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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 13, 1999
REGISTRATION NO. 333-72889
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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 2
TO
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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MULTI-LINK TELECOMMUNICATIONS, INC.
(Name of small business issuer in its charter)
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<S> <C> <C>
COLORADO 7389 84-1334687
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
incorporation or organization) Classification Code Number)
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<TABLE>
<S> <C>
4704 HARLAN STREET, SUITE 420 NIGEL V. ALEXANDER
DENVER, COLORADO 80212 4704 HARLAN STREET, SUITE 420
(303) 831-1977 DENVER, COLORADO 80212
(Address and telephone number of (303) 831-1977
principal executive offices and (Name, address and telephone number of
address of principal place of agent for service)
business)
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With Copies to:
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<S> <C>
THOMAS S. SMITH, ESQ. ROBERT W. WALTER, ESQ.
KEVIN J. KANOUFF, ESQ. BERLINER ZISSER WALTER & GALLEGOS,
SMITH MCCULLOUGH, P.C. P.C.
4643 SOUTH ULSTER STREET, SUITE 900 1700 LINCOLN STREET, SUITE 4700
DENVER, COLORADO 80237 DENVER, COLORADO 80203
(303) 221-6000 (303) 830-1700
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APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
following the date on which the Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE REGISTRATION FEE(1)
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<S> <C> <C> <C> <C>
Units Consisting of.............................. 1,380,000 Units $6.00 $8,280,000 $2,302.00
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(a) One Share of Common Stock.................. 1,380,000 Shares
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(b) One Warrant................................ 1,380,000 Warrants
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Representative's Option for the Purchase of
Units(3)....................................... 1 Warrant $100.00 $100 $1.00
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Units Underlying Representative's Option for the
Purchase of Units Consisting of (2)(4)......... 120,000 Units $7.68 $921,600 $256.00
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(a) One Share of Common Stock.................. 120,000 Shares
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(b) One Warrant................................ 120,000 Warrants
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Common Stock(2).................................. 690,000 Shares $9.00 $6,210,000 $1,726.00
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Common Stock(5).................................. 60,000 Shares $11.52 $691,200 $192.00
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Total............................................ $16,102,900 $4,477.00
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(1) Estimated pursuant to Rule 457(o) under the Securities Act of 1933 solely
for the purpose of calculating the registration fee.
(2) In accordance with Rule 416 under the Securities Act of 1933, a presently
indeterminable number of shares of common stock are registered hereunder
which may be issued in the event provisions preventing dilution become
operative, as provided in the warrants and in the representative's option
for the purchase of units. No additional registration fee has been paid for
these shares of common stock.
(3) To be issued to the representative of the underwriters.
(4) Issuable upon exercise of the representative's option for the purchase of
units.
(5) Issuable upon exercise of the warrants, including the warrants contained in
the units underlying the representative's option for the purchase of units.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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[The following text appears in a two page gate fold with graphic art and
pictures]
Multi-Link Telecommunications, Inc.
Providing Advanced Messaging Services
Solving These Problems
I have voice mailboxes for my office, mobile phone,
pager and at home. I really wish all my messages
could be left in the same mailbox so I have only
one place to check for all messages.
People trying to reach me have to try so many
different numbers...the office, mobile phone,
pager, or my home.
It would be so much easier if they only had to call
one number to reach me, no matter where I was. It
would be even better if I could screen those calls
to find out which were important and which were
not.
Let's see. I have voice messages, faxes and e-mail.
People leave these messages in different ways and I
have to retrieve them from different devices.
What a wonderful world it would be if all these
types of messages could be stored in the same place
and I could retrieve them from a telephone or
computer, no matter where I was.
KEEPING YOU IN TOUCH
Multi-Link maintains a web site on the World Wide Web at www.multilinkcom.com.
The information on Multi-Link's web site is not a part of this prospectus.
Going Beyond Traditional
Voice Mail and Voice
Messaging
Voice Mail................. A single mailbox for all calls to the office
All calls to the office that are not answered are
transferred to a single mailbox.
Voice Messaging............ A directory and personal mailbox for each employee
Callers may reach personal mailboxes through an
automated directory, by calling mailboxes directly,
and by receptionist transfers.
Consolidated Messaging..... Only one mailbox to check for messages
No matter where a caller tries to reach you, home,
office, mobile,... if you can't take the call, they
are transferred to the same mailbox.
One Number Service......... Callers only ever need to dial one number to speak
to you
Callers who reach your mailbox can leave a message
or use the Constant Touch service to locate you.
When activated, the service dials all your chosen
devices and tells you who is calling. You decide
whether to connect with them, return them to voice
mail, or disconnect immediately.
Unified Messaging.......... Voice, fax, and e-mail messages are stored in the
same mailbox
Voice, fax, and e-mail messages are stored in the
same mailbox. You can retrieve these messages from
a telephone, personal computer or fax machine.
E-mail integration available in late 1999.
Multi-Link Telecommunications -- Providing Advanced Messaging Services
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THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED
WITH SECURITIES AND EXCHANGE COMMISSION BECOMES EFFECTIVE. THIS PRELIMINARY
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES NOR DOES IT SEEK TO BUY
THESE SECURITIES IN ANY JURISDICTIONS WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED MAY 13, 1999
1,200,000 UNITS
MULTI-LINK TELECOMMUNICATIONS, INC.
"KEEPING YOU IN TOUCH"
[MULTI-LINK LOGO]
1,200,000 SHARES OF COMMON STOCK
AND 1,200,000 WARRANTS
This is an initial public offering of units of Multi-Link
Telecommunications, Inc. The public offering price is $6.00 per unit.
Multi-Link will list the common stock and warrants on The Nasdaq SmallCap
Market under the symbols "MLNK" and "MLNKW."
THESE ARE SPECULATIVE SECURITIES AND INVESTORS WILL EXPERIENCE SIGNIFICANT
DILUTION. INVESTING IN THE UNITS INVOLVES CERTAIN RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 4.
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PER UNIT TOTAL
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Public offering price....................................... $6.00 $7,200,000
Underwriting discounts...................................... $0.60 $ 720,000
Proceeds to Multi-Link...................................... $5.40 $6,480,000
</TABLE>
The underwriters have a 45-day option to purchase an additional 180,000
units from Multi-Link.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
SCHNEIDER SECURITIES, INC.
PROSPECTUS DATED , 1999
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PROSPECTUS SUMMARY
MULTI-LINK
Multi-Link provides integrated voice and fax messaging services for small
and medium sized businesses. These services enable businesses to improve the
handling of incoming calls and can be used with an automated attendant service
to replace receptionists. Multi-Link's voice messaging services can produce
improved efficiency and cost savings for the subscriber by offering
comprehensive voice messaging solutions. Multi-Link's integrated messaging
system:
- provides personal mailboxes that can be linked to office, mobile and home
telephones, eliminating the need to check multiple mailboxes and
providing cost savings through the termination of multiple mailbox
charges;
- provides immediate notification to a subscriber's mobile phone or digital
pager that the subscriber has new messages;
- automatically transfers important calls to the subscriber's office,
mobile telephone, pager and home phones to eliminate the need for callers
to try other numbers in an attempt to reach the subscriber; and
- will soon offer, using a portion of the proceeds from this offering, a
unified messaging service which will enable the subscriber to receive
voice, fax and Internet based e-mail messages in one mailbox.
Multi-Link's target customers are small and medium sized businesses that
choose to subscribe to a messaging service rather than invest in their own
equipment. Multi-Link currently provides its voice messaging services to
approximately 5,000 businesses with approximately 16,000 individual users.
Multi-Link intends to use a portion of the proceeds from this offering to
acquire other voice messaging companies.
Multi-Link's principal executive offices are 4704 Harlan Street, Suite 420,
Denver, Colorado 80212. Multi-Link's telephone number is (303) 831.1977 and its
facsimile number is (303) 831.1988.
THE OFFERING
Securities offered......... 1,200,000 units, each unit consisting of one share
of common stock and one warrant.
Warrant attributes......... Two warrants are exercisable to purchase one share
of common stock for an exercise price of $9.00 per
share during the three years ending May , 2002,
subject to Multi-Link's redemption rights.
Shares of common stock to
be outstanding after the
offering................. 2,891,542 shares.
Unless the context otherwise requires, use of the term "Multi-Link" in this
prospectus includes Multi-Link's 97.5% owned subsidiary, Multi-Link
Communications, Inc.
All share figures in this prospectus have been adjusted to reflect a 3 for
5 reverse split of Multi-Link's common stock that was effective on February 2,
1999. Unless otherwise stated, all information in this prospectus assumes no
exercise of the over-allotment option by the underwriters.
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Offers and sales of Multi-Link's securities in this offering may be made to
investors in the following jurisdictions only if individual investors meet the
suitability requirements imposed by the state securities administrator in the
respective jurisdictions. These suitability requirements will apply to all
offers and sales until Multi-Link's securities become "covered securities" under
Section 18 of the Securities Act of 1933.
California. Investors in this offering residing in the state of California
must have a minimum annual gross income of $60,000 and a minimum net worth of
$60,000, exclusive of automobile, home and home furnishings; or a minimum net
worth of $225,000, exclusive of automobile, home and home furnishings.
New Jersey and Missouri. Offers and sales in this offering in New Jersey
and Missouri may only be made to "accredited investors" as defined in Rule
501(a) of Regulation D of the Securities Act of 1933, as amended. To be an
accredited investor, an individual must have (a) a net worth, or joint net worth
with such individual's spouse, of more than $1,000,000; or (b) income of more
than $200,000 in each of the two most recent years or joint income with such
individual's spouse of more than $300,000 in each of those years and a
reasonable expectation of reaching the same income level in the current year.
Other standards apply to investors who are not individuals.
Ohio. Investors in this offering residing in the state of Ohio must have a
minimum annual gross income of $65,000 and a minimum net worth of $250,000,
exclusive of automobile, home and home furnishings.
Kansas, Texas, Oklahoma and Oregon. Investors in this offering residing in
the states of Texas, Oklahoma and Oregon must have a minimum annual gross income
of $65,000 and a minimum net worth of $65,000, exclusive of automobile, home and
home furnishings; or a minimum net worth of $150,000, exclusive of automobile,
home and home furnishings. Investors residing in Kansas must also have
experience in purchasing securities similar to those of Multi-Link or be
sophisticated.
Forward-Looking Statements. Some of the statements contained in this
prospectus under "Prospectus Summary," "Risk Factors," "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and "Business"
are forward-looking. They include statements that involve risks and
uncertainties that might adversely affect Multi-Link's operating results in the
future in a material way. Such risks and uncertainties include:
- the availability and cost of future acquisitions;
- the effects of regional economic and market conditions on Multi-Link's
employee salaries and benefits and its ability to secure and keep
customers;
- increases in marketing and sales costs;
- intensity of competition for customers;
- costs of technologies; and
- availability of financing.
Most of these risks are beyond Multi-Link's control. Actual results may differ
materially from those suggested by the forward-looking statements for various
reasons, including those discussed under "Risk Factors."
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SUMMARY CONSOLIDATED FINANCIAL DATA
The following table summarizes the financial data of Multi-Link's business.
The consolidated balance sheet data includes a column entitled "As Adjusted"
that reflects the sale of 1,200,000 units at an offering price of $6.00 per
unit, net of estimated offering costs totaling $1,194,000. You should refer to
the consolidated financial statements included elsewhere in this prospectus for
a more complete description of the financial condition of Multi-Link.
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THREE MONTHS
YEAR ENDED SEPTEMBER 30, ENDED DECEMBER 31,
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1997 1998 1997 1998
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CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME (LOSS) DATA:
Net revenues................................. $1,154,161 $1,859,276 $ 413,046 $ 512,714
Cost of services and products................ 348,413 371,391 92,933 95,994
Gross margin................................. 805,748 1,487,885 320,113 416,720
Total operating expenses..................... 1,606,997 1,019,984 326,550 229,060
Income (loss) from operations................ (801,249) 467,901 (6,437) 187,660
Interest income (expense).................... (437,198) (635,518) (137,656) (103,134)
Net income (loss) and comprehensive profit
(loss)..................................... (1,238,447) (167,617) (144,093) 84,526
Net income (loss) per share of common
stock -- basic and diluted................. $ (0.89) $ (0.11) $ (0.10) $ 0.05
Weighted average common stock outstanding
-- basic................................... 1,392,568 1,496,905 1,490,698 1,632,325
-- diluted................................. 1,392,568 1,496,905 1,490,698 1,750,020
</TABLE>
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DECEMBER 31, 1998
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SEPTEMBER 30, 1998 ACTUAL AS ADJUSTED
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CONSOLIDATED BALANCE SHEET DATA:
Cash............................................... $ 555,852 $ 188,574 $3,994,574
Working capital (deficit).......................... (455,362) (45,406) 3,786,693
Total assets....................................... 1,746,715 1,677,817 5,733,817
Long-term liabilities.............................. 2,469,872 2,415,291 491,390
Total stockholders' equity (deficit)............... (1,838,655) (1,373,949) 4,632,051
</TABLE>
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<CAPTION>
THREE MONTHS
YEAR ENDED SEPTEMBER 30, ENDED DECEMBER 31,
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1997 1998 1997 1998
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<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF CASH FLOWS AND OTHER
DATA:
Cash flow used in operating activities......... $(966,790) $(109,431) $(115,029) $(190,363)
Cash flow used in investing activities......... (38,446) (265,834) -- (303,756)
Cash flow provided by financing activities..... 999,539 914,137 117,517 126,841
EBITDA (loss).................................. (734,306) 590,088 15,181 236,749
</TABLE>
The row entitled "EBITDA" reflects net income or loss plus depreciation,
amortization and interest expense, income taxes and other non-cash charges.
EBITDA is a measure used by analysts and investors as an indicator of operating
cash flow because it excludes the impact of movements in working capital items,
non-cash charges and financing costs. However, EBITDA is not a measure of
financial performance under generally accepted accounting principles and should
not be considered a substitute for other financial measures of performance.
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<PAGE> 7
RISK FACTORS
You should carefully consider the following factors and other information
in this prospectus before deciding to invest in the units.
MULTI-LINK HAS BEEN OPERATING ITS BUSINESS ONLY SINCE FEBRUARY 1996
Multi-Link began voice messaging operations by completing an acquisition of
a voice messaging business in February 1996. Accordingly, Multi-Link has a
limited operating history upon which you may evaluate it. This limited operating
history makes predicting Multi-Link's future operating results difficult.
MULTI-LINK HAS AN ACCUMULATED DEFICIT AND INVESTORS WILL SUFFER SUBSTANTIAL
DILUTION; AND MULTI-LINK HAS ONLY RECENTLY ACHIEVED PROFITABILITY SO ITS
LONG-TERM SUCCESS IS NOT ASSURED
Multi-Link generated net income of $85,000 in the three months ended
December 31, 1998. Multi-Link incurred net losses of approximately $1.2 million
in fiscal 1997 and approximately $168,000 in fiscal 1998. In addition,
Multi-Link has an accumulated stockholders' deficit of $1.4 million. Investors
in this offering will experience immediate dilution per share of $4.52 or 75% of
the price of a share of common stock. Although Multi-Link's revenues have grown
in recent periods, they may not continue to grow or even continue at their
current level. Multi-Link's expenses may increase in future periods due to:
- goodwill and other amortized charges resulting from future acquisitions,
including acquisitions of subscriber accounts and subscriber lists;
- planned equipment purchases; and
- increases in sales and marketing activities.
If any of these expenses are not accompanied by increased revenues, Multi-Link's
business, financial condition and operating results will be materially adversely
affected.
MULTI-LINK CURRENTLY RELIES HEAVILY ON ONE INDEPENDENT SALES AGENCY -- LOSS OF
THIS AGENCY WILL HURT ITS REVENUES AND THE VALUE OF YOUR INVESTMENT
Approximately 86% of Multi-Link's sales during the year ended September 30,
1998 were obtained through one independent sales agency, Telcom Sales
Associates, Inc., or "Telcom." The loss of Telcom would adversely affect
Multi-Link's future subscriber and revenue growth in its current market. Multi-
Link's agreement with Telcom is terminable by either party upon 30 days notice
and without cause. Such termination would materially adversely affect
Multi-Link's business, financial condition and operating results.
MULTI-LINK'S RELIANCE ON INDEPENDENT SALES AGENTS TO MARKET ITS SERVICES EXPOSES
MULTI-LINK TO RISKS THAT MAY HURT ITS REVENUES, WHICH MAY DECREASE THE VALUE OF
YOUR INVESTMENT
Multi-Link anticipates continuing to use independent sales agents to market
its services. The use of these agents to market its services may expose
Multi-Link to risks such as:
- increase in commissions or other compensation charged by independent
sales agents;
- inability to exercise control over the sales and marketing activities of
the independent sales agents; and
- termination of agreements with independent sales agencies on short
notice.
Multi-Link may be forced to adopt new and more costly methods of marketing
its services if the use of independent sales agents is ineffective, which may
hurt Multi-Link's revenues and decrease the value of your investment.
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<PAGE> 8
MULTI-LINK HAS BROAD DISCRETION TO USE THE OFFERING PROCEEDS
Multi-Link has not designated any specific use for some of the net proceeds
of this offering and could reallocate the use of up to 60% of the net proceeds
of this offering when and if market conditions or unexpected changes in
operating conditions or results of operations occur. Management will have
significant discretion in applying the net proceeds of this offering. You will
not have the opportunity to evaluate the economic, financial or other
information on which Multi-Link bases its decisions on how to use these
proceeds.
BECAUSE MULTI-LINK FACES INTENSE COMPETITION FROM LARGER VOICE MESSAGING AND
RELATED SERVICE PROVIDERS, MULTI-LINK MAY BE UNABLE TO COMPETE SUCCESSFULLY,
WHICH WOULD REDUCE ITS REVENUES AND THE VALUE OF YOUR INVESTMENT
Multi-Link competes primarily with US West, a baby bell, and expects to
compete with other national, regional and local telecommunications companies as
it expands. Most of Multi-Link's competitors have greater name recognition and
greater financial, marketing and other resources than Multi-Link. This may place
Multi-Link at a disadvantage in responding to its competitors' pricing
strategies, technological advances, advertising campaigns and other initiatives.
If Multi-Link is unable to compete successfully against its competitors, its
business, financial condition and operating results will be adversely affected,
which in turn may reduce the value of your investment.
MULTI-LINK MAY LOSE CUSTOMERS AND REVENUES IF ITS VOICE MESSAGING EQUIPMENT
FAILS
Multi-Link depends on the efficient and uninterrupted operation of its
voice messaging equipment, referred to as voice messaging platforms, to deliver
service to its customers. Any sustained service interruption for customers could
materially adversely affect its business, financial condition and operating
results. For instance, Multi-Link's facility was struck by lightning in 1998,
causing damage to the platforms and a temporary disruption in Multi-Link's
services. While the platforms were soon after repaired and have since operated
normally, this event resulted in a loss of subscribers and a decrease in
revenues. Similar service interruptions could result from natural disasters as
well as power loss, telecommunications failure and similar events. Multi-Link's
insurance may not provide sufficient coverage for these events and its operating
results could suffer if losses exceed Multi-Link's coverage.
THE VOICE MESSAGING AND RELATED SERVICES MARKET IS CHARACTERIZED BY RAPID
TECHNOLOGICAL CHANGE
Multi-Link's success depends on its ability to remain competitive in cost
and services provided. There can be no assurance that Multi-Link can acquire
superior technologies as needed. If Multi-Link is unable to successfully respond
to technological developments or acquire technologies in a cost effective way,
Multi-Link's business, financial condition and operating results will be
materially adversely affected. To be successful, Multi-Link must:
- continually improve its services on a cost-effective basis;
- develop and offer new features and services to meet customer needs; and
- adopt Internet based messaging and other advanced technologies that
achieve widespread acceptance.
Multi-Link's success will depend in part on Multi-Link's ability to
purchase or license leading technologies necessary to remain competitive.
Licensing these technologies may require Multi-Link to pay royalties,
maintenance and other fees that reduce operating margins.
MULTI-LINK DEPENDS ON US WEST TO PROVIDE INTERCONNECTION TO THE PUBLIC TELEPHONE
NETWORK
Multi-Link relies on US West for interconnection to the public telephone
network. The inability of US West to provide Multi-Link with interconnection
would materially adversely affect Multi-Link's business, financial condition and
operating results. In this event, Multi-Link would have to establish a new
5
<PAGE> 9
connection to the public telephone network, possibly resulting in interrupted
service. Multi-Link could lose subscribers if such a disruption occurred.
RESTRICTIONS IMPOSED BY MULTI-LINK'S CURRENT LOAN AGREEMENT
The agreement between Multi-Link and its primary lender contains certain
debt covenants which require Multi-Link to maintain a debt to annualized cash
flow ratio of not more than 3 to 1 and also requires Multi-Link to maintain a
ratio of annualized cash flow to interest, principal and taxes of not less than
1.25 to 1. A violation of these restrictions could accelerate Multi-Link's
repayment obligation. Multi-Link must obtain the prior written consent of its
lender to:
- incur additional debt;
- make capital expenditures exceeding certain limits; and
- pay dividends.
Multi-Link may not have sufficient resources to repay the loan if it is
accelerated. Nonpayment of the loan allows the lender to foreclose on
Multi-Link's assets and would materially adversely affect Multi-Link's business.
IF NIGEL V. ALEXANDER OR SHAWN B. STICKLE DO NOT CONTINUE IN THEIR PRESENT
POSITIONS AT MULTI-LINK, MULTI-LINK'S BUSINESS AND YOUR INVESTMENT MAY BE
ADVERSELY AFFECTED
Multi-Link believes that its ability to successfully implement its business
strategy and to operate profitably depends on Nigel V. Alexander and Shawn B.
Stickle, both directors and officers, continuing to render their services to
Multi-Link. If Mr. Alexander or Mr. Stickle become unable or unwilling to
continue in their present positions, Multi-Link's growth, business and financial
results, and your investment, could be materially adversely affected. Multi-Link
has a three year employment agreement with Mr. Stickle and a three year
consulting agreement with Mr. Alexander's company, Octagon Strategies, Inc.
Multi-Link currently does not have "key man" life insurance on either officer.
Multi-Link intends to obtain key man life insurance policies in the face amounts
of $1,000,000 each on both Mr. Alexander and Mr. Stickle within 90 days after
this offering.
MULTI-LINK'S BUSINESS MAY BE ADVERSELY AFFECTED BY THE APPLICATION OF FUTURE
COMMUNICATIONS INDUSTRY REGULATIONS
Multi-Link is not currently subject to direct regulation by any government
agency, other than regulations applicable to businesses generally. Multi-Link's
suppliers are subject to varying degrees of federal, state and local regulation,
including by the Federal Communications Commission. The FCC has adopted
regulations that, among other things, set installation and equipment standards
for communications systems. Future regulations applicable to Multi-Link's
suppliers could be adopted by the FCC or other regulatory bodies. If these
regulations are adopted and adversely impact Multi-Link's suppliers, its
business, financial condition and operating results may be materially adversely
affected.
Multi-Link anticipates offering Internet based messaging services in the
future. There are currently few laws or regulations specifically addressing the
Internet. Due to the increasing use and growth of the Internet, it is possible
that such regulations may be adopted. This could require Multi-Link to make
significant expenditures or to modify any Internet based services it then
provides. Security breaches in Multi-Link's proposed Internet service that
result in unauthorized access to confidential information could damage
Multi-Link's reputation and expose it to a risk of loss or liability. Multi-Link
may be required to make significant investments to protect against or remedy
security breaches that may occur.
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FAILURE TO MANAGE MULTI-LINK'S GROWTH MAY ADVERSELY AFFECT MULTI-LINK'S BUSINESS
AND YOUR INVESTMENT
Multi-Link has grown and expects to continue to grow rapidly by acquiring
voice messaging companies and adding new services and subscribers. This growth
is likely to place a significant strain on Multi-Link's resources and systems.
To manage its growth, Multi-Link must continue to implement effective systems
and hire additional employees. Multi-Link cannot assure you that its management
will be able to effectively or successfully manage its growth. Failure to manage
this growth could have a material adverse effect on Multi-Link's business,
financial position and operating results and your investment.
MULTI-LINK'S ACQUISITIONS MAY BE UNSUCCESSFUL DUE TO AN INABILITY TO RETAIN
CUSTOMERS, A FAILURE TO INTEGRATE THE ACQUISITION OR A FAILURE TO MEET FINANCIAL
OBJECTIVES
Multi-Link's acquisition strategy is subject to the following risks:
- Multi-Link may be unsuccessful in retaining the customer base of specific
acquisitions;
- Multi-Link may be unable to successfully integrate services and personnel
of any acquisition into its operations; and
- acquisitions could result in charges to its earnings for the excess of
the purchase price over book value, commonly known as amortization of
goodwill, or other expenses that adversely affect its operating results.
YOU WILL BE UNABLE TO REVIEW INFORMATION ABOUT PROPOSED ACQUISITIONS OR TO VOTE
ON ACQUISITIONS
Multi-Link has determined certain criteria which it will most likely use in
considering potential acquisitions. You will not have the opportunity to review
the financial statements or any other information of any voice messaging
business Multi-Link may propose to acquire and you will not be able to vote on
any such acquisition.
THE FINANCE CHARGES ASSOCIATED WITH ANTICIPATED ADDITIONAL EQUIPMENT PURCHASES
MAY ADVERSELY AFFECT MULTI-LINK'S PROFITABILITY
Multi-Link expects to purchase additional voice messaging platforms and
accompanying software licenses. If financing for these purchases is not
available at an acceptable cost, Multi-Link's financial condition may be
materially adversely affected. This may reduce Multi-Link's future
profitability, if any.
ANTI-TAKEOVER PROVISIONS AND THE RIGHT TO ISSUE PREFERRED STOCK COULD MAKE A
THIRD PARTY ACQUISITION OF MULTI-LINK DIFFICULT AND THEREFORE REDUCE THE VALUE
OF YOUR INVESTMENT
Anti-takeover provisions in Multi-Link's charter documents and under
applicable law could make it more difficult for a third party to acquire control
of it, even if such change in control would increase the value of your
investment. Multi-Link's restated articles of incorporation provide that its
board of directors may issue preferred stock without stockholder approval. In
addition, Multi-Link's bylaws provide for a classified board, with each board
member serving staggered terms. The issuance of preferred stock and the
existence of a classified board could make it more difficult for a third-party
to acquire Multi-Link and may reduce the value of your investment.
MULTI-LINK'S SECURITIES' PRICES ARE LIKELY TO BE HIGHLY VOLATILE DUE TO
MULTI-LINK'S OPERATIONS, INDUSTRY TRENDS AND OTHER FACTORS THAT MAY REDUCE THE
VALUE OF YOUR INVESTMENT
Because of Multi-Link's business characteristics and the characteristics of
Multi-Link's industry, the market prices of Multi-Link's common stock and
warrants are likely to be highly volatile. Multi-Link cannot assure you that its
securities will trade at the same levels of other telecommunications related
7
<PAGE> 11
stocks in general, or that Multi-Link's common stock and warrants will sustain
the initial offering price of the units. Factors that could cause such
volatility may include:
- actual or anticipated variations in Multi-Link's quarterly operating
results;
- announcements of technological innovations in the telecommunications and
voice messaging industry;
- development of new sales channels or new products or services by
Multi-Link;
- changes in financial estimates by securities analysts;
- conditions or trends in the telecommunications or voice messaging
industry;
- changes in the market valuations of other telecommunications or voice
messaging companies;
- announcements by Multi-Link or its competitors of significant
acquisitions;
- capital commitments by Multi-Link;
- additions or departures of Multi-Link's key personnel; and
- sales of common stock by Multi-Link's current stockholders.
Many of these factors are beyond Multi-Link's control. These factors may
materially adversely affect your investment.
THE OFFERING WILL BENEFIT MULTI-LINK'S CURRENT OFFICERS, DIRECTORS AND
STOCKHOLDERS WHO WILL CONTINUE TO EXERCISE CONTROL
Multi-Link's current officers, directors and stockholders, including
members of management, will recognize significant benefits from the offering.
These benefits include the creation of a public market for common stock which
will afford existing stockholders the ability to liquidate their investments,
subject, in certain cases, to volume limitations and other restrictions upon the
sale of the common stock, including applicable lock-up arrangements. The amounts
previously paid for common stock by the executive officers and directors of
Multi-Link is less than the offering price of the common stock and warrants.
Further, the use of proceeds from this offering to repay debt will benefit two
officers and directors that provided personal guarantees to the lender.
8
<PAGE> 12
ADDITIONAL INFORMATION
Multi-Link has filed with the SEC a registration statement under the
Securities Act of 1933 with respect to the securities offered. This prospectus,
filed as part of the registration statement, does not contain certain
information contained in the registration statement required by the rules and
regulations of the SEC. For further information, please see the registration
statement and its exhibits, which may be inspected without charge at the
principal office of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549.
Copies of the material contained in the registration statement and its exhibits
may be obtained from the SEC upon payment of applicable copying charges.
Statements contained in this prospectus as to the contents of any contract or
other document are not necessarily complete, and in each instance you should
refer to the copy of such contract or other document filed as an exhibit to the
registration statement.
