U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 8-K/A No. 1
Current Report
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): February 1, 2000
Commission file number 0-26013
MULTI-LINK TELECOMMUNICATIONS, INC.
----------------------------------
(Exact name of small business issuer
as specified in its charter)
Colorado 84-1334687
------------------------------ -------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
4704 Harlan Street, Suite 420, Denver, CO 80212
-----------------------------------------------
(Address of principal executive offices)
(303) 831-1977
-------------------------
(Issuer's telephone number)
Not Applicable
---------------------------------------------------
(Former name, former address, and former fiscal year,
if changed since last report)
<PAGE>
This Form 8-K/A amends and supplements a filing by Multi-Link
Telecommunications, Inc. ("Multi-Link" or "Registrant") on Form 8-K, dated
November 19, 1999 pursuant to which Registrant reported the acquisition of
substantially all of the assets of Hellyer Communications, Inc. ("Hellyer") by
Hellyer Communications Services, Inc., a wholly- owned subsidiary of the
Registrant. Such Form 8-K is hereby amended by changing Item 7 thereof to read
as follows, and filing herewith the attached financial statements and
information.
The acquisition of substantially all of the assets and certain liabilities
of Hellyer was accounted for under the purchase method of accounting and, as
such, the statements of operations of Hellyer for periods prior to November 17,
1999 (the date of acquisition) will never be consolidated into Multi-Link's
statements of operations for any period.
During fiscal 1999 Hellyer lost significant revenue and consequently
suffered substantial operating losses as a result of the termination of its
customer billing arrangement with Ameritech, under which small charges for voice
mail service were added to each customer's Ameritech bill each month, and paid
to Hellyer as one amount.
This Ameritech billing arrangement was restored prior to the date of
acquisition by Multi-Link, and as a result, Hellyer's fiscal 1999 statement of
operations and the pro-forma combining condensed statement of operations are not
indicative of the expected future performance of the combined companies.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL
INFORMATION AND EXHIBITS
(a) Financial Statements of Business Acquired.
The following financial statements of the business acquired are filed
herewith:
Audited financial statements of Hellyer Communications, Inc. for the twelve
month periods ending October 31, 1998 and October 31, 1999.
(b) Pro Forma Financial Information.
The following pro forma financial statements of the Registrant are filed
herewith:
Unaudited pro form combining, condensed balance sheet of Multi-Link
Telecommunications, Inc. and Hellyer Communications, Inc., as of September
30, 1999.
Unaudited pro forma combining, condensed statement of operations of
Multi-Link Telecommunications, Inc. and Hellyer Communications, Inc., for
the twelve months ended September 30, 1999 and October 31, 1999,
respectively.
(c) Exhibits.
10.14 Amended and Restated Asset Purchase Agreement dated November 17,
1999 by and among Hellyer Communications, Inc., Jerry L. Hellyer,
Sr., Multi-Link Telecommunications, Inc. and Hellyer Communications
Services, Inc. (without exhibits).*
10.15 Loan Agreement dated November 17, 1999 by and between Multi-Link
Telecommunications, Inc. and Jerry L. Hellyer, Sr.*
10.16 Promissory Note dated November 17, 1999 by and between Multi-Link
Telecommunications, Inc. and Jerry L. Hellyer, Sr.*
10.17 Pledge and Security Agreement by and between Multi-Link
Telecommunications, Inc. and Jerry L. Hellyer, Sr.*
99.2 Press Release.*
*Filed with the Form 8-K on November 19, 1999.
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MULTI-LINK TELECOMMUNICATIONS,
INC.
Date: February 1, 2000 By: /s/ David J. Cutler
----------------------------------------
David J. Cutler, Chief Financial Officer
3
<PAGE>
HELLYER COMMUNICATIONS, INC.
INDIANAPOLIS, INDIANA
FINANCIAL STATEMENTS
OCTOBER 31, 1999 AND 1998
(See Independent Auditor's Report)
HELLYER COMMUNICATIONS, INC.
INDIANAPOLIS, INDIANA
INDEX
- Independent Auditor's Report
- Balance Sheets at October 31, 1999
and 1998
- Statements of Operations for the
Years Ended October 31, 1999 and 1998
- Statements of Changes in Stockholders'
Equity (Deficit) for the Years Ended
October 31, 1999 and 1998
- Statements of Cash Flows for the Years
Ended October 31, 1999 and 1998
- Notes to Financial Statements
- Schedules of Selling, General and
Administrative Expenses for the Years
Ended October 31, 1999 and 1998
Page 4
<PAGE>
Robert C. Teipen, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
ROBERT C. TEIPEN, C.P.A. V. SCOTT SELANDERS, C.P.A.
