UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended MARCH 31, 2003
[ ] Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act
of 1934
For the transition period from __________ to __________
Commission File Number - 333-100046
LINK2 TECHNOLOGIES, INC.
------------------------
(Exact name of Small Business Issuer as specified in its charter)
NEVADA 52-2360156
- ------ ----------
(State or other jurisdiction of (IRS Employer
incorporation) Identification No.)
3235 WEST 4TH AVENUE, SUITE 101, VANCOUVER, BC CANADA V6K 1R8
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(Address of principal executive offices)
604-736-4989
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(Issuer's telephone number)
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(Former name, former address and former fiscal year if changed since last
report)
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 21,077,500 SHARES OF COMMON STOCK AS
AT MAY 8, 2003.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
2
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GENERAL
The Company's unaudited financial statements for the three months ended March
31, 2003 are included with this Form 10-QSB. The unaudited financial statements
for the three months ended March 31, 2003 include:
(a) Balance Sheet as of March 31, 2003 and December 31, 2002;
(b) Statement of Operations -Three months ended March 31, 2003 and December 31,
2002;
(c) Statement of Changes in Shareholders' Deficit for the period from August
16, 1996 (inception) to December 31, 2002 (audited) and the three months
ended March 31, 2003 (unaudited)
(d) Statement of Cash flows -Three months ended March 31, 2003 and December 31,
2002
(e) Notes to Financial Statements.
The unaudited financial statements have been prepared in accordance with the
instructions to Form 10-QSB and, therefore, do not include all information and
footnotes necessary for a complete presentation of financial position, results
of operations, cash flows, and stockholders' equity in conformity with generally
accepted accounting principles. In the opinion of management, all adjustments
considered necessary for a fair presentation of the results of operations and
financial position have been included and all such adjustments are of a normal
recurring nature. Operating results for the three months ended March 31, 2003
are not necessarily indicative of the results that can be expected for the
fiscal year ending December 31, 2003.
3
Link2 Technologies, Inc.
(A Development Stage Company)
INDEX
PART I - Financial Information
Item 1. Financial Statements Page
----
Financial Information F-1
Balance Sheets F-2
Statements of Operations F-3
Statements of Changes in Shareholders' Deficit F-4
Statements of Cash Flows F-5
Notes to the Financial Statements F-6
Item 2. Management's Discussion and Analysis or Plan of Operation 10
Item 3. Controls and Procedures 12
PART II - Other Information 13
SIGNATURES
F1
FINANCIAL INFORMATION
To the Shareholders
Link2 Technologies, Inc.
(Development Stage Company)
The accompanying balances sheets of Link2 Technologies, Inc. (development stage
company) at March 31, 2003 and December 31, 2002, and the statements of
operations for the three ended March 31, 2003 and the period August 16, 1996
(date of inception) to March 31, 2003, and the statements of cash flows for the
three months ended March 31, 2003, and the period from August 16, 1996 to March
31, 2003, have been prepared by the Company's management and they do not
include all information and notes to the financial statements necessary for a
complete presentation of the financial position, results of operations, and cash
flows in conformity with generally accepted accounting principles in the United
States of America. In the opinion of management, all adjustments considered
necessary for a fair presentation of the results of operations and financial
position have been included and all such adjustments are of a normal recurring
nature.
Operating results for the quarter ended March 31, 2002, are not necessarily
indicative of the results that can be expected for the year ending December 31,
2003.