On completion of this offering, Multi-Link will be subject to the reporting
and other informational requirements of the Securities Exchange Act of 1934 and
will file reports and other information with the SEC. Such reports, proxy
statements and other information, once filed by Multi-Link, can be inspected and
copied at the public reference facilities maintained by the SEC and at the SEC's
regional offices at Northwest Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511 and 7 World Trade Center, New York, New York
10048. Information on the operations of the Public Reference Room may be
obtained by calling the SEC at 1-800-SEC-0330. The SEC also maintains a web site
on the Internet that contains reports, proxy and information statements and
other information regarding issuers that file electronically with the SEC. The
address of such site is http://www.sec.gov.
Multi-Link intends to furnish annual reports to stockholders containing
audited financial statements and will also make available quarterly reports and
such other periodic reports as it may determine to be appropriate or as may be
required by law.
9
<PAGE> 13
USE OF PROCEEDS
The net proceeds from the sale of the units are estimated to be
approximately $6,006,000 ($6,945,600 if the underwriters' over-allotment option
is fully exercised). Multi-Link intends to allocate the net proceeds as follows:
<TABLE>
<CAPTION>
USE PROCEEDS PERCENT
- --- ---------- -------
<S> <C> <C>
Repayment of a revolving loan from Westburg Media Capital,
LP........................................................ $2,140,000 35.63%
Payment of sales commissions to independent agents.......... 1,000,000 16.65
Purchase of unified internet messaging equipment............ 250,000 4.17
Acquiring voice messaging businesses subject to the criteria
below..................................................... 2,000,000 33.30
Working capital............................................. 616,000 10.25
---------- ------
Total....................................................... $6,006,000 100.00%
========== ======
</TABLE>
The revolving loan from Westburg Media Capital, L.P. to be repaid was used
by Multi-Link for working capital and to repay other indebtedness, is evidenced
by two promissory notes that bear interest at a rate of prime rate plus three
percent and, after it is repaid, will continue to be available to be drawn on by
Multi-Link. The use of proceeds from this offering to repay debt will benefit
two officers and directors of Multi-Link. These two officers and directors will
benefit because the outstanding amount of the loan as to which they have
provided personal guarantees will be reduced. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and
"Management -- Certain Transactions" for more detailed descriptions of this loan
and the personal guarantees.
Voice Messaging businesses that Multi-Link will consider acquiring will
likely:
- be established in a larger, urban North American market;
- service a critical mass of business subscribers;
- use older and easily replaceable or upgradeable voice messaging
equipment;
- be owned by an individual interested in continuing some management
responsibilities and receiving stock as partial consideration for the
purchase; and
- have facilities that can support expansion.
Multi-Link has no present commitments, agreements or understandings with respect
to any such acquisitions.
Working capital will be used to pay such items as the payment of rent,
office expenses, equipment, equipment repairs, salaries and Multi-Link's other
day-to-day costs of doing business. If the over-allotment option is exercised by
the underwriters or if warrants are exercised, Multi-Link will allocate the
additional proceeds to acquisitions and working capital provided, however,
amounts allocated to working capital will not exceed 15% of the net proceeds.
The foregoing represents Multi-Link's best estimate of the uses of the net
proceeds to be received in this offering, based on current planning and business
conditions. However, Multi-Link reserves the right to change such uses when and
if market conditions or unexpected changes in operating conditions or results of
operations occur. The amounts actually expended for each use may vary
significantly depending upon a number of factors including, but not limited to,
future acquisitions and the amount of cash generated by Multi-Link's operations.
Multi-Link believes that its existing capital resources and the net proceeds of
this offering will be sufficient to maintain its current and planned operations
for a period of at least 12 months from the date of this prospectus. Net
proceeds not immediately required for the purposes described above will be
invested principally in investment grade, interest-bearing securities.
10
<PAGE> 14
DIVIDEND POLICY
Multi-Link has never declared or paid any dividends or distributions on its
common stock. The amount of cash dividends that Multi-Link may pay without the
consent of its primary lender is limited by Multi-Link's loan agreement.
Multi-Link anticipates that for the foreseeable future all earnings will be
retained for use in Multi-Link's business and no cash dividends will be paid to
stockholders. Any payment of cash dividends in the future on the common stock
will be dependent upon Multi-Link's financial condition, results of operations,
current and anticipated cash requirements, plans for expansion, restrictions, if
any, under debt obligations, as well as other factors that the board of
directors deems relevant.
DILUTION
As of December 31, 1998, Multi-Link had a net tangible book value (deficit)
of $(1,771,853) or $(1.05) per share of common stock. After giving effect to the
sale of the 1,200,000 units offered in this prospectus at an offering price of
$6.00 per unit, the pro forma net tangible book value of Multi-Link as of
December 31, 1998, would have been $4,274,967 or $1.48 per share of common
stock. This amount represents an immediate increase in pro forma net tangible
book value of $2.53 per share of common stock to the existing holders of common
stock and an immediate dilution of $4.52 per share of common stock to new
investors. For purposes of dilution, all of the offering price of a unit has
been attributed to the common stock and none of the offering price has been
attributed to the warrants. "Dilution" is determined by subtracting pro forma
net tangible book value per share of common stock after the offering from the
offering price per share of common stock, as illustrated by the following table:
<TABLE>
<S> <C> <C>
Public offering price per share of common stock............. $6.00
Net tangible book value (deficit) per share of common stock
as of December 31, 1998................................... $(1.05)
Increase in pro forma net tangible book value per share of
common stock attributable to new investors................ 2.53
------
Pro forma net tangible book value per share of common stock
after the offering........................................ 1.48
-----
Dilution per share of common stock to new investors......... $4.52
=====
Dilution per share of common stock to new investors as a
percentage................................................ 75%
=====
</TABLE>
The following table sets forth as of December 31, 1998, the number of
shares of common stock acquired, the total cash consideration paid and the
average cash price per share of common stock paid to Multi-Link by Multi-Link's
existing stockholders and by new investors (assuming the sale of 1,200,000 units
at $6.00 per unit, before deduction of underwriting discounts and other
estimated offering expenses):
<TABLE>
<CAPTION>
SHARES PURCHASED CASH CONSIDERATION
------------------- -------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ---------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders................... 1,691,542 58.50% $ 955,000 11.71% $0.56
New investors........................... 1,200,000 41.50 7,200,000 88.29 6.00
--------- ------ ---------- ------
Total......................... 2,891,542 100.00% $8,155,000 100.00%
========= ====== ========== ======
</TABLE>
The foregoing information assumes no exercise of the warrants included in
the units, no exercise of currently outstanding options and warrants and no
exercise of the representative's option for the purchase of units. See
"Management -- Stock Option Plan," "Description of Securities" and
"Underwriting" for more in depth descriptions of these options and warrants. To
the extent that currently outstanding options or warrants are exercised at
prices below $6.00 per share, there will be further dilution to new investors.
11
<PAGE> 15
CAPITALIZATION
The following table sets forth the capitalization of Multi-Link as of
December 31, 1998, and as adjusted for the sale of the 1,200,000 units offered
at an offering price of $6.00 per unit (after deducting underwriting discounts
and estimated offering expenses) and excludes:
- 468,500 shares of common stock issuable on exercise of outstanding
options and warrants;
- 600,000 shares of common stock issuable on exercise of the warrants
included in the units; and
- 120,000 units issuable on exercise of the representative's option.
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-------------------------
ACTUAL AS ADJUSTED
----------- -----------
<S> <C> <C>
Long term debt (net of current portion)..................... $ 2,415,291 $ 491,390
=========== ===========
Stockholders' equity:
Preferred stock, par value $.01 per share; 5,000,000
shares authorized; no shares issued or outstanding, as
adjusted............................................... $ 0 $ 0
Common stock, no par value; 20,000,000 shares authorized;
1,691,542 shares issued and outstanding, 2,891,542
shares issued and outstanding, as adjusted............. 822,771 6,828,771
Accumulated deficit....................................... (2,196,720) (2,196,720)
----------- -----------
Total stockholders' equity (deficit)........................ $(1,373,949) $ 4,632,051
=========== ===========
</TABLE>
12
<PAGE> 16
SELECTED CONSOLIDATED FINANCIAL DATA
The data for the three months ended December 31, 1998 include, in the
opinion of management, all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of Multi-Link's financial
position at those dates and results of operations for those periods. The results
of operations for the three months ended December 31, 1998 are not necessarily
indicative of the results to be expected for the full year or future periods.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED SEPTEMBER 30, ENDED DECEMBER 31,
------------------------ ---------------------
1997 1998 1997 1998
----------- ---------- --------- ---------
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME (LOSS) DATA:
Net revenues.................................. $ 1,154,161 $1,859,276 $ 413,046 $ 512,714
Cost of services and products................. 348,413 371,391 92,933 95,994
----------- ---------- --------- ---------
Gross margin.................................. 805,748 1,487,885 320,113 416,720
Total operating expenses...................... 1,606,997 1,019,984 326,550 229,060
----------- ---------- --------- ---------
Income (loss) from operations................. (801,249) 467,901 (6,437) 187,660
Interest income (expense)..................... (437,198) (635,518) (137,656) (103,134)
----------- ---------- --------- ---------
Net income (loss) and comprehensive profit
(loss)...................................... $(1,238,447) $ (167,617) $(144,093) $ 84,526
=========== ========== ========= =========
Net income (loss) per share of common stock --
basic and diluted........................... $ (0.89) $ (0.11) $ (0.10) $ 0.05
=========== ========== ========= =========
Weighted average common stock
outstanding -- basic........................ 1,392,568 1,496,905 1,490,698 1,632,325
-- diluted..................... 1,392,568 1,496,905 1,490,698 1,750,020
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-------------------------
SEPTEMBER 30, 1998 ACTUAL AS ADJUSTED
------------------ ----------- -----------
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash............................................... $ 555,852 $ 188,574 $3,944,574
Working capital (deficit).......................... (455,362) (45,406) 3,786,693
Total assets....................................... 1,746,715 1,677,817 5,733,817
Long-term liabilities.............................. 2,469,872 2,415,291 491,390
Total stockholders' equity (deficit)............... (1,838,655) (1,373,949) 4,632,051
</TABLE>
The "As Adjusted" column in the foregoing table reflects the sale of
1,200,000 units at an offering price of $6.00 per unit net of estimated offering
costs totaling $1,194,000.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED SEPTEMBER 30, DECEMBER 31,
------------------------- ---------------------
1997 1998 1997 1998
----------- ----------- --------- ---------
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF CASH FLOWS AND OTHER DATA:
Cash flow used in operating activities......... $(966,790) $(109,431) $(115,029) $(190,363)
Cash flow used in investing activities......... (38,446) (265,834) -- (303,756)
Cash flow provided by financing activities..... 999,539 914,137 117,517 126,841
EBITDA (loss).................................. (734,306) 590,088 15,181 236,749
</TABLE>
The row entitled "EBITDA" reflects net income or loss plus depreciation,
amortization and interest expense, income taxes and other non-cash charges.
EBITDA is a measure used by analysts and investors as an indicator of operating
cash flow because it excludes the impact of movements in working capital items,
non-cash charges and financing costs. However, EBITDA is not a measure of
financial performance under generally accepted accounting principles and should
not be considered a substitute for other financial measures of performance.
13
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto and the other financial
information included elsewhere in this prospectus. This discussion contains
forward-looking statements that involve risks and uncertainties. Multi-Link's
actual results could differ materially from those anticipated in these forward
looking statements as a result of any number of factors, including those set
forth under "Risk Factors" and elsewhere in this prospectus.
OVERVIEW
Multi-Link provides integrated voice and fax messaging services for small
and medium sized businesses to improve the handling of incoming calls.
Multi-Link's automated attendant services can be used to replace receptionists
and can produce improved efficiency and cost savings for the subscriber.
Multi-Link's revenues are primarily derived from receiving fixed monthly
service fees, installation and set-up charges and sales of ancillary
telecommunications services such as paging. Multi-Link recognizes revenues as it
delivers services. Annual prepayments by subscribers are recognized over the
period covered by the prepayment on a straight-line basis.
Multi-Link's primary costs of delivering its voice messaging services to
its subscribers are its voice messaging platforms, maintenance costs and the
interconnection costs to the US West network. Most of Multi-Link's general and
administrative expenses are incurred in the processing and servicing of new
subscriber accounts.
From inception through December 31, 1997, Multi-Link sold voice messaging
services to businesses through an in-house sales force. All salaries and
commissions associated with Multi-Link's in-house sales force were expensed as
incurred. On December 31, 1997, the in-house sales operations were closed and
Multi-Link began selling through independent sales agents. All commissions paid
to independent agents for procuring subscribers are capitalized and amortized.
Multi-Link's policy is to amortize subscriber account acquisition costs over the
estimated economic life of subscriber accounts or 36 months, whichever is less.
To determine the economic life of subscriber accounts, Multi-Link analyzes the
net reduction in the total amount billed to its existing subscribers each month.
The calculation includes service reductions and service increases to existing
subscribers but excludes new subscriber contracts or subscriber lists purchased
during the period. This enables Multi-Link to project the average subscriber
life across the total existing subscriber base. During fiscal 1998 Multi-Link
experienced an average attrition rate of 1.21% per month, indicating a projected
life of the subscriber portfolio of 83 months. Multi-Link currently amortizes
subscriber account acquisition costs over 36 months.
From inception through September 1998, Multi-Link financed its net losses
through factoring of customer contracts and working capital loans provided by CS
Capital at implied interest rates of up to 52% per annum. In September 1998,
Multi-Link refinanced most of its indebtedness to CS Capital with a five-year
term loan from Westburg Media Capital. The new loan has an interest rate of 3%
per annum over the prime rate. As a result, Multi-Link should experience
significantly lower interest expense in fiscal 1999 than in prior years.
Multi-Link plans to continue to increase its revenues by increasing the
number of independent sales agents that offer Multi-Link's voice messaging
services, by increasing the range of telecommunications services offered by
Multi-Link to its subscribers and by acquiring companies involved in the voice
messaging industry. After completing any such acquisition, Multi-Link plans to
convert the operations of the acquired company to conform to the business model
currently used by Multi-Link, where economically feasible.
14
<PAGE> 18
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
relationship to net revenues of certain items in Multi-Link's consolidated
statements of operations and comprehensive income (loss). The results of
operations data for the quarter ended December 31, 1998 are not necessarily
indicative of the results to be expected for the full year or future periods.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED QUARTER ENDED QUARTER ENDED
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1997 1998 1997 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net revenues............................. 100.0% 100.0% 100.0% 100.0%
Cost of services and products............ 30.2 20.0 22.5 18.7
------ ----- ----- -----
Gross margin............................. 69.8 80.0 77.5 81.3
------ ----- ----- -----
Sales and advertising expense............ 60.0 8.4 27.8 2.0
General and administrative expense....... 73.4 39.9 46.1 33.2
Depreciation expense..................... 5.4 4.3 4.9 4.2
Amortization expense..................... 0.4 2.2 0.3 5.3
------ ----- ----- -----
Total operating expenses................. 139.2 54.8 79.1 44.7
------ ----- ----- -----
Income (loss) from operations............ (69.4) 25.2 (1.6) 36.6
Interest income (expense)................ (37.9) (34.2) (33.3) (20.1)
------ ----- ----- -----
Net income (loss) and comprehensive
income (loss).......................... (107.3) (9.0) (34.9) 16.5
====== ===== ===== =====
EBITDA................................... (63.6)% 31.7% 3.7% 46.2%
====== ===== ===== =====
</TABLE>
QUARTER ENDED DECEMBER 31, 1998 COMPARED TO QUARTER ENDED DECEMBER 31,
1997.
Net Revenues. Net revenues for the quarter ended December 31, 1998 were
$513,000 compared to $413,000 for the quarter ended December 31, 1997, an
increase of approximately 24%. This increase reflects the steady net growth in
Multi-Link's base of customers from an estimated 5,355 customers for the quarter
ended December 31, 1997 to 6,756 customers for the quarter ended December 31,
1998. Multi-Link attributes this increase to additional marketing and ongoing
sales by independent sales agents. The messaging services offered by Multi-Link
and the prices charged for such services have not changed since inception. As a
result, the increase in net revenues reflects only the net growth in
Multi-Link's base of customers. Management believes that its base of customers
will continue to grow in the future because management believes it will continue
to have both price and service advantages over its principal competitors.
Cost of Services and Products. Cost of services and products for the
quarter ended December 31, 1998 was $96,000 compared to $93,000 for the quarter
ended December 31, 1997, an increase of 3%. The relative stability of cost of
services and products in relation to the 24% growth in revenues resulted from
operating a network with excess capacity in 1997 and which required only minimal
additional expenditures to provide service for a greater number of customers in
1998.
Gross Profit Margin. Gross profit margin for the quarter ended December 31,
1998 was $417,000 compared to $320,000 for the quarter ended December 31, 1997,
an increase of 30%. The gross profit margin as a percentage of net revenues
increased from 78% to 81%. This increase in gross profit margin resulted from
achieving higher revenues from the same network capacity resulting in more
efficient utilization of fixed asset infrastructure. Management believes that
its current gross profit margins are sustainable because it believes that
Multi-Link will not encounter intense price competition for messaging services
in the near future, it has no present intention of lowering prices and most of
Multi-Link's costs of providing services are not subject to price increases.
Most of Multi-Link's costs of providing services are not subject to price
increases because they relate to charges for interconnection to the US West
telephone network, which are governed by a ten year fixed price agreement.
Sales and Advertising Expenses. Sales and advertising expenses for the
quarter ended December 31, 1998 were $10,000 compared to $115,000 for the
quarter ended December 31, 1997, a decrease of 91%.
15
<PAGE> 19
This resulted from the closure of Multi-Link's in-house sales and telemarketing
operations on December 31, 1997 when Multi-Link began procuring subscriber
accounts from independent sales agencies and capitalizing the cost of acquiring
such subscriber accounts.
General and Administrative Expenses. General and administrative expenses
for the quarter ended December 31, 1998 were $170,000 compared to $190,000 for
the quarter ended December 31, 1997, a decrease of 11%. This decrease was due
primarily to lower professional fees.
Depreciation. Depreciation expense increased to $22,000 for the quarter
ended December 31, 1998 from $20,000 for the quarter ended December 31, 1997.
This increase was due to an increase in fixed assets.
Amortization. Amortization of subscriber accounts and goodwill was $27,000
for the quarter ended December 31, 1998 compared to $1,000 for the same period
in 1997. Amortization expense associated with subscriber accounts was first
incurred in 1998 after Multi-Link commenced procuring subscriber accounts
through the base of independent sales agencies as previously described.
Income (Loss) from Operations. The income from operations was $188,000 for
the quarter ended December 31, 1998 compared to a loss from operations of
$(6,000) for the quarter ended December 31, 1997, due to the factors discussed
above.
Interest Income (Expense). Multi-Link's interest income (expense) decreased
to $(103,000) for the quarter ended December 31, 1998 from $(138,000) for the
quarter ended December 31, 1997, a decrease of 25%. Although Multi-Link's total
indebtedness in 1998 was higher than in 1997, the refinancing of most of
Multi-Link's high interest debt with a term loan at a substantially lower rate
of interest caused a reduction in the total interest expense. See
"Management -- Certain Transactions."
Net Income (Loss) and Comprehensive Income (Loss). Multi-Link realized net
income of $85,000 for the quarter ended December 31, 1998 compared to a net loss
of $(144,000) for the quarter ended December 31, 1997 due to the factors
outlined above. The net loss and comprehensive loss were the same for the
quarters presented. Multi-Link's net income for the quarter ended December 31,
1998 does not reflect an income tax provision because of the utilization of net
operating loss carryforwards.
YEAR ENDED SEPTEMBER 30, 1998 COMPARED TO YEAR ENDED SEPTEMBER 30, 1997.
Net Revenues. Revenues for the year ended September 30, 1998 were
$1,859,000, compared to $1,154,000 for the year ended September 30, 1997, an
increase of 61%. This increase reflects the steady net growth in Multi-Link's
base of customers from an estimated 4,857 customers for the year ended September
30, 1997 to an estimated 6,176 customers for the year ended September 30, 1998.
Multi-Link attributes this increase to additional marketing and ongoing sales by
independent sales agents. The messaging services offered by Multi-Link and the
prices charged for such services have not changed since inception. As a result,
the increase in net revenues reflects only the net growth in Multi-Link's base
of customers. Management believes that its base of customers will continue to
grow in the future because management believes it will continue to have both
price and service advantages over its principal competitors.
Cost of Services and Products. Cost of services and products for the year
ended September 30, 1998 was $371,000, compared to $348,000 for the year ended
September 30, 1997, an increase of 7%. The relative stability of cost of
services and products in relation to the 61% growth in revenues resulted from
operating a network with excess capacity in 1997 which required only minimal
additional expenditures to provide service for a greater number of customers in
1998.
Gross Profit Margin. Gross profit margin for the year ended September 30,
1998 was $1,488,000 compared to $806,000 for the year ended September 30, 1997,
an increase of 85%. The gross profit margin as a percentage of net revenues
increased from 70% to 80%. The increase in gross profit margin resulted from
achieving higher revenues from the same network capacity resulting in more
efficient utilization of fixed asset infrastructure.
16
<PAGE> 20
Sales and Advertising Expense. Sales and advertising expenses for the year
ended September 30, 1998 were $155,000 compared to $692,000 for the year ended
September 30, 1997, a decrease of 78%. This resulted from the closure of
Multi-Link's in-house sales and telemarketing operations on December 31, 1997
when Multi-Link began procuring subscriber accounts from independent sales
agencies and capitalizing the cost of acquiring such subscriber accounts.
General and Administrative Expenses. General and administrative expenses
for year ended September 30, 1998 were $743,000 compared to $848,000 for the
year ended September 30, 1997. This decrease of 12% was due to a reduction in
personnel expenses during 1998.
Depreciation of Equipment. Depreciation expense in the year ended September
30, 1998 was $81,000 compared to $62,000 for the year ended September 30, 1997.
This increase of 31% was due to increased fixed assets.
Amortization. Amortization of subscriber accounts and goodwill was $42,000
for the year ended September 30, 1998 compared to $5,000 for the year ended
September 30, 1997. Amortization expense associated with subscriber accounts was
first incurred in 1998 after Multi-Link commenced procuring subscriber accounts
through the base of independent sales agents as previously described.
Income (Loss) from Operations. The income from operations was $468,000 for
the year ended September 30, 1998 compared to an operating loss of $(801,000)
for the year ended September 30, 1997, due to the factors discussed above.
Interest Income (Expense). Interest income (expense) for the year ended
September 30, 1998 was $(636,000), compared to $(437,000) for the year ended
September 30, 1997, an increase of 46%. The increase is attributable to an
increase in outstanding borrowings.
Net Income (Loss) and Comprehensive Income (Loss). Multi-Link incurred a
net loss of $(168,000) for the year ended September 30, 1998, compared to a net
loss of $(1,238,000) for the year ended December 31, 1997, a decrease of 86% due
to the factors outlined above. The net loss and comprehensive loss were the same
for fiscal 1998 and 1997.
LIQUIDITY AND CAPITAL RESOURCES
General
Multi-Link has historically had two primary needs for cash: investment in
the equipment necessary to deliver its voice messaging services and the
financing of start-up losses until revenues exceed expenses.
Equipment Financing
Multi-Link paid for its voice messaging equipment with long term financing
provided by Associates Capital Corporation of Illinois. All loans were arranged
on Multi-Link's behalf by Glenayre Electronics, the manufacturer of the
equipment. The loans are repayable monthly over a five-year term with interest
at the rate of 12.7% per annum and are guaranteed by two of Multi-Link's
directors and officers. Currently, monthly payments on the voice messaging
platforms are approximately $18,000. Multi-Link was current on all loan
obligations as of December 31, 1998.
Financing of Operations
From inception through September 1998, Multi-Link financed its operations
from equity contributions, loans from several stockholders, deferred executive
compensation and consulting fees, a factoring facility and several working
capital loans.
In September 1998, Multi-Link obtained a $2.1 million, five-year senior
term loan facility from Westburg Media Capital LP or "Westburg." Multi-Link used
the proceeds of this facility to repay all of the working capital loans,
deferred executive compensation and all of the indebtedness to CS Capital. The
loan from Westburg bears interest at the rate of 3% per annum over prime rate
and is guaranteed by two
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of Multi-Link's directors and officers. The loan is collateralized by 960,000
shares of common stock pledged by certain stockholders and substantially all of
the assets of Multi-Link. The loan requires monthly payments of interest only
(currently $17,500 per month) until October 2001, when regular repayments of
$26,900 per month, including interest, commence on the basis of a ten-year
amortization schedule. All outstanding balances are repayable on October 31,
2003. Under the terms of the loan, Multi-Link's ratio of debt to annualized cash
flow may not exceed 3 to 1 and Multi-Link's ratio of annualized cash flow to
interest, principal repayments and taxes may not be less than 1.25 to 1.
Additionally, the loan has certain other restrictions including limits on total
indebtedness and lease obligations, limits on capital expenditures and
restrictions on the payment of dividends.
As of December 31, 1998, Multi-Link was current on its obligations to all
lenders and in compliance with all debt covenants.
Cash Flow Information
For the three months ended December 31, 1997 and 1998 net cash used in
operations was approximately $(115,000) and $(190,000), respectively. Net cash
used in investing activities during the three months ended December 31, 1998,
was $304,000, up from $0 for the prior period. Expenditures for fixed assets and
intangibles increased $99,000 during the three months ended December 31, 1998
from $0 for the prior period. Additionally, Multi-Link advanced approximately
$204,000 to Telcom Sales Associates, Inc. during the three months ended December
31, 1998 that was paid back in February 1999. During the three months ended
December 31, 1997 and 1998, cash from financing activities included borrowings
of $561,000 and $229,000, respectively, before note payable payments of $444,000
and $494,000 for the same respective periods. Additionally, net cash from
financing activities included net proceeds of $397,000 from the sale of common
stock during the three months ended December 1998.
For the year ended September 30, 1997 and 1998, net cash used in operations
was approximately $(967,000) and $(109,000), respectively. Net cash used in
investing activities in the year ended September 30, 1998 for the purchase of
fixed assets and intangibles was $(266,000) compared to $(38,000) in the prior
year. During the year ended September 30, 1997 and 1998, cash from financing
activities included borrowings of $1,379,000 and $2,871,000, respectively,
before note payable payments of $380,000 and $1,795,000 for the same respective
periods.
Future Liquidity Considerations
As of December 31, 1998, Multi-Link had a cash balance of $189,000. Upon
completion of this offering Multi-Link will receive minimum net proceeds of
approximately $6,006,000. Approximately $2,140,000 of the proceeds will be used
to repay the indebtedness owed to Westburg. Approximately $1,000,000 of the
proceeds will be used to pay sales agent commissions on expected new business
over the next 12 months. Approximately $250,000 of the proceeds will be used for
the purchase of unified internet messaging equipment. Approximately $2,000,000
of the proceeds will be used to acquire voice messaging businesses. Multi-Link
may pay for such acquisitions by using a portion of the net proceeds of this
offering and by issuing debt and/or equity securities of Multi-Link. Multi-Link
has no present commitments, agreement or understandings with respect to any
acquisitions. Approximately $616,000 of the proceeds will be used for working
capital. Multi-Link intends to use any balance of the proceeds for the
acquisition of voice messaging companies and working capital.
Multi-Link plans to purchase approximately $500,000 worth of additional
voice messaging equipment in the next 12 months. As Multi-Link expands to new
geographic markets, it will purchase this additional voice messaging equipment.
It is Multi-Link's intention to seek five year debt financing for all equipment
purchases. Although there are no assurances, management believes that such
financing will be available on terms no less favorable than Multi-Link has
obtained in the past.
Management anticipates that the net proceeds from this offering, together
with internally generated funds from operations and the $2.1 million Westburg
revolving term loan, will be sufficient to meet Multi-Link's presently projected
cash and working capital requirements for the next 12 months. Pending use of
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the proceeds, Multi-Link intends to invest the net proceeds of the offering in
investment grade, interest-bearing securities. See "Use of Proceeds" for a more
detailed discussion of Multi-Link's expected use of proceeds.
In order to raise additional working capital, Multi-Link could make a
limited number of offers and sales of its securities to qualified investors in
transactions that are exempt from registration under the securities laws. Such
purchasers may acquire Multi-Link's securities on terms more favorable than
offered in this prospectus. The price may not relate to any ascertainable
criterion of value, including the prevailing market price. Multi-Link may make
sales of its securities at a lower price than that of the units.
ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosure about Segments of an
Enterprise and Related Information," which is effective for financial statements
with fiscal years beginning after December 15, 1997. Statement No. 131 requires
that public business enterprises report certain information about operating
segments in complete sets of financial statements of the enterprise and in
condensed financial statements of interim periods issued to stockholders.
Statement No. 131 also requires that public business enterprises report certain
information about their products and services, the geographic areas in which
they operate and their major customers.
In February 1998, the Board issued Statement No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits," which revises
employers' disclosures about pension and other postretirement benefit plans.
Statement No. 132 does not change the measurement or recognition of those plans,
but requires additional information on changes in benefit obligations and fair
values of plan assets and eliminates certain disclosures previously required by
Statement Nos. 87, 88 and 106. Statement No. 132 is effective for financial
statements with fiscal years beginning after December 15, 1997.