7340 E. 82nd Street, Suite A
Indianapolis, IN 46256
-----------------
(317) 598-6700
fax (317) 598-6701
INDEPENDENT AUDITOR'S REPORT
To: The Board of Directors of the
Hellyer Communications Services, Inc.
Indianapolis, Indiana
We have audited the accompanying balance sheets of Hellyer Communications,
Inc. as of October 31, 1999 and 1998, and the related statements of operations,
changes in stockholders' equity (deficit) and cash flows for years ended October
31, 1999 and 1998. 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 made 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 to above present fairly,
in all material respects, the financial position of Hellyer Communications, Inc
as of October 31, 1999 and 1998, and the results of its operations and its cash
flows for years then ended in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 7 to the
financial statements, the Company has suffered recurring losses from operations
and has a net capital deficiency that raises substantial doubt about its ability
to continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Page 5
<PAGE>
Our audits were conducted for the purpose of forming an opinion on the
basic financial statements taken as a whole. The Schedules of Selling, General
and Administrative Expenses are presented for purposes of additional analysis
and are not a required part of the basic financial statements. Such information
has been subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
/s/ Robert C. Teipen P.C.
Robert C. Teipen P.C.
Certified Public Accountants
January 12, 2000
Page 6
<PAGE>
HELLYER COMMUNICATIONS, INC.
INDIANAPOLIS, INDIANA
BALANCE SHEETS
OCTOBER 31, 1999 AND 1998
(See Independent Auditor's Report)
1999 1998
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents .................... $ 26,698 $ 153,783
Accounts Receivable - Trade .................. 63,960 643,894
Inventory .................................... 22,389 160,492
Note Receivable - Shareholder ................ 0 194,141
Prepaid Expenses ............................. 0 200
Advances to Employees ........................ 0 370
---------- ----------
TOTAL CURRENT ASSETS .................... 113,047 1,152,880
---------- ----------
PROPERTY AND EQUIPMENT
Office Equipment ............................. 661,923 642,381
Automobiles .................................. 13,877 62,164
Answering Service Equipment .................. 182,887 182,887
Computer Equipment ........................... 2,389,056 1,840,622
---------- ----------
3,247,743 2,728,054
Less: Accumulated Depreciation .............. 1,561,607 1,041,616
---------- ----------
TOTAL PROPERTY AND EQUIPMENT - NET ..... 1,686,136 1,686,438
---------- ----------
OTHER ASSETS
Subscribers List ............................. 0 991,587
Escrow Deposit ............................... 0 15,000
Non-Compete Agreement ........................ 0 2,000
Trade Name ................................... 0 5,000
---------- ----------
0 1,013,587
LESS: Accumulated Amortization ............... 0 291, 136
---------- ----------
TOTAL OTHER ASSETS - NET ............... 0 722,451
---------- ----------
TOTAL ASSETS ............................ $1,799,183 $3,561,769
========== ==========
See Accompanying Notes to Financial Statements Page 7
<PAGE>
HELLYER COMMUNICATIONS, INC.
INDIANAPOLIS, INDIANA
BALANCE SHEETS
OCTOBER 31, 1999 AND 1998
(See Independent Auditor's Report)
1999 1998
LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts Payable - Trade ..................... $1,250,662 $ 263,787
Accounts Receivable - Related Parties ........ 325,997 0
Accrued Expenses ............................. 887,657 91,832
Accrued Taxes ................................ 356,813 48,479
Customer Deposits ............................ 155,956 170,858
Current Portion of Capital Leases ............ 417,232 288,280
Current Portion of Long Term Debt ............ 877,423 552,845
Current Portion of Long Term Debt - Related
Party ..................................... 58,500 0
---------- ----------
TOTAL CURRENT LIABILITIES ............... 4,330,240 1,416,081
---------- ----------
COMMITMENTS (NOTES 3 and 4)
LONG TERM LIABILITIES
Long Term Capital Leases, Less Current
Portion ................................... 1,479,503 1,038,462
---------- ----------
TOTAL LONG TERM LIABILITIES .............. 1,479,503 1,038,462
---------- ----------
TOTAL LIABILITIES ........................ 5,809,743 2,454,543
---------- ----------
SHAREHOLDER'S EQUITY (DEFICIT)
Common Stock, No Par Value, 2,000 Shares
Authorized, 1,100 Shares Issued and
Outstanding ................................ 1,100 1,100
Retained Earnings - (Accumulated Deficit) .... (4,011,660) 1,106,126
---------- ----------
TOTAL SHAREHOLDER'S EQUITY (DEFICIT) ....... (4,010,560) 1,107,226
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDER'S
EQUITY (DEFICIT) ......................... $ 1,799,183 $ 3,561,769
========== ==========
See Accompanying Notes to Financial Statements Page 8
<PAGE>
HELLYER COMMUNICATIONS, INC.
