U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-QSB
(Mark One)
[X} QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
Commission file number 0 - 26013
MULTI-LINK TELECOMMUNICATIONS, INC.
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(Exact name of small business issuer as specified in its charter)
Colorado 84-1334687
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
4704 Harlan St, Suite 420, Denver, Colorado, 80212
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(Address of principal executive offices)
(303) 831 1977
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(Issuer's telephone number)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
State the number of shares outstanding of each of the issuer's classes of
equity, as of the latest practicable date:
Class Outstanding August 14, 2000
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Common Stock, No par value 4,084,290 shares
Transitional Small Business Disclosure format: Yes [ ] No [X]
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INDEX
MULTI-LINK TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) PAGE
Consolidated Balance Sheet, June 30, 2000. 3
Consolidated Statements of Operations and Comprehensive Income - 4
Three Months Ended June 30, 2000 and 1999 and Nine Months
ended June 30, 2000 and 1999.
Consolidated Statement of Cash Flows - Nine Months ended June 30, 5
2000 and 1999.
Notes to Consolidated Financial Statements. 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities and Use of Proceeds. 15
Item 3. Defaults on Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K. 15
2
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Part I. FINANCIAL INFORMATION
Item I. Financial Statements
<TABLE>
<CAPTION>
Multi-Link Telecommunications, Inc.
Consolidated Balance Sheet
(Unaudited)
June 30,
2000
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<S> <C>
ASSETS
Current Assets
Cash & Cash Equivalents .......................................................... $ 614,600
Marketable Securities, current ................................................... 295,820
Accounts Receivable, net of allowance for doubtful accounts of $207,310 .......... 1,211,862
Note Receivable .................................................................. 322,118
Subscription Receivable .......................................................... 200,000
Inventory ........................................................................ 32,407
Prepaid Expenses ................................................................. 337,497
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Total Current Assets ............................................. 3,014,304
Subscription Receivable .......................................................................... 800,000
Marketable Securities ............................................................................ 292,273
Property & Equipment Net ......................................................................... 4,639,268
Other Assets
Deferred Financing Costs ......................................................... 93,773
Intangible Assets, net of amortization of $1,361,125 ............................. 7,245,028
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TOTAL ASSETS ..................................................................................... $ 16,048,646
============
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable ................................................................. $ 613,432
Accrued Expenses ................................................................. 540,448
Customer Deposits ................................................................ 128,635
Deferred Revenue ................................................................. 142,685
Notes Payable and Current Portion of Long -Term Debt ............................. 637,759
------------
Total Current Liabilities ........................................ 2,062,959
Long-Term Debt, Net of Current Portion ........................................................... 3,783,693
STOCKHOLDERS' EQUITY
Preferred Stock, $.01 par value: 5,000,000 shares authorized: none issued ........ 0
Common Stock no par value: 20,000,000 shares authorized, 4,084,290
shares issued and outstanding .................................................... 11,921,548
Loss on Investments available for sale ........................................... (9,679)
Accumulated Deficit .............................................................. (1,673,875)
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Total Stockholders' Equity ....................................... 10,237,994
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ....................................................... $ 16,048,646
============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
3
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<TABLE>
<CAPTION>
Multi-Link Telecommunications, Inc.
Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
Three Months Ended Nine Months Ended
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
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<S> <C> <C> <C> <C>
NET REVENUES ........................................... $ 3,113,638 $ 1,153,581 $ 8,262,473 $ 3,354,536
COST OF SERVICES AND PRODUCTS .......................... 687,715 197,256 1,747,237 595,990
----------- ----------- ----------- -----------
GROSS MARGIN ........................................... 2,425,923 956,325 6,515,236 2,758,546
EXPENSES
Sales & Advertising Expenses ............. 368,540 84,862 998,708 271,830
General & Administrative Expenses ........ 1,531,163 543,593 4,044,685 1,497,432
Non Recurring Pooling Expenses ........... 101,091 0 101,901 0
Non Recurring Moving Expenses ............ 122,179 0 122,179 0
Depreciation ............................. 129,135 36,843 295,788 105,634
Amortization ............................. 290,375 67,870 697,608 155,458
----------- ----------- ----------- -----------
Total Expenses .................... 2,542,483 733,168 6,260,059 2,030,354
INCOME (LOSS) FROM OPERATIONS .......................... (116,560) 223,157 255,178 728,192
INTEREST INCOME (EXPENSE) NET AND OTHER ................ (90,434) (80,889) (200,220) (291,210)
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES ...................... (206,994) 142,268 54,958 436,982
PROVISION FOR INCOME TAXES ............................. (6,536) (24,174) (11,252) (73,878)
----------- ----------- ----------- -----------
NET INCOME (LOSS) ...................................... $ (213,530) $ 118,094 $ 43,706 $ 363,104
UNREALIZED PROFIT (LOSS) ON INVESTMENTS ................ 5,522 (5,821) 1,633 (5,821)
AVAILABLE FOR SALE
----------- ----------- ----------- -----------
COMPREHENSIVE INCOME (LOSS) ............................ $ (208,008) $ 112,273 $ 45,339 $ 357,283
=========== =========== =========== ===========
NET INCOME (LOSS) PER COMMON SHARE
Basic .................................... $ (0.05) $ 0.04 $ 0.01 $ 0.16
Diluted .................................. $ (0.05) $ 0.04 $ 0.01 $ 0.14
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic .................................... 3,956,301 2,825,942 3,824,375 2,320,732
Diluted .................................. 3,956,301 3,048,326 4,011,660 2,534,677
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
4
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<TABLE>
<CAPTION>
Multi-Link Telecommunications, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended
June 30, June 30,
2000 1999
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<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
NET INCOME (LOSS) ........................................................................ $ 43,706 $ 363,104
ADJUSTMENTS to reconcile net profit to net
cash generated from (used in) operating activities ....................................
