<PAGE>1
PROSPECTUS
iLINK TELECOM, INC.
COMMON STOCK
----------------
Two stockholders of iLink Telecom, Inc. are offering up to 168,925 shares
of iLink's Common Stock for resale. One of the Selling Stockholders is ABDE
Holdings, Ltd. which is an entity owned and controlled by Amar Bahadoorsingh,
the President of iLink. The other Selling Stockholder is Century Capital
Management Ltd. which owns approximately 6% of the outstanding common stock of
iLink Telecom, Inc. The Selling Stockholders will be reselling shares of Common
Stock which they currently own.
We will not receive any proceeds from the resale of shares of Common Stock
by the Selling Stockholders. We will pay for expenses of this offering.
iLink's Common Stock is listed in the NASD "pink sheets" under the symbol
"ILTE." On November 15, 1999, the quotation for one share of Common Stock was
$1.13. We do not have any securities that are currently traded on any exchange
or quotation system. The Selling Stockholders will attempt to sell the shares
being offered in this Prospectus at the best market price obtainable.
All dollar amounts refer to US dollars unless otherwise indicated.
--------------------------------
Our business is subject to many risks and an investment in our Common Stock
will also involve significant risks. You should carefully consider the various
Risk Factors described beginning on page 5 before investing in the Common Stock.
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.
--------------------------------
The date of this Prospectus is November 30, 1999.
<PAGE>2
TABLE OF CONTENTS
PROSPECTUS SUMMARY.............................................................3
RISK FACTORS...................................................................5
THE OFFERING..................................................................11
USE OF PROCEEDS...............................................................11
PRICE RANGE OF COMMON STOCK...................................................11
DILUTION......................................................................13
DIVIDEND POLICY...............................................................13
MANAGEMENT'S DISCUSSION AND ANALYSIS
AND PLAN OF OPERATIONS......................................................13
BUSINESS......................................................................16
PROPERTY......................................................................23
MANAGEMENT....................................................................23
EXECUTIVE COMPENSATION........................................................25
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT............................................27
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................................28
PLAN OF DISTRIBUTION..........................................................30
SELLING STOCKHOLDERS..........................................................31
DESCRIPTION OF CAPITAL STOCK..................................................31
LEGAL PROCEEDINGS.............................................................32
LEGAL MATTERS.................................................................32
EXPERTS.......................................................................32
AVAILABLE INFORMATION.........................................................32
FINANCIAL STATEMENTS AND SCHEDULES............................................33
<PAGE>3
PROSPECTUS SUMMARY
This summary is intended to highlight information contained elsewhere in
this Prospectus. Consequently, this summary does not contain all of the
information that you should consider before investing in our Common Stock. You
should carefully read the entire Prospectus, including the documents and
information incorporated by reference into it. This Prospectus contains
forward-looking statements that are subject to risks and uncertainties,
including those risk factors discussed elsewhere in this Prospectus.
Our Business
We are engaged in the business of providing customized
telecommunications switching solutions. We are developing prepaid calling card
products for retail and wholesale markets through voice over the Internet and we
are also in the process of applying for a personal communications system license
which, if granted, will give us the right to provide wireless communications in
Trinidad and Tobago. At present we are a development stage company in the
process of establishing our business. We began to realize revenues in March 1999
as a result of services provided at our switching facility.
We currently have a service agreement with BCT.Telus Communications
Inc., Canada's third largest telephone utility, where they are routing their
long-distance calling card traffic through our switching platform in Calgary,
Alberta. We have recently entered into a second service agreement with Vir-Tec
TeleServices Inc. to provide similar services for their calling card traffic.
Our switching platform provides interactive voice response to the user so that
calls may be handled without incurring labor costs. We are in the process of
manufacturing, distributing and marketing our own pre-paid calling cards in
Canada and the United States. These cards will allow purchasers to place long
distance telephone calls on the iLink Network through our switching platforms
located in Calgary, Alberta and our future facilities planned in Vancouver,
British Columbia, and New York, New York. Our first pre-paid calling cards are
expected to go on sale by the end of 1999. Our Calgary switching platform has a
current capacity of 69,032 minutes per day and we intend to expand this capacity
concurrent with increased demand.
We plan to expand our business to include "voice-over-Internet-protocol"
communications or "VoIP" which would allow for long distance communication via
the Internet. The VoIP divides the raw data derived from conversations into
discrete packets of information known as "syllables." Each syllable has a unique
identifier and destination address which routes this data through the Internet
to the destination address where it is converted back into real audio. Because
most Internet calls are local, there would be no long distance charges so the
user of VoIP would be able to realize significant cost savings. The VoIP system
would be integrated with our pre-paid call processing system to present the user
with a seamless end product. We expect to commence marketing this VoIP service
in June of 2000 with planned service initiation and commencement of revenues in
September 2000.
We have applied for a digital wireless phone license in Trinidad and
Tobago. We have retained the services of Industar Digital PCS of Milwaukee,
Wisconsin to aid in the preparation and processing of the application to the
governments of Trinidad and Tobago. Our application was filed on June 30, 1999
in a timely manner, and we are at present awaiting the government's response to
the application. Due to recent legal action commenced by a late applicant, the
response to all applications is expected to be delayed. There is no assurance
that our application will be approved.
iLink is a Nevada corporation with its business offices located at 1177
West Hastings Street, Suite 1910, Vancouver, British Columbia V6E 2K3. Its
telephone number is (604) 717-1110. We also have offices located at #304, 320
23rd Avenue, Calgary Alberta T2S 0J2 and One Sansome Street, Suite 2000, San
Francisco, California 94104. iLink has two wholly-owned subsidiaries, iLink
Telecom (B.C.), Inc. and iLink Telecom (BVI) Inc. both of which maintain their
business offices at our corporate offices in Vancouver.
<PAGE>4
Summary Of Risk Factors
An investment in iLink's Common Stock involves a number of risks which
should be carefully considered and evaluated. These risks would include:
o The fact that iLink is a development stage company and has generated
no significant operating revenues; that the operating revenues are
dependent on one customer; and to date the revenues have not been
sufficient to cover expenses; and
o The technological challenges involved in developing new
communication systems using IVR technology, VoIP technology and PCS
technology; and
o The need to raise a significant amount of capital for the following
purposes:
o to expand our IVR switching systems (estimated at over $1.5
million);
o To design and implement a VoIP system (estimated at over $2
million); and
o To build a PCS System in Trinidad and Tobago (estimated at
over $48 million if awarded the PCS license).
For a more complete discussion of risk factors relevant to an investment
in our Common Stock see the "Risk Factors" section.
The Offering
The Selling Stockholders are registering for resale 168,925 shares of
iLink's Common Stock which they currently own.
<PAGE>5
Summary Consolidated Financial Data
The summarized consolidated financial data presented below should be
read in conjunction with the more detailed financial statements of iLink and
notes thereto which are included elsewhere in this Prospectus along with the
section entitled "Management's Discussion and Analysis and Plan of Operations."
<TABLE>
<S> <C> <C> <C> <C>
For the six For the year For the period from
months ended For the six ended December 10, 1997 (date
August 31, months ended February 28, of Incorporation) to
1999 August 31, 1998 1999 August 31, 1999
---- --------------- ---- ---------------
Revenue 14,427 $ -0- $ - $ 14,427
Loss from operations (573,362) -0- (18,314) (597,076)
Net Loss Attributable to (621,362) -0- (18,314) (645,076)
Common Stockholders
Loss per Share (0.21) -0- (0.01) (0.22)
Working Capital (Deficit) (91,950) 274 (27,139) (91,950)
Total Assets 215,641 274 154,000 215,641
Stockholders' Equity
(Deficit) 83,614 274 126,861 83,614
</TABLE>
RISK FACTORS
An investment in iLink's Common Stock involves a number of very
significant risks. You should carefully consider the following risks and
uncertainties in evaluating iLink and its proposed business before purchasing
shares.
iLink is a Development Stage Company with Limited Operating History Which Makes
Future Performance Very Difficult to Predict.
We are a development stage company which is primarily involved in the
development of our IVR, VoIP and PCS Systems. As a development stage company, we
have just begun offering our telecommunications services, and as a result, we do
not have an established track record in any of these service areas.
Our ability to provide commercial telecommunications service and to
eventually generate operating revenue will depend on our ability to, among other
things:
o Successfully expand our pre-paid calling card and IVR platform
agreements to increase the number of minutes utilized;
o Develop, implement and successfully market an operative VoIP
system; and
o Obtain a PCS license as well as the necessary financing to
implement a PCS system in Trinidad and Tobago.
<PAGE>6
Given our limited operating history and lack of revenues, there can be no
assurance that we will be able to achieve any of these goals and develop a
sufficiently large customer base to be profitable.
Lack of Established Revenue Stream will Result in Anticipated Operating Losses.
As of August 31, 1999 iLink has received $14,427 in revenues from its
IVR services provided at the Calgary switching facility. iLink had an operating
loss of $573,362 during the 6 months ending August 31, 1999. We do not
anticipate any significant revenues until the latter part of the current fiscal
year. As of February 28, 1999, iLink had not earned any revenues since
formation. iLink had an operating loss of $18, 314 for the year ended February
28, 1999. We expect to incur substantial and increasing operating losses and
negative net cash flow until our businesses are developed, deployed and
operating in a profitable manner.
iLink Will Need Substantial Capital in the Future to Fund its Business Growth.
Due to Limited Revenues, this Capital Will Have to Be Obtained from Outside
Sources Which May Not Be Available and Could Have a Dilutive Effect on
Stockholder's Ownership.
We estimate that we will incur in excess of $51.5 million in capital
expenditures relating to the development and operating costs in expanding our
IVR system and building and deploying VoIP and PCS systems. Given the risks in
undertakings of this nature, there can be no assurance that actual cash
requirements will not exceed our estimates. In particular, additional capital
will be required in the event that:
o We incur unexpected costs in completing the system design or
encounter any unexpected technical or regulatory difficulties;
o We incur delays and additional expenses as the result of technology
failure;
o We are unable to enter into marketing agreements with third
parties; or
o We incur any significant unanticipated expenses.
The occurrence of any of the aforementioned events could adversely
affect our ability to meet our business plans.
We will depend almost exclusively on outside capital to pay for the IVR,
VoIP and PCS system expansion and development, including the sale of additional
stock and commercial borrowing. There can be no assurance that capital will be
available to us to meet these development costs or, if the capital is available,
it will be on terms acceptable to us. The issuance of additional equity
securities by us would result in a significant dilution in the equity interests
of our current stockholders. Obtaining commercial loans, assuming those loans
would be available, will increase our liabilities and future cash commitments.
If we are unable to obtain financing in the amounts and at the terms
necessary, our business and future success will be adversely affected.
A Large Portion of iLink's Assets Are Intangible Assets Which May Have Little
Liquidation Value if iLink Were Unsuccessful.
As of August 31, 1999, approximately 53% of our assets consisted of
Goodwill, which is an intangible asset. In case of a liquidation such intangible
assets would have very little if any realizable value.
Also, this Goodwill is to be amortized over a relatively short period of
time (3 years). This will result in larger deductions against iLink's earnings
over the 3 year period.
<PAGE>7
Rapid Technological Changes in the Telecommunications Industry Could Render Some
Services Obsolete or Non-Competitive.
The design, construction and operation of the IVR, VoIP and PCS systems
are exposed to risks associated in developing a sophisticated communications
systems. Although we believe that our existing and proposed systems are based on
established technology, certain aspects of our technology have not been used in
commercial applications. Although we will engage contractors who are experienced
in the communications industry, we have little experience in developing,
constructing, and operating communications systems. The failure of our systems
to function as designed, or the failure of system components to function with
other components or to specification could result in delays, unanticipated
costs, and loss of system performance, thereby rendering our systems unable to
perform at the quality and capacity levels anticipated.
In addition, future advances in the telecommunications industry could
lead to new technologies, products or services competitive with the products or
services to be provided by us. Those technological advances could also lower the
costs of other products or services that may compete with our systems, resulting
in pricing pressures on our products and services, which could adversely affect
our results of operations.
Lack of Patent and Copyright Protections for iLink's Technologies Could Result
in Duplication by Competitors.
Our IVR System technology is not protected by any patents or copyrights.
Our business is based on the utilization of existing available
telecommunications technologies. Consequently, other competitors could copy our
systems and services except in those cases where (like Trinidad and Tobago) an
exclusive government license is granted.
Furthermore, iLink is exposed to potential claims of wrongful use by the
holders of proprietary rights in various telecommunications systems. Although
iLink does not believe it is currently utilizing any protected technology, there
is no assurance that its current or future services will not be the subject of
an infringement action in the future.
Unscheduled Delays in Establishing New Switching Facilities or Introducing New
Services Could Result in Lost or Delayed Revenues.
Delays and related increases in costs in the expansion of the IVR system
or the construction and implementation of the VoIP and PCS systems could result
from a variety of causes, including:
o delays encountered in the construction, integration and testing of
these systems;
o delays caused by design reviews or other events beyond our control;
o further modification of the design of all or a portion of these
systems as a result of, among other things, technical difficulties
or changes in regulatory requirements;
o the failure of iLink to obtain a PCS license in Trinidad and Tobago
or to enter into agreements with technology providers and with
marketing providers at the times or on the terms expected; and
o the failure to develop or acquire effective applications for use
with the IVR, VoIP and PCS systems.
There can be no assurance that these systems will be available on a
timely basis, or at all, or that implementation of these systems will occur. A
significant delay in the completion of these systems could erode our competitive
position, could result in cancellation of iLink's PCS license (in the event that
the license is obtained), and could have a material adverse effect on our
financial condition and results of operations.
<PAGE>8
iLink Relies on Vendors, Consultants and "Leased Employees" Who Are Not Under
the Control of iLink.
We have relied on and will continue to rely on vendors, consultants and
leased employees who are not employees of iLink or our affiliates, to expand our
IVR system and to design, construct and implement the VoIP and PCS systems, to
operate our switching facilities, to market our services and for representation
on regulatory issues. Other than as disclosed herein, we have no long-term
contractual relationship with these vendors and consultants. While we believe
that vendors and consultants will continue to provide the expertise necessary to
complete the design and construction of our proposed systems, there can be no
assurance that the vendors and consultants will be available in the future, and
if available, will be available on terms deemed acceptable to us.