INDIANAPOLIS, INDIANA
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED OCTOBER 31, 1999 AND 1998
(See Independent Auditor's Report)
1999 1998
REVENUE
Services ............................... $ 7,181,663 $ 8,611,364
Paging Equipment Sales ................. 1,718,959 1,566,049
------------ ------------
TOTAL REVENUE ....................... 8,900,622 10, 177,413
------------ ------------
COST OF GOODS SOLD
Cost of Services ....................... 2,598,328 2,125,847
Cost of Paging Equipment ............... 583,548 477,436
------------ ------------
TOTAL COST OF GOODS SOLD ............ 3,181,876 2,603,283
GROSS MARGIN ............................... 5,718,746 7,574,130
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES - SCHEDULE B-1 ................. 10,064,884 7,077,752
------------ ------------
OPERATING INCOME (LOSS) ................. (4,346,138) 496,378
------------ ------------
OTHER INCOME (EXPENSE)
Interest Income ......................... 8,458 31,833
Interest Expense ........................ (219,056) (151,746)
------------ ------------
TOTAL OTHER INCOME (EXPENSE) ........ (210,598) (119,913)
------------ ------------
NET INCOME (LOSS) ...................... $ (4,556,736) $ 376,463
============ ============
See Accompanying Notes to Financial Statements Page 9
<PAGE>
HELLYER COMMUNICATIONS, INC.
INDIANAPOLIS, INDIANA
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
OCTOBER 31, 1999 AND 1998
(See Independent Auditor's Report)
Retained
Earnings
Common (Accumulated
Stock Deficit)
Balances at November 1, 1997 .............. $ 1,100 $ 1,435,730
Net Income ................................ 0 376,465
Distributions to Shareholder .............. 0 (706,069)
----------- -----------
Balances at October 31, 1998 .............. 1,100 1,106,126
Net Income (Loss) ......................... 0 (4,556,736)
Distributions to Shareholder .............. 0 (561, 052)
----------- -----------
Balances at October 31, 1999 .............. $ 1,100 $(4,011,662)
=========== ===========
See Accompanying Notes to Financial Statements Page 10
<PAGE>
HELLYER COMMUNICATIONS, INC.
INDIANAPOLIS, INDIANA
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED OCTOBER 31, 1999 AND 1998
(See Independent Auditor's Report)
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES
Cash Received from Customers ................. $ 9,480,556 $ 10,110,675
Cash Paid to Suppliers and Others ............ (9,667,912) (8,551,891)
Interest Received ............................ 8,458 31,833
Other Operating Receipts ..................... 0 9,264
Interest Paid ................................ (73,836) (151,746)
------------ ------------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES ...................... (252,734) 1,448,135
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for Purchases of Equipment ......... (639,445) (1,679,111)
Proceeds from Repayment of Shareholder Note.. 194,141 77,648
------------ ------------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES ................... (445,304) (1,601,463)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Issuance of Long Term Debt ..... 345,616 1,062,689
Proceeds from Issuance of Capital Leases ..... 921,684 0
Principal Payments on Long Term Debt ........ 0 (219, 214)
Principal Payments on Capital Leases ......... (135,297) 0
Distributions to Shareholder ................. (561,052) (706,069)
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES .. 570,951 137,406
(DECREASE) IN CASH AND CASH EQUIVALENTS ......... (127,087) (15,922)
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR ... 153, 783 169,705
------------ ------------
CASH AND CASH EQUIVALENTS - END OF YEAR ......... $ 26,696 $ 153,783
============ ============
See Accompanying Notes to Financial Statements Page 11
<PAGE>
<TABLE>
<CAPTION>
HELLYER COMMUNICATIONS, INC.
