U.S. 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: December 31, 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 registrant (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___.
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes X No ___.
As of February 3, 2006, there were 37,215,913 shares of common stock
outstanding.
Transitional Small Business Disclosure Format (check one): Yes___ No X .
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets, December 31, 2005 (unaudited)
and September 30, 2005 1
Condensed Statements of Operations for the three month
periods ended December 31, 2005 and 2004 (unaudited) 2
Condensed Statements of Cash Flows for the three month periods
ended December 31, 2005 and 2004 (unaudited) 3
Notes to Condensed Financial Statements (unaudited) 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Item 3. Controls and Procedures 17
PART II.OTHER INFORMATION
Item 2. Changes in Securities 18
Item 6. Exhibits and Reports on Form 8-K 18
Signatures 19
Certifications 21
Part I - Financial Information
Item 1. Financial 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"). These statements often can be identified by the
use of terms such as "may", "will", "expect", "believe", "anticipate",
"estimate", "approximate", or "continue", or the negative thereof. Multi Link
Telecommunications, Inc. (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. However, forward-looking statements are subject to risks,
uncertainties and important factors beyond the control of the Company that could
cause actual results and events to differ materially from historical results of
operations and events and those presently anticipated or projected. These
factors include adverse economic conditions, entry of new and stronger
competitors, inadequate capital and unexpected costs. 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.
MULTI LINK TELELCOMMUNICATIONS, INC.
CONDENSED FINANCIAL STATEMENTS
For the quarterly period ended December 31, 2005
(Unaudited)
MULTI LINK TELECOMMUNICATIONS, INC.
CONDENSED BALANCE SHEETS
December 31, September 30,
2005 2005
------------- -------------
(unaudited) ***
ASSETS
Current Assets
Cash $ 52,491 $ 21,330
------------ ------------
Total Current Assets 52,491 21,330
------------ ------------
Total Assets $ 52,491 $ 21,330
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities $ - $ -
------------ ------------
Total Current Liabilities -- --
Stockholders' Equity
Preferred stock authorized 5,000,000 shares,
$0.01 par value, no shares issued or outstanding -- --
Common stock; no par value, 150,000,000
shares authorized, 37,215,913 shares issued and
outstanding at December 31, 2005, 33,215,913
shares issued and outstanding at September 30,2005 12,839,653 12,799,653
Accumulated deficit (12,787,162) (12,778,323)
------------ ------------
Total Stockholders' Equity 52,491 21,330
------------ ------------
Total Liabilities and Stockholders' Equity $ 52,491 $ 21,330
============ ============
*** Amounts are derived from the audited financial statements for the fiscal
year ended September 30, 2005.
The accompanying notes are an integral part of the financial statements.
1
MULTI LINK TELECOMMUNICATIONS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended December 31,
2005 2004
------------- ------------
Revenue $ - $ -
General and Administrative Expenses 8,928 16,557
------------ ------------
Operating Loss (8,928) (16,557)
Interest Income / (Expense) 89 (14)
------------ ------------
Net Loss $ (8,839) $ (16,571)
============ ============
Net loss per share, Basic and diluted $ (NIL) $ (NIL)
============ ============
Weighted average shares 36,128,956 19,886,935
============ ============
The accompanying notes are an integral part of the financial statements.
2
MULTI LINK TELECOMMUNICATIONS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
Three Months Ended December 31,
2005 2004
-------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (8,839) $(16,571)
Adjustments to reconcile net loss to net cash
Provided (used) by operating activities:
Decrease in prepaid expenses -- 471
Increase in accrued expenses -- 3,342
Increase in accounts payable -- 8,489
-------- --------
Net cash flows used by operating activities (8,839) (4,269)
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash flows from investing activities -- --
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of common stock 40,000 --
Advances under notes payable -- 4,218
-------- --------
Net cash flows from financing activities 40,000 4,218
-------- --------
Net increase (decrease) in cash 31,161 (51)
Cash, beginning of period 21,330 74
-------- --------
Cash, end of period $ 52,491 $ 23
======== ========
SUPPLEMENTARY CASH FLOW INFORMATION
Interest -- 14
-------- --------
Taxes -- --
-------- --------
The accompanying notes are an integral part of the financial statements.
3
MULTI LINK TELECOMMUNICATIONS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
December 31, 2005
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The financial statements as of December 31, 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, 2005 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.").
4
MULTI LINK TELECOMMUNICATIONS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
December 31, 2005
(Unaudited)
NOTE 2 - COMMON STOCK ISSUANCE
On October 25, 2005, the Company issued 4,000,000 shares of its common stock
to KI Equity at a purchase price of $0.01 per share, for an aggregate
purchase price of $40,000. The funds were to provide working capital to the
Company for operating expenses.
NOTE 3 - 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 December 31, 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
MULTI LINK TELECOMMUNICATIONS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
December 31, 2005
(Unaudited)
NOTE 4 - 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 77.1% of the outstanding shares of the
Company's common stock as of December 31, 2005. Kevin R. Keating is not
affiliated with and has no equity interest is 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. Effective November 1, 2005, the Company agreed to increase the
monthly fee to $2,500 For the three month ended December 31, 2005, $6,000 is
included in general and administrative expense pursuant to this agreement,
$6,000 has been paid.
6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
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").
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
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 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.
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 $2,500 per month for services provided to it.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
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 77.1% of the
outstanding shares of the Company's common stock as of December 31, 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.
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.
On October 25, 2005, the Company issued 4,000,000 shares of its common stock to
KI Equity at a purchase price of $0.01 per share, for an aggregate purchase
price of $40,000. The funds were to provide working capital to the Company for
operating expenses.
Results of Operations
- ---------------------
For the three months ended December 31, 2005, the Company had no activities that
produced revenues from operations. For the three months ending December 31,
2005, the Company had a net loss of $(8,839), as compared with net loss of
$(16,571) for the corresponding period of 2004.
Liquidity and Capital Resources
- -------------------------------
The Company's total assets as December 31, 2005 are $52,491, which is comprised
of cash. The Company has no liabilities as of December 31, 2005. Total
stockholders' equity as of December 31, 2005 is $52,491.
The following is a summary of the Company's cash flows from operating,
investing, and financing activities:
Three Months Ended December 31,
2005 2004
--------- ---------
Cash Flows from Operating Activities $ (8,839) $ (4,269)
Cash Flows from Investing Activities -- --
Cash Flows from Financing Activities 40,000 4,218
-------- --------
Net Change in Cash $ 31,161 $ (51)
======== ========
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.
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
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 December 31, 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.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
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.
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.
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
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.
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
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
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.
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.
13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
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.
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.
14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
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.
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.
15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
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.
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.
16
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.
17
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
On October 25, 2005, the Company issued 4,000,000 shares of its
common stock to KI Equity at a purchase price of $0.01 per share, for an
aggregate purchase price of $40,000. The funds were to provide working capital
to the Company for operating expenses.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
We are not aware of any defaults upon senior securities during the
first fiscal quarter ended December 31, 2005.
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
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
On October 25, 2005, the Company filed a Current Report on Form
8-K dated October 24, 2005 announcing the sale of unregistered
securities which is disclosed more fully elsewhere in this report.
18
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: February 10, 2006 By: /s/ Kevin R. Keating
----------------------
Kevin R. Keating
President and Chief Executive Officer
19
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.
20