During June 1998, the Board issued Statement No. 133, "Accounting for
Derivative Instruments and Hedging Activities." Statement No. 133 establishes
new standards by which derivative financial instruments must be recognized in an
entity's financial statements. Besides requiring derivatives to be included on
balance sheets at fair value, Statement No. 133 generally requires that gains
and losses from later changes in a derivative's fair value be recognized
currently in earnings. Statement No. 133 also unifies qualifying criteria for
hedges involving all kinds of derivatives, requiring that a company document,
designate and assess the effectiveness of its hedges. Statement No. 133 is
required to be adopted by Multi-Link in 2000.
Multi-Link has not determined what additional disclosures, if any, may be
required by the provisions of Statement Nos. 131, 132, and 133 but does not
expect adoption of these statements to have a material effect on its results of
operations or consolidated financial position.
EFFECTS OF INFLATION
Although Multi-Link cannot accurately anticipate the effect of inflation on
its operations, Multi-Link does not believe that inflation has had, or is likely
in the future to have, a material effect on its operating results or financial
condition.
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YEAR 2000 ISSUE
Many computer systems, software applications and other electronics
currently in use worldwide are programmed to accept only two digits in the
portion of the date field, which designates the year. The "Year 2000 problem"
arises because these systems and products cannot properly distinguish between a
year that begins with "20" and the familiar "19." If these systems and products
are not modified or replaced, many will fail, create erroneous results and/or
may cause interfacing systems to fail.
Multi-Link relies on certain suppliers to provide its voice messaging
service. A regional or national failure in the telephone network or power grid
would prevent Multi-Link from servicing its customers and generating revenues.
Such failure would materially adversely affect Multi-Link's business, financial
condition and operating results. Multi-Link has no contingency plan for
occurrence of these events.
Year 2000 compliance issues are of particular importance to Multi-Link
since its operations rely heavily upon computer systems, software applications
and other electronics containing date-sensitive embedded technology. Some of
these technologies were internally developed and others are standard, purchased
systems which may or may not have been customized for Multi-Link's particular
application. Multi-Link also relies heavily upon various vendors and suppliers
that are themselves very reliant on computer systems, software applications and
other electronics containing date sensitive embedded technology. These vendors
and suppliers include:
- Glenayre Electronics, the manufacturer and supplier of Multi-Link's voice
mail operating platforms;
- Telemessaging Services, Inc., the supplier of Multi-Link's billing
software; and
- US West, the local telephone line carrier with which Multi-Link has
interconnection agreements.
Internal Systems. Multi-Link has completed internal assessment and testing
of its date sensitive computer systems and has determined that its internal
billing, customer service and support systems are compatible with the year 2000.
Glenayre Electronics. Glenayre Electronics has advised Multi-Link that the
voice messaging platforms used by Multi-Link are year 2000 compatible.
Telemessaging Services. Telemessaging Services, the supplier of
Multi-Link's billing software, has certified that its software is Year 2000
compliant.
US West and Other Infrastructure Providers. Multi-Link is dependent upon US
West and other central infrastructure providers including suppliers of electric
power and the national telephone network for the provision of its services to
its customers. US West has publicly announced that its local telephone network
is Year 2000 compliant. Multi-Link is not aware of any central infrastructure
provider that has indicated that it expects to be adversely affected by the Year
2000 problem. However, Multi-Link has not obtained assurances from such
providers as to whether or not they will be adversely affected by the Year 2000
issue.
Acquisitions. Multi-Link plans to use a portion of the proceeds of this
offering to acquire companies involved in the voice messaging business.
Multi-Link intends to address the Year 2000 issue in detail with all such
companies prior to acquisition. Management believes that there are many older
voice messaging systems that are not Year 2000 compliant, and that the Year 2000
issue may cause some companies to view Multi-Link's acquisition proposals
favorably. Multi-Link cannot quantify the risks and expenses that may be
incurred through acquisitions of companies that are not Year 2000 compliant.
Costs. Multi-Link has not incurred any material costs for Year 2000
modifications to date and does not anticipate incurring any such material costs
in the future. However, there can be no assurance that Multi-Link will not
identify other Year 2000 issues that may require expenditures in the future.
SUBSEQUENT EVENTS -- QUARTER ENDED MARCH 31, 1999
Multi-Link is in the process of completing its internally prepared
financial statements for the quarter ended March 31, 1999. Based on preliminary
results, Multi-Link estimates that its net revenues will
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increase to an estimated $510,000 compared to $471,000 for the quarter ended
March 31, 1998, an increase of 8%. Multi-Link estimates that its gross margin
percentage will be 81%, the same as for the period ended March 31, 1998.
Multi-Link estimates that its net income will be $79,000 compared to $74,000 for
the quarter ended March 31, 1998, an increase of 7%.
During the quarter ended March 31, 1999 Multi-Link incurred certain
expenses relating to its office relocation from 811 Lincoln Street, Suite 500,
Denver, Colorado to 4704 Harlan Street, Suite 420, Denver, Colorado 80212. In
addition, Multi-Link incurred nonrecurring move-related expenses since March 30,
1999, which will negatively impact Multi-Link's third fiscal quarter ending June
30, 1999.
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BUSINESS
SUMMARY
Multi-Link provides integrated voice and fax messaging services for small
and medium sized businesses. These services enable businesses to improve the
handling of incoming calls and can be used with an automated attendant service
to replace receptionists. Multi-Link's voice messaging services can produce
improved efficiency and cost savings for the subscriber by offering
comprehensive voice messaging solutions. Multi-Link's integrated messaging
system:
- provides personal mailboxes that can be linked to office, mobile and home
telephones, eliminating the need to check multiple mailboxes and
providing cost savings through the termination of multiple mailbox
charges;
- provides immediate notification to a subscriber's mobile phone or digital
pager that the subscriber has new messages;
- automatically transfers important calls to the subscriber's office,
mobile telephone, pager and home phones to eliminate the need for callers
to try other numbers in an attempt to reach the subscriber; and
- will soon offer a unified messaging service which will enable the
subscriber to receive voice, fax and Internet e-mail messages in one
mailbox.
THE VOICE MESSAGING INDUSTRY
Management estimates that revenues realized in 1997 by North American voice
messaging providers were approximately $2.67 billion, with $570 million of the
total revenues realized by approximately 4,200 independent voice messaging
providers scattered throughout North America. Management also estimates that the
remaining $2.1 billion in revenues were realized by:
- the local telephone companies, or the "baby bells" in the amount of $1.25
billion;
- wireless providers in the amount of $396 million; and
- other providers in the amount of $454 million.
Management also believes that the voice messaging market was growing at a
10% annual rate and was experiencing structural changes brought about by new
technology and changes in consumer preferences. Management believes that these
changes will increase the rate of growth of the overall market, and create an
opportunity for voice messaging providers such as Multi-Link to capture
increased market share.
Development of the Business Voice Messaging Industry. In the 1970's, the
local telephone companies in the United States introduced a new service called
voice messaging or voice mail. The service uses automated "call-forwarding"
features programmed on the telephone line to transfer incoming calls to a
central voice mail platform when the line is in use or when nobody answers.
Voice mail service is almost always provided on a local basis since subscribers
are reluctant to incur long distance charges to receive and recover voice mail
messages.
The basic concept of voice mail has changed little since its introduction
two decades ago. Voice mail systems have become more sophisticated and more
reliable and now offer more features than they did when they were first
introduced. However, their basic operational method of using call forwarding
features to route incoming calls to the central system is the same. In almost
all cases, the voice mail service is provided as an additional option by the
provider of the telephone line or mobile phone and is a secondary function which
is only used if the person sought is unavailable.
Market acceptance of voice mail has changed since its inception, when
management believes it was disliked by many users. Management believes that
voice mail has now gained popular acceptance and most users in the business
community prefer to leave voice mail messages rather than written messages.
Despite
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this, the overall market penetration of voice mail remains low and management
believes there is opportunity for growth in this market.
Currently, users often have several voice mailboxes: one for business
attached to their business phone lines, one for home use attached to their home
phone line and one attached to their mobile phone. After 20 years of providing
the same basic function, voice mail service is changing as new technology is
developed to streamline personal communications practices.
Although the local telephone companies are in the best position to sell
voice mail service to their customers, there is no technological barrier that
prevents companies from acquiring a central voice mail platform and offering
voice messaging services. The local telephone companies are motivated to provide
multiple voice mailboxes to each subscriber, thus increasing per subscriber
revenues.
OVERVIEW OF MULTI-LINK'S CURRENT AND PROPOSED SERVICES
While reading this section, please open the schematic diagram on the inside
front cover of this prospectus for an illustrated representation of these
service concepts.
When Multi-Link launched its voice messaging service in May 1996, it did so
in anticipation of the significant technological changes now taking place in the
industry. Management believes that broad market adoption of the new services and
communications practices described below will only be achieved over time. As a
result, Multi-Link will continue to offer traditional voice messaging services
while implementing the new services described below.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
SERVICE TYPE AVAILABLE
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Single Box Voice Mail Service for Business and Home Yes
- ---------------------------------------------------------------------------------------------
Multiple Box Business Voice Messaging Networks Yes
- ---------------------------------------------------------------------------------------------
Automated Attendant Call Routing Service Yes
- ---------------------------------------------------------------------------------------------
Consolidated Messaging Service Yes
- ---------------------------------------------------------------------------------------------
One Number Service Yes
- ---------------------------------------------------------------------------------------------
Calling Card Functionality/Call Origination Capability Yes
- ---------------------------------------------------------------------------------------------
Voice/Fax: Yes
Unified Messaging Service for Voice, Fax and Internet based Internet e-mail:
e-mail Last quarter of 1999
- ---------------------------------------------------------------------------------------------
Voice Activated Commands Last quarter of 1999
- ---------------------------------------------------------------------------------------------
Adtracker Service Yes
- ---------------------------------------------------------------------------------------------
</TABLE>
Single Box Voice Mail for Business and Home. Multi-Link provides single
voice mailboxes to residences and small businesses for telephone answering.
Using automated call forwarding features programmed on the phone lines, incoming
calls are transferred to a single mailbox when the line is busy or when nobody
answers. The standard mailbox provided by Multi-Link has many useful features
that currently are not available from the baby bells or are provided by the baby
bells as additional cost options. These features include: multiple greetings
which play according to a time schedule, the option for a caller to press the
zero key to be transferred to another number and the option to have new messages
notified to a pager or a mobile telephone.
Multiple Box Business Voice Messaging Networks. Multi-Link provides
comprehensive voice messaging networks for businesses that employ up to 50
people. Every network is designed individually to meet each specific customer's
needs. There are several ways callers can access the voice messaging system:
- using automated call-forwarding features programmed on the phone lines,
incoming calls are transferred to a general company mailbox when the line
is busy or when nobody answers. Callers
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then have the option to leave a message or to reach the mailbox of a
specific individual through a directory;
- incoming calls during normal business hours can be answered by a person
and then transferred to an individual voice mailbox if the person sought
is not available; and
- callers who wish to leave a personal message can dial the voicemail box
directly without speaking with the receptionist.
Each mailbox within the overall network can be individually programmed to send
notification of new messages to a wide variety of pagers and mobile telephones,
to forward callers to different numbers when the zero key is pressed and to take
advantage of the consolidated messaging and one number services described below.
Automated Attendant Call Routing Service. Multi-Link offers automated call
routing services. Multi-Link's system answers all incoming calls for a business
and acts as the receptionist for the business. By pressing keys in response to a
series of progressive menus, callers reach the person or department they
require. The service provides fully automated call handling and often allows
businesses to reduce or eliminate the cost of receptionist personnel. Management
believes that the service is particularly valuable to businesses with multiple
locations in the same local calling area since all those businesses can now be
linked through one central access telephone number.
Consolidated Messaging Service. Multi-Link offers a consolidated messaging
service. A subscriber buys a voice mailbox from Multi-Link. Call forwarding is
then established from all of the subscriber's phone lines -- home, business and
mobile -- to the same voice mailbox. In this way, all voice messages are
channeled automatically into one voice mailbox. This saves time, is more
efficient and often saves money -- one mailbox instead of three.
One Number Service. Multi-Link offers one number service which Multi-Link
calls "Constant Touch Service." Callers who reach a subscriber mailbox are given
two options in the greeting. If immediate contact with the subscriber is not
required, they are instructed to leave a voice message for later attention by
the subscriber. However, if they need to speak to the subscriber, they are
instructed to press keys to activate the subscriber's Constant Touch Service.
Upon activation, the service requires the caller to state the caller's name for
recordation in the voice mailbox. The messaging system immediately dials several
numbers simultaneously to try to reach the subscriber. Typically the system will
dial a mobile phone number, a pager number, a home telephone number and an
office direct line. If the subscriber is reached, the messaging system plays the
name of the caller on hold and awaits instructions. Then, by selecting the
appropriate key, the subscriber may elect to connect immediately with the
caller, to reject the call but request that the caller leave a message, or to
terminate the call without offering the opportunity to leave a message. By using
Constant Touch Service, the subscriber makes it very simple for callers to reach
the subscriber, yet maintains complete control over who reaches the subscriber.
If the subscriber is not reached, the messaging system will wait up to two
minutes and then advise the caller that the subscriber could not be reached and
request the caller to leave a message.
Over the next few years, management expects this "one number" technology
will revolutionize the way business people communicate. It will no longer be
necessary to guess where the person called may be at any given time. The work of
finding the subscriber will be undertaken by the messaging system. In time, as
communications practices change, management believes subscribers will give out
their voice mail number as the primary contact number and all callers will leave
messages or use the one number technology. The use of the messaging system as a
primary contact point will eliminate the interruption of non-urgent calls and
should increase productivity.
Calling Card Functionality/Call Origination Capability. The voice messaging
system can act as a communications hub for subscribers who travel extensively.
Subscribers access their messaging system from anywhere in the United States by
using a dedicated "800" number. After listening to their messages, they may
elect to obtain a dial tone and make a call from within the voice mailbox. When
they terminate
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each call, they are returned to the mailbox and may continue listening to other
messages or make further calls. Management believes that this service is less
expensive and more convenient than most calling cards. Multi-Link's messaging
systems offer this service capability now, although Multi-Link has not yet begun
marketing this product on a commercial basis. Multi-Link expects to begin
marketing this service in the last quarter of fiscal 1999.
Unified Messaging Service for Voice, Fax and Internet Based
e-mail. Management believes that unified messaging is the best publicized of the
new technologies which are expected to change the messaging industry over the
next few years. Unified messaging is the term used to describe a messaging
service that can store voice messages, fax messages and Internet e-mail messages
in one mailbox. The service should also allow retrieval of any type of message
over a telephone, fax machine or personal computer, no matter what the original
form of the message might have been.
Unified messaging technology is still in the early stages of development
and, although some equipment has been deployed commercially, management believes
that revenues from unified messaging services are still very small. Management
expects that unified messaging services will be particularly popular among
traveling executives. Multi-Link currently provides unified voice and fax
messaging service. Multi-Link plans to offer a unified messaging service which
will include integration with Internet based e-mail service in the last quarter
of fiscal 1999.
Voice Activated Commands. At the present time, almost all voice-messaging
systems respond to tones created by key presses on the Dial Tone Modulated
Frequency or DTMF keypad. The exclusive use of the DTMF keypad has significant
disadvantages to the mobile user who may often wish to use the messaging system
when driving or performing other complex tasks. The use of speech recognition
technology will allow subscribers to simply speak commands to the messaging
system rather than using key presses. In addition to the benefits to mobile
users, the use of speech recognition will facilitate faster navigation through
complex menus and offer more intuitive access to less frequently used functions
of the messaging system. Management believes that speech recognition technology
is one of the most exciting developments in the messaging industry. Multi-Link
expects to market speech recognition technology in the last quarter of fiscal
1999.
"Adtracker" Advertising Analysis Tool. With each Adtracker service package,
the customer is provided with a block of five local telephone numbers. All
direct response advertising is directed to one of these numbers and not to the
advertiser's main office telephone number. When callers dial the number in
response to the advertising, the call passes momentarily through Multi-Link's
system and is transferred to the advertiser's main office telephone number and
handled by the advertiser in the normal way. The transit of the call through
Multi-Link's switch generates a call detail record that is printed through
Multi-Link's billing system in the form of a monthly call log. The log gives
time and date information for every call received through the system. By
comparing the call logs to the advertising, the advertiser can identify patterns
in the responses and determine how best to deploy advertising dollars in the
future.
DISTRIBUTION METHODS
Multi-Link engages approximately 20 independent commissioned sales agents
or agencies to procure subscribers for voice messaging services. Multi-Link's
sales agents include retail telecommunications stores, vendors of telephone
system hardware, vendors of long distance services and other telecommunications
related businesses. After the successful completion of the offering, Multi-Link
plans to engage approximately 10 additional independent commissioned sales
agents or agencies, bringing the total number of independent commissioned sales
agents or agencies to 30.
During the three months ended December 31, 1998, Multi-Link procured
approximately 86% of its new customer subscriptions from Telcom Sales
Associates, an independent sales agency specializing in the sale of a broad
range of telecommunications services to small and medium sized businesses.
Telcom is owned by a former employee of Multi-Link.
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Multi-Link's management believes that the introduction of unified messaging
in 1999 will open up new distribution channels allowing Multi-Link to forge
distribution alliances with Internet service providers and other companies
involved in the provision of Internet based e-mail services. Multi-Link's
management plans to provide Internet based e-mail services and other Internet
related services in calendar 1999. Multi-Link plans to use similar distribution
methods in connection with expanding its acquisitions described in "-- Industry
Consolidation and Geographic Expansion Strategy."
CUSTOMER BASE
Multi-Link's customer base consists predominantly of small and medium sized
businesses that have between one and 50 employees. This customer base includes
diverse businesses. Multi-Link's customer base includes approximately 5,000
business customers that have approximately 16,000 users. Multi-Link's average
business customer pays approximately $30 per month. Multi-Link currently
provides services in the Denver metropolitan area.
TECHNOLOGY
Equipment. Multi-Link's voice messaging systems are manufactured by
Glenayre. Each Glenayre system has capacity for approximately 12,000
subscribers. Currently, Multi-Link has two Glenayre Electronics systems. As a
result, Multi-Link could provide service to an additional 8,000 subscribers
before additional equipment is required. The Glenayre Electronics systems are
reliable, easy to maintain and have historically experienced minimal downtime.
Multi-Link finances its Glenayre Electronics system purchases through term loans
and makes no expenditures on research and development of any kind. Multi-Link
employs technicians who provide support for the Glenayre Electronics systems. In
addition, Glenayre Electronics provides technical support via a direct modem
link when necessary and provides periodic free software upgrades to insure that
Multi-Link continues to offer updated services. Multi-Link has no written
agreements with Glenayre Electronics. Glenayre Electronics has advised
Multi-Link that Glenayre Electronics expects to offer a fully functional unified
messaging upgrade in the second quarter of 1999 that will enable Multi-Link to
offer unified messaging services to its customers in the last quarter of 1999.
Interconnection with Public Switched Networks. Voice messaging systems are
linked to the public switched telephone network using digital two-way direct
inward dial trunks with call transfer capability. These interconnection services
are provided by US West under a ten year agreement which includes a price cap
that expires in 2008. Following the deregulation of the telecommunications
industry in 1996, Multi-Link now has several possible providers of
interconnection facilities and may benefit from price competition over the next
few years.
COMPETITION
Management estimates that the baby bells have the largest share of the
North American voice messaging services market. The baby bells are considerably
larger and better financed than Multi-Link and have extensive marketing
experience. Management believes that approximately $570 million of the North
American voice messaging market is shared by approximately 4,200 voice messaging
service providers including Multi-Link.
COMPETITIVE STRATEGY
Multi-Link obtains most of its business customers by offering voice
messaging services which the management of Multi-Link believes compare favorably
with those provided by the baby bells in the following ways:
- Multi-Link has consolidated messaging service, one number service and
other applications and features which are not currently offered by the
baby bells;
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- Multi-Link's independent sales agents conduct a comprehensive analysis of
every prospective customer's needs and custom design a Multi-Link voice
messaging service to meet those specific needs. Generally, the baby bells
do not offer this type of analysis in the voice messaging market;
- Management believes that Multi-Link's voice messaging service includes
more standard features than its largest current competitor;
- Multi-Link sends out customer trainers to teach new subscribers how to
best use its messaging services. The baby bells offer only telephone
based support;
- Multi-Link maintains a well-trained customer service staff who specialize
in providing messaging services. By comparison, the baby bells' customer
service staff generally deal with a wide range of telephone line issues
and, therefore, might not be as knowledgeable as Multi-Link's specialist
voice messaging group;
- Multi-Link provides help in reorganizing service configurations, adding
staff members to, or deleting staff members from, a network or simply
understanding the best way to use the voice messaging services; and
- Multi-Link charges up to 48% less than its largest competitor for what
management believes is overall a superior voice messaging service.
Management believes that the technological changes taking place in the
voice messaging industry will enable messaging service providers like Multi-Link
to capture a part of the baby bells' market share of the voice messaging
industry. The new services described above require the provider of the messaging
services to maintain complex messaging networks which interact with a broad
range of other telecommunications services supplied by a wide range of service
providers. Management believes that the provision and maintenance of the new
services involves a level of complexity that is unattractive to the baby bells
and that they may be unwilling to compete aggressively in this service category.
INDUSTRY CONSOLIDATION AND GEOGRAPHIC EXPANSION STRATEGY
Management believes that most of the 4,200 independent voice mail providers
offer only basic voice messaging services that are similar to, and in
competition with, the baby bells. Management believes that the opportunity
exists to acquire several voice mail providers in major urban markets in North
America. Multi-Link intends to use a portion of the proceeds raised from this
offering to acquire some of these voice messaging companies. Multi-Link will
provide technology, capital and marketing expertise to each business acquired.
In addition to the benefits derived from Multi-Link's technological, capital and
marketing expertise, management believes that savings can be achieved as a
result of the centralization of purchasing, accounting, administration,
marketing, telemarketing and other core functions of these voice mail providers.
FACILITIES
Multi-Link's corporate office and principal operating facility is presently
located at 4704 Harlan Street, Suite 420, Denver, Colorado. The three-year lease
for this property provides for Multi-Link to occupy approximately 3,067 square
feet on May 1, 1999 at a monthly rent of $4,345. Multi-Link expects to incur a
substantial one time charge related to moving its operations.
Upon the successful completion of this offering, Multi-Link will lease an
additional 2,992 square feet for a total of 6,059 square feet, and the lease
term will be extended to 78 months. After an initial six month rent-free period,
Multi-Link will pay $8,457 per month for the next 24 months, $8,710 per month
for the next 12 months, and $8,962 per month for the remaining 36 months of the
lease.
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<PAGE> 31
EMPLOYEES
As of January 30, 1999, Multi-Link employed 13 people, all of whom were
employed on a full time basis. There are no union or collective bargaining
agreements between Multi-Link and its employees and employee relations are
considered by management to be excellent.
LEGAL PROCEEDINGS
Multi-Link currently is not a party to any legal proceedings of any kind.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and officers of Multi-Link are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Nigel V. Alexander................... 38 Director, Chief Executive Officer, Secretary
and Treasurer
Shawn B. Stickle..................... 34 Director, President and Chief Operating Officer
Keith R. Holder...................... 54 Director
R. Brad Stillahn..................... 45 Director
David J. Cutler...................... 44 Chief Financial Officer
</TABLE>
The directors are elected for a three-year term, with approximately
one-third of the board of directors standing for election each year. Each
director holds office until the expiration of the director's term, until the
director's successor has been duly elected and qualified or until the earlier of
their resignation, removal or death. All of Multi-Link's officers devote
full-time to Multi-Link's business and affairs.
Nigel V. Alexander -- Chief Executive Officer, Secretary and Treasurer. Mr.
Alexander co-founded Multi-Link in 1996. Mr. Alexander has served since that
time as a Managing Director and now as the Chief Executive Officer of Multi-Link
with responsibility for financing and strategic planning. Since January of 1996,
Mr. Alexander has been the sole owner of Octagon Strategies, Inc., a consultant
to Multi-Link. From September 1994 until founding Multi-Link, Mr. Alexander
conducted research into the telecommunications industry to identify the business
opportunity now being pursued by Multi-Link. From April 1991 to September 1994,
Mr. Alexander was an executive officer of SnowRunner, Inc. a public company
involved in the distribution of winter sports products that later changed its
name to The Sled Dogs Company. Mr. Alexander is an Associate of the British
Chartered Institute of Bankers. He has over 15 years experience in merchant
banking, mergers and acquisitions and corporate finance, including ten years as
a merchant banker in London, England and Geneva, Switzerland with Henry
Ansbacher & Co. and the Paribas Group.
Shawn B. Stickle -- President and Chief Operating Officer. Mr. Stickle
co-founded Multi-Link in 1996. Mr. Stickle has served since that time as a
Managing Director and now as the President and Chief Operating Officer of
Multi-Link with direct responsibility for all of Multi-Link's operations. From
February 1995 until January 1996, Mr. Stickle was employed as Executive Vice
President of Voice Services, Inc. From 1987 to December 1994, Mr. Stickle was
Sales and Marketing Manager for T.A. Pelsue Company, a manufacturer of
telecommunications products. Mr. Stickle holds a bachelor's degree from the
University of Colorado in marketing and is a certified ISO 9000 Quality
Assurance Advisor.
Keith R. Holder -- Director. Mr. Holder became a director of Multi-Link in
February 1999. Since January 1998, Mr. Holder has been the Chief Executive
Officer of Recovery Specialists Inc., a regional environmental company. From
March 1990 to January 1998, Mr. Holder was the founder, Chief Executive Officer
and Director of Triumph Fuels Corporation, a gasoline refining, distribution and
retailing company. Mr. Holder received his Bachelor of Science degree in Geology
from the University of London in 1969.
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<PAGE> 32
R. Brad Stillahn -- Director. Mr. Stillahn became a director of Multi-Link
in February 1999. Since January 1991, Mr. Stillahn has been the owner, Chairman
and Chief Executive Officer of West Tape & Label, Inc., a national custom label
printer. From 1987 to 1991, Mr. Stillahn was the Director of Corporate Marketing
for Menasha Corporation, a diversified holding company. Mr. Stillahn received
his Masters of Business Administration from Washington University in 1976 and in
1974 received a Bachelor of Arts degree in Economics from the University of
Missouri.
David J. Cutler -- Chief Financial Officer. Mr. Cutler joined Multi-Link in
March 1998 and has served as its Chief Financial Officer since that time. From
March 1993 until joining Multi-Link, Mr. Cutler was a self employed consultant
providing accounting and financial advice to small and medium sized companies in
the United Kingdom and the United States. Mr. Cutler has more than 20 years
experience in international finance, accounting and business administration. He
held senior positions with multi-national companies such as Reuters Group Plc
and the Schlumberger Ltd. and has served as a director for two British
previously publicly quoted companies -- Charterhall Plc and Reliant Group Plc.
Mr. Cutler has a masters degree from St. Catherine College in Cambridge, England
and qualified as a British Chartered Accountant and as an Associate of the
Institute of Taxation with Arthur Andersen & Co. in London. He was subsequently
admitted as a Fellow of the UK Institute of Chartered Accountants. In early
1998, he passed the CPA examination in the United States.
COMMITTEES OF THE BOARD OF DIRECTORS
The board of directors maintains a compensation committee and an audit
committee. The compensation committee is composed of Keith R. Holder and R. Brad
Stillahn, both non-employee directors. The audit committee is composed of Keith
R. Holder and R. Brad Stillahn. The primary function of the compensation
committee is to review and make recommendations to the board of directors with
respect to the compensation, including bonuses, of Multi-Link's officers and to
administer the grants under Multi-Link's stock option plan. The functions of the
audit committee are to review the scope of the audit procedures employed by
Multi-Link's independent auditors, to review with the independent auditors
Multi-Link's accounting practices and policies and recommend to whom reports
should be submitted within Multi-Link, to review with the independent auditors
their final audit reports, to review with Multi-Link's internal and independent
auditors Multi-Link's overall accounting and financial controls, to be available
to the independent auditors during the year for consultation, to approve the
audit fee charged by the independent auditors, to report to the board of
directors with respect to such matters and to recommend the selection of the
independent auditors.
COMPENSATION OF DIRECTORS
As compensation for serving as directors of Multi-Link, Multi-Link pays
Keith R. Holder and R. Brad Stillahn $250 for each meeting of the board of
directors they attend in person or by telephone. In addition, on the date of
this prospectus, Keith R. Holder and R. Brad Stillahn each received five year
options to purchase 10,000 shares of Multi-Link's common stock at $6.00 per
share. The options vest over a three year period commencing one year from the
date of this prospectus. Directors are reimbursed for expenses incurred by them
in attending meetings of the board of directors or its committees.
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by Multi-Link for
services rendered during the fiscal years ended September 30, 1998, 1997 and
1996 to Nigel V. Alexander and Shawn B. Stickle. No executive officer of
Multi-Link earned or was paid compensation of more than $100,000 for the year
ended September 30, 1998.
On January 1, 1999, Nigel V. Alexander became the Chief Executive Officer
of Multi-Link and Shawn B. Stickle became the President and Chief Operating
Officer of Multi-Link in place of each being a Managing Director of Multi-Link.