INDIANAPOLIS, INDIANA
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED OCTOBER 31, 1999 AND 1998
(See Independent Auditor's Report)
1999 1998
<S> <C> <C>
RECONCILIATION OF NET INCOME (LOSS) TO NET CASH
PROVIDED BY (USED IN) OPERATING ACTIVITIES
Net Income (Loss) ................................................ $(4,556,734) $ 376,465
----------- -----------
Adjustments to Reconcile Net Income (Loss) to
Net Cash provided by (Used in) Operating
Activities
Depreciation and Amortization .................................. 434,869 370,612
Loss on Impairment of Assets ................................... 733,397 304,296
(Increase) Decrease in:
Accounts Receivable - Trade ................................. 579,934 (378,494)
Accounts Receivable - Related Parties ....................... 0 311,760
Inventory ................................................... 138, 103 202,237
Prepaid Expenses ............................................ 15,200 26,380
Advances to Employees ....................................... 370 (229)
Increase (Decrease) in:
Accounts Payable - Trade .................................... 986,875 197,850
Acounts Payable - Related Parties ........................... 325,997 0
Accrued Taxes and Expenses .................................. 1,104,159 27,994
Customer Deposits ........................................... (14,902) 9,264
----------- -----------
Total Adjustments ................................................ 4,304,002 1,071,670
----------- -----------
NET CASH PROVIDED BY (USED IN) ................................... $ (252,732) $1,448,135
OPERATING ACTIVITIES ......................................... ========== ==========
</TABLE>
See Accompanying Notes to Financial Statements Page 12
<PAGE>
HELLYER COMMUNICATIONS, INC.
INDIANAPOLIS, INDIANA
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1999 and 1998
(See Independent Auditor's Report)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL - The Company's business lines currently include telephone
answering services, leasing and servicing of paging equipment and
commercial and residential voice mail services in Central Indiana,
Northern Illinois, and Southern Michigan.
CASH AND CASH EQUIVALENTS - The Company considers all temporary
investments which are readily convertible to cash, such as
certificates of deposit, commercial paper and treasury bills with
original maturities of less than three months to be cash equivalents.
ACCOUNTS RECEIVABLE - TRADE - The allowance method is used to account
for the Company's losses in the collection of accounts receivable. An
allowance for bad debts, as valued by management, at October 31, 1999
and 1998 is as follows:
1999 1998
Allowance for Bad Debts - See Note 7 $1,271,341 $ 19,779
========= ========
Bad Debt Expense - See Note 7 $2,710,786 $ 943,320
========= ========
INVENTORY - Inventory is recorded at the lower of cost (first-in,
first-out method) or market. Due to the cancellation of the Ameritech
contract (see NOTE 7), the value of the inventory at October 31, 1999,
has been reduced to market value. Inventory is detailed as follows:
1999 1998
Pagers $ 22,389 $ 160,492
--------- --------
Total Inventory $ 22,389 $ 160,492
========= ========
(CONTINUED)
Page 13
<PAGE>
HELLYER COMMUNICATIONS, INC.
INDIANAPOLIS, INDIANA
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1999 AND 1998
(See Independent Auditor's Report)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT - Property and Equipment are stated at cost.
Provisions for depreciation are made using the straight-line method
over the estimated useful lives of the assets. The major components
are:
Office Equipment 3 - 8 Years
Automobiles 5 Years
Answering Service Equipment 5 - 8 Years
Paging Equipment 5 Years
Computer Equipment 3 - 8 Years
Leasehold Improvements 10 Years
Expenditures for maintenance, repairs and betterments which do not
materially extend the useful lives of the assets or increase the
operating efficiency are charged to expense as incurred.
1999 1998
Depreciation Expense $ 434,869 $ 300,290
======== ========
OTHER ASSETS - Intangible assets are amortized by the straight-line
method over their estimated useful lives of 5 to 15 Years.
1999 1998
Amortization Expense $ 0 $ 70,322
======== ========
IMPAIRMENT OF ASSETS - The impaired assets consist of a subscriber
list, trade name, and non-compete agreement that the Company no longer
plans to utilize. The Statements of Operations includes a $722,452
loss from Discontinued Operations relating to the disposal of these
assets.
LEASES - The Company accounts for non-cancelable leases that meet
specified criteria similar to an installment sale as capital leases.
All other leases are accounted for as operating leases.
INCOME TAXES - The Company, with the consent of the shareholder, has
elected under the Internal Revenue Code to be taxed as an S
Corporation. In lieu of corporation income taxes, the shareholder of
an S Corporation is taxed on the Company's taxable income. Therefore,
no provision or liability for income taxes has been included in the
financial statements.
(CONTINUED)
Rage 14
<PAGE>
HELLYER COMMUNICATIONS, INC.
INDIANAPOLIS, INDIANA
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1999 AND 1998
(See Independent Auditors Report)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CONSIDERATION OF CREDIT RISK - The Company maintains their cash in
bank deposit accounts at high credit quality financial institutions.
