have sufficient capital to fully exploit
the opportunity. Our ultimate success will depend upon our ability to raise
additional capital at the time of the acquisition and thereafter. When
additional capital may be needed, there can be no assurance that funds will be
available from any source or, if available, that they can be obtained on
acceptable terms.
14. Borrowing Transactions. There is a possibility that any acquisition
of a business opportunity by us will require borrowing against the assets of the
business opportunity to be acquired, or against the projected future revenues or
profits of the business opportunity. This leverage could increase our exposure
to larger losses. There is no assurance that any business opportunity acquired
through borrowing and leverage will generate sufficient revenues to cover the
related debt and expenses.
14
15. No Foreseeable Dividends. We do not intend to pay any dividends. We
do not foresee making any cash distributions in the manner of a dividend or
otherwise.
16. Loss of Control by Present Management and Stockholders. It is
likely that any acquisition of an operating company will result in a change in
control of the then current directors, officers and the stockholders. Therefore,
our management prior to the acquisition will be changed to those of the target
company and its stockholders, who will then control the combined company. At
that time, our stockholders will be at investment risk for the decisions about
the business by persons that they may not know or have any ability to influence
through a board seat or by the voting mechanism of stockholders.
17. Dilutive Effects of Issuing Additional Common Stock. In any reverse
merger transaction, for tax reasons and management reasons, the owners of the
target company will be issued a large number of shares of common stock which
will dilute the ownership interest of our current stockholders. In addition, at
the time of the reverse merger, it will be likely that there will be additional
authorized but unissued shares that may be later issued by the then new
management for any purpose without the consent or vote of the stockholders. The
acquisition issuance and additional issuances that may occur will dilute the
interests of our stockholders after the reverse merger transaction.
18. Thinly-traded Public Market. Our securities may be very thinly
traded, and the price if traded may not reflect the value of the company.
Moreover, there may be a reverse split of the shares which may not reflect the
value of the company either. There can be no assurance that there will be an
active market for our shares either now or after we complete the reverse merger.
The market liquidity will be dependant on the perception of the operating
business and any steps that its management might take to bring the company to
the awareness of investors. There can be no assurance given that there will be
any awareness generated. Consequently, investors may not be able to liquidate
their investment or liquidate it at a price that reflects the value of the
business. If a more active market should develop, the price may be highly
volatile. Because there may be a low price for our securities, many brokerage
firms may not be willing to effect transactions in the securities. Even if an
investor finds a broker willing to effect a transaction in the securities, the
combination of brokerage commissions, transfer fees, taxes, if any, and any
other selling costs may exceed the selling price. Further, many lending
institutions will not permit the use of such securities as collateral for any
loans.
19. Possible Rule 144 Sales. The majority of our shares currently
outstanding are "restricted securities" within the meaning of Rule 144 under the
Securities Act of 1933, as amended (the "Act"). As restricted shares, these
shares may be resold only pursuant to an effective registration statement or
under the requirements of Rule 144 or other applicable exemption from
registration under the Act and as required under applicable state securities
laws. Rule 144 provides in essence that a person who has held restricted
securities for a period of one year may, under certain conditions, sell every
three months, in brokerage transactions, a number of shares that does not exceed
the greater of 1.0% of a company's outstanding common stock or the average
weekly trading volume during the four calendar weeks prior to the sale. There is
no limit on the amount of restricted securities that may be sold by a
non-affiliate after the restricted securities have been held by the owner for a
period of two years. Current stockholders who own 10% or more of our shares will
likely be deemed an affiliate until 90 days after a reverse merger is completed
with a target company. After such 90-day period, and assuming said shares have
been held for more than two years, these stockholders may be able to sell their
shares without volume restrictions. A sale under Rule 144 or under any other
exemption from the Act, if available, or pursuant to subsequent registrations of
our shares, may have a depressive effect upon the price of our shares in any
market that may develop.
15
Plan of Operations
General Business Plan
Our plan of operation is to seek a target company with which to merge
or to complete a business combination. In any transaction, we will be the
surviving entity, and our stockholders will retain a percentage ownership
interest in the post-transaction company. The amount of the retained equity
ownership by our stockholders will be negotiated by our management and the
target company. We may also be required to pay cash and/or equity fees to third
parties that advise us in connection with the merger or business combination,
commonly refereed to as a reverse merger. These third party advisors may include
certain affiliates of ours and their affiliated entities.