Multi-Link pays consulting fees to Octagon Strategies, Inc. for consulting
services rendered by Nigel V. Alexander to Multi-Link. "Octagon" is a company
wholly-owned
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<PAGE> 33
by Nigel V. Alexander. All amounts reflected in the salary column in the
following table paid to Mr. Alexander are consulting fees paid to Octagon for
Mr. Alexander's benefit.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
FISCAL ANNUAL COMPENSATION
YEAR ENDED -------------------
NAME AND PRINCIPAL POSITION SEPTEMBER 30, SALARY BONUS
- --------------------------- ------------- -------- --------
<S> <C> <C> <C>
Nigel V. Alexander................................... 1998 $40,000 --
Managing Director 1997 $39,960 --
Secretary and Treasurer 1996 $34,042 --
Shawn B. Stickle..................................... 1998 $36,000 --
Managing Director 1997 $36,000 --
1996 $29,000 --
</TABLE>
Effective January 1, 1999, Multi-Link entered into a three-year consulting
agreement with Octagon and a three-year employment agreement with Shawn B.
Stickle pursuant to which Multi-Link pays Octagon and Mr. Stickle an annual
consulting fee and an annual salary of $53,333 and $48,000, respectively. Any
future increases in compensation under the agreements will be determined by the
compensation committee of the board of directors. The consulting agreement and
the employment agreement require that Messrs. Alexander and Stickle devote their
full business time to Multi-Link, may only be terminated by Multi-Link for
"cause" (as defined in the agreements) and may be terminated with or without
cause by Octagon or Mr. Stickle. If the agreements are terminated by Multi-Link
without cause, Octagon and Mr. Stickle are entitled to receive lump sum payments
equal to the greater of the compensation payable pursuant to the agreements for
the remaining terms thereof or one year's annual payments. The consulting
agreement and employment agreement also contain confidentiality and noncompete
provisions.
LIFE INSURANCE POLICIES
Multi-Link intends to obtain key man life insurance policies in the face
amounts of $1,000,000 each on both Nigel V. Alexander and Shawn B. Stickle
following the closing of the offering. The proceeds of these policies will be
payable to Multi-Link.
STOCK OPTION PLAN
Multi-Link adopted its stock option plan in 1997 pursuant to which an
aggregate of 300,000 shares of common stock are currently reserved for issuance.
The stock option plan provides for the granting of incentive stock options
within the meaning of Section 422 of the Internal Revenue Code and non-qualified
stock options, reload options and stock appreciation rights. Under the plan as
currently in effect, options may be granted only to employees. The stock option
plan is currently administered by the compensation committee of the board of
directors, which determines the terms and conditions of the options granted
under the stock option plan, including the exercise price, the number of shares
subject to a particular option and the exercisability thereof.
The exercise price of all incentive stock options granted under the stock
option plan must be at least equal to the fair market value of Multi-Link's
common stock on the date of grant and must be 110% of fair market value when
granted to a 10% or more stockholder. Under the stock option plan, the exercise
price of all non-qualified stock options granted under the stock option plan may
be less than the fair market value of the common stock on the date of grant. The
term of all options granted under the stock option plan may not exceed ten
years, except the term of incentive stock options granted to a 10% or more
stockholder may not exceed five years. Multi-Link has agreed that for a period
of at least one year following the date of this prospectus, non-qualified
options will not be granted at an exercise price of less than 100% of the fair
market value of Multi-Link's common stock on the date of grant and the terms
will
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<PAGE> 34
not exceed five years. The stock option plan may be amended or terminated by the
board of directors, but no such action may impair the rights of a participant
under a previously granted option.
The stock option plan provides the board of directors or the compensation
committee with the discretion to determine when options granted under the stock
option plan shall become exercisable and the vesting period of such options.
The following table provides information with respect to the stock options
that are currently outstanding:
<TABLE>
<CAPTION>
NUMBER OF SHARES EXERCISE EXPIRATION
GRANT DATE UNDERLYING OPTIONS PRICE DATE
---------- ------------------ -------- ----------
<S> <C> <C> <C>
January 15, 1997........................ 72,000 $0.02 January 14, 2007
January 15, 1997........................ 7,410 $0.17 January 14, 2007
June 30, 1997........................... 16,605 $0.42 June 29, 2007
December 30, 1997....................... 23,580 $2.45 December 29, 2007
June 30, 1998........................... 35,070 $4.17 June 29, 2008
December 31, 1998....................... 10,335 $6.00 December 30, 2008
-------
165,000
</TABLE>
No options to purchase shares of common stock have been granted by
Multi-Link to Nigel V. Alexander, Shawn B. Stickle or Octagon, and none of such
persons owned any options to purchase common stock on September 30, 1998.
Multi-Link expects to issue options to purchase 10,000 shares of common stock
each to the two non-management directors upon the successful completion of the
offering.
No reload options or stock appreciation rights have been granted pursuant
to the stock option plan.
Multi-Link has no other bonus, profit sharing, pension, retirement, stock
purchase, deferred compensation, or other incentive plan.
CERTAIN TRANSACTIONS
All of the following related party transactions were made on terms no less
favorable to Multi-Link than those available from unaffiliated parties. In
addition, all future related party transactions will be made on terms no less
favorable to Multi-Link than those available from unaffiliated parties and such
related party transactions will be approved by a majority of the independent,
disinterested members of Multi-Link's board of directors who had access, at
Multi-Link's expense, to Multi-Link's counsel or independent legal counsel.
In January 1996, Octagon and Shawn B. Stickle each purchased 600,000 shares
of common stock from Multi-Link for $0.0083 per share. In March 1997, Octagon
sold 450,000 shares of common stock to the Blackhawk Trust and 150,000 shares of
common stock to Nigel V. Alexander, for $0.017 per share.
In January 1996, Octagon loaned Multi-Link $41,000. Such loan was
unsecured, had an interest rate of 10% per annum and was repaid in September
1998. The proceeds from this loan were used to fund operating losses. This loan
has been repaid in full.
In April 1996, CS Capital provided Multi-Link with a factoring facility of
$500,000. Multi-Link issued 61,200 shares of common stock to CS Capital at the
time the facility was obtained. The factoring facility was secured by all of the
assets of Multi-Link, was guaranteed by Nigel V. Alexander and Shawn B. Stickle
and had an implied interest rate of 52% per annum, exclusive of value
attributable to common stock or warrants issued to CS Capital. The proceeds from
this factoring facility were used to fund rent, office expenses, equipment,
salaries and other operating costs related to Multi-Link's business. This
factoring facility has been repaid in full.
In January 1997, Multi-Link issued 68,118 shares of common stock to CS
Capital in connection with a $250,000 loan that CS Capital made to Multi-Link.
The loan was secured by all of the assets of Multi-
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<PAGE> 35
Link, was guaranteed by Nigel V. Alexander and Shawn B. Stickle and had an
interest rate of 40% per annum, exclusive of value attributable to common stock
issued. The proceeds from this loan were used to fund rent, office expenses,
equipment, salaries and other operating costs related to Multi-Link's business.
This loan has been repaid in full.
In January 1997, Multi-Link issued 13,320 shares of common stock to Ronald
Stickle, the father of Shawn B. Stickle, in connection with a $25,000 loan that
Ronald Stickle made to Multi-Link in June 1996. Such loan was unsecured, had an
interest rate of 35% per annum, exclusive of value attributable to common stock
issued and was repaid in September 1998. The proceeds from this loan were used
to fund operating losses. This loan has been repaid in full.
In January 1997, Multi-Link issued 26,640 shares of common stock to Harbour
Settlement in connection with a $60,000 loan that Harbour Settlement made to
Multi-Link in May 1996. Such loan was unsecured, had an interest rate of 15% per
annum, exclusive of value attributable to common stock issued and was guaranteed
by Nigel V. Alexander and Shawn B. Stickle. The loan was repaid in September
1998. Harbour Settlement is a trust established for the benefit of the children
of Keith R. Holder, a director of Multi-Link. The proceeds from this loan were
used to fund operating losses. This loan has been repaid in full.
In June 1997, Multi-Link issued 28,610 shares of common stock to CS Capital
in connection with a $300,000 loan that CS Capital made to Multi-Link. The loan
was secured by Multi-Link's assets, was guaranteed by Nigel V. Alexander and
Shawn B. Stickle and had an interest rate of 30% per annum, exclusive of value
attributable to common stock issued. The proceeds from this loan were used to
fund rent, office expenses, equipment, salaries and other operating costs
related to Multi-Link's business. This loan has been repaid in full.
In January 1998, CS Capital loaned Multi-Link $700,000. The loan was
secured by all of the assets of Multi-Link, was guaranteed by Nigel V. Alexander
and Shawn B. Stickle and had an interest rate of 30% per annum. The proceeds
from this loan were used to fund rent, office expenses, equipment, salaries and
other operating costs related to Multi-Link's business. This loan has been
repaid in full.
In January 1998, Multi-Link converted $20,000 of debt owed to Robert and
Lynne Williams (Robert Williams was a former director of Multi-Link) into 7,454
shares of common stock.
In May 1998, all of the outstanding balances on Multi-Link's loans, the
factoring facility and the loans that CS Capital had made to Multi-Link were
consolidated into a $1,698,000 term loan that was secured by the assets of
Multi-Link, was guaranteed by Nigel V. Alexander and Shawn B. Stickle, had an
interest rate of 25% per annum and was payable in fixed payments of principal
and interest through June 30, 2001. This loan has been repaid in full.
In September 1998, Multi-Link paid CS Capital $900,000 on the term loan and
CS Capital converted $300,000 of the term loan into 72,000 shares of
Multi-Link's common stock and warrants to purchase 36,000 shares of Multi-Link's
common stock originally at an exercise price of $8.33 per share and in February
1999, reduced the exercise price to $4.17 per share. The warrants are
exercisable from November 17, 1999 through May 17, 2001. The conversion price
paid by CS Capital for the shares of common stock and warrants was the same
price that was paid by nonaffiliated persons to Multi-Link in a private offering
that was being conducted by Multi-Link at that time. Multi-Link paid CS Capital
an additional $328,000 on the loan and $48,000 of accrued interest in November
1998. In March of 1999, Multi-Link paid the remaining amounts due under this
loan.
In September 1998, Westburg loaned Multi-Link $2,100,000 to repay debt and
deferred executive compensation, and to fund purchases of customer contracts.
The loan has a five-year term and bears interest at a current rate of 10.75% per
annum as of December 31, 1998. The loan is payable interest only until September
25, 2001, and thereafter the outstanding principal balance and accrued interest
will be payable monthly and amortized over ten years. The outstanding principal
balance and all accrued interest thereon will be payable in full on October 31,
2003. The loan is collateralized by all of the assets of Multi-Link and is
guaranteed personally by Nigel V. Alexander and Shawn B. Stickle. In connection
with the
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<PAGE> 36
loan, Multi-Link issued Westburg a warrant (valued at $73,440) to purchase
150,000 shares of common stock of Multi-Link at an exercise price of $4.17 per
share. In addition, Nigel V. Alexander and Shawn B. Stickle have pledged 480,000
shares each of Multi-Link's common stock owned by them as collateral for the
loan. Westburg has agreed to release such shares from pledge upon the closing of
this offering. In April 1999, Multi-Link renegotiated the terms of its loan with
Westburg to convert all but $10,000 of the loan into a revolving loan.
Multi-Link has agreed that it will not repay the remaining $10,000 on the loan
and, as a result, will be unable to trigger expiration of Westburg's warrant. In
addition, Multi-Link has agreed to pay a two percent commitment fee on all
undrawn balances and granted certain registration rights for the common stock
underlying the warrant. This loan is due on October 31, 2003. While Multi-Link
plans to pay the indebtedness due on this loan with the proceeds of this
offering, Multi-Link is permitted to and may make further draws on this loan. In
April 1999, Westburg loaned Multi-Link an additional $50,000 which was used to
fund expenses associated with this offering. Including this $50,000 loan,
Multi-Link owes Westburg $2,150,000 of which Multi-Link intends to repay
$2,140,000 with proceeds from this offering. The repayment of this indebtedness
will benefit Mr. Alexander and Mr. Stickle because the outstanding amount of the
loan as to which they have provided personal guarantees will be reduced.
In September 1998, Octagon Strategies, Inc. agreed to loan Multi-Link
$100,000. Approximately $43,923 had been borrowed pursuant to this loan. The
loan was unsecured, had an interest rate of 10% and was due on demand. The
proceeds from this loan were used to fund working capital. This loan has been
repaid in full.
In September 1998, Shawn B. Stickle loaned $77,244 to Multi-Link. The loan
was unsecured, had an interest rate of 10% and was due on demand. The proceeds
from this loan were used to fund working capital. This loan has been repaid in
full.
In January 1999, Nigel V. Alexander purchased 431,250 shares of common
stock from The Blackhawk Trust for $6.00 per share. Mr. Alexander gave The
Blackhawk Trust a promissory note secured by the 431,250 shares in payment of
the purchase price. The promissory note bears interest at a rate of 6% per annum
and is payable on the earlier of January 31, 2009 or the sale of the 431,250
shares by Mr. Alexander.
On February 1, 1999, Multi-Link reduced the exercise price of the warrants
issued to CS Capital from $8.33 to $4.17 per share at the same time Multi-Link
reduced the exercise price of outstanding warrants held by other persons
unaffiliated with Multi-Link who had acquired warrants from Multi-Link at
approximately the same time CS Capital acquired its warrants. As a result of the
3-for-5 reverse split of Multi-Link's outstanding common stock on February 2,
1999, the exercise price of the warrants held by CS Capital and such other
persons was increased to a post-split price of $4.17 per share.
LIMITATION OF LIABILITY AND INDEMNIFICATION
Pursuant to the provisions of the Colorado Business Corporation Act,
Multi-Link has adopted provisions in its restated articles of incorporation
which provide that its directors shall not be personally liable for monetary
damages to Multi-Link or its stockholders for a breach of fiduciary duty as a
director, except for liability as a result of:
- a breach of the director's duty of loyalty to Multi-Link or its
stockholders;
- acts or omissions not in good faith or which involve intentional
misconduct or knowing violation of law;
- voting for or assenting to a distribution, which, after giving effect to
the distribution, would result in (a) Multi-Link not being able to pay
its debts as they become due, or (b) Multi-Link's total assets being less
than the sum of its total liabilities plus amounts needed to satisfy
preferential rights upon dissolution of Multi-Link, but only if it is
established that the director did not perform his duties in good faith,
with the care of an ordinary prudent person in a like position under
similar circumstances, and in a manner the director believed to be in the
best interest of Multi-Link, provided that the personal liability of a
director in this circumstance is limited to the amount of the
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<PAGE> 37
distribution which exceeds that which could have been distributed without
violation of this paragraph; or
- any transaction from which the director directly or indirectly derives an
improper personal benefit.
Multi-Link's restated articles of incorporation state that Multi-Link shall
indemnify, to the maximum extent permitted by law, any person who is or was a
director or officer of Multi-Link, and may indemnify any other person, against
any claim, liability or expense arising against or incurred by such person made
party to a proceeding because the person is or was a director, officer, agent,
fiduciary, or employee of Multi-Link or because the person is or was serving
another entity as a director, officer, partner, trustee, employee, fiduciary or
agent at Multi-Link's request. The restated articles of incorporation also
permit Multi-Link to purchase and maintain insurance providing such
indemnification, advance expenses to persons indemnified by Multi-Link, and
provide indemnification to any person by general or specific action of the board
of directors under the bylaws of Multi-Link, by contract or otherwise.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and control persons of
Multi-Link pursuant to the foregoing provisions, or otherwise, Multi-Link has
been advised that in the opinion of the SEC, such indemnification is against
public policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable.
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<PAGE> 38
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of Multi-Link's common stock, as of the date of this prospectus, and
as adjusted to reflect the sale of the units offered by this prospectus, by:
- each person who is known by Multi-Link to own beneficially more than 5%
of Multi-Link's outstanding common stock,
- each of Multi-Link's named executive officers and directors, and
- all executive officers and directors as a group.
Shares of common stock not outstanding but deemed beneficially owned by
virtue of the right of an individual to acquire the shares of common stock
within 60 days are treated as outstanding only when determining the amount and
percentage of common stock owned by such individual. Except as noted below the
table, each person has sole voting and investment power with respect to the
shares of common stock shown. Unless otherwise shown, the address of each person
is 811 Lincoln Street, Suite 500, Denver, Colorado 80203.
<TABLE>
<CAPTION>
SHARES OF COMMON
STOCK BENEFICIALLY
OWNED PRIOR TO THE
OFFERING
-------------------- PERCENTAGE OWNED
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT AFTER THE OFFERING
- ------------------------------------ --------- ------- ------------------
<S> <C> <C> <C>
Nigel V. Alexander....................................... 581,250 34.4% 20.1%
Shawn B. Stickle......................................... 581,250 34.4 20.1
Keith R. Holder.......................................... 26,640 1.6 0.9
107 Country Club Park Drive
Grand Junction, Colorado 81503
R. Brad Stillahn......................................... 0 0 0
3845 Forest
Denver, Colorado 80207
All officers and directors as a group (5 persons)........ 1,204,140 70.6 41.4
CS Capital Corp.......................................... 229,928 13.6 8.0
8301 E. Prentice Ave, #200
Englewood, Colorado 80111
Greg Curtiss...................................... 229,928 13.6 8.0
8301 E. Prentice Ave., #200
Englewood, Colorado 80111
Westburg Media Capital LP................................ 150,000 8.1 4.9
200 First Avenue West, Suite 400
Seattle, Washington 98119
David Westburg.................................... 150,000 8.1 4.9
200 First Avenue West, Suite 400
Seattle, Washington 98119
John Weller....................................... 150,000 8.1 4.9
200 First Avenue West, Suite 400
Seattle, Washington 98119
John Hanson....................................... 150,000 8.1 4.9
200 First Avenue West, Suite 400
Seattle, Washington 98119
</TABLE>
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<PAGE> 39
In the foregoing table the common stock beneficially owned by:
- Keith R. Holder, represents shares beneficially owned by Harbour
Settlement, a Jersey Channel Islands Trust established for the benefit of
Mr. Holder's children;
- all of the executive officers and directors as a group, includes 15,000
shares of common stock underlying presently exercisable options but does
not include 35,000 shares underlying options that are not exercisable for
the next 60 days;
- CS Capital Corp, does not include 36,000 shares of common stock
underlying warrants that are not exercisable for the next 60 days;
- Greg Curtiss represents common stock beneficially owned by CS Capital
Corp., a corporation in which Mr. Curtiss is the only controlling person
and the only principal stockholder.
- Westburg Media Capital LP, represents 150,000 shares of common stock
underlying presently exercisable warrants;
- David Westburg represents 150,000 shares of common stock underlying
presently exercisable warrants beneficially owned by Westburg Media
Capital LP, in which Mr. Westburg is the President and a 37.5% owner;
- John Weller represents 150,000 shares of common stock underlying
presently exercisable warrants beneficially owned by Westburg Media
Capital LP, in which Mr. Weller is the Chief Financial Officer and a
37.5% owner; and
- John Hanson represents 150,000 shares of common stock underlying
presently exercisable warrants beneficially owned by Westburg Media
Capital LP, in which Mr. Hanson is a director and a 25% owner.
ESCROW SHARES
The underwriters' representative, or "representative," has required Nigel
V. Alexander and Shawn B. Stickle to each deposit 100,000 shares of common stock
of Multi-Link owned by such stockholders in an escrow account pursuant to an
escrow agreement with American Securities Transfer & Trust, Inc. These shares
are currently issued and in escrow. The common stock deposited in the escrow
account will be subject to release to the stockholders on the earlier to occur
of:
- Multi-Link achieving basic net income of at least $0.75 per share and the
common stock having a bid price of at least $15.00 per share for the year
ended and as of September 31, 2000;
- Multi-Link achieving basic net income of at least $1.25 per share and a
bid price of at least $25.00 per share for the year ended and as of
September 30, 2001;
- property exchange, or sale of all or substantially all of the assets or
stock of Multi-Link if any such transaction is approved by the holders of
a majority of the outstanding shares of common stock (excluding the
shares in escrow); or
- seven years after the date of this prospectus.
For purposes of determining the release from escrow, net income will
include the effects of any extraordinary items and will be based on basic net
income per share and on the audited financial statements of Multi-Link for the
respective periods. The shares of common stock held in escrow are not
transferable or assignable, although they may be voted by the stockholders. The
earnings levels and per share prices set forth above were determined by
negotiation between Multi-Link and the representative and should not be
construed to imply or predict any future earnings by Multi-Link or the market
price of the common stock.
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<PAGE> 40
DESCRIPTION OF SECURITIES
The following summary description of Multi-Link's securities is not
complete and is qualified in its entirety by reference to Multi-Link's restated
articles of incorporation and bylaws.
The authorized capital stock of Multi-Link consists of 20,000,000 shares of
no par value common stock and 5,000,000 shares of $0.01 par value preferred
stock, which Multi-Link may issue in one or more series as determined by the
board of directors. There currently are 1,691,542 shares of common stock issued
and outstanding that are held of record by 32 shareholders.
UNITS
Each unit being offered in this prospectus consists of one share of common
stock and one warrant. The common stock and warrants are separately
transferable.
COMMON STOCK
Each holder of record of common stock is entitled to one vote for each
share held on all matters properly submitted to the stockholders for their vote.
Cumulative voting in the election of directors is not authorized by the restated
articles of incorporation.
Holders of outstanding shares of common stock are entitled to those
dividends declared by the board of directors out of legally available funds and,
in the event of liquidation, dissolution or winding up of the affairs of
Multi-Link, holders are entitled to receive, pro rata, the net assets of
Multi-Link available to the stockholders. Holders of outstanding common stock
have no preemptive, conversion or redemption rights. All of the issued and
outstanding shares of common stock are, and all unissued shares of common stock,
when offered and sold will be, duly authorized, validly issued, fully paid and
nonassessable. To the extent that additional shares of common stock may be
issued in the future, the relative interests of the then existing stockholders
may be diluted.
There is currently no trading market for the common stock or warrants of
Multi-Link, and there can be no assurance that a trading market will develop in
the future. Further, the outstanding shares of common stock are restricted
securities as that term is defined in Rule 144 under the Securities Act of 1933
and cannot be resold without registration under the Securities Act of 1933 or an
exemption from registration.
PREFERRED STOCK
Multi-Link's board of directors is authorized to issue from time to time,
without stockholder authorization, in one or more designated series, any or all
of the authorized but unissued shares of preferred stock with such dividend,
redemption, conversion, and exchange provisions as may be provided by the board
of directors with regard to such particular series. Any series of preferred
stock may possess voting, dividend, liquidation, and redemption rights superior
to those of the common stock. The rights of the holders of common stock will be
subject to and may be adversely affected by the rights of the holders of any
preferred stock that may be issued in the future. Issuance of a new series of
preferred stock could make it more difficult for a third party to acquire, or
discourage a third party from acquiring, the outstanding shares of common stock
of Multi-Link and make removal of the board of directors more difficult. No
shares of preferred stock are currently issued and outstanding, and Multi-Link
has no present plans to issue any shares of preferred stock.
Multi-Link will not offer preferred stock to promoters, except on the same
terms as it is offered to all other existing shareholders or to new
shareholders. Any issuances of preferred stock must be approved by a majority of
Multi-Link's independent, disinterested directors who have access, at
Multi-Link's expense, to Multi-Link's external legal counsel.
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<PAGE> 41
WARRANTS
Two warrants will entitle the holder to purchase one share of common stock
at an exercise price of $9.00 for a period of 36 months from the date hereof
subject to Multi-Link's redemption rights described below. The warrants will be
issued pursuant to the terms of a warrant agreement between Multi-Link and the
"warrant agent," American Securities Transfer & Trust, Incorporated. Multi-Link
has authorized and reserved for issuance the shares of common stock issuable on
exercise of the warrants. The warrants are exercisable to purchase a total of
600,000 shares of common stock of Multi-Link unless the underwriter's
over-allotment option relating to the warrants is exercised, in which case the
warrants are exercisable to purchase a total of 690,000 shares of common stock.
The warrant exercise price and the number of shares of common stock
purchasable upon exercise of the warrants are subject to adjustment in the event
of, among other events, a stock dividend on, or a subdivision, recapitalization
or reorganization of, the common stock, or the merger or consolidation of
Multi-Link with or into another corporation or business entity.
Commencing one year from the date of this prospectus and until the
expiration of the warrants, Multi-Link, may redeem outstanding warrants, in
whole but not in part, upon not less than 30 days' notice, at a price of $0.05
per warrant, provided that the closing bid price of the common stock equals or
exceeds 125% of the warrant exercise price ($9.00 per share) for 20 consecutive
trading days. The redemption notice must be provided not more than five business
days after conclusion of the 20 consecutive trading days in which the closing
bid price of the common stock equals or exceeds 125% of the warrant exercise
price per share. In the event Multi-Link exercises its right to redeem the
warrants, the warrants will be exercisable until the close of business on the
date fixed for redemption in such notice. If any warrant called for redemption
is not exercised by such time, it will cease to be exercisable and the holder
thereof will be entitled only to the redemption price.
Multi-Link must have on file a current registration statement with the SEC
pertaining to the common stock underlying the warrants in order for a holder to
exercise the warrants or in order for the warrants to be redeemed by Multi-Link.
The shares of common stock underlying the warrants must also be registered or
qualified for sale under the securities laws of the states in which the warrant
holders reside. Multi-Link intends to use its best efforts to keep the
registration statement incorporating this prospectus current, but there can be
no assurance that such registration statement (or any other registration
statement filed by Multi-Link covering shares of common stock underlying the
warrants) can be kept current. In the event the registration statement covering
the underlying common stock is not kept current, or if the common stock
underlying the warrants is not registered or qualified for sale in the state in
which a warrant holder resides, the warrants may be deprived of any value.
Multi-Link is not required to issue any fractional shares of common stock
upon the exercise of warrants or upon the occurrence of adjustments pursuant to
anti-dilution provisions. Multi-Link will pay to holders of fractional interests
an amount equal to the cash value of such fractional interests based upon the
then-current market price of a share of common stock.
The warrants may be exercised upon surrender of the certificate
representing such warrants on or prior to the expiration date (or earlier
redemption date) of such warrants at the offices of the warrant agent with the
form of "Election to Purchase" on the reverse side of the warrant certificate
completed and executed as indicated, accompanied by payment of the full exercise
price by check payable to the order of Multi-Link for the number of warrants
being exercised. Shares of common stock issued upon exercise of warrants for
which payment has been received in accordance with the terms of the warrants
will be fully paid and nonassessable.
The warrants do not confer upon the warrantholder any voting or other
rights of a shareholder of Multi-Link. Upon notice to the warrantholders,
Multi-Link has the right to reduce the exercise price or extend the expiration
date of the warrants. Although this right is intended to benefit warrantholders,
to the extent Multi-Link exercises this right when the warrants would otherwise
be exercisable at a price higher
38
<PAGE> 42
than the prevailing market price of the common stock, the likelihood of
exercise, and the resultant increase in the number of shares outstanding, may
impede or make more costly a change in control of Multi-Link.
ANTI-TAKEOVER PROVISIONS
Multi-Link's restated articles of incorporation and bylaws contain
provisions that may make it more difficult for a third party to acquire, or may
discourage acquisition bids for, Multi-Link. The board of directors of
Multi-Link is authorized, without action of its stockholders, to issue
authorized but unissued common stock and preferred stock. The existence of
undesignated preferred stock and authorized but unissued common stock enables
Multi-Link to discourage or to make it more difficult to obtain control of
Multi-Link by means of a merger, tender offer, proxy contest or otherwise. The
restated articles of incorporation and bylaws provide further that:
- directors must be elected for three-year terms, with approximately
one-third of the board of directors standing for election each year;
- to alter or repeal the staggered board provision or other measures in the
restated articles of incorporation and bylaws, the affirmative vote of
the holders of not less than two-thirds of the votes entitled to be cast
by the holders of all stock entitled to vote in the election of directors
is required;
- the unanimous vote of the board of directors or the affirmative vote of
the holders of not less than two-thirds of the votes entitled to be cast
by the holders of all stock entitled to vote in the election of directors
is required to change the size of the board of directors; and
- directors may only be removed for cause by holders of not less than
two-thirds of the common stock.
TRANSFER AGENT, WARRANT AGENT AND REGISTRAR
Multi-Link has retained American Securities Transfer & Trust, Inc. to serve
as the transfer agent and registrar for the common stock and warrant agent for
the warrants.
SHARES ELIGIBLE FOR FUTURE SALE
On completion of this offering, Multi-Link will have 2,891,542 shares of
common stock outstanding, assuming no warrants are exercised. If the
underwriters' over-allotment option is exercised in full, 3,071,542 shares of
common stock will be outstanding. Of these shares, the 1,200,000 shares of
common stock sold in this offering and any shares sold by Multi-Link upon
exercise of the underwriters' over-allotment option will be freely transferable
by persons other than "affiliates" of Multi-Link as that term is defined under
the Securities Act of 1933 without restriction or further registration.
The remaining 1,691,542 outstanding shares of common stock are "restricted
securities" within the meaning of Rule 144 under the Securities Act of 1933 and
may not be sold in the absence of registration unless an exemption from
registration is available, including the exemption contained in Rule 144. All of
such shares become eligible for sale under Rule 144 commencing 90 days after the
date of this prospectus through November 1999. Pursuant to the terms of the
underwriting agreement, the representative has required that the shares of
common stock owned by officers, directors and the current shareholders may not
be sold until at least 12 months from the date of this prospectus without its
prior written consent. Of the shares owned by Nigel V. Alexander and Shawn B.
