UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED JULY 31, 2003
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ______________
Commission File Number: 000-24637
Telynx, Inc.
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(Exact name of small business issuer as specified in its charter)
Delaware 94-3022377
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
13520 Rye St. Suite 105, Sherman Oaks, CA 91423
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(Address of principal executive offices)
(310) 857-6736
(Issuer's Telephone Number)
APPLICABLE ONLY TO CORPORATE ISSUERS
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 [_] No [X]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [X] No [_].
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practical date. As of July 31, 2003, there were
187,784,770 shares of the issuer's $.01 par value common stock issued and
outstanding.
Transitional Small Business Disclosure Format (check one): Yes [_] No [X]
1
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
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TELYNX, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
July 31, 2003
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ASSETS
Current Assets:
Cash and cash equivalents $ -
Accounts receivable -
Deposits and prepaid expenses -
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Total Current Assets -
Total Assets $ -
============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts payable and accrued liabilities $ 754,969
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Total Liabilities 754,969
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COMMITMENTS AND CONTINGENCIES -
Stockholders' Deficit
Preferred stock, $.01 par value - 1,000,000 shares
authorized; 500 shares issued and outstanding -
Common stock, $.01 par value - 1,005,000,000 shares
authorized; 352,110,957 shares issued and outstanding 3,521,720
Additional paid-in capital 31,132,000
Accumulated deficit (35,408,689)
Total stockholders' deficit (754,969)
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Total liabilities and stockholders' deficit $ -
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See the accompanying notes to these condensed consolidated financial statements.
2
TELYNX, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three months ended July 31 Nine months ended July 31
2003 2002 2003 2002
---- ---- ---- ----
Net revenues $ - $ - $ - $ 479,000
Cost of revenue - 2,598 - 97,598
----------- ------------- ------------- -------------
Gross profit - (2,598) - 381,402
Operating expenses:
Sales and marketing - 40,034 - 258,034
Services - 77,078 - 174,078
Research and development - 231,070 - 387,070
Administrative and general expenses - 413,077 - 1,027,077
----------- ------------- ------------- -------------
Total operating expenses - 761,259 - 1,846,259
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Loss from operations - (763,857) - (1,464,857)
Other income (expense)
Settlement/cancellation of debt - - 4,946,259 -
Loss on disposal of property - - (33,614) -
----------- ------------- ------------- -------------
Total other income (expense) - - 4,912,645 -
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Interest Income - - - -
Interest Expense - (172,189) - (541,189)
----------- ------------- ------------- -------------
Net Income (Loss) $ - $ (936,046) $ 4,912,645 $ (2,006,046)
=========== ============= ============= =============
Net income (loss) applicable to common shareholders $ - $ (936,046) $ 4,912,645 $ (2,006,046)
=========== ============= ============= =============
Basic net income (loss) per common share $ - $ (0.00) $ 0.03 $ (0.01)
=========== ============= ============= =============
Weighted average shares outstanding 187,784,770 310,110,957 187,784,770 275,215,023
=========== ============= ============= =============
See the accompanying notes to these condensed consolidated financial statements.
3
TELYNX, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine months ended July 31
2003 2002
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Cash flows from operating activities:
Net income (loss) $ 4,912,645 $(2,006,046)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization - 47,000
Beneficial conversion cost of convertible debt and warrants - 700,954
Expenses and settlements paid with equity - 344,000
Loss on disposal of property/equipment 33,614 -
Cancellation/settlement of debt (4,946,259) -
Changes in assets and liabilities:
Receivables $ - $ 103,000
Prepaid expenses - (19,154)
Other assets - -
Accounts payable and accrued liabilities - 721,328
Deferred revenue - (14,000)
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Net cash used in operating activities - (122,918)
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Cash flows from investing activities:
Additions to property and equipment $ - $ -
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Net cash used in investing activities - -
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Cash flows from financing activities:
Proceeds from issuance of convertible debt $ - $ -
Proceeds from issuance of stock and warrants - -
Borrowings on debt - -
Payment on convertible debt -
Other - -
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Net provided by operating activities $ - $ -
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Net increase (decrease) in cash and cash equivalents - (122,918)
Cash and cash equivalents, beginning of period - 130,000
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Cash and cash equivalents, end of period $ - $ 7,082
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest paid $ - $ -
Income taxes paid - -
Non-cash financing activity:
Conversion of debt for common shares - -
Discount of beneficial conversion on debt - -
See the accompanying notes to these condensed consolidated financial statements.