Depreciation and Amortization .............................................. 993,396 261,092
Amortization of Debt Discount and Issuance Costs ........................... 21,876 21,525
Bad Debt Expense ........................................................... 190,683 28,415
CHANGES IN OPERATING ASSETS & LIABILITIES
(Increase)/Decrease in Accounts Receivable ................................. (877,918) (129,698)
(Increase)/Decrease in Inventory ........................................... (8,235) 11,479
(Increase)/Decrease in Prepayments ......................................... (186,191) 71,572
Increase/(Decrease) in Accounts Payable .................................... 317,998 (46,587)
Increase/(Decrease) in Accrued Expenses .................................... (1,130,704) (132,239)
----------- -----------
NET CASH (Used in)/Provided by Operating Activities ...................................... (635,389) 448,663
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of Subscriber Accounts ............................................ (334,674) (507,428)
Purchase of Fixed Assets ................................................... (1,578,082) (128,884)
Advance on Note Receivable ................................................. (322,118) 0
Sale of Marketable Securities .............................................. 3,195,266 0
Unrealized Loss on Investments ............................................. 1,633 0
Deferred Financing Costs ................................................... 1,038 0
Investment in Associated Company ........................................... 0 (35,484)
Purchase Cashtel ........................................................... (258,320) 0
Purchase of Hellyer Communications' Business and Assets .................... (1,419,936) 0
Purchase of One Touch Communications' Business and Assets .................. (1,152,060) 0
----------- -----------
Total Cash Flow (used in) Investing Activities ......................... (1,867,253) (671,796)
CASH FLOW FROM FINANCING ACTIVITIES
Payment of Related Party Notes Payable ..................................... (17,569) (718,191)
Advances under Related Party Notes Payable ................................. 0 80,000
Advances under Notes Payable ............................................... 3,591,863 350,000
Payments of Notes Payable .................................................. (1,211,126) (2,439,946)
Repurchase of Outstanding Shares ........................................... 0 (5,721)
Proceeds from Issuance of Common Stock ..................................... 105,172 8,870,000
Customer Deposits .......................................................... 128,635 0
Net effect of pooling VoiceLink ............................................ 10,726 0
Costs of equity raising .................................................... (62,719) (1,630,430)
----------- -----------
Total Cash Flow provided by Financing Activities ....................... 2,544,982 4,505,712
INCREASE/(DECREASE) IN CASH & CASH EQUIVALENTS ........................................... 42,340 4,282,579
Cash and Cash Equivalents at the beginning of the period ................................. 572,260 626,218
----------- -----------
Cash and Cash Equivalents at the end of the period ....................................... $ 614,600 $ 4,908,797
=========== ===========
(continued)
See accompanying Notes to Consolidated Financial Statements.
5(a)
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<CAPTION>
Multi-Link Telecommunications, Inc.
Consolidated Statements of Cash Flows (Continued)
(Unaudited)
Nine Months Ended
June 30, June 30,
2000 1999
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<S> <C> <C>
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION
Cash paid for interest ................................................................... $ 200,937 $ 272,698
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Cash paid for taxes ...................................................................... $ 0 $ 9,792
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Conversion of note payable to equity ..................................................... $ 0 $ 35,000
----------- -----------
Consultancy and non-compete agreements acquired for equity ............................... $ 956,624 $ 0
----------- -----------
Business and assets of One Touch acquired for equity ..................................... $ 2,020,000 $ 0
----------- -----------
Capital stock of VoiceLink of Florida, Inc acquired for equity ........................... $ 132,000 $ 0
----------- -----------
Subscriber accounts acquired for equity .................................................. $ 20,535 $ 0
----------- -----------
Fixed assets purchased through debt ...................................................... $ 1,105,472 $ 0
----------- -----------
Net liabilities assumed in business combination accounted for as a purchase .............. $ 769,022 $ 0
----------- -----------
Capital stock issued on June 30, 2000, proceeds received after quarter end ............... $ 1,000,000 $ 0
----------- -----------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
5(b)
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Note 1 Basis of Presentation
The accompanying unaudited financial statements of Multi-Link
Telecommunications, Inc. have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-QSB and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In our opinion
the financial statements include all adjustments (consisting of normal recurring
accruals) necessary in order to make the financial statements not misleading.