F2
LINK2 TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
(EXPRESSED IN U.S. DOLLARS)
March 31, December 31,
2003 2002
$ $
(unaudited) (audited)
ASSETS - -
============ ==============
LIABILITIES
Current
Accounts payable and accrued expenses . . . . 5,477 6,079
Due to shareholder [Note 3] . . . . . . . . . 36,494 24,365
------------ --------------
Total current liabilities. . . . . . . . . . 41,971 30,444
Promissory notes [Note 4] . . . . . . . . . . . . 15,000 15,000
------------ --------------
Total liabilities. . . . . . . . . . . . . . 56,971 45,444
STOCKHOLDERS' DEFICIENCY
Common capital stock; with a par value of $0.001. 10,539 10,539
Authorized: 50,000,000 shares; issued and
outstanding: 21,077,500 (2001: 21,077,500)
Discount on common stock. . . . . . . . . . . . . (5,900) (5,900)
Additional paid-in capital. . . . . . . . . . . . 72,061 72,061
Accumulated deficit during the development stage. (133,671) (122,124)
------------ --------------
Total stockholders' deficiency. . . . . . . . . . (56,971) (45,444)
- -
============ ==============
F3
LINK2 TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(EXPRESSED IN U.S. DOLLARS)
August 16, 1996
(date of
Three Months Ended inception)
March 31 March 31 to March
2003 2002 31, 2003
$ $ $
------------ ------------ ----------
REVENUE
Production fees . . . . . . . . . . . . . . . . . . 1,000 - 7,200
EXPENSES
Consulting . . . . . . . . . . . . . . . . . . . 5,050 3,000 68,497
Accounting and legal . . . . . . . . . . . . . . 5,048 - 39,112
Office and general . . . . . . . . . . . . . . . 10 489 14,919
Telephone. . . . . . . . . . . . . . . . . . . . 190 308 6,396
Advertising. . . . . . . . . . . . . . . . . . . - - 3,202
Rent . . . . . . . . . . . . . . . . . . . . . . - - 2,974
Filing fees. . . . . . . . . . . . . . . . . . . 2,229 - 2,718
Management fees. . . . . . . . . . . . . . . . . - - 1,600
Travel . . . . . . . . . . . . . . . . . . . . . - - 1,453
------------ ------------ ----------
12,527 3,797 140,871
------------ ------------ ----------
NET LOSS. . . . . . . . . . . . . . . . . (11,527) (3,797) (133,671)
============ ============ ==========
BASIC AND DILUTED LOSS PER COMMON SHARE . . . . . . (0.000) (0.000)
============ ============
WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING 21,077,500 21,077,500
============ ============
F4
Link2 Technologies, Inc.
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
(EXPRESSED IN U.S. DOLLARS)
Period from inception (August 16, 1996) to December 31, 2002 (audited)
and the three months ended March 31, 2003 (Unaudited)
Common Common Discount on Additional Deficit
Stock Stock Common Paid-in Accumulated
Shares Amount Stock Capital During the
Development
Stage
# $ # $ $
Inception, August 16, 1996 . . . . . . . . . - - - - -
Common stock issued for:
Cash, February 1997, $.000008. . . . . . 12,000,000 12,000 (11,900) - -
Cash, April 1997, $0.005 per share . . . 4,000,000 4,000 - 16,000 -
Cash, May and June 1997, $0.01 per share 3,300,000 3,300 - 29,700 -
Services, March 1997, $0.005 per share . 1,020,000 1,020 - 4,080 -
Net loss . . . . . . . . . . . . . . . . . . - - - - (45,313)
---------- ------- ------------ ----------- -------------
Balance - December 31, 1997. . . . . . . . . 20,320,000 20,320 (11,900) 49,780 (45,313)
Common stock issued for:
Cash, February 1998, $0.01 per share . . 700,000 700 - 6,300 -
Cash, May and June 1998, $.20 per share. 57,500 57 - 11,443 -
Net loss . . . . . . . . . . . . . . . . . . - - - - (33,787)
---------- ------- ------------ ----------- -------------
Balance - December 31, 1998. . . . . . . . . 21,077,500 21,077 (11,900) 67,523 (79,100)
Net loss . . . . . . . . . . . . . . . . . . - - - - -
---------- ------- ------------ ----------- -------------
Balance - December 31, 1999. . . . . . . . . 21,077,500 21,077 (11,900) 67,523 (79,100)
Net loss . . . . . . . . . . . . . . . . . . - - - - (2,814)
---------- ------- ------------ ----------- -------------
Balance - December 31, 2000. . . . . . . . . 21,077,500 21,077 (11,900) 67,523 (81,914)
Net loss . . . . . . . . . . . . . . . . . . - - - - (6,164)
---------- ------- ------------ ----------- -------------