In addition, we rely and will continue to rely on outside parties to
manufacture parts and equipment for the IVR, VoIP and PCS systems such as
Telephony Experts, Dialogic, Hughes Networks, Nortel, and Cisco Systems. No
assurances can be given that these manufacturers will be able to meet our needs
in a satisfactory and timely manner or that we will be able to obtain additional
manufacturers when and if necessary. A significant price increase, a quality
control problem, an interruption in supply or other difficulties with third
party manufacturers could have a material adverse effect on our plan of
business. Further, the failure of third parties to deliver the requisite
products, components, necessary parts or equipment on schedule, or the failure
of third parties to perform at expected levels, could delay our deployment of
the IVR, VoIP and PCS systems. Any such delay or increased costs could have a
material adverse effect on our business.
iLink Needs to Manage its Business and Management Growth in Order to Realize
Profitability; iLink Needs to Provide Reliable Performance of Systems in Order
to Maintain Customers.
We expect to experience significant and rapid growth in the scope and
complexity of the industries in which we are involved as we proceed with the
development of the IVR, VoIP and PCS systems. If we are unable to effectively
manage this rapid growth, we may not achieve profitable operations in the time
frames anticipated, if at all.
We do not currently serve significant markets but must identify,
investigate and enter existing or establish new markets for our services. There
is no assurance that we can enter and effectively compete in these existing or
new markets.
The growth of existing telecommunications systems and services as well
as establishing new markets depends to a large extent on the reliability of our
telecommunication systems. The telecommunications industry requires near perfect
execution of telecommunication services to promote customer use. The failure to
establish and operate highly reliable telecommunications systems or services
would inhibit our future growth.
We do not have sufficient staff to manage operations, control the
operations of the proposed systems, handle sales and marketing efforts or
perform finance and accounting functions. Currently, iLink has four full-time
employees and one part-time employee. See "Risk Factors - Reliance on Vendors
and Consultants Who Are Not Under the Control of iLink." We will be required to
hire a broad range of additional personnel as we begin commercial operations.
This growth is likely to place a strain on our management and operational
resources. Material, adverse effects could occur if we:
o fail to develop and implement effective systems;
o cannot hire and train sufficient personnel to perform all of the
functions necessary to effectively develop, service and manage our
subscriber base and business; or
o fail to manage our anticipated growth effectively.
<PAGE>9
The Loss of iLink's CEO Would Have an Adverse Impact on Future Development.
Our performance is substantially dependent on the ability of our
executive officers and key personnel to identify and exploit new
telecommunications markets and on our ability to retain and motivate
high-quality personnel. The loss of any of iLink's key personnel, particularly
Amar Bahadoorsingh, our President and Chief Executive Officer, could have a
material adverse effect on iLink's business, development, financial condition,
and operating results. We do not maintain "key person" life insurance on Mr.
Bahadoorsingh.
We are significantly smaller than virtually all of our national competitors and
consequently, we may lack the financial resources needed to enter markets and
increase market share.
We will encounter competition from other IVR and VoIP systems and from
other applicants for the PCS license in Trinidad and Tobago, as well as from an
increasingly competitive communications industry in general. The growing market
for communication services has attracted new market participants as well as
expansion by established participants resulting in substantial and increasing
competition. Many of our present and future competitors using IVR, VoIP and PCS
systems have substantially greater:
o financial, marketing, technical and manufacturing resources;
o name recognition, and
o experience than we do.
Our competitors may be able to respond more quickly to new or emerging
advancements in the industry and to devote greater resources to the development,
promotion and sale of their products and services.
While we believe that our technology is competitive and our systems have
been designed to provide communications services at a cost lower than our
competitors, no assurances can be given that those competitors, in the future,
will not succeed in developing better or more cost effective communications
systems.
In addition, current and potential competitors may make strategic
acquisitions or establish cooperative relationships among themselves or with
third parties that could increase their ability to reach commercial customers or
subscribers of communications services. This type of existing and future
competition could affect our ability to form and maintain agreements with our
customers. No assurances can be given that we will be able to compete
successfully against current and future competitors, and any failure to do so
would have a material adverse effect on our business.
Trading of Our Stock is Restricted by the SEC's Penny Stock Regulations Which
May Limit a Stockholder's Ability to Buy and Sell our Stock.
The Securities and Exchange Commission has adopted regulations which
generally define "penny stock" to be any equity security that has a market price
(as defined) less than $5.00 per share or an exercise price of less than $5.00
per share, subject to certain exceptions. iLink's securities may be covered by
the penny stock rules, which impose additional sales practice requirements on
broker-dealers who sell to persons other than established customers and
"accredited investors." The term "accredited investor" refers generally to
institutions with assets in excess of $5,000,000 or individuals with a net worth
in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly
with their spouse. For transactions covered by this rule, the broker-dealers
must make a special suitability determination of the purchaser and receive the
purchaser's written agreement of the transaction prior to the sale.
Consequently, the rule may affect the ability of broker-dealers to trade iLink's
securities and affect the ability of existing stockholders to sell their shares
in the secondary market.
<PAGE>10
iLink's Stock is no Longer Quoted on the OTC Bulletin Board Which Limits a
Stockholder's Ability to Buy and Sell our Stock.
The OTC Bulletin Board upon which our Common Stock was quoted has
required that all companies whose securities are quoted on the OTC Bulletin
Board must become reporting issuers with the SEC pursuant to a phase-in schedule
beginning on August 1, 1999. We were required to become a reporting issuer on or
before September 1, 1999, in order to maintain the listing of our Common Stock.
We were unable to meet this deadline and, as a result, our stock listing was
removed from the OTC Bulletin Board. Since September 1, 1999, our Common Stock
is listed only in the "pink sheets" which is expected to have a negative impact
upon our investor's ability to buy or sell our Common Stock. We intend to
reapply for OTC Bulletin Board listing when and if we become a reporting company
with the SEC. Until our Common Stock is readmitted to the OTC Bulletin Board,
trading will be accomplished through the much more limited "pink sheet" listing.
Concentration of Voting Share Ownership Could Allow a Relatively Few
Stockholders to Influence the Affairs of iLink.
Stockholders owning a majority of iLink's outstanding voting stock
represent the ultimate control over iLink's affairs. Our officers and directors
currently control 34% of the outstanding shares of Common Stock. As a result of
this ownership, these Stockholders will be able to influence share voting
regarding the election of directors and approving major transactions. All of the
shares owned by our officers and directors are subject to a Vesting Agreement.
See "Executive Compensation."
Furthermore, our Articles of Incorporation authorize our Board of
Directors to issue up to 5,000,000 shares of preferred stock. These provisions
allow our directors to issue preferred stock with multiple votes per share and
dividend and liquidation rights which could have priority over any dividends
paid or liquidation value with respect to the shares of Common Stock. The
issuance of preferred stock with these rights may make the removal of management
more difficult even if that removal could be considered beneficial to
Stockholders generally, and will have the effect of limiting shareholder
participation in certain transactions such as mergers or tender offers if those
transactions are not favored by incumbent management.
No Dividends are Expected to be Declared in the Foreseeable Future.
We have not declared or paid any dividends on our Common Stock since our
inception, and we do not anticipate paying any such dividends for the
foreseeable future.
Virtually all of iLink's Current Revenues are Dependent on One Customer.
Therefore, the Loss of This Customer Would Have a Significant, Adverse Effect on
our Business.
It is anticipated that initial revenue will come from long-distance
calling card traffic through our IVR switching platform. At this time we have a
contract with BCT.Telus Communications, Inc. to provide these services. This
contract expires on June 1, 2000 and while it can be renewed for up to 2
successive years, it can also be canceled, without cause, by BCT.Telus upon 60
days notice. In the event that this contract is not renewed or is terminated,
this will have an adverse financial impact on our operations and anticipated
revenues. The concentration of our business on one customer poses a credit risk
for us should the customer become unable to honor its debts.
Having Year 2000 Compliant Technology and Equipment is critical to Avoid
Interruption in iLink's Telecommunication Services After January 1, 2000.
We believe our current call processing facility is Year 2000 compliant.
We also anticipate upgrading parts of our call processing facility with new
equipment by the end of 1999 which equipment should also be Year 2000 compliant.
The estimated cost to upgrade the call processing facility is $50,000. In the
event that our call
<PAGE>11
processing facility or that of BCT.Telus Communications is not Y2K compliant
significant disruption in the call network could result which would have a
material adverse effect on our operations. (See "Impact of the Year 2000 Issue"
below).
No Assurance That ILink's Application for PCS Authorization in Trinidad or
Tobago Will Be Granted Which, If Not Granted, Would Significantly Reduce iLink's
Potential Business.
We are seeking a PCS license for Trinidad and Tobago which, if granted,
would substantially increase our current business and revenues. We will require
foreign assistance in the application for and operation under the PCS license in
this foreign country. There can be no assurance that the required regulatory
authorizations will be obtained in this country or that a license will be
obtained in a timely manner. The failure to obtain a PCS license in Trinidad or
Tobago would have a materially adverse affect on our business plan.
THE OFFERING
The Shares being offered for resale by this prospectus were issued in
previous private placements conducted by iLink or in exchange for 145 shares of
Series A Convertible Preferred Stock which were issued in connection with our
acquisition of all of the issued and outstanding common shares of iLink Telecom
(B.C.) Inc. iLink Telecom (B.C.) is now our subsidiary. See "Business of the
Company." Under the terms of the acquisition of iLink Telecom (B.C.) Ltd., we
are contractually required to register the shares of Common Stock to be issued
upon the conversion or exchange of the shares of Series A Convertible Preferred
Stock.
The shares of Common Stock offered for resale may be sold in a secondary
offering by the Selling Stockholders by means of this Prospectus.
USE OF PROCEEDS
We will not receive any proceeds from the resale of the Common Stock by
the Selling Stockholders. We are registering this Common Stock under a
contractual agreement to register the shares of Common Stock to be issued upon
the conversion or exchange of the Series A Convertible Preferred Stock or issued
in prior private placements.
PRICE RANGE OF COMMON STOCK
The following table sets forth the high and low bids for our Common
Stock, as quoted on the OTC Bulletin Board through August 31, 1999 and in the
NASD "pink sheets" thereafter. Our trading symbol is "ILTE." The OTC Bulletin
Board began quotations on our Common Stock on March 31, 1998 and ceased quoting
our stock on August 31, 1999 at which time our common stock became listed in the
NASD "pink sheets."
Common Stock
Quarter Ended High Low
- ------------- ---- ---
September 30, 1999(1) 1.75 1.75
June 30, 1999 6.00 3.87
March 31, 1999(2) 5.63 0.95
December 31, 1998 5.63 0.95
September 30, 1998 10.63 5.00
June 30, 1998 2.50 1.13
March 31, 1998 1.25 1.25
- -------------------------
(1) Amounts derived from our listing in the NASD "pink sheets."
(2) Effective February 14, 1999, we consolidated our share capital by way of
reverse stock split on the basis of one new share of Common Stock for each
five old shares of Common Stock. The prices listed have been adjusted to
reflect the effect of the one-for-five reverse stock split.
<PAGE>12
Our management is of the view that our market capitalization, being the
number of shares of our Common Stock outstanding multiplied by the trading price
of those shares, may not reflect the true value of iLink. The actual daily
trading volume of our Common Stock over the past three months has averaged less
than 10,000 shares which indicates that the ability of our Stockholders to
realize the current trading price of the shares they hold may fluctuate if any
substantial number of shares were to be offered for sale. In addition, due to
the extremely limited nature of the market for our Common Stock, any significant
trading may have a dramatic effect on the price of our Common Stock.
The above quotations reflect inter-dealer prices, without retail
markup, mark-down or commission, and may not represent actual transactions.
As of September 30, 1999, we had 5,509,629 shares of Common Stock
outstanding and approximately 288 stockholders of record. This number does not
include stockholders who hold our securities in street name.
iLink has authorized and implemented a stock option plan pursuant to
which options to acquire up to 500,000 shares of iLink's common stock may be
granted. As of September 30, 1999, iLink had granted options to purchase 23,000
shares of common stock at an exercise price of $5.25 exercisable until June 9,
2000.
2,558,925 of the currently outstanding shares of iLink's common stock
are subject to the resale limitations of Rule 144 of the Securities Act. Of the
shares subject to the resale limitations of Rule 144 outstanding as of September
30, 1999, 300,000 shares of common stock have been held for at least one year
and, as a result, could be sold pursuant to the terms and limitations of Rule
144(d).
<PAGE>13
DILUTION
During 1999, iLink has issued shares of its common stock to officers,
directors and affiliated persons at a price of $0.001 per share as compared to
an offering price of approximately $1.13 per share pursuant to this Prospectus.
The following table illustrates the per share dilution to an investor
purchasing the common Stock offered herein assuming the sale of the Shares at a
price of $2.00 per share.
Purchase price per Share $ 2.00
Net tangible book value per Share
based on iLink's August 31, 1999
financial statements(1)(2) $ (0.01)
Increase to Selling Stockholders
attributable to the sale of shares of
Common Stock in this Offering $ Nil
Dilution per Share to Investors(3) $ 2.01
Dilution to Investors as a percent of
offering price 100%
- -------------------------
(1) Net tangible book value per Share is determined by dividing the number of
shares outstanding into the tangible net worth of iLink (tangible assets
less liabilities as of August 31, 1999). (See iLink's Interim Consolidated
Balance Sheet as of August 31, 1999 at page F-2 of this Prospectus.)
(2) Net tangible book value per share is based upon the shares outstanding as
of August 31, 1999.
(3) Dilution is determined by subtracting net tangible book value per share
from the amount paid per share by new Investors.
DIVIDEND POLICY
We have not declared or paid any cash dividends since inception. We
intend to retain future earnings, if any, for use in the operation and expansion
of our business and do not intend to pay any cash dividends in the foreseeable
future.
MANAGEMENT'S DISCUSSION AND ANALYSIS
AND PLAN OF OPERATIONS
This discussion, other than the historical financial information, may
consist of forward-looking statements that involve risks and uncertainties,
including quarterly and yearly fluctuations in results, the timely availability
of new communication products, the impact of competitive products and services,
and the other risks described in this Prospectus. These forward-looking
statements speak only as of the date hereof and should not be given undue
reliance. Actual results may vary significantly from those projected.
Plan of Operations
In orde to expand our operations we will need additional capital.
We do not have any commitments from any source to provide additional capital.
Our current revenue stream will provide only a small portion of our capital
needs so, we expect that over the next twelve months we will require a total
of $1,500,000 in outside financing. Of
<PAGE>14
this amount, we will need approximately $600,000 over the next two quarters to
finance the initial expansion of our existing IVR system and to fund general
operating and administrative expenses. These operating and administrative
expenses would include contractual obligations pursuant to consulting agreements
and leases of approximately $274,000 over the next 12 months. The balance of
$900,000 will be required over the next twelve months to finance the expansion
of our IVR switching systems in new locations and the marketing of our prepaid
phone card and VoIP services. As a result of this increased business activity ,
we expect general and administrative expenses and consulting fees to increase
from current levels.