Typically in connection with the reverse merger transaction involving
us and the target company, there will be a capital funding event for the target
business on a combined basis either at the time of the reverse merger or shortly
thereafter. This may be a private placement by either us or the target company,
if the funding event is contingent on the closing of the reverse merger. If the
funding event is after the reverse merger, it will likely be a public offering
or private placement of our securities. It will often be the case that the
liquidity opportunity for our existing stockholders will be tied to the ability
of the old and new investors of the target enterprise to have liquidity in the
market for their financial investment. Therefore, our stockholders may have to
continue to hold their investment or may face competition in being able to sell
their shares in the post-transaction business in the public market, which may
depress the price for such a volume of securities.
We will not restrict our search to any specific business, industry or
geographic location, and we may participate in a business venture of virtually
any kind or nature. This discussion of our plan for acquiring an operating
business is purposefully general, and it is not meant to be restrictive of the
virtually unlimited discretion to search for and enter into potential business
opportunities. We anticipate that we will be able to participate in only one
potential business venture because of our nominal assets and limited 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 potential targets with either sound business ideas or
operations seeking the benefits of a shell company that has complied with the
federal reporting requirements for public companies and is publicly trading.
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, limited
capital with which to provide the owners of business opportunities with any
significant cash or other assets. We will, however, be able to offer owners of
target candidates the opportunity to acquire a controlling ownership interest in
an issuer who has complied with the reporting requirements under federal
securities laws without incurring the cost and time required to conduct an
initial public offering.
16
The analysis of new business opportunities will be undertaken by, or
under the supervision of, our management who will likely engage outside advisors
to assist us in this analysis. Some of these outside advisors may be affiliates
of ours or their affiliated entities. We intend to concentrate on identifying
preliminary prospective business opportunities which may be brought to our
attention through present associations of our officers and directors, or by our
advisors. 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
or our advisors expect to meet personally with or interview management and key
personnel.
We may also have to compensate certain advisors, finders and investment
banking firms for services rendered in connection with the identification of
target operating companies and the negotiation and completion of the
transaction. Due to our limited resources, it is expected that all or a portion
of this compensation will be in the form of our common stock or from cash
provided by the target company or the funding event. Additional issuance of our
common stock will have a further dilutive effect on the percentage of shares
held by our stockholders. Keating Securities, LLC, an affiliate of Keating
Investments, LLC, the managing member of our controlling stockholder, will also
act as a financial advisor in connection with the reverse merger transaction and
will be paid a cash and/or equity fee upon the successful closing of the reverse
merger.
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. Our management may have the right to approve and
authorize a reverse merger transaction with a target company without obtaining
the vote of the majority of our stockholders. Further, upon consummation of a
reverse merger transaction, it is probable that our present management and
stockholders will no longer be in control of us. In addition, our management, as
part of the terms of the reverse merger transaction, may resign and may be
replaced by new directors without a vote of our stockholders. Any and all sales
of shares of our common stock may only be made in compliance with the securities
laws of the United States and any applicable state.
It is anticipated that certain securities issued by us in connection
with the reverse merger would be issued in reliance upon exemptions from
registration under application of federal and state securities laws. In some
circumstances, as a negotiated element of the reverse merger transaction, we
will be asked to agree to register all or a part of such securities immediately
after the transaction is consummated or at specified times thereafter. In such a
case, we will attempt to negotiate the registration of some or all of our
current outstanding shares which are restricted, but there is no guarantee that
this will be accomplished or, if accomplished, that the registration rights will
be identical. If such registration occurs, it will be undertaken by the
surviving entity after it has successfully consummated a reverse merger and is
no longer considered an inactive company. The issuance of substantial additional
securities by us in connection with the reverse merger 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.
17
While the actual terms of a reverse merger 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 owners of the
acquired business to own 80 percent or more of the voting stock of the surviving
entity. In such event, the equity interest retained by our current stockholders
would be less than 20 percent of the issued and outstanding shares of the
surviving entity. This would result in significant dilution in the equity
interests of our stockholders.