Stickle, 200,000 shares are subject to an escrow arrangement and may, under
certain circumstances, be released as late as seven years after the date of this
prospectus. In the absence of agreements with the representative, the
outstanding restricted common stock could be sold in accordance with Rule 144 as
described above. See "Underwriting" for a more in depth description of the
underwriting agreement.
In general, under Rule 144 as currently in effect, a shareholder who has
beneficially owned shares of common stock for at least one year is entitled to
sell, within any three-month period, a number of "restricted" shares that does
not exceed the greater of 1% of the then outstanding shares of common stock
39
<PAGE> 43
or the average weekly trading volume during the four calendar weeks preceding
such sale. Sales under Rule 144 are also subject to certain manner of sale
limitations, notice requirements and the availability of current public
information about Multi-Link. Rule 144(k) provides that a shareholder who is not
deemed to be an "affiliate" and who has beneficially owned shares of common
stock for at least two years is entitled to sell such shares at any time under
Rule 144(k) without regard to the limitations described above.
In addition to the shares of common stock that are currently outstanding, a
total of 300,000 shares of common stock have been reserved for issuance upon
exercise of options granted under the stock option plan, under which options to
acquire 165,000 shares of common stock at exercise prices of between $0.017 and
$4.17 per share have been granted and are exercisable at various times through
2008 and options to purchase an additional 20,000 shares of Multi-Link's common
stock at $6.00 per share have been granted and are exercisable until 2009.
Ninety days after the date of this prospectus, Multi-Link plans to file a
registration statement on Form S-8 to register the shares of common stock that
have been reserved for issuance upon exercise of options granted under the stock
option plan. Once registered, the shares of common stock issued upon exercise of
such options will be freely tradable without restriction under the Securities
Act 1933 except for shares held by an "affiliate" of Multi-Link, which shares
will remain subject to certain restrictions. In addition, the representative has
required all holders of options to agree not to sell, transfer, hypothecate or
convey any shares of common stock issued upon exercise of stock options for a
period of 13 months after the date hereof, except as specified below. Multi-Link
may permit the sale from time to time of common stock issued upon exercise of
stock options by persons who are not directors or officers of Multi-Link;
provided that such sales shall not exceed an aggregate of 30,000 shares of
common stock during the 13 month period after this offering. All sales of common
stock issued upon exercise of stock options within the 13 month period must be
made through the representative.
Multi-Link also has outstanding warrants to purchase 133,500 shares of
common stock that are not exercisable until November 17, 1999. These warrants
are exercisable at a price of $5.00 per share as to 15,000 shares and at a price
of $4.17 per share as to 118,500 shares. Multi-Link has agreed to register these
shares of common stock for public resale.
Multi-Link also has outstanding warrants to purchase 150,000 shares of
common stock at a price of $4.17 per share. Multi-Link has agreed to register
these shares of common stock for public resale.
Multi-Link is unable to estimate the number of shares that may be sold in
the future by the existing holders of shares of Multi-Link's common stock or
holders of options or warrants that are outstanding or the effect, if any, that
sales of shares of common stock by such persons will have on the market price of
the common stock prevailing from time to time. Sales of substantial amounts of
common stock by such persons could adversely affect the then prevailing market
prices.
Furthermore, Multi-Link will not grant any warrants at an exercise price of
less than 85% of the fair market value of the underlying common stock on the
date of grant for a period of at least one year following the date of this
prospectus. It will not grant any non-qualified or incentive options at an
exercise price of less than 100% of fair market value of the underlying common
stock on the date of grant for a period of at least one year following the date
of this prospectus.
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<PAGE> 44
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement, the
underwriters named below, for which Schneider Securities, Inc. is acting as the
underwriters' representative, or "representative," have agreed to purchase from
Multi-Link the number of units set forth opposite their names, and will purchase
the units at the price to public less underwriting discount set forth on the
cover page of this prospectus:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF UNITS
----------- ---------
<S> <C>
Schneider Securities, Inc...................................
---------
Total............................................. 1,200,000
=========
</TABLE>
The underwriting agreement provides that the underwriters' obligations are
subject to conditions precedent and that the underwriters are committed to
purchase all units offered hereby (other than those covered by the
over-allotment option described below) if the underwriters purchase any such
securities.
The representative has advised Multi-Link that the underwriters propose to
offer the units offered hereby directly to the public at the price to public set
forth on the cover page of this prospectus, and that they may allow to certain
dealers which are members of the National Association of Securities Dealers,
Inc., concessions not in excess of $ . After the initial public
distribution of the units is completed, the price of the shares of common stock
and warrants may change as a result of market conditions. No change in such
terms will change the amount of proceeds to be received by Multi-Link as set
forth on the cover page of this prospectus. The representative has further
advised Multi-Link that the underwriters do not intend to confirm sales to any
accounts over which any of them exercises discretionary authority.
Multi-Link has agreed to pay the representative a nonaccountable expense
allowance of 3% of the aggregate public offering price of the units offered,
including units sold on exercise of the over-allotment option, of which $45,000
has been previously paid to the representative. Multi-Link has also agreed to
pay all expenses in connection with qualifying the units offered hereby for sale
under the laws of such states as the representative may designate.
Multi-Link has granted the underwriters an option, exercisable for 45 days
after the date of this prospectus, to purchase up to 180,000 additional units at
the same price as the initial units offered. The underwriters may purchase the
units solely to cover over-allotments, if any, in connection with the sale of
the units offered hereby. If the over-allotment option is exercised in full, the
total public offering price, underwriting discounts and gross proceeds to
Multi-Link will be $8,280,000, $828,000 and $7,452,000, respectively.
The underwriters may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation M
under the Securities Exchange Act of 1934. Over-allotment involves syndicate
sales in excess of the offering size, which create a syndicate short position
Stabilizing transactions permit bids to purchase the underlying security so long
as the stabilizing bids do not exceed a specified maximum. Syndicate covering
transactions involve purchases of the securities in the open market after the
distribution has been completed in order to cover syndicate short positions.
Penalty bids permit the underwriters to reclaim a selling concession from a
syndicate member when the securities originally sold by such syndicate member
are purchased in a syndicate covering transaction to cover syndicate short
positions. Such stabilizing transactions, syndicate covering transactions and
penalty bids may cause the price of the common stock or warrants to be higher
than they would otherwise be in the absence of such transactions.
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<PAGE> 45
Neither Multi-Link nor the underwriters make any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the common stock or warrants. In
addition, neither Multi-Link nor any of the underwriters makes any
representation that the underwriters will engage in such transactions or that
such transactions, once commenced, will not be discontinued without notice.
Multi-Link's officers, directors and shareholders owning 1% or more of the
outstanding common stock (including derivative securities of Multi-Link), have
agreed not to offer, sell or otherwise dispose of any shares of common stock or
derivative securities of Multi-Link for a period of 13 months after the date of
this prospectus without the prior written consent of the representative. All
officers, directors and holders of 5% or more of the common stock of Multi-Link
have further agreed not to offer, sell or otherwise dispose of any capital stock
or derivative securities of Multi-Link through a "Regulation S" transaction for
a minimum period of five years from the date of this prospectus without the
prior written consent of the representative. Each of the shareholders of
Multi-Link who owns less than 1% of the outstanding shares of common stock of
Multi-Link has also agreed not to offer, sell or otherwise dispose of any shares
of common stock for a period of 12 months after the date of this prospectus
without the prior written consent of the representative. Collectively, these
periods in which the common stock or derivative securities of Multi-Link cannot
be offered, sold or otherwise disposed of, are referred to in this prospectus as
the "lock-up period." The representative has undertaken to the Texas State
Securities Board that it will not shorten or waive the lock-up period.
Multi-Link has undertaken to the Texas State Securities Board that it will not,
for a period of one year following the date of this offering, issue or reserve
for issuance options or warrants to purchase common stock that in the aggregate
exceed 15% of the shares of common stock outstanding on completion of this
offering.
Excluded from the 15% limitation are:
- the representative's option and any other options or warrants exercisable
at or above the public offering price of the units;
- options that are issued or reserved for issuance to employees or
consultants that are not promoters under a qualified incentive stock
option plan;
- options or warrants granted to unaffiliated institutional investors in
connection with loans, subject to satisfaction of certain additional
conditions; and
- options and warrants granted in connection with acquisitions, mergers and
certain other transactions to persons unaffiliated with Multi-Link that
will not materially dilute Multi-Link's earnings.
Multi-Link will sell to the representative on completion of the offering,
for a total purchase price of $100, the representative's option for the purchase
of units entitling the representative or its assigns to purchase one unit for
each 10 units sold to the public (excluding the units sold in the over-allotment
option). The representative's option will be exercisable commencing one year
from the date of this prospectus and will expire five years from such date. Two
of the warrants included in the units underlying the representative's option
will be exercisable to purchase one share of common stock at an exercise price
of $11.52 per share during the three year term of the warrants. The
representative's option will contain certain anti-dilution provisions and
provide for the cashless exercise of the representative's option utilizing
securities of Multi-Link (which may include the implicit value of the
representative's option or warrants being surrendered). The exercise price of
the representative's option to purchase units is 128% of the public offering
price or $7.68 per unit.
Multi-Link will set aside and at all times have available a sufficient
number of securities to be issued upon exercise of the representative's option.
The representative's option and underlying securities will be restricted from
sale, transfer, assignment or hypothecation for a period of one year after the
date of this prospectus, except to officers of the representative,
co-underwriters, selling group members and their officers or partners.
Thereafter, the representative's option and underlying units will be
transferable provided such transfer is in accordance with the provisions of the
Securities Act of 1933. Subject to certain limitations and exclusions,
Multi-Link has agreed, at the request of representative, to
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<PAGE> 46
register the common stock included in the units and underlying the warrants
included in the units issuable upon exercise of the representative's option.
Upon any solicited exercise of the warrants after one year from the date of
this prospectus, Multi-Link will pay the representative a fee of 5% of the
aggregate exercise price for warrant exercises if:
- the market price of the common stock on the date the warrant is exercised
is greater than the then exercise price of the warrant;
- the exercise of the warrant was solicited by a member of the National
Association of Securities Dealers, Inc. as designated in writing on the
warrant certificate subscription form (provided that any request for
exercise will be presumed to be unsolicited unless the customer states in
writing that the transaction was solicited and designates the
broker-dealer to receive compensation);
- the warrant is not held in a discretionary account;
- disclosure of compensation arrangements was made both at the time of the
offering and at the time of exercise of the warrant; and
- the solicitation of exercise of the warrant was not in violation of
Regulation M promulgated under the Securities Exchange Act of 1934.
A portion of the 5% fee may be reallowed by the representative to participating
broker-dealers.
Regulation M prohibits the representative from engaging in any market
making activities with regard to Multi-Link's securities during the period
commencing as of the date on which the representative becomes a participant in
the solicitation of the exercise of warrants until the termination of such
solicitation activity. As a result, the representative may be unable to make a
market in Multi-Link's securities during certain periods while the warrants are
exercisable.
Multi-Link and the representative have entered into a non-exclusive
agreement which provides that, if the representative arranges for the purchase
or sale of substantially all of the assets of Multi-Link, or for a merger,
consolidation or acquisition accepted by Multi-Link during the five-year period
commencing on the date of this prospectus, the representative will receive a fee
based on a sliding scale ranging from 5% of the first $1 million of
consideration and decreasing to 3% of consideration in excess of $2 million.
For a period of five years after the date hereof, the representative has
the right to have an observer attend meetings of Multi-Link's board of directors
and receive the same compensation (excluding grants of options) and expenses
paid to Multi-Link's directors.
Prior to this offering, there has not been a public market for Multi-Link's
securities. The public offering price of the units and the exercise price of the
warrants has been determined by arms-length negotiation between Multi-Link and
the representative. There is no direct relation between the offering price of
the units and the assets, book value or net worth of Multi-Link. Among the
factors considered by Multi-Link and the representative in pricing the units and
in determining the exercise price of the warrants were the results of
operations, the current financial condition and future prospects of Multi-Link,
the experience of management, the amount of ownership to be retained by present
stockholders, the general condition of the economy and the securities markets
and the demand for securities of companies considered comparable to Multi-Link.
In connection with this offering, Multi-Link and the underwriters have
agreed to indemnify each other against certain liabilities, including
liabilities under the Securities Act of 1933 and if such indemnification is
unavailable or insufficient, Multi-Link and the underwriters have agreed to
damage contribution arrangements based upon relative benefits received from this
offering and relative fault resulting in such damage.
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<PAGE> 47
LEGAL MATTERS
The validity of the common stock and warrants offered in this prospectus
will be passed upon by Smith McCullough, P.C. Certain legal matters will be
passed upon for the representative by Berliner Zisser Walter & Gallegos, P.C.
EXPERTS
The consolidated balance sheet of Multi-Link as of September 30, 1998 and
the consolidated statements of operations and comprehensive income (loss),
stockholders' equity and cash flows for the year ended September 30, 1998
included in this prospectus have been included herein in reliance on the report
of HEIN + ASSOCIATES LLP, independent certified public accountants, given on the
authority of that firm as experts in auditing and accounting.
The consolidated statements of operations and comprehensive income (loss),
stockholder's equity and cash flows for the year ended September 30, 1997 and
for the period from January 22, 1996 to September 30, 1996 included in this
prospectus have been included herein in reliance on the report of James E.
Scheifley & Associates, PC, independent certified public accountants, given on
the authority of that firm as experts in auditing and accounting.
With respect to the unaudited interim consolidated financial information
for the three months ended December 31, 1997 and 1998, the independent certified
public accountants have not audited such consolidated financial information and
have not expressed an opinion or any other form of assurance with respect to
such consolidated financial information.
On December 16, 1998, Multi-Link engaged HEIN & ASSOCIATES LLP as
Multi-Link's principal independent accountant in place of James E. Scheifley &
Associates, PC. On December 16, 1998, Multi-Link requested and received the
resignation of James E. Scheifley & Associates, PC. There were no disagreements
between Multi-Link and James E. Scheifley & Associates, PC on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure which, if not resolved to the satisfaction of James E.
Scheifley & Associates, PC, would have caused James E. Scheifley & Associates,
PC to make reference in its reports to the subject matter of such disagreements.
The opinion of James E. Scheifley & Associates, PC on Multi-Link's consolidated
financial statements for the fiscal year ended September 30, 1997, and for the
period from January 22, 1996 to September 30, 1996 contained no adverse opinion
or disclaimer of opinion, nor was such opinion qualified as to uncertainty,
audit scope or accounting principles. The decision to change accountants was
approved by Multi-Link's board of directors.
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<PAGE> 48
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Reports............................... F-2
Consolidated Balance Sheets -- September 30, 1998 and
December 31, 1998 (Unaudited)............................. F-4
Consolidated Statements of Operations and Comprehensive
Income (Loss) -- For the Period from Inception (January
22, 1996) to September 30, 1996, for the Years Ended
September 30, 1997 and 1998, and for the Three Months
Ended December 31, 1997 and 1998 (Unaudited).............. F-5
Consolidated Statements of Changes in Stockholders' Equity
(Deficit) -- For the Period from Inception (January 22,
1996) to September 30, 1996, for the Years Ended September
30, 1997 and 1998, and for the Three Months Ended December
31, 1998 (Unaudited)...................................... F-6
Consolidated Statements of Cash Flows - For the Period from
Inception (January 22, 1996) to September 30, 1996, for
the Years Ended September 30, 1997 and 1998, and for the
Three Months Ended December 31, 1997 and 1998
(Unaudited)............................................... F-7
Notes to Consolidated Financial Statements.................. F-8
</TABLE>
F-1
<PAGE> 49
INDEPENDENT AUDITOR'S REPORT
Shareholders and Board of Directors
Multi-Link Telecommunications, Inc. and Subsidiary
Denver, Colorado
We have audited the accompanying consolidated balance sheet of Multi-Link
Telecommunications, Inc. and subsidiary as of September 30, 1998 and the related
consolidated statements of operations and comprehensive income (loss), changes
in stockholders' equity (deficit), and cash flows for the year then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Multi-Link Telecommunications, Inc. and subsidiary as of September 30, 1998 and
of the results of their operations and their cash flows for the year then ended,
in conformity with generally accepted accounting principles.
HEIN + ASSOCIATES LLP
Denver, Colorado
January 21, 1999, except for Note 4 for which the
date is February 10, 1999
F-2
<PAGE> 50
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
Multi-Link Holdings, Inc. and Subsidiary
We have audited the consolidated balance sheet of Multi-Link Holdings, Inc.
and Subsidiary as of September 30, 1997 and 1996 and the accompanying related
consolidated statements of operations and comprehensive loss, stockholders'
equity, and cash flows for the year ended September 30, 1997 and the period from
inception (January 22, 1996) to September 30, 1996. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred in above present fairly,
in all material respects, the financial position of Multi-Link Holdings, Inc.
and Subsidiary as of September 30, 1997, and of the results of its operations
and comprehensive loss and cash flows for the year ended September 30, 1997 and
the period ended September 30, 1996, in conformity with generally accepted
accounting principles.
James E. Scheifley & Associates, PC
Certified Public Accountants
Englewood, Colorado
February 13, 1998
F-3
<PAGE> 51
MULTI-LINK TELECOMMUNICATIONS, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1998
------------- ------------
(UNAUDITED)
<S> <C> <C>
Current Assets:
Cash and cash equivalents................................. $ 555,852 $ 188,574
Accounts receivable -- trade, net of allowance for
doubtful accounts of $46,563 and $43,438 (unaudited),
respectively........................................... 104,284 198,042
Note receivable........................................... -- 204,453
----------- -----------
Total current assets.............................. 660,136 591,069
Property and Equipment, net................................. 683,966 688,844
Other Assets:
Deferred financing and offering costs..................... 161,369 111,324
Intangible assets, less amortization of $349,160 and
$376,555 (unaudited), respectively..................... 241,244 286,580
----------- -----------
Total Assets...................................... $ 1,746,715 $ 1,677,817
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts payable.......................................... $ 153,432 $ 33,123
Accrued expenses.......................................... 199,639 95,108
Deferred revenue.......................................... 161,431 148,876
Notes payable -- related parties, current portion......... 421,167 179,916
Notes payable and current portion of long-term debt....... 179,829 179,452
----------- -----------
Total current liabilities......................... 1,115,498 636,475
Notes Payable -- Related Parties, Less Current Portion...... 247,807 113,570
Long-Term Debt, Less Current Portion........................ 2,222,065 2,301,721
Commitments (Note 7)
Stockholders' Deficit:
Preferred stock, $.01 par value; 5,000,000 shares
authorized; none issued................................ -- --
Common stock, no par value; 20,000,000 shares authorized,
1,570,152 and 1,691,542 (unaudited) shares issued and
outstanding, respectively.............................. 442,591 822,771
Accumulated deficit....................................... (2,281,246) (2,196,720)
----------- -----------
Total stockholders' deficit....................... (1,838,655) (1,373,949)
----------- -----------
Total Liabilities and Stockholders' Deficit....... $ 1,746,715 $ 1,677,817
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 52
MULTI-LINK TELECOMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM INCEPTION
(JANUARY 22, 1996) FOR THE YEARS ENDED FOR THE THREE MONTHS ENDED
TO SEPTEMBER 30, DECEMBER 31,
SEPTEMBER 30, ------------------------ ---------------------------
1996 1997 1998 1997 1998
------------------ ----------- ---------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net Revenues............... $ 221,824 $ 1,154,161 $1,859,276 $ 413,046 $ 512,714
Cost of Services and
Products................. 82,572 348,413 371,391 92,933 95,994
---------- ----------- ---------- ---------- ----------
Gross Margin............... 139,252 805,748 1,487,885 320,113 416,720
Operating Expenses:
Sales and advertising.... 306,979 692,247 155,270 114,547 10,017
General and
administrative........ 313,957 847,807 742,527 190,385 169,954
Depreciation............. 30,263 61,943 80,513 20,368 21,694
Amortization............. 2,916 5,000 41,674 1,250 27,395
Impairment of goodwill... 299,570 -- -- -- --
---------- ----------- ---------- ---------- ----------
Total operating
expenses....... 953,685 1,606,997 1,019,984 326,550 229,060
---------- ----------- ---------- ---------- ----------
Income (Loss) from
Operations............... (814,433) (801,249) 467,901 (6,437) 187,660
Interest Income
(Expense), net........ (60,749) (437,198) (635,518) (137,656) (103,134)
---------- ----------- ---------- ---------- ----------
Net Income (Loss) and
Comprehensive Income
(Loss)................... $ (875,182) $(1,238,447) $ (167,617) $ (144,093) $ 84,526
========== =========== ========== ========== ==========
Net Income (Loss) Per
Common Share:
Basic.................... $ (.71) $ (.89) $ (.11) $ (.10) $ .05
========== =========== ========== ========== ==========
Diluted.................. $ (.71) $ (.89) $ (.11) $ (.10) $ .05
========== =========== ========== ========== ==========
Weighted Average Common
Shares Outstanding:
Basic.................... 1,229,640 1,392,568 1,496,905 1,490,698 1,632,325
========== =========== ========== ========== ==========
Diluted.................. 1,229,640 1,392,568 1,496,905 1,490,698 1,750,020
========== =========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 53
MULTI-LINK TELECOMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD FROM INCEPTION (JANUARY 22, 1996) TO SEPTEMBER 30, 1996,
FOR THE YEARS ENDED SEPTEMBER 30, 1997 AND 1998, AND
FOR THE THREE MONTHS ENDED DECEMBER 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK
-------------------- ACCUMULATED
SHARES AMOUNT DEFICIT TOTAL
--------- -------- ----------- -----------
<S> <C> <C> <C> <C>
Balances, January 22, 1996................... -- $ -- $ -- $ --
Common stock for cash...................... 1,200,000 10,000 -- 10,000
Common stock issued for services........... 61,200 1,020 -- 1,020
Net loss................................... -- -- (875,182) (875,182)
--------- -------- ----------- -----------
Balances, September 30, 1996................. 1,261,200 11,020 (875,182) (864,162)
Common stock issued for services........... 92,810 14,191 -- 14,191
Common stock issued for loans.............. 136,688 23,940 23,940
Net loss................................... -- -- (1,238,447) (1,238,447)
--------- -------- ----------- -----------
Balances, September 30, 1997................. 1,490,698 49,151 (2,113,629) (2,064,478)
Warrants issued for loans.................. -- 73,440 -- 73,440
Common stock issued in exchange for debt... 79,454 320,000 -- 320,000
Net loss................................... -- -- (167,617) (167,617)
--------- -------- ----------- -----------
Balances, September 30, 1998................. 1,570,152 442,591 (2,281,246) (1,838,655)
Common stock issued for private placement
(unaudited)............................. 141,600 350,901 -- 350,901
Common stock issued in exchange for debt
(unaudited)............................. 8,400 35,000 -- 35,000
Shares repurchased (unaudited)............. (28,610) (5,721) -- (5,721)
Net income (unaudited)..................... -- -- 84,526 84,526
--------- -------- ----------- -----------
Balances, December 31, 1998 (Unaudited)...... 1,691,542 $822,771 $(2,196,720) $(1,373,949)
========= ======== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 54
MULTI-LINK TELECOMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
INCEPTION FOR THE THREE
(JANUARY 22, FOR THE YEARS ENDED MONTHS ENDED
1996) TO SEPTEMBER 30, DECEMBER 31,
SEPTEMBER 30, ------------------------- -----------------------
1996 1997 1998 1997 1998
------------- ----------- ----------- ----------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash Flows From Operating Activities:
Net income (loss).................................. $(875,182) $(1,238,447) $ (167,617) $(144,093) $ 84,526
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation and amortization.................... 33,179 66,943 122,187 21,618 49,089
Impairment of goodwill........................... 299,570 -- -- -- --
Amortization of debt discount and issuance
costs.......................................... -- -- -- -- 7,175
Common stock issued for services and loans....... 1,020 38,131 -- -- --
Bad debt expense................................. 8,929 64,038 95,299 23,850 25,514
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable............................ (30,680) (186,647) (49,190) (2,771) (103,093)
Deferred factoring costs and other
prepayments................................. (52,709) (54,871) 107,492 18,948 (16,179)
Increase (decrease) in:
Accounts payable............................... 157,519 305,494 (63,449) 17,107 (120,309)
Accrued expenses............................... 55,209 49,128 (214,471) (41,453) (104,531)
Deferred revenue............................... 36,177 (40,559) 60,318 (8,235) (12,555)
--------- ----------- ----------- --------- ---------
Net cash used in operating activities............ (366,968) (966,790) (109,431) (115,029) (190,363)
Cash Flows From Investing Activities:
Purchase of subscriber accounts.................... -- -- (265,834) -- (72,731)
Sale (purchase) of fixed assets.................... 800 (38,446) -- -- (26,572)
Advance of note receivable......................... -- -- -- -- (204,453)
--------- ----------- ----------- --------- ---------
Net cash provided by (used in) investing
activities..................................... 800 (38,446) (265,834) -- (303,756)
Cash Flows From Financing Activities:
Debt issue costs................................... -- -- (70,154) -- --
Offering costs..................................... -- -- (91,215) -- (192,557)
Payment of related party notes payable............. (14,472) (364,035) (1,546,938) (383,567) (448,594)
Advances under related party notes payable......... 325,817 1,342,913 1,673,641 555,253 79,283
Advances under notes payable....................... 80,000 36,241 1,197,215 5,971 150,000
Payment of notes payable........................... (12,500) (15,580) (248,412) (60,140) (45,570)
Repurchase of outstanding shares................... -- -- -- -- (5,721)
Proceeds from issuance of common stock............. 10,000 -- -- -- 590,000
--------- ----------- ----------- --------- ---------
Net cash provided by financing activities........ 388,845 999,539 914,137 117,517 126,841
Increase (Decrease) in Cash and Cash Equivalents..... 22,677 (5,697) 538,872 2,488 (367,278)
Cash and Cash Equivalents, at beginning of period.... -- 22,677 16,980 16,980 555,852
--------- ----------- ----------- --------- ---------
Cash and Cash Equivalents, at end of period.......... $ 22,677 $ 16,980 $ 555,852 $ 19,468 $ 188,574
========= =========== =========== ========= =========
Supplemental Schedule of Cash Flow Information:
Cash paid for interest............................... $ 73,508 $ 298,331 $ 652,199 $ 59,381 $ 125,041
========= =========== =========== ========= =========
Cash paid for taxes.................................. $ -- $ -- $ -- $ -- $ --
========= =========== =========== ========= =========
Equipment acquired through capital leases............ $ 17,465 $ 14,295 $ -- $ -- $ --
========= =========== =========== ========= =========
Equipment acquired through debt...................... $ 281,050 $ 475,444 $ 23,016 $ -- $ --
========= =========== =========== ========= =========
Conversion of notes payable to equity................ $ -- $ -- $ 320,000 $ -- $ 35,000
========= =========== =========== ========= =========
Fair value of warrants granted for loans............. $ -- $ -- $ 73,440 $ -- $ --
========= =========== =========== ========= =========
Liabilities assumed in business combination accounted
for as a purchase.................................. $ 315,485 $ -- $ -- $ -- $ --
========= =========== =========== ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE> 55
MULTI-LINK TELECOMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1998 IS UNAUDITED)
1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES:
Nature of Operations -- Multi-Link Telecommunications, Inc.
(Telecommunications) was incorporated in the state of Colorado in January 1996
under the name Multi-Link Holdings, Inc. Multi-Link Holdings, Inc. was renamed
Multi-Link Telecommunications, Inc. in May 1998. On February 15, 1996,
Telecommunications acquired 97.5% of the issued common stock of Voice Services,
Inc., a Colorado corporation. Voice Services Inc. was renamed Multi-Link
Communications, Inc. (Communications) in April 1996. In May 1996, Communications
purchased a Glenayre Modular Voice Processor and launched a new range of custom
designed voice and fax messaging products targeted at business users in the
Denver and Boulder local calling areas.
Principles of Consolidation -- The consolidated financial statements
include the accounts of Telecommunications and its 97.5% owned subsidiary,
Communications (collectively the "Company"). All significant intercompany
transactions and accounts have been eliminated. As a result of the stockholders'
deficiency in Communications, the minority interest currently has no book value.
Cash and Cash Equivalents -- Cash and cash equivalents consist of cash and
highly liquid debt instruments with original maturities of less than three
months.
Property and Equipment -- Property and equipment acquired on the purchase
of Communications have been stated at fair value. Otherwise, property and
equipment are stated at cost. Depreciation of property and equipment is
calculated using the straight -- line method over the estimated useful lives of
the assets. The estimated useful lives are as follows:
<TABLE>
<S> <C> <C>
Computer equipment -- 3
years
Motor vehicles -- 3
years
Plant and equipment -- 3
years
Voice messaging -- 15
equipment years
</TABLE>
Intangible Assets -- Direct and incremental external costs associated with
the acquisition of subscriber accounts are capitalized. The Company's personnel
and related support costs incurred in support of acquiring and transitioning
subscriber accounts are expensed as incurred. Costs related to the sales and
marketing for subscriber accounts internally generated are expensed as incurred.