We have budgeted approximately $20,000 for product/service research and
development over the next 12 months. We expect to focus our research and
development on IVR programming and VoIP.
An essential element of the Company's business is the submission of an
application for a PCS license in Trinidad and Tobago. If the license is
obtained, we estimate that an additional $50,000,000 will be required to finance
this project. We will seek approximately $2 million to design and implement a
VoIP system in North America, and approximately $48 million to establish PCS
systems in Trinidad and Tobago. If a license were granted to iLink, it would
build the new PCS system through a joint venture in which iLink would be the
manager and would hold a 49% interest. Other joint venture partners, including
Thor Communications Inc., a Trinidad company, would hold the remaining 51%
interest in the joint venture. iLink would also be responsible for securing the
financing to build the PCS system.
Since inception, we have relied on equity financings to fund our
operations. Funds required to finance our future site expansions and ongoing
business are expected to come primarily from debt and equity financing with the
remainder provided from operating revenues which began in March 1999. Operating
revenues to date have been substantially less than the cost of operations for
the switching facility in Calgary, Alberta. Our management will be seeking
additional capital to finance our operations over the next 12 months.
Results of Operations
Six Month Period Ended August 31, 1999 Compared to the Year Ended February 28,
1999
Revenues totaled $14,427 during this six-month period compared to no
revenues during the fiscal year ended February 28, 1999. We began receiving
revenues in March 1999 from the one customer of our switching facility in
Calgary. For the interim period ending August 31, 1999, we incurred a loss of
$573,362 compared to a loss of $18,314 for the year ended February 28, 1999.
Costs and operating expenses for the six months ending August 31, 1999 were
$587,789 compared to $18,314 for the year ending February 28, 1999. General and
administrative expenses increased to $389,910 during the first six months of
fiscal year 2000. This increase in general and administrative expenses was due
primarily to travel expenses and business development by management and the
establishment of corporate relations programs by consultants. Management was
required to travel extensively in North America and Trinidad and Tobago in order
to identify business opportunities for iLink and to develop the proposal for
obtaining a PCS license in Trinidad and Tobago. Expenditures for consulting
services included financial, technical and management services in the amount of
$146,344 during this six month period. iLink has only five employees and
consequently must rely on consultants to provide substantial operational
support. The Corporate Relations Program required $155,000 in expenditures to
promote our services in the marketplace. The object of the Corporate Relations
Program is to establish industry contacts and to identify potential strategic
partners to promote iLink's business.
Research and development expenditures were approximately $10,000 during
the six-month period ended August 31, 1999 compared to none for the year ending
February 28, 1999. The expenditure was for the consulting services of a
technical person to perform research and development on behalf of iLink relating
to IVR designing, manufacturing and programming. We continue to test the IVR
programs to enable clearer voice transmissions, customized programming and to
add specialized features. The products are tested on our switching facility at
<PAGE>15
Calgary and in our offices at Vancouver. As new products are developed, we will
obtain license, trademark, and/or proprietary rights to the products as deemed
appropriate.
Year Ended February 28, 1999 Compared to the Period from December 10, 1997 (date
of incorporation) to February 28, 1998
We had no revenues during the fiscal years ended February 28, 1999 or
1998.
In the year ended February 28, 1999, we incurred a loss of $18,314
compared to a loss of $5,400 for the period ended February 28, 1998. Expenses
during fiscal year 1999 included $8,139 in business consulting fees and $10,000
in professional fees related to our year-end audit. Expenses during fiscal year
1998 consisted primarily of start-up expenses.
Liquidity and Capital Resources
We have been in the development stage since our inception and have not
recognized any significant revenues or generated any significant cash flows from
operations. As of August 31, 1999 we had a negative working capital of $91,950
compared to a negative working capital of $27,139 for the year ended February
28, 1999. We expect expenses to continue to increase during fiscal year 2000
with the demands of developing new switching facilities and additional capital
will be necessary to expand operations as well as continue current operations.
Operating capital was provided by $433,507 of proceeds from the private
sale of iLink's common stock and a $100,000 loan from a private company. We
issued 145 shares of Series A Convertible Preferred Stock in payment for various
assets and services related to our IVR services.
From inception, we have relied on equity financings to fund our
operations. This financing has been supplemented by the issuance of preferred
stock to acquire various business assets. We will need substantial additional
capital, an estimated $600,000, over the next six months to carry out our
current business plans.
As indicated in the section "Plan of Operations" above, we anticipate
raising necessary operating capital through a combination of debt and equity
financing augmented by anticipated operating revenues. There is no assurance
that we will be able to obtain capital from these sources or that the amounts
will be sufficient to fund its operations.
Impact of the Year 2000 Issue
The Year 2000 Issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Any of iLink's,
or its suppliers' and customers' computer programs that have date- sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in system failure or miscalculations causing disruptions
of operations including, among other things, a temporary inability to process
transactions, send invoices, or engage in similar normal business activities. In
our assessment, the Year 2000 Issue is a significant issue which could have a
material impact on our business operations.
In iLink's assessment, the switching facility in Calgary, Alberta is
Y2K compliant as required. Management bases this assessment on the results of a
National Software Testing Lab ("NSTL") test on the hardware which confirmed the
site as Y2K compliant as per the NSTL tests. Management has also upgraded all
software applications as required by the customer of the switching facility to
comply with Y2K standards. The new hardware and software intended to be
purchased after May 31, 1999 will be assessed for Y2K compliancy.
<PAGE>16
Approximately $1,500 of the consulting fees incurred during the six
months ended August 31, 1999 relate to our Y2K compliancy. As of August 31,
1999, we do not anticipate incurring any material additional software or
hardware costs associated with our Y2K compliance program.
iLink is reliant on third parties' compliance with the Year 2000 issue.
In particular, the one customer of the switching facility provides trunking and
connectivity and network services to iLink. Due to the interdependence of the
services provided, iLink risks business interruption if the Customer's system
does not function in Year 2000. The Customer has implemented a Year 2000
Readiness Program and has stated that related products and services are "service
ready". Service ready means that, to the best of their knowledge, the products
or services, if required, will be able to accurately process data, provided that
all products and services which interconnect with, or which are used in
combination with, that product and service, properly exchange data with it, and
in the case of a product, provided that no unauthorized modifications or
additions are made to the product.
In addition, we will be relying on our vendors to, among other things,
manufacture telecommunications systems and equipment which are Y2K compliant. We
have entered into contracts with several vendors to develop the IVR and PCS
systems, and an assessment has been made as to their Year 2000 compliance. As
part of ongoing contract negotiations, we will request and determine its
vendors' and customer's Year 2000 readiness. In the event that it is determined
that a key vendor or customer will not be Year 2000 compliant, this may have an
adverse effect on our business plans.
The risks posed by the Year 2000 issue are uncertain and the potential
negative impact is not fully known. In the worst case scenario, the switching
facility system or the customer's or vendors' products relied upon could disable
iLink's operations. In the event the worst case occurs, iLink would have to wait
for the Customer or Vendors to reactivate their systems, thereby delaying
iLink's operations for an unknown period of time. iLink does not anticipate any
interruptions in business, however, it remains an unknown risk.
iLink has created a contingency plan to reduce the risk of business
interruption and loss of revenues in the event the switching facility cannot
operate in Year 2000. The contingency plan includes the key contacts, internal
emergency response plan, the estimated expense to restore services and estimated
loss/recovery plan due to external vendors not operating in Year 2000.
----------------------------
BUSINESS
This discussion, other than the historical financial information, may
consist of forward-looking statements that involve risks and uncertainties,
including fluctuations in results, the timely availability of new communication
products, the impact of competitive products and services, and other risks
described herein. Any forward-looking statements speak only as of the date
hereof and should not be given undue reliance. Actual results may vary
significantly from those projected.
General
We are a developer of computer telephony integrated technologies and
applications, and we provide Interactive Voice Response ("IVR") services in both
Calgary and Vancouver. Current operations consist of the provision of custom
manufactured switching solutions for a Canadian telephone company and the
development of brand name prepaid phone card solutions for retail and wholesale
markets through Voice over Internet Protocol ("VoIP") solutions. We are also in
the process of applying for a personal communications systems ("PCS") license to
provide wireless communications in Trinidad and Tobago. We are a development
stage company and have no substantial revenue. Revenue to date has not been
sufficient to cover operating expenses.
<PAGE>17
Corporate History
Aquasol Technologies, Inc.
We were originally incorporated in Colorado on December 10, 1997, under
the name Aquasol, Inc. On December 11, 1997, we sold 1,500,000 shares of our
Common Stock for $5,000 in cash. On December 26, 1997, we issued 175,456 shares
of our Common Stock in a share-for-share exchange with the Series "I"
Stockholders of STB Corp. On January 9, 1998, we changed our corporate domicile
to Delaware and changed our name to Aquasol Technologies, Inc. On January 12,
1998, we issued 4,000,000 shares of Common Stock for $400 in cash.
On January 15, 1998, we issued 992,000 shares of our Common Stock to
acquire Noralta Technologies Corp., an Alberta corporation, in a share-for-share
exchange. The name of Noralta was subsequently changed to Aquasol Technologies
Inc. This company was engaged in the business of designing, engineering,
manufacturing and installing wastewater treatment systems for government,
industrial, commercial and agricultural customers.
Merger with AFD Capital Group, Inc.
On March 24, 1997, AFD Capital Group, Inc. was incorporated in Nevada.
On March 27, 1997, AFD Capital Group, Inc. issued 1,000,000 shares of its common
stock for $1,650 in cash. On April 1, 1997, AFD Capital Group, Inc. issued an
additional 1,000,000 shares of its common stock for $10,000 in cash. On March
31, 1998 AFD Capital Group, Inc. issued an additional 80,000 shares of its
common stock for $4,000 in cash.
On June 18, 1998, AFD Capital Group, Inc. changed its name to Aquasol
Technologies, Inc. On July 14, 1998, Aquasol Technologies, Inc., a Nevada
corporation, merged with Aquasol Technologies, Inc., a Delaware corporation, in
a one-for-one stock exchange and the surviving entity continued under the laws
of the state of Nevada.
2,080,000 shares of the Delaware corporation's common stock were issued
in exchange for the 2,080,000 shares of common stock of the Nevada corporate
entity then outstanding. On September 3, 1998 1,020,000 shares of the Delaware
corporation's common stock were canceled as part of a re-capitalization.
Disposition of Aquasol Technologies Inc.
On February 3, 1999, we disposed of Aquasol Technologies Inc., an
Alberta corporation, by returning the shares of common stock of that corporation
to the former holders thereof in exchange for the return of the 992,000 shares
of Common Stock originally issued in the Noralta acquisition on January 15,
1998. We have no further interest in the business of Aquasol Technologies Inc.
(the Alberta corporation).
Name Change and Share Consolidation
On February 14, 1999, we consolidated our share capital by way of
reverse stock split on the basis of one new share of our Common Stock for each
five old shares of our Common Stock and changed our name to iLink Telecom, Inc.
Acquisition of iLink BC
Pursuant to a share purchase agreement dated February 26, 1999 with
ABDE Holdings Ltd., a British Columbia company, we acquired all of the issued
and outstanding common shares of 579782 B.C. Ltd. in exchange for the 145 shares
of Series A Convertible Preferred Stock of iLink. On March 11, 1999, 579782 B.C.
Ltd. changed its name to iLink Telecom (B.C.), Inc. and is now a subsidiary of
iLink. This Preferred Stock was exchanged for the shares of Common Stock which
are being offered by a Selling Stockholder in this registration statement.
<PAGE>18
Following the acquisition of iLink BC, Mr. Amar Bahadoorsingh, a
principal of iLink BC, was appointed as our President, Chief Executive Officer
and a director, while Mr. Peter M. Schriber was appointed a director and our
prior director resigned.
The assets of iLink BC consisted of the IVR Agreement with BCT.Telus as
well as miscellaneous telecommunications and computer equipment and office
furniture. These assets were in turn acquired by ABDE from Revere Communications
Inc., an Alberta corporation.
Principal Products or Services
As discussed above under the heading "General" we currently provide IVR
services to BCT.Telus under the terms of an IVR Platform Services Agreement
dated June 16, 1998 (the "IVR Agreement"). Subject to obtaining adequate
financing, we plan on providing VoIP services and, in the event that we obtain a
license to provide PCS services in Trinidad and Tobago and also obtain adequate
financing, we plan on offering PCS services as well.
Switching Solutions
Currently, IVR services are provided through our switching facility
located in Calgary, Alberta. The switching facility is comprised of computer
equipment, telecom equipment and IVR programming. The software (VoiceCard)
technology is licensed through Telephony Experts. Pursuant to the IVR Agreement,
we provide services to one major customer at the Calgary site, namely BCT.Telus
Communications Inc., Canada's third largest telephone company. We provide
BCT.Telus with IVR services which include account processing, customer service
and time billing for their brand name phone cards distributed in Alberta and
British Columbia. Revenues are generated through the charge of a transaction fee
to BCT.Telus based upon the number of minutes passed through the Calgary
switching facility each month by BCT.Telus phone card customers. Revenues from
this facility have increased an average of 180% each month since we commenced
service in March 1999. Through August 31, 1999, revenues from the Calgary
Switching facility has represented 100% of iLink's total revenues. In November,
1999, we entered into a second, smaller contract to provide IVR services to
Vir-Tec Teleservices Inc. Vir-Tec is an interactive voice response provider also
located in Calgary, Canada. Our management estimates revenues from this site
will total $90,000 in fiscal year 2000. The assets and BCT.Telus contract for
this facility were acquired pursuant to a share purchase agreement dated
February 26, 1999 with ABDE Holdings Ltd. The agreed value of this facility was
$145,000 of which $138,746 was allocated to "goodwill" which included the rights
of ABDE in the following:
o Potential customer contacts;
o The BCT.Telus switching contract; and
o Assignment of equipment lease/financing agreements including
buy-out rights.
At the Calgary site, all inbound lines to the call processing facility
are digital T1 as well as on the outbound side. This high quality, digital link
provides for high data transmission rates and zero line noise for voice
transmissions. The Calgary facility hosts a basic 48 Port IVPS Node which
supports, at maximum capacity, 69,032 minutes/day. Each 24 port upgrade will
cost approximately $50,000. We anticipate capacity upgrades will be required
when the local area IVPS reaches 75% use threshold on existing capacity. As
indicated previously, all software and hardware upgrades will be assessed for
Y2K compliancy.