The balances, at times, may exceed federally insured limits.
NOTE 2 - RELATED PARTY TRANSACTIONS
The Company is related, by reason of common ownership, to Hellyer Real
Estate, LLC and to Hellyer Construction, Inc.; both Companies are
located in Indianapolis, Indiana. These Companies have not been
included in these financial statements.
LOAN GUARANTEES - Hellyer Real Estate, LLC has guaranteed certain debt
of the Company to Fifth Third Bank of Central Indiana. See Note 4 for
details.
NOTE RECEIVABLE - SHAREHOLDER - Hellyer Communications, Inc. has a
note receivable from the president and sole shareholder. The principal
amount with accrued interest at 9% is due December 29, 2000. The note
balance and the portion of interest income from the shareholder at
October 31, 1999 and 1998 is:
1999 1998
Note Receivable from Shareholder $ 0 $ 194,141
======== ========
Accounts Payable from Hellyer Real
Estate, LLC $ 325,997 $ 0
======== ========
Note from Hellyer Real Estate, LLC $ 58,500 $ 0
======== ========
Interest Income from Shareholder $ 21,310 $ 25,580
======== ========
Page 15
<PAGE>
HELLYER COMMUNICATIONS, INC.
INDIANAPOLIS, INDIANA
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1999 AND 1998
(See Independent Auditor's Report)
NOTE 3 - LEASES
OPERATING LEASES - Hellyer Communications, Inc. leases its facilities
under a non-cancelable operating lease through Hellyer Real Estate,
LLC, a related party. The payments to Hellyer Real Estate, LLC, are to
be equal monthly installments equal to minimum annual rents. Future
minimum lease payments for the next five years are as follows:
Years Ending October 31, 2000 $ 605,423
2001 651,994
2002 651,994
2003 651,994
2004 651,994
-----------
$ 3,213,399
===========
1999 1998
Rent Expense $ 716,396 $ 723,834
======== ========
CAPITAL LEASES - The following is an analysis of property under
capital lease by major classes at cost value:
1999 1998
Office Equipment $ 5,722 $ 5,722
Voice Mail Computers 2,323,397 1,572,131
--------- ---------
Total Equipment Under Capital Lease $2,329,119 $1,577,853
========= =========
Future capital lease payments at October 31, 1999, are as follows:
Years Ending October 31, 2000 $ 417,232
2001 413, 162
2002 445,059
2003 404,765
2004 216,516
2005 and Thereafter 0
-----------
$ 1,896,734
===========
Page 16
<PAGE>
HELLYER COMMUNICATIONS, INC.
INDIANAPOLIS, INDIANA
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1999 AND 1998
(See Independent Auditor's Report)
NOTE 4 - LONG TERM DEBT
Long Term Debt consists of the following: 1999 1998
Note Payable - Fifth Third Bank of Central
Indiana, line of credit,collateralized by
the Company's assets and funds on deposit,
interest at prime plus 3% (11.00% at
October 31, 1999), monthly principal
payments of $12,500 plus accrued interest,
due November 1999, and personally
guaranteed by Jerry L. Hellyer, Sr. The
note is currently in default due to
violation of the following covenants:
1. Debt Service Coverage greater than
1.2-1.0
2. Total Liabilities to Tangible Net Worth
exceeds 2.2-1.0
3. Minimum Tangible Net Worth less than
$800,000 $ 769,239 $ 552,845
Note Payable - Hellyer Real Estate, LLC,
see Note 2 Related Parties, due on demand 58,500 0
Note Payable - Fifth Third Bank of Central
Indiana, line of credit, secured by the
Company's assets and funds on deposit,
interest at 8.25%, due November 1999,
and personally guaranteed by Jerry L.
Hellyer, Sr. 108, 184 0
---------- --------
935,923 552,845
LESS: Current Maturities 935,923 552,845
---------- --------
TOTAL LONG TERM DEBT $ 0 $ 0
========== ========
Page 17
<PAGE>
HELLYER COMMUNICATIONS, INC.
INDIANAPOLIS, INDIANA
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1999 AND 1998
(See Independent Auditor's Report)
NOTE 5 - PERMANENT IMPAIRMENTS
In December 1998, the company abandoned the use of the name of a
company whose assets it had purchased five years earlier. Those assets
consisted of intangible assets such as subscriber lists and trade
name. These amortizable assets were considered to be worthless when
the company discontinued using the acquired name in marketing the
services.