Through December 1997, all subscriber accounts were internally generated and,
accordingly, sales and marketing costs were expensed as incurred. Beginning
January 1998, the Company acquired its subscriber accounts primarily through
independent, third-party sales organizations and, accordingly, these direct and
incremental costs have been capitalized.
The costs of capitalized subscriber accounts acquired are amortized on a
straight-line basis over the lesser of 3 years or the estimated economic life of
the subscriber account.
Goodwill represents the excess of the purchase price over the value of net
assets/liabilities acquired in business acquisitions accounted for as a
purchase. Goodwill is amortized over 5 years on a straight-line basis.
Deferred Financing, Discount on Long-Term Debt, and Offering Costs -- Costs
incurred with respect to the Company's factoring facility have been capitalized
and are amortized over the twelve month term of a customer contract using the
straight line method, which approximates the interest rate method.
Costs incurred with respect to the Company's debt financing have been
capitalized and are amortized over the respective lives of associated debt using
the straight-line method, which approximates the interest rate method.
F-8
<PAGE> 56
MULTI-LINK TELECOMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1998 IS UNAUDITED)
Fair value of warrants issued with respect to the Company's debt financing
is treated as a discount to the respective debt and amortized over the term of
the loan.
Deferred offering costs, totaling $91,714 at September 30, 1998, were
offset against the proceeds of a private offering completed during the three
months ended December 31, 1998. As of December 31, 1998, the Company has
incurred $40,820 of deferred offering costs relating to a proposed public
offering (see Note 10). These costs will be offset against the offering proceeds
if it is successfully completed or otherwise will be expensed.
Impairment of Long-Lived and Intangible Assets -- In the event that facts
and circumstances indicate that the cost of long-lived and intangible assets may
be impaired, an evaluation of recoverability would be performed. If an
evaluation is required, the estimated future undiscounted cash flows associated
with the asset would be compared to the asset's carrying amount to determine if
a write-down to market value or discounted cash flow value is required.
Concentration of Credit Risk and Significant Vendors -- Concentration of
credit risk is limited to trade accounts receivable and notes receivable. The
nature of the Company's business is such that no single customer represents more
than 2% of net accounts receivable. The Company does not require collateral or
other security to support customer's receivables but conducts periodic reviews
of customer payment practices to minimize collection risk on trade accounts
receivable. Allowances are maintained for potential credit losses and such
losses have been within management's expectations.
At December 31, 1998, the note receivable was from one corporation, totaled
$204,453, and was uncollateralized. The note was repaid in full during February
1999.
The Company currently uses services provided by US West for interconnection
to the public telephone network. There are other local telephone companies which
could provide the Company with a similar interconnection. However, in the event
that US West was to experience difficulties in providing the Company with
interconnection in its present configuration, it could materially adversely
affect the Company's business in the short-term. An appropriate time period
would be required to enable the Company to establish a new interconnection to
the public telephone network.
During the year ended September 30, 1998, the Company began using
independent agents to obtain new subscriber accounts. One agent accounted for
approximately 45% of the Company's new revenue growth during the fiscal year
1998 which represents a cumulative monthly revenue of approximately $37,000.
Financial Instruments -- The estimated fair values for financial
instruments are determined at discrete points in time based on relevant market
information. These estimates involve uncertainties and cannot be determined with
precision. The carrying amounts of note receivable, accounts receivable,
accounts payable, and accrued liabilities approximate fair value because of the
short-term maturities of these instruments. The fair value of notes payable
approximates their carrying value as generally their interest rates reflect the
Company's current effective annual borrowing rate.
Income Taxes -- The Company currently accounts for income taxes under the
liability method, which requires recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have been
included in the financial statements or tax returns. Under this method, deferred
tax assets and liabilities are determined based on the difference between the
financial statements and tax bases of assets and liabilities using enacted tax
rates in effect for the year in which the differences are expected to reverse.
F-9
<PAGE> 57
MULTI-LINK TELECOMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1998 IS UNAUDITED)
Deferred Revenue and Revenue Recognition -- Revenues are recognized at the
time services are performed or products are delivered, net of refunds. Deferred
revenues primarily represent customer prepayments which are recognized as income
when earned.
Comprehensive Income (Loss) -- Comprehensive income is defined as all
changes in stockholders' equity (deficit), exclusive of transactions with
owners, such as capital investments. Comprehensive income includes net income or
loss, changes in certain assets and liabilities that are reported directly in
equity such as translation adjustments on investments in foreign subsidiaries,
and certain changes in minimum pension liabilities. The Company's comprehensive
income (loss) was equal to its net income (loss) for all periods presented in
these financial statements.
Income (Loss) Per Share -- The income (loss) per share is presented in
accordance with the provisions of Statement of Financial Accounting Standards
(SFAS) No. 128, Earnings Per Share. SFAS No. 128 replaced the presentation of
primary and fully diluted earnings (loss) per share (EPS) with a presentation of
basic EPS and diluted EPS. Basic EPS is calculated by dividing the income or
loss available to common stockholders by the weighted average number of common
stock outstanding for the period. Diluted EPS reflects the potential dilution
that could occur if securities or other contracts to issue common stock were
exercised or converted into common stock. Basic and diluted EPS were the same
for fiscal 1996, 1997, and 1998 as the Company had losses from operations and,
therefore, the effect of all additional potential common stock was antidilutive.
During the three months ended December 31, 1998, included in diluted EPS are
common equivalent shares outstanding totaling 117,695, determined using the
treasury stock method consisting of stock options and warrants. In connection
with the Company's proposed public offering (see Note 10), the representative of
the underwriters required certain of the Company's significant stockholders to
place 200,000 shares of common stock in escrow pursuant to an escrow agreement.
These shares will be released from escrow based on achieving certain net income
and share price levels in the future or the sale of all or substantially all the
assets or stock of the Company. However, the shares will be released from escrow
seven years from the date of the public offering, if not previously released,
and therefore are included in the basic and diluted earnings (loss) per share
calculations. The shares in escrow will retain voting rights.
Stock-Based Compensation -- In fiscal 1997, the Company adopted SFAS No.
123, Accounting for Stock-Based Compensation. SFAS No. 123 encourages, but does
not require, companies to recognize compensation expense for grants of stock,
stock options, and other equity instruments to employees based on fair value.
Companies that do not adopt the fair value accounting rules must disclose the
impact of adopting the new method in the notes to the financial statements.
Transactions in equity instruments with non-employees for goods or services must
be accounted for on the fair value method. The Company has elected not to adopt
the fair value accounting prescribed by SFAS No. 123 for employees, and is
subject only to the disclosure requirements prescribed by SFAS No. 123.
Use of Estimates -- The preparation of the Company's consolidated financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts reported in
these financial statements and accompanying notes. Actual results could differ
from those estimates.
Recently Issued Accounting Pronouncements -- SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, was issued in June 1998. This
statement establishes accounting and reporting standards for derivative
instruments and for hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. This statement is
effective for the Company's financial statements for the year ended September
30, 2001 and the adoption of this standard is not expected to have a material
effect on the Company's financial statements.
F-10
<PAGE> 58
MULTI-LINK TELECOMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1998 IS UNAUDITED)
SFAS No. 132, Employers' Disclosures about Pensions and Other
Postretirement Benefits, was issued in February 1998. This statement revises the
disclosure requirement for pensions and other postretirement benefits. This
statement is effective for the Company's financial statements for the year ended
September 30, 1999 and the adoption of this standard is not expected to have a
material effect on the Company's financial statements.
SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information, was issued in June 1997. This statement establishes standards for
the way public business enterprises report information about operating segments.
It also establishes standards for related disclosure about products and
services, geographical areas and major customers. This statement is effective
for the Company's financial statements for the year ended September 30, 1999 and
the adoption of this standard is not expected to have a material effect on the
Company's financial statements.
Unaudited Information -- The consolidated balance sheet as of December 31,
1998 and the consolidated statements of operations for the three-month period
ended December 31, 1997 and 1998 were taken from the Company's books and records
without audit. However, in the opinion of management, such information includes
all adjustments (consisting only of normal recurring accruals) which are
necessary to properly reflect the consolidated financial position of the Company
as of December 31, 1998 and the results of operations for the three months ended
December 31, 1997 and 1998.
Reclassifications -- Certain reclassifications have been made so that the
financial statements for the period from inception (January 22, 1996) to
September 30, 1996 and the year ended September 30, 1997 conform to the
presentation adopted in fiscal 1998. The reclassifications had no effect on net
income (loss).
2. ACQUISITION:
On February 15, 1996, Telecommunications acquired 97.5% of the common stock
of Communications for $140,000. The Company used the purchase method to account
for this acquisition. The results of Communications have been included in
Telecommunications' consolidated statements of operation from the date of
acquisition. The excess of the total acquisition costs and related fees over the
fair market value of the net liabilities acquired totaling $324,570 has been
recorded as goodwill which, is being amortized over a five-year period on a
straight-line basis. Effective September 30, 1996, the Company recognized an
impairment of goodwill totaling $299,570, as a result of management's
re-evaluation of the acquired technology, customer base and anticipated future
cash flows.
3. PROPERTY AND EQUIPMENT:
Property and equipment comprise the following as of September 30, 1998:
<TABLE>
<S> <C>
Computer equipment.......................................... $ 79,980
Motor vehicles.............................................. 17,426
Plant and equipment......................................... 2,905
Voice messaging equipment................................... 756,374
---------
856,685
Accumulated depreciation.................................... (172,719)
---------
$ 683,966
=========
</TABLE>
F-11
<PAGE> 59
MULTI-LINK TELECOMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1998 IS UNAUDITED)
4. NOTE RECEIVABLE:
In November 1998, Communications entered into a $250,000 line-of-credit
agreement with one of the Company's independent agents. As of December 31, 1998,
the amount drawn on the line-of-credit was $204,453. During February 1999, all
outstanding principal and accrued interest was paid and the line-of-credit was
terminated.
5. INTANGIBLE ASSETS:
Intangible assets comprise the following as of September 30, 1998:
<TABLE>
<S> <C>
Goodwill.................................................... $ 324,570
Subscriber accounts......................................... 265,834
---------
590,404
Amortization................................................ (349,160)
---------
$ 241,244
=========
</TABLE>
6. NOTES PAYABLE AND LONG-TERM DEBT:
Notes payable and long-term debt consist of the following as of September
30, 1998:
Related Parties:
<TABLE>
<S> <C>
Note payable to a stockholder (previously the Company's
factor) with interest at 15% until September 30, 1999,
then increasing to 25%. Repayment of principal is required
from net proceeds of all subsequent debt and equity
financing until the balance is repaid in full. Interest is
payable monthly and principal payments of $25,000 begin
October 30, 1999 and continue until the balance is repaid
in full. This note is collateralized by all the assets of
the Company with the personal guarantees of certain
officers/directors/stockholders and is subordinated to the
Westburg Loan (see other notes payable). During the three
months ended December 31, 1998, the Company made $374,237
of principal and interest payments from the private
placement which occurred in November 1998. The Company
also issued warrants for the purchase of 36,000 shares of
common stock to the lender as consideration for converting
part of the loan to equity (see Note 8)................... $ 547,807
Notes payable to an entity owned by a stockholder/director
of the Company with 10% interest, payable on demand. This
note is unsecured......................................... 43,923
Notes payable to a stockholder/director of the Company, with
10% interest, payable on demand. This note is unsecured... 77,244
---------
668,974
Less current portion........................................ (421,167)
---------
$ 247,807
=========
</TABLE>
Total interest expense to these related parties for the period from
inception (January 22, 1996) to September 30, 1996, for the years ended
September 30, 1997 and 1998 and for the three months ended December 31, 1997 and
1998 was $17,844, $255,446, $376,344, $101,159, and $17,008, respectively.
F-12
<PAGE> 60
MULTI-LINK TELECOMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1998 IS UNAUDITED)
Other:
<TABLE>
<S> <C> <C>
Communications has entered into various loan agreements to purchase
motor vehicles, computer and voice messaging equipment The loans require
varying monthly payments and mature through June 2003. Interest is
charged at rates between 12.5% and 13.9%. The loans are collateralized
by the underlying assets and are personally guaranteed by certain
officers/directors/stockholders of the Company
........................................................................ $ 621,308
Note payable to a commercial lender (the Westburg Loan) with interest
charged at 3% above prime (11.25% as of September 30, 1998) monthly
payments of interest only through September 1999 after which date
monthly principal and interest payments are to be made on the basis of
a 10-year amortization with all unpaid principal and accrued interest
due October 2003. Certain officers/directors/ stockholders have
pledged 960,000 shares of their common stock as collateral for the
loan. Additionally, this note is collateralized by all the assets of
the Company and guaranteed by certain officers/directors/stockholders
of the Company. The Westburg Loan is a $2,100,000 term credit facility
of which $1,800,000 and $1,950,000 have been drawn as of September 30,
1998 and December 31, 1998, respectively. Under the terms of the
Westburg Loan, the Company is required to maintain certain financial
ratios and has certain other restrictions including limits on total
indebtedness, payment of dividends, and capital expenditures. As of
September 30, 1998, the Company was not in compliance with the debt
ratio covenant and received a waiver from Westburg. The Company was in
compliance with all debt covenants as of December 31, 1998. The
Company also issued warrants for the purchase of 150,000 shares of
common stock with a fair value of $73,440 to the lender as
consideration for the loan. The estimated fair value of the warrants
is treated as a discount on the long-term debt and is being amortized
over the 5-year term of the loan.
Face value...................................... $1,800,000
Unamortized discount............................ (73,440)
----------
1,726,560
Note payable to a private individual with interest charged at 15% which
was unsecured and which was due to mature June 30, 1999. The principal
balance was converted to equity in November 1998...................... 35,849
Other................................................................... 18,177
----------
2,401,894
Less current portion.................................................... (179,829)
----------
$2,222,065
==========
</TABLE>
F-13
<PAGE> 61
MULTI-LINK TELECOMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1998 IS UNAUDITED)
Principal payments on the above obligations at September 30, 1998, net of
the discount on the Westburg Loan, are due as follows:
<TABLE>
<CAPTION>
RELATED
PARTIES OTHER
-------- ----------
<S> <C> <C>
1999........................................................ $421,167 $ 179,829
2000........................................................ 247,807 248,460
2001........................................................ -- 273,756
2002........................................................ -- 233,977
2003........................................................ -- 153,376
Thereafter.................................................. -- 1,312,496
-------- ----------
$668,974 $2,401,894
======== ==========
</TABLE>
7. COMMITMENTS:
The Company leases certain equipment under lease agreements classified as
operating leases. Minimum future equipment rental payments are as follows:
<TABLE>
<S> <C>
1999...................................................... $ 8,575
2000...................................................... 7,664
2001...................................................... 6,535
2002...................................................... 4,635
2003...................................................... 1,545
-------
$28,954
=======
</TABLE>
The Company leases its office facility for monthly payments of $2,200 and
intends to vacate this facility and lease a new facility in 1999.
Rent expense for the period from inception (January 22, 1996) to September
30, 1996, for the years ended September 30, 1997 and 1998 and for the three
months ended December 31, 1997 and 1998 was $12,655, $18,150, $20,712, $5,134,
and $6,501, respectively.
8. STOCKHOLDERS' EQUITY:
Preferred Stock -- The Company has the authority to issue 5,000,000 shares
of preferred stock. The Board of Directors has the authority to issue such
preferred stock in series and determine the rights and preferences of the
shares.
Common Stock -- During 1997, the Company declared a 200 for 1 stock split.
The Company also declared a 3 for 5 reverse stock split effective in February
1999. Accordingly, all amounts for common stock reflected in the financial
statements and accompanying notes reflect the effect of these splits.
Warrants -- During fiscal 1998, the Company issued warrants for the
purchase of 36,000 shares of common stock to an entity in consideration for
converting part of its debt with the Company into 72,000 shares of common stock.
These warrants expire May 2000 and as of December 31, 1998, were exercisable at
$8.33 per share. Effective February 1999, these warrants were repriced at $4.17
per share.
During the year ended September 30, 1998, the Company issued a warrant for
the purchase of 150,000 shares of common stock to the lender in consideration
for advancing the Westburg Loan (see Note 6). The expiration date of the
warrants will be earlier of (i) the date all amounts are repaid under the
Westburg loan, (ii) the date of the sale of the Company or substantially all of
its assets, or (iii) the
F-14
<PAGE> 62
MULTI-LINK TELECOMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1998 IS UNAUDITED)
effective date of a registration statement filed under the Securities Act in
connection with a $5,000,000 or greater firm commitment underwriting for common
stock of the Company. These warrants are exercisable at $4.17 per share.
In connection with the private placement and debt conversion in November
1998, the Company issued warrants to purchase 75,000 shares of common shares
which, as of December 31, 1998, were exercisable at $8.33 per share. Effective
February 1999, these warrants were repriced at $4.17 per share. The warrants
expire in May 2000 and are redeemable under certain circumstances by the
Company.
In November 1998, the placement agent of the private placement was issued
warrants to purchase 15,000 and 7,500 shares of common stock at $5 and $4.17 per
share, respectively. The warrants are exercisable under the same terms as the
warrants issued in the private placement. The placement agent options are
exercisable after November 1999 and expire in November 2003.
Stock Options -- In 1997, the Company adopted a stock option plan (the
"Plan") that authorizes the issuance of up to 300,000 shares of common stock.
Pursuant to the Plan, the Company may grant "incentive stock options" (intended
to qualify under Section 422 of the Internal Revenue Code of 1986, as amended)
or "nonqualified stock options."
Incentive and nonqualified stock options shall be granted at fair market
value, to be determined by the Board of Directors, at the date of grant (except
for holders of more than 10% of common stock, in which case the exercise price
must be at least 110% of the fair market value at the date of grant for
incentive stock options). The term of the options shall not exceed ten years and
the vesting date is determined by the Board of Directors. As of September 30,
1998, the Company had granted options under the Plan to purchase 164,295 shares,
of which no options have been exercised and 9,630 have been forfeited or
canceled.
The following is a table of activity under the Plan:
<TABLE>
<CAPTION>
1997 1998
-------------------- --------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
NUMBER EXERCISE NUMBER EXERCISE
OF SHARES PRICE OF SHARES PRICE
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Outstanding, beginning of year................. -- $ -- 101,355 $ .105
Granted:
Employees and others...................... -- -- 25,200 2.450
Employees and others...................... -- -- 35,490 4.167
Employees................................. 72,000 .017 -- --
Employees................................. 13,110 .167 -- --
Employees................................. 18,495 .417 -- --
Forfeited/Canceled........................... (2,250) .220 (7,380) .943
------- ----- ------- ------
Outstanding, end of year....................... 101,355 $.105 154,665 $1.384
======= ===== ======= ======
</TABLE>
For all options granted during fiscal 1997 and 1998, the weighted average
market price of the Company's common stock on the grant date was approximately
equal to the weighted average exercise price. Because the shares are not
registered and publicly traded, for the purpose of pricing the grants, the fair
market value of the Company's common stock is determined by the Company's
management and the Board of Directors.
F-15
<PAGE> 63
MULTI-LINK TELECOMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1998 IS UNAUDITED)
The weighted average contractual life for all options as of September 30,
1998 was approximately 9 years, with the exercise prices ranging from $.017 to
$4.167. At September 30, 1998, options for 12,015 shares were exercisable and
options for the remaining shares become exercisable pro rata through fiscal
2000. If not previously exercised, options outstanding at September 30, 1998,
will expire as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER EXERCISE
FISCAL YEAR OF SHARES PRICE
- ----------- --------- --------
<S> <C> <C>
2007...................................................... 72,000 $ .017
2007...................................................... 7,410 .167
2007...................................................... 16,605 .417
2008...................................................... 23,580 2.450
2008...................................................... 35,070 4.166
------- ------
154,665 $1.384
======= ======
</TABLE>
On December 31, 1998, the Company issued a total of 10,335 options at an
exercise price of $6.00 per share to employees of the Company and others.
The Company will issue options for the purchase of 20,000 shares of common
stock at an exercise price of $6.00 per share to two independent directors of
the Company if the public offering is successful (see Note 10).
Pro Forma Stock-Based Compensation Disclosures -- The Company applies APB
Opinion 25 and related interpretations in accounting for its stock options which
are granted to employees. Accordingly, no compensation cost has been recognized
for grants of options to employees since the exercise prices were not less than
the fair value of the Company's common stock on the grant dates. Had
compensation cost been determined based on the fair value at the grant dates for
awards under the Plan consistent with the method of FAS 123, the Company's net
income and earnings per share would have been reduced to the pro forma amount
indicated below.
<TABLE>
<CAPTION>
YEARS ENDED
SEPTEMBER 30,
------------------------
1997 1998
----------- ---------
<S> <C> <C>
Net loss applicable to common shareholders:
As reported.............................................. $(1,238,447) $(167,617)
Pro forma................................................ (1,239,410) (184,033)
Net loss per common share, basic and diluted:
As reported.............................................. $ (.89) $ (.11)
Pro forma................................................ (.89) (.12)
</TABLE>
For purposes of this disclosure, the weighted average fair value of the
options granted was $.033 and $1.117 in fiscal 1997 and 1998, respectively. The
fair value of each employee option granted in fiscal year
F-16
<PAGE> 64
MULTI-LINK TELECOMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1998 IS UNAUDITED)
1997 and 1998, was estimated on the date of grant using the Black-Scholes option
pricing model with the following weighted average assumptions:
<TABLE>
<CAPTION>
YEARS ENDED
SEPTEMBER 30,
-------------
1997 1998
---- -----
<S> <C> <C>
Expected volatility......................................... 0% 0%
Risk-Free interest rate..................................... 6.5% 5.6%
Expected dividends.......................................... -- --
Expected terms (in years)................................... 4 4
</TABLE>
9. INCOME TAXES:
The Company's actual effective tax rate differs from U.S. Federal corporate
income tax rate of 34% as follows:
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(JANUARY 22, 1996) YEARS ENDED
TO SEPTEMBER 30,
SEPTEMBER 30, -------------
1996 1997 1998
------------------ ----- -----
<S> <C> <C> <C>
Statutory rate....................................... (34.0)% (34.0)% (34.0)%
State income taxes, net of Federal income tax
benefit............................................ (3.3)% (3.3)% (3.3)%
Increase (reduction) in valuation allowance related
to of net operating loss carryforwards and change
in temporary differences........................... 37.3% 37.3% 37.3%
----- ----- -----
-0-% -0-% -0-%
===== ===== =====
</TABLE>
The components of the net deferred tax asset recognized as of September 30
are as follows:
<TABLE>
<CAPTION>
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Long-term deferred tax assets (liabilities):
Net operating loss carryforwards................... $300,000 $740,000 $756,000
Goodwill........................................... 107,000 99,000 96,000
Capitalized subscriber accounts.................... -- -- (86,000)
Other.............................................. -- -- (45,000)
Valuation allowance................................ (407,000) (839,000) (721,000)
-------- -------- --------
Net long-term deferred tax asset........... $ -- $ -- $ --
======== ======== ========
</TABLE>
The Company currently has a net operating loss carryforward for Federal tax
purposes of approximately $2,025,000, which, unless utilized, expires from 2011
through 2018. Certain of the loss carryforwards will be subject to restrictions
upon completion of the public offering (see Note 10).
10. INITIAL PUBLIC OFFERING:
Letter of Intent for a Public Offering -- The Company is preparing for a
public offering consisting of 1,200,000 units to provide gross proceeds to the
Company of approximately $7,200,000. The Company anticipates that the offering
price will be $6.00 per unit. Each unit will consist of one share of common
stock and one common stock purchase warrant. Two warrants will allow the holder
to purchase one share of common stock at an exercise price of 150% of the
offering price for a period of three years after the
F-17
<PAGE> 65
date of the offering. The warrants are redeemable by the Company at $.05 per
warrant upon 30 days notice if the market price of the common stock for 20
consecutive trading days within the 30-day period preceding the date the notice
is given equals or exceeds 125% of the exercise price. The representative of the
underwriters has a 45-day option (over-allotment option) to purchase up to
180,000 units at the offering price. The Company will also sell to the
representative of the underwriters at the close of the public offering warrants,
at a total purchase price of $100, to purchase 120,000 units. The underwriters
warrants will be exercisable for four years beginning one year after the
effective date of the registration statement at 128% of the offering price. The
letter of intent is subject to change and cancellation by either party.
F-18
<PAGE> 66
------------------------------------------------------
------------------------------------------------------
MULTI-LINK HAS NOT AUTHORIZED ANY DEALER, SALESPERSON OR OTHER PERSON TO GIVE
ANY INFORMATION OR REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS. YOU MUST
NOT RELY ON ANY UNAUTHORIZED INFORMATION. THIS PROSPECTUS DOES NOT OFFER TO SELL
OR BUY ANY UNITS IN ANY JURISDICTION WHERE IT IS UNLAWFUL. THE INFORMATION IN
THIS PROSPECTUS IS CURRENT ONLY AS OF ITS DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
Prospectus Summary................... 1
Risk Factors......................... 4
Additional Information............... 9
Use of Proceeds...................... 10
Dividend Policy...................... 11
Dilution............................. 11
Capitalization....................... 12
Selected Consolidated Financial
Data............................... 13
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 14
Business............................. 21
Management........................... 27
Principal Stockholders............... 34
Description of Securities............ 36
Shares Eligible for Future Sale...... 38
Underwriting......................... 40
Legal Matters........................ 43
Experts.............................. 43
Index to Financial Statements........ F-1
</TABLE>
UNTIL , ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
MULTI-LINK
TELECOMMUNICATIONS, INC.
"KEEPING YOU IN TOUCH"
[MULTI-LINK LOGO]
1,200,000 Units
--------------------
PROSPECTUS
--------------------
SCHNEIDER SECURITIES, INC.
, 1999
------------------------------------------------------
------------------------------------------------------
<PAGE> 67
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 7-109-102 of the Colorado Business Corporation Act permits a
Colorado corporation to indemnify any director against liability if such person
acted in good faith and, in the case of conduct in an official capacity with the
corporation, that the director's conduct was in the corporation's best interests
and, in all other cases, that the director's conduct was at least not opposed to
the best interests of the corporation or, with regard to criminal proceedings,
the director had no reasonable cause to believe the director's conduct was
unlawful.
Section 7-109-102 of the Colorado Business Corporation Act provides that,
unless limited by its articles of incorporation, a Colorado corporation shall
indemnify a person who was wholly successful, on the merits or otherwise, in the
defense of any proceeding to which the person was a party because the person is
or was a director, against reasonable expenses incurred by him or her in
connection with the proceeding.
Article V.A. of Multi-Link's Restated Articles of Incorporation, filed as
Exhibit 3.1, hereto, provides that Multi-Link shall indemnify, to the maximum
extent permitted by law, any person who is or was a director or officer of
Multi-Link, and may indemnify any other person, against any claim, liability or
expense arising against or incurred by such person made party to a proceeding
because he is or was serving another entity as a director, officer, partner,
trustee, employee, fiduciary or agent at Multi-Link's request. Multi-Link shall
further have the authority, to the maximum extent permitted by law, to purchase
and maintain insurance providing such indemnification, advance expenses to
persons indemnified by Multi-Link, and provide indemnification to any person by
general or specific action of the board of directors, the bylaws of Multi-Link,
contract or otherwise.
Article V.B. of Multi-Link's Restated Articles of Incorporation, filed as
Exhibit 3.1, hereto, provides that no director of Multi-Link shall have any
personal liability to Multi-Link or its shareholders for monetary damages for
breach of his fiduciary duty as a director, except that this provision shall not
eliminate or limit the personal liability of a director to Multi-Link or to its
shareholders for monetary damages for: (i) any breach of the director's duty of
loyalty to Multi-Link or to its shareholders; (ii) acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law;
(iii) voting for or assenting to a distribution which, after giving effect to
the distribution, would result in (a) Multi-Link not being able to pay its debts
as they become due, or (b) Multi-Link's total assets being less than the sum of
its total liabilities plus amounts needed to satisfy preferential rights upon
dissolution of Multi-Link, but only if it is established that the director did
not perform his duties in good faith, with the care of an ordinary prudent
person in a like position under similar circumstances, and in a manner he
believed to be in the best interests of Multi-Link, provided that the personal
liability of a director in this circumstance shall be limited to the amount of
the distribution which exceeds what could have been distributed without
violation of this paragraph; or (iv) any transaction from which the director
directly or indirectly derives an improper personal benefit. Article V.B. also
provides that if the Colorado Business Corporation Act is amended or superseded
and such amendment or superseding statute eliminates or limits further, or
allows Multi-Link to eliminate or limit further, the liability of a director,
then in addition to the elimination and limitation of liability provided by the
preceding sentence, the liability of each director shall be eliminated or
limited to the fullest extent permitted by the Colorado Business Corporation
Act, as so amended, or such superseding statute. Nothing contained in Article
V.B. is to be construed to deprive any director of his right to all defenses
ordinarily available to a director nor will anything herein be construed to
deprive any director of any right he may have for contribution from any other
director or other person.