In order to expand operations and revenue flows, we plan on
establishing two additional custom manufactured switching facilities to service
customers throughout North America which will enable us to create brand name
prepaid phone cards and VoIP services. Consequently, the commencement of these
new services will coincide with establishing the two new switching facilities
which is projected to be in the next 3-to-6 months. Once the new facilities have
been installed and tested, the Company will prepare a marketing plan which will
include advertising, trade shows and Internet-based marketing. Once the
marketing plan has been implemented, we anticipate a 1-3 month delay before
revenues would be expected since the prepaid cards are sold directly to
retailers who pay in advance for the prepaid cards regardless of when the
<PAGE>19
cards are actually sold or used. VoIP services would be billed monthly to
subscribing customers with revenues being generated approximately 60 days after
the commencement of the services. Our management has identified two cities for
the implementation of these additional switching sites: Vancouver and New York.
These sites were selected based on the large populations in each city and the
geographical location of these sites to transmit VoIP traffic between each
other.
The Vancouver facility will be located in our present office to save
costs and permit efficient monitoring of the system. This new switching facility
is expected to be installed and on line in approximately six months at an
estimate cost of $50,000. We expect to be able to acquire the equipment through
vendor financing or a lease. The remaining costs comprised of installation
expenses and telephone lines is expected to be financed through private capital
sources.
With regard to the proposed New York switching facility, our management
is negotiating with an existing Internet service provider ("ISP") in New York to
co-locate our proposed switching system at their ISP site. By developing a
relationship with the New York co-location partner, we hope to utilize the
existing ISP network and customer base, as well as save the costs of building an
entire facility. In effect, our site will share the resources of the existing
ISP and exchange services thereby expanding both our business and that of our
proposed partner. We are currently assembling cash flow models and traffic
pattern data to determine the current equipment requirements for the New York
facility. We anticipate that this switching facility would be installed and on
line in early 2000. Our management estimates that approximately $150,000 will be
required to finance the custom manufactured switch in New York which includes
the costs of hardware, installation and any wire upgrades to the office. Our
expansion plan will require technical staff and administrative costs which are
estimated to be $384,000 in total per year for both facilities.
In addition, one of our employees is working together with Telephony
Experts Inc. of Los Angeles, California to distribute and develop IVR software.
This employee works closely with Telephony Experts to create new applications
and turnkey solutions for retail and wholesale customers. Telephony Experts has
offered to provide IVR software to us at reduced rates in exchange for
promotional considerations which will reduce the capital requirements for
building any new custom manufactured switching facilities.
VoIP
We have the in-house technical expertise to provide long-distance voice
services across the Internet via VoIP technology. With this technology we are
able to convert voice information into data which can then be transmitted
anywhere in the world. Telephone calls are routed to a local switch facility and
then transmitted via the Internet, without the same toll restrictions as voice
transmission via the Public Switched Network. We will implement this service
through the use of our Calgary switching facility and the two proposed
facilities in Vancouver and New York. Each switching platform can host multiple
phone carriers and route calls to specific phone carriers world wide based on
the time of day and/or destination. This will give us flexibility in routing
calls to the most cost effective carrier and diversifies carrier sources in case
of network failure and/or outages. In addition, it will allow us to obtain
contracts with local exchange carriers who, while they do not have the technical
ability to provide VoIP, have an existing client base to service.
We plan on creating brand name retail lines of phone cards for
distribution in the marketplace which utilizes VoIP technology. The manufacture
of the cards will take place in Canada with an estimated unit cost of Cdn$0.41
per card. The cards will then be distributed in our specific target markets. We
have identified two card manufacturers who may be contracted to print and cello
wrap all phone cards. Our management intends on identifying and entering into
agreements with distribution companies for our phone cards in specific target
markets within the next 6 months. We plan on approaching retail chains to offer
brand name phone cards at a retail discount of 25-30% depending on the number of
units purchased. Wholesalers who resell cards exclusively to retailers and
utilize iLink's switching platforms will receive a 40-50% discount. We expect to
commence marketing our VoIP services in June of 2000 with planned service
commencing in September 2000.
<PAGE>20
Wireless Communications
We have submitted a proposal which, if accepted, would allow us to
offer a digital mobile phone service and wireless infrastructure to the people
of Trinidad and Tobago. The Government of Trinidad and Tobago plans on
deregulating the telecommunications industry that is currently comprised of a
sole national wireless phone provider, the Telephone Service of Trinidad and
Tobago. The Trinidad Government will select these providers for their new
services based on submissions provided by June 30, 1999. By way of an agreement
dated April 1, 1999 we have teamed with Trinidad based Thor Communications
Limited as a joint-venture partner to compete for the service contracts. Thor is
comprised of a team of local Trinidad telecommunications experts and
businesspeople who offer local and regional expertise in the telecom industry.
Our management estimates that the cost to implement a wireless digital phone
infrastructure over five years will be $48 million. If successful in the
application process, our management will endeavor to obtain sufficient financing
for the entire project on terms deemed acceptable to us. See the Risk Factor
"iLink Will Need Substantial Capital in the Future to Fund its Business Growth."
The joint venture between Thor and iLink is intended to operate during
the PCS license application process. We have recently formed a new corporation
named iLink Trinidad and Tobago Telecom Inc. through which we will build and
operate the digital phone service in Trinidad and Tobago, if our application is
accepted. iLink Trinidad will be 51% owned by Thor and 49% owned by iLink as
required by the PCS license. iLink's 49% interest will be held by iLink Telecom
(BVI) Inc. which is a wholly-owned subsidiary of iLink. The allocation of
responsibilities and revenue sharing between the Stockholders of iLink Trinidad
have not yet been determined and probably won't be determined unless and until
the PCS license is granted to iLink Trinidad.
We have contracted the services of Industar Digital PCS of Milwaukee to
provide assistance in completing the application for the PCS license in Trinidad
and Tobago. The contract with Industar, made in May 1999, is for $50,000. As of
June 30, 1999 iLink had paid $35,000 in fees and owed a balance of $15,000. The
Company has agreed that Industar will provide ongoing management services in the
operation of iLink BVI if the PCS license is awarded to iLink Trinidad. The cost
of the Industar agreement and the application process for the PCS license is
estimated at $70,000.
We do not know when the government of Trinidad and Tobago will be
making a final decision. We hope a decision will be made by December 1, 1999.
The government has hired a European consultant to assist in the application
review process. We are also aware of a pending law suit filed by an applicant
who was denied access to the competition for a PCS license as the government
states they missed the filing deadline. It is our understanding that the
government will not award the PCS license until the pending law suit is
resolved.
Marketing and Distribution Methods
At present our Calgary site is processing call minutes through pre-paid
calling cards manufactured and distributed by BCT.Telus and Vir-Tec. As
discussed above, we intend on engaging a card manufacturer to produce pre-paid
calling cards under the brand name "iLink" and we intend on marketing and
distributing these cards concurrent with the establishment of switching
facilities in Vancouver and New York.
Our current marketing strategy also includes promoting a Corporate
Relations Program. The Corporate Relations Program uses a variety of media
avenues to increase iLink's profile within the financial and telecommunications
industry.
New Products
We have developed the technological capacity to implement VoIP
technology and have contracted the required technical expertise to complete the
PCS license proposal for Trinidad and Tobago. Particulars of these developments
are discussed above.
<PAGE>21
Competition
Our competitors are both the incumbent providers of long distance
services as well as other providers of Internet telephony services and PCS
services. Incumbent providers of long distance services have been forced to
accept considerable price discounting in recent years due to increased
competition and government deregulation, and telephone companies have begun
offering discounts to large business and government customers with high calling
volumes. Our management expects this trend in price discounting to continue.
Our competitors all have better financial resources than we do. Our
competitors include CardCaller, DataMark/Phoneline International, CanQuest, CTN,
the members of the former Stentor Group, GTS, and Fonorola.
CardCaller and DataMark/Phoneline International have focused on the
retail market while CanQuest is a service bureau that has established
arrangement with small marketing companies to focus on retail, and to a lesser
extent promotional markets.
CTN as well as the Stentor Group have focused on both the retail and
promotional market. GTS, through strategic alliances, has been developing
targeted retail applications. Fonorola has been expanding their network and
targeting major accounts and developing custom card programs in key industry
sectors.
In addition to the above identified competitors, iLink's prepaid
calling card business would compete with a similar calling card sold by
BCT.Telus. As part of our service agreement with BCT.Telus, we have agreed not
to market our prepaid calling cards in the province of Alberta in which province
BCT.Telus actively markets its prepaid calling cards.
While price discounting makes the market for long distance
communications more competitive, it requires all providers of these services to
develop and deliver cost competitive services. An example of the drive for price
reductions is our IVR Agreement with BCT.Telus, a member of the former Stentor
Group, which has chosen to utilize our technology rather than incur the costs of
developing and operating an IVR system in-house.
We anticipate that we will encounter significantly more competition
from other potential entrants into the long distance market as well as from the
traditional providers of long distance services. Determining the degree,
intensity and duration of competition or the impact of competition on our
financial and operating results is uncertain. Sustained or extensive competition
on the basis of price or discounts, amongst other things, would have a material
adverse effect on our revenues, earnings potential and operational
effectiveness.
Suppliers
We have four main equipment suppliers. McKinnon Micro Distributors Ltd.
of Richmond, British Columbia supplies us with various computer hardware
including central processing units, printers and disk drives. We lease our 48
Port IVPS Node Switching Server from Newcourt Financial Ltd. under a lease
expiring June 1, 2000. Pro-Data Inc. of Richmond, British Columbia supplies us
with assortedcomputer hardware and printing systems. Telephony Experts Inc. of
Los Angeles, California has offered to provide IVR software to us at reduced
rates in exchange for promotional consideration which will reduce the
capital requirements for building any new custom manufactured switching
facilities.
We believe equipment used by us would be available from other suppliers
if alternative sources should become necessary.
Customers
At present, we have only two customers, however, we are entirely
dependent for substantially all of our revenue at this stage of our development
from our one major customer, BCT.Telus. The IVR services are provided pursuant
to the IVR Agreement which has a term of one year (through June 2000) and up to
two automatic renewals
<PAGE>22
of one year each. The IVR Agreement provides for termination for various reasons
and can be terminated by either party at any time, without cause, upon sixty
(60) days' notice. Although, we consider our relationship with BCT.Telus to be
good and we expect that this relationship will continue to expand, the loss of
our IVR Agreement with BCT.Telus would have a material adverse effect upon iLink
BC and our business as a whole. At this time, we have one other customer to whom
we are providing services, however, the revenues from this customer are not
expected to be substantial. Upon the successful production, distribution and
marketing of our pre-paid calling cards we expect to broaden our customer base
at the retail level. Management has begun planning of this business and
anticipates producing the first line of brand name cards by the end of 1999.
Intellectual Property, Government Approvals and Regulation
Our IVR platforms and our VoIP technology are not protected by any
patents or copyrights. We are not subject to government regulation nor do we
require any government approvals in either Canada or the United States to
provide IVR services to incumbent long-distance providers or to manufacture,
distribute and market pre-paid calling cards. The provision of VoIP
communications is also not subject to government regulation nor does it require
government approvals in either Canada or the United States. As the Internet is
rapidly changing, regulations may be imposed in future with which we will have
to comply. In the event that we are successful in obtaining a PCS license in
Trinidad and Tobago we expect that numerous subsequent government approvals will
have to be obtained.
Research And Development
We are presently conducting research and development to keep our IVR
and VoIP switching technologies current. We are also developing technology which
will allow persons selling our switching services to remotely process credit
card transactions without the requirement for local credit card clearing
equipment by using e- commerce services and a secured web site. At present we
devote substantially all of our technical resources to developing and updating
our existing technology and to establishing our business. Management has
contracted the services of a consultant to perform research and development and
other duties as required for a one year period ending March 2000 at an expense
of Cdn$5,000 per month. During the last fiscal year, no amounts were spent on
product/service research and development. For the six-month period ended August
31, 1999, we have spent approximately $10,000 on research and development.
Employees
We currently employ four people on a full-time basis and one person on
a part-time basis. We consider our relationship with our employees to be good.
Contingent upon raising sufficient capital, we plan to hire additional employees
as may be required by the level of our operations. Our management has identified
the need to hire the following members to fulfill our operational plans:
A Chief Financial Officer One Technical Staff Member for Each
Proposed Switch Facility in Vancouver
and New York
Four Marketing and Sales
Staff Members Two Additional Technical Web Designers
We currently, and expect in the future to, contract with outside
employment sources for additional persons to operate the existing and future
switch facilities.
Retaining our current employees and attracting new employees is
critical to our success. The market for experienced technical people is very
competitive and there is no assurance that we will be successful in retaining
and recruiting qualified personnel.
<PAGE>23
Consultants
We rely on and will continue to rely on consultants that are not
employees of iLink or our affiliates to expand our IVR system and to design,
construct and implement the VoIP and PCS systems, to market our services and for
representation on regulatory issues. In addition to the consultants who are
identified under the heading "Management," we have entered into a one year
agreement dated March 25, 1999, pursuant to which we retained the services of
Century Capital Management Ltd., a company controlled by one of our former
directors, to assist us in the development and implementation of our financing
and acquisition strategies. Pursuant to the terms of this agreement we have paid
to Century the sum of $12,500 and issued to Century 300,000 shares of our Common
Stock which are subject to a Vesting Agreement. Under this Agreement, Century
would forfeit all or part of these shares if certain milestones are not achieved
by March 25, 2000. We are also required to pay a monthly consulting fee of
$5,000 to Century.
We have also entered into two agreements dated March 22, 1999, under
which we have engaged the services of Corporate Relations Group,. Inc. and Gulf
Atlantic Publishing, Inc. for a period of one year. These two companies are in
the business of planning, developing and implementing advertising, marketing and
promotional campaigns. Pursuant to the terms of these agreements we have paid
Corporate Relations Group the sum of $40,000 and Gulf Atlantic Publishing the
sum of $110,000. We also issued 250,000 shares of iLink's Common Stock for
$12,500 to each of these companies.
PROPERTY
We have leased 2,239 square feet at a monthly rate of Cdn$4,637.54
which includes both operating expenses and base amount for our principal offices
at 1177 West Hastings Street, Suite 1910 under a lease agreement which expires
on August 1, 2002. We have also leased approximately 200 square feet located at
#304, 320 23rd Avenue, Calgary Alberta T2S 0J2 at a monthly rate of Cdn$625.00
pursuant to a sublease which expires on March 30, 2000. This space houses our
switching platform. We have entered into an office access agreement with
Advantis Business Centres pursuant to which they provide us with office space
and services on an 'as needed' basis until March 31, 2000, at One Sansome
Street, Suite 2000, San Francisco, CA 94104 at a cost of $299.00 per month.