Operating results for the three and nine month periods ended June 30, 2000 are
not necessarily indicative of the results that may be expected for the year
ended September 30, 2000. These statements should be read in conjunction with
the financial statements and related notes contained in our latest Form 10-KSB
which includes audited financial statements for the years ended September 30,
1998 and 1999.
Note 2 Basis of Consolidation
On November 19, 1999 Multi-Link Telecommunications, Inc., through its newly
formed subsidiary, Hellyer Communications Services, Inc., acquired the business
and substantially all the assets of Hellyer Communications, Inc. for a
combination of cash, assumption of certain liabilities and common stock valued
at $4.2 million. Hellyer has been a provider of business messaging services
since 1969, and has over 40,000 subscribers in Indianapolis, Chicago and
Detroit. The transaction was accounted for using the purchase method of
accounting and resulted in $2.61 million of goodwill representing the excess of
the purchase price over the fair value of net assets acquired. The purchase
price was $1.1 million in cash and the assumption of approximately $2.1 million
in liabilities. $956,000 in restricted common stock was issued with a two-year
vesting schedule with respect to non-compete and consulting agreements with
Jerry L. Hellyer, the sole shareholder of Hellyer. The results of the Hellyer
Communications business have been consolidated with those of Multi-Link
Telecommunications, Inc. effective November 17, 1999.
On November 29, 1999 Hellyer Communications Services, Inc., acquired 9,416
residential voice-messaging accounts from B.F.G. of Illinois Inc., doing
business as Cashtel, Inc., in Chicago. The purchase price was $258,320 in cash
and $20,536 in common stock. The revenues and expenses of these accounts have
been consolidated with those of Multi-Link Telecommunications, Inc., effective
November 29, 1999.
On January 6, 2000, Multi-Link Telecommunications, Inc., through its newly
formed subsidiary, One Touch Communications, Inc., acquired the business and
substantially all the assets of One Touch Communications, Inc., a provider of
advanced voice messaging services to businesses in Raleigh, North Carolina. The
transaction was accounted for using the purchase method of accounting and
resulted in $2.88 million of goodwill representing the excess of the purchase
price over the fair market value of net assets acquired. The purchase price was
$3.12 million, $1.1 million in cash and $2.02 million in restricted common
stock. The sellers have agreed to hold the common stock for up to two years from
the date of closing. The results of the One Touch business have been
consolidated with those of Multi-Link Telecommunications, Inc. effective January
6, 2000.
On March 31, 2000, Multi-Link Telecommunications, Inc., acquired 100% of
the outstanding capital stock of VoiceLink Inc., a provider of advanced voice
messaging services to businesses in Atlanta, Georgia. The purchase price was
$4.88 million paid through the issue of 406,488 restricted common shares at a
price of $12.00 per share. The acquisition was accounted for as a pooling of
interests, and the results of the VoiceLink business have been consolidated with
those of Multi-Link Telecommunications, as if the two businesses had been merged
throughout the periods presented. Included in net income for the three months
and nine months ended June 30, 2000 was net income from VoiceLink, Inc. of
$23,000 and $105,000, respectively after expensing non-recurring pooling
expenses of $101,000. Included in net income for the three months and nine
months ended June 30, 1999 was net income from VoiceLink, Inc. of $39,000 and
$121,000, respectively.
6
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Effective May 1, 2000 Multi-Link Telecommunications, Inc., acquired 50% of
the outstanding capital stock of VoiceLink of Florida, Inc., a provider of
advanced voice messaging services to businesses in Ft. Lauderdale, Florida.
VoiceLink, Inc., a wholly owned subsidiary of Multi-Link Telecommunications,
Inc., had previously owned 50% of the outstanding share capital of VoiceLink of
Florida, Inc. and VoiceLink of Florida, Inc. had been accounted for under the
equity method of accounting. The equity income (loss) of VoiceLink of Florida,
Inc. was not significant to Multi-Link Telecommunications, Inc. and has been
included in interest income (expense) net and other within the consolidated
statements of operation and comprehensive income. The purchase price for the
remaining 50% of outstanding share capital of VoiceLink of Florida, Inc. was
$132,000 which was paid through the issuance of 12,000 restricted common shares
of Multi-Link Telecommunications, Inc. at a market price of $11.00 per common
share. The acquisition was accounted for as a purchase, and, as a result, the
results of VoiceLink of Florida, Inc. have been consolidated with those of
Multi-Link Telecommunications, Inc., effective May 1, 2000.