Section 8(b) of the form of underwriting agreement filed as Exhibit 1.1
hereto provides that the underwriter agrees to indemnify and hold harmless
Multi-Link, each director of Multi-Link, each officer of Multi-Link who has
signed the registration statement, each other person, if any, who controls
Multi-Link within the meaning of Section 15 of the Securities Act of 1933 or
Section 20(a) of the Securities
II-1
<PAGE> 68
Exchange Act of 1934 with respect to statements or omissions, if any, made in
any preliminary prospectus, the registration statement or the prospectus, or any
amendment or supplement thereto, or in any application, in reliance upon and in
conformity with written information furnished to Multi-Link with respect to the
underwriters, by or on behalf of the underwriters expressly for inclusion in any
such document. Section 8(c) provides for contribution in circumstances where the
indemnity provisions are unavailable.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Expenses payable by us in connection with the issuance and distribution of
the securities being registered hereby are as follows:
<TABLE>
<S> <C>
SEC Registration Fee........................................ $ 4,421
NASD Filing Fee............................................. $ 2,090
Nasdaq SmallCap Market Filing Fee........................... $ 10,000
Accounting Fees and Expenses................................ $ 50,000*
Legal Fees and Expenses..................................... $ 80,000*
Blue Sky Fees and Expenses.................................. $ 20,000*
Representative's Non-Accountable Expense Allowance.......... $216,000*
Printing, Freight and Engraving............................. $ 80,000*
Miscellaneous............................................... $ 11,489*
--------
Total............................................. $474,000*
========
</TABLE>
- ---------------
* Estimated.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
The following is information as to all securities of Multi-Link sold by
Multi-Link within the past three years which were not registered under the
Securities Act of 1933, as amended ("1933 Act").
(a) In January 1996, Multi-Link issued 600,000 shares of its common stock
to each of Octagon Strategies, Inc. and Shawn B. Stickle for $0.0083 per share.
Multi-Link issued the shares in reliance upon the exemption from registration
provided by Section 4(2) of the 1933 Act. Such persons represented to Multi-Link
that they acquired the shares for their own account and not with a view to
distribution and that they had available to them all material information
concerning Multi-Link. The certificates evidencing the shares bear a restrictive
legend under the 1933 Act. No underwriter was involved in the transaction.
(b) In May 1996, Multi-Link issued 61,200 shares of its common stock to CS
Capital Corp. as an equity addition to a $500,000 factoring facility. Multi-Link
issued the shares in reliance upon the exemption from registration provided by
Section 4(2) of the 1933 Act. Such company represented to Multi-Link that it
acquired the shares for its own account and not with a view to distribution and
that it had available to it all material information concerning Multi-Link. The
certificates evidencing the shares bear a restrictive legend under the 1933 Act.
No underwriter was involved in the transaction.
(c) In January 1997, Multi-Link issued 61,200 shares of its common stock to
Telemessaging Services, Inc. for consulting services. Multi-Link issued the
shares in reliance upon the exemption from registration provided by Section 4(2)
of the 1933 Act. Such company represented to Multi-Link that it acquired the
shares for its own account and not with a view to distribution and that it had
available to it all material information concerning Multi-Link. The certificates
evidencing the shares bear a restrictive legend under the 1933 Act. No
underwriter was involved in the transaction.
(d) In January 1997, Multi-Link issued 26,640 shares of its common stock to
Harbour Settlement as an equity addition to a $60,000 loan. Multi-Link issued
the shares in reliance upon the exemption from registration provided by Section
4(2) of the 1933 Act. Such company represented to Multi-Link that it acquired
the shares for its own account and not with a view to distribution and that it
had available to it
II-2
<PAGE> 69
all material information concerning Multi-Link. The certificates evidencing the
shares bear a restrictive legend under the 1933 Act. No underwriter was involved
in the transaction.
(e) In January 1997, Multi-Link issued 13,320 shares of its common stock to
Ron Stickle as an equity addition to a $25,000 loan. Multi-Link issued the
shares in reliance upon the exemption from registration provided by Section 4(2)
of the 1933 Act. Such person represented to Multi-Link that he acquired the
shares for his own account and not with a view to distribution and that he had
available to him all material information concerning Multi-Link. The
certificates evidencing the shares bear a restrictive legend under the 1933 Act.
No underwriter was involved in the transaction.
(f) In January 1997, Multi-Link issued 68,118 shares of its common stock to
CS Capital Corp. as an equity addition to a $250,000 loan. Multi-Link issued the
shares in reliance upon the exemption from registration provided by Section 4(2)
of the 1933 Act. Such company represented to Multi-Link that it acquired the
shares for its own account and not with a view to distribution and that it had
available to it all material information concerning Multi-Link. The certificates
evidencing the shares bear a restrictive legend under the 1933 Act. No
underwriter was involved in the transaction.
(g) In June 1997, Multi-Link issued 28,610 shares of its common stock to CS
Capital Corp. as an equity addition to a $300,000 loan. Multi-Link issued the
shares in reliance upon the exemption from registration provided by Section 4(2)
of the 1933 Act. Such company represented to Multi-Link that it acquired the
shares for its own account and not with a view to distribution and that it had
available to it all material information concerning Multi-Link. The certificates
evidencing the shares bear a restrictive legend under the 1933 Act. No
underwriter was involved in the transaction.
(h) In July 1997, Multi-Link issued 3,000 shares of its common stock to
David E. Peri for consulting services. Multi-Link issued the shares in reliance
upon the exemption from registration provided by Section 4(2) of the 1933 Act.
Such person represented to Multi-Link that he acquired the shares for his own
account and not with a view to distribution and that he had available to him all
material information concerning Multi-Link. The certificates evidencing the
shares bear a restrictive legend under the 1933 Act. No underwriter was involved
in the transaction.
(i) In July 1997, Multi-Link issued 28,610 shares of its common stock to
Corporate Finance Group, Inc. for corporate finance and other consulting
services. Multi-Link issued the shares in reliance upon the exemption from
registration provided by Section 4(2) of the 1933 Act. Such company represented
to Multi-Link that it acquired the shares for its own account and not with a
view to distribution and that it had available to it all material information
concerning Multi-Link. The certificates evidencing the shares bear a restrictive
legend under the 1933 Act. No underwriter was involved in the transaction. The
28,610 shares of common stock were repurchased by Multi-Link in November 1998.
(j) In January 1998, Multi-Link issued 7,454 shares of its common stock to
Robert and Lynne Williams on conversion of a $20,000 loan. Multi-Link issued the
shares in reliance upon the exemption from registration provided by Section 4(2)
of the 1933 Act. Such persons represented to Multi-Link that they acquired the
shares for their own account and not with a view to distribution and that they
had available to them all material information concerning Multi-Link. The
certificates evidencing the shares bear a restrictive legend under the 1933 Act.
No underwriter was involved in the transaction.
(k) In September 1998, Multi-Link issued warrants to purchase 150,000 of
its common stock at an exercise price of $4.17 per share to Westburg Media
Capital LLP in connection with a $2,100,000 term credit facility furnished by
Westburg to Multi-Link. The expiration date of the warrants is the earlier of
(i) the date all amounts are repaid under the Westburg loan, (ii) the date of
the sale of Multi-Link or substantially all of its assets, (iii) the effective
date of a registration statement filed under the 1933 Act in connection with a
firm commitment underwriting for common stock of Multi-Link seeking to raise
gross proceeds of at least $5,000,000 at a price of not less than $5.00 per
share or (iv) October 21, 2003. Multi-Link issued the warrants in reliance upon
the exemption from registration provided by Section 4(2) of the 1933 Act.
Westburg had available to it all material information concerning Multi-Link. The
certificate evidencing the warrants bears a restrictive legend under the 1933
Act. No underwriter was involved in the transaction.
II-3
<PAGE> 70
ITEM 27. EXHIBITS.
The following is a list of all exhibits filed as part of this Registration
Statement:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION AND METHOD OF FILING
----------- --------------------------------
<C> <S>
1.1 -- Form of Underwriting Agreement.*
1.2 -- Form of Selected Dealers Agreement.*
3.1 -- Restated Articles of Incorporation filed on May 18,
1998.*
3.2 -- Amendments to Restated Articles of Incorporation filed on
February 2, 1999.*
3.3 -- Bylaws as amended through January 1, 1999.*
4.1 -- Borrowing Agreement dated September 25, 1998, between
Westburg Media Capital LP, the Registrant, Multi-Link
Telecommunications, Inc., Nigel V. Alexander, Shawn B.
Stickle and The Blackhawk Trust.*
4.2 -- Form of Commercial Installment Contract between the
Registrant and Associates Commercial Corporation.*
4.3 -- Form of Security Agreement between the Registrant and
Associates Commercial Corporation.*
4.4 -- Form of Warrant Agreement between the Registrant and
American Securities Transfer & Trust, Inc.
4.5 -- Form of Escrow Agreement.*
4.6 -- Forms of Lock-Up Agreements.*
4.7 -- Form of Representative's Option for the Purchase of
Units.
4.8 -- Form of Warrant Exercise Fee Agreement between Schneider
Securities, Inc., American Securities Transfer & Trust,
Inc. and the Registrant.*
4.9 -- Amendment to Borrowing Agreement dated April 15, 1999
between Westburg Media Capital L.P., the Registrant and
Multi-Link Communications, Inc.*
4.10 -- Registration Rights Agreement dated April 15, 1999
between Westburg Media Capital L.P. and the Registrant.*
5.1 -- Opinion of Smith McCullough, P.C. on legality.*
10.1 -- Stock Option Plan.*
10.2 -- First Amendment to Stock Option Plan.*
10.3 -- Agreement dated January 1, 1999, between the Registrant
and Telecom Sales Associates, Inc. as amended on February
3, 1999.*
10.4 -- Form of Customer Agreement.*
10.5 -- US West Communications Digital Switched Service Rate
Stability Plan Agreements.*
10.6 -- Consulting Agreement between the Registrant and Octagon
Strategies, Inc.*
10.7 -- Employment Agreement between the Registrant and Shawn B.
Stickle.*
10.8 -- Lease Agreement dated March 29, 1999 between the
Registrant and Lakeside Holdings, L.L.C., as amended.*
10.9 -- Promissory Note dated September 30, 1998 from Registrant
to Octagon Strategies, Inc.*
10.10 -- Promissory Note dated September 30, 1998 from Registrant
to Shawn B. Stickle.*
10.11 -- Promissory Note dated April 14, 1999 from Registrant to
Westburg Media Capital, L.P.*
16 -- Letter from James E. Scheifley & Associates, PC
confirming the circumstances pursuant to which James E.
Scheifley & Associates, PC resigned as Registrant's
principal independent accountants.*
21 -- Subsidiaries of the Registrant.*
23.1 -- Consent of HEIN + ASSOCIATES LLP.
23.2 -- Consent of James E. Scheifley & Associates, PC.
23.3 -- Consent of Smith McCullough, P.C. (included in Exhibit
5.1).*
27 -- Financial Data Schedule.*
</TABLE>
- ---------------
* Previously filed as a part of this registration statement.
II-4
<PAGE> 71
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City and County
of Denver, State of Colorado on May 12, 1999.
MULTI-LINK TELECOMMUNICATIONS, INC.
/s/ NIGEL V. ALEXANDER
--------------------------------------
Nigel V. Alexander,
Chief Executive Officer and Principal
Executive Officer
/s/ SHAWN B. STICKLE
--------------------------------------
Shawn B. Stickle,
President and Chief Operating Officer
/s/ DAVID J. CUTLER
--------------------------------------
David J. Cutler,
Chief Financial Officer and Principal
Accounting Officer
In accordance with the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates stated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ SHAWN B. STICKLE Director May 12, 1999
- -----------------------------------------------------
Shawn B. Stickle
/s/ NIGEL V. ALEXANDER Director May 12, 1999
- -----------------------------------------------------
Nigel V. Alexander
/s/ KEITH R. HOLDER Director May 12, 1999
- -----------------------------------------------------
Keith R. Holder
/s/ R. BRAD STILLAHN Director May 12, 1999
- -----------------------------------------------------
R. Brad Stillahn
</TABLE>
II-5
<PAGE> 72
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION AND METHOD OF FILING
----------- --------------------------------
<C> <S>
1.1 -- Form of Underwriting Agreement.*
1.2 -- Form of Selected Dealers Agreement.*
3.1 -- Restated Articles of Incorporation filed on May 18,
1998.*
3.2 -- Amendments to Restated Articles of Incorporation filed on
February 2, 1999.*
3.3 -- Bylaws as amended through January 1, 1999.*
4.1 -- Borrowing Agreement dated September 25, 1998, between
Westburg Media Capital LP, the Registrant, Multi-Link
Telecommunications, Inc., Nigel V. Alexander, Shawn B.
Stickle and The Blackhawk Trust.*
4.2 -- Form of Commercial Installment Contract between the
Registrant and Associates Commercial Corporation.*
4.3 -- Form of Security Agreement between the Registrant and
Associates Commercial Corporation.*
4.4 -- Form of Warrant Agreement between the Registrant and
American Securities Transfer & Trust, Inc.
4.5 -- Form of Escrow Agreement.*
4.6 -- Forms of Lock-Up Agreements.*
4.7 -- Form of Representative's Option for the Purchase of
Units.
4.8 -- Form of Warrant Exercise Fee Agreement between Schneider
Securities, Inc., American Securities Transfer & Trust,
Inc. and the Registrant.*
4.9 -- Amendment to Borrowing Agreement dated April 15, 1999
between Westburg Media Capital L.P., the Registrant and
Multi-Link Communications, Inc.*
4.10 -- Registration Rights Agreement dated April 15, 1999
between Westburg Media Capital L.P. and the Registrant.*
5.1 -- Opinion of Smith McCullough, P.C. on legality.*
10.1 -- Stock Option Plan.*
10.2 -- First Amendment to Stock Option Plan.*
10.3 -- Agreement dated January 1, 1999, between the Registrant
and Telecom Sales Associates, Inc. as amended on February
3, 1999.*
10.4 -- Form of Customer Agreement.*
10.5 -- US West Communications Digital Switched Service Rate
Stability Plan Agreements.*
10.6 -- Consulting Agreement between the Registrant and Octagon
Strategies, Inc.*
10.7 -- Employment Agreement between the Registrant and Shawn B.
Stickle.*
10.8 -- Lease Agreement dated March 29, 1999 between the
Registrant and Lakeside Holdings, L.L.C., as amended.*
10.9 -- Promissory Note dated September 30, 1998 from Registrant
to Octagon Strategies, Inc.*
10.10 -- Promissory Note dated September 30, 1998 from Registrant
to Shawn B. Stickle.*
10.11 -- Promissory Note dated April 14, 1999 from Registrant to
Westburg Media Capital, L.P.*
16 -- Letter from James E. Scheifley & Associates, PC
confirming the circumstances pursuant to which James E.
Scheifley & Associates, PC resigned as Registrant's
principal independent accountants.*
21 -- Subsidiaries of the Registrant.*
23.1 -- Consent of HEIN + ASSOCIATES LLP.
23.2 -- Consent of James E. Scheifley & Associates, PC.
23.3 -- Consent of Smith McCullough, P.C. (included in Exhibit
5.1).*
27 -- Financial Data Schedule.*
</TABLE>
- ---------------
* Previously filed as a part of this registration statement.
<PAGE> 1
EXHIBIT 4.4
WARRANT AGREEMENT
-------------------------
MULTI-LINK TELECOMMUNICATIONS, INC.
AND
AMERICAN SECURITIES TRANSFER & TRUST, INC.
WARRANT AGENT
_________________, 1999
<PAGE> 2
WARRANT AGREEMENT
THIS AGREEMENT dated as of _______________, 1999, between MULTI-LINK
TELECOMMUNICATIONS, INC., a Colorado corporation (the "Company"), and AMERICAN
SECURITIES TRANSFER & TRUST, INC., a transfer agency located in Denver, Colorado
(the "Warrant Agent").
WHEREAS: The Company is conducting a public offering (the "Public
Offering") of 1,200,000 shares (the "Firm Shares") of Common Stock of the
Company ("Common Stock") and 1,200,000 warrants ("Firm Warrants"), two Warrants
entitling the Registered Owner thereof to purchase one share of Common Stock, or
an aggregate of 600,000 shares of Common Stock of the Company on exercise of all
Firm Warrants; and
The Company also is granting the several underwriters (the
"Underwriters") of the Company's Public Offering pursuant to an underwriting
agreement (the "Underwriting Agreement"), the option to purchase up to an
additional 180,000 shares (the "Over-Allotment Shares") and 180,000 warrants
(the "Over-Allotment Warrants") exercisable to purchase up to an aggregate of
90,000 shares of Common Stock; and
The Company desires to provide for the issuance, registration,
transfer, exchange and exercise of certificates (the "Warrant Certificates")
representing the Firm Warrants and the Over-Allotment Warrants (collectively,
herein, the "Warrants") and for the exercise of the Warrants;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth and for the purpose of defining the terms and
provisions of the Warrant Certificates and the Warrants, and the respective
rights and obligations thereunder of the Company, the registered holders of the
Warrant Certificates and the Warrant Agent, the parties hereto agree as follows:
1. DEFINITIONS. As used herein:
(a) "Common Stock" shall mean Common Stock, of the Company,
whether now or hereafter authorized, holders of which have the right to
participate in the distribution of earnings and assets of the Company
without limit as to amount or percentage.
(b) "Corporate Office" shall mean the place of business of
the Warrant Agent (or its successor) located in Denver, Colorado, which
office is presently located at 1825 Lawrence Street, Denver, Colorado
80202.
(c) "Effective Date" shall mean ___________________, 1999,
the date on which the Company's Registration Statement is declared
effective by the Securities and Exchange Commission.
(d) "Exercise Date" shall mean the date of surrender for
exercise of any Warrant Certificate, provided the exercise form on the
back of the Warrant Certificate or a form substantially similar thereto
has been completed in full by the Registered Owner or a duly appointed
attorney and the Warrant Certificate is accompanied by payment in full
of the Exercise Price.
(e) "Exercise Period" shall mean the period commencing on the
Effective Date and extending to and through the Expiration Date.
(f) "Exercise Price" shall mean a purchase price of $9.00 per
share of Common Stock (150% of the offering price for one Firm Share);
provided, however, that in the event the Company reduces the Exercise
Price in accordance with Section 9(i) hereof, the Exercise Price shall
be as established by the Company in accordance with such Section.
(g) "Expiration Date" shall mean 5:00 P.M. Mountain Time on
the last day of the 3 year period commencing on the Effective Date,
subject to the terms provided in Section 5 herein for
2
<PAGE> 3
redemption; provided however, if such date shall be a holiday or a day
on which banks are authorized to close, then Expiration Date shall mean
5:00 p.m., Mountain Time on the next following day which in the State
of Colorado is not a holiday or a day on which banks are authorized to
close. If the Company redeems the Warrants as provided in Section 5 of
this Agreement, the Expiration Date shall be the date fixed for
redemption.
(h) "Firm Warrants" shall mean 1,200,000 Warrants to purchase
600,000 shares of Common Stock, all of which will be purchased by the
several Underwriters from the Company and sold in the Public Offering
in accordance with the Underwriting Agreement.
(i) "Over-Allotment Warrants" shall mean 180,000 Warrants to
purchase 90,000 shares of Common Stock, any or all of which may be
purchased by the Representative for the several Underwriters from the
Company in accordance with the Underwriting Agreement. The
Over-Allotment Warrants shall have identical terms and conditions to
those established for the Firm Warrants, subject to their issuance in
accordance with Section 2 hereof.
(j) "Representative" shall mean Schneider Securities, Inc.,
the representative of the several Underwriters.
(k) "Registered Owner" shall mean the person in whose name any
Warrant Certificate shall be registered on the books maintained by the
Warrant Agent pursuant to Section 6 of this Agreement.
(l) "Registration Statement" shall mean the Company's
Registration Statement on Form SB-2 (S.E.C. File No. 333-72889), as
amended.
(m) "Subsidiary" shall mean any corporation of which shares
having ordinary voting power to elect a majority of the Board of
Directors of such corporation (regardless of whether the shares of any
other class or classes of such corporation shall have or may have
voting power by reason of the happening of any contingency) are at the
time directly or indirectly owned by the Company or one or more
subsidiaries of the Company.
(n) "Warrant" or the "Warrants" shall mean and include up to
1,380,000 Warrants to purchase 690,000 authorized and unissued Shares
of Common Stock of the Company and, unless otherwise noted, shall
include 1,200,000 Firm Warrants and 180,000 Over-Allotment Warrants.
(o) "Warrant Agent" shall mean American Securities Transfer &
Trust, Inc., or its successor, as the transfer agent and registrar of
the Warrants.
(p) "Warrant Shares" shall mean and include up to 690,000
authorized and unissued shares of Common Stock reserved for issuance on
exercise of the Warrants, and unless otherwise noted, shall include
600,000 shares of Common Stock issuable upon exercise of the Firm
Warrants and 90,000 shares of Common Stock issuable upon exercise of
the Over-Allotment Warrants and any additional shares of Common Stock
or other property which may hereafter be issuable or deliverable on
exercise of the Warrants pursuant to Section 9 of this Agreement.
2. WARRANTS AND ISSUANCE OF WARRANT CERTIFICATES. Each two
Warrants shall initially entitle the Registered Owner of the Warrant
Certificates representing such Warrants to purchase one share of Common Stock on
exercise thereof, subject to modification and adjustment as hereinafter provided
in Section 9. Warrant Certificates representing 1,200,000 Firm Warrants and
evidencing the right to purchase an aggregate of 600,000 shares of Common Stock
of the Company shall be executed by the proper officers of the Company and
delivered to the Warrant Agent for countersignature. Certificates representing
the Firm Warrants to be delivered to the Warrant Agent shall be in direct
relation to the Firm Shares sold in the Company's Public Offering and shall be
attached to certificates representing an equal number of Firm Shares. The
Warrant Certificates representing the Firm Warrants will be issued and delivered
on written order of the Company signed by the proper officers of the Company.
The
3
<PAGE> 4
Warrant Agent shall deliver Warrant Certificates in required whole number
denominations to the persons entitled thereto in connection with any transfer or
exchange permitted under this Agreement.
The Over-Allotment Warrants shall carry identical terms and conditions
to those established for the Firm Warrants and outlined herein. Up to 180,000
Over-Allotment Warrants may be issued and such Over-Allotment Warrants shall
evidence the right of the Registered Owners thereof to purchase an aggregate of
up to 90,000 shares of Common Stock of the Company. Any Warrant Certificates for
Over-Allotment Warrants to be issued will be issued and delivered on written
order of the Company signed by the proper officers of the Company on exercise of
the option to purchase Over-Allotment Warrants by the several Underwriters in
accordance with the Underwriting Agreement. Certificates representing
Over-Allotment Warrants will be initially attached to certificates representing
an equal number of Over-Allotment Shares.
Except as provided in Section 8 hereof, share certificates representing
the Warrant Shares shall be issued only on or after the Exercise Date on
exercise of the Warrants or on transfer or exchange of the Warrant Shares. The
Warrant Agent, if other than the Company's Transfer Agent, shall arrange with
the Transfer Agent for the issuance and registration of all Warrant Shares.
3. FORM AND EXECUTION OF WARRANT CERTIFICATES. The Warrant
Certificates shall be substantially in the form attached as Exhibit "A" and may
have such letters, numbers or other marks of identification and such legends,
summaries or endorsements printed, lithographed or engraved thereon as the
Company may deem appropriate and as are not inconsistent with the provisions of
this Agreement. The Warrant Certificates shall be dated as of the date of
issuance, whether on initial issuance, transfer, exchange or in lieu of
mutilated, lost, stolen or destroyed Warrant Certificates.
Each Warrant Certificate for Firm Warrants shall be initially issued
only when attached to a certificate representing an equal number of Firm Shares
of Common Stock as Firm Warrants and shall be separately transferable from the
certificate representing Firm Shares immediately upon issuance. Warrant
Certificates issued for Over-Allotment Warrants shall be issued together with
certificates representing an equal number of shares of Common Stock as
Over-Allotment Warrants.
The Warrant Certificates shall be executed on behalf of the Company by
its duly authorized officers, by manual signatures or by facsimile signatures
printed thereon, and shall have imprinted thereon a facsimile of the Company's
seal. The Warrant Certificates shall be manually countersigned by the Warrant
Agent and shall not be valid for any purpose unless so countersigned. In the
event any officer of the Company who executed the Warrant Certificates shall
cease to be an officer of the Company before the date of issuance of the Warrant
Certificates or before countersignature and delivery by the Warrant Agent, such
Warrant Certificates may be countersigned, issued and delivered by the Warrant
Agent with the same force and effect as though the person who signed such
Warrant Certificates had not ceased to be an officer of the Company.
4. EXERCISE. The exercise of Warrants in accordance with this
Agreement shall only be permitted during the Exercise Period.
Warrants shall be deemed to have been exercised immediately prior to
the close of business on the Exercise Date. The exercise form shall be executed
by the Registered Owner thereof or the Registered Owner's attorney duly
authorized in writing and shall be delivered together with payment to the
Warrant Agent, in cash or by official bank or certified check, of an amount in
lawful money of the United States of America. Such payment shall be in an amount
equal to the Exercise Price as hereinabove defined.
The person entitled to receive the number of Warrant Shares deliverable
on such exercise shall be treated for all purposes as the Registered Owner of
such Warrant Shares as of the close of business on the Exercise Date. The
Company shall not be obligated to issue any fractional share interests in
Warrant Shares. If Warrants represented by more than one Warrant Certificate
shall be exercised at one time by the same Registered Owner, the number of full
Warrant Shares which shall be issuable on exercise thereof shall be computed on
the basis of the aggregate number of full Warrant Shares issuable on such
exercise.
4
<PAGE> 5
As soon as practicable on or after the Exercise Date and in any event
within 30 days after such date, the Warrant Agent shall cause to be issued and
delivered by the Transfer Agent to the person or persons entitled to receive the
same, a certificate or certificates for the number of Warrant Shares deliverable
on such exercise. No adjustment shall be made in respect of cash dividends on
Warrant Shares deliverable on exercise of any Warrant. The Warrant Agent shall
promptly notify the Company in writing of any exercise and of the number of
Warrant Shares caused to be delivered and shall cause payment of an amount in
cash equal to the Exercise Price to be made promptly to the order of the
Company. The parties contemplate such payments will be made by the Warrant Agent
to the Company on a weekly basis and will consist of collected funds only. The
Warrant Agent shall hold any proceeds collected and not yet paid to the Company
in a Federally-insured escrow account at a commercial bank selected by agreement
of the Company and the Warrant Agent, at all times relevant hereto. Following a
determination by the Warrant Agent that collected funds have been received, the
Warrant Agent shall cause the Transfer Agent to issue share certificates
representing the number of Warrant Shares purchased by the Registered Owner.
Expenses incurred by the Warrant Agent, including administrative costs,
and the standard fees imposed by the Warrant Agent for the Warrant Agent's
services, shall be paid by the Company and shall be deducted from the Escrow
Account prior to distribution of funds to the Company.
A detailed accounting statement setting forth the number of Warrants
exercised, the number of Warrant Shares issued, the net amount of exercised
funds and all expenses incurred by the Warrant Agent shall be transmitted to the
Company on payment of each exercise amount. Such accounting statement shall
serve as an interim accounting for the Company during the Exercise Period. The
Warrant Agent shall render to the Company, at the completion of the Exercise
Period, a complete accounting setting forth the number of Warrants exercised,
the identity of persons exercising such Warrants, the number of Warrant Shares
issued, the amounts distributed to the Company, and all expenses incurred by the
Warrant Agent.
The Company may be required to deliver a prospectus that satisfies the
requirements of Section 10 of the Securities Act of 1933, as amended (the "1933
Act") with delivery of the Warrant Shares and must have a registration statement
(or a post-effective amendment to an existing registration statement) effective
under the 1933 Act in order for the Company to comply with any such prospectus
delivery requirements. The Company will advise the Warrant Agent of the status
of any such registration statement under the 1933 Act and of the effectiveness
of the Company's registration statement or lapse of effectiveness.
No issuance of Warrant Shares shall be made unless there is an
effective registration statement under the 1933 Act, and registration or
qualification of the Warrant Shares, or an exemption therefrom, has been
obtained from state or other regulatory authorities in the jurisdiction in which
such Warrant Shares are sold. The Company will provide to the Warrant Agent
written confirmation of all such registration or qualification, or an exemption
therefrom, when requested by the Warrant Agent.
5. REDEMPTION. Commencing one year from the Effective Date, the
Company may, at its option, redeem the Warrants in whole, but not in part, for a
redemption price of $.05 per Warrant, on not less than 30 days' notice to the
Registered Owners. The right to redeem the Warrants may be exercised by the
Company following such one year period and during the Exercise Period only in
the event (i) the closing bid price for Company's shares of Common Stock has
equaled or exceeded $11.25 (125% of the Warrant Exercise Price) for 20
consecutive trading days, (ii) any notice of the call for redemption is given
not more than five (5) business days after the conclusion of the 20 consecutive
trading days referred to in the foregoing (i), (iii) the Company has a
registration statement (or a post-effective amendment to an existing
registration statement) pertaining to the Warrant Shares effective with the
Securities and Exchange Commission, which registration statement would enable a
Registered Owner to exercise the Warrants, and (iv) the expiration of the 30 day
notice period is within the Exercise Period. In the event the Company exercises
its right to redeem the Warrants, the Expiration Date will be deemed to be, and
the Warrants will be exercisable until the close of business on, the date fixed
for redemption in such notice. If any Warrant called for redemption is not
exercised by such time, it will cease to be exercisable and the Registered Owner
thereof will be entitled only to the redemption price.