MANAGEMENT
Directors and Executive Officers of iLink
The present directors, executive officers, key employees and
consultants of iLink, their ages, positions held in iLink, and duration as such,
are as follows:
<TABLE>
<S> <C> <C> <C>
Name Position Age Period
Amar Bahadoorsingh Chairman of the Board, President, 29 February 1999 - present
Secretary and Chief Financial
Officer
Peter Schriber Director 31 February 1999 - present
Joseph R. Q. (Rick) Villaneuva Key Employee 35 March 1999 - present
Randall Owen Walrond Key Consultant 33 March 1999 - present
</TABLE>
Business Experience
The following is a brief account of the education and business
experience during at least the past five years of each director, executive
officer, and key employee, indicating the principal occupation and employment
during that period, and the name and principal business of the organization in
which their occupation and employment were carried out.
<PAGE>24
Amar Bahadoorsingh has been an officer and director of iLink since
February 26, 1999. Mr. Bahadoorsingh has been integral in solidifying the
opportunities that now comprise iLink. Starting in 1992, Mr. Bahadoorsingh ran a
private venture capital organization which assisted in the development, funding
and strategic marketing of concepts and businesses. Mr. Bahadoorsingh holds a
master's degree in business administration from Queen's University, in Ontario,
Canada, with a focus on management and marketing strategy and a bachelor's
degree from the University of Western Ontario. He is a partner in several
businesses including the brokerage firm Insync Securities Limited, a real-estate
development company, and a travel management company.
Peter M. Schriber has been a director of iLink since February 26, 1999.
Mr. Schriber holds a bachelor's degree in economics from the University of
Western Ontario. Since December of 1996 Mr. Schriber has been the president of
Insync Securities Limited and a director and vice-president of Matisse
Investment Management, two companies engaged in the business of the designing
and marketing financial products. Prior to December 1996, Mr. Schriber was
employed by a European investment bank.
Joseph R.Q.(Rick) Villaneuva has been involved in the telecommunications
industry since 1988. Previously, he specialized in the maintenance and
manufacturing of radio/wireless technologies and equipment. In 1994, Mr.
Villaneuva developed his expertise in IVR based technologies and products,
working in both technical and marketing/sales support capacities. Mr. Villaneuva
oversees iLink's Calgary operations.
Randall Owen Walrond is the founding President of IVR interACTIVE which
developed and marketed voice mail products. Mr. Walrond guides iLink's
implementation of new products as well as its research and development. Mr.
Walrond has over 15 years programming experience and holds a bachelors Degree in
Economics focusing on computer based macro-economic regressionary analysis. Mr.
Walrond's work in computer integrated telephony includes voice processing, call
management, interactive voice response, voice recognition, fax processing, web
development, scripting languages as well as telephony networking based on
Internet protocols.
Family Relationships
There are no family relationships between any director, executive
officer or employee of iLink.
<PAGE>25
EXECUTIVE COMPENSATION
The following table provides certain summary information concerning
compensation of iLink's Chief Executive Officer. No executive officer of iLink
or of any subsidiaries earned in excess of $100,000 for the fiscal year ended
February 28, 1999.
<TABLE>
SUMMARY COMPENSATION TABLE
- ------------------------------------------------------------------------------------------------------------------------------------
Annual Compensation Long-Term Compensation
-------------------------------------------- --------------------------------------------
Awards Payouts
---------------------------------- -------
Name and Principal Restricted LTIP
Position Other Annual Stock Awards Securities Payouts All Other
Year Salary Bonus Compensation ($) Underlying Options ($) Compensation
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert Knight(1) 1999 -0- -0- -0- -0- -0- -0- -0-
President and Chief
Executive Officer
Andrew Hromyk(2) 1999 -0- -0- -0- -0- -0- -0- -0-
President and Chief
Executive Officer
Amar Bahadoorsingh(3) 1999 -0- -0- -0- -0- -0- -0- -0-
President and Chief
Executive Officer
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Mr. Knight served as CEO of iLink's predecessor corporation (AFD Capital Group) until his resignation on June 5, 1998.
(2) Mr. Hromyk served as President of iLink's predecessor corporation Aquasol Technologies, Inc. (formerly AFD Capital Group) from
June 5, 1998 until his resignation on February 26, 1999.
(3 Mr. Bahadoorsingh has served as iLink's President and Chief Executive Officer since February 26, 1999.
</TABLE>
Subsequent to the fiscal year end of February 28, 1999:
o On April 1, 1999, iLink commenced paying $5,000 per month for
consulting services to Devmar Holdings Ltd., a company controlled
by Mr. Bahadoorsingh;
o On March 25, 1999, iLink issued 1,500,000 shares of its common
stock to Mr. Bahadoorsingh as executive compensation; and
o On May 25, 1999, iLink issued 250,000 shares of its common stock
to Marketsource Direct Holdings, Ltd. (a company controlled by
Mr. Schriber) as compensation for consulting services to iLink.
On March 25, 1999, in addition to the shares issued to Mr.
Bahadoorsingh, the following officers, employees and consultants were issued
390,000 shares of iLink's Common Stock as compensation in the following amounts:
Randall Walrond 50,000 shares
Peter Schriber 25,000 shares
Rick Villaneuva 10,000 shares
Andrea Daley 5,000 shares
Century Capital Management Limited 300,000 shares
<PAGE>26
All of these shares are subject to a Vesting Agreement dated May 25,
1999 which provides for iLink to hold the shares until certain milestones are
reached or certain events occur. These milestones include achieving certain
levels of gross revenues (through internal growth or outside acquisitions) or
obtaining a PCS license in the Republic of Trinidad and Tobago. The shares vest
automatically upon a takeover bid. Any shares not vested by May 25, 2000 will be
automatically canceled.
Employment Agreements
iLink has entered into a five year consulting agreement dated February
27, 1999, with Devmar Holdings Ltd., a company controlled by Mr. Amar
Bahadoorsingh. Pursuant to this consulting agreement iLink has agreed to pay
Devmar Holdings Ltd. $5,000 per month for management consulting services
provided by Mr. Bahadoorsingh.
iLink has also entered into a one year consulting agreement dated
February 27, 1999, with Mr. Randall Owen Walrond. Pursuant to this consulting
agreement iLink has agreed to pay Mr. Walrond Cdn$5,000 per month in exchange
for technology consulting services which includes research and development.
iLink has also entered into employment agreements with each of its
employees which contain confidentiality and non-circumvention clauses.
Stock Option Plan
iLink has adopted a Non-Qualified Stock Option Plan. The Option Plan
authorizes the issuance of options to purchase up to 500,000 shares of its
Common Stock. The Option Plan became effective on June 1, 1999.
iLink employees, directors, officers, consultants and advisors are eligible to
be granted options pursuant to the Option Plan. The option exercise price is
determined by the Board of Directors.
Options granted pursuant to the Option Plan terminate on the date
established by the Board of Directors when the option was granted.
The Option Plan is administered by iLink's Board of Directors. The
Board of Directors has the authority to interpret the provisions of the Option
Plan and supervise the administration of the Option Plan. In addition, the Board
of Directors is empowered to select those persons to whom options are to be
granted, to determine the number of shares subject to each grant of an option
and to determine when, and upon what conditions or options granted under the
Option Plan will vest or otherwise be subject to forfeiture and cancellation.
In the discretion of the Board of Directors, any option granted
pursuant to the Option Plan may include installment exercise terms so that the
option becomes fully exercisable in a series of cumulating portions. The Board
of Directors may also accelerate the date upon which any option (or any part of
any options) is first exercisable. Any options granted pursuant to the Option
Plan will be forfeited if the "vesting" schedule established by the Board of
Directors at the time of the grant is not met. For this purpose, vesting means
the period during which the employee must remain an employee or the period of
time a non-employee must provide services to us. At the time an employee ceases
working for us or at the time a non-employee ceases to perform services for us,
any options not fully vested will be forfeited and canceled. In the discretion
of the Board of Directors payment for shares of Common Stock underlying options
may be paid through the delivery of shares of our Common Stock having an
aggregate fair market value equal to the option price, provided such shares have
been owned by the option holder for at least one year prior to the exercise. A
combination of cash and shares of Common Stock may also be permitted at the
discretion of the Board of Directors. Options are generally non-transferable
except upon death of the option holder.
iLink's Board of Directors may at any time, and from time to time,
amend, terminate, or suspend the Option Plan in any manner it deems appropriate,
provided that the amendment, termination or suspension cannot adversely affect
rights or obligations with respect to shares or options previously granted.
<PAGE>27
The Option Plan is not qualified under Section 401(a) of the Internal
Revenue Code, and is not subject to any provisions of the Employee Retirement
Income Security Act of 1974.
The following sets forth certain information as of August 31, 1999,
concerning the stock options granted by iLink. Each option represents the right
to purchase one share of iLink Common Stock.
<TABLE>
<S> <C> <C> <C>
Total Shares Reserved Shares Reserved for Remaining Options Under
Name of Plan Under Plan Outstanding Options Plan
Non-Qualified Stock Option 500,000 23,000 477,000
Plan
</TABLE>
On June 8, 1999, the Board granted options to purchase a total of
23,000 shares of iLink Common Stock at a price of $5.25 per share to three of
its employees. The options are exercisable for a term of one year. No directors
or officers have been granted any incentive stock options.
Directors Compensation
iLink reimburses its directors for expenses incurred in connection with
attending Board meetings but it does not pay director's fees or other cash
compensation for services rendered as a director.
Limitation of Liability and Indemnification Matters
Section 78.7502 of the Nevada Revised Statutes provides that a
corporation may indemnify any person who was or is a party or is threatened to
be made a party to any litigation by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, against expenses,
including attorneys' fees, judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with the action if he
acted in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. Any indemnification made under section 78.7502 must be determined
to be proper, on a case-by-case basis, by either iLink stockholders, a quorum of
its Board of Directors (excluding any directors named in the action) or by the
written opinion of its legal counsel. iLink's Articles of Incorporation and its
Bylaws provide for indemnification of its directors, officers, employees or
agents against expenses, including attorneys' fees, judgments, fines and amounts
paid in settlement if they acted in good faith and reasonably believed their
conduct or action to be in iLink's best interest.
iLink has entered into indemnification agreements with both of its
directors pursuant to which it has agreed to indemnify them from and against any
and all costs, charges and expenses, however arising or incurred by them by
reason of their being a director of iLink, subject to the determination referred
to above.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, or persons controlling
iLink pursuant to the foregoing provisions, iLink has been informed that in the
opinion of the SEC, such indemnification is against public policy as expressed
in the Act and is therefore unenforceable.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
Principal Stockholders
The following table set forth certain information as of September 30,
1999, with respect to the beneficial ownership of iLink Common Stock for (i)
each director, (ii) all directors and officers of iLink as a group, and (iii)
each person known to iLink to own beneficially five percent (5%) or more of the
outstanding shares of our Common Stock.
<PAGE>28
<TABLE>
<S> <C> <C>
Name of Address of Number of Shares
Beneficial Owner Beneficially Owned(1) Percent of Class
- ---------------- --------------------- ----------------
Amar Bahadoorsingh 1,596,666(3) 29%
2360 Larch Street
Vancouver, BC V6K 3P8
Peter M. Schriber 335,000(2)(3) 6.1%
#3 - 2636 Yukon Street
Vancouver, BC V5Y 3P8
Century Capital Management Ltd. 322,259(3) 6%
Suite 1650, 200 Burrard Street
Vancouver, BC V6C 3L6(4)
Bona Vista West Ltd. 500,000 9.2%
2001 Leeward Highway,
P. O. Box 62
The McLean Building, Providenciales
Turks & Caicos Islands(5)
All Directors and Officers as a Group 1,931,666 35%
</TABLE>
- ------------------------
(1) The persons named in the table have sole voting or investment power with
respect to all of the Common Stock shown as beneficially owned by them,
subject to community property laws where applicable or as otherwise
indicated.
(2) Includes 300,000 shares held by Marketsource Direct Holdings Ltd., which is
an entity controlled by Mr. Schriber; 10,000 shares held by Insync
Securities, Limited of which Mr. Schriber is the majority shareholder; and
25,000 held by Mr. Schriber directly.
(3) 275,000 of these shares are subject to a Vesting Agreement pursuant to
which a portion of the shares may be forfeited unless and until fully
vested. See description of Vesting Agreement under the heading "Certain
Relationships and Related Transactions."
(4) The sole officer, director and shareholder of Century Capital Management
Ltd. is Andrew Hromyk, a former director and president of iLink.
(5) The sole officer, director and shareholder of Bona Vista West Ltd. is
Andrew Meade.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Except as otherwise indicated below, we have not been a party to any
transaction, proposed transaction, or series of transactions in which the amount
involved exceeds $60,000, and in which, to our knowledge, any of our directors,
officers, five percent beneficial security holder, or any member of the
immediate family of the foregoing persons has had or will have a direct or
indirect material interest.
In February 1999, we agreed to purchase all of the shares of iLink BC
from ABDE Holdings Ltd., a company controlled by Mr. Bahadoorsingh, our
President and Chief Executive Officer, in exchange for 145 shares of our Series
A Convertible Preferred Stock. At the time of this agreement Mr. Bahadoorsingh
was not a director or officer of iLink. Subsequent to this agreement Mr.
Bahadoorsingh and Mr. Schriber were appointed as directors and the prior
director resigned. Each share of Series A Convertible Preferred Stock entitles
ABDE to convert into $1,000 worth of our common stock at a 25% discount to the
average market price of our common stock for the five trading days immediately
preceding the conversion. The shares of Series A Convertible Preferred Stock
were to convert into shares of our Common Stock on the date which is five days
from the date of this Prospectus. The acquisition of iLink BC was valued at
$145,000 which was based upon arm's length negotiations between iLink and
<PAGE>29
ABDE, however, no independent appraisal was obtained. ABDE acquired these assets
from Revere Communications, Inc. on January 13, 1999 for $123,165. We also
agreed with ABDE to file a registration statement with the SEC in respect of the
shares of Common Stock to be issued upon the conversion of the shares of Series
A Convertible Preferred Stock on or before May 31, 1999 and to use our best
efforts to make same effective as soon as practicable thereafter. ABDE has
subsequently agreed to postpone this filing deadline indefinitely. On September
30, 1999, our Board of Directors (with Mr. Bahadoorsingh abstaining) and ABDE
agreed to exchange the 145 shares of Series A Preferred Stock for 96,666 shares
of iLink Common Stock.
We have entered into a five-year consulting agreement dated February
27, 1999 with Devmar Holdings, Ltd. which is controlled by Mr. Bahadoorsingh.
The agreement provides for monthly payments of $5,000 per month for the
consulting services of Mr. Bahadoorsingh. Although the agreement provides for
semi-annual reviews by iLink, and either party may terminate the agreement upon
four weeks notice. On March 25, 1999, iLink issued 1,500,000 of its restricted
common stock to Mr. Bahadoorsingh as compensation for services rendered and to
induce Mr. Bahadoorsingh to remain in iLink's employ which was deemed essential
for iLink's future business developments. These transactions were approved by
iLink's Board of Directors with Mr. Bahadoorsingh abstaining.