1999 1998
Impairment of Assets $ 733,397 $ 304,296
======= =======
NOTE 6 - DISPOSAL OF PROPERTY & EQUIPMENT
The Company moved its operations at the close of October, 1998, to its
new headquarters. The Company disposed of furniture, computer
equipment, and leasehold improvements, replacing those with new
products.
NOTE 7 - GOING CONCERN
The Company has operated for a number of years under a contract with
Ameritech. This contract called for Ameritech to bill Hellyer
customers for services, and remit collected funds to Hellyer after
withholding a fee for this service. Ameritech abruptly cancelled this
service in 1999. Ameritech claimed that they had overpaid Hellyer over
time and charged Hellyer back for those overpayments. Due to
significant Ameritech chargebacks and the resulting inability of
Hellyer to invoice customers directly in a timely manner caused the
Company to lose a substantial amount of money.
On November 17, 1999, the assets of Hellyer Communications, Inc. were
purchased by Multi-Link Telecommunications, Inc. The company ceased
operation as of that date. Creditors accepted a plan whereby they
received a substantially discounted payment in full settlement of
their liabilities to Hellyer.
NOTE 8 - RECLASSIFICATION
Certain accounts relating to the prior year have been restated to
conform to current year's presentation. This reclassification is due
to the sale of assets of Hellyer Communications, Inc. and the new
owners disposing of various intangible assets (see NOTES 5 and 7) .
These assets were reclassed in prior years as if they had been
expensed when they were acquired.
Page 18
<PAGE>
HELLYER COMMUNICATIONS, INC.
INDIANAPOLIS, INDIANA
SCHEDULES OF SELLING, GENERAL AND SCHEDULE B-1
ADMINISTRATIVE EXPENSES
FOR THE YEARS ENDED OCTOBER 31, 1999 AND 1998
(See Independent Auditor's Report)
1999 1998
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES
Wages and Taxes .......................... $2,713,705 $ 3,061,950
Bad Debt ................................. 2,710,786 943,320
Rent and Utilities ....................... 716,396 723,834
Telephone ................................ 636,898 759,126
Depreciation and Amortization ............ 434,869 370,612
Impairment of Assets ..................... 733,397 304,296
Advertising .............................. 91,076 63,644
Repairs and Maintenance .................. 183,352 70,485
Auto Expense ............................. 4,788 9,273
Travel and Entertainment ................. 30,464 53,588
Office Expense ........................... 600,299 229,448
Printing Expense ......................... 37,433 46,198
Postage .................................. 97,525 117,903
Insurance - Casualty ..................... 7,239 20,136
Insurance - Group ........................ 392,893 152,263
Insurance - Life ......................... 2,006 3,428
Legal and Accounting ..................... 421,237 50,708
Pension Plan ............................. 9,582 (13,649)
Property Taxes ........................... 140,256 21,780
Employee Recruitment ..................... 45,909 87,959
Penalties ................................ 53,850 0
Other .................................... 924 1,450
----------- -----------
TOTAL SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES ................................. $10,064,884 $ 7,077,752
=========== ===========
See Accompanying Notes to Financial Statements Page 19
<PAGE>
MULTI - LINK TELECOMMUNICATIONS, INC
AND
HELLYER COMMUNICATIONS, INC
INTRODUCTION
The accompanying unaudited pro forma combining, condensed balance sheet combines
the balance sheet of Multi-Link Telecommunications, Inc ('the Company") as at
September 30, 1999 with the balance sheet of Hellyer Communications, Inc
('Hellyer') as at October 31, 1999.
The accompanying unaudited pro forma combining, condensed statement of
operations combine the operations of the Company for the year ended September
30, 1999 with the operations of Hellyer for the year ended October 31, 1999 as
if the acquisition had been completed at the beginning of the period presented
under the purchase method of accounting and based upon the assumptions as
included in the notes to the proforma statements.
These statements are not necessarily indicative of future operations or the
actual results that would have occurred had the acquisition been consummated at
the beginning of the period indicated.
The unaudited pro forma combining, condensed financial statements should be read
in conjunction with the historical financial statements and notes thereto,
included elsewhere in the document.
The acquisition of substantially all of the assets and certain liabilities of
Hellyer Communications, Inc. was accounted for under the purchase method of
accounting and, as such, the statements of operations of Hellyer for periods
prior to November 17, 1999 (the date of acquisition) will never be consolidated
into Multi-Link's statements of operations for any period.
During fiscal 1999 Hellyer Communications, Inc. lost significant revenue and
consequently suffered substantial operating losses as a result of the
termination of its customer billing arrangement with Ameritech, under which
small charges for voice mail service were added to each customer's Ameritech
bill each month, and paid to Hellyer as one amount.