Note 3 Subscription Receivable
On June 30, 2000 Glenayre Technologies, Inc. subscribed $1 million for
stock and warrants in Multi-Link Telecommunications, Inc. Full details of the
transaction are set out in Note. 5 below. None of the proceeds of the stock
issue were received prior to the end of the quarter. Accordingly the proceeds
have been recorded in the balance sheet at June 30, 2000 as Subscription
Receivable. $800,000 of the proceeds of the stock issue are held in an escrow
account by Glenayre Technologies, Inc. and the use of these funds is restricted
to the purchase of Glenayre messaging equipment. These funds have been
categorized as long-term assets. The balance of $200,000 of the proceeds of the
stock issue were subsequently remitted to us, can be used at our discretion, and
have been categorized as a current asset.
Note 4 Notes Payable
During the nine months ended June 30, 2000 Multi-Link Telecommunications,
Inc. drew $1.2 million under its five-year term loan with Westburg Media Capital
and $400,000 under its margin facility with PaineWebber, Inc. to repay lease and
loan facilities and provide additional working capital.
Multi-Link Telecommunications, Inc., through its wholly owned subsidiaries
Hellyer Communications Services, Inc., One Touch Communications, Inc. and
Multi-Link Communications, Inc, also entered into seven equipment financing
facilities with terms between thirty six and sixty months, at interest rates
between 9.25% and 10.5% per annum for a total of $1.92 million and one ten year
property loan for $76,000 at an interest rate of 10.25% per annum. These funds
were used to repay existing leases and to finance the purchase of additional
voice messaging equipment.
Note 5 Stockholders' Equity
On May 15, 2000, 40,123 shares of common stock were issued for $105,000
under the terms of our approved stock option plan.
On June 30, 2000, 104,439 restricted shares of common stock were issued at
$9.57 per share together with a five year warrant to purchase 100,000 shares of
our common stock at an exercise price of $14.3625 to Glenayre Technologies, Inc.
for a total purchase price of $1 million. As part of this transaction, we
contracted to purchase not less than $2.5 million of messaging equipment from
Glenayre over the next three years at standard list price. $800,000 of the
$1,000,000 million stock purchase consideration was retained in an escrow
account by Glenayre to fund part of these contracted purchases.
ITEM 2. 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 included in this report. This discussion
contains forward-looking statements that involve risks and uncertainties. Our
7
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actual results could differ materially from those anticipated in these forward
looking statements as a result of any number of factors, including but not
limited to, intensity of competition, customer attrition, disruption of local
telephone networks, technological obsolescence, cost of technology, the
availability of third party billing solutions, the availability of financing,
our ability to manage our growth, the availability and success of future
acquisitions, the effects of regional economic and market conditions and
increases in marketing and sales costs.
OVERVIEW
Our long-term goal is to become a significant force within the U.S. unified
messaging service industry, which is predicted by analysts to be an important
market over the next few years. At present we provide advanced voice messaging
services to businesses and homes. We plan to achieve this market position by
acquiring voice messaging subscribers through a national industry consolidation
plan, and then transitioning our customers to unified messaging services as
market demand for this service increases.
We currently provide advanced integrated voice and fax messaging services
for residences and small and medium sized businesses. These services enable
businesses to improve the handling of incoming calls and facilitate more
efficient communication between employees, customers, suppliers and other key
relationships of the subscriber company.
Our revenues are primarily derived from receiving fixed monthly service
fees for voice mail, installation and set-up charges and sales of ancillary
telecommunications services such as paging. We recognize revenues as we deliver
services. Annual prepayments by subscribers are recognized over the period
covered by the prepayment on a straight-line basis.
Our primary costs of delivering our voice messaging services to our
subscribers are our voice messaging platforms, maintenance costs and the costs
of interconnection to the public switched telephone network. Most of our general
and administrative expenses are incurred in the processing and servicing of new
subscriber accounts.
We currently sell a small portion of our services through independent sales
agents and the majority through our in-house sales force. However, for the past
two years, the majority of our sales were made through independent sales agents.
All salaries and commissions associated with our in-house sales force are
expensed as incurred. All commissions paid to independent sales agents for
procuring subscribers are capitalized and amortized. We amortize these
subscriber account acquisition costs over the estimated economic life of
subscriber accounts or 36 months, whichever is less.
From inception through September 1998, we financed our operations and net
losses through factoring of customer contracts and working capital loans
provided by CS Capital Corp. at implied interest rates of up to 52% per annum.
In September 1998, we refinanced most of our indebtedness to CS Capital Corp.
with a five-year term loan from Westburg Media Capital LP. The Westburg loan has
an interest rate of 3% per annum over prime rate. In May 1999, we repaid all but
$10,000 of the Westburg loan from the proceeds of our initial public offering
and, as a result, experienced significantly lower net interest expense in fiscal
1999 than in prior years. Subsequently we have now drawn down a further $1.2
million under this facility to finance our program of acquisitions and provided
additional working capital finance.
We plan to continue to increase revenues by increasing the number of sales
agents that offer our voice messaging services, by increasing the range of
telecommunications services we offer to our customers, and by acquiring
companies in the voice messaging industry. After completing an acquisition, we
plan to convert the operations of the acquired company to conform to our current
business model, where economically feasible.