In March 1999, we issued 25,000 shares of iLink's restricted common
stock to Peter Schriber and in May 1999, we issued 250,000 shares of iLink's
restricted common stock to Marketsource Direct Holdings, Ltd., a company
controlled by Mr. Schriber, a director of iLink, as compensation for services
rendered to iLink. The number of shares issued was based upon Mr. Schriber's
past services to iLink and to induce his continued employment by iLink which was
deemed to be vital to iLink's future business development. This transaction was
approved by iLink's Board of Directors with Mr. Schriber abstaining.
The 1,500,000 shares issued to Mr. Bahadoorsingh and the 275,000 shares
issued to Mr. Schriber referred to above are subject to a Vesting Agreement,
dated May 25, 1999 and are being held by iLink until the shares have vested. The
Vesting Agreement provides for vesting of the shares if:
(a) the Holder remains an officer, director or employee of iLink; and
(b) certain operating milestones are achieved or if iLink is granted
a PCS License in Trinidad and Tobago or if iLink becomes subject
to a takeover bid. Shares not vested by May 25, 2000 will be
forfeited and returned to iLink for cancellation.
In March 1999 we issued 300,000 of iLink Common Stock to Century
Capital Management Ltd., a company controlled by Andrew Hromyk, a former
director of iLink, as compensation for services rendered to iLink. These shares
are subject to the terms of a Vesting Agreement which, among other things,
requires forfeiture of all or part of these shares if certain milestones are not
achieved by March 25, 2000. On June 3, 1999 one milestone set forth in the
Vesting Agreement was achieved allowing for the release of 50,000 shares to
Century Capital. The agreement with Century Capital also provides for an initial
payment of $12,500 and monthly consulting fees of $5,000 for the term of
agreement which is for 12 months. The term is automatically renewed for
successive 6- month periods until either party gives notice to terminate the
agreement.
In May, 1999 Century Capital assigned its interest in a lease covering
certain office space to iLink. The lease was assigned to iLink on the same terms
and conditions that existed for Century Capital except that iLink has agreed to
indemnify Century Capital for any liabilities which may arise under the lease
after the assignment and Century Capital was issued 22,259 shares of iLink
Common Stock as consideration for certain leasehold improvements, furniture and
telephone equipment.
In March 1999, we entered into indemnification agreements with our
directors. In these agreements iLink agreed to indemnify the Directors from and
against any and all costs, charges and expenses, however arising or incurred by
either of them in relation to our affairs by reason of them being a director. As
required by Nevada corporate law, the indemnification must be determined to be
proper, on a case-by-case basis, by either our stockholders, a quorum of our
Board of Directors excluding any directors named in the action or by the written
opinion of our legal counsel.
<PAGE>30
PLAN OF DISTRIBUTION
The Selling Stockholders may, from time to time, sell all or a portion
of the shares of Common Stock on any market upon which the Common Stock may be
quoted, in privately negotiated transactions or otherwise. Such sales may be at
fixed prices that may be changed, at market prices prevailing at the time of
sale, at prices related to the market prices or at negotiated prices. The shares
of Common Stock may be sold by the Selling Stockholders by one or more of the
following methods, without limitation:
(a) block trades in which the broker or dealer so engaged will
attempt to sell the shares of Common Stock as agent but may
position and resell a portion of the block as principal to
facilitate the transaction;
(b) purchases by broker or dealer as principal and resale by the
broker or dealer for its account pursuant to this Prospectus;
(c) an exchange distribution in accordance with the rules of the
exchange;
(d) ordinary brokerage transactions and transactions in which the
broker solicits purchasers;
(e) privately negotiated transactions;
(f) market sales (both long and short to the extent permitted under
the federal securities laws); and
(g) a combination of any aforementioned methods of sale.
In effecting sales, brokers and dealers engaged by the Selling
Stockholders may arrange for other brokers or dealers to participate.
Brokers or dealers may receive commissions or discounts from the
Selling Stockholders or, if any of the broker-dealers act as an agent for the
purchaser of said shares, from the purchaser in amounts to be negotiated which
are not expected to exceed those customary in the types of transactions
involved. Broker-dealers may agree with the Selling Stockholders to sell a
specified number of the shares of Common Stock at a stipulated price per share.
Such an agreement may also require the broker-dealer to purchase as principal
any unsold shares of Common Stock at the price required to fulfill the
broker-dealer commitment to the Selling Stockholders if said broker-dealer is
unable to sell the shares on behalf of the Selling Stockholders. Broker-dealers
who acquire shares of Common Stock as principal may thereafter resell the shares
of Common Stock from time to time in transactions which may involve block
transactions and sales to and through other broker-dealers, including
transactions of the nature described above. Such sales by a broker-dealer could
be at prices and on terms then prevailing at the time of sale, at prices related
to the then-current market price or in negotiated transactions. In connection
with such resales, the broker-dealer may pay to or receive from the purchasers
of the shares, commissions as described above. The Selling Stockholders may also
sell the shares of Common Stock in accordance with Rule 144 under the Securities
Act, rather than pursuant to this Prospectus.
The Selling Stockholders and any broker-dealers or agents that
participate with the Selling Stockholders in the sale of the shares of Common
Stock may be deemed to be "underwriters" within the meaning of the Securities
Act in connection with these sales. In that event, any commissions received by
the broker-dealers or agents and any profit on the resale of the shares of
Common Stock purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act.
From time to time, the Selling Stockholders may pledge their shares of
Common Stock pursuant to the margin provisions of their customer agreements with
their brokers. Upon a default by a Selling Stockholder, the broker may offer and
sell the pledged shares of Common Stock from time to time. Upon a sale of the
shares of
<PAGE>31
Common Stock, the Selling Stockholders intend to comply with the Prospectus
delivery requirements, under the Securities Act, by delivering a Prospectus to
each purchaser in the transaction. We intend to file any amendments or other
necessary documents in compliance with the Securities Act which may be required
in the event the Selling Stockholders defaults under any customer agreement with
brokers.
Subscription Procedures
All expenses of the registration statement including, but not limited
to, legal, accounting, printing and mailing fees are and will be borne by us.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is Liberty
Transfer Agent; telephone: (516) 385- 1616.
SELLING STOCKHOLDERS
<TABLE>
<S> <C> <C> <C>
Number of Common
Number of Common Number of Shares Beneficially
Shares Beneficially Common Shares Owned Following
Name of Shareholder Owned Prior to the Offering Offered Hereby the Offering
- ------------------- --------------------------- -------------- ------------
# Of % Of # Of # Of % Of
Shares Class Shares Shares Class
------ ----- ------ ------ -----
ABDE Holdings, Ltd.(2) 96,666(1) 1.8% 96,666 -0-(1) 0%
Century Capital Management Ltd. 322,259 5.8% 72,259 250,000 4.5%
- ----------------------
</TABLE>
(1) Excludes 1,500,000 shares owned by Mr. Bahadoorsingh who is the controlling
owner of ABDE Holdings, Ltd.
(2) ABDE Holdings Ltd. is one of the Selling Stockholder of the shares of our
common stock. The sole voting stockholder of ABDE Holdings Ltd. is Devmar
Holdings Ltd., a company owned by Mr. Amar Bahadoorsingh, our President and
Chief Executive Officer.
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 25,000,000 shares of Common
Stock, $.001 par value, and 5,000,000 shares of preferred stock, $.001 par
value. As of September 30, 1999, there were 5,509,629 shares of Common Stock
outstanding which includes the replacement of the 145 shares of Series A
Convertible Preferred Stock with 96,666 shares of common stock.
Common Stock
Each stockholder is entitled to one vote for each share of Common Stock
held on all matters submitted to a vote of stockholders. Cumulative voting for
the election of directors is not provided for in our certificate of
incorporation.
Holders of Common Stock are entitled to receive the dividends as may be
declared by our Board of Directors out of funds legally available for dividends
and, in the event of liquidation, to share pro rata in any distribution of our
assets after payment of liabilities. Our Board of Directors is not obligated to
declare a dividend.
It is not anticipated that dividends will be paid in the foreseeable future.
<PAGE>32
Holders of Common Stock do not have preemptive rights to subscribe to
additional shares if issued by us. There are no conversion, redemption, sinking
fund or similar provisions regarding the Common Stock. All of the outstanding
shares of Common Stock are fully paid and nonassessable and all of the shares of
Common Stock issued upon the conversion of the Series A Preferred Stock will be,
upon issuance, fully paid and non-assessable.
Preferred Stock
iLink is authorized to issue up to 5,000,000 shares of Preferred Stock.
Our Articles of Incorporation provide that the Board of Directors has the
authority to issue the Preferred Stock into series and, within the limitations
provided by Nevada statute, to fix by resolution the powers, rights,
preferences, qualifications, limitations and restrictions of the shares of any
series so established. As our Board of Directors has authority to establish the
terms of, and to issue, the preferred stock without shareholder approval, the
preferred stock could be issued to defend against any attempted takeover of
iLink.
In March 1999, our Board of Directors established a Series A
Convertible Preferred Stock and authorized the issuance of up to 145 shares of
Series A Convertible Preferred Stock as part of that series. Upon any
liquidation or dissolution of iLink, each outstanding share of Series A
Convertible Preferred Stock is entitled to distribution of $1,000 per share
prior to any distribution to the holders of our Common Stock. The shares of
Series A Convertible Preferred Stock are not entitled to any dividends or voting
rights. On March 31, 1999, we issued 145 shares of our Series A Convertible
Preferred Stock to ABDE Holdings Ltd. at a deemed price of $1,000 per share in
recognition of the exchange for all of the shares of iLink BC which occurred on
February 26, 1999. Five days after the date of this Registration Statement is
declared effective each share of Series A Convertible Preferred Stock will
automatically convert into shares of our Common Stock in an amount equal to the
Series A Preferred Stock stated value of $1,000 divided by 75% of the average
closing bid price of our Common Stock for the five trading days preceding the
conversion date. On September 30, 1999, these shares of Series A Preferred Stock
were replaced with 96,666 shares of iLink's Common Stock at an exchange rate of
$1.50 per common share. The shares which were exchanged for the Series A
Preferred Shares are being offered for resale to the public by means of this
Prospectus. See "Selling Stockholders." At this time, the Board of Directors has
authorized no other shares of Preferred Stock.
LEGAL PROCEEDINGS
We are not a party to any legal proceedings.
LEGAL MATTERS
The validity of the shares of Common Stock offered by the Selling
Stockholders will be passed upon by the law firm of Bartel Eng Linn & Schroder,
Sacramento, California.
EXPERTS
The consolidated balance sheets as of February 28, 1999 and 1998, and
the related consolidated statements of operations, stockholders' equity and cash
flows for the year ended February 28, 1999 and for each of the periods from
December 10, 1997 (date of inception) to February 28, 1999 and February 28,
1998, included in this Prospectus have been audited by Ernst & Young LLP,
independent chartered accountants, as set forth in their report thereon included
elsewhere herein and are included in reliance upon the report, given on the
authority of the firm, as experts in accounting and auditing.
AVAILABLE INFORMATION
We have filed a registration statement on Form SB-2, together with all
amendments and exhibits, with the SEC. This Prospectus, which forms a part of
that registration statement, does not contain all information included in the
registration statement. Certain information is omitted and you should refer to
the registration statement and its exhibits. With respect to references made in
<PAGE>33
this Prospectus to any contract or other document of iLink, the references are
not necessarily complete and you should refer to the exhibits attached to the
registration statement for copies of the actual contract or document. You may
review a copy of the registration statement at the SEC's public reference room,
and at the SEC's regional offices located at 500 West Madison Street, Suite
1400, Chicago, Illinois 60661, and Seven World Trade Center, 13th Floor, New
York, New York 10048. Please call the SEC at 1-800-SEC- 0330 for further
information on the operation of the public reference rooms. Our filings and the
registration statement can also be reviewed by accessing the SEC's website at
http://www.sec.gov.
FINANCIAL STATEMENTS AND SCHEDULES
Financial Statements
The following Financial Statements pertaining to iLink are filed as part of this
Prospectus:
Interim Consolidated Financial Statements for the Six Months Ended August 31,
1999F-1 thru F-11
Report of Independent Accountants...........................................F-12
Year-end Consolidated Balance Sheets........................................F-13
Year-end Consolidated Statements of Operations..............................F-14
Year-end Consolidated Statements of Stockholders' Equity....................F-15
Year-end Consolidated Statements of Cash Flows..............................F-16
Notes to Consolidated Financial Statements........................F-17 thru F-22
<PAGE>F-1
iLINK TELECOM, INC.
(A development stage enterprise)
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
PREPARED BY MANAGEMENT
(in U.S. dollars)
For the Six Months Ended August 31, 1999
<PAGE>F-2
iLINK TELECOM, INC.
(A development stage enterprise)
Interim Consolidated Balance Sheet
(unaudited)
As at August 31, 1999
<TABLE>
<S> <C> <C>
(in U.S. dollars)
August 31, February 28,
Assets 1999 1999
- -------------------------------------------------------------------------------------------------------- ----------------
Current:
Cash and cash equivalents $ 17,286 $ -
Accounts receivable 1,780 -
Prepaid expenses and deposits 5,221 -
Due from related parties 10,170 -
Other receivables 5,620
- ------------------------------------------------------------------------------------------------------------------------
Total current assets 40,077 -
Equipment [note 3] 59,942 15,254
Goodwill 115,622 138,746
- -------------------------------------------------------------------------------------------------------------------------
215,641 $ 154,000
- -------------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
- -------------------------------------------------------------------------------------------------------------------------
Current:
Accrued liabilities [note 5(a)] $ 32,027 $ 27,139
Loan [note 5(b)] 100,000 -
- -------------------------------------------------------------------------------------------------------------------------
Total current liabilities 132,027 27,139
- -------------------------------------------------------------------------------------------------------------------------
Stockholders' Equity:
Share Capital [note 4]
Common stock - $0.001 par value
25,000,000 authorized, 5,412,963
[February 28, 1999 - 1,347,204] issued and outstanding 5,413 1,347
Preferred stock - $0.001 par value
5,000,000 authorized, 145 (February 28, 1999 - nil)
Series A Convertible issued and outstanding 1 -
Additional paid in capital 723,276 4,228
Preferred stock to be issued - 145,000
Deficit accumulated in the development stage (645,076) (23,714)
- --------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 83,614 126,861
Commitments [note 5]
Subsequent Events [note 8]
- --------------------------------------------------------------------------------------------------------------------------
$215,641 $154,000
- --------------------------------------------------------------------------------------------------------------------------
See accompanying notes
</TABLE>
<PAGE>F-3
iLINK TELECOM, INC.