This Ameritech billing arrangement was restored prior to the date of acquisition
by Multi-Link, and as a result, Hellyer's fiscal 1999 statement of operations
and the pro-forma combining condensed statement of operations are not indicative
of the expected future performance of the combined companies.
20
<PAGE>
MULTI - LINK TELECOMMUNICATIONS, INC
AND
HELLYER COMMUNICATIONS, INC
NOTES TO COMBINING, CONDENSED FINANCIAL INFORMATION
(A) To reflect the cash purchase consideration for the acquisition of the
business and assets of Hellyer Communications, Inc ('Hellyer') allocated as
the partial repayment of Hellyer's Notes Payable and Accounts Payable and
acquisition costs.
(B) To reflect the write down of assets acquired from Hellyer to fair market
value in respect of property improvements that will not be transferred with
the existing business, equipment that will need to be replaced shortly
after the acquisition because of technical obsolescence and office
furniture in excess of ongoing requirements.
(C) To reflect the transfer of deferred acquisition costs to the value of
goodwill arising on the acquisition of the Hellyer business.
(D) To reflect the value of:
1) Consultancy and non - compete agreements entered into on the
acquisition of Hellyer in consideration of the issue of 150,000
shares of common stock of Multi-Link Telecommunications, Inc
('the Company').
2) Goodwill arising on the acquisition of the Hellyer business.
(E) To reflect the partial payment and write down of Accounts Payable, Accrued
Expenses and Notes Payable agreed to by the creditors of Hellyer as part of
the terms and conditions of the acquisition of the Hellyer business.
(F) To reflect the impact of the above transactions on Stockholders' Equity.
(G) To reflect the costs of amortizing the consultancy agreement (2 years),
non-compete agreement (5 years) and goodwill (15 years).
(H) To reflect the impact of the reduction in interest expense arising from the
agreed write off of certain Hellyer Notes Payable.
(I) To reflect the impact of the issue of 150,000 shares of common stock of the
Company as consideration for the Consultancy and Non Compete agreements.
21
<PAGE>
<TABLE>
<CAPTION>
MULTI-LINK TELECOMMUNICATIONS, INC. AND HELLYER COMMUNICATIONS, INC.
COMBINING, CONDENSED BALANCE SHEET
AS AT SEPTEMBER, 30 1999
(UNAUDITED)
Multi-Link Hellyer
Telecommunications, Communications Pro Forma Pro Forma
Inc. Inc. Adjustments Combined
------------------- -------------- ----------- --------
<S> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents ................................... $ 512,617 $ 26,698 $ 0 $ 539,315
Marketable securities, current .............................. 3,397,002 0 (1,057,000)(A) 2,340 002
Accounts receivable ......................................... 265,419 63,960 0 329,379
Inventory ................................................... 0 22,389 0 22,389
Prepaid expenses............................................ 51,234 0 0 51,234
----------- ----------- ----------- -----------
4,226,272 113,047 (1,057,000) 3,282,319
Marketable Securities ....................................... 386,357 0 0 386,357
Property and Equipment, net.................................. 1,184,653 1,686,136 (428,105)(B) 2,442,684
Other Assets
Deferred financing and offering costs ....................... 159,430 0 (50,000)(C) 109,430
Intangible assets, less amortization ........................ 715,882 0 2,883,987 (D) 3,599,869
----------- ----------- ----------- -----------
Total Assets ........................................... $ 6,672,594 $ 1,799,183 $ 1,348,882 $ 9,820,659
=========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable ............................................ $ 117,373 $ 1,576,659 $(1,159,915)(E) $ 534,117
Accrued expenses ............................................ 50,647 1,244,470 (790,472)(E) 504,645
Deferred revenue ............................................ 164,091 155,956 0 320,047
Notes payable - related parties, current portion ............ 17,569 0 0 17,569
Notes payable and current portion of long term debt ......... 160,424 1,353,155 (1,263,155)(E) 250,424
----------- ----------- ----------- -----------
Total current liabilities .............................. 510,104 4,330,240 (3,213,542) 1,626,802
Long-Term Debt, less current portion ........................ 341,011 1,479,503 (464,031)(E) 1,356,483
Stockholders' Equity/(Deficit) .............................. 5,821,479 (4,010,560) 5,026,455 (F) 6,837,374
----------- ----------- ---------- -----------
Total Liabilities and Stockholders' Equity ............. $ 6,672,594 $ 1,799,183 $1,348,882 $ 9,820,659
=========== =========== ========== ===========
</TABLE>
See accompanying Notes to Combining, Condensed Financial Information.