In addition to the tax considerations discussed above, it is likely
that in any reverse merger, and depending upon, among other things, the target
company's assets and liabilities, the equity interests of our stockholders after
the transaction will be a small percentage of the post-transaction company. The
percentage ownership may be subject to significant reduction in the event we
acquire a target company with significant assets and expectations of growth.
We will participate in a business opportunity only after the
negotiation and execution of appropriate written agreements. Although the terms
of the acquisition agreements cannot be predicted, generally such agreements
will (i) require specific representations and warranties by all of the parties;
(ii) specify certain events of default and remedies therefore; (iii) detail the
terms of closing and the conditions which must be satisfied by each of the
parties prior to and after closing; (iv) outline the manner of bearing costs,
including costs associated with our attorneys and accountants; (v) set forth
indemnification provisions; 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. Included in these
requirements is the affirmative duty to file independent audited financial
statements 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 compliance with the
reporting requirements under federal securities laws, or if the audited
financial statements provided do not conform to the representations made by the
business to be acquired, we will attempt to negotiate a provision in the
definitive closing documents to void the transaction. However, there is no
guarantee that we will be successful in including such a provision and, in such
case, the continued ability of the post-transaction company to remain a
reporting company and publicly trading may be in jeopardy.
Competition
We are an insignificant participant among the firms which engage in the
reverse merger of shell companies into an operating business. 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. As a result, we may not be able to find suitable target companies
with which to complete a reverse merger transaction.
18
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.
19
PART II
ITEM 1. LEGAL PROCEEDINGS
We are not aware of any pending or threatened legal proceedings in
which we are involved.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
In a special meeting of shareholders held May 23, 2005, the Company's
shareholders authorized the increase in authorized shares of common stock from
20,000,000 to 150,000,000.
On May 25, 2005, the Company issued 6,628,978 shares of its common
stock to KI Equity in connection with the conversion of a promissory note in the
amount of $147,153 ("Note"), or a conversion price of approximately $0.022 per
share. The Note was acquired by KI Equity from Cutler as part of the change of
control transactions completed on March 18, 2005.
On May 25, 2005, the Company issued 5,000,000 shares of its common
stock to KI Equity at a purchase price of $0.01 per share, for an aggregate
purchase price of $50,000. The funds were to provide working capital to the
Company for operating expenses.
On May 25, 2005, the Company also issued 850,000 shares of its common
stock to Kevin R. Keating , the sole officer and director of the Company, for
services to the Company with a fair value of $8,500, or $0.01 per share.
On May 25, 2005, the Company also issued 850,000 shares of its common
stock to Garisch Financial, Inc. ("GFI") for financial consulting services to
the Company with a fair value of $8,500, or $0.01 per share.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
We are not aware of any defaults upon senior securities during the
third quarter of the fiscal year ended June 30, 2005.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
A special meeting of stockholders was held on May 23, 2005 to vote on a
proposal to amend the Company's articles of incorporation to increase the number
of authorized shares of common stock from 20,000,000 to 150,000,000. This
increase in the Company's authorized common stock was approved by a vote of a
majority of the shareholders as follows:
For 17,080,367 Against 93,978 Abstain 25,000
ITEM 5. OTHER INFORMATION
None.
20
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
31 Certification pursuant to Rule 13a-14(a) or 15d-14(a) under
the Securities Exchange Act of 1934, as amended.
32 Certification of Chief Executive Officer and President of the
Company, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K
The following current reports were filed during the quarter ended
June 30, 2005:
On May 26, 2005, the Company filed a Current Report on Form 8-K
dated May 23, 2005 reporting the unregistered sale of 13,328,978
shares of common stock for cash and services and the amendment of
the articles of incorporation to increase the number of authorized
shares of common stock from 20,000,000 to 150,000,000.
21
SIGNATURES
In accordance with Section 13 or 15(d) 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.
Date: July 29, 2005 By: /s/ Kevin R. Keating
----------------------
Kevin R. Keating
President and Chief Executive Officer
22
Exhibit Index
Exhibit
Number Description of Exhibit
------ ----------------------
31 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
32 Certification of Chief Executive Officer and Chief Financial Officer
of the Company, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.