(A development stage enterprise)
Interim Consolidated Statement of Stockholders' Equity
(unaudited)
For the Six Months Ended August 31, 1999
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(in U.S. dollars)
Common Stock Preferred Stock Deficit
------------ --------------- Additional Shares accumulated
Number Number paid in to be in the development
of shares Amount of shares Amount capital issued stage Total
# $ # $ $ $ $
- -----------------------------------------------------------------------------------------------------------------------------------
Issuance of common stock
[note 4(a) and (b)] 1,347,204 $1,347 $ 4,228 145,000 $ - $ 150,575
Net Loss - - - - - - (23,714) (23,714)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, February 28, 1999 1,347,204 1,347 - - 4,228 145,000 (23,714) 126,861
Issuance of common
Stock [Note 4(a) and
(d)] 4,065,759 4,066 - - 526,049 - - 530,115
Issuance of preferred
stock - - 145 1 144,999 (145,000) - -
Net Loss - - - - - - (573,362) (573,362)
Dividend - - - - 48,000 - (48,000) -
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, August 31, 1999 5,412,963 $5,413 145 1 $723,276 - $ (645,076) $ 83,614
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes
<PAGE>F-4
iLINK TELECOM, INC.
(A development stage enterprise)
Interim Consolidated Statement of Operations
(unaudited)
For the Six Months Ended August 31, 1999
<TABLE>
<S> <C> <C> <C> <C>
(in U.S. dollars)
Period from
For the Period For the Period December 10, 1997
March 1, 1999 to March 1, 1998 to For the Year Ended (Date of Incorporation)
August 31, 1999 August 31, 1998 February 28, 1999 to August 31, 1999
- -----------------------------------------------------------------------------------------------------------------------------------
Revenue:
Sales $ 14,427 $ - $ - $ 14,427
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses:
Amortization 30,911 - - 30,911
Consulting fees 146,344 - 8,139 154,483
General and administrative 389,910 - - 389,910
Professional fees 20,624 - 10,000 30,624
Writedown of investment - - 175 175
- -----------------------------------------------------------------------------------------------------------------------------------
587,789 - 18,314 611,503
- -----------------------------------------------------------------------------------------------------------------------------------
Net Loss (573,362) - (18,314) (597,076)
Dividend (48,000) - - (48,000)
- -----------------------------------------------------------------------------------------------------------------------------------
Net loss attributable to
common stockholders $ (621,362) - $ (18,314) $ (645,076)
- -----------------------------------------------------------------------------------------------------------------------------------
Basic and diluted loss per
share attributed to $ (0.21) - $ (0.01) -
common stockholders
- -----------------------------------------------------------------------------------------------------------------------------------
Weighted average number of
shares 2,988,015 1,137,169 1,484,299 -
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes
<PAGE>F-5
iLINK TELECOM, INC.
(A development stage enterprise)
Interim Consolidated Statement of Cash Flows
(unaudited)
For the Six Months Ended August 31, 1999
<TABLE>
<S> <C> <C> <C> <C>
(in U.S. dollars)
Period from
For the Period For the Period December 10, 1997
March 1, 1999 to March 1, 1998 to For the Year Ended (Date of Incorporation)
August 31, 1999 August 31, 1998 February 28, 1999 to August 31, 1999
- -----------------------------------------------------------------------------------------------------------------------------------
Operating Activities:
Net Loss $ (573,362) $ - $ (18,314) $ (597,076)
Adjustments to reconcile
net loss to net cash used
in operating activities -
Amortization 30,911 - - 30,911
Write-down of investment - - 175 175
Shares issued for Services
Rendered 52,090 - - 52,090
Changes in operating assets and
liabilities -
Increase in accounts receivable (1,780) - - (1,780)
Increase in prepaid expenses and
deposits (5,221) - - (5,221)
Increase in due from related
parties (10,170) - - (10,170)
Increase in other receivables (5,620) - - (5,620)
Increase accrued liabilities 4,888 - 18,139 23,027
- -----------------------------------------------------------------------------------------------------------------------------------
Cash flows used in operating activities (508,264) - - (513,664)
Investing Activity:
Acquisition of capital assets (7,957) - - (7,957)
Financing Activity:
Proceeds from financing activities 33,507 - - 438,907
Loans [note 5(b)] 100,000 - - 100,000
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase in Cash and Cash
Equivalents 17,286 - - 17,286
Cash and cash equivalents beginning of
period - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of
period $17,286 $ - $ - $ 17,286
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes
<PAGE>F-6
iLINK TELECOM, INC.
(A development stage enterprise)
Notes to Financial Statements
(unaudited)
For the Six Months Ended August 31, 1999
1. Formation and Business of the Company:
iLink Telecom Inc. was incorporated on December 10, 1997 under the name of
Aquasol Inc. pursuant to the laws of Colorado and on January 9, 1998
changed its domicile to Delaware. On July 14, 1998, the company merged with
Aquasol Technologies Inc., a Nevada corporation with nominal net assets,
resulting in a change in its domicile to Nevada. On February 26, 1999, the
company acquired all of the issued and outstanding common stock of 579782
B.C. Ltd. and subsequently changed the name of this subsidiary to iLink
Telecom (B.C.) Inc.
The company is engaged in the development of the business of providing
automated call-processing services including prepaid call processing,
audiotex and passive inbound automated tele-surveys. The company is a
development stage enterprise and anticipates obtaining working capital to
fund the continuing development of its business through equity financings.
2. Significant Accounting Policies:
In the opinion of management, the unaudited financial statements reflect
all adjustments, which consist only of normal and recurring adjustments,
necessary to present fairly the financial position at August 31, 1999 and
the results of operations and the changes in financial position for the
respective six month period ended August 31, 1999, in accordance with
accounting principles generally accepted in the United States.
These financial statements should be read in conjunction with the financial
statements and notes thereto contained in the Company's audited
consolidated financial statements for the year ended February 28, 1999.
a) Principles of Consolidation -
The interim consolidated financial statements include the accounts of
the company and its wholly-owned subsidiary, iLink Telecom (B.C.) Inc.
(British Columbia, Canada). All significant intercompany accounts and
transactions have been eliminated.
b) Use of Estimates -
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from
these estimates.
c) Equipment -
Is stated at cost and are amortized on a straight-line basis over the
estimated useful lives of the related assets as follows:
Computer equipment 3 years
Furniture and office equipment 5 years
Telecom equipment 2 years
<PAGE>F-7
iLINK TELECOM, INC.
(A development stage enterprise)
Notes to Financial Statements
(unaudited)
For the Six Months Ended August 31, 1999
d) Income Taxes
The company uses the liability method of accounting for income taxes.
Under this method, deferred tax assets and liabilities are determined
based on the difference between financial statement and tax bases of
assets and liabilities and are measured using the enacted tax rates
and laws that are expected to be in effect when the differences are
expected to reverse. Deferred tax assets are reduced by a valuation
allowance in respect of amounts considered by management to be less
likely than not of realization in future periods.
e) Goodwill -
Goodwill is being amortized on a straight-line basis over 3 years.
f) Computation of Loss per share -
Basic loss per share is computed by dividing the loss attributable to
common stockholders by the weighted average number of common shares
outstanding for that period excluding shares issued for nominal
consideration and subject to performance criteria. Diluted loss per
share is computed giving effect to all dilutive potential common
shares that were outstanding during the period. Dilutive potential
common shares consist of incremental common shares issuable upon
exercise of convertible securities. As at August 31, 1999, there were
no dilutive potential common shares and therefore the dilutive loss
per share is equivalent to the basic loss per share.
g) Foreign Currency Translation -
Assets and liabilities of integrated foreign subsidiary operations and
foreign currency denominated assets and liabilities of Canadian
operations are translated into United States dollars at exchange rates
prevailing at the balance sheet date for monetary items and at
exchange rates prevailing at the transaction date for non-monetary
items. The foreign subsidiary operates in Canadian currency. Revenues
and expenses, except amortization, are translated at the average
exchange rates for the year. Amortization is translated at the same
rate as the related assets.
Foreign exchange gains or losses on monetary assets and liabilities
are included in operations.
h) Revenue Recognition -
Revenue for the provision of telecom services is recorded upon the
delivery of the services.
<PAGE>F-8
iLINK TELECOM, INC.
(A development stage enterprise)
Notes to Financial Statements
(unaudited)
For the Six Months Ended August 31, 1999
<TABLE>
<S> <C> <C> <C>
3. Equipment:
Accumulated Net Book
Cost Amortization Value
- ------------------------------------------------------------------------------------------------------------------
Computer equipment $ 15,777 $ 2,510 $ 13,267
Furniture and office equipment 50,924 5,020 45,904
Telecom equipment 1,028 257 771
- ------------------------------------------------------------------------------------------------------------------
$ 67,729 $ 7,787 $ 59,942
- ------------------------------------------------------------------------------------------------------------------
4. Share Stock:
a) Issued - Common stock Number
of Shares $
- ------------------------------------------------------------------------------------------------------------------
Shares issued for cash on incorporation, December 11, 1997 300,113 $ 5,000
Shares issued for cash, January 12, 1998 800,000 400
Other, December 26, 1997 35,091 175
Shares issued for investment subsequently returned,
January 15, 1998 198,400 99
- ------------------------------------------------------------------------------------------------------------------
Balance, February 28, 1998 1,333,604 5,674
Shares issued to acquire the capital stock of
Aquasol Technologies Inc., June 26, 1998 416,000 -
Shares returned to treasury (204,000) -
Cancellation of shares related to investment (198,400) (99)
- ------------------------------------------------------------------------------------------------------------------
Balance, February 28, 1999 1,347,204 5,575
Shares issued for cash, net of issue costs of $1,559, April 1, 1999 1,903,500 433,507
Shares issued for services rendered, March 25, 1999 2,140,000 52,090
Shares issued for capital assets, May 20, 1999 22,259 44,518
- ------------------------------------------------------------------------------------------------------------------
Balance, August 31, 1999 5,412,963 $ 535,690
- ------------------------------------------------------------------------------------------------------------------
<PAGE>F-9
iLINK TELECOM, INC.
(A development stage enterprise)
Notes to Financial Statements
(unaudited)
For the Six Months Ended August 31, 1999
b) Issued - Preferred stock, Series A convertible Number
of Shares $
- -------------------------------------------------------------------------------------------------------------------
Shares issued to acquire the capital stock of iLink
Telecom (B.C.) Inc., March 31, 1999 145 $145,000
- -------------------------------------------------------------------------------------------------------------------
Balance, August 31, 1999 145 $145,000
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
c) On February 26, 1999 the company entered into an agreement to purchase all
the issued and outstanding shares of iLink Telecom, (B.C.) Inc. The
consideration comprised 145 preferred shares which were issued March 31,
1999. The 145 preferred shares are designated as Series A Convertible
Preferred Stock with the following rights and restrictions: The shares are
entitled to $1,000 per share upon liquidation, dissolution or winding up of
the Company. In addition, the shares will be converted into common stock
five days after the effective date of a registration statement covering the
common stock of the Company to be issued upon the conversion of the Series
A Convertible Preferred Stock. The conversion rate for each preferred share
is $1,000 divided by 75% of the average market price of the common stock
for the five trading days immediately preceding the conversion date. [See
Note8(b)]
In recognition of this beneficial conversion feature the Company has
recognized an imputed dividend of approximately $48,000. The beneficial
conversion feature will result in additional accretion to preferred stock
over the period to expected conversion.
d) During the six month period ended August 31, 1999, the Company issued
2,140,000 common shares to certain officers and employees and consultants
for services to be rendered. These shares are subject to vesting agreements
which provide that the shares be held by the Company undelivered and
released upon the achievement of milestones as set out in the vesting
agreements. In the event the milestones are not met within a specified
period or that the individual ceases to be an employee of the Company, any
shares not released at such time will be forfeited to the Company. As a
result of the vesting provisions, the Company has recorded the issuance of
the shares at nominal value equal to their par value. In the event that it
becomes probable that these shares will be earned the Company will record
compensation expense at each financial statement date over the period
services are performed based on the difference between the nominal
consideration received and quoted market price of the Company's stock.
The Company vested 50,000 common shares to a consultant upon a milestone
being reached by the Company on June 3, 1999 as per the Vesting Agreement
dated March 25, 1999. A compensation expense of $49,950 was recorded using
the cash per share price of the most recent private placement, valued at
$1.00 per share.
e) During the three month period ended May 31, 1999 the Company issued 22,259
common shares in exchange for fixed assets. The fair market value of the
assets acquired has been determined to be $44,518.
f) During the six month period ended August 31, 1999, the Company established
a stock option plan pursuant to which options to acquire a maximum of
500,000 common shares may be granted. The Company granted options to
employees to acquire 23,000 common shares at an exercise price of $5.25 on
June 9, 1999, exercisable up to and including June 9, 2000.
<PAGE>F-10
iLINK TELECOM, INC.
(A development stage enterprise)
Notes to Financial Statements
(unaudited)
For the Six Months Ended August 31, 1999
5. Commitments:
a) The Company entered into an agreement for consulting services, dated
May 14, 1999 for a term of six weeks beginning May 15, 1999 to June
30, 1999. As of August 31, 1999, included in accounts payable is an
amount of $15,000 relating to this agreement.
b) The Company received a loan in the amount of $100,000 from PTN Ltd.,
a shareholder of the company. The term of the loan is one year,
payable by July 22, 2000 at an interest rate of 8.5%.
c) The Company took assignment and assumed all right and obligations of
a lease for office premises effective June 1, 1999 with the minimum
lease payments and share of operating costs as follows:
2000 $ 80,434
2001 107,246
2002 107,246
2003 35,748
The company also took assignment and assumed all rights and
obligations of other leases for office premises effective February 1,
1999 and April 30, 1999 with minimum lease payments as follows:
2000 $ 10,191
2001 924
d) Entered into an agreement for consulting services pursuant to which
the Company agreed to pay $5,000 CDN per month for the initial twelve
month term of the agreement, commencing March 1, 1999.
e) Entered into an agreement with a company controlled by a Director for
consulting services pursuant to which the Company agreed to pay
$5,000 per month for the five year term of the agreement, commencing
April 1, 1999.
6. Major Customers and Suppliers:
a) The Company earns its revenue from one customer. As at August 31,
1999, the aggregate accounts receivable balance relating to this
customer was $nil [February 28, 1999 - $nil].
b) The Company currently has four main equipment suppliers. However, the
Company believes that other suppliers could provide the required
components on comparable terms. A change in supplier, however, could
cause a delay in the ability of the company to provide its service and
could result in possible lost revenue.
<PAGE> F-11
iLINK TELECOM, INC.