4
Item 2. Plan of Operation
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This following information specifies certain forward-looking statements of
management of the company. Forward-looking statements are statements that
estimate the happening of future events and are not based on historical fact.
Forward-looking statements may be identified by the use of forward-looking
terminology, such as "may", "shall", "could", "expect", "estimate",
"anticipate", "predict", "probable", "possible", "should", "continue", or
similar terms, variations of those terms or the negative of those terms. The
forward-looking statements specified in the following information have been
compiled by our management on the basis of assumptions made by management and
considered by management to be reasonable. Our future operating results,
however, are impossible to predict and no representation, guaranty, or warranty
is to be inferred from those forward-looking statements.
The assumptions used for purposes of the forward-looking statements specified in
the following information represent estimates of future events and are subject
to uncertainty as to possible changes in economic, legislative, industry, and
other circumstances. As a result, the identification and interpretation of data
and other information and their use in developing and selecting assumptions from
and among reasonable alternatives require the exercise of judgment. To the
extent that the assumed events do not occur, the outcome may vary substantially
from anticipated or projected results, and, accordingly, no opinion is expressed
on the achievability of those forward-looking statements. We cannot guaranty
that any of the assumptions relating to the forward-looking statements specified
in the following information are accurate, and we assume no obligation to update
any such forward-looking statements.
Critical Accounting Policy and Estimates. Our Management's Discussion and
Analysis of Financial Condition and Results of Operations section discusses our
consolidated financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States of America. The
preparation of these financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. On an on-going basis, management evaluates
its estimates and judgments, including those related to revenue recognition,
accrued expenses, financing operations, and contingencies and litigation.
Management bases its estimates and judgments on historical experience and on
various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying value of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions. The most significant accounting estimates inherent in
the preparation of our financial statements include estimates as to the
appropriate carrying value of certain assets and liabilities which are not
readily apparent from other sources. These accounting policies are described at
relevant sections in this discussion and analysis and in the notes to them
consolidated financial statements included in our Quarterly Report on Form
10-QSB for the period ended July 31, 2003.
Telynx, Inc. ("Telynx" or the "Company" or "we"), formerly Meadowbrook
Rehabilitation Group, Inc. and Cambio, Inc. acquired Cambio Networks, Inc.
("Networks") on September 14, 1998. From 1998 to 2002 we provided professional
services and supplies software products for operations support systems of
telecommunications networks. We encountered significant financial difficulties
in the third quarter of 2002 and ceased operations in August 2002. We have
remained in a dormant stage through July 31, 2003.
5
Liquidity and Capital Resources. We had no cash as of July 31, 2003, and no
other current assets as of that date. Our total current liabilities were
$754,969 as of July 31, 2003, which was represented solely by accounts payable
and accrued expenses. We had no long term commitments or contingencies.
We believe that our negative operational cash flow will be alleviated by
operations and investment. However, there can be no assurance that sales will
increase or additional capital will be available on terms favorable to us. If
adequate funds are not available to us, we will not be able to recommence
operations and begin to generate revenue. If we are unable to raise additional
capital in the future, we may not be able to continue as a going concern. As a
result of the above conditions, our most recent audited financial statements
contained a going concern opinion.
FOR THE THREE MONTHS ENDED JULY 31, 2003 COMPARED TO THE SAME PERIOD ENDED JULY
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31, 2002.
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Results of Operations.
Revenues. For the three months ended July 31, 2003, we did not generate any
revenue from our operations. This is in comparison to $0 that we had in net
revenues for the three months ended July 31, 2002; after $2,598 in cost of
revenue, we had ($2,598) in gross profit for the three months ended July 31,
2002. The change in revenues is due to the fact that we ceased operations in
August 2002.
Operating Expenses. For three months ended July 31, 2003, we had no operating
expenses, since we conducted no operations during that period. Therefore our
loss from operations was $0, and our net income for the three months ended July
31, 2003 was also $0. This is in comparison to the three months ended July 31,
2002, where we had operating expenses of $761,259, which were represented by
$40,034 in sales and marketing, $77,078 in services, $231,070 represented by
research and development, and $413,077 represented by administrative and
marketing expenses. Therefore our loss from operations for the period was
$763,857. We also had $172,189 in interest expense for the period ended July 31,
2002, making our net loss for the period $936,046. The change in our net income,
operating expenses and net income is due to the fact that we had no operations
after August 2002 and no operations during the period ended July 31, 2003.
FOR THE NINE MONTHS ENDED JULY 31, 2003 COMPARED TO THE SAME PERIOD ENDED JULY
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31, 2002.
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Results of Operations.