22
<PAGE>
<TABLE>
<CAPTION>
MULTI-LINK TELECOMMUNICATIONS, INC. AND HELLYER COMMUNICATIONS, INC.
COMBINING, CONDENSED BALANCE SHEET
AS AT SEPTEMBER, 30 1999
ADJUSTMENTS
1 2 3 4 5 6 Total
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents ...................... 0
Marketable securities, current ................. (1,057,000) (1,057,000)
Accounts receivable ............................ 0
Inventory ...................................... 0
Prepaid expenses ............................... 0
----------- -------- ---------- ---------- -------- -------- -----------
(1,057,000) 0 0 0 0 0 (1,057,000)
Marketable Securities .......................... 0
Property and Equipment, net..................... (428,105) (428,105)
Other Assets
Deferred financing and offering costs .......... (50,000) (50,000)
Intangible assets, less amortization ........... 150,000 965,625 1,768,362 2,883,987
----------- -------- --------- ---------- -------- -------- ----------
Total Assets .............................. (907,000) 965,625 0 1,718,362 0 (428,105) 1,348,882
=========== ======== ========= ========== ======== ======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable ............................... (337,000) (822,915) (1,159,915)
Accrued expenses ............................... (790,472) (790,472)
Deferred revenue ............................... 0
Notes payable - related parties, current
portion ..................................... 0
Notes payable and current portion of long
term debt ................................... (570,000) (693,155) (1,263,155)
----------- -------- --------- ---------- -------- -------- ----------
Total current liabilities ................. (970,000) 0 (693,155) 0 (1,613,387) 0 (3,213,542)
Long-Term Debt, less current portion ........... (464,031) (464,031)
Stockholders' Equity
Common Stock ................................... 965,625 965,625
Accumulated deficit ............................ 1,157,186 1,718,362 1,613,387 (428,105) 4,060,830
Unrealized loss on marketable securities .......
----------- -------- --------- ---------- -------- -------- ----------
Total stockholder's equity ................ 0 965,625 1,157,186 1,718,362 1,613,387 (428,105) 5,026,455
Total Liabilities and Stockholders'
Equity .................................. (907,000) 965,625 0 1,718,362 0 (428,105) 1,348,882
</TABLE>
See accompanying Notes to Combining, Condensed Financial Information.
23
<PAGE>
MULTI-LINK TELECOMMUNICATIONS, INC. AND HELLYER COMMUNICATIONS, INC.
COMBINING, CONDENSED BALANCE SHEET
AS AT SEPTEMBER, 30 1999
ADJUSTMENTS
1. Injection of $1,057,000 cash on closing
570,000 banks
150,000 fees
337,000 unsecured creditors
---------
1,057,000
2. Issue of shares in Telecommunications for non-compete & consultancy
agreements with Jerry Hellyer.
3. Write off of liabilities of primary creditors:
Notes payable and current portion of long term debt 1,353,155
Long term debt, less current portion 1,479,503
----------
2,832,658
Prepaid in cash (570,000)
Less: primary liabilities assumed
Haworth (980,000)
Fifth Third (80,000)
Heller (45,472)
---------
(1,105,472)
split $90k
current,
balance
greater than
12 months.
----------
1,157,186
4. Goodwill
Accounts receivable 63,690
Inventory 22,389
Fixed Assets 1,358,031
Assumed primary liabilities (980,000)
(80,000)
(45,472)
Cash injected on closing (1,057,000)
Assumed secondary liabilities (1,000,000)
Costs of acquisition (50,000)
--------- ----------
1,444,110 (3,212,472) (1,768,362)
Fees paid as cash at closing (150,000)
----------
(1,918,362)
24
<PAGE>
MULTI-LINK TELECOMMUNICATIONS, INC. AND HELLYER COMMUNICATIONS, INC.
COMBINING, CONDENSED BALANCE SHEET
AS AT SEPTEMBER, 30 1999
ADJUSTMENTS
5. Additional $1,000,000 secondary liabilities assumed.
CFWD Write off
Accrued expenses 1,244,470 453,998 790,472
Customer deposits 155,956 155,956 0
---------
609,954
Total liabilities to be assumed 1,000,000
---------
Balance to be paid to creditors 390,046
Opening creditors 1,576,659
less initial cash settlement (337,000)
Less existing cash (26,698)
Less balance of secondary
liabilities (390,046)
---------
822,915
6. Write off fixed assets
1,686,136
Fair value (1,358,031)
----------
328,105