Balance - December 31, 2001. . . . . . . . . 21,077,500 21,077 (11,900) 67,523 (88,078)
Net loss . . . . . . . . . . . . . . . . . . - - - - (34,066)
---------- ------- ------------ ----------- -------------
Balance - December 31, 2002. . . . . . . . . 21,077,500 21,077 (11,900) 67,523 (122,144)
Net loss . . . . . . . . . . . . . . . . . . - - - - (11,527)
---------- ------- ------------ ----------- -------------
Balance - March 31, 2002 . . . . . . . . . . 21,077,500 21,077 (11,900) 67,523 (133,671)
========== ======= ============ =========== =============
F5
Link2 Technologies, Inc.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(EXPRESSED IN U.S. DOLLARS)
August 16, 1996
(date of
Three Months Ended inception)
March 31 March 31 to March
2003 2002 31, 2003
$ $ $
------------ ------------ ----------
OPERATIONS
Net loss . . . . . . . . . . . . . . . . (11,527) (3,797) (133,671)
Shares issued for services . . . . . . . - - 5,100
Increase in accounts payable and accrued (602) 3,797 5,477
expenses ---------- ---------- --------------
Net cash used in operating activities. . (12,129) - (123,094)
FINANCING
Promissory notes issued for cash . . . . - - 15,000
Increase in amount due to shareholder. . 12,129 - 36,494
Shares issued for cash . . . . . . . . . - - 71,600
---------- ---------- --------------
Net cash provided by financing . . . . . 12,129 - 123,094
---------- ---------- --------------
Increase in cash . . . . . . . . . . . . - - -
Cash, beginning of period. . . . . . . . - - -
---------- ---------- --------------
Cash - end of period. . . . . . . . . . - - -
========== ========== ==============
F6
LINK2 TECHNOLOGIES, INC.
(DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(EXPRESSED IN U.S. DOLLARS)
1. NATURE OF OPERATIONS AND GOING CONCERN
The Company was incorporated in the State of Nevada on August 16, 1996 and on
April 24, 2001 changed its name from "Great Energy Corporation International" to
Link2 Technologies, Inc.
The Company is currently in the development stage and has been in the process of
investigating and evaluating new business opportunities. The Company is
currently in the process of developing a three-dimensional ("3D") animation and
digital effects studio that provides 3D animation and digital effects to the
music video industry.
The Company has suffered recurring losses from operations and has a working
capital deficiency of $41,971 that raises substantial doubt about its ability to
continue as a going concern. The continuation of the Company as a going concern
is dependent upon the Company attaining profitable operations and raising funds.
Management's plan in this regard is to raise additional funding through debt
financing. The financial statements do not include any adjustment relating to
the recovery and classification of recorded asset amounts or the amount and
classification of liabilities that might be necessary should the Company
discontinue operations.
2. SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION - Revenue from sales of products and services is recognized
at the time of shipment or performance of services.
FINANCIAL INSTRUMENTS - The Company's financial instruments consist of accounts
payable and accrued expenses and amount due to shareholder. Amount due to
shareholder is interest free. It is management's opinion that the Company is
not exposed to significant interest, currency or credit risks arising from its
financial instruments and that their fair values approximate their carrying
values, unless otherwise noted.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS - 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 at the date of the financial
statements and the reporting period. Actual results could differ from those
estimates.
INCOME TAXES - The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes". Under the asset and liability method of Statement 109, deferred tax
assets and liabilities are recognized for the estimated future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates in effect for the
year in which those temporary differences are expected to be recovered or
settled.