Revenues. For the nine months ended July 31, 2003, we did not generate any
revenue from our operations, and no cost of revenues. Therefore we had no gross
profit for the nine months ended July 31, 2002. This is in comparison to the
nine months ended July 31, 2002, where we generated $479,000 in revenues, and
$97,598 for cost of revenue for the nine months ended July 31, 2003. Therefore,
our gross profit was $381,402 for the nine months ended July 31, 2002. The
change in profits, revenues and cost of revenues is due to the fact that we
ceased operations in August 2002.
Operating Expenses. For nine months ended July 31, 2003, we had no operating
expenses, since we conducted no operations during that period. We had $4,946,259
which was represented by the settlement/cancellation of debt. Less the amount of
$33,614 represented by a loss on the disposal of property, we had $4,912,645 in
other income, resulting in a net income for the nine months ended July 31, 2003
of $4,912,645. This is in comparison to the nine months ended July 31, 2002,
where we had total operating expenses of $1,846,259, which was comprised of
$258,034 in sales and marketing expenses, $174,078 represented by services,
$387,070 represented by research and development, and $1,027,077 represented by
general and administrative expenses. Therefore our loss from operations for the
period was $1,464,857. We had interest expense of $541,189 for the period ended
July 31, 2002, making our net loss for the period $2,006,046. The change in our
net loss due to the fact that we had no operations during the period ended July
31, 2003, but had other income represented by the settlement of the debt.
6
OUR PLAN OF OPERATION FOR THE NEXT TWELVE MONTHS. We have generated no revenues
since ceasing operations in August 2002. We were dormant from that time until
April 2004. In recent months, our new management has been researching potential
acquisitions of assets or operations, or other suitable business partners which
will assist us in commencing new operations. We have not yet entered into any
formal or binding agreement to proceed with our business development, and we
cannot guaranty that we will acquire or begin any operations or assets, or enter
into any similar transaction, or that in the event that we are able to
recommence operations in any manner, that this effort will succeed or that such
activity will increase the value of our common stock. We intend to continue to
explore ways of restarting our business operations.
We have no cash as of July 31, 2003. In the opinion of management, available
funds will not satisfy our working capital requirements for the next twelve
months. Our forecast for the period for which our financial resources will be
adequate to support our operations involves risks and uncertainties and actual
results could differ as a result of a number of factors.
We plan to raise operating funds through private and institutional or other
equity offerings. We may attempt to secure other loans from lending institutions
or other sources. There is no guarantee that we will be able to raise additional
funds through offerings or other sources. If we are unable to raise funds, our
ability to restart our business will be hindered.
In the event that we experience a shortfall in our capital, we hope anticipate
that our officers and directors will contribute funds to pay for our expenses to
achieve our objectives over the next twelve months. However, our officers and
directors are not committed to contribute funds to pay for our expenses.
We are not currently conducting any research and development activities. We do
not anticipate that we will purchase or sell any significant equipment. In the
event that we generate significant revenues and expand our operations, then we
may need to hire additional employees or independent contractors as well as
purchase or lease additional equipment.
Off-Balance Sheet Arrangements. There are no off balance sheet arrangements that
have or are reasonably likely to have a current or future effect on our
financial condition, changes in financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital resources that
are material to investors.
Item 3. Controls and Procedures
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(a) Evaluation of disclosure controls and procedures. We maintain controls and
procedures designed to ensure that information required to be disclosed in the
reports that we file or submit under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported within the time periods specified
in the rules and forms of the Securities and Exchange Commission. Based upon
their evaluation of those controls and procedures performed as of July 31, 2003,
the end of the period covered by this report, our chief executive officer and
the principal financial officer concluded that our disclosure controls and
procedures were effective.
(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 the evaluation of those controls by the chief
executive officer and principal financial officer.
7
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
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We are a party to various litigation matters primarily involved with vendors and
arising out of the ordinary course of business. Aggressive efforts are being
pursued to defend or otherwise resolve the claims and any pending litigation.
Item 2. Changes in Securities.
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None.
Item 3. Defaults Upon Senior Securities
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None.
Item 4. Submission of Matters to Vote of Security Holders
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None.
Item 5. Other Information
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None.
Item 6. Exhibits and Reports on Form 8-K
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31. Rule 13a-14(a)/15d-14(a) Certifications.
32. Section 1350 Certifications.
8
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Telynx, Inc.,
a Delaware corporation
August 29, 2006 By: /S/ Talieh Safadi
-----------------------------------
Talieh Safadi, President, CEO, and
Director