8
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Acquisitions
On November 17, 1999 we competed the acquisition of substantially all of
the business, assets and certain liabilities of Hellyer Communications, Inc., a
provider of basic voice messaging services in Indianapolis, Detroit and Chicago.
As a result, our financial statements include the revenues and expenses of
Hellyer from the date of acquisition through June 30, 2000.
On November 29, 1999 we completed the acquisition of 9,416 residential
voice-messaging subscribers from BFG of Illinois, Inc. doing business as
Cashtel, Inc. in Chicago. As a result, our financial statements include the
revenues and the expenses of these subscribers from the date of the acquisition
through June 30, 2000.
On January 6, 2000, we completed the acquisition of all of the business,
assets and certain liabilities of One Touch Communications, Inc., a provider of
voice messaging services in Raleigh, North Carolina. As a result, our financial
statements include the revenues and expenses of One Touch from the date of
acquisition through June 30, 2000.
On March 31, 2000, we acquired 100% of the outstanding share capital of
VoiceLink Inc., a provider of advanced voice messaging services to businesses in
Atlanta, Georgia. The acquisition was accounted for as a pooling of interests,
and, as a result, the results of the VoiceLink business have been consolidated
with those of Multi-Link Telecommunications, as if the two businesses had been
merged throughout the periods presented.
On May 1, 2000 we acquired 50% of the outstanding capital stock of
VoiceLink of Florida, Inc., a provider of advanced voice messaging services to
businesses in Ft. Lauderdale, Florida. VoiceLink, Inc., a wholly owned
subsidiary of Multi-Link Telecommunications, Inc., had previously owned 50% of
the outstanding share capital of VoiceLink of Florida, Inc. and VoiceLink of
Florida, Inc. had been accounted for under the equity method of accounting. The
equity income (loss) of VoiceLink of Florida, Inc. was not significant to
Multi-Link Telecommunications, Inc. and has been included in interest income
(expense) net and other within the consolidated statements of operation and
comprehensive income. The acquisition of the remaining 50% of the capital stock
of VoiceLink of Florida, Inc. was accounted for as a purchase, and, as a result,
the results of VoiceLink of Florida, Inc. have been consolidated with those of
Multi-Link Telecommunications, Inc., effective May 1, 2000.
Results of Operations
Quarter ended June 30, 2000 compared to quarter ended June 30, 1999.
The results for the quarter ended June 30, 2000 include the results for all
the acquisitions described above for the periods stated. The results for the
quarter ended June 30, 1999 have been restated to include the results of
VoiceLink Inc., the acquisition of which has been accounted for as a pooling of
interests.
Net Revenues. Our revenues for the quarter ended June 30, 2000 were
$3,114,000 compared to $1,154,000 for the fiscal quarter ended June 30, 1999, an
increase of 170%. The increase was due to the combined result of (a) continuing
internal growth in our base of customers at Multi-Link in Denver and an increase
in the price charged by us for certain messaging services at our Denver
operation in July 1999. These factors combined generated 22% internal growth -
$121,000, and (b) the inclusion of revenues from the various acquisitions
described above - $1,839,000.
Cost of Services and Products. Cost of services and products for the fiscal
quarter ended June 30, 2000 was $688,000, compared to $197,000 for the fiscal
quarter ended June 30, 1999, an increase of 249%. The increase was due to the
various acquisitions described above.
9
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Gross Profit Margin. Gross margin for the fiscal quarter ended June 30,
2000 was $2,426,000 compared to $956,000 for the fiscal quarter ended June 30,
1999, an increase of 154% due to the factors described above.
Gross Profit Margin Percentage. The overall gross profit margin declined
from 83% for the three months ended June 30, 1999 to 78% for the three months
ended June 30, 2000. The decline resulted from the change in our business mix as
a result of the various acquisitions detailed above. Our gross profit margin on
automated business messaging services is higher than the gross profit margin on
business live answering and residential automated messaging services.
Sales and Advertising Expense. Sales and advertising expenses for the three
months ended June 30, 2000 were $369,000 compared to $85,000 for the three
months ended June 30, 1999, an increase of 334% This increase was due to the
inclusion of sales and advertising expenses from the various acquisitions
described above - $161,000, and the cost of operating our new residential
telesales center - $123,000.
General and Administrative Expenses. General and administrative expenses
for the three months ended June 30, 2000 were $1,531,000 compared to $544,000
for the three months ended June 30, 1999. This increase of 181% was due to (a)
the costs associated with our becoming a public company, including investor
relations expenses, transfer agent fees, legal fees, accounting fees, other
professional expenses, and increases in management salaries - $135,000 and (b)
the inclusion of general and administrative expenses from the various
acquisitions described above, including a broad based reorganization at Hellyer
Communications Services, Inc. - $725,000, and (c) the costs of operating the new
residential telesales center - $127,000.
Non Recurring Pooling Expenses. In the three months ended June 30, 2000 we
incurred professional fees in connection with the acquisition of VoiceLink, Inc.
of $101,000. As the acquisition was accounted for as a pooling of interests all
the costs of the acquisition were expensed rather than being capitalized. No
such expenses were incurred in the three months ended June 30, 1999 and these
expenses will not recur in the future.