3. DUE TO SHAREHOLDER
Amounts due to shareholder are non-interest bearing with no specific terms of
repayment.
F7
LINK2 TECHNOLOGIES, INC.
(DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(EXPRESSED IN U.S. DOLLARS)
4. INCOME TAXES
At March 31, 2003 the Company had a federal net operating loss carryforward of
approximately $133,000 that may be available to be applied against any future
taxable income. This net operating loss carryforward may result in future
income tax benefits of approximately $26,600, however, because realization is
uncertain at this time, a valuation reserve in the same amount has been
established.
Significant components of the Company's deferred tax liabilities and assets as
of March 31, 2003 are as follows:
2003
Deferred tax liabilities $ -
2003
Deferred tax assets: $ 26,600
Net operating loss carryforwards (26,600)
----------
Valuation allowance $ -
----------
The valuation allowance for deferred tax assets was increased by $1,800 during
the period ended March 31, 2003.
The Company's net operating loss carryforwards, if not used, will expire as
follows:
2012 $ 45,300
2018 33,800
2020 2,800
2021 6,100
2022 34,000
2023 11,000
------------
$ 133,000
------------
5. RELATED PARTY TRANSACTION
The Company is indebted to a shareholder as described in Note 3.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Forward Looking Statements
- ----------------------------
This report on Form 10-QSB contains certain forward-looking statements within
the meaning of section 21e of the Securities Exchange Act of 1934, as amended,
and other applicable securities laws. All statements other than statements of
historical fact are "forward-looking statements" for purposes of these
provisions, including any projections of earnings, revenues, or other financial
items; any statements of the plans, strategies, and objectives of management for
future operation; any statements concerning proposed new products, services, or
developments; any statements regarding future economic conditions or
performance; statements of belief; and any statement of assumptions underlying
any of the foregoing. Such forward-looking statements are subject to inherent
risks and uncertainties, and actual results could differ materially from those
anticipated by the forward-looking statements.
OVERVIEW
Our business plan is to provide 3D animation and digital effects to the music
video industry. We entered into our first engagement on August 21, 2002.
Pursuant to that engagement we are currently producing a music video based on
performances of the rock group Search for Utopia. Production of the video
includes modeling, animation and visual effects as well as some live action
footage. When the production is complete and ready for broadcast we hope to
utilize airplay of the video as well as distribution of the video to various
prospective clients and artists as a marketing tool. This project is expected
to take six to nine months to complete. Payment for this contract has been
partially received. We have no other income producing agreements at this time.
PLAN OF OPERATION
Link2 is presently producing its first music video. Our employee Carl Whiteside
is working almost full time on this project. The company has shot footage of
the band for live parts of the video and has completed a significant amount of
animation. Mr. Whiteside has found working largely alone a challenge as he has
previously had the support of a large to teem to complete these tasks. Thus the
project has taken a lot longer to complete than expected. We expect this
project to be completed by July of this 2003. Over the next 12 months we hope
to obtain engagements to produce other music videos. We hope the results of our
first video will establish our credibility within the industry. There is no
guarantee that this will occur however. The company has attempted to procure
new contracts but has been unsuccessful to this point
At the present time we have no cash resources. We are using computer equipment
to do our animation work that is on loan to Link2. We hope to purchase more
computer equipment software soon. Our cash needs are being met by borrowings
11
from our president, Robert Sawatsky. We have also recently made a series of
loans from non-affiliate people.
It is our goal to raise $700,000 over the next 12 months. This money would be
used primarily to purchase equipment, pay salaries for new members of the
company as well as existing ones and to do marketing. We plan to raise this
money through private placements of equity capital and/or debt financing.