(A development stage enterprise)
Notes to Financial Statements
(unaudited)
For the Six Months Ended August 31, 1999
7. Uncertainty Due to the Year 2000 Issue:
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize
the year 2000 as 1900 or some other date, resulting in errors when
information using year 2000 dates is processed. In addition, similar
problems may arise in some systems which use certain dates in 1999 to
represent something other than a date. The effects of the Year 2000 Issue
may be experienced before, on, or after January 1, 2000, and, if not
addressed, the impact on operations and financial reporting may range from
minor errors to significant systems failure which could affect the
Company's ability to conduct normal business operations. It is not possible
to be certain that all aspects of the Year 2000 Issue affecting the
Company, including those related to the efforts of customers, suppliers, or
other third parties, will be fully resolved.
8. Subsequent Events:
(a) Subsequent to the six months ended August 31, 1999, the Company
intends on entering into an agreement to provide IVR services for a
one year renewable term to a new customer beginning in October 1999.
(b) The Company authorized a Share Exchange Agreement on September 30,
1999 to exchange the 145 shares of Series A Convertible Preferred
Stock issued to ABDE Holdings Ltd. to 96,666 shares of Common stock
valued at $1.50 per share, which shares are fully paid and
non-assessable.
<PAGE> F-12
INDEPENDENT AUDITORS' REPORT
To the Shareholders of
iLink Telecom Inc.
We have audited the accompanying consolidated balance sheets of iLink Telecom
Inc. (a development stage enterprise) as of February 28, 1999 and 1998, and the
related consolidated statements of operations, stockholders' equity and cash
flows for the year ended February 28, 1999, and for each of the periods from
December 10, 1997 (date of incorporation) to February 28, 1999 and February 28,
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 United States 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of iLink Telecom Inc.
at February 28, 1999 and 1998 and the results of its operations and its cash
flows for the year ended February 28, 1999 and for each of the periods from
December 10, 1997 (date of incorporation) to February 28, 1999 and February 28,
1998, in conformity with accounting principles generally accepted in the United
States.
Vancouver, Canada, ERNST & YOUNG LLP
April 16, 1999. Chartered Accountants
<PAGE>F-13
iLink Telecom Inc.
(A development stage enterprise)
CONSOLIDATED BALANCE SHEETS
As at February 28
<TABLE>
<S> <C> <C>
1999 1998
$ $
- --------------------------------------------------------------------------------------------------
ASSETS
Current
Other assets -- 274
- --------------------------------------------------------------------------------------------------
Total current assets -- 274
- --------------------------------------------------------------------------------------------------
Equipment [note 4] 15,254 --
Goodwill [note 3] 138,746 --
- --------------------------------------------------------------------------------------------------
154,000 274
- --------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Accrued liabilities 27,139 --
- --------------------------------------------------------------------------------------------------
Total current liabilities 27,139 --
- --------------------------------------------------------------------------------------------------
Stockholders' equity Share capital - [note 5]
Common stock - $0.001 par value
25,000,000 authorized, 1,347,204 [1998 - 1,333,604] 1,347 1,333
issued and outstanding
Additional paid in capital 4,228 4,341
Preferred stock to be issued [notes 3 and 6] 145,000 --
Deficit accumulated in the development stage (23,714) (5,400)
- --------------------------------------------------------------------------------------------------
Total stockholders' equity 126,861 274
- --------------------------------------------------------------------------------------------------
154,000 274
==================================================================================================
</TABLE>
See accompanying notes
<PAGE>F-14
iLink Telecom Inc.
(A development stage enterprise)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<S> <C> <C> <C>
Period from Period from
December 10, 1997 December 10, 1997
Year (date of (date of
ended incorporation) to incorporation) to
February 28, February 28, February 28,
1999 1998 1999
$ $ $
- ------------------------------------------------------------------------------------------------------------------
EXPENSES
General and administrative -- 5,400 5,400
Writedown of investment [note 3] 175 -- 175
Consulting fees 8,139 -- 8,139
Professional fees 10,000 -- 10,000
- ------------------------------------------------------------------------------------------------------------------
Loss for period (18,314) (5,400) (23,714)
Deficit beginning of period (5,400) -- --
- ------------------------------------------------------------------------------------------------------------------
Deficit end of period (23,714) (5,400) (23,714)
- ------------------------------------------------------------------------------------------------------------------
Basic and fully diluted loss per share [note 5[c]] (0.01) (0.01)
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes
<PAGE>F-15
iLink Telecom Inc.
(A development stage enterprise)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Common stock Deficit
------------ Additional accumulated
Number paid in Shares to in the development
of shares Amount capital be issued stage Total
# $ $ $ $ $
- -----------------------------------------------------------------------------------------------------------------------------------
Issuance of common stock [note 5[b]] 1,333,604 1,333 4,341 -- -- 5,674
Loss -- -- -- -- (5,400) (5,400)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, February 28, 1998 1,333,604 1,333 4,341 (5,400) 274
Issuance of common stock [notes 1
and 3] 416,000 416 (416) --
Shares returned to treasury
[note 5(b)] (204,000) (204) 204 --
Cancellation of shares [note 3] (198,400) (198) 99 (99)
Preferred stock to be issued 145,000 145,000
Loss (18,314) (18,314)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, February 28, 1999 1,347,204 1,347 4,228 145,000 (23,714) 126,861
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>F-16
iLink Telecom Inc.
(A development stage enterprise)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<S> <C> <C> <C>
Period from Period from
December 10, December 10, 1997
Year 1997 (date of (date of
ended incorporation) incorporation) to
February 28, to February 28, February 28,
1999 1998 1999
$ $ $
- ------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
Loss (18,314) (5,400) (23,714)
Adjustments to reconcile net loss to net cash used
in operating activities:
Writedown of investment 175 -- 175
Changes in operating assets and liabilities:
Accrued liabilities 18,139 -- 18,139
- ------------------------------------------------------------------------------------------------------------
Net cash used in operating activities -- (5,400) (5,400)
- ------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds from capital contributions -- 5,400 5,400
- ------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities -- 5,400 5,400
- ------------------------------------------------------------------------------------------------------------
Net change in cash during the period and cash,
end of period -- -- --
- ------------------------------------------------------------------------------------------------------------
See accompanying notes
</TABLE>
<PAGE>F-17
iLink Telecom Inc.
(A development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
February 28, 1999 and 1998
1. FORMATION AND BUSINESS OF THE COMPANY
iLink Telecom Inc. ("Company") was incorporated on December 10, 1997 under the
name of Aquasol Inc. pursuant to the laws of Colorado and on January 9, 1998
changed its domicile to Delaware. On July 14, 1998 the Company merged with
Aquasol Technologies Inc., a Nevada corporation with nominal net assets,
resulting in a change in its domicile to Nevada. On February 26, 1999, the
Company acquired all of the issued and outstanding common stock of 579782 B.C.
Ltd. and subsequently changed the name of this subsidiary to iLink Telecom
(B.C.) Inc.
The Company is engaged in the development of the business of providing automated
call-processing services including pre-paid call processing, auditotex and
passive inbound automated tele-surveys. The Company is a development stage
enterprise and anticipates obtaining working capital to fund the continuing
development of its business through equity financings.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiary, iLink Telecom (B.C.) Inc. (British Columbia,
Canada). All significant intercompany accounts and transactions have been
eliminated.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from these estimates.
Equipment
Equipment is stated at cost and is being depreciated on a straight-line basis
over the estimated useful lives of the related assets as follows:
Telecom equipment 2 years
Computer equipment 3 years
Furniture and office equipment 5 years
Depreciation will commence on March 1, 1999.
<PAGE>F-18
iLink Telecom Inc.
(A development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
February 28, 1999 and 1998
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
Income taxes
The Company uses the liability method of accounting for income taxes. Under this
method, deferred tax assets and liabilities are determined based on the
difference between financial statement and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that are expected to be in
effect when the differences are expected to reverse. Deferred tax assets are
reduced by a valuation allowance in respect of amounts considered by management
to be less likely than not of realization in future periods.
Goodwill
Goodwill is being amortized on a straight-line basis over 3 years commencing
March 1, 1999.
Computation of loss
Basic loss per share is computed by dividing the loss attributable to common
stockholders by the weighted average number of common shares outstanding for
that period. Diluted loss per share is computed giving effect to all dilutive
potential common shares that were outstanding during the period. Dilutive
potential common shares consist of incremental common shares issuable upon
exercise of convertible securities. As at February 28, 1999, there were no
dilutive potential common shares and therefore the dilutive loss per share is
equivalent to the basic loss per share.
3. ACQUISITIONS
i) Pursuant to the terms of a share purchase agreement dated February 26,
1999 between the Company and ABDE Holdings Ltd., a British Columbia
company, the Company acquired all of the issued and outstanding share
capital of iLink Telecom (B.C.) Inc., formerly 579782 B.C. Ltd., for the
following consideration:
$
-----------------------------------------------------------------------
Purchase price 145,000
-----------------------------------------------------------------------
Consideration to be given:
Preferred Stock 145,000
-----------------------------------------------------------------------
145,000
-----------------------------------------------------------------------
The Preferred Stock was issued subsequent to the year end [see note 6].
<PAGE>F-19
iLink Telecom Inc.
(A development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
February 28, 1999 and 1998
3. BUSINESS ACQUISITIONS (cont'd)
The acquisition has been accounted for using the purchase method of accounting
and the purchase price has been allocated according to the estimated fair values
of the assets and liabilities of 579782 B.C. Ltd. as follows:
$
- -------------------------------------------------------------------------------
Working capital deficiency (9,000)
Equipment 15,254
Goodwill 138,746
- -------------------------------------------------------------------------------
145,000
- -------------------------------------------------------------------------------
ii) On July 14, 1998, the Company merged with Aquasol Technologies Inc. a
Nevada corporation ("Aquasol") with nominal net assets. Pursuant to
the merger, the shareholders of each of the merging companies received
one common share of the merged company for each common share
previously held. Accordingly, the shareholders of the Company received
1,333,491 common shares and the shareholders of Aquasol received
416,000 common shares. One of the former shareholders of Aquasol owned
approximately 51% of its outstanding common shares and also controlled
approximately 80% of the Company. Accordingly, this transaction has
been accounted for as the acquisition of the minority shareholders of
Aquasol. As Aquasol had no net assets, the merger had no impact on the
assets or liabilities of the Company.
iii) During the year ended February 28, 1998, the Company issued 35,091
shares of its common stock in exchange for 175,456 Series I common
shares of STB Corp., a corporation with nominal net assets. In
December 1998, STB Corp. was dissolved and accordingly the nominal
value assigned to the acquisition of $175 was written off.
iv) On January 15, 1998, the Company acquired 100% of the outstanding
shares of Noralta Technologies Corp. ("Noralta") for 198,400 common
shares from treasury. On February 3, 1999, the Company and the former
Noralta shareholders agreed to rescind the transaction.
<PAGE>F-20
iLink Telecom Inc.
(A development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
February 28, 1999 and 1998
4. EQUIPMENT
<TABLE>
<S> <C> <C>
1999 1998
Cost Cost
$ $
- --------------------------------------------------------------------------------------------------
Telecom equipment 1,028 --
Computer equipment 8,191 --
Furniture and office equipment 6,035 --
- --------------------------------------------------------------------------------------------------
15,254 --
- --------------------------------------------------------------------------------------------------
</TABLE>
5. SHARE STOCK
[a] Authorized
Holders of the Common Stock are entitled to one vote per share and to share
equally in any dividends declared and distributions in liquidation.
[b] Issued
<TABLE>
<S> <C> <C>
# of Shares $
---------------------------------------------------------------------------------------------
Shares issued for cash on incorporation 300,113 5,000
Shares issued for cash 800,000 400
Other 35,091 175
Shares issued for investment subsequently 198,400 99
returned [note 3]
---------------------------------------------------------------------------------------------
Balance, February 28, 1998 1,333,604 5,674
---------------------------------------------------------------------------------------------
Shares issued to acquire the capital stock of Aquasol
Technologies Inc. [notes 1 and 3] 416,000 --
Shares returned to treasury (204,000) --
Cancellation of shares related to investment [note 3] (198,400) (99)
---------------------------------------------------------------------------------------------
Balance, February 28, 1999 1,347,204 5,575
---------------------------------------------------------------------------------------------
</TABLE>
On February 3, 1999, the Company consolidated its share capital by way of a
reverse stock split on the basis of one new common share for each five old
common shares. In addition concurrent with the merger referred to in note
1, the Company changed the par value of its common shares from $0.0001 to
$0.001.
<PAGE>F-21
iLink Telecom Inc.
(A development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
February 28, 1999 and 1998
5. SHARE STOCK (cont'd)
All outstanding shares in these financial statements have been
retroactively adjusted to reflect this share consolidation and change in
par value.
[c] The basic and diluted loss per share for the periods is based on the
following:
<TABLE>
<S> <C> <C>
December 10, 1997
(date of
March 1, 1998 to incorporation)
February 28, to February 28,
1999 1998
$ $
- ----------------------------------------------------------------------------------------------------
Net loss for the period (18,314) (5,400)
Weighted average number of common shares used in computation
adjusted for the reverse consolidation of stock 5:1) 1,480,870 911,634
Basic and fully diluted loss per share (0.01) (0.01)
- ----------------------------------------------------------------------------------------------------
</TABLE>
6. SUBSEQUENT EVENTS
Subsequent to the year end, the Company:
i) issued, pursuant to three private placements, 250,000 common shares for
gross proceeds of $12,500, 1,300,000 common shares for gross proceeds of
$65,000 and 353,500 common shares for gross proceeds of $353,500.
ii) entered into an agreement for financial consulting services pursuant to
which the Company agreed to pay $12,500 upon execution of the agreement,
$5,000 per month for the initial twelve month term of the agreement and
issue 300,000 common shares.
iii) amended the authorized capital to include 5,000,000 preferred shares,
non-voting with a par value of $.001 per share, issuable in series. 145
preferred shares were designated as Series A Convertible Preferred Stock
with the following rights and restrictions:
<PAGE>F-22
iLink Telecom Inc.
(A development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
February 28, 1999 and 1998
6. SUBSEQUENT EVENTS (cont'd)
The shares are entitled to $1,000 per share upon liquidation, dissolution
or winding up of the Company. In addition, the shares will be converted
into common stock on the later of August 26, 1999 or five days after the
effective date of a registration statement covering the common stock of the
Company to be issued upon the conversion of the Series A Convertible
Preferred Stock. The conversion rate for each preferred share is $1,000
divided by 75% of the average market price of the common stock for the five
trading days immediately preceding the conversion date.
The 145 Series A Convertible Preferred Stock was issued pursuant to the
acquisition referred to in note 3.
iv) issued 1,590,000 common shares to certain principals and employees for
nominal consideration.