Non Recurring Moving Expenses. During the three months ended June 30, 2000
we relocated the offices of our 100% owned subsidiary, Hellyer Communications
Services, Inc. The costs incurred in respect of this relocation totaled
$122,000. No such expenses were incurred in the three months ended June 30, 1999
and these expenses will not recur in the future.
EBITDA - Earnings Before Interest, Tax, Depreciation, and Amortization.
EBITDA for the three months ended June 30, 2000 was $303,000 compared to
$328,000 for the three months ended June 30, 1999, a decrease of 8%. This
decrease was caused by non-recurring costs incurred in respect of pooling
expenses ($101,000) and moving costs ($122,000). EBITDA for the three months
ended June 30, 2000, excluding these non-recurring charges, was $526,000, an
increase of 60% over the three months ended June 30, 1999. This is the result of
the inclusion of the various acquisitions detailed above."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.
Depreciation of Equipment. Depreciation expense in the three months ended
June 30, 2000 was $129,000 compared to $37,000 for the three months ended June
30, 1999. This increase of 249% was due to increased purchases of equipment and
the inclusion of the various acquisitions described above.
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Amortization. Amortization was $290,000 for the three months ended June 30,
2000 compared to $68,000 for the three months ended June 30, 1999. This increase
of 326% was due to (a) continued customer account purchases from our base of
independent sales agents in the Denver area, (b) amortization of goodwill on the
various acquisitions described above and (c) the amortization of the non compete
agreement and consulting agreement with Jerry L. Hellyer relating to the Hellyer
acquisition.
Income (Loss) from Operations. Loss from operations was $(117,000) for the
three months ended June 30, 2000 compared to a profit from operations of
$223,000 for the three months ended June 30, 1999, due to the factors described
above.
Net Interest Income (Expense). Net interest income (expense) for the three
months ended June 30, 2000 was $(90,000) compared to $(81,000) for the three
months ended June 30, 1999, a increase of 11%.
Provision for Income Taxes. The provision for income taxes for the three
months ended June 30, 2000 was $7,000 compared to $24,000 for the three months
ended June 30, 1999, a decrease of 58% due to the taxable losses generated in
the current quarter due to the factors described above.
Net Income (Loss) and Comprehensive Income (Loss). We incurred a net loss
of $(214,000) for the three months ended June 30, 2000, compared to a net income
of $118,000 for the three months ended June 30, 1999, due to the factors
outlined above. The comprehensive loss for the three months ended June 30, 2000
was $(208,000), $6,000 less than the net loss of $(214,000). The difference of
$6,000 relates to a reduction in the level of unrealized losses on our portfolio
of marketable securities, which are held as available for sale investments. The
comprehensive income for the three months ended June 30, 1999 was $112,000,
$6,000 less than the net income of $118,000. The difference of $6,000 was due to
unrealized losses on our portfolio of marketable securities, which are held as
available for sale investments.
Nine Months ended June 30, 2000 compared to Nine Months ended June 30, 1999.
The results for the nine months ended June 30, 2000 include the results for
the acquisitions described above for the periods stated. The results for the
nine months ended June 30, 1999 have been restated to include the results of
VoiceLink Inc., the acquisition of which has been accounted for as a pooling of
interests.
Net Revenues. Our revenues for the nine months ended June 30, 2000 were
$8,262,000 compared to $3,355,000 for the nine months ended June 30, 1999, an
increase of 146%. The increase was the combined result of (a) continuing
internal growth in our base of customers at Multi-Link in Denver and an increase
in the price charged by us for certain messaging services at our Denver
operation in July 1999. These factors combined generated 24% internal growth -
$377,000, and (b) the inclusion of revenues from the various acquisitions
described above - $4,530,000.
Cost of Services and Products. Cost of services and products for the nine
months ended June 30, 2000 was $1,747,000, compared to $596,000 for the nine
months ended June 30, 1999, an increase of 193%. The increase was the result of
the various acquisitions described above.
Gross Profit Margin. Gross margin for the nine months ended June 30, 2000
was $6,515,000 compared to $2,759,000 for the nine months ended June 30, 1999,
an increase of 136% due to the factors described above.
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Gross Profit Margin Percentage. The overall gross profit margin declined
from 82% for the nine months ended June 30, 1999 to 79% for the nine months
ended June 30, 2000. The decline comes from the change in our business mix as a
result of the various acquisitions detailed above. Our gross profit margin on
automated business messaging services is higher than the gross profit margin on
business live answering and residential automated messaging services.
Sales and Advertising Expense. Sales and advertising expenses for the nine
months ended June 30, 2000 were $999,000 compared to $272,000 for the nine
months ended June 30, 1999, an increase of 267%. This increase resulted from the
inclusion of sales and advertising expenses from the various acquisitions
described above - $427,000, and the operation of our new residential telesales
center at a cost of $300,000.