RESULTS OF OPERATIONS
We accumulated $1000 of revenue in the first quarter which related to funds
coming form our client and current project. This was a sharp decline from the
previous 2 quarters where we earned $6200 in total. We incurred a loss of
$11,527 for the three months ended March 31, 2003, compared to a loss of $3297
for the three months ended March 31, 2002. Operating expenses during the nine
months included professional (legal and accounting) fees incurred as a result of
filing our Form SB-2 statement with the Securities and Exchange Commission.
We will continue to incur higher professional expenses in order to comply with
our ongoing goal of becoming a public company. Professional fees increased from
$ 0 for the first three months of 2002 to $5048 for the first three months of
2003. Consulting expenses increased from $3000 during the first three months of
2002 to $5050 for the same period in 2003. The increase in operating expenses
incurred during the first three months of 2003 compared with the operating
expenses incurred during the first three months of 2002 is due to the increased
focus on becoming a public company.
We are engaged in business for profit, but cannot predict future profitability.
We currently have two full-time employees.
LIQUIDITY AND CAPITAL RESOURCES
We had cash of $0 as of March 31, 2002, similar to $0 at March 31, 2003. We
anticipate that we will operate at a loss for the foreseeable future. We hope to
expand our team as soon as possible but there is no indication that this is
inevitable. Our management is currently providing capital through debt
financing. Further initiatives are planned when we are better able to finance
ourself in a better stock market environment. We have no agreements for
additional financing and we can provide no assurance that additional funding
will be available to us on acceptable terms in order to enable us to complete
any plan of operations.
We have limited assets and will require significant capital to complete any
future research and development programs. We do not know the specific financial
requirements of the projects, products or ventures in which we may eventually
participate, and therefore do not know what our exact capital needs will be. In
addition, we may incur substantial costs in connection with any research and/or
negotiations for business opportunities, which may deplete our assets.
12
ITEM 3. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures. Based on the evaluation
of the Company's disclosure controls and procedures (as defined in Rules
13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934) as of a
date within 90 days of the filing date of this Quarterly Report on Form
10-QSB, our principal executive officer and principal financial officer
have concluded that our disclosure controls and procedures are designed to
ensure that the information we are required to disclose in the reports we
file or submit under the Exchange Act is recorded, processed, summarized
and reported within the time periods specified in the SEC's rules and forms
and are operating in an effective manner.
(b) Changes in internal controls. There were no significant changes in our
internal controls or in other factors that could significantly affect these
controls subsequent to the date of their most recent evaluation.
13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
NONE
Item 2. Changes in Securities and Use of Proceeds
NONE
Item 3. Defaults Upon Senior Securities:
NONE
Item 4. Submission of Matters to a Vote of Security Holders:
NONE
Item 5. Other Information:
NONE
Item 6. Exhibits and Reports on Form 8K
(a) Exhibits
99.1 Certification of Robert Sawatsky, President (Principal
Executive Officer and Principal Financial Officer), 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
There were no Forms 8-K filed during the period of this report.
14
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: May 12, 2003
Link2 Technologies, Inc.
By: /s/ Robert Sawatsky
-----------------------------
Robert Sawatsky, President
(Principal Executive Officer,
Principal Financial Officer, and
Principal Accounting Officer)
CERTIFICATION BY PRINCIPAL EXECUTIVE OFFICER
I, Robert Sawatsky, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Link2 Technologies,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
15
c) presented in this quarterly report my conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 12, 2003
/s/ Robert Sawatsky
- ---------------------
Robert Sawatsky
President
(Principal Executive Officer)
(Principal Financial Officer)
16
EXHIBIT 99.1
CERTIFICATION
I, Robert Sawatsky, President and Principal Executive Officer and Principal
Financial Officer of Link2 Technologies, Inc. certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Link2 Technologies,
Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report; and
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this quarterly
report.
LINK2 TECHNOLOGIES, INC.
By: /s/ ROBERT SAWATSKY
---------------------
Robert Sawatsky
President and Principal
Executive Officer and
Principal Financial Officer
Date: May 12, 2003