5
<PAGE> 6
6. RESERVATION OF SHARES AND PAYMENT OF TAXES. The Company
covenants that it will at all times reserve and have available from its
authorized shares of Common Stock such number of shares of Common Stock as shall
then be issuable on exercise of all outstanding Warrants. The Company covenants
that all Warrant Shares issuable shall be duly and validly issued, fully paid
and nonassessable, and free from all taxes, liens and charges with respect to
the issue thereof.
The Registered Owner shall pay all documentary, stamp or similar taxes
and other government charges that may be imposed with respect to the issuance of
the Warrants, or the issuance, transfer or delivery of any Warrant Shares on
exercise of the Warrants. In the event the Warrant Shares are to be delivered in
a name other than the name of the Registered Owner of the Warrant Certificates,
no such delivery shall be made unless the person requesting the same has paid to
the Warrant Agent or Transfer Agent the amount of any such taxes or charges
incident thereto.
The Company will supply the Warrant Agent with blank Warrant
Certificates, so as to maintain an inventory satisfactory to the Warrant Agent.
The Company will file with the Warrant Agent a statement setting forth the name
and address of its Transfer Agent for Warrant Shares and of each successor
Transfer Agent, if any.
7. REGISTRATION OF TRANSFER. The Warrant Certificates may be
transferred in whole or in part and may be separately transferred from the
Common Stock share certificate to which such Warrant Certificate is attached
upon initial issuance, if any, at any time during the Exercise Period. Warrant
Certificates to be exchanged shall be surrendered to the Warrant Agent at its
corporate office. The Company shall execute and the Warrant Agent shall
countersign, issue and deliver in exchange therefor, the Warrant Certificate or
Certificates which the holder making the transfer shall be entitled to receive.
The Warrant Agent shall keep transfer books at its corporate office on
which Warrant Certificates and the transfer thereof shall be registered. On due
presentment for registration of transfer of any Warrant Certificate at such
office, the Company shall execute and the Warrant Agent shall issue and deliver
to the transferee or transferees a new Warrant Certificate or Certificates
representing an equal aggregate number of Warrants.
All Warrant Certificates presented for registration of transfer or
exercise shall be duly endorsed or be accompanied by a written instrument or
instruments of transfer in form satisfactory to the Company and the Warrant
Agent.
Prior to due presentment for registration of transfer thereof, the
Company and the Warrant Agent may treat the Registered Owner of any Warrant
Certificate as the absolute owner thereof (notwithstanding any notations of
ownership or writing thereon made by anyone other than the Company or the
Warrant Agent) and the parties hereto shall not be affected by any notice to the
contrary.
8. LOSS OR MUTILATION. On receipt by the Company and the Warrant
Agent of evidence satisfactory as to the ownership of and the loss, theft,
destruction or mutilation of any Warrant Certificate, the Company shall execute
and the Warrant Agent shall countersign and deliver in lieu thereof, a new
Warrant Certificate representing an equal aggregate number of Warrants. In the
case of loss, theft or destruction of any Warrant Certificate, the Registered
Owner requesting issuance of a new Warrant Certificate shall be required to
secure an indemnity bond from an approved surety bonding company in favor of the
Company and Warrant Agent in an amount satisfactory to each of them. In the
event a Warrant Certificate is mutilated, such Certificate shall be surrendered
and cancelled by the Warrant Agent prior to delivery of a new Warrant
Certificate. Applicants for a substitute Warrant Certificate shall also comply
with such other regulations and pay such other reasonable charges as the Company
may prescribe.
9. ADJUSTMENT OF EXERCISE PRICE AND SHARES.
(a) If at any time prior to the expiration of the Warrants by
their terms or by exercise, the Company increases or decreases the
number of its issued and outstanding shares of Common Stock, or changes
in any way the rights and privileges of such shares of Common Stock, by
means of (i) the payment
6
<PAGE> 7
of a share dividend or the making of any other distribution on such
shares of Common Stock payable in its shares of Common Stock, (ii) a
split or subdivision of shares of Common Stock, or (iii) a
consolidation or combination of shares of Common Stock, then the
Exercise Price in effect at the time of such action and the number of
Warrants required to purchase each Warrant Share at that time shall be
proportionately adjusted so that the numbers, rights and privileges
relating to the Warrant Shares then purchasable upon the exercise of
the Warrants shall be increased, decreased or changed in like manner,
for the same aggregate purchase price set forth in the Warrants, as if
the Warrant Shares purchasable upon the exercise of the Warrants
immediately prior to the event had been issued, outstanding, fully paid
and nonassessable at the time of that event. Any dividend paid or
distributed on the shares of Common Stock in shares of any other class
of shares of the Company or securities convertible into shares of
Common Stock shall be treated as a dividend paid in shares of Common
Stock to the extent shares of Common Stock are issuable on the payment
or conversion thereof.
(b) In the event, prior to the expiration of the Warrants by
exercise or by their terms, the Company shall be recapitalized by
reclassifying its outstanding shares of Common Stock into shares with a
different par value, or by changing its outstanding shares of Common
Stock to shares without par value or in the event of any other material
change in the capital structure of the Company or of any successor
corporation by reason of any reclassification, recapitalization or
conveyance, prompt, proportionate, equitable, lawful and adequate
provision shall be made whereby any Registered Owner of the Warrants
shall thereafter have the right to purchase, on the basis and the terms
and conditions specified in this Agreement, in lieu of the Warrant
Shares theretofore purchasable on the exercise of any Warrant, such
securities or assets as may be issued or payable with respect to or in
exchange for the number of Warrant Shares theretofore purchasable on
exercise of the Warrants had such reclassification, recapitalization or
conveyance not taken place; and in any such event, the rights of any
Registered Owner of a Warrant to any adjustment in the number of
Warrant Shares purchasable on exercise of such Warrant, as set forth
above, shall continue and be preserved in respect of any stock,
securities or assets which the Registered Owner becomes entitled to
purchase.
(c) In the event the Company, at any time while the Warrants
shall remain unexpired and unexercised, shall sell all or substantially
all of its property, or dissolves, liquidates or winds up its affairs,
prompt, proportionate, equitable, lawful and adequate provision shall
be made as part of the terms of such sale, dissolution, liquidation or
winding up such that the Registered Owner of a Warrant may thereafter
receive, on exercise thereof, in lieu of each Warrant Share which the
Registered Owner would have been entitled to receive, the same kind and
amount of any stock, securities or assets as may be issuable,
distributable or payable on any such sale, dissolution, liquidation or
winding up with respect to each share of Common Stock of the Company;
provided, however, that in the event of any such sale, dissolution,
liquidation or winding up, the right to exercise the Warrants shall
terminate on a date fixed by the Company, such date to be not earlier
than 5:00 P.M., Mountain Time, on the 30th day next succeeding the date
on which notice of such termination of the right to exercise the
Warrants has been given by mail to the Registered Owners thereof at
such addresses as may appear on the books of the Company.
(d) In the event prior to the expiration of the Warrants by
exercise or by their terms, the Company shall take a record of the
holders of its Common Stock for the purpose of entitling them to
purchase its shares of Common Stock at a price per share more than 10%
below the then-current market price per share (as defined below) at the
date of taking such record, then, (i) the number of Warrant Shares
purchasable pursuant to the Warrants shall be redetermined as follows:
the number of Warrant Shares purchasable pursuant to a Warrant
immediately prior to such adjustment (taking into account fractional
interests to the nearest 1,000th of a share) shall be multiplied by a
fraction, the numerator of which shall be the number of shares of
Common Stock of the Company outstanding (excluding shares of Common
Stock then owned by the Company) immediately prior to the taking of
such record, plus the number of additional shares offered for purchase,
and the denominator of which shall be the number of shares of Common
Stock of the Company outstanding (excluding shares of Common Stock
owned by the Company) immediately prior to the taking of such record,
plus the number of shares which the aggregate offering price of the
total number of additional shares so offered would purchase at such
current market price; and (ii) the Exercise
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<PAGE> 8
Price per Warrant Share purchasable pursuant to a Warrant shall be
redetermined as follows: the Exercise Price in effect immediately prior
to the taking of such record shall be multiplied by a fraction, the
numerator of which is the number of Warrant Shares purchasable
immediately prior to the taking of such record, and the denominator of
which is the number of Warrant Shares purchasable immediately after the
taking of such record as determined pursuant to clause (i) above;
provided, however, (i) that any adjustment in the number of shares
issuable as set forth above shall be effective only to the extent
sufficient shares of Common Stock have been registered through a
registration statement effective under the 1933 Act, and (ii) that any
adjustment in the Exercise Price does not cause the Company to receive
proceeds in excess of the amount authorized by any such registration
statement. For the purpose hereof, the current market price per share
at any date shall be determined as follows:
(i) If the Common Stock is listed on the New York
Stock Exchange, the American Stock Exchange or such other
securities exchange designated by the Board of Directors of
the Company, or admitted to unlisted trading privileges on any
such exchange, or if the Common Stock is quoted on a National
Association of Securities Dealers, Inc. system that reports
closing prices, the current market price shall be the average
of the closing prices of the Common Stock as reported by such
exchange or system for 10 consecutive business days commencing
30 business days prior to the record date;
(ii) If the Common Stock is not so listed or admitted to
unlisted trading privileges or so quoted, the current market
price shall be the average of the last reported highest bid
and the lowest asked prices quoted on the National Association
of Securities Dealers, Inc. Automated Quotations System or, if
not so quoted, then by the National Quotation Bureau, Inc. for
10 consecutive business days commencing 30 business days prior
to the record date; or
(iii) If the Common Stock is not so listed or admitted to
unlisted trading privileges or so quoted, and bid and asked
prices are not reported, the current market price shall be
determined in such reasonable manner as may be prescribed by
the Board of Directors.
(e) On exercise of the Warrants by the Registered Owners, the
Company shall not be required to deliver fractions of Warrant Shares;
provided, however, that the Company shall make prompt, proportionate,
equitable, lawful and adequate provisions in respect of any such
fraction of one Warrant Share either on the basis of adjustment in the
then applicable Exercise Price or a purchase of the fractional interest
at the price of the Company's shares of Common Stock or such other
reasonable basis as the Company may determine.
(f) In the event, prior to expiration of the Warrants by
exercise or by their terms, the Company shall determine to take a
record of the holders of its shares of Common Stock for the purpose of
determining shareholders entitled to receive any stock dividend,
distribution or other right which will cause any change or adjustment
in the number, amount, price or nature of the shares of Common Stock or
other stock, securities or assets deliverable on exercise of the
Warrants pursuant to the foregoing provisions, the Company shall give
to the Registered Owners of the Warrants at the addresses as may appear
on the books of the Company at least 30 days' prior written notice to
the effect that it intends to take such a record. Such notice shall
specify the date as of which such record is to be taken; the purpose
for which such record is to be taken; and the number, amount, price and
nature of the shares of Common Stock or other stock, securities or
assets which will be deliverable on exercise of the Warrants after the
action for which such record will be taken has been completed. Without
limiting the obligation of the Company to provide notice to the
Registered Owners of the Warrants of any corporate action hereunder,
the failure of the Company to give notice shall not invalidate such
corporate action of the Company.
(g) The Warrants shall not entitle the Registered Owner
thereof to any of the rights of shareholders or to any dividend
declared on the shares of Common Stock unless the Warrant is exercised
and the Warrant Shares purchased prior to the record date fixed by the
Board of Directors of the Company for the determination of holders of
shares of Common Stock entitled to such dividend or other right.
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<PAGE> 9
(h) On and after ____________, 2000, the Company shall be
empowered, in the sole and unconditional discretion of the Board of
Directors, at any time during the Exercise Period, to reduce the
applicable Exercise Price of the Warrants. Prior to _____________,
2000, the Company may reduce the applicable Exercise Price of the
Warrants only with the prior written consent of the Representative. Any
reduction in the applicable Exercise Price shall be effective upon
written notice to the Warrant Agent, which notice shall be given
pursuant to a duly and validly authorized resolution of the Board of
Directors of the Company. Any such reduction in the Exercise Price
shall not entitle the Registered Owners to issuance of any additional
Common Shares pursuant to the adjustment provisions set forth elsewhere
herein, regardless of whether the reduction in the Exercise Price was
effected either prior to or following exercise of Warrants by the
Registered Owners thereof. A nonexercising Registered Owner shall have
no remedy or rights to receive any additional Warrant Shares as a
result of any reduction in any applicable Exercise Price pursuant to
this subsection.
10. DUTIES, COMPENSATION AND TERMINATION OF WARRANT AGENT. The
Warrant Agent shall act hereunder as agent and in a ministerial capacity for the
Company, and its duties shall be determined solely by the provisions hereof. The
Warrant Agent shall not, by issuing and delivering Warrant Certificates or by
any other act hereunder, be deemed to make any representations as to the
validity, value or authorization of the Warrant Certificate or the Warrants
represented thereby or of the Warrant Shares or other property delivered on
exercise of any Warrant. The Warrant Agent shall not be under any duty or
responsibility to any holder of the Warrant Certificates to make or cause to be
made any adjustment of the Exercise Price or to determine whether any fact
exists which may require any such adjustment.
The Warrant Agent shall not (i) be liable for any recital or statement
of fact contained herein or for any action taken or omitted by it in reliance on
any Warrant Certificate or other document or instrument believed by it in good
faith to be genuine and to have been signed or presented by the proper party or
parties, (ii) be responsible for any failure on the part of the Company to
comply with any of its covenants and obligations contained in this Agreement or
in the Warrant Certificates, or (iii) be liable for any act or omission in
connection with this Agreement except for its own negligence or willful
misconduct.
The Warrant Agent may at any time consult with counsel satisfactory to
it (who may be counsel for the Company) and shall incur no liability or
responsibility for any action taken or omitted by it in good faith in accordance
with the opinion or advice of such counsel.
Any notice, statement, instruction, request, direction, order or demand
of the Company shall be sufficiently evidenced by an instrument signed by an
officer of the Company. The Warrant Agent shall not be liable for any action
taken or omitted by it in accordance with such notice, statement, instruction,
request, direction, order or demand.
The Company agrees to pay the Warrant Agent reasonable compensation for
its services hereunder and to reimburse the Warrant Agent for its reasonable
expenses. The Company further agrees to indemnify the Warrant Agent against any
and all losses, expenses and liabilities, including judgments, costs and counsel
fees, for any action taken or omitted by the Warrant Agent in the execution of
its duties and powers hereunder, excepting losses, expenses and liabilities
arising as a result of the Warrant Agent's negligence or willful misconduct.
The Warrant Agent may resign its duties or the Company may terminate
the Warrant Agent and the Warrant Agent shall be discharged from all further
duties and liabilities hereunder (except liabilities arising as a result of the
Warrant Agent's own negligence or willful misconduct) on 30 days' prior written
notice to the other party. Upon notice by the Company to the Warrant Agent, the
Warrant Agent shall cause a copy of such notice of resignation to be mailed to
the Registered Owner of each Warrant Certificate. The expenses the Warrant Agent
incurs in mailing such notice shall be paid by the Company. On such resignation
or termination, the Company shall appoint a new Warrant Agent. If the Company
shall fail to make such appointment within a period of 30 days after it has been
notified in writing of the resignation by the Warrant Agent, then the Registered
Owner of any Warrant Certificate may apply to any court of competent
jurisdiction for the appointment of a new Warrant Agent. Any new
9
<PAGE> 10
Warrant Agent, whether appointed by the Company or by such court, shall be a
bank or trust company having a capital and surplus, as shown by its last
published report to its shareholders, of not less than $1,000,000, and having
its principal office in the United States.
After acceptance in writing of an appointment of a new Warrant Agent is
received by the Company, such new Warrant Agent shall be vested with the same
powers, rights, duties and responsibilities as if it had been originally named
herein as the Warrant Agent, without any further assurance, conveyance, act or
deed; provided, however, if it shall be necessary or expedient to execute and
deliver any further assurance, conveyance, act or deed, the same shall be done
at the expense of the Company and shall be legally and validly executed. The
Company shall file a notice of appointment of a new Warrant Agent with the
resigning Warrant Agent and shall forthwith cause a copy of such notice to be
mailed to the Registered Owner of each Warrant Certificate.
Any corporation into which the Warrant Agent or any new Warrant Agent
may be converted or merged, or any corporation resulting from any consolidation
to which the Warrant Agent or any new Warrant Agent shall be a party, or any
corporation succeeding to the corporate trust business of the Warrant Agent
shall be a successor Warrant Agent under this Agreement, provided that such
corporation is eligible for appointment as a successor to the Warrant Agent. Any
such successor Warrant Agent shall promptly cause notice of its succession as
Warrant Agent to be mailed to the Company and to the Registered Owner of each
Warrant Certificate. No further action shall be required for establishment and
authorization of such successor Warrant Agent.
The Warrant Agent, its officers or directors and it subsidiaries or
affiliates may buy, hold or sell Warrants or other securities of the Company and
otherwise deal with the Company in the same manner and to the same extent and
with like effect as though it were not the Warrant Agent. Nothing herein shall
preclude the Warrant Agent from acting in any other capacity for the Company.
11. MODIFICATION OF AGREEMENT. The Warrant Agent and the Company
may by supplemental agreement make any changes or corrections in this Agreement
they shall deem appropriate to cure any ambiguity or to correct any defective or
inconsistent provision or mistake or error herein contained. Additionally, the
parties may make any changes or corrections deemed necessary which shall not
adversely affect the interests of the Registered Owners of Warrant Certificates;
provided, however, this Agreement shall not otherwise be modified, supplemented
or altered in any respect except with the consent in writing of the Registered
Owners of Warrant Certificates representing not less than a majority of the
Warrants outstanding. Additionally, no change in the number or nature of the
Warrant Shares purchasable on exercise of a Warrant or the Exercise Price
therefor shall be made without the consent in writing of the Registered Owner of
the Warrant Certificate representing such Warrant, other than such changes as
are specifically prescribed by this Agreement.
12. NOTICES. All notices, demands, elections, opinions or requests
(however characterized or described) required or authorized hereunder shall be
deemed given sufficiently in writing and sent by registered or certified mail,
return receipt requested and postage prepaid, or by tested telex, telegram or
cable to:
in the case of the Company:
Multi-Link Telecommunications, Inc.
and in the case of the Warrant Agent:
American Securities Transfer & Trust, Inc.
1825 Lawrence Street, Suite 444
Denver, Colorado 80202
10
<PAGE> 11
with a copy to:
Thomas S. Smith, Esq.
Smith McCullough, P.C.
4643 South Ulster Street, Suite 900
Denver, Colorado 80237
and, if requested by the Company to the Registered Owner of a Warrant
Certificate, at the address of such Registered Owner as set forth on the books
maintained by the Warrant Agent.
13. PERSONS BENEFITING. This Agreement shall be binding upon and
inure to the benefit of the Company, the Warrant Agent and their respective
successors and assigns, and the Registered Owners and beneficial owners from
time to time of the Warrant Certificates. Nothing in this Agreement is intended
or shall be construed to confer on any other person any right, remedy or claim
or to impose on any other person any duty, liability or obligation.
14. FURTHER INSTRUMENTS. The parties shall execute and deliver any
and all such other instruments and shall take any and all such other actions as
may be reasonable or necessary to carry out the intention of this Agreement.
15. SEVERABILITY. If any provision of this Agreement shall be
held, declared or pronounced void, voidable, invalid, unenforceable or
inoperative for any reason by any court of competent jurisdiction, government
authority or otherwise, such holding, declaration or pronouncement shall not
affect adversely any other provision of this Agreement, which shall otherwise
remain in full force and effect and be enforced in accordance with its terms,
and the effect of such holding, declaration or pronouncement shall be limited to
the territory or jurisdiction in which made.
16. WAIVER. All the rights and remedies of either party under this
Agreement are cumulative and not exclusive of any other rights and remedies as
provided by law. No delay or failure on the part of either party in the exercise
of any right or remedy arising from a breach of this Agreement shall operate as
a waiver of any subsequent right or remedy arising from a subsequent breach of
this Agreement. The consent of any party where required hereunder to any act or
occurrence shall not be deemed to be a consent to any other action or
occurrence.
17. GENERAL PROVISIONS. This Agreement shall be construed and
enforced in accordance with, and governed by, the laws of the State of Colorado.
Except as otherwise expressly stated herein, time is of the essence in
performing hereunder. This Agreement embodies the entire agreement and
understanding between the parties and supersedes all prior agreements and
understandings relating to the subject matter hereof, and this Agreement may not
be modified or amended or any term or provision hereof waived or discharged
except in writing signed by the party against whom such amendment, modification,
waiver or discharge is sought to be enforced. The headings of this Agreement are
for convenience of reference only and shall not limit or otherwise affect the
meaning thereof. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
11
<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above mentioned.
THE COMPANY:
MULTI-LINK TELECOMMUNICATIONS, INC.
(CORPORATE SEAL)
By:
----------------------------------
Nigel Alexander, Managing Director
ATTEST:
- -----------------------------
,
THE WARRANT AGENT:
AMERICAN SECURITIES TRANSFER & TRUST,
INC.
By:
------------------------------
Title:
------------------------------
ATTEST:
- -----------------------------
, Secretary
12
<PAGE> 13
Exhibit "A"
WARRANT NUMBER OF
CERTIFICATE NUMBER WARRANTS
- ------------------
CUSIP NO. SEE REVERSE FOR CERTAIN DEFINITIONS
COMMON STOCK PURCHASE WARRANT FOR THE
PURCHASE OF SHARES OF COMMON STOCK OF
MULTI-LINK TELECOMMUNICATIONS, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF COLORADO
THIS CERTIFIES THAT, for value received
as registered owner (the "Registered Owner) of this Common Stock Purchase
Warrant (the "Warrant") is entitled at any time commencing on __________, 1999
(the Effective Date"), and before 5:00 P.M. Mountain Time, on ____________,
2002, which is the last day of the three year period commencing on the Effective
Date, (the "Expiration Date") to subscribe for, purchase and receive for each
two Warrants specified above one fully paid and nonassessable share of common
stock (a "Warrant Share"), of Multi-Link Telecommunications, Inc. (the
"Company"), at the price of $9.00 per share (the "Exercise Price"), upon
presentation and surrender of this Warrant, together with payment of the
Exercise Price for the Warrant Shares to be purchased, to the Company at its
principal office or to the Company's warrant agent at the warrant agent's
principal office in the manner described in the Warrant Agreement (the "Warrant
Agreement") between the Company and American Securities Transfer & Trust, Inc.;
provided, however, that upon the occurrence of any of the events specified in
such Warrant Agreement, the rights granted by this Warrant shall be adjusted as
specified therein. This Certificate and the Warrant represented hereby are
issued pursuant to and are subject in all respects to the terms and conditions
set forth in the Warrant Agreement.
Upon exercise of this Warrant, the form of Election to Purchase
hereinafter provided must be duly executed, the Exercise Price must be paid in
lawful money of the United States of America in cash, certified check, bank
draft or wire transfer and the instructions for registration of the Warrant
Shares acquired by such exercise must be completed. At or before 5:00 P.M.
Mountain Time on the Expiration Date, this Warrant shall become null and void
without further force or effect, and all rights represented hereby shall cease
and expire.
Commencing one year from the Effective Date, the Company may, at its
option, redeem this Warrant in whole for a redemption price of $.05 per Warrant,
on 30 days' prior written notice to the Registered Owner, provided, however, the
right to redeem this Warrant may be exercised by the Company only in the event
(1) the closing bid price for the Company's Common Stock equals or exceeds
$11.25 for 20 consecutive trading days immediately preceding any notice of
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<PAGE> 14
the call for redemption, and the notice is given within five business days of
the conclusion of the 20 day trading period, and (2) the Company has a
registration statement or a post-effective amendment to an existing registration
statement pertaining to the Warrant Shares effective with the Securities and
Exchange Commission. In the event the Company exercises its right to redeem this
Warrant, the Expiration Date will be deemed to be, and this Warrant will be
exercisable until the close of business on, the date fixed for redemption in
such notice. If the Warrant has been called for redemption and is not exercised
by such time, the Warrant will cease to be exercisable and the Registered Owner
hereof will be entitled only to the redemption price.
Subject to the terms contained herein and in the Warrant Agreement,
this Warrant may be assigned or exercised by the Registered Owner in whole or in
part by execution by the Registered Owner of the form of Assignment or Election
to Purchase, as appropriate, appearing on the reverse side hereof. If the
assignment is in whole, the Company shall execute and deliver a new Warrant or
Warrants of like tenor to the appropriate assignee expressly evidencing the
right to purchase the aggregate number of Warrant Shares purchasable hereunder,
and if the assignment be in part, the Company shall execute and deliver to the
appropriate assignee a new Warrant or Warrants of like tenor expressly
evidencing the right to purchase the portion of the aggregate number of Warrant
Shares as shall be contemplated by any such assignment, and shall concurrently
execute and deliver to the Registered Owner a new Warrant of like tenor
evidencing the right to purchase the remaining portion of Warrant Shares
purchasable hereunder which has not been transferred to the assignee.
In the event this Warrant is exercised in part only, the Company shall
cause to be delivered to the Registered Owner a new Warrant of like tenor
evidencing the right of the Registered Owner to purchase the number of Warrant
Shares purchasable hereunder as to which the Warrant has not been exercised. No
fractional shares will be issued upon exercise of the Warrant.
In no event shall this Warrant (or the Warrant Shares issuable upon
full or partial exercise hereof) be offered or sold except in conformity with
all applicable state and Federal securities laws.
The Company and the Warrant Agent may deem and treat the Registered
Owner hereof as the absolute owner of this Warrant Certificate (notwithstanding
any notation of ownership or other writing hereon made by anyone) for all
purposes and neither the Company nor the Warrant Agent shall be affected by any
notice to the contrary. The Registered Owner of this Warrant, as such, shall not
have any rights of a shareholder of the Company, either at law or at equity, and
the rights of the Registered Owner, as such, are limited to those rights
expressly provided in this Warrant Certificate and in the Warrant Agreement.
This certificate is not valid unless countersigned by the Warrant Agent.
The Company has agreed to pay a warrant solicitation fee of 5% of the
Exercise Price to broker-dealers under specified conditions upon the exercise of
the Warrants represented hereby.
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<PAGE> 15
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer.
Dated: MULTI-LINK TELECOMMUNICATIONS, INC.
By:
Nigel Alexander, Managing Director
[SEAL]
COUNTERSIGNED AND REGISTERED:
American Securities Transfer & Trust, Inc.
P.O. Box 1596
Denver, Colorado 80201
By:
Warrant Agent and Registrar Authorized
Signature
15
<PAGE> 16
MULTI-LINK TELECOMMUNICATIONS, INC.
ELECTION TO PURCHASE
The undersigned hereby elects irrevocably to exercise the within
Warrant and to purchase _______ shares of Common Stock of Multi-Link
Telecommunications, Inc. and hereby makes payment of $_______ (at the rate of
$_____________ per share) in payment of the Exercise Price pursuant hereto. The
undersigned acknowledges that two Warrants must be exercised to purchase one
share of Common Stock. Please issue the shares as to which this Warrant is
exercised in accordance with the instructions given below. The undersigned
represents that the exercise of the within Warrant was solicited by the member
firm of the National Association of Securities Dealers, Inc. ("NASD") listed
below. If not solicited by an NASD member, the undersigned has written
"unsolicited" in the space below. If neither the name of another member firm or
"unsolicited" in entered, it will be assumed that exercise was unsolicited.
(Insert Name of NASD Member or "Unsolicited")
Dated:
----------------------
Signature:
INSTRUCTIONS FOR REGISTRATION OF SHARES
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF OWNER
Name
(Print in Block Letters)
Address
16
<PAGE> 17
ASSIGNMENT
FOR VALUE RECEIVED, ________________________________ does hereby sell,
assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF OWNER
(Please print or Typewrite Name and Address Including Zip Code, of Assignee)
the right to purchase __________ shares of Common Stock of Multi-Link
Telecommunications, Inc. evidenced by the within Warrant, and does hereby
irrevocable constitute and appoint ________________________________________
Attorney to transfer such right on the books of Multi-Link Telecommunications,
Inc. with full power of substitution in the premises.
Dated:
Signature:
Signature(s) Guaranteed:
The signature(s) must be guaranteed by an eligible guarantor
institution (Banks, Stockbrokers, Savings and Loan Associations and Credit
Unions with membership in an approved signature guarantee Medallion Program),
pursuant to S.E.C. Rule 17Ad-15.
17
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITOR'S CONSENT
We consent to the use in the Registration Statement and Prospectus of Multi-Link
Telecommunications, Inc. of our report dated January 21, 1999, except for Note 4
of the financial statements, for which the date is February 10, 1999,
accompanying the consolidated financial statements of Multi-Link
Telecommunications, Inc. contained in such Registration Statement, and to the
use of our name and the statements with respect to us, as appearing under the
heading "Experts" in the Registration Statement.
HEIN + ASSOCIATES LLP
Denver, Colorado
May 10, 1999
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the use in the Registration Statement and Prospectus of
Multi-Link Telecommunications, Inc. of our report dated February 13, 1998,
relating to the financial statements of Multi-Link Telecommunications, Inc.
(formerly Multi-Link Holdings, Inc.) contained in the Registration Statement,
and to reference our firm under the caption "EXPERTS" in the Registration
Statement.
James E. Scheifley & Associates, P.C.
May 10, 1999
Englewood, Colorado