General and Administrative Expenses. General and administrative expenses
for the nine months ended June 30, 2000 were $4,045,000 compared to $1,497,000
for the nine months ended June 30, 1999. This increase of 170% was due to (a)
the costs associated with our becoming a public company, including investor
relations expenses, transfer agent fees, legal fees, accounting fees, other
professional expenses and increases in management salaries - $375,000, and (b)
the inclusion of general and administrative expenses from the various
acquisitions described above, including a broad based reorganization at Hellyer
Communications Services, Inc. - $1,946,000, and (c) the costs of operating the
new residential telesales center - $227,000.
Non Recurring Pooling Expenses. During the nine months ended June 30, 2000
we incurred professional fees in connection with the acquisition of VoiceLink,
Inc. of $101,000. As the acquisition was accounted for as a pooling of interests
all the costs of the acquisition were expensed rather than being capitalized. No
such expenses were incurred in the nine months ended June 30, 1999 and these
expenses will not recur in the future.
Non Recurring Moving Expenses. During nine months ended June 30, 2000 we
relocated the offices of our 100% owned subsidiary, Hellyer Communications
Services, Inc. The costs incurred in respect of this relocation totaled
$122,000. No such expenses were incurred in the nine months ended June 30, 1999
and these expenses will not recur in the future.
EBITDA - Earnings Before Interest, Tax, Depreciation, and Amortization.
EBITDA for the nine months ended June 30, 2000 was $1,249,000 compared to
$989,000 for the nine months ended June 30, 1999, an increase of 26%. The
increase is the result of the inclusion of the various acquisitions detailed
above. EBITDA for the nine months ended June 30, 2000, excluding the
non-recurring charges for pooling expenses ($101,000) and moving expenses
($121,000) was $1,472,000, an increase of 49% over the quarter to June 30, 1999.
This is the result of the inclusion of the various acquisitions detailed
above."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.
Depreciation of Equipment. Depreciation expense in the nine months ended
June 30, 2000 was $296,000 compared to $106,000 for the nine months ended June
30, 1999. This increase of 179% was due to increased purchases of equipment and
the inclusion of the various acquisitions described above.
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Amortization. Amortization was $698,000 for the nine months ended June 30,
2000 compared to $155,000 for the nine months ended June 30, 1999. This increase
of 350% was due to (a) continued customer account purchases from our base of
independent sales agents in the Denver area, (b) amortization of goodwill on the
various acquisitions described above and (c) the amortization of the non compete
agreement and consulting agreement with Jerry L. Hellyer relating to the Hellyer
acquisition.
Income (Loss) from Operations. Income from operations was $255,000 for the
nine months ended June 30, 2000 compared to $728,000 for the nine months ended
June 30, 1999, a decrease of 65% due to the factors outlined above.
Net Interest Income (Expense). Net interest expense for the nine months
ended June 30, 2000 was $(200,000), compared to $(291,000) for the nine months
ended June 30, 1999, a decrease of 31%. The decrease was attributable to the
significantly lower levels of debt after our initial public offering in May
1999.
Provision for Income Taxes. The provision for income taxes for the nine
months ended June 30, 2000 was $11,000 compared to $74,000 for the nine months
to June 30, 1999, a decrease of 85% due to the availability of net operating
losses in Multi-Link Telecommunications, Inc. to offset taxable profits arising
in VoiceLink, Inc. after the date of VoiceLink, Inc.'s acquisition in March
2000.
Net Income (Loss) and Comprehensive Income (Loss). We achieved a net income
of $44,000 for the nine months ended June 30, 2000, compared to a net income of
$363,000 for the nine months ended June 30, 1999, an decrease of 88% due to the
factors outlined above. The comprehensive income for the nine months ended June
30, 2000 was $45,000, $1,000 more than the net income of $44,000. The difference
of $1,000 relates to a decrease in the level of unrealized losses on our
portfolio of marketable securities, which are held as available for sale
investments. The comprehensive income for the nine months ended June 30, 1999
was $357,000, $6,000 less than the net income of $363,000. The difference of
$6,000 relates to unrealized losses on our portfolio of marketable securities,
which are held as available for sale investments.
Liquidity and Capital Resources
We continue to meet our capital requirements through (a) cash provided from
continuing operations, (b) the $1 million equity investment from Glenayre
Technologies, Inc., (b) a $2.1 million line of credit provided by Westburg Media
Capital, and (c) various long-term equipment leasing facilities.
As of June 30, 2000 we were current on our obligations to all lenders and
in compliance with all debt covenants. As of June 30, 2000, we had available
cash of $614,000, marketable investments, net of the related margin facility, of
$179,000, subscriptions receivable from Glenayre Technologies, Inc. of
$1,000,000 ($800,000 of which is restricted for the purchase of Glenayre
messaging equipment) and available undrawn loan facilities of $940,000.
For the nine months ended June 30, 2000 net cash used in operations was
approximately $(635,000) compared to net cash provided by operations of $449,000
for the nine months ended June 30, 1999. The majority of this $1,084,000
variance arises from a one-time increase in accounts receivable at Hellyer
Communications Services, Inc. on the introduction of a third party billing agent
for residential customers that results in a four month delay in receiving
payment from Ameritech. Net cash used in investing activities in the nine months
ended June 30, 2000 for the purchase of the Hellyer Communications and One Touch
Communications businesses, subscriber accounts (including those acquired from
B.F.G. of Illinois Inc.) and fixed assets, less the proceeds realized from the
sale of marketable securities, was $(1,867,000) compared to $(672,000) for the
nine months ended June 30, 1999. During the nine months ended June 30, 2000,
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financing activities generated $2,545,000 of net cash the majority of which
($2.3 million) arose from a net increase in long term debt. This compares to
$4,506,000 generated from financing activities in the nine months to June 30,
1999 which arose from $7.2 million of net equity raised through a private
placement and the initial public offering, less repayment of net debt of $2.7
million.
We anticipate that our existing cash balances, marketable securities and
subscription receivable from Glenayre Technologies, Inc., together with
internally generated funds from operations and the Westburg revolving term loan
will be sufficient to meet our presently projected operating requirements for
the next 12 months.
We plan to continue our industry consolidation plan and to acquire more
companies involved in the messaging industry. It is likely that we will seek
additional debt and equity financing to support our acquisition programs over
the next twelve months.
Effects of Inflation
Although we cannot accurately anticipate the effect of inflation on our
operations, we do not believe that inflation has had, or is likely in the future
to have, a material effect on our operating results or financial condition.
Year 2000 Issue
We did not experience any year 2000 problems with any of our operating
software or voice messaging equipment. To the best of our knowledge, none of our
suppliers have experienced any year 2000 problems in providing us with the goods
and services that we require from them. We did not incur any material costs in
preparing for year 2000 compliance.
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PART II OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not a party to any legal proceedings.
Item 2. Changes in Securities.
Recent Sales of Unregistered Securities
In May 2000, we acquired 50% of the outstanding capital stock of
VoiceLink of Florida, Inc. and we issued 12,000 shares of our common
stock to Robert Thomas as consideration for the acquisition. The
issuance was exempt from registration under the Securities Act
pursuant to Section 4(2) of the Securities Act and/or Rule 506 under
the Securities Act. Mr. Thomas represented that he was an "accredited
investor" as that term is defined in Rule 501 under the Securities
Act. No underwriters were engaged in connection with such issuances.
On May 26, 2000, we issued 2,220 shares of our common stock to
BFG of Illinois, Inc. doing business as Cashtel, Inc. in connection
with our purchase from Cashtel of certain subscriber accounts. The
issuance was exempt from registration under the Securities Act
pursuant to Section 4(2) of the Securities Act and/or Rule 506 under
the Securities Act. Cashtel represented that it was an "accredited
investor" as that term is defined in Rule 501 under the Securities
Act. No underwriters were engaged in connection with such issuances.
On June 30, 2000, we issued 104,439 shares of our common stock
and warrants to purchase 100,000 shares of our common stock at an
exercise price of $14.3625 to Glenayre Technologies, Inc. for a total
purchase price of $1,000,000. The issuance was exempt from
registration under the Securities Act pursuant to Section 4(2) of the
Securities Act and/or Rule 506 under Securities Act. Glenayre
represented that it was an "accredited investor" as that term is
defined in Rule 501 under the Securities Act. No underwriters were
engaged in connection with such issuances.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to Vote of Security Holders
None.
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits.
27.1 Financial Data Schedule
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b. Reports on Form 8-K.
On April 14, 2000, we filed a Form 8-K under Item 2 to report the
acquisition of all of the outstanding common stock of VoiceLink, Inc.
On May 16, 2000, we filed a Form 8-K under Item 5 to release the
financial results of Multi-Link for April, 2000, pursuant to the
requirements of Accounting Series Release No. 135 as interpreted by
Staff Accounting Bulletin No. 65.
On May 30, 2000, we filed a Form 8-K under Item 5 to report a letter
of intent with Glenayre Technologies, Inc., pursuant to which Glenayre
was to purchase shares of Multi-Link common stock.
On June 12, 2000, we filed a Form 8-K/A amending and supplementing
Item 7 of our filing on Form 8-K dated April 14, 2000, reporting the
acquisition of all of the outstanding common stock of VoiceLink, Inc.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
MULTI-LINK TELECOMMUNICATIONS, INC,
(Registrant)
Date: August 14, 2000 /s/ Nigel V. Alexander
--------------------- --------------------------------------
Nigel V. Alexander,
Chief Executive Officer.
Date: August 14, 2000 /s/ Shawn B. Stickle
--------------------- --------------------------------------
Shawn B. Stickle,
President and Chief Operating Officer.
Date: August 14, 2000 /s/ David J. C. Cutler
--------------------- --------------------------------------
David J.C. Cutler,
Chief Financial Officer.
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